Market Overview

MYR Group Inc. Announces First-Quarter 2018 Results

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ROLLING MEADOWS, Ill., May 02, 2018 (GLOBE NEWSWIRE) -- MYR Group Inc. ("MYR") (NASDAQ:MYRG), a holding company of leading specialty contractors serving the electric utility infrastructure, commercial and industrial construction markets in the United States and western Canada, today announced its first-quarter 2018 financial results.

Highlights

  • First quarter revenues of $345.6 million, a 15.2% increase year over year
  • First quarter net income of $5.6 million, or $0.34 per diluted share
  • Backlog of $958.5 million, an all-time high

Management Comments
Rick Swartz, MYR's President and CEO, said, "We are pleased with our first-quarter 2018 financial results, which included increases in revenues, gross profit, earnings per share, net income and EBITDA as compared to the first quarter of 2017. Our backlog in the first quarter reached $958.5 million, a record high consisting of both short and long-term projects with varying construction start dates. We believe our strong market position and active bidding climates in both our T&D and C&I markets should continue to support efficiencies in our operations."

First Quarter Results
MYR reported first-quarter 2018 revenues of $345.6 million, an increase of $45.5 million, or 15.2 percent, compared to the first quarter of 2017. Specifically, the T&D segment reported revenues of $216.4 million, an increase of $20.7 million, or 10.6 percent, from the first quarter of 2017, primarily due to an increase in distribution revenue. The C&I segment reported first-quarter 2018 revenues of $129.2 million, an increase of $24.8 million, or 23.8 percent, from the first quarter of 2017, primarily due to increased spending from new and existing customers and increased volume on certain organic expansion locations.

Consolidated gross profit increased to $35.8 million in the first quarter of 2018, compared to $25.7 million in the first quarter of 2017. The increase in gross profit was primarily due to higher revenues and increased margins. Gross margin increased to 10.3 percent for the first quarter of 2018 from 8.6 percent for the first quarter of 2017. The increase in gross margin was largely due to improvements in efficiency from the prior year, which was significantly impacted by inclement weather and a high mix of smaller, shorter duration work. Changes in estimates of gross profit on certain projects resulted in a gross margin decrease of 0.1 percent for the first quarter of 2018. Gross margin increased 0.4 percent due to changes in estimates of gross profit on certain projects for the first quarter of 2017.

Selling, general and administrative expenses ("SG&A") increased to $28.3 million in the first quarter of 2018, compared to $25.8 million in the first quarter of 2017. The year-over-year increase was primarily due to higher bonus and profit sharing costs. As a percentage of revenues, SG&A decreased to 8.2 percent for the first quarter of 2018 from 8.6 percent for the first quarter of 2017.

Income tax expense was $2.3 million for the first quarter of 2018, with an effective tax rate of 28.9 percent. For the first quarter of 2017 we had an income tax benefit of $0.4 million, which represented 42.7 percent of pretax income. The effective tax rate for the first quarter of 2018 benefited from the enactment of the United States Tax Cuts and Jobs Act on December 22, 2017. The tax benefit in the first quarter of 2017 was caused by excess tax benefits pertaining to the vesting of stock awards and the exercise of stock options related to the Company's stock compensation program.

For the first quarter of 2018, net income was $5.6 million, or $0.34 per diluted share, compared to $1.2 million, or $0.07 per diluted share, for the same period of 2017. First-quarter 2018 EBITDA, a non-GAAP financial measure, was $18.0 million, or 5.2 percent of revenues, compared to $11.1 million, or 3.7 percent of revenues, in the first quarter of 2017.

Backlog
As of March 31, 2018, MYR's backlog was $958.5 million, which represented an increase of $279.4 million, or 41.1 percent, compared to December 31, 2017. Specifically, in the same period, T&D backlog increased $101.2 million, or 30.4 percent, to $434.3 million while C&I backlog increased $178.2 million, or 51.5 percent, to $524.2. Total backlog at March 31, 2018 increased $297.6 million, or 45.0 percent, from the $660.9 million reported at March 31, 2017. The increase in backlog was primarily due to the addition of the previously announced Denver Central 70 Project and various small and mid-sized T&D projects.

Balance Sheet
As of March 31, 2018, MYR had $162.0 million of borrowing availability under its credit facility.

Non-GAAP Financial Measures
To supplement MYR's financial statements presented in accordance with generally accepted accounting principles in the United States (GAAP), MYR uses certain non-GAAP measures. Reconciliation to the nearest GAAP measures of all non-GAAP measures included in this press release can be found at the end of this release. MYR's definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP.

MYR believes that these non-GAAP measures are useful because they (i) provide both management and investors meaningful supplemental information regarding financial performance by excluding certain expenses and benefits that may not be indicative of recurring core business operating results, (ii) permit investors to view MYR's performance using the same tools that management uses to evaluate MYR's past performance, reportable business segments and prospects for future performance, (iii) publicly disclose results that are relevant to financial covenants included in MYR's credit facility and (iv) otherwise provide supplemental information that may be useful to investors in evaluating MYR.

Conference Call
MYR will host a conference call to discuss its first-quarter 2018 results on Thursday, May 3, 2018, at 9:00 a.m. Central time. To participate in the conference call via telephone, please dial (877) 561-2750 (domestic) or (763) 416-8565 (international) at least five minutes prior to the start of the event. A replay of the conference call will be available through Thursday, May 10, 2018, at 11:59 p.m. Eastern time, by dialing (855) 859-2056 or (404) 537-3406, and entering conference ID 6855529. MYR will also broadcast the conference call live via the internet. Interested parties may access the webcast through the Investor Relations section of MYR's website at www.myrgroup.com. Please access the website at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. The webcast will be available until Thursday, May 10, 2018, at 11:59 P.M. Eastern time.

About MYR

MYR is a holding company of leading specialty contractors serving the electric utility infrastructure, commercial and industrial construction markets throughout the United States and western Canada who have the experience and expertise to complete electrical installations of any type and size. Their comprehensive services on electric transmission and distribution networks and substation facilities include design, engineering, procurement, construction, upgrade, maintenance and repair services. Transmission and distribution customers include investor-owned utilities, cooperatives, private developers, government-funded utilities, independent power producers, independent transmission companies, industrial facility owners and other contractors. Commercial and industrial electrical contracting services are provided to general contractors, commercial and industrial facility owners, local governments and developers generally throughout the western and northeastern United States and western Canada. For more information, visit myrgroup.com.

Forward-Looking Statements
Various statements in this announcement, including those that express a belief, expectation, or intention, as well as those that are not statements of historical fact, are forward-looking statements. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenue, income, capital spending, segment improvements and investments. Forward-looking statements are generally accompanied by words such as "anticipate," "believe," "encouraged," "estimate," "expect," "intend," "likely," "may," "objective," "outlook," "plan," "possible," "potential," "project," "remain confident," "should" "unlikely," or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this announcement speak only as of the date of this announcement; we disclaim any obligation to update these statements (unless required by securities laws), and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. No forward-looking statement can be guaranteed and actual results may differ materially from those projected. Forward-looking statements in this announcement should be evaluated together with the many uncertainties that affect MYR's business, particularly those mentioned in the risk factors and cautionary statements in Item 1A of MYR's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, and in any risk factors or cautionary statements contained in MYR's subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

MYR Group Inc. Contact:
Betty R. Johnson, Chief Financial Officer, 847-290-1891, investorinfo@myrgroup.com

Investor Contact:
Kristine Walczak
Dresner Corporate Services, 312-780-7205, kwalczak@dresnerco.com 

Financial tables follow…

 
 
MYR GROUP INC.
Consolidated Balance Sheets
As of March 31, 2018 and December 31, 2017
 
  March 31,   December 31,
(In thousands, except share and per share data)  2018   2017
  (unaudited)    
ASSETS      
Current assets:              
Cash and cash equivalents $ 1,719     $ 5,343  
Accounts receivable, net of allowances of $537 and $605, respectively   256,364       283,008  
Costs and estimated earnings in excess of billings on uncompleted contracts   93,206       78,260  
Current portion of receivable for insurance claims in excess of deductibles   4,366       4,221  
Refundable income taxes, net         391  
Other current assets   7,882       8,513  
Total current assets   363,537       379,736  
Property and equipment, net of accumulated depreciation of $238,112 and $231,391, respectively   151,570       148,084  
Goodwill   46,988       46,994  
Intangible assets, net of accumulated amortization of $5,305 and $5,183, respectively   10,720       10,852  
Receivable for insurance claims in excess of deductibles   14,440       14,295  
Investment in joint ventures   719       168  
Other assets   3,617       3,659  
Total assets $ 591,591     $ 603,788  
               
LIABILITIES AND STOCKHOLDERS' EQUITY              
Current liabilities:              
Current portion of capital lease obligations $ 1,094     $ 1,086  
Accounts payable   105,042       110,383  
Billings in excess of costs and estimated earnings on uncompleted contracts   18,699       28,919  
Current portion of accrued self-insurance   12,452       13,138  
Income taxes payable, net   2,110        
Other current liabilities   42,562       35,038  
Total current liabilities   181,959       188,564  
Deferred income tax liabilities   13,525       13,452  
Long-term debt   67,381       78,960  
Accrued self-insurance   32,046       32,225  
Capital lease obligations, net of current maturities   2,349       2,629  
Other liabilities   903       919  
Total liabilities   298,163       316,749  
Commitments and contingencies              
Stockholders' equity:              
Preferred stock—$0.01 par value per share; 4,000,000 authorized shares;              
none issued and outstanding at March 31, 2018 and December 31, 2017          
Common stock—$0.01 par value per share; 100,000,000 authorized shares;              
16,492,060 and 16,464,757 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively   164       163  
Additional paid-in capital   144,260       143,934  
Accumulated other comprehensive loss   (316 )     (299 )
Retained earnings   149,320       143,241  
Total stockholders' equity   293,428       287,039  
Total liabilities and stockholders' equity $ 591,591     $ 603,788  
               
               


MYR GROUP INC.
Unaudited Consolidated Statements of Operations and Comprehensive Income
Three Months Ended March 31, 2018 and 2017
 
  Three months ended
   March 31, 
(In thousands, except per share data) 2018   2017
               
Contract revenues  $ 345,611     $ 300,129  
Contract costs      309,858         274,389  
Gross profit      35,753         25,740  
Selling, general and administrative expenses      28,280         25,779  
Amortization of intangible assets      117         188  
Gain on sale of property and equipment      (1,051 )       (707 )
Income from operations      8,407         480  
Other income (expense)              
Interest income      —         1  
Interest expense      (721 )       (514 )
Other, net      249         874  
Income before provision for income taxes      7,935         841  
Income tax expense (benefit)     2,291         (359 )
Net income $   5,644     $   1,200  
Income per common share:              
—Basic  $   0.35     $   0.07  
—Diluted  $   0.34     $   0.07  
Weighted average number of common shares and potential common shares outstanding:              
—Basic      16,321         16,161  
—Diluted      16,520         16,452  
               
Net income $   5,644     $   1,200  
Other comprehensive income (loss):              
Foreign currency translation adjustment     (17 )       (49 )
Other comprehensive income (loss)     (17 )       (49 )
Total comprehensive income $   5,627     $   1,151  
               
               


MYR GROUP INC.
Unaudited Consolidated Statements of Cash Flows
Three Months Ended March 31, 2018 and 2017
 
  Three months ended
   March 31, 
(In thousands)   2018       2017  
       
 Cash flows from operating activities:               
Net income $   5,644     $   1,200  
Adjustments to reconcile net income to net cash flows provided by operating activities:              
Depreciation and amortization of property and equipment     9,275         9,558  
Amortization of intangible assets      117         188  
Stock-based compensation expense     420         867  
Deferred income taxes      48         (143 )
Gain on sale of property and equipment      (1,051 )       (707 )
Other non-cash items      702         (93 )
Changes in operating assets and liabilities              
Accounts receivable, net      26,041         12,417  
Costs and estimated earnings in excess of billings on              
uncompleted contracts      (15,131 )       (2,847 )
Receivable for insurance claims in excess of deductibles      (290 )       (47 )
Other assets      1,405         (289 )
Accounts payable      (3,765 )       (10,333 )
Billings in excess of costs and estimated earnings on              
uncompleted contracts      (10,191 )       7,134  
Accrued self insurance     (857 )       1,834  
Other liabilities      9,666         (5,679 )
Net cash flows provided by operating activities     22,033         13,060  
 Cash flows from investing activities:               
Proceeds from sale of property and equipment      1,074         937  
Purchases of property and equipment      (14,497 )       (10,002 )
Net cash flows used in investing activities     (13,423 )       (9,065 )
 Cash flows from financing activities:               
Net repayments under revolving lines of credit     (11,579 )       (19,491 )
Payment of principal obligations under capital leases     (272 )       (268 )
Proceeds from exercise of stock options     582         911  
Repurchase of common shares     (934 )       (2,208 )
Net cash flows used in financing activities     (12,203 )       (21,056 )
Effect of exchange rate changes on cash     (31 )       154  
Net decrease in cash and cash equivalents     (3,624 )       (16,907 )
 Cash and cash equivalents:               
Beginning of period      5,343         23,846  
End of period  $   1,719     $   6,939  
               
               


MYR GROUP INC.
Unaudited Consolidated Selected Data and Net Income Per Share 
Three and Twelve Months Ended March 31, 2018 and 2017
 
    Three months ended   Last twelve months ended  
     March 31,     March 31,   
 (in thousands, except share and per share data)    2018     2017     2018     2017   
                   
Summary Statement of Operations Data:                   
Contract revenues   $ 345,611     $ 300,129     $ 1,448,799     $ 1,188,982    
Gross profit   $ 35,753     $ 25,740     $ 135,017     $ 133,182    
Income from operations   $ 8,407     $ 480     $ 37,485     $ 35,927    
Income before provision for income taxes   $ 7,935     $ 841     $ 31,734     $ 35,950    
Income tax expense (benefit)   $ 2,291     $ (359 )   $ 6,136     $ 15,306    
Net income   $ 5,644     $ 1,200     $ 25,598     $ 20,644    
Tax rate     28.9 %     (42.7 )%     19.3 %     42.6 %  
                   
Per Share Data:                   
Income per common share:                   
- Basic   $ 0.35     $ 0.07     $ 1.58   (1) $ 1.27   (1)
- Diluted   $ 0.34     $ 0.07     $ 1.54   (1) $ 1.24   (1)
Weighted average number of common shares                   
and potential common shares outstanding : 
                 
- Basic     16,321       16,161       16,312   (2)   16,324   (2)
- Diluted     16,520       16,452       16,507   (2)   16,663   (2)
                   
     March 31,     December 31,     March 31,     March 31,   
 (in thousands)    2018   2017   2017   2016  
                   
Summary Balance Sheet Data:                   
Total assets   $ 591,591     $ 603,788     $ 548,708     $ 504,604    
Total stockholders' equity (book value)   $ 293,428     $ 287,039     $ 263,894     $ 305,018    
Goodwill and intangible assets   $ 57,708     $ 57,846     $ 58,166     $ 58,275    
Total funded debt   $ 67,381     $ 78,960     $ 39,580     $    
                   
            Last twelve months ended  
             March 31,   
             2018     2017   
Financial Performance Measures (3):                   
Reconciliation of Non-GAAP measures:                   
Net income           $ 25,598     $ 20,644    
Interest expense, net             2,807       1,628    
Tax impact of interest             (542 )     (694 )  
EBIT, net of taxes (4)            $ 27,863     $ 21,578    

See notes at the end of this earnings release.

 
 
MYR GROUP INC.
Unaudited Performance Measures and Reconciliation of Non-GAAP Measures
Three and Twelve Months Ended March 31, 2018 and 2017
 
    Three months ended   Last twelve months ended  
     March 31,     March 31,   
 (in thousands, except share, per share data, ratios and percentages)    2018     2017    2018     2017   
                   
 Financial Performance Measures (3):                   
EBITDA (5)    $ 18,048     $ 11,100     $ 72,763     $ 76,530    
EBITDA per Diluted Share (6)    $ 1.09     $ 0.67     $ 4.41     $ 4.59    
Free Cash Flow (7)    $ 7,536     $ 3,058     $ (35,563 )   $ 21,520    
Book Value per Period End Share (8)    $ 17.58     $ 15.74            
Tangible Book Value (9)    $ 235,720     $ 205,728            
Tangible Book Value per Period End Share (10)    $ 14.12     $ 12.27            
Funded Debt to Equity Ratio  (11)      0.23       0.15            
Asset Turnover (12)              2.64       2.36    
Return on Assets (13)              4.7 %     4.1 %  
Return on Equity  (14)              9.7 %     6.8 %  
Return on Invested Capital (17)              9.4 %     7.7 %  
                   
Reconciliation of Non-GAAP Measures:                   
Reconciliation of Net Income to EBITDA:                   
Net income   $ 5,644     $ 1,200     $ 25,598     $ 20,644    
Interest expense, net     721       513       2,807       1,628    
Provision for income taxes     2,291       (359 )     6,136       15,306    
Depreciation and amortization     9,392       9,746       38,222       38,952    
 EBITDA (5)    $ 18,048     $ 11,100     $ 72,763     $ 76,530    
                   
Reconciliation of Net Income per Diluted Share                   
to EBITDA per Diluted Share:                   
Net Income per share:   $ 0.34     $ 0.07     $ 1.54     $ 1.24    
Interest expense, net, per share     0.04       0.03       0.17       0.10    
Provision for income taxes per share     0.14       (0.02 )     0.37       0.92    
Depreciation and amortization per share     0.57       0.59       2.33       2.33    
 EBITDA per Diluted Share (6)    $ 1.09     $ 0.67     $ 4.41     $ 4.59    
                   
Calculation of Free Cash Flow:                   
Net cash flow from operating activities   $ 22,033     $ 13,060     $ (225 )   $ 53,124    
Less: cash used in purchasing property and equipment     (14,497 )     (10,002 )     (35,338 )     (31,604 )  
 Free Cash Flow (7)    $ 7,536     $ 3,058     $ (35,563 )   $ 21,520    
                   
Reconciliation of Book Value to Tangible Book Value:                   
Book value (total stockholders' equity)   $ 293,428     $ 263,894            
Goodwill and intangible assets     (57,708 )     (58,166 )          
Tangible Book Value (9)    $ 235,720     $ 205,728            
                   
Reconciliation of Book Value per Period End Share                   
to Tangible Book Value per Period End Share: 
                 
Book value per period end share   $ 17.58     $ 15.74            
Goodwill and intangible assets per period end share     (3.46 )     (3.47 )          
Tangible Book Value per Period End Share (10)    $ 14.12     $ 12.27            
                   
 Calculation of Period End Shares:                   
Shares Outstanding     16,492       16,473            
Plus: Common Equivalents     199       291            
 Period End Shares (15)      16,691       16,764            
                   
         March 31,     March 31,     March 31,   
        2018   2017   2016  
Reconciliation of Invested Capital to Shareholders Equity:                   
Book value (total stockholders' equity)       $ 293,428     $ 263,894     $ 305,018    
Plus: Total Funded Debt         67,381       39,580          
Less: Cash and cash equivalents         (1,719 )     (6,939 )     (26,039 )  
Invested Capital (16)        $ 359,090     $ 296,535     $ 278,979    
                   

 See notes at the end of this earnings release.

     
(1)   Last-twelve-months earnings per share is the sum of earnings per share reported in the last four quarters.
(2)   Last-twelve-months average basic and diluted shares were determined by adding the average shares reported for the last four quarters and dividing by four.  
(3)   These financial performance measures are provided as supplemental information to the financial statements. These measures are used by management to evaluate our past performance, our prospects for future performance and our ability to comply with certain material covenants as defined within our credit agreement, and to compare our results with those of our peers. In addition, we believe that certain of the measures, such as book value, tangible book value, free cash flow, asset turnover, return on equity and debt leverage are measures that are monitored by sureties, lenders, lessors, suppliers and certain investors. Our calculation of each measure is described in the following notes; our calculation may not be the same as the calculations made by other companies.
(4)   EBIT, net of taxes is defined as net income plus net interest, less the tax impact of net interest. The tax impact of net interest is computed by multiplying net interest by the effective tax rate. Management uses EBIT, net of taxes, to measure our results exclusive of the impact of financing costs.  
(5)   EBITDA is defined as earnings before interest, taxes, depreciation and amortization.  EBITDA is not recognized under GAAP and does not purport to be an alternative to net income as a measure of operating performance or to net cash flows provided by operating activities as a measure of liquidity. EBITDA is a component of the debt to EBITDA covenant, as defined in our credit agreement, which we must comply with to avoid potential immediate repayment of amounts borrowed or additional fees to seek relief from our lenders. In addition, management considers EBITDA a useful measure because it eliminates differences which are caused by different capital structures as well as different tax rates and depreciation schedules when comparing our measures to our peers' measures.
(6)   EBITDA per diluted share is calculated by dividing EBITDA by the weighted average number of diluted shares outstanding for the period. EBITDA per diluted share is not recognized under GAAP and does not purport to be an alternative to income per diluted share.  
(7)   Free cash flow, which is defined as cash flow provided by operating activities minus cash flow used in purchasing property and equipment, is not recognized under GAAP and does not purport to be an alternative to net income, cash flow from operations or the change in cash on the balance sheet. Management views free cash flow as a measure of operational performance, liquidity and financial health.  
(8)   Book value per period end share is calculated by dividing total stockholders' equity at the end of the period by the period end shares outstanding.  
(9)   Tangible book value is calculated by subtracting goodwill and intangible assets outstanding at the end of the period from stockholders' equity outstanding at the end of the period. Tangible book value is not recognized under GAAP and does not purport to be an alternative to book value or stockholders' equity.  
(10)   Tangible book value per period end share is calculated by dividing tangible book value at the end of the period by the period end number of shares outstanding. Tangible book value per period end share is not recognized under GAAP and does not purport to be an alternative to income per diluted share.  
(11)   The funded debt to equity ratio is calculated by dividing total funded debt at the end of the period by total stockholders' equity at the end of the period.  
(12)   Asset turnover is calculated by dividing the current period revenue by total assets at the beginning of the period.  
(13)   Return on assets is calculated by dividing net income for the period by total assets at the beginning of the period.  
(14)   Return on equity is calculated by dividing net income for the period by total stockholders' equity at the beginning of the period.  
(15)   Period end shares is calculated by adding average common stock equivalents for the quarter to the period end balance of common stock outstanding. Period end shares is not recognized under GAAP and does not purport to be an alternative to diluted shares. Management views period end shares as a better measure of shares outstanding as of the end of the period.  
(16)   Invested capital is calculated by adding net funded debt (total funded debt less cash and marketable securities) to total stockholders' equity.  
(17)   Return on invested capital is calculated by dividing EBIT, net of taxes, less any dividends, by invested capital at the beginning of the period. Return on invested capital is not recognized under GAAP, and is a key metric used by management to determine our executive compensation.  

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