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 March 31, 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 3, 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 May 5, 1997: 3,247,378
MYR GROUP INC.
I N D E X
PART I. Financial Information Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 2
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1997 and 1996 3
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996 4
Notes to Condensed Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
PART II. Other Information
Item 1. Legal Proceedings 8
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURE 9
Part I, Item 1
Financial
Information
MYR Group Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31 Dec. 31
1997 1996
(Unaudited) *
ASSETS
Current assets:
Cash and cash equivalents $ 549 $ 1,011
Contract receivables including retainage 54,096 53,508
Costs and estimated earnings in excess of 11,600 10,760
billings on uncompleted contracts
Deferred income taxes 4,896 4,896
Other current assets 1,024 471
Total current assets 72,165 70,646
Property and equipment: 58,968 58,668
Less accumulated depreciation 36,760 36,429
22,208 22,239
Intangible assets 2,439 2,466
Other assets 3,452 3,135
Total assets $ 100,264 98,486
LIABILITIES
Current Liabilities:
Current maturities of long-term debt $ 7,851 $ 4,445
Accounts payable 13,809 17,721
Billings in excess of costs and estimated 6,000 5,504
earnings on uncompleted contracts
Accrued insurance 12,465 12,160
Other current liabilities 18,169 16,645
Total current liabilities 58,294 56,475
Deferred income taxes 3,047 3,047
Other liabilities 396 399
Long-term debt:
Revolver and other debt 101 121
Term loan 1,875 2,500
Industrial revenue bond 695 695
Subordinated convertible debentures 5,679 5,679
Total long-term debt 8,350 8,995
SHAREHOLDERS' EQUITY
Common stock and additional paid-in capital 9,278 9,315
Retained earnings 22,636 22,121
Treasury stock (945) (1,043)
Restricted stock awards and shareholders'
notes receivable (792) (823)
Total shareholders' equity 30,177 29,570
Total liabilities and shareholders' equity $ 100,264 $ 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)
Three Months Ended March 31 1997 1996
Contract revenue $ 89,004 $ 64,376
Contract cost 81,619 57,946
Gross profit 7,385 6,430
Selling, general and administrative expenses 5,871 5,718
Income from operations 1,514 712
Other income (expense)
Interest income 8 6
Interest expense (250) (410)
Gain on sale of property and equipment 7 131
Miscellaneous (124) (163)
Income before taxes 1,155 276
Income tax expense 462 110
Net income $ 693 $ 166
Earnings per share:
Primary $ .20 $ .05
Fully diluted $ .18 $ .05
Dividends per common share $ .055 $ .05
Weighted average common shares and
common share equivalents outstanding 3,532 3,411
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)
Three Months Ended March 31 1997 1996
CASH FLOWS FROM OPERATIONS
Net income $ 693 $ 166
Adjustments to reconcile net income to cash flows
from operations
Depreciation and amortization 1,292 1,555
Amortization of intangibles 58 91
Gain from disposition of assets (7) (131)
Changes in assets and liabilities (3,885) (705)
Cash flows from operations (1,849) 976
CASH FLOWS FROM INVESTMENTS
Expenditures for property and equipment (1,282) (416)
Proceeds from disposition of assets 27 196
Cash flows from investments (1,255) (220)
CASH FLOWS FROM FINANCING
Proceeds (repayments) of long term debt 2,762 (608)
Proceeds from exercise of stock options 62 19
Decrease (increase) in deferred compensation (3) 3
Dividends paid (179) (159)
Cash flows from financing 2,642 (745)
Increase (decrease) in cash and cash equivalents (462) 11
Cash and cash equivalents at beginning of year 1,011 703
Cash and cash equivalents at end of period $ 549 $ 714
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 sheet, statement of operations and
statement 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 three month period ended March 31, 1997
are not necessarily indicative of the results to be expected for the full year.
2 - Contingencies
On April 10, 1997 a judgment was entered in favor of the Company in the amount
of approximately $4,900,000 against National Union Fire Insurance Company of
Pittsburgh, PA ("National Union") in the previously reported lawsuit filed by
National Union against the Company in 1985. The lawsuit related to a coverage
issue under an excess umbrella insurance policy provided by National Union to
the Company. National Union has filed a notice of appeal related to the
judgment with the United States Court of Appeals for the Second Circuit. The
Company had previously recorded as an asset approximately $1,850,000 related
to a portion of the damages the Company was seeking in the lawsuit
Notwithstanding the judgment in its favor, the Company has not adjusted this
amount pending the outcome of the appeal.
The Company is involved in various other lawsuits and legal proceedings which
arise in the ordinary course of business, none of which is expected to have a
material adverse effect on the Company financial condition.
3 - Earnings Per Share
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.
4 - Supplemental Quarterly Financial Information (Unaudited)
(Dollars in thousands, except per share amounts)
1997 1996
Mar. 31 Mar.31 June 30 Sept. 31 Dec. 31 Year
Contract revenue 89,004 64,376 69,052 80,712 96,437 310,577
Gross profit 7,385 6,430 8,028 8,282 8,901 31,641
Income from continuing
operations 693 166 1,269 1,536 997 3,968
Net income 693 166 909 1,536 827 3,438
Earnings per share - Primary:
Income from continuing
operations 0.20 0.05 0.37 0.44 0.29 1.15
Net income 0.20 0.05 0.26 0.44 0.24 1.00
Earnings per share - Fully diluted:
Income from continuing
operations 0.18 0.05 0.33 0.39 0.26 1.02
Net income 0.18 0.05 0.24 0.39 0.21 .089
Dividends paid per share 0.055 0.050 0.050 0.050 0.050 0.200
Market price:
High 14.00 11.00 11.75 11.75 12.88 12.88
Low 12.00 10.00 10.25 10.38 10.50 10.00
5 - Subsequent Events
On May 1, 1997, the Company completed the acquisition of Seattle, Washington
based D.W. Close Company, Inc.. D.W. Close's principal business is commercial
and industrial electrical construction.
6 - Pending Accounting Standard
In February 1997, the Financial Accounting Standards Boards issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" which
simplifies the method for computing earnings per share. Under the new
requirements, primary earnings per share will be replaced with basic earnings
per share. The statement, which will not have a material impact on the results
of operations, financial position or cash flows of the Company, is effective
for financial statements issued for periods ending after December 15, 1997 and
will be adopted by the Company in the fourth quarter of 1997.
Part I Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
for the Three Months Ending March 31, 1997
(Dollars in thousands)
Results of Operations
Revenue for the quarter was $89,004, compared to $64,376 in 1996, or an
increase of 38.3%. The revenue increase was primarily due to additional
storm work, 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 electoral job for a hotel and casino in Nevada that did not
start until the second quarter of 1996.
Gross profit for the quarter was $7,385, compared to $6,430 in 1996, or an
increase of 14.9%. Gross profit as a percentage of revenue was 8.3% compared
to 10.0% in 1996. The lower margin percentage in 1997 is primarily due to
a greater percentage of our commercial - industrial revenues coming from
cost-plus work. The cost-plus work generates lower margins since it involves
lower financial risk.
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. Such variables include unusual or unseasonable weather and
delays in receipt of construction materials on projects where the materials
are provided to the Company by its clients. The different mix of the Company's
work from period to period can impact the gross margin percentage. As the
percentage of revenue derived from projects in which the Company supplies
materials increases, the gross profit percentage will generally decrease. As
the percentage of revenue derived from cost-plus work increases, margins may
also decrease since this work involves lower financial risk. Finally, 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 a 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 quarter were $5,871,
compared to $5,718 in 1996, and as a percentage of revenue was 6.6% compared
to 8.9%. This reduction reflects higher revenue volume spread over a
relatively fixed expense base.
Net interest expense for the quarter was $242 compared to $404 in 1996. The
decrease in interest expense was due to lower average outstanding debt levels
in 1997 compared to 1996.
Gain on sale of property and equipment was $7 compared to $131 in 1996.
The 1996 amount was unusually high due to the large number of units sold as a
result of plans to modernize the equipment fleet.
Other expense for the quarter was $124 compared to $163 in 1996 and consisted
primarily of bank fees and amortization of goodwill. The decrease in 1997 is
due to the elimination of amortization of a non-competition agreement that was
fully amortized in 1996.
Income tax expense for the quarter was $462 compared to $110 in 1996. As a
percentage of income, the effective rate was 40% in 1997 and 1996.
The Company's backlog at March 31, 1997 was $138,100, compared to $134,900
at December 31, 1996, and $75,700 at March 31, 1996. Substantially all the
current backlog will be completed within twelve months and approximately 85%
will be completed by December 31, 1997.
Liquidity and Capital Resources
Cash flows provided from net proceeds of long term debt and the exercise of
stock options for the quarter amounted to $2,824, which was used for operations
of $1,849, net capital expenditures of $1,255 and dividends paid of $179.
The Company's financial condition continues to be strong at March 31, 1997,
with working capital of $13,871 compared to $14,171 at December 31, 1996.
The Company's current ratio was 1.24:1 at March 31, 1997, compared to 1.25:1 at
December 31, 1996.
The Company has a $20,000 revolving and $4,375 term credit facility. As of
March 31, 1997, there were $5,080 and $4,375 outstanding under the revolving
and term credit facility, respectively. 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 condition 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 with cash and Company notes
issued to the seller.
Capital expenditures for the quarter were $1,282 compared to $416 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 quarter amounted to $27 and $196 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 1st Quarter
of 1997.
CAUTIONARY STATEMENT-- This Report may contain statements which constitute
"forward-looking" information as defined in the Private Securities Litigation
Reform Act of 1995 or by the Securities and Exchange Commission. Investors
are cautioned that any such forward-looking statements are not guarantees of
future performance and actual results may differ.
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: May 14, 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 March 31, 1997
Exhibit Index
Number Description Page (or Reference)
11 Computation of Net Income Per Share 11
27 Financial Data Schedules 12
MYR Group Inc.
Exhibit 11
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
(In thousands, except per share data)
Period Ending March 31 Three Months
1997 1996
Primary income per share:
Net income $ 693 $ 166
Weighted average number of common shares
outstanding during the period 3,243 3,187
Add - common equivalent shares (determined
using the "treasury stock" method)
representing shares issuable upon exercise
of the common share equivalents 289 224
Weighted average number of shares for
income per common share 3,532 3,411
Income per common share $ 0.20 $ 0.05
Fully diluted income per share:
Net income $ 693 $ 166
Add interest on convertible subordinated notes,
net of tax 59 59
$ 752 $ 225
Weighted average number of common shares
outstanding during the period 3,243 3,187
Add - common equivalent shares (determined
using the "treasury stock" method)
representing shares issuable upon exercise
of the common share equivalents 289 231
- - - Shares assumed converted from convertible
subordinated notes 600 600
Weighted average number of shares for
income per common share 4,132 4,018
Income per common share $ 0.18 (1)
(1) The calculation of fully diluted income per common share for the first
quarter of 1996 has an antidilutive effect.
5
3-MOS
DEC-31-1997
MAR-31-1997
549
0
54590
494
0
72165
58968
36760
100264
58294
8249
0
0
3350
26827
100264
89004
89004
81619
87490
124
0
250
1155
462
693
0
0
0
693
.20
.18
