-----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, ISwC0wk6b2vQZ+Yx3hmhtHScVMHr/FqJxtqhd3IGTvpbbH/m1xWeH0VEbv5rYuHB 1GmhTD/KM0mjCJCGW6lMyA== 0000700923-97-000009.txt : 19970811 0000700923-97-000009.hdr.sgml : 19970811 ACCESSION NUMBER: 0000700923-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970808 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: 97654172 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 June 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, Suite 1012, Tower Three, Rolling Meadows, IL 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 July 28, 1997: 3,255,615 MYR GROUP INC. I N D E X PART I. Financial Information Page No. Item 1. Financial Statements Condensed Consolidated Balance Sheets - June 30, 1997 and December 31, 1996 2 Condensed Consolidated Statements of Operations - Three and Six Months Ended June 30, 1997 and 1996 3 Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 1997 and 1996 4 Notes to Condensed Consolidated Financial Statements 5-6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-8 PART II. Other Information Item 1. Legal Proceedings 8 Item 4. Submission of Matters to a Vote of Security Holders 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) June 30 Dec. 31 1997 1996 (Unaudited) * ASSETS Current assets: Cash and cash equivalents $ 592 $ 1,011 Contract receivables including retainage 67,369 53,508 Costs and estimated earnings in excess of billings on uncompleted contracts 16,928 10,760 Deferred income taxes 4,896 4,896 Other current assets 1,190 471 Total current assets 90,975 70,646 Property and equipment: 60,249 58,668 Less accumulated depreciation 37,663 36,429 22,586 22,239 Intangible assets 2,437 2,466 Other assets 1,081 3,135 Total assets $117,079 $98,486 LIABILITIES Current liabilities: Current maturities of long-term debt $ 9,438 $ 4,445 Accounts payable 18,635 17,721 Billings in excess of costs and estimated earnings on uncompleted contracts 7,450 5,504 Accrued insurance 15,449 12,160 Other current liabilities 20,729 16,645 Total current liabilities 71,701 56,475 Deferred income taxes 3,047 3,047 Other liabilities 393 399 Long-term debt: Revolver and other debt 1,922 121 Term loan 1,250 2,500 Industrial revenue bond 695 695 Subordinated convertible debentures 5,679 5,679 Total long-term debt 9,546 8,995 SHAREHOLDERS' EQUITY Common stock and additional paid-in capital 9,278 9,315 Retained earnings 24,770 22,121 Treasury stock (869) (1,043) Unearned stock awards and shareholders' notes receivable (787) (823) Total shareholders' equity 32,392 29,570 Total liabilities and shareholders' equity $117,079 $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 June 30 Three Months Six Months 1997 1996 1997 1996 Contract revenue $112,310 $69,052 $201,314 $133,428 Contract cost 102,356 61,024 183,975 118,970 Gross profit 9,954 8,028 17,339 14,458 Selling, general and administrative expenses 6,659 5,597 12,530 11,315 Income from operations 3,295 2,431 4,809 3,143 Other income (expense) Interest income 8 4 16 10 Interest expense (400) (467) (650) (877) Gain (loss) on sale of property and equipment (254) 261 (247) 392 Miscellaneous 201 (113) 77 (276) Income from continuing operations before income taxes 2,850 2,116 4,005 2,392 Income tax expense 1,140 847 1,602 957 Income from continuing operations 1,710 1,269 2,403 1,435 Income (loss) from discontinued operations 602 (360) 602 (360) Net income $ 2,312 $ 909 $ 3,005 $ 1,075 Earnings per share - Primary Income from continuing operations $ .48 $ .37 $ .68 $ .42 Income (loss) from discontinued operations .17 (.11) .17 (.11) Net Income .65 .26 .85 .31 Earnings per share - Fully Diluted: Income from continuing operations .42 .33 .59 .38 Income (loss) from discontinued operations .14 (.09) .14 (.09) Net Income .56 .24 .73 .29 Dividends per common share .055 .050 .110 .100 Weighted average common shares and common share equivalents outstanding Primary 3,579 3,439 3,554 3,423 Fully Diluted 4,262 4,057 4,260 4,050 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) Six Months Ended June 30 1997 1996 CASH FLOWS FROM OPERATIONS Income from continuing operations $ 2,403 $ 1,435 Adjustments to reconcile income from continuing operations to cash flows from continuing operations Depreciation and amortization 2,732 3,100 Amortization of intangibles 54 162 Loss (gain) on sale of property and equipment 247 (392) Changes in current assets and liabilities (6,282) (2,163) Cash flows from continuing operations (846) 2,142 Cash flows from discontinued operations 2,456 (360) Cash flows from operations 1,610 1,782 CASH FLOWS FROM INVESTMENTS Expenditures for property and equipment (2,800) (2,396) Proceeds from disposition of assets 121 546 Cash used in acquisition, net of cash acquired (241) - Cash flows from investments (2,920) (1,850) CASH FLOWS FROM FINANCING Proceeds from long term debt 1,142 516 Proceeds from exercise of stock options 112 13 Increase (decrease) in deferred compensation (6) 5 Dividends paid (357) (320) Cash flows from financing 891 214 Increase (decrease) in cash and cash equivalents (419) 146 Cash and cash equivalents at beginning of year 1,011 703 Cash and cash equivalents at end of period $ 592 $ 849 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 six month period ended June 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 will be due in installments of $666,667, $666,667 and $1,166,666 on 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 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 Standard In February 1997, the Financial Accounting Standards Boards issued Statement of Financial Accounting Standards No. 128, `Earnings Per Share' which simplifies the method for computing earnings per share. Under the new requirements, primary earnings per share will be replaced with basic earnings per share. The statement, which will not have a material impact on the results of operations, financial position or cash flows of the Company, is effective for financial statements issued for periods ending after December 15, 1997 and will be adopted by the Company in the fourth quarter of 1997. 6 - Supplemental Quarterly Financial Information (Unaudited) (Dollars in thousands, except per share amounts) 1997 Mar 31 June 30 Sept 30 Dec 31 Year Contract revenue 89,004 112,310 201,314 Gross profit 7,385 9,954 17,339 Income from continuing operations 693 1,710 2,403 Net income 693 2,312 3,005 Earnings per share - Primary: Income from continuing operations 0.20 0.48 0.68 Net income 0.20 0.65 0.85 Earnings per share - Fully diluted: Income from continuing operations 0.18 0.42 0.59 Net income 0.18 0.56 0.73 Dividends paid per share 0.055 0.055 0.110 Market price: High 14.00 18.31 18.31 Low 12.00 11.63 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 Six Months Ending June 30, 1997 (Dollars in thousands) Results of Operations Continuing Operations Revenue for the three and six month periods was $112,310 and $201,314, compared to $69,052 and $133,428 in 1996. This is an increase of 62.6% and 50.9% for the three and six month periods, primarily due to storm work, a higher level of work in the commercial-industrial sector and an increase of line work in California. The commercial-industrial sector includes a major 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 six month periods was $9,954 and $17,339, compared to $8,028 and $14,458 in 1996. Gross profit as a percentage of revenue was 8.9% and 8.6% for the three and six month periods, respectively, compared to 11.6% and 10.8% in 1996. The lower margin percentage in 1997 is primarily due to a greater percentage 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 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 impact 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 six month periods were $6,659 and $12,530, compared to $5,597 and $11,315 in 1996. This represents 5.9% and 6.2% of consolidated revenues for the three and six month periods of 1997, compared to 8.1% and 8.5% for 1996. This reduction reflects higher revenue volume spread over a relatively fixed expense base. Net interest expense for the three and six month periods was $392 and $634, compared to $464 and $867 in 1996. The decrease in interest expense was due to lower average outstanding debt levels in 1997 compared to 1996. Gain (loss) on sale of property and equipment for the three and six month periods was ($254) and ($247), compared to $261 and $392 in 1996. The 1997 second quarter loss was due to the sale and disposal of obsolete and damaged units as a result of plans to modernize the equipment fleet. Other income for the three and six month periods was $201 and $77, compared to other expense of $113 and $276 in 1996. The 1997 other income includes $1,042,000 relating to the settlement of a lawsuit (see Note 3 to the 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 six month periods was $1,140 and $1,602, compared to $847 and $957 in 1996. As a percentage of income, the effective rate was 40% in 1997 and 1996. The Company's backlog at June 30, 1997 was $130,600, compared to $134,900 at December 31, 1996, and $89,600 at June 30, 1996. Substantially all the current backlog will be completed within twelve months and approximately 90% 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 three and six month periods, the Company recorded amounts received from a settlement with National Fire Insurance Company of Pittsburgh, PA, which resulted in a gain of $602 ($1,004 pre-tax). In the three and six month periods of 1996, the Company recorded additional 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 Cash flows provided from operations for the six months amounted to $1,610, net proceeds from borrowings amounted to $1,142, proceeds from the exercise of stock options amounted to $112, and proceeds from the disposition of property and equipment amounted to $121. The cash flows provided from operations includes $4,250,000 received from a settlement of a lawsuit (see Note 3 to Financial Statements). The cash flows were primarily used for net capital expenditures of $2,800, the acquisition of D.W. Close Company, Inc. of $241 and dividend payments of $357. The Company's financial condition continues to be strong at June 30, 1997 with working capital of $19,274, compared to $14,171 at December 31, 1996. The Company's current ratio was 1.27:1 at June 30, 1997, compared to 1.25:1 at December 31, 1996. The Company has a $20,000 revolving and $3,750 term credit facility. As of June 30, 1997, there were $6,000 and $3,750 outstanding under the revolving and term credit facility, respectively. The Company has outstanding letters of credit with Banks totaling $12,585. The Company anticipates that its credit facility, cash balances and internally generated cash flows will continue to be sufficient to fund operations, capital expenditures and debt service requirements. The Company is also confident that its financial condition will allow it to meet long-term capital requirements. The acquisition of D.W. Close Company, Inc. was completed on May 1, 1997. The purchase price for this transaction was paid in cash and Company notes issued to the seller (See Note 2 to Financial Statements). Capital expenditures for the six months were $2,800, compared to $2,396 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 six months were $121 and $546 in 1996. The Company plans to spend approximately $5,000 on capital improvements during 1997. PART II Item 1. Legal Proceedings On June 24, 1997 the Company entered into a Settlement Agreement and Releases (the ``Agreement'') between National Union Fire Insurance Company of Pittsburgh, PA (``National Union'') and the Company, on behalf of The L.E. Myers Co. Group, the L.E. Myers Co. and LEMCO Engineers, Inc. (hereinafter referred to as the Company), related to the appeal to the United States Court of Appeals for the Second Circuit by National Union of the judgment in favor of the Company entered on April 10, 1997 in the United States District Court for the Southern District of New York in the previously disclosed lawsuit. Pursuant to the Agreement National Union paid to the Company the sum of $4,250,000 on June 27, 1997. The Agreement further provided that all appeals would be dismissed and that the Company and National Union each provided a release of liability of the other party. Item 4. Submission of Matters to a Vote of Security Holders The Company held its annual meeting of Stockholders on May 12, 1997 pursuant to a notice of meeting and proxy statement sent to stockholders of the Company. Stockholders elected Allan E. Bulley, Jr. and Bide L. Thomas as Class II directors to serve a term until the annual meeting of stockholders to be held in the year 2000. Mr. Bulley and Mr. Thomas were incumbent Class II directors who were nominated by the Board of Directors for re-election. Messrs. William G. Brown (Class I), John M. Harlan (Class I) and Charles M. Brennan (Class III), continue to serve as directors of the class indicated after the meeting. 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 1997. CAUTIONARY STATEMENT-- This Release may contain statements which constitute ``forward-looking'' information as defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and actual results may differ. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MYR Group Inc. Date: August 6, 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 June 30, 1997 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 June 30 Three Months Six Months 1997 1996 1997 1996 Primary income per share Net income $ 2,312 $ 909 $ 3,005 $1,075 Weighted average number of common shares outstanding during the period 3,249 3,198 3,246 3,191 Add - common equivalent shares (determined using the "treasury stock" method) representing shares issuable upon exercise of the common stock equivalents 330 241 308 232 Weighted average number of shares for income per common share 3,579 3,439 3,554 3,423 Income per common share - primary $ .65 $ .26 $ .85 $ .31 Fully diluted income per share Net income $ 2,312 $ 909 $ 3,005 $1,075 Add interest on subordinated convertible debentures, net of tax 60 59 118 119 $ 2,372 $ 968 $ 3,123 $1,194 Weighted average number of common shares outstanding during the period 3,249 3,198 3,246 3,191 Add - -Common equivalent shares (determined using the "treasury stock" method) representing shares issuable upon exercise of the common stock equivalents 413 259 414 259 - -Shares assumed converted from subordinated convertible debentures 600 600 600 600 4,262 4,057 4,260 4,050 Income per common share - fully diluted $ .56 $ .24 $ .73 $ .29 EX-27 3
5 1,000 3-MOS DEC-31-1997 APR-1-1997 JUN-30-1997 592 0 67864 495 0 90975 60249 37663 117079 71701 9546 0 0 2512 29880 117079 112310 112310 102356 109015 254 0 400 2850 1140 1710 602 0 0 2312 .65 .56
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