Goldfield Corp Reports Operating Results (10-Q)
The Goldfield Corporation is a leading provider of electrical construction and maintenance services in the energy infrastructure industry in the southeastern United States. The company specializes in installing and maintaining electrical transmission lines for a wide range of electric utilities. Goldfield is also involved in the development of high-end condominium projects on Florida's east coast. Goldfield Corp has a market cap of $10.7 million; its shares were traded at around $0.42 with and P/S ratio of 0.3. Goldfield Corp had an annual average earning growth of 1.5% over the past 10 years. Highlight of Business Operations: Electrical construction revenue increased $2.7 million, or 14.6%, to $21.6 million for the nine months ended September 30, 2009 from $18.8 million for the nine months ended September 30, 2008. This increase was primarily due to an increase in storm restoration work in Missouri as a result of damage due to ice storms.
The varying magnitude and duration of electrical construction projects may result in substantial fluctuations in our backlog from time to time. Backlog represents the uncompleted portion of services to be performed under project-specific contracts and the estimated value of future services that we expect to provide under our existing service agreements, including new contractual agreements on which work has not begun. In many instances, our customers are not contractually committed to specific volumes of services and many of our contracts may be terminated with notice, therefore we do not consider any portion of our backlog to be firm. However, our customers become obligated once we provide the services they have requested. Our service agreements are typically multi-year agreements, and we include in our backlog the amount of services projected to be performed over the terms of the contracts based on our historical relationships with these customers. Our estimates of a customers requirements during a particular future period may not be accurate at any point in time. As of September 30, 2009, the electrical construction operations backlog was approximately $11.5 million, which included approximately $4.8 million from fixed price contracts for which revenue is recognized using percentage-of-completion and approximately $6.7 million from service agreement contracts for which revenue is recognized as work is performed. Of our total backlog, we expect approximately 50% to be completed within the current fiscal year. This compares to a backlog of $18.6 million at September 30, 2008, of which approximately $4.9 million represented backlog from fixed price contracts and approximately $13.7 million represented service agreement backlog. The decrease in backlog is mainly due to the completion of one years work of a three year service agreement contract.
Total operating loss was $1.2 million for the nine months ended September 30, 2009, compared to an operating loss of $2.7 million for the like period in 2008. Electrical construction operations had operating income of $721,000 during the nine months ended September 30, 2009, compared to an operating loss of $236,000 during the nine months ended September 30, 2008, an increase of $1.0 million. Operating margins on electrical construction operations increased to 3.3% for the nine months ended September 30, 2009, from (1.3)% for the nine months ended September 30, 2008. The increase in operating margins for the nine month period ended September 30, 2009 was primarily due to storm work and the result of improved productivity on several jobs in the current period compared to the prior year period, as well as the increase in revenue, which covers a higher percentage of fixed overhead costs.
Real estate development operations had operating income of $13,000 in the nine months ended September 30, 2009, compared to an operating loss of $499,000 in the nine months ended September 30, 2008, an increase of $513,000. The increase in operating income for the nine month period ended September 30, 2009 was mainly due to the lower comparative costs of goods sold as a result of the previously reported write-down of $3.1 million in the fourth quarter of 2008 on the then existing Pineapple House inventory.
Electrical construction cost of goods sold increased to $18.6 million in the nine months ended September 30, 2009, from $16.5 million in the nine months ended September 30, 2008, an increase of $2.1 million. The increase in cost reflects the increase in our storm work activity and corresponds to our increase in revenue in the current period.
In September 2003, we were notified by the EPA that we are a PRP with respect to possible investigation and removal activities at a mine we previously owned and in September 2009 we entered into a Settlement Agreement with the EPA with respect thereto, pursuant to which we made a cash payment to the EPA of $73,000, as described in note 4 to the consolidated financial statements contained herein. During the nine months ended September 30, 2009, we recorded a decrease of $400 to the provision for remediation, reflecting a decrease in anticipated expenses associated with the EPA matter, partially offset by a reduction in estimated insurance reimbursements, as described in note 4 to the consolidated financial statements. In addition, during the nine months ended September 30, 2008, a net increase of $149,000 was recorded to the provision for remediation, mainly due to a decrease in the expected reimbursable amount from the Companys former general liability insurance carriers.
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