Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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.)
2550 W. Golf Road, Suite 200 Rolling Meadows, Illinois 60008
(Address of principal executive offices)
(Zip Code)
(847) 290-1891
Registrant's telephone number, include area code
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
and Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of May 4, 1996: 3,187,443
MYR GROUP INC.
I N D E X
PART I. Financial Information Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995 2
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995 4
Notes to Condensed Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
PART II. Other Information
Item 1. Legal Proceedings 8
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURE 9
Part I, Item 1
Financial
Information
MYR Group Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31 Dec. 31
1996 1995
(Unaudited) *
ASSETS
Current assets:
Cash and cash equivalents $ 714 $ 703
Contract receivables including retainage 43,718 51,114
Costs and estimated earnings in excess of
billings on uncompleted contracts 16,584 14,851
Deferred income taxes 4,602 4,602
Other current assets 1,737 1,594
Total current assets 67,355 72,864
Property and equipment: 60,581 61,625
Less accumulated depreciation 38,643 38,481
21,938 23,144
Intangible assets 2,590 2,681
Other assets 3,043 3,145
Total assets $ 94,926 $ 101,834
LIABILITIES
Current Liabilities:
Current maturities of long-term debt 8,590 $ 9,178
Accounts payable 5,320 13,886
Billings in excess of costs and estimated
earnings on uncompleted contracts 4,962 5,042
Accrued insurance 13,122 13,053
Other current liabilities 18,465 16,215
Total current liabilities 50,459 57,374
Deferred income taxes 2,861 2,861
Other liabilities 394 391
Long-term debt:
Revolver and other debt 3,000 3,021
Term loan 5,000 5,000
Industrial revenue bond 890 890
Subordinated convertible debentures 5,679 5,679
Total long-term debt 14,569 14,590
SHAREHOLDERS' EQUITY
Common stock and additional paid-in capital 9,242 9,248
Retained earnings 19,333 19,326
Treasury stock (1,524) (1,548)
Shareholders' notes receivable (408) (408)
Total shareholders' equity 26,643 26,618
Total liabilities and shareholders' equity $ 94,926 $ 101,834
*Condensed from audited financial statements
The "Notes to Condensed Consolidated Financial Statements"
are an integral part of this statement.
MYR Group Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share amounts)
(Unaudited)
Three Months Ended March 31 1996 1995
Contract revenue $ 64,376 $ 56,051
Contract cost 57,946 49,398
Gross profit 6,430 6,653
Selling, general and administrative expense 5,718 5,713
Income from operations 712 940
Other income (expense)
Interest income 6 22
Interest expense (410) (465)
Gain on sale of property and equipment 131 26
Miscellaneous (163) (103)
Income before taxes 276 420
Income tax expense 110 168
Net income $ 166 252
Earnings per share $ .05 $ .08
Dividends per common share $ .05 $ .041
Weighted average common shares and
common share equivalents outstanding 3,411 3,379
The "Notes to Condensed Consolidated Financial Statements"
are an integral part of this statement.
MYR Group Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31 1996 1995
CASH FLOWS FROM OPERATIONS
Net income $ 166 $ 252
Adjustments to reconcile net income to cash flows
from operations
Depreciation and amortization 1,555 1,408
Amortization of intangibles 91 75
Gain from disposition of assets (131) (27)
Changes in assets and liabilities (705) 1,448
Cash flows from operations 976 3,156
CASH FLOWS FROM INVESTMENTS
Expenditures for property and equipment (416) (477)
Proceeds from disposition of assets 196 38
Cash used in acquisition, net of cash acquired - (12,995)
Cash flows from investments (220) (13,434)
CASH FLOWS FROM FINANCING
Repayments of long term debt (608) (13,950)
Proceeds from issuance of debt - 19,500
Proceeds from exercise of stock options 19 -
Decrease (increase) in deferred compensation 3 (8)
Increase in other assets - 28
Dividends paid (159) (132)
Cash flows from financing (745) 5,438
Increase (decrease) in cash and cash equivalents 11 (4,840)
Cash and cash equivalents at beginning of year 703 6,115
Cash and cash equivalents at end of period $ 714 $ 1,275
The "Notes to Condensed Consolidated Financial Statements"
are an integral part of this statement.
MYR Group Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1 - Basis of Presentation
The condensed consolidated balance sheet, statement of
operations and statement of cash flows include the accounts of
the Company and its subsidiaries. All material intercompany
balances and transactions have been eliminated.
The financial information included herein is unaudited;
however, such information reflects all adjustments (consisting
solely of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair presentation of results for
the interim period.
The results of operations for the three month period ended
March 31, 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 - 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.
4 - Earnings Per Share
Earnings per share are based on the weighted average number
of common shares and common share equivalents outstanding during
the period. Stock options are considered to be common share
equivalents.
5 - 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.
6 - Supplemental Quarterly Financial Information (Unaudited)
(Dollars in thousands, except per share amounts)
1996 1995
Mar 31. Mar 31. June 30 Sept. 30 Dec. 31 Year
Contract Revenue 64,376 56,05 66,638 64,015 80,261 266,965
Gross Profit 6,430 6,653 7,338 7,968 7,588 29,547
Net Income 166 252 1,005 1,248 924 3,429
Net Income per Share:
Primary .05 .08 .30 .37 .27 1.01
Fully Diluted .05 .08 .26 .32 .25 .91
Dividends Paid Per Share: .05 .041 .047 .047 .047 .182
Market Price:
High 11.00 9.66 10.31 11.91 11.81 11.91
Low 10.00 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 Months Ending March 31, 1996
(Dollars in thousands)
Results of Operations
Revenue for the quarter was $64,376, compared to $56,051 in
1995, or an increase of 14.9%. The revenue increase was
primarily due to storm work in the northwest, central and
northeast sections of the country and increased activity with
utilities under alliance agreements.
Gross profit for the quarter was $6,430, compared to $6,653
in 1995, or a decrease of 3.4%. Gross profit as a percentage of
revenue was 10.0% compared to 11.9% in 1995. The decrease was
due to less productive winter working conditions during the
current quarter, and the prior period had several jobs with
higher 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. Such variables
include unusual or unseasonable weather and delays in receipt of
construction materials on projects where the materials are
provided to the Company by its clients. The different mix of the
Company's work from period to period can impact gross margin
percentage. As the percentage of revenue derived from projects
in which the Company supplies materials increases, the gross
profit percentage will generally decrease. As the percentage of
revenue derived from cost-plus work increases, margins may also
decrease since this work involves lower financial risk. Finally,
since the Company's revenues are derived principally from
providing construction labor services, insurance costs,
particularly for workers' compensation, are a significant factor
in the Company's contract cost structure. Fluctuations in
insurance reserves for claims under the retrospective rated
insurance programs can have a significant impact on gross
margins, either upward or downward, in the period in which such
insurance reserve adjustments are made.
Selling, general and administrative expenses for the quarter
were $5,718, compared to $5,713 in 1995, and as a percentage of
revenue was 8.9% compared to 10.2%. This reduction reflects
higher revenue volume spread over a relatively fixed expense
base.
Net interest expense for the quarter was $404 compared to
$443 in 1995. The decrease in interest expense was due to lower
average outstanding debt levels in 1996 compared to 1995.
Gain on sale of property and equipment was $131 compared to
$26 in 1995. The increase was due to the increased number of
units sold in conjunction with upgrading our fleet.
Other expense for the quarter was $163 compared to $103 in
1995. It primarily covered the amortization of non-competition
agreements and goodwill.
Income tax expense for the quarter was $110 compared to $168
in 1995. As a percentage of income, the effective rate was 40%
in 1996 and 1995.
The Company's backlog at March 31, 1996 was $75,700,
compared to $69,100 at December 31, 1995, and $62,500 at March
31, 1995. Substantially all the current backlog will be
completed within twelve months and by December 31, 1996.
Liquidity and Capital Resources
Cash flows provided from operations for the quarter amounted
to $976, which was used for net capital expenditures of $220,
repayment of long-term debt of $608 and dividends paid of $159.
The Company's financial condition continues to be strong at March
31, 1996, with working capital of $16,896 compared to $15,490 at
December 31, 1995. The Company's current ratio was 1.33:1 at
March 31, 1996, compared to 1.27:1 at December 31, 1995.
The Company has a $25,000 revolving and term credit
facility. As of March 31, 1996, there were $8,700 and $7,500
outstanding under the revolving and term credit facility,
respectively. The Company has outstanding letters of credit with
Banks totaling $12,769. 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.
Capital expenditures for the quarter were $416 compared to
$477 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 quarter amounted to $196 and $38 in 1995. The
Company plans to spend approximately $5,000 on capital
improvements during 1996.
PART II
Item 1. Legal Proceedings
The April 15, 1996 trial date for the National Union Fire
Insurance Company of Pittsburgh, Pennsylvania v. The L.E. Myers
Co. Group etal,. The L.E. Myers Co. and LEMCO Engineers was set
aside by the U.S. District Court Judge. No new trial date had
been set.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits filed herewith are listed in the Exhibit Index
filed as a part hereof and incorporated herein by reference.
b. No reports on Form 8-K were filed by the Company for the 1st
Quarter of 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: May 3, 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 March 31, 1996
Exhibit Index
Number Description Page (or Reference)
11 Computation of Net Income Per Share 11
27 Financial Data Schedules 12
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
3-MOS
DEC-31-1996
MAR-31-1996
714
0
44,266
548
0
67,355
60,581
38,643
94,926
50,459
14,569
0
0
3,350
23,293
94,926
64,376
64,376
57,946
63,664
163
0
410
276
110
166
0
0
0
166
.05
.05
MYR Group Inc.
Exhibit 11
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
(In thousands, except per share data)
Period Ended March 31 Three Months
1996 1995
Net income $ 166 $ 252
Weighted average number of common shares
outstanding during the period 3,187 3,174
Add - common equivalent shares (determined
using the "treasury stock" method)
representing shares issuable upon
exercise of the common stock equivalents 224 205
Weighted average number of shares
for income per common share $ 3,411 3,379
Income per common share $ .05 $ .08
MYR Group Inc.
