<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, 1998
-------------------------------
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 April 30, 1998
----- -----------------------------
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, 1998
PART I. FINANCIAL INFORMATION Page
Number
------
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1998 and
March 31, 1997 3
Condensed Consolidated Balance Sheets -
As of March 31, 1998 and December 31, 1997 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and
March 31, 1997 5-6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
2
<PAGE>
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
Revenues............................................ $39,510,832 $28,315,105
Cost of revenues.................................... 37,423,427 26,895,622
------------ ------------
Gross profit........................................ 2,087,405 1,419,483
General and administrative expenses................. 1,653,005 1,218,312
------------ ------------
Income from operations.............................. 434,400 201,171
------------ ------------
Other income (expense):
Interest income..................................... 116,982 169,438
Interest expense.................................... (141,484) (152,192)
Other income........................................ 30,912 6,611
------------ ------------
6,410 23,857
------------ ------------
Income before income taxes.......................... 440,810 225,028
Income taxes........................................ 176,000 92,300
------------ ------------
Net income.......................................... $ 264,810 $ 132,728
============ ============
Basic net income per common share................... $ .07 $ .04
============ ============
Diluted net income per common share................. $ .07 $ .04
============ ============
Basic weighted average common shares outstanding.... 3,601,250 3,601,250
============ ============
Diluted weighted average common shares outstanding.. 3,655,782 3,606,547
============ ============
</TABLE>
3
<PAGE>
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997 *
----------- -----------
<S> <C> <C>
Assets: (UNAUDITED)
Current Assets:
Cash and cash equivalents.................................................... $ 2,395,556 $ 2,853,065
Restricted cash.............................................................. 1,919,657 1,719,768
Accounts receivable, net..................................................... 27,394,377 26,244,473
Prepaid expenses and other................................................... 1,236,616 925,923
Note receivable - related party.............................................. - 257,575
Note receivable - other...................................................... 2,049 2,009
Costs and estimated earnings in excess of billings on uncompleted
contracts.................................................................. 5,305,766 4,758,917
----------- -----------
Total Current Assets..................................................... 38,254,021 36,761,730
Property and equipment, net.................................................... 10,623,072 10,211,468
Refundable deposits............................................................ 171,983 127,737
Note receivable - other........................................................ 209,224 209,264
Goodwill, net.................................................................. 1,720,814 1,740,821
Tradename, net................................................................. 9,133 12,177
----------- -----------
Total Assets............................................................. $50,988,247 $49,063,197
=========== ===========
Liabilities and Stockholders' Equity:
Current Liabilities:
Note payable - related party................................................. $ 500,000 $ 500,000
Notes payable - other........................................................ 790,760 818,846
Obligations under capital leases............................................. 439,649 405,204
Accounts payable............................................................. 20,640,652 19,536,421
Accrued liabilities.......................................................... 1,561,436 1,993,182
Billings in excess of costs and estimated earnings on uncompleted
contracts.................................................................. 7,784,585 6,660,940
----------- -----------
Total Current Liabilities................................................ 31,717,082 29,914,593
Deferred income taxes.......................................................... 412,561 412,561
Obligations under capital leases............................................... 1,022,048 973,847
Note payable - related party................................................... 2,000,000 2,000,000
Notes payable - other.......................................................... 2,683,362 2,873,812
----------- -----------
Total Liabilities........................................................ 37,835,053 36,174,813
----------- -----------
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 adjustments.......................................................... (799,147) (799,147)
Retained earnings............................................................ 3,005,171 2,740,361
----------- -----------
Total Stockholders' Equity............................................... 13,153,194 12,888,384
----------- -----------
Total Liabilities and Stockholders' Equity............................... $50,988,247 $49,063,197
=========== ===========
</TABLE>
*Derived from audited financial statements
4
<PAGE>
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1997
------------ ------------
Increase (Decrease) in Cash and Cash Equivalents: (UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers..................... $ 38,875,113 $ 34,901,987
Cash paid to suppliers and employees............. (38,222,993) (32,542,926)
Interest received................................ 196,109 182,033
Interest paid.................................... (81,928) (158,032)
Income taxes paid................................ (301,940) -
------------ ------------
Net cash provided by operating activities... 464,361 2,383,062
------------ ------------
Cash flows from investing activities:
Decrease (increase) in restricted cash........... (199,889) 259,271
Collection of notes receivable - other........... - 450
Collection of note receivable - related party.... 257,575 -
Proceeds from sale of property and equipment..... 69,485 27,938
Purchase of property and equipment............... (629,878) (1,440,099)
------------ ------------
Net cash (used in) investing activities..... (502,707) (1,152,440)
------------ ------------
Cash flows from financing activities:
Repayment of notes payable - other............... (114,077) (70,930)
Repayment of capital lease obligations........... (305,086) (67,772)
------------ ------------
Net cash (used in) financing activities..... (419,163) (138,702)
------------ ------------
Net increase (decrease) in cash and cash equivalents.. (457,509) 1,091,920
Cash and cash equivalents at beginning of period...... 2,853,065 1,440,519
------------ ------------
Cash and cash equivalents at end of period............ $ 2,395,556 $ 2,532,439
============ ============
</TABLE>
5
<PAGE>
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1998 1997
----------- -----------
Increase (Decrease) in Cash and Cash Equivalents (UNAUDITED) (UNAUDITED)
(Continued):
<S> <C> <C>
Reconciliation of Net Income to Net Cash Provided by
Operating Activities:
Net Income................................................... $ 264,810 $ 132,728
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization........................... 469,614 253,691
Gain on sale of property and equipment.................. (14,396) (4,800)
Changes in Assets and Liabilities:
Accounts receivable..................................... (1,229,031) 6,629,580
Prepaid expenses and other.............................. (184,754) (378,186)
Costs and estimated earnings in excess of billings on
uncompleted contracts................................. (546,849) 332,986
Refundable deposits..................................... (44,350) (12,870)
Interest payable........................................ 59,556 (5,840)
Accounts payable........................................ 1,104,231 (4,305,097)
Accrued liabilities..................................... (491,302) 13,470
Billings in excess of costs and estimated earnings on
uncompleted contracts................................. 1,123,645 (377,495)
Interest receivable..................................... 79,127 12,595
Income tax receivable................................... (125,940) 92,300
----------- -----------
Net cash provided by operating activities.......... $ 464,361 $ 2,383,062
=========== ===========
</TABLE>
6
<PAGE>
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. MVC was acquired by the Company as of
October 1, 1994. RMI is a producer and retailer of ready-mix concrete
operating in the Las Vegas metropolitan area. PPI manufactures and erects
precast and prestressed products primarily in the Southern Nevada area.
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, 1998 are not
necessarily indicative of operating results for the entire year.
3. Notes Payable- other:
Summary of first quarter additions to Notes payable - other and their
balances at March 31, 1998:
7.41% note payable, with monthly payments of $2,084, due 12/01/01
collateralized by equipment........................................ $79,330
Less: current maturities included in current liabilities........... 19,406
-------
$59,924
=======
Following are maturities of the above long-term debt for each of the next 4
years:
1999................................. $ 19,406
2000................................. 21,004
2001................................. 22,734
2002................................. 16,186
-----------
$ 79,330
===========
4. Subsequent Events:
During April 1998, the Company financed the purchase of construction
equipment in the amount of $256,320. The loan has a 7.33% interest rate
with monthly payments of $5,115, due 4/24/03.
During April 1998, the Company financed the purchase of an asphalt plant in
the amount of $1,091,685. The loan has a 7.36% interest rate with monthly
payments of $16,669, due 4/24/05.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
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, 1998
and 1997, certain items derived from the Company's Condensed Consolidated
Statements of Operations expressed as a percentage of revenue.
<TABLE>
<CAPTION>
Three months Ended
March 31,
------------------
1998 1997
------ ------
<S> <C> <C>
Revenue............................. 100.0% 100.0%
Gross profit........................ 5.3 5.0
General and administrative expense.. 4.2 4.3
Interest income..................... .3 .6
Interest expense.................... .4 .5
Income before income taxes.......... 1.1 .8
Net income after income taxes....... .7 .5
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Revenue and Backlog. Revenue for the three months ended March 31, 1998
("interim 1998") was $39.5 million compared to $28.3 million for the three
months ended March 31, 1997 ("interim 1997"). The increase in revenue was the
result of an increase in contract revenue of $6.5 million and a $4.7 million
increase in revenue generated from construction materials production and
manufacturing sold to non-affiliates. Backlog increased 107% to approximately
$221 million at March 31, 1998, from approximately $107 million at March 31,
1997. 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 5.0% for interim 1997 to 5.3% for interim 1998. The increase
results primarily from an increase in MVCI and RMI combined gross profit margins
from 5.2% in interim 1997 to 6.2% in interim 1998, or an increase of 19%, offset
by a gross loss of 16% related to the precast operations of PPI. The precast
operations gross loss was the result of an increase in fixed production costs,
as a percentage of revenue, and field erection and finishing cost overruns.
8
<PAGE>
General and Administrative. General and administrative expenses increased
from $1,218,312 for interim 1997 to $1,653,005 for interim 1998. The increase
results, in part, from costs associated with expansion into the white paving
market, amounting to approximately $110,000, $286,000 in corporate labor and
approximately $43,000 related to investor relations.
Interest Income and Expense. Interest income for interim 1998 decreased to
$116,982 from $169,438 for interim 1997 due to a decrease in cash reserves
resulting primarily from the expansion in the production and manufacturing of
construction materials and the purchase of equipment. Interest expense
decreased for interim 1998 to $141,484 from $152,192 for interim 1997 due to a
fourth quarter $1,000,000 reduction in related party debt.
Net Income After Income Taxes. Net income after income taxes was $264,810
for interim 1998 as compared to $132,728 for interim 1997. The increase, offset
somewhat by increased general and administrative expenses discussed above,
resulted from higher interim 1998 gross profit margins.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary need for capital has been to finance growth in its
core business as a heavy construction contractor and its expansion into the
other construction and construction related businesses heretofore discussed.
Growth has resulted in the need for additional capital to finance increased
receivables, retentions and capital expenditures, and to address fluctuations in
the work-in-process billing cycle.
The following table sets forth for the three months ended March 31, 1998
and 1997, certain items from the condensed consolidated statements of cash
flows.
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1998 1997
---------- -----------
<S> <C> <C>
Cash Provided by Operating Activities.. $ 464,361 $ 2,383,062
Cash Used in Investing Activities...... (502,707) (1,152,440)
Cash Used in Financing Activities...... (419,163) (138,702)
</TABLE>
Although the Company may experience increased profitability as operations
increase, cash may be reduced to finance receivables and for customer cash
retention required under contracts subject to completion. Management
continually monitors the Company's cash requirements to maintain adequate cash
reserves, and the Company believes that its cash balances were and, together
with the operating lines of credit described below, are sufficient.
Cash provided by operating activities during interim 1998 amounted to
$464,361, primarily the result of net income of $265,000, depreciation and
amortization of $470,000, net billings in excess of costs of $577,000 and a net
increase in accounts payable and accrued liabilities of $613,000, offset by
increase in accounts receivable of $1,229,000 and income taxes paid of $302,000.
Cash provided by operating activities during interim 1997 was $2,383,000,
resulting primarily from a decrease in accounts receivable of $6,692,000,
depreciation and amortization of $254,000 and net income of $133,00, offset by a
net decrease in accounts payable and accrued liabilities of $4,292,000 and an
increase in prepaid expenses and other of $378,000.
Cash used in investing activities during interim 1998 included the purchase
of property and equipment of $630,000, an increase in restricted cash of
$200,000, offset by the collection of a related party note receivable of
$258,000 and $69,000 proceeds from the sale of property and equipment.
9
<PAGE>
Cash used in investing activities during interim 1997 included the purchase
of property and equipment of $1,440,000, offset by a decrease in restricted cash
of $259,000.
Cash used in financing activities during interim 1998 and 1997 included the
repayment of notes payable and capital lease obligations in the amounts of
$419,000 and $139,000, respectively.
The Company currently has available from a commercial bank a $2,000,000
operating 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% ("lines of credit"). At March 31, 1998,
nothing had been drawn on either of the lines of credit. Under the lines of
credit, the Company is required to maintain certain levels of working capital,
to promptly pay all its obligations and is precluded from conveying, selling or
leasing all or substantially all of its assets. At March 31, 1998, the Company
was in full compliance with all such covenants and there are no material
covenants or restrictions in the lines of credit which the Company believes
would impair its operations. The lines of credit expire September 15, 1998.
The Company is currently leasing approximately 40 ready-mix trucks with
estimated annual lease payments of $800,000. The Company anticipates that a
substantial portion of the costs associated with a planned second ready-mix
plant and related equipment will be financed through bank financing and
operating leases.
Management believes that the Company's cash reserves, together with its
lines of credit and its capacity to enter into other financing arrangements 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.
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, 1998.
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 ____________________________________
Gary W. Burnell
Chief Financial Officer
By ____________________________________
Julie L. Bergo
Principal Accounting Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,315,213
<SECURITIES> 0
<RECEIVABLES> 32,706,392
<ALLOWANCES> 6,249
<INVENTORY> 0
<CURRENT-ASSETS> 38,254,021
<PP&E> 11,069,532
<DEPRECIATION> 446,460
<TOTAL-ASSETS> 50,988,247
<CURRENT-LIABILITIES> 31,717,082
<BONDS> 7,435,819
0
0
<COMMON> 3,601
<OTHER-SE> 13,179,593
<TOTAL-LIABILITY-AND-EQUITY> 50,988,247
<SALES> 39,510,832
<TOTAL-REVENUES> 39,510,832
<CGS> 37,423,427
<TOTAL-COSTS> 37,423,427
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 141,484
<INCOME-PRETAX> 440,810
<INCOME-TAX> 176,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 264,810
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
