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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
xx Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
FORM 10-K
For the fiscal year ended December 31, 2018
or
¨ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number: 1-7525
The Goldfield Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
88-0031580
(I.R.S. Employer
Identification No.)
1684 W. Hibiscus Boulevard
Melbourne, Florida 32901
(Address of principal executive offices, including zip code)
(321) 724-1700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock
par value $0.10 per share
Name of each exchange on which registered
NYSE AMERICAN
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days: Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes x No ¨
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
¨ Accelerated filer
¨ Smaller reporting company
Emerging growth company
x
x
¨
If an emerging growth company, indicate by check mark if the registrant has elected to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately
$98.6 million as of June 29, 2018 (the last business day of the registrant’s most recently completed second fiscal quarter), computed by
reference to the price at which such common equity was last sold on such date.
The number of shares of the registrant’s common stock, $0.10 par value per share, outstanding as of March 7, 2019 was 24,522,534.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of The Goldfield Corporation’s definitive proxy statement for its 2019 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission within 120 days after the end of the year covered by this Form 10-K Report are incorporated by
reference into Part III of this report.
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THE GOLDFIELD CORPORATION AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2018
TABLE OF CONTENTS
Item 1. Business.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Mine Safety Disclosures.
PART I
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Item 6. Selected Financial Data.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Item 9A. Controls and Procedures.
Item 9B. Other Information.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Item 14. Principal Accounting Fees and Services.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
Item 16. Form 10-K Summary.
SIGNATURES
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Item 1. Business.
General
PART I
The Goldfield Corporation, incorporated in Wyoming in 1906 and subsequently reincorporated in Delaware in 1968, is engaged in both the
construction of electrical infrastructure for the utility industry and industrial customers and to a considerably lesser extent real estate
development. Real estate development represented 1% of our total revenue in 2018. The principal market for the electrical construction
operation is primarily in the Southeast, mid-Atlantic and Texas-Southwest regions of the United States. The primary focus of the real estate
operations is on the development of residential properties on the east coast of Central Florida. Unless the context otherwise requires, the
terms “Goldfield,” the “Company,” “we,” “our” and “us” as used herein mean The Goldfield Corporation and its consolidated subsidiaries.
Our Internet website address is www.goldfieldcorp.com. Within the “Investor Relations” section, under the “Investors” tab of our website,
we make available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as
soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission
(“SEC”). The information on our website is not incorporated by reference into this Annual Report on Form 10-K. You may also access our
reports, proxy statement, and other information regarding us at the SEC’s website at www.sec.gov. You may also read and copy any
document we file with the SEC at the SEC’s public reference facilities located at 100 F Street, NE, Washington, DC 20549. Please call the
SEC at 1-800-SEC-0330 for further information on the public reference facilities.
Financial Information About Geographic Areas
During the years ended December 31, 2018 and 2017, our operations were exclusively in the United States.
Employees
As of March 3, 2019, we had a total of 487 employees, which included 480 full-time and seven part-time employees. These employees
included 108 unionized employees at our subsidiary, C and C Power Line, Inc. (“C&C”). The total number of employees includes 427
hourly-rate employees. The number of hourly-rate employees fluctuates depending upon the number and size of projects under construction
at any particular time. We believe that our relationship with our employees is good.
Electrical Construction Operations
Through our subsidiaries, Power Corporation of America (“PCA”), Southeast Power Corporation (“Southeast Power”), C&C and Precision
Foundations, Inc. (“PFI”) we are engaged in the construction of electrical infrastructure for the utility industry and industrial customers.
Southeast Power, C&C and PFI operate under PCA, headquartered in Port Orange, Florida. Southeast Power is headquartered in Titusville,
Florida, and has additional offices in Bastrop, Texas and Spartanburg, South Carolina. C&C, headquartered in Jacksonville, Florida, is a
full-service electrical contractor that provides similar services as Southeast Power with a unionized work force. PFI, headquartered in Port
Orange, Florida, constructs drilled pier foundations and installs concrete poles, direct embeds and vibratory casings.
Our electrical construction business includes the construction of transmission lines, distribution systems, substations, drilled pier
foundations and other electrical services.
Representative customers include:
Santee Cooper (South Carolina Public Service Authority)
Florida Power & Light Company
CPS Energy
Lower Colorado River Authority
Oncor Electric Delivery Company LLC
Central Electric Power Cooperative, Inc.
Duke Energy Corporation
Orlando Utilities Commission
Union Power Cooperative
Dominion Energy
Historically, a significant portion of our revenue has come from several different customers each year. Our largest customers may change
from year to year. For the year ended December 31, 2018, our top three customers accounted for approximately 57.2% of our consolidated
revenue. Since the contribution of a customer may vary from year to year, we cannot predict the future effect of the loss of any given
customer.
It is our policy to commit ourselves only to the amount of work we believe we can properly supervise, equip and complete to the
customer’s satisfaction and timetable. As a result of this policy and the magnitude of some of the construction projects
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undertaken by us, a substantial portion of our annual revenue is derived from a relatively small number of customers. See note 11 to the
consolidated financial statements for detail on sales to major customers that exceed 10% of total sales.
Construction is customarily performed pursuant to plans and specifications of customers. We generally supply the management, labor,
equipment and tools, while customers generally supply most of the required materials, however we generally supply most of the required
materials for the construction of concrete foundations. We are not presently experiencing, nor do we anticipate experiencing, any
difficulties in procuring an adequate supply of materials.
Revenue and results of operations in our electrical construction business can be subject to seasonal variations. These variations are
influenced by weather, customer spending patterns and system loads. Project duration varies based on project type, complexity, applicable
environmental regulations and customer requirements.
We enter into contracts on the basis of either competitive bidding, direct negotiations or pursuant to master service agreements (“MSAs”).
Competitively bid contracts and MSAs account for a majority of our electrical construction revenue. Although there is considerable
variation in the terms of the contracts undertaken, such contracts are typically lump sum (fixed-price) contracts, time plus equipment
contracts, or unit price contracts. Most of our contracts do not require our clients to purchase a minimum amount of services, and some of
our contracts are cancelable on short notice.
In certain circumstances, we are required to provide performance and payment bonds issued by a surety to secure our contractual
commitments. These bonds provide a guarantee to the customer that we will perform under the terms of a contract and that we will pay
subcontractors and vendors. If we fail to perform under a contract or to pay subcontractors and vendors, the customer may demand the
surety to make payments or provide services under the bond. No bond issued for us has ever been called by a customer. Under current
circumstances we believe that we will not need to fund any claims written by our surety in the foreseeable future. At present, we have
adequate bonding availability for our operations. As of December 31, 2018, outstanding performance bonds issued on behalf of our
electrical construction subsidiaries amounted to $46.4 million.
Contracts may include retention provisions. From 5% to 10% is withheld by the customer from progress payments as retainage until the
contract work has been completed and approved.
Backlog
Our backlog represents future services to be performed under existing project-specific fixed-price and maintenance contracts and the
estimated value of future services that we expect to provide under our existing MSAs.
The following table presents our total backlog as of December 31, 2018 and 2017 along with an estimate of the backlog amounts expected
to be realized within 12 months and during the life of each of the MSAs. When awarded, our MSA initial terms range from one to seven
years. Most of the MSAs have remaining renewals ranging from one to three years at the option of the customer. The calculation assumes
exercise of the renewal options by the customer. Revenue from assumed exercise of renewal options represents $45.8 million (26.9%) of
our total estimated MSA backlog as of December 31, 2018.
Backlog as of
December 31, 2018
Backlog as of
December 31, 2017
Electrical Construction Operations
Project-Specific Firm Contracts (1)
Estimated MSAs
$
Total
$
12-Month
Total
12-Month
44,373,384 $
57,464,231
101,837,615 $
44,373,384 $
170,097,919
214,471,303 $
27,110,793 $
83,124,471
110,235,264 $
Total
27,110,793
187,047,802
214,158,595
_________________________
(1)Amount includes firm contract awards under MSA agreements.
Our total backlog as of December 31, 2018, increased $313,000, or 0.1%, to $214.5 million, compared to $214.2 million as of
December 31, 2017. The increase in total backlog is primarily due to the increase in MSA firm projects, which includes the addition of four
new MSA customers for 2018, offset by existing MSA backlog run-off and adjustments to existing MSA backlog estimates.
Our 12-month backlog as of December 31, 2018, decreased $8.4 million, or 7.6%, to $101.8 million, mainly due to MSA backlog run-off
and adjustments to existing MSA backlog estimates.
Of our total backlog as of December 31, 2018, we expect approximately $101.8 million, or 47.5%, to be completed during 2019.
Backlog is estimated at a particular point in time and is not determinative of total revenue in any particular period. It does not reflect future
revenue from a significant number of short-term projects undertaken and completed between the estimated dates. Our electrical
construction revenue in 2018 exceeded our 12-month backlog as of December 31, 2017 by 23.9%.
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The estimated amount of backlog for work under MSAs is calculated by using recurring historical trends inherent in current MSAs and
projected customer needs based upon ongoing communications with the customer. Our estimated backlog also assumes exercise of existing
customer renewal options. Certain MSAs are not exclusive to the Company and, therefore, the size and amount of projects we may be
awarded cannot be determined with certainty. Accordingly, the amount of future revenue from MSA contracts may vary substantially from
reported backlog. Even if we realize all of the revenue from the projects in our backlog, there is no guarantee of profit from the projects
awarded under MSAs.
As of December 31, 2018 and 2017, MSAs accounted for approximately 79.3% and 87.3% of total backlog, respectively. We plan to
continue our efforts to grow MSA business. MSA contracts are generally multi-year and should provide improved operating efficiencies.
Backlog is not a term recognized under U.S. generally accepted accounting principles, but is a common measurement used in our industry.
While we believe that our methodology of calculation is appropriate, such methodology may not be comparable to that employed by other
companies. Given the duration of our contracts and MSAs and our method of calculating backlog, our backlog at any point in time may not
accurately represent the revenue that we expect to realize during any period, and our backlog as of the end of the year may not be indicative
of the revenue we expect to earn in the following year and should not be viewed or relied upon as a stand-alone indicator. Consequently, we
cannot provide assurance as to our customers’ requirements or our estimates of backlog.
Reconciliation of Backlog to our Remaining Unsatisfied Performance Obligation
The following table presents a reconciliation of our total backlog as of December 31, 2018 to our remaining unsatisfied performance
obligation as defined under U.S. generally accepted accounting principles:
Total Backlog
Estimated MSAs
Estimated Firm (1)
Total Unsatisfied Performance Obligation
_________________________
(1) Projects awarded, however backlog contract value was estimated as of December 31, 2018.
December 31, 2018
$
$
214,471,303
(170,097,919 )
(7,933,373 )
36,440,011
The amount of total backlog differs from the amount of our remaining unsatisfied performance obligation as of December 31, 2018 and as
described in note 14 to the consolidated financial statements, primarily due to the inclusion of estimates of future revenue under MSA and
other service agreements within our backlog estimates, as described above.
Revenue estimates included in our backlog may be subject to change as a result of project accelerations, additions, cancellations or delays
due to various factors, including but not limited to: commercial issues, material deficiencies, permitting, regulatory requirements and
adverse weather. Our customers are not contractually committed to a specific level of services under our MSAs (other than project-specific
firm contracts under MSAs). While we did not experience any material cancellations during the current period, most of our contracts may
be terminated, even if we are not in default under the contract.
For further information regarding the factors that affect the realizability of profits from our business backlog, please refer to the
information set forth in “Item 1A. Risk Factors.”
Competition and Regulation
The electrical construction business is highly competitive. We compete with other independent contractors, including larger regional and
national firms that may have financial, operational, technical and marketing resources that exceed our own. Competitive factors include:
level of technical expertise and experience, industry reputation, quality of work, price, geographic presence, dependability, availability of
skilled personnel, worker safety and financial stability. Our management believes that we compete favorably with our competitors on the
basis of these factors. There can be no assurance that our competitors will not develop the expertise, experience and resources to provide
services that are superior in both price and quality to our services, or that we will be able to maintain or enhance our competitive position.
We are subject to various federal, state and local statutes and rules regarding, among other things, contractor licensing, electrical codes,
worker safety and environmental protection. We believe that we are in substantial compliance with all applicable regulatory requirements.
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Properties
The Company and its subsidiaries operate with owned or leased offices and facilities located in Florida, South Carolina and Texas.
Individually, none of the properties are financially significant to the Company. We believe that such properties are currently in good
condition and properly maintained. See note 8 to the consolidated financial statements for additional detail on properties.
Real Estate Development
Through our subsidiary Bayswater Development Corporation and its various subsidiaries (“Bayswater”) we are engaged in the acquisition,
development, management and disposition of land and improved properties. The primary focus of our real estate operations has been the
development of residential properties along the east coast of Central Florida.
When we use either of the terms “homes” or “units,” we mean our residential properties, which include detached single-family homes,
townhomes and condominiums. References to our homebuilding revenues and similar references refer to revenues derived from the sales of
our residential properties, in each case unless otherwise expressly stated or the context otherwise requires.
Our customers generally are pre-retirement, retirement or second home buyers seeking higher quality, low maintenance residences.
We generally purchase land and pay for architectural, engineering and various other costs with cash reserves. Construction costs are
generally paid with cash reserves or in some cases financed, as specified in note 7 to the consolidated financial statements.
We acquire land for development only after feasibility and environmental testing has been performed. Architectural, engineering, structural
and other plans for the projects are outsourced. In an effort to limit risk on condominium projects, our policy is to obtain a substantial
number of contracts for purchase prior to commencing construction, backed by customers’ non-refundable earnest money deposits which
are generally 20% of the purchase price. We do not offer financing arrangements to purchasers of our homes. As of December 31, 2018, we
had two projects with a total of twenty units under construction in Brevard County, Florida. One project consists of an ocean front five-story
building containing fourteen luxury ocean-view condominium units, of which thirteen units were under contract as of December 31, 2018.
The second project consists of a six-unit townhome complex with three and four bedroom townhome units, of which three units were under
contract as of December 31, 2018. Both projects are expected be completed during 2019.
As of December 31, 2018, we owned nine vacant parcels of land, eight of which are for future development projects and one is for sale.
Our historical financial performance in real estate construction is not necessarily a meaningful indicator of future results and, in particular,
we expect financial results to vary from project to project and from quarter-to-quarter. Our revenue may therefore fluctuate significantly on
a quarterly basis, and we believe that quarter-to-quarter comparisons of our results should not be relied upon as an indication of future
performance.
The real estate industry is highly competitive and fragmented. The Company competes with other real estate developers on the basis of a
number of interrelated factors, including: quality, location, design, perceived value, price and reputation in the marketplace. We believe
that we have certain competitive advantages including desirable locations, attractive designs and higher quality features not generally
offered by other developers in the markets in which we compete.
We are subject to federal, state and local statutes, ordinances, rules and regulations regarding, among other things, zoning, building permits,
environmental standards, building moratoriums and building codes. Permits and approvals mandated by regulation for development of any
magnitude are often numerous, significantly time-consuming and onerous to obtain, and not guaranteed. We believe that our real estate
operations are in substantial compliance with all applicable regulations.
The real estate division administrative offices are located within the Company’s corporate offices in Melbourne, Florida.
Item 1A. Risk Factors.
Our business involves various risks associated with the operations of our Company. To provide a framework to understand our operating
environment, we are providing a brief explanation of the significant risks associated with our business. Although we have tried to identify
and discuss key risk factors, others could emerge in the future. Each of the following risks could affect our performance.
We derive a significant portion of our revenue from a small group of customers. The loss of one or more of these customers could
negatively impact our revenue and results of operations.
Our electrical construction customer base is highly concentrated. For the year ended December 31, 2018, our top three customers
accounted for approximately 57.2% of our consolidated revenue, as discussed in note 11 to our consolidated
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financial statements herein. Our revenue could materially decline if one or more of our significant customers terminated our business
relationship. Revenue under our contracts with significant customers may vary substantially from period-to-period. Reduced demand for
our services or the loss of one or more of these customers, if not replaced by other business, would result in a decrease in revenue and
profits, and could have a material impact on our results of operations.
The electrical construction industry is highly competitive.
The electrical construction business is highly competitive. We compete with other independent contractors, including larger regional and
national firms that may have financial, operational, technical and marketing resources that exceed our own. We also face competition from
existing and prospective customers establishing or augmenting in-house service and organizations that employ personnel who perform
some of the same types of services as those provided by us. Some of our competitors may have lower cost structures and may, therefore, be
able to provide their services at lower rates than we can provide. Many of our current and potential competitors, especially our competitors
with national scope, also may have significantly greater financial, technical and marketing resources than we do. If we fail to compete
favorably with new or existing competitors, our results of operations and financial condition could be adversely affected.
Our business is affected by the spending patterns of our customers, exposing us to variable quarterly results.
Our revenues are primarily driven by the spending patterns of our customers, which can vary significantly from period-to-period, as well as
seasonal variations. These variations are influenced by available system outages, bidding seasons, customers’ budgetary constraints,
holidays, weather and hours of daylight, which can have a significant impact on our gross margins.
An adverse change in economic conditions in the electric utility industry might reduce the demand for our services.
Because a substantial portion of our electrical construction work is performed for customers in the electric utility industry, an adverse
change in economic conditions in the electric utility industry could impair the financial condition of many of our customers, which may
cause them to reduce their capital expenditures and demand for our services.
Skilled labor shortages and increased labor costs may negatively affect our ability to compete for new projects.
In our electrical construction business, we have from time to time experienced shortages of certain types of qualified personnel. The
commencement of new, large-scale infrastructure projects, increased demand for infrastructure improvements, departure of workers to
storm affected locations and the aging utility workforce reduce the pool of skilled labor available to us, even if we are not awarded such
projects. As a result of these factors, the supply of experienced linemen and supervisors may not be sufficient to meet our expected demand
and we may not be able to allocate or hire a sufficient number of project managers for new electrical construction projects. We may also
spend considerable resources training employees who may then be hired by our competitors, forcing us to spend additional funds to attract
personnel to fill those positions. If we were unable to retain sufficient qualified personnel at a reasonable cost, or at all, we would be unable
to staff new and existing projects, which would reduce our revenue and profits.
Our revenue recognition accounting policies may result in a reduction or elimination of previously reported profits.
As discussed in Critical Accounting Estimates and in the notes to our consolidated financial statements included herein, a significant
portion of our revenue in our electrical construction operations is recognized using the cost-to-cost method, which is standard for fixed-
price contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of
costs incurred to date to the total estimated costs at completion of the performance obligation. Revenue is recorded proportionally as costs
are incurred.
Due to the nature of the work required to be performed on many of the performance obligations, the estimation of total revenue and cost at
completion is complex, subject to many variables and requires significant judgment. We estimate variable consideration at the most likely
amount we expect to receive. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of
cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The estimates of
variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an
assessment of all information (historical, current and forecasted) that is reasonably available to us.
The earnings or losses recognized on individual contracts are based on these estimates of contract revenue, costs and profitability. The cost
of labor and materials, however, may vary from the costs we originally estimated. These variations, along with other risks inherent in
performing fixed-price contracts, may cause actual revenue and gross profit for a project to differ from those we originally estimated and
may result in reduced profitability or losses on projects. Depending upon the size of a particular project, variations from the estimated
contract costs may have a significant impact on our operating results for any quarter or year.
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We possess a significant amount of accounts receivable and costs and estimated earnings in excess of billings assets.
We extend credit to our customers as a result of performing work under contract prior to billing our customers for that work. These
customers mainly include electric utilities. As of December 31, 2018, we had net accounts receivable of $22.2 million and costs and
estimated earnings in excess of billings of $12.0 million. We periodically assess the credit risk of our customers and continuously monitor
the timeliness of payments. Slowdowns in the industries we serve may impair the financial condition of one or more of our customers and
hinder their ability to pay us on a timely basis or at all. The failure or delay in payment by our customers may reduce our cash flows and
adversely impact our liquidity and profitability.
Amounts included in our backlog may not result in revenue or translate into profits.
Backlog for our electrical construction operations as of December 31, 2018 was $214.5 million, which represents the estimated amount of
revenue that we expect to realize from work to be performed on uncompleted contracts, including new contractual agreements on which
work has not begun. Of the total backlog, $170.1 million is attributable to MSAs (other than project-specific firm contracts under MSAs).
We determine the estimated amount of backlog for work under MSAs by using recurring historical trends in current MSAs and projected
customer needs based upon ongoing communications with the customer. These service agreements do not require our customers to award a
minimum amount of contracts and are cancelable on short notice. To the extent that our customers cancel their contracts with us or reduce
their requirements during a particular period for any reason, we will not realize revenue or profit from the associated backlog. Furthermore,
contracts included in our backlog may not be profitable. We may experience variances in the realization of backlog revenue because of
project delays or cancellations, external market factors and economic factors beyond our control. Even if we realize all of the revenue from
the projects in our backlog, there is no guarantee of profit from the projects awarded under MSAs. Given these factors and our method of
calculating backlog, our backlog at any point in time may not accurately represent the revenue that we expect to realize during any period,
and our backlog as of the end of the year may not be indicative of the revenue we expect to earn in the following year and should not be
viewed or relied upon as a stand-alone indicator. Consequently, we cannot provide assurance as to our customers’ requirements or our
estimates of backlog and should we receive less revenue than expected, our results of operations and financial condition may be adversely
affected. For further discussion on how we calculate backlog for our business, please refer to the information set forth in “Item 1.
Business” under the caption “Backlog.”
Our projects are subject to numerous hazards. If we do not maintain an adequate safety record, we may be ineligible to bid on certain
projects, may be terminated from existing projects and may have difficulty procuring adequate insurance.
Hazards experienced as a result of our electrical construction operations include electrocutions, fires, mechanical failure and transportation
accidents. These hazards can cause and have caused personal injury and loss of life, severe damage to or destruction of property and
equipment, and other consequential damages, including blackouts, and may result in suspension of our operations on a project, large
damage claims, and, in extreme cases, criminal liability. At any given time, we are subject to workers’ compensation claims and claims by
employees, customers and third parties for property damage, loss of life and personal injuries resulting from such hazards or other
workplace accidents. Further, regulatory changes implemented by the Occupational Safety and Health Administration may impose
additional costs on us. Notwithstanding our investment of substantial resources in occupational health and safety programs, our industry
involves a high degree of operational risk and we may be unable to avoid accidents resulting from the hazards described above and the
associated liability exposure, which may be significant. Furthermore, if serious accidents or fatalities were to occur or if our safety record
were to deteriorate, we may become ineligible to bid on certain projects and may be terminated from existing projects, our reputation and
our prospects for future projects may be negatively affected, and we may be required to expend additional resources on health and safety
programs. In addition, if our safety record were to significantly deteriorate, it would become more difficult and expensive for us to procure
adequate insurance.
An inability to obtain bonding would have a negative impact on our operations and results.
On many of our projects we are required to provide performance bonds to secure our contractual commitments. We have not experienced
difficulty in obtaining bonding. However, if we were unable to obtain surety bonds in the future, or were required to post collateral in order
to obtain surety bonds, our ability to obtain new contracts would be adversely affected. This may have a material adverse effect on our
results of operations and financial condition.
Our capital expenditures may fluctuate as a result of changes in business requirements.
Our anticipated capital expenditure requirements, primarily for property and equipment for our electrical construction operation, may vary
from time to time as a result of the level of our electrical construction operations. Increased capital expenditures will use cash flow and may
increase our borrowing costs if cash for capital expenditures is not available from operations.
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We may be unable to secure sufficient independent subcontractors to fulfill our obligations, or our independent subcontractors may fail
to satisfy their obligations.
We utilize independent subcontractors to complete work on a portion of our projects. If we are unable to secure independent subcontractors
at a reasonable cost or at all, we may be delayed in completing work under a contract or the cost of completing the work may increase. In
addition, we may have disputes with these independent subcontractors arising from, among other things, the quality and timeliness of the
work they performed. Any of these factors may adversely affect the quality of our service, our ability to perform under certain contracts
and the relationship with our customers, which could have an adverse effect on our results of operations, cash flows and liquidity.
Our failure to properly manage projects, or project delays, may result in additional costs or claims, which could have a material adverse
effect on our operating results, cash flows and liquidity.
Certain of our engagements involve large-scale, complex projects. The quality of our performance on such a project depends in large part
upon our ability to manage our client relationship and the project itself and to timely deploy appropriate resources, including third-party
contractors and our own personnel. Our results of operations, cash flows and liquidity could be adversely affected if we miscalculate the
resources or time needed to complete a project with capped or fixed fees, or the resources or time needed to meet contractual milestones.
Additionally, delays on a particular project, including permitting, material and weather delays, may cause us to incur costs for standby pay,
and may lead to personnel shortages on other projects scheduled to commence at a later date. In addition, some of our agreements require
that we share in cost overages or pay liquidated damages if we do not meet project deadlines; therefore, any failure to properly estimate or
manage costs, or delays in completion of projects, could subject us to penalties, which could adversely affect our results of operations, cash
flows and liquidity. Further, any defects or errors, or failures to meet our customers’ expectations could result in large damage claims
against us, and because of the substantial cost of, and potentially long lead-times necessary to acquire certain of the materials and
equipment used in our more complex projects, damage claims may substantially exceed the amount we can charge for our associated
services.
Our business may be affected by difficult work sites and environments, which could cause delays and increase our costs.
We perform work under a variety of conditions, including, but not limited to, difficult and hard to reach terrain and difficult site conditions.
Weather changes can materially change work site conditions after initial inspection and bid submittal. Performing work under such
conditions can result in project delays or cancellations, potentially causing us to incur additional unanticipated costs, reductions in revenues
or the payment of liquidated damages. In addition, most of our contracts require that we assume the risk should actual site conditions vary
from those expected.
Our unionized workforce and related obligations could adversely affect our operations.
Certain of our employees are represented by labor unions and collective bargaining agreements. Although all such collective bargaining
agreements prohibit strikes and work stoppages, we cannot be certain that strikes or work stoppages will not occur despite the terms of
these agreements. Strikes or work stoppages would adversely impact relationships with our customers and could cause us to lose business
and decrease our revenue. Additionally, as current agreements expire, the labor unions may not be able to negotiate extensions or
replacements on terms favorable to their members, or at all, or avoid strikes, lockouts or other labor actions from time to time that may
affect their members. Therefore, it cannot be assured that new agreements will be reached with employee labor unions as existing contracts
expire, or on terms that we find desirable. Any labor action against us relating to failure to reach an agreement with employee labor unions
could have a material adverse effect on our liquidity, cash flows and results of operations.
We may be required to contribute cash to meet our underfunded obligations in certain multi-employer pension plans.
Our collective bargaining agreements generally require us to participate with other companies in multi-employer pension plans. To the
extent those plans are underfunded, the Employee Retirement Income Security Act of 1974, as amended by the Multi-Employer Pension
Plan Amendments Act of 1980, may subject us to substantial liabilities under those plans if we withdraw from them or they are terminated
or experience a mass withdrawal.
In addition, the Pension Protection Act of 2006 added special funding and operational rules generally applicable to plan years beginning
after 2007 for multi-employer plans that are classified as “endangered,” “seriously endangered,” or “critical” status. Plans in these
classifications must adopt measures to improve their funded status through a funding improvement or rehabilitation plan, which may
require additional contributions from employers (which may take the form of a surcharge on benefit contributions) and/or modifications to
retiree benefits. A number of multi-employer plans to which we contribute or may contribute in the future could have “endangered,”
“seriously endangered” or “critical” status. The amount of additional funds we may be obligated to contribute to these plans in the future
cannot be estimated, as such amounts will likely be based on future work that requires the specific use of union employees covered by these
plans, and the amount of that future work and the number of employees that may be affected cannot reasonably be estimated. Our
performance of a significant amount of future services in areas that require us to utilize unionized employees covered by these affected
plans, or a deterioration in the
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funding status of any of the plans to which our operating units contribute, could require significant additional contributions, which could
detrimentally affect our results of operations, financial condition or cash flows if we are not able to adequately mitigate these costs.
Adverse weather conditions and climate change risk expose us to variable quarterly results.
Most of our work is performed outdoors and as a result, our results of operations can be adversely impacted by extended periods of
inclement weather. Any weather related delays in the completion of, or which increase the cost of, our projects could adversely affect our
revenue and results of operations in any one or more of our reporting periods. We cannot predict with certainty whether climate change is
occurring and, if so, at what rate. However, the physical effects of climate change could have a material adverse effect on our properties,
operations and business. The potential physical impacts of climate change on our operations are highly uncertain. Climate change may
result in, among other things, changing rainfall patterns, changing storm patterns and intensities and changing temperature levels. Because
our operating results are significantly influenced by weather, substantial changes in historical weather patterns could significantly impact
our future operating results. For example, if climate change results in a greater amount of rainfall, snow, ice, flooding or other less
accommodating weather over a greater period of time in a given period, we could experience reduced productivity, which could negatively
impact our revenue and gross margins.
Environmental risks.
We are subject to numerous federal, state, local and environmental laws and regulations governing our operations, including the handling,
transportation and disposal of non-hazardous and hazardous substances and wastes, as well as emissions and discharges into the
environment, including discharges to air, surface water and groundwater and soil. We also are subject to laws and regulations that impose
liability and cleanup responsibility for releases of hazardous substances into the environment. Under some of these laws and regulations,
such liabilities can be imposed for cleanup of previously operated properties regardless of whether we directly caused the contamination or
violated any law at the time. The presence of any contamination from substances or wastes could interfere with ongoing operations. In
addition, we could be held liable for significant penalties and damages under certain environmental laws and regulations and also could be
subject to a revocation of our permits, which could materially and adversely affect our business and results of operations.
From time to time, we may incur costs and obligations for correcting environmental noncompliance matters and for remediation at or
relating to our operations. We believe that we are currently in compliance with our environmental obligations and that any such obligations
should not have a material adverse effect on our business or financial performance.
Climate change issues may result in the adoption of new environmental regulations that may unfavorably impact us, our suppliers, our
customers, and subsequently effect how we conduct our businesses. This could also cause us to incur additional direct costs in complying
with any new environmental regulations, as well as increased indirect costs resulting from our customers, suppliers, or both, incurring
additional compliance costs that are passed on to us. These costs may adversely impact our operations and financial condition. In addition,
developments in federal and state legislation and regulation on climate change could result in increased capital expenditures to improve the
energy efficiency of our existing properties, equipment and our processes without a corresponding increase in revenue.
Our operating results may vary significantly from period-to-period.
Our periodic results may be materially and adversely affected by:
•
•
•
•
•
•
•
•
•
•
•
•
the timing and volume of work under contract;
changes in national, regional, local and general economic conditions;
the budgetary spending patterns of customers;
variations in margins of projects performed during any particular quarter;
a change in the demand for our services;
increased costs of performance of our services caused by severe weather conditions;
increases in design and construction costs that we are unable to pass through to our customers;
the termination of existing agreements;
losses experienced in our operations that are not covered by insurance;
a change in the mix of our customers, contracts and business;
availability of qualified labor hired for specific projects; and
changes in bonding requirements applicable to existing and new agreements.
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Our actual costs may be greater than expected in performing our fixed-price and unit-price contracts.
We currently generate, and expect to continue to generate, a significant portion of our revenues and profits under fixed-price and unit-price
contracts. We must estimate the costs of completing a particular project when we bid for these types of contracts or when they are awarded
under our current MSAs. The actual cost of labor and equipment, however, may vary from the costs we originally estimated and we may
not be successful in recouping additional costs from our customers. These variations, along with other risks inherent in performing fixed-
price and unit-price contracts, may cause actual revenue and gross profits for a project to differ from those we originally estimated and
could result in reduced profitability or losses on projects due to changes in a variety of factors such as:
•
•
•
•
•
•
•
•
•
•
•
•
failure to properly estimate costs of engineering, material, equipment or labor;
unanticipated technical problems with the materials or services being supplied by us, which may require us to incur additional
costs to remedy the problem;
project modifications that create unanticipated costs;
changes in costs of equipment, materials, labor or subcontractors;
the failure of our suppliers or subcontractors to perform;
difficulties in our customers obtaining required governmental permits or approvals;
site conditions that differ from those assumed in the original bid (to the extent contract remedies are unavailable);
the availability and skill level of workers in the geographic location of the project;
an increase in the cost of fuel or other resources;
changes in local laws and regulations;
delays caused by local weather conditions, third parties or customers; and
quality issues requiring rework.
We could be adversely affected by the loss of key management personnel.
Our future success depends, to a significant degree, on the efforts of our executive officers and senior management, including those of our
subsidiaries. Other than with respect to our Chief Executive Officer, we do not have employment agreements with any of our employees.
We believe that key members of our senior management possess valuable industry knowledge, relationships and experience that are
important to the successful operation of our business. The relationships between our executive officers and senior management and our
customers are important to our being retained as a service provider. We are also dependent upon our project managers and field supervisors
who are responsible for managing and drawing employees to our projects. There can be no assurance that any individual will continue in
his or her capacity for any particular period of time. Industry-wide competition for managerial talent in electrical construction has increased
and the loss of one or more of our key employees could negatively impact our ability to manage our business and relationships with our
customers. The loss of any of our executive officers or senior management could adversely affect our financial condition and results of
operations.
We engage in real estate activities which are speculative and involve a high degree of risk.
The real estate industry is highly cyclical by nature and future market conditions are uncertain. Factors which adversely affect the real
estate and homebuilding industries, many of which are beyond our control, include:
•
•
•
•
•
•
•
•
the availability and cost of financing;
unfavorable interest rates and increases in
inflation;
overbuilding or decreases in demand;
changes in national, regional and local economic conditions;
cost overruns, inclement weather, and labor and material shortages;
the impact of present or future environmental legislation, zoning laws and other regulations;
availability, delays and costs associated with obtaining permits, approvals or licenses necessary to develop property;
and
increases in real estate taxes and other local government fees.
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Changes in national and regional economic conditions, as well as local economic conditions where we conduct our real estate
development operations and where prospective purchasers of our homes live, can have a negative impact on our business. Adverse
changes in employment levels, job growth, consumer confidence, interest rates and population growth may reduce demand and depress
prices for our homes. This, in turn, can reduce our earnings.
The homebuilding industry is cyclical and is significantly affected by changes in general and local economic conditions, such as
employment levels; availability of financing for homebuyers; interest rates; consumer confidence; levels of new and existing homes for
sale; demographic trends and housing demand. If any adverse conditions affect our markets, they could have a proportionately greater or
lesser impact on us versus other homebuilding companies. An excess supply of housing, including homes held for sale by investors, banks
and other lending institutions, can also lower new residential property prices and reduce our gross margins on new home sales.
As a result of the foregoing, potential customers may be less willing or able to buy our homes, or we may take longer or incur more costs to
build them. We may not be able to recapture increased costs by raising prices in many cases because of market conditions or because we fix
our prices in advance of delivery by signing residential property sales contracts. We may be unable to change the affordability of our
residential properties to maintain our margins or satisfactorily address changing market conditions in other ways. In addition, cancellations
of residential property sales contracts from time to time may increase if homebuyers’ sentiment changes and they may fail to honor their
contracts.
The residential real estate development industry is highly competitive and, if others are more successful, our business could decline.
We operate in a very competitive environment, which is characterized by competition from a number of other real estate developers. We
compete with large national and regional development companies and with smaller local firms for land, financing, raw materials and skilled
management and labor resources. We also compete with the resale, or “previously owned” market. Increased competition could cause us to
increase our selling incentives and/or reduce our prices. Increased competition could also result in an oversupply of new homes or other
housing alternatives available, which could depress the prices at which we can sell our homes, and increase the length of time it takes us to
sell them. If a failure to compete effectively resulted in our selling fewer homes at lower prices, our results of operations and financial
condition would be adversely affected. Due to various contingencies, like delayed construction and buyer defaults, we may receive less cash
than we expected, which could affect our financial condition and results of operations.
If land is not available at reasonable prices, our sales and earnings could decrease.
Our real estate development operations depend on our ability to obtain land at reasonable prices for our developments. Changes in the
general availability of land, competition for available land, availability of financing to acquire land, zoning regulations that limit housing
density and other market conditions may hurt our ability to obtain land for new residential developments. If the supply of land appropriate
for development becomes more limited because of these factors, or for any other reason, the cost of land could increase, which could
reduce the profitability of our real estate development operations if we are unable to recover these costs in the sales prices of our homes,
and the number of homes that we build and sell could be reduced, which would reduce our revenue.
If the market value of our land and developments drops significantly, our profits could decrease.
The market value of our land and home inventories of our real estate development operations depends on market conditions. We acquire
land for replacement of land inventory and expansion within our current market. If housing demand decreases below what we anticipated
when we acquired our inventory, we may not be able to make profits similar to what we have made in the past, may experience less than
anticipated profits and may not be able to recover our costs when we sell our property or finished product. In the face of adverse market
conditions, we may have substantial inventory carrying costs or may have to sell land or completed units at a loss, which would have an
adverse effect on our results of operations and financial condition. Also, if there is a decrease in demand for homes such that the market
value of a home is less than purchase price reduced by the deposit made by a buyer, the buyer may elect to forfeit their deposit to us and
have no further obligation to purchase the home, resulting in a loss of revenue, operating income and a possible write-down of homes in
inventory.
Government regulations and legal challenges may delay the start or completion of our developments, increase our expenses or limit our
building activities, which could have a negative impact on our operations.
We must obtain the approval of numerous governmental authorities in connection with our real estate development operations, and these
governmental authorities often have broad discretion in exercising their approval authority. We incur substantial costs related to compliance
with legal and regulatory requirements. Any increase in legal and regulatory requirements may cause us to incur substantial additional
costs, as discussed below. Various local, state and federal statutes, ordinances, rules and regulations concerning building, zoning, sales and
similar matters apply to and/or affect the homebuilding industry. Municipalities may restrict or place moratoriums on the availability of
utilities, such as water and sewer taps. In some areas, municipalities may enact growth control initiatives, which will restrict the number of
building permits available in a given year.
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This governmental regulation affects construction activities as well as sales activities, mortgage lending activities and other dealings with
consumers. The industry also has experienced an increase in state and local legislation and regulations which limit the availability or use of
land. We may be required to apply for additional approvals or modify our existing approvals because of changes in local circumstances or
applicable law. Further, we may experience delays and increased expenses as a result of legal challenges to our proposed developments,
whether brought by governmental authorities or private parties.
Increases in taxes or government fees could increase our costs, and adverse changes in tax laws could reduce customer demand for our
homes.
Increases in real estate taxes and other local government fees, such as fees imposed on developers to fund schools, open space, road
improvements, or to provide low or moderate income housing, could increase our costs and have an adverse effect on our real estate
development operations if we are unable to recover these costs in the sales prices of our homes. In addition, increases in local real estate
taxes could adversely affect our potential customers who may consider those costs in determining whether to make a new home purchase
and decide, as a result, not to purchase one of our homes. In addition, any changes in the income tax laws that would reduce or eliminate tax
deductions or incentives to homeowners could make housing less affordable or otherwise reduce the demand for housing, which in turn
could reduce our sales and adversely affect our revenues. Specifically, the enactment of the Tax Cuts and Jobs Act (the “Tax Act”), which
was enacted in December 2017, establishes new limits on the federal tax deductions individual taxpayers may take on mortgage loan
interest payments and on state and local taxes, including property taxes. These changes could reduce the actual or perceived affordability of
homeownership, which could adversely affect demand for and sales prices of new homes.
Our real estate business is concentrated in Florida, which increases our exposure to local adverse events.
In our real estate development operations, we currently develop and sell homes only on the east coast of Central Florida. As a consequence,
our exposure to local adverse events, such as natural disasters or changes in economic conditions, is increased. In particular, Florida is
affected by tropical storms and hurricanes, which can damage or destroy buildings. The occurrence of such a storm or other natural disaster
could result in delays in construction and shortages and increased costs of labor and building materials. Any such delays or additional costs
could adversely affect the profitability of our real estate development operations.
Additionally, the inability of property owners to obtain cost-effective insurance could have an adverse effect on demand for property in our
markets, which could reduce our revenue. Furthermore, there are periods of time during which insurance companies will not write policies
because of the presence of a named storm that may pass over the areas in which we sell homes. During these periods, home closings in
areas that could be affected by such a storm will be delayed until the risk of the storm has passed and the required insurance can be
obtained.
Adverse weather conditions and conditions in nature beyond our control could significantly impact our revenue and profitability.
In our real estate development operations, adverse weather conditions and natural disasters, such as, but not limited to, hurricanes,
tornadoes, floods and fires, can have serious effects on our ability to perform work. We also may be affected by unforeseen engineering,
environmental or geological problems. Any of these adverse events or circumstances could cause delays in the completion of, or increase
the cost of, our projects and, as a result, could adversely affect our sales, earnings and profitability.
In addition, approaching storms require that sales, development and construction operations be suspended in favor of storm preparation
activities such as securing construction materials and equipment. After a storm has passed, construction-related resources such as sub-
contracted labor and building materials are likely to be redeployed to hurricane recovery efforts around the State of Florida.
Governmental permitting and inspection activities may similarly be focused primarily on returning displaced residents to homes damaged
by the storms, rather than on new construction activity. Depending on the severity of the damage caused by the storms, disruptions such as
these could last for several months.
If we experience shortages of labor and supplies or other circumstances beyond our control, there could be delays or increased costs in
developing our homes, which could adversely affect our operating results.
Our ability to develop land and construct homes may be affected by circumstances beyond our control, including: work stoppages, labor
disputes and shortages of qualified trades people, such as carpenters, roofers, electricians and plumbers; lack of availability of adequate
utility infrastructure and services; our need to rely on local subcontractors who may not be adequately capitalized or insured; and shortages,
or delays in availability, or fluctuations in prices of, building materials. Any of these circumstances could give rise to delays in the start or
completion of, or increase the cost of, one or more of our developments. If we are not able to recover these increased costs by raising the
prices of our homes we might decide to postpone or cancel the development of projects on which we have not yet begun construction. If
that happens, our operating
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results could be harmed. Additionally, we may be limited in the amount we can raise sales prices by our customers’ unwillingness to pay
higher prices.
Product liability litigation and warranty claims that arise in the ordinary course of business may be costly, which could adversely affect
our business.
As a real estate developer, we are subject to construction defect and home warranty claims arising in the ordinary course of business. These
claims, which can include bodily injury claims and mold-related property damage claims among others, are common in the homebuilding
industry and can be costly. In addition, the costs of insuring against construction defect and product liability claims are high, and the
amount of coverage offered by insurance companies is currently limited. There can be no assurance that this coverage will not be further
restricted and become more costly. If we are not able to obtain adequate insurance against these claims, we may experience losses that
could have an adverse affect on our results of operations and financial condition, which could be material.
If we are not able to obtain suitable financing, our business may decline.
Our real estate development operations depend substantially on our ability to obtain financing for the development of our projects. If we
are not able to obtain suitable financing, our costs would increase and our revenue would decrease, or we could be precluded from
continuing our operations at current levels. Increases in interest rates can make it more difficult and expensive for us to obtain the funds we
need to operate our business, which would have an adverse affect on our profitability.
If our potential customers are not able to obtain suitable financing, our business may decline.
Our real estate development operations also depend on the ability of our potential customers to obtain mortgages for the purchase of our
homes. An increase in default rates, fewer loan products and stricter loan qualification standards may make it more difficult for some
borrowers to finance the purchase of our homes. Increases in the cost of home mortgage financing could prevent our potential customers
from purchasing our homes. In addition, where our potential customers must sell their existing homes in order to buy a new home from us,
increases in mortgage costs could prevent the buyers of our customers’ existing homes from obtaining the mortgages they need to complete
the purchase, which could result in our potential customers’ inability to buy a home from us. Furthermore, changes in government
sponsored entities involved in the residential mortgage market such as Fannie Mae and FHA could affect mortgage rates, down payment
requirements and our customers’ ability to obtain affordable financing, which could subsequently affect our customers’ ability to purchase
our products. If our potential customers or the buyers of our customers’ current homes are not able to obtain suitable financing, our sales
and revenue could decline.
We depend upon the availability and skill of subcontractors.
Substantially all our construction work is done by subcontractors. Accordingly, the timing and quality of our construction depends on the
availability and skill of those subcontractors. We do not have long-term contractual commitments with any particular subcontractors or
suppliers. Although we believe that our relationships with our subcontractors and suppliers are good, we cannot assure you that skilled
subcontractors will continue to be available to us at reasonable rates. The inability to contract with skilled subcontractors at reasonable
costs on a timely basis could limit our ability to build and deliver homes and could have a material adverse effect on the operating results of
our real estate development operations. Additionally, if there is an impairment, bankruptcy or default by subcontractors or suppliers our
production, revenue and operating income may be adversely affected.
We rely on outside professionals whose errors could increase our costs.
We often collaborate with numerous professionals such as architects and engineers in the development of our real estate projects. In the
course of our business, we rely on the work of these professionals to help design and permit the homes that we develop, and errors in their
work can create significant increases in cost and delays in construction.
Our revenue and operating results have fluctuated in the past and may continue to do so in the future.
Our revenue and operating results from real estate development operations are subject to fluctuations. Because we typically do not have
more than one or two projects under development at any time, factors such as the timing of the start of construction of new projects, the
timing of receipt of regulatory approvals for development and construction and others can cause our revenue and operating results to vary
from period to period and from year to year. Accordingly, the historical financial performance of our real estate development operations is
not necessarily a meaningful indicator of future results for any particular period, and quarter-to-quarter comparisons should not be relied
upon as an indicator of future performance.
We may be subject to environmental liabilities that could adversely affect our results of operations or the value of our properties.
The development and sale of real property creates a potential for environmental liability on our part as owner and developer, for our own
acts as well as the acts of prior owners, current owners or past owners of adjacent parcels. If hazardous substances are
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discovered on or emanating from any of our properties, we may be held liable for costs and liabilities relating to those hazardous
substances. Should a substantial environmental hazard be found on any of our properties, our results of operations and the value of the
contaminated property could be adversely affected.
Increased insurance risk could negatively affect our business.
Insurance and surety companies may take actions that could negatively affect our business, including increasing insurance premiums,
requiring higher self-insured retentions and deductibles, requiring additional collateral or covenants on surety bonds, reducing limits,
restricting coverages, imposing exclusions, and refusing to underwrite certain risks and classes of business. Any of these actions may
adversely affect our ability to obtain appropriate insurance coverage at reasonable costs, which could have a material adverse effect on our
business.
Changes in tax laws.
Changes in tax laws or tax rates may have a material impact on our future cash expended for taxes, effective tax rate or deferred tax assets
and liabilities. These conditions are beyond our control and may have a significant impact on our business, results of operations, liquidity,
and financial position. See “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations” and note 3 to
the consolidated financial statements for additional information on the impact of the Tax Act.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
Borrowings under our credit facility are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt
service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same, and net income and
cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.
We could be adversely affected by environmental liabilities associated with our former mining business.
The Company was previously engaged in mining activities and disposed of our last mining property over 15 years ago. Although we are not
aware of any current environmental investigations relating to previously owned sites, we could still be liable for previous activities at such
sites. For example, in 2015 we completed remediation activities at a mining site which we sold over 50 years ago, as discussed in note 4 to
the consolidated financial statements.
The violation of our debt covenants imposed by our credit facility could impact our access to that credit facility and therefore our cash
flows.
Our debt arrangements contain various financial and other covenants including, but not limited to: minimum tangible net worth, outside
debt limitation, maximum debt to tangible net worth ratio and fixed charge coverage ratio. Our loans also have cross-default provisions
whereby any default under any loans of the Company (or its subsidiaries) with the lender will constitute a default under all of the other
loans of the Company (and its subsidiaries) with the lender. Although we are in compliance with all covenants, if we were to experience
substantial losses, absent a modification of the loan agreement or a waiver, this could result in a violation of the financial covenants. A
violation of our financial covenants will give the right to our lender to accelerate our loans. Under these circumstances, there can be no
assurance that we could obtain a modification or waiver. The acceleration of all of our loans would adversely affect our cash flows and
consequently our results of operations.
Failure to protect critical data and technology systems adequately could materially affect our operations.
We use our own information technology systems as well as those of business partners to manage our operations and other business
processes and to protect sensitive information maintained in the normal course of business. Third-party security breaches, employee error,
malfeasance or other irregularities may compromise our measures to protect these systems and may result in persons obtaining
unauthorized access to our or our customers’ data or accounts. The occurrence of any such event could have a material adverse effect on
our business.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
For information with respect to the principal properties utilized in the Company’s operations, see “Item 1. Business - Properties.”
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Item 3. Legal Proceedings.
The Company is not currently involved in any material legal proceedings, having substantially completed the Environmental Protection
Agency remediation matter described in note 4 to the consolidated financial statements in this Form 10-K.
The Company is involved in various legal claims arising in the ordinary course of business. The Company has concluded that the ultimate
disposition of these matters should not have a material adverse effect on the Company’s consolidated financial position, results of
operations, or liquidity.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Our Common Stock is listed on the NYSE American under the symbol GV. Our Common Stock is the longest traded security on the NYSE
American and its predecessor exchanges, having commenced trading in 1906. The following table shows the reported high and low sales
price at which our Common Stock was traded in 2018 and 2017:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2018
2017
High
Low
High
Low
$
5.35 $
4.63
4.96
4.32
3.60 $
3.70
4.11
1.98
8.65 $
6.08
6.30
6.38
5.00
4.00
4.00
4.05
As of March 7, 2019, there were 5,286 holders of record of our Common Stock.
We have paid no cash dividends on our Common Stock since 1933, and it is not expected that we will pay any cash dividends on our
Common Stock in the immediate future.
We have had a stock repurchase plan since September 17, 2002, that was last amended by the Board of Directors on March 7, 2019.
Through December 31, 2018, we have repurchased 3,206,171 shares of our Common Stock at a cost of $3,260,098 (average cost of $1.02
per share). We may repurchase our shares either in the open market or through private transactions. The volume of the shares to be
repurchased is contingent upon market conditions and other factors. We currently hold the repurchased stock as Treasury Stock, reported at
cost. Also included as Treasury Stock are 17,358 shares purchased prior to the current stock repurchase plan at a cost of $18,720.
Issuer Purchases of Equity Securities (1)
(a)
Total number of
shares (or units)
purchased
(b)
Average price
paid per share
(or unit)
(c)
Total number of
shares (or units)
purchased as part
of publicly
announced plans
or programs
(d)
Maximum number (or
approximate dollar
value) of shares (or
units) that may yet be
purchased under the
plans or programs
861,111 $
861,111 $
2.29
2.29
861,111
293,829
861,111
293,829 (1)
Period
December 1, 2018 to
December 31, 2018
Total
(1) The stock repurchase plan became effective on September 17, 2002, and was last amended by the Board of Directors on March 7,
2019. The Company resumed the repurchase of its shares under the plan on December 10, 2018. The March 7, 2019 amendment
expanded the original purchase amount of 3,500,000 shares by an additional 2,500,000 shares. There is currently available for purchase
through September 30, 2020, a maximum of 2,726,120 shares.
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Item 6. Selected Financial Data.
The following table sets forth summary consolidated financial information for each of the years in the five-year period ended
December 31, 2018:
Year Ended December 31,
2018
2017
2016
2015
2014
(In thousands except per share and share amounts)
Continuing operations
Revenue
Electrical construction
Real estate development
Total revenue
Income before taxes from continuing operations
Income tax provision
Income from continuing operations
Discontinued operations (1)
Loss from operations, net of tax
Net income (loss)
Earnings (loss) per share — basic and diluted
Continuing operations
Discontinued operations
Net income (loss)
Weighted average shares outstanding — basic and
diluted
Balance sheet data
Total assets (2)
Long term debt including current portion, net (2)
Stockholders’ equity
Working capital
$
$
$
$
$
$
136,527
1,622
138,149
6,825
1,797
5,028
—
5,028
0.20
—
0.20
$
$
$
$
$
$
109,154
4,799
113,954
9,609
1,036
8,573
(276)
8,298
0.34
(0.01 )
0.33
$
$
$
$
$
$
125,771
4,652
130,423
20,918
7,810
13,108
(108)
13,000
0.52
—
0.51
$
$
$
$
$
$
119,617
955
120,571
8,204
3,378
4,826
(333)
4,493
0.19
(0.01 )
0.18
$
$
$
$
$
$
94,827
3,537
98,363
778
653
125
(444)
(319)
—
(0.02 )
(0.01 )
25,411,623
25,451,354
25,451,354
25,451,354
25,451,354
$
112,548
$
29,191
59,605
33,078
$
93,632
22,251
56,548
35,995
$
91,302
22,333
48,251
32,993
$
81,164
26,472
35,251
25,498
79,910
26,284
30,758
19,674
The total of the above categories may differ from the sum of the components due to rounding.
___________________
(1) For information as to Discontinued Operations, see note 4 to the consolidated financial
statements.
(2) Reflects the presentation of debt issuance costs in accordance with the adoption of Accounting Standard Update No. 2015-03 and
2015-15, which resulted in a reduction of total assets and long term debt of $60,000 as of December 31, 2014.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
We make “forward-looking statements” within the meaning of the “safe harbor” provision of the Private Securities Litigation Reform Act
of 1995 throughout this document. You can identify these statements by forward-looking words such as “may,” “will,” “expect,”
“anticipate,” “believe,” “estimate,” “plan,” and “continue” or similar words. We have based these statements on our current
expectations about future events. Although we believe that our expectations reflected in or suggested by our forward-looking statements
are reasonable, we cannot assure you that these expectations will be achieved. Our actual results may differ materially from what we
currently expect. Factors that may affect the results of our operations include, among others: the level of construction activities by public
utilities; the concentration of revenue from a limited number of utility customers; the loss of one or more significant customers; the timing
and duration of construction projects for which we are engaged; our ability to estimate accurately with respect to fixed-price construction
contracts; and heightened competition in the electrical construction field, including intensification of price competition. Other factors that
may affect the results of our operations include, among others: adverse weather; natural disasters; effects of climate changes; changes in
generally accepted accounting principles; ability to obtain necessary permits from regulatory agencies; our ability to maintain or increase
historical revenue and profit margins; general economic conditions, both nationally and in our region; adverse legislation or regulations;
availability of skilled construction labor and materials and material increases in labor and material costs; and our ability to obtain
additional and/or renew financing. Other important factors which could cause our actual results to differ materially from the forward-
looking statements in this document include, but are not limited to, those discussed in the “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” and “Risk Factors” sections and should be considered while evaluating our business,
financial condition, results of operations and prospects.
You should read this report in its entirety and with the understanding that our actual future results may be materially different from what
we expect. We may not update these forward-looking statements, even in the event that our situation changes in the future, except as
required by law. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
Overview
We are a provider of electrical construction services for the utility industry and industrial customers primarily in the Southeast, mid-
Atlantic and Texas-Southwest regions of the United States. To a considerably lesser extent we are a developer of real estate residential
properties on the east coast of Central Florida. We report our results under two reportable segments, electrical construction and real estate
development. For the year ended December 31, 2018, our total consolidated revenue grew 21.2% to $138.1 million from $114.0 million in
2017.
Through our subsidiaries, Power Corporation of America (“PCA”), Southeast Power Corporation (“Southeast Power”), C and C Power
Line, Inc. (“C&C”) and Precision Foundations, Inc. (“PFI”), we are engaged in the construction of electrical infrastructure for the utility
industry and industrial customers. Southeast Power performs electrical contracting services including the construction of transmission lines,
distribution systems, substations, and other electrical services. Southeast Power is headquartered in Titusville, Florida and has additional
offices in Bastrop, Texas and Spartanburg, South Carolina. C&C, headquartered in Jacksonville, Florida, is a full-service electrical
contractor that provides similar services as Southeast Power with a unionized workforce. PFI, headquartered in Port Orange, Florida,
acquired its operating assets from Southeast Power in August 2018 and constructs drilled pier foundations and installs concrete poles, direct
embeds and vibratory casings.
The electrical construction business is highly competitive and fragmented. We compete with other independent contractors, including
larger regional and national firms that may have financial, operational, technical and marketing resources that exceed our own. We also
face competition from existing and prospective customers establishing or augmenting in-house services and organizations that employ
personnel who perform similar services as those provided by us. In addition, a significant portion of our electrical construction revenue is
derived from a small group of customers that account for a substantial portion of our revenue in any given year. The revenue contribution
by any single customer or group of customers may significantly fluctuate from period-to-period. For example, for the years ended
December 31, 2018 and 2017, three of our customers accounted for approximately 57.2% and 58.7% of our consolidated revenue,
respectively. The loss of, or decrease in current demand from one or more customers, if not replaced, may result in a material decrease in
revenue, margin and profit.
Through our subsidiary Bayswater Development Corporation and its various subsidiaries (“Bayswater”), we are engaged in the acquisition,
development, management and disposition of land and improved properties along the east coast of Central Florida. Bayswater is
headquartered in Melbourne, Florida. Our customers are generally pre-retirement, retirement or second home buyers seeking higher
quality, low maintenance residences.
When we use either of the terms “homes” or “units,” we mean our residential properties, which include detached single-family homes,
townhomes and condominiums. References to our homebuilding revenues and similar references refer to revenues
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derived from the sales of our residential properties, in each case unless otherwise expressly stated or the context otherwise requires.
Critical Accounting Estimates
This discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which
have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial
statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenue and expense, and
related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, particularly those related to
electrical construction contracts. We base our estimates on historical experience and on various other assumptions that we believe to be
reasonable, under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities, that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or
conditions. Our management has discussed the selection and development of our critical accounting policies, estimates, and related
disclosures with the Audit Committee of the Board of Directors.
Revenue Recognition
Our significant accounting policies are detailed in note 1 to the consolidated financial statements. Changes to our accounting policies as a
result of adopting Accounting Standards Codification (“ASC”) Topic 606 Revenue from Contracts with Customers and all the related
amendments (“new revenue standard”) are discussed in note 1, note 2 and note 14 to the consolidated financial statements.
Fixed-Price Electrical Construction Contracts
We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms
are identified, the contract has commercial substance and collectability of consideration is probable. We generally recognize revenue over
time as we perform because of continuous transfer of control to the customer. Because of control transferring over time, revenue is
recognized based on the extent of progress towards completion of the performance obligation. We generally use the cost-to-cost measure of
progress for our contracts because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts.
Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to
date to the total estimated costs at completion of the performance obligation. Revenue is recorded proportionally as costs are incurred.
Due to the nature of the work required to be performed on many of our performance obligations, the estimation of total revenue and cost at
completion is complex, subject to many variables and requires significant judgment. We estimate variable consideration at the most likely
amount which we expect to receive. We include estimated amounts in the transaction price to the extent it is probable that a significant
reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our
estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on
an assessment of all information (historical, current and forecasted) that is reasonably available to us.
Contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to
exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of our contract
modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in
the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the
transaction price and our measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue
(either as an increase in or a reduction of revenue) on a cumulative catch-up basis.
We have a standard and disciplined quarterly estimated costs at completion process in which management reviews the progress and
execution of our performance obligations. Management must make assumptions and estimates regarding labor productivity and availability,
the complexity of the work to be performed, the availability of materials, the length of time to complete the performance obligation (e.g., to
estimate increases in wages and prices for materials and related support cost allocations), execution by our subcontractors, among other
variables. Based on this analysis, any quarterly adjustments to net revenue, cost of electrical construction revenue and the related impact to
operating income are recognized as necessary in the period they become known.
The accuracy of our revenue and profit recognition in a given period is almost solely dependent on the accuracy of our estimates of the cost
to complete each project. Our projects can be complex and in almost every case the profit margin estimates for a project will either increase
or decrease from the amount that was originally estimated at the time of bid. If a current estimate of total costs exceeds the total estimate of
revenue to be earned, on a performance obligation, the projected loss is recognized in full when determined. Accrued contract losses were
$680,000 as of December 31, 2018 and $201,000 as
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of December 31, 2017. The accrued contract losses as of both December 31, 2018 and December 31, 2017 are mainly attributable to
transmission projects experiencing unexpected construction issues.
The following table disaggregates our revenue for the years ended December 31 as indicated:
Electrical construction operations (1)
Southeast
mid-Atlantic
Texas-Southwest
Other electrical construction (2)
Total
Real estate development
Total revenue
___________________________
2018
2017
54,123,848 $
41,071,994
33,825,666
7,505,003
136,526,511
1,622,331
138,148,842 $
56,268,413
29,289,385
15,046,719
8,549,959
109,154,476
4,799,043
113,953,519
$
$
(1) Principal electrical construction operations include revenue from transmission lines, distribution systems, substations and drilled pier
foundations.
(2) Other electrical construction includes revenue from storm work, fiber optics and other miscellaneous electrical construction items.
We would have recognized $134,000 less revenue under legacy accounting practices for the year ended December 31, 2018 than we did
under the new revenue standard. This was attributable to the assessment of variable consideration and performance obligations within our
contractual arrangements.
The aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of December 31, 2018 was $36.4
million, all of which is expected to be satisfied within the next twelve months.
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YEAR ENDED DECEMBER 31, 2018 COMPARED TO YEAR ENDED DECEMBER 31, 2017
The following table presents a reconciliation of our operating income (loss) attributable to each of our reportable segments for the years
ended December 31 as indicated:
RESULTS OF OPERATIONS
Electrical construction
Revenue
Operating expenses
Costs of goods sold
Selling, general and administrative
Depreciation and amortization
(Gain) loss on sale of property and equipment
Total costs and expenses
Operating income
Real estate development
Revenue
Operating expenses
Costs of goods sold
Selling, general and administrative
Depreciation and amortization
Loss on sale of property and equipment
Total costs and expenses
Operating (loss) income
2018
2017
136,526,511 $
109,154,476
113,976,157
1,797,548
8,319,362
(178,114 )
123,914,953
12,611,558 $
86,714,412
1,587,101
7,086,361
75,847
95,463,721
13,690,755
1,622,331 $
4,799,043
1,012,098
890,951
21,279
507
1,924,835
(302,504 ) $
3,147,791
1,014,560
15,207
—
4,177,558
621,485
$
$
$
$
Operating income (loss) equals total operating revenue less operating costs and expenses inclusive of depreciation and amortization, and
selling, general and administrative expenses. Operating costs and expenses also include any gains or losses on the sale of property and
equipment. Operating income (loss) excludes interest expense, interest income, other income, and income taxes.
Revenue
Total revenue for the year ended December 31, 2018, increased 21.2% to $138.1 million, from $114.0 million in 2017, mainly due to the
increase in electrical construction operations.
Electrical construction revenue increased $27.4 million, or 25.1%, to $136.5 million for the year ended December 31, 2018, from $109.2
million in 2017. The increase in electrical construction revenue was mainly attributable to increases in projects awarded and work
completed in the Texas-Southwest and mid-Atlantic regions of $18.8 million and $11.8 million, respectively. This increase was primarily
due to both master service agreement (“MSA”) and non-MSA customer project activity for the year ended December 31, 2018. This
increase was partially offset by a decrease in Southeast operations revenue of $2.1 million, due to a decline in non-MSA customer projects
attributable to competitive pressures and a decrease in our Other operations revenue of $1.0 million, primarily fiber splicing.
Revenue from real estate development decreased to $1.6 million for the year ended December 31, 2018, from $4.8 million in 2017, mainly
due to the decline in the number of units sold and completed units available for sale.
Backlog
Our backlog represents future services to be performed under existing project-specific fixed-price and maintenance contracts and the
estimated value of future services that we expect to provide under our existing MSAs.
The following table presents our total backlog as of December 31, 2018 and 2017 along with an estimate of the backlog amounts expected
to be realized within 12 months and during the life of each of the MSAs. When awarded, our MSA initial terms range from one to seven
years. Most of the MSAs have renewal options ranging from one to three years at the option of
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the customer. The calculation assumes exercise of the renewal options by the customer. Revenue from assumed exercise of renewal options
represents $45.8 million, or 26.9%, of our total estimated MSA backlog as of December 31, 2018.
Backlog as of
December 31, 2018
Backlog as of
December 31, 2017
Electrical Construction Operations
Project-Specific Firm Contracts (1)
Estimated MSAs
Total
12-Month
$
$
44,373,384 $
57,464,231
101,837,615 $
Total
44,373,384 $
170,097,919
214,471,303 $
12-Month
27,110,793 $
83,124,471
110,235,264 $
Total
27,110,793
187,047,802
214,158,595
___________________________
(1)Amount includes firm contract awards under MSA agreements.
Our total backlog as of December 31, 2018, increased $313,000, or 0.1%, to $214.5 million, compared to $214.2 million as of
December 31, 2017. The increase in total backlog is primarily due to the increase in MSA firm projects, which includes the addition of four
new MSA customers, offset by existing MSA backlog run-off and adjustments to existing MSA backlog estimates.
Our 12-month backlog as of December 31, 2018 decreased $8.4 million, or 7.6%, to $101.8 million, mainly due to MSA backlog run-off
and adjustments to existing MSA backlog estimates.
Of our total backlog as of December 31, 2018, we expect approximately $101.8 million, or 47.5%, to be completed during 2019.
Backlog is estimated at a particular point in time and is not determinative of total revenue in any particular period. It does not reflect future
revenue from a significant number of short-term projects undertaken and completed between the estimated dates. Our electrical
construction revenue in 2018 exceeded our 12-month backlog as of December 31, 2017 by 23.9%.
The estimated amount of backlog for work under MSAs is calculated by using recurring historical trends inherent in current MSAs and
projected customer needs based upon ongoing communications with the customer. Our estimated backlog also assumes exercise of existing
customer renewal options. Certain MSAs are not exclusive to the Company and, therefore, the size and amount of projects we may be
awarded cannot be determined with certainty. Accordingly, the amount of future revenue from MSA contracts may vary substantially from
reported backlog. Even if we realize all the revenue from the projects in our backlog, there is no guarantee of profit from the projects
awarded under MSAs.
As of December 31, 2018 and 2017, estimated MSAs (other than project-specific firm contracts under MSAs) accounted for approximately
79.3% and 87.3% of total backlog, respectively. We plan to continue to grow our MSA business. MSA contracts are generally multi-year
and should provide improved operating efficiencies.
Backlog is not a term recognized under U.S. generally accepted accounting principles, but is a common measurement used in our industry.
While we believe that our methodology of calculation is appropriate, such methodology may not be comparable to that employed by some
other companies. Given the duration of our contracts and MSAs and our method of calculating backlog, our backlog at any point in time
may not accurately represent the revenue that we expect to realize during any period and our backlog as of the end of a fiscal year may not
be indicative of the revenue we expect to earn in the following fiscal year and should not be viewed or relied upon as a stand-alone
indicator. Consequently, we cannot provide assurance as to our customers’ requirements or our estimates of backlog.
Reconciliation of Backlog to our Remaining Unsatisfied Performance Obligation
The following table presents a reconciliation of our total backlog as of December 31, 2018 to our remaining unsatisfied performance
obligation as defined under U.S. generally accepted accounting principles:
Total Backlog
Estimated MSAs
Estimated Firm (1)
Total Unsatisfied Performance Obligation
_________________________
(1) Projects awarded, however backlog contract value was estimated as of December 31, 2018.
20
December 31, 2018
$
$
214,471,303
(170,097,919 )
(7,933,373 )
36,440,011
Table of Contents
The amount of total backlog differs from the amount of our remaining unsatisfied performance obligation as of December 31, 2018 and as
described in note 14 to the consolidated financial statements, primarily due to the inclusion of estimates of future revenue under MSA and
other service agreements within our backlog estimates, as described above.
Revenue estimates included in our backlog may be subject to change as a result of project accelerations, additions, cancellations or delays
due to various factors, including but not limited to: commercial issues, material deficiencies, permitting, regulatory requirements and
adverse weather. Our customers are not contractually committed to a specific level of services under our MSAs (other than project-specific
firm contracts under MSAs). While we did not experience any material cancellations during the current period, most of our contracts may
be terminated, even if we are not in default under the contract.
For further Backlog information, please refer to the information set forth in “Item 1. Business” under the caption “Backlog,” and “Item 1A.
Risk Factors.”
Operating Results
Total operating income decreased to $7.6 million for the year ended December 31, 2018, from $10.2 million in 2017, mainly due to an
increase in depreciation expense, a decrease in real estate development margin and lower margins on electrical construction projects.
Electrical construction operating income decreased to $12.6 million for the year ended December 31, 2018, from $13.7 million in 2017.
This decrease was primarily attributable to the change in electrical construction project mix to a higher level of lower margin work, mainly
due to escalating costs, competitive pressures and expansion into lower margin service lines. Also contributing to the decline in operating
income were higher depreciation and selling, general and administrative expenses.
Gross margin on electrical construction for the year ended December 31, 2018 was 16.5%, compared to 20.6% in 2017. Such gross margin
represents electrical construction revenue less electrical construction costs and expenses (excluding depreciation and amortization, selling,
general and administrative expenses, and (gain) loss on sale of property and equipment), divided by electrical construction revenue.
Real estate development operating results decreased to an operating loss of $303,000 for the year ended December 31, 2018, from operating
income of $621,000 in 2017, mainly due to the decrease in units sold and available for sale during the year ended December 31, 2018,
compared to the same prior year period.
Gross margin on real estate development for the year ended December 31, 2018 was 37.6%, compared to 34.4% in 2017. Such gross
margin represents real estate revenue less real estate costs and expenses (excluding depreciation and amortization, selling, general and
administrative expenses, and (gain) loss on sale of property and equipment), divided by real estate development revenue.
The following table provides a reconciliation of our net income to EBITDA (a non-GAAP financial measure) for the years ended December
31 as indicated:
Net income (GAAP as reported)
Interest expense, net of amount capitalized
Provision for income taxes, net (1)
Depreciation and amortization (2)
EBITDA
___________________________
$
$
2018
2017
5,027,751 $
875,646
1,796,946
8,436,972
16,137,315 $
8,297,751
665,268
871,762
7,217,901
17,052,682
(1) Provision for income tax, net is equal to the total amount of tax provision, which includes the tax benefit for discontinued operations.
(2) Depreciation and amortization include depreciation on property, plant and equipment and amortization of finite-lived intangible
assets.
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EBITDA, a non-GAAP performance measure used by management, is defined as net income plus: interest expense, provision (benefit) for
income taxes and depreciation and amortization, as shown in the table above. EBITDA, a non-GAAP financial measure, does not purport to
be an alternative to net income as a measure of operating performance or to net cash flows provided by operating activities as a measure of
liquidity. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly-titled
measures of other companies. We use, and we believe investors benefit from the presentation of, EBITDA in evaluating our operating
performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by
removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is
useful to investors and other external users of our financial statements in evaluating our operating performance because EBITDA is widely
used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, and depreciation
and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets,
capital structure and the method by which assets were acquired.
Using EBITDA as a performance measure has material limitations as compared to net income, or other financial measures as defined under
GAAP as it excludes certain recurring items which may be meaningful to investors. EBITDA excludes interest expense; however, as we
have borrowed money in order to finance transactions and operations, interest expense is an element of our cost structure and can affect our
ability to generate revenue and returns for our stockholders. Further, EBITDA excludes depreciation and amortization; however, as we use
capital and intangible assets to generate revenues, depreciation and amortization are a necessary element of our costs and ability to generate
revenue. Finally, EBITDA excludes income taxes; however, as we are organized as a corporation, the payment of taxes is a necessary
element of our operations. As a result of these exclusions from EBITDA, any measure that excludes interest expense, depreciation and
amortization and income taxes has material limitations as compared to net income. When using EBITDA as a performance measure,
management compensates for these limitations by comparing EBITDA and net income in each period, so as to allow for the comparison of
the performance of the underlying core operations with the overall performance of the company on a full-cost, after-tax basis. Using both
EBITDA and net income to evaluate the business allows management and investors to (a) assess our relative performance against our
competitors and (b) monitor our capacity to generate returns for our stockholders.
Costs and Expenses
Total costs and expenses increased by $26.8 million to $130.6 million for the year ended December 31, 2018, from $103.8 million in 2017,
primarily attributable to the increase in costs associated with the increase in electrical construction revenue, as well as increases in
depreciation and selling, general and administrative expenses. These increases were partially offset by the decrease in real estate
development revenue related costs and expenses.
The following table sets forth selling, general and administrative (“SG&A”) expenses for the years ended December 31 as indicated:
Electrical construction
Real estate development
Corporate
Total
$
$
2018
2017
1,797,548 $
890,951
4,647,976
7,336,475 $
1,587,101
1,014,560
4,009,654
6,611,315
SG&A expenses increased 11.0% to $7.3 million for the year ended December 31, 2018, from $6.6 million for the year ended December
31, 2017. The increase in SG&A expenses was mainly attributable to higher salary and wage related expenses for 2018, when compared to
2017. As a percentage of revenue, SG&A expenses decreased to 5.3% for the year ended December 31, 2018, from 5.8% in 2017, due
primarily to the aforementioned increase in revenue during 2018.
The following table sets forth depreciation and amortization expense for the years ended December 31 as indicated:
Electrical construction
Real estate development
Corporate
Total
$
$
2018
2017
8,319,362 $
21,279
96,331
8,436,972 $
7,086,361
15,207
116,333
7,217,901
Depreciation and amortization expense, which includes $62,000 of amortization expense for acquired intangibles, increased to $8.4 million
for the year ended December 31, 2018, from $7.2 million for the year ended December 31, 2017, as a result of an increase in capital
expenditures.
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Income Taxes
The following table presents our provision for income tax and effective income tax rate from continuing operations for the years ended
December 31 as indicated:
Income tax provision
Effective income tax rate
2018
2017
$
1,796,946
$
26.3 %
1,035,997
10.8 %
Our effective tax rate for the year ending December 31, 2018 is 26.3%. Our effective tax rate differs from the federal statutory rate of 21%
primarily due to state income taxes and nondeductible expenses. Our effective tax rate for the year ended December 31, 2017 was 10.8%.
The effective tax rate differs from the federal statutory rate of 34% mainly due to the Tax Act, enacted on December 22, 2017, resulting in a
one-time total net tax benefit of $2.5 million or 26% for the year ended December 31, 2017. This benefit is the result of the re-measurement
of our deferred tax assets and liabilities to the lower enacted corporate tax rate of 21%, which offsets the effects of state income taxes and
nondeductible expenses reduced by a significant domestic production activities deduction.
Working Capital Analysis
Liquidity and Capital Resources
Our primary cash needs have been for capital expenditures and working capital. Our primary sources of cash have been cash flow from
operations and borrowings under our lines of credit and equipment financing. As of December 31, 2018, we had cash and cash equivalents
of $11.4 million and working capital of $33.1 million, as compared to cash and cash equivalents of $18.5 million, and working capital of
$36.0 million as of December 31, 2017.
In addition to cash flow from operations, we have an $18.0 million revolving line of credit, of which $12.4 million was available for
borrowing as of December 31, 2018. This revolving line of credit is used as a Working Capital Loan, as discussed in note 7 to the
consolidated financial statements. We anticipate that this cash on hand, our credit facilities and our future cash flows from operating
activities will provide sufficient cash to enable us to meet our operating needs and debt requirements for the next twelve months.
Cash Flow Analysis
The following table presents our net cash flows for each of the years ended December 31 as indicated:
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Net decrease in cash, cash equivalents and restricted cash
Operating Activities
2018
6,819,485 $
(18,577,571)
4,528,655
(7,229,431) $
2017
8,132,463
(10,167,988)
(105,380)
(2,140,905)
$
$
Cash flows from operating activities are comprised of net income, adjusted to reflect the timing of cash receipts and disbursements
therefrom. Our cash flows are influenced by the level of operations, operating margins and the types of services we provide, as well as the
stages of our electrical construction projects.
Cash provided by our operating activities totaled $6.8 million for the year ended December 31, 2018, compared to cash provided by
operating activities of $8.1 million for 2017. The decrease in cash flows from operating activities was approximately $1.3 million and was
primarily due to the changes reflected in our net income of $3.3 million, offset by the changes in our accounts receivable and accrued
billings of $1.8 million. Operating cash flows normally fluctuate relative to the status of our electrical construction projects.
Days of Sales Outstanding Analysis
We evaluate fluctuations in our “accounts receivable and accrued billings” and “costs and estimated earnings in excess of billings on
uncompleted contracts,” for our electrical construction operations, by comparing days of sales outstanding (“DSO”). We calculate DSO as
of the end of any period by utilizing the respective quarter’s electrical construction revenue to determine sales per day. We then divide
“accounts receivable and accrued billings, net of allowance for doubtful accounts” at the end of the period, by sales per day, to calculate
DSO for accounts receivable. To calculate DSO for costs and estimated earnings in excess of billings, we divide “costs and estimated
earnings in excess of billings on uncompleted contracts,” by sales per day.
23
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For the quarters ended December 31, 2018 and 2017, our DSO for accounts receivable and accrued billings were 56 and 73, respectively,
and our DSO for costs and estimated earnings in excess of billings on uncompleted contracts were 30 and 20, respectively. The decrease in
our DSO for accounts receivable and accrued billings and the increase in our costs and estimated earnings in excess of billings for the
quarter ended December 31, 2018, when compared to the same quarterly period in 2017 was mainly due to the timing of project billings and
cash collections, as well as the aforementioned decrease in revenue. As of March 8, 2019, we have received approximately 99.9% of our
December 31, 2018 outstanding trade accounts receivable and have billed 68.7% of our costs and estimated earnings in excess of billings
balance.
Income Taxes Paid
Income tax payments decreased to a little over $1.0 million for the year ended December 31, 2018 from $4.5 million for the year ended
December 31, 2017. Taxes paid for the year ended December 31, 2018 included approximately $35,000, mainly for the 2017 tax liability,
and the remaining $1.0 million for the estimated 2018 income tax liability. Taxes paid for the year ended December 31, 2017 included
$500,000 for the 2016 income tax liability and the remaining $4.0 million for the estimated 2017 income tax liability.
Investing Activities
Cash used in investing activities for the year ended December 31, 2018, was $18.6 million, compared to cash used in investing activities of
$10.2 million for 2017. The increase in cash used in our investing activities for the year ended December 31, 2018 is attributable to an
increase in capital expenditures of $9.3 million when compared to 2017. Our capital expenditures are mainly for the purchases of
equipment, primarily trucks and heavy machinery, used by our electrical construction operations for the upgrading and replacement of
equipment. Our capital budget for 2019 is expected to total approximately $15.7 million, the majority of which is for continued upgrading
and purchases of equipment, for our electrical construction operations, mainly due to favorable purchasing opportunities. We plan to fund
these purchases through our cash on hand and equipment financing, consistent with past practices.
Financing Activities
Cash provided by financing activities for the year ended December 31, 2018, was $4.5 million, compared to cash used in financing
activities of $105,000 for 2017. Our financing activities for the current year consisted mainly of borrowings totaling $18.3 million as
follows: $10.5 million on our $27.49 Million Equipment Loan (previously $22.6 Million Equipment Loan) and borrowings of $7.8 million
on our Working Capital Loan (as such loans are defined in note 7 to the consolidated financial statements). These borrowings were offset
by repayments totaling $11.6 million, as follows: repayments of $6.1 million on our $27.49 Million Equipment Loan (previously $22.6
Million Equipment Loan), and repayments of $2.8 million on our Previous Working Capital Loan, repayments of $2.8 million on our
current Working Capital Loan (as such loans are defined in note 7 to the consolidated financial statements) and repayments of $107,000 on
our other long term debt (as described in note 7 to the consolidated statements). Our financing activities for the year ended December 31,
2018, also included the repurchase of 861,111 shares of common stock totaling $2.0 million, as discussed in note 10 to the consolidated
financial statements. Our financing activities for the year ended December 31, 2017 consisted mainly of repayments totaling $22.7 million,
as follows: $9.6 million on our $17.0 Million Equipment Loan, repayments of $7.6 million on our $10.0 Million Equipment Loan,
repayments of $3.1 million on our $22.6 Million Equipment Loan, repayments of $1.3 million on our $2.0 Million Equipment Loan and
repayments of $1.2 million on our Working Capital Loan(as such loans are defined in note 7 to the consolidated financial statements).
These repayments were offset by net borrowings of $22.6 million on our $22.6 Million Equipment Loan (as defined in note 7 to the
consolidated financial statements).
We have paid no cash dividends on our Common Stock since 1933, and it is not expected that we will pay any cash dividends on our
Common Stock in the immediate future.
Debt Covenants
Our debt arrangements contain various financial and other covenants including cross-default provisions whereby any default under any
loans of the Company (or its subsidiaries) with the lender will constitute a default under all of the other loans of the Company (and its
subsidiaries) with the lender. The most significant of the covenants are: maximum debt to tangible net worth ratio and fixed charge
coverage ratio. We must maintain: a tangible net worth of at least $20.0 million calculated quarterly; no more than $2.0 million in outside
debt (with certain exceptions); a maximum debt to tangible net worth ratio of no greater than 2.5 : 1.0 and a fixed charge coverage ratio that
is to equal or exceed 1.3 : 1.0. The fixed charge coverage ratio is calculated annually using EBITDAR (earnings before interest, taxes,
depreciation, amortization and rental expense) divided by the sum of CPLTD (current portion of long term debt), interest expense and
rental expense. We were in compliance with all of our covenants as of December 31, 2018.
24
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The following are computations of these most restrictive financial covenants:
Covenants Measured at Each Quarter End:
Tangible net worth minimum
Outside debt not to exceed
Maximum debt/tangible net worth ratio not to exceed
Covenants Measured Only at Year End:
Earnings to fixed charge coverage ratio must equal or exceed
Forecast
$
$
Actual as of
Covenant
20,000,000 $
2,000,000 $
2.5 : 1.0
December 31, 2018
58,814,859
297,599
0.90 : 1.00
1.3 : 1.0
1.94 : 1.00
We anticipate our cash on hand and cash flows from operations and credit facilities will provide sufficient cash to enable us to meet our
working capital needs, debt service requirements and planned capital expenditures, for at least the next twelve months. The amount of our
planned capital expenditures will depend, to some extent, on the results of our future performance. However, our revenue, results of
operations and cash flows, as well as our ability to seek additional financing, may be negatively impacted by factors including, but not
limited to: a decline in demand for electrical construction services, general economic conditions, heightened competition, availability of
construction materials, increased interest rates, and adverse weather conditions.
Off-Balance Sheet Arrangements
We do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign
currency forward contracts. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity
that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in an unconsolidated entity that
provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services
with us.
Contractual Obligations
The following table summarizes the Company’s future aggregate contractual obligations at December 31, 2018:
Payments Due By Period
Total
29,217,599 $
2,240,708
4,727,693
3,813,623
39,999,623 $
$
$
Less Than
1 Year
7,289,855 $
1,134,249
3,613,980
3,813,623
15,851,707 $
1-2 Years
3-5 Years
19,535,744 $
1,084,981
999,247
—
2,392,000 $
21,478
114,466
—
21,619,972 $
2,527,944 $
More Than
5 Years
—
—
—
—
—
Long term debt - principal (1)
Long term debt - interest (2)
Operating leases (3)
Purchase obligations (4)
Total
___________________
(1) Excludes interest, see footnote
2.
(2) Interest is at a rate per annum equal to one month LIBOR (as defined in the documentation related to each loan) plus 1.80% for notes
payable and 5.85% fixed rate for the other long term debt.
(3) Operating leases with initial or remaining non-cancelable lease terms in excess of one year for office space and equipment, which is
primarily used in our electrical construction operations.
(4) Purchase obligations include various contractual agreements that secure future rights to goods, services and other items to be used in
the normal course of operations. These commitments include capital equipment purchases, sub-contractor services for the construction
of residential properties and land purchases for the future construction of residential properties.
Item7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
25
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Item 8. Financial Statements and Supplementary Data.
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
The Goldfield Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of The Goldfield Corporation and subsidiaries (the “Company”) as of
December 31, 2018 and 2017, the related consolidated statements of income, cash flows, and stockholders’ equity for the years then ended,
and the related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations
and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),
the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated
March 12, 2019 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for revenue from
contracts with customers in 2018 due to the adoption of Accounting Standards Codification 606, Revenue from Contracts with Customers.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or
fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 1963.
/s/ KPMG LLP
Orlando, Florida
March 12, 2019
26
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THE GOLDFIELD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Current assets
ASSETS
Cash and cash equivalents
Accounts receivable and accrued billings
Costs and estimated earnings in excess of billings on uncompleted contracts
Income taxes receivable
Residential properties under construction
Prepaid expenses
Other current assets
Total current assets
Property, buildings and equipment, at cost, net of accumulated depreciation of $43,060,083 in 2018
and $38,927,654 in 2017
Deferred charges and other assets
Land and land development costs
Cash surrender value of life insurance
Restricted cash
Goodwill
Intangibles, net of accumulated amortization of $324,634 in 2018 and $263,134 in 2017
Total deferred charges and other assets
Total assets
Current liabilities
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued liabilities
Billings in excess of costs and estimated earnings on uncompleted contracts
Current portion of other long-term debt
Current portion of notes payable, net
Accrued remediation costs
Total current liabilities
Deferred income taxes
Accrued remediation costs, less current portion
Other long-term debt, less current portion, net
Notes payable, less current portion, net
Other accrued liabilities
Total liabilities
Commitments and contingencies (notes 4 and 8)
Stockholders’ equity
$
$
$
December 31,
2018
2017
11,376,373 $
22,236,071
12,030,000
1,220,527
8,244,995
634,069
1,835,743
57,577,778
18,529,757
21,566,842
6,074,346
619,552
2,412,202
993,668
1,532,110
51,728,477
48,927,055
36,072,300
4,680,080
547,009
25,980
101,407
689,166
6,043,642
112,548,475 $
15,999,157 $
1,165,002
113,855
7,161,890
60,101
24,500,005
6,061,042
436,982
183,744
21,731,024
30,246
52,943,043
—
4,326,728
550,335
102,027
101,407
750,666
5,831,163
93,631,940
9,379,535
166,268
—
6,099,787
87,553
15,733,143
4,698,720
434,164
—
16,151,567
66,033
37,083,627
—
Preferred stock, $1 par value, 5,000,000 shares authorized, none issued
Common stock, $.10 par value, 40,000,000 shares authorized; 27,813,772 shares issued
24,590,243 shares outstanding in 2018 and 25,451,354 shares outstanding in 2017
Additional paid-in capital
Retained earnings
Treasury stock, 3,223,529 shares in 2018 and 2,362,418 shares in 2017, at cost
Total stockholders’ equity
Total liabilities and stockholders’ equity
—
—
2,781,377
18,481,683
41,621,191
(3,278,819)
59,605,432
112,548,475 $
$
2,781,377
18,481,683
36,593,440
(1,308,187)
56,548,313
93,631,940
See accompanying notes to consolidated financial statements
27
Table of Contents
THE GOLDFIELD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Revenue
Electrical construction
Real estate development
Total revenue
Costs and expenses
Electrical construction
Real estate development
Selling, general and administrative
Depreciation and amortization
(Gain) loss on sale of property and equipment
Total costs and expenses
Total operating income
Other income (expense), net
Interest income
Interest expense, net of amount capitalized
Other income, net
Total other expense, net
Income before income taxes
Income tax provision
Income from continuing operations
Loss from discontinued operations, net of income tax benefit of $0 and $164,235, respectively
Net income
Net income per share of common stock — basic and diluted
Continuing operations
Discontinued operations
Net income per share of common stock — basic and diluted
Weighted average shares outstanding — basic and diluted
See accompanying notes to consolidated financial statements
28
Years Ended December 31,
2018
2017
$
136,526,511 $
1,622,331
138,148,842
109,154,476
4,799,043
113,953,519
113,976,157
1,012,098
7,336,475
8,436,972
(176,564)
130,585,138
7,563,704
86,714,412
3,147,791
6,611,315
7,217,901
76,810
103,768,229
10,185,290
52,288
(875,646)
84,351
(739,007)
6,824,697
1,796,946
5,027,751
—
5,027,751 $
31,696
(665,268)
57,654
(575,918)
9,609,372
1,035,997
8,573,375
(275,624)
8,297,751
0.20 $
—
0.20 $
0.34
(0.01)
0.33
25,411,623
25,451,354
$
$
$
Table of Contents
THE GOLDFIELD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
Amortization of debt issuance costs
Deferred income taxes
(Gain) loss on sale of property and equipment
Other losses
Changes in operating assets and liabilities
Accounts receivable and accrued billings
Costs and estimated earnings in excess of billings on uncompleted contracts
Residential properties under construction
Income taxes receivable
Prepaid expenses and other assets
Land and land development costs
Accounts payable and accrued liabilities
Billings in excess of costs and estimated earnings on uncompleted contracts
Accrued remediation costs
Net cash provided by operating activities
Cash flows from investing activities
Proceeds from disposal of property and equipment
Purchases of property, buildings and equipment
Net cash used in investing activities
Cash flows from financing activities
Purchase of treasury stock
Proceeds from notes payable
Repayments on notes payable
Other long-term debt repayments
Debt issuance costs
Net cash provided by (used in) financing activities
Net decrease in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of the year
Cash, cash equivalents and restricted cash at end of the year
Supplemental disclosure of cash flow information
Interest paid, net of amounts capitalized
Income taxes paid, net
Supplemental disclosure of non-cash investing
Liability for equipment acquired
Equipment funded by other long-term debt
See accompanying notes to consolidated financial statements
29
Years Ended December 31,
2018
2017
$
5,027,751 $
8,297,751
8,436,972
34,873
1,362,322
(176,564)
3,326
(669,229)
(5,955,654)
(5,832,793)
(600,975)
55,966
(353,352)
4,512,742
998,734
(24,634)
6,819,485
7,217,901
23,506
(3,505,604)
76,810
337
(2,472,435)
1,238,753
(860,071)
(85,715)
(130,307)
603,603
(1,900,088)
(678,789)
306,811
8,132,463
1,031,674
(19,609,245)
(18,577,571)
133,733
(10,301,721)
(10,167,988)
(1,970,632)
18,275,451
(11,645,451)
(107,400)
(23,313)
4,528,655
(7,229,431)
18,631,784
11,402,353 $
—
22,600,000
(22,697,255)
—
(8,125)
(105,380)
(2,140,905)
20,772,689
18,631,784
805,756 $
1,035,599 $
621,797
4,463,081
2,235,772 $
297,599 $
57,279
—
$
$
$
$
$
Table of Contents
THE GOLDFIELD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2018 AND 2017
Balance as of December 31,
2016
Net income
Balance as of December 31,
2017
Repurchase of stock
Net income
Balance as of December 31,
2018
Common stock
Shares
Amount
Additional
paid-in
capital
Retained earnings
Treasury
stock
Total
stockholders’
equity
27,813,772 $
2,781,377 $
18,481,683 $
—
—
—
28,295,689 $
8,297,751
(1,308,187) $ 48,250,562
8,297,751
—
27,813,772
2,781,377
18,481,683
36,593,440
—
—
—
5,027,751
(1,308,187)
(1,970,632)
—
56,548,313
(1,970,632)
5,027,751
27,813,772 $
2,781,377 $
18,481,683 $
41,621,191 $
(3,278,819) $ 59,605,432
See accompanying notes to consolidated financial statements
30
Table of Contents
THE GOLDFIELD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2017
Note 1 – Organization and Summary of Significant Accounting Policies
Overview
The Goldfield Corporation (the “Company”) was incorporated in Wyoming in 1906 and subsequently reincorporated in Delaware in 1968.
The Company’s principal line of business is the construction of electrical infrastructure for the utility industry and industrial customers.
The principal market for the Company’s electrical construction operation is primarily in the Southeast, mid-Atlantic and Texas-Southwest
regions of the United States.
Basis of Financial Statement Presentation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in consolidation.
The Company adopted Accounting Standards Updates (“ASU”) ASU 2011-05 and ASU 2011-12, which require comprehensive income to
be reported in either a single statement or in two consecutive statements reporting net income and other comprehensive income. The
amendment eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders’
equity. However, comprehensive income is equivalent to net income for the Company, and therefore, the Company’s accompanying
financial statements do not include a Statement of Other Comprehensive Income.
Cash and Cash Equivalents
The Company considers highly liquid investments with maturities of three months or less when purchased to be cash equivalents.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing
accounts receivable. The Company determines the allowance based on customer specific information and historical write-off experience.
The Company reviews its allowance for doubtful accounts quarterly. Account balances are charged off against the allowance after
reasonable means of collection have been exhausted and the potential for recovery is considered remote. As of both December 31, 2018 and
2017, upon its review, management determined it was not necessary to record an allowance for doubtful accounts due to the majority of
accounts receivable being generated by electrical utility customers who the Company considers creditworthy based on timely collection
history and other considerations.
Property, Buildings, Equipment and Depreciation
Property, buildings and equipment are stated at cost. Depreciation on property, buildings and equipment is calculated on the straight-line
method over the estimated useful lives of the assets. Leasehold improvements are depreciated on a straight-line basis over the shorter of the
lease term, including renewals that are deemed to be reasonably assured, or the estimated useful life of the improvement.
In accordance with Accounting Standard Codification (“ASC”) ASC Topic 360-10-05, Accounting for the Impairment or Disposal of
Long-Lived Assets, the Company assesses the need to record impairment losses on long-lived assets when events and circumstances
indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when future estimated
undiscounted cash flows expected to result from use of the asset are less than the asset’s carrying value. Any resulting loss would be
measured at fair value based on discounted expected cash flows.
Electrical Construction Revenue
In May 2014, the FASB issued ASU 2014-09, ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), which will replace
most existing revenue recognition guidance in U.S. generally accepted accounting principles and is intended to improve and converge the
financial reporting requirements for revenue from contracts with customers with International Financial Reporting Standards (“IFRS”).
Subsequently Financial Accounting Standards Board (the “FASB”) issued various Accounting Standards Updates (“ASUs”) in relation to
the new revenue recognition standard. The core principle of ASC 606 is that an entity should recognize revenue for the transfer of goods or
services equal to the amount that it expects to be entitled to receive for those goods or services. ASC 606 also requires additional
disclosures about the nature, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant
judgments and changes in judgments. ASC 606 allows for either retrospective or cumulative effect transition methods of adoption and is
effective for periods beginning after December 15, 2017.
On January 1, 2018 the Company adopted the new accounting standard ASC 606 and all the related amendments (“new revenue standard”)
to all applicable contracts using the modified retrospective method (cumulative effect method). Applicable
31
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contracts did not include contracts considered substantially complete. Contracts that were modified before the beginning of the earliest
period presented were not retrospectively restated. Instead, the Company reflected the aggregate effect of all modifications when
identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction price as of
the date of adoption. Adoption of the new revenue standard did not result in significant changes to the Company’s accounting policies,
business processes, systems or controls, or have a material impact on its financial position, results of operations and cash flows. In addition,
the Company concluded that the cumulative effect of initially applying the new revenue standard was immaterial and consequently did not
record an adjustment to the opening balance of retained earnings (less than $30,000 net of tax). The comparative information has not been
restated and continues to be reported under the accounting standards in effect for those periods. The Company does not expect the adoption
of the new revenue standard to have a material impact to its financial position, results of operations and cash flows on an ongoing basis.
The Company accepts contracts on a fixed-price, unit-price and service agreement basis. Under the new revenue standard, electrical
construction fixed-price contracts previously accounted for under ASC 605-35 will be recognized over time as services are performed and
the underlying obligations to customers are fulfilled. This resulted mainly in the use of input measures on a cost to cost basis similar to the
practices previously in place for contracts accounted for under ASC 605-35. The Company concluded that under the new revenue standard
the primary impact is on the timing of when contract modifications, variable consideration and change orders are recognized, mainly due to
the application of the contract identification criteria. This resulted in timing differences on the recognition in revenue and margin when
compared to prior practices.
Revenue from unit-price contracts is recognized over time as services are performed and the underlying obligations to customers are
fulfilled. The Company has elected to apply the practical expedient within ASC 606-10-55-18 for contracts that are routinely billed based
on established man hour and equipment rates and the amounts invoiced correspond directly with the value to the customer of the
Company’s performance completed to date. These contracts will be treated as a series of distinct services transferred over time and will
generally result in a similar revenue pattern when compared to the prior accounting policies.
Revenue from service agreements are recognized as services are performed. Revenue from service agreements are billed on either a man-
hour or man-hour plus equipment basis. Terms of the Company’s service agreements may extend for periods beyond one year.
The Company’s contracts allow it to bill additional amounts for change orders and claims. The Company considers a claim to be for
additional work performed outside the scope of the contract and contested by the customer. Historically, claims relating to electrical
construction work have not been significant.
A change order is a modification to a contract that changes the provisions of the contract, typically resulting from changes in scope,
specifications, design, manner of performance, facilities, equipment, materials, sites, or period of completion of the work under the
contract. It is the Company’s policy to include revenue from change orders in contract value only when they can be reliably estimated and
realization is considered probable.
The asset, “costs and estimated earnings in excess of billings on uncompleted contracts” represents revenue recognized in excess of
amounts billed. The liability, “billings in excess of costs and estimated earnings on uncompleted contracts” represents billings in excess of
revenue recognized.
Contract costs include all direct material, direct labor, subcontractor costs and indirect costs related to contract performance, such as
supplies, tools and equipment maintenance. General and administrative costs are charged to expense as incurred. Provisions for estimated
losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions,
estimated profitability and final contract settlements may result in revisions to costs and income and are recognized in the period in which
the revisions are determined.
Land and Land Development Costs and Residential Properties Under Construction
The costs of a land purchase and any development expenses up to the initial construction phase of any residential property development
project are recorded under the asset “land and land development costs.” Once construction commences, both the land development costs
and construction costs are recorded under the asset “residential properties under construction.” The assets “land and land development
costs” and “residential properties under construction” relating to specific projects are recorded as current assets when the estimated project
completion date is less than one year from the date of the consolidated financial statements, or as non-current assets when the estimated
project completion date is one year or more from the date of the consolidated financial statements.
In accordance with ASC Topic 360-10, Accounting for the Impairment or Disposal of Long-lived Assets , land and residential properties
under construction are reviewed by the Company for impairment whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. If the carrying amount or basis is not expected to be recovered, impairment losses are recorded and the
related assets are adjusted to their estimated fair value. The fair value of an asset is the amount at which that asset could be bought or sold
in a current transaction between willing parties, other than in a forced or
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liquidation sale. The Company also complies with ASC Topic 820, Fair Value Measurement, which defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair value measurements. The Company did not record an impairment
write-down to either of its land carrying value or residential properties under construction carrying value for either years ended
December 31, 2018 or 2017.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes, which establishes the recognition
requirements. Deferred tax assets and liabilities are recognized for the future tax effects attributable to temporary differences and
carryforwards between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized
income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or
measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to
unrecognized tax benefits as interest expense and other general and administrative expenses, respectively, and not as a component of
income taxes.
Executive Long-term Incentive Plan
The Company has not issued shares pursuant to The Goldfield Corporation 2013 Long-term Incentive Plan (the “2013 Plan”) in either 2018
or 2017. Therefore, the Company has no compensation expense for shares pursuant to the 2013 Plan for either of the years ended December
31, 2018 or 2017.
Use of Estimates
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with U.S. generally accepted
accounting principles. Actual results could differ from those estimates. Management considers the most significant estimates in preparing
these consolidated financial statements to be the estimated costs at completion of electrical construction contracts in progress.
Fair Value of Financial Instruments
The Company’s financial instruments include cash and cash equivalents, accounts receivable and accrued billings, restricted cash collateral
deposited with insurance carriers, cash surrender value of life insurance policies, accounts payable, notes payable, and other current
liabilities.
Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value
guidance establishes a valuation hierarchy, which requires maximizing the use of observable inputs when measuring fair value.
The three levels of inputs that may be used are:
Level 1 - Quoted market prices in active markets for identical assets or liabilities.
Level 2 - Observable market based inputs or other observable inputs.
Level 3 - Significant unobservable inputs that cannot be corroborated by observable market data. These values are generally determined
using valuation models incorporating management’s estimates of market participant assumptions.
Fair values of financial instruments are estimated through the use of public market prices, quotes from financial institutions, and other
available information. Management considers the carrying amounts reported on the consolidated balance sheets for cash and cash
equivalents, accounts receivable and accrued billings, accounts payable and accrued liabilities, to approximate fair value due to the
immediate or short-term maturity of these financial instruments. The Company has determined the fair value of its fixed rate other long-
term debt to be $292,000 using an interest rate of 4.31% (Level 2 input), which is the Company's current interest rate on borrowings. The
Company’s carrying value of long-term notes payable are estimated by management to approximate fair value since the interest rates
prescribed by Branch Banking and Trust Company (the “Bank”) are variable market interest rates and are adjusted periodically, and as
such, are classified as Level 2. Restricted cash is considered by management to approximate fair value due to the nature of the asset held in
a secured interest bearing bank account. The carrying value of cash surrender value of life insurance is also considered by management to
approximate fair value as the carrying value is based on the current settlement value under the contract, as provided by the carrier and as
such, is classified as Level 2.
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Restricted Cash
The Company’s restricted cash includes cash deposited in a secured interest bearing bank account, as required by the Collateral Trust
Agreement in connection with the Company’s previous workers’ compensation insurance policies, as described in note 12. Also, see note
12 for financial information regarding the immaterial impact of an ASU issued by the FASB specifically related to the disclosure of
restricted cash.
Goodwill and Intangible Assets
Intangible assets with finite useful lives recorded in connection with a historical acquisition are amortized over the term of the related
contract or useful life, as applicable. Intangible assets held by the Company with finite useful lives include customer relationships and
trademarks. The Company reviews the values recorded for intangible assets and goodwill to assess recoverability from future operations
annually or whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. As of December 31,
2018, the Company assessed the recoverability of its long-lived assets and goodwill, by reviewing relevant events and circumstances to
evaluate the qualitative factors in addition to the quantitative impairment test. As a result, there was no impairment of the carrying amounts
of such assets.
Reclassifications
Certain amounts previously reflected in the prior year statement of cash flows have been reclassified to conform to the Company’s 2018
presentation. The reclassifications are associated with the adoption of ASU 2016-15 for restricted cash.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, to increase transparency and comparability among organizations by recognizing all lease
transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use (“ROU”) asset (as defined). ASU
2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier
application permitted. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date
of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period
presented in the financial statements as its date of initial application. The Company will use the effective date as our date of initial
application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be
provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients in transition.
We expect to elect the package of practical expedients, which permits us not to reassess under the new standard our prior conclusions about
lease identification, lease classification and initial direct costs. We do not expect to elect the use-of-hindsight or the practical expedient
pertaining to land easements; the latter not being applicable to us. The new standard also provides practical expedients for an entity’s
ongoing accounting. We currently expect to elect the short-term lease recognition exemption for all leases that qualify. This means, for
those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease
liabilities for existing short-term leases of those assets in transition. We also currently expect to elect the practical expedient to not separate
lease and non-lease components for all of our leases. While we continue to assess all of the effects of adoption, we expect upon adoption to
recognize additional operating liabilities ranging from $4 million to $5 million, with corresponding ROU assets of the same amount based
on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases. The
Company expects the derecognition of existing deferred rent allowances to be immaterial. The Company is not anticipating material
changes to either the consolidated statements of income or the consolidated statements of cash flows as a result of the adoption. The impact
of this ASU is non-cash in nature, therefore the Company does not expect the adoption of this new guidance to have a material impact on
the Company’s cash flows or liquidity.
In August 2016, the FASB issued ASU 2016-15, which provides clarification regarding how certain cash receipts and cash payments are
presented and classified in the statement of cash flows. This update addresses eight specific cash flow issues with the objective of reducing
the existing diversity in practice. In addition, in November 2016, the FASB issued ASU 2016-18, which requires that amounts generally
described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the
beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Both updates are effective for annual and
interim periods beginning after December 15, 2017, with early adoption permitted. The Company has adopted these updates and
determined there is not a material impact on its consolidated financial statements due to the adoption. The consolidated statement of cash
flows for the twelve months ended December 31, 2017, has been adjusted on the line item “Accounts receivable and accrued billings” to
reflect an immaterial difference in the balance of cash, cash equivalents and restricted cash for the 2017 period. The Company did not make
any other prior period adjustments due to the adoption of this ASU. Had the Company made the adjustment to its consolidated balance
sheet as of December 31, 2017, restricted cash would have decreased by approximately $2,300 with a corresponding increase to other
receivables. This adjustment is associated with the interest income earned on the amount deposited in a trust account for the restricted cash
balance. See note 12 for additional restricted cash disclosure information.
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In October 2016, the FASB issued ASU 2016-16, which eliminates the requirement to defer the recognition of current and deferred income
taxes for an intra-entity asset transfer until the asset has been sold to an outside party. Under the new guidance, an entity should recognize
the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This update is effective
for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years; early adoption is permitted and is to
be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings at the time of
adoption. The adoption of ASU 2016-16 had no impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, which eliminates Step 2 of the current goodwill impairment test. A goodwill impairment
loss will instead be measured at the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the recorded
amount of goodwill allocated to that reporting unit. The provisions of this ASU are effective for years beginning after December 15, 2019,
with early adoption permitted for any impairment test performed on testing dates after January 1, 2017. The Company is currently assessing
the impact that adoption will have on its consolidated financial statements however, the Company does not expect this ASU to have a
significant impact on its consolidated financial statements.
Note 2 – Contract Assets and Contract Liabilities
On January 1, 2018 the Company adopted the new accounting standard ASC 606 and all the related amendments (“new revenue standard”)
to all applicable contracts using the modified retrospective method. Applicable contracts did not include contracts considered substantially
complete. Contracts that were modified before the beginning of the earliest period presented were not retrospectively restated. Instead, the
Company reflected the aggregate effect of all modifications when identifying the satisfied and unsatisfied performance obligations,
determining the transaction price and allocating the transaction price as of the date of adoption. Adoption of this standard did not result in
significant changes to the Company’s accounting policies, business processes, systems or controls, or have a material impact on its
financial position, results of operations and cash flows.
The following table presents the net contract assets and liabilities for the electrical construction operations as of the dates indicated:
December 31, 2018
December 31, 2017
$ Change
$
Contract assets (1)
Contract liabilities (2)
Net contract assets
___________________________
(1) Contract assets consist of amounts under the caption “Costs and estimated earnings in excess of billings on uncompleted contracts.”
(2) Contract liabilities consist of the aggregate of amounts presented under the caption “Billings in excess of costs and estimated earnings
on uncompleted contracts” and any contract loss accruals included in “Accounts payable and accrued liabilities.”
12,030,000 $
(1,845,049 )
10,184,951 $
6,074,346 $
(367,552 )
5,706,794 $
5,955,654
(1,477,497 )
4,478,157
$
The amounts billed but not paid by customers pursuant to retention provisions of the electrical construction contracts were $2.2 million and
$3.3 million as of December 31, 2018 and 2017, respectively, and are included in the accompanying consolidated balance sheets in
accounts receivable and accrued billings. Retainage is expected to be collected within the next twelve months.
The following table presents the changes in the net contract assets and liabilities for the electrical construction operations for the twelve
months ended December 31, 2018:
Cumulative adjustment due to changes in contract values (1)
Cumulative adjustment due to changes in estimated costs at completion
Revenue recognized in the period
Amounts reclassified to receivables
Impairment of contract assets (2)
Total
$ Change
1,877,219
(1,556,467 )
100,224,125
(95,587,957 )
(478,763 )
4,478,157
$
$
(1) Amount attributable to contract modifications accounted for on a cumulative catch-up basis where the customer has approved a
change in the scope or price of the contract, where the modification is treated as part of the existing contract and where the remaining
goods and services are not distinct.
(2) Adjustment amounts due to changes in contract losses.
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For the year ended December 31, 2018, $166,000 of the total revenue recognized in the current period was attributable to the contract
liability billings in excess of costs and estimated earnings on uncompleted contracts’ balance as of December 31, 2017.
Note 3 – Income Taxes
On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly revises the
U.S. tax code by, among other items, reducing the federal corporate tax rate from its highest rate of 35% to a single rate of 21%.
Certain provisions in the Tax Act, such as providing for full expensing of certain depreciable property, the limitation on interest expense
deductibility, the limitation on the deductibility of certain executive compensation and net operating loss carryforwards have had an impact
on the Company and have been reflected in the consolidated financial statements for the year ended December 31, 2018.
The Company has evaluated the impact of the new revenue standard under ASC 606 for tax purposes. The impact has been reported in the
financial statements as of December 31, 2018 and accounted for tax purposes under deferred tax liabilities as a Section 481(a) adjustment.
It is a non-automatic change in accounting method based on current Internal Revenue Service (“IRS”) regulations at this time and is subject
to review and approval by the IRS.
The following table presents the income tax provision from continuing operations for the years ended December 31 as indicated:
Current
Federal
State
Deferred
Federal
State
Total
2018
2017
(153,610 ) $
597,909
444,299
1,779,574
(426,927 )
1,352,647
1,796,946 $
3,863,151
558,993
4,422,144
(3,270,928 )
(115,219 )
(3,386,147 )
1,035,997
$
$
The following table presents the total income tax provision for the years ended December 31 as indicated:
Income tax provision
Discontinued operations
Total
$
$
2018
2017
1,796,946 $
—
1,796,946 $
1,035,997
(164,235 )
871,762
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The following table presents the temporary differences and carryforwards, which give rise to deferred tax assets and liabilities as of
December 31 as indicated:
2018
2017
Deferred tax assets
Accrued vacation
Acquisition costs capitalized
Accrued remediation costs
Net operating loss carryforwards
Sec 163(j) interest limitation
Federal depreciation in excess of state
Accrued payables
Percentage completed contract method for tax
Accrued workers’ compensation
Capitalized bidding costs
Inventory adjustments
Accrued lease expense
Accrued contract losses
Other
Total deferred tax assets
Deferred tax liabilities
481 (a) adjustment for deferred revenue
Tax amortization in excess of financial statement amortization
Tax depreciation in excess of financial statement depreciation
Total deferred tax liabilities
Total net deferred tax liabilities
$
$
139,713 $
55,917
120,493
435,121
199,582
635,202
17,914
1,557,437
205,150
73,565
263,680
15,199
164,843
4,097
3,887,913
(24,602 )
(13,378 )
(9,910,975 )
(9,948,955 )
(6,061,042 ) $
113,893
58,886
130,168
—
—
—
174,674
276,413
159,237
121,227
139,565
17,902
50,220
4,103
1,246,288
—
(10,850 )
(5,934,158 )
(5,945,008 )
(4,698,720 )
As of December 31, 2018, the Company had net operating loss (“NOL”) carryforwards of approximately $2.1 million available to offset
future federal taxable income. The Tax Act allows for an indefinite carryforward of the NOL to use against future taxable income, subject
to a limitation of 80 percent of taxable income each year.
As of December 31, 2018, the non-current deferred tax liabilities increased to $6.1 million from $4.7 million as of December 31, 2017
primarily due to additional tax depreciation in excess of book depreciation. The Tax Act provides for the full expensing of certain
depreciable property for 2018 and through 2022 and partial expensing through 2026.
The carrying amounts of deferred tax assets are reduced by a valuation allowance, if based on the available evidence, it is more likely than
not such assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable
income during the periods in which the deferred tax assets are expected to be recovered or settled. In the assessment for a valuation
allowance, appropriate consideration is given to positive and negative evidence related to the realization of the deferred tax assets. This
assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future
profitability and tax planning alternatives. If the Company determines it will not be able to realize all or part of the deferred tax assets, a
valuation allowance would be recorded to reduce deferred tax assets to the amount that is more likely than not to be realized.
Based on assumptions with respect to forecasts of future taxable income and tax planning, among others, the Company anticipates being
able to generate sufficient taxable income to utilize the deferred tax assets. Therefore, the Company has not recorded a valuation allowance
against deferred tax assets. The minimum amount of future taxable income required to be generated to fully realize the deferred tax assets
as of December 31, 2018 is approximately $13.4 million.
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The following table presents the differences between the Company’s effective income tax rate and the federal statutory rate on income from
continuing operations for the years ended December 31 as indicated:
Federal statutory rate
State tax rate, net of federal tax
Nondeductible expenses
Domestic production activities deduction
Tax Act rate change
Other
Total
2018
21.0%
3.2
5.4
—
—
(3.3)
26.3%
2017
34.0%
3.1
3.6
(4.0)
(26.0)
0.1
10.8%
The Company had gross unrecognized tax benefits of $5,000 as of both December 31, 2018 and 2017. The Company believes that it is
reasonably possible that the liability for unrecognized tax benefits related to certain state income tax matters may be settled within the next
twelve months. The federal statute of limitation has expired for tax years prior to 2015 and relevant state statutes vary. The Company is
currently not under any income tax audits or examinations and does not expect the assessment of any significant additional tax in excess of
amounts provided.
The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years as indicated:
Balance as of January 1
Increase from current year tax positions
Decrease from settlements with taxing authority
Balance as of December 31
$
$
2018
2017
4,723 $
—
—
4,723 $
4,723
—
—
4,723
The Company accrues interest and penalties related to unrecognized tax benefits as interest expense and other general and administrative
expenses, respectively, and not as a component of income taxes. Decreases in interest and penalties are due to settlements with taxing
authorities and expiration of statutes of limitation. During the years ended December 31, 2018 and 2017, the Company recognized $1,000
each year in interest and penalties. The Company had accrued as a current liability $11,000 and $9,000 for the future payment of interest
and penalties as of December 31, 2018 and 2017, respectively.
Note 4 – Commitments and Contingencies Related to Discontinued Operations
Discontinued operations represent former mining activities, the last of which ended in 2002. Pursuant to an agreement with the United
States Environmental Protection Agency (the “EPA”), the Company performed certain remediation actions at a property sold over fifty
years ago. This remediation work was completed by September 30, 2015. As of December 31, 2018 and 2017, the Company has established
a contingency provision related to discontinued operations, which was $497,000 and $522,000, respectively. No change to the provision
was required for either of the three or twelve month periods ended December 31, 2018. For the three and twelve month periods ended
December 31, 2017, the Company increased the provision $275,000 and $440,000 ($172,000 and $276,000, net of tax benefit of $103,000
and $164,000, respectively). This increase resulted mainly from changes in the scope of the project as required by the EPA and the state of
Washington.
The remaining balance of the accrued remediation costs as of December 31, 2018, mainly represents estimated future charges for EPA
response costs and monitoring and provisions for potential future remediation efforts of the property as required by the state of Washington.
The total costs to be incurred in future periods may vary from this estimate. The amounts recorded in the aforementioned contingency
provision are not discounted. The provision will be reviewed periodically based upon facts and circumstances available at the time.
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Note 5 – Property, Buildings and Equipment
The following table presents the balances of major classes of properties as of December 31 as indicated:
Land
Land improvements
Buildings and improvements
Leasehold improvements
Machinery and equipment
Construction in progress
Total
Less accumulated depreciation
Net properties, buildings and equipment
Estimated useful lives in
years
—
7 - 15
5 - 40
5 - 39
2 - 10
—
$
$
2018
2017
670,400 $
537,175
2,767,603
254,385
87,734,262
23,313
91,987,138
43,060,083
48,927,055 $
530,221
495,484
2,588,053
252,646
70,892,181
241,369
74,999,954
38,927,654
36,072,300
Management reviews the net carrying value of all properties, buildings and equipment on a regular basis to assess and determine whether
trigger events of impairment exist and the need for possible impairments. As a result of such review, no impairment write-down was
considered necessary for the years ended December 31, 2018 and 2017.
Note 6 – 401(k) Employee Benefits Plan
Effective January 1, 1995, the Company adopted The Goldfield Corporation and Subsidiaries Employee Savings and Retirement Plan, a
defined contribution plan that qualifies under Section 401(k) of the Internal Revenue Code. The plan provides retirement benefits to all
employees who meet eligibility requirements and elect to participate. Under the plan, participating employees may defer up to 75% of their
pre-tax compensation per calendar year subject to Internal Revenue Code limits. The Company’s contributions to the plan are discretionary
and amounted to approximately $258,000 and $297,000 for the years ended December 31, 2018 and 2017, respectively.
Note 7 – Notes Payable
The following table presents the balances of our notes payables as of December 31 as indicated:
Branch Banking and Trust Company
Working Capital Loan
$27.49 Million Equipment Loan (previously $22.6
Million Equipment Loan)
Previous Working Capital Loan
Total notes payable
Less unamortized debt issuance costs
Total notes payable, net
Less current portion of notes payable, net
Notes payable net, less current portion
Maturity Date
November 28, 2020 $
2018
5,000,000 $
2017
—
May 1, 2022
23,920,000
—
28,920,000
27,086
28,892,914
7,161,890
19,540,000
2,750,000
22,290,000
38,646
22,251,354
6,099,787
$ 21,731,024 $ 16,151,567
Interest Rates
2018
2017
4.31%
—%
4.31%
—%
3.25%
3.38%
As of December 31, 2018, the Company, and the Company’s wholly owned subsidiaries Southeast Power, Pineapple House of Brevard,
Inc. (“Pineapple House”), Bayswater Development Corporation (“Bayswater”), Power Corporation of America (“PCA”) Precision
Foundations, Inc. (“PFI”) and C and C Power Line, Inc. (“C&C”), collectively (the “Debtors,”) were parties to a Master Loan Agreement,
dated May 24, 2018 (the “2018 Master Loan Agreement”), with Branch Banking and Trust Company (the “Bank”). The 2018 Master Loan
Agreement restates substantially the same terms and conditions as those set forth in the previous Master Loan Agreement (the “Previous
Master Loan Agreement”) among the Debtors and the Bank, originally entered into on June 9, 2017, except for the update in the exhibit for
the loan modification and the new Working Capital Loan described below and an increase in the permissible outside debt and leases
amount from $500,000 in the Previous Master Loan Agreement to $2.0 million.
As of December 31, 2018, the Company had a promissory note and a series of related ancillary agreements with the Bank providing for a
revolving line of credit loan for a maximum principal amount of $18.0 million, to be used as a “Working
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Capital Loan” (the “Working Capital Loan”). The Company entered into the Working Capital Loan on May 24, 2018, the Working Capital
Loan restates and replaces all previous renewals and or modifications on the previous working capital loan entered into on August 26, 2005
(the “Previous Working Capital Loan”) on substantially the same terms and conditions as those set forth in the Previous Working Capital
Loan. Borrowings of $2.78 million, outstanding as of May 24, 2018, from the Working Capital Loan were used to pay in full the
outstanding amount of the Previous Working Capital Loan, plus accrued interest and loan closing costs.
As of December 31, 2018, borrowings under the Working Capital Loan were $5.0 million. As of December 31, 2018 and December 31,
2017, borrowings under the Previous Working Capital Loan were zero and $2.8 million, respectively.
As a credit guaranty to the Bank, the Company is contingently liable for the guaranty of a subsidiary obligation under an irrevocable letter
of credit related to workers’ compensation. The amount of this letter of credit was $575,000 and $420,000 as of December 31, 2018 and
December 31, 2017, respectively.
On January 1, 2018, the Company had a loan agreement with the Bank for a $22.6 Million equipment loan (the “$22.6 Million Equipment
Loan”). The $22.6 Million Equipment Loan between the Company and the Bank was modified on May 24, 2018 increasing the principal
amount to $27.49 Million (the “$27.49 Million Equipment Loan”). Borrowings of $16.99 million, outstanding as of May 24, 2018, plus
accrued interest, under the $22.6 Million Equipment Loan were continued under the $27.49 Million Equipment Loan. The remaining
portion of the $27.49 Million Equipment Loan balance was drawn by the Company for equipment purchases that were made after January
1, 2018.
As of December 31, 2018, the Company had a loan agreement with the Bank for the $27.49 Million Equipment Loan. Under the
documentation related to the $27.49 Million Equipment Loan, principal payments in the amount of $510,000 plus accrued interest
commenced on June 9, 2018 and continued monthly thereafter until and including the payment due on December 9, 2018. On December 31,
2018, the outstanding principal balance of the $27.49 Million Equipment Loan was amortized over a forty (40) month period. Equal
monthly payments of principal in the amount of $598,000 plus accrued interest commenced on January 9, 2019 and will continue monthly
on the same day of each month thereafter, with all outstanding principal, accrued interest, and all other amounts then due and owing to be
payable on May 1, 2022, its maturity date.
As of December 31, 2018, the Debtors had a loan agreement with the Bank under the 2018 Master Loan Agreement for the $27.49 Million
Equipment Loan (previously $22.6 Million Equipment Loan), and the Working Capital Loan, which are guaranteed by the Debtors and
includes the grant of a continuing security interest in all now owned and after acquired and wherever located personal property of the
Debtors.
The $27.49 Million Equipment Loan (previously $22.6 Million Equipment Loan) and the Working Capital Loan bear interest at a rate per
annum equal to one month LIBOR (as defined in the documentation related to each loan) plus 1.80%, which will be adjusted monthly and
subject to a maximum rate as described in the documentation related to each loan.
Subsequently, on March 7, 2019, the Company, the Debtors and the Bank entered into a First Amendment to the 2018 Master Loan
Agreement (the “Amendment”). The Amendment provides an exhibit which lists new loans, or modifications of loans, which will be
governed by the 2018 Master Loan Agreement and which were also entered into on March 7, 2019.
Also, on March 7, 2019, the Company, the Debtors and the Bank entered into a modification of the $27.49 Million Equipment Loan,
increasing it to a $38.2 million equipment loan (as increased, the “$38.2 Million Equipment Loan”) and a new $4.5 million equipment
promissory note (the “$4.5 Million Equipment Note”).
Borrowings of $22.7 million, outstanding as of March 7, 2019, plus accrued interest under the $27.49 Million Equipment Loan will
continue under the $38.2 Million Equipment Loan. The $15.5 million balance remaining on the $38.2 Million Equipment Loan was drawn
by the Company on March 8, 2019 for equipment purchases that were made on or after August 1, 2018.
Under the documentation related to the $38.2 Million Equipment Loan, principal payments of $598,000 plus accrued interest will
commence on March 9, 2019 and continue monthly thereafter until and including the payment due on December 9, 2019. On January 9,
2020, equal monthly principal payments of $650,000, plus accrued interest, will commence and continue monthly thereafter on the same
day of each month until the March 9, 2024 maturity date.
Under the documentation related to the $4.5 Million Equipment Note, borrowings will be made only for the purchase of equipment
currently held by the Company under Master Lease Agreements and will not exceed the cost of the lease buy-out. Interest only payments on
any amounts drawn will commence on April 7, 2019, and continue monthly on the same day through and including the payment due on
March 7, 2020. Thereafter, principal payments of $93,750 plus accrued interest will commence on April 7, 2020, and continue monthly
thereafter until and including the payment due on March 7, 2024.
The Company’s debt arrangements contain various financial and other covenants including, but not limited to: minimum tangible net
worth, maximum debt to tangible net worth ratio and fixed charge coverage ratio. Other loan covenants prohibit, among other things, a
change in legal form of the Company, and entering into a merger or consolidation. The loans also have
40
Table of Contents
cross-default provisions whereby any default under any loans of the Company (or its subsidiaries) with the Bank, will constitute a default
under all of the other loans of the Company (and its subsidiaries) with the Bank.
The schedule of payments of the notes payable as of December 31, 2018 is as follows:
2019
2020
2021
2022
Total payments of notes payable
Other Long Term Debt
$
$
7,176,000
12,176,000
7,176,000
2,392,000
28,920,000
As of December 31, 2018, the Company had an equipment purchase loan agreement for a specialty piece of equipment to be used in the
Company’s electrical construction operations in the amount of $405,000 plus interest and sales tax. The agreement requires monthly
payments of $10,687 plus interest at a 5.85% fixed rate. The loan matures on June 14, 2021 and there are no early payment provisions.
The schedule of payments of the other long term debt as of December 31, 2018 is as follows:
2019
2020
2021
2022
Total payments of other long term debt
Note 8 – Commitments and Contingencies
Operating Leases
$
$
113,855
120,697
63,047
—
297,599
The Company leases its principal office space under a nine-year operating lease. Within the provisions of the office lease, there are
escalations in payments over the base lease term, as well as renewal periods and cancellation provisions. The effects of the escalations have
been reflected in rent expense on a straight-line basis over the expected lease term. In addition, the Company leases other office spaces as
principal offices for our subsidiaries PCA, PFI and C&C. The Company also leases office equipment under operating leases that expire
over the next four years. The Company’s leases require payments of property taxes, insurance and maintenance costs in addition to the
lease payments. Additionally, the Company leases several off-site storage facilities, used to store equipment and materials, under a month
to month lease arrangement. Lastly, the Company has several lease agreements to lease certain equipment from time to time over a 60-
month term. The leased equipment is used in our electrical construction operations. The Company recognizes rent expense on a straight-
line basis over the expected lease term.
Future minimum lease payments under operating leases having initial or remaining non-cancelable lease terms in excess of one year as of
December 31, 2018 are as follows:
2019
2020
2021
2022 and beyond
Total minimum operating lease payments
$
$
3,613,980
910,778
88,469
114,466
4,727,693
Total expense for the operating leases were $4.7 million and $4.7 million for the years ended December 31, 2018 and 2017, respectively.
Performance Bonds
In certain circumstances, the Company is required to provide performance bonds to secure its contractual commitments. Management is not
aware of any performance bond issued for the Company that has ever been called by a customer. As of December 31, 2018, outstanding
performance bonds issued on behalf of the Company’s electrical construction subsidiaries amounted to approximately $46.4 million.
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Collective Bargaining Agreements
C&C, one of the Company’s electrical construction subsidiaries, is party to collective bargaining agreements with unions representing
workers performing field construction operations. The collective bargaining agreements expire at various times and have typically been
renegotiated and renewed on terms similar to the ones contained in the expiring agreements. The agreements require the subsidiary to pay
specified wages, provide certain benefits to their respective union employees and contribute certain amounts to multi-employer pension
plans and employee benefit trusts. The subsidiary’s multi-employer pension plan contribution rates generally are specified in the collective
bargaining agreements (usually on an annual basis), and contributions are made to the plans on a “pay-as-you-go” basis based on such
subsidiary’s union employee payrolls, which cannot be determined for future periods because contributions depend on, among other things,
the number of union employees that such subsidiary employs at any given time; the plans in which it may participate vary depending on the
projects it has ongoing at any time; and the need for union resources in connection with those projects. If the subsidiary withdraws from, or
otherwise terminates its participation in, one or more multi-employer pension plans, or if the plans were to otherwise become substantially
underfunded, such subsidiary could be assessed liabilities for additional contributions related to the underfunding of these plans. The
Company is not aware of any amounts of withdrawal liability that have been incurred as a result of a withdrawal by C&C from any multi-
employer defined benefit pension plans.
Multi-employer Pension Plans
The Company contributes to a multi-employer pension plan on behalf of employees covered by collective bargaining agreements. These
plans are administered jointly by management and union representatives and cover substantially all full-time and certain part-time union
employees who are not covered by other plans. The risks of participating in multi-employer plans are different from single-employer
plans in the following aspects: (1) assets contributed to the multi-employer plan by one employer may be used to provide benefits to
employees of other participating employers, (2) if a participating employer stops contributing to the plan, the unfunded obligations of the
plan may be borne by the remaining participating employers, and (3) if the Company chooses to stop participating in a multi-employer plan,
we could, under certain circumstances, be liable for unfunded vested benefits or other expenses of jointly administered union/management
plans. At this time, we have not established any liabilities because withdrawal from these plans is not probable. For the years ended
December 31, 2018 and 2017, the contributions to these plans were $227,000 and $180,000, respectively.
The Company’s participation in multi-employer pension plans is outlined in the table below. The EIN column provides the Employer
Identification Number (“EIN”) of the plan. Unless otherwise noted, the most recent Pension Protection Act zone status available in 2018
and 2017 is for the plan’s year ended December 31, 2018, and 2017, respectively. The zone status is based on information that the
Company received from the plan, and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than
65% funded, plans in the yellow zone are less than 80% funded, and plans in the green zone are at least 80% funded. The “FIP” column
indicates plans for which a financial improvement plan (“FIP”) is either pending or has been implemented. The last column lists the
expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject. There have been no significant changes in the
number of Company employees covered by the multi-employer plans or other significant events that would impact the comparability of
contributions to the plans.
Information about the Plan is publicly available on Form 5500, Annual Return / Report of Employee Benefit Plan. The Plan year-end is
December 31st and no single employer contributes 5% or more of total plan contributions.
Certified Zone Status
Plan Name:
EIN Number
Plan
Number
2018
2017
National Electrical
Benefit Fund
53-0181657
001
Green
Green
FIP
Implemented
Not applicable
(green-zone
plan)
Surcharge
Imposed
Not applicable
(green-zone
plan)
Committed Expenditures
Expiration Date of
Collective Bargaining
Agreement
August 31, 2019
The Company from time to time commits to various contractual agreements that secure future rights to goods, services and other items to be
used in the normal course of operations. These commitments include capital equipment purchases, sub-contractor services for the
construction of residential properties and land purchases for the future construction of residential properties. The Company’s committed
expenditures as of December 31, 2018, totaled $3,813,623 all of which is expected to be completed in 2019.
Legal Proceedings
The Company is involved in various legal claims arising in the ordinary course of business. The Company has concluded that the ultimate
disposition of these matters should not have a material adverse effect on the Company’s consolidated financial position, results of
operations, or liquidity.
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Table of Contents
Note 9 – Income Per Share of Common Stock
Basic income per common share is computed by dividing net income by the weighted average number of common stock shares outstanding
during the period. Diluted income per share reflects the potential dilution that could occur if common stock equivalents, such as stock
options outstanding, were exercised into common stock that subsequently shared in the earnings of the Company.
As of December 31, 2018 and 2017, the Company had no common stock equivalents. The computation of the weighted average number of
common stock shares outstanding excludes 3,223,529 and 2,362,418 shares of Treasury Stock for the years ended December 31, 2018 and
2017, respectively.
Note 10 – Common Stock Repurchase Plan
The Company has had a stock repurchase plan since September 17, 2002, when the Board of Directors approval was announced. As last
amended by the Board of Directors on September 13, 2018, this plan permits the purchase of up to 3,500,000 shares. There is currently
available for purchase through September 30, 2019, a maximum of 293,829 shares. The Company may repurchase its shares either in the
open market or through private transactions. The volume of the shares to be repurchased is contingent upon market conditions and other
factors. During the year ended December 31, 2018, 861,111 shares were purchased at a cost of $1,970,632 (average cost of $2.29 per
share), no shares were repurchased during the year ended December 31, 2017. As of December 31, 2018, the total number of shares
repurchased under the Repurchase Plan was 3,206,171 at a cost of $3,260,098 (average cost of $1.02 per share). The Company currently
holds the repurchased stock as Treasury Stock, reported at cost. Prior to September 17, 2002, the Company had 17,358 shares of Treasury
Stock that it had purchased at a cost of $18,720.
Subsequently, on March 7, 2019, the Company’s Board of Directors extended the Company’s Common Stock Repurchase plan from
September 30, 2019 until September 30, 2020 and increased the number of shares available for purchase under the plan. The plan
previously authorized the repurchase of up to 3,500,000 shares, of which 3,273,880 have been repurchased as of March 7, 2019. The
revised plan will permit an additional 2,500,000 shares to be repurchased, increasing the amount available for repurchase to 2,726,120
shares as of March 7, 2019.
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Note 11 – Business Segment, Business Credit Risks and Concentration
Segment
The Company is currently involved in two segments, electrical construction and real estate development. There were no material amounts
of sales or transfers between segments and no material amounts of foreign sales. Any inter-segment sales have been eliminated.
The following table sets forth certain segment information as of December 31 for the years indicated:
Continuing Operations
Revenue
Electrical construction
Real estate development
Total revenue
Operating expenses
Electrical construction
Real estate development
Corporate
Total operating expenses
Operating income (loss)
Electrical construction
Real estate development
Corporate
Total operating income
Other income (expenses), net
Electrical construction
Real estate development
Corporate
Total other expenses, net
Net income (loss) before taxes
Electrical construction
Real estate development
Corporate
Total net income before taxes
Identifiable Assets
Electrical construction
Real estate development
Corporate
Total
Capital Expenditures
Electrical construction
Real estate development
Corporate
Total
Depreciation and Amortization
Electrical construction
Real estate development
Corporate
Total
2018
2017
$
136,526,511 $
1,622,331
138,148,842
123,914,953
1,924,835
4,745,350
130,585,138
12,611,558
(302,504 )
(4,745,350 )
7,563,704
(761,117 )
(56,010 )
78,120
(739,007 )
11,850,441
(358,514 )
(4,667,230 )
6,824,697 $
93,642,412 $
16,444,209
2,461,854
112,548,475 $
19,514,124 $
42,545
52,576
19,609,245 $
8,319,362 $
21,279
96,331
8,436,972 $
$
$
$
$
$
$
$
44
109,154,476
4,799,043
113,953,519
95,463,721
4,177,558
4,126,950
103,768,229
13,690,755
621,485
(4,126,950 )
10,185,290
(562,233 )
(71,945 )
58,260
(575,918 )
13,128,522
549,540
(4,068,690 )
9,609,372
78,745,673
8,713,310
6,172,957
93,631,940
10,191,515
1,065
109,141
10,301,721
7,086,361
15,207
116,333
7,217,901
Table of Contents
Credit Risks
Financial instruments, mainly within the electrical construction operations, which potentially subject the Company to concentrations of
credit risk, consist principally of accounts receivable and accrued billings in the amounts of $22.2 million and $21.6 million as of
December 31, 2018 and 2017, respectively, which management reviews to assess the need to establish an allowance for doubtful accounts.
Cash and Cash Equivalents
The Company holds cash on deposit in U.S. banks, in excess of Federal Deposit Insurance Corporation insurance limits. The Company has
not experienced and does not anticipate any losses in any such accounts. The Company mitigates this risk by doing business with well
capitalized, quality financial institutions.
Customer Concentration
Revenue (in thousands of dollars) to customers exceeding 10% of the Company’s total revenue for the years ended December 31 as
indicated are as follows:
Electrical construction operations
Customer A
Customer B
Customer C
2018
2017
Amount
% of Total
revenue
Amount
% of Total
revenue
$
39,866
22,085
16,972
29
16
12
$
38,306
16,912
11,681
34
15
10
Revenue by service/product (in thousands of dollars) for the years ended December 31 as indicated are as follows:
Electrical construction
Principal electrical construction operations (1)
Other electrical construction (2)
Total
Real estate development
Total revenue
___________________________
2018
2017
Amount
% of Total
revenue
Amount
% of Total
revenue
$
$
129,022
7,505
136,527
1,622
138,149
93
6
99
1
100
$
$
100,604
8,550
109,154
4,799
113,953
88
8
96
4
100
(1) Principal electrical construction operations include revenue from transmission lines, distribution systems, substations and drilled pier
foundations.
(2) Other electrical construction includes revenue from storm work, fiber optics and other miscellaneous electrical construction items as
disclosed in the revenue disaggregation reported in note 14.
The total of the above categories may differ from the sum of the components due to rounding.
Note 12 – Restricted Cash
Restricted cash, reported under “Deferred charges and other assets” on the Company’s consolidated balance sheet, represents amounts
deposited in a trust account to secure the Company’s obligations in connection with the Company’s previous workers’ compensation
insurance policies.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheet that sum to the
total of the same such amounts shown in the statement of cash flows as of the dates indicated:
Cash and cash equivalents
Restricted cash
Cash, cash equivalents and restricted cash shown in the consolidated statement
of cash flows
$
$
December 31, 2018
December 31, 2017
11,376,373 $
25,980
18,529,757
102,027
11,402,353 $
18,631,784
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Note 13 – Goodwill and Other Intangible Assets Associated with the Acquisition of C&C
The Company performed an annual impairment assessment on its goodwill and intangible assets on December 31, 2018. Based upon this
analysis, the Company determined that there were no impairments.
The following table presents the gross and net balances of our goodwill and intangible assets as of the dates indicated:
December 31, 2018
December 31, 2017
Useful Life
(Years)
Indefinite $
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
101,407 $
— $
101,407 $
101,407 $
— $
Net
Carrying
Amount
101,407
15
20
5
1
$
640,000 $
(213,334) $
426,666 $
640,000 $
(170,670) $
469,330
350,000
(87,500)
262,500
350,000
(70,000)
280,000
10,000
13,800
$ 1,013,800 $
(10,000)
(13,800)
(324,634) $
—
—
10,000
13,800
689,166 $ 1,013,800 $
(8,664)
(13,800)
(263,134) $
1,336
—
750,666
Goodwill
Trademarks/Names
Customer
relationships
Non-competition
agreement
Other
Total
Amortization of definite-lived intangible assets will be approximately $60,000 annually for 2019 through 2023.
Note 14 – ASC 606 Revenue Recognition and Significant Accounting Policies Disclosures
On January 1, 2018, the Company adopted the new revenue standard ASC 606 and all the related amendments (“new revenue standard”).
Adoption of this standard did not result in significant changes to the Company’s accounting policies, business processes, systems or
controls, or have a material impact on its financial position, results of operations and cash flows. The Company concluded that the
cumulative effect of initially applying the new revenue standard was immaterial and consequently did not record an adjustment to the
opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting
standards in effect for those periods. The Company does not expect the adoption of the new revenue standard to have a material impact to
its financial position, results of operations and cash flows on an ongoing basis.
The Company’s significant accounting policies are detailed in note 1, changes to the Company’s accounting policies as a result of adopting
the new revenue standard are discussed below.
To determine the proper revenue recognition method for contracts for electrical construction services, the Company evaluates whether two
or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be
accounted for as more than one performance obligation. This evaluation requires significant judgment and the decision to combine a group
of contracts or separate the combined or single contract into multiple performance obligations could change the amount of revenue and
profit recorded in a given period. For most of the contracts, the Company provides a significant service of integrating a complex set of tasks
and components into a single project or capability. Hence, the entire contract is accounted for as one performance obligation. However, less
likely, if a contract is separated into more than one performance obligation, the Company allocates the total transaction price for each
performance obligation in an amount based on the estimated relative stand-alone selling prices of the promised goods or services
underlying each performance obligation.
The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified,
payment terms are identified, the contract has commercial substance and collectability of consideration is probable. The Company
generally recognizes revenue over time as it performs because of continuous transfer of control to the customer. Because of control
transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The cost-
to-cost measure of progress is generally used for its contracts because it best depicts the transfer of control to the customer which occurs as
the Company incurs costs on the contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is
measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenue is
recorded proportionally as costs are incurred.
Due to the nature of the work required to be performed on many of the performance obligations, the estimation of total revenue and cost at
completion is complex, subject to many variables and requires significant judgment. The Company estimates variable consideration at the
most likely amount which the Company expects to receive. The Company includes estimated
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Table of Contents
amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when
the uncertainty associated with the variable consideration is resolved. The estimates of variable consideration and determination of whether
to include estimated amounts in the transaction price are based largely on an assessment of all information (historical, current and
forecasted) that is reasonably available to the Company.
Contracts are often modified to account for changes in contract specifications and requirements. The Company considers contract
modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of the
contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service
provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract
modification on the transaction price and our measure of progress for the performance obligation to which it relates is recognized as an
adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.
The Company has a standard and disciplined quarterly estimated costs at completion process in which management reviews the progress
and execution of our performance obligations. Management must make assumptions and estimates regarding labor productivity and
availability, the complexity of the work to be performed, the availability of materials, the length of time to complete the performance
obligation (e.g., to estimate increases in wages and prices for materials and related support cost allocations), and execution by our
subcontractors, among other variables. Based on this analysis, any quarterly adjustments to net revenue, cost of electrical construction
revenue and the related impact to operating income are recognized as necessary in the period they become known.
The following table disaggregates the Company’s revenue for the years ended December 31 as indicated:
Electrical construction operations (1)
Southeast
mid-Atlantic
Texas-Southwest
Other electrical construction (2)
Total
Real estate development
Total revenue
___________________________
2018
2017
54,123,848 $
41,071,994
33,825,666
7,505,003
136,526,511
1,622,331
138,148,842 $
56,268,413
29,289,385
15,046,719
8,549,959
109,154,476
4,799,043
113,953,519
$
$
(1) Principal electrical construction operations include revenue from transmission lines, distribution systems, substations and drilled pier
foundations.
(2) Other electrical construction includes revenue from storm work, fiber optics and other miscellaneous electrical construction items.
The Company would have recognized $134,000 less revenue under legacy accounting practices for the year ended December 31, 2018,
than it did under the new revenue standard. This was attributable to the assessment of variable consideration and performance obligations
within our contractual arrangements.
The aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of December 31, 2018 was $36.4
million, all of which is expected to be satisfied within the next twelve months.
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Table of Contents
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of disclosure controls and procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we
file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and
reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated
to our management in a timely manner. An evaluation was performed under the supervision and with the participation of our management,
including John H. Sottile, our Chief Executive Officer (“CEO”), and Stephen R. Wherry, our Chief Financial Officer (“CFO”), of the
effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31,
2018. Based upon this evaluation, our management, including our CEO and our CFO, concluded that our disclosure controls and procedures
were effective, as of the end of the period covered by this Annual Report on Form 10-K, at the reasonable assurance level.
Management’s report on internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined
in Exchange Act Rule 13a-15(f), which consists of processes and procedures designed to provide reasonable assurance to our management
and board of directors regarding the preparation and fair presentation of our published financial statements. Under the supervision and with
the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control
over financial reporting as of December 31, 2018, based on the criteria set forth in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on our assessment, we believe that as of
December 31, 2018, our internal control over financial reporting was effective based on those criteria.
KPMG LLP, the Company’s independent registered public accounting firm, has issued an attestation report on the effectiveness of the
Company’s internal control over financial reporting.
Changes in internal control
No changes in our internal control over financial reporting occurred during the fourth quarter of 2018 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the effectiveness of controls
A control system, no matter how well conceived and operated, can provide only reasonable assurance, not absolute assurance, that the
objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues, if any, within a company have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can
be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.
The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be
no assurance that the design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become
inadequate because of changes in conditions, or the degree of compliance with policies and procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
The Goldfield Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited The Goldfield Corporation and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31,
2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),
the consolidated balance sheets of the Company as of December 31, 2018 and 2017, the related consolidated statements of income, cash
flows, and stockholders’ equity for the years then ended, and the related notes (collectively, the “consolidated financial statements”), and
our report dated March 12, 2019 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our
audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our
audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Orlando, Florida
March 12, 2019
/s/ KPMG LLP
49
Table of Contents
Item 9B. Other Information.
None.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Information concerning the directors of the Company will be contained under the heading “Proposal 1. Election of Directors” and
information concerning compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, will be contained under the
heading “Section 16(a) Beneficial Ownership Reporting Compliance” in our 2019 Proxy Statement, which information is incorporated
herein by reference.
Our executive officers are as follows:
Name and Title
John H. Sottile
Chairman of the Board, President and Chief Executive Officer, Director
Stephen R. Wherry
Senior Vice President, Chief Financial Officer, Treasurer, and Assistant Secretary
Jason M. Spivey President
Power Corporation of America, Southeast Power Corporation and Precision Foundations, Inc.
Year in which
service began
as officer
1983
1988
2017
Age (1)
71
60
48
___________________
(1) As of February 28,
2019
Throughout the past five years, John H. Sottile and Stephen R. Wherry have been principally employed as executive officers of the
Company, with responsibilities substantially consistent with those of their current positions.
John H. Sottile has served as Chairman of the Board of Directors since May 1998.
Jason M. Spivey joined Southeast Power Corporation as Project Manager in January 2015 and was promoted to Assistant Vice President in
May 2016, prior to being appointed President in June of 2017. Prior to joining the Company, Mr. Spivey worked in the power line
construction industry for over 25 years and held various leadership roles related to transmission and distribution line construction at Orlando
Utilities Commission, a municipally-owned public utility company, including the position of Transmission Line Supervisor from February
2010 until January 2015.
The term of office of all directors is until the next annual meeting and the term of office of all officers is one year, and until their
successors are elected and qualify.
Code of Ethics
In March 2003, our Board of Directors adopted a Code of Ethics (the “Code”) that is specifically applicable to our Chief Executive Officer
and Senior Financial Officers, including our Chief Financial Officer (who is our Principal Financial and Accounting Officer). The Code
incorporates guidelines designed to deter wrongdoing, to promote honest and ethical conduct, compliance with applicable laws and
regulations, prompt internal reporting of Code violations and accountability for Code adherence. A copy of the Code was filed as an exhibit
to our Annual Report on Form 10-K for the period ended December 31, 2003.
The Code is also available, free of charge, within the “Corporate Governance” section of our website, our website address is
www.goldfieldcorp.com. We intend to disclose on our website any amendments to, or waivers from, our Code of Ethics that are required to
be publicly disclosed pursuant to the rules of the Securities and Exchange Commission.
Audit Committee
Information concerning our Audit Committee including the Audit Committee Financial Expert will be contained under “Committees and
Meetings of the Board of Directors” in our 2019 Proxy Statement, which information is incorporated herein by reference.
Item 11. Executive Compensation.
Information concerning executive compensation and director compensation will be contained under “Executive Compensation” and
“Director Compensation” in our 2019 Proxy Statement, which information is incorporated herein by reference.
50
Table of Contents
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information concerning the security ownership of certain beneficial owners and management will be contained under “Security Ownership
of Certain Beneficial Owners and Management” and “Executive Compensation-Equity Compensation Plan Information” in our 2019 Proxy
Statement, which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information concerning certain relationships and related transactions of the directors and officers of our Company and director
independence will be contained under “Proposal 1. Election of Directors” and “Director Compensation-Transactions with Related Parties”
in our 2019 Proxy Statement, which information is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
Information concerning the accounting services performed by our Independent Registered Public Accounting Firm, KPMG LLP, and their
respective fees for such services will be contained under “Audit Committee Report and Fee Information” in our 2019 Proxy Statement,
which information is incorporated herein by reference.
PART IV
Item 15.
Exhibits, Financial Statement Schedules.
(a) The following documents are filed as part of this report:
(1) Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets — December 31, 2018 and 2017
Consolidated Statements of Income — Years ended December 31, 2018 and 2017
Consolidated Statements of Cash Flows — Years ended December 31, 2018 and 2017
Consolidated Statements of Stockholders’ Equity — Years ended December 31, 2018 and 2017
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
Page
26
27
28
29
30
31
No financial statement schedules are included as all applicable information is included in the notes to the consolidated financial
statements.
(3) Exhibits
3-1 (p)
Restated Certificate of Incorporation of the Company, as amended, is hereby incorporated by reference to Exhibit 3-1 of
the Company’s Annual Report on Form 10-K for the year ended December 31, 1987, heretofore filed with the
Commission (file No. 1-7525).
3-2
Amended and Restated By-Laws of the Company are hereby incorporated by reference to Exhibit 3-1 of the Company’s
Current Report on Form 8-K dated December 11, 2007, heretofore filed with the Commission (file No. 1-7525).
4-1 (p)
+10-1
+10-1(a)
+10-1(b)
Specimen copy of Company’s Common Stock certificate is hereby incorporated by reference to Exhibit 4-5 of the
Company’s Annual Report on Form 10-K for the year ended December 31, 1987, heretofore filed with the Commission
(file No. 1-7525).
Amended and Restated Employment Agreement dated November 1, 2001 between The Goldfield Corporation and John
H. Sottile is hereby incorporated by reference to Exhibit 10-2(g) of the Company’s Quarterly Report on Form 10-Q for
the period ended September 30, 2001, heretofore filed with the Commission (file No. 1-7525).
Amendment to John H. Sottile Employment Agreement, dated April 15, 2010, between John H. Sottile and The
Goldfield Corporation, is hereby incorporated by reference to Exhibit 10-1 of the Company’s Current Report on Form 8-
K dated April 15, 2010, heretofore filed with the Commission (file No. 1-7525).
Letter dated March 15, 2012 from John H. Sottile to the Benefits and Compensation Committee of the Board of Directors
of The Goldfield Corporation, is hereby incorporated by reference to Exhibit 10-1 of the Company’s Current Report on
Form 8-K dated March 15, 2012, heretofore filed with the Commission (file No. 1-7525).
51
Table of Contents
+10-1(c)
Partial Bonus Waiver Letter dated November 5, 2018 from John H. Sottile to the Benefits and Compensation Committee
of the Board of Directors of The Goldfield Corporation, is hereby incorporated by reference to Exhibit 10-1 of the
Company’s Current Report on Form 10-Q dated November 5, 2018, hereto filed with the Commission (file No. 1-7525).
+10-2
+10-3
+10-4
10-5
10-6
10-6(a)
10-6(b)
10-7
10-8
10-9
10-9(a)
10-9(b)
10-9(c)
10-9(d)
Form of Indemnification Agreement is hereby incorporated by reference to Item 1.01 of the Company’s Current Report
on Form 8-K dated December 7, 2017, heretofore filed with the Commission (file No. 1-7525).
Amended and Restated Performance-Based Bonus Plan effective January 1, 2016 is hereby incorporated by reference to
the Company’s 2016 Proxy Statement, heretofore filed with the Commission on April 27, 2016 (file No. 1-7525).
The Goldfield Corporation 2013 Long-Term Incentive Plan is hereby incorporated by reference to the Company’s 2013
Proxy Statement, heretofore filed with the Commission on April 29, 2013 (file No. 1-7525).
Collateral Trust Agreement between The Goldfield Corporation, Valley Forge Insurance Company Branch Banking and
Trust Company is hereby incorporated by reference to Exhibit 10-1 of the Company’s Current Report on Form 8-K
dated October 25, 2010, heretofore filed with the Commission (file No. 1-7525).
The Lease Agreement dated June 7, 2004 between Hibiscus Office Park, LLC and The Goldfield Corporation is hereby
incorporated by reference to Exhibit 10-1 of the Company’s Quarterly Report on Form 10-Q for the period ended June
30, 2004, heretofore filed with the Commission (file No. 1-7525).
The First Amendment to the Lease Agreement signed October 7, 2011, effective November 1, 2011 between Hibiscus
Office Park, LLC and The Goldfield Corporation is hereby incorporated by reference to Exhibit 10-1 of the Company’s
Current Report on Form 8-K dated October 7, 2011, heretofore filed with the Commission (file No. 1-7525).
The Second Amendment to the Lease Agreement signed July 29, 2013, effective November 1, 2013 between Hibiscus
Office Park, LLC and The Goldfield Corporation is hereby incorporated by reference to Exhibit 10-1 of the Company’s
Quarterly Report on Form 10-Q for the period ended September 30, 2013, heretofore filed with the Commission (file
No. 1-7525).
Master Lease Agreement dated March 31, 2014, among Power Corporation of America and Terex Master Trust relating
to (4) 60 month lease schedules for specific use of equipment totaling $6.4 million in the aggregate over the 60-month
term is hereby incorporated by reference to Item 2.03 of the Company’s Current Report on Form 8-K dated April 3,
2014, heretofore filed with the Commission (file No. 1-7525).
Master Loan Agreement, dated May 24, 2018, among The Goldfield Corporation, Power Corporation of America,
Southeast Power Corporation, C and C Power Line, Inc, Bayswater Development Corporation, Precision Foundations,
Inc., Pineapple House of Brevard, Inc., and Branch Banking and Trust Company relating to all prior and new loans with
Branch Banking and Trust Company as listed in Exhibit “A” of the loan document is hereby incorporated by reference to
Exhibit 10-1 of the Company’s Current Report on Form 8-K dated May 24, 2018, heretofore filed with the Commission
(file No. 1-7525).
Promissory Note of The Goldfield Corporation, dated June 9, 2017, relating to Loans of up to $22.6 million is hereby
incorporated by reference to Exhibit 10-2 of the Company’s Current Report on Form 8-K dated June 9, 2017, heretofore
filed with the Commission (file No. 1-7525).
Addendum to Promissory Note dated June 9, 2017, among The Goldfield Corporation and Branch Banking and Trust
Company relating to Loans of up to $22.6 million is hereby incorporated by reference to Exhibit 10-3 of the Company’s
Current Report on Form 8-K dated June 9, 2017, heretofore filed with the Commission (file No. 1-7525).
Modification Promissory Note, dated May 24, 2018, among The Goldfield Corporation and Branch Banking and Trust
Company relating to Loans to The Goldfield Corporation of up to $27.49 million is hereby incorporated by reference to
Exhibit 10-2 of the Company's Current Report on Form 8-K dated May 24, 2018, heretofore filed with the Commission
(file No. 1-7525).
Addendum To Modification Promissory Note, dated May 24, 2018, among The Goldfield Corporation and Branch
Banking and Trust Company relating to Loans to The Goldfield Corporation of up to $27.49 million is hereby
incorporated by reference to Exhibit 10-3 of the Company's Current Report on Form 8-K dated May 24, 2018, heretofore
filed with the Commission (file No. 1-7525).
Security Agreement, dated May 24, 2018, between Southeast Power Corporation, Power Corporation of America,
Bayswater Development Corporation, Pineapple House of Brevard, Inc., C and C Power Line, Inc., Precision
Foundations, Inc., and Branch Banking and Trust Company relating to Loans to The Goldfield Corporation of up to
$27.49 million is hereby incorporated by reference to Exhibit 10-4 of the Company's Current Report on Form 8-K dated
May 24, 2018, heretofore filed with the Commission (file No. 1-7525).
52
Table of Contents
10-9(e)
10-10
10-10(a)
10-10(b)
10-10(c)
Guaranty Agreement, dated May 24, 2018, between Southeast Power Corporation, Power Corporation of America,
Bayswater Development Corporation, Pineapple House of Brevard, Inc., C and C Power Line, Inc., Precision
Foundations, Inc., and Branch Banking and Trust Company relating to Loans to The Goldfield Corporation of up to
$27.49 million is hereby incorporated by reference to Exhibit 10-5 of the Company's Current Report on Form 8-K dated
May 24, 2018, heretofore filed with the Commission (file No. 1-7525).
Promissory Note, dated May 24, 2018, among The Goldfield Corporation and Branch Banking and Trust Company
relating to Loans to The Goldfield Corporation of up to $18.0 million is hereby incorporated by reference to Exhibit 10-6
of the Company’s Current Report on Form 8-K dated May 24, 2018, heretofore filed with the Commission (file No. 1-
7525).
Addendum To Promissory Note, dated May 24, 2018, among The Goldfield Corporation and Branch Banking and Trust
Company relating to Loans to The Goldfield Corporation of up to $18.0 million is hereby incorporated by reference to
Exhibit 10-7 of the Company’s Current Report on Form 8-K dated May 24, 2018, heretofore filed with the Commission
(file No. 1-7525).
Security Agreement, dated May 24, 2018, between Southeast Power Corporation, Power Corporation of America,
Bayswater Development Corporation, Pineapple House of Brevard, Inc., C and C Power Line, Inc., Precision
Foundations, Inc., and Branch Banking and Trust Company relating to Loans to The Goldfield Corporation of up to
$18.0 million is hereby incorporated by reference to Exhibit 10-8 of the Company’s Current Report on Form 8-K dated
May 24, 2018, heretofore filed with the Commission (file No. 1-7525).
Guaranty Agreement, dated May 24, 2018, between Southeast Power Corporation, Power Corporation of America,
Bayswater Development Corporation, Pineapple House of Brevard, Inc., C and C Power Line, Inc., Precision
Foundations, Inc., and Branch Banking and Trust Company relating to Loans to The Goldfield Corporation of up to
$18.0 million is hereby incorporated by reference to Exhibit 10-9 of the Company’s Current Report on Form 8-K dated
May 24, 2018, heretofore filed with the Commission (file No. 1-7525).
(p) Filed as a paper exhibit with the U.S. Securities and Exchange Commission
For computation of per share earnings, see note 9 to the consolidated financial statements.
11
*21 Subsidiaries of Registrant
*23 Consent of Independent Registered Public Accounting Firm
*24 Powers of Attorney
*31-1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 15 U.S.C. Section 7241
*31-2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 15 U.S.C. Section 7241
*32-1 **Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
*32-2 **Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
101.INS XBRL Instance Document
101.SCH XBRL Schema Document
101.CAL XBRL Calculation Linkbase Document
101.DEF XBRL Definition Linkbase Document
101.LAB XBRL Label Linkbase Document
101.PRE XBRL Presentation Linkbase Document
* Filed herewith.
** These exhibits are furnished in accordance with Regulation S-K Item 601(b)(32) and shall not be deemed filed for purposes of
Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section. These exhibits shall not
be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that the registrant specifically incorporates them by reference.
+ Management contract, compensatory plan or arrangement.
53
Table of Contents
Item 16. Form 10-K Summary.
None.
54
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
THE GOLDFIELD CORPORATION
By:
/s/ JOHN H. SOTTILE
(John H. Sottile)
Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)
Dated: March 12, 2019
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities indicated on March 12, 2019.
Signature
Title
/s/ JOHN H. SOTTILE
(John H. Sottile)
/s/ STEPHEN R. WHERRY
(Stephen R. Wherry)
*
(Stephen L. Appel)
*
(David P. Bicks)
*
(Harvey C. Eads, Jr.)
*
(John P. Fazzini)
*
(Danforth E. Leitner)
*By:
/s/ JOHN H. SOTTILE
John H. Sottile
Attorney-in-Fact
Chairman of the Board, President and Chief Executive Officer (Principal
Executive Officer)
Senior Vice President, Chief Financial Officer, Treasurer and Assistant
Secretary (Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
55
Subsidiaries of Registrant
Company
Power Corporation of America
Subsidiaries of Power Corporation of America
C and C Power Line, Inc.
Southeast Power Corporation
Precision Foundations, Inc.
Bayswater Development Corporation
Subsidiaries of Bayswater Development
Corporation
Abacos of Brevard, Inc.
Florida Coastal Homes, Inc.
Harbor Beach Club of Brevard
Palm Beach of Brevard, Inc. (Previously Palmilla of Brevard, Inc.)
Pineapple House of Brevard, Inc.
The Savoy of Brevard, Inc.
All of the above subsidiaries are included in the consolidated financial statements
of the Company as of December 31, 2018.
Exhibit 21
State of
Jurisdiction
of
Organization
Percentage
of Voting
Securities
Owned
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Exhibit 23
Consent of Independent Registered Public Accounting Firm
The Board of Directors
The Goldfield Corporation:
We consent to the incorporation by reference in the registration statements (No. 333‑72241 and No. 333-201028) on Form S-8 of The
Goldfield Corporation of our reports dated March 12, 2019, with respect to the consolidated balance sheets of The Goldfield Corporation as
of December 31, 2018 and 2017, and the related consolidated statements of income, cash flows, and stockholders’ equity for each of the
years then ended, and the related notes (collectively, the “consolidated financial statements”), and the effectiveness of internal control over
financial reporting as of December 31, 2018, which reports appear in the December 31, 2018 annual report on Form 10-K of The Goldfield
Corporation.
Our report dated March 12, 2019, on the consolidated financial statements, contains an explanatory paragraph relating to the Company
changing its method of accounting for revenue from contracts with customers in 2018 due to the adoption of Accounting Standards
Codification 606, Revenue from Contracts with Customers.
/s/ KPMG LLP
Orlando, Florida
March 12, 2019
POWER OF ATTORNEY
Exhibit 24
The undersigned who is a director or officer of The Goldfield Corporation, a Delaware corporation (the “Company”);
Does hereby constitute and appoint John H. Sottile and Stephen R. Wherry to be his agent and attorney-in-fact;
Each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the
undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 2018, and any amendments or supplements to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which they shall deem necessary or proper in connection with the
filing of such Annual Report, and generally to act for and in the name of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
Each agent named above is hereby empowered to determine in his discretion the times when, the purposes for, and the names in which, any
power conferred upon him herein shall be exercised and the terms and conditions of any instrument, certificate or document which may be
executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed by those laws of the State of Delaware that apply to
instruments negotiated, executed, delivered and performed solely within the State of Delaware.
This Power of Attorney may be executed in any number of counterparts, each of which shall have the same effect as if it were the original
instrument and all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 6th day of December, 2018.
/s/ Stephen R. Wherry
Witness
/s/ Danforth E. Leitner
Witness
State of Florida
County of Brevard
/s/ John P. Fazzini
John P. Fazzini, Director
The foregoing instrument was acknowledged before me this 6th day of December, 2018 by John P. Fazzini, Director of The Goldfield
Corporation, a Delaware corporation. He is personally known to me.
/s/ Melissa A. Munson
Notary Public Melissa A. Munson
Imprint of Notary Stamp of Melissa A. Munson
The undersigned who is a director or officer of The Goldfield Corporation, a Delaware corporation (the “Company”);
Does hereby constitute and appoint John H. Sottile and Stephen R. Wherry to be his agent and attorney-in-fact;
POWER OF ATTORNEY
Each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the
undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 2018, and any amendments or supplements to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which they shall deem necessary or proper in connection with the
filing of such Annual Report, and generally to act for and in the name of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
Each agent named above is hereby empowered to determine in his discretion the times when, the purposes for, and the names in which, any
power conferred upon him herein shall be exercised and the terms and conditions of any instrument, certificate or document which may be
executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed by those laws of the State of Delaware that apply to
instruments negotiated, executed, delivered and performed solely within the State of Delaware.
This Power of Attorney may be executed in any number of counterparts, each of which shall have the same effect as if it were the original
instrument and all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 6th day of December, 2018.
/s/ Denise L. Diaz
Witness
/s/ David P. Bicks
Witness
State of Florida
County of Brevard
/s/ Harvey C. Eads, Jr.
Harvey C. Eads, Jr., Director
The foregoing instrument was acknowledged before me this 6th day of December, 2018 by Harvey C. Eads, Jr., Director of The Goldfield
Corporation, a Delaware corporation. He is personally known to me.
/s/Melissa A. Munson
Notary Public Melissa A. Munson
Imprint of Notary Stamp of Melissa A. Munson
The undersigned who is a director or officer of The Goldfield Corporation, a Delaware corporation (the “Company”);
Does hereby constitute and appoint John H. Sottile and Stephen R. Wherry to be his agent and attorney-in-fact;
POWER OF ATTORNEY
Each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the
undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 2018, and any amendments or supplements to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which they shall deem necessary or proper in connection with the
filing of such Annual Report, and generally to act for and in the name of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
Each agent named above is hereby empowered to determine in his discretion the times when, the purposes for, and the names in which, any
power conferred upon him herein shall be exercised and the terms and conditions of any instrument, certificate or document which may be
executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed by those laws of the State of Delaware that apply to
instruments negotiated, executed, delivered and performed solely within the State of Delaware.
This Power of Attorney may be executed in any number of counterparts, each of which shall have the same effect as if it were the original
instrument and all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 6th day of December, 2018.
/s/ Denise L. Diaz
Witness
/s/ Harvey C. Eads, Jr.
Witness
State of Florida
County of Brevard
/s/ David P. Bicks
David P. Bicks, Director
The foregoing instrument was acknowledged before me this 6th day of December, 2018 by David P. Bicks, Director of The Goldfield
Corporation, a Delaware corporation. He is personally known to me.
/s/ Melissa A. Munson
Notary Public Melissa A. Munson
Imprint of Notary Stamp of Melissa A. Munson
The undersigned who is a director or officer of The Goldfield Corporation, a Delaware corporation (the “Company”);
Does hereby constitute and appoint John H. Sottile and Stephen R. Wherry to be his agent and attorney-in-fact;
POWER OF ATTORNEY
Each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the
undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 2018, and any amendments or supplements to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which they shall deem necessary or proper in connection with the
filing of such Annual Report, and generally to act for and in the name of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
Each agent named above is hereby empowered to determine in his discretion the times when, the purposes for, and the names in which, any
power conferred upon him herein shall be exercised and the terms and conditions of any instrument, certificate or document which may be
executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed by those laws of the State of Delaware that apply to
instruments negotiated, executed, delivered and performed solely within the State of Delaware.
This Power of Attorney may be executed in any number of counterparts, each of which shall have the same effect as if it were the original
instrument and all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 6th day of December, 2018.
/s/ John P. Fazzini
Witness
/s/ John H. Sottile
Witness
State of Florida
County of Brevard
/s/ Danforth E. Leitner
Danforth E. Leitner, Director
The foregoing instrument was acknowledged before me this 6th day of December, 2018 by Danforth E. Leitner, Director of The Goldfield
Corporation, a Delaware corporation. He is personally known to me.
/s/ Melissa A. Munson
Notary Public Melissa A. Munson
Imprint of Notary Stamp of Melissa A. Munson
The undersigned who is a director or officer of The Goldfield Corporation, a Delaware corporation (the “Company”);
Does hereby constitute and appoint John H. Sottile and Stephen R. Wherry to be his agent and attorney-in-fact;
POWER OF ATTORNEY
Each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the
undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 2018, and any amendments or supplements to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which they shall deem necessary or proper in connection with the
filing of such Annual Report, and generally to act for and in the name of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
Each agent named above is hereby empowered to determine in his discretion the times when, the purposes for, and the names in which, any
power conferred upon him herein shall be exercised and the terms and conditions of any instrument, certificate or document which may be
executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed by those laws of the State of Delaware that apply to
instruments negotiated, executed, delivered and performed solely within the State of Delaware.
This Power of Attorney may be executed in any number of counterparts, each of which shall have the same effect as if it were the original
instrument and all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 6th day of December, 2018.
/s/ Dwayne Straughan
Witness
/s/ Liliana Reyes Diez
Witness
State of Florida
County of Orange
/s/ Stephen. L. Appel
Stephen. L. Appel, Director
The foregoing instrument was acknowledged before me this 6th day of December, 2018 by Stephen. L. Appel, Director of The Goldfield
Corporation, a Delaware corporation. He is personally known to me.
/s/ Liliana Reyes Diez
Notary Public Liliana Reyes Diez
Imprint of Notary Stamp of Liliana Reyes Diez
The undersigned who is a director or officer of The Goldfield Corporation, a Delaware corporation (the “Company”);
Does hereby constitute and appoint Stephen R. Wherry to be his agent and attorney-in-fact;
POWER OF ATTORNEY
Each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the
undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 2018, and any amendments or supplements to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which they shall deem necessary or proper in connection with the
filing of such Annual Report, and generally to act for and in the name of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
Each agent named above is hereby empowered to determine in his discretion the times when, the purposes for, and the names in which, any
power conferred upon him herein shall be exercised and the terms and conditions of any instrument, certificate or document which may be
executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed by those laws of the State of Delaware that apply to
instruments negotiated, executed, delivered and performed solely within the State of Delaware.
This Power of Attorney may be executed in any number of counterparts, each of which shall have the same effect as if it were the original
instrument and all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 6th day of December, 2018.
/s/ John P. Fazzini
Witness
/s/ John H. Sottile
John H. Sottile, Director
/s/ Danforth E. Leitner
Witness
State of Florida
County of Brevard
The foregoing instrument was acknowledged before me this 6th day of December, 2018 by John H. Sottile, Director of The Goldfield
Corporation, a Delaware corporation. He is personally known to me.
/s/ Melissa A. Munson
Notary Public Melissa A. Munson
Imprint of Notary Stamp of Melissa A. Munson
The undersigned who is a director or officer of The Goldfield Corporation, a Delaware corporation (the “Company”);
Does hereby constitute and appoint John H. Sottile to be his agent and attorney-in-fact;
POWER OF ATTORNEY
Each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the
undersigned;
To sign and file with the Securities and Exchange Commission the Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 2018, and any amendments or supplements to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which they shall deem necessary or proper in connection with the
filing of such Annual Report, and generally to act for and in the name of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
Each agent named above is hereby empowered to determine in his discretion the times when, the purposes for, and the names in which, any
power conferred upon him herein shall be exercised and the terms and conditions of any instrument, certificate or document which may be
executed by him pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the undersigned nor by the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be governed by those laws of the State of Delaware that apply to
instruments negotiated, executed, delivered and performed solely within the State of Delaware.
This Power of Attorney may be executed in any number of counterparts, each of which shall have the same effect as if it were the original
instrument and all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 6th day of December, 2018.
/s/ Stephen R. Wherry
Stephen R. Wherry, Senior
Vice President
/s/ Denise L. Diaz
Witness
/s/ Danforth E. Leitner
Witness
State of Florida
County of Brevard
The foregoing instrument was acknowledged before me this 6th day of December, 2018 by Stephen R. Wherry, Senior Vice President of
The Goldfield Corporation, a Delaware corporation. He is personally known to me.
/s/ Melissa A. Munson
Notary Public Melissa A. Munson
Imprint of Notary Stamp of Melissa A. Munson
Exhibit 31-1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002 15 U.S.C. SECTION 7241
I, John H. Sottile, certify that:
1.
I have reviewed
Corporation;
this annual report on Form 10-K of The Goldfield
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the
equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
/s/ JOHN H. SOTTILE
John H. Sottile
Chairman of the Board, President
and Chief Executive Officer (Principal
Executive Officer)
March 12, 2019
Exhibit 31-2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002 15 U.S.C. SECTION 7241
I, Stephen R. Wherry, certify that:
1.
I have reviewed
Corporation;
this annual report on Form 10-K of The Goldfield
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the
equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
/s/ STEPHEN R. WHERRY
Stephen R. Wherry
Senior Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary (Principal Financial and Accounting Officer)
March 12, 2019
Exhibit 32-1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
18 U.S.C. SECTION 1350
In connection with the Annual Report of The Goldfield Corporation (the “Company”) on Form 10-K for the year ended December 31,
2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John H. Sottile, Chairman of the Board,
President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-
Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of
operations of the Company.
A signed original of this written statement required by Section 906 has been provided to The Goldfield Corporation and will be retained by
The Goldfield Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ JOHN H. SOTTILE
John H. Sottile
Chairman of the Board, President
and Chief Executive Officer (Principal
Executive Officer)
March 12, 2019
Exhibit 32-2
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
18 U.S.C. SECTION 1350
In connection with the Annual Report of The Goldfield Corporation (the “Company”) on Form 10-K for the year ended December 31,
2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen R. Wherry, Senior Vice
President, Treasurer, Assistant Secretary and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of
operations of the Company.
A signed original of this written statement required by Section 906 has been provided to The Goldfield Corporation and will be retained by
The Goldfield Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ STEPHEN R. WHERRY
Stephen R. Wherry
Senior Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary (Principal Financial and Accounting Officer)
March 12, 2019