<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 (FEE REQUIRED)
For fiscal year ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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 (I.R.S. Employer
of incorporation) Identification No.)
1701 W. GOLF ROAD, ROLLING MEADOWS, IL 60008
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 290-1891
---------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- -------------------------- -----------------------
Common Stock, $1 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 12 or 15(d) of the Securities 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
----- -----
The aggregate market value of the registrant's Common Stock, $1 par value,
held by non-affiliates of the registrant as of March 12, 1998, was $53,090,953
based on the closing price on that date on the New York Stock Exchange. As of
March 12, 1998, 5,591,598 shares of the registrant's Common Stock, $1 par value
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Those sections or portions of the definitive proxy statement of MYR Group Inc.
for use in connection with its annual meeting of stockholders to be held May 6,
1998 are incorporated by reference into Part III of this annual report.
<PAGE> 2
Table of Contents
and Cross-Reference Sheet
-------------------------
<TABLE>
<CAPTION>
Page or Reference
-----------------
<S> <C> <C> <C>
PART I Item 1. Business ..................................... 3
Item 2. Properties ................................... 6
Item 3. Legal Proceedings ............................ 7
Item 4. Submission of Matters to a Vote of Security
Holders ...................................... 7
Part II Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters .............. 8
Item 6. Selected Financial Data ...................... 9
Item 7. Management's Discussion and Analysis of
Financial Condition and Results
of Operations ................................ 10
Item 8. Financial Statements ......................... 14
Item 9. Changes in and Disagreements with Independent
Auditors on Accounting and Financial
Disclosure ................................... 30
Part III Item 10. Directors and Executive Officers of the
Registrant ................................... 31
Item 11. Executive Compensation ....................... 31
Item 12. Security Ownership of Certain Beneficial
Owners and Management ........................ 31
Item 13. Certain Relationships and
Related Transactions ......................... 31
Part IV Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K .......................... 32
Signatures ......................................................... 33
</TABLE>
2
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MYR GROUP INC.
PART I
ITEM 1. BUSINESS
The Company was organized under the laws of Delaware in April 1982, to serve as
a holding company. Its principal assets consist of all of the outstanding
shares of capital stock of The L. E. Myers Co., a Delaware corporation
("Myers"), Hawkeye Construction Inc., an Oregon corporation ("Hawkeye"), Harlan
Electric Company, a Michigan corporation ("Harlan"), and D.W. Close Company
Inc., a Washington Corporation ("D.W. Close"). Myers is based in Rolling
Meadows, Illinois and is the successor to another Delaware corporation of the
same name which was organized in 1914 to succeed a business established in 1891
by Lewis E. Myers. Hawkeye was acquired by the Company in 1991 and its
principal place of business is Troutdale, Oregon. Harlan was acquired by the
Company in 1995 and is headquartered in Rochester Hills, Michigan. Harlan has
two subsidiaries: Sturgeon Electric Company, Inc., a Michigan corporation
("Sturgeon") with its principal place of business in Henderson, Colorado,
acquired by Harlan in 1974 and Power Piping Company, a Pennsylvania corporation
("Power Piping") with its principal place of business in Pittsburgh,
Pennsylvania, acquired by Harlan in 1963. Comtel Technology, Inc., ("Comtel")
a Colorado Corporation is a wholly owned subsidiary of Sturgeon. Comtel was
organized in 1983 and its principal place of business is Broomfield, Colorado.
The Company acquired D.W. Close on May 1, 1997. D.W. Close was organized in
1979 as a Washington corporation and its principal place of business is
Seattle, Washington. As used under this Item 1 and Item 2, the term "Company"
refers collectively to MYR Group Inc. and its direct and indirect subsidiaries
and predecessors, unless the context otherwise requires.
The consolidated financial statements and notes thereto set forth in Part II,
Item 8 of this report contain information regarding Harlan and its subsidiaries
from January 3, 1995 and D.W. Close since May 1, 1997.
The general offices of the Company are located at 1701 West Golf Road, Rolling
Meadows, Illinois.
CONSTRUCTION SERVICES
The Company conducts its business through its direct and indirect operating
subsidiaries. The construction services performed by the Company include
electric utility line construction, commercial and industrial electrical
construction, traffic signal and street lighting construction services,
telecommunication construction services and mechanical construction.
Myers, Hawkeye, Harlan, Sturgeon and D.W. Close are involved in the
construction and maintenance of electric transmission lines, substations,
distribution systems and lighting systems for electric utilities and industrial
users of similar systems and providing construction services to the
telecommunication market. These services are frequently referred to as
"outside" or "line" electrical construction service. The Company generally
serves the electric utility industry as a prime construction contractor.
Designs and specifications for a project are usually prepared by the clients or
their agents. The Company supplies the management, labor, equipment and tools
necessary to construct the project. Construction materials are generally
supplied by the clients although the Company occasionally may be required to
procure and supply the construction materials. Most contracts undertaken by
the Company are completed within twelve months, although certain contracts may
extend for longer periods.
Myers, Hawkeye, Harlan, Sturgeon and D.W. Close provide construction services
to the "outside" telecommunication market nationwide. These services include
the installation of foundations and towers for PCS wireless communication
installations, fiber optic and copper communication installation for the
transmission of voice, data and video. The Company, through Sturgeon, Comtel
and D.W. Close also installs telecommunications/teledata services which include
LAN/WAN, telephone, video, voice, data, security and fire alarm.
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The Company, through Sturgeon and D.W. Close, provides electric construction
and maintenance services to the commercial and industrial marketplace. These
services are typically referred to as "inside" electrical construction. The
Company's work in the commercial and industrial electric construction market
place is most often performed as a subcontractor to a general contractor,
however, the Company does perform certain commercial and industrial
construction services as a prime contractor. Commercial and industrial
electrical maintenance services are frequently performed by the Company as a
prime contractor. The Company generally provides the materials to be installed
as a part of the scope of these contracts which vary greatly in size and
duration. The Company provides such construction services on many varied types
of projects including airports, hospitals, hotels and casinos, arenas and
convention centers, and manufacturing and process facilities. On occasion, a
subsidiary of the Company will enter into a joint venture with another
contractor to perform a specific project. In these cases the subsidiary and
the other contractor will typically share in the profits or losses on the
project in the percentage determined by the joint venture agreement. The joint
venture agreement will define the obligations of the subsidiary and the other
contractor with respect to the project and the management of the venture.
The Company, through Power Piping, provides mechanical construction and
maintenance services for the steel industry, electric utility industry,
chemical industry, food processors and other industrial customers located in
the eastern half of the United States. These services are provided by the
Company both as a prime contractor and as a subcontractor.
The Company's construction and maintenance crews are active year round in all
geographic areas in which the Company operates. Winter weather in some
northern areas and summer weather in some southern areas can adversely impact
work schedules.
The Company is subject to the authority of state and municipal regulatory
bodies concerned with the licensing of contractors. The Company has
experienced no material difficulty in complying with the requirements imposed
on it by such regulatory bodies.
The Company's operations are currently conducted primarily in the United
States.
CUSTOMERS
Electric utilities, in the aggregate, represent the largest customer base of
the Company. During the last five years, the Company's ten largest customers
accounted for 43% of its consolidated contract revenues and its single largest
customer accounted for 7.8% of such revenue. General contractors, as a group,
constitute a significant group of customers for the Company's commercial and
industrial work. Municipal or other government funded large projects provide
the Company with significant revenues when it is awarded all or a substantial
part of the electrical construction work on such projects.
In 1997 the Company's ten largest customers accounted for 48.6% of annual
revenues. The Company's single largest customer during 1997 was Atlandia
Design, the General Contractor which is constructing the Bellagio Hotel and
Casino in Nevada, accounting for 17.3% of such revenue.
CONTRACTS
The Company enters into contracts principally on the basis of competitive bids.
Although there is considerable variation in the terms of the contracts
undertaken by the Company, contracts will usually be either lump sum or unit
price contracts pursuant to which the Company agrees to do the work for a fixed
amount for the entire project or for the particular units of work performed.
On occasion, the Company does obtain cost-plus contracts which provide for
reimbursement of costs incurred by the Company, often within stated limits,
plus the payment of a fee in a fixed amount or equal to a percentage of
reimbursable cost. On occasion these cost-plus contracts require the Company
to include a guaranteed not-to-exceed maximum price. Lump sum or unit price
contracts have accounted for the larger portion of the Company's contract
revenues in recent years. Such contracts typically place greater risks on the
Company than do cost-plus contracts. A portion of the work performed by the
Company requires performance and payment bonds at the time of execution of the
4
<PAGE> 5
contract. Contracts generally include payment provisions pursuant to which a
5% to 10% retainage is withheld from each progress payment until the contract
work has been completed and approved.
The Company's backlog was $136,400,000 at December 31, 1997, compared to
$134,900,000 at December 31, 1996. The varying magnitude and duration of
projects undertaken by the Company may result in substantial fluctuations in
its backlog from time to time. Substantially all of the December 31, 1997
backlog will be completed in 1998.
Certain of the projects which the Company undertakes are not completed in one
accounting period. Revenue on construction contracts is recorded on the
percentage-of-completion accounting method determined by the ratio of cost
incurred to date on the contracts to management's estimates of total contract
costs. Projected losses are provided for in their entirety when identified.
Some projects give rise to claims by the Company against its customers for
additional compensation based upon such matters as scheduling changes, delays
and interruptions or improper or revised specifications. The resolution of
such claims often extends over several years. Management's judgment as to the
possible outcome of such claims pending at the end of a financial reporting
period is reflected in the Company's results of operations for such period and
is revised in subsequent periods, if and as, required by developments with
respect to such claims (see Note 1 to the Financial Statements).
COMPETITION
The Company's business is highly competitive. Competition is primarily based
on the price of the construction services rendered and upon the reputation for
quality, safety and reliability of the contractor rendering them.
The competition encountered by the Company can vary depending upon the type of
construction services which it renders. The construction and maintenance
service provided to electric utilities and industrial owners of similar systems
often requires larger amounts of capital and more specialized equipment than
the requirements for commercial construction. Larger electric utility projects
require increased numbers of heavy duty equipment as well as stronger financial
resources to meet the cash flow requirements of these projects. These factors
reduce the number of potential competitors on these projects to the larger
competitors. The number of firms which generally compete for any electric
utility project varies greatly depending on a number of factors, including the
size of the project, its location and the bidder qualification requirements
imposed upon contractors by the customer. Many of the competitors the Company
encounters restrict their operations to one geographic area while a few operate
nationally, as does the Company.
Competition for the electrical construction services provided by the Company to
the telecommunication industry and to commercial and industrial customers
varies greatly. Again, size and location of the project will impact which
competitors and the number of competitors that the Company will encounter on
any particular project. The individual relationships with general contractors
developed over several years by particular contractors based upon prior
projects worked together will impact the Company's and its competitors'
opportunities to bid on certain projects. The equipment requirements for this
type of work are not as significant as for the electric utility construction.
Since commercial construction typically involves the purchase of materials by
the contractor the financial resources to meet these requirements on particular
projects may impact the competition the Company encounters. The Company has
performed such construction services principally in the western half of the
United States. Certain of the Company's competitors for this type of work
operate nationally, however, the preponderance of the Company's competition
operates regionally.
The Company's mechanical construction and maintenance service have been
performed principally in the eastern half of the United States. The Company's
competitors for this type of work operate regionally.
The Company's competition includes entities which operate solely as union
contractors, solely as non-union contractors, or in certain cases, through
related companies having both union and non-union contractors.
5
<PAGE> 6
In essentially all cases involving maintenance services provided by the
Company, the Company's customers will also perform some or all of these types
of services as well.
EMPLOYEES
At December 31, 1997, the Company had approximately 350 salaried employees
including executive officers, district managers, project managers,
superintendents, estimators, office managers, and staff and clerical personnel.
The Company also employed approximately 3,650 hourly-rated employees, whose
number fluctuates depending upon the number and size of the projects under
construction by the Company at any particular time. Approximately 90% of the
Company's hourly-rated employees were members of the International
Brotherhood of Electrical Workers ("IBEW"), AFL-CIO. Such IBEW employees are
represented by numerous local unions under various agreements with varying
terms and expiration dates. Such local agreements are entered into by and
between the IBEW local and the National Electrical Contractors Association, of
which the Company is a member. On occasion the Company will employ employees
who are members of other trade unions pursuant to multi-employer, multi-union
project agreements.
ITEM 2. PROPERTIES
CONSTRUCTION EQUIPMENT
The Company owns a substantial amount of construction equipment. This
equipment, which at December 31, 1997 had an aggregate cost of $46,140,000 and
a book value of $11,654,000 includes, among other items, trucks, trailers,
tractors, tension stringing machines, bulldozers, bucket trucks, digger
derricks, cranes and construction tools. Circumstances often require the
Company to lease or rent various items of equipment in connection with its work
on particular projects. The terms of these equipment leases and rental
agreements are generally related to the length of time to complete the
construction contract and sometimes include an option to purchase. The Company
generally exercises the lease-purchase options with respect to such equipment,
and in such cases, usually receives a credit toward the purchase price in the
amount of all or a portion of the rentals paid on the lease.
REAL ESTATE
The general offices of the Company occupy approximately 10,500 square feet of
leased space in an office building at 1701 West Golf Road, Rolling Meadows,
Illinois. The lease on these quarters expires in February, 2004. Rent expense
for this property in 1997 totaled approximately $159,000.
The Company owns land which at December 31, 1997 aggregated approximately 52
acres. Buildings owned by the Company as of the same date contained
approximately 183,000 square feet of space and housed certain regional offices
and equipment centers, as well as a number of small warehouses and garages.
Certain other regional locations, which were leased on December 31, 1997,
contained approximately 123,000 square feet of enclosed space. Rentals for
such property in 1997 totaled approximately $1,082,000 and were under both long
and short-term leases.
The following table sets forth Company acquisitions of all property and
equipment, including acquisitions under capital leases, during each of the last
three years.
<TABLE>
<CAPTION>
Year Amount
---- ----------
<S> <C>
1997 $4,173,000
1996 $5,293,000
1995 $4,959,000
</TABLE>
6
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ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in lawsuits arising in the ordinary course of its
business. In the opinion of the Company's management, based in part upon the
advice of its counsel, these lawsuits are covered by insurance, provided for in
the consolidated financial statements of the Company, or are without merit, and
the Company's management is of the opinion that the ultimate disposition of any
of these pending lawsuits will not have a material adverse impact on the
Company in relation to the Company's consolidated financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders in the fourth quarter
of the year ended December 31, 1997.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The shares of Common Stock of the Company are listed and traded on the New York
Stock Exchange. As of March 12, 1998 there were approximately 775 holders of
record of the shares of Common Stock of the Company. The following table sets
forth quarterly market price and dividend information per share for the Common
Stock of the Company (see Note 18 to the Financial Statements).
<TABLE>
<CAPTION>
Quarter Ended Stock Price Range (1) Dividends Declared (1)
------------- --------------------- ----------------------
<S> <C> <C>
December 31, 1997 $12.44 - $14.85 $.033
September 30, 1997 10.50 - 14.18 .033
June 30, 1997 6.98 - 10.99 .033
March 31, 1997 7.20 - 8.40 .033
December 31, 1996 $ 6.30 - $ 7.73 $.030
September 30, 1996 6.23 - 7.05 .030
June 30, 1996 6.15 - 7.05 .030
March 31, 1996 6.00 - 6.60 .030
</TABLE>
(1) The stock price range and dividends declared reflect a five-for-three stock
split in the form of a stock dividend on December 15, 1997.
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ITEM 6. SELECTED FINANCIAL DATA
CONTINUING OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
============================================================================================
YEARS ENDED DECEMBER 31 1997 1996 1995 1994 1993
============================================================================================
<S> <C> <C> <C> <C> <C> <C>
FOR THE Contract revenue $431,276 $310,577 $266,965 $86,842 $108,515
YEAR Income 5,951 3,968 3,429 2,329 1,633
Depreciation and
Amortization 5,580 6,091 6,189 3,191 2,892
Capital expenditures 4,173 5,293 4,959 4,449 3,432
Interest expense 1,720 1,826 1,772 99 350
==================================================================================
AT YEAR Backlog $136,400 $134,900 $ 69,100 $28,200 $ 26,150
END Working capital 22,598 14,171 15,490 8,595 8,636
Property (net) 16,891 22,239 23,144 14,652 13,189
Total assets 117,424 98,486 101,834 39,644 39,624
Total long-term debt 7,784 8,995 14,590 318 804
Shareholders' equity 31,078 29,570 26,618 23,622 22,046
Shares outstanding 5,488 5,395 5,303 5,287 5,322
==================================================================================
PER Income
SHARE Basic $ 1.09 $ .74 $ .65 $ .44 $ .30
DATA Diluted .87 .62 .55 .42 .29
Book value 5.66 5.48 5.02 4.47 4.14
Stock price range
Low 6.98 6.00 4.78 4.39 3.83
High 14.85 7.73 7.15 6.13 8.05
Cash dividends .1320 .1200 .1091 .0990 .0945
==================================================================================
</TABLE>
NOTES: 1. Selected financial data for 1997, 1996 and 1995 includes
Harlan Electric Company since the January 3, 1995 date of
acquisition. The 1997 data includes D.W. Close Company
since the May 1, 1997 date of acquisition. See Note 2 to
the Financial Statements.
2. The selected financial data excludes discontinued
operations (see Note 5 to the Financial Statements).
3. All share and per share data have been adjusted for the
four-for-three stock split in the form of a stock
dividend in December 1995 and the five-for-three stock
split in the form of a stock dividend in December, 1997.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(all dollar amounts, except per share amounts, are in thousands)
Results of Operations
Continuing Operations
Revenues increased by 38.9% to $431,276 in 1997 from $310,577 in 1996. The
1997 increase in revenues was due to a higher volume of commercial and
industrial services, an increase in line work in California and the D.W. Close
acquisition described in Note 2 to the Financial Statements. The commercial
and industrial services include a major electrical job for a hotel and casino
in Nevada that did not have significant revenue until the fourth quarter of
1996. The increase is also a result of the Company's success at capitalizing
on the rapidly growing trend by its customers to outsource their electrical,
telecommunication, facility management and mechanical construction and service
requirements.
The use of alliances, primarily with our electrical utility customers,
continued to increase. In 1997 alliances accounted for $121,000 of revenues
versus $110,000 in 1996. Clients use alliances to award some or all of their
construction requirements to one or more preferred contractors at competitively
negotiated prices.
Revenue increased by 16.3% to $310,577 in 1996 from $266,965 in 1995. The 1996
increase is primarily due to increases in the line construction revenues as a
result of the Company's electric utility alliances and storm work.
Gross profit increased by 25.3% to $39,660 in 1997 from $31,641 in 1996 due
primarily to the growth in revenues. The gross profit percentage decreased to
9.2% in 1997 compared to 10.2% in 1996 due, in large part, to a greater percent
of our commercial and industrial revenues coming from a significant cost-plus
fixed fee job. The cost-plus fixed fee work generally involves lower financial
risk, therefore generates lower margins.
Gross profit increased by 7.1% to $31,641 in 1996 from $29,547 in 1995. Gross
profit as a percentage of revenue was 10.2% in 1996 compared to 11.1% in 1995.
The lower margin percentage in 1996 is primarily due to lower margins generated
on the utility alliance work and in the Company's commercial and industrial
business units. The commercial and industrial units have experienced increased
competition. In addition, several commercial projects had lower than
anticipated margins due to increases in scope and impact costs incurred which
resulted in pending change orders and claims that were not recognized as
revenues as of December 31, 1996.
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 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 percent
of revenue derived for 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 increased by 19.2% to $28,164 in
1997 from $23,623 in 1996. The 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. Selling, general
and administrative expenses as a percentage of revenues decreased to 6.5% in
1997 from
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7.6% in 1996 due to higher consolidated revenue volume spread over a
relatively fixed expense base.
Selling, general and administrative expenses increased by 8.5% to $23,623 in
1996 from $21,780 in 1995. This represents 7.6% of revenues in 1996 in
comparison to 8.2% in 1995. The overall increase is primarily due to
additional compensation and safety program costs. The additional compensation
costs reflect wage increases and additional operations and safety personnel to
support the higher volume of work. The increase in safety program costs is a
result of enhancements in the safety incentive program instituted in January
1996 for all MYR Group subsidiary companies.
Net interest expense was $1,680 in 1997 compared to $1,803 in 1996. Interest
expense decreased in 1997 primarily due to the decrease in term debt used to
acquire Harlan.
Net interest expense was $1,803 in 1996 compared to $1,707 in 1995. Interest
expense increased in 1996 primarily due to short term borrowing used to finance
the Company's increased working capital requirements.
Losses recognized from sales of property and equipment was $76 in 1997 compared
to gains recognized from sales of property and equipment of $668 and $220 in
1996 and 1995, respectively. The loss in the current year is primarily due to
the sale and disposal of obsolete and damaged equipment as a result of a
program to modernize the equipment fleet.
Net other income was $178 in 1997 compared to net other expense of $483 in 1996
and $565 in 1995. The 1997 other income includes $1,042 relating to the
settlement of a lawsuit (see Note 5 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 other expense consisted primarily of bank fees
and amortization of non-competition agreements and goodwill. The decrease in
1996 is due to the non-competition agreements which became fully amortized in
1996.
Income tax expense was $3,967 in 1997, $2,432 in 1996 and $2,286 in 1995. As a
percentage of income the effective rate was 40.0% for 1997 and 1995 and 38.0%
for 1996.
The Company's backlog was $136,400 at December 31, 1997, $134,900 at December
31, 1996 and $69,100 at December 31, 1995. Substantially all of the current
backlog will be completed within twelve months.
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 recorded the amounts received from the
settlement, which resulted in a net gain from discontinued operations of $602,
including the income tax expense of $402. In 1996, the Company recorded
additional amounts, primarily legal expenses related to the National Union
lawsuit, which resulted in additional losses of $530, net of income tax
benefits of $325. See Note 5 to the Financial Statements.
Liquidity and Capital Resources
The Company's financial condition continues to be strong at December 31, 1997
with working capital of $22,598 as compared to $14,171 in 1996 and $15,490 in
1995. Working capital increased in 1997 primarily due to the cash received
from the National Union settlement (see Note 5 to the Financial Statements),
acquisition of D.W. Close and the increase in accounts receivable as a result
of the higher volume of work. Working capital decreased in 1996 primarily due
to the paydown of debt .
11
<PAGE> 12
The Company's current ratio was 1.29:1 at December 31, 1997 compared to 1.25:1
at December 31, 1996.
The acquisition of D.W. Close was completed on May 1, 1997. The purchase price
was $2,900. Of this amount $400 was paid to the D.W. Close shareholder in
cash with the remaining $2,500 in the form of promissory notes to the seller.
The cash portion of the purchase price was funded through the Company's cash
balances and from bank debt (see Note 2 to the Financial Statements).
The Company has a $20,000 revolving and $2,500 term credit facility (see Note 8
to the Financial Statements). As of December 31, 1997 there were $10,000 and
$2,500 outstanding under the revolver and term credit facility, respectively.
The Company has outstanding letters of credit with banks totaling $13,404, of
which $12,627 guarantees the Company's payment obligations under its insurance
programs and $777 which is a credit enhancement to guarantee an industrial
revenue bond. 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 Company's Board of Directors has authorized the purchase of up to 555,556
shares of its common stock. No purchases were made in 1997, 1996 or 1995. At
December 31, 1997 the balance available under the Board of Directors'
authorization to purchase shares was 257,742.
Capital expenditures were $4,173 in 1997, compared to $5,293 in 1996 and $4,959
in 1995. Capital expenditures during these periods were used for normal
property and equipment additions, replacements and upgrades and includes $232
of additions through capital leases in 1996. The Company plans to spend
approximately $5,700 on capital improvements in 1998.
Cash flows from operations were $3,819 in 1997 compared to $14,138 in 1996.
This decrease is primarily the result of the increase in accounts receivable,
offset by the proceeds received in the settlement of the National Union lawsuit
(see Note 5 to the Financial Statements). The accounts receivable increase is
primarily a result of the increase in the volume of work and due to an increase
in retentions outstanding on a significant Commercial service contract.
Cash flows from operations were $14,138 in 1996 compared to $4,161 in 1995.
This increase is primarily the result of the decrease in net underbillings from
contracts in process and an increase in accounts payable due to large material
purchases at year end for a specific job.
Cash flows used for investments in 1997 included $4,173 of expenditures for
property and equipment and $241 for the acquisition of D.W. Close (see Note 2
to the Financial Statements). Cash flows were generated from the disposal of
property and equipment amounting to $404.
Cash flows used for investments in 1996 consisted mainly of expenditures for
properties and equipment of $5,061. This was offset by proceeds received from
disposals of property and equipment of $2,310, including $1,300 in proceeds
from the sale of a building.
During 1997, the Company had $3,403 of net proceeds from issuance of long-term
debt compared to repayments on its long-term debt of $10,559 in 1996. The 1997
additional proceeds result from increases in the revolving credit facility to
fund working capital needs for the higher volume of work, offset by scheduled
paydowns in the term loan and proceeds received in the settlement of the
National Union lawsuit. The 1996 repayments include approximately $7,500, in
unscheduled reductions of the line of credit used for working capital. As
noted above, improvements in the net underbillings and proceeds from sales of
property and equipment were significant factors that contributed to the
Company's ability to make these additional debt repayments in 1996.
Cash flows for dividends were $725, $643 and $575 in 1997, 1996 and 1995,
respectively. Financing costs of $133 in 1995 represented banking fees for the
Harlan acquisition financing.
12
<PAGE> 13
Year 2000 Compliance
Over the next two years, most companies will face a potentially serious
business problem because many software applications and business equipment
developed in the past may not properly recognize calendar dates beginning in
the year 2000. This problem could cause systems to become unstable, stop
working altogether or provide incorrect data based upon dates.
In 1997, the Company began to evaluate and convert all systems that were not
capable of performing properly in the year 2000 and beyond. All material
systems within the Company are expected to be compliant by December 31, 1998.
The evaluation, correction and testing of all material systems in the Company
will include internal staff time as well as consulting and other expenses
related to equipment upgrades and replacements and software modifications. The
estimated costs associated with the project are not anticipated to be material
to the financial position or results of operations in any given year and are
being expensed as incurred.
The Company, in addition to the above, is also surveying all significant
customers and suppliers to determine their compliance with the year 2000 issue
and what impact, if any, their efforts will have on the Company's business.
In 1997, the Financial Accounting Standards Board Issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". SFAS
No. 131 establishes standards for reporting information about operating
segments and related disclosures about products and services, geographic areas
and major customers. This standard is effective for years beginning after
December 15, 1997. It expands current disclosures and accordingly, will have
no impact on the Company's reported financial position, results of operations
and cash flows. The Company is assessing the impact of SFAS No. 131 on its
current disclosures.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET PRICE - Not
applicable
13
<PAGE> 14
ITEM 8. FINANCIAL STATEMENTS
Index to Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Responsibility for Financial Statements 15
Independent Auditors' Report 16
Financial Statements:
Consolidated Balance Sheet -
December 31, 1997 and 1996 17
Consolidated Statement of Operations -
Years Ended December 31, 1997, 1996 and 1995 18
Consolidated Statement of Shareholders' Equity
Years Ended December 31, 1997, 1996 and 1995 19
Consolidated Statement of Cash Flows
Years Ended December 31, 1997, 1996 and 1995 20
Notes to Financial Statements 21
</TABLE>
14
<PAGE> 15
MYR GROUP INC.
- -------------------------------------------------------------------------------
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The financial statements, and all other information in this annual report, were
prepared by management which is responsible for their integrity and
objectivity. Management believes the financial statements, which require the
use of certain estimates and judgments, fairly and accurately reflect the
Company's financial position, operating results and cash flows, in accordance
with generally accepted accounting principles. All financial information in
this annual report is consistent with the financial statements.
Management maintains a system of internal controls which it believes provides
reasonable assurance that, in all material respects, assets are maintained and
accounted for in accordance with management's authorizations and transactions
are recorded accurately in the books and records. The concept of reasonable
assurance is based on the premise that the cost of internal controls should not
exceed the benefits derived. To assure the effectiveness of the internal lines
of responsibility and delegation of authority, the Company's formally stated
and communicated policies require employees to maintain high ethical standards
in their conduct of its business. These policies address, among other things,
potential conflicts of interest; compliance with all laws, including those
related to financial disclosure; and confidentiality of proprietary
information.
The Audit Committee of the Board of Directors is comprised entirely of
directors who are not employees of the Company. The committee reviews audit
plans, internal controls, financial reports and related matters and meets
regularly with the Company's management and independent auditors. The
independent auditors have free access to the Audit Committee, without
management being present, to discuss the results of their audits or any other
matters.
Deloitte & Touche LLP, independent auditors, have audited the financial
statements of the Company. Their report is presented on page 16. Their audit
includes a study and evaluation of the Company's control environment,
accounting systems and control procedures. Deloitte & Touche LLP advises
management and the Audit Committee of significant matters resulting from their
audit of our financial statements and consideration of our internal controls.
Charles M. Brennan III
Chairman and
Chief Executive Officer
Elliott C. Robbins
Senior Vice President, Treasurer
and Chief Financial Officer
15
<PAGE> 16
MYR GROUP INC.
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
MYR Group Inc.:
We have audited the accompanying consolidated balance sheets of MYR Group Inc.
and subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of MYR Group Inc. and subsidiaries at
December 31, 1997 and 1996, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Chicago, Illinois
March 18, 1998
16
<PAGE> 17
MYR GROUP INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
==========================================================================================
DECEMBER 31 1997 1996
==========================================================================================
<S> <C> <C> <C>
ASSETS Current assets:
Cash and cash equivalents $ 3,757 $ 1,011
Accounts receivable (Note 3) 75,414 53,508
Costs and estimated earnings in excess
of billings on uncompleted contracts (Note 4) 14,919 10,760
Deferred income taxes (Note 10) 5,322 4,896
Other current assets 587 471
---------- ---------
Total current assets 99,999 70,646
Property and equipment-net (Notes 2, 6 and 8) 16,891 22,239
Intangible assets - net (Note 2) - 2,466
Other assets (Note 5) 534 3,135
---------- ---------
Total assets $ 117,424 $ 98,486
==========================================================================================
LIABILITIES Current liabilities:
Current maturities of long-term debt (Note 8) $ 13,462 $ 4,445
Accounts payable 19,727 17,721
Billings in excess of costs and estimated
earnings on uncompleted contracts (Note 4) 9,183 5,504
Accrued liabilities (Note 9) 35,029 28,805
---------- ---------
Total current liabilities 77,401 56,475
Long-term liabilities:
Long-term debt (Note 8) 7,784 8,995
Deferred compensation 415 399
Deferred income taxes (Notes 2 and 10) 746 3,047
---------- ---------
Total liabilities 86,346 68,916
SHAREHOLDERS' Common stock - par value $1 per share;
EQUITY authorized 10,000,000 shares; issued
5,582,251 shares 5,582 3,350
Additional paid-in capital (Note 2) - 5,965
Common stock held in Treasury, at cost:
1997- 94,131 shares and
1996- 188,135 shares (Note 12) (522) (1,043)
Retained earnings (Note 2) 27,238 22,121
Restricted stock awards and shareholder notes
receivable (Note 14) (1,220) (823)
---------- ---------
Total shareholders' equity 31,078 29,570
---------- ---------
Total liabilities and shareholders' equity $ 117,424 $ 98,486
==========================================================================================
</TABLE>
The "Notes to Financial Statements" are an integral part of this statement.
17
<PAGE> 18
MYR GROUP INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
==============================================================================================
YEARS ENDED DECEMBER 31 1997 1996 1995
==============================================================================================
<S> <C> <C> <C>
Contract revenue $ 431,276 $ 310,577 $ 266,965
Contract cost 391,616 278,936 237,418
------- ------- -------
Gross profit 39,660 31,641 29,547
Selling, general and administrative expenses 28,164 23,623 21,780
------- ------- -------
Income from operations 11,496 8,018 7,767
Other income (expense)
Interest income 40 23 65
Interest expense (1,720) (1,826) (1,772)
Gain (loss) on sale of property and equipment (76) 668 220
Other 178 (483) (565)
------- ------- -------
Income from continuing operations
before income taxes 9,918 6,400 5,715
Income tax expense (Note 10) 3,967 2,432 2,286
------- ------- -------
Income from continuing operations 5,951 3,968 3,429
Gain (loss) from discontinued operations (Note 5) 602 (530) -
------- ------- -------
Net income $ 6,553 $ 3,438 $ 3,429
==============================================================================================
EARNINGS PER SHARE
Earnings per share (Note 13) - Basic: $ 1.09 $ .74 $ .65
Income from continuing operations .11 (.10) -
Gain (loss) from discontinued operations ------- ------- -------
Net income $ 1.20 $ .64 $ .65
Earnings per share (Note 13) - Diluted: .87 .62 .55
Income from continuing operations $ .09 $ (.08) $ -
Gain (loss) from discontinued operations ------- ------- -------
Net income $ .96 $ .54 $ .55
==============================================================================================
</TABLE>
The "Notes to Financial Statements" are an integral part of this statement.
18
<PAGE> 19
MYR GROUP INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
=======================================================================================================
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
=======================================================================================================
Restricted Stock
Common Additional Awards and
Stock Paid-In Treasury Retained Shareholder Note
Issued Capital Stock Earnings Receivable Total
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1995 $ 2,512 $ 6,757 $ (1,643) $ 16,472 $ (476) $ 23,622
Four-for-three stock split 838 (838)
Issuance of 17,112
common shares
upon exercise of
stock options (21) 95 74
Net income 3,429 3,429
Dividends paid (575) (575)
Shareholder note payment 68 68
-------------------------------------------------------------------------
Balance December 31, 1995 3,350 5,898 (1,548) 19,326 (408) 26,618
Issuance of 12,222
common shares
upon exercise of
stock options (21) 68 47
Issuance of 78,783
common shares for
restricted stock awards 88 437 (525) -
Amortization of
unearned restricted
stock awards 42 42
Net income 3,438 3,438
Dividends paid (643) (643)
Shareholder note payment 68 68
-------------------------------------------------------------------------
Balance December 31, 1996 3,350 5,965 (1,043) 22,121 (823) 29,570
Five-for-three stock split 2,232 (2,232)
Claim settlement (Note 2) (3,994) (711) (4,705)
Issuance of 41,660
common shares
upon exercise of
stock options (56) 231 175
Issuance of 52,343
common shares for
restricted stock awards 317 290 (607)
Amortization of
unearned restricted
stock awards 142 142
Net income 6,553 6,553
Dividends paid (725) (725)
Shareholder note payment 68 68
-------------------------------------------------------------------------
Balance December 31, 1997 $ 5,582 $ - $ (522) $ 27,238 $(1,220) $ 31,078
=======================================================================================================
</TABLE>
The "Notes to Financial Statements" are an integral part of this statement.
19
<PAGE> 20
MYR GROUP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
==================================================================================================
YEARS ENDED DECEMBER 31 1997 1996 1995
==================================================================================================
<S> <C> <C> <C> <C>
CASH Net income $ 6,553 $ 3,438 $ 3,429
FLOWS Adjustments to reconcile net income
FROM to cashflows from continuing operations:
OPERATIONS Discontinued operations (602) 530 -
Depreciation and amortization 5,331 5,834 5,822
Amortization of intangibles 107 215 367
Amortization of unearned stock awards 142 42 -
Deferred income taxes (66) (108) 489
Loss (gain) on sale of property and equipment 76 (668) (220)
Changes in operating assets and
Liabilities; net of acquisition:
Accounts receivable (15,810) (2,394) (3,622)
Costs and estimated earnings in
Excess of billings on uncompleted
Contracts (2,796) 4,091 (6,557)
Other assets 823 (163) 247
Accounts payable 58 3,835 (4,673)
Billings in excess of costs and
Estimated earnings on uncompleted
Contracts 3,679 462 685
Insurance accruals 2,961 (893) 2,341
Other liabilities 907 447 5,853
-------- -------- --------
Cash flows from continuing operations 1,363 14,668 4,161
Cash flows from discontinued operations 2,456 (530) -
-------- -------- --------
Cash flows from operations 3,819 14,138 4,161
-------- -------- --------
CASH Proceeds from disposal of property and
FLOWS Equipment 404 2,310 1,818
FROM Expenditures for property and equipment (4,173) (5,061) (4,959)
INVESTMENTS Cash used in acquisition, net of cash acquired (241) - (12,995)
-------- -------- --------
Cash flows from investments (4,010) (2,751) (16,136)
-------- -------- --------
CASH Proceeds from issuance of long-term debt 3,403 - 19,500
FLOWS Repayments on long-term debt - (10,559) (12,344)
FROM Increase (decrease) in deferred compensation 16 8 (27)
FINANCING Proceeds from exercise of stock options 175 47 74
Dividends paid (725) (643) (575)
Shareholder's note payments 68 68 68
Financing costs - - (133)
-------- -------- --------
Cash flows from financing 2,937 (11,079) 6,563
-------- -------- --------
Increase (decrease) in cash and cash equivalents 2,746 308 (5,412)
Cash and cash equivalents beginning of year 1,011 703 6,115
-------- -------- --------
Cash and cash equivalents end of year $ 3,757 $ 1,011 $ 703
==================================================================================================
</TABLE>
The "Notes to Financial Statements" are an integral part of this statement.
20
<PAGE> 21
MYR GROUP INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - The five principal types of construction services performed by the
Company are electric utility line construction, commercial and industrial
electrical construction, traffic signals and street lighting, telecommunication
construction services and mechanical construction. Work is performed under
lump sum, unit price, and cost-plus-fee contracts. These contracts are
undertaken by the Company or its subsidiaries alone, or with subcontractors.
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and its subsidiaries. The Company's investment in
joint ventures is accounted for by the equity method. All material
intercompany balances and transactions have been eliminated.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the period reported. Actual
results could differ from those estimates.
Revenue Recognition - The Company recognizes revenue on construction contracts
using the percentage-of-completion accounting method determined in each case by
the ratio of cost incurred to date on the contract (excluding uninstalled
direct materials) to management's estimate of the contract's total cost.
Contract cost includes all direct material, subcontract and labor costs and
those indirect costs related to contract performance, such as supplies, tool
repairs and depreciation. The Company charges selling, general, and
administrative costs, including indirect costs associated with maintaining
district offices, to expense as incurred.
Provisions for estimated losses on uncompleted contracts are recorded in the
period in which such losses are determined. Changes in estimated revenues and
costs are recognized in the periods in which such estimates are revised.
Significant claims are included in revenue in accordance with industry
practice.
The asset, "Costs and estimated earnings in excess of billings on uncompleted
contracts," represents revenues recognized in excess of amounts billed. The
liability, "Billings in excess of costs and estimated earnings on uncompleted
contracts," represents amounts billed in excess of revenues recognized.
Classification of Current Assets and Current Liabilities - The length of the
Company's contracts varies, with some larger contracts exceeding one year. In
accordance with industry practice, the Company includes in current assets and
current liabilities amounts realizable and payable under contracts which may
extend beyond one year.
Property and Equipment - Property and equipment are carried at cost, which has
been reduced for the effect of the settlement agreement entered into in
December 1997 (see Note 2). Depreciation for buildings and improvements is
computed using the straight line method over estimated useful lives ranging
from five years to 32 years. Depreciation for equipment is computed using
straight line and accelerated methods over estimated useful lives ranging from
three years to ten years. The cost of maintenance and repairs is charged to
income as incurred.
Intangible Assets - Intangible assets at December 31, 1996 consists of goodwill
arising from acquisitions. Goodwill represents the excess of the purchase
price over the fair value of net assets acquired in a business combination
treated as a purchase. Goodwill was being amortized on a straight line basis
over 25 years. Effective December 29, 1997, goodwill was eliminated in
connection with the settlement agreement with the subordinated note holders
(see Note 2).
21
<PAGE> 22
Insurance - The Company maintains insurance coverage it believes to be adequate
for its needs. Under its insurance contracts, the Company usually accepts
self-insured retentions appropriate for the specific risks of its business.
Income Taxes - Deferred income taxes are recorded based upon the differences
between the financial statement and the tax bases of assets and liabilities and
available tax credit carryforwards.
Consolidated Statement of Cash Flows - For purposes of this statement, short
term investments which have a maturity at purchase of ninety days or less are
considered to be cash equivalents. Supplemental disclosures with respect to
cash flows are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Cash paid for interest $1,826 $1,788 $1,677
Cash paid for income taxes 2,900 3,045 1,937
Convertible subordinated notes issued (Note 2) - - 5,679
Capital lease obligations incurred - 232 -
Claim settlement (Note 2) 4,705 - -
</TABLE>
Other - In December 1997 and 1995, the Company effected a five-for-three and a
four-for-three stock split in the form of a stock dividend. The $2,232,000 and
$838,000 par value of the additional shares issued was transferred from
additional paid-in capital to common stock in 1997 and 1995, respectively.
Amounts relating to number of shares and amounts per share have been adjusted
for 1996 and prior years to reflect the stock splits. Certain other amounts in
prior year financial statements have been reclassified to conform to the 1997
presentation.
2. ACQUISITION
On May 1, 1997, the Company acquired 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, telecommunication 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 in 1997, 1998, 1999 and 2000, with interest
payable quarterly each year. The transaction has been accounted for using the
purchase method of accounting.
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. All the shares of Harlan were exchanged for $13,612,000
in cash and $5,679,000 of 7% convertible subordinated notes. The notes are
convertible into 1,000,000 shares of the Company's common stock at a price per
share of $5.67954. The transaction has been accounted for using the purchase
method of accounting.
In accordance with the Harlan merger agreement and the promissory notes, the
Company submitted a claim against the subordinated note holders in 1996.
Effective December 29, 1997, the Company and note holders entered into a
settlement agreement whereby the Company agreed to withdraw all claims and the
note holders agreed to issue a call option at $5.67954 per share on 600,191
shares of the common stock, when and if converted by the noteholders. The net
value of options received, determined using the Black-Scholes option pricing
model, was $4,705,000 and has been recorded as a reduction of equity and the
fair value of assets acquired in accordance with the Accounting Principles
Board Opinion No. 16, "Business Combinations" (APB16). As a result, the net
goodwill balance of $2,359,000 was eliminated, the Harlan property and
equipment was reduced by $3,753,000 and $1,407,000 of deferred taxes were
recorded relating to the tax effect of the property and equipment adjustment.
22
<PAGE> 23
3. ACCOUNTS RECEIVABLE (IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Contract receivables $59,893 $47,431
Contract retainages 16,093 6,338
Other 103 233
------- -------
76,089 54,002
Allowance for doubtful accounts 675 494
------- -------
$75,414 $53,508
======= =======
</TABLE>
4. CONTRACTS IN PROCESS (IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Costs incurred on uncompleted contracts $509,187 $351,851
Estimated earnings 42,276 38,834
-------- --------
551,463 390,685
Less: Billings to date 545,727 385,429
-------- --------
$ 5,736 $ 5,256
======== ========
Included in the accompanying balance sheet
under the following captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 14,919 $ 10,760
Billings in excess of costs and estimated
earnings on uncompleted contracts 9,183 5,504
-------- --------
$ 5,736 $ 5,256
======== ========
</TABLE>
5. 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 ("National Union"). In
June 1997, the Company settled the lawsuit and received $4,250,000. The
Company had a receivable, classified as other assets, 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 National Union lawsuit, which resulted in additional
losses of $530,000, net of income tax benefits of $325,000.
6. PROPERTY AND EQUIPMENT (IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Land $ 931 $ 1,431
Buildings and improvements 4,144 5,716
Construction equipment 46,140 48,245
Office equipment 3,643 3,276
------- -------
54,858 58,668
Accumulated depreciation 37,967 36,429
------- -------
$16,891 $22,239
======= =======
</TABLE>
23
<PAGE> 24
7. LEASES AND COMMITMENTS
At December 31, 1997, the Company had outstanding irrevocable standby letters
of credit totaling $13,404,000 of which $12,627,000 guarantees the Company's
payment obligation under its insurance programs and $777,000 which is a credit
enhancement to guarantee an industrial revenue bond.
The Company also leases real estate and construction equipment under operating
leases with terms ranging from one to five years. Future minimum lease
payments as of December 31, 1997 total $6,926,000, $5,952,000, $5,181,000,
$3,833,000 and $1,389,000 for the years ending 1998, 1999, 2000, 2001 and 2002
respectively. Total rent expense, including both short-term and long-term
leases, for 1997, 1996, and 1995 amounted to approximately $14,078,000,
$12,088,000 and $7,417,000, respectively.
8. LONG-TERM DEBT
Long-term debt outstanding consisted of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Variable - rate term credit agreement (effective interest
rate of 7.7% at December 31, 1997), payable in quarterly
installments of $625 through December 1998 $ 2,500 $ 5,000
Variable - rate revolving credit agreement, (effective
interest rate of 7.75% at December 31, 1997), payable
at maturity in December 1998 10,000 1,675
7% convertible subordinated notes, payable in three
equal installments commencing in January 2000 5,679 5,679
Industrial revenue bond financing at variable rates
(weighted average of 8.5%) and due in varying annual
amounts ranging from $215 to $250 through 2000 695 890
Variable - rate notes payable (1.5% over adjusted LIBOR),
payable in annual installments commencing in 1998 2,250 -
Equipment lease at 6%, payable in monthly installments
through July 1999 122 196
------- -------
21,246 13,440
Less current portion 13,462 4,445
------- -------
$ 7,784 $ 8,995
======= =======
</TABLE>
The Company maintains a $20,000,000 revolving and $2,500,000 term credit
facility with a bank. At the Company's option, borrowing under this line bears
interest at the bank's prime interest rate or the adjusted LIBOR commercial
rate plus a spread. The credit facility expires on December 31, 1998.
Under the credit facility, borrowings are limited to an amount equal to 75% of
eligible accounts receivable balances. The terms of the credit agreement
require, among other things, minimum current ratios, fixed charge coverage
ratio and senior debt leverage ratios. Payments of cash dividends and
repurchases of capital stock, each quarter, are restricted to an amount not to
exceed $150,000 plus 6.25% of the Company's net income for the preceding 12
months. The Company has complied with these provisions.
24
<PAGE> 25
The industrial revenue bond is secured by properties with a net book value of
approximately $1,933,000 and $2,063,000 at December 31, 1997 and 1996,
respectively. The equipment leases are secured by equipment with a net book
value of approximately $160,000 and $207,000 as of December 31, 1997 and 1996,
respectively.
Maturities of long-term debt are $13,462,000 in 1998, $939,000 in 1999,
$3,059,000 in 2000, and $1,893,000 per year for 2001, and 2002. The maturities
of debt incurred under the revolving credit agreement have been reported based
on an estimate of the expected paydown through the 1998 expiration date of the
credit facility.
9. ACCRUED LIABILITIES (IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Insurance $ 15,121 $ 12,160
Payroll 3,778 5,365
Union dues and benefits 3,946 2,919
Profit sharing and thrift plan 1,632 1,191
Income taxes 1,249 -
Taxes, other than income taxes 1,557 1,397
Other 7,746 5,773
--------- ---------
$ 35,029 $ 28,805
========= =========
</TABLE>
10. INCOME TAXES
Provision for income taxes on income from continuing operations comprises the
following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Current
Federal $ 3,409 $ 2,137 $ 1,331
State 624 403 466
-------- -------- --------
4,033 2,540 1,797
Deferred (66) (108) 489
-------- -------- --------
$ 3,967 $ 2,432 $ 2,286
======== ======== ========
</TABLE>
The differences between the U.S. federal statutory tax rate and the Company's
effective rate for the three years ended December 31, 1997 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
U.S. federal statutory rate 34.0% 34.0% 34.0%
State income taxes, net of U.S.
federal income tax benefit 5.3 4.9 5.4
Other .7 (.9) .6
---- ---- ----
40.0% 38.0% 40.0%
==== ==== ====
</TABLE>
25
<PAGE> 26
The net deferred tax assets and liabilities arising from temporary differences
at December 31, 1997 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
--------------------- ----------------------
CURRENT NONCURRENT CURRENT NONCURRENT
ASSETS LIABILITIES ASSETS LIABILITIES
-----------------------------------------------
<S> <C> <C> <C> <C>
Employee and retiree benefit
plans $ - $ (252) $ - $ (251)
Excess tax over book depreciation - 2,969 - 3,298
Insurance accruals 3,060 2,584 -
Other allowances and accruals 2,262 (1,971) 2,312 -
------ ------- ------ ------
$5,322 $ 746 $4,896 $3,047
====== ======= ====== ======
</TABLE>
11. CONTINGENCIES
The Company is involved in various legal matters which arise in the ordinary
course of business, for which the Company has made provisions in its financial
statements or which are not expected to have a material adverse effect.
12. TREASURY STOCK
The Company's Board of Directors has authorized the purchase of up to 555,556
shares (adjusted to reflect the December 1995 and 1997 stock splits) of its
common stock for future issuance to key employees under the Company's stock
option plans. No shares were purchased in 1997, 1996 and 1995. At December
31, 1997, the balance available under the Board of Directors' authorization to
purchase shares was 257,742. The Company issued, 41,660 and 12,222 shares out
of treasury for options exercised in 1997 and 1996, respectively. The Company
also issued 52,343 and 78,783 shares out of treasury for restricted stock
awarded to non-employee directors and key employees in 1997 and 1996,
respectively.
13. EARNINGS PER SHARE
On December 31, 1997, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, Earnings Per Share, which requires the disclosure
of two earnings per common share computations: basic and diluted. The basic
earnings per common share is computed by dividing net income by the weighted
average number of shares of common stock. The diluted earnings per share
reflects the potential dilution which would result from the exercise of stock
options and conversion of the convertible subordinated notes. Earnings per
share computations for prior years have been restated to reflect this new
standard.
Basic and diluted weighted average shares outstanding and earnings per share on
income from continuing operations are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Share data:
Basic shares 5,443 5,353 5,290
Common equivalent shares 645 394 376
Shares assumed converted 1,000 1,000 1,000
----- ----- -----
Diluted shares 7,088 6,747 6,666
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ----------------- -----------------
Total Per Share Total Per Share Total Per Share
----- --------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Income from
Continuing operations:
Basic $5,951 $1.09 $3,968 $0.74 $3,429 $0.65
Interest on convertible
subordinated notes 239 247 237
------ ------ ------
Diluted $6,190 $0.87 $4,215 $0.62 $3,666 $0.55
====== ====== ======
</TABLE>
26
<PAGE> 27
14. STOCK OPTION AND RESTRICTED STOCK PLANS
At December 31, 1997, under the 1996, 1995, 1993, 1992 and 1990 Stock Option
and Restricted Stock Plans, 76,373, 430,555, 102,209, 22,218, and 21,961
shares, respectively, are available for grant.
Stock Options:
Outstanding options granted under the 1995, 1993 and 1992 plans are exercisable
at a price equal to 100% of the fair market value at the date of grant.
Outstanding options granted under the 1990 and 1989 plans are exercisable at a
price equal to either 85% or 100% of the fair market value at the date of
grant. Vesting of options granted under the plans is determined separately for
each grant and has generally been equally over a three to five year term.
Transactions and other information relating to the stock option plans for the
three years ended December 31, 1997 are summarized below:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Number Exercise Number Exercise Number Exercise
Of Shares Price Of Shares Price Of Shares Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding beginning of year 1,195,490 $ 4.50 1,239,934 $ 4.49 973,342 $ 4.28
Granted 43,060 8.53 15,560 6.59 374,467 5.09
Exercised (41,660) 4.09 (12,222) 4.30 (17,112) 4.31
Forfeited (25,117) 4.64 (47,782) 4.95 (90,763) 4.70
--------- ------- --------- ------- --------- -------
Outstanding end of year 1,171,773 $ 4.66 1,195,490 $ 4.50 1,239,934 $ 4.49
========= ======= ========= ======= ========= =======
Exercisable end of year 827,246 $ 4.04 743,680 $ 3.70 652,915 $ 3.70
========= ======= ========= ======= ========= =======
</TABLE>
Options outstanding at December 31, 1997 are summarized below:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------- ----------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- --------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$2.56 391,668 1.76 $ 2.56 391,668 $ 2.56
$4.24 - $5.51 450,645 6.55 4.75 298,068 4.70
$6.52 - $13.61 329,460 6.00 7.04 137,510 6.82
--------- -------
1,171,773 827,246
========= =======
</TABLE>
The weighted average fair value of the stock options granted during 1997 and
1996 was $2.81 and $2.12, respectively. The fair value of each stock option
grant is estimated using the Black-Scholes option pricing model with the
following weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Expected life (years) 5 5
Risk-free interest rate 6.43% 6.24%
Expected volatility 29.55% 30.74%
Expected dividend yield 1.4% 1.80%
</TABLE>
27
<PAGE> 28
The Company accounts for the stock option plans in accordance with Accounting
Principles Board Opinion No. 25, under which no compensation cost has been
recognized for stock option awards granted at fair market value. Had
compensation cost for the Stock Plans been determined consistent with Statement
of Financial Accounting Standards No. 123, "Accounting for Stock - Based
Compensation" (SFAS 123), the Company's pro forma income and earnings per share
for 1997 and 1996 would have been:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Net Income $6,478,000 $3,365,000
Earnings per share - Basic 1.19 .63
Earnings per share - Diluted .95 .53
</TABLE>
Restricted stock
Participants under the restricted stock award plans are entitled to cash
dividends and to vote their respective shares. The shares issued are held by
the Company until the restriction period expires. Under the 1995, 1992 and
1990 plans, the restriction period is determined separately for each grant.
Upon issuance of stock under such plans, unearned compensation equivalent to
the market value at the date of grant is charged to stockholders' equity and
subsequently amortized to expense over the restriction period. In 1997 and
1996, 49,166 and 75,000 shares were awarded at an average market price of
$11.83 and $6.66, respectively with seven year restriction periods. The charge
against net earnings for compensation under the plan was $116,100 in 1997 and
$25,900 in 1996.
The restricted stock awards under the 1996 plan are issued to non-employee
directors who elect to receive restricted stock in lieu of the annual retainer
payable quarterly in cash. In 1997 and 1996, 3,177 and 3,783 shares were
awarded at an average market price of $8.18 and $6.64, respectively. The
charge against net earnings for director fees under the plan was $26,000 in
1997 and $16,100 in 1996.
Under the Company's 1992, 1990 and 1989 Stock Option and Restricted Stock
Plans, a Committee of the Board of Directors is authorized to grant loans to
option holders to purchase the shares of common stock upon the exercise of
options. At December 31, 1997 and 1996, respectively, the outstanding note
receivable balance was $272,000 and $340,000. The note was collateralized by
81,250 shares of the Company's common stock at December 31, 1997 and 1996. The
note bears interest at an annual rate of 7.7%, payable annually, with principal
payments due through December 2001. Outstanding loans are shown as a reduction
of shareholders' equity on the balance sheet.
15. EMPLOYEE BENEFIT PLANS
The Company has profit sharing and thrift employee benefit plans in effect for
all eligible salaried employees. Company contributions under such plans are
based upon a percentage of income with limitations as defined by the plans.
Contributions amounted to approximately $1,650,000, $1,230,000 and $645,000 in
1997, 1996, and 1995, respectively.
Certain employees are covered under union-sponsored collectively bargained
defined benefit plans. Expenses for these plans amounted to approximately
$23,883,000, $15,387,000 and $10,265,000 in 1997, 1996 and 1995, respectively,
as determined in accordance with negotiated labor contracts.
The Company also has a supplemental retirement and death benefit program. It
was discontinued in 1988. The program provided for aggregate benefits at
retirement or death equal to approximately twice the key employee's highest
base salary. The benefits are paid out in equal monthly installments over 10
years for retirement or 15 years in the event of death. Benefits are reduced
for early retirement. There are currently four active employee participants.
28
<PAGE> 29
16. MAJOR CUSTOMERS
The Company had one customer that accounted for 17.3% of the Company's
consolidated contract revenue in 1997. In 1996, the Company had another
customer that accounted for 12.1% of the Company's consolidated revenue. No
customers accounted for more than 10% of the Company's consolidated contract
revenues in 1995.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair values of
financial instruments:
For cash and cash equivalents, accounts receivable and payable, accrued
liabilities, and other assets and liabilities, the carrying amount approximates
the fair value because of the short maturities of those instruments.
The variable-rate borrowings under the Company's bank term and revolving credit
agreement, which is repriced frequently, approximate fair value. The fair
value of long-term debt is estimated based on quoted market prices, when
available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar financial instruments or discounting
future cash flows. The difference between the fair value and the carrying
value of the Company's long term debt is not material.
29
<PAGE> 30
18. SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
1997
----------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31 Year
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contract revenue $ 89,004 $112,310 $119,838 $110,124 $431,276
Gross profit 7,385 9,954 11,789 10,532 39,660
Income from continuing operations 693 1,710 1,890 1,658 5,951
Net income 693 2,312 1,890 1,658 6,553
Earnings per share - basic:
Income from continuing operations 0.13 0.31 0.35 0.30 1.09
Net income 0.13 0.42 0.35 0.30 1.20
Earnings per share - diluted:
Income from continuing operations 0.11 0.25 0.27 0.24 0.87
Net income 0.11 0.34 0.27 0.24 0.96
Dividends paid per share 0.033 0.033 0.033 0.033 0.132
Market price:
High 8.40 10.99 14.18 14.85 14.85
Low 7.20 6.98 10.50 12.44 6.98
</TABLE>
<TABLE>
<CAPTION>
1996
----------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31 Year
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 - basic:
Income from continuing operations 0.03 0.24 0.29 0.18 0.74
Net income 0.03 0.17 0.29 0.15 0.64
Earnings per share - diluted:
Income from continuing operations 0.03 0.20 0.23 0.16 0.62
Net income 0.03 0.15 0.23 0.13 0.54
Dividends paid per share 0.03 0.03 0.03 0.03 0.12
Market price:
High 6.60 7.05 7.05 7.73 7.73
Low 6.00 6.15 6.23 6.30 6.00
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
The Company has no items to report under Item 9 of this report.
30
<PAGE> 31
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
- -------------------------------
Incorporated by reference from the Company's definitive proxy statement for use
in conjunction with its annual meeting of stockholders under the caption
"Election of Director".
(b) Identification of Executive Officers
- ----------------------------------------
The names and ages of the executive officers of the Company and their business
experience during the past five years are set forth below:
Charles M. Brennan III (56)
- ---------------------------
Chairman (since August 1988) and Chief Executive Officer (since October 1989)
Director (since 1986).
William S. Skibitsky (48)
- -------------------------
President and Chief Operating Officer (since July 1996), President and Chief
Operating Officer of The L. E. Myers Co. (Since May 1994) President of ABB
Combustion Engineering Nuclear Services (1990 - January 1994)
Byron D. Nelson (51)
- --------------------
Senior Vice President, General Counsel and Secretary (since February 1986).
Elliott C. Robbins (51)
- -----------------------
Senior Vice President, Treasurer and Chief Financial Officer (since February
1986)
Betty R. Johnson (39)
- ---------------------
Controller (since June 1992); Senior Manager at Deloitte & Touche (1981 - June
1992).
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the Company's definitive proxy statement for use
in connection with its annual meeting of stockholders under the caption
"Executive Compensation".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the Company's definitive proxy statement for use
in connection with its annual meeting of stockholders under the caption
"Security Ownership".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the Company's definitive proxy statement for use
in connection with its annual meeting of stockholders under the captions
"Executive Compensation" and "Compensation Committee Interlocks and Insider
Participation".
31
<PAGE> 32
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(a) 1. The following documents are included in Item 8:
Responsibility for Financial Statements 15
Independent Auditors' Report 16
Financial Statements:
Consolidated Balance Sheet -
December 31, 1997 and 1996 17
Consolidated Statement of Operations -
Years Ended December 31, 1997, 1996 and 1995 18
Consolidated Statement of Shareholders' Equity
Years Ended December 31, 1997, 1996, and 1995 19
Consolidated Statement of Cash Flows
Years Ended December 31, 1997, 1996, and 1995 20
Notes to Financial Statements 21
2. All schedules are omitted because they are not applicable, not
required, or the required information is included in the
financial statements or notes thereto.
(b) No reports on Form 8-K were filed by the Company during the fourth quarter
1997.
(c) Exhibits required to be filed by Item 601 of Regulation S-K are listed in
the Exhibit Index which appear at pages 34 and 35 and which are
incorporated by reference.
</TABLE>
32
<PAGE> 33
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Securities
and 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.
/s/ Elliott C. Robbins
------------------------------------------
Elliott C. Robbins
Senior Vice President, Treasurer
and Chief Financial Officer
Dated: March 18, 1998
In accordance with the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
(i) Principal Executive Officer:
/s/ Charles M. Brennan III Chairman and Chief
- ----------------------------------- Executive Officer
Charles M. Brennan III
(ii) Principal Financial Officer:
/s/ Elliott C. Robbins Senior Vice President,
- ----------------------------------- Treasurer and Chief
Elliott C. Robbins Financial Officer
(iii) Principal Accounting Officer
/s/ Betty R. Johnson Controller
- -----------------------------------
Betty R. Johnson
(iv) A Majority of the Board of Directors:
/s/ Charles M. Brennan III
- -----------------------------------
Charles M. Brennan III
/s/ William G. Brown
- -----------------------------------
William G. Brown
/s/ Allan E. Bulley, Jr.
- -----------------------------------
Allan E. Bulley, Jr.
/s/ Bide L. Thomas
- -----------------------------------
Bide L. Thomas
/s/ John M. Harlan
- -----------------------------------
John M. Harlan
33
<PAGE> 34
MYR GROUP INC.
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 1997
-------------------------------------------
Exhibit Index
<TABLE>
<CAPTION>
Page
Number Description (or Reference)
- ------ ----------- --------------
<S> <C> <C>
2.1 Merger Agreement by and among the Company,
HMM Corporation and Harlan Electric Company
dated October 5, 1994, as amended (1)
3.1 Amended and Restated Certificate of Incorporation of
the Company (2)
3.2 Bylaws of the Company (as amended) (3)
4.1 Form of 7% Subordinated Convertible Escrow and Non-Escrow
promissory notes of the Company to certain former
stockholders of Harlan Electric Company (4)
10.1 Form of Agreement for Supplemental Retirement and Death
Benefit Programs of the Company and its subsidiaries (5)
10.2 Form of Agreement of Indemnification for Directors of
the Company and certain officers of the Company and its
subsidiaries (6)
10.3 1989 Stock Option Plan (7)
10.4 1990 Stock Option Plan (7)
10.5 1992 Stock Option Plan (7)
10.6 1995 Stock Option Plan (7)
10.7 1993 Non-Employee Director Stock Option Plan (8)
10.8 1996 Non-Employee Director Stock Ownership Plan (9)
10.9 Management Incentive Program (10)
10.10 Amended Employment Agreement between the Company and
C. M. Brennan effective January 1, 1997. (11)
21 Subsidiaries of the Company 36
23 Independent Auditors' Consent 37
27 Financial Data Schedules 38
- ---------------------------------------------------------------------------
</TABLE>
34
<PAGE> 35
(1) Filed as exhibit 2 to the Report on Form 8-K of the Company dated January
3, 1995, and incorporated herein by reference.
(2) Filed as exhibits 3.1 to the Annual Report on Form 10-K of the Company
for the year ended December 31, 1995, and incorporated herein by
reference.
(3) Field as exhibits 3.2 to the Annual Report on Form 10-K of the Company for
the year ended December 31, 1995, and incorporated herein by reference.
(4) Filed as exhibits E-1 and E-2 to the Merger Agreement by and among the
Company, HMM Corporation and Harlan Electric Company dated October 5,
1994, as amended, which agreement and exhibits thereto were filed as
exhibit 2 to the Report on Form 8-K of the Company dated January 3, 1995,
and incorporated herein by reference.
(5) Filed as exhibit 10.5 to the Annual Report on Form 10-K of the Company for
the year ended December 31, 1984, and incorporated herein by reference.
(6) Filed as exhibit 10.8 to the Annual Report on Form 10-K of the Company for
the year ended December 31, 1986, and incorporated herein by reference.
(7) Filed as Appendix B to the notice of meeting and proxy statement for use
in connection with the Company's 1996 Annual Meetings of stockholders held
on May 15, 1996.
(8) Filed as exhibit 10.6 to the Report on Form 10-K of the Company for the
year ended December 31, 1993 and incorporated herein by reference.
(9) Filed as Appendix A to the notice of meetings and proxy statements for use
in connection with the Company's 1996 Annual Meeting of stockholders held
on May 15, 1996.
(10) Filed as exhibit 10.8 to the Annual Report on Form 10-K of the Company for
the year ended December 31, 1995, and incorporated herein by reference.
(11) Filed as exhibit 10.10 to the Annual Report on Form 10-K of the Company
for the year ended December 31, 1996, and incorporated herein by
reference.
35
<PAGE> 1
Exhibit 21
MYR GROUP INC.
LIST OF SUBSIDIARIES
The Company's significant subsidiaries are:
<TABLE>
<CAPTION>
Name of Corporation State or Jurisdiction Percentage
or other entity of Organization of Interest
- ------------------- --------------------- -------------
<S> <C> <C>
The L. E. Myers Co. Delaware 100%
Hawkeye Construction, Inc. Oregon 100%
Harlan Electric Company Michigan 100%
D.W. Close Company Inc. Washington 100%
Sturgeon Electric Company, Inc. Michigan 100%(1)
Power Piping Company Pennsylvania 100%(1)
Comtel Technologies, Inc. Colorado 100%(2)
</TABLE>
(1) wholly owned subsidiary of Harlan Electric Company
(2) wholly owned subsidiary of Sturgeon Electric Company, Inc.
36
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
Board of Directors and Shareholders
MYR Group Inc.
We consent to the incorporation by reference in Registration Statement Nos.
33-31305, 33-36557, 33-53628, 33-76722 and 333-41065 of MYR Group Inc. on Form
S-8 of our report dated March 18, 1998, appearing in the Annual Report on Form
10-K of MYR Group Inc. for the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
Chicago, Illinois
March 18, 1998
37
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000700923
<NAME> MYR GROUP INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,757
<SECURITIES> 0
<RECEIVABLES> 76,089
<ALLOWANCES> 675
<INVENTORY> 0
<CURRENT-ASSETS> 99,999
<PP&E> 54,858
<DEPRECIATION> 37,967
<TOTAL-ASSETS> 117,424
<CURRENT-LIABILITIES> 77,401
<BONDS> 7,784
0
0
<COMMON> 5,582
<OTHER-SE> 25,496
<TOTAL-LIABILITY-AND-EQUITY> 117,424
<SALES> 431,276
<TOTAL-REVENUES> 431,276
<CGS> 391,616
<TOTAL-COSTS> 419,780
<OTHER-EXPENSES> (178)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,720
<INCOME-PRETAX> 9,918
<INCOME-TAX> 3,967
<INCOME-CONTINUING> 5,951
<DISCONTINUED> (602)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,553
<EPS-PRIMARY> 1.20
<EPS-DILUTED> .96
</TABLE>
