The accompanying notes are an integral part of these consolidated financial statements.

MYR GROUP INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

The accompanying notes are an integral part of these consolidated financial statements.

MYR GROUP INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these consolidated financial statements.

MYR GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Organization, Business and Basis of Presentation

Organization and Business

MYR Group Inc. (the “Company”) is a holding company of specialty electrical construction service providers that conducts operations through a number of 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; E.S. Boulos Company, a Delaware corporation; MYR Transmission Services, Inc., a Delaware corporation; E.S. Boulos Company, a Delaware corporation; High Country Line Construction, Inc., a Nevada corporation;MYR Group Construction Canada, Ltd., a British Columbia corporation; MYR Transmission Services Canada, Ltd., a British Columbia corporation; and Northern Transmission Services, Ltd., a British Columbia corporation.

Business

The Company performs construction services in two business segments: Transmission and Distribution (“T&D”), and Commercial and Industrial (“C&I”). T&D customers include electricinvestor-owned utilities, cooperatives, private developers, government-funded utilities, independent power producers, independent transmission companies, industrial facility owners and private developers.other contractors. The Company 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 to propertygeneral contractors, commercial and industrial facility owners, local governments and general contractorsdevelopers in the western and northeastern United States.

Basis of Presentation

Interim Consolidated Financial Information

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting and pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with U.S. GAAP, have been condensed or omitted pursuant to the rules and regulations of the SEC. The Company believes that the disclosures made are adequate to make the information presented not misleading. In the opinion of management all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations, comprehensive income and cash flows with respect to the interim consolidated financial statements have been included. The consolidated balance sheet as of December 31, 20142015 has been derived from the audited financial statements as of that date. The results of operations and comprehensive income are not necessarily indicative of the results for the full year or the results for any future periods. These financial statements should be read in conjunction with the audited financial statements and related notes for the year ended December 31, 2014,2015, included in the Company’s annual report on Form 10-K, which was filed with the SEC on March 11, 2015.

Reclassification

A reclassification was made in the current year presentation of the unaudited consolidated balance sheet as of June 30, 2015. The Company adjusted the classification of the impact of shares repurchased, which had previously been recorded as a deduction to additional paid-in capital, to a deduction which was allocated between additional paid-in capital and retained earnings. As a result of this reclassification, retained earnings were reduced by $14.0 million and additional paid-in capital was increased by the same amount.3, 2016.

Foreign Currency Translation

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. Cumulative translation adjustments are included as a separate component of accumulated other comprehensive income (loss) in shareholders’ equity. Foreign currency transaction gains and losses, arising primarily from changes in exchange rates on foreign currency denominated balances, are recorded in other, netthe “other, net” line on the consolidated statements of operations.

For the six months ended June 30, 2016, the Company recorded $0.2 million of foreign currency transaction gains. Foreign currency transaction gains were not significant in the three months ended June 30, 2016.

Use of Estimates

The preparation of financial statements in conformity with U.S. 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 the completion percentagesestimates of costs to complete on our contracts, insurance reserves, accounts receivableincome tax reserves, estimates surrounding stock-based compensation, the recoverability of goodwill and intangibles and estimates surrounding stock-based compensation.accounts receivable reserves.

The percentage of completion method of accounting requires the Company to make estimates about the expected revenue and gross profit on each of its contracts in process. The estimates are reviewed and revised quarterly, as needed. During the three months ended June 30, 2016, changes in estimates pertaining to certain projects resulted in increased consolidated gross margin of 0.1%. The Company’s income from operations for the three months ended June 30, 2016 increased $0.2 million due to the changes in estimated gross profit. These changes in estimates resulted in an increase of $0.1 million in net income, or $0.01 in diluted earnings per common share, during the three months ended June 30, 2016. During the six months ended June 30, 2016, changes in estimates pertaining to certain projects resulted in decreased consolidated gross margin of 0.7%. The Company’s income from operations for the six months ended June 30, 2016 decreased $3.7 million due to the changes in estimated gross profit. These changes in estimates resulted in a decrease of $2.3 million in net income, or $0.12 in diluted earnings per common share, during the six months ended June 30, 2016. During the three and six months ended June 30, 2015, changes in estimates pertaining to certain projects the majority of which were transmission projects, resulted in increased consolidated gross margin of 1.0% and 1.1%, respectively. The Company’s income from operations for the three and six months ended June 30, 2015 increased $2.7 million and $5.7 million, respectively, due to the changes in estimated gross profit. These changes in estimates resulted in increases of $1.7 million and $3.6 million, respectively, in net income or $0.08 and $0.17, respectively, in diluted earnings per common share during the three and six months ended June 30, 2015. During the three and six months ended June 30, 2014, changes in estimates pertaining to several large transmission projects, resulted in increased gross margin of 1.9% and 2.2%, respectively. The Company’s income from operations for the three and six months ended June 30, 2014 increased $4.3 million and $9.7 million, respectively, due to the changes in estimated gross profit. These changes in estimates resulted in increases of $2.7 million and $6.1 million, respectively, in net income or $0.13 and $0.28, respectively, in diluted earnings per common share during the three and six months ended June 30, 2014.

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 adoption will have minimal impact on our consolidated financial statements.

Recently Adopted Accounting Pronouncements

In April 2015, FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Topic 835), which simplifies the presentation of debt issuance costs by requiring debt issuance costs related to a debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. Additionally in August 2015, the FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (Topic 835), to clarify that an entity may elect to present debt issuance costs related to a line-of-credit arrangement as an asset, regardless of whether or not there are any outstanding borrowings on the line-of-credit arrangement. The Company adopted these ASUs on January 1, 2016. The Company has elected to present debt issuance costs related to the line of credit as a deferred asset within other assets as permitted by ASU 2015-15, resulting in no change on the Company’s financial statements.

Recently Issued Accounting Pronouncements

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718). The amendments under this pronouncement make modifications to the accounting treatment for forfeitures, required withholding on stock compensation and the financial statement presentation of excess tax benefits or deficiencies and certain components of stock compensation. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted in any interim period. The Company is evaluating the impact this pronouncement will have on its policies and procedures pertaining to its accounting for stock compensation, disclosure requirements and on the Company’s 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. The Company is evaluating the impact 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.

In August 2014, the FASB issued ASU No. 2014-09, Presentation of Financial Statements—Going Concern (Topic 205). The amendments under this pronouncement address the diversity in practice in determining when there is substantial doubt about an entity’s ability to continue as a going concern and when and how an entity must disclose certain relevant conditions and events. This update requires an entity to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern for a period of one year after the date that the financial statements are issued (or available to be issued). If such conditions or events exist, an entity should disclose that there is substantial doubt about the entity’s ability to continue as a going concern for a period of one year after the date that the financial statements are issued (or available to be issued), along with the principal conditions or events that raise substantial doubt, management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations and management’s plans that are intended to mitigate those conditions or events. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted in any interim period. This guidance would impact the disclosure and presentation of any substantial doubt about the Company’s ability to continue as a going concern, if such substantial doubt were to exist.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments under this pronouncement may 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. The update is effective for annual reporting periods, and interim periods within those reporting periods, beginning after December 15, 2016. The Company is evaluating the impact of this pronouncement on its policies and procedures pertaining to recognition of revenue from contracts with customers, the pronouncement’s expanded disclosure requirements and the impact on the Company’s financial statements.

On April 1,August 16, 2015, the FASB proposed deferringdeferred the effective date of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) by one year to December 15, 2017 for annual reporting periods beginning after that date, and permitting early adoption of the standard, but not before the original effective date of December 15, 2016. The Company is evaluating the impact of this pronouncement and its expanded disclosure requirements, and all amendments relating to this pronouncement, on the Company’s policies and procedures pertaining to recognition of revenue from contracts with customers, and the impact on the Company’s Financial Statements.

2. Acquisitions

On November 24, 2015, the Company acquired all of the outstanding common stock of High Country Line Construction, Inc. (“HCL”). The acquisition of HCL expands the Company’s T&D construction services, predominantly in the western United States. The preliminary acquisition date fair value of consideration transferred was $1.7 million, net of cash acquired, of which $0.3 million was preliminarily allocated to identifiable intangibles (backlog and customer relationships) and the remaining $0.2 million allocated to goodwill. The Company is still in the process of determining the fair value of the acquired assets and liabilities. 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.

On April 13, 2015, the Company acquired substantially all of the assets of E.S. Boulos Company (“ESB”), one of New England’s largest and most experienced electrical contractors with over 95 years in operation, from a subsidiary of Eversource Energy. The total consideration paid was approximately $11.4 million, subject to working capital adjustments, which was funded through existing cash resources of the Company. Headquartered in Westbrook, Maine, ESB offers construction capabilities forunder the Company’s T&D segment, including substation, transmission and distribution construction. ESB also provides commercial and industrial electrical construction for the Company’sunder its C&I segment, including a wide range of commercial electrical construction services.

The results of operations for ESB are included in the Company’s consolidated statement of operations and the T&D and C&I segments from the date of acquisition. The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are expected to beCompany has finalized by the end of 2015. Costs of approximately $0.4 million related to the acquisition were included in selling, general and administrative expenses in the consolidated statement of operations. The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed as of the date of acquisition:

Further adjustments are expected to the allocation as third party valuations of identifiable intangible assets, including trade names, customer relationships, and backlog are finalized, as well as final working capital adjustments. The goodwill to be recognized, which represents the excess of the purchase price over the net amount of the fair values assigned to assets acquired and liabilities assumed, is primarily attributableaccounting relating to the value of an assembled workforce. All of the goodwill and identifiable intangible assets are expected to be tax deductible per applicable IRS regulations.ESB acquisition.

3. 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.

As of June 30, 20152016 and December 31, 2014,2015, the carrying value of the Company’s cash and cash equivalents approximated fair value based on Level 1 inputs. As of June 30, 2016, the fair value of the Company’s long term debt, including capital leases, was based on variable and fixed interest rates at June 30, 2016, for new issues with similar remaining maturities and approximated carrying value based on Level 2 inputs.

4. Contracts in Process

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

The net asset position for contracts in process included in the accompanying consolidated balance sheets was as follows:

5. Lease Obligations

From time to time, the Company enters into leasing arrangements for real estate, vehicles and construction equipment. In 2016 the Company entered into master leasing arrangements for vehicles and construction equipment. As of June 30, 2016, the Company had approximately $0.3 million of outstanding commitments under its master lease agreements. Some of the leases entered into under these agreements were recorded as capital leases while others were treated as operating leases.

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 and long term debt. The capital 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 in the statements of operations. The interest associated with capital leases is included in interest expense in the statements of operations.

As of June 30, 2016, $4.6 million of capital lease assets were included in property and equipment, net of accumulated depreciation.

Operating Leases

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

The future minimum lease payments required under capital leases and operating leases, together with the present value of capital leases, as of June 30, 2016 were as follows:

6. Debt and Capital Lease Obligations

On June 30, 2016, the Company entered into a five-year amended and restated credit agreement (the “Credit Agreement”) with a facility of $250 million (the “2016 Facility”) with a syndicate of banks led by JPMorgan Chase Bank, N.A. and Bank of America, N.A. The 2016 Facility may be used for revolving loans and letters of credit. The 2016 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 million. The Company has an expansion option to increase the commitments under the 2016 Facility or enter into incremental term loans, subject to certain conditions, by up to an additional $100 million upon receipt of additional commitments from new or existing lenders. Subject to certain exceptions, the 2016 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 2016 Facility may be accelerated and may become or be declared immediately due and payable. Borrowings under the Credit Agreement were used to refinance existing debt and are expected to be used for working capital, capital expenditures, acquisitions and other general corporate purposes.

Amounts borrowed under the Credit Agreement in U.S. dollars 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%; or (2) Adjusted LIBO Rate (as defined in the Credit Agreement) plus an applicable margin ranging from 1.00% to 2.00%. Amounts borrowed under the Credit Agreement in any currency other than U.S. dollars will bear interest at a rate equal to the Adjusted LIBO Rate plus an applicable margin ranging from 1.00% to 2.00%. The applicable margin is determined based on the Company’s consolidated Leverage Ratio (as defined in the Credit Agreement). Letters of credit issued under the 2016 Facility are subject to a letter of credit fee of 1.125% to 2.125% for standby or commercial letters of credit or 0.625% to 1.125% for performance letters of credit, based on the Company’s consolidated Leverage Ratio. The Company also will be subject to a commitment fee of 0.20% to 0.375% based on the Company’s consolidated Leverage Ratio on any unused portion of the 2016 Facility. The Credit Agreement restricts certain types of payments when the Company’s consolidated Leverage Ratio exceeds 2.25.

Under the Credit Agreement, the Company is subject to certain financial covenants and must maintain 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. 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, 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.

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 (the “2011 Facility”). The 2011 Facility provided funds for revolving loans and the issuance of letters of credit and up to $25.0 million for swingline loans.

As of June 30, 2016, the Company had irrevocable standby letters of credit outstanding under the 2016 Facility of approximately $24.3 million, including $17.6 million related to the Company’s payment obligation under its insurance programs and approximately $6.7 million related to contract performance obligations. As of December 31, 2015, the Company had irrevocable standby letters of credit outstanding of approximately $19.3 million, including $17.5 million related to the Company’s payment obligation under its insurance programs and approximately $1.8 million related to contract performance obligations.

The Company has debt issuance costs totaling $1.1 million as of June 30, 2016, 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 assetwithin other assets, which is amortized as interest expense over the term of the line of credit.

As of June 30, 2016, the Company had approximately $4.6 million of capital lease obligations outstanding, $0.9 million of which was classified as a current liability. As of December 31, 2015, the Company had no outstanding capital lease obligations.

7. Income Taxes

The difference between the U.S. federal statutory tax rate of 35% and the Company’s effective tax rates for the three and six months ended June 30, 20152016 and 20142015 was principally due to state income taxes.

The Company had unrecognized tax benefits of approximately $0.8 million and $0.7$0.6 million as of June 30, 20152016 and December 31, 2014, respectively,2015, which were included in other liabilities in the accompanying consolidated balance sheets.

The Company’s policy is to recognize interest and penalties related to income tax liabilities as a component of income tax expense in the consolidated statements of operations. The amount of interest and penalties charged to income tax expense because of the unrecognized tax benefits was not materialsignificant for the three and six months ended June 30, 20152016 and 2014.2015.

The Company is subject to taxation in various jurisdictions. The Company is subject toCompany’s tax returns for 2012 through 2014 are currently under examination by U.S. federal authorities for the openauthorities. The Company’s tax years 2011 through 2014 andreturns are subject to examination by various state authorities for the years 20102011 through 2014.

6.8. Commitments and Contingencies

Letters of Credit

As of June 30, 2015 and December 31, 2014, the Company had irrevocable standby letters of credit outstanding of approximately $19.3 million, including $17.5 million related to the Company’s payment obligation under its insurance programs and approximately $1.8 million related to contract performance obligations.

Leases

The Company leases real estate, construction equipment and office equipment under operating leases with remaining terms ranging from one to six years. As of June 30, 2015, future minimum lease payments for operating leases were as follows: $0.8 million for the remainder of 2015, $1.1 million for 2016, $0.7 million for 2017, $0.5 million for 2018, $0.4 million for 2019 and $0.2 million thereafter.

Purchase Commitments

As of June 30, 2015,2016, the Company had approximately $3.8 million in outstanding commitments to purchase real estate and $2.9$2.0 million in outstanding purchase orders for certain construction equipment, with cash outlay requirements scheduled to occur over the next three 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 certain of the Company’s health benefit plans, which are subject to a $0.1 million deductible 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 in the consolidated balance sheets.

Performance and Payment Bonds

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 surety for any expenses paid out under these bonds. As of June 30, 2015,2016, an aggregate of approximately $942.2$870.5 million in original face amount of bonds issued by the surety were outstanding. Our estimated remaining cost to complete these bonded projects was approximately $133.1$105.1 million as of June 30, 2015.2016.

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 and liabilities and related litigation. The Company is not aware of any material unrecorded liabilities for asserted claims in connection with these indemnification obligations.

Multi-employer Pension PlansCollective Bargaining Agreements

Many 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 be assessedincur additional liabilities for additional contributions related to the underfunding of these plans. Although the Company has been informed that some of the multi-employer pension plans to which its subsidiaries contribute have been labeled with aclassified as “critical” status, the Company is not currently aware of any potential significant liabilities related to this issue.

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 and/or property damages, punitive damages, civil penalties or other losses, or injunctive or declaratory relief.

The Company is routinely subject to other civil claims, litigation and arbitration, and regulatory investigations arising in the ordinary course of our business as well as in respect of our divested businesses. These claims, lawsuits and other proceedings include claims related to the Company’s current services and operations, as well as our historic operations.

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 operations or cash flows.

In January 2013, The L. E. Myers Co. (“L. E. Myers”) was joined as a defendant in Northern States Power Company (Wisconsin) v. The City of Ashland, Wisconsin et al., filed in the U.S. District Court for the Western District of Wisconsin. Northern States Power Company alleged that named defendants, including L. E. Myers, contributed to contamination at the Ashland Lakefront Superfund Site in Ashland, Wisconsin. Specifically, the lawsuit alleged that L. E. Myers operated a manufactured gas plant at the site for 6 to 12 years of the plant’s operation during the time frame from 1885 to 1947. In April 2015, L .E. Myers negotiated a settlement of this litigation with Northern States Power Company, funded largely by L. E. Myers’ insurance carriers, with L.E. Myers’ contribution being $230,000.

7.9. Stock-Based Compensation

The Company maintains two equity compensation plans under which stock-based compensation has been granted,granted; the 2006 Stock Option Plan (the “2006 Plan”) and the 2007 Long-Term Incentive Plan, (as amended)as amended (the “LTIP”). Upon the adoption of the LTIP in 2007, awards were no longer granted under the 2006 Plan. The LTIP 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) performance awards, (f) phantom stock, (g) stock bonuses, (h) dividend equivalents, and (i) any combination of such awards.

All awards were made with an exercise price or base price, as the case may be, that was not less than the fair market value per share on the grant date. The grant date fair value of restricted stock awards and performance share awards with performance conditions not based on market conditions was equal to the closing market price of the Company’s common stock on the date of grant. The grant date fair value of performance share awards with performance conditions based on market conditions was measured using a Monte Carlo simulation model.

During the six months ended June 30, 2015,2016, plan participants exercised 227,143102,409 options with a weighted average exercise price of $6.69.$10.90.

During the six months ended June 30, 2015,2016, the Company granted 74,37593,575 shares of restricted stock, which vest ratably over the next three years, at a weighted average grant date fair value of $30.00.$24.69. Additionally, 80,38584,061 shares of restricted stock vested during the six months ended June 30, 2015,2016, at a weighted average grant date fair value of $21.87.$25.11.

During the six months ended June 30, 2015,2016, the Company granted 69,9785,944 shares of phantom stock, which vest ratably over three years, at a weighted average grant date fair value of $25.23.

During the six months ended June 30, 2016, the Company granted 79,661 performance shares,share awards, at target, which cliff vest on December 31, 2017.2018. The grant of performance grantshares was split evenly between performance metrics of return on invested capital (“ROIC”), an internal performance measure, and total shareholder return (“TSR”), a market performance measure.

The Company granted 45,940 ROIC-based awards, at target, on March 24, 2016 valued at $24.50, the grant date closing price of the Company’s stock. ROIC is defined as earnings before interest, net of taxes (net income plus interest, net of taxes), less any dividends, divided by stockholders’ equity plus net debt (total debt less cash and marketable securities) at the beginning of the performance period. The ROIC-based target shares awarded were valued at $30.16, which represented the closing price of the Company’s stock on the date of grant, and ROIC is measured over a three-year performance period ending December 31, 2017.

The Company granted 33,721 TSR-based awards, at target, on March 24, 2016. TSR is defined as the change in the fair market value, adjusted for dividends, of a company’s stock. The TSR of the Company’s stock will be compared to the TSR of a peer group of companies defined at the time of the grant. The TSR awards are calculated using the average stock price of the 20 trading days prior to January 1, 2015March 24, 2016 and compared to the average stock price of the 20 trading days prior to December 31, 2017.2018. Because TSR is a market-based performance metric, the Company used a Monte Carlo simulation model to calculate the fair value of the grant, which resulted in a fair value of $47.24$33.35 per share.award.

8.10. Segment Information

MYR Group is a specialty contractor serving the electrical infrastructure market.market in the United States and parts of Canada. The Company has two 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, professional fees, management fees, and intangible amortization. The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.2015.

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

Commercial and Industrial: The C&I segment provides services such as 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, manufacturing plants, processing facilities, waste-water treatment facilities, mining facilities and transportation control and management systems. C&I segment services are generally performed in the western and northeastern United States.

The information in the following table was derived from internal financial reports used for corporate management purposes:

For the three and six months ended June 30, 2016, contract revenues attributable to the Company’s Canadian operations were $5.3 million and $6.5 million, respectively. For the three and six months ended June 30, 2015, contract revenues attributable to the Company’s Canadian operations were $0.3 million. The Company’s Canadian revenues are predominantly in the T&D segment.

9.11. Earnings Per Share

The Company computes earnings per share using the treasury stock method unless the two-class method is more dilutive. The Company computed earnings per share for the three and six months ended June 30, 2016 using the treasury stock method. Under the treasury stock method, basic earnings per share are computed by dividing net income available to shareholders by the weighted average number of common shares outstanding during the period, and diluted earnings per share are computed by dividing net income available to shareholders 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.

For the three and six months ended June 30, 2015, the Company computed earnings per share using the two-class method because that method resulted in a more dilutive effect than the treasury stock method. The two-class method is an earnings allocation formula that determines earnings per share for common stock and participating securities according to dividends declared and participation rights in undistributed earnings, when thatearnings. Under the two-class method, results in a more dilutive effect than the treasury method. The Company’s unvested grants of restricted stock granted prior to 2014 containthat contained non-forfeitable rights to dividends should any be declared, and arewere treated as participating securities and included in the computation of earnings per share.

The restricted shares granted after 2013 contain a provision making the payment of dividends contingent upon vesting of the shares. These shares are not participating shares because any accumulated unvested dividends are forfeited, along with the shares, if the awards fail to vest. These non-participating shares arewere excluded from the computation of net income allocated tobasic and diluted earnings per share. All shares of restricted stock granted since 2013 are not participating securities inbecause the table below, but are included ingrant agreements contain provisions that dividends, if declared, will be forfeited if the computation of weighted average dilutive securities, unless their inclusion would be anti-dilutive.grantee leaves the Company before the stock is vested.

Net income available to common shareholders and the weighted average number of common shares used to compute basic and diluted earnings per share waswere as follows:

For the three and six month periodsmonths ended June 30, 20152016 and 2014,2015, 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 summarizes the shares of common stock underlying the Company’s unvested stock options and performance awards that were excluded from the calculation of dilutive securities:

Share Repurchases

On February 10, 2016, the Company’s Board of Directors approved an amended share repurchase program (“Repurchase Program”), which increased the Repurchase Program from $67.5 million to $142.5 million, and revised provisions of the Repurchase Program to enable the Company to accelerate the pace of share repurchases. During the six months ended June 30, 2015,2016, the Company repurchased 119,5794,003,352 shares of its common stock at a weighted-average price of $26.52$23.77 per share; 72,7063,965,669 of those shares were purchased under its Repurchase Program for approximately $1.8 million, under its stock repurchase program (the “Repurchase Program”), which was scheduled to expire on August 31, 2015.$94.3 million. Additionally, the Company repurchased 46,87337,683 shares of stock, for approximately $1.4$0.9 million, from its employees to satisfy tax obligations on shares vested under the LTIP program.LTIP. All of the shares repurchased were retired and returned to authorized but unissued stock.

On July 30, 201528, 2016, the Company’s Board of Directors approved an amended Repurchase Program, which increased the program from $25.0$142.5 million to $42.5$162.5 million, and extended the term of the program through August 31, 2016. With the amendment, the availability to purchase shares under15, 2017 and revised provisions of the Repurchase Program increased to $25.0 million.enable the Company to repurchase shares of our common stock albeit at a less aggressive pace than pursued during the six months ended June 30, 2016.

ITEM 2.               MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the accompanying unaudited consolidated financial statements as of June 30, 2015 and December 31, 2014, and for the three and six months ended June 30, 2015 and 2014, and with our Annual Report on Form 10-K for the year ended December 31, 20142015 (the “2014“2015 Annual Report”). In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed herein under the captions “Cautionary Statement Concerning Forward-Looking Statements and Information” and “Risk Factors,” as well as in the 20142015 Annual Report. We assume no obligation to update any of these forward-looking statements.

Overview and Outlook

We are a leading specialty contractor serving the electrical infrastructure market.market throughout the United States. We also have operations in parts of Canada. We manage and report our operations through two industry segments: T&D and C&I. We have operated in the T&D industry since 1891. We are one of the largest national contractors servicing the T&D sector of the electric utility industry in the United States, and our customers include many of the leading companies in the electric industry. We provide C&I electrical contracting services to facility owners and general contractors generally in the western and northeastern United States. We have operated in the C&I industry since 1912. We strive to maintain our status as a preferred provider to our T&D and C&I customers.

We had consolidated revenues for the six months ended June 30, 20152016 of $520.6$515.6 million, of which 74.9%70.1% was attributable to our T&D customers and 25.1%29.9% was attributable to our C&I customers. Our consolidated revenues for the six months ended June 30, 20142015 were $444.5$520.6 million. For the six months ended June 30, 2015,2016, our net income and EBITDA (1) were $15.2$7.5 million and $42.9$32.2 million, respectively, compared to $14.0$15.2 million and $39.0$42.9 million, respectively, for the six months ended June 30, 2014. Our financial results for the six months ended June 30, 2015 benefited from margin adjustments due to performance incentives, change orders and close-outs. It is unlikely that future periods will benefit to a similar extent from such favorable developments.2015.

We expect bidding activity to remain strong in both our T&D and C&I segments for the remainder of 2015.2016 and 2017. Although competitionbidding remains strong,highly competitive in our T&D segment, we expect that our centralcentralized fleet and nationalskilled workforce will continue to benefit us in securing and executing profitable projects. We continue to bid on many transmission projects: however,The sizes of the size of theT&D projects we are currently performing are generally smaller and of shorter duration than those experienced a few years ago. These smaller, shorter duration projects often result in lower margins because of greater competition, and reduced fleet utilization rates. Althoughand the cost of transitioning from project to project. While the transmission projects being bid this year represent a good mix of projects, including a number of larger, longer duration projects, there is often a significant lag from when a project is awarded to when the revenues and costs are recognized. Several of the recently bid larger, longer-duration projects contain a highhigher percentage of material and subcontractor costs aswhen compared to recent history. Due to competition,history, and we typically add less mark-up to material and subcontractor costs in our bid estimates than thosethe mark-up applied to our labor and owned equipment. This could lead to lower overall margins depending on our awarded portfolio of work. OurAdditionally, competition, project execution, adverse weather and project delays, among other factors, have impacted our margins in the past and could affect our margins in the future. Spending by clients on their distribution business continuessystems appears to expand;be generally improving; however, the contractthis spending can be highly variable from quarter to quarter in response to weather, client budget constraints and regulatory pressures. Contract margins and fleet billing rates are generally lower in our distribution business than what we realize in our transmission business.

The C&I segment continues to benefit from robust bidding activity, and we continue to explore further expansion into new markets. The C&I segment, in part due to intense competition, has not provided overall contract margin opportunities comparable to our T&D segment.

Our futureIn 2015, we began to implement a three-pronged strategy of organic growth, may be organic, or throughstrategic acquisitions or joint ventures that we expect could improve our competitive position within our existing markets orfurther expand our geographic footprint. On April 13,capabilities and prudent capital returns as further detailed below.

Organic Growth In 2015, we expanded our operations, opening six new offices in the United States located in California, Kansas, Colorado, Nevada, Texas and Washington State. We also opened two offices in Canada and began work on our first major project award in Canada. We continue to look for opportunities to expand our operations into new markets in the United States and Canada.

A few of our new organic growth initiatives are progressing slower than expected due to the timing of contract awards and penetration of the new market, which resulted in uncovered fixed costs in the first six months ended June 30, 2016. Despite slower starts in these markets, we have experienced improvements in these organic growth initiatives during the three months ended June 30, 2016, and we believe that this strategy to grow the business will result in positive growth and enhance shareholder value.

Strategic Acquisitions In 2015, we acquired substantially all of the assets of E.S. Boulos Company which will enhanceand all of the outstanding common stock of High Country Line Construction, Inc. These acquisitions have enhanced our T&D presence in the northeast U.S.and western United States and further expandexpanded our C&I presence outside of our existing markets. Ininto the second quarter of 2015 we were awarded our first project in Canada and have commenced work in Manitoba.northeast United States. We continue to review biddinglook for acquisition opportunities that are compatible with our culture while enhancing shareholder value.

Prudent Capital ReturnsIn February 2016, we increased the share Repurchase Program by $75.0 million to $142.5 million and revised provisions of the Repurchase Program to enable us to accelerate the pace of share repurchases. On July 12, 2016, we exhausted the remaining availability under the Repurchase Program. We repurchased a total of 6,024,978 shares of our common stock for $142.5 million at an average share price of $23.64 per share. Subsequently, in CanadaJuly 2016 we increased the Repurchase Program by $20.0 million to $162.5 million and believeextended the economic environment in Canada could present favorable biddingRepurchase Program to August 15, 2017. These additional funds are to be used to repurchase shares of our common stock albeit at a less aggressive pace than pursued during the first half of 2016. Additionally, we updated our capital allocation strategy, reducing future capital spending while expanding our fleet through alternative financing approaches, such as leasing. In March of 2016, we entered into master lease arrangements and began to lease vehicles and equipment under these arrangements. We continue to look for opportunities in 2015. to improve our resource allocation to enhance shareholder value.

We continue to invest in developing key management and craft personnel in both our T&D and C&I markets and in procuring the specialty equipment and tooling needed to win and execute projects of all sizes and complexity. We ended the second quarter of 2015 in a strong financial position, which included2016 with cash and cash equivalents of $46.9$3.4 million and availability of $155.7$205.7 million available under our credit facility.2016 Facility. 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 for further strategic investments.to successfully execute our three-pronged strategy.

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 suchthese contracts. A customer’s intention to award us work under a fixed-price contract is not included in backlog unless there is an actual award to perform a specific scope of work at specific terms and pricing. For many of our unit-price, time-and-equipment, time-and-materials and cost plus contracts, we only include projected revenue for a three-month period in the calculation of backlog, although these types of contracts are generally awarded as part of MSAsmaster service agreements that typically have a one-year to three-year duration from execution. Backlog may not accurately represent the revenues that we expect to realize during any particular period. Several factors such as the timing of contract awards, the type and duration of contracts, and the mix of subcontractor and material costs in our projects can impact our backlog at any point in time. Some of our revenue does not appear in our periodic backlog reporting because the award of the project, as well as the execution of the work, may all take place within the period. Our backlog only includes projects that have a signed contract or an agreed upon work order to perform work on mutually accepted terms and conditions. Backlog should not be relied upon as a stand-alone indicator of future events.

Our backlog was $475.0 million at June 30, 2016 compared to $434.8 million at March 31, 2016 and $410.7 million at June 30, 2015 compared to $398.4 million at March 31, 2015 and $397.9 million at June 30, 2014.2015. Our backlog at June 30, 20152016 increased $12.3$40.2 million or 3.1%9.3% from March 31, 2015 due primarily to the acquisition of ESB.2016. Backlog in the T&D segment increased $0.1$11.0 million and C&I backlog increased $12.2$29.2 million compared to March 31, 2015.2016.

The following table summarizes that amount of our backlog that we believe to be firm as of the dates shown and the amount of our current backlog that we reasonably estimate will not be recognized within the next twelve months:

Project Bonding Requirements

A substantial portion of our business requires performance and payment bonds or other means of financial assurance to secure contractual performance. These bonds are typically issued at the face value of the contract awarded. If we fail to perform or pay our subcontractors or vendors, the customer may demand that the surety provide services or make payments under the bond. In such a case, we would likely be required to reimburse the surety for any expenses or outlays it incurs. To date, we have not been required to make any reimbursements to our surety for claims against the surety bonds. As of June 30, 2015,2016, we had approximately $942.2$870.5 million in original face amount of surety bonds outstanding. Our estimated remaining cost to complete these bonded projects was approximately $133.1$105.1 million as of June 30, 2015.2016.

Consolidated Results of Operations

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

Three Months Ended June 30, 20152016 Compared to Three Months Ended June 30, 20142015

Revenues. Revenues increased $47.6decreased $14.6 million, or 20.8%5.3%, to $261.9 million for the three months ended June 30, 2016 from $276.5 million for the three months ended June 30, 2015 from $228.9 million2015. The decrease was primarily due to lower T&D revenue partially offset by higher C&I revenue and organic and acquisitive growth, as further discussed below.

Gross margin. Gross margin increased to 12.0% for the three months ended June 30, 2014. The increase was primarily due to higher T&D revenues2016 from jobs of all sizes and the acquisition of ESB. Material and subcontractor costs comprised approximately 33% and 31% of total contract costs in11.5% for the three months ended June 30, 20152015. The year-over-year increase in gross margin was primarily due to improved performance on several projects, which was partially offset by some significant write-downs due to a pending project claim, pending change orders and 2014,inclement weather experienced on certain projects. Changes in estimates of gross profit on certain projects resulted in gross margin increases of 0.1% and 1.0% for the three months ended June 30, 2016 and 2015, respectively.

Gross profit. Gross profit increased $1.2decreased $0.3 million, or 4.0%0.9%, to $31.4 million for the three months ended June 30, 2016 from $31.7 million for the three months ended June 30, 2015, from $30.5 million for the three months ended June 30, 2014, primarily due to lower revenue, largely offset by higher revenues and contract performance incentives.

Grossgross margin. Gross margin decreased to 11.5% for the three months ended June 30, 2015 from 13.3% for the three months ended June 30, 2014, primarily due to the year-over-year change in estimates of gross profit on certain T&D projects. For the three months ended June 30, 2015, contract performance incentives provided a gross margin benefit of approximately 1.0%. For the three months ended June 30, 2014, cost efficiencies, additional work and effective contract management resulted in improved contract margins on several transmission projects, and provided a gross margin benefit of approximately 1.9%. The remainder of the variance was primarily due to several underperforming projects in the three months ended June 30, 2015.

Selling, general and administrative expenses. Selling, general and administrative expenses, which were $22.5 million for the three months ended June 30, 2016, increased $3.6 million from $18.9 million for the three months ended June 30, 2015, increased $0.8 million from $18.1 million for the three months ended June 30, 2014.2015. The year-over-year increase in selling, general and administrative expenses for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014 was primarily due to $2.3 million of costs associated with our expansion into new geographic markets and higher personnelpayroll costs to support operations and ESB acquisition costs.operations. As a percentage of revenues, selling, general and administrative expenses decreasedincreased to 8.6% for the three months ended June 30, 2016 from 6.9% for the three months ended June 30, 2015 from 7.9% for the three months ended June 30, 2014.2015.

Gain on sale of property and equipment. Gains from the sale of property and equipment in the three months ended June 30, 20152016 were $0.3$0.5 million compared to $0.1$0.3 million in the three months ended June 30, 2014.2015. 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 $0.2 million for the three month periodsmonths ended June 30, 20152016 and 2014.2015.

Provision for income taxes. The provision for income taxes was $3.3 million for the three months ended June 30, 2016, with an effective tax rate of 37.8%, compared to a provision of $4.7 million for the three months ended June 30, 2015, with an effective tax rate of 37.0%, compared to a provision of $4.6 million for the three months ended June 30, 2014, with an effective tax rate of 37.4%. The decreaseincrease in the effective rate was primarily caused by the year to date impact of lower state taxes due todomestic activities deductions and changes in the mix of business between states.

Net income. Net income increaseddecreased to $5.5 million for the three months ended June 30, 2016 from $8.1 million for the three months ended June 30, 2015 from $7.7 million for the three months ended June 30, 2014.2015. The increasedecrease was primarily for the reasons stated earlier.described above.

Segment Results

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

Transmission & Distribution

Revenues for our T&D segment for the three months ended June 30, 20152016 were $200.6$178.6 million compared to $166.4$200.6 million for the three months ended June 30, 2014, an increase2015, a decrease of $34.2$22.0 million, or 20.6%11.0%. The increasedecrease in revenue was primarily due to an increasea decline in the number of jobs of all sizes. Materialrevenue from large, multi-year transmission projects partially offset by organic and subcontractor costs in our T&D segment comprised approximately 27% of total contract costs in the three months ended June 30, 2015, compared to approximately 25% in the three months ended June 30, 2014.acquisitive growth.

Revenues from transmission projects represented 75.0%75.2% and 79.8%75.0% of T&D segment revenue for the three months ended June 30, 20152016 and 2014,2015, respectively. Additionally, for the three months ended June 30, 2015,2016, measured by revenue in our T&D segment, we provided 48.5%60.0% of our T&D services under fixed-price contracts, as compared to 56.4%48.5% for the three months ended June 30, 2014.2015.

Operating income for our T&D segment for the three months ended June 30, 20152016 was $16.7$15.6 million, a decrease of $0.1$1.1 million from the three months ended June 30, 2014. Operating2015. The decline in operating income decreased for our T&D segment for the three months ended June 30, 2015 comparedwas due to 2014 as higherlower revenues, wereand expansion into new geographic markets, partially offset by lower grossimproved margins. The margin improvement was primarily due toan increase in favorable closeouts and improved productivity on several large jobs comparedof our projects, partially offset by some significant write-downs due to the three months ended June 30, 2014.pending project change orders and inclement weather. As a percentage of revenues, operating income for our T&D segment was 8.7% for the three months ended June 30, 2016 compared to 8.3% for the three months ended June 30, 2015 compared to 10.1% for the three months ended June 30, 2014.2015.

Commercial & Industrial

Revenues for our C&I segment for the three months ended June 30, 20152016 were $75.9$83.3 million compared to $62.5$75.9 million for the three months ended June 30, 2014,2015, an increase of $13.4$7.4 million or 21.5%9.7%, primarily due primarily to the acquisition of ESB. Materialorganic growth and subcontractor costs in our C&I segment comprised approximately 47% of total contract costs in both the three month periods ended June 30, 2015 and 2014.acquisitive expansion into new markets.

Measured by revenue in our C&I segment, we provided 73.2%63.9% of our services under fixed-price contracts for the three months ended June 30, 2015,2016, compared to 31.6%73.2% in the three months ended June 30, 2014.2015.

Operating income for our C&I segment for the three months ended June 30, 20152016 was $3.9$2.4 million, a decrease of $0.5$1.5 million overfrom the three months ended June 30, 2014.2015. The year-over-year decline in operating income compared to the three months ended June 30, 2014 was primarily attributable to costs associated with a pending claim, expansion into new geographic markets, and lower gross margin compared to the three months ended June 30, 2014.than expected productivity on certain projects, partially offset by higher revenues. As a percentage of revenues, operating income for our C&I segment was 2.9% for the three months ended June 30, 2016 compared to 5.2% for the three months ended June 30, 2015 compared to 7.0% for the three months ended June 30, 2014.2015.

Six Months Ended June 30, 20152016 Compared to Six Months Ended June 30, 20142015

Revenues. Revenues increased $76.1decreased $5.0 million, or 17.1%1.0%, to $515.6 million for the six months ended June 30, 2016 from $520.6 million for the six months ended June 30, 2015 from $444.5 million2015. The decrease was primarily due to lower T&D revenue mostly offset by higher C&I revenue and organic and acquisitive growth, as further discussed below.

Gross margin. Gross margin decreased to 11.4% for the six months ended June 30, 2014. The increase was primarily due to higher T&D revenues2016 from jobs of all sizes and the acquisition of ESB. Material and subcontractor costs comprised approximately 30% and 29% of total contract costs in11.7% for the six months ended June 30, 20152015. The decline in our gross margin was largely due to lower bid margins caused by increased competition in many of our markets and 2014,an increase in shorter duration projects (which affects labor productivity, fleet utilization, mobilization costs and demobilization costs). In addition, during the six months ended June 30, 2016, we experienced some significant write-downs due to a pending project claim and change orders, inclement weather and lower productivity experienced on certain projects. These declines were partially offset by favorable close outs and improved performance on several projects. Changes in estimates of gross profit on certain projects resulted in a gross margin decrease of 0.7% and an increase of 1.1% for the six months ended June 30, 2016 and 2015, respectively.

Gross profit. Gross profit increased $3.5decreased $2.4 million, or 6.1%3.9%, to $58.7 million for the six months ended June 30, 2016 from $61.1 million for the six months ended June 30, 2015, from $57.6 million for the six months ended June 30, 2014, due primarily to higher revenues.

Gross margin. Gross margin decreased to 11.7% for the six months ended June 30, 2015 from 13.0% for the six months ended June 30, 2014, primarily due to the year-over-year change in estimates oflower revenue and gross profit on certain projects. For the six months ended June 30, 2015, contract performance incentives, cost efficiencies, additional work and effective contract management resulted in improved contract margins on several projects, primarily transmission projects, and provided a gross margin benefit of 1.1%. For the six months ended June 30, 2014, cost efficiencies, additional work and effective contract management resulted in improved contract margins on several transmission projects, and provided a gross margin benefit of 2.2%.margin.

Selling, general and administrative expenses. Selling, general and administrative expenses, which were $46.4 million for the six months ended June 30, 2016, increased $8.9 million from $37.5 million for the six months ended June 30, 2015, increased $2.5 million from $35.0 million for the six months ended June 30, 2014.2015. The year-over-year increase in selling, general and administrative expenses for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014 was primarily due to $5.3 million of costs associated with our expansion into new geographic markets, $1.0 million associated with activist investor activities, higher personnelpayroll costs to support operations ESB acquisitionand higher medical claims costs, partially offset by lower profit sharing and higher stock compensation costs. As a percentage of revenues, selling, general and administrative expenses decreasedincreased to 9.0% for the six months ended June 30, 2016 from 7.2% for the six months ended June 30, 2015 from 7.9% for the six months ended June 30, 2014.2015.

Gain on sale of property and equipment. Gains from the sale of property and equipment in the six months ended June 30, 20152016 were $1.2$0.6 million compared to $0.1$1.2 million in the six months ended June 30, 2014.2015. 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 $0.4 million for the six month periodsmonths ended June 30, 20152016 and 2014.2015.

Provision for income taxes. The provision for income taxes was $4.6 million for the six months ended June 30, 2016, with an effective tax rate of 38.0%, compared to a provision of $8.9 million for the six months ended June 30, 2015, with an effective tax rate of 37.0%, compared to a provision of $8.4 million for the six months ended June 30, 2014, with an effective tax rate of 37.3%. The decreaseincrease in the effective rate was primarily caused by the year to date impact of lower state taxes due todomestic activities deductions and changes in the mix of business between states.

Net income. Net income increaseddecreased to $7.5 million for the six months ended June 30, 2016 from $15.2 million for the six months ended June 30, 2015 from $14.0 million for the six months ended June 30, 2014.2015. The increasedecrease was primarily for the reasons stated earlier.described above.

Segment Results

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

Transmission & Distribution