MYR GROUP INC. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS Management’s Report on Internal Control Over Financial Reporting 44 Report of Independent Registered Public Accounting Fir m (1) 45 Consolidated Balance Sheets as of December 31, 2021 and 2020 47 Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2021 , 2020 and 2019 48 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021 , 2020 and 2019 49 Consolidated Statements of Cash Flows for the years ended December 31, 2021 , 2020 and 2019 50 Notes to Financial Statements 51 ___________________________ (1) The report of MYR Group’s independent registered public accounting firm (PCAOB ID: 173 ) with respect to the above-referenced financial statements and their report on internal control over financial reporting are included in Item 8 of this Form 10-K at the page number referenced above. 43 TABLE OF CONTENTS Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our Financial Statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2021 in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurances and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate. Crowe LLP, the independent registered public accounting firm that audited and reported on the 2021 Financial Statements included in this Annual Report on Form 10-K, has audited the effectiveness of MYR Group’s internal control over financial reporting as of December 31, 2021 and has issued an attestation report on MYR Group’s internal control over financial reporting which appears herein. February 23, 2022 44 TABLE OF CONTENTS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of MYR Group Inc. Henderson, CO Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of MYR Group Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework: (2013) issued by COSO. Basis for Opinions The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 45 TABLE OF CONTENTS Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Evaluation of variable consideration and estimated costs to complete on select long-term fixed price construction contracts As described in Note 1 of the Company’s consolidated financial statements, Organization, Business, and Significant Accounting Policies , and Note 12, Revenue Recognition , the Company recognizes revenue on fixed price construction projects over time using the cost-to-cost method. The amount of contract revenues and gross profit recognized on fixed price construction contracts is dependent on the contract price, the actual contract costs incurred, and the forecasted contract revenues and contract costs for construction projects. The recognition of revenue on fixed price construction contracts involves significant estimates based on specific project conditions and performance and due to uncertainty about estimates of costs to complete, and uncertainty in the outcome of discussions with customers on the valuation of change orders and claims. The Company measures progress towards completion using the cost-to-cost method, which measures the progress as the ratio of actual contract costs incurred to date to the total estimated cost. The Company recognizes revenue related to change orders only when it is probable that the change order will result in an addition to contract value and can be reliably estimated. The Company evaluates change orders and claims based on historical experience with the customer, similar contracts, and on an individual basis, which involves significant judgment. The Company recognizes estimated amounts of variable consideration in transaction price to the extent that it is probable there will not be a significant reversal of revenue. Changes in estimates of variable consideration and costs to complete on in-process construction projects could have a significant impact on the amount of contract revenue recognized. We identified auditing management’s estimates of variable consideration for change orders and claims and estimated costs to complete associated with the revenue recognition on select long-term fixed price construction contracts to be a critical audit matter. The critical audit matter relates to select long-term fixed price construction contracts, based on magnitude of estimated costs to complete and the stage of completion of the contract. These estimates require management to make assumptions about future events and, as a result, a high degree of auditor judgment is involved in auditing these estimates. Due to the factors above, auditing management’s estimates of costs to complete and variable consideration required extensive audit procedures. Our audit procedures to address the critical audit matter included the following: – Tested the operating effectiveness of controls over the reasonableness of estimates of costs to complete contracts and estimates of variable consideration recognized on contracts; – Evaluated management’s process for estimating the costs to complete for select long-term fixed price construction contracts and evaluated the reasonableness of the significant assumptions used in the estimates; – Agreed a sample of contract costs incurred to supporting documentation; – Performed corroborative interviews of management and project personnel regarding facts and circumstances relevant to the accounting for such contracts; – Evaluated variable consideration recognized related to construction projects by comparing management’s estimates to subsequent actual data, evaluating the contracts and other documents that support estimates made by management, and obtaining legal correspondence from internal and external counsel; and – Performed procedures to retrospectively assess management’s historical ability to accurately estimate variable consideration and cost to complete of construction contracts. /s/ Crowe LLP We have served as the Company’s auditor since 2017. Oak Brook, Illinois February 23, 2022 46 TABLE OF CONTENTS MYR GROUP INC. CONSOLIDATED BALANCE SHEETS December 31, (in thousands, except share and per share data) 2021 2020 ASSETS Current assets Cash and cash equivalents $ 82,092 $ 22,668 Accounts receivable, net of allowances of $ 2,441 and $ 1,696 , respectively 375,353 385,938 Contract assets, net of allowances of $ 385 and $ 359 , respectively 225,075 185,803 Current portion of receivable for insurance claims in excess of deductibles 11,078 11,859 Refundable income taxes 9,228 1,534 Prepaid expenses and other current assets 45,564 28,882 Total current assets 748,390 636,684 Property and equipment, net of accumulated depreciation of $ 322,128 and $ 294,366 , respectively 196,092 185,114 Operating lease right-of-use assets 20,971 22,291 Goodwill 66,065 66,065 Intangible assets, net of accumulated amortization of $ 16,779 and $ 14,467 , respectively 49,054 51,365 Receivable for insurance claims in excess of deductibles 32,443 27,043 Investment in joint venture 3,978 3,040 Other assets 4,099 4,257 Total assets $ 1,121,092 $ 995,859 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Current portion of long-term debt $ 1,039 $ 4,381 Current portion of operating lease obligations 7,765 6,612 Current portion of finance lease obligations — 318 Accounts payable 200,744 162,580 Contract liabilities 167,931 158,396 Current portion of accrued self-insurance 24,242 24,395 Accrued income taxes 2,021 — Other current liabilities 94,857 86,718 Total current liabilities 498,599 443,400 Deferred income tax liabilities 24,620 18,339 Long-term debt 3,464 25,039 Accrued self-insurance 50,816 45,428 Operating lease obligations, net of current maturities 13,230 15,730 Other liabilities 11,261 18,631 Total liabilities 601,990 566,567 Commitments and contingencies Stockholders’ equity Preferred stock – $ 0.01 par value per share; 4,000,000 authorized shares; none issued and outstanding at December 31, 2021 and December 31, 2020 — — Common stock – $ 0.01 par value per share; 100,000,000 authorized shares; 16,870,636 and 16,734,239 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively 168 167 Additional paid-in capital 163,754 158,618 Accumulated other comprehensive income 173 23 Retained earnings 355,007 270,480 Total stockholders’ equity attributable to MYR Group Inc. 519,102 429,288 Noncontrolling interest — 4 Total stockholders’ equity 519,102 429,292 Total liabilities and stockholders’ equity $ 1,121,092 $ 995,859 The accompanying notes are an integral part of these Financial Statements. 47 TABLE OF CONTENTS MYR GROUP INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME Year ended December 31, (in thousands, except per share data) 2021 2020 2019 Contract revenues $ 2,498,289 $ 2,247,392 $ 2,071,159 Contract costs 2,173,308 1,971,539 1,857,001 Gross profit 324,981 275,853 214,158 Selling, general and administrative expenses 207,208 188,535 156,674 Amortization of intangible assets 2,311 3,586 3,849 Gain on sale of property and equipment ( 3,098 ) ( 2,813 ) ( 3,543 ) Income from operations 118,560 86,545 57,178 Other income (expense): Interest income 70 9 4 Interest expense ( 1,799 ) ( 4,563 ) ( 6,225 ) Other expense, net ( 525 ) ( 606 ) ( 515 ) Income before provision for income taxes 116,306 81,385 50,442 Income tax expense 31,300 22,626 14,228 Net income 85,006 58,759 36,214 Less: net loss attributable to noncontrolling interest ( 4 ) — ( 1,476 ) Net income attributable to MYR Group Inc. $ 85,010 $ 58,759 $ 37,690 Income per common share attributable to MYR Group Inc.: – Basic $ 5.05 $ 3.52 $ 2.27 – Diluted $ 4.95 $ 3.48 $ 2.26 Weighted average number of common shares and potential common shares outstanding: – Basic 16,838 16,684 16,587 – Diluted 17,161 16,890 16,699 Net income $ 85,006 $ 58,759 $ 36,214 Other comprehensive income (loss): Foreign currency translation adjustment 150 469 ( 253 ) Other comprehensive income (loss) 150 469 ( 253 ) Total comprehensive income 85,156 59,228 35,961 Less: net loss attributable to noncontrolling interest ( 4 ) — ( 1,476 ) Total comprehensive income attributable to MYR Group Inc. $ 85,160 $ 59,228 $ 37,437 The accompanying notes are an integral part of these Financial Statements. 48 TABLE OF CONTENTS MYR GROUP INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Preferred Stock Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings MYR Group Inc. Shareholders’ Equity Noncontrolling Interest Total (in thousands) Shares Amount Balance at December 31, 2018 $ — 16,565 $ 165 $ 148,276 $ ( 193 ) $ 174,736 $ 322,984 $ 1,480 $ 324,464 Net income — — — — — 37,690 37,690 ( 1,476 ) 36,214 Stock issued under compensation plans, net — 105 1 340 — — 341 — 341 Stock-based compensation expense — — — 4,403 — — 4,403 — 4,403 Shares repurchased — ( 23 ) — ( 571 ) — ( 207 ) ( 778 ) — ( 778 ) Other comprehensive loss — — — — ( 253 ) — ( 253 ) — ( 253 ) Stock issued – other — 2 — 84 — — 84 — 84 Balance at December 31, 2019 — 16,649 166 152,532 ( 446 ) 212,219 364,471 4 364,475 Net income — — — — — 58,759 58,759 — 58,759 Adjustment to adopt ASC 326 — — — — — ( 268 ) ( 268 ) — ( 268 ) Stock issued under compensation plans, net — 108 1 748 — — 749 — 749 Stock-based compensation expense — — — 5,688 — — 5,688 — 5,688 Shares repurchased — ( 25 ) — ( 422 ) ( 230 ) ( 652 ) — ( 652 ) Other comprehensive income — — — — 469 — 469 — 469 Stock issued – other — 2 — 72 — — 72 — 72 Balance at December 31, 2020 — 16,734 167 158,618 23 270,480 429,288 4 429,292 Net income — — — — — 85,010 85,010 ( 4 ) 85,006 Stock issued under compensation plans, net — 187 2 496 — — 498 — 498 Stock-based compensation expense — — — 7,496 — — 7,496 — 7,496 Shares repurchased — ( 51 ) ( 1 ) ( 2,868 ) — ( 483 ) ( 3,352 ) — ( 3,352 ) Other comprehensive income — — — — 150 — 150 — 150 Stock issued – other — 1 — 12 — — 12 — 12 Balance at December 31, 2021 $ — 16,871 $ 168 $ 163,754 $ 173 $ 355,007 $ 519,102 $ — $ 519,102 The accompanying notes are an integral part of these Financial Statements. 49 TABLE OF CONTENTS MYR GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended December 31, (in thousands) 2021 2020 2019 Cash flows from operating activities: Net income $ 85,006 $ 58,759 $ 36,214 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation and amortization of property and equipment 43,894 42,867 40,667 Amortization of intangible assets 2,311 3,586 3,849 Stock-based compensation expense 7,496 5,688 4,403 Deferred income taxes 6,281 ( 2,641 ) 3,602 Gain on sale of property and equipment ( 3,098 ) ( 2,813 ) ( 3,543 ) Other non-cash items 1,892 1,951 1,029 Changes in operating assets and liabilities: Accounts receivable, net 10,659 2,903 ( 39,710 ) Contract assets, net ( 39,266 ) 31,360 ( 16,443 ) Receivable for insurance claims in excess of deductibles ( 4,619 ) ( 1,511 ) ( 9,646 ) Prepaid expenses and other assets ( 25,320 ) ( 15,458 ) ( 10,327 ) Accounts payable 34,348 ( 43,079 ) 22,492 Contract liabilities 9,573 52,918 28,163 Accrued self-insurance 5,233 3,010 12,755 Other liabilities 2,838 37,627 ( 8,606 ) Net cash flows provided by operating activities 137,228 175,167 64,899 Cash flows from investing activities: Proceeds from sale of property and equipment 3,062 3,429 4,051 Cash paid for acquisitions, net of cash acquired — — ( 79,720 ) Purchases of property and equipment ( 52,361 ) ( 44,355 ) ( 57,828 ) Net cash flows used in investing activities ( 49,299 ) ( 40,926 ) ( 133,497 ) Cash flows from financing activities: Net borrowings (repayments) under revolving lines of credit — ( 103,820 ) 45,514 Payment of principal obligations under equipment notes ( 24,917 ) ( 32,584 ) ( 4,550 ) Payment of principal obligations under finance leases ( 336 ) ( 1,238 ) ( 1,201 ) Borrowings under equipment notes — — 35,068 Proceeds from exercise of stock options 498 749 341 Debt refinancing costs — — ( 1,122 ) Payments related to tax withholding for stock-based compensation ( 3,352 ) ( 652 ) ( 778 ) Other financing activities 12 13,249 84 Net cash flows provided by (used in) financing activities ( 28,095 ) ( 124,296 ) 73,356 Effect of exchange rate changes on cash ( 410 ) 326 132 Net increase in cash and cash equivalents 59,424 10,271 4,890 Cash and cash equivalents: Beginning of period 22,668 12,397 7,507 End of period $ 82,092 $ 22,668 $ 12,397 Supplemental Cash Flow Information: Cash paid during the period for: Income taxes payments $ 30,009 $ 24,185 $ 13,381 Interest payments 1,444 4,071 5,737 Noncash investing activities: Acquisition of property and equipment for which payment is pending 4,120 349 43 The accompanying notes are an integral part of these Financial Statements. 50 TABLE OF CONTENTS MYR GROUP INC. NOTES TO FINANCIAL STATEMENTS 1. Organization, Business and Significant Accounting Policies Organization and Business MYR Group Inc. (the “Company”) is a holding company of specialty electrical construction service providers and is currently conducting operations through wholly owned subsidiaries. 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. T&D provides a broad range of services, which include design, engineering, procurement, construction, upgrade, maintenance and repair services, with a particular focus on construction, maintenance and repair. C&I customers include general contractors, commercial and industrial facility owners, government agencies and developers. C&I provides a broad range of services, which include design, installation, maintenance and repair of commercial and industrial wiring, the installation of traffic networks and the installation of bridge, roadway and tunnel lighting. Significant Accounting Policies Consolidation The accompanying Financial Statements include the results of operations of the Company and its subsidiaries. Significant intercompany transactions and balances have been eliminated. Certain reclassifications were made to prior year amounts to conform to the current year presentation. Revenue Recognition The Company recognizes revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services provided. Revenue associated with contracts with customers is recognized over time as the Company’s performance creates or enhances customer-controlled assets or creates or enhances an asset with no alternative use, for which the Company has an enforceable right to receive compensation as defined under the contract. To determine the amount of revenue to recognize over time, the Company estimates profit by determining the difference between total estimated revenue and total estimated cost of a contract. In addition, the Company estimates a cost accrual every quarter that represents unbilled invoicing activity for services performed by subcontractors and suppliers during the quarter, and estimates revenue from the contract cost portion of this accrual based on current gross margin rates to be consistent with its cost method of revenue recognition. The estimated value of unbilled amounts are determined using a regression analysis that estimates value based on the Company’s historical experience, and is adjusted for large individual projects. The profit and corresponding revenue is recognized over the contract term based on costs incurred under the cost-to-cost method. The Company utilizes the cost-to-cost method as it believes cost incurred best represents the amount of work completed and remaining on projects, and is the most common basis for computing percentage of completion in the industry. For purposes of recognizing revenue, the Company follows the five-step approach outlined in Accounting Standards Codification (“ASC”) 606-10-25. As the cost-to-cost method is driven by incurred cost, the Company calculates the percentage of completion by dividing costs incurred to date by the total estimated cost. The percentage of completion is then multiplied by estimated revenues to determine inception-to-date revenue. Revenue recognized for the period is the current inception-to-date recognized revenue less the prior period inception-to-date recognized revenue. If a contract is projected to result in a loss, the entire contract loss is recognized in the period when the loss was first determined and the amount of the loss is updated in subsequent reporting periods. Because the Company’s billings are based on contract terms and do not coincide with our progress in a project, revenue recognition also includes an amount related to a contract asset or contract liability. If the recognized revenue is greater than the amount billed to the customer, a contract asset is recorded. Additionally, the contract asset includes retainage billed to the customer that cannot be collected until the contract work has been completed and approved. Conversely, if the amount billed to the customer is greater than the recognized revenue, a contract liability is recorded. Additionally, the contract liability includes a liability for the excess of costs over revenues for all contracts that are in a loss position. 51 TABLE OF CONTENTS Contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract. Changes in the job performance, job conditions and final contract settlements are factors that influence management’s assessment of total contract value and the total estimated costs to complete those contracts, and therefore, profit and revenue recognition. Additionally, the Company estimates costs to complete on fixed price contracts which are determined on an individual contract basis by evaluating each project’s status as of the balance sheet date, and using our historical experience with the level of effort required to complete the underlying project. Claims and change orders are also measured based on our historical experience with individual customers and similar contracts, and are evaluated by management individually. A change order is a modification to a contract that changes the provisions of the contract, typically resulting from changes in scope, specifications, design, manner of performance, facilities, equipment, materials, sites, or period of completion of the work under the contract. A claim is an amount in excess of the agreed-upon contract price that the Company seeks to collect from its clients or others for client-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes. The Company includes these estimated amounts of variable consideration to the extent that it is probable there will not be a significant reversal of revenue. Some of the Company’s contracts may have contract terms that include variable consideration such as safety or performance bonuses or liquidated damages. In accordance with ASC 606-10-32, the Company estimates the variable consideration using one of two methods. In contracts in which there is a binary outcome, the most likely amount method is used. In instances in which there is a range of possible outcomes, the expected value method is used. In accordance with ASC 606-10-32-11, the Company includes the estimated amount of variable consideration in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative recognized revenue will not occur when the final outcome of the variable consideration is determined. In contracts in which a significant reversal may occur, the Company uses constraint in recognizing revenue on variable consideration. Although the Company often enters into contracts that contain liquidated damage clauses, the Company rarely incurs them, and as such, the Company does not include amounts associated with liquidated damage clauses until it is probable that liquidated damages will occur. These items are continually monitored by multiple levels of management throughout the reporting period. A portion of the work the Company performs requires financial assurances in the form of performance and payment bonds or letters of credit at the time of execution of the contract. Many of the Company’s contracts include retention provisions of up to 10 %, which are generally withheld from each progress payment as retainage until the contract work has been completed and approved. The Company provides warranties to customers on a basis customary to the industry; however, the warranty period does not typically exceed one year. Historically, warranty claims have not been material to the Company. Total revenues do not include sales tax as the Company considers itself a pass-through conduit for collecting and remitting sales taxes. Sales tax and value added tax collected from customers is included in other current liabilities on the Company’s consolidated balance sheets. Joint Ventures and Noncontrolling Interests The Company accounts for investments in joint ventures using the proportionate consolidation method for income statement reporting and under the equity method for balance sheet reporting, unless the Company has a controlling interest causing the joint venture to be consolidated with equity owned by other joint venture partners recorded as noncontrolling interests. Under the proportionate consolidation method, joint venture activity is allocated to the appropriate line items found on the consolidated statements of operations in proportion to the percentage of participation the Company has in the joint venture. During the years ended December 31, 2021, 2020 and 2019, the Company recognized its proportionate share of joint venture revenues of $ 26.1 million, $ 27.2 million, and $ 20.3 million, respectively. Under the equity method the net investment in joint ventures is stated as a single item on the Company’s consolidated balance sheets. If an investment in a joint venture contains a recourse or unfunded commitments to provide additional equity, distributions and/or losses in excess of the investment a liability is recorded in other current liabilities on the Company’s consolidated balance sheets. For joint ventures which the Company does not have a controlling interest, the Company’s share of any profits and assets and its share of any losses and liabilities are recognized based on the Company’s stated percentage partnership interest in the joint venture, and are normally recorded by the Company one month in arrears. The investments in joint ventures are recorded at cost and the carrying amounts are adjusted to recognize the Company’s proportionate share of cumulative income or loss, additional contributions made and dividends and capital distributions received. The Company records the effect of any impairment or any other-than-temporary decrease in the value of the joint venture investment as incurred, which may or may not be one month in arrears, depending on when the Company obtains the joint venture activity information. Additionally, the Company continually assesses the fair value of its investment in unconsolidated joint ventures despite using information that is one month in arrears for regular reporting purposes. The Company includes only its percentage ownership of each joint venture in its backlog. See Note 18–Noncontrolling Interests to the Financial Statements for further information related to joint ventures in which the Company has a majority controlling interest. 52 TABLE OF CONTENTS Foreign Currency The functional currency for the Company’s Canadian operations is the Canadian dollar. Assets and liabilities denominated in Canadian dollars are translated into U.S. dollars at the end-of-period exchange rate. Revenues and expenses are translated using average exchange rates for the periods reported. Equity accounts are translated at historical rates. Cumulative translation adjustments are included as a separate component of accumulated other comprehensive income in shareholders’ equity. Foreign currency transaction gains and losses, arising primarily from changes in exchange rates on short-term monetary assets and liabilities, and ineffective long-term monetary assets and liabilities are recorded in the “other income, net” line on the Company’s consolidated statements of operations. Foreign currency losses, recorded in other income, net, for the year ended December 31, 2021, were $ 0.1 million. Effective foreign currency transaction gains and losses, arising primarily from long-term assets and liabilities are recorded in the foreign currency translation adjustment line on the Company’s consolidated statements of comprehensive income. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the period reported. Actual results could differ from those estimates. The most significant estimates are related to estimates of costs to complete on contracts, pending change orders and claims, shared savings, insurance reserves, income tax reserves, estimates surrounding stock-based compensation, the recoverability of goodwill and intangibles and allowance for doubtful accounts. The Company estimates a cost accrual every period that represents costs incurred but not invoiced for services performed or goods delivered during the period, and estimates revenue from the contract cost portion of these accruals based on current gross margin rates to be consistent with its cost method of revenue recognition. As of December 31, 2021 and 2020, the Company recognized revenues of $ 2.4 million and $ 14.7 million, respectively, related to significant change orders and/or claims that had been included as contract price adjustments on certain contracts, some of which are multi-year projects. These change orders and/or claims are in the process of being negotiated in the normal course of business, and a portion of these recognized revenues had been included in multiple periods. These aggregate amounts, which were included in “Contract assets” in the accompanying consolidated balance sheets, represent the Company’s estimates of additional contract revenues that were earned and probable of collection, however, the amount ultimately realized could be significantly higher or lower than the estimated amount. The cost-to-cost method of accounting requires the Company to make estimates about the expected revenue and gross profit on each of its contracts in process. During the year ended December 31, 2021, changes in estimates pertaining to certain projects increased consolidated gross margin by 0.4 %, which resulted in increases in operating income of $ 9.2 million, net income of $ 6.6 million and diluted earnings per common share attributable to MYR Group Inc. of $ 0.39 . The estimates are reviewed and revised quarterly, as needed. During the year ended December 31, 2020, changes in estimates pertaining to certain projects decreased consolidated gross margin by 0.8 %, which resulted in decreases in operating income of $ 18.0 million, net income of $ 12.8 million and diluted earnings per common share attributable to MYR Group Inc. of $ 0.76 . During the year ended December 31, 2019, changes in estimates pertaining to certain projects decreased consolidated gross margin by 0.8 %, which resulted in decreases in operating income of $ 11.7 million, net income attributable to MYR Group Inc. of $ 7.5 million and diluted earnings per common share attributable to MYR Group Inc. of $ 0.45 . Advertising Advertising costs are expensed when incurred. Advertising costs, included in selling, general and administrative expenses, were $ 0.8 million, $ 0.7 million and $ 0.8 million for the years ended December 31, 2021, 2020 and 2019, respectively. 53 TABLE OF CONTENTS Income Taxes The Company follows the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded for future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled. The Company also evaluates whether the recorded deferred tax assets and valuation allowances can be realized and, when necessary, reduces the amounts to what is expected to be realized. Interest and penalties related to uncertain income tax positions are included in income tax expense on the Company’s consolidated statements of operations. Interest and penalties actually incurred are charged to interest expense and the “other income, net” line, respectively. Stock-Based Compensation The Company determines compensation expense for stock-based awards based on the estimated fair values at the grant date and recognize the related compensation expense over the vesting period. The Company uses the straight-line amortization method to recognize compensation expense related to stock-based awards, such as restricted stock and restricted stock units, that have only service conditions. This method recognizes stock compensation expense on a straight-line basis over the requisite service period for the entire award. The Company recognizes compensation expense related to performance awards that vest based on internal performance metrics and service conditions on a straight-line basis over the service period, but adjust inception-to-date expense based upon our determination of the potential achievement of the performance target at each reporting date. The Company recognizes compensation expense related to performance awards with market-based performance metrics on a straight-line basis over the requisite service period. The Company recognizes forfeitures as they occur. Shares issued under the Company’s stock-based compensation program are taken out of authorized but unissued shares. Earnings Per Share The Company computes earnings per share using the treasury stock method. Under the treasury stock method, basic earnings per share attributable to MYR Group Inc. are computed by dividing net income attributable to MYR Group Inc. by the weighted average number of common shares outstanding during the period. Diluted earnings per share attributable to MYR Group Inc. are computed by dividing net income attributable to MYR Group Inc. by the weighted average number of common shares outstanding during the period plus all potentially dilutive common stock equivalents, except in cases where the effect of the common stock equivalent would be anti-dilutive. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2021 and 2020, the Company held its cash in checking accounts or in highly liquid money market funds. The Company’s banking arrangements allow the Company to fund outstanding checks when presented to financial institutions for payment. The Company funds all intraday bank balances overdrafts during the same business day. Checks issued and outstanding in excess of bank balance are recorded in accounts payable on the Company’s consolidated balance sheets and are reflected as a financing activity on the Company’s Consolidated Statements of Cash Flows. Accounts Receivable and Allowance for Doubtful Accounts The Company does not charge interest to its customers and carries its customer receivables at their face amounts, net of contract retainage, less an allowance for doubtful accounts. Based on the Company’s experience in recent years, the majority of customer balances at each balance sheet date are collected within twelve months. As is common practice in the industry, the Company classifies all accounts receivable as current assets. The Company grants trade credit, on a non-collateralized basis (with the exception of lien rights against the property in certain cases), to its customers and is subject to potential credit risk related to changes in business and overall economic activity. The Company analyzes specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful accounts. Classification of Contract Assets and Liabilities The Company recognizes revenue associated with its contracts with customers over time, for which the Company has an enforceable right to receive compensation. Many of our contracts contain specific provisions that determine when the Company can bill for its work performed under these contracts. 54 TABLE OF CONTENTS Any revenue earned on a contract that has not yet been billed to the customer is recorded as a contract asset on the Company’s consolidated balance sheets. Contract retainages associated with contract work that has been completed and billed but not paid by its customers until the contracts are substantially complete, pursuant to contract retainage provisions under the contract, are also included in contract assets. The Company’s consolidated balance sheets present contract liabilities that contain deferred revenue that represent any costs incurred on contracts in process for which revenue has not yet been recognized. Additionally, accruals for contracts in a loss provision are included in contract liabilities. Property and Equipment Property and equipment is carried at cost, except for assets acquired in a business combination which are recorded at fair value at the date of acquisition. Depreciation is computed using the straight-line method over estimated useful lives. Major modifications or refurbishments which extend the useful life of the assets are capitalized and depreciated over the adjusted remaining useful life of the assets. Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is recognized in income from operations. The cost of maintenance and repairs is charged to expense as incurred. Property and equipment is reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value of property and equipment exceeds its fair value, an impairment charge would be recorded in the statement of operations. Leases The Company enters into non-cancelable leases for some of our facility, vehicle and equipment needs. These leases allow the Company to conserve cash by paying a monthly lease rental fee for the use of facilities, vehicles and equipment rather than purchasing them. The Company’s leases have remaining terms ranging from one to six years , some of which may include options to extend the leases for up to five years , and some of which may include options to terminate the leases within one year . Currently, all the Company’s leases contain fixed payment terms. The Company may decide to cancel or terminate a lease before the end of its term, in which case we are typically liable to the lessor for the remaining lease payments under the term of the lease. Additionally, all of the Company’s month-to-month leases are cancelable, by the Company or the lessor, at any time and are not included in our right-of-use asset or liability. As of December 31, 2021, the Company had several leases with residual value guarantees. The total amount probable of being owed of residual leases guarantees is not significant. Typically, the Company has purchase options on the equipment underlying its long-term leases and many of its short-term rental arrangements. The Company may exercise some of these purchase options when the need for equipment is on-going and the purchase option price is attractive. Nonperformance-related default covenants, cross-default provisions, subjective default provisions and material adverse change clauses contained in material lease agreements, if any, are also evaluated to determine whether those clauses affect lease classification in accordance with ASC Topic 842-10-25. Leases are accounted for as operating or finance leases, depending on the terms of the lease. Finance Leases. The Company leases some vehicles and certain equipment under finance leases. The economic substance of the leases is a financing transaction for acquisition of the vehicles and equipment. Accordingly, the right-of-use assets for these leases are included on the Company’s consolidated balance sheets in property and equipment, net of accumulated depreciation, with a corresponding amount recorded in current portion of finance lease obligations or finance lease obligations, net of current maturities, as appropriate. The finance lease assets are amortized over the life of the lease or, if shorter, the life of the leased asset, on a straight-line basis and included in depreciation expense. The financing component associated with finance lease obligations is included in interest expense. Generally, for the Company’s finance leases an implicit rate to calculate present value is provided in the lease agreement, however if a rate in not provided the Company determines this rate by estimating the Company’s incremental borrowing rate, utilizing the borrowing rates associated with the Company’s various debt instruments. Operating Right-of-Use Leases. Operating right-of-use leases are included in operating lease right-of-use assets, current portion of operating lease obligations and operating lease obligations, net of current maturities on the Company’s consolidated balance sheets, as appropriate. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate to calculate present value, the Company determines this rate by estimating the Company’s incremental borrowing rate, utilizing the borrowing rates associated with the Company’s various debt instruments. The operating lease right-of-use asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. 55 TABLE OF CONTENTS Insurance The Company carries insurance policies, which are subject to certain deductibles, for workers’ compensation, general liability, automobile liability and other coverages. The deductible for each line of coverage is up to $ 1.0 million, except for wildfire coverage which has a deductible of $ 2.0 million. The Company also maintains excess umbrella coverage providing higher layers of insurance coverage for losses that exhaust the limits of underlying coverage. A layer of this umbrella coverage requires the Company to pay a portion of any loss within a certain loss range and our potential exposure for such losses is up to approximately $ 3.8 million. Certain health benefit plans are subject to a stop-loss limit of up to $ 0.2 million, for qualified individuals. Losses up to the deductible amounts are accrued based upon the Company’s estimates of the ultimate liability for claims reported and an estimate of claims incurred but not yet reported. The insurance and claims accruals are based on known facts, actuarial estimates and historical trends. While recorded accruals are based on the ultimate liability, which includes amounts in excess of the deductible, a corresponding receivable for amounts in excess of the deductible is included in current assets on the Company’s consolidated balance sheets. Goodwill and Intangible Assets Goodwill and intangible assets with indefinite lives are not amortized. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. The Company performs either a qualitative or quantitative assessment to review goodwill and intangible assets with indefinite lives for impairment on an annual basis. This assessment is performed at the beginning of the fourth quarter, or when circumstances change, such as a significant adverse change in the business climate or the decision to sell a business, both of which would indicate that impairment may have occurred. Intangible assets with finite lives are also reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. A qualitative assessment considers financial, industry, segment and macroeconomic factors, if the qualitative assessment indicates a potential for impairment, a quantitative assessment is performed to determine if impairment exists. The quantitative assessment begins with a comparison of the fair value of the reporting unit or intangible asset with its carrying value. If the carrying amount of the reporting unit or intangible asset exceeds its fair value, an impairment loss would be recognized in an amount equal to that excess, limited to the total amount of the goodwill allocated to the reporting unit or intangible asset. If the carrying value of goodwill or other indefinite lived assets exceeds its implied fair value, an impairment charge would be recorded in the statement of operations. As a result of the annual qualitative review process in 2020 and 2019, the Company determined it was not necessary to perform a quantitative assessment. In 2021, the Company performed a quantitative assessment on goodwill and intangible assets with indefinite lives, this assessment did not indicate that the Company’s goodwill or indefinite lived intangible assets were impaired. Concentrations Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains substantially all of its cash and cash equivalent balances with large financial institutions which are believed to be high quality institutions. The Company is subject to a concentration of risk because it derives a significant portion of its revenues from a few customers. The Company’s top ten customers accounted for approximately 34.9 %, 32.7 %, and 30.8 % of consolidated revenues for the years ended December 31, 2021, 2020 and 2019, respectively. For the years ended December 31, 2021, 2020 and 2019, no single customer accounted for more than 10.0% of annual revenues. The Company grants trade credit under contractual payment terms, generally without collateral, to its customers, which include high credit quality electric utilities, governmental entities, general contractors and builders, owners and managers of commercial and industrial properties. Consequently, the Company is subject to potential credit risk related to changes in business and economic factors. However, the Company generally has certain statutory lien rights with respect to services provided. Under certain circumstances such as foreclosures or negotiated settlements, the Company may take title to the underlying assets in lieu of cash in settlement of receivables. As of December 31, 2021 and 2020, none of the Company’s customers individually exceeded 10.0% of accounts receivable. The Company believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk. As of December 31, 2021, approximately 92 % of the Company’s craft labor employees were covered by collective bargaining agreements. Although the majority of these agreements prohibit strikes and work stoppages, the Company cannot be certain that strikes or work stoppages will not occur in the future. 56 TABLE OF CONTENTS Recent Accounting Pronouncements Changes to GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs. The Company, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Company or may have minimal impact on its Financial Statements. Recently Adopted Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes , which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The Company adopted this ASU in January 2021 and there was no effect on the consolidated financial statements or disclosures. Recently Issued Accounting Pronouncements In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which is intended to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. Under the new guidance the acquirer is required to recognize contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 as if the acquirer had originated the contracts. The update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in an interim period, for any period for which financial statements have not yet been issued. However, adoption in an interim period other than the first fiscal quarter requires an entity to apply the new guidance to all prior business combinations that have occurred since the beginning of the annual period in which the new guidance is adopted. The Company is currently evaluating the adoption date and impact, if any, this update will have on its financial position and results of operations. 2. Acquisition CSI Electrical Contractors, Inc. On July 15, 2019, the Company completed the acquisition of substantially all the assets of CSI Electrical Contractors, Inc. (“CSI”), an electrical contracting firm based in California. CSI provides services to a broad array of end markets under the Company’s C&I segment. The total consideration, after net asset adjustments of approximately $ 1.0 million, was $ 80.7 million which was funded through borrowings under the Company’s credit facility. The Company finalized the purchase price accounting relating to the acquisition of CSI during the year ended December 31, 2019. The purchase agreement also includes contingent consideration provisions for margin guarantee adjustments based upon contract performance subsequent to the acquisition. The contracts were valued at fair value at the acquisition date, causing no margin guarantee estimate or adjustments for fair value. Changes in contract estimates, such as modified costs to complete or change order recognition, will result in changes to these margin guarantee estimates. Changes in contingent consideration, subsequent to the acquisition, related to the margin guarantee adjustments on contracts of approximately $ 0.5 million, $ 0.6 million and $ 2.0 million were recorded in other expense for the year ended December 31, 2021, 2020 and 2019, respectively. Future margin guarantee adjustments, if any, are expected to be recognized in 2022. The Company could also be required to make compensation payments contingent on the successful achievement of certain performance targets and continued employment of certain key executives of CSI. Payment of amounts earned, if any, as defined in the purchase agreement, will be made in 2024 and are included in other liabilities on the Company’s consolidated balance sheets. These payments are recognized as compensation expense on the Company’s consolidated statements of operations when deemed probable. For the year ended December 31, 2021, 2020 and 2019 the Company recognized $ 5.4 million, $ 4.0 million and $ 0.4 million, respectively, of compensation expense associated with these contingent payments. 3. Contract Assets and Liabilities Contracts with customers usually stipulate the timing of payment, which is defined by the terms found within the various contracts under which work was performed during the period. Therefore, contract assets and liabilities are created when the timing of costs incurred on work performed does not coincide with the billing terms, which frequently include retention provisions contained in each contract. 57 TABLE OF CONTENTS The Company’s consolidated balance sheets present contract assets, which contain unbilled revenue and contract retainages associated with contract work that has been completed and billed but not paid by customers, pursuant to retainage provisions, that are generally due once the job is completed and approved. The allowance for doubtful accounts associated with contract assets was $ 0.4 million as of December 31, 2021 and 2020. Contract assets consisted of the following at December 31: (in thousands) 2021 2020 Change Unbilled revenue, net $ 134,187 $ 97,543 $ 36,644 Contract retainages, net 90,888 88,260 2,628 Contract assets, net $ 225,075 $ 185,803 $ 39,272 The Company’s consolidated balance sheets present contract liabilities which contain deferred revenue and an accrual for contracts in a loss provision. Contract liabilities consisted of the following at December 31: (in thousands) 2021 2020 Change Deferred revenue $ 165,699 $ 155,570 $ 10,129 Accrued loss provision 2,232 2,826 ( 594 ) Contract liabilities $ 167,931 $ 158,396 $ 9,535 The following table provides information about contract assets and contract liabilities from contracts with customers at December 31: (in thousands) 2021 2020 Change Contract assets $ 225,075 $ 185,803 $ 39,272 Contract liabilities ( 167,931 ) ( 158,396 ) ( 9,535 ) Net contract assets (liabilities) $ 57,144 $ 27,407 $ 29,737 The difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing of the Company’s billings in relation to its performance of work. The amounts of revenues recognized in the period that were included in the opening contract liability balances were $ 116.5 million and $ 72.2 million for the year ended December 31, 2021 and 2020, respectively. This revenue consists primarily of work performed on previous billings to customers. The net asset position for contracts in process consisted of the following at December 31: (in thousands) 2021 2020 Costs and estimated earnings on uncompleted contracts $ 4,130,621 $ 3,921,376 Less: billings to date 4,162,133 3,979,403 $ ( 31,512 ) $ ( 58,027 ) The net asset position for contracts in process is included within the contract asset and contract liability in the accompanying consolidated balance sheets as follows at December 31: (in thousands) 2021 2020 Unbilled revenue, net $ 134,187 $ 97,543 Deferred revenue ( 165,699 ) ( 155,570 ) $ ( 31,512 ) $ ( 58,027 ) 58 TABLE OF CONTENTS 4. Lease Obligations From time-to-time, the Company enters into non-cancelable leases for some of our facility, vehicle and equipment needs. These leases allow the Company to conserve cash by paying a monthly lease rental fee for the use of facilities, vehicles and equipment rather than purchasing them. The Company’s leases have remaining terms ranging from one to six years , some of which may include options to extend the leases for up to five years , and some of which may include options to terminate the leases within one year . Currently, all the Company’s leases contain fixed payment terms. The Company may decide to cancel or terminate a lease before the end of its term, in which case we are typically liable to the lessor for the remaining lease payments under the term of the lease. Additionally, all of the Company's month-to-month leases are cancelable, by the Company or the lessor, at any time and are not included in our right-of-use asset or liability. At December 31, 2021, the Company had several leases with residual value guarantees. Typically, the Company has purchase options on the equipment underlying its long-term leases and many of its short-term rental arrangements. The Company may exercise some of these purchase options when the need for equipment is on-going and the purchase option price is attractive. Leases are accounted for as operating or finance leases, depending on the terms of the lease. The following is a summary of the lease-related assets and liabilities recorded: December 31, 2021 December 31, 2020 (in thousands) Classification on the Consolidated Balance Sheet Assets Operating lease right-of-use assets Operating lease right-of-use assets $ 20,971 $ 22,291 Finance lease right-of-use assets Property and equipment, net of accumulated depreciation — 390 Total right-of-use lease assets $ 20,971 $ 22,681 Liabilities Current Operating lease obligations Current portion of operating lease obligations $ 7,765 $ 6,612 Finance lease obligations Current portion of finance lease obligations — 318 Total current obligations 7,765 6,930 Non-current Operating lease obligations Operating lease obligations, net of current maturities 13,230 15,730 Total non-current obligations 13,230 15,730 Total lease obligations $ 20,995 $ 22,660 The following is a summary of the lease terms and discount rates: December 31, 2021 December 31, 2020 Weighted-average remaining lease term – finance leases 0.0 years 0.4 years Weighted-average remaining lease term – operating leases 2.9 years 3.4 years Weighted-average discount rate – finance leases — % 2.6 % Weighted-average discount rate – operating leases 3.9 % 3.9 % The following is a summary of certain information related to the lease costs for finance and operating leases: Year ended December 31, (in thousands) 2021 2020 Lease cost: Finance lease cost: Amortization of right-of-use assets $ — $ 883 Interest on lease liabilities — 31 Operating lease cost 10,217 9,378 Variable lease costs 317 335 Total lease cost $ 10,534 $ 10,627 59 TABLE OF CONTENTS The following is a summary of other information and supplemental cash flow information related to finance and operating leases: Year ended December 31, (in thousands) 2021 2020 Other information: Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 10,451 $ 9,237 Right-of-use asset obtained in exchange for new operating lease obligations $ 7,459 $ 6,764 The future undiscounted minimum lease payments, as reconciled to the discounted minimum lease obligation indicated on the Company’s consolidated balance sheets, under current portion of operating lease obligations and operating lease obligations, net of current maturities, as of December 31, 2021 were as follows: (in thousands) Operating Lease Obligations 2022 $ 9,826 2023 7,208 2024 4,149 2025 1,942 2026 1,047 Thereafter 10 Total minimum lease payments 24,182 Financing component ( 3,187 ) Net present value of minimum lease payments 20,995 Less: current portion of operating lease obligations ( 7,765 ) Long-term operating lease obligations $ 13,230 The financing component for operating lease obligations represents the effect of discounting the lease payments to their present value. As of December 31, 2021, the Company had no outstanding finance lease obligations. Certain subsidiaries of the Company have operating leases for facilities from third party companies that are owned, in whole or part, by employees of the subsidiaries. The terms and rental rates of these leases are at market rental rates. As of December 31, 2021, the minimum lease payments required under these leases totaled $ 2.5 million, which are due over the next 2.5 years. 5. Fair Value Measurements The Company uses the three-tier hierarchy of fair value measurement, which prioritizes the inputs used in measuring fair value based upon their degree of availability in external active markets. These tiers include: Level 1 (the highest priority), defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 (the lowest priority), defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. As of December 31, 2021 and 2020, the Company determined that the carrying value of cash and cash equivalents approximated fair value based on Level 1 inputs. As of December 31, 2021 and 2020, the fair value of the Company’s long-term debt and finance lease obligations, were based on Level 2 inputs. The Company’s long-term debt was based on variable and fixed interest rates at December 31, 2021 and 2020. Long-term debt, if any, with variable interest rates are based on rates for new issues with similar remaining maturities, and approximated carrying value. In addition, based on borrowing rates currently available to the Company for borrowings with similar terms, the carrying values of the Company’s long term debt with fixed interest rates also approximated fair value. 60 TABLE OF CONTENTS 6. Accounts Receivable Accounts receivable consisted of the following at December 31: (in thousands) 2021 2020 Contract receivables $ 374,826 $ 382,096 Other 2,968 5,538 377,794 387,634 Less: allowance for doubtful accounts ( 2,441 ) ( 1,696 ) $ 375,353 $ 385,938 The roll-forward of activity in the allowance for doubtful accounts was as follows for the years ended December 31: (in thousands) 2021 2020 2019 Balance at beginning of period $ 1,696 $ 3,364 $ 1,331 Less: reduction in (provision for) allowances ( 764 ) 1,296 ( 2,532 ) Less: write offs, net of recoveries 19 375 501 Change in foreign currency translation — ( 3 ) ( 2 ) Balance at end of period $ 2,441 $ 1,696 $ 3,364 7. Prepaid Expenses and Other Current Assets Prepaid expense and other current assets consisted of the following at December 31: (in thousands) 2021 2020 Prepaid expenses $ 44,677 $ 28,305 Other current assets 887 577 $ 45,564 $ 28,882 8. Property and Equipment Property and equipment consisted of the following at December 31: (dollars in thousands) Estimated Useful Life in Years 2021 2020 Land — $ 10,226 $ 9,301 Buildings and improvements 3 to 39 35,600 33,452 Construction equipment 3 to 12 455,011 420,002 Office equipment 3 to 10 17,383 16,725 518,220 479,480 Less: accumulated depreciation and amortization ( 322,128 ) ( 294,366 ) $ 196,092 $ 185,114 Construction equipment includes assets under finance leases — see additional information provided in Note 4 — Lease Obligations to the Financial Statements. Depreciation and amortization expense of property and equipment for the years ended December 31, 2021, 2020 and 2019 was $ 43.9 million, $ 42.9 million and $ 40.7 million, respectively. 61 TABLE OF CONTENTS 9. Goodwill and Intangible Assets Goodwill and intangible assets consisted of the following at December 31: 2021 2020 (in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Goodwill T&D $ 40,224 $ — $ 40,224 $ 40,224 $ — $ 40,224 C&I 25,841 — 25,841 25,841 — 25,841 Total goodwill $ 66,065 $ — $ 66,065 $ 66,065 $ — $ 66,065 Amortizable Intangible Assets Backlog $ 5,289 $ 5,289 $ — $ 5,289 $ 5,289 $ — Customer relationships 31,381 11,179 20,202 31,381 8,914 22,467 Trade names 696 311 385 696 264 432 Indefinite-lived Intangible Assets Trade names 28,467 — 28,467 28,466 — 28,466 Total intangible assets $ 65,833 $ 16,779 $ 49,054 $ 65,832 $ 14,467 $ 51,365 Customer relationships and backlog are being amortized on a straight-line method over an estimated useful life ranging up to 12.5 years and the remaining life of the contract, respectively, and have been determined to have no residual value. Amortizable trade names are being amortized on a straight-line basis over an estimated useful life of approximately 15 years. Certain trade names have indefinite lives and, therefore, are not being amortized. Intangible asset amortization expense was $ 2.3 million, $ 3.6 million and $ 3.8 million for the years ended December 31, 2021, 2020 and 2019, respectively. Immaterial foreign currency translation adjustments related to goodwill and intangible assets are netted with the amounts indicated above. As of December 31, 2021, estimated future intangible asset amortization expense for the each of the next five years and thereafter was as follows: (in thousands) Future Amortization Expense 2022 $ 2,312 2023 2,312 2024 2,312 2025 2,312 2026 2,312 Thereafter 9,027 Total $ 20,587 10. Accrued Liabilities Other current liabilities consisted of the following at December 31: (in thousands) 2021 2020 Payroll and incentive compensation $ 46,485 $ 30,145 Union dues and benefits 19,994 17,800 Taxes 4,605 18,130 Profit sharing and thrift plan 11,175 10,763 Other 12,598 9,880 $ 94,857 $ 86,718 62 TABLE OF CONTENTS 11. Debt The table below reflects the Company’s total debt, including borrowings under its credit agreement and master loan agreement for equipment notes: (dollars in thousands) Inception Date Stated Interest Rate (per annum) Payment Frequency Term (years) Outstanding Balance as of December 31, 2021 Outstanding Balance as of December 31, 2020 Credit Agreement Revolving loans 9/13/2019 Variable Variable 5 $ — $ — Equipment Notes Equipment Note 6 6/25/2019 2.89 % Semi-annual 7 — 12,896 Equipment Note 7 6/24/2019 3.09 % Semi-annual 5 — 6,980 Equipment Note 8 12/27/2019 2.75 % Semi-annual 5 4,503 5,513 Equipment Note 9 12/24/2019 3.01 % Semi-annual 7 — 4,031 4,503 29,420 Total debt 4,503 29,420 Less: current portion of long-term debt ( 1,039 ) ( 4,381 ) Long-term debt $ 3,464 $ 25,039 Credit Agreement On September 13, 2019, the Company entered into a five-year amended and restated credit agreement (the “Credit Agreement”) with a syndicate of banks led by JPMorgan Chase Bank, N.A. and Bank of America, N.A, that provides for a $ 375 million facility (the “Facility”), subject to certain financial covenants as defined in the Credit Agreement, that may be used for revolving loans of which $ 150 million may be used for letters of credit. The Facility also allows for revolving loans and letters of credit in Canadian dollars and other currencies, up to the U.S. dollar equivalent of $ 75 million. The Company has an expansion option to increase the commitments under the Facility or enter into incremental term loans, subject to certain conditions, by up to an additional $ 200 million upon receipt of additional commitments from new or existing lenders. Subject to certain exceptions, the Facility is secured by substantially all of the assets of the Company and its domestic subsidiaries, and by a pledge of substantially all of the capital stock of the Company’s domestic subsidiaries and 65 % of the capital stock of the direct foreign subsidiaries of the Company. Additionally, subject to certain exceptions, the Company’s domestic subsidiaries also guarantee the repayment of all amounts due under the Credit Agreement. If an event of default occurs and is continuing, on the terms and subject to the conditions set forth in the Credit Agreement, amounts outstanding under the Facility may be accelerated and may become or be declared immediately due and payable. Borrowings under the Credit Agreement are used for refinancing existing indebtedness, working capital, capital expenditures, acquisitions, share repurchases, and other general corporate purposes. Amounts borrowed under the Credit Agreement bear interest, at the Company’s option, at a rate equal to either (1) the Alternate Base Rate (as defined in the Credit Agreement), plus an applicable margin ranging from 0.00 % to 0.75 %; or (2) Adjusted LIBO Rate (as defined in the Credit Agreement) plus an applicable margin ranging from 1.00 % to 1.75 %. The applicable margin is determined based on the Company’s consolidated leverage ratio (the “Leverage Ratio”) which is defined in the Credit Agreement as Consolidated Total Indebtedness (as defined in the Credit Agreement) divided by Consolidated EBITDA (as defined in the Credit Agreement). Letters of credit issued under the Facility are subject to a letter of credit fee of 1.00 % to 1.75 % for non-performance letters of credit or 0.50 % to 0.875 % for performance letters of credit, based on the Company’s consolidated Leverage Ratio. The Company is subject to a commitment fee of 0.15 % to 0.25 %, based on the Company’s consolidated Leverage Ratio, on any unused portion of the Facility. The Credit Agreement restricts certain types of payments when the Company’s consolidated Leverage Ratio exceeds 2.50 or the Company’s consolidated Liquidity (as defined in the Credit Agreement) is less than $ 50 million. Under the Credit Agreement, the Company is subject to certain financial covenants and is limited to a maximum consolidated Leverage Ratio of 3.0 and a minimum interest coverage ratio of 3.0 , which is defined in the Credit Agreement as Consolidated EBITDA (as defined in the Credit Agreement) divided by interest expense (as defined in the Credit Agreement). The Credit Agreement also contains covenants including limitations on asset sales, investments, indebtedness and liens. The Company was in compliance with all of its financial covenants under the Credit Agreement as of December 31, 2021. 63 TABLE OF CONTENTS As of December 31, 2021, the Company had no debt outstanding under the Facility and letters of credit outstanding under the Facility of approximately $ 12.3 million, which are almost entirely related to the Company's payment obligation under its insurance programs. As of December 31, 2020, the Company had no debt outstanding under the Facility and letters of credit outstanding under the Facility of approximately $ 10.4 million, including $ 9.8 million related to the Company’s payment obligation under its insurance programs and approximately $ 0.6 million related to contract performance obligations. The Company had remaining deferred debt issuance costs totaling $ 0.8 million as of December 31, 2021, related to the line of credit. As permitted, debt issuance costs have been deferred and are presented as an asset within other assets, which is amortized as interest expense over the term of the line of credit. Equipment Notes The Company has entered into Master Equipment Loan and Security Agreements (the “Master Loan Agreements”) with multiple banks. The Master Loan Agreements may be used for the financing of equipment between the Company and the lending banks pursuant to one or more equipment notes “Equipment Note”. Each Equipment Note executed under the Master Loan Agreements constitutes a separate, distinct and independent financing of equipment and a contractual obligation of the Company, which may contain prepayment clauses. As of December 31, 2021, the Company had one Equipment Note outstanding under the Master Loan Agreement that is collateralized by equipment and vehicles owned by the Company. The following table sets forth our remaining principal payments for the Company’s outstanding Equipment Note as of December 31, 2021: (in thousands) Future Equipment Notes Principal Payments 2022 $ 1,039 2023 1,067 2024 2,397 2025 — 2026 — Thereafter — Total future principal payments $ 4,503 Less: current portion of equipment notes ( 1,039 ) Long-term principal obligations $ 3,464 12. Revenue Recognition Disaggregation of Revenue A majority of the Company’s revenues are earned through contracts with customers that normally provide for payment upon completion of specified work or units of work as identified in the contract. Although there is considerable variation in the terms of these contracts, they are primarily structured as fixed-price contracts, under which the Company agrees to perform a defined scope of a project for a fixed amount, or unit-price contracts, under which the Company agrees to do the work at a fixed price per unit of work as specified in the contract. The Company also enters into time-and-equipment and time-and-materials contracts under which the Company is paid for labor and equipment at negotiated hourly billing rates and for other expenses, including materials, as incurred at rates agreed to in the contract. Finally, the Company sometimes enters into cost-plus contracts, where the Company is paid for costs plus a negotiated margin. On occasion, time-and-equipment, time-and-materials and cost-plus contracts require the Company to include a guaranteed not-to-exceed maximum price. 64 TABLE OF CONTENTS Historically, fixed-price and unit-price contracts have had the highest potential margins; however, they have had a greater risk in terms of profitability because cost overruns may not be recoverable. Time-and-equipment, time-and-materials and cost-plus contracts have historically had less margin upside, but generally have had a lower risk of cost overruns. The Company also provides services under master service agreements (“MSAs”) and other variable-term service agreements. MSAs normally cover maintenance, upgrade and extension services, as well as new construction. Work performed under MSAs is typically billed on a unit-price, time-and-materials or time-and-equipment basis. MSAs are typically one to three years in duration; however, most of the Company’s contracts, including MSAs, may be terminated by the customer on short notice, typically 30 to 90 days, even if the Company is not in default under the contract. Under MSAs, customers generally agree to use the Company for certain services in a specified geographic region. Most MSAs include no obligation for the contract counterparty to assign specific volumes of work to the Company and do not require the counterparty to use the Company exclusively, although in some cases the MSA contract gives the Company a right of first refusal for certain work. Additional information related to the Company’s market types is provided in Note 17–Segment Information to the Financial Statements. The components of the Company’s revenue by contract type were as follows for the year ended December 31: 2021 T&D C&I Total (dollars in thousands) Amount Percent Amount Percent Amount Percent Fixed price $ 559,861 43.0 % $ 963,477 80.5 % $ 1,523,338 61.0 % Unit price 369,710 28.4 73,826 6.2 443,536 17.7 T&E 372,016 28.6 159,399 13.3 531,415 21.3 $ 1,301,587 100.0 % $ 1,196,702 100.0 % $ 2,498,289 100.0 % 2020 T&D C&I Total (dollars in thousands) Amount Percent Amount Percent Amount Percent Fixed price $ 507,634 44.0 % $ 904,024 82.7 % $ 1,411,658 62.8 % Unit price 338,611 29.3 77,331 7.1 415,942 18.5 T&E 308,133 26.7 111,659 10.2 419,792 18.7 $ 1,154,378 100.0 % $ 1,093,014 100.0 % $ 2,247,392 100.0 % 2019 T&D C&I Total (dollars in thousands) Amount Percent Amount Percent Amount Percent Fixed price $ 564,266 49.7 % $ 701,135 74.8 % $ 1,265,401 61.1 % Unit price 228,229 20.1 53,552 5.7 281,781 13.6 T&E 341,916 30.2 182,061 19.5 523,977 25.3 $ 1,134,411 100.0 % $ 936,748 100.0 % $ 2,071,159 100.0 % The components of the Company’s revenue by market type were as follows for the year ended December 31: 2021 2020 2019 (dollars in thousands) Segment Amount Percent Amount Percent Amount Percent Transmission T&D $ 806,367 32.3 % $ 745,599 33.2 % $ 772,609 37.3 % Distribution T&D 495,220 19.8 408,779 18.2 361,802 17.5 Electrical construction C&I 1,196,702 47.9 1,093,014 48.6 936,748 45.2 Total revenue $ 2,498,289 100.0 % $ 2,247,392 100.0 % $ 2,071,159 100.0 % Remaining Performance Obligations On December 31, 2021, the Company had $ 1.68 billion of remaining performance obligations. The Company’s remaining performance obligations include projects that have a written award, a letter of intent, a notice to proceed or an agreed upon work order to perform work on mutually accepted terms and conditions. 65 TABLE OF CONTENTS The following table summarizes the amount of remaining performance obligations as of December 31, 2021 that the Company expects to be realized and the amount of the remaining performance obligations that the Company reasonably estimates will not be recognized within the next twelve months. Remaining Performance Obligations as of December 31, 2021 (in thousands) Total Amount estimated to not be recognized within 12 months T&D $ 572,032 $ 84,075 C&I 1,105,866 339,659 Total $ 1,677,898 $ 423,734 The Company expects a vast majority of the remaining performance obligations to be recognized within twenty-four months, although the timing of the Company’s performance is not always under its control. Additionally, the difference between the remaining performance obligations and backlog is due to the exclusion of a portion of the Company’s MSAs under certain contract types from the Company’s remaining performance obligations as these contracts can be canceled for convenience at any time by the Company or the customer without considerable cost incurred by the customer. Additional information related to backlog is provided in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report. 13. Income Taxes Income before income taxes by geographic area was, for the years ended December 31: (in thousands) 2021 2020 2019 Federal $ 106,956 $ 77,195 $ 46,445 Foreign 9,350 4,190 3,997 $ 116,306 $ 81,385 $ 50,442 Income tax expense consisted of the following for the years ended December 31: (in thousands) 2021 2020 2019 Current Federal $ 16,512 $ 19,014 $ 6,976 Foreign 1,947 — — State 6,560 6,363 3,562 25,019 25,377 10,538 Deferred Federal 5,061 ( 2,519 ) 3,010 Foreign 287 963 874 State 933 ( 1,195 ) ( 194 ) 6,281 ( 2,751 ) 3,690 Income tax expense $ 31,300 $ 22,626 $ 14,228 66 TABLE OF CONTENTS The differences between the U.S. federal statutory tax rate and the Company’s effective tax rate for operations were as follows for the years ended December 31: 2021 2020 2019 U.S federal statutory rate 21.0 % 21.0 % 21.0 % State income taxes, net of U.S. federal income tax expense 4.7 5.0 4.7 Change in valuation allowance — 0.1 ( 0.3 ) Tax differential on foreign earnings 0.5 0.3 0.4 Non-deductible meals and entertainment 0.1 0.4 0.8 Stock compensation excess tax benefits ( 0.8 ) ( 0.6 ) 0.1 Uncertain tax positions — 0.3 ( 0.4 ) Provision to return adjustments, net 0.4 0.4 0.2 Global intangible low tax income — 0.9 0.3 Section 162(m) limitation 1.1 0.5 0.3 Non-controlling interest — — 0.9 Other income, net ( 0.1 ) ( 0.5 ) 0.2 Effective rate 26.9 % 27.8 % 28.2 % The net deferred tax assets and (liabilities) arising from temporary differences was as follows at December 31: (in thousands) 2021 2020 Deferred income tax assets: Self insurance reserves $ 2,138 $ 4,091 Contract loss reserves 541 703 Stock-based awards 1,633 1,300 Bonus 8,373 6,173 Accrued vacation 1,977 1,741 Accrued profit sharing 2,665 2,476 Operating lease liabilities 5,404 5,715 Non-U.S. operating loss 2,520 3,601 Other 2,628 4,661 Total deferred income tax assets before valuation allowances 27,879 30,461 Less: valuation allowances ( 2,593 ) ( 2,566 ) Total deferred income tax assets 25,286 27,895 Deferred income tax liabilities: Property and equipment — tax over book depreciation ( 36,856 ) ( 34,439 ) Intangible assets — tax over book amortization ( 2,913 ) ( 2,207 ) Right-of-use operating lease assets ( 5,398 ) ( 5,702 ) Non-U.S. deferred income tax liabilities — ( 1,322 ) Contract revenue adjustment ( 4,526 ) ( 2,128 ) Other ( 213 ) ( 436 ) Total deferred income tax liabilities ( 49,906 ) ( 46,234 ) Net deferred income taxes $ ( 24,620 ) $ ( 18,339 ) The Company determined that it is more-likely-than-not that it will not realize the deferred tax assets on certain Canadian subsidiaries and recorded a valuation allowance against the entire related deferred tax assets for those entities. As of December 31, 2021, the Company had no undistributed earnings of our Canadian subsidiaries. We expect future earnings to be reinvested. Accordingly, as of December 31, 2021, no expense for U.S. income taxes or foreign withholding taxes was recorded. 67 TABLE OF CONTENTS The Company is subject to taxation in various jurisdictions. The Company’s 2018 through 2020 tax returns are subject to examination by U. S. federal authorities. The Company’s tax returns are subject to examination by various state authorities for the years 2017 through 2020. The Company has recorded a liability for unrecognized tax benefits related to tax positions taken on its various income tax returns. If recognized, the entire amount of unrecognized tax benefits would favorably impact the effective tax rate that is reported in future periods. The decrease in the unrecognized tax benefits as of December 31, 2021 was primarily due to the lapses in the applicable statutes of limitations. The total unrecognized tax benefits is expected to be reduced by less than $ 0.1 million within the next 12 months. Interest and penalties related to uncertain income tax positions are included as a component of income tax expense in the Financial Statements. The following is a reconciliation of the beginning and ending liability for unrecognized tax benefits at December 31: (in thousands) 2021 2020 Balance at beginning of period $ 353 $ 152 Gross increases in current period tax positions 45 217 Reductions in tax positions due to lapse of statutory limitations ( 70 ) ( 16 ) Balance at end of period 328 353 Accrued interest and penalties at end of period 72 69 Total liability for unrecognized tax benefits $ 400 $ 422 The liability for unrecognized tax benefits, including accrued interest and penalties, was included in other liabilities on the accompanying consolidated balance sheets. The amount of interest and penalties charged or credited to income tax expense as a result of the unrecognized tax benefits was not significant in the years ended December 31, 2021, 2020 and 2019. 14. Commitments and Contingencies Purchase Commitments As of December 31, 2021, the Company had approximately $ 9.2 million in outstanding purchase orders for certain construction equipment, with cash payments scheduled to occur over the next eight months . Insurance and Claims Accruals The Company carries insurance policies, which are subject to certain deductibles and limits, for workers’ compensation, general liability, automobile liability and other insurance coverage. The deductible per occurrence for each line of coverage is up to $ 1.0 million, except for wildfire coverage which has a deductible of $ 2.0 million. The Company also maintains excess umbrella coverage providing higher layers of insurance coverage for losses that exhaust the limits of underlying coverage. A layer of this umbrella coverage requires the Company to pay a portion of any loss within a certain loss range and our potential exposure for such losses is up to approximately $ 3.8 million. The Company’s health benefit plans are subject to stop-loss limits of up to $ 0.2 million for qualified individuals. Losses up to the deductible and stop-loss amounts are accrued based upon the Company’s estimates of the ultimate liability for claims reported and an estimate of claims incurred but not yet reported. The insurance and claims accruals are based on known facts, actuarial estimates and historical trends. While recorded accruals are based on the ultimate liability, which includes amounts in excess of the deductible, a corresponding receivable for amounts in excess of the deductible is included in total assets on the Company’s consolidated balance sheets. The following table includes the Company’s accrued short- and long-term insurance liabilities at December 31: (in thousands) 2021 2020 Balance at beginning of period $ 69,823 $ 66,804 Net increases in accrued self-insurance 62,819 38,064 Net payments made ( 57,584 ) ( 35,045 ) Balance at end of period $ 75,058 $ 69,823 Insurance expense, including premiums, for workers’ compensation, general liability, automobile liability, employee health benefits, and other coverages for the years ended December 31, 2021, 2020 and 2019 was $ 65.1 million, $ 56.4 million and $ 48.5 million, respectively. 68 TABLE OF CONTENTS Performance and Payment Bonds and Parent Guarantees In certain circumstances, the Company is required to provide performance and payment bonds in connection with its future performance on certain contractual commitments. The Company has indemnified its sureties for any expenses paid out under these bonds. As of December 31, 2021, an aggregate of approximately $ 1.39 billion in original face amount of bonds issued by the Company’s sureties were outstanding. The Company estimated the remaining cost to complete these bonded projects was approximately $ 607.0 million as of December 31, 2021. From time to time the Company guarantees the obligations of wholly owned subsidiaries, including obligations under certain contracts with customers, certain lease agreements and, in some states, obligations in connection with obtaining contractors’ licenses. Additionally, from time to time the Company is required to post letters of credit to guarantee the obligations of its wholly owned subsidiaries, which reduces the borrowing availability under the Facility. Indemnities From time to time, pursuant to its service arrangements, the Company indemnifies its customers for claims related to the services it provides under those service arrangements. These indemnification obligations may subject the Company to indemnity claims, liabilities and related litigation. The Company is not aware of any material unrecorded liabilities for asserted claims in connection with these indemnification obligations. Collective Bargaining Agreements Most of the Company’s subsidiaries’ craft labor employees are covered by collective bargaining agreements. The agreements require the subsidiaries to pay specified wages, provide certain benefits and contribute certain amounts to multi-employer pension plans. If a subsidiary withdraws from any of the multi-employer pension plans or if the plans were to otherwise become underfunded, the subsidiary could incur liabilities for additional contributions related to these plans. Although the Company has been informed that the status of some multi-employer pension plans to which its subsidiaries contribute have been classified as “critical” the Company is not currently aware of any potential liabilities related to this issue. See Note 16 — Employee Benefit Plans to the Financial Statements for further information related to the Company’s participation in multi-employer plans. Litigation and Other Legal Matters The Company is from time-to-time party to various lawsuits, claims, and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, property damages, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, the Company records reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company does not believe that any of these proceedings, separately or in the aggregate, would be expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows. The Company is routinely subject to other civil claims, litigation and arbitration, and regulatory investigations arising in the ordinary course of our present business as well as in respect of our divested businesses. Some of these claims and litigations include claims related to the Company’s current services and operations, the Company believes that it has strong defenses to these claims as well as insurance coverages that could contribute to any settlement or liability in the event claims are not resolved in our favor. These claims have not had a material impact on the Company to date, and the Company believes that the likelihood that a future material adverse outcome will result from these claims is remote. However, if facts and circumstances change in the future, the Company cannot be certain that an adverse outcome of one or more of these claims would not have a material adverse effect on the Company’s financial condition, results of operations or cash flows. 69 TABLE OF CONTENTS 15. Stock-Based Compensation The Company maintains two equity compensation plans under which stock-based compensation has been granted, the 2017 Long-Term Incentive Plan (Amended and Restated as of April 23, 2020) (the “LTIP”) and the 2007 Long-Term Incentive Plan (Amended and Restated as of May 1, 2014) (the “2007 LTIP” and, collectively with the LTIP, the “Long-Term Incentive Plans”). Upon the initial adoption of the LTIP in 2017, awards were no longer granted under the 2007 LTIP. The LTIP was approved by our stockholders and provides for grants of (a) incentive stock options qualified as such under U.S. federal income tax laws, (b) stock options that do not qualify as incentive stock options, (c) stock appreciation rights, (d) restricted stock awards, (e) restricted stock units, (f) performance awards, (g) phantom stock, (h) stock bonuses, (i) dividend equivalents, or (j) any combination of such awards. The LTIP permits the granting of up to 1,500,000 shares to directors, officers and other employees of the Company. Grants of awards to employees are approved by the Compensation Committee of the Board of Directors and grants to independent members of the Board of Directors are approved by the Board of Directors. All awards are made with an exercise price or base price, as the case may be, that is not less than the full fair market value per share on the date of grant. No stock option or stock appreciation right may be exercised more than 10 years from the date of grant. Shares issued as a result of stock option exercises or stock grants are made available from authorized unissued shares of common stock or treasury stock. Stock Options The Company has not awarded any stock options since 2013. Stock options granted to the Company’s employees or directors were granted with an exercise price equal to the market price of the Company’s stock on the date of grant. The Company used the Black-Scholes-Merton option-pricing model to estimate the fair value of options as of the date of grant. All stock options were fully expensed as of December 31, 2016. Following is a summary of stock option activity for the three-year period ended December 31, 2021: Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) Outstanding at January 1, 2019 76,764 $ 22.33 Exercised ( 14,743 ) $ 23.16 Expired ( 2,435 ) $ 19.86 Outstanding and Exercisable at December 31, 2019 59,586 $ 22.26 2.2 years $ 352 Exercised ( 34,388 ) $ 21.82 Expired ( 641 ) $ 19.66 Outstanding and Exercisable at December 31, 2020 24,557 $ 22.94 1.9 years $ 912 Exercised ( 21,806 ) $ 22.84 Expired ( 42 ) $ 24.68 Outstanding and Exercisable at December 31, 2021 2,709 $ 23.74 1.1 years $ 235 During the years ended December 31, 2021, 2020 and 2019, the intrinsic value of stock options exercised was $ 1.2 million, $ 0.7 million and $ 0.2 million, respectively. The following table summarizes information with respect to stock options outstanding and exercisable under the Company’s plans at December 31, 2021: Options Outstanding and Exercisable Exercise Price Number Of Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term $ 17.48  – $ 17.48 354 $ 17.48 0.2 years $ 24.68  – $ 24.68 2,355 $ 24.68 1.2 years 2,709 $ 23.74 1.1 years 70 TABLE OF CONTENTS Time-Vested Stock Awards The company grants time-vested stock awards under the LTIP in the form of restricted stock awards, restricted stock units or equity-settled phantom stock. The grant date fair value of the time-vested stock awards is equal to the closing market price of the Company’s common stock on the date of grant. Time-vested stock awards granted under the LTIP to eligible employees in 2021 vest ratably on an annual basis, over three years . Time-vested stock awards granted under the LTIP to non-employee directors in 2021 vest over a one year period. The Company recognizes stock-based compensation expense related to restricted stock awards and restricted stock units based on the grant date fair value, which was the closing price of the Company’s stock on the date of grant. The fair value is expensed over the service period, which is generally three years for time-vested stock awards granted to eligible employees and one year for non-employee directors. During the years ended December 31, 2021, 2020 and 2019, time-vested stock vesting activity settled in common stock had an intrinsic value, at the time of vesting, of $ 5.7 million, $ 2.5 million and $ 3.4 million, respectively. Following is a summary of time-vested stock awards activity for the three-year period ended December 31, 2021: Shares Per Share Weighted- Average Grant Date Fair Value Outstanding unvested at January 1, 2019 175,431 $ 30.40 Granted 85,640 $ 34.22 Vested ( 99,655 ) $ 30.51 Forfeited ( 3,034 ) $ 35.88 Outstanding unvested at December 31, 2019 158,382 $ 32.29 Granted 104,857 $ 26.75 Vested ( 93,669 ) $ 32.09 Forfeited ( 3,781 ) $ 29.80 Outstanding unvested at December 31, 2020 165,789 $ 28.96 Granted 57,196 $ 66.80 Vested ( 87,584 ) $ 29.20 Forfeited ( 2,904 ) $ 40.60 Outstanding unvested at December 31, 2021 132,497 $ 44.88 Performance Awards The Company grants performance awards under the LTIP. Under these awards, shares of the Company’s common stock may be earned based on the Company’s performance compared to defined metrics. The number of shares earned under a performance award may vary from zero to 200 % of the target shares awarded, based upon the Company’s performance compared to the metrics. The metrics used for the grant are determined by the Compensation Committee of the Board of Directors and may be either based on internal measures such as the Company’s financial performance compared to target or on a market-based metric such as the Company’s stock performance compared to a peer group. Performance awards cliff vest upon attainment of at least the minimum stated performance targets and minimum service requirements and are paid in the Company’s common stock. For performance awards, the Company recognizes stock-based compensation expense based on the grant date fair value of the award. The fair value of internal metric-based performance awards is determined by the closing stock price of the Company’s common stock on the date of the grant. The fair value of market-based performance awards is computed using a Monte Carlo simulation. Performance awards granted in 2021 are expensed over the service period of approximately 2.8 years. The Company adjusts the stock-based compensation expense related to internal metric-based performance awards according to its determination of the shares expected to vest at each reporting date. Stock-based compensation expense related to market metric-based performance awards is expensed at their grant date fair value regardless of performance. During the years ended December 31, 2021, 2020 and 2019, performance award vesting activity settled in common stock had an intrinsic value, at the time of vesting, of $ 12.7 million, $ 4.8 million and $ 0.2 million, respectively. 71 TABLE OF CONTENTS Following is a summary of performance share award activity for the three-year period ended December 31, 2021: Shares Per Share Weighted- Average Grant Date Fair Value Outstanding at January 1, 2019 112,253 $ 39.73 Granted at target 72,932 $ 39.26 Forfeited for performance below target ( 36,581 ) $ 48.94 Vested ( 8,854 ) $ 58.34 Forfeited ( 1,505 ) $ 43.43 Outstanding at December 31, 2019 138,245 $ 37.02 Granted at target 79,788 $ 34.10 Earned for performance above target 14,962 $ 69.45 Vested ( 78,260 ) $ 48.86 Forfeited ( 4,396 ) $ 36.28 Outstanding at December 31, 2020 150,339 $ 36.54 Granted at target 42,091 $ 80.11 Earned for performance above target 58,461 $ 40.41 Vested ( 128,920 ) $ 39.26 Forfeited ( 644 ) $ 39.25 Outstanding at December 31, 2021 121,327 $ 50.06 Stock-based Compensation Expense The Company recognized stock-based compensation expense of approximately $ 7.5 million, $ 5.7 million and $ 4.4 million for the years ended December 31, 2021, 2020 and 2019, respectively, in selling, general and administrative expenses on the Company’s consolidated statements of operations. As of December 31, 2021, there was approximately $ 8.6 million of unrecognized stock-based compensation expense related to awards granted under the Long-Term Incentive Plans. This included $ 3.6 million of unrecognized compensation cost related to unvested time-vested stock awards expected to be recognized over a remaining weighted average vesting period of approximately 1.4 years and $ 5.0 million of unrecognized compensation cost related to unvested performance awards, expected to be recognized over a remaining weighted average vesting period of approximately 1.4 years. 16. Employee Benefit Plans The Company sponsors multiple defined contribution plans for eligible employees not covered by collective bargaining agreements. The plans include various features such as voluntary employee pre-tax and Roth-based contributions and matching contributions made by the Company. In addition, at the discretion of our Board of Directors, we may make additional profit sharing contributions to the plans. Company contributions under these defined contribution plans are based upon a percentage of income with limitations as defined by each plan. Total contributions for the years ended December 31, 2021, 2020 and 2019 amounted to $ 17.8 million, $ 16.8 million, and $ 10.9 million, respectively. The Company contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover its union-represented employees, who are represented by more than 300 local unions. The related collective-bargaining agreements between those organizations and the Company, which specify the rate at which the Company must contribute to the multi-employer defined pension plan, expire at different times between 2022 and 2024. The risks of participating in these multiemployer defined benefit pension plans are different from single-employer plans in the following aspects: 1) Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. 2) If a participating employer stops contributing to a plan, the unfunded obligations of the plan may be borne by the remaining participating employers. 72 TABLE OF CONTENTS 3) If the Company chooses to stop participating in a multiemployer plan, it may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability. The amount of additional funds, if any, that the Company may be obligated to contribute to these plans in the future cannot be estimated due to uncertainty of the future levels of work that require the specific use of union employees covered by these plans, as well as the future contribution levels and possible surcharges on contributions applicable to these plans. The following table summarizes plan information relating to the Company’s participation in multi-employer defined benefit pension plans, including company contributions for the last three years, the status under the Pension Protection Act of 2006, as amended by the Consolidated and Further Continuing Appropriations Act of 2015 (“PPA”) of the plans and whether the plans are subject to a funding improvement or rehabilitation plan, or contribution surcharges. The most recent zone status is for the plan’s year-end indicated in the table. The zone status is based on information that the Company received from the plan, as well as from publicly available information on the U.S. Department of Labor website. The PPA zone status for the plan year ended on December 31, 2021 has not been listed because Forms 5500 were not yet available. Among other factors, plans in the red “critical” zone are generally less than 65 percent funded, plans in the yellow “endangered” zone are between 65 and 80 percent funded, and plans in the green zone are at least 80 percent funded. Also listed in the table below are the Company’s contributions to defined contribution plans. Information in the table has been presented separately for individually significant plans and in the aggregate for all other plans. Pension Fund EIN/Pension Plan Number Pension Protection Act Zone Status Contributions to Plan for the Year ended December 31, Funding Plan Surcharge Imposed Status Plan Year End Status Plan Year End 2021 2020 2019 (in thousands) Defined Benefit Plans: Southern California IBEW-NECA Pension Trust Fund 95-6392774 001 Yellow 6/30/2020 Yellow 6/30/2019 $ 39,529 $ 32,791 $ 14,268 Yes No National Electrical Benefit Fund 53-0181657 001 Green 12/31/2020 Green 12/31/2019 11,627 10,850 11,050 No No Eighth District Electrical Pension Fund 84-6100393 001 Green 3/31/2021 Green 3/31/2020 10,977 10,998 11,199 No No IBEW Local 332 Pension Plan Part A 94-2688032 004 Green 12/31/2020 Green 12/31/2019 6,409 3,418 1,913 No No IBEW Local 769 Management Pension Plan A 86-6049763 001 Green 6/30/2020 Green 6/30/2019 3,446 3,866 2,689 No No IBEW Local No. 640 and Arizona NECA Defined Benefit Pension Plan 86-0323980 001 Green 12/31/2020 Green 12/31/2019 1,751 1,195 2,397 No No IBEW Local Union 1249 Pension Fund 15-6035161 001 Green 12/31/2020 Green 12/31/2019 3,684 2,126 1,578 No No Indiana/Kentucky/Ohio Regional Council of Carpenters Pension Fund 51-6123713 001 Green 6/30/2020 Green 6/30/2019 1,243 2,109 1,742 No No Alaska Electrical Pension Plan 92-6005171 001 Green 12/31/2020 Green 12/31/2019 2,039 1,548 1,408 No No Defined Contribution Plans: National Electrical Annuity Plan 52-6132372 001 n/a n/a 27,974 25,037 28,822 n/a n/a Eighth District Electrical Pension Fund Annuity Plan 84-6100393 002 n/a n/a 5,097 4,915 5,339 n/a n/a San Mateo Country Electrical Construction Industry Retirement Plan 51-6052127 001 n/a n/a 5,976 3,202 854 n/a n/a Puget Sound Electrical Workers 401(K) Savings Plan 91-6180326 001 n/a n/a 1,021 2,132 1,833 n/a n/a All other plans: 25,107 17,663 17,117 Total contributions: $ 145,880 $ 121,850 $ 102,209 Total contributions to these plans, at any given time, correspond to the number of union employees employed and the plans in which they participate, which varies depending upon location, the number of ongoing projects and the need for union resources in connection with such projects at a given time. The PPA data presented in the table above represents data available to us for the two most recent plan years. 73 TABLE OF CONTENTS One of the Company’s subsidiaries was listed in the Eighth District Electrical Pension Fund’s Form 5500 as providing more than five percent of the total contributions to that plan for the plan years ended March 31, 2021, 2020 and 2019, in the IBEW local 769 Management Pension Plan A’s Form 5500 as providing more than five percent of the total contributions to that plan for the plan years ended June 30, 2020 and 2019 and in the IBEW Local No. 640 and Arizona NECA Defined Benefit Pension Plan’s Form 5500 as providing more than five percent of the total contributions to that plan for the plan years ended December 31, 2020 and 2019. Another of the company’s subsidiaries was listed in the Southern California IBEW-NECA Pension Trust Fund Plan’s Form 5500 as providing more than 5 percent of the total contributions to that plan for the plan year ended June 30, 2020. 17. Segment Information MYR Group is a holding company of specialty contractors serving electrical utility infrastructure and commercial construction markets in the United States and Canada. The Company has two reporting segments, each a separate operating segment, which are referred to as T&D and C&I. Performance measurement and resource allocation for the reporting segments are based on many factors. The primary financial measures used to evaluate the segment information are contract revenues and income from operations, excluding general corporate expenses. General corporate expenses include corporate facility and staffing costs, which includes safety costs, professional fees, IT expenses and management fees. Transmission and Distribution: The T&D segment provides a broad range of services on electric transmission and distribution networks and substation facilities which include design, engineering, procurement, construction, upgrade, maintenance and repair services with a particular focus on construction, maintenance and repair. T&D services include the construction and maintenance of high voltage transmission lines, substations, lower voltage underground and overhead distribution systems, renewable power facilities and limited gas construction services. 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 including the design, installation, maintenance and repair of commercial and industrial wiring, installation of traffic networks and the installation of bridge, roadway and tunnel lighting. Typical C&I contracts cover electrical contracting services for airports, hospitals, data centers, hotels, stadiums, convention centers, renewable energy projects, manufacturing plants, processing facilities, water treatment facilities, mining facilities and transportation control and management systems. The C&I segment generally provides electric construction and maintenance services as a subcontractor to general contractors in the C&I industry, but also contracts directly with facility owners. The information in the following table is derived from the segment’s internal financial reports used for corporate management purposes: For the Year ended December 31, (in thousands) 2021 2020 2019 Contract revenues: T&D $ 1,301,587 $ 1,154,378 $ 1,134,411 C&I 1,196,702 1,093,014 936,748 $ 2,498,289 $ 2,247,392 $ 2,071,159 Income from operations: T&D $ 132,738 $ 109,387 $ 73,580 C&I 54,418 37,247 30,506 General Corporate ( 68,596 ) ( 60,089 ) ( 46,908 ) $ 118,560 $ 86,545 $ 57,178 74 TABLE OF CONTENTS The Company does not identify capital expenditures and total assets by segment in its internal financial reports due in part to the shared use of a centralized fleet of vehicles and specialized equipment. Identifiable assets, consisting of contract receivables, contract assets, construction materials inventory, goodwill and intangibles for each segment are as follows as of December 31: (in thousands) 2021 2020 T&D $ 303,685 $ 269,721 C&I 408,896 413,910 General Corporate 408,511 312,228 $ 1,121,092 $ 995,859 An allocation of total depreciation, including depreciation of shared construction equipment, and amortization to each segment is as follows: For the Year ended December 31, (in thousands) 2021 2020 2019 Depreciation and amortization T&D $ 38,668 $ 37,254 $ 35,711 C&I 7,537 9,199 8,805 $ 46,205 $ 46,453 $ 44,516 As of December 31, 2021 and 2020, there were $ 23.1 million and $ 23.2 million, respectively, of identifiable assets attributable to Canadian operations. 18. Noncontrolling Interests On July 2, 2018, through the acquisition of certain assets of the Huen Companies, the Company became the majority controlling interest in a joint venture. As a result, the Company has consolidated the carrying value of the joint ventures’ assets and liabilities and results of operations on the Company’s consolidated financial statements. The Company records the equity owned by the other joint venture partners as noncontrolling interests on the Company’s consolidated balance sheets, consolidated statements of stockholders’ equity, and their portions, if material, of net income (loss) and other comprehensive income (loss) is shown as net income (loss) or other comprehensive income (loss) attributable to noncontrolling interests on the Company’s consolidated statements of operations and other comprehensive income (loss). Additionally the joint venture associated with the Company’s noncontrolling interests is a partnership, and consequently, the tax effect of only the Company’s share of the joint venture income (loss) is recognized by the Company. The acquired joint venture made no distributions to its partners, and the Company made no capital contributions to the joint venture during the year ended December 31, 2021. Additionally, the joint venture was dissolved during the year ended December 31, 2021, and the underlying project was substantially completed in 2019. The initial balance of the Company’s noncontrolling interest consists of the fair value of noncontrolling interest acquired on July 2, 2018 with the Huen Companies. Net loss recognized during the year ended December 31, 2021 was not significant. 19. Earnings Per Share The Company computes earnings per share using the treasury stock method. Under the treasury stock method, basic earnings per share attributable to MYR Group Inc. are computed by dividing net income attributable to MYR Group Inc. by the weighted average number of common shares outstanding during the period. Diluted earnings per share attributable to MYR Group Inc. are computed by dividing net income attributable to MYR Group Inc. by the weighted average number of common shares outstanding during the period plus all potentially dilutive common stock equivalents, except in cases where the effect of the common stock equivalent would be anti-dilutive. 75 TABLE OF CONTENTS Net income attributable to MYR Group Inc. and the weighted average number of common shares used to compute basic and diluted earnings per share was as follows: For the Year ended December 31, (in thousands, except per share data) 2021 2020 2019 Numerator: Net income $ 85,006 $ 58,759 $ 36,214 Less: net loss attributable to noncontrolling interest ( 4 ) — ( 1,476 ) Net income attributable to MYR Group Inc. $ 85,010 $ 58,759 $ 37,690 Denominator: Weighted average common shares outstanding 16,838 16,684 16,587 Weighted average dilutive securities 323 206 112 Weighted average common shares outstanding, diluted 17,161 16,890 16,699 Net income per share attributable to MYR Group Inc.: Basic $ 5.05 $ 3.52 $ 2.27 Diluted $ 4.95 $ 3.48 $ 2.26 For the years ended December 31, 2021, 2020 and 2019, 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 performance awards that were excluded from the calculation of dilutive securities: (in thousands) 2021 2020 2019 Performance awards — 34 73 Share Repurchase Program During 2021 and 2020, the Company repurchased 51,113 and 24,910 shares of stock, respectively, for approximately $ 3.4 million and $ 0.7 million, respectively, from its employees to satisfy tax obligations on shares vested under the Long-Term Incentive Plans. All of the shares repurchased were retired and returned to authorized but unissued stock. 20. Subsequent Event On January 4, 2022, the Company acquired all issued and outstanding shares of capital stock of Powerline Plus Ltd. and its affiliate PLP Redimix Ltd. (collectively, the “Powerline Plus Companies"), a full-service electrical distribution construction company based in Toronto, Ontario. Consideration paid was approximately $ 114.4 million, subject to working capital and net asset adjustments, and was funded through a combination of cash on hand and borrowings under the Facility. There could be additional contingent consideration paid based on the achievement of certain performance targets. The results of Powerline Plus Companies will be included in the Company’s consolidated financial statements beginning on the transaction date. Approximately $ 0.2 million of acquisition-related costs associated with this acquisition were expensed by the Company in the year ended December 31, 2021. Due to the timing of the acquisition, preliminary purchase price allocation has not yet been completed. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.