SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ________ to ________
Commission File Number: 1-7525
The Goldfield Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware 88-0031580
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
100 Rialto Place, Suite 500
Melbourne, Florida 32901
(Address of principal executive offices) (Zip Code)
(407) 724-1700
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
Common Stock, which registered
Par Value $.10 per share American Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
On February 22, 1999, the aggregate market value (based upon the closing
price on the American Stock Exchange, Inc.) of the common stock held by
nonaffiliates was approximately $6.6 million.
As of February 22, 1999, 26,854,748 shares of the Registrant's common
stock were outstanding.
Documents Incorporated by Reference
Document Where Incorporated
Proxy Statement for 1999 Annual Meeting Part III
PART I
Item 1. Business.
The Goldfield Corporation, incorporated in Wyoming in 1906 and subsequently
reincorporated in Delaware in 1968, is engaged in electrical construction
and mining activities. Since January 1, 1996, the electrical construction
segment has included the construction of fiber optic communication systems.
Unless the context otherwise requires, the terms "Goldfield" and "the
Company" as used herein mean The Goldfield Corporation and its consolidated
subsidiaries. For information concerning sales, operating profits and
identifiable assets by business segment, see note 15 of notes to
consolidated financial statements.
Electrical Construction
The Company, through its subsidiary, Southeast Power Corporation, a Florida
corporation ("Southeast Power"), is engaged in the construction and
maintenance of electrical facilities for utilities and industrial customers
in the southeastern United States. As a result of an acquisition effected
January 1, 1996, electrical construction operations now include, through
the Company's subsidiary Fiber Optic Services, Inc., a Florida
corporation, ("Fiber Optic Services"), the construction of fiber optic
communication systems throughout the United States.
The Company's construction business through Southeast Power includes the
construction of transmission lines, distribution systems and substations
and other electrical installation services for utility systems and
industrial and specialty projects. Fiber Optic Services provides various
construction services, including installation of aerial and underground
cable systems, conduit systems and the splicing, testing and documentation
of optical fibers. Fiber Optic Services performs these services primarily
for power utilities and telecommunications companies pursuant to fixed and
unit price contracts.
It is the Company's policy to commit itself only to the amount of work it
believes it can properly supervise, equip and complete to the customer's
satisfaction and schedule. As a result of this policy and the magnitude of
some of the construction projects undertaken by the Company, a substantial
portion of the Company's annual revenue is derived from a relatively small
number of customers, the specific identity of which vary from year to year.
See note 15 of notes to consolidated financial statements.
Construction is customarily performed pursuant to the plans and
specifications of customers. The Company generally supplies the management,
labor, equipment, tools and, except with respect to some utility customers,
the materials necessary to construct a project. Contracts may extend beyond
one year, although most projects are completed within 90 days.
The electrical construction business is highly competitive. Certain of the
Company's actual or potential competitors have substantially greater
financial resources available to them. A portion of the electrical
construction work requires payment and performance bonds. The Company has
adequate bonding availability.
The Company enters into contracts on the basis of either competitive
bidding or direct negotiations with its customers. Competitively bid
contracts account for a majority of the Company's construction revenues.
Although there is considerable variation in the terms of the contracts
undertaken, such contracts typically involve either lump sum or unit price
contracts, pursuant to which the Company agrees to do the work for a fixed
amount.
The magnitude and duration of projects undertaken by the Company vary,
which may result in substantial fluctuations in its backlog from time to
time. At February 1, 1999, the approximate value of uncompleted contracts
was $7,580,000, compared to $1,500,000 at March 1, 1998 and $4,000,000
at February 14, 1997.
As of February 5, 1999, electrical construction had a staff of 16 salaried
employees, including executive officers, division managers, superinten-
dents, project managers and administrative personnel. In addition, at such
date, electrical construction had 94 hourly-rated employees, none of whom
are affiliated with any trade or labor organization. The number of hourly-
rated employees fluctuates depending upon the number and size of projects
under construction at any particular time. The Company believes that the
experience and continuity of its employees has been an important factor in
its success. Management of the Company believes its relations with both
its salaried and hourly rated employees are good.
The Company is subject to the authority of state and municipal regulatory
bodies concerned with the licensing of contractors. The Company believes
that it is in compliance with such licensing requirements in all
jurisdictions in which it conducts its business.
The administrative and maintenance facilities of Southeast Power are
located on a 13-acre tract of land near Titusville, Florida, which is owned
by the Company. The office building has 3,744 feet of floor space and the
shop and buildings contain approximately 17,000 feet of floor space.
The administrative and maintenance facility of Fiber Optic Services is
located in Largo, Florida, where the Company leases approximately 10,100
square feet of space at an average annual rental rate of $48,800. This
lease, which expires in March 2001, may be renewed for two additional two
year terms.
Mining
The Company, through its subsidiaries, explores for, mines, processes and
markets industrial minerals, aggregate products and base and precious
metals from properties located in New Mexico.
The Company does not consider itself to be a significant factor in the
mining industry. The Company competes with other companies in the search
for and the acquisition of mining properties and their exploration and
development. Many of these competitors have substantially greater financial
resources than the Company, which may give them certain competitive
advantages, especially with respect to projects requiring large amounts of
capital.
The Company's mining operations are subject to the jurisdiction of federal
and state governmental authorities which have responsibility for
environmental matters such as air and water quality, the promotion of
occupational safety and mine reclamation. The Company has in the past
reclaimed mining areas, tailing impoundments and other associated
disturbances and expects to continue to do so in the future. Costs of such
reclamation are charged against earnings as incurred. Future costs or
capital expenditures relating to the protection of the environment are not
expected to have a material adverse effect on the Company's earnings. The
Company believes that compliance with mine reclamation laws will not
adversely affect the competitive position of its operations since
competitors in the mining industry are subject to the same laws. The
Company holds federal and state environmental permits and licenses required
for the operation of its mining activities.
St. Cloud - Industrial Minerals
St. Cloud Mining Company, a Florida corporation ("St. Cloud"), is a
wholly-owned subsidiary of the Company and operates the St. Cloud mill and
mining properties in Sierra County, New Mexico. The St. Cloud mill and
mining properties encompass approximately 1,500 acres which are estimated
to contain several million tons of geologic reserves of natural zeolites,
a special type of volcanic ash (clinoptilolite).
The clinoptilolite mineral occurs in flat lying beds and is extracted by
conventional open pit mining methods. At the St. Cloud mill, the
clinoptilolite minerals are crushed, dried, and sized without beneficiation
and shipped in bulk, packaged or modified to customer's specifications.
Most deliveries are by contract motor carriers to manufacturers, brokers,
or independent sales agents who incorporate zeolites into consumer products
or for specific industrial uses.
The zeolite products were originally sold beginning in 1990 as animal feed
supplements. Zeolite markets now include cat litter, industrial fillers
and absorbents, air and water filtration media, environmental products and
soil conditioners. The zeolite product is also used in other applications
where ammonia control or specific cation exchange capacity is required.
In 1998, St. Cloud sold 14,095 tons of natural zeolite, compared to 15,013
tons and 14,456 tons in 1997 and 1996, respectively. St. Cloud has made
several modifications to its zeolite operation, including the addition of
cation exchange capacity for added value products, drying, warehousing,
bagging, blending and additional classification capabilities to expand
markets for the products.
At February 5, 1999, St. Cloud had a total of 23 full-time employees,
none of whom are affiliated with trade or labor organizations.
St. Cloud - Base and Precious Metals Mining
Since 1968, the Company has been involved in the exploration, mining and
milling of silver, copper and gold ores at the St. Cloud property.
Production commenced at St. Cloud in 1981. However, surface and underground
mining was halted during the third quarter of 1991 and the first quarter of
1992, respectively, due to declining metal prices and mine grades. St.
Cloud's viability is sensitive to the future price of base and precious
metals, particularly silver. Significant portions of the Company's
investment in St. Cloud's silver mines, processing facilities and equipment
were written-down at the end of 1993.
St. Cloud's principal metal mining properties are located within the Gila
National Forest in the Chloride Mining District in New Mexico and encompass
approximately 250 acres in two main claim blocks.
Several veins are known to exist in the Chloride Mining District and may
have exploration potential. The Company's two main deposits, the St. Cloud
and U. S. Treasury mines, have been partially mined and explored at depths
up to 1,000 feet from declined ramps utilizing rubber-tired equipment. St.
Cloud currently estimates their indicated reserves to be approximately
349,500 tons averaging 0.70% copper, 5.95 ounces silver per ton and 0.031
ounces gold per ton. Based on current metal prices, the Company believes
that the above-estimated reserves are not, at present, economically
recoverable.
During 1994, the Company implemented a plan to refocus mining operations on
the production of industrial minerals. As a result, mineralized siliceous
converter flux sales at St. Cloud were virtually discontinued. Subsequent
to the first quarter of 1992, the only base and precious metal mining
activity at St. Cloud was the sale of stockpiled ore of mineralized
siliceous converter flux. No significant amount of stockpiled ore remains
at St. Cloud. There have been no such sales since 1994.
As part of the industrial mineral operations, as well as the Company's
construction aggregate operations described below, the Company provides
off-site construction services utilizing existing mining personnel and
equipment. Such construction projects have included restoring an endangered
species habitat, closure of a municipal landfill, and providing
construction aggregates for road projects.
Management of the Company reviews the net carrying value of all mining
facilities on a periodic basis to determine, among other factors, (1) the
net realizable value of each major project, (2) the ability of the Company
to fund all care, maintenance and standby costs, (3) the status and usage
of the assets while in a standby mode, to determine whether some form of
amortization is appropriate and (4) current projections of metal prices
that affect the decision to reopen or make a disposition of the Company's
assets.
Lordsburg
In 1990, The Lordsburg Mining Company, a Florida corporation and a wholly-
owned subsidiary of the Company ("Lordsburg"), entered into a venture
agreement with Federal Resources Corporation ("Federal") to explore,
develop and mine deposits near the town of Lordsburg in southwestern New
Mexico. Under this operating agreement, Federal conveyed and assigned to
the venture, The Lordsburg Mining Company, approximately 12,000 acres of
patented and unpatented mining claims which include certain mining claims
leased in the Lordsburg Mining District by Federal, and existing milling
facilities, buildings and other personal property located on the claims.
In April 1994, the Company acquired Federal's 50% interest in the Lordsburg
properties for $75,000. Prior to the acquisition of Federal's interest,
Lordsburg did not produce sufficient revenue over the related expenses to
permit a net proceeds distribution to Lordsburg and Federal.
During 1993, a large number of unpatented claims were dropped due to
increased holding costs imposed by the Federal government. Most of the
important mining and exploration potential is on patented property and was
retained. Indicated reserves are estimated to be 103,800 tons averaging
0.53% copper, 1.0 ounces silver per ton and 0.097 ounces gold per ton.
Based on current metal prices and operating costs, the above estimated
reserves are not, at present, economically recoverable.
Production from underground mining, which was suspended in February 1994,
had previously been intermittent due to low ore grade and inconsistent
smelter demand. The ore produced from the mine was used by nearby copper
smelters as precious metal bearing siliceous flux. Future demand for
underground ores cannot be determined at this time.
Although the Company has continued production of construction aggregates at
Lordsburg, a final decision with respect to the future operations at
Lordsburg has not been reached.
Lordsburg sold 16,547 tons of construction aggregate material in 1998,
compared to 24,553 tons and 14,070 tons in 1997 and 1996, respectively.
Lordsburg sold 17,190 tons of barren, siliceous flux to copper smelters in
1996. There have been no barren, siliceous flux sales since 1996.
At February 5, 1999, Lordsburg had a total of three full-time employees in
New Mexico, none of whom are affiliated with trade or labor organizations.
San Pedro
In April 1993, the capital stock of The San Pedro Mining Corporation ("San
Pedro" a then wholly-owned subsidiary of the Company), was sold for
$1,220,000, of which $50,000 in cash was paid at closing with the balance
of the purchase price represented by a promissory note payable to the
Company in equal monthly principal installments of $15,000 plus interest
through October 1999. Effective December 23, 1997, terms of the note and
mortgage were modified to defer principal payments to November 1998. The
purchaser failed to make the October 1998 scheduled interest payment and
on-going discussions with the debtor indicate that collection of the
principal balance is doubtful. Under the circumstances, management has
determined the note receivable to be an impaired asset and has written off
the unpaid balance of the note. Future discounted cash flows have been
estimated by management to be zero. The impairment loss of $258,538 has
been separately identified as a component of continuing operations. The
loss, which was recognized in the third quarter of 1998, has been included
in the Company's operating results from mining.
Royalty
In connection with a coal mining property in Harlan, Kentucky, formerly
owned by the Company, the Company retains a coal royalty which provides for
a royalty between 1 1/2% to 3% per year, originally to be paid until 2002.
The original royalty agreement provided that the Company was to receive
annual minimum royalties in the amount of $150,000. Effective February 14,
1997, the agreement was amended to provide for a payment of $20,000 and
monthly minimum payments of $5,000 until all minimum royalties are
collected. The expiration date of the royalty agreement was extended
beyond 2002 to the extent necessary to permit payments of the $150,000 per
year minimum royalties. Since February 1996, Great Western Coal, Inc.
("Great Western"), the owner of the coal property, has generally failed to
make the required royalty payments. On July 1, 1998, the Company filed
suit against Great Western for breach of contract. Under the circumstances,
management has determined the royalty interest to be an impaired asset.
The fair value of the Harlan coal royalty has been determined by management
to be zero as there is no open market for the sale of this royalty and
future discounted cash flows have been estimated by management to be zero.
The impairment loss of $95,618 has been separately identified as a
component of continuing operations. The loss, which was recognized in the
second quarter of 1998, has been included in the Company's operating
results from mining.
Item 2. Properties.
For information with respect to the principal properties and equipment
utilized in the Company's mining and electrical construction operations,
see "Item 1. Business."
The Company's principal office is located in Melbourne, Florida, where the
Company leases 4,503 square feet of space at an annual rental rate of
$64,978. The lease, which expires in January 2001, may be renewed for one
additional three-year term.
Item 3. Legal Proceedings.
There are no material pending legal proceedings, other than routine
litigation incidental to the business of the Company, to which the Company
or any of its subsidiaries is a party or of which any of their property is
subject.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the fourth
quarter of 1998.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The Common Stock of the Company is traded on the American Stock Exchange,
Inc. under the symbol GV. The following table shows the reported high and
low sales price at which the Common Stock of the Company was traded in 1998
and 1997:
1998 1997
High Low High Low
First Quarter 7/16 5/16 3/8 1/4
Second Quarter 3/8 5/16 3/8 1/4
Third Quarter 7/16 1/4 7/16 1/4
Fourth Quarter 5/16 3/16 1/2 5/16
As of February 22, 1999, the Company had approximately 18,970 holders of
record.
No cash dividends have been paid by the Company on its Common Stock since
1933, and it is not expected that the Company will pay any cash dividends
on its Common Stock in the immediate future.
Item 6. Selected Financial Data.
The following table sets forth summary consolidated financial information
of the Company for each of the years in the five-year period ended December
31, 1998:
Years Ended December 31,
1998 1997 1996 1995 1994
(in thousands except per share amounts)
Statements of Operations
Total revenues $16,782 $15,974 $13,544 $13,328 $13,394
Net (loss) income (610) 414 (338) (678) (1,101)
(Loss) earnings
per share of
common stock (0.02) 0.01 (0.01) (0.03) (0.04)
Balance Sheets
Total assets 14,213 13,967 13,652 13,847 14,458
Working capital 6,144 6,371 5,934 6,241 7,511
Stockholders' equity 12,200 12,834 12,443 12,805 13,506
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
Net (Loss) Income
The Company incurred a net loss of $609,630 for the year ended December 31,
1998, compared to net income of $413,971 for the year ended December 31,
1997 and a net loss of $337,838 for the year ended December 31, 1996. The
net loss for the year ended December 31, 1998 included a charge of $354,156
for impairment losses related to the Harlan coal royalty and the San Pedro
mine note receivable as discussed in Note 5 to the consolidated financial
statements. Net (loss) income for the years ended December 31, 1998 and
1997, included income tax expense of $23,322 and $340,731, respectively.
There was no tax expense for the year ended December 31, 1996.
Revenues
Total revenues in 1998 were $16,781,913, compared to $15,974,357 and
$13,544,392 in 1997 and 1996, respectively. The increase in revenues was
primarily attributable to a higher level of activity in electrical
construction operations.
Electrical construction revenue increased by 5% in 1998 to $14,447,808 from
$13,742,723 for 1997 and $11,628,898 in 1996. Electrical construction
revenue includes the results of the subsidiary acquired in January 1996,
Fiber Optic Services, Inc. which had revenue, net of intercompany
elimination, of $805,783 for 1998, compared to $1,114,954 for 1997 and
$788,690 for 1996.
Revenue from mining operations increased by 12% to $2,041,259 for the year
ended 1998 from $1,814,583 for the year ended 1997. The increase in
revenue from mining for 1998 was primarily a result of new off-site
construction contracts utilizing existing mining personnel and equipment.
In 1996, revenue from mining operations was $1,506,797.
Operating Results
Electrical construction operations had an operating profit of $1,232,711
during 1998, compared to operating profits of $1,715,608 in 1997 and
$578,265 in 1996. The decrease in operating results in 1998 was primarily
due to a decrease in the level of operations and profit margins of Fiber
Optic Services and to losses from a single unit price contract. The varying
magnitude and duration of electrical construction projects may result in
substantial fluctuation in the Company's backlog from time to time. At
February 1, 1999, the approximate value of uncompleted contracts was
$7,580,000, compared to $1,500,000 at March 1, 1998.
The operating loss from mining operations was $656,538 for 1998, compared
to operating losses of $82,003 and $179,542 in 1997 and 1996, respectively.
The decrease in operating results from mining operations in 1998 was due
primarily to the charge of $354,156 for impairment losses relating to the
Harlan coal royalty and the San Pedro mine note receivable and to losses
relating to an off-site mining construction contract, which was completed
in December 1998. Operating (loss) profit includes royalty income and
depreciation expense.
Other Income
Other income for 1998 was $292,846, compared to $407,051 and $388,697 for
1997 and 1996, respectively. The decrease in other income for 1998 was
primarily a result of lower interest income.
Costs and Expenses
Total costs and expenses and the components thereof, increased to
$17,368,221 for 1998 from $15,219,655 in 1997 and $13,882,230 in 1996 as a
result of increased electrical construction costs, increased off-site
mining construction costs and the charge for impairment losses mentioned
above.
Electrical construction costs were $12,522,747, $11,361,069 and $10,482,506
in 1998, 1997 and 1996, respectively. The increase in costs for 1998 was
attributable to a higher level of operations.
Mining costs were $2,029,940 for 1998 as compared to $1,565,801 in 1997 and
$1,388,150 in 1996. The increase in the 1998 period was primarily a result
of an off-site mining construction contract.
Depreciation and amortization was $1,072,876 in 1998, compared to
$1,058,403 in 1997 and $916,726 in 1996.
General corporate expenses of the Company increased to $1,455,327 in 1998,
compared to $1,285,954 in 1997 and $1,125,348 in 1996. The 1998 period
included increases in various categories including consulting expenses
relating to the implementation of new computers and accounting software.
Liquidity and Capital Resources
Cash and cash equivalents at December 31, 1998 were $2,616,465 as compared
to $4,397,281 as of December 31, 1997. Working capital at December 31,
1998 was $6,143,737, compared to $6,371,043 at December 31, 1997. However,
the Company's ratio of current assets to current liabilities declined to
4.1 to 1 at December 31, 1998, from 7.3 to 1 at December 31, 1997 because
of the higher level of accounts payable and accrued liabilities at
December 31, 1998.
The Company paid cash dividends on its Series A Preferred Stock in the
amount of $23,758 in each of the years ended December 31, 1998, 1997 and
1996. No cash dividends have been paid by the Company on its Common Stock
since 1933, and it is not expected that the Company will pay any cash
dividends on its Common Stock in the immediate future.
Pursuant to an unsecured line of credit agreement between Southeast Power
and SunTrust Bank of Central Florida, N.A. (guaranteed by the Company),
Southeast Power may borrow up to $1,000,000 at the bank's prime rate of
interest. This credit line expires April 30, 1999, at which time the
Company expects to renew it for an additional year. No borrowings were
outstanding under this line of credit during the three years ended December
31, 1998. However, since 1996, $100,000 of this line of credit has been
reserved for a standby letter of credit.
The Company's capital expenditures for the year ended December 31, 1998
decreased to $1,193,684 from $1,450,914 for 1997. Capital expenditures
in 1999 are expected to be approximately $1,100,000, which the Company
expects to finance through existing credit facilities or cash reserves.
Year 2000 Compliance
Background
In the past, many computers, software programs, and other information
technology ("IT systems"), as well as other equipment relying on
microprocessors or similar circuitry ("non-IT systems"), were written or
designed using two digits, rather than four, to define the applicable
year. As a result, date-sensitive systems (both IT systems and non-IT
systems) may recognize a date identified with "00" as the year 1900, rather
than the year 2000. This is generally described as the Year 2000 issue.
If this situation occurs, the potential exists for system failures or
miscalculations, which could impact business operations.
The Securities and Exchange Commission ("SEC") has asked public companies
to disclose four general types of information related to Year 2000
preparedness: the Company's state of readiness, costs, risks, and
contingency plans. See SEC Release No. 33-7558 (July 29, 1998).
Accordingly, the Company has included the following discussion in this
report, in addition to the Year 2000 disclosures previously filed with the
SEC.
State of Readiness
The Company believes that it has identified all significant IT systems and
non-IT systems that require modification in connection with Year 2000
issues. Internal and external resources have been used and are continuing
to be used, to make the required modifications and test Year 2000
readiness. The required modifications are under way. The Company plans on
completing the modifications to and testing of all significant systems by
July 1999.
In addition, the Company has been communicating with customers, suppliers,
banks, vendors and others with whom it does significant business
(collectively, its "business partners") to determine their Year 2000
readiness and the extent to which the Company is vulnerable to any other
organization's Year 2000 issues. Based on these communications and related
responses, the Company is monitoring the Year 2000 preparations and state
of readiness of its business partners. Although the Company is not aware
of any significant Year 2000 problems with its business partners, there can
be no guarantee that the systems of other organizations on which the
Company's systems rely will be converted in a timely manner, or that a
failure to convert by another organization, or a conversion that is
incompatible with the Company's systems, would not have a material adverse
effect on the Company.
Costs
The total cost to the Company of Year 2000 activities has not been and is
not anticipated to be material to its financial position or results of
operations in any given year. The total costs to the Company of addressing
Year 2000 issues are estimated to be less than $10,000. These total costs,
as well as the date on which the Company plans to complete the Year 2000
modification and testing processes, are based on management's best
estimates. However, there can be no guarantee that these estimates will be
achieved, and actual results could differ from those estimates.
Risks
The Company utilizes IT systems and non-IT systems in various aspects of
its business. Year 2000 problems in some of the Company's systems could
possibly disrupt operations, but the Company does not expect that any such
disruption would have a material adverse impact on the Company's operating
results.
The Company is also exposed to the risk that one or more of its customers,
suppliers or vendors could experience Year 2000 problems that could impact
the ability of such customers to transact business or such suppliers or
vendors to provide goods and services. Although this risk is lessened by
the availability of alternative suppliers, the disruption of certain
services, such as utilities, could, depending upon the extent of the
disruption, potentially have a material adverse impact on the Company's
operations.
Contingency Plans
The Company is in the process of developing contingency plans for the
Company's IT systems and non-IT systems requiring Year 2000 modification.
In addition, the Company is developing contingency plans to deal with the
possibility that some suppliers or vendors might fail to provide goods and
services on a timely basis as a result of Year 2000 problems. These
contingency plans will include the identification, acquisition and/or
preparation of backup systems, suppliers and vendors.
Item 8. Financial Statements and Supplementary Data.
Independent Auditors' Report
The Shareholders and Board of Directors
The Goldfield Corporation:
We have audited the consolidated financial statements of The Goldfield
Corporation and subsidiaries as listed in the accompanying index. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The
Goldfield Corporation and subsidiaries at December 31, 1998 and 1997, and
the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1998, in conformity with
generally accepted accounting principles.
/s/
KPMG LLP
Orlando, Florida
February 19, 1999
THE GOLDFIELD CORPORATION
and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
1998 1997
ASSETS
Current assets
Cash and cash equivalents $ 2,616,465 $ 4,397,281
Accounts receivable and accrued billings 3,133,855 1,829,644
Current portion of notes receivable (Note 5) 123,393 78,946
Inventories (Note 2) 346,799 218,502
Costs and estimated earnings in excess of
billings on uncompleted contracts (Note 3) 1,793,119 791,360
Prepaid expenses and other current assets 83,428 74,368
Total current assets 8,097,059 7,390,101
Property, buildings and equipment, net (Note 4) 4,450,256 4,510,158
Notes receivable, less current portion (Note 5) 293,956 672,576
Deferred charges and other assets
Deferred income taxes (Note 6) 548,000 548,000
Land held for sale 52,448 --
Coal royalty at cost, net of accumulated
amortization of $210,793 in 1997 (Note 5) -- 108,657
Cash surrender value of life insurance (Note 7) 771,430 737,050
Total deferred charges and other assets 1,371,878 1,393,707
Total assets $14,213,149 $13,966,542
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities
(Note 8) $ 1,905,457 $ 917,279
Billings in excess of costs and estimated
earnings on uncompleted contracts (Note 3) 13,769 73,048
Current portion of deferred gain on
installment sales 10,774 --
Income taxes payable (Note 6) 23,322 28,731
Total current liabilities 1,953,322 1,019,058
Deferred gain on installment sales,
less current portion 59,596 113,865
Total liabilities 2,012,918 1,132,923
Stockholders' equity
Preferred stock, $1 par value per share,
5,000,000 shares authorized; issued and
outstanding 339,407 shares of Series A
7% voting cumulative convertible stock
(Note 9) 339,407 339,407
Common stock, $.10 par value per share,
40,000,000 shares authorized; issued
26,872,106 shares (Notes 9, 10 and 11) 2,687,211 2,687,211
Capital surplus 18,369,860 18,369,860
Accumulated deficit (9,177,527) (8,544,139)
Total 12,218,951 12,852,339
Less common stock in treasury, 17,358
shares, at cost 18,720 18,720
Total stockholders' equity 12,200,231 12,833,619
Total liabilities and stockholders' equity $14,213,149 $13,966,542
See accompanying notes to consolidated financial statements
THE GOLDFIELD CORPORATION
and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
1998 1997 1996
Revenue
Electrical construction $14,447,808 $13,742,723 $11,628,898
Mining 2,041,259 1,814,583 1,506,797
Royalty income -- 10,000 20,000
Other income, net (Note 12) 292,846 407,051 388,697
Total revenue 16,781,913 15,974,357 13,544,392
Costs and expenses
Electrical construction 12,522,747 11,361,069 10,482,506
Mining 2,029,940 1,565,801 1,388,150
Depreciation and amortization 1,072,876 1,058,403 916,726
Impairment losses (Note 5) 354,156 -- --
General and administrative 1,388,502 1,234,382 1,094,848
Total costs and expenses 17,368,221 15,219,655 13,882,230
(Loss) income from operations
before income taxes (586,308) 754,702 (337,838)
Income taxes (Note 6) 23,322 340,731 --
Net (loss) income (609,630) 413,971 (337,838)
Preferred stock dividends 23,758 23,758 23,758
(Loss) income available to
common stockholders $ (633,388) $ 390,213 $ (361,596)
Basic and diluted (loss)
earnings per share of
common stock (Note 11) $ (0.02) $ 0.01 $ (0.01)
Weighted average number of
common shares outstanding 26,854,748 26,854,748 26,854,748
See accompanying notes to consolidated financial statements
THE GOLDFIELD CORPORATION
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
1998 1997 1996
Cash flows from operating activities
Net (loss) income $ (609,630) $ 413,971 $ (337,838)
Adjustments to reconcile net (loss)
income to net cash (used by)
provided from operating activities
Depreciation and amortization 1,072,876 1,058,403 916,726
Impairment losses 354,156 -- --
Deferred income taxes -- 312,000 --
Loss (gain) on sale of property
and equipment 32,215 (14,499) (32,288)
Cash provided by (used by) changes in
Accounts receivable and accrued
billings (1,304,211) (409,374) 117,769
Inventories (128,297) 9,547 (62,441)
Costs and estimated earnings in
excess of billings on
uncompleted contracts (1,001,759) (191,058) 38,884
Prepaid expenses and other
current assets (9,060) (10,574) 98,676
Land held for sale (52,448) -- --
Cash surrender value of life
insurance (34,380) (104,311) (117,240)
Accounts payable and accrued
liabilities 988,553 (37,087) 134,519
Billings in excess of costs
and estimated earnings on
uncompleted contracts (59,279) (1,023) 38,920
Deferred gain on installment sales 52,592 (66,535) (6,360)
Income taxes payable (5,409) 28,731 --
Net cash (used by) provided
from operating activities (704,081) 988,191 789,327
Cash flows from investing activities
Proceeds from the disposal of
property and equipment 161,534 110,215 46,658
Loans granted (245,145) (139,969) (113,878)
Collections from notes receivable 224,318 303,318 200,445
Purchases of property and equipment (1,193,684) (1,450,914) (563,268)
Payments made to acquire fixed assets
of Fiber Optic Services -- -- (173,138)
Net cash used by investing
activities (1,052,977) (1,177,350) (603,181)
Cash flows from financing activities
Payments of preferred stock dividends (23,758) (23,758) (23,758)
Net (decrease) increase in cash and
cash equivalents (1,780,816) (212,917) 162,388
Cash and cash equivalents at
beginning of period 4,397,281 4,610,198 4,447,810
Cash and cash equivalents at end
of period $2,616,465 $4,397,281 $4,610,198
Supplemental disclosure of cash
flow information
Income taxes paid $ 28,731 $ -- $ --
See accompanying notes to consolidated financial statements
THE GOLDFIELD CORPORATION
and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31,
1998 1997 1996
STOCKHOLDERS' EQUITY
ACCUMULATED Beginning balance $(8,544,139) $(8,934,352) $(8,572,756)
DEFICIT Net (loss) income (609,630) 413,971 (337,838)
Cash dividends
Series A Stock
(per share: 7%) (23,758) (23,758) (23,758)
Ending balance (9,177,527) (8,544,139) (8,934,352)
PREFERRED Beginning and
STOCK SERIES A ending balance 339,407 339,407 339,407
COMMON STOCK Beginning and
ending balance 2,687,211 2,687,211 2,687,211
CAPITAL Beginning and
SURPLUS ending balance 18,369,860 18,369,860 18,369,860
TREASURY STOCK Beginning and
ending balance (18,720) (18,720) (18,720)
Total consolidated
stockholders'
equity $12,200,231 $12,833,619 $12,443,406
SHARES OF CAPITAL STOCK ISSUED
PREFERRED Beginning and
STOCK SERIES A ending balance 339,407 339,407 339,407
COMMON STOCK Beginning and
ending balance 26,872,106 26,872,106 26,872,106
TREASURY STOCK Beginning and
ending balance 17,358 17,358 17,358
See accompanying notes to consolidated financial statements
THE GOLDFIELD CORPORATION
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
Note 1 - Summary of Significant Accounting Policies
Basis of Financial Statement Presentation - The accompanying consolidated
financial statements include the accounts of The Goldfield Corporation
("Parent") and its subsidiaries (collectively, "the Company"), all of which
are wholly-owned. All significant intercompany balances and transactions
have been eliminated.
Nature of Operations - The Company's principal lines of business are
electrical construction and the mining of industrial minerals as well as
base and precious metals. The principal market for the Company's
electrical construction operation is electric utilities in the
southeastern United States. The principal market for the Company's mining
operations is purchasers of zeolite products throughout the United States.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be
cash equivalents.
Inventories - Inventories are valued at the lower of cost or market. Cost
is determined by the first-in, first-out method. Costs associated with
extraction and milling or production activities are inventoried and valued
at lower of cost or estimated final smelter settlement or net sales (net
realizable value).
Property, Buildings, Equipment and Depreciation - Property, buildings and
equipment are stated at cost. The Company provides depreciation for
financial reporting purposes over the estimated useful lives of fixed
assets using the straight-line and units-of-production methods.
Coal Royalty - The original Harlan coal royalty agreement provided that the
Company was to receive annual minimum royalties in the amount of $150,000.
During the year ended December 31, 1996, the Company did not receive any
1996 minimum royalty payments. Effective February 14, 1997, the agreement
was amended to provide for a payment of $20,000 and monthly minimum
payments of $5,000 until all minimum royalties are collected. Such annual
minimum royalties are recognized when realization of the income is
assured. On January 9, 1998, the Company declared a default in the Harlan
coal royalty agreement for failure to make required monthly payments. The
Company has brought court action to enforce its rights under the agreement.
The Company has reduced the carrying value of the royalty to zero during
1998.
Mining Revenues - Zeolite sales are recorded upon delivery. Other sales
are recorded in the month of delivery. Recorded values are adjusted
periodically and upon final settlement.
Mine Exploration and Development - Exploration costs and normal
development costs at operating mines are charged to operations as
incurred.
Long-Term Electrical Contracts - Revenues are earned under long-term
fixed price contracts and units of delivery contracts. Revenues from
units of delivery contracts are recorded as the service is performed.
For completed units of delivery contracts, the revenue is based on actual
billings. For uncompleted units of delivery contracts the revenue is
based on actual labor hours incurred and estimated final billing rates.
Revenues from long-term fixed price construction contracts are recognized
on the percentage-of-completion method measured by comparing the costs
incurred to date to the estimated total costs to be incurred for each
contract. The asset, "costs and estimated earnings in excess of
billings on uncompleted contracts" represents revenues recognized in
excess of amounts billed. The liability, "billings in
excess of costs and estimated earnings on uncompleted contracts"
represents billings in excess of revenue recognized.
Contract costs include all direct material, direct labor, subcontractor
costs and other indirect costs related to contract performance, such as
supplies, tools and repairs. General and administrative costs are charged
to expense as incurred. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined.
Changes in job performance, job conditions, estimated profitability and
final contract settlements may result in revisions to costs and income and
are recognized in the period in which the revisions are determined.
Income Taxes - The Company accounts for income taxes using the asset and
liability method. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Use of Estimates - Management of the Company has made a number of estimates
and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
Financial Instruments Fair Value, Concentration of Business and Credit
Risks - The carrying amount reported in the balance sheet for cash and cash
equivalents, accounts receivable and accrued billings, accounts payable and
accrued liabilities approximates fair value because of the immediate or
short-term maturity of these financial instruments. The fair value of
notes receivable is considered by management to approximate carrying
value. Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable,
accrued billings and retainage in the amount of $1,849,115 at December 31,
1998 due from electrical utilities pursuant to contract terms. The Company
considers these electrical utility customers to be creditworthy.
Reclassifications Certain amounts in 1997 and 1996 have been reclassified
to conform to the 1998 presentation.
Note 2 Inventories
Inventories at December 31, consisted of:
1998 1997
Materials and supplies $257,788 $110,399
Industrial mineral products 72,212 45,169
Ores in process 16,799 62,934
Total inventories $346,799 $218,502
Note 3 - Costs and Estimated Earnings on Uncompleted Contracts
Long-term fixed price construction contracts in progress accounted for
using the percentage-of-completion method at December 31 consisted of:
1998 1997
Costs incurred on uncompleted contracts $3,201,099 $5,269,002
Estimated earnings 1,719,030 828,429
4,920,129 6,097,431
Less billings to date 3,140,779 5,379,119
$1,779,350 $ 718,312
Included in the balance sheets under
the following captions
Costs and estimated earnings
in excess of billings on
uncompleted contracts $1,793,119 $791,360
Billings in excess of costs
and estimated earnings
on uncompleted contracts (13,769) (73,048)
Total $1,779,350 $718,312
The amounts billed but not paid by customers pursuant to retention
provisions of long-term construction contracts were $202,095 and $346,283
at December 31, 1998 and 1997, respectively. Such retainage is expected to
be collected within the next twelve months.
Note 4 Property, Buildings and Equipment
Balances of major classes of properties at December 31 consisted of:
1998 1997
Land, mines and mining claims $ 5,266,753 $ 5,255,047
Buildings and improvements 1,732,442 1,728,278
Machinery and equipment 15,542,364 14,966,807
Construction in progress 128,723 23,935
Total 22,670,282 21,974,067
Less accumulated depreciation,
depletion and amortization 18,220,026 17,463,909
Net properties, buildings and
equipment $ 4,450,256 $ 4,510,158
As a matter of policy, management of the Company reviews the net carrying
value of all properties, buildings and equipment on a periodic basis. As
a result of such review, no write-down was considered necessary during any
of the years in the three-year period ended December 31, 1998.
Note 5 Impairment Losses
In connection with a coal mining property in Harlan, Kentucky, formerly
owned by the Company, the Company retains a coal royalty which provides for
a royalty between 1 1/2% to 3% per year, originally to be paid until 2002.
Effective February 14, 1997, the agreement was amended to provide for a
payment of $20,000 and monthly minimum payments of $5,000 until all minimum
royalties are collected. The expiration date of the royalty agreement was
extended beyond 2002 to the extent necessary to permit payments of the
$150,000 per year minimum royalties. Since February 1996, Great Western
Coal, Inc. ("Great Western"), the owner of the property, has generally
failed to make the required royalty payments. On July 1, 1998, the Company
filed suit against Great Western for breach of contract. Under the
circumstances, management has determined the royalty interest to be an
impaired asset. The fair value of the Harlan coal royalty has been
determined by management to be zero as there is no open market for the sale
of this royalty and future discounted cash flows have been estimated by
management to be zero. The impairment loss of $95,618 has been separately
identified as a component of continuing operations. The loss, which was
recognized in the second quarter of 1998, has been included in the
Company's operating results from mining.
In April 1993, the capital stock of The San Pedro Mining Corporation was
sold for $1,220,000, of which $50,000 in cash was paid at closing with the
balance of the purchase price represented by a promissory note payable to
the Company in equal monthly principal installments of $15,000 plus
interest through October 1999. Effective December 23, 1997, terms of the
note and mortgage were modified to defer principal payments to November
1998. The purchaser failed to make the October 1998 scheduled interest
payment and on-going discussions indicate that collection of the principal
balance is doubtful. Under the circumstances, management has determined
the note receivable to be an impaired asset and has written off the unpaid
balance of the note. Future discounted cash flows have been estimated by
management to be zero. The impairment loss of $258,538 has been separately
identified as a component of continuing operations. The loss, which was
recognized in the third quarter of 1998, has been included in the Company's
operating results from mining.
Note 6 - Income Taxes
The income tax provisions for the years ended December 31 consisted of:
1998 1997 1996
Current
Federal $ -- $ 5,000 $ --
State 23,322 23,731 --
23,322 28,731 --
Deferred
Federal -- 261,000 --
State -- 51,000 --
-- 312,000 --
Total $ 23,322 $340,731 $ --
Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities as of December 31 consisted of:
1998 1997
Deferred tax assets
Depletion, mineral rights and deferred
development and exploration costs $ 354,000 $ 324,000
Accrued workers' compensation costs 11,000 28,000
Note receivable principally due to
allowance 135,000 --
Accrued vacation and bonus 25,000 14,000
Property and equipment, principally
due to differences in depreciation
and valuation write-downs 325,000 358,000
Contingent salary payments recorded
as goodwill for tax purposes 7,000 7,000
Net operating loss carryforwards 2,722,000 2,644,000
Investment tax credit carryforwards 9,000 209,000
Alternative minimum tax credit
carryforwards 262,000 262,000
3,850,000 3,846,000
Valuation allowance for deferred tax
assets (3,265,000) (3,298,000)
Total deferred tax assets 585,000 548,000
Deferred tax liabilities
Deferred gain on sale of subsidiary (37,000) --
Total net deferred tax assets $ 548,000 $ 548,000
The Company has recorded a valuation allowance to reflect the estimated
amount of deferred tax assets which may not be realized. In assessing the
realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods
in which those temporary differences become deductible. Management
considers the projected future taxable income and tax planning strategies
in making this assessment. The Company decreased the valuation allowance
for net deferred tax assets by $33,000 for the year ended December 31,
1998.
At December 31, 1998, the Company had tax net operating loss carryforwards
of approximately $7,000,000 available to offset future regular taxable
income, which if unused, will expire from 2000 through 2018.
Additionally, the Company at December 31, 1998 had investment tax credit
carryforwards of approximately $9,000 available to reduce future Federal
income taxes, which if unused, will expire in 2000. In addition, the
Company has alternative minimum tax credit carryforwards of approximately
$262,000, which are available to reduce future Federal income taxes over
an indefinite period.
The differences between the Company's effective income tax rate and the
Federal statutory rate for the years ended December 31 are reconciled
below:
1998 1997 1996
Federal statutory rate (benefit) (34.0)% 34.0% (34.0)%
State income tax 3.8 6.5 (3.6)
Non-deductible expenses 6.6 2.5 6.4
Expiration of investment tax credits 32.8 7.4 --
Valuation allowance (5.4) (5.2) 31.2
Total 3.8% 45.2% -- %
Note 7 - Employee Benefit Agreements and 401(k) Plan
Beginning in 1989, the Company entered into employee benefit agreements
with certain employees of the Company. Under the terms of the agreements,
the Company buys life insurance policies that build cash surrender value
while also providing life insurance benefits for the employee. The Company
is entitled to a refund of all previously paid premiums or the cash
surrender value of the policy, whichever is lower, if the agreement is
terminated prior to the employee attaining the age of 65. After an
employee reaches age 65, the Company is entitled to a refund of all
previously paid premiums in ten annual installments. In the event of
death, the Company will immediately be entitled to a refund of all
previously paid premiums. The Company may terminate the agreements at any
time by giving written notice to the employee.
Effective January 1, 1995, the Company adopted The Goldfield Corporation
and Subsidiaries Employee Savings and Retirement Plan, a defined
contribution plan that qualifies under Section 401(k) of the Internal
Revenue Code. The plan provides retirement benefits to all employees who
meet eligibility requirements and elect to participate. Under the plan,
participating employees may defer up to 15% of their pre-tax compensation
per calendar year subject to Internal Revenue Code limits. The Company's
contributions to the plan are discretionary and amounted to approximately
$95,000, $96,000 and $79,000 for the years ended December 31, 1998, 1997
and 1996, respectively.
Note 8 Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities at December 31 consisted of:
1998 1997
Accounts payable $1,277,929 $430,176
Bonuses 331,267 199,382
Payroll and related expenses 149,300 130,970
Worker's compensation
insurance reserve 29,927 73,302
Insurance 80,157 29,735
Other 36,877 53,714
Total $1,905,457 $917,279
Note 9 - Preferred and Common Stock
The Series A 7% Voting Cumulative Convertible Preferred Stock ("Series A
Stock") is convertible into common stock, presently at the rate of 1.144929
shares of common stock for each share of Series A Stock, and has an annual
dividend rate of $.07 per share. The Series A Stock may be redeemed by the
Company at par. Holders of the Series A Stock have the same voting rights
as common stockholders (except under certain circumstances arising from the
failure to pay dividends on the Series A Stock) and have certain rights not
held by common stockholders such as preferences in liquidation and
controlling voting rights in certain mergers, sales and amendments to the
Certificate of Incorporation.
At December 31, 1998, 26,872,106 shares of Common Stock were issued and
388,597 shares of Common Stock were reserved for possible conversion of the
Series A Stock.
Note 10 - The Goldfield Corporation 1998 Executive Long-Term Incentive
Plan
In 1998 the stockholders of the Company approved the 1998 Executive Long-
Term Incentive Plan, which plan permits the granting of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted
Stock, Restricted Stock Units, Performance Units, Performance Share and
other awards to all officers and key employees of the Company and its
subsidiaries. Shares granted pursuant to the plan may be authorized but
unissued shares of Common Stock, Treasury shares or shares purchased on the
open market. Sale price for common stock will be based on fair market
value at date of grant. The maximum number of shares available for grant
under the plan shall be 1,300,000.
As of December 31, 1998, no options have been granted nor shares issued in
connection with the Executive Long-Term Incentive Plan.
Note 11 Basic (Loss) Earnings Per Share of Common Stock
Basic (loss) earnings per common share, after deducting dividend
requirements on the Company's Series A Stock of $23,758 in each of the
years ended December 31, 1998, 1997 and 1996 was based on the weighted
average number of shares of Common Stock outstanding, excluding 17,358
shares of Treasury Stock for each of the years ended December 31, 1998,
1997 and 1996. Convertible Preferred Stock is not considered in the
basic (loss) earnings calculation because its effect would be anti-
dilutive.
Note 12 - Other Income, Net
Other income, net for the years ended December 31 consisted of:
1998 1997 1996
Interest income $221,775 $300,241 $283,538
Recognized gain on
installment sale of
subsidiary (Note 5) -- 66,313 24,360
Recognized gain on
installment sale of lots 87,785 221 --
Gain (loss) on sale of
equipment (32,215) 14,499 32,288
Other 15,501 25,777 48,511
Total other income, net $292,846 $407,051 $388,697
Note 13 - Credit Facility
Under an unsecured line of credit arrangement expiring April 30, 1999
(guaranteed by the Company), the Company's electrical construction
subsidiary may borrow up to $1,000,000 at the bank's prime rate of
interest. At December 31, 1998 and 1997, no borrowings were outstanding
under this line of credit; however, during 1998 and 1997, $100,000 of the
line of credit was reserved for a standby letter of credit for the
outstanding self-insured workers compensation claims. All stated
conditions related to this available credit line have been complied with in
1998 and 1997.
Note 14 - Acquisition of Fiber Optic Services
In January 1996, the Company acquired the fixed assets of Fiber Optic
Services for payments of $173,138 and contingent payments equal to 2 1/2
times their average pre-tax earnings for the five years ended December 31,
2000. This acquisition was accounted for as a purchase. Accordingly, the
initial payments were allocated to the fixed assets acquired based upon
their estimated fair market values. Contingent payments will be treated as
compensation expense in the period incurred.
Fiber Optic Services is engaged in the construction of fiber optic
communication systems throughout the United States primarily for electric
utilities and communication companies.
Note 15 - Business Segment Information
The Company adopted SFAS No. 131, Disclosure About Segments of an
Enterprise and Related Information, in 1998. The adoption of this
statement did not have any effect on either the current or prior years'
presentation of reportable segments. The Company is primarily involved
in two lines of business, mining and electrical construction. There
were no material amounts of sales or transfers between lines of
business and no material amounts of export sales. Any intersegment
sales have been eliminated. The following table sets forth certain
segment information for the periods indicated:
1998 1997 1996
Sales from operations to
unaffiliated customers
Electrical construction $14,447,808 $13,742,723 $11,628,898
Mining 2,041,259 1,814,583 1,506,797
Total $16,489,067 $15,557,306 $13,135,695
Gross profit
Electrical construction $ 1,232,711 $1,715,608 $ 578,265
Mining (656,538) (82,003) (179,452)
Total gross profit 576,173 1,633,605 398,813
Interest and other
income, net 292,846 407,051 388,697
General corporate expenses (1,455,327) (1,285,954) (1,125,348)
(Loss) income from
operations before
income taxes $ (586,308) $ 754,702 $ (337,838)
Identifiable assets
Electrical construction $ 8,916,375 $ 7,365,219 $ 6,459,253
Mining 2,586,344 2,745,216 2,835,680
Corporate 2,710,430 3,856,107 4,357,310
Total $14,213,149 $13,966,542 $13,652,243
Capital expenditures
Electrical construction $ 901,347 $1,120,678 $579,032
Mining 191,034 152,783 79,783
Corporate 101,303 177,453 77,591
Total $1,193,684 $1,450,914 $736,406
Depreciation, amortization
and depletion
Electrical construction $ 692,350 $ 666,047 $568,127
Mining 313,701 340,784 306,798
Corporate 66,825 51,572 41,801
Total $1,072,876 $1,058,403 $916,726
Gross profit is total operating revenue less operating expenses. Gross
profit excludes general corporate expenses, interest expense, interest
income and income taxes. Royalty income (loss) is included in the
calculation of gross profit for the mining segment. Identifiable assets
by industry are used in the operations of each industry.
Sales (in thousands of dollars) to major customers exceeding 10% of total
sales follows:
1998 1997 1996
% of % of % of
Total Total Total
Amount Sales Amount Sales Amount Sales
Electrical construction
Customer A $2,910 19 $2,171 17
Customer B 3,081 23
Customer C 1,526 10
Customer D $2,321 14 3,383 22
Customer E 2,490 15
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information concerning the directors of the Company will be contained under
"Election of Directors" in the Company's 1999 Proxy Statement, which
information is incorporated by reference.
The executive officers of the Company are as follows:
Year In Which
Service Began
Name and Title(1) As Officer Age
John H. Sottile
Chairman of the Board of
Directors, President and
Chief Executive Officer,
Director 1983 51
John M. Starling
Secretary, Director 1996 69
Stephen R. Wherry,
Vice President, Treasurer
and Chief Financial Officer 1988 40
(1) As of March 1, 1999.
Throughout the past five years John H. Sottile and Stephen R. Wherry have
been principally employed as executive officers of the Company.
John H. Sottile has served as Chairman of the Board of Directors since May
1998.
John M. Starling has been an executive officer of the Company since March
15, 1996. Since June 1998, Mr. Starling has been the principal for the law
firm of John M. Starling, P.A. From March 1998 to June 1998, Mr. Starling
acted as Of Counsel for the law firm of Dwight W. Severs & Associates, P.A.
Between January 1, 1995 and March 1, 1998, Mr. Starling acted as Of Counsel
for the law firm of Severs, Stadler & Harris, P.A. Prior to such time, Mr.
Starling was a member of the law firm of Holland, Starling, Severs, Stadler
& Friedland, P.A.
The term of office of all directors is until the next annual meeting and
the term of office of all officers is for one year and until their
successors are chosen and qualify.
Item 11. Executive Compensation.
Information concerning executive compensation will be contained under
"Executive Compensation" in the Company's 1999 Proxy Statement, which
information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information concerning the security ownership of the directors and officers
of the registrant will be contained under "Ownership of Voting Securities
by Certain Beneficial Owners and Management" in the Company's 1999 Proxy
Statement, which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
Information concerning relationships and related transactions of the
directors and officers of the Company will be contained under "Election of
Directors" in the Company's 1999 Proxy Statement, which information is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
(a) Financial Statements Page
Report of Independent Certified Public Accountants 15
Consolidated Balance Sheets - December 31, 1998
and 1997 16
Consolidated Statements of Operations - Three Years
ended December 31, 1998 17
Consolidated Statements of Cash Flows - Three Years
ended December 31, 1998 18
Consolidated Statements of Stockholders' Equity -
Three Years ended December 31, 1998 19
Notes to Consolidated Financial Statements 20
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter ended
December 31, 1998.
(c) Exhibits
3-1 Restated Certificate of Incorporation of the Company, as
amended, is hereby incorporated by reference to Exhibit 3-1 of the
Company's Annual Report on Form 10-K for the year ended December 31,
1987, heretofore filed with the Commission (file No. 1-7525).
3-2 By-Laws of the Company, as amended, is hereby incorporated
by reference to Exhibit 3-2 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1987, heretofore filed
with the Commission (file No. 1-7525).
4-1 Action by Unanimous Consent of Holders of Preferred Stock as of
September 30, 1979 permanently waiving mandatory redemption is
hereby incorporated by reference to Exhibit 3-5 of the Company's
Registration Statement on Form S-l, No. 2-65781, heretofore filed
with the Commission on November 28, 1979.
4-2 Specimen copy of Company's Common Stock certificate is hereby
incorporated by reference to Exhibit 4-5 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1987,
heretofore filed with the Commission (file No. 1-7525).
*4-3 The Goldfield Corporation 1998 Executive Long-Term Incentive
Plan.
10-2 Employment Agreement effective January 15, 1985 between The
Goldfield Corporation and John H. Sottile is hereby incorporated
by reference to Exhibit 10-6 of the Company's Registration
Statement on Form S-l, No. 33-3866, heretofore filed with the
Commission on March 10, 1986.
10-2(a) Amendment dated February 25, 1986 to the Employment Agreement
included in Exhibit 10-2 is hereby incorporated by reference to
Exhibit 10-6(a) of the Company's Registration Statement on Form
S-l, No. 33-3866, heretofore filed with the Commission on March
10, 1986.
10-2(b) Amendment dated September 23, 1988 to Employment Agreement
effective January 15, 1985 between The Goldfield Corporation and
John H. Sottile is hereby incorporated by reference to Exhibit
10-2(b) to the Company's report on Form 10-Q for the quarter
ended September 30, 1988, heretofore filed with the Commission
(file No. 1-7525).
10-2(c) Amendment dated February 27, 1990 to Employment Agreement
effective January 15, 1985 between The Goldfield Corporation and
John H. Sottile, is hereby incorporated by reference to Exhibit
10-2(c) of the Company's Annual Report on Form 10-K for the year
ended December 31, 1989, heretofore filed with the Commission
(file No. 1-7525).
10-2(d) Amendment dated January 29, 1992 to Employment Agreement
effective January 15, 1985 between The Goldfield Corporation and
John H. Sottile, is hereby incorporated by reference to Exhibit
10-2(d) of the Company's Annual Report on Form 10-K for the year
ended December 31, 1991, heretofore filed with the Commission
(file No. 1-7525).
10-2(e) Amendment dated September 15, 1995 to Employment Agreement
effective January 15, 1985 between The Goldfield Corporation and
John H. Sottile, is hereby incorporated by reference to Exhibit
10-2(e) of the Company's report on Form 10-Q for the quarter
ended September 30, 1995, heretofore filed with the Commission
(file No. 1-7525).
10-3 Employment Agreement dated January 1, 1986 among John H. Sottile,
Southeast Power Corporation and The Goldfield Corporation is
hereby incorporated by reference to Exhibit 10-8 of the Company's
Registration Statement on Form S-l, No. 33-3866, heretofore filed
with the Commission on March 10, 1986.
10-3(a) Amendment No. 1 to Employment Agreement dated January 1, 1986
among John H. Sottile, Southeast Power Corporation and The
Goldfield Corporation is hereby incorporated by reference to
Exhibit 10-4(a) of the Company's report on Form 10-Q for the
quarter ended September 30, 1988, heretofore filed with the
Commission (file No. 1-7525).
10-3(b) Amendment No. 2 to Employment Agreement dated January 1, 1986
among John H. Sottile, Southeast Power Corporation and The
Goldfield Corporation, is hereby incorporated by reference to
Exhibit 10-4(b) of the Company's Annual Report on Form 10-K for
the year ended December 31, 1991, heretofore filed with the
Commission (file No. 1-7525).
10-3(c) Amendment dated September 11, 1995 to Employment Agreement
effective January 1, 1986 between Southeast Power Corporation and
John H. Sottile, is hereby incorporated by reference to Exhibit
10-4(c) of the Company's report on Form 10-Q for the quarter
ended September 30, 1995 heretofore filed with the Commission
(file No. 1-7525).
10-4 Employee Benefit Agreement dated November 20, 1989 between The
Goldfield Corporation and John H. Sottile, is hereby incorporated
by reference to Exhibit 10-5 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1989, heretofore filed
with the Commission (file No. 1-7525).
10-5 Employee Benefit Agreement dated November 16, 1989 between The
Goldfield Corporation and Stephen R. Wherry, is hereby
incorporated by reference to Exhibit 10-6 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1989,
heretofore filed with the Commission (file No. 1-7525).
10-6 Stock Purchase Agreement dated April 12, 1993 between Florida
Transport Corporation and Royalstar Southwest, Inc. relating to
the sale of San Pedro Mining Corporation is hereby incorporated
by reference to Exhibit 10-13 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, heretofore filed
with the Commission.
10-6(a) Amendment dated April 3, 1996 to Promissory Note dated April 12,
1993 between Florida Transport Corporation and The San Pedro
Mining Corporation, Royalstar Resources Ltd., and Royalstar
Southwest is hereby incorporated by reference to Exhibit 10-6(a)
of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, heretofore filed with the Commission (file No.
1-7525).
10-6(b) Amendment dated February 18, 1997 to Promissory Note dated April
12, 1993 between Florida Transport Corporation and The San Pedro
Mining Corporation, Royalstar Resources Ltd., and Royalstar
Southwest is hereby incorporated by reference to Exhibit 10-6(b)
of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, heretofore filed with the Commission (file No.
1-7525).
10-6(c) Amendment dated May 2, 1997 to Promissory Note dated April 12,
1993 between Florida Transport Corporation and The San Pedro
Mining Corporation, Royalstar Resources Ltd., and Royalstar
Southwest is hereby incorporated by reference to Exhibit 10-6(c)
of the Company's report on Form 10-Q for the quarter ended March
31, 1997, heretofore filed with the Commission (file No. 1-7525).
10-6(d) Amendment dated December 23, 1997 to the Modification of Secured
Term Note, Mortgage, Security Agreement and Financing
Statements between Florida Transport Corporation and The San
Pedro Mining Corporation, Royalstar Resources Ltd. and
Royalstar Southwest, Inc.
10-7 The Goldfield Corporation and Subsidiaries Standardized Adoption
Agreement and Prototype Cash or Deferred Profit-Sharing Plan and
Trust Basic Plan Document #3 effective January 1, 1995, is hereby
incorporated by reference to Exhibit 10-9 of the Company's report
on Form 10-Q for the quarter ended March 31, 1995, heretofore
filed with the Commission (file No. 1-7525).
10-8 Royalty Agreement dated February 19, 1982 between Bow Valley Coal
Resources, Inc. and Northern Goldfield Investments, Ltd., Inc.
is hereby incorporated by reference to Exhibit 10-8 of the
Company's Annual Report on Form 10-K for the year ended December
31, 1996, heretofore filed with the Commission (file No. 1-7525).
10-8(a) Amendment dated February 14, 1997 to Royalty Agreement dated
February 19, 1982 between Great Western Coal Inc. dba New
Horizons Coal Inc. and The Goldfield Corporation is hereby
incorporated by reference to Exhibit 10-8(a) of the Company's
Annual Report on Form 10-K for the year ended December 31, 1996,
heretofore filed with the Commission (file No. 1-7525).
11 For computation of per share earnings, see note 11 of notes to
consolidated financial statements.
*21 Subsidiaries of Registrant
*23 Consent of Independent Auditors
*24 Powers of Attorney
(a) Powers of Attorney
(b) Certified resolution of the Registrant's Board of Directors
authorizing officers and directors signing on behalf of the
Registrant to sign pursuant to a power of attorney.
*27 Financial Data Schedule (submitted electronically for SEC
information only)
* Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 10, 1999
THE GOLDFIELD CORPORATION
By /s/ John H. Sottile
(John H. Sottile)
Chairman of the Board of Directors, President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 10, 1999.
Signature Title
/s/ John H. Sottile Chairman of the Board of
(John H. Sottile) Directors, President, Chief
Executive Officer and Director
/s/ Stephen R. Wherry Vice President, Finance
(Stephen R. Wherry) and Chief Financial Officer
(Principal Financial Officer),
Treasurer and Principal
Accounting Officer
* Director and Secretary
(John M. Starling)
* Director
(John P. Fazzini)
* Director
(Danforth E. Leitner)
* Director
(Dwight W. Severs)
*By: /s/ John H. Sottile
John H. Sottile
Attorney-in-Fact