EMPLOYMENT SOLUTIONS, LLC
REPORT ON FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
EMPLOYMENT SOLUTIONS, LLC
GREENVILLE, SOUTH CAROLINA
TABLE OF CONTENTS
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Balance sheets 2
Statements of income 3
Statements of changes in members' equity 4
Statements of cash flows 5
NOTES TO FINANCIAL STATEMENTS 6 - 7
SCHEDULES
1 - Cost of revenues 8
2 - Selling, general and administrative expenses 8
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Members
Employment Solutions, LLC
Greenville, South Carolina
We have audited the accompanying balance sheets of Employment Solutions,
LLC as of December 31, 2001 and 2000, and the related statements of income,
changes in members' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating 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 Employment Solutions, LLC as
of December 31, 2001 and 2000, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The information included in the schedules
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ Elliott Davis, LLC
May 3, 2002
Greenville, South Carolina
1
EMPLOYMENT SOLUTIONS, LLC
BALANCE SHEETS
DECEMBER 31,
-----------------------
2001 2000
---- ----
ASSETS
CURRENT ASSETS
Cash $ 101,180 $ 131,133
Accounts receivable 46,431 139,523
Prepaid Expense -- 45,000
--------- ---------
Total current assets 147,611 315,656
PROPERTY AND EQUIPMENT, net 6,141 10,235
--------- ---------
$ 153,752 $ 325,891
========= =========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 36,577 $ 70,521
Accrued wages and salaries 3,352 47,251
--------- ---------
Total current liabilities 39,929 117,772
MEMBERS' EQUITY 113,823 208,119
--------- ---------
$ 153,752 $ 325,891
========== ==========
2
EMPLOYMENT SOLUTIONS, LLC
STATEMENTS OF INCOME
For the years ended
December 31,
------------------------
2001 2000
---- ----
REVENUES $5,573,670 $9,419,276
COST OF REVENUES 4,622,638 7,760,019
---------- ----------
Gross profit 951,032 1,659,257
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 111,778 113,079
---------- ----------
Income from operations 839,254 1,546,178
INTEREST INCOME 300 3,474
---------- ----------
Net income $ 839,554 $1,549,652
========== ==========
3
EMPLOYMENT SOLUTIONS, LLC
STATEMENTS OF CHANGES IN MEMBERS EQUITY
For the years ended December 31, 2001 and 2000
JANUARY 1, 2000 $ 193,552
Net income 1,549,652
Distributions to members (1,535,085)
-----------
DECEMBER 31, 2000 208,119
Net income 839,554
Distributions to members (982,850)
Capital contributions by members 49,000
------------
DECEMBER 31, 2001 $ 113,823
============
4
EMPLOYMENT SOLUTIONS, LLC
STATEMENTS OF CASH FLOWS
For the years ended
December 31,
------------------------
2001 2000
---- ----
OPERATING ACTIVITIES
Net income $ 839,554 $1,549,652
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 4,094 4,387
Changes in deferred and accrued amounts
Accounts receivable 93,092 56,353
Prepaid Expenses 45,000 (45,000)
Accounts payable (33,944) (21,825)
Accrued wages and salaries (43,899) 9,881
--------- ----------
Net cash provided by operating activities 903,897 1,553,448
--------- ----------
INVESTING ACTIVITIES
Purchase of equipment - (3,500)
--------- ----------
FINANCING ACTIVITIES
Distributions to members (982,850) (1,535,085)
Capital contributions by members 49,000 -
--------- ----------
Net cash used for financing activities (933,850) (1,535,085)
--------- ----------
Net increase (decrease) in cash (29,953) 14,863
CASH, BEGINNING OF YEAR 131,133 116,270
--------- ----------
CASH, END OF YEAR $ 101,180 $ 131,133
========= ==========
5
EMPLOYMENT SOLUTIONS, LLC
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES
Employment Solutions, LLC (the "Company") is engaged in providing hispanic
workers for unskilled or limited skills jobs. The Company also provides lodging,
and transportation, if necessary, for the workers.
Until January 31, 2001, the entity operated as a corporation. Upon the
addition of new shareholders, the operating entity was converted to a limited
liability corporation. For ease of presentation, the financial statements
include the financial results of the continued business of the Company and are
not segregated by changes in the Company's legal structure.
Cash
The Company places its cash deposits with high credit quality financial
institutions. At times, the Company's cash deposits may be in excess of the
FDIC insurance limits.
Property and equipment
Property and equipment, including improvements to existing assets, is
stated at cost. Expenditures for repairs and maintenance which do not
result in improvements are charged to expense. Depreciation is calculated
using accelerated methods over the estimated useful lives (which range from
5 to 10 years) of the respective assets.
Income taxes
As an LLC, the Company's income, deductions and credits are reported by
its members on their income tax returns. Therefore, no provision for income
taxes is recorded by the Company.
Revenue recognition
The Company recognizes revenue on the accrual basis of accounting. Revenues
are recorded when services are rendered and expenses are recorded when
costs are incurred.
Estimates
The preparation of financial statements in conformity with 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
financial statements and the reported amounts of revenue and expenses
during the reported period. Actual results could differ from these
estimates.
NOTE 2 - CUSTOMERS
The Company conducts a significant portion of its business with a few
customers. Revenues for the year ended December 31, 2001 for these customers are
as follows:
2001 Percentage 2000 Percentage
---- ---------- ---- ----------
Claxton Poultry $ 548,218 9.84% $ 1,865,727 19.81%
Clendenin Lumber Company 768,626 13.79 969,759 10.30
Flexible Technologies 215,283 3.86 860,976 9.14
Greenwood Mop and Broom - - 3,155 0.03
Greenwood Packing 4,041,544 72.51 5,465,234 58.02
Thantex Specialties, Inc. - - 254,425 2.70
------------ ------- ------------ -------
$ 5,573,671 100.00% $ 9,419,276 100.00%
============ ======= ============ =======
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NOTE 3 - OPERATING LEASES
The Company leases housing for workers and office space for its operations.
The leases are on a month-to-month basis and the aggregate monthly rental
expense is approximately $10,000.
NOTE 4 - SUBSEQUENT EVENTS
On March 4, 2002, substantially all of the assets of the Company were
acquired for $2,023,000 by Employment Solutions Acquisition, Inc., a newly
formed subsidiary of RSI Holdings, Inc. The acquisition was accounted for as a
purchase and generated approximately $1,928,770 in goodwill and intangible
assets.
On April 2, 2002 the Company's leased office space was destroyed by fire.
All of the assets and records in the premises were destroyed. The Company was
able to relocate to another office and continue operations and received an
insurance settlement of $36,657.
7
Schedule 1
EMPLOYMENT SOLUTIONS, LLC
COST OF REVENUES
For the years ended
December 31,
------------------------
2001 2000
---- ----
Wages $ 3,586,143 $ 6,285,083
Contract labor 161,763 -
Commissions 120,366 280,892
Employee lodging 194,341 290,249
Payroll taxes 337,917 622,201
Workers compensation insurance 222,108 281,594
----------- -----------
$ 4,622,638 $ 7,760,019
=========== ===========
Schedule 2
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
For the years ended
December 31,
------------------------
2001 2000
---- ----
Auto $ 21,435 $ 23,711
Medical 10,203 9,223
Office supplies 33,217 21,284
Postage 1,455 1,088
Professional fees 11,721 15,041
Telephone 13,233 17,617
Depreciation 4,094 4,387
Recruiting 2,595 1,500
Training 4,588 -
Travel 6,185 5,898
Advertising 859 536
Bank charges 244 -
Computer 882 5,735
Equipment 600 3,852
Gifts and donations 273 411
Other 194 2,796
--------- ---------
$ 111,778 $ 113,079
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