Attached files
EXHIBIT 13
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
WITH CONSOLIDATING INFORMATION
YEARS ENDED JUNE 30, 2010 AND 2009
TABLE OF CONTENTS
Page
Report of Independent Registered Public Accounting Firm
Report of Former 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
Moquist Thorvilson Kaufmann Kennedy & Pieper LLC
Certified Public Accountants & Consultants
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Oakridge Holdings, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Oakridge
Holdings, Inc. and Subsidiaries as of June 30, 2010, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for the year then ended. Oakridge Holdings, Inc. and Subsidiaries' management
is responsible for these financial statements. Our responsibility is to
express an opinion on these financial statements based on our audit. The
consolidated financial statements of Oakridge Holdings, Inc. and Subsidiaries
as of June 30, 2009, were audited by other auditors whose report dated
September 29, 2009, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with the 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 audit 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 financial statements referred to above present fairly, in
all material respects, the financial position of Oakridge Holdings, Inc. and
Subsidiaries as of June 30, 2010, and the results of its operations and its
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
/s/ Moquist Thorvilson Kaufmann Kennedy & Pieper LLC
Moquist Thorvilson Kaufmann Kennedy & Pieper LLC
Edina, Minnesota
September 29, 2010
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 sheet of Oakridge
Holdings, Inc. and Subsidiaries as of June 30, 2009 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards 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 the results of their operations
and their cash flows for the year 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 30,2010 June 30,2009
ASSETS
Current assets:
Cash and cash equivalents $372,797 $345,153
Restricted cash 89,320 -
Accounts receivable, less allowance for
doubtful accounts of $15,000 in 2010 and 2009 2,236,804 2,295,234
Inventories:
Production, net 6,647,308 6,315,017
Cemetery, mausoleum space, and markers 607,435 630,746
Deferred income tax assets 312,000 232,000
Other current assets 104,942 119,864
----------- -----------
Total current assets 10,370,606 9,938,014
----------- -----------
Property and equipment:
Property and equipment 6,506,136 6,342,170
Less accumulated depreciation 4,312,179 4,093,125
----------- -----------
Property and equipment, net 2,193,957 2,249,045
----------- -----------
Other assets:
Cemetery perpetual care trusts 4,962,756 4,687,816
Preneed trust investments 2,023,358 2,059,056
Debt issuance costs, less accumulated
amortization of $16,131 and $8,388 in 2010
and 2009, respectively 61,299 69,042
Deferred income tax assets 78,000 265,000
Other 11,033 11,431
----------- -----------
Total other assets 7,136,446 7,092,345
----------- -----------
Total Assets $19,701,009 $19,279,404
----------- -----------
June 30,2010 June 30,2009
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit - bank $1,331,443 $979,840
Trade accounts payable 1,249,716 1,274,591
Due to finance company 1,227,231 1,724,900
Accrued liabilities 979,818 875,396
Deferred revenue 1,886,908 1,615,936
Short term notes payable - others 380,000 330,000
Current maturities of long-term debt 696,321 227,012
----------- -----------
Total current liabilities 7,751,437 7,027,675
----------- -----------
Long-term liabilities:
Non-controlling interest in pre-need
trust investments 2,023,358 2,059,056
Long term debt, less current maturities 3,496,865 4,173,231
----------- -----------
5,520,223 6,232,287
----------- -----------
Total liabilities 13,271,660 13,259,962
----------- -----------
Non-controlling interest in perpetual
care trust investments 4,962,756 4,687,816
----------- -----------
Stockholders' equity:
Preferred stock, $.10 par value, 1,000,000
shares authorized; none issued - -
Common stock, $.10 par value, 5,000,000
shares authorized; 1,431,503 shares issued
and outstanding in 2010 and 2009 143,151 143,151
Additional paid-in capital 2,028,975 2,028,975
Accumulated deficit (705,533) (840,500)
----------- -----------
Total stockholders' equity 1,466,593 1,331,626
----------- -----------
Total Liabilities and Stockholders' Equity $19,701,009 $19,279,404
=========== ===========
See Notes to Consolidated Financial Statements
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended Year Ended
June 30, 2010 June 30, 2009
---------- ----------
Revenue $14,134,028 $12,044,532
Cost of good sold 11,865,348 10,070,105
---------- ----------
Gross margin 2,268,680 1,974,427
---------- ----------
Operating expenses:
Selling 493,602 404,829
General and administrative 1,087,910 1,178,142
Research and development - 551,698
---------- ----------
Total operating expenses 1,581,512 2,134,669
---------- ----------
Income (loss) from operations 687,168 (160,242)
---------- ----------
Other income (expense):
Interest income 23,022 27,435
Interest expense (464,123) (384,646)
---------- ----------
Total other expense (441,101) (357,211)
---------- ----------
Net income (loss) before income taxes 246,067 (517,453)
(Benefit) provision for income taxes 111,100 (237,000)
---------- ----------
Net income (loss) $134,967 $(280,453)
========== ==========
Earnings per share:
Basic income (loss) per share $.09 $(.20)
========== ==========
Diluted net income (loss) per share $.09 $(.20)
========== ==========
See Notes to Consolidated Financial Statements
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 2010 AND 2009
Common Stock
Number of Common Additional Total
Shares Stock Paid-In Accumulated
Capital (Deficit)
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
Net income - - - 134,967 134,967
BALANCE,
June 30, 2010 1,431,503 $143,151 $2,028,975 $(705,533) $1,466,593
========= ======== ========== ========= ==========
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 30,2010 June 30,2009
Cash flows from operating activities:
Net income (loss) $134,967 $(280,453)
Adjustments to reconcile net income (loss) to
net cash flows from operating activities:
Depreciation and amortization 226,797 238,839
Deferred income taxes 107,000 (237,000)
Accounts receivables 58,430 (90,923)
Inventories (308,980) (642,826)
Other assets 15,320 (10,622)
Accounts payable and due to finance company (522,544) 958,385
(Gains) losses on trust investments 3,872 (97,315)
Deferred revenue 270,972 (756,589)
Accrued liabilities 104,422 61,040
---------- ----------
Net cash flows from operating activities 90,256 (857,464)
---------- ----------
Cash flows from investing activities:
Restricted cash (89,320) -
Purchases of property and equipment (163,966) (115,334)
Payments on net investment in sales-type lease - 460,200
Sales of non-controlling investments in trusts 172,266 450,491
Purchases of non-controlling investments
in trusts (176,138) (353,176)
---------- ----------
Net cash flows from investing activities (257,158) 442,181
---------- ----------
Cash flows from financing activities:
Net borrowings (repayments) on lines of
credit - bank (9,242) 459,840
Proceeds from issuance of notes payable 410,845 250,000
Proceeds from issuance of debt 50,000 -
Principal payments on long-term debt (257,057) (227,606)
---------- ----------
Net cash flows from financing activities 194,546 482,234
---------- ----------
Net change in cash and cash equivalents 27,644 66,951
Cash and cash equivalents, beginning of year 345,153 278,202
---------- ----------
Cash and cash equivalents, end of year $372,797 $345,153
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the years for:
Interest $448,114 $369,173
========== ==========
Income taxes $4,100 $2,000
========== ==========
See Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2010 AND 2009
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, 2010 and 2009, 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, 2010, and the methods and assumptions used to estimate such fair
values, were as follows:
- Cash and cash equivalents, accounts receivable, accounts payable and accrued
expenses - Fair value approximates the carrying amount because of the short
maturity of those financial instruments.
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, 2010 and 2009, the fair value approximated the carrying
value.
Cemetery perpetual care trusts - Fair market value is the amount on the trust
reports reported by the trustee.
Pre-need trust investments - Fair 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.
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
International customer accounted for 10% of Stinar's accounts receivable at
June 30, 2010, and one United States customer accounted for 26% at
June 30, 2009. Additionally, the U.S. Government accounted for approximately
69% of Stinar's accounts receivable at June 30, 2010 and 2009.
Customers
A significant portion of Stinar's customers are concentrated in the airline
industry. A downturn in the airline industry related to the world recession,
acts of terrorism and increases in fuel costs have had a negative impact on the
Company's continuing operations.
In 2010, net sales of Stinar to international customers, United States
government and North American customers were 16%, 68% and 16%, respectively.
In 2009, net sales of Stinar to international customers, United States
government and North American customers were 30%, 45% and 25%, respectively.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows and balance
sheets, the Company considers all highly liquid investments purchased with
a maturity of three months or less to be cash equivalents.
RESTRICTED CASH
Restricted cash represents amounts required to be held in escrow by certain
customers until project completion.
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.
The Company reviews inventory on a yearly basis and provides an inventory
reserve for slow-moving, obsolete or unusable inventory.
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 two
years for workmanship and manufacturing defects and one year 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, 2010 and 2009, 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 plots rights are recognized in accordance
with the retail land sales provisions of Financial Accounting Standards Board
(FASB) Accounting Standard Codification (ASC) 976-10 "Accounting for Sales of
Real Estate. 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 products and services have been
delivered and collection of the resulting receivable is reasonably assured.
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 all significant contractual obligations have been
satisfied and collection of the resulting receivable is reasonably assured.
The Company has a contract to supply equipment to the U.S. 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 reasonable dependable estimates of the percentage of
work completed on the contract due to unique nature of the contract; the
U.S. 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 U.S. 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 FASB ASC 740-10-25 which 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. FASB ASC 740-10-25 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, 2005 through June 30, 2010, the tax years that remain
subject to examination by major tax jurisdictions as of June 30, 2010. 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 FASB ASC 740-10-25, 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
The Company records as an expense in its consolidated statement of operations
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.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs in the product development process are expensed
as incurred. Assets that are acquired for research and development
activities and have alternative future uses in addition to a current use are
included in equipment and depreciated over the assets' estimated useful lives.
Research and development costs consist primarily of contract engineering costs
for outsourced design or development and equipment and material costs relating
to all design and prototype development activities.
BASIC AND DILUTED NET EARNINGS PER SHARE
Basic net earnings (loss) per common share is computed by dividing net earnings
(loss) applicable to common stockholders by the weighted average number of
common shares outstanding during the period. Diluted net earnings (loss) per
common share is determined using the weighted average number of common shares
outstanding during the period, adjusted for the dilutive effect of common stock
equivalents, consisting of shares that might be issued upon exercise of common
stock options and conversion of subordinated debenture and adjusting the net
earnings (loss) applicable to common stockholders resulting from the assumed
conversions. In periods where losses are reported, the weighted average number
of common shares outstanding excludes common stock equivalents, because their
inclusion would be anti-dilutive.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 2009, the FASB issued ASC 605 "Revenue Recognition - Multiple -
Deliverable Revenue Arrangments a consensus of the FASB Emerging Issues Task
Force". This guidance establishes a selling price hierarchy for determining the
selling price of a deliverable; eliminates the residual method of allocation
and requires arrangement consideration to be allocated at the inception of the
arrangement to all deliverables using the relative selling price method; and
requires a vendor to determine its best estimate of selling price in a manner
consistent with that used to determine the selling price of the deliverable on
a stand-alone basis. This guidance also expands the required disclosures
related to a vendor's multiple-deliverable revenue arrangements. The guidance
is effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010. Early adoption is
permitted. The Company does not believe the adoption of this standard will
have a material impact on our consolidated results of operations, financial
condition, cash flows, or disclosures.
In January 2010, the FASB issued ASU No. 2010-06, "Fair Value Measurements and
Disclosures (Topic 820) - Improving Disclosures about Fair Value Measurements"
("ASU No. 2010-06"). ASU No. 2010-06 requires new disclosures regarding
significant transfers in and out of Levels 1 and 2, as well as information
about activity in Level 3 fair value measurements, including presenting
information about purchases, sales, issuances and settlements on a gross versus
a net basis in the Level 3 activity roll forward. In addition, ASU No. 2010-06
clarifies existing disclosures regarding input and valuation techniques, as
well as the level of disaggregation for each class of assets and liabilities.
ASU No. 2010-06 is effective for interim and annual periods beginning after
December 15, 2009, except for the disclosures pertaining to purchases, sales,
issuances and settlements in the roll forward of Level 3 activity; those
disclosures are effective for interim and annual periods beginning after
December 15, 2010. Our adoption of ASU No. 2010-06 effective January 1, 2010
had no current impact on our consolidated financial position, results of
operations or cash flows.
3. CONSOLIDATION OF VARIABLE INTEREST ENTITY
The Company identifies variable interest entities (VIEs) and determines when
they should include the assets, liabilities, non-controlling interests and
results of activities of a VIE in its consolidated financial statements.
In general, a VIE is a corporation, partnership, limited liability company,
trust, or any other legal structure used to conduct activities or hold assets
that either (1) has an insufficient amount of equity to carry out its principal
activities without additional subordinated financial support, (2) has a group
of equity owners that are unable to make significant decisions about its
activities, or (3) has a group of equity owners that do not have the obligation
to absorb losses or the right to receive returns generated by its operations.
The Company has determined they are required to consolidate the preneed
cemetery merchandise and service trusts and the cemetery perpetual care trust
(the trusts) as variable interest entities in its consolidated statement of
operations due to the equity investors not having the characteristics of a
controlling financial interest or do not have a insufficient amount of equity
to carry out its principal activities without additional subordinated financial
support. The consolidation affected certain line items in the consolidated
balance sheet, but had no impact on net earnings. Also, the consolidation does
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 further discussion of the trusts in 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 were $2,023,358 and $2,059,056 at June 30, 2010 and
2009, respectively.
The market value associated with the preneed cemetery merchandise and service
trust assets as of June 30, 2010 and 2009 are detailed below.
Year Beginning Interest Distributions Contributions Ending
Market Income Market
Value Value
2010 $2,059,056 $88,826 $(224,280) $99,756 $2,023,358
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, 2010 and 2009, 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 FASB ASC 976-10, "Accounting For Sales of Real
Estate." Under FASB ASC 976-10, 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.
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
2010 $4,687,816 $132,606 $(69,829) $(104,166) $98,974 $217,355 $4,962,756
2009 $4,918,067 $98,260 $181,837 $(112,524) $93,379 $(491,203) $4,687,816
The cost of the trust investments held by the cemetery are $5,201,797 and
$5,073,694 as of June 30, 2010 and 2009, respectively.
6. INVENTORIES
Production inventories consisted of the following:
2010 2009
Finished goods $6,574 $ -
Work-in-process 3,686,827 3,851,562
Raw materials and trucks 2,983,907 2,463,455
Reserve for obsolescence (30,000) -
---------- ----------
$6,647,308 $6,315,017
========== ==========
Inventories of cemetery and mausoleum space available for sale
consisted of the following:
2010 2009
Cemetery space $420,992 $428,227
Mausoleum space and other 186,443 202,519
-------- --------
$607,435 $630,746
======== =========
7. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
2010 2009
Land and improvements $1,366,000 $1,366,000
Building and improvements 2,376,374 2,355,552
Vehicles 581,710 581,710
Equipment and other 2,182,052 2,038,908
---------- ----------
$6,506,136 $6,342,170
========== ==========
Depreciation charged to operations was $219,054 in 2010 and $231,096 in 2009.
8. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
2010 2009
Salaries and payroll taxes $677,009 $613,679
Due trust funds 188,413 155,520
Interest 46,106 30,097
Other 68,290 76,100
-------- --------
$979,818 $875,396
======== ========
9. 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, 2010 and 2009, $1,227,231 and $1,724,900 was outstanding with interest
ranging from 5.88% to 8.25%. Amounts financed are generally due 90 days after
chassis purchase. The financing is secured by chassis inventory and personally
guaranteed by the assets of the chief executive officer/key stockholder.
Lines of Credit - Bank
The Company has a line of credit agreement with a bank allowing borrowings up
to $1,000,000, subject to certain borrowing base limitations, with interest at
2% over the reference rate with a floor of 7% (7% at June 30, 2010), maturing
October 31, 2010. The reference rate is the rate announced by U.S. Bank
National Association referred to as the "U.S. Bancorp Prime Lending Rate". As
of June 30, 2010 and 2009, the outstanding borrowings under this line of credit
was $970,598 and $979,840 respectively. The line of credit is secured by the
assets of the Company's wholly owned subsidiary, Stinar HG, Inc., continuing
commercial guarantees from the Company, the chief executive officer and VP of
marketing and sales, and by the assignment of a life insurance policy on the
chief executive officer/key stockholder.
In January 2010, the Company entered into a second line of credit with the same
bank initially allowing borrowings up to $350,000 (increased to $750,000 in
April 2010), subject to certain borrowing base limitations, with interest at
2% over the reference rate with a floor of 7% (7% at June 30, 2010), maturing
April 26, 2011. As of June 30, 2010, the outstanding borrowings under this
line of credit was $360,845. The line of credit is secured by the assets of
the Company's wholly owned subsidiary, Stinar HG, Inc., continuing commercial
guarantees from the Company, the chief executive officer and VP of marketing
and sales.
Note Payable - Others
The Company had $380,000 and $330,000 in unsecured notes payable at
June 30, 2010 and 2009, respectively, including $300,000 and $250,000 due to
key officers/stockholders at June 30, 2010 and 2009, respectively. These
notes are due on demand and bear interest at 9%.
Long Term Debt
Long-term debt consisted of the following:
2010 2009
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. $4,610 $12,524
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. 5,938 13,444
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,
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 real property owned by
Stinar and the assignment of all rents to
Stinar on real property owned by Stinar. 1,998,661 2,049,223
U.S. Small Business Administration term loan,
payable in monthly installments of $22,457
including interest at the prime rate plus 1%,
adjusted every calendar quarter (4.25% at
June 30, 2010), maturing in May 2018. The note
is secured by the assets of Stinar and the
unconditional guarantee of the chief executive
officer/key stockholder. 1,648,977 1,820,052
---------- ----------
Long-term debt before debentures 3,658,186 3,895,243
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
member of the Company. On July 1, 2010, the
Company modified these debentures, whereby
the conversion rate was decreased to $.50 of
principal, maturity date was extended to
July 1, 2012 and interest is payable quarterly.
Due to the significance of this modification,
GAAP considers the modification to be a debt
extinguishment, which will require the Company
to record a loss on debt extinguishment of
approximately $180,000 in fiscal year 2011. 485,000 505,000
Convertible subordinated debenture - unsecured
with 9% interest due quarterly, convertible
into one common share for each $.50 of principal,
maturing on July 1, 2012. The debenture was
issued to an unrelated individual. 50,000 -
---------- ----------
4,193,186 4,400,243
Less current maturities 696,321 227,012
---------- ----------
$3,496,865 $4,173,231
========== ==========
Future maturities of long-term debt are as follows:
2011 $696,321
2012 294,973
2013 2,063,811
2014 204,135
2015 217,266
Thereafter 716,680
----------
$4,193,186
==========
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, 2010,
the actual cash flow to current maturity ratio was (.60) to 1.00 while the
allowed minimum was 1.20 to 1.00, and the debt to equity ratio was 3.49 to 1.00
which meets the maximum ratio allowed of 4.50 to 1.00. The negative covenants
include a restriction on capital expenditures of $50,000 annually. In 2010, the
Company incurred approximately $114,000 of capital expenditures. The bank
subsequently issued a waiver for the violated cash flow to current maturity
ratio covenant and the capital expenditure covenant.
10. INCOME TAXES
The income tax provision (benefit) is comprised of the following:
2010 2009
Current tax expense (benefit):
Federal $ - $ -
State 4,000 2,000
---------- ----------
Total current 4,000 2,000
---------- ----------
Deferred tax (benefit):
Federal 121,000 (185,000)
State (14,000) (54,000)
---------- ----------
Total deferred 107,000 (239,000)
---------- ----------
Total expense (benefit) for income taxes $111,100 $(237,000)
========== ==========
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:
2010 2009
Deferred tax assets:
Inventory $133,000 $70,000
Accrued compensation 154,000 163,000
Tax credit carryforwards 53,000 29,000
Net operating loss carryforwards 84,000 271,000
Other 11,000 4,000
------- -------
Gross deferred tax assets 435,000 537,000
------- -------
Deferred tax liabilities:
Property and equipment (45,000) (40,000)
-------- --------
Gross deferred tax liabilities (45,000) (40,000)
-------- --------
Net deferred tax assets $390,000 $497,000
======== ========
The Company has recorded its deferred tax assets (liabilities) in the
accompanying consolidated balance sheets as follows:
June 30, 2010 2009
Current assets:
Deferred income taxes $312,000 $232,000
Non-current assets:
Deferred income taxes 78,000 265,000
-------- --------
Net deferred tax asset $390,000 $497,000
======== ========
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:
2010 2009
Statutory U.S. federal tax rate 34.0% 34.0%
State taxes, net of federal benefit 4.0% 4.0%
Permanent differences and other 7.2% 7.8%
----- -----
Effective tax rate 45.2% 45.8%
===== =====
The Company has federal and state net operating loss carryforwards of
approximately $111,000 and $837,000, respectively, which begin to expire in
2017.
11. OTHER RELATED PARTY TRANSACTIONS
Amounts expensed for tax and SEC compliance services to the chief executive
officer's spouse were $23,329 in 2010 and $25,493 in 2009. Interest expense on
the related party convertible debentures and notes payable to the
officers/stockholders totaled $72,450 and $45,450 in 2010 and 2009,
respectively. The Company has a month-to-month operating lease from one of the
officers. Total rent expense was $24,600 in 2010 and 2009.
12. 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, 2013. Pension expense under
this plan was $28,619 in 2010 and $18,849 in 2009.
13. STOCK OPTIONS
On September 1, 1998, the Board of Directors approved a Stock Incentive Awards
Plan to attract and retain individuals to contribute to the achievement of the
Company's economic objectives. Under the Plan, individuals are eligible based
on the judgment of a committee of Board members (committee). At the discretion
of the committee, eligible recipients may be granted options to purchase shares
of the Company's common stock at an exercise price per share equal to the
market price at the grant date. The stock options are exercisable at such times
and in such installments as determined by the committee, limited to a maximum
of ten years from the date of the grant. The Plan has authorized the issuance
of 175,000 shares of common stock under the Plan. There were no grants for
shares issued in 2010 and 2009, and at June 30, 2010, 165,000 shares were
available for future grants.
FASB ASC 718 requires companies to estimate the fair value of share-based
payment awards on the date of grant using an option-pricing model. The fair
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
consolidated statements of operations. The Company recorded $0 of related
compensation expense for the year ended June 30, 2010 as no options were
granted and no additional options vested during the period. There were no
options exercised during fiscal years ended 2010 and 2009. During 2010, 5,000
options expired.
The Company uses the Black-Scholes-Merton ("Black Scholes") option-pricing model
as a method for determining the estimated fair market value for employee stock
awards.
As of June 30, 2009, there were 10,000 options outstanding and exercisable with
an average exercise price of $1.63, a weighted average remaining contractual
life of 1.5 years and an aggregate intrinsic value of $0.
As of June 30, 2010, there were 5,000 options outstanding and exercisable with
an average exercise price of $2.00, a weighted average remaining contractual
life of 0.5 years and an aggregate intrinsic value of $0.
The aggregate intrinsic value represents the difference between the closing
stock price on June 30, 2010 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, 2010.
14. 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:
2010 2009
Net Income Shares Per-Share Net(Loss) Shares Per-Share
---------- ------------ ------- ---------- ------------ -------
(Numerator)(Denominator) Amount (Numerator)(Denominator) Amount
---------- ------------ ------- ---------- ------------ -------
BASIC EPS
Net income (loss)
available to common
shareholders $134,967 1,431,503 $.09 $(280,453) 1,431,503 $(.20)
EFFECT OF DILUTIVE
SECURITIES
Employee stock options
and convertible
debentures 45,450 542,998 Anti-dilutive Anti-dilutive
--------- ---------- --------- ---------
DILUTED EPS
Net income (loss)
available to common
shareholders plus
assumed conversions $180,417 1,974,501 $.09 $(280,453) 1,431,503 $(.20)
========= ========== ======= ========= ========== =====
ANTIDILUTIVE SECURITIES
Employee stock options
and convertible
debentures 5,000 571,111
======= =======
15. 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, 2010 and 2009 is summarized as follows:
Aviation
Ground
Support
Cemeteries Equipment Total
2010 ----------- ------------ -----------
Net sales - external $3,405,276 $10,728,752 $14,134,028
Depreciation 145,769 72,800 218,569
Interest expense 2,911 379,762 382,673
Segment operating profit 517,987 449,785 967,772
Segment assets 13,229,128 10,527,945 23,757,073
Expenditures for segment fixed
assets 45,761 114,305 160,066
Income tax expense 238,000 31,000 269,000
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)
Reconciliation of segment profit to consolidated net income before income
taxes is as follows:
2010 2009
---------- ----------
Total profit (loss) for reportable segments $608,121 $(167,251)
Unallocated amounts:
Interest expense (81,450) (53,152)
Other corporate expenses (280,604) (297,050)
Other corporate income - -
---------- ----------
$246,067 $(517,453)
========== ==========
Reconciliation of segment assets to consolidated assets is as follows:
June 30, 2010 2009
---------- ----------
Total segment assets $23,757,073 $22,797,894
Other assets 58,996 74,658
Elimination of receivable from holding
company (4,318,060) (3,966,148)
Deferred tax asset 203,000 373,000
---------- ----------
Total assets $19,701,009 $19,279,404
========== ==========
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.
16. RECLASSIFICATIONS
Certain 2009 information has been reclassified to conform to the 2010
presentation. The reclassifications did not affect cash flows, financial
position or net income.
17. FAIR VALUE MEASUREMENTS
As discussed in Note 1, effective July 1, 2009, the Company adopted the
provisions of FASB ASC 820-10, Fair Value Measurements (ASC 820-10), 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.
ASC 820-10 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, 2010
and 2009, respectively, is as follows:
Recurring Fair Value Measurement Using Total Fair
Level 1 Level 2 Level 3 Value
-------- ---------- ------- ----------
June 30, 2010
Assets at fair value:
Cash and cash equivalents $372,797 $ - $ - $372,797
Fixed income and debt
securities - Cemetery
perpetual care and pre-need
trust investments - 6,986,114 - 6,986,114
-------- ---------- --- ----------
Total assets at fair value $372,797 $6,986,114 $ - $7,358,911
======== ========== === ==========
Liabilities at fair value:
Non-controlling interest in
pre-need trust investments $ - $2,023,358 $ - $2,023,358
======== ========== === ==========
June 30, 2009
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.
Moquist Thorvilson Kaufmann Kennedy & Pieper LLC
Certified Public Accountants & Consultants
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Oakridge Holdings, Inc. and Subsidiaries
Our report on our audits of the consolidated financial statements of Oakridge
Holdings, Inc. and Subsidiaries for the year ended June 30, 2010 appears
before page 1. That audit was made for the purpose of forming an opinion on
the consolidated financial statements taken as a whole. The consolidating
information in pages 20 through 22 is presented for purposes of additional
analysis of the consolidated financial statements rather than to present the
financial position, results of operations, and cash flows of the individual
companies. Such information has been subject 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. The 2009 consolidating
information on pages 20 through 22 was subject to auditing procedures applied
in the 2009 audit of the consolidated financial statements by other auditors,
whose report on such information stated that it was fairly stated in all
material respects in relation to the 2009 consolidated financial statements
taken as a whole.
/s/ Moquist Thorvilson Kaufmann Kennedy & Pieper LLC
Moquist Thorvilson Kaufmann Kennedy & Pieper LLC
Edina, Minnesota
September 29, 2010
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 audit of the consolidated financial statements of Oakridge
Holdings, Inc. and Subsidiaries for the year ended June 30, 2009 appears
before page 1. That audit was made for the purpose of forming an opinion on
the consolidated financial statements taken as a whole. The consolidating
information 0n pages 20 through 22 is presented for purposes of additional
analysis of the consolidated financial statements rather than to present the
financial position and results of operations of the individual companies.
The 2009 consolidated totals have been subject to the auditing procedures
applied in the audit 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, 2010 (with Comparative Totals for 2009)
Oakridge Oakridge Stinar Consolidated
Holdings, Inc. Cemeteries HG, Inc. Eliminations 2010 2009
------------- ---------- ----------- ------------ ---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $4,188 $274,657 $93,952 $ - 372,797 345,153
Restricted cash - - 89,320 - 89,320 -
Trade accounts receivable - 222,164 2,014,640 - 2,236,804 2,295,234
Intercompany receivables 371,310 4,318,060 (4,689,370) - -
Inventories:
Production, net - - 6,647,308 - 6,647,308 6,315,017
Cemetery, mausoleum space, and markers - 607,435 - - 607,435 630,746
Deferred income taxes 125,000 4,000 183,000 - 312,00 232,000
Other current assets 39,875 3,563 61,504 - 104,942 119,864
---------- ---------- --------- ------------ ----------- ----------
Total current assets 540,373 5,429,879 9,089,724 (4,689,370) 10,370,606 9,938,014
---------- ---------- --------- ------------ ----------- ----------
Property and equipment
Land and improvements - 954,347 411,653 - 1,366,000 1,366,000
Building and improvements - 878,873 1,497,501 - 2,376,374 2,355,552
Vehicles - 517,690 64,020 - 581,710 581,710
Equipment 19,276 1,154,151 1,008,625 - 2,182,052 2,038,908
---------- ---------- --------- ------------ ----------- ----------
19,276 3,505,061 2,981,799 - 6,506,136 6,342,170
Less accumulated depreciation 15,376 2,691,926 1,604,877 - 4,312,179 4,093,125
---------- ---------- --------- ------------ ----------- ----------
Property and equipment, net 3,900 813,135 1,376,922 - 2,193,957 2,249,045
---------- ---------- --------- ------------ ----------- ----------
Other assets:
Investments in subsidiaries 6,754,255 - - (6,754,255) - -
Cemetery perpetual care trusts - 4,962,756 - - 4,962,756 4,687,816
Preneed trust Investments - 2,023,358 - - 2,023,358 2,059,056
Debt issuance costs - - 61,299 - 61,299 69,042
Deferred income taxes 102,000 - - (24,000) 78,000 265,000
Other 11,033 - - - 11,033 11,431
---------- ---------- --------- ------------ ----------- ----------
Total other assets 6,867,288 6,986,114 61,299 (6,778,255) 7,136,446 7,092,345
---------- ---------- --------- ------------ ----------- ----------
Total Assets $7,411,561 $13,229,128 $10,527,945 $(11,467,625) $19,701,009 $19,279,404
========== ========== ========= ============ =========== ==========
Oakridge Oakridge Stinar Consolidated
Holdings, Inc. Cemeteries HG, Inc. Eliminations 2010 2009
------------- ---------- ----------- ------------ ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit - bank $ - $ - $1,331,443 $ - $1,331,443 $979,840
Trade accounts payable 78,325 132,484 1,038,907 - 1,249,716 1,274,591
Due to finance company - - 1,227,231 - 1,227,231 1,724,900
Intercompany payables 4,547,850 - 141,520 (4,689,370) - -
Accrued liabilities
Salaries and payroll taxes 357,687 119,258 200,064 - 677,009 613,679
Due to trust funds - 188,413 - - 188,413 155,520
Interest 46,106 - - - 46,106 30,097
Other - - 68,290 - 68,290 76,100
Deferred revenue - 1,416,027 470,881 - 1,886,908 1,615,936
Notes payable - other 380,000 - - - 380,000 330,000
Current maturities of long-term debt 485,000 10,548 200,773 - 696,321 227,012
---------- ---------- --------- ------------ ----------- ----------
Total current liabilities 5,894,968 1,866,730 4,679,109 (4,689,370) 7,751,437 7,027,675
---------- ---------- --------- ------------ ----------- ----------
Long-term liabilities:
Non-controlling interest in pre-need
investments - 2,023,358 - - 2,023,358 2,059,056
Long-term debt 50,000 - 3,446,865 - 3,496,865 4,173,231
Deferred income tax liabilities - 15,000 9,000 (24,000) - -
---------- ---------- --------- ------------ ----------- ----------
Total long-term liabilities 50,000 2,038,358 3,455,865 (24,000) 5,520,223 6,232,287
---------- ---------- --------- ------------ ----------- ----------
Total Liabilities 5,944,968 3,905,088 8,134,974 (4,713,370) 13,271,660 13,259,962
---------- ---------- --------- ------------ ----------- ----------
Non-controlling interest in
perpetual care trust investments - 4,962,756 - - 4,962,756 4,687,816
---------- ---------- --------- ------------ ----------- ----------
Stockholders' equity:
Common stock 143,151 20,000 10,000 (30,000) 143,151 143,151
Additional paid in capital 2,028,975 - 3,172,041 (3,172,041) 2,028,975 2,028,975
Accumulated deficit (705,533) 4,341,284 (789,070) (3,552,214) (705,533) (840,500)
---------- ---------- --------- ------------ ----------- ----------
Total Stockholders Equity 1,466,593 4,361,284 2,392,971 (6,754,255) 1,466,593 1,331,626
---------- ---------- --------- ------------ ----------- ----------
Total Liabilities and
Stockholders' Equity $7,411,561 $13,229,128 $10,527,945 $(11,467,625) $19,701,009 $19,279,404
========== ========== ========= ============ =========== ==========
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended June 30, 2010 (with Comparative Totals for 2009)
Oakridge Oakridge Stinar Consolidated
Holdings, Inc. Cemeteries HG, Inc. Eliminations 2010 2009
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Revenue $ - $3,405,276 $10,728,752 $ - $14,134,028 $12,044,532
Cost of goods sold - 2,064,180 9,801,168 - 11,865,348 10,070,105
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Gross margin - 1,341,096 927,584 - 2,268,680 1,974,427
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Operating expenses:
Selling - 256,902 236,700 - 493,602 404,829
General and administrative 280,604 566,207 241,099 - 1,087,910 1,178,142
Research and development - - - - - 551,698
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Total operating expenses 280,604 823,109 477,799 - 1,581,512 2,134,669
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Income (loss) from operations (280,604) 517,987 449,785 - 687,168 (160,242)
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Other income (expense):
Equity in subsidiary earnings (losses) 339,121 - - (339,121) - -
Interest expense (81,450) (2,911) (379,762) - (464,123) (384,646)
Interest income - 23,022 - - 23,022 27,435
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Total other income (expense) 257,671 20,111 (379,762) (339,121) (441,101) (357,211)
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Net income (loss) before income taxes (22,933) 538,098 70,023 (339,121) 246,067 (517,453)
Income taxes (benefit) (157,900) 238,000 31,000 - 111,100 (237,000)
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Net income (loss) $134,967 $300,098 $39,023 $(339,121) $134,967 $(280,453)
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See Report of Independent Registered Public Accounting Firm on Consolidating Information.
