<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 June 30, 2000
--------------------------------
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 July 29, 2000
----- ----------------------------
Common Stock, $.001 par value 3,559,938 shares
<PAGE>
MEADOW VALLEY CORPORATION
INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
Number
------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of Operations (Unaudited) -
Six Months Ended June 30, 2000 and June 30, 1999 3
Condensed Consolidated Statements of Operations (Unaudited) -
Three Months Ended June 30, 2000 and June 30, 1999 4
Condensed Consolidated Balance Sheets -
As of June 30, 2000 (Unaudited) and December 31, 1999 5
Condensed Consolidated Statements of Cash Flows (Unaudited)-
Six Months Ended June 30, 2000 and June 30, 1999 6-7
Notes to Condensed Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11-14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
2
<PAGE>
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------------
2000 1999
------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenue....................................................... $ 83,968,329 $ 112,475,541
Cost of revenue............................................... 80,769,927 107,060,061
------------ -------------
Gross profit.................................................. 3,198,402 5,415,480
General and administrative expenses........................... 3,049,453 3,573,061
------------ -------------
Income from operations........................................ 148,949 1,842,419
------------ -------------
Other income (expense):
Interest income............................................... 299,930 275,194
Interest expense.............................................. (79,328) (107,019)
Other income.................................................. 34,669 36,658
------------ -------------
255,271 204,833
------------ -------------
Income before income taxes.................................... 404,220 2,047,252
Income taxes.................................................. 161,690 818,901
------------ -------------
Net income.................................................... $ 242,530 $ 1,228,351
============ =============
Basic net income per common share............................. $ .07 $ .35
============ =============
Diluted net income per common share........................... $ .07 $ .34
============ =============
Basic weighted average common shares outstanding.............. 3,538,978 3,536,057
============ =============
Diluted weighted average common shares outstanding............ 3,538,978 3,569,301
============ =============
</TABLE>
3
<PAGE>
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------------------------------
2000 1999
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenue....................................................... $ 45,378,857 $ 54,201,337
Cost of revenue............................................... 43,965,285 51,529,044
------------ ------------
Gross profit.................................................. 1,413,572 2,672,293
General and administrative expenses........................... 1,474,909 1,617,492
------------ ------------
Income (Loss) from operations................................. (61,337) 1,054,801
------------ ------------
Other income (expense):
Interest income............................................... 133,813 136,448
Interest expense.............................................. (33,794) (54,660)
Other expense................................................. (12,506) (9,026)
------------ ------------
87,513 72,762
------------ ------------
Income before income taxes.................................... 26,176 1,127,563
Income taxes.................................................. 10,810 451,024
------------ ------------
Net income.................................................... $ 15,366 $ 676,539
============ ============
Basic net income per common share............................. $ .01 $ .20
============ ============
Diluted net income per common share........................... $ .01 $ .19
============ ============
Basic weighted average common shares outstanding.............. 3,559,938 3,501,250
============ ============
Diluted weighted average common shares outstanding............ 3,559,938 3,509,272
============ ============
</TABLE>
4
<PAGE>
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999 *
------------ ------------
(Unaudited)
<S> <C> <C>
Assets:
Current Assets:
Cash and cash equivalents................................................ $ 2,698,977 $ 6,177,489
Restricted cash.......................................................... 2,496,583 2,143,507
Accounts receivable, net................................................. 19,717,627 19,256,882
Prepaid expenses and other............................................... 1,254,908 1,193,912
Inventory................................................................ 4,437,971 3,603,517
Costs and estimated earnings in excess of billings on uncompleted
contracts............................................................... 9,591,716 8,858,933
------------ ------------
Total Current Assets........................................... 40,197,782 41,234,240
Property and equipment, net................................................... 15,855,236 15,077,673
Refundable deposits........................................................... 167,980 83,680
Goodwill, net................................................................. 1,540,748 1,580,762
Mineral rights................................................................ 254,963 255,168
Net assets of discontinued operations......................................... - 193,838
------------ ------------
Total Assets .................................................. $ 58,016,709 $ 58,425,361
============ ============
Liabilities and Stockholders' Equity:
Current Liabilities:
Notes payable - other.................................................... $ 1,445,609 $ 1,304,092
Obligations under capital leases......................................... 1,049,081 1,114,722
Accounts payable......................................................... 18,501,828 20,807,792
Accrued liabilities...................................................... 2,945,762 3,387,320
Billings in excess of costs and estimated earnings on uncompleted
Contracts............................................................... 8,952,687 8,453,153
------------ ------------
Total Current Liabilities...................................... 32,894,967 35,067,079
Deferred income taxes......................................................... 1,423,825 1,423,825
Obligations under capital leases.............................................. 3,866,933 4,410,854
Notes payable - other......................................................... 4,775,631 2,710,780
------------ ------------
Total Liabilities.............................................. 42,961,356 43,612,538
------------ ------------
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,
3,559,938 and 3,501,250 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........................................................ 4,907,330 4,664,800
------------ ------------
Total Stockholders' Equity..................................... 15,055,353 14,812,823
------------ ------------
Total Liabilities and Stockholders' Equity..................... $ 58,016,709 $ 58,425,361
============ ============
</TABLE>
*Derived from audited financial statements
5
<PAGE>
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------------
2000 1999
------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents:
Cash flows from operating activities:
Cash received from customers.............................................. $ 83,176,832 $ 109,215,804
Cash paid to suppliers and employees...................................... (86,026,016) (108,337,191)
Interest received......................................................... 330,088 359,098
Interest paid............................................................. (79,328) (133,046)
Income taxes paid......................................................... (291,314) (558,011)
------------- --------------
Net cash provided by (used in) operating activities................... (2,889,738) 546,654
------------- --------------
Cash flows from investing activities:
Increase in restricted cash............................................... (353,076) (988,453)
Collection of note receivable - other..................................... - 461
Proceeds from sale of property and equipment.............................. 212,516 179,554
Increase in net liabilities and reserves of discontinued
operations............................................................... - 240,950
Purchase of property and equipment........................................ (627,311) (1,315,503)
Decrease in net assets of discontinued operations......................... - 425,181
Purchase of treasury stock held for funding employer
retirement plan contributions............................................ - (451,754)
------------- --------------
Net cash used in investing activities................................. (767,871) (1,909,564)
------------- --------------
Cash flows from financing activities:
Repayment of notes payable - other........................................ (718,842) (614,588)
Proceed received from notes payable - other............................... 1,507,500 -
Repayment of note payable - related party................................. - (1,000,000)
Repayment of capital lease obligations.................................... (609,561) (421,065)
------------- --------------
Net cash provided by (used in) financing activities................... 179,097 (2,035,653)
------------- --------------
Net decrease in cash and cash equivalents.................................... (3,478,512) (3,398,563)
Cash and cash equivalents at beginning of period............................. 6,177,489 10,993,025
------------- --------------
Cash and cash equivalents at end of period................................... $ 2,698,977 $ 7,594,462
============= ==============
</TABLE>
6
<PAGE>
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------
2000 1999
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents (Continued):
Reconciliation of Net Income to Net Cash Provided by (Used in)
Operating Activities:
Net income....................................................................... $ 242,530 $ 1,228,351
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization............................................... 1,197,174 1,026,216
Gain on sale of property and equipment...................................... (102,014) (38,740)
Changes in Assets and Liabilities:
Accounts receivable, net.................................................... (490,903) (3,479,463)
Prepaid expenses and other.................................................. 262,466 (908,686)
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................................... (732,783) 375,760
Inventory................................................................... (834,454) -
Refundable deposits......................................................... (84,300) 112,303
Interest payable............................................................ - (26,027)
Accounts payable............................................................ (2,305,964) 2,613,136
Accrued liabilities......................................................... (441,558) (547,037)
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................................... 499,534 (153,953)
Interest receivable......................................................... 30,158 83,904
Income tax receivable....................................................... (129,624) 260,890
----------- -----------
Net cash provided by (used in) operating activities.................... $(2,889,738) $ 546,654
=========== ===========
</TABLE>
7
<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) and Ready Mix, Inc. (RMI). 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. RMI is a producer and retailer of ready-mix concrete
operating in the Las Vegas, NV and Phoenix, AZ metropolitan areas. Formed by the
Company, RMI commenced operations in 1997.
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 Report
on 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 and six months ended June 30, 2000 are not necessarily indicative of
operating results for the entire year.
3. Revenue and Cost Recognition:
Revenues and costs from fixed-price and modified fixed-price construction
contracts are recognized for each contract on the percentage-of-completion
method, measured by the percentage of costs incurred to date to the estimated
total of direct costs. Direct costs include, among other things, direct labor,
field labor, equipment rent, subcontracting, direct materials, and direct
overhead. General and administrative expenses are accounted for as period costs
and are, therefore, not included in the calculation of the estimates to complete
construction contracts in progress. Project losses are provided in the period in
which such losses are determined, without reference to the percentage-of-
completion. As contracts can extend over one or more accounting periods,
revisions in costs and earnings estimated during the course of the work are
reflected during the accounting period in which the facts that required such
revisions become known.
Claims for additional contract revenue are recognized only to the extent
that contract costs relating to the claim have been incurred and evidence
provides a legal basis for the claim. At June 30, 2000, revenue and costs in the
amount of $4,806,636 were recorded related to claims. The estimated total claims
that have been filed or will be filed exceed $20,660,000 at June 30, 2000.
8
<PAGE>
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Notes payable:
Summary of second quarter additions to Notes payable and their
balances at June 30, 2000:
<TABLE>
<S> <C>
Notes payable, interest rates from 0% to 8.11% with monthly
payments of $10,077, due dates ranging from 7/10/02 to 5/11/04,
collateralized by equipment................................................. $ 304,223
Notes payable, variable interest rate at 9.50%, Chase Manhattan
Bank's prime, with monthly payments of $15,552, due dates ranging from
3/18/06 to 06/28/08, collateralized by equipment............................ 1,076,336
Notes payable, variable interest rate at 9.75%, Chase Manhattan Bank's
prime plus .25%, with interest only monthly payments, due 1/31/02,
collateralized by equipment................................................. 1,507,500
------------
2,888,059
Less: current portion (292,397)
------------
$ 2,595,662
============
</TABLE>
Following are maturities of the above long-term debt for each of the next 5
years:
2001................................. $ 292,397
2002................................. 1,805,045
2003................................. 231,983
2004................................. 228,768
2005................................. 186,618
Subsequent to 2005.................. 143,248
-----------
$ 2,888,059
===========
5. Line of Credit:
In July 2000, the Company entered into a revolving loan agreement
("line of credit"). Under the terms of the agreement, the Company may borrow
$7,000,000 at Chase Manhattan Bank's prime, plus .25% through December 31, 2000.
The Company paid off the $1,507,500 note payable with proceeds from the line of
credit.
6. Discontinued Operations:
In June 1998, the Company adopted a formal plan ( the "plan" ) to
discontinue the operations of Prestressed Products Incorporated ("PPI"). The
plan included the completion of approximately $2.8 million of uncompleted
contracts and the disposition of approximately $1.2 million of equipment. The
Company recorded an estimated loss of $1,950,000 (net of income tax benefit of
$1,300,000), related to the disposal of assets for PPI, which included a
provision of $1,350,000 for estimated operating losses during the phase-out
period.
9
<PAGE>
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Discontinued Operations (Continued):
The accompanying consolidated balance sheets as of June 30, 2000 and
December 31, 1999, have been restated to reflect the net liabilities and the
estimated loss as a single amount as follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------- ------------
<S> <C> <C>
Current assets................................................. $ - $ 653,668
Non-current assets............................................. - -
Liabilities.................................................... - (242,113)
--------- ------------
Net assets................................................... - 411,555
Estimated loss on disposition.................................. - (217,717)
--------- ------------
Net assets of discontinued operations.......................... $ - $ 193,838
========= ============
</TABLE>
7. Commitments:
During the quarter ended June 30, 2000, the Company entered into two
operating lease agreements expiring in June 2006. Minimum future rental
payments under the non-cancelable operating leases having remaining terms in
excess of one year as of June 30, 2000 for each of the next five years in
aggregate are:
2001 ......................................... $ 576,236
2002 ......................................... 576,236
2003 ......................................... 576,236
2004 ......................................... 576,236
Subsequent to 2004 ........................... 680,428
-----------
Total minimum lease payments ................. $ 2,985,372
===========
8. Subsequent Events:
During July 2000, the Company entered into a revolving loan agreement
("line of credit"). Under the terms of the agreement, the Company may borrow
$7,000,000 at Chase Manhattan Bank's prime, plus .25% through December 31, 2000.
In July 2000, the Company borrowed approximately $3,000,000 from the line of
credit at 9.75%, Chase Manhattan Bank's prime, plus .25%. The Company used a
portion of the line of credit proceeds to pay off a note payable in the amount
of $1,507,500.
During July 2000, the Company financed the purchase of equipment in
the amount of $133,775. The note payable obligation has an interest rate of
6.49%, with monthly principal payments of $5,068, and is due July 5, 2002.
10
<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.
The Company's backlog (anticipated revenue from the uncompleted portions of
awarded projects) was approximately $88.4 million at June 30, 2000, compared to
approximately $134.0 million at June 30, 1999. At June 30, 2000, the Company's
backlog included approximately $61 million of work that is scheduled for
completion during 2000. Accordingly, revenue in 2000 and 2001 will be
significantly reduced if the Company is unable to obtain substantial new
projects during 2000. During the second quarter ended June 30, 2000, the
Company obtained new projects totaling $24.9 million.
Revenue on uncompleted fixed price contracts is recorded under the
percentage-of-completion method of accounting. The Company begins to recognize
revenue on its contracts when it first accrues direct costs. Contracts often
involve work periods in excess of one year and revisions in cost and profit
estimates during construction are reflected in the accounting period in which
the facts that require the revision become known. Losses on contracts, if any,
are provided in total when determined, regardless of the percent complete.
Claims for additional contract revenue are recognized only to the extent that
contract costs relating to the claim have been incurred or evidence provides a
legal basis for the claim. At June 30, 2000, revenue in the amount of $4.8
million were recorded related to claims. The estimated total claims that have
been filed or will be filed exceed $20.6 million. If the Company is not
successful in obtaining any portion of the $4.8 million in claim settlement
revenue, there would be a reduction in earnings.
Results of Operations
The following table sets forth, for the six and the three months ended
June 30, 2000 and 1999, certain items derived from the Company's Condensed
Consolidated Statements of Operations expressed as a percentage of revenue.
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
---------------------------- ----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue............................................ 100.0 % 100.0 % 100.0 % 100.0 %
Gross Profit....................................... 3.8 4.8 3.1 4.9
General and administrative expense................. 3.6 3.1 3.3 3.0
Interest income.................................... 0.4 0.2 0.3 0.2
Interest expense................................... 0.1 0.1 0.1 0.1
Other income....................................... 0.0 0.0 0.0 0.0
Income before income taxes......................... 0.5 1.8 0.1 2.0
Income taxes....................................... 0.2 0.7 0.0 0.8
</TABLE>
11
<PAGE>
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Revenue and Backlog. Revenue for the six months ended June 30, 2000
("interim 2000") was $83.9 million compared to $112.5 million for the six months
ended June 30, 1999 ("interim 1999"). The decrease in revenue was the result of
a $28.3 million decrease in contract revenue and a $.3 million decrease in
revenue generated from construction materials production and manufacturing sold
to non-affiliates. Backlog decreased 34% to approximately $88.4 million at June
30, 2000 from approximately $134 million at June 30, 1999. Revenue may be
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
decreased from 4.8% for interim 1999 to 3.8% for interim 2000. The decrease in
MVC's gross profit margin was the result of cost overruns on certain projects
offset, in part, by increased profit recognition related to several projects
nearing completion at June 30, 2000. 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.
General and Administrative Expenses. General and administrative expenses
decreased to 3,049,453 for interim 2000 from $3,573,061 for interim 1999. The
decrease resulted primarily from reduction of costs related to various employee
incentive plans amounting to $538,124.
Interest Income and Expense. Interest income for interim 2000 increased to
$299,930 from $275,194 in interim 1999 due to an increase in interest bearing
retention receivables. Interest expense decreased in interim 2000 to $79,328
from $107,019, due primarily to a $1,000,000 reduction in related party debt at
the beginning of interim 1999.
Net Income After Income Taxes. Net income after income taxes was $242,530
in interim 2000 as compared to $1,228,351 for interim 1999. The decrease
resulted from lower revenues along with decreased gross profit margins, offset,
in part, by higher interest income, lower interest expense and a decrease in
general and administrative expenses.
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
Revenue and Backlog. Revenue for the three months ended June 30, 2000
("interim 2000") was $45.4 million compared to $54.2 million for the three
months ended June 30, 1999 ("interim 1999"). The decrease in revenue was the
result of a $8.8 million decrease in contract revenue. Backlog decreased 34% to
approximately $88.4 million at June 30, 2000 from approximately $134 million at
June 30, 1999. Revenue may be 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
decreased from 4.9% for interim 1999 to 3.1% for interim 2000. The decrease in
MVC's gross profit margin was the result of cost overruns on certain projects
offset, in part, by increased profit recognition related to several projects
nearing completion at June 30, 2000. 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.
General and Administrative Expenses. General and administrative expenses
decreased to $1,474,909 for interim 2000 from $1,617,492 for interim 1999. The
decrease resulted primarily from costs related to various employee incentive
plans amounting to $154,453.
Interest Income and Expense. Interest income for interim 2000 decreased to
$133,813 from $136,448 in interim 1999 due to a decrease in interest bearing
retention receivables. Interest expense decreased in interim 2000 to $33,794
from $54,660, due primarily to a $1,000,000 reduction in related party debt at
the beginning of interim 1999.
Net Income After Income Taxes. Net income after income taxes was $15,366
in interim 2000 as compared to $676,539 for interim 1999. The decrease resulted
from lower revenues along with decreased gross profit margins, offset, in part,
by lower interest expense and a decrease in general and administrative expenses.
12
<PAGE>
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 to address
fluctuations in the work-in-process billing cycle.
The following table sets forth for the six months ended June 30, 2000 and
1999, certain items from the condensed consolidated statements of cash flows.
<TABLE>
<CAPTION>
Six months ended
June 30,
------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows Provided by (Used in) Operating Activities ...... $(2,889,738) $ 546,654
Cash flows Used in Investing Activities..................... (767,871) (1,909,564)
Cash flows Provided by (Used in) Financing Activities ...... 179,097 (2,035,653)
</TABLE>
As the Company expands its operations, particularly its aggregate, ready
mix concrete and asphalt production, cash may be reduced to finance receivables,
build inventories and for customer cash retention required under contracts
subject to completion. Management continually monitors the Company's cash
requirements in an effort to maintain adequate cash reserves. The Company is
currently experiencing a decline in its backlog and several larger projects are
nearing final stages of completion, resulting in a significant decline in the
Company's cash reserves. It is not unusual for cash flows from construction
projects nearing the final stages of completion to have negative cash flows.
Accordingly, in July 2000 the Company secured a $7.0 million operating line of
credit. The Company believes the $7.0 million operating line of credit,
together with the Company's historical ability to acquire new work may be
sufficient to meet the Company's cash requirements for the next twelve months.
Cash used in operating activities during interim 2000 amounted to $2.9
million, primarily the result of a decrease in accounts payable of $2.3 million,
a decrease in accrued liabilities of $.4 million, an increase in inventory of
$.8 million, an increase in accounts receivable,net of $.5 million, and an
increase in net costs in excess of billings of $.2 million offset, in part, by
net income of $.2 million, depreciation and amortization of $1.2 million and a
decrease in prepaid expenses and other of $.2 million.
Cash used in operating activities during interim 1999 amounted to $.5
million, primarily the result of an increase in accounts payable of $2.6
million, net income of $1.2 million, depreciation and amortization of $1.0
million and a decrease in income tax receivable of $.3 million, offset, in part,
by an increase in accounts receivable of $3.5 million, and increase in prepaid
expenses and other of $.9 million and a decrease in accrued liabilities of .5
million.
Cash used in investing activities during interim 2000 amounted to $.8
million related primarily to the purchase of property and equipment of $.6
million and an increase in restricted cash of $.4 million, offset by proceeds
from the sale of property and equipment in the amount of $.2 million.
Cash used in investing activities during interim 1999 amounted to $2.0
million related primarily to the purchase of property and equipment of $1.3
million, an increase in restricted cash of $1.0 million and the purchase of
treasury stock held for funding employer retirement plan contributions of $.5
million offset, in part, by an increase in net liabilities and reserves of
discontinued operations of $.2 million, a decrease in net assets of discontinued
operations of $.4 million and $.2 million proceeds from the sale of property and
equipment.
Cash provided by financing activities during interim 2000 amounted to $.2
million related primarily to the proceeds received from a note payable of $1.5
million, offset by the repayment of notes payable and capital lease obligations
of $1.3 million.
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Cash used in financing activities during interim 1999 amounted to $2.0
million including $1.0 million repayment of a loan from a related party and
repayments of notes payable and capital lease obligations in the amount of $1.0
million. The aforementioned note payable-related party was due to a principal
shareholder of the Company, the Richard C. Lewis Family Revocable Trust I.
In July 2000, the Company entered into a revolving loan agreement ("line of
credit"). Under the terms of the agreement, the Company may borrow $7,000,000
at Chase Manhattan Bank's prime, plus .25% through December 31, 2000. In July
2000, the Company borrowed approximately $3,000,000 from the line of credit at
9.75%, Chase Manhattan Bank's prime, plus .25%. The Company used a portion of
the line of credit proceeds to pay off a note payable in the amount of
$1,507,500.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
b) Reports on Form 8-K
The Company filed a Form 8-K during the six months ended June 30, 2000.
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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/ Bradley E. Larson
_____________________________________
Bradley E. Larson
President and Chief Executive Officer
By /s/ Nicole R. Smith
_____________________________________
Nicole R. Smith
Principal Accounting Officer
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