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    MYRG   US55405W1045

MYR GROUP INC.

(MYRG)
  Report
Delayed Quote. Delayed Nasdaq - 11/26 01:00:00 pm
116.36 USD   -3.93%
11/17MYR Group Inc. to Attend Credit Suisse 9th Annual Industrials Conference
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11/16INSIDER SELL : Myr Group
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11/15MYR GROUP INC. : The trend should regain control
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MYR GROUP INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

10/27/2021 | 04:15pm EST
The following discussion should be read in conjunction with the accompanying
unaudited consolidated financial statements and with our Annual Report on Form
10-K for the year ended December 31, 2020 (the "2020 Annual Report"). In
addition to historical information, this discussion contains forward-looking
statements that involve risks, uncertainties and assumptions that could cause
actual results to differ materially from management's expectations. Factors that
could cause such differences are discussed herein under the captions "Cautionary
Statement Concerning Forward-Looking Statements and Information" and "Risk
Factors," as well as in the 2020 Annual Report. We assume no obligation to
update any of these forward-looking statements.
Overview and Outlook
We are a holding company of specialty electrical construction service providers
that was established through the merger of long-standing specialty contractors.
Through our subsidiaries, we serve the electric utility infrastructure,
commercial and industrial construction markets. We manage and report our
operations through two electrical contracting service segments: Transmission and
Distribution ("T&D") and Commercial and Industrial ("C&I").
We have operated in the transmission and distribution industry since 1891. We
are one of the largest U.S. contractors servicing the T&D sector of the electric
utility industry and provide T&D services throughout the United States and
western Canada. Our T&D customers include many of the leading companies in the
electric utility industry. We have also provided electrical contracting services
for commercial and industrial construction since 1912. Our C&I segment provides
services in the United States and in western Canada. Our C&I customers include
facility owners and general contractors.
We believe that we have a number of competitive advantages in both of our
segments, including our skilled workforce, extensive centralized fleet, proven
safety performance and reputation for timely completion of quality work that
allows us to compete favorably in our markets. In addition, we believe that we
are better capitalized than some of our competitors, which provides us with
valuable flexibility to take on additional and more complex projects.
We believe proposed legislative actions aimed at supporting infrastructure
improvements in the United States may positively impact long-term demand,
particularly in connection with electric power infrastructure, transportation
and renewable energy spending. We believe the proposed legislative actions are
likely to provide greater long-term opportunity in both of our reporting
segments. However both of our segments and supporting operations may be subject
to delays and pricing volatility due to the continued market disruption from the
COVID-19 pandemic and regulatory slowdowns. These delays and pricing volatility
could result in decelerations in project opportunities and awards.
We had consolidated revenues for the nine months ended September 30, 2021 of
$1.85 billion, of which 51.2% was attributable to our T&D customers and 48.8%
was attributable to our C&I customers. Our consolidated revenues for the nine
months ended September 30, 2020 were $1.64 billion. For the nine months ended
September 30, 2021, our net income and EBITDA(1) were $64.3 million and $122.8
million, respectively, compared to $40.6 million and $95.2 million,
respectively, for the nine months ended September 30, 2020.
We believe there is an ongoing need for utilities to sustain investment in their
transmission systems to improve reliability, reduce congestion and connect to
new sources of renewable generation. Consequently, we anticipate that we will
continue to see significant bidding activity on large transmission projects
going forward. The timing of multi-year transmission project awards and
substantial construction activity is difficult to predict due to regulatory
requirements and the permitting needed to commence construction. Significant
construction on any large, multi-year projects awarded in the remainder of 2021
will not likely begin until 2022. Bidding and construction activity for small to
medium-size transmission projects and upgrades remain active, and we expect this
trend to continue, primarily due to reliability and economic drivers.
As a result of reduced spending by United States utilities on their distribution
systems for several years, we believe there is a need for sustained investment
by utilities in their distribution systems to properly maintain or meet
reliability requirements. We continue to see increased bidding activity in some
of our electric distribution markets, as economic conditions improved in those
areas. We believe the increased hurricane activity and destruction caused by
wildfires will cause a push to strengthen utility distribution systems against
catastrophic damage. Several industry and market trends are also prompting
customers in the electric utility industry to seek outsourcing partners rather
than performing projects internally. These trends include an aging electric
utility workforce, increasing costs and staffing constraints. We believe
electric utility employee retirements could increase with further economic
recovery, which may result in an increase in outsourcing opportunities.
(1) EBITDA is a non-GAAP measure. Refer to "Non-GAAP Measure-EBITDA" for a
discussion of this measure.
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We expect C&I bidding opportunities to continue to be impacted by various recent
market disruptions, and as a result the ultimate recovery of the C&I market will
be heavily dependent on the timing and pace of the United States and Canada
economic recoveries. We believe that the primary markets we serve may be
somewhat less vulnerable to economic slowing, such as health care,
transportation, data centers, warehousing, renewable energy and water projects.
We are hopeful that the service industry and small project market could quickly
rebound as pent-up demand will need to be addressed.
In addition, the United States has experienced a decade of economic expansion
which has challenged the capacity of public water and transportation
infrastructure forcing states and municipalities to seek creative means to fund
needed expansion. We believe the need for expanding public infrastructure will
offer opportunity in our C&I segment for several years. We expect the long-term
growth in our C&I segment to generally track the economic growth of the regions
we serve.
We strive to maintain our status as a preferred provider to our T&D and C&I
customers. In an effort to support our growth strategy and maximize stockholder
returns, we seek to efficiently manage our capital. We continue to implement
strategies that further expand our capabilities and allow opportunities to
provide prudent capital returns. We ended the third quarter of 2021 with $362.7
million available under our credit facility. We continue to manage our
increasing costs for supporting our operations, including increasing insurance,
equipment, labor and material costs. We believe that our financial position,
positive cash flows and other operational strengths will enable us to manage the
challenges and uncertainties in the markets we serve and give us the flexibility
to successfully execute our strategies. We continue to invest in developing key
management and craft personnel in both our T&D and C&I markets and in procuring
the specific specialty equipment and tooling needed to win and execute projects
of all sizes and complexity.
Backlog
We refer to our estimated revenue on uncompleted contracts, including the amount
of revenue on contracts for which work has not begun, less the revenue we have
recognized under such contracts, as "backlog." A customer's intention to award
us work under a fixed-price contract is not included in backlog unless there is
an actual written award to perform a specific scope of work at specific terms
and pricing. For many of our unit-price, time-and-equipment, time-and-materials
and cost plus contracts, we only include projected revenue for a three-month
period in the calculation of backlog, although these types of contracts are
generally awarded as part of master service agreements that typically have a
one-year to three-year duration from execution. Backlog may not accurately
represent the revenues that we expect to realize during any particular period.
Several factors, such as the timing of contract awards, the type and duration of
contracts, and the mix of subcontractor and material costs in our projects, can
impact our backlog at any point in time. Some of our revenue does not appear in
our periodic backlog reporting because the award of the project, as well as the
execution of the work, may all take place within the period. Our backlog
includes projects that have a written award, a letter of intent, a notice to
proceed or an agreed upon work order to perform work on mutually accepted terms
and conditions. Backlog should not be relied upon as a stand-alone indicator of
future events.
The difference between our backlog and remaining performance obligations is due
to the exclusion of a portion of our master service agreements under certain
contract types from our remaining performance obligations as these contracts can
be canceled for convenience at any time by us or the customer without
considerable cost incurred by the customer. Our estimated backlog also includes
our proportionate share of unconsolidated joint venture contracts. Additional
information related to our remaining performance obligations is provided in Note
6-Revenue Recognition in the accompanying notes to our Consolidated Financial
Statements.
Our backlog was $1.63 billion at September 30, 2021, compared to $1.65 billion
at December 31, 2020 and $1.72 billion at September 30, 2020. Our backlog at
September 30, 2021 increased 4.3% from June 30, 2021. Backlog in the T&D segment
increased $17.1 million and C&I backlog increased $49.7 million compared to
June 30, 2021. Our backlog as of September 30, 2021 included our proportionate
share of joint venture backlog totaling $10.2 million, compared to $15.2 million
at June 30, 2021.
                                       22
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  Table of Contents
The following table summarizes that amount of our backlog that we believe to be
firm as of the dates shown and the amount of our current backlog that we
reasonably estimate will not be recognized within the next twelve months:
                                                               Backlog at September 30, 2021
                                                                                  Amount estimated to
                                                                                          not
                                                                                 be recognized within        Total backlog at
                (in thousands)                               Total                     12 months             December 31, 2020

                      T&D                             $         652,218          $           89,531          $      753,932
                      C&I                                       981,261                     207,990                 895,524
                     Total                            $       1,633,479          $          297,521          $    1,649,456



Project Bonding Requirements and Parent Guarantees
A substantial portion of our business requires performance and payment bonds or
other means of financial assurance to secure contractual performance. These
bonds are typically issued at the face value of the contract awarded. If we fail
to perform or pay our subcontractors or vendors, the customer may demand that
the surety provide services or make payments under the bond. In such a case, we
would likely be required to reimburse the surety for any expenses or outlays it
incurs. To date, we have not been required to make any reimbursements to our
sureties for claims against our surety bonds. As of September 30, 2021, we had
approximately $1.28 billion in original face amount of surety bonds outstanding.
Our estimated remaining cost to complete these bonded projects was approximately
$531.5 million as of September 30, 2021.
From time to time, we guarantee the obligations of our wholly owned
subsidiaries, including obligations under certain contracts with customers,
certain lease agreements, and, in some states, obligations in connection with
obtaining contractors' licenses. Additionally, from time to time, we are
required to post letters of credit to guarantee the obligations of our wholly
owned subsidiaries, which reduces the borrowing availability under our credit
facility.
Consolidated Results of Operations
The following table sets forth selected consolidated statements of operations
data and such data as a percentage of revenues for the periods indicated:

© Edgar Online, source Glimpses

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