UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ForFor the quarterly period ended March 31, 2016

2017

OR

For the transition period from              to              

Commission file number: 1-08325

MYR GROUP INC.

(Exact name of registrant as specified in its charter)

(847) 290-1891

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities 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. Yesx No¨

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 No¨

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

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.¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso¨ Nox

As of April 22, 2016,25, 2017, there were 18,226,78816,474,367 outstanding shares of the registrant’s $0.01 par value common stock.

WEBSITE ACCESS TO COMPANY’S REPORTS

MYR Group Inc.’s internet 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 Securities Exchange Act of 1934 (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 Securities and Exchange Commission (“SEC”).

INDEX

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.

MYR GROUP INC.

CONSOLIDATED BALANCE SHEETS

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

MYR GROUP INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

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 conductsand is currently conducting 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; 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., Sturgeon Electric California, LLC, a British Columbia corporation;Delaware limited liability company; GSW Integrated Services, LLC, a Delaware limited liability company; MYR Transmission Services Canada, Ltd., a British Columbia corporation; and Northern Transmission Services, Ltd., a British Columbia corporation; and Western Pacific Enterprises Ltd., a British Columbia corporation.

The Company performs construction services in two 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. The CompanyT&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 to general contractors, commercial and industrial facility owners, local governments and developers in the western and northeastern United States.States and western Canada.

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.Securities and Exchange Commission (“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, 20152016 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, 2015,2016, included in the Company’s annual report on Form 10-K, which was filed with the SEC on March 3, 2016.9, 2017.

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. 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 foreign currency denominated balances,short term monetary assets and liabilities, are recorded in the “other income, net” line on the consolidated statements of operations. For the three months ended March 31, 2016,2017, the Company recorded $0.2 millionan insignificant amount of foreign currency gains.gains compared to foreign currency gains of $0.2 million for the three months ended March 31, 2016. Foreign currency transaction gains and losses, arising primarily from long term monetary assets and liabilities are recorded in the foreign currency translation adjustment line on the consolidated statements of comprehensive income.

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 estimates of costs to complete on our 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.

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 March 31, 2017, changes in estimates pertaining to certain projects resulted in increased consolidated gross margin of 0.4%. The Company’s income from operations for the three months ended March 31, 2017 increased $1.1 million due to the changes in estimated gross profit. These changes in estimates resulted in increases of $0.6 million in net income or $0.04 in diluted earnings per common share during the three months ended March 31, 2017. During the three months ended March 31, 2016, changes in estimates pertaining to certain projects resulted in decreased consolidated gross margin of 0.6%. The Company’s income from operations for the three months ended March 31, 2016 decreased $1.5 million due to the changes in estimated gross profit. These changes in estimates resulted in decreases of $0.9 million in net income or $0.05 in diluted earnings per common share during the three months ended March 31, 2016. During the three months ended March 31, 2015, changes in estimates pertaining to certain projects, the majority of which were transmission projects, resulted in increased consolidated gross margin of 1.5%. The Company’s income from operations for the three months ended March 31, 2015 increased $3.7 million due to the changes in estimated gross profit. These changes in estimates resulted in increases of $2.3 million in net income or $0.11 in diluted earnings per common share during the three months ended March 31, 2015.

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 IssuedAdopted 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, althoughwith early adoption permitted. The Company adopted this ASU, on a prospective basis, on January 1, 2017. For the three months ended March 31, 2017, $0.8 million in excess tax benefits were reflected as income tax benefit in the Consolidated Statement of Operations and Comprehensive Income. Prior to adoption of the ASU, this amount would have been recorded to additional paid-in capital. The Company typically experiences the largest volume of restricted stock vesting in the first quarter of its fiscal year. The extent of excess tax benefits/deficiencies is subject to variation in MYR Group stock price and the timing/extent of restricted stock, performance share and phantom stock vesting and stock option exercises. In addition, the Company has 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—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill, through 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 update 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, 2017, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. 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 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 anypractice 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 period.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 policiesfinancial statements.

In August 2016, the FASB issued ASU No. 2016-15,Statement of Cash Flows (Topic 230):Classification of Certain Cash Receipts and procedures pertainingCash Payments, which is intended to its accountingreduce diversity in practice in how eight specific transactions are classified in the statement of cash flows. The update is effective for stock compensation, disclosure requirementsannual 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 the Company’sits 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. TheWhile the Company is evaluatingcontinues to evaluate 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.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 maywill 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 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. The Company is evaluatingplans to adopt the amendments under this pronouncement using the modified retrospective transition approach on January 1, 2018. Under the modified retrospective transition approach, the Company will recognize any changes from the beginning of the year of initial application through retained earnings with no restatement of comparative periods. As the amendments under this pronouncement will supersede substantially all existing revenue guidance affecting us under U.S. GAAP, it will impact revenue and cost recognition on certain contracts across both our T&D and C&I business segments, in addition to impacting our business processes and our information technology systems. As a result, the Company’s evaluation of the impact of this pronouncement and its expanded disclosure requirements, and all amendments relating to this pronouncement, on itsthe Company’s 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.financial statements is ongoing.

2. Acquisitions

E.S. Boulos CompanyWestern Pacific Enterprises Ltd.

On April 13, 2015,October 28, 2016, the Company acquiredcompleted the acquisition of substantially all of the assets of E.S. Boulos CompanyWestern 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. (“ESB”WPE”), onean electrical contracting firm in western Canada. With its main headquarters in Coquitlam, British Columbia, WPE provides a wide range of New England’s largestcommercial and most experiencedindustrial electrical contractors with over 95 years in operation, from a subsidiary of Eversource Energy.construction capabilities under the Company’s C&I segment. WPE also provides substation construction capabilities under the Company’s T&D segment. The total consideration paid was approximately $11.4$12.1 million, subject to working capital adjustments, which was funded through existing cash resourcesborrowings from our line of credit. Total consideration paid included $2.2 million subject to potential net asset adjustments once finalized by the end of 2017 as stipulated in the purchase agreement. These net asset adjustments were approximately $0.8 million as of the Company. HeadquarteredOctober 28, 2016 closing date and as of March 31, 2017. The Company accounted for the net asset adjustments as a reduction to consideration paid and will be funded through our escrow, established at the time of purchase.

The purchase agreement also includes contingent consideration provisions for margin guarantee adjustments based upon performance subsequent to the acquisition on certain contracts. Contingent consideration of approximately $0.9 million related to the margin guarantee adjustments on certain contracts was recorded in Westbrook, Maine, ESB offers construction capabilities underother income for the Company’s T&D segment, including substation, transmissionthree months ended March 31, 2017. Future margin guarantee adjustments, if any, are expected to be completed by the end of 2017. There could also be contingent compensation payments based on the successful achievement of certain performance targets and distribution construction. ESB also provides commercial and industrial electrical construction under its C&I segment, including a wide rangecontinued employment of commercial electrical construction services.certain key executives of WPE. These payments are recognized as compensation expense in the consolidated statement of operations as incurred. The Company has recognized approximately $0.2 million of compensation expense associated with these contingent payments since the acquisition.

The results of operations for ESBWPE are included in the Company’s consolidated statement of operations and the T&D and C&I segmentssegment from the date of acquisition. 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 purchase accountingoperations for ESB was complete as ofthe year ended December 31, 2015. 2016.

The following table summarizes the allocation of the opening balance sheet from asthe date of acquisition through March 31, 2016:2017:

High Country Line Construction, Inc.

On November 24, 2015, theThe Company acquired allhas developed preliminary estimates 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 cashthe assets acquired of which $0.5 million was preliminarily allocated to goodwill. The Company’s process of valuing the acquired assets and liabilities is in its preliminary stages. Costsassumed for the purposes of approximately $0.2 million relatedallocating the purchase price. Further adjustments are expected to the acquisition were included in selling, generalallocation as third party valuations of identifiable intangible assets, including backlog, customer relationships, trade name and administrative expensesoff-market component, are determined, and as net asset adjustments are finalized. A portion of the unallocated intangible assets are expected to be tax deductible per applicable Canadian Revenue Authority regulations. The Company expects to complete the purchase accounting in the December 31, 2015 consolidated statementsecond half of operations.2017.

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 March 31, 20162017 and December 31, 2015,2016, the Company determined that the carrying value of the Company’s cash and cash equivalents approximated fair value based on Level 1 inputs. As of March 31, 2017 and December 31, 2016, the fair value of the Company’s long-term debt and capital lease obligations were based on Level 2 inputs. The Company’s long-term debt was based on variable and fixed interest rates at March 31, 2017 and December 31, 2016, 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 capital lease obligations also approximated fair value.

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. Some of the leases entered into under these agreements were recorded as capital leases while others were treated as operating leases. As of March 31, 2017, the Company had no outstanding commitments to enter into future leases under its master lease agreements.

Capital Leases

The Company leases some vehicles and equipment under capital leases. The economic substance of the leases is a financing transaction for acquisition of the vehicles and equipment and, accordingly, these 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 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 March 31, 2017, the Company had approximately $4.6 million of capital lease obligations outstanding, $1.1 million of which was classified as a current liability. As of December 31, 2016, the Company had approximately $4.9 million of capital lease obligations outstanding, $1.1 million of which was classified as a current liability.

As of March 31, 2017 and December 31, 2016, $4.7 million and $5.0 million, respectively, of leased assets were capitalized in construction 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 their present value of capital leases, as of March 31, 2017 were as follows:

6. Debt

On June 30, 2016, 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 Agreement provides for a facility of $250 million (the “Facility”) that may be used for revolving loans and 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 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 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 have been, and will be, used for refinancing existing debt, 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 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 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 is 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 Facility. The Credit Agreement restricts certain types of payments when the Company’s consolidated Leverage Ratio exceeds 2.25. The weighted average interest rate on borrowings outstanding through March 31, 2017, was 2.09% per annum.

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. The Company was in compliance with all of its covenants under the Credit Agreement as of March 31, 2017.

The amount outstanding under the Facility as of March 31, 2017 and December 31, 2016, was $39.6 million and $59.1 million, respectively.

As of March 31, 2017 and December 31, 2016, the Company had irrevocable standby letters of credit outstanding under the Facility of approximately $23.7 million, including $17.6 million related to the Company’s payment obligation under its insurance programs and approximately $6.1 million related to contract performance obligations.

The Company has remaining deferred debt issuance costs totaling $0.9 million as of March 31, 2017, related to entry into the Credit Agreement. 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 Facility.

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 months ended March 31, 2017 was primarily due to inclusion of excess tax benefits related tohe adoption of ASU No. 2016-09,Compensation—Stock Compensation (Topic 718), and state income taxes.For the three months ended March 31, 2017, $0.8 million in excess tax benefits related to stock compensation have been reflected as income tax benefit in the Consolidated Statement of Operations and Comprehensive Income; prior to adoption of ASU No. 2016-09, this amount would have been recorded to additional paid-in capital. Due predominately to the inclusion of the excess tax benefit the Company had a net tax benefit for the three months ended March 31, 2017. The tax benefit in three months ended March 31, 2017 represented 42.7% of pretax income, compared to the effective rate for the three months ended March 31, 2016 of 38.6%.The difference between the U.S. federal statutory tax rate and 2015the Company’s effective tax rate for the three months ended March 31, 2016 was principallyprimarily due to state income taxes.

The Company had unrecognized tax benefits of approximately $0.6$0.3 million as of March 31, 20162017 and December 31, 2015,2016, 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 significant for the three months ended March 31, 20162017 and 2015.2016.

The Company is subject to taxation in various jurisdictions. The Company’s tax returnsreturn for 2012 through 2014 are currently under2015 is subject to examination by U.S. federal authorities. The company’sCompany’s tax returns are subject to examination by various state authorities for the years 20112012 through 2014.2015.

6.8. Commitments and Contingencies

Letters of Credit

As of March 31, 2016, the Company had irrevocable standby letters of credit outstanding 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.

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 March 31, 2016, future minimum lease payments for operating leases were as follows: $1.7 million for the remainder of 2016, $1.8 million for 2017, $1.3 million for 2018, $1.0 million for 2019, $0.5 million for 2020 and $0.2 million thereafter.

Purchase Commitments

As of March 31, 2016,2017, the Company had approximately $0.6$3.7 million in outstanding purchase orders for certain construction equipment, with cash outlay requirements scheduled to occur over the next twofive 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 themillion. The Company’s health benefit plans, which are subject to a $0.1deductible up to $0.2 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 suretysureties for any expenses paid out under these bonds. As of March 31, 2016,2017, an aggregate of approximately $872.1$526.8 million in original face amount of bonds issued by the suretyCompany’s sureties were outstanding. Our estimated remaining cost to complete these bonded projects was approximately $104.6$56.7 million as of March 31, 2016.2017.

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.

Collective 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 incur liabilities for additional liabilitiescontributions related to these plans. Although the Company has been informed that the underfunding of some of the multi-employer pension plans to which its subsidiaries contribute have been classified as “critical” status, the Company is not currently aware of any significantpotential 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.

7.9. Stock-Based Compensation

The Company maintains two equity compensation plans under whichgrants stock-based compensation has been granted; the 2006 Stock Option Plan (the “2006 Plan”) and theunder its 2007 Long-Term Incentive Plan, 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 three months ended March 31, 2016, plan participants exercised 25,961 options with a weighted average exercise price of $4.01.

During the three months ended March 31, 2016,2017, the Company granted 69,79943,972 shares of restricted stock, which vest ratably over three years, at a weighted average grant date fair value of $24.50.$39.52. Additionally, 65,92876,831 shares of restricted stock vested during the three months ended March 31, 2016,2017, at a weighted average grant date fair value of $24.84.$24.80.

During the three months ended March 31, 2016,2017, the Company granted 79,66147,454 performance share awards, at target, which cliff vest on December 31, 2018.2019, at a weighted average grant date fair value of $47.12. The number of shares actually earned under a performance award may vary from zero to 200% of the target shares awarded, based upon the Company’s performance compared to certain metrics. The metrics used were determined at grant by the Compensation Committee of the Board of Directors and were 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 the stated performance targets and minimum service requirements and are paid in common shares was split between performance metrics of return on invested capital (“ROIC”), an internal performance measure, and total shareholder return (“TSR”), a market performance measure.the Company’s stock.

The Company granted 45,940 ROIC-basedrecognizes stock-based compensation expense related to restricted stock awards at target,based on March 24, 2016 valued at $24.50, the grant date fair value, which was the closing price of the Company’s stock. ROICstock on the date of grant. The fair value is defined as earnings before interest, netexpensed over the service period of taxes (net income plus interest, net3.0 years. The Company recognizes stock-based compensation expense related to market-based performance awards based on the grant date fair value, which is computed using a Monte Carlo simulation. The fair value is expensed over the service period, which is approximately 2.8 years. The Company recognizes stock-based compensation expense related to internal measure-based performance awards based on the grant date fair value, which was the closing price of taxes), less any dividends, divided by stockholders’ equity plus net debt (total debt less cashthe Company’s stock on the date of grant. The fair value is expensed over the service period of approximately 2.8 years, and marketable securities) at the beginningCompany adjusts the stock-based compensation expense related to internal metric-based performance awards according to its determination of the potential achievement of the performance period.target at each reporting date.

During the three months ended March 31, 2017, plan participants exercised 55,995 stock options with a weighted average exercise price of $16.27.

The Company granted 33,721 TSR-based awards, at target,adopted ASU No. 2016-09,Compensation—Stock Compensation (Topic 718) on January 1, 2017. The adoption is required to be implemented prospectively and resulted in income tax benefits of $0.8 million for the three months ended March 24, 2016. TSR is defined31, 2017. Additionally, the Company has elected to account for forfeitures as thethey occur, rather than estimate expected forfeitures. 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 the fair market value, adjusted for dividends, of a company’s stock. The TSR of the Company’s stock will be comparedadditional paid in capital. See Note 1 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 March 24, 2016 and compared to the average stock price of the 20 trading days prior to December 31, 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 $33.35 per award.Financial Statements for further information regarding ASU No. 2016-09,Compensation—Stock Compensation (Topic 718).

8.10. Segment Information

MYR Group is a specialty contractor serving the electrical infrastructure market in the United States and parts of Canada.Canadian electrical infrastructure markets. 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 costs, 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, 2015.2016.

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 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 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.States and in western Canada.

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

For the three months ended March 31, 2017 and 2016, contract revenues attributable to the Company’s Canadian operations were $19.2 million and $1.2 million, respectively. For the three months ended March 31, 2017 the Company’s Canadian revenues were predominantly in the C&I segment, due to the acquisition of WPE and predominantly in the T&D segment.segment for the three months ended March 31, 2016.

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 months ended March 31, 2017 and 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 months ended March 31, 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. Under the two-class method, the Company’s unvested grants of restricted stock that contained non-forfeitable rights to dividends were treated as participating securities and were excluded from the computation of basic and diluted earnings per share. All shares of restricted stock granted since 2013 are not participating because the grant agreements contain provisions that dividends, if declared, will be forfeited if the 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 month periodsmonths ended March 31, 20162017 and 2015,2016, 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:

The Company adopted ASU No. 2016-09,Share RepurchasesCompensation—Stock Compensation (Topic 718)

On February 10, 2016,on January 1, 2017. The adoption is required to be implemented prospectively and requires excess tax benefits and deficiencies to be prospectively excluded from assumed future proceeds in the Company’s Boardcalculation of Directors approveddiluted shares, resulting in an amended share repurchase program (“Repurchase Program”), which increased the Repurchase Program from $67.5increase in diluted weighted average shares outstanding of 0.1 million to $142.5 million, extended the term of the Repurchase Program through April 30, 2017 and revised provisions of the Repurchase Program to enable the Company to accelerate the pace of share repurchases. Duringfor the three months ended March 31, 2016,2017. See Note 1 to the Company repurchased 1,225,753 shares of its common stock at a weighted-average price of $22.42 per share; 1,192,116 of those shares were purchased under its Repurchase Program,Financial Statements for approximately $26.7 million. Additionally, the Company repurchased 33,637 shares of stock, for approximately $0.8 million, from its employees to satisfy tax obligations on shares vested under the LTIP program. All of the shares repurchased were retired and returned to authorized but unissued stock.further information regarding ASU No. 2016-09,Compensation—Stock Compensation (Topic 718).

10. 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 recorded as assets and liabilities. Included in depreciation expense is amortization of vehicles and equipment held under capital leases, amortized over their useful lives on a straight-line basis.

In March, 2016 the Company entered into master leasing arrangements for vehicles and construction equipment. Some of the leases entered into under these agreements met the accounting requirements to be recorded as capital leases. As a result, $0.7 million was included in property and equipment, net of accumulated depreciation and $0.1 million and $0.6 million were recorded in current maturities of long-term debt and long-term debt, net of current maturities, respectively. As of March 31, 2016 the Company had approximately $6.8 million of outstanding commitments under its master lease agreements.

The following is a schedule by year of the future minimum lease payments required under capital leases together with their present value as of March 31, 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 March 31, 2016 and December 31, 2015, and for the three months ended March 31, 2016 and 2015, and with our Annual Report on Form 10-K for the year ended December 31, 20152016 (the “2015“2016 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 20152016 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 throughout the United States. We also have operations in parts of Canada.market. 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 contractors servicing the T&D sector of the electric utility industry in the United States and are expanding our T&D services into Canada. Our customers include many of the leading companies in the electric industry. We providehave provided 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 three months ended March 31, 20162017 of $253.6$300.1 million, of which 72.1%65.2% was attributable to our T&D customers and 27.9%34.8% was attributable to our C&I customers. Our consolidated revenues for the three months ended March 31, 20152016 were $244.1$253.6 million. For the three months ended March 31, 2016,2017, our net income and EBITDA (1) were $2.0$1.2 million and $13.3$11.0 million, respectively, compared to $7.2$2.0 million and $20.5$13.3 million, respectively, for the three months ended March 31, 2015.2016.

We expect bidding activity to remain strong in both our T&D and C&I segments for the remainder of 2016 and 2017. Although competition remains strong in our T&D segment,believe we expect that our centralized fleet and skilled workforce will continue to benefit ussee significant bidding activity on large transmission projects this year as well as in securing2018. The timing of multi-year transmission project awards and executing profitable projects. The sizes of the T&Dsubstantial 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 this year, will not likely occur until 2018. Bidding and construction activity for small to medium-size transmission projects and upgrades remains strong, and we are currently performing are generally smallerexpect this trend to continue, primarily due to electric infrastructure reliability 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, reduced fleet utilization rateseconomic drivers. Competition and the costunpredictability of transitioning from project to project. Whileawards in the transmission projects being bid this year represent a good mixmarket may impact our ability to maintain adequate utilization of projects, including a number of larger, longer duration projects, thereequipment and manpower resources, which is often a significant lag from when a project is awardedimportant to when the revenues and costs are recognized. Several of the recently bid larger, longer-duration projects contain a higher percentage of material and subcontractor costs when compared to recent history and we typically add less mark-up to material and subcontractor costs in our bid estimates than the mark-up applied to our labor and owned equipment. This could lead to lower overall margins depending on our awarded portfolio of work. Additionally, competition,maintaining contract margins. In addition, 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. SpendingWe believe that spending by clients on their distribution systems appears to beis generally improving; however, this 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.

TheWe expect to see continued improvement in bidding opportunities in our C&I segment continuesthroughout the year. We expect the long-term growth in our C&I segment to generally track the economic growth of the regions we serve and benefit from robust bidding activity and weto the extent economic conditions continue to explore further expansion intoimprove in the markets we serve. We also expect to see an improvement in bidding opportunities as we penetrate the new markets. The C&I segment, in part duemarkets we recently entered through our strategic acquisitions and organic expansions.

We strive to intense competition, has not provided overall contract margin opportunities comparablemaintain our status as a preferred provider to our T&D segment.

In 2015, we beganand C&I customers. We continue to implement a three-pronged strategy of organic growth, strategic acquisitions that further expand our capabilities and prudent capital returns as further detaileddescribed 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 forevaluate opportunities to expand our operations into new markets in the United States and Canada. We expanded our C&I services into California in 2016 and Utah in 2017, while continuing to support previous growth areas.

Strategic Acquisitions On October 28, 2016, we acquired substantially all of the assets of Western Pacific Enterprises, which expanded our C&I operations and enhanced our T&D presence in western and central Canada. We continue to look for acquisition opportunities that are compatible with our culture while enhancing shareholder value.

A few of our new organic growth initiatives are getting off the ground slower than expected due to the timing of contract awards and penetration of the new market. This resulted in uncovered fixed costs in the first three months ended March 31, 2016. Despite slower starts in these markets, we believe that this strategy to grow the business will result in positive growth and enhance shareholder value.

Strategic Acquisitions On April 13, 2015, we acquired substantially all of the assets of E.S. Boulos Company, which enhances our T&D presence in the northeast United States and further expands our C&I presence into the northeast. On November 24, 2015, the Company acquired all of the outstanding common stock of High Country Line Construction, Inc., which enhances our T&D presence, predominantly in the western United States. We continue to look for acquisition opportunities that are compatible with our culture while enhancing shareholder value.

Prudent Capital ReturnsIn February 2016,Under our share repurchase program, we increasedhave repurchased a total of 6,024,978 shares of our common stock for an average share price of $23.64 per share. As of March 31, 2017, we had $20.0 million of remaining availability to purchase shares under the share Repurchase Program by $75.0 million to $142.5 million, extended the Repurchase Programprogram, which continues in effect until April 30, 2017 and revised provisions of the Repurchase Program to enable us to accelerate the pace of share repurchases. 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 have begun to lease vehicles and equipment under these arrangements. We continue to look for opportunities to improve our resource allocation to enhance shareholder value.August 15, 2017.

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 first quarter of 20162017 with cash and cash equivalents of $26.0$186.7 million no outstanding funded debt and availability of $150.7 millionavailable under our credit facility.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 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 master service agreements that typically have a one-year to three-year duration from execution. Backlog may not accurately represent the revenues that we expect to realize during any particular period. Several factors such as the timing of contract awards, the type and duration of contracts, and the mix of subcontractor and material costs in our projects can impact our backlog at any point in time. Some of our revenue does not appear in our periodic backlog reporting because the award of the project, as well as the execution of the work, may all take place within the period. Our backlog 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 $660.9 million at March 31, 2017 compared to $688.8 million at December 31, 2016 and $434.8 million at March 31, 2016 compared to $450.9 million at December 31, 2015 and $398.4 million at March 31, 2015.2016. Our backlog at March 31, 20162017 decreased $16.1$27.9 million or 3.6%4.1% from December 31, 2015.2016. Backlog in the T&D segment decreased $30.0$29.7 million and C&I backlog increased $13.9$1.8 million compared to December 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 suretysureties for claims against theour surety bonds. As of March 31, 2016,2017, we had approximately $872.1$526.8 million in original face amount of surety bonds outstanding. Our estimated remaining cost to complete these bonded projects was approximately $104.6$56.7 million as of March 31, 2016.2017.

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 March 31, 20162017 Compared to Three Months Ended March 31, 20152016

Revenues. Revenues increased $9.5$46.5 million, or 3.9%18.3%, to $300.1 million for the three months ended March 31, 2017 from $253.6 million for the three months ended March 31, 2016 from $244.1 million for the three months ended March 31, 2015.2016. The increase was primarily due to higher C&I revenue.revenues, in new markets (including WPE) and established markets, and higher distribution revenues.

Gross margin. Gross margin decreased to 8.6% for the three months ended March 31, 2017 from 10.8% for the three months ended March 31, 2016 from 12.0% for the three months ended March 31, 2015.2016. The year-over-year declinedecrease in gross margin was primarilylargely due to favorable closeouts on several large projectsdeclines in the first three months of 2015. Our gross margin has been lower in recent quarters primarilyefficiency due to lower bid margins caused by increased competitioninclement weather in many of our markets and an increase ina higher mix of smaller, shorter duration jobs (which affects labor productivity,T&D work. The shift in the mix of work also caused a decline in our fleet utilization and increased mobilization costs and demobilization costs). Additionally, in the three months ended March 31, 2016, certain jobs underperformed duecosts. These impacts were partially offset by settlements related to labor productivity below previous estimatespreviously unrecognized revenue on a project claim and unfavorable weather conditions in certain markets.pending change orders. Changes in estimates of gross profit on certain projects resulted in a gross margin decrease of 0.6% and an increase of 1.5%0.4% for the three months ended March 31, 20162017 and 2015, respectively.a decrease of 0.6% for the three months ended March 31, 2016.

Gross profit. Gross profit decreased $2.1$1.6 million, or 7.1%5.6%, to $25.7 million for the three months ended March 31, 2017 from $27.3 million for the three months ended March 31, 2016, from $29.4 million for the three months ended March 31, 2015, due to lower overall gross margin, partially offset by higher revenue.

Selling, general and administrative expenses. Selling, general and administrative expenses which were(“SG&A”), of $25.8 million for the three months ended March 31, 2017, increased $1.9 million from $23.9 million for the three months ended March 31, 2016, increased $5.3 million from $18.6 million for the three months ended March 31, 2015.2016. The year-over-year increase was primarily due to $3.3$2.3 million of costs associated with our expansion into new geographic markets and higher payroll costs to support operations, partially offset by lower bonus and profit sharing costs. Additionally, $1.0 million of costs associated with activist investor activities and higher medical claims costs, partially offset by lower bonus, profit sharing and stock compensation costs.were incurred in the three months ended March 31, 2016. As a percentage of revenues, selling, general and administrative expenses increasedSG&A decreased to 8.6% for the three months ended March 31, 2017 from 9.4% for the three months ended March 31, 2016 from 7.6% for the three months ended March 31, 2015.2016.

Gain on sale of property and equipment. Gains from the sale of property and equipment in the three months ended March 31, 20162017 were $0.1$0.7 million compared to $0.9$0.1 million in the three months ended March 31, 2015.2016. 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$0.5 million for the three month periodsmonths ended March 31, 20162017 compared to $0.2 million in the three months ended March 31, 2016. This increase was primarily attributable to borrowings outstanding on our line of credit and 2015.the length of time borrowings were outstanding during the three months ended March 31, 2017 as compared to the three months ended March 31, 2016.

Other Income.Other income was $0.9 million for the three months ended March 31, 2017 compared to $0.1 million in the three months ended March 31, 2016. The increase was primarily attributable to contingent consideration related to margin guarantees of $0.9 million recognized on certain contracts associated with the acquisition of WPE.

Provision for income taxes.Income tax expense. The income tax benefit was $0.4 million for the three months ended March 31, 2017 compared to a provision for income taxes wasof $1.2 million for the three months ended March 31, 2016, with2016. The tax benefit in the three months ended March 31, 2017 represented 42.7% of pretax income, compared to an effective tax rate of 38.6%, compared to a provision of $4.2 million for the three months ended March 31, 2015, with an effective2016. The tax rate of 36.9%. The increasebenefit in the effective ratethree months ended March 31, 2017 was primarily caused by excess tax benefits of approximately $0.8 million pertaining to the yearvesting of stock awards and the exercise of stock options. With the adoption of ASU No. 2016-09,Compensation—Stock Compensation (Topic 718), the tax benefit from stock compensation is no longer recorded to date impact of lower domestic activities deductions and changesadditional paid-in capital; rather, it is included in the mix of business between states.current tax provision as a discrete item.

Net income. Net income decreased to $1.2 million for the three months ended March 31, 2017 from $2.0 million for the three months ended March 31, 2016 from $7.2 million for the three months ended March 31, 2015.2016. The decrease was primarily for the reasons stated earlier.

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 March 31, 20162017 were $183.0$195.7 million compared to $189.2$183.0 million for the three months ended March 31, 2015, a decrease2016, an increase of $6.2$12.7 million, or 3.3%7.0%. The decreaseincrease in revenue was primarily due to a declinean increase in revenue from large, multi-year transmissiondistribution projects.

Revenues from transmission projects represented 77.2%72.2% and 78.2%77.2% of T&D segment revenue for the three months ended March 31, 20162017 and 2015,2016, respectively. Additionally, for the three months ended March 31, 2016,2017, measured by revenue in our T&D segment, we provided 55.1%35.1% of our T&D services under fixed-price contracts, as compared to 49.1%55.1% for the three months ended March 31, 2015.2016.

Operating income for our T&D segment for the three months ended March 31, 20162017 was $10.7$5.1 million, a decrease of $6.1$5.5 million from the three months ended March 31, 2015.2016. The year-over-year decline in T&D operating income was primarily due to favorable closeouts on several large, multi-year transmission projectsdeclines in the first three months of 2015. In recent quarters, the T&D segment experienced lower bid margins caused by increased competitionefficiency due to inclement weather in many of our markets an increaseand a higher mix of smaller, shorter duration work. The shift in the numbermix of shorter duration projects (which affects labor productivity,work also caused a decline in our fleet utilization and increased mobilization costs and demobilization costs. Additionally,These impacts were partially offset by resolution of pending project change orders that were previously not recognized in the three months ended March 31, 2016, certain jobs underperformed due to labor productivity below previous estimates and unfavorable weather conditions in certain markets.We also experienced incremental costs associated with the expansion into new geographic markets.revenue. As a percentage of revenues, operating income for our T&D segment was 2.6% for the three months ended March 31, 2017 compared to 5.8% for the three months ended March 31, 2016 compared to 8.9% for the three months ended March 31, 2015.2016.

Commercial & Industrial

Revenues for our C&I segment for the three months ended March 31, 20162017 were $70.7$104.4 million compared to $54.9$70.7 million for the three months ended March 31, 2015,2016, an increase of $15.7$33.7 million, or 28.6%47.7%, primarily due primarilyto organic and acquisitive expansion into new markets.markets and a general improvement of the C&I construction market.

Measured by revenue in our C&I segment, we provided 71.3%66.8% of our services under fixed-price contracts for the three months ended March 31, 2016,2017, compared to 67.9%71.3% in the three months ended March 31, 2015.2016.

Operating income for our C&I segment for the three months ended March 31, 20162017 was $2.2$4.4 million, a decreasean increase of $0.6$2.3 million over the three months ended March 31, 2015.2016. The year-over-year declineincrease in operating income was primarily attributable to lower bid margins causedhigher revenue and the settlement of a project claim that was previously not recognized in revenue. These were partially offset by increased competition in many of our markets, productivity below estimates on certain jobs and costs associated with expansion into new geographic markets, partially offset by higher revenues.organic and acquisitive growth, including the impact of contingent consideration related to margin guarantees of $0.9 million that are classified as other income. As a percentage of revenues, operating income for our C&I segment was 4.2% for the three months ended March 31, 2017 compared to 3.1% for the three months ended March 31, 2016 compared to 5.2% for the three months ended March 31, 2015.2016.

Non-GAAP Measure—EBITDA

We define EBITDA, a performance measure used by management, is defined 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, book lives placed on assets, capital structure and the method by which assets were acquired.

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 whichthat may be meaningful to investors. EBITDA excludes interest expense or interest income; however, as we have borrowed money in order 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, interest income, depreciation and amortization and income taxes has material limitations as compared to net income. When using EBITDA as a performance measure, management 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 to EBITDA:

We also use EBITDA as a liquidity measure. We believe that EBITDA is important in analyzingfor evaluating our liquidity because it is a key component ofability to comply with certain material covenants contained within our credit agreement (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 and our leverage ratio—Leverage Ratio (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 EBITDA to net cash flows provided by operating activities:activities to EBITDA:

Liquidity and Capital Resources

As of March 31, 2017 and 2016, we had cash and cash equivalents of $26.0 million and working capital of $108.0 million and $106.3 million.million, respectively. We define working capital as current assets less current liabilities. During the three months ended March 31, 2016,2017, operating activities of our business provided net cash of $14.4$13.1 million, compared to $1.4$14.4 million of cash provided infor the three months ended March 31, 2015.2016. 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. TheNet cash provided by operating activities is driven by our net income adjusted for changes in various working capital accounts (such as: accounts receivable,operating assets and liabilities and non-cash items including, retention; costsbut not limited to, depreciation and estimated earnings in excessamortization, stock-based compensation, deferred income taxes, and the gain on sale of billings on uncompleted contracts; accounts payable;property and billings in excess of costs and estimated earnings on uncompleted contracts) are due to both the volume and timing of work performed, the mix of the types of projects and customers and their varying billing requirements as well as settlements of payables and other obligations. In particular, the gross amount of accounts receivable, net, costs and estimated earnings in excess of billings on uncompleted contracts, and billings in excess of costs and estimated earnings on uncompleted contracts used cash of $1.6 million in the three months ended March 31, 2016, aequipment. The year-over-year decline in net cash usedprovided by operating activities was primarily due a decrease of $22.2 million compared to the $23.8 million of cash used in the three months ended March 31, 2015.

Accounts receivable, which provided $14.4$0.8 million in cashnet income and $0.7 million decrease in the three months ended March 31, 2016 compared to $1.4 million provided in the three months ended March 31, 2015, accounted for a $13.0 million year-over-year increase in cash provided as a result of improved collections due to improvements in billing procedures for several of our new clients in the three months ended March 31, 2016. Billings in excess of costs and estimated earnings on uncompleted contracts, which provided $4.0 million in cash in the three months ended March 31, 2016 and used $5.1 million in the three months ended March 31, 2015, accounted for a $9.1 million year-over-year change in cash used as a result of the contractual billing terms of our contracts. The improvements in these working capital components werenon-cash items, partially offset by a decline$0.2 million favorable change in other liabilitiesoperating assets and liabilities. The decrease in non-cash items was primarily due to a $0.6 million increase in gains from the timingsale of paymentsproperty and lower net income.equipment.

In the three months ended March 31, 2016,2017, we used net cash in investing activities of $2.7$9.1 million, consisting of $3.7$10.0 million for capital expenditures, partially offset by $1.0$0.9 million of proceeds from the sale of equipment.

In the three months ended March 31, 2016,2017, we used net cash of $25.4$21.1 million in financing activities, consisting primarily of $25.7$19.5 million of cash used to purchase sharesrepayments under our revolving lines of our common stock, which was partially offset by proceeds from stock optionscredit and tax benefits related to our stock compensation programs. The $25.7$2.2 million of cash used to purchase sharesshare repurchases, all of our common stock consisted of $24.9 million purchased under our Repurchase Program and $0.8 million to purchasewhich represented shares surrendered by employees to satisfy employee tax obligations under our stock compensation program. On February 10, 2016, our Board of Directors approved an amended Repurchase Program, which increased the program from $67.5 million to $142.5 million, extended the term of the program through April 30, 2017 and revised provisions of the Repurchase Program to enable the us to accelerate the pace of share repurchases. As of March 31, 2016, we had $73.1 million of remaining availability to purchase shares under the Repurchase Program.

We anticipate that our cash and cash equivalents on hand, $150.7$186.7 million borrowing availability under our credit facility 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, and share purchases under our Repurchase Program. We expect that our capital spending in 2016 will be lower than the last few years as we look to finance our fleet through an increased use of alternative financing approaches, such as leasing.repurchases. 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.

The Company hasWe have not historically paid dividends and currently doesdo not expect to pay dividends.

Debt Instruments

On December 21, 2011,June 30, 2016, we entered into a five-year syndicatedamended 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 withprovides for a facility of $175.0$250 million (the “Facility”). The entire Facility is available that may be used for revolving loans and the issuanceletters of credit. The Facility also allows for revolving loans and letters of credit in Canadian dollars and other currencies, up to $25.0 million is available for swingline loans.the U.S. dollar equivalent of $50 million. We have thean expansion option to increase the commitments under the Facility or enter into incremental term loans, subject to certain conditions, by up to an additional $75.0$100 million upon receipt of additional commitments from new or existing lenders. We are currently in discussions to amend and extend, or replace, the Facility.

Revolving loans under the Facility bear interest, at our option, at either (1) ABR, which is the greatest of the Prime Rate, the Federal Funds Effective Rate plus 0.50% or adjusted LIBOR plus 1.00%, plus in each case an applicable margin ranging from 0.00% to 1.00%; or (2) adjusted LIBOR plus an applicable margin ranging from 1.00% to 2.00%. The applicable margin is determined based on our Leverage Ratio, defined under the Credit Agreement as consolidated total indebtedness divided by consolidated EBITDA, as defined by the Credit Agreement. Letters of credit issued under the Facility are subject to a letter of credit fee of 1.00% to 2.00%, based on our Leverage Ratio and a fronting fee of 0.125%. Swingline loans bear interest at the ABR Rate. We are required to pay a 0.2% commitment fee on the unused portion of the Facility.

Subject to certain exceptions, the Facility is secured by substantially all of our assets and the assets of all 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. OurAdditionally, subject to certain exceptions, our domestic subsidiaries also guarantee the repayment of all amounts due under the Facility. The Credit Agreement provides for customary events of default.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 were, and will be, used for refinancing existing debt, working capital, capital expenditures, stock repurchases, acquisitions and other general corporate purposes.

Amounts borrowed under the Credit Agreement in U.S. dollars 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%; 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 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 our consolidated Leverage Ratio (as defined in the Credit Agreement). Letters of credit issued under the 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 our consolidated Leverage Ratio. We are subject to a commitment fee of 0.20% to 0.375% 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.

Under the Credit Agreement, we are subject to certain financial covenants and must maintain a maximum consolidated Leverage Ratio of 3.0and a minimum interest coverage ratio of 3.0, which is defined underin the Credit Agreement as Consolidated EBITDA (as defined in the Credit Agreement) divided by interest expense. We were in compliance with all of our debt covenants at March 31, 2016. 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 covenants under the Credit Agreement as of March 31, 2017.

As of March 31, 2016 and December 31, 2015,2017, we had no$39.6 million of debt outstanding under the Facility and irrevocable standby letters of credit outstanding of approximately $24.3$23.7 million. As of December 31, 2016, we had $59.1 million including $17.6 million related to our payment obligationof debt outstanding under our insurance programsthe Facility and irrevocable standby letters of credit outstanding of approximately $6.7 million related to contract performance obligations.$23.7 million.

Off-Balance Sheet Transactions

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 on our balance sheets. Our significant off-balance sheet transactions such as liabilities associated with non-cancelable operating leases, letter of credit obligations and surety guarantees could be entered into in the normal course of business. We have not engaged in any off-balance sheet financing arrangements through special purpose entities.

For a discussion regarding off-balance sheet transactions, refer to Note 6,8, “Commitments and Contingencies” in the accompanying Notes to Consolidated Financial Statements.

Concentration of Credit Risk

We grant trade credit under normal 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 located in the United States. Consequently, we are subject to potential credit risk related to changes in business and economic factors throughout the United States. 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 March 31, 2017, none of our customers individually exceeded 10.0% of consolidated accounts receivable. As of March 31, 2016, one customer individually exceeded 10.0% of consolidated accounts receivable with approximately 17.8% of the total consolidated accounts receivable amount (excluding the impact of allowance for doubtful accounts). As of March 31, 2015, no customers individually exceeded 10.0% of consolidated accounts receivable (excluding the impact of allowance for doubtful accounts). Management believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk.

New Accounting Pronouncements

For a discussion regarding new accounting pronouncements, please refer to Note 1, “Organization, Business and Basis of Presentation—Recently Issued Accounting Pronouncements” in the accompanying Notes to Consolidated Financial Statements.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated 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 consolidated 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 believedwe believe to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates. For further information regarding our critical accounting policies and estimates, please refer to Item 7.7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” included in our 20152016 Annual Report.

Cautionary Statement Concerning Forward-Looking Statements and Information

We are including the following discussion to inform you of some of the risks and uncertainties that can affect our company and to take advantage of the protections for forward-looking statements that applicable federal securities law affords.

Statements in this Quarterly Report on Form 10-Q contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), which represent our 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,” “may,” “objective,” “outlook,” “plan,” “project,” “likely,” “unlikely,” “possible,” “potential,” “should” or other words that convey the uncertainty of future events or outcomes. The forward looking statements in this quarterly report on Form 10-Q speak only as of the date of this quarterly report on Form 10-Q. 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 we consider 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. These and other important factors, including those discussed under the caption “Forward-Looking Statements” and in Item 1A “Risk Factors” in our 20152016 Annual Report, and in any risk factors or cautionary statements contained in our other filings with the Securities and Exchange Commission, 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.

These risks, contingencies and uncertainties include, but are not limited to, the following:

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of March 31, 2016,2017, we were not party to any derivative instruments. We did not use any material derivative financial instruments during the three months ended March 31, 20162017 and 2015,2016, including trading or speculation on changes in interest rates or commodity prices of materials used in our business.

As of March 31, 2016,2017, we had no borrowings$39.6 million of debt outstanding under the Facility. Borrowings under the Facility are based upon an interest rate that will vary depending upon the prime rate, federal funds rate and LIBOR. If we had borrowings outstanding under the Facility and if the prime rate, federal funds rate or LIBOR increased, our interest payment obligations on outstanding borrowings would 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 as of March 31, 2017, which is subject to variable rates, permanently increased by 1%, the increase in interest expense on all revolving debt would decrease future income before provision for income taxes and cash flows by approximately $0.4 million annually. If market rates of interest on all our revolving debt, which is subject to variable rates as of March 31, 2017, permanently decreased by 1%, the decrease in interest expense on all debt would increase future income before provision for income taxes and cash flows by the same amount.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision, and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures, pursuant toas defined under Exchange Act Rules 13a-15(e) and 15d-15(e), as of the end of the period covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2016.2017.

As permitted by interpretive guidance issued by the Securities and Exchange Commission staff, companies are allowed to exclude acquired businesses from their assessment of internal control over financial reporting during the first year after completion of an acquisition while integrating the acquired company. Accordingly, as WPE was acquired by the Company on October 28, 2016, management's assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2016 excluded WPE. Management's evaluation and conclusion as to the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report excludes any evaluation of the internal controls of WPE. WPE represented a total of approximately 5.6% and 1.6% of total assets and net assets, respectively, as of March 31, 2017, and 5.0% and (144.4%) of contract revenues and income from operations, respectively, for the three months then ended.

Changes in Internal Control Over Financial Reporting

During the period covered by this report, there were no changes in our internal control over financial reporting that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For further discussion regarding legal proceedings, please refer to Note 6,8, “Commitments and Contingencies—Litigation and Other Legal Matters” in the accompanying Notes to Consolidated Financial Statements.

ITEM 1A. RISK FACTORS

As of the date of this filing, there have been no material changes to the risk factors previously discussed in Item 1A toof our 20152016 Annual Report. An investment in our common stock involves various risks. When considering an investment in our company, you should carefully consider all of the risk factors described in our 20152016 Annual Report. These risks and uncertainties are not the only ones facing us and there may be additional matters that are not known to us or that we currently consider immaterial. These risks and uncertainties could adversely affect our business, financial condition or future results and, thus, the value of our common stock and any investment in our company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Common Stock. The following table includes all of the Company’s repurchases of common stock for the periods shown, including those made pursuant to publicly announced plans or programs and those not made pursuant to publicly announced plans or programs. Repurchased shares are retired and returned to authorized but unissued common stock.None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.