UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


Form 10-Q

(Mark One)

 X 

Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the quarterly period ended March 31, 2003

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
(State or Other Jurisdiction of
Incorporation or Organization)

88-0031580
(IRS Employer Identification
 Number)
 

100 Rialto Place, Suite 500 Melbourne, FL
(Address of Principal Executive Offices)

32901
(Zip Code)

 

 

(321) 724-1700
(Registrant's Telephone Number, including Area Code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  X     No ___

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

Yes        No  X  

     As of May 7, 2003, 26,695,014 shares of the Registrant's common stock were outstanding.

 

1



 

THE GOLDFIELD CORPORATION AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2003

 

INDEX

 

 

 
   

Page
 Number

     

Part I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

  Consolidated Balance Sheets

 3

 

  Consolidated Statements of Operations

 4

 

  Consolidated Statements of Cash Flows

 5

 

  Notes to Consolidated Financial Statements

 6

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations


11

 

 

 

Item 4.

Controls and Procedures

16

 

 

 

Part II.

OTHER INFORMATION

 

Item 6.

Exhibits and Reports on Form 8-K

17

 

 

 

Signatures

 

17

 

 

 

Certifications

 

18

 

 

 

 

2



PART I.   FINANCIAL INFORMATION

1. Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THE GOLDFIELD CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

 

 

 

 

 

 

 

2003

 

2002

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 $ 4,024,945 

 

 $ 7,405,342 

 

Short-term investments (Note 3)

 

 

   1,273,796 

 

   1,266,419 

 

Accounts receivable and accrued billings

 

   4,832,173 

 

   2,611,268 

 

Current portion of notes receivable

 

      46,902 

 

      46,625 

 

Costs and estimated earnings in excess of 

 

 

 

 

 

 

billings on uncompleted contracts 

 

   2,164,665 

 

   1,330,675 

 

Deferred income taxes 

 

 

 

      89,108 

 

     146,297 

 

Recoverable income tax 

 

 

 

      15,600 

 

      32,155 

 

Residential properties under construction

 

     574,613 

 

     614,390 

 

Prepaid expenses

 

 

 

 

     876,229 

 

     790,073 

 

Other current assets

 

 

 

      19,882 

 

      18,837 

 

 

Total current assets

 

 

 

  13,917,913 

 

  14,262,081 

Property, buildings and equipment, net 

 

   5,542,822 

 

   4,432,848 

Notes receivable, less current portion

 

     609,067 

 

     681,915 

Deferred charges and other assets

 

 

 

 

 

 

Deferred income taxes, less current portion 

 

   1,356,921 

 

   1,433,923 

 

Land and land development costs, less current portion 

   2,179,904 

 

   1,126,515 

 

Land held for sale

 

 

 

     100,242 

 

     117,106 

 

Cash surrender value of life insurance 

 

     302,253 

 

     303,613 

 

Other assets

 

 

 

 

      64,169 

 

         -   

 

 

Total deferred charges and other assets

 

   4,003,489 

 

   2,981,157 

Total assets

 

 

 

 

 $24,073,291 

 

 $22,358,001 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities

 

 

 

 

   

 

 

 

Accounts payable and accrued liabilities 

 

 $ 2,431,785 

 

 $ 1,371,987 

 

Billings in excess of costs and estimated 

 

 

 

 

 

 

earnings on uncompleted contracts 

 

       9,216 

 

      37,904 

 

Note payable to bank (Note 5)

 

 

   1,414,649 

 

     866,903 

 

Income taxes payable 

 

 

 

       8,533 

 

         -   

 

 

Total current liabilities

   

 

   3,864,183 

 

   2,276,794 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

 

   3,864,183 

 

   2,276,794 

Commitments and contingencies (Note 6)

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

Preferred stock, $1 par value per share, 100,000 

 

 

 

 

 

 

shares authorized, none issued 

 

         -   

 

         -   

 

Common stock, $.10 par value per share, 

 

 

 

 

 

 

40,000,000 shares authorized; 27,570,104 and 

 

 

 

 

 

 

27,570,104 shares issued at March 31, 2003 

 

 

 

 

 

 

and December 31, 2002, respectively 

 

   2,757,010 

 

   2,757,010 

 

Capital surplus 

 

 

 

 

  18,452,748 

 

  18,452,748 

 

Accumulated deficit

 

 

 

    (680,651)

 

    (905,613)

 

 

Total

 

 

 

 

 

  20,529,107 

 

  20,304,145 

 

Less common stock in treasury, at cost; 695,797

 

 

 

 

 

 

and 486,968 shares at March 31, 2003 and 

 

 

 

 

 

 

December 31, 2002, respectively

 

     319,999 

 

     222,938 

 

 

 

Total stockholders' equity

 

 

  20,209,108 

 

  20,081,207 

Total liabilities and stockholders' equity

 

 $24,073,291 

 

 $22,358,001 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3



THE GOLDFIELD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

March 31,

2003

2002

Revenue
    Electrical construction    $ 6,952,899   $ 5,596,776 
    Real estate   727,445  25,749 
        Total revenue   7,680,344  5,622,525 
Costs and expenses
    Electrical construction   5,749,598  4,445,586 
    Real estate   647,391  23,211 
    Depreciation and amortization   345,597  332,985 
    Selling, general and administrative   577,698  485,357 
        Total costs and expenses   7,320,284  5,287,139 
Other income, net
    Interest income   39,486  16,327 
    Interest expense, net   (6,754) (7,191)
    Other   (17,576) 9,944 
        Total other income, net   15,156  19,080 
Income from continuing operations 
    before income taxes   375,216  354,466 
             
Income taxes
150,254 
142,435 
      
 Income available to common 
    stockholders from continuing operations   224,962  212,031 
 Income from discontinued operations (including gain 
    on the sale of real estate of $237,843 in 2002)  
     (net of income taxes) (note 4)  
        -   
128,894 
   
Net income available to common stockholders
 $  224,962 
 $     340,925 
Earnings per share of common stock -
    basic and diluted (Note 8)  
        Income from continuing operations    $        0.01   $           0.01 
        Income from discontinued operations   0.00          0.00 
        Net income          $        0.01    $           0.01 
        
Weighted average common shares and 
    equivalents used in the calculations  
    of earnings per share  
        Basic    26,927,262    27,446,079 
        Diluted    27,050,729    28,057,556 
See accompanying notes to consolidated financial statements

4



THE GOLDFIELD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,

2003    

2002    

Cash flows from operating activities
Income from continuing operations available
   to common stockholders  $     224,962   $      212,031 
Adjustments to reconcile net income to net
   cash provided by (used in) operating activities
      Depreciation and amortization 345,597  332,985 
      Deferred income taxes 134,191  212,311 
      Loss (gain) on sale of property and equipment 22,483  (9,756)
      Gain on disposition of land held for sale           -    (25,749)
      Cash provided from (used by) changes in
         Accounts receivable and accrued billings (2,220,905) 788,194 
         Costs and estimated earnings in excess
            of billings on uncompleted contracts (833,990) (107,194)
         Land and land development costs (1,053,389) (91,126)
         Land held for sale 16,864             -   
         Residential properties under construction 39,777  (550,786)
         Recoverable income taxes 16,555             -   
         Prepaid expenses and other assets (151,370) (98,098)
         Accounts payable and accrued liabilities     1,059,798  (730,781)
         Billings in excess of costs and estimated   
            earnings on uncompleted contracts (28,688)            -   
         Income taxes payable
8,533 
(11,337)
         Net cash used in operating activities 
           of continuing operations (2,419,582) (79,306)
         Net cash provided by operating activities 
           of discontinued operations             -  16,018 
         Net cash used in operating activities (2,419,582) (63,288)
Cash flows from investing activities
  Issuance of notes receivable (22,326)            -   
  Proceeds from the disposal of property and equipment 28,000  14,805 
  Proceeds from notes receivable        94,897          12,746 
  Net purchases of investment securities        (7,377)            -   
  Purchases of property and equipment    (1,506,054)       (590,162)
  Proceeds from sale of land held for sale             -          39,882 
  Cash surrender value of life insurance
1,360 
4,304 
    Net cash used in investing activities of 
   
      continuing operations (1,411,500) (518,425)
    Net cash provided by investing activities of   
      discontinued operations           -    74,773 
    Net cash used in investing activities      (1,411,500)       (443,652)
Cash flows from financing activities
  Net borrowings on note payable to bank       547,746  536,715 
  Purchase of treasury stock
(97,061)
           -   
       Net cash provided by financing activities
          of continuing operations
      450,685 
       536,715 
Net (decrease) increase in cash and cash equivalents (3,380,397) 29,775 
Cash and cash equivalents at beginning of period
7,405,342 
4,662,126 
Cash and cash equivalents at end of period
 $    4,024,945 
 $    4,691,901 
Cash and cash equivalents at end of period
  Continuing operations $4,024,945  $4,279,081 
  Discontinued operations
          -   
412,820 
 $    4,024,945 
 $    4,691,901 
 
Supplemental disclosure of cash flow information  
  Income taxes paid           -     $         29,392 
  Interest paid  $           2,866  2,886 
Supplemental disclosure of non-cash investing activities
  Notes receivable in partial payment for land held for sale           -    263,580 
See accompanying notes to consolidated financial statements

5



THE GOLDFIELD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003 and 2002

 

Note 1 -

Basis of Financial Statement Presentation

 In the opinion of management, the accompanying unaudited interim consolidated financial statements include all adjustments necessary to present fairly the financial position of the Company, the results of its operations and changes in cash flows for the interim periods reported.  These adjustments are of a normal recurring nature.  All financial statements presented herein are unaudited with the exception of the consolidated balance sheet as of December 31, 2002, which was derived from the audited consolidated financial statements.  The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year.  These statements should be read in conjunction with the financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2002.

Note 2 -

Reclassifications

Certain prior period amounts in the consolidated financial statements have been reclassified to conform with the current period presentation.

Note 3 -

Short-term Investments

In August 2002, the Company began investing in highly liquid U.S. government debt securities.  In Accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities", these securities are classified as available-for-sale and carried at fair value, with unrealized gains or losses, net of tax, to be recorded as a separate component of stockholders' equity.  As of March 31, 2003 and December 31, 2002, short-term investments had a balance of $1,273,796 and $1,266,419, respectively.  Unrealized gains or losses incurred were insignificant.

6

 



Note 4 -

Discontinued Operations

On December 4, 2002, effective November 30, 2002, the Company completed the sale of the capital stock of its mining subsidiaries.

The following table sets forth certain unaudited operating results of the discontinued operations for the three months ended March 31, 2002:

 

 

 2002    

 

 

Net sales

  $701,784 

Cost of sales

   (677,334)

Depreciation

     (54,288)

  Gross loss

    (29,838)

General and
  administrative expense


       (3,314)

Operating loss

     (33,152)

Other income, net

 

  Interest expense

     (3,452)

  Other income, net (including
    gain on sale of real estate
    of $237,843)



     253,428 

 

     249,976 

Income from discontinued
  operations before income taxes


   216,824 

Income taxes

      (87,930)

 

 

Income from discontinued
  operations, net of tax


  $128,894 

 

Note 5 -

Note Payable to Bank

In April 2002, the Company entered into a $6,000,000 loan agreement, of which $4,500,000 can be used for the construction development costs of the Company's condominium projects and $1,500,000 can be used for the working capital needs of the Company. Under the terms of the loan, interest is payable monthly at an annual rate equal to the "Monthly LIBOR Index" plus one and nine-tenths percent (3.2% and 3.3% at March 31, 2003 and December 31, 2002, respectively). The proceeds from sales of condominiums will be used to repay the loan. At the sole option of the lender, the outstanding principal and interest is due and payable in full within 30 days of the lender providing written notice to the Company. The loan is guaranteed by the Company's electrical construction subsidiary and is collateralized by a security interest in the subsidiary's assets. Borrowings outstanding under this agreement were $1,414,649 and $866,903 at March, 31, 2003 and December 31, 2002, respectively.  The amount available for additional borrowings at March 31, 2003 was $3,085,351 and $1,500,000, for construction development costs and working capital, respectively. The loan agreement contains various financial covenants, including, but not limited to, minimum tangible net worth, minimum current ratio, and maximum debt to tangible net worth ratio. Other loan covenants prohibit, among other things, incurring additional indebtedness, issuing loans to other entities in excess of a certain amount, entering into a merger or consolidation, and any change in the Company's current Chief Executive Officer without prior written consent from the lender.  The Company was in compliance with all such covenants as of March 31, 2003 and December 31, 2002.

Interest costs related to the construction of condominiums were capitalized. During the three month periods ended March 31, 2003 and 2002, the Company capitalized interest costs of $9,932 and $14,335, respectively.

7



Note 6 -

Commitments and Contingencies

The Company has provided third party guarantees for St. Cloud Mining Company ("St. Cloud") and The Lordsburg Mining Company ("Lordsburg"), in favor of the State of New Mexico's Mining and Minerals Division of the Energy, Minerals and Natural Resources Department ("Financial Assurances").  These Financial Assurances, amounting to $269,787, guarantee approved post mine reclamation plans.  The Company has also provided a Financial Assurance for $16,390 to guarantee approved post mine reclamation plans for the Company's previously owned San Pedro Mine.  Additionally, the Company has provided performance bonds in connection with St. Cloud's contractual commitments in the amount of approximately $443,000.  Although the Company sold its mining operations to unrelated third parties, the Company remains liable under these guarantees and performance bonds.  However, the buyer of St. Cloud and Lordsburg has agreed to indemnify the Company against any losses from these Financial Assurances and performance bonds and has undertaken to secure the Company's release therefrom.

In certain circumstances, the Company is required to provide performance bonds in connection with its electrical construction subsidiary's contractual commitments.  Management is not aware of any performance bonds issued for the Company that have ever been called by a customer.  As of March 31, 2003, outstanding performance bonds issued on behalf of the electrical construction operations amounted to approximately $7,341,000.

Note 7 -

Income Taxes

At March 31, 2003, the Company had tax net operating loss carryforwards of approximately $1,951,000 available to offset future taxable income, which if unused will expire from 2009 through 2020.  The Company has alternative minimum tax credit carryforwards of $363,001, which are available to reduce future Federal income taxes over an indefinite period.

Note 8 -

Earnings Per Share of Common Stock and Stock Repurchase Plan

Basic earnings per common share is equal to net income divided by the weighted average of the number of common stock shares outstanding.  The weighted average of the number of common stock shares outstanding excludes 695,797 and 17,358 shares of Treasury Stock for the three month periods ended March 31, 2003 and 2002, respectively.  Diluted earnings per share include additional dilution from potential common stock equivalents, such as stock options outstanding.

On September 17, 2002, the Company's Board of Directors approved a Common Stock Repurchase Plan ("the Repurchase Plan") allowing the Company to repurchase up to five percent (approximately 1.3 million shares) of its outstanding Common Stock over the next twelve-month period.  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.  As of March 31, 2003, pursuant to the Repurchase Plan, the Company has repurchased 678,439 shares of its Common Stock at a cost of $301,279, an average cost of $0.44 per share.  The Company currently holds the repurchased stock as Treasury Stock, reported at cost.

Note 9 -

Business Segment Information

The Company is primarily involved in two lines of business, electrical construction and real estate development.  There were no material amounts of sales or transfers between lines of business and no material amounts of export sales.  Any intersegment sales have been eliminated.

8



The following table sets forth certain segment information for the three months ended March 31, as indicated:

 

 

2003     

 2002     

Continuing Operations:

 

 

Sales from operations to
  unaffiliated customers

 

 

    Electrical construction

$6,952,899 

$5,596,776 

    Real estate

     727,445 

       25,749 

      Total

$7,680,344 

$5,622,525 

 

 

 

Operating income (loss)

 

 

  Electrical construction

$   848,998 

  $   772,822 

  Real estate

        42,360 

       (13,561)

    Total operating income

   891,358 

   759,261 

 

 

 

Other income, net

    15,156 

    19,080 

General corporate expenses

    (531,298)

     (423,875)

Income from continuing
  operations before income
  taxes



 $375,216 



  $354,466 

Operating income is total operating revenue less operating expenses inclusive of depreciation and selling, general and administrative expense for each respective segment.  Operating income excludes interest expense, interest income and income taxes.  General corporate expenses are comprised of general and administrative expenses and corporate depreciation expense.

The following table sets forth certain segment information as of the dates indicated:

 

 

  March 31,
  2003    

   December 31,
  2002       

Identifiable assets:

 

 

Continuing operations

 

 

  Electrical construction

$11,615,347

    $ 9,596,844

  Real estate

  5,071,055

  3,442,714

  Corporate

    7,386,889

        9,318,443

    Total

$24,073,291

 $22,358,001

 

Note 10 -

The Goldfield Corporation 1998 Executive Long-term Incentive Plan

In 1998, the stockholders of the Company approved the 1998 Executive Long-term Incentive Plan (the "Plan"), which permits the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and other awards to all officers and key employees of the Company and its subsidiaries. Shares granted pursuant to the Plan may be authorized but unissued shares of Common Stock, Treasury shares or shares purchased on the open market.  The exercise price under such grants will be based on the fair market value of the Common Stock at the date of grant.  The maximum number of shares available for grant under the Plan is 1,300,000.  The options must be exercised within 10 years of the date of grant.  On March 9, 1999, the Company granted options to purchase 985,000 shares, exercisable at $0.21875 per share, the fair market price of the Common Stock at the date of grant.  No stock options were granted during the three months ended March 31, 2003 and 2002.  As of March 31, 2003, 243,668 options were outstanding.

The Company applies APB Opinion No. 25 for issuances to officers and key employees in accounting for its Plan and, accordingly, no compensation cost has been recognized in the consolidated financial statements during the three months March 31, 2003 and 2002.  Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net income would not have changed for the three month periods ended March 31, 2003 and March 31, 2002.

9



 

 

Note 11 -

Recent Accounting Pronouncements

In January 2003, FASB issued Interpretation No. 46 "Consolidation of Variable Interest Entities." The Interpretation clarifies the application of Accounting Research Bulletin No. 51 "Consolidated Financial Statements", to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have the sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.  This Interpretation applies to variable interest entities created after January 31, 2003 and to variable interest entities in which an enterprise obtains an interest after that date. If applicable, it applies to the Company's interim period beginning July 1, 2003 for variable interest entities in which the Company holds a variable interest that it acquired before February 1, 2003.  Adoption of this Interpretation is not expected to have a significant impact on the financial position or results of operations of the Company.

Forward-Looking Statements

We make "forward looking statements" within the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995 throughout this document and in the documents we incorporate by reference into this Quarterly Report on Form 10-Q.  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 effect the results of our electrical construction operations include, among others: the level of construction activities by public utilities; the timing and duration of construction projects for which we are engaged; our ability to estimate accurately with respect to fixed price construction contracts; heightened competition in the electric construction field, including intensification of price competition; the availability of skilled construction labor; and in connection with our real estate development projects, interest rates; ability to obtain necessary permits from regulatory agencies; ability to acquire land; natural disasters; and general economic conditions, both nationally and in our region.  Important factors which could cause our actual results to differ materially from the forward-looking statements in this document are also set forth in the Management's Discussion and Analysis of Financial Condition and Results of Operations section and elsewhere in this document.

You should read this Quarterly Report on Form 10-Q completely 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.  All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

 

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Item 2.

Management's Discussion and Analysis of Financial Condition and
Results of Operations.

Critical Accounting Policies and Estimates

This discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  On an on-going basis, the Company evaluates its estimates, including those related to fixed price electrical construction contracts, real estate development projects and deferred income tax assets.  The Company bases its 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 under different assumptions or conditions. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

A number of factors relating to our electrical construction segment affect the recognition of contract revenue.  The Company recognizes revenue when electrical services are performed except when work is performed under a fixed price contract.  Revenue from fixed price construction contracts is recognized on the percentage of completion method.  Under this method, estimated contract income and resulting revenue is generally accrued based on costs incurred to date as a percentage of total estimated costs.  Total estimated costs, and thus contract income, are impacted by changes in productivity, scheduling, and the unit cost of labor, subcontracts, materials and equipment.  Additionally, external factors such as weather, client needs, client delays in providing approvals, labor availability 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.  If a current estimate of total contract cost indicates a loss on a contract, the projected loss is recognized in full when determined. Revenue from change orders, extra work, variations in the scope of work and claims is recognized when realization is reasonably assured.

Given our limited experience in condominium development, the initial condominium development project was accounted for under the deposit method, thus deferring the recognition of related revenue and expenses until the project was complete and the underlying titles were transferred to the buyers.

Commencing with the second condominium development project, all revenue associated with real estate development projects that meet the criteria specified by Statement of Financial Accounting Standards ("SFAS") No. 66 "Accounting for Sales of Real Estate" will be recognized using the percentage of completion method.  Under this method, revenue is recognized when (1) construction is beyond a preliminary stage, (2)buyers are unable to receive refunds of down-payments except in the event of non-delivery, (3)a substantial percentage of the condominiums are under firm contracts, (4)collection of the sales price is reasonably assured and (5)sales proceeds and costs can be reasonably estimated.  Revenue recognized is calculated based on the percentage of completion, as determined by the fixed price construction contract costs incurred to date in relation to the total fixed price construction contract.  If a buyer were to default on the contract for sale, revenues and expenses recognized in prior periods would be adjusted in the period of default.  A significant majority of the total estimated project costs is attributable to the fixed price construction contract; the residual estimated costs could vary from actual.  If a current estimate of total project cost indicates a loss on a project, the projected loss is recognized in full when determined.  The timing of revenue and expense recognition is contingent on construction productivity.  Factors possibly impeding construction productivity include, but are not limited to, supply of labor, materials and equipment, scheduling, permitting and unforeseen events.

 

11



The Company considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance for deferred tax assets. Should the Company determine that it would not be able to realize all or part of its net deferred tax assets, a valuation allowance would be recorded to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company were to subsequently determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the previously recorded valuation allowance would increase income in the period such determination was made.

 

Results of Operations 

THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THREE MONTHS ENDED MARCH 31, 2002

Segment Information

The table below reflects the Company's consolidated revenue and operating income attributable to each of its ongoing lines of business for the three months ended March 31, as indicated:

 

 2003     

2002    

 

Revenue

 

 

 

  Electrical construction

 $6,952,899

 $5,596,776

 

  Real estate

       727,445

         25,749

 

    Total

 $7,680,344

 $5,622,525

 

 

 

 

 

Operating income

 

 

 

  Electrical construction

   $848,998

   $772,822

 

  Real estate

          42,360

         (13,561)

 

    Total

   $891,358

   $759,261

 

 

 Continuing Operations

  Revenues

Total revenues in the three months ended March 31, 2003 increased by 36.6% to $7,680,344, compared to $5,622,525 in the three months ended March 31, 2002.  This increase in total revenues was the result of significant increases in revenues generated by both the electrical construction and real estate operations.

Electrical construction revenue increased by 24.2% in the three months ended March 31, 2003 to $6,952,899 from $5,596,776 in the three months ended March 31, 2002.  This increase was primarily attributable to an increase in both transmission line construction and fiber optic projects as a result of a greater availability of electrical construction contracts.  During the first quarter of 2003, the Company was awarded approximately $15.8 million in new energy construction projects.  The Company believes that this high level of new contract awards may suggest the beginning of a rebound in the electrical construction industry.

Revenues recognized by the real estate operations for the three months ended March 31, 2003 were $727,445 compared to $25,749 for the three months March 31, 2002, an increase of $701,696.  This significant increase was primarily attributed to percentage of completion revenue recognition.

 

12



 

"Riomar" a six-unit oceanfront condominium project near Cocoa Beach, FL is currently under construction and expected to be completed in the summer of 2003.  Five of the six units are currently under contract for sale.

"Cape Club", a sixteen-unit oceanfront condominium project is currently in the permitting/pre-development phase.  Twelve units are under contract for sale, two units, which are currently reserved, are in the process of being converted to contracts for sale and two units have been reserved with refundable deposits.  Construction on Cape Club is expected to commence in spring 2003 and to be completed in the second quarter of 2004. Commencement of construction is dependent upon the receipt of required permits.

"Oak Park", a townhouse-style condominium project in Cape Canaveral, FL, is currently in the planning/permitting phase.  Preliminary plans call for a forty-unit complex, twenty-five of which have been reserved with refundable deposits.  Construction is expected to commence in the latter part of 2003 and to be completed in the latter part of 2004.

The Company's most recent plans are to develop a riverfront combination residential and commercial complex on a two-acre parcel in Melbourne, FL acquired in January 2003 for approximately $1 million.  Initial plans call for a multi-phase development, with the first phase, "Pineapple House", a thirty-three--unit luxury riverfront condominium complex.  Additional phases may include additional residential condominiums and commercial buildings.  Construction is anticipated to commence in late 2003 and to be completed in late 2004.

  Operating Results

Electrical construction operations had an operating income of $848,998 in the three months ended March 31, 2003, compared to an operating income of $772,822 during the three months ended March 31, 2002, an increase of 9.9%.  As a percentage of revenue, operating margins on electrical construction operations decreased to 12.2% for the three months ended March 31, 2003 from 13.8% for the three months ended March 31, 2002.  The decrease in the operating margin was primarily a result of additional costs incurred on one large electrical construction project due to adverse weather conditions.  The varying magnitude and duration of electrical construction projects may result in substantial fluctuation in the Company's backlog from time to time.  At March 31, 2003, the approximate value of uncompleted contracts was $12,900,000 compared to $7,700,000 at March 31, 2002.

Real estate operations had an operating income of $42,360 in the three months ended March 31, 2003, compared to an operating loss of $13,561 in the three months ended March 31, 2002, an increase of $55,921.  As a percentage of revenue, operating margins increased to 5.8% for the three months ended March 31, 2003 from (52.7)% for the three months ended March 31, 2002.  This increase in the operating margin was primarily the result of percentage of completion revenue recognition for the three months ended March 31, 2003.  For the three months ended March 31, 2002, no revenue from condominium development projects had been recognized due to the Company utilizing the deposit method as described in the above Critical Accounting Policies and Estimates.  Operating margins from real estate operations are expected to vary due to the type and number of projects under construction at any given time and each respective project's estimated operating margin.

As of March 31, 2003, outstanding real estate contracts for sale amounted to approximately $4,700,000, compared to approximately $4,300,000 as of March 31, 2002.  There can be no assurance that settlements of condominiums subject to contracts for sale will occur.

 

13



 

  Costs and Expenses

Total costs and expenses, and the components thereof, increased to $7,320,284 in the three months ended March 31, 2003 from $5,287,139 in the three months ended March 31, 2002, an increase of 38.5%.

Electrical construction costs increased to $5,749,598 in the three months ended March 31, 2003 from $4,445,586 in the three months ended March 31, 2002, an increase of 29.3%.  The increase in costs was primarily attributable to an increase in subcontractor costs incurred as a result of out-sourcing labor and constructions services.

Cost of real estate operations increased to $647,391 for the three months ended March 31, 2003 from $23,211 for the three months ended March 31, 2002.  This increase of $624,180 was the result of construction and other costs recognized under the percentage of completion method.

Depreciation and amortization was $345,597 in the three months ended March 31, 2003, compared to $332,985 in the three months ended March 31, 2002.  The increase in depreciation and amortization was primarily the result of capital expenditures made by company's electrical construction operations.

The following table sets forth selling, general and administrative expenses for each respective segment for the three months ended March 31, as indicated:

 

 

 2003   

 2002   

 

 

 

Electrical construction

$ 21,406 

$ 57,692 

Real estate

35,603 

15,512 

Corporate

   520,689 

    412,153 

  Total

$577,698 

$485,357 

 

 

 

 

In the three months ended March 31, 2003, total selling, general and administrative expenses increased by 19% when compared to the like period in 2002.  The increase was primarily a result of increases in professional and legal expenses, salaries and directors' fees incurred by the corporate office.  Selling, general and administrative expenses, as a percentage of revenue, decreased to 7.5% from 8.6% in the three months ended March 31, 2003 as compared to the three months ended March 31, 2002.

  Income Taxes

The provision for income taxes was $150,254 in the three months ended March 31, 2003, an effective tax rate of 40.0%, as compared to $142,435 in the three months ended March 31, 2002, an effective tax rate of 40.2%. The effective tax rates differ from the statutory rate largely due to state income taxes.

14



 

Discontinued Operations 

On December 4, 2002, effective November 30, 2002, the Company completed the sale of the capital stock of its mining subsidiaries.

Summary operating results of discontinued operations for the three months ended March 31, 2002 are as follows:

 

 

 2002    

 

 

Net sales

  $701,784 

Cost of sales

   (677,334)

Depreciation

      (54,288)

  Gross loss

    (29,838)

General and
  administrative expense


        (3,314)

Operating loss

      (33,152)

Other income, net

 

  Interest expense

     (3,452)

  Other income, net (including
    gain on sale of real
    estate of $237,843)



     253,428 

 

     249,976 

Income from discontinued
  operations before income taxes


   216,824 

Income taxes

       (87,930)

 

 

Income from discontinued
  operations, net of tax


  $128,894 

 

 

Liquidity and Capital Resources

Cash and cash equivalents at March 31, 2003 were $4,024,945 as compared to $7,405,342 as of March 31, 2002.  Working capital at March 31, 2003 was $10,053,730, compared to $11,985,287 at December 31, 2002.  The Company's ratio of current assets to current liabilities decreased to 3.6:1 at March 31, 2003, from 6.3:1 at December 31, 2002.  This net decrease was primarily attributable to a decrease in cash reserves due to capital expenditures made by the electrical construction operations of approximately $1.5 million in construction machinery and equipment and an increase in accounts payable and accrued liabilities due to a higher level of electrical construction activity.  The foregoing was offset by significant increases in accounts receivable, accrued billing and costs and estimated earnings in excess of billings on uncompleted contracts also attributed to a higher level of electrical construction activity.

At March 31, 2003, 243,668 shares were reserved for possible exercise of options to purchase Common Stock issued under the 1998 Executive Long-term Incentive Plan.

In August 2002, the Company began investing a portion of its cash, in excess of operating requirements, in short-term highly liquid U.S. government debt securities.  As of March 31, 2003, short-term investments had a balance of $1,273,796.

15



On September 17, 2002, the Company's Board of Directors approved a Common Stock Repurchase Plan (the "Repurchase Plan") allowing the Company to repurchase up to five percent of its outstanding Common Stock over the next twelve-month period.  The Company may repurchase its shares either in the open market or through private transactions.  The volume of shares to be repurchased is contingent upon market conditions and other factors.  As of May 1, 2003, pursuant to the Repurchase Plan, the Company has repurchased 853,196 shares of its Common Stock at a cost of $377,686, an average cost of $0.44 per share.

On April 15, 2002, the Company entered into a new loan agreement with Wachovia Bank, N.A. ("Wachovia") for a $6,000,000 line of credit.  Borrowings outstanding under the agreement were $1,414,649 and $866,903 at March 31, 2003 and December 31, 2002, respectively.  The credit facility, as described in note 5 of notes to consolidated financial statements, will primarily be used to finance the costs of constructing condominium units in Florida and will subsequently be repaid with the sales proceeds from said condominiums.

The Company's capital expenditures for continuing operations for the three months ended March 31, 2003, increased to $1,506,054 from $590,162 for the three months ended March 31, 2002.  This increase in the level of capital expenditures was primarily attributable to significant acquisitions of machinery and equipment made by the Company's electrical construction segment.

The following table summarizes the Company's future aggregate contractual obligations at March 31, 2003:

 

 
Payments Due By Period
       Total      Less Than
   1 Year
 

    1-2 Years

 

After 2
Years

 

 

 

 

 

 

 

 

Operating leases

  $ 92,046

 

  $ 78,560

 

$13,486

 

--  

Purchase obligations

      819,927

   819,927

   --        

       --  

 

    Total

  $911,973

 

  $898,487

 

$13,486

 

  --  

 

Item 4.

Controls and Procedures

(a) Evaluation of disclosure controls and procedures

Based on their evaluation of our disclosure controls and procedures conducted as of a date within 90 days of the date of filing this report on Form 10-Q, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934) are effective as of such date.

(b) Changes in internal controls

There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date that the evaluation was conducted.

 

16



 

PART II.  OTHER INFORMATION

 

Item 6.

Exhibits and Reports on Form 8-K.

(a) Exhibits in accordance with the provisions of Item 601 of Regulation S-K

99-1  Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
          Sarbanes-Oxley Act of 2002

99-2  Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
          Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

 None.

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

THE GOLDFIELD CORPORATION
(Registrant)

Dated:  May 15, 2003

/s/John H. Sottile
(John H. Sottile)
Chairman of the Board of Directors,
President, Chief Executive Officer and
Director.

 

/s/Stephen R. Wherry
(Stephen R. Wherry)
Vice President, Treasurer and Chief
Financial Officer.

17



CERTIFICATION

I, John H. Sottile, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Goldfield Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

  a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

  b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

  c)  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

  a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

  b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated: May 15, 2003

/s/John H. Sottile
(John H. Sottile)
Chairman of the Board of Directors,
President, Chief Executive Officer and
Director.

18



 

 

CERTIFICATION

I, Stephen R. Wherry, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Goldfield Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

  a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

  b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

  c)  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

  a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

  b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated: May 15, 2003

/s/Stephen R. Wherry
(Stephen R. Wherry)
Vice President, Treasurer and Chief
Financial Officer.

19