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, 1999
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.
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(Exact name of registrant as specified in its charter)
Delaware 36-3158643
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(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1701 W. Golf Road, Rolling Meadows, IL 60008
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(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
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Common Stock, $0.01 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, $0.01
par value, held by non-affiliates of the registrant as of March 22,
2000, was $152,817,148 based on the closing price on that date on the
New York Stock Exchange. As of March 22, 2000, 6,714,259 shares of the
registrant's Common Stock, $0.01 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 stock-
holders are incorporated by reference into Part III of this annual
report.
<PAGE>
Table of Contents
and Cross-Reference Sheet
Page or Reference
-----------------
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.......................32
Part III
Item 10. Directors and Executive Officers of the
Registrant.................................33
Item 11. Executive Compensation.....................33
Item 12. Security Ownership of Certain Beneficial
Owners and Management......................33
Item 13. Certain Relationships and Related
Transactions...............................33
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K........................34
Signatures.................................................35
<PAGE>
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"), MYRcom, Inc. ("MYRcom"), a Delaware Corporation, ComTel
Technology, Inc., ("ComTel") a Colorado Corporation, 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 was organized in 1983 and its principal place of business is
Broomfield, Colorado. The Company acquired D.W. Close on May 1, 1997.
MYRcom was formed in 1999 and its principal place of business is in
Texas. 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 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 are principally involved in two areas, infrastructure services
and commercial/industrial services. The commercial/industrial services
include electrical construction and mechanical construction.
<PAGE>
Infrastructure Services
The infrastructure construction and maintenance services involve
primarily electric utility line construction and maintenance services
to electric utilities, other similar entities and other users of these
higher voltage electrical construction services, gas utility
construction services to utilities, telecommunication construction
services to a broad spectrum of clients and traffic signal and street
lighting construction services predominantly to various departments of
transportation and municipalities.
Myers, Hawkeye, Harlan, ComTel, MYRcom, Sturgeon and D.W. Close each
provide some or all of these services to their respective markets. The
Company generally serves the electric utility and gas utility
industries as a prime construction contractor while its
telecommunications services and its traffic and street lighting
services are provided both as a prime contractor and as a
subcontractor. Designs and specifications for a project are usually
prepared by the clients or their agents. The services provided to
electric utilities and other similar entities include the construction
and maintenance of high voltage transmission lines, substations and
distribution systems. The gas construction services involves the
underground installation and repair of gas mains and lines. The
telecommunications services include the installation of foundations
and towers for PCS and cellular wireless communication installations,
fiber optic and copper communication installation for the trans-
mission of voice, data and video. The Company also installs
telecommunications/teledata services which include LAN/WAN, telephone,
video, voice, data, security and fire alarm systems. 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.
Commercial/Industrial Construction Services
The Company, through Sturgeon, ComTel 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.
<PAGE>
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.
General
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 42.3% of its consolidated contract
revenues and its single largest customer accounted for 8.1% 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 1999 the Company's ten largest customers accounted for 40.3% of
annual revenues. The Company's single largest customer during 1999
accounting for 7.1% of such revenue.
Contracts
The Company enters into contracts principally on the basis of competi-
tive 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. Cost-plus and unit
price contracts have accounted for a larger portion of revenue due in
part to our increased level of alliances with our utility clients. A
portion of the work performed by the Company requires performance and
payment bonds at the time of execution of the 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.
<PAGE>
The Company's backlog was $173.0 million at December 31, 1999, compared
to $140.1 million at December 31, 1998. 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, 1999 backlog will be completed in
2000.
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 (excluding uninstalled
direct materials) 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. Some projects also result in counter claims against
the Company related to costs incurred by the owner or general
contractor allegedly as a result of deficiencies or delays in
performance by the Company. 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 in both its infrastructure
construction services and commercial/industrial construction services.
Competition in both areas 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.
Infrastructure Construction Competition
The infrastructure construction and maintenance service provided by the
Company often requires larger amounts of capital and more specialized
equipment than the requirements for commercial/ industrial
construction. Larger infrastructure projects require more heavy duty
equipment as well as stronger financial resources to meet the cash flow
requirements of these projects. These factors sometimes reduce the
number of potential competitors on these projects to the larger
competitors. The number of firms which generally compete for any
significant infrastructure 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 others operate
nationally, as does the Company.
<PAGE>
Commercial/Industrial Construction Competition
Competition for the commercial/industrial construction services
provided by the Company varies greatly. 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 generally not as significant as for the
infrastructure construction. Since commercial and industrial
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 with the exception of the mechanical
portion of the Company's commercial and industrial construction
services, provided through Power Piping, which have been performed
principally in the eastern 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 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.
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, 1999, the Company had approximately 440 salaried
employees including executive officers, district managers, project
managers, superintendents, estimators, office managers, and staff and
clerical personnel. The Company also employed approximately 3,700
hourly-rated employees. This number fluctuates depending upon the
number and size of the projects under construction by the Company at
any particular time. During peak construction periods, the Company had
about 4,100 hourly-rated employees working on various construction
projects in 1999. 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.
<PAGE>
Recent Events
On December 21, 1999, MYR Group, Inc. (the "Company"), GPX Acquisition
Corp., a Delaware corporation and wholly-owned subsidiary of Parent
("Purchaser") and GPU, Inc. ("Parent") entered into an Agreement and
Plan of Merger (the "Merger Agreement") pursuant to which, Purchaser
commenced a cash tender offer (the "Offer"), to purchase all the issued
and outstanding shares of common stock of the Company, $0.01 par value
per share (the "Shares"), at a price of $30.10 per Share, net to the
seller in cash, without interest thereon, subject to the terms and
conditions of the Offer. The obligation of Purchaser to accept for
payment or pay for Shares is subject to the satisfaction of the
condition that there shall be validly tendered in accordance with the
terms of the Offer prior to the expiration date of the Offer and not
withdrawn a number of Shares which, together with the Shares then owned
by Parent and Purchaser, represents at least a majority of the Shares
outstanding on a fully diluted basis, and certain other conditions.
The Merger Agreement provides that, following the consummation of the
Offer, upon the satisfaction or waiver of certain conditions, Purchaser
will be merged with and into the Company (the "Merger"), with the
Company continuing as the surviving corporation (the "Surviving
Corporation"). In the Merger, each Share outstanding immediately prior
to the effective time of the Merger (other than Shares held in the
treasury of the Company, Shares owned by Parent, Purchaser or any other
wholly owned subsidiary of Parent, or Shares held by stockholders who
properly perfect their dissenters' rights under the Delaware General
Corporation Law) will be converted, by virtue of the Merger and without
any action by the holder thereof, into the right to receive $30.10 per
Share (or any higher price paid per Share in the Offer), net to the
seller in cash, without interest thereon.
The transaction is subject to regulatory approval under the Public
Utility Holding Company Act, to the satisfaction of certain other
conditions, and also provides for the payment of a break-up fee.
Item 2. Properties
Construction Equipment
The Company owns a substantial amount of construction equipment. This
equipment, which at December 31, 1999 had an aggregate cost of $47.6
million and a net book value of $10.1 million 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.
<PAGE>
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 1999 totaled
approximately $159,000.
The Company owns land which at December 31, 1999 aggregated
approximately 46 acres. Buildings owned by the Company as of the same
date contained approximately 174,000 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,
1999, contained approximately 131,000 square feet of enclosed space.
Rentals for such property in 1999 totaled approximately $1.2 million
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.
Year Amount
---- ---------
1999 $4,340,000
1998 $4,545,000
1997 $4,173,000
Item 3. Legal Proceedings
The Company is a defendant in a number of 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, 1999.
<PAGE>
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 22, 2000 there were 712 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 19 to the Financial
Statements).
Quarter Ended Stock Price Range Dividends Declared
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December 31, 1999 $17.88 - $29.50 $.0375
September 30, 1999 16.75 - 22.50 .0375
June 30, 1999 11.75 - 18.00 .0375
March 31, 1999 10.06 - 12.00 .0375
December 31, 1998 $10.13 - $12.88 $.035
September 30, 1998 10.69 - 16.88 .035
June 30, 1998 11.31 - 14.25 .035
March 31, 1998 11.31 - 12.81 .035
<PAGE>
Item 6. Selected Financial Data
<TABLE>
CONTINUING OPERATIONS
(Dollars in thousands except per share amounts)
===============================================================================================
Years ended December 31 1999 1998 1997 1996 1995
===============================================================================================
<S> <C> <C> <C> <C> <C>
FOR THE Contract revenue $477,279 $459,343 $431,276 $310,577 $266,965
YEAR Income 9,132 7,888 5,951 3,968 3,429
Depreciation and
Amortization 4,668 4,565 5,580 6,091 6,189
Capital expenditures 4,340 4,545 4,173 5,293 4,959
Interest expense 1,020 2,160 1,720 1,826 1,772
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AT YEAR Backlog $173,000 $140,100 $136,400 $134,900 $ 69,100
END Working capital 33,813 30,176 22,598 14,171 15,490
Property (net) 15,817 16,102 16,891 22,239 23,144
Total assets 129,706 110,199 117,424 98,486 101,834
Total long-term debt -- 6,614 7,784 8,995 14,590
Shareholders' equity 49,696 39,348 31,078 29,570 26,618
Shares outstanding 6,429 5,699 5,488 5,395 5,303
Diluted shares outstanding 6,900 6,672 7,088 6,747 6,666
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PER Income
SHARE Basic $ 1.53 $ 1.40 $ 1.09 $ .74 $ .65
DATA Diluted 1.34 1.20 .87 .62 .55
Book value 7.73 6.90 5.66 5.48 5.02
Stock price range
Low 10.06 10.13 6.98 6.00 4.78
High 29.50 16.88 14.85 7.73 7.15
Cash dividends .1500 .1400 .1320 .1200 .1091
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</TABLE>
<PAGE>
NOTES: 1. Selected financial data for 1999, 1998, 1997, 1996
and 1995 includes Harlan Electric Company since the
January 3, 1995 date of acquisition. The 1999,
1998 and 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.
4. Income from continuing operations in 1999 is before
an extraordinary charge of $572,000 or $0.09 per
share as a result of merger related costs pursuant
to the December 21, 1999 Agreement and Plan of
Merger.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Continuing Operations
Revenues increased 3.9% to $477.3 million in 1999 from $459.3 million
in 1998. The 1999 increase in revenue was due to higher alliance
related work and generally strong demand for infrastructure services.
This increase was offset by a decrease in revenues from a major
commercial electrical job for a hotel and casino in Nevada that was
completed in 1998. Revenues increased by 18.8% excluding this project.
Revenues increased 6.5% to $459.3 million in 1998 from $431.3 million
in 1997. The 1998 increase in revenue was due to higher storm work,
alliance related work and the D.W. Close acquisition in the second
quarter of 1997 as described in Note 2 to the Financial Statements.
This increase was offset by a decrease in revenues from a major
commercial electrical job for a hotel and casino in Nevada that was
completed in 1998. Revenues increased by 13.8%, excluding this
project.
The use of alliances, primarily with our electrical utility customers,
continued in 1999. In 1999 alliances accounted for $173 million of
revenues versus $126 million of revenues in 1998. Clients use
alliances to award some or all of their construction requirements to
one or more preferred contractors at negotiated or pre-determined
prices.
Gross profit increased 12.1% to $50.7 million in 1999 from $45.2
million in 1998. The gross profit percentage increased to 10.6% in 1999
compared to 9.8% in 1998, in part, due to a lesser percent of our
commercial and industrial revenues coming from a significant cost-plus
fixed-fee job. This type of work generally involves lower financial
risk, therefore frequently generates lower margins. The margin was also
positively impacted by a favorable decision in a lawsuit in which the
company together with its joint venture partner, were awarded damages
for additional costs incurred on a construction project which was
completed in 1998. Gross profit was adversely impacted by contract loss
accruals on two projects during the year. Losses were recorded on one
of these projects as a result of the Company incurring substantial
costs to perform certain underground work in rock conditions that it
did not anticipate at the time of the contract. Although the Company
is seeking additional compensation related to certain of the costs
incurred it has recognized no revenue to date against such costs. This
contract is substantially complete. Losses were recorded on the second
contract as a result of significant costs incurred and estimated to be
incurred in excess of amounts of revenue currently agreed upon for the
base contract price plus change orders, approved to date, to the
contract. The Company has submitted change order requests for certain
of these costs. While the Company anticipates making claims related to
this contract, including claims to recover certain costs incurred and
anticipated to be incurred, the Company has recorded no revenue related
to such claims. The total of these losses on these two contracts
amounted to $10.3 million in 1999.
<PAGE>
Gross profit increased 14.0% to $45.2 million in 1998 from $39.7
million in 1997. The gross profit percentage increased to 9.8% in 1998
compared to 9.2% in 1997, in part, due to a lesser percent of our
commercial and industrial revenues coming from a significant cost-plus
fixed-fee job. The gross profit percentage also increased due to lower
insurance costs as a result of the impact of our safety program on
construction costs. Offsetting these increases in gross margin
percentages were losses at a recently acquired business doing
commercial and industrial electrical work. The unit, which was acquired
as a turnaround opportunity, has made a number of significant changes
in its operations which resulted in improved operations in 1999.
Revenue and gross profit comparisons from quarter to quarter and
comparable quarters of different years 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 client 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
high deductible 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 15.5% to $35.7
million in 1999 from $30.9 million in 1998. The increase reflects
additional compensation and related costs to support the higher volume
of work. Selling, general and administrative expenses as a percentage
of revenues increased to 7.5% in 1999 from 6.7% in 1998.
Selling, general and administrative expenses increased 9.7% to $30.9
million in 1998 from $28.2 million in 1997. The increase reflects the
inclusion of D.W. Close for a full year, additional compensation and
related relocation costs to support the higher volume of work and
increased training related costs associated with new management
development programs. Selling, general and administrative expenses as a
percentage of revenues increased to 6.7% in 1998 from 6.5% in 1997.
Net interest expense was $899,000 in 1999 compared to $2.1 million in
1998. Interest expense decreased in 1999 primarily due to lower
average bank debt throughout the year.
Net interest expense was $2.1 million in 1998 compared to $1.7 million
in 1997. Interest expense increased in 1998 primarily due to higher
average bank debt throughout the year to support working capital needs
as a result of the higher volume of work and higher average retention
receivable balances relating to the major hotel and casino project in
Nevada.
<PAGE>
Gains recognized from sales of property and equipment were $1.2 million
and $550,000 in 1999 and 1998, respectivly. The gain in the current
year is primarily due to the sale of equipment as a result of a program
to modernize the equipment fleet. The gain in 1998 was partially
attributable to the sale of a facility as a result of consolidating
operations. In 1997, losses of $76,000 were recognized from sales of
property and equipment. This loss was primarily due to the sale and
disposal of obsolete equipment.
Net other expense was $94,000 in 1999 compared to net other income of
$175,000 in 1998 and of $178,000 in 1997. The 1999 other expense
primarily represents bank fees and other related costs offset by cash
discounts. The 1998 other income represents cash discounts and the
reversal of the prior year's accruals for the clean-up and move out of
an operating unit's facility that were not needed when the property was
sold. This income is offset by bank fee expenses. The 1997 other income
includes $1 million 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.
Income tax expense from continuing operations was $6.1 million in 1999,
$5.0 million in 1998 and $4.0 million in 1997. As a percentage of
income the effective rate was 40.0% for 1999, 39.0% for 1998, and 40.0%
for 1997.
The Company's backlog was $173.0 million at December 31, 1999, $140.1
million at December 31, 1998 and $136.4 million at December 31, 1997.
Substantially all of the current backlog will be completed within
twelve months.
The extraordinary item in 1999 represents a charge of $572,000 or
$0.09 per share as a result of merger related costs pursuant to
the December 21, 1999 Agreement and Plan of Merger.
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 $602,000, net of income tax expense of
$402,000.
Liquidity and Capital Resources
The Company's financial condition continues to be strong at December
31, 1999 with working capital of $33.8 million as compared to $30.2
million in 1998 and $22.6 million in 1997. The Company's debt to equity
ratio decreased to 26.3% at December 31, 1999 from 26.8% and 40.6% at
December 31, 1998 and 1997, respectively. Working capital increased in
1999 mainly as a result of strong operating results that were used to
reduce line of credit borrowings.
<PAGE>
The acquisition of D.W. Close was completed on May 1, 1997. The
purchase price was $2.9 million. Of this amount $400,000 was paid to
the D.W. Close shareholder in cash with the remaining $2.5 million in
the form of promissory notes to the seller. The cash portion of the
purchase price was funded through the Company's cash balances (see Note
2 to the Financial Statements). At December 31, 1999, the balance of
the promissory notes to the seller was approximately $917,000.
The Company has a $30 million revolving credit facility (see Note 8 to
the Financial Statements). As of December 31, 1999 there was $11.9
million outstanding under the revolver facility. The Company has
outstanding letters of credit with banks totaling $1.9 million, which
guarantee the Company's payment obligations under its insurance
programs. The Company anticipates that its credit facility and
additions thereto if necessary, cash balances and internally generated
cash flows will continue to be sufficient to fund operations, capital
expenditures, possible acquisitions 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 authorized the purchase of up to
750,000 shares of its common stock. In 1999 and 1998, purchases under
this program totaled 144,808 and 19,494 shares at a cost of $1,492,000
and $248,000, respectively. No purchases were made in 1997. At
December 31, 1999 the balance available under the Board of Directors'
authorization to purchase shares was 605,192. Further stock purchases
are prohibited under the definitive GPU Merger Agreement dated December
21, 1999.
The Company loaned four officers $4,694,104 during 1999 for payment of
the exercise price and related tax liability associated with exercising
options on 622,371 shares, which included 347,225 shares that were
expiring in 1999. The portion related to the exercise price,
$2,631,000, is classified in stockholders' equity and the balance that
relates to the withholding taxes paid is included in other assets.
Cash flows from operations were $9.2 million in 1999 compared to $7.3
million in 1998. The increase is primarily the result of higher net
income and higher levels of billings in excess of costs and estimated
earnings on uncompleted contracts.
Cash flows from operations were $7.3 million in 1998 compared to $3.8
million in 1997. The 1997 amount includes $2.5 million of proceeds
received from the National Union lawsuit (see Note 5 to the Financial
Statements). The $5.9 million increase from continuing operations is
mainly the result of higher net income and the net proceeds from
collecting a significant retention receivable balance, offset by
payments of retention to subcontractors on a major hotel and casino
project in Nevada.
Capital expenditures were $4.3 million in 1999, compared to $4.5
million in 1998 and $4.2 million in 1997. Capital expenditures during
these periods were used for normal property and equipment additions,
replacements and upgrades. The Company plans to spend approximately
$5.8 million on capital improvements in 2000. Capital expenditures are
supplemented with operating leases for construction equipment and real
estate (see Note 7 to the Financial Statements).
<PAGE>
Cash flows used for investments were $2.8 million in 1999 and $3.0
million in 1998. Cash flows were generated from the disposal of
equipment amounting to $1.6 million in 1999 and from the disposal of
property and equipment amounting to $1.5 million in 1998. Cash flows
used for investments in 1997 were $4.0 million, which included $241,000
for the acquisition of D.W. Close. Cash flows were generated from the
disposal of equipment amounting to $404,000.
During 1999, the Company had $3.8 million of net proceeds of long-term
debt compared to $6.6 million of net repayments of long-term debt in
1998. The 1999 proceeds were used to fund operations and support the
higher level of working capital investment.
During 1998, the Company had $6.6 million of net repayments of long-
term debt compared to $3.4 million of net proceeds from issuance of
long-term debt in 1997. The 1998 repayments include $3.5 million of
payments under the terms of debt agreements and $3.1 million of
unscheduled reductions of the line of credit for working capital. These
additional payments are the result of higher cash flow from continuing
operations and lower investment cash outflows during the year, as noted
above.
Cash flows for dividends were $893,000, $791,000, and $725,000 in 1999,
1998 and 1997, respectively.
YEAR 2000 Compliance:
General
The "Year 2000 problem" arose because many existing computer programs
use only the last two digits to refer to a year. Therefore, these
computer programs do not properly recognize a year that begins with
"20" instead of the familiar "19." If not corrected, many computer
applications could have failed or created erroneous results. To date,
the Company has not experienced any material Year 2000 issues and has
been informed by our material suppliers and vendors that they have also
not experienced material Year 2000 Issues.
Year 2000 Costs
Costs related to the Year 2000 issue were funded through operating cash
flows and were expensed as incurred. As of December 1999, the Company
had expended funds in remediation efforts, which consisted of costs
associated with modifying the source code of existing software. This
amount has been immaterial to the Company. Total costs related to the
Year 2000 issue were immaterial. A number of other upgrades have been
made to systems in the normal course of business that mitigate Year
2000 issues.
<PAGE>
New Accounting Pronouncements
In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS
No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for hedging
activities. This standard is effective for years beginning after June
15, 2000. The Company believes the implementation of this pronouncement
will not have a material impact on the Company's reported financial
position, results of operations and cash flows. To date, the Company
has not engaged in activities or entered into arrangements normally
associated with derivative instruments.
CAUTIONARY STATEMENT- This Form 10-K may contain statements, which
constitute "forward-looking" information as defined in the Private
Securities Litigation Reform Act of 1995 or by the Securities and
Exchange Commission. These statements are based on the Company's
expectations and are subject to risks and uncertainties that may cause
the actual results in the future to differ significantly from the
results expressed or implied in any forward-looking statements
contained in this filing. Such forward-looking statements are within
the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Act of 1934, as amended.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to the impact of interest rate changes. The
Company conducted an analysis of its financial instruments assuming a
one percentage point adverse change in interest rates at December 31,
1999, and 1998. Holding all other variables constant, the hypothetical
adverse changes would not materially affect the Company's financial
position for either year.
<PAGE>
Item 8. Financial Statements
Index to Financial Statements
-----------------------------
Page
----
Responsibility for Financial Statements 15
Independent Auditors' Report 16
Financial Statements:
Consolidated Balance Sheets -
December 31, 1999 and 1998 17
Consolidated Statement of Income - Years
Ended December 31, 1999, 1998 and 1997 18
Consolidated Statement of Shareholders' Equity
Years Ended December 31, 1999, 1998 and 1997 19
Consolidated Statement of Cash Flows
Years Ended December 31, 1999, 1998 and 1997 20
Notes to Consolidated Financial Statements 21
<PAGE>
MYR GROUP INC.
-----------------------------------------------------------------------
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The consolidated 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
consolidated 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.
Ernst & Young LLP, independent auditors, have audited the 1999 and 1998
consolidated financial statements of the Company. Their report is
presented on page 16. Their audits include a study and evaluation of
the Company's control environment, accounting systems and control
procedures. Ernst & Young LLP advises management and the Audit
Committee of significant matters resulting from their audits of our
consolidated financial statements and consideration of our internal
controls.
Charles M. Brennan III
Chairman and
Chief Executive Officer
William A. Koertner
Senior Vice President, Treasurer
and Chief Financial Officer
<PAGE>
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, 1999 and 1998 and the
related consolidated statements of income, shareholders' equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
The consolidated financial statements of MYR Group Inc., for the year
ended December 31, 1997 were audited by other auditors whose report
dated March 18, 1998, expressed an unqualified opinion on the
statements.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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, the 1999 and 1998 consolidated financial statements
referred to above present fairly in all material respects, the
consolidated financial position of MYR Group Inc. and subsidiaries at
December 31, 1999 and 1998 and the consolidated results of their
operations and their cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States.
Ernst & Young LLP
Chicago, Illinois
March 29, 2000
<PAGE>
<TABLE>
MYR GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share and per share amounts)
============================================================================
December 31 1999 1998
============================================================================
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,458 $ 1,372
Accounts receivable (Note 3) 73,485 68,112
Costs and estimated earnings in excess of
billings on uncompleted contracts (Note 4) 18,672 17,092
Deferred income taxes (Note 10) 9,152 6,153
Other current assets 3,052 239
------- -------
Total current assets 111,819 92,968
Property and equipment-net (Notes 2, 6 and 8) 15,817 16,102
Other assets 2,070 1,129
------- -------
Total assets $129,706 $110,199
============================================================================
LIABILITIES
Current liabilities:
Current maturities of long-term debt (Note 8) $ 17,777 $ 7,813
Accounts payable 16,220 14,135
Billings in excess of costs and estimated
earnings on uncompleted contracts (Note 4) 14,970 9,448
Accrued liabilities (Note 9) 29,039 31,396
------- -------
Total current liabilities 78,006 62,792
Long-term liabilities:
Long-term debt (Note 8) -- 6,614
Deferred compensation 384 393
Deferred income taxes (Notes 2 and 10) 1,620 1,052
------- -------
Total liabilities 80,010 70,851
SHAREHOLDERS' EQUITY
Common stock - par value $0.01 per share and
$1 per share; authorized 25,000,000 and
10,000,000 shares; issued 6,429,135 and
5,698,892 shares in 1999 and 1998,
respectively. 64 5,699
Additional paid-in capital (Note 2) 13,800 1,310
Retained earnings (Note 2) 42,002 34,335
Restricted stock awards and shareholder notes
receivable (Note 14) (6,170) (1,996)
------- -------
Total shareholders' equity 49,696 39,348
------- -------
Total liabilities and shareholders' equity $129,706 $110,199
============================================================================
The "Notes to Consolidated Financial Statements" are an integral part
of this statement.
</TABLE>
<PAGE>
<TABLE>
MYR GROUP INC.
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands except share and per share amounts)
============================================================================
Years ended December 31 1999 1998 1997
============================================================================
<S> <C> <C> <C>
Contract revenue $477,279 $459,343 $431,276
Contract cost 426,566 414,123 391,616
------- ------- -------
Gross profit 50,713 45,220 39,660
Selling, general and administrative
expenses 35,713 30,885 28,164
------- ------- -------
Income from operations 15,000 14,335 11,496
Other income (expense)
Interest income 121 31 40
Interest expense (1,020) (2,106) (1,720)
Gain (loss) on sale of property
and equipment 1,213 550 (76)
Other (94) 175 178
------- ------- -------
Income from continuing operations
before income taxes 15,220 12,931 9,918
Income tax expense (Note 10) 6,088 5,043 3,967
------- ------- -------
Income from continuing operations 9,132 7,888 5,951
Gain from discontinued operations
(Note 5) -- -- 602
------- ------- -------
Net income before extraordinary item 9,132 7,888 6,553
Extraordinary item (Note 19)
(572) -- --
------- ------- -------
Net income $ 8,789 $ 7,888 $ 6,553
----------------------------------------------------------------------------
EARNINGS PER SHARE
Earnings per share (Note 13)-Basic:
Income from continuing operations $ 1.53 $ 1.40 $ 1.09
Gain from discontinued operations -- -- .11
Extraordinary item (Note 19) (.09) -- --
------- ------- -------
Net Income $ 1.44 $ 1.40 $ 1.20
Earnings per share (Note 13)-Diluted:
Income from continuing operations $ 1.34 $ 1.20 $ .87
Gain from discontinued operations -- -- .09
Extraordinary item (Note 19) (.09) -- --
------- ------- -------
Net income $ 1.25 $ 1.20 $ .96
============================================================================
The "Notes to Consolidated Financial Statements" are an integral part
of this statement.
</TABLE>
<PAGE>
<TABLE>
MYR GROUP INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
===========================================================================================
Years ended December 31, 1997, 1998 and 1999
===========================================================================================
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, 1997 $ 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
Issuance of 113,006
common shares upon
exercise of stock
options 57 396 452 905
Issuance of 76,395
common shares for
restricted stock awards 19 723 318 (1,060) -
Amortization of
unearned restricted
stock awards 216 216
Converted subordinated
notes 41 191 232
Treasury stock purchases (248) (248)
Net income 7,888 7,888
Dividends paid (791) (791)
Shareholder note payment 68 68
Balance December 31, 1998 $ 5,699 $ 1,310 $ 0 $34,335 $ (1,996) $39,348
-----------------------------------------------------------
Issuance of 670,715
common shares upon
exercise of stock
options 223 4,168 1,492 (2,631) 3,252
Issuance of 125,908
common shares for
restricted stock awards 54 1,973 - (2,027) -
Amortization of unearned
restricted stock awards 416 416
Converted subordinated
notes 1 436 437
Treasury stock purchases (1,492) (1,492)
Net income 8,560 8,560
Dividends paid (893) (893)
Shareholder note payment 68 68
Stockholder amendment-change
in stated par value (5,913) 5,913 -
-----------------------------------------------------------
Balance December 31, 1999 $ 64 $13,800 $ 0 $42,002 $ (6,170) $49,696
The "Notes to Consolidated Financial Statements" are an integral part of this statement.
</TABLE>
<PAGE>
<TABLE>
MYR GROUP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
(Dollars in thousands)
==============================================================================
Years ended December 31 1999 1998 1997
==============================================================================
<S> <C> <C> <C>
CASH Net income $8,560 $7,888 $6,553
FLOWS Adjustments to reconcile net
FROM income to cash flows from
OPERATIONS continuing operations:
Extraordinary item (572) - -
Discontinued operations - - (602)
Depreciation 4,252 4,349 5,331
Amortization of intangibles - - 107
Amortization of unearned
stock awards 416 216 142
Deferred income taxes (2,431) (525) (66)
(Gain) loss on sale of
property and equipment (1,213) (550) 76
Changes in operating assets
and liabilities, net of
acquisition:
Accounts receivable (5,207) 7,302 (15,810)
Costs and estimated
earnings in excess of
billings on uncompleted
contracts (1,580) (2,173) (2,796)
Other assets (1,860) (248) 823
Accounts payable 2,085 (5,592) 58
Billings in excess of
costs and estimated
earnings on
uncompleted contracts 5,522 265 3,679
Insurance accruals (1,333) (1,253) 2,961
Other liabilities 2,595 (2,380) 907
------ ------ ------
Cash flows from continuing
operations 9,234 7,299 1,363
Cash flows from discontinued
operations - - 2,456
------ ------ ------
Cash flows from operations 9,234 7,299 3,819
------ ------ ------
<PAGE>
CASH Proceeds from disposal of
FLOWS property and equipment 1,585 1,535 404
FROM Expenditures for property and
INVESTMENTS equipment (4,340) (4,545) (4,173)
Cash used in acquisition,
net of cash acquired - - (241)
------ ------ ------
Cash flows from investments (2,755) (3,010) (4,010)
------ ------ ------
CASH Proceeds from issuance of
FLOWS long-term debt 4,875 - 3,403
FROM Repayments on long-term debt (1,089) - (6,586) -
FINANCING Increase (decrease) in deferred
compensation (9) (22) 16
Purchases of treasury stock (1,492) (248) -
Shareholder notes related to
stock option exercise
Proceeds from exercise of stock
options
Dividends paid (4,694) - -
Shareholder note payments 2,841 905 175
Cash flows from financing (893) (791) (725)
68 68 68
------ ------ ------
Increase (decrease) in cash
and cash equivalents (393) (6,674) 2,937
------ ------ ------
Cash and cash equivalents
beginning of year 6,086 (2,385) 2,746
Cash and cash equivalents
end of year 1,372 3,757 1,011
------ ------ ------
$7,458 $1,372 $3,757
==============================================================================
The "Notes to Consolidated Financial Statements" are an integral part
of this statement.
</TABLE>
<PAGE>
MYR GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Business - The construction services performed by the Company
are principally involved in infrastructure services and
commercial/industrial services. The infrastructure construction and
maintenance services include primarily electric and gas utility line
construction and maintenance services, telecommunication construction
services and traffic signals and street lighting construction services.
The commercial/industrial services include electrical and mechanical
construction and maintenance services to the commercial and industrial
marketplace. 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 investments in joint ventures are 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.
<PAGE>
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.
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 basis 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):
1999 1998 1997
-------- --------- --------
Cash paid for interest $ 1,042 $ 2,195 $ 1,826
Cash paid for income taxes 6,472 5,130 2,900
Subordinated notes converted 437 232 -
Claim settlement (Note 2) - - 4,705
Other - In December 1997, the Company effected a five-for-three stock
split in the form of a stock dividend. The $2,232,000 par value of the
additional shares issued was transferred from additional paid-in
capital to common stock in 1997.
2. Acquisitions
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 remaining principal on the
promissory notes is $916,666 which is due in 2000, with interest
payable quarterly each year. The transaction has been accounted for
using the purchase method of accounting.
<PAGE>
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.
<TABLE>
3. Accounts Receivable (in thousands)
1999 1998
------------- -----------
<S> <C> <C>
Contract receivables $ 63,743 $ 60,559
Contract retainages 10,060 8,267
Other 198 33
------ ------
74,001 68,859
Allowance for doubtful accounts 516 747
------ ------
$ 73,485 $ 68,112
====== ======
</TABLE>
<PAGE>
<TABLE>
4. Contracts in Process (in thousands)
1999 1998
<S> <C> <C>
Costs incurred on uncompleted contracts $ 595,402 $ 594,166
Estimated earnings 34,804 44,555
------- -------
630,206 638,721
Less: Billings to date 626,504 631,077
------- -------
$ 3,702 $ 7,644
======= =======
Included in the accompanying balance
sheet under the following captions:
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 18,672 $ 17,092
Billings in excess of costs and estimated
earnings on uncompleted contracts 14,970 9,448
------- -------
$ 3,702 $ 7,644
======= =======
</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
income tax expense of $402,000.
<TABLE>
6. Property and Equipment (in thousands)
1999 1998
------ ------
<S> <C> <C>
Land $ 931 $ 931
Buildings and improvements 4,209 4,012
Construction equipment 47,619 47,302
Office equipment 5,388 4,461
------ ------
58,147 56,706
Accumulated depreciation 42,330 40,604
------ ------
$ 15,817 $ 16,102
====== ======
</TABLE>
<PAGE>
7. Leases and Commitments
At December 31, 1999, the Company had outstanding irrevocable standby
letters of credit totaling $1,939,139 which guarantees the Company's
payment obligation under its insurance programs.
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, 1999 total $9,476,000,
$8,157,000 $5,076,000, $2,243,000 and $851,000 for the years ending
2000, 2001, 2002, 2003, and 2004 respectively. Total rent expense,
including both short-term and long-term leases, for 1999, 1998, and
1997 amounted to approximately $22,207,000, $17,121,000 and $14,078,000
respectively.
8. Long-Term Debt
<TABLE>
Long-term debt outstanding consisted of the following (in thousands):
1999 1998
------ ------
<S> <C> <C>
Variable - rate revolving credit agreement, (effective
interest rate of 8.0% at December 31, 1999), payable
at maturity on September 30, 2002 $11,851 $ 6,875
7% convertible subordinated notes, payable in three
equal installments commencing in January 2000
(see Note 21) 5,010 5,447
Variable - rate notes (1.5% over adjusted LIBOR,
at December 31, 1999 the LIBOR rate was 6.1 %) payable
in annual installments commencing in 1998 916 1,583
Industrial revenue bond financing at variable rates
(weighted average of 9.75%) - 480
Equipment lease at 6%, payable in monthly installments
through July 1999 - 42
------ ------
17,777 14,427
Less current portion 17,777 7,813
------ ------
$ - $ 6,614
====== ======
</TABLE>
The Company maintains a $30,000,000 credit facility with a bank group.
At the Company's option, borrowings under this line bears interest at
the banks' domestic prime rate less a discount or the adjusted LIBOR
index rate plus a spread, both in accordance with a pricing matrix.
The credit facility expires on September 21, 2002.
The terms of the credit agreement require, among other things, minimum
fixed charge coverage and senior funded debt ratios plus a minimum net
worth. Payments of cash dividends and repurchases of capital stock are
restricted by the minimum net worth test and adherence to other
provisions of the agreement. The Company has complied with these
provisions.
<PAGE>
Convertible subordinated notes with a principal amount of $437,000 were
converted into 77,038 shares of common stock in 1999. In January
2000, the first principal payment of $1,136,000 was made to
noteholders. The 7% convertible subordinated notes with a principal
amount of $1,601,000 were converted into 281,900 shares of common stock
on various dates in January and February, 2000. In addition,
pursuant to a Notice of Redemption and in accordance with the terms of
the note agreement, the remaining notes with a principal amount of
$2,273,000 plus accrued interest were redeemed by the Company on
March 5, 2000.
In 1999, the Company redeemed all of the industrial revenue bonds which
included the final $250,000 principal amount plus accrued interest,
pursuant to an early redemption clause in the trust indenture
agreement. The industrial revenue bond was secured by properties with
a net book value of approximately $1,310,000 at December 31, 1998. The
equipment leases were secured by equipment with a net book value of
approximately $114,000 as of December 31, 1998.
<TABLE>
9. Accrued Liabilities (in thousands)
1999 1998
------ ------
<S> <C> <C>
Insurance $ 12,535 $ 13,868
Payroll 2,696 3,388
Union dues and benefits 4,751 4,043
Profit sharing and thrift plan 2,145 1,844
Income taxes 1,100 990
Taxes, other than income taxes 1,266 1,232
Other 4,546 6,031
------ ------
$ 29,039 $ 31,396
====== ======
</TABLE>
<PAGE>
10. Income Taxes
<TABLE>
Provision for income taxes on income from continuing operations
comprises the following (in thousands):
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Current
Federal $ 6,488 $ 4,303 $ 3,409
State 2,031 1,265 624
------ ------ ------
8,519 5,568 4,033
Deferred (2,431) (525) (66)
------ ------ ------
$ 6,088 $ 5,043 $ 3,967
====== ====== ======
The differences between the U.S. federal statutory tax rate and the
Company's effective rate for the three years ended December 31, 1999
are as follows:
1999 1998 1997
---- ---- ----
<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 5.9 6.5 5.3
Other .1 (1.5) .7
---- ---- ----
40.0% 39.0% 40.0%
==== ==== ====
The net deferred tax assets and liabilities arising from temporary
differences at December 31, 1999 and 1998 are as follows (in
thousands):
1999 1998
---------------------- ----------------------
CURRENT NONCURRENT CURRENT NONCURRENT
ASSETS LIABILITIES ASSETS LIABILITIES
------------------------------------------------
<C> <C> <C> <C> <C>
Employee and retiree
benefit plans $ - $ (168) $ - $ (245)
Excess tax over book
depreciation 3,270 - 3,023
Insurance accruals 4,407 (1,482) 3,964 -
Other allowances and
accruals 4,745 2,189 (1,726)
------ ------ ------- ------
$ 9,152 $ 1,620 $ 6,153 $ 1,052
====== ====== ======= ======
</TABLE>
<PAGE>
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
750,000 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. The Company purchased 144,808 and
19,494 shares on the open market at a cost of $1,492,000 and $248,000
in 1999 and 1998, respectively. No shares were purchased in 1997. At
December 31, 1999, the balance available under the Board of Directors'
authorization to purchase shares was 605,192. Further stock purchases
are prohibited under the definitive GPU Merger Agreement. The Company
issued 145,308 and 56,230 shares out of treasury for options exercised
in 1999 and 1998, respectively. The Company also issued 57,395 shares
out of treasury for restricted stock awarded to non-employee directors
and key employees in 1998.
13. Earnings per Share
<TABLE>
Basic and diluted weighted average shares outstanding and earnings per
share on income from continuing operations are as follows (in
thousands, except per share amounts):
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Share data:
Basic shares 5,957 5,611 5,443
Common equivalent shares 603 702 645
Shares assumed converted 340 359 1,000
----- ----- -----
Diluted shares 6,900 6,672 7,088
===== ===== =====
1999 1998 1997
------------------------------------------------------
Total Per Share Total Per Share Total Per Share
----- --------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Income from
continuing
operations:
Basic $ 9,132 $ 1.53 $ 7,888 $ 1.40 $ 5,951 $ 1.09
Interest on
convertible
Subordinated
notes 81 86 239
------ ------ ------
Diluted $ 9,213 $ 1.34 $ 7,974 $ 1.20 $ 6,190 $ 0.87
====== ====== ======
</TABLE>
<PAGE>
14. Stock Option and Restricted Stock Plans
At December 31, 1999, under the 1999, 1996, 1995, 1993, 1992 and 1990
Stock Option and Restricted Stock Plans, 16,500, 72,571, 29,779,
62,193, 163 and 296 shares, respectively, are available for grant.
Stock Options
Outstanding options granted under the 1999, 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.
<TABLE>
Transactions and other information relating to the stock option plans
for the three years ended December 31, 1999 are summarized below:
1999 1998 1997
--------------------------------------------------------------
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 1,216,969 $ 5.95 1,171,773 $ 4.66 1,195,490 $ 4.50
Granted 212,396 13.86 204,396 12.40 43,060 8.53
Exercised (670,715) 4.23 (113,006) 4.36 (41,660) 4.09
Forfeited (2,000) 11.75 (46,194) 5.58 (25,117) 4.64
--------- ------ --------- ----- --------- -----
Outstanding end of year 756,650 $ 9.69 1,216,969 $ 5.95 1,171,773 $ 4.66
========= ====== ========= ===== ========= =====
Exercisable end of year 347,018 $ 6.96 823,458 $ 4.19 827,246 $ 4.04
========= ====== ========= ===== ========= =====
Options outstanding at
December 31, 1999 are
summarized below:
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>
$ 4.24 - $ 5.51 145,863 4.40 4.64 145,863 4.64
$ 6.52 - $13.61 560,787 6.76 10.26 201,195 8.64
$17.88 - $18.96 50,000 9.79 17.96 - -
------- -------
756,650 347,018
======= =======
</TABLE>
<PAGE>
The weighted average fair value of the stock options granted during
1999 and 1998 was $5.34 and $4.15, respectively. The fair value of
each stock option grant is estimated using the Black-Scholes option
pricing model with the following weighted average assumptions:
1999 1998
---- ----
Expected life (years) 5 5
Risk-free interest rate 5.63% 5.19%
Expected volatility 36.94% 32.26%
Expected dividend yield 0.9 % 1.2 %
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 1999 and 1998 would have
been:
1999 1998
---- ----
Net Income from continuing operations $8,878,000 $7,763,000
Basic earnings per share from continuing operations 1.49 1.38
Diluted earnings per share from continuing operations 1.30 1.18
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion,
the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
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 1999, 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 1999, 1998, and
1997, 124,000, 74,501, 49,166 shares were awarded at an average market
price of $15.86, $12.28, and $11.83, respectively with restriction
periods of incremental vesting over five years or "bullet" vesting at
seven years. The charge against net earnings for compensation under
the plan was $390,857, $190,063, and $116,100 in 1999, 1998 and 1997,
respectively.
<PAGE>
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 1999, 1998, and 1997,
1,908, 1,894 and 3,177 shares were awarded at an average market price
of $13.31, $13.06 and $8.18, respectively. The charge against net
earnings for director fees under the plan was $25,180 $26,234, and
$26,000 in 1999, 1998 and 1997, respectively.
Under the Company's 1995, 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, 1999 and
1998, respectively, the outstanding notes receivable balance was
$2,768,551 and $204,000. The notes were collateralized by 703,621 and
81,250 shares, respectively of the Company's common stock at December
31, 1999 and 1998. The notes bears interest at various annual rates of
interest, payable annually, with principal payments due through
December 2001. Outstanding loans for the exercise price of options are
shown as a reduction of shareholders' equity on the balance sheet.
Option holders also obtained loans from the Company related to the tax
liability associated with exercising the options. At December 31,
1999, there were $1.3 million of notes included in current assets and
$800,000 of notes in other long term assets.
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
$2,182,000 $1,866,000, and $1,650,000 in 1999, 1998 and 1997,
respectively.
Certain employees are covered under union-sponsored collectively
bargained defined benefit plans. Expenses for these plans amounted to
approximately $26,945,000, $26,403,000, and $23,883,000 in 1999, 1998
and 1997, 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 three active employee participants.
16. Major Customers
The Company had no single customer account for at least 10.0% of the
Company's consolidated contract revenue in 1999. The Company had one
customer that accounted for 12.7% and 17.3% of the Company's
consolidated contract revenue in 1998 and 1997, respectively.
<PAGE>
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.
18. Segment Reporting
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", during the fourth quarter of 1998.
SFAS No. 131 established standards for reporting information about
operating segments in annual financial statements and requires selected
information about operating segments in interim financial reports
issued to stockholders. Operating segments are defined as components of
an enterprise about which separate financial information is available
that is evaluated regularly by the chief operating decision maker, or
decision making group, in deciding how to allocate resources and in
assessing performance.
The Company is engaged primarily in two segments: infrastructure
services and commercial/industrial construction. The accounting
policies of the operating segments are the same as those described in
the summary of significant accounting policies except that the
financial results have been prepared using a management approach. This
approach is consistent with the basis and manner in which management
internally disaggregates financial information for the purpose of
assisting in making internal operating decisions and is exclusive of
corporate selling, general and administrative expenses, net interest
expense and other income. Identifiable assets include all assets
directly identified with the reportable segments including retentions,
accounts receivable, property, equipment and costs and estimated
earnings in excess of billings on uncompleted contracts. Corporate
assets include cash, deferred tax assets, and other assets that are
corporate in nature.
<PAGE>
<TABLE>
Infrastructure Commercial Corporate
Services and and
Consolidated Industrial Other Consolidated
-------- -------- ------ --------
<S> <C> <C> <C> <C>
1999
Contract revenue $ 316,844 $ 160,435 $ - $ 477,279
Depreciation and
amortization 4,210 42 416 4,668
Income before taxes 19,815 7,925 (12,520) 15,220
Segment assets 68,047 41,139 20,520 129,706
Capital expenditures 3,976 364 - 4,340
1998
Contract revenue 249,482 209,861 - 459,343
Depreciation and
amortization 4,069 280 216 4,565
Income before taxes 20,894 2,645 (10,608) 12,931
Segment assets 58,942 43,018 8,239 110,199
Capital expenditures 4,308 237 - 4,545
1997
Contract revenue 234,280 196,996 - 431,276
Depreciation and
amortization 4,646 685 249 5,580
Income before taxes 13,920 4,223 (8,225) 9,918
Segment assets 55,436 51,729 10,259 117,424
Capital expenditures 3,882 291 - 4,173
</TABLE>
19. Extraordinary Item
During the current year, the Company recognized an extraordinary
charge of $572,000 or $0.09 per share as a result of merger related
costs pursuant to the December 21, 1999 Agreement and Plan of Merger.
<PAGE>
<TABLE>
20. Supplemental Quarterly Financial Information (Unaudited)
(Dollars in thousands, except per share amounts)
1999
----------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31 Year
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contract revenue $107,327 $118,524 $122,265 $129,163 $477,279
Gross profit 11,758 14,683 15,030 9,242 50,713
Net income before
extraordinary item 1,762 3,439 4,080 (149) 9,132
Net income after
extraordinary item 1,762 3,439 4,080 (721) 8,560
Earnings per share - basic 0.31 0.58 0.68 (0.04) 1.53
Earnings per share - basic
after extraordinary item 0.31 0.58 0.68 (0.13) 1.44
Earnings per share - diluted 0.27 .51 0.60 (0.04) 1.34
Earnings per share - diluted
after extraordinary item 0.27 .51 0.60 (0.13) 1.25
Dividends paid per share 0.375 0.375 0.375 0.375 0.15
Market price:
High 12.00 18.00 22.50 29.50 29.50
Low 10.06 11.75 16.75 17.88 10.06
</TABLE>
<TABLE>
1998
----------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31 Year
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contract revenue $110,671 $109,666 $122,282 $116,724 $459,343
Gross profit 8,929 11,053 12,224 13,014 45,220
Net income 1,082 2,071 2,285 2,450 7,888
Earnings per share - basic 0.20 0.37 0.40 0.43 1.40
Earnings per share - diluted 0.17 0.31 0.34 0.38 1.20
Dividends paid per share 0.035 0.035 0.035 0.035 0.14
Market price:
High 12.81 14.25 16.88 12.88 16.88
Low 11.31 11.31 10.69 10.13 10.13
</TABLE>
<PAGE>
21. Contract Losses
Gross profit was adversely impacted by contract loss accruals on two
projects during the year. Losses were recorded on one of these
projects as a result of the Company incurring substantial costs to
perform certain underground work in rock conditions that it did not
anticipate at the time of the contract. Although the Company is
seeking additional compensation related to certain of the costs
incurred it has recognized no revenue to date against such costs. This
contract is substantially complete. Losses were recorded on the second
contract as a result of significant costs incurred and estimated to be
incurred in excess of amounts of revenue currently agreed upon for the
base contract price plus change orders, approved to date, to the
contract. The Company has submitted change order requests for certain
of these costs. While the Company anticipates making claims related to
this contract, including claims to recover certain costs incurred and
anticipated to be incurred, the Company has recorded no revenue related
to such claims. The total of these losses on these two contracts
amounted to $10.3 million in 1999.
22. Pending Merger Agreement
On December 21, 1999, MYR Group, Inc. (the "Company"), GPX Acquisition
Corp., a Delaware corporation and wholly-owned subsidiary of Parent
("Purchaser") and GPU, Inc. ("Parent") entered into an Agreement and
Plan of Merger (the "Merger Agreement") pursuant to which, Purchaser
commenced a cash tender offer (the "Offer"), to purchase all the issued
and outstanding shares of common stock of the Company, $0.01 par value
per share (the "Shares"), at a price of $30.10 per Share, net to the
seller in cash, without interest thereon, subject to the terms and
conditions of the Offer.
The transaction is subject to regulatory approval under the Public
Utility Holding Company Act, to the satisfaction of certain other
conditions, and also provides for the payment of a break-up fee.
The Company has entered into Change of Control Agreements with certain
executives. These agreements provide that all outstanding stock
options and restricted stock shall become immediately vested upon a
change in control and the occurrence of one or more other conditions.
Consummation of the pending merger will constitute a change of control
for the purposes of these agreements. At December 31, 1999 there were
393,472 options and 219,166 shares of restricted stock covered by these
agreements.
Effective December 21, 1999, the 3,338 non vested options held by non-
employee directors became fully vested.
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.
<PAGE>
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 (58)
---------------------------
Chairman (since August 1988) and Chief Executive Officer (since October
1989); Director (since 1986).
William S. Skibitsky (50)
-------------------------
President and Chief Operating Officer (since July 1996); Executive Vice
President (May 1994-July 1996); President and Chief Operating Officer
of The L.E. Myers Co. (Since May 1994).
Michael F. Knapp (53)
---------------------
Group Vice President-Commercial and Industrial (since December 1998),
Vice President and Program Director at Parsons Energy & Chemicals Group
Inc. (1996-December 1998); Vice President, Regional Operations at
International Technology Corporation (1994-1996).
Byron D. Nelson (53)
--------------------
Senior Vice President, General Counsel and Secretary (since February
1986).
William A. Koertner (50)
------------------------
Senior Vice President, Treasurer and Chief Financial Officer (since
November 1998); Vice President at Central Illinois Public Service
Company (1993-1998).
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".
<PAGE>
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".
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
Page
----
(a) 1. The following documents are included in Item 8:
Responsibility for Financial Statements 15
Independent Auditors' Report 16
Financial Statements:
Consolidated Balance Sheets -
December 31, 1999 and 1998 17
Consolidated Statement of Income -
Years Ended December 31, 1999, 1998 and 1997 18
Consolidated Statement of Shareholders' Equity
Years Ended December 31, 1999, 1998, and 1997 19
Consolidated Statement of Cash Flows
Years Ended December 31, 1999, 1998, and 1997 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) A report on Form 8-K was filed by the Company on December 22,
1999, describing the Agreement and Plan of Merger by and among
GPU, Inc., GPX Acquisition Corp., and MYR Group, Inc.
(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.
<PAGE>
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/ William A. Koertner
-------------------------------
William A. Koertner
Senior Vice President, Treasurer
and Chief Financial Officer
Dated: March 29, 2000
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
Charles M. Brennan III Executive Officer
(ii) Principal Financial Officer:
/s/ William A. Koertner
----------------------- Senior Vice President,
William A. Koertner Treasurer and Chief
Financial Officer
(iii) Principle Accounting Officer:
/s/ Greg R. Medici
---------------------- Group Controller
Greg R. Medici
(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
<PAGE>
MYR GROUP INC
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 1999
-------------------------------------------
Exhibit Index
Page
Number Description (or Reference)
------ ----------------------------------------------- --------------
2.1 Agreement and Plan of Merger by and among
GPU, Inc., GPX Acquisition Corp. and the
Company dated December 21, 1999 (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)
9.1 Change in Independent Auditors (5)
10.1 Form of Agreement for Supplemental Retirement
and Death Benefit Programs of the Company and
its subsidiaries (6)
10.2 Form of Agreement of Indemnification for Directors
of the Company and certain officers of the Company
and its subsidiaries (7)
10.3 1989 Stock Option and Restricted Stock Plan (8)
10.4 1990 Stock Option and Restricted Stock Plan (8)
10.5 1992 Stock Option and Restricted Stock Plan (8)
10.6 1995 Stock Option and Restricted Stock Plan (8)
10.7 1993 Non-Employee Director Stock Option Plan (9)
10.8 1996 Non-Employee Director Stock Ownership Plan (10)
10.9 Management Incentive Program (11)
10.10 Amended Employment Agreement between the Company
and C. M. Brennan effective January 1,1997. (12)
10.11 Change of Control Agreement with William S. Skibitsky 38
10.12 Change of Control Agreement with William A. Koertner 44
10.13 Change of Control Agreement with Michael F. Knapp 52
<PAGE>
10.14 Change of Control Agreement with Byron D. Nelson 58
21 Subsidiaries of the Company 65
23 Independent Auditors' Consents 66
27 Financial Data Schedules 68
99.1 Report of Predecessor Auditors 69
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(1) Filed as exhibit (c)(1) to Schedule 14D-9 of the Company dated
December 29, 1999, 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) Filed 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 Report on Form 8-K of the Company, August 10, 1998,
and incorporated herein by reference.
(6) Filed as exhibit 10.5 to the Annual Report on Form 10-K of
the Company for the year ended December 31, 1984, and incorpor-
ated herein by reference.
(7) 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.
(8) 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.
(9) 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.
(10) 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.
(11) 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.
(12) 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.
Exhibit 10.11
CHANGE OF CONTROL AGREEMENT
AGREEMENT by and between MYR Group, Inc. (the "Company") and
William S. Skibitsky (the "Employee"), dated as of the 21st day of
December, 1999.
The Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its stockholders to
assure that the Company will have the continued dedication of the
Employee, notwithstanding the possibility, threat or occurrence of a
Change of Control (as defined below) of the Company. The Board
believes it is imperative to diminish the distraction of the Employee
by virtue of the personal uncertainties and risks created by a pending
or threatened Change of Control and to encourage the Employee's full
attention and dedication to the Company currently and in the event of
any threatened or pending Change of Control, and to provide the
Employee with compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits expectations of
the Employee will be satisfied and which are competitive with those of
other corporations. Therefore, in order to accomplish these objectives
the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Term of Agreement. This Agreement shall terminate if a
Change of Control Date (as hereinafter defined) does not occur on or
before December 31, 2001.
2. Change of Control. For purposes of this Agreement, a
"Change of Control" shall be defined as the occurrence of any of the
following events:
(a) There is a report filed on Schedule 13D (or any
successor schedule, form or report) as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
generally in effect on the date hereof, disclosing that any person (as
the term "person" is used in Section 13(d)(3) of the Exchange Act),
other than Charles M. Brennan III, has become the beneficial owner (as
the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of 20%
or more of the issued and outstanding shares of voting securities of
the Company; or
(b) The acquisition of 20% or more of the issued and
outstanding shares of voting securities of the Company by any person
which would otherwise require the filing of a report as described in
(a) above.
<PAGE>
3. Change of Control Date. For purposes of this Agreement, the
"Change of Control Date" shall mean the first date during the term of
this Agreement on which a Change of Control occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control
occurs and if the Employee's employment with the Company is terminated
prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Employee that such termination of
employment (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (ii) otherwise
arose in connection with or in anticipation of a Change of Control,
then for all purposes of this Agreement the "Change of Control Date"
shall mean the date immediately prior to the date of such termination
of employment.
4. Termination of Employment
(a) Good Cause. For purposes of this Agreement, "Good
Cause" shall mean (i) the Employee's commission of a felony, (ii)
the Employee's material breach of any of his obligations or duties,
including the Employee's willful failure to substantially perform his
duties other than as a result of his incapacity due to illness or
injury, or (iii) the Employee's commission of a willful act, such as
embezzlement, against the Company intended to enrich the Employee at
the expense of the Company. No termination for Good Cause may be
effected under clause (ii) of the preceding sentence unless (a) the
Company shall have given written notice to the Employee specifying with
particularity the basis for the Company's decision to terminate the
Employee's employment, and (b) the Employee shall have failed to cease
or correct the performance (or nonperformance) which forms the basis
for the Company's decision within 30 days following the date of the
Company's written notice.
(b) Good Reason. For purposes of this Agreement, "Good
Reason" shall mean any of the following which occurs without the
written consent of the Employee:
(i) Any significant change in the nature of
Employee's principal duties or any significant
diminution in the Employee's status or responsibilities;
(ii) Any decrease in the Employee's salary or cash
incentive opportunity below the level the Employee was
earning at the time of a Change of Control;
(iii) The Company's failure to obtain the
agreement of a successor entity to assume the
obligations under this Agreement; or
(iv) The Company's requiring the Employee to be
based in any location which would materially increase
the Employee's commuting time.
(c) Disability. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180
consecutive days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and reasonably acceptable to
the Executive or the Executive's legal representative.
<PAGE>
5. Notice of Termination. Any termination by the Company for
Good Cause, or by the Employee for Good Reason, shall be communicated
by a Notice of Termination to the other party hereto given in
accordance with Section 12(b) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination
of the Employee's employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice).
The failure by the Employee or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing
of Good Reason or Good Cause shall not waive any right of the Employee
or the Company, respectively, hereunder or preclude the Employee or the
Company, respectively, from asserting such fact or circumstance in
enforcing the Employee's or the Company's rights hereunder.
6. Date of Termination. For purposes of this Agreement, "Date
of Termination" means (a) if the Employee's employment is terminated
by the Company for Good Cause, or by the Employee for Good Reason, the
date of receipt of the Notice of Termination or any later date
specified therein, as the case may be, (b) if the Employee's employment
is terminated by the Company other than for Good Cause, death or
Disability, the date on which the Company notifies the Employee of such
termination and (c) if the Employee's employment is terminated by
reason of death or Disability, the date of death of the Employee or the
date of the determination that the Employee's Disability is determined
to be total and permanent, as the case may be.
7. Obligations of the Company upon Termination.
(a) Termination by Company Not for Good Cause; Resignation
by Employee for Good Reason. If, on or within five years after a
Change of Control Date, the Company shall terminate the Employee's
employment other than for Good Cause, Disability or death, or the
Employee shall terminate employment for Good Reason within five years
after the Change of Control Date, the Employee will receive, in
addition to all benefits to which the Employee is legally entitled:
(i) Acceleration of all unvested MYR stock option grants and
MYR restricted stock awards or, at the sole discretion
of MYR's Board of Directors, their cash equivalent;
(ii) Any earned but unpaid bonus for the year preceding the
year in which termination occurs;
(iii) A pro-rated target bonus for the worked portion of
the year in which termination occurs;
(iv) One year of current salary (not lower than the
Employee's salary on the Change of Control Date) and one
year of target bonus;
(v) One year of post-termination medical coverage on the
same basis as if the Employee was a current employee;
<PAGE>
(vi) Reimbursement of legal expenses incurred, in accordance
with Section 9, to enforce this Agreement; and
(vii) In the event that any of the foregoing provisions
of this Section 7 result in the receipt by the
Employee of a "parachute payment" (as defined in
Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code")), then the Company shall make an
additional payment to the Employee in an amount in cash
such that the amount of the after-tax proceeds of the
Employee from the payments provided for in this
Agreement, taking into account federal and state income
and excise taxes, is equal to the amount of the after-
tax proceeds the Employee would have received from the
payments provided for in this Agreement had such
payments not resulted in the receipt by the Employee of
a parachute payment. The Employee agrees to give the
Company prompt written notice of any claim by the
Internal Revenue Service that any payments made pursuant
to this Agreement result in the receipt by the Employee
of a parachute payment. In such event the Company shall
have the right to assume and control the defense of an
such claim with counsel of its own selection. The
Employee agrees to cooperate with the Company in
connection with any defense of such claim.
In addition, for a period of 90 days following the thirtieth month
anniversary of a Change of Control Date, the Employee may elect to
terminate employment at the Employee's discretion provided that the
Employee offers to continue employment at the request of the Company
for a period of up to six months. In the event of such termination at
the discretion of the Employee, the Employee shall receive items (i)
through (vi) above. The Employee will also be entitled to receive all
other benefits to which the Employee is entitled under the Company's
various policies or plans or to which the Employee is otherwise legally
entitled. Solely for purposes of the computation of benefits under
this Agreement, payments made by the Company as the result of such a
termination at the discretion of the Employee that are required to be
taken into account with respect to the Employee under Section
280G(b)(2)(A)(ii) of the Code shall not, in the aggregate, exceed 2.99
times the Employee's "base amount" as that term is defined in Section
280G(b)(3) of the Code. If the limitation contained in the immediately
preceding sentence applies, any reduction in payments will in no event
affect the computation of payments hereunder which do not constitute
"excess parachute payments" within the meaning of Section 280G(b) of
the Code.
(b) Death. If the Employee dies during the term of this
Agreement prior to the Change in Control Date, this Agreement shall
terminate without further obligation of the Company to the Employee or
his estate other than the obligation to pay any compensation or
benefits that have been earned but not paid on the Date of Termination,
and any post-termination, life insurance or death benefits that are
provided under the Company's normal benefit plans and policies.
<PAGE>
(c) Disability. If the Employee's employment shall be
terminated during the term of this Agreement prior to the Change in
Control Date by reason of the Employee's Disability, this Agreement
shall terminate without further obligation of the Company to the
Employee other than the obligation to pay any compensation or benefits
that have been earned but not paid on the Date of Termination, and any
post-termination benefits or disability benefits that are provided
under the Company's normal benefit plans and policies.
(d) Good Cause; Other than for Good Reason. If, whether
before or after a Change of Control Date, the Employee's employment
shall be terminated for Good Cause, or if the Employee shall resign
other than for Good Reason, this Agreement shall terminate without
further obligation to the Employee other than the obligation to pay any
compensation or benefits that have been earned but not paid on the Date
of Termination, and any post-termination benefits that are provided
under the Company's normal benefit plans and policies.
8. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Employee's continuing or future participation in
any plan, program, policy or practice provided by the Company and for
which the Employee may qualify, nor, subject to Section 12(g), shall
anything herein limit or otherwise affect such rights as the Employee
may have under any contract or agreement with the Company. Amounts
which are vested benefits or which the Employee is otherwise entitled
to receive under any plan, policy, practice or program of or any
contract or agreement with the Company at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly
modified by this Agreement.
9. Full Settlement; Legal Fees. The Company's obligation to
make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which
the Company may have against the Employee or others. In no event shall
the Employee be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Employee
under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Employee obtains other employment.
In the event the Employee incurs legal fees and expenses in seeking to
obtain any benefit under this Agreement and it is ultimately determined
by a court of competent jurisdiction that the Employee is entitled to
receive all or any part of such benefit, then the Company shall pay to
the Employee the reasonable legal fees and expenses so incurred by the
Employee.
<PAGE>
10. Confidential Information. The Employee shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company,
and their respective businesses, which shall have been obtained by the
Employee during the Employee's employment by the Company and which
shall not be or become public knowledge (other than by acts by the
Employee or representatives of the Employee in violation of this
Agreement). After termination of the Employee's employment with the
Company, the Employee shall not, without the prior written consent of
the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event
shall an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts otherwise
payable to the Employee under this Agreement.
11. Successors.
(a) This Agreement is personal to the Employee and without
the prior written consent of the Company shall not be assignable by the
Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes this
Agreement by operation of law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois without reference to
principles of conflict of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors
and legal representatives.
<PAGE>
(b) All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Employee: William S. Skibitsky
RFD 1357
Long Grove, IL 60047
If to the Company: MYR Group, Inc.
Three Continental Towers
1701 W. Golf Road, Suite 1012
Rolling Meadows, Illinois 60008-4007
Attention: Secretary
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(d) This Agreement represents the entire agreement between
the parties hereto with respect to the subject matter hereof,
and supersedes all prior or contemporaneous oral or written
negotiations, understandings and agreements between the parties hereto.
(e) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(f) The Employee's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure
to assert any right the Employee or the Company may have hereunder,
including, without limitation, the right of the Employee to terminate
employment for Good Reason pursuant to Section 4(b) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(g) The Employee and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Employee and the Company, the employment of the Employee by the Company
is "at will" and, prior to the Change of Control Date, the Employee's
employment may be terminated by either the Employee or the Company at
any time prior to the Change of Control Date, in which case the
Employee shall have no further rights under this Agreement. From and
after the Change of Control Date this Agreement shall supersede any
other agreement between the parties with respect to the subject matter
hereof.
<PAGE>
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's
hand and, pursuant to the authorization from its Board of Directors,
the Company has caused this Agreement to be executed in its name on its
behalf, all as of the day and year first above written.
________________________________________
William S. Skibitsky
MYR GROUP, INC.
By: ____________________________________
Its:____________________________________
Exhibit 10.12
CHANGE OF CONTROL AGREEMENT
AGREEMENT by and between MYR Group, Inc. (the "Company") and
William A. Koertner (the "Employee"), dated as of the 21st day of
December, 1999.
The Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its stockholders to
assure that the Company will have the continued dedication of the
Employee, notwithstanding the possibility, threat or occurrence of a
Change of Control (as defined below) of the Company. The Board
believes it is imperative to diminish the distraction of the Employee
by virtue of the personal uncertainties and risks created by a pending
or threatened Change of Control and to encourage the Employee's full
attention and dedication to the Company currently and in the event of
any threatened or pending Change of Control, and to provide the
Employee with compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits expectations of
the Employee will be satisfied and which are competitive with those of
other corporations. Therefore, in order to accomplish these objectives
the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Term of Agreement. This Agreement shall terminate
if a Change of Control Date (as hereinafter defined) does not occur on
or before December 31, 2001.
2. Change of Control. For purposes of this Agreement, a
"Change of Control" shall be defined as the occurrence of any of the
following events:
(a) There is a report filed on Schedule 13D (or any
successor schedule, form or report) as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
generally in effect on the date hereof, disclosing that any person (as
the term "person" is used in Section 13(d)(3) of the Exchange Act),
other than Charles M. Brennan III, has become the beneficial owner (as
the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of 20%
or more of the issued and outstanding shares of voting securities of
the Company; or
(b) The acquisition of 20% or more of the issued and
outstanding shares of voting securities of the Company by any person
which would otherwise require the filing of a report as described in
(a) above.
<PAGE>
3. Change of Control Date. For purposes of this Agreement, the
"Change of Control Date" shall mean the first date during the term of
this Agreement on which a Change of Control occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control
occurs and if the Employee's employment with the Company is terminated
prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Employee that such termination of
employment (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (ii) otherwise
arose in connection with or in anticipation of a Change of Control,
then for all purposes of this Agreement the "Change of Control Date"
shall mean the date immediately prior to the date of such termination
of employment.
4. Termination of Employment
(a) Good Cause. For purposes of this Agreement,
"Good Cause" shall mean (i) the Employee's commission of a felony, (ii)
the Employee's material breach of any of his obligations or duties,
including the Employee's willful failure to substantially perform his
duties other than as a result of his incapacity due to illness or
injury, or (iii) the Employee's commission of a willful act, such as
embezzlement, against the Company intended to enrich the Employee at
the expense of the Company. No termination for Good Cause may be
effected under clause (ii) of the preceding sentence unless (a) the
Company shall have given written notice to the Employee specifying with
particularity the basis for the Company's decision to terminate the
Employee's employment, and (b) the Employee shall have failed to cease
or correct the performance (or nonperformance) which forms the basis
for the Company's decision within 30 days following the date of the
Company's written notice.
(b) Good Reason. For purposes of this Agreement,
"Good Reason" shall mean any of the following which occurs without the
written consent of the Employee:
(i) Any significant change in the nature of
Employee's principal duties or any significant
diminution in the Employee's status or responsibilities;
(ii) Any decrease in the Employee's salary or cash
incentive opportunity below the level the Employee was
earning at the time of a Change of Control;
(iii) The Company's failure to obtain the agreement
of a successor entity to assume the obligations under
this Agreement; or
(iv) The Company's requiring the Employee to be
based in any location which would materially increase
the Employee's commuting time.
<PAGE>
(c) Disability. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180
consecutive days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and reasonably acceptable to
the Executive or the Executive's legal representative.
5. Notice of Termination. Any termination by the Company for
Good Cause, or by the Employee for Good Reason, shall be communicated
by a Notice of Termination to the other party hereto given in
accordance with Section 12(b) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination
of the Employee's employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice).
The failure by the Employee or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing
of Good Reason or Good Cause shall not waive any right of the Employee
or the Company, respectively, hereunder or preclude the Employee or the
Company, respectively, from asserting such fact or circumstance in
enforcing the Employee's or the Company's rights hereunder.
6. Date of Termination. For purposes of this Agreement, "Date
of Termination" means (a) if the Employee's employment is terminated
by the Company for Good Cause, or by the Employee for Good Reason, the
date of receipt of the Notice of Termination or any later date
specified therein, as the case may be, (b) if the Employee's employment
is terminated by the Company other than for Good Cause, death or
Disability, the date on which the Company notifies the Employee of such
termination and (c) if the Employee's employment is terminated by
reason of death or Disability, the date of death of the Employee or the
date of the determination that the Employee's Disability is determined
to be total and permanent, as the case may be.
7. Obligations of the Company upon Termination.
(a) Termination by Company Not for Good Cause; Resignation
by Employee for Good Reason. If, on or within two years after a Change
of Control Date , the Company shall terminate the Employee's employment
other than for Good Cause, Disability or death, or the Employee shall
terminate employment for Good Reason within two years after the Change
of Control Date, the Employee will receive, in addition to all benefits
to which the Employee is legally entitled:
(i) Acceleration of all unvested MYR stock option grants and
MYR restricted stock awards or, at the sole discretion
of MYR's Board of Directors, their cash equivalent;
(ii) Any earned but unpaid bonus for the year preceding the
year in which termination occurs;
(iii) A pro-rated target bonus for the worked portion of the
year in which termination occurs;
<PAGE>
(iv) Two years of current salary (not lower than the
Employee's salary on the Change of Control Date,
increased by the supplemental payments and relocation
payments described in Exhibit A due during the two-year
period following the employment termination) and two
years of target bonus;
(v) Two years of post-termination medical coverage on the
same basis as if the Employee was a current employee;
(vi) Reimbursement of legal expenses incurred, in accordance
with Section 9, to enforce this Agreement;
(vii) The benefits of the "Put Option" as described
in that certain letter agreement dated June 30, 1999
between Employee and the Company; and
(viii) In the event that the foregoing provisions of this
Section 7 result in the receipt by the Employee
of a parachute payment (as defined in Section 280G of
the Internal Revenue Code of 1986, as amended), then the
Company shall make an additional payment to the Employee
in an amount in cash such that the amount of the after-
tax proceeds of the Employee from the payments provided
for in this Agreement, taking into account federal and
state income and excise taxes, is equal to the amount of
the after-tax proceeds the Employee would have received
from the payments provided for in this Agreement had
such payments not resulted in the receipt by the
Employee of a parachute payment. The Employee agrees to
give the Company prompt written notice of any claim by
the Internal Revenue Service that any payments made
pursuant to this Agreement result in the receipt by the
Employee of a parachute payment. In such event the
Company shall have the right to assume and control the
defense of an such claim with counsel of its own
selection. The Employee agrees to cooperate with the
Company in connection with any defense of such claim.
If the Employee is terminated from employment more than two years but
less than four years after a Change of Control Date for other than Good
Cause, Disability or death, the Employee will receive items (i), (ii),
(iii), (vi), (vii) and (viii) above, plus one year of current salary
(not lower than the Employee's salary on the Change of Control Date,
increased by the supplemental payments and relocation payments
described in Exhibit A due during the one-year period following the
employment termination), one year of target bonus and one year of
medical coverage.
<PAGE>
In addition, for a period of 90 days following the second anniversary
of a Change of Control Date, the Employee may elect to terminate
employment at the Employee's discretion provided that the Employee
offers to continue employment at the request of the Company for a
period of up to six months. In the event of such termination at the
discretion of the Employee, the Employee shall receive items (i)
through (vii) above. The Employee will also be entitled to receive all
other benefits to which the Employee is entitled under the Company's
various policies or plans or to which the Employee is otherwise legally
entitled. Solely for purposes of the computation of benefits under
this Agreement, payments made by the Company as the result of such a
termination at the discretion of the Employee that are required to be
taken into account with respect to the Employee under Section
280G(b)(2)(A)(ii) of the Code shall not, in the aggregate, exceed 2.99
times the Employee's "base amount" as that term is defined in Section
280G(b)(3) of the Code. If the limitation contained in the immediately
preceding sentence applies, any reduction in payments will in no event
affect the computation of payments hereunder which do not constitute
"excess parachute payments" within the meaning of Section 280G(b) of
the Code.
(b) Death. If the Employee dies during the term of this
Agreement prior to the Change in Control Date, this Agreement shall
terminate without further obligation of the Company to the Employee or
his estate other than the obligation to pay any compensation or
benefits that have been earned but not paid on the Date of Termination,
and any post-termination, life insurance or death benefits that are
provided under the Company's normal benefit plans and policies.
(c) Disability. If the Employee's employment shall be
terminated during the term of this Agreement prior to the Change in
Control Date by reason of the Employee's Disability, this Agreement
shall terminate without further obligation of the Company to the
Employee other than the obligation to pay any compensation or benefits
that have been earned but not paid on the Date of Termination, and any
post-termination benefits or disability benefits that are provided
under the Company's normal benefit plans and policies.
(d) Good Cause; Other than for Good Reason. If, whether
before or after a Change of Control Date, the Employee's employment
shall be terminated for Good Cause, or if the Employee shall resign
other than for Good Reason, this Agreement shall terminate without
further obligation to the Employee other than the obligation to pay any
compensation or benefits that have been earned but not paid on the Date
of Termination, and any post-termination benefits that are provided
under the Company's normal benefit plans and policies.
8. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Employee's continuing or future participation in
any plan, program, policy or practice provided by the Company and for
which the Employee may qualify, nor, subject to Section 12(g), shall
anything herein limit or otherwise affect such rights as the Employee
may have under any contract or agreement with the Company. Amounts
which are vested benefits or which the Employee is otherwise entitled
to receive under any plan, policy, practice or program of or any
contract or agreement with the Company at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly
modified by this Agreement.
<PAGE>
9. Full Settlement; Legal Fees. The Company's obligation to
make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which
the Company may have against the Employee or others. In no event shall
the Employee be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Employee
under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Employee obtains other employment.
In the event the Employee incurs legal fees and expenses in seeking to
obtain any benefit under this Agreement and it is ultimately determined
by a court of competent jurisdiction that the Employee is entitled to
receive all or any part of such benefit, then the Company shall pay to
the Employee the reasonable legal fees and expenses so incurred by the
Employee.
10. Confidential Information. The Employee shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company,
and their respective businesses, which shall have been obtained by the
Employee during the Employee's employment by the Company and which
shall not be or become public knowledge (other than by acts by the
Employee or representatives of the Employee in violation of this
Agreement). After termination of the Employee's employment with the
Company, the Employee shall not, without the prior written consent of
the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event
shall an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts otherwise
payable to the Employee under this Agreement.
11. Successors.
(a) This Agreement is personal to the Employee and without
the prior written consent of the Company shall not be assignable by the
Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes this
Agreement by operation of law, or otherwise.
<PAGE>
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois without reference to
principles of conflict of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Employee: William A. Koertner
58 S. Wynstone Dr.
Barrington, IL 60010
If to the Company: MYR Group, Inc.
Three Continental Towers
1701 W. Golf Road, Suite 1012
Rolling Meadows, Illinois 60008-4007
Attention: Secretary
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(a) This Agreement represents the entire agreement
between the parties hereto with respect to the subject matter hereof,
and supersedes all prior or contemporaneous oral or written
negotiations, understandings and agreements between the parties hereto.
(e) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(f) The Employee's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure
to assert any right the Employee or the Company may have hereunder,
including, without limitation, the right of the Employee to terminate
employment for Good Reason pursuant to Section 4(b) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
<PAGE>
(g) The Employee and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Employee and the Company, the employment of the Employee by the Company
is "at will" and, prior to the Change of Control Date, the Employee's
employment may be terminated by either the Employee or the Company at
any time prior to the Change of Control Date, in which case the
Employee shall have no further rights under this Agreement. From and
after the Change of Control Date this Agreement shall supersede any
other agreement between the parties with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's
hand and, pursuant to the authorization from its Board of Directors,
the Company has caused this Agreement to be executed in its name on its
behalf, all as of the day and year first above written.
________________________________________
William A. Koertner
MYR GROUP, INC.
By: ___________________________________
Its: ___________________________________
<PAGE>
EXHIBIT A
Date Payable Supplemental Payment Relocation Payment
------------ -------------------- ------------------
February-00 3,750
May 3,750
July 11,104
August 3,750
November 2,500
February-01 2,500
May 2,500
July 8,328
August 2,500
November 1,250
February-02 1,250
May 1,250
July 5,552
August 1,250
July-03 2,776
Exhibit 10.13
CHANGE OF CONTROL AGREEMENT
AGREEMENT by and between MYR Group, Inc. (the "Company") and
Michael F. Knapp (the "Employee"), dated as of the 21st day of
December, 1999.
The Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its stockholders to
assure that the Company will have the continued dedication of the
Employee, notwithstanding the possibility, threat or occurrence of a
Change of Control (as defined below) of the Company. The Board
believes it is imperative to diminish the distraction of the Employee
by virtue of the personal uncertainties and risks created by a pending
or threatened Change of Control and to encourage the Employee's full
attention and dedication to the Company currently and in the event of
any threatened or pending Change of Control, and to provide the
Employee with compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits expectations of
the Employee will be satisfied and which are competitive with those of
other corporations. Therefore, in order to accomplish these objectives
the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Term of Agreement. This Agreement shall terminate if a
Change of Control Date (as hereinafter defined) does not occur on or
before December 31, 2001.
2. Change of Control. For purposes of this Agreement, a
"Change of Control" shall be defined as the occurrence of any of the
following events:
(a) There is a report filed on Schedule 13D (or any
successor schedule, form or report) as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
generally in effect on the date hereof, disclosing that any person (as
the term "person" is used in Section 13(d)(3) of the Exchange Act),
other than Charles M. Brennan III, has become the beneficial owner (as
the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of 20%
or more of the issued and outstanding shares of voting securities of
the Company; or
(b) The acquisition of 20% or more of the issued and
outstanding shares of voting securities of the Company by any person
which would otherwise require the filing of a report as described in
(a) above.
<PAGE>
3. Change of Control Date. For purposes of this Agreement, the
"Change of Control Date" shall mean the first date during the term of
this Agreement on which a Change of Control occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control
occurs and if the Employee's employment with the Company is terminated
prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Employee that such termination of
employment (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (ii) otherwise
arose in connection with or in anticipation of a Change of Control,
then for all purposes of this Agreement the "Change of Control Date"
shall mean the date immediately prior to the date of such termination
of employment.
4. Termination of Employment
(a) Good Cause. For purposes of this Agreement,
"Good Cause" shall mean (i) the Employee's commission of a felony, (ii)
the Employee's material breach of any of his obligations or duties,
including the Employee's willful failure to substantially perform his
duties other than as a result of his incapacity due to illness or
injury, or (iii) the Employee's commission of a willful act, such as
embezzlement, against the Company intended to enrich the Employee at
the expense of the Company. No termination for Good Cause may be
effected under clause (ii) of the preceding sentence unless (a) the
Company shall have given written notice to the Employee specifying with
particularity the basis for the Company's decision to terminate the
Employee's employment, and (b) the Employee shall have failed to cease
or correct the performance (or nonperformance) which forms the basis
for the Company's decision within 30 days following the date of the
Company's written notice.
(b) Good Reason. For purposes of this Agreement,
"Good Reason" shall mean any of the following which occurs without the
written consent of the Employee:
(i) Any significant change in the nature of
Employee's principal duties or any significant
diminution in the Employee's status or responsibilities;
(ii) Any decrease in the Employee's salary or cash
incentive opportunity below the level the Employee was
earning at the time of a Change of Control;
(iii) The Company's failure to obtain the agreement
of a successor entity to assume the obligations under
this Agreement; or
(iv) The Company's requiring the Employee to be
based in any location which would materially increase
the Employee's commuting time.
(c) Disability. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180
consecutive days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and reasonably acceptable to
the Executive or the Executive's legal representative.
<PAGE>
5. Notice of Termination. Any termination by the Company for
Good Cause, or by the Employee for Good Reason, shall be communicated
by a Notice of Termination to the other party hereto given in
accordance with Section 12(b) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination
of the Employee's employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice).
The failure by the Employee or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing
of Good Reason or Good Cause shall not waive any right of the Employee
or the Company, respectively, hereunder or preclude the Employee or the
Company, respectively, from asserting such fact or circumstance in
enforcing the Employee's or the Company's rights hereunder.
6. Date of Termination. For purposes of this Agreement, "Date
of Termination" means (a) if the Employee's employment is terminated
by the Company for Good Cause, or by the Employee for Good Reason, the
date of receipt of the Notice of Termination or any later date
specified therein, as the case may be, (b) if the Employee's employment
is terminated by the Company other than for Good Cause, death or
Disability, the date on which the Company notifies the Employee of such
termination and (c) if the Employee's employment is terminated by
reason of death or Disability, the date of death of the Employee or the
date of the determination that the Employee's Disability is determined
to be total and permanent, as the case may be.
7. Obligations of the Company upon Termination.
(a) Termination by Company Not for Good Cause; Resignation
by Employee for Good Reason. If, on or within five years after a
Change of Control Date, the Company shall terminate the Employee's
employment other than for Good Cause, Disability or death, or the
Employee shall terminate employment for Good Reason within five years
after the Change of Control Date, the Employee will receive, in
addition to all benefits to which the Employee is legally entitled:
(i) Acceleration of all unvested MYR stock option grants and
MYR restricted stock awards or, at the sole discretion
of MYR's Board of Directors, their cash equivalent;
(ii) Any earned but unpaid bonus for the year preceding the
year in which termination occurs;
(iii) A pro-rated target bonus for the worked portion of the
year in which termination occurs;
(iv) One year of current salary (not lower than the
Employee's salary on the Change of Control Date) and one
year of target bonus;
(v) One year of post-termination medical coverage on the
same basis as if the Employee was a current employee;
<PAGE>
(vi) Reimbursement of legal expenses incurred, in accordance
with Section 9, to enforce thisAgreement; and
In addition, for a period of 90 days following the thirtieth month
anniversary of a Change of Control Date, the Employee may elect to
terminate employment at the Employee's discretion provided that the
Employee offers to continue employment at the request of the Company
for a period of up to six months. In the event of such termination at
the discretion of the Employee, the Employee shall receive items (i)
through (vi) above. The Employee will also be entitled to receive all
other benefits to which the Employee is entitled under the Company's
various policies or plans or to which the Employee is otherwise legally
entitled.
For purposes of the computation of benefits under this Agreement,
payments made by the Company as the result of such a termination that
are required to be taken into account with respect to the Employee
under Section 280G(b)(2)(A)(ii) of the Code shall not, in the
aggregate, exceed 2.99 times the Employee's "base amount" as that term
is defined in Section 280G(b)(3) of the Code. If the limitation
contained in the immediately preceding sentence applies, any reduction
in payments will in no event affect the computation of payments
hereunder which do not constitute "excess parachute payments" within
the meaning of Section 280G(b) of the Code.
(b) Death. If the Employee dies during the term of this
Agreement prior to the Change in Control Date, this Agreement shall
terminate without further obligation of the Company to the Employee or
his estate other than the obligation to pay any compensation or
benefits that have been earned but not paid on the Date of Termination,
and any post-termination, life insurance or death benefits that are
provided under the Company's normal benefit plans and policies.
(c) Disability. If the Employee's employment shall be
terminated during the term of this Agreement prior to the Change in
Control Date by reason of the Employee's Disability, this Agreement
shall terminate without further obligation of the Company to the
Employee other than the obligation to pay any compensation or benefits
that have been earned but not paid on the Date of Termination, and any
post-termination benefits or disability benefits that are provided
under the Company's normal benefit plans and policies.
(d) Good Cause; Other than for Good Reason. If, whether
before or after a Change of Control Date, the Employee's employment
shall be terminated for Good Cause, or if the Employee shall resign
other than for Good Reason, this Agreement shall terminate without
further obligation to the Employee other than the obligation to pay any
compensation or benefits that have been earned but not paid on the Date
of Termination, and any post-termination benefits that are provided
under the Company's normal benefit plans and policies.
<PAGE>
8. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Employee's continuing or future participation in
any plan, program, policy or practice provided by the Company and for
which the Employee may qualify, nor, subject to Section 12(g), shall
anything herein limit or otherwise affect such rights as the Employee
may have under any contract or agreement with the Company. Amounts
which are vested benefits or which the Employee is otherwise entitled
to receive under any plan, policy, practice or program of or any
contract or agreement with the Company at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly
modified by this Agreement.
9. Full Settlement; Legal Fees. The Company's obligation to
make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which
the Company may have against the Employee or others. In no event shall
the Employee be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Employee
under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Employee obtains other employment.
In the event the Employee incurs legal fees and expenses in seeking to
obtain any benefit under this Agreement and it is ultimately determined
by a court of competent jurisdiction that the Employee is entitled to
receive all or any part of such benefit, then the Company shall pay to
the Employee the reasonable legal fees and expenses so incurred by the
Employee.
10. Confidential Information. The Employee shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company,
and their respective businesses, which shall have been obtained by the
Employee during the Employee's employment by the Company and which
shall not be or become public knowledge (other than by acts by the
Employee or representatives of the Employee in violation of this
Agreement). After termination of the Employee's employment with the
Company, the Employee shall not, without the prior written consent of
the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event
shall an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts otherwise
payable to the Employee under this Agreement.
11. Successors.
(a) This Agreement is personal to the Employee and without
the prior written consent of the Company shall not be assignable by the
Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
<PAGE>
(c) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes this
Agreement by operation of law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois without reference to
principles of conflict of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Employee: Michael F. Knapp
1220A Oak Hill Rd.
Lake Barrington Shores, IL 60010
If to the Company: MYR Group, Inc.
Three Continental Towers
1701 W. Golf Road, Suite 1012
Rolling Meadows, Illinois 60008-4007
Attention: Secretary
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(a) This Agreement represents the entire agreement between
the parties hereto with respect to the subject matter hereof, and
supersedes all prior or contemporaneous oral or written negotiations,
understandings and agreements between the parties hereto.
(e) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
<PAGE>
(f) The Employee's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure
to assert any right the Employee or the Company may have hereunder,
including, without limitation, the right of the Employee to terminate
employment for Good Reason pursuant to Section 4(b) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(g) The Employee and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Employee and the Company, the employment of the Employee by the Company
is "at will" and, prior to the Change of Control Date, the Employee's
employment may be terminated by either the Employee or the Company at
any time prior to the Change of Control Date, in which case the
Employee shall have no further rights under this Agreement. From and
after the Change of Control Date this Agreement shall supersede any
other agreement between the parties with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's
hand and, pursuant to the authorization from its Board of Directors,
the Company has caused this Agreement to be executed in its name on its
behalf, all as of the day and year first above written.
________________________________________
Michael F. Knapp
MYR GROUP, INC.
By: ___________________________________
Its: ___________________________________
Exhibit 10.14
CHANGE OF CONTROL AGREEMENT
AGREEMENT by and between MYR Group, Inc. (the "Company") and Byron
D. Nelson (the "Employee"), dated as of the 21st day of December, 1999.
The Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its stockholders to
assure that the Company will have the continued dedication of the
Employee, notwithstanding the possibility, threat or occurrence of a
Change of Control (as defined below) of the Company. The Board
believes it is imperative to diminish the distraction of the Employee
by virtue of the personal uncertainties and risks created by a pending
or threatened Change of Control and to encourage the Employee's full
attention and dedication to the Company currently and in the event of
any threatened or pending Change of Control, and to provide the
Employee with compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits expectations of
the Employee will be satisfied and which are competitive with those of
other corporations. Therefore, in order to accomplish these objectives
the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Term of Agreement. This Agreement shall terminate if a
Change of Control Date (as hereinafter defined) does not occur on or
before December 31, 2001.
2. Change of Control. For purposes of this Agreement, a
"Change of Control" shall be defined as the occurrence of any of the
following events:
(a) There is a report filed on Schedule 13D (or
any successor schedule, form or report) as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
generally in effect on the date hereof, disclosing that any person (as
the term "person" is used in Section 13(d)(3) of the Exchange Act),
other than Charles M. Brennan III, has become the beneficial owner (as
the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of 20%
or more of the issued and outstanding shares of voting securities of
the Company; or
(b) The acquisition of 20% or more of the issued and
outstanding shares of voting securities of the Company by any person
which would otherwise require the filing of a report as described in
(a) above.
3. Change of Control Date. For purposes of this Agreement, the
"Change of Control Date" shall mean the first date during the term of
this Agreement on which a Change of Control occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control
occurs and if the Employee's employment with the Company is terminated
prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Employee that such termination of
employment (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (ii) otherwise
arose in connection with or in anticipation of a Change of Control,
then for all purposes of this Agreement the "Change of Control Date"
shall mean the date immediately prior to the date of such termination
of employment.
4. Termination of Employment
(a) Good Cause. For purposes of this Agreement,
"Good Cause" shall mean (i) the Employee's commission of a felony, (ii)
the Employee's material breach of any of his obligations or duties,
including the Employee's willful failure to substantially perform his
duties other than as a result of his incapacity due to illness or
injury, or (iii) the Employee's commission of a willful act, such as
embezzlement, against the Company intended to enrich the Employee at
the expense of the Company. No termination for Good Cause may be
effected under clause (ii) of the preceding sentence unless (a) the
Company shall have given written notice to the Employee specifying with
particularity the basis for the Company's decision to terminate the
Employee's employment, and (b) the Employee shall have failed to cease
or correct the performance (or nonperformance) which forms the basis
for the Company's decision within 30 days following the date of the
Company's written notice.
(b) Good Reason. For purposes of this Agreement,
"Good Reason" shall mean any of the following which occurs without the
written consent of the Employee:
(i) Any significant change in the nature of
Employee's principal duties or any significant
diminution in the Employee's status or responsibilities;
(ii) Any decrease in the Employee's salary or cash
incentive opportunity below the level the Employee was
earning at the time of a Change of Control;
(iii) The Company's failure to obtain the agreement
of a successor entity to assume the obligations under
this Agreement; or
(iv) The Company's requiring the Employee to be
based in any location which would materially increase
the Employee's commuting time.
(c) Disability. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180
consecutive days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and reasonably acceptable to
the Executive or the Executive's legal representative.
5. Notice of Termination. Any termination by the Company for
Good Cause, or by the Employee for Good Reason, shall be communicated
by a Notice of Termination to the other party hereto given in
accordance with Section 12(b) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination
of the Employee's employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice).
The failure by the Employee or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing
of Good Reason or Good Cause shall not waive any right of the Employee
or the Company, respectively, hereunder or preclude the Employee or the
Company, respectively, from asserting such fact or circumstance in
enforcing the Employee's or the Company's rights hereunder.
6. Date of Termination. For purposes of this Agreement, "Date
of Termination" means (a) if the Employee's employment is terminated
by the Company for Good Cause, or by the Employee for Good Reason, the
date of receipt of the Notice of Termination or any later date
specified therein, as the case may be, (b) if the Employee's employment
is terminated by the Company other than for Good Cause, death or
Disability, the date on which the Company notifies the Employee of such
termination and (c) if the Employee's employment is terminated by
reason of death or Disability, the date of death of the Employee or the
date of the determination that the Employee's Disability is determined
to be total and permanent, as the case may be.
7. Obligations of the Company upon Termination.
(a) Termination by Company Not for Good Cause; Resignation
by Employee for Good Reason. If, on or within two years after a Change
of Control Date , the Company shall terminate the Employee's employment
other than for Good Cause, Disability or death, or the Employee shall
terminate employment for Good Reason within two years after the Change
of Control Date, the Employee will receive, in addition to all benefits
to which the Employee is legally entitled:
(i) Acceleration of all unvested MYR stock option grants and
MYR restricted stock awards or, at the sole discretion
of MYR's Board of Directors, their cash equivalent;
(ii) Any earned but unpaid bonus for the year preceding the
year in which termination occurs;
(iii) A pro-rated target bonus for the worked portion of the
year in which termination occurs;
(iv) Two years of current salary (not lower than the
Employee's salary on the Change of Control Date) and two
years of target bonus;
(v) Two years of post-termination medical coverage on the
same basis as if the Employee was a current employee;
(vi) Reimbursement of legal expenses incurred, in accordance
with Section 9, to enforce this Agreement; and
(vii) In the event that the foregoing provisions of
this Section 7 result in the receipt by the Employee of
a parachute payment (as defined in Section 280G of the
Internal Revenue Code of 1986, as amended), then the
Company shall make an additional payment to the Employee
in an amount in cash such that the amount of the after-
tax proceeds of the Employee from the payments provided
for in this Agreement, taking into account federal and
state income and excise taxes, is equal to the amount of
the after-tax proceeds the Employee would have received
from the payments provided for in this Agreement had
such payments not resulted in the receipt by the
Employee of a parachute payment. The Employee agrees to
give the Company prompt written notice of any claim by
the Internal Revenue Service that any payments made
pursuant to this Agreement result in the receipt by the
Employee of a parachute payment. In such event the
Company shall have the right to assume and control the
defense of an such claim with counsel of its own
selection. The Employee agrees to cooperate with the
Company in connection with any defense of such claim.
If the Employee is terminated from employment more than two years but
less than four years after a Change of Control Date for other than Good
Cause, Disability or death, the Employee will receive items (i), (ii),
(iii), (vi) and (vii) above, plus one year of current salary (not less
than the Employee's salary on the Change of Control Date), one year of
target bonus and one year of medical coverage.
In addition, for a period of 90 days following the second anniversary
of a Change of Control Date, the Employee may elect to terminate
employment at the Employee's discretion provided that the Employee
offers to continue employment at the request of the Company for a
period of up to six months. In the event of such termination at the
discretion of the Employee, the Employee shall receive items (i)
through (vi) above. The Employee will also be entitled to receive all
other benefits to which the Employee is entitled under the Company's
various policies or plans or to which the Employee is otherwise legally
entitled. Solely for purposes of the computation of benefits under
this Agreement, payments made by the Company as the result of such a
termination at the discretion of the Employee that are required to be
taken into account with respect to the Employee under Section
280G(b)(2)(A)(ii) of the Code shall not, in the aggregate, exceed 2.99
times the Employee's "base amount" as that term is defined in Section
280G(b)(3) of the Code. If the limitation contained in the immediately
preceding sentence applies, any reduction in payments will in no event
affect the computation of payments hereunder which do not constitute
"excess parachute payments" within the meaning of Section 280G(b) of
the Code.
(b) Death. If the Employee dies during the term of this
Agreement prior to the Change in Control Date, this Agreement shall
terminate without further obligation of the Company to the Employee or
his estate other than the obligation to pay any compensation or
benefits that have been earned but not paid on the Date of Termination,
and any post-termination, life insurance or death benefits that are
provided under the Company's normal benefit plans and policies.
(c) Disability. If the Employee's employment shall be
terminated during the term of this Agreement prior to the Change in
Control Date by reason of the Employee's Disability, this Agreement
shall terminate without further obligation of the Company to the
Employee other than the obligation to pay any compensation or benefits
that have been earned but not paid on the Date of Termination, and any
post-termination benefits or disability benefits that are provided
under the Company's normal benefit plans and policies.
(d) Good Cause; Other than for Good Reason. If, whether
before or after a Change of Control Date, the Employee's employment
shall be terminated for Good Cause, or if the Employee shall resign
other than for Good Reason, this Agreement shall terminate without
further obligation to the Employee other than the obligation to pay any
compensation or benefits that have been earned but not paid on the Date
of Termination, and any post-termination benefits that are provided
under the Company's normal benefit plans and policies.
8. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Employee's continuing or future participation in
any plan, program, policy or practice provided by the Company and for
which the Employee may qualify, nor, subject to Section 12(g), shall
anything herein limit or otherwise affect such rights as the Employee
may have under any contract or agreement with the Company. Amounts
which are vested benefits or which the Employee is otherwise entitled
to receive under any plan, policy, practice or program of or any
contract or agreement with the Company at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly
modified by this Agreement.
9. Full Settlement; Legal Fees. The Company's obligation to
make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which
the Company may have against the Employee or others. In no event shall
the Employee be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Employee
under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Employee obtains other employment.
In the event the Employee incurs legal fees and expenses in seeking to
obtain any benefit under this Agreement and it is ultimately determined
by a court of competent jurisdiction that the Employee is entitled to
receive all or any part of such benefit, then the Company shall pay to
the Employee the reasonable legal fees and expenses so incurred by the
Employee.
10. Confidential Information. The Employee shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company,
and their respective businesses, which shall have been obtained by the
Employee during the Employee's employment by the Company and which
shall not be or become public knowledge (other than by acts by the
Employee or representatives of the Employee in violation of this
Agreement). After termination of the Employee's employment with the
Company, the Employee shall not, without the prior written consent of
the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event
shall an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts otherwise
payable to the Employee under this Agreement.
11. Successors.
(a) This Agreement is personal to the Employee and without
the prior written consent of the Company shall not be assignable by the
Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes this
Agreement by operation of law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois without reference to
principles of conflict of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Employee: Byron D. Nelson
629 W. Gartner Road
Naperville, IL 60540
If to the Company: MYR Group, Inc.
Three Continental Towers
1701 W. Golf Road, Suite 1012
Rolling Meadows, Illinois 60008-4007
Attention: President
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(a) This Agreement represents the entire agreement between
the parties hereto with respect to the subject matter hereof,
and supersedes all prior or contemporaneous oral or written
negotiations, understandings and agreements between the parties hereto.
(e) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(f) The Employee's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure
to assert any right the Employee or the Company may have hereunder,
including, without limitation, the right of the Employee to terminate
employment for Good Reason pursuant to Section 4(b) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(g) The Employee and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Employee and the Company, the employment of the Employee by the Company
is "at will" and, prior to the Change of Control Date, the Employee's
employment may be terminated by either the Employee or the Company at
any time prior to the Change of Control Date, in which case the
Employee shall have no further rights under this Agreement. From and
after the Change of Control Date this Agreement shall supersede any
other agreement between the parties with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's
hand and, pursuant to the authorization from its Board of Directors,
the Company has caused this Agreement to be executed in its name on its
behalf, all as of the day and year first above written.
________________________________________
Byron D. Nelson
MYR GROUP, INC.
By: ___________________________________
Its: ___________________________________
MYR Group Inc.
List of Subsidiaries
The Company's significant subsidiaries are:
Name of Corporation State or Jurisdiction Percentage
or other entity of Organization of Interest
------------------- --------------- -------------
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%
MYRcom, Inc. Delaware 100%
(1) wholly owned subsidiary of Harlan Electric Company
Exhibit 21
- 65 -
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 27, 2000, with respect to the
consolidated financial statements of MYR Group Inc. included in the
Annual Report (Form 10-K) for the year ended December 31, 1999.
ERNST & YOUNG LLP
Chicago, Illinois
March 27, 2000
Exhibit 23
- 66 -
<PAGE>
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 Exhibit
99.1 in the Annual Report on Form 10-K of MYR Group Inc. for the year
ended December 31, 1999.
Deloitte & Touche LLP
Chicago, Illinois
March 29, 2000
Exhibit 23
- 67 -
MYR GROUP INC.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
MYR Group Inc.:
We have audited the accompanying consolidated balance sheet of MYR
Group Inc. and subsidiaries as of December 31, 1997, and the related
consolidated statements of operations, shareholders' equity, and cash
flows for each of the two 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 the results of their operations
and their cash flows for each of the two years in the period ended
December 31, 1997 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Chicago, Illinois
March 18, 1998
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