e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2006
Commission File No 001-32440
READY MIX, INC.
(Exact name of registrant as specified in its charter)
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Nevada
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86-0830443 |
(State or other Jurisdiction of
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(I.R.S. Employer Identification Number) |
incorporation or organization) |
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3430 East Flamingo Road, Suite 100
Las Vegas, Nevada 89121
(702) 433-2090
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer (as defined in Rule
12b-2 of the Exchange Act).
Large accelerated filer o; Accelerated filer o; Non-accelerated filer þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
Number of shares outstanding of the registrants common stock as of August 8, 2006:
Common Stock, $.001 par value
3,807,500 shares
READY MIX, INC.
INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2006
2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
READY MIX, INC.
CONDENSED BALANCE SHEETS
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June 30, |
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December 31, |
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2006 |
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2005 |
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(Unaudited) |
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Assets: |
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Current assets: |
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Cash and cash equivalents |
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$ |
10,690,720 |
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$ |
12,110,417 |
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Accounts receivable, net |
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11,314,035 |
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8,502,504 |
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Inventory |
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1,102,484 |
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604,906 |
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Prepaid expenses |
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921,976 |
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1,114,001 |
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Deferred tax asset |
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189,690 |
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184,591 |
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Total current assets |
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24,218,905 |
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22,516,419 |
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Property and equipment, net |
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24,644,776 |
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17,049,210 |
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Refundable deposits |
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193,830 |
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341,165 |
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Total assets |
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$ |
49,057,511 |
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$ |
39,906,794 |
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Liabilities and stockholders equity: |
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Current liabilities: |
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Accounts payable |
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$ |
5,842,240 |
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$ |
4,146,636 |
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Accrued liabilities |
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1,915,362 |
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1,735,287 |
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Notes payable |
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2,310,239 |
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1,670,643 |
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Obligations under capital leases |
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476,234 |
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468,972 |
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Due to affiliate |
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367,686 |
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84,810 |
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Income tax payable |
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1,058,968 |
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224,514 |
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Total current liabilities |
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11,970,729 |
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8,330,862 |
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Notes payable, less current portion |
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9,234,583 |
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5,625,360 |
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Obligations under capital leases, less current portion |
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16,821 |
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254,946 |
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Deferred tax liability |
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1,729,472 |
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1,729,472 |
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Total liabilities |
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22,951,605 |
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15,940,640 |
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Commitments and contingencies |
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Stockholders equity: |
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Preferred stock $.001 par value; 5,000,000 shares authorized,
none issued and outstanding |
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Common stock $.001 par value; 15,000,000 shares authorized,
3,807,500 issued and outstanding |
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3,808 |
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3,808 |
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Additional paid-in capital |
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17,713,179 |
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17,632,465 |
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Retained earnings |
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8,388,919 |
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6,329,881 |
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Total stockholders equity |
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26,105,906 |
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23,966,154 |
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Total liabilities and stockholders equity |
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$ |
49,057,511 |
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$ |
39,906,794 |
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The accompanying notes are an integral part of these condensed financial statements.
3
READY MIX, INC.
CONDENSED STATEMENTS OF OPERATIONS AND
CHANGES IN STOCKHOLDERS EQUITY
(Unaudited)
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Six months ended |
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Three months ended |
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June 30, |
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June 30, |
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2006 |
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2005 |
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2006 |
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2005 |
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Revenue: |
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Revenue |
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$ |
43,930,234 |
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$ |
31,257,566 |
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$ |
22,905,646 |
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$ |
17,283,715 |
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Revenue related parties |
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198,904 |
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559,872 |
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91,968 |
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202,226 |
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Total revenue |
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44,129,138 |
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31,817,438 |
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22,997,614 |
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17,485,941 |
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Cost of revenue |
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38,615,605 |
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28,666,170 |
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20,157,039 |
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15,416,723 |
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Gross profit |
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5,513,533 |
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3,151,268 |
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2,840,575 |
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2,069,218 |
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General and administrative expenses |
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2,389,236 |
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1,582,267 |
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1,252,565 |
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869,406 |
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Income from operations |
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3,124,297 |
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1,569,001 |
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1,588,010 |
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1,199,812 |
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Other income (expense): |
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Interest income |
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180,038 |
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14,250 |
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87,140 |
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7,891 |
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Interest expense |
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(63,914 |
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(130,870 |
) |
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(34,628 |
) |
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(62,784 |
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Other income |
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13,824 |
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12,289 |
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8,023 |
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9,449 |
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129,948 |
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(104,331 |
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60,535 |
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(45,444 |
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Income before income taxes |
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3,254,245 |
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1,464,670 |
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1,648,545 |
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1,154,368 |
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Income tax expense |
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1,195,207 |
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527,281 |
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605,219 |
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415,572 |
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Net income |
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$ |
2,059,038 |
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$ |
937,389 |
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$ |
1,043,326 |
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$ |
738,796 |
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Basic net income per common share |
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$ |
0.54 |
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$ |
0.46 |
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$ |
0.27 |
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$ |
0.36 |
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Diluted net income per common share |
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$ |
0.53 |
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$ |
0.46 |
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$ |
0.27 |
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$ |
0.36 |
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Basic weighted average common
shares outstanding |
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3,807,500 |
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2,025,000 |
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3,807,500 |
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2,025,000 |
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Diluted weighted average common
shares outstanding |
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3,859,660 |
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2,025,000 |
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3,852,732 |
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2,025,000 |
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Common Stock |
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Number of |
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Additional |
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Shares |
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Paid-in |
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Retained |
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Outstanding |
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Amount |
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Capital |
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Earnings |
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Balance at January 1, 2006 |
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3,807,500 |
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$ |
3,808 |
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$ |
17,632,465 |
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$ |
6,329,881 |
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Stock based compensation
expense |
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80,714 |
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Net income for the six months
ended June 30, 2006 |
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2,059,038 |
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Balance at June 30, 2006 |
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3,807,500 |
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$ |
3,808 |
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$ |
17,713,179 |
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$ |
8,388,919 |
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The accompanying notes are an integral part of these condensed financial statements.
4
READY MIX, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six months ended |
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June 30, |
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2006 |
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2005 |
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Increase (decrease) in cash and cash equivalents: |
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Cash flows from operating activities: |
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Cash received from customers |
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$ |
41,300,076 |
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$ |
31,348,467 |
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Cash paid to suppliers and employees |
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(37,513,339 |
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(29,524,052 |
) |
Taxes paid |
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(365,852 |
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Interest received |
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180,038 |
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14,250 |
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Interest paid |
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(63,914 |
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(130,870 |
) |
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Net cash provided by operating activities |
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3,537,009 |
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1,707,795 |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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(6,580,190 |
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(816,907 |
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Net cash used in investing activities |
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(6,580,190 |
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(816,907 |
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Cash flows from financing activities: |
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Received from due to affiliate |
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282,876 |
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384,721 |
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Proceeds from notes payable |
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3,083,540 |
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Repayment of notes payable |
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(1,512,069 |
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(1,318,489 |
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Repayment of capital lease obligations |
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(230,863 |
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(217,027 |
) |
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Net cash provided by (used in) financing activities |
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1,623,484 |
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(1,150,795 |
) |
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Net decrease in cash and cash equivalents |
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(1,419,697 |
) |
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(259,907 |
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Cash and cash equivalents at beginning of period |
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12,110,417 |
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1,424,629 |
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Cash and cash equivalents at end of period |
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$ |
10,690,720 |
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$ |
1,164,722 |
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Reconciliation of net income to net cash provided by
operating activities: |
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Net income |
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$ |
2,059,038 |
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$ |
937,389 |
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Adjustments
to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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1,655,581 |
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1,151,423 |
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Loss on sale of equipment |
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6,391 |
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Deferred taxes, net |
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|
(5,099 |
) |
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|
527,281 |
|
Stock-based compensation expense |
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|
80,714 |
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Provision for doubtful accounts |
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|
37,746 |
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|
85,814 |
|
Changes in operating assets and liabilities: |
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Accounts receivable |
|
|
(2,849,277 |
) |
|
|
(481,260 |
) |
Prepaid expenses |
|
|
192,025 |
|
|
|
(284,691 |
) |
Inventory |
|
|
(497,578 |
) |
|
|
(136,864 |
) |
Refundable deposits |
|
|
147,335 |
|
|
|
(26,776 |
) |
Accounts payable |
|
|
1,695,604 |
|
|
|
(247,740 |
) |
Accrued liabilities |
|
|
180,075 |
|
|
|
183,219 |
|
Income tax payable |
|
|
834,454 |
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
Net cash provided by operating activities |
|
$ |
3,537,009 |
|
|
$ |
1,707,795 |
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|
The accompanying notes are an integral part of these condensed financial statements.
5
READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies and Use of Estimates:
Presentation of Interim Information:
The condensed financial statements included herein have been prepared by Ready Mix, Inc. (a
subsidiary of Meadow Valley Corporation (Parent)) (we, us, our or Company) without audit,
pursuant to the rules and regulations of the United States Securities and Exchange Commission
(SEC) and should be read in conjunction with our December 31, 2005 annual report filed on Form
10-K. Certain information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted, as permitted by the SEC, although we believe the
disclosures, which are made, are adequate to make the information presented not misleading.
Further, the condensed financial statements reflect, in the opinion of management, all normal
recurring adjustments necessary to present fairly our financial position at June 30, 2006, and the
results of our operations and cash flows for the periods presented. The December 31, 2005 condensed
balance sheet data was derived from audited financial statements, but does not include all
disclosures required by accounting principles generally accepted in the United States of America.
Seasonal Variations:
Interim results are subject to significant seasonal variations and the results of operations
for the six months ended June 30, 2006 are not necessarily indicative of the results to be expected
for the full year.
Nature of Corporation:
Ready Mix, Inc. was organized under the laws of the State of Nevada on June 21, 1996. The
principal business purpose of the Company is to manufacture and distribute ready-mix concrete. The
Company targets prospective customers such as concrete subcontractors, prime contractors,
homebuilders, commercial and industrial property developers and homeowners in the states of Nevada
and Arizona. The Company began operations in March 1997 and is a subsidiary of Meadow Valley
Corporation.
Reclassifications:
Certain balances as of June 30, 2005 have been reclassified in the accompanying condensed
financial statements to conform to the current year presentation. These reclassifications had no
effect on previously reported net income or stockholders equity.
Revenue Recognition:
The Company recognizes revenue on the sale of its concrete and aggregate products at the time
of delivery.
Earnings per Share:
Statement of Financial Accounting Standards No. 128, Earnings per Share, (SFAS 128)
provides for the calculation of Basic and Diluted earnings per share. Basic earnings per share
includes no dilution and is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding for the period. Diluted earnings per share
reflect the potential dilution of securities that could share in the earnings of an entity.
Stock-Based Compensation:
Effective January 1, 2006, the Company adopted the fair value recognition provisions of
Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS
123R), using the modified prospective transition method and therefore the Company has not restated
its results for prior periods. Under this transition method, stock-based compensation expense for
the six months ended June 30, 2006 includes compensation expense for all stock-based compensation
awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair
value estimated in accordance with the original provision of Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123). The Company recognizes
these compensation costs on a straight-line basis over the requisite service period of the award,
which is three years. Stock-based compensation expense for all stock-based compensation awards
granted after January 1, 2006 is based on the grant-date fair value estimated in accordance with
the provisions of SFAS 123R.
6
READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies and Use of Estimates (Continued):
Stock-Based Compensation (Continued):
We estimate fair value using the Black-Scholes valuation model. Assumptions used to estimate
the compensation expense are determined as follows:
|
|
|
Expected term is determined using a weighted average of the contractual term and vesting
period of the award; |
|
|
|
|
Expected volatility is measured using the weighted average of historical daily changes
in the market price of the Companys peer groups common stock over the expected term of
the award. The peer group is used since the Company does not have sufficient historical
daily changes in its 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 similar awards granted by the
Company and managements analysis of potential forfeitures. |
Prior to the adoption of SFAS 123R, the Company recognized stock-based compensation expense in
accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25). In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (SAB 107)
regarding the SECs interpretation of SFAS 123R and the valuation of share-based payments for
public companies. The Company has applied the provisions of SAB 107 in its adoption of SFAS 123R.
See Note 2 to the condensed financial statements for a further discussion on stock-based
compensation.
The following table illustrates the effect on net income and net income per share if the
Company had applied the fair value recognition provisions of SFAS 123 to options granted under the
stock option plans, non-vested stock awards granted and shares issued under their respective plans
in the six months ended June 30, 2005. For purposes of pro forma disclosures, the value of the
options are estimated using the Black-Scholes option-pricing formula and amortized to expense over
the options vesting periods; using the straight line method. The following pro forma information
sets forth the net income and net income per share assuming that the Company had used the SFAS 123
fair value method in accounting for stock options during the six months ended June 30, 2005:
|
|
|
|
|
|
|
Six months |
|
|
|
ended June 30, |
|
|
|
2005 |
|
Net income, as reported |
|
$ |
937,389 |
|
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 |
|
|
48,438 |
|
|
|
|
|
Pro forma net income |
|
$ |
888,951 |
|
|
|
|
|
|
|
|
|
|
Basic net income per common share |
|
|
|
|
As reported |
|
$ |
0.46 |
|
Pro forma |
|
|
0.44 |
|
Diluted net income per common share |
|
|
|
|
As reported |
|
$ |
0.46 |
|
Pro forma |
|
|
0.44 |
|
7
READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies and Use of Estimates (Continued):
New Accounting Pronouncements:
In June 2006, the FASB issued FASB Interpretation No. 48, An Interpretation of FASB Statement
No. 109, which clarifies the accounting for uncertainty in income taxes recognized in a companys
financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes.
This Interpretation prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. FIN No. 48 reflects the benefit recognition approach, where a tax benefit is recognized
when it is more likely than not to be sustained based on the technical merits of the position.
This Interpretation is effective for fiscal years beginning after December 15, 2006. The Company
is evaluating the impact of FIN No. 48 on its financial statements.
In April 2006, the FASB issued FASB Staff Position (FSP) FIN No. 46(R)-6, Determining the
Variability to Be Considered in Applying FASB Interpretation No. 46(R), that will become effective
beginning the third quarter of 2006. FSP FIN No. 46(R)-6 clarifies that the variability to be
considered in applying FASB Interpretation 46(R) shall be based on an analysis of the design of the
variable interest entity. The adoption of this FSP is not expected to have a material effect on
the Companys consolidated financial statements.
In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets,
which provides an approach to simplify efforts to obtain hedge-like (offset) accounting. This new
Statement amends SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing
assets and servicing liabilities. SFAS No. 156 is effective for all separately recognized
servicing assets and liabilities as of the beginning of an entitys fiscal year that begins after
September 15, 2006, with earlier adoption permitted in certain circumstances. The Company does not
expect SFAS No. 156 will have a material effect on its financial statements.
The FASB has revised its guidance on SFAS No. 133 Implementation Issues as of March 2006.
Several Implementation Issues were revised to reflect the issuance of SFAS No. 155, Accounting for
Certain Hybrid Financial Instruments an Amendment of FASB Statements No. 133 and 140, in
February 2006. SFAS No. 155 allows any hybrid financial instrument that contains an embedded
derivative that otherwise would require bifurcation under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities to be carried at fair value in its entirety, with changes in
fair value recognized in earnings. In addition, SFAS No. 155 requires that beneficial interests in
securitized financial assets be analyzed to determine whether they are freestanding derivatives or
contain an embedded derivative. SFAS No. 155 also eliminates a prior restriction on the types of
passive derivatives that a qualifying special purpose entity is permitted to hold. SFAS No. 155 is
applicable to new or modified financial instruments in fiscal years beginning after September 15,
2006, though the provisions related to fair value accounting for hybrid financial instruments can
also be applied to existing instruments. The Company does not expect SFAS No. 155 will have a
material effect on its financial statements.
2. Stock-Based Compensation:
On January 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123R.
Prior to January 1, 2006, the Company accounted for share-based payments under the recognition and
measurement provisions of APB 25, and related Interpretations, as permitted by SFAS 123. In
accordance with APB 25, no compensation cost was required to be recognized for options granted that
had an exercise price equal to the market value of the underlying common stock on the date of
grant.
The Company adopted SFAS 123R using the modified prospective transition method. Under this
transition method, compensation cost recognized in the six months ended June 30, 2006 includes: a)
compensation cost for all share-based payments granted prior to, but not yet vested as of January
1, 2006, based on the grant date fair value estimated in accordance with the original provisions of
SFAS 123, and b) compensation cost for all share-based payments granted subsequent to January 1,
2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R.
The results for the prior periods have not been restated.
8
READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
2. Stock-Based Compensation (Continued):
The Company recognizes expected tax benefits related to employee stock based compensation as
awards are granted and the incremental tax benefit or liability when related awards are deductible.
No stock-based compensation costs were recognized in expense for the six months ended June 30,
2005.
As of June 30, 2006, the Company has the following stock-based compensation plans:
Equity Incentive Plan
In 2005, the Company adopted the 2005 Equity Incentive Plan (2005 Plan). The 2005 Plan
permits the granting of any or all of the following types of awards: (1) incentive and nonqualified
stock options, (2) stock appreciation rights, (3) stock awards, restricted stock and stock units,
(4) other stock or cash-based awards. In connection with any award or any deferred award, payments
may also be made representing dividends or their equivalent.
The Company has reserved 675,000 shares of its common stock for issuance under the plan.
Shares of common stock covered by an award granted under the 2005 Plan will not be counted as used
unless and until they are actually issued and delivered to a participant. As of June 30, 2006,
424,375 shares were available for future grant under the 2005 Plan. The term of the stock options
are five years and may be exercised after issuance as follows: 33.3% after one year of continuous
service, 66.6% after two years of continuous service and 100% after three years of continuous
service. The exercise price of each option is equal to the market price of the Companys common
stock on the date of grant.
The Company uses the Black Scholes option pricing model to estimate fair value of stock-based
awards with the following assumptions for the indicated periods:
|
|
|
|
|
|
|
Awards prior to |
|
|
January 1, 2006 |
Dividend yield |
|
|
0 |
% |
Expected volatility |
|
|
21.4% - 23.3 |
% |
Weighted-average volatility |
|
|
21.55 |
% |
Risk-free interest rate |
|
|
5.00 |
% |
Expected life of options (in years) |
|
|
3 |
|
Weighted-average grant-date fair value |
|
$ |
2.02 |
|
No awards were granted during the six months ended June 30, 2006.
The following table summarizes the stock option activity during the first six months of fiscal
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
Remaining |
|
|
Aggregate |
|
|
Aggregate |
|
|
|
|
|
|
|
Exercise Price |
|
|
Contractural |
|
|
Fair |
|
|
Intrinsic |
|
|
|
Shares |
|
|
per Share |
|
|
Term (1) |
|
|
Value |
|
|
Value (2) |
|
Outstanding January 1, 2006 |
|
|
253,125 |
|
|
$ |
11.12 |
|
|
|
3.89 |
|
|
$ |
511,616 |
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(2,500 |
) |
|
|
11.00 |
|
|
|
|
|
|
|
(4,875 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding June 30, 2006 |
|
|
250,625 |
|
|
$ |
11.12 |
|
|
|
3.64 |
|
|
$ |
506,741 |
|
|
$ |
460,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable June 30, 2006 |
|
|
76,791 |
|
|
$ |
11.00 |
|
|
|
3.58 |
|
|
$ |
149,742 |
|
|
$ |
150,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 our common stock as of
June 30, 2006, for those awards that have an exercise price currently below the closing
price as of June 30, 2006. |
9
READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
2. Stock-Based Compensation (Continued):
A summary of the status of the Companys nonvested shares as of June 30, 2006 and changes
during the six months ended June 30, 2006 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
Grant-Date |
|
|
Shares |
|
Fair Value |
Nonvested stock options at January 1, 2006 |
|
|
253,125 |
|
|
$ |
2.02 |
|
Granted |
|
|
|
|
|
|
|
|
Vested |
|
|
(76,791 |
) |
|
|
1.95 |
|
Forfeited |
|
|
(2,500 |
) |
|
|
1.95 |
|
|
|
|
|
|
|
|
|
|
Nonvested stock options at June 30, 2006 |
|
|
173,834 |
|
|
$ |
2.05 |
|
|
|
|
|
|
|
|
|
|
During the six months ended June 30, 2006 the Company recognized compensation expense of
$80,714 and a tax benefit of $5,099, related thereto. As of June 30, 2006, there was $256,518 of
total unrecognized compensation cost, net of $11,231 attributable to estimated forfeitures, related
to nonvested stock options granted under the Plan. That cost is expected to be recognized over the
weighted average period of 3.64 years. The total fair value of 76,791 options vested during the
six months ended June 30, 2006, was $150,510. No awards were granted in the six months ended June
30, 2006. During the six months ended June 30, 2006, 2,500 options were forfeited, of which, 833
options were vested.
3. Statement of Cash Flows:
Non-Cash Investing and Financing Activities:
The Company recognized investing and financing activities that affected assets and
liabilities, but did not result in cash receipts or payments. These non-cash activities are as
follows:
During the six months ended June 30, 2006 and 2005, the Company financed the purchase of
property and equipment in the amounts of $2,677,348 and $475,337, respectively.
During the six months ended June 30, 2006, the Company incurred $80,714 in stock-based
compensation expense associated with stock option awards granted to employees, directors and
consultants.
10
READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
4. Notes Payable:
Notes payable consists of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
Note payable, variable interest rate was 7.75% at March 31,
2006, with monthly principal payments of $4,121, due March 11,
2006, collateralized by equipment |
|
$ |
|
|
|
$ |
12,363 |
|
|
|
|
|
|
|
|
|
|
6.65% note payable, with monthly payments of $723, due
July 9, 2006, collateralized by equipment |
|
|
|
|
|
|
4,255 |
|
|
|
|
|
|
|
|
|
|
5.99% note payable, with monthly payments of $471, due
September 28, 2008, collateralized by a vehicle |
|
|
11,878 |
|
|
|
14,307 |
|
|
|
|
|
|
|
|
|
|
Non-interest bearing note payable, with monthly payments of
$390, due February 12, 2007, collateralized by equipment |
|
|
3,119 |
|
|
|
5,459 |
|
|
|
|
|
|
|
|
|
|
5.31% note payable, with monthly payments of $1,730, due
March 22, 2009, collateralized by vehicles |
|
|
53,018 |
|
|
|
61,855 |
|
|
|
|
|
|
|
|
|
|
5.31% note payable, with monthly payments of $788, due
April 8, 2009, collateralized by a vehicle |
|
|
24,136 |
|
|
|
28,159 |
|
|
|
|
|
|
|
|
|
|
6.21% note payable, with monthly payments of $4,921 and a
principal payment of $443,902, due April 16, 2009, collateralized
by land |
|
|
520,869 |
|
|
|
534,022 |
|
|
|
|
|
|
|
|
|
|
6.34% note payable, with monthly payments of $3,450 and a
principal payment of $309,412, due April 16, 2009, collateralized
by land |
|
|
362,528 |
|
|
|
371,604 |
|
|
|
|
|
|
|
|
|
|
5.90% note payable, with monthly principal payments of $1,905,
plus interest, due May 24, 2007, collateralized by equipment |
|
|
20,952 |
|
|
|
32,380 |
|
|
|
|
|
|
|
|
|
|
5.22% note payable, with monthly payments of $10,398, due
May 25, 2008, collateralized by equipment |
|
|
227,128 |
|
|
|
282,736 |
|
|
|
|
|
|
|
|
|
|
5.75% note payable, with monthly payments of $59,149, due
April 20, 2006, collateralized by equipment |
|
|
|
|
|
|
233,790 |
|
|
|
|
|
|
|
|
|
|
7.05% note payable, with monthly payments of $2,930 and
a principal payment of $254,742, due August 27, 2009,
collateralized by land |
|
|
300,624 |
|
|
|
307,645 |
|
|
|
|
|
|
|
|
|
|
8.55% note payable, with monthly payments of $22,071, due
February 27, 2006, collateralized by vehicles |
|
|
|
|
|
|
43,676 |
|
|
|
|
|
|
|
|
|
|
5.90% note payable, with monthly payments of $593, due
December 15, 2009, collateralized by vehicles |
|
|
22,461 |
|
|
|
25,309 |
|
|
|
|
|
|
|
|
|
|
6.60% note payable, with monthly payments of $30,812, due
December 15, 2007, collateralized by equipment |
|
|
526,676 |
|
|
|
690,992 |
|
|
|
|
|
|
|
|
|
|
6.60% note payable, with monthly payments of $22,806, due
December 29, 2007, collateralized by equipment |
|
|
389,816 |
|
|
|
511,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,463,205 |
|
|
$ |
3,159,986 |
|
|
|
|
|
|
|
|
11
READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
4. Notes Payable (Continued):
Notes payable consists of the following (Continued):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
Total from previous page |
|
$ |
2,463,205 |
|
|
$ |
3,159,986 |
|
|
|
|
|
|
|
|
|
|
5.90% notes payable, with combined monthly payments
of $5,322, due dates ranging from January 31, 2010 to
March 11, 2010, collateralized by vehicles |
|
|
207,821 |
|
|
|
233,187 |
|
|
|
|
|
|
|
|
|
|
7.25% note payable, with monthly payments of $4,153, due
May 4, 2009, collateralized by equipment |
|
|
141,218 |
|
|
|
166,139 |
|
|
|
|
|
|
|
|
|
|
7.50% notes payable, with combined monthly principal
payments of $15,100 plus interest, due September 1, 2008,
collateralized by equipment |
|
|
392,599 |
|
|
|
483,198 |
|
|
|
|
|
|
|
|
|
|
6.85% notes payable, with combined monthly payments of
$1,098, due September 28, 2010, collateralized by vehicles |
|
|
48,473 |
|
|
|
53,305 |
|
|
|
|
|
|
|
|
|
|
6.85% note payable, with a monthly payment of $522, due
October 13, 2010, collateralized by a vehicle |
|
|
23,422 |
|
|
|
25,705 |
|
|
|
|
|
|
|
|
|
|
Note payable, variable interest rate was 9.75% at June 30,
2006, with monthly principal payments of $21,429
plus interest, due July 29, 2012, collateralized by
mining water rights |
|
|
1,564,285 |
|
|
|
1,692,857 |
|
|
|
|
|
|
|
|
|
|
7.99% note payable, with monthly principal payments of
$14,362 plus interest, due March 25, 2011, collateralized
by equipment |
|
|
818,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.14% note payable, with monthly principal payments of
$30,470 plus interest, due March 28, 2011, collateralized
by equipment |
|
|
1,736,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.99% note payable, with a monthly payment of $496, due
November 30, 2008, collateralized by a vehicle |
|
|
13,360 |
|
|
|
15,893 |
|
|
|
|
|
|
|
|
|
|
Line of credit, variable interest rate was 8.5% at June 30,
2006, interest only payments until December 31, 2008,
36 equal monthly principal payments plus interest thereafter,
collateralized by all of the Companys assets |
|
|
1,070,263 |
|
|
|
1,465,733 |
|
|
|
|
|
|
|
|
|
|
8.45% notes payable, with combined monthly principal
payments of $26,182 plus interest, due June 28, 2011,
collateralized by equipment |
|
|
1,570,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.46% note payable, with a monthly payment of $13,867, due
May 26, 2021, collateralized by a building and land |
|
|
1,493,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,544,822 |
|
|
|
7,296,003 |
|
Less: current portion |
|
|
(2,310,239 |
) |
|
|
(1,670,643 |
) |
|
|
|
|
|
|
|
|
|
$ |
9,234,583 |
|
|
$ |
5,625,360 |
|
|
|
|
|
|
|
|
12
READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
4. Notes Payable (Continued):
Following are maturities of long-term debt as of June 30, 2006 for each of the following
years:
|
|
|
|
|
2007 |
|
$ |
2,310,239 |
|
2008 |
|
|
2,012,218 |
|
2009 |
|
|
2,372,298 |
|
2010 |
|
|
1,922,104 |
|
2011 |
|
|
1,483,400 |
|
Subsequent to 2011 |
|
|
1,444,563 |
|
|
|
|
|
|
|
$ |
11,544,822 |
|
|
|
|
|
5. Line of Credit:
As of June 30, 2006 the Company had a $5,000,000 revolving line of credit agreement, with an
interest rate at Chase Manhattan Banks prime, plus .25%. The interest rate as of June 30, 2006
was 8.5%. The balance outstanding on the line of credit as of June 30, 2006 was $1,070,263 and is
reported in Note 4 of these notes to condensed financial statements. The credit agreement provides
for interest only payments until December 31, 2008. If the agreement is not renewed by December
31, 2008 and a balance is outstanding, then the line of credit converts into a term agreement
requiring equal monthly principal plus interest payments through December 31, 2011 and is
collateralized by all of the Companys assets. Under the terms of the agreement, the Company and
its Parent are required to maintain a certain level of tangible net worth, a ratio of total debt to
tangible net worth as well as a minimum cash flow to debt ratio. As of June 30, 2006, the Company
and its Parent company were in compliance with these covenants.
In addition to the line of credit agreement mentioned above, the Company has also established
a capital expenditure commitment in the amount of $10,000,000. The purpose of this commitment is
to fund certain acquisitions of capital equipment that the Company may need to improve capacity or
productivity. As of June 30, 2006, the Company had approximately $5,700,000 of availability under
the commitment.
6. Commitments:
During the six months ended June 30, 2006, the Company extended its office lease with a
monthly payment of $8,230. In addition, the Company leased various pieces of equipment, with a
combined monthly payment of $76,952. Minimum future rental payments under the non-cancelable
operating leases entered into during the six months ended June 30, 2006 for each of the following
years are:
|
|
|
|
|
2007 |
|
$ |
1,005,728 |
|
2008 |
|
|
923,428 |
|
2009 |
|
|
923,428 |
|
2010 |
|
|
923,428 |
|
2011 |
|
|
769,523 |
|
|
|
|
|
|
|
$ |
4,545,535 |
|
|
|
|
|
During the six months ended June 30, 2006, the Company extended its purchase agreement with a
minimum monthly payment of $20,000. Minimum future purchase agreement payments under the
non-cancelable agreement entered into during the six months ended June 30, 2006 for the following
year is:
13
READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
6. Commitments (Continued):
All of the Companys assets are pledged as collateral for certain surety bonds of Meadow Valley
Contractors, Inc. (Meadow Valley). Should Meadow Valleys assets be insufficient to satisfy
these obligations, then our assets could be foreclosed upon in order to satisfy Meadow Valleys
obligations. Based on current facts and circumstances management believes that the likelihood of
any default by Meadow Valley is remote, and has no liabilities recorded for these agreements as of
June 30, 2006. As of June 30, 2006, the amount of bonds collateralized by our assets was
approximately $1.4 million.
The Company has agreed to indemnify its officers and directors for certain events or
occurrences arising as a result of the officer or director serving in such capacity. The term of
the indemnification period is for the officers or directors lifetime. The maximum potential
amount of future payments the Company could be required to make under these indemnification
agreements is unlimited. However, the Company has a directors and officers liability insurance
policy that enables it to recover a portion of any future amounts paid up to $10 million. As a
result of its insurance policy coverage and no current or expected litigation, the Company believes
the estimated fair value of these indemnification agreements is minimal and has no liabilities
recorded for these agreements as of June 30, 2006.
The Company enters into indemnification provisions under its agreements with other companies
in its ordinary course of business, typically with business partners, customers, landlords, lenders
and lessors. Under these provisions the Company generally indemnifies and holds harmless the
indemnified party for losses suffered or incurred by the indemnified party as a result of the
Companys activities or, in some cases, as a result of the indemnified partys activities under the
agreement. The maximum potential amount of future payments the Company could be required to make
under these indemnification provisions is unlimited. The Company has not incurred material costs
to defend lawsuits or settle claims related to these indemnification agreements. As a result, the
Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company
has no liabilities recorded for these agreements as of June 30, 2006.
7. Earnings per Share:
Statement of Financial Accounting Standards No. 128, Earnings per Share, provides for the
calculation of Basic and Diluted earnings per share. Basic earnings per share includes no dilution
and is computed by dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period.
Diluted earnings per share reflect the potential dilution of securities that could share in
the earnings of an entity, as set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended |
|
Three months ended |
|
|
June 30, |
|
June 30, |
|
|
2006 |
|
2005 |
|
2006 |
|
2005 |
Weighted average common shares
outstanding |
|
|
3,807,500 |
|
|
|
2,025,000 |
|
|
|
3,807,500 |
|
|
|
2,025,000 |
|
Dilutive effect of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and warrants |
|
|
52,160 |
|
|
|
|
|
|
|
45,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding assuming dilution |
|
|
3,859,660 |
|
|
|
2,025,000 |
|
|
|
3,852,732 |
|
|
|
2,025,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All dilutive common stock equivalents are reflected in our earnings per share calculations.
Anti-dilutive common stock equivalents are not included in our earnings per share calculations. For
the six months ended June 30, 2006 and 2005 the Company had no anti-dilutive common stock
equivalents.
14
READY MIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
7. Earnings per Share (Continued):
The Companys diluted net income per common share for the six months and three months ended
June 30, 2006 was computed based on the weighted average number of shares of common stock
outstanding during the period and the weighted average of options to purchase 230,375 shares of
common stock at $11.00 per share, 20,250 shares of common stock at $12.50 per share and in
connection with the public offering the Company issued the underwriters warrants entitling them to
purchase 116,250 shares of common stock at a price of $13.20 per share. The Companys diluted net
income per common share for the six months and three months ended June 30, 2005 was computed based
on the weighted average number of shares of common stock outstanding during the period as no
options or warrants were considered in the money to purchase common stock.
8. Income Taxes:
The Companys effective tax rate is based on expected income, statutory tax rates and tax
planning opportunities available in the various jurisdictions in which it operates. For interim
financial reporting, in accordance with APB Opinion No. 28, the Company estimates the annual tax
rate based on projected taxable income for the full year and records a quarterly income tax
provision in accordance with the anticipated annual rate. As the year progresses, the Company
refines the estimates of the years taxable income as new information becomes available, including
year-to-date financial results. This continual estimation process can result in a change to the
expected effective tax rate for the year. When this occurs, the Company adjusts the income tax
provision during the quarter in which the change in estimate occurs so that the year-to-date
provision reflects the expected annual tax rate. Significant judgment is required in determining
the Companys effective tax rate and in evaluating our tax positions.
The effective income tax rate of approximately 37% for the six months ended June 30, 2006
differed from the statutory rate, due primarily to state income taxes and non-deductible stock
based compensation expense associated with employee incentive stock options. The effective income
tax rate of approximately 36% for the six months ended June 30, 2005 differed from the statutory
rate, due primarily to state income taxes.
15
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Disclosure
This Quarterly Report on Form 10-Q and the documents we incorporate by reference herein
include forward-looking statements. All statements other than statements of historical facts
contained in this Form 10-Q and the documents we incorporate by reference, including statements
regarding our future financial position, business strategy and plans and objectives of management
for future operations, are forward-looking statements. The words believe, may, estimate,
continue, anticipate, intend, should, plan, could, target, potential, is likely,
will, expect and similar expressions, as they relate to us, are intended to identify
forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. We have based these forward-looking statements largely on our current expectations and
projections about future events and financial trends that we believe may affect our financial
condition, results of operations, business strategy and financial needs.
These forward-looking statements are subject to a number of risks, uncertainties and
assumptions described in Risk Factors in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2005, and any changes thereto in Part II. Item 1A. Risk Factors of this Form 10-Q.
In addition, our past results of operations do not necessarily indicate our future results.
Moreover, the ready-mix concrete business is very competitive and rapidly changing. New risk
factors emerge from time to time and it is not possible for us to predict all such risk factors,
nor can we assess the impact of all such risk factors on our business or the extent to which any
risk factor, or combination of risk factors, may cause actual results to differ materially from
those contained in any forward-looking statements.
Except as otherwise required by applicable laws, we undertake no obligation to publicly update
or revise any forward-looking statements or the risk factors described in this Quarterly Report on
Form 10-Q or in the documents we incorporate by reference, whether as a result of new information,
future events, changed circumstances or any other reason after the date of this Quarterly Report on
Form 10-Q. You should not rely upon forward-looking statements as predictions of future events or
performance. We cannot assure you that the events and circumstances reflected in the
forward-looking statements will be achieved or occur. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements.
General
The following is managements discussion and analysis of certain significant factors affecting
the Companys financial position and operating results during the periods included in the
accompanying condensed financial statements. Except for the historical information contained
herein, the matters set forth in this report are forward-looking statements.
We concentrate on serving the ready-mix concrete markets of the Las Vegas, Nevada and Phoenix,
Arizona metropolitan areas. From our rock quarry, located approximately 50 miles northwest of Las
Vegas in Moapa, Nevada, we supply rock and sand for our Las Vegas area ready-mix plants. The
quarry supplies all of our sand and approximately 60% of the coarse aggregate requirements of our
Nevada operations. Also at our quarry we manufacture, by crushing and screening, a variety of
decorative rock products used primarily for landscaping. In the Phoenix metropolitan area, both of
our existing ready-mix plants are currently supplied rock and sand from third parties.
Overview
Our performance through the first half of 2006 reflects better than normal weather in the
first quarter and continuing strong demand for our product into the second quarter. Units of ready
mix concrete sales were up approximately 22% in the first half of 2006 compared to the first half
of last year. In addition, selling price increases reflected continued strong demand for our
product and our ability to pass through rising production and raw material costs. The average sale
price of ready mix concrete rose 16% from the first half of 2005. Occasional shortages of certain
raw materials, like cement, fly ash and ice, continue to occur, but we believe we have been
effective in mitigating their affect. We expect these occasional shortages to reoccur and we will
strive to minimize
16
their impact on our operations. We also expect further increases in costs of
raw materials later this year which we anticipate we will be able to incorporate into our selling
price. Our gross margin improved from 9.9% through the first six months of 2005 to 12.5% in the
first six months of this year, in spite of costs associated with a new aggregate production
facility and batch plant facility at Lee Canyon in northwest Las Vegas and initiating the
installation of a third concrete batching facility in the Phoenix metropolitan area. Typically,
new facilities require a number of months of operation to reach profitable levels of volume. To
date, bringing these facilities on line has caused only a minimal decrease in gross margin.
Historically, the portion of our ready mix concrete volume related to the residential sector
of the construction industry has been between approximately 50% and 55%. For the first half of
2006, ready mix concrete volumes related to residential have declined to about 50% of our total
volume. Residential building activity in 2006, in our markets, as measured by the number of
single-family housing permits issued, has decreased more than most forecasts. For example,
according to the Arizona Blue Chip Economic Forecast from 2005 to 2006, single family permits in
Arizona were forecast to decrease approximately 5.2% while Nevada was expected to increase by 2%.
Through the first six months of 2006, according to the U.S. Census Bureau, single family housing
permits in metropolitan Phoenix have decreased by nearly 23% and 5.7% in Las Vegas. As evidenced
by our increase in unit sales, we have thus far successfully directed our efforts to increase units
sold in the commercial, industrial and infrastructure sectors of the construction industry to
compensate for the decrease in residential activity. This strength in non-residential sectors of
nation-wide construction spending is indicated by the U.S. Census Bureaus estimated increase of
8.5% (±1.9%) in total construction spending during the first six months of 2006 compared to the
first half of 2005. Also according to the U.S. Department of Commerce and as reported by FW Dodge
in its Engineering-News Record July 17, 2006 edition, total transportation spending increased 29.8%
year over year from May 2005 to May 2006. The Clark County Construction Index for April 2006 as
recently published by the Center for Business and Economic Research at the University of Nevada
Las Vegas, posted a double digit growth rate for the tenth consecutive month on a year-over-year
basis. We believe that if the residential decline is not too severe or prolonged, that the demand
for our product in non-residential construction should compensate for the weaker housing market.
However, if we are unable to continue successfully capturing volume from non-residential
construction projects, our volumes in the 3rd and possibly the 4th quarter
could be negatively impacted. Thus far, as mentioned above, we have been successful in adjusting
our mix of customers, but can not assure that our volume or average unit price will continue to
grow at its recent historic pace.
New Accounting Pronouncements
In June 2006, the FASB issued FASB Interpretation No. 48, An Interpretation of FASB Statement
No. 109, which clarifies the accounting for uncertainty in income taxes recognized in a companys
financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes.
This Interpretation prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. FIN No. 48 reflects the benefit recognition approach, where a tax benefit is recognized
when it is more likely than not to be sustained based on the technical merits of the position.
This Interpretation is effective for fiscal years beginning after December 15, 2006. The Company
is evaluating the impact of FIN No. 48 on its financial statements.
In April 2006, the FASB issued FASB Staff Position (FSP) FIN No. 46(R)-6, Determining the
Variability to Be Considered in Applying FASB Interpretation No. 46(R), that will become effective
beginning the third quarter of 2006. FSP FIN No. 46(R)-6 clarifies that the variability to be
considered in applying FASB Interpretation 46(R) shall be based on an analysis of the design of the
variable interest entity. The adoption of this FSP is not expected to have a material effect on
the Companys consolidated financial statements.
In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets,
which provides an approach to simplify efforts to obtain hedge-like (offset) accounting. This new
Statement amends SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing
assets and servicing liabilities. SFAS No. 156 is effective for all separately recognized
servicing assets and liabilities as of the beginning of an entitys fiscal year that begins after
September 15, 2006, with earlier adoption permitted in certain circumstances. The Company does not
expect SFAS No. 156 will have a material effect on its financial statements.
17
The FASB has revised its guidance on SFAS No. 133 Implementation Issues as of March 2006.
Several Implementation Issues were revised to reflect the issuance of SFAS No. 155, Accounting for
Certain Hybrid Financial Instruments an Amendment of FASB Statements No. 133 and 140, in
February 2006. SFAS No. 155 allows any hybrid financial instrument that contains an embedded
derivative that otherwise would require bifurcation under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities to be carried at
fair value in its entirety, with changes in fair value recognized in earnings. In addition,
SFAS No. 155 requires that beneficial interests in securitized financial assets be analyzed to
determine whether they are freestanding derivatives or contain an embedded derivative. SFAS No.
155 also eliminates a prior restriction on the types of passive derivatives that a qualifying
special purpose entity is permitted to hold. SFAS No. 155 is applicable to new or modified
financial instruments in fiscal years beginning after September 15, 2006, though the provisions
related to fair value accounting for hybrid financial instruments can also be applied to existing
instruments. The Company does not expect SFAS No. 155 will have a material effect on its financial
statements.
Critical Accounting Policies, Estimates and Judgments
Significant accounting policies are described in the audited financial statements and notes
thereto included in our Annual Report on Form 10-K for the year ended December 31, 2005. We
believe our most critical accounting policies are the collectibility of accounts receivable, the
valuation of property and equipment, estimating income taxes and the valuation of stock-based
compensation.
We are required to estimate the collectibility of our accounts receivable. A considerable
amount of judgment is required in assessing the realization of these receivables, including the
current credit worthiness of each customer and the related aging of the past due balances. Our
provision for bad debts at June 30, 2006 and December 31, 2005 amounted to $297,390 and $259,644,
respectively. We determine our reserve by using percentages applied to certain types of revenue
generated, as well as a review of the individual accounts outstanding and our collection history.
The increase in the provision for bad debt for the six months ended June 30, 2006 represented our
historic bad debt expense as a percentage applied to certain revenue, less write-offs in the amount
of $35,479 during the six months ended June 30, 2006. Should our estimate for the provision of bad
debt be insufficient to allow for the write-off of future bad debts, we will incur additional bad
debt expense, thereby reducing net income in a future period. If, on the other hand, we determine
in the future that we have over estimated our provision for bad debt we will reduce bad debt
expense, thereby increasing net income in the period in which the provision for bad debt was
determined to be over estimated.
We are required to provide property and equipment net of depreciation and amortization
expense. We expense depreciation and amortization utilizing the straight-line method over what we
believe to be the estimated useful lives. Leasehold improvements are amortized over their
estimated useful lives or the lease term, whichever is shorter. The life of any piece of equipment
can vary, even within the same category of equipment, due to the quality of the maintenance, care
provided by the operator and the general environmental conditions, such as temperature, weather
severity and the terrain in which the equipment operates. We maintain, service and repair a
majority of our equipment through the use of our mechanics. If we inaccurately estimate the life
of any given piece of equipment or category of equipment we may be overstating or understating
earnings in any given period.
We also review our property and equipment for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment recognized is measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. The impairments are recognized in the period during
which they are identified. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
We are required to estimate our income taxes in each jurisdiction in which we operate. This
process requires us to estimate the actual current tax exposure together with assessing temporary
differences resulting from differing treatment of items for tax and financial reporting purposes.
These temporary differences result in deferred tax assets and liabilities on our balance sheets.
We must calculate the blended tax rate, combining all applicable tax jurisdictions, which can vary
over time as a result of the allocation of taxable income between the tax jurisdictions and the
changes in tax rates. We must also assess the likelihood that the deferred tax assets, if any,
will be recovered from future taxable income and, to the extent recovery is not likely, must
establish a valuation allowance. As of
18
June 30, 2006, the Company had total deferred tax assets of
$.2 million with no valuation allowance and total deferred tax liabilities of $1.7 million. The
deferred tax asset does not contain a valuation allowance as we believe we will be able to utilize
the deferred tax asset through future taxable income.
Furthermore, we are subject to periodic review by domestic tax authorities for audit of our
income tax returns. These audits generally include questions regarding our tax filing positions,
including the amount and timing of deductions and the allocation of income among various tax
jurisdictions. In evaluating the exposures associated with our various tax filing positions,
including federal and state taxes, we believe we have complied with the rules of the service codes
and therefore have not recorded reserves for any possible exposure. Typically the taxing
authorities can audit the previous three years of tax returns and in certain situations audit
additional years, therefore a significant amount of time may pass before an audit is conducted and
fully resolved. Although no audits are currently being conducted, if a taxing authority would
require us to amend a prior years tax return we would record the increase or decrease in our tax
obligation in the period in which it is more likely than not to be realized.
Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS 123R,
using the modified prospective transition method, and therefore have not restated prior periods
results. Under this method we recognize compensation expense for all share-based payments granted
after January 1, 2006 and prior to but not yet vested as of January 1, 2006, in accordance with
SFAS 123R using Black-Scholes option valuation model. Under the fair value recognition provisions
of SFAS 123R, we recognize stock-based compensation net of an estimated forfeiture rate and only
recognize compensation cost for those shares expected to vest on a straight-line basis over the
requisite service period of the award. Prior to SFAS 123R adoption, we accounted for share-based
payments under APB 25 and accordingly, did not recognize compensation expense for options granted
that had an exercise price equal to the market value of the underlying common stock on the date of
grant.
Determining the appropriate fair value model and calculating the fair value of share-based
payment awards requires the input of highly subjective assumptions, including the expected life of
the share-based payment awards and stock price volatility. The assumptions used in calculating the
fair value of share-based payment awards represent managements best estimates, but these estimates
involve inherent uncertainties and the application of management judgment. As a result, if factors
change and we use different assumptions, our stock-based compensation expense could be materially
different in the future. In addition, we are required to estimate the expected forfeiture rate and
only recognize expense for those shares expected to vest. If our actual forfeiture rate is
materially different from our estimate, the stock-based compensation expense could be significantly
different from what we have recorded in the current period. See Note 2 to the Condensed Financial
Statements for a further discussion on stock-based compensation.
Results of Operations
The following table sets forth certain items derived from our Condensed Statements of
Operations for the periods indicated and the corresponding percentage of total revenue for each
item:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended |
|
|
Three months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
(dollars in thousands) |
|
(Unaudited) |
|
|
(Unaudited) |
|
Revenue |
|
$ |
43,930 |
|
|
|
99.6 |
% |
|
$ |
31,257 |
|
|
|
98.2 |
% |
|
$ |
22,906 |
|
|
|
99.6 |
% |
|
$ |
17,284 |
|
|
|
98.8 |
% |
Related party revenue |
|
|
199 |
|
|
|
0.4 |
% |
|
|
560 |
|
|
|
1.8 |
% |
|
|
92 |
|
|
|
0.4 |
% |
|
|
202 |
|
|
|
1.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
44,129 |
|
|
|
100.0 |
% |
|
|
31,817 |
|
|
|
100.0 |
% |
|
|
22,998 |
|
|
|
100.0 |
% |
|
|
17,486 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
5,513 |
|
|
|
12.5 |
% |
|
|
3,151 |
|
|
|
9.9 |
% |
|
|
2,841 |
|
|
|
12.4 |
% |
|
|
2,069 |
|
|
|
11.8 |
% |
General and
administrative expenses |
|
|
2,389 |
|
|
|
5.4 |
% |
|
|
1,582 |
|
|
|
5.0 |
% |
|
|
1,253 |
|
|
|
5.5 |
% |
|
|
869 |
|
|
|
5.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
3,124 |
|
|
|
7.1 |
% |
|
|
1,569 |
|
|
|
4.9 |
% |
|
|
1,588 |
|
|
|
6.9 |
% |
|
|
1,200 |
|
|
|
6.8 |
% |
Interest income |
|
|
180 |
|
|
|
0.4 |
% |
|
|
14 |
|
|
|
0.0 |
% |
|
|
87 |
|
|
|
0.4 |
% |
|
|
8 |
|
|
|
0.1 |
% |
Interest expense |
|
|
(64 |
) |
|
|
-0.1 |
% |
|
|
(131 |
) |
|
|
-0.4 |
% |
|
|
(35 |
) |
|
|
-0.2 |
% |
|
|
(63 |
) |
|
|
-0.4 |
% |
Income tax expense |
|
|
(1,195 |
) |
|
|
-2.7 |
% |
|
|
(527 |
) |
|
|
-1.6 |
% |
|
|
(605 |
) |
|
|
-2.6 |
% |
|
|
(416 |
) |
|
|
-2.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,059 |
|
|
|
4.7 |
% |
|
$ |
937 |
|
|
|
2.9 |
% |
|
$ |
1,043 |
|
|
|
4.5 |
% |
|
$ |
739 |
|
|
|
4.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
$ |
1,656 |
|
|
|
3.8 |
% |
|
$ |
1,151 |
|
|
|
3.6 |
% |
|
$ |
867 |
|
|
|
3.8 |
% |
|
$ |
584 |
|
|
|
3.4 |
% |
19
Six Months Ended June 30, 2006 compared to Six Months Ended June 30, 2005
Revenue. Revenue improved 38.7% to $44.1 million for the six months ended June 30, 2006,
which we refer to as interim 2006, from $31.8 million for the six months ended June 30, 2005,
which we refer to as interim
2005. The improved revenue resulted primarily from a 21.5% increase in the sale of cubic yards of
concrete, which we refer to as units, complemented by a 16.4% increase in the average unit sales
price. The increased average unit sales price reflects our ability to pass on additional costs to
our customers, such as the increased costs of raw materials and transportation of those materials.
The increased volume in the interim 2006 was primarily due to favorable weather conditions during
the first quarter 2006 when compared to the wet weather experienced in January and February 2005,
an increased number of mixer trucks in our fleet and our blend of customers allowing the delivery
of our product during non-peak hours. We provide ready-mix concrete to our related parties. Revenue
from related parties for interim 2006 was $.2 million representing less than 1% of total revenue
compared to $.6 million of total revenue in interim 2005. Location of the project, type of product
needed and the availability of product and personnel are factors which we consider when quoting
prices to our customers, including our related parties. Based on that criteria, future sales to
related parties could increase or decrease in any given year, but are not anticipated to be
material. We anticipate additional raw material price increases and additional transport costs
associated with those materials during 2006. However, we believe we will be able to pass through
the increase in the cost of our raw materials to our customers. We intend on adding an additional
10 mixer trucks over the next six months.
Gross Profit. Gross profit increased to $5.5 million in interim 2006 from $3.2 million in
interim 2005 and the gross profit margin increased to 12.5% from 9.9% in the respective periods.
The increase in the gross profit margin during interim 2006 was primarily due to the increased
productivity which was generated on an equivalent fixed asset basis when compared to interim 2005.
Although our average unit sales price increased, our variable unit costs also increased as a
percentage of revenue. We anticipate that as a result of our expansion efforts our fixed costs
will increase in the near future as the Lee Canyon Pit in northwest Las Vegas, Nevada becomes
operational and our third ready mix production facility in Phoenix, Arizona opens.
Depreciation and Amortization. Depreciation and amortization expense increased $.5 million,
or 44.0%, to $1.7 million for interim 2006 from $1.2. million in interim 2005. This increase
resulted from the additional plant, equipment and vehicles we placed in service in the later part
of 2005 and interim 2006.
General and Administrative Expenses. General and administrative expenses increased to $2.4
million for interim 2006 from $1.6 million for interim 2005. The increase resulted primarily from a
$.5 million increase in administrative salaries, wages, accrued bonuses, related payroll taxes and
benefits, public company expenses in the amount of $.2 million and increased insurance expense in
the amount of $.1 million. Continuing through 2006, general and administrative expenses will
increase as it relates to public company expense, which consists primarily of legal, printing,
communications with our shareholders and accounting fees, which we estimate will be approximately
$.4 million total for the year.
Interest Income and Expense. Interest income for interim 2006 increased to $.18 million from
$.01 million for interim 2005, resulting primarily from an increase in invested cash reserves,
which resulted from the initial public offering of our common stock. Interest expense decreased in
interim 2006 to $.06 million compared to $.13 million for interim 2005. The decrease in interest
expense was related to the repayment of related party debt thereby reducing interest expense.
Interest expense associated with assets used to generate revenue is included in cost of revenue.
We intend to enter into additional financing agreements to acquire equipment and fund working
capital when needed, which will increase interest expense in future periods.
Income Taxes. The increase in the income tax provision for interim 2006 to $1.2 million
compared to an income tax provision of $.5 million for interim 2005 was due to an increase in
pre-tax income in interim 2006 when compared to interim 2005. The difference between the effective
tax rate and the statutory rate was due primarily to state income taxes and non-deductible stock
based compensation expense associated with employee incentive stock options.
Net Income. Net income was $2.1 million for interim 2006 as compared to a net income of $.9
million for interim 2005. The increase in net income resulted from an increase in our sales of
cubic yards of concrete, complemented by an increase in the average unit sales price as discussed
above.
20
Three Months Ended June 30, 2006 compared to Three Months Ended June 30, 2005
Revenue. Revenue improved 31.5% to $23.0 million for the three months ended June 30, 2006,
which we refer to as 2nd quarter 2006, from $17.5 million for the three months ended June 30,
2005, which we refer to as 2nd quarter 2005. The improved revenue resulted primarily from a 15.4% increase in the sale
of cubic yards of concrete, which we refer to as units, complemented by a 16.9% increase in the
average unit sales price. The increased average unit sales price reflects our ability to pass on
additional costs to our customers, such as the increased costs of raw materials and transportation
of those materials. The increased volume in the 2nd quarter 2006 was primarily due to an increased
number of mixer trucks in our fleet and our blend of customers allowing the delivery of our product
during non-peak hours. We provide ready-mix concrete to our related parties. Revenue from related
parties in 2nd quarter 2006 was $.1 million representing .4% of total revenue compared to $.2
million of total revenue in 2nd quarter 2005. Location of the project, type of product needed and
the availability of product and personnel are factors which we consider when quoting prices to our
customers, including our related parties. Based on that criteria, future sales to related parties
could increase or decrease in any given quarter, but are not anticipated to be material. During 2nd
quarter 2006 we leased an additional 30 mixer trucks in anticipation of future volume growth.
Gross Profit. Gross profit increased to $2.8 million in 2nd quarter 2006 from $2.1 million
in 2nd quarter 2005, and the gross profit margin increased to 12.4% from 11.8% in the respective
periods. The increase in the gross profit margin during 2nd quarter 2006 was primarily due to an
increase in our average unit sales price, while our fixed costs, which were only slightly higher
when compared with the same period in 2005, were allocated over the higher volume, thereby reducing
the average fixed cost per unit sold.
Depreciation and amortization. Depreciation and amortization expense increased $.3 million,
or 48.5%, to $.9 million for 2nd quarter 2006 from $.6 million in 2nd quarter 2005. This increase
is attributable to additional plant, equipment and vehicles we placed in service in the later part
of 2005 and interim 2006.
General and Administrative Expenses. General and administrative expenses increased to $1.3
million for 2nd quarter 2006 from $.9 million for 2nd quarter 2005. The increase resulted primarily
from a $.2 million increase in administrative salaries, wages, bonuses, related payroll taxes and
benefits and public company expenses in the amount of $.1 million.
Interest Income and Expense. Interest income for 2nd quarter 2006 increased to $0.09
million from $.01 million for 2nd quarter 2005, resulting primarily from an increase in invested
cash reserves. Interest expense decreased in 2nd quarter 2006 to $.04 million compared to $.6
million for 2nd quarter 2005. The decrease in interest expense was related to the repayment of
related party debt thereby reducing interest expense. Interest expense associated with assets used
to generate revenue is included in cost of revenue. We intend to enter into additional financing
agreements to acquire equipment and fund working capital when needed, which will increase interest
expense in future periods.
Income taxes. The increase in the income tax provision for 2nd quarter 2006 to $.6 million
compared to an income tax provision of $.4 million for 2nd quarter 2005 was due to an increase in
pre-tax income in 2nd quarter 2006 when compared to 2nd quarter 2005. The difference between the
effective tax rate and the statutory rate was due primarily to state income taxes and
non-deductible stock based compensation expense associated with employee incentive stock options.
Net income. Net income was $1.0 million for 2nd quarter 2006 as compared to a net income of
$.7 million for 2nd quarter 2005. The increase in net income resulted from an increase in our
average unit sales price as discussed above.
Liquidity and Capital Resources
Our primary need for capital has been to increase the number of mixer trucks in our fleet, to
increase the number of concrete batch plant locations, to purchase support equipment at each
location and to provide working capital to support the expansion of our operations. As we expand
our business, we will continue to utilize the availability of capital offered by financial
institutions, in turn increasing our total debt and debt service obligations. Our largest provider
of financing has been The CIT Group/Equipment Financing, Inc. also referred to as CIT. We
21
believe the proceeds from the offering and our historical sources of capital will be
satisfactory to meet our needs for at least one year from the date of this quarterly report.
We currently have a credit facility with CIT which provides $5.0 million in revolving credit
as well as $10.0 million in a capital expenditure commitment. The CIT credit facility is
collateralized by all of our assets as well as the assets of Meadow Valley, our parent. Under the
terms of the agreement, Meadow Valley is required to maintain a certain level of tangible net worth
as well as maintain a ratio of total debt to tangible net worth, and earnings before interest, tax,
depreciation and amortization (EBITDA). We are also required to maintain a minimum ratio of cash
flow to current portion of long term debt. As of June 30, 2006, our parent company, Meadow Valley
and ourselves were compliant with the covenants. As of June 30, 2006, approximately $3.9 million in
revolving credit was available under this agreement and approximately $5.7 million was available
through the capital expenditure commitment.
Over approximately the next 18 months we intend to expand our operations by adding two
additional ready-mix production plants, purchasing related production plant equipment and
completing site improvements at each of the new sites, which we anticipate using cash flow from
operations and financing the balance utilizing the capital expenditure commitment available to us
by CIT. We also intend to lease an additional 10 mixer trucks within the next six months.
We continue to negotiate the lease for a site in the southwest Phoenix metropolitan area to
locate a third ready-mix facility. Construction of a ready-mix production facility, as part of our
expansion plan in the northwest Las Vegas metropolitan area, was completed in July 2006. We
anticipate the completion of our Northwest Las Vegas crushing and screening operation to be
complete in October 2006.
As a result of the expansion efforts we have already executed, we have entered into additional
debt and operating lease obligations which, in turn, have increased our fixed minimum monthly
payments. To date we have not been impacted by this increase in our fixed minimum monthly payment
as our cash flow from operations has provided an amount in excess of the increase in these
payments. We do not expect this trend to change in the coming year, but cannot assure that cash
inflow from operations will be adequate to provide for the cash outflow needed to service all
obligations for our expansion efforts.
The following table sets forth for the six months ended June 30, 2006 and 2005, certain items
from the condensed statements of cash flows.
|
|
|
|
|
|
|
|
|
|
|
Six months ended |
|
|
June 30, |
|
|
2006 |
|
2005 |
(dollars in thousands) |
|
(Unaudited) |
Cash flows provided by operating activities |
|
$ |
3,537 |
|
|
$ |
1,708 |
|
Cash flows used in investing activities |
|
|
(6,580 |
) |
|
|
(817 |
) |
Cash flows provided by (used in) financing activities |
|
|
1,623 |
|
|
|
(1,151 |
) |
Cash provided by operating activities during interim 2006 of $3.5 million represents a $1.8
million increase from the amount provided by operating activities during interim 2005. The
increase was primarily due to the improved growth in sales, offset by a decrease in our collections
when compared to the disbursement of payables.
Cash used in investing activities during interim 2006 of $6.6 million represents a $5.8
million increase from the amount used in investing activities during interim 2005. Investing
activities during interim 2006 was due to capital expenditures of $6.6 million. Investing
activities during interim 2005 was due to capital expenditures of $.8 million.
Cash provided by financing activities during interim 2006 of $1.6 million represents a $2.8
million increase from the amount used in financing activities during interim 2005. Financing
activities during interim 2006 included the receipt of proceeds received from notes payable in the
amount of $3.1 million and proceeds from Meadow Valley of $.3 million, offset by the repayment of
notes payable and capital leases of $1.7 million. Financing
activities during interim 2005 included the repayment of notes payable and capital lease
obligations of $1.5 million, offset by the receipt of $.4 million from Meadow Valley.
22
Summary of Contractual Obligations and Commercial Commitments
Contractual obligations at June 30, 2006, and the effects such obligations are expected to
have on liquidity and cash flow in future periods, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
$ |
11,545 |
|
|
$ |
2,310 |
|
|
$ |
4,385 |
|
|
$ |
3,406 |
|
|
$ |
1,444 |
|
Interest payments on
long-term debt (1) |
|
|
2,737 |
|
|
|
726 |
|
|
|
1,020 |
|
|
|
490 |
|
|
|
501 |
|
Capital lease obligations |
|
|
520 |
|
|
|
501 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
9,091 |
|
|
|
2,634 |
|
|
|
4,303 |
|
|
|
2,154 |
|
|
|
|
|
Purchase obligations |
|
|
4,861 |
|
|
|
1,428 |
|
|
|
2,488 |
|
|
|
945 |
|
|
|
|
|
Other long
term liabilities (2) |
|
|
1,072 |
|
|
|
524 |
|
|
|
548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations |
|
$ |
29,826 |
|
|
$ |
8,123 |
|
|
$ |
12,763 |
|
|
$ |
6,995 |
|
|
$ |
1,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Interest payments are based on the individual interest rates of each obligation,
which range from 5.22% to 9.75% per annum. We do not assume an increase in the variable
interest rate. See Note 4Notes payable in the accompanying condensed financial
statements. |
|
(2) |
|
Other long-term liabilities include employment contracts with two of our key
executive officers that call for annual salaries of $150,000 and $110,000 through
January 2008, and are to be reviewed annually by our Compensation Committee. In
addition, other long-term liabilities include the administrative services agreement
with Meadow Valley in the amount of $22,000 per month expiring December 31, 2008. |
Website Access
Our website address is www.readymixinc.com. On our website we make available, free of charge,
our annual report on Form 10-K, our most recent quarterly reports on Form 10-Q, current reports on
Form 8-K, Forms 3, 4, and 5 related to beneficial ownership of securities, code of ethics and all
amendments to those reports as soon as reasonably practicable after such material is electronically
filed with or furnished to the United States Securities and Exchange Commission. The information
on our website is not incorporated into, and is not part of, this report.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Market risk generally represents the risk that losses may occur in the values of financial
instruments as a result of movements in interest rates, foreign currency exchange rates and
commodity prices. We do not have foreign currency exchange rate market risk. We purchase
commodities, such as cement, aggregates and diesel fuel, at market prices and are not aware of any
financial instruments to hedge these commodity prices.
Our operations are likely to be affected by the level of general construction activity,
including the level of interest rates and availability of funds for construction projects. A
significant decrease in the level of general construction activity in any of the metropolitan areas
that we service may have a material adverse effect on our sales and earnings.
Interest Rate RiskFrom time to time we temporarily invest our excess cash in interest-bearing
securities issued by high-quality issuers. We monitor risk exposure to monies invested in
securities in our financial institutions. Due to the short time the investments are outstanding and
their general liquidity, these instruments are
classified as cash equivalents in the condensed balance sheet and do not represent a material
interest rate risk. Our primary market risk exposure for changes in interest rates relates to our
long-term debt obligations. We manage our exposure to changing interest rates principally through
the use of a combination of fixed and floating rate debt.
23
We evaluated the potential effect that near term changes in interest rates would have had on
the fair value of our interest rate risk sensitive financial instruments at June 30, 2006. Assuming
a 100 basis point increase in the prime interest rate at June 30, 2006, the potential increase in
the fair value of our debt obligations would have been approximately $.03 million at June 30, 2006.
See Note 4Notes payable in the accompanying June 30, 2006 condensed financial statements.
Item 4. Controls and Procedures
An evaluation as of the end of the period covered by this report was carried out under the
supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that those disclosure controls and procedures were effective. In addition, there has been
no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934) that occurred during the period covered by
this report that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider
the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the
year ended December 31, 2005, which could materially affect our business, financial condition or
future results. The risks described in our Annual Report on Form 10-K are not the only risks we
face. Additional risks and uncertainties not currently known to us or that we currently deem to be
immaterial also may materially adversely affect our business, financial condition and/or operating
results. There are no material changes to the risk factors included in our Annual Report on Form
10-K for the fiscal year ended December 31, 2005 during the six months ended June 30, 2006.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
24
Item 4. Submission of Matters to a Vote of Security Holders
At the Companys Annual Meeting of Shareholders on June 13, 2006, nominees for Directors as
listed in the proxy statement, to hold office for a one year term, expiring 2007 or until election
and qualification of their successors or until their resignation, death, disqualification or
removal from office were elected by the holders of Common Stock with the following vote:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affirmative |
|
Authority |
|
Broker non- |
Directors |
|
Votes |
|
Withheld |
|
votes/Abstentions |
Charles E. Cowan |
|
|
3,738,215 |
|
|
|
9,683 |
|
|
|
|
|
Charles R. Norton |
|
|
3,591,374 |
|
|
|
9,524 |
|
|
|
|
|
Dan H. Stewart |
|
|
3,591,215 |
|
|
|
9,683 |
|
|
|
|
|
Don A. Patterson |
|
|
3,591,215 |
|
|
|
9,683 |
|
|
|
|
|
Bradley E. Larson |
|
|
3,480,781 |
|
|
|
120,117 |
|
|
|
|
|
Robert R. Morris |
|
|
3,480,915 |
|
|
|
119,983 |
|
|
|
|
|
Kenneth D. Nelson |
|
|
3,480,915 |
|
|
|
119,983 |
|
|
|
|
|
A proposal to ratify the selection of Semple and Cooper, LLP as the independent registered
public accounting firm for the fiscal year ending December 31, 2006 was approved by the holders of
Common Stock with the following vote:
|
|
|
|
|
|
|
|
|
|
|
|
|
Affirmative |
|
Against |
|
Authority |
|
Broker non- |
Votes |
|
Votes |
|
Withheld |
|
votes/Abstentions |
3,736,835 |
|
|
1,997 |
|
|
|
9,066 |
|
|
|
|
|
Item 5. Other Information
None
Item 6. Exhibits
Exhibits:
|
|
|
3.2
|
|
Amended Bylaws of the Registrant |
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
32.1
|
|
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. |
25
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act as of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
READY MIX, INC. |
|
|
|
|
|
|
(Registrant) |
|
|
|
|
|
|
|
|
|
|
|
By
|
|
/s/ Bradley E. Larson
Bradley E. Larson
|
|
|
|
|
|
|
Chief Executive Officer |
|
|
|
|
|
|
August 14, 2006 |
|
|
|
|
|
|
|
|
|
|
|
By
|
|
/s/ Clint Tryon
Clint Tryon
|
|
|
|
|
|
|
Chief Financial Officer, Secretary and Treasurer |
|
|
|
|
|
|
(Principal Accounting Officer) |
|
|
|
|
|
|
August 14, 2006 |
|
|
26
Index
to Exhibits
|
|
|
3.2
|
|
Amended Bylaws of the Registrant |
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
32.1
|
|
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. |
27