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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 June 30, 1995
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
THE L. E. MYERS CO. GROUP
(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.)
2550 W. Golf Road, Suite 200 Rolling Meadows, Illinois 60008
(Address of principal executive offices)
(Zip Code)
(708) 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 July 26, 1995: 2,379,656
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THE L.E. MYERS CO. GROUP
I N D E X
Page No.
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PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheet -
June 30, 1995 and December 31, 1994 2
Condensed Consolidated Statement of Operations -
Six Months Ended June 30, 1995 and 1994 3
Condensed Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1995 and 1994 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 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURE 10
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Part I, Item 1
Financial
Information
THE L.E. MYERS CO. GROUP
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
- ------------------------------------------------------------------------------------------------------------------
JUNE 30 DEC. 31
1995 1994
-------------- -----------
(UNAUDITED) *
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ASSETS
Current assets:
Cash and cash equivalents $ 375 $ 6,115
Contract receivables including retainage 42,022 12,687
Costs and estimated earnings in excess of billings on uncompleted 9,719 1,408
contracts
Deferred income taxes 3,192 1,622
Other current assets 2,953 532
--------------------------------
Total current assets 58,261 22,364
--------------------------------
Property and equipment: 60,504 50,515
Less accumulated depreciation 37,500 35,863
--------------------------------
23,004 14,652
--------------------------------
Intangible assets 1,170 368
Other assets 2,997 2,260
--------------------------------
Total assets $ 85,432 $ 39,644
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LIABILITIES
Current Liabilities:
Current maturities of long-term debt $ 4,893 $ 507
Accounts payable 7,548 3,069
Billings in excess of costs and estimated earnings on uncompleted 6,130 783
contracts
Accrued insurance 9,126 4,415
Other current liabilities 14,353 4,995
--------------------------------
Total current liabilities 42,050 13,769
--------------------------------
Deferred income taxes 2,221 1,257
Other liabilities 403 678
Long-term debt:
Revolver and other debt 3,152 318
Term loan 6,250 0
Industrial revenue bond 1,070 0
Subordinated convertible debentures 5,679 0
-------------- -----------
Total long-term debt 16,151 318
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SHAREHOLDERS' EQUITY
Common stock and additional paid-in capital 9,268 9,269
Retained earnings 17,452 16,472
Treasury stock (1,637) (1,643)
Shareholders' notes receivable (476) (476)
--------------------------------
Total shareholders' equity 24,607 23,622
--------------------------------
Total liabilities and shareholders' equity $ 85,432 $ 39,644
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*Condensed from audited financial statements
The "Notes to Condensed Consolidated Financial Statements" are an
integral part of this statement.
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THE L.E. MYERS CO. GROUP
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands except per share amounts)
(Unaudited)
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PERIODS ENDED JUNE 30 THREE MONTHS SIX MONTHS
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1995 1994 1995 1994
---- ---- ---- ----
Contract revenue $ 64,015 $ 22,243 $ 120,066 $ 43,791
Contract cost 56,677 18,927 106,075 38,019
-------------------------- ----------------------------
Gross profit 7,338 3,316 13,991 5,772
Selling, general and administrative expenses 5,224 2,034 10,937 4,357
-------------------------- ----------------------------
Income from operations 2,114 1,282 3,054 1,415
Other income (expense)
Interest income 13 39 35 84
Interest expense (430) (18) (895) (56)
Gain on sale of fixed assets 80 19 107 19
Miscellaneous (102) (105) (206) (203)
-------------------------- ----------------------------
Income before taxes 1,675 1,217 2,095 1,259
Income tax expense 670 475 838 491
-------------------------- ----------------------------
Net income $ 1,005 $ 742 $ 1,257 $ 768
=======================================================================================================================
Earnings per share
Primary $ .40 $ .30 $ .50 $ .31
========================= ============================
Fully diluted $ .35 $ .30 $ .46 $ .31
========================= ============================
Dividends per common share $ .0625 $ .055 $ .1175 $ .11
========================= ============================
Weighted average common shares and
Common share equivalents outstanding
Primary 2,529 2,490 2,526 2,494
========================= ============================
Fully diluted 2,979 2,490 2,976 2,494
========================= ============================
The "Notes to Condensed Consolidated Financial Statements" are an integral part
of this statement.
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THE L.E. MYERS CO. GROUP
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
w(Dollars in thousands)
(Unaudited)
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SIX MONTHS ENDED JUNE 30 1995 1994
---- ----
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CASH FLOWS FROM OPERATIONS
Net income $ 1,257 $ 768
Adjustments to reconcile net income to cash flows
from operations
Depreciation and amortization 2,856 1,393
Amortization of intangibles 158 130
Gain from disposition of assets (107) (19)
Changes in current assets and liabilities 627 (134)
----------------------------------
Cash flows from operations 4,791 2,138
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CASH FLOWS FROM INVESTMENTS
Expenditures for property and equipment (1,734) (1,315)
Proceeds from disposition of assets 200 58
Cash used in acquisition, net of cash acquired (12,995) 0
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Cash flows from investments (14,529) (1,257)
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CASH FLOWS FROM FINANCING
Repayments of long term debt (15,068) (795)
Proceeds from issuance of debt 19,500 0
Purchase of treasury stock 0 (168)
Decrease in deferred compensation (15) (22)
Decrease in other assets (142) (1)
Dividends paid (277) (263)
----------------------------------
Cash flows from financing 3,998 (1,249)
Decrease in cash and cash equivalents (5,740) (368)
Cash and cash equivalents at beginning of year 6,115 5,698
----------------------------------
Cash and cash equivalents at end of period $ 375 $ 5,330
==================================
The "Notes to Condensed Consolidated Financial Statements" are an integral part
of this statement.
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THE L.E. MYERS CO. GROUP
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 six month period ended June 30, 1995
are not necessarily indicative of the results to be expected for the full year.
2 - ACQUISITION OF HARLAN ELECTRIC CO.
Effective as of January 3, 1995, the Company acquired all the stock of
Harlan Electric Company ("Harlan"). Harlan and its wholly-owned subsidiaries,
Sturgeon Electric Company, Inc. and Power Piping Company, are engaged primarily
in the installation and maintenance of electrical equipment and lighting
systems for commercial, industrial and electrical utility customers and in the
erection and maintenance of high and low pressure piping systems for electrical
utilities and steel industry customers.
All the shares of Harlan were exchanged for $13,612,000 in cash and
$5,679,000 of 7% convertible subordinated notes. The principal of each note
will be due in three equal installments on January 3, 2000, 2001 and 2002, with
interest payable semiannually each year. The notes are convertible into
450,000 shares of Myers common stock at a price per share of $12.62. Myers
also refinanced $8,756,000 of Harlan debt. The transaction was financed
through cash on hand and borrowings under a new $25,000,000 revolving and term
credit facility with Harris Trust and Savings Bank and Comerica Bank. The
transaction has been accounted for using the purchase method of accounting and
the results of operations of Harlan have been included in the Company's
consolidated financial statements since the effective date.
The following unaudited pro forma summary presents the consolidated
results of continuing operations for the six month period ended June 30, 1994
as if the acquisition had occured January 1, 1994 and does not purport to be
indicative of what would have occurred had the acquisition actually been made
as of January 1, 1994 or of results which may occur in the future (in
thousands, except per share amounts).
1994
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Contract revenue $116,640
Income 2,839
Income per share
Primary 1.12
Fully diluted .99
Adjustments made in arriving at pro forma unaudited results of operations
include increased interest expense on acquisition debt, amortization of
goodwill and related tax adjustments.
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3 - CONTINGENCIES
The Company has been involved in two lawsuits as a result of errors in
the design of four transmission towers by the Company's former engineering
subsidiary for City Utilities Commission of Owensboro, Kentucky (OMU). The
engineering subsidiary has been sold but the Company retained the rights and
obligations related to these lawsuits as part of the sale agreement.
One lawsuit (the Kentucky lawsuit) alleged that the engineering
subsidiary negligently designed and engineered the towers, and that OMU
incurred damages as a result of the redesign and replacement of the four
towers. During 1993, OMU agreed to a settlement of the case pursuant to which
it accepted payment of $1.3 million from the Company.
The other lawsuit (the New York lawsuit) concerns the insurance coverage
of the engineering subsidiary related to the design errors. The Company
notified its primary and excess umbrella insurance carriers at the time of the
discovery of the design errors. The Company's excess umbrella carrier denied
insurance coverage for the damages above the primary carrier's policy limits
and filed an action against the Company seeking a declaratory judgement that
the umbrella insurance coverage did not apply to the loss on several theories.
The Company counterclaimed against the umbrella carrier and, in addition, in a
third party action, brought suit against three former insurance brokers which
had procured the insurance for the Company. The Company is seeking to recover
$550,000 of unreimbursed costs it incurred in the disassembly, redesign and
replacement of the towers, the amount of payments it made to OMU, the legal and
related expenses it incurred in the Kentucky lawsuit, legal and related
expenses it has and will incur in the New York lawsuit, and interest.
The approximately $550,000 of unreimbursed costs as well as the $1.3
million paid to OMU during 1993 is recorded on the Company's books as a
non-current asset. Management is of the opinion that the amounts so recorded
will be recovered in the New York lawsuit from its excess umbrella insurance
carrier and its brokers, individually or collectively.
The Company is also involved in various other legal matters which arise
in the ordinary course of business, none of which is expected to have a
material adverse effect.
4 - EARNINGS PER SHARE
In 1995, the computation of primary earnings per share is based on the
weighted average number of outstanding common shares and additional shares
assuming the exercise of stock options. The computation of fully diluted
earnings per share further assumes the conversion of the 7% convertible
subordinated notes due January 3, 2000, 2001 and 2002. In 1995 and 1994, both
primary and fully diluted earnings per common share were based on the weighted
average number of outstanding common shares.
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5 - SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(Dollars in thousands, except per share amounts)
1995
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MAR. 31 JUNE 30 SEPT. 30 DEC. 30 YEAR TO DATE
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Contract Revenue $ 56,051 $ 64,015 $ $ $ 120,066
Gross Profit 6,653 7,338 13,991
Net Income 252 1,005 1,257
Income Per Share:
Primary .10 .40 .50
Fully diluted .10 .35 .46
Dividends Paid Per Share .05-1/2 .06-1/4 11-3/4
Market Price:
High 12-7/8 13-3/4 13-3/4
Low 10-5/8 11-3/8 10-5/8
1994
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MAR. 31 JUNE 30 SEPT. 30 DEC. 31 YEAR TO DATE
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Contract Revenue $ 21,548 $ 22,243 $ 21,675 $ 21,376 $ 86,842
Gross Profit 2,456 3,316 3,072 3,453 12,297
Income from Continuing Operations 26 742 759 802 2,329
Net Income 26 742 759 652 2,179
Income Per Share:
Continuing Operations .01 .30 .30 .32 .93
Net Income .01 .30 .30 .26 .87
Dividends Paid Per Share .05-1/2 .05-1/2 .05-1/2 .05-1/2 .22
Market Price:
High 12 12-1/4 13-5/8 12-3/4 13-5/8
Low 10-3/8 10-3/8 9-3/4 10-3/4 9-3/4
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Part I
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1995
RESULTS OF OPERATIONS
Effective as of January 3, 1995, the Company acquired all the stock of
Harlan Electric Company. Harlan and its wholly-owned subsidiaries, Sturgeon
Electric Company, Inc. and Power Piping Company (hereinafter collectively
referred to as "Harlan"), are engaged primarily in the installation and
maintenance of electrical equipment and lighting systems for commercial,
industrial and electrical utility customers and in the erection and maintenance
of high and low pressure piping systems for electrical utilities and steel
industry customers. (See Note 2 to Consolidated Financial Statements).
The Company reported net income of $1,005,000 or $.40 per share and
$1,257,000 or $.50 per share for the three and six month periods ended June 30,
1995. This compares to $742,000 or $.30 per share and $768,000 or $.31 per
share for the same periods in 1994.
Revenues for the three and six month periods were $64,015,000 and
$120,066,000 in 1995 compared to $22,243,000 and $43,791,000 in 1994. Harlan's
contribution to 1995 revenues accounts for most of the growth compared to 1994.
Gross profits for the three and six month periods of 1995 were
$7,338,000 or 11.5% and $13,991,000 or 11.7% compared to $3,316,000 or 14.9%
and $5,772,000 or 13.2% for the same periods in 1994. Harlan's contribution to
1995 gross profits accounts for most of the growth in 1994. Margins were
reduced in 1995 due to increased revenues from certain contracts which were bid
with lower mark-ups due to competition.
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 unseasonal
weather and delays in receipt of construction materials which are typically
procured by the Company's clients. The seasonal nature of outside electrical
construction 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 were $5,224,000 and
$10,937,000 for the three and six month periods of 1995 compared to $2,034,000
and $4,357,000 in 1994. This represents 8.2% and 9.1% of consolidated revenues
for the three and six month period of 1995 and 9.1% and 9.9% for the same
periods in 1994. Harlan accounts for most of the increase over 1994.
The Company's backlog at June 30, 1995 is $69,400,000 compared to
$28,200,000 at December 31, 1994 and $31,215,000 at June 30, 1994.
Substantially all of the current backlog will be completed within twelve months
and approximately 93% is expected to be completed by December 31, 1995. Harlan
accounts for a majority of the increase in the backlog from the prior year.
LIQUIDITY AND CAPITAL RESOURCES
On January 3, 1995, the Company borrowed $10,000,000 under a new term
loan agreement and $9,500,000 under a $15,000,000 bank revolving line of credit
to finance the Harlan acquisition and pay off Harlan's line of credit balance.
The Company also issued $5,679,000 of subordinated convertible debentures to
some of Harlan's former shareholders in the acquisition. The term loan is due
in quarterly payments of $625,000 over four years and the revolving line of
credit expires on December 31, 1998. The
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subordinated convertible debentures are to be paid in three equal installments
in years 2000, 2001 and 2002. The Company has outstanding letters of credit
with the bank totaling $12,373,000 which guarantee the Company's payment
obligation under its insurance programs. The Company anticipates that its line
of credit, cash balances and internally generated cash flows will be sufficient
to fund operations, capital expenditures and debt service requirements for the
next twelve months. The Company is also confident that its financial condition
will allow it to meet long-term capital requirements.
A quarterly dividend of $.0625 per share was paid on June 15, 1995.
The Company's cash decreased $5,740,000 for the six months. Cash
provided by operations was $4,791,000. Cash used in the acquisition of Harlan
was $12,995,000 and cash used for capital expenditures was $1,534,000. Cash
provided from financing was $3,998,000.
The Company's current ratio is 1.4:1 at June 30, 1995 compared to 1.6:1
at December 31, 1994.
Capital acquisitions for 1995 totalled $1,734,000. The Company
anticipates acquiring a total of approximately $3,900,000 of capital assets in
1995.
PART II
Item 1. Legal Proceedings
There were no material developments during the quarter related to legal
proceedings previously reported by the Company.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders was held on May 11, 1995 pursuant to
a notice of meeting and proxy statement sent to the Company's stockholders on
or about April 4, 1995. Mr. Charles M. Brennan III was elected as the Class
III director whose term expires at the 1998 annual meeting of stockholders.
Mr. William G. Brown and Mr. John M. Harlan continued as Class I directors.
Mr. Allan E. Bulley, Jr. and Mr. Bide L. Thomas continued as Class II
directors. The Class I and II directors' terms expire at the 1996 and 1997
annual meeting of stockholders, respectively.
The stockholders approved the Company's 1995 Stock Option Plan by a vote of
1,248,986 shares in favor and 224,570 shares against and 15,104 shares
abstaining. Reference to the description of the 1995 Stock Option Plan set
forth in the Company's proxy statement is hereby incorporated.
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 second
quarter of 1995.
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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.
The L. E. Myers Co. Group
Date: July 27, 1995 By:_________________________________________
Elliott C. Robbins, Sr. Vice President,
Treasurer, and Chief Financial Officer
(duly authorized representative of
registrant and principal financial
officer)
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THE L.E. MYERS CO. GROUP
QUARTERLY REPORT ON FORM 10Q
For the Three and Six Months Ended June 30, 1995 and 1994
Exhibit Index
Number Description Page (or Reference)
- --------------------- -------------------
10.1 1995 Stock Option Plan 12
10.2 Management Incentive Plan 16
11 Computation of Net Income Per Share 18
27 Financial Data Schedules 19
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EXHIBIT 10.1
THE L. E. MYERS CO. GROUP
1995 STOCK OPTION PLAN
1. STATEMENT OF PURPOSE. The purpose of this Stock Option Plan (the
"Plan") is to benefit The L. E. Myers Co. Group (the "Company") and its
subsidiaries through the maintenance and development of management by offering
certain present and future key individuals a favorable opportunity to become
holders of stock in the Company over a period of years, thereby giving them a
permanent stake in the growth and prosperity of the Company and encouraging
them to continue their involvement with the Company or its subsidiaries.
2. ADMINISTRATION. The Plan shall be administered by a committee (the
"Committee") of the Board of Directors of the Company (the "Board"), consisting
of not less than two members of the Board who are not employees or officers of
the Company or any of its subsidiaries. Each member of the Committee shall be
appointed from time to time by the Board and shall serve at the pleasure of the
Board. Only "disinterested persons", as such term is defined in Section
16b-3(c)(2)(i) of the Securities Exchange Act of 1934 (as amended), shall serve
as members of the Committee. The Board of Directors may from time to time,
create a management subcommittee consisting of officers of the Company, and
delegate to such subcommittee the authority to grant options to non-officer
employees of the Company subject to subsequent ratification of the grants by
the Committee.
Subject to the terms of the Plan, the Committee shall have the authority,
in its sole discretion, (a) to determine the individuals to whom options are
granted under the Plan; (b) to determine the number of shares subject to each
option; (c) to determine the exercise price per share of each option (subject
to Section 5 of the Plan); (d) to determine the time or times when options are
granted; (d) to determine the time or times when, or conditions upon which,
each option becomes exercisable; (e) to accelerate the exercisability of any
option granted pursuant to the Plan including with respect to options held by
employees whose employment has been terminated by reason of death, permanent
disability or retirement; (f) to determine the term of each option (subject to
Section 6 of the Plan); (g) to prescribe the form or forms of agreements which
evidence options granted under the Plan; and (h) to interpret the Plan and to
adopt rules or regulations (consistent with the terms of the Plan) which, in
the Committee's opinion, may be necessary or advisable for the administration
of the Plan. Any action taken or decision made by the Committee in connection
with the administration and interpretation of the Plan shall, to the extent
permitted by law, be conclusive and binding upon grantees of options under the
Plan, including any transferee or assignee of any option granted under the Plan
or any person claiming rights under or through such optionee.
3. ELIGIBILITY. Options may be granted to key employees of the Company
and its subsidiaries selected initially and from time to time thereafter by the
Committee in its sole discretion on the basis of their importance to the
business of the Company or its subsidiaries.
4. GRANTING OF OPTIONS. Options may be granted under the Plan under
which a total of not in excess of 300,000 shares of common stock of the
Company, $1.00 par value, ("Common Stock") may be purchased from the Company,
subject to adjustment as provided in Section 10. Options granted under the
Plan will not be treated as incentive stock options as defined in Section 422A
of the Internal Revenue Code of 1986, as amended (the "Code").
In the event that an option expires or is terminated or canceled
unexercised as to any shares, such released shares may be made the subject of
options granted hereunder (including without limitation options granted in
substitution for canceled options). Shares subject to options may be made
available from unissued or reacquired shares of Common Stock.
5. OPTION EXERCISE PRICE. The option exercise price of each option shall
be determined by the Committee and, subject to the provisions of Section 10
hereof, shall be not less than 100% of the fair market value, at the time the
option is granted, of the shares of Common Stock subject to the option. Any
determination of the fair market value or of the method of computing fair
market value of a share of
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Common Stock made by the Committee pursuant to any provision of this Plan shall
be final, binding and conclusive on all parties.
6. DURATION OF OPTIONS, INCREMENTS, AND EXTENSIONS. (a) Subject to the
provisions of Paragraph 8, each option shall be for a term of not more than ten
years as shall be determined by the Committee at the date of the grant. The
Committee shall have the authority to determine with respect to each option the
time or times at which, or the conditions upon which, any option, or portions
thereof, shall become exercisable.
(b) The Committee, in its discretion, may accelerate the exercisability of
all or any portion of any option; or (ii) at any time prior to the expiration
or termination of any option previously granted, extend the term of any option
for such additional period as the Committee in its discretion shall determine,
except that the aggregate term of any such option, including the original term
of the option and any extensions thereof, shall in no event exceed ten years
from the date of the original grant.
7. EXERCISE OF OPTIONS. (a) An option may be exercised by giving
written notice to the Company, attention of the Secretary, specifying the
number of shares to be purchased, accompanied by the full purchase price for
the shares to be purchased in cash or by check, except that the Committee may
permit, in its discretion, the purchase price to be paid in any other manner,
including but not limited to, payment, in whole or in part, by the delivery to
the Company of shares of Common Stock in such manner as the Committee may
specify. Shares of the Common Stock delivered upon exercise of an option shall
be valued at their fair market value as of the close of business on the date
preceding the date of exercise as determined by the Committee.
(b) At the time of any exercise of any option, the Company may, if it
shall determine it necessary or desirable for any reason, require the optionee
(or his heirs, legatees, or legal representative, as the case may be) as a
condition upon the exercise thereof, to deliver to the Company a written
representation of present intention to purchase the shares for investment and
not for distribution. In the event such representation is required to be
delivered, an appropriate legend may be placed upon each certificate delivered
to the optionee upon his exercise of part or all of the option and a stop
transfer order may be placed with the transfer agent.
(c) Each option shall also be subject to the requirement that, if at any
time the Company determines, in its discretion, that the listing, registration
or qualification of the shares subject to the option upon any securities
exchange or under any state or federal law or approval of any regulatory body
is necessary or desirable as a condition of or in connection with, the issue or
purchase of shares thereunder, the option may not be exercised in whole or in
part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Company.
(d) At the time of the exercise of any option, the Company may require, as
a condition of the exercise of such option, that the optionee pay to the
Company, in such manner and under such conditions as the Committee may specify,
an amount equal to the amount of the tax the Company may be required to
withhold as a result of the exercise of such option by the optionee.
8. EXERCISE AFTER TERMINATION OF EMPLOYMENT. (a) Any optionee whose
employment is terminated for any reason other than death, permanent disability,
or retirement may exercise his or her option to the extent exercisable at the
date of such termination at any time during its specified term prior to the
90th day after the date of such termination, provided, however, that if the
optionee's employment is terminated for cause such optionee's option shall
expire and all rights to purchase shares pursuant thereto shall terminate
immediately. Temporary absence from employment because of illness, vacation,
approved leaves of absence, and transfers of employment among the Company and
its subsidiaries, shall not be considered to terminate employment or to
interrupt continuous employment.
(b) In the event of termination of employment because of death,
permanent disability (as that term is defined in Section 22(e)(3) of the Code,
as now in effect or as subsequently amended) or retirement (as hereinafter
defined), the option may be exercised to the extent exercisable at the date of
such termination (or to the extent exercisability has been accelerated by the
Committee in its sole discretion) by the optionee or, if the optionee is not
living, by the optionee's heirs, legatees, or legal representative, as the case
may be, at any time during its specified term prior to the third anniversary of
the date of death,
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3
permanent disability or retirement (as hereinafter defined). Retirement as used
herein shall mean termination of employment (other than for death or
disability) at any date after (i) the employee reaches age 60 and (ii) the sum
of the terminated employee's age added to the number of years such employee was
employed by the Company or any of its subsidiaries is equal to or greater than
75.
(c) Notwithstanding the provisions of 8(a) and 8(b) above, the Committee
may specify other provisions in the form of agreement evidencing an option with
respect to the exercise of such option after the optionee's termination of
employment.
9. NON-TRANSFERABILITY OF OPTIONS. Except as provided below, no option
shall be transferable by the optionee otherwise than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Internal Revenue Code of 1986 (as amended), and each option
shall be exercisable during an optionee's lifetime only by such optionee.
Notwithstanding the above, the Committee may, in its discretion, grant an
option which would permit the optionee, at any time prior to his or her death,
to transfer or assign all or any portion of such option to: (i) his or her
spouse or lineal descendants or the spouse or spouses of his or her lineal
descendants; (ii) the trustee of a trust established for the benefit of his or
her spouse or lineal descendants or the spouse or spouses of his or her lineal
descendants; or (iii) a partnership whose only partners are the spouse and/or
lineal descendants and/or the spouse or spouses of the lineal descendants of
the optionee; provided that the form of agreement evidencing such option
specifically sets forth the transfer limitations, the optionee receives no
consideration from the transferee or assignee, and the transferee or assignee
is subject to all the conditions applicable to the option prior to the grant.
Any such transfer or assignment shall be evidenced by an appropriate written
document executed by the optionee and a copy of such document shall be
delivered to the Committee on or prior to the effective date of the transfer or
assignment.
10. ADJUSTMENT. (a) In the event that the Company's outstanding Common
Stock is changed by any stock dividend, stock split or combination of shares,
the number of shares subject to this Plan and to options under this Plan shall
be proportionately adjusted.
(b) In case of any capital reorganization, or of any reclassification of
the Common Stock or in case of a consolidation of the Company with or the
merger of the Company with or into any other corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification of outstanding shares of Common
Stock) or of the sale of the properties and assets of the Company as, or
substantially as, an entirety to any other corporation, the Company, or the
corporation resulting from such consolidation or surviving such merger or to
which such sale shall be made, as the case may be, shall determine that upon
exercise of options granted under the Plan after such capital reorganization,
reclassification, consolidation, merger or sale there shall be issuable upon
exercise of an option a kind and amount of shares of stock or other securities
or property (which may, as an example, be a fixed amount of cash equal to the
consideration paid to stockholders of the Company for shares transferred or
sold by them) which the holders of the Common Stock (immediately prior to the
time of such capital reorganization, reclassification, consolidation, merger or
sale) are entitled to receive in such transaction as in the judgement of the
Board of Directors is required to compensate equitably for the effect of such
event upon the exercise rights of the optionees. The above provisions of this
paragraph shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers and sales.
(c) In the event of any such adjustment the purchase price per share shall
be appropriately adjusted.
11. DIVIDEND EQUIVALENT PAYMENTS. The Committee, in its sole discretion,
may provide with respect any option granted under the Plan that, on each date
on which cash dividends are paid on shares of Common Stock the Company will pay
to the optionee holding such option an amount in cash equal to the amount of
the dividends that would have been paid to such optionee had the optionee owned
that number of shares of Common Stock for which such option is then currently
exercisable or for that number of shares for which such option was granted
regardless of whether or not such option is currently exercisable.
12. AMENDMENT OF PLAN. The Board may amend or discontinue the Plan at any
time. However, no such amendment or discontinuance shall change or impair any
option previously granted without the consent of the optionee, increase the
maximum number of shares which may be purchased by all optionees, change the
minimum purchase price, or permit granting of options to the members of the
- 14 -
4
Committee.
13. CONTINUED EMPLOYMENT. Nothing contained in the Plan or in any option
granted pursuant thereto shall confer upon any optionee any right to continue
to be employed by the Company or any subsidiary of the Company, or interfere in
any way with the right of the Company or its subsidiaries to terminate such
optionee's employment at any time.
14. EFFECTIVE DATE. On March 22, 1995, the Plan as previously authorized
was approved, effective January 3, 1995, by the Board of Directors who directed
that the Plan be submitted to the stockholders of the Company for approval. If
the Plan is approved by the affirmative vote of the holders of a majority of
the shares of Common Stock of the Company voting in person or by proxy at a
duly held stockholders' meeting, the Plan shall be deemed to have become
effective on January 3, 1995. Options may be granted under the Plan prior to
approval by stockholders of the Company and, in each such case, the date of
grant shall be determined without reference to the date of approval of the Plan
by stockholders of the Company; provided, however, that if the Plan has not
been approved by stockholders at or prior to the 1995 annual meeting of
stockholders of the Company (or any adjournments thereof), then all options
granted hereunder shall be canceled and void.
- 15 -
1
EXHIBIT 10.2
THE L.E. MYERS GROUP
MANAGEMENT INCENTIVE PLAN
(BOARD APPROVED - 2/23/95)
1. PURPOSE. The L.E. Myers Group Management Incentive Plan
("MIP") is established as a discretionary incentive plan which provides an
opportunity for key management to be awarded a substantial discretionary
incentive payment when business is strong.
2. ELIGIBILITY. At the Discretion of the Board of Directors,
awards under the MIP may be granted to key management of the Company
recommended by the Executive Management Committee and approved by the board of
Directors in its sole discretion (hereinafter "Participant" or "Participants").
To be eligible for an award, a Participant must be a full-time employee of the
Company or one of its affiliates on the date the award is paid. For purposes
of this section, the term "affiliate" shall mean a person or entity which
directly or indirectly, is controlled by, or is under common control, with the
Company.
3. AWARDS.
3.1 THRESHOLD FOR AWARDS. Before any incentive compensation award
("MIP award") can be made, the Company must achieve 75% of its approved
business plan's earnings per share goal. If this threshold is not achieved,
only special awards at the sole discretion of the Board of Directors, may be
made.
3.2 GROUPING OF PARTICIPANTS. Awards will vary by groups of key
employees. The Executive Management Committee will maintain a list of eligible
employees in each group which list shall be approved by the Board of Directors.
3.3 AWARD LEVELS. Each participant shall be eligible to receive
an award for each calendar year of service (a "Plan Year"), for which the
earnings per share threshold is achieved. The following matrix shows the MIP
award levels to be paid as a percentage of salary for various performance
ratings as set forth in Section 4.4 below:
PERFORMANCE RATING
GROUP 75% 100% 125% 150%
----- ---- ----- ----- -----
I 25% 55% 85% 115%
II 25% 50% 75% 100%
III 20% 35% 50% 65%
IV 10% 15% 20%
V non-overtime 5% 10% 15% 20%
V overtime eligible 1 week 2 weeks 3 weeks 4 weeks
3.4 GRANT OF AWARDS. MIP awards will be paid during the first
quarter of each year.
4.0 ADMINISTRATION.
4.1 COMMITTEE. The MIP shall be administered by the Executive
Management Committee appointed by the Board of Directors.
4.2 ANNUAL GOALS. Prior to each December 31st, each Group I, II,
III, and IV Participant must submit a completed annual goals form to the
Executive Management Committee. The annual goals form must be approved by the
Participant's immediate supervisor prior to submission. Prior to January 31st
following the year being evaluated, each Participant must submit a copy of his
or her annual goals form with (a) actual performance against goals under a
heading "Actual Performance" and (b) rating of performance and comments, if
any, under a heading "Self Rating."
- 16 -
2
4.3 REVIEW BY COMMITTEE. The Executive Management Committee shall
review each Group I, II, III and IV Participant's performance and give a final
rating recommendation for each goal. The Executive Management Committee shall
then weigh the individual goal ratings to determine the Participant's
performance rating upon which his or her MIP award recommendation is based.
The Executive Management Committee shall recommend to the Board of Directors
the amount of the MIP award for each Participant prior to February 28 of each
year. Each Vice President shall submit to the Executive Management Committee
his or her recommendation for rating and awards for his or her Group V
Participants. The Executive Management Committee shall review each such
recommendation with the respective Vice President and following such review
will make a determination of a rating and award level to be given to each such
participant and recommend to the Board of Directors the amount of the MIP award
for each Participant prior to February 28 of each year. The Board of
Directors, in its sole discretion, shall determine awards to be made, if any.
4.4 CRITERIA. In evaluating and rating each Participant's
performance, the Executive Management Committee shall use the following
criteria:
4.4.1 PERFORMANCE AGAINST ANNUAL PLAN. The principal criteria
will be actual revenue, contract margins, property income, operating income,
cash flow and return on net assets performance versus plan. Corporate officers
and staff will be measured against the consolidated corporate plan and other
Participants will be measured against their respective annual plans.
4.4.2 PERFORMANCE AGAINST NON-FINANCIAL GOALS. Each Group I,
II, III and IV Participant will set three non-financial goals annually such as
increasing market share with current clients, capturing a new client,
penetrating a new geographic region or integrating an acquisition. The
determinant will be the evaluation of Participant's achievement of each
non-financial goal.
4.4.3 SAFETY. Each operation's record in terms of incidence rate
(total and lost time) and actual costs, among other things, will be evaluated
in determining the final incentive award recommendation.
The Executive Management Committee rating is made as a percentage
of goal achievement. For example, if a Participant's performance on a
particular goal was determined to have exactly met plan, the rating for this
goal would be 100%. If performance does not achieve at least 75% of the goal,
the rating will be zero. Exceptional achievement can be given a performance
rating up to 150% of the goal. The individual goal ratings are then weighted
to determine a Participant's Performance Rating.
4.5 COMMITTEE'S POWERS. The Executive Management Committee shall
have such powers as may be delegated to it by the Board of Directors from time
to time as may be necessary to discharge its duties hereunder, including, but
not in the way of limitation, the following powers, rights and duties:
4.5.1 INTERPRETATION OF MIP. The Executive Management Committee
shall have the power, right and duty to construe and interpret the plan
provisions and to determine all questions arising under the MIP.
4.5.2 MIP PROCEDURES. The Executive Management Committee shall
have the power, right and duty to adopt and promulgate procedures, rules,
regulations and forms as it considers necessary and appropriate for the
implementation, management and administration of the MIP.
5. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing contained in this
MIP shall give any Participant the right to be retained in the employment of
the Company or affect the right of the Company to dismiss any Participant. The
adoption of this MIP shall not constitute a contract between the Company and
any Participant. No Participant shall receive any right to be granted an award
hereunder nor shall any such award be considered as compensation under any
employee benefit plan of the Company, except as otherwise determined by the
Company.
6. AMENDMENT OF MIP. The Board of Directors or the Executive
Management Committee may amend or discontinue the MIP at any time. However, no
such amendment or discontinuance shall change or impair any MIP award
previously given under the MIP without the consent of the Participant.
- 17 -
1
THE L.E. MYERS CO. GROUP
EXHIBIT 11
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
(In thousands, except per share data)
- ------------------------------------------------------------------------------------ ------------------------
PERIOD ENDED JUNE 30 THREE MONTHS SIX MONTHS
- ------------------------------------------------------------------------------------ ------------------------
1995 1994 1995 1994
---------- ---------- ---------- ---------
Primary income per share
Net income $ 1,005 $ 742 $ 1,257 $ 768
------------------------ ----------------------
Weighted average number of common shares
outstanding during the period 2,380 2,385 2,380 2,389
Add - common equivalent shares (determined
using the "treasury stock" method)
representing shares issuable upon
exercise of the common stock equivalents 149 105 146 105
------------------------ ----------------------
Weighted average number of shares
for income per common share 2,529 2,490 2,526 2,494
======================== ======================
Income per share - primary $ .40 $ .30 $ .50 $ .31
======================== ======================
Fully diluted income per share
Net income $ 1,005 $ 742 $ 1,257 $ 768
Add interest on subordinated convertible
debentures, net of tax 58 N/A 116 N/A
------------------------ ----------------------
$ 1,063 $ 742 $ 1,373 $ 768
------------------------ ----------------------
Weighted average number of common shares
outstanding during the period 2,380 2,385 2,380 2,389
Add
- - Common equivalent shares (determined
using the "treasury stock" method)
representing shares issuable upon
exercise of the common stock equivalents 149 105 146 105
- - Shares assumed converted from subordinated
convertible debentures 450 N/A 450 N/A
------------------------ ----------------------
2,979 2,490 2,976 2,494
======================== =======================
Income per share - fully diluted $ .35 $ .30 $ .46 $ .31
======================== =======================
5
1,000
3-MOS
DEC-31-1995
APR-01-1995
JUN-30-1995
375
0
43,022
1,000
0
58,261
60,504
37,500
85,432
42,050
21,044
2,512
0
0
22,095
85,432
64,015
64,015
56,677
61,901
102
0
430
1,675
670
1,005
0
0
0
1,005
.40
.35
