Table of Contents
SECURITIES AND EXCHANGE COMMISSION
Securities Exchange Act of 1934
þ | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
o | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to § 240.14a-12 |
o | No Fee required. | |
þ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which transaction applies: | ||
Common stock, par value $0.001 per share, of Meadow Valley Corporation | |||
(2) | Aggregate number of securities to which transaction applies: | ||
5,180,654 shares of common stock of Meadow Valley Corporation 266,693 options to purchase shares of common stock of Meadow Valley Corporation | |||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||
Calculated solely for the purpose of determining the filing fee.The maximum aggregate transaction value was determined based upon the sum of (a) the product of (i) 5,180,654 shares of Meadow Valley Corporation common stock outstanding on September 16, 2008, and (ii) the merger consideration of $11.25 per share and (b) the product of (i) 266,693 shares of Meadow Valley Corporation common stock subject to currently outstanding options and (ii) the excess of $11.25 over $4.86, the weighted average exercise price with respect to such options (the “Total Consideration”). The filing fee, calculated in accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, and Rule 0-11(c)(1) promulgated thereunder, was determined by multiplying 0.0000393 by the Total Consideration. | |||
(4) | Proposed maximum aggregate value of transaction: | ||
$59,986,526 | |||
(5) | Total fee paid: | ||
$2,358 |
o | Fee paid previously with preliminary materials. | |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: | ||
(2) | Form, Schedule or Registration Statement No.: | ||
(3) | Filing Party: | ||
(4) | Date Filed: |
Table of Contents
Table of Contents
Very truly yours, | ||
Don A. Patterson | David D. Doty | |
Chairman of the Special Committee | Chief Financial Officer and Secretary | |
Table of Contents
Table of Contents
1 | ||||
11 | ||||
16 | ||||
16 | ||||
36 | ||||
42 | ||||
46 | ||||
51 | ||||
53 | ||||
53 | ||||
55 | ||||
58 | ||||
58 | ||||
59 | ||||
62 | ||||
65 | ||||
66 | ||||
68 | ||||
68 | ||||
69 | ||||
69 | ||||
69 | ||||
69 | ||||
69 | ||||
70 | ||||
71 | ||||
71 | ||||
71 | ||||
71 | ||||
71 | ||||
71 | ||||
72 | ||||
72 | ||||
73 | ||||
73 | ||||
74 | ||||
74 | ||||
74 | ||||
74 | ||||
75 | ||||
75 | ||||
75 | ||||
75 | ||||
75 |
i
Table of Contents
75 | ||||
76 | ||||
76 | ||||
79 | ||||
82 | ||||
84 | ||||
84 | ||||
84 | ||||
84 | ||||
85 | ||||
86 | ||||
87 | ||||
88 | ||||
89 | ||||
89 | ||||
89 | ||||
89 | ||||
90 | ||||
91 | ||||
91 | ||||
92 | ||||
93 | ||||
93 | ||||
93 | ||||
95 | ||||
97 | ||||
97 | ||||
97 | ||||
98 | ||||
100 | ||||
101 |
Agreement and Plan of Merger, dated as of July 28, 2008, by and among Meadow Valley Corporation, Phoenix Parent Corp. and Phoenix Merger Sub, Inc. | A-1 | |||||
Opinion of Morgan Joseph & Co. Inc. | B-1 | |||||
Annual Report on Form 10-K for the fiscal year ended December 31, 2007 | C-1 | |||||
Amendment No. 1 to Annual Report on Form 10-K for the fiscal year ended December 31, 2007 | D-1 | |||||
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2008 | E-1 |
ii
Table of Contents
1
Table of Contents
2
Table of Contents
• | determined that the merger agreement and the merger are fair to and in the best interests of Meadow Valley and its unaffiliated stockholders; | |
• | approved the merger agreement; and | |
• | recommended that Meadow Valley’s stockholders adopt and approve the merger agreement. |
3
Table of Contents
• | Messrs. Larson and Nelson will contribute substantially all of their shares of Meadow Valley common stock to Phoenix Holdings. Their respective contributions will include shares acquired by them upon exercise of their options prior to the merger and may, at their discretion, be net of shares utilized to pay the exercise price of their options and estimated federal income taxes. Shares held by Messrs. Larson and Nelson in their respective retirement plans, constituting 16,247 and 1,979 shares, respectively, may be canceled and converted into the right to receive $11.25 per share in cash, without interest. Assuming Messrs. Larson and Nelson effect a cashless exercise of their Meadow Valley options and that shares held by them in their respective retirement plans are canceled and converted into the right to receive $11.25 in cash, without interest, Messrs. Larson and Nelson are expected to receive a 3.6% and 3.8% fully diluted equity interest in Phoenix Holdings, respectively, with an imputed value of approximately $1.21 million and $1.27 million, respectively. If, instead, Messrs. Larson and Nelson choose not to engage in a cashless exercise and to pay their own estimated federal income taxes, Messrs. Larson and Nelson are expected to receive a 4.5% and 4.9% fully diluted equity interest in Phoenix Holdings, respectively, with an imputed value of approximately $1.51 million and $1.64 million, respectively. The foregoing percentages are subject to certain factors and assumptions described more fully herein; |
• | Messrs Larson and Nelson will each be provided the opportunity to earn up to 3.5% of the Class B-1 Voting Units outstanding at the effective time of the merger in Phoenix Holdings if they meet certain performance criteria subsequent to the merger. Such Class B-1 interests have no immediate economic value and no readily ascertainable long term value. The Class B-1 interests will participate in the net cash flow of the company following the closing of the merger if, and only if, the Class A-1 interests realize a full return of invested capital plus a preferred return. Consequently, it is not possible to assign a value to the Class B-1 interests as such interests are entirely dependent on the company’s future performance, which is uncertain; |
• | Mr. Bottcher will be given the right, but will have no obligation, to contribute all of his shares of Meadow Valley common stock (other than those held in his retirement plan) to Phoenix Holdings. If he elects to do so, his contribution will include shares acquired by him upon exercise of his options prior to the merger and may, at his discretion, be net of shares utilized to pay the exercise price of his options and estimated federal |
4
Table of Contents
income taxes. Shares held by Mr. Bottcher in his retirement plan, constituting 1,036 shares, will be canceled and converted into the right to receive $11.25 per share in cash, without interest. Depending on how he determines to effect his contribution, Mr. Bottcher is expected to receive between a 0.9% and 1.0% fully diluted equity interest in Phoenix Holdings with an imputed value of approximately $290,000 and $330,000, respectively. The foregoing percentages are subject to certain factors and assumptions described more fully herein. Mr. Bottcher has advised Meadow Valley that he intends to contribute his Meadow Valley shares to Phoenix Holdings; |
• | each option to purchase shares of Meadow Valley’s common stock that is outstanding and unexercised (whether vested or unvested) will be canceled and the holders of such options will be entitled to receive an amount, in cash, equal to the product of the number of shares subject to each such option multiplied by the excess, if any, of the merger consideration over the exercise price per share of each such option, net of applicable withholding taxes. The aggregate consideration expected to be paid to our directors and executive officers (excluding the Rollover Participants and Mr. Bottcher) in connection with the merger for options to purchase shares of Meadow Valley common stock held by such directors and executive officers is $150,862; |
• | it is anticipated that the current executive officers of Meadow Valley will hold substantially similar positions with the surviving corporation after completion of the merger and will receive substantially similar compensation; | |
• | our executive officers and directors will be indemnified in respect of their past service, and Investor will maintain Meadow Valley’s current directors’ and officers’ liability insurance, subject to certain conditions; and |
• | Our directors and executive officers (excluding the Rollover Participants and Mr. Bottcher) do not hold any shares of Meadow Valley common stock and, as a result, will not receive any consideration for shares of Meadow Valley common stock in the merger. |
• | the Special Committee members receive an annual fee of $40,000, paid quarterly in arrears; | |
• | the chairman of the Special Committee receives an additional fee of $25,000 for service as chairman, paid quarterly in arrears; and | |
• | the Special Committee members are reimbursed for their reasonable expenses. |
• | Meadow Valley will be a privately-held, wholly-owned subsidiary of Investor and price quotations for Meadow Valley common stock will no longer be available; | |
• | each holder of Meadow Valley common stock (other than as provided for with respect to the Rollover Participants and Mr. Bottcher) will be entitled to receive $11.25 in cash, without interest (and less applicable withholding taxes), for each share of common stock owned at the effective time of the merger; | |
• | each option to purchase shares of Meadow Valley common stock that is outstanding and unexercised (whether vested or unvested) will be canceled and the holders of such options will be entitled to receive an amount, in cash, equal to the product of the number of shares subject to each such option multiplied by the excess, if any, of the merger consideration over the exercise price per share subject to each such option, net of applicable withholding taxes; | |
• | adequate provision will be made so that the holders of warrants to purchase common stock of Meadow Valley will have the right to receive, upon exercise of the warrants and subject to the terms and conditions thereof, $11.25 per share, without interest (and less applicable withholding taxes), but given that the exercise price of all outstanding warrants is in excess of the merger consideration, we do not expect any warrant holder to exercise their warrants; | |
• | the registration of Meadow Valley’s common stock under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will be terminated; and |
5
Table of Contents
• | unaffiliated stockholders will no longer have a direct or indirect interest in or be stockholders of Meadow Valley, and, therefore, will not be able to participate in the surviving corporation’s future earnings and growth, and dividends, if any. |
• | the negotiation, execution and delivery of definitive documentation with respect to the Term Facility I or the Term Facility II, as applicable (including, without limitation, an intercreditor agreement), satisfactory to the administrative agent in its reasonable discretion; | |
• | since the date of the merger agreement, no event, change, effect, development, condition or occurrence shall have occurred that has had or could reasonably be expected to have, individually or in the aggregate, a material adverse effect (as defined in the merger agreement) with respect to Meadow Valley or, in the case of the Term Facility I, a material adverse effect on the condition (financial or otherwise), business, or assets of the borrower; | |
• | Insight Equity’s compliance in all material respects with the terms of the commitment letter for the Term Facility I or the Term Facility II, as applicable; | |
• | the conditions to closing of the merger set forth in the merger agreement shall have been met (or waived with the administrative agent’s prior consent, which consent shall not be unreasonably withheld); | |
• | after giving effect to the merger and the transactions contemplated thereby, Investor and its subsidiaries shall have no indebtedness for borrowed money, guarantees, or preferred stock outstanding other than, as applicable, (i) the Term Facility I, (ii) the Term Facility II, (iii) the Revolving Credit Facility, (iv) the existing Ready Mix credit facility, (v) capital leases existing as of July 27, 2008 and additional capital leases to the extent permitted under section 5.1(vi) of the merger agreement, and (vi) other indebtedness and preferred stock existing prior to the merger and reasonably acceptable to the administrative agent; | |
• | the administrative agent shall have received a certificate, in form and substance reasonably satisfactory to it, confirming the solvency of certain of the Debt Parties; and | |
• | consummation of the merger and the related transactions, including closing of the Term Facility I, the Term Facility II and the Revolving Credit Facility, as applicable, shall not (i) violate any applicable law, statute, rule or regulation, (ii) violate, or result in an event of default under, any material agreement after giving effect to any consents or approvals that shall have been obtained, or (iii) require any governmental or other consent or approval that shall not have been obtained so as to permit the Debt Parties to operate their business, in all material respects, consistent with past practices following the merger. |
6
Table of Contents
• | Meadow Valley’s stockholders voting to adopt and approve the Merger Proposal; |
• | the representations and warranties made by the respective parties to the merger agreement being true and correct as of the effective time of the merger, except for such failures as could not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect (as detailed on page 78 of this proxy statement); |
• | each party to the merger agreement having performed, in all material respects, all obligations that it is required to perform under the merger agreement; | |
• | no change, event or occurrence, individually or in the aggregate, that would, or could reasonably be expected to, have a Material Adverse Effect on Meadow Valley or any of its subsidiaries, including Ready Mix, occurring between the date of the merger agreement and the effective time of the merger; | |
• | Meadow Valley’s and its subsidiaries’ (excluding Ready Mix) bonding capacity being at least $200.0 million in the aggregate and at least $50.0 million for any individual engagement, which amounts Meadow Valley and its subsidiaries (excluding Ready Mix) met as of the date of this proxy statement; | |
• | Meadow Valley’s work backlog being at least $112.5 million, which Meadow Valley met as of the date of this proxy statement; | |
• | Meadow Valley shall have EBIT during the twelve full calendar months immediately preceding the effective time of the merger of no less than $5.5 million; | |
• | Ready Mix shall have EBIT during the twelve full calendar months immediately preceding the effective time of the merger of no less than negative $4.0 million; | |
• | receipt of certain real estate deliverables, including delivery by Meadow Valley of estoppel certificates, landlord and other consents for leased property, title insurance, and collateral access agreements with respect to certain leased property; | |
• | there shall be no order, injunction or decree preventing, restraining or rendering illegal the consummation of the merger; | |
• | Meadow Valley shall have obtained all required permits, licenses and the written consent of any party necessary for the consummation of the merger; | |
• | certain Meadow Valley employees shall have waived their rights to any change of control, severance or similar payments that could be due and owing as a result of the merger; | |
• | no warrants or other rights for the purchase of any shares of Meadow Valley capital stock shall be outstanding; | |
• | Meadow Valley and its subsidiaries (including Ready Mix), on a consolidated basis, shall have a minimum book value of $31.0 million; | |
• | Meadow Valley shall have terminated certain stock pledge agreements and Meadow Valley and its subsidiaries (excluding Ready Mix) shall be released as guarantors, grantors, co-borrowersand/or pledgors with respect to any and all indebtedness or other obligations of Ready Mix; and | |
• | Meadow Valley shall continue to own at least 66% of the Ready Mix common stock outstanding on a fully diluted basis and no shares of Ready Mix preferred stock shall be issued. |
7
Table of Contents
• | initiate, solicit and encourage Acquisition Proposals (as detailed on page 83 of this proxy statement), including by way of providing access to non-public information pursuant to one or more acceptable confidentiality agreements; and |
• | participate in discussions or negotiations with respect to Acquisition Proposals or otherwise cooperate with or assist or participate in, or facilitate, any such discussions or negotiations. |
• | initiate, solicit or knowingly encourage the submission of any inquiries, proposals or offers that constitute or may reasonably be expected to lead to any Acquisition Proposal or engage in any discussions or negotiations with respect thereto or otherwise cooperate with or assist or participate in, or knowingly facilitate any such inquiries, proposals, discussions or negotiations; or | |
• | approve or recommend, or publicly propose to approve or recommend, any Acquisition Proposal or enter into any merger agreement, letter of intent, agreement in principle, share purchase agreement, asset purchase agreement or share exchange agreement, option agreement or other similar agreement relating to an Acquisition Proposal or enter into any agreement or agreement in principle requiring us to abandon, terminate or fail to consummate the transactions contemplated by the merger agreement or breach our obligations thereunder or resolve, propose or agree to do any of the foregoing. |
• | upon the mutual written agreement of Meadow Valley and Investor; | |
• | by either Meadow Valley or Investor after the issuance of a final injunction or order prohibiting the merger, or the final denial of any approval necessary to consummate the merger; | |
• | by either Meadow Valley or Investor if, in certain circumstances, the merger has not been consummated on or before December 31, 2008 (unless extended under limited circumstances in Investor’s sole discretion to a date not later than January 31, 2009), unless the reason for not closing the merger is due to the actions or beach by the party seeking termination (the “Outside Date Termination Right”); | |
• | by either Meadow Valley or Investor if the Merger Proposal does not receive the requisite stockholder vote at the special meeting (the “Stockholder Rejection Termination Right”), unless the special meeting is adjourned or postponed pursuant to the terms of the merger agreement; | |
• | by Meadow Valley upon a failure or breach by Investor of any of its obligations, covenants, representations, or warranties in the merger agreement, and if such failure or breach would result in a failure of the Meadow Valley closing conditions to be satisfied and is not cured within the period of time provided for in the merger agreement, provided that Meadow Valley is not then in material breach of its obligations under the merger agreement (the “Investor Breach Termination Right”); | |
• | by Investor upon a failure or breach by Meadow Valley of any of its obligations, covenants, representations, or warranties in the merger agreement, if such failure or breach would reasonably be expected to result in a failure of Investor closing conditions to be satisfied and if such failure or breach is not cured within the period of time provided for in the merger agreement, provided that Investor is not then in material breach of its obligations under the merger agreement (the “Meadow Valley Breach Termination Right”); |
8
Table of Contents
• | by Investor upon Meadow Valley or Meadow Valley’s board of directors, as the case may be, (i) changing its recommendation that Meadow Valley’s stockholders approve the Merger Proposal, (ii) approving, adopting, or recommending any Acquisition Proposal, (iii) approving, recommending or entering into a letter of intent, agreement in principle or definitive agreement for an Acquisition Proposal, (iv) failing to publicly reaffirm the board of director’s recommendation in favor of the Merger Proposal, (v) materially breaching its obligations under the “go shop” provision or the stockholder vote provision in the merger agreement, (vi) failing to include the board of directors recommendation in favor of the Merger Proposal in this proxy statement, or (vii) authorizing any of the above (the “Change of Recommendation Termination Right”); | |
• | by Investor upon an event, change or occurrence that has had or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect that cannot reasonably be expected to be cured by December 31, 2008; | |
• | by Meadow Valley any time prior to receiving the requisite stockholder vote in favor of the Merger Proposal, if Meadow Valley has received a Superior Proposal in accordance with the “go shop” provision, provided that Meadow Valley must enter into such alternative acquisition agreement within 24 hours after, and pay a fee in advance of, terminating the merger agreement (the “New Agreement Termination Right”); or | |
• | by Meadow Valley upon Investor’s failure to consummate the merger within 10 days after Meadow Valley makes a written demand of Investor, provided that all the requirements and conditions necessary to consummate the merger have been satisfied. |
• | the Outside Date Termination Right, if, at the time of the delay, Investor has taken all actions necessary on its part to consummate the merger, but Meadow Valley has failed to do so; | |
• | the Stockholder Rejection Termination Right, if Meadow Valley subsequently enters into a definitive agreement with respect to an Acquisition Proposal within 12 months after such termination; | |
• | the Meadow Valley Breach Termination Right; | |
• | the Change of Recommendation Termination Right, unless the termination relates to a Superior Proposal from certain parties that had previously expressed an interest in Meadow Valley; or | |
• | the New Agreement Termination Right, unless the termination relates to a Superior Proposal from certain parties that had previously expressed an interest in Meadow Valley. |
9
Table of Contents
• | the Outside Date Termination Right, if, at the time of the delay, Meadow Valley has taken all actions necessary on its part to consummate the merger, but Investor has failed to do so; | |
• | the Investor Breach Termination Right; or | |
• | the terms of the merger agreement if either Investor or Merger Sub has breached any agreement terms such that their conditions to close are not satisfied thereby causing the closing not to be effective by December 31, 2008. |
10
Table of Contents
Q: | Why am I receiving this proxy statement and proxy card? |
A: | You are receiving this proxy statement and proxy card because you are a record or beneficial holder of Meadow Valley common stock and consequently you are being asked to consider and vote upon important matters at a special meeting of stockholders of Meadow Valley. |
Q: | When and where is the special meeting? |
A: | The special meeting of our stockholders will be held on , 2008 at a.m., local time, at . |
Q: | What matters will be considered and voted on at the special meeting? |
A: | At the special meeting, you will be asked to consider and vote on the following: |
• | to adopt and approve the Merger Proposal; | |
• | to approve the Adjournment Proposal; and | |
• | to transact such other business as may properly come before the special meeting or any adjournment or postponement thereof. |
Q: | How do the Special Committee and board of directors recommend that I vote on the proposals? |
A: | Each of the Special Committee and the board of directors of Meadow Valley (with Bradley E. Larson and Kenneth D. Nelson abstaining) has unanimously determined that the merger and the merger agreement are fair to, and in the best interests of, Meadow Valley and its unaffiliated stockholders, and the Special Committee and the board of directors of Meadow Valley each recommend that you vote “FOR” the Merger Proposal and “FOR” the Adjournment Proposal. Please be aware that Messrs. Larson and Nelson abstained from voting as members of Meadow Valley’s board of directors and, as a result, the members of the Special Committee and the members of the board of directors that voted on the merger were identical. |
Q: | Who is entitled to vote at the special meeting? |
A: | All stockholders of record as of the close of business on , 2008 will be entitled to notice of, and to vote at, the special meeting. |
Q: | How many shares must be present to hold the special meeting? |
A: | The holders of one-third of all outstanding shares of Meadow Valley common stock must be present, in person or represented by proxy, at the special meeting in order to hold the special meeting and conduct business. This is called a quorum. If you submit a properly executed proxy card or properly submit your proxy by telephone or through the Internet, then your shares will be counted as part of the quorum. Abstentions and shares that are the subject of broker non-votes will also be counted in determining the presence of a quorum. |
Q: | What vote is required to approve the proposals? |
A: | Approval of the Merger Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Meadow Valley common stock entitled to vote at the special meeting, or shares. Approval of the Adjournment Proposal requires the affirmative vote of a majority of the outstanding shares of Meadow Valley common stock entitled to vote and represented at the special meeting. |
11
Table of Contents
Q: | What will I receive in the merger? |
A: | For each share of common stock owned, stockholders will receive $11.25 in cash, without interest. Investor, the surviving corporation and the paying agent designated by Investor will be entitled to deduct and withhold from the merger consideration any amounts required to be deducted and withheld under any applicable tax law, and any amounts so withheld shall be treated as having been paid to the holder from whose merger consideration the amounts were so deducted and withheld. |
Q: | What do I need to do now? |
A: | We ask that you please vote by proxy, whether or not you plan on attending the special meeting in person. If your shares are held in your name, you can submit your proxy (i) by mail, by completing, signing, dating, and returning the enclosed proxy card in the enclosed postage-paid envelope, (ii) by telephone, using the toll-free number shown on your proxy card, or (iii) through the Internet by visiting the website shown on your proxy card, in each case before 5:00 p.m., Eastern Time, on , 2008. If you submit a proxy, but do not specify how you want your shares to be voted, they will be voted “FOR” the approval of the Merger Proposal and “FOR” approval of the Adjournment Proposal. If your shares are registered differently or are in more than one account, you will receive more than one proxy card. Please complete and return all of the proxy cards you receive or submit your proxy by telephone or through the Internet for all such proxy cards to ensure that all of your shares are voted. |
Q: | What rights do I have if I oppose the merger? |
A: | You may vote against the Merger Proposal and Adjournment Proposal, but pursuant to applicable Nevada law, there are no dissenters’ or appraisal rights relating to the matters to be acted upon at the special meeting. |
Q: | If I am in favor of the merger, should I send my share certificates now? |
A: | No. As soon as reasonably practicable after the effective time of the merger, a paying agent designated by Investor will commence mailing a letter of transmittal and instructions to you and the other stockholders of Meadow Valley. The letter of transmittal and instructions will tell you how to surrender your stock certificates in exchange for the merger consideration.You should not return your stock certificates with the enclosed proxy card and you should not forward your stock certificates to the paying agent without a letter of transmittal. |
Q: | If my shares are held in “street name” by my broker, banker or other nominee, will my broker or banker vote my shares for me? |
A: | No for the Merger Proposal, but yes for the Adjournment Proposal. |
12
Table of Contents
Q: | May I change my vote after I have submitted a proxy? |
A: | Yes. You may change your vote at any time before your proxy is voted at the special meeting. You may do this in one of the following ways: |
• | by sending a written notice of revocation to the secretary of Meadow Valley; | |
• | by sending a completed proxy card bearing a later date than your original proxy card; | |
• | by calling the telephone number specified on your proxy card and following the instructions; | |
• | by submitting a later dated proxy via the Internet in the same manner that you submitted your earlier proxy via the Internet and following the instructions; or | |
• | by attending Meadow Valley’s special meeting and voting in person. |
Q: | When is the merger expected to be completed? |
A: | The merger will become effective upon the later of the date and time of the filing of the articles of merger with the Secretary of State of the State of Nevada or such later date and time as may be specified in the articles of merger with the consent of the parties. The filing of the articles of merger will occur as promptly as practicable, but unless otherwise agreed to in writing by the parties to the merger agreement, in no event later than the third business day after the conditions to completion of the merger have been satisfied or waived. The parties are working toward completing the merger as quickly as possible and anticipate closing the merger prior to the end of this year. |
Q: | How do Meadow Valley’s directors and executive officers intend to vote? |
A: | As of , 2008, the record date for the special meeting, the directors and executive officers of Meadow Valley held and are entitled to vote, in the aggregate, shares of our common stock representing approximately 3.5% of the outstanding shares. Our directors and executive officers have advised us that they intend to vote all of their shares of our common stock “FOR” the Merger Proposal and “FOR” the Adjournment Proposal. In particular, Messrs. Larson and Nelson will be entitled to vote their shares in favor of the proposals described in this proxy statement and have indicated their intent to do so. Assuming Messrs. Larson and Nelson do not exercise their options to acquire Meadow Valley common stock prior to the record date for the special meeting, they will be able to vote an aggregate of 180,325 shares in favor of the Merger Proposal and the Adjournment Proposal. In the event Messrs. Larson and Nelson exercise their options prior to the record date for the special meeting, they will be able to vote an aggregate of 285,625 shares in favor of the Merger Proposal and the Adjournment Proposal. |
Q: | What effects will the proposed merger have on Meadow Valley? |
A: | This is a “going private” transaction. As a result of the proposed merger, we will cease to be a publicly-traded company and will be directly owned by Investor and controlled by Insight Equity. You will no longer have any interest in our future earnings or growth, and dividends, if any. In addition, upon consummation of the proposed merger, our common stock will no longer be listed on any exchange or quotation system. |
13
Table of Contents
Q: | What happens if one of the parties to the merger terminates the merger agreement? |
A: | Under specified circumstances, Meadow Valley may be required to pay Investor a termination fee and reimburse Investor and Merger Sub for certain of their documented and reasonable out-of-pocket expenses, or Investor and Merger Sub may be required to pay Meadow Valley a reverse termination fee and reimburse us for certain of our documented and reasonable out-of-pocket expenses. |
Q: | What happens to Meadow Valley shares if the merger is not consummated? |
A: | Stockholders will not receive any payment for their shares in connection with the merger. Instead, Meadow Valley will remain an independent public company, investors will continue to hold our common stock and our common stock will continue to be listed and traded on Nasdaq. If you want to sell your common stock, you would need to sell that stock in the open market or in a privately negotiated transaction in compliance with applicable securities laws and the price you would receive for that stock is uncertain. |
Q: | Does this special meeting replace our annual meeting of stockholders? |
A: | No. If the merger agreement is not approved by our stockholders or if the merger is not consummated for any other reason, the board of directors of Meadow Valley intends to promptly call and hold our next annual meeting of stockholders to elect directors and to attend to such other matters as may properly come before the annual meeting. |
Q: | What are the material U.S. federal income tax consequences of the merger to me? |
A: | The cash you receive for your shares generally will be taxable for U.S. federal income tax purposes to the extent the cash received exceeds your tax basis in your shares. To review the federal income tax consequences to stockholders in greater detail, see “Special Factors — Material U.S. Federal Income Tax Consequences of the Merger.” |
Q: | I do not know where my stock certificate is — how will I get my cash? |
A: | The materials the paying agent will send you after completion of the merger will include the procedures that you must follow if you cannot locate your stock certificate. This will include an affidavit that you will need to sign attesting to the loss of your certificate. You may also be required to provide a bond to the surviving corporation in order to cover any potential loss and follow other procedures. |
Q: | What happens if I sell my shares before the special meeting? |
A: | The record date of the special meeting is earlier than the date set for the special meeting and the date that the merger is expected to be completed. If you transfer your shares of common stock after the record date, but before the special meeting, you will retain your right to vote at the special meeting, but will have transferred the right to receive $11.25 per share in cash, without interest (and less applicable withholding taxes), to be received by our stockholders in the merger. In order to become entitled to receive $11.25 per share, without interest (and less applicable withholding taxes), you must hold your shares through the effective time of the merger. |
Q: | What does it mean if I receive more than one proxy card? |
A: | It means that you have multiple accounts at the transfer agentand/or with brokers, banks or other nominees. Please sign and return all proxy cards that you receive or submit proxies for each proxy card by telephone or through the Internet to ensure that all your shares are voted. |
Q: | How are votes counted? |
A: | For the Merger Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” If you abstain or do not vote on the proposal, it will have the same effect as if you voted against the Merger Proposal. In addition, if your shares are not represented at the special meeting or if your shares are held in the name of a broker, bank or other nominee, and your broker, bank or other nominee does not receive specific instructions from you on how to vote, it will have the effect of a vote against the Merger Proposal. |
14
Table of Contents
Q: | Will any other business be conducted at the special meeting? |
A: | Our board of directors knows of no business, other than as set forth in the attached Notice of Special Meeting, that will be presented at the special meeting. If any other proposal properly comes before the stockholders for a vote at the special meeting, the persons named in the proxy card that accompanies this proxy statement will, to the extent permitted by law and to the extent we were not notified of the proposal in a reasonable amount of time before our solicitation, vote your shares in accordance with their judgment on such matter. |
Q: | Who is soliciting my vote? |
A: | This proxy solicitation is being made and paid for by Meadow Valley. In addition, we have retained The Altman Group, Inc. to assist in the solicitation. We will pay The Altman Group, Inc. approximately $8,500 plus out-of-pocket expenses for its assistance. Our directors, officers and employees may also solicit proxies by personal interview, mail,e-mail, telephone, facsimile or by other means of communication. These persons will not be paid additional remuneration for their efforts. We will also request brokers and other fiduciaries to forward proxy solicitation material to the beneficial owners of shares of Meadow Valley common stock that the brokers and fiduciaries hold of record. We will reimburse them for their reasonable out-of-pocket expenses. |
Q: | Who can help answer my questions? |
A: | If you have any questions about the merger or if you need additional copies of this proxy statement or the enclosed proxy card, you should contact The Altman Group, Inc., which is acting as the proxy solicitation agent and information agent in connection with the merger, by telephone at (866)721-1324 or by mail to the following address: |
15
Table of Contents
16
Table of Contents
17
Table of Contents
18
Table of Contents
19
Table of Contents
20
Table of Contents
21
Table of Contents
22
Table of Contents
23
Table of Contents
24
Table of Contents
25
Table of Contents
26
Table of Contents
27
Table of Contents
28
Table of Contents
29
Table of Contents
30
Table of Contents
31
Table of Contents
• | a summary of the terms of the Buyer Group’s offer; |
32
Table of Contents
• | a list of key considerations in deciding to select the Buyer Group as the “stalking horse” in lieu of proceeding with a widespread solicitation of market interest in Meadow Valley, including a lengthy list of advantages and disadvantages of proceeding with the Buyer Group as the “stalking horse;” | |
• | an overview of Meadow Valley’s financial condition and historic share price performance; | |
• | Meadow Valley’s year-to-date financial performance (through April 2008) and summary of Meadow Valley’s April 28, 2008 financial projections, including Meadow Valley’s April 2008 year-to-date operating results as compared to Meadow Valley’s business plan and Meadow Valley’s most recent projections through 2010; | |
• | purchase offer premiums(1-day;5-days; and30-days) and historic purchase price premiums paid in similar sized transactions; | |
• | a list of Meadow Valley’s top institutional holders and their estimated basis in Meadow Valley’s common stock; | |
• | the historic trading activity in Meadow Valley’s common stock at selected price ranges over the preceding 12 months; | |
• | a total equity value summary of Meadow Valley; | |
• | a “sum of the parts” analysis of the Buyer Group’s offer of $11.25 per share; | |
• | a hypothetical acquisition transaction analysis of potential strategic buyers of Meadow Valley; | |
• | an analysis of termination fees potentially payable by Meadow Valley; | |
• | factors affecting the public market value of Meadow Valley; and | |
• | a comparable company analysis. |
33
Table of Contents
• | the purchase price; | |
• | the provisions for a45-day “go shop” period during which Meadow Valley could actively seek other bidders to buy Meadow Valley and after which Meadow Valley could continue to negotiate with certain “Excluded Parties” and could negotiate with unsolicited bidders, provided that the merger agreement could terminate if not consummated by December 31, 2008; | |
• | the definition of “Material Adverse Effect,” that had been heavily negotiated; | |
• | abreak-up fee equal to 2.5% of the aggregate purchase price plus reasonable out-of-pocket expenses if the deal is terminated as a result of activities undertaken during the “go shop” period; | |
• | abreak-up fee equal to 4.5% of the aggregate purchase price plus reasonable out-of-pocket expenses if the deal is terminated as a result of activities undertaken after the “go shop” period; | |
• | abreak-up fee equal to $500,000 plus reasonable out-of-pocket expenses if the deal is terminated under certain other circumstances; | |
• | a reverse termination fee payable to Meadow Valley equal to 2.5% of the aggregate purchase price plus reasonable out-of-pocket expenses if the deal is terminated by Insight Equity under certain circumstances; | |
• | continued indemnification protection for current and former directors and officers for a specified period of time and the mechanics by which insurance coverage may be maintained for such directors and officers; | |
• | closing requirements applicable to Meadow Valley and required in order for Investor and Merger Sub to consummate the merger, which requirements were reasonable and achievable in the view of Meadow Valley and its legal advisors and environmental consultants; |
34
Table of Contents
• | the delivery to Investor of a letter of credit to support any necessary payments of its reverse termination fee obligations in the event that such a fee was payable in certain circumstances upon a termination of the merger agreement by Meadow Valley; and | |
• | the absence of a financing contingency with respect to Merger Sub’s obligations to close the transaction contemplated by the merger agreement. Representatives of DLA Piper also reiterated the Special Committee’s fiduciary duties as previously discussed with the Special Committee. |
35
Table of Contents
36
Table of Contents
• | the value of the merger consideration to be received by Meadow Valley’s unaffiliated stockholders pursuant to the merger agreement, as well as the fact that the unaffiliated stockholders will receive the consideration in cash, which provides certainty of value to Meadow Valley’s unaffiliated stockholders; | |
• | its view that the merger consideration is more favorable to Meadow Valley’s unaffiliated stockholders than the potential value that might result from the other alternatives the Special Committee believed were reasonably available to Meadow Valley pursuing other strategic initiatives or continuing with Meadow Valley’s current business plan, which view was based on the following factors: the prospects for the macro economy and the industries in which Meadow Valley operates that create challenges to Meadow Valley’s ability to sustain gross margins and earnings growth, the perceived risks associated with the achievement of Meadow Valley’s business plan, the determination that Meadow Valley did not receive many of the benefits associated with being a public company and faces significant costs associated with remaining a public company, the risk of uncertain returns to Meadow Valley’s stockholders, the expected time, capital required and availability and cost to effectuate other strategic alternatives, and the analysis provided as to the fairness of the Buyer Group’s offer and based on the analysis of the future potential value of Meadow Valley’s business versus the Buyer Group’s offer; | |
• | its view that the merger consideration is fair in light of the Special Committee’s familiarity with Meadow Valley’s business, assets, operations, financial condition, strategy and prospects, as well as Meadow Valley’s historical and projected financial performance; | |
• | its view that the merger maximizes stockholder value by providing stockholder liquidity, without the risk to stockholders of a business plan constrained by uncertain market conditions; | |
• | that the merger consideration of $11.25 per share, without interest, represented a 22.1% premium over the price per share of Meadow Valley’s common stock, based on the closing sale price for Meadow Valley’s common stock on July 25, 2008, the last trading day before public announcement of the merger; | |
• | that the merger consideration of $11.25 per share, without interest, represented a 30.8% premium over the volume weighted average share price for the 30 calendar days prior to the public announcement of the merger agreement; | |
• | that notwithstanding the fact that the merger consideration of $11.25 per share, without interest, reflected a premium that fell below the average historic purchase premiums paid in similar sized transactions, as reported in the April 7, 2008 materials presented to the Special Committee by Alvarez &Marsal, the Special Committee believed that Meadow Valley’s valuation as implied by the Buyer Group’s offer remained consistent with the current valuation of Meadow Valley as compared to the value of comparable companies in Meadow Valley’s industry and in light of the increased competitive pressures and lower demand facing the construction industry , and that in the three year period ended July 28, 2008, Meadow Valley had seen a total increase in its historic per share price of approximately 72% (based on the $11.25 per share offer); | |
• | a discounted cash flow analysis performed by Morgan Joseph revealed a range of equity values of $8.99 per share to $12.27 per share assuming a 19% discount rate and Terminal Value Multiples of EBITDA of 3.5x to 5.5x. Inherent in any discounted cash flow valuation are the use of a number of assumptions and the aforementioned valuation range should be viewed in connection with the full report of Morgan Joseph attached as Exhibit (c)(1) to the Schedule 13E-3 filed by Meadow Valley; | |
• | a book value analysis, based on Meadow Valley’s business including its ownership interest of Ready Mix revealed that the per share cash merger consideration of $11.25 represented a 56% premium over the net book value per diluted weighted average share as of June 30, 2008 of $7.21. Further, analysis of companies generally comparable to Meadow Valley revealed price-to-book ratios consistent with the ratio implied by the per share cash merger consideration of $11.25; | |
• | a liquidation value analysis was not materially considered by the Special Committee because it considered Meadow Valley to be a viable, going concern and as such, an orderly liquidation of Meadow Valley assets would not result in a value maximizing alternative for stockholders; |
37
Table of Contents
• | that historically the common stock of Meadow Valley traded with low volume, making the stock relatively illiquid and often difficult to sell without negatively impacting the per share price and that Morgan Joseph presented the current and historical market prices of Meadow Valley’s common stock, including the market price of Meadow Valley’s common stock relative to those of other participants in Meadow Valley’s industries and general market indices, as background material; | |
• | the opinion of Morgan Joseph, delivered orally and confirmed in writing, to the effect that as of the date of the opinion, and based upon and subject to the procedures followed, assumptions made, qualifications, and limitations on the review undertaken, the merger consideration was fair, from a financial point of view, to Meadow Valley’s stockholders; | |
• | the presentation by Morgan Joseph to the Special Committee on July 25, 2008 in connection with the foregoing opinion, which is described under “— Opinion of Morgan Joseph to the Special Committee” below; | |
• | the terms of the merger agreement that permitted Meadow Valley to conduct a post-signing market test designed to determine that the $11.25 per share price provided in the merger agreement was the highest value reasonably available to Meadow Valley’s unaffiliated stockholders, including (i) a45-day “go shop” period during which Meadow Valley, under the direction of the Special Committee, was permitted to actively seek and negotiate competing Acquisition Proposals for a business combination or acquisition, which period the Special Committee (after consulting with its outside financial and legal advisors) believed was sufficient time for any potentially interested party to make such a competing Acquisition Proposal, (ii) the right, even after the end of the45-day solicitation period, subject to certain conditions, to continue to explore Acquisition Proposals made by any interested party during the45-day solicitation period, and (iii) the right, even after the end of the45-day solicitation period, subject to certain conditions, to explore unsolicited Acquisition Proposals and to terminate the merger agreement and accept a “Superior Proposal” as determined by the Special Committee prior to stockholder approval of the merger agreement, subject to payment of what the Special Committee believed (after consulting with its outside financial advisors) was a reasonable termination fee and the reimbursement of certain of Investor’s and Merger Sub’s documented and reasonable out-of-pocket expenses; | |
• | the Special Committee’s understanding, after consultation with its financial and legal advisors, that both the termination fees (and the circumstances when such fees are payable) set forth in the merger agreement and the requirement to reimburse Investor and Merger Sub for certain of their documented and reasonable out-of-pocket expenses in the event that the merger agreement is terminated under certain circumstances, were reasonable and customary in light of the benefits of the merger contemplated by the merger agreement, commercial practice and transactions of similar size and nature; | |
• | the increased costs associated with being a public company, particularly those costs associated with compliance with the Sarbanes-Oxley Act of 2002, which costs disproportionately impact smaller public companies; | |
• | that the terms of the merger agreement provided reasonable certainty of consummation because it was subject to and included conditions that the Special Committee believed would reasonably likely be satisfied, including the fact that the merger agreement does not contain a financing contingency, which the Special Committee found to be favorable given current market conditions; | |
• | that the financial and other terms and conditions of the merger agreement, as reviewed by the Special Committee with its legal and financial advisors, were the product of extensive negotiations between the parties, which resulted in, among other things, the following changes from Insight Equity’s initial written proposal, (i) an increase of $1.45 per share from the initial proposed $9.80 per share price, (ii) a reduction by 1.5% in termination fees to be paid by Meadow Valley if it terminated the merger agreement under certain circumstances, plus a cap on fees and expenses related to financing sources of $500,000, (iii) a reduction by 1% in termination fees to be paid by Meadow Valley if it terminated the merger agreement under other circumstances (amount of expenses remains the same), (iv) the imposition of a reverse termination fee to be paid by Investor if Investor or Meadow Valley terminated the merger agreement under certain circumstances, plus Meadow Valley’s expenses, (subject to certain limitations) supported by a $2.5 million letter of credit, |
38
Table of Contents
(v) an increase of 15 days to the “go shop” period, and (vi) the addition of certain carve-outs to the definition of “Material Adverse Effect;” |
• | the fact that no alternative acquisition proposal for Meadow Valley had been submitted since the initial announcement of interest by YVM and Messrs. Larson, Nelson and Furman in pursuing a potential transaction with Meadow Valley on November 2, 2007; | |
• | the fact that no firm offers to acquire Meadow Valley were made by any unaffiliated person during the two year period preceding the Buyer Group’s firm offer; | |
• | the fact that Meadow Valley had the option to initiate a broad market canvass prior to entering in to the merger agreement but that the Special Committee considered execution of the merger agreement followed by a “go shop” period to be in the best interests of Meadow Valley and its unaffiliated stockholders; and | |
• | the fact that all of the members of the Special Committee (which are all of the members of the board of directors of Meadow Valley who are not participating in the transaction), some of whom have investments in Meadow Valley’s common stock, were unanimous in their determination to approve the merger agreement. |
• | that Meadow Valley’s unaffiliated stockholders would not participate in any future earnings or growth of Meadow Valley and would not benefit from any appreciation in value of Meadow Valley if the merger is completed; | |
• | that Investor and its investors could realize significant returns on their equity investment in Meadow Valley from the merger; | |
• | the fact that Meadow Valley entered into a merger agreement with Investor and Merger Sub, newly-formed corporations with essentially no assets, that Meadow Valley’s recourse was dependent on its ability to draw on a letter of credit obtained by Investor to support its obligations under the merger agreement and that Meadow Valley’s recovery for such a breach by Investor or Merger Sub is essentially capped by the lesser of the amount of the termination fees payable under the merger agreement or the amount of the letter of credit; | |
• | that the $11.25 price per share, without interest, is the maximum amount per share receivable by Meadow Valley’s unaffiliated stockholders unless the merger agreement is terminated in accordance with its terms; | |
• | that the historical stock price performance of Meadow Valley’s common stock included a closing price as high as $13.35 per share immediately following the formation of the Special Committee in early November 2007, and a trading price as high as $14.20 per share during the two year period ended June 3, 2008, which |
39
Table of Contents
per share prices were materially above the merger consideration of $11.25 price per share, without interest, offered by the Buyer Group; |
• | that the Special Committee was not able to solicit alternative proposals during intermittent periods prior to the signing of the merger agreement; | |
• | the fact of the participation of the Rollover Participants in the merger and the fact that the Rollover Participants have interests in the transaction that are different from, or in addition to, those of Meadow Valley’s unaffiliated stockholders; | |
• | that the merger agreement contains restrictions on the conduct of Meadow Valley’s business prior to the completion of the merger, generally requiring Meadow Valley to conduct its business only in the ordinary course, subject to specific limitations, which may delay or prevent Meadow Valley from undertaking business opportunities that may arise pending completion of the merger and the length of time between signing and closing when these restrictions are in place, due to the time needed to satisfy the conditions to closing; | |
• | the risks and costs to Meadow Valley if the merger does not close, including the diversion of management and employee attention, potential employee attrition and the potential effect on business and customer relationships; | |
• | that if the merger is not completed, Meadow Valley would be required to pay its fees and expenses associated with the transaction and also, under certain circumstances, pay a termination fee up to 4.5% of the aggregate merger consideration and reimburse Investor and Merger Sub for certain of their documented and reasonable out-of-pocket expenses associated with the transaction; | |
• | that the receipt of cash in exchange for shares of Meadow Valley common stock pursuant to the merger will be a taxable sale transaction for U.S. federal income tax purposes; | |
• | that Meadow Valley stockholders do not have dissenters’ or appraisal rights under Nevada law; | |
• | the merger agreement’s limitations on Meadow Valley’s ability to solicit other offers after the “go shop” period, despite the fact that the Special Committee is authorized to respond to unsolicited proposals meeting specified criteria; | |
• | that, unless otherwise provided pursuant to the terms of the merger agreement, Meadow Valley will be required to pay Investor a termination fee of $500,000 plus certain of Investor’s and Merger Sub’s documented and reasonable out-of-pocket expenses no matter the reason for termination of the merger agreement; and | |
• | that Investor’s obligation to close the transaction is subject to certain conditions that are outside of Meadow Valley’s control. |
• | that the Special Committee consists solely of independent and disinterested directors who are not employees of Meadow Valley and who have no financial interest in the merger that is different from that of Meadow Valley unaffiliated stockholders (other than the acceleration of options to acquire shares of Meadow Valley common stock); |
• | that the members of the Special Committee were adequately compensated for their services and that their compensation for serving on the Special Committee was in no way contingent on their approving the merger agreement and taking the other actions described in this proxy statement; |
40
Table of Contents
• | that the Special Committee received an opinion from Morgan Joseph, delivered orally at the Special Committee meeting on July 25, 2008, and subsequently confirmed in writing, that, as of July 25, 2008, the date of the opinion, and based upon and subject to the factors, assumptions, limitations, qualifications and other conditions set forth in the opinion, the merger consideration of $11.25 per share, without interest, to be received pursuant to the merger agreement by the public holders of shares of Meadow Valley common stock was fair, from a financial point of view, to such holders; | |
• | that the Special Committee was involved in extensive deliberations over many months regarding the proposal, and was provided broad authority and sufficient resources, including access to Meadow Valley’s management; | |
• | that the Special Committee, with the assistance of its legal and financial advisors, negotiated with Investor and its representatives and sought and received numerous concessions; | |
• | the requirement that the merger agreement be approved by the affirmative vote of holders of a majority of the outstanding shares of Meadow Valley common stock entitled to vote at the special meeting; | |
• | that the Special Committee had ultimate authority to decide whether or not to proceed with a transaction or any alternative thereto, subject to the board of director’s approval of the merger agreement, where the members of the Special Committee comprised a majority of the board of directors, as required by Nevada law; | |
• | that the Special Committee was aware that it had no obligation to recommend any transaction, including the proposal put forth by Investor; and | |
• | that the Special Committee made its evaluation of the merger agreement and the merger based upon the factors discussed in this proxy statement, and independent of members of the board who are Rollover Participants. |
• | determined that the merger and the merger agreement are fair to, and in the best interests of, the unaffiliated stockholders of Meadow Valley; |
• | determined, based on the conclusions and recommendations of the Special Committee, that undertaking the transaction at this time was in the best interests of Meadow Valley and Meadow Valley’s stockholders; |
• | recommended that Meadow Valley’s stockholders vote to approve the merger agreement; |
41
Table of Contents
• | took all actions so that the merger agreement would not be subject to the Nevada business combination statutes or any other applicable merger, anti-takeover or similar statute or regulation; | |
• | took all actions so that the Rollover Participants, Investor, Merger Sub and their respective affiliates would not be an “acquiring person” under Meadow Valley’s stockholder rights plan; and | |
• | approved various related resolutions. |
• | the unanimous determination and recommendation of the Special Committee; | |
• | the fact that the merger consideration, including the amount thereof, and the other terms of the merger agreement resulted from negotiations between the Special Committee and Insight Equity, and the board of directors’ belief that $11.25 per share, without interest, was the highest consideration that it was able to negotiate with Insight Equity; and | |
• | the factors considered by the Special Committee, including the positive factors and potential benefits of the merger agreement, the risks and potentially negative factors relating to the merger agreement, the fairness opinion received by the Special Committee and the factors relating to procedural safeguards described above. |
42
Table of Contents
• | the July 23, 2008 draft of the merger agreement, which we represented to Morgan Joseph was, with respect to all material terms and conditions thereof, substantially in the form of the definitive agreement to be executed by the parties promptly after receipt of Morgan Joseph’s opinion; |
• | Meadow Valley’s annual report onForm 10-K filed with the SEC with respect to the year ended December 31, 2007, Meadow Valley’s quarterly report onForm 10-Q filed with the SEC with respect to the quarter ended March 31, 2008, which our management had identified to Morgan Joseph as being the most current historical financial statements available at the time, and certain other filings made by Meadow Valley with the SEC; |
• | certain other publicly available business and financial information concerning Meadow Valley and the industry in which we operate, which Morgan Joseph believed to be relevant to its opinion; | |
• | certain internal information and other data relating to Meadow Valley and our business and prospects, including budgets, projections and certain presentations prepared by Meadow Valley, which were provided to Morgan Joseph by Meadow Valley’s senior management; | |
• | the reported sales prices and trading activity of Meadow Valley common stock; | |
• | certain publicly available information concerning certain other companies engaged in businesses that Morgan Joseph believed to be generally comparable to Meadow Valley and the trading markets for such other companies’ securities; and | |
• | the financial terms of certain recent business combinations that Morgan Joseph believed to be relevant. |
43
Table of Contents
• | Granite Construction Inc. | |
• | Perini Corp. | |
• | Sterling Construction Co. Inc. |
44
Table of Contents
Multiple Percentile | High | Low | ||
EBITDA Multiple Range | 5.8x | 1.7x | ||
2008E EBITDA for Meadow Valley | $11.8 million | $11.8 million | ||
Implied Equity Valuation Range Per Share | $13.11 | $6.46 |
Announcement | ||||
Target | Acquiror | Date | ||
Douglas E Barnhart Inc. | Balfour Beatty Plc | 06/05/08 | ||
BE&K, Inc. | KBR, Inc. (NYSE:KBR) | 05/06/08 | ||
Tutor-Saliba Corporation | Perini Corp. (NYSE:PCR) | 04/02/08 | ||
Primoris Corporation | Rhapsody Acquisition Corporation | 02/19/08 | ||
Schiavone Construction Company | Dragados Inversiones USA | 12/28/07 | ||
Road & Highway Builders, LLC | Sterling Construction Co. Inc. (NasdaqNM:STRL) | 10/31/07 | ||
Flatiron Construction Corp. | Hochtief AG (DB:HOT) | 09/25/07 | ||
Five Road construction, Gravel Crushing and Log Hauling Businesses of Alberta | Petrowest Energy Services Trust (TSX:PRW.UN) | 05/09/07 | ||
Ashland Paving and Construction, Contracting and Asphalt Activities | Undisclosed (six separate transactions) | 12/12/06 | ||
Webcor, Inc. | Obayashi Corp. (TSE:1802) | 11/13/06 | ||
Community Asphalt Corp./ The Tower Group | Obrascón Huarte Lain (OHL) | 07/24/06 |
Multiple Percentile | High | Low | ||
EBITDA Multiple Range | 6.7x | 3.9x | ||
2008E EBITDA for Meadow Valley | $11.8 million | $11.8 million | ||
Implied Equity Valuation Range Per Share | $15.33 | $8.68 |
45
Table of Contents
Terminal Value Multiples | ||||||||||||
Discount Rate: | 3.5x | 4.5x | 5.5x | |||||||||
19.0% | $ | 8.99 | $ | 10.63 | $ | 12.27 |
46
Table of Contents
• | participated in various meetings and conference calls with Meadow Valley’s board of directors, the Special Committee, certain Meadow Valley employees and representatives of Insight Equity, DLA Piper, Ballard Spahr and BHFS concerning Meadow Valley’s business, operations, assets, financial condition and prospects; | |
• | reviewed and analyzed certain public and internal financial and operating information relating to Meadow Valley, including its financial projections; | |
• | reviewed certain publicly available information concerning certain other companies engaged in businesses that Alvarez & Marsal believed to be generally comparable to Meadow Valley’s business; | |
• | reviewed the trading markets for Meadow Valley’s common stock; | |
• | reviewed the financial terms of certain recent business combinations that Alvarez & Marsal believed to be comparable to the merger; and | |
• | undertook such other studies, analyses and investigations as it deemed appropriate. |
47
Table of Contents
• | a sum of the parts analysis illustrating the enterprise valuation of Meadow Valley based on its share price on April 7, 2008 and Meadow Valley’s then most current financial data, such valuation as a multiple of Meadow Valley’s select 2007 financial results, the hypothetical allocation of such value among Meadow Valley’s business units and the implied valuation multiples of such business units based on Meadow Valley’s select |
48
Table of Contents
2007 financial results. The analysis was used to determine valuation metrics and to draw comparisons to the selected comparable industry participants; |
• | the historic share price performance of Meadow Valley from the period April 2003 through April 7, 2008 and of Ready Mix for the period commencing on the third fiscal quarter of 2005 through April 7, 2008 developed using publicly available stock price information; |
• | the historic share price performance of Meadow Valley as compared to selected participants in industries that were generally comparable to those in which Meadow Valley operates (“comparable industries”) for the period April 10, 2006 through April 7, 2008 developed using publicly available stock price information. The analysis showed that Meadow Valley’s stock price performance had outperformed such comparable participants during the period. The analysis also showed that Ready Mix’s stock price performance had outperformed its most comparable industry participant during the period, but that it had underperformed as compared to a larger sample of comparable companies, some of which benefit from certain competitive advantages that Ready Mix did not possess (as illustrated in the descriptions of select participants in comparable industries pages later in the presentation); |
• | selected publicly traded companies analysis developed using the then most current publicly available information among participants in comparable industries. The analysis showed that, based on Meadow Valley’s and Ready Mix’s then-current share prices, they currently traded below or at the low-end of the range of comparable industry participants in terms of certain valuation multiples; |
• | selected transactions analysis of purchase prices and multiples paid in the selected mergers and acquisitions that were announced since 2004 among participants in comparable industries. The analysis showed that, based on Meadow Valley’s and Ready Mix’s current share prices, they currently traded below or at the low-end of the range of comparable industry participants in terms of certain valuation multiples; |
• | selected publicly traded companies analysis developed using historic valuation metrics for Meadow Valley as compared to select participants in comparable industries. The analysis showed that Meadow Valley and Ready Mix had historically traded at a discount to comparable industry participants in terms of certain valuation multiples; and |
• | descriptions and analysis of publicly available information regarding select participants in comparable industries. |
• | an analysis of the purchase offer premium implied by the April 21st Oral Revised Proposal on Meadow Valley’s share price as of April 21, 2008, April 15, 2008 and March 11, 2008, and premiums paid by buyers in all industries for deal sizes ranging from $25-$250 million in total enterprise value for the period 2004 through year-to-date 2008; The analysis showed that, based on the Buyer Group’s offer of $11.25 per share, the premium offered was below the average premium paid by buyers in the selected comparable transactions; |
• | a “sum of the parts” analysis illustrating the enterprise valuation of Meadow Valley based on the April 21st Oral Revised Proposal offer price of $11.15 per share and Meadow Valley’s then most current financial data, the hypothetical allocation of such value among Meadow Valley’s business units and the implied valuation multiples of such business units based on Meadow Valley’s select projected 2008 financial results. The analysis was used to determine valuation metrics and to draw comparisons to selected comparable industry participants; |
• | a list of selected key considerations for the Special Committee regarding the strategic alternatives available to Meadow Valley, including the advantages and disadvantages of remaining a public company, key considerations of a potential sale transaction and a budget to actual comparison of recent financial performance; |
49
Table of Contents
• | an analysis of the purchase offer premium implied by the April 29th Revised Proposal Letter on Meadow Valley’s share price as of April 25, 2008, April 21, 2008 and March 14, 2008; The analysis was included to illustrate the improvement of the Buyer Group’s offer over previous Buyer Group offers; |
• | a “sum of the parts” analysis illustrating the enterprise valuation of Meadow Valley based on the April 29th Revised Proposal Letter offer price of $11.25 per share and Meadow Valley’s then most current financial data, the hypothetical allocation of such value among Meadow Valley’s business units and the implied valuation multiples of such business units based on Meadow Valley’s select updated projected 2008 financial results; The analysis was used to determine the improved valuation metrics implied by the Buyer Group’s $11.25 offer price and to draw comparisons to selected comparable industry participants; |
• | an illustrative and hypothetical analysis of the potential future stock price of Meadow Valley based on the average price / earnings multiples and enterprise value to EBITDA multiples that Meadow Valley has traded at historically (September 2005 through April 2008) and the Meadow Valley’s select updated projected 2008 financial results; The analysis showed that, depending on the assumptions and methodologies employed, the present value per share implied by Meadow Valley’s financial projections was below the current Buyer Group’s offer through year-end 2009 and was above the current Buyer Group’s offer by 2010; and |
• | an illustrative and hypothetical analysis of a strategic acquiror acquisition of Meadow Valley from the perspective of certain illustrative buyers and the implied potential proceeds available to Meadow Valley’s stockholders. The analysis showed that, based on certain purchase assumptions, a strategic acquirer’s offer could provide more value per share in some cases and less value per share in other cases than Buyer Group’s offer of $11.25 per share; |
• | a list of selected key considerations for the Special Committee regarding a potential sale transaction; |
• | a summary of key terms of the then current merger agreement, including purchase price per share, the lack of a financing contingency, various aspects of the “go shop” period, various aspects of the terminations fees and a summary of conditions to the merger agreement; |
• | a summary of the key considerations for the Special Committee in executing the merger agreement, specifically a summary of selected advantages and disadvantages of such a decision; |
• | a summary of Meadow Valley’s operating fundamentals, its share price performance for the five year period ended June 3, 2008 developed using publicly available stock price information and the historic share price performance of Meadow Valley as compared to select peers for the period June 5, 2006 through June 3, 2008 developed using publicly available stock price information; |
• | a summary of Meadow Valley’s year-to-date results versus its most recent financial projections for the same period and a summary of Meadow Valley’s financial projections through the fiscal year ended 2010; |
• | an analysis of the purchase offer premium implied by the merger agreement based on Meadow Valley’s share price as of June 6, 2008, June 2, 2008 and April 28, 2008 and a graphic of acquisition premiums paid by buyers in all industries for deal sizes ranging from $25-$250 million in total enterprise value of U.S. public company targets purchased by U.S. or international acquirers for the period 2004 through year-to-date 2008. The analysis showed that, based on the Buyer Group’s offer of $11.25 per share, the premium offered was below the average premium paid by buyers in selected comparable transactions; |
• | a table of Meadow Valley’s top 14 institutional stockholders and estimates of such stockholders’ basis in Meadow Valley’s common stock based on publicly available information. The analysis showed that the weighted average basis of Meadow Valley’s top 14 institutional stockholders was lower than the offer premium implied by the merger agreement; |
• | a summary analysis of recent trading volume and pricing in Meadow Valley’s commons stock; |
• | a sum of the parts analysis illustrating the enterprise valuation of Meadow Valley based on the Buyer Group’s offer of $11.25 per share and Meadow Valley’s then most current financial data, such valuation as a multiple |
50
Table of Contents
• | illustrative and hypothetical analyses of a financial sponsor buy-out and a strategic acquiror acquisition of Meadow Valley from the perspective of such illustrative buyers. The analysis illustrated that a hypothetical financial buyer, based on certain assumptions, would need to lower its investment return requirements in order to pay a purchase price above $11.25 per share; |
• | an analysis of the termination fees potentially payable under the merger agreement and a comparison of such termination fees to those contained in selected precedent going private transactions of similar size. The analysis showed that the “go shop” period of the Buyer Group’s offer was longer than typical in similar sized transactions and that the termination fees in the Buyer Group’s offer were within the range of termination fees of similar sized transactions; |
• | a summary of selected factors affecting the public market valuation of Meadow Valley and an analysis of selected publicly traded companies developed using historic valuation metrics for Meadow Valley as compared to select participants in comparable industries; |
• | selected publicly traded companies analysis developed using the then most current publicly available information among participants in comparable industries. The analysis showed that the $11.25 offer was above, below and within the range of valuation multiples of comparable industry participants depending on the valuation metric and the assumptions and methodologies employed; |
• | selected transactions analysis of purchase prices and multiples paid in the selected mergers and acquisitions that were announced since 2004 among participants in comparable industries. The analysis showed that the $11.25 offer was above, below and within the range of valuation multiples of comparable industry participants depending on the valuation metric and the assumptions and methodologies employed; |
• | a summary of selected recent events from the period October 23, 2007 through May 8, 2008; and |
• | Meadow Valley’s then currentmark-up of the material adverse effect definition in the merger agreement. |
• | the merger consideration of $11.25 per share represented a 22.1% premium over the price per share of Meadow Valley’s common stock, based on the closing sale price for Meadow Valley’s common stock on July 25, 2008, the last trading day before public announcement of the merger; | |
• | the merger consideration of $11.25 per share represented a 30.8% premium to the volume weighted average share price for the 30 calendar days prior to the announcement of the merger agreement; |
51
Table of Contents
• | the opinion of Morgan Joseph delivered to the Special Committee to the effect that as of the date of the opinion, and based upon the assumptions made, matters considered, and limits of review set forth therein, the merger consideration was fair, from a financial point of view, to Meadow Valley’s stockholders; | |
• | each of the Special Committee and Meadow Valley’s board of directors determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are both procedurally and substantively fair to and in the best interests of Meadow Valley’s unaffiliated stockholders; | |
• | the Special Committee consisted entirely of directors who are independent directors with respect to the transaction and included all the independent directors on Meadow Valley’s board of directors; | |
• | except with respect to any options held by the Special Committee, the members of the Special Committee will not personally benefit from the consummation of the merger in a manner different from Meadow Valley’s unaffiliated stockholders; | |
• | the Special Committee retained and was advised by independent legal counsel experienced in advising on similar transactions; | |
• | the Special Committee retained Alvarez & Marsal, which has experience in advising on similar transactions, as its financial advisor in connection with the merger; | |
• | the merger was unanimously approved by the members of the Special Committee and by Meadow Valley’s board of directors (Messrs. Larson and Nelson abstained from voting as members of Meadow Valley’s board of directors and, as a result, the members of the Special Committee and the members of the board of directors that voted on the merger were identical); and | |
• | that the terms of the merger agreement permitted Meadow Valley to conduct a post-signing market test designed to determine that the $11.25 per share price provided in the merger agreement was the highest value reasonably available to Meadow Valley’s stockholders, including (i) a45-day “go shop” period during which Meadow Valley, under the direction of the Special Committee, was permitted to actively seek and negotiate competing Acquisition Proposals for a business combination or acquisition, which period the Special Committee (after consulting with its outside financial advisors) believed was sufficient time for any potentially interested party to make such a competing Acquisition Proposal, (ii) the right, even after the end of the45-day solicitation period, subject to certain conditions, to continue to explore Acquisition Proposals made by any interested party during the45-day solicitation period, and (iii) the right, even after the end of the45-day solicitation period, subject to certain conditions, to explore unsolicited Acquisition Proposals and to terminate the merger agreement and accept a “Superior Proposal” as determined by the Special Committee prior to stockholder approval of the merger agreement, subject to payment of what the Special Committee believed (after consulting with its outside financial advisors) was a reasonable termination fee and the reimbursement of certain of Investor’s and Merger Sub’s documented and reasonable out-of-pocket expenses. |
52
Table of Contents
53
Table of Contents
• | the current and historical market prices of Meadow Valley common stock, including the market price of Meadow Valley common stock relative to those of other industry participants, the high volatility of Meadow Valley common stock and the relatively low volume and illiquid nature of Meadow Valley common stock; | |
• | the $11.25 per share merger consideration represented a premium of approximately 22.1% over the price per share of Meadow Valley’s common stock on July 25, 2008, the last trading day before public announcement of the merger, and a 30.8% premium over the volume weighted average share price for the 30 calendar days prior to the public announcement of the merger agreement; |
• | the terms of the merger agreement provide Meadow Valley with a45-day post-signing “go shop” period during which Meadow Valley has the right to solicit additional interest in a transaction involving Meadow Valley and, after such45-day period, permit Meadow Valley to respond to unsolicited proposals during the period prior to the stockholders’ vote, subject to certain conditions as more fully described below under “The Merger Agreement — Restrictions on Solicitation, Acquisition Proposals and Changes in Recommendation”; |
• | the Meadow Valley board of directors (with Messrs. Larson and Nelson abstaining) unanimously determined, based, in part, on the recommendation of the Special Committee, that the merger agreement and the merger are substantively and procedurally fair to the unaffiliated stockholders of Meadow Valley and in the best interests of such stockholders; | |
• | the merger will provide consideration to the stockholders of Meadow Valley (other than the Rollover Participants and possibly Mr. Bottcher) entirely in cash, which provides certainty of value; and | |
• | Meadow Valley would not have to establish the existence and amount of its damages in the event of a failure of the merger to be consummated under certain circumstances in light of the 2.5% reversebreak-up fee (not including certain of Meadow Valley’s documented and reasonable out-of-pocket expenses associated with the transaction) payable by Investor if Investor were to breach its obligations under the merger agreement and fail to complete the merger, which such obligation is supported by a letter of credit obtained by Investor. |
• | the $11.25 per share merger consideration and other terms and conditions of the merger agreement resulted from extensive negotiations between the Special Committee and its advisors and Investor, Merger Sub and Insight Equity and their respective advisors; | |
• | the Special Committee consisted entirely of directors who are independent directors with respect to the transaction and included all the independent directors on Meadow Valley’s board of directors; | |
• | except with respect to any options held by the Special Committee, the members of the Special Committee will not personally benefit from the consummation of the merger in a manner different from Meadow Valley’s unaffiliated stockholders; | |
• | that Meadow Valley had opportunities to market a transaction to third parties even during its negotiations with Insight Equity; |
54
Table of Contents
• | the Special Committee unanimously determined that the merger agreement and the merger are substantively and procedurally fair to the unaffiliated stockholders of Meadow Valley and in the best interests of such stockholders; | |
• | the Special Committee retained and received advice from Alvarez & Marsal, as financial advisor, DLA Piper and Ballard Spahr, as legal advisors, and retained Morgan Joseph and received the opinion referred to above; | |
• | the fact that Investor, Merger Sub and the Insight Group did not participate in or have any influence on the deliberative process of, or the conclusions reached by, the Special Committee or the negotiating positions of the Special Committee; and | |
• | the fact that there is a provision in the merger agreement allowing the board of directors (acting upon the recommendation of the Special Committee, if then in existence) or the Special Committee to withdraw or change its recommendation of the merger agreement, and to terminate the merger agreement, in certain circumstances relating to the presence of a Superior Proposal, subject, in certain cases, to a payment by Meadow Valley to Investor of a termination fee. |
55
Table of Contents
56
Table of Contents
• | Gross Orderly Liquidation Value of $24,279,100; |
• | Net Orderly Liquidation Value of $23,355,000; and |
• | Fair Market Value of $28,491,600. |
• | effective date of opinion of value; |
• | commencement date of production/sales; |
• | sustainable production and sales rates; |
• | saleable reserves; |
• | reserve lives; |
• | sustainable royalty or mining income rates; |
57
Table of Contents
• | applicable fees or mining costs; and |
• | applicable discount/capitalization rates. |
• | Market value of the mineral interest of the subject property as of the effective date of the Draft CMC Opinion: |
• | Market value of the mining interest of the subject property as of the effective date of the Draft CMC Opinion: |
• | Market value of the mining interest of the subject property using a property specific metric as of the effective date of the Draft CMC Opinion: |
58
Table of Contents
59
Table of Contents
60
Table of Contents
ThomasLloyd Prepared | ||||||||||||||||
Projections Provided in October 2007 | ||||||||||||||||
$ in thousands except as otherwise noted | 2007 | 2008 | 2009 | 2010 | ||||||||||||
Revenue | $ | 212,672 | $ | 246,382 | $ | 301,248 | $ | 331,373 | ||||||||
Gross margin | 11.4% | 11.0% | 9.6% | 9.6% | ||||||||||||
Net income | $ | 5,558 | $ | 3,417 | $ | 3,487 | $ | 4,053 | ||||||||
Depreciation | $ | 4,129 | $ | 5,543 | $ | 6,243 | $ | 7,013 | ||||||||
EBITDA* | $ | 12,352 | $ | 15,661 | $ | 16,591 | $ | 18,250 | ||||||||
Working capital | $ | 20,516 | $ | 3,606 | $ | (1,575 | ) | $ | (6,045 | ) | ||||||
Capital expenditures | $ | 4,800 | $ | 7,000 | $ | 7,000 | $ | 7,700 | ||||||||
Long-term debt | $ | 13,738 | $ | 50,992 | $ | 43,246 | $ | 35,500 | ||||||||
Interest expense | $ | 1,386 | $ | 4,423 | $ | 4,536 | $ | 4,482 |
Meadow Valley Prepared | ||||||||||||||||
Projections Provided in April 2008 | ||||||||||||||||
$ in thousands except as otherwise noted | 2007(1) | 2008 | 2009 | 2010 | ||||||||||||
Revenue | $ | 205,919 | $ | 232,793 | $ | 268,024 | $ | 306,467 | ||||||||
Gross margin | 8.5% | 5.9% | 6.2% | 7.6% | ||||||||||||
Net income | $ | 4,061 | $ | 3,270 | $ | 3,738 | $ | 6,340 | ||||||||
Depreciation | $ | 7,082 | $ | 7,286 | $ | 6,849 | $ | 6,584 | ||||||||
EBITDA* | $ | 14,197 | $ | 11,973 | $ | 13,099 | $ | 18,416 | ||||||||
Working capital | $ | 22,971 | $ | 26,405 | $ | 31,867 | $ | 38,024 | ||||||||
Capital expenditures | $ | 8,172 | $ | 5,720 | $ | 5,500 | $ | 6,000 | ||||||||
Long-term debt | $ | 12,269 | $ | 11,154 | $ | 8,789 | $ | 6,174 | ||||||||
Interest expense | $ | 1,386 | $ | 1,365 | $ | 1,451 | $ | 1,517 |
* | EBITDA, or earnings before interest income, interest expense, income taxes, depreciation expense and amortization expense, is a non-GAAP financial measure within the meaning of Regulation G promulgated by the SEC and is calculated by Meadow Valley by adjusting net income to exclude interest expense, interest income, income taxes, depreciation expense and amortization expense. For internal purposes, Meadow Valley analyzes operating performance using a non-GAAP financial measure since it believes that this measure enhances understanding and comparability of its performance by highlighting its results from continuing operations and the underlying profitability drivers. |
61
Table of Contents
(1) | As of April 28, 2008, which is the date that Meadow Valley completed its financial projections summarized above, 2007 financial results were finalized and included in Meadow Valley’s annual report onForm 10-K filed with the SEC on March 31, 2008. |
62
Table of Contents
63
Table of Contents
Capital Contributions | ||||||||||||||||||||||||||||||||||||
Contributed | ||||||||||||||||||||||||||||||||||||
Shares of | % of Fully | |||||||||||||||||||||||||||||||||||
Meadow | % of | % of | Class B-2 | % of Class | Diluted | |||||||||||||||||||||||||||||||
Valley | Class A | Class A | Class B-1 | Class B-1 | Non- | B-2 Non- | Common | |||||||||||||||||||||||||||||
Common | Imputed | Preferred | Preferred | Voting | Voting | Voting | Voting | Equity | ||||||||||||||||||||||||||||
Stock | Value | Units | Units | Units | Units | Units | Units | Interests | ||||||||||||||||||||||||||||
Insight Equity Member | — | — | 30,716,618 | 91.7 | % | 30,716,618 | 91.7 | % | — | — | 91.7 | % | ||||||||||||||||||||||||
Bradley E. Larson | 107,788 | 1,212,619 | 1,212,619 | 3.6 | % | 1,212,619 | 3.6 | % | — | — | 3.6 | % | ||||||||||||||||||||||||
Kenneth D. Nelson | 112,608 | 1,266,836 | 1,266,836 | 3.8 | % | 1,266,836 | 3.8 | % | — | — | 3.8 | % | ||||||||||||||||||||||||
Robert W. Bottcher | 25,755 | 289,743 | 289,743 | 0.9 | % | 289,743 | 0.9 | % | — | — | 0.9 | % | ||||||||||||||||||||||||
Total | 246,151 | $ | 2,769,197 | 33,485,815 | 100.0 | % | 33,485,815 | 100.0 | % | — | — | 100.0 | % | |||||||||||||||||||||||
(1) | Based on the current debt commitment letters received by Insight Equity in connection with the proposed merger as described herein, Insight Equity’s expected capital contributions to Phoenix Holdings as of the date hereof, the estimated taxes payable with respect to the exercise of options, and the assumption that no other party makes an equity investment in Phoenix Holdings. Should any such factors or assumptions change prior to the closing of the merger, the information reflected in this table may also change. The information in this table also assumes that Messrs. Larson, Nelson and Bottcher effect a cashless exercise of their options and, as a result, is net of shares utilized to pay the exercise price of their options and estimated federal income taxes, and that shares held by them in their respective retirement plans are canceled and converted into the right to receive $11.25 in cash, without interest. If, instead, they choose not to engage in a cashless exercise and to pay their own estimated federal income taxes, Messrs. Larson, Nelson and Bottcher are expected to receive a 4.5%, 4.9%, and 1.0% fully diluted equity interest in Phoenix Holdings, respectively, subject to certain factors and assumptions described herein. The information in the table excludes the up to 0.25% interest of Phoenix Holdings Mr. Furman expects to receive in connection with this transaction. |
64
Table of Contents
65
Table of Contents
66
Table of Contents
• | the negotiation, execution and delivery of definitive documentation with respect to Term Facility I or Term Facility II, as applicable, (including, without limitation, an intercreditor agreement), satisfactory to the administrative agent in its reasonable discretion; | |
• | since the date of the merger agreement, no event, change, effect, development, condition or occurrence shall have occurred that has had or could reasonably be expected to have, individually or in the aggregate, a material adverse effect (as defined in the merger agreement) with respect to Meadow Valley or, in the case of Term Facility I, a material adverse effect on the condition (financial or otherwise), business, or assets of the borrower; | |
• | Insight Equity’s compliance in all material respects with the terms of the commitment letter for Term Facility I or Term Facility II, as applicable; | |
• | the conditions to closing of the merger set forth in the merger agreement shall have been met (or waived with the administrative agent’s prior consent, which consent shall not be unreasonably withheld); | |
• | after giving effect to the merger and the transactions contemplated thereby, Investor and its subsidiaries shall have no indebtedness for borrowed money, guarantees, or preferred stock outstanding other than, as applicable, (i) Term Facility I, (ii) Term Facility II, (iii) the Revolving Credit Facility (iv) the existing Ready Mix credit facility, (v) capital leases existing as of July 27, 2008, and additional capital leases to the extent permitted under section 5.1(vi) of the merger agreement and (vi) other indebtedness and preferred stock existing prior to the merger and reasonably acceptable to the administrative agent; | |
• | the administrative agent shall have received a certificate, in form and substance reasonably satisfactory to it, confirming the solvency of certain of the Debt Parties; and | |
• | consummation of the merger and the related transactions, including closing of the Term Facility I, the Term Facility II and the Revolving Credit Facility, as applicable, shall not (i) violate any applicable law, statute, rule or regulation, (ii) violate, or result in an event of default under, any material agreement after giving effect to any consents or approvals that shall have been obtained, or (iii) require any governmental or other consent or approval that shall not have been obtained so as to permit the Debt Parties to operate their business, in all material respects, consistent with past practices following the merger. |
67
Table of Contents
68
Table of Contents
Legal fees and expenses | $ | 950,000 | ||
Accounting expenses | 25,000 | |||
Financial advisory fees and expenses | 1,722,000 | |||
Special Committee fees | 145,000 | |||
Printing, proxy solicitation and meeting costs | 215,000 | |||
Filing fees | 2,358 | |||
Miscellaneous | 150,000 | |||
$ | 3,209,358 | |||
69
Table of Contents
• | the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; | |
• | significant distress in the U.S. capital markets and other distress in the U.S. financial system; | |
• | the outcome of any legal proceedings that have been or may be in the future instituted against Meadow Valley and others following announcement of the merger agreement; | |
• | the inability to complete the merger due to the failure to obtain stockholder approval or satisfy other conditions to the closing of the merger; | |
• | failure of any party to the merger agreement to abide by the terms of the merger agreement; | |
• | risks that the merger, including the uncertainty surrounding the closing of the merger, will disrupt the current plans and operations of Meadow Valley, including as a result of undue distraction of management and personnel retention problems; | |
• | conflicts of interest that may exist between members of management who will be indirectly participating in the ownership of Meadow Valley following the closing of the merger; | |
• | the amount of the costs, fees, expenses and charges related to the merger, including the impact of any termination fees Meadow Valley may incur, which may be substantial; and | |
• | other risks detailed in our filings with the SEC, including our Annual Report onForm 10-K for the year ended December 31, 2007, as amended, and our Quarterly Report onForm 10-Q for the quarterly period ended June 30, 2008. |
70
Table of Contents
71
Table of Contents
• | by sending a notice of revocation to the secretary of Meadow Valley; | |
• | by sending a completed proxy card bearing a later date than your original proxy card; | |
• | by calling the telephone number specified on your proxy card and following the instructions; | |
• | by submitting a later dated proxy via the Internet in the same manner that you submitted your earlier proxy via the Internet and following the instructions; or | |
• | by attending the special meeting and voting in person. |
72
Table of Contents
73
Table of Contents
74
Table of Contents
75
Table of Contents
76
Table of Contents
• | corporate matters, including due organization, good standing, power to conduct business, and qualification to do business; | |
• | capitalization; | |
• | the authorization, execution, delivery, performance and enforceability of the merger agreement; | |
• | the absence of conflicts with, or violations of, organizational documents, certain contracts, applicable law or judgments, orders or decrees, or other obligations as a result of the execution and delivery of the merger agreement or the consummation of the transactions contemplated by the merger agreement; | |
• | required consents and approvals in connection with the execution, delivery, and performance of the merger agreement and the consummation of the transactions contemplated by the merger agreement; | |
• | the filing or furnishing of all forms, reports, statements, certifications and other documents required to be filed or furnished by Meadow Valley with the SEC since January 1, 2005 and by Ready Mix since August 23, 2005; the accuracy of the information contained in those filings and the compliance of those filings with applicable requirements of the Securities Act of 1933, as amended, and the Exchange Act; and, with respect to financial statements contained therein, preparation in accordance with GAAP applied on a consistent basis; | |
• | the implementation, maintenance and effectiveness of disclosure controls and procedures, and effectiveness of, and other matters related to, internal controls over financial reporting; | |
• | the absence of material complaints, allegations, assertions, or claims regarding deficiencies in accounting or auditing practices, procedures, methodologies, or methods; | |
• | the absence of undisclosed material liabilities; | |
• | the absence of securities offerings in violation of applicable law since December 31, 2002; | |
• | the conduct of business and the absence of any Material Adverse Effect (as detailed on the next page) since December 31, 2007; | |
• | the accuracy of information contained in this proxy statement and other documents filed with the SEC; | |
• | the absence of undisclosed brokers’ fees; | |
• | employee benefit matters; | |
• | labor matters; | |
• | the absence of undisclosed material litigation; | |
• | tax matters; | |
• | compliance with laws; | |
• | possession of required permits; | |
• | environmental matters; | |
• | intellectual property matters; | |
• | real property matters; | |
• | material contracts to which Meadow Valley or any of its subsidiaries (including Ready Mix) are a party, the enforceability of such material contracts, and the absence of breaches of certain material contracts; |
77
Table of Contents
• | title to assets; | |
• | insurance matters; | |
• | receipt by the Special Committee of an opinion from Morgan Joseph as to the fairness, from a financial point of view, of the merger consideration to our stockholders; | |
• | the required stockholder vote relating to the merger; | |
• | the inapplicability of state anti-takeover statutes; | |
• | the amendment and proposed termination of Meadow Valley’s stockholder rights agreement; | |
• | customers and suppliers; | |
• | certain affiliate transactions; | |
• | the absence of material product warranties and product liability claims; | |
• | the bonding capacity of Meadow Valley and its subsidiaries (excluding Ready Mix); | |
• | Meadow Valley’s backlog; and | |
• | compliance with the Foreign Corrupt Practices Act of 1977, as amended. |
• | facts, circumstances, events, or changes generally affecting any industries or markets in which Meadow Valley and its subsidiaries, including Ready Mix operate, provided that, in each case, such events, changes, effects, developments, conditions, or occurrences do not have a disproportionate effect on Meadow Valley and its subsidiaries, including Ready Mix as compared to other persons in the industry and in the region in which they operate; |
• | facts, circumstances, events, or changes generally affecting the economy or the financial or securities markets in the United States or elsewhere in the world, including regulatory and political conditions or developments (including any outbreak or escalation of hostilities or acts of war or terrorism); | |
• | changes in interest rates, provided that, in each case, such events, changes, effects, developments, conditions, or occurrences do not have a disproportionate effect on Meadow Valley and its subsidiaries, including Ready Mix, as compared to other persons in the industry and in the region in which they operate; | |
• | facts, circumstances, events, or changes resulting from the announcement or the pendency of the merger agreement or the announcement of the merger or any of the other transactions contemplated by the merger agreement; | |
• | changes in applicable law, GAAP or accounting standards, provided that such changes are first announced after the date of the merger agreement and do not have a disproportionate effect on Meadow Valley and its subsidiaries, including Ready Mix, as compared to other persons in the industry and in the region in which they operate; | |
• | changes in the market price or trading volume of Meadow Valley’s common stock; | |
• | changes in any analyst’s recommendations, any financial strength rating or any other similar recommendations or ratings as to Meadow Valley or Ready Mix; | |
• | any reduction in maximum borrowings under Ready Mix’s existing line of credit loan agreement or replacement line of credit that does not exceed $1.0 million; or |
78
Table of Contents
• | failure by Meadow Valley to meet any projections, estimates, or budgets for any period prior to, on, or after the date of the merger agreement, including projections relating to fiscal year 2008; |
• | corporate matters, including due organization, good standing, power to conduct business, and qualification to do business; | |
• | the authorization, execution, delivery, performance, and enforceability of the merger agreement; | |
• | the absence of conflicts with, or violations of, organizational documents, certain contracts, applicable law or judgments, orders or decrees, or other obligations as a result of the execution and delivery of the merger agreement or consummation of the transactions contemplated by the merger agreement; | |
• | required consents and approvals in connection with the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated by the merger agreement; | |
• | the accuracy of information provided for inclusion in this proxy statement and other documents filed with the SEC; | |
• | the sufficiency of Investor’s financing to consummate the merger and letter of credit supporting the same; | |
• | the absence of material litigation; | |
• | the absence of liability for brokers’ fees; | |
• | ownership and operations of Merger Sub; | |
• | the absence of a required vote by Investor’s equity holders to approve the merger agreement or the transactions contemplated thereby; and | |
• | the solvency of the surviving corporation at the effective time of the merger. |
• | issue, sell, grant options or warrants or other rights to purchase, pledge, or authorize or propose the issuance, sale, grant of options or warrants or other rights to purchase or pledge any securities or phantom stock, phantom stock rights, stock appreciation rights or other similar rights relating thereto (other than the issuance of Meadow Valley common stock pursuant to the exercise of stock options as contemplated by the merger agreement); | |
• | amend or otherwise change its governing documents; |
79
Table of Contents
• | with respect to Ready Mix, adopt a “poison pill;” | |
• | acquire or redeem, directly or indirectly, or amend (i) any securities of Meadow Valley or its subsidiaries (other than the issuance of Meadow Valley common stock pursuant to the exercise of stock options as contemplated by the merger agreement), excluding Ready Mix, or (ii) any phantom stock, phantom stock rights, stock appreciation rights, options, warrants or similar rights relating thereto of Meadow Valley or its subsidiaries, including Ready Mix; | |
• | split, combine, redenominate, recapitalize, or reclassify capital stock or authorize, declare, set aside, make, or pay any dividend or distribution on any shares of capital stock, options, warrants, convertible securities, or other rights of any kind to acquire or receive capital stock of Meadow Valley or any of its subsidiaries, including Ready Mix; | |
• | acquire or offer to acquire any business or division thereof or sell, lease, encumber or otherwise dispose of assets outside the ordinary course of business, and in any event, involving a transaction value in excess of $300,000 individually or $750,000 in the aggregate ($200,000 individually or $500,000 in the aggregate with respect to Ready Mix); | |
• | except in the ordinary course of business, enter into, make any proposal for, renew, extend, amend or modify in any material respect, terminate, cancel, waive, release or assign any right or claim under, a contract, agreement, or lease that is or would be material; | |
• | except for borrowings under existing credit facilities in the ordinary course of business, incur or become liable for any indebtedness for borrowed money or mezzanine financing in excess of $2.0 million, or enter into any off-balance sheet arrangement; | |
• | become liable for the obligations of, or make any loans, advances, investments in or capital contributions to, any other person (excluding a wholly-owned subsidiary) in an aggregate amount in excess of $200,000; | |
• | other than in the ordinary course of business, enter into or materially increase or materially decrease the outstanding balances of any intercompany loan or intercompany debt arrangements; | |
• | mortgage, pledge, or otherwise similarly encumber any assets, or create, assume, or suffer to exist any non-permitted liens thereupon, or alter or apply to alter any zoning classification in connection with the owned or leased real property; | |
• | incur capital expenditures, or make any acquisition or disposition of assets outside of the ordinary course of business, in each case, in an aggregate amount in excess of $1.5 million ($2.0 million with respect to Ready Mix); | |
• | change in any material respect any of the accounting, reserving, underwriting, claims, or actuarial methods, principles or practices used by it, or any working capital policies, except as required by law, GAAP or applicable statutory accounting principles; | |
• | make or change any material tax election, take certain actions involving tax liabilities or refunds in excess of $125,000, or take certain other actions that affect tax reporting; | |
• | agree to grant or grant any stock-related, cash-based, performance, or similar awards or bonuses or any other award that may be settled in securities of Meadow Valley or any of its subsidiaries, including Ready Mix; | |
• | enter into, forgive, renew, or amend in any respect any loans to officers or directors or any of their respective affiliates or approve any transaction reportable under Rule 404 ofRegulation S-K; | |
• | except as may be required by law or as specifically contemplated by merger agreement, enter into any new, or amend, terminate, or renew any existing employee benefit plan, or take certain actions with respect to the benefits arrangements of officers, directors, employees and certain others; | |
• | other than in the ordinary course and consistent with past practice, make any deposits or contributions of cash or property to employee benefits plans; |
80
Table of Contents
• | except as required by law, enter into, amend, modify, or supplement any collective bargaining or other agreement, including any individual employment agreement; | |
• | renew or enter into any non-compete, exclusivity, non-solicitation, or similar agreement; | |
• | commence, compromise, settle or agree to compromise or settle any suit, action, claim, proceeding, violation, deficiency, default, non-compliance, or investigation, or consent to the same, unless the compromise or settlement involves the payment of monetary damages only either to or from Meadow Valley in excess of $300,000 individually or $600,000 in the aggregate; | |
• | enter into any agreement, understanding, or arrangement with respect to the voting or registration of securities of Meadow Valley or its subsidiaries, including Ready Mix; | |
• | sell or transfer any securities of Ready Mix; | |
• | fail to use reasonable best efforts to keep in force its current or replacement insurance policies; | |
• | merge or consolidate with any person, subject to certain limited exceptions; | |
• | adopt or approve a plan of complete or partial liquidation or resolutions providing for a complete or partial liquidation, dissolution, restructuring, recapitalization, or other reorganization; | |
• | adopt or amend any resolution or agreement concerning indemnification of officers, directors, or agents; | |
• | transfer or license to any person or otherwise extend, materially amend or modify, permit to lapse, or fail to preserve any intellectual property; | |
• | fail to maintain books, accounts, and records in the usual manner; | |
• | establish any subsidiary or enter into any new line of business; | |
• | fail to make in a timely manner any required filings with the SEC; | |
• | discharge any obligations other than on a timely basis in the ordinary course of business consistent with past practice; | |
• | close or materially reduce activities, or effect any material layoff or other personnel reduction or change at any facility; | |
• | with respect to Meadow Valley, allow the bonding capacity of Meadow Valley and its subsidiaries (excluding Ready Mix) to be less than $200.0 million in the aggregate and $50.0 million for any individual engagement, or otherwise permit the bonding capacity, bonds or terms thereof of Meadow Valley or any of its subsidiaries (excluding Ready Mix) to be on terms that are substantially different, in any adverse manner, than the terms that existed on the date the merger agreement was executed; |
• | with respect to Meadow Valley, materially modify or cancel any project constituting backlog as of the date the merger agreement was executed, or enter into any order that would constitute backlog at a price and on terms (including profit margin) that are not consistent with Meadow Valley’s past practices and the ordinary course of business, or that would reasonably be expected after due diligence consistent with Meadow Valley’s past practice to result in a loss to Meadow Valley; |
• | other than in the ordinary course of business, enter into any contract that involves any exchange traded, over-the-counter or other swap, cap, floor, collar, futures contract, forward contract, option, or any other derivative financial instrument or contract; | |
• | with respect to Meadow Valley, call, schedule, establish a record date with respect to, or hold a special or annual meeting of its stockholders, other than the special meeting that is the subject of this proxy statement; or | |
• | authorize, commit, or agree to take any of the foregoing actions. |
81
Table of Contents
• | initiate, solicit and encourage, Acquisition Proposals (as detailed on the next page), including by way of providing access to non-public information pursuant to one or more acceptable confidentiality agreements; and | |
• | participate in discussions or negotiations with respect to Acquisition Proposals or otherwise cooperate with or assist or participate in, or facilitate, any such discussions or negotiations. |
• | initiate, solicit, or knowingly encourage the submission of any inquiries, proposals, or offers or any other efforts or attempts that constitute or may reasonably be expected to lead to, any Acquisition Proposal or engage in any discussions or negotiations with respect thereto, or otherwise cooperate with or assist or participate in, or knowingly facilitate any such inquiries, proposals, offers, discussions, or negotiations; or | |
• | approve or recommend, or publicly propose to approve or recommend, an Acquisition Proposal or enter into any merger agreement, letter of intent, agreement in principle, share purchase agreement, asset purchase agreement or share exchange agreement, option agreement, or other similar agreement relating to an Acquisition Proposal, or enter into any agreement or agreement in principle requiring Meadow Valley to abandon, terminate, or fail to consummate the transactions contemplated by the merger agreement or breach its obligations thereunder or resolve, propose, or agree to do any of the foregoing. |
• | furnish information with respect to Meadow Valley and its subsidiaries to the person making such Acquisition Proposal; and | |
• | participate in discussions or negotiations with the person making such Acquisition Proposal regarding such Acquisition Proposal. |
• | withdraw, modify or qualify, or propose publicly to withdraw, modify, or qualify, in a manner adverse to Investor or Merger Sub, the Meadow Valley board of directors recommendation in favor of the Merger Proposal; approve, recommend or endorse, or propose publicly to approve, recommend or endorse, any |
82
Table of Contents
Superior Proposal; or make other statements that are reasonably calculated or expected to have the same effect (a “Change of Board Recommendation”); and |
• | if Meadow Valley receives an Acquisition Proposal that the board of directors of Meadow Valley (acting upon the prior recommendation of the Special Committee, if then in existence) concludes in good faith (after consultation with its outside counsel and financial advisors), constitutes a Superior Proposal, after considering all of the adjustments to the terms of this Agreement which may be offered by Investor, terminate the merger agreement and enter into a definitive agreement with respect to such Superior Proposal, provided, that and in such event, Meadow Valley concurrently enters into such alternative acquisition agreement. |
• | any direct or indirect acquisition or purchase of a business that constitutes 20% or more of the net revenues of Meadow Valley and its subsidiaries, excluding Ready Mix, taken as a whole, or 20% or more of the outstanding equity securities (including securities convertible into or exchangeable for securities of Meadow Valley upon the exercise of options, warrants or similar rights) of Meadow Valley; | |
• | any tender offer or exchange offer that if consummated would result in any person or group of persons beneficially owning 20% or more of the outstanding equity securities (including securities convertible into or exchangeable for securities of Meadow Valley upon the exercise of options, warrants or similar rights) of Meadow Valley; or | |
• | any merger, reorganization, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution, or similar transaction involving Meadow Valley or any of its subsidiaries (excluding Ready Mix) whose business constitutes 20% or more of the net revenues of Meadow Valley and its subsidiaries, taken as a whole. |
• | is on terms that the board of directors of Meadow Valley (acting upon the prior recommendation of the Special Committee, if then in existence) has determined in its good faith judgment (after consultation with its financial advisor and outside counsel and after taking into account all legal, financial, regulatory, and other aspects of the proposal, including the financing terms thereof) is more favorable to Meadow Valley’s stockholders from a financial point of view than the transactions contemplated by the merger agreement; and | |
• | the board of directors of Meadow Valley (acting upon the prior recommendation of the Special Committee, if then in existence) has determined in good faith (after consultation with its financial advisor and outside counsel and after taking into account all legal, financial, regulatory, and other aspects of the proposal) is reasonably capable of being consummated (taking into account the financeability of such proposal). |
83
Table of Contents
84
Table of Contents
• | Meadow Valley’s stockholders shall have voted to approve the Merger Proposal; | |
• | no order, injunction, or decree shall have been issued by any court or agency of competent jurisdiction preventing, restraining, or rendering illegal the merger; | |
• | any waiting period under any antitrust laws shall have expired or been terminated; | |
• | the representations and warranties made by the respective parties to the merger agreement being true and correct as of the effective time of the merger, except for such failures as could not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect (as such term is defined in the merger agreement) and except as otherwise specified in the merger agreement; and | |
• | each party to the merger agreement having performed, in all material respects, all obligations that it is required to perform under the merger agreement. |
• | receipt of a certificate signed on behalf of Meadow Valley by its Chief Executive Officer or the Chief Financial Officer certifying as to certain of the closing conditions; | |
• | no change, event or occurrence, individually or in the aggregate, that would, or could reasonably be expected to, have a Material Adverse Effect on Meadow Valley or any of its subsidiaries, including Ready Mix, shall have occurred between the date of the merger agreement and the effective time of the merger; | |
• | with respect to any obligation pursuant to which Meadow Valley is required to cause Ready Mix to act, the actual performance of Ready Mix in all material respects shall have occurred; | |
• | receipt of certain real estate deliverables, including (i) an estoppel certificate from each landlord, lessor, sublessor, or third-party tenant of material leased real property, (ii) any and all consents, approvals, or authorizations required to be obtained under the terms of any lease governing any material leased real property, (iii) any and all documentation reasonably required by a title company to issue title insurance for owned or material leased real property, and (iv) a collateral access agreement with each landlord, lessor, or sublessor of certain specified leased real properties; | |
• | receipt of certain other consents, licenses, approvals, waivers, releases and permits, including certain specified consents of governmental agencies so as to permit the surviving corporation to conduct its business consistent with past practice; | |
• | receipt of waivers signed by certain of Meadow Valley’s executive officers waiving such person’s rights to any change of control, severance, or similar payments that could otherwise be due and owing as a result of the merger; | |
• | there shall be no outstanding warrants or other rights for the purchase of any shares of the capital stock of Meadow Valley; |
• | Meadow Valley’s and its subsidiaries’ (excluding Ready Mix) bonding capacity shall be at least $200.0 million in the aggregate and at least $50.0 million for any individual engagement, and Meadow Valley’s and its subsidiaries’ (excluding Ready Mix) bonding arrangements, bonding capacity, bonds, and the terms thereof shall not be on terms that are substantially different, in any adverse manner, than the terms that existed on the date of the merger agreement; |
• | the combined gross revenue on all projects constituting backlog as of the effective date of the merger shall be projected, in good faith, to be at least $112.5 million; |
85
Table of Contents
• | Meadow Valley and its subsidiaries, including Ready Mix, on a consolidated basis, shall have a minimum book value (assets less each of intangible assets, minority interest, and liabilities, including mezzanine financing), determined in accordance with GAAP, of $31.0 million; | |
• | Meadow Valley shall have earnings before interest and taxes during the twelve full calendar months immediately preceding the effective date of the merger of no less than $5.5 million, and Ready Mix shall have earnings before interest and taxes during the twelve full calendar months immediately preceding the effective date of the merger of no less than negative $4.0 million; | |
• | Meadow Valley shall have received pay-off letters with respect to its notes payable, credit facilities, and financings and any additional indebtedness other than accounts payable; | |
• | Meadow Valley shall have terminated, and be released from, a stock pledge agreement involving shares of Ready Mix common stock; | |
• | with limited exceptions, all shares of Ready Mix common stock owned by Meadow Valley shall be free and clear of all liens; | |
• | Meadow Valley and its subsidiaries, excluding Ready Mix, shall have been released as guarantors, grantors, co-borrowers,and/or pledgors with respect to all indebtedness of Ready Mix and shall have procured the release of any liens on their respective assets in connection therewith; | |
• | Meadow Valley and its subsidiaries, including Ready Mix, shall have obtained, secured, and resolved, as applicable, certain pre-identified environmental issues, conditions and deficiencies; and | |
• | Meadow Valley shall continue to own the same number of shares of Ready Mix common stock as it did on the date on which the merger agreement was executed, and that such ownership will constitute at least 66% of the Ready Mix common stock outstanding on a fully diluted basis, and no shares of preferred stock of Ready Mix shall be issued or outstanding on a fully diluted basis. |
• | receipt of a certificate signed on behalf of Investor by a duly authorized officer certifying as to certain of the closing conditions; and | |
• | Investor shall have caused to be deposited with the paying agent cash in an aggregate amount sufficient to pay the merger consideration to holders of shares of Meadow Valley common stock outstanding immediately prior to the effective time of the merger. |
• | upon the mutual written agreement of Meadow Valley and Investor; | |
• | by either Meadow Valley or Investor after the issuance by any court of competent jurisdiction or othernon-governmental entity of a final injunction or order prohibiting any of the transactions contemplated by the merger agreement, or the final denial by any governmental entity of any approval necessary to consummate the merger; | |
• | by either Meadow Valley or Investor if, in most circumstances, the merger has not been consummated on or before December 31, 2008 (unless extended under limited circumstances in Investor’s sole discretion to a |
86
Table of Contents
date not later than January 31, 2009), unless the reason for not closing the merger is due to the actions or breach by the party seeking termination (the “Outside Date Termination Right”); |
• | by either Meadow Valley or Investor if the special meeting is convened and the merger agreement does not receive the requisite stockholder vote (the “Stockholder Rejection Termination Right”), unless the special meeting is adjourned or postponed to vote on the merger agreement on a subsequent date; | |
• | by Meadow Valley upon a failure or breach by Investor of any of its obligations, covenants, representations, or warranties in the merger agreement, if such failure or breach would reasonably be expected to result in a failure of the Meadow Valley closing conditions to be satisfied under the merger agreement and if such failure or breach is not cured within the period of time provided for in the merger agreement, provided that Meadow Valley shall not have the right to terminate if it is then in material breach of its obligations under the merger agreement (the “Investor Breach Termination Right”); | |
• | by Investor upon a failure or breach by Meadow Valley of any of its obligations, covenants, representations, or warranties in the merger agreement, if such failure or breach would result in a failure of Investor closing conditions to be satisfied under the merger agreement and if such failure or breach is not cured within the period of time provided for in the merger agreement, provided that Investor shall not have the right to terminate if it is then in material breach of its obligations under the merger agreement (the “Meadow Valley Breach Termination Right”); | |
• | by Investor upon Meadow Valley or the Meadow Valley board of directors, as the case may be, (i) instituting a Change of Board Recommendation, (ii) approving, adopting, or recommending any Acquisition Proposal, (iii) approving, recommending or entering into a letter of intent, agreement in principle or definitive agreement for an Acquisition Proposal, (iv) failing to publicly reaffirm Meadow Valley board recommendation in favor of the Merger Proposal within 48 hours of a request by Investor, (v) materially breaching its obligations under the “go shop” provision or the stockholder vote provision in the merger agreement, (vi) failing to include Meadow Valley board recommendation in favor of the Merger Proposal in the proxy statement distributed to holders of common stock, or (vii) authorizing or publicly proposing any of the above (the “Change of Recommendation Termination Right”); | |
• | by Investor if, since the date of the merger agreement, there has been an event, change, or other circumstance that has had or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect that cannot reasonably be expected to be cured by December 31, 2008; | |
• | by Meadow Valley any time prior to receiving the requisite stockholder vote in favor of the Merger Proposal, if Meadow Valley has received a Superior Proposal in accordance with the “go shop” provision, provided that Meadow Valley must enter into such alternative acquisition agreement within 24 hours after, and pay a fee in advance of, terminating the merger agreement (the “New Agreement Termination Right”); or | |
• | by Meadow Valley upon Investor’s failure to consummate the merger within 10 days after Meadow Valley makes a written demand of Investor, provided that all the requirements and conditions necessary to consummate the merger have been satisfied. |
• | by either Meadow Valley or Investor pursuant to the Outside Date Termination Right, if, at the time of the delay, Investor has taken all actions necessary on its part to consummate the merger and all conditions precedent to Meadow Valley’s obligation to effect the merger have been satisfied, but Meadow Valley has not taken all actions necessary on its part to consummate the merger; |
87
Table of Contents
• | by either Meadow Valley or Investor pursuant to the Stockholder Rejection Termination Right, if Meadow Valley subsequently enters into a definitive agreement with respect to an Acquisition Proposal within 12 months after such termination; | |
• | by Investor pursuant to the Meadow Valley Breach Termination Right; | |
• | by Investor pursuant to the Change of Recommendation Termination Right (unless the termination relates to a Superior Proposal from certain parties that had previously expressed an interest in Meadow Valley); or | |
• | by Meadow Valley pursuant to the New Agreement Termination Right (unless the termination relates to a Superior Proposal from certain parties that had previously expressed an interest in Meadow Valley). |
• | by either Meadow Valley or Investor pursuant to the Outside Date Termination Right, if, at the time of the delay, Meadow Valley has taken all actions necessary on its part to consummate the merger and all conditions precedent to Investor’s and Merger Sub’s obligation to effect the merger have been satisfied, but Investor has failed to take all actions necessary on its part to consummate the merger; | |
• | by Meadow Valley pursuant to the Investor Breach Termination Right; or | |
• | otherwise in accordance with the terms of the merger agreement, if either Investor or Merger Sub has breached any of the agreement terms and thereby caused the closing not to be effected by December 31, 2008. |
88
Table of Contents
(PROPOSAL NO. 2)
89
Table of Contents
90
Table of Contents
91
Table of Contents
Summary Financial Information
Six Months Ended | ||||||||||||||||||||||||||||
Year Ended December 31, | June 30, | |||||||||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | 2008 | 2007 | ||||||||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||||||||||
Statements of Operations Data: | ||||||||||||||||||||||||||||
Revenue | $ | 205,919 | $ | 195,522 | $ | 183,873 | $ | 166,832 | $ | 154,107 | $ | 117,382 | $ | 101,300 | ||||||||||||||
Gross profit | 17,415 | 19,310 | 15,188 | 6,968 | 6,344 | 8,348 | 8,751 | |||||||||||||||||||||
Income (loss) from operations | 5,602 | 8,148 | 6,521 | 458 | (151 | ) | 2,883 | 2,529 | ||||||||||||||||||||
Income before income taxes and minority interest | 7,289 | 8,893 | 7,063 | 890 | 162 | 3,174 | 3,317 | |||||||||||||||||||||
Net income | 4,061 | 4,166 | 4,204 | 574 | 92 | 2,371 | 1,386 | |||||||||||||||||||||
Basic net income per share of common stock | 0.79 | 0.96 | 1.11 | 0.16 | 0.03 | 0.46 | 0.27 | |||||||||||||||||||||
Diluted net income per share of common stock | 0.77 | 0.90 | 1.01 | 0.15 | 0.03 | 0.45 | 0.26 | |||||||||||||||||||||
Basic weighted average common stock outstanding | 5,129,275 | 4,328,160 | 3,783,089 | 3,601,250 | 3,593,102 | 5,163,289 | 5,124,545 | |||||||||||||||||||||
Diluted weighted average common stock outstanding | 5,306,294 | 4,621,124 | 4,151,096 | 3,780,597 | 3,599,259 | 5,308,427 | 5,305,079 | |||||||||||||||||||||
Dividends | — | — | — | — | — | — | — | |||||||||||||||||||||
Statements of Financial Position Data: | ||||||||||||||||||||||||||||
Working capital | $ | 22,971 | $ | 27,255 | $ | 21,913 | $ | 2,294 | $ | 5,758 | $ | 25,262 | $ | 22,370 | ||||||||||||||
Current assets | 62,504 | 62,060 | 56,673 | 39,877 | 38,315 | 78,316 | 65,393 | |||||||||||||||||||||
Noncurrent assets | 39,248 | 40,046 | 30,344 | 25,452 | 17,052 | 38,215 | 40,322 | |||||||||||||||||||||
Total assets | 101,752 | 102,106 | 87,017 | 65,329 | 55,367 | 116,531 | 105,715 | |||||||||||||||||||||
Current liabilities | 39,533 | 34,805 | 34,760 | 37,583 | 32,557 | 53,054 | 43,023 | |||||||||||||||||||||
Noncurrent liabilities | 14,880 | 16,972 | 15,036 | 15,030 | 10,667 | 13,674 | 16,713 | |||||||||||||||||||||
Long-term debt, current portion | 4,319 | 5,171 | 4,066 | 5,744 | 4,391 | 5,087 | 4,787 | |||||||||||||||||||||
Long-term debt, less current portion | 12,269 | 13,996 | 11,858 | 11,786 | 8,085 | 11,062 | 13,738 | |||||||||||||||||||||
Minority interest in consolidated subsidiary | 12,812 | 18,988 | 17,425 | — | — | 12,471 | 14,425 | |||||||||||||||||||||
Stockholders’ equity | 34,527 | 31,341 | 19,796 | 12,716 | 12,143 | 37,332 | 31,554 |
92
Table of Contents
For the Six Months | For the Year | For the Year | ||||||||||
Ended, | Ended | Ended | ||||||||||
June 30, 2008 | December 31, 2007 | December 31, 2006 | ||||||||||
Adjusted income from operations* | $ | 3,395,594 | $ | 6,747,895 | $ | 9,126,254 | ||||||
Fixed charges: | ||||||||||||
Interest expense | 580,071 | 1,384,813 | 1,316,864 | |||||||||
Total fixed charges | 580,071 | 1,384,813 | 1,316,864 | |||||||||
Ratio of earnings to fixed charges | 5.9 | 4.9 | 6.9 |
* | Income from operations for the fiscal years ended December 31, 2006 and 2007 and for the six months ended June 30, 2008 have been adjusted to remove the effect of interest expense included in cost of revenue. |
Price | ||||||||
High | Low | |||||||
Fiscal 2008 | ||||||||
Fourth Quarter (through October 26, 2008) | $ | 9.85 | $ | 7.72 | ||||
Third Quarter | 11.00 | 8.00 | ||||||
Second Quarter | 11.94 | 8.29 | ||||||
First Quarter | 12.70 | 8.20 | ||||||
Fiscal 2007 | ||||||||
Fourth Quarter | $ | 13.99 | $ | 11.01 | ||||
Third Quarter | 14.58 | 11.27 | ||||||
Second Quarter | 14.25 | 11.53 | ||||||
First Quarter | 13.25 | 10.13 | ||||||
Fiscal 2006 | ||||||||
Fourth Quarter | $ | 11.59 | $ | 9.46 | ||||
Third Quarter | 12.58 | 8.66 | ||||||
Second Quarter | 12.50 | 8.90 | ||||||
First Quarter | 15.87 | 10.06 |
93
Table of Contents
94
Table of Contents
Amount and | ||||||||
Nature of | ||||||||
Beneficial | Percent of | |||||||
Name and Address of Beneficial Owner(1) | Ownership(2) | Class(2) | ||||||
Bradley E. Larson(3) | 146,814 | 2.8 | % | |||||
Kenneth D. Nelson(4) | 145,479 | 2.8 | % | |||||
David D. Doty(5) | 5,834 | * | ||||||
Don A. Patterson(6) | 24,167 | * | ||||||
Charles E. Cowan(7) | 16,667 | * | ||||||
Charles R. Norton(8) | 28,367 | * | ||||||
Robert W. Bottcher(9) | 30,436 | * | ||||||
Robert A. Terril(10) | — | — | ||||||
All executive officers and directors as a group (8 persons) | 397,764 | 7.4 | % | |||||
North Atlantic Value LLP(10) | 411,900 | 8.0 | % | |||||
Tontine Capital Partners, L.P.(11) | 344,452 | 6.7 | % | |||||
Hoak Public Equities, L.P.(12) | 273,924 | 5.3 | % | |||||
Carpe Diem Capital Management LLC(13) | 380,530 | 7.4 | % | |||||
Lord, Abbett & Co. LLC(14) | 362,376 | 7.0 | % |
* | Less than 1%. | |
(1) | Unless otherwise indicated, all stockholders listed below have an address in care of our principal executive offices, which are located at 4602 E. Thomas Road, Phoenix, Arizona 85018. | |
(2) | Beneficial ownership includes direct and indirect ownership of shares of our common stock including rights to acquire beneficial ownership of shares upon the exercise of stock options exercisable within 60 days of October 14, 2008. To our knowledge and unless otherwise indicated, each stockholder listed above has sole voting and investment power over the shares listed as beneficially owned by such stockholder, subject to community property laws where applicable. Percentage of ownership for each stockholder is based on 5,180,654 shares of common stock outstanding as of October 14, 2008 and options exercisable by that stockholder within 60 days of October 14, 2008. Beneficial ownership does not include options that are scheduled to vest beyond 60 days, but which would vest upon the closing of the merger. | |
(3) | Includes vested portion of options to purchase 47,001 shares of common stock. | |
(4) | Includes vested portion of options to purchase 64,967 shares of common stock. | |
(5) | Includes vested portion of options to purchase 5,834 shares of common stock. | |
(6) | Includes vested portion of options to purchase 24,167 shares of common stock. | |
(7) | Includes vested portion of options to purchase 16,667 shares of common stock. | |
(8) | Includes vested portion of options to purchase 28,367 shares of common stock. | |
(9) | Includes vested portion of options to purchase 16,800 shares of common stock. | |
(10) | Based solely on Amendment No. 3 to a Schedule 13D filed with the SEC on May 14, 2007. According to this filing, the address of this holder is Ryder Court, 14 Ryder Street, London SW1Y 6QB, England. This holder shares voting and dispositive power over (i) all of these shares with Christopher Harwood Bernard Mills, (ii) 80,293 of these shares with Trident Holdings, (iii) 120,000 of these shares with The Trident North Atlantic Fund, (iv) 11,607 of these shares with High Tor Limited, and (v) 200,000 of these shares with Oryx International Growth Fund Limited. Mr. Mills, who shares an address with the holder is, among other things, a director of The Trident North Atlantic Fund, Oryx International Growth Fund Limited, and a member and the |
95
Table of Contents
chief investment officer of the holder. The address for Trident Holdings is P.O. Box 1350GT, 75 Fort Street, George Town, Grand Cayman, Cayman Islands. The address for The Trident North Atlantic Fund is P.O. Box 309, Ugland House, George Town, Grand Cayman, Cayman Islands. The address for High Tor Limited is P.O. Box N-4857, Unit No. 2, Cable Beach Court, West Bay Street, Nassau, The Bahamas. The address for Oryx International Growth Fund Limited is Arnold House, St. Julian’s Avenue, St. Peter Port Guernsey, Channel Islands, GY1 3NF. | ||
(11) | Based solely on a Schedule 13G/A filed with the SEC on February 15, 2006. According to this filing, the address of this holder is 55 Railroad Avenue, 3rd Floor, Greenwich, Connecticut 06830, and this holder shares voting and dispositive power over these shares with Tontine Capital Management, L.L.C. and Jeffrey L. Gendell, individually and as managing member of Tontine Capital Management, L.L.C. and general partner of Tontine Capital Partners, L.P. All persons share the same address. | |
(12) | Based solely on Amendment No. 1 to Schedule 13D filed with the SEC on November 7, 2007. According to this filing, the address of this holder is 500 Crescent Court, Suite 230, Dallas, Texas 75201, and this holder shares voting and dispositive power over these shares with Hoak Fund Management, L.P., Hoak Public Equities, L.P., and James M. Hoak, in his individual capacity, and also James M. Hoak & Co., which is the general partner of Hoak Fund Management, L.P., which is co-general partner along with Hoak Fund Management, L.P. of Hoak Public Equities, L.P. | |
(13) | Based solely on Amendment No. 8 to Schedule 13D filed with the SEC on October 14, 2008. According to this filing, the address of this holder is 111 South Wacker Drive, Suite 3950, Chicago, Illinois 60606, and this holder shares voting and dispositive power over these shares with John D. Ziegelman, the President of C3 Management Inc., which is the general partner of ZP II, L.P., which is the managing member of Carpe Diem Capital Management, LLC. | |
(14) | Based solely on a Form 13G filed with the SEC on February 14, 2008. According to this filing, the address of this holder is 90 Hudson Street, 11th Floor, Jersey City, New Jersey 07302. |
96
Table of Contents
97
Table of Contents
98
Table of Contents
99
Table of Contents
100
Table of Contents
101
Table of Contents
A-1
Table of Contents
Page | ||||||
ARTICLE I THE MERGER | A-9 | |||||
Section 1.1 | The Merger | A-9 | ||||
Section 1.2 | Consummation of the Merger | A-9 | ||||
Section 1.3 | Effects of the Merger | A-10 | ||||
Section 1.4 | Articles of Incorporation and Bylaws | A-10 | ||||
Section 1.5 | Directors and Officers | A-10 | ||||
Section 1.6 | Conversion of Shares | A-10 | ||||
Section 1.7 | Withholding Taxes | A-10 | ||||
Section 1.8 | Subsequent Actions | A-10 | ||||
ARTICLE II DISSENTING SHARES; PAYMENT FOR SHARES; TREATMENT OF EQUITY-BASED AWARDS | A-11 | |||||
Section 2.1 | Dissenting Shares | A-11 | ||||
Section 2.2 | Payment for Shares | A-11 | ||||
Section 2.3 | Closing of the Company’s Transfer Books | A-12 | ||||
Section 2.4 | Treatment of Options | A-12 | ||||
Section 2.5 | Further Adjustments | A-12 | ||||
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY | A-13 | |||||
Section 3.1 | Organization and Qualification | A-13 | ||||
Section 3.2 | Capitalization | A-13 | ||||
Section 3.3 | Authority for this Agreement; Board Action | A-15 | ||||
Section 3.4 | Consents and Approvals; No Violation | A-15 | ||||
Section 3.5 | Reports; SEC Matters; Financial Statements | A-16 | ||||
Section 3.6 | Absence of Certain Changes | A-18 | ||||
Section 3.7 | Proxy Statement; Other Filings | A-19 | ||||
Section 3.8 | Brokers; Certain Expenses | A-19 | ||||
Section 3.9 | Employee Matters | A-19 | ||||
Section 3.10 | Employees | A-21 | ||||
Section 3.11 | Litigation | A-22 | ||||
Section 3.12 | Tax Matters | A-22 | ||||
Section 3.13 | Compliance with Law; No Default | A-25 | ||||
Section 3.14 | Environmental Matters | A-25 | ||||
Section 3.15 | Intellectual Property | A-27 | ||||
Section 3.16 | Real Property | A-28 | ||||
Section 3.17 | Material Contracts | A-30 | ||||
Section 3.18 | Title to Assets | A-33 | ||||
Section 3.19 | Insurance | A-33 | ||||
Section 3.20 | Opinion | A-33 | ||||
Section 3.21 | Required Vote of Company Stockholders | A-33 | ||||
Section 3.22 | State Takeover Statutes | A-33 | ||||
Section 3.23 | Rights Agreement | A-34 | ||||
Section 3.24 | Customers and Suppliers | A-34 | ||||
Section 3.25 | Affiliate Transactions | A-34 |
A-2
Table of Contents
Page | ||||||
Section 3.26 | Product Warranties; Product Liability Claims | A-34 | ||||
Section 3.27 | Bonding | A-34 | ||||
Section 3.28 | Backlog | A-35 | ||||
Section 3.29 | Foreign Corrupt Practices Act | A-35 | ||||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB | A-35 | |||||
Section 4.1 | Organization | A-35 | ||||
Section 4.2 | Authority for this Agreement | A-35 | ||||
Section 4.3 | Consents and Approvals; No Violation | A-36 | ||||
Section 4.4 | Proxy Statement; Other Filings | A-36 | ||||
Section 4.5 | Financing | A-36 | ||||
Section 4.6 | Letter of Credit | A-37 | ||||
Section 4.7 | Litigation | A-37 | ||||
Section 4.8 | Brokers | A-37 | ||||
Section 4.9 | Ownership of Merger Sub; No Prior Activities | A-37 | ||||
Section 4.10 | Vote Required | A-37 | ||||
Section 4.11 | Solvency | A-37 | ||||
ARTICLE V COVENANTS | A-38 | |||||
Section 5.1 | Conduct of Business of the Company and RMI | A-38 | ||||
Section 5.2 | Solicitation | A-44 | ||||
Section 5.3 | Access to Information | A-48 | ||||
Section 5.4 | Stockholder Approval | A-48 | ||||
Section 5.5 | Proxy Statement; Other Filings | A-49 | ||||
Section 5.6 | Reasonable Best Efforts; Consents and Governmental Approvals; Stockholder Litigation | A-50 | ||||
Section 5.7 | Indemnification and Insurance | A-51 | ||||
Section 5.8 | Employee Matters | A-52 | ||||
Section 5.9 | Takeover Laws | A-52 | ||||
Section 5.10 | Notification of Certain Matters | A-52 | ||||
Section 5.11 | Financing | A-53 | ||||
Section 5.12 | Subsequent Filings | A-53 | ||||
Section 5.13 | Press Releases | A-54 | ||||
Section 5.14 | Resignation of Directors | A-54 | ||||
Section 5.15 | Rule 16b-3 | A-54 | ||||
Section 5.16 | Company Rights Agreement | A-54 | ||||
Section 5.17 | Voting of RMI Shares | A-54 | ||||
Section 5.18 | Environmental Matters | A-55 | ||||
Section 5.19 | Real Estate Matters | A-55 | ||||
Section 5.20 | Additional Consents and Releases | A-56 | ||||
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER | A-56 | |||||
Section 6.1 | Conditions to Each Party’s Obligation to Effect the Merger | A-56 | ||||
Section 6.2 | Conditions to Obligations of Parent and Merger Sub | A-56 | ||||
Section 6.3 | Conditions to Obligations of the Company | A-58 |
A-3
Table of Contents
Page | ||||||
ARTICLE VII TERMINATION; AMENDMENT; WAIVER | A-59 | |||||
Section 7.1 | Termination | A-59 | ||||
Section 7.2 | Written Notice of Termination | A-60 | ||||
Section 7.3 | Effect of Termination | A-60 | ||||
Section 7.4 | Fees and Expenses | A-60 | ||||
Section 7.5 | Amendment | A-62 | ||||
Section 7.6 | Extension; Waiver; Remedies | A-62 | ||||
ARTICLE VIII MISCELLANEOUS | A-63 | |||||
Section 8.1 | Representations and Warranties | A-63 | ||||
Section 8.2 | Entire Agreement; Assignment | A-63 | ||||
Section 8.3 | Jurisdiction; Venue | A-63 | ||||
Section 8.4 | Validity | A-63 | ||||
Section 8.5 | Notices | A-63 | ||||
Section 8.6 | Governing Law | A-64 | ||||
Section 8.7 | Descriptive Headings | A-64 | ||||
Section 8.8 | Parties in Interest | A-64 | ||||
Section 8.9 | Rules of Construction | A-65 | ||||
Section 8.10 | Counterparts | A-65 | ||||
Section 8.11 | Certain Definitions | A-65 |
A-4
Table of Contents
Defined Terms | Defined in | |||
409A Authorities | SECTION 3.9(h) | |||
Acceptable Confidentiality Agreement | SECTION 8.11(a) | |||
Acquisition Proposal | SECTION 5.2(i) | |||
Action | SECTION 5.7(a) | |||
Affiliate | SECTION 8.11(b) | |||
Agreement | Preamble | |||
AJCA | SECTION 3.9(h) | |||
Alternative Acquisition Agreement | SECTION 5.2(e)(i) | |||
Articles of Incorporation | SECTION 8.11(c) | |||
Articles of Merger | SECTION 1.2 | |||
Associate | SECTION 8.11(b) | |||
Backlog | SECTION 8.11(d) | |||
beneficial ownership | SECTION 8.11(e) | |||
Bond | SECTION 8.11(f) | |||
Bonded Project | SECTION 8.11(g) | |||
Bonding Arrangement | SECTION 8.11(h) | |||
Bonding Capacity | SECTION 8.11(i) | |||
Breach Fee | SECTION 7.4(f) | |||
Business Day | SECTION 8.11(j) | |||
Bylaws | SECTION 8.11(k) | |||
Change of Board Recommendation | SECTION 5.2(e) | |||
Closing | SECTION 1.2 | |||
Closing Date | SECTION 1.2 | |||
Code | SECTION 1.7 | |||
Collective Bargaining Agreements | SECTION 3.10(a) | |||
Combinations Law | Recitals | |||
Common Shares | SECTION 3.2(a) | |||
Company | Preamble | |||
Company Balance Sheet | SECTION 3.5(e)(i) | |||
Company Board Recommendation | SECTION 3.3(b) | |||
Company Breakup Fee | SECTION 7.4(c) | |||
Company Disclosure Letter | SECTION 8.11(l) | |||
Company Fairness Opinion | SECTION 3.20 | |||
Company Financial Advisor | SECTION 3.8 | |||
Company Rights Agreement | SECTION 8.11(m) | |||
Company SEC Reports | SECTION 8.11(n) | |||
Company Securities | SECTION 3.2(a) | |||
Confidentiality Agreements | SECTION 8.11(o) | |||
Construction Agreement | SECTION 8.11(p) | |||
Construction Agreement Party | SECTION 8.11(q) | |||
Construction Project | SECTION 8.11(r) | |||
Controlled Group Liability | SECTION 8.11(s) | |||
Corporation Law | SECTION 5.2(h) |
A-5
Table of Contents
Defined Terms | Defined in | |||
Current Employees | SECTION 5.8(b) | |||
EBIT | SECTION 8.11(t) | |||
Effective Time | SECTION 1.2 | |||
Environment | SECTION 3.14(b)(i) | |||
Environmental Claim | SECTION 3.14(b)(ii) | |||
Environmental Law | SECTION 3.14(b)(iii) | |||
ERISA | SECTION 8.11(u) | |||
ERISA Affiliate | SECTION 8.11(v) | |||
Exchange Act | SECTION 3.4(b) | |||
Excluded Party | SECTION 5.2(b) | |||
Excluded Shares | SECTION 1.6 | |||
Expenses | SECTION 7.4(e) | |||
Facility or Facilities | SECTION 8.11(w) | |||
Financing | SECTION 5.11(a) | |||
Financing Commitments | SECTION 4.5 | |||
GAAP | SECTION 8.11(x) | |||
Government Contracts | SECTION 3.17(c)(i) | |||
Governmental Entity | SECTION 3.4(b) | |||
Hazardous Materials | SECTION 3.14(b)(iv) | |||
hereby | SECTION 8.9 | |||
herein | SECTION 8.9 | |||
hereinafter | SECTION 8.9 | |||
HSR Act | SECTION 3.4(b) | |||
Immaterial Leased Real Property | SECTION 3.15(a) | |||
Immaterial Owned Real Property | SECTION 3.16(a) | |||
including | SECTION 8.9 | |||
Indemnified Persons | SECTION 5.7(a) | |||
Intellectual Property | SECTION 8.11(y) | |||
knowledge | SECTION 8.11(z) | |||
Laws | SECTION 3.13(a)(i) | |||
Lease or Leases | SECTION 8.11(aa) | |||
Leased Real Property | SECTION 8.11(bb) | |||
Licensed Intellectual Property Agreements | SECTION 3.15(a) | |||
Liens | SECTION 8.11(cc) | |||
Material Adverse Effect | SECTION 8.11(dd) | |||
Material Contract | SECTION 3.17(a) | |||
Material Leased Real Property | SECTION 3.16(a) | |||
Material Owned Real Property | SECTION 3.16(a) | |||
Merger | SECTION 1.1 | |||
Merger Consideration | SECTION 1.6 | |||
Merger Sub | Preamble | |||
Morgan Joseph | SECTION 3.8 | |||
NASDAQ | SECTION 3.4(b) | |||
Nevada Secretary | SECTION 1.2 |
A-6
Table of Contents
Defined Terms | Defined in | |||
Nonqualified Deferred Compensation Plan | SECTION 3.9(h) | |||
Notice Period | SECTION 5.2(e)(i) | |||
Official Notice | SECTION 3.17(c)(ii) | |||
Option | SECTION 2.4(a) | |||
Other Filings | SECTION 3.7 | |||
Outside Date | SECTION 7.1(c) | |||
Owned Real Property | SECTION 8.11(ee) | |||
Parent | Preamble | |||
Parent Disclosure Letter | SECTION 8.11(ff) | |||
Parent Material Adverse Effect | SECTION 8.11(gg) | |||
Paying Agent | SECTION 2.2(a) | |||
Payment Fund | SECTION 2.2(a) | |||
Permits | SECTION 3.13(a)(ii) | |||
Permitted Liens | SECTION 8.11(hh) | |||
Person | SECTION 8.11(ii) | |||
Plan | SECTION 8.11(jj) | |||
Preferred Shares | SECTION 3.2(a) | |||
Proxy Statement | SECTION 3.7 | |||
Release | SECTION 3.14(b)(v) | |||
Representatives | SECTION 8.11(kk) | |||
Requisite Stockholder Vote | SECTION 3.21 | |||
Retiree Welfare Programs | SECTION 3.9(f) | |||
RMI | SECTION 8.11(ll) | |||
RMI Balance Sheet | SECTION 3.5(e)(ii) | |||
RMI Common Shares | SECTION 3.2(c) | |||
RMI Preferred Shares | SECTION 3.2(c) | |||
RMI SEC Reports | SECTION 8.11(mm) | |||
RMI Securities | SECTION 3.2(c) | |||
Sarbanes-Oxley Act | SECTION 3.5(a) | |||
SEC | SECTION 3.5(a) | |||
Securities | SECTION 3.2(b) | |||
Securities Act | SECTION 3.5(a) | |||
Share or Shares | SECTION 1.6 | |||
Significant Customers | SECTION 3.24 | |||
Significant Suppliers | SECTION 3.24 | |||
SNDA | SECTION 8.11(nn) | |||
Solicitation Period End-Date | SECTION 8.11(oo) | |||
Solvent | SECTION 4.11 | |||
Special Committee | SECTION 8.11(pp) | |||
Special Meeting | SECTION 5.4 | |||
Stock Right | SECTION 3.9(i) | |||
Subsidiary | SECTION 8.11(qq) | |||
Superior Fee | SECTION 7.4(d) | |||
Superior Proposal | SECTION 5.2(i) |
A-7
Table of Contents
Defined Terms | Defined in | |||
Surety | SECTION 8.11(rr) | |||
Surviving Entity | SECTION 1.1 | |||
Takeover Laws | SECTION 3.3(b) | |||
Tax | SECTION 3.12(p) | |||
Tax Returns | SECTION 3.12(p) | |||
Tax-Controlled Joint Venture | SECTION 3.12(p) | |||
Title IV Plan | SECTION 3.9(c) | |||
U.S. Tax-Controlled Joint Venture | SECTION 3.12(p) |
A-8
Table of Contents
A-9
Table of Contents
A-10
Table of Contents
A-11
Table of Contents
A-12
Table of Contents
A-13
Table of Contents
A-14
Table of Contents
A-15
Table of Contents
A-16
Table of Contents
A-17
Table of Contents
A-18
Table of Contents
A-19
Table of Contents
A-20
Table of Contents
A-21
Table of Contents
A-22
Table of Contents
A-23
Table of Contents
A-24
Table of Contents
A-25
Table of Contents
A-26
Table of Contents
A-27
Table of Contents
A-28
Table of Contents
A-29
Table of Contents
A-30
Table of Contents
A-31
Table of Contents
A-32
Table of Contents
A-33
Table of Contents
A-34
Table of Contents
A-35
Table of Contents
A-36
Table of Contents
A-37
Table of Contents
A-38
Table of Contents
A-39
Table of Contents
A-40
Table of Contents
A-41
Table of Contents
A-42
Table of Contents
A-43
Table of Contents
A-44
Table of Contents
A-45
Table of Contents
A-46
Table of Contents
A-47
Table of Contents
A-48
Table of Contents
A-49
Table of Contents
A-50
Table of Contents
A-51
Table of Contents
A-52
Table of Contents
A-53
Table of Contents
A-54
Table of Contents
A-55
Table of Contents
A-56
Table of Contents
A-57
Table of Contents
A-58
Table of Contents
A-59
Table of Contents
A-60
Table of Contents
A-61
Table of Contents
A-62
Table of Contents
1400 Civic Place
Suite 250
Southlake, Texas 76092
Attention: Conner Searcy
Facsimile:(817) 488-7739
Email:csearcy@insightequity.com
A-63
Table of Contents
Bank of America Plaza, Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia30308-2216
Attention: Ronald J. Lieberman
Facsimile:(404) 888-4190
Email:rlieberman@hunton.com
Fountain Place, Suite 3700
1445 Ross Avenue
Dallas, Texas75202-2799
Attention: Andrew W. Lawrence
Facsimile:(214) 880-0011
Email:alawarence@hunton.com
4602 East Thomas Road
Phoenix, Arizona 85018
Attention: Bradley E. Larson
Facsimile:(602) 437-1681
Email:blarson@meadowvalley.com
Phoenix, Arizona 85018
Attention: Don A. Patterson
Facsimile:(480) 619-4601
Email: donp@legacywc.com
2415 E. Camelback Road, Suite 700
Phoenix, Arizona 85016
Attention: Gregory R. Hall
Facsimile:(480) 606-5528
Email:greg.hall@dlapiper.com
A-64
Table of Contents
A-65
Table of Contents
A-66
Table of Contents
A-67
Table of Contents
A-68
Table of Contents
A-69
Table of Contents
By: | /s/ Ted W. Beneski |
Title: | Chairman of the Board |
By: | /s/ Ted W. Beneski |
Title: | Chairman of the Board |
By: | /s/ David Doty |
Title: | Chief Financial Officer |
A-70
Table of Contents
By: |
Name: |
Title: |
A-71
Table of Contents
A-72
Table of Contents
A-73
Table of Contents
A-74
Table of Contents
a |
By: | ||
Name: |
Title: |
, | ||||
Notary Public | ||||
Notary Seal | (Printed Name of Notary) | |||
My Commission Expires: |
A-75
Table of Contents
By: |
, | ||||
Notary Public | ||||
Notary Seal | (Printed Name of Notary) | |||
My Commission Expires: |
A-76
Table of Contents
When recorded return to: | Tax Parcel Number(s): | |
A-77
Table of Contents
, a | ||
By: | ||
Name: |
Title: |
STATE OF | ) | |
) SS: | ||
COUNTY/CITY OF | ) |
A-78
Table of Contents
, a | ||
By: | ||
Name: |
Title: |
STATE OF | ) | |
) SS: | ||
COUNTY/CITY OF | ) |
A-79
Table of Contents
i. | the draft of the Agreement dated as of July 23, 2008, which you have represented to us is, with respect to all material terms and conditions thereof, substantially in the form of the definitive agreement to be executed by the parties thereto promptly after your receipt of our opinion; | |
ii. | the Company’s annual report onForm 10-K filed with the Securities and Exchange Commission (the “SEC”) with respect to the year ended December 31, 2007, the Company’s quarterly report onForm 10-Q filed with the SEC with respect to the quarter ended March 31, 2008, which the Company’s management has identified to us as being the most current historical financial statements available, and certain other filings made by the Company with the SEC; |
iii. | certain other publicly available business and financial information concerning the Company, and the industry in which it operates, which we believe relevant; |
iv. | certain internal information and other data relating to the Company, and its respective business and prospects, including budgets, projections and certain presentations prepared by the Company, which were provided to us by the Company’s senior management; | |
v. | the reported sales prices and trading activity of Company Common Stock; |
vi. | certain publicly available information concerning certain other companies engaged in businesses which we believe to be generally comparable to the Company and the trading markets for certain of such other companies’ securities; and | |
vii. | the financial terms of certain recent business combinations which we believe to be relevant. |
B-1
Table of Contents
Page 2 of 3 |
B-2
Table of Contents
Page 3 of 3 |
B-3
Table of Contents
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2007 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Nevada | 88-0328443 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
4602 E. Thomas Road, Phoenix, AZ (Address of principal executive offices) | 85018 (Zip Code) |
(602) 437-5400
None
Title of Each Class: | Name of Exchange on Which Registered: | |
Common stock, $.001 par value | Nasdaq Capital Market |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Table of Contents
ANNUAL REPORT ONFORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2007
TABLE OF CONTENTS
C-2
Table of Contents
Item 1. | Business |
C-3
Table of Contents
C-4
Table of Contents
• | Continuing to actively bid in the construction markets in Arizona and Nevada and improving construction project profitability. We will continue to focus our construction services within the geographic markets that have historically produced the best profits. Our emphasis is on building transportation infrastructure and other related heavy civil projects in our core markets of Arizona and Nevada. At the same time, we strive to improve margins on new contracts by, among other things, increasing, when possible, margins on new work bidding, maximizing labor and equipment productivity, negotiating more favorable material purchase contracts and employing the most competitive subcontractors. | |
• | Growing our client base for private construction services and ensuring satisfaction of existing private customer base. We have succeeded in attracting and retaining a nucleus of non-public clients for whom we regularly perform construction services. We believe we can generate better margins in the private sector, therefore we seek to grow our client base, add new customers and maintain continued customer satisfaction. | |
• | Continuing to increase working capital and liquidity. We strive to grow cash balances and employ available financing opportunities that will maximize working capital and liquidity. By doing so, we expect to increase bonding capacity, thereby allowing us to bid additional or larger projects. | |
• | Continuing diligent pursuit of the successful resolution of three construction claims. Substantial costs were incurred in completing certain projects in New Mexico and Utah for which we are seeking reimbursement. We believe that much of the costs are reimbursable due to changed conditions, owners’ plan errors and omissions, conflicting utility right of ways and delays not attributable to us. As of December 31, 2007, the total amount of claims on the New Mexico and Utah projects that have been submitted and remain unpaid is approximately $19.1 million, of which $15.1 million represents our portion of the claims. | |
• | Implementing the growth strategy for Ready Mix, Inc. We will seek to enter new geographic sub-markets initially within the Phoenix, Arizona and Las Vegas, Nevada metropolitan areas. These markets will likely be located at the outer edges of the two metropolitan markets, but at a sufficient distance from these metropolitan markets so as to require the development of newer plants to service job sites in these areas. | |
• | Acquiring sand and gravel mining rights. A key strategy for the future growth and value of the construction materials segment is the acquisition of mining properties, either by purchase or lease, whichever is most advantageous, to decrease dependency on third-party suppliers, to control production and to increase revenue from the sale of sand and gravel products. |
C-5
Table of Contents
C-6
Table of Contents
For the Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Arizona Department of Transportation (Public) | 24.7 | % | 20.9 | % | 21.0 | % | ||||||
Clark County (Public) | 21.0 | % | 9.1 | % | 23.5 | % | ||||||
Del Webb (Private) | 2.9 | % | 5.1 | % | 11.6 | % |
C-7
Table of Contents
C-8
Table of Contents
C-9
Table of Contents
C-10
Table of Contents
C-11
Table of Contents
Item 1A. | Risk Factors |
C-12
Table of Contents
• | quarterly variations in our operating results; | |
• | operating results that vary from the expectations of securities analysts and investors; | |
• | changes in the construction and real estate industries; | |
• | changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors or such guidance provided by us; |
C-13
Table of Contents
• | announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments; | |
• | additions or departures of key personnel; | |
• | future issuances and sales of our securities; | |
• | trading and volume fluctuations; | |
• | other risk factors as discussed above; and | |
• | other unforeseen events. |
• | delay, defer or prevent a change in control in our Company; | |
• | discourage bids for our Company’s securities at a premium over the market price; | |
• | adversely affect the market price of, and the voting and other rights of the holders of, our Company’s securities; or | |
• | impede the ability of the holders of our Company’s securities to change its management. |
C-14
Table of Contents
C-15
Table of Contents
Item 1B. | Unresolved Staff Comments |
C-16
Table of Contents
Item 2. | Properties |
Approximate | Approximate | |||||||||||||
Building Size in | Land | Owned/ | Monthly | Lease | ||||||||||
Location | Segment | Purpose | Square Feet | in Acres | Leased | Rental | Expires | |||||||
4602 East Thomas Road, Phoenix, Arizona | CSS, CMS | Corporate office, Area office | 18,400 | 2 | Owned | — | — | |||||||
3430 East Flamingo Suite 100, Las Vegas, Nevada | CMS | Area office | 5,900 | — | Leased | $9,870 | 03/10/2010 | |||||||
2250 West Center Street, Springville, Utah | CSS | Field office | 1,600 | — | Leased | $2,370 | 04/30/2008 | |||||||
4635 Andrews Street, North Las Vegas, Nevada | CSS | Area office | 4,320 | — | Leased | $3,906 | 09/30/2009 | |||||||
109 West Delhi, North Las Vegas, Nevada | CMS | Ready Mix production facility | 4,470 | 5 | Owned | — | — | |||||||
11500 West Beardsley Road, Sun City, Arizona(1) | CMS | Ready Mix production facility | 440 | 5 | Leased | — | 05/31/2010 | |||||||
39245 North Schnepf Road, Queen Creek, Arizona | CMS | Ready Mix production facility | 440 | 5 | Owned | — | — | |||||||
Richmar Ave., Las Vegas, Nevada | CMS | Ready Mix production facility | 440 | 5 | Owned | — | — | |||||||
6204 West Southern Avenue, Tolleson, Arizona(1) | CMS | Ready Mix production facility | 440 | 5 | Leased | — | 10/31/2016 | |||||||
6210 Annie Oakley Drive Suite 102, Las Vegas, Nevada | CSS | Field office | 1,000 | — | Leased | $1,800 | 03/31/2009 | |||||||
North Schnepf Road, Queen Creek, Arizona(1)(2) | CMS | Sand and Aggegate production facility | — | 15 | Leased | — | 08/30/2009 | |||||||
Moapa, Nevada(1) | CMS | Sand and Aggegate production facility | 840 | 40 | Leased | — | 01/01/2009 | |||||||
Moapa, Nevada(1) | CMS | Ready Mix production facility | 440 | — | Leased | — | — | |||||||
Northwest Arizona(1) | CMS | Sand and Aggegate production facility | 840 | 40 | Leased | — | 08/27/2008 | |||||||
Northwest Las Vegas, Nevada(1) | CMS | Sand and Aggegate production facility | — | 40 | Leased | — | 03/31/2008 | |||||||
Northwest Las Vegas, Nevada(1) | CMS | Ready Mix production facility | 440 | — | Leased | — | — | |||||||
3155 East Patrick Lane Suite #12, Las Vegas, Nevada | CMTS | Area office, laboratory facility | 3,300 | — | Leased | $2,898 | — |
(1) | — Our facility rent is included in the cost of the material which we purchase from the lessors. | |
(2) | — Currently we are not mining at this site. |
Item 3. | Legal Proceedings |
C-17
Table of Contents
Item 4. | Submission of Matters to a Vote of Security Holders |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
2007 * | 2006 * | |||||||||||||||
High | Low | High | Low | |||||||||||||
First Quarter | $ | 13.11 | $ | 10.31 | $ | 15.59 | $ | 11.12 | ||||||||
Second Quarter | 14.09 | 12.81 | 12.35 | 10.13 | ||||||||||||
Third Quarter | 13.98 | 11.75 | 12.34 | 8.78 | ||||||||||||
Fourth Quarter | 13.50 | 11.29 | 10.80 | 9.80 |
* | — The quarterly highs and lows are based on daily market closing prices during each respective period. |
Meadow Valley Corporation | ||||||||||||
Equity Compensation Plan Information | ||||||||||||
Number of Securities | ||||||||||||
Remaining Available | ||||||||||||
Number of Securities | for Future Issuance | |||||||||||
to be Issued Upon | Weighted-Average | Under Equity | ||||||||||
Exercise of | Exercise Price of | Compensation Plans | ||||||||||
Outstanding Options, | Outstanding Options, | (Excluding Securities | ||||||||||
Plan Category | Warrants and Rights | Warrants and Rights | Reflected in Column (a)) | |||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders(1) | 320,011 | $ | 5.35 | 150,149 | ||||||||
Equity compensation plans not approved by security holders | — | — | ||||||||||
Total | 320,011 | 150,149 | ||||||||||
(1) | — Includes 320,011 options to purchase shares of our common stock issued to employees and directors from our 2004 Plan. |
C-18
Table of Contents
Ready Mix, Inc. | ||||||||||||
Equity Compensation Plan Information | ||||||||||||
Number of Securities | ||||||||||||
Remaining Available | ||||||||||||
Number of Securities | for Future Issuance | |||||||||||
to be Issued Upon | Weighted-Average | Under Equity | ||||||||||
Exercise of | Exercise Price of | Compensation Plans | ||||||||||
Outstanding Options, | Outstanding Options, | (Excluding Securities | ||||||||||
Plan Category | Warrants and Rights | Warrants and Rights | Reflected in Column (a)) | |||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders(1)(2) | 482,375 | $ | 11.54 | 306,875 | ||||||||
Equity compensation plans not approved by security holders | — | — | ||||||||||
Total | 482,375 | 306,875 | ||||||||||
(1) | — Includes an individual compensation agreement for 116,250 warrants to purchase shares of RMI’s common stock issued to RMI’s underwriters as a portion of their compensation in connection with RMI’s initial public offering. | |
(2) | — Includes 366,125 options to purchase shares of RMI’s common stock issued to RMI’s employees and directors from the RMI 2005 Plan. |
C-19
Table of Contents
* | $100 invested on 12/31/02 in stock or index-including reinvestment of dividends. Fiscal year ending December 31. |
12/31/2002 | 12/31/2003 | 12/31/2004 | 12/31/2005 | 12/31/2006 | 12/31/2007 | |||||||||||||||||||||||||
Meadow Valley Corporation | 100.00 | 219.23 | 510.26 | 1,484.62 | 1,301.28 | 1,632.05 | ||||||||||||||||||||||||
NASDAQ Composite Index | 100.00 | 149.75 | 164.64 | 168.60 | 187.83 | 205.22 | ||||||||||||||||||||||||
Dow Jones US Heavy Construction Index | 100.00 | 136.41 | 165.42 | 239.03 | 298.17 | 566.39 | ||||||||||||||||||||||||
C-20
Table of Contents
Item 6. | Selected Financial Data |
Years Ended December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Revenue | $ | 205,919,004 | $ | 195,521,951 | $ | 183,872,863 | $ | 166,831,664 | $ | 154,106,865 | ||||||||||
Gross profit | 17,415,250 | 19,310,088 | 15,187,579 | 6,967,790 | 6,343,618 | |||||||||||||||
Income (loss) from operations | 5,601,948 | 8,148,269 | 6,521,006 | 457,951 | (150,667 | ) | ||||||||||||||
Income before income taxes and minority interest | 7,288,861 | 8,893,156 | 7,063,197 | 890,443 | 162,381 | |||||||||||||||
Net income | 4,060,806 | 4,165,922 | 4,203,719 | 573,639 | 91,635 | |||||||||||||||
Basic net income per common share | $ | 0.79 | $ | 0.96 | $ | 1.11 | $ | 0.16 | $ | 0.03 | ||||||||||
Diluted net income per common share | $ | 0.77 | $ | 0.90 | $ | 1.01 | $ | 0.15 | $ | 0.03 | ||||||||||
Basic weighted average common shares outstanding | 5,129,275 | 4,328,160 | 3,783,089 | 3,601,250 | 3,593,102 | |||||||||||||||
Diluted weighted average common shares outstanding | 5,306,294 | 4,621,124 | 4,151,096 | 3,780,597 | 3,599,259 | |||||||||||||||
Dividends | — | — | — | — | — | |||||||||||||||
Financial Position Data: | ||||||||||||||||||||
Working capital | $ | 22,970,687 | $ | 27,255,590 | $ | 21,913,277 | $ | 2,294,162 | $ | 5,757,671 | ||||||||||
Total assets | 101,752,276 | 102,105,655 | 87,016,530 | 65,328,832 | 55,366,528 | |||||||||||||||
Long-term debt | 12,269,017 | 13,996,482 | 11,858,042 | 11,785,816 | 8,084,793 | |||||||||||||||
Stockholders’ equity | 34,526,728 | 31,341,214 | 19,795,787 | 12,716,188 | 12,142,549 |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | focus on the construction markets of Nevada and Arizona which have historically been more profitable for us, | |
• | be selective in the projects we choose to bid, provide incentives and reward outstanding project management, | |
• | concentrate our efforts to prevail in our past construction claims and eliminate distractions from lingering claims as well as to avoid future claims, | |
• | gradually increase our bonding capacity in order to bid on larger single projects and increase our contract backlog to levels that provide more sustainable momentum, and | |
• | implement expansion plans for our materials segment and focus marketing efforts on non-residential market sector. |
C-21
Table of Contents
For the Years Ended December 31, | ||||||||||||||||||||||||
2007 | 2006 | 2005 | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||
Construction services | $ | 129,262 | 62.8 | % | $ | 111,936 | 57.3 | % | $ | 116,822 | 63.5 | % | ||||||||||||
Construction materials | 75,620 | 36.7 | % | 83,152 | 42.5 | % | 67,051 | 36.5 | % | |||||||||||||||
Construction materials testing | 1,037 | 0.5 | % | 434 | 0.2 | % | — | 0.0 | % | |||||||||||||||
Total revenue | 205,919 | 100.0 | % | 195,522 | 100.0 | % | 183,873 | 100.0 | % | |||||||||||||||
Gross profit | 17,415 | 8.5 | % | 19,310 | 9.9 | % | 15,188 | 8.3 | % | |||||||||||||||
General and administrative expenses | 11,813 | 5.7 | % | 11,162 | 5.7 | % | 8,667 | 4.7 | % | |||||||||||||||
Income from operations | 5,602 | 2.7 | % | 8,148 | 4.2 | % | 6,521 | 3.6 | % | |||||||||||||||
Interest income | 1,558 | 0.8 | % | 1,010 | 0.5 | % | 563 | 0.3 | % | |||||||||||||||
Interest expense | (239 | ) | (0.1 | )% | (339 | ) | (0.2 | )% | (362 | ) | (0.2 | )% | ||||||||||||
Other income | 368 | 0.2 | % | 74 | 0.0 | % | 342 | 0.2 | % | |||||||||||||||
Income tax expense | (2,564 | ) | (1.2 | )% | (3,164 | ) | (1.6 | )% | (2,571 | ) | (1.4 | )% | ||||||||||||
Minority interest in consolidated subsidiary | (664 | ) | (0.3 | )% | (1,563 | ) | (0.8 | )% | (289 | ) | (0.2 | )% | ||||||||||||
Net income | $ | 4,061 | 2.0 | % | $ | 4,166 | 2.1 | % | $ | 4,204 | 2.3 | % | ||||||||||||
Depreciation and amortization | $ | 7,082 | 3.4 | % | $ | 5,885 | 3.0 | % | $ | 4,499 | 2.4 | % | ||||||||||||
C-22
Table of Contents
C-23
Table of Contents
C-24
Table of Contents
For the Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Cash provided by operating activities | $ | 16,746,813 | $ | 10,323,569 | $ | 5,217,432 | ||||||
Cash used in investing activities | (11,573,019 | ) | (8,002,773 | ) | (5,128,942 | ) | ||||||
Cash provided by (used in) financing activities | (6,382,348 | ) | 3,468,469 | 13,312,609 |
C-25
Table of Contents
Payments Due by Period | ||||||||||||||||||||
Less than | 1 - 3 | 4 - 5 | After | |||||||||||||||||
Total | 1 Year | Years | Years | 5 Years | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Contractual Obligations | ||||||||||||||||||||
Long-term debt obligations | $ | 16,485 | $ | 4,216 | $ | 8,162 | $ | 3,001 | $ | 1,106 | ||||||||||
Interest payments on long-term debt(1) | 2,697 | 1,037 | 1,189 | 327 | 144 | |||||||||||||||
Capital lease obligations | 104 | 104 | — | — | — | |||||||||||||||
Operating lease obligations | 7,945 | 3,135 | 4,019 | 791 | — | |||||||||||||||
Purchase obligations | 24,086 | 3,857 | 6,353 | 4,770 | 9,106 | |||||||||||||||
Other long-term liabilities(2) | 1,897 | 979 | 918 | — | — | |||||||||||||||
Total contractual obligations | $ | 53,214 | $ | 13,328 | $ | 20,641 | $ | 8,889 | $ | 10,356 | ||||||||||
(1) | Interest payments are based on the individual interest rates of each obligation, which range from 1.9% to 9.5% per annum. We do not assume an increase in the variable interest rate. See Item 8, Note 10 — Notes Payable and Note 11 — Lines of Credit in the notes to the consolidated financial statements. | |
(2) | Other long-term liabilities reflected on our balance sheets under GAAP include employment contracts with officers and key employees that call for annual salaries ranging from $118,450 to $262,500 through October 2010, and are to be reviewed annually by our Compensation Committee. |
C-26
Table of Contents
C-27
Table of Contents
Plants | 4 — 15 years | |
Computer equipment | 3 — 5 years | |
Equipment | 3 — 10 years | |
Leasehold improvements | 2 — 10 years | |
Office furniture and equipment | 5 — 7 years | |
Vehicles | 3 — 10 years | |
Building | 39 years |
C-28
Table of Contents
C-29
Table of Contents
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
C-30
Table of Contents
Item 8. | Financial Statements and Supplementary Data |
C-31
Table of Contents
December 31, | ||||||||
2007 | 2006 | |||||||
ASSETS: | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 28,146,028 | $ | 29,354,582 | ||||
Restricted cash | 327,886 | 605,243 | ||||||
Accounts receivable, net | 28,565,983 | 25,990,763 | ||||||
Prepaid expenses and other | 2,973,664 | 2,820,768 | ||||||
Inventory, net | 1,232,478 | 1,366,534 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | 567,013 | 1,254,860 | ||||||
Note receivable | 110,824 | 106,499 | ||||||
Deferred tax asset | 580,103 | 561,199 | ||||||
Total current assets | 62,503,979 | 62,060,448 | ||||||
Property and equipment, net | 36,173,373 | 35,553,000 | ||||||
Refundable deposits | 186,508 | 1,492,967 | ||||||
Note receivable, less current portion | 424,536 | 535,360 | ||||||
Claims receivable | 2,463,880 | 2,463,880 | ||||||
Total assets | $ | 101,752,276 | $ | 102,105,655 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY: | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 15,288,168 | $ | 13,298,114 | ||||
Accrued liabilities | 6,907,633 | 7,569,928 | ||||||
Notes payable | 4,216,498 | 4,837,628 | ||||||
Obligations under capital leases | 102,100 | 332,898 | ||||||
Income tax payable | 1,770,786 | 399,536 | ||||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 11,248,107 | 8,366,754 | ||||||
Total current liabilities | 39,533,292 | 34,804,858 | ||||||
Notes payable, less current portion | 12,269,017 | 13,894,382 | ||||||
Obligations under capital leases, less current portion | — | 102,100 | ||||||
Deferred tax liability | 2,610,836 | 2,974,857 | ||||||
Total liabilities | 54,413,145 | 51,776,197 | ||||||
Commitments and contingencies | ||||||||
Minority interest in consolidated subsidiary | 12,812,403 | 18,988,244 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock — $.001 par value; 1,000,000 shares authorized, none issued and outstanding | — | — | ||||||
Common stock — $.001 par value; 15,000,000 shares authorized, 5,148,404 and 5,098,679 issued and outstanding | 5,148 | 5,099 | ||||||
Additional paid-in capital | 20,322,115 | 21,197,456 | ||||||
Capital adjustments | (799,147 | ) | (799,147 | ) | ||||
Retained earnings | 14,998,612 | 10,937,806 | ||||||
Total stockholders’ equity | 34,526,728 | 31,341,214 | ||||||
Total liabilities and stockholders’ equity | $ | 101,752,276 | $ | 102,105,655 | ||||
C-32
Table of Contents
For the Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Revenue: | ||||||||||||
Construction services | $ | 129,262,421 | $ | 111,936,285 | $ | 116,822,072 | ||||||
Construction materials | 75,620,128 | 83,151,938 | 67,050,791 | |||||||||
Construction materials testing | 1,036,455 | 433,728 | — | |||||||||
Total revenue | 205,919,004 | 195,521,951 | 183,872,863 | |||||||||
Cost of revenue: | ||||||||||||
Construction services | 117,924,528 | 101,866,540 | 108,706,174 | |||||||||
Construction materials | 69,465,646 | 73,945,571 | 59,979,110 | |||||||||
Construction materials testing | 1,113,580 | 399,752 | — | |||||||||
Total cost of revenue | 188,503,754 | 176,211,863 | 168,685,284 | |||||||||
Gross profit | 17,415,250 | 19,310,088 | 15,187,579 | |||||||||
General and administrative expenses | 11,813,302 | 11,161,819 | 8,666,573 | |||||||||
Income from operations | 5,601,948 | 8,148,269 | 6,521,006 | |||||||||
Other income (expense): | ||||||||||||
Interest income | 1,557,627 | 1,010,144 | 562,914 | |||||||||
Interest expense | (238,866 | ) | (338,886 | ) | (362,326 | ) | ||||||
Other income | 368,152 | 73,629 | 341,603 | |||||||||
1,686,913 | 744,887 | 542,191 | ||||||||||
Income before income taxes and minority interest in consolidated subsidiary | 7,288,861 | 8,893,156 | 7,063,197 | |||||||||
Income tax expense | 2,564,376 | 3,163,785 | 2,570,955 | |||||||||
Income before minority interest in consolidated subsidiary | 4,724,485 | 5,729,371 | 4,492,242 | |||||||||
Minority interest in consolidated subsidiary | 663,679 | 1,563,449 | 288,523 | |||||||||
Net income | $ | 4,060,806 | $ | 4,165,922 | $ | 4,203,719 | ||||||
Basic net income per common share | $ | 0.79 | $ | 0.96 | $ | 1.11 | ||||||
Diluted net income per common share | $ | 0.77 | $ | 0.90 | $ | 1.01 | ||||||
Basic weighted average common shares outstanding | 5,129,275 | 4,328,160 | 3,783,089 | |||||||||
Diluted weighted average common shares outstanding | 5,306,294 | 4,621,124 | 4,151,096 | |||||||||
C-33
Table of Contents
Common Stock | ||||||||||||||||||||
Number of | Additional | |||||||||||||||||||
Shares | Paid-In | Capital | Retained | |||||||||||||||||
Outstanding | Amount | Capital | Adjustments | Earnings | ||||||||||||||||
Balance at January 1, 2005 | 3,601,250 | $ | 3,601 | $ | 10,943,569 | $ | (799,147 | ) | $ | 2,568,165 | ||||||||||
Common stock issued on exercise of options, net of tax benefit(1) | 535,662 | �� | 536 | 2,875,344 | — | — | ||||||||||||||
Net income for the year ended 2005 | — | — | — | — | 4,203,719 | |||||||||||||||
Balance at December 31, 2005 | 4,136,912 | 4,137 | 13,818,913 | (799,147 | ) | 6,771,884 | ||||||||||||||
Common stock issued in private placement offering | 817,120 | 817 | 6,567,083 | — | — | |||||||||||||||
Stock-based compensation | — | — | 267,110 | — | — | |||||||||||||||
Excess tax benefits from stock-based payment arrangements | — | — | 144,879 | — | — | |||||||||||||||
Common stock issued on exercise of options | 144,647 | 145 | 399,471 | — | — | |||||||||||||||
Net income for the year ended 2006 | — | — | — | — | 4,165,922 | |||||||||||||||
Balance at December 31, 2006 | 5,098,679 | 5,099 | 21,197,456 | (799,147 | ) | 10,937,806 | ||||||||||||||
Stock-based compensation | — | — | 626,509 | — | — | |||||||||||||||
Excess tax benefits from stock-based payment arrangements | — | — | 97,077 | — | — | |||||||||||||||
Excess payments from purchase of minority interest common stock | — | — | (1,783,424 | ) | — | — | ||||||||||||||
Common stock issued on exercise of options | 49,725 | 49 | 184,497 | — | — | |||||||||||||||
Net income for the year ended 2007 | — | — | — | — | 4,060,806 | |||||||||||||||
Balance at December 31, 2007 | 5,148,404 | $ | 5,148 | $ | 20,322,115 | $ | (799,147 | ) | $ | 14,998,612 | ||||||||||
(1) | — Additional paid-in capital associated with the issuance of common stock on exercise of options for 2005 includes an income tax benefit of $884,083. |
C-34
Table of Contents
For the Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Increase (decrease) in cash and cash equivalents: | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Cash received from customers | $ | 206,770,970 | $ | 198,871,293 | $ | 178,671,433 | ||||||
Cash paid to suppliers and employees | (189,766,867 | ) | (186,080,171 | ) | (173,653,659 | ) | ||||||
Interest received | 1,557,627 | 1,010,144 | 562,914 | |||||||||
Interest paid | (238,866 | ) | (338,886 | ) | (362,326 | ) | ||||||
Income taxes paid | (1,576,051 | ) | (3,138,811 | ) | (930 | ) | ||||||
Net cash provided by operating activities | 16,746,813 | 10,323,569 | 5,217,432 | |||||||||
Cash flows from investing activities: | ||||||||||||
Decrease in restricted cash | 277,357 | 661,847 | 1,359 | |||||||||
Proceeds from sale of property and equipment | 775,667 | 552,270 | 391,504 | |||||||||
Purchase of property and equipment | (4,087,598 | ) | (9,368,571 | ) | (5,521,805 | ) | ||||||
Proceeds from note receivable | 106,499 | 151,681 | — | |||||||||
Purchase of minority interest common stock | (8,644,944 | ) | — | — | ||||||||
Net cash used in investing activities | (11,573,019 | ) | (8,002,773 | ) | (5,128,942 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from the issuance of common stock | 184,546 | 7,753,696 | 1,991,797 | |||||||||
Offering costs associated with private placement offering | — | (786,180 | ) | — | ||||||||
Proceeds from minority interest in consolidated subsidiary | 22,000 | — | 17,747,900 | |||||||||
Offering costs associated with minority interest in consolidated subsidiary | — | — | (611,628 | ) | ||||||||
Repayment of capital lease obligations | (332,898 | ) | (546,801 | ) | (531,746 | ) | ||||||
Proceeds received from notes payable | 2,956,120 | 3,083,540 | 543,998 | |||||||||
Repayment of notes payable | (9,309,193 | ) | (6,180,665 | ) | (5,827,712 | ) | ||||||
Excess tax benefits from share-based payment arrangements | 97,077 | 144,879 | — | |||||||||
Net cash provided by (used in) financing activities | (6,382,348 | ) | 3,468,469 | 13,312,609 | ||||||||
Net increase (decrease) in cash and cash equivalents | (1,208,554 | ) | 5,789,265 | 13,401,099 | ||||||||
Cash and cash equivalents at beginning of year | 29,354,582 | 23,565,317 | 10,164,218 | |||||||||
Cash and cash equivalents at end of year | $ | 28,146,028 | $ | 29,354,582 | $ | 23,565,317 | ||||||
Reconciliation of net income to net cash provided by operating activities: | ||||||||||||
Net income | $ | 4,060,806 | $ | 4,165,922 | $ | 4,203,719 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 7,082,406 | 5,885,481 | 4,499,044 | |||||||||
Gain on sale of property and equipment | (310,687 | ) | (42,002 | ) | (9,397 | ) | ||||||
Share-based compensation expense | 626,509 | 267,110 | — | |||||||||
Deferred taxes, net | (382,925 | ) | (3,389 | ) | 2,198,853 | |||||||
Allowance for doubtful accounts | 199,479 | 69,131 | (281,565 | ) | ||||||||
Inventory allowance | (64 | ) | (44,271 | ) | (42,551 | ) | ||||||
Minority interest in consolidated subsidiary | 663,679 | 1,563,449 | 288,523 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | (2,774,699 | ) | (940,284 | ) | (2,674,326 | ) | ||||||
Income taxes receivable | — | 20,030 | (20,030 | ) | ||||||||
Claims receivable | — | 1,057,200 | — | |||||||||
Prepaid expenses and other | (126,479 | ) | 92,456 | 62,742 | ||||||||
Inventory | 134,120 | (545,285 | ) | 136,685 | ||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | 687,847 | 737,133 | (1,542,635 | ) | ||||||||
Refundable deposits | 1,306,459 | (1,014,002 | ) | (457,185 | ) | |||||||
Other receivables | — | 115,000 | — | |||||||||
Accounts payable | 1,990,054 | (5,223,444 | ) | (1,190,013 | ) | |||||||
Accrued liabilities | (662,295 | ) | 1,691,333 | 971,041 | ||||||||
Income taxes payable | 1,371,250 | 8,334 | 391,202 | |||||||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 2,881,353 | 2,463,667 | (1,316,675 | ) | ||||||||
Net cash provided by operating activities | $ | 16,746,813 | $ | 10,323,569 | $ | 5,217,432 | ||||||
C-35
Table of Contents
1. | Summary of Significant Accounting Policies and Use of Estimates: |
C-36
Table of Contents
C-37
Table of Contents
C-38
Table of Contents
Plants | 4 — 15 years | |
Computer equipment | 3 — 5 years | |
Equipment | 3 — 10 years | |
Vehicles | 3 — 10 years | |
Office furniture and equipment | 5 — 7 years | |
Leasehold improvements | 2 — 10 years | |
Building | 39 years |
C-39
Table of Contents
• | Expected term is generally determined using an average of the contractual term and vesting period of the award; | |
• | Expected volatility is measured using the average of historical daily changes in the market price of the Company’s common stock over the expected term of the award; | |
• | Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and, | |
• | Forfeitures are based on the history of cancellations of awards granted by both companies and management’s analysis of potential forfeitures. |
C-40
Table of Contents
Year Ended | ||||
December 31, | ||||
2005 | ||||
Net income, as reported | $ | 4,203,719 | ||
Add: Stock-based employee compensation expense included in reported income, net of related tax effects | — | |||
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects | (157,146 | ) | ||
Pro forma net income | $ | 4,046,573 | ||
Basic net income per common share | ||||
As reported | $ | 1.11 | ||
Pro forma | 1.07 | |||
Diluted net income per common share | ||||
As reported | $ | 1.01 | ||
Pro forma | 0.97 |
C-41
Table of Contents
2. | Stock-Based Compensation: |
C-42
Table of Contents
Awards During | ||||
the Year Ended | Awards Prior to | |||
December 31, | January 1, | |||
2007 | 2007 | |||
Dividend yield | 0% | 0% | ||
Expected volatility | 58.95% | 23.94% - 82.23% | ||
Weighted — average expected volatility | 58.95% | 50.04% | ||
Risk — free interest rate | 5.00% | 5.00% | ||
Expected life of options (in years) | 5 | 3 | ||
Weighted — average grant-date fair value | $7.67 | $1.34 |
Weighted Average | ||||||||||||||||||||
Weighted Average | Remaining | Aggregate | Aggregate | |||||||||||||||||
Exercise Price | Contractural | Fair | Intrinsic | |||||||||||||||||
Shares | per Share | Term(1) | Value | Value(2) | ||||||||||||||||
Outstanding January 1, 2007 | 434,542 | $ | 4.86 | 3.98 | $ | 818,371 | ||||||||||||||
Granted | 15,000 | 13.88 | 115,050 | |||||||||||||||||
Exercised | (49,531 | ) | 3.73 | (80,837 | ) | $ | 402,799 | |||||||||||||
Forfeited or expired | (80,000 | ) | 5.31 | (80,800 | ) | |||||||||||||||
Outstanding December 31, 2007 | 320,011 | $ | 5.35 | 3.87 | $ | 771,784 | $ | 2,379,777 | ||||||||||||
Exercisable December 31, 2007 | 258,341 | $ | 4.22 | 3.88 | $ | 473,301 | $ | 2,214,552 | ||||||||||||
(1) | Remaining contractual term is presented in years. | |
(2) | The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing price of the Company’s common stock as of December 31, 2007, for those awards that have an exercise price currently below the closing price as of December 31, 2007. Awards with an exercise price above the closing price as of December 31, 2007 are considered to have no intrinsic value. |
Weighted Average | ||||||||
Grant-Date | ||||||||
Shares | Fair Value | |||||||
Nonvested stock options at January 1, 2007 | 95,000 | $ | 4.85 | |||||
Granted | 15,000 | 7.67 | ||||||
Vested | (48,330 | ) | 5.74 | |||||
Forfeited | — | — | ||||||
Nonvested stock options at December 31, 2007 | 61,670 | $ | 4.84 | |||||
C-43
Table of Contents
Awards During | ||||
the Year Ended | Awards Prior to | |||
December 31, | January 1, | |||
2007 | 2007 | |||
Dividend yield | 0% | 0% | ||
Expected volatility | 36.70% | 21.4% - 39.1% | ||
Weighted-average volatility | 36.70% | 26.60% | ||
Risk-free interest rate | 5.00% | 5.00% | ||
Expected life of options (in years) | 5 | 3 | ||
Weighted-average grant-date fair value | $5.21 | $2.40 |
Weighted Average | ||||||||||||||||||||
Weighted Average | Remaining | Aggregate | Aggregate | |||||||||||||||||
Exercise Price | Contractural | Fair | Intrinsic | |||||||||||||||||
Shares | per Share | Term(1) | Value | Value(2) | ||||||||||||||||
Outstanding January 1, 2007 | 350,625 | $ | 10.90 | 3.65 | $ | 839,741 | ||||||||||||||
Granted | 20,000 | 12.85 | 104,200 | |||||||||||||||||
Exercised(3) | (2,000 | ) | 11.00 | (3,900 | ) | |||||||||||||||
Forfeited or expired | (2,500 | ) | 11.00 | (4,875 | ) | |||||||||||||||
Outstanding December 31, 2007 | 366,125 | $ | 11.01 | 2.75 | $ | 935,166 | $ | — | ||||||||||||
Exercisable December 31, 2007 | 218,750 | $ | 11.16 | 2.63 | $ | 380,865 | $ | — | ||||||||||||
(1) | Remaining contractual term is presented in years. |
C-44
Table of Contents
(2) | The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing price of RMI’s common stock as of December 31, 2007, for those awards that have an exercise price currently below RMI’s closing price as of December 31, 2007. Awards with an exercise price above RMI’s closing price as of December 31, 2007 are considered to have no intrinsic value. | |
(3) | RMI’s aggregate intrinsic value for exercised options was $4,400 for the year ended December 31, 2007. |
Weighted Average | ||||||||
Grant-Date | ||||||||
Shares | Fair Value | |||||||
Nonvested stock options at January 1, 2007 | 267,084 | $ | 2.51 | |||||
Granted | 20,000 | 5.21 | ||||||
Vested | (135,209 | ) | 2.82 | |||||
Forfeited | (2,500 | ) | 1.95 | |||||
Nonvested stock options at December 31, 2007 | 149,375 | $ | 2.61 | |||||
3. | Note Receivable: |
4. | Concentration of Credit Risk: |
C-45
Table of Contents
5. | Accounts Receivable, net: |
December 31, | ||||||||
2007 | 2006 | |||||||
Contracts in progress | $ | 14,156,776 | $ | 11,781,074 | ||||
Contracts in progress — retention | 5,297,883 | 3,928,480 | ||||||
Completed contracts | — | 9,481 | ||||||
Completed contracts—retention | 888,649 | 964,255 | ||||||
Other trade receivables | 8,593,891 | 9,468,930 | ||||||
Other receivables | 223,506 | 233,786 | ||||||
29,160,705 | 26,386,006 | |||||||
Less: Allowance for doubtful accounts | (594,722 | ) | (395,243 | ) | ||||
$ | 28,565,983 | $ | 25,990,763 | |||||
6. | Contracts in Progress: |
December 31, | ||||||||
2007 | 2006 | |||||||
Costs incurred on uncompleted contracts | $ | 182,467,584 | $ | 200,904,026 | ||||
Estimated earnings to date | 14,965,044 | 17,742,674 | ||||||
197,432,628 | 218,646,700 | |||||||
Less: billings to date | (208,113,722 | ) | (225,758,594 | ) | ||||
$ | (10,681,094 | ) | $ | (7,111,894 | ) | |||
December 31, | ||||||||
2007 | 2006 | |||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | $ | 567,013 | $ | 1,254,860 | ||||
Billings in excess of costs and estimated earnings on uncompleted contracts | (11,248,107 | ) | (8,366,754 | ) | ||||
$ | (10,681,094 | ) | $ | (7,111,894 | ) | |||
C-46
Table of Contents
7. | Property and Equipment, net: |
December 31, | ||||||||
2007 | 2006 | |||||||
Land and building | $ | 4,878,126 | $ | 4,821,556 | ||||
Plants | 17,177,402 | 13,683,086 | ||||||
Computer equipment | 1,062,719 | 964,178 | ||||||
Equipment | 22,180,190 | 21,214,671 | ||||||
Vehicles | 14,147,149 | 12,572,265 | ||||||
Office furniture and equipment | 147,467 | 123,831 | ||||||
Mineral rights and pit development | — | 97,488 | ||||||
Leasehold improvements | 526,386 | 497,654 | ||||||
Water rights | 2,250,000 | 2,250,000 | ||||||
62,369,439 | 56,224,729 | |||||||
Less: Accumulated depreciation and amortization | (26,196,066 | ) | (20,671,729 | ) | ||||
$ | 36,173,373 | $ | 35,553,000 | |||||
8. | Accounts Payable: |
December 31, | ||||||||
2007 | 2006 | |||||||
Trade | $ | 13,216,787 | $ | 11,917,720 | ||||
Retentions | 2,071,381 | 1,380,394 | ||||||
$ | 15,288,168 | $ | 13,298,114 | |||||
9. | Accrued Liabilities: |
December 31, | ||||||||
2007 | 2006 | |||||||
Compensation | $ | 4,534,707 | $ | 4,894,724 | ||||
Taxes | 471,929 | 516,683 | ||||||
Insurance | 868,805 | 1,572,996 | ||||||
Other | 1,032,192 | 585,525 | ||||||
$ | 6,907,633 | $ | 7,569,928 | |||||
C-47
Table of Contents
10. | Notes Payable: |
December 31, | ||||||||
2007 | 2006 | |||||||
Notes payable, interest rates ranging from 5.22% to 8.18% with combined monthly payments of $29,052 and balloon payments of $1,119,909 with due dates ranging from May 25, 2008 to November 14, 2009, collateralized by real property and equipment | $ | 1,388,055 | $ | 1,634,855 | ||||
Note payable, variable interest rate with monthly principal payments of $21,429 plus interest, due July 29, 2012, collateralized by mining water rights | — | 1,435,714 | ||||||
Note payable, 7.46% interest rate with a monthly payment of $13,867, due May 26, 2021, collateralized by real property | 1,406,689 | 1,465,927 | ||||||
Line of credit for $10,000,000, variable interest at prime plus .25% (7.5% at December 31, 2007), interest only payments until January 31, 2009, then principal plus interest payments, due January 31, 2012, collateralized by all assets of the Company (See Note 11) | 340,669 | 1,240,669 | ||||||
Line of credit for $5,000,000, variable interest at prime plus .25% (7.5% at December 31, 2007), interest only payments until December 31, 2008, then principal plus interest payments, due December 31, 2011, collateralized by all assets of the Company (See Note 11) | 664,012 | 650,180 | ||||||
Notes payable, interest rates ranging from 1.902% to 9.5% with combined monthly payments of $54,155 with due dates ranging from September 28, 2008 to November 20, 2012, collateralized by vehicles | 1,449,026 | 1,569,770 | ||||||
Notes payable, non-interest bearing, with combined monthly payments of $5,858 with due dates ranging from August 15, 2008 to February 29, 2012, collateralized by vehicles | 73,338 | 125,967 | ||||||
Note payable, 7.79% interest rate with monthly payments of $45,141, due September 1, 2007, collateralized by the Company’s general liability insurance policy | — | 350,806 | ||||||
$ | 5,321,789 | $ | 8,473,888 | |||||
Notes payable, interest rates of 3.848% with interest only monthly payments until April 1, 2006 then combined monthly payments of $4,780 due December 1, 2009, collateralized by equipment | 105,814 | 158,004 | ||||||
Notes payable, interest rates ranging from 2.83% to 6.87% with combined monthly payments of $86,912 with due dates ranging from November 10, 2008 to January 9, 2013, collateralized by equipment | 2,385,280 | 3,518,055 | ||||||
Notes payable, interest rates ranging from 6.5% to 8.65% with combined monthly payments of $211,811 plus interest, due dates ranging from July 5, 2008 to February 28, 2013, collateralized by equipment | 8,672,632 | 6,582,063 | ||||||
16,485,515 | 18,732,010 | |||||||
Less Current Portion | (4,216,498 | ) | (4,837,628 | ) | ||||
$ | 12,269,017 | $ | 13,894,382 | |||||
C-48
Table of Contents
2008 | $ | 4,216,498 | ||
2009 | 5,217,166 | |||
2010 | 2,944,559 | |||
2011 | 2,128,558 | |||
2012 | 872,729 | |||
Subsequent to 2011 | 1,106,005 | |||
$ | 16,485,515 | |||
11. | Lines of Credit: |
12. | Related Party Transactions: |
C-49
Table of Contents
13. | Income Taxes: |
For the Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Current | $ | (2,947,301 | ) | $ | (3,167,174 | ) | $ | (372,102 | ) | |||
Deferred | 382,925 | 3,389 | (2,198,853 | ) | ||||||||
$ | (2,564,376 | ) | $ | (3,163,785 | ) | $ | (2,570,955 | ) | ||||
December 31, | ||||||||
2007 | 2006 | |||||||
Deferred tax asset: | ||||||||
Nonqualified stock-based compensation | $ | 144,159 | $ | 25,991 | ||||
Allowance for bad debt and other | 363,967 | 462,216 | ||||||
Inventory allowance | 71,977 | 72,000 | ||||||
NOL carryforward | — | 992 | ||||||
580,103 | 561,199 | |||||||
Deferred tax liability: | ||||||||
Depreciation | (2,610,836 | ) | (2,974,857 | ) | ||||
Net deferred tax liability | $ | (2,030,733 | ) | $ | (2,413,658 | ) | ||
C-50
Table of Contents
For the Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Statutory rate of 34% applied to income before income taxes | $ | 2,516,000 | $ | 3,024,000 | $ | 2,401,000 | ||||||
State taxes, net of federal benefit | 196,000 | 202,000 | 140,000 | |||||||||
Increase (decrease) in income taxes resulting from: | ||||||||||||
Non-Deductible items | 36,000 | 40,000 | 30,000 | |||||||||
Domestic production activities deduction | (184,000 | ) | (102,000 | ) | — | |||||||
$ | 2,564,000 | $ | 3,164,000 | $ | 2,571,000 | |||||||
14. | Commitments and Contingencies: |
For the Years Ending December 31, | Amount | |||
2008 | $ | 3,135,171 | ||
2009 | 2,486,739 | |||
2010 | 1,532,754 | |||
2011 | 717,642 | |||
2012 | 73,213 | |||
$ | 7,945,519 | |||
For the Years Ending December 31, | Amount | |||
2008 | $ | 3,857,293 | ||
2009 | 3,549,644 | |||
2010 | 2,802,935 | |||
2011 | 2,385,000 | |||
2012 | 2,385,000 | |||
Subsequent to 2012 | 9,106,250 | |||
$ | 24,086,122 | |||
C-51
Table of Contents
For the Years Ending December 31, | Amount | |||
2008 | $ | 979,208 | ||
2009 | 557,500 | |||
2010 | 360,417 | |||
$ | 1,897,125 | |||
For the Year Ending December 31, | Amount | |||
2008 | $ | 104,193 | ||
Total minimum payments | 104,193 | |||
Less: amount representing interest | (2,093 | ) | ||
Present value of net minimum lease payment | 102,100 | |||
Less: current portion | (102,100 | ) | ||
$ | — | |||
C-52
Table of Contents
15. | Minority Interest in Consolidated Subsidiary: |
16. | Stockholders’ Equity: |
17. | Litigation and Claim Matters: |
C-53
Table of Contents
C-54
Table of Contents
18. | Statement of Cash Flows: |
19. | Significant Customers: |
For the Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
A | 24.7 | % | 20.9 | % | 21.0 | % | ||||||
B | 21.0 | % | 9.1 | % | 23.5 | % | ||||||
C | 2.9 | % | 5.1 | % | 11.6 | % |
C-55
Table of Contents
December 31, | ||||||||
2007 | 2006 | |||||||
A | $ | 2,500,347 | $ | 1,874,446 | ||||
B | 8,172,638 | 4,789,025 | ||||||
C | 1,964,328 | 2,153,500 |
20. | Employee Benefit Plan: |
21. | Earnings per Share: |
For the Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Weighted average common shares outstanding | 5,129,275 | 4,328,160 | 3,783,089 | |||||||||
Dilutive effect of: | ||||||||||||
Stock options | 177,019 | 292,964 | 368,007 | |||||||||
Weighted average common shares outstanding assuming dilution | 5,306,294 | 4,621,124 | 4,151,096 | |||||||||
C-56
Table of Contents
22. | Backlog: |
23. | Other Informative Disclosures: |
C-57
Table of Contents
Construction | Construction | Construction | ||||||||||
Services | Materials | Materials Testing | ||||||||||
For the twelve months ended December 31, 2007 | ||||||||||||
Gross revenue | $ | 129,262,421 | $ | 77,364,672 | $ | 1,383,085 | ||||||
Intercompany revenue | — | (1,744,544 | ) | (346,630 | ) | |||||||
Cost of revenue | 117,924,528 | 71,210,190 | 1,460,210 | |||||||||
Interest income | 1,172,274 | 385,353 | — | |||||||||
Interest expense | 101,333 | 137,533 | — | |||||||||
Depreciation and amortization | 2,686,412 | 4,376,723 | 19,271 | |||||||||
Income (loss) before taxes | 5,773,251 | 2,111,309 | (595,699 | ) | ||||||||
Income tax benefit (expense) | (2,011,750 | ) | (756,107 | ) | 203,481 | |||||||
Net income (loss)* | 3,761,501 | 691,523 | (392,218 | ) | ||||||||
Total assets | 54,836,237 | 46,279,080 | 636,959 | |||||||||
For the twelve months ended December 31, 2006 | ||||||||||||
Gross revenue | $ | 112,948,370 | $ | 83,588,803 | $ | 546,548 | ||||||
Intercompany revenue | (1,012,085 | ) | (436,865 | ) | (112,820 | ) | ||||||
Cost of revenue | 102,878,625 | 74,382,436 | 512,572 | |||||||||
Interest income | 615,365 | 394,779 | — | |||||||||
Interest expense | (175,657 | ) | (163,229 | ) | — | |||||||
Depreciation and amortization | 2,438,374 | 3,439,208 | 7,899 | |||||||||
Income (loss) before taxes | 3,863,765 | 5,211,606 | (182,216 | ) | ||||||||
Income tax benefit (expense) | (1,357,211 | ) | (1,872,331 | ) | 65,757 | |||||||
Net income (loss)* | 2,506,554 | 1,775,827 | (116,459 | ) | ||||||||
Total assets | 54,463,850 | 47,022,753 | 619,052 | |||||||||
For the twelve months ended December 31, 2005 | ||||||||||||
Gross revenue | $ | 116,822,072 | $ | 67,734,424 | $ | — | ||||||
Intercompany revenue | — | (683,633 | ) | — | ||||||||
Cost of revenue | 108,706,174 | 60,662,743 | — | |||||||||
Interest income | 466,901 | 173,574 | — | |||||||||
Interest expense | (212,546 | ) | (227,341 | ) | — | |||||||
Intercompany interest income (expense) | 77,561 | (77,561 | ) | — | ||||||||
Depreciation and amortization | 2,088,144 | 2,410,900 | — | |||||||||
Income before taxes | 3,142,565 | 3,920,632 | — | |||||||||
Income tax expense | (1,135,913 | ) | (1,435,042 | ) | — | |||||||
Net income* | 2,006,652 | 2,197,067 | — | |||||||||
Total assets | 47,109,736 | 39,906,794 | — |
* | Net income for the construction materials segment includes the minority interest deduction of $663,679, $1,563,449 and $288,523 for the years ended December 31, 2007, 2006 and 2005, respectively. In addition, in 2005 net income has been re-allocated for comparative purposes. |
C-58
Table of Contents
24. | Quarterly Financial Data, Unaudited: |
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2007 | ||||||||||||||||
Revenue | $ | 42,648,675 | $ | 58,651,001 | $ | 54,891,341 | $ | 49,727,987 | ||||||||
Gross profit | 3,952,970 | 4,798,300 | 4,377,543 | 4,286,437 | ||||||||||||
Income from operations | 935,994 | 1,592,777 | 1,317,322 | 1,755,855 | ||||||||||||
Net income | 529,894 | 856,472 | 1,106,972 | 1,567,468 | ||||||||||||
Basic net income per common share | 0.10 | 0.17 | 0.22 | 0.31 | ||||||||||||
Diluted net income per common share | 0.10 | 0.16 | 0.21 | 0.30 | ||||||||||||
Basic weighted average common shares outstanding | 5,120,296 | 5,128,793 | 5,130,980 | 5,137,030 | ||||||||||||
Diluted weighted average common shares outstanding | 5,295,852 | 5,314,305 | 5,310,448 | 5,304,571 | ||||||||||||
2006 | ||||||||||||||||
Revenue | $ | 45,749,668 | $ | 48,316,869 | $ | 51,704,022 | $ | 49,751,392 | ||||||||
Gross profit | 4,747,913 | 4,766,927 | 4,043,279 | 5,751,969 | ||||||||||||
Income from operations | 1,988,971 | 2,053,758 | 1,692,828 | 2,412,712 | ||||||||||||
Net income | 863,958 | 873,727 | 885,266 | 1,542,971 | ||||||||||||
Basic net income per common share | 0.21 | 0.21 | 0.21 | 0.32 | ||||||||||||
Diluted net income per common share | 0.19 | 0.19 | 0.20 | 0.31 | ||||||||||||
Basic weighted average common shares outstanding | 4,154,444 | 4,161,732 | 4,165,760 | 4,830,704 | ||||||||||||
Diluted weighted average common shares outstanding | 4,476,559 | 4,481,183 | 4,470,241 | 5,056,513 | ||||||||||||
2005 | ||||||||||||||||
Revenue | $ | 39,926,013 | $ | 53,443,002 | $ | 47,083,476 | $ | 43,420,372 | ||||||||
Gross profit | 1,946,110 | 3,638,552 | 4,543,061 | 5,059,856 | ||||||||||||
Income from operations | 290,496 | 1,482,142 | 2,726,120 | 2,022,248 | ||||||||||||
Net income | 252,495 | 997,684 | 1,639,409 | 1,314,131 | ||||||||||||
Basic net income per common share | 0.07 | 0.27 | 0.43 | 0.32 | ||||||||||||
Diluted net income per common share | 0.06 | 0.25 | 0.39 | 0.30 | ||||||||||||
Basic weighted average common shares outstanding | 3,604,555 | 3,653,501 | 3,808,809 | 4,065,489 | ||||||||||||
Diluted weighted average common shares outstanding | 3,960,138 | 4,040,282 | 4,198,742 | 4,405,220 |
25. | Subsequent Events: |
C-59
Table of Contents
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A(T). | Controls and Procedures |
Item 9B. | Other Information |
Item 10. | Directors, Executive Officers and Corporate Governance |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
C-60
Table of Contents
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accounting Fees and Services |
Item 15. | Exhibits and Financial Statement Schedules |
Balance at | Charged to | Balance at | ||||||||||||||
Beginning | Expense | Ending | ||||||||||||||
Description | of Year | Account | Deductions | of Year | ||||||||||||
In thousands | ||||||||||||||||
Year ended December 31, 2005 | ||||||||||||||||
Allowance for doubtful accounts | $ | 608 | $ | (207 | ) | $ | (75 | ) | $ | 326 | ||||||
Allowance for potentially obsolete or slow moving inventory | $ | 287 | $ | — | $ | (43 | ) | $ | 244 | |||||||
Year ended December 31, 2006 | ||||||||||||||||
Allowance for doubtful accounts | $ | 326 | $ | 126 | $ | (57 | ) | $ | 395 | |||||||
Allowance for potentially obsolete or slow moving inventory | $ | 244 | $ | (44 | ) | $ | — | $ | 200 | |||||||
Year ended December 31, 2007 | ||||||||||||||||
Allowance for doubtful accounts | $ | 395 | $ | 338 | $ | (138 | ) | $ | 595 | |||||||
Allowance for potentially obsolete or slow moving inventory | $ | 200 | $ | — | $ | (1 | ) | $ | 199 |
Exhibit | ||||
No. | Title | |||
3 | .01 | Articles of Incorporation and amendments thereto of the Registrant(1) | ||
3 | .02 | Certificate of Designation of Series A Participating Preferred Stock Effective February 13, 2007(17) | ||
3 | .03 | Amended and Restated Bylaws effective November 8, 2007(2) | ||
4 | .1 | Rights Plan effective February 13, 2007(18) | ||
10 | .1 | Form of Indemnification Agreement entered into by the Registrant with its directors and executive officers(21) | ||
10 | .2 | Employment Agreement with Bradley E. Larson(22) | ||
10 | .3 | Employment Agreement with Kenneth D. Nelson(22) | ||
10 | .5 | Property Lease and Aggregate Supply Agreement with Sun State Rock & Materials Corp.(7) |
C-61
Table of Contents
Exhibit | ||||
No. | Title | |||
10 | .6 | Property Lease and Aggregate Supply Agreement with Clay R. Oliver d.b.a. Oliver Mining Company(7) | ||
10 | .7 | Office Lease Agreement(20) | ||
10 | .8 | Amendment to Office Lease Agreement of the Registrant(9) | ||
10 | .9 | Amendment to Office Lease Agreement of the Registrant(9) | ||
10 | .10 | General Agreement of Indemnity between the Registrant and Liberty Mutual Insurance Company(3) | ||
10 | .11 | Settlement Agreement and Release between the Registrant and New Mexico Department of Transportation(11) | ||
10 | .12 | Promissory Note with Nevada State Bank(12) | ||
10 | .13 | Promissory Note with Nevada State Bank(12) | ||
10 | .14 | Master Lease Agreement with The CIT Group/Equipment Financing, Inc.(7) | ||
10 | .15 | Master Lease Agreement with The CIT Group/Equipment Financing, Inc.(7) | ||
10 | .16 | Master Security Agreement with The CIT Group/Equipment Financing, Inc.(7) | ||
10 | .17 | Master Security Agreement with The CIT Group/Equipment Financing, Inc.(7) | ||
10 | .18 | Master Lease Agreement with The CIT Group/Equipment Financing, Inc.(7) | ||
10 | .19 | Master Lease Agreement with The CIT Group/Equipment Financing, Inc.(13) | ||
10 | .20 | Master Lease Agreement with The CIT Group/Equipment Financing, Inc.(12) | ||
10 | .21 | Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(7) | ||
10 | .22 | Amended and Restated Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(8) | ||
10 | .23 | Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(8) | ||
10 | .24 | Amendment No. 1 to Restated and Amended Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(20) | ||
10 | .25 | Amendment No. 2 to Restated and Amended Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(20) | ||
10 | .26 | Renewal and Amendment of Amended and Restated Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(5) | ||
10 | .27 | Renewal and Amendment of Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(5) | ||
10 | .28 | Amendment of Amended and Restated Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(13) | ||
10 | .29 | Amendment of Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(13) | ||
10 | .30 | Line of Credit Agreement with GMAC Financial Services(10) | ||
10 | .31 | Line of Credit Agreement with Ford Motor Credit Company(10) | ||
10 | .32 | Commitment letter from DaimlerChrysler Services(14) | ||
10 | .33 | Master Lease Agreement with Wells Fargo Equipment Finance, Inc.(14) | ||
10 | .34 | Employment Agreement with David D. Doty(19) | ||
10 | .35 | Office Lease Agreement(22) | ||
10 | .36 | Amendment to Office Lease Agreement of the Registrant(22) | ||
10 | .37 | Amended and Restated Revolving Loan Agreement with Wells Fargo Equipment Finance, Inc.(23) | ||
10 | .38 | General Agreement of Indemnity between the Registrant and Safeco Insurance Companies* | ||
14 | .1 | Code of Ethics for Senior Management(11) | ||
21 | Subsidiaries of the Registrant(1) | |||
23 | Consent of Independent Auditors* | |||
24 | Power of Attorney (included on the signature pages hereto)* | |||
31 | .1 | Certification of Chief Executive Officer Pursuant toRules 13a-14 and 15d-14 of The Securities Exchange Act of 1934* |
C-62
Table of Contents
Exhibit | ||||
No. | Title | |||
31 | .2 | Certification of Chief Financial Officer Pursuant toRules 13a-14 and 15d-14 of The Securities Exchange Act of 1934* | ||
32 | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
* | Filed herewith. | |
(1) | Incorporation by reference to the Company’s Registration Statement onForm S-1, File Number33-87750 declared effective on October 16, 1995 | |
(2) | Previously filed as Exhibit 3.1 to the Company’sForm 8-K Current Report dated November 8, 2007 | |
(3) | Incorporated by reference to the Company’s June 30, 2002Form 10-Q | |
(4) | Incorporated by reference to the Company’s September 30, 2002 Form10-Q | |
(5) | Incorporated by reference to the Company’s December 31, 2002 Annual Report onForm 10-K | |
(6) | Incorporated by reference to the Company’s December 31, 1998 Annual Report onForm 10-K | |
(7) | Incorporated by reference to the Company’s December 31, 2000 Annual Report onForm 10-K | |
(8) | Incorporated by reference to the Company’s September 30, 2001 Form10-Q | |
(9) | Incorporated by reference to the Company’s June 30, 2003Form 10-Q | |
(10) | Incorporated by reference to the Company’s September 30, 2003 Form10-Q | |
(11) | Incorporated by reference to the Company’s December 31, 2003 Annual Report onForm 10-K | |
(12) | Incorporated by reference to the Company’s June 30, 2004Form 10-Q | |
(13) | Incorporated by reference to the Company’s March 31, 2003Form 10-Q | |
(14) | Incorporated by reference to the Company’s March 31, 2004Form 10-Q | |
(15) | Previously filed as an Exhibit with the same Exhibit number to the Company’sForm 8-K Current Report dated September 13, 2004 | |
(16) | Previously filed as Exhibit 3.2 to the Company’sForm 8-K Current Report dated February 9, 2007 | |
(17) | Previously filed as Exhibit 3.1 to the Company’sForm 8-K Current Report dated February 14, 2007 | |
(18) | Previously filed as an Exhibit with the same Exhibit number to the Company’sForm 8-K Current Report dated February 14, 2007 | |
(19) | Previously filed without exhibit to the Company’sForm 8-K Current Report dated November 7, 2006 | |
(20) | Incorporated by reference to the Company’s December 31, 2001 Annual Report onForm 10-K | |
(21) | Previously filed as an Exhibit with the same Exhibit number to the Company’sForm 8-K Current Report dated March 6, 2007 | |
(22) | Incorporated by reference to the Company’s December 31, 2006 Annual Report onForm 10-K | |
(23) | Previously filed as an Exhibit with the same Exhibit number to the Company’sForm 8-K Current Report dated October 9, 2007 |
C-63
Table of Contents
/s/ Bradley E. Larson |
(Principal Executive Officer)
/s/ David D. Doty |
(Principal Financial and Accounting Officer)
/s/ Charles R. Norton | /s/ Don A. Patterson | |
Charles R. Norton | Don A. Patterson | |
Director | Director | |
Date: March 31, 2008 | Date: March 31, 2008 | |
/s/ Kenneth D. Nelson | /s/ Charles E. Cowan | |
Kenneth D. Nelson | Charles E. Cowan | |
Director | Director | |
Date: March 31, 2008 | Date: March 31, 2008 |
C-64
Table of Contents
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2007 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Nevada (State or other jurisdiction of incorporation or organization) | 88-0328443 (I.R.S. Employer Identification No.) | |
4602 E. Thomas Road, Phoenix, AZ (Address of principal executive offices) | 85018 (Zip Code) |
Title of Each Class: | Name of Exchange on Which Registered: | |
Common stock, $.001 par value | Nasdaq Capital Market |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o |
Table of Contents
D-2
Table of Contents
PART III | ||||||
Directors, Executive Officers and Corporate Governance | D-4 | |||||
Executive Compensation | D-8 | |||||
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | D-18 | |||||
Certain Relationships and Related Transactions, and Director Independence | D-19 | |||||
Principal Accounting Fees and Services | D-20 | |||||
PART IV | ||||||
Exhibits and Financial Statement Schedules | D-21 | |||||
D-23 | ||||||
EX-23 | ||||||
EX-31.1 | ||||||
EX-31.2 | ||||||
EX-32 |
D-3
Table of Contents
Item 10. | Directors, Executive Officers and Corporate Governance |
D-4
Table of Contents
Name | Positions and Offices with the Company | |
Charles E. Cowan(1)(2)(3)(4) | Director | |
Charles R. Norton(1)(2)(3)(4) | Director | |
Don A. Patterson(1)(2)(3)(4) | Director | |
Bradley E. Larson | President, Chief Executive Officer and Director | |
Kenneth D. Nelson | Vice President, Chief Administrative Officer and Director |
(1) | Member of the Compensation Committee | |
(2) | Member of the Audit Committee | |
(3) | Member of the Nominating and Governance Committee | |
(4) | Member of the Special Committee |
D-5
Table of Contents
• | identify, consider and nominate candidates for membership on the Board, including any nominees properly received by the Secretary of the Corporation from any stockholder; | |
• | develop, recommend and evaluate corporate governance guidelines and a code of business conduct and ethics applicable to the Company; | |
• | make recommendations regarding the structure and composition of the Board and Board committees; and | |
• | advise the Board on corporate governance matters. |
• | Unquestionable integrity and honesty; | |
• | The ability to exercise sound, mature and independent business judgment in the best interests of the stockholders as a whole; | |
• | Recognized leadership in business or professional activity; | |
• | A background and experience that will complement the talents of the other Board members; | |
• | Willingness and capability to take the time to actively participate in Board and Committee meetings and related activities; | |
• | Ability to work professionally and effectively with other Board members and the Company’s management; | |
• | An age to enable the director to remain on the Board long enough to make an effective contribution; and | |
• | Lack of realistic possibilities of conflict of interest or legal prohibition. |
D-6
Table of Contents
D-7
Table of Contents
Item 11. | Executive Compensation |
Change in | ||||||||||||||||||||||||||||
Pension Value | ||||||||||||||||||||||||||||
and Nonqualified | ||||||||||||||||||||||||||||
Fees Earned | Non-Equity | Deferred | ||||||||||||||||||||||||||
or Paid in | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||
Name(1) | Cash(2) | Awards | Awards(3) | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||
Charles E. Cowan | $ | 31,000 | — | $ | 38,350 | — | — | — | $ | 69,350 | ||||||||||||||||||
Charles R. Norton | 33,000 | — | 38,350 | — | — | — | 71,350 | |||||||||||||||||||||
Don A. Patterson | 39,000 | — | 38,350 | — | — | — | 77,350 | |||||||||||||||||||||
$ | 103,000 | — | $ | 115,050 | — | — | — | $ | 218,050 | |||||||||||||||||||
(1) | Bradley E. Larson, President and Chief Executive Officer, and Kenneth D. Nelson, Vice President and Chief Administrative Officer, are not included in this table as they are employees of our Company and receive no additional compensation for their service as directors. Their compensation is shown in theSummary Compensation Table for 2007, below. | |
(2) | Directors receive $15,000 per year for being a member of the Board of Directors and $4,000 for each committee upon which they serve and are reimbursed for reasonable out-of-pocket expenses. The Chairman of the Audit Committee and the Special Committee each received an additional $4,000, and the Chairman of the Compensation Committee receives an additional $2,000 per year. The above amounts do not include out-of-pocket expenses. Directors who are employed by the Company are not compensated for their service on the Board. | |
(3) | Directors are entitled to participate in our equity incentive plan, and each director not employed by the Company was issued 5,000 stock options to purchase common stock on July 2, 2007, for his service on the Board during 2007. This column represents the aggregate dollar amount of the awards granted in 2007. Therefore, the values shown here are not representative of the amounts that may eventually be realized by a director. Pursuant to the rules of the Securities and Exchange Commission, we have provided a grant date fair value for stock awards in accordance with the provisions of Statement of Financial Accounting Standards No. 123(R), “Share-based Payments.” At December 31, 2007, there were no restricted stock units, deferred stock units or dividend equivalent units accumulated in any director accounts. |
D-8
Table of Contents
• | Alan Terril resigned as Vice President and Chief Operating Officer. | |
• | Bradley E. Larson, Kenneth D. Nelson, David D. Doty, Robert Bottcher and Robert Terril received a salary increase during fiscal 2007. | |
• | Bradley E. Larson, Kenneth D. Nelson, David D. Doty, Robert Bottcher and Robert Terril received incentives pursuant to the Company’s Non-Equity Incentive Plan (the “Incentive Plan”). | |
• | Robert Bottcher, Arizona Area President of Meadow Valley Contractors, Inc, and Robert Terril, Nevada Area President of Meadow Valley Contractors, Inc., were included as named executive officers for 2007. |
• | set levels of annual salary, non-equity incentives and equity compensation that are competitive and that will attract and retain superior executives, taking into account the difficult industry conditions and competitive environment that the Company faces, | |
• | incorporate a performance-based component to executive compensation by linking the incentive compensation to the Company’s financial and operational performance, and | |
• | provide long-term equity-based compensation, thereby further aligning the interests of the Company’s executives with those of its other stockholders. |
D-9
Table of Contents
Maximum of | ||||
Non-Equity Cash Incentive | ||||
as a Percent of | ||||
Name and Principal Position | Annual Salary | |||
Bradley E. Larson, President and Chief Executive Officer | 115 | % | ||
(Principal Executive Officer) | ||||
David D. Doty, Chief Financial Officer, Secretary and Treasurer | 70 | % | ||
(Principal Financial Officer) | ||||
Kenneth D. Nelson, Vice-President and Chief Administrative Officer | 110 | % | ||
Robert Bottcher, Arizona Area President | 65 | % | ||
Meadow Valley Contractors, Inc. (a Meadow Valley Corporation wholly owned subsidiary) | ||||
Robert Terril, Nevada Area President | 65 | % | ||
Meadow Valley Contractors, Inc. (a Meadow Valley Corporation wholly owned subsidiary) |
D-10
Table of Contents
D-11
Table of Contents
Charles R. Norton | Don A. Patterson | Charles E. Cowan |
D-12
Table of Contents
Change in | ||||||||||||||||||||||||||||||||||||
Pension Value | ||||||||||||||||||||||||||||||||||||
and | ||||||||||||||||||||||||||||||||||||
Non-Equity | Nonqualified | |||||||||||||||||||||||||||||||||||
Stock | Option | Incentive Plan | Deferred | All Other | ||||||||||||||||||||||||||||||||
Salary | Bonus | Awards | Awards(1) | Compensation(2) | Compensation | Compensation(3) | Total | |||||||||||||||||||||||||||||
Name and Principal Position | Year | ($) | ($) | ($) | ($) | ($) | Earnings ($) | ($) | ($) | |||||||||||||||||||||||||||
Bradley E. Larson, | 2007 | 250,240 | — | — | — | 183,754 | — | 25,413 | 459,407 | |||||||||||||||||||||||||||
President and Chief Executive Officer (Principal Executive Officer) | 2006 | 250,000 | — | — | 48,100 | 363,785 | — | 23,384 | 685,269 | |||||||||||||||||||||||||||
David D. Doty, | 2007 | 140,192 | — | — | — | 105,000 | — | 15,904 | 261,096 | |||||||||||||||||||||||||||
Chief Financial Officer (Principal Financial Officer) Secretary, Treasurer | 2006 | 140,000 | — | — | 48,100 | 216,664 | — | 14,995 | 419,759 | |||||||||||||||||||||||||||
Kenneth D. Nelson, | 2007 | 140,577 | — | — | — | 124,003 | — | 23,279 | 287,859 | |||||||||||||||||||||||||||
Vice-President and Chief Administrative Officer | 2006 | 140,000 | — | — | 48,100 | 216,664 | — | 22,370 | 427,134 | |||||||||||||||||||||||||||
Robert Bottcher, | 2007 | 138,519 | — | — | — | 122,250 | — | 16,608 | 277,377 | |||||||||||||||||||||||||||
Arizona Area President, Meadow Valley Contractors, Inc | 2006 | 138,000 | — | — | — | 128,340 | — | 12,326 | 278,666 | |||||||||||||||||||||||||||
Robert Terril, | 2007 | 138,519 | — | — | — | 122,250 | — | 16,209 | 276,978 | |||||||||||||||||||||||||||
Nevada Area President, Meadow Valley Contractors, Inc | 2006 | 138,000 | — | — | — | 86,940 | — | 15,300 | 240,240 | |||||||||||||||||||||||||||
Alan A. Terril, | 2007 | 49,039 | — | — | — | — | — | 9,906 | 58,945 | |||||||||||||||||||||||||||
Vice-President and Chief Operating Officer (former) | 2006 | 150,000 | — | — | 48,100 | 230,400 | — | 17,029 | 445,529 |
(1) | This column represents the aggregate dollar amount of the awards granted in each respective year. Therefore, the values shown here are not representative of the amounts that may eventually be realized by an executive. Pursuant to the rules of the Securities and Exchange Commission, we have provided a grant date fair value for option awards in accordance with the provisions of Statement of Financial Accounting Standards No. 123(R), “Share-based Payments.” For option awards, the fair value is estimated as of the date of grant using the Black-Scholes option pricing model, which requires the use of certain assumptions, including the risk-free interest rate, dividend yield, volatility and expected term. The risk-free interest rate is based on the yield at the date of grant of a U.S. Treasury security with a maturity period equal to or approximating the option’s expected term. The dividend yield assumption is based on our historical dividend payouts, which is zero. The volatility assumption is based on the historical volatility of our common stock over a period equal to the option’s expected term or trading stock’s trading history which ever is shorter. The expected term of options granted is based on expectations about future exercises and represents the period of time that options granted are expected to be outstanding. | |
(2) | The non-equity incentive plan payments for 2007 and 2006 were made on March 7, 2008 and March 9, 2007, respectively. See discussion of non-equity incentive plans under the heading “Compensation Discussion and Analysis” above. None of the named executive officers elected to defer their 2007 or 2006 non-equity incentive plan payments. |
D-13
Table of Contents
(3) | The amounts shown include Company-paid life insurance premiums, defined contribution plan payments, personal use of Company vehicles and Company-paid portion of health insurance for the fiscal years ended 2007 and 2006. The following table identifies the separate amounts attributable to each category of perquisites and other compensation: |
Company Paid | Company Paid | Company Paid | Defined | |||||||||||||||||||||||||
Disability | Life | Portion of | Vehicle | Contribution | ||||||||||||||||||||||||
Name | Insurance | Insurance | Health Insurance | Personal Use | Plan | Total | ||||||||||||||||||||||
Bradley E. Larson | 2007 | $ | 8,864 | $ | 645 | $ | 7,374 | $ | 780 | $ | 7,750 | $ | 25,413 | |||||||||||||||
2006 | $ | 7,744 | $ | 645 | $ | 6,715 | $ | 780 | $ | 7,500 | $ | 23,384 | ||||||||||||||||
David D. Doty | 2007 | $ | — | $ | — | $ | 7,374 | $ | 780 | $ | 7,750 | $ | 15,904 | |||||||||||||||
2006 | $ | — | $ | — | $ | 6,715 | $ | 780 | $ | 7,500 | $ | 14,995 | ||||||||||||||||
Kenneth D. Nelson | 2007 | $ | 6,620 | $ | 755 | $ | 7,374 | $ | 780 | $ | 7,750 | $ | 23,279 | |||||||||||||||
2006 | $ | 6,620 | $ | 755 | $ | 6,715 | $ | 780 | $ | 7,500 | $ | 22,370 | ||||||||||||||||
Robert Bottcher | 2007 | $ | — | $ | 704 | $ | 7,374 | $ | 780 | $ | 7,750 | $ | 16,608 | |||||||||||||||
2006 | $ | — | $ | 704 | $ | 6,715 | $ | 780 | $ | 4,127 | $ | 12,326 | ||||||||||||||||
Robert Terril | 2007 | $ | — | $ | 305 | $ | 7,374 | $ | 780 | $ | 7,750 | $ | 16,209 | |||||||||||||||
2006 | $ | — | $ | 305 | $ | 6,715 | $ | 780 | $ | 7,500 | $ | 15,300 | ||||||||||||||||
Alan A. Terril | 2007 | $ | — | $ | — | $ | 1,901 | $ | 255 | $ | 7,750 | $ | 9,906 | |||||||||||||||
2006 | $ | 1,905 | $ | 1,530 | $ | 5,314 | $ | 780 | $ | 7,500 | $ | 17,029 |
All Other | Grant | |||||||||||||||||||||||||||||||||||||||||||
All Other | Option | Date | ||||||||||||||||||||||||||||||||||||||||||
Stock | Awards: | Exercise | Fair | |||||||||||||||||||||||||||||||||||||||||
Estimated Future | Awards: | Number of | or Base | Value of | ||||||||||||||||||||||||||||||||||||||||
Payouts Under | Payouts Under | Number of | Securities | Price of | Stock | |||||||||||||||||||||||||||||||||||||||
Non-Equity Incentive Plan Awards | Equity Incentive Plan Awards | Shares of | Underlying | Option | and | |||||||||||||||||||||||||||||||||||||||
Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | Stock or | Options | Awards | Option | ||||||||||||||||||||||||||||||||||
Name | Date | ($) | ($)(1) | ($)(2) | ($) | ($) | ($) | Units (#) | (#) | ($/Sh) | Awards | |||||||||||||||||||||||||||||||||
Bradley E. Larson | — | $ | — | $ | 183,754 | $ | 287,500 | — | — | — | — | — | $ | — | $ | — | ||||||||||||||||||||||||||||
David D. Doty | — | $ | — | $ | 105,000 | $ | 105,000 | — | — | — | — | — | $ | — | $ | — | ||||||||||||||||||||||||||||
Kenneth D. Nelson | — | $ | — | $ | 124,003 | $ | 154,000 | — | — | — | — | — | $ | — | $ | — | ||||||||||||||||||||||||||||
Robert Bottcher | — | $ | — | $ | 122,250 | $ | 122,250 | — | — | — | — | — | $ | — | $ | — | ||||||||||||||||||||||||||||
Robert Terril | — | $ | — | $ | 122,250 | $ | 122,250 | — | — | — | — | — | $ | — | $ | — | ||||||||||||||||||||||||||||
Alan A. Terril | — | $ | — | $ | — | $ | — | — | — | — | — | — | $ | — | $ | — |
(1) | The non-equity incentive plan payments were made on March 7, 2008 and related to the achievement of specified financial performance objectives, as discussed under the heading “Compensation Discussion and Analysis” above during 2007. | |
(2) | Individual payments made under the Non-Equity Incentive Plan are subject to maximum amounts established by the Compensation Committee and are based upon cap amounts as a percentage of annual salary amounts. |
D-14
Table of Contents
Option Awards (1) | ||||||||||||||||||||
Equity Incentive | ||||||||||||||||||||
Plan Awards: | ||||||||||||||||||||
Number of | Number of | Number of | ||||||||||||||||||
Securities | Securities | Securities | ||||||||||||||||||
Underlying | Underlying | Underlying | ||||||||||||||||||
Unexercised | Unexercised | Unexercised | Option | Option | ||||||||||||||||
Options (#) | Options (#) | Unearned | Exercise | Expiration | ||||||||||||||||
Name | Exercisable | Unexercisable | Options (#) | Price ($)(2) | Date | |||||||||||||||
Bradley E. Larson, | 7,000 | — | — | 5.8750 | 04/16/2008 | |||||||||||||||
President and Chief Executive | 7,000 | — | — | 3.8750 | 10/21/2009 | |||||||||||||||
Officer (Principal Executive Officer) | 33,334 | — | — | 1.4600 | 11/19/2013 | |||||||||||||||
3,333 | — | 6,667 | 10.1100 | 11/30/2011 | ||||||||||||||||
David D. Doty, | — | — | 2,500 | 9.3800 | 11/01/2010 | |||||||||||||||
Chief Financial Officer | — | — | 6,667 | 10.1100 | 11/30/2011 | |||||||||||||||
(Principal Financial Officer) Secretary, Treasurer | ||||||||||||||||||||
Kenneth D. Nelson, | 5,800 | — | — | 5.8750 | 04/16/2008 | |||||||||||||||
Vice-President and Chief | 5,800 | — | — | 3.8750 | 10/21/2009 | |||||||||||||||
Administrative Officer | 20,000 | — | — | 2.4375 | 03/08/2011 | |||||||||||||||
32,500 | — | — | 1.4600 | 11/19/2013 | ||||||||||||||||
3,333 | — | 6,667 | 10.1100 | 11/30/2011 | ||||||||||||||||
Robert Bottcher, | 4,800 | — | — | 5.8750 | 04/16/2008 | |||||||||||||||
Arizona Area President | 4,800 | — | — | 3.8750 | 10/21/2009 | |||||||||||||||
Meadow Valley Contractors, Inc | 5,000 | — | — | 2.4375 | 03/08/2011 | |||||||||||||||
7,000 | — | — | 1.4600 | 11/19/2013 | ||||||||||||||||
Robert Terril, | — | — | — | — | — | |||||||||||||||
Nevada Area President | — | — | — | — | — | |||||||||||||||
Meadow Valley Contractors, Inc | — | — | — | — | — | |||||||||||||||
Alan A. Terril, | 3,333 | — | 6,667 | 10.1100 | 11/30/2011 | |||||||||||||||
Vice-President and Chief | — | — | — | — | — | |||||||||||||||
Operating Officer (former) | — | — | — | — | — |
(1) | Outstanding options vest in one-third increments on each anniversary date of grant. | |
(2) | Pursuant to the 2004 Equity Incentive Plan, the exercise price for all outstanding options is based on the grant date fair market value, which is the market closing price of our common stock on the Nasdaq Capital Market on the date of grant. |
D-15
Table of Contents
Option Awards | Stock Awards | |||||||||||||||||||
Number of | Number of | |||||||||||||||||||
Shares Acquired | Value Realized | Shares Acquired | Value Realized | |||||||||||||||||
Name | on Exercise (#) | on Exercise ($) | on Vesting (#) | on Vesting ($) | ||||||||||||||||
Bradley E. Larson | — | $ | — | — | $ | — | ||||||||||||||
David D. Doty | 8,333 | 26,659 | — | — | ||||||||||||||||
Kenneth D. Nelson | — | — | — | — | ||||||||||||||||
Robert Bottcher | — | — | — | — | ||||||||||||||||
Robert Terril | — | — | — | — | ||||||||||||||||
Alan A. Terril | — | — | — | — |
D-16
Table of Contents
• | employees holding positions of responsibility with RMI whose performance can have a significant effect on RMI’s success; and | |
• | non-employee directors. |
D-17
Table of Contents
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Amount and | ||||||||
Nature of | ||||||||
Beneficial | Percent of | |||||||
Name and Address of Beneficial Owner | Ownership(1) | Class(1) | ||||||
Directors and Executive Officers Bradley E. Larson(2) | 148,011 | 2.8 | % | |||||
Kenneth D. Nelson(3) | 150,529 | 2.8 | % | |||||
Alan A. Terril | 0 | * | ||||||
David D. Doty | 0 | * | ||||||
Don A. Patterson(4) | 18,333 | * | ||||||
Charles E. Cowan(5) | 13,333 | * | ||||||
Charles R. Norton(6) | 25,033 | * | ||||||
All officers and directors as a group (7 persons) | 355,239 | 6.6 | % | |||||
5% Stockholders North Atlantic Value LLP(7) | 411,900 | 7.7 | % | |||||
Praesidium Investment Management Company, LLC(8) | 277,701 | 5.2 | % | |||||
Tontine Capital Partners, LP(9) | 344,452 | 6.4 | % | |||||
Hoak Public Equities, LP(10) | 273,924 | 5.1 | % | |||||
Carpe Diem Capital Management LLC(11) | 424,415 | 7.9 | % | |||||
Lord, Abbett and Co. LLC(12) | 324,276 | 6.1 | % |
* | Less than 1%. | |
(1) | Beneficial ownership includes direct and indirect ownership of shares of our common stock, including rights to acquire beneficial ownership of shares upon the exercise of stock options exercisable as of April 15, 2008 and that would become exercisable within 60 days of such date. To our knowledge and unless otherwise indicated, each stockholder listed below has sole voting and investment power over the shares listed as beneficially owned by such stockholder, subject to community property laws where applicable. Percentage of ownership is based on 5,353,453 shares of common stock outstanding as of April 15, 2008 and options exercisable within 60 days. Unless otherwise indicated, all stockholders listed below have an address in care of our principal executive offices which are located at 4602 E. Thomas Road, Phoenix, Arizona 85018. | |
(2) | Includes vested portion of stock options to purchase 50,667 shares of common stock. | |
(3) | Includes vested portion of stock options to purchase 67,433 shares of common stock. | |
(4) | Includes vested portion of stock options to purchase 18,333 shares of common stock. | |
(5) | Includes vested portion of stock options to purchase 13,333 shares of common stock. | |
(6) | Includes vested portion of stock options to purchase 25,033 shares of common stock. | |
(7) | Based solely on a Schedule 13D/A filed with the SEC on May 14, 2007. According to this filing, the address of this holder is Ryder Court, 14 Ryder Street, London SW1Y 6QB, England. | |
(8) | Based solely on a Schedule 13G/A filed with the SEC on June 20, 2007. According to this filing, the address of this holder is 747 Third Avenue, New York, New York 10017. | |
(9) | Based solely on a Schedule 13G/A filed with the SEC on February 15, 2006. According to this filing, the address of this holder is 55 Railroad Avenue, 3rd Floor, Greenwich, Connecticut 06830. | |
(10) | Based solely on a Schedule 13D/A filed with the SEC on November 7, 2007. According to this filing, the address of this holder is 500 Crescent Court, Suite 230, Dallas, Texas 75201. | |
(11) | Based solely on a Schedule 13D/A filed with the SEC on April 11, 2008. According to this filing, the address of this holder is 111 South Wacker Drive, Suite 3950, Chicago, Illinois 60606. | |
(12) | Based solely on a Schedule 13G filed with the SEC on February 14, 2008. According to this filing, the address of this holder is 90 Hudson Street, Jersey City, New Jersey 07302. |
D-18
Table of Contents
Meadow Valley Corporation | ||||||||||||
Equity Compensation Plan Information | ||||||||||||
Number of Securities | ||||||||||||
Remaining Available | ||||||||||||
Number of Securities | for Future Issuance | |||||||||||
to be Issued upon | Weighted-Average | Under Equity | ||||||||||
Exercise of | Exercise Price of | Compensation Plans | ||||||||||
Outstanding Options, | Outstanding Options, | (Excluding Securities | ||||||||||
Plan Category | Warrants and Rights | Warrants and Rights | Reflected in Column (a)) | |||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders(1) | 320,011 | $ | 5.35 | 150,149 | ||||||||
Equity compensation plans not approved by security holders | — | — | ||||||||||
Total | 320,011 | 150,149 | ||||||||||
(1) | Includes 320,011 options to purchase shares of our common stock issued to employees and directors from our 2004 Plan. |
Number of Securities | Number of Securities | |||||||||||
to be Issued upon | Weighted-Average | Remaining Available for | ||||||||||
Exercise of | Exercise Price of | Future Issuance Under | ||||||||||
Plan Category | Outstanding Options | Outstanding Options | Equity Compensation Plans | |||||||||
Equity Compensation Plans Approved by Security Holders(1)(2) | 482,375 | $ | 11.54 | 306,875 | ||||||||
Equity Compensation Plans Not Approved by Security Holders | — | — | ||||||||||
Total | 482,375 | 306,875 | ||||||||||
(1) | Includes an individual compensation agreement for 116,250 warrants to purchase common stock issued to RMI’s common stock issued to RMI’s underwriters as a portion of their compensation in connection with RMI’s initial public offering. | |
(2) | Includes 366,125 options to purchase shares of RMI’s common stock issued to RMI’s employees and directors from RMI’s Plan. |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
D-19
Table of Contents
Item 14. | Principal Accounting Fees and Services |
For the Years Ended | ||||||||
December 31, | ||||||||
2007 | 2006 | |||||||
Audit fees for the years ended December 31 and fees for the review of financial statements included in quarterly reports onForm 10-Q | $ | 233,645 | $ | 169,000 | ||||
Audit related fees(1) | — | 4,322 | ||||||
Tax fees | 30,206 | 30,008 | ||||||
All other fees | 4,093 | 36,284 |
(1) | Fees paid in 2006 were associated with the registration RMI’s common stock shares underlying the equity incentive plan. |
D-20
Table of Contents
Item 15. | Exhibits and Financial Statement Schedules |
Exhibit | ||||
No. | Title | |||
3 | .01 | Articles of Incorporation and amendments thereto of the Registrant(1) | ||
3 | .02 | Certificate of Designation of Series A Participating Preferred Stock Effective February 13, 2007(17) | ||
3 | .03 | Amended and Restated Bylaws effective November 8, 2007(2) | ||
4 | .1 | Rights Plan effective February 13, 2007(18) | ||
10 | .1 | Form of Indemnification Agreement entered into by the Registrant with its directors and executive officers(21) | ||
10 | .2 | Employment Agreement with Bradley E. Larson(22) | ||
10 | .3 | Employment Agreement with Kenneth D. Nelson(22) | ||
10 | .5 | Property Lease and Aggregate Supply Agreement with Sun State Rock & Materials Corp.(7) | ||
10 | .6 | Property Lease and Aggregate Supply Agreement with Clay R. Oliver d.b.a. Oliver Mining Company(7) | ||
10 | .7 | Office Lease Agreement(20) | ||
10 | .8 | Amendment to Office Lease Agreement of the Registrant(9) | ||
10 | .9 | Amendment to Office Lease Agreement of the Registrant(9) | ||
10 | .10 | General Agreement of Indemnity between the Registrant and Liberty Mutual Insurance Company(3) | ||
10 | .11 | Settlement Agreement and Release between the Registrant and New Mexico Department of Transportation(11) | ||
10 | .12 | Promissory Note with Nevada State Bank(12) | ||
10 | .13 | Promissory Note with Nevada State Bank(12) | ||
10 | .14 | Master Lease Agreement with The CIT Group/Equipment Financing, Inc.(7) | ||
10 | .15 | Master Lease Agreement with The CIT Group/Equipment Financing, Inc.(7) | ||
10 | .16 | Master Security Agreement with The CIT Group/Equipment Financing, Inc.(7) | ||
10 | .17 | Master Security Agreement with The CIT Group/Equipment Financing, Inc.(7) | ||
10 | .18 | Master Lease Agreement with The CIT Group/Equipment Financing, Inc.(7) | ||
10 | .19 | Master Lease Agreement with The CIT Group/Equipment Financing, Inc.(13) | ||
10 | .20 | Master Lease Agreement with The CIT Group/Equipment Financing, Inc.(12) | ||
10 | .21 | Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(7) | ||
10 | .22 | Amended and Restated Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(8) | ||
10 | .23 | Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(8) | ||
10 | .24 | Amendment No. 1 to Restated and Amended Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(20) | ||
10 | .25 | Amendment No. 2 to Restated and Amended Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(20) | ||
10 | .26 | Renewal and Amendment of Amended and Restated Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(5) | ||
10 | .27 | Renewal and Amendment of Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(5) | ||
10 | .28 | Amendment of Amended and Restated Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(13) | ||
10 | .29 | Amendment of Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc.(13) | ||
10 | .30 | Line of Credit Agreement with GMAC Financial Services(10) | ||
10 | .31 | Line of Credit Agreement with Ford Motor Credit Company(10) | ||
10 | .32 | Commitment letter from DaimlerChrysler Services(14) | ||
10 | .33 | Master Lease Agreement with Wells Fargo Equipment Finance, Inc.(14) | ||
10 | .34 | Employment Agreement with David D. Doty(19) | ||
10 | .35 | Office Lease Agreement(22) |
D-21
Table of Contents
Exhibit | ||||
No. | Title | |||
10 | .36 | Amendment to Office Lease Agreement of the Registrant(22) | ||
10 | .37 | Amended and Restated Revolving Loan Agreement with Wells Fargo Equipment Finance, Inc.(23) | ||
10 | .38 | General Agreement of Indemnity between the Registrant and Safeco Insurance Companies(24) | ||
14 | .1 | Code of Ethics for Senior Management(11) | ||
21 | Subsidiaries of the Registrant(1) | |||
23 | Consent of Independent Auditors* | |||
24 | Power of Attorney(24) | |||
31 | .1 | Certification of Chief Executive Officer Pursuant toRules 13a-14 and 15d-14 of The Securities Exchange Act of 1934* | ||
31 | .2 | Certification of Chief Financial Officer Pursuant toRules 13a-14 and 15d-14 of The Securities Exchange Act of 1934* | ||
32 | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
(1) | Incorporation by reference to the Company’s Registration Statement onForm S-1, File Number33-87750 declared effective on October 16, 1995 | |
(2) | Previously filed as Exhibit 3.1 to the Company’sForm 8-K Current Report dated November 8, 2007 | |
(3) | Incorporated by reference to the Company’s June 30, 2002Form 10-Q | |
(4) | Incorporated by reference to the Company’s September 30, 2002Form 10-Q | |
(5) | Incorporated by reference to the Company’s December 31, 2002 Annual Report onForm 10-K | |
(6) | Incorporated by reference to the Company’s December 31, 1998 Annual Report onForm 10-K | |
(7) | Incorporated by reference to the Company’s December 31, 2000 Annual Report onForm 10-K | |
(8) | Incorporated by reference to the Company’s September 30, 2001Form 10-Q | |
(9) | Incorporated by reference to the Company’s June 30, 2003Form 10-Q | |
(10) | Incorporated by reference to the Company’s September 30, 2003 Form10-Q | |
(11) | Incorporated by reference to the Company’s December 31, 2003 Annual Report onForm 10-K | |
(12) | Incorporated by reference to the Company’s June 30, 2004Form 10-Q | |
(13) | Incorporated by reference to the Company’s March 31, 2003Form 10-Q | |
(14) | Incorporated by reference to the Company’s March 31, 2004Form 10-Q | |
(15) | Previously filed as an Exhibit with the same Exhibit number to the Company’sForm 8-K Current Report dated September 13, 2004 | |
(16) | Previously filed as Exhibit 3.2 to the Company’sForm 8-K Current Report dated February 9, 2007 | |
(17) | Previously filed as Exhibit 3.1 to the Company’sForm 8-K Current Report dated February 14, 2007 | |
(18) | Previously filed as an Exhibit with the same Exhibit number to the Company’sForm 8-K Current Report dated February 14, 2007 | |
(19) | Previously filed without exhibit to the Company’sForm 8-K Current Report dated November 7, 2006 | |
(20) | Incorporated by reference to the Company’s December 31, 2001 Annual Report onForm 10-K | |
(21) | Previously filed as an Exhibit with the same Exhibit number to the Company’sForm 8-K Current Report dated March 6, 2007 | |
(22) | Incorporated by reference to the Company’s December 31, 2006 Annual Report onForm 10-K | |
(23) | Previously filed as an Exhibit with the same Exhibit number to the Company’sForm 8-K Current Report dated October 9, 2007 | |
(24) | Incorporated by reference to the Company’s December 31, 2007 Annual Report onForm 10-K |
* | Filed herewith. |
D-22
Table of Contents
/s/ David D. Doty |
* Charles R. Norton Director Date: April 29, 2008 | * Don A. Patterson Director Date: April 29, 2008 | |
* Kenneth D. Nelson Director Date: April 29, 2008 | * Charles E. Cowan Director Date: April 29, 2008 | |
*by: /s/ Bradley E. Larson Bradley E. Larson,Attorney-in-Fact Date: April 29, 2008 |
D-23
Table of Contents
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended June 30, 2008 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Nevada | 88-0328443 | |
(State or other Jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o |
Table of Contents
FOR THE QUARTER ENDED JUNE 30, 2008
PART I. FINANCIAL INFORMATION | ||||||||
E-3 | ||||||||
E-4 | ||||||||
E-5 | ||||||||
E-6 | ||||||||
E-7 | ||||||||
E-21 | ||||||||
E-30 | ||||||||
E-31 | ||||||||
PART II. OTHER INFORMATION | ||||||||
E-31 | ||||||||
E-32 | ||||||||
E-33 | ||||||||
E-33 | ||||||||
E-33 | ||||||||
E-34 | ||||||||
E-34 | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32 |
E-2
Table of Contents
Item 1. | Financial Statements |
June 30, | December 31, | |||||||
2008 | 2007 | |||||||
(Unaudited) | ||||||||
ASSETS: | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 38,271,058 | $ | 28,146,028 | ||||
Restricted cash | 377,588 | 327,886 | ||||||
Accounts receivable, net | 35,236,248 | 28,565,983 | ||||||
Prepaid expenses and other | 1,775,008 | 2,973,664 | ||||||
Inventory, net | 1,626,225 | 1,232,478 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | 297,365 | 567,013 | ||||||
Note receivable | 84,365 | 110,824 | ||||||
Deferred tax asset | 648,219 | 580,103 | ||||||
Total current assets | 78,316,076 | 62,503,979 | ||||||
Property and equipment, net | 35,200,125 | 36,173,373 | ||||||
Refundable deposits | 154,736 | 186,508 | ||||||
Note receivable, less current portion | 396,134 | 424,536 | ||||||
Claims receivable | 2,463,880 | 2,463,880 | ||||||
Total assets | $ | 116,530,951 | $ | 101,752,276 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY: | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 23,052,510 | $ | 15,288,168 | ||||
Accrued liabilities | 4,729,017 | 6,907,633 | ||||||
Notes payable | 5,029,394 | 4,216,498 | ||||||
Obligations under capital leases | 57,733 | 102,100 | ||||||
Income tax payable | 117,412 | 1,770,786 | ||||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 20,068,160 | 11,248,107 | ||||||
Total current liabilities | 53,054,226 | 39,533,292 | ||||||
Notes payable, less current portion | 11,062,480 | 12,269,017 | ||||||
Deferred tax liability | 2,610,836 | 2,610,836 | ||||||
Total liabilities | 66,727,542 | 54,413,145 | ||||||
Commitments and contingencies | ||||||||
Minority interest in consolidated subsidiary | 12,471,084 | 12,812,403 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock — $.001 par value; 1,000,000 shares authorized, none issued and outstanding | — | — | ||||||
Common stock — $.001 par value; 15,000,000 shares authorized, 5,178,654 and 5,148,404 issued and outstanding | 5,179 | 5,148 | ||||||
Additional paid-in capital | 20,756,290 | 20,322,115 | ||||||
Capital adjustments | (799,147 | ) | (799,147 | ) | ||||
Retained earnings | 17,370,003 | 14,998,612 | ||||||
Total stockholders’ equity | 37,332,325 | 34,526,728 | ||||||
Total liabilities and stockholders’ equity | $ | 116,530,951 | $ | 101,752,276 | ||||
E-3
Table of Contents
Six Months Ended | Three Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(Unaudited) | ||||||||||||||||
Revenue: | ||||||||||||||||
Construction services | $ | 84,140,914 | $ | 59,061,711 | $ | 50,508,185 | $ | 36,338,017 | ||||||||
Construction materials | 32,595,666 | 41,814,357 | 16,905,255 | 22,103,800 | ||||||||||||
Construction materials testing | 645,381 | 423,608 | 313,431 | 209,185 | ||||||||||||
Total revenue | 117,381,961 | 101,299,676 | 67,726,871 | 58,651,002 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Construction services | 76,260,633 | 54,665,443 | 46,003,051 | 33,852,768 | ||||||||||||
Construction materials | 32,314,843 | 37,355,924 | 16,621,747 | 19,746,381 | ||||||||||||
Construction materials testing | 458,363 | 527,039 | 233,494 | 253,552 | ||||||||||||
Total cost of revenue | 109,033,839 | 92,548,406 | 62,858,292 | 53,852,701 | ||||||||||||
Gross profit | 8,348,122 | 8,751,270 | 4,868,579 | 4,798,301 | ||||||||||||
General and administrative expenses | 5,465,095 | 6,222,499 | 2,964,886 | 3,205,523 | ||||||||||||
Income from operations | 2,883,027 | 2,528,771 | 1,903,693 | 1,592,778 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | 436,132 | 768,163 | 171,249 | 398,880 | ||||||||||||
Interest expense | (67,504 | ) | (146,265 | ) | (32,808 | ) | (68,001 | ) | ||||||||
Other income (expense) | (77,980 | ) | 165,850 | (11,009 | ) | 64,145 | ||||||||||
290,648 | 787,748 | 127,432 | 395,024 | |||||||||||||
Income before income taxes and minority interest in consolidated subsidiary | 3,173,675 | 3,316,519 | 2,031,125 | 1,987,802 | ||||||||||||
Income tax expense | (1,143,603 | ) | (1,229,677 | ) | (732,339 | ) | (757,884 | ) | ||||||||
Income before minority interest in consolidated subsidiary | 2,030,072 | 2,086,842 | 1,298,786 | 1,229,918 | ||||||||||||
Minority interest in consolidated subsidiary | 341,319 | (700,476 | ) | 142,545 | (373,445 | ) | ||||||||||
Net income | $ | 2,371,391 | $ | 1,386,366 | $ | 1,441,331 | $ | 856,473 | ||||||||
Basic net income per common share | $ | 0.46 | $ | 0.27 | $ | 0.28 | $ | 0.17 | ||||||||
Diluted net income per common share | $ | 0.45 | $ | 0.26 | $ | 0.27 | $ | 0.16 | ||||||||
Basic weighted average common shares outstanding | 5,163,289 | 5,124,545 | 5,177,212 | 5,128,793 | ||||||||||||
Diluted weighted average common shares outstanding | 5,308,427 | 5,305,079 | 5,316,016 | 5,314,305 | ||||||||||||
E-4
Table of Contents
Common Stock | ||||||||||||||||||||
Number of | Additional | |||||||||||||||||||
Shares | Paid-In | Capital | Retained | |||||||||||||||||
Outstanding | Amount | Capital | Adjustment | Earnings | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Balance at January 1, 2008 | 5,148,404 | $ | 5,148 | $ | 20,322,115 | $ | (799,147 | ) | $ | 14,998,612 | ||||||||||
Common stock issued on exercise of options | 30,250 | 31 | 170,523 | — | — | |||||||||||||||
Stock-based compensation | — | — | 263,652 | — | — | |||||||||||||||
Net income for the six months ended June 30, 2008 | — | — | — | — | 2,371,391 | |||||||||||||||
Balance at June 30, 2008 | 5,178,654 | $ | 5,179 | $ | 20,756,290 | $ | (799,147 | ) | $ | 17,370,003 | ||||||||||
E-5
Table of Contents
Six Months Ended | ||||||||
June 30, | ||||||||
2008 | 2007 | |||||||
(Unaudited) | ||||||||
Increase (decrease) in cash and cash equivalents: | ||||||||
Cash flows from operating activities: | ||||||||
Cash received from customers | $ | 119,872,377 | $ | 99,814,922 | ||||
Cash paid to suppliers and employees | (104,133,941 | ) | (89,610,237 | ) | ||||
Income taxes paid | (2,865,093 | ) | (1,555,074 | ) | ||||
Interest received | 436,132 | 768,163 | ||||||
Interest paid | (67,504 | ) | (146,265 | ) | ||||
Net cash provided by operating activities | 13,241,971 | 9,271,509 | ||||||
Cash flows from investing activities: | ||||||||
(Increase) decrease in restricted cash | (49,702 | ) | 605,243 | |||||
Proceeds from sale of property and equipment | 265,928 | 238,236 | ||||||
Purchase of property and equipment | (1,269,150 | ) | (2,323,612 | ) | ||||
Proceeds from note receivable | 54,861 | 52,719 | ||||||
Purchase of minority interest common stock | — | (6,790,838 | ) | |||||
Net cash used in investing activities | (998,063 | ) | (8,218,252 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of common stock | 170,554 | 62,493 | ||||||
Proceeds from notes payable | 590,676 | 2,699,929 | ||||||
Repayment of notes payable | (2,835,741 | ) | (5,304,012 | ) | ||||
Repayment of capital lease obligations | (44,367 | ) | (278,805 | ) | ||||
Excess tax benefits from share-based payment arrangements | — | 82,689 | ||||||
Net cash used in financing activities | (2,118,878 | ) | (2,737,706 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 10,125,030 | (1,684,449 | ) | |||||
Cash and cash equivalents at beginning of period | 28,146,028 | 29,354,582 | ||||||
Cash and cash equivalents at end of period | $ | 38,271,058 | $ | 27,670,133 | ||||
Reconciliation of net income to net cash provided by operating activities: | ||||||||
Net income | $ | 2,371,391 | $ | 1,386,366 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 3,718,038 | 3,421,035 | ||||||
(Gain) Loss on sale of property and equipment | 109,856 | (61,681 | ) | |||||
Stock-based compensation expense | 263,652 | 208,404 | ||||||
Deferred taxes, net | (68,116 | ) | (19,275 | ) | ||||
Allowance for doubtful accounts | (39,104 | ) | 145,798 | |||||
Inventory allowance | — | (64 | ) | |||||
Minority interest in consolidated subsidiary | (341,319 | ) | 700,476 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (6,631,161 | ) | (7,807,009 | ) | ||||
Prepaid expenses and other | 1,198,656 | 1,178,618 | ||||||
Inventory | (393,747 | ) | 115,543 | |||||
Costs and estimated earnings in excess of billings on uncompleted contracts | 269,648 | 792,845 | ||||||
Refundable deposits | 31,772 | 608,826 | ||||||
Accounts payable | 7,764,342 | 5,687,118 | ||||||
Accrued liabilities | (2,178,616 | ) | (2,204,610 | ) | ||||
Income taxes payable | (1,653,374 | ) | (306,122 | ) | ||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 8,820,053 | 5,425,241 | ||||||
Net cash provided by operating activities | $ | 13,241,971 | $ | 9,271,509 | ||||
E-6
Table of Contents
1. | Summary of Significant Accounting Policies and Use of Estimates: |
E-7
Table of Contents
E-8
Table of Contents
• | Expected term is generally determined using an average of the contractual term and vesting period of the award; | |
• | Expected volatility is measured using the average of historical daily changes in the market price of the Company’s common stock over the expected term of the award; | |
• | Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and | |
• | Forfeitures are based on the history of cancellations of awards granted by both companies and management’s analysis of potential forfeitures. |
2. | Stock-Based Compensation: |
E-9
Table of Contents
Awards Granted | ||||||
During the Six | ||||||
Months Ended | Awards Prior to | |||||
June 30, 2008 | January 1, 2008 | |||||
Dividend yield | 0 | % | 0% | |||
Expected volatility | 53.30 | % | 23.94% - 82.23% | |||
Weighted-average expected volatility | 53.30 | % | 50.12% | |||
Risk-free interest rate | 5.00 | % | 5.00% | |||
Expected life of options (in years) | 4 | 3-5 | ||||
Weighted-average grant-date fair value | $ | 5.81 | $1.40 |
E-10
Table of Contents
Weighted Average | ||||||||||||||||||||
Weighted Average | Remaining | Aggregate | ||||||||||||||||||
Exercise Price | Contractual | Aggregate | Intrinsic | |||||||||||||||||
Shares | per Share | Term(1) | Fair Value | Value(2) | ||||||||||||||||
Outstanding January 1, 2008 | 320,011 | 5.35 | 3.87 | $ | 771,784 | $ | 2,379,777 | |||||||||||||
Granted | 15,000 | 12.50 | 87,150 | |||||||||||||||||
Exercised | (30,250 | ) | 5.64 | (42,564 | ) | 129,916 | ||||||||||||||
Forfeited or expired | (6,068 | ) | 5.39 | (8,324 | ) | |||||||||||||||
Outstanding June 30, 2008 | 298,693 | 5.68 | 3.83 | $ | 808,046 | $ | 1,212,928 | |||||||||||||
Exercisable June 30, 2008 | 237,023 | 4.54 | 3.96 | $ | 509,563 | $ | 1,212,928 | |||||||||||||
(1) | Remaining contractual term is presented in years. | |
(2) | The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing price of the Company’s common stock as of June 30, 2008, for those awards that have an exercise price currently below the closing price as of June 30, 2008. Awards with an exercise price above the closing price as of June 30, 2008 are considered to have no intrinsic value. |
Weighted Average | ||||||||
Grant-Date | ||||||||
Shares | Fair Value | |||||||
Nonvested stock options at January 1, 2008 | 61,667 | $ | 4.84 | |||||
Granted | 15,000 | 5.81 | ||||||
Vested | (15,000 | ) | 5.81 | |||||
Forfeited | — | — | ||||||
Nonvested stock options at June 30, 2008 | 61,667 | $ | 4.84 | |||||
E-11
Table of Contents
Awards Granted | ||||||
During the Six | Awards Granted | |||||
Months Ended | Prior to | |||||
June 30, 2008 | January 1, 2008 | |||||
Dividend yield | 0 | % | 0% | |||
Expected volatility | 35.5 | % | 21.4% - 39.1% | |||
Weighted-average volatility | 35.50 | % | 27.18% | |||
Risk-free interest rate | 3.00 | % | 5.00% | |||
Expected life of options (in years) | 5 | 3-5 | ||||
Weighted-average grant-date fair value | $ | 2.31 | $2.40 |
Weighted Average | ||||||||||||||||||||
Weighted Average | Remaining | Aggregate | Aggregate | |||||||||||||||||
Exercise Price | Contractual | Fair | Intrinsic | |||||||||||||||||
Shares | per Share | Term(1) | Value | Value(2) | ||||||||||||||||
Outstanding January 1, 2008 | 366,125 | $ | 11.01 | 2.75 | $ | 935,166 | ||||||||||||||
Granted | 20,000 | 6.40 | 46,200 | |||||||||||||||||
Exercised | — | — | — | |||||||||||||||||
Forfeited or expired | (7,000 | ) | 11.00 | (13,650 | ) | |||||||||||||||
Outstanding June 30, 2008 | 379,125 | $ | 10.76 | 2.39 | $ | 967,716 | $ | — | ||||||||||||
Exercisable June 30, 2008 | 305,708 | $ | 10.82 | 2.16 | $ | 180,668 | $ | — | ||||||||||||
(1) | Remaining contractual term is presented in years. |
E-12
Table of Contents
(2) | The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing price of RMI’s common stock as of June 30, 2008, for those awards that have an exercise price currently below RMI’s closing price as of June 30, 2008. Awards with an exercise price above RMI’s closing price as of June 30, 2008 are considered to have no intrinsic value. |
Weighted Average | ||||||||
Grant-Date | ||||||||
Shares | Fair Value | |||||||
Nonvested stock options at January 1, 2008 | 149,375 | $ | 2.61 | |||||
Granted | 20,000 | — | ||||||
Vested | (91,458 | ) | 2.03 | |||||
Forfeited | (4,500 | ) | 1.95 | |||||
Nonvested stock options at June 30, 2008 | 73,417 | $ | 3.28 | |||||
3. | Notes Payable: |
June 30, | December 31, | |||||||
2008 | 2007 | |||||||
Balance of notes payable outstanding from year end | $ | 13,721,172 | $ | 16,485,515 | ||||
Note payable, 8.25% interest rate with monthly payments of $1,440, due April 25, 2013, collateralized by vehicles | 68,700 | — | ||||||
Notes payable, interest rates ranging 5.39% to 6.8% with combined monthly principal payments of $42,032 plus interest, due dates ranging from June 26, 2011 to June 26, 2014, collateralized by equipment | 2,302,002 | — | ||||||
16,091,874 | 16,485,515 | |||||||
Less: current portion | (5,029,394 | ) | (4,216,498 | ) | ||||
$ | 11,062,480 | $ | 12,269,017 | |||||
E-13
Table of Contents
2009 | $ | 5,029,394 | ||
2010 | 4,394,406 | |||
2011 | 3,084,713 | |||
2012 | 1,689,947 | |||
2013 | 804,087 | |||
Subsequent to 2013 | 1,089,327 | |||
$ | 16,091,874 | |||
4. | Lines of Credit: |
E-14
Table of Contents
5. | Commitments: |
2009 | $ | 732,392 | ||
2010 | 1,106,873 | |||
2011 | 1,446,365 | |||
2012 | 1,652,615 | |||
2013 | 1,652,615 | |||
After 2013 | 3,027,180 | |||
$ | 9,618,040 | |||
6. | Statement of Cash Flows: |
E-15
Table of Contents
7. | Litigation and Claim Matters: |
E-16
Table of Contents
E-17
Table of Contents
8. | Earnings per Share: |
Six Months Ended | Three Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Weighted average common shares outstanding | 5,163,289 | 5,124,545 | 5,177,212 | 5,128,793 | ||||||||||||
Dilutive effect of: | ||||||||||||||||
Stock options and warrants | 145,138 | 180,534 | 138,804 | 185,512 | ||||||||||||
Weighted average common shares outstanding assuming dilution | 5,308,427 | 5,305,079 | 5,316,016 | 5,314,305 | ||||||||||||
9. | Income Taxes: |
10. | Subsequent Events: |
E-18
Table of Contents
E-19
Table of Contents
11. | Segment Information: |
Six Months Ended June 30, | ||||||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||||||
Construction | Materials | Construction | Materials | |||||||||||||||||||||
Services | Materials | Testing | Services | Materials | Testing | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Gross revenue | $ | 84,141 | $ | 32,861 | $ | 908 | $ | 59,062 | $ | 42,865 | $ | 587 | ||||||||||||
Intercompany revenue | — | (265 | ) | (263 | ) | — | (1,051 | ) | (163 | ) | ||||||||||||||
Cost of revenue | 76,261 | 32,580 | 721 | 54,665 | 38,407 | 690 | ||||||||||||||||||
Interest income | 331 | 105 | — | 584 | 184 | — | ||||||||||||||||||
Interest expense | 13 | 55 | — | 65 | 81 | — | ||||||||||||||||||
Depreciation and | ||||||||||||||||||||||||
amortization | 1,365 | 2,339 | 14 | 1,306 | 2,106 | 9 | ||||||||||||||||||
Income (loss) before income taxes and minority interest in consolidated subsidiary | 4,849 | (1,747 | ) | 72 | 1,384 | 2,393 | (460 | ) | ||||||||||||||||
Income tax benefit (expense) | (1,746 | ) | 629 | (27 | ) | (499 | ) | (897 | ) | 166 | ||||||||||||||
Income (loss) before minority interest in consolidated subsidiary | 3,103 | (1,118 | ) | 45 | 885 | 1,496 | (294 | ) | ||||||||||||||||
Minority interest in consolidated subsidiary | — | 341 | — | — | (701 | ) | — | |||||||||||||||||
Net income (loss) | 3,103 | (777 | ) | 45 | 885 | 795 | (294 | ) | ||||||||||||||||
Total assets | 70,486 | 45,524 | 521 | 55,692 | 49,572 | 451 |
E-20
Table of Contents
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
E-21
Table of Contents
E-22
Table of Contents
E-23
Table of Contents
E-24
Table of Contents
E-25
Table of Contents
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||||||||
Construction services | $ | 84,141 | 71.7 | % | $ | 59,062 | 58.3 | % | $ | 50,508 | 74.6 | % | $ | 36,338 | 62.0 | % | ||||||||||||||||
Construction materials | 32,596 | 27.8 | % | 41,814 | 41.3 | % | 16,905 | 25.0 | % | 22,104 | 37.7 | % | ||||||||||||||||||||
Construction materials testing | 645 | 0.5 | % | 424 | �� | 0.4 | % | 314 | 0.4 | % | 209 | 0.3 | % | |||||||||||||||||||
Total revenue | 117,382 | 100.0 | % | 101,300 | 100.0 | % | 67,727 | 100.0 | % | 58,651 | 100.0 | % | ||||||||||||||||||||
Gross profit | 8,348 | 7.1 | % | 8,751 | 8.6 | % | 4,869 | 7.2 | % | 4,798 | 8.2 | % | ||||||||||||||||||||
General and administrative expenses | 5,465 | 4.7 | % | 6,222 | 6.1 | % | 2,965 | 4.4 | % | 3,205 | 5.5 | % | ||||||||||||||||||||
Income from operations | 2,883 | 2.5 | % | 2,529 | 2.5 | % | 1,904 | 2.8 | % | 1,593 | 2.7 | % | ||||||||||||||||||||
Interest income | 436 | 0.4 | % | 768 | 0.8 | % | 171 | 0.3 | % | 399 | 0.7 | % | ||||||||||||||||||||
Interest expense | (68 | ) | (0.1 | )% | (146 | ) | (0.1 | )% | (33 | ) | 0.0 | % | (68 | ) | (0.1 | )% | ||||||||||||||||
Other income (expense) | (78 | ) | (0.1 | )% | 166 | 0.2 | % | (11 | ) | 0.0 | % | 64 | 0.1 | % | ||||||||||||||||||
Income before income taxes and minority interest in consolidated subsidiary | 3,174 | 2.7 | % | 3,317 | 3.3 | % | 2,031 | 3.0 | % | 1,988 | 3.4 | % | ||||||||||||||||||||
Income tax expense | (1,144 | ) | (1.0 | )% | (1,230 | ) | (1.2 | )% | (732 | ) | (1.1 | )% | (758 | ) | (1.3 | )% | ||||||||||||||||
Income before minority interest in consolidated subsidiary | 2,030 | 1.7 | % | 2,087 | 2.1 | % | 1,299 | 1.9 | % | 1,230 | 2.1 | % | ||||||||||||||||||||
Minority interest in consolidated subsidiary | 341 | 0.3 | % | (701 | ) | (0.7 | )% | 142 | 0.2 | % | (374 | ) | (0.6 | )% | ||||||||||||||||||
Net income | $ | 2,371 | 2.0 | % | $ | 1,386 | 1.4 | % | $ | 1,441 | 2.1 | % | $ | 856 | 1.5 | % | ||||||||||||||||
Depreciation and amortization | $ | 3,718 | 3.2 | % | $ | 3,421 | 3.4 | % | $ | 1,888 | 2.8 | % | $ | 1,777 | 3.0 | % | ||||||||||||||||
E-26
Table of Contents
E-27
Table of Contents
E-28
Table of Contents
June 30, 2008 | December 31, 2007 | |||||||
Covenant | Actual | Covenant | Actual | |||||
Requirement | Results | Requirement | Results | |||||
(Amounts in thousands) | ||||||||
Minimum Net Worth(1) | 21,156 | 37,332 | 21,156 | 34,527 | ||||
Maximum Leverage(2) | n/a | n/a | 3.0 to 1.0 | 1.58 to 1.0 | ||||
Maximun Funded Debt to EBITDA(3) | 3.0 to 1.0 | 1.11 to 1.0 | 3.0 to 1.0 | 1.19 to 1.0 | ||||
Minimum CF/CPLTD(4) | n/a | n/a | 1.25 to 1.0 | 2.58 to 1.0 |
June 30, 2008 | December 31, 2007 | |||||||||||||||
Covenant | Actual | Covenant | Actual | |||||||||||||
Requirement | Results | Requirement | Results | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Minimum CF/CPLTD(4) | n/a | n/a | 1.25 to 1.0 | 2.17 to 1.0 |
June 30, 2008 | December 31, 2007 | |||||||||||||||
Covenant | Actual | Covenant | Actual | |||||||||||||
Requirement | Results | Requirement | Results | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Minimum CF/CPLTD(4) | n/a | n/a | 1.25 to 1.0 | 2.84 to 1.0 |
(1) | Minimum Net Worth is defined as the sum of common stock, additional paid in capital, retained earnings minus goodwill and other intangible assets, all determined in accordance with United States Generally Accepted Accounting Principles. Base net worth of $14,000,000 as of September 15, 2005 plus 75% of net profit for every fiscal year thereafter, beginning December 31, 2005. | |
(2) | Leverage is defined as total liabilities to Net Worth. Measured at fiscal year end. | |
(3) | Funded Debt to EBITDA is defined as all interest bearing notes, loans and capital leases divided by the sum of net profit, interest expense, taxes, depreciation and amortization less interest income and dividends, plus or minus minority interest of consolidated subsidiary and extraordinary expenses or gains, to be determined at WFE’s sole discretion, for the previous four fiscal quarterly periods. Measured quarterly. |
E-29
Table of Contents
(4) | Minimum CF to CPLTD is defined as cash flow (the sum of net profit, depreciation and amortization, less dividends, plus or minus extraordinary expenses or gains, to be determined at WFE’s sole discretion) divided by the current portion of long term debt. Measured at fiscal year end. |
n/a | Not required to be calculated at the interim period. |
Six Months Ended June 30, | ||||||||
2008 | 2007 | |||||||
(Unaudited) | ||||||||
Cash flows provided by operating activities | $ | 13,241,971 | $ | 9,271,509 | ||||
Cash flows used in investing activities | (998,063 | ) | (8,218,252 | ) | ||||
Cash flows used in financing activities | (2,118,878 | ) | (2,737,706 | ) |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
E-30
Table of Contents
Item 4T. | Controls and Procedures |
(a) | Evaluation of Disclosure Controls and Procedures |
(b) | Management’s Report on Internal Control over Financial Reporting |
(c) | Changes in Internal Control over Financial Reporting |
Item 1. | Legal Proceedings |
E-31
Table of Contents
Item 1A. | Risk Factors |
E-32
Table of Contents
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Item 3. | Defaults Upon Senior Securities |
Item 4. | Submission of Matters to a Vote of Security Holders |
E-33
Table of Contents
Item 5. | Other Information |
Item 6. | Exhibits |
2 | .1 | Agreement and Plan of Merger, dated July 28, 2008, by and among Meadow Valley Corporation, Phoenix Parent Corp. and Phoenix Merger Sub, Inc. (incorporated by reference to exhibit number 2.1 of theForm 8-K filed by Meadow Valley Corporation with the SEC on July 28, 2008) | ||
4 | .2 | Amendment to Rights Agreement, dated as of July 28, 2008, by and among Meadow Valley Corporation and Corporate Stock Transfer, Inc. (incorporated by reference to exhibit number 4.1 of theForm 8-K filed by Meadow Valley Corporation with the SEC on July 28, 2008) | ||
31 | .1 | Certification of Chief Executive Officer Pursuant toRules 13a-14 and 15d-14 of the Securities Exchange Act of 1934 | ||
31 | .2 | Certification of Chief Financial Officer Pursuant toRules 13a-14 and 15d-14 of the Securities Exchange Act of 1934 | ||
32 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
E-34
Table of Contents
(Registrant)
By | /s/ Bradley E. Larson |
By | /s/ David D. Doty |
E-35
Table of Contents
Meadow Valley Corporation | ||
4602 East Thomas Road | ||
Phoenix, Arizona 85018 | Proxy | |
Table of Contents
COMPANY | ||
# |
• | Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week, until 5:00 p.m. (ET) on , , 2008. | ||
• | Please have your proxy card and the last four digits of your Social Security Number or Tax Identification Number available. Follow the instructions the voice provides you. |
• | Use the Internet to vote your proxy 24 hours a day, 7 days a week, until 5:00 p.m. (ET) on , , 2008. | ||
• | Please have your proxy card and the last four digits of your Social Security Number or Tax Identification Number available. Follow the instructions to obtain your records and create an electronic ballot. |
Table of Contents
1. | Proposal to approve the Agreement and Plan of Merger, dated as of July 28, 2008, by and among Meadow Valley Corporation, Phoenix Parent Corp. and Phoenix Merger Sub, Inc., as it may be amended from time to time. | o For | o Against | o Abstain | ||||
2. | Motion to adjourn the Special Meeting to a later date, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to approve proposal number 1. | o For | o Against | o Abstain |
Address Change? Mark Boxo and indicate | ||
changes below: | ||
Please sign exactly as your name(s) appears on the proxy. If shares are held in joint tenancy, all persons must sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy.
Table of Contents
1200 Wall Street West, 3rd Floor
Lyndhurst, New Jersey 07071
Toll-Free: 1-866-721-1324