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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
(Mark One)
x
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
 
For the fiscal year ended December 31, 2017
Or
¨
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: 1-7525

The Goldfield Corporation
(Exact name of registrant as specified in its charter)
Delaware
 
88-0031580
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
1684 W. Hibiscus Boulevard
Melbourne, Florida 32901
(Address of principal executive offices, including zip code)
(321) 724-1700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock
 
NYSE AMERICAN
par value $0.10 per share
 
 
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No   x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  x   No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x   No  ¨


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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
 
Accelerated filer
x
 
 
 
 
 
Non-accelerated filer
¨
 
Smaller reporting company
x
 
 
 
 
 
 
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $127.6 million as of June 30, 2017 (the last business day of the registrant’s most recently completed second fiscal quarter), computed by reference to the price at which such common equity was last sold on such date.
The number of shares of the registrant’s common stock, $0.10 par value per share, outstanding as of March 9, 2018 was 25,451,354.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of The Goldfield Corporation’s definitive proxy statement for its 2018 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the year covered by this Form 10-K Report are incorporated by reference into Part III of this report.
 



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THE GOLDFIELD CORPORATION AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2017
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Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



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PART I
Item 1.    Business.
General
The Goldfield Corporation, incorporated in Wyoming in 1906 and subsequently reincorporated in Delaware in 1968, is primarily engaged in the construction of electrical infrastructure for the utility industry and industrial customers, primarily in the Southeast and mid-Atlantic regions of the United States and Texas. Unless the context otherwise requires, the terms “Goldfield,” the “Company,” “we,” “our” and “us” as used herein mean The Goldfield Corporation and its consolidated subsidiaries.
Our Internet website address is www.goldfieldcorp.com. Within the “Investor Relations” section, under the “Investors” tab of our website, we make available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission (“SEC”). The information on our website is not incorporated by reference into this Annual Report on Form 10-K. You may also access our reports at the SEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC at the SEC’s public reference facilities located at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference facilities.
Financial Information About Geographic Areas
During the years ended December 31, 2017 and 2016, our operations were exclusively in the United States.
Employees
As of March 4, 2018, we had a total of 373 employees, which included 363 full-time and ten part-time employees. These employees included 82 unionized employees at our subsidiary, C and C Power Line, Inc. (“C&C”). The total number of employees includes 323 hourly-rate employees. The number of hourly-rate employees fluctuates depending upon the number and size of projects under construction at any particular time. We believe that our relationship with our employees is good.
Electrical Construction Operations
Through our subsidiaries, Power Corporation of America (“PCA”), Southeast Power Corporation (“Southeast Power”) and C&C, we are engaged in the construction of electrical infrastructure for the utility industry and industrial customers. Southeast Power and C&C operate under Power Corporation of America, headquartered in Port Orange, Florida. Southeast Power is headquartered in Titusville, Florida, and has additional offices in Bastrop, Texas and Spartanburg, South Carolina. C&C, headquartered in Jacksonville, Florida, is a full service electrical contractor that provides similar services as Southeast Power with a unionized work force.
Our electrical construction business includes the construction of transmission lines, distribution systems, substations, drilled pier foundations and other electrical services.
Representative customers include:
Santee Cooper (South Carolina Public Service Authority)
 
Central Electric Power Cooperative, Inc.
Florida Power & Light Company
 
Duke Energy Corporation
CPS Energy
 
Orlando Utilities Commission
Lower Colorado River Authority
 
Lee County Electric Cooperative
Historically, a significant portion of our revenue has come from several different customers each year. Our largest customers may change from year to year. For the year ended December 31, 2017, our top three customers accounted for approximately 58.7% of our consolidated revenue. Since the contribution of a customer may vary from year to year, we cannot predict the future effect of the loss of any given customer.
It is our policy to commit ourselves only to the amount of work we believe we can properly supervise, equip and complete to the customer’s satisfaction and timetable. As a result of this policy and the magnitude of some of the construction projects undertaken by us, a substantial portion of our annual revenue is derived from a relatively small number of customers. See note 11 to the consolidated financial statements for detail on sales to major customers that exceed 10% of total sales.
Construction is customarily performed pursuant to plans and specifications of customers. We generally supply the management, labor, equipment and tools, while customers generally supply most of the required materials, except we generally supply most of the required materials for the construction of concrete foundations. We are not presently experiencing, nor do we anticipate experiencing, any difficulties in procuring an adequate supply of materials.

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Revenue and results of operations in our electrical construction business can be subject to seasonal variations. These variations are influenced by weather, customer spending patterns and system loads. Project duration varies based on project type, complexity and customer requirements.
We enter into contracts on the basis of either competitive bidding, direct negotiations or pursuant to master service agreements (“MSAs”). Competitively bid contracts and MSAs account for a majority of our electrical construction revenue. Although there is considerable variation in the terms of the contracts undertaken, such contracts are typically lump sum (fixed-price) or unit price contracts. Most of our contracts do not require our clients to purchase a minimum amount of services, and some of our contracts are cancelable on short notice.
In certain circumstances, we are required to provide performance and payment bonds issued by a surety to secure our contractual commitments. These bonds provide a guarantee to the customer that we will perform under the terms of a contract and that we will pay subcontractors and vendors. If we fail to perform under a contract or to pay subcontractors and vendors, the customer may demand the surety make payments or provide services under the bond. Management is not aware of any performance bonds issued for us that have ever been called by a customer. We currently believe that we will not have to fund any claims under our surety arrangements in the foreseeable future. We believe that we have adequate bonding availability for our operations. As of December 31, 2017, outstanding performance bonds issued on behalf of our electrical construction subsidiaries amounted to $58.2 million.
Contracts may include retention provisions. From 5% to 10% is withheld by the customer from progress payments as retainage until the contract work has been completed and approved.
Backlog
Our backlog represents future services to be performed under existing project-specific fixed-price and maintenance contracts and the estimated value of future services that we expect to provide under our existing MSAs.
The following table presents our total backlog as of December 31, 2017 and 2016 along with an estimate of the backlog amounts expected to be realized within 12 months and during the life of each of the MSAs. The existing MSAs have remaining renewals ranging from one to three years at the option of the customer. The calculation assumes exercise of the renewal options by the customer. Revenue from assumed exercise of renewal options represents $131.2 million (70.1%) of our total estimated MSA backlog as of December 31, 2017.
 
 
Backlog as of
 
Backlog as of
 
 
December 31, 2017
 
December 31, 2016
Electrical Construction Operations
 
12-Month
 
Total
 
12-Month
 
Total
Project-Specific Firm Contracts (1)
 
$
27,110,793

 
$
27,110,793

 
$
27,094,081

 
$
27,094,081

Estimated MSAs
 
83,124,471

 
187,047,802

 
70,464,180

 
162,923,289

Total
 
$
110,235,264

 
$
214,158,595

 
$
97,558,261

 
$
190,017,370

 
 
 
 
 
 
 
 
 
(1)Amount includes firm contract awards under MSA agreements.
Our 12-month backlog as of December 31, 2017, increased $12.7 million (13.0%) to $110.2 million, due to the successful renewal of an MSA agreement and adjustments to existing MSA backlog estimates, partially offset by existing MSA backlog run off.
Our total backlog as of December 31, 2017, increased $24.1 million (12.7%) to $214.2 million, compared to $190.0 million as of December 31, 2016. The increase in total backlog is primarily due to the aforementioned successful renewal of an MSA agreement and adjustments to existing MSA backlog estimates, partially offset by existing MSA backlog run off.
Of our total backlog as of December 31, 2017, we expect approximately $110.2 million (51.5%) to be completed during 2018.
Backlog is estimated at a particular point in time and is not determinative of total revenue in any particular period. It does not reflect future revenue from a significant number of short-term projects undertaken and completed between the estimated dates. Our electrical construction revenue in 2017 exceeded our 12-month backlog as of December 31, 2016 by 11.9%.
The estimated amount of backlog for work under MSAs is calculated by using recurring historical trends inherent in current MSAs and projected customer needs based upon ongoing communications with the customer. Our estimated backlog also assumes exercise of existing customer renewal options. Certain MSAs are not exclusive to the Company and, therefore, the size and amount of projects we may be awarded cannot be determined with certainty. Accordingly, the amount of future revenue from MSA contracts may vary substantially from reported backlog. Even if we realize all of the revenue from the projects in our backlog, there is no guarantee of profit from the projects awarded under MSAs.

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As of December 31, 2017 and 2016, MSAs accounted for approximately 87.3% and 85.7% of total backlog, respectively. We plan to continue our efforts to grow MSA business. MSA contracts are generally multi-year and should provide improved operating efficiencies.
Backlog is not a term recognized under U.S. generally accepted accounting principles, but is a common measurement used in our industry. While we believe that our methodology of calculation is appropriate, such methodology may not be comparable to that employed by some other companies. Given the duration of our contracts and MSAs and our method of calculating backlog, our backlog at any point in time may not accurately represent the revenue that we expect to realize during any period, and our backlog as of the end of the year may not be indicative of the revenue we expect to earn in the following year and should not be viewed or relied upon as a stand-alone indicator. Consequently, we cannot provide assurance as to our customers’ requirements or our estimates of backlog.
Revenue estimates included in our backlog may be subject to change as a result of project accelerations, additions, cancellations or delays due to various factors, including but not limited to: commercial issues, material deficiencies, permitting, regulatory requirements and adverse weather. Our customers are not contractually committed to a specific level of services under our MSAs (other than project-specific firm contracts under MSAs). While we did not experience any material cancellations during the current period, most of our contracts may be terminated, even if we are not in default under the contract.
For further information regarding the factors that affect the realizability of profits from our business backlog, please refer to the information set forth in “Item 1A. Risk Factors.”
Competition and Regulation
The electrical construction business is highly competitive. We compete with other independent contractors, including larger regional and national firms that may have financial, operational, technical and marketing resources that exceed our own. Competitive factors include: level of technical expertise and experience, industry reputation, quality of work, price, geographic presence, dependability, availability of skilled personnel, worker safety and financial stability. Our management believes that we compete favorably with our competitors on the basis of these factors. There can be no assurance that our competitors will not develop the expertise, experience and resources to provide services that are superior in both price and quality to our services, or that we will be able to maintain or enhance our competitive position.
We are subject to various federal, state and local statutes and rules regarding, among other things, contractor licensing, electrical codes, worker safety and environmental protection. We believe that we are in substantial compliance with all applicable regulatory requirements.
Properties
The Company and its subsidiaries operate with owned or leased offices and facilities located in Florida, South Carolina and Texas. Individually, none of the properties are financially significant to the Company. We believe that such properties are currently in good condition and properly maintained. See note 8 to the consolidated financial statements for additional detail on properties.
Other Operations - Real Estate Development
Our real estate development operations are not significant for reporting purposes and, accordingly, results of the ongoing real estate development operations are included in the income statement under the caption “Other.” Revenue from real estate development under the caption “Other” was $4.8 million and $4.7 million for the years ended December 31, 2017 and 2016, respectively, representing approximately 4% of our total revenue for both years. Our current real estate development activity is the construction of single and multi-family residential projects in Brevard County, Florida.
Item 1A.    Risk Factors.
Our business involves various risks associated with the operations of our Company. To provide a framework to understand our operating environment, we are providing a brief explanation of the significant risks associated with our business. Although we have tried to identify and discuss key risk factors, others could emerge in the future. Each of the following risks could affect our performance.
Changes in Tax Laws
Changes in tax laws or tax rates may have a material impact on our future cash expended for taxes, effective tax rate or deferred tax assets and liabilities. These conditions are beyond our control and may have a significant impact on our business, results of operations, liquidity, and financial position. See “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations” and note 3 to the consolidated financial statements for additional information on the impact of the Tax Cuts and Jobs Act (the “Tax Act”) enacted in December 2017.

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Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
Borrowings under our credit facility are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same, and net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.
We derive a significant portion of our revenue from a small group of customers. The loss of one or more of these customers could negatively impact our revenue and results of operations.
Our electrical construction customer base is highly concentrated. For the year ended December 31, 2017, our top three customers accounted for approximately 58.7% of our consolidated revenue, as discussed in note 11 to our consolidated financial statements herein. Our revenue could materially decline if one or more of our significant customers terminated our business relationship. Revenue under our contracts with significant customers may vary substantially from period-to-period. Reduced demand for our services or the loss of one or more of these customers, if not replaced by other business, would result in a decrease in revenue and profits, and could have a material impact on our results of operations.
The electrical construction industry is highly competitive.
The electrical construction business is highly competitive. We compete with other independent contractors, including larger regional and national firms that may have financial, operational, technical and marketing resources that exceed our own. We also face competition from existing and prospective customers establishing or augmenting in-house service and organizations that employ personnel who perform some of the same types of services as those provided by us. Some of our competitors may have lower cost structures and may, therefore, be able to provide their services at lower rates than we can provide. Many of our current and potential competitors, especially our competitors with national scope, also may have significantly greater financial, technical and marketing resources than we do. If we fail to compete favorably with new or existing competitors, our results of operations and financial condition could be adversely affected.
Our business is affected by the spending patterns of our customers, exposing us to variable quarterly results.
Our revenues are primarily driven by the spending patterns of our customers, which can vary significantly from period-to-period, as well as seasonal variations. These variations are influenced by available system outages from utilities, bidding seasons, customers’ budgetary constraints, holidays, weather and hours of daylight, which can have a significant impact on our gross margins.
An adverse change in economic conditions in the electric utility industry might reduce the demand for our services.
Because a substantial portion of our electrical construction work is performed for customers in the electric utility industry, an adverse change in economic conditions in the electric utility industry could impair the financial condition of many of our customers, which may cause them to reduce their capital expenditures and demand for our services.
Skilled labor shortages and increased labor costs may negatively affect our ability to compete for new projects.
In our electrical construction business, we have from time to time experienced shortages of certain types of qualified personnel. The commencement of new, large-scale infrastructure projects, increased demand for infrastructure improvements, a departure of workers to storm devastated locations and the aging utility workforce reduce the pool of skilled labor available to us, even if we are not awarded such projects. As a result of these factors, the supply of experienced linemen and supervisors may not be sufficient to meet our expected demand and we may not be able to allocate or hire a sufficient number of project managers for new electrical construction projects. We may also spend considerable resources training employees who may then be hired by our competitors, forcing us to spend additional funds to attract personnel to fill those positions. If we were unable to retain sufficient qualified personnel at a reasonable cost, or at all, we would be unable to staff new and existing projects, which would reduce our revenue and profits.
Our use of percentage-of-completion accounting may result in a reduction or elimination of previously reported profits.
As discussed in Critical Accounting Estimates and in the notes to our consolidated financial statements included herein, a significant portion of our revenue in our electrical construction operations is recognized on a percentage-of-completion method of accounting, using the cost-to-cost method, which is standard for fixed-price contracts. For the percentage-of-completion accounting practice, we recognize contract revenue and earnings ratably over the contract term in proportion to our incurrence of contract costs. The earnings or losses recognized on individual contracts are based on estimates of contract revenue, costs and profitability. The cost of labor and materials, however, may vary from the costs we originally estimated. These variations, along with other risks inherent in performing fixed-price contracts, may cause actual revenue and gross profit for a project to differ from those we originally estimated and may result in reduced profitability or losses on projects. Depending upon the size of a particular project, variations from the estimated contract costs may have a significant impact on our operating results for any quarter or year.

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We possess a significant amount of accounts receivable and costs and estimated earnings in excess of billings assets.
We extend credit to our customers as a result of performing work under contract prior to billing our customers for that work. These customers mainly include electric utilities. As of December 31, 2017, we had net accounts receivable of $21.6 million and costs and estimated earnings in excess of billings of $6.1 million. We periodically assess the credit risk of our customers and continuously monitor the timeliness of payments. Slowdowns in the industries we serve may impair the financial condition of one or more of our customers and hinder their ability to pay us on a timely basis or at all. The failure or delay in payment by our customers may reduce our cash flows and adversely impact our liquidity and profitability.
Amounts included in our backlog may not result in revenue or translate into profits.
Backlog for our electrical construction operations as of December 31, 2017 was $214.2 million, which represents the estimated amount of revenue that we expect to realize from work to be performed on uncompleted contracts, including new contractual agreements on which work has not begun. Of the total backlog, $187.0 million is attributable to MSAs (other than project-specific firm contracts under MSAs). We determine the estimated amount of backlog for work under MSAs by using recurring historical trends in current MSAs and projected customer needs based upon ongoing communications with the customer. These service agreements do not require our customers to award a minimum amount of contracts and are cancelable on short notice. To the extent that our customers cancel their contracts with us or reduce their requirements during a particular period for any reason, we will not realize revenue or profit from the associated backlog. Furthermore, contracts included in our backlog may not be profitable. We may experience variances in the realization of backlog revenue because of project delays or cancellations, external market factors and economic factors beyond our control. Even if we realize all of the revenue from the projects in our backlog, there is no guarantee of profit from the projects awarded under MSAs. Given these factors and our method of calculating backlog, our backlog at any point in time may not accurately represent the revenue that we expect to realize during any period, and our backlog as of the end of the year may not be indicative of the revenue we expect to earn in the following year and should not be viewed or relied upon as a stand-alone indicator. Consequently, we cannot provide assurance as to our customers’ requirements or our estimates of backlog and should we receive less revenue than expected, our results of operations and financial condition may be adversely affected. For further discussion on how we calculate backlog for our business, please refer to the information set forth in “Item 1. Business” under the caption “Backlog.”
Our projects are subject to numerous hazards. If we do not maintain an adequate safety record, we may be ineligible to bid on certain projects, may be terminated from existing projects and may have difficulty procuring adequate insurance.
Hazards experienced as a result of our electrical construction operations include electrocutions, fires, mechanical failure and transportation accidents. These hazards can cause and have caused personal injury and loss of life, severe damage to or destruction of property and equipment, and other consequential damages, including blackouts, and may result in suspension of our operations on a project, large damage claims, and, in extreme cases, criminal liability. At any given time, we are subject to workers’ compensation claims and claims by employees, customers and third parties for property damage, loss of life and personal injuries resulting from such hazards or other workplace accidents. Further, regulatory changes implemented by the Occupational Safety and Health Administration may impose additional costs on us. Notwithstanding our investment of substantial resources in occupational health and safety programs, our industry involves a high degree of operational risk and we may be unable to avoid accidents resulting from the hazards described above and the associated liability exposure, which may be significant. Furthermore, if serious accidents or fatalities were to occur or if our safety record were to deteriorate, we may become ineligible to bid on certain projects and may be terminated from existing projects, our reputation and our prospects for future projects may be negatively affected, and we may be required to expend additional resources on health and safety programs. In addition, if our safety record were to significantly deteriorate, it would become more difficult and expensive for us to procure adequate insurance.
An inability to obtain bonding would have a negative impact on our operations and results.
On many of our projects we are required to provide performance bonds to secure our contractual commitments. We have not experienced difficulty in obtaining bonding. However, if we were unable to obtain surety bonds in the future, or were required to post collateral in order to obtain surety bonds, our ability to obtain new contracts would be adversely affected. This may have a material adverse effect on our results of operations and financial condition.
Our capital expenditures may fluctuate as a result of changes in business requirements.
Our anticipated capital expenditure requirements may vary from time to time as a result of changes in our business. Increased capital expenditures will use cash flow and may increase our borrowing costs if cash for capital expenditures is not available from operations.

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We may be unable to secure sufficient independent subcontractors to fulfill our obligations, or our independent subcontractors may fail to satisfy their obligations.
We utilize independent subcontractors to complete work on a portion of our projects. If we are unable to secure independent subcontractors at a reasonable cost or at all, we may be delayed in completing work under a contract or the cost of completing the work may increase. In addition, we may have disputes with these independent subcontractors arising from, among other things, the quality and timeliness of the work they performed. Any of these factors may adversely affect the quality of our service, our ability to perform under certain contracts and the relationship with our customers, which could have an adverse effect on our results of operations, cash flows and liquidity.
Our failure to properly manage projects, or project delays, may result in additional costs or claims, which could have a material adverse effect on our operating results, cash flows and liquidity.
Certain of our engagements involve large-scale, complex projects. The quality of our performance on such a project depends in large part upon our ability to manage our client relationship and the project itself and to timely deploy appropriate resources, including third-party contractors and our own personnel. Our results of operations, cash flows and liquidity could be adversely affected if we miscalculate the resources or time needed to complete a project with capped or fixed fees, or the resources or time needed to meet contractual milestones. Additionally, delays on a particular project, including permitting, material and weather delays, may cause us to incur costs for standby pay, and may lead to personnel shortages on other projects scheduled to commence at a later date. In addition, some of our agreements require that we share in cost overages or pay liquidated damages if we do not meet project deadlines; therefore, any failure to properly estimate or manage costs, or delays in completion of projects, could subject us to penalties, which could adversely affect our results of operations, cash flows and liquidity. Further, any defects or errors, or failures to meet our customers’ expectations could result in large damage claims against us, and because of the substantial cost of, and potentially long lead-times necessary to acquire certain of the materials and equipment used in our more complex projects, damage claims may substantially exceed the amount we can charge for our associated services.
Our business may be affected by difficult work sites and environments, which could cause delays and increase our costs.
We perform work under a variety of conditions, including, but not limited to, difficult and hard to reach terrain and difficult site conditions. Weather changes can materially change work site conditions after initial inspection and bid submittal. Performing work under such conditions can result in project delays or cancellations, potentially causing us to incur additional unanticipated costs, reductions in revenues or the payment of liquidated damages. In addition, most of our contracts require that we assume the risk should actual site conditions vary from those expected.
Our unionized workforce and related obligations could adversely affect our operations.
Certain of our employees are represented by labor unions and collective bargaining agreements. Although all such collective bargaining agreements prohibit strikes and work stoppages, we cannot be certain that strikes or work stoppages will not occur despite the terms of these agreements. Strikes or work stoppages would adversely impact relationships with our customers and could cause us to lose business and decrease our revenue. Additionally, as current agreements expire, the labor unions may not be able to negotiate extensions or replacements on terms favorable to their members, or at all, or avoid strikes, lockouts or other labor actions from time to time that may affect their members. Therefore, it cannot be assured that new agreements will be reached with employee labor unions as existing contracts expire, or on terms that we find desirable. Any labor action against us relating to failure to reach an agreement with employee labor unions could have a material adverse effect on our liquidity, cash flows and results of operations.
We may be required to contribute cash to meet our underfunded obligations in certain multi-employer pension plans.
Our collective bargaining agreements generally require us to participate with other companies in multi-employer pension plans. To the extent those plans are underfunded, the Employee Retirement Income Security Act of 1974, as amended by the Multi-Employer Pension Plan Amendments Act of 1980, may subject us to substantial liabilities under those plans if we withdraw from them or they are terminated or experience a mass withdrawal.
In addition, the Pension Protection Act of 2006 added special funding and operational rules generally applicable to plan years beginning after 2007 for multi-employer plans that are classified as “endangered,” “seriously endangered,” or “critical” status. Plans in these classifications must adopt measures to improve their funded status through a funding improvement or rehabilitation plan, which may require additional contributions from employers (which may take the form of a surcharge on benefit contributions) and/or modifications to retiree benefits. A number of multi-employer plans to which we contribute or may contribute in the future could have “endangered,” “seriously endangered” or “critical” status. The amount of additional funds we may be obligated to contribute to these plans in the future cannot be estimated, as such amounts will likely be based on future work that requires the specific use of union employees covered by these plans, and the amount of that future work and the number of employees that may be affected cannot reasonably be estimated. Our performance of a significant amount of future services in areas that require us to utilize unionized employees covered by these affected plans, or a deterioration in the

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funding status of any of the plans to which our operating units contribute, could require significant additional contributions, which could detrimentally affect our results of operations, financial condition or cash flows if we are not able to adequately mitigate these costs.
Adverse weather conditions and climate change risk expose us to variable quarterly results.
Most of our work is performed outdoors and as a result, our results of operations can be adversely impacted by extended periods of inclement weather. Any weather related delays in the completion of, or which increase the cost of, our projects could adversely affect our revenue and results of operations in any one or more of our reporting periods. We cannot predict with certainty whether climate change is occurring and, if so, at what rate. However, the physical effects of climate change could have a material adverse effect on our properties, operations and business. The potential physical impacts of climate change on our operations are highly uncertain. Climate change may result in, among other things, changing rainfall patterns, changing storm patterns and intensities and changing temperature levels. Because our operating results are significantly influenced by weather, substantial changes in historical weather patterns could significantly impact our future operating results. For example, if climate change results in a greater amount of rainfall, snow, ice, flooding or other less accommodating weather over a greater period of time in a given period, we could experience reduced productivity, which could negatively impact our revenue and gross margins.
Environmental risks.
We are subject to numerous federal, state, local and environmental laws and regulations governing our operations, including the handling, transportation and disposal of non-hazardous and hazardous substances and wastes, as well as emissions and discharges into the environment, including discharges to air, surface water and groundwater and soil. We also are subject to laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment. Under some of these laws and regulations, such liabilities can be imposed for cleanup of previously operated properties regardless of whether we directly caused the contamination or violated any law at the time. The presence of any contamination from substances or wastes could interfere with ongoing operations. In addition, we could be held liable for significant penalties and damages under certain environmental laws and regulations and also could be subject to a revocation of our permits, which could materially and adversely affect our business and results of operations.
From time to time, we may incur costs and obligations for correcting environmental noncompliance matters and for remediation at or relating to our operations. We believe that we are currently in compliance with our environmental obligations and that any such obligations should not have a material adverse effect on our business or financial performance.
Climate change issues may result in the adoption of new environmental regulations that may unfavorably impact us, our suppliers, our customers, and subsequently effect how we conduct our businesses. This could also cause us to incur additional direct costs in complying with any new environmental regulations, as well as increased indirect costs resulting from our customers, suppliers, or both, incurring additional compliance costs that are passed on to us. These costs may adversely impact our operations and financial condition. In addition, developments in federal and state legislation and regulation on climate change could result in increased capital expenditures to improve the energy efficiency of our existing properties, equipment and our processes without a corresponding increase in revenue.
We could be adversely affected by environmental liabilities associated with our former mining business.
The Company was previously engaged in mining activities and disposed of our last mining property over 15 years ago. Although we are not aware of any current environmental investigations relating to previously owned sites, we could still be liable for previous activities at such sites. For example, in 2015 we completed remediation activities at a mining site which we sold over 50 years ago, as discussed in note 4 to the consolidated financial statements.
Our operating results may vary significantly from period-to-period.
Our periodic results may be materially and adversely affected by:
the timing and volume of work under contract;
changes in national, regional, local and general economic conditions;
the budgetary spending patterns of customers;
variations in margins of projects performed during any particular quarter;
a change in the demand for our services;
increased costs of performance of our services caused by severe weather conditions;
increases in design and construction costs that we are unable to pass through to our customers;
the termination of existing agreements;

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losses experienced in our operations that are not covered by insurance;
a change in the mix of our customers, contracts and business;
availability of qualified labor hired for specific projects; and
changes in bonding requirements applicable to existing and new agreements.
Our actual costs may be greater than expected in performing our fixed-price and unit-price contracts.
We currently generate, and expect to continue to generate, a significant portion of our revenues and profits under fixed-price and unit-price contracts. We must estimate the costs of completing a particular project when we bid for these types of contracts or when they are awarded under our current MSAs. The actual cost of labor and materials, however, may vary from the costs we originally estimated and we may not be successful in recouping additional costs from our customers. These variations, along with other risks inherent in performing fixed-price and unit-price contracts, may cause actual revenue and gross profits for a project to differ from those we originally estimated and could result in reduced profitability or losses on projects due to changes in a variety of factors such as:
failure to properly estimate costs of engineering, material, equipment or labor;
unanticipated technical problems with the materials or services being supplied by us, which may require us to incur additional costs to remedy the problem;
project modifications that create unanticipated costs;
changes in costs of equipment, materials, labor or subcontractors;
the failure of our suppliers or subcontractors to perform;
difficulties in our customers obtaining required governmental permits or approvals;
site conditions that differ from those assumed in the original bid (to the extent contract remedies are unavailable);
the availability and skill level of workers in the geographic location of the project;
an increase in the cost of fuel or other resources;
changes in local laws and regulations;
delays caused by local weather conditions, third parties or customers; and
quality issues requiring rework.
We could be adversely affected by the loss of key management personnel.
Our future success depends, to a significant degree, on the efforts of our executive officers and senior management, including those of our subsidiaries. Other than with respect to our Chief Executive Officer, we do not have employment agreements with any of our employees. We believe that key members of our senior management possess valuable industry knowledge, relationships and experience that are important to the successful operation of our business. The relationships between our executive officers and senior management and our customers are important to our being retained as a service provider. We are also dependent upon our project managers and field supervisors who are responsible for managing and drawing employees to our projects. There can be no assurance that any individual will continue in his or her capacity for any particular period of time. Industry-wide competition for managerial talent in electrical construction has increased and the loss of one or more of our key employees could negatively impact our ability to manage our business and relationships with our customers. The loss of any of our executive officers or senior management could adversely affect our financial condition and results of operations.
The violation of our debt covenants imposed by our credit facility could impact our access to that credit facility and therefore our cash flows.
Our debt arrangements contain various financial and other covenants including, but not limited to: minimum tangible net worth, outside debt limitation, maximum debt to tangible net worth ratio and fixed charge coverage ratio. Our loans also have cross-default provisions whereby any default under any loans of the Company (or its subsidiaries) with the lender will constitute a default under all of the other loans of the Company (and its subsidiaries) with the lender. Although we are in compliance with all covenants, if we were to experience substantial losses, absent a modification of the loan agreement or a waiver, this could result in a violation of the financial covenants. A violation of our financial covenants will give the right to our lender to accelerate our loans. Under these circumstances, there can be no assurance that we could obtain a modification or waiver. The acceleration of all of our loans would adversely affect our cash flows and consequently our results of operations.

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Due to our market capitalization, we will be unable to continue to rely on the exemption from the requirement to provide an attestation by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. If we fail to maintain effective internal control, investors could lose confidence and the market value of our common stock could decrease.
The Sarbanes-Oxley Act of 2002 has many requirements applicable to us regarding corporate governance and financial reporting, including the requirement that management report on our internal control over financial reporting. As of December 31, 2017, our internal control over financial reporting was effective. Refer to “Item 9A. Controls and Procedures.” However, there can be no assurance that our internal control over financial reporting will continue to be effective in the future. Pursuant to rules of the SEC, we will no longer be exempt from the requirement that our independent registered public accounting firm express an opinion on the effectiveness of our internal control over financial reporting. Therefore, we engaged our independent registered public accounting firm to perform an audit of our internal control over financial reporting. Refer to “Item 9A. Controls and Procedures.”
Our aggregate market value of the voting and non-voting common equity held by non-affiliates of the Company increased to $127.6 million on June 30, 2017, which rendered us ineligible to rely on this exemption. Furthermore, as of this year, we are in year one of compliance with Section 404(b) of the Sarbanes-Oxley Act of 2002, which requires our registered public accounting firm, who prepares and issues the audit report for us, to attest to, and report on, the assessment made by management regarding our internal controls over financial reporting. Refer to “Item 9A. Controls and Procedures.” As we grow our business, our internal controls will become more complex, and we will require significantly more resources to ensure our internal controls remain effective. As a result, we may incur significant additional cost. If we or our independent registered public accounting firm discover a material weakness, the disclosure of that fact, even if quickly remedied, could result in a loss of investor confidence and reduce the market value of our common stock. Additionally, the existence of any material weakness or significant deficiency may require management to devote significant time and incur significant expense to remediate any such material weakness or significant deficiency and management may not be able to remediate any such material weakness or significant deficiency in a timely manner. Failure to maintain effective internal controls or the identification of significant internal control deficiencies could also impair our ability to obtain financing and result in the loss of customers. In addition, such failure could result in investigations and penalties.
Item 1B.    Unresolved Staff Comments.
None.
Item 2.    Properties.
For information with respect to the principal properties utilized in the Company’s operations, see “Item 1. Business - Properties.”
Item 3.    Legal Proceedings.
The Company is not currently involved in any material legal proceedings, having substantially completed the Environmental Protection Agency remediation matter described in note 4 to the consolidated financial statements in this Form 10-K.
The Company is involved in various legal claims arising in the ordinary course of business. The Company has concluded that the ultimate disposition of these matters should not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.
Item 4.    Mine Safety Disclosures.
Not applicable.

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PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our Common Stock is listed on the NYSE American under the symbol GV. Our Common Stock is the longest traded security on the NYSE American and its predecessor exchanges, having commenced trading in 1906. The following table shows the reported high and low sales price at which our Common Stock was traded in 2017 and 2016:
 
2017
 
2016
 
High
 
Low
 
High
 
Low
First Quarter
$
8.65

 
$
5.00

 
$
1.74

 
$
1.13

Second Quarter
6.08

 
4.00

 
3.44

 
1.70

Third Quarter
6.30

 
4.00

 
4.00

 
2.54

Fourth Quarter
6.38

 
4.05

 
5.40

 
2.60

As of March 9, 2018, there were 5,473 holders of record of our Common Stock.
We have paid no cash dividends on our Common Stock since 1933, and it is not expected that we will pay any cash dividends on our Common Stock in the immediate future.
We have had a stock repurchase plan since September 17, 2002, that was last amended by the Board of Directors on September 21, 2017. This plan permits the purchase of up to 3,500,000 shares. There is currently available for purchase through September 30, 2018, a maximum of 1,154,940 shares. No shares have been purchased since 2006. Since the inception of the repurchase plan, we have repurchased 2,345,060 shares of our Common Stock at a cost of $1,289,467 (average cost of $0.55 per share). We may repurchase our shares either in the open market or through private transactions. The volume of the shares to be repurchased is contingent upon market conditions and other factors. We currently hold the repurchased stock as Treasury Stock, reported at cost. Also included as Treasury Stock are 17,358 shares purchased prior to the current stock repurchase plan at a cost of $18,720.

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Item 6.    Selected Financial Data.
The following table sets forth summary consolidated financial information for each of the years in the five-year period ended December 31, 2017:
 
Year Ended December 31,
 
2017
 
 
2016
 
 
2015
 
 
2014
 
 
2013
 
(In thousands except per share and share amounts)
Continuing operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Electrical construction
$
109,154

  
 
$
125,771

  
 
$
119,617

  
 
$
94,827

  
 
$
88,755

Other
4,799

  
 
4,652

  
 
955

  
 
3,537

  
 
449

Total revenue
$
113,954

  
 
$
130,423

  
 
$
120,571

  
 
$
98,363

  
 
$
89,204

Income before taxes from continuing operations
$
9,609

  
 
$
20,918

  
 
$
8,204

 
 
$
778

 
 
$
7,792

Income tax provision
1,036

 
 
7,810

 
 
3,378


 
653


 
3,285

Income from continuing operations
8,573

  
 
13,108

  
 
4,826

 
 
125

 
 
4,507

Discontinued operations (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss from operations, net of tax
(276
)

 
(108
)
 
 
(333
)

 
(444
)

 
(724
)
Net income (loss)
$
8,298

  
 
$
13,000

  
 
$
4,493

 
 
$
(319
)
 
 
$
3,783

Earnings (loss) per share — basic and diluted
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
$
0.34

  
 
$
0.52

  
 
$
0.19

 
 
$

 
 
$
0.18

Discontinued operations
(0.01
)
  
 

  
 
(0.01
)
  
 
(0.02
)
  
 
(0.03
)
Net income (loss)
$
0.33

  
 
$
0.51

  
 
$
0.18

 
 
$
(0.01
)
 
 
$
0.15

Weighted average shares outstanding — basic and diluted
25,451,354

  
 
25,451,354

  
 
25,451,354

  
 
25,451,354

  
 
25,451,354

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance sheet data
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets (2)
$
93,632

  
 
$
91,302

  
 
$
81,164

  
 
$
79,910

  
 
$
77,530

Long term debt including current portion, net (2)
22,251

  
 
22,333

  
 
26,472

  
 
26,284

  
 
31,483

Stockholders’ equity
56,548

  
 
48,251

  
 
35,251

  
 
30,758

  
 
31,077

Working capital
35,995

  
 
32,993

  
 
25,498

  
 
19,674

  
 
21,923

The total of the above categories may differ from the sum of the components due to rounding.
 ___________________
(1)
For information as to Discontinued Operations, see note 4 to the consolidated financial statements.
(2)
Reflects the presentation of debt issuance costs in accordance with the adoption of Accounting Standard Update No. 2015-03 and 2015-15, which resulted in a reduction of total assets and long term debt of $60,000 and $49,000 as of December 31, 2014, and 2013, respectively.

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
We make “forward-looking statements” within the meaning of the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995 throughout this document. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” and “continue” or similar words. We have based these statements on our current expectations about future events. Although we believe that our expectations reflected in or suggested by our forward-looking statements are reasonable, we cannot assure you that these expectations will be achieved. Our actual results may differ materially from what we currently expect. Factors that may affect the results of our operations include, among others: the level of construction activities by public utilities; the concentration of revenue from a limited number of utility customers; the loss of one or more significant customers; the timing and duration of construction projects for which we are engaged; our ability to estimate accurately with respect to fixed-price construction contracts; and heightened competition in the electrical construction field, including intensification of price competition. Other factors that may affect the results of our operations include, among others: adverse weather; natural disasters; effects of climate changes; changes in generally accepted accounting principles; ability to obtain necessary permits from regulatory agencies; our ability to maintain or increase historical revenue and profit margins; general economic conditions, both nationally and in our region; adverse legislation or regulations; availability of skilled construction labor and materials and material increases in labor and material costs; and our ability to obtain additional and/or renew financing. Other important factors which could cause our actual results to differ materially from the forward-looking statements in this document include, but are not limited to, those discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Risk Factors” sections and should be considered while evaluating our business, financial condition, results of operations and prospects.
You should read this report in its entirety and with the understanding that our actual future results may be materially different from what we expect. We may not update these forward-looking statements, even in the event that our situation changes in the future, except as required by law. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
Overview
We are a provider of electrical construction services, primarily in the Southeast and mid-Atlantic regions of the United States and Texas. For the year ended December 31, 2017, our total consolidated revenue decreased 12.6% to $114.0 million from $130.4 million in 2016.
Through our subsidiaries, Power Corporation of America (“PCA”), Southeast Power Corporation (“Southeast Power”), and C and C Power Line, Inc. (“C&C”), we are engaged in the construction of electrical infrastructure for the utility industry and industrial customers. Southeast Power performs electrical contracting services including the construction of transmission lines, distribution systems, substations, drilled pier foundations and other electrical services. Southeast Power is headquartered in Titusville, Florida and has additional offices in Bastrop, Texas and Spartanburg, South Carolina. C&C, headquartered in Jacksonville, Florida, is a full service electrical contractor that provides similar services as Southeast Power with a unionized workforce.
The electrical construction business is highly competitive. We compete with other independent contractors, including larger regional and national firms that may have financial, operational, technical and marketing resources that exceed our own. We also face competition from existing and prospective customers establishing or augmenting in-house services and organizations that employ personnel who perform similar services as those provided by us. In addition, a significant portion of our electrical construction revenue is derived from a small group of customers that account for a substantial portion of our revenue in any given year. The revenue contribution by any single customer or group of customers may significantly fluctuate from period-to-period. For example, for the years ended December 31, 2017 and 2016, three of our customers accounted for approximately 58.7% and 58.3% of our consolidated revenue, respectively. The loss of, or decrease in current demand from one or more customers, if not replaced, may result in a material decrease in revenue, margin and profit.
Critical Accounting Estimates
This discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to fixed-price electrical construction contracts, the adequacy of our accrued remediation costs and deferred tax assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities, that are not readily apparent from other sources. Actual results may differ from these estimates

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under different assumptions or conditions. Our management has discussed the selection and development of our critical accounting policies, estimates, and related disclosure with the Audit Committee of the Board of Directors.
Percentage of Completion
We recognize revenue from fixed-price contracts on a percentage-of-completion basis, using primarily the cost-to-cost method based on the percentage of total cost incurred to date, in proportion to total estimated cost to complete the contract. Total estimated cost, and thus contract income, is impacted by factors including, but not limited to: changes in productivity and scheduling, the cost of labor, subcontracts, materials and equipment. Additionally, external factors such as weather, site conditions and scheduling that differ from those assumed in the original bid (to the extent contract remedies are unavailable), customer needs, customer delays in providing approvals and materials, the availability and skill level of workers in the geographic location of the project, a change in the availability and proximity of materials, and governmental regulation, may also affect the progress and estimated cost of a project’s completion and thus the timing of income and revenue recognition.
A change order is a modification to a contract that changes the provisions of the contract, typically resulting from changes in scope, specifications, design, manner of performance, facilities, equipment, materials, sites, or period of completion of the work under the contract. Revenue from a change order is included in total estimated contract revenue only when it is probable that the change order will result in an addition to contract value and can be reliably estimated.
The accuracy of our revenue and profit recognition in a given period is almost solely dependent on the accuracy of our estimates of the cost to complete each project. Our projects can be complex and in almost every case the profit margin estimates for a project will either increase or decrease, to some extent, from the amount that was originally estimated at the time of bid. If a current estimate of total costs indicates a loss on a contract, the projected loss is recognized in full when determined. Accrued contract losses were $201,000 as of December 31, 2017 and insignificant as of December 31, 2016 (reported under “Accounts payable and accrued liabilities” on the consolidated balance sheet). The accrued contract losses as of December 31, 2017 were mainly attributable to transmission projects experiencing unexpected construction issues. Revenue from change orders, extra work, variations in the scope of work and claims is recognized when realization is probable and estimable.
In May 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance, which will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles. The amendments will change when and how an entity recognizes revenue from contracts it enters to transfer goods, services or non-financial assets to its customers. The new guidance creates a comprehensive framework for all entities in all industries to apply when determining when and how to recognize revenue. This new guidance supersedes virtually all existing revenue recognition requirements and guidance.
Under the new guidance, electrical construction fixed-price contracts, currently accounted for under percentage-of-completion, will be recognized over time as services are performed and the underlying obligation to the customer is fulfilled. Generally, this will result in the use of input measures on a cost to cost basis, similar to our current practices in place for contracts accounted for under percentage-of-completion. We have assessed that under the new guidance the primary impact will be on the timing of when and how contract modifications and change orders are recognized. Currently, contract modifications, change orders and variable consideration are generally included in total contract value when executed by the customer as compared to the new guidance, when legally enforceable and estimable. This may result in timing differences on the recognition of revenue and profit when compared to our current practices. Additionally, our contract modifications, change orders and variable consideration have historically been accounted for on a cumulative catch up basis. While this methodology is still applicable under the new standard, modifications, change orders and variable consideration need to be evaluated to determine whether distinct goods and services are being added to the contract or if they are distinct from the goods already transferred. The treatment of contract modifications, change orders and variable consideration on a contract by contract basis under the new standard could be different and have an impact on the timing of individual project revenue and profit.
We have also determined there will not be material changes in the pattern of revenue recognition for electrical construction contracts, which are currently accounted for on a time and materials basis. These contracts will be treated as a series of distinct services transferred over time and will generally result in a similar revenue pattern when compared to our current accounting policies.
We will apply this guidance using the cumulative effect transition method to contracts with customers that were not substantially complete as of January 1, 2018 and will be effective for the quarter ending March 31, 2018. We will present financial results for reporting periods after January 1, 2018 under the new guidance, while financial results from prior periods will continue to be reported in accordance with the prior guidance and our historical accounting policies. We have substantially completed our evaluation of the impact of the new guidance on contracts with our customers, including the identification of differences that may result from the new requirements, the most significant of which are discussed above.
We do not expect this update to have a material effect on our results of operations, financial position or cash flows. This conclusion is based on our continued evaluation of on-going contracts, our understanding of historical contracts with our

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customers and our evaluation of contracts under the cumulative effect transition method. We expect our disclosures related to revenue recognition will expand to address new quantitative and qualitative requirements regarding the nature, amount and timing of revenue from contracts with customers and additional information related to contract assets and liabilities. We have identified and are in the final stages of implementing changes to our processes and internal controls to meet the reporting and disclosure requirements of this update.
Accrued Remediation Costs
As described in note 4 to the consolidated financial statements, in 2015 we completed remediation activities at a mining site which we sold over 50 years ago. We had a balance of accrued remediation costs, related mainly to Environmental Protection Agency response, legal and monitoring of the site, as of December 31, 2017 and 2016, of $522,000 and $215,000, respectively. In 2017, we increased the balance of the accrued remediation costs mainly for additional costs related to the state of Washington response costs and provisions for potential future remediation efforts at the site. We anticipate that this accrual will be adequate to cover these estimated future charges. The accrual will be reviewed periodically based upon facts and circumstances available at the time.
Deferred Tax Assets and Liabilities
We account for income taxes in accordance with ASC Topic 740, Income Taxes, which establishes the recognition requirements. Deferred tax assets and liabilities are recognized for the future tax effects attributable to temporary differences and carryforwards between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly revises the U.S. tax code of which the most significant to our Company is the reduction of the federal corporate tax rate from its highest rate of 35% to a single rate of 21% as of January 1, 2018. This results in a material re-measurement of our net deferred tax liability position at the new tax rate of 21% as of December 31, 2017. In addition to the rate change, the Tax Act provides for the full expensing of certain depreciable property. While this provision may be material based upon capital expenditures, the effect to our financial position is a reduction in current taxes and a corresponding increase in deferred taxes. The full expensing was only effective for certain depreciable property placed in service after September 27, 2017. Therefore, the impact in future years will be more substantial. Other applicable provisions of the Tax Act include limiting the deductibility of interest expense, further limiting the deductibility of certain executive compensation and limiting the use of net operating loss carryforwards created in tax years beginning after December 31, 2017, none of which are expected to have a material effect on our future financial statements. We estimate, based on prior years' results, our combined federal and state effective tax rate beginning in 2018 will be in the range of 26% to 29%.
As of December 31, 2017, in accordance with ASU No 2015-17, our deferred tax assets and liabilities are netted and reported as a non-current deferred tax liability on our balance sheet. Our non-current deferred tax liabilities are primarily comprised of tax depreciation in excess of book depreciation and are offset by our deferred tax assets, largely comprised of accrued vacation, accrued payables, accrued workers’ compensation claims, Section 263A adjustments, accrued remediation costs and percentage completed contract method for tax. The carrying amounts of deferred tax assets are reduced by a valuation allowance, if based on the available evidence, it is more likely than not such assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the deferred tax assets are expected to be recovered or settled. In the assessment for a valuation allowance, appropriate consideration is given to positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability and tax planning alternatives. If we determine we will not be able to realize all or part of our deferred tax assets, a valuation allowance would be recorded to reduce our deferred tax assets to the amount that is more likely than not to be realized.
Based on our assumption with respect to forecasts of future taxable income and tax planning, among others, we anticipate being able to generate sufficient taxable income to utilize our deferred tax assets. Therefore, we have not recorded a valuation allowance against deferred tax assets. The minimum amount of future taxable income required to be generated to fully realize the deferred tax assets, applying the new Tax Act federal rate of 21%, as of December 31, 2017 is approximately $5.0 million.

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RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2017 COMPARED TO YEAR ENDED DECEMBER 31, 2016
The following table presents our operating income from continuing operations for the two year period ended December 31 as indicated:
 
2017
 
2016
Revenue
 
 
 
Electrical construction
$
109,154,476

 
$
125,771,361

Other
4,799,043

 
4,652,102

Total revenue
113,953,519

 
130,423,463

Costs and expenses
 
 
 
Electrical construction
86,714,412

 
93,566,045

Other
3,147,791

 
3,242,887

Selling, general and administrative
6,611,315

 
5,913,132

Depreciation and amortization
7,217,901

 
6,312,164

Loss (gain) on sale of property and equipment
76,810

 
(17,535
)
Total costs and expenses
103,768,229

 
109,016,693

Total operating income
$
10,185,290

 
$
21,406,770

Operating income equals total operating revenue less operating costs and expenses inclusive of depreciation and amortization, and selling, general and administrative expenses. Operating costs and expenses also include any gains or losses on the sale of property and equipment. Operating income excludes interest expense, interest income, other income, and income taxes.
Revenue
Total revenue for the year ended December 31, 2017, decreased 12.6% to $114.0 million, from $130.4 million in 2016. Electrical construction operations revenue decreased $16.6 million (13.2%) to $109.2 million, from $125.8 million in 2016. The decrease in electrical construction revenue was attributable to fewer awarded bid opportunities issued by our customers and the substantial completion of certain large, higher margin fixed-price contracts in the first and second quarters of 2016. The decrease was partially offset by storm restoration work in the 2017 third quarter and an increase in master service agreement (“MSA”) revenue.
Revenue from real estate development operations, included under the caption “Other,” was $4.8 million and $4.7 million for the years ended December 31, 2017 and 2016, respectively, representing approximately 4% of our total revenue for both years.
Backlog
Our backlog represents future services to be performed under existing project-specific fixed-price and maintenance contracts and the estimated value of future services that we expect to provide under our existing MSAs.
The following table presents our total backlog as of December 31, 2017 and 2016 along with an estimate of the backlog amounts expected to be realized within 12 months and during the life of each of the MSAs. The existing MSAs have remaining renewals ranging from one to three years at the option of the customer. The calculation assumes exercise of the renewal options by the customer. Revenue from assumed exercise of renewal options represents $131.2 million (70.1%) of our total estimated MSA backlog as of December 31, 2017.
 
 
Backlog as of
 
Backlog as of
 
 
December 31, 2017
 
December 31, 2016
Electrical Construction Operations
 
12-Month
 
Total
 
12-Month
 
Total
Project-Specific Firm Contracts (1)
 
$
27,110,793

 
$
27,110,793

 
$
27,094,081

 
$
27,094,081

Estimated MSAs
 
83,124,471

 
187,047,802

 
70,464,180

 
162,923,289

Total
 
$
110,235,264

 
$
214,158,595

 
$
97,558,261

 
$
190,017,370

 
 
 
 
 
 
 
 
 
(1)Amount includes firm contract awards under MSA agreements.
Our total backlog as of December 31, 2017, increased $24.1 million (12.7%) to $214.2 million, compared to $190.0 million as of December 31, 2016.

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Our 12-month backlog as of December 31, 2017 increased $12.7 million, (13.0%) to $110.2 million, due to the successful renewal of an MSA agreement and adjustments to existing MSA backlog estimates partially offset by existing MSA backlog run off.
Of our total backlog as of December 31, 2017, we expect approximately $110.2 million (51.5%) to be completed during 2018.
Backlog is estimated at a particular point in time and is not determinative of total revenue in any particular period. It does not reflect future revenue from a significant number of short-term projects undertaken and completed between the estimated dates. Our electrical construction revenue in 2017 exceeded our 12-month backlog as of December 31, 2016 by 11.9%.
The estimated amount of backlog for work under MSAs is calculated by using recurring historical trends inherent in current MSAs and projected customer needs based upon ongoing communications with the customer. Our estimated backlog also assumes exercise of existing customer renewal options. Certain MSAs are not exclusive to the Company and, therefore, the size and amount of projects we may be awarded cannot be determined with certainty. Accordingly, the amount of future revenue from MSA contracts may vary substantially from reported backlog. Even if we realize all the revenue from the projects in our backlog, there is no guarantee of profit from the projects awarded under MSAs.
As of December 31, 2017 and 2016, estimated MSAs (other than project-specific firm contracts under MSAs) accounted for approximately 87.3% and 85.7% of total backlog, respectively. We plan to continue to grow our MSA business. MSA contracts are generally multi-year and should provide improved operating efficiencies.
Backlog is not a term recognized under U.S. generally accepted accounting principles, but is a common measurement used in our industry. While we believe that our methodology of calculation is appropriate, such methodology may not be comparable to that employed by some other companies. Given the duration of our contracts and MSAs and our method of calculating backlog, our backlog at any point in time may not accurately represent the revenue that we expect to realize during any period and our backlog as of the end of a fiscal year may not be indicative of the revenue we expect to earn in the following fiscal year and should not be viewed or relied upon as a stand-alone indicator. Consequently, we cannot provide assurance as to our customers’ requirements or our estimates of backlog.
Revenue estimates included in our backlog may be subject to change as a result of project accelerations, additions, cancellations or delays due to various factors, including but not limited to: commercial issues, material deficiencies, permitting, regulatory requirements and adverse weather. Our customers are not contractually committed to a specific level of services under our MSAs (other than project-specific firm contracts under MSAs). While we did not experience any material cancellations during the current period, most of our contracts may be terminated, even if we are not in default under the contract.
For further Backlog information, please refer to the information set forth in “Item 1. Business” under the caption “Backlog,” and “Item 1A. Risk Factors.”
Operating Results
Total operating income decreased to $10.2 million for the year ended December 31, 2017, from $21.4 million in 2016. This decrease was attributable to the substantial completion in the first and second quarters of 2016 of certain large, higher margin fixed-price electrical construction projects. In addition, our 2017 results were affected by a decline in awarded bid opportunities and increased competition which resulted in lower margins. The results for the year were also significantly affected by operating losses in our Texas operations in the third and fourth quarters aggregating $2.8 million. The operating loss in Texas resulted from the retention of personnel for certain potential projects that did not materialize. This loss was partially offset by reallocating personnel and equipment to Florida for storm restoration work. Since year end we have experienced significant growth in the level of our Texas operations resulting from awarded projects for 2018, although future revenue and the impact on earnings cannot be predicted with certainty. In 2017, the decrease in our operating income was adversely affected by increased selling, general and administrative and depreciation expenses totaling $1.6 million, detailed in the tables below.
Gross margin on electrical construction operations for the year ended December 31, 2017 was 20.6%, compared to 25.6% in 2016. Such gross margin represents electrical construction revenue less electrical construction costs and expenses (excluding depreciation and amortization, selling, general and administrative expenses, and (gain) loss on sale of property and equipment), divided by electrical construction revenue.

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The following table provides a reconciliation of our net income to EBITDA (a non-GAAP financial measure) for the years ended December 31, 2017 and 2016:
 
 
2017
 
2016
Net income (GAAP as reported)
 
$
8,297,751

 
$
12,999,749

Interest expense, net of amount capitalized
 
665,268

 
591,176

Provision for income taxes, net (1)
 
871,762

 
7,743,691

Depreciation and amortization (2)
 
7,217,901

 
6,312,164

EBITDA
 
$
17,052,682

 
$
27,646,780

___________
 
 
 
 
(1) Provision for income tax, net is equal to the total amount of tax provision, which includes the tax benefit for discontinued operations.
(2) Depreciation and amortization includes depreciation on property, plant and equipment and amortization of finite-lived intangible assets.
EBITDA, a non-GAAP performance measure used by management, is defined as net income plus: interest expense, provision (benefit) for income taxes and depreciation and amortization, as shown in the table above. EBITDA, a non-GAAP financial measure, does not purport to be an alternative to net income as a measure of operating performance or to net cash flows provided by operating activities as a measure of liquidity. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly-titled measures of other companies. We use, and we believe investors benefit from the presentation of, EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired.
Using EBITDA as a performance measure has material limitations as compared to net income, or other financial measures as defined under U.S. GAAP as it excludes certain recurring items which may be meaningful to investors. EBITDA excludes interest expense; however, as we have borrowed money in order to finance transactions and operations, interest expense is an element of our cost structure and can affect our ability to generate revenue and returns for our stockholders. Further, EBITDA excludes depreciation and amortization; however, as we use capital and intangible assets to generate revenues, depreciation and amortization are a necessary element of our costs and ability to generate revenue. Finally, EBITDA excludes income taxes; however, as we are organized as a corporation, the payment of taxes is a necessary element of our operations. As a result of these exclusions from EBITDA, any measure that excludes interest expense, depreciation and amortization and income taxes has material limitations as compared to net income. When using EBITDA as a performance measure, management compensates for these limitations by comparing EBITDA and net income in each period, so as to allow for the comparison of the performance of the underlying core operations with the overall performance of the company on a full-cost, after-tax basis. Using both EBITDA and net income to evaluate the business allows management and investors to (a) assess our relative performance against our competitors and (b) monitor our capacity to generate returns for our stockholders. 
Costs and Expenses
Total costs and expenses decreased by $5.2 million to $103.8 million for the year ended December 31, 2017, from $109.0 million in 2016, primarily attributable to the decrease in electrical construction and “Other” revenue, partially offset by increases in selling, general and administrative and depreciation expenses.
The following table sets forth selling, general and administrative (“SG&A”) expenses for the years ended December 31 as indicated:
 
2017
 
2016
Electrical construction operations
$
1,587,101

 
$
1,265,811

Other
1,014,560

 
832,260

Corporate
4,009,654

 
3,815,061

Total
$
6,611,315

 
$
5,913,132


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SG&A expenses increased 11.8% to $6.6 million for the year ended December 31, 2017, from $5.9 million for the year ended December 31, 2016. The increase in SG&A expenses was mainly attributable to higher professional services including accounting service fees resulting from the change in our filing status to an accelerated filer, as of December 31, 2017 and a change in the method of allocating corporate SG&A expenses. See Item 1A. “Risk Factors,” under Part I and “Item 9A. Controls and Procedures,” of this form for additional requirements now applicable due to our change in reporting status.
As a percentage of revenue, SG&A expenses increased to 5.8% for 2017, from 4.5% in 2016, due primarily to the aforementioned increase in SG&A expenses and lower revenue during 2017.
The following table sets forth depreciation and amortization expense for the years ended December 31 as indicated:
 
2017
 
2016
Electrical construction operations
$
7,086,361

 
$
6,179,831

Other
15,207

 
15,103

Corporate
116,333

 
117,230

Total
$
7,217,901

 
$
6,312,164

Depreciation and amortization expense, which includes $62,000 of amortization expense for acquired intangibles, increased to $7.2 million for the year ended December 31, 2017, from $6.3 million for the year ended December 31, 2016, as a result of an increase in capital expenditures, mainly attributable to favorable purchasing opportunities and fleet upgrades.
Income Taxes
The following table presents our provision for income tax and effective income tax rate from continuing operations for the years ended December 31 as indicated:
 
2017
 
2016
Income tax provision
$
1,035,997

 
$
7,809,768

Effective income tax rate
10.8
%
 
37.3
%
Our effective tax rate for the year ended December 31, 2017 was 10.8%. The effective tax rate differs from the federal statutory rate of 34% mainly due to the Tax Act, enacted on December 22, 2017, resulting in a one-time total net tax benefit of $2.5 million or 26.0% for the year ended December 31, 2017. This benefit is the result of the re-measurement of our deferred tax assets and liabilities to the lower enacted corporate tax rate of 21%, which offsets the effects of state income taxes and nondeductible expenses reduced by a significant domestic production activities deduction. Our effective tax rate for the year ended December 31, 2016 was 37.3% and differs from the federal statutory rate of 35% mainly due to state income taxes and nondeductible expenses offset by a significant domestic production activities deduction.
Liquidity and Capital Resources
Working Capital Analysis
Our primary cash needs have been for capital expenditures and working capital. Our primary sources of cash have been cash flow from operations and borrowings under our lines of credit and equipment financing. As of December 31, 2017, we had cash and cash equivalents of $18.5 million and working capital of $36.0 million, as compared to cash and cash equivalents of $20.6 million, and working capital of $33.0 million as of December 31, 2016.
In addition to cash flow from operations, we have an $18.0 million revolving line of credit, of which $14.8 million was available for borrowing as of December 31, 2017. This revolving line of credit is used as a Working Capital Loan, as discussed in note 7 to the consolidated financial statements. We anticipate that this cash on hand, our credit facilities and our future cash flows from operating activities will provide sufficient cash to enable us to meet our operating needs and debt requirements for the next twelve months.
Cash Flow Analysis
The following table presents our net cash flows for each of the years ended December 31 as indicated:
 
2017
 
2016
Net cash provided by operating activities
$
8,203,477

 
$
18,057,251

Net cash used in investing activities
(10,167,988
)
 
(4,669,739
)
Net cash used in financing activities
(105,380
)
 
(4,162,102
)
Net (decrease) increase in cash and cash equivalents
$
(2,069,891
)
 
$
9,225,410


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Operating Activities
Cash flows from operating activities are comprised of net income, adjusted to reflect the timing of cash receipts and disbursements therefrom. Our cash flows are influenced by the level of operations, operating margins and the types of services we provide, as well as the stages of our electrical construction projects.
Cash provided by our operating activities totaled $8.2 million for the year ended December 31, 2017, compared to cash provided by operating activities of $18.1 million for 2016. The decrease in cash flows from operating activities was approximately $9.9 million and was primarily due to the changes reflected in our net income. Operating cash flows normally fluctuate relative to the status of our electrical construction projects.
Days of Sales Outstanding Analysis
We evaluate fluctuations in our “accounts receivable and accrued billings” and “costs and estimated earnings in excess of billings on uncompleted contracts,” for our electrical construction operations, by comparing days of sales outstanding (“DSO”). We calculate DSO as of the end of any period by utilizing the respective quarter’s electrical construction revenue to determine sales per day. We then divide “accounts receivable and accrued billings, net of allowance for doubtful accounts” at the end of the period, by sales per day, to calculate DSO for accounts receivable. To calculate DSO for costs and estimated earnings in excess of billings, we divide “costs and estimated earnings in excess of billings on uncompleted contracts,” by sales per day.
For the quarters ended December 31, 2017 and 2016, our DSO for accounts receivable and accrued billings were 73 and 58, respectively, and our DSO for costs and estimated earnings in excess of billings on uncompleted contracts were 20 and 22, respectively. The increase in our DSO for accounts receivable and accrued billings and the decrease in our costs and estimated earnings in excess of billings for the quarter ended December 31, 2017, when compared to the same quarterly period in 2016 was mainly due to the timing of project billings and cash collections, as well as the aforementioned decrease in revenue. As of March 9, 2018, we have received approximately 97.8% of our December 31, 2017 outstanding trade accounts receivable and have billed 87.6% of our costs and estimated earnings in excess of billings balance.
Income Taxes Paid
Income tax payments decreased to $4.5 million for the year ended December 31, 2017 from $8.1 million for the year ended December 31, 2016. Taxes paid for the year ended December 31, 2017 included approximately $500,000 for 2016 and the remaining $4.0 million for the estimated 2017 income tax liability. Taxes paid for the year ended December 31, 2016 included $500,000 for the 2015 income tax liability and the remaining $7.6 million for the estimated 2016 income tax liability.
Investing Activities
Cash used in investing activities for the year ended December 31, 2017, was $10.2 million, compared to cash used in investing activities of $4.7 million for 2016. The increase in cash used in our investing activities for the year ended December 31, 2017, when compared to 2016, is attributable to an increase in capital expenditures of $5.3 million when compared to 2016. Our capital expenditures are mainly for the purchases of equipment, primarily trucks and heavy machinery, used by our electrical construction operations for the upgrading and replacement of equipment. Our capital budget for 2018 is expected to total approximately $8.7 million, the majority of which is for continued upgrading and purchases of equipment, for our electrical construction operations, mainly due to favorable purchasing opportunities. We plan to fund these purchases through our cash on hand and equipment financing, consistent with past practices.
Financing Activities
Cash used in financing activities for the year ended December 31, 2017, was $105,000, compared to cash used in financing activities of $4.2 million for 2016. Our financing activities for the current year consisted mainly of repayments totaling $22.7 million, as follows: $9.6 million on our $17.0 Million Equipment Loan, repayments of $7.6 million on our $10.0 Million Equipment Loan, repayments of $3.1 million on our $22.6 Million Equipment Loan, repayments of $1.3 million on our $2.0 Million Equipment Loan and repayments of $1.2 million on our Working Capital Loan (as such loans are defined in note 7 to the consolidated financial statements). These repayments were offset by net borrowings of $22.6 million on our $22.6 Million Equipment Loan (as defined in note 7 to the consolidated financial statements). Our financing activities for the year ended December 31, 2016 consisted mainly of repayments totaling $8.8 million, as follows: $3.4 million on our $17.0 Million Equipment Loan, repayments of $2.4 million on our $10.0 Million Equipment Loan, repayments of $2.3 million on our Working Capital Loan and repayments of $743,000 on our $2.0 Million Equipment Loan (as such loans are defined in note 7 to the consolidated financial statements). These repayments were offset by net borrowings of $4.7 million on our Working Capital Loan (as defined in note 7 to the consolidated financial statements).
We have paid no cash dividends on our Common Stock since 1933, and it is not expected that we will pay any cash dividends on our Common Stock in the immediate future.

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Debt Covenants
Our debt arrangements contain various financial and other covenants including cross-default provisions whereby any default under any loans of the Company (or its subsidiaries) with the lender will constitute a default under all of the other loans of the Company (and its subsidiaries) with the lender. The most significant of the covenants are: maximum debt to tangible net worth ratio and fixed charge coverage ratio. We must maintain: a tangible net worth of at least $20.0 million calculated quarterly; no more than $500,000 in outside debt (with certain exceptions); a maximum debt to tangible net worth ratio of no greater than 2.5 : 1.0 and a fixed charge coverage ratio that is to equal or exceed 1.3 : 1.0. The fixed charge coverage ratio is calculated annually using EBITDAR (earnings before interest, taxes, depreciation, amortization and rental expense) divided by the sum of CPLTD (current portion of long term debt), interest expense and rental expense. We were in compliance with all of our covenants as of December 31, 2017.
The following are computations of these most significant financial covenants:
 
 
 
 
Actual as of
Covenants Measured at Quarter End:
 
Covenant
 
December 31, 2017
Tangible net worth minimum
 
$
20,000,000

 
$
55,696,240

Outside debt not to exceed
 
$
500,000

 
$

Maximum debt/tangible net worth ratio not to exceed
 
2.5 : 1.0

 
0.67 : 1.0

Covenants Measured at Year End:
 
 
 
 
Earnings to fixed charge coverage ratio must equal or exceed
 
1.3 : 1.0

 
2.44 : 1.00

Forecast
We anticipate our cash on hand and cash flows from operations and credit facilities will provide sufficient cash to enable us to meet our working capital needs, debt service requirements and planned capital expenditures, for at least the next twelve months. The amount of our planned capital expenditures will depend, to some extent, on the results of our future performance. However, our revenue, results of operations and cash flows, as well as our ability to seek additional financing, may be negatively impacted by factors including, but not limited to: a decline in demand for electrical construction services, general economic conditions, heightened competition, availability of construction materials, increased interest rates, and adverse weather conditions.

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Item 8.    Financial Statements and Supplementary Data.
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
The Goldfield Corporation:

Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of The Goldfield Corporation and subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of income, cash flows, and stockholders’ equity for the years then ended, and the related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 14, 2018 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 1963.
Orlando, Florida
March 14, 2018
Certified Public Accountants


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THE GOLDFIELD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
December 31,
 
2017
 
2016
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
18,529,757

 
$
20,599,648

Accounts receivable and accrued billings
21,566,842

 
19,094,407

Costs and estimated earnings in excess of billings on uncompleted contracts
6,074,346

 
7,313,099

Income taxes receivable
619,552

 
533,837

Residential properties under construction
2,412,202

 
1,552,131

Prepaid expenses
993,668

 
1,037,715

Other current assets
1,532,110

 
1,298,044

Total current assets
51,728,477

 
51,428,881

 
 
 
 
Property, buildings and equipment, at cost, net of accumulated depreciation of $38,927,654 in 2017 and $33,140,214 in 2016
36,072,300

 
33,245,947

Deferred charges and other assets
 
 
 
Land and land development costs
4,326,728

 
4,930,331

Cash surrender value of life insurance
550,335

 
550,672

Restricted cash
102,027

 
173,041

Goodwill
101,407

 
101,407

Intangibles, net of accumulated amortization of $263,134 in 2017 and $201,634 in 2016
750,666

 
812,166

Other assets

 
59,712

Total deferred charges and other assets
5,831,163

 
6,627,329

Total assets
$
93,631,940

 
$
91,302,157

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable and accrued liabilities
$
9,379,535

 
$
11,386,119

Billings in excess of costs and estimated earnings on uncompleted contracts
166,268

 
845,057

Current portion of notes payable, net
6,099,787

 
6,101,855

Accrued remediation costs
87,553

 
102,526

Total current liabilities
15,733,143

 
18,435,557

Deferred income taxes
4,698,720

 
8,204,324

Accrued remediation costs, less current portion
434,164

 
112,380

Notes payable, less current portion, net
16,151,567

 
16,231,373

Other accrued liabilities
66,033

 
67,961

Total liabilities
37,083,627

 
43,051,595

Commitments and contingencies (notes 4 and 8)

 

Stockholders’ equity
 
 
 
Preferred stock, $1 par value, 5,000,000 shares authorized, none issued


 


Common stock, $.10 par value, 40,000,000 shares authorized; 27,813,772 shares issued and 25,451,354 shares outstanding
2,781,377

 
2,781,377

Additional paid-in capital
18,481,683

 
18,481,683

Retained earnings
36,593,440

 
28,295,689

Treasury stock, 2,362,418 shares, at cost
(1,308,187
)
 
(1,308,187
)
Total stockholders’ equity
56,548,313

 
48,250,562

Total liabilities and stockholders’ equity
$
93,631,940

 
$
91,302,157

See accompanying notes to consolidated financial statements

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THE GOLDFIELD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 
 
Years Ended December 31,
 
2017
 
2016
Revenue
 
 
 
Electrical construction
$
109,154,476

 
$
125,771,361

Other
4,799,043

 
4,652,102

Total revenue
113,953,519

 
130,423,463

Costs and expenses
 
 
 
Electrical construction
86,714,412

 
93,566,045

Other
3,147,791

 
3,242,887

Selling, general and administrative
6,611,315

 
5,913,132

Depreciation and amortization
7,217,901

 
6,312,164

Loss (gain) on sale of property and equipment
76,810

 
(17,535
)
Total costs and expenses
103,768,229

 
109,016,693

Total operating income
10,185,290

 
21,406,770

Other income (expense), net
 
 
 
Interest income
31,696

 
33,465

Interest expense, net of amount capitalized
(665,268
)
 
(591,176
)
Other income, net
57,654

 
68,465

Total other expense, net
(575,918
)
 
(489,246
)
Income from continuing operations before income taxes
9,609,372

 
20,917,524

Income tax provision
1,035,997

 
7,809,768

Income from continuing operations
8,573,375

 
13,107,756

Loss from discontinued operations, net of income tax benefit of $164,235 and $66,077, respectively
(275,624
)
 
(108,007
)
Net income
$
8,297,751

 
$
12,999,749

Net income (loss) per share of common stock — basic and diluted
 
 
 
Continuing operations
$
0.34

 
$
0.52

Discontinued operations
(0.01
)
 

Net income
$
0.33

 
$
0.51

Weighted average shares outstanding — basic and diluted
25,451,354

 
25,451,354

See accompanying notes to consolidated financial statements


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THE GOLDFIELD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS 
 
Years Ended December 31,
 
2017
 
2016
Cash flows from operating activities
 
 
 
Net income
$
8,297,751

 
$
12,999,749

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Depreciation and amortization
7,217,901

 
6,312,164

Amortization of debt issuance costs
23,506

 
23,418

Deferred income taxes
(3,505,604
)
 
649,077

Loss (gain) on sale of property and equipment
76,810

 
(17,535
)
Other losses (gains)
337

 
(1,072
)
Changes in operating assets and liabilities
 
 
 
Accounts receivable and accrued billings
(2,472,435
)
 
(1,844,340
)
Costs and estimated earnings in excess of billings on uncompleted contracts
1,238,753

 
2,979,100

Residential properties under construction
(860,071
)
 
(1,406,681
)
Income taxes receivable
(85,715
)
 
(533,837
)
Prepaid expenses and other assets
(130,307
)
 
(43,912
)
Land and land development costs
603,603

 
(2,513,242
)
Restricted cash
71,014

 
134,051

Income taxes payable

 
(483,763
)
Accounts payable and accrued liabilities
(1,900,088
)
 
1,221,487

Billings in excess of costs and estimated earnings on uncompleted contracts
(678,789
)
 
610,896

Accrued remediation costs
306,811

 
(28,309
)
Net cash provided by operating activities
8,203,477

 
18,057,251

Cash flows from investing activities
 
 
 
Proceeds from disposal of property and equipment
133,733

 
263,876

Proceeds from notes receivable

 
56,048

Purchases of property, buildings and equipment
(10,301,721
)
 
(4,989,663
)
Net cash used in investing activities
(10,167,988
)
 
(4,669,739
)
Cash flows from financing activities
 
 
 
Proceeds from notes payable
22,600,000

 
4,700,000

Repayments on notes payable
(22,697,255
)
 
(8,840,137
)
Debt issuance costs
(8,125
)
 
(21,965
)
Net cash used in financing activities
(105,380
)
 
(4,162,102
)
Net (decrease) increase in cash and cash equivalents
(2,069,891
)
 
9,225,410

Cash and cash equivalents at beginning of year
20,599,648

 
11,374,238

Cash and cash equivalents at end of year
$
18,529,757

 
$
20,599,648

Supplemental disclosure of cash flow information
 
 
 
Interest paid, net of amounts capitalized
$
621,797

 
$
548,959

Income taxes paid, net
$
4,463,081

 
$
8,112,214

Supplemental disclosure of non-cash investing
 
 
 
Liability for equipment acquired
$
57,279

 
$
165,703

See accompanying notes to consolidated financial statements

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Table of Contents

THE GOLDFIELD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2017 AND 2016
 
 
Common stock
 
Additional
paid-in
capital
 
Retained earnings
 
Treasury
stock
 
Total
stockholders’
equity
 
Shares
 
Amount
 
 
 
 
Balance as of December 31, 2015
27,813,772

 
$
2,781,377

 
$
18,481,683

 
$
15,295,940

 
$
(1,308,187
)
 
$
35,250,813

Net income

 

 

 
12,999,749

 

 
12,999,749

Balance as of December 31, 2016
27,813,772

 
2,781,377

 
18,481,683

 
28,295,689

 
(1,308,187
)
 
48,250,562

Net income

 

 

 
8,297,751

 

 
8,297,751

Balance as of December 31, 2017
27,813,772

 
$
2,781,377

 
$
18,481,683

 
$
36,593,440

 
$
(1,308,187
)
 
$
56,548,313

See accompanying notes to consolidated financial statements


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THE GOLDFIELD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
Note 1 – Organization and Summary of Significant Accounting Policies
Overview
The Goldfield Corporation (the “Company”) was incorporated in Wyoming in 1906 and subsequently reincorporated in Delaware in 1968. The Company’s principal line of business is the construction of electrical infrastructure for the utility industry and industrial customers. The principal market for the Company’s electrical construction operation is primarily in the Southeast and mid-Atlantic regions of the United States and Texas.
Basis of Financial Statement Presentation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
The Company adopted Accounting Standards Updates (“ASU”) ASU 2011-05 and ASU 2011-12, which require comprehensive income to be reported in either a single statement or in two consecutive statements reporting net income and other comprehensive income. The amendment eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders’ equity. However, comprehensive income is equivalent to net income for the Company, and therefore, the Company’s accompanying financial statements do not include a Statement of Other Comprehensive Income.
Cash and Cash Equivalents
The Company considers highly liquid investments with maturities of three months or less when purchased to be cash equivalents.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on customer specific information and historical write-off experience. The Company reviews its allowance for doubtful accounts quarterly. Account balances are charged off against the allowance after reasonable means of collection have been exhausted and the potential for recovery is considered remote. As of both December 31, 2017 and 2016, upon its review, management determined it was not necessary to record an allowance for doubtful accounts due to the majority of accounts receivable being generated by electrical utility customers who the Company considers creditworthy based on timely collection history and other considerations.
Property, Buildings, Equipment and Depreciation
Property, buildings and equipment are stated at cost. Depreciation on property, buildings and equipment is calculated on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated on a straight-line basis over the shorter of the lease term, including renewals that are deemed to be reasonably assured, or the estimated useful life of the improvement.
In accordance with Accounting Standard Codification (“ASC”) ASC Topic 360-10-05, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company assesses the need to record impairment losses on long-lived assets when events and circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when future estimated undiscounted cash flows expected to result from use of the asset are less than the asset’s carrying value. Any resulting loss would be measured at fair value based on discounted expected cash flows.
Electrical Construction Revenue
The Company accepts contracts on a fixed-price, unit-price and service agreement basis. Revenue from fixed-price construction contracts are recognized on the percentage-of-completion method, measured by the ratio of costs incurred to date, to the estimated total costs to be incurred for each contract. Revenue from unit-price contracts is recognized on either the percentage-of-completion method or a man-hour or man-hour plus equipment basis. Revenue from service agreements are recognized as services are performed. Revenue from service agreements are billed on either a man-hour or man-hour plus equipment basis. Terms of the Company’s service agreements may extend for periods beyond one year.
The Company’s contracts allow it to bill additional amounts for change orders and claims. The Company considers a claim to be for additional work performed outside the scope of the contract and contested by the customer. Historically, claims relating to electrical construction work have not been significant.
A change order is a modification to a contract that changes the provisions of the contract, typically resulting from changes in scope, specifications, design, manner of performance, facilities, equipment, materials, sites, or period of completion of the

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work under the contract. It is the Company’s policy to include revenue from change orders in contract value only when they can be reliably estimated and realization is considered probable, in accordance with ASC Topic 605-35-25-30 and ASC Topic 605-35-25-31, Revenue Recognition for Construction Type Contracts.
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 revenue recognized.
Contract costs include all direct material, direct labor, subcontractor costs and indirect costs related to contract performance, such as supplies, tools and equipment maintenance. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, estimated profitability and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined.
Land and Land Development Costs and Residential Properties Under Construction
The costs of a land purchase and any development expenses up to the initial construction phase of any residential property development project are recorded under the asset “land and land development costs.” Once construction commences, both the land development costs and construction costs are recorded under the asset “residential properties under construction.” The assets “land and land development costs” and “residential properties under construction” relating to specific projects are recorded as current assets when the estimated project completion date is less than one year from the date of the consolidated financial statements, or as non-current assets when the estimated project completion date is one year or more from the date of the consolidated financial statements.
In accordance with ASC Topic 360-10, Accounting for the Impairment or Disposal of Long-lived Assets, land and residential properties under construction are reviewed by the Company for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the carrying amount or basis is not expected to be recovered, impairment losses are recorded and the related assets are adjusted to their estimated fair value. The fair value of an asset is the amount at which that asset could be bought or sold in a current transaction between willing parties, that is, other than in a forced or liquidation sale. The Company also complies with ASC Topic 820, Fair Value Measurement, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Company did not record an impairment write-down to either of its land carrying value or residential properties under construction carrying value for either the years ended December 31, 2017 or 2016.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes, which establishes the recognition requirements. Deferred tax assets and liabilities are recognized for the future tax effects attributable to temporary differences and carryforwards between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained.  Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as interest expense and other general and administrative expenses, respectively, and not as a component of income taxes.
Executive Long-term Incentive Plan
The Company has not issued shares pursuant to The Goldfield Corporation 2013 Long-term Incentive Plan (the “2013 Plan”) in either 2017 or 2016. Therefore, the Company has no compensation expense for shares pursuant to the 2013 Plan for either of the years ended December 31, 2017 or 2016.
Use of Estimates
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). Actual results could differ from those estimates. Management considers the most significant estimates in preparing these consolidated financial statements to be the estimated cost to complete electrical construction contracts in progress, the adequacy of the accrued remediation costs and the realizability of deferred tax assets.

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Fair Value of Financial Instruments
The Company’s financial instruments include cash and cash equivalents, accounts receivable and accrued billings, restricted cash collateral deposited with insurance carriers, cash surrender value of life insurance policies, accounts payable, notes payable, and other current liabilities.
Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value guidance establishes a valuation hierarchy, which requires maximizing the use of observable inputs when measuring fair value.
The three levels of inputs that may be used are:
Level 1 - Quoted market prices in active markets for identical assets or liabilities.
Level 2 - Observable market based inputs or other observable inputs.
Level 3 - Significant unobservable inputs that cannot be corroborated by observable market data. These values are generally determined using valuation models incorporating management’s estimates of market participant assumptions.
Fair values of financial instruments are estimated through the use of public market prices, quotes from financial institutions, and other available information. Management considers the carrying amounts reported on the consolidated balance sheets for cash and cash equivalents, accounts receivable and accrued billings, accounts payable and accrued liabilities, to approximate fair value due to the immediate or short-term maturity of these financial instruments. The Company’s carrying value of long-term notes payable are estimated by management to approximate fair value since the interest rates prescribed by Branch Banking and Trust Company (the “Bank”) are variable market interest rates and are adjusted periodically, and as such, are classified as Level 2. Restricted cash is considered by management to approximate fair value due to the nature of the asset held in a secured interest bearing bank account. The carrying value of cash surrender value of life insurance is also considered by management to approximate fair value as the carrying value is based on the current settlement value under the contract, as provided by the carrier and as such, is classified as Level 2.
Restricted Cash
The Company’s restricted cash includes cash deposited in a secured interest bearing bank account, as required by the Collateral Trust Agreement in connection with the Company’s workers’ compensation insurance policies, as described in note 12.
Goodwill and Intangible Assets
Intangible assets with finite useful lives recorded in connection with a historical acquisition are amortized over the term of the related contract or useful life, as applicable. Intangible assets held by the Company with finite useful lives include customer relationships and trademarks. The Company reviews the values recorded for intangible assets and goodwill to assess recoverability from future operations annually or whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. As of December 31, 2017, the Company assessed the recoverability of its long-lived assets and goodwill, and believed that there were no events or circumstances present that would require a test of recoverability on those assets. As a result, there was no impairment of the carrying amounts of such assets.
Segment Reporting
The Company operates as a single reportable segment, electrical construction, under ASC Topic 280-10-50 Disclosures about Segments of an Enterprise and Related Information. The Company’s real estate development operations are not significant for reporting purposes and, accordingly, results of the ongoing real estate development operations are included in the income statement under the caption “Other.” Certain corporate costs are not allocated to the electrical construction segment.
Reclassifications
Certain amounts previously reflected on the prior year cash flows from operating activities include amounts under contract loss accruals now included under Accounts payable and accrued liabilities. This reclassification had no effect on the previously reported total of cash flows from operating activities.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014-09, which will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles. The amendments under this pronouncement will change when and how an entity recognizes revenue from contracts it enters to transfer goods, services or non-financial assets to its customers. The new guidance creates a comprehensive framework for all entities in all industries to apply when determining when and how to recognize revenue. This new guidance supersedes virtually all existing revenue recognition requirements and guidance. This framework is expected to result in less complex guidance in application while providing a

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consistent and comparable methodology for revenue recognition. The core principle of ASU 2014-09 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. ASU 2014-09 also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU 2014-09 allows for either retrospective or cumulative effect transition methods of adoption and is effective for periods beginning after December 15, 2016. In August 2015, the FASB issued ASU 2015-14 which provides a one-year deferral of the revenue recognition standard’s effective date. Public business entities are required to apply the revenue recognition standard to annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods.
Under the new standard ASC Topic 606 Revenue from Contracts from Customers, electrical construction fixed-price contracts, currently accounted for under ASC Topic 605-35, will be recognized over time as services are performed and the underlying obligation to the customer is fulfilled. Generally, this will result in the use of input measures on a cost to cost basis, similar to the practices currently in place for contracts accounted for under ASC Topic 605-35. The Company has assessed that under the new guidance the primary impact will be on the timing of when and how contract modifications and change orders are recognized. Currently, contract modifications, change orders and variable consideration are generally included in total contract value when executed by the customer as compared to the new guidance, when legally enforceable and estimable. This may result in timing differences on the recognition of revenue and profit when compared to the Company’s current practices. Additionally, under ASC Topic 605-35 the Company’s contract modifications, change orders and variable consideration have historically been accounted for on a cumulative catch up basis. While this methodology is still applicable under the new standard, modifications, change orders and variable consideration need to be evaluated to determine whether distinct goods and services are being added to the contract or if they are distinct from the goods already transferred. The treatment of contract modifications, change orders and variable consideration on a contract by contract basis under the new standard could be different and have an impact on the timing of individual project revenue and profit.
The Company has also determined there will not be material changes in the pattern of revenue recognition for electrical construction contracts, which are currently accounted for on a time and materials basis. These contracts will be treated as a series of distinct services transferred over time and will generally result in a similar revenue pattern when compared to our current accounting policies.
The Company estimates that there will not be material changes in the pattern of revenue recognition for real estate development operations, which are presented under the caption “Other” in the consolidated financial statements. The Company will continue to recognize revenue upon the transfer of control of the promised real estate properties, generally at time of closing.
When this pronouncement is adopted in 2018, the Company will adopt all amendments under this ASU using the cumulative effect transition method. The Company will apply this guidance to contracts with customers that were not substantially complete as of January 1, 2018 and will be effective for the quarter ending March 31, 2018. The Company’s financial results for reporting periods after January 1, 2018 will be presented under the new guidance, while financial results from prior periods will continue to be reported in accordance with the prior guidance and the Company's historical accounting policies. The Company has substantially completed its evaluation of the impact of the new guidance on its contracts with customers, including the identification of differences that may result from the new requirements, the most significant of which are discussed above.
The Company does not expect this update to have a material effect on the Company’s results of operations, financial position or cash flows. This conclusion is based on the Company’s continued evaluation of on-going contracts, its understanding of historical contracts with its customers and its evaluation of contracts under the cumulative effect transition method. The Company expects its disclosures related to revenue recognition will expand to address new quantitative and qualitative requirements regarding the nature, amount and timing of revenue from contracts with customers and additional information related to contract assets and liabilities. The Company has identified and is in the final stages of implementing changes to its processes and internal controls to meet the reporting and disclosure requirements of this update.
In May 2016, the FASB issued ASU 2016-12, which improves guidance on assessing collectability, presentation of sales taxes, non-cash consideration, and completed contracts and contract modifications at transition. The FASB has also issued the following standards which clarify ASU 2014-09 and have the same effective date as the original standard: ASU 2016-20, ASU 2016-10 and ASU 2016-08. These updates are effective concurrently with ASU 2014-09 and the Company does not expect the adoption of this new guidance to have a material impact on the Company’s consolidated financial statements. 
In February 2016, the FASB issued ASU 2016-02, to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier application permitted. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption.  The Company expects this new guidance to cause a material increase to the assets and liabilities on the Company’s consolidated

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balance sheets. The Company is currently assessing the effect the adoption will have on its consolidated financial statements of income. The impact of this ASU is non-cash in nature, therefore the Company does not expect the adoption of this new guidance to have a material impact on the Company’s cash flows or liquidity.
In August 2016, the FASB issued ASU 2016-15, which provides clarification regarding how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. In addition, in November 2016, the FASB issued ASU 2016-18, which requires that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Both updates are effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company will adopt this guidance as of January 1, 2018 and does not expect the adoption will have a material impact on its consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16, which eliminates the requirement to defer the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. Under the new guidance, an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years; early adoption is permitted and is to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings at the time of adoption. The Company will adopt this guidance as of January 1, 2018 and does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, which eliminates Step 2 of the current goodwill impairment test. A goodwill impairment loss will instead be measured at the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the recorded amount of goodwill allocated to that reporting unit. The provisions of this ASU are effective for years beginning after December 15, 2019, with early adoption permitted for any impairment test performed on testing dates after January 1, 2017. The Company is currently assessing the impact that adoption will have on its consolidated financial statements, however, the Company does not expect this ASU to have a significant impact on its consolidated financial statements or disclosures.
Note 2 – Costs and Estimated Earnings on Uncompleted Contracts
Long-term fixed-price electrical construction contracts in progress accounted for using the percentage-of-completion method as of December 31 for the years as indicated:
 
2017
 
2016
Costs incurred on uncompleted contracts
$
48,681,608

 
$
47,282,570

Estimated earnings
16,076,125

 
18,644,216

 
64,757,733

 
65,926,786

Less billings to date
58,849,655

 
59,458,744

Total
$
5,908,078

 
$
6,468,042

Included in the consolidated balance sheets under the following captions
 
 
 
Costs and estimated earnings in excess of billings on uncompleted contracts
$
6,074,346

 
$
7,313,099

Billings in excess of costs and estimated earnings on uncompleted contracts
(166,268
)
 
(845,057
)
Total
$
5,908,078

 
$
6,468,042

The amounts billed but not paid by customers pursuant to retention provisions of long-term electrical construction contracts were $3.3 million and $3.2 million as of December 31, 2017 and 2016, respectively, and are included in the accompanying consolidated balance sheets in accounts receivable and accrued billings. Retainage is expected to be collected within the next twelve months.
Note 3 – Income Taxes
On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly revises the U.S. tax code by, among other items, reducing the federal corporate tax rate from its highest rate of 35% to a single rate of 21%, providing for the full expensing of certain depreciable property, limiting the deductibility of interest expense, further limiting the deductibility of certain executive compensation, and limiting the use of net operating loss carryforwards created in tax years beginning after December 31, 2017.
Generally accepted accounting principles require companies to record the impact of the Tax Act in their financial statements for the period during which the Tax Act becomes law, even if provisions of the Tax Act become effective at a future date. The Securities and Exchange Commission (“SEC”) staff recently issued Staff Accounting Bulletin (“SAB”) 118, Income Tax

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Accounting Implications of the Tax Cuts and Jobs Act, which provides guidance on accounting for the effects and includes a measurement period that ends when a company has obtained, prepared and analyzed the information necessary to finalize its accounting of the Tax Act which cannot extend beyond one year. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740, Income Taxes, is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.
The Company’s accounting for the following elements of the Tax Act are complete. However, these estimates may be affected by additional analysis and are subject to change due to a variety of factors, including, among others: (i) management’s further assessment of the Tax Act and related regulatory guidance; (ii) further guidance that may be issued by the Treasury, Financial Accounting Standards Board, SEC, Internal Revenue Service, or state, local or other taxing authorities; and (iii) actions the Company may take as a result of the Tax Act.
Re-measurement of Net Deferred Tax Liability: As a result of the Company’s net deferred tax liability position, a one-time income tax benefit of $2.5 million for the year ended December 31, 2017 was recorded as a result of the reduction in the federal corporate tax rate.
Cost Recovery: The Company has completed a full analysis of its 2017 capital expenditures that qualify for immediate expensing and has recorded a benefit for bonus depreciation that resulted in a decrease of approximately $140,000 to current income taxes and a corresponding increase in our deferred tax liabilities (after considering the effects of the reduction in the federal corporate tax rate). The full expensing was only effective for certain depreciable property placed in service after September 27, 2017.
The Company believes the impact of certain provisions in the Tax Act, such as the limitation on interest expense deductibility, the limitation on the deductibility of certain executive compensation and net operating loss carryforwards will be immaterial.
The following table presents the income tax provision from continuing operations for the years ended December 31 as indicated:
 
2017
 
2016
Current
 
 
 
Federal
$
3,863,151

 
$
6,157,900

State
558,993

 
1,014,213

 
4,422,144

 
7,172,113

Deferred
 
 
 
Federal
(3,270,928
)
 
570,770

State
(115,219
)
 
66,885

 
(3,386,147
)
 
637,655

Total
$
1,035,997

 
$
7,809,768

The following table presents the total income tax provision for the years ended December 31 as indicated:
 
2017
 
2016
Income tax provision
$
1,035,997

 
$
7,809,768

Discontinued operations
(164,235
)
 
(66,077
)
Total
$
871,762

 
$
7,743,691


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The following table presents the temporary differences and carryforwards, which give rise to deferred tax assets and liabilities as of December 31 as indicated:
 
2017
 
2016
Deferred tax assets
 
 
 
Accrued vacation
$
113,893

 
$
146,215

Acquisition costs capitalized
58,886

 
98,484

Accrued remediation costs
130,168

 
80,100

Accrued payables
174,674

 
122,235

Percentage completed contract method for tax
276,413

 

Accrued workers’ compensation
159,237

 
127,033

Capitalized bidding costs
121,227

 
8,846

Inventory adjustments
139,565

 
133,991

Accrued lease expense
17,902

 
32,683

Accrued contract losses
50,220

 
89

Other
4,103

 
5,214

Total deferred tax assets
1,246,288

 
754,890

Deferred tax liabilities
 
 
 
Tax amortization in excess of financial statement amortization
(10,850
)
 
(12,156
)
Tax depreciation in excess of financial statement depreciation
(5,934,158
)
 
(8,947,058
)
Total deferred tax liabilities
(5,945,008
)
 
(8,959,214
)
Total net deferred tax liabilities
$
(4,698,720
)
 
$
(8,204,324
)
As of December 31, 2017, the non-current deferred tax liabilities decreased to $4.7 million from $8.2 million as of December 31, 2016 due to the re-measurement of the Company’s net deferred tax liability position at the new tax rate of 21% under the Tax Act.
The carrying amounts of deferred tax assets are reduced by a valuation allowance, if based on the available evidence, it is more likely than not such assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the deferred tax assets are expected to be recovered or settled. In the assessment for a valuation allowance, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability and tax planning alternatives. If the Company determines it will not be able to realize all or part of the deferred tax assets, a valuation allowance would be recorded to reduce deferred tax assets to the amount that is more likely than not to be realized.
Based on assumptions with respect to forecasts of future taxable income and tax planning strategies, among others, the Company anticipates being able to generate sufficient taxable income to utilize the deferred tax assets. Therefore, the Company has not recorded a valuation allowance against deferred tax assets. The minimum amount of future taxable income required to be generated to fully realize the deferred tax assets, applying the new Tax Act federal rate of 21%, as of December 31, 2017 is approximately $5.0 million.
The following table presents the differences between the Company’s effective income tax rate and the federal statutory rate on income from continuing operations for the years ended December 31 as indicated:
 
2017
 
2016
Federal statutory rate
34.0%
 
35.0%
State tax rate, net of federal tax
3.1
 
3.3
Nondeductible expenses
3.6
 
1.6
Domestic production activities deduction
(4.0)
 
(3.2)
Tax Act rate change
(26.0)
 
Other
0.1
 
0.6
Total
10.8%
 
37.3%

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The Company had gross unrecognized tax benefits of $5,000 as of both December 31, 2017 and 2016. The Company believes that it is reasonably possible that the liability for unrecognized tax benefits related to certain state income tax matters may be settled within the next twelve months. The federal statute of limitation has expired for tax years prior to 2014 and relevant state statutes vary. The Company is currently not under any income tax audits or examinations and does not expect the assessment of any significant additional tax in excess of amounts provided.
The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years as indicated:
 
2017
 
2016
Balance as of January 1
$
4,723

 
$
4,723

Increase from current year tax positions

 

Decrease from settlements with taxing authority

 

Balance as of December 31
$
4,723

 
$
4,723

The Company accrues interest and penalties related to unrecognized tax benefits as interest expense and other general and administrative expenses, respectively, and not as a component of income taxes. Decreases in interest and penalties are due to settlements with taxing authorities and expiration of statutes of limitation. During the years ended December 31, 2017 and 2016, the Company recognized $1,000 each year in interest and penalties. The Company had accrued as a current liability $9,000 and $8,000 for the future payment of interest and penalties as of December 31, 2017 and 2016, respectively.
Note 4 – Discontinued Operations
Commitments and Contingencies Related to Discontinued Operations
Discontinued operations represent former mining activities, the last of which ended in 2002. Pursuant to an agreement with the United States Environmental Protection Agency (the “EPA”), the Company performed certain remediation actions at a property sold over fifty years ago. This remediation work was completed by September 30, 2015. The Company has established a contingency provision related to discontinued operations, which was $522,000 and $215,000, respectively, including an increase of $440,000 and $174,000 ($276,000 and $108,000, net of tax benefit of $164,000 and $66,000, respectively) recognized for the years ended December 31, 2017 and 2016, respectively. The increase for both the years ended December 31, 2017 and 2016, resulted mainly from changes in the scope of the project as required by the EPA and the state of Washington. The remaining balance of the accrued remediation costs as of December 31, 2017, mainly represents estimated future charges for EPA response costs and monitoring and provisions for potential future remediation efforts of the property as required by the state of Washington. The total costs to be incurred in future periods may vary from this estimate.
The provision will be reviewed periodically based upon facts and circumstances available at the time. The costs provisioned for future expenditures related to this environmental obligation are not discounted to present value.
Note 5 – Property, Buildings and Equipment
The following table presents the balances of major classes of properties as of December 31 as indicated:
 
Estimated useful lives in years
 
2017
 
2016
Land
 
$
530,221

 
$
371,228

Land improvements
7 - 15
 
495,484

 
470,754

Buildings and improvements
5 - 40
 
2,588,053

 
2,155,578

Leasehold improvements
7 - 39
 
252,646

 
252,646

Machinery and equipment
2 - 10
 
70,892,181

 
62,955,883

Construction in progress
 
241,369

 
180,072

Total
 
 
74,999,954

 
66,386,161

Less accumulated depreciation
 
 
38,927,654

 
33,140,214

Net properties, buildings and equipment
 
 
$
36,072,300

 
$
33,245,947

Management reviews the net carrying value of all properties, buildings and equipment on a regular basis to assess and determine whether trigger events of impairment exist and the need for possible impairments. As a result of such review, no impairment write-down was considered necessary for the years ended December 31, 2017 and 2016.

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Note 6 – 401(k) Employee Benefits Plan
Effective January 1, 1995, the Company adopted The Goldfield Corporation and Subsidiaries Employee Savings and Retirement Plan, a defined contribution plan that qualifies under Section 401(k) of the Internal Revenue Code. The plan provides retirement benefits to all employees who meet eligibility requirements and elect to participate. Under the plan, participating employees may defer up to 75% of their pre-tax compensation per calendar year subject to Internal Revenue Code limits. The Company’s contributions to the plan are discretionary and amounted to approximately $297,000 and $286,000 for the years ended December 31, 2017 and 2016, respectively.
Note 7 – Notes Payable
The following table presents the balances of our notes payables as of December 31 as indicated:
Branch Banking and Trust Company
 
Maturity Date
 
2017
 
2016
 
Interest Rates
 
 
 
 
2017
 
2016
Working Capital Loan
 
November 28, 2019
 
$
2,750,000

 
$
3,950,000

 
3.38
%
 
2.44
%
$22.6 Million Equipment Loan
 
March 9, 2021
 
$
19,540,000

 
$

 
3.25
%
 
%
$10.0 Million Equipment Loan
 
July 28, 2020
 

 
7,579,630

 
%
 
2.81
%
$17.0 Million Equipment Loan
 
March 6, 2020
 

 
9,601,000

 
%
 
2.50
%
$2.0 Million Equipment Loan
 
March 6, 2020
 

 
1,256,625

 
%
 
2.50
%
Total notes payable
 
 
 
22,290,000

 
22,387,255

 
 
 
 
Less unamortized debt issuance costs
 
38,646

 
54,027

 
 
 
 
Total notes payable, net
 
22,251,354

 
22,333,228

 
 
 
 
Less current portion of notes payable, net
 
6,099,787

 
6,101,855

 
 
 
 
Notes payable net, less current portion
 
$
16,151,567

 
$
16,231,373

 
 
 
 
As of December 31, 2017, the Company, and the Company’s wholly owned subsidiaries Southeast Power, Pineapple House of Brevard, Inc. (“Pineapple House”), Bayswater Development Corporation (“Bayswater”), Power Corporation of America (“PCA”) Precision Foundations, Inc. (“PFI”) and C and C Power Line, Inc. (“C&C”), collectively (the “Debtors,”) were parties to a Master Loan Agreement, dated June 9, 2017 (the “2017 Master Loan Agreement”), with Branch Banking and Trust Company (the “Bank”).
On June 9, 2017, the Company and the Debtors entered into the $22.6 Million Equipment Loan agreement. Borrowings of $15.6 million from the $22.6 Million Equipment Loan were used to pay in full all the outstanding Bank equipment loans, with the exception of the Working Capital Loan, plus accrued interest and loan closing costs.
As of December 31, 2017, the Company had a loan agreement and a series of related ancillary agreements with the Bank providing for a revolving line of credit loan for a maximum principal amount of $18.0 million, to be used as a “Working Capital Loan.” As of December 31, 2017 and December 31, 2016, borrowings under the Working Capital Loan were $2.8 million and $4.0 million, respectively. As a credit guaranty to the Bank, the Company is contingently liable for the guaranty of a subsidiary obligation under an irrevocable letter of credit related to workers’ compensation. As of both December 31, 2017 and December 31, 2016, the Company had $420,000 for this irrevocable letter of credit related to workers’ compensation.
As of December 31, 2017, the Debtors had a loan agreement with the Bank for the $22.6 Million Equipment Loan, which is guaranteed by the Debtors and include the grant of a continuing security interest in all now owned and after acquired and wherever located personal property of the Debtors.
The Working Capital Loan and the $22.6 Million Equipment Loan bear interest at a rate per annum equal to one month LIBOR (as defined in the documentation related to each loan) plus 1.80%, which will be adjusted monthly and subject to a maximum rate of 24.00%.
The Company’s debt arrangements contain various financial and other covenants including, but not limited to: minimum tangible net worth, maximum debt to tangible net worth ratio and fixed charge coverage ratio. Other loan covenants prohibit, among other things, a change in legal form of the Company, and entering into a merger or consolidation. The loans also have cross-default provisions whereby any default under any loans of the Company (or its subsidiaries) with the Bank, will constitute a default under all of the other loans of the Company (and its subsidiaries) with the Bank.

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The schedule of payments of the notes payable as of December 31, 2017 is as follows:
2018
$
6,120,000

2019
8,870,000

2020
6,120,000

2021
1,180,000

Total payments of debt
$
22,290,000

Note 8 – Commitments and Contingencies
Operating Leases
The Company leases its principal office space under a nine-year operating lease. Within the provisions of the office lease, there are escalations in payments over the base lease term, as well as renewal periods and cancellation provisions. The effects of the escalations have been reflected in rent expense on a straight-line basis over the expected lease term. In addition, the Company leases other office spaces as principal offices for our subsidiaries PCA and C&C. The Company also leases office equipment under operating leases that expire over the next four years. The Company’s leases require payments of property taxes, insurance and maintenance costs in addition to the rent payments. Additionally, the Company leases several off-site storage facilities, used to store equipment and materials, under a month to month lease arrangement. Lastly, the Company has several lease agreements to lease certain equipment from time to time over a 60-month term. The leased equipment is used in our electrical construction operations. The Company recognizes rent expense on a straight-line basis over the expected lease term.
Future minimum lease payments under operating leases having initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2017 are as follows:
2018
 
 
$
4,636,362

2019
 
 
3,570,048

2020
 
 
837,971

2021 and beyond
 
 
7,999

Total minimum operating lease payments
 
 
$
9,052,380

Total expense for the operating leases were $4.7 million and $4.8 million for the years ended December 31, 2017 and 2016, respectively.
Performance Bonds
In certain circumstances, the Company is required to provide performance bonds to secure its contractual commitments. Management is not aware of any performance bonds issued for the Company that have ever been called by a customer. As of December 31, 2017, outstanding performance bonds issued on behalf of the Company’s electrical construction subsidiaries amounted to approximately $58.2 million.
Collective Bargaining Agreements
C&C, one of the Company’s electrical construction subsidiaries, is party to collective bargaining agreements with unions representing workers performing field construction operations. The collective bargaining agreements expire at various times and have typically been renegotiated and renewed on terms similar to the ones contained in the expiring agreements. The agreements require the subsidiary to pay specified wages, provide certain benefits to their respective union employees and contribute certain amounts to multi-employer pension plans and employee benefit trusts. The subsidiary’s multi-employer pension plan contribution rates generally are specified in the collective bargaining agreements (usually on an annual basis), and contributions are made to the plans on a “pay-as-you-go” basis based on such subsidiary’s union employee payrolls, which cannot be determined for future periods because contributions depend on, among other things, the number of union employees that such subsidiary employs at any given time; the plans in which it may participate vary depending on the projects it has ongoing at any time; and the need for union resources in connection with those projects. If the subsidiary withdraws from, or otherwise terminates its participation in, one or more multi-employer pension plans, or if the plans were to otherwise become substantially underfunded, such subsidiary could be assessed liabilities for additional contributions related to the underfunding of these plans. The Company is not aware of any amounts of withdrawal liability that have been incurred as a result of a withdrawal by C&C from any multi-employer defined benefit pension plans.

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Multi-employer Pension Plans 
The Company contributes to a multi-employer pension plan on behalf of employees covered by collective bargaining agreements. These plans are administered jointly by management and union representatives and cover substantially all full-time and certain part-time union employees who are not covered by other plans. The risks of participating in multi-employer plans are different from single-employer plans in the following aspects: (1) assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers, (2) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers, and (3) if the Company chooses to stop participating in a multi-employer plan, we could, under certain circumstances, be liable for unfunded vested benefits or other expenses of jointly administered union/management plans. At this time, we have not established any liabilities because withdrawal from these plans is not probable. For the years ended December 31, 2017 and 2016, the contributions to these plans were $180,000 and $176,000, respectively.
The Company’s participation in multi-employer pension plans is outlined in the table below. The EIN column provides the Employer Identification Number (“EIN”) of the plan. Unless otherwise noted, the most recent Pension Protection Act zone status available in 2017 and 2016 is for the plan’s year ended December 31, 2017, and 2016, respectively. The zone status is based on information that the Company received from the plan, and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are less than 80% funded, and plans in the green zone are at least 80% funded. The “FIP” column indicates plans for which a financial improvement plan (“FIP”) is either pending or has been implemented. The last column lists the expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject. There have been no significant changes in the number of Company employees covered by the multi-employer plans or other significant events that would impact the comparability of contributions to the plans.
Information about the Plan is publicly available on Form 5500, Annual Return / Report of Employee Benefit Plan. The Plan year-end is December 31st and no single employer contributes 5% or more of total plan contributions.
 
 
Certified Zone Status
 
 
 
Plan  Name:
EIN Number
Plan  Number
2017
2016
FIP Implemented
Surcharge Imposed
Expiration Date of Collective Bargaining Agreement
National Electrical Benefit Fund
53-0181657
001
Green
Green
Not applicable (green-zone plan)
Not applicable (green-zone plan)
August 31, 2019
Committed Expenditures 
The Company from time to time commits to various contractual agreements that secure future rights to goods, services and other items to be used in the normal course of operations. These commitments include capital equipment purchases, sub-contractor services for the construction of residential properties and land purchases for the future construction of residential properties.
The following table presents the Company’s committed expenditures as of December 31, 2017:
2018
 
 
$
2,871,492

2019
 
 
369,069

2020
 
 
128,244

2021 and beyond
 
 
64,122

Total committed expenditures
 
 
$
3,432,927

Legal Proceedings 
The Company is involved in various legal claims arising in the ordinary course of business. The Company has concluded that the ultimate disposition of these matters should not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.

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Note 9 – Income Per Share of Common Stock
Basic income per common share is computed by dividing net income by the weighted average number of common stock shares outstanding during the period. Diluted income per share reflects the potential dilution that could occur if common stock equivalents, such as stock options outstanding, were exercised into common stock that subsequently shared in the earnings of the Company.
As of December 31, 2017 and 2016, the Company had no common stock equivalents. The computation of the weighted average number of common stock shares outstanding excludes 2,362,418 shares of Treasury Stock for each of the years ended December 31, 2017 and 2016.
Note 10 – Common Stock Repurchase Plan
The Company has had a stock repurchase plan since September 17, 2002, when the Board of Directors approval was announced. As last amended by the Board of Directors on September 21, 2017, this plan permits the purchase of up to 3,500,000 shares. There is currently available for purchase through September 30, 2018, a maximum of 1,154,940 shares. The Company may repurchase its shares either in the open market or through private transactions. The volume of the shares to be repurchased is contingent upon market conditions and other factors. No shares were repurchased during the years ended December 31, 2017 and December 31, 2016. As of December 31, 2017, the total number of shares repurchased under the Repurchase Plan was 2,345,060 at a cost of $1,289,467 (average cost of $0.55 per share). The Company currently holds the repurchased stock as Treasury Stock, reported at cost. Prior to September 17, 2002, the Company had 17,358 shares of Treasury Stock that it had purchased at a cost of $18,720.
Note 11 – Business Concentration and Credit Risks
Credit Risks
Financial instruments, mainly within the electrical construction operations, which potentially subject the Company to concentrations of credit risk, consist principally of accounts receivable and accrued billings in the amounts of $21.6 million and $19.1 million as of December 31, 2017 and 2016, respectively, which management reviews to assess the need to establish an allowance for doubtful accounts.
Cash and Cash Equivalents
The Company holds cash on deposit in U.S. banks, in excess of Federal Deposit Insurance Corporation insurance limits. The Company has not experienced and does not anticipate any losses in any such accounts. The Company mitigates this risk by doing business with well capitalized, quality financial institutions.

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Customer Concentration
Revenue (in thousands of dollars) to customers exceeding 10% of the Company’s total revenue for the years ended December 31 as indicated are as follows:
 
2017
 
2016
 
Amount
 
% of Total revenue
 
Amount
 
% of Total revenue
Electrical construction operations
 
 
 
 
 
 
 
Customer A
$
38,306

 
34
 
$
23,669

 
18
Customer B

 
 
18,630

 
14
Customer C
16,912

 
15
 
33,770

 
26
Customer D
11,681

 
10
 

 
Revenue by service/product (in thousands of dollars) for the years ended December 31 as indicated are as follows:
 
2017
 
2016
 
Amount
 
% of Total revenue
 
Amount
 
% of Total revenue
Electrical construction operations
 
 
 
 
 
 
 
Principal electrical construction operations (1)
$
100,305

 
88
 
$
118,748

 
91
Other electrical construction (2)
8,850

 
8
 
7,023

 
5
Total
109,154

 
96
 
125,771

 
96
All other
4,799

 
4
 
4,652

 
4
Total revenue
$
113,954

 
100
 
$
130,423

 
100
 
 
 
 
 
 
 
 
___________
 
 
 
 
 
 
 
(1) Principal electrical construction operations includes revenue from transmission lines, distribution systems, substations and drilled pier foundations.
(2) Other electrical construction includes revenue from storm work, fiber optics and other miscellaneous electrical construction items.
The total of the above categories may differ from the sum of the components due to rounding.
Note 12 – Restricted Cash
Restricted cash, reported under “Deferred charges and other assets” on the Company’s balance sheet, represents amounts deposited in a trust account to secure the Company’s obligations in connection with the Company’s workers’ compensation insurance policies.

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Note 13 – Goodwill and Other Intangible Assets Associated with the Acquisition of C&C
The Company performed an annual impairment assessment on its goodwill and intangible assets on December 31, 2017.  Based upon this analysis, the Company determined that there were no impairments.
The following table presents the gross and net balances of our goodwill and intangible assets as of the dates indicated:
 
 
 
December 31, 2017
 
December 31, 2016
 
Useful Life
(Years)
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Indefinite-lived and non-amortizable acquired intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
Indefinite
 
$
101,407

 
$

 
$
101,407

 
$
101,407

 
$

 
$
101,407

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Definite-lived and amortizable acquired intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
Trademarks/Names
15
 
$
640,000

 
$
(170,670
)
 
$
469,330

 
$
640,000

 
$
(128,002
)
 
$
511,998

Customer relationships
20
 
350,000

 
(70,000
)
 
280,000

 
350,000

 
(52,500
)
 
297,500

Non-competition agreement
5
 
10,000

 
(8,664
)
 
1,336

 
10,000

 
(7,332
)
 
2,668

Other
1
 
13,800

 
(13,800
)
 

 
13,800

 
(13,800
)
 

Total
 
$
1,013,800

 
$
(263,134
)
 
$
750,666

 
$
1,013,800

 
$
(201,634
)
 
$
812,166

Amortization of definite-lived intangible assets will be approximately $60,000 annually for 2018 through 2022.

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Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A.    Controls and Procedures.
Evaluation of disclosure controls and procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management in a timely manner. An evaluation was performed under the supervision and with the participation of our management, including John H. Sottile, our Chief Executive Officer (“CEO”), and Stephen R. Wherry, our Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2017. Based upon this evaluation, our management, including our CEO and our CFO, concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this Annual Report on Form 10-K, at the reasonable assurance level.
Management’s report on internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f), which consists of processes and procedures designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of our published financial statements. Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2017, based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on our assessment, we believe that as of December 31, 2017, our internal control over financial reporting was effective based on those criteria.
KPMG LLP, the Company’s independent registered public accounting firm, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting.
Changes in internal control
No changes in our internal control over financial reporting occurred during the fourth quarter of 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the effectiveness of controls
A control system, no matter how well conceived and operated, can provide only reasonable assurance, not absolute assurance, that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that the design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies and procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
The Goldfield Corporation:

Opinion on Internal Control Over Financial Reporting
We have audited The Goldfield Corporation and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2017 and 2016, the related consolidated statements of income, cash flows, and stockholders’ equity for the years then ended, and the related notes (collectively, the “consolidated financial statements”), and our report dated March 14, 2018 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Orlando, Florida
March 14, 2018
Certified Public Accountants

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Item 9B.    Other Information.
None.
PART III
Item 10.    Directors, Executive Officers and Corporate Governance.
Information concerning the directors of the Company will be contained under the heading “Proposal 1. Election of Directors” and information concerning compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, will be contained under the heading “Section 16(a) Beneficial Ownership Reporting Compliance” in our 2018 Proxy Statement, which information is incorporated herein by reference.
Our executive officers are as follows:
Name and Title
Year in which
service began
as officer
 
Age (1)
John H. Sottile
Chairman of the Board, President and Chief Executive Officer, Director
1983
 
70
Stephen R. Wherry
Senior Vice President, Chief Financial Officer, Treasurer, and Assistant Secretary
1988
 
59
Jason M. Spivey President
Power Corporation of America and Southeast Power Corporation
2017
 
47
___________________
(1)
As of February 28, 2018
Throughout the past five years, John H. Sottile and Stephen R. Wherry have been principally employed as executive officers of the Company, with responsibilities substantially consistent with those of their current positions.
John H. Sottile has served as Chairman of the Board of Directors since May 1998.
Jason M. Spivey joined Southeast Power Corporation as Project Manager in January 2015 and was promoted to Assistant Vice President in May 2016, prior to being appointed President in June of 2017. Prior to joining the Company, Mr. Spivey worked in the power line construction industry for over 25 years and held various leadership roles related to transmission and distribution line construction at Orlando Utilities Commission, a municipally-owned public utility company, including the position of Transmission Line Supervisor from February 2010 until January 2015.
The term of office of all directors is until the next annual meeting and the term of office of all officers is one year, and until their successors are elected and qualify.
Code of Ethics
In March 2003, our Board of Directors adopted a Code of Ethics (the “Code”) that is specifically applicable to our Chief Executive Officer and Senior Financial Officers, including our Chief Financial Officer (who is our Principal Financial and Accounting Officer). The Code incorporates guidelines designed to deter wrongdoing, to promote honest and ethical conduct, compliance with applicable laws and regulations, prompt internal reporting of Code violations and accountability for Code adherence. A copy of the Code was filed as an exhibit to our Annual Report on Form 10-K for the period ended December 31, 2003.
The Code is also available, free of charge, within the “Corporate Governance” section of our website, our website address is www.goldfieldcorp.com. We intend to disclose on our website any amendments to, or waivers from, our Code of Ethics that are required to be publicly disclosed pursuant to the rules of the Securities and Exchange Commission.
Audit Committee
Information concerning our Audit Committee including the Audit Committee Financial Expert will be contained under “Committees and Meetings of the Board of Directors” in our 2018 Proxy Statement, which information is incorporated herein by reference.
Item 11.    Executive Compensation.
Information concerning executive compensation and director compensation will be contained under “Executive Compensation” and “Director Compensation” in our 2018 Proxy Statement, which information is incorporated herein by reference.

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Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information concerning the security ownership of certain beneficial owners and management will be contained under “Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation-Equity Compensation Plan Information” in our 2018 Proxy Statement, which information is incorporated herein by reference.
Item 13.    Certain Relationships and Related Transactions, and Director Independence.
Information concerning certain relationships and related transactions of the directors and officers of our Company and director independence will be contained under “Proposal 1. Election of Directors” and “Director Compensation-Transactions with Related Parties” in our 2018 Proxy Statement, which information is incorporated herein by reference.
Item 14.    Principal Accounting Fees and Services.
Information concerning the accounting services performed by our Independent Registered Public Accounting Firm, KPMG LLP, and their respective fees for such services will be contained under “Audit Committee Report and Fee Information” in our 2018 Proxy Statement, which information is incorporated herein by reference.
PART IV
Item 15.
Exhibits, Financial Statement Schedules.
(a) The following documents are filed as part of this report:
(1) Financial Statements
 
Page
 
 
 
 
 
 
 
 
 
 
(2) Financial Statement Schedules
No financial statement schedules are included as all applicable information is included in the notes to the consolidated financial statements.
(3) Exhibits

3-1 (p)
 
Restated Certificate of Incorporation of the Company, as amended, is hereby incorporated by reference to Exhibit 3-1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 1987, heretofore filed with the Commission (file No. 1-7525).
 
 
 
3-2
 
 
 
 
3-3
 
 
 
 
4-1 (p)
 
Specimen copy of Company’s Common Stock certificate is hereby incorporated by reference to Exhibit 4-5 of the Company’s Annual Report on Form 10-K for the year ended December 31, 1987, heretofore filed with the Commission (file No. 1-7525).
 
 
 
+10-1
 
 
 
 

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