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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from____________________to____________________
Commission File Number 1-8325
THE L. E. MYERS CO. GROUP
(Exact name of registrant as specified in its charter)
Delaware 36-3158643
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
2550 W. Golf Road, Suite 200 Rolling Meadows, Illinois 60008
(Address of principal executive offices)
(Zip Code)
(708) 290-1891
Registrant's telephone number, include area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and 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_____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes_____ No_____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of July 26, 1995: 2,379,656
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THE L.E. MYERS CO. GROUP
I N D E X
Page No.
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PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheet -
June 30, 1995 and December 31, 1994 2
Condensed Consolidated Statement of Operations -
Six Months Ended June 30, 1995 and 1994 3
Condensed Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1995 and 1994 4
Notes to Condensed Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II. Other Information
Item 1. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURE 10
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Part I, Item 1
Financial
Information
THE L.E. MYERS CO. GROUP
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
- ------------------------------------------------------------------------------------------------------------------
JUNE 30 DEC. 31
1995 1994
-------------- -----------
(UNAUDITED) *
- ------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 375 $ 6,115
Contract receivables including retainage 42,022 12,687
Costs and estimated earnings in excess of billings on uncompleted 9,719 1,408
contracts
Deferred income taxes 3,192 1,622
Other current assets 2,953 532
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Total current assets 58,261 22,364
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Property and equipment: 60,504 50,515
Less accumulated depreciation 37,500 35,863
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23,004 14,652
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Intangible assets 1,170 368
Other assets 2,997 2,260
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Total assets $ 85,432 $ 39,644
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LIABILITIES
Current Liabilities:
Current maturities of long-term debt $ 4,893 $ 507
Accounts payable 7,548 3,069
Billings in excess of costs and estimated earnings on uncompleted 6,130 783
contracts
Accrued insurance 9,126 4,415
Other current liabilities 14,353 4,995
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Total current liabilities 42,050 13,769
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Deferred income taxes 2,221 1,257
Other liabilities 403 678
Long-term debt:
Revolver and other debt 3,152 318
Term loan 6,250 0
Industrial revenue bond 1,070 0
Subordinated convertible debentures 5,679 0
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Total long-term debt 16,151 318
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SHAREHOLDERS' EQUITY
Common stock and additional paid-in capital 9,268 9,269
Retained earnings 17,452 16,472
Treasury stock (1,637) (1,643)
Shareholders' notes receivable (476) (476)
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Total shareholders' equity 24,607 23,622
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Total liabilities and shareholders' equity $ 85,432 $ 39,644
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*Condensed from audited financial statements
The "Notes to Condensed Consolidated Financial Statements" are an
integral part of this statement.
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THE L.E. MYERS CO. GROUP
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands except per share amounts)
(Unaudited)
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PERIODS ENDED JUNE 30 THREE MONTHS SIX MONTHS
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1995 1994 1995 1994
---- ---- ---- ----
Contract revenue $ 64,015 $ 22,243 $ 120,066 $ 43,791
Contract cost 56,677 18,927 106,075 38,019
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Gross profit 7,338 3,316 13,991 5,772
Selling, general and administrative expenses 5,224 2,034 10,937 4,357
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Income from operations 2,114 1,282 3,054 1,415
Other income (expense)
Interest income 13 39 35 84
Interest expense (430) (18) (895) (56)
Gain on sale of fixed assets 80 19 107 19
Miscellaneous (102) (105) (206) (203)
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Income before taxes 1,675 1,217 2,095 1,259
Income tax expense 670 475 838 491
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Net income $ 1,005 $ 742 $ 1,257 $ 768
=======================================================================================================================
Earnings per share
Primary $ .40 $ .30 $ .50 $ .31
========================= ============================
Fully diluted $ .35 $ .30 $ .46 $ .31
========================= ============================
Dividends per common share $ .0625 $ .055 $ .1175 $ .11
========================= ============================
Weighted average common shares and
Common share equivalents outstanding
Primary 2,529 2,490 2,526 2,494
========================= ============================
Fully diluted 2,979 2,490 2,976 2,494
========================= ============================
The "Notes to Condensed Consolidated Financial Statements" are an integral part
of this statement.
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THE L.E. MYERS CO. GROUP
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
w(Dollars in thousands)
(Unaudited)
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SIX MONTHS ENDED JUNE 30 1995 1994
---- ----
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CASH FLOWS FROM OPERATIONS
Net income $ 1,257 $ 768
Adjustments to reconcile net income to cash flows
from operations
Depreciation and amortization 2,856 1,393
Amortization of intangibles 158 130
Gain from disposition of assets (107) (19)
Changes in current assets and liabilities 627 (134)
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Cash flows from operations 4,791 2,138
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CASH FLOWS FROM INVESTMENTS
Expenditures for property and equipment (1,734) (1,315)
Proceeds from disposition of assets 200 58
Cash used in acquisition, net of cash acquired (12,995) 0
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Cash flows from investments (14,529) (1,257)
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CASH FLOWS FROM FINANCING
Repayments of long term debt (15,068) (795)
Proceeds from issuance of debt 19,500 0
Purchase of treasury stock 0 (168)
Decrease in deferred compensation (15) (22)
Decrease in other assets (142) (1)
Dividends paid (277) (263)
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Cash flows from financing 3,998 (1,249)
Decrease in cash and cash equivalents (5,740) (368)
Cash and cash equivalents at beginning of year 6,115 5,698
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Cash and cash equivalents at end of period $ 375 $ 5,330
==================================
The "Notes to Condensed Consolidated Financial Statements" are an integral part
of this statement.
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THE L.E. MYERS CO. GROUP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1 - BASIS OF PRESENTATION
The condensed consolidated balance sheet, statement of operations and
statement of cash flows include the accounts of the Company and its
subsidiaries. All material intercompany balances and transactions have been
eliminated.
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of results for the interim period.
The results of operations for the six month period ended June 30, 1995
are not necessarily indicative of the results to be expected for the full year.
2 - ACQUISITION OF HARLAN ELECTRIC CO.
Effective as of January 3, 1995, the Company acquired all the stock of
Harlan Electric Company ("Harlan"). Harlan and its wholly-owned subsidiaries,
Sturgeon Electric Company, Inc. and Power Piping Company, are engaged primarily
in the installation and maintenance of electrical equipment and lighting
systems for commercial, industrial and electrical utility customers and in the
erection and maintenance of high and low pressure piping systems for electrical
utilities and steel industry customers.
All the shares of Harlan were exchanged for $13,612,000 in cash and
$5,679,000 of 7% convertible subordinated notes. The principal of each note
will be due in three equal installments on January 3, 2000, 2001 and 2002, with
interest payable semiannually each year. The notes are convertible into
450,000 shares of Myers common stock at a price per share of $12.62. Myers
also refinanced $8,756,000 of Harlan debt. The transaction was financed
through cash on hand and borrowings under a new $25,000,000 revolving and term
credit facility with Harris Trust and Savings Bank and Comerica Bank. The
transaction has been accounted for using the purchase method of accounting and
the results of operations of Harlan have been included in the Company's
consolidated financial statements since the effective date.
The following unaudited pro forma summary presents the consolidated
results of continuing operations for the six month period ended June 30, 1994
as if the acquisition had occured January 1, 1994 and does not purport to be
indicative of what would have occurred had the acquisition actually been made
as of January 1, 1994 or of results which may occur in the future (in
thousands, except per share amounts).
1994
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Contract revenue $116,640
Income 2,839
Income per share
Primary 1.12
Fully diluted .99
Adjustments made in arriving at pro forma unaudited results of operations
include increased interest expense on acquisition debt, amortization of
goodwill and related tax adjustments.
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3 - CONTINGENCIES
The Company has been involved in two lawsuits as a result of errors in
the design of four transmission towers by the Company's former engineering
subsidiary for City Utilities Commission of Owensboro, Kentucky (OMU). The
engineering subsidiary has been sold but the Company retained the rights and
obligations related to these lawsuits as part of the sale agreement.
One lawsuit (the Kentucky lawsuit) alleged that the engineering
subsidiary negligently designed and engineered the towers, and that OMU
incurred damages as a result of the redesign and replacement of the four
towers. During 1993, OMU agreed to a settlement of the case pursuant to which
it accepted payment of $1.3 million from the Company.
The other lawsuit (the New York lawsuit) concerns the insurance coverage
of the engineering subsidiary related to the design errors. The Company
notified its primary and excess umbrella insurance carriers at the time of the
discovery of the design errors. The Company's excess umbrella carrier denied
insurance coverage for the damages above the primary carrier's policy limits
and filed an action against the Company seeking a declaratory judgement that
the umbrella insurance coverage did not apply to the loss on several theories.
The Company counterclaimed against the umbrella carrier and, in addition, in a
third party action, brought suit against three former insurance brokers which
had procured the insurance for the Company. The Company is seeking to recover
$550,000 of unreimbursed costs it incurred in the disassembly, redesign and
replacement of the towers, the amount of payments it made to OMU, the legal and
related expenses it incurred in the Kentucky lawsuit, legal and related
expenses it has and will incur in the New York lawsuit, and interest.
The approximately $550,000 of unreimbursed costs as well as the $1.3
million paid to OMU during 1993 is recorded on the Company's books as a
non-current asset. Management is of the opinion that the amounts so recorded
will be recovered in the New York lawsuit from its excess umbrella insurance
carrier and its brokers, individually or collectively.
The Company is also involved in various other legal matters which arise
in the ordinary course of business, none of which is expected to have a
material adverse effect.
4 - EARNINGS PER SHARE
In 1995, the computation of primary earnings per share is based on the
weighted average number of outstanding common shares and additional shares
assuming the exercise of stock options. The computation of fully diluted
earnings per share further assumes the conversion of the 7% convertible
subordinated notes due January 3, 2000, 2001 and 2002. In 1995 and 1994, both
primary and fully diluted earnings per common share were based on the weighted
average number of outstanding common shares.
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5 - SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(Dollars in thousands, except per share amounts)
1995
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MAR. 31 JUNE 30 SEPT. 30 DEC. 30 YEAR TO DATE
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Contract Revenue $ 56,051 $ 64,015 $ $ $ 120,066
Gross Profit 6,653 7,338 13,991
Net Income 252 1,005 1,257
Income Per Share:
Primary .10 .40 .50
Fully diluted .10 .35 .46
Dividends Paid Per Share .05-1/2 .06-1/4 11-3/4
Market Price:
High 12-7/8 13-3/4 13-3/4
Low 10-5/8 11-3/8 10-5/8
1994
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MAR. 31 JUNE 30 SEPT. 30 DEC. 31 YEAR TO DATE
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Contract Revenue $ 21,548 $ 22,243 $ 21,675 $ 21,376 $ 86,842
Gross Profit 2,456 3,316 3,072 3,453 12,297
Income from Continuing Operations 26 742 759 802 2,329
Net Income 26 742 759 652 2,179
Income Per Share:
Continuing Operations .01 .30 .30 .32 .93
Net Income .01 .30 .30 .26 .87
Dividends Paid Per Share .05-1/2 .05-1/2 .05-1/2 .05-1/2 .22
Market Price:
High 12 12-1/4 13-5/8 12-3/4 13-5/8
Low 10-3/8 10-3/8 9-3/4 10-3/4 9-3/4
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Part I
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1995
RESULTS OF OPERATIONS
Effective as of January 3, 1995, the Company acquired all the stock of
Harlan Electric Company. Harlan and its wholly-owned subsidiaries, Sturgeon
Electric Company, Inc. and Power Piping Company (hereinafter collectively
referred to as "Harlan"), are engaged primarily in the installation and
maintenance of electrical equipment and lighting systems for commercial,
industrial and electrical utility customers and in the erection and maintenance
of high and low pressure piping systems for electrical utilities and steel
industry customers. (See Note 2 to Consolidated Financial Statements).
The Company reported net income of $1,005,000 or $.40 per share and
$1,257,000 or $.50 per share for the three and six month periods ended June 30,
1995. This compares to $742,000 or $.30 per share and $768,000 or $.31 per
share for the same periods in 1994.
Revenues for the three and six month periods were $64,015,000 and
$120,066,000 in 1995 compared to $22,243,000 and $43,791,000 in 1994. Harlan's
contribution to 1995 revenues accounts for most of the growth compared to 1994.
Gross profits for the three and six month periods of 1995 were
$7,338,000 or 11.5% and $13,991,000 or 11.7% compared to $3,316,000 or 14.9%
and $5,772,000 or 13.2% for the same periods in 1994. Harlan's contribution to
1995 gross profits accounts for most of the growth in 1994. Margins were
reduced in 1995 due to increased revenues from certain contracts which were bid
with lower mark-ups due to competition.
Revenue and gross profit comparisons from quarter to quarter and
comparable quarters of different periods may be impacted by variables beyond
the control of the Company due to the nature of the Company's work as an
outside electrical contractor. Such variables include unusual or unseasonal
weather and delays in receipt of construction materials which are typically
procured by the Company's clients. The seasonal nature of outside electrical
construction typically results in lower revenues and lower margins in the first
quarter when compared to other quarters. As a general rule, the better
construction weather in the second, third and fourth quarters usually results
in higher revenues and margins from those quarters. Competitive bidding
pressures may cause these general trends to vary. Additionally, since the
company's revenues are derived principally from providing construction labor
services, insurance costs, particularly for workers compensation, are a
significant factor in the Company's contract cost structure. Fluctuations in
insurance reserves for claims under the retrospective rated insurance programs
can have 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 were $5,224,000 and
$10,937,000 for the three and six month periods of 1995 compared to $2,034,000
and $4,357,000 in 1994. This represents 8.2% and 9.1% of consolidated revenues
for the three and six month period of 1995 and 9.1% and 9.9% for the same
periods in 1994. Harlan accounts for most of the increase over 1994.
The Company's backlog at June 30, 1995 is $69,400,000 compared to
$28,200,000 at December 31, 1994 and $31,215,000 at June 30, 1994.
Substantially all of the current backlog will be completed within twelve months
and approximately 93% is expected to be completed by December 31, 1995. Harlan
accounts for a majority of the increase in the backlog from the prior year.
LIQUIDITY AND CAPITAL RESOURCES
On January 3, 1995, the Company borrowed $10,000,000 under a new term
loan agreement and $9,500,000 under a $15,000,000 bank revolving line of credit
to finance the Harlan acquisition and pay off Harlan's line of credit balance.
The Company also issued $5,679,000 of subordinated convertible debentures to
some of Harlan's former shareholders in the acquisition. The term loan is due
in quarterly payments of $625,000 over four years and the revolving line of
credit expires on December 31, 1998. The
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subordinated convertible debentures are to be paid in three equal installments
in years 2000, 2001 and 2002. The Company has outstanding letters of credit
with the bank totaling $12,373,000 which guarantee the Company's payment
obligation under its insurance programs. The Company anticipates that its line
of credit, cash balances and internally generated cash flows will be sufficient
to fund operations, capital expenditures and debt service requirements for the
next twelve months. The Company is also confident that its financial condition
will allow it to meet long-term capital requirements.
A quarterly dividend of $.0625 per share was paid on June 15, 1995.
The Company's cash decreased $5,740,000 for the six months. Cash
provided by operations was $4,791,000. Cash used in the acquisition of Harlan
was $12,995,000 and cash used for capital expenditures was $1,534,000. Cash
provided from financing was $3,998,000.
The Company's current ratio is 1.4:1 at June 30, 1995 compared to 1.6:1
at December 31, 1994.
Capital acquisitions for 1995 totalled $1,734,000. The Company
anticipates acquiring a total of approximately $3,900,000 of capital assets in
1995.
PART II
Item 1. Legal Proceedings
There were no material developments during the quarter related to legal
proceedings previously reported by the Company.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders was held on May 11, 1995 pursuant to
a notice of meeting and proxy statement sent to the Company's stockholders on
or about April 4, 1995. Mr. Charles M. Brennan III was elected as the Class
III director whose term expires at the 1998 annual meeting of stockholders.
Mr. William G. Brown and Mr. John M. Harlan continued as Class I directors.
Mr. Allan E. Bulley, Jr. and Mr. Bide L. Thomas continued as Class II
directors. The Class I and II directors' terms expire at the 1996 and 1997
annual meeting of stockholders, respectively.
The stockholders approved the Company's 1995 Stock Option Plan by a vote of
1,248,986 shares in favor and 224,570 shares against and 15,104 shares
abstaining. Reference to the description of the 1995 Stock Option Plan set
forth in the Company's proxy statement is hereby incorporated.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits filed herewith are listed in the Exhibit Index filed as a
part hereof and incorporated herein by reference.
b. No reports on Form 8-K were filed by the Company for the second
quarter of 1995.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The L. E. Myers Co. Group
Date: July 27, 1995 By:_________________________________________
Elliott C. Robbins, Sr. Vice President,
Treasurer, and Chief Financial Officer
(duly authorized representative of
registrant and principal financial
officer)
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THE L.E. MYERS CO. GROUP
QUARTERLY REPORT ON FORM 10Q
For the Three and Six Months Ended June 30, 1995 and 1994
Exhibit Index
Number Description Page (or Reference)
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10.1 1995 Stock Option Plan 12
10.2 Management Incentive Plan 16
11 Computation of Net Income Per Share 18
27 Financial Data Schedules 19
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