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Mar 4, 2020

MYR Group Inc. Announces Fourth-Quarter and Full-Year 2019 Results

ROLLING MEADOWS, Ill., March 04, 2020 (GLOBE NEWSWIRE) -- MYR Group Inc. (“MYR”) (NASDAQ: MYRG), a holding company of leading specialty contractors serving the electric utility infrastructure, commercial and industrial construction markets in the United States and western Canada, today announced its fourth-quarter and full-year 2019 financial results.

Highlights for Fourth Quarter 2019

  • Fourth quarter revenues of $571.1 million
  • Fourth quarter net income attributable to MYR Group Inc. of $12.8 million, or $0.76 per diluted share
  • Record backlog of $1.5 billion

Management Comments
Rick Swartz, MYR's President and CEO said, “We finished 2019 with strong financial results in the fourth quarter, and full year revenues of $2.07 billion, setting a record high for the fifth consecutive year. Our backlog of $1.5 billion at the end of 2019, a new record high, demonstrates that efforts to expand our service offerings across a wider footprint and continually improve customer value are translating to diverse opportunities in the United States and western Canada. We anticipate continued market strength and growth opportunities for both our Transmission & Distribution and Commercial & Industrial segments as we further enhance our leadership position in the electrical construction industry.”

Fourth-Quarter Results
MYR reported fourth-quarter 2019 revenues of $571.1 million, an increase of $124.8 million, or 27.9 percent, compared to the fourth quarter of 2018. Specifically, our Transmission and Distribution (“T&D”) segment reported record quarterly revenues of $311.0 million, an increase of $53.7 million, or 20.9 percent, from the fourth quarter of 2018, primarily due to an increase in revenue on small- to medium-sized transmission projects. Our Commercial and Industrial (“C&I”) segment reported fourth-quarter 2019 revenues of $260.1 million, an increase of $71.0 million, or 37.5 percent, from the fourth quarter of 2018, primarily due to incremental revenues from the acquisition of CSI Electrical Contractors, Inc (“CSI”).

Consolidated gross profit increased to $68.9 million in the fourth quarter of 2019, compared to $47.4 million in the fourth quarter of 2018. Gross margin increased to 12.1 percent for the fourth quarter of 2019 from 10.6 percent for the fourth quarter of 2018. The increase in gross margin was primarily due to better than anticipated productivity and a favorable claim settlement. The increase in gross margin was partially offset by inclement weather and labor inefficiencies for which we are in ongoing negotiations to receive reimbursement. Changes in estimates of gross profit on certain projects, resulted in gross margin decreases of 0.5 percent and 1.7 percent for the fourth quarters of 2019 and 2018, respectively.

Selling, general and administrative expenses (“SG&A”) increased to $48.1 million in the fourth quarter of 2019, compared to $30.1 million in the fourth quarter of 2018. The period-over-period increase was primarily due to the acquisition of CSI, along with higher incentive compensation and other employee-related expenses to support the growth in our operations. As a percentage of revenues, SG&A increased to 8.4 percent for the fourth quarter of 2019 from 6.7 percent for the fourth quarter of 2018.

Income tax expense was $5.5 million for the fourth quarter of 2019, with an effective tax rate of 29.9 percent, compared to an income tax expense of $3.8 million in the fourth quarter of 2018, which represented 26.1 percent of pretax income. The increase in the effective tax rate for the fourth quarter of 2019 compared to the fourth quarter of 2018 was primarily due to the impact of foreign earnings and the associated impact of the global intangible low tax income (“GILTI)”.

For the fourth quarter of 2019, net income attributable to MYR Group Inc. was $12.8 million, or $0.76 per diluted share attributable to MYR Group Inc., compared to $10.7 million, or $0.64, for the same period of 2018. Fourth-quarter 2019 EBITDA, a non-GAAP financial measure, was $31.4 million, or 5.5 percent of revenues, compared to $26.6 million, or 6.0 percent of revenues, in the fourth quarter of 2018.

Full Year
MYR reported record revenues of $2.071 billion for the full year of 2019, an increase of $540.0 million, or 35.3 percent, compared to $1.531 billion for the full year of 2018. Specifically, the T&D segment reported revenues of $1.134 billion, an increase of $241.3 million, or 27.0 percent, from the full year of 2018, primarily due to an increase in revenue on small- to medium-sized transmission and distribution projects. The C&I segment reported full year of 2019 revenues of $936.7 million, an increase of $298.6 million, or 46.8 percent, from the full year of 2018, primarily due to increases in volume across all project sizes and incremental revenues from the acquisitions of CSI, and the Huen Companies in the second half of 2019 and 2018, respectively.

Consolidated gross profit was $214.2 million in the full year of 2019, compared to $167.1 million in the full year of 2018. The increase in gross profit was due to higher revenues, partially offset by lower margins. Gross margin decreased to 10.3 percent for the full year of 2019 from 10.9 percent for the full year of 2018. The decrease in gross margin was primarily due to inclement weather on certain projects and material delays associated with a substantially completed joint venture project in which we own the majority controlling interest, which were partially offset by net loss attributable to noncontrolling interest. The joint venture project, along with other acquired projects, are subject to margin guarantees for which an offset is recognized in other income. Gross margin was also negatively impacted by certain projects with changes in estimates relating to inclement weather conditions and labor inefficiencies for which we are in ongoing negotiations to receive reimbursement. These margin decreases were partially offset by better than anticipated productivity on certain projects, a favorable claim settlement and successful change order negotiations. Changes in estimates of gross margin on certain projects, including those discussed above, resulted in gross margin decreases of 0.8 percent and 0.7 percent for the full years of 2019 and 2018, respectively.

SG&A increased to $156.7 million for the full year of 2019, from $118.7 million for the full year of 2018. The year-over-year increase was primarily due to the acquisitions of CSI and the Huen Companies, along with higher incentive compensation and other employee-related expenses to support the growth in our operations. As a percentage of revenues, SG&A decreased to 7.6 percent for the full year of 2019 from 7.8 percent for the full year of 2018.

Income tax expense was $14.2 million for the full year of 2019, with an effective tax rate of 28.2 percent, compared to an expense of $11.8 million for the full year of 2018 with an effective tax rate of 27.3 percent. The increase in the tax rate for the year ended December 31, 2019 was primarily due to foreign earnings and the associated impact of GILTI.

For the full year of 2019, net income attributable to MYR Group Inc. was $37.7 million, or $2.26 per diluted share attributable to MYR Group Inc., compared to $31.1 million, or $1.87, for the same period of 2018. Full-year 2019 EBITDA, a non-GAAP financial measure, was $101.2 million, or 4.9 percent of revenues, compared to $86.6 million, or 5.7 percent of revenues, for the full year of 2018.

Backlog
As of December 31, 2019, MYR's backlog was $1.50 billion, compared to $1.37 billion as of September 30, 2019. As of December 31, 2019, T&D backlog was $469.9 million, and C&I backlog was $1.029 billion. Total backlog at December 31, 2019 increased $352.6 million, or 30.7 percent, from the $1.147 billion reported at December 31, 2018.

Balance Sheet
As of December 31, 2019, MYR had $260.6 million of borrowing availability under its credit facility.

Non-GAAP Financial Measures
To supplement MYR’s financial statements presented in accordance with generally accepted accounting principles in the United States (“GAAP”), MYR uses certain non-GAAP measures. Reconciliation to the nearest GAAP measures of all non-GAAP measures included in this press release can be found at the end of this release. MYR’s definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP.
MYR believes that these non-GAAP measures are useful because they (i) provide both management and investors meaningful supplemental information regarding financial performance by excluding certain expenses and benefits that may not be indicative of recurring core business operating results, (ii) permit investors to view MYR’s performance using the same tools that management uses to evaluate MYR’s past performance, reportable business segments and prospects for future performance, (iii) publicly disclose results that are relevant to financial covenants included in MYR’s credit facility and (iv) otherwise provide supplemental information that may be useful to investors in evaluating MYR.

Conference Call
MYR will host a conference call to discuss its fourth-quarter and full-year 2019 results on Thursday, March 5, 2020, at 9:00 a.m. Central time. To participate in the conference call via telephone, please dial (877) 561-2750 (domestic) or (763) 416-8565 (international) and enter conference ID 1989856, at least five minutes prior to the start of the event. A replay of the conference call will be available through Thursday, March 12, 2020, at 2:00 p.m. Eastern time, by dialing (855) 859-2056 or (404) 537-3406 and entering conference ID 1989856. MYR will also broadcast the conference call live via the internet. Interested parties may access the webcast through the Investor Relations section of MYR's website at www.myrgroup.com. Please access the website at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. The webcast will be available until Thursday, March 12, 2020, at 2:00 p.m. Eastern time.

About MYR
MYR is a holding company of leading specialty contractors serving the electric utility infrastructure, commercial and industrial construction markets throughout the United States and western Canada who have the experience and expertise to complete electrical installations of any type and size. Their comprehensive services on electric transmission and distribution networks and substation facilities include design, engineering, procurement, construction, upgrade, maintenance and repair services. Transmission and distribution customers include investor-owned utilities, cooperatives, private developers, government-funded utilities, independent power producers, independent transmission companies, industrial facility owners and other contractors. Commercial and industrial electrical contracting services are provided to general contractors, commercial and industrial facility owners, local governments and developers throughout the United States and western Canada. For more information, visit myrgroup.com.

Forward-Looking Statements
Various statements in this announcement, including those that express a belief, expectation, or intention, as well as those that are not statements of historical fact, are forward-looking statements. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenue, income, capital spending, segment improvements and investments. Forward-looking statements are generally accompanied by words such as “anticipate,” “believe,” “encouraged,” “estimate,” “expect,” “intend,” “likely,” “may,” “objective,” “outlook,” “plan,” “possible,” “potential,” “project,” “remain confident,” “should,” “unlikely,” or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this announcement speak only as of the date of this announcement; we disclaim any obligation to update these statements (unless required by securities laws), and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. No forward-looking statement can be guaranteed and actual results may differ materially from those projected. Forward-looking statements in this announcement should be evaluated together with the many uncertainties that affect MYR's business, particularly those mentioned in the risk factors and cautionary statements in Item 1A of MYR's Annual Report on Form 10-K, and in any risk factors or cautionary statements contained in MYR's subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

MYR Group Inc. Contact:
Betty R. Johnson, Chief Financial Officer, 847-290-1891, investorinfo@myrgroup.com

Investor Contact:
David Gutierrez, Dresner Corporate Services, 312-780-7204, dgutierrez@dresnerco.com

Financial tables follow…

MYR GROUP INC.
Consolidated Balance Sheets
As of December 31, 2019 and 2018 
         
    December 31,
(in thousands, except share and per share data)     2019       2018  
ASSETS        
Current assets        
Cash and cash equivalents   $ 12,397     $ 7,507  
Accounts receivable, net of allowances of $3,364 and $1,331, respectively     388,479       288,427  
Contract assets     217,109       160,281  
Current portion of receivable for insurance claims in excess of deductibles     6,415       10,572  
Refundable income taxes     1,973        
Other current assets     12,811       8,847  
Total current assets     639,184       475,634  
Property and equipment, net of accumulated depreciation of $272,865 and $253,495, respectively     185,344       161,892  
Operating lease right-of-use assets     22,958        
Goodwill     66,060       56,588  
Intangible assets, net of accumulated amortization of $10,880 and $7,031, respectively     54,940       33,266  
Receivable for insurance claims in excess of deductibles     30,976       17,173  
Investment in joint venture     4,722       1,324  
Other assets     3,687       2,878  
Total assets   $ 1,007,871     $ 748,755  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities        
Current portion of long-term debt   $ 8,737     $ 3,681  
Current portion of operating lease obligations     6,205        
Current portion of finance lease obligations     1,135       1,119  
Accounts payable     192,107       139,480  
Contract liabilities     105,486       58,534  
Current portion of accrued self-insurance     18,780       19,633  
Other current liabilities     64,364       61,358  
Total current liabilities     396,814       283,805  
Deferred income tax liabilities     20,945       17,398  
Long-term debt     157,087       86,111  
Accrued self-insurance     48,024       34,406  
Operating lease obligations, net of current maturities     16,884        
Finance lease obligations, net of current maturities     338       1,514  
Other liabilities     3,304       1,057  
Total liabilities     643,396       424,291  
Commitments and contingencies        
Stockholders’ equity        
Preferred stock—$0.01 par value per share; 4,000,000 authorized shares;        
none issued and outstanding at December 31, 2019 and December 31, 2018            
Common stock—$0.01 par value per share; 100,000,000 authorized shares;        
16,648,616 and 16,564,961 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively     166       165  
Additional paid-in capital     152,532       148,276  
Accumulated other comprehensive income (loss)     (446 )     (193 )
Retained earnings     212,219       174,736  
Total stockholders’ equity attributable to MYR Group Inc.     364,471       322,984  
Noncontrolling interest     4       1,480  
Total stockholders’ equity     364,475       324,464  
Total liabilities and stockholders’ equity   $ 1,007,871     $ 748,755  


MYR GROUP INC.
Consolidated Statements of Operations
Three Months and Twelve Months Ended December 31, 2019 and 2018
           
  Three months ended   For the year ended
  December 31,   December 31,
(in thousands, except per share data)   2019       2018       2019       2018  
                               
  (Unaudited)        
               
Contract revenues $ 571,075     $ 446,345     $ 2,071,159     $ 1,531,169  
Contract costs   502,153       398,954       1,857,001       1,364,109  
Gross profit   68,922       47,391       214,158       167,060  
Selling, general and administrative expenses   48,076       30,079       156,674       118,737  
Amortization of intangible assets   961       864       3,849       1,843  
Gain on sale of property and equipment   (995 )     (963 )     (3,543 )     (3,832 )
Income from operations   20,880       17,411       57,178       50,312  
Other income (expense):              
Interest income   4       11       4       24  
Interest expense   (1,727 )     (1,134 )     (6,225 )     (3,652 )
Other income, net   (921 )     (1,596 )     (515 )     (3,616 )
Income before provision for income taxes   18,236       14,692       50,442       43,068  
Income tax expense   5,461       3,834       14,228       11,774  
Net income   12,775       10,858       36,214       31,294  
Less: net income (loss) - noncontrolling interests         207       (1,476 )     207  
Net income attributable to MYR Group Inc. $ 12,775     $ 10,651     $ 37,690     $ 31,087  
Income per common share attributable to MYR Group Inc.:              
—Basic $ 0.77     $ 0.65     $ 2.27     $ 1.89  
—Diluted $ 0.76     $ 0.64     $ 2.26     $ 1.87  
Weighted average number of common shares and potential common shares outstanding:              
—Basic   16,619       16,496       16,587       16,441  
—Diluted   16,748       16,631       16,699       16,585  


MYR GROUP INC.
Consolidated Statements of Cash Flows
Twelve Months Ended December 31, 2019 and 2018
         
  For the year ended
December 31,
 
(in thousands of dollars)   2019       2018    
         
Cash flows from operating activities:        
Net income $ 36,214     $ 31,294    
Adjustments to reconcile net income to net cash flows provided by operating activities:    
Depreciation and amortization of property and equipment   40,667       38,070    
Amortization of intangible assets   3,849       1,843    
Stock-based compensation expense   4,403       3,165    
Deferred income taxes   3,602       3,649    
Gain on sale of property and equipment   (3,543 )     (3,832 )  
Other non-cash items   1,029       237    
Changes in operating assets and liabilities, net of acquisitions        
Accounts receivable, net   (39,710 )     (15,871 )  
Contract assets   (16,443 )     (28,141 )  
Receivable for insurance claims in excess of deductibles   (9,646 )     (9,229 )  
Other assets   (10,327 )     2,280    
Accounts payable   22,492       19,953    
Contract liabilities   28,163       22,551    
Accrued self-insurance   12,755       8,701    
Other liabilities   (8,606 )     10,119    
Net cash flows provided by operating activities   64,899       84,789    
Cash flows from investing activities:        
Proceeds from sale of property and equipment   4,051       4,583    
Cash paid for acquisitions, net of cash acquired   (79,720 )     (47,082 )  
Purchases of property and equipment   (57,828 )     (50,704 )  
Net cash flows used in investing activities   (133,497 )     (93,203 )  
Cash flows from financing activities:        
Net borrowings (repayments) under revolving lines of credit   45,514       (20,655 )  
Payment of principal obligations under equipment notes   (4,550 )        
Payment of principal obligations under finance leases   (1,201 )     (1,081 )  
Borrowings under equipment notes   35,068       31,486    
Proceeds from exercise of stock options   341       1,897    
    (1,122 )        
Repurchase of common shares   (778 )     (1,043 )  
Other financing activities   84       38    
Net cash flows provided by financing activities   73,356       10,642    
Effect of exchange rate changes on cash   132       (64 )  
Net increase in cash and cash equivalents   4,890       2,164    
Cash and cash equivalents:        
Beginning of period   7,507       5,343    
End of period $ 12,397     $ 7,507    


 MYR GROUP INC.
Unaudited Consolidated Selected Data, Net Income Per Share,
Unaudited Performance Measures and Reconciliation of Non-GAAP Measures
Three Months and Twelve Months Ended December 31, 2019 and 2018
               
  Three months ended   Twelve months ended
  December 31,   December 31,
(in thousands, except per share data and percentages)   2019       2018       2019       2018  
               
Summary Statement of Operations Data:              
Contract revenues $ 571,075     $ 446,345     $ 2,071,159     $ 1,531,169  
Gross profit $ 68,922     $ 47,391     $ 214,158     $ 167,060  
Income from operations $ 20,880     $ 17,411     $ 57,178     $ 50,312  
Income before provision for income taxes $ 18,236     $ 14,692     $ 50,442     $ 43,068  
Income tax expense $ 5,461     $ 3,834     $ 14,228     $ 11,774  
Net income attributable to MYR Group Inc. $ 12,775     $ 10,651     $ 37,690     $ 31,087  
Effective tax rate   29.9%       26.1%       28.2%       27.3%  
               
Per Share Data:              
Income per common share attributable to MYR Group Inc.:            
 - Basic  $ 0.77     $ 0.65     $ 2.27     $ 1.89  
 - Diluted $ 0.76     $ 0.64     $ 2.26     $ 1.87  
Weighted average number of common shares              
and potential common shares outstanding :
             
 - Basic    16,619       16,496       16,587       16,441  
 - Diluted   16,748       16,631       16,699       16,585  
               
  December 31,   December 31,   December 31,   December 31,
(in thousands)   2019       2018       2017       2016  
               
Summary Balance Sheet Data:              
Total assets $ 1,007,871     $ 748,755     $ 603,788     $ 573,495  
Total stockholders’ equity attributable to MYR Group Inc. $ 364,471     $ 322,984     $ 287,039     $ 263,174  
Goodwill and intangible assets $ 121,000     $ 89,854     $ 57,846     $ 58,347  
Total funded debt (1) $ 165,824     $ 89,792     $ 78,960     $ 59,070  
               
          Twelve months ended
          December 31,
            2019       2018  
Financial Performance Measures (2):              
Reconciliation of Non-GAAP measures:              
Net income attributable to MYR Group Inc.         $ 37,690     $ 31,087  
 Interest expense, net           6,221       3,628  
 Tax impact of interest           (1,754 )     (990 )
EBIT, net of taxes (3)         $ 42,157     $ 33,725  
               
See notes at the end of this earnings release.


MYR GROUP INC.
Unaudited Performance Measures and Reconciliation of Non-GAAP Measures
Three Months and Twelve Months Ended December 31, 2019 and 2018
               
  Three months ended   Twelve months ended
  December 31,   December 31,
(in thousands, except per share data, ratios and percentages)   2019       2018       2019       2018  
               
Financial Performance Measures (2):              
               
EBITDA (4) $ 31,434     $ 26,598     $ 101,179     $ 86,609  
EBITDA per Diluted Share (5) $ 1.88     $ 1.60     $ 6.06     $ 5.22  
Free Cash Flow (6) $ 14,680     $ 15,139     $ 7,071     $ 34,085  
Book Value per Period End Share (7)         $ 21.75     $ 19.33  
Tangible Book Value (8)         $ 243,471     $ 233,130  
Tangible Book Value per Period End Share (9)         $ 14.53     $ 13.95  
Funded debt to Equity Ratio (10)           0.5       0.3  
Asset Turnover (11)           2.77       2.54  
Return on Assets (12)           5.0%       5.1%  
Return on Equity (13)           11.7%       10.8%  
Return on Invested Capital (16)           10.4%       9.4%  
               
Reconciliation of Non-GAAP measures:              
Reconciliation of Net income attributable to MYR Group Inc. to EBITDA:              
Net income attributable to MYR Group Inc. $ 12,775     $ 10,651     $ 37,690     $ 31,087  
 Net income - noncontrolling interests         207       (1,476 )     207  
Net income   12,775       10,858       36,214       31,294  
 Interest expense, net   1,723       1,123       6,221       3,628  
 Income tax expense    5,461       3,834       14,228       11,774  
 Depreciation and amortization   11,475       10,783       44,516       39,913  
EBITDA (4) $ 31,434     $ 26,598     $ 101,179     $ 86,609  
               
Reconciliation of Net Income attributable to MYR Group Inc. per Diluted Share        
to EBITDA per Diluted Share:
             
Net income attributable to MYR Group Inc. per share $ 0.76     $ 0.64     $ 2.26     $ 1.87  
 Net income - noncontrolling interests per share         0.01       (0.09 )     0.01  
Net income per share   0.76       0.65       2.17       1.88  
 Interest expense, net, per share   0.10       0.07       0.37       0.22  
 Income tax expense per share   0.33       0.23       0.85       0.71  
 Depreciation and amortization per share   0.69       0.65       2.67       2.41  
EBITDA per Diluted Share (5) $ 1.88     $ 1.60     $ 6.06     $ 5.22  
               
Calculation of Free Cash Flow:              
Net cash flow from (used in) operating activities $ 33,154     $ 26,120     $ 64,899     $ 84,789  
Less: cash used in purchasing property and equipment   (18,474 )     (10,981 )     (57,828 )     (50,704 )
Free Cash Flow (6) $ 14,680     $ 15,139     $ 7,071     $ 34,085  
               
Reconciliation of Book Value to Tangible Book Value:              
Book value (total stockholders' equity attributable to MYR Group Inc.)       $ 364,471     $ 322,984  
Goodwill and intangible assets           (121,000 )     (89,854 )
Tangible Book Value (9)         $ 243,471     $ 233,130  
               
Reconciliation of Book Value per Period End Share              
to Tangible Book Value per Period End Share:
             
Book value per period end share         $ 21.75     $ 19.33  
Goodwill and intangible assets per period end share           (7.22 )     (5.38 )
Tangible Book Value per Period End Share (8)         $ 14.53     $ 13.95  
               
Calculation of Period End Shares:              
Shares outstanding           16,649       16,565  
 Plus: Common equivalents           112       144  
Period End Shares (14)           16,761       16,709  
               
          December 31,   December 31,
            2018       2017  
Reconciliation of Invested Capital to Shareholders Equity:            
Book value (total stockholders' equity attributable to MYR Group Inc.)       $ 322,984     $ 287,039  
Plus: Total funded debt           89,792       78,960  
Less: Cash and cash equivalents           (7,507 )     (5,343 )
Invested Capital (15)         $ 405,269     $ 360,656  
               
See notes at the end of this earnings release.


(1) Funded debt includes borrowings under our revolving credit facility and the outstanding balances of our outstanding equipment notes.
(2) These financial performance measures are provided as supplemental information to the financial statements. These measures are used by management to evaluate our past performance, our prospects for future performance and our ability to comply with certain material covenants as defined within our credit agreement, and to compare our results with those of our peers. In addition, we believe that certain of the measures, such as book value, tangible book value, free cash flow, asset turnover, return on equity and debt leverage are measures that are monitored by sureties, lenders, lessors, suppliers and certain investors. Our calculation of each measure is described in the following notes; our calculation may not be the same as the calculations made by other companies.
(3)  EBIT, net of taxes is defined as net income attributable to MYR Group Inc. plus net interest, less the tax impact of net interest. The tax impact of net interest is computed by multiplying net interest by the effective tax rate. Management uses EBIT, net of taxes, to measure our results exclusive of the impact of financing costs.
(4)  EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA is not recognized under GAAP and does not purport to be an alternative to net income as a measure of operating performance or to net cash flows provided by operating activities as a measure of liquidity. Certain material covenants contained within our credit agreement are based on EBITDA with certain additional adjustments, including our interest coverage ratio and leverage ratio, which we must comply with to avoid potential immediate repayment of amounts borrowed or additional fees to seek relief from our lenders. In addition, management considers EBITDA a useful measure because it provides MYR Group Inc. and its investors with an additional tool to compare MYR Group Inc. operating performance on a consistent basis by removing the impact of certain items that management believes to not directly reflect the company’s core operations. Management further believes that EBITDA is useful to investors and other external users of MYR Group Inc. financial statements in evaluating the company’s operating performance and cash flow because EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, useful lives placed on assets, capital structure and the method by which assets were acquired.
(5)  EBITDA per diluted share is calculated by dividing EBITDA by the weighted average number of diluted shares attributable to MYR Group Inc. outstanding for the period. EBITDA per diluted share is not recognized under GAAP and does not purport to be an alternative to income per diluted share.
(6)  Free cash flow, which is defined as cash flow provided by operating activities minus cash flow used in purchasing property and equipment, is not recognized under GAAP and does not purport to be an alternative to net income attributable to MYR Group Inc., cash flow from operations or the change in cash on the balance sheet. Management views free cash flow as a measure of operational performance, liquidity and financial health.
(7)  Book value per period end share is calculated by dividing total stockholders’ equity attributable to MYR Group Inc. at the end of the period by the period end shares outstanding. 
(8)  Tangible book value is calculated by subtracting goodwill and intangible assets at the end of the period from stockholders’ equity attributable to MYR Group Inc. at the end of the period. Tangible book value is not recognized under GAAP and does not purport to be an alternative to book value or stockholders’ equity attributable to MYR Group Inc.
(9)  Tangible book value per period end share is calculated by dividing tangible book value at the end of the period by the period end number of shares outstanding. Tangible book value per period end share is not recognized under GAAP and does not purport to be an alternative to income per diluted share.
(10)  The funded debt to equity ratio is calculated by dividing total funded debt at the end of the period by total stockholders’ equity attributable to MYR Group Inc. at the end of the period.
(11) Asset turnover is calculated by dividing the current period revenue by total assets at the beginning of the period.
(12) Return on assets is calculated by dividing net income attributable to MYR Group Inc. for the period by total assets at the beginning of the period.
(13) Return on equity is calculated by dividing net income attributable to MYR Group Inc. for the period by total stockholders’ equity attributable to MYR Group Inc. at the beginning of the period.
(14) Period end shares is calculated by adding average common stock equivalents for the quarter to the period end balance of common shares outstanding. Period end shares is not recognized under GAAP and does not purport to be an alternative to diluted shares. Management views period end shares as a better measure of shares outstanding as of the end of the period.
(15) Invested capital is calculated by adding net funded debt (total funded debt less cash and marketable securities) to total stockholders’ equity attributable to MYR Group Inc.
(16) Return on invested capital is calculated by dividing EBIT, net of taxes, less any dividends, by invested capital at the beginning of the period. Return on invested capital is not recognized under GAAP, and is a key metric used by management to determine our executive compensation.

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Source: MYR Group, Inc.