Independent Auditor's Report and Audited Financial Statements for Northern Food & Dairy, Inc. (1999 and 1998)

Summary

This document contains the independent auditor's report and audited financial statements for Northern Food & Dairy, Inc. for the years ending December 31, 1999 and 1998. Prepared by Froehling, Anderson, Plowman & Wasmuth, Ltd., the report provides an opinion on the company's financial position, results of operations, and cash flows, confirming they are presented fairly in accordance with generally accepted accounting principles. The document includes balance sheets, income statements, statements of equity and cash flows, and related notes.

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EX-10.3 2 0002.txt FINANCIAL STATEMENTS NORTHERN FOOD & DAIRY, INC. FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT December 31, 1999 and 1998 NORTHERN FOOD & DAIRY, INC. December 31, 1999 and 1998 INDEX Page ---- INDEPENDENT AUDITOR'S REPORT 3 PART I - FINANCIAL STATEMENTS Balance Sheets 5 Statements of Income and Comprehensive Income 6 Statements of Stockholders' Equity 7 Statements of Cash Flows 8 Notes to Financial Statements 9 - 16 PART II - ADDITIONAL INFORMATION INDEPENDENT AUDITOR'S REPORT ON ADDITIONAL INFORMATION 18 Schedules of Cost of Sales 19 Schedules of General and Administrative Expenses 20 NORTHERN FOOD & DAIRY, INC. AUDITED FINANCIAL STATEMENTS December 31, 1999 and 1998 PART I [LETTERHEAD OF FROEHLING, ANDERSON, PLOWMAN & WASMUTH LTD.] INDEPENDENT AUDITOR'S REPORT To the Board of Directors Northern Food & Dairy, Inc. Alexandria, Minnesota We have audited the accompanying balance sheets of Northern Food & Dairy, Inc. (an S corporation) as of December 31, 1999 and 1998 and the related statements of income and comprehensive income, stockhoders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Northern Food & Dairy, Inc. as of December 31, 1999 and 1998, and the results of its operations and cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ Froehling, Anderson, Plowman & Wasmuth, Ltd. Minnetonka, Minnesota February 24, 2000 NORTHERN FOOD & DAIRY, INC. BALANCE SHEETS December 31, 1999 and 1998 1999 1998 ----------- ----------- ASSETS CURRENT ASSETS Cash $ 12,962 $ 1,886 Marketable securities 115,202 34,360 Accounts receivable, less allowance for doubtful accounts of $10,000 3,166,927 2,311,900 Other receivables 32,102 16,775 Inventories 1,304,707 1,516,720 Prepaid expenses 3,970 23,562 Note receivable, current portion 82,364 ----------- ----------- Total Current Assets 4,635,870 3,987,567 PROPERTY AND EQUIPMENT Land 145,713 145,713 Leasehold improvements 327,210 Buildings 2,752,121 2,591,312 Equipment 7,122,860 6,875,501 Furniture and fixtures 355,418 173,249 Vehicles 237,892 177,321 Equipment deposits 15,160 3,394 Construction in progress 1,774,464 516,156 ----------- ----------- 12,730,838 10,482,646 Less: accumulated depreciation 5,919,113 5,212,820 ----------- ----------- Property and Equipment - Net 6,811,725 5,269,826 OTHER ASSETS Loan origination fees 13,615 ----------- ----------- Total Assets $11,461,210 $ 9,257,393 =========== =========== See Accompanying Notes to Financial Statements and Independent Auditor's Report. Balance Sheet (continued)
1999 1998 ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Note payable - bank $ 801,439 Note payable - customer $ 59,020 75,000 Current portion of notes payable and capital lease obligations 674,785 474,853 Bank overdraft 577,863 191,029 Accounts payable 3,424,468 3,164,688 Customer deposits 75,000 Accrued wages and vacation 282,408 188,904 Accrued interest 1,165 6,535 Accrued property taxes 53,055 53,115 Accrued other 32,049 16,470 ----------- ----------- Total Current Liabilities 5,104,813 5,047,033 LONG-TERM LIABILITIES Notes payable and capital lease obligations, net of current portion shown above 3,119,039 1,161,705 ----------- ----------- Total Liabilities 8,223,852 6,208,738 STOCKHOLDERS' EQUITY Common stock, $10 par value; 2,500 shares authorized; 1,000 shares issued and outstanding 10,000 10,000 Additional paid-in capital 1,747,991 1,729,111 Retained earnings 1,398,525 1,309,544 Accumulated other comprehensive income 80,842 ----------- ----------- Total Stockholders' Equity 3,237,358 3,048,655 ----------- ----------- Total Liabilities and Stockholders' Equity $11,461,210 $ 9,257,393 =========== ===========
-5- NORTHERN FOOD & DAIRY, INC. STATEMENTS OF INCOME and COMPREHENSIVE INCOME For the Years Ended December 31, 1999 and 1998
1999 1998 ---------------------- ---------------------- Percent Percent of of Amount Sales Amount Sales ------------ ------ ------------ ------ SALES $ 21,248,554 100.00% $ 20,724,610 100.00% COST OF SALES 18,520,172 87.16 18,366,518 88.62 ------------ ------ ------------ ------ GROSS PROFIT 2,728,382 12.84 2,358,092 11.38 GENERAL AND ADMINISTRATIVE EXPENSES 2,046,526 9.62 1,567,779 7.55 ------------ ------ ------------ ------ INCOME FROM OPERATIONS 681,856 3.21 790,313 3.81 OTHER INCOME (EXPENSE) Interest income 4 0.00 20,078 0.10 Other income 70,115 0.33 35,738 0.17 Gain on sale of assets 6,008 0.03 13,201 0.06 Finance charges (29,425) (0.14) (32,048) (0.15) Interest expense (238,701) (1.12) (198,717) (0.96) ------------ ------ ------------ ------ TOTAL OTHER INCOME (EXPENSE) (191,999) (0.90) (161,748) (0.78) ------------ ------ ------------ ------ INCOME BEFORE INCOME TAX PROVISION 489,857 2.31 628,565 3.03 PROVISION FOR INCOME TAXES 5,000 0.02 8,000 0.04 ------------ ------ ------------ ------ NET INCOME 484,857 2.28 620,565 2.99 OTHER COMPREHENSIVE INCOME Unrealized holding gains arising during the year 80,842 0.38 ------------ ------ ------------ ------ TOTAL COMPREHENSIVE INCOME 565,699 2.66% 620,565 2.99% ============ ====== ============ ======
See Accompanying Notes to Financial Statements and Independent Auditor's Report. -6- NORTHERN FOOD & DAIRY, INC. STATEMENTS CHANGES IN STOCKHOLDERS' EQUITY For the Years Ended December 31, 1999 and 1998
Accumulated Additional Other Total Common Paid-In Retained Comprehensive Stockholders' Stock Capital Earnings Income Equity ---------------------------------------------------------------- BALANCE - January 1, 1998 $10,000 $1,727,320 $959,394 -- $2,696,714 Contributed capital 1,791 1,791 Distributions to shareholders (270,415) (270,415) Net income 620,565 620,565 ------- ---------- ---------- ------- --------- BALANCE - December 31, 1998 10,000 1,729,111 1,309,544 -- 3,048,655 Contributed capital 18,880 18,880 Distributions to shareholders (395,876) (395,876) Net income 484,857 484,857 Comprehensive income 80,842 80,842 ------- ---------- ---------- ------- --------- BALANCE - December 31, 1999 $10,000 $1,747,991 $1,398,525 $80,842 3,237,358 ======= ========== ========== ======= =========
See Accompanying Notes to Financial Statements and Independent Auditor's Report. NORTHERN FOOD & DAIRY, INC. STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1999 and 1998
1999 1998 ----------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 565,699 $ 620,565 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 706,293 675,636 Unrealized holding gains (80,842) Loan discount amortization (51,133) Bad debt write offs 16,439 (Gain) on sale of assets (6,008) (13,201) Changes in assets and liabilities: (Increase) in accounts receivable (855,027) (92,953) (Increase) in other receivables (15,327) (8,248) (Increase) decrease in inventory 212,013 (759,226) (Increase) decrease in prepaid expenses 19,592 (9,983) (Increase) in equipment deposits (11,766) (3,394) (Increase) in loan origination fees (13,615) Increase (decrease) in bank overdraft 386,834 (134,573) Increase in accounts payable 259,780 786,599 (Decrease) in customer deposits (75,000) (25,813) Increase (decrease) in accrued expenses 103,653 (91,323) ----------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,196,279 909,392 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES Purchase of property and equipment (981,110) (249,360) Proceeds from sale of assets 9,000 106,000 Renovation construction in progress costs/ proceeds (1,258,308) (438,990) Purchase of investments (34,360) Payments received on notes receivable 82,364 232,968 ----------- --------- NET CASH (USED IN) INVESTING ACTIVITIES (2,148,054) (383,742) CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES Net proceeds (payments) on note payable - bank (801,439) 401,439 Net proceeds (payments) on note payable - customer (15,980) 75,000 Proceeds from long-term debt and capital lease obligations 3,570,079 Payments on long-term debt and capital lease obligations (1,412,813) (731,579) Proceeds from additional paid in capital 18,880 1,791 Distributions to shareholders (395,876) (270,415) ----------- --------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 962,851 (523,764) ----------- --------- NET INCREASE IN CASH 11,076 1,886 CASH - BEGINNING OF YEAR 1,886 -- ----------- --------- CASH - END OF YEAR $ 12,962 $ 1,886 =========== =========
See Accompanying Notes to Financial Statements and Independent Auditor's Report 1999 1998 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest $244,071 $195,692 ======== ======== Income taxes $ 5,000 $ 8,000 ======== ======== SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES During the years ended December 31, 1999 and 1998, the Company incurred a capital lease obligations for use of equipment in the amount of $125,165 and $75,477, respectively. During the year ended December 31, 1998, the Company decreased the purchase price of equipment and the related debt by $150,776 in accordance with the terms of the original purchase agreement. NORTHERN FOOD & DAIRY, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1999 and 1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Activity - Northern Food & Dairy, Inc. processes liquid dairy and non-dairy products into products suitable for human or animal consumption. The Company grants credit to customers located throughout the United States and Japan. Trade receivables are not collateralized. Cash and Cash Equivalents The Company recognizes cash equivalents as short-term, highly liquid investments that are both readily convertible to known amounts of cash and with an original maturity of three months or less. Inventories - Inventories are valued at the lower of cost or market under the first-in, first-out (FIFO) inventory method. Marketable Securities- SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities" establishes three categories of securities. The first category, held to maturity, is composed of debt securities which a company has the positive intent and ability to hold to maturity. These securities are carried at amortized cost. The second category, available for sale, may be sold to address the liquidity and other needs of a company. Debt and equity securities classified as available for sale are carried at fair value on the balance sheet, with unrealized gains and losses excluded from income and reported as a separate component of stockholder's equity. The third category, trading securities, is for debt and equity securities acquired for the purpose of selling them in the near-term. Realized gains and losses on dispositions are based on the net proceeds and the adjusted book value of the securities sold, using the specific identification method. Unrealized gains and losses on investment securities available for sale are based on the difference between book value and fair value of each security. These gains and losses are credited or charged to other comprehensive income, whereas realized gains and losses flow through the Company's yearly operations. For the year ended December 31, 1999, all securities are classified as available for sale. For the year ended December 31, 1998, the investment represented stock of a privately held corporation and was recorded using the cost method of accounting. -9- NORTHERN FOOD & DAIRY, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1999 and 1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Property and Equipment - Property and equipment are stated at cost and depreciated over their estimated useful lives applying straight-line and accelerated methods over the following useful lives: Buildings 30 to 40 Years Furniture and fixtures 5 to 7 Years Plant equipment 5 to 15 Years Vehicles 5 Years Use of Estimates in Financial Statements - In preparing financial statements in conformity with generally accepted accounting principles, management makes 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, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Income Taxes - The Company has elected to be taxed as a Subchapter S corporation under provisions of the Internal Revenue Code whereby all income and expense is reflected on the shareholders' individual income tax returns. Therefore, no provision for income taxes is reflected in these financial statements except for a Minnesota minimum tax. NOTE 2 - MARKETABLE SECURITIES Cost and fair value of marketable securities available for sale at October 31, 1999 are as follows: Unrealized Unrealized Fair Cost Gains Loss Value ------- ---------- ---------- -------- Securities $34,360 $80,842 $115,202 -10- NORTHERN FOOD & DAIRY, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1999 and 1998 NOTE 3 - INVENTORIES A summary of inventories is as follows: 1999 1998 ---------- ---------- Raw materials $ 48,956 $ 162,301 Package and fuel inventory 152,923 190,457 Finished goods and ingredients 1,102,828 1,163,962 ---------- ---------- $1,304,707 $1,516,720 ---------- ---------- NOTE 4 - NOTES RECEIVABLE Notes receivable, as of December 31, consisted of the following: 1999 1998 -------- ------- Note receivable in monthly installments of $21,000, including interest at 9.5%; final payment due April, 1999; secured by equipment. $ $82,364 -------- ------- 82,364 Less: current portion 82,364 -------- ------- Total Notes Receivable $ $ ======== ======= NOTE 5 - NOTES PAYABLE Bank - The Company has an available line of credit with a bank in the amount of $1,000,000 for the years ended December 31, 1999 and 1998, respectively. The note bears interest at the base rate plus 1.5% (currently 10%); is due December, 1999 and is secured by accounts receivable, inventory, equipment, general intangibles and the personal guarantee of the majority stockholder of the Company. The Company had no borrowings as of December 31, 1999 and $801,439 as of December 31, 1998. Customer - The Company entered into a contract with a customer to purchase equipment to improve production of the customer's product. The terms include interest of $2,000 for one year, to be paid back at a rate of $0.06 per pound of product sold to the customer. Total outstanding borrowing as of December 31, 1999, and 1998, was $59,020 and $75,000, respectively. -11- NORTHERN FOOD & DAIRY, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1999 and 1998 NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following: 1999 1998 ---- ---- Note payable to a bank in monthly installments of $119,444 starting September 2000, plus interest at 0.375% over the base rate (currently 8.875%) through August, 2003, secured by a combination mortgage, security agreement and fixture financing statement. This agreement contains certain restrictive covenants $905,747 Note payable to a bank in monthly installments of $32,350, including interest at 1% over the base rate (currently 8.875%) through December, 2004, secured by a second mortgage and the personal guarantee of two stockholders in the Company This agreement contains certain restrictive covenants 2,500,000 Note payable to a credit company in monthly installments of $823, including interest at 1.9% through February, 2002; secured by vehicle. 20,951 Note payable to a bank in monthly installments of $43,332, including interest at 1.50% over the base rate (currently 10%) through November, 2001; secured by accounts receivable, inventory, intangibles, equipment and guaranteed by the stockholders of the Company This agreement contains certain restrictive covenants. $1,300,500 Note payable to a bank in monthly installments of $500, including interest at 8.5% through September, 1999; secured by a vehicle. 3,893 Contract for deed payable in quarterly installments of $4,648, including interest at 8% through August, 2001, secured by real estate. $30,081 45,488 Note payable to a bank in monthly installments of $525, including interest at 9.25% through May, 2001; secured by vehicle. 8,121 13,380
-12- NORTHERN FOOD & DAIRY, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1999 and 1998 NOTE 6 - LONG-TERM DEBT (continued)
1999 1998 ---------- ---------- Contract for deed payable in quarterly installments of $7,033, including interest at 8% through January, 2002; secured by real estate. 57,228 79,649 Note payable to a customer; total future payments of $400,000 due in monthly installments of $11,111 beginning May 1, 1999 for 36 months. The note was originally discounted to $216,114. The discount will be amortized over five years. During 1998, in accordance with the loan agreement, the note balance was decreased. Under the revised agreement, payments commence on May 31, 2001 for $11,111 per month until April 30, 2002. 111,740 101,656 Capital lease obligations(Note 6). 159,956 91,992 ---------- ---------- 3,793,824 1,636,558 Less: current portion 674,785 474,853 ---------- ---------- Total Long-Term Debt $3,119,039 $1,161,705 ========== ==========
Current maturities of long-term debt are as follows: Year ending December 31, 2000 $674 ###-###-#### 865,117 2002 261,033 2003 222 ###-###-#### 1,770,139 ---------- $3,793,824 ========== NOTE 7 - CAPITAL LEASES During 1999 and 1998, the Company leased forklifts and office equipment under capital lease agreements. Amounts representing capitalized lease equipment and related accumulated amortization are included in property, plant and equipment as follows: 1999 1998 -------- -------- Equipment $231,953 $115,819 Less: accumulated amortization 84,096 27,137 -------- -------- $147,857 $ 88,682 -------- -------- -13- NORTHERN FOOD & DAIRY, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1999 and 1998 NOTE 7 - CAPITAL LEASES - (continued) The following is a schedule, by year, of future minimum lease payments as of December 31: Year ending December 31, 2000 $ 72 ###-###-#### 67 ###-###-#### 24 ###-###-#### 14,217 -------- Total minimum lease payments 179,281 Less: amount representing interest 19,325 -------- Present Value of Minimum Lease Payments $159,956 ======== NOTE 8 - EMPLOYEE BENEFIT PLANS The Company has an employee profit sharing plan which allows an annual contribution not to exceed the maximum amount allowed as a deduction under the Internal Revenue Code. The amount contributed each year is to be determined by the Company's Board of Directors at its sole discretion. There were no accrued contributions for the years ended December 31, 1999 and 1998. This plan was amended January 1, 1993 to add a salary reduction 401(k) feature. The Company matches 100% of the first 2% of the employee's salary deferral. The match was $43,556 and $41,700 for the years ended December 31, 1999 and 1998, respectively. NOTE 9 - RELATED PARTY TRANSACTIONS The Company leased a warehouse from a stockholder under a five year operating lease with the option to renew for an additional five year term. Rent of $6,500 is paid monthly, expense for the year ended December 31, 1999 and 1998 was $66,447 and $66,231, respectively. The warehouse is subleased to a customer on a month-to-month basis. Rents received from the customer are offset against rent expense. The Company has a month-to-month lease on land owned by a stockholder, annual rent on the land is $12,000. -14- NORTHERN FOOD & DAIRY, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1999 and 1998 NOTE 9 - RELATED PARTY TRANSACTIONS - (continued) Beginning April 1, 1998, the Company leased office space, on a month-to-month triple net lease, from a stockholder for $2,500 per month. Annual rent expense for the years ended December 31, 1999 and 1998 was $30,000 and $25,000, respectively. Future Rental Commitments: 2000 $ 78,000 2001 78,000 -------- $156,000 ======== NOTE 10 - INCOME TAXES Income tax expense consisted of a Minnesota minimum fees of $5,000 and $8,000 for the years ended December 31, 1999 and 1998, respectively. NOTE 11 - MAJOR CUSTOMER DISCLOSURE The Company has sales to customers who contributed in excess of 10% of revenues for the years ended December 31, 1999 and 1998. They are as follows: 1999 1998 ---- ---- Number of customers 3 2 Revenue contributed $8,458,399 $5,762,976 Total revenue $21,248,554 $20,724,610 Percent of total revenue contributed 40% 28% NOTE 12 - MAJOR SUPPLIER DISCLOSURE The Company has purchased from vendors which, individually, contributed in excess of 10% of cost of goods sold purchases for the year ended December 31, 1999 and 1998 as follows: 1999 1998 ---- ---- Number of vendors 4 3 Purchases $8,456,762 $6,843,406 Total purchases $10,139,372 $12,270,280 Percent of total purchases contributed 83% 56% -15- NORTHERN FOOD & DAIRY, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1999 and 1998 NOTE 13 - COBRA BENEFITS Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Company provides health care benefits to eligible, former employees and eligible dependents. Certain requirements are outlined by the federal government for this coverage. The premium is paid in full by the insured on or before the fifteenth day of the month prior to the month of coverage. This program is offered for a duration of 18 months after the termination date. There were eight and eight participants in this program in 1999 and 1998, respectively. NOTE 14 - COMMITMENT The Company entered into a consulting agreement with a former officer. The agreement provides for monthly payments of $5,428 through January, 2014. Consulting expense was $65,139 for the years ended December 31, 1999 and 1998, respectively. NOTE 15 - ADVERTISING COSTS The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 1999 and 1998 was $5,814 and $4,944, respectively. -16- NORTHERN FOOD & DAIRY, INC. ADDITIONAL INFORMATION December 31, 1999 and 1998 PART II [LETTERHEAD OF FROEHLING, ANDERSON, PLOWMAN & WASMUTH LTD.] INDEPENDENT AUDITOR'S REPORT ON ADDITIONAL INFORMATION To the Board of Directors Northern Food & Dairy, Inc. Alexandria, Minnesota Our report on our audits of the basic financial statements of Northern Food & Dairy, Inc., for the years ended December 31, 1999 and 1998, appears on page three. Those audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompany additional information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. /s/ Froehling, Anderson, Plowman & Wasmuth, Ltd. Minnetonka, Minnesota February 24, 2000 NORTHERN FOOD & DAIRY, INC. SCHEDULES OF COST OF SALES For the Years Ended December 31, 1999 and 1998
1999 1998 --------------------------- ------------------------- Percent Percent Amount of Sales Amount of Sales --------------- --------- -------------- -------- BEGINNING INVENTORY $ 1,326,263 6.24% $ 626,040 3.02% PRODUCT PURCHASES 10,139,372 47.72 12,220,530 58.97 DIRECT LABOR 2,663,575 12.54 2,295,547 11.08 BROKER COMMISSION 59,908 0.28 32,568 0.16 VARIABLE INDIRECT EXPENSES Payroll taxes 327,629 1.54 265,827 1.28 Employee uniforms 66,544 0.31 60,148 0.29 Employee training 3,299 0.02 615 0.00 Employee insurance 223,957 1.05 176,139 0.85 Plant supplies 293,727 1.38 160,923 0.78 Cleaning supplies 210,503 0.99 191,381 0.92 Packaging supplies 0 0.00 124 0.00 Lab supplies 55,939 0.26 53,405 0.26 Filters 71,499 0.34 82,838 0.40 Outside lab 53,384 0.25 40,957 0.20 Disposal costs 198,453 0.93 126,491 0.61 Outside services 134,711 0.63 94,567 0.46 Processing and drying fuel 828,895 3.90 712,642 3.44 Utilities 706,224 3.32 615,559 2.97 Freight 2,925 0.01 3,326 0.02 Miscellaneous 4,584 0.02 13,986 0.07 --------------- ----- -------------- ----- TOTAL VARIABLE INDIRECT EXPENSES 3,182,273 14.98 2,598,928 12.54 OTHER INDIRECT EXPENSES Labor 504,335 2.36 489,998 2.35 Equipment repairs 711,698 3.35 435,944 2.10 Building repairs 72,236 0.34 34,599 0.17 Rent 99,599 0.47 90,694 0.44 Real estate taxes 61,690 0.29 50,940 0.25 Pest control 24,510 0.12 16,709 0.08 Insurance 183,766 0.86 132,861 0.64 Depreciation 642,731 3.02 667,423 3.22 --------------- ----- -------------- ----- TOTAL OTHER INDIRECT EXPENSES 2,300,565 10.83 1,919,168 9.26 --------------- ----- -------------- ----- TOTAL INDIRECT EXPENSES 5,482,838 25.81 4,518,096 21.80 --------------- ----- -------------- ----- TOTAL EXPENSES 19,671,956 92.58 19,692,781 95.02 LESS: ENDING INVENTORY 1,151,784 5.42 1,326,263 6.40 --------------- ----- -------------- ----- TOTAL COST OF SALES $ 18,520,172 87.16% $ 18,366,518 88.62% =============== ===== ============== =====
See Independent Auditor's Report on Additional Information. -19- NORTHERN FOOD & DAIRY, INC. SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES For the Years Ended December 31, 1999 and 1998
1999 1998 ----------------------- ----------------------- Percent Percent Amount of Sales Amount of Sales ---------- ---------- ---------- ---------- GENERAL AND ADMINISTRATIVE EXPENSES Advertising and business promotion $ 5,814 0.03% $ 4,944 0.02% Bad debt expense 0 0.00 16,439 0.08 Contributions 3,130 0.01 10,276 0.05 Depreciation 63,562 0.30 8,213 0.04 Dues and subscriptions 1,833 0.01 1,857 0.01 Employee insurance 84,205 0.40 65,504 0.32 General insurance 3,228 0.02 2,298 0.01 License fees 9,877 0.05 11,899 0.06 Office supplies 21,647 0.10 14,094 0.07 Payroll taxes 112,732 0.53 91,467 0.44 Postage 36,856 0.17 34,959 0.17 Professional fees 210,034 0.99 101,035 0.49 Consulting fees 65,139 0.31 65,139 0.31 401(k) match 43,556 0.20 41,700 0.20 Real estate taxes 2,570 0.01 2,123 0.01 Salaries and wages 1,231,747 5.80 959,251 4.63 Telephone 55,282 0.26 38,957 0.19 Travel and entertainment 85,050 0.40 83,053 0.40 Two-way radio 962 0.00 6,463 0.03 Utilities 9,302 0.03 8,108 0.03 ---------- ---------- ---------- ---------- TOTAL GENERAL AND ADMINISTRATIVE EXPENSES $2,046,526 9.62% $1,567,779 7.55% ========== ========== ========== ==========
See Independent Auditor's Report on Additional Information. -20-