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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-K



FORM 10-K

x☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

2020
o☐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: 1-08325



_________________________________________________________________

MYR GROUP INC.

(Exact name of registrant as specified in its charter)



_________________________________________________________________

Delaware36-3158643
(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

1701 Golf Road, Suite 3-1012
Rolling Meadows, IL 60008

12150 East 112th Avenue
Henderson CO 80640
(Address of principal executive offices, including zip code)

(847) 290-1891

(303) 286-8000
(Registrant’s telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:

Title of Each Classeach classTrading Symbol(s)Name of Exchangeeach exchange on Which Registeredwhich registered
Common Stock, $0.01 par valueMYRGThe NASDAQNasdaq Stock Market LLC
(Nasdaq Global Market)

Securities registered pursuant to Section 12(g) of the Act:

None



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.YesoAct.  Yes ☐ Nox

☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.YesoAct.  Yes ☐ Nox

☒

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 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.Yesxdays.  Yes ☒ Noo

☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yesx.  Yes ☒ Noo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filero☐
Accelerated filerx☒
Non-accelerated filero (Do not check if a smaller reporting company)☐
Smaller reporting companyo☐
Emerging growth companyo☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yeso.  Yes ☐Nox

☒

As of June 30, 20172020 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the outstanding common equity held by non-affiliates of the registrant was approximately $431.4$380.7 million, based upon the closing sale price of the common stock on such date as reported by the NASDAQNasdaq Global Market (for purposes of calculating this amount, only directors, officers and beneficial owners of 10% or more of the outstanding capital stock of the registrant have been deemed affiliates).

As of March 1, 2018February 26, 2021 there were 16,467,47416,788,372 shares of the registrant’s $0.01 par value common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission (the “SEC”) in connection with its 20182021 annual meeting of stockholders expected to be held on April 26, 2018,22, 2021, are incorporated into Part III hereof.


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MYR GROUP INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2017

2020

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Page

Item 1.

Business

13

Item 1A.

1011

Item 1B.

2522

Item 2.

Properties

2523

Item 3.

2523

Item 4.

2523

Item 5.

2624

Item 6.

2826

Item 7.

3129

Item 7A.

4843

Item 8.

4944

Item 9.

8680

Item 9A.

8680

Item 9B.

8781

Item 10.

8882

Item 11.

8882

Item 12.

8882

Item 13.

8983

Item 14.

8983

Item 15.

Exhibits

84
Item 16.
9086

Throughout this report, references to “MYR Group,” the “Company,” “we,” “us,” and “our” refer to MYR Group Inc. and its consolidated subsidiaries, except as otherwise indicated or as the context otherwise requires.

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FORWARD-LOOKING STATEMENTS

Statements in this Annual Report on Form 10-K contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), which represent our management’s beliefs and assumptions concerning future events. When used in this document and in documents incorporated by reference, forward-looking statements include, without limitation, statements regarding financial forecasts or projections, and our expectations, beliefs, intentions or future strategies that are signified by the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “likely,” “may,” “objective,” “outlook,” “plan,” “project,” “likely,” “unlikely,” “possible,” “potential,” “should”“should,” “unlikely,” or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this Annual Report on Form 10-K speak only as of the date of this Annual Report on Form 10-K. 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. In addition, many of these risks, contingencies and uncertainties are currently amplified by, and may continue to be amplified by, the COVID-19 pandemic. These and other important factors, including those discussed in Item 1A — “Risk Factors” of this report, and in any risk factors or cautionary statements contained in our other filings with the SEC, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements.

WEBSITE ACCESS TO COMPANY’S REPORTS

Our website address iswww.myrgroup.com. Our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act will be available free of charge through our website as soon as reasonably possible after they are electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”). The information on our website is not, and shall not be deemed to be, a part of this Annual Report on Form 10-K or incorporated into any other filings we make with the SEC.

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PART I
Item 1.Business

Item 1.    Business
General

We are a holding company of specialty electrical construction service providers that was established in 1995 through the merger of long-standing specialty contractors. Through our subsidiaries, we serve the electric utility infrastructure, commercial and industrial construction markets. Our operations are currently conducted through wholly owned subsidiaries, including: The L. E. Myers Co.; Harlan Electric Company; Great Southwestern Construction, Inc.; Sturgeon Electric Company, Inc.; MYR TransmissionEnergy Services, Inc.; E.S. Boulos Company; Western Pacific Enterprises Ltd.; High Country Line Construction, Inc.; MYR Transmission Services Canada, Ltd.; Northern Transmission Services, Ltd.; Sturgeon Electric California, LLC; and GSW Integrated Services, LLC.LLC; Huen Electric, Inc. and CSI Electrical Contractors, Inc. We primarily provide electrical construction services, and limited gas construction services through a network of local offices located throughout the United States and western Canada. We provide a broad range of services, including design, engineering, procurement, construction, upgrade, maintenance and repair services, with a particular focus on construction, maintenance and repair.

Our principal executive offices are located at 1701 Golf Road, Suite 3-1012, Rolling Meadows, Illinois 60008.12150 East 112th Avenue, Henderson, Colorado 80640. The telephone number of our principal executive offices is (847) 290-1891.

(303) 286-8000.

Reportable Segments

Through our subsidiaries, we are a leading specialty contractor serving the electric utility infrastructure, commercial and industrial construction markets in the United States and western Canada. We manage and report our operations through two electrical contracting service segments: Transmission and Distribution (“T&D”) and Commercial and Industrial (“C&I”). We generally focus on improving our profitability by selecting projects we believe will provide attractive margins, actively monitoring the costs of completing our projects, holding customers accountable for costs related to changes to contract specifications and rewarding our employees for effectively managing costs.

Transmission and Distribution segment   We have operated in the T&Dtransmission and distribution industry since 1891. We are one of the largest U.S. contractors servicing the T&D sector of the electric utility and renewable energy industries.industry. We provide a broad range of services on electric transmission and distribution networks and substation facilities, which include design, engineering, procurement, construction, upgrade, maintenance and repair services, with a particular focus on construction, maintenance and repair, to customers in the electric utility and the renewable energy industriesindustry throughout the United States and western Canada. Our T&D services include the construction and maintenance of high voltage transmission lines, substations, and lower voltage underground and overhead distribution systems.systems, renewable power facilities and limited gas construction services. We also provide emergency restoration services in response to hurricane, ice or other storm-related damage.

In our T&D segment, we generally serve the electric utility industry as a prime contractor, through traditional design-bid-build or engineering, procurement and construction (“EPC”) forms of project delivery. We have long-standing relationships with many of our T&D customers who rely on us to construct and maintain reliable electric and other utility infrastructure. We also provide many services to our customers under multi-year master service agreements (“MSAs”) and other variable-term service agreements.

Commercial and Industrial segment   We have provided electrical contracting services for C&Icommercial and industrial construction since 1912. Our C&I segment provides services such as the design, installation, maintenance and repair of commercial and industrial wiring, the installation of traffic networks and the installation of bridge, roadway and tunnel lighting. Our C&I operations are primarilylighting in the western and northeastern United States and in western Canada where we have sufficient scale to deploy the level of resources necessary to achieve significant market share.Canada. We concentrate our efforts on projects where our technical and project management expertise are critical to successful and timely execution. Typical C&I contracts cover electrical contracting services for airports, hospitals, data centers, hotels, stadiums, convention centers, renewable energy projects, manufacturing plants, processing facilities, waste-waterwater treatment facilities, mining facilities and transportation control and management systems.


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In our C&I segment, we generally provide our electric construction and maintenance services as a subcontractor to general contractors, but also contract directly with facility owners. We have a diverse customer base with many long-standing relationships.

Additional financial information related to our business segments is provided under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 1516 — Segment Information to our Financial Statements.

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Customers

Our T&D customers include many of the leading companies in the electric utility industry. Our T&DThese customers include investor-owned utilities, cooperatives, private developers, government-funded utilities, independent power producers, independent transmission companies, industrial facility owners and other contractors. Our C&I customer base includes general contractors, commercial and industrial facility owners, local governmentsgovernmental agencies and developers.
We have long-standing relationships with many of our customers, and we cultivate these relationships at all levels of our organization from senior management to project supervisors. We seek to build upon our customer relationships to secure additional projects from our current customer base. Many of our customer relationships originated decades ago and are maintained through a partnering approach, which includes project evaluation and consulting, quality performance, performance measurement and direct customer contact. At all levels of management, we maintain a focus on pursuing growth opportunities with prospective customers. In addition, our management teams promote and market our services for prospective large-scale projects and national accounts. We believe that our industry experience, technical expertise, customer relationships and emphasis on safety and customer service contribute to obtaining new contracts with both existing and new customers.

For the years ended December 31, 2017, 20162020, 2019 and 2015,2018, our top 10 customers accounted for 40.4%32.7%, 46.4%30.8%, and 44.6%32.9%, of our revenues, respectively. For the year ended December 31, 2017, one T&D customer accounted for 10.7% of our revenues. For the years ended December 31, 20162020, 2019 and 2015,2018, no single customer accounted for more than 10.0% of annual revenues.

For the years ended December 31, 2017, 20162020, 2019 and 2015,2018, revenues derived from T&D customers accounted for 62.7%51.4%, 71.7%54.8% and 74.9%58.3% of our total revenues, respectively, and revenues derived from C&I customers accounted for 37.3%48.6%, 28.3%45.2% and 25.1%41.7% of our total revenues, respectively.

Types of Service Arrangements and Bidding Process

We enter into contracts principally through a competitive bid process. Our typical construction project begins with the preparation and submission of a bid to a customer. If selected as the successful bidder, we generally enter into a contract with the customer that provides for payment upon completion of specified work or units of work as identified in the contract. Most of our contracts, including MSAs, may be terminated by our customers on short notice, typically 30 to 90 days, even if we are not in default under the contract. Although there is considerable variation in the terms of the contracts we undertake, our contracts are primarily structured as as:
•fixed-price agreements, under which we agree to doperform the entire projectdefined scope for a fixed amount, or amount;
•unit-price agreements, under which we agree to doperform the work at a fixed price per unit of work as specified in the agreement. We also enter into agreement;
•time-and-equipment and time-and-materials contracts, under which we are paid for labor and equipmentagree to perform the work at negotiated hourly billing rates for labor and equipment and for other expenses, including materials, as incurred, and time-and-materials contracts under which we are paid for labor at negotiated hourly billing rates agreed to in the contract; and for other expenses, including materials, as incurred. Finally, we sometimes enter into
•cost-plus contracts, where we are paid for our costs plus a negotiated margin.
On occasion, time-and-equipment, time-and-materials, cost-plus and cost-plusshared savings contracts require us to include a guaranteed not-to-exceed maximum price.

Fixed-price and unit-price contracts typically have the highesthigher potential margins; however, they hold a greater risk in terms of profitability because cost overruns may not be recoverable. Time-and-equipment, time-and-materials and cost-plus contracts have less margin upside, but generally have a lower risk of cost overruns. Work in our T&D segment is generally completed under fixed-price, time-and-materials, time-and-equipment, unit-price and cost-plus agreements. Work in our C&I worksegment is typically performed under fixed-price, time-and-materials, cost-plus, and unit-price agreements. Fixed-price contracts accounted for 43.5%,62.7% of total revenue for the year ended December 31, 2017,2020, including 31.4%,43.9% of our total revenue for our T&D segment and 63.7%,82.5% of our total revenue for our C&I segment.


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Our EPC contracts are typically fixed-price.fixed-price and may be entered into through joint ventures. We may act as the prime contractor for an EPC project where we perform the procurement and construction functions but use a subcontractor to perform the engineering component, or we may use a subcontractor for both engineering and procurement functions. We may also act as a subcontractor on an EPC project to an engineering firm or construction management firm.general contractor. When acting as a subcontractor for an EPC project, we typically provide construction services only, although we may also perform both the construction and procurement functions.

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Our T&D segment also provides services under MSAs that cover maintenance, upgrade and extension services, as well as new construction. Work performed under MSAs is typically billed on a unit-price, time-and-materials or time-and-equipment basis. MSAs are typically one to three years in duration; however, most of our contracts, including MSAs, may be terminated by our customers on short notice, typically 30 to 90 days, even if we are not in default under the contract.duration. Under MSAs, customers generally agree to usecontract with us for certain services in a specified geographic region. Most MSA customers have no obligationA majority of our MSAs do not include obligations to assign specific volumes of work to us and are not required to usenor do they grant us exclusively,exclusivity, although in some cases they arecertain work under the MSA may be subject to our right of first refusal. Many of our contracts, including MSAs, are open to public bid at expiration and generally attract numerous bidders.

A portion of the work we perform requires financial assurances in the form of performance and payment bonds, or letters of credit or other guarantees at the time of execution of the contract. MostMany of our contracts include retention provisions of up to 10%, which are generally withheld from each progress payment as retainage until the contract work has been completed and approved.

Materials

In many cases, our T&D customers are responsible for supplying their own materials on projects; however, under certain contracts, we may agree to provide all or a portion of the required materials. For our C&I contracts, we usually procure the necessary materials and supplies. We are not dependent on any one supplierspecific suppliers for materials or supplies.

Subcontracting

We are the prime contractor for the majority of our T&D projects.projects, however, we occasionally perform work as a subcontractor, and we may elect to do so from time-to-time on larger projects in order to manage our execution risk. We are a subcontractor to a general contractor for the majority of our C&I projects, but may contract directly with facility owners. We may useutilize subcontractors to perform portions of our contracts and to manage workflow, particularly for design, engineering, and procurement and some foundation work. under both segments.
We often work with subcontractors who are sole proprietorships or small business entities. Subcontractors normally provide their own employees, vehicles, tools and insurance coverages. We are not dependent on any single subcontractor. Our contracts with subcontractors often contain provisions limiting our obligation to pay the subcontractor if our client has not paid us. We hold our subcontractors responsible for their work or delays in their performance. When we perform work as a subcontractor we are often only paid after the general or prime contractor is paid. On larger projects, we may require performance and payment bonding from subcontractors, where we deem appropriate, based on the risk involved. We occasionally perform work as a subcontractor, and we may elect to do so from time-to-time on larger projects in order to manage our execution risk. When we perform work as a subcontractor we are often only paid after the general or prime contractor is paid.

The majority of the work in our C&I segment is done as a subcontractor to a general contractor.

Competition

Our business is highly competitive in both our T&D and C&I segments. Competition in both of our business segments is primarily based on the price of the construction services and upon the reputation for safety, quality and reliability of the contractor. The competition we encounter can vary depending upon the type and/orand location of construction services.

We believe that the principal competitive factors that customers consider in our industry are:

•price and flexible contract terms;
•safety programs and safety performance;
•technical expertise and experience;
•management team experience;

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•reputation and relationships with the customer;
•geographic presence and breadth of service offerings;
•willingness to accept risk;
•quality of service execution;
•specialized equipment, tooling and centralized fleet structure;
•the availability of qualified and/orand licensed personnel;
•adequate financial resources and bonding capacity;
•technological capabilities; and
•weather-damage restoration abilities and reputation.

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While we believe our customers consider a number of factors when selecting a service provider, most of their work is awarded through a bid process where price is always a principal factor. See “Risk Factors — Our industry is highly competitive. Increased competition can place downward pressure on contract prices and profit margins and may limit the number of projects that we are awarded.”

T&D Competition

Our T&D segment competes with a number of companies in the local markets where we operate, ranging from small local independent companies to large national firms. There are many national or large regional firms that compete with us for T&D contracts including, among others, Asplundh Construction Corp., Davis H. Elliot Company, Inc., Henkels & McCoy, Inc., MasTec, Inc., MDU Resources Group, Inc., Michels Corporation, Pike Corporation, Power Line Services, Inc., Primoris Services Corporation and Quanta Services, Inc. and Willbros Group, Inc.

There are a number of barriers to entry into the transmission services business,markets, including the cost of equipment and tooling necessary to perform transmission work, the availability of qualified labor, the scope of typical transmission projects and the technical, managerial and supervisory skills necessary to complete the job. Larger transmission projects generally require specialized heavy duty equipment as well as strong financial resources to meet the cash flow, bonding or letter of credit requirements of these projects. These factors sometimes reduce the number of potential competitors on these projects. The number of firms that generally compete for any one significant transmission infrastructure project varies greatly depending on a number of factors, including the size of the project, its location and the bidder qualification requirements imposed upon contractors by the customer. Some of our competitors restrict their operations to one geographic area andwhile others operate nationally and internationally.

Compared to the transmission markets, there are fewer significant barriers to entry into the distribution markets in which we operate. As a result, any organization that has adequate financial resources and access to technical expertise can compete for distribution projects. Instead of outsourcing, to us, some of our T&D customers also employ personnel internally to perform the same typesimilar types of distribution services that we provide.

C&I Competition

Our C&I segment predominately competes with a number of regional or small local firms and with subsidiaries of larger national firms. Competition for our C&I construction services varies greatly. There are few significant barriers to entry in the C&I business,markets, and there are a number of small companies that compete for C&I business. The size, location and technical requirements of the project will impact which competitors and the number of competitors that we will encounter when bidding on any particular project.

A major competitive factor in our C&I segment is the individual relationships that we and our competitors have developed with general contractors who typically manage the bid process.process, along with the willingness to be an exclusive partner with the general contractor on pursuits requiring the complete finance, design and construction services for the project. Additionally, the equipment requirements for C&I work are generally not as significant as that of T&D construction. Since C&I construction typically involves the purchase of materials, the financial resources to meet the materials procurement and equipment requirements of a particular project may impact the competition that we encounter. We differentiate ourselves from our competitors by bidding for larger and/orand more technically complex projects, which we believe many of our smaller competitors may not be capable of executing


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effectively or profitably. We believe that we have a favorable competitive position in the markets that we serve due in part to our strong operating history, and strong local market share, as well as our reputation and our relationships with our customers.

Project Bonding Requirements and Parent Guarantees

Many customers, particularly in connection with new construction, require us to post performance and payment bonds issued by a financial institution known as a surety. These bonds provide a guarantee to the customer that we will perform under the terms of a contract and that we will pay subcontractors and vendors. If we fail to perform under a contract or to pay subcontractors and vendors, the customer may demand that the surety make payments or provide services under the bond. We generally mustare required to reimburse the surety for anyits expenses or outlays it incurs.incurred in performing its obligations under the bond. We believe that the strength of our balance sheet, as well as our strong and long-standing relationship with our sureties, enhances our ability to obtain adequate financing and bonds. These bonds are typically issued at the face value of the contract awarded. As of December 31, 2017,2020, we had approximately $200.8$542.8 million in original face amount of bonds outstanding for projects in our T&D segment and $296.2approximately $789.1 million for projects in our C&I segment. Our estimated remaining cost to complete these bonded projects for both segments was approximately $144.5$629.1 million as of December 31, 2017.2020. As of December 31, 2016,2019, we had approximately $654.2$270.0 million in original face amount of bonds outstanding for projects in our T&D segment and $233.5approximately $632.1 million for projects in our C&I segment. The ability to post bonds provides us with a competitive advantage over smaller or less financially secure competitors. We believe that the strength of our balance sheet, as well as our strong and long-standing relationship with our surety, enhances our ability to obtain adequate financing and bonds.

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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.

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.” We calculate backlog differently for different types of contracts. For our fixed-price contracts, we include the full remaining portion of the contract in our calculation of backlog. A customer’s intention to award us work under a fixed-price contract is not included in backlog unless there is an actual award and contract 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 MSAs that typically have a one-yearone- to three-year duration from execution. Given the duration of our contracts and MSAs and our method of calculating backlog, our backlog at any point in time may not accurately represent the revenue we expect to realize during any period and our backlog as of the end of a fiscal year may not be indicative of the revenue we expect to generate in the following fiscal year and should not be viewed or relied upon as a stand-alone indicator. 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. Additionally, the difference between our backlog and remaining performance obligations is due to the portion of our MSAs that is excluded, 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 11 — Revenue Recognition to our Financial Statements. See also “Item 1A. Risk Factors — Backlog may not be realized or may not result in profits and may not accurately represent future revenue.”

Certain projects that we undertake are not completed in one accounting period. Revenue on construction contracts is recordedrecognized over the contract term based uponon costs incurred under the percentage-of-completion accountingcost-to-cost method. As the cost-to-cost method under which revenue is determineddriven by incurred cost, we calculate the ratiopercentage of completion by dividing costs incurred to date onby the contractstotal estimated cost. The percentage of completion is then multiplied by estimated revenues to determine inception-to-date revenue. Revenue recognized for the period is the current inception-to-date recognized revenue less the prior period inception-to-date recognized revenue. If a contract is projected to result in a loss, the entire contract loss is recognized in the period when the loss was first determined and the amount of the loss is updated in subsequent reporting periods. Contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract. Changes in the job performance, job conditions and final contract settlements are factors that influence management’s estimatesassessment of total contract costs. Undervalue and the percentage-of-completion method of accounting,total estimated costs to complete those contracts, and therefore, profit and revenue recognition is largely a function of contract costs incurred for any given period. Contract costs may include direct material, labor, subcontractor and material procurement services, equipment, and those indirect costs related to contract performance such as indirect labor, supplies, tools and repairs.recognition. While our contracts typically include labor, equipment and indirect costs, the amount of subcontractor and material costs on any individual contract can vary considerably.


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There can be no assurance as to the accuracy of our customers’ requirements or of our estimates of existing and future needs under MSAs, or of the values of our cost or time-dependent contracts and, therefore, our current backlog may not be realized as part of our future revenues. Subject to the foregoing discussions, the following table summarizes our estimate of backlog that we believe to be firm as of the dates shown and the backlog that we reasonably estimate will not be recognized within the next twelve months:

   
 Backlog at December 31, 2017 Backlog at December 31, 2020
(in thousands) Total Amount
estimated to not
be recognized
within 12 months		 Total
Backlog at
December 31,
2016		(in thousands)TotalAmount estimated
to not be recognized
within 12 months		Total backlog at December 31, 2019
T&D $333,147  $30,823  $386,701 T&D$753,932 $184,526 $469,898 
C&I  345,992   39,316   302,131 C&I895,524 208,519 1,029,305 
Total $679,139  $70,139  $688,832 Total$1,649,456 $393,045 $1,499,203 

Changes in backlog from period to period are primarily the result of fluctuations in the timing of awards and revenue recognition of contracts. Our backlog as of December 31, 20172020 included our proportionate share of unconsolidated joint venture backlog totaling $27.6$24.8 million. The December 31, 2017 backlog does not include any amount related to the previously announced Denver Central 70 Project. We expect this project to be added to backlog in the first quarter of 2018.

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Trade Names and Intellectual Property

We operate in the United States under a number of trade names, includingincluding: The L. E. Myers Co.; Harlan Electric Company; Great Southwestern Construction, Inc.; Sturgeon Electric Company, Inc.; MYR TransmissionEnergy Services, Inc.; E.S. Boulos Company; High Country Line Construction, Inc.; Sturgeon Electric California, LLC; and GSW Integrated Services, LLC.LLC; Huen Electric, Inc.; and CSI Electrical Contractors, Inc. We operate in Canada under the following trade namesnames: MYR Transmission Services Canada, Ltd.; Northern Transmission Services, Ltd and Western Pacific Enterprises Ltd. We do not generally register our trade names, but instead rely on statutory and common law protection. While we consider our trade names to be valuable assets, we do not consider any single trade name to be of such material importance that its absence would cause a material disruption to our business. We also do not materially rely upon any patents, licenses or other intellectual property.

Equipment

Our long history in the T&D industry has allowed us to be instrumental in designing much of the specialty tools and equipment used in the industry, including wire pullers, wire tensioners and aerial devices. We operate a fleet of trucks and trailers, support vehicles, bulldozers, bucket trucks, digger derricks and cranes and specialty construction equipment, such as wire pullers and wire tensioning machines. We also rely on specialized tooling, including stringing blocks, wire grips and presses. The standardization of our trucks and trailers allows us to streamline training, maintenance and parts costs. We operate a centralized fleet facility, as well as 21 regional maintenance shops throughout the United States, whichthat are staffed bywith over 140150 mechanics and equipment managers who service our fleet. Our ability to internally service our fleet in various markets often allows us to reduce repair costs and the time equipment is out of service by eliminating both the need to ship equipment long distances for repair and dependence on third party maintenance providers. Our maintenance shops are also able to modify standard construction equipment to meet the specific needs of our specialty applications. We are a final-stage manufacturer for several configurations of our specialty vehicles, and, in the event that a particular piece of equipment is not available to us, we can often build the component on-site, which reduces our reliance on our equipment suppliers.

Our United States based fleet of equipment is managed by our centralized fleet management group. Our fleet is highly mobile, which gives us the ability to shift resources from region-to-region quickly and to effectively respond to customer needs or major weather events. Our centralized fleet management group is designed to enable us to optimize and maintain our equipment to achieve the highest equipment utilization, which helps to maintain a competitive position with respect to our equipment costs. We develop internal equipment rates whichthat provide our business units with appropriate pricing levels to estimate their bids for new projects more accurately. We also involveThe fleet management group works with our business units in prioritizing the use of our fleet assets. The fleet management group also


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manages the procurement and disposition of equipment and short-term rentals. All of these factors are critical in allowing us to operate efficiently and meet our customers’ needs.

Equipment needs in Canada are managed by our Canadian operating subsidiaries.

Regulation

Our operations are subject to various laws and regulations including:

•licensing, permitting and inspection requirements applicable to electricians and engineers;
•regulations relating to worker safety and environmental protection;
•licensing, permitting and inspection requirements applicable to construction projects;
•building and electrical codes;
•special bidding and procurement requirements on government projects; and
•local laws and government acts regulating work on protected sites.

We believe that we are in compliance with applicable regulatory requirements and we believe that we have all material licenses required to conduct our operations. Our failure to comply with applicable regulations could result in project delays, cost overruns, remediation costs, substantial fines and/orand revocation of our operating licenses.

We are also required to comply with increasingly complex and changing laws and regulations enacted to protect business and personal data regarding privacy, data protection and data security, including those related to the collection, storage, use, transmission and protection of personal information and other customer, vendor or employee data. In addition, health and safety regulations (including laws or regulations promulgated in response to the ongoing COVID-19 pandemic) may require increased operating costs or capital investments to promote a safe working environment. With respect to the laws and regulations noted above, as well as other applicable laws and regulations, the Company's compliance programs may under certain circumstances involve material investments in the form of additional processes, training, personnel, information technology and capital. For a discussion of the risks associated with certain applicable laws and regulations, see “Item 1A. Risk Factors.
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Environmental Matters

As a result of our current and past operations, we are subject to numerous environmental laws and regulations governing our operations, including the use, transport and disposal of non-hazardous and hazardous substances and wastes, as well as emissions and discharges into the environment, including discharges to air, surface water, groundwater and soil. We also are subject to laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment. Under certain of these laws and regulations, such liabilities can be imposed for cleanup of previously owned or operated properties, or properties to which hazardous substances or wastes were discharged by current or former operations at our facilities, regardless of whether we directly caused the contamination or violated any law at the time of discharge or disposal. The presence of contamination from such substances or wastes could interfere with ongoing operations or adversely affect our ability to sell, lease or otherwise use our properties in certain ways such as collateral for possible financing. We could also be held liable for significant penalties and damages under certain environmental laws and regulations, which could materially and adversely affect our business andfinancial condition, results of operations.

operations and cash flows.

We believe that we are in substantial compliance with environmental laws and regulations and that any obligations related to environmental matters should not have a material effect on our financial condition, results of operations andor cash flows.

Additionally, there are significant environmental regulations under consideration to encourage the use of clean energy technologies and regulate emissions of greenhouse gases to address climate change. We regularly monitor the various proposals in this regard. Although the impact of climate change regulations on our business will depend on the specifics of governmental policies, legislation, and regulation, we believe that we will be well-positioned to adapt our business to meet new regulations. See “Item 1A. Risk Factors — We are subject to risks associated with climate change” and “Item 1A. Risk Factors — Our failure to comply with environmental and other laws and regulations could result in significant liabilities.”

liabilities” and “Item 1A. Risk Factors — We are subject to risks associated with climate change including financial risks and physical risks such as an increase in extreme weather events (such as floods, wildfires or hurricanes), rising sea levels and limitations on water availability and quality."

Cyclical Nature of Business and Seasonality

The demand for construction and maintenance services from our customers is cyclical in nature, particularly in our T&D segment, and vulnerable to downturns in the industries we serve as well as the economy in general. As a result, our volume of business could be adversely affected by declines or delays in new projects in various geographic regions.

Although our revenues are primarily driven by spending patterns in our customers’ industries, our revenues and results of operations can be subject to seasonal and other variations. These variations are influenced by weather, daylight hours, availability of system outages from utilities and holidays. For example, during the winter months, demand for our T&D work may be high, but our work can be delayed due to inclement weather. During the summer months, the demand for our T&D work may be affected by fewer


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available system outages during which we can perform electrical line service work due to peak electrical demands caused by warmer weather.weather which limits our ability to perform electrical line service work. During the spring and fall months, the demand for our T&D work may increase due to improved weather and system availability; however, extended periods of rain and other severe weather can affect the deployment of our crews and the efficiency of our operations.

Employees

Human Capital Resources
We believe that our people are our greatest assets and the success and growth of our business depend in large part on our ability to attract, develop and retain a diverse population of talented, qualified and highly skilled employees at all levels of our organization, including the individuals who comprise our workforce as well as our executive officers and other key personnel. We have developed key recruitment and retention strategies, objectives and measures that serve as the framework for our human capital management approach and guide the overall management of our business. These strategies, objectives and measures are advanced through a number of programs, policies and initiatives, including those related to: health and safety; inclusion, diversity, and equality; employee recruitment, training and development; and compensation and benefits programs.
We seek to attract and retain highly qualified craft employees by providing a superior work environment through our emphasis on safety, our competitive compensation, and our high qualityhigh-quality fleet of equipment. The number of individuals we employ varies significantly throughout the year, typically with lower staffing levels at year end and through the winter months when fewer projects are active. The number of craft employees fluctuates depending on the number and size of projects at any particular time. As of December 31, 2017,2020, we had approximately 5,2757,200 employees, consisting of approximately 9501,350 salaried employees, including executive officers, district managers, project managers, superintendents, estimators, office managers, andadministrative staff, and clerical personnel and approximately 4,3255,850 craft employees. Approximately 91%88% of our craft employees are members of unions, with the majority being members of the International Brotherhood of Electrical Workers (“IBEW”), who are represented by many local unions under agreements with generally uniform terms and varying expiration dates. We generally are not direct
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parties to such local agreements, but instead these agreements are entered into by and between the IBEW local unions and the National Electrical Contractors Association (“NECA”), of which wethe majority of our subsidiaries are a member. NECA negotiates the terms of these agreements on our behalf.members. On occasion, we will also employ individuals who are members of other trade unions pursuant to multi-employer, multi-union project agreements.

Information about our Executive Officers

Name
Age on
March 7, 20183, 2021
Position
Richard S. Swartz Jr.5457President and Chief Executive Officer
Betty R. Johnson5962Senior Vice President and Chief Financial Officer and Treasurer
William A. Koertner68Executive Chairman of the Board of Directors
Tod M. Cooper5356Senior Vice President, Chief Operating Officer T&D
Gerald B. Engen, Jr.William F. Fry6746Senior Vice President, Chief Legal Officer and Secretary
Jeffrey J. Waneka5659Senior Vice President, Chief Operating Officer C&I

Richard S. Swartz Jr.was appointed president and chief executive officer on January 1, 2017.2017 and has served as a member of our board of directors since April 2019. Prior to his current role, he served as executive vice president and chief operating officer sincefrom September 2016 to December 2016 and as senior vice president and chief operating officer from May 2011 to September 2016. Mr. Swartz served as senior vice president from August 2009 to May 2011, and as a group vice president from 2004 to 2009. Prior to becoming a group vice president, Mr. Swartz served as vice president of our transmission & distribution central division from 2002 to 2004. Mr. Swartz has held a number of additional positions since he joined us in 1982, including project foreman, superintendent, project manager and district manager.

Betty R. Johnsonjoined ushas served as senior vice president, chief financial officer and treasurer onsince October 19, 2015. From October 19, 2015 to November, 2020, she also served as treasurer. Prior to joining us, Ms. Johnson served as the chief financial officer of Faith Technologies, Inc., a privately held electrical, engineering and technology systems contractor.contractor in 2015. From 2009 to 2014, Ms. Johnson served as the vice president of global finance and chief financial officer of Sloan Valve Company. Prior to this, Ms. Johnson was executive vice president and chief financial officer with Block and Company, Inc. from 2003 to 2009. From 1999 to 2003 she served as the vice president-operations/finance with Encompass Services Corporation. Ms. Johnson served as our controller from 1992 to 1998 and vice president and controller from 1998 to 1999. Ms. Johnson served as a member of our board of directors from 2007 until accepting her current position with us.

William A. Koertner stepped down as president and chief executive officer effective January 1, 2017. He continues his role as executive chairman of the board. Mr. Koertner has served as executive chairman ofus in 2015. Ms. Johnson also currently serves on the board since 2007 and served as president and chief executive officer from 2003 to the end of 2016. Mr. Koertner joined us as senior vice president, treasurer and chief financial officer in 1998. Prior to joining us, Mr. Koertner served as vice president at Central Illinois Public Service Company from 1989 until 1998.

directors of Atkore International Group Inc., a publicly-traded manufacturer of electrical products company.

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Tod M. Cooper was appointed senior vice president and chief operating officer T&D on January 1, 2017. Prior to his current role, he served as senior vice president sincefrom August 2013.2013 to December 2016. Mr. Cooper served as group vice president, east from 2009 to 2013 and vice president T&D, east from 2006 to 2009. Mr. Cooper has held a number of additional positions since joining us in 1989, including business development manager, regional manager, district manager, and estimator.

Gerald B. Engen, Jr. has served

William F. Fry joined us as senior vice president, chief legal officer and secretary since August 2009. From November 2002on January 21, 2019. Prior to August 2009,joining us, Mr. EngenFry served as vice president chief— legal officerfor Team Inc., a specialty industrial service, engineering and secretary.manufacturing company from 2016 to 2018. Mr. Engen joined us as an assistantFry was general counsel, secretary, vice president & chief compliance officer of Furmanite Corporation, a provider of specialized technical services and product solutions, from 2012 to 2016, prior to its merger with Team Inc. Prior to joining Furmanite Corporation, Mr. Fry worked for American Tank & Vessel, Inc., a specialty engineering and construction company, in September 2000various roles from Wells, Love & Scoby, LLC, a law firm specializing in construction law.

2006 to 2012, ultimately serving as their general counsel.

Jeffrey J. Wanekawas appointed senior vice president and chief operating officer C&I on January 1, 2017. Prior to his current role, he served as president of aour subsidiary company, Sturgeon Electric Company, Inc., sincefrom February 2015.2015 to December 2016. Mr. Waneka served as group vice president, C&I from 2014 to 2015 and vice president, C&I from 2009 to 2014. Mr. Waneka has held a number of additional positions since joining the Company in 1991, including regional manager, director business development and district manager.


Website Access to Company Reports
Our website address is www.myrgroup.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act will be available free of charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information on our website is not a part of this Annual Report on Form 10-K or incorporated into any other filings we make with the SEC.

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Item 1A.Risk Factors

RISK FACTORS

Item 1A.    Risk Factors
You should read the following risk factors carefully in connection with evaluating our business and the forward-looking information contained in this Annual Report on Form 10-K. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could affect our operations. The risks described below highlight some of the factors that have affected, and in the future could affect, our operations. Additional risks we do not yet know of, or that we currently think are immaterial, may also affect our business operations. If any of the events or circumstances described in the following risks actually occurs, our business, financial condition, or results of operations and cash flows could be affected and our stock price could decline.

Industry & Market Risks
Our operating results may vary significantly from period to period.

Our business can be highly cyclical and subject to seasonal and other variations that can result in significant differences in operating results from period to period. Additionally, our results may be materially and adversely affected by:

•the timing and volume of work under contract;
•increased competition and changes in the competitive marketplace for our services;
•the spending patterns of customers and governments;
•safety performance and reputation;
•increased costs of performance of our services caused by adverse weather conditions;
•cost overruns on fixed-price and unit-price contracts;
the amount of subcontractor and material costs in our projects;
•decreased equipment utilization;
•delays on projects due to permitting, regulatory issues or customer-caused delays on projects;delays;
•disputes with customers relating to payment terms under our contracts and change orders, and our ability to successfully negotiate and obtain payment or reimbursement under our contracts and change orders;
•variations in the margins of projects performed during any particular reporting period;
a change•changes in the demand for our services;
•the loss of a major customer;
•changes in the mix of our customers, contracts and business;
•the amount of subcontractor and material costs in our projects;
•payment risk associated with the financial condition of our customers;
•increases in design and construction costs that we are unable to pass through to our customers;
•the termination or expiration of existing agreements;
•regional and general economic conditions and the condition of the financial markets;
•the inability to secure future sufficient funding to finance operations, fund growth or to provide the required financial resources certain large projects may require;
•losses experienced in our operations not otherwise covered by insurance;
a change in the mix of our customers, contracts and business;
payment risk associated with the financial condition of our customers;
costs we incur to support growth internally or otherwise;
availability of qualified labor for specific projects;
liabilities associated with participation in joint ventures related to third party failures;
significant fluctuations in foreign currency exchange rates;
changes in bonding requirements applicable to existing and new agreements;

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changes in accounting pronouncements that require us to account for items differently than historical pronouncements;
•the timing and integration of acquisitions and the magnitude of the related acquisition and integration costs;
•costs we incur to support growth internally or otherwise;
•availability of qualified labor for specific projects;
•liabilities associated with participation in joint ventures related to third party failures;
•significant fluctuations in foreign currency exchange rates;
•significant fluctuations in interest rates;
•changes in bonding requirements applicable to existing and new agreements;
•costs associated with our multi-employer pension plan obligations;
•the availability of equipment;
costs associated with responding to actions•supply chain interruptions, including as a result of activist stockholders;natural disasters, wildfires, weather, labor disputes, pandemic outbreak of disease, fire or explosions and power outages;
•impairment of goodwill or intangible assets; and
•warranty claims.

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Accordingly, our operating results in any particular reporting period may not be indicative of the results that can be expected for any other reporting period.

Our industry is highly competitive. Increased competition can place downward pressure on contract prices and profit margins and may limit the number of projects that we are awarded.

Our industry is fragmented and we compete with other companies, ranging from small, independent firms servicing local markets to larger firms servicing regional, national and international markets. Relatively few barriers prevent entry into the C&I market and the distribution market. As a result, any organization that has adequate financial resources and access to technical expertise may become one of our competitors in those areas. Competition in the industry depends on a number ofmany factors, including price.pricing of the construction services, the reputation for safety and the quality and reliability of the contractor. Some of our competitors including our competitors in the transmission market, may have lower labor and overhead cost structures and, therefore, may be able to provide their services at lower prices than ours. In addition, some of our competitors may have greater financial, technological and human resources than we do. We cannot be certain that our competitors will not develop the expertise, experience and resources to provide services that are superior in both price and quality to our services. Similarly, we cannot be certain that we will be able to maintain or enhance our competitive position within the markets we serve or maintain our customer base at current levels. We alsoAdditionally, we may face competition from in-house service organizations of our existing or prospective customers. Electriccustomers including electric utility companies and others which often employ personnel to internally perform some of the same types of services we do. If we are unable to compete successfully in our markets, our operating results could be adversely affected.

We may be unsuccessful in generating internal growth, which could impact the projects available to the Company.

Our ability to generate internal growth will be affected by, among other factors, our ability to:

attract new customers;
increase the number of projects performed for existing customers;
hire and retain qualified personnel;
successfully bid new projects;
expand geographically; and
adapt the range of services we offer to customers to address their evolving construction needs.

In addition, if our customers are constrained in their ability to obtain capital, it could reduce the number, timing or size of projects available to us. Many of the factors affecting our ability to generate internal growth may be beyond our control, and we cannot be certain that our strategies will be successful, or that we will be able to generate cash flow sufficient to fund our operations and to support internal growth. If we are unsuccessful, we may not be able to achieve internal growth, expand our operations or grow our business.


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Negative economic and market conditions as well as regulatory and environmental requirements, may adversely impact our customers’ future spending and, as a result, our operations and growth.

The demand for infrastructure construction and maintenance services from our customers has been, and will likely continue to be, cyclical in nature and vulnerable to downturns in the industries we serve as well as the economy in general. Stagnant or declining economic conditions have adversely impacted the demand for our services in the past and resultedcould result in the delay, reduction or cancellation of certain projects and maycould cause our customers to outsource less work, which could adversely affect us in the future. Unfavorable economic conditions could also cause our customers to outsource less work. Additionally, many of our customers finance their projects through the incurrence of debt or the issuance of equity. A reduction in cash flow or the lack of availability of debt or equity financing may result in a reduction in our customers’ spending for our services and may also impact the ability of our customers to pay amounts owed to us, which could have a material adverse effect on our operations and our ability to grow at historical levels.levels, or at all. A prolonged economic downturn or recession could adversely affect our customers and their ability or willingness to fund capital expenditures in the future or pay for past services. Material fluctuations in energy markets could also have an adverse impact on our customers’ spending patterns. Consolidation, competition, capital constraints or negative economic conditions in the electric power industry may also result in reduced spending by, or the loss of, one or more of our customers.

Because the vast majority of our T&D revenue is derived from the electric utility industry, regulatory

Changes to U.S. policies related to global trade and environmental requirements affecting that industry could adversely affect our results of operations. Customers in the electric utility industry we serve face stringent regulatory and environmental requirements,tariffs, as well as permitting processes, as they implement plans for their projects, which may result in delays, reductions and cancellations of some of their projects. These regulatory factorsretaliatory trade measures implemented by other countries, have resulted in decreased demand for our servicesuncertainty surrounding the future of the global economy. Increases in the past,cost of imported raw materials or finished goods as a result of tariffs or trade policies may impact customer spending, and theyreductions in customer spending could lead to fewer project awards and more competition We cannot predict the outcome of these changing trade policies or other unanticipated political conditions, nor can we predict the timing or strength of any economic recovery or downturn worldwide or its impact on our customers’ markets.
New Project and Growth Risks
We may do sobe unsuccessful in generating internal growth, which could impact the projects available to the Company.
Our ability to generate internal growth will be affected by, among other factors, our ability to:
•attract new customers;
•increase the number of projects performed for existing customers;
•hire and retain qualified personnel;
•successfully bid new projects;
•expand geographically; and
•adapt the range of services we offer to customers to address their evolving construction needs.
In addition, if our customers are constrained in their ability to obtain capital, it could reduce the number, timing or size of projects available to us. Many of the factors affecting our ability to generate internal growth may be beyond our control, and we cannot be certain that our strategies will be successful, or that we will be able to generate cash flow sufficient to fund our operations and support internal growth. If we are unsuccessful, we may not be able to achieve internal growth, expand our operations and grow our business.
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Our inability to successfully execute or integrate acquisitions or joint ventures may have an adverse impact on our growth strategy and business.
From time to time, our business strategy may include expanding our presence in the future, potentially impactingindustries we serve through strategic acquisitions of companies or entry into joint ventures that complement or diversify our operationsbusiness. The number of acquisition targets that meet our criteria may be limited. We may also face competition for acquisition opportunities, and other potential acquirers may offer more favorable terms or have greater financial resources available for potential acquisitions. This competition may limit our ability to grow through acquisitions or could raise the prices of acquisitions adversely impacting any accretion that might be achieved. Failure to consummate future acquisitions could negatively affect our future growth strategies. Additionally, the acquisitions we pursue may involve significant cash expenditures, the incurrence or assumption of debt or burdensome regulatory requirements.
Any acquisition may ultimately have a negative impact on our business, financial condition, results of operations or cash flows. We may not realize the anticipated benefits and synergies of an acquisition, and our attempts at historical levels.

integrating an acquired business may not be successful. Acquisitions or joint ventures may expose us to operational and financial challenges and risks, including the disruption of our ongoing business; significant diversion of resources and management’s attention from our existing business; reductions of cash and other resources available for operations and other uses; exposure to risks specific to the acquired businesses, services, or technologies to which we are not currently exposed; the failure to retain key personnel or customers of an acquired business; difficulties integrating new operations and personnel; failure of acquired companies to achieve the results we expect; the assumption of unknown liabilities of the acquired business for which there are inadequate reserves and the potential impairment of acquired intangible assets. Our ability to grow and maintain our competitive position may be affected by our ability to successfully integrate any businesses acquired.

Business and Operating Risks
Project performance issues, including those caused by third parties, or certain contractual obligations may result in additional costs to us, reductions or delays in revenues or the payment of penalties, including liquidated damages.

Many projects involve challenging engineering, procurement and construction phases that may occur over several years. We may encounter difficulties that impact our ability to complete the project in accordance with the original delivery schedule. These difficulties may be the result of delays in designs,designs; engineering information or materials provided by the customer or a third party,party; delays or difficulties in equipment and material delivery,delivery; schedule changes,changes; delays from our customer’s failure to timely obtain permits, or rights-of-way or to meet other regulatory requirements,requirements; weather-related delays,delays; delays caused by difficult worksite environments,environments; delays caused by inefficiencies and not achieving expected labor performance and other factors, some of which are beyond our control. In addition, for some projects we contract with third-party subcontractors to assist us with the completion of contracts. Any delay or failure by suppliers or by third-party subcontractors in the completion of their portion of the project may result in delays in the overall progress of the project or may cause us to incur additional costs, or both. We also may encounter project delays due to local opposition, which may include injunctive actions as well as public protests, to the siting of electric transmission lines, renewable energy projects, or other facilities. We may not be able to recover the costs we incur that are caused by delays. In certain circumstances, weCertain contracts have guarantee or bonus provisions regarding project completion by a scheduled acceptance date or achievement of certain acceptance and performance testing levels. Failure to meet any of our schedules or performance requirements could also result in additional costs or penalties, including liquidated damages, and such amounts could exceed expected project profit. In extreme cases, the above-mentioned factors could cause project cancellations, and we may not be able to replace such projects with similar projects or at all. Such delayscancellations. Delays or cancellations may impact our reputation or relationships with customers and adversely affectingaffect our ability to secure new contracts. Larger projects in particular, present additional performance risks due to complexity of the more complex work involved.

and duration of the project.

Our customers may change or delay various elements of the project after its commencement. The design, engineering information, equipment or materials that are to be provided by the customer or other parties may be deficient or delivered later than required by the project schedule, resulting in additional direct or indirect costs. Under these circumstances, we generally negotiate with the customer with respect to the amount of additional time required and the compensation to be paid to us. We are subject to the risk that we may be


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unable to obtain, through negotiation, arbitration, litigation or otherwise, adequate amounts to compensate us for the additional work or expenses incurred by us due to customer-requested change orders or failure by the customerothers to timely deliver items, such as engineering drawings or materials. Litigation or arbitration of claims for compensation may be lengthy and costly, and it is often difficult to predict when and for how much the claims will be resolved. A failure to obtain adequate compensation for these matters could require us to record a reduction to amounts of revenue and gross profit recognized in prior periods under the percentage-of-completion accounting method. Any such adjustments could be substantial. We may also be required to invest significant working capital to fund cost overruns while the resolution of change orders or claims is pending, which could adversely affect our liquidity and financial results in any given period.

Our revenues may be exposed to potential risk if a project is terminated or canceled, if our customers encounter financial difficulties or if we encounter disputes with our customers.

Our contracts often require us to satisfy or achieve certain milestones in order to receive payment for the work performed, or in the case of cost-reimbursable contracts, provide support for billings in advance of receiving payment. As a result, we may incur significant costs or perform significant amounts of work prior to receipt of payment. If any of our customers do not proceed with the completion of projects or default on their payment obligations, or if we encounter disputes with our customers with respect to the adequacy of billing support, we may face difficulties in collecting payment of amounts due to us for the costs previously incurred. In addition, many of our customers for large projects are project-specific entities that do not have significant assets other than their interests in the project and may encounter financial difficulties relating to their businesses. It may be difficult to collect amounts owed to us by these customers. If we are unable to collect amounts owed to us, this would have an adverse effect on our future financial condition, results of operations and cash flows.

We have in the past brought, and may in the future bring, claims against our customers related to, among other things, the payment terms of our contracts and change orders relating to our contracts. These types of claims occur due to, among other things, customer-caused delays or changes in project scope, both of which may result in additional cost, which may or may not be recovered until the claim is resolved. Additionally, if any of our customers do not proceed with the completion of projects or default on their payment obligations, or if we encounter disputes with our customers with respect to the adequacy of billing support, we may face difficulties in collecting payment of amounts due to us for the costs previously incurred. In some instances, these claims can be the subject of lengthy legal proceedings, and it is difficult to accurately predict when or if they will be fully
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resolved. A failure to promptly recover on these types of claims could have a negative impact on our business, financial condition, results of operations and cash flows. Additionally, any such claims may harm our future relationships with our customers.

Our business is labor intensive and we

We may be unable to attract and retain qualified employees.

personnel.

Our ability to maintain our productivity and our operating results may be limited by our ability to employ, train and retain skilledqualified personnel necessary to meet our requirements. We may not be able to maintain an adequate skilled labor force necessary to operate efficiently and to support our growth strategy. We have from time-to-timetime to time experienced shortages of certain types of qualified personnel, such as linemen, field supervisors, project managers and engineers, in certain regions. In addition, our projects are sometimes located in remote areas, which can make recruitment and deployment of our employeespersonnel challenging. During periods with large volumes of storm restoration services work, linemen are frequently recruited across geographic regions to satisfy demand. Many linemen are willing to travel to earn premium wages for such work, which from time-to-timetime to time makes it difficult for us to retain these workers for ongoing projects when storm conditions persist. The supply of experienced linemen, field supervisors, project managers, engineers and other skilled workers may not be sufficient to meet current or expected demand. The commencement of new, large-scale infrastructure projects or increased demand for infrastructure improvements, as well as the shrinking electric utility workforce, may reduce the pool of skilled workers available to us. Labor shortages could impair our ability to maintain our business or grow our revenues. If we are unable to hire employeespersonnel with the requisite skills, we may also be forced to incur significant training expenses.

In addition, the success of our business depends upon the continued efforts and abilities of our executive officers and senior management, including the management at our operating subsidiaries. The relationships between our executive officers and senior management and our customers are important to obtaining and retaining business. We are also dependent upon our project managers and field supervisors who are responsible for managing and recruiting personnel for our projects. There can be no assurance that any individual will continue in his or her capacity for any particular period of time. Industry-wide competition for managerial talent is high. Given that level of competition, there could be situations where our overall compensation package may be viewed as less attractive as compared to our competition, and we may experience the loss of key personnel or higher costs to retain and hire key personnel. The loss of key personnel, or the inability to hire and retain qualified personnel, could negatively impact our ability to manage our business and relationships with our customers.
The timing of new contracts and termination of existing contracts may result in unpredictable fluctuations in our cash flows and financial results.

A substantial portion of our revenues are derived from project-based work that is awarded through a competitive bid process. It is generally very difficult to predict the timing and geographic distribution of the projects that we will be awarded. The selection of, timing of, or failure to obtain projects, delays in awards of


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projects, the re-bidding or termination of projects due to budget overruns, cancellations of projects or delays in completion of contracts could result in the under-utilization of our assets, including our fleet of construction equipment, which could lower our overall profitability and reduce our cash flows. Even if we are awarded contracts, we face additional risks that could affect whether,when, or when,whether, work will begin. This can present difficulty in matching workforce size and equipment location with contract needs. In some cases, we may be required to bear the cost of a ready workforce and equipment that is larger than necessary, which could impact our cash flow, expenses and profitability. If an expected contract award or the related work release is delayed or not received, we could incur substantial costs without receipt of any corresponding revenues. Moreover, construction projects for which our services are contracted may require significant expenditures by us prior to receipt of relevant payments from the customer. Finally, the winding down or completion of work on significant projects that were active in previous periods will reduce our revenue and earnings if such significant projects have not been replaced in the current period.

Many of our contracts may be canceled upon short notice, typically 30 to 90 days, even if we are not in default under the contract, and we may be unsuccessful in replacing our contracts, if they are canceled or as they are completed or expire. We could experienceresulting in a decrease in our revenue, net income and liquidity if contracts are canceled and if we are unable to replace canceled, completed or expired contracts.liquidity. Certain of our customers assign work to us on a project-by-project basis under MSAs. Under these agreements, our customers often have no obligation to assign a specific amount of work to us. Our operations could decline significantly if the anticipated volume of work is not assigned to us or is canceled. Many of our contracts, including our MSAs, are openedopen to competitive bidbidding at the expiration of their terms. There can be no assurance that we will be the successful bidder on our existing contracts that come up for re-bid.

We

During the ordinary course of our business, we may incur liabilities and suffer negative financial or reputational impacts relating to occupational health and safety matters.

Our operations arebecome subject to extensive laws and regulations relating to the maintenance of safe conditions in the workplace. While we have invested, and will continue to invest, substantial resources in our occupational health and safety programs, our industry involves a high degree of operational risk, and there can be no assurance that we will avoid significant liability exposure. Our business is subject to numerous safety risks, including electrocutions, fires, explosions, mechanical failures, weather-related incidents, transportation accidents and damage to equipment. These hazards can cause personal injurylawsuits or loss of life, severe damage to or destruction of property and equipment and other consequential damages and could lead to suspension of operations, large monetary claims and, in extreme cases, criminal liability. Our workforce have suffered serious injuries and fatalities in the past and may suffer additional serious injuries and fatalities in the future. Monetary claims for damages to persons, including claims for bodily injury or loss of life, could result in substantial costs and liabilities. In addition, weindemnity claims.

We have in the past been, and we may in the future be, named as a defendant in lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. These actions may seek, among other things, compensation for alleged personal injury, workers’ compensation, employment discrimination, sexual harassment, workplace misconduct and other employment-related damages, breach of contract, property damage, environmental liabilities, multiemployer pension plan withdrawal liabilities, punitive damages, consequential damages, and civil penalties or other losses or injunctive or declaratory relief. In addition, we generally indemnify our customers for claims related to the services we provide and actions we take under our contracts, and, in some instances, we may be allocated risk through our contract terms for actions by our customers,
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subcontractors or other third parties. Because our services in certain instances may be integral to the operation and performance of our customers’ infrastructure, we have been and may become subject to criminal penalties relating to occupational health and safety violations, which have resulted in and could in the future result in substantial costs and liabilities. Anylawsuits or claims for any failure of the foregoingsystems that we work on, even if our services are not the cause of such failures, and we could be subject to civil and criminal liabilities to the extent that our services contributed to any property damage, personal injury or system failure. Insurance coverage may not be available or may be insufficient for these lawsuits, claims or legal proceedings. The outcome of any of these lawsuits, claims or legal proceedings could result in financial loss, whichsignificant costs and diversion of management’s attention from our business. Payments of significant amounts, even if reserved, could have a material adverse impact onmaterially and adversely affect our business, financial condition, results of operations and cash flows.

Our customers seek to minimize safety risks on their sites, and they frequently review the safety records of outside contractors during the bidding process. If our safety record were to substantially deteriorate, we could become ineligible to bid on certain work, and our customers could cancel our contracts and not award us future business.

Backlog may not be realized or may not result in profits and may not accurately represent future revenue.

Backlog is difficult to determine accurately, and companies within our industry may define backlog differently. Reductions in backlog due to cancellation, termination or scope adjustment by a customer or for other reasons could significantly reduce the revenue and profit we actually receive from contracts in backlog. In the event of a project cancellation, termination or scope adjustment, we typically have no contractual right to the total revenues reflected in our backlog. The timing of contract awards, duration of large new contracts and the mix of services, subcontracted work and material in our contracts can significantly affect backlog reporting. Given these factors and our method of calculating backlog, our backlog at any point in time may not accurately represent the revenue that we expect to realize during any period, and our backlog as of the end of a fiscal year may not be indicative of the revenue we expect to earn in the following fiscal year and


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should not be viewed or relied upon as a stand-alone indicator. Consequently, we cannot provide assurance as to our customers’ requirements or our estimates of backlog. See “Item 1. Business — Backlog” for a discussion on how we calculate backlog for our business.

Our insurance has limits and exclusions that may not fully indemnify us against certain claims or losses, including claims resulting from wildfires or other natural disasters, and the unavailability or cancellation of third party insurance coverages would increase our overall risk exposure and could disrupt our operations.
We maintain insurance coverages from third party insurers as part of our overall risk management strategy because some of our contracts require us to maintain specific insurance coverage limits. Although we maintain insurance policies with respect to automobile liability, general liability, workers’ compensation, our employee group health program, and other types of coverages, these policies are subject to high deductibles, and we are self-insured up to the amount of those deductibles. Insurance losses are accrued based upon our estimates of the ultimate liability for claims reported and an estimate of claims incurred but not yet reported. Insurance liabilities are difficult to assess and estimate due to unknown factors, including the severity of an injury, the determination of our liability in proportion to other parties, estimates of incidents not reported and the effectiveness of our safety programs, and as a result, our actual losses may exceed our estimates. Therefore, there can be no assurance that our current or past insurance coverages will be sufficient or effective under all circumstances or against all claims and liabilities to which we may be subject.
We generally renew our insurance policies on an annual basis; therefore, deductibles and levels of insurance coverages may change in future periods. There can be no assurance that any of our existing insurance coverages will be renewed upon the expiration of the coverage period or that future coverage will be affordable at the required limits. In addition, insurers may fail, cancel our coverage, determine to exclude certain items from coverage, or otherwise be unable to provide us with adequate insurance coverage. We may not be able to obtain certain types of insurance or incremental levels of insurance in scope or amount sufficient to cover liabilities we may incur. If our risk exposure increases as a result of adverse changes in our insurance coverages, we could be subject to increased liabilities that could negatively affect our business, financial condition, results of operations and cash flow.
In addition, we perform work in hazardous environments and our employees are exposed to a number of hazards. Incidents can occur, regardless of fault, that may be catastrophic and adversely impact our employees and third parties by causing serious personal injury, loss of life, damage to property or the environment, and interruption of operations. Furthermore, we perform a significant amount of services for customers that operate electrical power infrastructure assets in locations and climates that are more susceptible to wildfires or other natural disasters. In locations or environments where claims have been higher than normal, insurance may become difficult or impossible to obtain. Our contracts may require us to indemnify our customers, project owners and others for injury, damage or loss arising out of our presence at our customers’ location, regardless of fault, or the performance of our work and provide for warranties for materials and workmanship. We may also be required to name the customer and others as an additional insured under our insurance policies. We maintain limited insurance coverage against these and other risks associated with our business. This insurance may not protect us against liability for certain events, including events involving pollution, professional liability, losses resulting from business interruption or acts of terrorism or damages from breach of contract by us. We cannot guarantee that our insurance will be adequate in risk coverage or policy limits to cover all losses or liabilities that we may incur. Any future damages caused by our services that are not covered by insurance or are in excess of policy limits could have a material adverse effect on our business, financial position, results of operations and cash flows.
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Changes in tax laws or our interpretations of tax laws could materially impact our income tax liabilities.
We have operations in the United States and Canada and are subject to the jurisdiction of multiple federal and state taxing authorities. The income earned in these various jurisdictions is taxed on different bases which are subject to change by the taxing authorities. The final determination of our income tax liabilities involves the interpretation of local tax laws, tax treaties and related authorities in each jurisdiction, as well as the significant use of estimates and assumptions regarding the scope of future operations and results achieved and the timing and nature of income earned and expenditures incurred. Changes in the operating environment, including changes in tax laws, could materially impact our income tax liabilities.
The nature of our business exposes us to potential liability for warranty claims and faulty engineering, which may reduce our profitability.
Our customer contracts typically include a warranty for the services that we provide against certain defects in workmanship and material. Additionally, materials used in construction are often provided by the customer or are warranted against defects from the supplier. Certain projects have longer warranty periods and include facility performance warranties that may be broader than the warranties we generally provide. If warranty claims occurred, it could require us to re-perform the services or to repair or replace the warranted item, at a cost to us, and could also result in other damages if we are not able to adequately satisfy our warranty obligations. In addition, we may be required under contractual arrangements with our customers to warrant any defects or failures in materials we provide that we purchase from third parties. While we generally require suppliers to provide us warranties that are consistent with those we provide to the customers, if any of these suppliers default on their warranty obligations to us, we may incur costs to repair or replace the defective materials for which we are not reimbursed. Costs incurred because of warranty claims could adversely affect our business, financial condition, results of operations and cash flows.
Our business growthinvolves professional judgments regarding the planning, design, development, construction, operations and management of electric power transmission and commercial construction. Because our projects are often technically complex, our failure to make judgments and recommendations in accordance with applicable professional standards, including engineering standards, could outpace the capabilityresult in damages. A significantly adverse or catastrophic event at one of our internal resourcesproject sites or completed projects resulting from the services we have performed could result in significant warranty, professional liability, or other claims against us as well as reputational harm, especially if public safety is impacted. These liabilities could exceed our insurance limits or could impact our ability to obtain insurance in the future. In addition, customers, subcontractors or suppliers who have agreed to indemnify us against any such liabilities or losses might refuse or be unable to pay us. An uninsured or underinsured claim could have an adverse impact on our business, financial condition, results of operations and cash flows.
Risks associated with operating in the Canadian market could restrict our ability to expand and harm our business and prospects.
There are numerous inherent risks in conducting our business in a different country including, but not limited to, potential instability in markets, political, economic or social conditions, and difficult or additional legal and regulatory requirements applicable to our operations. Limits on our ability to repatriate earnings, exchange controls, and complex U.S. and Canadian laws and treaties including laws related to the U.S. Foreign Corrupt Practices Act (“FCPA”) and similar laws could also adversely impact our operations. Changes in the value of the Canadian dollar could increase or decrease the U.S. dollar value of our profits earned or assets held in Canada or potentially limit our ability to support growth.

Our internal resources, including our workforce, specialized equipment and financial resources, may not be adequate to supportreinvest earnings from our operations as they expand, particularly if we are awarded a significant numberin Canada to fund the financing requirements of large projects in a short time period. A large project may require hiring additional qualified personnel, such as linemen, field supervisors, project managers, engineers and safety personnel, the supply of which may not be sufficient to meet our demands.

Often large transmission projects require specialized equipment. To the extent that we are unable to buy or build equipment necessary for a project, either due to a lack of available funding or equipment shortagesoperations in the marketplace, we may be forcedUnited States. These risks could restrict our ability to rent equipment on a short-term basisprovide services to Canadian customers or to find alternative waysoperate our Canadian business profitably, and could negatively impact our results. We also are exposed to perform the work without the benefit of equipment ideally suited for the job, which could increase the costs of completing the project. Furthermore, we may be unable to buy or rent the specialty equipment and tooling we require duecurrency risks relating to the limited numbertranslation of manufacturerscertain monetary transactions, assets and distributors in the marketplace.

Larger projects may require substantial financial resources to meet the cash flow, bonding or letter of credit requirements imposed upon contractors by the customer. Future growth also could impose additional demands and responsibilities on members of our senior management.

liabilities.

Third Party Partner Risks
Our dependence on suppliers, subcontractors and equipment manufacturers could expose us to the risk of loss in our operations.

On certain projects, we rely on suppliers to obtain the necessary materials and subcontractors to perform portions of our services. We also rely on equipment manufacturers to provide us with the equipment required to conduct our operations. Although we are not dependent on any single supplier, subcontractor or equipment manufacturer, any substantial limitation on the availability of required suppliers, subcontractors or equipment manufacturers could negatively impact our operations. The risk of a lack of available suppliers, subcontractors or equipment manufacturers may be heightened as a result of market and economic conditions. We may experience difficulties in acquiring equipment or materials due to supply chain interruptions, including as a result of natural disasters, weather, labor disputes, pandemic outbreak of disease, fire or explosions and power outages. To the extent we cannot engage subcontractors or acquire equipment or materials, we could experience losses in the performance of our operations. Additionally, successfulSuccessful completion of our contracts may depend on whether our subcontractors successfully fulfill their contractual obligations. If our subcontractors fail to perform their contractual obligations as a result of financial or other difficulties, or if our
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subcontractors fail to meet the expected completion dates or quality standards, we may be required to incur additional costs or provide additional services in order to make up such shortfall and we may suffer damage to our reputation.

Our participation in joint ventures and other projects with third parties may expose us to liability for failures of our partners.

We may enter into joint venture or other strategic arrangements with other parties as part of our business operations. Success on a jointly performed project depends in large part on whether all parties satisfy their contractual obligations. Joint venture partners are generally jointly and severally liable for all liabilities and obligations of the joint venture. If a joint venture partner fails to perform or is financially unable to bear its portion of required capital contributions or other obligations, including liabilities relating to claims or lawsuits, we could be required to make additional investments, provide additional services or pay more than our proportionate or agreed upon share of a liability to compensate for the partner’s shortfall. In addition, if we are unable to adequately address our partner’s performance issues, the customer may terminate the project, which could result in legal liability to us, reduce our profit on the project or damage our reputation.

Regulatory and Environmental Risks
Legislative or regulatory actions relating to electricity transmission and renewable energy may impact demand for our services.

Current and potential legislative or regulatory actions may impact demand for our services. Certain legislation or regulations requireservices, requiring utilities to meet reliability standards and encourage installation of new electric transmission and renewable energy generation facilities. However, it is unclear whether these


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initiatives will create sufficient incentives for projects or result in increased demand for our services. Additionally,

Because most of our T&D revenue is derived from the electric utility industry, regulatory and environmental requirements affecting that industry could adversely affect our business, financial condition, results of operations and cash flows. Customers in the electric utility industry we serve face stringent regulatory and environmental requirements, as well as permitting processes, as they implement plans for their projects, which may result in delays, reductions and cancellations of some of their projects. These regulatory factors have resulted in decreased demand for our services in the past, we have benefited from certain tax credits that are being eliminated, which could impact current and they may do so in the future, demand forpotentially impacting our services.

Whileoperations and our ability to grow at historical levels, or at all.

In addition, while many states have mandates in place that require specified percentages of electricity to be generated from renewable sources, states could reduce those mandates or make them optional, which could reduce, delay or eliminate renewable energy development in the affected states. Additionally, renewable energy is generally more expensive to produce and may require additional power generation sources as backup. The locations of renewable energy projects are often remote and may not be viable unless new or expanded transmission infrastructure to transport the electricity to demand centers is economically feasible. Furthermore, funding for renewable energy initiatives may not be available. These factors could result in fewer renewable energy projects and a delay in the construction of these projects and the related infrastructure, which could negatively impact our business.

We may incur liabilities and suffer negative financial or reputational impacts relating to occupational health and safety matters, including those related to environmental hazards such as wildfires and other natural disasters.
Our useoperations are subject to extensive laws and regulations relating to the maintenance of percentage-of-completion accounting could result in a reduction or reversal of previously recognized profits.

As discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results from Operations — Critical Accounting Policies” andsafe conditions in the notesworkplace. While we have invested, and will continue to our Financial Statements, a significant portion of our revenues is recognized on a percentage-of-completion method of accounting, using the cost-to-cost method. This method is used because management considers expended costs to be the best available measure of progress on these contracts. This accounting method is commonly used in the construction industry for fixed-price contracts. The percentage-of-completion accounting practice we use resultsinvest, substantial resources in our recognizing contract revenuesoccupational health and earnings ratably over the contract term in proportion tosafety programs, our incurrence of contract costs. The earnings or losses recognized on individual contracts are based on estimates of contract revenues, costs and profitability. Contract losses are recognized in full when determined, and contract profit estimates are adjusted based on ongoing reviews of contract profitability. In addition, we record adjustments to estimated costs of contracts when we believe the change in estimate is probable and the amounts can be reasonably estimated. These adjustments could result in both increases and decreases in profit margins. Actual results could differ from estimated amounts and could result in a reduction or elimination of previously recognized earnings.

Our actual costs may be greater than expected in performing our fixed-price and unit-price contracts.

We currently generate, and expect to continue to generate, a significant portion of our revenues and profits under fixed-price and unit-price contracts. We must estimate the costs of completing a particular project when we bid for these types of contracts. The actual cost of labor and materials, however, may vary from the costs we originally estimated and we may not be successful in recouping additional costs from our customers. These variations, along with other risks inherent in performing fixed-price and unit-price contracts, may cause actual revenue and gross profits for a project to differ from those we originally estimated and could result in reduced profitability or losses on projects due to changes in a variety of factors such as:

failure to properly estimate costs of engineering, material, equipment or labor;
inefficient labor performance;
unanticipated technical problems with the materials or services being supplied by us, which may require us to incur additional costs to remedy the problem;
project modifications that create unanticipated costs;
changes in the costs of equipment, materials, labor or subcontractors;
the failure of our suppliers or subcontractors to perform;
difficulties in our customers obtaining required governmental permits or approvals;
site conditions that differ from those assumed in the original bid (to the extent contract remedies are unavailable);
the availability and skill level of workers in the geographic location of the project;

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an increase in the cost of fuel or other resources;
changes in local laws and regulations;
delays caused by local weather conditions, third parties or customers; or
quality issues requiring rework.

Our financial results are based upon estimates and assumptions that may differ from actual results.

In preparing our financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”), estimates and assumptions are used by management in determining the reported amounts of assets and liabilities, revenues and expenses recognized during the periods presented and disclosures of contingent assets and liabilities known to exist as of the date of the financial statements. These estimates and assumptions must be made because certain information that is used in the preparation of our financial statements is dependent on future events, cannot be calculated withindustry involves a high degree of precision from data availableoperational risk, and there can be no assurance that we will avoid significant liability exposure. Our business is subject to numerous safety risks, including electrocutions, fires, explosions, mechanical failures, weather-related incidents, transportation accidents and damage to equipment. Furthermore, we perform a significant amount of services for customers that operate electrical power infrastructure assets in locations and climates that are more susceptible to wildfires or is not capableother natural disasters. These hazards can cause personal injury or loss of being readily calculated. In some cases, these estimates are particularly difficultlife, severe damage to determine, and we must exercise significant judgment.

The most significant estimates we use are related to costs to complete contracts, pending change orders and claims, shared savings, insurance reserves, income tax reserves, estimates surrounding stock-based compensation, the recoverability of goodwill and intangibles, and accounts receivable reserves. We also may use estimates in our assessment of the useful livesor destruction of property and equipment and other consequential damages and could lead to suspension of operations, large monetary claims and, in extreme cases, criminal liability. Members of our workforce have suffered serious injuries or fatalities in the valuation allowance on deferred taxespast and may suffer additional serious injuries or fatalities in the provisionfuture. Monetary claims for income taxes. From time-to-time,damages to persons, including claims for bodily injury or loss of life, could result in substantial costs and liabilities. In addition, we have in the past, and we may publicly provide earnings or other forms of guidance,in the future, be subject to criminal penalties relating to occupational health and safety violations, which reflect our predictions abouthave resulted in and could in the future revenue, operatingresult in, substantial costs and capital structure, among other factors. These predictions may be impacted by estimates, as well as other factors that are beyond our control and may not turn out to be correct. Actual results for all estimates could differ materially from the estimates and assumptions that we use.

We maintain insurance policies with respect to automobile liability, general liability, workers’ compensation, and other coverages, but those policies do not cover all possible claims and are subject to high deductible limits. We also have an employee health care benefit plan for employees not subject to collective bargaining agreements, which is subject to certain deductible limits. Insurance losses are accrued based upon our estimatesliabilities. Any of the ultimate liability for claims reportedforegoing could result in financial loss, which could have a material adverse impact on our business, financial condition, results of operations and an estimatecash flows.

Our customers seek to minimize safety risks on their sites, and they frequently review the safety records of claims incurred but not yet reported. However, insurance liabilities are difficult to assess and estimate due to unknown factors, includingoutside contractors during the severity of an injury, the determination of our liability in proportion to other parties, the number of incidents not reported and the effectiveness ofbidding process. If our safety programs,record were to substantially deteriorate, we could become ineligible to bid on certain work, and as a result, our actual losses may exceedcustomers could cancel our estimates.

The loss of a key customer could have an adverse effect on us.

Our customer base is highly concentrated, with our top ten customers accounting for 40.4% of our revenuecontracts and one T&D customer accounting for 10.7% of our revenues for the year ended December 31, 2017. Much of our success depends on developing and maintaining relationships with our major customers. Our revenue could significantly decline if we lose one or more of our significant customers. In addition, revenues generated from contracts with significant customers may vary from period-to-period depending on the timing and volume of work ordered by such customers in a given period and as a result of competition from the in-house service organizations of our customers.

not award us future business.

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Our failure to comply with environmental and other laws and regulations could result in significant liabilities.

Our past, current and future operations are subject to numerous environmental and other laws and regulations governing our operations, including the use, transport and disposal of non-hazardous and hazardous substances and wastes, as well as emissions and discharges into the environment, including discharges to air, surface water, groundwater and soil. We also are subject to laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment. Under certain of these laws and regulations, such liabilities can be imposed for cleanup of previously owned or operated properties, or properties to which hazardous substances or wastes were discharged by current or former


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operations at our facilities, regardless of whether we directly caused the contamination or violated any law at the time of discharge or disposal. The presence of contamination from such substances or wastes could interfere with ongoing operations or adversely affect our ability to sell, lease or otherwise use our properties in ways such as collateral for possible financing. We could also be held liable for significant penalties and damages under certain environmental laws and regulations, which could materially and adversely affect our business, andfinancial condition, results of operations.

operations and cash flows.

In addition, new laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or leaks, or the imposition of new permitting or cleanup requirements could require us to incur significant costs or become the basis for new or increased liabilities that could harm our business, financial condition, and results of operations.operations and cash flows. In certain instances, we have obtained indemnification or covenants from third parties (including our predecessor owners or lessors) for some or all of such cleanup and other obligations and liabilities. However, such third-party indemnities or covenants may not cover all of our costs.

Legislative and regulatory proposals related to address greenhouse gas emissions could result in a variety of regulatory programs, additional charges to fund energy efficiency activities, or other regulatory actions. Any of these actions could result in increased costs associated with our operations and impact the prices we charge our customers. If new regulations are adopted regulating greenhouse gas emissions from mobile sources such as cars and trucks, we could experience a significant increase in environmental compliance costs in light ofdue to our large fleet. In addition, if our operations are perceived to result in high greenhouse gas emissions, our reputation could suffer.

In addition, we

We are also subject to laws and regulations protecting endangered species. Laws also protect Native Americanspecies, artifacts and archaeological sites and a part of our business is operated in the southwestern United States, where there is a greater chance of discovering those sites. We may incur work stoppages to avoid violating these laws and regulations, or we may risk fines or other sanctions for accidentally or willfully violating these laws and regulations.

Unavailability or cancellation We are also subject to immigration laws and regulations, for which noncompliance could be material and adversely affect our business, financial condition, results of third party insurance coverages would increase our overall risk exposureoperations and could disrupt our operations.

We maintain insurance coverages from third party insurers as part of our overall risk management strategy and because some of our contracts require uscash flows.

Furthermore, failure to maintain specific insurance coverage limits. Although we maintain insurance policies with respect to automobile liability, general liability, workers’ compensation, our employee group health program,obtain permitting, right-of-way access and other types of coverages, these policies are subject to high deductibles, and we are self-insured uptactical considerations prior to the amountcommencement of those deductibles. There can be no assurance thatwork could delay the commencement of work on projects or cause modifications of work plans, potentially resulting in lower margins. We generally plan for certain up-front time and other costs to obtain required permitting and right-of-way access and for other tactical challenges prior to the commencement of work on our currentprojects. Delays in obtaining, or past insurance coverages will be sufficientthe inability to obtain, permits or effective under all circumstances or against all claimsright-of-way access, could negatively impact our margins due to additional cost and liabilities to whichunabsorbed overhead resulting from under-utilized personnel and equipment. Additionally, we may be subject.

We renew our insurance policiesencounter unexpected tactical issues on an annual basis; therefore, deductiblesthe site which could lead to unanticipated costs and levels of insurance coverages may change in future periods. There can be no assurance that any of our existing insurance coverages will be renewed upon the expiration of the coverage period or that future coverage will be affordable at the required limits. In addition, insurers may fail, cancel our coverage, determine to exclude certain items from coverage, or otherwise be unable to provide us with adequate insurance coverage. Wedelays, which we may not be able to obtain certain types of insurance or incremental levels of insurance in scope or amount sufficient to cover liabilities we may incur.

If any of these events occurs,recover from our overall risk exposure would increase and our operations could be disrupted. If our risk exposure increases as a result of adverse changes in our insurance coverages, we could be subject to increased claims and liabilities that could negatively affect our results of operations and financial condition.

We extend trade credit to customers for purchases of our services, and may have difficulty collecting receivables from them.

We grant trade credit, generally without collateral, to our customers for the purchase of our services. We have in the past, and may in the future, have difficulty collecting receivables from customers, particularly those experiencing financial difficulties. Our customers in the T&D segment include investor-owned utilities,

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cooperatives, private developers, government-funded utilities, independent power producers, independent transmission companies, industrial facility owners and other contractors. Our customers in the C&I segment include general contractors, commercial and industrial facility owners, local governments and developers located in our regional markets. Our customers also include special purpose entities that own T&D projects which do not have the financial resources of traditional transmission utility operators. Consequently, we are subject to potential credit risk related to changes in business and economic factors. Due to our work on large construction projects, a few customers sometimes may comprise a large portion of our receivable balance at any point in time. If any of our major customers experience financial difficulties, we could experience reduced cash flows and losses in excess of current allowances provided. In addition, material changes in any of our customers’ revenues or cash flows could affect our ability to collect amounts due from them.

We may not be able to compete for, or work on, certain projects if we are not able to obtain necessary bonds, letters of credit, bank guarantees or other financial assurances.

Our contracts may require that we provide to our customers security for the performance of their projects in the form of bonds, letters of credit, bank guarantees or other financial assurances. Current or future market conditions, including losses incurred in the construction industry or as a result of large corporate bankruptcies, as well as changes in our sureties’ assessment of our operating and financial risk, could cause our surety providers and lenders to decline to issue or renew, or substantially reduce the amount of, bid or performance bonds for our work and could increase our costs associated with collateral. These actions could be taken on short notice. If our surety providers or lenders were to limit or eliminate our access to bonding, letters of credit or guarantees, our alternatives would include seeking capacity from other sureties and lenders, finding more business that does not require bonds or allows for other forms of collateral for project performance, such as cash. We may be unable to secure these alternatives in a timely manner, on acceptable terms, or at all, which could affect our ability to bid for or work on future projects requiring financial assurances.

We have also granted security interests in various assets to collateralize our obligations to our sureties and lenders. Furthermore, under standard terms in the surety market, sureties issue or continue bonds on a project-by-project basis and can decline to issue bonds at any time or require the posting of additional collateral as a condition to issuing or renewing any bonds. If we were to experience an interruption or reduction in the availability of bonding capacity as a result of these or any other reasons, we may be unable to compete for or work on certain projects that would require bonding.

Inability to hire or retain key personnel could disrupt our business.

The success of our business depends upon the continued efforts and abilities of our executive officers and senior management, including the management at each operating subsidiary. The relationships between our executive officers and senior management and our customers are important to obtaining and retaining business. We are also dependent upon our project managers and field supervisors who are responsible for managing and recruiting employees to our projects. There can be no assurance that any individual will continue in his or her capacity for any particular period of time. Industry-wide competition for managerial talent is high. Given that level of competition, there could be situations where our overall compensation package may be viewed as less attractive as compared to our competition, and we may experience the loss of key personnel. The loss of key personnel, or the inability to hire and retain qualified employees, could negatively impact our ability to manage our business and relationships with our customers.

Our business may be affected by seasonal and other variations, including severe weather conditions and the nature of our work environment.

Although our revenues are primarily driven by spending patterns in our customers’ industries, our revenues and results of operations can be subject to seasonal variations, particularly in our T&D segment. These variations are influenced by weather, hours of daylight, customer spending patterns, available system outages from utilities and holidays, and can have a significant impact on our gross margins. Our profitability may decrease during the winter months and during severe weather conditions because work performed during these periods may be restricted and more costly to complete. Additionally, our T&D customers often cannot remove their T&D lines from service during the summer months when consumer demand for electricity is at its peak, delaying the demand for our maintenance and repair services. Furthermore, our work is performed


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under a variety of conditions, including but not limited to, difficult terrain, difficult site conditions and large urban centers where delivery of materials and availability of labor may be impacted and sites which may have been exposed to harsh and hazardous conditions. Working capital needs are also influenced by the seasonality of our business. We generally experience a need for additional working capital during the spring when we increase outdoor construction in weather-affected regions of the country, and we convert working capital assets to cash during the winter months.

We may fail to execute or integrate acquisitions or joint ventures successfully.

As part of our growth strategy, we may acquire companies or enter into joint ventures that expand, complement or diversify our business. The number of acquisition targets or joint venture opportunities that meet our criteria may be limited, and we may face competition for these opportunities. Acquisitions or joint ventures that we may pursue may also involve significant cash expenditures, the incurrence or assumption of debt or burdensome regulatory requirements.

Future acquisitions or joint ventures may expose us to operational challenges and risks, including the diversion of management’s attention from our existing business, the failure to retain key personnel or customers of an acquired business, difficulties integrating the operations and personnel, failure of acquired companies to achieve the results we expect, the assumption of unknown liabilities of the acquired business for which there are inadequate reserves and the potential impairment of acquired intangible assets. Our ability to grow and maintain our competitive position may be affected by our ability to successfully integrate any businesses acquired.

Work stoppages or other labor issues with our unionized workforce could adversely affect our business.

As of December 31, 2017, approximately 91% of our craft labor employees were covered by collective bargaining agreements. Although the majority of these agreements prohibit strikes and work stoppages, we cannot be certain that strikes or work stoppages will not occur in the future. Strikes or work stoppages could adversely impact our relationships with our customers and could cause us to lose business, resulting in decreased revenues.

Multi-employer pension plan obligations related to our unionized workforce could adversely impact our earnings.

Our collective bargaining agreements may require us to participate with other companies in various multi-employer pension plans. To the extent that we participate in any multi-employer pension plans that are underfunded, the Employee Retirement Income Security Act of 1974, as amended by the Multi-Employer Pension Plan Amendments Act of 1980, may subject us to substantial liabilities under those plans if we were to withdraw from them, if they were terminated or experience a mass withdrawal. Furthermore, the Pension Protection Act of 2006, as amended by the Consolidated and Further Continuing Appropriations Act of 2015 (the “PPA”) imposes additional funding and operational rules applicable to plan years beginning after 2007 for multi-employer pension plans that are classified as either “endangered,” “seriously endangered” or “critical” status. Plans in these classifications must adopt measures to improve their funded status, which may require additional employer contributions and/or modifications to employee benefits based on future union wages paid.

We have been informed that several of the multi-employer pension plans to which our subsidiaries contribute have been classified as “critical” or “endangered” status as defined by the PPA. Although we are not currently aware of any potential significant liabilities to us as a result of these plans being classified as being in a “critical” or “endangered” status, our future financial results could be impacted by the amended funding rules.

We may not have access in the future to sufficient funding to finance desired growth and operations.

If we cannot secure funds in the future, including financing on acceptable terms, we may be unable to support our growth strategy or future operations. Our credit facility contains numerous covenants and requires us to meet and maintain certain financial ratios and other tests. General business and economic conditions may affect our ability to comply with these covenants or meet those financial ratios and other tests, which may limit our ability to borrow under the facility.


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Restrictions in the availability of bank credit could cause us to forgo otherwise attractive business opportunities and could require us to modify our business plan. We will continue to closely monitor our liquidity and the overall condition of the financial markets; however, we can give no assurance that we will be able to obtain such financing either on favorable terms or at all in the future.

We, or our business partners, may be subject to failures, interruptions or breaches of information technology systems, which could affect our operations, competitive position, sensitive information or damage our reputation.

We use our own information technology systems as well as our business partners’ systems to maintain certain data and provide reports. Furthermore, in connection with our business we collect and retain personally identifiable and other sensitive information of our customers, stockholders and employees, all of which expect that we will adequately protect such information. The failure of these systems to operate effectively or problems with transitioning to upgraded or replacement systems could cause delays and reduce the efficiency of our operations, which could have a material adverse effect on our results of operations, and significant costs could be incurred to remediate the problem. Additionally, our security measures, and those of our business partners, may be compromised as a result of third-party security breaches, employee error, malfeasance, faulty password management, or other irregularity, and may result in persons obtaining unauthorized access to our customer, stockholder or employee data or accounts. While we devote significant resources to network security and other security measures to protect our systems and data, these security measures cannot provide absolute security. If a security breach affects our informational technology systems, or results in the unauthorized release of our proprietary or sensitive information, our competitive situation or our reputation could be damaged and could result in significant costs, fines and litigation.

Our stock has experienced significant price and volume fluctuations and future sales of our common stock could lead to dilution of our issued and outstanding common stock.

From time to time, the price and trading volume of our common stock, as well as the stock of other companies in our industry, may experience periods of significant volatility in response to various factors and events beyond our control. Company-specific issues and developments generally in our industry (including the regulatory environment) and the capital markets and the economy in general may cause this volatility. We may issue equity securities in the future, including securities that are convertible into or exchangeable for, or that represent the right to receive, common stock. The issuance of additional shares of our common stock or other equity securities, including sales of shares in connection with any future acquisitions, could be substantially dilutive to our stockholders. In addition numerous factors could have a significant effect on the price of our common stock, including but not limited to:

announcements of fluctuations in our operating results or the operating results of one of our competitors;
market conditions in our customers’ industries;
capital spending plans of our significant customers;
announcements by us or one of our competitors of new or terminated customers or new, amended or terminated contracts;
announcements of acquisitions by us or one of our competitors;
changes in recommendations or earnings estimates by securities analysts;
future repurchases of our common stock; and
future sales of our common stock or other securities, including any shares issued in connection with business acquisitions or earn-out obligations for any future acquisitions.

Our operations are subject to a number of operational risks which may result in unexpected costs or liabilities.

Unexpected costs or liabilities may arise from lawsuits or indemnity claims related to the services we perform or have performed in the past. We have in the past been, and may in the future be, named as a


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defendant in lawsuits, claims and other legal proceedings during the ordinary course of our business. These actions may seek, among other things, compensation for alleged personal injury, workers’ compensation, employment discrimination, breach of contract, property damage, environmental remediation, punitive damages, civil penalties or other losses, consequential damages or injunctive or declaratory relief. In addition, pursuant to our service arrangements, we generally indemnify our customers for claims related to the services we provide under those service arrangements. In some instances, our services are integral to the operation and performance of the electric distribution and transmission infrastructure. As a result, we may become subject to lawsuits or claims for any failure of the systems we work on, even if our services are not the cause for such failures. In addition, we may incur civil and criminal liabilities to the extent that our services contributed to any personal injury or property damage. The outcome of any of these lawsuits, claims or legal proceedings could result in significant costs and diversion of managements’ attention to the business.

Opportunities associated with government contracts could lead to increased governmental regulation applicable to us.

Most government contracts are awarded through a regulated competitive bidding process. If we were to be successful in being awarded government contracts, significant costs could be incurred by us before any revenues were realized from these contracts. Government agencies may review a contractor’s performance, cost structure and compliance with applicable laws, regulations and standards. If government agencies determine through these reviews that costs were improperly allocated to specific contracts, they will not reimburse the contractor for those costs or may require the contractor to refund previously reimbursed costs. If government agencies determine that we engaged in improper activity, we may be subject to civil and criminal penalties. Government contracts are also subject to renegotiation of profit and termination by the government prior to the expiration of the term.

Changes in our interpretation of tax laws could impact the determination of our income tax liabilities for a tax year.

We have operations in the United States and Canada and are subject to the jurisdiction of a multiple federal and state taxing authorities. The income earned in these various jurisdictions is taxed on different bases which are subject to change by the taxing authorities. The final determination of our income tax liabilities involves the interpretation of local tax laws, tax treaties and related authorities in each jurisdiction, as well as the significant use of estimates and assumptions regarding the scope of future operations and results achieved and the timing and nature of income earned and expenditures incurred. Changes in the operating environment, including changes in or interpretation of tax law, could impact the determination of our income tax liabilities for the year.

Additionally, we are currently evaluating provisions of the United States Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017, which among other things, lowered the corporate income tax rate from 35% to 21% and moved the country towards a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of foreign subsidiaries. In the fourth quarter of 2017, we recorded a net income tax benefit of approximately $7.8 million related to our preliminary assessment of the net effects of the Tax Act. As we do not have all the necessary information to analyze all income tax effects of the Tax Act, this is a provisional amount which we believe represents a reasonable estimate of the accounting implications of the Tax Act. We will continue to evaluate the Tax Act and adjust the provisional amounts as additional information is obtained. The ultimate impact of the Tax Act may differ from our provisional amounts due to changes in our interpretations and assumptions, as well as additional regulatory guidance that may be issued. We expect to complete our detailed analysis no later than the fourth quarter of 2018. For further information, see Note 10 — Income Taxes to the consolidated Financial Statements.

Risks associated with operating in the Canadian market could restrict our ability to expand and harm our business and prospects.

There are numerous inherent risks in conducting our business in a different country including, but not limited to, potential instability in markets, political, economic or social conditions, and difficult or additional legal and regulatory requirements applicable to our operations. Limits on our ability to repatriate earnings, exchange controls, and complex U.S. and Canadian laws and treaties could also adversely impact our


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operations. Changes in the value of the Canadian dollar could increase or decrease the U.S. dollar value of our profits earned or assets held in Canada or potentially limit our ability to reinvest earnings from our operations in Canada to fund the financing requirements of our operations in the U.S. These risks could restrict our ability to provide services to Canadian customers or to operate our Canadian business profitably, and could negatively impact our results. We also are exposed to currency risks relating to the translation of certain monetary transactions, assets and liabilities.

Our failure to comply with the laws applicable to our Canadian activities, including the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws, could have an adverse effect on us.

The U.S. Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery laws in other jurisdictions prohibit U.S.-based companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business. Our policies mandate compliance with all applicable anti-bribery laws. Although we have policies and procedures designed to ensure that we, our employees, our agents and others who work with us in foreign countries comply with the FCPA and other anti-bribery laws, there is no assurance that such policies or procedures will protect us against liability under the FCPA or other laws for actions taken by our agents, employees and intermediaries. If we are found to be liable for FCPA violations (either due to our own acts or inadvertence, or due to the acts or inadvertence of others), we could suffer from severe criminal or civil penalties or other sanctions, which could have a material adverse effect on our reputation, business, results of operations, financial condition or cash flows. In addition, detecting, investigating and resolving actual or alleged FCPA violations is expensive and could consume significant time and attention of our senior management.

The nature of our business exposes us to potential liability for warranty claims and faulty engineering, which may reduce our profitability.

Under our contracts with customers, we typically provide a warranty for the services we provide, guaranteeing the work performed against defects in workmanship and material. As much of the work we perform is inspected by our customers for any defects in construction prior to acceptance of the project, the warranty claims that we have historically received have been minimal. Additionally, materials used in construction are often provided by the customer or are warranted against defects from the supplier. However, certain projects may have longer warranty periods and include facility performance warranties that may be broader than the warranties we generally provide. In these circumstances, if warranty claims occurred, it could require us to re-perform the services or to repair or replace the warranted item, at a cost to us, and could also result in other damages if we are not able to adequately satisfy our warranty obligations. In addition, we may be required under contractual arrangements with our customers to warrant any defects or failures in materials we provide that we purchase from third parties. While we generally require suppliers to provide us warranties that are consistent with those we provide to the customers, if any of these suppliers default on their warranty obligations to us, we may incur costs to repair or replace the defective materials for which we are not reimbursed. Costs incurred as a result of warranty claims could adversely affect our operating results, financial condition and cash flows.

Our business involves professional judgments regarding the planning, design, development, construction, operations and management of electric power transmission and commercial construction. Because our projects are often technically complex, our failure to make judgments and recommendations in accordance with applicable professional standards, including engineering standards, could result in damages. While we do not generally accept liability for consequential damages, and although we have adopted a range of insurance, risk management and risk avoidance programs designed to reduce potential liabilities, a significantly adverse or catastrophic event at one of our project sites or completed projects resulting from the services we have performed could result in significant warranty, professional liability, or other claims against us as well as reputational harm, especially if public safety is impacted. These liabilities could exceed our insurance limits or could impact our ability to obtain insurance in the future. In addition, customers, subcontractors or suppliers who have agreed to indemnify us against any such liabilities or losses might refuse or be unable to pay us. An uninsured claim, either in part or in whole, if successful and of a material magnitude, could have a substantial impact on our business, financial condition, results of operations and cash flows.


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Our internal controls over financial reporting and our disclosure controls and procedures may not prevent all possible errors that could occur. Internal controls over financial reporting and disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objective will be met.

On a quarterly basis we evaluate our internal controls over financial reporting and our disclosure controls and procedures, which include a review of the objectives, design, implementation and effectiveness of the controls and the information generated for use in our periodic reports. In the course of our controls evaluation, we seek to identify data errors, control problems and to confirm that appropriate corrective actions, including process improvements, are being undertaken.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be satisfied. Internal controls over financial reporting and disclosure controls and procedures are designed to give reasonable assurance that they are effective and achieve their objectives. We cannot provide absolute assurance that all possible future control issues have been detected. These inherent limitations include the possibility that our judgments can be faulty, and that isolated breakdowns can occur because of human error. The design of our system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed absolutely in achieving our stated goals under all potential future or unforeseeable conditions. We may discover in the future that we have deficiencies in the design and operation of our internal controls. If any deficiency in our internal controls, either by itself or in combination with other deficiencies, becomes a “material weakness”, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis, we may be unable to conclude that we have effective internal control over financial reporting. In such event, investors could lose confidence in the reliability of our financial statements, which may significantly harm our business and cause our stock price to decline.

An increase in the prices of certain materials and commodities used in our business could adversely affect our business.

For certain contracts, we are exposed to market risk of increases in certain commodity prices of materials, such as copper and steel, which are used as components of supplies or materials utilized in all of our operations. We are also exposed to increases in energy prices, particularly as they relate to gasoline prices for our fleet vehicles. While we believe we can increase our prices to adjust for some price increases in commodities, there can be no assurance that price increases of commodities, if they were to occur, would be recoverable. Additionally, some of our fixed price contracts do not allow us to adjust our prices and, as a result, increases in material or fuel costs could reduce our profitability with respect to such projects.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under our credit facility are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on our variable rate indebtedness will increase even if the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.

Certain provisions in our organizational documents and Delaware law could delay or prevent a change in control of our company.

The existence of certain provisions in our organizational documents and Delaware law could delay or prevent an unsolicited change in control of our company, even if a change of control might be beneficial to our shareholders. For example, provisions in our certificate of incorporation and by-laws that could delay or prevent a change in control of our company include: a staggered board of directors, the potential of our board of directors to authorize the issuance of preferred stock, the power of a majority of our board of directors to fix the number of directors, the power of our board of directors to fill a vacancy on the board of directors, including when such vacancy occurs as a result of an increase in the number of directors, the requirement that actions to be taken by our stockholders may be taken only at an annual or special meeting of our stockholders


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and not by written consent, and advance notice provisions for director nominations or business to be considered at a stockholder meeting. In addition, Delaware law imposes restrictions on mergers and other business combinations between us and an interested stockholder (defined as the holder of 15% or more of our outstanding common stock), and prohibits us from engaging in any of a broad range of business transactions with an interested stockholder, or an interested stockholder’s affiliates and associates, for a period of three years following the date such stockholder became an interested stockholder.

We are subject to risks associated with climate change.

change including financial risks and physical risks such as an increase in extreme weather events (such as floods, wildfires or hurricanes), rising sea levels and limitations on water availability and quality.

Climate change may create physical and financial risk. Physical risks from climate change could, among other things, include an increase in extreme weather events (such as floods, wildfires or hurricanes), rising sea levels and limitations on water availability and quality. Such extreme weather conditions may limit the availability of resources, increasing the costs of our projects, or may cause projects to be delayed or cancelled.

Additionally, legislative and regulatory responses related to climate change and new interpretations of existing laws through climate change litigation may also negatively impact our operations. The cost of additional environmental regulatory requirements could impact the availability of goods and increase our costs. International treaties or accords could also have an impact on our business to the extent they lead to future governmental regulations. Compliance with any new laws or regulations regarding the reduction of greenhouse gases could result in significant changes to our operations and a significant increase in our cost of conducting business.

Accounting Risks
Our use of percentage-of-completion accounting could result in a reduction or reversal of previously recognized revenues and profits.
A significant portion of our revenues is recognized over the contract term based on costs incurred under the cost-to-cost method. This method is used because management believes costs incurred best represent the amount of work completed and remaining on our projects and is the most common basis for computing percentage of completion in our industry. The percentage-of-completion accounting practice we use results in our recognizing contract revenues and earnings ratably over the contract term in proportion to our incurrence of contract costs. The earnings or losses recognized on individual contracts are based on estimates of contract revenues, costs and profitability. Contract losses are recognized in full when determined, and contract profit estimates are adjusted based on ongoing reviews of contract profitability. In addition, we record adjustments to estimated costs of contracts when we believe the change in estimate is probable and the amounts can be reasonably estimated. These adjustments could result in both increases and decreases in profit margins. Actual results could differ from estimated amounts and could result in a reduction or elimination of previously recognized earnings. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results from Operations — Critical Accounting Policies” and in the notes to our Financial Statements, for a discussion on howpercentage-of-completion accounting impacts our business.
Our financial results are based upon estimates and assumptions that may differ from actual results.
In preparing our financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”), estimates and assumptions are used by management in determining the reported amounts of assets and liabilities, revenues and expenses recognized during the periods presented and disclosures of contingent assets and liabilities known to exist as of the date of the financial statements. These estimates and assumptions must be made because certain information that is used in the preparation of our financial statements is dependent on future events. These estimates and assumptions cannot be calculated with a high degree of precision from data available or is not capable of being readily calculated. In some cases, these estimates are particularly difficult to determine, and we must exercise significant judgment.
The most significant estimates we use are related to costs to complete contracts, pending change orders and claims, shared savings, insurance reserves, income tax reserves, estimates surrounding stock-based compensation, the recoverability of goodwill and intangibles, and accounts receivable reserves.
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Our business, financial condition, results of operations and cash flows could be adversely affected by impairments to goodwill, other intangible assets, receivables, long-lived assets or investments. For example, when we acquire a business, we record goodwill in an amount equal to the amount we paid for the business minus the fair value of the net tangible assets and other intangible assets of the acquired business. Goodwill and other intangible assets that have indefinite useful lives cannot be amortized, but instead must be tested at least annually for impairment. For additional description on this impairment testing, please read Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — “Goodwill and Intangibles”. Any future impairments, including impairments of goodwill, intangible assets, long-lived assets or investments, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Pricing and Cost Risks
Our actual costs may be greater than expected in performing our fixed-price and unit-price contracts.
We generate a significant portion of our revenues and profits under fixed-price and unit-price contracts. We must estimate the costs of completing a particular project when we bid for these types of contracts. The actual cost of labor and materials, however, may vary from the costs we originally estimated and we may not be successful in recouping additional costs from our customers. These variations, along with other risks inherent in performing fixed-price and unit-price contracts, may cause actual revenue and gross profits for a project to differ from those we originally estimated and could result in reduced profitability or losses on projects due to changes in a variety of factors such as:
•failure to properly estimate costs of engineering, material, equipment or labor;
•inefficient labor performance;
•unanticipated technical problems with the materials or services being supplied by us, which may require us to incur additional costs to remedy the problem;
•project modifications that create unanticipated costs;
•changes in the costs of equipment, materials, labor or subcontractors;
•the failure of our suppliers or subcontractors to perform;
•difficulties in our customers obtaining required governmental permits or approvals;
•site conditions that differ from those assumed in the original bid;
•the availability and skill level of workers in the geographic location of the project;
•an increase in the cost of fuel or other resources;
•changes in local laws and regulations;
•delays caused by local weather conditions, third parties or customers; and
•quality issues requiring rework.
An increase in the prices of certain materials and commodities used in our business could adversely affect our business.
For certain contracts, we are exposed to market risk of increases in certain commodity prices of materials, such as copper and steel, which are used as components of supplies or materials utilized in all of our operations. In addition, our customers’ capital budgets may be impacted by the prices of certain materials, and reduced customer spending could lead to fewer project awards and more competition. These prices could be materially impacted by general market conditions and other factors, including U.S. trade relationships with other countries or the imposition of tariffs. We are also exposed to increases in energy prices, particularly as they relate to gasoline prices for our fleet vehicles. While we believe we can increase our prices to adjust for some price increases in commodities, there can be no assurance that price increases of commodities, if they were to occur, would be recoverable. Additionally, some of our fixed price contracts do not allow us to adjust our prices and, as a result, increases in material or fuel costs could reduce our profitability with respect to such projects.
Capital and Credit Risks
We may not be able to compete for, or work on, certain projects if we are not able to obtain necessary bonds, letters of credit, bank guarantees or other financial assurances.
Many of our contracts require that we provide security to our customers for the performance of their projects in the form of bonds, letters of credit, bank guarantees or other financial assurances. Current or future market conditions, including losses incurred in the construction industry or as a result of large corporate bankruptcies, as well as changes in our sureties’ assessment of our operating and financial risk, could cause our surety providers and lenders to decline to issue or renew, or substantially reduce the amount of, bid or performance bonds for our work and could increase our costs associated with collateral. These
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actions could be taken on short notice. If our surety providers or lenders were to limit or eliminate our access to bonding, letters of credit or guarantees, our alternatives would include seeking capacity from other sureties and lenders, finding more business that does not require bonds or allows for other forms of collateral for project performance, such as cash. We may be unable to secure these alternatives in a timely manner, on acceptable terms, or at all, which could affect our ability to bid for or work on future projects requiring financial assurances.
We have also granted security interests in various assets to collateralize our obligations to our sureties and lenders. Furthermore, under standard terms in the surety market, sureties issue or continue bonds on a project-by-project basis and can decline to issue bonds at any time or require the posting of additional collateral as a condition to issuing or renewing any bonds. If we were to experience an interruption or reduction in the availability of bonding capacity as a result of these or any other reasons, we may be unable to compete for or work on certain projects that would require bonding.
COVID-19 Risks
COVID-19 may have an adverse impact on our business, employees, liquidity, financial condition, results of operations and cash flows.
In response to the COVID-19 pandemic and related mitigation measures, we implemented changes in our business in an effort to protect our employees and customers, and to support appropriate health and safety protocols, including implementing remote, alternative and flexible work arrangements, where possible. In the future these changes and other impacts from COVID-19 could result in higher operating costs and could adversely impact our business, including certain operational, reporting, accounting or other processes. In addition, an extended period of remote work arrangements could impair our ability to effectively manage our business, and introduce additional operational risks, including but not limited to cybersecurity risks and increased vulnerability to security breaches, cyber-attacks, computer viruses, ransomware, or other similar events and intrusions.
As our response to the pandemic continues to evolve, we may incur additional costs and could experience adverse impacts to our business, each of which may be significant. We have focused on controlling our costs and capital expenditures to preserve our ability to continue to fund our operations and may need to take additional actions to reduce spending in the future. Although we are unable to predict the ultimate impact of the COVID-19 pandemic at this time, the pandemic could adversely affect, our business, financial condition, results of operations and cash flows. Such effects may be material and the potential impacts include, but are not limited to:
• disruptions in our supply chain due to transportation delays, travel restrictions, raw material cost increases and shortages, and closures of businesses or facilities;
• reductions in our operating effectiveness due to workforce disruptions resulting from “shelter-in-place” and “stay-at-home” orders, and the unavailability of key personnel necessary to conduct our business activities; and
• volatility in the global financial markets, which could have a negative impact on our ability to access capital and additional sources of financing in the future.
The situation surrounding COVID-19 remains fluid, and given its inherent uncertainty, the pandemic may have an adverse impact on our business in the near term. Should these conditions persist for a prolonged period, the COVID-19 pandemic, including any of the above factors and others that are currently unknown, may have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, we cannot predict the impact that COVID-19 will have on our customers and suppliers, and any adverse impacts on these parties may have a material adverse impact on our business.
Employee Risks
Work stoppages or other labor issues with our unionized workforce could adversely affect our business, and we may be subject to unionization attempts.
As of December 31, 2020, approximately 88% of our craft labor employees were covered by collective bargaining agreements. Although most of these agreements prohibit strikes and work stoppages, we cannot be certain that strikes or work stoppages will not occur in the future. Strikes or work stoppages could adversely impact our relationships with our customers and could cause us to lose business, resulting in decreased revenues. From time to time, we have experienced attempts to unionize our nonunion businesses. Such efforts often delay work and present the risk of labor unrest. If nonunion employees were to unionize, we could experience higher ongoing labor costs.
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Multi-employer pension plan obligations related to our unionized workforce could adversely impact our earnings.
Our collective bargaining agreements may require us to participate with other companies in various multi-employer pension plans. To the extent that we participate in any multi-employer pension plans that are underfunded, the Employee Retirement Income Security Act of 1974, as amended by the Multi-Employer Pension Plan Amendments Act of 1980, may subject us to substantial liabilities under those plans if we were to withdraw from them, if they were terminated or experience a mass withdrawal. Furthermore, the Pension Protection Act of 2006, as amended, imposes additional funding and operational rules applicable to plan years beginning after 2007 for multi-employer pension plans that are classified as either “endangered,” “seriously endangered” or “critical” status. Plans in these classifications must adopt measures to improve their funded status, which may require additional employer contributions and/or modifications to employee benefits based on future union wages paid.
Although we are not currently aware of any potential significant liabilities to us as a result of these plans being classified as being in a “critical” or “endangered” status, our future financial results could be impacted by the amended funding rules.
Cybersecurity and Information Technology Risks
We rely on information, communications and data systems in our operations and we or our business partners may be subject to failures, interruptions or breaches of such systems, which could affect our operations or our competitive position, expose sensitive information or damage our reputation.
We and our business partners are heavily reliant on information and communications technology and related systems to conduct our business. We also rely on third-party software and information technology to run certain of our critical accounting, project management and financial information systems. Furthermore, in connection with our business we may collect and retain personally identifiable and other sensitive information of our customers and personnel, all of which expect that we will adequately protect such information. The failure of these systems to operate effectively or problems with transitioning to upgraded or replacement systems could cause delays and reduce the efficiency of our operations, which could have a material adverse effect on our business, financial position, results of operations and cash flows, and significant costs could be incurred to remediate any problem.
Increased IT security threats and more sophisticated computer crimes, including advanced persistent threats, computer viruses, ransomware, other types of malicious code, hacking, phishing and social engineering schemes designed to provide access to our networks or data, pose a potential risk to the security of our IT systems, networks and services, as well as the confidentiality, availability and integrity of our data. If the IT systems, networks or service providers we rely upon fail to function properly, or if we suffer a loss or disclosure of sensitive information, we may suffer interruptions in our ability to manage operations, be subject to government enforcement actions, litigation, and reputational, competitive and business harm which may adversely impact our business, financial position, results of operations and cash flows, competitive position and reputation.
As techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. As cyber threats continue to evolve, we may be required to expend additional resources to comply with new cyber-related regulations, continue to enhance our information security measures or investigate and remediate any information security vulnerabilities. Our remediation efforts may not be successful and could result in interruptions, delays or cessation of service. This could also impact the cost and availability of cyber insurance to us. Furthermore, our relationships with, and access provided to, third parties and their vendors may create difficulties in anticipating and implementing adequate preventative measures or mitigating harms after an attack or breach occurs.
If an actual or perceived breach of our security occurs, the public perception of the effectiveness of our security measures could be harmed and we could lose customers. Any of these disruptions or breaches of security would have a material adverse effect on our business, financial position, results of operations and cash flows.
In addition, current and future laws and regulations governing data privacy and the unauthorized disclosure of confidential information may pose complex compliance challenges and/or result in additional costs. A failure to comply with such laws and regulations could result in penalties or fines, legal liabilities and/or harm our reputation. The continuing and evolving threat of cyber-attacks has also resulted in increased regulatory focus on risk management and prevention. New cyber-related regulations or other requirements could cause us to incur significant costs, which could have an adverse effect on our business, financial position, results of operations and cash flows.
Item 1B.Unresolved Staff Comments

Item 1B.    Unresolved Staff Comments
None.

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Item 2.Properties

Item 2.    Properties
Our principal executive offices are located at 1701 Golf Road, Suite 3-1012, Rolling Meadows, Illinois 60008, the lease term of which expires on January 31, 2020.12150 East 112th Avenue, Henderson, Colorado 80640 in a building that we own. In addition to our executive offices, our corporate accounting and finance departments, corporate information technology department and certain legal, accounting and other personnel are located atin this office.building. As of December 31, 2017,2020, we owned 1516 operating facilities and leased many other properties in various locations throughout our service territory. Most of our properties are used as operational offices or for fleet operations. We believe that our facilities are adequate for our current operating needs. We do not believe that any owned or leased facility is material to our operations and, if necessary, we could obtain replacement facilities for our leased facilities.

Item 3.Legal Proceedings

Item 3.    Legal Proceedings
We are, from time-to-time, party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract and/or property damages, punitive damages, civil and criminal penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, we record reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We do not believe that any of these proceedings, separately or in the aggregate, would be expected to have a material adverse effect on our financial position, results of operations, or cash flows.

We are routinely subject to other civil claims, litigation and arbitration, and regulatory investigations arising in the ordinary course of our past and present businesses as well as in respect of our divested businesses. Some of these include claims related to our services and operations, and asbestos-related claims concerning operations of a divested subsidiary of our predecessor. Wewe believe that we have strong defenses to these claims as well as insurance coverage that will contribute to any settlement or liability in the event any asbestos-related claim isclaims are not resolved in our favor. These claims have not had a material impact on us to date, and we believe the likelihood that a future material adverse outcome will result from these claims is remote. However, if facts and circumstances change in the future, we cannot be certain that an adverse outcome of one or more of these claims would not have a material adverse effect on our financial condition, results of operations, or cash flows.

Item 4.Mine Safety Disclosures

Item 4.    Mine Safety Disclosures
Not Applicable.


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PART II
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock, par value $0.01, is listed on The NASDAQNasdaq Global Market under the symbol “MYRG.”

The following table sets forth the high and low sales prices of our common stock per share, as reported by The NASDAQ Global Market for each of the periods listed:

  
 High Low
Year Ended December 31, 2017
          
First Quarter $43.77  $35.89 
Second Quarter $43.49  $27.83 
Third Quarter $32.26  $23.00 
Fourth Quarter $37.62  $29.05 
Year Ended December 31, 2016
          
First Quarter $25.69  $17.77 
Second Quarter $26.70  $22.59 
Third Quarter $30.38  $21.84 
Fourth Quarter $41.43  $28.34 

Holders of Record

As of March 7, 2018,February 26, 2021, we had 147 holders of record of our common stock.

Dividend Policy

We have neither declared nor paid any cash dividend on our common stock since our common stock began trading publicly on August 12, 2008. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to compliance with legal requirements and covenants under any existing financing agreements, which may restrict or limit our ability to declare or pay dividends, and will depend on our financial condition, results of operations, capital requirements, general business conditions, and other factors that our board of directors may deem relevant.

Issuances of Common Stock
On October 22, 2020, a total of 270 unregistered shares of our common stock, valued in the aggregate at $11,966 was issued to a director of the Company who elected to receive a portion of their director retainer fee in stock in lieu of cash. The shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933 for an issuance not involving a public offering.
Purchases of Common Stock.

We did not purchase any sharesStock

The following table includes all of the Company’s repurchases of common stock for the periods shown. Repurchased shares are retired and returned to authorized but unissued common stock.
PeriodTotal Number of Shares Purchased (1)Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (2)
October 1, 2020 - October 31, 20202,597 $43.94 — $50,000,000 
November 1, 2020 - November 30, 20202,172 $51.92 — $50,000,000 
December 1, 2020 - December 31, 2020— $— — $50,000,000 
Total4,769 $47.57 — 
(1) This column contains repurchases of common stock to satisfy tax obligations on the vesting of restricted stock under the 2007 Long-Term Incentive Plan (as amended).
(2) On October 22, 2020 the Company’s Board of Directors authorized a new $50.0 million share repurchase program effective November 2, 2020. The Company intends to fund the share repurchase program from cash on hand and through borrowings under its credit facility. The new share repurchase program will expire on November 2, 2021, or when the authorized funds are exhausted, whichever is earlier. No shares were repurchased under the new program in October, November or December of 2017.

2020.

Performance Graph

The following Performance Graph and related information shall be deemed “furnished” and not “filed” for purposes of Section 18 of the Exchange Act, and such information shall not be incorporated by reference into any future filing under the Securities Act or the Exchange Act except to the extent that we specifically incorporate it by reference into such filing.

The following graph compares, for the period from December 31, 20122015 to December 31, 2017,2020, the cumulative total stockholder return on our common stock with the cumulative total return on the Standard & Poor’s 500 Index (the “S&P 500 Index”), the Russell 2000 Index, and a peer group index selected by our management that includes fourteentwelve publicly traded companies within our industry (the “Peer Group”). The comparison assumes that $100 was invested on December 31, 20122015 and further assumes any dividends were reinvested quarterly. The stock price performance reflected on the following graph is not necessarily indicative of future stock price performance.


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The companies in the Peer Group were selected because they comprise a broad group of publicly traded companies, each of which has some operations similar to ours. When taken as a whole, the Peer Group more closely resembles our total business than any individual company in the group while reducing the impact of a significant change in any one of the Peer Group company’s stock price. The Peer Group is composed of the following companies:

Aegion CorporationEMCOR Group*Granite Construction IncorporatedQuanta Services, Inc.*Matrix Service Company
Astec Industries, Inc.Granite Construction IncorporatedIES Holdings, Inc.Tetra Tech, Inc.Primoris Services Corporation*
Comfort Systems USA, Inc.IES Holdings, Inc.MasTec,Quanta Services, Inc.*TRC Companies, Inc.
Dycom Industries, Inc.Matrix Service CompanyWillbros Group,MasTec, Inc.*
EMCOR Group*Primoris Services CorporationTetra Tech, Inc.

*Considered our core group of peers with a more significant portion of operations being similar to ours than the overall group. Graph presents entire Peer Group.

      
 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017
MYR Group Inc.  100.00   112.72   123.15   92.63   169.35   160.58 
S&P 500  100.00   132.39   150.51   152.59   170.84   208.14 
Russell 2000  100.00   138.82   145.62   139.19   168.85   193.58 
Peer Group  100.00   124.63   114.60   113.26   168.86   195.54 
___________________________
*    Considered our core group of peers with a more significant portion of operations being similar to ours than the overall group. Graph presents entire Peer Group.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among MYR Group, Inc., the S&P 500 Index, the Russell 2000 Index,
and a peer Group
myrg-20201231_g1.jpg
*$100 invested on 12/31/2015 in stock or including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2021 Standard & Poor's, a division of S&P Global. All rights reserved
Copyright© 2021 Russell Investment Group. All right reserved.
12/31/201512/31/201612/31/201712/31/201812/31/201912/31/2020
MYR Group Inc.100.00 182.82 173.36 136.68 158.13 291.61 
S&P 500100.00 111.96 136.40 130.42 171.49 203.04 
Russell 2000100.00 121.31 139.08 123.76 155.35 186.36 
Peer Group100.00 149.36 173.81 131.61 175.60 227.17 

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Item 6.Selected Financial Data

Item 6.    Selected Financial Data
The following table sets forth certain summary financial information on a historical basis. The summary statement of operations and the balance sheet data set forth below have been derived from our audited Financial Statements and footnotes thereto included elsewhere in this filing or in prior filings. Our Financial Statements have been prepared in accordance with U.S. GAAP.accounting principles generally accepted in the United States of America (“GAAP”). Historical results are not necessarily indicative of the results we expect in the future and quarterly results are not necessarily indicative of the results of any future quarter or any full-year period. The information below should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results from Operations” and the Financial Statements and notes thereto included in this Annual Report on Form 10-K.

Statement of operations data:

     
 For the year ended December 31,For the year ended December 31,
(in thousands, except per share data) 2017 2016 2015 2014 2013(in thousands, except per share data)20202019201820172016
Contract revenues(1) $1,403,317  $1,142,487  $1,061,681  $943,967  $902,729 $2,247,392 $2,071,159 $1,531,169 $1,403,317 $1,142,487 
Contract costs  1,278,313   1,007,764   939,340   811,553   777,852 Contract costs1,971,539 1,857,001 1,364,109 1,278,313 1,007,764 
Gross profit  125,004   134,723   122,341   132,414   124,877 Gross profit275,853 214,158 167,060 125,004 134,723 
Selling, general and administrative expenses  98,611   96,424   79,186   73,818   69,818 Selling, general and administrative expenses188,535 156,674 118,737 98,611 96,424 
Amortization of intangible assets  499   886   571   334   335 Amortization of intangible assets3,586 3,849 1,843 499 886 
Gain on sale of property and equipment  (3,664)   (1,341)   (2,257)   (142)   (893) Gain on sale of property and equipment(2,813)(3,543)(3,832)(3,664)(1,341)
Income from operations  29,558   38,754   44,841   58,404   55,617 Income from operations86,545 57,178 50,312 29,558 38,754 
Other income (expense):
                         Other income (expense):
Interest income  4   5   25   106   9 Interest income9 4 24 4 5 
Interest expense  (2,603)   (1,299)   (741)   (722)   (727) Interest expense(4,563)(6,225)(3,652)(2,603)(1,299)
Other income (expense), net  (2,319)   885   174   162   (27) Other income (expense), net(606)(515)(3,616)(2,319)885 
Income before provision for income taxes  24,640   38,345   44,299   57,950   54,872 Income before provision for income taxes81,385 50,442 43,068 24,640 38,345 
Income tax expense(1)(2)  3,486   16,914   16,997   21,406   20,113 22,626 14,228 11,774 3,486 16,914 
Net income $21,154  $21,431  $27,302  $36,544  $34,759 Net income58,759 36,214 31,294 21,154 21,431 
Income per common share:
                         
Basic $1.30  $1.25  $1.33  $1.73  $1.65 
Diluted $1.28  $1.23  $1.30  $1.69  $1.61 
Less: net income (loss) attributable to noncontrolling interestLess: net income (loss) attributable to noncontrolling interest— (1,476)207 — — 
Net income attributable to MYR Group Inc.Net income attributable to MYR Group Inc.$58,759 $37,690 $31,087 $21,154 $21,431 
Income per common share attributable to MYR Group Inc.:Income per common share attributable to MYR Group Inc.:
– Basic– Basic$3.52 $2.27 $1.89 $1.30 $1.25 
– Diluted– Diluted$3.48 $2.26 $1.87 $1.28 $1.23 
Weighted average number of common shares and potential common shares outstanding:
                         Weighted average number of common shares and potential common shares outstanding:
Basic  16,273   17,109   20,577   20,922   20,821 
Diluted  16,496   17,461   21,038   21,466   21,431 
– Basic– Basic16,684 16,587 16,441 16,273 17,109 
– Diluted– Diluted16,890 16,699 16,585 16,496 17,461 

Balance sheet data:

     
 As of December 31,As of December 31,
(in thousands) 2017 2016 2015 2014 2013(in thousands)20202019201820172016
Cash and cash equivalents $5,343  $23,846  $39,797  $77,636  $76,454 Cash and cash equivalents$22,668 $12,397 $7,507 $5,343 $23,846 
Working capital(2)(3)  191,172   146,677   123,630   141,913   119,570 193,284 242,370 191,829 191,172 146,677 
Total assets  603,788   573,495   524,925   520,086   525,422 Total assets995,859 1,007,871 748,755 603,788 573,495 
Long-term debt  78,960   59,070   —   —   — 
Total debtTotal debt29,420 165,824 89,792 78,960 59,070 
Total liabilities  316,749   310,321   195,045   197,553   229,331 Total liabilities566,567 643,396 424,291 316,749 310,321 
Stockholders’ equity  287,039   263,174   329,880   322,553   296,091 
Total stockholders’ equity attributable to MYR Group Inc.Total stockholders’ equity attributable to MYR Group Inc.429,288 364,471 322,984 287,039 263,174 
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Other Data: (Unaudited)

     
 For the year ended December 31,For the year ended December 31,
(in thousands) 2017 2016 2015 2014 2013(in thousands)20202019201820172016
Net cash flows provided by (used in) operating activities $(9,198)  $54,490  $43,000  $54,976  $95,062 Net cash flows provided by (used in) operating activities$175,167 $64,899 $84,789 $(9,198)$54,490 
Net cash flows used in investing activities  (26,501)   (34,128)   (56,928)   (38,725)   (41,574) Net cash flows used in investing activities(40,926)(133,497)(93,203)(26,501)(34,128)
Net cash flows provided by (used in) financing activities  16,889   (35,539)   (23,911)   (15,069)   3,141 Net cash flows provided by (used in) financing activities(124,296)73,356 10,642 16,889 (35,539)
Depreciation and amortization(3)(4)  38,576   39,122   38,029   33,423   29,195 46,453 44,516 39,913 38,576 39,122 
Capital expenditures  30,843   25,371   46,599   39,045   42,725 Capital expenditures44,355 57,828 50,704 30,843 25,371 
Backlog(4)(5)  679,139   688,832   450,934   433,641   326,094 1,649,456 1,499,203 1,146,637 679,139 688,832 
EBITDA(5)(6) $65,815  $78,761  $83,044  $91,989  $84,785 132,392 101,179 86,609 65,815 78,761 

(1)Due to the enactment of the Tax Act on December 22, 2017, the results for the year ended December 31, 2017 include a net Tax Act benefit of $7.8 million, or $0.48 and $0.47 per basic and diluted share, respectively. See further discussion in Note 10 — Income Taxes to our Financial Statements.
(2)Working capital represents total current assets less total current liabilities. Certain adjustments were made to working capital beginning in 2016 that are not reflected in the prior periods, see additional information related to these reclassifications in Note 1 — Organization, Business and Significant Accounting Policies to our Financial Statements.
(3)Depreciation and amortization includes depreciation on capital assets, amortization of capital leases and amortization of finite-lived intangible assets.
(4)Backlog represents our estimated revenue on uncompleted contracts, including the amount of revenue on contracts on which work has not begun, minus the revenue we have recognized under such contracts. See “Item 1. Business — Backlog” for a discussion on how we calculate backlog for our business and “Item 1A. Risk Factors — Backlog may not be realized or may not result in profits and may not accurately represent future revenue.”
(5)We define EBITDA, a performance measure used by management, as net income plus: interest income and expense, provision for income taxes and depreciation and amortization, as shown in the following table. EBITDA, a non-GAAP financial measure, 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. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly-titled measures of other companies. We use, and we believe investors benefit from, the presentation of EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our Financial Statements in evaluating our operating performance and cash flow because EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, useful lives placed on assets, capital structure and the method by which assets were acquired.

___________________________
(1)On January 1, 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) using the modified retrospective method for contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under this new pronouncement, while prior period amounts were not adjusted and continue to be reported under the accounting standard Revenue Recognition Topic 605, which was in effect for those periods. Differences in revenue recognition under Topic 606 were due to accelerated recognition of contract provisions related to variable consideration previously not permitted to be recognized under Topic 605 until no remaining contingency existed related to this consideration.
(2)The Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”), among its many provisions, reduced the federal statutory tax rate from 35% to 21%. The Company applied the new provisions to its tax assets and liabilities in 2017, which resulted in a net reduction of income tax expense. Income tax expense in the years after 2017 benefited from the lower federal statutory tax rate and other provisions of the 2017 Tax Act. See further discussion in Note 12 — Income Taxes to our Financial Statements.
(3)Working capital is a non-GAAP measure. The Company defines working capital as total current assets less total current liabilities. The following table provides the Company’s calculation of working capital:
As of December 31,
(in thousands)20202019201820172016
Total current assets$636,684 $639,184 $475,634 $379,736 $342,899 
Less: total current liabilities(443,400)(396,814)(283,805)(188,564)(196,222)
Working capital$193,284 $242,370 $191,829 $191,172 $146,677 
(4)Depreciation and amortization includes depreciation on capital assets, amortization of finance lease assets and amortization of finite-lived intangible assets.
(5)Backlog represents our estimated revenue on uncompleted contracts, including the amount of revenue on contracts on which work has not begun, minus the revenue we have recognized under such contracts. See “Item 1. Business — Backlog” for a discussion on how we calculate backlog for our business and “Item 1A. Risk Factors — Backlog may not be realized or may not result in profits and may not accurately represent future revenue.”
(6)EBITDA is a non-GAAP measure used by management that we define as net income attributable to MYR Group Inc. plus net income from noncontrolling interests, interest expense net of interest income, income tax expense and depreciation and amortization, as shown in the following table. EBITDA does not purport to be an alternative to net income attributable to MYR Group Inc. as a measure of operating performance or to net cash flows provided by operating activities as a measure of liquidity. We believe that EBITDA is useful to investors and other external users of our Consolidated Financial Statements in evaluating our operating performance and cash flow because EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods, book value of assets, useful lives placed on assets, capital structure and the method by which assets were acquired. Because not all companies define EBITDA as we do, this presentation of EBITDA may not be comparable to other similarly-titled measures of other companies. We use, and we believe investors benefit from, the presentation of EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations.
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Using EBITDA as a performance measure has material limitations as compared to net income, or other financial measures as defined under U.S. GAAP, as it excludes certain recurring items, which may be meaningful to investors. EBITDA excludes interest expense ornet of interest income; however, as we have borrowed money to finance transactions and operations, or invested available cash to generate interest income, interest expense and interest income are elements of our cost structure and can affect our ability to generate revenue and returns for our stockholders. Further, EBITDA excludes depreciation and amortization; however, as we use capital and intangible assets to generate revenues, depreciation and amortization are a necessary element of our costs and ability to generate revenue. Finally, EBITDA excludes income taxes; however, as we are organized as a corporation, the payment of taxes is a necessary element of our operations. As a result of these exclusions from EBITDA, any measure that excludes interest expense net of interest income, depreciation and amortization and income taxes has material limitations as compared to net income. When using EBITDA as a performance measure, management


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compensates for these limitations by comparing EBITDA to net income in each period, to allow for the comparison of the performance of the underlying core operations with the overall performance of the company on a full-cost, after-tax basis. Using both EBITDA and net income to evaluate the business allows management and investors to (a) assess our relative performance against our competitors and (b) monitor our capacity to generate returns for our stockholders.

The following table provides a reconciliation of net income attributable to MYR Group Inc. to EBITDA:

     
 For the year ended December 31,For the year ended December 31,
(in thousands) 2017 2016 2015 2014 2013(in thousands)20202019201820172016
Net income attributable to MYR Group Inc.Net income attributable to MYR Group Inc.$58,759 $37,690 $31,087 $21,154 $21,431 
Net income (loss) - noncontrolling interestsNet income (loss) - noncontrolling interests— (1,476)207 — — 
Net income $21,154  $21,431  $27,302  $36,544  $34,759 Net income58,759 36,214 31,294 21,154 21,431 
Interest expense, net  2,599   1,294   716   616   718 Interest expense, net4,554 6,221 3,628 2,599 1,294 
Provision for income taxes  3,486   16,914   16,997   21,406   20,113 
Depreciation and amortization(2)  38,576   39,122   38,029   33,423   29,195 
Income tax expenseIncome tax expense22,626 14,228 11,774 3,486 16,914 
Depreciation and amortizationDepreciation and amortization46,453 44,516 39,913 38,576 39,122 
EBITDA $65,815  $78,761  $83,044  $91,989  $84,785 EBITDA$132,392 $101,179 $86,609 $65,815 $78,761 

We also use EBITDA as a liquidity measure. Certain material covenants contained within our credit agreement (the “Credit Agreement”) are based on EBITDA.EBITDA with certain additional adjustments as defined in the Credit Agreement. Non-compliance with these financial covenants under the Credit Agreement — our interest coverage ratio which is defined in the Credit Agreement as Consolidated EBITDA (as defined in the Credit Agreement) divided by interest expense (as defined in the Credit Agreement) and our leverage ratio, which is defined in the Credit Agreement as Consolidated Total Indebtedness (as defined in the Credit Agreement), divided by Consolidated EBITDA (as defined in the Credit Agreement) — could result in our lenders requiring us to immediately repay all amounts borrowed. If we anticipated a potential covenant violation, we would seek relief from our lenders, likely causing us to incur additional cost, and such relief might not be available, or if available, might not be on terms as favorable as those in the Credit Agreement. In addition, if we cannot satisfy these financial covenants, we would be prohibited under the Credit Agreement from engaging in certain activities, such as incurring additional indebtedness, making certain payments, and acquiring or disposing of assets. Based on the information above, management believes that the presentation of EBITDA as a liquidity measure is useful to investors and relevant to their assessment of our capacity to service or incur debt, fund capital expenditures, finance acquisitions and expand our operations.

The following table provides a reconciliation of net cash flows provided by operating activities to EBITDA:

     
 For the year ended December 31,For the year ended December 31,
(in thousands) 2017 2016 2015 2014 2013(in thousands)20202019201820172016
Net cash flows provided by (used in) operating activities $(9,198)  $54,490  $43,000  $54,976  $95,062 Net cash flows provided by (used in) operating activities$175,167 $64,899 $84,789 $(9,198)$54,490 
Add/(subtract)
                         Add/(subtract)
Changes in operating assets and liabilities  65,743   13,795   26,669   23,314   (27,950) Changes in operating assets and liabilities(67,770)21,322 (10,363)65,743 13,795 
Adjustments to reconcile net income to net cash flows provided by (used in) operating activities  (35,391)   (46,854)   (42,367)   (41,746)   (32,353) Adjustments to reconcile net income to net cash flows provided by (used in) operating activities(48,638)(50,007)(43,132)(35,391)(46,854)
Depreciation and amortization(2)  38,576   39,122   38,029   33,423   29,195 46,453 44,516 39,913 38,576 39,122 
Provision for income taxes  3,486   16,914   16,997   21,406   20,113 
Income tax expenseIncome tax expense22,626 14,228 11,774 3,486��16,914 
Interest expense, net  2,599   1,294   716   616   718 Interest expense, net4,554 6,221 3,628 2,599 1,294 
EBITDA $65,815  $78,761  $83,044  $91,989  $84,785 EBITDA$132,392 $101,179 $86,609 $65,815 $78,761 
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Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the other sections of this report, including the Financial Statements and related notes contained in Item 8 of this Annual Report on Form 10-K. 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 in “Forward-Looking Statements” and “Risk Factors.” We assume no obligation to update any of these forward-looking statements.

Presentation of Information
The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the fiscal years ended December 31, 2019 and 2020. For a discussion of changes from the fiscal year ended December 31, 2018 to the fiscal year ended December 31, 2019, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019 (filed March 4, 2020).
Overview-Introduction

We are a holding company of specialty electrical construction service providers that was established in 1995 through the merger of long-standing specialty contractors. Through our subsidiaries, we serve the electric utility infrastructure, commercial and commercialindustrial construction markets. We manage and report our operations through two industryelectrical contracting service segments: T&DTransmission and Distribution (“T&D”) and Commercial and Industrial (“C&I. &I”).
We have operated in the T&Dtransmission and distribution industry since 1891. We are one of the largest U.S. contractors servicing the T&D sector of the electric utility industry inand provide T&D services throughout the United States and provide T&D services in western Canada. Our T&D customers include many of the leading companies in the electric utility industry. We have provided C&I electrical contracting services tofor 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 since 1912. We generally provide our C&I services as a subcontractor to general contractors, but also contract directly with facility owners.

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 had revenues for the year ended December 31, 20172020 of $1.403$2.25 billion compared to $1.142$2.07 billion for the year ended December 31, 2016.2019. For the year ended December 31, 2017, our2020, net income attributable to MYR Group Inc. was $21.2$58.8 million compared to $21.4$37.7 million for the year ended December 31, 2016.

2019.

Overview-Segments

Transmission and Distribution segment.segment.   Our T&D segment provides comprehensive solutions to customers in the electric utility and the renewable energy industries.industry. Our T&D segment generally serves the electric utility industry as a prime contractor to customers such as investor-owned utilities, cooperatives, private developers, government-funded utilities, independent power producers, independent transmission companies, industrial facility owners and other contractors. We have long-standing relationships with many of our T&D customers who rely on us to construct and maintain reliable electric and other utility infrastructure. Our T&D segment provides a broad range of services on electric transmission and distribution networks and substation facilities, which include design, engineering, procurement, construction, upgrade, maintenance and repair services, with a particular focus on construction, maintenance and repair. The demand for transmissionOur T&D services include the construction and maintenance of high voltage transmission lines, substations, lower voltage underground and overhead distribution systems, renewable power facilities and limited gas construction services. We also provide many services has remained strong over the past several years due to the modernization of the existing electric utility infrastructureour customers under multi-year master service agreements (“MSAs”) and the need to integrate renewable generation into the electric power grid.

other variable-term service agreements.

For the year ended December 31, 2017,2020, our T&D revenues were $879.4 million,$1.15 billion, or 62.7%51.4%, of our revenue, compared to $819.0 million,$1.13 billion, or 71.7%54.8%, of our revenue for the year ended December 31, 20162019 and $794.9$893.1 million, or 74.9%58.3%, of our revenue for the year ended December 31, 2015.2018. Revenues from transmission projects represented 68.5%64.6%, 75.8%68.1%, and 73.9%62.6% of T&D segment revenue for the years ended December 31, 2017, 20162020, 2019 and 2015,2018, respectively.

Our T&D segment also provides restoration services in response to hurricanes, ice storms or other storm related events, which typically accountaccounted for less than 5% of our annual revenues.

revenues in 2020, 2019 and 2018.

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Measured by revenues in our T&D segment, we provided 31.4%43.9%, 56.9%49.7% and 48.4%40.5% of our T&D services under fixed-price contracts during the years ended December 31, 2017, 20162020, 2019 and 2015,2018, respectively. We also provide many services to our customers under multi-year maintenance service agreements and other variable service agreements.


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Commercial and Industrial segment.segment.   Our C&I segment provides a wide range of services including design, installation, maintenance and repair of commercial and industrial wiring, the installation of traffic networks and the installation of bridge, roadway and tunnel lighting. In our C&I segment, we generally provide our electric construction and maintenance services as a subcontractor to general contractors in the C&I industry as well as directly to facility owners. Our C&I operations are primarily in the western and northeastern United States and in western Canada where weWe have sufficient scale to deploy the level of resources necessary to achieve significant market share.a diverse customer base with many long-standing relationships. We concentrate our efforts on projects where our technical and project management expertise are critical to successful and timely execution. The majority of C&I contracts cover electrical contracting services for airports, hospitals, data centers, hotels, stadiums, convention centers, renewable energy projects, manufacturing plants, processing facilities, waste-waterwater treatment facilities, mining facilities and transportation control and management systems.

For the year ended December 31, 2017,2020, our C&I revenues were $523.9 million,$1.09 billion, or 37.3%48.6%, of our revenue, compared to $323.5$936.7 million, or 28.3%45.2%, of our revenue for the year ended December 31, 20162019 and $266.8$638.1 million, or 25.1%41.7%, of our revenue for the year ended December 31, 2015.

2018.

Measured by revenues in our C&I segment, we provided 63.7%82.5%, 73.4%75.2% and 71.6%71.0% of our services under fixed-price contracts for the years ended December 31, 2017, 20162020, 2019 and 2015,2018, respectively.

Overview-Revenue and Gross Margins

Revenue Recognition.   We recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that we expect to be entitled to in exchange for goods or services provided. Revenue associated with contracts with customers is recognized over time as our performance creates or enhances customer controlled assets or creates or enhances an asset with no alternative use, for which we have an enforceable right to receive compensation as defined under the contract. To determine the amount of revenue to recognize over time, we utilized the cost-to-cost method as we believe cost incurred best represents the amount of work completed and remaining on our projects, and is the most common basis for computing percentage of completion in our industry. As the cost-to-cost method is driven by incurred cost, we calculate the percentage of completion by dividing costs incurred to date by the total estimated cost. The percentage of completion is then multiplied by estimated revenues to determine inception-to-date revenue. Revenue recognized for the period is the current inception-to-date recognized revenue less the prior period inception-to-date recognized revenue. If a percentage-of-completion method of accounting, whichcontract is commonly usedprojected to result in a loss, the entire contract loss is recognized in the construction industry. The percentage-of-completion accounting method results in recognizing contract revenues and earnings ratably overperiod when the contract term in proportion to our incurrence of contract costs. The profits or losses recognized on individual contracts are based on estimates of contract revenues, costs and profitability. Contract losses are recognized in full whenloss was first determined and the amount of the loss is updated in subsequent reporting periods. Additionally, contract profit estimatescosts incurred to date and expected total contract costs are adjusted based on ongoing reviewscontinuously monitored during the term of contract profitability.the contract. Changes in the job performance, labor costs, equipment costs, job conditions weather, estimated profitability and final contract settlements may result in revisions to costsare factors that influence management’s assessment of total contract value and income and their effects are recognized in the period in which the revisions are determined. We record adjustments tototal estimated costs ofto complete those contracts, when we believe the change in estimate is probable and the amounts can be reasonably estimated. These adjustments could result in either increases or decreases intherefore, profit margins.

and revenue recognition.

Gross Margins.   Our gross margin can vary between periods as a result of many factors, some of which are beyond our control. These factors include: the mix of revenue derived from the industries we serve, the size and duration of our projects, the mix of business conducted in different parts of the United States and Canada, the mix in service and maintenance work compared to new construction work, the amount of work that we subcontract, the amount of material we supply, changes in labor, equipment or insurance costs, seasonal weather patterns, changes in fleet utilization, pricing pressures due to competition, efficiency of work performance, fluctuations in commodity prices of materials, delays in the timing of projects and other factors. The gross margins we record in the current period may not be indicative of margins in future periods.

Overview-Economic, Industry and Market Factors

We operate in competitive markets, which can result in pricing pressures for the services we provide. Work is often awarded through a bidding and selection process, where price is always a principal factor. We generally focus on managing our profitability by: selecting projects that we believe will provide attractive margins; actively monitoring the costs of completing our projects; holding customers accountable for costs related to changes to contract specifications;specifications and rewarding our employees for controlling costs.

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The demand for construction and maintenance services from our customers has been, and will likely continue to be, cyclical in nature and vulnerable to downturns in the markets we serve as well as the economy in general. The financial condition of our customers and their access to capital, variations in the margins of projects performed during any particular period, and regional and national economic conditions in the United States and Canada may materially affect results. Project schedules, particularly in connection with larger, multi-year projects, can also create fluctuations in our revenues. Other market and industry factors, such as changes to our customers’ capital spending plans or delays in regulatory approvals can affect project schedules. Changes in technology, tax and other incentives and new or changing regulatory requirements


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affecting the industries we serve can impact demand for our services. Additionally, continued economic slowdowns related to the current worldwide COVID-19 pandemic could have a significant impact on our business. While we actively monitor economic, industry and market factors affecting our business, we cannot predict the impact such factors may have on our future results of operations, liquidity and cash flows. As a result of economic, industry and market factors, our operating results in any particular period or year may not be indicative of the results that can be expected for any other period or for any other year.

Overview-Seasonality and Nature of Our Work Environment

Although our revenues are primarily driven by spending patterns in our customers’ industries, our revenues and results of operations, particularly those derived from our T&D segment, and results of operations can be subject to seasonal variations. These variations are influenced by weather, daylight hours, availability of system outages from utilities, and holidays. During the winter months, demand for our T&D work may be high, but our work can be delayed due to inclement weather. During the summer months, the demand for our T&D work may be affected by fewer available system outages, during which we can perform electrical line service work due to peak electrical demands caused by warmer weather, conditions.which limits our ability to perform electrical line service work. During the spring and fall months, the demand for our T&D work may increase due to improved weather conditions and system availability; however, extended periods of rain and other severe weather can affect the deployment of our crews and efficiency of operations. Furthermore, our work is performed under a variety of conditions in different locations, including but not limited to, difficult terrain, difficult sitesites which may have been exposed to harsh and hazardous conditions, and in large urban centers where delivery of materials and availability of labor may be impacted and sites which may have been exposed to harsh and hazardous conditions.

impacted.

We also provide storm restoration services to our T&D customers. These services tend to have a higher profit margin. However, storm restoration service work that is performed under an MSA typically has similar rates to other work under the agreement. In addition, deploying employees on storm restoration work may, at times, delay work on other transmission and distribution work. Storm restoration service work is unpredictable and can affect results of operations.

Outlook

We continue to expect long-term growth in the transmission market, although the timing of large bids and subsequent construction is likely to be highly variable from year to year. We believe several multi-year transmission projects will be available for bid in the 2018 to 2019 timeframe. We also expect bidding activity on small and medium-sized transmission and distribution projects to continue in 2018. We are optimistic about overall economic growth and infrastructure spending and believe that improving industry activity will continue in both our transmission and distribution market segments and the drivers for utility investment will remain intact. We believe that the Tax Act, other regulatory reform, state renewable portfolio standards, the aging of the electric grid, and the general improvement of the economy will positively impact the level of spending by our customers. Although competition remains strong, we see these trends as positive factors for us in the future.

Our business is directly impacted by the level of spending on T&D infrastructure and the level of C&I electrical construction activity across the United States and western Canada. We are optimistic about infrastructure spending and believe that industry activity will continue in both our transmission and distribution market segments and the drivers for utility investment will remain intact. We believe that regulatory reform, state renewable portfolio standards, the aging of the electric grid, and potential overall improvement of the economy will positively impact the level of spending by our customers in all of the markets we serve. Although competition remains strong, we see these trends as positive factors for us in the future.
Since March 2020, the COVID-19 pandemic has had a significant impact on the global economy, including the US and Canadian economies. As the situation continues to evolve, we are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it impacts our customers, subcontractors, suppliers, vendors and employees. The COVID-19 pandemic caused a slowdown of certain projects due to specific state, local, municipal and customer mandated stay-at-home orders and new project requirements that were established to protect construction workers and the general public, most of which continue to impact our C&I segment. Although the majority of stay-at-home orders have been phased-out, we continue to experience impacts associated with the COVID-19 project-specific protocols. We expect the project-specific requirements to remain in place which will continue to impact project schedules and workflow going forward.
We are unable to predict the ultimate impact that COVID-19 will have on our business, employees, liquidity, financial condition, results of operations and cash flows. Most of the Company’s operations are considered critical and essential businesses, making our projects generally exempt from stay-at-home or similar orders in certain parts of the United States and western Canada. However, if this pandemic persists for an extended timeframe our business could be more significantly impacted as a result of prolonged unfavorable economic conditions. The Company began implementing changes in March of 2020 in an effort to protect our employees and customers and to support appropriate health and safety protocols, including implementing alternative and flexible work arrangements where possible. As the conditions surrounding the ongoing COVID-19 pandemic remain fluid, and if disruptions do re-emerge, they could materially adversely impact our business. Our key estimates that could potentially be impacted include estimates of costs to complete contracts, the recoverability of goodwill and intangibles and allowance for doubtful accounts.
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We continue to expect long-term growth in the transmission market, although the timing of large bids and subsequent construction will likely continue to be highly variable from year to year. The electric grid is aging and requires significant upgrades and maintenance to meet current and future demands for electricity. In addition, regulatory pressures and low energy prices may accelerate the shut-down of coal-fired generating plants, which could result in the need for line upgrades and new substations. Over the past several years, many utilities have begun to implement plans to improve reliability of their transmission systems and reduce congestion. These utilities have started or planned new construction, line upgrades and maintenance projects on their transmission systems. We believe that our customers remain committed to the expansion and strengthening of their transmission infrastructure, with planning, engineering and funding for many of their projects already in place.

State renewable portfolio standards, which set required or voluntary standards for how much electricity is to be generated from renewable energy sources, as well as general environmental concerns, are drivingcontinue to drive the development of renewable energy projects. The economic feasibility of renewable energy projects, and therefore the attractiveness of investment in the projects, may depend on the availability of tax incentive programs or the ability of the projects to take advantage of such incentives.

As Renewable energy-related construction contracts, depending on the type, may benefit both the T&D and C&I business segments.

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 believe we will continue to see significant bidding activity on large transmission projects over the next two years. 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 second half of 2021 will not likely occur 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. However, in light of the uncertain COVID-19 environment, there may be a resultpotential slowdown of construction activity in the transmission market, the recovery of which will be dependent upon the pace and timing of the United States overall recovery from the COVID-19 pandemic.
Because 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 on their distribution systems to properly


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maintain or meet reliability requirements. In 2017,2020, we sawcontinued to see increased bidding activity in some of our electric distribution markets, as economic conditions improved in those areas. We believe that continued recovery in the United States economy, and in the housing market in particular,increased hurricane activity over the next fewpast several years could provide additional stimulus for spendingand recent destruction caused by our customers on their distribution systems. In addition, after hurricanes Harvey, Irma and, Maria, we believe therewildfires will because a push to strengthen utility distribution systems against major storm-relatedcatastrophic 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. We expect to see an incremental increase in distribution opportunities in the United States in 20182021, however, in light of the uncertain COVID-19 environment, there may be a potential slowdown of construction activity in distribution systems, the recovery of which will be dependent upon the pace and timing of the United States overall recovery from the COVID-19 pandemic.

Amid the ongoing COVID-19 pandemic, we believe theseexpect C&I bidding opportunities will continue to be bidimpacted and market uncertainty could contribute to an overall deceleration in projects coming out to bid. Recovery of the C&I market will be heavily dependent on overall economic recovery. We are hopeful that stimulus packages will provide greater opportunity and are encouraged by the possible approval of a competitive market.

long-awaited infrastructure bill. We believe that the primary markets we will continueserve may be somewhat less vulnerable to see significant bidding activity on large transmission projects in 2018economic slowing, such as health care, transportation, data centers, warehousing, renewable energy and 2019. The timing of multi-year transmissionwater projects. We are hopeful that the service industry and small project awards and substantial construction activity is difficult to predict due to regulatory requirements and right-of-way permits needed to commence construction. Significant construction on any large, multi-year projects awarded in 2018 will not likely occur until 2019. Bidding and construction activity for small to medium-size transmission projects and upgrades remains strong, and we expect this trend to continue in 2018, primarily due to reliability and economic drivers. Competition and the unpredictability of awardsmarket could quickly rebound in the transmission market may impact our abilitynear future as pent-up demand will need to maintain high utilizationbe addressed.

In addition, the United States has experienced a decade of equipmenteconomic expansion which has challenged the capacity of public water and manpower resources which is essentialtransportation infrastructure forcing states and municipalities to maintaining contract margins.

seek creative means to fund needed expansion. We saw increased activity in many of our C&I markets in 2017 and expect to see continued improvement in bidding opportunitiesbelieve the need for expanding public infrastructure will offer opportunity in our C&I segment in 2018.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. Through 2017,2020, we continued the implementation ofto implement strategies that further expand our three-pronged strategy of organic growth, strategic acquisitionscapabilities and allow opportunities to provide prudent capital returns. In June 2016,On July 15, 2019, we entered into an amended and restated, five-year credit agreement,completed the acquisition of substantially all the assets of CSI Electrical Contractors, Inc. (“CSI”), which expanded our borrowing capacityC&I operations in California. Additionally, we ended 2020 with $364.6 million available under our credit facility.
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We believe that our financial position, positive cash flows and other operational strengths will enable us to $250 million. Thismanage the challenges and uncertainties in the markets we serve, including new credit agreement provided added resourceschallenges and uncertainties associated with the ongoing COVID-19 pandemic, and give us the flexibility to successfully execute each of our three-pronged strategy initiatives.

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. In 20172020 and 2016,2019, we invested in capital expenditures of approximately $30.8$44.4 million and $25.4$57.8 million, respectively. Most of our capital expenditures supported opportunities in our T&D business. We plan to continue to evaluate our needs offor additional equipment and tooling. Our investment strategy is based on our belief that spending in transmission and distribution projects will continue to remain strong over the next several years as electric utilities, cooperatives and municipalities make up for the lack of infrastructure spending in the past, combined with the overall need to integrate new generation into the electric power grid, and our belief that distribution demand will increase over the next several years.

We ended 2017 with $150.1 million available under our line of credit. We believe that our financial position and operational strengths will enable us to manage the current challenges and uncertainties in the markets we serve and give us the flexibility to successfully execute our three-pronged strategy.

Understanding Backlog

We define backlog as 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. 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, can all take place within the period. 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 MSAs that typically have a one-yearone- to three-year duration from execution. Additionally, the difference between our backlog and remaining performance obligations is due to the exclusion of a portion of our MSAs 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 backlog only includes projects that have a signed contractwritten award, a letter of intent, a notice to proceed or an agreed upon work order to perform work on mutually accepted terms and conditions.

Our estimated backlog also includes our proportionate share of our unconsolidated joint venture contracts.

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Changes in backlog from period to period are primarily the result of fluctuations in the timing of awards and revenue recognition of contracts.

Backlog should not be relied upon as a stand-alone indicator of future events.

Understanding Gross Margins

Our gross margin is gross profit expressed as a percentage of revenues. Gross profit is calculated by subtracting contract costs from revenue. Contract costs consist primarily of salaries, wages and benefits to employees, depreciation, fuel and other equipment expenses, equipment rentals, subcontracted services, insurance, facilities expenses, materials and parts and supplies. Various factors affect our gross margins on a quarterly or annual basis, including those listed below.

Performance Risk.   Margins may fluctuate because of the volume of work and the impacts of pricing and job productivity, which can be impacted both favorably and negatively by customer decisions and crew productivity, as well as other factors. When comparing a service contract between periods, factors affecting the gross margins associated with the revenues generated by the contract may include pricing under the contract, the volume of work performed under the contract, the mix of the type of work specifically being performed, the availability of labor resources at expected labor rates and the productivity of the crews performing the work. Productivity can be influenced by many factors including the experience level of the crew, whether the work is on an open or encumbered right of way, weather conditions, geographical conditions, trade stacking, performance of other sub-trades, schedule changes, effects of environmental restrictions and regulatory and permitting delays.

Revenue Mix and Contract Terms.   The mix of revenue derived from the industries we serve will impact gross margins. Changes in our customers’ spending patterns in each of the industries we serve can cause an imbalance in supply and demand and, therefore, affect margins and mix of revenue by industry served. Storm restoration services typically command higher profit margins than other maintenance services. Seasonal and weather factors, as noted below, can impact the timing at which customers perform maintenance and repairs, which can cause a shift in the revenue mix. Some of our time-and-equipment, time-and-materials and cost-plus contracts include shared savings clauses, in which the contract includes a target price and we agree to share savings from that target price with our customer,customer. Additionally, new construction work has a higher gross margin than maintenance and repair work. New construction work is often obtained on a fixed-price basis, which carries a higher risk than other types of pricing arrangements because a contractor can bear the risk of increased expenses. As such, we generally bid fixed-price contracts with higher profit margins. We typically derive approximately 20% to 45% of our revenue from maintenance and repair work that is performed under pre-established or negotiated prices or cost-plus pricing arrangements which generally allow us a set margin above our costs. Thus, the mix between new construction work, at fixed-price, and maintenance and repair work, at cost-plus, in a given period will impact gross margin in that period. The timing of accounting recognition of such savings can
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impact our margins. In addition, change orders and claims can impact our margins. Costs related to change orders and claims are recognized in contract costs when incurred, but revenue related to change orders is only recognized when it is probable that the change order will result in an addition to contract value and can be reliably estimated. Costs related to claims are recognized in contract costs when incurred, butestimated, whereas revenue related to claims is recognized only to the extent that contract costs related to the claim have been incurred and when it is probable that the claim will result in an addition to contract value which can be reliably estimated. NoGenerally, no profit is recognized on a claim until final settlement occurs.

Seasonal, Weather and Geographical.   Seasonal patterns, primarily related to weather conditions and the availability of system outages, can have a significant impact on gross margins in a given period. It is typical during the winter months that parts of the country may experience snow or rainfall, which can affect our crews’ ability to work efficiently. Additionally, our T&D customers often cannot remove their T&D lines from service during the summer months, when consumer demand for electricity is at its peak, delaying maintenance and repair services. In both cases, projects may be delayed or temporarily placed on hold. Conversely, in periods when weather remains dry and temperatures are moderate, more work can be done, sometimes with less cost, which would have a favorable impact on gross margins. The mix of business conducted in different parts of the country could also affect margins, as some parts of the country offer the opportunity for higher margins than others due to the geographic characteristics associated with the location where the work is being performed. Such characteristics include whether the project is performed in an urban versus a rural setting; in a mountainous area or in open terrain; or in normal soil conditions or rocky terrain. Site conditions, including unforeseen underground conditions, can also impact margins.

Depreciation and Amortization.   We include depreciation on equipment and capitalfinance lease amortization in contract costs. This is common practice in our industry, but can make comparability to other companies difficult. Over the last few years, we have spentWe spend a significant amount of capital on property, facilities and equipment, with the majority of such expenditures being used to purchase additional specialized equipment to enhance our fleet and to reduce our reliance on lease arrangements and short term equipment rentals. We believe the investment in specialized equipment helps to reduce our costs, improve our margins and provide us with valuable flexibility to take on additional and complex projects.


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Service and Maintenance Compared to New Construction.  In general, new construction work has a higher gross margin than maintenance and repair work. New construction work is often obtained on a fixed-price basis, which carries a higher risk than other types of pricing arrangements because a contractor can bear the risk of increased expenses. As such, we generally bid fixed-price contracts with higher profit margins. We typically derive approximately 10% to 35% of our revenue from maintenance and repair work that is performed under pre-established or negotiated prices or cost-plus pricing arrangements which generally allow us a set margin above our costs. Thus, the mix between new construction work, at fixed-price, and maintenance and repair work, at cost-plus, in a given period will impact gross margin in that period.

Material and Subcontract Costs.   Projects that include a greater amount of material or subcontractor costs can experience lower overall project gross margins as we typically add a lower mark-up to material and subcontractor costs in our bids than what we would to our labor and equipment cost. In addition, successful completion of our contracts may depend on whether our subcontractors successfully fulfill their contractual obligations. If our subcontractors fail to satisfactorily perform their contractual obligations as a result of financial or other difficulties, we may be required to incur additional costs and provide additional services in order to make up such shortfalls.

Cost of Material.  On fixed-price contracts where Additionally, we are required to allocate more working capital to projects when we are required to provide materials, our overall gross margin may be affected if we experience increases in material quantity or higher commodity costs.

Materials versus Labor.  Projects that include a greater amount of material cost can experience lower overall project gross margins as we typically add a lower mark-up to material cost in our bids than what we would to our labor and equipment cost.

materials.

Insurance.   Gross margins could be impacted by fluctuations in insurance accruals related to our deductibles and loss history in the period in which such adjustments are made. We carry insurance policies, which are subject to high deductibles, for workers’ compensation, general liability, automobile liability and other coverages. Losses up to the deductible amounts are accrued based upon estimates of the ultimate liability for claims reported and an estimate of claims incurred but not yet reported.

Fleet Utilization, Estimation, and Bidding.   We operate a centrally-managed fleet in the United States in an effort to achieve the highest equipment utilization. We also develop internal equipment rates which provide our business units with appropriate cost information to estimate bids for new projects. Availability of equipment for a particular contract is determined by our internal fleet ordering process which is designed to optimize the use of internal fleet assets and allocate equipment costs to individual contracts. We believe these processes allow us to utilize our equipment efficiently, which leads to improved gross margins. Transmission and distribution projects can require different types of equipment. A significant shift in project mix or timing could impact fleet utilization, causing gross margins to vary.

Cost of Material.   On fixed-price contracts where we are required to provide materials, our overall gross margin may be affected if we experience increases in the quantity or costs of materials. Projects that include a greater amount of material cost can experience lower overall project gross margins as we typically add a lower mark-up to material cost in our bids than what we would add to our labor and equipment cost.
Our team of trained estimators helps us to determine potential costs and revenues and make informed decisions on whether to bid for a project and, if bid, the rates to use in estimating the costs for that bid. The ability to accurately estimate labor, equipment, subcontracting and material costs in connection with a new project may affect the gross margins achieved for the project.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A”) consist primarily of compensation, related benefits and employee costs for management and administrative personnel, office rent and utilities, stock compensation, communications, professional fees, depreciation, IT expenses, marketing costs and bad debt expense.


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Consolidated Results of Operations

The following table sets forth selected statements of operations data and such data as a percentage of revenues for the years indicated:

      
 For the year ended December 31,
(dollars in thousands) 2017 2016 2015
Contract revenues $1,403,317   100.0%  $1,142,487   100.0%  $1,061,681   100.0% 
Contract costs  1,278,313   91.1   1,007,764   88.2   939,340   88.5 
Gross profit  125,004   8.9   134,723   11.8   122,341   11.5 
Selling, general and administrative expenses  98,611   7.0   96,424   8.4   79,186   7.5 
Amortization of intangible assets  499   —   886   0.1   571   — 
Gain on sale of property and equipment  (3,664)   (0.3)   (1,341)   (0.1)   (2,257)   (0.2) 
Income from operations  29,558   2.2   38,754   3.4   44,841   4.2 
Other income (expense):
                              
Interest income  4   —   5   —   25   — 
Interest expense  (2,603)   (0.2)   (1,299)   (0.1)   (741)   — 
Other income (expense), net  (2,319)   (0.2)   885   0.1   174   — 
Income before provision for income taxes  24,640   1.8   38,345   3.4   44,299   4.2 
Income tax expense  3,486   0.3   16,914   1.5   16,997   1.6 
Net income $21,154   1.5%  $21,431   1.9%  $27,302   2.6% 

Year Ended December 31, 20172020 Compared to the Year Ended December 31, 2016

2019

For the year ended December 31,
(dollars in thousands)20202019
Contract revenues$2,247,392 100.0 %$2,071,159 100.0 %
Contract costs1,971,539 87.7 1,857,001 89.7 
Gross profit275,853 12.3 214,158 10.3 
Selling, general and administrative expenses188,535 8.4 156,674 7.6 
Amortization of intangible assets3,586 0.2 3,849 0.2 
Gain on sale of property and equipment(2,813)(0.1)(3,543)(0.2)
Income from operations86,545 3.8 57,178 2.7 
Other income (expense):
Interest income9 — 4 — 
Interest expense(4,563)(0.2)(6,225)(0.3)
Other expense, net(606)— (515)— 
Income before provision for income taxes81,385 3.6 50,442 2.4 
Income tax expense22,626 1.0 14,228 0.7 
Net income58,759 2.6 36,214 1.7 
Less: net income (loss) attributable to noncontrolling interest— — (1,476)(0.1)
Net income attributable to MYR Group Inc.$58,759 2.6 %$37,690 1.8 %
Revenues.   Revenues increased $260.8$176.2 million, or 22.8%8.5%, to $1.403$2.25 billion for the year ended December 31, 20172020 from $1.142$2.07 billion for the year ended December 31, 2016.2019. The increase was primarily due to increased spendingincremental revenues from existingthe CSI acquisition, partially offset by impacts related to the COVID-19 pandemic primarily associated with our C&I customers, the WPE acquisition in late 2016, higher revenue from large transmission projects and an increase in distribution projects.

segment.

Gross margin.   Gross margin decreasedincreased to 8.9%12.3% for the year ended December 31, 20172020 from 11.8%10.3% for the year ended December 31, 2016.2019. The decreaseincrease in gross margin was primarily due to write-downs on three projects. Two projectsan increase in the Midwest U.S. were significantly impacted by weather resulting in unanticipated costs associated with right-of-way access, lower productivityhigher margin and increased road damage and repair requirements. As a result, we wrote down $4.8 million for these projects in 2017. One T&D project in Canada experienced cost impacts mainly associated with project delays and schedule extensions. Although we are working with our clients to recover these costs, we have not recognized all of the revenues relating to various pending project claims and change orders, which resulted in write-downs on this project of $4.4 million. Margins were also negatively impacted from significant revenue on a large transmission project that had lower than average margins due to a high mix of material and subcontractor costs and lower than average margin on a certain distribution project,storm-related work as well as costs associated with organic and acquisition growth. In addition, during 2017 we had a higher mix of revenue in our C&I segment and distribution work, compared to transmission work which generally carries a higher margin.better-than-anticipated productivity on certain projects. These impactsincreases were partially offset by labor inefficiencies as well as unfavorable settlements on certain projects. Additionally, gross margin during the year ended December 31, 2019 was negatively impacted by projects at lower than historical margins and inefficiencies associated with a joint venture project, efficiencies and settlements related to previously unrecognized revenues on a project claim and pending change orders.that has since been completed. Changes in estimates of gross profit on certain projects, including those discussed above, resulted in gross margin decreases of 0.7%0.8% for the yearyears ended December 31, 2017. Changes in estimates of gross profit on certain projects resulted in gross margin decreases of 0.2% for the year ended December 31, 2016.

2020 and 2019, respectively.

Gross profit.   Gross profit decreased $9.7increased $61.7 million, or 7.2%28.8%, to $125.0$275.9 million for year ended December 31, 20172020 from $134.7$214.2 million for the year ended December 31, 2016, primarily2019, due to lower overall gross margin, partially offset by higher revenue.

margins and revenues.

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Selling, general and administrative expenses.  Selling, general and administrative expenses (“SG&A”), which were $98.6&A, was $188.5 million for the year ended December 31, 2017, increased $2.22020, an increase of $31.8 million from $96.4$156.7 million for the year ended December 31, 2016.2019. The year-over-year increase was primarily due to $6.8 millionthe acquisition of incremental costs associated with our expansion into new geographic marketsCSI and strategic acquisitions as well as higher payroll costs to support operations, largely offset by lower bonus and profit sharingemployee incentive compensation costs. Additionally, $1.0 million of costs associated with activist investor activities were incurred in 2016. As a percentage of revenues, SG&A decreased to 7.0% for the year ended December 31, 2017 from 8.4% for the year ended December 31, 2016.

Gain on sale of property and equipment.   Gains from the sale of property and equipment in the year ended December 31, 20172020 were $3.7$2.8 million compared to $1.3$3.5 million in the year ended December 31, 2016.2019. Gains from the sale of property and equipment are attributable to routine sales of property and equipment no longer useful or valuable to our ongoing operations.

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Interest expense.   Interest expense was $2.6$4.6 million for the year ended December 31, 20172020 compared to $1.3$6.2 million for the year ended December 31, 2016.2019. This increasedecrease was primarily attributable to the amounta decrease in our outstanding debt and duration of borrowings outstanding undera decrease in our line of creditweighted average interest rate during the year ended December 31, 20172020 as compared to the year ended December 31, 2016.

2019, partially offset by prepayment penalties from early retirements of equipment notes.

Other income (expense).expense, net.   Other expense was $2.3$0.6 million for the year ended December 31, 20172020 compared to other incomeexpense of $0.9$0.5 million for the year ended December 31, 2016.2019. The change was largely dueprimarily attributable to a $2.3 million reversal of previously recognized contingent consideration related to the finalization of margin guarantees on certain contracts associated with the acquisition of WPE.

CSI recognized in the year ended December 31, 2020.

Income tax expense.  The provision for income taxes   Income tax expense was $3.5$22.6 million for the year ended December 31, 2017,2020, with an effective tax rate of 14.1%27.8%, compared to a provision of $16.9$14.2 million for the year ended December 31, 2016,2019, with an effective tax rate of 44.1%28.2%. The decrease in the tax rate for the year ended December 31, 20172020 was primarily caused by the revaluation of the Company’s net deferred tax liabilitiesdue to reflect the recently enacted 21% federal corporate tax rate. In addition, we recognizeda favorable impact from stock compensation excess tax benefits, of approximately $0.8 million pertaining to the vesting of stock awards and the exercise of stock options. This was partially offset by our inability to utilize losses experienced in certain Canadian operations.

Net income.the impact of the global intangible low tax income (“GILTI”).

Net income decreasedattributable to $21.2MYR Group Inc.   Net income attributable to MYR Group Inc. increased to $58.8 million for the year ended December 31, 20172020 from $21.4$37.7 million for the year ended December 31, 2016.2019. The decreaseincrease was primarily for the reasons stated above.

Segment Results

The following table sets forth, for the periods indicated, statements of operations data by segment, segment net sales as a percentage of total net sales and segment operating income as a percentage of segment net sales:

    
 For the Year Ended December 31,
   2017 2016
(dollars in thousands) Amount Percent Amount Percent
Contract revenues:
                    
Transmission & Distribution $879,372   62.7%  $818,972   71.7% 
Commercial & Industrial  523,945   37.3   323,515   28.3 
Total $1,403,317   100.0  $1,142,487   100.0 
Operating income (loss):
                    
Transmission & Distribution $39,631   4.5  $63,459   7.7 
Commercial & Industrial  25,048   4.8   13,920   4.3 
Total  64,679   4.6   77,379   6.8 
Corporate  (35,121)   (2.5)   (38,625)   (3.4) 
Consolidated $29,558   2.1%  $38,754   3.4% 

For the Year Ended December 31,
20202019
(dollars in thousands)AmountPercentAmountPercent
Contract revenues:
Transmission & Distribution$1,154,378 51.4 %$1,134,411 54.8 %
Commercial & Industrial1,093,014 48.6 936,748 45.2 
Total$2,247,392 100.0 $2,071,159 100.0 
Operating income (loss):
Transmission & Distribution$109,387 9.5 $73,580 6.5 
Commercial & Industrial37,247 3.4 30,506 3.3 
Total146,634 6.5 104,086 5.0 
Corporate(60,089)(2.7)(46,908)(2.2)
Consolidated$86,545 3.8 %$57,178 2.8 %

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Transmission & Distribution

Revenues for our T&D segment for the year ended December 31, 20172020 were $879.4 million$1.15 billion compared to $819.0 million$1.13 billion for the year ended December 31, 2016,2019, an increase of $60.4$20.0 million, or 7.4%1.8%. The increase in revenue was primarily duerelated to higher revenue from large transmission projects and an increase in revenue on distribution projects which include an increase in storm work related to certain weather events, partially offset by a decrease in revenue on transmission projects.

Revenues from transmission projects represented 68.5%64.6% and 75.8%68.1% of T&D segment revenue for the years ended December 31, 20172020 and 2016,2019, respectively. Additionally, for the year ended December 31, 2017,2020, measured by revenue in our T&D segment, we provided 31.4%43.9% of our T&D services under fixed-price contracts, as compared to 56.9%49.7% for the year ended December 31, 2016.

2019.

Operating income for our T&D segment for the year ended December 31, 20172020 was $39.6$109.4 million compared to $63.4$73.6 million for the year ended December 31, 2016, a decrease2019, an increase of $23.8$35.8 million, or 37.5%48.7%. The declineincrease in T&D operating income from the prior year was primarily due to lower margins causedbetter-than-anticipated productivity on certain projects, and an increase in higher margin and storm related work. These increases were partially offset by write-downslabor and material inefficiencies and inclement weather experienced on two projects in the Midwest U.S. and on one project in Canada. Margins were also negatively impacted from significant revenue on certain large transmission projects that have lower than average margins due to a high mix of material and subcontractor costs.projects. Operating income, as a percentage of revenues, for our T&D segment decreasedincreased to 4.5%9.5% for the year ended December 31, 20172020 from 7.7%6.5% for the year ended December 31, 2016.

2019.

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Commercial & Industrial

Revenues for our C&I segment for the year ended December 31, 20172020 were $523.9 million$1.09 billion compared to $323.5$936.7 million for the year ended December 31, 2016,2019, an increase of $200.4$156.3 million, or 62.0%16.7%, primarily due to increased spendingincremental revenues from existing customers, the WPECSI acquisition, in late 2016 and organic expansion into new markets.

partially offset by impacts related to the COVID-19 pandemic.

Measured by revenue in our C&I segment, we provided 63.7%82.5% of our services under fixed-price contracts for the year ended December 31, 2017,2020, compared to 73.4%75.2% for the year ended December 31, 2016.

2019.

Operating income for our C&I segment for the year ended December 31, 20172020 was $25.0$37.2 million compared to $13.9$30.5 million for the year ended December 31, 2016,2019, an increase of $11.1$6.7 million, or 79.9%22.1%. The year-over-year increase in operating income compared to the year ended December 31, 2016 was primarily attributabledue to higher revenue from largerevenues, an increase in higher margin work on certain projects the settlement of a project claim that was previously not recognized in revenue and improvedbetter-than-anticipated productivity on certain jobs. These wereprojects, partially offset by costs associated with organic and acquisition growth.labor inefficiencies as well as unfavorable settlements on certain projects. As a percentage of revenues, operating income for our C&I segment was 4.8%3.4% and 4.3%3.3% for the years ended December 31, 20172020 and 2016,2019, respectively.

Corporate

The decreaseincrease in corporate expenses in 2017 was primarily attributable to lower bonus and profit sharing costs offset by higher payroll costs to support operations. Additionally in 2016 we incurred $1.0 million of costs associated with activist investor activities.

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Revenues.  Revenues increased $80.8 million, or 7.6%, to $1.142 billion for the year ended December 31, 2016 from $1.062 billion for the year ended December 31, 2015. The increase in revenue was primarily due to organic and acquisitive growth, partially offset by a decline in revenue in some geographic areas.

Gross margin.  Gross margin increased to 11.8% for the year ended December 31, 2016 from 11.5% for the year ended December 31, 2015. The increase in gross margin was largely due to improved performance on certain jobs as well as favorable close-outs on several projects, partially offset by costs associated with unrecognized revenue related to pending project claims and change orders. We also experienced inclement weather in some of our markets and lower productivity on other jobs. Changes in estimates of gross profit on certain projects resulted in gross margin decreases of 0.2% for the year ended December 31, 2016. Changes in estimates of gross profit on certain projects, including large claims or change orders, resulted in gross margin increases of 0.5% for the year ended December 31, 2015.


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Gross profit.  Gross profit increased $12.4 million, or 10.1%, to $134.7 million for year ended December 31, 2016 from $122.3 million for the year ended December 31, 2015, primarily due to higher revenue and improved gross margin.

Selling, general and administrative expenses.  SG&A expenses, which were $96.4 million for the year ended December 31, 2016, increased $17.2 million from $79.2 million for the year ended December 31, 2015. The increase in SG&A was primarily due to $9.4 million of costs associated with our organic and acquisitive growth strategies. Bonus and profit sharing costs as well as personnel costs to support our overall growth increased in 2016. We also incurred $1.0 million of costs associated with responding to activist investors. The impact of these increases were partially offset by a $1.4 million cost related to an executive officer transition in the fourth quarter of 2015. As a percentage of revenues, SG&A increased to 8.4% for the year ended December 31, 2016 from 7.5% for the year ended December 31, 2015.

Gain on sale of property and equipment.  Gains from the sale of property and equipment in the year ended December 31, 2016 were $1.3 million compared to $2.3 million in the year ended December 31, 2015. Gains from the sale of property and equipment are attributable to routine sales of property and equipment no longer useful or valuable to our ongoing operations.

Interest expense.  Interest expense was $1.3 million for the year ended December 31, 2016 compared to $0.7 million in the year ended December 31, 2015. This increase is primarily attributable to the borrowings on our line of credit during the year ended December 31, 2016.

Other Income.  Other income was $0.9 million for the year ended December 31, 2016 compared to $0.2 million in the year ended December 31, 2015. This increase is primarily attributable to contingent consideration related to margin guarantees of $1.4 million recognized on certain contracts associated with the acquisition of WPE.

Income tax expense.  The provision for income taxes was $16.9 million for the year ended December 31, 2016, with an effective tax rate of 44.1%, compared to a provision of $17.0 million for the year ended December 31, 2015, with an effective tax rate of 38.4%. The increase in the effective tax rate was primarily caused by the year-to-date impact of lower domestic activities deductions and changes in the mix of business between states. In addition, our effective tax rate increased due to the deferred tax balance true-up for changes in the blended state rate, as well as the valuation allowance for the deferred tax assets on certain Canadian subsidiaries.

Net income.  Net income decreased to $21.4 million for the year ended December 31, 2016 from $27.3 million for the year ended December 31, 2015. The decrease was primarily for the reasons stated above.

Segment Results

The following table sets forth, for the periods indicated, statements of operations data by segment, segment net sales as a percentage of total net sales and segment operating income as a percentage of segment net sales:

    
 For the Year Ended December 31,
   2016 2015
(dollars in thousands) Amount Percent Amount Percent
Contract revenues:
                    
Transmission & Distribution $818,972   71.7%  $794,898   74.9% 
Commercial & Industrial  323,515   28.3   266,783   25.1 
Total $1,142,487   100.0  $1,061,681   100.0 
Operating income (loss):
                    
Transmission & Distribution $63,459   7.7  $63,155   7.9 
Commercial & Industrial  13,920   4.3   13,592   5.1 
Total  77,379   6.8   76,747   7.2 
Corporate  (38,625)   (3.4)   (31,906)   (3.0) 
Consolidated $38,754   3.4%  $44,841   4.2% 

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Transmission & Distribution

Revenues for our T&D segment for the year ended December 31, 2016 were $819.0 million compared to $794.9 million for the year ended December 31, 2015, an increase of $24.1 million, or 3.0%. The increase in revenue was primarily due to organic and acquisitive growth, partially offset by a decline in revenue in some geographic areas.

Revenues from transmission projects represented 75.8% and 73.9% of T&D segment revenue for the years ended December 31, 2016 and 2015, respectively. Additionally, for the year ended December 31, 2016, measured by revenue in our T&D segment, we provided 56.9% of our T&D services under fixed-price contracts, as compared to 48.4% for the year ended December 31, 2015.

Operating income for our T&D segment for the year ended December 31, 2016 was $63.4 million compared to $63.1 million for the year ended December 31, 2015, an increase of $0.3 million, or 0.5%. The slight increase in operating income was primarily due to operating income associated with our expansion in new geographic markets and favorable project close-outs, offset by lower margins due to unrecognized revenue on a pending project claim and change orders, inclement weather in some of our markets and lower productivity on other jobs. Operating income, as a percentage of revenues, for our T&D segment decreased to 7.7% for the year ended December 31, 2016 from 7.9% for the year ended December 31, 2015.

Commercial & Industrial

Revenues for our C&I segment for the year ended December 31, 2016 were $323.5 million compared to $266.8 million for the year ended December 31, 2015, an increase of $56.7 million, or 21.3%, primarily due to organic and acquisitive expansion in new markets. For the year ended December 31, 2016, measured by revenue in our C&I segment, we provided 73.4% of our services under fixed-price contracts, as compared to 71.6% for the year ended December 31, 2015.

Operating income for our C&I segment for the year ended December 31, 2016 was $13.9 million compared to $13.6 million for the year ended December 31, 2015, an increase of $0.3 million, or 2.4%. The year-over-year increase in operating income compared to the year ended December 31, 20152020 was primarily attributable to higher revenuesincentive compensation and margins experienced on certain projects, partially offset by productivity below our previous estimates and unrecognized revenue relatedother employee-related expenses to a pending project claim. Our expansion in new geographic markets provided positive operating income, albeit at a lower operating percentage of revenue, due to slower market penetration experienced in certain geographic areas and contingent consideration related to margin guarantees of $1.4 million classified as other income. As a percentage of revenues, operating income for our C&I segment decreased to 4.3% for the year ended December 31, 2016 from 5.1% for the year ended December 31, 2015.

Corporate

The increase in corporate expenses in 2016 was primarily attributable to higher bonus and profit sharing costs as well as additional support costs. Additionally we incurred $1.0 million of costs associated with activist investor activities. The impact of these increases were partially offset by a $1.4 million cost related to an executive officer transition in the fourth quarter of 2015.

operations.

Liquidity and Capital Resources

As of December 31, 20172020 and 2016,2019, we had working capital of $191.2$193.3 million and $146.7$242.4 million, respectively. We define working capital, a non-GAAP measure, as current assets less current liabilities. During the year ended December 31, 2017,2020, the operating activities of our business usedprovided cash of $9.2$175.2 million, compared to providing cash of $54.5$64.9 million for the year ended December 31, 2016.2019. Cash flow from operations is primarily influenced by demand for our services, operating margins, timing of contract performance and the type of services we provide to our customers. NetThe $110.3 million year-over-year increase in cash used in or provided by operating activities is driven by ourwas primarily due to favorable net income adjusted for changes in operating assets and liabilities and non-cash items including, but not limited to,of $89.1 million, $22.5 million in net income, $1.9 million in depreciation and amortization, stock-basedand $1.3 million in non-cash stock compensation deferred income taxes,expense. The favorable change in operating assets and the gain on sale of property and equipment. The $63.7 million year-over-year decline in net cash from operating activitiesliabilities was primarily due to unfavorablenet favorable year-over-year changes in various working capital accounts that relate primarily to the timing of costs incurred on work performed that does not coincide with the billing terms (accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts,contract assets, accounts payable and billings in excesscontract liabilities) of costs$49.6 million and estimated earnings on uncompleted contracts)favorable changes of $31.3 million. Additionally, a $19.0$46.2 million decline


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in other liabilities primarily attributable to lower bonus and profit sharing accruals and a $9.3(of which $26.1 million unfavorable non-cash change in deferred taxes,was due primarily to the Tax Act.

timing of payroll and the related tax payments, that we elected to defer under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act")), partially offset by a decrease of $5.1 million in other assets. The increase in cash provided by other liabilities was primarily due to the payment of net asset adjustments related to favorable changes in various working capital accounts are generallycontract assets and contract liabilities due to normal timing fluctuations in our operating activities. The unfavorable year-over-year cash flow change of $18.7 million in accounts receivable was mainly due to an increase in volume and the timing of billings and collections. The net unfavorable change of $3.4 million in costs and estimated earnings in excess of billings on uncompleted contracts and billings in excess of costs and estimated earnings on uncompleted contracts was primarily due to significant change orders and/or claims that had been included as contract price adjustments on certain contracts which were in the process of being negotiated in the normal course of business. The change in accounts payable was due to fluctuations in the construction cycle and the billing and payment terms of specificpayments under our contracts.

During the years ended December 31, 20172020 and 20162019, we used net cash of $26.5$40.9 million and $34.1$133.5 million, respectively, in investing activities. The $26.5$40.9 million of cash used in investing activities in the year ended December 31, 20172020 consisted of $30.8$44.4 million for capital expenditures, partially offset by $4.3$3.4 million of proceeds from the sale of equipment. The $34.1$133.5 million of cash used in investing activities in the year ended December 31, 20162019 consisted of $25.3$57.8 million for capital expenditures and $12.1$79.7 million to acquire WPE,CSI, partially offset by $3.3$4.0 million of proceeds from the sale of equipment.

Financing activities providedused cash of $16.9$124.3 million, compared to $35.5$73.4 million of cash used,provided, during the years ended December 31, 20172020 and 2016,2019, respectively. The $16.9 million of cash provided in financing activities in the year ended December 31, 2017 consisted primarily of $19.9 million of borrowings under our revolving lines of credit, partially offset by $3.0 million of share repurchases. The $3.0 million of cash used to purchase shares of our common stock consisted of $2.2 million to purchase shares surrendered by employees to satisfy employee tax obligations under our stock compensation program and $0.8 million purchased under our share repurchase program. The $35.5$124.3 million of cash used in financing activities in the year ended December 31, 2016,2020 consisted primarily of $101.5$103.8 million of net repayments under our revolving line of credit, $32.6 million of net repayments under our master equipment loan agreements and $1.2 million of repayments of finance lease obligations, $0.7 million of cash used to purchase shares surrendered by employees to satisfy tax obligations under our stock compensation programs during the year ended December 31, 2020, partially offset by $0.7 million of our commonproceeds from the exercise of stock as well as $1.0options. The $73.4 million of cash used to pay debt issuance costs related toprovided by financing activities in the year ended December 31, 2019 consisted primarily of $45.5 million of net borrowings under our newrevolving line of credit. These usescredit, primarily to fund the CSI acquisition, $35.1 million of cashnew equipment notes under our master equipment loan agreements and $0.3 million of proceeds from the exercise of stock options, which were partially offset by borrowings of $59.1 million, $6.2$4.6 million of proceeds from stock options and $2.3repayments of principal obligations under equipment notes, $1.1 million of tax benefitsdebt refinancing costs related to the amendment to the Credit Agreement, $1.2 million of repayments of finance lease obligations and share repurchases of $0.8 million, all of which represented shares surrendered to satisfy tax obligations under our stock compensation programs.

During 2017,programs during the Company’s Board of Directors approved a $20.0 million share repurchase program that began when the previous share repurchase program expired on August 15, 2017. As ofyear ended December 31, 2017, we had $19.3 million of remaining availability to purchase shares under the program, which continues in effect until August 15, 2018, or until the authorized funds are exhausted.

2019.

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We anticipate that our $150.1$364.6 million borrowing availability under our revolving line of credit facilityat December 31, 2020 and future cash flow from operations will provide sufficient cash to enable us to meet our future operating needs, debt service requirements, capital expenditures, acquisition and joint venture opportunities, share repurchases, and share repurchases.any new challenges and uncertainties associated with the COVID-19 pandemic. Although we believe that we have adequate cash and availability under our Credit Agreementborrowing capacity to meet our liquidity needs, any large projects or acquisitions may require additional capital.

Additionally, in light of the uncertainties around the economic impacts from the ongoing COVID-19 pandemic, we are focused on controlling our costs and capital expenditures to preserve our ability to continue to fund our operations; however, 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.

We have not historically paid dividends and currently do not expect to pay dividends.

Debt Instruments

Credit Agreement
On June 30, 2016,September 13, 2019, we entered into a five-year amended and restated credit agreement (the “Credit Agreement”) with a syndicate of banks led by JPMorgan Chase Bank, N.A. and Bank of America, N.A. The Credit Agreement provides for a facility of $250$375 million (the “Facility”), subject to certain financial covenants as defined in the Credit Agreement, that may be used for revolving loans andof which $150 million may be used for letters of credit. The Facility also allows for revolving loans and letters of credit in Canadian dollars and other currencies, up to the U.S. dollar equivalent of $50$75 million. We have an expansion option to increase the commitments under the Facility or enter into incremental term loans, subject to certain conditions, by up to an additional $100$200 million upon receipt of additional commitments from new or existing lenders. Subject to certain exceptions, the Facility is secured by substantially all of our assets and the assets of our domestic subsidiaries and by a pledge of substantially all of the capital stock of our domestic subsidiaries and 65% of the capital stock of our direct foreign subsidiaries. Additionally, subject to certain exceptions, our domestic subsidiaries also guarantee the repayment of all amounts due under the Credit Agreement. If an event of default occurs and is continuing, on the terms and subject to the conditions set forth in the Credit Agreement,


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amounts outstanding under the Facility may be accelerated and may become or be declared immediately due and payable. Borrowings under the Credit Agreement wereFacility are used to refinancefor refinancing existing debt, and are expected to be used for working capital, capital expenditures, acquisitions, stockshare repurchases and other general corporate purposes.

Amounts borrowed under the Credit Agreement bear interest, at our option, at a rate equal to either (1) the Alternate Base Rate (as defined in the Credit Agreement), plus an applicable margin ranging from 0.00% to 1.00%0.75%; or (2) Adjusted LIBO Rate (as defined in the Credit Agreement) plus an applicable margin ranging from 1.00% to 2.00%1.75%. The applicable margin is determined based on our consolidated leverage ratio (Leverage Ratio)(“Leverage Ratio”) which is defined in the Credit Agreement as Consolidated Total Indebtedness (as defined in the Credit Agreement) divided by Consolidated EBITDA (as defined in the Credit Agreement). Letters of credit issued under the Facility are subject to a letter of credit fee of 1.125%1.00% to 2.125%1.75% for non-performance letters of credit or 0.625%0.50% to 1.125%0.875% for performance letters of credit, based on the our consolidated Leverage Ratio. We are subject to a commitment fee of 0.20%0.15% to 0.375%0.25%, based on our consolidated Leverage Ratio, on any unused portion of the Facility. The Credit Agreement restricts certain types of payments when our consolidated Leverage Ratio exceeds 2.25.

2.50 or our consolidated Liquidity (as defined in the Credit Agreement) is less than $50 million.

Under the Credit Agreement, we are subject to certain financial covenants and must maintainare limited to a maximum consolidated Leverage Ratio of 3.0 and a minimum interest coverage ratio of 3.0, which3.0. The minimum interest coverage ratio is defined in the Credit Agreement as Consolidated EBITDA (as defined in the Credit Agreement) divided by interest expense (as defined in the Credit Agreement). The Credit Agreement also contains a number of covenants, including limitations on asset sales, investments, indebtedness and liens. In connection with any permitted acquisition where the total consideration exceeds $50 million, we may request that the maximum permitted consolidated Leverage Ratio increase from 3.0 to 3.5. Any such increase, if given effect, shall begin in the quarter in which such permitted acquisition is consummated and shall continue in effect for four consecutive fiscal quarters. We were in compliance with all of the financial covenants under the Credit Agreement as of December 31, 2017.

Prior to the amendment and restatement of the Credit Agreement, we had a five-year syndicated credit agreement with a facility of $175.0 million that provided funds for revolving loans and the issuance of letters of credit and up to $25.0 million for swingline loans.

2020.

As of December 31, 2017,2020, we had $79.0no debt outstanding under the Facility and letters of credit outstanding of approximately $10.4 million. As of December 31, 2019, we had $103.8 million of debt outstanding under the Facility and irrevocable standby letters of credit outstanding of approximately $20.9$10.6 million.
Equipment Notes
We have entered into multiple Master Loan Agreements with multiple banks. The Master Loan Agreements may be used for financing of equipment between us and the lending banks pursuant to one or more equipment notes (“Equipment Notes”). Each Equipment Note constitutes a separate, distinct and independent financing of equipment and contractual obligation.
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As of December 31, 2016,2020, we had $59.1four executed and outstanding Equipment Notes that are collateralized by equipment and vehicles owned by us. In addition to regularly schedule payments we retired five of our Equipment Notes during the year ended December 31, 2020. The outstanding balance of these Equipment Notes was $29.4 million as of debtDecember 31, 2020. As of December 31, 2019, we had executed nine Equipment Notes that are collateralized by equipment and vehicles owned by us. The outstanding under the Facility and irrevocable standby lettersbalance of credit outstandingthese Equipment Notes was $62.0 million as of approximately $23.7 million.

December 31, 2019.

Off-Balance Sheet Arrangements

As is common in our industry, we enter into certain off-balance sheet arrangements in the ordinary course of business that result in risks not directly reflected in our balance sheets. Our significant off-balance sheet transactions include liabilities associated with non-cancelable operating leases, letter of credit obligations and bond guarantees entered into in the normal course of business. We have not engaged in any off-balance sheet financing arrangements through special purpose entities.

Leases

We enter into non-cancelable leases for some of our facility, vehicle and equipment needs. These leases allow us to conserve cash by paying a monthly lease rental fee for the use of facilities, vehicles and equipment rather than purchasing them. Leases are accounted for as operating or capital leases, depending on the terms of the lease. We may decide to cancel or terminate a lease before the end of its term, in which case we are typically liable to the lessor for the remaining lease payments under the term of the lease. At December 31, 2017, we had no leases with residual value guarantees.

We typically have purchase options on the equipment underlying our long-term operating leases and many of our short-term rental arrangements. We exercise some of these purchase options when the need for equipment is on-going and the purchase option price is attractive.


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Purchase Commitments for Construction Equipment

As of December 31, 2017,2020, we had approximately $12.3$9.5 million in outstanding purchase obligations for certain construction equipment to be paid with cash outlayoutlays scheduled to occur over the first nine months of 2018.

2021.

Letters of Credit

Some of our vendors require letters of credit to ensure reimbursement for amounts they are disbursing on our behalf, such as to beneficiaries under our insurance programs. In addition, from time-to-time certain customers require us to post letters of credit to ensure payment to our subcontractors and vendors under those contracts and to guarantee performance under our contracts. Such letters of credit are generally issued by a bank or similar financial institution. The letter of credit commits the issuer to pay specified amounts to the holder of the letter of credit if the holder claims that we have failed to perform specified actions in accordance with the terms of the letter of credit. If this were to occur, we would be required to reimburse the issuer of the letter of credit. Depending on the circumstances of such a reimbursement, we may also have to record a charge to earnings for the reimbursement. Currently, we do not believe that it is likely that any claims will be made under any letter of credit.

At December 31, 2017,2020, we had $20.9$10.4 million in irrevocable standby letters of credit outstanding under our Credit Agreement, including $17.6$9.8 million, at an interest rate of 1.125%, related to the Company’s payment obligation under its insurance programs and approximately $3.3$0.6 million, at an interest rate of 0.625%, related to contract performance obligations. At December 31, 2016,2019, we had $23.7$10.6 million in irrevocable standby letters of credit outstanding under our Credit Agreement, including $17.6$10.0 million, at an interest rate of 1.125%, related to the Company’s payment obligation under its insurance programs and approximately $6.1$0.6 million, at an interest rate of 0.625%, related to contract performance obligations.

Performance and Payment Bonds and Parent Guarantees

Many customers, particularly in connection with new construction, require us to post performance and payment bonds issued by a financial institution known as a surety. These bonds provide a guarantee to the customer that we will perform under the terms of a contract and that we will pay subcontractors and vendors. If we fail to perform under a contract or to pay subcontractors and vendors, the customer may demand that the surety make payments or provide services under the bond. We must reimburse our sureties for any expenses or outlays they incur. Under our continuing indemnity and security agreements with our sureties, with the consent of our lenders under the Credit Agreement, we have granted security interests in certain of our assets to collateralize our obligations to the surety. We may be required to post letters of credit or other collateral in favor of the surety or our customers. Posting letters of credit in favor of the surety or our customers reduces the borrowing availability under the Credit Agreement. To date, we have not been required to make any reimbursements to any of our sureties for bond-related costs. We believe that it is unlikely that we will have to fund significant claims under our surety arrangements. As of December 31, 2017,2020, an aggregate of approximately $497.0 million$1.33 billion in original face amount of bonds issued by our sureties were outstanding. Our estimated remaining cost to complete these bonded projects was approximately $144.5$629.1 million as of December 31, 2017.

2020.

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.

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Indemnities

From time to time, pursuant to our service arrangements, we indemnify our customers for claims related to the services we provide under those service arrangements. These indemnification obligations may subject us to indemnity claims, liabilities and related litigation. We are not aware of any material unrecorded liabilities for asserted claims in connection with these indemnification obligations.


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Contractual Obligations

As of December 31, 2017,2020, our future contractual obligations are as follows:

      
(in thousands) Total Less than
1 Year		 1 – 3 Years 3 – 5 Years More than
5 Years		 Other(in thousands)TotalLess than
1 Year		1 – 3 Years3 – 5 YearsMore than
5 Years		Other
Short and long term debt(1) $78,960  $—  $—  $78,960  $—  $— $29,420 $4,381 $9,156 $9,291 $6,592 $— 
Operating lease obligations  11,831   3,599   5,072   2,596   564   — Operating lease obligations26,803 9,111 12,998 3,899 795 — 
Capital lease obligations  3,915   1,185   2,370   360   —   — 
Finance lease obligationsFinance lease obligations321 321 — — — — 
Purchase obligations  12,261   12,261   —   —   —   — Purchase obligations9,491 9,491 — — — — 
Income tax contingencies  787   —   —   —   —   787 Income tax contingencies422 — — — — 422 
Total $107,754  $17,045  $7,442  $81,916  $564  $787 Total$66,457 $23,304 $22,154 $13,190 $7,387 $422 

___________________________
(1)Includes obligations under the Facility and obligations under Equipment Notes.
Excluded from the above table are interest and fees associated with our short term and long term debt and irrevocable standby letters of credit outstanding under our Facility, because the applicable interest rates and fees are variable. We have also excluded our multi-employer pension plan contributions, which are determined annually, based on our union employee payrolls, and which cannot be determined for future periods in advance.

The amount of income tax contingencies has been presented in the “Other” column in the table above due to the fact that the period of future payment cannot be reliably estimated. For further information, refer to Note 1012 — Income Taxes to theour Financial Statements.

Concentration of Credit Risk

We grant trade credit under contractual payment terms, generally without collateral, to our customers, which include high credit quality electric utilities, governmental entities, general contractors and builders, owners and managers of commercial and industrial properties. Consequently, we are subject to potential credit risk related to changes in business and economic factors. However, we generally have certain statutory lien rights with respect to services provided. Under certain circumstances such as foreclosures or negotiated settlements, we may take title to the underlying assets in lieu of cash in settlement of receivables. As of December 31, 2017,2020 and 2019, none of our customers individually exceeded 10.0% of our accounts receivable. As of December 31, 2016, one customer individually exceeded 10.0% of accounts receivable with approximately 11.2% of the total accounts receivable amount (excluding the impact of allowance for doubtful accounts). Management believes the terms and conditions in our contracts, billing and collection policies are adequate to minimize the potential credit risk.

Inflation

Inflation did not have a significant effect on our results during the years ended December 31, 2017, 20162020 or 2015.

2019.

New Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 1 — Organization, Business and Summary of Significant Accounting Policies in the Notes to theour Financial Statements.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based on our Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates. We believe the following accounting policies affect our more significant judgments and estimates used in the preparation of our Financial Statements:

Revenue Recognition.  Revenues under long-term contracts are accounted for under the percentage-of-completion method of accounting. Under the percentage-of-completion method, we estimate


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Revenue Recognition.   We recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that we expect to be entitled to in exchange for goods or services provided. Revenue associated with contracts with customers is recognized over time as our performance creates or enhances customer-controlled assets or creates or enhances an asset with no alternative use, for which we have an enforceable right to receive compensation as defined under the contract. To determine the amount of revenue to recognize over time, we estimate profit asby determining the difference between total estimated revenue and total estimated cost of a contract. In addition, we estimate a cost accrual every quarter that represents unbilled invoicing activity for services performed by subcontractors and suppliers during the quarter, and estimate revenue from the contract cost portion of this accrual based on current gross margin rates to be consistent with our cost method of revenue recognition. The estimated value of unbilled amounts are determined using a regression analysis that estimates value based on our historical experience, and recognize thatis adjusted for large individual projects. The profit and corresponding revenue is recognized over the contract term based on costs incurred under the cost-to-cost method.

Revenues from our construction services are performed under fixed-price, time-and-equipment, time-and-materials, unit-price, and cost-plus fee contracts. For fixed-price and unit-price contracts, We utilized the cost-to-cost method as we use the ratio ofbelieve cost incurred to datebest represents the amount of work completed and remaining on our projects, and is the contract (excluding uninstalled direct materials) to management’s estimatemost common basis for computing percentage of completion in our industry. For purposes of recognizing revenue, we follow the contract’s totalfive-step approach outlined in Accounting Standards Codification (“ASC”) 606-10-25.

As the cost-to-cost method is driven by incurred cost, to determinewe calculate the percentage of completion by dividing costs incurred to date by the total estimated cost. The percentage of completion is then multiplied by estimated revenues to determine inception-to-date revenue. Revenue recognized for the period is the current inception-to-date recognized revenue less the prior period inception-to-date recognized revenue. If a contract is projected to result in a loss, the entire contract loss is recognized in the period when the loss was first determined and the amount of the loss is updated in subsequent reporting periods. Because our billings are based on each contract. This method is used as management considers expended costs to be the best available measure of progression of these contracts. Contract costcontract terms and do not coincide with our progress in a project, revenue recognition also includes all direct costs on contracts, including labor and material, subcontractor costs and those indirect costsan amount related to our contract performance, such as supplies, fuel, tool repairsasset or contract liability. If the recognized revenue is greater than the amount billed to the customer, a contract asset is recorded. Additionally, the contract asset includes retainage billed to the customer that cannot be collected until the contract work has been completed and depreciation. We recognizeapproved. Conversely, if the amount billed to the customer is greater than the recognized revenue, a contract liability is recorded. Additionally, the contract liability includes a liability for the excess of costs over revenues from construction services with fees based on time-and-materials, or cost-plus fee as the servicesfor all contracts that are performed and amounts are earned. If contracts include contract incentive or bonus provisions, they are included in estimated contract revenues only when the achievement of such incentive or bonus is reasonably certain.

a loss position.

Contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract. Changes in the job performance, job conditions and final contract settlements are factors that influence management’s assessment of total contract value and the total estimated costs to complete those contracts, and therefore, our profit and revenue recognition. These changes, which include contracts with estimated costs in excess of estimated revenues, are recognized in contract costs in the period in which the revisions are determined. At the point we anticipate a loss on a contract,Additionally, we estimate costs to complete on fixed price contracts which are determined on an individual contract basis by evaluating each project’s status as of the ultimate loss through completionbalance sheet date, and recognize that loss inusing our historical experience with the period in whichlevel of effort required to complete the possible loss was identified.

underlying project. Claims and change orders are also measured based on our historical experience with individual customers and similar contracts, and are evaluated by management individually. A change order is a modification to a contract that changes the provisions of the contract, typically resulting from changes in scope, specifications, design, manner of performance, facilities, equipment, materials, sites, or period of completion of the work under the contract. A claim is an amount in excess of the agreed-upon contract price that the Company seekswe seek to collect from itsour clients or others for client-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes. Costs relatedWe include these estimated amounts of variable consideration to change orders and claims are recognized when incurred. Revenue from a change order is included in total estimated contract revenue whenthe extent that it is probable there will not be a significant reversal of revenue.

Some of our contracts may have contract terms that include variable consideration such as safety or performance bonuses or liquidated damages. In accordance with ASC 606-10-32, we estimate the change order will resultvariable consideration using one of two methods. In contracts in an addition to contractwhich there is a binary outcome, the most likely amount method is used. In instances in which there is a range of possible outcomes, the expected value and can be reliably estimated. Revenue from a claimmethod is includedused. In accordance with ASC 606-10-32-11, we include the estimated amount of variable consideration in total estimated contract revenues,the transaction price only to the extent that contract costs related to the claim have been incurred, when it is probable that a significant reversal in the claimamount of cumulative recognized revenue will resultnot occur when the final outcome of the variable consideration is determined. In contracts in an additionwhich a significant reversal may occur, we use constraint in recognizing revenue on variable consideration. Although we often enter into contracts that contain liquidated damage clauses, we rarely incur them, and as such, we do not include amounts associated with liquidated damage clauses until it is probable that liquidated damages will occur. These items are continually monitored by multiple levels of management throughout the reporting period.
A portion of the work we perform requires financial assurances in the form of performance and payment bonds or letters of credit at the time of execution of the contract. Many of our contracts include retention provisions of up to 10%, which are generally withheld from each progress payment as retainage until the contract value which can be reliably estimated. No profit is recognized on a claim until final settlement occurs.

work has been completed and approved.

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The accuracy of our revenue and profit recognition in a given period is dependent on the accuracy of our estimates of the cost to complete each project. Cost estimates for all of our significant projects use a detailed “bottoms up” approach and we believe our experience typically allows us to provide materially reliable estimates. There are a number of factors that can contribute to changes in estimates of contract cost and profitability. The most significant of these include, among others:

•the completeness and accuracy of the original bid;
•costs associated with scope changes, change orders or claims;
•costs of labor and/or materials;
•extended overhead due to owner, weather and other delays;
•subcontractor performance issues;
•changes in productivity expectations;
•site conditions that differ from those assumed in the original bid (to the extent contract remedies are unavailable);
•the availability and skill level of workers in the geographic location of the project; and
•a change in the availability and proximity of equipment and materials.

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The foregoing factors as well as the stage of completion of contracts in process and the mix of contracts at different margins may cause fluctuations in gross profit between periods.

We provide warranties to customers on a basis customary to the industry; however, the warranty period does not typically exceed one year. Historically, warranty claims have not been material.

Total revenues do not include sales tax as we consider ourselves a pass-through conduit for collecting and remitting sales taxes. Sales tax and value added tax collected from customers is included in other current liabilities on our consolidated balance sheets.

Insurance.   We carry insurance policies, which are subject to certain deductibles, for workers’ compensation, general liability, automobile liability and other coverages. Our deductible for each line of coverage is up to $1.0 million, except for wildfire coverage which has a deductible of $2.0 million. Certain health benefit plans are subject to a deductiblestop-loss limits of up to $0.2 million, for qualified individuals. Losses up to the deductible and stop-loss amounts are accrued based upon our estimates of the ultimate liability for claims reported and an estimate of claims incurred but not yet reported.

The insurance and claims accruals are based on known facts, actuarial estimates and historical trends. While recorded accruals are based on the ultimate liability, which includes amounts in excess of the deductible, a corresponding receivable for amounts in excess of the deductible is included in current assets in theon our consolidated balance sheets.

Stock-Based Compensation.   We determine compensation expense for stock-based awards based on the estimated fair values at the grant date and recognize the related compensation expense ratably over the vesting period. We use the straight-line amortization method to recognize compensation expense related to stock-based awards, such as restricted stock and phantomrestricted stock units, that have only service conditions. This method recognizes stock compensation expense on a straight-line basis over the requisite service period for the entire award. We recognize compensation expense related to performance awards that vest based on internal performance metrics and service conditions on a straight-line basis over the service period, but adjust inception-to-date expense based upon our determination of the potentialexpected achievement of the performance target at each reporting date. We recognize compensation expense related to performance awards with market-based performance metrics on a straight-line basis over the requisite service period. Upon adoption ASU No. 2016-09,Compensation — Stock Compensation (Topic 718) in January of 2017, we elected to discontinue estimating future forfeitures andWe recognize forfeitures as they occur. Prior to the adoption, we used historical data to estimate the forfeiture rate applied to stock grants. Shares issued under the Company’s stock-based compensation program are taken out of authorized but unissued shares.

Goodwill and Intangibles.   Goodwill and intangible assets with indefinite lives are not amortized. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. We perform either a qualitative or quantitative assessment to review goodwill and intangible assets with indefinite lives for impairment on an annual basisbasis. This assessment is performed at the beginning of the fourth quarter, or when circumstances change, such as a significant adverse change in the business climate or the decision to sell a business, both of which would indicate that impairment may have occurred. We perform a qualitative assessment to determine whether it is necessary to perform a two-step goodwillIntangible assets with finite lives are also reviewed for impairment test. Theand tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
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A qualitative assessment considers financial, industry, segment and macroeconomic factors. Iffactors, if the qualitative assessment indicates a potential for impairment, the two-step methoda quantitative assessment is usedperformed to determine if impairment exists. The two-step methodquantitative assessment begins with a comparison of the fair value of the reporting unit or intangible asset with its carrying value. If the carrying amount of the reporting unit or intangible asset exceeds its fair value, an impairment loss would be recognized in an amount equal to that excess, limited to the second step of the process involves a comparison of the implied fair value and carrying valuetotal amount of the goodwill of thatallocated to the reporting unit. The company also performs a qualitative assessment onunit or intangible assets with indefinite lives. If the qualitative assessment indicates a potential for impairment, a quantitative impairment test would be performed to compare the fair value of the indefinite-lived intangible asset with its carrying value.asset. If the carrying value of goodwill or other indefinite lived assets exceeds its implied fair value, an impairment charge would be recorded in the statement of operations.

As a result of the annual qualitative review process in 20172020 and 2016,2019, we determined it was not necessary to perform a two-step analysis.


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qualitative assessment. In 2015,2018, we determined, basedperformed a quantitative assessment on our qualitative analysis, that it was appropriate to perform a two-step analysis. The first step involves a comparison of the fair value of the reporting unitgoodwill and intangible assets with its carrying value. If the carrying amount of the reporting unit exceeds its fair value, the second step of the process involves a comparison of the implied fair value and carrying value of the goodwill of that reporting unit. If the carrying value of goodwill exceeds its implied fair value, an impairment charge is recorded in the statement of operations. The step one analysisindefinite lives, this assessment did not indicate that our goodwill or indefinite lived intangible assets were impaired. As a result, no step two analysis was performed.

Accounts Receivable and Allowance for Doubtful Accounts.   We do not generally charge interest to our customers, and we carry our customer receivables at their face amounts, less an allowance for doubtful accounts. Included in accounts receivable are balances billed to customers pursuant to retainage provisions in certain contracts that are due upon completion of the contracts and acceptance by the customer, or earlier, as provided by the contract. Based on our experience in recent years, the majority of customer balances at each balance sheet date are collected within twelve months. As is common practice in the industry, we classify all accounts receivable including retainage, as current assets. The contracting cycle for certain long-term contracts may extend beyond one year, and accordingly, collection of retainage on those contracts may extend beyond one year.

We grant trade credit, on a non-collateralized basis (with the exception of lien rights against the property in certain cases) to our customers, and we are subject to potential credit risk related to changes in business and overall economic activity. We analyze specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible the account balance is written-off against the allowance for doubtful accounts.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

As of December 31, 2017, we

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk
We were not parties to any derivative instruments. We did not use anyinstruments and had no derivative financial instruments during the years ended December 31, 2017, 20162020, 2019 or 2015.

Borrowings2018.

Any borrowings under our Facility are based upon interest rates that will vary depending upon the prime rate, Canadian prime rate, federal funds effective rate, the NYFRB overnight bank funding rate, CDOR, and LIBOR. If the prime rate, Canadian prime rate, federal funds effective rate, the NYFRB overnight bank funding rate, CDOR, or LIBOR rises, ourany interest payment obligations willwould increase and have a negative effect on our cash flow and financial condition. We currently do not maintain any hedging contracts that would limit our exposure to variable rates of interest when we have outstanding borrowings. If market rates of interest on all our revolving debt asAs of December 31, 2017, which is subject to variable2020, we did not have any borrowings under our Facility.
Borrowings under our Equipment Notes are at fixed rates permanently increased by 1%,established on the increase in interest expense on all revolving debt would decrease future income before provision for income taxes and cash flows by approximately $0.8 million annually. If market rates of interest on all our revolving debt, which is subject to variable rates as of December 31, 2017, permanently decreased by 1%,date the decrease in interest expense on all debt would increase future income before provision for income taxes and cash flows by the same amount.

note was executed.

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Item 8.Financial Statements and Supplementary Data

Item 8.    Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS

5045
5146
5448
5549
5650
5751
5852


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Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our Financial Statements for external purposes in accordance with U.S. GAAP. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the companyCompany are being made only in accordance with authorizations of management and directors of the company;Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’sCompany’s assets that could have a material effect on the financial statements.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 20172020 in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. GAAP.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurances and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.

Crowe Horwath LLP, anthe independent registered public accounting firm whothat audited and reported on the 20172020 Financial Statements included in this Annual Report on Form 10-K, has audited the effectiveness of MYR Group’s internal control over financial reporting as of December 31, 2017 as stated in their2020 and has issued an attestation report on MYR Group’s internal control over financial reporting which appears herein.

March 7, 2018

3, 2021

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Report of Independent Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of MYR Group Inc.
Rolling Meadows, IL

Henderson, CO
Opinions on the Financial Statements and Internal Control Overover Financial Reporting

We have audited the accompanying consolidated balance sheetsheets of MYR Group Inc. (the “Company”) as of December 31, 2017,2020 and 2019, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the yearyears in the three-year period ended December 31, 2017,2020, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control — Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017,2020 and 2019, and the results of its operations and its cash flows for each of the year thenyears in the three-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control — Integrated Framework: (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our auditaudits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our auditaudits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and


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directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of variable consideration and estimated costs to complete on select long-term fixed price construction contracts
As described in Note 1 of the Company’s consolidated financial statements, Organization, Business, and Significant Accounting Policies, and Note 3, Revenue Recognition, the Company recognizes revenue on fixed price construction projects over time using the cost-to-cost method. The amount of contract revenues and gross profit recognized on fixed price construction contracts is dependent on the contract price, the actual contract costs incurred, and the forecasted contract revenues and contract costs for construction projects. The recognition of revenue on fixed price construction contracts involves significant estimates based on specific project conditions and performance and due to uncertainty about estimates of costs to complete, and uncertainty in the outcome of discussions with customers on the valuation of change orders and claims. The Company measures progress towards completion using the cost-to-cost method, which measures the progress as the ratio of actual contract costs incurred to date to the total estimated cost. The Company recognizes revenue related to change orders only when it is probable that the change order will result in an addition to contract value and can be reliably estimated. The Company evaluates change orders and claims based on historical experience with the customer, similar contracts, and on an individual basis, which involves significant judgment. The Company recognizes estimated amounts of variable consideration in transaction price to the extent that it is probable there will not be a significant reversal of revenue. Changes in estimates of variable consideration and costs to complete on in-process construction projects could have a significant impact on the amount of contract revenue recognized.
We identified auditing management’s estimates of variable consideration for change orders and claims and estimated costs to complete associated with the revenue recognition on select long-term fixed price construction contracts to be a critical audit matter. The critical audit matter relates to select long-term fixed price construction contracts, based on magnitude of estimated costs to complete and the stage of completion of the contract. These estimates require management to make assumptions about future events and, as a result, a high degree of auditor judgment is involved in auditing these estimates. Due to the factors above, auditing management’s estimates of costs to complete and variable consideration required extensive audit procedures.
Our audit procedures to address the critical audit matter included the following:
–Tested the operating effectiveness of controls over the reasonableness of estimates of costs to complete contracts and estimates of variable consideration recognized on contracts;
–Evaluated management’s process for estimating the costs to complete for select long-term fixed price construction contracts and evaluated the reasonableness of the significant assumptions used in the estimates;
–Agreed a sample of contract costs incurred to supporting documentation;
–Performed corroborative interviews of management and project personnel regarding facts and circumstances relevant to the accounting for such contracts;
–Evaluated variable consideration recognized related to construction projects by comparing management’s estimates to subsequent actual data, evaluating the contracts and other documents that support estimates made by management, and obtaining legal correspondence from internal and external counsel; and
–Performed procedures to retrospectively assess management’s historical ability to accurately estimate variable consideration and cost to complete of construction contracts.
/s/ Crowe Horwath LLP

We have served as the Company’s auditor since 2017.

Oak Brook, Illinois
March 7, 2018

3, 2021

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Report of Independent Registered Public Accounting Firm

To Board of Directors and Stockholders of
MYR Group Inc.

We have audited the accompanying consolidated balance sheet of MYR Group Inc. as of December 31, 2016, and the related consolidated statements of operations and comprehensive income, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MYR Group Inc. at December 31, 2016, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Chicago, Illinois
March 9, 2017


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MYR GROUP INC.

CONSOLIDATED BALANCE SHEETS

  
 December 31,December 31,
(in thousands, except share and per share data) 2017 2016(in thousands, except share and per share data)20202019
ASSETS
          ASSETS
Current assets
          Current assets
Cash and cash equivalents $5,343  $23,846 Cash and cash equivalents$22,668 $12,397 
Accounts receivable, net of allowances of $605 and $432, respectively  283,008   234,642 
Costs and estimated earnings in excess of billings on uncompleted contracts  78,260   69,950 
Accounts receivable, net of allowances of $1,696 and $3,364, respectivelyAccounts receivable, net of allowances of $1,696 and $3,364, respectively385,938 388,479 
Contract assets, net of allowances of $359 and $147, respectivelyContract assets, net of allowances of $359 and $147, respectively185,803 217,109 
Current portion of receivable for insurance claims in excess of deductibles  4,221   3,785 Current portion of receivable for insurance claims in excess of deductibles11,859 6,415 
Refundable income taxes  391   2,474 Refundable income taxes1,534 1,973 
Other current assets  8,513   8,202 Other current assets28,882 12,811 
Total current assets  379,736   342,899 Total current assets636,684 639,184 
Property and equipment, net of accumulated depreciation of $231,391 and $209,466, respectively  148,084   154,891 
Property and equipment, net of accumulated depreciation of $294,366 and $272,865, respectivelyProperty and equipment, net of accumulated depreciation of $294,366 and $272,865, respectively185,114 185,344 
Operating lease right-of-use assetsOperating lease right-of-use assets22,291 22,958 
Goodwill  46,994   46,781 Goodwill66,065 66,060 
Intangible assets, net of accumulated amortization of $5,183 and $4,684, respectively  10,852   11,566 
Intangible assets, net of accumulated amortization of $14,467 and $10,880, respectivelyIntangible assets, net of accumulated amortization of $14,467 and $10,880, respectively51,365 54,940 
Receivable for insurance claims in excess of deductibles  14,295   14,692 Receivable for insurance claims in excess of deductibles27,043 30,976 
Investment in joint venture  168   — Investment in joint venture3,040 4,722 
Other assets  3,659   2,666 Other assets4,257 3,687 
Total assets $603,788  $573,495 Total assets$995,859 $1,007,871 
LIABILITIES AND STOCKHOLDERS’ EQUITY
          LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
          Current liabilities
Current portion of capital lease obligations $1,086  $1,085 
Current portion of long-term debtCurrent portion of long-term debt$4,381 $8,737 
Current portion of operating lease obligationsCurrent portion of operating lease obligations6,612 6,205 
Current portion of finance lease obligationsCurrent portion of finance lease obligations318 1,135 
Accounts payable  110,383   99,942 Accounts payable162,580 192,107 
Billings in excess of costs and estimated earnings on uncompleted contracts  28,919   42,321 
Current portion of self-insurance reserves  13,138   10,492 
Contract liabilitiesContract liabilities158,396 105,486 
Current portion of accrued self-insuranceCurrent portion of accrued self-insurance24,395 18,780 
Other current liabilities  35,038   42,382 Other current liabilities86,718 64,364 
Total current liabilities  188,564   196,222 Total current liabilities443,400 396,814 
Deferred income tax liabilities  13,452   18,565 Deferred income tax liabilities18,339 20,945 
Long-term debt  78,960   59,070 Long-term debt25,039 157,087 
Self-insurance reserves  32,225   32,092 
Capital lease obligations, net of current maturities  2,629   3,833 
Accrued self-insuranceAccrued self-insurance45,428 48,024 
Operating lease obligations, net of current maturitiesOperating lease obligations, net of current maturities15,730 16,884 
Finance lease obligations, net of current maturitiesFinance lease obligations, net of current maturities0 338 
Other liabilities  919   539 Other liabilities18,631 3,304 
Total liabilities  316,749   310,321 Total liabilities566,567 643,396 
Commitments and contingencies
          Commitments and contingencies00
Stockholders’ equity
          Stockholders’ equity
Preferred stock – $0.01 par value per share; 4,000,000 authorized shares; none issued and outstanding at December 31, 2017 and December 31, 2016  —   — 
Common stock – $0.01 par value per share; 100,000,000 authorized shares; 16,464,757 and 16,333,139 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively  163   162 
Preferred stock – $0.01 par value per share; 4,000,000 authorized shares; NaN issued and outstanding at December 31, 2020 and December 31, 2019Preferred stock – $0.01 par value per share; 4,000,000 authorized shares; NaN issued and outstanding at December 31, 2020 and December 31, 20190 0 
Common stock – $0.01 par value per share; 100,000,000 authorized shares; 16,734,239 and 16,648,616 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectivelyCommon stock – $0.01 par value per share; 100,000,000 authorized shares; 16,734,239 and 16,648,616 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively167 166 
Additional paid-in capital  143,934   140,100 Additional paid-in capital158,618 152,532 
Accumulated other comprehensive income (loss)  (299)   (433) Accumulated other comprehensive income (loss)23 (446)
Retained earnings  143,241   123,345 Retained earnings270,480 212,219 
Total stockholders’ equity attributable to MYR Group Inc.Total stockholders’ equity attributable to MYR Group Inc.429,288 364,471 
Noncontrolling interestNoncontrolling interest4 4 
Total stockholders’ equity  287,039   263,174 Total stockholders’ equity429,292 364,475 
Total liabilities and stockholders’ equity $603,788  $573,495 Total liabilities and stockholders’ equity$995,859 $1,007,871 



The accompanying notes are an integral part of these Financial Statements.


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MYR GROUP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

   
 Year ended December 31,Year ended December 31,
(in thousands, except per share data) 2017 2016 2015(in thousands, except per share data)202020192018
Contract revenues $1,403,317  $1,142,487  $1,061,681 Contract revenues$2,247,392 $2,071,159 $1,531,169 
Contract costs  1,278,313   1,007,764   939,340 Contract costs1,971,539 1,857,001 1,364,109 
Gross profit  125,004   134,723   122,341 Gross profit275,853 214,158 167,060 
Selling, general and administrative expenses  98,611   96,424   79,186 Selling, general and administrative expenses188,535 156,674 118,737 
Amortization of intangible assets  499   886   571 Amortization of intangible assets3,586 3,849 1,843 
Gain on sale of property and equipment  (3,664)   (1,341)   (2,257) Gain on sale of property and equipment(2,813)(3,543)(3,832)
Income from operations  29,558   38,754   44,841 Income from operations86,545 57,178 50,312 
Other income (expense):
               Other income (expense):
Interest income  4   5   25 Interest income9 4 24 
Interest expense  (2,603)   (1,299)   (741) Interest expense(4,563)(6,225)(3,652)
Other income (expense), net  (2,319)   885   174 
Other expense, netOther expense, net(606)(515)(3,616)
Income before provision for income taxes  24,640   38,345   44,299 Income before provision for income taxes81,385 50,442 43,068 
Income tax expense  3,486   16,914   16,997 Income tax expense22,626 14,228 11,774 
Net income $21,154  $21,431  $27,302 Net income58,759 36,214 31,294 
Income per common share:
               
Less: net income (loss) attributable to noncontrolling interestLess: net income (loss) attributable to noncontrolling interest0 (1,476)207 
Net income attributable to MYR Group Inc.Net income attributable to MYR Group Inc.$58,759 $37,690 $31,087 
Income per common share attributable to MYR Group Inc.:Income per common share attributable to MYR Group Inc.:
– Basic $1.30  $1.25  $1.33 – Basic$3.52 $2.27 $1.89 
– Diluted $1.28  $1.23  $1.30 – Diluted$3.48 $2.26 $1.87 
Weighted average number of common shares and potential common shares outstanding:
               Weighted average number of common shares and potential common shares outstanding:
– Basic  16,273   17,109   20,577 – Basic16,684 16,587 16,441 
– Diluted  16,496   17,461   21,038 – Diluted16,890 16,699 16,585 
Net income $21,154  $21,431  $27,302 Net income$58,759 $36,214 $31,294 
Other comprehensive income (loss):
               Other comprehensive income (loss):
Foreign currency translation adjustment  134   (549)   103 Foreign currency translation adjustment469 (253)106 
Other comprehensive income (loss)  134   (549)   103 Other comprehensive income (loss)469 (253)106 
Total comprehensive income $21,288  $20,882  $27,405 Total comprehensive income59,228 35,961 31,400 
Less: net income (loss) attributable to noncontrolling interestLess: net income (loss) attributable to noncontrolling interest0 (1,476)207 
Total comprehensive income attributable to MYR Group Inc.Total comprehensive income attributable to MYR Group Inc.$59,228 $37,437 $31,193 



The accompanying notes are an integral part of these Financial Statements.


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MYR GROUP INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

       Preferred StockCommon StockAdditional
Paid-In
Capital		Accumulated
Other Comprehensive Income (Loss)		Retained
Earnings		MYR
Group Inc. Shareholders’ Equity		Noncontrolling
Interest		Total
(in thousands) Preferred Stock Common Stock Additional
Paid-In
Capital		 Accumulated
Other
Comprehensive
Income (loss)		 Retained
Earnings		 Total(in thousands)SharesAmount
Shares Amount
Balance at December 31, 2014 $—   20,792  $206  $151,111  $13  $171,223  $322,553 
Balance at December 31, 2017Balance at December 31, 2017$0 16,465 $163 $143,934 $(299)$143,241 $287,039 $0 $287,039 
Net incomeNet income— — — — — 31,087 31,087 207 31,294 
Adjustment to adopt ASC 606Adjustment to adopt ASC 606— — — — — 695 695 — 695 
Stock issued under compensation plans, netStock issued under compensation plans, net— 132 2 1,895 — — 1,897 — 1,897 
Stock-based compensation expenseStock-based compensation expense— — — 3,165 — — 3,165 — 3,165 
Shares repurchasedShares repurchased— (33)— (756)— (287)(1,043)— (1,043)
Noncontrolling interest acquiredNoncontrolling interest acquired— — — — — — — 1,273 1,273 
Other comprehensive incomeOther comprehensive income— — — — 106 — 106 — 106 
Stock issued – otherStock issued – other— 1 — 38 — — 38 — 38 
Balance at December 31, 2018Balance at December 31, 20180 16,565 165 148,276 (193)174,736 322,984 1,480 324,464 
Net income  —   —   —   —   —   27,302   27,302 Net income— — — — — 37,690 37,690 (1,476)36,214 
Stock issued under compensation plans, net  —   413   4   1,919   —   —   1,923 Stock issued under compensation plans, net— 105 1 340 — — 341 — 341 
Tax benefit from stock-based awards  —   —   —   1,612   —   —   1,612 
Stock-based compensation expense  —   —   —   4,837   —   —   4,837 
Shares repurchased  —   (1,236)   (12)   (12,130)   —   (16,336)   (28,478) 
Other comprehensive income  —   —   —   —   103   —   103 
Reclassification of shares repurchased  —   —   —   13,965   —   (13,965)   — 
Stock issued – other  —   —   —   28   —   —   28 
Balance at December 31, 2015  —   19,969   198   161,342   116   168,224   329,880 
Net income  —   —   —   —   —   21,431   21,431 
Stock issued under compensation plans, net  —   589   6   6,213   —   —   6,219 
Tax benefit from stock-based awards  —   —   —   2,044   —   —   2,044 
Stock-based compensation expense  —   —   —   4,674   —   —   4,674 Stock-based compensation expense— — — 4,403 — — 4,403 — 4,403 
Shares repurchased  —   (4,228)   (42)   (34,235)   —   (66,310)   (100,587) Shares repurchased— (23)— (571)— (207)(778)— (778)
Other comprehensive loss  —   —   —   —   (549)   —   (549) Other comprehensive loss— — — — (253)— (253)— (253)
Stock issued – other  —   3   —   62   —   —   62 Stock issued – other— 2 — 84 — — 84 — 84 
Balance at December 31, 2016  —   16,333   162   140,100   (433)   123,345   263,174 
Balance at December 31, 2019Balance at December 31, 20190 16,649 166 152,532 (446)212,219 364,471 4 364,475 
Net income  —   —   —   —   —   21,154   21,154 Net income— — — — — 58,759 58,759 — 58,759 
Adjustment to adopt ASU No. 2016-09  —   —   —   225   —   (225)   — 
Adjustment to adopt ASC 326Adjustment to adopt ASC 326— — — — — (268)(268)— (268)
Stock issued under compensation plans, net  —   224   2   1,230   —   —   1,232 Stock issued under compensation plans, net— 108 1 748 — — 749 — 749 
Stock-based compensation expense  —   —   —   4,376   —   —   4,376 Stock-based compensation expense— — — 5,688 — — 5,688 — 5,688 
Shares repurchased  —   (93)   (1)   (2,025)   —   (1,033)   (3,059) Shares repurchased— (25)— (422)(230)(652)— (652)
Other comprehensive income  —   —   —   —   134   —   134 Other comprehensive income— — — — 469 — 469 — 469 
Stock issued – other  —   1   —   28   —   —   28 Stock issued – other— 2 — 72 — — 72 — 72 
Balance at December 31, 2017 $—   16,465  $163  $143,934  $(299)  $143,241  $287,039 
Balance at December 31, 2020Balance at December 31, 2020$0 16,734 $167 $158,618 $23 $270,480 $429,288 $4 $429,292 



The accompanying notes are an integral part of these Financial Statements.


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MYR GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

   
 Year ended December 31,Year ended December 31,
(in thousands) 2017 2016 2015(in thousands)202020192018
Cash flows from operating activities:
               Cash flows from operating activities:
Net income $21,154  $21,431  $27,302 Net income$58,759 $36,214 $31,294 
Adjustments to reconcile net income to net cash flows provided by (used in) operating activities –
               
Adjustments to reconcile net income to net cash flows provided by operating activities:Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization of property and equipment  38,077   38,236   37,458 Depreciation and amortization of property and equipment42,867 40,667 38,070 
Amortization of intangible assets  499   886   571 Amortization of intangible assets3,586 3,849 1,843 
Stock-based compensation expense  4,376   4,674   4,837 Stock-based compensation expense5,688 4,403 3,165 
Deferred income taxes  (5,091)   4,205   1,558 Deferred income taxes(2,641)3,602 3,649 
Gain on sale of property and equipment  (3,664)   (1,341)   (2,257) Gain on sale of property and equipment(2,813)(3,543)(3,832)
Other non-cash items  1,194   194   200 Other non-cash items1,951 1,029 237 
Changes in operating assets and liabilities, net of acquisitions
               
Changes in operating assets and liabilities, net of acquisitions:Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net  (46,190)   (27,485)   (17,765) Accounts receivable, net2,903 (39,710)(15,871)
Costs and estimated earnings in excess of billings on uncompleted contracts  (7,611)   (17,001)   (4,597) 
Contract assetsContract assets31,360 (16,443)(28,141)
Receivable for insurance claims in excess of deductibles  (39)   (7,187)   1,021 Receivable for insurance claims in excess of deductibles(1,511)(9,646)(9,229)
Other assets  (2,213)   3,730   (5,634) Other assets(15,458)(10,327)2,280 
Accounts payable  8,149   17,322   6,742 Accounts payable(43,079)22,492 19,953 
Billings in excess of costs and estimated earnings on uncompleted contracts  (13,502)   (707)   1,003 
Contract liabilitiesContract liabilities52,918 28,163 22,551 
Accrued self-insurance  2,765   5,617   (2,616) Accrued self-insurance3,010 12,755 8,701 
Other liabilities  (7,102)   11,916   (4,823) Other liabilities37,627 (8,606)10,119 
Net cash flows provided by (used in) operating activities  (9,198)   54,490   43,000 
Net cash flows provided by operating activitiesNet cash flows provided by operating activities175,167 64,899 84,789 
Cash flows from investing activities:
               Cash flows from investing activities:
Proceeds from sale of property and equipment  4,342   3,299   2,758 Proceeds from sale of property and equipment3,429 4,051 4,583 
Cash paid for acquisitions, net of cash acquired  —   (12,056)   (13,087) Cash paid for acquisitions, net of cash acquired0 (79,720)(47,082)
Purchases of property and equipment  (30,843)   (25,371)   (46,599) Purchases of property and equipment(44,355)(57,828)(50,704)
Net cash flows used in investing activities  (26,501)   (34,128)   (56,928) Net cash flows used in investing activities(40,926)(133,497)(93,203)
Cash flows from financing activities:
               Cash flows from financing activities:
Net borrowings under revolving lines of credit  19,890   59,070   — 
Payment of principal obligations under capital leases  (1,203)   (740)   — 
Net borrowings (repayments) under revolving lines of creditNet borrowings (repayments) under revolving lines of credit(103,820)45,514 (20,655)
Payment of principal obligations under equipment notesPayment of principal obligations under equipment notes(32,584)(4,550)0 
Payment of principal obligations under finance leasesPayment of principal obligations under finance leases(1,238)(1,201)(1,081)
Borrowings under equipment notesBorrowings under equipment notes0 35,068 31,486 
Proceeds from exercise of stock options  1,232   6,218   1,923 Proceeds from exercise of stock options749 341 1,897 
Debt refinancing costsDebt refinancing costs0 (1,122)0 
Repurchase of common shares  (3,058)   (101,483)   (27,582) Repurchase of common shares(652)(778)(1,043)
Other financing activities  28   1,396   1,748 Other financing activities13,249 84 38 
Net cash flows provided by (used in) financing activities  16,889   (35,539)   (23,911) Net cash flows provided by (used in) financing activities(124,296)73,356 10,642 
Effect of exchange rate changes on cash  307   (774)   — Effect of exchange rate changes on cash326 132 (64)
Net decrease in cash and cash equivalents  (18,503)   (15,951)   (37,839) 
Net increase in cash and cash equivalentsNet increase in cash and cash equivalents10,271 4,890 2,164 
Cash and cash equivalents:
               Cash and cash equivalents:
Beginning of period  23,846   39,797   77,636 Beginning of period12,397 7,507 5,343 
End of period $5,343  $23,846  $39,797 End of period$22,668 $12,397 $7,507 
Supplemental Cash Flow Information:
               Supplemental Cash Flow Information:
Cash paid during the period for:
               Cash paid during the period for:
Income taxes payments $6,597  $6,274  $16,960 Income taxes payments$24,185 $13,381 $7,247 
Interest payments  2,259   1,114   591 Interest payments4,071 5,737 3,097 
Noncash investing activities:
               Noncash investing activities:
Acquisition of property and equipment for which payment is pending  2,050   614   1,328 Acquisition of property and equipment for which payment is pending349 43 953 
Acquisition of property under capital lease arrangements  —   5,658   — 
Noncash financing activities:
               
Capital lease obligations initiated  —   5,658   — 
Share repurchases that have not settled  —   —   896 



The accompanying notes are an integral part of these Financial Statements.


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MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

1. Organization, Business and Significant Accounting Policies

Organization and Business

MYR Group Inc. (the “Company”) is a holding company of specialty electrical construction service providers and is currently conducting operations through wholly owned subsidiaries including: The L. E. Myers Co., a Delaware corporation; Harlan Electric Company, a Michigan corporation; Great Southwestern Construction, Inc., a Colorado corporation; Sturgeon Electric Company, Inc., a Michigan corporation; MYR TransmissionEnergy Services, Inc., a Delaware corporation; E.S. Boulos Company, a Delaware corporation; High Country Line Construction, Inc., a Nevada corporation; Sturgeon Electric California, LLC, a Delaware limited liability company; GSW Integrated Services, LLC, a Delaware limited liability company; Huen Electric, Inc., a Delaware corporation; CSI Electrical Contractors, Inc., a Delaware corporation; MYR Transmission Services Canada, Ltd., a British Columbia corporation; Northern Transmission Services, Ltd., a British Columbia corporation and Western Pacific Enterprises Ltd., a British Columbia corporation.

The Company performs construction services in two2 business segments: Transmission and Distribution (“T&D”), and Commercial and Industrial (“C&I”). T&D customers include investor-owned utilities, cooperatives, private developers, government-funded utilities, independent power producers, independent transmission companies, industrial facility owners and other contractors. T&D provides a broad range of services, which include design, engineering, procurement, construction, upgrade, maintenance and repair services, with a particular focus on construction, maintenance and repair. The Company also provides C&I electrical contracting services tocustomers include general contractors, commercial and industrial facility owners, government agencies and developers. C&I provides a broad range of services, which include design, installation, maintenance and repair of commercial and industrial wiring, the installation of traffic networks and the installation of bridge, roadway and tunnel lighting.
The COVID-19 pandemic caused a slowdown of certain projects due to specific state, local, governmentsmunicipal and developerscustomer mandated stay-at-home orders and new project requirements that were established to protect construction workers and the general public, most of which have impacted our C&I segment. Although the majority of stay-at-home orders have been phased out, we are still experiencing impacts associated with the COVID-19 project-specific protocols. We expect the project-specific requirements to remain in place which will continue to impact project schedules and workflow going forward, however the westernCompany is unable to predict the ultimate impact that COVID-19 will have on our business, employees, liquidity, financial condition, results of operations and northeastern United Statescash flows. Additionally, key estimates that could potentially be impacted include estimates of costs to complete contracts, the recoverability of goodwill and western Canada.

intangibles and allowance for doubtful accounts.

Significant Accounting Policies

Consolidation

The accompanying Financial Statements include the results of operations of the Company and its subsidiaries. Significant intercompany transactions and balances have been eliminated. Certain reclassifications were made to prior year amounts to conform to the current year presentation.

Revenue Recognition
The Company adjusted its presentationrecognizes revenue to depict the transfer of accrued self-insurance liabilities andgoods or services to customers in an amount that reflects the related receivables for insurance claims in excess of deductibles to classify claim amounts estimatedconsideration the Company expects to be settled more than one year fromentitled to in exchange for goods or services provided. Revenue associated with contracts with customers is recognized over time as the balance sheet dateCompany’s performance creates or enhances customer-controlled assets or creates or enhances an asset with no alternative use, for which the Company has an enforceable right to receive compensation as non-current liabilities and non-current receivables in the second quarter of 2017. As a result of this adjustment, $32.1 million was adjusted from current portion of accrued self-insurance into non-current accrued self-insurance as of December 31, 2016. In addition, $14.7 million was adjusted from current portion of receivable for insurance claims in excess of deductibles into non-current receivable for insurance claims in excess of deductibles as December 31, 2016. The effect of such classification on the December 31, 2016 balance sheet was immaterial and had no effect on the previously reported statements of operations or cash flows.

Revenue Recognition

Revenues under long-term contracts are accounted fordefined under the percentage-of-completion methodcontract. To determine the amount of accounting. Under the percentage-of-completion method,revenue to recognize over time, the Company estimates profit asby determining the difference between total estimated revenue and total estimated cost of a contract. In addition, the Company estimates a cost accrual every quarter that represents unbilled invoicing activity for services performed by subcontractors and suppliers during the quarter, and estimates revenue from the contract cost portion of this accrual based on current gross margin rates to be consistent with its cost method of revenue recognition. The estimated value of unbilled amounts are determined using a regression analysis that estimates value based on the Company’s historical experience, and recognizes thatis adjusted for large individual projects. The profit and corresponding revenue is recognized over the contract term based on costs incurred under the cost-to-cost method.

Revenues from The Company utilizes the Company’s construction services are performed under fixed-price, time-and-equipment, time-and-materials, unit-price,cost-to-cost method as it believes cost incurred best represents the amount of work completed and cost-plus fee contracts.remaining on projects, and is the most common basis for computing percentage of completion in the industry. For fixed-price and unit-price contracts,purposes of recognizing revenue, the Company usesfollows the ratio offive-step approach outlined in Accounting Standards Codification (“ASC”) 606-10-25.

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As the cost-to-cost method is driven by incurred cost, incurred to date on the contract to management’s estimate of the contract’s total cost, to determineCompany calculates the percentage of completion by dividing costs incurred to date by the total estimated cost. The percentage of completion is then multiplied by estimated revenues to determine inception-to-date revenue. Revenue recognized for the period is the current inception-to-date recognized revenue less the prior period inception-to-date recognized revenue. If a contract is projected to result in a loss, the entire contract loss is recognized in the period when the loss was first determined and the amount of the loss is updated in subsequent reporting periods. Because the Company’s billings are based on each contract. This method is used as management considers expended costs to be the best available measure of progression of these contracts. Contract costcontract terms and do not coincide with our progress in a project, revenue recognition also includes all direct costs on contracts, including labor and material, subcontractor costs and those indirect costsan amount related to a contract performance, such as supplies, fuel, tool repairsasset or contract liability. If the recognized revenue is greater than the amount billed to the customer, a contract asset is recorded. Additionally, the contract asset includes retainage billed to the customer that cannot be collected until the contract work has been completed and depreciation. The Company recognizesapproved. Conversely, if the amount billed to the customer is greater than the recognized revenue, a contract liability is recorded. Additionally, the contract liability includes a liability for the excess of costs over revenues from construction services with fees based on time-and-materials, or cost-plus

for all contracts that are in a loss position.

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fee as the services are performed and amounts are earned. If contracts include contract incentive or bonus provisions, they are included in estimated contract revenues only when the achievement of such incentive or bonus is reasonably certain.

Contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract. Changes in the job performance, job conditions and final contract settlements are factors that influence management’s assessment of total contract value and the total estimated costs to complete those contracts, and therefore, the Company’s profit and revenue recognition. These changes, which include contracts with estimated costs in excess of estimated revenues, are recognized in contract costs in the period in which the revisions are determined. At the point the Company anticipates a loss on a contract,Additionally, the Company estimates costs to complete on fixed price contracts which are determined on an individual contract basis by evaluating each project’s status as of the ultimate loss through completionbalance sheet date, and recognizes that loss inusing our historical experience with the period in whichlevel of effort required to complete the possible loss was identified.

underlying project. Claims and change orders are also measured based on our historical experience with individual customers and similar contracts, and are evaluated by management individually. A change order is a modification to a contract that changes the provisions of the contract, typically resulting from changes in scope, specifications, design, manner of performance, facilities, equipment, materials, sites, or period of completion of the work under the contract. A claim is an amount in excess of the agreed-upon contract price that the Company seeks to collect from its clients or others for client-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes. Costs relatedThe Company includes these estimated amounts of variable consideration to change orders and claims are recognized when incurred. Revenue from a change order is included in total estimated contract revenue whenthe extent that it is probable there will not be a significant reversal of revenue.

Some of the Company’s contracts may have contract terms that include variable consideration such as safety or performance bonuses or liquidated damages. In accordance with ASC 606-10-32, the change order will resultCompany estimates the variable consideration using one of two methods. In contracts in an addition to contractwhich there is a binary outcome, the most likely amount method is used. In instances in which there is a range of possible outcomes, the expected value and can be reliably estimated. Revenue from a claimmethod is includedused. In accordance with ASC 606-10-32-11, the Company includes the estimated amount of variable consideration in total estimated contract revenues,the transaction price only to the extent that contract costs related to the claim have been incurred, when it is probable that a significant reversal in the claimamount of cumulative recognized revenue will resultnot occur when the final outcome of the variable consideration is determined. In contracts in an additionwhich a significant reversal may occur, the Company uses constraint in recognizing revenue on variable consideration. Although the Company often enters into contracts that contain liquidated damage clauses, the Company rarely incurs them, and as such, the Company does not include amounts associated with liquidated damage clauses until it is probable that liquidated damages will occur. These items are continually monitored by multiple levels of management throughout the reporting period.
A portion of the work the Company performs requires financial assurances in the form of performance and payment bonds or letters of credit at the time of execution of the contract. Many of the Company’s contracts include retention provisions of up to 10%, which are generally withheld from each progress payment as retainage until the contract value which can be reliably estimated. No profit is recognized on a claim until final settlement occurs.

work has been completed and approved.

The Company provides warranties to customers on a basis customary to the industry; however, the warranty period does not typically exceed one year. Historically, warranty claims have not been material to the Company.

Total revenues do not include sales tax as the Company considers itself a pass-through conduit for collecting and remitting sales taxes. Sales tax and value added tax collected from customers is included in other current liabilities on ourthe Company’s consolidated balance sheets.

Joint Ventures

and Noncontrolling Interests

The Company accounts for investments in joint ventures using the proportionate consolidation method for income statement reporting and under the equity method for balance sheet reporting, unless the Company has a controlling interest causing the joint venture to be consolidated.consolidated with equity owned by other joint venture partners recorded as noncontrolling interests. Under the proportionate consolidation method, joint venture activity is allocated to the appropriate line items found on the consolidated statements of operations in proportion to the percentage of participation the Company has in the joint venture. Under the equity method the net investment in joint ventures is stated as a single item on the Company’s consolidated balance sheets. TheIf an investment in a joint venture contains a recourse or unfunded commitments to provide additional equity, distributions and/or losses in excess of the investment a liability is recorded in other current liabilities on the Company’s interests inconsolidated balance sheets.
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For joint ventures which the Company does not have a controlling interest, the Company’s share of any profits and assets and its share of any losses and liabilities are recognized based on itsthe Company’s stated percentage partnership interest in the joint venture. Theventure, and are normally recorded by the Company includes only its percentage ownership of each joint ventureone month in is backlog.arrears. The investments in joint ventures are recorded at cost and the carrying amounts are adjusted to recognize the Company’s proportionate share of cumulative income or loss, additional contributions made and dividends and capital distributions received. The Company records the effect of any impairment or any other-than-temporary decrease in the value of the joint venture investment as incurred.

incurred, which may or may not be one month in arrears, depending on when the Company obtains the joint venture activity information. Additionally, the Company continually assesses the fair value of its investment in unconsolidated joint ventures despite using information that is one month in arrears for regular reporting purposes. The Company includes only its percentage ownership of each joint venture in its backlog. See Note 17–Noncontrolling Interests to the Financial Statements for further information related to joint ventures in which the Company has a majority controlling interest.

Foreign Currency

The functional currency for the Company’s Canadian operations is the Canadian dollar. Assets and liabilities denominated in Canadian dollars are translated into U.S. dollars at the end-of-period exchange rate. Revenues and expenses are translated using average exchange rates for the periods reported. Equity accounts


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are translated at historical rates. Cumulative translation adjustments are included as a separate component of accumulated other comprehensive income in shareholders’ equity. Foreign currency transaction gains and losses, arising primarily from changes in exchange rates on short-term monetary assets and liabilities, and ineffective long-term monetary assets and liabilities are recorded in the “other income, net” line on the Company’s consolidated statements of operations. ForForeign currency losses, recorded in other income, net, for the year ended December 31, 2017, the Company recorded an insignificant amount of foreign currency losses.2020, were not significant. Effective foreign currency transaction gains and losses, arising primarily from long-term assets and liabilities are recorded in the foreign currency translation adjustment line on the Company’s consolidated statements of comprehensive income.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAPaccounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the period reported. Actual results could differ from those estimates.

The most significant estimates are related to estimates of costs to complete on contracts, pending change orders and claims, shared savings, insurance reserves, income tax reserves, estimates surrounding stock-based compensation, the recoverability of goodwill and intangibles and accounts receivable reserves. Actual results could differ from these estimates.

In 2017,

As of December 31, 2020 and 2019, the Company recognized revenues of $13.7$14.7 million and $35.9 million, respectively, related to significant change orders and/or claims that had been included as contract price adjustments on certain contracts, some of which wereare multi-year projects. These change orders and/or claims are in the process of being negotiated in the normal course of business.

business, and a portion of these recognized revenues had been included in multiple periods. These aggregate amounts, which were included in “Contract assets” in the accompanying consolidated balance sheets, represent the Company’s estimates of additional contract revenues that were earned and probable of collection, however, the amount ultimately realized could be significantly higher or lower than the estimated amount.

The percentage of completioncost-to-cost method of accounting requires the Company to make estimates about the expected revenue and gross profit on each of its contracts in process. During the year ended December 31, 2020, changes in estimates pertaining to certain projects decreased consolidated gross margin by 0.8%, which resulted in decreases in operating income of $18.0 million, net income attributable to MYR Group Inc. of $12.8 million and diluted earnings per common share attributable to MYR Group Inc. of $0.76. The estimates are reviewed and revised quarterly, as needed.
During the year ended December 31, 2017,2019, changes in estimates pertaining to certain projects decreased consolidated gross margin by 0.8%, which resulted in decreases in operating income of $11.7 million, net income attributable to MYR Group Inc. of $7.5 million and diluted earnings per common share attributable to MYR Group Inc. of $0.45.
During the year ended December 31, 2018, changes in estimates pertaining to certain projects decreased consolidated gross margin by 0.7%, which resulted in decreases in operating income of $10.4$10.5 million, net income attributable to MYR Group Inc. of $6.2$8.2 million and diluted earnings per common share attributable to MYR Group Inc. of $0.38. During the year ended December 31, 2016, changes in estimates pertaining to certain projects decreased consolidated gross margin by 0.2%, which resulted in decreases in operating income of $2.6 million, net income of $1.4 million and diluted earnings per common share of $0.08. During the year ended December 31, 2015, changes in estimates pertaining to certain projects increased consolidated gross margin by 0.5%, which resulted in increases in operating income of $5.9 million, net income of $3.6 million and diluted earnings per common share of $0.17.

$0.49.

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Advertising

Advertising costs are expensed when incurred. Advertising costs, included in selling, general and administrative expenses, were $0.7 million, $0.6$0.8 million and $0.5$0.7 million for the years ended December 31, 2017, 20162020, 2019 and 2015,2018, respectively.

Income Taxes

The Company follows the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded for future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled. The Company also evaluates whether the recorded deferred tax assets and valuation allowances can be realized and, when necessary, reduces the amounts to what is expected to be realized.

Interest and penalties related to uncertain income tax positions are included in income tax expense inon the accompanyingCompany’s consolidated statements of operations. Interest and penalties actually incurred are charged to interest expense and the “other income, net” line, respectively.


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Stock-Based Compensation

The Company determines compensation expense for stock-based awards based on the estimated fair values at the grant date and recognize the related compensation expense over the vesting period. The Company uses the straight-line amortization method to recognize compensation expense related to stock-based awards, such as restricted stock and phantomrestricted stock units, that have only service conditions. This method recognizes stock compensation expense on a straight-line basis over the requisite service period for the entire award. The Company recognizes compensation expense related to performance awards that vest based on internal performance metrics and service conditions on a straight-line basis over the service period, but adjust inception-to-date expense based upon our determination of the potential achievement of the performance target at each reporting date. The Company recognizes compensation expense related to performance awards with market-based performance metrics on a straight-line basis over the requisite service period. Upon adoption ASU No. 2016-09,Compensation — Stock Compensation (Topic 718) in January of 2017, theThe Company elected to discontinue estimating future forfeitures and recognizerecognizes forfeitures as they occur. Prior to the adoption, the Company used historical data to estimate the forfeiture rate applied to stock grants. Shares issued under the Company’s stock-based compensation program are taken out of authorized but unissued shares.

Earnings Per Share

The Company computes earnings per share using the treasury stock method. Under the treasury stock method, basic earnings per share attributable to MYR Group Inc. are computed by dividing net income attributable to MYR Group Inc. by the weighted average number of common shares outstanding during the period. Diluted earnings per share attributable to MYR Group Inc. are computed by dividing net income attributable to MYR Group Inc. by the weighted average number of common shares outstanding during the period plus all potentially dilutive common stock equivalents, except in cases where the effect of the common stock equivalent would be anti-dilutive.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 20172020 and 2016,2019, the Company held its cash in checking accounts or in highly liquid money market funds. The Company’s banking arrangements allow the Company to fund outstanding checks when presented to financial institutions for payment. The Company funds all intraday bank balances overdrafts during the same business day. Checks issued and outstanding in excess of bank balance are recorded in accounts payable inon the Consolidated Balance SheetsCompany’s consolidated balance sheets and are reflected as a financing activity inon the Company’s Consolidated Statements of Cash Flows.

Accounts Receivable and Allowance for Doubtful Accounts

The Company does not charge interest to its customers and carries its customer receivables at their face amounts, net of contract retainage, less an allowance for doubtful accounts. Included in accounts receivable are balances billed to customers pursuant to retainage provisions in certain contracts that are due upon completion of the contract and acceptance by the customer, or earlier as provided by the contract. Based on the Company’s experience in recent years, the majority of customer balances at each balance sheet date are collected within twelve months. As is common practice in the industry, the Company classifies all accounts receivable including retainage, as current assets. The contracting cycle for certain long-term contracts may extend beyond one year, and accordingly, collection of retainage on those contracts may extend beyond one year. The Company expects a majority of the retainage recorded at December 31, 2017 to be collected within one year, with the remaining to be collected in the subsequent year as the related contracts are completed.

The Company grants trade credit, on a non-collateralized basis (with the exception of lien rights against the property in certain cases), to its customers and is subject to potential credit risk related to changes in business and overall economic activity. The Company analyzes specific accounts receivable balances,


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historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful accounts.

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Classification of Construction Contract-relatedContract Assets and Liabilities

Costs

The Company recognizes revenue associated with its contracts with customers over time, for which the Company has an enforceable right to receive compensation. Many of our contracts contain specific provisions that determine when the Company can bill for its work performed under these contracts.
Any revenue earned on a contract that has not yet been billed to the customer is recorded as a contract asset on the Company’s consolidated balance sheets. Contract retainages associated with contract work that has been completed and estimated earnings in excess of billings on uncompletedbilled but not paid by its customers until the contracts are presentedsubstantially complete, pursuant to contract retainage provisions under the contract, are also included in contract assets. The allowance for collection of contract retainage was $0.4 million and $0.1 million as a current asset in the accompanyingof December 31, 2020 and 2019, respectively.
The Company’s consolidated balance sheets and billingspresent contract liabilities that contain deferred revenue that represent any costs incurred on contracts in excess of costs and estimated earnings on uncompletedprocess for which revenue has not yet been recognized. Additionally, accruals for contracts in a loss provision are presented as a current liabilityincluded in the accompanying consolidated balance sheets. The Company’s contracts vary in duration, with the duration of some larger contracts exceeding one year. Consistent with industry practices, the Company includes the amounts realizable and payable under contracts, which may extend beyond one year, in current assets and currentcontract liabilities. These balances are generally settled within one year.

Property and Equipment

Property and equipment is carried at cost. Depreciation is computed using the straight-line method over estimated useful lives. Major modifications or refurbishments which extend the useful life of the assets are capitalized and depreciated over the adjusted remaining useful life of the assets. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is recognized in income from operations. The cost of maintenance and repairs is charged to expense as incurred.

Property and equipment is reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value of property and equipment exceeds its fair value, an impairment charge would be recorded in the statement of operations.

Leases

The Company enters into non-cancelable leases certain real estate, constructionfor some of our facility, vehicle and equipment needs. These leases allow the Company to conserve cash by paying a monthly lease rental fee for the use of facilities, vehicles and office equipment. Real estate is generally leasedequipment rather than purchasing them. The Company’s leases have remaining terms ranging from one to six years, some of which may include options to extend the leases for terms up to tenfive years, and some of which may include options to terminate the leases within one year. Currently, all the Company’s leases contain fixed payment terms. The Company may decide to cancel or terminate a lease before the end of its term, in duration. The terms and conditions of leases (such as renewal or purchase options and escalation clauses), if material,which case we are reviewed at inceptiontypically liable to determine the classification (operating or capital)lessor for the remaining lease payments under the term of the lease. Additionally, all of the Company’s month-to-month leases are cancelable, by the Company or the lessor, at any time and are not included in our right-of-use asset or liability. As of December 31, 2020, the Company had several leases with residual value guarantees. The total amount probable of being owed of residual leases guarantees is not significant. Typically, the Company has purchase options on the equipment underlying its long-term leases and many of its short-term rental arrangements. The Company may exercise some of these purchase options when the need for equipment is on-going and the purchase option price is attractive. Nonperformance-related default covenants, cross-default provisions, subjective default provisions and material adverse change clauses contained in material lease agreements, if any, are also evaluated to determine whether those clauses affect lease classification in accordance with Accounting Standards Codification (“ASC”)ASC Topic 840-10-25.

842-10-25. Leases are accounted for as operating or finance leases, depending on the terms of the lease.

Finance Leases.   The Company leases some vehicles and certain equipment under finance leases. The economic substance of the leases is a financing transaction for acquisition of the vehicles and equipment. Accordingly, the right-of-use assets for these leases are included on the Company’s consolidated balance sheets in property and equipment, net of accumulated depreciation, with a corresponding amount recorded in current portion of finance lease obligations or finance lease obligations, net of current maturities, as appropriate. The finance lease assets are amortized over the life of the lease or, if shorter, the life of the leased asset, on a straight-line basis and included in depreciation expense. The financing component associated with finance lease obligations is included in interest expense. Generally, for the Company’s finance leases an implicit rate to calculate present value is provided in the lease agreement, however if a rate in not provided the Company determines this rate by estimating the Company’s incremental borrowing rate, utilizing the borrowing rates associated with the Company’s various debt instruments.
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Operating Right-of-Use Leases.   Operating right-of-use leases are included in operating lease right-of-use assets, current portion of operating lease obligations and operating lease obligations, net of current maturities on the Company’s consolidated balance sheets, as appropriate. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate to calculate present value, the Company determines this rate by estimating the Company’s incremental borrowing rate, utilizing the borrowing rates associated with the Company’s various debt instruments. The operating lease right-of-use asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
Insurance

The Company carries insurance policies, which are subject to certain deductibles, for workers’ compensation, general liability, automobile liability and other coverages. The deductible for each line of coverage is up to $1.0 million, except for wildfire coverage which has a deductible of $2.0 million. Certain health benefit plans are subject to a deductiblestop-loss limit of up to $0.2 million, for qualified individuals. Losses up to the deductible amounts are accrued based upon the Company’s estimates of the ultimate liability for claims reported and an estimate of claims incurred but not yet reported.

The insurance and claims accruals are based on known facts, actuarial estimates and historical trends. While recorded accruals are based on the ultimate liability, which includes amounts in excess of the deductible, a corresponding receivable for amounts in excess of the deductible is included in current assets inon the Company’s consolidated balance sheets.

Goodwill and Intangible Assets

Goodwill and intangible assets with indefinite lives are not amortized. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. The Company reviewsperforms either a qualitative or quantitative assessment to review goodwill and intangible assets with indefinite lives for impairment on an annual basisbasis. This assessment is performed at the beginning of the fourth quarter, or when circumstances change, such as a significant adverse change in the business climate or the decision to


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sell a business, both of which would indicate that impairment may have occurred. The Company performs a qualitative assessment to determine whether it is necessary to perform a two-step goodwillIntangible assets with finite lives are also reviewed for impairment test. Theand tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

A qualitative assessment considers financial, industry, segment and macroeconomic factors. Iffactors, if the qualitative assessment indicates a potential for impairment, the two-step methoda quantitative assessment is usedperformed to determine if impairment exists. The two-step methodquantitative assessment begins with a comparison of the fair value of the reporting unit or intangible asset with its carrying value. If the carrying amount of the reporting unit or intangible asset exceeds its fair value, an impairment loss would be recognized in an amount equal to that excess, limited to the second step of the process involves a comparison of the implied fair value and carrying valuetotal amount of the goodwill of thatallocated to the reporting unit. The company also performs a qualitative assessment onunit or intangible assets with indefinite lives. If the qualitative assessment indicates a potential for impairment, a quantitative impairment test would be performed to compare the fair value of the indefinite-lived intangible asset with its carrying value.asset. If the carrying value of goodwill or other indefinite-livedindefinite lived assets exceeds its implied fair value, an impairment charge would be recorded in the statement of operations.

As a result of the annual qualitative review process in 20172020 and 2016,2019, the Company determined it was not necessary to perform a two-step analysis.

quantitative assessment. In 2015,2018, the Company determined, basedperformed a quantitative assessment on its qualitative analysis, that it was appropriate to perform a two-step analysis. The first step involves a comparison of the fair value of the reporting unitgoodwill and intangible assets with its carrying value. If the carrying amount of the reporting unit exceeds its fair value, the second step of the process involves a comparison of the implied fair value and carrying value of the goodwill of that reporting unit. If the carrying value of goodwill exceeds its implied fair value, an impairment charge is recorded in the statement of operations. The step one analysisindefinite lives, this assessment did not indicate that the Company’s goodwill or indefinite-livedindefinite lived intangible assets were impaired. As a result, no step two analysis was performed.

Concentrations

Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains substantially all of its cash and cash equivalent balances with large financial institutions which are believed to be high quality institutions.

The Company is subject to a concentration of risk because it derives a significant portion of its revenues from a few customers. The Company’s top ten customers accounted for approximately 32.7%, 30.8%, and 32.9% of consolidated revenues for the years ended December 31, 2020, 2019 and 2018, respectively. For the years ended December 31, 2020, 2019 and 2018, no single customer accounted for more than 10.0% of annual revenues.
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The Company grants trade credit under contractual payment terms, generally without collateral, to its customers, which include high credit quality electric utilities, governmental entities, general contractors and builders, owners and managers of commercial and industrial properties. Consequently, the Company is subject to potential credit risk related to changes in business and economic factors. However, the Company generally has certain statutory lien rights with respect to services provided. Under certain circumstances such as foreclosures or negotiated settlements, the Company may take title to the underlying assets in lieu of cash in settlement of receivables. As of December 31, 2017,2020 and 2019, none of ourthe Company’s customers individually exceeded 10.0% of accounts receivable. As of December 31, 2016, one customer individually exceeded 10.0% of consolidated accounts receivable with an aggregate balance of approximately 11.2% of the total consolidated accounts receivable amount (excluding the impact of allowance for doubtful accounts). The Company believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk.

The Company is subject to a concentration of risk because it derives a significant portion of its revenues from a few customers. The Company’s top ten customers accounted for approximately 40.4%, 46.4%, and 44.6% of consolidated revenues for the years ended December 31, 2017, 2016 and 2015, respectively. For the year ended December 31, 2017, one T&D customer accounted for 10.7% of our revenues. For the years ended December 31, 2016 and 2015, no single customer accounted for more than 10.0% of annual revenues.

As of December 31, 2017,2020, approximately 91%88% of the Company’s craft labor employees were covered by collective bargaining agreements. Although the majority of these agreements prohibit strikes and work stoppages, the Company cannot be certain that strikes or work stoppages will not occur in the future.


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Recent Accounting Pronouncements

Changes to U.S. GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs. The Company, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Company or may have minimal impact on its Financial Statements.

Recently Adopted Accounting Pronouncements

In MarchJune 2016, the FASB issued ASU No. 2016-09,Compensation — Stock Compensation2016-13, Financial Instruments - Credit Losses (Topic 718). The amendments under326), Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial instruments, including trade receivables and off-balance sheet credit exposures. Under this pronouncement made modificationsguidance, an entity is required to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. This ASU also requires disclosure of information regarding how a company developed its allowance, including changes in the accounting treatment for forfeitures, required withholding on stock compensationfactors that influenced management’s estimate of expected credit losses and the financial statement presentation of excess tax benefits or deficiencies and certain components of stock compensation. The standard was effectivereasons for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted.those changes. On January 1, 2017,2020, the Company adopted this ASU onresulting in a prospective basis except$0.3 million cumulative-effect adjustment to retained earnings associated with the increase in the Company’s allowance for forfeitures, which it adopted on a modified retrospective basis. Thedoubtful accounts. Additionally, in connection with the adoption of this ASU had the following impacts:

Excess tax benefitsCompany adjusted its presentation for allowance for doubtful accounts associated with unbilled revenue, which represents a portion of $0.8 millionthe Company’s contract assets, and were reflectedpreviously classified as income tax benefits inaccounts receivable net of allowances. Total allowance for doubtful accounts associated with contract assets as of December 31, 2020 and at the 2017 Consolidated Statementstime of Operations and Comprehensive Income. Prior to adoption ofadopting this ASU were $0.4 million. The Company’s consolidated balance sheet as of December 31, 2019 and consolidated statements of cash flows for the year ended December 31, 2019 have not been adjusted for this amount would have been recordedchange in additional paid-in capital.
The adoptiontreatment of this ASU eliminated the additional paid-in capital pool (“APIC Pool”) resulting in the excess tax benefitsallowance for doubtful accounts associated with unbilled revenue. See Note 3–Contract Assets and deficiencies being excluded from assumed future proceeds in the calculation of diluted shares, which caused an immaterial increase in diluted weighted average shares outstandingLiabilities for 2017. The extent of excess tax benefits/deficiencies is subjectfurther information related to variation in the Company’s stock price and the timing/extent of restricted stock, performance share and phantom stock vesting and stock option exercises.contract assets.
The Company elected to discontinue estimating forfeitures and will account for forfeitures as they occur. The net cumulative effect of this change was recognized as a $0.2 million reduction to retained earnings as of January 1, 2017 with a corresponding increase in additional paid in capital.

Recently Issued Accounting Pronouncements

In January 2017, the FASB issued ASU No. 2017-04,Intangibles — Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill, through the elimination of Step 2 from the goodwill impairment test. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The updateCompany adopted this ASU on a prospective basis in January 2020 and there was no effect on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments in the fair value hierarchy. The Company adopted this ASU in January 2020 and there was no effect on the consolidated financial statements or disclosures.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The guidance is effective for any annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The guidance requires application on a prospective basis. The Company does not expect that this pronouncement will have a significant impact on its financial statements

In January 2017, the FASB issued ASU No. 2017-01,Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The update is effective for annual reporting periods beginning after December 15, 20172020, and interim periods within those fiscal years. Earlyyears, with early adoption is permittedpermitted. Upon adoption, the Company must apply certain aspects of this standard retrospectively for financial statements that have not been previously issued. The guidance requires applicationall periods presented while other aspects are applied on a prospective basis. The Company does not expect that this pronouncement will have a significant impact on its financial statements.

In October 2016, the FASB issued ASU No. 2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which modifies existing guidance and is intended to reduce the diversity in


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1. Organization, Business and Significant Accounting Policies  – (continued)

practice with respect to the accounting for income tax consequences of intra-entity transfers of assets. This update requires entities to immediately recognize the tax consequences on intercompany asset transfers (excluding inventory) at the transaction date, and eliminates the recognition exception within current guidance. The update is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted. The guidance requires application using a modified retrospective approach. The Company is evaluating the impact this pronouncement will have on its financial statements.

In August 2016, the FASB issued ASU No. 2016-15,Statementbasis through a cumulative-effect adjustment to retained earnings as of Cash Flows (Topic 230):Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity in practice in how eight specific transactions are classified in the statement of cash flows. The update is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective approach. The Company is evaluating the impact this update will have on its financial statements.

In February 2016, the FASB issued ASU No. 2016-02,Leases (Topic 842). The amendments under this pronouncement will change the way all leases with durations in excess of one year or more are treated. Under this guidance, lessees will be required to recognize virtually all leases on the balance sheet as a right-of-use asset and an associated financing lease liability or capital lease liability. The right-of-use asset represents the lessee’s right to use, or control the use of, a specified asset for the specified lease term. The lease liability represents the lessee’s obligation to make lease payments arising from the lease, measured on a discounted basis. Based on certain characteristics, leases are classified as financing leases or operating leases. Financing lease liabilities, which contain provisions similar to capitalized leases, are amortized like capital leases under current accounting, as amortization expense and interest expense in the statement of operations. Operating lease liabilities are amortized on a straight-line basis over the life of the lease as lease expense in the statement of operations. This update is effective for annual reporting periods, and interim periods within those reporting periods, beginning after December 15, 2018. While the Company continues to evaluate the impact this pronouncement, and all amendments relating to this pronouncement, will have on its policies and procedures pertaining to its existing and future lease arrangements, disclosure requirements and on the Company’s financial statements, the Company expects most existing operating lease commitments, that extend beyond twelve months at the time of adoption, will be recognized as lease liabilities and right-of-use assets upon adoption.

In May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers (Topic 606). The amendments under this pronouncement will change how an entity recognizes revenue from contracts it enters to transfer goods, services or nonfinancial assets to its customers. These changes created a comprehensive framework for all entities in all industries to apply in the determination of when to recognize revenue, and, therefore, supersede virtually all existing revenue recognition requirements and guidance. This framework is expected to result in less complex guidance in application while providing a consistent and comparable methodology for revenue recognition. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: Step 1: Identify the contract(s) with the customer; Step 2: Identify the performance obligations in the contract; Step 3: Determine the transaction price; Step 4: Allocate the transaction price to the performance obligations in the contract; Step 5: Recognize revenue when, or as, the entity satisfies the performance obligations. In addition, the amendments require expanded disclosure to enable the users of the financial statements to understand the nature, timing and uncertainty of revenue and cash flow arising from contracts with customers. On August 16, 2015, the FASB


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NOTES TO FINANCIAL STATEMENTS

1. Organization, Business and Significant Accounting Policies  – (continued)

deferred the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date, permitting early adoption of the standard, but not before the original effective date of December 15, 2016.

When this pronouncement is adopted in 2018, the Company will adopt the amendments under this ASU using the modified retrospective transition approach. Under the modified retrospective transition approach, the Company will recognize changes from the beginning of the fiscal year of initial application through retained earnings with no restatementadoption. The adoption of comparative periods. The Company doesthis standard is not expect this updateexpected to materially affect the results of the Company’s operations, financial position or cash flows. This conclusion is basedhave a material impact on the Company’s continued recognition of revenues from long-term service contracts over time as services are performed and the underlying obligation to the customer is fulfilled. The Company has identified and is in the final stages of implementing changes to its processes and internal controls to meet the reporting and disclosure requirements of this update.

consolidated financial statements or disclosures.

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2. Acquisitions

Western Pacific Enterprises Ltd.

CSI Electrical Contractors, Inc.
On October 28, 2016,July 15, 2019, the Company completed the acquisition of substantially all of the assets of Western Pacific Enterprises GP and of Western Pacific Enterprises Ltd., except for certain real estate owned by Western Pacific Enterprises Ltd., with the company continuing operations under the name Western Pacific Enterprises Ltd.CSI Electrical Contractors, Inc. (“WPE”CSI”), an electrical contracting firm based in western Canada. With its main headquartersCalifornia. CSI provides services to a broad array of end markets under the Company’s C&I segment. The total consideration, after net asset adjustments of approximately $1.0 million, was $80.7 million which was funded through borrowings under the Company’s credit facility. The Company finalized the purchase price accounting relating to the acquisition of CSI during the year ended December 31, 2019.
The purchase agreement also includes contingent consideration provisions for margin guarantee adjustments based upon contract performance subsequent to the acquisition. The contracts were valued at fair value at the acquisition date, causing no margin guarantee estimate or adjustments for fair value. Changes in Coquitlam, British Columbia, WPE providescontract estimates, such as modified costs to complete or change order recognition, will result in changes to these margin guarantee estimates. Changes in contingent consideration, subsequent to the acquisition, related to the margin guarantee adjustments on contracts of approximately $0.6 million and $2.0 million were recorded in other expense for the year ended December 31, 2020 and 2019, respectively. Future margin guarantee adjustments, if any, are expected to be recognized in 2021. The Company could also be required to make compensation payments contingent on the successful achievement of certain performance targets and continued employment of certain key executives of CSI. Payment of amounts earned, if any, as defined in the purchase agreement, will be made in 2024. These payments are recognized as compensation expense on the Company’s consolidated statements of operations when deemed probable. For the year ended December 31, 2020 and 2019 the Company recognized $4.0 million and $0.4 million of compensation expense associated with these contingent payments.
The following table summarizes the allocation of the opening balance sheet from the date of the CSI acquisition:
(in thousands)(as of acquisition date) July 15, 2019Measurement
Period
Adjustments		Final Acquisition
Allocation
Consideration paid$79,720 $0 $79,720 
Net asset adjustments633 354 987 
Total consideration, net of net asset adjustments$80,353 $354 $80,707 
Accounts receivable, net$59,579 $186 $59,765 
Contract assets38,970 994 39,964 
Other current assets83 0 83 
Property and equipment7,964 0 7,964 
Operating lease right-of-use assets9,933 0 9,933 
Intangible assets26,000 (500)25,500 
Other long term assets149 0 149 
Accounts payable(29,533)(1,100)(30,633)
Accrued salaries and benefits(8,091)0 (8,091)
Contract liabilities(18,934)200 (18,734)
Current portion of operating lease obligations(2,526)(36)(2,562)
Other current liabilities(4,776)73 (4,703)
Operating lease obligations, net of current maturities(7,407)36 (7,371)
Long-term debt(20)0 (20)
Net identifiable assets and liabilities71,391 (147)71,244 
Goodwill$8,962 $501 $9,463 
Huen Electric, Inc.
On July 2, 2018, the Company completed the acquisition of substantially all the assets of Huen Electric, Inc., an electrical contracting firm based in Illinois, Huen Electric New Jersey Inc., an electrical contracting firm based in New Jersey, and Huen New York, Inc., an electrical contracting firm based in New York (collectively, the “Huen Companies”). The Huen Companies provide a wide range of commercial and industrial electrical construction capabilities under the Company’s C&I segment. WPE also provides substation construction capabilities under the Company’s T&D segment.segment in Illinois, New Jersey and New York. The total consideration, paidafter net asset adjustments of approximately $10.8 million, was approximately $12.1$57.9 million which was funded through borrowings from our line of credit. Total consideration paid included $2.2 million subjectunder the Company’s credit facility. The Company finalized the purchase price accounting relating to potential net asset adjustments. These net asset adjustments were approximately $0.8 million asthe acquisition of the October 28, 2016 closing date and as ofHuen Companies during the year ended December 31, 2017. The Company accounted for the net asset adjustments as a reduction to consideration paid which was funded through the return of funds held in a $1.9 million escrow account, established at the time of purchase.

2019.

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The purchase agreement also includes contingent consideration provisions for margin guarantee adjustments based upon performance subsequent to the acquisition on certain contracts. In early 2018,The contracts are valued at fair value at the Company finalized an agreementacquisition date, causing no margin guarantee estimate or adjustments for fair value. Changes in contract estimates, such as modified costs to settle all amounts outstanding undercomplete or change order recognition, have resulted and will continue to result in changes to these margin guarantee estimates. Changes in contingent consideration, subsequent to the acquisition, related to the margin guarantee adjustment provisionadjustments on certain contracts of approximately $1.5 million and $3.9 million were recorded in other expense for the year ended December 31, 2019 and 2018, respectively. Margin guarantee adjustments were finalized in early 2019. The Company could also be required to make compensation payments contingent on the successful achievement of certain performance targets and continued employment of certain key executives of the Huen Companies. Payment of amounts earned, if any, as well as previous contingent compensation agreements that were beingdefined in the purchase agreement, will be made in 2023. These payments are recognized as compensation expense on the Company’s consolidated statements of operations when deemed probable. For the years ended December 31, 2020, 2019 and 2018, the Company recognized a net benefit of $2.5 million and expense of$1.9 million and $0.6 million, respectively, of compensation expense associated with these contingent payments.
3. Contract Assets and Liabilities
Contracts with customers usually stipulate the timing of payment, which is defined by the terms found within the various contracts under which work was performed during the period. Therefore, contract assets and liabilities are created when the timing of costs incurred on work performed does not coincide with the billing terms, which frequently include retention provisions contained in each contract.
The Company’s consolidated balance sheets present contract assets which contains unbilled revenue and contract retainages associated with contract work that has been completed and billed but not paid by customers, pursuant to retainage provisions, that are generally due once the job is completed and approved. The allowance for doubtful accounts associated with contract assets was $0.4 million as of December 31, 2020 and $0.1 million as of 2019.
Contract assets consisted of the following at December 31:
(in thousands)20202019Change
Unbilled revenue$97,543 $126,087 $(28,544)
Contract retainages, net88,260 91,022 (2,762)
Contract assets$185,803 $217,109 $(31,306)
The Company’s consolidated balance sheets present contract liabilities which contains deferred revenue (previously identified as billings in excess of costs and estimated earnings on uncompleted contracts) and an accrual for contracts in a loss provision.
Contract liabilities consisted of the following at December 31:
(in thousands)20202019Change
Deferred revenue$155,570 $102,673 $52,897 
Accrued loss provision2,826 2,813 13 
Contract liabilities$158,396 $105,486 $52,910 
The following table provides information about contract assets and contract liabilities from contracts with customers:
(in thousands)20202019Change
Contract assets$185,803 $217,109 $(31,306)
Contract liabilities(158,396)(105,486)(52,910)
Net contract assets (liabilities)$27,407 $111,623 $(84,216)
The difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing of the Company’s billings in relation to its performance of work along with contract assets and contract liabilities acquired in the consolidated statementCSI acquisition. The amounts of operations as incurred. As a result,revenues recognized in the Company recorded other expense of $2.3period that were included in the opening contract liability balances were $72.2 million and $39.2 million for the year ended December 31, 20172020 and reversed2019, respectively. This revenue consists primarily of work performed on previous billings to customers.
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The net asset position for contracts in process consisted of the compensation expense that was previously recorded.following at December 31:
(in thousands)20202019
Costs and estimated earnings on uncompleted contracts$3,921,376 $3,532,886 
Less: billings to date3,979,403 3,509,472 
$(58,027)$23,414 
The net asset position for contracts in process is included within the contract asset and contract liability in the accompanying consolidated balance sheets as follows at December 31:
(in thousands)20202019
Unbilled revenue$97,543 $126,087 
Deferred revenue(155,570)(102,673)
$(58,027)$23,414 

4. Lease Obligations
From time-to-time, the Company enters into non-cancelable leases for some of our facility, vehicle and equipment needs. These leases allow the Company to conserve cash by paying a monthly lease rental fee for the use of facilities, vehicles and equipment rather than purchasing them. The Company’s leases have remaining terms ranging from one to six years, some of which may include options to extend the leases for up to five years, and some of which may include options to terminate the leases within one year. Currently, all the Company’s leases contain fixed payment terms. The Company had previously recognized other incomemay decide to cancel or terminate a lease before the end of $1.4 million relatingits term, in which case we are typically liable to the margin guarantee adjustments provisionlessor for the year endedremaining lease payments under the term of the lease. Additionally, all of the Company's month-to-month leases are cancelable, by the Company or the lessor, at any time and are not included in our right-of-use asset or liability. At December 31, 2016.

2020, the Company had several leases with residual value guarantees. Typically, the Company has purchase options on the equipment underlying its long-term leases and many of its short-term rental arrangements. The resultsCompany may exercise some of operationsthese purchase options when the need for WPEequipment is on-going and the purchase option price is attractive. Leases are included inaccounted for as operating or finance leases, depending on the terms of the lease.

The following is a summary of the lease-related assets and liabilities recorded:
December 31,
2020		December 31,
2019
(in thousands)Classification on the Consolidated Balance Sheet
Assets
Operating lease right-of-use assetsOperating lease right-of-use assets$22,291 $22,958 
Finance lease right-of-use assetsProperty and equipment, net of accumulated depreciation390 1,478 
Total right-of-use lease assets$22,681 $24,436 
Liabilities
Current
Operating lease obligationsCurrent portion of operating lease obligations$6,612 $6,205 
Finance lease obligationsCurrent portion of finance lease obligations318 1,135 
Total current obligations6,930 7,340 
Non-current
Operating lease obligationsOperating lease obligations, net of current maturities15,730 16,884 
Finance lease obligationsFinance lease obligations, net of current maturities0 338 
Total non-current obligations15,730 17,222 
Total lease obligations$22,660 $24,562 
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The following is a summary of the lease terms and discount rates:
December 31,
2020		December 31,
2019
Weighted-average remaining lease term – finance leases0.4 years1.4 years
Weighted-average remaining lease term – operating leases3.4 years3.9 years
Weighted-average discount rate – finance leases2.6 %2.5 %
Weighted-average discount rate – operating leases3.91 %3.8 %
The following is a summary of certain information related to the lease costs for finance and operating leases:
Year ended December 31,
(in thousands)20202019
Lease cost:
Finance lease cost:
Amortization of right-of-use assets$883 $820 
Interest on lease liabilities31 66 
Operating lease cost9,378 7,282 
Short-term lease cost0 8 
Variable lease costs335 284 
Total lease cost$10,627 $8,460 
The following is a summary of other information and supplemental cash flow information related to finance and operating leases:
Year ended December 31,
(in thousands)20202019
Other information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$9,237 $7,337 
Right-of-use asset obtained in exchange for new operating lease obligations$6,764 $13,301 
The future undiscounted minimum lease payments, as reconciled to the discounted minimum lease obligation indicated on the Company’s consolidated statementbalance sheets, under current portion of operationsoperating lease obligations, current portion of finance lease obligations, and the C&I segment from the dateoperating lease obligations, net of acquisition. Costscurrent maturities, as of approximately $0.4 million related to the acquisition were included in selling, general and administrative expenses in the consolidated statement of operations for the year ended December 31, 2016. 2020 were as follows:
(in thousands)Finance
Lease
Obligations		Operating
Lease
Obligations		Total
Lease
Obligations
2021$321 $9,111 $9,432 
20220 7,496 7,496 
20230 5,502 5,502 
20240 2,772 2,772 
20250 1,127 1,127 
Thereafter0 795 795 
Total minimum lease payments321 26,803 27,124 
Financing component(3)(4,461)(4,464)
Net present value of minimum lease payments318 22,342 22,660 
Less: current portion of finance and operating lease obligations(318)(6,612)(6,930)
Long-term finance and operating lease obligations$0 $15,730 $15,730 
The Company has finalizedfinancing component for finance lease obligations represents the purchase price accounting relatinginterest component of finance leases that will be recognized as interest expense in future periods. The financing component for operating lease obligations represents the effect of discounting the lease payments to the WPE acquisition. The purchase price was allocated to net identifiable assets with $0.5 million allocated to identifiable intangibles (tradename, net backlog and customer relationships) and the remaining $0.2 million allocated to goodwill. A portion of the goodwill is expected to be tax deductible per applicable Canada Revenue Agency regulations.

their present value.

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NOTES TO FINANCIAL STATEMENTS

2. Acquisitions  – (continued)

The following table summarizes the allocation

Certain subsidiaries of the opening balance sheetCompany have operating leases for facilities from third party companies that are owned, in whole or part, by employees of the datesubsidiaries. The terms and rental rates of acquisition throughthese leases are at market rental rates. As of December 31, 2017:

   
(in thousands) (as of
acquisition date)
October 28, 2016		 Measurement
Period
Adjustments		 (adjusted
acquisition
amounts as of)
December 31, 2017
Total consideration, net of net asset adjustments $11,283  $—  $11,283 
Accounts receivable, net $20,249  $—  $20,249 
Costs and estimated earnings in excess of billings on uncompleted contracts  1,610   —   1,610 
Other current assets  8   —   8 
Property and equipment  4,108   46   4,154 
Intangible assets  —   501   501 
Accounts payable  (10,125)   —   (10,125) 
Billings in excess of costs and estimated earnings on uncompleted contracts  (3,020)   —   (3,020) 
Other current liabilities  (2,294)   —   (2,294) 
Net identifiable assets  10,536   547   11,083 
Unallocated intangible assets  747   (747)   — 
Goodwill $—  $200  $200 

High Country Line Construction, Inc.

On November 24, 2015,2020, the Company acquired all of the outstanding common stock of High Country Line Construction, Inc. (“HCL”). The acquisition of HCL expanded the Company’s T&D construction services, predominantly in the western United States. The acquisition date fair value of consideration transferred, funded through existing cash resources, was $1.7 million, net of cash acquired. The purchase price was allocated to net identifiable assets with $0.3 million allocated to identifiable intangibles (backlog and customer relationships) and the remaining $0.2 million allocated to goodwill. The Company has finalized the purchase price accounting relating to the HCL acquisition. Costs of approximately $0.2 million related to the acquisition were included in selling, general and administrative expenses in the December 31, 2015 consolidated statement of operations.

E.S. Boulos Company

On April 13, 2015, the Company acquired substantially all of the assets of E.S. Boulos Company (“ESB”). The total consideration paid was approximately $11.4minimum lease payments required under these leases totaled $3.3 million, which was funded through existing cash resources ofare due over the Company. Headquartered in Westbrook, Maine, ESB offers construction capabilities under the Company’s T&D segment, including substation, transmission and distribution construction. ESB also provides commercial and industrial electrical construction under its C&I segment, including a wide range of commercial electrical construction services. The Company has finalized the purchase price accounting relating to the ESB acquisition.

3.next 3.5 years.

5. Fair Value Measurements

The Company uses the three-tier hierarchy of fair value measurement, which prioritizes the inputs used in measuring fair value based upon their degree of availability in external active markets. These tiers include: Level 1 (the highest priority), defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 (the lowest priority), defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.


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NOTES TO FINANCIAL STATEMENTS

3. Fair Value Measurements  – (continued)

As of December 31, 20172020 and 2016,2019, the Company determined that the carrying value of cash and cash equivalents approximated fair value based on Level 1 inputs. As of December 31, 20172020 and 2016,2019, the fair value of the Company’s long-term debt and capitalfinance lease obligations, were based on Level 2 inputs. The Company’s long-term debt was based on variable and fixed interest rates at December 31, 20172020 and 2016,2019. Long-term debt with variable interest rates was based on rates for new issues with similar remaining maturities and approximated carrying value. In addition, based on borrowing rates currently available to the Company for borrowings with similar terms, the carrying values of the Company’s capitalfinance lease obligations and long term debt with fixed interest rates also approximated fair value.

4.

6. Accounts Receivable

Accounts receivable consisted of the following at December 31:

  
(in thousands) 2017 2016(in thousands)20202019
Contract receivables $231,808  $200,732 Contract receivables$382,096 $385,744 
Contract retainages  42,732   32,486 
Other  9,073   1,856 Other5,538 6,099 
  283,613   235,074 387,634 391,843 
Less: Allowance for doubtful accounts  (605)   (432) 
Less: allowance for doubtful accountsLess: allowance for doubtful accounts(1,696)(3,364)
 $283,008  $234,642 $385,938 $388,479 

The roll-forward of activity in the allowance for doubtful accounts was as follows for the years ended December 31:

   
(in thousands) 2017 2016 2015
Balance at beginning of period $432  $376  $1,179 
Less: Reduction in (provision for) allowances  (263)   (146)   528 
Less: Write offs, net of recoveries  92   90   275 
Change in foreign currency translation  (2)   —   — 
Balance at end of period $605  $432  $376 

5. Contracts in Process

The net asset position for contracts in process consisted of the following at December 31:

  
(in thousands) 2017 2016
Costs and estimated earnings on uncompleted contracts $1,978,981  $2,194,695 
Less: Billings to date  1,929,640   2,167,066 
   $49,341  $27,629 

The net asset position for contracts in process is included in the accompanying consolidated balance sheets as follows at December 31:

  
(in thousands) 2017 2016
Costs and estimated earnings in excess of billings on uncompleted contracts $78,260  $69,950 
Billings in excess of costs and estimated earnings on uncompleted contracts  (28,919)   (42,321) 
   $49,341  $27,629 

(in thousands)202020192018
Balance at beginning of period$3,364 $1,331 $605 
Less: reduction in (provision for) allowances1,296 (2,532)(860)
Less: write offs, net of recoveries375 501 123 
Change in foreign currency translation(3)(2)11 
Balance at end of period$1,696 $3,364 $1,331 

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NOTES TO FINANCIAL STATEMENTS

6.7. Property and Equipment

Property and equipment consisted of the following at December 31:

   
(dollars in thousands) Estimated
Useful Life
in Years		 2017 2016(dollars in thousands)Estimated
Useful Life
in Years		20202019
Land  —  $7,733  $5,468 Land—$9,301 $9,301 
Buildings and improvements  3 to 39   22,718   21,660 Buildings and improvements3 to 3933,452 29,747 
Construction equipment  3 to 12   340,060   329,299 Construction equipment3 to 12420,002 403,217 
Office equipment  3 to 10   8,964   7,930 Office equipment3 to 1016,725 15,944 
       379,475   364,357 479,480 458,209 
Less: Accumulated depreciation and amortization     (231,391)   (209,466) 
Less: accumulated depreciation and amortizationLess: accumulated depreciation and amortization(294,366)(272,865)
    $148,084  $154,891 $185,114 $185,344 

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Construction equipment includes assets under capitalfinance leases — see additional information provided in Note 124 — Lease Obligations to the Financial Statements.

Depreciation and amortization expense of property and equipment for the years ended December 31, 2017, 20162020, 2019 and 20152018 was $42.9 million, $40.7 million and $38.1 million, $38.2 million and $37.5 million, respectively.

7.

8. Goodwill and Intangible Assets

Goodwill and intangible assets consisted of the following at December 31:

      
 2017 201620202019
(in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net
Carrying Amount		(in thousands)Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount		Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount
Goodwill
                              Goodwill
T&D $40,224  $—  $40,224  $40,224  $—  $40,224 T&D$40,224 $0 $40,224 $40,224 $0 $40,224 
C&I  6,770   —   6,770   6,557   —   6,557 C&I25,841 0 25,841 25,836 0 25,836 
Total goodwill $46,994  $—  $46,994  $46,781  $—  $46,781 Total goodwill$66,065 $0 $66,065 $66,060 $0 $66,060 
Amortizable Intangible Assets
                              Amortizable Intangible Assets
Backlog $989  $989  $—  $989  $989  $— Backlog$5,289 $5,289 $0 $5,289 $4,039 $1,250 
Customer relationships  5,277   4,069   1,208   5,266   3,590   1,676 Customer relationships31,381 8,914 22,467 31,381 6,623 24,758 
Trade names  695   125   570   695   79   616 Trade names696 264 432 695 218 477 
Unallocated intangible assets  —   —   —   744   26   718 
Indefinite-lived Intangible Assets
                              Indefinite-lived Intangible Assets
Trade names  9,074   —   9,074   8,556   —   8,556 Trade names28,466 — 28,466 28,455 — 28,455 
Total Intangible assets $16,035  $5,183  $10,852  $16,250  $4,684  $11,566 
Total intangible assetsTotal intangible assets$65,832 $14,467 $51,365 $65,820 $10,880 $54,940 

The increase in goodwill and as of December 31, 2017 compared to December 31, 2016 was due to the allocation of $0.2 million of goodwill related to the WPE acquisition identified during the finalization of the WPE purchase price accounting. Intangible assets related to the WPE acquisition and are being amortized based on a straight line basis over periods ranging up to 12.5 years. Additional financial information related to this acquisition is provided in Note 2 — Acquisitions to the Financial Statements. Immaterial foreign currency translation adjustments related to goodwill and intangible assets are netted with the amounts indicated above.

Customer relationships and backlog are being amortized on a straight-line method over an estimated useful life of approximately 12ranging up to 12.5 years and the remaining life of the contract, respectively, and have been determined to have no residual value. Amortizable trade names are being amortized on a straight-line basis over an estimated useful life of approximately 15 years. Infinite-livedCertain trade names have been determined to


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MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

7. Goodwill and Intangible Assets  – (continued)

have indefinite lives and, therefore, are not being amortized. Intangible asset amortization expense was $0.5$3.6 million, $3.8 million and $1.8 million for the yearyears ended December 31, 2017, $0.9 million for2020, 2019 and 2018, respectively. Immaterial foreign currency translation adjustments related to goodwill and intangible assets are netted with the year ended December 31, 2016 and $0.6 million for the year ended December 31, 2015.

amounts indicated above.

As of December 31, 20172020, estimated future intangible asset amortization expense for the each of the next five years and thereafter was as follows:

 
(In thousands) Future
Amortization
Expense
2018 $443 
2019  137 
2020  137 
(in thousands)(in thousands)Future
Amortization
Expense
2021  137 2021$2,312 
2022  137 20222,312 
202320232,312 
202420242,312 
202520252,312 
Thereafter  787 Thereafter11,339 
Total $1,778 Total$22,899 

8.

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9. Accrued Liabilities

Other current liabilities consisted of the following at December 31:

  
(in thousands) 2017 2016(in thousands)20202019
Payroll and incentive compensation $9,146  $16,101 Payroll and incentive compensation$30,145 $22,645 
Union dues and benefits  12,494   10,261 Union dues and benefits17,800 18,747 
TaxesTaxes18,130 6,790 
Profit sharing and thrift plan  443   2,004 Profit sharing and thrift plan10,763 5,325 
Taxes, other than income taxes  6,807   7,639 
Net asset adjustmentsNet asset adjustments0 987 
Joint venture liabilityJoint venture liability0 652 
Other  6,148   6,377 Other9,880 9,218 
 $35,038  $42,382 $86,718 $64,364 

9.
See additional information on net asset adjustments provided in Note 2–Acquisitions to the Financial Statements.
10. Debt

The table below reflects the Company’s total debt, including borrowings under its credit agreement and master loan agreement for equipment notes:
(dollars in thousands)Inception
Date		Stated Interest
Rate
(per annum)		Payment
Frequency		Term
(years)		Outstanding Balance as of December 31,
2020		Outstanding Balance as of December 31,
2019
Credit Agreement
Revolving loans9/13/2019VariableVariable5$0 $103,820 
Equipment Notes
Equipment Note 19/28/20184.16%Semi-annual5$0 $10,643 
Equipment Note 29/28/20184.23%Semi-annual70 11,200 
Equipment Note 312/31/20183.97%Semi-annual50 1,953 
Equipment Note 412/31/20184.02%Semi-annual70 2,108 
Equipment Note 512/31/20184.01%Semi-annual70 1,751 
Equipment Note 66/25/20192.89%Semi-annual712,896 14,286 
Equipment Note 76/24/20193.09%Semi-annual56,980 9,033 
Equipment Note 812/27/20192.75%Semi-annual55,513 6,496 
Equipment Note 912/24/20193.01%Semi-annual74,031 4,534 
29,420 62,004 
Total debt29,420 165,824 
Less: current portion of long-term debt(4,381)(8,737)
Long-term debt$25,039 $157,087 
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Credit Agreement
On June 30, 2016,September 13, 2019, the Company entered into a five-year amended and restated credit agreement (the “Credit Agreement”) with a syndicate of banks led by JPMorgan Chase Bank, N.A. and Bank of America, N.A. The Credit AgreementN.A, that provides for a $375 million facility of $250 million (the “Facility”) that may,subject to certain financial covenants as defined in the Credit Agreement, which can be used for revolving loans and up to $150 million may be used for letters of credit. The Facility also allows for revolving loans and letters of credit in Canadian dollars and other currencies, up to the U.S. dollar equivalent of $50$75 million. The Company has an expansion option to increase the commitments under the Facility or enter into incremental term loans, subject to certain conditions, by up to an additional $100$200 million upon receipt of additional commitments from new or existing lenders. Subject to certain exceptions, the Facility is secured by substantially all of the assets of the Company and its domestic subsidiaries, and by a pledge of substantially all of the capital stock of the Company’s domestic subsidiaries and 65% of the capital stock of the direct foreign subsidiaries of the Company. Additionally, subject to certain exceptions, the Company’s domestic subsidiaries also guarantee the repayment of all amounts due under the Credit Agreement. If an event of default occurs and is continuing, on the terms and subject to the conditions set forth in the Credit Agreement, amounts outstanding under the Facility may be accelerated and may become or be declared immediately due and payable. Borrowings under the Credit Agreement wereare used to refinancefor refinancing existing debt and are expected to be used forindebtedness, working capital, capital expenditures, acquisitions, stockshare repurchases, and other general corporate purposes.

Amounts borrowed under the Credit Agreement bear interest, at the Company’s option, at a rate equal to either (1) the Alternate Base Rate (as defined in the Credit Agreement), plus an applicable margin ranging from 0.00% to 1.00%0.75%; or (2) Adjusted LIBO Rate (as defined in the Credit Agreement) plus an applicable


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MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

9. Debt  – (continued)

margin ranging from 1.00% to 2.00%1.75%. The applicable margin is determined based on the Company’s consolidated leverage ratio (Leverage Ratio)(the “Leverage Ratio”) which is defined in the Credit Agreement as Consolidated Total Indebtedness (as defined in the Credit Agreement) divided by Consolidated EBITDA (as defined in the Credit Agreement). Letters of credit issued under the Facility are subject to a letter of credit fee of 1.125%1.00% to 2.125%1.75% for non-performance letters of credit or 0.625%0.50% to 1.125%0.875% for performance letters of credit, based on the Company’s consolidated Leverage Ratio. The Company is subject to a commitment fee of 0.20%0.15% to 0.375%0.25%, based on the Company’s consolidated Leverage Ratio, on any unused portion of the Facility. The Credit Agreement restricts certain types of payments when the Company’s consolidated Leverage Ratio exceeds 2.25.2.50 or the Company’s consolidated Liquidity (as defined in the Credit Agreement) is less than $50 million. The weighted average interest rate on borrowings outstanding on the Facility for the year ended December 31, 2017,2020 was 2.07%2.35% per annum.

Under the Credit Agreement, the Company is subject to certain financial covenants and must maintainis limited to a maximum consolidated Leverage Ratio of 3.0 and a minimum interest coverage ratio of 3.0, which is defined in the Credit Agreement as Consolidated EBITDA (as defined in the Credit Agreement) divided by interest expense (as defined in the Credit Agreement). The Credit Agreement also contains a number of covenants including limitations on asset sales, investments, indebtedness and liens. In connection with any permitted acquisition where the total consideration exceeds $50 million, the Company may request that the maximum permitted consolidated Leverage Ratio increase from 3.0 to 3.5. Any such increase shall begin in the quarter in which such permitted acquisition is consummated and shall continue in effect for four consecutive fiscal quarters. The Company was in compliance with all of its financial covenants under the Credit Agreement as of December 31, 2017.

Prior to the amendment and restatement of the Credit Agreement, the Company had a five-year syndicated credit agreement with a facility of $175.0 million that provided funds for revolving loans and the issuance of letters of credit and up to $25.0 million for swingline loans.

The amount outstanding on the Facility was $79.0 million and $59.1 million as of December 31, 2017 and 2016, respectively.

2020.

As of December 31, 2017,2020, the Company had irrevocable standby letters of credit outstanding under the Facility of approximately $20.9$10.4 million, including $17.6$9.8 million related to the Company’s payment obligation under its insurance programs and approximately $3.3$0.6 million related to contract performance obligations.
As of December 31, 2016,2019, the Company had irrevocable standby letters of credit outstanding under the Facility of approximately $23.7$10.6 million, including $17.6$10.0 million related to the Company’s payment obligation under its insurance programs and approximately $6.1$0.6 million related to contract performance obligations.

The Company hashad remaining deferred debt issuance costs totaling $0.8$1.1 million as of December 31, 2017,2020, related to entry into the line of credit. As permitted under ASU No. 2015-15, debt issuance costs have been deferred and are presented as an asset within other assets, which is amortized as interest expense over the term of the line of credit.

10. Income Taxes

Equipment Notes
The United States Tax CutsCompany has entered into a Master Equipment Loan and Jobs ActSecurity Agreement (the “Tax Act”“Master Loan Agreement”) with multiple lending banks. The Master Loan Agreement may be used for the financing of equipment between the Company and lending banks pursuant to one or more “Equipment Notes”. Each Equipment Note executed under the Master Loan Agreement constitutes a separate, distinct and independent financing of equipment and a contractual obligation of the Company, which was signed into law December 22, 2017, made significant changes to the Internal Revenue Code. The changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning aftermay contain prepayment clauses.
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As of December 31, 2017,2020, the transition of U.S international taxation from a worldwide tax system to a territorial system,Company had 4 Equipment Notes outstanding under the Master Loan Agreement that are collateralized by equipment and a one-time transition tax onvehicles owned by the mandatory deemed repatriation of cumulative foreign earningsCompany. The following table sets forth our remaining principal payments for the Company’s outstanding Equipment Notes as of December 31, 2017.2020:
(in thousands)Future
Equipment Notes
Principal Payments
2021$4,381 
20224,511 
20234,645 
20247,102 
20252,189 
Thereafter6,592 
Total future principal payments$29,420 
Less: current portion of equipment notes(4,381)
Long-term principal obligations$25,039 

11. Revenue Recognition
Disaggregation of Revenue
A majority of the Company’s revenues are earned through contracts with customers that normally provide for payment upon completion of specified work or units of work as identified in the contract. Although there is considerable variation in the terms of these contracts, they are primarily structured as fixed-price contracts, under which the Company agrees to perform a defined scope of a project for a fixed amount, or unit-price contracts, under which the Company agrees to do the work at a fixed price per unit of work as specified in the contract. The Company calculated our best estimatealso enters into time-and-equipment and time-and-materials contracts under which the Company is paid for labor and equipment at negotiated hourly billing rates and for other expenses, including materials, as incurred at rates agreed to in the contract. Finally, the Company sometimes enters into cost-plus contracts, where the Company is paid for costs plus a negotiated margin. On occasion, time-and-equipment, time-and-materials and cost-plus contracts require the Company to include a guaranteed not-to-exceed maximum price.
Historically, fixed-price and unit-price contracts have had the highest potential margins; however, they have had a greater risk in terms of profitability because cost overruns may not be recoverable. Time-and-equipment, time-and-materials and cost-plus contracts have historically had less margin upside, but generally have had a lower risk of cost overruns. The Company also provides services under master service agreements (“MSAs”) and other variable-term service agreements. MSAs normally cover maintenance, upgrade and extension services, as well as new construction. Work performed under MSAs is typically billed on a unit-price, time-and-materials or time-and-equipment basis. MSAs are typically one to three years in duration; however, most of the impactCompany’s contracts, including MSAs, may be terminated by the customer on short notice, typically 30 to 90 days, even if the Company is not in default under the contract. Under MSAs, customers generally agree to use the Company for certain services in a specified geographic region. Most MSAs include no obligation for the contract counterparty to assign specific volumes of work to the Tax ActCompany and do not require the counterparty to use the Company exclusively, although in our year end income tax provision in accordance with its understandingsome cases the MSA contract gives the Company a right of the Tax Act and guidance available as of the date of this filing and, as a result, have recorded a net benefit of $7.8 million within income tax expense. This benefit was primarily duefirst refusal for certain work. Additional information related to revaluing the Company’s net deferred tax liabilitiesmarket types is provided in Note 16–Segment Information to reflect the recently enacted 21% federal corporate tax rate effective January 1, 2018.

Financial Statements.

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MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

10. Income Taxes  – (continued)

In addition, on December 22, 2017, the SEC staff issued SEC Staff Accounting Bulletin 118 (“SAB 118”) to address the accounting implications

The components of the Tax Act. SAB 118 permits a company to recognize provisional amountsCompany’s revenue by contract type were as follows for the one-time tax effectsyear ended December 31:
2020
T&DC&ITotal
(dollars in thousands)AmountPercentAmountPercentAmountPercent
Fixed price$507,203 43.9 %$902,134 82.5 %$1,409,337 62.7 %
Unit price338,326 29.3 77,144 7.1 415,470 18.5 
T&E285,158 24.7 72,560 6.6 357,718 15.9 
Other23,691 2.1 41,176 3.8 64,867 2.9 
$1,154,378 100.0 %$1,093,014 100.0 %$2,247,392 100.0 %
2019
T&DC&ITotal
(dollars in thousands)AmountPercentAmountPercentAmountPercent
Fixed price$564,251 49.7 %$704,743 75.2 %$1,268,994 61.3 %
Unit price228,223 20.1 54,433 5.8 282,656 13.6 
T&E316,943 27.9 101,770 10.9 418,713 20.2 
Other24,994 2.3 75,802 8.1 100,796 4.9 
$1,134,411 100.0 %$936,748 100.0 %$2,071,159 100.0 %
2018
T&DC&ITotal
(dollars in thousands)AmountPercentAmountPercentAmountPercent
Fixed price$361,699 40.5 %$452,732 71.0 %$814,431 53.2 %
Unit price181,179 20.3 51,590 8.1 232,769 15.2 
T&E305,581 34.2 34,938 5.4 340,519 22.2 
Other44,649 5.0 98,801 15.5 143,450 9.4 
$893,108 100.0 %$638,061 100.0 %$1,531,169 100.0 %
The components of the Tax Act upon enactment when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accountingCompany’s revenue by market type were as follows for the change in tax law.year ended December 31:
202020192018
(dollars in thousands)SegmentAmountPercentAmountPercentAmountPercent
TransmissionT&D$745,599 33.2 %$772,609 37.3 %$559,467 36.5 %
DistributionT&D408,779 18.2 361,802 17.5 333,641 21.8 
Electrical constructionC&I1,093,014 48.6 936,748 45.2 638,061 41.7 
Total revenue$2,247,392 100.0 %$2,071,159 100.0 %$1,531,169 100.0 %
Remaining Performance Obligations
On December 31, 2020, the Company had $1.54 billion of remaining performance obligations. The measurement period to finalize these calculations cannot extend beyond one year of the enactment date. Key provisionsCompany’s remaining performance obligations includes projects that have a significant impactwritten award, a letter of intent, a notice to proceed or an agreed upon work order to perform work on the Financial Statementsmutually accepted terms and where the Company has recognized estimated amounts include the remeasurementconditions.
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The following table summarizes that amount of certain net deferred tax assets and liabilities and recognition of liabilities for taxes on mandatory one-time deemed repatriation of accumulated earnings of foreign subsidiaries. These estimates are based on the Company’s initial analysis of the Tax Act and likely will be adjusted in future periods as required. The completion of the Company’s 2017 tax return filings could all impact these estimates. The Company will utilize implementation guidance from the Internal Revenue Service and clarifications of state tax law, as well as information from other authoritative sources, to understand the significant complexity of the Tax Act. The Company does not believe any potential adjustments in future periods would materially impact the Company’s financial condition or results of operations. The Tax Act provisions related to global intangible low taxed income (“GILTI”) could impact the Company’s taxes associated with foreign earnings in the future, however GILTI did not have an impact to the Company’sremaining performance obligations as of December 31, 2017.

2020 that the Company expects to be realized and the amount of the remaining performance obligations that the Company reasonably estimates will not be recognized within the next twelve months.

Remaining Performance Obligations as of December 31, 2020
(in thousands)TotalAmount estimated to not be
recognized within 12 months
T&D$645,422 $184,526 
C&I889,596 208,519 
Total$1,535,018 $393,045 
The Company expects a vast majority of the remaining performance obligations to be recognized within twenty-four months, although the timing of the Company’s performance is not always under its control. Additionally, the difference between the remaining performance obligations and backlog is due to the exclusion of a portion of the Company’s MSAs under certain contract types from the Company’s remaining performance obligations as these contracts can be canceled for convenience at any time by the Company or the customer without considerable cost incurred by the customer. Additional information related to backlog is provided in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report.
12. Income Taxes
Income before income taxes by geographic area was, for the years ended December 31:

   
(in thousands) 2017 2016 2015(in thousands)202020192018
Federal $33,830  $39,419  $45,456 Federal$77,195 $46,445 $48,393 
Foreign  (9,190)   (1,074)   (1,157) Foreign4,190 3,997 (5,325)
 $24,640  $38,345  $44,299 $81,385 $50,442 $43,068 

The income

Income tax provisionexpense consisted of the following for the years ended December 31:

   
(in thousands) 2017 2016 2015(in thousands)202020192018
Current
               Current
Federal $7,020  $9,838  $12,433 Federal$19,014 $6,976 $5,155 
State  1,557   2,871   3,006 State6,363 3,562 3,310 
  8,577   12,709   15,439 25,377 10,538 8,465 
Deferred
               Deferred
Federal  (1,453)   2,491   1,553 Federal(2,519)3,010 4,936 
Foreign  (875)   481   (272) Foreign963 874 (822)
State  (2,763)   1,233   277 State(1,195)(194)(805)
  (5,091)   4,205   1,558 (2,751)3,690 3,309 
Income tax expense $3,486  $16,914  $16,997 Income tax expense$22,626 $14,228 $11,774 
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MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

10. Income Taxes  – (continued)

The differences between the U.S. federal statutory tax rate and the Company’s effective tax rate for continuing operations were as follows for the years ended December 31:

202020192018
U.S federal statutory rate21.0 %21.0 %21.0 %
State income taxes, net of U.S. federal income tax expense5.0 4.7 5.2 
Change in valuation allowance0.1 (0.3)1.2 
Tax differential on foreign earnings0 0.4 (0.5)
Non-deductible meals and entertainment0.4 0.8 0.8 
Stock compensation excess tax benefits(0.6)0.1 (0.1)
Uncertain tax positions0.3 (0.4)0.1 
Provision to return adjustments, net0.4 0.2 (0.2)
Global intangible low tax income0.9 0.3 0 
Non-controlling interest0 0.9 (0.5)
Other income, net0.3 0.5 0.3 
Effective rate27.8 %28.2 %27.3 %
   
 2017 2016 2015
U.S federal statutory rate  35.0%   35.0%   35.0% 
Deferred balance adjustments due to Tax Act, net  (31.6)   —   — 
State income taxes, net of U.S. federal income tax expense  5.3   5.2   4.6 
Change in valuation allowance  6.4   1.6   — 
Domestic production/manufacturing deduction  (1.6)   (1.9)   (2.4) 
Tax differential on foreign earnings  3.2   0.6   0.3 
Deferred state tax adjustments, net  (2.4)   1.6   — 
Non-deductible meals and entertainment  1.7   1.0   0.6 
Stock compensation excess tax benefits  (3.1)   —   — 
Uncertain tax positions  2.0   —   (0.4) 
Provision to return adjustments, net  (0.3)   0.8   0.5 
Other income, net  (0.5)   0.2   0.2 
Effective rate  14.1%   44.1%   38.4% 

The net deferred tax assets and (liabilities) arising from temporary differences was as follows at December 31:

  
(in thousands) 2017 2016(in thousands)20202019
Deferred income tax assets:
          Deferred income tax assets:
Self insurance reserves $4,555  $6,670 Self insurance reserves$4,091 $4,458 
Contract loss reserves  317   257 Contract loss reserves703 642 
Stock-based awards  1,571   2,554 Stock-based awards1,300 1,164 
Bonus  590   2,908 Bonus7,554 4,904 
Operating lease liabilitiesOperating lease liabilities5,715 5,850 
Non-U.S. operating loss  2,173   595 Non-U.S. operating loss3,601 5,499 
Non-U.S. deferred income tax assets, net  773   — 
Other  1,359   1,652 Other7,250 3,439 
Total deferred income tax assets before valuation allowances  11,338   14,636 Total deferred income tax assets before valuation allowances30,214 25,956 
Less: valuation allowances  (2,173)   (595) Less: valuation allowances(2,566)(2,508)
Total deferred income tax assets  9,165   14,041 Total deferred income tax assets27,648 23,448 
Deferred income tax liabilities:
          Deferred income tax liabilities:
Property and equipment – tax over book depreciation  (18,792)   (26,664) 
Intangible assets – tax over book amortization  (2,186)   (3,592) 
Non-U.S. deferred income tax liabilities, net  —   (91) 
Property and equipment — tax over book depreciationProperty and equipment — tax over book depreciation(34,439)(32,220)
Intangible assets — tax over book amortizationIntangible assets — tax over book amortization(1,960)(1,856)
Right-of-use operating lease assetsRight-of-use operating lease assets(5,702)(5,850)
Non-U.S. deferred income tax liabilitiesNon-U.S. deferred income tax liabilities(1,322)(2,280)
Other  (1,639)   (2,259) Other(2,564)(2,187)
Total deferred income tax liabilities  (22,617)   (32,606) Total deferred income tax liabilities(45,987)(44,393)
Net deferred income taxes $(13,452)  $(18,565) Net deferred income taxes$(18,339)$(20,945)

The Company determined that it is more-likely-than-not that it will not realize the deferred tax assets on certain Canadian subsidiaries and recorded a valuation allowance against the entire related deferred tax assets.

assets for those entities.

As of December 31, 2017,2020, the Company had no undistributed earnings of our Canadian subsidiaries.We expect future earnings to be reinvested. Accordingly, as of December 31, 20172020, no provisionexpense for U.S. income taxes or foreign withholding taxes has been made.

was recorded.

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MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

10. Income Taxes  – (continued)

The Company is subject to taxation in various jurisdictions. The Company’s 2017 through 2019 tax returns for 2015 and 2016 are subject to examination by U.S.U. S. federal authorities. The Company’s tax returns are subject to examination by various state authorities for the years 20132016 through 2016.

2019.

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The Company has recorded a liability for unrecognized tax benefits related to tax positions taken on its various income tax returns. If recognized, the entire amount of unrecognized tax benefits would favorably impact the effective tax rate that is reported in future periods. The increase in the unrecognized tax benefits as ofDecember 31, 20172020 was primarily due to revaluation of the reserve for statelikelihood of the uncertain tax expense deducted on the federal tax returns for the 2011 through 2016 tax years.positions. The total unrecognized tax benefits is expected to be reduced by less than $0.1 million within the next 12 months due to the lapses in the applicable statutes of limitations.months. Interest and penalties related to uncertain income tax positions are included as a component of income tax expense in the Financial Statements.

The following is a reconciliation of the beginning and ending liability for unrecognized tax benefits at December 31:

  
(in thousands) 2017 2016(in thousands)20202019
Balance at beginning of period $301  $425 Balance at beginning of period$152 $327 
Gross increases in current period tax positions  67   100 Gross increases in current period tax positions217 31 
Gross increases in prior period tax positions  441   — 
Settlements with taxing authoritiesSettlements with taxing authorities0 (88)
Reductions in tax positions due to lapse of statutory limitations  (22)   (12) Reductions in tax positions due to lapse of statutory limitations(16)(118)
Settlements with taxing authorities  —   (243) 
Balance at end of period  787   270 Balance at end of period353 152 
Accrued interest and penalties at end of period  —   31 Accrued interest and penalties at end of period69 24 
Total liability for unrecognized tax benefits $787  $301 Total liability for unrecognized tax benefits$422 $176 

The liability for unrecognized tax benefits, including accrued interest and penalties, was included in other liabilities inon the accompanying consolidated balance sheets. The amount of interest and penalties charged or credited to income tax expense as a result of the unrecognized tax benefits was not significant in the years ended December 31, 2017, 20162020, 2019 and 2015.

The Company adopted ASU No. 2016-09,Compensation — Stock Compensation (Topic 718) on January 1, 2017. See Note 1 — Organization, Business and Significant Accounting Policies to the Financial Statements for further information regarding ASU No. 2016-09,Compensation — Stock Compensation (Topic 718).

11.2018.

13. Commitments and Contingencies

Purchase Commitments

As of December 31, 2017,2020, the Company had approximately $12.3$9.5 million in outstanding purchase orders for certain construction equipment, with cash outlay scheduled to occur over the next nine months.

Insurance and Claims Accruals

The Company carries insurance policies, which are subject to certain deductibles, for workers’ compensation, general liability, automobile liability and other coverages. The deductible per occurrence for each line of coverage is up to $1.0 million, except for wildfire coverage which has a deductible of $2.0 million. The Company’s health benefit plans are subject to deductiblesstop-loss limits of up to $0.2 million for qualified individuals. Losses up to the deductible and stop-loss amounts are accrued based upon the Company’s estimates of the ultimate liability for claims reported and an estimate of claims incurred but not yet reported.


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NOTES TO FINANCIAL STATEMENTS

11. Commitments and Contingencies  – (continued)

The insurance and claims accruals are based on known facts, actuarial estimates and historical trends. While recorded accruals are based on the ultimate liability, which includes amounts in excess of the deductible, a corresponding receivable for amounts in excess of the deductible is included in total assets inon the Company’s consolidated balance sheetssheets. The following table includes the Company’s accrued short- and long-term insurance liabilities at December 31:

   
(in thousands) 2017 2016 2015(in thousands)20202019
Balance at beginning of period $42,584  $36,967  $39,480 Balance at beginning of period$66,804 $54,039 
Net increases in reserves  22,938   25,139   15,686 
Net increases in accrued self-insuranceNet increases in accrued self-insurance38,064 45,419 
Net payments made  (20,159)   (19,522)   (18,199) Net payments made(35,045)(32,654)
Balance at end of period $45,363  $42,584  $36,967 Balance at end of period$69,823 $66,804 

Insurance expense, including premiums, for workers’ compensation, general liability, automobile liability, employee health benefits, and other coverages for the years ended December 31, 2017, 20162020, 2019 and 20152018 was $29.5$56.4 million, $25.6$48.5 million and $23.6$30.4 million, respectively.

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Performance and Payment Bonds and Parent Guarantees

In certain circumstances, the Company is required to provide performance and payment bonds in connection with its future performance on certain contractual commitments. The Company has indemnified its sureties for any expenses paid out under these bonds. As of December 31, 2017,2020, an aggregate of approximately $497.0 million$1.33 billion in original face amount of bonds issued by the Company’s sureties were outstanding. Our estimated remaining cost to complete these bonded projects was approximately $144.5$629.1 million as of December 31, 2017.

2020.

From time to time the Company guarantees the obligations of wholly owned subsidiaries, including obligations under certain contracts with customers, certain lease agreements, and obligations in connection with obtaining contractors’ licenses. Additionally, from time to time the Company is required to post letters of credit to guarantee the obligations of its wholly owned subsidiaries, which reduces the borrowing availability under our Facility.

Indemnities

From time to time, pursuant to its service arrangements, the Company indemnifies its customers for claims related to the services it provides under those service arrangements. These indemnification obligations may subject the Company to indemnity claims, liabilities and related litigation. The Company is not aware of any material unrecorded liabilities for asserted claims in connection with these indemnification obligations.

Collective Bargaining Agreements

Many

Most of the Company’s subsidiaries’ craft labor employees are covered by collective bargaining agreements. The agreements require the subsidiaries to pay specified wages, provide certain benefits and contribute certain amounts to multi-employer pension plans. If a subsidiary withdraws from any of the multi-employer pension plans or if the plans were to otherwise become underfunded, the subsidiary could incur liabilities for additional contributions related to these plans. Although the Company has been informed that the status of some multi-employer pension plans to which its subsidiaries contribute have been classified as “critical”, the Company is not currently aware of any potential liabilities related to this issue. See Note 1415 — Employee Benefit Plans to the Financial Statements for further information related to the Company’s participation in multi-employer plans.

Litigation and Other Legal Matters

The Company is from time-to-time party to various lawsuits, claims, and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, property damages, punitive damages, civil penalties or other losses,


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NOTES TO FINANCIAL STATEMENTS

11. Commitments and Contingencies  – (continued)

or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, the Company records reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company does not believe that any of these proceedings, separately or in the aggregate, would be expected to have a material adverse effect on the Company’s financial position, results of operation or cash flows.

The Company is routinely subject to other civil claims, litigation and arbitration, and regulatory investigations arising in the ordinary course of our present business as well as in respect of our divested businesses. Some of these claims and litigations include claims related to the Company’s current services and operations, and asbestos-related claims concerning historic operations of a predecessor affiliate. Thethe Company believes that it has strong defenses to these claims as well as insurance coverages that could contribute to any settlement or liability in the event any asbestos-related claim isclaims are not resolved in the Company’sour favor. These claims have not had a material impact on the Company to date, and the Company believes that the likelihood that a future material adverse outcome will result from these claims is remote. However, if facts and circumstances change in the future, the Company cannot be certain that an adverse outcome of one or more of these claims would not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

12. Lease Obligations

From time to time, the Company enters into leasing arrangements for real estate, vehicles and construction equipment. In 2017, the Company entered into master leasing arrangements for vehicles and construction equipment. Some of the leases entered into under these agreements met the requirements for capitalizations and were recorded as capital leases, while others were treated as operating leases. As of December 31, 2017, the Company had no outstanding commitments to enter into future leases under its master lease agreements.

Capital Leases

The Company leases vehicles and certain equipment under capital leases. The economic substance of the leases is a financing transaction for acquisition of the vehicles and equipment and, accordingly, the leases are included in the balance sheets in property and equipment, net of accumulated depreciation, with a corresponding amount recorded in current portion of capital lease obligations or capital lease obligations, net of current maturities, as appropriate. The capital lease assets are amortized on a straight-line basis over the life of the lease or, if shorter, the life of the leased asset, and included in depreciation expense in the statements of operations. The interest associated with capital leases is included in interest expense in the statements of operations.

As of December 31, 2017, the Company had approximately $3.7 million of capital lease obligations outstanding, $1.1 million of which was classified as a current liability.

As of December 31, 2017 and 2016, $3.7 million and $5.0 million, respectively, of leased assets were capitalized in construction equipment, net of accumulated depreciation. Additional information related to property and equipment is provided in Note 6 — Property and Equipment to the Financial Statements.

Operating Leases

The Company leases real estate, construction equipment and office equipment under operating leases with remaining terms ranging from one to six years.

Rent expense includes lease payments as well as rent on items that are rented under cancellable rental agreements. Total rent expense for the years ended December 31, 2017, 2016 and 2015, was $44.6 million, $44.9 million and $57.2 million, respectively.


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NOTES TO FINANCIAL STATEMENTS

12. Lease Obligations  – (continued)

The future minimum lease payments required under capital leases, together with their present value of capital leases, and operating leases as of December 31, 2017 were as follows:

  
(In thousands) Capital
Lease
Obligations		 Operating
Lease
Obligations
2018 $1,185  $3,599 
2019  1,185   2,885 
2020  1,185   2,187 
2021  360   1,582 
2022  —   1,014 
Thereafter  —   564 
Total minimum lease payments $3,915  $11,831 
Interest  (200)    
Net present of minimum lease payments  3,715      
Less: Current portion of capital lease obligations  1,086    
Long-term capital lease obligations $2,629    

13.14. Stock-Based Compensation

The Company maintains two2 equity compensation plans under which stock-based compensation has been granted, the 2017 Long-Term Incentive Plan (Amended and Restated as of April 23, 2020) (the “LTIP”) and the 2007 Long-Term Incentive Plan (Amended and Restated as of May 1, 2014) (the “2007 Plan”LTIP” and, collectively with the LTIP, the “Long-Term Incentive Plans”). Upon the initial adoption of the LTIP in 2017, awards were no longer granted under the 2007 Plan.LTIP. The LTIP was approved by our stockholders and provides for grants of (a) incentive stock options qualified as such under U.S. federal income tax laws, (b) stock options that do not qualify as incentive stock options, (c) stock appreciation rights, (d) restricted stock awards, (e) restricted stock units, (f) performance awards, (g) phantom stock, (h) stock bonuses, (i) dividend equivalents, or (j) any combination of such awards. The LTIP permits the granting of up to 900,0001,500,000 shares to directors, officers and other employees of the Company. Grants of awards to employees are approved by the Compensation Committee of the Board of Directors and grants to independent members of the Board of Directors are approved by the Board of Directors. All awards are made with an
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exercise price or base price, as the case may be, that is not less than the full fair market value per share on the date of grant. No stock option or stock appreciation right may be exercised more than 10 years from the date of grant.

Ordinarily the number of restricted stock awards and ROIC-based performance share awards are determined by dividing the amount of the equity compensation award allocated to each award type, by the closing price of the Company’s common stock on the date of the grant. However, as a result of the negative impact of the COVID-19 pandemic on the Company’s stock price during late March and early April of 2020, the Company’s compensation committee elected to utilize the Company's average closing stock price during the last 30 trading days of 2019 to determine the number of restricted stock and ROIC-based performance shares granted in 2020. The use of this 30-trading day average resulted in the utilization of an average stock price of $33.57, instead of the grant date closing stock price of $26.75.
Shares issued as a result of stock option exercises or stock grants are made available from authorized unissued shares of common stock or treasury stock.

Stock Options

The Company has not awarded any stock options since 2013. Stock options granted to the Company’s employees or directors vested ratably over a three- or four-year vesting period and were granted with an exercise price equal to the market price of the Company’s stock on the date of grant. The Company used the Black-Scholes-Merton option-pricing model to estimate the fair value of options as of the date of grant. All stock options were fully expensed as of December 31, 2016.

2017.

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NOTES TO FINANCIAL STATEMENTS

13. Stock-Based Compensation  – (continued)

Following is a summary of stock option activity for the three-year period endingended December 31, 2017:

2020:
    
 Options Weighted-
Average
Exercise
Price		 Weighted-
Average
Remaining
Contractual
Term		 Aggregate
Intrinsic
Value
(in thousands)
Outstanding at January 1, 2015  1,008,781  $13.87           
Exercised  (267,440)  $7.19           
Forfeited  (1,290)  $23.14           
Expired  (9,446)  $5.92       
Outstanding at December 31, 2015  730,605  $16.40   3.6 years  $3,722 
Exercised  (443,283)  $14.03           
Forfeited  (933)  $24.68           
Expired  (40,672)  $21.40       
Outstanding at December 31, 2016  245,717  $19.82   4.4 years  $4,396 
Exercised  (79,797)  $15.43       
Outstanding and Exercisable at December 31, 2017  165,920  $21.92   4.2 years  $2,292 
OptionsWeighted-
Average
Exercise
Price		Weighted-
Average
Remaining
Contractual
Term		Aggregate
Intrinsic
Value
(in thousands)
Outstanding at January 1, 2018165,920 $21.92 
Exercised(88,053)$21.54 
Expired(1,103)$21.16 
Outstanding and Exercisable at December 31, 201876,764 $22.33 2.9 years$446 
Exercised(14,743)$23.16 
Expired(2,435)$19.86 
Outstanding and Exercisable at December 31, 201959,586 $22.26 2.2 years$352 
Exercised(34,388)$21.82 
Expired(641)$19.66 
Outstanding and Exercisable at December 31, 202024,557 $22.94 1.9 years$912 

Other data relating to option activity for

During the years ended December 31, are as follows:

2020, 2019 and 2018, the intrinsic value of stock options exercised was $0.7 million, $0.2 million and $1.3 million, respectively.
   
(dollars in thousands) 2017 2016 2015
Intrinsic value of options exercised $1,721  $7,832  $5,857 
Fair value of options vested  —   372   948 

The following table summarizes information with respect to stock options outstanding and exercisable under the Company’s plans at December 31, 2017:

2020:
   
 Options Outstanding and ExercisableOptions Outstanding and Exercisable
Exercise Price Number Of
Options		 Weighted-
Average
Exercise
Price		 Weighted-
Average
Remaining
Contractual
Term		Exercise PriceNumber Of OptionsWeighted- Average Exercise PriceWeighted- Average Remaining Contractual Term
$17.18 – $17.48  60,267  $17.44   3.9 years 
$17.48 – $17.48$17.48 – $17.485,817 $17.48 1.2 years
$24.18 – $24.18  44,151  $24.18   3.2 years $24.18 – $24.181,577 $24.18 0.2 years
$24.68 – $24.68  61,502  $24.68   5.2 years $24.68 – $24.6817,163 $24.68 2.2 years
  165,920  $21.92   4.2 years 24,557 $22.94 1.9 years

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Time-Vested Stock Awards

The company grants time-vested stock awards under the LTIP in the form of restricted stock awards, restricted stock units or equity-settled phantom stock. Time-vested stock awards granted to non-employee directors and eligible employees in 2017 vest ratably, on an annual basis, over three years. The grant date fair value of the time-vested stock awards wasis equal to the closing market price of the Company’s common stock on the date of grant.

Time-vested stock awards granted under the LTIP to eligible employees in 2020 vest ratably on April 27, 2021, March 23, 2022 and March 23, 2023. Time-vested stock awards granted under the LTIP to non-employee directors in 2020 vest over a one year period.

The Company recognizes stock-based compensation expense related to restricted stock awards and restricted stock units based on the grant date fair value, which was the closing price of the Company’s stock on the date of grant. The fair value is expensed over the service period, which is generally three years for time-vested stock awards granted to eligible employees and one year for non-employee directors.
During the years ended December 31, 2020, 2019 and 2018, time-vested stock vesting activity settled in common stock had an intrinsic value, at the time of vesting, of $2.5 million, $3.4 million and $3.0 million, respectively.

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NOTES TO FINANCIAL STATEMENTS

13. Stock-Based Compensation  – (continued)

Following is a summary of time-vested stock awards activity for the three-year period endingended December 31, 2017:

2020:
  
 Shares Per Share
Weighted-
Average
Grant Date
Fair Value		SharesPer Share Weighted- Average
Grant Date
Fair Value
Outstanding unvested at January 1, 2015  220,337  $22.64 
Outstanding unvested at January 1, 2018Outstanding unvested at January 1, 2018188,648 $29.55 
Granted  87,040  $29.23 Granted93,280 $30.22 
Vested  (102,297)  $22.42 Vested(96,840)$28.91 
Forfeited  (3,131)  $24.10 Forfeited(9,657)$27.02 
Outstanding unvested at December 31, 2015  201,949  $24.58 
Outstanding unvested at December 31, 2018Outstanding unvested at December 31, 2018175,431 $30.40 
Granted  112,912  $24.66 Granted85,640 $34.22 
Vested  (88,301)  $25.18 Vested(99,655)$30.51 
Forfeited  (3,144)  $26.09 Forfeited(3,034)$35.88 
Outstanding unvested at December 31, 2016  223,416  $25.26 
Outstanding unvested at December 31, 2019Outstanding unvested at December 31, 2019158,382 $32.29 
Granted  66,352  $37.49 Granted104,857 $26.75 
Vested  (99,774)  $25.19 Vested(93,669)$32.09 
Forfeited  (1,346)  $31.22 Forfeited(3,781)$29.80 
Outstanding unvested at December 31, 2017  188,648  $29.55 
Outstanding unvested at December 31, 2020Outstanding unvested at December 31, 2020165,789 $28.96 

Performance Awards

The Company grants performance awards under whichthe LTIP. Under these awards, shares of the Company’s common stock may be earned based on the Company’s performance compared to defined metrics. The number of shares earned under a performance award may vary from zero0 to 200% of the target shares awarded, based upon the Company’s performance compared to the metrics. The metrics used for the grant are determined by the Compensation Committee of the Board of Directors and may be either based on internal measures such as the Company’s financial performance compared to target or on a market-based metric such as the Company’s stock performance compared to a peer group. Performance awards cliff vest upon attainment of at least the minimum stated performance targets and minimum service requirements and are paid in common shares of the Company’s common stock.

The

For performance awards, the Company recognizes stock-based compensation expense related to market-based performance awards based on the grant date fair value whichof the award. The fair value of internal metric-based performance awards is determined by the closing stock price of the Company’s common stock on the date of the grant. The fair value of market-based performance awards is computed using a Monte Carlo simulation. The Company recognizes stock-based compensation expense related to internal measure-based performancePerformance awards based ongranted in 2020 are expensed over the grant date fair value, which was the closing priceservice period of the Company’s stock on the date of grant.approximately 2.7 years. The Company adjusts the stock-based compensation expense related to internal metric-based performance awards according to its determination of the potential achievement of the performance targetshares expected to vest at each reporting date. TheStock-based compensation expense related to market metric-based performance awards is expensed at their grant date fair value regardless of performance.
During the years ended December 31, 2020, 2019 and 2018, performance grants are expensed overaward vesting activity settled in common stock had an intrinsic value, at the service periodtime of approximately 2.8 years.

vesting, of $4.8 million, $0.2 million and $1.0 million, respectively.

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NOTES TO FINANCIAL STATEMENTS

13. Stock-Based Compensation  – (continued)

Following is a summary of performance share award activity for the three-year period endingended December 31, 2017:

2020:
  
 Shares Per Share
Weighted-
Average
Grant Date
Fair Value		SharesPer Share Weighted- Average
Grant Date
Fair Value
Outstanding at January 1, 2015  126,803  $26.63 
Granted at target  69,978  $38.70 
Vested  (40,474)  $24.68 
Forfeited for performance below target  (3,810)  $24.68 
Forfeited  (8,889)  $30.87 
Outstanding at December 31, 2015  143,608  $32.68 
Granted at target  79,661  $28.25 
Earned for performance above target  20,650  $31.01 
Vested  (98,270)  $27.74 
Forfeited  (1,626)  $32.96 
Outstanding at December 31, 2016  144,023  $32.92 
Outstanding at January 1, 2018Outstanding at January 1, 2018126,975 $35.29 
Granted at target  47,454  $47.12 Granted at target66,764 $34.52 
Forfeited for performance below target  (24,873)  $36.40 Forfeited for performance below target(42,584)$29.73 
Vested  (39,407)  $40.15 Vested(29,655)$33.35 
Forfeited  (222)  $37.22 Forfeited(9,247)$30.85 
Outstanding at December 31, 2017  126,975  $35.29 
Outstanding at December 31, 2018Outstanding at December 31, 2018112,253 $39.73 
Granted at targetGranted at target72,932 $39.26 
Forfeited for performance below targetForfeited for performance below target(36,581)$48.94 
VestedVested(8,854)$58.34 
ForfeitedForfeited(1,505)$43.43 
Outstanding at December 31, 2019Outstanding at December 31, 2019138,245 $37.02 
Granted at targetGranted at target79,788 $34.10 
Earned for performance above target, netEarned for performance above target, net14,962 $69.45 
VestedVested(78,260)$48.86 
ForfeitedForfeited(4,396)$36.28 
Outstanding at December 31, 2020Outstanding at December 31, 2020150,339 $36.54 

Stock-based Compensation Expense

The Company recognized stock-based compensation expense of approximately $5.7 million, $4.4 million $4.7 million and $4.8$3.2 million for the years ended December 31, 2017, 20162020, 2019 and 2015,2018, respectively, in selling, general and administrative expenses.expenses on the Company’s consolidated statements of operations. As of December 31, 2017,2020, there was approximately $4.4$6.9 million of total unrecognized stock-based compensation expense related to awards granted under the LTIP and 2007 Plan.Long-Term Incentive Plans. This included $2.5$2.9 million of unrecognized compensation cost related to unvested time-vested stock awards expected to be recognized over a remaining weighted average vesting period of approximately 1.81.5 years and $1.9$4.0 million of unrecognized compensation cost related to unvested performance awards, expected to be recognized over a remaining weighted average vesting period of approximately 1.41.5 years. Time-vested stock awards granted to non-employee directors after 2013,in 2020 and all2019 vest at the end of a one-year period and those granted prior to 2019 vest over a period of three years. The grant provision of the time-vested stock awards granted to non-employee directors after 2016,prior to 2019 contained provisions whichthat call for the vesting of all shares awarded upon a change in control or resignation from the board for any reason except breach of fiduciary duty. As a result of these provisions, the fair value of time-vested stock awards granted to the non-employee directors after 2013 and all directors after 2016,in 2018, was expensed on the date of the grant.

The Company adopted ASU No. 2016-09,Compensation — Stock Compensation (Topic 718) on January 1, 2017. See Note 1 — Organization, Business and Significant Accounting Policies to the Financial Statements for further information regarding ASU No. 2016-09,Compensation — Stock Compensation (Topic 718).

14.

15. Employee Benefit Plans

The Company has asponsors multiple defined contribution plans for eligible employees not covered by collective bargaining agreements. The plans include various features such as voluntary employee pre-tax and Roth-based contributions and matching contributions made by the Company. In addition, at the discretion of our Board of Directors, we may make additional profit sharing and thrift employee benefit plan in effect for all eligible employees.contributions to the plans. Company contributions under thisthese defined contribution planplans are based upon a percentage of income with limitations as defined by theeach plan. ContributionsTotal contributions for the years ended December 31, 2017, 20162020, 2019 and 20152018 amounted to $3.4$16.8 million, $4.6$10.9 million, and $3.4$5.8 million, respectively. The Company also has an


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NOTES TO FINANCIAL STATEMENTS

14. Employee Benefit Plans  – (continued)

employee benefit planincrease in effect for certain non-union hourly employees. Company contributions under this defined contribution plan are based upon a percentage of income with limitations as defined by the plan. Contributions for the years ended December 31, 2017, 2016 and 2015 amounted to $0.6 million, $0.6 million and $0.7 million, respectively. The Company also has a registered retirement saving plan for certain Canadian employees, contributions to this plan for the year ended December 31, 2017 amounted2020 was due to $0.1 million.

an increase in profit sharing and the acquisition of CSI.

The Company contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover its union-represented employees, who are represented by over 100more than 300 local unions. The related collective-bargaining agreements between those organizations and the Company, which specify the rate at which the Company must contribute to the multi-employer defined pension plan, expire at different times between 20182021 and 2020.

2023.

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The risks of participating in these multiemployer defined benefit pension plans are different from single-employer plans in the following aspects:

1)Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.
2)If a participating employer stops contributing to a plan, the unfunded obligations of the plan may be borne by the remaining participating employers.
3)If the Company chooses to stop participating in a multiemployer plan, it may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

1)Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.
2)If a participating employer stops contributing to a plan, the unfunded obligations of the plan may be borne by the remaining participating employers.
3)If the Company chooses to stop participating in a multiemployer plan, it may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
The amount of additional funds, if any, that the Company may be obligated to contribute to these plans in the future cannot be estimated due to uncertainty of the future levels of work that require the specific use of union employees covered by these plans, as well as the future contribution levels and possible surcharges on contributions applicable to these plans.

The following table summarizes plan information relating to the Company’s participation in multi-employer defined benefit pension plans, including company contributions for the last three years, the status under the Pension Protection Act of 2006, as amended by the Consolidated and Further Continuing Appropriations Act of 2015 (“PPA”) of the plans and whether the plans are subject to a funding improvement or rehabilitation plan, or contribution surcharges. The most recent zone status is for the plan’s year-end indicated in the table. The zone status is based on information that the Company received from the plan, as well as from publicly available information on the U.S. Department of Labor website. The PPA zone status for the plan year ended on December 31, 20172020 has not been listed because Forms 5500 were not yet available. Among other factors, plans in the red “critical” zone are generally less than 65 percent funded, plans in the yellow “endangered” zone are between 65 and 80 percent funded, and plans in the green zone are at least 80 percent funded. Also listed in the table below are the Company’s contributions to defined contribution plans. Information in the table has been presented separately for individually significant plans and in the aggregate for all other plans.


Pension FundEIN/Pension
Plan Number		Pension Protection Act Zone StatusContributions to Plan for the Year ended December 31,Funding
Plan		Surcharge
Imposed
StatusPlan Year
End		StatusPlan Year
End		202020192018
(in thousands)
Defined Benefit Plans:
Southern California IBEW-NECA Pension Trust Fund95-6392774 001Yellow6/30/2019Yellow6/30/2018$32,791 $14,268 $767 YesYes
National Electrical Benefit Fund53-0181657 001Green12/31/2019Green12/31/201810,850 11,050 9,840 NoNo
Eighth District Electrical Pension
Fund		84-6100393 001Green3/31/2020Green3/31/201910,998 11,199 9,707 NoNo
IBEW Local 332 Pension Plan Part A94-2688032 004Green12/31/2019Green12/31/20183,418 1,913 0 NoNo
IBEW Local 769 Management Pension Plan A86-6049763 001Green6/30/2019Green6/30/20183,866 2,689 2,587 NoNo
IBEW Local No. 640 and Arizona NECA Defined Benefit Pension
Plan		86-0323980 001Green12/31/2019Green12/31/20181,195 2,397 1,629 NoNo
IBEW Local Union 1249 Pension Fund15-6035161 001Green12/31/2019Green12/31/20182,126 1,578 881 NoNo
Indiana/Kentucky/Ohio Regional Council of Carpenters Pension
Fund		51-6123713 001Green6/30/2019Green6/30/20182,109 1,742 1,157 NoNo
Alaska Electrical Pension Plan92-6005171 001Green12/31/2019Green12/31/20181,548 1,408 2,723 NoNo
Defined Contribution Plans:
National Electrical Annuity Plan52-6132372 001n/an/a25,037 28,822 26,559 n/an/a
Eighth District Electrical Pension Fund Annuity Plan84-6100393 002n/an/a4,915 5,339 4,785 n/an/a
San Mateo Country Electrical Construction Industry Retirement Plan51-6052127 001n/an/a3,202 854 0 n/an/a
Puget Sound Electrical Workers 401(K) Savings Plan91-6180326 001n/an/a2,132 1,833 967 n/an/a
All other plans:17,663 17,117 8,818 
Total contributions:$121,850 $102,209 $70,420 
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MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

14. Employee Benefit Plans  – (continued)

          
          
Pension Fund EIN/Pension
Plan Number		 Pension Protection Act Zone Status Contributions to Plan for the Year Ended December 31, Funding Plan Surcharge Imposed
    Status Plan Year End Status Plan Year End 2017 2016 2015
                  (in thousands)      
Defined Benefit Plans:
                                                  
National Electrical Benefit Fund  53-0181657 001   Green   12/31/2016   Green   12/31/2015  $9,542  $9,040  $6,930   No   No 
Eighth District Electrical Management Pension Fund  84-6100393 001   Green   3/31/2017   Green   3/31/2016   7,908   7,519   5,598   No   No 
Indiana/Kentucky/Ohio Regional Council of Carpenters Pension Fund  51-6123713 001   Green   6/30/2016   Green   6/30/2015   2,515   696   116   No   No 
IBEW Local 769 Management Pension Plan  86-6049763 001   Green   6/30/2016   Green   6/30/2015   2,115   1,709   2,120   No   No 
IBEW Local 1249 Pension Plan  15-6035161 001   Yellow   12/31/2016   Yellow   12/31/2015   1,315   630   2,042   Yes   No 
Defined Contribution Plans:
                                                  
National Electrical Annuity Plan  52-6132372 001        n/a        n/a   27,633   22,840   24,226   n/a   n/a 
Eighth District Electrical Pension Fund Annuity Plan  84-6100393 002        n/a        n/a   4,109   4,883   3,700   n/a   n/a 
All other plans:                 9,751   6,479   7,954       
Total Contributions:                $64,888  $53,796  $52,686       

Total contributions to these plans, at any given time, correspond to the number of union employees employed and the plans in which they participate, which varies depending upon location, the number of ongoing projects and the need for union resources in connection with such projects at a given time. The PPA data presented in the table above represents data available to us for the two most recent plan years.

One of the Company’s subsidiaries was listed in the Eighth District Electrical Pension Fund’s Form 5500 as providing more than 5five percent of the total contributions to that plan for the plan years ended March 31, 2017, 20162020, 2019 and 2015 and2018, in the IBEW local 769 Management Pension Fund’sPlan A’s Form 5500 as providing more than 5five percent of the total contributions to that plan for the plan years ended June 30, 20162019 and 2015. Another of the company’s subsidiaries was listed2018 and in the IBEW Local 1249No. 640 and Arizona NECA Defined Benefit Pension Plan’s Form 5500 as providing more than 5five percent of the total contributions to that plan for the plan yearyears ended December 31, 2015.

15.2019 and 2018.

16. Segment Information

MYR Group is a holding company of specialty contractors serving electrical utility infrastructure and commercial construction markets in the United States and western Canada. The Company has two2 reporting segments, each a separate operating segment, which are referred to as T&D and C&I. Performance measurement and resource allocation for the reporting segments are based on many factors. The primary financial measures used to evaluate the segment information are contract revenues and income from operations, excluding general corporate expenses. General corporate expenses include corporate facility and staffing costs, which includes safety costs, professional fees, IT expenses and management fees, and intangible amortization. The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies.

fees.

Transmission and Distribution: The T&D segment provides a broad range of services on electric transmission and distribution networks and substation facilities which include design, engineering, procurement, construction, upgrade, maintenance and repair services with a particular focus on construction, maintenance and repair. T&D services include the construction and maintenance of high voltage transmission lines, substations and lower voltage underground and overhead distribution systems. The T&D segment also provides emergency restoration services in response to hurricane, ice or other storm-related damage. T&D


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MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

15. Segment Information  – (continued)

customers include investor-owned utilities, cooperatives, private developers, government-funded utilities, independent power producers, independent transmission companies, industrial facility owners and other contractors.

Commercial and Industrial: The C&I segment provides services such asincluding the design, installation, maintenance and repair of commercial and industrial wiring, installation of traffic networks and the installation of bridge, roadway and tunnel lighting. Typical C&I contracts cover electrical contracting services for airports, hospitals, data centers, hotels, stadiums, convention centers, renewable energy projects, manufacturing plants, processing facilities, waste-waterwater treatment facilities, mining facilities and transportation control and management systems. C&I segment services are generally performed in the western and northeastern United States and in western Canada. The C&I segment generally provides electric construction and maintenance services as a subcontractor to general contractors in the C&I industry, but also contracts directly with facility owners. The C&I segment has a diverse customer base with many long-standing relationships.

The information in the following table is derived from the segment’s internal financial reports used for corporate management purposes:

   
 For the Year Ended December 31,For the Year ended December 31,
(in thousands) 2017 2016 2015(in thousands)202020192018
Contract revenues:
               Contract revenues:
T&D $879,372  $818,972  $794,898 T&D$1,154,378 $1,134,411 $893,108 
C&I  523,945   323,515   266,783 C&I1,093,014 936,748 638,061 
 $1,403,317  $1,142,487  $1,061,681 $2,247,392 $2,071,159 $1,531,169 
Income from operations:
               Income from operations:
T&D $39,631  $63,459  $63,155 T&D$109,387 $73,580 $57,242 
C&I  25,048   13,920   13,592 C&I37,247 30,506 34,112 
General Corporate  (35,121)   (38,625)   (31,906) General Corporate(60,089)(46,908)(41,042)
 $29,558  $38,754  $44,841 $86,545 $57,178 $50,312 

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The Company does not identify capital expenditures and total assets by segment in its internal financial reports due in part to the shared use of a centralized fleet of vehicles and specialized equipment. Identifiable assets, consisting of contract receivables, costs and estimated earnings in excess of billings on uncompleted contracts,contract assets, construction materials inventory, goodwill and intangibles for each segment are as follows as of December 31:

  
(in thousands) 2017 2016
T&D $257,834  $235,548 
C&I  152,207   125,696 
General Corporate  193,747   212,251 
   $603,788  $573,495 

(in thousands)20202019
T&D$269,721 $306,226 
C&I413,910 414,264 
General Corporate312,228 287,381 
$995,859 $1,007,871 

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MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

15. Segment Information  – (continued)

An allocation of total depreciation, including depreciation of shared construction equipment, and amortization to each segment is as follows:

   
 For the Year Ended December 31,For the Year ended December 31,
(in thousands) 2017 2016 2015(in thousands)202020192018
Depreciation and amortization
               Depreciation and amortization
T&D $34,990  $35,947  $35,456 T&D$37,254 $35,711 $33,977 
C&I  3,586   3,175   2,573 C&I9,199 8,805 5,936 
 $38,576  $39,122  $38,029 $46,453 $44,516 $39,913 

For the yearyears ended December 31, 2017,2020, 2019 and 2018 the Company had Canadian contract revenues of $84.1$77.9 million, of which $18.7$79.5 million and $65.4$53.8 million, is attributable torespectively, predominantly in the T&D and C&I segments, respectively. For the year ended December 31, 2016, the Company had Canadian contract revenues of $36.5 million, of which $26.9 million and $9.6 million is attributable to the T&D and C&I segments, respectively. For the year ended December 31, 2015, the Company had Canadian contract revenues of $1.5 million, of which $1.4 million and $0.1 million is attributable to the T&D and C&I segments, respectively.segment. As of December 31, 20172020 and 2016,2019, there were $40.0$23.2 million and $45.5$24.8 million, respectively, of identifiable assets attributable to Canadian operations.

16.

17. Noncontrolling Interests
On July 2, 2018, through the acquisition of certain assets of the Huen Companies, the Company became the majority controlling interest in a joint venture. As a result, the Company has consolidated the carrying value of the joint ventures’ assets and liabilities and results of operations on the Company’s consolidated financial statements. The Company records the equity owned by the other joint venture partners as noncontrolling interests on the Company’s consolidated balance sheets, consolidated statements of stockholders’ equity, and their portions, if material, of net income (loss) and other comprehensive income (loss) is shown as net income (loss) or other comprehensive income (loss) attributable to noncontrolling interests on the Company’s consolidated statements of operations and other comprehensive income (loss). Additionally the joint venture associated with the Company’s noncontrolling interests is a partnership, and consequently, the tax effect of only the Company’s share of the joint venture income (loss) is recognized by the Company.
The acquired joint venture made 0 distributions to its partners, and the Company made 0 capital contributions to the joint venture during the year ended December 31, 2020. Additionally, there have been no changes in ownership during the year ended December 31, 2020, and the underlying project was substantially completed in 2019. The initial balance of the Company’s noncontrolling interest consists of the fair value of noncontrolling interest acquired on July 2, 2018 with the Huen Companies. The Company recognized 0 net income or (loss) attributable to the noncontrolling interest during the year ended December 31, 2020. The Company recognized $1.5 million of net loss attributable to the noncontrolling interest during the year ended December 31, 2019.
18. Earnings Per Share

The Company computes earnings per share using the treasury stock method. Under the treasury stock method, basic earnings per share attributable to MYR Group Inc. are computed by dividing net income attributable to MYR Group Inc. by the weighted average number of common shares outstanding during the period. Diluted earnings per share attributable to MYR Group Inc. are computed by dividing net income attributable to MYR Group Inc. by the weighted average number of common shares outstanding during the period plus all potentially dilutive common stock equivalents, except in cases where the effect of the common stock equivalent would be anti-dilutive.

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Net income availableattributable to common shareholdersMYR Group Inc. and the weighted average number of common shares used to compute basic and diluted earnings per share was as follows:

   
 For the Year Ended December 31,For the Year ended December 31,
(in thousands, except per share data) 2017 2016 2015(in thousands, except per share data)202020192018
Numerator:
               Numerator:
Net income $21,154  $21,431  $27,302 Net income$58,759 $36,214 $31,294 
Less: net income (loss) attributable to noncontrolling interestLess: net income (loss) attributable to noncontrolling interest0 (1,476)207 
Net income attributable to MYR Group Inc.Net income attributable to MYR Group Inc.$58,759 $37,690 $31,087 
Denominator:
               Denominator:
Weighted average common shares outstanding  16,273   17,109   20,577 Weighted average common shares outstanding16,684 16,587 16,441 
Weighted average dilutive securities  223   352   461 Weighted average dilutive securities206 112 144 
Weighted average common shares outstanding, diluted  16,496   17,461   21,038 Weighted average common shares outstanding, diluted16,890 16,699 16,585 
Income per common share, basic $1.30  $1.25  $1.33 
Income per common share, diluted $1.28  $1.23  $1.30 
Net income per share attributable to MYR Group Inc.:Net income per share attributable to MYR Group Inc.:
BasicBasic$3.52 $2.27 $1.89 
DilutedDiluted$3.48 $2.26 $1.87 

Results for the year ended December 31, 2017 included a net Tax Act benefit of $7.8 million, or $0.48 and $0.47 per basic and diluted share, respectively. See further discussion in Note 10 — Income Taxes to our Financial Statements.

For the years ended December 31, 2017, 20162020, 2019 and 2015,2018, certain common stock equivalents were excluded from the calculation of dilutive securities because their inclusion would either have been anti-dilutive or, for stock options, the exercise prices of those stock options were greater than the average market price of the Company’s common stock for the period. All of the Company’s non-participating unvested restricted shares were included in the computation of weighted average dilutive securities. The following table


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MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

16. Earnings Per Share  – (continued)

summarizes the shares of common stock underlying the Company’s unvested stock optionstime-vested and performance awards that were excluded from the calculation of dilutive securities:

   
(In thousands) 2017 2016 2015
Stock options  —   —   3 
(in thousands)(in thousands)202020192018
Time-vested stock awards  44   —   — Time-vested stock awards0 0 1 
Performance awards  97   63   34 Performance awards34 73 67 

Share Repurchase Program

On July 27, 2017,October 22, 2020, the Company’s Board of Directors approvedauthorized a new $20.0$50.0 million share repurchase program (Repurchase Program) that began atwhich became effective on November 2, 2020. The Company intends to fund the expiration of the existing program.share repurchase program from cash on hand and through borrowings under its credit facility. The Repurchase Programnew share repurchase program will continue in effect through August 15, 2018,expire on November 2, 2021, or untilwhen the authorized funds are exhausted. exhausted, whichever is earlier. NaN shares were repurchased under the new program in 2020. The remaining availability to purchase shares under the Repurchase Program was $50.0 million as of December 31, 2020.
During 2017,2020 and 2019, the Company repurchased 92,987 shares of its common stock at a weighted-average price of $32.90 per share; 35,338 of those shares were purchased under its Repurchase Program for approximately $0.8 million. Additionally, the Company repurchased 57,64924,910 and 23,103 shares of stock, respectively, for approximately $2.2$0.7 million and $0.8 million, respectively, from its employees to satisfy tax obligations on shares vested under the 2007 Plan.Long-Term Incentive Plans. All of the shares repurchased were retired and returned to authorized but unissued stock. The remaining availability to purchase shares under the Repurchase Program was $19.3 million as of December 31, 2017.

17.

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19. Quarterly Financial Data (Unaudited)

The following table presents the unaudited consolidated operating results by quarter for the years ended December 31, 20172020 and 2016:

2019:
    
 For the Three Months Ended
(in thousands, except per share data) March 31, June 30, September 30, December 31,(a)
2017:
                    
Revenues $300,129  $356,185  $373,502  $373,501 
Gross profit  25,740   27,517   34,853   36,894 
Net income  1,200   1,230   5,145   13,579 
Basic earnings per share $0.07  $0.08  $0.32  $0.83 
Diluted earnings per share $0.07  $0.07  $0.31  $0.82 
2016:
                    
Revenues $253,634  $261,934  $283,259  $343,660 
Gross profit  27,281   31,435   34,063   41,944 
Net income  1,987   5,500   6,146   7,798 
Basic earnings per share $0.10  $0.32  $0.39  $0.49 
Diluted earnings per share $0.10  $0.31  $0.38  $0.48 
For the Three Months Ended
(in thousands, except per share data)March 31,June 30,September 30,December 31,
2020:
Revenues$518,470 $513,051 $607,901 $607,970 
Gross profit61,632 61,305 76,472 76,444 
Net income attributable to MYR Group9,932 13,385 17,292 18,150 
Basic earnings per share attributable to MYR Group(1)
$0.60 $0.80 $1.04 $1.09 
Diluted earnings per share attributable to MYR Group(1)
$0.59 $0.80 $1.02 $1.07 
2019:
Revenues$468,094 $448,776 $583,214 $571,075 
Gross profit42,876 43,163 59,197 68,922 
Net income attributable to MYR Group7,353 7,207 10,355 12,775 
Basic earnings per share attributable to MYR Group(1)
$0.45 $0.43 $0.62 $0.77 
Diluted earnings per share attributable to MYR Group(1)
$0.44 $0.43 $0.62 $0.76 

(a)Results for the fourth quarter of 2017 include a net Tax Act benefit of $7.8 million, or $0.48 and $0.47 per basic and diluted share, respectively. See further discussion in Note 10 — Income Taxes to our Financial Statements.

___________________________________________
(1)    Earnings per share amounts for each quarter are required to be computed independently using the weighted average number of shares outstanding during the period. As a result, the sum of the individual quarterly earnings per share amounts may not agree to the earnings per share calculated for the year.


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Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

Item 9A.Controls and Procedures

Item 9A.    Controls and Procedures
Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management, together with our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this annual reportAnnual Report on Form 10-K. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and provided reasonable assurance related to the matters stated in the above paragraph as of December 31, 2017.

2020.

Evaluation of Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth inInternal Control-IntegratedControl — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has concluded that our internal control over financial reporting was effective, as of December 31, 2020, in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP. Management’s annual report on internal control over financial reporting and the report of our independent registered public accounting firm appearis included in Part II, Item 8 “Financial“Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

This

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In addition, Crowe LLP, an independent registered public accounting firm, audited and reported on the 2020 Financial Statements included in this Annual Report on Form 10-K, includes ahas issued an attestation report of management’s assessment regardingon our internal control over financial reporting (see “Management’sreporting. The report is included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Internal Control over Financial Reporting”) and an attestation report of our independent registered public accounting firm regarding internal control over financial reporting (see “Report of Independent Registered Public Accounting Firm”).

Form 10-K.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the fourth quarter ended December 31, 20172020 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will detect or prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.


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Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Item 9B.
Item 9B.    Other Information

None.


None.
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PART III
Item 10.Directors, Executive Officers and Corporate Governance

Item 10.     Directors, Executive Officers and Corporate Governance
Information required by this Item 10 related to our directors is incorporated by reference to the information to be included under “Proposal No. 1. Election of Directors” of our definitive Proxy Statement for our Annual Meeting of Stockholders scheduled expected to be held April 26, 2018 (“201822, 2021 (the “2021 Proxy Statement”). Information about compliance with Section 16(a) of the Exchange Act is incorporated by reference to the information to be included under the heading “Section 16(a) Beneficial Ownership Reporting Compliance” in our 2018 Proxy Statement. Information regarding the procedures by which our stockholders may recommend nominees to our board of directors is incorporated by reference to the information to be included under the heading “Nominating, and Corporate Governance, Diversity and Inclusion Committee Matters — Criteria for Nomination and “2021 Annual Meeting of Stockholders” in the 2021 Proxy Statement. There were no material changes to the Boardprocedures by which security holders may recommend nominees to our board of Directors and Diversity”directors in our 2018 Proxy Statement.2020. Information about our Audit Committee, including its members, and our Audit Committee financial experts, is incorporated by reference to the information to be included under the headings “Corporate Governance—Committee Membership and Meeting Attendance” and “Audit Committee Matters” in our 2018the 2021 Proxy Statement. The balance of the information required by this itemInformation related to our executive officers is contained in the discussion entitled “Executive“Information about our Executive Officers” in Part I of this Annual Report on Form 10-K.

We have a code of ethics that applies to all of our directors, officers and other employees.employees, including our principal executive officer, principal financial officer and principal accounting officer. This code is publicly available on our website atwww.myrgroup.com. Amendments to the code of ethics or any grant of a waiver from a provision of the code that applies to our principal executive officer, principal financial officer and principal accounting officer requiring disclosure under applicable SEC and NASDAQ GlobalNasdaq Stock Market rules will be disclosed on our website or, if so required, disclosed in a Current Report on Form 8-K filed with the SEC.website. The information on our website is not and shall not be deemed to be, a part of this Annual Report on Form 10-K or incorporated into any other filings we make with the SEC.

Item 11.Executive Compensation

Item 11.    Executive Compensation
The information required by this Item 11 is incorporated by reference to the information to be included in our 2018the 2021 Proxy Statement under the headings “Director“Proposal 1. Election of Directors - Director Compensation,” “Compensation Discussion and Analysis,” “Executive Compensation Tables” and “Compensation Committee Matters — Matters–Compensation Committee Report for the Year Ended December 31, 2017.”

Report”
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Equity Compensation Plan Information

The following table sets forth certain information regarding our 2007 Long-Term Incentive Plan (Amended and Restated as of May 1, 2014) (the “2007 Plan”) and our 2017 Long-Term Incentive Plan (Amended and Restated as of April 23, 2020) (the “LTIP”) as of December 31, 2017.2020. At December 31, 2017,2020, our only active equity compensation plan was the LTIP.

   
Plan Category Number of
securities to
be issued
upon exercise
of outstanding
options,
warrants and
rights(1)		 Weighted-
average
exercise price
of outstanding
options,
warrants and
rights(2)		 Number of
securities
remaining
available for
future issuance
under equity
compensation
plans(3)
Equity compensation plans approved by security holders  785,706  $21.92   877,620 
Equity compensation plans not approved by security holders  —  $—   — 

(1)Includes (i) 597,406 shares committed to be issued for phantom stock and performance awards granted in 2015, 2016 and 2017 under the 2007 Plan (assumes actual performance for performance awards granted in 2015; assumes maximum performance for performance awards granted in 2016 and 2017), (ii) 165,920 shares subject to outstanding option awards granted under the 2007 Plan and (iii) 22,380 shares subject to outstanding restricted stock units granted under the LTIP.
(2)The calculation in this column includes only option awards because the shares underlying other outstanding awards will be issued upon vesting or satisfaction of relevant performance criteria without any cash consideration payable for those shares.
(3)Reflects securities remaining available for future issuance under our LTIP. No further awards will be granted under the 2007 Plan.

Plan CategoryNumber of securities
to be issued upon
exercise of
outstanding
options, warrants
and rights
(a)		Weighted-average
exercise price
of outstanding
options, warrants
and rights
(b)		Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding shares
reflected in
column(a))
(c)
Equity compensation plans approved by security holders569,284 (1)$22.94 (2)827,797 (3)
Equity compensation plans not approved by security holders— — — 
___________________________________________

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(1)    Includes (i) 24,557 shares subject to outstanding option awards granted under the 2007 Plan, (ii) 378,938 shares subject to outstanding performance share awards granted in 2018, 2019 and 2020 under the LTIP (assumes maximum performance) and (iii) 165,789 shares subject to outstanding restricted stock units granted under the LTIP.

(2)    The calculation in this column includes only option awards because the shares underlying other outstanding awards will be issued upon vesting or satisfaction of relevant performance criteria or time-based conditions without any cash consideration payable for those shares.
(3)    Reflects securities remaining available for future issuance under our LTIP. No further awards will be granted under the 2007 Plan.
Other information required by this Item 12 is incorporated by reference to the information to be included in our 2018the 2021 Proxy Statement under the headings “Ownership of Equity Securities” and “Compensation Discussion and Analysis.Securities.”

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Item 13.Certain Relationships and Related Transactions, and Director Independence

Item 13.    Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 is incorporated by reference to the information to be included in our 2018the 2021 Proxy Statement under the headings “Certain Relationships and Related Person Transactions” and “Corporate Governance — Director Independence.”

Item 14.Principal Accounting Fees and Services

Item 14.    Principal Accounting Fees and Services
The information required by this Item 14 is incorporated by reference to the information to be included in our 2018the 2021 Proxy Statement under the heading “Audit Committee Matters — Independent Auditors’ Fees.Matters.”


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PART IV
Item 15.Exhibits and Financial Statement Schedules
i)Documents filed as part of this Report
(1)The following Financial Statements are filed herewith in Item 8 of Part II above.
(a)Report of Management
(b)Reports of Independent Registered Public Accounting Firms
(c)Consolidated Balance Sheets
(d)Consolidated Statements of Operations
(e)Consolidated Statements of Comprehensive Income
(f)Consolidated Statements of Stockholders’ Equity
(g)Consolidated Statements of Cash Flows
(h)Notes to Financial Statements
ii)Financial Statement Schedules

Item 15.    Exhibits and Financial Statement Schedules
i)    Documents filed as part of this Report
(1)    The following Financial Statements are filed herewith in Item 8 of Part II above.
(a)    Report of Management
(b)    Reports of Independent Registered Public Accounting Firms
(c)    Consolidated Balance Sheets
(d)    Consolidated Statements of Operations
(e)    Consolidated Statements of Comprehensive Income
(f)    Consolidated Statements of Stockholders’ Equity
(g)    Consolidated Statements of Cash Flows
(h)    Notes to Financial Statements
ii)    Financial Statement Schedules
All other supplemental schedules are omitted because of the absence of conditions under which they are required, or the required information is shown in the notes to the Financial Statements.


iii)Exhibit List

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iii)Exhibit List

NumberDescription
3.1
3.2
4.1
10.14.2
10.210.1
Pledge and Security Agreement, dated December 21, 2011, between the Registrant, certain of its Subsidiaries and J.P. Morgan Chase Bank, N.A., in its capacity as administrative agent for the lenders party to the Credit Agreement, incorporated by reference to exhibit 10.2 of the Company’s Current Report on Form 8-K (File No. 001-08325), filed with the SEC on December 23, 2011
10.3Guaranty, dated December 21, 2011, between certain Subsidiaries of the Registrant in favor of J.P. Morgan Chase Bank, N.A., as administrative agent for the benefit of the Holders of Secured Obligations under the Credit Agreement, incorporated by reference to exhibit 10.3 of the Company’s Current Report on Form 8-K (File No. 001-08325), filed with the SEC on December 23, 2011
10.4
10.510.2
10.610.3
10.710.4
10.810.5
10.910.6
 10.1010.7
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 10.11NumberForm of Independent Director Restricted Stock Award under 2007 Long-Term Incentive Plan, incorporated by reference to exhibit 10.17 of the Company’s Form 10-K for the year ended December 31, 2013 (File No. 001-08325), filed with the SEC on March 5, 2014+Description
 10.1210.8
Form of Independent Director Phantom Stock and Dividend Equivalents Award under the 2007 Long-Term Incentive Plan, incorporated by reference to exhibit 10.1 of the Company’s Form 10-Q for the quarter ended June 30, 2015 (File No. 001-08325), filed with the SEC on August 5, 2015+
 10.13

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Number
10.9
Description
10.14
10.1510.10
10.1610.11
Amended and Restated Credit Agreement, dated June 30, 2016, incorporated by reference to exhibit 10.1 of the Company’s Current Report on Form 8-K (File No. 001-08325), filed with the SEC on July 7, 2016
10.17Joinder, Amendment No. 1 and Reaffirmation of Pledge and Security Agreement, dated June 30, 2016, incorporated by reference to exhibit 10.2 of the Company’s Current Report on Form 8-K (File No. 001-08325), filed with the SEC on July 7, 2016
10.18Joinder, Amendment No. 1 and Reaffirmation of Guaranty, dated June 30, 2016, incorporated by reference to exhibit 10.3 of the Company’s Current Report on Form 8-K (File No. 001-08325), filed with the SEC on July 7, 2016
10.19
10.2010.12
10.2110.13
10.2210.14
10.2310.15
10.2410.16
10.2510.17
10.2610.18
10.2710.19
10.2810.20
10.21
10.22
10.23
10.24
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NumberDescription
10.25
10.26
10.27
10.28
10.29
21.1
23.1

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Number
24.1
Description
23.2  Consent of Ernst & Young LLP†
24.1  
31.1
31.2
32.1
32.2
101.INSInline XBRL Instance Document*
101.SCHInline XBRL Taxonomy Extension Schema Document*
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document*
101.LABInline XBRL Taxonomy Extension Label Linkbase Document*
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document*
104Cover Page Interactive Data File (formatted as Inline XBRL document and contained in Exhibit 101)

†
†    Filed herewith.
+Indicates management contract or compensatory plan or arrangement.
*Electronically filed.

+    Indicates management contract or compensatory plan or arrangement.
*    Electronically filed.

Item 16.    Form 10-K Summary
Not applicable.
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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

MYR GROUP INC.
(Registrant)
March 7, 2018
/s/ BETTY R. JOHNSON

March 3, 2021
Name:
Betty R. Johnson
Title:
Senior Vice President and Chief Financial
Officer and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

SignatureTitleDate
*

President, Chief Executive Officer and Director (Principal Executive Officer)March 3, 2021
Richard S. Swartz Jr.President and Chief Executive Officer
(Principal Executive Officer)		March 7, 2018
/s/ BETTY R. JOHNSON


Betty R. Johnson		Senior Vice President and Chief Financial Officer
and Treasurer (Principal
(Principal Financial Officer and
Principal Accounting Officer)		March 7, 20183, 2021
*


William A. Koertner
Betty R. Johnson
Executive
*Chairman of the Board of DirectorsMarch 7, 20183, 2021
*


Jack L. AlexanderKenneth M. Hartwick		DirectorMarch 7, 2018
*


Larry F. Altenbaumer		DirectorMarch 7, 20183, 2021
*


Bradley T. Favreau
DirectorMarch 7, 2018
*


Henry W. Fayne		DirectorMarch 7, 20183, 2021
*


Kenneth M. HartwickWilliam A. Koertner		DirectorMarch 7, 2018
*


Gary R. Johnson		DirectorMarch 7, 20183, 2021
Jennifer E. Lowry
*


DirectorMarch 3, 2021
Donald C.I. LuckyDirectorMarch 7, 2018
*


DirectorMarch 3, 2021
Shirin O'Connor
*DirectorMarch 3, 2021
Maurice E. Moore
DirectorMarch 7, 2018
*


DirectorMarch 3, 2021
William D. Patterson
Director
March 7, 2018

*By:

/s/ BETTY R. JOHNSON

March 3, 2021
(Betty R. Johnson)
(Attorney-in-fact)

March 7, 2018
87

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