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MYR Group Inc. Announces First-Quarter 2017 Results

ROLLING MEADOWS, Ill., May 03, 2017 (GLOBE NEWSWIRE) -- MYR Group Inc. (“MYR”) (NASDAQ:MYRG), a leading specialty contractor serving the electrical infrastructure market in the United States and Canada, today announced its first-quarter 2017 financial results.

/EIN News/ -- Highlights

  • First quarter revenues of $300.1 million.
  • First quarter net income of $1.2 million, or $0.07 per diluted share.
  • Backlog remains strong at $660.9 million.

Management Comments
Rick Swartz, MYR’s President and CEO, said, "The first quarter represents a challenging start to 2017 for MYR. Revenues came in strong at $300.1 million; however, our gross profit and net income were down compared to the same quarter last year. In a number of geographic areas equipment utilization and productivity were negatively impacted by inclement weather and the timing and sequencing of small to medium size projects. While we are not satisfied with first quarter returns we expect to improve performance throughout the remainder of 2017 due to our healthy backlog and a steady bidding climate in both our market segments, and we believe our continued investment in expanding our footprint through organic expansion and strategic acquisitions will deliver strong results in the long term.”

First Quarter Results
MYR reported first quarter 2017 revenues of $300.1 million, an increase of $46.5 million, or 18.3 percent, compared to the first quarter of 2016. Specifically, the T&D segment reported revenues of $195.7 million, an increase of $12.7 million, or 7.0 percent, from the first quarter of 2016, primarily due to an increase in distribution revenues. The C&I segment reported first quarter 2017 revenues of $104.4 million, an increase of $33.7 million, or 47.7 percent, from the first quarter of 2016, due primarily to organic and acquisitive expansion into new markets and a general improvement of the C&I construction market.

Consolidated gross profit decreased to $25.7 million in the first quarter of 2017, compared to $27.3 million in the first quarter of 2016. The decrease in gross profit was primarily due to lower overall gross margin, partially offset by higher revenue. Gross margin decreased to 8.6 percent for the first quarter of 2017 from 10.8 percent for the first quarter of 2016. The decrease in gross margin was largely due to declines in efficiency due to inclement weather in many of our markets and a higher mix of smaller, shorter duration T&D work. The shift in the mix of work duration also caused a decline in our fleet utilization and increased mobilization and demobilization costs. These impacts were partially offset by settlements related to previously unrecognized revenue on a project claim and pending change orders. Changes in estimates of gross profit on certain projects resulted in a gross margin increase of 0.4 percent for the first quarter of 2017 and a decrease of 0.6 percent for the first quarter of 2016.

Selling, general and administrative expenses (“SG&A”) increased to $25.8 million in the first quarter of 2017 compared to $23.9 million in the first quarter of 2016. The year-over-year increase was primarily due to $2.3 million of costs associated with our expansion into new geographic markets and higher payroll costs to support operations, partially offset by lower bonus and profit sharing costs. Additionally, $1.0 million of costs associated with activist investor activities were incurred in the first quarter of 2016. As a percentage of revenues, SG&A decreased to 8.6 percent for the first quarter of 2017 from 9.4 percent for the first quarter of 2016.

For the first quarter of 2017, net income was $1.2 million, or $0.07 per diluted share, compared to $2.0 million, or $0.10 per diluted share, for the same period of 2016. First quarter 2017 EBITDA, a non-GAAP financial measure, was $11.1 million, or 3.7 percent of revenues, compared to $13.3 million, or 5.2 percent of revenues, in the first quarter of 2016.

Income Taxes
On January 1, 2017 MYR adopted ASU No. 2016-09, Compensation—Stock Compensation (Topic 718). As a result, MYR recorded $0.8 million of excess tax benefit pertaining to the exercise of stock options and vesting of restricted stock and performance awards. This tax benefit would have been recorded to additional paid-in capital under the previous guidance. 

Backlog
As of March 31, 2017, MYR's backlog was $660.9 million, consisting of $357.0 million in the T&D segment and $303.9 million in the C&I segment. Total backlog of $660.9 million was $27.9 million lower than the $688.8 million reported as of December 31, 2016. T&D backlog decreased $29.7 million, or 7.7 percent, from December 31, 2016, while C&I backlog increased $1.8 million, or 0.6 percent, over the same period. Total backlog at March 31, 2017 increased $226.1 million, or 52.0 percent, from the $434.8 million reported at March 31, 2016.

Balance Sheet
As of March 31, 2017, MYR had $186.7 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 2017 results on Thursday, May 4, 2017, 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 Wednesday, May 10, 2017, at 11:59 p.m. Eastern time, by dialing (855) 859-2056 or (404) 537-3406, and entering conference ID 5308077. 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 Wednesday, May 10, 2017, at 11:59 P.M. Eastern time.

About MYR
MYR is a leading specialty contractor serving the electrical infrastructure market throughout the United States and Canada, and has the experience and expertise to complete electrical installations of any type and size. MYR’s comprehensive services on electric transmission and distribution networks and substation facilities include design, engineering, procurement, construction, upgrade, maintenance and repair services. MYR’s 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. MYR also provides commercial and industrial electrical contracting services 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,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “likely,” “unlikely,” “possible,” “potential,” “should” 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, 2016, 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.

Financial tables follow…


MYR GROUP INC.
Consolidated Balance Sheets
As of March 31, 2017 and December 31, 2016
       
  March 31,   December 31,
(In thousands, except share and per share data)   2017     2016 
  (unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $   6,939     $   23,846  
Accounts receivable, net of allowances of $442 and $432, respectively     222,549         234,642  
Costs and estimated earnings in excess of billings on uncompleted contracts      72,903         69,950  
Receivable for insurance claims in excess of deductibles      18,524         18,477  
Refundable income taxes      2,518         2,474  
Other current assets      7,275         8,202  
Total current assets      330,708         357,591  
Property and equipment, net of accumulated depreciation of $215,968 and $209,466, respectively     156,458         154,891  
Goodwill      46,781         46,781  
Intangible assets, net of accumulated amortization of $4,872 and $4,684, respectively     11,385         11,566  
Other assets      3,376         2,666  
Total assets  $   548,708     $   573,495  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Current portion of capital lease obligations $   1,093     $   1,085  
Accounts payable      91,048         99,942  
Billings in excess of costs and estimated earnings on uncompleted contracts      49,448         42,321  
Accrued self insurance      44,419         42,584  
Other current liabilities      36,722         42,382  
Total current liabilities      222,730         228,314  
Deferred income tax liabilities      18,423         18,565  
Long-term debt     39,580         59,070  
Capital lease obligations, net of current maturities     3,556         3,833  
Other liabilities      525         539  
Total liabilities      284,814         310,321  
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, 2017 and December 31, 2016     —         —  
Common stock—$0.01 par value per share; 100,000,000 authorized shares;      
16,473,065 and 16,333,139 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively     163         162  
Additional paid-in capital      140,386         140,100  
Accumulated other comprehensive loss     (482 )       (433 )
Retained earnings     123,827         123,345  
Total stockholders’ equity      263,894         263,174  
Total liabilities and stockholders’ equity  $   548,708     $   573,495  
 


MYR GROUP INC.
Unaudited Consolidated Statements of Operations and Comprehensive Income
Three Months Ended March 31, 2017 and 2016
         
    Three months ended 
     March 31, 
(In thousands, except per share data)    2017     2016 
     
Contract revenues    $   300,129     $   253,634  
Contract costs        274,389         226,353  
Gross profit        25,740         27,281  
Selling, general and administrative expenses        25,779         23,859  
Amortization of intangible assets        188         211  
Gain on sale of property and equipment        (707 )       (96 )
Income from operations        480         3,307  
Other income (expense)    
Interest income        1         4  
Interest expense        (514 )       (183 )
Other, net        874         108  
Income before provision for income taxes        841         3,236  
Income tax expense (benefit)       (359 )       1,249  
Net income   $   1,200     $   1,987  
Income per common share:  
—Basic    $   0.07     $   0.10  
—Diluted    $   0.07     $   0.10  
Weighted average number of common shares and
potential common shares outstanding:
               
—Basic        16,161         19,321  
—Diluted        16,452         19,634  
         
Net income   $   1,200     $   1,987  
Other comprehensive loss:    
Foreign currency translation adjustment       (49 )       (81 )
Other comprehensive loss       (49 )       (81 )
Total comprehensive income   $   1,151     $   1,906  

 

MYR GROUP INC.
Unaudited Consolidated Statements of Cash Flows
Three Months Ended March 31, 2017 and 2016
       
  Three months ended 
   March 31, 
(In thousands)  2017     2016 
       
Cash flows from operating activities:   
Net income $   1,200     $   1,987  
Adjustments to reconcile net income to net cash flows provided by operating activities —              
Depreciation and amortization of property and equipment     9,558         9,705  
Amortization of intangible assets      188         211  
Stock-based compensation expense     867         730  
Deferred income taxes      (143 )       (75 )
Gain on sale of property and equipment      (707 )       (96 )
Other non-cash items      (93 )       (61 )
Changes in operating assets and liabilities      
Accounts receivable, net      12,417         14,420  
Costs and estimated earnings in excess of billings on    
uncompleted contracts      (2,847 )       (20,071 )
Receivable for insurance claims in excess of deductibles      (47 )       2,733  
Other assets      (289 )       2,046  
Accounts payable      (10,333 )       8,004  
Billings in excess of costs and estimated earnings on    
uncompleted contracts      7,134         4,026  
Accrued self insurance      1,834         (3,378 )
Other liabilities      (5,679 )       (5,755 )
Net cash flows provided by operating activities     13,060         14,426  
Cash flows from investing activities:       
Proceeds from sale of property and equipment      937         1,032  
Purchases of property and equipment      (10,002 )       (3,769 )
Net cash flows used in investing activities     (9,065 )       (2,737 )
Cash flows from financing activities:       
Net repayments under revolving lines of credit     (19,491 )       —  
Payment of principal obligations under capital leases     (268 )       —  
Proceeds from exercise of stock options     911         104  
Excess tax benefit from stock-based awards     —         135  
Repurchase of common shares     (2,208 )       (25,686 )
Net cash flows used in financing activities     (21,056 )       (25,447 )
Effect of exchange rate changes on cash     154         —  
Net decrease in cash and cash equivalents     (16,907 )       (13,758 )
Cash and cash equivalents:       
Beginning of period      23,846         39,797  
End of period  $   6,939     $   26,039  

 

MYR GROUP INC.
Unaudited Consolidated Selected Data and Net Income Per Share
Three and Twelve Months Ended March 31, 2017 and 2016
             
        Three months ended   Last twelve months ended
        March 31,   March 31,
(in thousands, except shares and per share data)       2017     2016     2017   2016
                     
Summary Statement of Operations Data:                    
Contract revenues       $ 300,129     $ 253,634     $ 1,188,982     $ 1,071,167    
Gross profit       $ 25,740     $ 27,281     $ 133,182     $ 120,248    
Income from operations       $ 480     $ 3,307     $ 35,927     $ 36,551    
Income before provision for income taxes       $ 841     $ 3,236     $ 35,950     $ 36,168    
Income tax expense (benefit)       $ (359 )   $ 1,249     $ 15,306     $ 14,051    
Net income       $ 1,200     $ 1,987     $ 20,644     $ 22,117    
Tax rate         (42.7 %)     38.6 %     42.6 %     38.8 %  
                     
Per Share Data:                    
Income per common share:                
- Basic       $ 0.07     $ 0.10     $ 1.27   (1 ) $ 1.08   (1)
- Diluted       $ 0.07     $ 0.10     $ 1.24   (1 ) $ 1.06   (1)
Weighted average number of common shares                
and potential common shares outstanding :                
- Basic         16,161       19,321       16,324   (2 )   20,268   (2)
- Diluted         16,452       19,634       16,663   (2 )   20,662   (2)
                 
        March 31,   December 31,
  March 31,   March 31,
 
(in thousands)       2017   2016   2016   2015
 
                                   
Summary Balance Sheet Data:                    
Total assets       $ 548,708     $ 573,495     $ 504,604     $ 528,222    
Total stockholders' equity (book value)       $ 263,894     $ 263,174     $ 305,018     $ 329,251    
Goodwill and intangible assets       $ 58,166     $ 58,347     $ 58,275     $ 56,381    
Total funded debt       $ 39,580     $ 59,070     $     $    
                                         
                Last twelve months ended
                March 31,
 
                2017   2016
 
Financial Performance Measures (3):                                
Reconciliation of Non-GAAP measures:                
Net income               $ 20,644     $ 22,117    
Interest expense, net                 1,628       723    
Tax impact of interest                 (694 )     (281 )  
EBIT, net of taxes (4)               $ 21,578     $ 22,559    


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, 2017 and 2016
               
          Three months ended   Last twelve months ended
          March 31,   March 31,
(in thousands, except shares, per share data, ratios and percentages)         2017   2016     2017   2016
                                       
Financial Performance Measures (3):                                      
EBITDA (5)       $ 11,100     $ 13,331     $ 76,530     $ 75,872  
EBITDA per Diluted Share (6)       $ 0.67     $ 0.68     $ 4.59     $ 3.67  
Free Cash Flow (7)       $ 3,058     $ 10,657     $ 21,520     $ 22,050  
Book Value per Period End Share (8)       $ 15.74     $ 15.89                  
Tangible Book Value (9)       $ 205,728     $ 246,743                  
Tangible Book Value per Period End Share (10)       $ 12.27     $ 12.86                  
Funded Debt to Equity Ratio  (11)         0.15       0.00                  
Asset Turnover (12)                         2.36       2.03  
Return on Assets (13)                         4.1 %     4.2 %
Return on Equity  (14)                         6.8 %     6.7 %
Return on Invested Capital (17)                         7.7 %     8.4 %
 
Reconciliation of Non-GAAP Measures:                                      
Reconciliation of Net Income to EBITDA:                                    
Net income       $ 1,200     $ 1,987     $ 20,644     $ 22,117  
Interest expense, net         513       179       1,628       723  
Provision for income taxes         (359 )     1,249       15,306       14,051  
Depreciation and amortization         9,746       9,916       38,952       38,981  
EBITDA (5)       $ 11,100     $ 13,331     $ 76,530     $ 75,872  
                                       
Reconciliation of Net Income per Diluted Share                                    
to EBITDA per Diluted Share:                                    
Net Income per share:       $ 0.07     $ 0.10     $ 1.24     $ 1.06  
Interest expense, net, per share         0.03       0.01       0.10       0.04  
Provision for income taxes per share         (0.02 )     0.06       0.92       0.68  
Depreciation and amortization per share         0.59       0.51       2.33       1.89  
EBITDA per Diluted Share (6)       $ 0.67     $ 0.68     $ 4.59     $ 3.67  
                                       
Calculation of Free Cash Flow:                                    
Net cash flow from operating activities       $ 13,060     $ 14,426     $ 53,124     $ 56,056  
Less: cash used in purchasing property and equipment   (10,002 )     (3,769 )     (31,604 )     (34,006 )
Free Cash Flow (7)       $ 3,058     $ 10,657     $ 21,520     $ 22,050  
                                       
Reconciliation of Book Value to Tangible Book Value:                                    
Book value (total stockholders' equity)       $ 263,894     $ 305,018                  
Goodwill and intangible assets         (58,166 )     (58,275 )                
Tangible Book Value (9)       $ 205,728     $ 246,743                  
                                       
Reconciliation of Book Value per Period End Share                                    
to Tangible Book Value per Period End Share:                              
Book value per period end share:       $ 15.74     $ 15.89                  
Goodwill and intangible assets per period end share   (3.47 )     (3.03 )                
Tangible Book Value per Period End Share (10)       $ 12.27     $ 12.86                  
                                       
Calculation of Period End Shares:                                    
Shares Outstanding     16,473       18,878                  
Plus: Common Equivalents     291       313                  
Period End Shares (15)     16,764       19,191                  
                                       
                  March 31,   March 31,   March 31,
                  2017   2016   2015
Reconciliation of Invested Capital to Shareholders Equity:                                    
Book value (total stockholders' equity)               $ 263,894     $ 305,018     $ 329,251  
Plus: Total Funded Debt                 39,580              
Less: Cash and cash equivalents                 (6,939 )     (26,039 )     (61,830 )
Invested Capital (16)               $ 296,535     $ 278,979     $ 267,421  


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 and prospects for future performance, to evaluating 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 report to our bank on a quarterly basis. 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 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 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.

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

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