Attached files
file | filename |
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EX-99.2 - EXHIBIT 99.2 - Hub Group, Inc. | exh_992.htm |
EX-99.1 - EXHIBIT 99.1 - Hub Group, Inc. | exh_991.htm |
EX-23.1 - EXHIBIT 23.1 - Hub Group, Inc. | exh_231.htm |
8-K/A - FORM 8-K/A - Hub Group, Inc. | f8ka_010518.htm |
Exhibit 99.3
ESTENSON LOGISTICS, LLC
YEARS ENDED DECEMBER 31, 2016 AND 2015
ESTENSON LOGISTICS, LLC
YEARS ENDED DECEMBER 31, 2016 AND 2015
Contents
Page
Independent auditors' report | 1 | ||
Financial statements: | |||
Balance sheets | 2 | ||
Statements of income | 3 | ||
Statements of members' equity | 4 | ||
Statements of cash flows | 5-6 | ||
Notes to financial statements | 7-17 |
Layton Layton & Tobler LLP | ||
Certified Public Accountants | ||
606 South Ninth Street (702) 384.1995 cps@Iltcpa.com |
Las Vegas, Nevada 89101 FAX (702) 384-6949 www.11tcpa.com |
Donald R. Layton, CPA Richard D. Layton, CPA, CFE, CFF Stephen D. Waldron, cPA Peter C. Gubler, CPA, CVA Francine M. Miller, CPA Michael D. Tobler, CPA (Deceased) |
Independent Auditors' Report
Board of Directors
Estenson Logistics, LLC
Las Vegas, Nevada
We have audited the accompanying financial statements of Estenson Logistics, LLC (a Nevada Limited Liability Company), which comprise the balance sheets as of December 31, 2016 and 2015, and the related statements of income, members' equity, and cash flows for the years then ended, and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these 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 financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the 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 entity's 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 financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Estenson Logistics, LLC as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
March 8, 2017
Members of:
Private Companies Practice Section of the American Institute of Certified
Public Accountants
Nevada Society of Certified Public Accountants
Independent Member of CPA Associates International, Inc.
ESTENSON LOGISTICS, LLC
BALANCE SHEETS
DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
ASSETS | ||||||||
2016 | 2015 | |||||||
Current assets: | ||||||||
Cash | $ | 13,841,637 | $ | 2,463,222 | ||||
Accounts receivable, net | 27,830,462 | 24,846,456 | ||||||
Due from affiliate | ||||||||
Other receivables | 388,872 | 246,573 | ||||||
Insurance deposit | 12,904,878 | 6,730,318 | ||||||
Prepaid expenses | 3,790,803 | 3,389,035 | ||||||
Total current assets | 58,756,652 | 37,675,604 | ||||||
Property and equipment: | ||||||||
Freight revenue equipment | 216,357,500 | 191,684,639 | ||||||
Other property and equipment | 3,570,588 | 3,394,009 | ||||||
Total property and equipment | 219,928,088 | 195,078,648 | ||||||
Less accumulated depreciation | 93,355,304 | 74,825,250 | ||||||
Net property and equipment | 126,572,784 | 120,253,398 | ||||||
Other assets: | ||||||||
Refundable deposits | 181,259 | 181,461 | ||||||
Total assets | $ | 185,510,695 | $ | 158,110,463 | ||||
LIABILITIES AND MEMBERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 25,881,832 | $ | 22,949,083 | ||||
Accounts payable | 4,984,939 | 2,421,664 | ||||||
Accrued expenses | 3,442,836 | 2,643,569 | ||||||
Current portion of claims payable | 1,455,720 | 1,060,135 | ||||||
Other current liabilities | 5,786,670 | 4,070,851 | ||||||
Due to affiliate | 135,070 | 98,437 | ||||||
Total current liabilities | 41,687,067 | 33,243,739 | ||||||
Long-term liabilities: | ||||||||
Notes payable, net of current portion | 83,216,887 | 79,669,945 | ||||||
Claims payable, net of current portion | 6,406,082 | 2,205,003 | ||||||
Total long-term liabilities | 89,622,969 | 81,874,948 | ||||||
Total liabilities | 131,310,036 | 115,118,687 | ||||||
Members' equity: | 54,200,659 | 42,991,776 | ||||||
Total liabilities & members' equity | $ | 185,510,695 | $ | 158,110,463 |
The accompanying notes are an integral
part of these financial statements.
2 |
ESTENSON LOGISTICS, LLC
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
2016 | 2015 | |||||||
Operating revenues, excluding fuel surcharges | $ | 219,735,205 | $ | 197,340,743 | ||||
Fuel surcharge revenues | 27,354,459 | 28,960,680 | ||||||
Total operating revenues | 247,089,664 | 226,301,423 | ||||||
Cost of operations: | ||||||||
Depreciation | 25,844,122 | 22,143,506 | ||||||
Equipment rent and lease | 9,065,841 | 8,628,552 | ||||||
Fuel and oil | 24,514,890 | 25,625,280 | ||||||
Independent transportation providers | 10,413,921 | 8,924,469 | ||||||
Insurance and employee benefits | 17,241,960 | 16,004,952 | ||||||
Payroll taxes | 7,852,213 | 6,665,022 | ||||||
Repairs and maintenance | 15,459,704 | 14,136,309 | ||||||
Salaries and wages | 96,843,429 | 88,043,240 | ||||||
Supplies and miscellaneous | 1,637,317 | 1,369,288 | ||||||
Total cost of operations | 208,873,397 | 191,540,618 | ||||||
Gross profit | 38,216,267 | 34,760,805 | ||||||
General and administrative expenses | 24,987,899 | 22,011,933 | ||||||
Income from operations | 13,228,368 | 12,748,872 | ||||||
Other income (expenses): | ||||||||
Gain on disposition of equipment | 1,296,684 | 1,927,338 | ||||||
Interest expense | (2,473,776 | ) | (2,343,861 | ) | ||||
Other income | 24,311 | 222,059 | ||||||
Other expenses | (2,681,716 | ) | (2,004,355 | ) | ||||
Net income | $ | 9,393,871 | $ | 10,549,453 |
The accompanying notes are an integral
part of these financial statements.
3 |
ESTENSON LOGISTICS, LLC
STATEMENTS OF MEMBERS' EQUITY
YEARS ENDED DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
2016 | 2015 | |||||||
Members' equity, January 1 | $ | 42,991,776 | $ | 38,721,142 | ||||
Members contributions | 6,246,000 | - | ||||||
Members distributions | (4,430,988 | ) | (6,278,819 | ) | ||||
Net income | 9,393,871 | 10,549,453 | ||||||
Members' equity, December 31 | $ | 54,200,659 | $ | 42,991,776 |
The accompanying notes are an integral
part of these financial statements.
4 |
ESTENSON LOGISTICS, LLC
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
2016 | 2015 | |||||||
Operating activities: | ||||||||
Net income | $ | 9,393,871 | $ | 10,549,453 | ||||
Adjustments to reconcile net income to net | ||||||||
cash provided by operating activities: | ||||||||
Depreciation | 26,130,442 | 22,388,780 | ||||||
Gain on disposition of equipment | (1,248,603 | ) | (1,927,338 | ) | ||||
(Increase) decrease in: | ||||||||
Accounts receivable | (2,984,006 | ) | (4,411,165 | ) | ||||
Due from affiliate | 347,748 | |||||||
Other receivables | (142,299 | ) | 226,667 | |||||
Prepaid expense | (9,515,843 | ) | 2,700,337 | |||||
Insurance deposit | 2,939,515 | (6,730,318 | ) | |||||
Refundable deposits | 202 | 45,877 | ||||||
Increase (decrease) in: | ||||||||
Accounts payable | 2,563,275 | (1,318,233 | ) | |||||
Accrued expenses | 799,267 | 443,036 | ||||||
Claims payable | 4,596,664 | 3,265,138 | ||||||
Other current liabilities | 1,715,819 | 2,177,155 | ||||||
Due to affiliate | 36,633 | 98,437 | ||||||
Net cash provided by operating activities | 34,284,937 | 27,855,574 | ||||||
Investing activities: | ||||||||
Proceeds from disposition of assets | 1,609,140 | 2,473,011 | ||||||
Purchases of property and equipment | (788,040 | ) | (1,975,177 | ) | ||||
Net cash provided by investing activities | 821,100 | 497,834 | ||||||
Financing activities: | ||||||||
Principal long-term debt repayments | (25,542,634 | ) | (21,622,873 | ) | ||||
Contributions from members | 6,246,000 | |||||||
Distributions to members | (4,430,988 | ) | (6,278,819 | ) | ||||
Net cash used in financing activities | (23,727,622 | ) | (27,901,692 | ) | ||||
Net increase/(decrease) in cash | 11,378,415 | 451,716 | ||||||
Cash, January 1st | 2,463,222 | 2,011,506 | ||||||
Cash, December 31st | $ | 13,841,637 | $ | 2,463,222 |
The accompanying notes are an integral
part of these financial statements.
5 |
ESTENSON LOGISTICS, LLC
STATEMENTS OF CASH FLOWS, CONTINUED
YEARS ENDED DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
Supplemental Disclosures of Cash Flow Information
2016 | 2015 | |||||||
Cash paid during the year for: | ||||||||
Interest | $ | 2,473,776 | $ | 2,343,861 | ||||
Schedule of non-cash activities: | ||||||||
Purchases of property and equipment | $ | 32,810,365 | $ | 38,276,685 | ||||
Cash purchases | (788,040 | ) | (1,975,177 | ) | ||||
Property and equipment acquired through | ||||||||
borrowings | $ | 32,022,325 | $ | 36,301,508 |
The accompanying notes are an integral
part of these financial statements.
6 |
ESTENSON LOGISTICS, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
1. | Summary of significant accounting policies: |
Nature of operations:
Estenson Logistics, LLC (a Nevada Limited Liability Company) was formed in February 1999. The Company provides freight transportation services and is a common carrier regulated by the Interstate Commerce Commission. The Company is licensed to operate in the continental United States of America.
Accounts receivable:
Accounts receivable are recorded net of allowance for doubtful accounts. At the end of each year management closely monitors outstanding balances and adjusts the allowance for doubtful accounts accordingly based upon prior write-offs and older outstanding receivables. In 2016, $18,232 has been estimated as allowance for doubtful accounts and $44,804 was expensed in the current year. In 2015, $20,043 was estimated as allowance for doubtful accounts and $17,210 was expensed. Accounts receivable are charged off when they are deemed uncollectible. All of the net trade receivables are pledged as collateral on a bank line of credit.
Property and equipment:
Company policy is to provide depreciation by use of the straight-line method for financial reporting purposes and accelerated methods for income tax purposes. The book cost, accumulated depreciation and useful life by asset classification are as follows:
2016 | Accumulated | Useful | ||||||||
Cost | Depreciation | Life | ||||||||
Tractors | $ | 116,607,261 | $ | 52,486,905 | 6 years | |||||
Trailers | 99,750,239 | 38,789,681 | 10 years | |||||||
Vehicles | 381,616 | 278,965 | 7 years | |||||||
Machinery & equipment | 1,062,460 | 562,144 | 7 years | |||||||
Office furniture & equipment | 1,590,807 | 1,038,496 | 5-7 years | |||||||
Leasehold Improvements | 535,705 | 199,113 | 10 years | |||||||
Total | $ | 219,928,088 | $ | 93,355,304 | ||||||
2015 | ||||||||||
Tractors | $ | 105,094,575 | $ | 43,061,327 | 6 years | |||||
Trailers | 86,590,064 | 30,122,071 | 10 years | |||||||
Vehicles | 381,616 | 236,210 | 7 years | |||||||
Machinery & equipment | 1,052,041 | 418,411 | 7 years | |||||||
Office furniture & equipment | 1,431,130 | 841,549 | 5-7 years | |||||||
Leasehold Improvements | 529,222 | 145,682 | 10 years | |||||||
Total | $ | 195,078,648 | $ | 74,825,250 |
7 |
ESTENSON LOGISTICS, LLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
1. | Summary of significant accounting policies (continued): |
General and administrative expense:
General and administrative costs are charged to expenses as incurred and consist of the following:
2016 | ||||
Advertising | $ | 1,097,504 | ||
Automobile expenses | 76,911 | |||
Bad debt expenses | 44,804 | |||
Contributions | 100,402 | |||
Depreciation | 286,320 | |||
Employee benefits | 622,039 | |||
Guaranteed payments to members | 390,000 | |||
Management fees | 2,019,743 | |||
Office expenses | 2,580,126 | |||
Payroll taxes | 367,390 | |||
Professional fees | 1,178,322 | |||
Rent | 1,227,186 | |||
Salaries and wages | 5,593,287 | |||
Taxes and licenses | 3,221,693 | |||
Travel expense | 3,636,290 | |||
Utilities | 2,545,882 | |||
Total | $ | 24,987,899 | ||
2015 | ||||
Advertising | $ | 755,939 | ||
Automobile expenses | 86,721 | |||
Bad debt expenses | 17,210 | |||
Contributions | 83,550 | |||
Depreciation | 245,274 | |||
Employee benefits | 447,568 | |||
Guaranteed payments to members | 397,500 | |||
Management fees | 1,848,944 | |||
Office expenses | 2,260,396 | |||
Payroll taxes | 279,636 | |||
Professional fees | 1,410,863 | |||
Rent | 1,175,592 | |||
Salaries and wages | 4,613,280 | |||
Taxes and licenses | 2,887,050 | |||
Travel expense | 3,293,672 | |||
Utilities | 2,208,738 | |||
Total | $ | 22,011,933 |
8 |
ESTENSON LOGISTICS, LLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
1. | Summary of significant accounting policies (continued): |
Advertising costs:
The Company expenses advertising costs as incurred.
Deposits:
The refundable deposits consist of insurance and rent deposits.
Use of estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
2. | Insurance claims deposit: |
In 2015, the Company self-funded for a portion of its auto liability, worker's compensation and general liability insurance. Under the terms of the agreement, the Company is to fund and maintain a deposit with the insurance company to pay insurance claim losses, including future actuarial expected losses and losses incurred but not reported. If the Company terminates the contract, after a twenty-four month period and all claims have been paid, the remaining deposit will be returned. As of December 31, 2016 and 2015, the insurance claims deposit is $12,904,878 and $6,730,318, respectively.
3. | Uninsured deposits: |
Periodically, due to fluctuations in funds on deposit, cash in bank accounts exceed the current Federal Deposit Insurance Corporation insurance limit. Bank balances at December 31, 2016 exceeded the insured limit by $16,354,306. At December 31, 2015, bank balances exceeded the insured limit by $7,947,983.
4. | Income taxes: |
Estenson Logistics, LLC is recognized as a partnership for federal and state income tax purposes. As a partnership, items of income and deductions are passed through to the members each year, and thus the Company pays no federal income tax and only pays state income tax for certain states.
The federal income tax returns of the Plan are subject to examination by the IRS, generally for three years after the return was filed.
9 |
ESTENSON LOGISTICS, LLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
5. | Related party transactions: |
The members own 90% of a company that provides managerial services, insurance administration, and freight transportation to Estenson Logistics, LLC as needed. In 2016, the Company owed the affiliate $2,070,608 for managerial services, workers compensation, vehicle insurance and miscellaneous transactions. The Company repaid the affiliate $2,058,027 during 2016 which included prior year unpaid balances. The Company also owed the affiliate $2,337,666 for brokerage fees and made payments of $2,242,654 during the year which included prior year unpaid balances.
Additionally, in 2016, the Company owed the affiliate $2,034,909 for health insurance and made payments to the affiliate totaling $2,050,356 which included prior year unpaid balances.
In 2016, the Company billed the affiliate $2,077,987 for freight, rent, and other transactions provided. The affiliate repaid the Company $2,020,286 during 2016 which included prior year unpaid balances.
In 2015, the Company owed the affiliate $2,013,115 for managerial services, workers compensation, vehicle insurance and miscellaneous transactions. The Company repaid the affiliate $2,026,264 during 2015 which included prior year unpaid balances. The Company also owed the affiliate $1,515,198 for brokerage fees and made payments of $1,515,744 during the year which included prior year unpaid balances.
Additionally, in 2015, the Company owed the affiliate $2,121,197 for health insurance and made payments to the affiliate totaling $2,143,983 which included prior year unpaid balances.
In 2015, the Company billed the affiliate $1,731,120 for freight, rent, and other transactions provided. The affiliate repaid the Company $2,230,900 during 2015 which included prior year unpaid balances.
The Company leases office space in Mesa Arizona from an entity which is owned totally by the members of the Company. The lease, is for the Corporate Office location. The amount of lease payments made in 2016 and 2015 for the office space was $470,141 and $470,141, respectively.
6. | Claims payable: |
Claims payable represent accruals for the self-insured portion of the outstanding claims at year end. The current portion reflects the amounts of claims expected to be paid in the following year. These accruals are estimated based upon actuarial analysis of the nature and severity of individual claims and an estimate of future claims based upon historical experience. The ultimate cost of a claim develops over time as additional information regarding the nature, timing and extent of damages become available. As of December 31, 2016 and 2015, claims payable is estimated at $7,861,802 and $3,265,138, respectively.
The actual cost to settle the self-insured claims liability can differ from reserve estimates because of legal costs, claims that have been incurred but not reported and a number of uncertainties, including the inherent difficulty in estimating the severity of the claims and the potential settlement amounts to dispose of the claims.
10 |
ESTENSON LOGISTICS, LLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
7. Notes payable:
All notes payable are secured by equipment and consist of the following:
2016 | ||||
Notes payable to lender, secured by equipment with original cost totaling $38,833,320, with monthly payments totaling $581,143, interest rates ranging from 2.05% to 2.48%, and maturity dates ranging from 2017 to 2022. | $ | 24,112,026 | ||
Notes payable to lender, secured by equipment with original cost totaling $23,179,260, with monthly payments totaling $333,976, interest rates ranging from 2.24% to 2.60%, and maturity dates ranging from 2017 to 2023. | 16,972,856 | |||
Notes payable to lender, secured by equipment with original cost totaling $18,234,247, with monthly payments totaling $256,162, interest rates ranging from 2.27% to 2.67%, and maturity dates ranging from 2020 to 2022. | 13,326,497 | |||
Notes payable to lender, secured by equipment with original cost totaling $19,263,352, with monthly payments totaling $270,240, interest rates ranging from 2.21% to 2.51%, and maturity dates ranging from 2020 to 2022. | 12,873,988 | |||
Notes payable to lender, secured by equipment with original cost totaling $19,210,673, with monthly payments totaling $249,781, interest rates ranging from 2.12% to 2.78%, and maturity dates ranging from 2020 to 2023. | 11,627,609 | |||
Notes payable to lender, secured by equipment with original cost totaling $23,430,599, with monthly payments totaling $351,425, interest rates ranging from 2.13% to 2.57%, and maturity dates ranging from 2017 to 2021. | 11,194,142 | |||
Notes payable to lender, secured by equipment with original cost totaling $9,693,530, with monthly payments totaling $130,870, interest rates ranging from 2.45% to 2.85%, and maturity dates ranging from 2019 to 2023. | 8,254,435 |
11 |
ESTENSON LOGISTICS, LLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
7. | Notes payable (continued): |
Notes payable to lender, secured by equipment with original cost totaling $5,250,545, with monthly payments totaling $75,501, interest rates ranging from 2.16% to 2.87%, and maturity dates ranging from 2022 to 2023. | $ | 5,001,119 | ||
Notes payable to lender, secured by equipment with original cost totaling $9,210,791, with monthly payments totaling $141,988, interest rates ranging from 2.09% to 2.74%, and maturity dates ranging from 2017 to 2019. | 3,392,557 | |||
Notes payable to lender, secured by equipment with original cost totaling $5,068,177, with monthly payments totaling $76,731, interest rates ranging from 2.35% to 2.70%, and maturity dates ranging from 2017 to 2020. | 1,403,709 | |||
Notes payable to lender, secured by equipment with original cost totaling $926,932, with monthly payments totaling $13,177, interest rates ranging from 2.46% to 2.49%, and maturity dates ranging from 2022 to 2023 | 881,719 | |||
Notes payable to various lenders, secured by equipment with original cost totaling $1,392,827, with monthly payments totaling $25,045, interest rates ranging from of 2.45% to 4.45% and maturity dates ranging from 2017 to 2018. | $ | 58,062 | ||
Total notes payable | 109,098,719 | |||
Less current portion of long-term debt | (25,881,832 | ) | ||
$ | 83,216,887 |
Maturities on long-term debts are as follows:
One year | $ | 25,881,832 | ||
Two years | 24,069,341 | |||
Three years | 23,294,854 | |||
Four years | 18,763,803 | |||
Five years | 11,649,884 | |||
Thereafter | 5,439,005 | |||
Total | $ | 109,098,719 |
12 |
ESTENSON LOGISTICS, LLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
7. | Notes payable (continued): |
2015 | ||||
Notes payable to lender, secured by equipment with original cost totaling $26,819,591, with monthly payments totaling $408,567, interest rates ranging from 2.05% to 2.48%, and maturity dates ranging from 2017 to 2022. | $ | 17,312,695 | ||
Notes payable to lender, secured by equipment with original cost totaling $18,234,247, with monthly payments totaling $256,162, interest rates ranging from 2.27% to 2.67%, and maturity dates ranging from 2020 to 2022. | 15,939,244 | |||
Notes payable to lender, secured by equipment with original cost totaling $19,263,352, with monthly payments totaling $270,240, interest rates ranging from 2.21% to 2.51%, and maturity dates ranging from 2020 to 2022. | 15,809,043 | |||
Notes payable to lender, secured by equipment with original cost totaling $28,089,718, with monthly payments totaling $438,252, interest rates ranging from 2.13% to 2.72%, and maturity dates ranging from 2015 to 2022. | 15,435,218 | |||
Notes payable to lender, secured by equipment with original cost totaling $26,412,851, with monthly payments totaling $462,719, interest rates ranging from 2.24% to 2.87%, and maturity dates ranging from 2015 to 2022. | 15,260,348 | |||
Notes payable to lender, secured by equipment with original cost totaling $17,602,077, with monthly payments totaling $228,317, interest rates ranging from 2.12% to 2.78%, and maturity dates ranging from 2020 to 2021. | 12,609,485 | |||
Notes payable to lender, secured by equipment with original cost totaling $12,216,235, with monthly payments totaling $195,562, interest rates ranging from 2.09% to 2.74%, and maturity dates ranging from 2016 to 2020. | 5,395,309 |
13 |
ESTENSON LOGISTICS, LLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
7. | Notes payable (continued): |
Notes payable to lender, secured by equipment with original cost totaling $7,243,237, with monthly payments totaling $118,361, interest rates ranging from 2.35% to 2.70%, and maturity dates ranging from 2017 to 2020. | $ | 2,272,304 | ||
Notes payable to lender, secured by equipment with original cost totaling $2,487,466, with monthly payments totaling $34,083, interest rates ranging from 2.45% to 2.85%, and maturity dates ranging from 2019 to 2022. | 2,015,476 | |||
Notes payable to lender, secured by equipment with original cost totaling $754,379, with monthly payments totaling $13,434, interest rates ranging from 2.45% to 2.78%, and maturity dates ranging from 2016 to 2017. | 200,093 | |||
Notes payable to lender, secured by equipment with original cost totaling $3,488,868, with monthly payments totaling $62,475, interest rates ranging from 2.84% to 2.88%, and maturity dates in 2016. | 160,030 | |||
Notes payable to various lenders, secured by equipment with original cost totaling $1,409,460, with monthly payments totaling $25,408, interest rates ranging from of 2.54% to 4.45% and maturity dates ranging from 2015 to 2018. | $ | 209,783 | ||
Total notes payable | 102,619,028 | |||
Less current portion of long-term debt | (22,949,083 | ) | ||
$ | 79,669,945 |
Maturities on long-term debts are as follows:
One year | $ | 22,949,083 | ||
Two years | 21,103,277 | |||
Three years | 19,778,905 | |||
Four years | 18,318,764 | |||
Five years | 13,725,196 | |||
Thereafter | 6,743,803 | |||
Total | $ | 102,619,028 |
14 |
ESTENSON LOGISTICS, LLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
8. | Concentrations of credit risk: |
At December 31, 2016, approximately 54% of the Company's revenues were provided by two customers and approximately 64% of the Company's accounts receivable was due from three customers. Approximately 70% of the Company's revenues were provided by three customers and approximately 67% of the Company's accounts receivable was due from three customers at December 31, 2015.
9. | Revolving line and letters of credit: |
The Company maintains a line of credit with a bank at an interest rate of prime. At December 31, 2016 and 2015, the Company had no outstanding balance on the line of credit but could borrow up to $2,000,000. The credit line is secured by all of the Company's net trade receivables.
The Company also has three letters of credit with a bank totaling $3,271,597 and four separate letters of credit with banks totaling $5,303,541 as of December 31, 2016 and 2015, respectively. At December 31, 2016 and 2015, there was no outstanding balance on the letters of credit and the unused balance was $3,271,597 and $5,303,541, respectively. These letters of credit are used for self-insurance bonding and are secured by the unencumbered accounts and assets of the Company.
10. | Commitments: |
The Company has a number of operating leases for offices, warehouses, and parking spaces as well as for tractors and trailers and other property in various locations.
An office located in Fontana, California requires lease payments of $21,748 per month through October 31, 2019. The Company has the option to renew the lease at that date. Also in Fontana, California the Company entered into a lease for office space with monthly payments of $695. This lease expires August of 2017.
An office located in Elk Grove, California requires lease payments totaling $27,680 and $28,522 for 2017 and 2018, respectively. This lease will expire on December 31, 2018 but could be extended or continued on a month to month basis.
An office located in Commerce City, Colorado requires lease payments totaling $8,859 for 2017. This lease will expire September 31, 2017 with an option to renew for an additional twelve months.
The Company leases office and shop space in Tracy, California. The lease requires lease payments totaling $18,168 per year for 2017 and $3,028 for 2018. The lease expires February 28, 2018.
The Corporate Office location in Mesa, Arizona is leased from an entity totally owned by the members of the Company. The required lease payments for the next five years, from 2017 to 2021, are $485,865; $493,714; $501,571; $509,429 and $517,286 respectively. Thereafter, the required lease payments total $612,886. This lease will expire February 28, 2023.
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ESTENSON LOGISTICS, LLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
10. | Commitments, continued: |
The Company leases various parking and storage areas at various work sites. These leases are generally month to month leases or one year leases and will expire in 2017. Total lease payments for 2017 for these leases are $27,906.
The Company also leases various tractors and trailers. The four leases expire in 2017 with total payments of $153,480 for 2017.
The Company leases a forklift with monthly payments of $1,397 expiring in March 2019. The required lease payments for the next four years, from 2017 to 2020, are $12,570; $16,761; $16,761 and $4,190 respectively.
The Company leases various office equipment with monthly payments ranging from $58 to $732. Total future lease payments for 2017 and 2018 are $21,274 and $11,333, respectively.
The Company has a service agreement for approximately 1,218 communication devices under a contract requiring monthly payments ranging from $6 to $8 per device. This service agreement expires November 30, 2017. Total remaining payments are estimated at $36,379 for 2017.
The following is a schedule by years of future minimum payments required under the above leases as of December 31, 2016:
One year | $ | 1,053,156 | ||
Two years | 814,337 | |||
Three years | 735,816 | |||
Four years | 513,619 | |||
Five years | 517,286 | |||
Later years | 612,886 | |||
Total | $ | 4,247,100 |
11. | Profit-sharing plan: |
The Company implemented a salary reduction/profit-sharing plan in 2001 under the provisions of Section 401(k) of the Internal Revenue Code. Company contributions for the years ended December 31, 2016 and 2015 totaled $288,792 and $256,930, respectively.
12. | Contingencies: |
The Company is party to various legal actions normally associated with the trucking industry, the aggregate effect of which, in management's and legal counsel's opinion are not material to the financial condition or results of operations of the Company, with the exception of the actions discussed in the following paragraph.
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ESTENSON LOGISTICS, LLC
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2016 AND 2015
See Independent Auditors' Report
12. | Contingencies, continued: |
The Company is defendant in multiple class action lawsuits brought by various employees alleging various wage violations. In August 2016, the parties attended mediation for three of the cases and agreed to consolidate and settle these three cases on a class-wide basis for a total of $1,980,000, contingent on approval by the court. The settlement would affect a release of all claims raised in the cases by plaintiffs, representing approximately 1,600 class members. Accordingly, the Company accrued the settlement loss at December 31, 2016.
13. | Date of Management Review: |
The Company has evaluated subsequent events through March 8, 2017, the date which the financial statements were available to be issued.
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