|
Advanced Roofing, Inc. and Affiliates
<br />Notes to Consolidated Financial Statements
<br />Note 10. Related Party Transactions (Continued)
<br />The Company has a captive insurance arrangement with a company related by common ownership. The
<br />Company transferred its warranty liability to this related captive insurance entity. For the years ended
<br />December 31, 2015 and 2014, the Company incurred and is expected to be paid approximately $40,000
<br />and $19,000, respectively, in warranty expenses, of which approximately $21,000 and $10,000,
<br />respectively, was reimbursed by the captive. Included in other current assets in the accompanying
<br />consolidated balance sheets is a receivable from this captive of approximately $19,000 and $9,000 as of
<br />December 31, 2015 and 2014, respectively.
<br />See Note 14 for other related party transactions.
<br />Note 11. Major Customers
<br />Revenues include sales to the following major customers for the years ended December 31, 2015 and
<br />2014, together with the receivables due from these customers as of December 31, 2015 and 2014:
<br />2015. 2014
<br />Customer Revenues Receivables Revenues Receivables
<br />A $ 751,813 $ - $ 6,997,234 $ 705,393
<br />B 6,452,609 164,880 7,238,235 1,091,497
<br />Because of the nature of the Company's business, major customers may vary between years.
<br />Note 12. Accounts Payable
<br />As of December 31, 2015 and 2014, accounts payable include amounts due to subcontractors totaling
<br />$267,516 and $348,403, respectively, which have been retained pending completion and customer
<br />acceptance of jobs.
<br />Note 13. Variable Interest Entities
<br />The Company is the primary beneficiary of and consolidates several related parties that are variable
<br />interest entities (VIEs). The Company would absorb more than a significant amount of the VIES' expected
<br />losses based on leasing and guarantee agreements and because the Company provides subordinated
<br />financial support to these entities as discussed in Note 1. Through the lease agreements and additional
<br />financial support, the Company controls the significant activities of the VIEs. The Company may provide
<br />additional financial support in the event the VIEs need it to support their operations. As of December 31,
<br />2015 and 2014, outstanding advances due from these VIEs were $896,217 and $4,947,846, respectively.
<br />For no consideration, the Company has agreed to cross guarantee the line of credit and long-term debt of
<br />the VIEs. The Company's maximum exposure under these guarantees was $5,414,170 and $3,383,273
<br />as of December 31, 2015 and 2014, respectively. The details of these debt instruments are included in
<br />Notes 6 and 7 to the consolidated financial statements. The Company can be required to perform on
<br />these guarantees in the event of nonpayment of these arrangements by the VIEs.
<br />Under the terms of the lease agreement with the VIEs, the Company is required to make monthly
<br />payments of approximately $25,300 to the VIEs. The leases expire at various times through April 2029.
<br />16
<br />
|