THE VILLA AT GREELEY, LLC
FINANCIAL STATEMENTS
Years Ended December 31, 1997 and 1996
TABLE OF CONTENTS
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Independent Auditors' Report..................................................2
BALANCE SHEETS................................................................3
STATEMENTS OF EARNINGS........................................................4
STATEMENTS OF CASH FLOWS......................................................5
STATEMENTS OF EQUITY..........................................................7
NOTES TO FINANCIAL STATEMENTS.................................................8
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ANDERSON & WHITNEY, P.C.
Certified Public Accountants and Business advisors
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1001 Ninth Avenue
Greeley, Colorado 80631-4046
(970) 352-7990 FAX (970) 352-1855
E-mail Address: CPA@awhiteny.com
Independent Auditors' Report
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Members and Board of Mangers
The Villa at Greeley, LLC
Greeley, Colorado
We have audited the accompanying balance sheets of The Villa at Greeley,
LLC (a Colorado limited liability corporation) as of December 31, 1997 and 1996,
and the related statements of equity, earnings, and cash flows for the years
then ended. These financial state ments 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 the generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts of disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the 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 financial statements referred to above present fairly,
in all material respects, the financial position of The Villa at Greeley, LLC as
of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended, in conformity with the generally accepted
accounting principles
Anderson & Whitney, P.C.
March 17, 1998
MEMBER OF
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
SEC AND PRIVATE COMPANIES PRACTICE SECTIONS - AICPA DIVISION FOR CPA FIRMS
ACCOUNTING FIRMS ASSOCIATED, INC.
THE VILLA AT GREELEY, LLC
BALANCE SHEETS
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December 31 1997 1996
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ASSETS
Current Assets:
Cash $ 30,102 $ 3,837
Assets limited as to use 56,651 46,313
Accounts receivable, net of allowance for doubtful
accounts of $-0- 326,659 284,488
Due from Weld County -- 331,595
Prepaid expenses and other 4,639 2,085
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Total Current Assets 418,051 668,318
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Property and Equipment:
Land 347,811 425,318
Furniture and equipment 184,303 192,493
Automobiles 261,332 221,512
Leasehold improvements 413,002 419,975
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1,206,448 1,259,298
Less: Accumulated depreciation and amortization 555,232 564,843
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651,216 694,455
Construction in progress 100,541 --
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Total Property and Equipment 751,757 694,455
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TOTAL ASSETS $ 1,169,808 $ 1,362,773
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LIABILITIES
Current Liabilities:
Bank overdraft $ -- $ 3,440
Notes payable 62,000 369,000
Accounts payable 133,246 93,396
Accrued expenses and other 309,262 285,656
Resident and client trust funds 56,651 46,313
Payable to related party 10,824 --
Current portion of long-term debt 75,278 54,628
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Total Current Liabilities 647,261 852,433
Long-Term Debt 458,307 398,201
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Total Liabilities 1,105,568 1,250,634
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EQUITY 64,240 112,139
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TOTAL LIABILITIES AND EQUITY $ 1,169,808 $ 1,362,773
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See Accompanying Notes to Financial Statements.
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THE VILLA AT GREELEY, LLC
STATEMENTS OF EARNINGS
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Years Ended December 31 1997 1996
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Revenue:
Restitution Center $ 1,731,254 $ 1,551,660
Residential Treatment Center 1,464,223 1,388,641
Villa Living Center 826,468 940,392
Outpatient 93,676 76,820
Other revenue 97,783 46,808
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Total Operating Revenue 4,213,404 4,004,321
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Operating Expenses:
Restitution Center 1,002,599 912,474
Residential Treatment Center 963,470 1,003,527
Villa Living Center 473,171 348,793
Outpatient 22,712 12,410
General and Administrative 1,669,952 1,635,609
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Total Operating Expenses 4,131,904 3,912,813
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Earnings from Operations 81,500 91,508
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Other Income (Expense):
Gain (loss) on sale of property and equipment (2,342) 3,350
Gain on sale of Del Camino property 205,398 --
Interest income 53,933 --
Miscellaneous income 1,966 5,248
Abandonment loss (30,526) --
Interest expense (61,563) (59,266)
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Total Other Income (Expense) - net 166,866 (50,668)
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NET EARNINGS $ 248,366 $ 40,840
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See Accompanying Notes to Financial Statements.
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THE VILLA AT GREELEY, LLC
STATEMENTS OF CASH FLOWS
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Years Ended December 31 1997 1996
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Cash Flows from Operating Activities:
Cash received from residents, clients, and third party payors $ 4,173,199 $ 3,980,829
Cash paid to suppliers and employees (4,023,697) (3,762,860)
Interest received 53,933 --
Interest paid (58,856) (58,929)
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Net Cash Provided by Operating Activities 144,579 159,040
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Cash Flows from Investing Activities:
Purchase of property and equipment (86,873) (63,370)
Proceeds from sale of property and equipment 283,156 3,537
Construction in progress (100,541) --
Site development costs (10,755) (43,356)
Reimbursement of site development costs 311,824 --
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Net Cash Provided (Used) by Investing Activities 396,811 (103,189)
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Cash Flows from Financing Activities:
Proceeds from:
Notes payable 965,000 1,103,300
Long-term debt 166,298 34,282
Principal payments on:
Notes payable (1,272,000) (1,023,370)
Long-term debt (85,542) (46,478)
Decrease in bank overdraft (3,440) (53,813)
Advances from related party 10,824 --
Contributions from members 1,000 --
Distributions paid (297,265) (68,601)
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Net Cash Used by Financing Activities (515,125) (54,680)
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Net Increase in Cash 26,265 1,171
Cash, Beginning of Year 3,837 2,666
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Cash, End of Year $ 30,102 $ 3,837
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Continued on next page.
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Years Ended December 31 1997 1996
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Reconciliation of Net Earnings to Net Cash
Provided by Operating Activities:
Net earnings $ 248,366 $ 40,840
Adjustments:
Depreciation and amortization 50,012 82,031
Gain on sale of property and equipment (203,056) (3,350)
Abandonment loss 30,526 --
(Increase) decrease in:
Accounts receivable (42,171) (28,740)
Prepaid expenses and other (2,554) 457
Increase (decrease) in:
Accounts payable 39,850 60,445
Accrued expenses and other 23,606 7,357
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Net Cash Provided by Operating Activities $ 144,579 $ 159,040
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See Accompanying Notes to Financial Statements.
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THE VILLA AT GREELEY, LLC
STATEMENTS OF EQUITY
Stockholders' Equity Members' Equity
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Additional Undistributed
Common Paid-In Retained Contributed Earnings
Years Ended December 31, 1996 and 1997 Stock Capital Earnings Capital (Loss) Total
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Balance, January 1, 1996 $ 4,000 $ 1,235,572 $ (1,099,672) $ -- $ -- $ 139,900
Distributions paid -- -- (68,601) -- -- (68,601)
Net earnings for the year ended
December 31, 1996 -- -- 40,840 -- -- 40,840
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Balance, December 31, 1996 4,000 1,235,572 (1,127,433) -- -- 112,139
Distributions paid -- -- (295,000) -- (2,265) (297,265)
Members' cash contribution -- -- -- 1,000 -- 1,000
Conversion from S corporation to limited
liability company effective August 1, 1997 (4,000) (1,235,572) 1,171,855 67,717 -- --
Net earnings (loss) for the year ended
December 31, 1997 -- -- 250,578 -- (2,212) 248,366
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Balance, December 31, 1997 $ -- $ -- $ -- $ 68,717 $ (4,477) $ 64,240
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See Accompanying Notes to Financial Statements.
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THE VILLA AT GREELEY, LLC
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies:
The accounting and reporting policies of The Villa at Greeley, LLC (the
Company) conform to generally accepted accounting principles. The following
summary of significant accounting policies is presented to assist the reader in
evaluating these financial statements.
Description of Business:
The Company, organized in Colorado in 1984, provides the following
services: The Villa Living Center is a 93-bed health care facility serving
persons of all ages who cannot live safely alone, but who do not need nursing
home care. The Restitution Center is a community-based correctional facility for
minimum risk offenders. The Residential Treatment Center is a drug and alcohol
treatment program for offenders.
Property and Equipment:
Property and equipment are recorded at acquisition cost. Depreciation is
computed using accelerated methods over the estimated useful lives of the
assets.
Operating Revenue:
Operating revenue is reported at the estimated net realizable amounts from
residents, third-party payors, and others for service rendered. Revenue under
third-party payor agreements may be subject to audit and retroactive adjustment.
Provisions for estimated third-party payor settlements are provided in the
period the related services are rendered. Differences between the estimated
amounts accrued and interim and final settlements are reported in operations in
the year of settlement.
Income Taxes:
Effective August 1, 1997, the Company converted from an S corporation to a
Colorado limited liability company (LLC). Limited liability companies are
treated like partnerships for federal income tax purposes. S corporations and
limited liability companies do not pay income taxes on their taxable income.
Instead, the stockholders and/or members each include their respective share of
the taxable income in their individual income tax returns.
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THE VILLA AT GREELEY, LLC
NOTES TO FINANCIAL STATEMENTS -- Continued
Note 1 - Summary of Significant Accounting Policies - Continued:
Resident and Client Trust Funds:
The Company receives and holds personal funds of residents and clients
residing in its facilities. Personal funds of $56,651 and $46,313 are reported
as assets limited as to use at December 31, 1997 and 1996, respectively.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Note 2 - Notes Payable:
December 31 1997 1996
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Revolving $150,000 line of credit with a bank maturing in
January 1998 (subsequently renewed to January 1999), interest $ 62,000 $ 119,000
payable quarterly at 1.75% over the prime rate quoted by the
Wall Street Journal (actual rate of 10.25% at December 31,
1997 and 10.5% at December 31, 1996), collateralized by
accounts receivable and general intangibles, personally
guaranteed by two members
Revolving $250,000 line of credit with a bank which matured
July 1997, interest payable quarterly at 1.75% over the prime -- 250,000
rate as quoted by the Wall Street Journal (actual rate of 10.5%
at December 31, 1996), without collateral, personally guaranteed
by two members
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$ 62,000 $ 369,000
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Note 3 - Long-Term Debt:
December 31 1997 1996
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Note payable to a bank in monthly installments of $4,527,
including interest at 9.5%, final payment due in August 2007 $ 341,370 $ 362,264
collateralized by a deed of trust, personally guaranteed by
the members
Various notes payable to financial institutions in monthly
installments including interest from 7.95% to 9.25%, final
payments due from 1998 to 2000, collateralized by vehicles 77,324 90,575
Loan payable to the State of Colorado in monthly installments
of $990, noninterest bearing, final payment due in July 2007
collateralized by facility improvements 114,891 --
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533,585 452,829
Less: Current Portion 75,278 54,628
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$ 458,307 $ 398,201
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As of December 31, 1997, annual maturities of long-term debt for each of
the next five years are as follows:
Year Ending Annual
December 31 Maturities
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1998 $ 75,278
1999 61,483
2000 51,886
2001 42,567
2002 45,283
Note 4 - Operating Leases:
The Company leases its facilities from a related party on a month-to-month
basis for $48,337 per month. The Company is responsible for insurance, property
taxes, utilities, and maintenance on the property. Total rent expense for each
of the years ended December 31, 1997 and 1996 was $580,055.
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THE VILLA AT GREELEY, LLC
NOTES TO FINANCIAL STATEMENTS -- Continued
Note 5 - Retirement Plan:
The Company has a 401(k) profit sharing plan covering substantially all
employees who are at least 21 years old and have completed six months of
service. Employee contributions must be at least 2% and no more than 15% of
eligible compensation and are matched 75% by the Company up to a maximum of 6%
of the employee's compensation per year. Employees are fully vested after five
years of service. The Company's contributions to the plan were $50,329 and
$74,923 for the years ended December 31, 1997 and 1996, respectively.
Note 6 - Concentration of Credit Risk:
Through the Restitution Center and the Residential Treatment Center, the
Company provides various services for the State of Colorado under
annually-renewable contracts. For the year ended December 31, 1997 and 1996, the
Company recorded revenue of $2,730,886 and $2,538,285, respectively, under these
contracts. Funding for the Villa Living Center and other programs is provided
from other sources, including Medicaid and federal programs.
At December 31, 1997, the Company had accounts receivable of $233,017 from
the State of Colorado. The Company's policy is to not obtain collateral on
accounts receivable.
Note 7 - Abandoned Project:
The Company purchased land in the Del Camino area during 1995 to be the
site of a new prison prerelease facility. Costs incurred in preparing for
construction, consisting of architectural design, attorney fees, and land
excavation, were capitalized as site development costs to be included in the
cost of the new facility when completed.
Although Weld County commissioners had approved the project, opposition
from the citizenry petitioned to require the project to be approved by the
voters. The project was defeated in November 1996, at which time the Company
abandoned the project and, in accordance with state vested rights statutes,
filed a claim with Weld County for reimburse ment of costs incurred. The
receivable from Weld County reported at December 31, 1996 was $331,595. In June
1997, Weld County reimbursed the Company $311,824 plus accrued interest of
$53,933. Unreimbursed costs of $30,526 are reported as an abandonment loss in
1997.
During 1997, the architect for the abandoned prerelease facility filed
claim with Weld County and the Company for costs incurred on the project. The
claim was settled in February 1998. The Company's share of the settlement,
$25,650, is included in accrued expenses at December 31, 1997.
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