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Schmidt Constiruetion <br />Notes to Divisional Balance Sheet <br />December 31, 2003 <br />Note 1 -Nature of Biusiness and Sl~iticant Accounting Polkks <br />The divisional balance sheet of Schmidt Construction (the "Division"), a division of <br />Edw. C. Levy Co. (the "Parent"), includes the accounts of the Division as of <br />December 31, 2003. The corporate staff of the Parem provides the Division with <br />certain executive, administrative, financial, legal, and general services performed on a <br />centralized basis. The costs of services provided by the Parent's staff are allocated <br />to the Division. In addition, the Division is allocated a portion of the Parent's <br />employee fringe benefit costs and state and local income taxes. <br />The Division extracts and processes natural aggregates, provides trucking services, <br />manufactures asphah products, and paves roads, parking lots, and other surfaces in <br />and around Colorado Springs, Colorado. <br />Trade Accounts Receivable -Accounts receivable are stated at Invoice amounts. <br />An allowance for doubtful accoums is recognized based on a specific assessment of <br />customer balances that remain unpaid. The allowance is determined based on <br />management's estimate of the amounts recoverable from each customer. Amounts <br />deemed uncollectible are written off in the period that determination is made. No <br />such allowance was deemed necessary at December 31, 2003. <br />Inventories -Inventories consist of raw materials and are stated at the lower of <br />cost or market. Cost is determined using the first-in, first-out (FIFO) method for <br />substantially all inventories. <br />Property, Plant, and Equipmertt -Property, plant, and equipment are recorded <br />at cost. Depreciation is computed using the straight-line method for buildings and <br />the double-declining balance method for other assets over the estimated useful lives <br />of the assets. <br />Divisional Equity -Divisional equity is the accumulated earnings of the Division <br />since inception less the allocated portion of stockholder redemptions described in <br />Note 6. <br />Self-insurance -The Division and affiliates of the Parent are partially self-insured <br />for workers' comperuation. The Division and affiliates of the Parent have obtained <br />specific excess reinsurance coverage for claims in excess of $1,000,000 per accident. <br />The Division is also self-insured for employee heakh care coverage. <br />3 ~ff 0~ <br />