<PAGE> 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, 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 No.)
incorporation or organization)
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 October 27, 1995: 2,382,356
<PAGE> 2
THE L. E. MYERS CO. GROUP
I N D E X
<TABLE>
<CAPTION>
PART I. Financial Information Page No.
--------------------- --------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheet -
September 30, 1995 and December 31, 1994 2
Condensed Consolidated Statement of Operations -
Nine Months Ended September 30, 1995 and 1994 3
Condensed Consolidated Statement of Cash Flows -
Nine Months Ended September 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
</TABLE>
<PAGE> 3
Part I, Item 1
Financial
Information
THE L.E. MYERS CO. GROUP
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
September 30 Dec. 31
1995 1994
------------- -------------
(Unaudited) *
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 339 $ 6,115
Contract receivables including retainage 44,033 12,687
Costs and estimated earnings in excess of billings on uncompleted contracts 12,909 1,408
Deferred income taxes 3,192 1,622
Other current assets 1,550 532
-----------------------------
Total current assets 62,023 22,364
-----------------------------
Property and equipment: 61,029 50,515
Less accumulated depreciation 37,786 35,863
-----------------------------
23,243 14,652
-----------------------------
Intangible assets 1,088 368
Other assets 3,038 2,260
-----------------------------
Total assets $ 89,392 $ 39,644
=============================
LIABILITIES
Current Liabilities:
Current maturities of long-term debt $ 2,976 $ 507
Accounts payable 8,021 3,069
Billings in excess of costs and estimated earnings on uncompleted contracts 5,162 783
Accrued insurance 10,449 4,415
Other current liabilities 18,981 4,995
-----------------------------
Total current liabilities 45,589 13,769
-----------------------------
Deferred income taxes 2,221 1,257
Other liabilities 397 678
Long-term debt:
Revolver and other debt 2,480 318
Term loan 6,250 0
Industrial revenue bond 1,070 0
Subordinated convertible debentures 5,679 0
-----------------------------
Total long-term debt 15,479 318
-----------------------------
SHAREHOLDERS' EQUITY
Common stock and additional paid-in capital 9,268 9,269
Retained earnings 18,551 16,472
Treasury stock (1,637) (1,643)
Shareholders' notes receivable (476) (476)
-----------------------------
Total shareholders' equity 25,706 23,622
-----------------------------
Total liabilities and shareholders' equity $ 89,392 $ 39,644
=============================
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
*Condensed from audited financial statements
The "Notes to Condensed Consolidated Financial Statements" are an integral
part of this statement.
2
<PAGE> 4
THE L.E. MYERS CO. GROUP
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Periods Ended September 30 Three Months Nine Months
- -----------------------------------------------------------------------------------------------------------------
1995 1994 1995 1994
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Contract revenue $ 66,638 $ 21,675 $ 186,704 $ 65,466
Contract cost 58,670 18,603 164,745 56,622
------------------------- ------------------------
Gross profit 7,968 3,072 21,959 8,844
Selling, general and administrative expenses 5,482 1,730 16,418 6,087
------------------------- ------------------------
Income from operations 2,486 1,342 5,541 2,757
Other income (expense)
Interest income 28 41 63 125
Interest expense (422) (34) (1,317) (90)
Gain (loss) on sale of fixed assets 56 (5) 163 14
Miscellaneous (69) (100) (275) (303)
------------------------- ------------------------
Income before taxes 2,079 1,244 4,175 2,503
Income tax expense 831 485 1,670 976
------------------------- ------------------------
Net income $ 1,248 $ 759 $ 2,505 $ 1,527
- -----------------------------------------------------------------------------------------------------------------
Earnings per share
Primary $ .49 $ .30 $ .99 $ .61
========================= ========================
Fully diluted $ .43 $ .30 $ .88 $ .61
========================= ========================
Dividends per common share $ .0625 $ .055 $ .18 $ .165
========================= ========================
Weighted average common shares and
Common share equivalents outstanding
Primary 2,559 2,507 2,539 2,501
========================= ========================
Fully diluted 3,030 2,510 3,030 2,515
========================= ========================
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The "Notes to Condensed Consolidated Financial Statements" are an integral
part of this statement
3
<PAGE> 5
THE L.E. MYERS CO. GROUP
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended September 30 1994 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Net income $ 2,505 $ 1,527
Adjustments to reconcile net income to cash flows
from operations
Depreciation and amortization 4,303 2,167
Amortization of intangibles 241 195
Gain from disposition of assets (163) (14)
Changes in current assets and liabilities 926 (4,078)
----------------------------------------------
Cash flows from operations 7,812 (203)
----------------------------------------------
CASH FLOWS FROM INVESTMENTS
Expenditures for property and equipment (3,436) (2,788)
Proceeds from disposition of assets 1,630 67
Cash used in acquisition, net of cash acquired (12,995) 0
----------------------------------------------
Cash flows from investments (14,801) (2,721)
----------------------------------------------
CASH FLOWS FROM FINANCING
Repayments of long term debt (17,657) (1,071)
Proceeds from issuance of debt 19,500 0
Purchase of treasury stock 0 (168)
Decrease in deferred compensation (21) (20)
Decrease in other assets (183) (2)
Dividends paid (426) (395)
----------------------------------------------
Cash flows from financing 1,213 (1,656)
----------------------------------------------
Decrease in cash and cash equivalents (5,776) (4,580)
Cash and cash equivalents at beginning of year 6,115 5,698
----------------------------------------------
Cash and cash equivalents at end of period $ 339 $ 1,118
==============================================
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The "Notes to Condensed Consolidated Financial Statements" are an integral part
of this statement.
4
<PAGE> 6
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 nine month period ended September 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 nine month period ended September 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).
<TABLE>
<CAPTION>
1994
-----
<S> <C>
Contract revenue $187,379
Income 4,005
Income per share
Primary 1.60
Fully diluted 1.42
</TABLE>
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.
5
<PAGE> 7
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 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
$1,300,000 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 1994, both primary
and fully diluted earnings per common share were based on the weighted average
number of outstanding common shares.
6
<PAGE> 8
5 - SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
1995
--------------------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31 Year to Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contract Revenue $ 56,051 $ 64,015 $ 66,638 $ $ 186,704
Gross Profit 6,653 7,338 7,968 21,959
Net Income 252 1,005 1,248 2,505
Income Per Share:
Primary .10 .40 .49 .99
Fully diluted .10 .35 .43 .88
Dividends Paid Per Share .05-1/2 .06-1/4 .06-1/4 .18
Market Price:
High 12-7/8 13-3/4 15-7/8 15-7/8
Low 10-5/8 11-3/8 12-1/4 10-5/8
<CAPTION>
1995
--------------------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31 Year to Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
7
<PAGE> 9
Part I
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 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 $1,248,000 or $.49 per share and
$2,505,000 or $.99 per share for the three and nine month periods ended
September 30, 1995. This compares to $759,000 or $.30 per share and $1,527,000
or $.61 per share for the same periods in 1994.
Revenues for the three and nine month periods were $66,638,000 and
$186,704,000 in 1995 compared to $21,675,000 and $65,466,000 in 1994. Harlan's
contribution to 1995 revenues accounts for most of the growth compared to 1994.
Gross profits for the three and nine month periods of 1995 were
$7,968,000 or 12.0% and $21,959,000 or 11.8% compared to $3,072,000 or 14.2%
and $8,844,000 or 13.5% 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 $5,482,000 and
$16,418,000 for the three and nine month periods of 1995 compared to $1,730,000
and $6,087,000 in 1994. This represents 8.2% and 8.8% of consolidated revenues
for the three and nine month period of 1995 and 8.0% and 9.3% for the same
periods in 1994. Harlan accounts for most of the increase over 1994.
The Company's backlog at September 30, 1995 is $74,400,000 compared to
$28,200,000 at December 31, 1994 and $23,400,000 at September 30, 1994.
Substantially all of the current backlog will be completed within twelve months
and approximately 60% is expected to be completed by December 31, 1995. Harlan
accounts for a majority of the increase in the backlog from the prior year.
8
<PAGE> 10
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 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 $13,649,000,
of which $12,320,000 guarantees the Company's payment obligation under its
insurance programs and $1,329,000 which is a credit enhancement to guarantee an
industrial revenue bond. 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 September 15, 1995.
The Company's cash decreased $5,776,000 for the nine months. Cash
provided by operations was $7,812,000. Cash used in the acquisition of Harlan
was $12,995,000 and net cash used for capital expenditures was $1,806,000.
Cash provided from financing was $1,213,000.
The Company's current ratio is 1.4:1 at September 30, 1995 compared to
1.6:1 at December 31, 1994.
Capital acquisitions for 1995 totalled $3,436,000. 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 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 1995.
9
<PAGE> 11
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: October 31, 1995 By: /s/
------------------------- ------------------------------------
Elliott C. Robbins, Sr. Vice President,
Treasurer, and Chief Financial Officer
(duly authorized representative of
registrant and principal financial
officer)
10
<PAGE> 12
THE L.E. MYERS CO. GROUP
QUARTERLY REPORT ON FORM 10Q
For the Three and Nine Months Ended September 30, 1995 and 1994
Exhibit Index
<TABLE>
<CAPTION>
Number Description Page (or Reference)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
11 Computation of Net Income Per Share -12-
27 Financial Data Schedules -13-
</TABLE>
11
<PAGE> 1
THE L.E. MYERS CO. GROUP
EXHIBIT 11
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
(In Thousands, except per share data)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------- -----------------------------
PERIOD ENDED SEPTEMBER 30 THREE MONTHS NINE MONTHS
- -------------------------------------------------------------------------------------------- -----------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary income per share
Net income $ 1,248 $ 759 $ 2,505 $ 1,527
----------------------------- -----------------------------
Weighted average number of common shares
outstanding during the period 2,380 2,379 2,380 2,385
Add - common equivalent shares (determined
using the "treasury stock" method)
representing shares issuable upon
exercise of the common stock equivalents 179 128 159 116
----------------------------- -----------------------------
Weighted average number of shares
for income per common share 2,559 2,507 2,539 2,501
============================= =============================
Income per share - primary $ 0.49 $ 0.30 $ 0.99 $ .61
============================= =============================
Fully diluted income per share
Net income $ 1,248 $ 759 $ 2,505 $ 1,527
Add interest on subordinated convertible
debentures, net of tax 60 N/A 176 N/A
----------------------------- -----------------------------
$ 1,308 $ 759 $ 2,681 $ 1,527
----------------------------- -----------------------------
Weighted average number of common shares
outstanding during the period 2,380 2,379 2,380 2,385
Add
- - Common equivalent shares (determined
using the "treasury stock" method)
representing shares issuable upon
exercise of the common stock equivalents 200 131 200 130
- - Shares assumed converted from subordinated
convertible debentures 450 N/A 450 N/A
----------------------------- -----------------------------
Weighted average number of shares
for income per common share 3,030 2,510 3,030 2,515
============================= =============================
Income per share - fully diluted $ 0.43 $ 0.30 $ 0.88 $ 0.61
============================= =============================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 339
<SECURITIES> 0
<RECEIVABLES> 45,033
<ALLOWANCES> 1,000
<INVENTORY> 0
<CURRENT-ASSETS> 62,023
<PP&E> 61,029
<DEPRECIATION> 37,786
<TOTAL-ASSETS> 89,392
<CURRENT-LIABILITIES> 45,589
<BONDS> 18,455
<COMMON> 2,512
0
0
<OTHER-SE> 23,194
<TOTAL-LIABILITY-AND-EQUITY> 89,392
<SALES> 66,638
<TOTAL-REVENUES> 66,638
<CGS> 58,670
<TOTAL-COSTS> 64,152
<OTHER-EXPENSES> 69
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 394
<INCOME-PRETAX> 2,079
<INCOME-TAX> 831
<INCOME-CONTINUING> 1,248
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,248
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>
