Exhibit 99.3
CONSOLIDATED FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS’ REPORTS
ELECTRIC MACHINERY ENTERPRISES, INC. AND SUBSIDIARY
December 31, 2002
TABLE OF CONTENTS
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INDEPENDENT AUDITORS’ REPORT | | 3 |
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FINANCIAL STATEMENTS | | |
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Consolidated Balance Sheet | | 4 - 5 |
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Consolidated Statement of Operations | | 6 |
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Consolidated Statement of Changes in Stockholders’ Equity | | 7 |
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Consolidated Statement of Cash Flows | | 8 -9 |
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Notes to Consolidated Financial Statements | | 10 - 18 |
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SUPPLEMENTAL INFORMATION | | 19 |
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Independent Auditors’ Report on Supplemental Information | | 20 |
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Schedule of Consolidated Selling, General and Administrative Expenses | | 21 |
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Schedule of Open Contracts | | 22 |
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Schedule of Closed Contracts | | 23 |
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Schedule of Time and Material Job Activity | | 24 |
INDEPENDENT AUDITORS’ REPORT
Board of Directors
Electric Machinery Enterprises, Inc. and Subsidiary
We have audited the consolidated balance sheet of Electric Machinery Enterprises, Inc. and Subsidiary (collectively, the “Company”) as of December 31, 2002, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year 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 audit.
We conducted our audit 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 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 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 Electric Machinery Enterprises, Inc. and Subsidiary, as of December 31, 2002, and the results of its operations, changes in stockholders’ equity, and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Tampa, Florida
March 26, 2003
2203 NORTH LOIS AVENUE•SUITE 700•POST OFFICE BOX 25177•TAMPA, FLORIDA 33622•(813) 875-7774 FAX (813) 874-6785
3
Electric Machinery Enterprises, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEET
December 31, 2002
| | | |
| ASSETS | | | |
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CURRENT ASSETS | | | |
Cash and cash equivalents (notes A4 and A10) | | $ | 664,500 |
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|
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Contract receivables (notes A6, C and E) | | | |
Billed | | | 9,620,578 |
Unbilled | | | 1,026,591 |
Retainage | | | 2,897,060 |
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| | | | 13,544,229 |
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Notes receivable (note B) | | | 229,775 |
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Other receivables | | | 182,826 |
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Income tax refund receivable | | | 116,000 |
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Costs and estimated earnings in excess of billings on uncompleted contracts (notes A5 and C) | | | 5,533,242 |
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Inventory (notes A7 and E) | | | 2,085,651 |
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Prepaid expenses | | | 39,000 |
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Total current assets | | | 22,395,223 |
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PROPERTY, PLANT AND EQUIPMENT - at cost, less accumulated depreciation (notes A8, D, E and F) | | | 2,336,813 |
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INVESTMENTS | | | |
Real estate held for future use | | | 838,511 |
Cash surrender value of life insurance policies (net of $144,366 of loans payable) | | | 101,750 |
Investments - deferred compensation (note K) | | | 262,691 |
Investment in partnership | | | 37,733 |
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| | | | 1,240,685 |
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OTHER ASSETS | | | |
Deferred tax asset (notes A9 and G) | | | 234,000 |
Notes receivable (note B) | | | 214,626 |
Other | | | 54,884 |
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| | | | 503,510 |
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| | | $ | 26,476,231 |
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4
Electric Machinery Enterprises, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEET
December 31, 2002
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
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CURRENT LIABILITIES | | | | |
Notes payable (note E) | | $ | 4,411,037 | |
Current maturities of long-term debt (note F) | | | 376,629 | |
Accounts payable | | | 3,875,021 | |
Billings in excess of costs and estimated earnings on uncompleted contracts (notes A5 and C) | | | 3,042,829 | |
Accrued expenses | | | 190,265 | |
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Total current liabilities | | | 11,895,781 | |
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LONG-TERM DEBT, less current maturities (note F) | | | 4,753,040 | |
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DEFERRED COMPENSATION (note K) | | | 262,691 | |
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COMMITMENTS AND CONTINGENCIES (note H) | | | — | |
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Total liabilities | | | 16,911,512 | |
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STOCKHOLDERS’ EQUITY | | | | |
Common stock | | | | |
Class A - voting stock, $.01 par value, 10,000,000 shares authorized, 1,417,872 shares issued and outstanding | | | 14,179 | |
Class B - non-voting stock, $.01 par value, 10,000,000 shares authorized, 1,093,539 shares issued and outstanding | | | 10,935 | |
Paid-in capital in excess of par value | | | 4,186,503 | |
Retained earnings | | | 6,281,892 | |
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| | | | 10,493,509 | |
Less 43,931 shares of common stock in treasury at cost (note J) | | | (928,790 | ) |
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Total stockholders’ equity | | | 9,564,719 | |
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| | | $ | 26,476,231 | |
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The accompanying notes are an integral part of this consolidated statement.
5
Electric Machinery Enterprises, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 2002
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Earned revenues (note A5) | | $ | 53,048,522 | |
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Cost of earned revenues (note A5) | | | 42,499,510 | |
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Gross profit | | | 10,549,012 | |
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Selling, general and administrative expenses | | | 11,887,439 | |
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Operating loss | | | (1,338,427 | ) |
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Other income (expense) | | | | |
Interest expense | | | (576,399 | ) |
Interest income | | | 285,261 | |
Bad debt recovery | | | 744,730 | |
Gain on sale of property | | | 302,765 | |
Miscellaneous | | | 60,235 | |
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| | | | 816,592 | |
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Loss before income taxes | | | (521,835 | ) |
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Provision for income taxes (notes A9 and G) | | | | |
Current benefit | | | 116,000 | |
Deferred benefit | | | 24,000 | |
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| | | | 140,000 | |
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NET LOSS | | $ | (381,835 | ) |
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The accompanying notes are an integral part of this consolidated statement.
6
Electric Machinery Enterprises, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
For the year ended December 31, 2002
| | | | | | | | | | | | | | | | | | | | | |
| | | Class A
Stock
| | Class B
Stock
| | Additional
Capital
| | Retained
Earnings
| | | Common
Stock in
Treasury
| �� | | Total
| |
Balance at December 31, 2001 | | $ | 14,179 | | $ | 10,935 | | $ | 4,186,503 | | $ | 6,663,727 | | | $ | (864,590 | ) | | $ | 10,010,754 | |
Cost of 4,066 shares acquired for treasury | | | — | | | — | | | — | | | — | | | | (64,200 | ) | | | (64,200 | ) |
Net loss | | | — | | | — | | | — | | | (381,835 | ) | | | — | | | | (381,835 | ) |
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| | | $ | 14,179 | | $ | 10,935 | | $ | 4,186,503 | | $ | 6,281,892 | | | $ | (928,790 | ) | | $ | 9,564,719 | |
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The accompanying notes are an integral part of this consolidated statement.
7
Electric Machinery Enterprises, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31, 2002
| | | | |
Cash flows from operating activities | | | | |
Net loss | | $ | (381,835 | ) |
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Adjustments to reconcile net earnings to net cash provided by operating activities | | | | |
Gain on sale of assets | | | (302,765 | ) |
Depreciation and amortization | | | 541,014 | |
Decrease in inventory | | | 199,064 | |
Decrease in accounts receivable | | | 4,053,813 | |
Increase in income tax refund and other receivables | | | (298,826 | ) |
Decrease in retirement arrangement | | | 5,812 | |
Decrease in prepaid expenses and other assets | | | 39,706 | |
Increase in deferred tax asset | | | (24,000 | ) |
Net increase in costs and estimated earnings in excess of billings on uncompleted contracts | | | (1,964,533 | ) |
Decrease in accounts payable | | | (1,077,520 | ) |
Decrease in accrued expenses and deferred compensation | | | (183,740 | ) |
Decrease in income taxes payable | | | (189,382 | ) |
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Total adjustments | | | 798,643 | |
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Net cash provided by operations | | | 416,808 | |
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Cash flows from investing activities | | | | |
Decrease in equity of partnership investment | | | (1,656 | ) |
Proceeds from sale of property and equipment | | | 57,612 | |
Property and equipment additions | | | (154,413 | ) |
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Net cash used by investing activities | | | (98,457 | ) |
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Cash flows from financing activities | | | | |
Net increase in notes receivable | | | (66,618 | ) |
Net payments on bank lines of credit | | | (612,301 | ) |
Proceeds from long-term debt | | | 1,308,951 | |
Payments on long-term debt | | | (688,314 | ) |
Purchase of treasury stock | | | (64,200 | ) |
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Net cash used by financing activities | | | (122,482 | ) |
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Net increase in cash and cash equivalents | | | 195,869 | |
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Cash and cash equivalents at beginning of year | | | 468,631 | |
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Cash and cash equivalents at end of year | | $ | 664,500 | |
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8
Electric Machinery Enterprises, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
For the year ended December 31, 2002
| | | |
Supplemental disclosures of cash flow information | | | |
Cash paid during the year | | | |
Interest | | $ | 572,918 |
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Income taxes | | $ | 165,567 |
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Supplemental disclosure of non-cash investing and financing transactions
The Company sold a building and land with a net book value of $335,049 and received total consideration of $631,961, resulting in a gain of $296,912
The accompanying notes are an integral part of this consolidated statement.
9
Electric Machinery Enterprises, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002
NOTE A - DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A description of the Company and a summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:
1.Description of the Business
Electric Machinery Enterprises, Inc., (“EME”), located in Tampa, Florida, is engaged primarily in the electrical construction of industrial and commercial buildings, providing services to a wide variety of clients in the United States and abroad. EME, through an operating division, is involved in the construction of towers used in the cellular telephone industry. EME’s construction contracts are typically twelve months or less, but may involve a longer duration of time depending upon the nature and size of the project. EME Modular Structures, Inc., a wholly owned subsidiary of EME, is engaged in the construction of concrete modular buildings.
2.Principles of Consolidation
The financial statements include the consolidated accounts of Electric Machinery Enterprises, Inc. and its subsidiary, EME Modular Structures, Inc. (collectively, the “Company”). All significant intercompany transactions and accounts have been eliminated.
3.Use of Estimates
The preparation of 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 and disclosures. Actual results could differ from those estimates.
4.Cash and Cash Equivalents
Cash and cash equivalents are comprised of highly liquid instruments with original maturities of three months or less. The cash balance includes no cash equivalents at December 31, 2002.
5.Revenue Recognition
Revenue on long-term contracts is recorded on the basis of the Company’s estimates of the percentage-of-completion of individual contracts, measured for each contract by the percentage of costs incurred-to-date to estimated total costs at completion (cost to cost method). As these long-term contracts extend over one or more years, revisions in costs and profits estimated during the course of the work are recorded in the accounting period in which the facts requiring their revision become known. At the time a loss on a contract becomes known, the entire amount of the estimated ultimate loss on the contract is recognized.
10
Electric Machinery Enterprises, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 2002
NOTE A - DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
6.Contracts Receivable
The Company considers contracts receivable to be fully collectible; accordingly, no allowance for doubtful accounts is required. If amounts become uncollectible, they will be charged to operations when that determination is made. The unbilled portion of accounts receivable relates to jobs completed at year-end, but not billed due to continuing litigation. (See note C).
7.Inventory
Inventory is stated at the lower of cost or market, determined by the first-in, first-out method.
8.Depreciation and Amortization
Depreciation is provided using both accelerated and straight-line methods over the estimated useful lives of the related assets, ranging from 3 to 39 years. Leasehold improvements are amortized over the shorter of the term of the lease or the useful life of the asset.
9.Income Taxes
The Company accounts for certain items differently for financial reporting purposes than for federal income tax purposes and makes appropriate provisions for deferred taxes in recognition of the temporary and permanent differences. The principal differences relate to deferred compensation payments and nondeductible meals and entertainment.
10.Concentrations of Credit Risk
Cash balances are maintained in financial institutions. Occasionally, deposits exceed amounts insured by the Federal Deposit Insurance Corporation. Accordingly, the Company places its cash with banks it considers to be high credit quality financial institutions.
NOTE B - NOTES RECEIVABLE
Notes receivable consisted of the following at December 31, 2002:
| | | |
Demand notes receivable from related parties, interest ranging from 4.75% to 11%, unsecured | | $ | 224,455 |
Note receivable from individual, weekly payments of $200 including interest at 6.75% per annum, due June 2005, secured by vehicle | | | 16,946 |
11
Electric Machinery Enterprises, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 2002
NOTE B - NOTES RECEIVABLE - Continued
| | | |
Note receivable from unrelated company, interest at 9% per annum, due December 2006, guaranteed by major stockholder of the unrelated company | | | 203,000 |
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| | | | 444,401 |
Less current portion | | | 229,775 |
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| | | $ | 214,626 |
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NOTE C - CONTRACTS IN PROGRESS
Uncompleted contracts at December 31, 2002 are summarized as follows:
| | | |
Costs incurred on uncompleted contracts | | $ | 31,920,622 |
Estimated earnings on uncompleted contracts | | | 10,869,592 |
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| | | | 42,790,214 |
Less billings to date | | | 40,299,801 |
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| | | $ | 2,490,413 |
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These components are included on the balance sheet under the following captions:
| | | |
Costs and estimated earnings in excess of billings on uncompleted contracts | | $ | 5,533,242 |
Billings in excess of costs and estimated earnings on uncompleted contracts | | | 3,042,829 |
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| | | $ | 2,490,413 |
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Included in the total contract receivable balance of $13,544,229 is approximately $2.5 million of receivables related to contracts currently undergoing legal action with payment contingent on the outcome of these legal proceedings. The Company’s management and legal counsel are of the opinion the outcome of the legal actions will be favorable. Any amounts originally recorded in receivables that upon further discovery become uncollectible will be written off at the time such determination is made.
12
Electric Machinery Enterprises, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 2002
NOTE C - CONTRACTS IN PROGRESS - Continued
Included in costs and estimated earnings in excess of billings on uncompleted contracts are amounts for costs incurred by the Company for damages caused by third parties with an approximate value of $450,000. As of December 31, 2002, no dispute of these charges has been made and the Company anticipates full collection.
Also included in costs and estimated earnings in excess of billings on uncompleted contracts, are amounts in excess of the agreed contract price for customer caused delays, changes in specification and design, pending change orders as to both scope and price, or other causes of unanticipated additional costs, totaling approximately $1 million. These amounts are readily estimated and the Company anticipates full collection of this amount.
NOTE D - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December 31, 2002:
| | | |
Land | | $ | 52,244 |
Buildings | | | 1,267,139 |
Leasehold improvements | | | 825,428 |
Equipment | | | 2,237,262 |
Vehicles | | | 1,437,629 |
Furnishings and fixtures | | | 105,331 |
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| | | | 5,925,033 |
Less accumulated depreciation and amortization | | | 3,588,220 |
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| | | $ | 2,336,813 |
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NOTE E - NOTES PAYABLE
Notes payable consisted of the following at December 31, 2002:
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Bank line of credit of $7,500,000, interest payable monthly at prime (4.25% at December 31, 2002), due June 2003, secured by contract receivables, inventory and equipment | | $ | 4,411,037 |
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13
Electric Machinery Enterprises, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 2002
NOTE F - LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 2002:
| | | |
Note payable to individual, interest payable monthly at 12%, principal payments of $50,000 annually, at option of payee, unamortized principal balance due March 2005, secured by partnership interest and real estate | | $ | 317,253 |
Mortgage payable to bank, monthly principal payments of $7,708 plus interest at prime (4.25% at December 31, 2002), secured by real estate, due October 2007 | | | 1,364,375 |
Note payable to related individual, interest payable quarterly at 9.5%, balance due October 2004, unsecured | | | 53,458 |
Note payable to stockholder, interest payable annually at 8%, due December 2006, unsecured | | | 560,000 |
Installment notes payable to various banks and finance companies, monthly payments of approximately $14,000 including interest ranging from 4.25% to 16.49%, secured by equipment purchased | | | 252,493 |
Note payable to related company, interest payable monthly at prime (4.25% at December 31, 2002) plus .25%, due October 2005, unsecured | | | 261,423 |
Note payable to related individuals, interest payable monthly at prime (4.25% at December 31, 2002) plus .25%, due December 2004, unsecured | | | 100,000 |
Mortgage payable to bank, monthly payments of $2,700, including interest at the bank’s prime index (6% at December 31, 2002) plus 2%, due September 2006, secured by real estate | | | 161,163 |
Note payable to stockholders, interest payable at prime (4.25% at December 31, 2002) plus 1%, due December 2004, unsecured | | | 181,000 |
Note payable to related company, monthly principal payments of $2,145 plus interest at prime (4.25% at December 31, 2002) plus .25%, due May 2010, unsecured | | | 1,583,504 |
14
Electric Machinery Enterprises, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 2002
NOTE F - LONG-TERM DEBT - Continued
| | | |
Note payable to stockholders, interest payable at prime (4.25% at December 31, 2002) plus .25%, due April 2005, unsecured | | | 200,000 |
Note payable to related company, interest payable at prime (4.25% at December 31, 2002), due on demand, unsecured | | | 95,000 |
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| | | | 5,129,669 |
Less current maturities | | | 376,629 |
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| | | $ | 4,753,040 |
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Interest expense during the year ended December 31, 2002 included approximately $198,000 to the above referenced related companies, stockholders and individuals.
Principal maturities on long-term debt are as follows:
| | | |
December 31, | | | |
2003 | | $ | 376,629 |
2004 | | | 549,438 |
2005 | | | 974,127 |
2006 | | | 754,553 |
2007 | | | 1,020,115 |
Thereafter | | | 1,454,807 |
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| | | $ | 5,129,669 |
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NOTE G - INCOME TAXES
The Financial Accounting Standards Board adopted Statement of Financial Accounting Standards (SFAS) No. 109, accounting for income taxes. The standard supersedes substantially all existing authoritative literature for accounting for income taxes.
15
Electric Machinery Enterprises, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 2002
NOTE G - INCOME TAXES - Continued
The calculation under (SFAS) No. 109 results in a net deferred tax asset of $234,000 as of December 31, 2002. Following is a summary of the components of the deferred tax asset:
| | | |
Deferred tax asset due to future income tax benefits from deferred compensation arrangements | | $ | 89,000 |
Deferred tax asset due to future state income tax benefits from net operating loss carryforwards of Electric Machinery Enterprises, Inc. and Subsidiary | | | 145,000 |
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| | | $ | 234,000 |
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The difference in the provision for federal income taxes from that obtained by applying normal corporate rates to income before taxes is due principally to the differences in deferred compensation and nondeductible meals and entertainment expenses. Following is a summary of the effect on operations of this difference:
| | | | |
Current Benefit | | | | |
| |
Current income tax provision | | $ | 177,000 | |
Income tax effect of non-deductible expenses | | | (57,000 | ) |
Income tax effect of temporary differences | | | (4,000 | ) |
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| | | $ | 116,000 | |
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| Deferred Benefit | | | | |
| |
Increase in deferred tax asset due to increase in state net operating loss carryforwards of Electric Machinery Enterprises, Inc. and Subsidiary | | $ | 22,000 | |
Decrease in deferred tax asset due to temporary differences of Electric Machinery Enterprises, Inc. and Subsidiary | | | (5,000 | ) |
Increase in valuation allowance of deferred tax asset | | | 7,000 | |
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| | | $ | 24,000 | |
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The Company has available approximately $2.6 million in net operating loss carryforwards available to offset future State of Florida taxable income expiring through 2017. The tax benefit of these operating loss carryforwards is recorded in the balance sheet as a deferred tax asset.
16
Electric Machinery Enterprises, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 2002
NOTE H - COMMITMENTS AND CONTINGENCIES
1.Lease Commitments
The Company leases vehicles under noncancelable operating leases for periods up to four years. In addition, the Company conducts its operations in a facility leased from a related corporation owned by stockholders of Electric Machinery Enterprises, Inc.
Total rent expense for the year ended December 31, 2002 was approximately $766,000 of which approximately $586,000 was for the facility leased from a related corporation.
Approximate future minimum rentals on noncancellable leases at December 31, 2002 are as follows:
| | | |
Year ending December 31, | | | |
2003 | | $ | 798,714 |
2004 | | | 695,243 |
2005 | | | 633,279 |
2006 | | | 632,921 |
2007 | | | 632,921 |
Thereafter | | | 4,746,906 |
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| | | $ | 8,139,984 |
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2.Contingencies
The Company is involved in other legal actions and proceedings, however, no actions exist which, in management’s opinion, would have a material effect on the Company’s financial position. See note C for a discussion of legal actions related to contract receivables.
NOTE I - RETIREMENT PLAN
The Company adopted a 401(k) savings plan effective January 1, 1997. The plan covers all employees who are at least 18 years of age with one or more years of service. The Company did not make any discretionary contributions for the year ended December 31, 2002.
17
Electric Machinery Enterprises, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 2002
NOTE J - EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
The EME Employee Stock Ownership Plan and Trust (the “Plan”) enables employees of the Company to share in the growth of the Company through the acquisition of stock. Employees of the Company are generally eligible to participate in the Plan after one year of service and attainment of age 18, provided they worked at least 1,000 hours during such Plan year and are employed on the last working day of the Plan year.
The Plan provides for the Company, at the discretion of its Board of Directors, to make contributions up to the maximum amount permitted under the Internal Revenue Code, as amended. The Company did not contribute to the Plan during the year ended December 31, 2002.
Additionally, during the year ended December 31, 2002, the Company purchased 4,066 shares from the Plan relating to the first right of refusal on the shares of stock assigned to employees who left the Company. These shares were repurchased at a price of $15.79 each (as valued by a third party hired by the Company), for a total cost of approximately, $64,000.
NOTE K - DEFERRED COMPENSATION
The Company has a non-qualified deferred compensation arrangement with members of executive management under which future benefits are funded through investments in mutual funds and deferred annuities. The Company had investments in mutual funds and deferred annuities totaling $262,691 to pay deferred compensation liabilities of $262,691 at December 31, 2002. Total deferred compensation expense approximated $15,000 for the year ended December 31, 2002.
Two customers generated revenue of approximately 34%, or $18 million, of the Company’s total consolidated earned revenue for the year ended December 31, 2002. Amounts due from these customers represent approximately 20% of total consolidated contract receivables, or $2.7 million, and 86% of costs and estimated earnings in excess of billings on uncompleted contracts, or $4.8 million.
18
SUPPLEMENTAL INFORMATION
19
INDEPENDENT AUDITORS’ REPORT ON SUPPLEMENTAL INFORMATION
Board of Directors
Electric Machinery Enterprises, Inc. and Subsidiary
Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole of Electric Machinery Enterprises, Inc. and Subsidiary for the year ended December 31, 2002. The supplemental information presented hereinafter is presented for purposes of additional analysis and is not a required part of the basic consolidated financial statements. Such information has been subjected to the audit procedures applied in the audit of the basic financial statements, and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.
Tampa, Florida
March 26, 2003
2203 NORTH LOIS AVENUE•SUITE 700•POST OFFICE BOX 25177•TAMPA, FLORIDA 33622•(813) 875-7774 FAX (813) 874-6785
20
Electric Machinery Enterprises, Inc. and Subsidiary
SCHEDULE OF CONSOLIDATED SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES
For the year ended December 31, 2002
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Advertising and promotion | | $ | 39,992 | |
Auto and truck expenses | | | 284,416 | |
Bad debts | | | 3,751,765 | |
Bank charges | | | 39,012 | |
Contract services | | | 151,113 | |
Contributions | | | 4,854 | |
Depreciation and amortization | | | 68,910 | |
Dues and subscriptions | | | 43,178 | |
Electricity and water | | | 132,258 | |
Freight and postage | | | 13,067 | |
Insurance | | | 2,247,706 | |
Laboratory testing | | | 26,845 | |
Legal and accounting | | | 1,443,738 | |
Licenses | | | 29,281 | |
Loan costs | | | 22,677 | |
Miscellaneous | | | 114,956 | |
Office supplies | | | 259,402 | |
Rents | | | 765,992 | |
Repairs and maintenance | | | 75,972 | |
Retirement benefits administration | | | 51,298 | |
Salaries and bonuses | | | 3,441,759 | |
Taxes | | | 317,566 | |
Telephone | | | 300,247 | |
Training and education | | | 38,034 | |
Travel | | | 59,220 | |
Less burden allocated to cost of sales | | | (1,835,819 | ) |
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| | | $ | 11,887,439 | |
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21
Electric Machinery Enterprises, Inc. and Subsidiaries
SCHEDULE OF OPEN CONTRACTS
December 31, 2002
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CONTRACT
DESCRIPTION
| | ESTIMATED
CONTRACT
PRICE
| | TOTAL
ESTIMATED
COSTS
| | EST. GROSS
PROFIT(LOSS)
@ COMPLETION
| | CONTRACT
COSTS TO DATE
| | PERCENT
COMPLETE
TO DATE
| | | PROFIT
(LOSS) TO DATE
| | PROFIT
(LOSS)
PRIOR YEAR
| | PROFIT
(LOSS)
CURRENT
| | TOTAL
BILLING TO DATE
| | BILLINGS IN
EXCESS OF
COSTS AND
ESTIMATED
EARNINGS
| | | COSTS AND ESTIMATED
EARNINGS IN
EXCESS OF
BILLINGS
|
Adventure Beach Deck #2 | | $ | 371,107 | | $ | 241,587 | | $ | 129,520 | | $ | 105,039 | | 43.48 | % | | $ | 56,315 | | $ | — | | $ | 56,315 | | $ | 145,519 | | $ | — | | | $ | 15,835 |
Northport WWTP | | | 619,829 | | | 477,309 | | | 142,520 | | | 33,366 | | 6.99 | % | | | 9,962 | | | — | | | 9,962 | | | 46,709 | | | (3,381 | ) | | | — |
Grand Isle Villas Exuma | | | 317,092 | | | 250,700 | | | 66,392 | | | 41,266 | | 16.46 | % | | | 10,928 | | | — | | | 10,928 | | | 93,524 | | | (41,330 | ) | | | — |
Manatee Elementary A’ | | | 1,090,052 | | | 897,795 | | | 192,257 | | | 404,004 | | 45.00 | % | | | 86,516 | | | — | | | 86,516 | | | 456,369 | | | — | | | | 34,151 |
Manatee Elementary B’ | | | 1,151,903 | | | 966,118 | | | 185,785 | | | 284,485 | | 29.45 | % | | | 54,714 | | | — | | | 54,714 | | | 319,758 | | | — | | | | 19,441 |
San Juan Airport | | | 359,000 | | | 279,858 | | | 79,142 | | | 122,516 | | 43.78 | % | | | 34,648 | | | — | | | 34,648 | | | 137,300 | | | — | | | | 19,864 |
OCCC Phase Five | | | 14,563,859 | | | 10,795,368 | | | 3,768,491 | | | 9,630,548 | | 89.21 | % | | | 3,361,871 | | | 498,940 | | | 2,862,931 | | | 9,278,234 | | | — | | | | 3,714,185 |
OCCC Systems, Division 17 | | | 4,535,323 | | | 3,292,497 | | | 1,242,826 | | | 2,276,133 | | 69.13 | % | | | 859,166 | | | 36,253 | | | 822,913 | | | 2,872,550 | | | — | | | | 262,749 |
Merk-Medco RX Service | | | 494,453 | | | 349,622 | | | 144,831 | | | 257,020 | | 73.51 | % | | | 106,465 | | | 2,848 | | | 103,617 | | | 464,453 | | | (100,968 | ) | | | — |
Pine Crest Place | | | 1,919,604 | | | 1,576,112 | | | 343,492 | | | 1,133,226 | | 71.90 | % | | | 246,971 | | | 1,451 | | | 245,520 | | | 1,875,327 | | | (495,130 | ) | | | — |
Ocwen Computer Room | | | 200,725 | | | 154,736 | | | 45,989 | | | 128,706 | | 83.18 | % | | | 38,254 | | | — | | | 38,254 | | | 169,325 | | | (2,365 | ) | | | — |
Newport Place | | | 394,382 | | | 294,822 | | | 99,560 | | | 243,709 | | 82.66 | % | | | 82,296 | | | — | | | 82,296 | | | 361,197 | | | (35,192 | ) | | | — |
ALF Waterside | | | 634,353 | | | 504,522 | | | 129,831 | | | 265,732 | | 52.67 | % | | | 68,382 | | | — | | | 68,382 | | | 546,555 | | | (212,441 | ) | | | — |
UCC II Building | | | 489,732 | | | 416,068 | | | 73,664 | | | 367,146 | | 88.24 | % | | | 65,001 | | | — | | | 65,001 | | | 472,791 | | | (40,644 | ) | | | — |
Prosperity Oaks | | | 1,034,698 | | | 814,167 | | | 220,531 | | | 92,507 | | 11.36 | % | | | 25,052 | | | — | | | 25,052 | | | 144,698 | | | (27,139 | ) | | | — |
Prog. Physical Damage TRN | | | 419,416 | | | 324,616 | | | 94,800 | | | 235,478 | | 72.54 | % | | | 68,768 | | | — | | | 68,768 | | | 419,416 | | | (115,170 | ) | | | — |
KMBT Storage Building | | | 275,052 | | | 215,704 | | | 59,348 | | | 72,765 | | 33.73 | % | | | 20,018 | | | — | | | 20,018 | | | 56,877 | | | — | | | | 35,906 |
Echelon Offices | | | 135,500 | | | 114,877 | | | 20,623 | | | 113,877 | | 99.13 | % | | | 20,444 | | | — | | | 20,444 | | | 115,500 | | | — | | | | 18,821 |
Delta Airlines Airside E | | | 241,614 | | | 182,383 | | | 59,231 | | | 137,039 | | 75.14 | % | | | 44,506 | | | — | | | 44,506 | | | 241,614 | | | (60,069 | ) | | | — |
Dominion Telecom | | | 142,910 | | | 108,905 | | | 34,005 | | | 52,060 | | 47.80 | % | | | 16,254 | | | — | | | 16,254 | | | 59,634 | | | — | | | | 8,680 |
Four Seasons Resort | | | 10,975,975 | | | 8,933,031 | | | 2,042,944 | | | 6,561,839 | | 73.46 | % | | | 1,500,747 | | | — | | | 1,500,747 | | | 7,013,079 | | | — | | | | 1,049,507 |
Verizon Switch | | | 4,751,643 | | | 4,396,484 | | | 355,159 | | | 2,279,475 | | 51.85 | % | | | 184,150 | | | — | | | 184,150 | | | 4,192,680 | | | (1,729,055 | ) | | | — |
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TOTAL | | $ | 45,118,222 | | $ | 35,587,281 | | $ | 9,530,941 | | $ | 24,837,936 | | | | | $ | 6,961,428 | | $ | 539,492 | | $ | 6,421,936 | | $ | 29,483,109 | | $ | (2,862,884 | ) | | $ | 5,179,139 |
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22
Electric Machinery Enterprises, Inc. and Subsidiary
SCHEDULE OF CLOSED CONTRACTS
December 31, 2002
| | | | | | | | | | | | | | | | | | | | | | | | | | |
CONTRACT DESCRIPTION
| | CONTRACT
PRICE
| | DIRECT
COSTS TO DATE
| | PROFIT
(LOSS) TO DATE
| | | PROFIT
(LOSS)
PRIOR YEAR
| | PROFIT
(LOSS)
CURRENT
| | | TOTAL
BILLING TO DATE
| | BILLINGS IN
EXCESS OF
COSTS AND
ESTIMATED
EARNINGS
| | COSTS AND
ESTIMATED
EARNINGS IN
EXCESS OF
BILLINGS
|
H. Lee Moffit Cancer Center | | $ | 1,495,872 | | $ | 795,662 | | $ | 700,210 | | | $ | 766,185 | | $ | (65,975 | ) | | $ | 1,495,872 | | $ | — | | $ | — |
St Pete Jr. College | | | 1,722,459 | | | 1,409,466 | | | 312,993 | | | | 279,328 | | | 33,665 | | | | 1,722,459 | | | — | | | — |
T.B.W. Surface Water DBO | | | 5,054,182 | | | 2,280,871 | | | 2,773,311 | | | | 247,710 | | | 2,525,601 | | | | 5,054,182 | | | — | | | — |
T.B.W. Surface Water DBB | | | 1,295,403 | | | 731,695 | | | 563,708 | | | | 114,001 | | | 449,707 | | | | 1,295,403 | | | — | | | — |
TBW Alafia River Pump St. | | | 559,865 | | | 287,452 | | | 272,413 | | | | 9,452 | | | 262,961 | | | | 559,865 | | | — | | | — |
St. Croix Airport | | | 3,065,295 | | | 2,770,452 | | | 294,843 | | | | 497,392 | | | (202,549 | ) | | | 3,065,295 | | | — | | | — |
Emerald Bay | | | 403,760 | | | 385,173 | | | 18,587 | | | | 29,441 | | | (10,854 | ) | | | 403,760 | | | — | | | — |
Venice WWTP Expansion | | | 1,484,474 | | | 1,110,309 | �� | | 374,165 | | | | 258,869 | | | 115,296 | | | | 1,484,474 | | | — | | | — |
Ritz-Club & Expansion, St. Thomas VI | | | 3,133,862 | | | 2,533,982 | | | 599,880 | | | | 308,523 | | | 291,357 | | | | 3,133,862 | | | — | | | — |
Nina Harris ESE Center | | | 1,020,610 | | | 795,273 | | | 225,337 | | | | 158,797 | | | 66,540 | | | | 1,020,610 | | | — | | | — |
Ritz Power & Comm., St Thomas VI | | | 1,602,064 | | | 950,144 | | | 651,920 | | | | 520,875 | | | 131,045 | | | | 1,602,064 | | | — | | | — |
Weston Hotel, St. John | | | 522,506 | | | 380,292 | | | 142,214 | | | | 143,215 | | | (1,001 | ) | | | 522,506 | | | — | | | — |
USF Largo | | | 165,903 | | | 140,901 | | | 25,002 | | | | — | | | 25,002 | | | | 165,903 | | | — | | | — |
SJH Central Energy Plant | | | 988,598 | | | 742,948 | | | 245,650 | | | | 241,943 | | | 3,707 | | | | 988,598 | | | — | | | — |
Baggage Handling Airside E | | | 390,376 | | | 329,346 | | | 61,030 | | | | — | | | 61,030 | | | | 390,376 | | | — | | | — |
Teleplace | | | 202,061 | | | 95,194 | | | 106,867 | | | | 106,915 | | | (48 | ) | | | 202,061 | | | — | | | — |
Delta Airlines Call Center | | | 104,198 | | | 62,843 | | | 41,355 | | | | — | | | 41,355 | | | | 104,198 | | | — | | | — |
Delta Airlines Call Center - Data | | | 184,029 | | | 126,875 | | | 57,154 | | | | — | | | 57,154 | | | | 184,029 | | | — | | | — |
Army Aviation Support II | | | 218,166 | | | 153,497 | | | 64,669 | | | | — | | | 64,669 | | | | 218,166 | | | — | | | — |
UBC Phase 4 | | | 311,209 | | | 216,309 | | | 94,900 | | | | — | | | 94,900 | | | | 311,209 | | | — | | | — |
Cendant | | | 294,442 | | | 168,196 | | | 126,246 | | | | — | | | 126,246 | | | | 294,442 | | | — | | | — |
AT&T Ltg. Upgrade | | | 102,147 | | | 84,654 | | | 17,493 | | | | — | | | 17,493 | | | | 102,147 | | | — | | | — |
Sykes | | | 304,544 | | | 337,323 | | | (32,779 | ) | | | — | | | (32,779 | ) | | | 304,544 | | | — | | | — |
TECO Data Center | | | 121,701 | | | 71,136 | | | 50,565 | | | | — | | | 50,565 | | | | 121,701 | | | — | | | — |
Progress Energy Crystal River | | | 70,878 | | | 49,687 | | | 21,191 | | | | — | | | 21,191 | | | | 70,878 | | | — | | | — |
Uniroyal Phase II | | | 1,723,989 | | | 1,229,264 | | | 494,725 | | | | 471,722 | | | 23,003 | | | | 1,723,989 | | | — | | | — |
Ritz-Carlton, Sarasota | | | 5,272,878 | | | 5,278,102 | | | (5,224 | ) | | | 50,108 | | | (55,332 | ) | | | 5,272,878 | | | — | | | — |
Ritz-Carlton Condos | | | 1,284,711 | | | 1,245,314 | | | 39,397 | | | | 15,183 | | | 24,214 | | | | 1,284,711 | | | — | | | — |
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TOTAL | | $ | 33,100,182 | | $ | 24,762,360 | | $ | 8,337,822 | | | $ | 4,219,659 | | $ | 4,118,163 | | | $ | 33,100,182 | | $ | — | | $ | — |
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23
Electric Machinery Enterprises, Inc. and Subsidiary
SCHEDULE OF TIME AND MATERIAL JOB ACTIVITY
December 31, 2002
| | | | | | | | | | | | | | | | | | | |
| | | JOB
REVENUE
| | DIRECT
COSTS
| | PROFIT
| | BILLING
| | BILLINGS IN
EXCESS OF
COSTS AND ESTIMATED
EARNINGS
| | | COSTS AND
ESTIMATED
EARNINGS IN
EXCESS OF
BILLINGS
|
2002 TIME AND MATERIAL JOB ACTIVITY | | $ | 10,990,850 | | $ | 7,082,686 | | $ | 3,908,164 | | $ | 10,816,692 | | $ | (179,945 | ) | | $ | 354,103 |
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24
