Page 16 - RosboroAR2020

16 — ROSBORO ANNUAL REPORT 2020
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Principles of consolidation - The nancial statements include the consolidated accounts of Rosboro Holdings, Inc., a Delaware corporation, along with its wholly owned subsidiary Rosboro Company, LLC, and its wholly owned subsidiary Western Structures, LLC, both Delaware limited liability companies and Rosboro Log Yard, LLC an Oregon limited liability company (collectively, the “Company”). All signi cant intercompany balances and transactions have been eliminated in the consolidated nancial statements.
Description of operations - Rosboro Company, LLC (“Rosboro”) consists of a stud mill, dimension
mill, glulam beam plant and veneer mill at one site
in Spring eld, Oregon and two glulam beam plants in Veneta, Oregon. The Company employs approximately
400 employees and strives to provide the most ef cient conversion of logs. Rosboro has maintained a focus on capital expenditures in the key processing centers to stay current with technology, and is a signi cant producer in its wood basket and the Paci c Northwest. The Company has an expanded product line, and is continuously looking for new product opportunities.
Use of estimates - The preparation of the nancial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions
that affect the amounts reported in the nancial statements and accompanying notes. Actual results could differ from those estimates. Signi cant estimates used
in preparing these nancial statements include estimated timber volumes used in determining annual depletion and future harvest plans, and assumptions used to calculate the fair value of stock option awards. These estimates have a direct effect on gross margin, working capital and stockholders’ equity.
Revenue recognition - Revenue consists of sales of lumber, glulam beams and by-products. Our products are used primarily in new residential construction, residential repair-and-remodeling markets and light commercial construction. The majority of our products are sold to wholesalers and retailers located throughout the United States and Canada. Performance obligations associated with sales are satis ed at a point in time when the products are either shipped or delivered to customers, depending on the shipping terms agreed to with the customer. Customers are generally invoiced shortly
after products are shipped, with payment generally due within a month or less of the invoice date. The amount of consideration received and revenue recognized varies with changes in rebates and cash discounts offered to customers. See “Rebates and Cash Discounts”.
Fees for shipping charged to customers for sales transactions are included in sales in the consolidated statements of income. The related expenses associated with shipping charged to customers are included in materials, services and other costs in the consolidated statements of income.
Sales and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue.
Substantially all of the Company’s performance obligations are satis ed as of a point in time. Therefore, there is
little judgment in determining when control transfers as described above.
Rebates & cash discounts - The Company utilizes rebates, credits, discounts and/or cash-based incentives with certain customers which are accounted for as variable consideration. These amounts are estimated
based on historical and anticipated customer sales and reduce recognized revenues accordingly. Estimates of variable consideration are considered not constrained as the likelihood and magnitude of a signi cant reversal are not probable. The allocation of these costs
are applied at the invoice level and recognized in conjunction with revenue. Additionally, the volume returns and refunds are estimated on a historical and expected basis which is a reduction of revenue recognized.
Cash & cash equivalents - For nancial statement purposes, the Company considers all liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The Company may maintain cash balances in federally insured nancial institutions in excess of the
insured limit. At December 31, 2020 and 2019,
cash in excess of insured limits was approximately $898,000 and $1,220,000, respectively. The Company’s banking system provides for the daily replenishment of major bank accounts as checks
are presented for payment. Accordingly, there
was a negative book cash balance of approximately $1,670,000 at December 31, 2020 (none at December 31, 2019). Such balances result from outstanding checks that had not yet been paid by the bank
and are re ected in accounts payable in the consolidated balance sheets.
Accounts receivable - The Company generally does not require collateral or other security to support accounts receivable. Credit risk associated with accounts receivable is periodically reviewed by management and an allowance, if required, is established. No allowance was deemed to be necessary at December 31, 2020 and 2019.
Inventories - Inventories are stated at the lower of cost or net realizable value. Cost is determined using a 12-month rolling average.