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Schmidt Construction (division of Edw. C. Levy Co.) Notes to Divisional Balance Sheet 1. Basis of Presentation and Operations: Effective December 31, 1988, Schmidt Construction (the "Division") was merged into Ed~~. C. Lcry Co. (the "Parent company") and became a division. Its separate corporate existence ceased. The divisional balance sheet includes all of the accounts of the division as of December 31, 1997. The corporate staff of the Parent company provides the Division with certain executive, administrative, financial, legal and general sen ices performed on a centralized basis. The Division extracts and processes natural aggregates, provides trucking services, manufactures asphalt products and paves roads, parking lots and other surfaces in and azound Colorado Springs, Colorado. 2. At:counting Policies: a. Cash Equivalents: For purposes of the divisional statement of cash flo++'s, the divisior. considers all highly liquid instruments purchased with a maturity date of three months or less to be cast, equivalents. b. lnventon Valuation: lrrventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out ("F]FO") method for substantially all inventor)•. c. Propert~~, Plant and Equipment: Properties aze recorded at cost and include expenditures for new facilities and those +vhich materially extend the useful lives of existinc equipment. Upon retirement or disposal of property, plant and equipment, the cos: and related accumulated depreciation are eliminated from the respective accounts. Property, plant, and equipment are depreciated over the estimated useful lives of the assets using either the straight-line ordouble-declining balance method. The general range of lives is as follows: Years Machinery and equipmenf Transportation equipment Furniture and fixtures 510 7 5to7 Sto7 3