UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001 Commission File No 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, Arizona 85040
(602) 437-5400
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 and 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 each of the registrant's classes of common stock
as of April 30, 2001:
Common Stock, $.001 par value
3,559,938 shares
MEADOW VALLEY CORPORATION
INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2001
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations (Unaudited) - Three Months Ended March 31, 2001 and March 31, 2000.. 3
Condensed Consolidated Balance Sheets - As of March 31, 2001 (Unaudited) and December 31, 2000...................... 4
Condensed Consolidated Statements of Cash Flows (Unaudited)- Three Months Ended March 31, 2001 and March 31, 2000... 5
Notes to Condensed Consolidated Financial Statements................................................................ 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 10
Item 3. Quantitative and Qualitatitve Disclosure About Market Risk.................................................. 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................................................... 13
Item 6. Exhibits and Reports on Form 8-K............................................................................ 14
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
-------------------------------------
2001 2000
----------- -----------
Revenue $35,353,537 $38,589,472
Cost of revenue 35,162,933 36,804,642
----------- -----------
Gross profit 190,604 1,784,830
General and administrative expenses 1,738,681 1,574,544
----------- -----------
Income (loss) from operations (1,548,077) 210,286
----------- -----------
Other income (expense):
Interest income 62,571 166,117
Interest expense (80,544) (45,534)
Other income (expense) (61,726) 47,175
----------- -----------
(79,699) 167,758
----------- -----------
Income (loss) before income taxes (1,627,776) 378,044
Income tax benefit (expense) 610,417 (150,880)
----------- -----------
Net income (loss) $(1,017,359) $ 227,164
=========== ===========
Basic net income (loss) per common share $ (0.29) $ 0.06
=========== ===========
Diluted net income (loss) per common share $ (0.29) $ 0.06
=========== ===========
Basic weighted average common shares outstanding 3,559,938 3,518,018
=========== ===========
Diluted weighted average common shares outstanding 3,559,938 3,518,018
=========== ===========
3
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2001 2000 *
----------- -----------
Assets: (Unaudited)
Current Assets:
Cash and cash equivalents $ 279,300 $ 1,822,598
Restricted cash 1,783,359 1,783,005
Accounts receivable, net 17,818,030 14,297,564
Prepaid expenses and other 682,647 749,708
Inventory 5,263,899 5,242,148
Income tax receivable 1,384,417 774,000
Costs and estimated earnings in excess of billings on uncompleted contracts 11,464,208 9,828,009
----------- -----------
Total Current Assets 38,675,860 34,497,032
Property and equipment, net 17,624,325 18,111,506
Deferred tax asset 873,441 873,441
Refundable deposits 144,834 176,565
Goodwill, net 1,480,725 1,500,733
Mineral rights 212,648 226,753
----------- -----------
Total Assets $59,011,833 $55,386,030
=========== ===========
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable $20,403,024 $17,606,113
Accrued liabilities 2,402,074 2,289,698
Notes payable 1,776,289 1,604,399
Obligations under capital leases 1,012,251 1,041,921
Billings in excess of costs and estimated earnings on uncompleted contracts 6,355,268 6,054,814
----------- -----------
Total Current Liabilities 31,948,906 28,596,945
Deferred tax liability 2,272,700 2,272,700
Notes payable, less current portion 9,210,013 7,674,608
Obligations under capital leases, less current portion 3,359,336 3,603,540
----------- -----------
Total Liabilities 46,790,955 42,147,793
----------- -----------
Stockholders' Equity:
Preferred stock - $.001 par value; 1,000,000 shares authorized, none
issued and outstanding 0 0
Common stock - $.001 par value; 15,000,000 shares authorized,
3,559,938 and 3,559,938 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 2,072,855 3,090,214
----------- -----------
Total Stockholders' Equity 12,220,878 13,238,237
----------- -----------
Total Liabilities and Stockholders' Equity $59,011,833 $55,386,030
=========== ===========
*Derived from audited financial statements
4
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
---------------------------------------
Increase (Decrease) in Cash and Cash Equivalents: 2001 2000
-------------- --------------
Cash flows from operating activities:
Cash received from customers $ 30,432,046 $ 38,760,868
Cash paid to suppliers and employees (33,275,029) (41,283,614)
Interest received 62,571 154,132
Interest paid (80,544) (45,534)
Income taxes paid 0 (200,335)
-------------- --------------
Net cash used in operating activities (2,860,956) (2,614,483)
-------------- --------------
Cash flows from investing activities:
Increase in restricted cash (354) (206,759)
Proceeds from sale of property and equipment 65,634 136,098
Purchase of property and equipment (112,966) (701,375)
-------------- --------------
Net cash used in investing activities (47,686) (772,036)
-------------- --------------
Cash flows from financing activities:
Proceeds received from notes payable 2,004,126 0
Repayment of notes payable (364,909) (344,961)
Repayment of capital lease obligations (273,873) (316,999)
-------------- --------------
Net cash provided by (used in) financing activities 1,365,344 (661,960)
-------------- --------------
Net decrease in cash and cash equivalents (1,543,298) (4,048,479)
Cash and cash equivalents at beginning of period 1,822,598 6,177,489
-------------- --------------
Cash and cash equivalents at end of period $ 279,300 $ 2,129,010
============== ==============
5
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Three Months Ended
March 31,
---------------------------------
2001 2000
------------ ------------
Increase (Decrease) in Cash and Cash Equivalents (Continued):
Reconciliation of Net Income (Loss) to Net Cash Used in Operating Activities:
Net Income (Loss) $ (1,017,359) $ 227,164
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization 640,257 590,561
Gain on sale of property and equipment (3,554) (66,943)
Changes in Operating Assets and Liabilities:
Accounts receivable, net (3,520,466) (135,899)
Prepaid expenses and other 67,061 182,645
Inventory (21,751) (798,455)
Income tax receivable (610,417) (49,455)
Costs and estimated earnings in excess of billings on uncompleted contracts (1,636,199) (827,014)
Refundable deposits 31,731 (225,272)
Accounts payable 2,796,911 (1,779,921)
Accrued liabilities 112,376 (873,986)
Billings in excess of costs and estimated earnings on uncompleted contracts 300,454 1,142,092
------------ ------------
Net cash used in operating activities $ (2,860,956) $ (2,614,483)
============ ============
6
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. ("MVCI") and Ready Mix, Inc. ("RMI"). MVCI 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 manufactures and distributes ready
mix concrete 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 as permitted by SEC rules and
regulations. 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 ended March 31, 2001
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. During the three months ended March 31,
2001, revenue from anticipated claim proceeds increased by $300,000. The
estimated total claims that have been filed or will be filed were approximately
$37,909,196 at March 31, 2001. The Company's portion of the total claims
amount, excluding claims filed by other prime contractors or on behalf of the
Company's subcontractors, total approximately $20,536,637.
7
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Notes Payable:
Summary of first quarter addition to notes payable and its balance at
March 31, 2001:
Note payable, interest rate at 8.84%, with monthly payments
of $1,690, due 2/13/05, collateralized by equipment $ 66,889
Less: current portion (14,961)
--------
$ 51,928
========
Following are maturities of the above long-term debt for each of the next
5 years:
2002 $ 14,961
2003 16,339
2004 17,843
Subsequent to 2004 17,746
--------
$ 66,889
========
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 up to
$7,000,000 at Chase Manhattan Bank's prime, plus .25% through December 31, 2001
at which time the line of credit converts to a term agreement requiring monthly
principal and interest payments through December 31, 2005. The line of credit
is collateralized by all of MVCI's assets and guaranteed by the Company. Under
the terms of the line of credit, the Company is required to maintain certain
levels of tangible net worth. As of March 31, 2001, the company was in
compliance with all such covenants and had withdrawn $5,041,975 from the line of
credit. As of May 14, 2001, the Company had withdrawn an additional $1,200,000
from the line of credit.
6. Statement of Cash Flows:
Non-Cash Investing and Financing Activities:
The Company recognized investing and financing activities that affected
assets, liabilities, and equity, but did not result in cash receipts or
payments. These non-cash activities are as follows:
During the three months ended March 31, 2001, the Company financed the
purchase of property, plant and equipment in the amount of $68,077.
7. Subsequent Events:
In May 2001, the Company had withdrawn an additional $1,200,000 from the
line of credit.
8
MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Segment Information:
The Company manages and operates two segments, construction services and
construction materials. The construction services segment provides construction
services to a broad range of public and some private customers primarily in the
western states of Arizona, Nevada, Utah and New Mexico. Through this segment,
the Company performs heavy civil construction such as the construction of
bridges and overpasses, channels, roadways, highways and airport runways. The
construction materials segment manufactures and distributes ready mix concrete
and sand and gravel products in the Las Vegas, NV and Phoenix, AZ markets.
Materials customers include concrete subcontractors, prime contractors,
homebuilders, commercial and industrial property developers, pool builders and
homeowners. Construction materials operates out of two locations in the Las
Vegas, NV vicinity, one location in the Moapa, NV vicinity and two locations in
the Phoenix, AZ vicinity.
Three Months Ended March 31,
--------------------------------------------------------
(dollars in thousands) 2001 2000
------------------------ -------------------------
Construction Construction
Services Materials Services Materials
-------- --------- -------- ---------
Gross revenue $ 29,022 $ 6,829 $ 34,720 $ 4,479
Intercompany revenue - 498 - 610
Cost of revenue 28,875 6,786 33,460 3,955
Interest income 56 6 159 7
Interest expense 45 36 45 -
Depreciation and amortization 443 197 446 145
Income (loss) before taxes (1,172) (456) 212 166
Income tax benefit (expense) 440 171 (85) (66)
Net income (loss) (732) (285) 127 100
Total assets 43,590 15,422 46,040 10,439
There are no differences in accounting principals between the segments.
All centrally incurred costs are allocated to the construction services segment.
Intercompany revenue is eliminated at cost to arrive at consolidated revenue and
cost of revenue.
9
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 $84.0 million at March 31, 2001, compared
to approximately $98.0 million at March 31, 2000. At March 31, 2001, the
Company's backlog included approximately $74 million of work that is scheduled
for completion during 2001. Accordingly, revenue in the future will be
significantly reduced if the Company is unable to obtain substantial new
projects in 2001. During the three months ended March 31, 2001, the Company
obtained new projects totaling $12.7 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 and evidence provides a
legal basis for the claim. At March 31, 2001, claim revenue in the amount of
$6.1 million has been recorded while claim costs incurred by both MVCI and its
subcontractors and for which claims have been or will be filed exceed $37.9
million. Of the $37.9 million in claims, approximately $17.4 million represents
costs incurred by MVCI subcontractors for which claims are filed by MVCI on
their behalf leaving the balance of $20.5 million as MVCI costs. The Company
must obtain at lease $6.1 million in proceeds from its $20.5 million portion of
the total claims or there would be a reduction in earnings.
Results of Operations
The following table sets forth, for the three months ended March 31, 2001
and 2000, certain items derived from the Company's Condensed Consolidated
Statements of Operations expressed as a percentage of revenue.
Three Months Ended
March 31,
----------------------
2001 2000
------ ------
Revenue 100.0% 100.0%
Gross profit 0.5% 4.6%
General and administrative expenses 4.9% 4.0%
Interest income 0.2% 0.4%
Interest expense -0.2% -0.1%
Other income (expense) -0.2% 0.1%
Income (loss) before income taxes -4.6% 1.0%
Income tax benefit (expense) 1.7% -0.4%
Net income (loss) -2.9% 0.6%
10
Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000
Revenue and backlog. Revenue for the three months ended March 31,2001
("interim 2001") was $35.4 million compared to $38.6 million for the three
months ended March 31, 2000 ("interim 2000"). The decrease in revenue was the
result of a $5.6 million decrease in contract revenue offset by a $2.4 million
increase in revenue generated from construction materials production and
manufacturing sold to non-affiliates. Backlog decreased 14% to approximately
$84.0 million at March 31, 2001 from approximately $98.0 million at March 31,
2000. 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 4.6% for interim 2000 to .5% for interim 2001. The
decrease in MVCI's gross profit margin was the result of costs related to claims
and cost overruns on certain projects offset, in part, by increased profit
recognition related to several projects nearing completion at March 31, 2001 and
by recording, in advance of receipt, conservative estimates of revenue from
claims. 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
increased to $1.7 million for interim 2001 from $1.6 million for 2000. The
increase resulted primarily from a $.2 million increase in general and
administrative expenses attributable to expanding construction material
operations offset, in part, by a $.09 million reduction of general and
administrative expenses related to various employee incentive plans.
Interest Income and Expense. Interest income for interim 2001 decreased
to $.06 million from $.2 million for 2000 resulting primarily from a decrease in
invested cash reserves. Interest expense increased for 2001 to $.08 million
from $.04 million for 2000, due primarily to the Company borrowing on the line
of credit.
Net Income (loss) After Income Taxes. Net income (loss) after income
taxes was $(1.0) million in interim 2001 as compared to $.2 million for interim
2000.
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 previously discussed.
Historically, the Company's primary source of cash has been from operations.
The Company's expansion into construction materials has required capital to
finance expanded receivables, increased inventories and capital expenditures as
well as to address fluctuations in the work-in-progress billing cycle.
The following table sets forth for the three months ended March 31, 2001
and 2000, certain items from the condensed consolidated statements of cash
flows.
Three Months Ended
March 31,
----------------------------
2001 2000
------------ ------------
Cash Flows Used in Operating Activities $ (2,860,956) $ (2,614,483)
Cash Flows Used in Investing Activities (47,686) (772,036)
Cash Flows Provided by (Used in) Financing Activities 1,365,344 (661,960)
Although the Company may experience increased profitability as the Company
expands its operations, particularly its aggregate, ready mix concrete and
asphalt production, cash may be used to finance receivables, build inventories
and for customer cash retention required under contracts subject to completion.
It is not unusual for cash flows from construction projects nearing the final
stages of
11
completion to have negative cash flows. The recent completion of several large
projects combined with claim-related costs expended on projects and the start-up
costs of the business expansion have resulted in a significant decline in the
Company's cash reserves. Accordingly, during the year ended December 31, 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, 2001. The line of credit is
collateralized by all of MVCI's assets. Under the line of credit, the Company is
required to maintain a certain level of tangible net worth. At March 31, 2001,
the Company is in compliance with all covenants under the line of credit. The
line of credit expires December 31, 2001 at which time the line of credit
converts to a term agreement requiring monthly principal and interest payments
through December 31, 2005. The Company believes, but cannot assure, that the
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. As of March 31, 2001, the Company had withdrawn $5,041,975 from
the line of credit. As of May 14, 2001, the Company had withdrawn an additional
$1,200,000 from the line of credit.
Cash used in operating activities during interim 2001 amounted to $2.9
million, primarily the result of a increase in accounts receivable of $3.5
million, an increase in income tax receivable of $.6 million, an decrease in net
billings in excess of costs of $1.3 million, a net loss of $1.0 million, offset,
in part, an increase in accounts payable of $2.8 million and depreciation and
amortization of $.6 million.
Cash used in operating activities during interim 2000 amounted to $2.6
million, primarily the result of a decrease in accounts payable of $1.8 million,
a decrease in accrued liabilities of $.9 million, an increase in inventory of
$.8 million, an increase in refundable deposits of $.2 million and an increase
in accounts receivable of $.1 million, offset, in part, by net income of $.2
million, depreciation and amortization of $.6 million, a decrease in net
billings in excess of costs of $.3 million and a decrease in prepaid expenses
and other of $.2 million.
Cash used in investing activities during interim 2001 amounted to $.05
million related primarily to the purchase of property and equipment of $.1
million, offset by proceeds from the sale of property and equipment in the
amount of $.06 million.
Cash used in investing activities during interim 2000 amounted to $.8
million related primarily to the purchase of property and equipment of $.7
million and an increase in restricted cash of $.2 million, offset by proceeds
from the sale of property and equipment in the amount of $.1 million.
Cash provided by financing activities during interim 2001 amounted to $1.4
million related primarily to the proceeds received from the line of credit of
$2.0 million, offset by the repayment of notes payable and capital lease
obligations of $.6 million.
Cash used in financing activities during interim 2000 amounted to $.7
million related to the repayment of notes payable and capital lease obligations.
12
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Market risk generally represents the risk that losses may occur in the
values of financial instruments as a result of movements in interest rates,
foreign currency exchange rates and commodity prices. The Company does not have
foreign currency exchange rate and commodity price market risk.
Interest Rate Risk - From time to time the Company temporarily invests its
cash and restricted cash in interest-bearing securities issued by high-quality
issuers. The Company's management monitors risk exposure to monies invested in
securities of any one financial institution. Due to the short time the
investments are outstanding and their general liquidity, these instruments are
classified as cash equivalents in the consolidated balance sheet and do not
represent a material interest rate risk to the Company. The Company's primary
market risk to exposure for changes in interest rates relates to the Company's
long-term debt obligations. The Company manages its exposure to changing
interest rates principally through the use of a combination of fixed and
floating rate debt.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a party to legal proceedings in the ordinary course of its
business. With the exception of those matters detailed below, the Company
believes that the nature of these proceedings (which generally relate to
disputes between the Company and its subcontractors, material suppliers or
customers regarding payment for work performed or materials supplied) are
typical for a construction firm of its size and scope, and no other pending
proceedings are material to its financial condition.
The following proceedings represent matters that may become material and
have already been or may soon be referred to legal counsel for further action:
Requests for Equitable Adjustment to Construction Contracts. The Company has or
will make claims as described below on the following contracts:
(1) Five contracts with the New Mexico State Highway and Transportation
Department - The approximate value of claims on these projects is
$19,050,000 of which approximately $12,550,000 is on behalf of MVCI and
the balance of $6,500,000 is on behalf of the prime contractor or
subcontractors. The primary issues are changed conditions, plan errors
and omissions, contract modifications and associated delay costs. In
addition, the projects were not completed within the adjusted contract
time because of the events giving rise to the claims. The prosecution of
the claims will include the appropriate extensions of contract time to
offset any potential liquidated damages.
(2) Village of Ruidoso Downs - The approximate value of claims for
additional compensation on this project is $477,000 of which
approximately $277,000 is on behalf of subcontractors. This claim amount
could increase by approximately $400,000 if the Company is directed to
place an additional lift of asphalt on the existing runway. The primary
issues concern quality control and acceptance of materials furnished by
MVCI and related penalties, errors in sampling and testing, wrongful
withholding of payment and associated delay costs and finance charges.
(3) Clark County, Nevada - The approximate total value of claims on this
project is $18,382,196 of which approximately $10,595,559 is on behalf
of subcontractors. The primary issues are changed conditions, plan
errors and omissions, contract modifications and associated delay costs.
The above Claims combined total approximately $37,909,196. Of that total,
MVCI's portion of the claims total approximately $20,536,637 and the balance of
approximately $17,372,559 pertains to prime contractor or subcontractors'
claims. Relative to the aforementioned claims, the Company has
13
recorded approximately $6,120,904 in claim revenue to offset portions of the
costs incurred to-date on the claims. Although the Company believes this
represents a reasonably conservative posture, any claims proceeds ultimately
awarded to the Company less than $6,120,904 will result in a reduction of
income. Conversely, any amount of claims proceeds in excess of $6,120,904 will
be an increase in income.
Lawsuits Filed Against Meadow Valley Contractors, Inc.
(1) Innovative Construction Services, Inc. ("ICS"), District Court, Clark
County, NV - ICS was a subcontractor to MVCI on several projects. ICS
failed to make payments of payroll, pension fund contributions and other
taxes for which the Internal Revenue Service garnished any future
payments due ICS on MVCI projects. As a result, ICS failed to supply
labor to perform its work and defaulted on its subcontracts. MVCI
terminated the ICS subcontracts and performed the work with MVCI
personnel. ICS alleges it was wrongfully terminated and is asserting
numerous claims for damages. ICS claims against MVCI total approximately
$15,000,000. The Company does not believe ICS' claims have merit and
intends to vigorously defend against these claims and will eventually
seek to recover the damages ICS has caused the Company through its
failure to perform.
(2) AnA Enterprises, LLC ("AnA"), District Court, Clark County, NV - AnA
supplied equipment to MVCI on a project under terms of a variety of
agreements. AnA is suing MVCI for non-payment. MVCI has counter-sued for
cost overruns deemed to be the responsibility of AnA. AnA's suit against
MVCI is for approximately $3,000,000. MVCI's countersuit against AnA is
for approximately $2,000,000. The Company does not believe AnA's claims
have merit and intends to vigorously defend against these claims.
(3) The Company is defending a claimed preference in connection with a
payment made to it by an insurance company in the approximate amount of
$100,000. The Company believes that the payment is not a preference, and
is vigorously defending the action.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.148 Installment Sale Contract with Caterpillar Financial Services
Corporation
(b) Reports on Form 8-K
The Company filed a Form 8-K during the three months ended March 31,
2001.
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SIGNATURE
Pursuant to the requirements of the Securities and 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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