FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-8325
MYR GROUP INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3158643
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
1701 W. Golf Road, Tower Three, Suite 1012, Rolling Meadows, Illinois 60008
(Address of principal executive offices)
(Zip Code)
(847) 290-1891
Registrant's telephone number, include area code
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 and 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of October 24, 1997: 3,288,447
MYR GROUP INC.
I N D E X
PART I. Financial Information Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1997 and December 31, 1996 2
Condensed Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 1997 and 1996 3
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996 4
Notes to Condensed Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II. Other Information
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURE 11
Part I, Item 1
Financial
Information
MYR GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
SEPTEMBER 30 DEC. 31
1997 1996
(UNAUDITED) *
ASSETS
Current assets:
Cash and cash equivalents $ 692 $ 1,011
Contract receivables including retainage 77,814 53,508
Costs and estimated earnings in excess of billings on
uncompleted contracts 18,292 10,760
Deferred income taxes 4,896 4,896
Other current assets 1,061 471
Total current assets 102,755 70,646
Property and equipment: 58,956 58,668
Less accumulated depreciation 37,578 36,429
21,378 22,239
Intangible assets 2,410 2,466
Other assets 1,007 3,135
Total assets $127,550 $ 98,486
LIABILITIES
Current liabilities:
Current maturities of long-term debt $ 14,540 $ 4,445
Accounts payable 17,644 17,721
Billings in excess of costs and estimated earnings on
uncompleted contracts 8,935 5,504
Accrued insurance 16,879 12,160
Other current liabilities 23,312 16,645
Total current liabilities 81,310 56,475
Deferred income taxes 3,047 3,047
Other liabilities 390 399
Long-term debt:
Revolver and other debt 1,652 121
Term loan 625 2,500
Industrial revenue bond 695 695
Subordinated convertible debentures 5,679 5,679
Total long-term debt 8,651 8,995
SHAREHOLDERS' EQUITY
Common stock and additional paid-in capital 9,530 9,315
Retained earnings 26,481 22,121
Treasury stock (621) (1,043)
Restricted stock awards and shareholder note receivable (1,238) (823)
Total shareholders' equity 34,152 29,570
Total liabilities and shareholders' equity $127,550 $ 98,486
*Condensed from audited financial statements
The "Notes to Condensed Consolidated Financial Statements" are an integral part
of this statement.
MYR GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share amounts)
(Unaudited)
PERIODS ENDED SEPTEMBER 30 THREE MONTHS NINE MONTHS
1997 1996 1997 1996
Contract revenue $119,838 $ 80,712 $321,152 $214,140
Contract cost 108,049 72,430 292,024 191,400
Gross profit 11,789 8,282 29,128 22,740
Selling, general and
administrative expenses 8,166 5,434 20,696 16,749
Income from operations 3,623 2,848 8,432 5,991
Other income (expense)
Interest income 7 2 23 12
Interest expense (499) (508) (1,149) (1,386)
Gain (loss) on sale of property and
equipment 40 156 (207) 549
Miscellaneous (21) (98) 56 (374)
Income from continuing
operations before income taxes 3,150 2,400 7,155 4,792
Income tax expense 1,260 864 2,862 1,821
Income from continuing operations 1,890 1,536 4,293 2,971
Income (loss) from discontinued
operations - - 602 (360)
Net income $ 1,890 $ 1,536 $ 4,895 $ 2,611
Earnings per share - Primary
Income from continuing operations $ .51 $ .44 $ 1.19 $ .86
Income (loss) from discontinued
operations - - .16 (.10)
Net Income .51 .44 1.35 .76
Earnings per share - Fully Diluted:
Income from continuing operations .45 .39 1.03 .78
Income (loss) from discontinued
operations - - .14 (.09)
Net Income .45 .39 1.17 .69
Dividends per common share .055 .050 .165 .150
Weighted average common shares and common
share equivalents outstanding
Primary 3,692 3,470 3,620 3,438
Fully Diluted 4,340 4,070 4,334 4,043
The "Notes to Condensed Consolidated Financial Statements" are an integral part
of this statement.
MYR GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30 1997 1996
CASH FLOWS FROM OPERATIONS
Income from continuing operations $ 4,293 $ 2,971
Adjustments to reconcile income from continuing
operations to cash flows from continuing operations
Depreciation and amortization 4,042 4,649
Amortization of intangibles 179 205
Loss (gain) from disposition of assets 207 (549)
Changes in current assets and liabilities (13,080) (9,214)
Cash flows from continuing operations (4,359) (1,938)
Cash flows from discontinued operations 2,456 (360)
Cash flows from operations (1,903) (2,298)
CASH FLOWS FROM INVESTMENTS
Expenditures for property and equipment (3,324) (3,988)
Proceeds from disposition of assets 221 2,088
Cash used in acquisition, net of cash acquired (241) -
Cash flows from investments (3,344) (1,900)
CASH FLOWS FROM FINANCING
Proceeds (repayments) of long term debt 5,349 4,497
Proceeds from exercise of stock options 125 13
Increase (decrease) in deferred compensation (10) 8
Dividends paid (536) (481)
Cash flows from financing 4,928 4,037
Decrease in cash and cash equivalents (319) (161)
Cash and cash equivalents at beginning of year 1,011 703
Cash and cash equivalents at end of period $ 692 $ 542
The "Notes to Condensed Consolidated Financial Statements" are an integral
part of this statement.
MYR GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1 - BASIS OF PRESENTATION
The condensed consolidated balance sheets, statements of operations and
statements of cash flows include the accounts of the Company and its
subsidiaries. All material intercompany balances and transactions have been
eliminated.
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of results for the interim period.
The results of operations for the nine month period ended September 30,
1997 are not necessarily indicative of the results to be expected for the full
year.
2 - ACQUISITION
On May 1, 1997, the Company completed the acquisition of all the stock of
D.W. Close Company, Inc. ("D.W. Close"). D.W. Close is engaged primarily in the
installation of lighting systems, electrical maintenance/construction and smart
highway construction for commercial, industrial and municipal customers.
All the shares of D.W. Close were exchanged for $400,000 in cash and
$2,500,000 of promissory notes. The principal is due in installments of
$250,000, $666,667, $666,667 and $916,666 on September 30, 1997, May 1, 1998,
1999 and 2000, with interest payable quarterly each year. The transaction has
been accounted for using the purchase method of accounting.
3 - DISCONTINUED OPERATIONS
As part of the sale in 1988 of its former engineering subsidiary, the
Company retained certain rights and obligations in connection with a lawsuit
with National Union Fire Insurance Company of Pittsburgh, PA. In June 1997, the
Company settled the lawsuit and received $4,250,000. The Company had a
receivable relating to this lawsuit of $1,854,000. The remaining $2,396,000
related to reimbursement for interest and legal costs. The portion allocated to
interest was $1,042,000 and was included in continuing operations as
miscellaneous other income. The portion allocated to legal costs was
$1,354,000. This amount was included in income from discontinued operations,
reduced by additional expenses incurred for legal and other directly related
costs totaling $350,000. The net result on discontinued operations was
$602,000, including the income tax expense of $402,000. In 1996, the Company
recorded additional amounts, primarily legal expenses related to the OMU
lawsuit, which resulted in additional losses of $360,000, net of income tax
benefits of $240,000.
4 - EARNINGS PER SHARE
Primary earnings per share are based on the weighted average number of
common shares and common share equivalents outstanding during the period. Stock
options are considered to be common share equivalents. Fully diluted earnings
per share also reflects the potential dilution which would result from the
conversion of the convertible subordinated notes.
5. - PENDING ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accouning Standards No. 128 (SFAS 128), 'Earnings Per
Share.' This statement, which will not have a significant effect on the results
of operations of the Company, establishes and simplifies standards for computing
and presenting earnings per share. SFAS 128 is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods, and will be adopted by the Company in the fourth quarter of 1997.
6 - SUBSEQUENT EVENT
On October 22, 1997, the Company announced that the Board of Directors
declared a stock dividend. Each stockholder will receive an additional two
shares of stock for every three shares of stock held. The stock dividend will
be paid on December 15, 1997 to all stockholders of record as of December 1,
1997.
7 - SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(Dollars in thousands, except per share amounts)
1997
Mar. 31 June 30 Sept. 30 Dec. 31 Year
Contract revenue $ 89,004 $ 112,310 $ 119,838 $ 321,152
Gross profit 7,385 9,954 11,789 29,128
Income from continuing operations 693 1,710 1,890 4,293
Net income 693 2,312 1,890 4,895
Earnings per share - Primary:
Income from continuing operations 0.20 0.48 0.51 1.19
Net Income 0.20 0.65 0.51 1.35
Earnings per share - Fully diluted:
Income from continuing operations 0.18 0.42 0.45 1.03
Net Income 0.18 0.56 0.45 1.17
Dividends paid per share 0.055 0.055 0.055 0.165
Market Price:
High 14.00 18.31 23.56 23.56
Low 12.00 11.63 17.50 11.63
1996
Mar. 31 June 30 Sept. 30 Dec. 31 Year
Contract revenue $ 64,376 $ 69,052 $ 80,712 $ 96,437 $ 310,577
Gross profit 6,430 8,028 8,282 8,901 31,641
Income from continuing operations 166 1,269 1,536 997 3,968
Net income 166 909 1,536 827 3,438
Earnings per share - Primary:
Income from continuing operations 0.05 0.37 0.44 0.29 1.15
Net income 0.05 0.26 0.44 0.24 1.00
Earnings per share - Fully diluted:
Income from continuing operations 0.05 0.33 0.39 0.26 1.02
Net income 0.05 0.24 0.39 0.21 0.89
Dividends paid per share 0.050 0.050 0.050 0.050 0.200
Market Price:
High 11.00 11.75 11.75 12.88 12.88
Low 10.00 10.25 10.38 10.50 10.00
Part I Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
for the Three and Nine Months Ending September 30, 1997
(Dollars in thousands)
RESULTS OF OPERATIONS
Continuing Operations
Revenue for the three and nine month periods was $119,838 and $321,152,
compared to $80,712 and $214,140 in 1996. This is an increase of 48.5% and
50.0% for the three and nine month periods, primarily due to the acquisition of
D.W. Close, a higher level of work in the commercial-industrial sector and an
increase of line work in California. The commercial-industrial sector includes
a major electrical job for a hotel and casino in Nevada that did not have
significant revenues until the fourth quarter of 1996.
Gross profit for the three and nine month periods was $11,789 and $29,128,
compared to $8,282 and $22,740 in 1996. Gross profit as a percentage of revenue
was 9.8% and 9.1% for the three and nine month periods, respectively, compared
to 10.3% and 10.6% in 1996. The lower profit percentages are primarily due to a
greater percent of our commercial-industrial revenues coming from cost-plus
fixed fee work. The cost-plus fixed fee work generally involves lower financial
risk, therefore generates lower margins.
Revenue and gross profit comparisons from quarter to quarter and comparable
quarters of different periods may be impacted by variables beyond the control of
the Company due to the nature of the Company's work as an outside electrical
contractor. Such variables include unusual or unseasonable weather and delays
in receipt of construction materials which typically results in lower revenues
and lower margins in the first quarter when compared to other quarters.
As a general rule, the better construction weather in the second, third and
fourth quarters usually results in higher revenues and margins from those
quarters. Competitive bidding pressures may cause these general trends to vary.
Additionally, since the company's revenues are derived principally from
providing construction labor services, insurance costs, particularly for workers
compensation, are a significant factor in the Company's contract cost structure.
Fluctuations in insurance reserves for claims under the retrospective rated
insurance programs can have significant impact on gross margins, either upward
or downward, in the period in which such insurance reserve adjustments are made.
Selling, general and administrative expenses for the three and nine month
periods were $8,166 and $20,696, compared to $5,434 and $16,749 in 1996. This
represents 6.8% and 6.4% of consolidated revenues for the three and nine month
periods of 1997, compared to 6.7% and 7.8% for 1996. The three month period
increase reflects the inclusion of D.W. Close, additional compensation costs to
support the higher volume of work, additional incentive compensation and profit
sharing accruals as a result of higher profit levels and additional legal
accruals on miscellaneous claims. The three and nine month period reductions,
as a percentage of consolidated revenue, reflect higher revenue volume spread
over a relatively fixed expense base.
Net interest expense for the three and nine month periods was $492 and
$1,126, compared to $506 and $1,374 in 1996. The decrease in interest expense
was due to lower average outstanding debt levels in 1997 compared to 1996,
primarily as a result of reduced number of days sales outstanding in net
unbilled work.
Gain (loss) on sale of property and equipment for the three and nine month
periods was $40 and $(207), compared to $156 and $549 in 1996. The loss for the
nine months was due to the sale and disposal of obsolete and damaged units as a
result of plans to modernize the equipment fleet.
Net miscellaneous other expense (income) for the three and nine month
periods was $21 and $(56), compared to $98 and $374 in 1996. The 1997 other
income for the nine month period includes $1,042 relating to the settlement
of a lawsuit (see Note 3 to Financial Statements). Offsetting this amount are
bank fees, amortization of goodwill, costs accrued for the clean-up and move out
of an operating unit's facility as a result of consolidating operations and the
write-off of an investment in land that has never been developed. The 1996
amounts consisted primarily of bank fees and amortization of goodwill and non-
complete agreements.
Income tax expense for the three and nine month periods was $1,260 and
$2,862, compared to $864 and $1,821 in 1996. As a percentage of income, the
effective rate for the three and nine month periods of 1997 and 1996 was 40%
The Company's backlog at September 30, 1997 was $132,500, compared to
$134,900 at December 31, 1996, and $124,900 at September 30, 1996.
Substantially all the current backlog will be completed within twelve months and
approximately 65% is expected to be completed by December 31, 1997.
Discontinued Operations
During 1988, the Company sold two subsidiaries. As part of the sale of the
engineering subsidiary, the Company retained certain rights and obligations in
connection with two lawsuits. In the nine month period of 1997, the Company
recorded amounts received from a settlement with National Fire Insurance Company
of Pittsburgh, PA, which results in a gain of $602 ($1,004 pre-tax). In the
nine month period of 1996, the Company recorded addtional amounts, primarily
legal expenses related to the OMU lawsuits, which resulted in additional losses
of $360 ($600 pre-tax). (See Note 3 to Financial Statements).
LIQUIDITY AND CAPITAL RESOURCES
Net proceeds from short term borrowings amounted to $5,349, proceeds from
the disposition of property and equipment amounted to $221 and proceeds from the
exercise of stock options amounted to $125. The cash flows were primarily used
by operations for the nine months of $1,903, net capital expenditures of $3,324,
the acquisition of D.W. Close Company, Inc. of $241 and dividend payments of
$536. The cash flows used by operations includes $4,520 received from a
settlement of a lawsuit (see Note 3 to Financial Statements). The Company's
financial condition continues to be strong at September 30, 1997 with working
capital of $21,445, compared to $14,171 at December 31, 1996. The Company's
current ratio was 1.26:1 at September 30, 1997, compared to 1.25:1 at December
31, 1996.
The Company has a $20,000 revolving and $3,125 term credit facility. As of
September 30, 1997, there were $11,100 and $3,125 outstanding under the
revolving and term credit facility. The company has outstanding letters of
credit with banks totaling $12,585. The company anticipates that its credit
facility, cash balances and internally generated cash flows will continue to be
sufficient to fund operations, capital expenditures and debt service
requirements. The Company is also confident that its financial conditions will
allow it to meet long-term capital requirements.
The acquisition of D.W. Close Company, Inc. was completed on May 1, 1997.
The purchase price for this transaction was paid in cash and Company issued
notes to the seller (See Note 2 to Financial Statements).
Capital expenditures for the nine months were $3,324, compared to $3,988 in
1996. Capital expenditures during these periods were used for normal property
and equipment additions, replacements and upgrades. Proceeds from the disposal
of property and equipment for the nine months were $221 compared to $2,088 in
1996. The Company plans to spend approximately $5,000 on capital improvements
during 1997.
PART II
Item 1. Legal Proceedings
There were no material developments during the quarter relating to legal
proceedings previously reported by the company.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits filed herewith are listed in the Exhibit Index filed as a part
hereof and incorporated herein by reference.
b. No reports on Form 8-K were filed by the Company for the third quarter of
1997.
SIGNATURES
Pursuant to the requirements 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.
MYR Group Inc.
Date: October 30, 1997 By: /s/
Elliott C. Robbins, Sr. Vice President, Treasurer,
and Chief Financial Officer
(duly authorized representative of registrant and
principal financial officer)
MYR GROUP INC.
QUARTERLY REPORT ON FORM 10Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
Exhibit Index
Number Description Page (or Reference)
11 Computation of Net Income Per Share 13
27 Financial Data Schedules 14
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE Exhibit 11
(In thousands, except per share data)
PERIOD ENDED SEPTEMBER 30 THREE MONTHS NINE MONTHS
1997 1996 1997 1996
Primary income per share
Net income $ 1,890 $ 1,536 $ 4,895 $ 2,611
Weighted average number of common shares
outstanding during the period 3,254 3,228 3,249 3,204
Add - common equivalent shares (determined
using the "treasury stock" method)
representing shares issuable upon
exercise of the common stock equivalents 438 242 371 234
Weighted average number of shares
for income per common share 3,692 3,470 3,620 3,438
Income per common share - primary $ .51 $ 0.44 $ 1.35 $ 0.76
Fully diluted income per share
Net income $ 1,890 $ 1,536 $ 4,895 $2,611
Add interest on subordinated convertible
debentures, net of tax 60 60 179 179
$ 1,950 $ 1,596 $ 5,074 $2,790
Weighted average number of common shares
outstanding during the period 3,254 3,228 3,249 3,204
Add
- -Common equivalent shares (determined
using the "treasury stock" method)
representing shares issuable upon
exercise of the common stock equivalents 486 242 485 239
- -Shares assumed converted from subordinated
convertible debentures 600 600 600 600
4,340 4,070 4,334 4,043
Income per common share - fully diluted $ .45 $ .39 $ 1.17 $ .69
5
3-MOS
DEC-31-1997
SEP-30-1997
692
0
78,350
536
0
102,755
58,956
37,578
127,550
81,310
8,651
0
0
2,512
31,640
127,550
119,838
119,838
108,049
116,215
21
0
499
3,150
1,260
1,890
0
0
0
1,890
.51
.45
