-----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, JtoJAOIYjikIZ8SF5rNkuzFjQmOft5x7xos3R6HH/EN13uxfgs5wb5wbXu4bsfkA nrUZ0ALDrDctQWqXkwPJdQ== 0000700923-97-000013.txt : 19971103 0000700923-97-000013.hdr.sgml : 19971103 ACCESSION NUMBER: 0000700923-97-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971031 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: SEC FILE NUMBER: 001-08325 FILM NUMBER: 97705453 BUSINESS ADDRESS: STREET 1: THREE CONTINENTAL TOWERS STREET 2: 1701 W GOLF ROAD SUITE 1012 CITY: ROLLING MEADOWS STATE: IL ZIP: 60008-4007 BUSINESS PHONE: 8472901891 MAIL ADDRESS: STREET 1: 1701 W GOLF ROAD STREET 2: SUITE 1012 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, 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 EX-11 2 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 EX-27 3
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
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