What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-10-27 compared with 2021-07-28 · 99 added, 97 removed, 266 unchanged (42% of the section changed)

19 unchanged sentences

We believe proposed legislative actions aimed at supporting infrastructure improvements in the United States may positively impact long-term demand, particularly in connection with electric power infrastructure, transportation and renewable energy spending.

We believe the proposed legislative actions are likely to provide greater opportunity in both of our reporting segments.

However due to the market disruption associated with the COVID-19 pandemic and market uncertainty, both of our segments may be subject to pricing volatility and materials availability delays which could contribute to an overall deceleration in project opportunities and awards.

We had consolidated revenues for the six months ended June 30, 2021 of $1.24 billion, of which 51.7% was attributable to our T&D customers and 48.3% was attributable to our C&I customers.

Our consolidated revenues for the six months ended June 30, 2020 were $1.03 billion.

For the six months ended June 30, 2021, our net income and EBITDA (1) were $41.1 million and $80.5 million, respectively, compared to $23.3 million and $58.9 million, respectively, for the six months ended June 30, 2020.

We believe the proposed legislative actions are likely to provide greater long-term opportunity in both of our reporting segments.

However both of our segments and supporting operations may be subject to delays and pricing volatility due to the continued market disruption from the COVID-19 pandemic and regulatory slowdowns.

These delays and pricing volatility could result in decelerations in project opportunities and awards.

We had consolidated revenues for the nine months ended September 30, 2021 of $1.85 billion, of which 51.2% was attributable to our T&D customers and 48.8% was attributable to our C&I customers.

Our consolidated revenues for the nine months ended September 30, 2020 were $1.64 billion.

For the nine months ended September 30, 2021, our net income and EBITDA (1) were $64.3 million and $122.8 million, respectively, compared to $40.6 million and $95.2 million, respectively, for the nine months ended September 30, 2020.

We believe there is an ongoing need for utilities to sustain investment in their transmission systems to improve reliability, reduce congestion and connect to new sources of renewable generation.

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The timing of multi-year transmission project awards and substantial construction activity is difficult to predict due to regulatory requirements and the permitting needed to commence construction.

Significant construction on any large, multi-year projects awarded in the remainder of 2021 will not likely occur until 2022.

Significant construction on any large, multi-year projects awarded in the remainder of 2021 will not likely begin until 2022.

Bidding and construction activity for small to medium-size transmission projects and upgrades remain active, and we expect this trend to continue, primarily due to reliability and economic drivers.

As a result of reduced spending by United States utilities on their distribution systems for several years, we believe there is a need for sustained investment by utilities in their distribution systems to properly maintain or meet reliability requirements.

In 2021, we continue to see increased bidding activity in some of our electric distribution markets, as economic conditions improved in those areas.

We believe the increased hurricane activity over the past several years and recent destruction caused by wildfires will cause a push to strengthen utility distribution systems against catastrophic damage.

We continue to see increased bidding activity in some of our electric distribution markets, as economic conditions improved in those areas.

We believe the increased hurricane activity and destruction caused by wildfires will cause a push to strengthen utility distribution systems against catastrophic damage.

Several industry and market trends are also prompting customers in the electric utility industry to seek outsourcing partners rather than performing projects internally.

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We continue to implement strategies that further expand our capabilities and allow opportunities to provide prudent capital returns.

We ended the second quarter of 2021 with $362.7 million available under our credit facility.

We ended the third quarter of 2021 with $362.7 million available under our credit facility.

We continue to manage our increasing costs for supporting our operations, including increasing insurance, equipment, labor and material costs.

We believe that our financial position, positive cash flows and other operational strengths will enable us to manage the challenges and uncertainties in the markets we serve and give us the flexibility to successfully execute our strategies.

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Additional information related to our remaining performance obligations is provided in Note 6–Revenue Recognition in the accompanying notes to our Consolidated Financial Statements.

Our backlog was $1.57 billion at June 30, 2021, compared to $1.65 billion at December 31, 2020 and $1.55 billion at June 30, 2020.

Our backlog at June 30, 2021 decreased 4.7% from March 31, 2021.

Backlog in the T&D segment decreased $59.4 million and C&I backlog decreased $17.2 million compared to March 31, 2021.

Our backlog as of June 30, 2021 included our proportionate share of joint venture backlog totaling $15.2 million, compared to $19.2 million at March 31, 2021.

Our backlog was $1.63 billion at September 30, 2021, compared to $1.65 billion at December 31, 2020 and $1.72 billion at September 30, 2020.

Our backlog at September 30, 2021 increased 4.3% from June 30, 2021.

Backlog in the T&D segment increased $17.1 million and C&I backlog increased $49.7 million compared to June 30, 2021.

Our backlog as of September 30, 2021 included our proportionate share of joint venture backlog totaling $10.2 million, compared to $15.2 million at June 30, 2021.

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

Backlog at June 30, 2021

Backlog at September 30, 2021

(in thousands) Total Amount estimated to not

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To date, we have not been required to make any reimbursements to our sureties for claims against our surety bonds.

As of June 30, 2021, we had approximately $1.30 billion in original face amount of surety bonds outstanding.

Our estimated remaining cost to complete these bonded projects was approximately $605.4 million as of June 30, 2021.

As of September 30, 2021, we had approximately $1.28 billion in original face amount of surety bonds outstanding.

Our estimated remaining cost to complete these bonded projects was approximately $531.5 million as of September 30, 2021.

From time to time, we guarantee the obligations of our wholly owned subsidiaries, including obligations under certain contracts with customers, certain lease agreements, and, in some states, obligations in connection with obtaining contractors’ licenses.

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2021 2020 2021 2020

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Gross profit 83,923 13.8 76,472 12.6 241,898 13.1 199,409 12.2

Selling, general and

administrative expenses 51,890 8.0 41,199 8.0 101,537 8.1 86,245 8.4

Selling, general and administrative expenses 53,072 8.7 51,443 8.5 154,609 8.3 137,688 8.4

Amortization of intangible assets 578 0.1 578 0.1 1,734 0.1 3,009 0.2

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Net income $ 23,171 3.8 % $ 17,292 2.8 % $ 64,318 3.5 % $ 40,609 2.5 %

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Revenues were $649.6 million for the three months ended June 30, 2021 compared to $513.1 million for the three months ended June 30, 2020.

The increase of $136.5 million, or 26.6%, was primarily due to an increase in revenue on large-sized T&D projects as well as an increase in revenue on various-sized C&I projects.

Additionally, revenues during the three months ended June 30, 2020 were negatively impacted by a slight slowdown of C&I work in certain geographic areas related to the COVID-19 pandemic.

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Revenues were $610.2 million for the three months ended September 30, 2021 compared to $607.9 million for the three months ended September 30, 2020.

The increase of $2.3 million, or 0.4%, was primarily due to an increase in revenue on distribution projects partially offset by a decrease in revenue on transmission projects and a decrease in volume on C&I projects in certain geographic areas.

Gross margin.

Gross margin was 12.5% for the three months ended June 30, 2021 compared to 11.9% for the three months ended June 30, 2020.

The increase in gross margin was primarily due to better-than-anticipated productivity on certain projects and favorable job close-outs, partially offset by labor and equipment inefficiencies on certain projects.

Changes in estimates of gross profit on certain projects resulted in a gross margin increases of 0.8% and 0.2% for the three months ended June 30, 2021 and 2020, respectively.

Gross margin was 13.8% for the three months ended September 30, 2021 compared to 12.6% for the three months ended September 30, 2020.

The increase in gross margin was primarily due to better-than-anticipated productivity on certain projects, favorable job close-outs and favorable change orders on certain projects.

These improvements were partially offset by labor and equipment inefficiencies on certain projects.

Changes in estimates of gross profit on certain projects resulted in a gross margin increase of 1.4% and decrease of 0.3% for the three months ended September 30, 2021 and 2020, respectively.

Gross profit.

Gross profit was $81.0 million for the three months ended June 30, 2021 compared to $61.3 million for the three months ended June 30, 2020.

The increase of $19.7 million, or 32.2%, was due to higher revenues and margins.

Gross profit was $83.9 million for the three months ended September 30, 2021 compared to $76.5 million for the three months ended September 30, 2020.

The increase of $7.4 million, or 9.7%, was due to higher margins and revenues.

Selling, general and administrative expenses.

Selling, general and administrative expenses ("SG&A") were $51.9 million for the three months ended June 30, 2021 compared to $41.2 million for the three months ended June 30, 2020.

The period-over-period increase of $10.7 million was primarily due to higher employee incentive compensation costs and contingent compensation expense related to prior acquisitions.

Selling, general and administrative expenses ("SG&A") were $53.1 million for the three months ended September 30, 2021 compared to $51.4 million for the three months ended September 30, 2020.

The period-over-period increase of $1.7 million was primarily due to an increase in employee-related expenses to support the growth in our operations.

Gain on sale of property and equipment .

Gains from the sale of property and equipment for the three months ended June 30, 2021 were $1.1 million compared to $0.4 million for the three months ended June 30, 2020.

Gains from the sale of property and equipment for the three months ended September 30, 2021 were $0.7 million compared to $0.5 million for the three months ended September 30, 2020.

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 $0.7 million for the three months ended June 30, 2021 compared to $1.3 million for the three months ended June 30, 2020.

The period-over-period decrease of $0.6 million was primarily due to the decrease in our outstanding debt during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, partially offset by a prepayment penalty from an early retirement of an equipment note during the three months ended June 30, 2021.

Interest expense was $0.3 million for the three months ended September 30, 2021 compared to $1.1 million for the three months ended September 30, 2020.

The period-over-period decrease of $0.8 million was primarily due to the decrease in our outstanding debt during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020, and prepayment penalties from early retirement of equipment notes during the three months ended September 30, 2020.

Income tax expense.

Income tax expense was $7.9 million for the three months ended June 30, 2021, with an effective tax rate of 27.0%, compared to the expense of $5.0 million for the three months ended June 30, 2020, with an effective tax rate of 27.1%.

The decrease in the tax rate for the three months ended June 30, 2021 was primarily due to a favorable impact from stock compensation excess tax benefits, partially offset by excess tax expense pertaining to the impact of global intangible low tax income (“GILTI”).

Net income was $21.2 million for the three months ended June 30, 2021 compared to $13.4 million for the three months ended June 30, 2020.

Income tax expense was $7.6 million for the three months ended September 30, 2021, with an effective tax rate of 24.6%, compared to the expense of $6.5 million for the three months ended September 30, 2020, with an effective tax rate of 27.4%.

The decrease in the tax rate for the three months ended September 30, 2021 was primarily due to the reduction of the impact of the global intangible low tax income (“GILTI”) and a favorable impact from stock compensation excess tax benefits.

Net income was $23.2 million for the three months ended September 30, 2021 compared to $17.3 million for the three months ended September 30, 2020.

The increase was primarily due to the reasons stated earlier.

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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:

Three months ended June 30,

Three months ended September 30,

(dollars in thousands) Amount Percent Amount Percent

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Transmission & Distribution

Revenues for our T&D segment for the three months ended June 30, 2021 were $326.8 million compared to $276.8 million for the three months ended June 30, 2020, an increase of $50.0 million, or 18.1%.

The increase in revenue was primarily related to an increase in revenue on two large-sized projects associated with accelerated schedule requirements at the beginning of a project and battery delivery and installation at the close-out of another.

Revenues from transmission projects represented 64.5% and 65.5% of T&D segment revenue for the three months ended June 30, 2021 and 2020, respectively.

Operating income for our T&D segment for the three months ended June 30, 2021 was $32.8 million, an increase of $9.0 million, or 37.4%, from the three months ended June 30, 2020.

The increase in T&D operating income from the prior year was primarily due to higher revenues, favorable job close-outs and better-than-anticipated productivity on certain projects, partially offset by labor and equipment inefficiencies on certain projects.

As a percentage of revenues, operating income for our T&D segment was 10.0% for the three months ended June 30, 2021 compared to 8.6% for the three months ended June 30, 2020.

Revenues for our T&D segment for the three months ended September 30, 2021 were $306.5 million compared to $299.7 million for the three months ended September 30, 2020, an increase of $6.8 million, or 2.3%.

The increase in revenue was primarily related to an increase in revenue on distribution projects partially offset by a decrease in revenue on transmission projects.

Revenues from transmission projects represented 54.1% and 61.7% of T&D segment revenue for the three months ended September 30, 2021 and 2020, respectively.

Operating income for our T&D segment for the three months ended September 30, 2021 was $35.3 million, an increase of $2.9 million, or 9.0%, from the three months ended September 30, 2020.

The increase in T&D operating income from the prior year was primarily due to higher revenues, favorable job close-outs and change orders and better-than-anticipated productivity on certain projects.

These improvements were partially offset by labor and equipment inefficiencies on certain projects.

As a percentage of revenues, operating income for our T&D segment was 11.5% for the three months ended September 30, 2021 compared to 10.8% for the three months ended September 30, 2020.

Commercial & Industrial

Revenues for our C&I segment for the three months ended June 30, 2021 were $322.7 million compared to $236.3 million for the three months ended June 30, 2020, an increase of $86.4 million, or 36.6%, primarily due to an increase in revenue on various-sized projects and accelerated schedules on two projects.

Additionally, revenues during the three months ended June 30, 2020 were negatively impacted by a slight slowdown of work in certain geographic areas related to the COVID-19 pandemic.

Operating income for our C&I segment for the three months ended June 30, 2021 was $14.5 million, an increase of $5.5 million, over the three months ended June 30, 2020.

The period-over-period increase in operating income was due to higher revenues and better-than-anticipated productivity on certain projects.

Revenues for our C&I segment for the three months ended September 30, 2021 were $303.6 million compared to $308.2 million for the three months ended September 30, 2020, a decrease of $4.6 million, or 1.5%, primarily due to a decrease in volume on various-sized projects in certain geographic areas.

Operating income for our C&I segment for the three months ended September 30, 2021 was $14.1 million, an increase of $2.4 million, over the three months ended September 30, 2020.

The period-over-period increase in operating income was due to better-than-anticipated productivity on certain projects and favorable change orders.

These increases were partially offset by labor and equipment inefficiencies on certain projects.

As a percentage of revenues, operating income for our C&I segment was 4.5% for the three months ended June 30, 2021 compared to 3.8% for the three months ended June 30, 2020.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Revenues were $1.24 billion for the six months ended June 30, 2021 compared to $1.03 billion for the six months ended June 30, 2020.

The increase of $210.6 million, or 20.4%, was primarily due to an increase in revenue on large-sized T&D projects as well as an increase in revenue on various-sized C&I projects.

Additionally, revenues during the six months ended June 30, 2020 were negatively impacted by a slight slowdown of C&I work in certain geographic areas related to the COVID-19 pandemic.

As a percentage of revenues, operating income for our C&I segment was 4.7% for the three months ended September 30, 2021 compared to 3.8% for the three months ended September 30, 2020.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Revenues were $1.85 billion for the nine months ended September 30, 2021 compared to $1.64 billion for the nine months ended September 30, 2020.

The increase of $212.8 million, or 13.0%, was primarily due to an increase in revenue on various-sized C&I projects in certain geographic areas, an increase in revenue on distribution projects and large-sized T&D projects.

Additionally, revenues during the nine months ended September 30, 2020 were negatively impacted by a slight slowdown of C&I work in certain geographic areas related to the COVID-19 pandemic.

Gross margin.

Gross margin was 12.7% for the six months ended June 30, 2021 compared to 11.9% for the six months ended June 30, 2020.

The increase in gross margin was primarily due to better-than-anticipated productivity on certain projects and favorable job close-outs.

These improvements were partially offset by labor and equipment inefficiencies on certain projects, unfavorable pending change order adjustments on certain projects and inclement weather experienced on a project.

Changes in estimates of gross profit on certain projects resulted in gross margin increase of 0.3% and decrease of 0.1% for the six months ended June 30, 2021 and 2020, respectively.

Gross margin was 13.1% for the nine months ended September 30, 2021 compared to 12.2% for the nine months ended September 30, 2020.

The increase in gross margin was primarily due to better-than-anticipated productivity on certain projects, favorable job close-outs and a favorable change order on a project.

These improvements were partially offset by labor and equipment inefficiencies on certain projects and unfavorable pending change order adjustments on certain projects.

Changes in estimates of gross profit on certain projects resulted in a gross margin increase of 0.4% and a decrease of 0.4% for the nine months ended September 30, 2021 and 2020, respectively.

Gross profit.

Gross profit was $158.0 million for the six months ended June 30, 2021 compared to $122.9 million for the six months ended June 30, 2020, the increase of $35.1 million, or 28.5% was due to higher revenues and margins.

Gross profit was $241.9 million for the nine months ended September 30, 2021 compared to $199.4 million for the nine months ended September 30, 2020, the increase of $42.5 million, or 21.3% was due to higher revenues and margins.

Selling, general and administrative expenses.

SG&A was $101.5 million for the six months ended June 30, 2021 compared to $86.2 million for the six months ended June 30, 2020.

The period-over-period increase of $15.3 million was primarily due to higher employee incentive compensation costs and contingent compensation expense related to prior acquisitions.

SG&A was $154.6 million for the nine months ended September 30, 2021 compared to $137.7 million for the nine months ended September 30, 2020.

The period-over-period increase of $16.9 million was primarily due to higher employee incentive compensation costs, contingent compensation expense related to prior acquisitions and an increase in employee-related expenses to support the growth in our operations.

Gain on sale of property and equipment.

Gains from the sale of property and equipment for the six months ended June 30, 2021 were $1.8 million compared to $1.5 million for the six months ended June 30, 2020.

Gains from the sale of property and equipment for the nine months ended September 30, 2021 were $2.5 million compared to $2.0 million for the nine months ended September 30, 2020.

Gains from the sale of property and equipment are attributable to routine sales of property and equipment no longer useful or valuable to our ongoing operations.

Interest expense.

Interest expense was $1.2 million for the six months ended June 30, 2021 compared to $2.8 million for the six months ended June 30, 2020.

This decrease was primarily attributable to a decrease in our outstanding debt during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020, partially offset by a prepayment penalty from an early retirement of an equipment note during the six months ended June 30, 2021.

Interest expense was $1.5 million for the nine months ended September 30, 2021 compared to $3.9 million for the nine months ended September 30, 2020.

This decrease was primarily attributable to a decrease in our outstanding debt during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.

Income tax expense.

Income tax expense was $14.9 million for the six months ended June 30, 2021, with an effective tax rate of 26.6%, compared to the expense of $9.0 million for the six months ended June 30, 2020, with an effective tax rate of 27.9%.

The decrease in the tax rate for the six months ended June 30, 2021 was primarily due to a favorable impact from stock compensation excess tax benefits, partially offset by excess tax expense pertaining to the impact of GILTI.

Net income was $41.1 million for the six months ended June 30, 2021 compared to $23.3 million for the six months ended June 30, 2020.

Income tax expense was $22.5 million for the nine months ended September 30, 2021, with an effective tax rate of 25.9%, compared to the expense of $15.6 million for the nine months ended September 30, 2020, with an effective tax rate of 27.7%.

The decrease in the tax rate for the nine months ended September 30, 2021 was primarily due to a favorable impact from stock compensation excess tax benefits and the reduction of the impact of GILTI.

Net income was $64.3 million for the nine months ended September 30, 2021 compared to $40.6 million for the nine months ended September 30, 2020.

The increase was primarily due to the reasons stated earlier.

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Nine months ended September 30,

(dollars in thousands) Amount Percent Amount Percent

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Transmission & Distribution

Revenues for our T&D segment for the six months ended June 30, 2021 were $641.7 million compared to $536.0 million for the six months ended June 30, 2020, an increase of $105.7 million, or 19.7%.

The increase in revenue was primarily related to an increase in revenue on large-sized projects.

Revenues from transmission projects represented 65.8% of T&D segment revenue for each of the six months ended June 30, 2021 and 2020.

Operating income for our T&D segment for the six months ended June 30, 2021 was $61.4 million, an increase of $19.6 million, or 47.0%, from the six months ended June 30, 2020.

The increase in T&D operating income from the prior year was primarily due to higher revenues, favorable job close-outs and better-than-anticipated productivity on certain projects.

These increases were partially offset by labor and equipment inefficiencies and inclement weather experienced on a project.

As a percentage of revenues, operating income for our T&D segment was 9.6% for the six months ended June 30, 2021 compared to 7.8% for the six months ended June 30, 2020.

Revenues for our T&D segment for the nine months ended September 30, 2021 were $948.3 million compared to $835.8 million for the nine months ended September 30, 2020, an increase of $112.5 million, or 13.5%.

The increase in revenue was primarily related to an increase in revenue on distribution projects and large-sized projects.

Revenues from transmission projects represented 62.0% and 64.3% of T&D segment revenue for the nine months ended September 30, 2021 and 2020, respectively.

Operating income for our T&D segment for the nine months ended September 30, 2021 was $96.7 million, an increase of $22.5 million, or 30.4%, from the nine months ended September 30, 2020.

The increase in T&D operating income from the prior year was primarily due to higher revenues, favorable job close-outs, better-than-anticipated productivity on certain projects and a favorable change order on a project, partially offset by labor and equipment inefficiencies.

As a percentage of revenues, operating income for our T&D segment was 10.2% for the nine months ended September 30, 2021 compared to 8.9% for the nine months ended September 30, 2020.

Commercial & Industrial

Revenues for our C&I segment for the six months ended June 30, 2021 were $600.3 million compared to $495.5 million for the six months ended June 30, 2020, an increase of $104.8 million, or 21.2%, primarily due an increase in revenues on various-sized projects.

Additionally, revenues during the six months ended June 30, 2020 were negatively impacted by a slight slowdown of work in certain geographic areas related to the COVID-19 pandemic.

Operating income for our C&I segment for the six months ended June 30, 2021 was $28.8 million, an increase of $10.5 million over the six months ended June 30, 2020.

Revenues for our C&I segment for the nine months ended September 30, 2021 were $904.0 million compared to $803.7 million for the nine months ended September 30, 2020, an increase of $100.3 million, or 12.5%, primarily due an increase in revenues on various-sized projects in certain geographic areas.

Additionally, revenues during the nine months ended September 30, 2020 were negatively impacted by a slight slowdown of work in certain geographic areas related to the COVID-19 pandemic.

Operating income for our C&I segment for the nine months ended September 30, 2021 was $42.9 million, an increase of $12.9 million over the nine months ended September 30, 2020.

The period-over-period increase in operating income was primarily due to higher revenues and better-than-anticipated productivity on certain projects.

These increases were partially offset by unfavorable change order adjustments on certain projects and labor and equipment inefficiencies on a project.

As a percentage of revenues, operating income for our C&I segment was 4.8% for the six months ended June 30, 2021 compared to 3.7% for the six months ended June 30, 2020.

These increases were partially offset by labor and equipment inefficiencies and unfavorable change order adjustments on certain projects.

As a percentage of revenues, operating income for our C&I segment was 4.7% for the nine months ended September 30, 2021 compared to 3.7% for the nine months ended September 30, 2020.

Non-GAAP Measure—EBITDA

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Liquidity and Capital Resources

As of June 30, 2021, we had working capital of $221.5 million.

As of September 30, 2021, we had working capital of $244.9 million.

We define working capital as current assets less current liabilities.

During the six months ended June 30, 2021, operating activities of our business provided net cash of $88.6 million, compared to $97.9 million of cash provided for the six months ended June 30, 2020.

During the nine months ended September 30, 2021, operating activities of our business provided net cash of $108.2 million, compared to $128.6 million of cash provided for the nine months ended September 30, 2020.

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.

The $9.4 million year-over-year decrease in cash used by operating activities was primarily due to unfavorable net changes in operating assets and liabilities of $28.8 million and an increase in net income of $17.8 million.

The unfavorable change in operating assets and liabilities was primarily due to the net unfavorable year-over-year changes in various working capital accounts that relate primarily to construction activities (accounts receivable, contract assets, accounts payable and contract liabilities) of $18.2 million and an unfavorable change of $16.8 million in other liabilities.

The unfavorable changes in cash provided by working capital accounts, primarily related to construction activities, was primarily due to unfavorable changes in contract assets and contract liabilities due to the timing of billings and payments under our contracts.

The $20.4 million year-over-year decrease in cash provided by operating activities was primarily due to unfavorable net changes in operating assets and liabilities of $45.9 million, partially offset by an increase in net income of $23.7 million.

The unfavorable change in operating assets and liabilities was primarily due to an unfavorable change of $34.0 million in other liabilities and an unfavorable change of $12.9 million in other assets, partially offset by the net favorable year-over-year changes in various working capital accounts that relate primarily to construction activities (accounts receivable, contract assets, accounts payable and contract liabilities) of $1.5 million.

The unfavorable change of $34.0 million in other liabilities was primarily due to higher bonus accruals and the timing of employee related wage and tax payments.

In the six months ended June 30, 2021, we used net cash of $19.4 million in investing activities of consisting of $21.0 million for capital expenditures, partially offset by $1.6 million of proceeds from the sale of equipment.

In the six months ended June 30, 2021, financing activities used net cash of $23.9 million, consisting primarily of payment of principal obligations under equipment notes of $20.6 million and share repurchases of $3.4 million, all of which represented shares surrendered to satisfy tax obligations under our stock compensation programs.

We anticipate that our borrowing availability of $362.7 million at June 30, 2021 under our revolving line of credit and future cash flow from operations will provide sufficient cash to enable us to meet our future operating needs, debt service requirements, capital expenditures, acquisition and joint venture opportunities, share repurchases, and $25.4 million of remaining payroll tax deferrals provided under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") which will be paid within the next two years.

The unfavorable change in other assets was primarily due to the prepayment of materials required for a large project.

The favorable changes in cash provided by working capital accounts, primarily related to construction activities, was primarily due to favorable changes in contract assets and contract liabilities due to the timing of billings and payments under our contracts.

In the nine months ended September 30, 2021, we used net cash of $30.2 million in investing activities consisting of $32.7 million for capital expenditures, partially offset by $2.5 million of proceeds from the sale of equipment.

In the nine months ended September 30, 2021, financing activities used net cash of $27.6 million, consisting primarily of payment of principal obligations under equipment notes of $24.4 million and share repurchases of $3.4 million, all of which represented shares surrendered to satisfy tax obligations under our stock compensation programs.

We anticipate that our borrowing availability of $362.7 million at September 30, 2021 under our revolving line of credit and future cash flow from operations will provide sufficient cash to enable us to meet our future operating needs, debt service requirements, capital expenditures, acquisition and joint venture opportunities, share repurchases, and $13.4 million of remaining payroll tax deferrals provided under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") which will be paid by the end of next year.

Although we believe that we have adequate cash and borrowing capacity to meet our liquidity needs, any large projects or acquisitions may require additional capital.

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The Credit Agreement also contains a number of covenants, including limitations on asset sales, investments, indebtedness and liens.

We were in compliance with all of the financial covenants under the Credit Agreement as of June 30, 2021.

We had no debt outstanding under the Facility as of June 30, 2021 and December 31, 2020, and letters of credit outstanding of approximately $12.3 million and $10.4 million as of June 30, 2021 and December 31, 2020, respectively.

We were in compliance with all of the financial covenants under the Credit Agreement as of September 30, 2021.

We had no debt outstanding under the Facility as of September 30, 2021 and December 31, 2020, and letters of credit outstanding of approximately $12.3 million and $10.4 million as of September 30, 2021 and December 31, 2020, respectively.

Equipment Notes

2 unchanged sentences

Each Equipment Note constitutes a separate, distinct and independent financing of equipment and contractual obligation.

As of June 30, 2021, we had two executed and outstanding Equipment Notes that are collateralized by equipment and vehicles owned by us.

In addition to regularly scheduled payments, we retired two of our Equipment Notes during the six months ended June 30, 2021, one of which contained a prepayment penalty.

The outstanding balance of our Equipment Notes was $8.8 million and $29.4 million as of June 30, 2021 and December 31, 2020, respectively.

On July 2, 2021, we prepaid our $3.8 million Equipment Note 9 using cash on hand.

This prepayment included an insignificant amount of accrued interest and there was no associated prepayment penalty.

As of September 30, 2021, we had one executed and outstanding Equipment Note that is collateralized by equipment and vehicles owned by us.

In addition to regularly scheduled payments, we retired three of our Equipment Notes during the nine months ended September 30, 2021, one of which contained a prepayment penalty.

The outstanding balance of our Equipment Notes was $5.0 million and $29.4 million as of September 30, 2021 and December 31, 2020, respectively.

Off-Balance Sheet Transactions

8 unchanged sentences

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 June 30, 2021 and 2020, none of our customers individually exceeded 10% of consolidated accounts receivable.

As of September 30, 2021 and 2020, none of our customers individually exceeded 10% of consolidated accounts receivable.

Management believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk.

29 unchanged sentences

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

• Our insurance has limits and exclusions that may not fully indemnify us against certain claims or losses, including claims resulting from wildfires or other natural disasters, and the unavailability or cancellation of third party insurance coverages would increase our overall risk exposure and could disrupt our operations.

• Our insurance has limits and exclusions that may not fully indemnify us against certain claims or losses, including claims resulting from wildfires or other natural disasters, and an increase in cost, unavailability or cancellation of third party insurance coverages would increase our overall risk exposure and could disrupt our operations and reduce our profitability.

• Changes in tax laws or our interpretations of tax laws could materially impact our income tax liabilities.

19 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis