What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-10-26 compared with 2022-07-27 · 112 added, 108 removed, 289 unchanged (43% of the section changed)

18 unchanged sentences

In addition, we believe that we are better capitalized than some of our competitors, which provides us with valuable flexibility to take on additional and more complex projects.

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

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

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

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

However both of our segments and supporting operations may be subject to delays and cost volatility due to supply chain disruptions, inflationary pressures, tariffs, regulatory slowdowns and the continued market disruption from the COVID-19 pandemic, which may result in decelerations in project opportunities and awards.

We had consolidated revenues for the six months ended June 30, 2022 of $1.34 billion, of which 58.0% was attributable to our T&D customers and 42.0% was attributable to our C&I customers.

Our consolidated revenues for the six months ended June 30, 2021 were $1.24 billion.

For the six months ended June 30, 2022, our net income and EBITDA (1) were $40.4 million and $83.5 million, respectively, compared to $41.1 million and $80.5 million, respectively, for the six months ended June 30, 2021.

We had consolidated revenues for the nine months ended September 30, 2022 of $2.14 billion, of which 57.5% was attributable to our T&D customers and 42.5% was attributable to our C&I customers.

Our consolidated revenues for the nine months ended September 30, 2021 were $1.85 billion.

For the nine months ended September 30, 2022, our net income and EBITDA (1) were $58.8 million and $123.8 million, respectively, compared to $64.3 million and $122.8 million, respectively, for the nine months ended September 30, 2021.

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

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

Significant construction on any large, multi-year projects awarded in the remainder of 2022 will not likely have a large impact on 2022 results.

Significant construction on any large, multi-year projects awarded in the remainder of 2022 will not likely begin until 2023.

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

(1) EBITDA is a non-GAAP measure.

Refer to “Non-GAAP Measure—EBITDA” for a discussion of this measure.

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

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We expect to see an incremental increase in distribution opportunities in the markets we serve during the rest of 2022.

(1) EBITDA is a non-GAAP measure.

Refer to “Non-GAAP Measure—EBITDA” for a discussion of this measure.

We expect C&I bidding opportunities to be impacted by continued market disruptions, and as a result, the growth of our C&I market will be heavily dependent on the timing and pace of the overall market recovery.

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

On January 4, 2022, we acquired all issued and outstanding shares of capital stock of Powerline Plus Ltd.

During the nine months ended September 30, 2022, the Company repurchased 398,152 shares of its common stock under our current repurchase program at a weighted-average price of $83.81 per share.

As of September 30, 2022, we had $41.6 million of remaining availability to purchase shares under the program, which continues in effect until November 7, 2022, or until the authorized funds are exhausted.

Additionally, on January 4, 2022, we acquired all issued and outstanding shares of capital stock of Powerline Plus Ltd.

and its affiliate (collectively, the “Powerline Plus Companies"), which expanded our distribution operations in Ontario, Canada.

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Additional information related to our remaining performance obligations is provided in Note 7–Revenue Recognition in the accompanying notes to our Consolidated Financial Statements.

Our backlog was $2.44 billion at June 30, 2022, compared to $1.79 billion at December 31, 2021 and $1.57 billion at June 30, 2021.

Our backlog at June 30, 2022 increased $39.3 million from March 31, 2022.

Backlog in the T&D segment decreased $60.6 million and C&I backlog increased $99.9 million compared to March 31, 2022.

Our backlog as of June 30, 2022 included our proportionate share of joint venture backlog totaling $3.7 million, compared to $4.2 million at March 31, 2022.

Our backlog was $2.48 billion at September 30, 2022, compared to $1.79 billion at December 31, 2021 and $1.63 billion at September 30, 2021.

Our backlog at September 30, 2022 increased $31.4 million from June 30, 2022.

Backlog in the T&D segment decreased $40.6 million and C&I backlog increased $72.0 million compared to June 30, 2022.

Our backlog as of September 30, 2022 included our proportionate share of joint venture backlog totaling $23.6 million, compared to $3.7 million at June 30, 2022.

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

Backlog at June 30, 2022

Backlog at September 30, 2022

(in thousands) Total Amount estimated to not

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Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

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Net income $ 18,436 2.3 % $ 23,171 3.8 % $ 58,808 2.7 % $ 64,318 3.5 %

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Revenues were $708.1 million for the three months ended June 30, 2022 compared to $649.6 million for the three months ended June 30, 2021.

The increase of $58.5 million, or 9.0%, was primarily due to an increase in revenue on distribution projects, including incremental distribution revenues from the Powerline Plus Companies and an increase in revenue from transmission projects, partially offset by a decrease in C&I revenue in certain geographical areas.

Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

Revenues were $799.8 million for the three months ended September 30, 2022 compared to $610.2 million for the three months ended September 30, 2021.

The increase of $189.6 million, or 31.1%, was primarily due to an increase in revenue on transmission projects, an increase in revenues on distribution projects, including incremental distribution revenues from the Powerline Plus Companies, and an increase in C&I revenue in certain geographical areas.

Gross margin.

Gross margin was 11.4% for the three months ended June 30, 2022 compared to 12.5% for the three months ended June 30, 2021.

The decrease in gross margin was primarily due to overall cost increases mainly associated with supply chain disruptions, inflation and continued impacts from the COVID-19 pandemic, some of which also caused labor and material inefficiencies on certain projects.

Gross margin was also negatively impacted by an unfavorable change order adjustment on a project and inclement weather experienced on certain projects.

These margin decreases were partially offset by better-than-anticipated productivity on certain projects and a favorable job close out.

Changes in estimates of gross profit on certain projects resulted in a gross margin decrease of 0.1% and an increase of 0.8% for the three months ended June 30, 2022 and 2021, respectively.

Gross margin was 10.8% for the three months ended September 30, 2022 compared to 13.8% for the three months ended September 30, 2021.

The decrease in gross margin was primarily due to overall cost increases mainly associated with supply chain disruptions and inflation.

Gross margin was also negatively impacted by labor inefficiencies and inclement weather experienced on certain projects.

These margin decreases were partially offset by a favorable change order adjustment and better-than-anticipated productivity on certain projects.

Changes in estimates of gross profit on certain projects resulted in a gross margin decrease of 0.3% and an increase of 1.4% for the three months ended September 30, 2022 and 2021, respectively.

Gross profit.

Gross profit was $80.9 million for the three months ended June 30, 2022 compared to $81.0 million for the three months ended June 30, 2021.

The decrease of $0.1 million, or 0.2%, was due to lower margins, partially offset by higher revenues.

Gross profit was $86.3 million for the three months ended September 30, 2022 compared to $83.9 million for the three months ended September 30, 2021.

The increase of $2.4 million, or 2.9%, was due to higher revenues, partially offset by lower margins.

Selling, general and administrative expenses.

Selling, general and administrative expenses ("SG&A") were $52.0 million for the three months ended June 30, 2022 compared to $51.9 million for the three months ended June 30, 2021.

The period-over-period increase of $0.1 million was primarily due to costs associated with the recently acquired Powerline Plus Companies partially offset by a decrease in employee incentive compensation costs.

Amortization of intangible assets.

Amortization of intangible assets was $3.3 million for the three months ended June 30, 2022 compared to $0.6 million for the three months ended June 30, 2021.

The period-over-period increase of $2.7 million was primarily due to amortization related to certain intangibles acquired with the Powerline Plus Companies.

Selling, general and administrative expenses ("SG&A") were $58.9 million for the three months ended September 30, 2022 compared to $53.1 million for the three months ended September 30, 2021.

The period-over-period increase of $5.8 million was primarily due to an increase in employee-related expenses to support the growth in our operations and the acquisition of the Powerline Plus Companies, partially offset by a decrease in employee incentive compensation costs.

Gain on sale of property and equipment .

Gains from the sale of property and equipment for the three months ended June 30, 2022 were $0.7 million compared to $1.1 million for the three months ended June 30, 2021.

Gains from the sale of property and equipment for the three months ended September 30, 2022 were $0.3 million compared to $0.7 million for the three months ended September 30, 2021.

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

Other income, net .

Other income was $2.3 million for the three months ended June 30, 2022 compared to other income of $0.1 million for the three months ended June 30, 2021.

The change was largely due to funds received under the Canadian Emergency Wage Subsidy ("CEWS") program, which were attributable to a C&I segment company.

Interest expense.

Interest expense was $1.1 million for three months ended September 30, 2022 compared to $0.3 million for the three months ended September 30, 2021.

This increase was primarily attributable to higher outstanding debt and interest rates during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021.

Income tax expense.

Income tax expense was $8.2 million for the three months ended June 30, 2022, with an effective tax rate of 29.4%, compared to the expense of $7.9 million for the three months ended June 30, 2021, with an effective tax rate of 27.0%.

The increase in the tax rate for the three months ended June 30, 2022 was primarily due to an increase in permanent difference items, partially offset by the reduction of the impact of the global intangible low tax income (“GILTI”).

Net income was $19.7 million for the three months ended June 30, 2022 compared to $21.2 million for the three months ended June 30, 2021.

Income tax expense was $7.7 million for the three months ended September 30, 2022, with an effective tax rate of 29.4%, compared to the expense of $7.6 million for the three months ended September 30, 2021, with an effective tax rate of 24.6%.

The increase in the tax rate for the three months ended September 30, 2022 was primarily due to an increase in permanent difference items and a tax benefit associated with the reversal of the global intangible low tax income (“GILTI”) during the three months ended September 30, 2021.

Net income was $18.4 million for the three months ended September 30, 2022 compared to $23.2 million for the three months ended September 30, 2021.

The decrease was primarily due to the reasons stated earlier.

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

Three months ended June 30,

Three months ended September 30,

(dollars in thousands) Amount Percent Amount Percent

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Transmission & Distribution

Revenues for our T&D segment for the three months ended June 30, 2022 were $415.2 million compared to $326.8 million for the three months ended June 30, 2021, an increase of $88.4 million, or 27.0%.

The increase in revenue was primarily related to an increase in revenue on distribution projects, including incremental distribution revenues from the Powerline Plus Companies and an increase in revenue from transmission projects.

Revenues from transmission projects represented 60.2% and 64.5% of T&D segment revenue for the three months ended June 30, 2022 and 2021, respectively.

Operating income for our T&D segment for the three months ended June 30, 2022 was $32.8 million, an increase of $0.1 million, or 0.1%, from the three months ended June 30, 2021.

The increase in T&D operating income from the prior year was primarily due to higher revenues and a favorable job close-out.

These increases were partially offset by the additional $2.7 million of amortization related to certain intangibles acquired with the Powerline Plus Companies, an unfavorable change order adjustment on a project and overall cost increases from supply chain disruptions and inflation.

Operating income was also negatively impacted by inclement weather experienced on certain projects.

As a percentage of revenues, operating income for our T&D segment was 7.9% for the three months ended June 30, 2022 compared to 10.0% for the three months ended June 30, 2021.

Revenues for our T&D segment for the three months ended September 30, 2022 were $452.0 million compared to $306.5 million for the three months ended September 30, 2021, an increase of $145.5 million, or 47.5%.

The increase in revenue was primarily related to an increase in revenue on transmission projects, an increase in revenues on distribution projects, including incremental distribution revenues from the Powerline Plus Companies.

Revenues from transmission projects represented 58.4% and 54.1% of T&D segment revenue for the three months ended September 30, 2022 and 2021, respectively.

Operating income for our T&D segment for the three months ended September 30, 2022 was $34.3 million, a decrease of $1.0 million, or 2.8%, from the three months ended September 30, 2021.

The decrease in T&D operating income from the prior year was primarily due to labor inefficiencies on a project and overall cost increases from supply chain disruptions, inflation and inclement weather experienced on certain projects.

These decreases were partially offset by higher revenues.

As a percentage of revenues, operating income for our T&D segment was 7.6% for the three months ended September 30, 2022 compared to 11.5% for the three months ended September 30, 2021.

Commercial & Industrial

Revenues for our C&I segment for the three months ended June 30, 2022 were $292.9 million compared to $322.7 million for the three months ended June 30, 2021, a decrease of $29.8 million, or 9.3%, primarily due to a decrease in revenue in certain geographical areas.

Operating income for our C&I segment for the three months ended June 30, 2022 was $9.5 million, a decrease of $5.0 million, over the three months ended June 30, 2021.

The period-over-period decrease in operating income was primarily due to lower revenues and overall cost increases mainly associated with supply chain disruptions, inflation and continued impacts from the COVID-19 pandemic, some of which also caused labor and material inefficiencies on certain projects.

The decrease in operating income was partially offset by better-than-anticipated productivity on certain projects.

As a percentage of revenues, operating income for our C&I segment was 3.2% for the three months ended June 30, 2022 compared to 4.5% for the three months ended June 30, 2021.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Revenues were $1.34 billion for the six months ended June 30, 2022 compared to $1.24 billion for the six months ended June 30, 2021.

The increase of $102.6 million, or 8.3%, was primarily due to an increase in revenue on distribution projects including incremental distribution revenues from the Powerline Plus Companies and an increase in revenue from transmission projects, partially offset by a decrease in C&I revenue in certain geographical areas.

Revenues for our C&I segment for the three months ended September 30, 2022 were $347.8 million compared to $303.6 million for the three months ended September 30, 2021, an increase of $44.2 million, or 14.6%, primarily due to higher revenue in certain geographical areas.

Operating income for our C&I segment for the three months ended September 30, 2022 was $10.9 million, a decrease of $3.3 million, over the three months ended September 30, 2021.

The period-over-period decrease in operating income was primarily due to overall cost increases mainly associated with supply chain disruptions and inflation.

Operating income was also negatively impacted by labor inefficiencies on certain projects.

The decrease in operating income was partially offset by a favorable change order adjustment and better-than-anticipated productivity on certain projects.

As a percentage of revenues, operating income for our C&I segment was 3.1% for the three months ended September 30, 2022 compared to 4.7% for the three months ended September 30, 2021.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Revenues were $2.14 billion for the nine months ended September 30, 2022 compared to $1.85 billion for the nine months ended September 30, 2021.

The increase of $292.4 million, or 15.8%, was primarily due to an increase in revenue on transmission projects, an increase in revenues on distribution projects, including incremental distribution revenues from the Powerline Plus Companies, and an increase in C&I revenue in certain geographical areas.

Gross margin.

Gross margin was 12.0% for the six months ended June 30, 2022 compared to 12.7% for the six months ended June 30, 2021.

These margin decreases were partially offset by favorable job close outs and better-than-anticipated productivity on certain projects.

Changes in estimates of gross profit on certain projects resulted in gross margin increases of 0.3% for the six months ended June 30, 2022 and 2021.

Gross margin was 11.5% for the nine months ended September 30, 2022 compared to 13.1% for the nine months ended September 30, 2021.

Gross margin was also negatively impacted by an unfavorable change order adjustment on a project and inclement weather experienced on certain projects.

These margin decreases were partially offset by better-than-anticipated productivity, favorable job close outs and favorable change order adjustments on certain projects.

Changes in estimates of gross profit on certain projects were not significant for the nine months ended September 30, 2022 and resulted in gross margin increase of 0.4% for the nine months ended September 30, 2021.

Gross profit.

Gross profit was $161.3 million for the six months ended June 30, 2022 compared to $158.0 million for the six months ended June 30, 2021, the increase of $3.3 million, or 2.1% was due to higher revenues, partially offset by lower margins.

Gross profit was $247.7 million for the nine months ended September 30, 2022 compared to $241.9 million for the nine months ended September 30, 2021, the increase of $5.8 million, or 2.4% was due to higher revenues, partially offset by lower margins.

Selling, general and administrative expenses.

SG&A was $105.6 million for the six months ended June 30, 2022 compared to $101.5 million for the six months ended June 30, 2021.

The period-over-period increase of $4.1 million was primarily due to costs associated with the recently acquired Powerline Plus Companies and an increase in employee-related expenses, partially offset by a decrease in employee incentive compensation costs.

SG&A was $164.5 million for the nine months ended September 30, 2022 compared to $154.6 million for the nine months ended September 30, 2021.

The period-over-period increase of $9.9 million was primarily due to the acquisition of Powerline Plus Companies and an increase in employee-related expenses to support the growth in our operations, partially offset by a decrease in employee incentive compensation costs.

Amortization of intangible assets.

Amortization of intangible assets was $6.0 million for the six months ended June 30, 2022 compared to $1.2 million for the six months ended June 30, 2021.

Amortization of intangible assets was $6.8 million for the nine months ended September 30, 2022 compared to $1.7 million for the nine months ended September 30, 2021.

The period-over-period increase of $5.1 million was primarily due to amortization related to certain intangibles acquired with the Powerline Plus Companies.

Gain on sale of property and equipment.

Gains from the sale of property and equipment for the six months ended June 30, 2022 were $1.4 million compared to $1.8 million for the six months ended June 30, 2021.

Gains from the sale of property and equipment for the nine months ended September 30, 2022 were $1.7 million compared to $2.5 million for the nine months ended September 30, 2021.

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

Other income, net .

Other income was $2.3 million for the six months ended June 30, 2022 compared to other income of $0.1 million for the six months ended June 30, 2021.

The change was largely due to funds received under the CEWS program, which were attributable to a C&I segment company.

Interest expense.

Interest expense was $1.1 million for the six months ended June 30, 2022 compared to $1.2 million for the six months ended June 30, 2021.

This decrease was primarily attributable to a decrease in our outstanding debt during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

Interest expense was $2.2 million for the nine months ended September 30, 2022 compared to $1.5 million for the nine months ended September 30, 2021.

This increase was primarily attributable to higher outstanding debt and interest rates during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021.

Other income, net .

Other income was $2.5 million for the nine months ended September 30, 2022 compared to other income of $0.2 million for the nine months ended September 30, 2021.

The change was largely due to funds received under the Canadian Emergency Wage Subsidy program, which were attributable to a C&I segment company.

Income tax expense.

Income tax expense was $12.0 million for the six months ended June 30, 2022, with an effective tax rate of 22.8%, compared to the expense of $14.9 million for the six months ended June 30, 2021, with an effective tax rate of 26.6%.

The decrease in the tax rate for the six months ended June 30, 2022 was primarily due to a favorable impact from stock compensation excess tax benefits and the reduction of the impact of GILTI, partially offset by an increase in other permanent difference items.

Net income was $40.4 million for the six months ended June 30, 2022 compared to $41.1 million for the six months ended June 30, 2021.

Income tax expense was $19.6 million for the nine months ended September 30, 2022, with an effective tax rate of 25.0%, compared to the expense of $22.5 million for the nine months ended September 30, 2021, with an effective tax rate of 25.9%.

The decrease in the tax rate for the nine months ended September 30, 2022 was primarily due to a favorable impact from stock compensation excess tax benefits, partially offset by an increase in other permanent difference items.

Net income was $58.8 million for the nine months ended September 30, 2022 compared to $64.3 million for the nine months ended September 30, 2021.

The decrease was primarily due to the reasons stated earlier.

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Six months ended June 30,

Nine months ended September 30,

(dollars in thousands) Amount Percent Amount Percent

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Transmission & Distribution

Revenues for our T&D segment for the six months ended June 30, 2022 were $780.1 million compared to $641.7 million for the six months ended June 30, 2021, an increase of $138.4 million, or 21.6%.

Revenues from transmission projects represented 60.5% and 65.8% of T&D segment revenue for the six months ended June 30, 2022 and 2021, respectively.

Operating income for our T&D segment for the six months ended June 30, 2022 was $63.2 million, an increase of $1.8 million, or 2.9%, from the six months ended June 30, 2021.

Revenues for our T&D segment for the nine months ended September 30, 2022 were $1.23 billion compared to $948.3 million for the nine months ended September 30, 2021, an increase of $283.8 million, or 29.9%.

Revenues from transmission projects represented 59.7% and 62.0% of T&D segment revenue for the nine months ended September 30, 2022 and 2021, respectively.

Operating income for our T&D segment for the nine months ended September 30, 2022 was $97.6 million, an increase of $0.9 million, or 0.8%, from the nine months ended September 30, 2021.

The increase in T&D operating income from the prior year was primarily due to higher revenues and a favorable job close-out.

These increases were partially offset by the additional $4.8 million of amortization related to certain intangibles acquired with the Powerline Plus Companies and overall cost increases from supply chain disruptions, inflation and inclement weather experienced on certain projects.

As a percentage of revenues, operating income for our T&D segment was 8.1% for the six months ended June 30, 2022 compared to 9.6% for the six months ended June 30, 2021.

These increases were partially offset by the additional $5.1 million of amortization related to certain intangibles acquired with the Powerline Plus Companies and an unfavorable change order adjustment on a project.

Operating income was also negatively impacted by overall cost increases from supply chain disruptions, labor inefficiencies, inflation and inclement weather experienced on certain projects.

As a percentage of revenues, operating income for our T&D segment was 7.9% for the nine months ended September 30, 2022 compared to 10.2% for the nine months ended September 30, 2021.

Commercial & Industrial

Revenues for our C&I segment for the six months ended June 30, 2022 were $564.6 million compared to $600.3 million for the six months ended June 30, 2021, a decrease of $35.7 million, or 5.9%, primarily due to a decrease in revenue in certain geographical areas.

Operating income for our C&I segment for the six months ended June 30, 2022 was $19.6 million, a decrease of $9.2 million over the six months ended June 30, 2021.

Revenues for our C&I segment for the nine months ended September 30, 2022 were $912.5 million compared to $904.0 million for the nine months ended September 30, 2021, an increase of $8.5 million, or 0.9%, primarily due to higher revenue in certain geographical areas.

Operating income for our C&I segment for the nine months ended September 30, 2022 was $30.5 million, a decrease of $12.4 million over the nine months ended September 30, 2021.

The period-over-period decrease in operating income was primarily due to overall cost increases mainly associated with supply chain disruptions, inflation and continued impacts from the COVID-19 pandemic some of which also caused labor and material inefficiencies on certain projects.

The decrease in operating income was partially offset by better-than-anticipated productivity on certain projects and a favorable job close out.

As a percentage of revenues, operating income for our C&I segment was 3.5% for the six months ended June 30, 2022 compared to 4.8% for the six months ended June 30, 2021.

The decrease in operating income was partially offset by better-than-anticipated productivity on various projects, favorable change order adjustments on certain projects and a favorable job close out.

As a percentage of revenues, operating income for our C&I segment was 3.3% for the nine months ended September 30, 2022 compared to 4.7% for the nine months ended September 30, 2021.

Non-GAAP Measure—EBITDA

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(in thousands) 2022 2021 2022 2021

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Liquidity, Capital Resources and Material Cash Requirements

As of June 30, 2022, we had working capital of $219.0 million.

As of September 30, 2022, we had working capital of $249.8 million.

We define working capital as current assets less current liabilities.

During the six months ended June 30, 2022, operating activities of our business provided net cash of $60.1 million, compared to $88.6 million of cash provided for the six months ended June 30, 2021.

During the nine months ended September 30, 2022, operating activities of our business provided net cash of $73.7 million, compared to $108.2 million of cash provided for the nine months ended September 30, 2021.

Cash flow from operations is primarily influenced by operating margins, timing of contract performance and the type of services we provide to our customers.

The $34.5 million year-over-year decrease in cash provided by operating activities was primarily due to unfavorable net changes in operating assets and liabilities of $39.5 million, partially offset by an increase in depreciation and amortization of $8.5 million.

The unfavorable change in operating assets and liabilities was primarily due to unfavorable changes of $24.0 million in other liabilities and $15.3 million in other assets, partially offset by the net favorable year-over-year changes in various working capital accounts that relate primarily to construction activities (accounts receivable, contract assets, accounts payable and contract liabilities) of $7.1 million.

The unfavorable change of $24.0 million in other liabilities was primarily due to the a decrease in accrued incentive compensation.

The unfavorable change in other assets was primarily due to the incremental prepayment of materials required for certain projects offset by a favorable change in our prepaid insurance.

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

In the six months ended June 30, 2022, we used net cash of $139.8 million in investing activities consisting of $110.6 million to acquire the Powerline Plus Companies and $30.4 million for capital expenditures, partially offset by $1.2 million of proceeds from the sale of equipment.

In the six months ended June 30, 2022, financing activities provided net cash of $20.4 million, consisting primarily of $51.4 million of borrowing under our revolving line of credit, partially offset by share repurchases of $23.5 million under our share repurchase program.

Additionally, we repurchased shares of our common stock for approximately $6.8 million, all of which represented shares surrendered to satisfy tax obligations under our stock compensation programs.

We believe that our $310.3 million borrowing availability under our revolving line of credit at June 30, 2022, future cash flow from operations and our ability to utilize short- and long-term leases will provide sufficient liquidity for our short- and long-term needs.

The unfavorable change in operating assets and liabilities was primarily due to the net unfavorable year-over-year changes in various working capital accounts that relate primarily to construction activities (accounts receivable, contract assets, accounts payable and contract liabilities) of $65.2 million, partially offset by the net favorable change of $29.1 million in other assets.

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

The favorable change in other assets was primarily due to the timing of insurance payments partially offset by incremental prepayment of materials required for certain projects.

In the nine months ended September 30, 2022, we used net cash of $157.5 million in investing activities consisting of $110.7 million to acquire the Powerline Plus Companies and $48.5 million for capital expenditures, partially offset by $1.6 million of proceeds from the sale of equipment.

In the nine months ended September 30, 2022, financing activities provided net cash of $41.7 million, consisting primarily of $57.7 million of borrowing under our revolving line of credit and $24.2 million of borrowing under our equipment notes.

The impact of these borrowing was partially offset by share repurchases of $31.7 million under our share repurchase program and $6.8 million of shares repurchased to satisfy tax obligations under our stock compensation programs.

We believe that our $303.9 million borrowing availability under our revolving line of credit at September 30, 2022, future cash flow from operations and our ability to utilize short- and long-term leases will provide sufficient liquidity for our short- and long-term needs.

Our primary short-term liquidity needs include cash for operations, debt service requirements, capital expenditures, acquisition and joint venture opportunities, share repurchases and $9.8 million of remaining payroll tax deferrals provided under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), which are expected to be paid by the end of 2022.

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

We were in compliance with all of the financial covenants under the Credit Agreement as of June 30, 2022.

We had $51.4 million of debt outstanding under the Facility as of June 30, 2022.

We were in compliance with all of the financial covenants under the Credit Agreement as of September 30, 2022.

We had $57.7 million of debt outstanding under the Facility as of September 30, 2022.

We had no debt outstanding under the Facility as of December 31, 2021.

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Currently, we do not believe that it is likely that any claims will be made under any letter of credit.

As of June 30, 2022 and December 31, 2021, we had $13.3 million and $12.3 million, respectively, in letters of credit outstanding under our Credit Agreement, which are almost entirely related to the Company's payment obligation under its insurance programs.

As of September 30, 2022 and December 31, 2021, we had $13.3 million and $12.3 million, respectively, in letters of credit outstanding under our Credit Agreement, which are almost entirely related to the Company's payment obligation under its insurance programs.

Equipment Notes

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

As of June 30, 2022 and December 31, 2021, we had one outstanding Equipment Note collateralized by equipment and vehicles owned by us.

As of June 30, 2022, the Company also had one other equipment note outstanding that is collateralized by a vehicle owned by the Company.

The outstanding balance of all equipment notes was $4.1 million as of June 30, 2022 and $4.5 million as of December 31, 2021.

As of June 30, 2022 we had outstanding short-term and long-term equipment notes of approximately $1.1 million and $3.0 million, respectively.

As of December 31, 2021, we had an outstanding short-term and long-term Equipment Note of approximately $1.0 million and $3.5 million, respectively.

As of September 30, 2022, we had two outstanding Equipment Notes collateralized by equipment and vehicles owned by us.

As of December 31, 2021, we had one outstanding Equipment Note collateralized by equipment and vehicles owned by us.

As of September 30, 2022, we also had one other equipment note outstanding collateralized by a vehicle owned by us.

The outstanding balance of all equipment notes was $28.2 million as of September 30, 2022 and $4.5 million as of December 31, 2021.

As of September 30, 2022 we had outstanding short-term and long-term equipment notes of approximately $5.1 million and $23.1 million, respectively.

As of December 31, 2021, we had an outstanding short-term and long-term Equipment Notes of approximately $1.0 million and $3.5 million, respectively.

Lease Obligations

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The Company may exercise some of these purchase options when the need for equipment is on-going and the purchase option price is attractive.

The outstanding balance of operating lease obligations was $32.7 million as of June 30, 2022, consisting of short-term and long-term operating lease obligations of approximately $9.4 million and $23.3 million, respectively.

The outstanding balance of operating lease obligations was $31.4 million as of September 30, 2022, consisting of short-term and long-term operating lease obligations of approximately $9.8 million and $21.6 million, respectively.

The outstanding balance of operating lease obligations was $21.0 million as of December 31, 2021, consisting of short-term and long-term operating lease obligations of approximately $7.8 million and $13.2 million, respectively.

The outstanding balance of finance lease obligations was $4.3 million as of June 30, 2022, consisting of short-term and long-term finance lease obligations of approximately $1.3 million and $3.0 million, respectively.

The outstanding balance of finance lease obligations was $3.7 million as of September 30, 2022, consisting of short-term and long-term finance lease obligations of approximately $1.2 million and $2.6 million, respectively.

As of December 31, 2021 we had no outstanding finance lease obligations.

Purchase Commitments for Construction Equipment

As of June 30, 2022, we had approximately $14.3 million in outstanding purchase obligations for certain construction equipment to be paid with cash outlays scheduled to occur over the next seven months.

As of September 30, 2022, we had approximately $26.2 million in outstanding purchase obligations for certain construction equipment to be paid with cash outlays scheduled to occur over the next seven months.

Performance and Payment Bonds and Parent Guarantees

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We believe that it is unlikely that we will have to fund significant claims under our surety arrangements.

As of June 30, 2022, an aggregate of approximately $1.74 billion in original face amount of bonds issued by our sureties were outstanding.

Our estimated remaining cost to complete these bonded projects was approximately $742.3 million as of June 30, 2022.

As of September 30, 2022, an aggregate of approximately $1.78 billion in original face amount of bonds issued by our sureties were outstanding.

Our estimated remaining cost to complete these bonded projects was approximately $861.1 million as of September 30, 2022.

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

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Under certain circumstances such as foreclosures or negotiated settlements, we may take title to the underlying assets in lieu of cash in settlement of receivables.

As of June 30, 2022 and 2021, none of our customers individually exceeded 10% of consolidated accounts receivable.

As of September 30, 2022 and 2021, none of our customers individually exceeded 10% of consolidated accounts receivable.

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

51 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis