Attached files
file | filename |
---|---|
8-K/A - 8-K/A - CECO ENVIRONMENTAL CORP | d853910d8ka.htm |
EX-23.1 - EX-23.1 - CECO ENVIRONMENTAL CORP | d853910dex231.htm |
EX-99.2 - EX-99.2 - CECO ENVIRONMENTAL CORP | d853910dex992.htm |
Exhibit 99.1
FINANCIAL STATEMENTS
EMTROL LLC AND SUBSIDIARY
DECEMBER 31, 2013
C O N T E N T S
Page | ||
ACCOUNTANTS LETTER |
3-4 | |
CONSOLIDATED BALANCE SHEET |
5 | |
CONSOLIDATED STATEMENT OF INCOME AND MEMBERS EQUITY | 6 | |
CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS EQUITY | 7 | |
CONSOLIDATED STATEMENT OF CASH FLOWS |
8 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
9-14 |
KUTZ & COMPANY, INC.
CERTIFIED PUBLIC ACCOUNTANTS
185 Great Neck Rd. - Suite 450 Great Neck, NY 11021 Telephone (516) 482-1158 Fax (516) 829-5312 |
ANDREW B. KUTZ
PAUL J. KUTZ
Managing Member
Emtrol LLC and Subsidiary
Islandia, New York 11749
We have audited the accompanying consolidated financial statements of Emtrol LLC and its subsidiary, which comprise the consolidated balance sheets as of December 31, 2013 and 2012, and the related consolidated statements of income, changes in members equity, and cash flows for the years then ended, and the related notes to the financial statements.
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United State of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Emtrol LLC and its subsidiary as of December 31, 2013 and 2012, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United State of America.
/s/ Kutz & Company, Inc.
Great Neck, New York
February 12, 2014
EMTROL LLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31st
ASSETS
2013 | 2012 | |||||||
CURRENT ASSETS |
||||||||
Cash including temporary investments |
$ | 8,680,589 | $ | 8,252,768 | ||||
Accounts receivable, less allowance for doubtful accounts of $0 |
9,051,107 | 8,131,878 | ||||||
Costs incurred on uncompleted projects (Note B-4) |
0 | 0 | ||||||
Inventories (Note B-6) |
8,673 | 16,255 | ||||||
Other current assets |
153,349 | 128,721 | ||||||
|
|
|
|
|||||
TOTAL CURRENT ASSETS |
17,893,718 | 16,529,622 | ||||||
FIXTURES AND EQUIPMENT (NET) (Note C) |
119,303 | 82,776 | ||||||
GOODWILL (NET) (Note A) |
2,992,430 | 2,992,430 | ||||||
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|
|
|
|||||
$ | 21,005,451 | $ | 19,604,828 | |||||
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|
|||||
LIABILITIES AND MEMBERS EQUITY |
| |||||||
CURRENT LIABILITIES |
||||||||
Accounts payable |
$ | 9,145,658 | $ | 7,943,626 | ||||
Accrued expenses |
479,291 | 670,737 | ||||||
Customer deposits (Note B-5) |
277,328 | 159,917 | ||||||
Income taxes payable (Note E) |
184,192 | 156,334 | ||||||
Due to member - Emtrol Corp. |
0 | 239,730 | ||||||
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|
|
|
|||||
TOTAL CURRENT LIABILITIES |
10,086,469 | 9,170,344 | ||||||
OTHER LIABILITIES |
||||||||
Long Term Debt (Note J) |
15,663 | 0 | ||||||
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|
|
|
|||||
TOTAL LIABILITIES |
10,102,132 | 9,170,344 | ||||||
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|
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MEMBERS EQUITY |
||||||||
Equity adjustment resulting from foreign currency conversion (Note G) |
500,550 | 520,877 | ||||||
Members equity |
10,402,769 | 9,913,607 | ||||||
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|
|
|
|||||
TOTAL MEMBERS EQUITY |
10,903,319 | 10,434,484 | ||||||
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|||||
TOTAL LIABILITIES & MEMBERS EQUITY |
$ | 21,005,451 | $ | 19,604,828 | ||||
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|
|
See accountants audit report.
-5-
EMTROL LLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME AND MEMBERS EQUITY FOR
THE YEAR ENDED DECEMBER 31, 2013
2013 | 2012 | |||||||
REVENUES |
$ | 33,371,470 | $ | 35,453,505 | ||||
|
|
|
|
|||||
COSTS AND EXPENSES |
||||||||
Cost of goods sold |
27,207,964 | 29,451,741 | ||||||
Selling expenses |
2,117,220 | 2,159,088 | ||||||
General and administrative expenses |
1,543,231 | 1,477,322 | ||||||
Administrators salaries |
219,154 | 220,846 | ||||||
Pension plan expense |
305,577 | 257,569 | ||||||
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|
|
|||||
TOTAL COSTS & EXPENSES |
31,393,146 | 33,566,566 | ||||||
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|
|||||
NET OPERATING EARNINGS (LOSS) |
1,978,324 | 1,886,939 | ||||||
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|
|||||
OTHER INCOME AND (EXPENSES) |
||||||||
Interest and dividend income |
6,895 | 8,248 | ||||||
Gain (loss) on foreign currency transactions (Note G) |
119,141 | (82,531 | ) | |||||
Miscellaneous Income |
0 | 74,045 | ||||||
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|
|
|||||
OTHER INCOME AND (EXPENSES) |
126,036 | (238 | ) | |||||
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|
|||||
EARNINGS (LOSS) BEFORE INCOME TAXES |
2,104,360 | 1,886,701 | ||||||
INCOME TAX PROVISION (Note E) |
178,927 | 146,195 | ||||||
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|
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|
|||||
NET EARNINGS (LOSS) |
1,925,433 | 1,740,506 | ||||||
MEMBERS EQUITY JANUARY 1ST |
9,913,607 | 9,303,581 | ||||||
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|
|
|
|||||
SUBTOTAL |
11,839,040 | 11,044,087 | ||||||
LESS: DISTRIBUTION TO MEMBERS |
(1,436,271 | ) | (1,130,480 | ) | ||||
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MEMBERS EQUITY DECEMBER 31ST |
$ | 10,402,769 | $ | 9,913,607 | ||||
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|
|
See accountants audit report.
-6-
EMTROL LLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS EQUITY
YEAR ENDED DECEMBER 31, 2013
Totals | Managing Member |
Non-managing Members |
||||||||||
BEGINNING MEMBERS |
||||||||||||
EQUITY - January 1, 2012 |
$ | 9,303,581 | $ | 9,303,581 | $ | 0 | ||||||
Net Income (Loss) for the year - 2012 |
$ | 1,740,506 | 1,740,506 | 0 | ||||||||
Add: Guaranteed Payments to non-managing members deducted to arrive at Net Income (Loss) for the year 2012 |
$ | 2,099,208 | 0 | 2,099,208 | ||||||||
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|||||||
Subtotal |
$ | 13,143,295 | $ | 11,044,087 | $ | 2,099,208 | ||||||
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|
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DISTRIBUTIONS TO MEMBERS |
||||||||||||
Non-managing Members |
(2,099,208 | ) | 0 | (2,099,208 | ) | |||||||
Managing Member |
(1,130,480 | ) | (1,130,480 | ) | 0 | |||||||
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|
|
|||||||
Total Distributions |
(3,229,688 | ) | (1,130,480 | ) | (2,099,208 | ) | ||||||
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|
|||||||
ENDING MEMBERS EQUITY |
||||||||||||
December 31, 2012 |
$ | 9,913,607 | $ | 9,913,607 | $ | 0 | ||||||
Net Income (Loss) - 2013 |
1,925,433 | 1,925,433 | 0 | |||||||||
Add: Guaranteed Payments to non-managing members deducted to arrive at Net Income (Loss) for 2013 |
2,273,595 | 0 | 2,273,595 | |||||||||
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|||||||
Subtotal |
$ | 14,112,635 | $ | 11,839,040 | $ | 2,273,595 | ||||||
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DISTRIBUTIONS TO MEMBERS |
||||||||||||
Non Managing Members |
(2,273,595 | ) | 0 | (2,273,595 | ) | |||||||
Managing Member |
(1,436,271 | ) | (1,436,271 | ) | 0 | |||||||
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Total Distributions |
(3,709,866 | ) | (1,436,271 | ) | (2,273,595 | ) | ||||||
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ENDING MEMBERS EQUITY | ||||||||||||
December 31, 2013 |
$ | 10,402,769 | $ | 10,402,769 | $ | 0 | ||||||
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|
|
See accountants audit report.
-7-
EMTROL LLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2013
2013 | 2012 | |||||||
CASH FLOW FROM OPERATING ACTIVITIES |
||||||||
Net income |
$ | 1,925,433 | $ | 1,740,506 | ||||
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|
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|
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Adjustment to reconcile cash flow: Depreciation and amortization |
37,908 | 34,170 | ||||||
Equity adjustment resulting from foreign currency conversion |
(20,327 | ) | 42,707 | |||||
Decrease (increase) in current assets |
||||||||
Accounts receivable |
(919,229 | ) | 6,361,190 | |||||
Costs incurred on incomplete contracts |
0 | 16,509 | ||||||
Inventories |
7,582 | 359 | ||||||
Other current assets and prepayments |
(24,628 | ) | 1,970 | |||||
Increase (decrease) in current liabilities: |
||||||||
Accounts payable |
1,202,032 | (6,724,612 | ) | |||||
Accrued expenses |
(191,446 | ) | (65,912 | ) | ||||
Customer deposits |
117,411 | (183,204 | ) | |||||
Income taxes payable |
27,858 | (97,461 | ) | |||||
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|
|||||
TOTAL ADJUSTMENTS |
237,161 | (614,284 | ) | |||||
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|
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Cash provided (used) by operations |
2,162,594 | 1,126,222 | ||||||
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CASH FLOW FROM INVESTING ACTIVITIES |
||||||||
Purchases of fixed assets (net of removals) |
(74,435 | ) | (67,899 | ) | ||||
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|
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Cash provided (used) by investing |
(74,435 | ) | (67,899 | ) | ||||
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CASH FLOW FROM FINANCING ACTIVITIES |
||||||||
Long Term Debt Incurred |
15,663 | 0 | ||||||
Advance from Member - Emtrol Corp. |
(239,730 | ) | 341,677 | |||||
(Distributions) to Managing Member |
(1,436,271 | ) | (1,130,480 | ) | ||||
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|
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Cash provided (used) by financing |
(1,660,338 | ) | (788,803 | ) | ||||
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|
|||||
Net increase (decrease) in cash |
427,821 | 269,520 | ||||||
Cash at beginning of year |
8,252,768 | 7,983,248 | ||||||
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|
|||||
Cash at end of year |
$ | 8,680,589 | $ | 8,252,768 | ||||
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|
See accountants audit report
-8-
EMTROL LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2013
NOTE A - ORGANIZATION
Emtrol Corporation was incorporated May 23, 1973, under the law of the State of Delaware, and is engaged in the design and sale of pollution control equipment. The equipment is fabricated by various subcontractors in accordance with customer contracts and specifications. The equipment is used primarily by companies engaged in the petroleum, chemical, mining, and other heavy industries.
As of January 1, 1999, Emtrol Corporation transferred substantially all of its assets subject to liabilities, to Emtrol LLC, (a New York Limited Liability Company) in exchange for a 100% interest in newly formed Emtrol LLC, which continues to operate the business. Certain key employees of the corporation have been granted minority member interests in the new LLC, which will entitle them to participate in any increase in the equity of the business, after certain priority distributions, as well as participate in the proceeds of any sale of the business.
NOTE B - PRINCIPLES OF ACCOUNTING
(1) CONSOLIDATION
The consolidated financial statements include the operations and changes in financial position of Emtrol LLC (both United States and United Kingdom divisions), as well as those of its Canadian subsidiary Emtrol, Ltd. All significant intercompany balances and transactions have been eliminated.
-9-
EMTROL LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2013
NOTE B - PRINCIPLES OF ACCOUNTING (CONTINUED)
(2) REVENUE RECOGNITION
These financial statements have been prepared on the accrual basis of accounting. Expenses are recognized when incurred. Revenue is recognized on the percentage of completion basis on the sale of pollution control equipment, which comprises the vast majority of the companys revenue. Revenue is recognized in proportion to the ratio that costs expended on current contracts bears to the total estimated cost of such contracts.
(3) DEPRECIATION
Depreciation is computed at the maximum allowable amounts for both financial reporting and income tax purposes, in accordance with regulations established by the Internal Revenue Service in the United States, and the Inland Revenue of the United Kingdom.
(4) COSTS INCURRED ON UNCOMPLETED CONTRACTS
Costs Incurred on Uncompleted Contracts represents charges from subcontractors who fabricate pollution control equipment for Emtrols customers, in excess of customer billings on these contracts.
(5) CUSTOMER DEPOSITS
Customer deposits represent advance payments to Emtrol LLC by its customers on incomplete contracts. These deposits are recognized as revenue as the contracts progress.
(6) INVENTORIES
Inventories consist of spare parts and supplies, and are valued at a lower of cost or market value, applied on a first in, first out (FIFO) basis. Inventories are not a material income producing factor.
(7) RESEARCH AND DEVELOPMENT
The company expenses currently all research and development costs for financial reporting purposes, and for income tax purposes pursuant to Section 174 of the Internal Revenue Code. Such costs amounted to $9,576 in 2013 and $30,397 in 2012.
-10-
EMTROL LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2013
NOTE B - PRINCIPLES OF ACCOUNTING (CONTINUED)
(8) GUARANTEED PAYMENTS TO MEMBERS
Guaranteed payments to the non managing members that are intended as compensation for services rendered are accounted for as expenses of the LLC rather than as allocations of LLC net income. Guaranteed payments to the managing members that are intended as payments for capital contributed are not accounted for as expenses of the LLC, but rather, as part of the allocation of net income.
NOTE C - FIXTURES AND EQUIPMENT
Fixtures and equipment consisted of the following at December 31st:
2013 | 2012 | |||||||
Furniture, office equipment, and computers |
$ | 420,506 | $ | 344,649 | ||||
Vehicles |
0 | 0 | ||||||
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|
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420,506 | 344,649 | |||||||
Less: Accumulated Depreciation |
(301,203 | ) | (261,873 | ) | ||||
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|
|||||
$ | 119,303 | $ | 82,776 | |||||
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|
|
Fixtures and equipment, which are recorded at cost, are being depreciated using the double declining and straight-line methods over useful lives ranging from 5 to 7 years. Depreciation and amortization expense was $37,908 in 2013 and $34,170 in 2012.
Obsolete and fully depreciated equipment in the amount of $649,058 was written off in 2012.
-11-
EMTROL LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2013
NOTE D - BUSINESS SEGMENTS INFORMATION
The following is a breakdown, by geographical area, of certain key amounts included in these consolidated financial statements, shown in thousands of dollars:
2013 |
||||||||||||||||
TOTAL | UNITED STATES |
UNITED KINGDOM |
CANADA | |||||||||||||
Total Assets |
$ | 21,005 | 15,904 | 4,132 | 969 | |||||||||||
Liabilities |
10,102 | 6,285 | 3,078 | 739 | ||||||||||||
Revenues |
33,371 | 23,718 | 8,075 | 1,578 | ||||||||||||
Net Income (Loss) |
1,925 | 1,310 | 550 | 65 |
NOTE E - INCOME TAXES
The company is not a taxpaying entity for federal income tax purposes, and thus, no federal income tax expense has been recorded in the financial statements. The income of the company is taxed directly to the members, on their respective tax returns.
New York State, in which the Company is organized, has similar provisions that recognize an LLC as a non taxpaying entity. Consequently, no New York State income taxes have been provided for in the financial statements. The Company is subject to a small per-member filing fee imposed annually by the State of New York.
Provisions have been made in these financial statements for United Kingdom and Canadian income taxes, where applicable.
-12-
EMTROL LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2013
NOTE F - PENSION AND PROFIT SHARING PLANS
The Company has established a defined contribution pension plan covering all eligible employees. Employees are eligible to participate in the plan after completing one year of service and attaining age 21. Employer profit sharing contributions are allocated on a pro rata formula based on compensation. Participants in the plan become vested on a graduated basis, with 100% vesting after six years of service. Normal retirement age under the plan is 65. The Company has amended and restated the existing profit sharing plan of Emtrol Corporation, effective January 1, 1995 to Emtrol LLC as of January 1, 1999. The contributions to the plan were $305,577 for 2013 and $257,569 for 2012.
NOTE G - FOREIGN CURRENCY TRANSLATION
The Company has adopted Financial Accounting Standards Board (FASB) Statement No. 52, covering the currency translation of financial statements of multinational operations. Accordingly, foreign statements of operations for the years ended December 31, 2013 and 2012 were translated into U.S. dollars using average currency exchange rates in effect during the period, and financial position balances were translated at exchange rates in effect at year end. Currency effect changes resulting from the differences in translation rates used to translate such financial statements into U.S. dollars are included as a component of the stockholders equity section of the consolidated balance sheets at December 31, 2013 and 2012. Transactional gains and losses resulting from currency exchange fluctuations are included in the consolidated statement of operations. Currency effect changes resulted in a loss of $(20,327) for 2013 and a gain of $42,707 for 2012, while transactional currency fluctuations resulted in a gain of $119,141 for 2013 and a loss of $(82,531) for 2012.
NOTE H - COMMITMENT AND CONTINGENCIES
LETTERS OF CREDIT
The company has a credit facility with M&T Bank, whereby the bank will provide letters of credit up to $10,000,000, plus a line of credit for operations of up to $1,000,000.
At December 31, 2013, the Company has 17 outstanding letters of credit totaling $5,802,735. The letters of credit serve as guarantees of customer advanced payments for contract performance and equipment warranty to Emtrol LLCs customers. To date, no losses have been incurred under this letter of credit arrangement.
-13-
EMTROL LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2013
NOTE I - LEASES
The Company leases its main facility at 1440 Veterans Memorial Highway, Islandia, New York from a partnership which is owned by several of the beneficial owners of Emtrol LLC. The current lease runs September 1, 2013 through August 31, 2014. The rent payable under the lease is $13,835 per month. Rent expense under this lease was $163,191 for 2013 and $158,093 for 2012.
The Company also leases space in the United Kingdom, from an unrelated party, at the rate of $24,912 per annum.
The Company also leases several automobiles and pieces of office equipment under operating lease agreements.
NOTE J - LONG TERM DEBT
The Company purchased a piece of office equipment under a capitalized lease arrangement in 2013. The lease calls for monthly payments of $347 including interest at 12.78% through February of 2019. The breakdown of the current and non-current portion of the long term debt is as follows:
2013 | ||||
Current portion of long term debt |
$ | 2,287 | ||
Non-current portion |
13,376 | |||
|
|
|||
Total Long Term Debt |
$ | 15,663 | ||
|
|
-14-
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
EMTROL LLC AND SUBSIDIARY
SEPTEMBER 30, 2014
CONTENTS
PAGE | ||
CONDENSED CONSOLIDATED BALANCE SHEETS |
3 | |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND MEMBERS EQUITY |
4 | |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
5 | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
6 |
EMTROL LLC AND SUBSIDIARY
CONDENSED CONSOLIDATED
BALANCE SHEETS
September 30, 2014 and December 31, 2013
(unaudited)
ASSETS
2014 | 2013 | |||||||
CURRENT ASSETS |
||||||||
Cash and cash equivalents |
$ | 8,947,373 | $ | 8,680,589 | ||||
Accounts receivable, less allowance for doubtful accounts |
8,382,960 | 2,081,007 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts |
4,803,573 | 6,970,100 | ||||||
Inventories |
7,895 | 8,673 | ||||||
Other current assets |
341,652 | 153,349 | ||||||
|
|
|
|
|||||
TOTAL CURRENT ASSETS |
22,483,453 | 17,893,718 | ||||||
|
|
|
|
|||||
FIXTURES AND EQUIPMENT (NET) |
125,838 | 119,303 | ||||||
|
|
|
|
|||||
GOODWILL (NET) |
2,992,430 | 2,992,430 | ||||||
|
|
|
|
|||||
TOTAL ASSETS |
$ | 25,601,721 | $ | 21,005,451 | ||||
|
|
|
|
|||||
LIABILITIES AND MEMBERS EQUITY |
| |||||||
CURRENT LIABILITIES |
||||||||
Accounts payable |
$ | 9,974,987 | $ | 9,145,658 | ||||
Accrued expenses |
2,213,397 | 479,291 | ||||||
Customer deposits |
2,299,364 | 277,328 | ||||||
Income taxes payable |
236,929 | 184,192 | ||||||
|
|
|
|
|||||
TOTAL CURRENT LIABILITIES |
$ | 14,724,677 | $ | 10,086,469 | ||||
|
|
|
|
|||||
LONG TERM DEBT |
18,909 | 15,663 | ||||||
|
|
|
|
|||||
TOTAL LIABILITIES |
14,743,586 | 10,102,132 | ||||||
|
|
|
|
|||||
MEMBERS EQUITY |
||||||||
Equity adjustment resulting from foreign currency conversion |
415,651 | 500,550 | ||||||
Members equity |
10,442,484 | 10,402,769 | ||||||
|
|
|
|
|||||
TOTAL MEMBERS EQUITY |
10,858,135 | 10,903,319 | ||||||
|
|
|
|
|||||
TOTAL LIABILITIES & MEMBERS EQUITY |
$ | 25,601,721 | $ | 21,005,451 | ||||
|
|
|
|
-3-
EMTROL LLC AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND MEMBERS EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 and 2013
(unaudited)
2014 | 2013 | |||||||
REVENUES |
$ | 29,836,617 | $ | 25,839,879 | ||||
|
|
|
|
|||||
COSTS AND EXPENSES |
||||||||
Cost of goods sold |
$ | 24,731,055 | $ | 21,012,430 | ||||
Selling expenses |
1,693,559 | 1,405,527 | ||||||
General and administrative expenses |
1,377,134 | 1,102,647 | ||||||
Administrators salaries |
159,901 | 165,000 | ||||||
Pension plan expense |
304,676 | 26,243 | ||||||
|
|
|
|
|||||
TOTAL COSTS & EXPENSES |
$ | 28,266,325 | $ | 23,711,847 | ||||
|
|
|
|
|||||
NET OPERATING EARNINGS |
1,570,292 | 2,128,032 | ||||||
|
|
|
|
|||||
OTHER INCOME AND (EXPENSES) |
||||||||
Interest income |
2,792 | 5,279 | ||||||
Gain on foreign currency transactions |
90,122 | 71,577 | ||||||
|
|
|
|
|||||
OTHER INCOME AND (EXPENSES) |
92,914 | 76,856 | ||||||
|
|
|
|
|||||
EARNINGS BEFORE INCOME TAXES |
1,663,206 | 2,204,888 | ||||||
INCOME TAX PROVISION |
240,492 | 77,432 | ||||||
|
|
|
|
|||||
NET EARNINGS |
1,422,714 | 2,127,456 | ||||||
MEMBERS EQUITY JANUARY 1st |
10,402,769 | 9,913,607 | ||||||
|
|
|
|
|||||
SUBTOTAL |
11,825,483 | 12,041,063 | ||||||
LESS: DISTRIBUTIONS TO MEMBERS |
(1,382,999 | ) | (1,082,271 | ) | ||||
|
|
|
|
|||||
MEMBERS EQUITY SEPTEMBER 30th |
$ | 10,442,484 | $ | 10,958,792 | ||||
|
|
|
|
-4-
EMTROL LLC AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2014 and 2013
(unaudited)
2014 | 2013 | |||||||
CASH FLOW FROM OPERATING ACTIVITIES |
||||||||
Net earnings |
$ | 1,422,714 | $ | 2,127,456 | ||||
|
|
|
|
|||||
Adjustment to reconcile cash flow |
||||||||
Depreciation and amortization |
31,780 | 26,560 | ||||||
Equity adjustment resulting from foreign currency conversion |
(84,899 | ) | (21,065 | ) | ||||
Decrease (increase) in current assets |
||||||||
Accounts receivable |
(4,135,426 | ) | (4,477,077 | ) | ||||
Costs incurred on incomplete contracts |
0 | 0 | ||||||
Inventories |
778 | 7,402 | ||||||
Other current assets and prepayments |
(188,303 | ) | (42,134 | ) | ||||
Increase (decrease) in current liabilities |
||||||||
Accounts payable |
829,329 | 2,632,308 | ||||||
Accrued expenses |
1,734,106 | (63,676 | ) | |||||
Customer deposits |
2,022,036 | 1,050,133 | ||||||
Income taxes payable |
52,737 | (72,964 | ) | |||||
|
|
|
|
|||||
TOTAL ADJUSTMENTS |
$ | 262,138 | $ | (960,513 | ) | |||
|
|
|
|
|||||
Cash provided by operations |
$ | 1,684,852 | $ | 1,166,943 | ||||
|
|
|
|
|||||
CASH FLOW FROM INVESTING ACTIVITIES |
||||||||
Purchases of fixed assets |
(38,314 | ) | (51,211 | ) | ||||
|
|
|
|
|||||
Cash provided (used) by investing |
(38,314 | ) | (51,211 | ) | ||||
|
|
|
|
|||||
CASH FLOW FROM FINANCING ACTIVITIES | ||||||||
Long term debt incurred (paid) |
3,245 | 0 | ||||||
Advance from Member repaid - Emtrol Corp. |
0 | (239,730 | ) | |||||
Distributions to Member |
(1,382,999 | ) | (1,082,271 | ) | ||||
|
|
|
|
|||||
Cash used by financing |
(1,379,754 | ) | (1,322,001 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in cash |
266,784 | (206,269 | ) | |||||
Cash at beginning of period ( January 1st) |
8,680,589 | 8,252,768 | ||||||
|
|
|
|
|||||
Cash at end of period (September 30th) |
$ | 8,947,373 | $ | 8,046,499 | ||||
|
|
|
|
-5-
EMTROL LLC AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited)
NOTE A - ORGANIZATION
Emtrol Corporation was incorporated May 23, 1973, under the law of the State of Delaware, and is engaged in the design and sale of pollution control equipment. The equipment is fabricated by various subcontractors in accordance with customer contracts and specifications. The equipment is used primarily by companies engaged in the petroleum, chemical, mining, and other heavy industries.
As of January 1, 1999, Emtrol Corporation transferred substantially all of its assets subject to liabilities, to Emtrol LLC, (a New York Limited Liability Company) in exchange for a 100% interest in newly formed Emtrol LLC, which continues to operate the business. Certain key employees of the corporation have been granted minority member interests in the new LLC, which will entitle them to participate in any increase in the equity of the business, after certain priority distributions, as well as participate in the proceeds of any sale of the business.
NOTE B - PRINCIPLES OF ACCOUNTING
(1) CONSOLIDATION
These condensed consolidated financial statements have been prepared for the nine month periods ended September 30, 2014 and 2013. Certain footnote disclosures normally included in the financial statements and prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted.
The condensed consolidated financial statements include the operations and changes in financial position of Emtrol LLC (both United States and United Kingdom divisions), as well as those of its Canadian subsidiary Emtrol, Ltd. All significant intercompany balances and transactions have been eliminated.
-6-
EMTROL LLC AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited)
NOTE B - PRINCIPLES OF ACCOUNTING
(2) REVENUE RECOGNITION
These financial statements have been prepared on the accrual basis of accounting. Expenses are recognized when incurred. Revenue is recognized on the percentage of completion basis on the sale of pollution control equipment, which comprises the vast majority of the companys revenue. Revenue is recognized in proportion to the ratio that costs expended on current contracts bears to the total estimated cost of such contracts.
(3) DEPRECIATION
Depreciation is computed at the maximum allowable amounts for both financial reporting and income tax purposes, in accordance with regulations established by the Internal Revenue Service in the United States, and the Inland Revenue of the United Kingdom.
(4) COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS
Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts represents charges from subcontractors who fabricate pollution control equipment for Emtrols customers plus the estimated earnings on those costs in excess of customer billings on these contracts.
(5) CUSTOMER DEPOSITS
Customer deposits represent advance payments to Emtrol LLC by its customers on incomplete contracts. These deposits are recognized as revenue as the contracts progress.
(6) INVENTORIES
Inventories consist of spare parts and supplies, and are valued at a lower of cost or market value, applied on a first in, first out (FIFO) basis. Inventories are not a material income producing factor.
(7) RESEARCH AND DEVELOPMENT
The company expenses currently all research and development costs for financial reporting purposes, and for income tax purposes pursuant to Section 174 of the Internal Revenue Code.
-7-
EMTROL LLC AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited)
NOTE B - PRINCIPLES OF ACCOUNTING
(8) GUARANTEED PAYMENTS TO MEMBERS
Guaranteed payments to the non managing members that are intended as compensation for services rendered are accounted for as expenses of the LLC rather than as allocations of LLC net income. Guaranteed payments to the managing members that are intended as payments for capital contributed are not accounted for as expenses of the LLC, but rather, as part of the allocation of net income.
NOTE C - FIXTURES AND EQUIPMENT
Fixtures and equipment, which are recorded at cost, are being depreciated using the double declining and straight-line methods over useful lives ranging from 5 to 7 years.
NOTE D - INCOME TAXES
The company is not a taxpaying entity for federal income tax purposes, and thus, no federal income tax expense has been recorded in the financial statements. The income of the company is taxed directly to the members, on their respective tax returns.
New York State, in which the Company is organized, has similar provisions that recognize an LLC as a non taxpaying entity. Consequently, no New York State income taxes have been provided for in the financial statements. The Company is subject to a small per-member filing fee imposed annually by the State of New York.
Provisions have been made in these financial statements for United Kingdom and Canadian income taxes, where applicable.
NOTE E - PENSION AND PROFIT SHARING PLANS
The Company has established a defined contribution pension plan covering all eligible employees. Employees are eligible to participate in the plan after completing one year of service and attaining age 21. Employer profit sharing contributions are allocated on a pro rata formula based on compensation. Participants in the plan become vested on a graduated basis, with 100% vesting after six years of service. Normal retirement age under the plan is 65. The Company has amended and restated the existing profit sharing plan of Emtrol Corporation, effective January 1, 1995 to Emtrol LLC as of January 1, 1999.
NOTE F - FOREIGN CURRENCY TRANSLATION
The Company has adopted Financial Accounting Standards Board (FASB) Statement No. 52, covering the currency translation of financial statements of multinational operations. Accordingly, foreign statements of operations for the periods ended September 30, 2014 and 2013 were translated into U.S. dollars using average currency exchange rates in effect during the period, and financial position balances were translated at exchange rates in effect at year end. Currency effect changes resulting from the differences in translation rates used to translate such financial statements into U.S. dollars are included as a component of the members equity section of the condensed consolidated balance sheets. Transactional gains and losses resulting from currency exchange fluctuations are included in the condensed consolidated statement of operations.
-8-
EMTROL LLC AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited)
NOTE G - COMMITMENT AND CONTINGENCIES
LETTERS OF CREDIT
The company has a credit facility with M&T Bank, whereby the bank will provide letters of credit up to $10,000,000, plus a line of credit for operations of up to $1,000,000. At September 30, 2014, the Company has 22 outstanding letters of credit totaling $7,185,880. The letters of credit serve as guarantees of customer advanced payments for contract performance and equipment warranty to Emtrol LLCs customers. To date, no losses have been incurred under this letter of credit arrangement.
NOTE H - LEASES
The Company leases its main facility at 1440 Veterans Memorial Highway, Islandia, New York from a partnership which is owned by several of the beneficial owners of Emtrol LLC.
The Company also leases space in the United Kingdom, from an unrelated party.
The Company also leases several automobiles and pieces of office equipment under operating lease agreements.
NOTE I - LONG TERM DEBT
The Company purchased a piece of office equipment under a capitalized lease arrangement in 2013. The lease calls for monthly payments of $347 including interest at 12.78% through February of 2019. The entire obligation is classified as long term debt on the condensed consolidated balance sheet.
-9-