-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L2m/r6lqq4AMNwwr4r32xWWxa2dPHjQnZcSkznY8dgH2le3oKqlz5wKA4SDsPDXH FODHP5Lqc9XEA2x78BmfVw== 0000700923-96-000014.txt : 19961106 0000700923-96-000014.hdr.sgml : 19961106 ACCESSION NUMBER: 0000700923-96-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961105 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MYR GROUP INC CENTRAL INDEX KEY: 0000700923 STANDARD INDUSTRIAL CLASSIFICATION: WATER, SEWER, PIPELINE, COMM AND POWER LINE CONSTRUCTION [1623] IRS NUMBER: 363158643 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08325 FILM NUMBER: 96654064 BUSINESS ADDRESS: STREET 1: 2550 W GOLF STE 200 CITY: ROLLING MEADOWS STATE: IL ZIP: 60008 BUSINESS PHONE: 7082901891 MAIL ADDRESS: STREET 1: 2550 W GOLF ROAD STREET 2: SUITE 200 CITY: ROLLING MEADOWS STATE: IL ZIP: 60008 FORMER COMPANY: FORMER CONFORMED NAME: MYERS L E CO GROUP DATE OF NAME CHANGE: 19920703 10-Q 1 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, 1996 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 25, 1996: 3,236,712 MYR GROUP INC. I N D E X PART I. Financial Information Page No. Item 1. Financial Statements Condensed Consolidated Balance Sheets - September 30, 1996 and December 31, 1995 2 Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 1996 and 1995 3 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1996 and 1995 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 6. Exhibits and Reports on Form 8-K 9 SIGNATURE 10 Part I, Item 1 Financial Information MYR Group Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) September 30 Dec. 31 1996 1995 (Unaudited) * ASSETS Current assets: Cash and cash equivalents $ 542 $ 703 Contract receivables including retainage 56,147 51,114 Costs and estimated earnings in excess of billings on uncompleted contracts 13,529 14,851 Deferred income taxes 4,602 4,602 Other current assets 572 1,594 Total current assets 75,392 72,864 Property and equipment: 59,637 61,625 Less accumulated depreciation 37,415 38,481 22,222 23,144 Intangible assets 2,493 2,681 Other assets 3,591 3,145 Total assets $ 103,698 $ 101,834 LIABILITIES Current liabilities: Current maturities of long-term debt $ 15,424 $ 9,178 Accounts payable 8,436 13,886 Billings in excess of costs and estimated earnings on uncompleted contracts 6,236 5,042 Accrued insurance 12,188 13,053 Other current liabilities 16,536 16,215 Total current liabilities 58,820 57,374 Deferred income taxes 2,861 2,861 Other liabilities 399 391 Long-term debt: Revolver and other debt 3,146 3,021 Term loan 3,125 5,000 Industrial revenue bond 890 890 Subordinated convertible debentures 5,679 5,679 Total long-term debt 12,840 14,590 SHAREHOLDERS' EQUITY Common stock and additional paid-in capital 9,324 9,248 Retained earnings 21,457 19,326 Treasury stock (1,087) (1,548) Restricted stock awards and shareholder note receivable (916) (408) Total shareholders' equity 28,778 26,618 Total liabilities and shareholders' equity $ 103,698 $ 101,834 *Condensed from audited financial statements 2 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 1996 1995 1996 1995 Contract revenue $ 80,712 $ 66,638 $ 214,140 $ 186,704 Contract cost 72,430 58,670 191,400 164,745 Gross profit 8,282 7,968 22,740 21,959 Selling, general and administrative expenses 5,434 5,482 16,749 16,418 Income from operations 2,848 2,486 5,991 5,541 Other income (expense) Interest income 2 28 12 63 Interest expense (508) (422) (1,386) (1,317) Gain on sale of property and equipment 156 56 549 163 Miscellaneous (98) (69) (374) (275) Income from continuing operations before income taxes 2,400 2,079 4,792 4,175 Income tax expense 864 831 1,821 1,670 Income from continuing operations 1,536 1,248 2,971 2,505 Loss from discontinued operations - - (360) - Net income $ 1,536 $ 1,248 $ 2,611 $ 2,505 Earnings per share - Primary Income from continuing operations $ .44 $ .37 $ .86 $ .74 Loss from discontinued operations - - (.10) - Net Income .44 .37 .76 .74 Earnings per share - Fully Diluted: Income from continuing operations .39 .32 .78 .66 Loss from discontinued operations - - (.09) - Net Income .39 .32 .69 .66 Dividends per common share .050 .047 .150 .135 Weighted average common shares and common share equivalents outstanding Primary 3,470 3,412 3,438 3,385 Fully Diluted 4,070 4,040 4,043 4,040 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 1996 1995 CASH FLOWS FROM OPERATIONS Income from continuing operations $ 2,971 $ 2,505 Adjustments to reconcile income from continuing operations to cash flows from continuing operations Depreciation and amortization 4,649 4,303 Amortization of intangibles 205 241 Gain from disposition of assets (549) (163) Changes in current assets and liabilities (9,214) 876 Cash flows from continuing operations (1,938) 7,762 Cash flows from discontinued operations (360) - Cash flows from operations (2,298) 7,762 CASH FLOWS FROM INVESTMENTS Expenditures for property and equipment (3,988) (3,436) Proceeds from disposition of assets 2,088 1,630 Cash used in acquisition, net of cash acquired - (12,995) Cash flows from investments (1,900) (14,801) CASH FLOWS FROM FINANCING Proceeds (repayments) of long term debt 4,497 (17,657) Proceeds from issuance of debt - 19,500 Proceeds from exercise of stock options 13 - Increase (decrease) in deferred compensation 8 (21) Financial costs - (133) Dividends paid (481) (426) Cash flows from financing 4,037 1,263 Decrease in cash and cash equivalents (161) (5,776) Cash and cash equivalents at beginning of year 703 6,115 Cash and cash equivalents at end of period $ 542 $ 339 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, 1996 are not necessarily indicative of the results to be expected for the full year. In December 1995, the Company effected a four-for-three stock split in the form of a stock dividend. The $838,000 par value of the additional shares issued was transferred from additional paid-in capital to common stock. Amounts relating to number of shares and amounts per share have been adjusted for 1995 to reflect the stock split. 2 - Acquisition On January 3, 1995, the Company completed the acquisition of all the stock of Harlan Electric Company ("Harlan"), pursuant to an Agreement and Plan of Merger dated October 5, 1994. 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 subordinates 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 600,000 shares of the Company's common stock at a price per share of $9.4659. The Company 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. 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 the OMU lawsuits (as defined in Note 4). In 1996, the Company recorded additional amounts, primarily legal expenses related to the OMU lawsuits, which resulted in additional losses of $360,000 (net of income tax benefits of $240,000). The additional provision includes anticipated cost for the trial and appeal since it now appears there is no opportunity for the Company to settle its dispute with the insurance carrier. 4 - 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 $1,300,000 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 judgment 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 $1,300,000 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. 5 - 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. 6 - Changes in Accounting Policy In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation", which will be effective for the Company beginning January 1, 1996. SFAS No. 123 requires expanded disclosures of stock-based compensative arrangements with employees and encourages (but does not require) compensation cost to be measured based on the fair value of the equity instrument awarded. Companies are permitted, however, to continue to apply APB Opinion No. 25, which recognizes compensation cost based on the intrinsic value of the equity instrument awarded. The Company will continue to apply APB Opinion No. 25 to its stock based compensation awards to employees and will disclose the required pro forma effect on net income and earnings per share on an annual basis. 7 - Supplemental Quarterly Financial Information (Unaudited) (Dollars in thousands, except per share amounts) 1996 Mar. 31 June 30 Sept. 30 Dec. 31 Year Contract revenue $ 64,376 $ 69,052 $ 80,712 $ 214,140 Gross profit 6,430 8,028 8,282 22,740 Income from continuing operations 166 1,269 1,536 2,971 Net income 166 909 1,536 2,611 Earnings per share - Primary: Income from continuing operations 0.05 0.37 0.44 0.86 Net Income 0.05 0.26 0.44 0.76 Earnings per share - Fully diluted: Income from continuing operations 0.05 0.33 0.39 0.78 Net Income 0.05 0.24 0.39 0.69 Dividends paid per share 0.050 0.050 0.050 0.150 Market Price: High 11.00 11.75 11.75 11.75 Low 10.00 10.25 10.38 10.00 1995 Mar. 31 June 30 Sept. 30 Dec. 31 Year Contract revenue $ 56,051 $ 64,015 $ 66,638 $80,261 $ 266,965 Gross profit 6,653 7,338 7,968 7,588 29,547 Income from continuing operations 252 1,005 1,248 924 3,429 Net income 252 1,005 1,248 924 3,429 Net income per share: Primary 0.08 0.30 0.37 0.27 1.01 Fully diluted 0.08 0.26 0.32 0.25 0.91 Dividends paid per share 0.041 0.047 0.047 0.047 0.182 Market Price: High 9.66 10.31 11.91 11.81 11.91 Low 7.97 8.53 9.19 10.00 7.97 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, 1996 (Dollars in thousands) Results of Operations Continuing Operations Revenue for the three and nine month periods was $80,712 and $214,140, compared to $66,638 and $186,704 in 1995. This is an increase of 21.1% and 14.7% for the three and nine month periods, primarily due to an increase in our line construction revenues, offset by decreases in our commercial/industrial revenues. The line construction revenue increase was a result of our electric utility alliances and storm work. The commercial/industrial revenues are down from the prior year nine month levels due to cut backs in the semi-conductor industry's capital spending plans and a slow down in work for our mining business customers. Gross profit for the three and nine month periods was $8,282 and $22,740, compared to $7,968 and $21,959 in 1995. Gross profit as a percentage of revenue was 10.3% and 10.6% for the three and nine month periods, respectively, compared to 12.0% and 11.8% in 1995. The lower profit percentages are primarily due to provisions made during the quarter for prior year workers compensation reserve adjustments and to lower margins on our utility alliance work for the three and nine months ended September 30, 1996 compared to 1995. 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 are 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 $5,434 and $16,749, compared to $5,482 and $16,418 in 1995. This represents 6.7% and 7.8% of consolidated revenues for the three and nine month periods of 1996, compared to 8.2% and 8.8% for 1995. Net interest expense for the three and nine month periods was $506 and $1,374, compared to $394 and $1,254 in 1995. The increase in 1996 over 1995 is primarily due to additional borrowings to fund working capital requirements for the higher volume of work in 1996. Gain on sale of property and equipment for the three and nine month periods was $156 and $549, compared to $56 and $163 in 1995. The increase was due to the increased number of units sold in conjunction with upgrading our fleet. Net other expense for the three and nine month periods was $98 and $374, compared to $69 and $275 in 1995. Other expense primarily includes the amortization of non-competition agreements and goodwill, letter of credit fees and bank fees offset by cash discounts. Income tax expense for the three and nine month periods was $864 and $1,821, compared to $831 and $1,670 in 1995. As a percentage of income, the effective rate for the three and nine month periods was 36% and 38%, compared to 40% in 1995. The effective tax rate for the nine month period of 1996 was changed from 40% to 38% in the current quarter to reflect revised tax planning assumptions. The Company's backlog at September 30, 1996 was $124,900, compared to $69,100 at December 31, 1995, and $74,400 at September 30, 1995. Substantially all the current backlog will be completed within twelve months and approximately 60% is expected to be completed by December 31, 1996. 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. The additional provision amounting to $360 includes anticipated cost for the trial and appeal since it now appears there is no opportunity for the Company to settle its dispute with the insurance carrier. Liquidity and Capital Resources As of September 30, 1996, the company had $15,600 outstanding under a $20,000 of revolving credit facilities, and $5,625 outstanding under a term loan. The Company has outstanding letters of credit with Banks totaling $12,956. The Company believes 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. Cash flows provided include net proceeds from short term borrowing of $4,497 and proceeds from the disposition of property and equipment of $2,088. The cash flows were primarily used for operations of $2,298, net capital expenditures of $3,988 and dividend payments of $481. The Company's financial condition continues to be strong at September 30, 1996 with working capital of $16,572, compared to $15,490 at December 31, 1995. The Company's current ratio was 1.28:1 at September 30, 1996, compared to 1.27:1 at December 31, 1995. Capital expenditures for the nine months were $3,988, compared to $3,436 in 1995. 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 $2,088 and $1,630 in 1995. The Company plans to spend approximately $5,200 on capital improvements during 1996. 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 1996. 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: November 4, 1996 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, 1996 Exhibit Index Number Description Page (or Reference) 11 Computation of Net Income Per Share 12 27 Financial Data Schedules 13 EX-11 2 MYR Group Inc. Exhibit 11 SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE (In thousands, except per share data) Period Ended September 30 Three Months Nine Months 1996 1995 1996 1995 Primary income per share Net income $ 1,536 $ 1,248 $ 2,611 $ 2,505 Weighted average number of common shares outstanding during the period 3,228 3,173 3,204 3,173 Add - common equivalent shares (determined using the "treasury stock" method) representing shares issuable upon exercise of the common stock equivalents 242 239 234 212 Weighted average number of shares for income per common share 3,470 3,412 3,438 3,385 Income per common share - primary $ 0.44 $ 0.37 $ 0.76 $ 0.74 Fully diluted income per share Net income $ 1,536 $ 1,248 $ 2,611 $ 2,505 Add interest on subordinated convertible debentures, net of tax 60 60 179 176 $ 1,596 $ 1,308 $ 2,790 $ 2,681 Weighted average number of common shares outstanding during the period 3,228 3,173 3,204 3,173 Add - -Common equivalent shares (determined using the "treasury stock" method) representing shares issuable upon exercise of the common stock equivalents 242 267 239 267 - -Shares assumed converted from subordinated convertible debentures 600 600 600 600 4,070 4,040 4,043 4,040 Income per common share - fully diluted $ .39 $ .32 $ .69 $ .66 EX-27 3
5 3-MOS DEC-31-1996 SEP-30-1996 542 0 56698 551 0 75392 59637 37415 103698 58820 12840 0 0 2512 26266 103698 80712 80712 72430 77864 98 0 508 2400 864 1536 0 0 0 1536 .44 .39
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