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.
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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