EXHIBIT 13
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
WITH CONSOLIDATING INFORMATION
YEARS ENDED JUNE 30, 2009 AND 2008
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 19
Consolidating Balance Sheets 20
Consolidating Statements of Operations 22
WIPFLI
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, 2009 and 2008, 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, 2009 and 2008, 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.
/s/ WIPFLI LLP
WIPFLI LLP
September 29, 2009
St. Paul, Minnesota
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30,2009 June 30,2008
ASSETS
Current assets:
Cash and cash equivalents $345,153 $278,202
doubtful accounts of $15,000 in 2008 and 2007 2,295,234 2,204,311
Current portion of net investment in
sales-type lease - 460,200
Inventories:
Production 6,315,017 5,656,996
Cemetery, mausoleum space, and markers 630,746 645,941
Deferred income tax assets 232,000 178,000
Other current assets 119,864 100,873
----------- -----------
Total current assets 9,938,014 9,524,523
----------- -----------
Property and equipment:
Property and equipment 6,342,170 6,226,836
Less accumulated depreciation 4,093,125 3,862,029
----------- -----------
Property and equipment, net 2,249,045 2,364,807
----------- -----------
Other assets:
Cemetery perpetual care trusts 4,687,816 4,918,067
Preneed trust investments 2,059,056 1,926,120
Debt issuance costs, less accumulated
amortization of $8,388 and $645 in 2009
and 2008 69,042 76,785
Deferred income tax assets 265,000 82,000
Other 11,431 19,800
----------- -----------
Total other assets 7,092,345 7,022,772
----------- -----------
Total Assets $19,279,404 $18,912,102
----------- -----------
June 30,2009 June 30,2008
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $979,840 $520,000
Accounts payable - trade 1,274,591 1,060,562
Due to finance company 1,724,900 980,544
Accrued liabilities 875,396 814,356
Deferred revenue 1,615,936 2,372,525
Note payable - others 330,000 80,000
Current maturities of long-term debt 227,012 212,575
----------- -----------
Total current liabilities 7,027,675 6,040,562
----------- -----------
Long-term liabilities:
Non-controlling interest in pre-need
trust investments 2,059,056 1,926,120
Long term debt 4,173,231 4,415,274
----------- -----------
6,232,287 6,341,394
----------- -----------
Total liabilities 13,259,962 12,381,956
----------- -----------
Non-controlling interest in perpetual
care trust investments 4,687,816 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 and 2007 143,151 143,151
Additional paid-in capital 2,028,975 2,028,975
Accumulated deficit (840,500) (560,047)
----------- -----------
Total stockholders' equity 1,331,626 1,612,079
----------- -----------
Total Liabilities and Stockholders' Equity $19,279,404 $18,912,102
=========== ===========
See Notes to Consolidated Financial Statements
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended Year Ended
June 30, 2009 June 30, 2008
---------- ----------
Revenue $12,044,532 $11,240,378
Cost of good sold 10,070,105 9,131,028
---------- ----------
Gross margin 1,974,427 2,109,350
---------- ----------
Operating expenses:
Selling 404,829 517,002
General and administrative 1,178,142 1,109,136
Research and development 551,698 43,774
---------- ----------
2,134,669 1,669,912
---------- ----------
Income (loss) from operations (160,242) 439,438
---------- ----------
Other income (expense):
Interest income 27,435 120,185
Interest expense (384,646) (369,972)
---------- ----------
Total other expense (357,211) (249,787)
---------- ----------
Net income (loss) before income taxes (517,453) 189,651
(Benefit) provision for income taxes (237,000) 74,000
---------- ----------
Net income (loss) $(280,453) $115,651
========== ==========
Earnings per share:
Basic income (loss) per share $(.20) $.08
========== ==========
Diluted net income (loss) per share $(.20) $.07
========== ==========
See Notes to Consolidated Financial Statements
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 2009 AND 2008
Common Stock
Number of Common Additional Retained Total
Shares Stock Paid-In Earnings
Capital (Deficit)
BALANCE,
June 30, 2007 1,431,503 $143,151 $2,028,975 $(675,698) $1,496,428
Net loss - - - 115,651 115,651
--------- -------- ---------- -------- ----------
BALANCE,
June 30, 2008 1,431,503 $143,151 $2,028,975 $(560,047) $1,612,079
Net income - - - (280,453) (280,453)
--------- -------- ---------- -------- ----------
BALANCE,
June 30, 2009 1,431,503 $143,151 $2,028,975 (840,500) $1,331,626
========= ======== ========== ========= ==========
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 30,2009 June 30,2008
Cash flows from operating activities:
Net income (loss) $(280,453) $115,651
Adjustments to reconcile net income (loss) to
net cash flows from operating activities:
Depreciation and amortization 238,839 250,502
Deferred income taxes (237,000) 72,000
Accounts receivables (90,923) (1,201,291)
Inventories (642,826) (1,675,968)
Other assets (10,622) (18,687)
Accounts payable and due to finance company 958,385 1,093,249
Realized and unrealized gains (losses) of
non-controlling trust 326,922 (100,716)
Change in non-controlling trust investments (510,348) 56,665
Change in pre-need trust investments 86,111 78,238
Deferred revenue (756,589) (1,153,504)
Accrued liabilities 61,040 101,281
---------- ----------
Net cash flows from operating activities (857,464) (2,382,580)
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (115,334) (256,579)
Debt issuance costs - (3,000)
Payments on net investment in sales-type lease 460,200 1,002,309
Sales of non-controlling investments in trusts 450,491 1,229,718
Purchases of non-controlling investments
in trusts (353,176) (1,263,905)
---------- ----------
Net cash flows from investing activities 442,181 708,543
---------- ----------
Cash flows from financing activities:
Change in notes payable - bank 459,840 (1,341,000)
Proceeds from issuance of debt 250,000 4,260,570
Principal payments on long-term debt (227,606) (1,821,826)
---------- ----------
Net cash flows from financing activities 482,234 1,097,744
---------- ----------
Net change in cash and cash equivalents 66,951 (576,293)
Cash and cash equivalents, beginning of year 278,202 854,495
---------- ----------
Cash and cash equivalents, end of year $345,153 $278,202
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the years for:
Interest $369,173 $367,498
========== ==========
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.
See Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2009 AND 2008
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, 2009 and 2008, 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, 2009, 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, 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, 2009 and 2008, the fair value
approximated the carrying value.
- - Cemetery perpetual care trusts - Market value is the amount on the
trust reports reported by the trustee.
- - Pre-need trust investments - Market value is the amount on the trust
reports reported by the trustee.
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, 2009 the Company exceeded the insured limit by
$87,153.
Financial instruments which potentially subject the Company to a
concentration of credit risk consist principally of accounts receivable.
The Company generally does not require collateral for its trade accounts
receivable. One United States customer accounted for 26% at June 30, 2009
and two international customers accounted for 59% of Stinar's accounts
receivable at June 30, 2008. Additionally, the U.S. Government accounted
for approximately 69% of Stinar's accounts receivable at June 30, 2009.
Customers
A significant portion of the Company's customers are concentrated in the
airline industry. A downturn in the airline industry related to the world
recession, 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 are 30%, United States government
45% and North American are 25% of Stinar's net sales in 2009. Net sales in
2008 to international customers were 44% and 35% to the United States
government.
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 lease was classified as sales-type lease and expired 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, 2009 and 2008 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 grave plot 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 collectible 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 in the
Company's consolidated financial statements. The un-trusted proceeds are
included in deferred revenue. Sales of preneed merchandise including grave
boxes and interment are recorded as revenue when the risk of loss has been
transferred to the customer. Upon transfer of the asset and the risks and
rewards of ownership to the customer, the company recognizes the sales
amount in 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, 2009, the tax years
that remain subject to examination by major tax jurisdictions as of
June 30, 2009. 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
The Company adopted SFAS No. 157, Fair Value Measurements as of
July 1, 2008. SFAS No. 157 clarifies how organizations are required to
use a fair value measure for recognition and disclosure by establishing
a common definition of fair value, creating a framework for measuring fair
value, and expanding disclosures about fair value measurements. SFAS
No. 157 establishes a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value. The adoption of SFAS No. 157 did
not have a material impact on the Company's results of operations or
financial position.
In May 2009, the FASB issued Statement of Financial Accounting Standards
No. 165, Subsequent Events ("SFAS 165"). SFAS 165 establishes general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are
available to be issued. SFAS 165 applies prospectively to both interim and
annual financial periods ending after June 15, 2009. The adoption of
SFAS 165 did not result in any material change to our polices.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally
Accepted Accounting Principles. This standard is intended to improve
financial reporting by identifying a consistent framework, or hierarchy,
for selecting accounting principles to be used in preparing financial
statements that are presented in conformity with GAAP for non-governmental
entities. We adopted SFAS NO. 162 on its effective date, November 15, 2008,
and it did not have a material impact on the preparation of our
consolidated financial statements
In June 2009, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 168, the "FASB Accounting Standards Codification" and the
Hierarchy of Generally Accepted Accounting Principles. This standard
replaces SFAS NO. 162, the Hierarchy of Generally Accepted Accounting
Principles and establishes only two levels of U.S. generally accepted
accounting principles ("GAAP"), authoritative and nonauthoritative. The
FASB Accounting Standards Codification (the "Codification") will become
the source of authoritative, nongovernmental GAAP, except for rules and
interpretive releases of the Securities and Exchange Commission ("SEC"),
which are sources of authoritative GAAP for SEC registrants. All other
nongrandfathered, non-SEC accounting literature not included in the
Codification will become nonauthoritative. This standard is effective
for financial statements for interim or annual reporting periods ending
after September 15, 2009. We will begin to use the new guidelines and
numbering system prescribed by the Codification when referring to GAAP
in the first quarter of fiscal year 2010. As Codification was not
intended to change or alter existing GAAP, it will not have any impact
on our consolidated financial statements.
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 $2,059,056 and $1,926,120 at June 30, 2009
and 2008, respectively.
The market value associated with the preneed cemetery merchandise and
service trust assets as of June 30, 2009 and 2008 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
2009 $1,926,120 $46,825 $ - $86,111 $2,059,056
All funds are invested in fixed equities.
Deferred Cemetery Revenue:
As of June 30, 2009 and 2008, 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
2009 $4,918,067 $98,260 $181,837 $(112,524) $93,379 $(491,203) $4,687,816
2008 $5,026,336 $161,927 $(326,861) $(123,698) $90,675 $89,688 $4,918,067
The cost of the trust investments held by the cemetery are $5,073,694 and
$5,026,753 as of June 30, 2009 and 2008, respectively.
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 September
2008. The following lists the components of the net investment in the
sales-type lease outstanding as of June 30:
2009 2008
Total minimum lease payments to be received - $466,594
Less: Amounts representing executory costs - -
---------- ----------
Minimum lease payments receivable - 466,594
Less: Allowance for uncollectibles - -
---------- ----------
Net minimum lease payments receivable - 466,594
Less: Unearned income - 6,394
---------- ----------
Net investment in sales-type lease $ - $460,200
========== ==========
7. INVENTORIES
Production inventories consisted of the following:
2009 2008
Finished goods $ - $1,130,988
Work-in-process 3,851,562 2,399,936
Raw materials and trucks 2,463,455 2,126,072
---------- ----------
$6,315,017 $5,656,996
========== ==========
Inventories of cemetery and mausoleum space available for sale
consisted of the following:
2009 2008
Cemetery space $428,227 $436,117
Mausoleum space and other 202,519 209,824
-------- --------
$630,746 $645,941
======== =========
8. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
2009 2008
Land and improvements $1,366,000 $1,366,000
Building and improvements 2,355,552 2,355,552
Vehicles 581,710 520,465
Equipment 2,038,908 1,984,819
---------- ----------
$6,342,170 $6,226,836
========== ==========
Depreciation charged to operations was $231,096 in 2009 and $249,857
in 2008.
9. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
2009 2008
Salaries and payroll taxes $613,679 $574,146
Due trust funds 155,520 148,926
Interest 30,097 14,624
Other 76,100 76,660
-------- --------
$875,396 $814,356
======== ========
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, 2009 and 2008, $1,724,900 and $980,544 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 $979,840 was in use at
June 30, 2009 and $520,000 at June 30, 2008, with interest at 1% over the
reference rate (6.0% at June 30, 2009 and 2008), maturing October 31, 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.
Note Payable - Others
The Company had $330,000 and $80,000 in unsecured notes payable at
June 30, 2009 and 2008, respectively, including $250,000 due to key
officers/shareholders at June 30, 2009. These notes are due on demand and
bear interest at 9%.
Long Term Debt
Long-term debt consisted of the following:
2009 2008
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. $12,524 $17,123
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. 13,444 21,785
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 $2,088,098
at June 30, 2009, 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. 2,049,223 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 (4.25% at June 30, 2009),
maturing in May 2018. The note is secured
by the assets of Stinar including accounts
receivable of $2,088,098 at June 30, 2009,
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. 1,820,052 1,987,876
---------- ----------
Long-term debt before debentures 3,895,243 4,122,849
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. 505,000 505,000
---------- ----------
4,400,243 4,627,849
Less current maturities 227,012 212,575
---------- ----------
$4,173,231 $4,415,274
========== ==========
Future maturities of long-term debt are as follows:
2010 $227,012
2011 742,467
2012 241,754
2013 2,069,366
2014 204,136
Thereafter 915,508
----------
$4,400,243
==========
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, 2009, the actual cash flow to current maturity ratio was (.61) to
1.00 while the allowed minimum was 1.20 to 1.00, and the debt to equity
ratio was 4.23 to 1.00 while the maximum allowed was 4.50 to 1.00.
The bank subsequently issued a waiver for these loan covenants.
11. INCOME TAXES
The income tax provision (benefit) is comprised of the following:
2009 2008
Current tax expense (benefit):
Federal $ - $ -
State 2,000 2,000
---------- ----------
Total current 2,000 2,000
---------- ----------
Deferred tax (benefit):
Federal (183,000) 80,000
State (54,000) (8,000)
---------- ----------
Total deferred (237,000) 72,000
---------- ----------
Benefits of operating loss carryforwards (2,000)
Total expense (credit) for income taxes $(237,000) $74,000
========== ==========
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:
2009 2008
Deferred tax assets:
Inventory $70,000 $67,000
Vacation 43,000 43,000
Tax credit carryforwards 29,000 34,000
Net operating loss carryforwards 271,000 92,000
Other 124,000 81,000
------- -------
Gross deferred tax asset 537,000 317,000
------- -------
Deferred tax liabilities:
Property and equipment (40,000) (57,000)
-------- --------
Gross deferred tax liability (40,000) (57,000)
-------- --------
Net deferred tax asset $497,000 $260,000
======== ========
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:
2009 2008
Statutory U.S. federal tax rate 34.0% 34.0%
State taxes, net of federal benefit (3.2)% (3.2)%
Net operating loss and credit adjustments 19.8% 11.2%
Permanent differences and other 3.6% 3.0%
----- -----
47.0% 39.0%
===== =====
The Company has federal and state net operating loss carryforwards of
approximately $657,000 and $710,000, respectively, which begin to expire
in 2017.
12. OTHER RELATED PARTY TRANSACTIONS
Amounts expensed for compliance services to entities related to the chief
executive officer's spouse were $25,493 accrued in 2009 and $17,742 in
2008. Interest expense on the related party convertible debentures
totaled $45,450 and $31,435 in 2009 and 2008, respectively. The Company
has a month-to-month operating lease from one of the officers. Total
rent expense was $24,600 in 2009 and 2008.
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 $18,849 in 2009 and $17,407 in 2008.
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 s
uch 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 2009 and 2008, and at June 30, 2009, 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, 2009 as no options were granted and no
additional options vested 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, 2008 10,000 $1.63
Balance, June 30, 2009 10,000 $1.63
======
Options exercisable at:
June 30, 2008 10,000 $1.63
June 30, 2009 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 1 Year $-
The aggregate intrinsic value in the table represents the difference
between the closing stock price on June 30, 2009 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, 2009. There were no options exercised during fiscal
years ending 2009 and 2008.
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:
2009 2008
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 $(280,453) 1,431,503 $(.20) $115,651 1,431,503 $.08
EFFECT OF DILUTIVE
SECURITIES
Employee stock options
and convertible
debentures Anti-dilutive Anti-dilutive 29,588 561,111
--------- ---------- --------- ---------
DILUTED EPS
Net income (loss)
available to common
shareholders plus
assumed conversions $(280,453) 1,431,503 $(.20) $145,239 1,992,614 $.07
========= ========== ======= ========= ========== =====
ANTIDILUTIVE SECURITIES
Employee stock options
and convertible
debentures 571,111 10,000
======= ======
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, 2009
and 2008 is summarized as follows:
Aviation
Ground
Support
Cemeteries Equipment Total
2009 ----------- ------------ -----------
Net sales - external $2,752,973 $9,291,559 $12,044,532
Depreciation 150,142 78,954 229,096
Interest expense 5,964 325,530 331,494
Segment operating profit (loss) 219,011 (82,203) 136,808
Segment assets 12,618,986 10,178,908 22,797,894
Expenditures for segment fixed
assets 80,209 35,125 115,334
Income tax expense (benefit) 107,000 (184,000) (77,000)
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
Reconciliation of segment profit to consolidated income before income
taxes is as follows:
2009 2008
---------- ----------
Total profit (loss) for reportable segments $(167,251) $610,732
Unallocated amounts:
Interest expense (53,152) (54,831)
Other corporate expenses (297,050) (366,250)
Other corporate income - -
---------- ----------
$(517,453) $189,651
========== ==========
Reconciliation of segment assets to consolidated assets is as follows:
2009 2008
---------- ----------
Total segment assets $22,797,894 $22,186,400
Other assets 74,658 105,934
Elimination of receivable from holding
company (3,966,148) (3,519,232)
Deferred tax asset 373,000 139,000
---------- ----------
Total assets $19,279,404 $18,912,102
========== ==========
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 $551,698 and
$43,774 in 2009 and 2008, respectively.
18. SUBSEQUENT EVENTS
We have evaluated events occurring subsequent to the date of our financial
statements through September 28, 2009, which is the date our financial
statements were issued. We have recognized the effects of all subsequent
events that provide additional evidence about conditions that exist at our
balance sheet date of June 30, 2009, including estimates inherent in the
process of preparing our financial statements. There were no nonrecognized
subsequent events to be disclosed in our financial statements.
19. RECLASSIFICATIONS
Certain 2008 information has been reclassified to conform to the 2009
presentation.
20. FAIR VALUE MEASUREMENTS
As discussed in Note 1, effective July 1, 2008, the Company adopted the
provisions of FASB Statement No. 157, Fair Value Measurements
(SFAS No. 157), which defines fair value as the price that would be
received to sell an asset or paid to transfer a liability between market
participants at a measurement date. SFAS No. 157 did not materially affect
the Company's results of operations or financial position; however,
additional disclosures are now required. This statement describes a fair
value hierarchy that includes three levels of inputs to be used to measure
fair value. The three levels are defined as follows as interpreted for use
by the Company:
Level 1 - Inputs into the fair value methodology are based on quoted
market prices in active markets.
Level 2 - Inputs into the fair value methodology are based on quoted
prices for similar items, broker/dealer quotes, or models using market
interest rates or yield curves. The inputs are generally seen as
observable in active markets for similar items for the asset or liability,
either directly or indirectly, for substantially the same term of the
financial instrument.
Level 3 - Inputs into the fair value methodology are unobservable and
significant to the fair value measurement (primarily consisting of
alternative type investments, which include but are not limited to
limited partnership interests, hedges, private equity, real estate, and
natural resource funds). Often these types of investments are valued based
on historical cost and then adjusted by shared earnings of a partnership
or cooperative, which can require some varying degree of judgment.
Information regarding assets (principally cash and investments) and
liabilities measured at fair value on a recurring basis as of
June 30, 2009, is as follows:
Recurring Fair Value Measurement Using Total Fair
Level 1 Level 2 Level 3 Value
-------- ---------- ------- ----------
Assets at fair value:
Cash and cash equivalents $345,153 $ - $ - $345,153
Fixed income and debt
securities - Cemetery
perpetual care and pre-need
trust investments - 6,746,872 - 6,746,872
-------- ---------- --- ----------
Total assets at fair value $345,153 $6,746,872 $ - $7,092,025
======== ========== === ==========
Liabilities at fair value:
Non-controlling interest in
pre-need trust investments $ - $2,059,056 $ - $2,059,056
======== ========== === ==========
The methods described above and shown above for fair value calculations
may produce a fair value calculation that may be different from the net
realizable value or not reflective of future values expected to be
received. The Company believes that its valuation methods are appropriate
and consistent with other market participants; however, the use of these
various methodologies and assumptions may produce results that differ in
the estimates of fair value at the financial reporting date.
WIPFLI
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, 2009
and 2008 appears before 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 21 and 22 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
September 29, 2009
St. Paul, Minnesota
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
June 30, 2009 (with Comparative Totals for 2008)
Oakridge Oakridge Stinar Consolidated
Holdings, Inc. Cemeteries HG, Inc. Eliminations 2009 2008
------------- ---------- ----------- ------------ ---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $5,392 $314,308 $25,453 $ - 345,153 $278,202
Trade receivables - 207,136 2,088,098 - 2,295,234 2,204,311
Current portion of net investment
in sales-type lease - - - - - 460,200
Intercompany receivables 243,002 3,776,148 190,000 (4,209,150) - -
Inventories:
Production - - 6,315,017 - 6,315,017 5,656,996
Cemetery, mausoleum space, markers - 630,746 - - 630,746 645,941
Deferred income tax assets 108,000 21,000 103,000 - 232,000 178,000
Other current assets 57,350 9,633 52,881 - 119,864 100,873
---------- ---------- --------- ------------ ----------- ----------
Total current assets 413,744 4,958,971 8,774,449 (4,209,150) 9,938,014 9,524,523
---------- ---------- --------- ------------ ----------- ----------
Property and equipment 15,376 3,459,300 2,867,494 - 6,342,170 6,226,836
Less accumulated depreciation 14,891 2,546,157 1,532,077 - 4,093,125 3,862,029
---------- ---------- --------- ------------ ----------- ----------
Property and equipment, net 485 913,143 1,335,417 - 2,249,045 2,364,807
---------- ---------- --------- ------------ ----------- ----------
Other assets:
Investment in subsidiaries 6,007,126 - - (6,007,126) - -
Preneed trust Investments - 2,059,056 - - 2,059,056 1,926,120
Cemetery perpetual care trusts - 4,687,816 - - 4,687,816 4,918,067
Debt issuance costs - - 69,042 - 69,042 76,785
Deferred income tax assets 304,000 - - (39,000) 265,000 82,000
Other 11,431 - - - 11,431 19,800
---------- ---------- --------- ------------ ----------- ----------
Total other assets 6,322,557 6,746,872 69,042 (6,046,126) 7,092,345 7,022,772
---------- ---------- --------- ------------ ----------- ----------
Total Assets $6,736,786 $12,618,986 $10,178,908 $(10,255,276) $19,279,404 $18,912,102
========== ========== ========= ============ =========== ==========
Oakridge Oakridge Stinar Consolidated
Holdings, Inc. Cemeteries HG, Inc. Eliminations 2009 2008
------------- ---------- ----------- ------------ ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ - $ - $979,840 $ - $979,840 $520,000
Accounts payable - trade 70,988 83,334 1,120,269 - 1,274,591 1,060,562
Due to finance company - - 1,724,900 - 1,724,900 980,544
Intercompany payables 4,209,150 - - (4,209,150) - -
Deferred revenue - 1,392,887 223,049 - 1,615,936 2,372,525
Accrued liabilities 290,022 283,739 301,635 - 875,396 814,356
Notes payable - others 330,000 - - - 330,000 80,000
Current maturities of long term debt - 14,930 212,082 - 227,012 212,575
---------- ---------- --------- ------------ ----------- ----------
Total current liabilities 4,900,160 1,774,890 4,561,775 (4,209,150) 7,027,675 6,040,562
---------- ---------- --------- ------------ ----------- ----------
Long-term liabilities:
Long term debt 505,000 11,038 3,657,193 - 4,173,231 4,415,274
Non-controlling interest in pre-need
investments - 2,059,056 - - 2,059,056 1,926,120
Deferred income tax liabilities - 25,000 14,000 (39,000) - -
---------- ---------- --------- ------------ ----------- ----------
Total long-term liabilities 505,000 2,095,094 3,671,193 (39,000) 6,232,287 6,541,394
---------- ---------- --------- ------------ ----------- ----------
Total Liabilities 5,405,160 3,869,984 8,232,968 (4,248,150) 13,259,962 10,455,836
---------- ---------- --------- ------------ ----------- ----------
Non-controlling interest in
perpetual care trust investments - 4,687,816 - - 4,687,816 4,918,067
---------- ---------- --------- ------------ ----------- ----------
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) (840,500) 4,041,186 (828,093) (3,213,093) (840,500) (560,047)
---------- ---------- --------- ------------ ----------- ----------
Total Stockholders Equity 1,331,626 4,061,186 1,945,940 (6,007,126) 1,331,626 1,612,079
---------- ---------- --------- ------------ ----------- ----------
Total Liabilities and
Stockholders' Equity $6,736,786 $12,618,986 $10,178,908 $(10,255,276) $19,279,404 $18,912,102
========== ========== ========= ============ =========== ==========
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended June 30, 2009 (with Comparative Totals for 2008)
Oakridge Oakridge Stinar Consolidated
Holdings, Inc. Cemeteries HG, Inc. Eliminations 2009 2008
------------- ---------- ----------- ------------ ---------- ----------
Revenue $ - $2,752,973 $9,291,559 $ - $12,044,532 $11,240,378
Cost of goods sold - 1,795,127 8,274,978 - 10,070,105 9,131,028
---------- ---------- --------- ------------ ----------- ----------
Gross margin - 957,846 1,016,581 - 1,974,427 2,109,350
---------- ---------- --------- ------------ ----------- ----------
Selling, general & administrative expenses:
Selling - 238,723 166,106 - 404,829 517,002
Research and development - - 551,698 - 551,698 43,774
General and administrative 297,050 500,112 380,980 - 1,178,142 1,109,136
---------- ---------- --------- ------------ ----------- ----------
Total operating expenses 297,050 738,835 1,098,784 - 2,134,669 1,669,912
---------- ---------- --------- ------------ ----------- ----------
Income (loss) from operations (297,050) 219,011 (82,203) - (160,242) 439,438
---------- ---------- --------- ------------ ----------- ----------
Other income (expense):
Equity in subsidiary earnings (losses) (90,251) - - 90,251 - -
Interest expense (53,152) (5,964) (325,530) - (384,646) (369,972)
Interest income - 20,580 6,855 - 27,435 120,185
---------- ---------- --------- ------------ ----------- ----------
Total other income (expense) (143,403) 14,616 (318,675) 90,251 (357,211) (249,787)
---------- ---------- --------- ------------ ----------- ----------
Net income (loss) before income taxes (440,453) 233,627 (400,878) 90,251 (517,453) 189,651
Income taxes (benefit) (160,000) 107,000 (184,000) - (237,000) 74,000
---------- ---------- --------- ------------ ----------- ----------
Net income (loss) $(280,453) $126,627 $(216,878) $90,251 $(280,453) $115,651
========== ========== ========= ============ =========== ==========
See Report of Independent Registered Public Accounting Firm on Consolidating Information.