<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
--------------------------------
Commission File Number 0-25428
----------------------
MEADOW VALLEY CORPORATION
- - --------------------------------------------------------------------------------
(Exact Name of registrant as specified in its charter)
NEVADA 88-0328443
- - --------------------------------------------------------------------------------
(State or other Jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4411 South 40th Street, Suite D-11, Phoenix, AZ 85040
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(602) 437-5400
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No____
---
Number of shares outstanding of the issuer's common stock:
Class Outstanding at May 8, 1996
----- --------------------------
Common Stock, $.001 par value 3,601,250 shares
<PAGE>
MEADOW VALLEY CORPORATION
INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
Number
------
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1996 and
March 31, 1995 3
Condensed Consolidated Balance Sheets -
As of March 31, 1996 and December 31, 1995 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and
March 31, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
2
<PAGE>
MEADOW VALLEY CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1996 1995
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Contract Revenues........................... $ 28,678,057 $ 16,179,064
Cost of Contract Revenues................... 27,338,940 15,635,790
------------- -------------
Gross Profit................................ 1,339,117 543,274
General and Administrative Expenses......... 650,041 348,482
------------- -------------
Income from Operations...................... 689,076 194,792
------------- -------------
Other Income (Expense):
Interest income............................. 212,976 154,400
Interest expense - related party............ (115,978) (293,133)
Other income (expense)...................... 11,695 (1,825)
------------- -------------
108,693 (140,558)
------------- -------------
Income before income taxes.................. 797,769 54,234
Income taxes................................ 295,174 27,907
------------- -------------
Net Income.................................. $ 502,595 $ 26,327
============= =============
Net Income per share........................ $ .14 $ .02
============= =============
Weighted Average Common Shares Outstanding.. 3,601,250 1,175,000
============= =============
</TABLE>
3
<PAGE>
MEADOW VALLEY CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995 *
------------ ------------
Assets: (UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents........................................ $ 6,460,530 $ 5,357,904
Restricted cash.................................................. 1,832,027 2,629,549
Accounts receivable.............................................. 16,726,726 13,710,390
Prepaid expenses and other....................................... 70,230 67,000
Notes receivable - related parties............................... 257,575 257,575
Costs and estimated earnings in excess of billings on
uncompleted contracts......................................... 4,292,116 2,721,178
------------- ------------
Total Current Assets................................... 29,639,204 24,743,596
Property and equipment, net........................................... 2,341,867 1,997,438
Refundable deposits................................................... 104,277 48,989
Goodwill, net......................................................... 1,880,872 1,900,880
Tradename, net........................................................ 33,486 -
Real Estate........................................................... 218,883 218,883
------------- ------------
Total Assets.............................................. $ 34,218,589 $ 28,909,786
============= =============
Liabilities and Stockholders' Equity :
Current Liabilities:
Obligation under capital lease................................... $ 75,840 $ 70,504
Accounts payable................................................. 15,060,861 10,985,454
Accrued liabilities.............................................. 1,420,225 1,040,422
Billings in excess of costs and estimated earnings on
uncompleted contracts....................................... 1,421,767 718,794
Income tax payable............................................... 252,945 609,315
------------- ------------
Total Current Liabilities................................. 18,231,638 13,424,489
Deferred income taxes................................................. 34,245 34,245
Obligation under capital lease........................................ 188,114 189,055
Note payable - related party.......................................... 3,500,000 3,500,000
------------- ------------
Total Liabilities......................................... 21,953,997 17,147,789
------------- ------------
Stockholders' Equity :
Preferred stock - $.001 par value; 1,000,000 shares authorized,
none issued and outstanding................................... - -
Common stock - $.001 par value; 15,000,000 shares authorized,
3,601,250 issued and outstanding.............................. 3,601 3,601
Additional paid-in capital....................................... 10,943,569 10,943,569
Capital adjustment............................................... (799,147) (799,147)
Retained earnings................................................ 2,116,569 1,613,974
------------- ------------
Total Stockholders' Equity................................ 12,264,592 11,761,997
------------- ------------
Total Liabilities and Stockholders' Equity................ $ 34,218,589 $ 28,909,786
============= ============
</TABLE>
* Derived from audited financial statements
4
<PAGE>
MEADOW VALLEY CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1996 1995
------------- ------------
Increase (Decrease) in Cash and Cash Equivalents: (UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers.............................. 24,825,781 $ 12,539,633
Cash paid to suppliers and employees...................... (23,533,044) (14,555,128)
Interest received......................................... 175,136 106,571
Interest paid............................................. (32,883) (186,609)
Income taxes paid......................................... (651,544) (340,298)
------------- ------------
Net cash provided by (used in) operating activities.. 783,446 (2,435,831)
------------- ------------
Cash flows from investing activities:
Decrease (increase) in restricted cash.................... 797,522 (824,544)
Purchase of AKR Contracting tradename..................... (36,531) -
Proceeds from sale of property and equipment.............. 79,364 -
Purchase of property and equipment........................ (502,025) (222,116)
------------- ------------
Net cash provided by (used in) investing activities.. 338,330 (1,046,660)
------------- ------------
Cash flows from financing activities:
Deferred offering costs................................... - (190,476)
Repayment of capital lease obligation..................... (19,150) -
------------- ------------
Net cash used in financing activities................ (19,150) (190,476)
------------- ------------
Net increase (decrease) in cash and cash equivalents........... 1,102,626 (3,672,967)
Cash and cash equivalents at beginning of period............... 5,357,904 4,739,424
------------- ------------
Cash and cash equivalents at end of period..................... $ 6,460,530 $ 1,066,457
============= ============
</TABLE>
5
<PAGE>
MEADOW VALLEY CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Corporation
Meadow Valley Corporation (the "Company") operates primarily as the
holding company of Meadow Valley Contractors, Inc. (MVC), a general
contractor, primarily engaged in the construction of structural
concrete highway bridges and overpasses and the paving of highways and
airport runways. The Company acquired all of the outstanding common
stock of MVC effective October 1, 1994.
2. Presentation of Interim Information
The amounts included in this report are unaudited; however, in the
opinion of management, all adjustments necessary for a fair statement
of results for the stated periods have been included. These
adjustments are of a normal recurring nature. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the
audited financial statements and notes thereto included in the
Company's Annual Form 10-K under the Securities Exchange Act of 1934
as filed with the Securities and Exchange Commission. The results of
operations for the three months ended March 31, 1996 are not
necessarily indicative of operating results for the entire year.
3. AKR Contracting Acquisition
During the three months ended March 31, 1996, the Company acquired the
tradename and certain assets of AKR Contracting in the amount of
$35,531 and 74,924, respectively. The tradename amortization is
provided for on a straight line basis over three years. The
acquisition of the above assets was not material to the Company's
financial position.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a heavy construction contractor specializing since 1980
in structural concrete construction of highway bridges and overpasses and the
paving of highways and airport runways. The Company generally serves as the
prime contractor for public sector customers (such as federal, state and local
governmental authorities) in the states of Nevada, Arizona and Utah. The
Company believes that specializing in structural concrete construction has
contributed significantly to its revenue growth and provides it with an
advantage in the competitive bidding process.
On January 2, 1996, the Company acquired the tradename and certain
assets of AKR Contracting in the amount of $35,531 and 74,924, respectively.
AKR Contracting is an unaffiliated company in Phoenix, Arizona specializing in
earthwork, grading and paving of residential subdivisions, commercial centers
and small public works. Through AKR, the Company expects to increase revenue
from the private construction market in which the Company was not previously
engaged. The acquisition of the above assets was not material to the Company's
financial position.
The Company has historically relied upon a small number of projects to
generate a significant portion of its revenue. For instance, revenue generated
from five projects represented 75% of the Company's revenue for the three months
ended March 31, 1996. Results for any one calendar quarter may fluctuate widely
depending upon the stage of completion of the Company's active projects and
backlog at the beginning of any one calendar quarter. At March 31, 1996 the
Company had backlog of approximately $98 million.
RESULTS OF OPERATIONS
The following table sets forth, for the three months ended March 31,
1996 and 1995, certain items derived from the Company's Condensed Consolidated
Statements of Operations expressed as a percentage of contract revenue.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Contract revenue 100.0% 100.0%
Gross profit 4.7 3.4
General and
administrative expense 2.3 2.2.
Interest income .8 1.0
Interest expense .4 1.8
Income before
income taxes 2.8 .4
Net income after
income taxes 1.8 .2
</TABLE>
7
<PAGE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
Revenue and Backlog. Revenue increased 77% to $28.7 million for the
three months ended March 31, 1996 ("interim 1996") from $16.2 million for the
three months ended March 31, 1995 ("interim 1995"). The increase results from a
$30.0 million increase in backlog at December 31, 1995 from the prior year.
Backlog increased 9% to approximately $98 million at March 31, 1996, from
approximately $90 million at March 31, 1995. Revenue is impacted in any one
period by the backlog at the beginning of the period.
Gross Profit. As a percentage of revenue, gross profit increased from
3.4% for interim 1995 to 4.7% for interim 1996. The increase results primarily
from the settlement of a claim which is related to a project completed during
1995 which improved gross profit by 2.2%, offset by a decrease in gross profit
margins due to (i) erratic weather conditions that delayed the completion of a
project (ii) difficulty in assembling an adequately skilled labor force due to
the physical location of a construction site and (iii) cost related plan or
specification errors. The Company is requesting additional compensation for
costs incurred related to plan or specification errors based upon the Company's
contractual right. Gross profit margins are affected by construction delays and
difficulties due to weather conditions, availability of materials, the timing of
work performed by other subcontractors and the physical and geological condition
of the construction site.
General and Administrative. General and administrative expenses
increased from $348,482 for interim 1995 to $650,041 for interim 1996. The
increase results primarily from the 77% growth in revenue and the Company's
expansion in the Utah market and the private construction market.
Interest Income and Expense. Interest income increased for interim
1996 to $212,976 from $154,400 for interim 1995 due to invested proceeds from
the initial public offering, increased cash from operations and higher average
interest rates earned during interim 1996. Interest expense decreased for
interim 1996 to $115,978 due to the repayment of $6.5 million of loans issued in
connection with the MVC acquisition.
Net Income After Income Taxes. Net income after income taxes
increased from $26,327 for interim 1995 to $502,595 for interim 1996. The
increase primarily resulted from a higher gross profit margin discussed above
together with interest income and interest expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary need for capital has been to finance expansion
and capital expenditures. Historically, the Company's primary source of cash
has been from operations. Revenue growth has required additional capital to
finance expanded receivables, retentions and capital expenditures and address
fluctuations in the work-in-process billing cycle, wherein costs and estimated
earnings on contracts in progress have exceeded billing.
The following table sets forth for the three months ended March 31,
1996 and 1995, certain items from the condensed consolidated statements of cash
flows.
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------
1996 1995
----------- ----------
<S> <C> <C>
Cash Flows Provided by (Used in) Operating Activities $ 783,446 $(2,435,831)
Cash Flows Provided by (Used in) Investing Activities 338,330 (1,046,660)
Cash Flows Used in Financing Activities ( 19,150) ( 190,476)
</TABLE>
Although the Company expects increased profitability as operations
continue to improve, cash may be reduced to finance receivables and for customer
cash retention required under contract subject to completion. In general, cash
flows from projects are negative until a project is approximately 15% complete,
then become positive during the middle approximately 70% of the project, and
again become negative during the final approximately 15% of the project.
Management continually monitors the Company's cash requirements to maintain
adequate cash reserves, and the Company believes that its cash balances were and
are sufficient.
8
<PAGE>
Accounts receivable and net costs in excess of billings ("billings")
at March 31, 1996, were approximately $19.6 million versus $15.7 million at
March 31, 1995 an increase of 24.8%. Revenues for the same period increased
77%. The outstanding accounts receivable and billings have increased primarily
due to the growth in revenue. The Company contracts primarily with public
sector customers, which it believes significantly reduces exposure to
conventional bad debts. Accordingly, based on the Company's history of no
material delays in the collection of accounts receivable, no allowance was
established for potentially uncollectible accounts at March 31, 1996.
Cash provided by investing activities during interim 1996 was
approximately $300,000, and included the release of retentions held in a
restricted cash account of approximately $800,000, offset by $500,000 in
equipment purchase. During interim 1995 cash used in investing activities
included an increase in restricted cash of approximately $800,000 and $200,000
in equipment purchase.
Cash used in financing activities during interim 1996 included $19,000
repayment of capital lease obligations. During interim 1995 cash used in
financing activities include deferred offering costs of approximately $190,000.
The Company currently has commitments in the amount of approximately
$180,000 for the purchase of precast forms and equipment. The Company
anticipates incurring total costs of approximately $600,000, which include the
above, for the acquisition of equipment and construction of a precast
manufacturing facility. The facility and its related equipment will be financed
with the proceeds of the IPO.
Management believes that the Company's cash reserves are sufficient to
fund its cash requirements for the next 12 months and that the Company's current
working capital combined with the net proceeds of the IPO will be adequate to
fund its short term and long term requirements
9
<PAGE>
PART 11. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
three months ended March 31, 1996.
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act as of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MEADOW VALLEY CORPORATION
(Registrant)
By /s/ Kenneth D. Nelson
---------------------
Kenneth D. Nelson
Chief Financial Officer
By /s/ Julie L. Bergo
---------------------
Julie L. Bergo
Principal Accounting Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 MAR-31-1995
<CASH> 8,292,557<F1> 7,987,453<F1>
<SECURITIES> 0 0
<RECEIVABLES> 21,276,417 16,689,143
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 29,639,204 24,743,596
<PP&E> 2,714,483 2,331,671
<DEPRECIATION> 372,616 334,232
<TOTAL-ASSETS> 34,218,589 28,909,786
<CURRENT-LIABILITIES> 18,231,638 13,424,489
<BONDS> 3,688,114 3,689,055
0 0
0 0
<COMMON> 3,601 3,601
<OTHER-SE> 12,260,991 11,758,396
<TOTAL-LIABILITY-AND-EQUITY> 34,218,589 28,909,786
<SALES> 28,678,057 16,179,064
<TOTAL-REVENUES> 28,678,057 16,179,064
<CGS> 27,338,940 15,635,790
<TOTAL-COSTS> 27,338,940 15,635,790
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 115,978 293,133
<INCOME-PRETAX> 797,769 54,234
<INCOME-TAX> 295,174 27,907
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 502,595 26,327
<EPS-PRIMARY> .14 .02
<EPS-DILUTED> 0 0
<FN>
<F1>Restricted Cash: At March 31, 1996 and December 31, 1995, the Company had
restricted money market and trust accounts in the aggregate amounts of
$1,832,027 and $2,629,549, respectively. These funds are held in lieu of
retention on some of the Company's construction contracts and will be released
to the Company when the contracts are completed.
</FN>
</TABLE>
