EXHIBIT 13
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
WITH CONSOLIDATING INFORMATION
YEARS ENDED JUNE 30, 2008 AND 2007
TABLE OF CONTENTS
Page
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Consolidated Balance Sheets 1
Consolidated Statements of Operations 2
Consolidated Statements of Stockholders' Equity 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Consolidating Information:
Report of Independent Registered Public Accounting Firm
on Consolidating Information 28
Consolidating Balance Sheets 29
Consolidating Statements of Operations 31
WIPFLI LLP
CPAs and Consultants
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Oakridge Holdings, Inc. and Subsidiaries
Chicago, Illinois
We have audited the accompanying consolidated balance sheets of Oakridge
Holdings, Inc. and Subsidiaries as of June 30, 2008 and 2007, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration 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 opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Oakridge Holdings,
Inc. and Subsidiaries as of June 30, 2008 and 2007, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.
As discussed in Note 18, the Company has restated its Consolidated Balance
Sheets as of June 30, 2008 and 2007, and the related Consolidated Statements of
Cash Flows for the years then ended to reflect the correction of errors in the
classification of the pre-need trust investment and the cash flows resulting
from the perpetual care and pre-need trust investments.
/s/ WIPFLI LLP
WIPFLI LLP
St. Paul, Minnesota
September 24, 2008
(September 28, 2009 as to the effects of the restatements discussed in Note 18
to the consolidated financial statements)
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30,2008 June 30,2007
ASSETS
Current assets:
Cash and cash equivalents $278,202 $854,495
Accounts receivable, less allowance for
doubtful accounts of $15,000 in 2008 and 2007 2,204,311 1,003,020
Current portion of net investment in
sales-type lease 460,200 1,100,316
Inventories:
Production 5,656,996 3,982,912
Cemetery, mausoleum space, and markers 645,941 644,057
Deferred income tax assets 178,000 170,000
Other current assets 100,873 79,628
----------- -----------
Total current assets 9,524,523 7,834,428
----------- -----------
Property and equipment:
Property and equipment 6,226,836 5,970,258
Less accumulated depreciation 3,862,029 3,612,173
----------- -----------
Property and equipment, net 2,364,807 2,358,085
----------- -----------
Other assets:
Net investment in sales-type lease,
net of current portion - 362,193
Cemetery perpetual care trusts 4,918,067 5,026,336
Preneed trust investments 1,926,120 1,783,664
Debt issuance costs, less accumulated
amortization of $645 and $0 in 2008
and 2007 76,785 -
Deferred income tax assets 82,000 162,000
Other 19,800 22,358
----------- -----------
Total other assets 7,022,772 7,356,551
----------- -----------
Total Assets $18,912,102 $17,549,064
----------- -----------
June 30,2008 June 30,2007
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $520,000 $1,861,000
Accounts payable - trade 1,140,562 898,225
Due to finance company 980,544 129,632
Accrued liabilities 814,356 713,075
Deferred revenue 2,372,525 3,526,029
Current maturities of long-term debt 212,575 524,831
----------- -----------
Total current liabilities 6,040,562 7,652,792
----------- -----------
Long-term liabilities:
Non-controlling interest in pre-need
trust investments 1,926,120 1,783,664
Bank debt 4,415,274 1,589,844
----------- -----------
6,341,394 3,373,508
----------- -----------
Total liabilities 12,381,956 11,026,300
----------- -----------
Non-controlling interest in perpetual
care trust investments 4,918,067 5,026,336
----------- -----------
Stockholders' equity:
Preferred stock, $.10 par value, 1,000,000
shares authorized; none issued - -
Common stock, $.10 par value, 5,000,000
shares authorized; shares issued and
outstanding 1,431,503 in 2008 and 2007 143,151 143,151
Additional paid-in capital 2,028,975 2,028,975
Accumulated deficit (560,047) (675,698)
----------- -----------
Total stockholders' equity 1,612,079 1,496,428
----------- -----------
Total Liabilities and Stockholders' Equity $18,912,102 $17,549,064
=========== ===========
See Notes to Consolidated Financial Statements
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended Year Ended
June 30, 2008 June 30, 2007
---------- ----------
Revenue $11,240,378 $8,216,424
Cost of good sold 9,174,802 7,116,019
---------- ----------
Gross margin 2,065,576 1,100,405
Selling, general and administrative expenses:
Selling 517,002 532,463
General and administrative 1,109,136 977,039
---------- ----------
1,626,138 1,509,502
---------- ----------
Income (loss) from operations 439,438 (409,097)
---------- ----------
Other income (expense):
Interest income 120,185 132,928
Interest expense (369,972) (318,649)
---------- ----------
Total other expense (249,787) (185,721)
---------- ----------
Net income (loss) before income taxes 189,651 (594,818)
(Benefit) provision for income taxes 74,000 (245,000)
---------- ----------
Net income (loss) $115,651 $(349,818)
========== ==========
Earnings per share:
Basic income (loss) per share $0.08 $(0.24)
========== ==========
Diluted net income (loss) per share $0.07 $(0.24)
========== ==========
See Notes to Consolidated Financial Statements
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 2008 AND 2007
Common Stock
Number of Common Additional Retained Total
Shares Stock Paid-In Earnings
Capital (Deficit)
BALANCE,
June 30, 2006 1,431,503 $143,151 $2,028,975 $(325,880) $1,846,246
Net loss - - - (349,818) (349,818)
--------- -------- ---------- -------- ----------
BALANCE,
June 30, 2007 1,431,503 $143,151 $2,028,975 $(675,698) $1,496,428
Net income - - - 115,651 115,651
--------- -------- ---------- -------- ----------
BALANCE,
June 30, 2008 1,431,503 $143,151 $2,028,975 (560,047) 1,612,079
========= ======== ========== ========= ==========
See Notes to Consolidated Financial Statements
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) In Cash and Cash Equivalents
Year Ended Year Ended
June 30,2008 June 30,2007
Cash flows from operating activities:
Net income (loss) $115,651 $(349,818)
Adjustments to reconcile net income (loss) to
net cash flows from operating activities:
Depreciation and amortization 250,502 272,651
Deferred income taxes 72,000 (246,000)
Accounts receivables (1,201,291) 1,220,998
Inventories (1,675,968) (1,549,071)
Other assets (18,687) (18,695)
Accounts payable and due to finance company 1,093,249 (284,745)
Realized and unrealized gains (losses) of
non-controlling trusts (100,716) 300,711
Change in non-controlling trust investments 56,665 115,631
Change in pre-need trust investments 78,238 (2,931)
Deferred revenue (1,153,504) 448,793
Accrued liabilities 101,281 (81,110)
---------- ----------
Net cash flows from operating activities (2,382,580) (173,586)
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (256,579) (69,088)
Debt issuance costs (3,000) -
Payments on net investment in sales-type lease 1,002,309 550,203
Purchases of non-controlling investments
in trusts (1,263,905) (3,582,758)
Sales of non-controlling investments in trusts 1,229,718 3,169,347
---------- ----------
Net cash flows from investing activities 708,543 67,704
---------- ----------
Cash flows from financing activities:
Change in notes payable - bank (1,341,000) 36,000
Proceeds from issuance of debt 4,260,570 -
Principal payments on long-term debt (1,821,826) (141,086)
---------- ----------
Net cash flows from financing activities 1,097,744 (105,086)
---------- ----------
Net change in cash and cash equivalents (576,293) (210,968)
Cash and cash equivalents, beginning of year 854,495 1,065,463
---------- ----------
Cash and cash equivalents, end of year $278,202 $854,495
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the years for:
Interest $367,498 $318,649
========== ==========
Income taxes $2,000 $2,000
========== ==========
Noncash investing and financing activity:
- -The Company re-financed debt during 2008, resulting in debt issuance
costs of $74,430 being paid directly by new bank at closing of
transaction.
- -During 2007, the Company entered into a sales-type lease resulting in
a net investment in sales-type lease and deferred revenue of $2,012,712.
See Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2008 AND 2007
1. THE COMPANY
NATURE OF BUSINESS
The Company is a Minnesota corporation organized on March 6, 1961. The
Company operates two cemeteries in Illinois and an aviation ground support
equipment business in Minnesota. The cemetery operations routinely grant
credit to pre-need customers, substantially all of who are in the Chicago
area. On June 29, 1998, the Company acquired the net assets of an aviation
ground support equipment business (Stinar). Stinar designs, engineers and
manufactures aviation ground support equipment serving the United States
Armed Services and businesses domestically and internationally.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, each of which is wholly-owned. All significant
intercompany balances and transactions have been eliminated in the
consolidated financial statements.
SEGMENT REPORTING
The Company operates and manages the business under two reporting segments,
cemeteries and aviation ground support equipment.
COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) includes net income (loss) and items defined
as other comprehensive income (loss). Items defined as other comprehensive
income (loss) include items such as foreign currency translation
adjustments and unrealized gains and losses on certain marketable
securities. For the years ended June 30, 2008 and 2007, there were no
adjustments to net income (loss) to arrive at comprehensive income (loss).
FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments at
June 30, 2008, and the methods and assumptions used to estimate such fair
values, were as follows:
Cash and cash equivalents - Fair value approximates the carrying
amount because of the short maturity of those financial instruments.
Net investment in sales-type lease - Fair value is estimated using
the discounted cash flow analysis. At June 30, 2008 and 2007, the fair
value approximated the carrying value.
Long term debt and other notes payable - Fair value is estimated
using discounted cash flow analysis, based on the interest rates that
are currently available to the Company for issuance of debt with similar
terms and remaining maturities. At June 30, 2008 and 2007, the fair value
approximated the carrying value.
ESTIMATES AND ASSUMPTIONS
The preparation of consolidated financial statements in accordance with
United States 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 consolidated financial statements, and the reported
amounts of revenue and expenses during the reporting period. As a result,
actual amounts could differ from those estimates.
CONCENTRATIONS
Credit Risk
The Company's cash deposits from time to time exceed federally insured
limits. The Company has not experienced any losses on its cash deposits
in the past. At June 30, 2008 the Company exceeded the insured limit by
approximately $155,000.
Financial instruments which potentially subject the Company to a
concentration of credit risk consist principally of accounts receivable
and a lease receivable. The Company generally does not require collateral
for its trade accounts receivable and the Company continues to hold the
title for equipment under lease. Two foreign customers accounted for 59%
and 62% of Stinar's accounts receivable at June 30, 2008 and 2007,
respectively. Additionally, the U.S. Government accounted for
approximately 23% of Stinar's accounts receivable at June 30, 2008.
Customers
A significant portion of the Company's customers are concentrated in the
airline industry. A downturn in the airline industry related to the
September 11, 2001, acts of terrorism and increases in fuel costs have
had a negative impact on the Company's continuing operations.
Net sales to international customers and the United States government
were approximately 44% and 32% of Stinar's net sales in 2008, and
approximately 35% and 18% of Stinar's net sales in 2007, respectively.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows and balance
sheets, the Company considers all highly liquid investments purchased with
a maturity of three months or less to be cash equivalents.
ACCOUNTS RECEIVABLES
The Company provides an allowance for doubtful accounts equal to the
estimated uncollectible amounts. The Company's estimate is based on
historical collection experience and a review of the current status of
accounts receivable. It is reasonably possible that the Company's estimate
of the allowance for doubtful accounts will change.
NET INVESTMENT IN SALES-TYPE LEASE
During 2007 the Company began leasing aviation ground support equipment.
The current lease is classified as sales-type lease and expires in
September 2008.
INVENTORIES
Finished goods, component parts and work-in-process inventories are stated
at the lower of cost (first-in, first-out [FIFO]) or market. The cemetery
and mausoleum space available for sale is stated at the lower of cost
(determined by an allocation of the total purchase and development costs
of each of the properties to the number of spaces available) or market.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the related
assets and are generally depreciated over a 3 to 15 year period. When
assets are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and any resulting
gain or loss is recognized in income for the period. The cost of
maintenance and repairs is charged to operations as incurred and
significant renewals and betterments are capitalized.
DEBT ISSUANCE COSTS
Debt issuance costs are carried at cost and amortized using the
straight-line method over the term of the related debt.
LONG-LIVED ASSETS
The Company periodically evaluates the carrying value of long-lived
assets to be held and used, including but not limited to, capital assets,
when events and circumstances warrant such a review. The carrying value
of a long-lived asset is considered impaired when the anticipated
undiscounted cash flow from such asset is less than its carrying value.
In that event, a loss is recognized based on the amount by which the
carrying value exceeds the fair value of the long-lived asset. Fair value
is determined primarily using the anticipated cash flows discounted at a
rate commensurate with the risk involved. Losses on long-lived assets
to be disposed of are determined in a similar manner, except that fair
values are reduced for the cost to dispose.
PRODUCT WARRANTY LIABILITY
The Company's aviation ground equipment segment warrants its products
against certain defects based on contract terms. Generally, warranty
periods are five years for workmanship and manufacturing defects
and seven years for painting defects. The Company has recourse
provisions for certain items that would enable recovery from third parties
for amounts paid under the warranties. At June 30, 2008 and 2007 the
Company's estimated product warranty liability based on historical
activity was $15,000.
REVENUE RECOGNITION
Cemetery and Mausoleum Space Revenue
Sales of cemetery merchandise and services and at-need cemetery interment
rights are recorded as revenue when the merchandise is delivered or service
is performed.
Sales of pre-need cemetery interment rights are recognized in accordance
with the retail land sales provisions of Statement of Financial Accounting
Standards No. 66, "Accounting for Sales of Real Estate" ("FAS No. 66").
Accordingly, provided certain collectable criteria are met, pre-need
cemetery interment right sales are deferred until a specified minimum
percentage of the sales price has been collected. A portion of the
proceeds from cemetery sales for interment rights is generally required by
law to be paid into perpetual care trusts. Earnings of perpetual care
trusts are recognized in current cemetery revenue and are used to defray
the maintenance costs of cemeteries, which are expensed as incurred.
Pursuant to various state and provincial laws, a portion of the proceeds
from the sale of pre-need merchandise and services are required to be paid
into trusts, which are included in pre-need trust investments are in the
Company's consolidated financial statements. The un-trusted proceeds are
included in deferred revenue. Revenue is recognized on the sale of the
pre-need opening and closing services and grave boxes sales upon delivery
at the time of need. The revenue recognized upon delivery is the
trusted amount plus the un-trusted amount included in deferred revenue.
Selling costs related to the sale of pre-need cemetery contract revenues
are expensed in the period incurred.
Aviation Ground Support Equipment
Revenue is recognized when the risks and rewards of ownership transfer to
customers, which is generally at the time of shipment or upon customer
inspection and approval of the equipment.
The Company has a contract to supply equipment to the US Government which
includes specific phases to which dollar amounts were assigned. The
Company will recognize revenue on the completed contract method because
the Company is not able to make reasonably dependable estimates of the
percentage of work completed on the contract due to the unique nature of
the contract; the US Government does not have the right to take
possession of the work in process; the deliverables resulting from
specific phases provide no value to the US Government without delivery
of the specific piece of equipment; and the Company does not have the
ability to require progress payments for the work in process.
SHIPPING AND HANDLING COSTS
All shipping and handling revenue is included in revenue. All direct costs
to ship the products to customers are classified as cost of goods sold.
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 income taxes. Deferred income taxes relate to differences
between the financial and tax bases of certain assets and liabilities.
The significant temporary differences relate to operating loss carry
forwards, depreciation, inventories and certain accruals. Deferred income
tax assets and liabilities represent the future tax return consequences
of those differences, which will either be taxable or deductible when the
assets and liabilities are recovered or settled.
The Company has adopted the provisions of the Financial Accounting
Standards Board's (FASB) Interpretation No. 48 (FIN 48), "Accounting
for Uncertainty in Income Taxes - an interpretation of Statement of
Financial Accounting Standards (SFAS) Statement No. 109." FIN 48
clarifies the accounting for uncertainty in income taxes recognized in
an enterprise's financial statements, and prescribes a recognition
threshold and measurement process for financial statement recognition
and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.
The Company files consolidated income tax returns in the U.S. federal
jurisdiction and various state jurisdictions. Based on the company's
evaluation, the company has concluded that there are no significant
unrecognized tax implications. The Company's evaluation was performed for
the tax years ended June 30, 2004 through June 30, 2008, the tax years
that remain subject to examination by major tax jurisdictions as of
June 30, 2008. The Company does not believe there will be any material
changes in unrecognized tax positions over the next twelve months.
The Company may from time to time be assessed interest or penalties by
major tax jurisdictions, although any such assessments historically have
been minimal and immaterial to financial results. In accordance with
FIN 48, paragraph 19, the Company has decided to classify interest and
penalties as a component of income tax expense.
ENVIRONMENTAL COSTS
Environmental expenditures that pertain to current operations or relate to
future revenue are expensed or capitalized consistent with the Company's
capitalization policy. Expenditures that result from the remediation of an
existing condition caused by past operations that do not contribute to
current or future revenue are expensed. Liabilities are recognized for
remedial activities when the clean-up is probable and the cost can be
reasonably estimated.
ADVERTISING COSTS
Advertising costs are expensed as incurred.
SHARE-BASED PAYMENTS
Effective July 1, 2006 the Company adopted FASB Statement No. 123(R)
"Share-Based Payment" (SFAS 123(R)), which requires an entity to reflect
on its income statement, instead of pro forma disclosures in its financial
footnotes, the cost of employee services received in exchange for an award
of equity instruments based on the grant-date fair market value of the
award. Statement 123(R) supersedes the Company's previous accounting under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" for periods beginning prior to December 31, 2005. The
Company adopted SFAS 123(R) using the modified prospective transition
method.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs in the product development process are
expensed as incurred. Assets that are acquired for research and
development activities and have alternative future uses in addition to
a current use are included in equipment and depreciated over the assets'
estimated useful lives. Research and development costs consist primarily
of contract engineering costs for outsourced design or development and
equipment and material costs relating to all design and prototype
development activities.
BASIC AND DILUTED NET EARNINGS PER SHARE
Basic net earnings (loss) per common share is computed by dividing net
earnings (loss) applicable to common stockholders by the weighted-average
number of common shares outstanding during the period. Diluted net
earnings (loss) per common share is determined using the weighted-average
number of common shares outstanding during the period, adjusted for the
dilutive effect of common stock equivalents, consisting of shares that
might be issued upon exercise of common stock options and conversion of
subordinated debenture and adjusting the net earnings (loss) applicable to
common stockholders resulting from the assumed conversions. In periods
where losses are reported, the weighted-average number of common shares
outstanding excludes common stock equivalents, because their inclusion
would be anti-dilutive.
RECENT ACCOUNTING PRONOUNCEMENTS
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 157, Fair Value
Measurements ("SFAS No. 157"). This standard clarifies the principle that
fair value should be based on the assumptions that market participants
would use when pricing an asset or liability. Additionally, it establishes
a fair value hierarchy that prioritizes the information used to develop
those assumptions. This standard is effective for financial statements
issued for fiscal years beginning after November 15, 2007. We are
currently evaluating the impact of this statement. We believe the
adoption of SFAS No. 157 will not have a material impact on our
consolidated financial position or results of operations.
3. CONSOLIDATION OF VARIABLE INTEREST ENTITY
In January 2003, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. 46, "Consolidation of Variable Interest Entities,
an Interpretation of Accounting Research Bulletin ("ARB") No. 51." This
interpretation clarifies the application of ARB No. 51, "Consolidated
Financial Statements", to certain entities in which equity investors do
not have the characteristics of a controlling financial interest or do not
have sufficient equity risk for the entity to finance its activities
without additional subordinated financial support from other parties.
In December 2003, the FASB revised FASB Interpretation No. 46 ("FIN 46R").
The Company implemented FIN 46R as of January 1, 2005, which resulted in
the consolidation of the Company's preneed cemetery merchandise and
service trusts and the Company's cemetery perpetual care trusts. The
implementation of FIN 46R affected certain line items in the consolidated
balance sheet, but had no impact on net earnings. Also, the
implementation of FIN 46R did not result in any net changes to the
Company's consolidated statement of cash flows, but does require
disclosure of certain financing and investing activities. See notes 4
and 5.
Although FIN 46R requires consolidation of the preneed cemetery
merchandise and services trusts and cemetery perpetual care trusts, it
does not change the legal relationships among the trusts, the Company
and its customers. In the case of preneed cemetery merchandise and
services trusts, the customers are the legal beneficiaries. In the case
of cemetery perpetual care trusts, the Company does not have a legal right
to the cemetery perpetual care trust assets. For these reasons, upon
consolidation of the trusts, the Company recognized non-controlling
interests in its financial statements to reflect third-party interests in
these trusts in accordance with SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and
Equity." The Company classifies deposits to the cemetery merchandise
and service trusts and perpetual care trusts as non-controlling.
All of these trusts hold investments in marketable securities, which have
been classified as available-for-sale and are reported at fair value,
with unrealized gains and losses excluded from earnings and initially
reported as a separate component of accumulated other comprehensive
income or loss in the Company's consolidated balance sheet pursuant to the
provisions of SFAS No. 115. Unrealized gains and losses attributable to
the non-controlling interest holders are reclassified from accumulated
other comprehensive income or loss to non-controlling interest in
cemetery trusts and perpetual care trusts in the Company's consolidated
balance sheet. Unrealized gains and losses attributable to the Company,
but that have not been earned through the performance of services or
delivery of merchandise are reclassified from accumulated other
comprehensive income or loss to deferred revenues.
The Company recognizes realized earnings of the preneed cemetery
merchandise and services trusts and perpetual care trusts within
investment and other income, net (with a corresponding debit to the
related trust asset). The Company then recognizes a corresponding
expense within investment and other income, net, representing the
realized earnings of these trusts attributable to the non-controlling
interest holders (with a corresponding credit to non-controlling
interest in cemetery trusts or non-controlling interest in cemetery
perpetual care trusts, as the case may be). The Company also
simultaneously recognizes a similar expense for realized earnings of the
trusts attributable to the Company (with a corresponding credit to
deferred preneed funeral or cemetery revenue), when such earnings have
not been earned by the Company through the performance of services or
delivery of merchandise.
The net effect is an increase by the amount of the realized earnings on
both the trust asset and the related non-controlling interest and deferred
revenue; there is no effect on net income. In the case of cemetery
merchandise and service trusts, the Company recognizes as revenues amounts
attributed to the non-controlling interest holders and the Company upon
the performance of services and delivery of merchandise, including
realized earnings accumulated in these trusts (with corresponding debit
to the related trust asset). The Company then recognizes a corresponding
expense within investment and other income net, representing the realized
earnings of these trusts attributable to the non-controlling interest
holders (with a corresponding credit to non-controlling interest in
cemetery perpetual care trusts, as the case may be). In the case of
cemetery perpetual care trusts, the Company recognizes investment
earnings in cemetery revenues when such earnings are realized and
permitted to be legally withdrawn by the Company (with a corresponding
debit to non-controlling interest in cemetery perpetual care trusts).
These earnings and related funds are intended to defray cemetery
maintenance costs.
The end result of FIN 46R is that the Company's trust assets are now
recorded on the consolidated balance sheet at their market value and
included in trust investments with corresponding credits to
non-controlling interest in perpetual care and trust investments, as
opposed to being recorded at their original cost as deferred revenue
prior to adoption of FIN 46R . The realized earnings on these trust
assets under FIN 46R flow into and out of the statement of earnings
through investment and other income, net with no effect on revenue or
net earnings. Both prior to and after the adoption of FIN 46R,
accumulated trust earnings from the preneed cemetery merchandise and
services trusts are recognized as revenue when the related merchandise
and services are delivered, and cemetery perpetual care trust earnings
are recognized as revenue as they are realized in the trust and
permitted to be legally withdrawn by the Company. In summary, the
adoption of FIN 46R had no effect on revenues, net earnings, cash flows
or stockholders' equity.
For more discussion of the Company's accounting policies after the
implementation of FIN 46R, see Notes 4 and 5.
4. PRENEED TRUST INVESTMENTS
The Company sells price-guaranteed preneed cemetery contracts providing
for merchandise or services to be delivered in the future at prices
prevailing when the agreements are signed. Some or all of the funds
received under these contracts for merchandise or services are required to
be placed into trust accounts, pursuant to Illinois state laws. When a
trust-funded preneed cemetery contract is entered into, the Company records
an asset (included in cemetery receivables and trust investments) and a
corresponding liability (included in deferred cemetery revenues) for the
contract price. As the customer makes payments on the contract prior to
performance by the Company, the Company deposits into the related trust
the required portion of the payment and reclassifies the corresponding
amount from deferred cemetery revenue into non-controlling interest in
cemetery trusts.
The Company recognizes realized earnings of these trusts with investment
and other income, net (with a corresponding debit to receivables and trust
investments). The corresponding expense is recognized within investment
and other income, net, equal to the realized earnings of the trusts
attributable to the non-controlling interest holders (with a corresponding
credit to non-controlling interest in cemetery trusts), or attributable to
the Company (with a corresponding credit to deferred cemetery revenue)
when such earnings have not been earned by the Company through the
performance of services or delivery of merchandise. The net effect is an
increase by the amount of the unrealized earnings in both (1) the trust
asset and (2) the related non-controlling interest or deferred cemetery
revenue items; there is no effect on net earnings. The cumulative
undistributed net trust investment earnings of the cemetery merchandise
and services trusts are included in non-controlling interest in cemetery
trusts. Upon performance of services or delivery of merchandise, the
Company recognizes as revenues amounts attributed to the non-controlling
interest holders, including realized trust earnings.
Trust Investments:
Trust investments represent trust assets for contracts sold in advance of
when the merchandise or services are needed. The trust investments in the
consolidated balance sheet was $1,926,120 and $1,783,664 at June 30, 2008
and 2007, respectively.
The market value associated with the preneed cemetery merchandise and
service trust assets as of June 30, 2008 and 2007 are detailed below.
Year Beginning Interest Distributions Contributions Ending
Market Income Market
Value Value
2008 $1,783,664 $64,218 $(31,474) $109,712 $1,926,120
2007 $1,727,913 $58,682 $(141,341) $138,410 $1,783,664
Deferred Cemetery Revenue:
As of June 30, 2008 and 2007, deferred cemetery revenue represents future
preneed cemetery revenues to be recognized upon delivery of merchandise
or performance of services. It includes amounts not required to be
trusted, this includes distributed and distributable trust investment
earnings associated with unperformed preneed cemetery services or
undelivered preneed cemetery merchandise where the related cash or
investments are not held in trust accounts (generally because the Company
was not required to deposit the cash in the trust). Future contract
revenues and non-distributable net trust investment earnings where the
related cash or investments are held in trust accounts are included in
non-controlling interest in cemetery trusts.
5. CEMETERY PERPETUAL CARE TRUSTS
The Company sells price-guaranteed preneed cemetery contracts providing for
property interment rights. For preneed sales of interment rights (cemetery
property), the associated revenue and all costs to acquire the sale are
recognized in accordance with SFAS No. 66, "Accounting For Sales of Real
Estate." Under SFAS No. 66, recognition of revenue and costs must be
deferred until 10 percent of the property sale price has been collected.
The Company is required by state law to pay into the cemetery perpetual
care trusts a portion of the proceeds from the sale of cemetery property
interment rights. As a result of implementation of FIN 46R, the Company
has consolidated the cemetery perpetual care trusts, including investments
accounted for under SFAS No. 115, resulting in such funds being reflected
in cemetery perpetual care trust investments within total assets, with a
corresponding amount reflected as non-controlling interest in perpetual
care trusts.
Beginning January 1, 2005, the Company recognizes realized earnings of
these trusts within investment and other income, net (with a corresponding
debit to cemetery perpetual care trust investments). The Company
recognizes a corresponding expense within investment and other income, net
for the amount of realized earnings of the trusts attributable to the non-
controlling interest holders (with a corresponding credit to non-
controlling interest in perpetual care trusts). The net effect is an
increase by the amount of the realized earnings of the trusts in both the
trust asset and the related non-controlling interest.
Earnings from these cemetery perpetual care trust investments that the
Company is legally permitted to withdraw are recognized in current cemetery
revenues and are used to defray cemetery maintenance costs which are
expensed as incurred.
Year Beginning Realized Unrealized Distributions Contributions Change Ending
Market Gain Gain (loss) in Market
Value Cash Value
2008 $5,026,336 $161,927 $(326,861) $(123,698) $90,675 $89,688 $4,918,067
2007 $4,668,676 $438,460 $(196,431) $(129,511) $79,127 $166,015 $5,026,336
6. NET INVESTMENT IN SALES-TYPE LEASE
The Company entered into a 24 month sales-type lease with a customer for
six High Deck Patient Loading Platform Vehicles, maturing in October 2008.
The following lists the components of the net investment in the sales-type
lease outstanding as of June 30:
2008 2007
Total minimum lease payments to be received $466,594 $1,547,763
Less: Amounts representing executory costs - -
---------- ----------
Minimum lease payments receivable 466,594 1,547,763
Less: Allowance for uncollectibles - -
---------- ----------
Net minimum lease payments receivable 466,594 1,547,763
Less: Unearned income 6,394 85,254
---------- ----------
Net investment in sales-type lease $460,200 $1,462,509
========== ==========
7. INVENTORIES
Production inventories consisted of the following:
2008 2007
Finished goods $1,130,988 $910,520
Work-in-process 2,399,936 1,452,357
Raw materials and trucks 2,126,072 1,620,035
---------- ----------
$5,656,996 $3,982,912
========== ==========
Inventories of cemetery and mausoleum space available for sale
consisted of the following:
2008 2007
Cemetery space $436,117 $438,852
Mausoleum space and other 209,824 205,205
-------- --------
$645,941 $644,057
======== =========
8. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
2008 2007
Land and improvements $1,366,000 $1,366,000
Building and improvements 2,355,552 2,133,784
Vehicles 520,465 528,545
Equipment 1,984,819 1,941,929
---------- ----------
$6,226,836 $5,970,258
========== ==========
Depreciation charged to operations was $249,857 in 2008 and $272,651 in
2007.
9. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
2008 2007
Salaries and payroll taxes $574,146 $424,361
Due trust funds 148,926 140,238
Interest 14,624 12,150
Other 76,660 136,326
-------- --------
$814,356 $713,075
======== ========
10. DEBT
Due to Finance Company
A finance company finances a subsidiary's inventory chassis purchases,
which are used in the production of aviation ground support equipment.
At June 30, 2008 and 2007, $980,544 and $129,632 was outstanding with
interest ranging from 5.88% to 7.66%, beginning 90 days after purchase.
The financing is secured by chassis inventory and personally guaranteed
by the assets of the chief executive officer/key stockholder.
Note Payable - Bank
The Company had a $2,500,000 line of credit of which was paid off from the
proceeds of financing secured with a new bank in May 2008. The new line of
credit facility is $1,000,000, of which $520,000 was in use at
June 30, 2008, with interest at 1% over the reference rate (6.0% at
June 30, 2008), maturing May 22, 2009. The reference rate is the rate
announced by U.S. Bank National Association. The note is secured by the
assets of the Company's wholly owned subsidiary, Stinar HG, Inc.,
continuing commercial guarantees from both the Company and the chief
executive officer/key stockholder, and by the assignment of a life
insurance policy on the chief executive officer/key stockholder.
See loan covenants below.
Long Term Debt
Long-term debt consisted of the following:
2008 2007
Note payable bank, payable in monthly
installments of $7,397, including interest
at 9.0%, maturing May 2008, secured by the
common stock of Oakridge Cemeteries, a
wholly owned subsidiary. The note payable
was paid off in 2008 from proceeds of the
new bank financing in May 2008. $ - $421,691
Note payable bank, payable in monthly
installments of $6,922, including interest
at the bank's reference rate plus .75%.
The note is secured by all the assets of
Stinar HG, Inc. The note payable was paid
off in 2008 from proceeds of the new bank
financing in May 2008. - 205,537
Contracts for deed, payable in monthly
installments of $6,798 and $1,236, including
interest at 7.00%. The contract for deed
was paid off in 2008 from proceeds of the
new bank financing in May 2008. - 1,163,607
Note payable bank payable in monthly
installments of $781, including interest
at 5.75%. The note is secured by the
equipment and matures January 2011. 17,123 29,657
Note payable finance company, payable
in monthly installments of $615, including
interest at 8.25%. The note is secured by
the equipment and matures April 2011. 21,785 24,183
Note payable - bank, payable in monthly
installments of $17,060, including interest
at 7.5%, with balloon payment in May 2013.
The note is secured by the assets of Stinar
including accounts receivable of $2,010,569
at June 30, 2008, continuing commercial
guarantees from both the Company and the
chief executive officer/key stockholder,
and by the assignment of a life insurance
policy on the chief executive officer/key
stockholder. Additionally, the note is
secured by a first mortgage on property
owned by Stinar. See loan covenants below. 2,096,065 -
Note payable - bank, payable in monthly
installments of $22,457 including interest
at the prime rate plus 1%, adjusted every
calendar quarter (6.25% at June 30, 2008),
maturing in May 2018. The note is secured
by the assets of Stinar including accounts
receivable of $2,010,569 at June 30, 2008,
and the unconditional guarantee of the
chief executive officer/key stockholder,
and by the assignment of a life insurance
policy on the chief executive officer/key
stockholder. See loan covenants below. 1,987,876 -
---------- ----------
Long-term debt before debentures 4,122,849 1,844,675
Convertible subordinated debentures -
unsecured with 9% interest due annually
each December 31, convertible into one
common share for each $2.00 of principal,
originally maturing in July 2008 and
subsequently extended to July 2009.
In May 2008, this debenture was
refinanced through a new subordinated
convertible debenture. All of the
debentures are issued to
shareholder/officers of the Company. - 270,000
Convertible subordinated debentures -
unsecured with 9% interest due annually
each January 1, convertible into one
common share for each $.90 of principal,
maturing on July 1, 2010. The debentures
are issued to shareholder/officers and
shareholder/board members of the Company. 505,000 -
---------- ----------
4,627,849 2,114,675
Less current maturities 212,575 524,831
---------- ----------
$4,415,274 $1,589,844
========== ==========
Future maturities of long-term debt are as follows:
2009 $212,575
2010 732,505
2011 235,986
2012 241,754
2013 2,067,030
Thereafter 1,137,999
----------
$4,627,849
==========
Loan Covenants
Stinar's bank loan agreements stipulate certain affirmative and negative
covenants, including financial covenants for cash flow and debt to
equity measured on a stand-alone basis. As of and for the year ended
June 30, 2008, the actual cash flow to current maturity ratio was .85
to 1.00 while the allowed minimum was 1.20 to 1.00, and the debt to
equity ratio was 4.62 to 1.00 while the maximum allowed was 4.50 to
1.00. The bank subsequently amended each of these covenants to match
the actual 2008 results.
11. INCOME TAXES
The income tax provision (benefit) is comprised of the following:
2008 2007
Current tax expense (benefit):
Federal $ - $ -
State 2,000 1,000
---------- ----------
Total current 2,000 1,000
---------- ----------
Deferred tax (benefit):
Federal 80,000 (25,000)
State (8,000) (4,000)
---------- ----------
Total deferred 72,000 (29,000)
---------- ----------
Benefits of operating loss carryforwards - (217,000)
Total expense (credit) for income taxes $74,000 $(245,000)
========== ==========
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax basis of the Company's assets and
liabilities. The major temporary differences that give rise to the deferred
tax liabilities and assets are as follows:
2008 2007
Deferred tax assets:
Inventory $67,000 $45,000
Vacation 43,000 61,000
Tax credit carryforwards 34,000 13,000
Net operating loss carryforwards 92,000 239,000
Other 81,000 65,000
------- -------
Gross deferred tax asset 317,000 423,000
------- -------
Deferred tax liabilities:
Property and equipment (57,000) (91,000)
-------- --------
Gross deferred tax liability (57,000) (91,000)
-------- --------
Net deferred tax asset $260,000 $332,000
======== ========
The provision for income taxes varies from the amount of income tax
determined by applying the applicable federal statutory income taxes to
pretax income as a result of the following differences:
2008 2007
Statutory U.S. federal tax rate 34.0% 34.0%
State taxes, net of federal benefit (3.2)% 7.0%
Net operating loss and credit adjustments 11.2% -
Permanent differences and other 3.0% .2
----- -----
39.0% 41.2%
===== =====
The net deferred income tax assets in the accompanying consolidated balance
sheets included the following components as of June 30, 2008 and 2007:
2008 2007
Total deferred income tax assets, no
valuation allowance considered necessary $317,000 $423,000
Total deferred income tax assets (57,000) (91,000)
-------- --------
$260,000 $332,000
======== ========
The Company has federal and state net operating loss carryforwards of
approximately $190,000 and $483,000, respectively, which begin to
expire in 2017.
12. OTHER RELATED PARTY TRANSACTIONS
Amounts paid for compliance services to entities related to the chief
executive officer's spouse were $17,742 in 2008 and $9,785 in 2007.
Interest expense on the related party convertible debentures totaled
$31,435 and $24,300 in 2008 and 2007, respectively. The Company has
a month-to-month operating lease from one of the officers. Total rent
expense was $24,600 in 2008 and 2007.
13. BENEFIT PLANS
Certain subsidiaries of the Company participate in a multi employer
union administered defined benefit pension plan that covers the cemetery
employees. The current union agreement expires on February 28, 2010.
Pension expense under this plan was $17,407 in 2008 and $24,848 in 2007.
14. STOCK OPTIONS
On September 1, 1998, the Board of Directors approved a Stock Incentive
Awards Plan to attract and retain individuals to contribute to the
achievement of the Company's economic objectives. Under the Plan,
individuals are eligible based on the judgment of a committee of Board
members (committee). At the discretion of the committee, eligible
recipients may be granted options to purchase shares of the Company's
common stock at an exercise price per share equal to the market price at
the grant date. The stock options are exercisable at such times and in such
installments as determined by the committee, limited to a maximum of ten
years from the date of the grant. The Plan has authorized the issuance of
175,000 shares of common stock under the Plan, there were no grants for
shares issued in 2008 and 2007, and at June 30, 2008, 165,000 shares were
available for future grants.
SFAS 123(R) requires companies to estimate the fair value of share-based
payment awards on the date of grant using an option-pricing model. The
value of the portion of the award that is ultimately expected to vest is
recognized as expense over the requisite service periods in the Company's
Statements of Operations. The Company recorded $0 of related compensation
expense for the year ended June 30, 2008 as no options were granted
during the period.
The Company uses the Black-Sholes-Merton ("Black Sholes") option-pricing
model as a method for determining the estimated fair market value for
employee stock awards. This is the same option-pricing model used in prior
years to calculate pro forma compensation expense under SFAS 123
footnote disclosures. Compensation expense for employee stock awards is
recognized on a straight-line basis over the vesting period of the award.
Shares subject to option are summarized as follows:
Employee Stock Weighted
Options Average
Exercise
Price
Balance, June 30, 2007 10,000 $1.63
Balance, June 30, 2008 10,000 $1.63
======
Options exercisable at:
June 30, 2007 10,000 $1.63
June 30, 2008 10,000 $1.63
Information regarding options outstanding at June 30, 2006, is as follows:
Type of Option Number Exercise Weighted Weighted Agggregate
of Price Range Average Average Intrinsic
Options Exercise Remaining Value
Price Contractual
Life
Employee Stock
Options 10,000 $1.25-$2.00 $1.63 2 Years $-
The aggregate intrinsic value in the table represents the difference
between the closing stock price on June 30, 2008 and the exercise price,
multiplied by the number of in-the-money options that would have been
received by the option holders had all option holders exercised their
options on June 30, 2008. There were no options exercised during fiscal
years ending 2008 and 2007.
15. EARNINGS PER SHARE OF COMMON STOCK DISCLOSURES
The following table reconciles the income (loss) and shares of the basic
and diluted earnings per share computations:
2008 2007
Net Income Net Income
(Loss) Shares Per-Share (Loss) Shares Per-Share
---------- ------------ ------- ---------- ------------ -------
(Numerator)(Denominator) Amount (Numerator)(Denominator) Amount
---------- ------------ ------- ---------- ------------ -------
BASIC EPS
Net income (loss)
available to common
shareholders $115,651 1,431,503 $0.08 $(349,818) 1,431,503 $(0.24)
EFFECT OF DILUTIVE
SECURITIES
Employee stock options
and convertible
debentures 29,588 561,111 - -
--------- ---------- --------- ---------
DILUTED EPS
Net income (loss)
available to common
shareholders plus
assumed conversions $145,239 1,992,614 $0.07 $(349,818) 1,431,503 $(0.24)
========= ========== ======= ========= ========== =======
SECURITIES
Employee stock options
and convertible
debentures 10,000 145,000
====== =======
16. SEGMENT INFORMATION
The Company's operations are classified into two principal industry
segments: cemeteries and aviation ground support equipment. The
accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based on profit or loss from operations before income taxes.
Financial information by industry segment as of and for the years ended
June 30, 2008 and 2007, is summarized as follows:
Aviation
Ground
Support
Cemeteries Equipment Total
2008 ----------- ------------ -----------
Net sales - external $3,007,274 $8,233,104 $11,240,378
Depreciation 151,165 96,692 247,857
Interest expense 15,456 299,685 315,141
Segment operating profit 487,578 318,223 805,801
Segment assets 12,475,624 9,710,776 22,186,400
Expenditures for segment fixed
assets 241,812 22,846 264,658
Income tax expense 193,000 46,000 239,000
Aviation
Ground
Support
Cemeteries Equipment Total
2007 ----------- ------------ -----------
Net sales - external $2,973,400 $5,243,024 $8,216,424
Depreciation 159,135 109,515 268,650
Interest expense 6,462 254,563 261,025
Segment operating profit (loss) 311,004 (427,599) (116,595)
Segment assets 12,281,359 8,002,933 20,284,292
Expenditures for segment fixed
assets 62,574 1,457 64,031
Income tax expense (benefit) 116,000 (258,000) (142,000)
Reconciliation of segment profit to consolidated income before income
taxes is as follows:
2008 2007
---------- ----------
Total profit (loss) for reportable segments $610,732 $(318,997)
Unallocated amounts:
Interest expense (54,831) (57,624)
Other corporate expenses (366,250) (220,502)
Other corporate income - 2,305
---------- ----------
$189,651 $(594,818)
========== ==========
Reconciliation of segment assets to consolidated assets is as follows:
2008 2007
---------- ----------
Total segment assets $22,186,400 $20,284,292
Other assets 105,934 141,269
Elimination of receivable from holding
company (3,519,232) (3,090,497)
Deferred tax asset 139,000 214,000
---------- ----------
Total assets $18,912,102 $17,549,064
========== ==========
Segment profit represents segment revenues less directly related operating
expenditures including interest of the Company's segments. Management
believes this is the most meaningful measurement of each segment's results
as it excludes consideration of corporate expenses which are common to both
business segments.
Other corporate expenses consist principally of senior management's
compensation and general and administrative expenses. These costs generally
would not be subject to significant reduction upon the discontinuance or
disposal of one of the segments.
17. RESEARCH AND DEVELOPMENT
Research and development expenses charged to operations were $43,744 in 2008
and $22,800 in 2007.
18. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
Certain reclassifications were noted subsequent to the issuance of the
financial statements. Accordingly, these financial statements reflect
the reclassifications as of June 30, 2008 and 2007, and for the years
then ended. Long-term liabilities were increased by the non-controlling
interest in the pre-need trust investments which was previously
presented in the mezzanine section of the consolidated balance sheets.
In addition, the cash flows from operations were adjusted to reflect the
cash flows from the perpetual care and trust investments which were
previously presented as cash flows from investing activities.
The Company has restated its consolidated financial statements as of and
for the year ended June 30, 2008 to correct the errors noted above as
follows:
As Previously Restatement
Reported Adjustments As Restated
------------ ------------ ------------
Consolidated Balance Sheet
June 30, 2008
Current Assets:
Cash and Cash equivalents $278,202 - $278,202
Accounts Receivable, less
allowance for doubtful accounts
of $15,000 2,204,311 - 2,204,311
Current portion of net investments
in sales type lease 460,200 - 460,200
Inventories:
Production 5,656,996 - 5,656,996
Cemetery, mausoleum space and markers 645,941 - 645,941
Deferred income tax assets 178,000 - 178,000
Other current assets 100,873 - 100,873
------------ ------------ ------------
Total current assets 9,524,523 - 9,524,523
------------ ------------ ------------
Property and equipment:
Property and equipment 6,226,836 - 6,226,836
Less accumulated depreciation 3,862,029 - 3,862,029
------------ ------------ ------------
Property and equipment, net 2,364,807 - 2,364,807
------------ ------------ ------------
Other Assets
Cemetery perpetual care trusts 4,918,067 - 4,918,067
Preneed trust investments 1,916,120 - 1,916,120
Debt issuance costs, less accumulated
Amortization of $645 in 2008 76,785 - 76,785
Deferred income tax assets 82,000 - 82,000
Other 19,800 - 19,800
------------ ------------ ------------
Total other assets 7,022,772 - 7,022,772
------------ ------------ ------------
Total Assets $18,912,102 - $18,912,102
============ ============ ============
As Previously Restatement
Reported Adjustments As Restated
------------ ------------ ------------
Liablities and Stockholders Equity:
Current Liabilities:
Notes payable - bank $520,000 - $520,000
Accounts payable - trade 1,140,562 - 1,140,562
Due to finance company 980,544 - 980,544
Accrued liabilities 814,356 - 814,356
Deferred revenue 2,372,525 - 2,372,525
Current maturities of long-term debt 212,575 - 212,575
------------ ------------ ------------
Total Current Liabilities $6,040,562 - $6,040,562
------------ ------------ ------------
Long-term liabilities:
Bank debt 4,415,274 - 4,415,274
Non-controlling interest in pre-need
care trust investments - 1,926,120 1,926,120
------------ ------------ ------------
Total Long term liablities 4,415,274 1,926,120 6,341,394
------------ ------------ ------------
Total liablities 10,455,836 1,926,120 12,381,956
------------ ------------ ------------
Non-controlling interest in
trust investments 6,844,187 (1,926,120) 4,918,067
------------ ------------ ------------
Stockholders' Equity
Preferred stock, $ .10 par value,
1,000,000 shares authorized;
none issued - - -
Common stock, $ .10 par value,
5,000,000 shares authorized;
shares issued and outstanding
1,431,503 in 2008 143,151 - 143,151
Additional paid in capital 2,028,975 - 2,028,975
Accumulated deficit (560,047) - (560,047)
------------ ------------ ------------
Total Stockholders' equity 1,612,079 - 1,612,079
------------ ------------ ------------
Total Liabilities and
Stockholders' Equity $18,912,102 - $18,912,102
============ ============ ============
As Previously Restatement
Reported Adjustments As Restated
------------ ------------ ------------
Consolidated Statement of Operations
For year ending June 30, 2008:
Revenue $11,240,378 - $11,240,378
Cost of goods sold 9,174,802 - 9,174,802
------------ ------------ ------------
Gross Margin 2,065,576 - 2,065,576
------------ ------------ ------------
Selling, general and administrative
expenses:
Selling 517,002 - 517,002
General and administrative 1,109,136 - 1,109,136
------------ ------------ ------------
1,626,138 - 1,626,138
------------ ------------ ------------
Income from operations 439,438 - 439,438
------------ ------------ ------------
Other income (expense):
Interest income 120,185 - 120,185
Interest expense (369,972) - (369,972)
------------ ------------ ------------
Total other expense (249,787) - (249,787)
------------ ------------ ------------
Net Income before income taxes 189,651 - 189,651
Provision for income taxes 74,000 - 74,000
------------ ------------ ------------
Net Income $115,000 - $115,000
============ ============ ============
Earnings per Share
Basic income per share $.08 - .08
============ ============ ============
Diluted net income per share $.07 - .07
============ ============ ============
As Previously Restatement
Reported Adjustments As Restated
------------ ------------ ------------
Consolidating Statements of Cash Flows
For Year ending June 30, 2008:
Cash flow from operating activities:
Net Income $115,651 - $115,651
Adjustments to reconcile net income to
net cash flows from
operating activities:
Depreciation and amortization 250,502 - 250,502
Deferred income taxes 72,000 - 72,000
Accounts Receivable (1,201,291) - (1,201,291)
Inventories (1,675,968) - (1,675,968)
Other Assets (18,687) - (18,687)
Accounts Payable and due to
finance company 1,093,249 - 1,093,249
Realized and unrealized loss of
non-controlling trusts - (100,716) (100,716)
Change in non-controlling trust
in investments - 56,665 56,665
Change in preneed trust
investments - 78,238 78,238
Deferred revenue (1,153,504) - (1,153,504)
Accrued liabilities 101,281 - 101,281
------------ ------------ ------------
Net Cash flows from
operating activities (2,416,767) 34,187 (2,382,580)
------------ ------------ ------------
Cash flow from investing activities:
Purchases of property and equipment (256,579) - (256,579)
Debt Issuance costs (3,000) - (3,000)
Cash inflows to perpetual care and
trust investments 207,166 (207,166) -
Cash inflows to perpetual care and
trust investments (123,698) 123,698 -
Realized losses on perpetual care
and trust investments (83,468) 83,468 -
Payments of net investment in
sales-type lease 1,002,309 - 1,002,309
Purchases of non-controlling
investment in trusts - (1,263,905) (1,263,905)
Sales of non-controlling
investments in trusts - 1,229,718 1,229,718
------------ ------------ ------------
Net Cash flows from
investing activities 742,730 (34,187) 708,543
------------ ------------ ------------
Cash flows from financing activities:
Change in notes payable - bank (1,341,000) - (1,341,000)
Proceeds from issuance of debt 4,260,570 - 4,260,570
Principal payments on long-term debt (1,821,826) - (1,821,826)
------------ ------------ ------------
Net cash flows from
financing activities 1,097,744 - 1,097,744
------------ ------------ ------------
Net Change in cash and
cash equivalents (576,293) - (576,293)
Cash and cash equivalents,
beginning of year 854,495 - 854,495
------------ ------------ ------------
Cash and cash equivalents,
end of year $278,202 - $278,202
============ ============ ============
The Company has restated its consolidated financial statements as of and
for the year ended June 30, 2007 to correct the errors noted above as
follows:
As Previously Restatement
Reported Adjustments As Restated
------------ ------------ ------------
Consolidated Balance Sheet
June 30, 2007
Current Assets:
Cash and Cash equivalents $854,495 - $854,495
Accounts Receivable, less allowance
for doubtful accounts of $15,000 1,103,020 - 1,103,020
Current portion of net investments
in sales type lease 1,100,316 - 1,100,316
Inventories:
Production 3,982,912 - 3,982,912
Cemetery, mausoleum space
and markers 644,057 - 644,057
Deferred income tax assets 170,000 - 170,000
Other current assets 79,628 - 79,628
------------ ------------ ------------
Total current assets 7,834,428 - 7,834,428
------------ ------------ ------------
Property and equipment
Property and equipment 5,970,258 - 5,970,258
Less accumulated depreciation 3,612,173 - 3,612,713
------------ ------------ ------------
Property and equipment, net 2,358,085 - 2,358,085
------------ ------------ ------------
Other Assets
Net investment in sales-type lease,
net of current portion 362,193 - 361,193
Cemetery perpetual care trusts 5,026,336 - 5,026,336
Preneed trust investments 1,783,664 - 1,783,664
Debt issuance costs, less accumulated
amortization of $645 - - -
Deferred income tax assets 162,000 - 162,000
Other 22,358 - 22,358
------------ ------------ ------------
Total other assets 7,356,551 - 7,356,551
------------ ------------ ------------
Total Assets $17,549,064 - $17,549,064
============ ============ ============
As Previously Restatement
Reported Adjustments As Restated
------------ ------------ ------------
Liablities and Stockholders Equity:
Current Liabilities:
Notes payable - bank $1,861,000 - $1,861,000
Accounts payable - trade 898,225 - 898,225
Due to finance Company 129,632 - 129,632
Accrued liabilities 713,075 - 713,075
Deferred revenue 3,526,029 - 3,526,029
Current Maturities of long-term debt 524,831 - 524,831
------------ ------------ ------------
Total Current Liabilities $7,652,792 - $7,652,792
------------ ------------ ------------
Long-term liabilities:
Bank debt 1,589,844 - 1,589,844
Non-controlling interest in pre-need
care trust trust investments - 1,783,664 1,783,664
------------ ------------ ------------
Total Long term liablities 1,589,844 1,783,664 3,373,508
------------ ------------ ------------
Total liablities 9,242,636 1,783,664 11,026,300
------------ ------------ ------------
Non-controlling interest in
trust investments 6,810,000 (1,783,664) 5,026,336
------------ ------------ ------------
Stockholders' Equity
Preferred stock, $.10 par value,
1,000,000 shares authorized;
none issued - - -
Common stock, $.10 par value,
5,000,000 shares authorized;
shares issued and outstanding
1,431,503 in 2008 143,151 - 143,151
Additional paid in capital 2,028,975 - 2,028,975
Accumulated deficit (675,698) - (675,698)
------------ ------------ ------------
Total Stockholders' equity 1,496,428 - 1,496,428
------------ ------------ ------------
Total Liabilities and
Stockholders' Equity $17,549,064 - $17,549,064
============ ============ ============
As Previously Restatement
Reported Adjustments As Restated
------------ ------------ ------------
Consolidated Statement of Operations
For year ending June 30, 2007:
Revenue $8,216,424 - $8,216,424
Cost of goods sold 7,116,019 - 7,116,019
------------ ------------ ------------
Gross Margin 1,100,405 - 1,100,405
------------ ------------ ------------
Selling, general and administrative
expenses:
Selling 532,463 - 532,463
General and administrative 977,039 - 977,039
------------ ------------ ------------
1,509,502 - 1,509,502
Loss from operations (409,097) - (409,097)
------------ ------------ ------------
Other income (expense):
Interest income 132,928 - 132,928
Interest expense (318,649) - (318,649)
------------ ------------ ------------
Total other expense (185,721) - (185,721)
------------ ------------ ------------
Net Loss before income taxes (594,818) - (594,818)
(Benefit) for income taxes (245,000) - (245,000)
------------ ------------ ------------
Net Loss $(349,818) - $(349,818)
============ ============ ============
Earnings per Share
Basic (loss) per share $(0.24) - $(.024)
============ ============ ============
Diluted net (loss) per share $(0.24) - $(0.24)
============ ============ ============
As Previously Restatement
Reported Adjustments As Restated
------------ ------------ ------------
Consolidating Statements of Cash Flows
For Year ending June 30, 2007:
Cash flow from operating activities:
Net Loss $(349,818) - $(349,818)
Adjustments to reconcile net income
to net cash flows from operating
activities:
Depreciation and amortization 272,651 - 272,651
Deferred income taxes (246,000) - (246,000)
Accounts Receivable 1,220,998 - 1,220,998
Inventories (1,549,071) - (1,549,071)
Other assets (18,695) - (18,695)
Accounts Payable and due to
finance company (284,745) - (284,745)
Realized and unrealized gain on
non-controlling trusts - 300,711 300,711
Change in non-controlling trust
in investments - 115,631 115,631
Change in preneed trust investments - (2,931) (2,931)
Deferred revenue 448,793 - 448,793
Accrued liabilities (81,110) - (88,110)
------------ ------------ ------------
Net Cash flows from
operating activities (586,937) 413,411 (173,586)
------------ ------------ ------------
Cash flow from investing activities:
Purchases of property and
equipment (69,088) - (69,088)
Payments of net investment in
sales-type lease 550,203 - 550,203
Cash inflows to perpetual care and
trust investments 229,041 (229,041) -
Cash outflows to perpetual care and
trust investments (129,511) 129,511 -
Realized losses on perpetual care and
trust investments (99,530) 99,530 -
Purchases of non-controlling
investment in trusts - (3,582,758) (3,582,758)
Sales of non-controlling
investments in trusts - 3,169,347 3,169,347
------------ ------------ ------------
Net cash flows from
investing activities 481,115 (413,411) 67,704
------------ ------------ ------------
Cash flows from financing activities:
Change in notes payable - bank 36,000 - 36,000
Principal payments on long-term debt (141,086) - (141,086)
------------ ------------ ------------
Net cash flows from
financing activities (105,086) - (105,086)
------------ ------------ ------------
Net Change in cash and
cash equivalents (210,968) - (210,968)
Cash and cash equivalents,
beginning of year 1,065,463 - 1,065,463
------------ ------------ ------------
Cash and cash equivalents,
end of year $854,495 - $854,495
============ ============ ============
WIPFLI LLP
CPAs and Consultants
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON CONSOLIDATING INFORMATION
Board of Directors and Stockholders
Oakridge Holdings, Inc. and Subsidiaries
Chicago, Illinois
Our report on our audits of the consolidated financial statements of Oakridge
Holdings, Inc. and Subsidiaries for the years ended June 30, 2008 and 2007,
appears on page 1. Those audits were made for the purpose of forming an opinion
on the consolidated financial statements taken as a whole. The consolidating
information on pages 29 through 31 is presented for the purposes of additional
analysis of the consolidated financial statements rather than to present the
financial position and results of operations of the individual companies. Such
information has been subjected to the auditing procedures applied in the audits
of the consolidated financial statements and, in our opinion, is fairly stated
in all material respects in relation to the consolidated financial statements
taken as a whole.
/s/ WIPFLI LLP
WIPFLI LLP
St. Paul, Minnesota
September 24, 2008
(September 28, 2009 as to the effects of the restatements discussed in Note 18
to the consolidated financial statements)
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
June 30, 2008 (with Comparative Totals for 2007)
Oakridge Oakridge Stinar Consolidated
Holdings, Inc. Cemeteries HG, Inc. Eliminations 2008 2007
------------- ---------- ----------- ------------ ---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $25,812 $247,158 $5,232 $ - $278,202 $854,495
Trade receivables - 193,742 2,010,569 - 2,204,311 1,003,020
Current portion of net investment
in sales-type lease - - 460,200 - 460,200 1,100,316
Intercompany receivables 444,001 3,519,232 - (3,963,233) - -
Inventories:
Production - - 5,656,996 - 5,656,996 3,982,912
Cemetery, mausoleum space, markers - 645,941 - - 645,941 644,057
Deferred income tax assets 57,000 18,000 103,000 - 178,000 170,000
Other current assets 57,837 24,288 18,748 - 100,873 79,628
---------- ---------- --------- ------------ ----------- ----------
Total current assets 584,650 4,648,361 8,254,745 (3,963,233) 9,524,523 7,834,428
---------- ---------- --------- ------------ ----------- ----------
Property and equipment 15,376 3,379,091 2,832,369 - 6,226,836 5,970,258
Less accumulated depreciation 12,891 2,396,015 1,453,123 - 3,862,029 3,612,173
---------- ---------- --------- ------------ ----------- ----------
Property and equipment, net 2,485 983,076 1,379,246 - 2,364,807 2,358,085
---------- ---------- --------- ------------ ----------- ----------
Other assets:
Investment in subsidiaries 5,661,973 - - (5,661,973) - -
Net investment in sales-type lease - - - - - 362,193
Cemetery perpetual care trusts - 4,918,067 - - 4,918,067 5,026,336
Preneed trust Investments - 1,926,120 - - 1,926,120 1,783,663
Debt issuance costs - - 76,785 - 76,785 -
Deferred income tax assets 139,000 - - (57,000) 82,000 162,000
Other 19,800 - - - 19,800 22,359
---------- ---------- --------- ------------ ----------- ----------
Total other assets 5,820,773 6,844,187 76,785 (5,718,973) 7,022,772 7,356,551
---------- ---------- --------- ------------ ----------- ----------
Total Assets $6,407,908 $12,475,624 $9,710,776 $(9,682,206) $18,912,102 $17,549,064
========== ========== ========= ============ =========== ==========
Oakridge Oakridge Stinar Consolidated
Holdings, Inc. Cemeteries HG, Inc. Eliminations 2008 2007
------------- ---------- ----------- ------------ ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ - $ - $520,000 $ - $520,000 $1,861,000
Accounts payable - trade 120,246 68,839 951,477 - 1,140,562 898,225
Due to finance company - - 980,544 - 980,544 129,632
Intercompany payables 3,963,233 - - (3,963,233) - -
Deferred revenue - 1,296,188 1,076,337 - 2,372,525 3,526,029
Accrued liabilities 207,350 243,944 363,062 - 814,356 713,075
Current maturities of long term debt - 13,925 198,650 - 212,575 524,831
---------- ---------- --------- ------------ ----------- ----------
Total current liabilities 4,290,829 1,622,896 4,090,070 (3,963,233) 6,040,562 7,652,792
---------- ---------- --------- ------------ ----------- ----------
Long-term liabilities:
Long term debt 505,000 24,982 3,885,292 - 4,415,274 1,589,844
Non-controlling interest in pre-need
care trust investments - 1,926,120 - - 1,926,120 1,783,664
Deferred income tax liabilities - 49,000 8,000 (57,000) - -
---------- ---------- --------- ------------ ----------- ----------
Total long-term liabilities 505,000 2,000,102 3,893,292 (57,000) 6,341,394 3,373,508
---------- ---------- --------- ------------ ----------- ----------
Total Liabilities 4,795,829 1,696,878 7,983,362 (4,020,233) 12,391,956 11,026,300
---------- ---------- --------- ------------ ----------- ----------
Non-controlling interest in
trust investments - 4,918,067 - - 4,918,067 5,026,336
---------- ---------- --------- ------------ ----------- ----------
Stockholders' equity:
Common stock 143,151 20,000 10,000 (30,000) 143,151 143,151
Additional paid in capital 2,028,975 - 2,328,629 (2,328,629) 2,028,975 2,028,975
Retained earnings (deficit) (560,047) 3,914,559 (611,215) (3,303,344) (560,047) (675,698)
---------- ---------- --------- ------------ ----------- ----------
Total Stockholders Equity 1,612,079 3,934,559 1,727,414 (5,661,973) 1,612,079 1,496,428
---------- ---------- --------- ------------ ----------- ----------
Total Liabilities and
Stockholders' Equity $6,407,908 $12,475,624 $9,710,776 $(9,682,206) $18,912,102 $17,549,064
========== ========== ========= ============ =========== ==========
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended June 30, 2008 (with Comparative Totals for 2007)
Oakridge Oakridge Stinar Consolidated
Holdings, Inc. Cemeteries HG, Inc. Eliminations 2008 2007
------------- ---------- ----------- ------------ ---------- ----------
Revenue $ - $3,007,274 $8,233,104 $ - $11,240,378 $8,216,424
Cost of goods sold - 1,865,269 7,309,533 - 9,174,802 7,116,019
---------- ---------- --------- ------------ ----------- ----------
Gross margin - 1,142,005 923,571 - 2,065,576 1,100,405
---------- ---------- --------- ------------ ----------- ----------
Selling, general & administrative expenses:
Selling - 238,786 278,216 - 517,002 532,463
General and administrative 366,250 415,754 327,132 - 1,109,136 977,039
---------- ---------- --------- ------------ ----------- ----------
Total selling, general &
administrative expenses 366,250 654,540 605,348 - 1,626,138 1,509,502
---------- ---------- --------- ------------ ----------- ----------
Income (loss) from operations (366,250) 487,465 318,223 - 439,438 (409,097)
---------- ---------- --------- ------------ ----------- ----------
Other income (expense):
Equity in subsidiary earnings (losses) 371,732 - - (371,732) - -
Interest expense (54,831) (15,456) (299,685) - (369,972) (318,649)
Interest income - 21,913 98,272 - 120,185 132,928
---------- ---------- --------- ------------ ----------- ----------
Total other income (expense) 316,901 6,457 (201,413) (371,732) (249,787) (185,721)
---------- ---------- --------- ------------ ----------- ----------
Net income (loss) before income taxes (49,349) 493,922 116,810 (371,732) 189,651 (594,818)
Income taxes (benefit) (165,000) 193,000 46,000 - 74,000 (245,000)
---------- ---------- --------- ------------ ----------- ----------
Net income (loss) $115,651 $300,922 $70,810 $(371,732) $115,651 $(349,818)
========== ========== ========= ============ =========== ==========
See Report of Independent Registered Public Accounting Firm on Consolidating Information.