UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 0-25428

MEADOW VALLEY CORPORATION

(Exact name of registrant as specified in its charter)

Nevada (State or other jurisdiction of incorporation or organization)		88-0328443 (I.R.S. Employer Identification No.)

4602 E. Thomas Road
Phoenix, Arizona 85018
(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 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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 
12b-2 of the Exchange Act).

Large accelerated filer o;       Accelerated filer o;      Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     Number of shares outstanding of each of the registrant’s classes of common stock as of August 3, 2007:

Common Stock, $.001 par value
5,129,760 shares

 

 

MEADOW VALLEY CORPORATION
INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2007

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - As of June 30, 2007 (Unaudited) and December 31, 2006			2
Condensed Consolidated Statements of Operations (Unaudited) - Six months and three months ended June 30, 2007 and 2006			3
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) - Six months ended June 30, 2007			4
Condensed Consolidated Statements of Cash Flows (Unaudited) - Six months ended June 30, 2007 and 2006			5
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3. Quantitative and Qualitative Disclosures About Market Risk			27
Item 4. Controls and Procedures			28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			28
Item 1A. Risk Factors			28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			28
Item 3. Defaults Upon Senior Securities			28
Item 4. Submission of Matters to a Vote of Security Holders			29
Item 5. Other Information			29
Item 6. Exhibits			29
Exhibit 31.1
Exhibit 31.2
Exhibit 32

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

MEADOW VALLEY CORPORATION AND SUBSIDIARIES

		June 30,				December 31,
		2007				2006
		(Unaudited)
Assets:
Current assets:
Cash and cash equivalents		$	27,670,133			$	29,354,582
Restricted cash			—				605,243
Accounts receivable, net			33,651,974				25,990,763
Prepaid expenses and other			1,668,567				2,820,768
Inventory, net			1,251,055				1,366,534
Costs and estimated earnings in excess of billings on uncompleted contracts			462,015				1,254,860
Note receivable			108,640				106,499
Deferred tax asset			580,474				561,199
Total current assets			65,392,858				62,060,448
Property and equipment, net			36,493,390				35,553,000
Refundable deposits			884,141				1,492,967
Note receivable, less current portion			480,500				535,360
Claims receivable			2,463,880				2,463,880
Total assets		$	105,714,769			$	102,105,655
Liabilities and Stockholders’ Equity:
Current liabilities:
Accounts payable		$	18,985,232			$	13,298,114
Accrued liabilities			5,365,318				7,569,928
Notes payable			4,638,325				4,837,628
Obligations under capital leases			148,428				332,898
Income tax payable			93,414				399,536
Billings in excess of costs and estimated earnings on uncompleted contracts			13,791,995				8,366,754
Total current liabilities			43,022,712				34,804,858
Notes payable, less current portion			13,730,386				13,894,382
Obligations under capital leases, less current portion			7,765				102,100
Deferred tax liability			2,974,857				2,974,857
Total liabilities			59,735,720				51,776,197
Commitments and contingencies
Minority interest in consolidated subsidiary			14,424,956				18,988,244
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, 5,129,760 and 5,098,679 issued and outstanding			5,130				5,099
Additional paid-in capital			20,023,938				21,197,456
Capital adjustments			(799,147	)			(799,147	)
Retained earnings			12,324,172				10,937,806
Total stockholders’ equity			31,554,093				31,341,214
Total liabilities and stockholders’ equity		$	105,714,769			$	102,105,655

The accompanying notes are an integral part of these condensed consolidated financial statements.

MEADOW VALLEY CORPORATION AND SUBSIDIARIES

		Six months ended								Three months ended
		June 30,								June 30,
		2007				2006				2007				2006
Revenue:
Construction services		$	59,061,711			$	49,907,031			$	36,338,017			$	25,288,003
Construction materials			41,814,357				44,090,244				22,103,800				22,959,604
Construction materials testing			423,608				69,262				209,185				69,262
Total revenue			101,299,676				94,066,537				58,651,002				48,316,869
Cost of revenue:
Construction services			54,665,443				45,909,736				33,852,768				23,365,663
Construction materials			37,355,924				38,576,711				19,746,381				20,119,029
Construction materials testing			527,039				65,250				253,552				65,250
Total cost of revenue			92,548,406				84,551,697				53,852,701				43,549,942
Gross profit			8,751,270				9,514,840				4,798,301				4,766,927
General and administrative expenses			6,222,499				5,472,111				3,205,523				2,713,169
Income from operations			2,528,771				4,042,729				1,592,778				2,053,758
Other income (expense):
Interest income			768,163				358,466				398,880				169,210
Interest expense			(146,265	)			(153,733	)			(68,001	)			(78,608	)
Other income			165,850				45,403				64,145				24,665
			787,748				250,136				395,024				115,267
Income before income taxes and minority interest in consolidated subsidiary			3,316,519				4,292,865				1,987,802				2,169,025
Income tax expense			(1,229,677	)			(1,591,138	)			(757,884	)			(806,812	)
Income before minority interest in consolidated subsidiary			2,086,842				2,701,727				1,229,918				1,362,213
Minority interest in consolidated subsidiary			700,476				964,042				373,445				488,486
Net income		$	1,386,366			$	1,737,685			$	856,473			$	873,727
Basic net income per common share		$	0.27			$	0.42			$	0.17			$	0.21
Diluted net income per common share		$	0.26			$	0.39			$	0.16			$	0.19
Basic weighted average common shares outstanding			5,124,545				4,158,088				5,128,793				4,161,732
Diluted weighted average common shares outstanding			5,305,079				4,478,871				5,314,305				4,481,183

The accompanying notes are an integral part of these condensed consolidated financial statements.

MEADOW VALLEY CORPORATION AND SUBSIDIARIES

		Common Stock
		Number of								Additional
		Shares								Paid-in				Capital				Retained
		Outstanding				Amount				Capital				Adjustment				Earnings
Balance at January 1, 2007			5,098,679			$	5,099			$	21,197,456			$	(799,147	)		$	10,937,806
Common stock issued on exercise of options			31,081				31				62,462				—				—
Stock-based compensation expense			—				—				208,404				—				—
Excess tax benefits from share-based payment arrangements			—				—				82,689				—				—
Excess payments from purchase of minority interest common stock			—				—				(1,527,073	)			—				—
Net income for the six months ended June 30, 2007			—				—				—				—				1,386,366
Balance at June 30, 2007			5,129,760			$	5,130			$	20,023,938			$	(799,147	)		$	12,324,172

The accompanying notes are an integral part of these condensed consolidated financial statements.

MEADOW VALLEY CORPORATION AND SUBSIDIARIES

		Six months ended
		June 30,
		2007				2006
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Cash received from customers		$	99,814,922			$	93,700,658
Cash paid to suppliers and employees			(89,610,237	)			(89,570,936	)
Income taxes paid			(1,555,074	)			(1,109,368	)
Interest received			768,163				358,466
Interest paid			(146,265	)			(153,733	)
Net cash provided by operating activities			9,271,509				3,225,087
Cash flows from investing activities:
Decrease (increase) in restricted cash			605,243				(2,031,889	)
Proceeds from sale of property and equipment			238,236				220,159
Purchase of property and equipment			(2,323,612	)			(7,135,300	)
Proceeds from note receivable			52,719				—
Purchase of minority interest common stock			(6,790,838	)			—
Net cash used in investing activities			(8,218,252	)			(8,947,030	)
Cash flows from financing activities:
Proceeds from issuance of common stock			62,493				55,080
Proceeds from notes payable			2,699,929				3,083,540
Repayment of notes payable			(5,304,012	)			(2,895,876	)
Repayment of capital lease obligations			(278,805	)			(269,200	)
Excess tax benefits from share-based payment arrangements			82,689				45,565
Net cash provided by (used in) financing activities			(2,737,706	)			19,109
Net decrease in cash and cash equivalents			(1,684,449	)			(5,702,834	)
Cash and cash equivalents at beginning of period			29,354,582				23,565,317
Cash and cash equivalents at end of period		$	27,670,133			$	17,862,483

The accompanying notes are an integral part of these condensed consolidated financial statements.

MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)

		Six months ended
		June 30,
		2007				2006
Increase (decrease) in cash and cash equivalents (Continued):
Reconciliation of net income to net cash provided by operating activities:
Net income		$	1,386,366			$	1,737,685
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			3,421,035				2,842,041
Gain on sale of property and equipment			(61,681	)			(23,296	)
Stock-based compensation expense			208,404				141,047
Deferred taxes, net			(19,275	)			(17,705	)
Allowance for doubtful accounts			145,798				38,838
Inventory allowance			(64	)			—
Minority interest in consolidated subsidiary			700,476				964,042
Changes in operating assets and liabilities:
Accounts receivable			(7,807,009	)			(5,062,190	)
Income tax receivable			—				20,030
Prepaid expenses and other			1,178,618				839,780
Inventory			115,543				(555,723	)
Costs and estimated earnings in excess of billings on uncompleted contracts			792,845				(751,948	)
Refundable deposits			608,826				270,793
Claims receivable			—				1,791,404
Other receivable			—				115,000
Accounts payable			5,687,118				(1,507,188	)
Accrued liabilities			(2,204,610	)			(1,731,717	)
Income tax payable			(306,122	)			479,446
Billings in excess of costs and estimated earnings on uncompleted contracts			5,425,241				3,634,748
Net cash provided by operating activities		$	9,271,509			$	3,225,087

The accompanying notes are an integral part of these condensed consolidated financial statements.

MEADOW VALLEY CORPORATION AND SUBSIDIARIES

1. Summary of Significant Accounting Policies and Use of Estimates:

   Presentation of Interim Information:

     The condensed consolidated financial statements included herein have been prepared by Meadow Valley Corporation (“we,” “us,” “our” or the “Company”) without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2006, as filed with the SEC under the Securities Exchange Act of 1934, as amended. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, as permitted by the SEC, although we believe the disclosures are adequate to make the information presented not misleading. Further, the condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to present fairly our financial position at June 30, 2007 and the results of our operations and cash flows for the periods presented. The December 31, 2006 condensed consolidated balance sheet data was derived from audited condensed consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

   Seasonal Variations:

     Interim results are subject to significant seasonal variations and the results of operations for the six months ended June 30, 2007 are not necessarily indicative of the results to be expected for the full year.

   Nature of Corporation:

     Meadow Valley Corporation 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”) (“Construction services segment”), Ready Mix, Inc. (“RMI”) (“Construction materials segment”) and Apex Testing Corp. (“Apex”) (“Construction materials testing segment”). 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 for various governmental authorities, municipalities and developers in southern Nevada and Arizona. RMI manufactures and distributes ready mix concrete in the Las Vegas, Nevada and Phoenix, Arizona metropolitan areas. In 2005, the Company sold, in a public offering, approximately 47% of its ownership interest in RMI. In June and July of 2007, the Company purchased 566,212 shares of RMI common stock from its minority interest shareholders. As of June 30, 2007, the Company held approximately 66% of RMI’s outstanding common stock. Apex is a construction materials testing provider in the Las Vegas, Nevada area. In May 2006, Apex was formed and subsequently, assets were purchased for approximately $134,000 from an existing materials testing company in Las Vegas, Nevada.

   Liquidity:

     The Company had income from operations for the six months ended June 30, 2007 of $2,528,771 and provided cash from operating activities of $9,271,509. For the six months ended June 30, 2006, the Company had income from operations of $4,042,729 and cash provided from operating activities of $3,225,087.

   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 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 for in their entirety 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 revision become known.

     We recognize revenue in our construction materials segment and construction materials testing segment on the sale of our concrete and aggregate products and testing services at the time of delivery of products and services.

MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies and Use of Estimates (Continued):

   Claims Receivable:

     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. As of June 30, 2007, the total amount of contract claims filed by the Company with various public entities was $19,084,311. Of this amount, the Company’s portion was $15,088,871 and the balance of $3,995,440 pertains to other contractors’ claims.

     Total claim amounts reported by the Company in its filings are approximate and are subject to revision as final documentation, resolution of issues, settlements progress and/or payments are received. Relative to the aforementioned claims, the Company has recorded $2,463,880 in cumulative claims receivable as of June 30, 2007 to offset a portion of costs incurred-to-date on the claims.

     The Company has not accrued a liability related to the contractors’ claims as no liability would be deemed payable if their portion of the claims did not receive a favorable outcome. Correspondingly, no receivable has been recorded for overhead and profit included in their portion of the claims on the Company’s behalf.

     Although the Company believes that the claims receivable amounts represent a reasonably conservative estimate, any claims proceeds ultimately paid to the Company less than the aggregate amount recorded on the balance sheet of $2,463,880 will decrease earnings. Conversely, a payment for those same items in excess of $2,463,880 will result in increased earnings.

     A common and customary practice in construction contracts is the owner’s withholding of a portion of the contract in the form of retention. Retention practices vary from contract to contract, but in general, retention (usually somewhere between 5% to 10% of the contract) is withheld from each progress payment by the owner and then paid upon satisfactory completion of the contract. Contract proceeds comprising retention are included in the Company’s balance sheet in accounts receivable. The portion of accounts receivable pertaining to retention withheld on the contracts for which claims have been filed amounts to $879,763 as of June 30, 2007. The degree to which the Company is successful in prosecuting its claims may also impact the amount of retention paid by the owner.

     The Company believes that all retention amounts currently being held by the owners on the contracts with outstanding claims will be paid in full in accordance with the contract terms. Therefore, no allowance has been made to reduce the receivables due from the retention on the disputed contracts.

   Earnings per Share:

     Statement of Financial Accounting Standards No. 128, “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 reflect the potential dilution of securities that could share in the earnings of an entity.

  Stock-Based Compensation:

     Both the Company and RMI have stock-based compensation plans. Effective January 1, 2006, the Company and RMI adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), using the modified prospective transition method and therefore, neither company has restated results for prior periods. Under this transition method, stock-based compensation expense for the first quarter of fiscal 2006 includes compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provision of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Stock-based compensation expense for all stock-based compensation awards granted after January 1, 2006 is based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. The Company and RMI recognize these compensation costs on a straight-line basis over the requisite service period of the award, which is the option vesting term of three years.

MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies and Use of Estimates (Continued):

   Stock-Based Compensation (Continued):

     The Company and RMI estimate fair value using the Black-Scholes valuation model. Assumptions used to estimate compensation expense are determined as follows:

	•		Expected term is determined using a weighted average of the contractual term and vesting period of the award;
	•		Expected volatility is measured using the average of historical daily changes in the market price of the Company’s common stock over the expected term of the award;
	•		Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and,
	•		Forfeitures are based on the history of cancellations of awards granted by both companies and management’s analysis of potential forfeitures.

   Recent Accounting Pronouncements:

     In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”), which is effective for fiscal years beginning after November 15, 2007. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The Company is currently evaluating the impact of SFAS 159 on its financial statements, but does not expect this new accounting pronouncement to have a material impact.

     In June 2007, the FASB ratified EITF 06-11 “Accounting for the Income Tax Benefits of Dividends on Share-Based Payment Awards” (“EITF 06-11”). EITF 06-11 provides that tax benefits associated with dividends on share-based payment awards be recorded as a component of additional paid-in capital. EITF 06-11 is effective, on a prospective basis, for fiscal years beginning after December 15, 2007. The Company is currently assessing the impact of EITF 06-11 on its financial position and results of operations.

2. Stock-Based Compensation:

     The Company and RMI both have individual stock-based compensation plans. Meadow Valley Corporation’s accompanying condensed consolidated financial statements and these related notes to financial statements have been presented on a consolidated basis and therefore include RMI’s stock-based compensation information. The information below is presented to show disclosures related to both the Company’s and RMI’s individual stock-based compensation plans. Under the sub-heading “Meadow Valley Corporation” of this footnote, information is included only with respect to the Company’s plan, with the exception of information presented that is directly related to the consolidation of the accompanying financial statements and this information is indicated as “consolidated.” Under the sub-heading “Ready Mix, Inc.” of this footnote, information is only for RMI’s plan.

   Meadow Valley Corporation:

     On January 1, 2006, the Company adopted the fair value recognition provisions SFAS 123R. The Company recognizes expected tax benefits related to employee stock-based compensation as awards are granted and the incremental tax benefit or liability when related awards are deductible.

     As of June 30, 2007, the Company has the following stock-based compensation plans:

   Equity Incentive Plan

     In 2004, the Company adopted the 2004 Equity Incentive Plan (“2004 Plan”). The 2004 Plan permits the granting of any or all of the following types of awards: (1) incentive and nonqualified stock options, (2) stock appreciation rights, (3) stock awards, restricted stock and stock units, and (4) other stock or cash-based awards. In connection with any award or any deferred award, payments may also be made representing dividends or their equivalent.

MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Stock-Based Compensation (Continued):

     The 2004 Plan authorizes the issuance of up to 1,200,000 shares of Common Stock, all of which were previously reserved for issuance under the Company’s prior plan. Shares of Common Stock covered by an award granted under the 2004 Plan will not be counted as used unless and until they are actually issued and delivered to a participant. As of June 30, 2007, 170,149 shares were available for future grant under the 2004 Plan. The stock options have terms from five to ten years and may be exercised after issuance as follows: 33.3% after one year of continuous service, 66.6% after two years of continuous service and 100% after three years of continuous service. The exercise price of each option is equal to the market price of the Company’s common stock on the date of the grant.

     The Company uses the Black-Scholes option pricing model to estimate fair value of stock-based awards with the following assumptions for prior awards of options:

		Awards Prior to
		January 1, 2007
Dividend yield			0	%
Expected volatility			23.94% - 82.23	%
Weighted-average expected volatility			50.04	%
Risk-free interest rate			5.00	%
Expected life of options (in years)			3
Weighted-average grant-date fair value		$	1.34

     No awards were granted during the six months ended June 30, 2007.

     The following table summarizes the Company’s stock option activity during the first half of fiscal 2007:

										Weighted Average
						Weighted Average				Remaining				Aggregate				Aggregate
						Exercise Price				Contractural				Fair				Intrinsic
		Shares				per Share				Term (1)				Value				Value (2)
Outstanding January 1, 2007			434,542				4.86				3.98			$	818,371			$	2,298,228
Granted			—				—				—				—
Exercised			(31,081	)			2.01				5.52				(27,656	)			289,770
Forfeited or expired			(80,000	)			5.31				—				(80,800	)
Outstanding June 30, 2007			323,461				5.02				4.27			$	709,915			$	2,926,016
Exercisable June 30, 2007			228,461				2.94				4.25			$	249,265			$	2,542,516

     A summary of the status of the Company’s nonvested shares as of June 30, 2007 and changes during the six months ended June 30, 2007 is presented below:

						Weighted Average
						Grant-Date
		Shares				Fair Value
Nonvested stock options at January 1, 2007			95,000			$	4.85
Granted			—				—
Vested			—				—
Forfeited			—				—
Nonvested stock options at June 30, 2007			95,000			$	4.85

MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Stock-Based Compensation (Continued):

     During the six months ended June 30, 2007 and 2006, the Company recognized consolidated compensation expense of $208,404 and $141,047, of which $135,441 and $80,714, respectively, was related to RMI’s stock-based compensation plan, and the Company recognized a tax benefit of $10,907 and $5,099, respectively, related thereto. As of June 30, 2007, there was $371,855 of total unrecognized compensation cost, net of $7,526 attributable to estimated forfeitures, related to nonvested stock options granted under the Plan. That cost is expected to be recognized over the weighted average period of 2.31 years. During the six months ended June 30, 2007, 80,000 exercisable awards expired unexercised with a grant date fair value per share of $1.01 and an aggregate grant date fair value of $80,800.

     During the six months ended June 30, 2007 and 2006, 31,081 and 25,941 common stock options were exercised with aggregate intrinsic values of $289,770 and $265,811, respectively. Also during the six months ended June 30, 2007 and 2006, the Company received proceeds of $62,493 and $55,080, respectively, as a result of the exercise of common stock options.

  Ready Mix, Inc.:

     On January 1, 2006, RMI adopted the fair value recognition provisions of SFAS 123R. RMI recognizes expected tax benefits related to employee stock based compensation as awards are granted and the incremental tax benefit or liability when related awards are deductible.

     As of June 30, 2007, RMI has the following stock-based compensation plan:

   Equity Incentive Plan

     In 2005, RMI adopted the 2005 Equity Incentive Plan (“2005 Plan”). The 2005 Plan permits the granting of any or all of the following types of awards: (1) incentive and nonqualified stock options, (2) stock appreciation rights, (3) stock awards, restricted stock and stock units, and (4) other stock or cash-based awards. In connection with any award or any deferred award, payments may also be made representing dividends or their equivalent.

     RMI has reserved 675,000 shares of its common stock for issuance under the plan. Shares of common stock covered by an award granted under the 2005 Plan will not be counted as used unless and until they are actually issued and delivered to a participant. As of June 30, 2007, 326,875 shares were available for future grant under the 2005 Plan. The term of the stock options are five years and may be exercised after issuance as follows: 33.3% after one year of continuous service, 66.6% after two years of continuous service and 100% after three years of continuous service. The exercise price of each option is equal to the closing market price of RMI’s common stock on the date of grant.

     RMI uses the Black Scholes option pricing model to estimate fair value of stock-based awards with the following assumptions for the indicated periods:

		Awards granted
		prior to
		January 1, 2007
Dividend yield			0	%
Expected volatility			21.4% - 39.1	%
Weighted-average volatility			26.60	%
Risk-free interest rate			5.00	%
Expected life of options (in years)			3
Weighted-average grant-date fair value		$	2.40

     No awards were granted during the six months ended June 30, 2007.

MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Stock-Based Compensation (Continued):

     The following table summarizes the stock option activity during the first six months of fiscal 2007:

										Weighted Average
						Weighted Average				Remaining				Aggregate				Aggregate
						Exercise Price				Contractural				Fair				Intrinsic
		Shares				per Share				Term (1)				Value				Value (2)
Outstanding January 1, 2007			350,625			$	10.90				3.65			$	839,741
Granted			—				—								—
Exercised			—				—								—
Forfeited or expired			(2,500	)			11.00								(4,875	)
Outstanding June 30, 2007			348,125			$	10.90				3.15			$	834,866			$	643,844
Exercisable June 30, 2007			158,667			$	11.06				2.61			$	315,408			$	267,542

     A summary of the status of RMI’s nonvested shares as of June 30, 2007 and changes during the six months ended June 30, 2007 is presented below:

						Weighted Average
						Grant-Date
		Shares				Fair Value
Nonvested stock options at January 1, 2007			267,084			$	2.51
Granted			—				—
Vested			(75,126	)			1.95
Forfeited			(2,500	)			1.95
Nonvested stock options at June 30, 2007			189,458			$	2.74

     During the six months ended June 30, 2007 and 2006, RMI recognized compensation expense of $135,441 and $80,714, and a tax benefit of $13,091 and $5,099, respectively, related thereto. As of June 30, 2007, there was $375,519 of total unrecognized compensation cost, net of $3,703 attributable to estimated forfeitures, related to nonvested stock options granted under the 2005 Plan. That cost is expected to be recognized over the weighted average period of 2.04 years. The total fair value of 75,126 and 76,791 options vested during the six months ended June 30, 2007 and 2006, was $146,496 and $150,510, respectively. During the six months ended June 30, 2007, 2,500 awards were forfeited, fair value per share of $1.95, with a total fair value of $4,875.

MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. Notes Payable:

     Notes payable consists of the following:

		June 30,				December 31,
		2007				2006
Balance of notes payable outstanding from year end		$	14,979,140			$	18,732,010
Notes payable, interest rates ranging from 7.13% to 8.03%, with combined monthly principal payments of $48,663 plus interest, due dates ranging from February 29, 2012 to February 28, 2013, collateralized by equipment			3,167,797				—
Notes payable, interest rates ranging from 7.943% to 9.5% with combined monthly payments of $4,130, due dates ranging from January 13, 2012 to February 15, 2012, collateralized by vehicles			188,845				—
Note payable, non-interest bearing, with monthly payments of $588, due February 29, 2012 (Less unamortized discount of $5,217 - effective rate of 7.5%), collateralized by a vehicle			32,929				—
			18,368,711				18,732,010
Less: current portion			(4,638,325	)			(4,837,628	)
		$	13,730,386			$	13,894,382

     Following are maturities of long-term debt as of June 30, 2007 for each of the following years:

2008		$	4,638,325
2009			4,625,647
2010			4,042,600
2011			2,619,574
2012			1,083,220
Subsequent to 2012			1,359,345
		$	18,368,711

4. Lines of Credit:

     As of June 30, 2007, the Company had a $3,000,000 line of credit loan agreement, with an interest rate at Chase Manhattan Bank’s prime, plus .75%. The interest rate as of June 30, 2007 was 9.0%. The balance outstanding on the line of credit as of June 30, 2007 was $250,000. The line of credit agreement allows for interest only payments until December 31, 2008. If the agreement is not renewed by December 31, 2008 and a balance is outstanding, then the line of credit converts into a term agreement requiring equal monthly principal plus interest payments through December 31, 2011 and is collateralized by all of the Company’s assets. Under the terms of the agreement, the Company is required to maintain a certain level of tangible net worth, a ratio of total debt to tangible net worth and earnings before interest, tax, depreciation and amortization (EBITDA). The Company and MVCI are also required to maintain a minimum cash flow to current portion of long-term debt. As of June 30, 2007, the Company and MVCI were compliant with these covenants.

MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. Lines of Credit (Continued):

     As of June 30, 2007, RMI had a $5,000,000 line of credit loan agreement, with an interest rate at Chase Manhattan Bank’s prime, plus .25%. The interest rate as of June 30, 2007 was 8.5%. The balance outstanding on the line of credit as of June 30, 2007 was $1,264,012. The line of credit agreement allows for interest only payments until December 31, 2008. If the agreement is not renewed by December 31, 2008 and a balance is outstanding, then the line of credit converts into a term agreement requiring equal monthly principal plus interest payments through December 31, 2011 and is collateralized by all of RMI’s assets. Under the terms of the agreement, the Company is required to maintain a certain level of tangible net worth, a ratio of total debt to tangible net worth, and earnings before interest, tax, depreciation and amortization (EBITDA). The Company and RMI are also required to maintain a minimum ratio of cash flow to current portion of long term debt. As of June 30, 2007, the Company and RMI were compliant with these covenants.

     As of June 30, 2007, the Company had a line of credit in the amount of $2,023,102, with an interest rate at Chase Manhattan Bank’s prime, plus .75%. The interest rate as of June 30, 2007 was 9.0%. The balance outstanding on the line of credit as of June 30, 2007 was $540,669. The line of credit agreement allows for interest only payments until December 31, 2007. Then the line of credit converts into a term agreement requiring equal monthly principal plus interest payments through December 31, 2010 and is collateralized by all of the Company’s assets. Under the terms of the agreement, the Company is required to maintain a certain level of tangible net worth, a ratio of total debt to tangible net worth and earnings before interest, tax, depreciation and amortization (EBITDA). The Company and MVCI are also required to maintain a minimum cash flow to current portion of long-term debt. As of June 30, 2007, the Company and MVCI were compliant with these covenants.

     In addition to such lines of credit agreements, the Company and RMI have each established capital expenditure commitments in the amounts of $5,000,000 and $10,000,000, respectively. The purpose of these commitments are to fund certain acquisitions of capital equipment that the Company and RMI may need to improve capacity or productivity. As of June 30, 2007, the Company and RMI had approximately $2,560,000 and $1,930,000, respectively, available to draw against under such commitments.

5. Commitments:

     During the six months ended June 30, 2007, the Company extended one of its office leases with a monthly payment of $9,740. The Company also entered into various lease agreements for office equipment with a combined monthly payment of $1,420. Minimum future rental payments under the non-cancelable operating leases entered into during the six months ended June 30, 2007, for each of the following years are:

2008		$	132,618
2009			126,118
2010			96,899
2011			7,502
2012			2,681
		$	365,818

     The Company has agreed to indemnify its officers and directors for certain events or occurrences arising as a result of the officer or directors serving in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. However, the Company has a directors and officers liability insurance policy that enables it to recover a portion of any future amounts paid up to $10 million. As a result of its insurance policy coverage and no current or expected litigation, the Company believes the estimated fair value of these indemnification agreements is minimal and has not recorded liabilities for these agreements as of June 30, 2007.

MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. Commitments (Continued):

     The Company enters into agreements with other companies in the ordinary course of business, typically with business partners, customers, landlords, lenders and lessors, which include indemnification provisions. Under these provisions the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of the Company’s activities or, in some cases, as a result of the indemnified party’s activities under the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is unlimited. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of June 30, 2007.

6. Statement of Cash Flows:

  Non-Cash Investing and Financing Activities:

     The Company recognized investing and financing activities that affected assets and liabilities, but did not result in cash receipts or payments. These non-cash activities are as follows:

     During the six months ended June 30, 2007 and 2006, the Company financed the purchase of equipment in the amount of $2,240,786 and $3,826,179, respectively.

     During the six months ended June 30, 2007 and 2006, the Company incurred $208,404 and $141,047, respectively, in stock-based compensation expense associated with stock option awards granted to employees, directors and consultants.

     During the six months ended June 30, 2007 and 2006, the Company realized income tax benefits of $82,689 and $45,565, respectively, as a result of disqualifying dispositions of incentive stock options and exercises of nonqualified stock options, which is included in income taxes payable and additional paid-in capital.

7. Litigation and Claim Matters:

     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 deemed to be materially detrimental and some claims may prove beneficial to its financial condition.

     The following proceedings represent matters that may be material and have been referred to legal counsel for further action:

     Requests for Equitable Adjustment to Construction Contracts. The Company has made claims as described below on the following contracts:

(1)

Two contracts with the New Mexico State Highway and Transportation Department – The approximate total value of claims on these projects is $12.0 million of which $8.3 million is on behalf of MVCI and the balance of $3.7 million 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 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. The trial date has been re-scheduled for February 2008.

MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. Litigation and Claim Matters (Continued):

(2)		Clark County Public Works, Clark County, Nevada – Previously, the Company had several claims against Clark County related to work that was performed on a project completed in 2000. The Company settled with Clark County on all but one of the claims in 2006. The remaining claim, which we refer to as the Shoring Entitlement claim, was asserted by a subcontractor on the project. A significant portion of the claim was rejected in 2004 by a three-member arbitration panel in a partial ruling of the original claim. Because of this ruling, the Company has not included amounts related to this claim in any of its disclosures surrounding outstanding claims amounts. MVCI filed with the District Court a Notice of and Motion to Vacate Arbitration Award on the Shoring Entitlement. The motion was denied by the District Court and on February 7, 2005. MVCI filed an appeal to the Nevada Supreme Court, which was denied in July 2007.
(3)		Federal Highway Administration – The approximate total value of claims on this project is $7.1 million, of which $6.8 million is on behalf of MVCI and the balance of $0.3 million is on behalf of a subcontractor. The primary issues are unforeseen conditions, 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 events giving rise to the claims. On September 18, 2006 MVCI submitted a formal claim with the Federal Highway Administration. MVCI was informed in June, 2007 that a formal decision would not be provided until at least September 2007.

     The combined total of all outstanding claims as of June 30, 2007 is $19,084,311. MVCI’s portion of the total claims is $15,088,871 and the balance pertaining to a prime contractor or subcontractors’ claims is $3,995,440. Total claim amounts reported by MVCI are approximate and are subject to revision as final documentation progresses and as issues are resolved and/or payments made. Claim amounts do not include any prejudgment interest, if applicable. Relative to the aforementioned claims, MVCI has recorded $2,463,880 in cumulative claims receivable to offset a portion of costs incurred to date on the claims.

     MVCI has not accrued a liability related to the prime contractor or subcontractors’ claims as no liability would be deemed payable if their portion of the claims did not receive a favorable final outcome. Correspondingly, no receivable has been recorded for overhead and profit included in their portion of the claims on MVCI’s behalf.

     Although MVCI believes that the claims receivable amount represents a reasonably conservative posture, any claims proceeds ultimately paid to MVCI less than the aggregate amount recorded on the balance sheet of $2,463,880, will decrease earnings. Conversely, a payment for those same items in excess of $2,463,880 will result in increased income.

     The portion of accounts receivable pertaining to retention withheld on the contracts for which claims have been filed amounts to $879,763. The degree to which MVCI is successful in prosecuting its claims may also impact the amount of retention paid by the owner. MVCI believes that all retention amounts currently being held by the owners on the contracts with outstanding claims will be paid in full in accordance with the contract terms. Therefore, no allowance has been made to reduce the receivables due from the retention on the disputed contracts.

Lawsuits Filed Against Meadow Valley Contractors, Inc.

(1)

Johnson & Danley Construction Co., Inc. (“JDCC”), J.D. Materials, Inc. (“JDM”) and Joel T. Danley (“Danley”) (collectively “J&D”), Twelfth Judicial District, District of New Mexico – JDCC was the prime contractor and MVCI was a subcontractor to JDCC on one of the two contracts involved in MVCI’s disputes with the state of New Mexico. JDCC was also a subcontractor to MVCI on other contracts in New Mexico. JDM is the owner of an aggregate pit in Alamogordo, NM and leased the pit to MVCI under a mineral lease agreement. Danley is believed to be an officer and owner of JDCC and JDM. JDCC filed for Chapter 11 bankruptcy protection, which in accordance with the contract,

MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. Litigation and Claim Matters (Continued):

			resulted in the termination of its contract with the New Mexico State Highway and Transportation Department (“NMSHTD”). The payment and performance bonds supplied by JDCC in connection with the one contract for which JDCC was the prime contractor had been furnished by MVCI’s surety companies. MVCI indemnified the surety companies against losses and claims on the one contract. Upon JDCC’s termination, the NMSHTD entered into a takeover agreement with the surety companies who subsequently entered into an agreement with MVCI to complete the work. MVCI has successfully completed the projects. In its complaint, J&D alleged, among other things, that MVCI was partially responsible for J&D’s bankruptcy and sought damages in an undetermined amount. On February 10, 2003, J&D and MVCI entered into a settlement agreement for mutual consideration whereby the two parties dismissed their claims and counterclaims in their entirety. The parties have agreed to jointly prosecute their respective claims against the NMSHTD.
	(2)		MVCI is defending a claimed preference, in the Third Judicial Court of Salt Lake County, in connection with a payment made to it by an insurance company, Southern America Insurance Company, in the approximate amount of $100,000. MVCI believes that the payment is not a preference, and is vigorously defending the action.
	(3)		MVCI, through its insurance company, is providing a defense to the State of Arizona, pursuant to its obligations under its contract, for a complaint brought by the parents of Corey James and Michelle James in the Superior Court of the State of Arizona, in and for the County of Pinal. The Complaint, No. CV00400744, was filed on July 9, 2004. The complaint is a civil action titled John James, the Father of Decedent Corey James, Donna James, the mother of Decedent Corey James, Marjorie Surine, the Mother of Decedent Michelle James and Joseph Burkhamer, the Father of Decedent Michelle James, Plaintiffs, vs. The State of Arizona, a Body Politic; John Does and Jane Does 1-10; ABC Companies 1-5; and Black and White Corporations, Partnerships and/or Sole proprietorships 1-10, or Other Entities, Defendants. The complaint seeks damages from the State of Arizona for losses suffered by the plaintiffs as a result of a traffic accident. In January of 2006, Joseph Burkhamer, the father of decedent Michelle James, was dismissed from the complaint. MVCI denies responsibility for the accident and is vigorously defending the action. MVCI is unable to ascertain if any loss is probable or even estimatable and accordingly, has not accrued a liability related to this complaint as of June 30, 2007.

8. Earnings per Share:

     Statement of Financial Accounting Standards No. 128, “Earnings per Share,” 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 reflect the potential dilution of securities that could share in the earnings of an entity, as set forth below:

		Six months ended								Three months ended
		June 30,								June 30,
		2007				2006				2007				2006
Weighted average common shares outstanding			5,124,545				4,158,088				5,128,793				4,161,732
Dilutive effect of:
Stock options and warrants			180,534				320,783				185,512				319,451
Weighted average common shares outstanding assuming dilution			5,305,079				4,478,871				5,314,305				4,481,183

MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8. Earnings per Share (Continued):

     All dilutive common stock equivalents are reflected in our earnings per share calculations. Anti-dilutive common stock equivalents are not included in our earnings per share calculations. The Company did not have anti-dilutive common stock equivalents as of June 30, 2007.

     The Company’s diluted net income per common share at June 30, 2007 is computed based on the weighted average number of shares of common stock outstanding during the period and the weighted average number of shares underlying options and warrants to purchase 411,915 common shares at a range of $1.46 to $12.60.

     Options to purchase 468,582 common shares at a range of $1.46 to $9.38 per share were outstanding during 2006.

9. Income Taxes:

     The Company’s effective tax rate is based on expected income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, in accordance with APB Opinion No. 28, the Company estimates the annual tax rate based on projected taxable income for the full year and records a quarterly income tax provision in accordance with the anticipated annual rate. As the year progresses, we refine the estimates of the year’s taxable income as new information becomes available, including year-to-date financial results. This continual estimation process can result in a change to the expected effective tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected annual tax rate. Significant judgment is required in determining the Company’s effective tax rate and in evaluating our tax positions.

     The effective income tax rate of approximately 37% for the six months ended June 30, 2007 differed from the statutory rate, due primarily to state income taxes and non-deductible stock based compensation expense associated with employee incentive stock options. The effective income tax rate of approximately 37% for the six months ended June 30, 2006 differed from the statutory rate, due primarily to state income taxes.

10. Subsequent Events:

     In July 2007, the Company purchased an additional 89,662 shares of RMI common stock under block trade agreements. Cash on hand was used to complete the purchase. The Company held an approximate 68% ownership interest in RMI after giving effect to this purchase.

     On July 2, 2007, the Company granted each of its outside, independent directors to purchase 5,000 shares of common stock. These options vested upon grant and expire in 2012. The exercise price per share for these stock options is $13.88.

MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11. Segment Information:

     The Company manages and operates three segments — construction services, construction materials and construction materials testing. The construction services segment provides construction services to a broad range of public and some private customers primarily in southern Nevada and Arizona. 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, Nevada and Phoenix, Arizona markets. Material customers include concrete subcontractors, prime contractors, homebuilders, commercial and industrial property developers, pool builders and homeowners. The construction materials segment operates out of three locations in the Las Vegas, Nevada vicinity, one location in the Moapa, Nevada vicinity and three locations in the Phoenix, Arizona vicinity. The construction materials testing segment provides materials testing services to the broader construction industry in the Las Vegas, Nevada area.

		Six Months Ended June 30,
		2007												2006
		Construction												Construction
										Materials												Materials
(dollars in thousands)		Services				Materials				Testing				Services				Materials				Testing
Gross revenue		$	59,062			$	42,865			$	587			$	50,918			$	44,129			$	69
Intercompany revenue			—				(1,051	)			(163	)			(1,011	)			(39	)			—
Cost of revenue			54,665				38,407				690				46,921				38,616				65
Interest income			584				184				—				178				180				—
Interest expense			65				81				—				90				64				—
Depreciation and amortization			1,306				2,106				9				1,185				1,656				1
Income (loss) before income taxes and minority interest in consolidated subsidiary			1,384				2,393				(460	)			1,063				3,254				(24	)
Income tax benefit (expense)			(499	)			(897	)			166				(405	)			(1,195	)			9
Income (loss) before minority interest in consolidated subsidiary			885				1,496				(294	)			658				2,059				(15	)
Minority interest in consolidated subsidiary			—				(701	)			—				—				(964	)			—
Net income (loss)			885				795				(294	)			658				1,095				(15	)
Total assets			55,692				49,572				451				45,297				49,058				225

     There are no differences in accounting principles between the segments. All centrally incurred costs are allocated to the construction services segment. Beginning in 2005, a management fee is allocated to the materials segment in the amount of $22,000 per month. Intercompany revenue is eliminated at cost to arrive at consolidated revenue and cost of revenue.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Disclosure

     This Quarterly Report on Form 10-Q and the documents we incorporate by reference herein include forward-looking statements. All statements other than statements of historical facts contained in this Form 10-Q and the documents we incorporate by reference, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements within the meaning of the “safe harbor” provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

     These forward-looking statements are subject to a number of risks, uncertainties and assumptions described in “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, and any changes thereto in Part II, Item 1A “Risk Factors” of this Form 10-Q. In addition, our past results of operations do not necessarily indicate our future results. Moreover, the construction services and construction materials segments of our business are very competitive and rapidly changing. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any risk factor, or combination of risk factors, may cause actual results to differ materially from those contained in any forward-looking statements.

     Except as otherwise required by applicable laws, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in this Quarterly Report on Form 10-Q or in the documents we incorporate by reference, whether as a result of new information, future events, changed circumstances or any other reason after the date of this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events or performance. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

General

     The following is management’s discussion and analysis of certain significant factors affecting our 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.

     Revenue on uncompleted fixed price contracts is recorded under the percentage-of-completion method of accounting. We begin to recognize revenue on our contracts when we first incur 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 revisions become known. Losses on contracts, if any, are provided for in total when determined, regardless of the percent complete.

     In general, labor, equipment and disposable materials tend to be the types of costs with the greatest uncertainty, and, therefore, have the greatest risk of variation from budgeted costs. Permanent materials and subcontract costs tend to be more predictable and, to a greater degree, can be fixed for the duration of the contract, thus have less risk of variation from the original estimate. We have avoided material deterioration of profit margins due to untimely delivery of important construction materials or from rapidly rising costs of the same, and from minor cost overruns due to rising costs of raw materials in our construction services segment. A significant and unforeseen rise in the cost of crude oil could negatively impact our performance. Likewise, prolonged shortages of raw materials could delay progress on projects, cause cost overruns and potentially erode profit margins.

Overview

     There are two primary factors affecting our performance in 2007. The first factor is the continuing degradation of the housing sector which affects demand for the materials segment’s products. The second factor is the improved contract backlog of the services segment. In comparison to 2006, our contract backlog was 31% greater at the beginning of this year and 40% greater at the beginning of this year’s second quarter. Backlog at June 30, 2007, was $104.4 million, 45.9% greater than a year ago. These backlog changes explain why the services segment revenue increased 18.3% in this year’s first half and 43.7% in this year’s second quarter when compared to the same periods in 2006. On the other hand, the residential market’s decline is the largest single reason that the materials segment revenue declined 5.2% in the first half and 3.7% in the second quarter compared to the same periods in 2006. The strength of the non-residential construction sectors has helped mitigate the impact of the weak residential sector.

     Our gross profit line is also affected by these two primary factors to the extent that volume helps carry the load of the fixed costs, particularly for the materials segment. Since initiating our expansion plans for the materials segment in 2005, this year’s second quarter is the first quarter to experience the full weight of the fixed costs of that additional capacity. In this year’s first half and second quarter, gross margin for the materials segment was 10.7% and 10.7%, respectively, compared to last year’s 12.5% and 12.4%, respectively. These numbers reflect the effect of increased fixed costs and declining volume. Volume also helps distribute the fixed costs of equipment for the services segment but has less of an impact on gross margin than does the stage of completion and performance of each individual project. For example, we tend to be conservative in claiming project profits in the early stages of completion until there are reliable indications of project performance as work progresses. So far this year, construction services segment gross profit has been somewhat affected by the amount of new work starting up as nearly 61% of our first half contract revenue came from projects 80% or less complete compared to nearly 38% for the same period of the previous year. For the services segment, gross margin in the first half and second quarter of 2007 was 7.4% and 6.8%, respectively, compared to last year’s 8.0% and 7.6%, respectively.

     We are re-thinking the materials segment’s outlook for the balance of 2007 due to the continuing softening of the housing sector beyond our expectations and the growing consensus amongst various economic forecasts predicting slower than expected recovery of residential construction. The Portland Cement Association recently revised its annual forecast for 2007 cement consumption and now predicts a 6.5% drop in cement use from 2006 to 2007 – three times their initial forecast. The Las Vegas Housing Market Letter published by Home Builders Research, Inc. reported in their July 12, 2007 letter that the number of new home permits reported year to date through June 2007 declined 35% from 2006. Likewise, the July 28, 2007 publication of The Phoenix Housing Market Letter written by RL Brown Housing Reports and published by Home Builders Marketing, Inc. and Builders Research Institute, LLC reports year to date through June 2007 housing permits in the Arizona counties of Maricopa and Pinal (metropolitan Phoenix and surrounding areas) are down 23.5% from the previous year. Non-residential construction activity remains very strong and has helped minimize the impact of the residential sector decline. According to the Department of Commerce, the seasonally-adjusted annualized rate of non-residential spending increased 18.9% year over year as of May 2007. Overall, however, these combined market forces have diminished the demand for our product, put downward pressure on our prices and reduced our ability to pass-on rising costs to our customers. We had previously stated that one of the keys to improving our financial performance was the degree to which our new expansion plants could contribute to our operations. The market’s decreased demand for ready mix concrete will make it difficult for us to increase production from the new facilities, thus less likely to fully absorb the increased fixed costs associated with the new assets without affecting margins. Based upon what we currently see, we now believe that our materials segment’s unit sales will likely be similar to last year’s second half and the materials segment’s revenue will likely be down slightly. Also, due to rising costs combined with downward pricing pressure, margins will likely compress even further.

     The outlook appears to be markedly different for the services segment. Having improved our contract backlog scenario, there is good visibility for the balance of 2007 in terms of services segment revenue. Furthermore, our mix of work is performing well relative to original estimates, the majority of which were bid at margins consistent with recent quarters. We took steps to increase our bonding capacity in order to make ourselves eligible to bid on opportunities that we had previously been forced to pass up. This is certainly reflected in our bid statistics. Year to date we have bid on 113% more work, as measured in dollars of contract value, than the same period last year and have maintained a win-rate of 23%, consistent with historical contract awards. In terms of the number of projects bid in this year’s first half, we have bid on 56% more projects than a year ago, thus indicating an increase in the average project size, in terms of dollars, of the projects we are now bidding. As of the date of this filing, our

current bid schedule contains over $200 million in contracts we intend to bid before October 2007, which could change depending upon our success. Our bonding limits as of June 30, 2007 are approximately $200 million in the aggregate and $60 million for a single project.

     Notwithstanding the current market conditions, the underlying primary drivers that ultimately affect long term demand for our products and services are population and job growth. There is no abatement to these two key drivers. Both population and job growth are continuing at expected rates. We believe that the timing and location of our materials segment’s expanded production facilities will ultimately prove to be wise investments based upon the anticipated long term growth of our markets. In addition, both the current and long term outlook for demand of our infrastructure construction capabilities is very favorable.

Critical Accounting Policies, Estimates and Judgments

     Significant accounting policies are described in the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2006. We believe our most critical accounting policies are revenue recognition and cost estimation on certain contracts for which we use a percentage-of-completion accounting method, our allowances for doubtful accounts, our inventory allowance, the valuation of property and equipment, and our accounting policies on contingencies, income taxes and the valuation of stock-based compensation. The revenue recognition and cost estimation accounting method is applied by our construction services segment to heavy construction projects executed under multi-year contracts with various customers.

     Revenue 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 recognized 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.

     The asset “costs and estimated earnings in excess of billings on uncompleted contracts” represents revenue recognized in excess of amounts billed. The liability “billings in excess of costs and estimated earnings on uncompleted contracts” represents billings in excess of revenues recognized.

     The complexity of the estimation process and all issues related to the assumptions, risks and uncertainties inherent with the application of the percentage-of-completion method of accounting affects the amounts reported in our condensed consolidated financial statements. A number of internal and external factors affect our percentage-of-completion estimates, including labor rate and efficiency variances, estimated future material prices and customer specification changes. If our business conditions were different, or if we used different assumptions in the application of this accounting policy, it is likely that materially different amounts would be reported in our condensed consolidated financial statements.

     We are required to estimate the collectibility of our accounts receivable. A considerable amount of judgment is required in assessing the realization of these receivables, including the current credit worthiness of each customer and the related aging of the past due balances. Our provision for bad debts at June 30, 2007 and December 31, 2006 amounted to $541,041 and $395,243, respectively. We determine our reserve by using percentages applied to certain aged receivable categories and percentages of certain types of revenue generated, as well as a review of the individual accounts outstanding and our collection history. Should our estimate for the provision of bad debt not be sufficient to allow for the write-off of future bad debts, we will incur additional bad debt expense, thereby reducing net income in a future period. If, on the other hand, we determine in the future that we have over estimated our provision for bad debt we will reduce bad debt expense, thereby increasing net income in the period in which the provision for bad debt was over estimated.

     We are required to state our inventories at the lower of cost or market. In assessing the ultimate realization of inventories, we are required to make judgments as to the future demand requirements and compare these with the current inventory levels. Our reserve requirements generally increase as our projected demand requirements

decrease due to market conditions and longer than expected usage periods. At June 30, 2007 and December 31, 2006, inventories of $1,251,055 and $1,366,534, respectively, are net of reserves of $199,936 and $200,000, respectively. It is possible that significant changes in required inventory reserves may occur in the future if there are changes in market conditions or market activity.

     We are required to provide property and equipment net of depreciation and amortization expense. We expense depreciation and amortization utilizing the straight-line method over what we believe to be the estimated useful lives. Leasehold improvements are amortized over their estimated useful lives or the lease term, whichever is shorter. The life of any piece of equipment can vary, even within the same category of equipment, due to the quality of the maintenance, care provided by the operator and the general environmental conditions, such as temperature, weather severity and the terrain in which the equipment operates. We maintain, service and repair a majority of our equipment through the use of our mechanics. If we inaccurately estimate the life of any given piece of equipment or category of equipment we may be overstating or understating earnings in any given period.

     We also review our property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Impairments are recognized in the period during which they are identified. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

     We are required to estimate our income taxes in each jurisdiction in which we operate. This process requires us to estimate the actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These temporary differences result in deferred tax assets and liabilities on our balance sheets. We must calculate the blended tax rate, combining all applicable tax jurisdictions, which can vary over time as a result of the allocation of taxable income between the tax jurisdictions and the changes in tax rates. We must also assess the likelihood that the deferred tax assets, if any, will be recovered from future taxable income and, to the extent recovery is not likely, must establish a valuation allowance. This assessment is complicated by the fact that we are required to consolidate our subsidiaries for financial reporting purposes, while being separately reported for tax purposes. As of June 30, 2007, we had total deferred tax assets of $.6 million with no valuation allowance and total deferred tax liabilities of $3.0 million. The deferred tax asset does not contain a valuation allowance as we believe we will be able to utilize the deferred tax asset through future taxable income.

     Furthermore, we are subject to periodic review by domestic tax authorities for audit of our income tax returns. These audits generally include questions regarding our tax filing positions, including the amount and timing of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposures associated with our various tax filing positions, including federal and state taxes, we believe we have complied with the rules of the service codes and therefore have not recorded reserves for any possible exposure. Typically the taxing authorities can audit the previous three years of tax returns and in certain situations audit additional years, therefore a significant amount of time may pass before an audit is conducted and fully resolved. Although no audits are currently being conducted, if a taxing authority would require us to amend a prior years tax return we would record the increase or decrease in our tax obligation in the period in which it is more likely than not to be realized.

     Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS 123R using the modified prospective transition method, and therefore have not restated prior periods’ results. Under this method we recognize compensation expense for all share-based payments granted after January 1, 2006 and prior to but not yet vested as of January 1, 2006, in accordance with SFAS 123R using Black-Scholes option valuation model. Under the fair value recognition provisions of SFAS 123R, we recognize stock-based compensation net of an estimated forfeiture rate and only recognize compensation cost for those shares expected to vest on a straight-line basis over the requisite service period of the award. Prior to SFAS 123R adoption, we accounted for share-based payments under APB 25 and accordingly, did not recognize compensation expense for options granted that had an exercise price equal to the market value of the underlying common stock on the date of grant.

     Determining the appropriate fair value model and calculating the fair value of share-based payment awards requires the input of highly subjective assumptions, including the expected life of the share-based payment awards and stock price volatility. The assumptions used in calculating the fair value of share-based payment awards

represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period. See Note 2 to the condensed consolidated financial statements for a further discussion on stock-based compensation.

     As discussed elsewhere in this filing, we disclose various litigation and claims matters. These issues involve significant estimates and judgments, which may materially change in future periods due to change in circumstances.

New Accounting Pronouncements

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”), which is effective for fiscal years beginning after November 15, 2007. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. We are currently evaluating the impact of SFAS 159 on our financial statements, but do not expect this new accounting pronouncement to have a material impact.

     In June 2007, the FASB ratified EITF 06-11 “Accounting for the Income Tax Benefits of Dividends on Share-Based Payment Awards” (“EITF 06-11”). EITF 06-11 provides that tax benefits associated with dividends on share-based payment awards be recorded as a component of additional paid-in capital. EITF 06-11 is effective, on a prospective basis, for fiscal years beginning after December 15, 2007. We are currently assessing the impact of EITF 06-11 on our financial position and results of operations.

Results of Operations

     The following table sets forth, for the six months and three months ended June 30, 2007 and 2006, certain items derived from the Company’s condensed consolidated statements of operations and the corresponding percentage of total revenue for each item:

		Six months ended June 30,																Three months ended June 30,
(dollars in thousands)		2007								2006								2007								2006
		(Unaudited)																(Unaudited)
Revenue:
Construction services		$	59,062				58.3	%		$	49,907				53.1	%		$	36,338				62.0	%		$	25,288				52.5	%
Construction materials			41,814				41.3	%			44,090				46.9	%			22,104				37.7	%			22,960				47.5	%
Construction materials testing			424				0.4	%			69				0.1	%			209				0.3	%			69				0.0	%
Total revenue			101,300				100.0	%			94,066				100.0	%			58,651				100.0	%			48,317				100.0	%
Gross profit			8,751				8.6	%			9,515				10.1	%			4,798				8.2	%			4,767				9.9	%
General and administrative expenses			6,222				6.1	%			5,472				5.8	%			3,205				5.5	%			2,713				5.6	%
Income from operations			2,529				2.5	%			4,043				4.3	%			1,593				2.7	%			2,054				4.3	%
Interest income			768				0.8	%			358				0.4	%			399				0.7	%			169				0.3	%
Interest expense			(146	)			-0.1	%			(154	)			-0.2	%			(68	)			-0.1	%			(79	)			-0.2	%
Other income			166				0.2	%			45				0.0	%			64				0.1	%			25				0.1	%
Income before income taxes and minority interest in consolidated subsidiary			3,317				3.3	%			4,293				4.6	%			1,988				3.4	%			2,169				4.5	%
Income tax expense			(1,230	)			-1.2	%			(1,591	)			-1.7	%			(758	)			-1.3	%			(807	)			-1.7	%
Income before minority interest in consolidated subsidiary			2,087				2.1	%			2,702				2.9	%			1,230				2.1	%			1,362				2.8	%
Minority interest in consolidated subsidiary			701				0.7	%			964				1.0	%			374				0.6	%			488				1.0	%
Net income		$	1,386				1.4	%		$	1,738				1.8	%		$	856				1.5	%		$	874				1.8	%
Depreciation and amortization		$	3,421				3.4	%		$	2,842				3.0	%		$	1,777				3.0	%		$	1,466				3.0	%

Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006

     Revenue and Backlog. Consolidated revenue for the six months ended June 30, 2007 (“interim 2007”) was $101.3 million compared to $94.1 million for the six months ended June 30, 2006 (“interim 2006”). The increase in revenue was the result of a $9.2 million increase in revenue from the construction services segment and a $.3 million increase in revenue from the construction materials testing segment, offset by a $2.3 million decrease in revenue from the construction materials segment. The increase in the construction services segment revenue was the result of the progress schedules and the nature of the contracts contained in the backlog at the beginning of interim 2007. Backlog as of June 30, 2007 increased 45.9% from June 30, 2006 to $104.4 million. The decrease in the construction materials segment revenue resulted primarily from a 9.3% decrease in the sale of cubic yards of concrete, which we refer to as “units,” partially offset by a 6.9% increase in the average unit sales price. The decreased volume in interim 2007 was primarily due to the decline in the housing market, which has affected our residential concrete customers, and the ebbs and flows of commercial construction projects. The increased average unit sales price reflects the change in the mix of the various ready-mix products we manufacture, including higher strength products requiring higher cement content, thus a higher per unit sales price.

     Gross Profit. Consolidated gross profit decreased to $8.8 million for interim 2007 from $9.5 million for interim 2006 and consolidated gross profit margin, as a percent of revenue, decreased to 8.6% in interim 2007 from 10.1% in interim 2006. Gross profit from construction materials decreased to $4.5 million in interim 2007 from $5.5 million in interim 2006 and the gross profit margin decreased to 10.7% from 12.5% in the respective periods. The materials segment’s decrease in gross profit margin during interim 2007 compared to interim 2006 was primarily due to decreased demand for our products on an increased fixed asset base resulting from our plant and delivery expansions. Although our average unit sales price increased, our variable unit costs also increased as a percentage of revenue. We anticipate that as a result of our recent expansion efforts now nearing completion our fixed costs should stabilize and allow for future capacity when demand in our market returns. Gross profit from construction services increased to $4.4 million in interim 2007 compared to $4.0 million in interim 2006, while the gross profit margin decreased to 7.4% from 8.0% in the respective periods. The decrease in the gross profit margin during interim 2007 was due to the combined mix of various projects at the early or beginning stages of the overall progress stages. We tend to estimate project margins conservatively when projects are in the early stages of construction. Accordingly, projects performed well in interim 2007and we expect projects to continue to realize margins achieved in the last several quarters. Gross profit margins are affected by a variety of factors including the quality and accuracy of the original estimate, 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, therefore the gross profit in interim 2007 may not be indicative of the annual gross profit margin.

     General and Administrative Expenses. General and administrative expenses increased to $6.2 million for interim 2007 from $5.5 million for interim 2006. The increase in the general and administrative expenses was the result of an increase of $.1 million in employee compensation expense, a decrease of $.1 million in legal expense, an increase of $.5 million in public company reporting and consulting expenses and an increase of $.2 million in our bad debt and administrative depreciation expenses.

     Interest Income and Expense. Interest income for interim 2007 increased to $.8 million from $.4 million for interim 2006, resulting primarily from an increase in invested cash reserves. Interest expense remained relatively flat at $.2 million for interim 2007 compared to interim 2006. Interest expense directly related to equipment is expensed as a cost of the equipment and is included in the cost of revenue.

     Income Taxes. The decrease in the income tax provision for interim 2007 to $1.2 million compared to an income tax provision of $1.6 million for interim 2006 was due to a decrease in pre-tax income during interim 2007.

     Net Income. Net income was $1.4 million in interim 2007 as compared to net income of $1.7 million for interim 2006. Interim 2007 net income is net of approximately $.7 million of minority interest compared to $1.0 million of minority interest in interim 2006.

Three Months Ended June 30, 2007 compared to Three Months Ended June 30, 2006

     Revenue and Backlog. Consolidated revenue for the three months ended June 30, 2007, which we refer to as “2^nd quarter 2007,” was $58.7 million compared to $48.3 million for the three months ended June 30, 2006, which we refer to as “2^nd quarter 2006.” The increase in revenue was the result of an $11.0 million increase in revenue from the construction services segment and a $.1 million increase in revenue from the construction materials testing segment, offset by $.9 million decrease in revenue from the construction materials segment. The decrease in the construction materials segment was due to a 6.9% decrease in the sale of cubic yards of concrete, which we refer to as “units,” partially offset by a 4.8% increase in the average unit sales price. The construction services segment revenue was impacted by the scheduled work activities of current projects in progress and the nature of the contracts contained in the backlog at the beginning of 2^nd quarter 2007. During the 2^nd quarter 2007, backlog increased 15.7% to $104.4 million.

     Gross Profit. Consolidated gross profit remained relatively flat at $4.8 million for 2^nd quarter 2007 compared to 2^nd quarter 2006 and consolidated gross margin, as a percent of revenue, decreased to 8.2% in 2^nd quarter 2007 from 9.9% in 2^nd quarter 2006. Gross profit from construction services increased to $2.5 million in 2^nd quarter 2007 when compared to $1.9 million in 2^nd quarter 2006 and the gross profit margin decreased to 6.8% from 7.6% in the respective periods. Gross profit margins in the services segment are affected by a variety of factors including the quality and accuracy of the original estimate, 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. Accordingly, the gross profit in 2^nd quarter 2007 may not be indicative of the annual gross profit margin. Gross profit from construction materials decreased to $2.4 million in 2^nd quarter 2007 from $2.8 million in 2^nd quarter 2006 and the gross profit margin decreased to 10.7% from 12.4% in the respective periods. The decrease in the gross profit margin during 2^nd quarter 2007 was primarily due to decreased demand for our products on an increased fixed asset base resulting from our plant and delivery expansions. Although our average unit sales price increased, our variable unit costs also increased as a percentage of revenue.

     General and Administrative Expenses. General and administrative expenses increased to $3.2 million for 2^nd quarter 2007 from $2.7 million in 2^nd quarter 2006. General and administrative expenses increased due to a $.1 million increase in employee compensation expense, a $.1 million increase in bad debt expense and a $.3 million increase in public company expenses.

     Interest Income, Expense and Other Income. Interest income and other income increased $.3 million, while interest expense remained flat in 2^nd quarter 2007 compared to 2^nd quarter 2006. Interest income and other income increased due to interest earned on increased cash balances, gains on the sale of equipment and increased miscellaneous income.

     Income Taxes. The income tax provision remained relatively flat at $.8 million for 2^nd quarter 2007 compared 2^nd quarter 2006.

     Net Income. Net income remained relatively flat at $.9 million for 2^nd quarter 2007 and 2^nd quarter 2006.

Liquidity and Capital Resources

     Our primary need for capital will be to maximize our working capital to continually improve our bonding capacity.

     Historically, our primary source of cash has been from operations and financial institutions. We believe our historical sources of capital will be satisfactory to meet our needs for the next 12 months.

     We currently have credit facilities with Wells Fargo Equipment Finance, Inc., formerly known as CIT Construction (“WFE”), which provides us with $8.0 million in revolving credit and $15.0 million in capital expenditure commitments. These credit facilities are collateralized by each of our subsidiaries’ assets as well as our guarantee. Under the terms of the agreements, we are required to maintain a certain level of tangible net worth as well as maintain a ratio of total debt to tangible net worth, and earnings before interest, tax, depreciation and amortization (EBITDA). The Company, MVCI and RMI, are also required to maintain a ratio of cash flow to current portion of long term debt. As of June 30, 2007, we were compliant with these covenants. As of June 30,

2007, approximately $6.5 million in revolving credit was available under these agreements. As of June 30, 2007, the Company and RMI had approximately $4,500,000 of availability under the capital expenditure commitment.

     The following table sets forth for the six months ended June 30, 2007 and 2006, certain items from the condensed consolidated statements of cash flows.

		Six Months Ended June 30,
		2007				2006
		(unaudited)
Cash flows provided by operating activities		$	9,271,509			$	3,225,087
Cash flows used in investing activities			(8,218,252	)			(8,947,030	)
Cash flows provided by (used in) financing activities			(2,737,706	)			19,109

     Cash provided by operating activities during interim 2007 of $9.3 million represents a $6.1 million increase from the amount provided by operating activities during interim 2006. The change was primarily due to the increase in cash received from customers.

     Cash used in investing activities during interim 2007 of $8.2 million represents a $.7 million decrease from the amount used in investing activities during interim 2006. The change was primarily due to the decrease in the purchase of property and equipment and the decrease in restricted cash, offset by the purchase of minority interest common stock.

     Cash used in financing activities during interim 2007 of $2.7 million represents a $2.8 million increase in cash used in financing activities during interim 2006. The change was primarily due to the decrease in proceeds from notes payable of $.4 million and $2.4 million more cash used in repayments of notes payable.

Website Access

     Our website address is www.meadowvalley.com. On our website we make available, free of charge, our annual report on Form 10-K, our most recent quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4, and 5 related to beneficial ownership of securities, code of ethics and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the United States Securities and Exchange Commission. The information on our website is not incorporated into, and is not part of, this report.

Item 3. Quantitative and Qualitative Disclosures 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. We do not have foreign currency exchange rate market risk. We purchase commodities, such as cement, aggregates and diesel fuel, at market prices and are not aware of any financial instruments to hedge these commodity prices.

     Our operations are likely to be affected by the level of general construction activity, including the level of interest rates and availability of funds for construction projects. A significant decrease in the level of general construction activity in any of the metropolitan areas which we service may have a material adverse effect on our sales and earnings.

     Interest Rate Risk—From time to time we temporarily invest our excess cash in interest-bearing securities issued by high-quality issuers. We monitor risk exposure to monies invested in securities in our financial institutions. Due to the short time the investments are outstanding and their general liquidity, these instruments are classified as cash equivalents in the condensed consolidated balance sheet and do not represent a material interest rate risk. Our primary market risk exposure for changes in interest rates relates to our long-term debt obligations. We manage our exposure to changing interest rates principally through the use of a combination of fixed and floating rate debt.

     We evaluated the potential effect that near term changes in interest rates would have had on the fair value of our interest rate risk sensitive financial instruments at June 30, 2007. Assuming a 100 basis point increase in the prime interest rate at June 30, 2007, the potential increase in the fair value of our debt obligations would have been

approximately $.02 million at June 30, 2007. See Note 3—Notes payable in the accompanying June 30, 2007 condensed consolidated financial statements.

Item 4. Controls and Procedures

     An evaluation as of the end of the period covered by this report was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that those disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. In addition, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

     It should be noted that any system of controls, however well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

     For information about litigation involving us, see Note 7 to the condensed consolidated financial statements in Part I of this report, which we incorporate by reference into this Item 1.

Item 1A. Risk Factors

     In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2006, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There are no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 during the six months ended June 30, 2007.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     None

Item 3. Defaults Upon Senior Securities

     None

Item 4. Submission of Matters to a Vote of Security Holders

     At the Company’s Annual Meeting of Shareholders held on June 11, 2007, nominees for Class C Directors of the Company, to hold office for a three year term, expiring in 2010, or until election and qualification of their successors or until their resignation, death, disqualification or removal from office were elected by the holders of Common Stock with the following vote:

		Affirmative				Authority				Broker non-
Class C Directors		Votes				Withheld				votes/Abstentions
Charles R. Norton			2,866,109				1,516,125				—
Bradley E. Larson			2,866,109				1,516,125				—

     A proposal to ratify the selection of Semple, Marchal & Cooper, LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2007 was approved by the holders of Common Stock with the following vote:

Affirmative		Against		Authority		Broker non-
Votes		Votes		Withheld		votes/Abstentions
3,727,313		424,879		230,042		—

     A proposal introduced by a shareholder to act in the most expeditious manner, consistent with effective tax considerations, to liquidate the Company’s investment in Ready Mix, Inc. and distribute the proceeds to the Company’s shareholders was not approved by the holders of Common Stock with the following vote:

Affirmative		Against		Authority		Broker non-
Votes		Votes		Withheld		votes/Abstentions
1,225,356		2,194,053		2,482		—

Item 5. Other Information

     None

Item 6. Exhibits

Exhibits:
31.1		Certification of Chief Executive Officer Pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934
31.2		Certification of Chief Financial Officer Pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934
32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.