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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION  FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003
 [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934  Commission file number 0-25428 MEADOW VALLEY CORPORATION  Nevada
    
    88-0328443(State or other jurisdiction of
    
    (IRS Employer Identification Number)incorporation or organization)4411 South 40th Street, Suite D-11, Phoenix, AZ
    
    85040(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (602) 437-5400 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of each class:
    
    Name of exchange on which registered:Common stock, $.001 par value
    
    Nasdaq SmallCap Market
 Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [  ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [  ] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes [  ] No [X] On June 30, 2003, the aggregate market value of the registrants voting stock held by non-affiliates was $3,825,140. On March 24, 2004, there were 3,601,250 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE The registrant incorporates by reference into Parts II and III of this
Report, information contained in its definitive proxy statement to be
disseminated in connection with its Annual Meeting of Shareholders for the year
ended December 31, 2003.




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MEADOW VALLEY CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2003 TABLE OF CONTENTS PAGEPART IItem 1.
    
    Business
    
    
    3Item 2.
    
    Properties
    
    
    11Item 3.
    
    Legal Proceedings
    
    
    11Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    11PART IIItem 5.
    
    Market for
Registrants Common Equity and Related Stockholders Matters
    
    
    12Item 6.
    
    Selected Financial Data
    
    
    12Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 8.
    
    Financial Statements and Supplementary Data
    
    
    19Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    47Item 9A.
    
    Controls and Procedures
    
    
    47PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    48Item 11.
    
    Executive Compensation
    
    
    48Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    
    48Item 13.
    
    Certain Relationships and Related Transactions
    
    
    48Item 14.
    
    Principal Accounting Fees and Services
    
    
    48PART IVItem 15.
    
    Exhibits, Financial Statement Schedules, and Reports on Form 8-K
    
    
    49
  MVCO
    2003 Form 10-KEX-10.247EX-10.248EX-10.249EX-10.250EX-10.251EX-10.252EX-10.254EX-10.254EX-10.255EX-10.256EX-14.01EX-31.5EX-31.6EX-32.3 2




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PART I 
 Item 1.Business About Meadow Valley Meadow Valley Corporation (Company, Meadow Valley, we, us and
our), based in Phoenix, Arizona, is engaged in the construction industry as
both a provider of construction services and a supplier of construction
materials. Our construction services segment (CSS) specializes in structural
concrete construction of highway bridges and overpasses, and the paving of
highways and airport runways. The construction materials segment (CMS)
provides ready mix concrete, sand and gravel products to itself and to other
contractors. The CSS operates throughout Nevada, Utah and Arizona and the CMS
operates in the Las Vegas, Nevada and Phoenix, Arizona metropolitan areas. Forward Looking Statements The following is a summary of certain information contained in this Report
and is qualified in its entirety by the detailed information and financial
statements that appear elsewhere herein. Except for the historical information
contained herein, the matters set forth in this Report include forward-looking
statements within the meaning of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
subject to risks and uncertainties that may cause actual results to differ
materially. These risks and uncertainties are detailed throughout this Report
and will be further discussed from time to time in the Companys periodic
reports filed with the Commission. The forward-looking statements included in
this Report speak only as of the date hereof. Recent Developments We experienced major improvements in several key areas over the past year.
From year end December 31, 2002 to year end December 31, 2003, working capital
increased from $2,307,005 to $5,210,466, the debt to equity ratio improved from
1.35:1 to 1.08:1, the current ratio improved from 1.07 to 1.16 and cash flow
from operations increased from $2.9 million to $5.0 million, respectively.
Much of these improvements stem from a $7 million settlement agreement with the
New Mexico State Highway and Transportation Department (NMSHTD), resulting in
moving approximately $4.1 million to a current claim receivable as of December
31, 2003. The settlement, including $1,127,636 in retention, was reached
during January 2004 and paid in February 2004 and completely resolves three of
the five disputed contracts with the NMSHTD. With our improved financial
position, we should be better able to respond to opportunities for future
growth and enhanced profitability. Meadow Valleys bonding capacity (that determines the size and number of
projects we can bid on and obtain as a provider of construction services) has
been constrained since 2001 when it was reduced to an aggregate program of $75
million and a single project limit of $10 million. The aggregate bonding
capacity had peaked in 2000 at approximately $300 million with a single project
limit of approximately $110 million. Operating losses in 2000 and 2001, mostly
stemming from cost overruns on contracts for which claims have been filed, were
the primary cause of decreased bonding capacity. Recent financial improvements
have resulted in our receiving approval for single project bonds approaching
$25 million and indications from our surety provider that the aggregate program
may increase to approximately $90 million. History Meadow Valley Corporation was incorporated in Nevada on September 15,
1994. In October and November 1995, we sold 1,926,250 Units of our securities
to the public at $6.00 per Unit (the Public Offering). Each Unit consisted
of one share of $.001 par value common stock and one common stock purchase
warrant exercisable to purchase one additional share of common stock at $7.20
per share. The warrants expired unexercised on December 31, 2002. We currently have two wholly owned subsidiaries, Meadow Valley
Contractors, Inc. (MVCI) and Ready Mix, Inc (RMI). MVCI was founded in
1980 as a heavy construction contractor and has been providing construction
services since inception. We purchased all of the outstanding common stock of
MVCI on October 1, 1994, therefore, references to our history includes the
history of MVCI. Through MVCI, we provide construction services. MVCI operates as a heavy
highway contractor in public infrastructure projects including the construction
of bridges and overpasses, channels, roadways, highways and airport  MVCO
    2003 Form 10-K 3




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runways.
MVCI generally serves as the prime contractor for public sector customers (such
as federal, state and local governmental authorities) in the states of Nevada,
Arizona, and Utah. MVCI primarily seeks public sector customers because
public sector projects are less cyclical than private sector projects, payment
is more reliable, work required by the project is generally standardized and
little marketing expense is incurred in obtaining projects. In 1996, we expanded into the construction materials segment of the
construction industry with the formation of Ready Mix, Inc. RMI manufactures
and distributes ready mix concrete, crushed landscaping rock and other
miscellaneous rock and sand products. RMI owns and operates four ready mix
concrete batch plants  two in the Las Vegas, NV area and two in the Phoenix,
AZ area and owns or leases 120 ready mix trucks as well as a small fleet of
aggregate hauling tractors and trailers. RMI produces the majority of our own
rock and sand for our Nevada plants from a crushing and screening plant in
Moapa, NV. RMI primarily targets customers such as concrete subcontractors,
prime contractors, homebuilders, commercial and industrial property developers,
pool builders and homeowners. RMI began its ready mix concrete operation from
its first location in North Las Vegas in March 1997, began processing rock and
sand from its Moapa pit in November 1999, and expanded into the Phoenix market
with two plants in 2000. Consistent with our dual interests in construction services and
construction materials, we also own or lease two portable hot mix asphalt
plants, a rubberized asphalt plant, and related asphalt paving equipment. The
portability of these asphalt paving capabilities provides us an opportunity to
enhance our construction operations in our existing markets, improve our
competitiveness and generate increased revenues on projects that call for large
quantities of asphaltic concrete, recycled asphalt, or rubberized asphalt.
These capabilities will also open opportunities to provide construction
materials or to subcontract our services to other construction companies. Our backlog (anticipated revenue from the uncompleted portions of awarded
projects) was approximately $71 million at December 31, 2003, compared to
approximately $69 million at December 31, 2002, and consists of various
projects in Nevada, Arizona and Utah. Approximately $65 million of our backlog
is scheduled for completion during 2004. We have been the prime contractor on
projects funded by a number of governmental authorities, including the Federal
Highway Administration, the Arizona Department of Transportation, the Nevada
Department of Transportation, the Utah Department of Transportation, the Clark
County (Nevada) Department of Public Works, the Salt Lake City (Utah) Airport
Authority, the New Mexico State Highway and Transportation Department and the
City of Phoenix. Business Strategy The business strategies we employ or are instituting include:  (i)
    
    Increasing revenue and profit from construction materials
segment. We will add to our ready mix truck fleet to increase
delivery capacity, to improve service to our customers and increase
sales. We plan to acquire and develop additional batch plant
locations in fast-growing areas of our existing markets. These
additional sites will increase productivity and permit us to better
service new and existing customers.(ii)
    
    Acquiring sand and gravel mining rights.A key strategy for
the future growth and value of the construction materials segment is
the acquisition of mining properties, either by purchase or lease
whichever is most advantageous, to decrease dependency on third-party
suppliers, to control production and to increase revenue from the
sale of sand and gravel products.(iii)
    
    Continuing to increase working capital and liquidity.We may
seek to sell certain under-performing or under-utilized assets.
Improved working capital and liquidity will potentially add more
bonding capacity, thereby allowing us to bid on larger and, ideally,
more profitable projects.(iv)
    
    Consolidating area offices and decrease overhead costs.We
plan to reduce the number of area offices from five to four, thereby
eliminating certain overhead costs and consolidating management and
administrative functions.(v)
    
    Diligently pursuing the successful resolution of the three
remaining construction claims. Substantial costs were incurred in
completing certain projects in New Mexico and Clark County, Nevada
and we strongly believe that much of the costs are compensable due to
changed conditions, owners plan errors and
omissions, conflicting utility right of ways, delays not caused by
us and misadministration by third party construction managers
employed by the owners. The total amount of claims that have been
submitted and  MVCO
    2003 Form 10-K 4




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remain unpaid is approximately $31.1 million. This
amount excludes claim costs settled in January of 2004 and paid in
February 2004 by the NMSHTD.(vi)
    
    Continuing to actively bid in the construction markets in
Arizona, southern Nevada and southern Utah and improving construction
project profitability.We plan to focus our construction services
within the geographic markets that have historically produced the
best profits. Our emphasis will be on building transportation
infrastructure and other related heavy civil projects in our core
markets of Arizona, southern Nevada and southern Utah. At the same
time, we will strive to improve margins on new contracts by, among
other things, increasing, when possible, margins on new work bidding,
maximizing labor and equipment productivity, negotiating more
favorable material purchase contracts and employing the most
competitive subcontractors.(vii)
    
    Growing our client base for private construction services and
insuring satisfaction of existing private customer base.We have
succeeded in attracting and retaining a nucleus of non-public clients
for whom we regularly perform construction services. Our strategy is
to grow our client base to include additional preferred customers and
to insure continued customer satisfaction. Market Overview A year ago, we characterized the construction market as being uncertain
because of both Federal and State budget deficits, the impending expiration of
the TEA-21 federal highway bill and a sluggish economic recovery. The
construction market for 2004 faces less uncertainty. We have observed that
recent budget deficits at both State and Federal levels have had little impact
on our construction markets or our business. Low interest rates continue to
drive a remarkably sustained growth in residential construction. A new
six-year highway bill is close to passing both houses of the U.S. Congress and
will likely constitute a slight increase over the previous TEA-21 legislation.
The overall economy is slow, in relative terms, but is steady and improving.
The 2004 construction market will likely be a repeat of 2003 or perhaps
slightly better. That is, single digit percentage declines in some segments of
the construction industry with single digit percentage increases in other
segments. Commercial construction (non-residential buildings) will probably be
the slowest segment while single-family housing, made attractive by low
mortgage rates, will see the smallest declines. From a national perspective,
once a federal highway bill is passed, transportation infrastructure will
likely see a small rise in activity, but still less than ten percent. As with
the passage of TEA-21, it will take some time for federal funding to filter its
way through the planning, design and construction pipeline and will not create
a noticeable blip, up or down, in 2004. Most funding for State highway
construction budgets originate from user fees, gas taxes or sales taxes and are
generally earmarked for construction spending. In addition, for States to
utilize Federal Highway funds, in most cases, they must match a certain
percentage of the Federal contribution. These factors will likely minimize
declines in construction budgets of the states in which we operate. One of Meadow Valleys strengths continues to be our geographic markets.
With operations in Nevada, Arizona and Utah, we are situated in the heart of
some of the fastest growing markets in the U.S. A leading national
construction industry consulting firm, FMI Corporation, published their The
2003  2004 U.S. Construction Overview Updateand identified only ten states
that are projected to grow by more than 40% from 1995-2025; Nevada, Arizona and
Utah made the top ten list. Perhaps just as important as population growth, is
job growth. The Western Blue Chip Economic Forecastestimates that Nevada
and Arizona will lead all of the ten western states in job growth. Nevada is
predicted to create the largest percentage of new job growth at 3.5% and
Arizona is expected to be second at 3.4%. The U.S. population is expected to
continue to move toward the Sunbelt states. Population and job growth are key
indicators for the construction industry as they create demand for housing,
commercial and industrial construction, not to mention transportation
facilities. Freeway construction programs, funded by sales tax measures in
Maricopa County, AZ and Clark County, NV, continue to create transportation
construction opportunities in the Phoenix and Las Vegas metropolitan areas. A key ballot proposal facing voters in 2004 in Maricopa County, AZ
(Phoenix metropolitan area) is the extension of an existing half-cent sales tax
dedicated to the construction and maintenance of transportation facilities
including freeways,
streets and mass transit. This sales tax has been in place since 1986 and has
funded in excess of $5 billion of transportation improvements in the past two
decades. Based upon population and spending forecasts, an extension of this
existing tax could generate approximately $9 billion of funding over the next
twenty years for construction of transportation-related infrastructure. The
outcome of this particular vote will be a key factor in deciding which
direction the construction services and construction materials markets take in
Maricopa County.  MVCO
    2003 Form 10-K 5




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The health of the overall construction market provides the foundation for
the our markets, but the construction materials segment is impacted to a
greater degree by the conditions of the residential and commercial sectors of
the construction economy  both market sectors primarily driven by population
and job growth. Residential construction activity in 2003 was about 1.2%
better than 2002 and 2004 is expected to decline by just over 2%. The 2004
Nevada residential market is forecast to increase by almost 3% over 2003
levels. The key is interest rates. If interest rate levels remain low,
residential construction should continue to contribute to another successful
year for our CMS in both Phoenix and Las Vegas. Construction Services Segment (CSS) Operations The CSS constructs highways, bridges, overpasses, airport runways and
constructs other heavy civil projects. From our Phoenix, Arizona corporate
office and area offices in Phoenix, Arizona, North Las Vegas, Nevada and
Springville, Utah, we market (primarily by responding to solicitations for
competitive bids) and manage all of our projects. Project management is also
located on-site to provide direct supervision for operations. We consider a number of factors when determining whether to bid on a
project, including profitability, the location of the project, likely
competitors and our current and projected workloads. We use a computer-based
project estimating system which reflects our bidding and construction
experience and we perform detailed quantity take-offs from bidding documents,
which we believe helps identify a projects risks and opportunities. We
develop comprehensive estimates with each project divided into phases and line
items for which separate labor, equipment, material, subcontractor and overhead
cost estimates are compiled. Once a project begins, the estimate provides us
with a budget against which ongoing project costs are measured. There can be
no assurance that every project will attain its budgeted costs. A number of
factors can affect a projects profitability including weather, availability of
a quality workforce and actual productivity rates. Each month the project
manager updates the projects projected performance at completion by using
actual costs-to-date and re-forecasted costs-to-complete for the balance of the
work remaining. Regular review of these estimated costs-at-completion reports
allow project, area and corporate management to be as responsive as possible to
cost overruns or other problems that may affect profitability. We own or lease most of the equipment used in our business, including
cranes, backhoes, graders, loaders, trucks, trailers, pavers, rollers,
construction material processing plants, batch plants and related equipment. On
occasion, equipment that we own may be rented on a short-term basis to third
parties. The net book value of our equipment in the CSS at December 31, 2003
was approximately $5.7 million. Our corporate management oversees operational and strategic issues and,
through the corporate accounting staff, provides administrative support
services to area managers and individual project management at the project
site. The latter are responsible for planning, scheduling and budgeting
operations, equipment maintenance and utilization and customer satisfaction.
Area managers and project managers monitor project costs on a daily and weekly
basis while corporate management monitors such costs monthly. Raw materials (primarily concrete, aggregate and steel) used in our
operation are available from a number of sources. There are usually a
sufficient number of materials suppliers within our market area to assure us of
adequate competitive bids for supplying such raw materials. Generally, we will
obtain several bids from competing concrete, asphalt or aggregate suppliers
whose reserves of such materials will normally extend beyond the expected
completion date of the project. Costs for raw materials vary depending upon
project duration, construction season, and other factors; but, generally,
prices quoted to us for raw materials are fixed for the projects duration. Projects and Customers We specialize in public sector construction projects and our principal
customers are the state departments of transportation in Nevada, Arizona and
Utah and bureaus and departments of municipal and county governments in those
states. Since completing the final contracts in New Mexico, we have ceased the
CSS operation in New Mexico. For the year ended December 31, 2003, revenue
generated from seven projects in Nevada, Arizona and Utah represented
approximately 38% of the Companys consolidated revenue, or 53% of the CSS
revenue. The discontinuance of any projects, a general
economic downturn or a reduction in the number of projects let out for bid
in any of the states in which we operate could have an adverse effect on our
future results of operations.  MVCO
    2003 Form 10-K 6




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For the years ended December 31, 2003, 2002 and 2001, we recognized a
significant portion of our consolidated revenue from three customers (shown as
an approximate percentage of consolidated revenue): For the Years Ended December 31,2003
    
    2002
    
    2001Arizona Department of Transportation
    
    
    27.9
    %
    
    
    21.4
    %
    
    
    21.9
    %Clark County General Services
    
    
    1.3
    %
    
    
    14.8
    %
    
    
    12.5
    %Utah Department of Transportation
    
    
    11.8
    %
    
    
    11.6
    %
    
    
    14.7
    %
 The Contract Process Our projects are obtained primarily through competitive bidding and
negotiations in response to advertisements by federal, state and local
government agencies and solicitations by private parties. We submit bids after
a detailed review of the project specifications, an internal review of our
capabilities and equipment availability and an assessment of whether the
project is likely to attain targeted profit margins. We own, lease, or are
readily able to rent, most equipment necessary to complete the projects upon
which we bid. After computing estimated costs of the project to be bid, we add
our desired profit margin before submitting the bid. We believe that success
in the competitive bidding process involves (i) being selective on projects bid
upon in order to optimize use of resources, (ii) identifying projects which
require our specific expertise, (iii) becoming familiar with all aspects of the
project to avoid costly bidding errors and (iv) analyzing the local market to
determine the availability and cost of labor and the degree of competition.
Since 1995, we have been awarded contracts of approximately 23.1% of the
projects upon which we have bid. A substantial portion of our revenue is
derived from projects that involve fixed unit price contracts under which we
are committed to provide materials or services at fixed unit prices (such as
dollars per cubic yard of earth or concrete, or linear feet of pipe). The unit
price is determined by a number of factors including haul distance between the
construction site and the warehouses or supply facilities of local material
suppliers and to or from disposal sites, site characteristics and the type of
equipment to be used. While the fixed unit price contract generally shifts the
risk of estimating the quantity of units for a particular project to the
customer, any increase in our unit cost over its unit bid price, whether due to
inefficiency, faulty estimates, weather, inflation or other factors, must be
borne by us. Most public sector contracts provide for termination of the contract at
the election of the customer. In such event we are generally entitled to
receive a small cancellation fee in addition to reimbursement for all costs we
incurred on the project. Many of our contracts are subject to completion
requirements with liquidated damages assessed against us if schedules are not
met. In the past these provisions have not materially adversely affected our
business. We are also obligated to perform work as directed to do so by the owner.
If we believe the directives to be outside the scope of the original bid
documents, or if the physical conditions as found on the project are different
than provided in the bid documents, or for any variety of reasons we believe
the directive to perform the work creates costs that could not reasonably be
ascertained from the bid documents, the contract permits us to make a claim for
equitable adjustment to the contract price. Such equitable adjustment requests
are often called contract claims. The process for resolving claims may vary
from one contract to another, but in general, there is a process to attempt
resolution at the project supervisory level or with higher levels of management
within the Company and the owner. Depending upon the terms of the contract,
claim resolution may employ a variety of resolution methods including
mediation, arbitration, binding arbitration, litigation or other methods.
Regardless of the process, it is typical that when a potential claim arises on
a project, we fulfill the obligation to perform the work and must incur the
costs in doing so. We will not recoup the costs until the claim is resolved.
It is not uncommon for the claim resolution process to take months, or, if it
entails litigation, years to resolve. Contracts often involve work periods in excess of one year. Revenue on
uncompleted fixed price contracts is recorded under the
percentage-of-completion method of accounting. We recognize revenue on
contracts when they first incur direct costs. Pursuant to common construction
industry practice, the customer may retain a portion of billings, generally not
exceeding 10%, until the project is completed satisfactorily and all of our
obligations are paid. We act as prime contractor on most of our construction projects and will
subcontract certain activities such as electrical, mechanical, guardrail and
fencing, signing and signals, foundation drilling, steel erection and other
specialty work to others. As prime contractor, we bill the customer for work
performed and pay the subcontractors from funds received from the customer.
Occasionally we provide our services as a subcontractor to another prime
contractor. As a subcontractor, we will generally receive the same or similar
profit margin as we would as a prime contractor, although revenue to us will be
smaller because we only contract a part of the project. As a prime contractor,
we are responsible for the performance of the  MVCO
    2003 Form 10-K 7




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entire contract, including work
assigned to subcontractors. Accordingly, we are subject to liability
associated with the failure of subcontractors to perform as required under the
contract. We occasionally require our subcontractors to furnish bonds
guaranteeing their performance, although affirmative action regulations require
us to use our best efforts to hire minority subcontractors for a portion of the
project and some of these subcontractors may not be able to obtain surety
bonds. On average, we have not required performance bonds for less than 10% of
the dollar amount of our subcontracted work, but will likely increase the
percentage of bonded subcontractors in the future. We are generally aware of
the skill levels and financial condition of our subcontractors through our
direct inquiry of the subcontractors and contract partners of the
subcontractors, as well as our review of financial information provided by the
subcontractors and third party reporting services including credit reporting
agencies and bonding companies. In connection with public sector contracts, we are required to provide
various types of surety bonds guaranteeing our own performance. Our ability to
obtain surety bonds depends upon our net worth, liquid working capital, past
performance, management expertise and other factors. Surety companies consider
such factors in light of the amount of our surety bonds then outstanding and
the surety companies current underwriting standards, which may change from
time to time. See Insurance and Bonding. Backlog Our backlog (anticipated revenue from the uncompleted portions of awarded
projects) was approximately $71 million at December 31, 2003, compared to
approximately $69 million at December 31, 2002. Much of our backlog depends
upon our success in the competitive bid process. Bidding strategies and
priorities may be influenced and changed from time to time by the level of our
backlog and other internal and external factors. A portion of our anticipated
revenue in any year is not reflected in its backlog at the start of the year
because some projects are initiated and completed in the same year. At
December 31, 2003, our backlog included approximately $65 million of work that
is scheduled for completion during 2004. Revenue is impacted in any one
period by the backlog at the beginning of the period. Accordingly, revenue in
the future may be significantly reduced if we are unable to obtain substantial
new projects in 2004. We include a construction project in our backlog at such
time as a contract is awarded or a firm letter of commitment is obtained. We
believe that our backlog figures are firm, subject to provisions contained in
some contracts, which allow customers to modify or cancel the contracts at any
time upon payment of a relatively small cancellation fee. We have not been
adversely affected by contract cancellations or modifications in the past. Competition We believe that the primary competitive factors as a prime contractor in
the heavy construction industry are price, reputation for quality work,
financial strength, knowledge of local market conditions and estimating
abilities. We believe that we compete favorably with respect to each of the
foregoing factors on projects that we are able to bid. Most of our projects
involve public sector work for which contractors are first pre-qualified to bid
and then are chosen by a competitive bidding process, primarily on the basis of
price. We compete with a large number of small owner/operator contractors that
tend to dominate smaller (under $4 million) projects. When bidding on larger
infrastructure projects, we also compete with larger, well capitalized regional
and national contractors, many of whom have larger net worth, higher bonding
capacity and more construction personnel. Larger competitors typically have
unlimited bonding capacity and, therefore, are able to bid on more work.
Except for bonding capacity and liquidity, we contend that we are not at a
competitive disadvantage in relation to our larger competitors. With respect
to our smaller competitors, we believe that our current bonding capacity and
long relationships with subcontractors and suppliers may be a competitive
advantage. In the event of a decrease of work available in the private construction
market, it is foreseeable that contractors may exit the private market and
enter the public market segment resulting in increased competition. Insurance and Bonding We carry builders risk insurance on a limited number of projects and
depending upon our assessment of individual project risk versus the cost of
insurance. We are required to provide a surety bond on nearly all publicly funded
projects. Our ability to obtain bonding, and the amount of bonding required,
is primarily determined by our experience, net worth, liquid working capital
(consisting of cash and accounts receivable and available funds through a line
of credit in excess of accounts payable and accrued liabilities), our
performance history, the number and size of projects under construction and
other factors. Surety companies  MVCO
    2003 Form 10-K 8




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consider such factors in light of the amount
of our surety bonds then outstanding and the surety companies current
underwriting standards, which may change from time to time. The larger the
project and/or the more projects, in which we are engaged, the greater our
bonding, net worth and liquid working capital requirements will be. Bonding
requirements vary depending upon the nature of the project to be performed. We
generally pay a fee to bonding companies based upon the amount of the contract
to be performed. Because these fees are generally payable at the beginning of
a project, we must maintain sufficient working capital to satisfy the fee prior
to receiving revenue from the project. Operating losses in 2000 and 2001, due
primarily to losses on contracts with New Mexico and Clark County, Nevada,
resulted in decreased liquidity and a change in our surety credit. More
recently, due to improved financial condition, our surety credit may increase
to approximately $25 million on a single project and an aggregate program bond
capacity of approximately $90 million. We believe our bonding capacity is
sufficient to sustain, or slightly increase our existing levels of workload but
will limit significant growth. As our performance continues to improve, it is
reasonable to assume that corresponding improvements in bonding capacity will
follow. Marketing We obtain most of our projects primarily through the process of
competitive bidding. Accordingly, our marketing efforts are limited to
subscribing to bid reporting services and monitoring trade journals and other
industry sources for bid solicitations by various government authorities. In
response to a bid request, we submit a proposal detailing our qualifications,
the services to be provided and the cost of the services to the soliciting
entity which then, based on their evaluation of the proposals submitted, awards
the contract to the successful bidder. Generally, the contract for a project
is awarded to the lowest bidder, although other factors may be taken into
consideration such as the bidders track record for compliance with bid
specifications and procedures and their construction experience. Some of our
CSS work is obtained through negotiation or being included on a preferred
bidders list. Accordingly, we strive to constantly approve our relationships
with our customers by being responsive and building quality work. Construction Materials Segment (CMS) Operations We began our construction materials operations in the first quarter 1997
with the start-up of RMI. RMI currently operates four ready mix concrete batch
plants - two in the Las Vegas, Nevada area and two in the Phoenix, Arizona area
and a total of 120 ready mix trucks. Most of our internal sand and gravel
requirements in the Las Vegas market are manufactured from our rock quarry in
Moapa, Nevada. Production capacity at the Moapa quarry was increased
substantially during 1999 with further refinements added in 2000. A fulltime
sales staff promotes sales of ready mix concrete, rock and sand products and
landscape rock. Projects and Customers We target concrete subcontractors, prime contractors, homebuilders,
commercial and industrial property developers in the Las Vegas, Nevada and
Phoenix, Arizona metropolitan areas. Revenue generated from our top 10 CMS
customers in Nevada and Arizona represented approximately 12% of our
consolidated revenue and represented 43% of the CMSs revenue. The
discontinuance of service to any of the above referenced customers or a general
economic downturn could have an adverse effect on our future results of
operations within this segment. For the years ended December 31, 2003, 2002
and 2001 we did not recognize a significant portion of our consolidated revenue
from any individual CMS customer. Competition The construction materials industry has experienced significant
consolidation during the last decade. As a result, it is common for a few
large, national or international companies to be the leading competitors in any
given geographic market. This is the case in our markets. We consider
ourselves a relatively small player in our markets, but can effectively compete
by virtue of our locations and our sales, marketing, service and quality.
We also may face the same competitors for sale of construction materials as we
do for our construction services work, as it is common for prime contractors in
the heavy highway construction industry to develop some degree of vertical
integration into construction materials. The quality of the product and
customer service are often just as important, if not more so, than price in
successfully marketing construction materials. Accordingly, we recognize that
we must provide quality products and outstanding service at a competitive price
to our CMS customers.  MVCO
    2003 Form 10-K 9




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##### Table of Contents



Marketing A more focused marketing effort and greater emphasis on customer care and
service are important tools in promoting sales of construction materials.
Membership and participation in selected industry associations help increase
our exposure to potential clients and stay informed on industry developments
and future prospects within the marketplaces. Building and maintaining
customer relations and reputation for quality work are essential elements to
the marketing efforts of the construction materials segment. Meadow Valley Corporation and our Segments Seasonality The construction industry is seasonal, generally due to inclement weather
occurring in the winter months. Accordingly, we may experience a seasonal
pattern in our operating results with lower revenue in the first and fourth
quarters of each calendar year than other quarters. Quarterly results may also
be affected by the timing of bid solicitations by governmental authorities, the
stage of completion of major projects and revenue recognition policies.
Results for any one particular quarter, therefore, may not be indicative of
results for other quarters or for the year. Insurance We maintain general liability and excess liability insurance covering our
owned and leased construction equipment and workers compensation insurance in
amounts we believe are consistent with our risks of loss and in compliance with
specific insurance coverage required by our customers as a part of the bidding
process. We carry liability insurance of $6 million per occurrence, which we
believe is adequate for our current operations and consistent with the
requirements of projects currently under construction by our construction
services segment. Government Regulation Our operations are subject to compliance with regulatory requirements of
federal, state and municipal authorities, including regulations covering labor
relations, safety standards, affirmative action and the protection of the
environment including requirements in connection with water discharge, air
emissions and hazardous and toxic substance discharge. Under the Federal Clean
Air Act and Clean Water Act, we must apply water or chemicals to reduce dust on
road construction projects and to contain water contaminants in run-off water
at construction sites. We may also be required to hire subcontractors to
dispose of hazardous wastes encountered on a project. We believe that we are
in substantial compliance with all applicable laws and regulations. However,
future amendments to current laws or regulations imposing more stringent
requirements could have a material adverse effect on the Company. Employees On March 1, 2004, the Company employed approximately 77 salaried employees
(including its management personnel and executive officers) and approximately
390 hourly employees. The number of hourly employees varies depending upon the
amount of construction in progress. During the year ended December 31, 2003,
the number of hourly employees ranged from approximately 332 to approximately
527 and averaged approximately 458. At December 31, 2003, the Company was
party to four project agreements in Arizona with the Arizona State District
Council of Carpenters, AFL-CIO that covers approximately 3% of the Companys
hourly workforce. We believe our relations with our employees are
satisfactory. Website Access Our website address is www.meadowvalley.com. On our website we make
available, free of charge, our annual report on Form 10-K, our most recent
quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4, and 5
related to Beneficial Ownership of Securities, and all amendments to those
reports as soon as reasonably practicable after such material is electronically
filed with or furnished to the United States Securities and Exchange
Commission. The information on our website is not incorporated into, and is
not part of, this report.  MVCO
    2003 Form 10-K 10




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##### Table of Contents



Item 2.Properties We owned or leased the following properties at December 31, 2003: Approximate
    
    ApproximateBuilding Size in
    
    Land
    
    Owned orLocation
    
    Segment
    
    Purpose
    
    Square Feet
    
    in Acres
    
    Leased4411 South 40th Street, Suites
D-8, D-10, D-11, Phoenix,
Arizona
    
    CSS
    
    Corporate office,
Area office
    
    
    8,280
    
    
    
    -
    
    
    Leased3430 East Flamingo Suite
100, Las Vegas, Nevada
    
    CMS
    
    Area office
    
    
    3,500
    
    
    
    -
    
    
    Leased2601 East Thomas Road Suite
120, Phoenix, Arizona
    
    CMS
    
    Area office
    
    
    3,200
    
    
    
    -
    
    
    Leased2250 West Center Street
Building two, Springville,
Utah
    
    CSS
    
    Area office
    
    
    1,600
    
    
    
    -
    
    
    Leased4635 Andrews Street, North
Las Vegas, Nevada
    
    CSS
    
    Area office
    
    
    4,320
    
    
    
    -
    
    
    Leased109 West Delhi, North Las
Vegas, Nevada
    
    CMS
    
    Ready Mix
production facility
    
    
    4,470
    
    
    
    5
    
    
    OwnedMoapa, Nevada
    
    CSS
    
    Land held for sale
    
    
    -
    
    
    
    24.5
    
    
    Owned11500 West Beardsley Road
Sun City, Arizona
    
    CMS
    
    Ready Mix
production facility
    
    
    440
    
    
    
    5
    
    
    Leased39245 North Schnepf Road
Queen Creek, Arizona
    
    CMS
    
    Ready Mix
production facility
    
    
    440
    
    
    
    5
    
    
    Leased7613 Commercial Way
Henderson, Nevada
    
    CMS
    
    Ready Mix
production facility
    
    
    720
    
    
    
    5
    
    
    Leased6210 Annie Oakley
Drive
Suite 102, Las Vegas, Nevada
    
    CSS
    
    Field Office
    
    
    1,000
    
    
    
    -
    
    
    LeasedMoapa, Nevada
    
    CMS
    
    Sand and Aggegate
production facility
    
    
    840
    
    
    
    40
    
    
    Leased
 Our CSS may lease office space on a short-term basis based on location,
duration, and the availability of facilities at our ongoing construction sites. We have determined that the above properties are sufficient to meet our
current needs. However, we are investigating expansion opportunities for the
CMS in both the Las Vegas, Nevada and Phoenix, Arizona Metropolitan areas. 
 Item 3.Legal Proceedings See
Note 15Litigation and Claim Matters in the accompanying consolidated
financial statements (Item 8) for information regarding legal proceedings. 
 Item 4.Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the year
ended December 31, 2003.  MVCO
    2003 Form 10-K 11




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##### Table of Contents



PART II 
 Item 5.Market for Registrants Common Equity and Related Stockholder Matters Meadow Valley Corporations common stock was listed on the Nasdaq National
Market from October 1995 to August 2001. In August 2001, our securities were
transferred to the Nasdaq SmallCap Market and trade under the symbol MVCO.
The following table represents the high and low closing prices for our common
stock on the Nasdaq SmallCap Market. As of March 24, 2004, there were 476
record and beneficial owners of the Companys Common Stock. On March 24, 2004,
our common stock closed at $2.29 per share. 2003
    
    2002High
    
    Low
    
    High
    
    LowFirst Quarter
    
    $
    1.29
    
    
    $
    0.60
    
    
    $
    1.95
    
    
    $
    1.66Second Quarter
    
    
    1.28
    
    
    
    1.09
    
    
    
    1.70
    
    
    
    0.95Third Quarter
    
    
    1.85
    
    
    
    1.10
    
    
    
    1.25
    
    
    
    0.75Fourth Quarter
    
    
    1.90
    
    
    
    1.45
    
    
    
    0.92
    
    
    
    0.72
 On November 19, 2003 we issued 369,000 options, to purchase our common
stock, to certain employees at an exercise price of $1.46 per share. See Note
18-Stock Option Plan in the accompanying consolidated financial statements
(Item 8) for additional information regarding our stock option plan. We have never declared or paid cash dividends on our common stock and do
not anticipate paying cash dividends in the foreseeable future. Any future
determination to pay cash dividends will also be at the discretion of our Board
of Directors and will be dependent upon our financial condition, results of
operations, capital requirements, general business conditions and other such
factors as our Board of Directors deems relevant. The information in the Proxy Statement set forth under the caption
Executive Compensation is incorporated herein by reference. 
 Item 6.Selected Financial Data Years Ended December 31,2003
    
    2002
    
    2001
    
    2000
    
    1999Statement of Operations Data:Revenue
    
    $
    154,106,865
    
    
    $
    151,047,268
    
    
    $
    174,063,148
    
    
    $
    163,573,258
    
    
    $
    210,002,272Gross profit
    
    
    6,343,618
    
    
    
    7,531,597
    
    
    
    4,658,361
    
    
    
    4,638,155
    
    
    
    9,931,446Income (loss) from operations
    
    
    (150,667
    )
    
    
    932,657
    
    
    
    (3,404,262
    )
    
    
    (2,139,685
    )
    
    
    3,260,411Interest Expense
    
    
    489,117
    
    
    
    441,585
    
    
    
    485,937
    
    
    
    250,996
    
    
    
    209,872Income (loss) before income taxes
    
    
    162,381
    
    
    
    936,770
    
    
    
    (3,192,562
    )
    
    
    (1,859,447
    )
    
    
    3,930,586Net income (loss)
    
    
    120,738
    
    
    
    738,141
    
    
    
    (2,523,931
    )
    
    
    (1,574,586
    )
    
    
    2,340,106Basic net income (loss) per common share
    
    $
    0.03
    
    
    $
    0.21
    
    
    $
    (0.71
    )
    
    $
    (0.44
    )
    
    $
    0.67Diluted net income (loss) per common share
    
    $
    0.03
    
    
    $
    0.21
    
    
    $
    (0.71
    )
    
    $
    (0.44
    )
    
    $
    0.66Basic weighted average common shares
outstanding
    
    
    3,593,102
    
    
    
    3,559,938
    
    
    
    3,559,938
    
    
    
    3,549,458
    
    
    
    3,518,510Diluted weighted average common shares
outstanding
    
    
    3,599,259
    
    
    
    3,559,938
    
    
    
    3,559,938
    
    
    
    3,549,458
    
    
    
    3,529,705Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Financial Position Data:Working capital
    
    $
    5,210,466
    
    
    $
    2,307,005
    
    
    $
    (1,194,786
    )
    
    $
    4,946,174
    
    
    $
    5,780,599Total assets
    
    
    54,819,323
    
    
    
    57,039,942
    
    
    
    60,191,119
    
    
    
    55,386,030
    
    
    
    58,554,822Long-term debt
    
    
    8,084,793
    
    
    
    11,132,310
    
    
    
    12,448,674
    
    
    
    11,278,148
    
    
    
    7,121,634Stockholders equity
    
    
    11,573,185
    
    
    
    11,452,447
    
    
    
    10,714,306
    
    
    
    13,238,237
    
    
    
    14,812,823
  MVCO
    2003 Form 10-K 12




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##### Table of Contents



Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations Introduction This Annual Report on Form 10-K contains forward-looking statements
within the meaning of the safe harbor provision of the Private Securities
Litigation Reform Act of 1995 regarding future events and the future results of
Meadow Valley Corporation that are based on current expectations, estimates,
forecasts, and projections as well as the beliefs and assumptions of Meadow
Valleys management. Words such as outlook, believes, expects,
appears, may, will, should, anticipates or the negative thereof or
comparable terminology, are intended to identify such forward-looking
statements. These forward-looking statements are only predictions and are
subject to risks, uncertainties and assumptions that are difficult to foresee.
Therefore, actual results may differ materially and adversely from those
expressed in any forward-looking statements. Factors that might cause or
contribute to such differences include, but are not limited to those discussed
in this Annual Report on Form 10-K under the section entitled Quantitative and
Qualitative Disclosures about Market Risk. You should not place undue
reliance on these forward-looking statements, which speak only as of the date
of this Annual Report. We undertake no obligation to revise or update publicly
any forward-looking statements for any reason. Our income statement performance in fiscal year 2003 did not meet our
expectations. Outstanding performances in both our CSS and CMS were
overshadowed by two very significant occurrences. First, a highway project in
Utah (Gooseberry Project) suffered the worst single-project loss in the
history of the Company  an approximate $2.5 million loss in 2003, and second,
two CMS customers declared bankruptcy that necessitated an increase in our
reserve for doubtful accounts in excess of approximately $250,000. The
combined impact reduced the Companys overall gross profit by approximately
$2.75 million. One of our primary goals for 2003 was to make progress toward resolution
of claims and litigation thereby, improving our balance sheet. In that regard,
2003 exceeded our expectations. During the course of the year, all five
disputed contracts with the New Mexico State Highway and Transportation
Department (NMSHTD) had completed the laborious and delay-ridden three-tiered
claim review process. These five projects were completed between December 2000
and March 2002. By the end of 2003, all five contracts had finally completed
the entire claim review process. During an extra mediation session in January
2004, mutually agreed to by both parties, a settlement was reached on three of
the five disputed
contracts. Significant progress was also made on the claim with Clark
County (Nevada) in that arbitration hearings began on February 23, 2004. Also
related to the Clark County claim, a settlement agreement was reached with
Innovative Construction Systems, Inc., a subcontractor to Meadow Valley, to
arbitrate in lieu of litigate any residual issues between the parties upon
conclusion of the Clark County arbitration. All of these positive steps have
greatly lightened the burden pertaining to outstanding claims and litigation
matters, and the influx of cash will improve our balance sheet and liquidity. Results of Operations The following table sets forth statement of operations data expressed as a
percentage of revenue for the periods indicated: Years Ended December 31,2003
    
    2002
    
    2001Revenue
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %Cost of revenue
    
    
    95.88
    
    
    
    95.01
    
    
    
    97.32Gross profit
    
    
    4.12
    
    
    
    4.99
    
    
    
    2.68General and administrative expenses
    
    
    4.21
    
    
    
    4.37
    
    
    
    4.63Income (loss) from operations
    
    
    (0.09
    )
    
    
    0.62
    
    
    
    (1.96
    )Interest income
    
    
    0.04
    
    
    
    0.10
    
    
    
    0.18Interest expense
    
    
    (0.32
    )
    
    
    (.29
    )
    
    
    (.28
    )Other income
    
    
    0.48
    
    
    
    0.19
    
    
    
    0.22Net income (loss)
    
    
    0.08
    
    
    
    0.49
    
    
    
    (1.45
    )
 Year Ended December 31, 2003 compared to Year Ended December 31, 2002 Revenue and Backlog.Revenue improved 2.0% to $154.1 million for the year
ended December 31, 2003 (2003) from $151.0 million for the year ended
December 31, 2002 (2002.) The improved revenue resulted from a $7.2 million
increase, net of inter-company sales, from the CMS, offset by a decrease in
revenue from the CSS of $4.1 million. The CMS  MVCO
    2003 Form 10-K 13




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##### Table of Contents



revenue increase was due
primarily to an approximate 15.00% volume increase in 2003 from 2002; the
average unit sales price increased approximately .20% in 2003 from 2002.
Backlog in the CSS increased to $71 million compared to $69 million a year ago.
CSS revenue was impacted less by the amount of the beginning backlog than by
the progress schedules and nature of the contracts contained in the backlog at
the beginning of 2003. Revenue in the CSS was also affected by the Gooseberry
Project. Because so much of our business stems from competitively bid public
works, backlog will fluctuate depending upon the amount and type of contracts
that we bid on and win. Bid bonds provided by our surety company are required
on most of the contracts that we bid, therefore, any restrictions or
limitations in the extension of surety credit can impact the amount and type of
contracts available to be bid by our CSS. Surety credit limitations have
contributed to the lack of growth in our backlog. Surety credit limits and
conditions may improve as our financial performance improves, but there can be
no assurance that surety credit will be increased. Gross Profit.Consolidated gross profit decreased to $6.3 million for
2003 from $7.5 million for 2002 and consolidated gross margin, as a percent of
revenue, decreased to 4.12% in 2003 from 4.99% in 2002. Gross profit from CSS
decreased to $2.2 million in 2003 from $3.6 million in 2002 and the gross
profit margin decreased to 2.03% from 3.19% in the respective periods. The
decrease in the CSS gross profit margin was greatly affected by the Gooseberry
Project. We have recognized, in the current year, what we believe to be the
total anticipated loss on the Gooseberry Project of approximately $2.5 million,
but can not assure that there may be not additional future losses. This
project is scheduled for completion in 2004. Gross profit margins are affected
by a variety of factors including, the quality and accuracy of the initial
estimate, construction delays and difficulties due to weather or other
conditions, availability of materials, the timing of work performed by other
subcontractors and the physical and geological condition of the construction
site. Gross profit from the CMS increased to $4.1 million in 2003 from $3.9
million in 2002 and the gross profit margin decreased to 9.34% from 10.57% in
the respective periods. The decrease in the gross profit margin in the CMS
during 2003 is the result of only a slight increase of .20%, in the average
unit price, which was not sufficient to compensate for the increase in the unit
cost. The inability to raise prices while experiencing increased costs is the
result of price competition in a challenging economic environment. General and Administrative Expenses.General and administrative expenses
decreased to $6.5 million for 2003 from $6.6 million for 2002. The decrease
resulted primarily from a $.4 million decrease in legal fees, offset by a $.3
million increase in the voluntary match contribution to the 401(k) plan. Interest Income, Expense and Other Income.Interest income for 2003
decreased to $.1 million from $.2 million for 2002 resulting primarily from a
decrease in invested cash reserves. Interest expense remained relatively flat
for 2003 at $.5 million compared to $.4 million for 2002. Other income for
2003 increased to $.7 million from $.3 for 2002 resulting primarily from the
gain on the disposal of property, equipment, land and mineral lease rights. Net Income.Net income was $.1 million for 2003 as compared to a net
income of $.7 million for 2002. The decrease in net income was the result of
the reduction in gross profit, as discussed above, offset by a net increase in
other income (expense). Year Ended December 31, 2002 compared to Year Ended December 31, 2001 Revenue and Backlog.Revenue decreased 13.2% to $151.0 million for the
year ended December 31, 2002 (2002) from $174.1 million for the year ended
December 31, 2001 (2001.) The decrease was the result of a $28.9 million
decrease in the CSS revenue offset by a $5.8 million increase in revenue from
the CMS sold to non-affiliates. Backlog decreased to $69 million at December
31, 2002 compared to $76 million at December 31, 2001. Revenue may be impacted
in any one period by the backlog at the beginning of the period. Because so
much of our business stems from competitively bid public works, backlog will
fluctuate depending upon the amount and type of contracts that we bid on and
win. Bid bonds provided by our surety company are required on most of the
contracts that we bid, therefore, any restrictions or limitations in the
extension of surety credit can impact the amount and type of contracts
available to be bid. Previous limitations to our surety credit have
contributed to our declining backlog. Surety credit limits may improve as our
financial performance improves, but there can be no assurance that surety
credit will improve as there also exist insurance industry and individual
insurance company dynamics that are unrelated to our performance. Gross Profit.Consolidated gross profit increased to $7.5 million for
2002 from $4.7 million for 2001 and consolidated gross margin, as a percent of
revenue, increased to 4.99% in 2002 from 2.68% in 2001. Gross profit from the
CSS increased to $3.6 million in 2002 from $3.1 million in 2001 and the gross
profit margin increased to 3.19% from 2.15% in the respective periods. The
increase in the CSS gross profit margin was the result of reductions in costs
related to claims and costs overruns on certain projects and by increased
profit recognition related to several projects nearing completion at  MVCO
    2003 Form 10-K 14




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##### Table of Contents



December
31, 2002. Gross profit margins are affected by a variety of factors including
construction delays and difficulties due to weather conditions, availability of
materials, the timing of work performed by other subcontractors and the
physical and geological condition of the construction site. Gross profit from
the CMS increased to $3.9 million in 2002 from $1.6 million in 2001 and the
gross profit margin increased to 10.6% from 5.13% in the respective periods.
The improved performance for the CMS during 2002 is the result of a 19.0%
increase in revenue from 2001 that resulted from the expansion of the
production and delivery capacity of the CMS. General and Administrative Expenses.General and administrative expenses
decreased to $6.6 million for 2002 from $8.1 million for 2001. The decrease
resulted primarily from the recording of an impairment loss of goodwill in the
amount of $1.4 million during 2001 versus no impairment loss of goodwill during
2002, a $.6 million decrease in administrative salaries, wages and related
payroll taxes, and a $.1 million decrease in administrative vehicle expense,
offset by a $.3 million increase in various employee incentive plans and a $.5
million increase in legal fees. Interest Income and Expense.Interest income for 2002 decreased to $.2
million from $.3 million for 2001 resulting primarily from a decrease in
invested cash reserves. Interest expense decreased for 2002 to $.4 million
from $.5 million for 2001, due primarily to the lower variable interest rate on
the line of credit in 2002 compared to the variable interest rate in 2001. Net Income (loss).Net income was $.7 million for 2002 as compared to a
net loss of $2.5 million for 2001. The change from a net loss to a net income
resulted primarily from our ability to increase gross profits and to decrease
general and administrative expenses, reduced by a net reduction in other income
(expense). Liquidity and Capital Resources Currently our primary need for capital is to finance the expansion of CMS.
Historically, our primary source of cash has been from operations. As of December 31, 2003, we no longer have a line of credit. Per the
terms of the loan agreement, we elected to allow the fully drawn pre-existing
line of credit to convert into a term agreement. The interest rate will remain
at Chase Manhattan Banks prime, plus 1.25% requiring equal monthly principal
plus interest payments through December 31, 2007. The term agreement is
collateralized by all of our assets. Under the terms of the agreement, we are
required to maintain a certain level of tangible net worth as well as maintain
a ratio of total debt to tangible net worth. We are in compliance with the
covenants. We are currently investigating credit arrangements, which will
provide us with an available line of credit. We feel that our cash reserves
will provide sufficient liquidity until a line of credit agreement is in place. The following table sets forth, for the periods presented, certain items
from our Statements of Cash Flows. For the Years Ended December 31,2003
    
    2002
    
    2001Cash Provided By Operating Activities
    
    $
    5,033,068
    
    
    $
    2,953,781
    
    
    $
    94,449Cash Provided By Investing Activities
    
    
    1,207,276
    
    
    
    1,619,844
    
    
    
    1,124,921Cash Used in Financing activities
    
    
    (4,791,491
    )
    
    
    (3,512,596
    )
    
    
    (813,462
    )
 Cash provided by operating activities during 2003 amounted to $5.0
million, primarily the result of a decrease in accounts receivable of $.1
million, a decrease in costs in excess of billings of $.1 million, a decrease
in inventory of $.4 million, a decrease in claims receivable of $.7 million, an
increase in net deferred taxes of $.1 million, an increase in allowance for
doubtful accounts of $.4 million, an increase in the allowance for obsolete
inventory of $.2 million, an increase in billings in excess of costs of $1.2
million, an increase in accrued liabilities of $.9 million, depreciation and
amortization of $2.7 million, and a net income of $.1 million, offset by, an
increase in prepaid expenses and other of $.1 million, a decrease in accounts
payable of $1.3 million and the gain on the disposal of property, equipment,
land and mineral lease rights of $.5 million. Cash provided by operating activities during 2002 amounted to $2.95
million, primarily the result of a decrease in accounts receivable of $.4
million, a decrease in costs in excess of billings of $3.8 million, a decrease
in inventory, net of $1.4 million, a decrease in net deferred taxes of $.5
million, an increase in accrued liabilities of $1.9 million, depreciation and
amortization of $2.8 million, and a net income of $.7 million, offset by, an
increase in claims receivable of $2.4 million, a  MVCO
    2003 Form 10-K 15




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decrease in billings in excess
of costs of $.9 million, a decrease in accounts payable of $7.1 million and a
decrease in allowance for doubtful accounts of $.3 million. Cash provided by operating activities during 2001 amounted to $.09
million, primarily the result of an increase in accounts payable of $9.4
million, a decrease in costs in excess of billings of $4.5 million, a decrease
in income tax receivable of $.8 million, the impairment of goodwill of $1.4
million and depreciation and amortization of $2.8 million, offset by, an
increase in accounts receivable of $7.2 million, a decrease in billings in
excess of costs of $1.4 million, an increase in claims receivable of $6.0
million, an increase in inventory of $1.2 million, an increase in net deferred
taxes of $.6 million and a net loss of $2.5 million. Cash provided by investing activities during 2003 amounted to $1.2
million, related primarily to the proceeds from the sale of property, equipment
and land in the amount of $1.7 million and the proceeds from the sale of
mineral lease rights and pit development of $.3 million, offset by the purchase
of property and equipment of $.6 million and an increase in restricted cash of
$.2 million. Cash provided by investing activities during 2002 amounted to $1.6
million, related primarily to the proceeds from the sale of property and
equipment in the amount of $1.6 million, a decrease in restricted cash of $.7
million and the proceeds from the sale of mineral rights and pit development of
$.5 million, offset by the purchase of property and equipment of $.5 million
and the purchase of land held for sale of $.7 million. Cash provided by investing activities during 2001 amounted to $1.1
million, related primarily to the proceeds from the sale of property and
equipment in the amount of $2.4 million, offset by the increase in restricted
cash of $.6 million, the purchase of property and equipment of $.5 million and
the increase in pit development of $.1 million. Cash used in financing activities during 2003 amounted to $4.8 million,
related primarily to repayment of notes payable and capital lease obligations. Cash used in financing activities during 2002 amounted to $3.5 million,
related primarily to repayment of notes payable and capital lease obligations
in the amount of $4.1 million, offset by the proceeds received from a note
payable in the amount of $.6 million. Cash used in financing activities during 2001 amounted to $.8 million,
related primarily to repayment of notes payable and capital lease obligations
in the amount of $5.0 million, offset by the proceeds received from a note
payable of $4.2 million. Impact of Inflation We believe that inflation has not had a material impact on our operations.
However, substantial increases in labor costs, worker compensation rates and
employee benefits, equipment costs, material or subcontractor costs could
adversely affect our operations in future periods. Critical Accounting Policies Our significant accounting policies are described in Note 1 to the
consolidated financial statements included in Item 8 of this Form 10-K. We
believe our most critical accounting policies are the revenue recognition and
cost estimation on certain contracts for which we use a
percentage-of-completion accounting method, our allowance for doubtful accounts
and the allowance for obsolete inventory. The revenue recognition and cost
estimation accounting method is applied by the CSS to heavy construction
projects executed under multi-year contracts with various customers.
Approximately 71%, 76% and 82% of total net revenue was recognized under the
percentage-of-completion method of accounting during 2003, 2002 and 2001,
respectively. Revenues and costs from fixed-price and modified fixed-price construction
contracts are recognized for each contract on the percentage-of-completion
method, measured by the percentage of costs incurred to-date to the estimated
total of direct costs. Direct costs include, among other things, direct labor,
field labor, equipment rent, subcontracting, direct materials, and direct
overhead. General and administrative expenses are accounted for as period
costs and are, therefore, not included in the calculation of the estimates to
complete construction contracts in progress. Project losses are provided for
in their entirety in the period in which such losses are determined, without
reference to the percentage-of-completion. As  MVCO
    2003 Form 10-K 16




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contracts can extend over one or
more accounting periods, revisions in costs and earnings estimated during the
course of the work are reflected during the accounting period in which the
facts that required such revisions become known. 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. The complexity of the estimation process and all issues related to the
assumptions, risks and uncertainties inherent with the application of the
percentage-of-completion method of accounting affects the amounts reported in
our financial statements. A number of internal and external factors affect our
percentage-of-completion estimates, including labor rate and efficiency
variances, estimated future material prices and customer specification changes.
If our business conditions were different, or if we used different assumptions
in the application of this accounting policy, it is likely that materially
different amounts would be reported in our financial statements. We are also required to estimate the collectibility of our account
receivables. A considerable amount of judgment is required in assessing the
realization of these receivables, including the current credit worthiness of
each customer and the related aging of the past due balances. Our provision
for bad debts during the years ended December 31, 2003 and 2002 amounted to
$710,153 and $287,333, respectively. We determine our reserve by using
percentages applied to certain aged receivable categories and percentages of
certain types of revenue generated, as well as a review of individual accounts
outstanding. We are required to state our inventories at the lower of cost or market.
In assessing the ultimate realization of inventories, we are required to make
judgments as to the future demand requirements and compare these with the
current inventory levels. Our reserve requirements generally increase as our
projected demand requirements decrease due to market conditions and longer than
expected usage periods. At December 31, 2003 and 2002, inventories of
$1,249,118 and $1,818,235 respectively, are net of reserves of $1,186,197 and
$1,000,000 respectively. It is possible that significant changes
in required inventory reserves may continue to occur in the future if
there is a further decline in market conditions or market activity. Summary of Contractual Obligations and Commercial Commitments Contractual obligations at December 31, 2003, and the effects such
obligations are expected to have on liquidity and cash flow in future periods,
are summarized as follows: Payments Due by PeriodLess than
    
    1 - 3
    
    4 - 5
    
    AfterTotal
    
    1 Year
    
    Years
    
    Years
    
    5 YearsContractual ObligationsLong-term debt
    
    $
    10,512,015
    
    
    $
    3,512,286
    
    
    $
    4,786,964
    
    
    $
    2,212,765
    
    
    $
    Capital Lease Obligations
    
    
    2,183,484
    
    
    
    1,009,449
    
    
    
    1,095,730
    
    
    
    78,305
    
    
    
    Operating Leases
    
    
    15,844,518
    
    
    
    5,141,006
    
    
    
    6,096,081
    
    
    
    3,144,452
    
    
    
    1,462,979Purchase Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Long term Liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual Obligations
    
    $
    28,540,017
    
    
    $
    9,662,741
    
    
    $
    11,978,775
    
    
    $
    5,435,522
    
    
    $
    1,462,979
 Recent Accounting Pronouncements See
Note 1Summary of Significant Accounting Policies and Use of
Estimates, new accounting announcements adopted in the accompanying
consolidated financial statements (Item 8) for information regarding recent
accounting pronouncements.  MVCO
    2003 Form 10-K 17




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Known and Anticipated Future Trends and Contingencies With continued improvement in profitability and working capital, it is
anticipated that our surety credit will increase proportionately, thereby
allowing us to bid on and perform more and larger projects. Bidding
opportunities within our focused market areas are ample for the size of our
current surety program and it is reasonable to believe, given historical
bidding success, that backlog may increase slightly during 2004. We believe that government, at all levels, will continue to be the primary
source of funding for infrastructure work. The national transportation
legislation, TEA-21, expired in September 2003. Interim funding extensions
have been granted while congress continues to work on a new six-year highway
bill. It is expected, but cannot be assured, that new legislation will be
enacted during 2004 to fund another six-year transportation infrastructure
program. Over the next few months until funding authority is finalized, State
Departments of Transportation may not let as many contracts until they are
fully aware of the funding available to them. The competitive bidding process will continue to be the dominant method
for determining contract award. However, other innovative bidding methods will
be tried and may gain favor, namely A Plus B contracts, where the bidders
proposals are selected on both price and scheduling criteria. Design-build
projects are becoming more common and are likely to increase in frequency. In light of the rising needs for infrastructure work throughout the nation
and the tendency of the current needs to out-pace the supply of funds, it is
anticipated that alternative funding sources will continue to be sought.
Funding for infrastructure development in the United States is coming from a
growing variety of innovative sources. An increase of funding measures is
being undertaken by various levels of government to help solve traffic
congestion and related air quality problems. Sales taxes, fuel taxes, user
fees in a variety of forms, vehicle license taxes, private toll roads and
quasi-public toll
roads are examples of how transportation funding is evolving.
Transportation norms are being challenged by federally mandated air quality
standards. Improving traffic movement, eliminating congestion, increasing
public transit, adding or designating high occupancy vehicle (HOV) lanes to
encourage car pooling and other solutions are being considered in order to help
meet EPA-imposed air quality standards. There is also a trend toward local and
state legislation regulating growth and urban sprawl. The passage of such
legislation and the degree of growth limits imposed by it could dramatically
affect the nature of our markets. 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market risk generally represents the risk that losses may occur in the
values of financial instruments as a result of movements in interest rates,
foreign currency exchange rates and commodity prices. We do not have foreign
currency exchange rate and commodity price market risk. Interest
Rate Risk - From time to time we temporarily invest our excess
cash and restricted cash in interest-bearing securities issued by high-quality
issuers. We monitor risk exposure to monies invested in securities in our
financial institutions. Due to the short time the investments are outstanding
and their general liquidity, these instruments are classified as cash
equivalents in the consolidated balance sheet and do not represent a material
interest rate risk. Our primary market risk exposure for changes in interest
rates relates to our long-term debt obligations. We manage our exposure to
changing interest rates principally through the use of a combination of fixed
and floating rate debt. We evaluated the potential effect that near term changes in interest rates
would have had on the fair value of our interest rate risk sensitive financial
instruments at December 31, 2003. Assuming a 100 basis point increase in the
prime interest rate at December 31, 2003 the potential increase in the fair
value of our debt obligations would have been approximately $74,000 at December
31, 2003. See Note 9-Notes payable and Note 10-Line of credit (Item 8) in the
accompanying consolidated financial statements.  MVCO
    2003 Form 10-K 18




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(SEMPLE & COOPER, LLP LOGO) 
 Item 8. Financial Statements and Supplementary Data Report of Independent Certified Public Accountants To The Board of Directors and Stockholders of
Meadow Valley Corporation We have audited the accompanying consolidated balance sheet of Meadow Valley
Corporation and Subsidiaries as of December 31, 2003 and the related
consolidated statements of operations, stockholders equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted
in the
United States of America. Those standards require that we plan and perform the
audit to
obtain reasonable assurance about whether the financial statements are free of
material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Meadow Valley
Corporation and Subsidiaries at December 31, 2003 and the results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America. /s/ Semple & Cooper, LLP Phoenix, Arizona
March 6, 2004 19




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##### Table of Contents



Report of Independent
Certified Public Accountants Board of Directors
Meadow Valley Corporation
Phoenix, Arizona We have audited the
accompanying consolidated balance sheets of Meadow Valley Corporation
and Subsidiaries as of December 31, 2002 and the related
consolidated statements of operations, stockholders equity, and
cash flows for each of the two years in the period ended
December 31, 2002. These financial statements are the
responsibility of the Companys management. Our responsibility
is to express an opinion on these financial statements based on our
audits. We conducted our audits in
accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion. In our opinion, the
consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Meadow Valley
Corporation and Subsidiaries at December 31, 2002 and the
results of its operations and its cash flows for each of the two
years in the period ended December 31, 2002 in conformity with
accounting principles generally accepted in the United States of America. -s- BDO Seidman Los Angeles, California
March 7, 2003  MVCO
    2003 Form 10-K 20




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MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS December 31,
    
    December 31,2003
    
    2002Assets:Current Assets:Cash and cash equivalents
    
    $
    4,738,388
    
    
    $
    3,289,535Restricted cash
    
    
    1,844,891
    
    
    
    1,681,361Accounts receivable, net
    
    
    20,664,022
    
    
    
    21,203,373Claims receivable
    
    
    4,101,898
    
    
    
    387,878Prepaid expenses and other
    
    
    2,196,899
    
    
    
    1,858,479Inventory, net
    
    
    1,249,118
    
    
    
    1,818,235Land held for sale
    
    
    264,738
    
    
    
    711,531Costs and estimated earnings in excess of billings on uncompleted
contracts
    
    
    1,463,309
    
    
    
    1,543,061Deferred tax asset
    
    
    1,243,896
    
    
    
    1,501,846Total Current Assets
    
    
    37,767,159
    
    
    
    33,995,299Property and equipment, net
    
    
    13,127,675
    
    
    
    14,555,646Refundable deposits
    
    
    94,299
    
    
    
    50,604Mineral rights and pit development, net
    
    
    309,110
    
    
    
    445,063Claims receivable
    
    
    3,521,080
    
    
    
    7,961,107Other assets
    
    
    
    
    
    
    32,223Total Assets
    
    $
    54,819,323
    
    
    $
    57,039,942Liabilities and Stockholders Equity:Current Liabilities:Accounts payable
    
    $
    18,646,857
    
    
    $
    19,912,516Accrued liabilities
    
    
    4,563,816
    
    
    
    3,697,111Notes payable
    
    
    3,512,286
    
    
    
    3,424,209Obligations under capital leases
    
    
    878,280
    
    
    
    921,306Billings in excess of costs and estimated earnings on uncompleted
contracts
    
    
    4,955,454
    
    
    
    3,733,152Total Current Liabilities
    
    
    32,556,693
    
    
    
    31,688,294Deferred tax liability
    
    
    2,604,652
    
    
    
    2,766,891Notes payable, less current portion
    
    
    6,999,729
    
    
    
    9,256,598Obligations under capital leases, less current portion
    
    
    1,085,064
    
    
    
    1,875,712Total Liabilities
    
    
    43,246,138
    
    
    
    45,587,495Commitments and contingenciesStockholders Equity:Preferred
stock - $.001 par value; 1,000,000 shares authorized, none
issued and outstanding
    
    
    
    
    
    
    Common stock
- $.001 par value; 15,000,000 shares authorized, 3,601,250
and 3,559,938 issued and outstanding
    
    
    3,601
    
    
    
    3,601Additional paid-in capital
    
    
    10,943,569
    
    
    
    10,943,569Capital adjustments
    
    
    (799,147
    )
    
    
    (799,147
    )Retained earnings
    
    
    1,425,162
    
    
    
    1,304,424Total Stockholders Equity
    
    
    11,573,185
    
    
    
    11,452,447Total Liabilities and Stockholders Equity
    
    $
    54,819,323
    
    
    $
    57,039,942
 The Accompanying Notes are an Integral Part of the Consolidated Financial Statements  MVCO
    2003 Form 10-K 21




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MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31,2003
    
    2002
    
    2001Revenue:Construction Services
    
    $
    110,119,548
    
    
    $
    114,245,704
    
    
    $
    143,129,246Construction Materials
    
    
    43,987,317
    
    
    
    36,801,564
    
    
    
    30,933,902Total revenue
    
    
    154,106,865
    
    
    
    151,047,268
    
    
    
    174,063,148Cost of revenue:Construction Services
    
    
    107,883,229
    
    
    
    110,603,682
    
    
    
    140,058,139Construction Materials
    
    
    39,880,018
    
    
    
    32,911,989
    
    
    
    29,346,648Total cost of revenue
    
    
    147,763,247
    
    
    
    143,515,671
    
    
    
    169,404,787Gross profit
    
    
    6,343,618
    
    
    
    7,531,597
    
    
    
    4,658,361General and administrative expenses
    
    
    6,494,285
    
    
    
    6,598,940
    
    
    
    8,062,623Income (loss) from operations
    
    
    (150,667
    )
    
    
    932,657
    
    
    
    (3,404,262
    )Other income (expense):Interest income
    
    
    58,622
    
    
    
    156,836
    
    
    
    319,797Interest expense
    
    
    (489,117
    )
    
    
    (441,585
    )
    
    
    (485,937
    )Other income
    
    
    743,543
    
    
    
    288,862
    
    
    
    377,840313,048
    
    
    
    4,113
    
    
    
    211,700Income (loss) before income taxes
    
    
    162,381
    
    
    
    936,770
    
    
    
    (3,192,562
    )Income tax benefit (expense)
    
    
    (41,643
    )
    
    
    (198,629
    )
    
    
    668,631Net income (loss)
    
    $
    120,738
    
    
    $
    738,141
    
    
    $
    (2,523,931
    )Basic net income (loss) per common share
    
    $
    0.03
    
    
    $
    0.21
    
    
    $
    (0.71
    )Diluted net income (loss) per common share
    
    $
    0.03
    
    
    $
    0.21
    
    
    $
    (0.71
    )Basic weighted average common shares outstanding
    
    
    3,593,102
    
    
    
    3,559,938
    
    
    
    3,559,938Diluted weighted average common shares outstanding
    
    
    3,599,259
    
    
    
    3,559,938
    
    
    
    3,559,938
 The Accompanying Notes are an Integral Part of the Consolidated Financial Statements  MVCO
    2003 Form 10-K 22




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MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
For the Years Ended December 31, 2003, 2002 and 2001 Common StockNumber ofShares
    
    
    
    
    
    Paid-in
    
    Capital
    
    RetainedOutstanding
    
    Amount
    
    Capital
    
    Adjustment
    
    EarningsBalance at January 1, 2001
    
    
    3,559,938
    
    
    $
    3,601
    
    
    $
    10,943,569
    
    
    $
    (799,147
    )
    
    $
    3,090,214Net loss for the year ended 2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,523,931
    )Balance at December 31, 2001
    
    
    3,559,938
    
    
    
    3,601
    
    
    
    10,943,569
    
    
    
    (799,147
    )
    
    
    566,283Net income for the year ended 2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    738,141Balance at December 31, 2002
    
    
    3,559,938
    
    
    
    3,601
    
    
    
    10,943,569
    
    
    
    (799,147
    )
    
    
    1,304,424Treasury stock used in funding
employer retirement plan
contributions
    
    
    41,312Net income for the year ended 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120,738Balance at December 31, 2003
    
    
    3,601,250
    
    
    $
    3,601
    
    
    $
    10,943,569
    
    
    $
    (799,147
    )
    
    $
    1,425,162
 The Accompanying Notes are an Integral Part of the Consolidated Financial Statements  MVCO
    2003 Form 10-K 23




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MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31,2003
    
    2002
    
    2001Increase (Decrease) in Cash and Cash Equivalents:Cash flows from operating activities:Cash received from customers
    
    $
    156,457,827
    
    
    $
    152,229,244
    
    
    $
    164,497,420Cash paid to suppliers and employees
    
    
    (151,048,332
    )
    
    
    (149,296,319
    )
    
    
    (165,041,014
    )Interest received
    
    
    58,622
    
    
    
    156,836
    
    
    
    319,797Interest paid
    
    
    (489,117
    )
    
    
    (441,585
    )
    
    
    (485,937
    )Income taxes refunded
    
    
    54,068
    
    
    
    305,605
    
    
    
    804,183Net cash provided by operating
activities
    
    
    5,033,068
    
    
    
    2,953,781
    
    
    
    94,449Cash flows from investing activities:Decrease (increase) in restricted cash
    
    
    (163,530
    )
    
    
    720,187
    
    
    
    (618,543
    )Proceeds from sale of property and equipment
    
    
    776,822
    
    
    
    1,573,495
    
    
    
    2,366,242Purchase of property and equipment
    
    
    (613,800
    )
    
    
    (519,894
    )
    
    
    (510,516
    )Decrease (increase) in land held for sale
    
    
    942,701
    
    
    
    (711,531
    )
    
    
    Purchase of mineral rights and pit development
    
    
    
    
    
    
    
    
    
    
    (112,262
    )Proceeds from sale of mineral rights and
pit development
    
    
    265,083
    
    
    
    557,587
    
    
    
    Net cash provided by investing
activities
    
    
    1,207,276
    
    
    
    1,619,844
    
    
    
    1,124,921Cash flows from financing activities:Repayment of capital lease obligations
    
    
    (1,032,586
    )
    
    
    (1,285,232
    )
    
    
    (1,105,301
    )Proceeds received from notes payable
    
    
    
    
    
    
    600,000
    
    
    
    4,182,533Repayment of notes payable
    
    
    (3,758,905
    )
    
    
    (2,827,364
    )
    
    
    (3,890,694
    )Net cash used in financing activities
    
    
    (4,791,491
    )
    
    
    (3,512,596
    )
    
    
    (813,462
    )Net increase in cash and cash equivalents
    
    
    1,448,853
    
    
    
    1,061,029
    
    
    
    405,908Cash and cash equivalents at beginning of year
    
    
    3,289,535
    
    
    
    2,228,506
    
    
    
    1,822,598Cash and cash equivalents at end of year
    
    $
    4,738,388
    
    
    $
    3,289,535
    
    
    $
    2,228,506
 The Accompanying Notes are an Integral Part of the Consolidated Financial Statements  MVCO
    2003 Form 10-K 24




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MEADOW VALLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) For the Years Ended December 31,2003
    
    2002
    
    2001Increase (Decrease) in Cash and Cash Equivalents (Continued):Reconciliation of Net Income (Loss) to Net Cash
Provided by Operating Activities:Net income (loss)
    
    $
    120,738
    
    
    $
    738,141
    
    
    $
    (2,523,931
    )Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation and amortization
    
    
    2,728,309
    
    
    
    2,816,406
    
    
    
    2,811,042(Gain) loss on sale of
property, equipment and land
    
    
    (537,173
    )
    
    
    (34,025
    )
    
    
    64,872Deferred taxes, net
    
    
    95,711
    
    
    
    504,234
    
    
    
    (638,448
    )Allowance for doubtful accounts
    
    
    422,820
    
    
    
    (275,079
    )
    
    
    163,193Inventory allowance
    
    
    186,197
    
    
    
    1,000,000
    
    
    
    Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    1,420,704Changes in Operating Assets and Liabilities:Accounts receivable
    
    
    116,531
    
    
    
    449,610
    
    
    
    (7,243,533
    )Claims receivable, current
    
    
    (3,714,020
    )
    
    
    (387,878
    )
    
    
    Prepaid expenses and other
    
    
    (100,620
    )
    
    
    (215,739
    )
    
    
    344,928Inventory
    
    
    382,920
    
    
    
    2,668,218
    
    
    
    (1,198,218
    )Income tax receivable
    
    
    
    
    
    
    
    
    
    
    774,000Costs and estimated earnings in excess of billings on
uncompleted contracts
    
    
    79,752
    
    
    
    3,750,993
    
    
    
    4,533,955Refundable deposits
    
    
    (43,695
    )
    
    
    4,506
    
    
    
    121,455Claims receivable, less current portion
    
    
    4,440,027
    
    
    
    (1,993,081
    )
    
    
    (5,968,026
    )Other assets
    
    
    32,223
    
    
    
    48,335
    
    
    
    (80,558
    )Accounts payable
    
    
    (1,265,659
    )
    
    
    (7,113,468
    )
    
    
    9,419,871Accrued liabilities
    
    
    866,705
    
    
    
    1,885,113
    
    
    
    (477,700
    )Billings in excess of costs and estimated earnings on
uncompleted contracts
    
    
    1,222,302
    
    
    
    (892,505
    )
    
    
    (1,429,157
    )Net cash provided by operating activities
    
    $
    5,033,068
    
    
    $
    2,953,781
    
    
    $
    94,449
 The Accompanying Notes are an Integral Part of the Consolidated Financial Statements  MVCO
    2003 Form 10-K 25




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies and Use of Estimates: Nature of the Corporation: Meadow Valley Corporation (the Company) was organized under the laws of
the State of Nevada on September 15, 1994. The principal business purpose of
the Company is to operate as the holding company of Meadow Valley Contractors,
Inc. (MVCI) and Ready Mix, Inc. (RMI.) MVCI is a general contractor,
primarily engaged in the construction of structural concrete highway bridges
and overpasses, and the paving of highways and airport runways for various
governmental authorities and municipalities in the states of Nevada, Arizona,
and Utah. RMI manufactures and distributes ready mix concrete in the Las Vegas
and Phoenix metropolitan areas. Formed by the Company, RMI commenced
operations in 1997. Liquidity: The Company incurred income (loss) from operations for the years ended
December 31, 2003, 2002 and 2001 of $(150,667), $932,657 and $(3,404,262) and
has provided cash from operating activities of $5,033,068, $2,953,781 and
$94,449 for the years ended December 31, 2003, 2002 and 2001. In order to
improve working capital during the year ended December 31, 2003, the Company,
through its construction services segment, disposed of under-utilized equipment
through two regional auctions. The net book value of assets sold was $488,949.
Proceeds from the sales, net of selling expenses, totaled $581,132 resulting
in a gain of $92,183, and is included in other income. The Company also
executed a definitive agreement on December 31, 2003 to sell certain pit assets
to Jobe Concrete Products, Inc. (Jobe.) The net book value of assets sold
and liabilities assumed was $128,803. Proceeds from the sale totaled $315,000
resulting in a gain of $186,197, and is included in other income. In
connection with the transaction, Jobe will be compensated to market and sell
the existing inventory, the ownership of which is retained by the Company. The
Company, through its construction materials segment, disposed of a parcel of
land held for sale. The net book value was $711,531. Proceeds from the sale
totaled $942,701, net of selling expenses, resulting in a gain of $231,170, and
is included in other income. The Company may consider the sale of other assets
to improve its working capital. Principles of Consolidation: The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries MVCI and RMI. Intercompany
transactions and balances have been eliminated in consolidation. Reclassifications: Certain balances as of and for the year ended December 31, 2002 have been
reclassified in the accompanying consolidated financial statements to conform
to the current year presentation. These reclassifications had no effect on
previously reported net loss or stockholders equity. Accounting Estimates: The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ materially
from those estimates. Significant estimates are used when accounting for the
percentage-of-completion and the estimated gross profit on projects in
progress, allowance for doubtful accounts, inventory allowance, depreciation
and amortization, accruals, taxes, contingencies and goodwill, which are
discussed in the respective notes to the consolidated financial statements. Revenue and Cost Recognition: Revenue and costs from fixed-price and modified fixed-price construction
contracts are recognized for each contract on the percentage-of-completion
method, measured by the percentage of costs incurred to date to the estimated
total of direct costs. Direct costs include, among other things, direct labor,
field labor, equipment rent, subcontracting, direct materials, and direct
overhead. General and administrative expenses are accounted for as period
costs and are, therefore, not included in the calculation of the estimates to
complete construction contracts in progress. Project losses are provided for
in their entirety in the period in which such losses are determined, without
reference to the percentage-of-completion. As contracts can extend over one or
more accounting periods, revisions in costs and earnings estimated during the
course of the work are reflected during the accounting period in which the
facts that required such revisions become known.  MVCO
    2003 Form 10-K 26




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Summary of Significant Accounting Policies and Use of Estimates (Continued): Revenue and Cost Recognition (Continued): Claims for additional contract revenue are recognized only to the extent
that contract costs relating to the claim have been incurred and evidence
provides a legal basis for the claim. As of December 31, 2003 and 2002, the
total amount of contract claims filed by the Company with various public
entities was $46,601,386 and $46,740,700, respectively. Of those sums, the
Companys portion of the claims total was $29,953,191 and $30,139,584 and the
balance of $16,648,195 and $16,601,116 pertains to a prime contractor or
subcontractors claims. Total claim amounts reported in its financial
statements are approximate and are subject to revision as final documentation,
resolution of issues, settlements progress and/or payments are received.
Relative to the aforementioned claims, the Company has recorded $7,622,978 and
$8,348,985 in cumulative claim receivable as of December 31, 2003 and 2002 to
offset a portion of costs incurred to-date on the claims. The claims
receivable as of December 31, 2003 and 2002 are comprised of a long-term
portion of $3,521,080 and $7,961,107 and a current portion of $4,101,898 and
$387,878, respectively. As of December 31, 2002, the Company also recorded $126,860, which was
included in costs and estimated earnings in excess of billings on uncompleted
contracts, for unpaid quantities, unpaid change orders, and pending change
orders in advance of receipt, from prior years activities. Although the Company believes these amounts represent a reasonably
conservative posture, any claims proceeds and payments for previously unpaid
quantities, unpaid change orders and pending change orders ultimately paid to
the Company less than $7,622,978, net of professional fees, will reduce income.
Conversely, a payment for those same items in excess of $7,622,978, net of
professional fees, will increase income. (See Note 21, Subsequent Events) 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. Cash and Cash Equivalents: The Company considers all highly liquid instruments purchased with an
initial maturity of three (3) months or less to be cash equivalents. Restricted Cash: At December 31, 2003 and 2002, funds in the amount of $1,844,891 and
$1,681,361, respectively, were held in trust, in lieu of retention, on certain
of the Companys construction contracts and will be released to the Company
after the contracts are completed. Accounts Receivable, net: Included in accounts receivable are trade receivables that represent
amounts billed but uncollected on completed construction contracts and
construction contracts in progress as well as other trade and non-trade
receivables. The Company follows the allowance method of recognizing uncollectible
accounts receivable. The allowance method recognizes bad debt expense based on
a review of the individual accounts outstanding and the Companys prior history
of uncollectible accounts receivable. At December 31, 2003 and 2002, the
Company had established an allowance for potentially uncollectible accounts
receivable in the amounts of $710,153 and $287,333, respectively. During the
years ended December 31, 2003, 2002 and 2001 the Company incurred bad debt
expense in the amounts of $431,909, $201,089 and $171,037, respectively. The
Company records delinquent finance charges on outstanding accounts receivables
only if they are collected. At December 31, 2003 and 2002 all of the Companys accounts receivables
were pledged as collateral for a note payable.  MVCO
    2003 Form 10-K 27




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Summary of Significant Accounting Policies and Use of Estimates (Continued): Inventory, net: Inventories, which consist primarily of raw materials, are stated at the
lower of cost, determined by the first-in, first-out method, or market.
Inventory quantities are determined by physical measurements. At December 31,
2003 and 2002, the Company had an allowance for potentially obsolete or slow
moving inventory in the amounts of $1,186,197 and $1,000,000. At December 31, 2003 and 2002 the Companys entire inventory was pledged
as collateral for a note payable. Property and Equipment: Property and equipment are recorded at cost. Depreciation charged to
operations during the years ended December 31, 2003, 2002 and 2001 was
$2,671,242, $2,727,860 and $2,529,281, respectively. Depreciation is provided
for on the straight-line method, over the estimated useful lives. Leasehold
improvements are recorded at cost and are depreciated over their estimated
useful lives or the lease term, whichever is shorter. The estimated useful lives of property and equipment are: Plants
    
    6-15 yearsComputer equipment
    
    5 yearsEquipment
    
    5-10 yearsVehicles
    
    5 yearsOffice furniture and equipment
    
    7 yearsLeasehold improvements
    
    2-10 years
 At December 31, 2003 and 2002, all property and equipment were pledged as
collateral for notes payable and capital lease obligations. Income Taxes: The Company accounts for income taxes in accordance with the Financial
Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109.) SFAS
109 requires the Company to recognize deferred tax assets and liabilities for
the expected future tax consequences of events that have been recognized in a
Companys financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on the difference between the
financial statement carrying amounts and tax basis of assets and liabilities
using enacted tax rates in effect in the years in which the differences are
expected to reverse. The Company files consolidated tax returns with MVCI and
RMI for federal and state tax reporting purposes. Fair Value of Financial Instruments: The carrying amounts of financial instruments including cash, restricted
cash, costs and estimated earnings in excess of billings on uncompleted
contracts, certain current maturities of long-term debt, billings in excess of
costs and estimated earnings on uncompleted contracts, accrued liabilities and
long-term debt approximate fair value based on their short maturities or on
borrowing rates currently available to the Company for loans with similar terms
and maturities. Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed of: The Company reviews property, plant & equipment for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to
be disposed of are reported at the lower of the carrying amount or fair value
less costs to sell. Based on an analysis of the carrying value of goodwill, the Company
determined that the fair value of goodwill as of December 31, 2001 was zero.
Accordingly, a goodwill impairment loss of $1,420,704 was recorded in the
fourth quarter of 2001 in accordance with the Statement of Financial Accounting
Standard No. 121 and is included in the loss from continuing operations.  MVCO
    2003 Form 10-K 28




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Summary of Significant Accounting Policies and Use of Estimates (Continued): Stock-Based Compensation: Statements of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS No. 123) establishes a fair value method of
accounting for stock-based compensation plans and for transactions in which an
entity acquires goods or services from nonemployees in exchange for equity
instruments. SFAS 123 also encourages, but does not require companies to
record compensation cost for stock-based employee compensation. The Company
has chosen to continue to account for stock-based compensation utilizing the
intrinsic value method prescribed in Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
fair market price of the Companys stock at the date of grant over the amount
an employee must pay to acquire the stock. Earnings per Share: Statement of Financial Accounting Standards No. 128, Earnings per Share,
(SFAS 128) provides for the calculation of Basic and Diluted earnings per
share. Basic earnings per share includes no dilution and is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding for the period. Diluted earnings per share
reflect the potential dilution of securities that could share in the earnings
of an entity, similar to fully diluted earnings per share. Business Combinations and Goodwill and Other Intangible Assets: The Companys previous business combinations were accounted for using the
purchase method. As of December 31, 2000, the net carrying amount of goodwill
was $1,500,733. Amortization expense during the year ended December 31, 2001
was $80,029. Based on an analysis of the carrying value of goodwill, the
Company determined that the fair value of goodwill as of December 31, 2001 was
zero. Accordingly, a goodwill impairment loss of $1,420,704 was recorded in
the fourth quarter of 2001 in accordance with the Statement of Financial
Accounting Standard No. 121 and is included in the loss from operations. Stock Option Expense: All stock options issued to employees have an exercise price not less than
the fair market value of the Companys Common Stock on the date of grant. In
accordance with accounting for such options utilizing the intrinsic value
method, there is no related compensation expense recorded in the Companys
financial statements for the years ended December 31, 2003, 2002 and 2001. Had
compensation cost for stock-based compensation been determined based on the
fair value of the options at the grant dates consistent with the method of SFAS
123, the Companys net income (loss) and earnings per share for the years ended
December 31, 2003, 2002 and 2001 would have been reduced to the pro forma
amounts presented below: 2003
    
    2002
    
    2001Net income (loss), as reported
    
    $
    120,738
    
    
    $
    738,141
    
    
    $
    (2,523,931
    )Add: Stock-based Employee compensation
expense included in reported income,
net of related tax effects
    
    
    
    
    
    
    
    
    
    
    Deduct: Total stock-based Employee
compensation expense determined under
fair value based methods for all awards,
net of related tax effects
    
    
    (58,604
    )
    
    
    (105,827
    )
    
    
    (101,797
    )Pro forma net income (loss)
    
    $
    62,134
    
    
    $
    632,314
    
    
    $
    (2,625,728
    )Basic net income (loss) per common shareAs Reported
    
    $
    0.03
    
    
    $
    0.21
    
    
    $
    (0.71
    )Pro forma
    
    
    0.02
    
    
    
    0.18
    
    
    
    (0.74
    )Diluted net income (loss) per common shareAs Reported
    
    $
    0.03
    
    
    $
    0.21
    
    
    $
    (0.71
    )Pro forma
    
    
    0.02
    
    
    
    0.18
    
    
    
    (0.74
    )
  MVCO
    2003 Form 10-K 29




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Summary of Significant Accounting Policies and Use of Estimates (Continued): Stock Option Expense (Continued): The fair value of option grants is estimated as of the date of grant
utilizing the Black-Scholes option-pricing model with the following weighted
average assumptions for grants in 2003: expected life of options of 3 years,
expected volatility of 82.23%, risk-free interest rates of 5%, and a 0%
dividend yield. The weighted average fair value at date of grant for options
granted during 2003 was approximated $.82. The fair value of option grants is estimated as of the date of grant
utilizing the Black-Scholes option-pricing model with the following weighted
average assumptions for grants in 2001: expected life of options of 5 years,
expected volatility of 60.85%, risk-free interest rates of 8%, and a 0%
dividend yield. The weighted average fair value at date of grant for options
granted during 2001 was approximated $.97. New Accounting Announcements adopted: In June 2001, Financial Accounting Standards Board (FASB) issued
Statement No. 143 (SFAS No. 143), Accounting for Asset Retirement
Obligations, effective for fiscal years beginning after June 15, 2002. The
Statement requires entities to record the fair value of a liability for an
asset retirement obligation in the period in which it is incurred. When the
liability is initially recorded, the entity capitalizes a cost by increasing
the carrying amount of the related long-lived asset. Over time, the liability
is accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. The adoption of SFAS No. 143 did not
have a material effect on the Companys financial position or results of
operations. In June 2002, FASB issued Statement No. 146 (SFAS No. 146), Accounting
for Costs Associated with Exit or Disposal Activities, effective for
activities that are initiated after December 31, 2002, with early application
encouraged. This Statement addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging Issues
Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). The adoption of SFAS No. 146 did not have
a material effect on the Companys financial position or results of operations. In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 expands on the
accounting guidance of SFAS No. 5, 57 and 107 and incorporates without change
the provisions of FASB Interpretation No. 34, which is being superceded. FIN
45 elaborates on existing disclosure requirements for most guarantees,
including standby letters of credit. It also clarifies that guarantees must be
recognized as an initial liability for fair value, or market value, of the
obligations assumed under the guarantee and that this information must be
disclosed in interim and annual financial statements. FIN 45 applies on a
prospective basis to guarantees issued or modified after December 31, 2002.
The adoption of FIN 45 did not have a material effect on the Companys
financial position or results of operations. In December 2002, FASB issued Statement No. 148 (SFAS No. 148),
Accounting for Stock-Based Compensation   Transition and Disclosure   An
Amendment of FASB Statement No. 123. SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company is required to follow the prescribed format and provide
the additional disclosures required by SFAS No. 148 in its annual financial
statements for the year ended December 31, 2002 and must also provide the
disclosures in its quarterly reports containing condensed financial statements
for interim periods beginning with the quarterly period ended March 31, 2003.
The adoption of SFAS No. 148 did not have a material effect on the Companys
financial position or results of operations.  MVCO
    2003 Form 10-K 30




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Summary of Significant Accounting Policies and Use of Estimates (Continued): New Accounting Announcements adopted (Continued): In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities (FIN 46) which is an interpretation of Accounting Research
Bulletin No. 51, Consolidated Financial Statements. FIN 46 requires a
variable interest entity (VIE) to be consolidated by a company that is
considered to be the primary beneficiary of that VIE. In December 2003, the
FASB issued FIN No. 46 (revised December 2003), Consolidation of Variable
Interest Entities (FIN 46-R) to address certain FIN 46 implementation
issues. The effective dates and impact of FIN 46 and FIN 46-R for our
consolidated financial statements are as follows:  1.
    
    Special purpose entities (SPEs) created prior to February 1, 2003.
We must apply either the provisions of FIN 46 or early adopt the
provisions of FIN 46-R at the end of the first interim or annual
reporting period ending after December 15, 2003. We have completed our
assessment and determined that we have no SPEs.2.
    
    Non-SPEs created prior to February 1, 2003. We are required to adopt
FIN 46-R at the end of the first interim or annual reporting period
ending after March 15, 2004. While not required, we could elect to
adopt FIN 46 or FIN 46-R for these non-SPEs as of the end of the first
interim or annual reporting period ending after December 15, 2003. We
have not entered into any material joint venture or partnership
agreements prior to February 1, 2003.3.
    
    All entities, regardless of whether a SPE, that were created
subsequent to January 31, 2003. We are required to apply the provisions
of FIN 46 unless we elect to early adopt the provisions of FIN 46-R as
of the first interim or annual reporting period ending after December
15, 2003. If we do not elect to early adopt FIN 46-R, then we are
required to apply FIN 46-R to these entities as of the end of the first
interim or annual reporting period ending after March 15, 2004. We have
not entered into any material joint venture or partnership agreements
subsequent to January 31, 2003 and we do not expect to enter into any
such material agreements during our first interim period ended January
31, 2004. If we enter into any significant joint venture and
partnership agreements in the future that would require consolidation
under FIN 46 or FIN 46-R, it could have a material impact on our
consolidated financial statements in future filings. EITF 00-21, Revenue Arrangements with Multiple Deliverables, was first
discussed at the July 2000 EITF meeting and was issued in February 2002.
Certain revisions to the scope language were made and finalized in May 2003.
It addresses the accounting for multiple element revenue arrangements, which
involve more than one deliverable or unit of accounting in circumstances where
the delivery of those units takes place in different accounting periods. EITF
00-21 requires disclosures of the accounting policy for revenue recognition of
multiple element revenue arrangements and the nature and description of such
arrangements. The accounting and reporting requirements are effective for
revenue arrangements entered into in fiscal periods beginning after June 15,
2003. Adoption of EITF 00-21 does not have a significant impact on our
financial statements. In
April 2003, the FASB issued Statement No. 149 (SFAS 149), Amendment
of Statement 133 on Derivative Instruments and Hedging Activities. SFAS 149
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging activities.
The accounting and reporting requirements will be effective for contracts
entered into or modified after June 30, 2003 and for hedging relationships
designated after June 30, 2003. Currently, we do not have any derivative
instruments and do not anticipate entering into any derivative contracts.
Accordingly, adoption of SFAS 149 does not have a significant impact on our
financial statements. In May 2003, the FASB issued Statement No. 150 (SFAS 150), Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and
Equity. SFAS 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). SFAS 150
is effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. Adoption of SFAS 150 does not have a
significant impact on our financial statements.  MVCO
    2003 Form 10-K 31




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Summary of Significant Accounting Policies and Use of Estimates (Continued): New Accounting Announcements adopted (Continued): In December of 2003, the FASB issued Statement of Financial Accounting
Standards No. 132 (Revised) (Revised SFAS 132), Employers Disclosure about
Pensions and Other Postretirement Benefits. Revised SFAS 132 retains
disclosure requirements in original SFAS 132 and requires additional
disclosures relating to assets, obligations, cash flows and net periodic
benefit cost. Revised SFAS 132 is effective for fiscal years ending after
December 15, 2003, except that certain disclosures are effective for fiscal
years ending after June 15, 2004. Interim period disclosures are effective for
interim periods beginning after December 15, 2003. The adoption of Revised
SFAS No. 132 did not have a material effect on the Companys financial position
or results of operations. 2. Concentration of Credit Risk: The Company maintains cash balances at various financial institutions.
Deposits not to exceed $100,000 for each institution are insured by the Federal
Deposit Insurance Corporation. At December 31, 2003 and 2002, the Company has
uninsured cash, cash equivalents, and restricted cash in the amounts of
$9,968,660 and $4,825,721, respectively. The Companys business activities and accounts receivable are with
customers in the construction industry and various governmental authorities and
municipalities located primarily in the Nevada, Arizona and Utah. The Company
performs ongoing credit evaluations of its customers and maintains allowances
for potential credit losses, returns and potential cash and other discounts
taken. 3. Accounts Receivable, net: Accounts receivable, net consists of the following: December 31,
    
    December 31,2003
    
    2002Contracts in progress
    
    $
    8,059,848
    
    
    $
    8,854,440Contracts in
progress - retention
    
    
    5,365,090
    
    
    
    5,619,937Completed contracts
    
    
    
    
    
    
    5,420Completed
contracts - retention
    
    
    
    
    
    
    119,444Other trade receivables
    
    
    7,233,568
    
    
    
    6,241,710Other receivables
    
    
    715,669
    
    
    
    649,75521,374,175
    
    
    
    21,490,706Less: Allowance for doubtful accounts
    
    
    (710,153
    )
    
    
    (287,333
    )$
    20,664,022
    
    
    $
    21,203,373
 4. Contracts in Progress: Costs and estimated earnings in excess of billings and billings in excess
of costs and estimated earnings on uncompleted contracts consist of the
following: December 31,
    
    December 31,2003
    
    2002Costs incurred on uncompleted contracts
    
    $
    448,808,200
    
    
    $
    450,305,829Estimated earnings to date
    
    
    16,572,424
    
    
    
    18,366,100465,380,624
    
    
    
    468,671,929Less: billings to date
    
    
    (461,249,791
    )
    
    
    (462,900,913
    )4,130,833
    
    
    
    5,771,016Less: claims receivable, not included in
billings to date
    
    
    (7,622,978
    )
    
    
    (7,961,107
    )$
    (3,492,145
    )
    
    $
    (2,190,091
    )
  MVCO
    2003 Form 10-K 32




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Contracts in Progress (Continued): Included in the accompanying balance sheets under the following captions: December 31,
    
    December 31,2003
    
    2002Costs and estimated earnings in excess of billings on
uncompleted contracts
    
    $
    1,463,309
    
    
    $
    1,543,061Billings in excess of costs and estimated earnings on
uncompleted contracts
    
    
    (4,955,454
    )
    
    
    (3,733,152
    )$
    (3,492,145
    )
    
    $
    (2,190,091
    )
 5. Land held for sale: In August 2003, management chose to make available for sale a parcel of
land held by the construction services segment with a cost basis of $264,738.
The Company intends to sell the land for cash within the next year. In
September 2003, the Company sold a parcel of land, which was held by the
construction materials segment, to a third party for $942,701, net of selling
expenses. The Company recognized a net gain on the disposal of the land in the
amount of $231,170, which is included in other income. 6. Property and Equipment: Property and equipment consists of the following: December 31,
    
    December 31,2003
    
    2002Land
    
    $
    562,901
    
    
    $
    827,639Plants
    
    
    7,283,099
    
    
    
    7,283,099Computer equipment
    
    
    515,183
    
    
    
    475,902Equipment
    
    
    10,239,981
    
    
    
    11,438,669Vehicles
    
    
    4,506,130
    
    
    
    3,542,820Office furniture and fixtures
    
    
    66,320
    
    
    
    61,995Improvements
    
    
    458,891
    
    
    
    446,54123,632,505
    
    
    
    24,076,665Accumulated depreciation
    
    
    (10,504,830
    )
    
    
    (9,521,019
    )$
    13,127,675
    
    
    $
    14,555,646
 7. Accounts Payable: Accounts payable consists of the following: December 31,
    
    December 31,2003
    
    2002Trade
    
    $
    15,705,914
    
    
    $
    16,108,962Retentions
    
    
    2,940,943
    
    
    
    3,803,554$
    18,646,857
    
    
    $
    19,912,516
  MVCO
    2003 Form 10-K 33




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. Accrued Liabilities: Accrued liabilities consist of the following: December 31,
    
    December 31,2003
    
    2002Compensation
    
    $
    2,369,891
    
    
    $
    2,031,966Taxes
    
    
    517,981
    
    
    
    241,772Insurance
    
    
    556,856
    
    
    
    212,701Other
    
    
    1,119,088
    
    
    
    1,210,672$
    4,563,816
    
    
    $
    3,697,111
 9. Notes Payable: Notes payable consists of the following: December 31,
    
    December 31,2003
    
    2002Notes payable, interest rates ranging from 6.28% to 7.81%
with monthly payments of $42,483, due dates ranging from
July 1, 2003 to June 4, 2004, collateralized by equipment
    
    $
    7,197
    
    
    $
    447,154Notes payable, interest rates ranging from 9.0% to 9.33% with
monthly payments of $9,958, due dates ranging from August
15, 2003 to December 31, 2004, collateralized by land
    
    
    31,159
    
    
    
    115,335Notes payable, interest rates ranging from 6.9% to 8.11% with
monthly payments of $7,524, due dates ranging from May 11,
2004 to November 1, 2004, collateralized by equipment
    
    
    54,086
    
    
    
    136,981Notes payable, variable interest rate was 4.0% at December 31,
2003, with monthly principal payments of $15,536, due
dates ranging from July 14, 2005 to May 13, 2006,
collateralized by equipment
    
    
    424,242
    
    
    
    610,672Non-interest bearing note payable, with monthly payments of
$5,012, due September 28, 2004, collateralized by equipment
    
    
    45,108
    
    
    
    105,251Notes payable, interest rates ranging from 4.5% to 8.84%, with
monthly payments of $33,099, due dates ranging from December
20, 2004 to February 27, 2006, collateralized by equipment
    
    
    668,185
    
    
    
    1,020,152$
    1,229,977
    
    
    $
    2,435,545
  MVCO
    2003 Form 10-K 34




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. Notes Payable (Continued): Notes payable consists of the following (Continued): December 31,
    
    December 31,2003
    
    2002Total from previous page
    
    $
    1,229,977
    
    
    $
    2,435,545Note payable, 4.75% interest rate, with monthly payments of
$126,507, due July 6, 2003, collateralized by workers
compensation and general liability insurance policies
    
    
    
    
    
    
    871,693Note payable, variable interest rate was 7.25% at December 31,
2002, with monthly interest only payments and a principal
payment of $600,000, due September 29, 2003, collateralized
by land
    
    
    
    
    
    
    600,000Non-interest bearing note payable, with monthly payments of
$1,344, due February 7, 2003, collateralized by equipment
    
    
    
    
    
    
    1,344Notes payable, interest rates ranging from 4.0% to 9.0%, with
monthly payments of $69,230, due dates ranging from May 5,
2004 to October 20, 2005, collateralized by equipment
    
    
    867,150
    
    
    
    1,772,225Notes payable, interest rates ranging from 4.5% to 6.75%, with
monthly payments of $18,577, due dates ranging from January
31, 2006 to December 1, 2008, collateralized by equipment
and vehicles
    
    
    841,708
    
    
    
    Note payable, 5.99% interest rate with monthly payments of
$24,438, due July 1, 2004, collateralized by the Companys
umbrella insurance policy
    
    
    144,099
    
    
    
    Notes payable, non-interest bearing, with
monthly payments of $7,641, due dates ranging from
August 15, 2008 to September 15, 2008 (less
unamortized discount of $55,785 - effective rate of 6%)
collateralized by vehicles
    
    
    429,081
    
    
    
    Note payable, variable interest rate was 5.25% at December 31,
2003, with equal principal payments of $145,833 plus interest,
due December 31, 2007, collateralized by all assets of the
Company (See Note 10)
    
    
    7,000,000
    
    
    
    7,000,00010,512,015
    
    
    
    12,680,807Less: current portion
    
    
    (3,512,286
    )
    
    
    (3,424,209
    )$
    6,999,729
    
    
    $
    9,256,598
  MVCO
    2003 Form 10-K 35




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. Notes Payable (Continued): Following are maturities of long-term debt for each of the next 5 years: 2004
    
    $
    3,512,2862005
    
    
    2,680,5682006
    
    
    2,106,3962007
    
    
    2,004,7582008
    
    
    208,007$
    10,512,015
 10. Line of Credit: During the year ended December 31, 2003, the Company elected to convert
the pre-existing line of credit into a term loan agreement, with an interest
rate at Chase Manhattan Banks prime, plus 1.25%. The term agreement requires
equal monthly principal plus interest payments through December 31, 2007 and is
collateralized by all of the Companys assets. Under the terms of the
agreement, the Company and the subsidiary are required to maintain a certain
level of tangible net worth as well as maintain a ratio of total debt to
tangible net worth. As of December 31, 2003 and 2002, the Company and its
subsidiary were in compliance with these covenants. As a result of the
conversion the Company has no available line of credit as of December 31, 2003. 11. Related Party Transactions: Revenue: During the years ended December 31, 2003 and 2002, the Company provided
construction materials to a related party in the amounts of $22,982 and
$12,282, respectively. Included in accounts receivable at December 31, 2003
and 2002 are amounts due from related parties, in the amounts of $11,822 and
$14,666, respectively. Professional Services: During the years ended December 31, 2003, 2002 and 2001, a related party
rendered professional services to the Company in the amounts of $6,246, $23,491
and $14,573, respectively. Included in accounts payable at December 31, 2003
and 2002 are amounts due to a related party, in the amounts of $0 and $3,990,
respectively. During the years ended December 31, 2003, 2002 and 2001, the
Company paid $40,000, $30,000 and $30,000, respectively to outside members of
the board of directors. Subcontractor/Supplier: Various related parties provided materials and equipment used in the
Companys construction service and material businesses during the years ended
December 31, 2003, 2002 and 2001, in the amounts of $589, $2,099,905 and
$4,114,319, respectively. Included in accounts payable at December 31, 2003
and 2002 are amounts due to related parties, in the amounts of $0 and $81,471,
respectively, related to subcontracts and supplies. Royalties: During the years ended December 31, 2003, 2002 and 2001, the Company paid
a related party mining royalties in the amounts of $0, $514,296 and $390,144,
respectively. Included in accrued liabilities at December 31, 2003 and 2002
are amounts due to a related party for royalties, in the amounts of $0 and
$31,276, respectively. Commitments: The Company leased office space in Moapa, Nevada on a month-to-month
basis, at a rental rate of $840 per month, from a related party of the Company.
The lease terms also required the Company to pay common area maintenance,
taxes, insurance and other costs. Rent expense under the lease for the years
ended December 31, 2003, 2002 and 2001 amount to $0, $0 and $9,240,
respectively.  MVCO
    2003 Form 10-K 36




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12. Income Taxes: The provisions for income tax benefit (expense) from operations consist of
the following: For the Years Ended December 31,2003
    
    2002
    
    2001Current:Federal
    
    $
    54,068
    
    
    $
    
    
    
    $
    30,183State
    
    
    
    
    
    
    
    
    
    
    54,068
    
    
    
    
    
    
    
    30,183Deferred
    
    
    (95,711
    )
    
    
    (198,629
    )
    
    
    638,448$
    (41,643
    )
    
    $
    (198,629
    )
    
    $
    668,631
 The Companys deferred tax asset (liability) consists of the following: December 31,
    
    December 31,2003
    
    2002Deferred tax asset:Other
    
    $
    346,209
    
    
    $
    176,288Inventory allowance
    
    
    442,452
    
    
    
    373,000NOL carryforward
    
    
    455,235
    
    
    
    952,5581,243,896
    
    
    
    1,501,846Deferred tax liability:Depreciation and other
    
    
    (2,604,652
    )
    
    
    (2,766,891
    )Net deferred tax liability
    
    $
    (1,360,756
    )
    
    $
    (1,265,045
    )
 For the years ended December 31, 2003, 2002 and 2001, the effective tax
rate differs from the federal statutory rate primarily due to state income
taxes and permanent differences, as follows: For the Years Ended December 31,2003
    
    2002
    
    2001Statutory rate applied to income
(loss) before income taxes
    
    $
    46,579
    
    
    $
    318,502
    
    
    $
    (1,085,471
    )State taxes, net of federal benefit
    
    
    5,358
    
    
    
    30,913
    
    
    
    (35,902
    )Increase (decrease) in income taxes
resulting from:Valuation Allowance
    
    
    
    
    
    
    (255,980
    )
    
    
    Non-Deductible items
    
    
    11,241
    
    
    
    14,599
    
    
    
    525,015Other
    
    
    (21,535
    )
    
    
    90,595
    
    
    
    (72,273
    )$
    41,643
    
    
    $
    198,629
    
    
    $
    (668,631
    )
 At December 31, 2003, the Company has available federal and state
operating loss carry-forwards of approximately $2,500,000, which will expire
through the year 2021.  MVCO
    2003 Form 10-K 37




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. Commitments: The Company is currently leasing office space in Phoenix, Arizona under a
non-cancelable operating lease agreement expiring in December 2008. The lease
agreement provides for monthly payments of $8,694 from February 1, 2004 through
December 31, 2004. The lease also requires the Company to pay common area
maintenance, taxes, insurance and other costs. Rent under the aforementioned
operating lease was $125,984, $113,456 and $115,059 for the years ended
December 31, 2003, 2002 and 2001, respectively. The Company leases office space, batch plants, equipment, mixer trucks,
property and aggregate supply under leases expiring in various years through
2010. Rents under the aforementioned operating leases were $7,169,010,
$6,641,195 and $8,307,423 for the years ended December 31, 2003, 2002 and 2001,
respectively. Minimum future rental payments under non-cancelable operating
leases having remaining terms in excess of one year as of December 31, 2003 for
each of the next five years and in aggregate are: 2004
    
    $
    5,141,0062005
    
    
    3,687,3352006
    
    
    2,408,7462007
    
    
    1,750,7632008
    
    
    1,393,689Subsequent to 2008
    
    
    1,462,979$
    15,844,518
 The Company has entered into employment contracts with some of its
executive officers and key managers that provide for an annual salary, issuance
of the Companys common stock and various other benefits and incentives. As of
the end of December 31, 2003, 2002 and 2001, the total commitments, excluding
benefits and incentives, amount to $1,724,677, $829,875 and $498,875,
respectively. The Company is the lessee of batch plants, equipment and vehicles under
capital leases expiring in various years through 2008. The assets and
liabilities under a capital lease are initially recorded at the lower of the
present value of the minimum lease payments or the fair value of the asset.
Each asset is depreciated over the lesser of the expected useful life or the
lease term. Depreciation on the assets under capital leases charged to expense
in 2003, 2002 and 2001 was $398,345, $482,748 and $621,147, respectively. At
December 31, 2003 and 2002, property and equipment included $3,380,685 and
$3,952,220, net of accumulated depreciation, of batch plants, vehicles and
equipment under capital leases. Minimum future lease payments under capital leases as of December 31, 2003
for each of the next five years and in aggregate are: 2004
    
    $
    1,009,4492005
    
    
    634,0302006
    
    
    461,7002007
    
    
    46,9832008
    
    
    31,322Total minimum payments
    
    
    2,183,484Less: amount representing interest
    
    
    (220,140
    )Present value of net minimum lease payment
    
    
    1,963,344Less: current portion
    
    
    (878,280
    )$
    1,085,064
 14. Stockholders Equity: Preferred Stock: The Company has authorized 1,000,000 shares of $.001 par value preferred
stock to be issued, with such rights, preferences, privileges, and restrictions
as determined by the Board of Directors.  MVCO
    2003 Form 10-K 38




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. Stockholders Equity (Continued): Initial Public Offering: During October 1995, the Company completed an initial public offering
(Offering) of Units of the Companys securities. Each unit consisted of one
share of $.001 par value common stock and one redeemable common stock purchase
warrant (Warrant). Each Warrant was exercisable to purchase one share of
common stock at $7.20 per share for a period of 5 years from the date of the
Offering. The Offering included the sale of 1,926,250 Units at $6.00 per Unit.
Net proceeds of the Offering, after deducting underwriting commissions and
offering expenses of $2,122,080, amounted to $9,435,420. The warrants expired
and were de-listed at the time of market closing on December 31, 2002. 15. Litigation and Claim Matters: The Company is a party to legal proceedings in the ordinary course of its
business. With the exception of those matters detailed below, the Company
believes that the nature of these proceedings (which generally relate to
disputes between the Company and its subcontractors, material suppliers or
customers regarding payment for work performed or materials supplied) are
typical for a construction firm of its size and scope, and no other pending
proceedings are material to its financial condition. The following proceedings represent matters that may become material and
have already been or may soon be referred to legal counsel for further action: Requests for Equitable Adjustment to Construction Contracts. The Company has
made claims as described below on the following contracts:  (1)
    
    Five contracts with the New Mexico State Highway and
Transportation Department  The approximate total value of claims on
these projects is $27,465,989 of which $23,703,059 is on behalf of
the Company and the balance of $3,762,930 is on behalf of the prime
contractor or subcontractors. The primary issues are changed
conditions, plan errors and omissions, contract modifications and
associated delay costs. In addition, the projects were not completed
within the adjusted contract time because of events giving rise to
the claims. The prosecution of the claims will include the
appropriate extensions of contract time to offset any potential
liquidated damages.(2)
    
    Clark County, Nevada  The approximate total value of claims on
this project is $19,135,397 of which $6,250,132 is on behalf of the
Company and the balance of $12,885,265 is on behalf of
subcontractors. The primary issues are changed conditions,
constructive changes, plan errors and omissions, contract
modifications and associated delay costs. The above claims combined total $46,601,386. Of that sum, the Companys
portion of the claims total was $29,953,191 and the balance of $16,648,195
pertains to prime contractor or subcontractors claims. Total claim amounts
reported by the Company are approximate and are subject to revision as final
documentation progresses and as issues are resolved and/or payments made.
Relative to the aforementioned claims, the Company has recorded $7,622,978 in
cumulative claim receivable as of December 31, 2003 to offset a portion of
costs incurred to-date on the claims. The claims receivable is comprised of a
long-term portion of $3,521,080 and a current portion of $4,101,898. The current portion of claims receivable results from a settlement
agreement on three of the five New Mexico claims (NM Settlement) reached
during January 2004. The Company agreed to accept $7,000,000, including
retention of $1,127,636, in exchange for releasing the New Mexico State Highway
and Transportation Department from three of the five claims. The claim amount
of the three settled claims totaled $15,463,207, of which $15,366,128 is on
behalf of the Company and the balance of $97,079 is on behalf of
subcontractors. Although the Company believes its claims receivable represent a reasonably
conservative posture, any claims proceeds and payments for previously unpaid
quantities, unpaid change orders and pending change orders ultimately paid to
the Company less than $7,622,978, net of professional fees, will reduce income.
Conversely, a payment for those same items in excess of $7,622,978, net of
professional fees, will increase income. (See Note 21, Subsequent Events)  MVCO
    2003 Form 10-K 39




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 15. Litigation and Claim Matters (Continued): The portion of accounts receivable pertaining to retention withheld on the
contracts for which claims have been filed amounts to $2,008,399, which
includes the $1,127,636 that is a part of the NM Settlement and represents full
payment of retention owed on the three disputed contracts. The degree to which
the Company is successful in recovering its costs from the remaining claims may
also impact the amount of retention paid by the owner. The Company believes
that all retention amounts currently being held by the owners on the contracts
with outstanding claims will be paid in full in accordance with the contract
terms. Therefore, no allowance has been made to reduce the receivables due
from the retention on the disputed contracts. Lawsuits Filed Against Meadow Valley Corporation and its Subsidiaries  (1)
    
    Innovative Construction Systems, Inc. (ICS), District Court,
Clark County, NV  ICS was a subcontractor to MVCI on several
projects. ICS failed to make payments of payroll, pension fund
contributions and other taxes for which the Internal Revenue Service
garnished any future payments due ICS on MVCIs projects. As a
result, ICS failed to supply labor to perform its work and defaulted
on its subcontracts. MVCI terminated the ICS subcontracts and
performed the work with MVCIs personnel. ICS alleges it was
wrongfully terminated and is asserting numerous claims for damages.
ICS claims against MVCI total approximately $15,000,000. The Company
does not believe ICS claims have merit and intends to vigorously
defend against these claims and has filed counter-claims for
approximately $3,200,000 seeking to recover the damages ICS has
caused MVCI through its failure to perform and satisfy its financial
obligations. As such, no liability has been recorded in the
accompanying financial statements for any potential loss arising from
this claim. In September 2003, a binding arbitration agreement was
entered into between ICS and the Company to stay all actions until
the Clark
County, Nevada claim, as mentioned above, has concluded, a decision
rendered, payment received from the county, and the funds are escrowed.
At that time, all remaining matters between the MVCI and ICS will be
heard before a three-person binding arbitration panel.(2)
    
    Progressive Contracting Inc. (PCI), District Court, Clark
County, NV  PCI was a subcontractor to MVCI on a project where there
is a dispute with the owner regarding delays to the project. PCI
claims they were damaged by these delays in an amount in excess of
$300,000. The Company believes that under the terms of the contract
with PCI they are only entitled to compensation for the delays if
MVCI is compensated by the owner. MVCI has submitted PCIs claims to
the owner and they are included in the total claim amount MVCI has
submitted. In July 2003, PCI filed a notice of dismissal without
prejudice. In February 2004, a settlement was reached whereas; PCI
will accept the value determined by the arbitrators in the above
noted claim between the Company and Clark County.(3)
    
    MVCI is defending a claimed preference, in the Third Judicial
Court of Salt Lake County, in connection with a payment made to it by
an insurance company, Southern America Insurance Company, in the
approximate amount of $100,000. MVCI believes that the payment is
not a preference, and is vigorously defending the action.(4)
    
    Johnson & Danley Construction Co., Inc. (JDCC), J.D.
Materials, Inc. (JDM) and Joel T. Danley (Danley) (collectively
J&D), Twelfth Judicial District, District of New Mexico  JDCC was
the prime contractor and MVCI was a subcontractor to JDCC on two of
the five contracts involved in MVCIs disputes with the state of New
Mexico. JDCC was also a subcontractor to MVCI on other contracts in
New Mexico. JDM is the owner of an aggregate pit in Alamogordo, NM
and leases the pit to MVCI under a mineral lease agreement. Danley
is believed to be an officer and owner of JDCC and JDM. JDCC filed
for Chapter 11 bankruptcy protection, which in accordance with the
contract, resulted in the termination of its contracts with the New
Mexico State Highway and Transportation Department (NMSHTD). The
payment and performance
bonds supplied by JDCC in connection with the two contracts for which
JDCC was the prime contractor had been furnished by MVCIs surety
companies. MVCI indemnified the surety companies against losses and
claims on the two contracts. Upon JDCCs termination, the NMSHTD
entered into a takeover agreement with the surety companies who
subsequently entered into an agreement with MVCI to complete the work.
MVCI has successfully completed the projects. In its complaint, J&D
alleged, among other things, that MVCI was partially responsible for
the cause of its bankruptcy and sought damages in an undetermined
amount.  MVCO
    2003 Form 10-K 40




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 15. Litigation and Claim Matters (Continued):  On February 10, 2003 for mutual consideration, J&D and MVCI entered
into a settlement agreement whereby the two parties dismiss their
claims and counterclaims in their entirety. The parties have agreed to
jointly prosecute their respective claims against the NMSHTD.  (5)
    
    The Company and all of its Directors were served with a civil
Complaint by Silver State Materials Corp. and Cyrus Spurlino
(collectively Plaintiffs) in case no. CV-S-01-1436-KJD-LRL
(USDC-NV). The Complaint primarily alleges that the Companys
October 1995 Registration Statement on Form S-1 was misleading in
stating that the Companys Directors were elected on a staggered
basis because the Companys Bylaws, providing for such staggered
terms, were not so amended until April 1997, and that such amendment
was not filed with the Securities and Exchange Commission. The
Complaint seeks (i) injunctive relief compelling a Special Meeting of
Shareholders to remove all of the Companys Directors for cause, (ii)
the election of a new Board of Directors, (iii) to compel the Company
to enact amended and restated Bylaws, (iv) monetary damages in an
undisclosed amount, (v) recovery of interest, fees and costs, and
(vi) such other relief as the District Court may deem appropriate.
The Plaintiffs filed a notice of dismissal without prejudice on April
22, 2003. 16. Statement of Cash Flows: Non-Cash Investing and Financing Activities: The Company recognized investing and financing activities that affected
assets, liabilities, and equity, but did not result in cash receipts or
payments. These non-cash activities are as follows: During the years ended December 31, 2003, 2002 and 2001, the Company
financed the purchase of property, plant and equipment in the amounts of
$1,551,225, $2,500,099 and $2,141,357, respectively. During the years ended December 31, 2003 and 2002, the Company financed
the purchase of various insurance policies in the amount of $237,800 and
$1,237,960, respectively. 17. Significant Customers: For the years ended December 31, 2003, 2002 and 2001, the Company
recognized a significant portion of its revenue from three Customers (shown as
an approximate percentage of total revenue): For the Years Ended December 31,2003
    
    2002
    
    2001A
    
    
    27.9
    %
    
    
    21.4
    %
    
    
    21.9
    %B
    
    
    1.3
    %
    
    
    14.8
    %
    
    
    12.5
    %C
    
    
    11.8
    %
    
    
    11.6
    %
    
    
    14.7
    %
 At December 31, 2003 and 2002, amounts due from the aforementioned
Customers included in restricted cash and accounts receivables, are as follows: For the Years Ended December 31,2003
    
    2002A
    
    $
    3,342,616
    
    
    $
    3,721,503B
    
    
    61,000
    
    
    
    1,006,668C
    
    
    1,398,098
    
    
    
    2,913,529
  MVCO
    2003 Form 10-K 41




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 18. Stock Option Plan: In November 1994, the Company adopted a Stock Option Plan providing for
the granting of both qualified incentive stock options and non-qualified stock
options. The Company has reserved 1,200,000 shares of its common stock for
issuance under the Plan. Granting of the options is at the discretion of the
Board of Directors and may be awarded to employees and consultants.
Consultants may receive only non-qualified stock options. The maximum term of
the stock options are 10 years and may be exercised after issuance as follows:
33.3% after one year of continuous service, 66.6% after two years of continuous
service and 100% after three years of continuous service. The exercise price
of each option is equal to the market price of the Companys common stock on
the date of grant. The following summarized the stock option transactions: Weighted AverageShares
    
    Price per ShareOutstanding January 1, 2001
    
    
    671,350
    
    
    $
    5.11Granted
    
    
    201,300
    
    
    
    2.44Forfeited
    
    
    (101,000
    )
    
    
    4.80Outstanding December 31, 2001
    
    
    771,650
    
    
    
    4.45Forfeited
    
    
    (27,625
    )
    
    
    4.29Outstanding December 31, 2002
    
    
    744,025
    
    
    
    4.46Granted
    
    
    369,000
    
    
    
    1.46Forfeited
    
    
    (37,200
    )
    
    
    4.68Outstanding December 31, 2003
    
    
    1,075,825
    
    
    
    3.42
 Information relating to stock options at December 31, 2003 summarized by
exercise price is as follows: Outstanding
    
    ExercisableWeighted Average
    
    
    
    
    
    Weighted AverageRemainingExercise Price Per Share

    Shares
    
    Life ( In Years)
    
    Exercise Price
    
    Shares
    
    Exercise Price$
    6.250


    
    125,675
    
    
    
    2
    
    
    $
    6.250
    
    
    
    125,675
    
    
    $
    6.2505.410


    
    2,500
    
    
    
    3
    
    
    
    5.410
    
    
    
    2,500
    
    
    
    5.4104.375


    
    132,000
    
    
    
    3
    
    
    
    4.375
    
    
    
    132,000
    
    
    
    4.3755.310


    
    80,000
    
    
    
    4
    
    
    
    5.310
    
    
    
    80,000
    
    
    
    5.3105.875


    
    79,200
    
    
    
    5
    
    
    
    5.875
    
    
    
    79,200
    
    
    
    5.8754.563


    
    20,000
    
    
    
    6
    
    
    
    4.563
    
    
    
    20,000
    
    
    
    4.5634.000


    
    20,000
    
    
    
    6
    
    
    
    4.000
    
    
    
    20,000
    
    
    
    4.0003.875


    
    71,800
    
    
    
    6
    
    
    
    3.875
    
    
    
    71,800
    
    
    
    3.8752.438


    
    175,650
    
    
    
    8
    
    
    
    2.438
    
    
    
    122,725
    
    
    
    2.438$
    1.460


    
    369,000
    
    
    
    10
    
    
    
    1.460
    
    
    
    
    
    
    
    1.460$
    1.46 to $6.25


    
    1,075,825
    
    
    
    
    
    
    $
    3.420
    
    
    
    653,900
    
    
    $
    4.610
  MVCO
    2003 Form 10-K 42




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 18. Stock Option Plan (Continued): All stock options issued to employees have an exercise price not less than
the fair market value of the Companys Common Stock on the date of grant. In
accordance with accounting for such options utilizing the intrinsic value
method, there is no related compensation expense recorded in the Companys
financial statements for the years ended December 31, 2003, 2002 and 2001. Had
compensation cost for stock-based compensation been determined based on the
fair value of the options at the grant dates consistent with the method of SFAS 123, the
Companys net income (loss) and earnings per share for the years ended December
31, 2003, 2002 and 2001 would have been reduced to the pro forma amounts
presented below: 2003
    
    2002
    
    2001Net income (loss), as reported
    
    $
    120,738
    
    
    $
    738,141
    
    
    $
    (2,523,931
    )Add: Stock-based Employee compensation
expense included in reported income,
net of related tax effects
    
    
    
    
    
    
    
    
    
    
    Deduct: Total stock-based Employee
compensation expense determined under
fair value based methods for all awards,
net of related tax effects
    
    
    (58,604
    )
    
    
    (105,827
    )
    
    
    (101,797
    )Pro forma net income (loss)
    
    $
    62,134
    
    
    $
    632,314
    
    
    $
    (2,625,728
    )Basic net income (loss) per common shareAs Reported
    
    $
    0.03
    
    
    $
    0.21
    
    
    $
    (0.71
    )Pro forma
    
    
    0.02
    
    
    
    0.18
    
    
    
    (0.74
    )Diluted net income (loss) per common shareAs Reported
    
    $
    0.03
    
    
    $
    0.21
    
    
    $
    (0.71
    )Pro forma
    
    
    0.02
    
    
    
    0.18
    
    
    
    (0.74
    )
 The fair value of option grants is estimated as of the date of grant
utilizing the Black-Scholes option-pricing model with the following weighted
average assumptions for grants in 2003: expected life of options of 3 years,
expected volatility of 82.23%, risk-free interest rates of 5%, and a 0%
dividend yield. The weighted average fair value at date of grant for options
granted during 2003 was approximated $.82. The fair value of option grants is estimated as of the date of grant
utilizing the Black-Scholes option-pricing model with the following weighted
average assumptions for grants in 2001: expected life of options of 5 years,
expected volatility of 60.85%, risk-free interest rates of 8%, and a 0%
dividend yield. The weighted average fair value at date of grant for options
granted during 2001 was approximated $.97. 19. Employee Benefit Plan The Company maintains a 401(k) profit sharing plan allowing substantially
all full-time employees to participate. Under the terms of the Plan, the
employees may elect to contribute a portion of their salary to the Plan. The
matching contributions by the Company are at the discretion of the Board of
Directors, and are subject to certain limitations. For the years ended
December 31, 2003, 2002 and 2001, the Company contributed $294,619, $32,223 and
$0 to the Plan. 20. Basic Earnings (Loss) Per Share: The Companys basic net income (loss) per share at December 31, 2003, 2002
and 2001 were computed by dividing net income (loss) for the period by
3,593,102, 3,559,938 and 3,559,938, respectively, the basic weighted average
number of common shares outstanding during the period.  MVCO
    2003 Form 10-K 43




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 20. Basic Earnings (Loss) Per Share (Continued): The Companys diluted net income per common share at December 31, 2003 is
computed based on the weighted average number of shares of common stock
outstanding during the period and the weighted average of options to purchase
369,000 shares at $1.46. Options to purchase 706,825 at a range of $2.438 to
$6.25 per share were outstanding during 2003, but were not included in the
computation of diluted net income per common shares because the options
exercise price was greater than the average market price of the common share. The Companys diluted net income per common share at December 31, 2002 is
computed based on the weighted average number of shares of common stock
outstanding during the period. Options to purchase 744,025 at a range of
$2.438 to $6.25 per share were outstanding during 2002, but were not included
in the computation of diluted net income per common shares because the options
exercise price was greater than the average market price of the common share. The Companys diluted net loss per common share at December 31, 2001 is
computed based on the weighted average number of shares of common stock
outstanding during the period. Options to purchase 771,650 at a range of
$2.438 to $6.25 per share were outstanding during 2001, but were not included
in the computation of diluted net loss per common shares because the options
exercise price was greater than the average market price of the common share. 21. Subsequent Events: In January 2004, the Company agreed to accept $7,000,000, including
retention of $1,127,636, in exchange for releasing the New Mexico State Highway
and Transportation Department from three of the five claims. The claim amount
of the three settled claims totaled $15,463,207, of which $15,366,128 was on
behalf of the Company and the balance of $97,079 was on behalf of
subcontractors. The Company previously recorded a claim receivable in the
amount of $4,101,898 related to the three claims. During January and February 2004, the Company financed the purchase of
five vehicles in the amount of $127,878. The note payable obligations have
interest rates ranging from 5.31% to 5.9%, with combined monthly payments of
$2,464, and are due February 2009. In February 2004, the Company financed the purchase of a piece of
equipment in the amount of $112,500. The note payable obligation has an
interest rate of 5.9%, with monthly principal payments of $3,135 plus interest,
and is due February 2007. In February 2004, the Company financed the purchase of a piece of
equipment in the amount of $14,037. The note payable obligation is
non-interest bearing, with monthly payments of $390, and is due February 2007. In February 2004, the Company financed the purchase of a piece of
equipment in the amount of $135,355. The note payable obligation has an
interest rate of 4.9%, with monthly payments of $4,050, and is due February
2007. In February 2004, the Company sold a parcel of land to a third party for
$350,000. The Company recognized a net gain on the disposal of the land in the
amount of $45,994. In February 2004, the Company leased five mixer trucks, with a combined
monthly payment of $10,625. The operating lease expires in February 2009. In March 2004, the Company was in the process of acquiring a parcel of
land in the Las Vegas Metropolitan area for use as an additional batching
facility for its materials segment. The agreed upon purchase price for this
property is $1,089,000. The Company has until April 20, 2004 to determine if
the site is acceptable and arrange financing. If the Company chooses not to
acquire the property it will forfeit the $50,000 deposit held in escrow on the
property.  MVCO
    2003 Form 10-K 44




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MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 22. Other Informative Disclosures: The construction materials segment manufactures and distributes ready mix
concrete and sand and gravel products in the Las Vegas, NV and Phoenix, AZ
markets. Prospective customers include concrete subcontractors, prime
contractors, homebuilders, commercial and industrial property developers, pool
builders and homeowners. Construction materials sales first began from a
single location in March 1997 and, by the end of 2000, expanded to two
locations in the Las Vegas, NV vicinity, one location in the Moapa, NV vicinity
and two locations in the Phoenix, AZ vicinity. The construction services segment of the Company generates revenue by
providing construction services, usually under terms of a contract with an
owner or a subcontract with another contractor. The following is a summary of certain financial information of the
Companys two main areas of operations for 2003, 2002 and 2001: Construction
    
    ConstructionServices
    
    MaterialsFor the twelve months ended December 31, 2003Gross revenue
    
    $
    110,119,548
    
    
    $
    44,128,065Intercompany revenue
    
    
    
    
    
    
    140,748Cost of revenue
    
    
    107,883,229
    
    
    
    40,020,766Interest income
    
    
    50,672
    
    
    
    7,950Interest expense
    
    
    (281,555
    )
    
    
    (207,562
    )Depreciation and amortization
    
    
    1,497,089
    
    
    
    1,231,220Income (loss) before taxes
    
    
    (1,511,323
    )
    
    
    1,673,704Income tax benefit (expense)
    
    
    591,751
    
    
    
    (633,394
    )Net income (loss)
    
    
    (919,572
    )
    
    
    1,040,310Total assets
    
    
    39,105,523
    
    
    
    15,713,800For the twelve months ended December 31, 2002Gross revenue
    
    $
    114,245,704
    
    
    $
    38,849,418Intercompany revenue
    
    
    
    
    
    
    2,047,854Cost of revenue
    
    
    110,603,682
    
    
    
    34,959,843Interest income
    
    
    146,354
    
    
    
    10,482Interest expense
    
    
    (279,636
    )
    
    
    (161,949
    )Depreciation and amortization
    
    
    1,698,828
    
    
    
    1,117,578Income (loss) before taxes
    
    
    (813,327
    )
    
    
    1,750,097Income tax benefit (expense)
    
    
    299,166
    
    
    
    (497,795
    )Net income (loss)
    
    
    (514,161
    )
    
    
    1,252,302Total assets
    
    
    40,550,315
    
    
    
    16,489,627
  MVCO
    2003 Form 10-K 45




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 22. Other Informative Disclosures (Continued): Construction
    
    ConstructionServices
    
    MaterialsFor the twelve months ended December 31, 2001Gross revenue
    
    $
    143,129,246
    
    
    $
    32,625,131Intercompany revenue
    
    
    
    
    
    
    1,691,229Cost of revenue
    
    
    140,058,139
    
    
    
    31,037,877Interest income
    
    
    299,887
    
    
    
    19,910Interest expense
    
    
    (302,489
    )
    
    
    (183,448
    )Depreciation and amortization
    
    
    1,999,626
    
    
    
    811,416Income (loss) before taxes
    
    
    (2,698,403
    )
    
    
    (494,159
    )Income tax benefit (expense)
    
    
    756,333
    
    
    
    (87,702
    )Net income (loss)
    
    
    (1,942,070
    )
    
    
    (581,861
    )Total assets
    
    
    46,005,220
    
    
    
    14,185,899
 There are no differences in accounting principles between the operations.
All centrally incurred costs are allocated to the construction services
operation. Intercompany revenue is eliminated at cost to arrive at
consolidated revenue and cost of revenue. 23. Quarterly Financial Data (Unaudited): March 31,
    
    June 30,
    
    September 30,
    
    December 31,2003Revenue
    
    $
    32,194,111
    
    
    $
    41,970,349
    
    
    $
    42,846,101
    
    
    $
    37,096,304Gross profit
    
    
    1,706,168
    
    
    
    2,486,882
    
    
    
    1,400,930
    
    
    
    749,638Income (loss) from operations
    
    
    126,502
    
    
    
    956,107
    
    
    
    (469,787
    )
    
    
    (763,489
    )Net income (loss)
    
    
    19,654
    
    
    
    521,303
    
    
    
    (97,094
    )
    
    
    (323,125
    )Basic net income (loss) per common share
    
    
    0.01
    
    
    
    0.14
    
    
    
    (0.03
    )
    
    
    (0.09
    )Diluted net income (loss) per common share
    
    
    0.01
    
    
    
    0.14
    
    
    
    (0.03
    )
    
    
    (0.09
    )Basic weighted average common shares
outstanding
    
    
    3,568,659
    
    
    
    3,601,250
    
    
    
    3,601,250
    
    
    
    3,601,250Diluted weighted average common shares
outstanding
    
    
    3,568,659
    
    
    
    3,601,250
    
    
    
    3,601,250
    
    
    
    3,625,8782002Revenue
    
    $
    35,005,133
    
    
    $
    41,976,217
    
    
    $
    37,523,094
    
    
    $
    36,542,824Gross profit
    
    
    1,642,374
    
    
    
    2,119,617
    
    
    
    1,477,462
    
    
    
    2,292,144Income from operations
    
    
    114,097
    
    
    
    723,829
    
    
    
    41,977
    
    
    
    52,754Net income
    
    
    20,307
    
    
    
    392,754
    
    
    
    40,807
    
    
    
    284,273Basic net income per common share
    
    
    0.01
    
    
    
    0.11
    
    
    
    0.01
    
    
    
    0.08Diluted net income per common share
    
    
    0.01
    
    
    
    0.11
    
    
    
    0.01
    
    
    
    0.08Basic weighted average common shares
outstanding
    
    
    3,559,938
    
    
    
    3,559,938
    
    
    
    3,559,938
    
    
    
    3,559,938Diluted weighted average common shares
outstanding
    
    
    3,559,938
    
    
    
    3,559,938
    
    
    
    3,559,938
    
    
    
    3,559,938
  MVCO
    2003 Form 10-K 46




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##### Table of Contents



MEADOW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 23. Quarterly Financial Data (Unaudited)(Continued): March 31,
    
    June 30,
    
    September 30,
    
    December 31,2001Revenue
    
    $
    35,353,537
    
    
    $
    45,476,667
    
    
    $
    52,619,530
    
    
    $
    40,613,414Gross profit
    
    
    190,604
    
    
    
    2,150,370
    
    
    
    2,205,774
    
    
    
    111,613Income (loss) from operations
    
    
    (1,548,077
    )
    
    
    417,024
    
    
    
    704,325
    
    
    
    (2,977,534
    )Net income (loss)
    
    
    (1,017,359
    )
    
    
    537,702
    
    
    
    325,453
    
    
    
    (2,369,727
    )Basic net income (loss) per common share
    
    
    (0.29
    )
    
    
    0.15
    
    
    
    0.09
    
    
    
    (0.66
    )Diluted net income (loss) per common share
    
    
    (0.29
    )
    
    
    0.15
    
    
    
    0.09
    
    
    
    (0.66
    )Basic weighted average common shares
outstanding
    
    
    3,559,938
    
    
    
    3,559,938
    
    
    
    3,559,938
    
    
    
    3,559,938Diluted weighted average common shares
outstanding
    
    
    3,559,938
    
    
    
    3,559,938
    
    
    
    3,559,938
    
    
    
    3,559,938
 
 Item 9.Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure On October 22, 2003, Meadow Valley Corporation dismissed BDO Seidman, LLP
(BDO Seidman) as the Companys principal accountants and engaged Semple &
Cooper, LLP (Semple & Cooper) as the principal accountants. The decision to
change principal accountants was recommended by the Audit Committee and
approved by the Board of Directors. In connection with the audits of the two fiscal years ended December 31,
2002, and 2001, and the subsequent interim period through October 22, 2003,
there were no disagreements with BDO Seidman on any matter of accounting
principles or practices, financial statement disclosure or an auditing scope or
procedure, which disagreement, if not resolved to BDO Seidmans satisfaction,
would have caused BDO Seidman to make reference to the subject matter of the
disagreement in connection with its reports. The audit reports of BDO Seidman on the financial statements of the
Company as of and for the years ended December 31, 2002 and 2001 did not
contain an adverse opinion or disclaimer of opinion, nor were the reports
qualified or modified as to audit scope or accounting principles. On October 22, 2003, the Company engaged Semple and Cooper as the
Companys new principal accountants for the fiscal year 2003. The Registrant
did not consult with Semple and Cooper regarding any matters prior to its
engagement. 
 Item 9A.Controls and Procedures Under the supervision and with the participation of our management,
including the Chief Executive Officer and Principal Accounting Officer, we have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14(c) as of the end
of the period covered by this report. Based on that evaluation, the Chief
Executive Officer and Principal Accounting Officer have concluded that these
disclosure controls and procedures are effective. There were no changes in our
internal control over financial reporting during the quarter ended December 31,
2003 that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.  MVCO
    2003 Form 10-K 47




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##### Table of Contents



PART III 
 Item 10.Directors and Executive Officers of the Registrant Information on directors and executive officers of the Company will be
included under the caption Directors and Executive Officers of the Companys
definitive Proxy Statement relating to the Annual Meeting of Shareholders for
the year ended December 31, 2003, which is hereby incorporated by reference. The information in the Proxy Statement set forth under the caption
Section 16(a) Beneficial Ownership Reporting Compliance is incorporated
herein by reference. Identification of the Audit Committee The Companys Board of Directors has established a standing Audit
Committee that consists of four outside directors. The current members of the
Audit Committee are Mr. Agron (Chair), Mr. Cowan, Mr. May and Mr. Norton. The
Board of Directors has determined that each of these directors is independent
as defined by the applicable rules of the Nasdaq Stock Exchange and the
Securities and Exchange Commission. The Board of Directors has also determined
that each of these directors is financially literate as such term is defined by
the applicable rules of the Nasdaq Stock Exchange and that Mr. Agron further
qualifies as an audit committee financial expert as such term is defined in
the applicable rules of the Securities and Exchange Commission. Code of Ethics Our Board of Directors has adopted a Code of Ethics that applies to the
Companys Chief Executive Officer, Chief Financial Officer, Principal
Accounting Officer, Chief Operating Officer, Chief Administrative
Officer, Treasurer, Controller and other officers and directors of
the Company (Senior
Management). We have
filed a copy of our Code of Ethics as an exhibit to this document and have also
posted the Code of Ethics on our website at http://meadowvalley.com investor
relations. We intend to disclose any amendment to or waiver from the Code of
Ethics applicable to any Senior manager on a Form 8-K or on our
website at http://meadowvalley.com. 
 Item 11.Executive Compensation Information on executive compensation will be included under the caption
Compensation of Executive Officers of the Companys definitive Proxy
Statement relating to the Annual Meeting of Shareholders for the year ended
December 31, 2003, which is hereby incorporated by reference. 
 Item 12.Security Ownership of Certain Beneficial Owners and Management Information on equity compensation plans and beneficial ownership of the
Companys voting securities by each director and all officers and directors as
a group, and by any person known to beneficially own more than 5% of any class
of voting security of the Company will be included under the caption
Beneficial Ownership of the Companys Securities of the Companys definitive
Proxy Statement relating to the Annual Meeting of the Shareholders for the year
ended December 31, 2003, which is hereby incorporated by reference. 
 Item 13.Certain Relationships and Related Transactions Information on certain relationships and related transactions including
information with respect to management indebtedness will be included under the
caption Certain Relationships and Related Transactions and Information
Regarding Indebtedness of Management to the Company of the Companys
definitive Proxy Statement relating to the Annual Meeting of Shareholders for
the year ended December 31, 2003, which is hereby incorporated by reference. 
 Item 14.Principal Accounting Fees and Services Information concerning principal accounting fees and services will be
included under the caption Independent Accountants: Audit and Fees of the
Companys definitive Proxy Statement relating to the Annual Meeting of
Shareholders for the year ended December 31, 2003, which is incorporated by
reference  MVCO
    2003 Form 10-K 48




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##### Table of Contents



PART IV 
 Item 15.Exhibits, Financial Statement Schedules and Reports on Form 8-K  (a)(1) Financial Statements  See Item 8 of Part II hereof.  (a)(2) Financial Statement Schedules  The schedules specified under Regulation S-X are either not applicable or
immaterial to the Companys consolidated financial statements for the years ended December 31, 2003, 2002 and 2001.  (b)
    
    Reports on Form 8-K  The Company filed two Form 8-Ks and one Form 8-K/A during the fourth
quarter ended December 31, 2003. The October 27, 2003 Form 8-K
announcing the change in Certifying Accountant. The November 7, 2003
Form 8-K/A amended the announcement of the change in Certifying
Accountant The November 14, 2003 Form 8-K provided the press release
announcing our financial results for the fiscal quarter ended
September 30, 2003.  (c)
    
    Exhibits ExhibitNo.
    
    Title3.01
    
    Articles of Incorporation and Amendments thereto of the Registrant (1)3.02
    
    Bylaws of the Registrant (1)3.03
    
    Bylaws of the Registrant Effective October 20, 1995 (1)3.04
    
    Bylaws of the Registrant Effective April 28, 1997 (13)5.01
    
    Opinion of Gary A. Agron, regarding legality of the Common Stock (includes Consent) (1)5.02
    
    Opinion of Gary A. Agron, regarding legality of the Units, Common Stock and Warrants (1)10.01
    
    Incentive Stock Option Plan (1)10.27
    
    Stock Purchase Agreement (1)10.28
    
    Form of Lockup Letter (1)10.44
    
    Promissory Note executed by Nevada State Bank (2)10.45
    
    Escrow Settlement Documents and related Promissory Note (2)10.46
    
    Conveyor Sales Contract and Security Agreement (2)10.48
    
    Second and Third Amendments to Office Lease of Registrant (2)10.49
    
    Lease Agreement with US Bancorp (2)10.50
    
    Lease Agreement with CIT Group (2)10.56
    
    Escrow Settlement Documents (3)10.59
    
    Promissory Note executed by General Electric Capital Corporation (3)10.60
    
    Promissory Note executed by General Electric Capital Corporation (3)10.61
    
    Promissory Note executed by Nevada State Bank (3)10.67
    
    Contract between Registrant and New Mexico State Highway and Transportation Department (3)10.71
    
    Contract between Registrant and Nevada Department of Transportation (3)10.77
    
    Lease Agreement with Banc One Leasing Corp. (4)10.78
    
    Lease Agreement with Banc One Leasing Corp. (4)10.79
    
    Lease Agreement with Banc One Leasing Corp. (4)10.80
    
    Lease Agreement with US Bancorp (4)10.81
    
    Security Agreement with Associates Commercial Corporation (4)10.83
    
    Contract between Registrant and Clark County, Nevada (4)10.84
    
    Contract between Registrant and Arizona Department of Transportation (4)10.85
    
    Contract between Registrant and New Mexico State Highway and Transportation Department (4)10.86
    
    Contract between Registrant and New Mexico State Highway and Transportation Department (4)10.87
    
    Contract between Registrant and New Mexico State Highway and Transportation Department (4)10.88
    
    Joint Venture Agreement between Registrant and R.E. Monks Construction Co. (4)
  MVCO
    2003 Form 10-K 49




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##### Table of Contents



ExhibitNo.
    
    Title10.89
    
    Contract between Meadow Valley Contractors, Inc./R.E. Monks Construction Co. (JV) and the
Arizona Department of Transportation (4)10.90
    
    Contract between the Registrant and Utah Department of Transportation (4)10.91
    
    Contract between the Registrant and Clark County, Nevada (4)10.92
    
    General Agreement of Indemnity between the Registrant and Liberty Mutual Insurance Company (4)10.94
    
    Lease Agreement between the Registrant and Ken Nosker (4)10.95
    
    Promissory Note executed by General Electric Capital Corporation (5)10.96
    
    Promissory Note executed by General Electric Capital Corporation (5)10.99
    
    Transfer and Assumption Agreement executed by Associates Leasing, Inc. (5)10.100
    
    Lease Agreement with Banc One Leasing Corp. (5)10.102
    
    Lease Agreement with Trinity Capital Corporation (5)10.103
    
    Lease Agreement with Banc One Leasing Corp. (5)10.107
    
    Promissory Note executed by General
Electric Capital Corporation (5)10.109
    
    Lease Agreement with Banc One Leasing Corp. (5)10.110
    
    Master Lease Agreement with Banc One Leasing Corp. (5)10.113
    
    Contract between Registrant and Utah Department of Transportation (5)10.115
    
    Contract between Registrant and Johnson and Danley Construction Co., Inc. (5)10.116
    
    Master Lease Agreement with The CIT Group/Equipment Financing, Inc. (6)10.117
    
    Lease Agreement with The CIT Group/Equipment Financing, Inc. (6)10.118
    
    Lease Agreement with The CIT Group/Equipment Financing, Inc. (6)10.119
    
    Lease Agreement with The CIT Group/Equipment Financing, Inc. (6)10.120
    
    Master Lease Agreement with The CIT Group/Equipment Financing, Inc. (6)10.121
    
    Lease Agreement with The CIT Group/Equipment Financing, Inc. (6)10.122
    
    Master Security Agreement with The CIT Group/Equipment Financing, Inc. (6)10.123
    
    Security Agreement with The CIT Group/Equipment Financing, Inc. (6)10.124
    
    Security Agreement with The CIT Group/Equipment Financing, Inc. (6)10.125
    
    Security Agreement with The CIT Group/Equipment Financing, Inc. (6)10.126
    
    Security Agreement with The CIT Group/Equipment Financing, Inc. (6)10.127
    
    Security Agreement with The CIT Group/Equipment Financing, Inc. (6)10.128
    
    Master Security Agreement with The CIT Group/Equipment Financing, Inc. (6)10.129
    
    Security Agreement with The CIT Group/Equipment Financing, Inc. (6)10.130
    
    Office lease of the Registrant (6)10.131
    
    Transfer and Assumption Agreement with Caterpillar Financial Services Corporation (6)10.132
    
    Installment Sale Contract with Caterpillar Financial Services Corporation (6)10.133
    
    Property Lease and Aggregate Supply Agreement with Sun State Rock & Materials Corp. (6)10.134
    
    Property Lease and Aggregate Supply Agreement with Clay R. Oliver d.b.a. Oliver
Mining Company (6)10.135
    
    Security Agreement with John Deere Construction Equipment Company (6)10.136
    
    Master Lease Agreement with The CIT Group/Equipment Financing, Inc. (6)10.137
    
    Lease Agreement with The CIT Group/Equipment Financing, Inc. (6)10.138
    
    Lease Agreement with The CIT Group/Equipment Financing, Inc. (6)10.139
    
    Security Agreement with Associates Leasing, Inc. (6)10.140
    
    Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc. (6)10.141
    
    Lease Agreement with Banc One Leasing Corporation (6)
  MVCO
    2003 Form 10-K 50




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##### Table of Contents



ExhibitNo.
    
    Title10.142
    
    Office lease of the Registrant (6)10.143
    
    Security Agreement with John Deere Construction Equipment Company (6)10.144
    
    Contract between Registrant and Nevada Department of Transportation (6)10.145
    
    Contract between Registrant and Arizona Department of Transportation (6)10.146
    
    Joint Venture Agreement between Registrant and R.E. Monks Construction Co., LLC (6)10.147
    
    Contract between Registrant and Nevada Department of Transportation (6)10.148
    
    Installment Sale Contract with Caterpillar Financial Services Corporation (7)10.149
    
    Lease Agreement with Associates Leasing, Inc. (8)10.150
    
    Lease Agreement with M&I First National Leasing Corp. (8)10.151
    
    Lease Agreement with Trinity Capital Corporation (8)10.152
    
    Security Agreement with FCC Equipment Financing, Inc. (9)10.153
    
    Lease Agreement with CitiCapital (9)10.154
    
    Amended and Restated Revolving Loan Agreement with The CIT Group/Equipment
Financing, Inc. (9)10.155
    
    Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc. (9)10.156
    
    Lease Agreement with Thomas Mining, LLC (9)10.157
    
    Employment Agreement with Mr. Kiesel (9)10.158
    
    Security Agreement with Volvo Commercial Finance LLC The Americas (9)10.159
    
    Letter of Intent with RMI Enterprises, LLC (12)10.160
    
    Lease Agreement with The CIT Group/Equipment Financing, Inc. (13)10.161
    
    Lease Agreement with Associates Leasing, Inc. (13)10.162
    
    Office Lease Agreement (13)10.163
    
    Lease Agreement with Caterpillar Financial Services Corporation (13)10.164
    
    Security Agreement with John Deere Construction Equipment & Forestry Company (13)10.165
    
    Lease Extension with U.S. Bancorp Leasing & Financial (13)10.166
    
    Security Agreement with The CIT Group/Equipment Financing, Inc. (13)10.167
    
    Security Agreement with The CIT Group/Equipment Financing, Inc. (13)10.168
    
    Amendment No. 1 to Restated and Amended Revolving Loan Agreement with The
CIT Group/Equipment Financing, Inc. (13)10.169
    
    Security Agreement with The CIT Group/Equipment Financing, Inc. (13)10.170
    
    Indemnification Agreement with Robert R. Morris (13)10.171
    
    Indemnification Agreement with Nicole R. Smith (13)10.172
    
    Indemnification Agreement with Alan A. Terril (13)10.173
    
    Indemnification Agreement with Bradley E. Larson (13)10.174
    
    Indemnification Agreement with Kenneth D. Nelson (13)10.175
    
    Installment Sale Contract with Caterpillar Financial Services Corporation (13)10.176
    
    Contract between Registrant and Clark County, Nevada (13)10.177
    
    Contract between Registrant and U.S. Army Corp of Engineers (13)10.178
    
    Contract between Registrant and Utah Department of Transportation (13)10.179
    
    Contract between Registrant and Clark County, Nevada (13)10.180
    
    Contract between Registrant and Utah Department of Transportation (13)10.181
    
    Contract between Registrant and Clark County, Nevada (13)10.182
    
    Lease Extension with The CIT Group/Equipment Financing, Inc. (13)10.183
    
    Asset Purchase Agreement between United Metro Materials Inc. and the Registrant (13)10.184
    
    Engagement Letter with AMG Financing Capital, Inc. (13)
  MVCO
    2003 Form 10-K 51




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##### Table of Contents



ExhibitNo.
    
    Title10.185
    
    Amendment No. 2 to Restated and Amended Revolving Loan Agreement with The
CIT Group/Equipment Financing, Inc. (13)10.186
    
    Notice of Termination of Non-Binding Letter of Intent with RMI Enterprises, LLC (13)10.187
    
    Security Agreement with Key Equipment Finance, a Division of Key Corporate Capital Inc. (14)10.188
    
    Amendment No. 1 to Security Agreement with Key Equipment Finance, a Division of Key
Corporate Capital Inc. (15)10.189
    
    Employment Agreement with Robert DeRuiter (15)10.190
    
    Addendum to Employment Contracts for Brad Larson, Ken Nelson, Ron Lewis and Alan
Terril (15)10.191
    
    General Agreement of Indemnity between the Registrant and Liberty Mutual Insurance
Company (15)10.192
    
    Security Agreement with The CIT Group/Equipment Financing, Inc. (15)10.193
    
    Office Lease Agreement (16)10.194
    
    Lease Agreement with The CIT Group/Equipment Financing, Inc. (16)10.195
    
    Security Agreement with Astec Financial Services, Inc. (16)10.196
    
    Security Agreement with Cananwill, Inc. (16)10.197
    
    Security Agreement with Astec Financial Services, Inc. (16)10.198
    
    Security Agreement with Caterpillar Financial Services Corporation (16)10.199
    
    Security Agreement with Deere Credit, Inc. (16)10.200
    
    Promissory Note executed by Nevada State Bank (16)10.201
    
    Employment Agreement with Nicole R. Smith (16)10.202
    
    Employment Agreement with Robert Morris (16)10.203
    
    Employment Agreement with Robert Bottcher (16)10.204
    
    Employment Agreement with Robert Terril (16)10.205
    
    Employment Agreement with Sam Grasmick (16)10.206
    
    Purchase Agreement with Nevada Title Company (16)10.207
    
    Security Agreement with The CIT Group/Equipment Financing, Inc. (16)10.208
    
    Contract between Registrant and Arizona Department of Transportation (17)10.209
    
    Contract between Registrant and City of Phoenix (17)10.210
    
    Contract between Registrant and Arizona Department of Transportation (17)10.211
    
    Contract between Registrant and Federal Highway Administration (17)10.212
    
    Contract between Registrant and Arizona Department of Transportation (17)10.213
    
    Contract between Registrant and Utah Department of Transportation (17)10.214
    
    Contract between Registrant and Arizona Department of Transportation (17)10.215
    
    Agreement with Fisher Sand and Gravel Co. to act as the Companys
co-indemnitor (17)10.216
    
    Contract between Registrant and City of North Las Vegas (17)10.217
    
    Renewal and Amendment of Amended and Restated Revolving Loan
Agreement with The CIT Group/Equipment Financing, Inc. (17)10.218
    
    Renewal and Amendment of Revolving Loan Agreement
with The CIT Group/Equipment Financing, Inc. (17)10.219
    
    Lease Agreement with Oshkosh/McNeilus (17)10.220
    
    Security Agreement with Wagner Equipment Co. (17)10.221
    
    Security Agreement with Wagner Equipment Co. (17)10.222
    
    Sales Agreement with Conde Del Mar Properties, L.L.C. (17)
  MVCO
    2003 Form 10-K 52




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##### Table of Contents



ExhibitNo.
    
    Title10.223
    
    Notice of Assignment of Security Agreement from Astec Financial
Services to The CIT Group/Equipment Financing, Inc. (17)10.224
    
    Notice of Assignment of Security Agreement from Astec Financial
Services to The CIT Group/Equipment Financing, Inc. (17)10.225
    
    Notice of Assignment of Lease Agreement from The CIT Group/Equipment
Financing, Inc. to General Electric Capital Corporation (17)10.226
    
    Notice of Assignment of Lease Agreement from The CIT Group/Equipment
Financing, Inc. to General Electric Capital Corporation (17)10.227
    
    Employment Agreement with Bradley E. Larson (17)10.228
    
    Employment Agreement with Kenneth D. Nelson (17)10.229
    
    Employment Agreement with Alan A. Terril (17)10.230
    
    Indemnification Agreement with Clint Tryon (17)10.231
    
    Amendment of Amended and Restated Revolving Loan Agreement with The CIT
Group/Equipment Financing, Inc. (18)10.232
    
    Amendment of Revolving Loan Agreement with The CIT Group/Equipment Financing, Inc. (18)10.233
    
    Indemnification Agreement with Clint Tryon (18)10.234
    
    Master Lease Agreement with The CIT Group/Equipment Financing, Inc. (18)10.235
    
    Lease Agreement with The CIT Group/Equipment Financing, Inc. (18)10.236
    
    Lease Agreement with The CIT Group/Equipment Financing, Inc. (18)10.237
    
    Lease Agreement with Caterpillar Financial Services Corporation (18)10.238
    
    Lease Agreement with Caterpillar Financial Services Corporation (18)10.239
    
    Amendment to Office Lease Agreement of the Registrant (19)10.240
    
    Amendment to Office Lease Agreement of the Registrant (19)10.241
    
    Security Agreement with The CIT Group/Equipment Financing, Inc. (19)10.242
    
    Line of Credit Agreement with GMAC Financial Services (20)10.243
    
    Security Agreement with Cananwill, Inc. (20)10.244
    
    Lease Agreement with The CIT Group/Equipment Financing, Inc. (20)10.245
    
    Line of Credit Agreement with Ford Motor Credit Company (20)10.246
    
    Amendment to Office Lease Agreement of the Registrant (20)10.247
    
    Security Agreement with John Deere Construction & Forestry Company10.248
    
    Contract between Registrant and Arizona Department of Transportation10.249
    
    Contract between Registrant and Arizona Department of Transportation10.250
    
    Contract between Registrant and City of Las Vegas10.251
    
    Contract between Registrant and City of North Las Vegas10.252
    
    Contract between Registrant and Arizona Department of Transportation10.253
    
    Subcontract agreement between Registrant and Wiser Construction LLC10.254
    
    Contract between Registrant and Arizona Department of Transportation10.255
    
    Amendment to Office Lease Agreement of the Registrant10.256
    
    Settlement Agreement and Release between the Registrant and New Mexico Department of
Transportation14.01
    
    Code of Ethics for Senior Management16.01
    
    Letter re: Change in Certifying Accountant (1)16.02
    
    Letter re: Change in Certifying Accountant (23)16.03
    
    Letter re: Change in Certifying Accountant (24)21.01
    
    Subsidiaries of the Registrant (1)
  MVCO
    2003 Form 10-K 53




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##### Table of Contents



ExhibitNo.
    
    Title23.01
    
    Consent of Semple & Cooper (Meadow Valley Contractors, Inc.) (1)23.02
    
    Consent of Semple & Cooper (Meadow Valley Corporation) (1)23.03
    
    Consent of Gary A. Agron, Esq. (See 5.01, above) (1)23.04
    
    Consent of Semple & Cooper (Meadow Valley Contractors, Inc.) (1)23.05
    
    Consent of BDO Seidman, LLP (Meadow Valley Corporation) (1)23.06
    
    Consent of Semple & Cooper (Meadow Valley Contractors, Inc.) (1)23.07
    
    Consent of BDO Seidman, LLP (Meadow Valley Corporation) (1)23.08
    
    Consent of Semple & Cooper (Meadow Valley Contractors, Inc.) (1)23.09
    
    Consent of BDO Seidman, LLP (Meadow Valley Corporation and Meadow Valley
Contractors, Inc.) (1)23.10
    
    Consent of Semple & Cooper (Meadow Valley Contractors, Inc.) (1)23.11
    
    Consent of BDO Seidman, LLP (Meadow Valley Corporation and Meadow Valley
Contractors, Inc.) (1)23.12
    
    Consent of Semple & Cooper (Meadow Valley Contractors, Inc.) (1)23.13
    
    Consent of BDO Seidman, LLP (Meadow Valley Corporation and Meadow Valley
Contractors, Inc.) (1)23.14
    
    Consent of Semple & Cooper (Meadow Valley Contractors, Inc.) (1)23.15
    
    Consent of BDO Seidman, LLP (Meadow Valley Corporation and Meadow Valley
Contractors, Inc.) (1)31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act
of 2002. (19)31.2
    
    Certification of Principal Accounting Officer pursuant to Section 302 of the
Sarbanes-Oxley
Act of 2002. (19)31.3
    
    Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act
of 2002. (20)31.4
    
    Certification of Principal Accounting Officer pursuant to Section 302 of the
Sarbanes-Oxley
Act of 2002. (20)31.5
    
    Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act
of 2002.31.6
    
    Certification of Principal Accounting Officer pursuant to Section 302 of the
Sarbanes-Oxley
Act of 2002.32.1
    
    Certifications of Chief Executive Officer and Principal Accounting Officer pursuant
to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (19)32.2
    
    Certifications of Chief Executive Officer and Principal Accounting Officer pursuant
to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (20)32.3
    
    Certifications of Chief Executive Officer and Principal Accounting Officer pursuant
to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.99.1
    
    Civil complaint by Silver State Materials Corp., et. al. vs. Meadow Valley
Corporation, et. al. (10)99.2
    
    Exhibits to civil complaint by Silver State Materials Corp., et. al. vs. Meadow Valley
Corporation, et. al. (11)99.3
    
    Press release by Meadow Valley Corporation to sell its Ready Mix Subsidiary (12)99.4
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Bradley
E. Larson (15)99.5
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Nicole R.
Smith (15)99.6
    
    Nasdaq Listing Qualifications warning (15)99.7
    
    Nasdaq Listing Qualifications compliance (16)
  MVCO
    2003 Form 10-K 54




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##### Table of Contents



ExhibitNo.
    
    Title99.8
    
    Nasdaq Listing Qualifications warning (16)99.9
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Bradley E. Larson (16)99.10
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Clint Tryon (16)99.11
    
    Nasdaq Listing Qualifications warning (16)99.12
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Bradley E. Larson (17)99.13
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Clint Tryon (17)99.14
    
    Nasdaq Listing Qualifications compliance (17)99.15
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Bradley E. Larson (18)99.16
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Clint Tryon (18)99.17
    
    Press release dated May 15, 2003 (21)99.18
    
    Press release dated August 13, 2003 (22)99.19
    
    Press release dated November 14, 2003 (25)99.20
    
    Press release dated February 27, 2004 (26)(1)
    
    Incorporation by reference to the Companys Registration Statement on Form S-1, File Number
33-87750 declared effective on October 16, 1995(2)
    
    Incorporated by reference to the Companys December 31, 1996 Annual Report on Form 10-K(3)
    
    Incorporated by reference to the Companys December 31, 1997 Annual Report on Form 10-K(4)
    
    Incorporated by reference to the Companys December 31, 1998 Annual Report on Form 10-K(5)
    
    Incorporated by reference to the Companys December 31, 1999 Annual Report on Form 10-K(6)
    
    Incorporated by reference to the Companys December 31, 2000 Annual Report on Form 10-K(7)
    
    Incorporated by reference to the Companys March 31, 2001 Form 10-Q(8)
    
    Incorporated by reference to the Companys June 30, 2001 Form 10-Q(9)
    
    Incorporated by reference to the Companys September 30, 2001 Form 10-Q(10)
    
    Incorporated by reference to the Companys November 20, 2001 Form 8-K(11)
    
    Incorporated by reference to the Companys November 20, 2001 Form 8-K/A(12)
    
    Incorporated by reference to the Companys February 14, 2002 Form 8-K(13)

    
    Incorporated by reference to the Companys December 31, 2001 Annual Report on Form 10-K(14)
    
    Incorporated by reference to the Companys March 31, 2002 Form 10-Q(15)
    
    Incorporated by reference to the Companys June 30, 2002 Form 10-Q(16)
    
    Incorporated by reference to the Companys September 30, 2002 Form 10-Q(17)
    
    Incorporated by reference to the Companys December 31, 2002 Annual Report on Form 10-K(18)
    
    Incorporated by reference to the Companys March 31, 2003 Form 10-Q(19)
    
    Incorporated by reference to the Companys June 30, 2003 Form 10-Q(20)
    
    Incorporated by reference to the Companys September 30, 2003 Form 10-Q(21)
    
    Incorporated by reference to the Companys May 16, 2003 Form 8-K(22)
    
    Incorporated by reference to the Companys August 14, 2003 Form 8-K(23)
    
    Incorporated by reference to the Companys October 27, 2003 Form 8-K(24)
    
    Incorporated by reference to the Companys November 7, 2003 Form 8-K/A(25)
    
    Incorporated by reference to the Companys November 14, 2003 Form 8-K(26)
    
    Incorporated by reference to the Companys March 1, 2004 Form 8-K
  MVCO
    2003 Form 10-K 55




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##### 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. MEADOW VALLEY CORPORATION/s/
Bradley E. LarsonBradley E. LarsonPresident and Chief Executive OfficerDate: March 30, 2004
 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 and on the dates indicated. /s/ Bradley E. Larson
    
    /s/ Earle C. MayBradley E. Larson
    
    Earle C. MayDirector, President and Chief Executive Officer
    
    DirectorDate: March 30, 2004
    
    Date: March 30, 2004/s/ Kenneth D. Nelson
    
    /s/ Alan A. TerrilKenneth D. Nelson
    
    Alan A. TerrilDirector, Chief Administrative Officer and
    
    Director, Vice President and Chief Operating OfficerVice President
    
    Date: March 30, 2004Date: March 30, 2004/s/ Charles E. Cowan
    
    /s/ Gary A. AgronCharles E. Cowan
    
    Gary A. AgronDirector
    
    DirectorDate: March 30, 2004
    
    Date: March 30, 2004/s/ Charles R. Norton
    
    /s/ Clint TryonCharles R. Norton
    
    Clint TryonDirector
    
    Treasurer, Secretary and Principal Accounting OfficerDate: March 30, 2004
    
    Date: March 30, 2004
  MVCO
    2003 Form 10-K 56