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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 Edw. C. Levy Co. (the "Pazent 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, 1998. The corporate staff of the Pazent company provides the Division with certain executive, administrative, financial, legal and general services performed on a centralized basis. The Division extracts and processes natural aggregates, provides trucking services, manufactures asphalt products and paves roads, pazking lots and other surfaces in and azound Colorado Springs, Colorado. 2. Accounting Policies: a. Cash Equivalents: For purposes of the divisional statement of cash flows, the division considers all highly liquid instruments purchased with a maturity date of three months or less to be cash equivalents. b. Inventory Valuation: Inventories aze stated at the lower of cost or mazket. Cost is determined using the first-in, first-out ("FIFO") method for substantially all inventory. c. Property, Plant and Equipment: Properties are recorded at cost and include expenditures for new facilities and those which materially extend the useful lives of existing equipment. Upon retirement or disposal of property, plant and equipment, the cost and related accumulated depreciation aze eliminated from the respective accounts. Property, plant, and equipment aze depreciated over the estimated useful lives of the assets using either the straight-line or double-declining balance method. The general range of lives is as follows: Years Machinery and equipment Transportation equipment Furniture and fixtures Sto7 5to7 5to7 3