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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, 1997
---------------------------------
Commission File Number 0-25428
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MEADOW VALLEY CORPORATION
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(Exact Name of registrant as specified in its charter)
NEVADA 88-0328443
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(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4411 South 40th Street, Suite D-11, Phoenix, AZ 85040
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(Address of principal executive offices) (Zip Code)
(602) 437-5400
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(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
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Number of shares outstanding of the issuer's common stock:
Class Outstanding at May 9, 1997
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Common Stock, $.001 par value 3,601,250 shares
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MEADOW VALLEY CORPORATION
INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
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<CAPTION>
PART I. FINANCIAL INFORMATION Page
Number
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Item 1. Financial Statements
<S> <C>
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1997 and March 31, 1996 3
Condensed Consolidated Balance Sheets -
As of March 31, 1997 and December 31, 1996 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and
March 31, 1996 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
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2
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MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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1997 1996
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(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenue..................................... $28,315,105 $28,678,057
Cost of Revenue............................. 26,895,622 27,338,940
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Gross Profit................................ 1,419,483 1,339,117
General and Administrative Expenses......... 1,218,312 650,041
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Income from Operations...................... 201,171 689,076
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Other Income (Expense):
Interest income............................. 169,438 212,976
Interest expense............................ (152,192) (115,978)
Other income................................ 6,611 11,695
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23,857 108,693
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Income before income taxes.................. 225,028 797,769
Income taxes................................ 92,300 295,174
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Net Income.................................. $ 132,728 $ 502,595
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Net Income per share........................ $ .04 $ .14
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Weighted Average Common Shares Outstanding.. 3,601,250 3,601,250
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3
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MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996*
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(UNAUDITED)
<S> <C> <C>
Assets:
Current Assets:
Cash and cash equivalents................ $ 2,532,439 $ 1,440,519
Restricted cash.......................... 1,156,306 1,415,577
Accounts receivable...................... 20,219,283 26,861,458
Prepaid expenses and other............... 1,121,972 836,086
Note receivable - related parties........ 257,575 257,575
Note receivable - other.................. 1,892 1,855
Costs and estimated earnings in excess
of billings on uncompleted contracts.... 3,393,342 3,726,328
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Total Current Assets............... 28,682,809 34,539,398
Property and equipment, net................ 6,621,760 5,278,390
Refundable deposits........................ 260,610 247,740
Note receivable - other.................... 210,115 210,602
Goodwill, net.............................. 1,800,843 1,820,850
Tradename, net............................. 21,309 24,354
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Total Assets....................... $37,597,446 $42,121,334
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Liabilities and Stockholders' Equity:
Current Liabilities:
Note payable - related party............. $ 500,000 $ 500,000
Notes payable - other.................... 325,688 266,220
Obligation under capital lease........... 254,364 254,364
Accounts payable......................... 15,324,710 19,629,807
Accrued liabilities...................... 1,784,964 1,777,334
Billings in excess of costs and estimated
earnings on uncompleted contracts....... 2,995,358 3,372,853
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Total Current Liabilities.......... 21,185,084 25,800,578
Deferred income taxes...................... 12,610 12,610
Obligation under capital lease............. 576,138 643,910
Note payable - related party............... 3,000,000 3,000,000
Notes payable - other...................... 1,014,117 987,467
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Total Liabilities.................. 25,787,949 30,444,565
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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........................ 1,661,474 1,528,746
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Total Stockholders' Equity......... 11,809,497 11,676,769
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Total Liabilities and Stockholders'
Equity............................ $37,597,446 $42,121,334
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</TABLE>
* Derived from audited financial statements
4
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MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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1997 1996
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<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents: (UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Cash received from customers.............................. 34,901,987 $ 24,825,781
Cash paid to suppliers and employees...................... (32,542,926) (23,533,044)
Interest received......................................... 182,033 175,136
Interest paid............................................. (158,032) (32,883)
Income taxes paid......................................... - (651,544)
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Net cash provided by operating activities............ 2,383,062 783,446
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Cash flows from investing activities:
Decrease (increase) in restricted cash.................... 259,271 797,522
Purchase of AKR Contracting
tradename................................................ - (36,531)
Proceeds from sale of property and equipment.............. 27,938 79,364
Purchase of property and equipment........................ (1,440,099) (502,025)
Collection of note receivable - other..................... 450 -
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Net cash provided by (used in) investing activities.. (1,152,440) 338,330
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Cash flows from financing activities:
Repayment of capital lease obligation..................... (67,772) (19,150)
Repayment of notes payable - other........................ (70,930) -
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Net cash used in financing activities................ (138,702) (19,150)
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Net increase in cash and cash equivalents...................... 1,091,920 1,102,626
Cash and cash equivalents at beginning of period............... 1,440,519 5,357,904
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Cash and cash equivalents at end of period..................... $ 2,532,439 $ 6,460,530
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</TABLE>
5
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MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Corporation
Meadow Valley Corporation (the "Company") was organized under the laws of
the State of Nevada on September 15, 1994. The principal business purpose of
the Company is to operate as the holding company of Meadow Valley
Contractors, Inc. (MVC), Ready Mix, Inc. (RMI) and Prestressed Products
Incorporated (PPI). MVC is a general contractor, primarily engaged in the
construction of structural concrete highway bridges and overpasses and the
paving of highways and airport runways in the states of Nevada, Arizona,
Utah and New Mexico. Founded in 1980, MVC was acquired by the Company as of
October 1, 1994. RMI, a producer and retailer of ready-mix concrete,
commenced operations in the Las Vegas metropolitan area in March 1997. PPI
manufactures and/or erects prestressed products primarily in the Southern
Nevada area.
2. Presentation of Interim Information
The amounts included in this report are unaudited; however, they were
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission and, in the opinion of management, all normal recurring
adjustments necessary for a fair statement of results for the stated periods
have been included. 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, filed with the Securities and Exchange
Commission under the Securities Exchange Act of 1934. The results of
operations for the three months ended March 31, 1997 are not necessarily
indicative of operating results for the entire year.
3. New Accounting Pronouncements
On March 3, 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, Earnings per Share (SFAS 128). This pronouncement
provides a different method of calculating earnings per share than is
currently required by APB 15, Earnings per Share. SFAS 128 provides for the
calculation of Basic and Diluted earnings per share. Basic earnings per
share includes no dilution and is computed by dividing income available to
common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the
potential dilution of securities that could share in the earnings of an
entity, similar to fully diluted earnings per share. This pronouncement is
effective for fiscal years and interim periods after December 15, 1997;
early adoption is not permitted. The Company has not determined the effect,
if any, of adoption on its EPS computation(s).
4. Notes payable- other
Following is a summary of first quarter additions to Notes payable - other
and balances at March 31, 1997:
7.55% note payable, with monthly payments of
$4,889, due 1/1/00, collateralized by equipment....................$145,273
Less: current portion............................................... 49,382
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$95,891
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Following are maturities of long-term debt for each of the next 3 years:
1998.........................................................$ 49,382
1999......................................................... 52,578
2000......................................................... 43,313
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$ 145,273
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6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors affecting the Company's financial position and operating results during
the periods included in the accompanying condensed consolidated financial
statements.
Except for the historical information contained herein, the matters set forth in
this report are forward-looking statements within the meaning of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to risks and uncertainties that may
cause actual results to differ materially. The Company disclaims any intent or
obligation to update these forward-looking statements.
RESULTS OF OPERATIONS
The following table sets forth, for the three months ended March 31, 1997
and 1996, certain items derived from the Company's Condensed Consolidated
Statements of Operations expressed as a percentage of revenue:
THREE MONTHS ENDED
MARCH 31, 1997
--------------
1997 1996
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Revenue..................... 100.0% 100.0%
Gross profit................ 5.0 4.7
General and administrative
expense.................... 4.3 2.3
Interest income............. .6 .7
Interest expense............ .5 .4
Income before income taxes.. .8 2.8
Net income after taxes...... .5 1.8
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
Revenue and Backlog. Revenue for the three months ended March 31, 1997
("interim 1997") was $28.3 million compared to $28.7 million for the three
months ended March 31, 1996 ("interim 1996"). The slight reduction in revenue
was the result of a $.7 million decrease in contract revenue offset in part by a
$.3 million increase in revenue generated from construction materials production
and manufacturing. Backlog increased 9% to approximately $107 million at March
31, 1997, from approximately $98 million at March 31, 1996. Revenue is impacted
in any one period by the backlog at the beginning of the period.
Gross Profit. As a percentage of revenue, consolidated gross profit margin
increased from 4.7% for interim 1996 to 5.0% for interim 1997. During interim
1997, MVC's contract related gross profit margin increased 26% to 5.8% from 4.7%
during interim 1996. The increase in MVC's contract related gross profit margin
was the result of lower gross profit margins in interim 1996 due to (i) erratic
weather conditions that delayed the completion of a project and (ii) cost
overruns. The interim 1997 consolidated gross profit margin was diluted by
approximately .8% as a result of ready-mix operating costs incurred throughout
interim 1997 even though ready-mix revenues did not commence until mid-March.
Gross profit margins are affected by a variety of factors including 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.
7
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General and Administrative. General and administrative expenses increased
from $650,041 for interim 1996 to $1,218,312 for interim 1997. The increase
results primarily from expenses of $383,864 associated with the Company's
expansion in the Utah market and the start up of the Company's wholly-owned
ready-mix concrete and precast/prestressed products subsidiaries. The remainder
of the increase was in corporate labor.
Interest Income and Expense. For interim 1997, interest income decreased to
$169,438 from $212,976 for interim 1996 due to a decrease in cash reserves
resulting primarily from the expansion into the production and manufacturing of
construction materials. Interest expense increased for interim 1997 to $152,192
from $115,978 for interim 1996 due to additional debt incurred related to the
purchase of land and crushing, screening and conveying equipment.
Net Income After Income Taxes. Net income after income taxes was $132,728
for interim 1997 as compared to $502,595 for interim 1996. The decrease, offset
somewhat by a higher gross profit margin, resulted primarily from the increased
general and administrative expenses discussed above.
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 billings.
The following table sets forth, for the three months ended March 31, 1997
and 1996, certain items from the condensed consolidated statements of cash
flows:
Three Months Ended
March 31,
--------------------
1997 1996
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Cash Flows Provided by Operating Activities............. $2,383,062 $783,446
Cash Flows Provided by (Used In) Investing Activities... (1,152,440) 338,330
Cash Flows Used In Financing Activities................. (138,702) (19,150)
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 contracts 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.
Accounts receivable and net costs in excess of billings ("billings") at
March 31, 1997, were approximately $20.6 million versus $19.6 million at March
31, 1996, an increase of 5.1%. 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
collection of accounts receivable, no allowance has been established for
potentially uncollectible accounts.
Cash used in investing activities during interim 1997 was approximately
$1.2 million, including $1.4 related to equipment purchases and the construction
of the ready-mix batch plant and building, offset partially by the net release
of approximately $.3 million retentions from a restricted cash account. During
interim 1996, cash provided by investing activities included the release of
retentions held in a restricted cash account of approximately $.8 million,
offset partially by $.5 million in equipment purchases.
Cash used in financing activities during interim 1997 included
approximately $68,000 repayment of capital lease obligations and approximately
$71,000 repayment of loans, as compared to interim 1996 cash used in financing
activities of $19,000 for repayment of capital lease obligations.
The Company currently has available from a commercial bank a $2,000,000
operating line of credit ("line of credit") at an interest rate of the
commercial bank's prime plus .50%, and a $2,000,000 operating line of credit at
an interest rate of the commercial bank's prime plus .25%. At March 31, 1997,
nothing had been drawn on either of the lines of credit.
8
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The Company anticipates financing approximately $500,000 of the $1.2
million already paid in connection with the construction of the existing ready-
mix batch plant and building. It is anticipated that a substantial portion of
the costs of a planned second ready-mix plant and related equipment will be
financed through operating leases and that second site will not require the
purchase of land. Currently, the Company is leasing 40 ready-mix trucks with
estimated annual lease payments of $885,000.
Management believes that the Company's cash reserves, together with its
lines of credit and anticipated cash flow from operations, are sufficient to
fund its cash requirements for the next 12 months and that the Company's working
capital will be adequate to fund its short term and long term requirements.
9
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PART II. 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, 1997.
10
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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/ Gary W. Burnell
----------------------------
Gary W. Burnell
Chief Financial Officer
By /s/ Julie L. Bergo
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Julie L. Bergo
Principal Accounting Officer
11
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> [TO COME]
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,688,745
<SECURITIES> 0
<RECEIVABLES> 23,870,200
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,682,809
<PP&E> 6,852,400
<DEPRECIATION> 230,640
<TOTAL-ASSETS> 37,597,446
<CURRENT-LIABILITIES> 21,185,084
<BONDS> 5,670,307
0
0
<COMMON> 3,601
<OTHER-SE> 11,805,896
<TOTAL-LIABILITY-AND-EQUITY> 37,597,446
<SALES> 28,315,105
<TOTAL-REVENUES> 28,315,105
<CGS> 26,895,622
<TOTAL-COSTS> 26,895,622
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152,192
<INCOME-PRETAX> 225,028
<INCOME-TAX> 92,300
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 132,728
<EPS-PRIMARY> .04
<EPS-DILUTED> 0
</TABLE>
