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 June 30, 2005

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)

   
1684 W. Hibiscus Blvd., Melbourne, FL
(Address of Principal Executive Offices)

32901
(Zip Code)

 

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

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

     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 August 4, 2005, 25,517,191 shares of the Registrant's common stock were outstanding.

 

 


 


THE GOLDFIELD CORPORATION AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED June 30, 2005

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


15

     

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

     

Item 4.

Controls and Procedures

27

 

Part II.
Item 1.

OTHER INFORMATION
Legal Proceedings

28

     

Item 2.

Unregistered Sales of Equity Securities and Use of
Proceeds

28

Item 4.

Submission of Matters to a Vote of Security Holders

28

     

Item 6.

Exhibits

29

 

Signatures

29

 

 

2



Part I.  FINANCIAL INFORMATION

Item 1. Financial Statements.

THE GOLDFIELD CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30,

December 31,

2005

2004

(unaudited)

ASSETS

Current assets

Cash and cash equivalents

 $

4,255,664 

 $

6,827,685 

Restricted cash - discontinued operations (Note 4)

7,845 

31,176 

Accounts receivable and accrued billings

2,936,238 

3,140,817 

Contracts receivable (Note 2)

5,317,737 

-   

Current portion of notes receivable

41,453 

41,453 

Costs and estimated earnings in excess of

billings on uncompleted contracts

1,074,062 

903,018 

Deferred income taxes

1,435,933 

993,516 

Income taxes recoverable

35,339 

46,054 

Residential properties under construction (Note 3)

193,990 

-   

Prepaid expenses

704,344 

321,865 

Other current assets

16,265 

13,648 

Total current assets

16,018,870 

12,319,232 

Property, buildings and equipment, net

8,729,434 

8,487,797 

Notes receivable, less current portion

487,044 

507,136 

Deferred charges and other assets

Deferred income taxes, less current portion

-   

368,890 

Land and land development costs (Note 3)

1,242,177 

1,582,882 

Cash surrender value of life insurance

310,974 

316,725 

Other assets

146,583 

121,855 

Total deferred charges and other assets

1,699,734 

2,390,352 

Total assets

 $

26,935,082 

 $

23,704,517 

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

  

  

Accounts payable and accrued liabilities

 $

2,553,669 

 $

1,802,539 

Billings in excess of costs and estimated

earnings on uncompleted contracts

6,921 

7,229 

Notes payable to bank (Note 5)

2,816,722 

866,667 

Current liabilities of discontinued operations (Note 4)

101,235 

153,919 

Total current liabilities

5,478,547 

2,830,354 

Deferred income taxes, noncurrent

515,498 

-   

Long-term obligations, less current portion (Note 5)

1,083,333 

1,516,667 

Total liabilities

7,077,378 

4,347,021 

Commitments and contingencies (Notes 4 and 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; 27,758,771 shares issued at

June 30, 2005 and December 31, 2004

2,775,877 

2,775,877 

Capital surplus

18,475,152 

18,475,152 

Accumulated deficit

(218,114)

(927,478)

Total

21,032,915 

20,323,551 

Less common stock in treasury, at cost; 2,241,580 and 1,862,522

shares at June 30, 2005 and December 31, 2004, respectively

1,175,211 

966,055 

Total stockholders' equity

19,857,704 

19,357,496 

Total liabilities and stockholders' equity

 $

26,935,082 

 $

23,704,517 

See accompanying notes to consolidated financial statements

 

3



THE GOLDFIELD CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2005

2004

2005

2004

Revenue

Electrical construction

 $

5,284,372 

 $

6,685,343 

 $

12,384,688 

 $

15,957,277 

Real estate development

4,186,580 

876,062 

5,317,737 

3,864,833 

Total revenue

9,470,952 

7,561,405 

17,702,425 

19,822,110 

Costs and expenses

Electrical construction

4,335,895 

6,880,757 

10,253,467 

14,429,031 

Real estate development

2,475,035 

647,912 

3,167,487 

2,722,941 

Depreciation and amortization

635,047 

500,815 

1,260,778 

987,335 

Selling, general and administrative

1,062,377 

659,262 

1,813,156 

1,423,756 

Total costs and expenses

8,508,354 

8,688,746 

16,494,888 

19,563,063 

Other income (expenses), net

Interest income

25,433 

17,934 

53,891 

38,509 

Interest expense, net

(33,475)

(11,502)

(66,460)

(18,001)

Loss on sale of property and equipment

(9,069)

(1,797)

(10,555)

(2,912)

Other

4,136 

16,164 

6,024 

16,759 

Total other income (expenses), net

(12,975)

20,799 

(17,100)

34,355 

Income (loss) from continuing operations

before income taxes

949,623 

(1,106,542)

1,190,437 

293,402 

Income taxes (benefit) (Note 7)

375,035 

(544,069)

466,545 

16,705 

Income(loss) from continuing operations

574,588 

(562,473)

723,892 

276,697 

Loss from discontinued operations (Note 4)

(1,776)

-   

(14,528)

-   

  

  

  

  

Net income (loss)

 $

572,812 

 $

(562,473)

 $

709,364 

 $

276,697 

 

Earnings(loss) per share of common stock-

       

basic and diluted (Note 8)

Continuing operations

 $

0.02 

 $

(0.02)

 $

0.03 

 $

0.01 

Discontinued operations

-   

-   

-   

-   

Net income (loss)

 $

0.02 

 $

(0.02)

 $

0.03 

 $

0.01 

Weighted average common shares and

equivalents used in the calculations

of earnings per share

Basic

25,687,548 

26,336,064 

25,760,218 

26,313,124 

Diluted

25,721,118 

26,336,064 

25,793,798 

26,364,166 

See accompanying notes to consolidated financial statements

4



THE GOLDFIELD CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended

June 30,

2005

2004

Cash flows from operating activities

Income from continuing operations

 $

709,364 

 $

276,697 

Adjustments to reconcile net income to net

cash provided by (used in) operating activities

Depreciation and amortization

1,260,778 

987,335 

Deferred income taxes

441,971 

7,823 

Loss on sale of property and equipment

10,555 

2,912 

Cash (used by) provided from changes in

Accounts receivable and accrued billings

204,579 

(168,274)

Contracts receivable

(5,317,737)

143,467 

Costs and estimated earnings in excess

of billings on uncompleted contracts

(171,044)

(1,170,658)

Land and land development costs

340,705 

(17,691)

Residential properties under construction

(193,990)

361,436 

Income taxes recoverable

10,715 

(4,005)

Prepaid expenses and other assets

(409,824)

(474,140)

Accounts payable and accrued liabilities

751,129 

907,135 

Billings in excess of costs and estimated

earnings on uncompleted contracts

(308)

(115,520)

Net cash used in operating

activities of continuing operations

(2,363,107)

736,517 

Net cash used in operating

activities of discontinued operations

(29,353)

(35,097)

Net cash used in operating activities

(2,392,460)

701,420 

Cash flows from investing activities

Proceeds from the disposal of property and equipment

66,031 

49,500 

Proceeds from notes receivable

20,092 

18,724 

Purchases of property and equipment

(1,579,001)

(2,457,261)

Cash surrender value of life insurance

5,752 

6,928 

Net cash used in investing

activities of continuing operations

(1,487,126)

(2,382,109)

Net cash used in investing activities of

discontinued operations

-   

-   

Net cash used in investing activities 

(1,487,126)

(2,382,109)

Cash flows from financing activities

Proceeds from the exercise of stock options

-   

36,458 

Borrowings (repayments) on term debt

(433,334)

1,229,934 

Borrowings (repayments) under lines of credit

1,950,055 

(1,578,923)

Purchase of treasury stock

(209,156)

(56,403)

Net cash (used in) provided by financing

activities of continuing operations

1,307,565 

(368,934)

Net decrease in cash and cash equivalents

(2,572,021)

(2,049,623)

Cash and cash equivalents at beginning of period

6,827,685 

5,045,463 

Cash and cash equivalents at end of period

 $

4,255,664 

 $

2,995,840 

Supplemental disclosure of cash flow information

Income taxes paid

 $

5,094 

 $

14,126 

Interest paid

55,483 

2,651 

See accompanying notes to consolidated financial statements

5



THE GOLDFIELD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2005 and 2004

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 Company's financial position, results of 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, 2004, 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, 2004.

Note 2 -

Contracts Receivable

Contracts receivable represent revenue recognized on a portion of the value of contracts for sale on condominium units, which establish buyers' commitments to purchase that are backed by their non-refundable earnest money deposits.  As of June 30, 2005, there was a $5,317,737 outstanding balance in contracts receivable compared to no outstanding balance at December 31, 2004.

The Company's real estate development operations do not extend financing to buyers and therefore, sales proceeds are received in full upon closing.

Note 3 -

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 new condominium development project are recorded under the asset "land and land development costs."  Once construction commences, the costs of construction 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.

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. 

  Commitments and Contingencies Related to Discontinued Operations

On September 8, 2003, the United States Environmental Protection Agency (the "EPA") issued a special notice letter notifying the Company that it is a potentially responsible party (a "PRP"), along with three other parties, with respect to investigation and removal activities at the Anderson-Calhoun Mine/Mill Site (the "Site") in Stevens County, Washington, which the EPA may request that the Company, along with the other PRPs, perform or finance.  Specifically, the EPA has requested that the Company and three other PRPs undertake, perform, and finance an Engineering Evaluation and Cost Analysis or "EE/CA" for the Site. The primary purpose of an EE/CA is to determine the nature and scope of contamination, evaluate risks, and identify and evaluate a range of possible clean-up alternatives.  EPA retains the sole discretion to determine what, if any, clean up will ultimately be required based on the EE/CA.

6



The Company sold the Site property in 1964. The Company has investigated the historic operations that occurred at the Site as well as the nature and scope of environmental conditions at the Site that may present concerns to the EPA.  Based upon its investigation to date, the Company has determined that its operations at the Site were primarily exploratory and that the Company never engaged in any milling or other processing activities at the Site.  The Company's records reflect that between the years 1950 and 1952 it extracted a limited amount (111,670 tons) of surface ore from the Site for off-site processing.  The Site has changed owners several times since it was sold by the Company, and the Company believes that a substantial majority of the mining activities and all of the milling and related processing and process waste disposal activities likely were conducted by subsequent owners.

The Company has entered into a Cost Sharing Agreement with two other PRPs (Combustion Engineering and Blue Tee Corp.) (collectively, the "Work Group") through which the Work Group has agreed how to perform and finance the EE/CA.  Pursuant to the Cost Sharing Agreement, the Work Group has agreed to share equally the costs of the EE/CA, subject to re-allocation of such costs among the Work Group after completion of the EE/CA. The Work Group has also entered into an Administrative Order on Consent ("AOC") with the EPA, wherein the Work Group members have agreed to perform and finance the EE/CA.  Evaluation of field work data and preparation of an EE/CA Report are expected to be completed by fall of 2005, whereupon the EPA will decide whether additional response action (remediation) may be necessary at the Site.

Under the Comprehensive Environmental Response, Compensation and Liability Act, any of the PRPs may be jointly and severally liable to the EPA for the full amount of any response costs incurred by the EPA, including costs related to investigation and remediation, subject to a right of contribution from other PRPs.  In practice, PRPs generally agree to perform such response activities, and negotiate among themselves to determine their respective contributions to any such multi-party activities based upon equitable allocation factors, including their respective contributions to the alleged contamination and their ability to pay.

It is impossible at this stage to estimate the total costs of investigation and remediation at the Site due to various factors, including incomplete information regarding the Site and the other PRPs, uncertainty regarding the extent of contamination and the Company's share, if any, of liability for the contamination, EPA's future selection of cleanup standards for the Site, and, ultimately, EPA's selection of a preferred clean-up remedy. 

In September 2003, in accordance with Financial Accounting Standards Board Interpretation No. 14, "Reasonable Estimation of the Amount of a Loss - an interpretation of Statement of Financial Accounting Standards No. 5 (Accounting for Contingencies)", and Statement of Position 96-1, "Environmental Remediation Liabilities", the Company recognized a provision of $210,976 (within discontinued operations) for this matter, in addition, this provision was increased by $111,769 during the twelve month period ended December 31, 2004 and $23,293 during the three month period ended June 30, 2005, increasing the total provision to $346,038, which represents the current estimate of the Company's share of the costs associated with an emergency removal action previously undertaken by the EPA, the anticipated cost of the EE/CA study and the anticipated professional fees associated with the EE/CA study.  Total actual costs to be incurred at the Site in future periods may vary from this estimate, given inherent uncertainties in evaluating environmental costs.  As of June 30, 2005, the Company incurred actual investigation and professional services costs of $244,803 and its reserve balance for the EE/CA study process, future EE/CA oversight costs and estimated EPA response costs is $101,235 (accrued as a current liability within discontinued operations).  The accrual will be reviewed periodically based upon facts and circumstances available at the time, which could result in changes to its amount.  The EPA has indicated that it has made no determination whether any additional response action (remediation) will be required at the Site and will not do so until after completion of the EE/CA process.  At this stage, the Company does not have sufficient information to determine the potential extent and nature of any necessary future response action (remediation) at the Site, or to estimate the potential additional future cost of such action or the Company's potential liability for such costs.  The Company is also investigating whether any cost incurred would be covered by insurance.  Based on that investigation, the Company is in the process of obtaining additional information and coverage determinations from two carriers who appear to have provided commercial liability insurance in the past.  No specific coverage determinations have yet been made.

7



 

The following table sets forth certain unaudited operating results of the discontinued operations for the six months ended June 30, as indicated in the table below.

2005

2004

(unaudited)

(unaudited)

Provision for remediation

 $

(23,293)

 $

-   

Loss from discontinued operations

before income taxes

(23,293)

-   

Income taxes (benefit)

(8,765)

-   

Loss from discontinued operations

net of tax

 $

(14,528)

 $

-   

The Company's effective tax benefit rate related to discontinued operations for the six months ended June 30, 2005 was 37.6%.  The effective tax benefit rate differs from the statutory rate (34%) for the six months ended June 30, 2005, largely due to state income taxes.

The following table sets forth certain unaudited operating results of the discontinued operations for the three months ended June 30, as indicated in the table below. 

2005

2004

(unaudited)

(unaudited)

Provision for remediation

 $

(23,293)

 $

-   

Loss from discontinued operations

before income taxes

(23,293)

-   

Income taxes (benefit)

(21,517)

-   

Loss from discontinued operations

net of tax

 $

(1,776)

 $

-   

 

8



Assets and liabilities of the discontinued operations have been reflected in the accompanying consolidated balance sheets as follows:

June 30,

December 31,

2005

2004

(unaudited)

Current assets

Cash in escrow

 $

7,845 

 $

31,176 

Total assets of discontinued

operations

 $

7,845 

 $

31,176 

Current liabilities

Reserve for remediation

 $

101,235 

 $

153,919 

Total liabilities of discontinued

operations

 $

101,235 

 $

153,919 

 

Note 5 -

Notes Payable to Bank

In April 2002, the Company entered into a $6,000,000 construction loan agreement, in favor of Wachovia Bank, N.A., to finance the development of condominium projects. A portion of the loan, up to $1,500,000, may 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 (5.2% and 4.3% at June 30, 2005 and December 31, 2004, respectively). The proceeds from the sales of the 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 secured by an agreement not to further encumber said condominium projects. Borrowings outstanding under this agreement were $1,950,056, as of June 30, 2005 compared to no borrowings outstanding as of December 31, 2004. The amount available for additional borrowing at June 30, 2005 was $4,049,944, of which $1,500,000 is available for working capital needs of the Company. 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 June 30, 2005 and December 31, 2004.

On January 30, 2004, the Company entered into a $2,600,000 term loan agreement, in favor of Wachovia Bank, N.A., to finance purchases of electrical construction equipment.  The Company was permitted to borrow funds under the loan during the draw period, January 30, 2004 through September 30, 2004. During the draw period, the Company was obligated to make monthly payments of accrued interest only.  On September 30, 2004 (the "conversion date"), the loan became payable in monthly loan payments including principal equal to 1/36 of the outstanding principal balance of the loan at the conversion date, plus accrued interest for 36 consecutive months.  The annual interest rate is equal to the "LIBOR Market Index Rate" plus one and nine-tenths percent (5.2% and 4.3% at June 30, 2005 and December 31, 2004, respectively).  The loan is secured by the equipment purchased with the proceeds of the loan, and any replacements, accessions, or substitutions thereof and all cash and non-cash proceeds received thereof. Borrowings outstanding under this agreement were $1,950,000 and $2,383,334 as of June 30, 2005 and December 31, 2004, 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, a change in fiscal year 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 June 30, 2005 and December 31, 2004.

9



Interest costs related to the construction of condominiums are capitalized. During the six month periods ended June 30, 2005 and 2004 the Company capitalized interest costs of $13,864 and $41,626, respectively.  During the three month periods ended June 30, 2005 and 2004 the Company capitalized interest costs of $12,996 and $24,078, respectively.

Note 6 -

Commitments and Contingencies

The Company's principal office space is under a seven-year non cancelable operating lease.  Future minimum lease payments under operating leases having initial or remaining non cancelable lease terms in excess of one year are as follows:

At June 30,

2005

2005

 $

70,570 

2006

138,960 

2007

139,378 

2008

142,132 

2009

146,884 

Thereafter

348,240 

Total

 $

986,164 

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 June 30, 2005, outstanding performance bonds issued on behalf of the Company's electrical construction subsidiary amounted to approximately $8,261,000.

Note 7 -

Income Taxes

At June 30, 2005, the Company had tax net operating loss carryforwards of approximately $3,590,000 available to offset future taxable income, which if unused will expire from 2009 through 2024.  The Company has alternative minimum tax credit carryforwards of approximately $324,000, which are available to reduce future Federal income taxes over an indefinite period.

The Company's effective tax rate for the six months ended June 30, 2005 was 39.2%.  This is the Company's expected tax rate for the year ending December 31, 2005, which was calculated based on the estimated annual operating results for the year.  The effective tax rate differs from the statutory rate (34%) for the six months ended June 30, 2005, largely due to state income taxes.  The provision for income taxes was $16,705 in the six months ended June 30, 2004, an effective tax rate of 5.7%, which was the Company's then expected tax rate for the year ended December 31, 2004.  The effective tax rate differs from the statutory rate for the six months ended June 30, 2004, largely due to estimated expenses which are non-deductible for tax purposes in proportion to the estimated operating results before taxes for the year.

 

10



Note 8 -

Earnings Per Share of Common Stock and Stock Repurchase Plan

Basic earnings per common share is computed by dividing net income by the weighted average number of common stock shares outstanding during the period.  Diluted earnings per share include additional dilution from potential common stock equivalents, such as stock options outstanding. The following tables set forth the computation of basic and diluted earnings per share for the periods indicated:

 

Six Months Ended

June 30,

2005

2004

(unaudited)

Continuing operations

Income from continuing operations

 $

723,892 

 $

276,697 

Discontinued operations

Loss from discontinued operations

(14,528)

-   

Net income

 $

709,364 

 $

276,697 

Weighted average common shares outstanding

25,760,218 

26,313,124 

Earnings per share-basic

 Continuing operations

 $

0.03 

 $

0.01 

 Discontinued operations

-   

-   

 Net income

 $

0.03 

 $

0.01 

Weighted average dilutive shares from stock option plan

33,580 

51,042 

Weighted average common shares outstanding including

dilutive shares

25,793,798 

26,364,166 

Earnings per share-diluted

Continuing operations

 $

0.03 

 $

0.01 

Discontinued operations

-   

-   

Net income

 $

0.03 

 $

0.01 

 

 

 

 

11



Three Months Ended

June 30,

2005

2004

(unaudited)

Continuing operations

Income (loss)  from continuing operations

 $

574,588 

 $

(562,473)

Discontinued operations

Loss from discontinued operations

(1,776)

-   

Net income (loss)

 $

572,812 

 $

(562,473)

Weighted average common shares outstanding

25,687,548 

26,336,064 

Earnings per share-basic

 Continuing operations

 $

0.02 

 $

(0.02)

 Discontinued operations

-   

-   

 Net income (loss)

 $

0.02 

 $

(0.02)

Weighted average dilutive shares from stock option plan

33,570 

-   

Weighted average common shares outstanding including

dilutive shares

25,721,118 

26,336,064 

Earnings per share-diluted

Continuing operations

 $

0.02 

 $

(0.02)

Discontinued operations

-   

-   

Net income (loss)

 $

0.02 

 $

(0.02)

Since September 17, 2002, the Company has had a stock repurchase plan which, as last amended by the Board of Directors on May 24, 2005, permitted the purchase of up to 3,500,000 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.  During the three month period ended June 30, 2005, the Company repurchased 313,974 shares of its common stock at a cost of $170,260 (average cost of $0.54 per share). The total number of shares repurchased under the Repurchase Plan as of June 30, 2005, was 2,224,222 at a cost of $1,156,513 (average cost of $0.52 per share) and the remaining number of shares the Company is authorized to repurchase under the Repurchase Plan is 1,275,778.  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 which it had purchased at a cost of $18,720.

Note 9 -

Business Segment Information

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

12


 


The following table sets forth certain segment information for the six months ended June 30, as indicated:

June 30,

June 30,

2005

2004

(unaudited)

(unaudited)

 

 

 

 

Continuing operations

Revenues

Electrical construction

 $

12,384,688 

 $

15,957,277 

Real estate development

5,317,737 

3,864,833 

Total

 $

17,702,425 

 $

19,822,110 

Operating income

Electrical construction

 $

843,135 

 $

514,183 

Real estate development

1,734,685 

873,903 

Total

 $

2,577,820 

 $

1,388,086 

The following table sets forth certain segment information for the three months ended June 30, as indicated:

June 30,

June 30,

2005

2004

(unaudited)

(unaudited)

 

 

 

 

Continuing operations

Revenues

Electrical construction

 $

5,284,372 

 $

6,685,343 

Real estate development

4,186,580 

876,062 

Total

 $

9,470,952 

 $

7,561,405 

Operating income (loss)

Electrical construction

 $

291,296 

 $

(714,330)

Real estate development

1,398,644 

168,018 

Total

 $

1,689,940 

 $

(546,312)

Operating income is total operating revenue less operating expenses inclusive of depreciation and selling, general and administrative expenses for each 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.  Operating income for each business segment, electrical construction and real estate development, is reconciled below in Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

13



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

June 30,

December 31,

2005

2004

 

(unaudited)

Identifiable assets

Electrical construction

 $

14,396,362 

 $

15,183,844 

Real estate development

6,871,047 

1,693,624 

Corporate

5,659,828 

6,795,873 

Discontinued operations

7,845 

31,176 

Total

 $

26,935,082 

 $

23,704,517 

 

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, if applicable, 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.  Any options granted under the Plan must be exercised within 10 years of the date of grant and are vested equally over a 3 year period.  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 six month periods ended June 30, 2005 and 2004.  As of June 30, 2005, 55,001 options were outstanding.

As permitted by Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation", as amended by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of SFAS No. 123", the Company applies the intrinsic value-based method of accounting as prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", in accounting for its Plan.  Accordingly, no compensation cost has been recognized in the consolidated financial statements during the six month periods ended June 30, 2005 and 2004.  Had the Company used the fair value-based method of accounting to determine compensation cost for its stock options at the grant date under SFAS No. 123, as amended by SFAS No. 148, the Company's net income per share would not have changed for the six month periods ended June, 2005 and 2004.

Note 11 -

Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123 (revised), "Share-Based Payment (Revised 2004)" (SFAS 123R) requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. The cost is to be measured based on the fair value of the equity or liability instruments issued. Originally, SFAS 123R required that companies adopt the provision of SFAS 123R as of the first interim or annual reporting period beginning after June 15, 2005. However, in April 2005, the Securities and Exchange Commission adopted a new rule which defers the compliance date of SFAS 123R until 2006 for calendar year companies such as Goldfield. The Company expects that, upon adoption, SFAS 123R will not have a significant impact on the financial position or results of operations of the Company.

14



In May 2005, the FASB issued SFAS 154 Accounting Changes and Error Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3 which requires that the direct effect of voluntary changes in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Indirect effects of a change should be recognized in the period of the change.  SFAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The impact of SFAS 154 will depend on the nature and extent of any voluntary accounting changes and correction of errors after the effective date, but the Company does not currently expect SFAS 154 to have a material impact on its results of operations, cash flows or financial position.

Item 2.

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

Overview

The Company's revenue from electrical construction operations decreased approximately 22.4% for the six month period ending June 30, 2005 and 21.0% for the three month period ended June 30, 2005 as compared to the same periods in the prior year.  The decrease in revenue was primarily the result of a reduction in the size of projects performed when compared to the like period in 2004 in addition to a decline in the availability of large transmission projects as compared to the like periods ending June 30, 2004.  Operating margins of the electrical construction operations increased to 6.8% for the six month period ending June 30, 2005, and to 5.5% for the three month period ended June 30, 2005 versus 3.22% and (10.7%) respectively when compared to the like periods in 2004.  The improvement in operating margins for the six and three month periods ended June 30, 2005 as compared to the like periods in 2004, is largely due to a combination of the utilization of company owned equipment versus rental equipment, reduced subcontract costs and the completion in 2004 of a project which experienced a significant loss.

Revenues from the real estate development operations increased by approximately 37.6% in the first six months of 2005 when compared to the same period in 2004.  This increase is mainly the result of the current condominium project under development being significantly larger than the condominium project under development in the like period of 2004. Operating margins increased to 32.6% for the six months ended June 30, 2005 from 22.6% for the six months ended June 30, 2004. During the latter part of 2005, the Company plans to commence construction on a second project, Pineapple House, described in the Results of Operations section below. Since this project is still in the permitting phase, there can be no assurance as to specific timing with respect to the commencement of construction.

Critical Accounting Policies and Estimates

This discussion and analysis of the Company's financial condition and results of operations is based upon the Company's consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles.  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, deferred income tax assets and environmental remediation.  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's management has discussed the selection and development of its critical accounting policies, estimates and related disclosure with the Audit Committee of the Board of Directors.

15



 Percentage of Completion - - Electrical Construction Segment

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 electrical 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 several factors including, but not limited to, changes in productivity and scheduling, and the cost of labor, subcontracts, materials and equipment.  Additionally, external factors such as weather, site conditions that differ from those assumed in the original bid (to the extent contract remedies are unavailable), client needs, client delays in providing approvals, 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.

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.  Due to our experience and the detailed approach in determining our cost estimates for all of our significant projects we believe our estimates to be highly reliable.  However, 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. Because we have a number of projects of varying levels of complexity and size in process at any given time these changes in estimates can offset each other without materially impacting our overall profitability.  If a current estimate of total costs 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 probable.

  Percentage of Completion - Real Estate Development Segment

Our initial condominium project was accounted for under the deposit method due to our limited experience in condominium development business.  Accordingly, the recognition of related revenue and expenses was deferred until the project was complete and the underlying titles were transferred to the buyers.

As of August 2002, commencing with the second condominium development project, 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", have been 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 construction contract costs incurred to date in relation to the total estimated construction costs.  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 and the variation is recognized in the period it is determined.

16



The Company believes that a material difference in total actual project costs versus total estimated project costs is unlikely due to the nature of a fixed-price construction contract. 

If a current estimate of total project costs 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, weather, permitting and unforeseen events.

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.

  Deferred Tax Assets

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.  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.  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.

As of June 30, 2005, the deferred tax asset was largely comprised of net operating loss ("NOL") carryforwards which will expire from 2009 through 2024 (refer to note 7 of notes to the consolidated financial statements).  Based on historical experience and other various assumptions including forecasts of future taxable income and tax planning, the Company anticipates being able to generate sufficient taxable income to utilize the NOL carryforwards prior to their respective expiration dates and therefore, has not recorded a valuation allowance against the deferred tax assets. 

 Provision for Remediation

In September 2003, the Company was notified by the United States Environmental Protection Agency (the "EPA") that it is a potentially responsible party (a "PRP") with respect to possible investigation and removal activities at a mine that it had formerly owned.  Refer to note 4 of notes to the consolidated financial statements in this Form 10-Q for a discussion of this matter.

In September 2003, in accordance with Financial Accounting Standards Board Interpretation No. 14, "Reasonable Estimation of the Amount of a Loss - an interpretation of Statement of Financial Accounting Standards No. 5 (Accounting for Contingencies)", and Statement of Position 96-1, "Environmental Remediation Liabilities", the Company recognized a provision of $210,976 (within discontinued operations) for this matter.  In addition, this provision was increased by $111,769 during the twelve months ended December 31, 2004 and $23,293 during the three months ended June 30, 2005, increasing the total provision to $346,038.  Total actual remediation costs to be incurred in future periods may vary from this estimate, given inherent uncertainties in evaluating environmental costs. 

 

17



Results of Operations

SIX MONTHS ENDED JUNE 30, 2005 COMPARED TO SIX MONTHS ENDED JUNE 30, 2004

Segment Information

The table below shows the Company's consolidated revenue and operating income attributable to each of its segments for the six months ended June 30, as indicated:

2005

2004

(unaudited)

(unaudited)

 

 

 

 

Continuing operations

Revenues

Electrical construction

 $

12,384,688 

 $

15,957,277 

Real estate development

5,317,737 

3,864,833 

Total

 $

17,702,425 

 $

19,822,110 

Operating income

Electrical construction

 $

843,135 

 $

514,183 

Real estate development

1,734,685 

873,903 

Total

 $

2,577,820 

 $

1,388,086 

The table below is a reconciliation of the Company's operating income attributable to each of its segments for the six months ended June 30, as indicated:

2005

2004

(unaudited)

(unaudited)

Electrical construction

Revenue

 $

12,384,688 

 $

15,957,277 

Expenses

Cost of goods sold

10,253,467 

14,429,031 

Depreciation & amortization

1,208,447 

945,513 

SG&A

79,639 

68,550 

Total expenses

11,541,553 

15,443,094 

Operating income

 $

843,135 

 $

514,183 

Real estate development

Revenue

 $

5,317,737 

 $

3,864,833 

Expenses

Cost of goods sold

3,167,487 

2,722,941 

Depreciation & amortization

10,981 

5,601 

SG&A

404,584 

262,388 

Total expenses

3,583,052 

2,990,930 

Operating income

 $

1,734,685 

 $

873,903 

Continuing Operations

  Revenues

Total revenues in the six months ended June 30, 2005 decreased by 10.7% to $17,702,425, compared to $19,822,110 in the six months ended June 30, 2004. This decrease in revenue was primarily the result of a reduction in the size of projects performed in the electrical construction segment, partially offset by increased revenue in the real estate segment for the period ending June 30, 2005 compared to the like period in 2004. 

18



Electrical construction revenues decreased by 22.4% to $12,384,688 in the six months ended June 30, 2005 from $15,957,277 in the six months ended June 30, 2004. The decrease was primarily the result of a reduction in the size of projects performed when compared to the like period in 2004. The varying magnitude and duration of electrical construction projects may result in substantial fluctuation in the Company's backlog from time to time. At June 30, 2005, the approximate value of uncompleted contracts was $11,590,000 compared to $4,700,000 at June 30, 2004.

Revenues recognized by the real estate development operations for the six months ended June 30, 2005 were $5,317,737 compared to $3,864,833 for the six months ended June 30, 2004, an increase of 37.6%.  The increase in revenues for the six months ended June 30, 2005 is mainly due to the increased number of condominium units in the real estate development project currently under construction.

The Company's real estate project currently under construction, "Oak Park", is due to be completed during the first quarter of 2006.  The Company's next project ("Pineapple House") is completing the permitting stage of development and is in the process of accepting contracts for sale and purchase.

As of June 30, 2005, the real estate development operation's backlog (outstanding real estate contracts for sale excluding partial revenue already recognized on said contracts under the percentage of completion method) was approximately $6,308,000.  There was no backlog as of June 30, 2004.  There can be no assurance that settlements of condominiums subject to contracts for sale will occur.

 Operating Results

Electrical construction operations had operating income of $843,135 in the six months ended June 30, 2005, compared to operating income of $514,183 during the six months ended June 30, 2004, an increase of $328,952, or 64.0%.  As a percentage of revenue, operating margins on electrical construction operations increased to 6.8% for the six months ended June 30, 2005 from 3.2% for the six months ended June 30, 2004.  The increase in operating margins for the six month period ended June 30, 2005 is largely due to a combination of the utilization of company owned equipment versus rental equipment, reduced subcontract costs and the completion in 2004 of a project which experienced a significant loss.

Real estate development operations had an operating income of $1,734,685 in the six months ended June 30, 2005, compared to $873,903 in the six months ended June 30, 2004, an increase of 98.5%.  As a percentage of revenue, operating margins increased to 32.6% for the six months ended June 30, 2005 from 22.6% for the six months ended June 30, 2004.  Operating margins from real estate development operations are expected to vary due to the type and number of projects under construction at any given time.

  Costs and Expenses

Total costs and expenses, and the components thereof, decreased to $16,494,888 in the six months ended June 30, 2005 from $19,563,063 in the six months ended June 30, 2004, a decrease of 15.7%.

Electrical construction costs decreased to $10,253,467 in the six months ended June 30, 2005 from $14,429,031 in the six months ended June 30, 2004, a decrease of 28.9%.  The decrease in costs is mainly the result of a decrease in the volume of work performed, increased utilization of company owned equipment and reduced subcontract costs for the like period ended June 30, 2004.

19



Costs of the real estate development operations increased to $3,167,487 for the six months ended June 30, 2005 from $2,722,941 for the six months ended June 30, 2004, an increase of 16.3%.  The increased costs are due to the increase in the number of units under construction during the period ended June 30, 2005 when compared to the like period ended June 30, 2004.

Depreciation and amortization was $1,260,778 in the six months ended June 30, 2005, compared to $987,335 in the six months ended June 30, 2004.  The increase in depreciation and amortization was primarily a result of an increase in capital expenditures made in recent years, most of which related to upgrading and replacing electrical construction equipment.

The following table sets forth selling, general and administrative ("SG&A") expenses for each respective segment for the six months ended June 30, as indicated:

2005

2004

(unaudited)

(unaudited)

Electrical construction

 $

79,639 

 $

68,550 

Real estate development

404,584 

262,388 

Corporate

1,328,933 

1,092,818 

Total

 $

1,813,156 

 $

1,423,756 

In the six months ended June 30, 2005, total SG&A expenses increased by $389,400 or 27.4% when compared to the like period in 2004. The increase was primarily a result of higher accrued selling expenses and bonuses associated with the real estate development operations as a result of the increased number of condominium units under construction and increased salary and accrued bonus expenses and professional fees incurred within the corporate division for the period ended June 30, 2005 when compared to the like period in 2004.  SG&A expenses, as a percentage of revenue, increased to 10.2% for the six months ended June 30, 2005 compared to 7.2% in the like period for 2004.

  Income Taxes

The provision for income taxes was $466,545 in the six months ended June 30, 2005, an effective tax rate of 39.2%. This is the Company's expected tax rate for the year ending December 31, 2005, which was calculated based on the estimated annual operating results for the year.  The effective tax rate differs from the statutory rate (34%) for the six months ended June 30, 2005, largely due to state income taxes.  The provision for income taxes was $16,705 in the six months ended June 30, 2004, an effective tax rate of 5.7%, which was the Company's then expected tax rate for the year ended December 31, 2004.  The effective tax rate differs from the statutory rate for the six months ended June 30, 2004, largely due to estimated expenses which are non-deductible for tax purposes in proportion to the estimated operating results before taxes for the year.

Discontinued Operations 

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

Following the sale, in September 2003, the Company was notified by the EPA that it is a PRP with respect to possible investigation and removal activities at a mine previously owned by the Company. Please see note 4 of notes to the consolidated financial statements in this Form 10-Q for a discussion of this matter.

20



The following table sets forth certain unaudited operating results of the discontinued operations for the six months ended June 30, as indicated:

2005

2004

(unaudited)

(unaudited)

Provision for remediation

 $

(23,293)

 $

-   

Loss from discontinued operations

before income taxes

(23,293)

-   

Income taxes (benefit)

(8,765)

-   

Loss from discontinued operations

net of tax

 $

(14,528)

 $

-   

The Company's effective tax benefit rate related to discontinued operations for the six months ended June 30, 2005 was 37.6%.  The effective tax benefit rate differs from the statutory rate (34%) for the six months ended June 30, 2005, largely due to state income taxes.

THREE MONTHS ENDED JUNE 30, 2005 COMPARED TO THREE MONTHS ENDED JUNE 30, 2004

Segment Information

The table below shows the Company's consolidated revenue and operating income attributable to each of its segments for the three months ended June 30, as indicated:

2005

2004

(unaudited)

(unaudited)

 

 

 

 

Continuing operations

Revenues

Electrical construction

 $

5,284,372 

 $

6,685,343 

Real estate development

4,186,580 

876,062 

Total

 $

9,470,952 

 $

7,561,405 

Operating income (loss)

Electrical construction

 $

291,296 

 $

(714,330)

Real estate development

1,398,644 

168,018 

Total

 $

1,689,940 

 $

(546,312)

 

21


 


The table below is a reconciliation of the Company's operating income attributable to each of its segments for the three months ended June 30, as indicated:

2005

2004

(unaudited)

(unaudited)

Electrical construction

Revenue

 $

5,284,372 

 $

6,685,343 

Expenses

Cost of goods sold

4,335,895 

6,880,757 

Depreciation & amortization

609,302 

482,621 

SG&A

47,879 

36,295 

Total expenses

4,993,076 

7,399,673 

Operating income (loss)

 $

291,296 

 $

(714,330)

Real estate development

Revenue

 $

4,186,580 

 $

876,062 

Expenses

Cost of goods sold

2,475,035 

647,912 

Depreciation & amortization

5,524 

2,808 

SG&A

307,377 

57,324 

Total expenses

2,787,936 

708,044 

Operating income

 $

1,398,644 

 $

168,018 

Continuing Operations

  Revenues

Total revenues in the three months ended June 30, 2005 increased by 25.3% to $9,470,952, compared to $7,561,405 in the three months ended June 30, 2004. This increase in revenue is mainly due to the construction of a larger real estate project for the period ending June 30, 2005 compared to the like period in 2004. 

Electrical construction revenues decreased by 21.0% to $5,284,372 in the three months ended June 30, 2005 from $6,685,343 in the three months ended June 30, 2004. This decrease is primarily due to the absence of a single large project performed during the like period in 2004.

Revenues recognized by the real estate development operations for the three months ended June 30, 2005 were $4,186,580 compared to $876,062 for the three months ended June 30, 2004, an increase of $3,310,518.  The increase in revenues for the second quarter of 2005 is due in large part to both the timing and the increased number of condominium units under construction.

 Operating Results

Electrical construction operations had operating income of $291,296 in the three months ended June 30, 2005, compared to an operating loss of $714,330 during the three months ended June 30, 2004. As a percentage of revenue, operating margins on electrical construction operations increased to 5.5% for the three months ended June 30, 2005 from (10.7)% for the three months ended June 30, 2004.  The increase in operating margins for the three month period ended June 30, 2005 is largely due to the completion in 2004 of a project which experienced a significant loss.

Real estate development operations had an operating income of $1,398,644 in the three months ended June 30, 2005, compared to $168,018 in the three months ended June 30, 2004, an increase of $1,230,626.  This increase was a result of both timing differences and the increased number of condominium units under construction. As a percentage of revenue, operating margins increased to 33.4% for the three months ended June 30, 2005 from 19.2% for the three months ended June 30, 2004.

22



  Costs and Expenses

Total costs and expenses, and the components thereof, decreased to $8,508,354 in the three months ended June 30, 2005 from $8,688,746 in the three months ended June 30, 2004, a decrease of 2.1%.

Electrical construction costs decreased to $4,335,895 in the three months ended June 30, 2005 from $6,880,757 in the three months ended June 30, 2004, a decrease of 37.0%.  The decrease in costs is mainly attributable to the decrease in the volume of work performed, decreased use of rental equipment and a decrease in subcontract costs during the like periods in 2004.

Costs of the real estate development operations increased to $2,475,035 for the three months ended June 30, 2005 from $647,912 for the three months ended June 30, 2004.  The increase in costs for the three month period ending June 30, 2005 is due in large part to the ongoing development of the current condominium project whereas last year's project was completed during the second quarter of 2004.

Depreciation and amortization was $635,047 in the three months ended June 30, 2005, compared to $500,815 in the three months ended June 30, 2004.  The increase in depreciation and amortization was primarily a result of an increase in capital expenditures made in recent years, most of which related to upgrading and replacing electrical construction equipment.

The following table sets forth selling, general and administrative ("SG&A") expenses for each respective segment for the three months ended June 30, as indicated:

2005

2004

(unaudited)

(unaudited)

Electrical construction

 $

47,879 

 $

36,295 

Real estate development

307,377 

57,324 

Corporate

707,121 

565,643 

Total

 $

1,062,377 

 $

659,262 

In the three months ended June 30, 2005, total SG&A expenses increased by $403,115 when compared to the like period in 2004. This increase was primarily attributable to higher accrued bonus and selling costs in the real estate development operations and increased salary and accrued bonus expenses incurred within the corporate division.  SG&A expenses, as a percentage of revenue, increased to 11.2% for the three months ended June 30, 2005 compared to 8.7% in the like period for 2004.

  Income Taxes

The provision for income taxes was $375,035 in the three months ended June 30, 2005, an effective tax rate of 39.5%, as compared to an income tax benefit of ($544,069)in the three months ended June 30, 2004, an effective tax (benefit)rate of (49.2)%.  The effective tax rate for the three months ended June 30, 2005 differs from the statutory rate largely due to state income taxes.  The effective tax benefit rate for the three months ended June 30, 2004 was the rate required to cause the cumulative tax provision for the six months ended June 30, 2004 to reflect the Company's estimated effective tax rate for the year ended December 31, 2004.

 

23



Discontinued Operations 

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

Following the sale, in September 2003, the Company was notified by the EPA that it is a PRP with respect to possible investigation and removal activities at a mine previously owned by the Company. Please see note 4 of notes to the consolidated financial statements in this Form 10-Q for a discussion of this matter.

The following table sets forth certain unaudited operating results of the discontinued operations for the three months ended June 30, as indicated:

2005

2004

(unaudited)

(unaudited)

Provision for remediation

 $

(23,293)

 $

-   

Loss from discontinued operations

before income taxes

(23,293)

-   

Income taxes (benefit)

(21,517)

-   

Loss from discontinued operations

net of tax

 $

(1,776)

 $

-   

Liquidity and Capital Resources

Working Capital Analysis

Cash and cash equivalents at June 30, 2005 were $4,255,664 as compared to $6,827,685 at December 31, 2004. Working capital of continuing and discontinued operations at June 30, 2005 was $10,540,323, compared to $9,488,878 at December 31, 2004.  The Company's ratio of current assets to current liabilities (including continuing and discontinued operations) decreased to 2.9:1 at June 30, 2005, from 4.4:1 at December 31, 2004. The net decrease was primarily attributed to an increase in the real estate development operation's note payable (construction loan), which was used to fund the construction costs of its most recent project.

Cash Flow Analysis

Net cash flows for each of the six month periods ended June 30, were as follows:

2005

2004

(unaudited)

(unaudited)

Operating activities

 $

(2,392,460)

 $

701,420 

Investing activities

(1,487,126)

(2,382,109)

Financing activities

1,307,565 

(368,934)

Net decrease in

cash and cash equivalents

 $

(2,572,021)

 $

(2,049,623)

 

24



  Operating Activities

Cash flows from operating activities are comprised of income from continuing operations adjusted to reflect the timing of cash receipts and disbursements therefrom.

Net cash used in operating activities during the six months ended June 30, 2005 was $2,392,460, compared to $701,420 of net cash provided during the same period in 2004.  The significant increase in cash used is attributable to $5,317,737 in contracts receivable of the real estate development operations for contracts on condominium units currently under development when compared to cash provided of $143,467 for the same period in 2004.  This was partially offset by cash provided from costs and estimated earnings in excess of billings on uncompleted projects of $999,614 and accounts receivable and accrued billings of $372,853 from the electrical construction segment from current billings and collections, the benefit of deferred income taxes of $434,148 and the benefit from a reduction in land and land development costs of $358,396.

  Investing Activities

Net cash used by investing activities in the first six months of 2005 was $1,487,126, compared to $2,382,109 for the same period in 2004. This decrease in cash used by the Company's investing activities during the first six months of 2005 when compared to the same period in 2004 was primarily the result of a decrease of capital expenditures in the first six months of 2005 to $1,579,001 from $2,457,261 in 2004. 

Capital expenditures in 2005 are expected to approximate $2.3 million, which includes approximately $1,579,000 in capital expenditures during the six months ended June 30, 2005.  The Company anticipates funding all 2005 capital expenditures through existing cash reserves.

  Financing Activities

Net cash provided by financing activities in the first six months of 2005 was $1,307,565, compared to net cash used  of $368,934 in the same period of 2004. Net cash provided by borrowing under lines of credit for the period ending June 30, 2005 was $1,950,055 compared to cash used of $1,578,923 in the first six months of 2004.  This difference is primarily due to an increase in borrowings within the real estate division for a current project under construction versus a project near completion in the first six months of 2004 and the subsequent repayment of the note.  Payments against the note payable for capital equipment in the electrical construction division accounted for cash used of $433,334 in the first six months of 2005 as compared to no payments made during the same period in 2004. 

The Company has paid no cash dividends on its Common Stock since 1933, and it is not expected that the Company will pay any cash dividends on its Common Stock in the immediate future.

Forecast

The Company anticipates its cash on hand, cash flows from operations and credit facilities will provide sufficient cash to enable the Company to meet its working capital needs, debt service requirements and planned capital expenditures for at least the next twelve months.  However, the Company's revenues, results of operations and cash flows as well as its ability to seek additional financing may be negatively impacted by factors including, but not limited to, a decline in demand for electrical construction services and/or condominiums in the markets served and general economic conditions, heightened competition, availability of construction materials, increased interest rates and adverse weather conditions.

 

25



Contractual Obligations

The following table summarizes the Company's future aggregate contractual obligations at June 30, 2005: 

Payments Due By Period

(in thousands)

Total

Less Than
1 Year

1 - 2
Years

3 - 5
Years

More Than
5 Years

Operating leases

 $

986 

 $

71 

 $

278 

 $

441 

 $

196 

Purchase obligations(1)

1,127 

429 

437 

260 

-   

Long-term debt - principal

1,950 

794 

1,156 

-   

-   

Long-term debt - interest(2)

381 

97 

70 

88 

126 

Total

 $

4,444 

 $

1,391 

 $

1,941 

 $

789 

 $

322 

 

(1)

Purchase obligations include only agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms.  These amounts include the employment contract of the CEO.

(2)

Includes interest on loans against the cash surrender value of life insurance policies included in other long term assets.

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. 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 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; adverse weather; our ability to estimate accurately with respect to fixed price construction contracts; heightened competition in the electrical construction field, including intensification of price competition; and the availability of skilled construction labor. Factors that may affect the results of our real estate development operations include, among others: interest rates; ability to obtain necessary permits from regulatory agencies; adverse legislation or regulations; ability to acquire land; ability to obtain additional construction financing; adverse weather; 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 report 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.

26



Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

The Company and its subsidiaries are exposed to certain market risks from transactions that are entered into during the normal course of business. The Company's primary market risk exposure is related to interest rate risk. At June 30, 2005, we performed sensitivity analyses to assess the potential effect of this risk and concluded that a hypothetical change in the interest rates of 100 basis points would not materially affect our financial position, results of operations or cash flows.

Item 4.

Controls and Procedures.

Evaluation of disclosure controls and procedures

John H. Sottile, our Chief Executive Officer ("CEO"), and Stephen R. Wherry, our Chief Financial Officer ("CFO"), have performed an evaluation of the Company's disclosure controls and procedures, as that term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of June 30, 2005 and each has concluded that such disclosure controls and procedures are sufficiently effective to provide reasonable assurance that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the Securities and Exchange Commission's rules and regulations.

Changes in internal controls

No changes in the Company's internal controls over financial reporting occurred during the second quarter of 2005 that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

Limitations of 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.  Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, our CEO and CFO have concluded, based on their evaluation, that our disclosure controls and procedures were sufficiently effective as of June 30, 2005 to provide reasonable assurance that the objectives of the disclosure control system were met.

 

27



PART II.  OTHER INFORMATION

Item 1.

  Legal Proceedings.

Environmental

For information in response to this Item, see the discussion regarding the special notice letter the Company received from the United States Environmental Protection Agency regarding the Anderson-Calhoun mine/mill site in note 4 of notes to the consolidated financial statements in this Form 10-Q.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

The following table sets forth information on a monthly basis regarding the Company's purchases of its Common Stock during the second quarter of 2005:

Issuer Purchases of Equity Securities

Period

 

Total Number
 of Shares
Purchased

 

Average
 Price Paid
per Share

 

Total Number of
 Shares Purchased
 as Part of
Publicly
Announced Plans
or Programs(1)

 

Maximum Number
 of Shares that
May Yet Be
Purchased Under
the Plans or
Programs

4/1/05-4/30/05

42,658 

 $

0.55 

42,658 

547,094 

5/1/05-5/31/05

226,860 

0.53 

226,860 

1,320,234 

6/1/05-6/30/05

44,456 

0.61 

44,456 

1,275,778 

Total

313,974 

 $

0.54 

313,974 

1,275,778 

 

(1)

Since September 17, 2002, the Company has had a stock repurchase plan which, as last amended by the Board of Directors on May 24, 2005, permitted the purchase of up to 3,500,000 shares.  As of June 30, 2005, the Company has repurchased under the repurchase plan 2,224,222 shares of its Common Stock at a cost of $1,156,513 (average cost of $.52 per share). 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 condition and other factors.

 

Item 4.

Submission of Matters to a Vote of Security Holders.

(a) The Annual Meeting of Stockholders was held on May 24, 2005.

(b) At the Annual Meeting of Stockholders, the shareholders voted to elect the following seven directors to the Board of Directors.  Set forth below are the votes cast in the election of directors:

     Directors

Votes For

Votes Withheld

Thomas E. Dewey, Jr.

21,897,846

1,189,449

Harvey C. Eads, Jr.

21,875,111

1,212,184

John P. Fazzini

21,904,336

1,182,959

Danforth E. Leitner

21,919,711

1,167,584

Al Marino

22,086,136

1,001,159

Dwight W. Severs

21,922,511

1,164,784

John H. Sottile

21,699,750

1,387,545

(c) The shareholders also voted to ratify the appointment of KPMG LLP as Independent Certified Public Accountants for the Company for the year ending December 31, 2005 with 22,534,848 votes cast for, 500,158 votes cast against, 52,289 votes abstained and 0 broker non-votes.

 

28



Item 6.

Exhibits.

   
3-2

Amended and restated By-Laws of the Company

   
31-1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 15 U.S.C. Section 7241

   
31-2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 15 U.S.C. Section 7241

   
32-1*

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

   
32-2*

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

  * These exhibits are intended to be furnished in accordance with Regulation S-K Item 601(b)(32)(ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Act of 1934 or incorporated by reference into any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference.

SIGNATURES

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

THE GOLDFIELD CORPORATION
(Registrant)

Dated:   August 15, 2005

/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, Chief Financial Officer
(Principal Financial Officer), Treasurer,
Assistant Secretary and
Principal Accounting Officer.