MYR Group Annual Report 2018

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2018

ANNUAL REPORT

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MARCH 6, 2019

DEAR STOCKHOLDERS

In 2018, MYR Group achieved another record year in revenues, delivering solid financial
returns. Through safe and successful project execution, strong leadership, and consistent
application of our organic and acquisition growth initiatives, we strengthened our market
position and paved the way for future growth in both our Transmission and Distribution
(T&D) and Commercial and Industrial (C&I) electrical construction segments.

NOTEWORTHY 2018 HIGHLIGHTS:

1. RECORD REVENUES

Achieved record revenues of $1.531 billion, an
increase of 9.1 percent over 2017.

2. RECORD BACKLOG

Reached record backlog of $1.147 billion.

3. STRATEGIC ACQUISITION

Acquired Huen Electric, which expanded our
U.S. C&I service offerings and geographic reach
throughout the upper Midwest and Northeast.

4. OUTSTANDING SAFETY PERFORMANCE

Continued excellent safety performance
demonstrating our commitment to the well-being
of our people through our investments in the latest
training, tools, and technology.

Our results reflect continued progress in expanding
our capabilities and geographic reach, effectively
serving our clients, adopting new operational
efficiencies, and delivering positive returns to our
stockholders.

MYR Group’s financial performance and operational
initiatives continue to support our position as a
solid, integrated, reliable leader in the electrical
construction industry -- backed by a culture built on
time-tested values that have guided and inspired us
for over a century.

We believe our performance and expanded service
offerings further enhance our reputation as a high-
value provider in this healthy market environment.
To maintain this position, we continually examine
our business, competitors, and industry dynamics
to formulate a sustainable growth model that not
only makes us bigger – but better.

We began work on the Harry
Allen to Eldorado project in Clark
County, Nevada. This 60-mile 500kV
transmission line project, which
is scheduled for 2020 completion,
was awarded to Desert Link, LLC (a
subsidiary of LS Power). We were
selected by LS Power as a teaming
partner to provide construction services.

TRANSMISSION &
DISTRIBUTION

Throughout 2018, our T&D
segment engaged in efforts
to optimize operational
efficiencies, strengthen valued
industry relationships, and
refine our estimating and project
delivery expertise.

Our increase in T&D backlog
reflects the strength of these
efforts as we secured new
work that includes projects of
different sizes, types and delivery
methods. This also reinforces our
solid competitive position in this
robust market.

Further strengthening and
maintaining strong alliances with
our valued clients continued to
provide ongoing, repeat work
throughout many of our service

areas. Consistently anticipating
our clients’ needs and providing
innovative solutions is an
important part of what sets us
apart from our competition.

This year we were awarded our
first competitive transmission
project with Midwest Independent
System Operators (MISO) - the
33-mile, Duff to Coleman 345kV
transmission line project in Indiana
and Kentucky. Other notable
project awards included the
Silver Run 230kV substation and
transmission line project, which is
part of the Artificial Island solution
to relieve congestion in the
Northeastern U.S.; the Rochester
Area Reliability Project in New York
which consists of two new 115kV
transmission lines and one new
345kV transmission line; and the
electrical design and construction
portion of the mid-Atlantic’s first
off-shore wind project, the Coastal
Virginia Offshore Wind project.

Work continues across the nation
on projects begun in 2018, such
as the Surry to Skiffes Creek
500kV transmission line project
in Virginia and the Harry Allen to
Eldorado 500kV transmission line
project in Nevada.

Distribution work has increased
as we perform services through
several ongoing alliance contracts
for clients across the country. Last
year our distribution crews also
restored power to communities
impacted by storm events, namely
hurricanes Florence and Matthew
in Florida and North Carolina.

As we head into 2019, we
expect continued strength in
opportunities through a steady
flow of small to medium-sized
projects coming to market.
Aging infrastructure, technology
advancements, reliability and
grid protection continue to
fuel the need for ongoing
investments in transmission,
distribution and substation
projects and we remain in a
solid, competitive position to
capitalize on new opportunities.

COMMERCIAL &
INDUSTRIAL

Our C&I segment’s solid financial
performance, diverse project
portfolio, and continued growth in
2018 are evidence that our efforts to
capture new and varied opportunities
are proving successful.

We established a strong backlog
of C&I work in 2018, with project
awards that reflect our range of
expertise and geographic reach.
Strengthening our preconstruction
capabilities and building trusted
relationships paved the way for
opportunities such as the award
of the Central 70 project in
Denver, Colorado; as well as other
transportation, healthcare, and
high-tech projects throughout our
markets. Our specialized training
programs also contributed to
awards on complex healthcare and
high-tech facility projects including
expansions for both a data center
and a chip manufacturing facility
in Phoenix, and a new hospital
expansion in Denver.

The transportation market
continued to provide opportunities
in roadway, rail transit, and
aviation projects. Our successful
track record of performance and
depth of experience contributed
to awards of critical highway
expansion projects throughout
many of our operating regions.

The acquisition of Huen Electric,
which expanded our geographic
reach and ability to serve C&I
clients with a national presence,
provided continued growth for our

C&I segment. Through integrating
systems and collaborating on
best practices, our various district
offices are better equipped to
combine resources, capitalize on
new opportunities and extend
offerings across a wide footprint.

Looking ahead, we expect healthy
growth in both our new and
established C&I markets, and
believe our core competencies in
healthcare, transportation, data
centers, commercial, industrial,
aviation, and manufacturing
place us in a favorable light as
we compete for project awards.
We remain diligent in working
together with our clients, staying
aware of industry developments
and new technologies,
understanding our competition,
developing our employees, and
expanding our service offerings
to more customers throughout
the U.S. and western Canada.
These efforts support our goals to
provide best-in-class solutions for
our clients.

A notable 2018 milestone
was commencing work on the
Central 70 project in Denver,
Colorado. This marks one of the
largest infrastructure projects
in Colorado’s history, and the
largest contract ever awarded
to our transportation division.

WHAT'S NEXT

Our momentum heading into 2019 is exciting,
and the markets we serve remain strong. Our
leadership team shares a commitment to growth,
innovation, and collaboration. We have established
talented people at every level of the organization
that strengthen one another through common
goals and consistent communications.

We remain focused on our key strategic
imperatives of delivering positive financial results,
maintaining operational and organizational
excellence, ensuring safety is paramount, and
providing optimal customer satisfaction. This allows
us to execute a sustainable, long-term growth
model, and to evolve and operate most effectively
in an ever-changing business climate.

We expect to grow profitably with a continued
focus on our culture that places safety, integrity,
learning, collaboration, innovation, diversity and
social responsibility at its core. By doing so, we will
persist in attracting, developing, and retaining the
best people in the industry.

We believe in building strong, resilient, and
sustainable communities and creating ways
for our employees to contribute to causes that
they care about. Coming together for the greater
good promotes positive change and we are
proud to invest our time, resources and energy.

We are inspired, committed, and proud of our
achievements. We thank our wonderful employees,
customers, and stockholders for supporting us on
this journey.

Sincerely,

Richard S. Swartz
President and
Chief Executive Officer

Kenneth M. Hartwick
Chairman of the Board

WELCOME NEW
BOARD MEMBERS

In April, our Board appointed Ken
Hartwick as MYR Group’s Chairman.
Ken has been a Board member since
2015, serving on the Board’s Audit
Committee and Nominating and
Corporate Governance Committee.
His valuable expertise and leadership
has and will continue to benefit
MYR Group.

In July, we welcomed Jennifer Lowry
as a new MYR Group Board and Audit
Committee member. Jennifer brings
industry knowledge, strong
leadership, and a diverse set
of governance skills.

FINANCIAL SUMMARY

(Dollars in thousands, except per share data)

SUMMARY BALANCE SHEET

Total current assets

Property and equipment, net

Goodwill

Intangible assets, net

Other assets

Total assets

Current liabilities

Long-term debt

Other long-term liabilities

Stockholders’ equity (1)

Total liabilities and stockholders’ equity

SUMMARY INCOME STATEMENT

Contract revenues

Gross profit

Income from operations

Net income attributable to MYR Group Inc. (2)

Diluted earnings per share attributable to MYR
Group Inc. (2)

OTHER SUMMARY DATA

Backlog

Net cash provided by (used in) operating activities

Expenditures for property and equipment

Cash paid for acquisition

EBITDA (3)

NOTES

2018

475,634

161,892

56,588

33,266

21,375

748,755

283,805

86,111

54,375

324,464

748,755

2018

1,531,169

167,060

50,312

31,087

1.87

2018

1,146,637

84,789

50,704

47,082

86,609

2017

379,736

148,084

46,994

10,852

18,122

603,788

188,564

78,960

49,225

287,039

603,788

2017

1,403,317

125,004

29,558

21,154

1.28

2017

679,139

(9,198)

30,843

65,815

(1) 2018 includes noncontrolling interest of $1,480.

(2) Revaluation of our deferred tax liabilities in 2017 due to the Tax Cuts and Jobs Act
resulted in a tax benefit of $7.8 million and an increase in diluted earnings per share
attributable to MYR Group Inc. of $0.47 in 2017.

(3) EBITDA is a non-GAAP measure that management believes is useful to investors
in understanding MYR Group’s results of operations. A reconciliation of EBITDA to
its GAAP counterpart (net income) is provided in Footnote 5 to the tables in “Item 6.
Selected Financial Data.”

STOCK TICKER SYMBOL
NASDAQ: MYRG

AUDITORS
Crowe LLP
1 Mid America Plaza, Ste. 700
Oakbrook Terrace, IL 60181
630.574.7878

STOCKHOLDER INQUIRIES
Dresner Corporate Services
Steve Carr, Managing Director
20 North Clark, Suite 3550
Chicago, IL 60602
312.780.7211
scarr@dresnerco.com

REGISTRAR AND
TRANSFER AGENT
American Stock Transfer &
Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
800.937.5449

FORM 10-K
A copy of the Company’s
Annual Report on Form 10-K
will be provided without charge
upon written request to the
Company’s Secretary.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(cid:2)

□

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the ﬁscal year ended December 31, 2018

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission ﬁle number: 1-08325

MYR GROUP INC.

(Exact name of registrant as speciﬁed in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

36-3158643
(I.R.S. Employer
Identiﬁcation No.)

1701 Golf Road, Suite 3-1012
Rolling Meadows, IL 60008
(Address of principal executive offices, including zip code)

(847) 290-1891
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Exchange on Which Registered

Common Stock, $0.01 par value

The NASDAQ Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as deﬁned in Rule 405 of the Securities Act. Yes (cid:4) No (cid:2)
Indicate by check mark if the registrant is not required to ﬁle reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:4) No (cid:2)
Indicate by check mark whether the registrant (1) has ﬁled all reports required to be ﬁled by Section 13 or 15(d) of the Securities Exchange

Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to ﬁle such reports), and (2) has been
subject to such ﬁling requirements for the past 90 days. Yes (cid:2) No (cid:4)

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to

Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit such ﬁles). Yes (cid:2) No (cid:4)

Indicate by check mark if disclosure of delinquent ﬁlers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of the registrant’s knowledge, in deﬁnitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. □

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

Large accelerated ﬁler □
Non-accelerated ﬁler □

Accelerated ﬁler (cid:2)
Smaller reporting company □
Emerging growth company □

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying

with any new or revised ﬁnancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □

Indicate by check mark whether the registrant is a shell company (as deﬁned in Rule 12b-2 of the Act). Yes (cid:4) No (cid:2)
As of June 29, 2018 (the last business day of the registrant’s most recently completed second ﬁscal quarter), the aggregate market value of the

outstanding common equity held by non-affiliates of the registrant was approximately $485.7 million, based upon the closing sale price of the
common stock on such date as reported by the Nasdaq Global Market (for purposes of calculating this amount, only directors, officers and beneﬁcial
owners of 10% or more of the outstanding capital stock of the registrant have been deemed affiliates).

As of March 1, 2019 there were 16,599,744 shares of the registrant’s $0.01 par value common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s deﬁnitive proxy statement to be ﬁled with the Securities and Exchange Commission (the ‘‘SEC’’) in connection

with its 2019 annual meeting of stockholders to be held on April 25, 2019, are incorporated into Part III hereof.

[This page intentionally left blank.]

MYR GROUP INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2018

TABLE OF CONTENTS

PART I

Item 1. Business

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 2. Properties

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . .

Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial

Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . .

Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 12. Security Ownership of Certain Beneﬁcial Owners and Management and Related

Stockholder Matters

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . .

Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Item 15. Exhibits and Financial Statement Schedules

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

100

101

102

Throughout this report, references to ‘‘MYR Group,’’ the ‘‘Company,’’ ‘‘we,’’ ‘‘us,’’ and ‘‘our’’ refer to
MYR Group Inc. and its consolidated subsidiaries, except as otherwise indicated or as the context otherwise
requires.

FORWARD-LOOKING STATEMENTS

Statements in this Annual Report on Form 10-K contain various forward-looking statements within the

meaning of Section 27A of the Securities Act of 1933 (the ‘‘Securities Act’’) and Section 21E of the
Securities Exchange Act of 1934 (the ‘‘Exchange Act’’), which represent our management’s beliefs and
assumptions concerning future events. When used in this document and in documents incorporated by
reference, forward-looking statements include, without limitation, statements regarding ﬁnancial forecasts or
projections, and our expectations, beliefs, intentions or future strategies that are signiﬁed by the words
‘‘anticipate,’’ ‘‘believe,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘intend,’’ ‘‘may,’’ ‘‘objective,’’ ‘‘outlook,’’ ‘‘plan,’’ ‘‘project,’’
‘‘likely,’’ ‘‘unlikely,’’ ‘‘possible,’’ ‘‘potential,’’ ‘‘should’’ or other words that convey the uncertainty of future
events or outcomes. The forward-looking statements in this Annual Report on Form 10-K speak only as of the
date of this Annual Report on Form 10-K. We disclaim any obligation to update these statements (unless
required by securities laws), and we caution you not to rely on them unduly. We have based these forward-
looking statements on our current expectations and assumptions about future events. While our management
considers these expectations and assumptions to be reasonable, they are inherently subject to signiﬁcant
business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are
difficult to predict, and many of which are beyond our control. These and other important factors, including
those discussed in Item 1A — ‘‘Risk Factors’’ of this report, and in any risk factors or cautionary statements
contained in our other ﬁlings with the U.S. Securities and Exchange Commission (the ‘‘SEC’’), may cause our
actual results, performance or achievements to differ materially from any future results, performance or
achievements expressed or implied by these forward-looking statements.

PART I

Item 1. Business

General

We are a holding company of specialty electrical construction service providers that was established in
1995 through the merger of long-standing specialty contractors. Through our subsidiaries, we serve the electric
utility infrastructure, commercial and industrial construction markets. Our operations are currently conducted
through wholly owned subsidiaries, including: The L. E. Myers Co.; Harlan Electric Company; Great
Southwestern Construction, Inc.; Sturgeon Electric Company, Inc.; MYR Transmission Services, Inc.;
E.S. Boulos Company; Western Paciﬁc Enterprises Ltd.; High Country Line Construction, Inc.; MYR
Transmission Services Canada, Ltd.; Northern Transmission Services, Ltd.; Sturgeon Electric California, LLC;
GSW Integrated Services, LLC and Huen Electric, Inc. We primarily provide electrical construction services
through a network of local offices located throughout the United States and western Canada. We provide a
broad range of services, including design, engineering, procurement, construction, upgrade, maintenance and
repair services, with a particular focus on construction, maintenance and repair.

Our principal executive offices are located at 1701 Golf Road, Suite 3-1012, Rolling Meadows, Illinois

60008. The telephone number of our principal executive offices is (847) 290-1891.

Reportable Segments

Through our subsidiaries, we are a leading specialty contractor serving the electric utility infrastructure,

commercial and industrial construction markets in the United States and western Canada. We manage and
report our operations through two electrical contracting service segments: Transmission and Distribution
(‘‘T&D’’) and Commercial and Industrial (‘‘C&I’’). We generally focus on improving our proﬁtability by
selecting projects we believe will provide attractive margins, actively monitoring the costs of completing our
projects, holding customers accountable for costs related to changes to contract speciﬁcations, and rewarding
our employees for effectively managing costs.

Transmission and Distribution segment We have operated in the T&D industry since 1891. We are one

of the largest U.S. contractors servicing the T&D sector of the electric utility industry. We provide 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, to customers in the electric utility industry throughout the
United States and western Canada. Our 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. We also provide emergency restoration
services in response to hurricane, ice or other storm-related damage.

In our T&D segment, we generally serve the electric utility industry as a prime contractor, through
traditional design-bid-build or engineering, procurement and construction (‘‘EPC’’) forms of project delivery.
We have long-standing relationships with many of our T&D customers who rely on us to construct and
maintain reliable electric and other utility infrastructure. We also provide many services to our customers
under multi-year master service agreements (‘‘MSAs’’) and other variable-term service agreements.

Commercial and Industrial segment We have provided electrical contracting services for C&I

construction since 1912. Our C&I segment provides services such as the design, installation, maintenance and
repair of commercial and industrial wiring, the installation of traffic networks and the installation of bridge,
roadway and tunnel lighting in the United States and western Canada. We concentrate our efforts on projects
where our technical and project management expertise are critical to successful and timely execution. Typical
C&I contracts cover electrical contracting services for airports, hospitals, data centers, hotels, stadiums,
convention centers, manufacturing plants, processing facilities, waste-water treatment facilities, mining
facilities and transportation control and management systems.

In our C&I segment, we generally provide our electric construction and maintenance services as a
subcontractor to general contractors, but also contract directly with facility owners. We have a diverse
customer base with many long-standing relationships.

Additional ﬁnancial information related to our business segments is provided under ‘‘Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and in
Note 15 — Segment Information to our Financial Statements.

Customers

Our T&D customers include many of the leading companies in the electric utility industry. These

customers include investor-owned utilities, cooperatives, private developers, government-funded utilities,
independent power producers, independent transmission companies, industrial facility owners and other
contractors. Our C&I customer base includes general contractors, commercial and industrial facility owners,
local governments and developers.

We have long-standing relationships with many of our customers, and we cultivate these relationships at

all levels of our organization from senior management to project supervisors. We seek to build upon our
customer relationships to secure additional projects from our current customer base. Many of our customer
relationships originated decades ago and are maintained through a partnering approach, which includes project
evaluation and consulting, quality performance, performance measurement and direct customer contact. At all
levels of management, we maintain a focus on pursuing growth opportunities with prospective customers. In
addition, our management teams promote and market our services for prospective large-scale projects and
national accounts. We believe that our industry experience, technical expertise, customer relationships and
emphasis on safety and customer service contribute to obtaining new contracts with both existing and new
customers.

For the years ended December 31, 2018, 2017 and 2016, our top 10 customers accounted for 32.9%,
40.4%, and 46.4%, of our revenues, respectively. For the years ended December 31, 2018 and 2016, no single
customer accounted for more than 10.0% of annual revenues. For the year ended December 31, 2017, one
T&D customer accounted for 10.7% of our revenues.

For the years ended December 31, 2018, 2017 and 2016, revenues derived from T&D customers
accounted for 58.3%, 62.7% and 71.7% of our total revenues, respectively, and revenues derived from C&I
customers accounted for 41.7%, 37.3% and 28.3% of our total revenues, respectively.

Types of Service Arrangements and Bidding Process

We enter into contracts principally through a competitive bid process. Our typical construction project
begins with the preparation and submission of a bid to a customer. If selected as the successful bidder, we
generally enter into a contract with the customer that provides 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 the
contracts we undertake, our contracts are primarily structured as:

•

ﬁxed-price agreements, under which we agree to perform the entire project for a ﬁxed amount;

unit-price agreements, under which we agree to perform the work at a ﬁxed price per unit of work
as speciﬁed in the agreement;

time-and-equipment and time-and-materials contracts, under which we agree to perform the work at
negotiated hourly billing rates for labor and equipment and for other expenses, including materials,
as incurred at rates agreed to in the contract; and

cost-plus contracts, where we are paid for our costs plus a negotiated margin.

On occasion, time-and-equipment, time-and-materials, cost-plus and shared savings contracts require us to

include a guaranteed not-to-exceed maximum price.

Fixed-price and unit-price contracts typically have higher potential margins; however, they hold 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 less margin upside, but generally have a lower risk of cost

overruns. Work in our T&D segment is generally completed under ﬁxed-price, time-and-materials, time-and-
equipment, unit-price and cost-plus agreements. Work in our C&I segment is typically performed under ﬁxed-
price, time-and-materials, cost-plus, and unit-price agreements. Fixed-price contracts accounted for 53.2% of
total revenue for the year ended December 31, 2018, including 40.5% of our total revenue for our T&D
segment and 71.0% of our total revenue for our C&I segment.

Our EPC contracts are typically ﬁxed-price and may be entered into through joint ventures. We may act
as the prime contractor for an EPC project where we perform the procurement and construction functions but
use a subcontractor to perform the engineering component, or we may use a subcontractor for both
engineering and procurement functions. We may also act as a subcontractor on an EPC project to an
engineering ﬁrm or general contractor. When acting as a subcontractor for an EPC project, we typically
provide construction services only, although we may also perform both the construction and procurement
functions.

Our T&D segment also provides services under MSAs that 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 our contracts, including MSAs, may be terminated by our customers on short notice, typically 30 to
90 days, even if we are not in default under the contract. Under MSAs, customers generally agree to contract
with us for certain services in a speciﬁed geographic region. A majority of our MSAs do not include
obligations to assign speciﬁc volumes of work to us nor do they grant us exclusivity, although in some cases
certain work under the MSA may be subject to our right of ﬁrst refusal. Many of our contracts, including
MSAs, are open to public bid at expiration and generally attract numerous bidders.

A portion of the work we perform requires ﬁnancial assurances in the form of performance and payment

bonds, letters of credit or other guarantees at the time of execution of the contract. Many of our 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.

Materials

In many cases, our T&D customers are responsible for supplying materials on projects; however, under
certain contracts, we may agree to provide all or a portion of the required materials. For our C&I contracts,
we usually procure the necessary materials and supplies. We are not dependent on speciﬁc suppliers for
materials or supplies.

Subcontracting

We are the prime contractor for the majority of our T&D projects, however, we occasionally perform

work as a subcontractor, and we may elect to do so from time-to-time on larger projects in order to manage
our execution risk. We are a subcontractor to a general contractor for the majority of our C&I projects, but
may contract directly with facility owners. We may utilize subcontractors to perform portions of our contracts
and to manage workﬂow, particularly for design, engineering, and procurement under both segments.

We often work with subcontractors who are sole proprietorships or small business entities. Subcontractors
normally provide their own employees, vehicles, tools and insurance coverages. We are not dependent on any
single subcontractor. Our contracts with subcontractors often contain provisions limiting our obligation to pay
the subcontractor if our client has not paid us. We hold our subcontractors responsible for their work or delays
in their performance. On larger projects, we may require performance and payment bonding from
subcontractors, where we deem appropriate, based on the risk involved. When we perform work as a
subcontractor we are often only paid after the general or prime contractor is paid.

Competition

Our business is highly competitive in both our T&D and C&I segments. Competition in both of our
business segments is primarily based on the price of the construction services and upon the reputation for
safety, quality and reliability of the contractor. The competition we encounter can vary depending upon the
type and/or location of construction services.

We believe that the principal competitive factors that customers consider in our industry are:

•

price and ﬂexible contract terms;

safety programs and safety performance;

technical expertise and experience;

management team experience;

reputation and relationships with the customer;

geographic presence and breadth of service offerings;

willingness to accept risk;

quality of service execution;

specialized equipment, tooling and centralized ﬂeet structure;

the availability of qualiﬁed and/or licensed personnel;

adequate ﬁnancial resources and bonding capacity;

technological capabilities; and

weather-damage restoration abilities and reputation.

While we believe our customers consider a number of factors when selecting a service provider, most of

their work is awarded through a bid process where price is always a principal factor. See ‘‘Risk
Factors — Our industry is highly competitive. Increased competition can place downward pressure on contract
prices and proﬁt margins and may limit the number of projects that we are awarded.’’

T&D Competition

Our T&D segment competes with a number of companies in the local market where we operate, ranging

from small local independent companies to large national ﬁrms. There are many national or large regional
ﬁrms that compete with us for T&D contracts including, among others, Asplundh Construction Corp., Davis
H. Elliot Company, Inc., Henkels & McCoy, Inc., MasTec, Inc., MDU Resources Group, Inc., Michels
Corporation, Pike Corporation, Power Line Services, Inc., Primoris Services Corporation and Quanta Services,
Inc.

There are a number of barriers to entry into the transmission markets, including the cost of equipment
and tooling necessary to perform transmission work, the availability of qualiﬁed labor, the scope of typical
transmission projects and the technical, managerial and supervisory skills necessary to complete the job.
Larger transmission projects generally require specialized heavy duty equipment as well as strong ﬁnancial
resources to meet the cash ﬂow, bonding, or letter of credit requirements of these projects. These factors
sometimes reduce the number of potential competitors on these projects. The number of ﬁrms that generally
compete for any one signiﬁcant transmission infrastructure project varies greatly depending on a number of
factors, including the size of the project, its location and the bidder qualiﬁcation requirements imposed upon
contractors by the customer. Some of our competitors restrict their operations to one geographic area, and
others operate nationally and internationally.

Compared to the transmission markets, there are fewer signiﬁcant barriers to entry into the distribution

markets in which we operate. As a result, any organization that has adequate ﬁnancial resources and access to
technical expertise can compete for distribution projects. Instead of outsourcing, some of our T&D customers
also employ personnel internally to perform similar types of distribution services that we provide.

C&I Competition

Our C&I segment predominately competes with a number of regional or local ﬁrms and also with
subsidiaries of national ﬁrms. There are few signiﬁcant barriers to entry in the C&I markets, and there are a
number of small companies that compete for C&I business. The size, location and technical requirements of
the project will impact which competitors and the number of competitors that we will encounter when bidding
on any particular project.

A major competitive factor in our C&I segment is the individual relationships that we and our

competitors have developed with general contractors who typically manage the bid process. Additionally, the
equipment requirements for C&I work are generally not as signiﬁcant as that of T&D construction. Since C&I
construction typically involves the purchase of materials, the ﬁnancial resources to meet the materials
procurement and equipment requirements of a particular project may impact the competition that we
encounter. We differentiate ourselves from our competitors by bidding for larger and/or more technically
complex projects, which we believe many of our smaller competitors may not be capable of executing
effectively or proﬁtably. We believe that we have a favorable competitive position in the markets that we
serve due in part to our strong operating history and strong local market share as well as our reputation and
relationships with our customers.

Project Bonding Requirements and Parent Guarantees

Many customers, particularly in connection with new construction, require us to post performance and
payment bonds issued by a ﬁnancial institution known as a surety. These bonds provide a guarantee to the
customer that we will perform under the terms of a contract and that we will pay subcontractors and vendors.
If we fail to perform under a contract or to pay subcontractors and vendors, the customer may demand that
the surety make payments or provide services under the bond. We generally must reimburse the surety for any
expenses or outlays it incurs. These bonds are typically issued at the face value of the contract awarded. As of
December 31, 2018, we had approximately $221.3 million in original face amount of bonds outstanding for
projects in our T&D segment and $393.6 million for projects in our C&I segment. Our estimated remaining
cost to complete these bonded projects for both segments was approximately $324.7 million as of
December 31, 2018. As of December 31, 2017, we had approximately $200.8 million in original face amount
of bonds outstanding for projects in our T&D segment and $296.2 million for projects in our C&I segment.
The ability to post bonds provides us with a competitive advantage over smaller or less ﬁnancially secure
competitors. We believe that the strength of our balance sheet, as well as our strong and long-standing
relationship with our sureties, enhances our ability to obtain adequate ﬁnancing and bonds.

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. Additionally, from time to time we are required to post letters of credit to
guarantee the obligations of our wholly owned subsidiaries, which reduces the borrowing availability under
our credit facility.

Backlog

We refer to our estimated revenue on uncompleted contracts, including the amount of revenue on
contracts for which work has not begun, less the revenue we have recognized under such contracts, as
‘‘backlog.’’ We calculate backlog differently for different types of contracts. For our ﬁxed-price contracts, we
include the full remaining portion of the contract in our calculation of backlog. A customer’s intention to
award us work under a ﬁxed-price contract is not included in backlog unless there is an actual award and
contract to perform a speciﬁc scope of work at speciﬁc terms and pricing. For many of our unit-price,
time-and-equipment, time-and-materials and cost-plus contracts, we only include projected revenue for a
three-month period in the calculation of backlog, although these types of contracts are generally awarded as
part of MSAs that typically have a one- to three-year duration from execution. Given the duration of our
contracts and MSAs and our method of calculating backlog, our backlog at any point in time may not
accurately represent the revenue we expect to realize during any period and our backlog as of the end of a
ﬁscal year may not be indicative of the revenue we expect to generate in the following ﬁscal year and should
not be viewed or relied upon as a stand-alone indicator. Our backlog includes 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. Additionally, the difference between our backlog and remaining performance
obligations is due to the portion of our MSAs that is excluded, under certain contract types, from our
remaining performance obligations as these contracts can be canceled for convenience at any time by us or the
customer without considerable cost incurred by the customer. Our estimated backlog also includes our
proportionate share of unconsolidated joint venture contracts. Additional information related to our remaining
performance obligations is provided in Note 3 — Revenue Recognition in the accompanying notes to our

Consolidated Financial Statements. See also ‘‘Item 1A. Risk Factors — Backlog may not be realized or may
not result in proﬁts and may not accurately represent future revenue.’’

Certain projects that we undertake are not completed in one accounting period. Revenue on construction

contracts is recognized over the contract term based on costs incurred under the cost-to-cost method. As the
cost-to-cost method is driven by incurred cost, we calculate 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. 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. While our contracts typically include labor, equipment and indirect costs, the
amount of subcontractor and material costs on any individual contract can vary considerably.

There can be no assurance as to the accuracy of our customers’ requirements or of our estimates of
existing and future needs under MSAs, or of the values of our cost or time-dependent contracts and, therefore,
our current backlog may not be realized as part of our future revenues. Subject to the foregoing discussions,
the following table summarizes our backlog that we believe to be ﬁrm as of the dates shown and the backlog
that we reasonably estimate will not be recognized within the next twelve months:

Backlog at December 31, 2018

(in thousands)
T&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C&I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total

Total
$ 494,922
651,715
$1,146,637

Amount
estimated to not
be recognized
within 12 months
$ 19,698
167,652
$187,350

Total
Backlog at
December 31,
2017
$333,147
345,992
$679,139

Changes in backlog from period to period are primarily the result of ﬂuctuations in the timing of awards
and revenue recognition of contracts. Our backlog as of December 31, 2018 included our proportionate share
of unconsolidated joint venture backlog totaling $33.7 million.

Trade Names and Intellectual Property

We operate in the United States under a number of trade names, including The L. E. Myers Co.; Harlan

Electric Company; Great Southwestern Construction, Inc.; Sturgeon Electric Company, Inc.; MYR
Transmission Services, Inc.; E.S. Boulos Company; High Country Line Construction, Inc.; Sturgeon Electric
California, LLC; GSW Integrated Services, LLC; and Huen Electric, Inc. We operate in Canada under the
trade names MYR Transmission Services Canada, Ltd.; Northern Transmission Services, Ltd and Western
Paciﬁc Enterprises Ltd. We do not generally register our trade names, but instead rely on statutory and
common law protection. While we consider our trade names to be valuable assets, we do not consider any
single trade name to be of such material importance that its absence would cause a material disruption to our
business. We also do not materially rely upon any patents, licenses or other intellectual property.

Equipment

Our long history in the T&D industry has allowed us to be instrumental in designing much of the
specialty tools and equipment used in the industry, including wire pullers, wire tensioners and aerial devices.
We operate a ﬂeet of trucks and trailers, support vehicles, bulldozers, bucket trucks, digger derricks and cranes
and specialty construction equipment, such as wire pullers and wire tensioning machines. We also rely on
specialized tooling, including stringing blocks, wire grips and presses. The standardization of our trucks and
trailers allows us to streamline training, maintenance and parts costs. We operate a centralized ﬂeet facility, as
well as 21 regional maintenance shops throughout the United States, which are staffed by over 140 mechanics
and equipment managers who service our ﬂeet. Our ability to internally service our ﬂeet in various markets
often allows us to reduce repair costs and the time equipment is out of service by eliminating both the need to

ship equipment long distances for repair and dependence on third party maintenance providers. Our
maintenance shops are also able to modify standard construction equipment to meet the speciﬁc needs of our
specialty applications. We are a ﬁnal-stage manufacturer for several conﬁgurations of our specialty vehicles,
and, in the event that a particular piece of equipment is not available to us, we can often build the component
on-site, which reduces our reliance on our equipment suppliers.

Our United States based ﬂeet of equipment is managed by our centralized ﬂeet management group. Our

ﬂeet is highly mobile, which gives us the ability to shift resources from region-to-region quickly and to
effectively respond to customer needs or major weather events. Our centralized ﬂeet management group is
designed to enable us to optimize and maintain our equipment to achieve the highest equipment utilization,
which helps to maintain a competitive position with respect to our equipment costs. We develop internal
equipment rates which provide our business units with appropriate pricing levels to estimate their bids for new
projects more accurately. We also involve our business units in prioritizing the use of our ﬂeet assets. The
ﬂeet management group also manages the procurement and disposition of equipment and short-term rentals.
All of these factors are critical in allowing us to operate efficiently and meet our customers’ needs. Equipment
needs in Canada are managed by our Canadian operating subsidiaries.

Regulation

Our operations are subject to various laws and regulations including:

•

licensing, permitting and inspection requirements applicable to electricians and engineers;

regulations relating to worker safety and environmental protection;

licensing, permitting and inspection requirements applicable to construction projects;

building and electrical codes;

special bidding and procurement requirements on government projects; and

local laws and government acts regulating work on protected sites.

We believe that we are in compliance with applicable regulatory requirements and we believe that we

have all material licenses required to conduct our operations. Our failure to comply with applicable
regulations could result in project delays, cost overruns, remediation costs, substantial ﬁnes and/or revocation
of our operating licenses.

Environmental Matters

As a result of our current and past operations, we are subject to numerous environmental laws and

regulations governing our operations, including the use, transport and disposal of non-hazardous and
hazardous substances and wastes, as well as emissions and discharges into the environment, including
discharges to air, surface water, groundwater and soil. We also are subject to laws and regulations that impose
liability and cleanup responsibility for releases of hazardous substances into the environment. Under certain of
these laws and regulations, such liabilities can be imposed for cleanup of previously owned or operated
properties, or properties to which hazardous substances or wastes were discharged by current or former
operations at our facilities, regardless of whether we directly caused the contamination or violated any law at
the time of discharge or disposal. The presence of contamination from such substances or wastes could
interfere with ongoing operations or adversely affect our ability to sell, lease or otherwise use our properties
in certain ways such as collateral for possible ﬁnancing. We could also be held liable for signiﬁcant penalties
and damages under certain environmental laws and regulations, which could materially and adversely affect
our business and results of operations.

We believe that we are in substantial compliance with environmental laws and regulations and that any

obligations related to environmental matters should not have a material effect on our ﬁnancial condition,
results of operations and cash ﬂows.

Additionally, there are signiﬁcant environmental regulations under consideration to encourage the use of

clean energy technologies and regulate emissions of greenhouse gases to address climate change. We regularly
monitor the various proposals in this regard. Although the impact of climate change regulations on our

business will depend on the speciﬁcs of governmental policies, legislation, and regulation, we believe that we
will be well-positioned to adapt our business to meet new regulations. See ‘‘Item 1A. Risk Factors — We are
subject to risks associated with climate change’’ and ‘‘Item 1A. Risk Factors — Our failure to comply with
environmental and other laws and regulations could result in signiﬁcant liabilities.’’

Cyclical Nature of Business and Seasonality

The demand for construction and maintenance services from our customers is cyclical in nature and
vulnerable to downturns in the industries we serve as well as the economy in general. As a result, our volume
of business could be adversely affected by declines or delays in new projects in various geographic regions.

Although our revenues are primarily driven by spending patterns in our customers’ industries, our
revenues and results of operations can be subject to seasonal and other variations. These variations are
inﬂuenced by weather, daylight hours, availability of system outages from utilities and holidays. For example,
during the winter months, demand for our T&D work may be high, but our work can be delayed due to
inclement weather. During the summer months, the demand for our T&D work may be affected by fewer
available system outages, due to peak electrical demands caused by warmer weather, which limits our ability
to perform electrical line service work. During the spring and fall months, the demand for our T&D work may
increase due to improved weather and system availability; however, extended periods of rain and other severe
weather can affect the deployment of our crews and the efficiency of our operations.

Employees

We seek to attract and retain highly qualiﬁed craft employees by providing a superior work environment
through our emphasis on safety, our competitive compensation, and our high-quality ﬂeet of equipment. The
number of individuals we employ varies signiﬁcantly throughout the year, typically with lower staffing levels
at year end and through the winter months when fewer projects are active. The number of craft employees
ﬂuctuates depending on the number and size of projects at any particular time. As of December 31, 2018, we
had approximately 5,500 employees, consisting of approximately 900 salaried employees, including executive
officers, district managers, project managers, superintendents, estimators, office managers, and staff and
clerical personnel, and approximately 4,600 craft employees. Approximately 88% of our craft employees are
members of unions, with the majority being members of the International Brotherhood of Electrical Workers
(‘‘IBEW’’), who are represented by many local unions under agreements with generally uniform terms and
varying expiration dates. We generally are not direct parties to such local agreements, but instead these
agreements are entered into by and between the IBEW local unions and the National Electrical Contractors
Association (‘‘NECA’’), of which the majority of our subsidiaries are members. On occasion we also employ
individuals who are members of other trade unions pursuant to multi-employer, multi-union project
agreements.

Executive Officers

Name

Richard S. Swartz.
Betty R. Johnson
Tod M. Cooper
William F. Fry
Jeffrey J. Waneka

Age on
March 6, 2019

Position

55
60
54
44
57

President and Chief Executive Officer
Senior Vice President, Chief Financial Officer and Treasurer
Senior Vice President, Chief Operating Officer T&D
Vice President, Chief Legal Officer and Secretary
Senior Vice President, Chief Operating Officer C&I

Richard S. Swartz, was appointed president and chief executive officer on January 1, 2017. Prior to his
current role, he served as executive vice president and chief operating officer from September 2016 and as
senior vice president and chief operating officer from May 2011 to September 2016. Mr. Swartz served as
senior vice president from August 2009 to May 2011, and as a group vice president from 2004 to 2009. Prior
to becoming a group vice president, Mr. Swartz served as vice president of our transmission & distribution
central division from 2002 to 2004. Mr. Swartz has held a number of additional positions since he joined us in
1982, including project foreman, superintendent, project manager and district manager.

Betty R. Johnson joined us as senior vice president, chief ﬁnancial officer and treasurer on October 19,

2015. Prior to joining us, Ms. Johnson served as the chief ﬁnancial officer of Faith Technologies, Inc.,

a privately held electrical, engineering and technology systems contractor in 2015. From 2009 to 2014,
Ms. Johnson served as the vice president of global ﬁnance and chief ﬁnancial officer of Sloan Valve Company.
Prior to this, Ms. Johnson was executive vice president and chief ﬁnancial officer with Block and Company,
Inc. from 2003 to 2009. From 1999 to 2003 she served as the vice president-operations/ﬁnance with
Encompass Services Corporation. Ms. Johnson served as our controller from 1992 to 1998 and vice president
and controller from 1998 to 1999. Ms. Johnson served as a member of our board of directors from 2007 until
accepting her current position with us in 2015.

Tod M. Cooper was appointed senior vice president and chief operating officer T&D on January 1, 2017.

Prior to his current role, he served as senior vice president since August 2013. Mr. Cooper served as group
vice president, east from 2009 to 2013 and vice president T&D, east from 2006 to 2009. Mr. Cooper has held
a number of additional positions since joining us in 1989, including business development manager, regional
manager, district manager, and estimator.

William F. Fry joined us as vice president, chief legal officer and secretary on January 21, 2019. Prior to
joining us, Mr. Fry served as vice-president — legal for Team Inc., a specialty industrial service, engineering
and manufacturing company from 2016. Mr. Fry was general counsel, secretary, vice-president & chief
compliance officer of Furmanite Corporation, a provider of specialized technical services and product
solutions, from 2012 to 2016, prior to its merger with Team Inc. Prior to joining Furmanite Corporation,
Mr. Fry worked for American Tank & Vessel, Inc., a specialty engineering and construction company, in
various roles since 2006, ultimately serving as their general counsel.

Jeffrey J. Waneka was appointed senior vice president and chief operating officer C&I on January 1,
2017. Prior to his current role, he served as president of our subsidiary company, Sturgeon Electric Company,
Inc., since February 2015. Mr. Waneka served as group vice president, C&I from 2014 to 2015 and vice
president, C&I from 2009 to 2014. Mr. Waneka has held a number of additional positions since joining the
Company in 1991, including regional manager, director business development and district manager.

Website Access to Company Reports

Our website address is www.myrgroup.com. Our Annual Reports on Form 10-K, quarterly reports on
Form 10 Q, current reports on Form 8 K, and amendments to those reports ﬁled or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act will be available free of charge through our website as soon as
reasonably possible after they are electronically ﬁled with, or furnished to, the Securities and Exchange
Commission (the ‘‘SEC’’). The information on our website is not, and shall not be deemed to be, a part of
this Annual Report on Form 10 K or incorporated into any other ﬁlings we make with the SEC.

Item 1A. Risk Factors

You should read the following risk factors carefully in connection with evaluating our business and the

forward-looking information contained in this Annual Report on Form 10-K. We operate in a changing
environment that involves numerous known and unknown risks and uncertainties that could affect our
operations. The risks described below highlight some of the factors that have affected, and in the future could
affect, our operations. Additional risks we do not yet know of, or that we currently think are immaterial, may
also affect our business operations. If any of the events or circumstances described in the following risks
actually occurs, our business, ﬁnancial condition or results of operations could be affected and our stock
price could decline.

Our operating results may vary signiﬁcantly from period to period.

Our business can be highly cyclical and subject to seasonal and other variations that can result in
signiﬁcant differences in operating results from period to period. Additionally, our results may be materially
and adversely affected by:

•

the timing and volume of work under contract;

increased competition and changes in the competitive marketplace for our services;

the spending patterns of customers and governments;

safety performance and reputation;

increased costs of performance of our services caused by adverse weather conditions;

cost overruns on ﬁxed-price and unit-price contracts;

the amount of subcontractor and material costs in our projects;

decreased equipment utilization;

permitting, regulatory or customer-caused delays on projects;

disputes with customers relating to payment terms under our contracts and change orders, and our
ability to successfully negotiate and obtain payment or reimbursement under our contracts and
change orders;

variations in the margins of projects performed during any particular reporting period;

a change in the demand for our services;

increases in design and construction costs that we are unable to pass through to our customers;

the termination or expiration of existing agreements;

regional and general economic conditions and the condition of the ﬁnancial markets;

losses experienced in our operations not otherwise covered by insurance;

a change in the mix of our customers, contracts and business;

payment risk associated with the ﬁnancial condition of our customers;

costs we incur to support growth internally or otherwise;

availability of qualiﬁed labor for speciﬁc projects;

liabilities associated with participation in joint ventures related to third party failures;

signiﬁcant ﬂuctuations in foreign currency exchange rates;

changes in bonding requirements applicable to existing and new agreements;

changes in accounting pronouncements that require us to account for items differently than historical
pronouncements;

•

the timing and integration of acquisitions and the magnitude of the related acquisition and
integration costs;

costs associated with our multi-employer pension plan obligations;

the availability of equipment;

costs associated with responding to actions of activist stockholders;

impairment of goodwill or intangible assets; and

warranty claims.

Accordingly, our operating results in any particular reporting period may not be indicative of the results

that can be expected for any other reporting period.

Our industry is highly competitive. Increased competition can place downward pressure on contract prices
and proﬁt margins and may limit the number of projects that we are awarded.

Our industry is fragmented and we compete with other companies, ranging from small, independent ﬁrms

servicing local markets to larger ﬁrms servicing regional, national and international markets. Relatively few
barriers prevent entry into the C&I market and the distribution market. As a result, any organization that has
adequate ﬁnancial resources and access to technical expertise may become one of our competitors in those
areas. Competition in the industry depends on a number of factors, including price of the construction services
and the reputation for safety, quality and reliability of the contractor. Some of our competitors, including our
competitors in the transmission market, may have lower labor and overhead cost structures and, therefore,
may be able to provide their services at lower prices than ours. In addition, some of our competitors may have
greater ﬁnancial, technological and human resources than we do. We cannot be certain that our competitors
will not develop the expertise, experience and resources to provide services that are superior in both price and
quality to our services. Similarly, we cannot be certain that we will be able to maintain or enhance our
competitive position within the markets we serve or maintain our customer base at current levels. We also
may face competition from in-house service organizations of our existing or prospective customers. Electric
utility companies often employ personnel to internally perform some of the same types of services we do. If
we are unable to compete successfully in our markets, our operating results could be adversely affected.

We may be unsuccessful in generating internal growth, which could impact the projects available to the
Company.

Our ability to generate internal growth will be affected by, among other factors, our ability to:

•

attract new customers;

increase the number of projects performed for existing customers;

hire and retain qualiﬁed personnel;

successfully bid new projects;

expand geographically; and

adapt the range of services we offer to customers to address their evolving construction needs.

In addition, if our customers are constrained in their ability to obtain capital, it could reduce the number,
timing or size of projects available to us. Many of the factors affecting our ability to generate internal growth
may be beyond our control, and we cannot be certain that our strategies will be successful, or that we will be
able to generate cash ﬂow sufficient to fund our operations and to support internal growth. If we are
unsuccessful, we may not be able to achieve internal growth, expand our operations or grow our business.

Negative economic and market conditions, as well as regulatory and environmental requirements, may
adversely impact our customers’ future spending and, as a result, our operations and growth.

The demand for infrastructure construction and maintenance services from our customers has been, and

will likely continue to be, cyclical in nature and vulnerable to downturns in the industries we serve as well as
the economy in general. Stagnant or declining economic conditions have adversely impacted the demand for

our services in the past and resulted in the delay, reduction or cancellation of certain projects and may
adversely affect us in the future. Unfavorable economic conditions could also cause our customers to
outsource less work. Additionally, many of our customers ﬁnance their projects through the incurrence of debt
or the issuance of equity. A reduction in cash ﬂow or the lack of availability of debt or equity ﬁnancing may
result in a reduction in our customers’ spending for our services and may also impact the ability of our
customers to pay amounts owed to us, which could have a material adverse effect on our operations and our
ability to grow at historical levels. A prolonged economic downturn or recession could adversely affect our
customers and their ability or willingness to fund capital expenditures in the future or pay for past services.
Material ﬂuctuations in energy markets could have an adverse impact on our customers’ spending patterns.
Consolidation, competition, capital constraints or negative economic conditions in the electric power industry
may also result in reduced spending by, or the loss of, one or more of our customers.

Because the vast majority of our T&D revenue is derived from the electric utility industry, regulatory and
environmental requirements affecting that industry could adversely affect our results of operations. Customers
in the electric utility industry we serve face stringent regulatory and environmental requirements, as well as
permitting processes, as they implement plans for their projects, which may result in delays, reductions and
cancellations of some of their projects. These regulatory factors have resulted in decreased demand for our
services in the past, and they may do so in the future, potentially impacting our operations and our ability to
grow at historical levels.

Project performance issues, including those caused by third parties, or certain contractual obligations may
result in additional costs to us, reductions or delays in revenues or the payment of penalties, including
liquidated damages.

Many projects involve challenging engineering, procurement and construction phases that may occur over
several years. We may encounter difficulties that impact our ability to complete the project in accordance with
the original delivery schedule. These difficulties may be the result of delays in designs, engineering
information or materials provided by the customer or a third party, delays or difficulties in equipment
and material delivery, schedule changes, delays from our customer’s failure to timely obtain permits or
rights-of-way or meet other regulatory requirements, weather-related delays, delays caused by difficult
worksite environments, delays caused by inefficiencies and not achieving expected labor performance, and
other factors, some of which are beyond our control. In addition, for some projects we contract with
third-party subcontractors to assist us with the completion of contracts. Any delay or failure by suppliers or by
subcontractors in the completion of their portion of the project may result in delays in the overall progress of
the project or may cause us to incur additional costs, or both. We also may encounter project delays due to
local opposition, which may include injunctive actions as well as public protests, to the siting of electric
transmission lines, renewable energy projects, or other facilities. We may not be able to recover the costs we
incur that are caused by delays. In certain circumstances, we guarantee project completion by a scheduled
acceptance date or achievement of certain acceptance and performance testing levels. Failure to meet any of
our schedules or performance requirements could also result in additional costs or penalties, including
liquidated damages, and such amounts could exceed expected project proﬁt. In extreme cases, the
above-mentioned factors could cause project cancellations, and we may not be able to replace such projects
with similar projects or at all. Such delays or cancellations may impact our reputation or relationships with
customers, adversely affecting our ability to secure new contracts. Larger projects, in particular, present
additional performance risks due to the more complex work involved.

Our customers may change or delay various elements of the project after its commencement. The design,
engineering information, equipment or materials that are to be provided by the customer or other parties may
be deﬁcient or delivered later than required by the project schedule, resulting in additional direct or indirect
costs. Under these circumstances, we generally negotiate with the customer with respect to the amount of
additional time required and the compensation to be paid to us. We are subject to the risk that we may be
unable to obtain, through negotiation, arbitration, litigation or otherwise, adequate amounts to compensate us
for the additional work or expenses incurred by us due to customer-requested change orders or failure by the
customer to timely deliver items, such as engineering drawings or materials. Litigation or arbitration of claims
for compensation may be lengthy and costly, and it is often difficult to predict when and for how much the
claims will be resolved. A failure to obtain adequate compensation for these matters could require us to record

a reduction to amounts of revenue and gross proﬁt recognized in prior periods under the percentage-of-completion
accounting method. Any such adjustments could be substantial. We may also be required to invest signiﬁcant
working capital to fund cost overruns while the resolution of change orders or claims is pending, which could
adversely affect our liquidity and ﬁnancial results in any given period.

Our revenues may be exposed to potential risk if a project is terminated or canceled, if our customers
encounter ﬁnancial difficulties or if we encounter disputes with our customers.

Our contracts often require us to satisfy or achieve certain milestones in order to receive payment for the

work performed, or in the case of cost-reimbursable contracts, provide support for billings in advance of
receiving payment. As a result, we may incur signiﬁcant costs or perform signiﬁcant amounts of work prior to
receipt of payment. If any of our customers do not proceed with the completion of projects or default on their
payment obligations, or if we encounter disputes with our customers with respect to the adequacy of billing
support, we may face difficulties in collecting payment of amounts due to us for the costs previously incurred.
In addition, many of our customers for large projects are project-speciﬁc entities that do not have signiﬁcant
assets other than their interests in the project and may encounter ﬁnancial difficulties relating to their
businesses. It may be difficult to collect amounts owed to us by these customers. If we are unable to collect
amounts owed to us, this would have an adverse effect on our future ﬁnancial condition, results of operations
and cash ﬂows.

We have in the past brought, and may in the future bring, claims against our customers related to, among

other things, the payment terms of our contracts and change orders relating to our contracts. These types of
claims occur due to, among other things, customer-caused delays or changes in project scope, both of which
may result in additional cost, which may or may not be recovered until the claim is resolved. In some
instances, these claims can be the subject of lengthy legal proceedings, and it is difficult to accurately predict
when they will be fully resolved. A failure to promptly recover on these types of claims could have a negative
impact on our ﬁnancial condition, results of operations and cash ﬂows. Additionally, any such claims may
harm our future relationships with our customers.

Our business is labor intensive and we may be unable to attract and retain qualiﬁed employees.

Our ability to maintain our productivity and our operating results may be limited by our ability to

employ, train and retain skilled personnel necessary to meet our requirements. We may not be able to maintain
an adequate skilled labor force necessary to operate efficiently and to support our growth strategy. We have
from time-to-time experienced shortages of certain types of qualiﬁed personnel, such as linemen, ﬁeld
supervisors, project managers and engineers, in certain regions. In addition, our projects are sometimes located
in remote areas, which can make recruitment and deployment of our employees challenging. During periods
with large volumes of storm restoration services work, linemen are frequently recruited across geographic
regions to satisfy demand. Many linemen are willing to travel to earn premium wages for such work, which
from time-to-time makes it difficult for us to retain these workers for ongoing projects when storm conditions
persist. The supply of experienced linemen, ﬁeld supervisors, project managers, engineers and other skilled
workers may not be sufficient to meet current or expected demand. The commencement of new, large-scale
infrastructure projects or increased demand for infrastructure improvements, as well as the shrinking electric
utility workforce, may reduce the pool of skilled workers available to us. Labor shortages could impair our
ability to maintain our business or grow our revenues. If we are unable to hire employees with the requisite
skills, we may also be forced to incur signiﬁcant training expenses.

The timing of new contracts and termination of existing contracts may result in unpredictable ﬂuctuations
in our cash ﬂows and ﬁnancial results.

A substantial portion of our revenues are derived from project-based work that is awarded through a
competitive bid process. It is generally very difficult to predict the timing and geographic distribution of the
projects that we will be awarded. The selection of, timing of, or failure to obtain projects, delays in awards of
projects, the re-bidding or termination of projects due to budget overruns, cancellations of projects or delays
in completion of contracts could result in the under-utilization of our assets, including our ﬂeet of construction
equipment, which could lower our overall proﬁtability and reduce our cash ﬂows. Even if we are awarded
contracts, we face additional risks that could affect whether, or when, work will begin. This can present

difficulty in matching workforce size and equipment location with contract needs. In some cases, we may be
required to bear the cost of a ready workforce and equipment that is larger than necessary, which could impact
our cash ﬂow, expenses and proﬁtability. If an expected contract award or the related work release is delayed
or not received, we could incur substantial costs without receipt of any corresponding revenues. Moreover,
construction projects for which our services are contracted may require signiﬁcant expenditures by us prior to
receipt of relevant payments from the customer. Finally, the winding down or completion of work on
signiﬁcant projects that were active in previous periods will reduce our revenue and earnings if such
signiﬁcant projects have not been replaced in the current period.

Many of our contracts may be canceled upon short notice, typically 30 to 90 days, even if we are not in

default under the contract, and we may be unsuccessful in replacing our contracts if they are canceled or as
they are completed or expire. We could experience a decrease in our revenue, net income and liquidity if
contracts are canceled and if we are unable to replace canceled, completed or expired contracts. Certain of our
customers assign work to us on a project-by-project basis under MSAs. Under these agreements, our
customers often have no obligation to assign a speciﬁc amount of work to us. Our operations could decline
signiﬁcantly if the anticipated volume of work is not assigned to us or is canceled. Many of our contracts,
including our MSAs, are opened to competitive bid at the expiration of their terms. There can be no assurance
that we will be the successful bidder on our existing contracts that come up for re-bid.

During the ordinary course of our business, we may become subject to lawsuits or indemnity claims, which
could materially and adversely affect our business and results of operations.

We have in the past been, and may in the future be, named as a defendant in lawsuits, claims and other

legal proceedings that arise in the ordinary course of our business. These actions may seek, among other
things, compensation for alleged personal injury, workers’ compensation, employment discrimination and other
employment-related damages, breach of contract, property damage, environmental liabilities, multiemployer
pension plan withdrawal liabilities, punitive damages, consequential damages, and civil penalties or other
losses or injunctive or declaratory relief. In addition, we generally indemnify our customers for claims related
to the services we provide and actions we take under our contracts, and, in some instances, we may be
allocated risk through our contract terms for actions by our customers, subcontractors or other third parties.
Because our services in certain instances may be integral to the operation and performance of our customers’
infrastructure, we have been and may become subject to lawsuits or claims for any failure of the systems that
we work on, even if our services are not the cause of such failures, and we could be subject to civil and
criminal liabilities to the extent that our services contributed to any property damage, personal injury or
system failure. Insurance coverage may not be available or may be insufficient for these lawsuits, claims or
legal proceedings. The outcome of any of these lawsuits, claims or legal proceedings could result in
signiﬁcant costs and diversion of management’s attention from our business. Payments of signiﬁcant amounts,
even if reserved, could materially and adversely affect our business, reputation, ﬁnancial condition, results of
operations and cash ﬂows.

We may incur liabilities and suffer negative ﬁnancial or reputational impacts relating to occupational
health and safety matters.

Our operations are subject to extensive laws and regulations relating to the maintenance of safe

conditions in the workplace. While we have invested, and will continue to invest, substantial resources in our
occupational health and safety programs, our industry involves a high degree of operational risk, and there can
be no assurance that we will avoid signiﬁcant liability exposure. Our business is subject to numerous safety
risks, including electrocutions, ﬁres, explosions, mechanical failures, weather-related incidents, transportation
accidents and damage to equipment. These hazards can cause personal injury or loss of life, severe damage to
or destruction of property and equipment and other consequential damages and could lead to suspension of
operations, large monetary claims and, in extreme cases, criminal liability. Members of our workforce have
suffered serious injuries or fatalities in the past and may suffer additional serious injuries or fatalities in the
future. Monetary claims for damages to persons, including claims for bodily injury or loss of life, could result
in substantial costs and liabilities. In addition, we have in the past, and we may in the future, be subject to
criminal penalties relating to occupational health and safety violations, which have resulted in and could in the
future result in substantial costs and liabilities. Any of the foregoing could result in ﬁnancial loss, which could
have a material adverse impact on our business, ﬁnancial condition, results of operations and cash ﬂows.

Our customers seek to minimize safety risks on their sites, and they frequently review the safety records

of outside contractors during the bidding process. If our safety record were to substantially deteriorate, we
could become ineligible to bid on certain work, and our customers could cancel our contracts and not award
us future business.

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

Backlog is difficult to determine accurately, and companies within our industry may deﬁne backlog
differently. Reductions in backlog due to cancellation, termination or scope adjustment by a customer or for
other reasons could signiﬁcantly reduce the revenue and proﬁt we actually receive from contracts in backlog.
In the event of a project cancellation, termination or scope adjustment, we typically have no contractual right
to the total revenues reﬂected in our backlog. The timing of contract awards, duration of large new contracts
and the mix of services, subcontracted work and material in our contracts can signiﬁcantly affect backlog
reporting. Given these factors and our method of calculating backlog, our backlog at any point in time may
not accurately represent the revenue that we expect to realize during any period, and our backlog as of the
end of a ﬁscal year may not be indicative of the revenue we expect to earn in the following ﬁscal year and
should not be viewed or relied upon as a stand-alone indicator. Consequently, we cannot provide assurance as
to our customers’ requirements or our estimates of backlog. See ‘‘Item 1. Business — Backlog’’ for a
discussion on how we calculate backlog for our business.

Our business growth could outpace the capability of our internal resources and limit our ability to support
growth.

Our internal resources, including our workforce, specialized equipment and ﬁnancial resources, may not
be adequate to support our operations as they expand, particularly if we are awarded a signiﬁcant number of
large projects in a short time period. A large project may require hiring additional qualiﬁed personnel, such as
linemen, ﬁeld supervisors, project managers, engineers and safety personnel, the supply of which may not be
sufficient to meet our demands.

Often large transmission projects require specialized equipment. To the extent that we are unable to buy

or build equipment necessary for a project, either due to a lack of available funding or equipment shortages in
the marketplace, we may be forced to rent equipment on a short-term basis or to ﬁnd alternative ways to
perform the work without the beneﬁt of equipment ideally suited for the job, which could increase the costs of
completing the project. Furthermore, we may be unable to buy or rent the specialty equipment and tooling we
require due to the limited number of manufacturers and distributors in the marketplace.

Larger projects may require substantial ﬁnancial resources to meet the cash ﬂow, bonding or letter of
credit requirements imposed upon contractors by the customer. Future growth also could impose additional
demands and responsibilities on members of our senior management.

Our dependence on suppliers, subcontractors and equipment manufacturers could expose us to the risk of
loss in our operations.

On certain projects, we rely on suppliers to obtain the necessary materials and subcontractors to perform
portions of our services. We also rely on equipment manufacturers to provide us with the equipment required
to conduct our operations. Although we are not dependent on any single supplier, subcontractor or equipment
manufacturer, any substantial limitation on the availability of required suppliers, subcontractors or equipment
manufacturers could negatively impact our operations. The risk of a lack of available suppliers, subcontractors
or equipment manufacturers may be heightened as a result of market and economic conditions. To the extent
we cannot engage subcontractors or acquire equipment or materials, we could experience losses in the
performance of our operations. Additionally, successful completion of our contracts may depend on whether
our subcontractors successfully fulﬁll their contractual obligations. If our subcontractors fail to perform their
contractual obligations as a result of ﬁnancial or other difficulties, or if our subcontractors fail to meet the
expected completion dates or quality standards, we may be required to incur additional costs or provide
additional services in order to make up such shortfall and we may suffer damage to our reputation.

Our participation in joint ventures and other projects with third parties may expose us to liability for
failures of our partners.

We may enter into joint venture or other strategic arrangements with other parties as part of our business

operations. Success on a jointly performed project depends in large part on whether all parties satisfy their
contractual obligations. Joint venture partners are generally jointly and severally liable for all liabilities and
obligations of the joint venture. If a joint venture partner fails to perform or is ﬁnancially unable to bear its
portion of required capital contributions or other obligations, including liabilities relating to claims or lawsuits,
we could be required to make additional investments, provide additional services or pay more than our
proportionate or agreed upon share of a liability to compensate for the partner’s shortfall. In addition, if we
are unable to adequately address our partner’s performance issues, the customer may terminate the project,
which could result in legal liability to us, reduce our proﬁt on the project or damage our reputation.

Our inability to successfully execute our acquisition strategy may have an adverse impact on our growth
strategy.

Our business strategy includes expanding our presence in the industries we serve through strategic
acquisitions of companies that complement or enhance our business. The number of acquisition targets that
meet our criteria may be limited. We may also face competition for acquisition opportunities, and other
potential acquirers may offer more favorable terms or have greater ﬁnancial resources available for potential
acquisitions. This competition may further limit our acquisition opportunities and our ability to grow through
acquisitions or could raise the prices of acquisitions and make them less accretive, or possibly not accretive,
to us. Failure to consummate future acquisitions could negatively affect our growth strategies. Additionally,
the acquisitions we complete may involve signiﬁcant cash expenditures, the incurrence or assumption of debt
or burdensome regulatory requirements, and any acquisition may ultimately have a negative impact on our
business, ﬁnancial condition, results of operations and cash ﬂows.

Legislative or regulatory actions relating to electricity transmission and renewable energy may impact
demand for our services.

Current and potential legislative or regulatory actions may impact demand for our services. Certain
legislation or regulations require utilities to meet reliability standards and encourage installation of new
electric transmission and renewable energy generation facilities. However, it is unclear whether these
initiatives will create sufficient incentives for projects or result in increased demand for our services.

While many states have mandates in place that require speciﬁed percentages of electricity to be generated
from renewable sources, states could reduce those mandates or make them optional, which could reduce, delay
or eliminate renewable energy development in the affected states. Additionally, renewable energy is generally
more expensive to produce and may require additional power generation sources as backup. The locations of
renewable energy projects are often remote and may not be viable unless new or expanded transmission
infrastructure to transport the electricity to demand centers is economically feasible. Furthermore, funding for
renewable energy initiatives may not be available. These factors could result in fewer renewable energy
projects and a delay in the construction of these projects and the related infrastructure, which could negatively
impact our business.

Our use of percentage-of-completion accounting could result in a reduction or reversal of previously
recognized proﬁts.

As discussed in ‘‘Item 7. Management’s Discussion and Analysis of Financial Condition and Results

from Operations — Critical Accounting Policies’’ and in the notes to our Financial Statements, a signiﬁcant
portion of our revenues is recognized over the contract term based on costs incurred under the cost-to-cost
method. This method is used because management believes cost incurred best represent the amount of work
completed and remaining on our projects, and is the most common basis for computing percentage of
completion in our industry. The percentage-of-completion accounting practice we use results in our
recognizing contract revenues and earnings ratably over the contract term in proportion to our incurrence of
contract costs. The earnings or losses recognized on individual contracts are based on estimates of contract
revenues, costs and proﬁtability. Contract losses are recognized in full when determined, and contract proﬁt

estimates are adjusted based on ongoing reviews of contract proﬁtability. In addition, we record adjustments to
estimated costs of contracts when we believe the change in estimate is probable and the amounts can be
reasonably estimated. These adjustments could result in both increases and decreases in proﬁt margins. Actual
results could differ from estimated amounts and could result in a reduction or elimination of previously
recognized earnings.

Our insurance coverage will not fully indemnify us against certain claims or losses. Further, our insurance
has limits and exclusions and not all losses or claims are insured.

We perform work in hazardous environments and our employees are exposed to a number of hazards.
Incidents can occur, regardless of fault, that may be catastrophic and adversely impact our employees and
third parties by causing serious personal injury, loss of life, damage to property, wildﬁres or the environment,
and interruption of operations. Our contracts may require us to indemnify our customers, project owners and
others for injury, damage or loss arising out of our presence at our customers’ location, regardless of fault, or
the performance of our work and provide for warranties for materials and workmanship. We may also be
required to name the customer and others as an additional insured under our insurance policies. We maintain
limited insurance coverage against these and other risks associated with our business. This insurance may not
protect us against liability for certain events, including events involving pollution, professional liability, losses
resulting from business interruption or acts of terrorism or damages from breach of contract by us. We cannot
guarantee that our insurance will be adequate in risk coverage or policy limits to cover all losses or liabilities
that we may incur. Moreover, in the future, we cannot assure that we will be able to maintain insurance at
levels of risk coverage or policy limits that we deem adequate. Any future damages caused by our services
that are not covered by insurance or are in excess of policy limits could have a material adverse effect on our
results of operations, ﬁnancial position or cash ﬂows.

Our actual costs may be greater than expected in performing our ﬁxed-price and unit-price contracts.

We currently generate, and expect to continue to generate, a signiﬁcant portion of our revenues and
proﬁts under ﬁxed-price and unit-price contracts. We must estimate the costs of completing a particular project
when we bid for these types of contracts. The actual cost of labor and materials, however, may vary from the
costs we originally estimated and we may not be successful in recouping additional costs from our customers.
These variations, along with other risks inherent in performing ﬁxed-price and unit-price contracts, may cause
actual revenue and gross proﬁts for a project to differ from those we originally estimated and could result in
reduced proﬁtability or losses on projects due to changes in a variety of factors such as:

•

failure to properly estimate costs of engineering, material, equipment or labor;

inefficient labor performance;

unanticipated technical problems with the materials or services being supplied by us, which may
require us to incur additional costs to remedy the problem;

project modiﬁcations that create unanticipated costs;

changes in the costs of equipment, materials, labor or subcontractors;

the failure of our suppliers or subcontractors to perform;

difficulties in our customers obtaining required governmental permits or approvals;

site conditions that differ from those assumed in the original bid (to the extent contract remedies are
unavailable);

the availability and skill level of workers in the geographic location of the project;

an increase in the cost of fuel or other resources;

changes in local laws and regulations;

delays caused by local weather conditions, third parties or customers; or

quality issues requiring rework.

Our ﬁnancial results are based upon estimates and assumptions that may differ from actual results.

In preparing our ﬁnancial statements in conformity with generally accepted accounting principles in the

United States (‘‘GAAP’’), estimates and assumptions are used by management in determining the reported
amounts of assets and liabilities, revenues and expenses recognized during the periods presented and
disclosures of contingent assets and liabilities known to exist as of the date of the ﬁnancial statements. These
estimates and assumptions must be made because certain information that is used in the preparation of our
ﬁnancial statements is dependent on future events, cannot be calculated with a high degree of precision from
data available or is not capable of being readily calculated. In some cases, these estimates are particularly
difficult to determine, and we must exercise signiﬁcant judgment.

The most signiﬁcant estimates we use are related to costs to complete contracts, pending change orders

and claims, shared savings, insurance reserves, income tax reserves, estimates surrounding stock-based
compensation, the recoverability of goodwill and intangibles, and accounts receivable reserves. We also may
use estimates in our assessment of the useful lives of property and equipment, the valuation allowance on
deferred taxes and the provision for income taxes. From time-to-time, we may publicly provide earnings or
other forms of guidance, which reﬂect our predictions about future revenue, operating costs and capital
structure, among other factors. These predictions may be impacted by estimates, as well as other factors that
are beyond our control and may not turn out to be correct. Actual results for all estimates could differ
materially from the estimates and assumptions that we use.

We maintain insurance policies with respect to automobile liability, general liability, workers’

compensation, and other coverages, but those policies do not cover all possible claims and are subject to high
deductible limits. We also have an employee health care beneﬁt plan for employees not subject to collective
bargaining agreements, which is subject to certain deductible limits. Insurance losses are accrued based upon
our estimates of the ultimate liability for claims reported and an estimate of claims incurred but not yet
reported. However, insurance liabilities are difficult to assess and estimate due to unknown factors, including
the severity of an injury, the determination of our liability in proportion to other parties, the number of
incidents not reported and the effectiveness of our safety programs, and as a result, our actual losses may
exceed our estimates.

The loss of a key customer could have an adverse effect on us.

Our customer base is highly concentrated, with our top ten customers accounting for 32.9% of our
revenue. Much of our success depends on developing and maintaining relationships with our major customers.
Our revenue could signiﬁcantly decline if we lose one or more of our signiﬁcant customers. In addition,
revenues generated from contracts with signiﬁcant customers may vary from period-to-period depending on
the timing and volume of work ordered by such customers in a given period and as a result of competition
from the in-house service organizations of our customers.

Our failure to comply with environmental and other laws and regulations could result in signiﬁcant
liabilities.

Our past, current and future operations are subject to numerous environmental and other laws and

regulations governing our operations, including the use, transport and disposal of non-hazardous and
hazardous substances and wastes, as well as emissions and discharges into the environment, including
discharges to air, surface water, groundwater and soil. We also are subject to laws and regulations that impose
liability and cleanup responsibility for releases of hazardous substances into the environment. Under certain of
these laws and regulations, such liabilities can be imposed for cleanup of previously owned or operated
properties, or properties to which hazardous substances or wastes were discharged by current or former
operations at our facilities, regardless of whether we directly caused the contamination or violated any law at
the time of discharge or disposal. The presence of contamination from such substances or wastes could
interfere with ongoing operations or adversely affect our ability to sell, lease or otherwise use our properties
in ways such as collateral for possible ﬁnancing. We could also be held liable for signiﬁcant penalties and
damages under certain environmental laws and regulations, which could materially and adversely affect our
business and results of operations.

In addition, new laws and regulations, stricter enforcement of existing laws and regulations, the discovery

of previously unknown contamination or leaks, or the imposition of new permitting or cleanup requirements
could require us to incur signiﬁcant costs or become the basis for new or increased liabilities that could harm
our ﬁnancial condition and results of operations. In certain instances, we have obtained indemniﬁcation or
covenants from third parties (including our predecessor owners or lessors) for some or all of such cleanup and
other obligations and liabilities. However, such third-party indemnities or covenants may not cover all of our
costs.

Legislative and regulatory proposals to address greenhouse gas emissions could result in a variety of
regulatory programs, additional charges to fund energy efficiency activities, or other regulatory actions. Any of
these actions could result in increased costs associated with our operations and impact the prices we charge
our customers. If new regulations are adopted regulating greenhouse gas emissions from mobile sources such
as cars and trucks, we could experience a signiﬁcant increase in environmental compliance costs in light of
our large ﬂeet. In addition, if our operations are perceived to result in high greenhouse gas emissions, our
reputation could suffer.

In addition, we are subject to laws and regulations protecting endangered species. Laws also protect
Native American artifacts and archaeological sites and a part of our business is operated in the southwestern
United States, where there is a greater chance of discovering those sites. We may incur work stoppages to
avoid violating these laws and regulations, or we may risk ﬁnes or other sanctions for accidentally or willfully
violating these laws and regulations.

Unavailability or cancellation of third party insurance coverages would increase our overall risk exposure
and could disrupt our operations.

We maintain insurance coverages from third party insurers as part of our overall risk management

strategy and because some of our contracts require us to maintain speciﬁc insurance coverage limits. Although
we maintain insurance policies with respect to automobile liability, general liability, workers’ compensation,
our employee group health program, and other types of coverages, these policies are subject to high
deductibles, and we are self-insured up to the amount of those deductibles. There can be no assurance that our
current or past insurance coverages will be sufficient or effective under all circumstances or against all claims
and liabilities to which we may be subject.

We renew our insurance policies on an annual basis; therefore, deductibles and levels of insurance

coverages may change in future periods. There can be no assurance that any of our existing insurance
coverages will be renewed upon the expiration of the coverage period or that future coverage will be
affordable at the required limits. In addition, insurers may fail, cancel our coverage, determine to exclude
certain items from coverage, or otherwise be unable to provide us with adequate insurance coverage. We may
not be able to obtain certain types of insurance or incremental levels of insurance in scope or amount
sufficient to cover liabilities we may incur.

If any of these events occurs, our overall risk exposure would increase and our operations could be
disrupted. If our risk exposure increases as a result of adverse changes in our insurance coverages, we could
be subject to increased claims and liabilities that could negatively affect our results of operations and ﬁnancial
condition.

We extend trade credit to customers for purchases of our services, and may have difficulty collecting
receivables from them.

We grant trade credit, generally without collateral, to our customers for the purchase of our services. We

have in the past, and may in the future, have difficulty collecting receivables from customers, particularly
those experiencing ﬁnancial difficulties. Our customers in the T&D segment include investor-owned utilities,
cooperatives, private developers, government-funded utilities, independent power producers, independent
transmission companies, industrial facility owners and other contractors. Our customers in the C&I segment
include general contractors, commercial and industrial facility owners, local governments and developers
located in our regional markets. Our customers also include special purpose entities that own T&D projects
which do not have the ﬁnancial resources of traditional transmission utility operators. Consequently, we are
subject to potential credit risk related to changes in business and economic factors. Due to our work on large

construction projects, a few customers sometimes may comprise a large portion of our receivable balance at
any point in time. If any of our major customers experience ﬁnancial difficulties, we could experience reduced
cash ﬂows and losses in excess of current allowances provided. In addition, material changes in any of our
customers’ revenues or cash ﬂows could affect our ability to collect amounts due from them.

We may not be able to compete for, or work on, certain projects if we are not able to obtain necessary
bonds, letters of credit, bank guarantees or other ﬁnancial assurances.

Many of our contracts require that we provide security to our customers for the performance of their
projects in the form of bonds, letters of credit, bank guarantees or other ﬁnancial assurances. Current or future
market conditions, including losses incurred in the construction industry or as a result of large corporate
bankruptcies, as well as changes in our sureties’ assessment of our operating and ﬁnancial risk, could cause
our surety providers and lenders to decline to issue or renew, or substantially reduce the amount of, bid or
performance bonds for our work and could increase our costs associated with collateral. These actions could
be taken on short notice. If our surety providers or lenders were to limit or eliminate our access to bonding,
letters of credit or guarantees, our alternatives would include seeking capacity from other sureties and lenders,
ﬁnding more business that does not require bonds or allows for other forms of collateral for project
performance, such as cash. We may be unable to secure these alternatives in a timely manner, on acceptable
terms, or at all, which could affect our ability to bid for or work on future projects requiring ﬁnancial
assurances.

We have also granted security interests in various assets to collateralize our obligations to our sureties
and lenders. Furthermore, under standard terms in the surety market, sureties issue or continue bonds on a
project-by-project basis and can decline to issue bonds at any time or require the posting of additional
collateral as a condition to issuing or renewing any bonds. If we were to experience an interruption or
reduction in the availability of bonding capacity as a result of these or any other reasons, we may be unable
to compete for or work on certain projects that would require bonding.

Inability to hire or retain key personnel could disrupt our business.

The success of our business depends upon the continued efforts and abilities of our executive officers and

senior management, including the management at each operating subsidiary. The relationships between our
executive officers and senior management and our customers are important to obtaining and retaining business.
We are also dependent upon our project managers and ﬁeld supervisors who are responsible for managing and
recruiting employees to our projects. There can be no assurance that any individual will continue in his or her
capacity for any particular period of time. Industry-wide competition for managerial talent is high. Given that
level of competition, there could be situations where our overall compensation package may be viewed as less
attractive as compared to our competition, and we may experience the loss of key personnel. The loss of key
personnel, or the inability to hire and retain qualiﬁed employees, could negatively impact our ability to
manage our business and relationships with our customers.

Our business may be affected by seasonal and other variations, including severe weather conditions and the
nature of our work environment.

Although our revenues are primarily driven by spending patterns in our customers’ industries, our
revenues and results of operations can be subject to seasonal variations, particularly in our T&D segment.
These variations are inﬂuenced by weather, hours of daylight, customer spending patterns, available system
outages from utilities and holidays, and can have a signiﬁcant impact on our gross margins. Our proﬁtability
may decrease during the winter months and during severe weather conditions because work performed during
these periods may be restricted and more costly to complete. Additionally, our T&D customers often cannot
remove their T&D lines from service during the summer months when consumer demand for electricity is at
its peak, delaying the demand for our maintenance and repair services. Furthermore, our work is performed
under a variety of conditions, including but not limited to, difficult terrain, difficult site conditions and large
urban centers where delivery of materials and availability of labor may be impacted and sites which may have
been exposed to harsh and hazardous conditions. Working capital needs are also inﬂuenced by the seasonality
of our business. We generally experience a need for additional working capital during the spring when we
increase outdoor construction in weather-affected regions of the country, and we convert working capital assets
to cash during the winter months.

We may fail to execute or integrate acquisitions or joint ventures successfully.

As part of our growth strategy, we may acquire companies or enter into joint ventures that expand,
complement or diversify our business. The number of acquisition targets or joint venture opportunities that
meet our criteria may be limited, and we may face competition for these opportunities. Acquisitions or joint
ventures that we may pursue may also involve signiﬁcant cash expenditures, the incurrence or assumption of
debt or burdensome regulatory requirements.

Future acquisitions or joint ventures may expose us to operational challenges and risks, including the

diversion of management’s attention from our existing business, the failure to retain key personnel or
customers of an acquired business, difficulties integrating the operations and personnel, failure of acquired
companies to achieve the results we expect, the assumption of unknown liabilities of the acquired business for
which there are inadequate reserves and the potential impairment of acquired intangible assets. Our ability to
grow and maintain our competitive position may be affected by our ability to successfully integrate any
businesses acquired.

Work stoppages or other labor issues with our unionized workforce could adversely affect our business.

As of December 31, 2018, approximately 88% of our craft labor employees were covered by collective

bargaining agreements. Although the majority of these agreements prohibit strikes and work stoppages, we
cannot be certain that strikes or work stoppages will not occur in the future. Strikes or work stoppages could
adversely impact our relationships with our customers and could cause us to lose business, resulting in
decreased revenues.

Failure to obtain permitting, right-of-way access and other tactical considerations prior to the
commencement of work could delay the commencement of work on projects or cause modiﬁcations of work
plans, potentially resulting in lower margins.

We generally plan for certain up-front time and other costs to obtain required permitting and right-of-way

access and for other tactical challenges prior to the commencement of work on our projects. Delays in
obtaining, or the inability to obtain, permits or right-of-way access, could negatively impact our margins due
to additional cost and unabsorbed overhead resulting from undeployed staff and equipment. Additionally, we
may encounter unexpected tactical issues on the site which could lead to unanticipated costs and delays,
which we may not be able to recover from our customers.

Multi-employer pension plan obligations related to our unionized workforce could adversely impact our
earnings.

Our collective bargaining agreements may require us to participate with other companies in various
multi-employer pension plans. To the extent that we participate in any multi-employer pension plans that are
underfunded, the Employee Retirement Income Security Act of 1974, as amended by the Multi-Employer
Pension Plan Amendments Act of 1980, may subject us to substantial liabilities under those plans if we were
to withdraw from them, if they were terminated or experience a mass withdrawal. Furthermore, the Pension
Protection Act of 2006, as amended by the Consolidated and Further Continuing Appropriations Act of 2015
(the ‘‘PPA’’) imposes additional funding and operational rules applicable to plan years beginning after 2007
for multi-employer pension plans that are classiﬁed as either ‘‘endangered,’’ ‘‘seriously endangered’’ or
‘‘critical’’ status. Plans in these classiﬁcations must adopt measures to improve their funded status, which may
require additional employer contributions and/or modiﬁcations to employee beneﬁts based on future union
wages paid.

We have been informed that several of the multi-employer pension plans to which our subsidiaries
contribute have been classiﬁed as ‘‘critical’’ or ‘‘endangered’’ status as deﬁned by the PPA. Although we are
not currently aware of any potential signiﬁcant liabilities to us as a result of these plans being classiﬁed as
being in a ‘‘critical’’ or ‘‘endangered’’ status, our future ﬁnancial results could be impacted by the amended
funding rules.

Our results of operations could be adversely affected as a result of asset impairments

Our results of operations and ﬁnancial condition could be adversely affected by impairments to goodwill,

other intangible assets, receivables, long-lived assets or investments. For example, when we acquire a

business, we record goodwill in an amount equal to the amount we paid for the business minus the fair value
of the net tangible assets and other intangible assets of the acquired business. Goodwill and other intangible
assets that have indeﬁnite useful lives cannot be amortized, but instead must be tested at least annually for
impairment. For additional description on this impairment testing, please read Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting
Policies — “Goodwill and Intangibles’’. Any future impairments, including impairments of goodwill,
intangible assets, long-lived assets or investments, could have a material adverse effect on our ﬁnancial
condition and results of operations for the period in which the impairment is recognized.

We may not have access in the future to sufficient funding to ﬁnance desired growth and operations.

If we cannot secure funds in the future, including ﬁnancing on acceptable terms, we may be unable to
support our growth strategy or future operations. Our credit facility contains numerous covenants and requires
us to meet and maintain certain ﬁnancial ratios and other tests. General business and economic conditions may
affect our ability to comply with these covenants or meet those ﬁnancial ratios and other tests, which may
limit our ability to borrow under the facility.

Restrictions in the availability of bank credit could cause us to forgo otherwise attractive business

opportunities and could require us to modify our business plan. We will continue to closely monitor our
liquidity and the overall condition of the ﬁnancial markets; however, we can give no assurance that we will be
able to obtain such ﬁnancing either on favorable terms or at all in the future.

We, or our business partners, may be subject to failures, interruptions or breaches of information
technology systems, which could affect our operations or our competitive position, expose sensitive
information or damage our reputation.

We use our own information technology systems as well as our business partners’ systems to maintain
certain data and provide reports. Furthermore, in connection with our business we collect and retain personally
identiﬁable and other sensitive information of our customers, stockholders and employees, all of which expect
that we will adequately protect such information. The failure of these systems to operate effectively or
problems with transitioning to upgraded or replacement systems could cause delays and reduce the efficiency
of our operations, which could have a material adverse effect on our results of operations, and signiﬁcant costs
could be incurred to remediate the problem. Additionally, our security measures, and those of our business
partners, may be compromised as a result of third-party security breaches, employee error, malfeasance, faulty
password management, or other irregularity, and may result in persons obtaining unauthorized access to our
customer, stockholder or employee data or accounts. While we devote signiﬁcant resources to network security
and other security measures to protect our systems and data, these security measures cannot provide absolute
security. If a security breach affects our informational technology systems, or results in the unauthorized
release of our proprietary or sensitive information, our competitive situation or our reputation could be
damaged and could result in signiﬁcant costs, ﬁnes and litigation.

Our stock has experienced signiﬁcant price and volume ﬂuctuations and future sales of our common stock
could lead to dilution of our issued and outstanding common stock.

From time to time, the price and trading volume of our common stock, as well as the stock of other
companies in our industry, may experience periods of signiﬁcant volatility in response to various factors and
events beyond our control. Company-speciﬁc issues and developments generally in our industry (including the
regulatory environment) and the capital markets and the economy in general may cause this volatility. We may
issue equity securities in the future, including securities that are convertible into or exchangeable for, or that
represent the right to receive, common stock. The issuance of additional shares of our common stock or other
equity securities, including sales of shares in connection with any future acquisitions, could be substantially
dilutive to our stockholders. In addition numerous factors could have a signiﬁcant effect on the price of our
common stock, including but not limited to:

•

announcements of ﬂuctuations in our operating results or the operating results of one of our
competitors;

market conditions in our customers’ industries;

•

capital spending plans of our signiﬁcant customers;

announcements by us or one of our competitors of new or terminated customers or new, amended or
terminated contracts;

announcements of acquisitions by us or one of our competitors;

changes in recommendations or earnings estimates by securities analysts;

future repurchases of our common stock; and

future sales of our common stock or other securities, including any shares issued in connection with
business acquisitions or earn-out obligations for any future acquisitions.

Our operations are subject to a number of operational risks which may result in unexpected costs or
liabilities.

Unexpected costs or liabilities may arise from lawsuits or indemnity claims related to the services we

perform or have performed in the past. We have in the past been, and may in the future be, named as a
defendant in lawsuits, claims and other legal proceedings during the ordinary course of our business. These
actions may seek, among other things, compensation for alleged personal injury, workers’ compensation,
employment discrimination, breach of contract, property damage, environmental remediation, punitive
damages, civil penalties or other losses, consequential damages or injunctive or declaratory relief. In addition,
pursuant to our service arrangements, we generally indemnify our customers for claims related to the services
we provide under those service arrangements. In some instances, our services are integral to the operation and
performance of the electric distribution and transmission infrastructure. As a result, we may become subject to
lawsuits or claims for any failure of the systems we work on, even if our services are not the cause for such
failures. In addition, we may incur civil and criminal liabilities to the extent that our services contributed to
any personal injury or property damage. The outcome of any of these lawsuits, claims or legal proceedings
could result in signiﬁcant costs and diversion of managements’ attention to the business.

Opportunities associated with government contracts could lead to increased governmental regulation
applicable to us.

Most government contracts are awarded through a regulated competitive bidding process. If we were to

be successful in being awarded government contracts, signiﬁcant costs could be incurred by us before any
revenues were realized from these contracts. Government agencies may review a contractor’s performance,
cost structure and compliance with applicable laws, regulations and standards. If government agencies
determine through these reviews that costs were improperly allocated to speciﬁc contracts, they will not
reimburse the contractor for those costs or may require the contractor to refund previously reimbursed costs. If
government agencies determine that we engaged in improper activity, we may be subject to civil and criminal
penalties. Government contracts are also subject to renegotiation of proﬁt and termination by the government
prior to the expiration of the term.

Changes in our interpretation of tax laws could impact the determination of our income tax liabilities for a
tax year.

We have operations in the United States and Canada and are subject to the jurisdiction of a multiple
federal and state taxing authorities. The income earned in these various jurisdictions is taxed on different bases
which are subject to change by the taxing authorities. The ﬁnal determination of our income tax liabilities
involves the interpretation of local tax laws, tax treaties and related authorities in each jurisdiction, as well as
the signiﬁcant use of estimates and assumptions regarding the scope of future operations and results achieved
and the timing and nature of income earned and expenditures incurred. Changes in the operating environment,
including changes in or interpretation of tax law, could impact the determination of our income tax liabilities
for the year.

Risks associated with operating in the Canadian market could restrict our ability to expand and harm our
business and prospects.

There are numerous inherent risks in conducting our business in a different country including, but not

limited to, potential instability in markets, political, economic or social conditions, and difficult or additional
legal and regulatory requirements applicable to our operations. Limits on our ability to repatriate earnings,
exchange controls, and complex U.S. and Canadian laws and treaties could also adversely impact our
operations. Changes in the value of the Canadian dollar could increase or decrease the U.S. dollar value of
our proﬁts earned or assets held in Canada or potentially limit our ability to reinvest earnings from our
operations in Canada to fund the ﬁnancing requirements of our operations in the U.S. These risks could
restrict our ability to provide services to Canadian customers or to operate our Canadian business proﬁtably,
and could negatively impact our results. We also are exposed to currency risks relating to the translation of
certain monetary transactions, assets and liabilities.

Our failure to comply with the laws applicable to our Canadian activities, including the U.S. Foreign
Corrupt Practices Act and similar anti-bribery laws, could have an adverse effect on us.

The U.S. Foreign Corrupt Practices Act (‘‘FCPA’’) and similar anti-bribery laws in other jurisdictions
prohibit U.S.-based companies and their intermediaries from making improper payments to foreign officials for
the purpose of obtaining or retaining business. Our policies mandate compliance with all applicable
anti-bribery laws. Although we have policies and procedures designed to ensure that we, our employees, our
agents and others who work with us in foreign countries comply with the FCPA and other anti-bribery laws,
there is no assurance that such policies or procedures will protect us against liability under the FCPA or other
laws for actions taken by our agents, employees and intermediaries. If we are found to be liable for FCPA
violations (either due to our own acts or inadvertence, or due to the acts or inadvertence of others), we could
suffer from severe criminal or civil penalties or other sanctions, which could have a material adverse effect on
our reputation, business, results of operations, ﬁnancial condition or cash ﬂows. In addition, detecting,
investigating and resolving actual or alleged FCPA violations is expensive and could consume signiﬁcant time
and attention of our senior management.

The nature of our business exposes us to potential liability for warranty claims and faulty engineering,
which may reduce our proﬁtability.

Under our contracts with customers, we typically provide a warranty for the services we provide,
guaranteeing the work performed against defects in workmanship and material. As much of the work we
perform is inspected by our customers for any defects in construction prior to acceptance of the project, the
warranty claims that we have historically received have been minimal. Additionally, materials used in
construction are often provided by the customer or are warranted against defects from the supplier. However,
certain projects may have longer warranty periods and include facility performance warranties that may be
broader than the warranties we generally provide. In these circumstances, if warranty claims occurred, it could
require us to re-perform the services or to repair or replace the warranted item, at a cost to us, and could also
result in other damages if we are not able to adequately satisfy our warranty obligations. In addition, we may
be required under contractual arrangements with our customers to warrant any defects or failures in materials
we provide that we purchase from third parties. While we generally require suppliers to provide us warranties
that are consistent with those we provide to the customers, if any of these suppliers default on their warranty
obligations to us, we may incur costs to repair or replace the defective materials for which we are not
reimbursed. Costs incurred as a result of warranty claims could adversely affect our operating results, ﬁnancial
condition and cash ﬂows.

Our business involves professional judgments regarding the planning, design, development, construction,
operations and management of electric power transmission and commercial construction. Because our projects
are often technically complex, our failure to make judgments and recommendations in accordance with
applicable professional standards, including engineering standards, could result in damages. While we do not
generally accept liability for consequential damages, and although we have adopted a range of insurance, risk
management and risk avoidance programs designed to reduce potential liabilities, a signiﬁcantly adverse or
catastrophic event at one of our project sites or completed projects resulting from the services we have
performed could result in signiﬁcant warranty, professional liability, or other claims against us as well as

reputational harm, especially if public safety is impacted. These liabilities could exceed our insurance limits or
could impact our ability to obtain insurance in the future. In addition, customers, subcontractors or suppliers
who have agreed to indemnify us against any such liabilities or losses might refuse or be unable to pay us. An
uninsured claim, either in part or in whole, if successful and of a material magnitude, could have a substantial
impact on our business, ﬁnancial condition, results of operations and cash ﬂows.

Our internal controls over ﬁnancial reporting and our disclosure controls and procedures may not prevent
all possible errors that could occur. Internal controls over ﬁnancial reporting and disclosure controls and
procedures, no matter how well designed and operated, can provide only reasonable, not absolute,
assurance that the control system’s objective will be met.

On a quarterly basis we evaluate our internal controls over ﬁnancial reporting and our disclosure controls

and procedures, which include a review of the objectives, design, implementation and effectiveness of the
controls and the information generated for use in our periodic reports. In the course of our controls evaluation,
we seek to identify data errors, control problems and to conﬁrm that appropriate corrective actions, including
process improvements, are being undertaken.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute,

assurance that the control system’s objectives will be satisﬁed. Internal controls over ﬁnancial reporting and
disclosure controls and procedures are designed to give reasonable assurance that they are effective and
achieve their objectives. We cannot provide absolute assurance that all possible future control issues have been
detected. These inherent limitations include the possibility that our judgments can be faulty, and that isolated
breakdowns can occur because of human error. The design of our system of controls is based in part upon
certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed absolutely in achieving our stated goals under all potential future or unforeseeable conditions. We
may discover in the future that we have deﬁciencies in the design and operation of our internal controls. If
any deﬁciency in our internal controls, either by itself or in combination with other deﬁciencies, becomes a
‘‘material weakness’’, such that there is a reasonable possibility that a material misstatement of the annual or
interim ﬁnancial statements will not be prevented or detected on a timely basis, we may be unable to conclude
that we have effective internal control over ﬁnancial reporting. In such event, investors could lose conﬁdence
in the reliability of our ﬁnancial statements, which may signiﬁcantly harm our business and cause our stock
price to decline.

An increase in the prices of certain materials and commodities used in our business could adversely affect
our business.

For certain contracts, we are exposed to market risk of increases in certain commodity prices of
materials, such as copper and steel, which are used as components of supplies or materials utilized in all of
our operations. We are also exposed to increases in energy prices, particularly as they relate to gasoline prices
for our ﬂeet vehicles. While we believe we can increase our prices to adjust for some price increases in
commodities, there can be no assurance that price increases of commodities, if they were to occur, would be
recoverable. Additionally, some of our ﬁxed price contracts do not allow us to adjust our prices and, as a
result, increases in material or fuel costs could reduce our proﬁtability with respect to such projects.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service
obligations to increase signiﬁcantly.

Borrowings under our credit facility are at variable rates of interest and expose us to interest rate risk. If
interest rates increase, our debt service obligations on our variable rate indebtedness will increase even if the
amount borrowed remains the same, and our net income and cash ﬂows, including cash available for servicing
our indebtedness, will correspondingly decrease.

In addition, borrowing under our revolving credit facility may use London Interbank Offering Rate

(‘‘LIBOR’’) as a benchmark for establishing the interest rate. LIBOR is the subject of recent national,
international and other regulatory guidance and proposals for reform. These reforms and other pressures may
cause LIBOR to disappear entirely or to perform differently than in the past. The consequences of these
developments cannot be entirely predicted, but could include an increase in the cost of our variable rate
indebtedness.

Certain provisions in our organizational documents and Delaware law could delay or prevent a change in
control of our company.

The existence of certain provisions in our organizational documents and Delaware law could delay or
prevent an unsolicited change in control of our company, even if a change of control might be beneﬁcial to
our shareholders. For example, provisions in our certiﬁcate of incorporation and by-laws that could delay or
prevent a change in control of our company include: a staggered board of directors, the potential of our board
of directors to authorize the issuance of preferred stock, the power of a majority of our board of directors to
ﬁx the number of directors, the power of our board of directors to ﬁll a vacancy on the board of directors,
including when such vacancy occurs as a result of an increase in the number of directors, the requirement that
actions to be taken by our stockholders may be taken only at an annual or special meeting of our stockholders
and not by written consent, and advance notice provisions for director nominations or business to be
considered at a stockholder meeting. In addition, Delaware law imposes restrictions on mergers and other
business combinations between us and an interested stockholder (deﬁned as the holder of 15% or more of our
outstanding common stock), and prohibits us from engaging in any of a broad range of business transactions
with an interested stockholder, or an interested stockholder’s affiliates and associates, for a period of
three years following the date such stockholder became an interested stockholder.

We are subject to risks associated with climate change.

Climate change may create physical and ﬁnancial risk. Physical risks from climate change could, among

other things, include an increase in extreme weather events (such as ﬂoods or hurricanes), rising sea levels
and limitations on water availability and quality. Such extreme weather conditions may limit the availability of
resources, increasing the costs of our projects, or may cause projects to be delayed or cancelled.

Additionally, legislative and regulatory responses related to climate change and new interpretations of

existing laws through climate change litigation may also negatively impact our operations. The cost of
additional environmental regulatory requirements could impact the availability of goods and increase our
costs. International treaties or accords could also have an impact on our business to the extent they lead to
future governmental regulations. Compliance with any new laws or regulations regarding the reduction of
greenhouse gases could result in signiﬁcant changes to our operations and a signiﬁcant increase in our cost of
conducting business.

Item 1B. Unresolved Staff Comments

None.

Item 2.

Properties

Our principal executive offices are located at 1701 Golf Road, Suite 3-1012, Rolling Meadows, Illinois
60008, the lease term of which expires on April 30, 2023. In addition to our executive offices, our corporate
accounting and ﬁnance departments, corporate information technology department and certain legal and other
personnel are located at this office. As of December 31, 2018, we owned 15 operating facilities and leased
many other properties in various locations throughout our service territory. Most of our properties are used as
offices or for ﬂeet operations. We believe that our facilities are adequate for our current operating needs. We
do not believe that any owned or leased facility is material to our operations and, if necessary, we could
obtain replacement facilities for our leased facilities.

Item 3.

Legal Proceedings

We are, from time-to-time, party to various lawsuits, claims and other legal proceedings that arise in the

ordinary course of business. These actions typically seek, among other things, compensation for alleged
personal injury, breach of contract and/or property damages, punitive damages, civil and criminal penalties or
other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, we
record reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably
estimated. We do not believe that any of these proceedings, separately or in the aggregate, would be expected
to have a material adverse effect on our ﬁnancial position, results of operations, or cash ﬂows.

We are routinely subject to other civil claims, litigation and arbitration, and regulatory investigations

arising in the ordinary course of our past and present businesses as well as in respect of our divested
businesses. Some of these include claims related to our services and operations, and asbestos-related claims
concerning operations of a divested subsidiary of our predecessor. We believe that we have strong defenses to
these claims as well as insurance coverage that will contribute to any settlement or liability in the event any
asbestos-related claim is not resolved in our favor. These claims have not had a material impact on us to date,
and we believe the likelihood that a future material adverse outcome will result from these claims is remote.
However, if facts and circumstances change in the future, we cannot be certain that an adverse outcome of
one or more of these claims would not have a material adverse effect on our ﬁnancial condition, results of
operations, or cash ﬂows.

Item 4.

Mine Safety Disclosures

Not Applicable.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities

Our common stock, par value $0.01, is listed on The Nasdaq Global Market under the symbol ‘‘MYRG.’’

Holders of Record

As of March 1, 2019, we had 10 holders of record of our common stock.

Dividend Policy

We have neither declared nor paid any cash dividend on our common stock since our common stock
began trading publicly on August 12, 2008. Any future determination to declare cash dividends will be made
at the discretion of our board of directors, subject to compliance with legal requirements and covenants under
any existing ﬁnancing agreements, which may restrict or limit our ability to declare or pay dividends, and will
depend on our ﬁnancial condition, results of operations, capital requirements, general business conditions, and
other factors that our board of directors may deem relevant.

Issuances of Common Stock.

On October 25, 2018, a total of 687 unregistered shares of our common stock, valued at $21,977, were
issued to directors of the Company who elected to receive a portion of their director retainer fee in stock in
lieu of cash. The shares were issued pursuant to the exemption from registration provided by Section 4(a)(2)
of the Securities Act of 1933.

Purchases of Common Stock.

We did not purchase any shares of common stock in October, November or December of 2018.

Performance Graph

The following Performance Graph and related information shall be deemed ‘‘furnished’’ and not ‘‘ﬁled’’
for purposes of Section 18 of the Exchange Act, and such information shall not be incorporated by reference
into any future ﬁling under the Securities Act or the Exchange Act except to the extent that we speciﬁcally
incorporate it by reference into such ﬁling.

The following graph compares, for the period from December 31, 2013 to December 31, 2018, the
cumulative total stockholder return on our common stock with the cumulative total return on the Standard &
Poor’s 500 Index (the ‘‘S&P 500 Index’’), the Russell 2000 Index, and a peer group index selected by our
management that includes fourteen publicly traded companies within our industry (the ‘‘Peer Group’’). The
comparison assumes that $100 was invested on December 31, 2013 and further assumes any dividends were
reinvested quarterly. The stock price performance reﬂected on the following graph is not necessarily indicative
of future stock price performance.

The companies in the Peer Group were selected because they comprise a broad group of publicly traded
companies, each of which has some operations similar to ours. When taken as a whole, the Peer Group more
closely resembles our total business than any individual company in the group while reducing the impact of a
signiﬁcant change in any one of the Peer Group company’s stock price. We removed Willbros Group, Inc. and
TRC Companies, Inc. from our Peer Group because they are no longer publicly traded. The Peer Group is
composed of the following companies:

Aegion Corporation
Astec Industries, Inc.
Comfort Systems USA, Inc.
Dycom Industries, Inc.

EMCOR Group*
Granite Construction Incorporated
IES Holdings, Inc.
MasTec, Inc.*

Matrix Service Company
Primoris Services Corporation*
Quanta Services, Inc.*
Tetra Tech, Inc.

Considered our core group of peers with a more signiﬁcant portion of operations being similar to ours
than the overall group. Graph presents entire Peer Group.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among MYR Group, Inc., the S&P 500 Index, the Russell 2000 Index,
and a Peer Group

$180

$160

$140

$120

$100

$80

$60

$40

$20

$0
12/13

12/14

12/15

12/16

12/17

12/18

MYR Group, Inc.

S&P 500

Russell 2000

Peer Group

*$100 invested on 12/31/13 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.

MYR Group Inc.
. .
S&P 500 . . . . . . . .
Russell 2000 . . . . . .
Peer Group . . . . . .

12/31/2013
100.00
100.00
100.00
100.00

12/31/2014
109.25
113.69
104.89
92.52

12/31/2015
82.18
115.26
100.26
92.29

12/31/2016
150.24
129.05
121.63
137.84

12/31/2017
142.46
157.22
139.44
160.41

12/31/2018
112.32
150.33
124.09
121.46

Item 6.

Selected Financial Data

The following table sets forth certain summary ﬁnancial information on a historical basis. The summary

statement of operations and the balance sheet data set forth below have been derived from our audited
Financial Statements and footnotes thereto included elsewhere in this ﬁling or in prior ﬁlings. Our Financial
Statements have been prepared in accordance with GAAP. Historical results are not necessarily indicative of
the results we expect in the future and quarterly results are not necessarily indicative of the results of any
future quarter or any full-year period. The information below should be read in conjunction with ‘‘Item 7.
Management’s Discussion and Analysis of Financial Condition and Results from Operations’’ and the
Financial Statements and notes thereto included in this Annual Report on Form 10-K.

Statement of operations data:

(in thousands, except per share data)
Contract revenues . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Contract costs
Gross proﬁt . . . . . . . . . . . . . .

Selling, general and administrative

expenses

. . . . . . . . . . . . . . . . .
Amortization of intangible assets . . .
Gain on sale of property and

2018
$1,531,169
1,364,109
167,060

118,737
1,843

equipment

Income from operations

. . . . . . . . . . . . . . . .
. . . . .

Other income (expense):

Interest income . . . . . . . . . . . . .
. . . . . . . . . . . .
Interest expense
. . . .
Other income (expense), net

Income before provision for

income taxes . . . . . . . . . . .
Income tax expense(1)
. . . . .
Net income . . . . . . . . . . . . . . . . .
Less: net income − noncontrolling

(3,832)
50,312

24
(3,652)
(3,616)

43,068
11,774
31,294

For the year ended December 31,
2016
$1,142,487
1,007,764
134,723

2015
$1,061,681
939,340
122,341

2017
$1,403,317
1,278,313
125,004

98,611
499

(3,664)
29,558

4
(2,603)
(2,319)

24,640
3,486
21,154

96,424
886

(1,341)
38,754

5
(1,299)
885

38,345
16,914
21,431

79,186
571

(2,257)
44,841

25
(741)
174

44,299
16,997
27,302

2014
$943,967
811,553
132,414

73,818
334

(142)
58,404

106
(722)
162

57,950
21,406
36,544

interests . . . . . . . . . . . . . . . . . .

207

—

Net income attributable to MYR

Group Inc.

. . . . . . . . . . . . . . . .

31,087

21,154

21,431

27,302

$ 36,544

Income per common share
attributable to MYR
Group Inc.:

− Basic . . . . . . . . . . . . . . . . . . . .
− Diluted . . . . . . . . . . . . . . . . . .

$
$

1.89
1.87

$
$

1.30
1.28

$
$

1.25
1.23

$
$

1.33
1.30

$
$

1.73
1.69

Weighted average number of

common shares and
potential common shares
outstanding:

− Basic . . . . . . . . . . . . . . . . . . . .
− Diluted . . . . . . . . . . . . . . . . . .

16,441
16,585

16,273
16,496

17,109
17,461

20,577
21,038

20,922
21,466

Balance sheet data:

(in thousands)
Cash and cash equivalents . . . . . . .
Working capital(2)
. . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . .
Total debt
. . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . .
Stockholders’ equity attributable to

2018
$ 7,507
191,829
748,755
89,792
424,291

2017
$
5,343
191,172
603,788
78,960
316,749

As of December 31,
2016
$ 23,846
146,677
573,495
59,070
310,321

2015
$ 39,797
123,630
524,925
—
195,045

2014
$ 77,636
141,913
520,086
—
197,553

MYR Group Inc. . . . . . . . . . . . .

322,984

287,039

263,174

329,880

322,553

Other Data: (Unaudited)

(in thousands)
Net cash ﬂows provided by (used in)
. . . . . . . . . .

operating activities

Net cash ﬂows used in investing

activities

. . . . . . . . . . . . . . . . .
Net cash ﬂows provided by (used in)
ﬁnancing activities . . . . . . . . . . .
Depreciation and amortization(3)
. . .
Capital expenditures . . . . . . . . . . .
Backlog(4)
. . . . . . . . . . . . . . . . . .
EBITDA(5)
. . . . . . . . . . . . . . . . .

2018

For the year ended December 31,
2016

2015

2017

2014

84,789

$ (9,198)

$ 54,490

$ 43,000

$ 54,976

(93,203)

(26,501)

(34,128)

(56,928)

(38,725)

10,642
39,913
50,704
1,146,637
86,609
$

16,889
38,576
30,843
679,139
$ 65,815

(35,539)
39,122
25,371
688,832
$ 78,761

(23,911)
38,029
46,599
450,934
$ 83,044

(15,069)
33,423
39,045
433,641
$ 91,989

(1) The 2017 Tax Act (‘‘Tax Act’’), among its many provisions, reduced the federal statutory tax rate from

35% to 21%. The Company applied the new provisions to its tax assets and liabilities in 2017, which
resulted in a net reduction of income tax expense. Income tax expense in the years after 2017 beneﬁted
from the lower federal statutory tax rate and other provisions of the Tax Act. See further discussion in
Note 10 — Income Taxes to our Financial Statements.

(2) Working capital is a non-GAAP measure. The Company deﬁnes working capital as total current assets

less total current liabilities. Certain adjustments were made to working capital beginning in 2016 that are
not reﬂected in the prior periods.

(3) Depreciation and amortization includes depreciation on capital assets, amortization of capital leases and

amortization of ﬁnite-lived intangible assets.

(4) Backlog represents our estimated revenue on uncompleted contracts, including the amount of revenue on
contracts on which work has not begun, minus the revenue we have recognized under such contracts. See
‘‘Item 1. Business — Backlog’’ for a discussion on how we calculate backlog for our business and
‘‘Item 1A. Risk Factors — Backlog may not be realized or may not result in proﬁts and may not
accurately represent future revenue.’’

(5) We deﬁne EBITDA, a performance measure used by management, as net income attributable to MYR
Group Inc. plus net income from noncontrolling interests, interest expense net of interest income,
provision for income taxes and depreciation and amortization, as shown in the following table. EBITDA,
a non-GAAP ﬁnancial measure, does not purport to be an alternative to net income attributable to MYR
Group Inc. as a measure of operating performance or to net cash ﬂows provided by operating activities as
a measure of liquidity. Because not all companies use identical calculations, this presentation of EBITDA
may not be comparable to other similarly-titled measures of other companies. We use, and we believe
investors beneﬁt from, the presentation of EBITDA in evaluating our operating performance because it
provides us and our investors with an additional tool to compare our operating performance on a
consistent basis by removing the impact of certain items that management believes do not directly reﬂect
our core operations. We believe that EBITDA is useful to investors and other external users of our
Financial Statements in evaluating our operating performance and cash ﬂow because EBITDA is widely
used by investors to measure a company’s operating performance without regard to items such as interest
expense, taxes, depreciation and amortization, which can vary substantially from company to company

depending upon accounting methods and book value of assets, useful lives placed on assets, capital
structure and the method by which assets were acquired.
Using EBITDA as a performance measure has material limitations as compared to net income, or other
ﬁnancial measures as deﬁned under GAAP, as it excludes certain recurring items, which may be
meaningful to investors. EBITDA excludes interest expense net of interest income; however, as we have
borrowed money to ﬁnance transactions and operations, or invested available cash to generate interest
income, interest expense and interest income are elements of our cost structure and can affect our ability
to generate revenue and returns for our stockholders. Further, EBITDA excludes depreciation and
amortization; however, as we use capital and intangible assets to generate revenues, depreciation and
amortization are a necessary element of our costs and ability to generate revenue. Finally, EBITDA
excludes income taxes; however, as we are organized as a corporation, the payment of taxes is a
necessary element of our operations. As a result of these exclusions from EBITDA, any measure that
excludes interest expense net of interest income, depreciation and amortization and income taxes has
material limitations as compared to net income. When using EBITDA as a performance measure,
management compensates for these limitations by comparing EBITDA to net income in each period, to
allow for the comparison of the performance of the underlying core operations with the overall
performance of the company on a full-cost, after-tax basis. Using both EBITDA and net income to
evaluate the business allows management and investors to (a) assess our relative performance against our
competitors and (b) monitor our capacity to generate returns for our stockholders.

The following table provides a reconciliation of net income attributable to MYR Group Inc. to EBITDA:

(in thousands)
Net income attributable to MYR

Group Inc. . . . . . . . . . . . . . . . . . . .
Net income − noncontrolling interests . .
Net income . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . .
Provision for income taxes
. . . . . . . .
Depreciation and amortization . . . . . .
EBITDA . . . . . . . . . . . . . . . . . . . . . .

2018

$31,087
207
31,294
3,628
11,774
39,913
$86,609

For the year ended December 31,
2015
2016
2017

$21,154
—
21,154
2,599
3,486
38,576
$65,815

$21,431
—
21,431
1,294
16,914
39,122
$78,761

$27,302
—
27,302
716
16,997
38,029
$83,044

2014

$36,544
—
36,544
616
21,406
33,423
$91,989

We also use EBITDA as a liquidity measure. Certain material covenants contained within our credit
agreement (the ‘‘Credit Agreement’’) are based on EBITDA. Non-compliance with these ﬁnancial covenants
under the Credit Agreement — our interest coverage ratio which is deﬁned in the Credit Agreement as
Consolidated EBITDA (as deﬁned in the Credit Agreement) divided by interest expense (as deﬁned in the
Credit Agreement) and our 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) — could result in our lenders requiring us to immediately repay all amounts borrowed. If we
anticipated a potential covenant violation, we would seek relief from our lenders, likely causing us to incur
additional cost, and such relief might not be available, or if available, might not be on terms as favorable as
those in the Credit Agreement. In addition, if we cannot satisfy these ﬁnancial covenants, we would be
prohibited under the Credit Agreement from engaging in certain activities, such as incurring additional
indebtedness, making certain payments, and acquiring or disposing of assets. Based on the information above,
management believes that the presentation of EBITDA as a liquidity measure is useful to investors and
relevant to their assessment of our capacity to service or incur debt, fund capital expenditures, ﬁnance
acquisitions and expand our operations.

The following table provides a reconciliation of net cash ﬂows provided by operating activities to

EBITDA:

(in thousands)
Net cash ﬂows provided by (used in)

2018

For the year ended December 31,
2015
2016
2017

2014

operating activities . . . . . . . . . . . . . $ 84,789

$ (9,198) $ 54,490

$ 43,000

$ 54,976

Add/(subtract)

Changes in operating assets and

(10,363)

liabilities . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to
net cash ﬂows provided by (used in)
(43,132)
operating activities . . . . . . . . . . . .
39,913
Depreciation and amortization . . . . . .
11,774
. . . . . . . .
Provision for income taxes
Interest expense, net . . . . . . . . . . . . .
3,628
EBITDA . . . . . . . . . . . . . . . . . . . . $ 86,609

65,743

13,795

26,669

23,314

(35,391)
38,576
3,486
2,599
$ 65,815

(46,854)
39,122
16,914
1,294
$ 78,761

(42,367)
38,029
16,997
716
$ 83,044

(41,746)
33,423
21,406
616
$ 91,989

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the other sections of this report, including

the Financial Statements and related notes contained in Item 8 of this Annual Report on Form 10-K. In
addition to historical information, this discussion contains forward-looking statements that involve risks,
uncertainties and assumptions that could cause actual results to differ materially from management’s
expectations. Factors that could cause such differences are discussed in ‘‘Forward-Looking Statements’’ and
‘‘Risk Factors.’’ We assume no obligation to update any of these forward-looking statements.

Overview-Introduction

We have operated in the transmission and distribution industry since 1891. We are one of the largest
contractors servicing the T&D sector of the electric utility industry in the United States and provide T&D
services in western Canada. Our T&D customers include many of the leading companies in the industry. We
have operated in the commercial and industrial industry since 1912. We are one of the largest electrical
contractors servicing the C&I industry in the United States and in western Canada. Our C&I customers
include facility owners and general contractors.

We believe that we have a number of competitive advantages in both of our segments, including our
skilled workforce, extensive centralized ﬂeet, proven safety performance and reputation for timely completion
of quality work that allows us to compete favorably in our markets. 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
complex projects.

We had revenues for the year ended December 31, 2018 of $1.531 billion compared to $1.403 billion for

the year ended December 31, 2017. For the year ended December 31, 2018, net income attributable to MYR
Group Inc. was $31.1 million compared to $21.2 million for the year ended December 31, 2017.

Overview-Segments

Transmission and Distribution segment. Our T&D segment provides comprehensive solutions to
customers in the electric utility industry. Our T&D segment generally serves the electric utility industry as
a prime contractor to customers such as investor-owned utilities, cooperatives, private developers,
government-funded utilities, independent power producers, independent transmission companies, industrial
facility owners and other contractors. We have long-standing relationships with many of our T&D customers
who rely on us to construct and maintain reliable electric and other utility infrastructure. Our 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. Our 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. We also provide many
services to our customers under multi-year master service agreements (‘‘MSAs’’) and other variable-term
service agreements.

For the year ended December 31, 2018, our T&D revenues were $893.1 million, or 58.3%, of our
revenue, compared to $879.4 million, or 62.7%, of our revenue for the year ended December 31, 2017 and
$819.0 million, or 71.7%, of our revenue for the year ended December 31, 2016. Revenues from transmission
projects represented 62.6%, 68.5%, and 75.8% of T&D segment revenue for the years ended December 31,
2018, 2017 and 2016, respectively.

Our T&D segment also provides restoration services in response to hurricanes, ice storms or other storm

related events, which typically account for less than 5% of our annual revenues.

Measured by revenues in our T&D segment, we provided 40.5%, 31.4% and 56.9% of our T&D services
under ﬁxed-price contracts during the years ended December 31, 2018, 2017 and 2016, respectively. We also
provide many services to our customers under multi-year maintenance service agreements and other variable
service agreements.

Commercial and Industrial segment. Our C&I segment provides a wide range of services including

design, installation, maintenance and repair of commercial and industrial wiring, installation of traffic
networks and the installation of bridge, roadway and tunnel lighting. In our C&I segment, we generally
provide our electric construction and maintenance services as a subcontractor to general contractors in the
C&I industry as well as directly to facility owners. We have a diverse customer base with many long-standing
relationships. We concentrate our efforts on projects where our technical and project management expertise are
critical to successful and timely execution. The majority of C&I contracts cover electrical contracting services
for airports, hospitals, data centers, hotels, stadiums, convention centers, manufacturing plants, processing
facilities, waste-water treatment facilities, mining facilities and transportation control and management
systems.

For the year ended December 31, 2018, our C&I revenues were $638.1 million, or 41.7%, of our
revenue, compared to $523.9 million, or 37.3%, of our revenue for the year ended December 31, 2017 and
$323.5 million, or 28.3%, of our revenue for the year ended December 31, 2016.

Measured by revenues in our C&I segment, we provided 71.0%, 63.7% and 73.4% of our services under

ﬁxed-price contracts for the years ended December 31, 2018, 2017 and 2016, respectively.

Overview-Revenue and Gross Margins

Revenue Recognition. On January 1, 2018, we adopted accounting standards update (‘‘ASU’’) No.
2014-09, Revenue from Contracts with Customers (Topic 606) using the modiﬁed retrospective method for
contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after
December 31, 2017 are presented under this new pronouncement, while prior period amounts were not
adjusted and continue to be reported under the accounting standard Revenue Recognition Topic 605, which
was in effect for those periods.

Under Topic 606, we recognize revenue to depict the transfer of goods or services to customers in an

amount that reﬂects the consideration that we expect to be entitled to in exchange for goods or services
provided. Revenue associated with contracts with customers is recognized over time as our performance
creates or enhances customer controlled assets or creates or enhances an asset with no alternative use, for
which we have an enforceable right to receive compensation as deﬁned under the contract. To determine the
amount of revenue to recognize over time, we utilized the cost-to-cost method as we believe cost incurred
best represents the amount of work completed and remaining on our projects, and is the most common basis
for computing percentage of completion in our industry. As the cost-to-cost method is driven by incurred cost,
we calculate 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. Additionally, 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.

Prior to 2018 under Topic 605, we recognized revenue on the percentage-of-completion method of
accounting, which was commonly used in the construction industry. The percentage-of-completion accounting
method resulted in recognizing contract revenues and earnings ratably over the contract term in proportion to
our incurrence of contract costs. The proﬁts or losses recognized on individual contracts were based on
estimates of contract revenues, costs and proﬁtability. Contract losses were recognized in full when
determined, and contract proﬁt estimates were adjusted based on ongoing reviews of contract proﬁtability.
Changes in job performance, labor costs, equipment costs, job conditions, weather, estimated proﬁtability and
ﬁnal contract settlements sometimes resulted in revisions to costs and income and their effects were

recognized in the period in which the revisions were determined. We recorded adjustments to estimated costs
of contracts when we believed the change in estimate was probable and the amounts could be reasonably
estimated. These adjustments could have resulted in either increases or decreases in proﬁt margins.

Gross Margins. Our gross margin can vary between periods as a result of many factors, some of which

are beyond our control. These factors include: the mix of revenue derived from the industries we serve, the
size and duration of our projects, the mix of business conducted in different parts of the United States and
Canada, the mix in service and maintenance work compared to new construction work, the amount of work
that we subcontract, the amount of material we supply, changes in labor, equipment or insurance costs,
seasonal weather patterns, changes in ﬂeet utilization, pricing pressures due to competition, efficiency of work
performance, ﬂuctuations in commodity prices of materials, delays in the timing of projects and other factors.
The gross margins we record in the current period may not be indicative of margins in future periods.

Overview-Economic, Industry and Market Factors

We operate in competitive markets, which can result in pricing pressures for the services we provide.

Work is often awarded through a bidding and selection process, where price is always a principal factor. We
generally focus on managing our proﬁtability by: selecting projects that we believe will provide attractive
margins; actively monitoring the costs of completing our projects; holding customers accountable for costs
related to changes to contract speciﬁcations; and rewarding our employees for controlling costs.

The demand for construction and maintenance services from our customers has been, and will likely
continue to be, cyclical in nature and vulnerable to downturns in the markets we serve as well as the economy
in general. The ﬁnancial condition of our customers and their access to capital, variations in the margins of
projects performed during any particular period, and regional and national economic conditions in the
United States and Canada may materially affect results. Project schedules, particularly in connection with
larger, multi-year projects, can also create ﬂuctuations in our revenues. Other market and industry factors,
such as changes to our customers’ capital spending plans or delays in regulatory approvals can affect project
schedules. Changes in technology, tax and other incentives and new or changing regulatory requirements
affecting the industries we serve can impact demand for our services. While we actively monitor economic,
industry and market factors affecting our business, we cannot predict the impact such factors may have on our
future results of operations, liquidity and cash ﬂows. As a result of economic, industry and market factors, our
operating results in any particular period or year may not be indicative of the results that can be expected for
any other period or for any other year.

Overview-Seasonality and Nature of Our Work Environment

Although our revenues are primarily driven by spending patterns in our customers’ industries, our
revenues and results of operations, particularly those derived from our T&D segment, can be subject to
seasonal variations. These variations are inﬂuenced by weather, daylight hours, availability of system outages
from utilities, and holidays. During the winter months, demand for our T&D work may be high, but our work
can be delayed due to inclement weather. During the summer months, the demand for our T&D work may be
affected by fewer available system outages during which we can perform electrical line service work due to
peak electrical demands caused by warmer weather conditions. During the spring and fall months, the demand
for our T&D work may increase due to improved weather conditions and system availability; however,
extended periods of rain and other severe weather can affect the deployment of our crews and efficiency of
operations. Furthermore, our work is performed under a variety of conditions, including but not limited to,
difficult terrain, difficult site conditions and large urban centers where delivery of materials and availability of
labor may be impacted and sites which may have been exposed to harsh and hazardous conditions.

We also provide storm restoration services to our T&D customers. These services tend to have a higher
proﬁt margin. However, storm restoration service work that is performed under an MSA typically has similar
rates to other work under the agreement. In addition, deploying employees on storm restoration work may, at
times, delay work on other transmission and distribution work. Storm restoration service work is unpredictable
and can affect results of operations.

Outlook

Our business is directly impacted by the level of spending on T&D infrastructure and the level of C&I

electrical construction activity across the United States and western Canada. We are optimistic about
infrastructure spending and believe that improving industry activity will continue in both our transmission and
distribution market segments and the drivers for utility investment will remain intact. We believe that
regulatory reform, state renewable portfolio standards, the aging of the electric grid, and the general
improvement of the economy will positively impact the level of spending by our customers in all of the
markets we serve. Although competition remains strong, we see these trends as positive factors for us in the
future.

We continue to expect long-term growth in the transmission market, although the timing of large bids and
subsequent construction will likely continue to be highly variable from year to year. The electric grid is aging
and requires signiﬁcant upgrades and maintenance to meet current and future demands for electricity. Over the
past several years, many utilities have begun to implement plans to improve reliability of their transmission
systems and reduce congestion. These utilities have started or planned new construction, line upgrades and
maintenance projects on their transmission systems. We believe that our customers remain committed to the
expansion and strengthening of their transmission infrastructure, with planning, engineering and funding for
many of their projects already in place.

State renewable portfolio standards, which set required or voluntary standards for how much electricity is

to be generated from renewable energy sources, as well as general environmental concerns, continue to drive
the development of renewable energy projects. The economic feasibility of renewable energy projects, and
therefore the attractiveness of investment in the projects, may depend on the availability of tax incentive
programs or the ability of the projects to take advantage of such incentives.

We believe there is an ongoing need for utilities to sustain investment in their transmission systems to
improve reliability, reduce congestion and connect to new sources of generation. Consequently, we believe we
will continue to see signiﬁcant bidding activity on large transmission projects over the next two years. The
timing of multi-year transmission project awards and substantial construction activity is difficult to predict due
to regulatory requirements and right-of-way permits needed to commence construction. Signiﬁcant
construction on any large, multi-year projects awarded in 2019 will not likely occur until 2020. Bidding and
construction activity for small to medium-size transmission projects and upgrades remains strong, and we
expect this trend to continue, primarily due to reliability and economic drivers. We also believe the need for
distribution services will continue to grow.

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. In 2018, we saw increased bidding activity in some of our electric
distribution markets, as economic conditions improved in those areas. We believe that continued recovery in
the United States economy, and in the housing market in particular, over the next few years could provide
additional stimulus for spending by our customers on their distribution systems. We also believe the increased
hurricane activity over the past several years and recent destruction caused by wildﬁres will cause a push to
strengthen utility distribution systems against catastrophic damage. Several industry and market trends are also
prompting customers in the electric utility industry to seek outsourcing partners rather than performing
projects internally. These trends include an aging electric utility workforce, increasing costs and staffing
constraints. We believe electric utility employee retirements could increase with further economic recovery,
which may result in an increase in outsourcing opportunities. We expect to see an incremental increase in
distribution opportunities in the United States in 2019, and we believe these opportunities will continue to be
bid in a competitive market.

We expect to see continued improvement in bidding opportunities in our C&I segment in 2019. Our
views are in-line with FMI’s 2019 United States Construction Outlook which forecasts an increase in spending
levels over 2018. According to FMI, the primary growth sectors in 2019 are expected to include office,
educational, public safety, transportation, conservation and development, and manufacturing, all with positive
forecasted growth rates. The Architectural Billing Index, which typically leads relevant construction activity

by nine to twelve months, paints a similarly upbeat picture. According to the latest readings, contractors will
continue to have robust backlogs during the coming months.

In Canada, we believe the non-building segments of power, water supply and transportation will lead

all others in growth of construction spending in 2019. These segments showed increasingly positive
activity through 2018 providing conﬁdence in forecasts to expand over the next ﬁve years, with several
multi-million-dollar projects planned across the nation. Nonresidential building segments, including
commercial, office and lodging, look to hold steady over the next ﬁve years. Activity in multi-family
construction looks to stay at or slightly above the long-term rate of inﬂation.

We expect the long-term growth in our C&I segment to generally track the economic growth of the
regions we serve. We also expect to see increased bidding opportunities in the new C&I markets we recently
entered through strategic acquisitions and organic expansions.

Through 2018, we continued our three-pronged strategy of organic growth, strategic acquisitions and
prudent capital returns. On July 2, 2018, the Company completed the acquisition of substantially all of the
assets of Huen Electric, Inc., an electrical contracting ﬁrm based in Illinois, Huen Electric New Jersey Inc., an
electrical contracting ﬁrm based in New Jersey, and Huen New York, Inc., an electrical contracting ﬁrm based
in New York (collectively, the ‘‘Huen Companies’’). The Huen Companies provide a wide range of
commercial and industrial electrical construction capabilities under the Company’s C&I segment in Illinois,
New Jersey and New York.

In order to continue to support our three-pronged growth strategy, we also continue to efficiently manage
capital in order to maximize shareholder return. On September 28, 2018, the Company entered into a Master
Equipment Loan and Security Agreement (the ‘‘Master Loan Agreement’’) with Banc of America Leasing &
Capital, LLC (‘‘BofA’’). The Master Loan Agreement may be used for the ﬁnancing of equipment between the
Company and BofA pursuant to one or more equipment notes (‘‘Equipment Notes’’).

We continue to invest in developing key management and craft personnel in both our T&D and C&I
markets and in procuring the specialty equipment and tooling needed to win and execute projects of all sizes
and complexity. In 2018 and 2017, we invested in capital expenditures of approximately $50.7 million and
$30.8 million, respectively. Most of our capital expenditures supported opportunities in our T&D business. We
plan to continue to evaluate our needs for additional equipment and tooling. Our investment strategy is based
on our belief that spending in transmission and distribution projects will continue to remain strong over the
next several years as electric utilities, cooperatives and municipalities make up for the lack of infrastructure
spending in the past, combined with the overall need to integrate new generation into the electric power grid,
and our belief that distribution demand will increase over the next several years.

We ended 2018 with $170.5 million available under our line of credit. We believe that our ﬁnancial

position and operational strengths will enable us to manage the current challenges and uncertainties in the
markets we serve and give us the ﬂexibility to successfully execute our three-pronged strategy.

Understanding Backlog

We deﬁne backlog as our estimated revenue on uncompleted contracts, including the amount of revenue

on contracts for which work has not begun, less the revenue we have recognized under such contracts.
Backlog may not accurately represent the revenues that we expect to realize during any particular period.
Several factors, such as the timing of contract awards, the type and duration of contracts, and the mix of
subcontractor and material costs in our projects, can impact our backlog at any point in time. Some of our
revenue does not appear in our periodic backlog reporting because the award of the project, as well as the
execution of the work, can all take place within the period. For many of our unit-price, time-and-equipment,
time-and-materials and cost-plus contracts, we only include projected revenue for a three-month period in the
calculation of backlog, although these types of contracts are generally awarded as part of MSAs that typically
have a one- to three-year duration from execution. Additionally, the difference between our backlog and
remaining performance obligations is due to the exclusion of a portion of our MSAs under certain contract
types from our remaining performance obligations as these contracts can be canceled for convenience at any
time by us or the customer without considerable cost incurred by the customer. Our backlog includes 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. Our estimated backlog also includes our proportionate share
of our unconsolidated joint venture contracts.

Changes in backlog from period to period are primarily the result of ﬂuctuations in the timing of awards

and revenue recognition of contracts. Backlog should not be relied upon as a stand-alone indicator of future
events.

Understanding Gross Margins

Our gross margin is gross proﬁt expressed as a percentage of revenues. Gross proﬁt is calculated by
subtracting contract costs from revenue. Contract costs consist primarily of salaries, wages and beneﬁts to
employees, depreciation, fuel and other equipment expenses, equipment rentals, subcontracted services,
insurance, facilities expenses, materials and parts and supplies. Various factors affect our gross margins on a
quarterly or annual basis, including those listed below.

Performance Risk. Margins may ﬂuctuate because of the volume of work and the impacts of pricing
and job productivity, which can be impacted both favorably and negatively by customer decisions and crew
productivity, as well as other factors. When comparing a service contract between periods, factors affecting the
gross margins associated with the revenues generated by the contract may include pricing under the contract,
the volume of work performed under the contract, the mix of the type of work speciﬁcally being performed,
the availability of labor resources at expected labor rates and the productivity of the crews performing the
work. Productivity can be inﬂuenced by many factors including the experience level of the crew, whether the
work is on an open or encumbered right of way, weather conditions, geographical conditions, trade stacking,
performance of other sub-trades, schedule changes, effects of environmental restrictions and regulatory and
permitting delays.

Revenue Mix and Contract Terms. The mix of revenue derived from the industries we serve will impact

gross margins. Changes in our customers’ spending patterns in each of the industries we serve can cause an
imbalance in supply and demand and, therefore, affect margins and mix of revenue by industry served. Storm
restoration services typically command higher proﬁt margins than other maintenance services. Seasonal and
weather factors, as noted below, can impact the timing at which customers perform maintenance and repairs,
which can cause a shift in the revenue mix. Some of our time-and-equipment, time-and-materials and
cost-plus contracts include shared savings clauses, in which the contract includes a target price and we agree
to share savings from that target price with our customer. The timing of accounting recognition of such
savings can impact our margins. In addition, change orders and claims can impact our margins. Costs related
to change orders are recognized in contract costs when incurred but revenue related to change orders is only
recognized when it is probable that the change order will result in an addition to contract value and can be
reliably estimated. Costs related to claims are recognized in contract costs when incurred, but revenue related
to claims is recognized only to the extent that contract costs related to the claim have been incurred and when
it is probable that the claim will result in an addition to contract value which can be reliably estimated. No
proﬁt is recognized on a claim until ﬁnal settlement occurs.

Seasonal, Weather and Geographical. Seasonal patterns, primarily related to weather conditions and the

availability of system outages, can have a signiﬁcant impact on gross margins in a given period. It is typical
during the winter months that parts of the country may experience snow or rainfall, which can affect our
crews’ ability to work efficiently. Additionally, our T&D customers often cannot remove their T&D lines from
service during the summer months, when consumer demand for electricity is at its peak, delaying maintenance
and repair services. In both cases, projects may be delayed or temporarily placed on hold. Conversely, in
periods when weather remains dry and temperatures are moderate, more work can be done, sometimes with
less cost, which would have a favorable impact on gross margins. The mix of business conducted in different
parts of the country could also affect margins, as some parts of the country offer the opportunity for higher
margins than others due to the geographic characteristics associated with the location where the work is being
performed. Such characteristics include whether the project is performed in an urban versus a rural setting; in
a mountainous area or in open terrain; or in normal soil conditions or rocky terrain. Site conditions, including
unforeseen underground conditions, can also impact margins.

Depreciation and Amortization. We include depreciation on equipment and capital lease amortization in

contract costs. This is common practice in our industry, but can make comparability to other companies
difficult. Over the last few years, we have spent a signiﬁcant amount of capital on property, facilities and
equipment, with the majority of such expenditures being used to purchase additional specialized equipment to
enhance our ﬂeet and to reduce our reliance on lease arrangements and short term equipment rentals. We
believe the investment in specialized equipment helps to reduce our costs, improve our margins and provide
us with valuable ﬂexibility to take on additional and complex projects.

Service and Maintenance Compared to New Construction.

In general, new construction work has a

higher gross margin than maintenance and repair work. New construction work is often obtained on a
ﬁxed-price basis, which carries a higher risk than other types of pricing arrangements because a contractor can
bear the risk of increased expenses. As such, we generally bid ﬁxed-price contracts with higher proﬁt margins.
We typically derive approximately 15% to 40% of our revenue from maintenance and repair work that is
performed under pre-established or negotiated prices or cost-plus pricing arrangements which generally allow
us a set margin above our costs. Thus, the mix between new construction work, at ﬁxed-price, and
maintenance and repair work, at cost-plus, in a given period will impact gross margin in that period.

Material and Subcontract Costs. Projects that include a greater amount of material or subcontractor
costs can experience lower overall project gross margins as we typically add a lower mark-up to material and
subcontractor costs in our bids than what we would to our labor and equipment cost. In addition, successful
completion of our contracts may depend on whether our subcontractors successfully fulﬁll their contractual
obligations. If our subcontractors fail to satisfactorily perform their contractual obligations as a result of
ﬁnancial or other difficulties, we may be required to incur additional costs and provide additional services in
order to make up such shortfalls.

Cost of Material. On ﬁxed-price contracts where we are required to provide materials, our overall gross

margin may be affected if we experience increases in material quantity or higher commodity costs.

Materials versus Labor. Projects that include a greater amount of material cost can experience lower

overall project gross margins as we typically add a lower mark-up to material cost in our bids than what we
would to our labor and equipment cost.

Insurance. Gross margins could be impacted by ﬂuctuations in insurance accruals related to our
deductibles and loss history in the period in which such adjustments are made. We carry insurance policies,
which are subject to high deductibles, for workers’ compensation, general liability, automobile liability and
other coverages. Losses up to the deductible amounts are accrued based upon estimates of the ultimate
liability for claims reported and an estimate of claims incurred but not yet reported.

Fleet Utilization, Estimation, and Bidding. We operate a centrally-managed ﬂeet in the United States in
an effort to achieve the highest equipment utilization. We also develop internal equipment rates which provide
our business units with appropriate cost information to estimate bids for new projects. Availability of
equipment for a particular contract is determined by our internal ﬂeet ordering process which is designed to
optimize the use of internal ﬂeet assets and allocate equipment costs to individual contracts. We believe these
processes allow us to utilize our equipment efficiently, which leads to improved gross margins. Transmission
and distribution projects can require different types of equipment. A signiﬁcant shift in project mix or timing
could impact ﬂeet utilization, causing gross margins to vary.

Our team of trained estimators helps us to determine potential costs and revenues and make informed

decisions on whether to bid for a project and, if bid, the rates to use in estimating the costs for that bid. The
ability to accurately estimate labor, equipment, subcontracting and material costs in connection with a new
project may affect the gross margins achieved for the project.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (‘‘SG&A’’) consist primarily of compensation, related
beneﬁts and employee costs for management and administrative personnel, office rent and utilities, stock
compensation, communications, professional fees, depreciation, IT expenses, marketing costs and bad debt
expense.

Consolidated Results of Operations

The following table sets forth selected statements of operations data and such data as a percentage of

revenues for the years indicated:

(dollars in thousands)
Contract revenues . . . . . . . . . . . . . $1,531,169
1,364,109
Contract costs
167,060

. . . . . . . . . . . . . . .
Gross proﬁt . . . . . . . . . . . . . .

2018

Selling, general and administrative

expenses

. . . . . . . . . . . . . . . . .
Amortization of intangible assets . . .
Gain on sale of property and

equipment

Income from operations

. . . . . . . . . . . . . . . .
. . . . .

Other income (expense):

Interest income . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . .
. . . .
Other income (expense), net

Income before provision for

income taxes . . . . . . . . . . .
Income tax expense . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . .
Less: net income − noncontrolling

118,737
1,843

(3,832)
50,312

24
(3,652)
(3,616)

43,068
11,774
31,294

interests . . . . . . . . . . . . . . . . . .

207

Net income attributable to MYR

For the year ended December 31,
2017

2016

100.0% $1,403,317
1,278,313
125,004

89.1
10.9

100.0% $1,142,487
1,007,764
91.1
134,723
8.9

100.0%
88.2
11.8

7.8
0.1

(0.2)
3.2

—
(0.2)
(0.2)

2.8
0.8
2.0

—

98,611
499

(3,664)
29,558

4
(2,603)
(2,319)

24,640
3,486
21,154

—

7.0
—

(0.3)
2.2

—
(0.2)
(0.2)

1.8
0.3
1.5

—

96,424
886

(1,341)
38,754

5
(1,299)
885

38,345
16,914
21,431

—

8.4
0.1

(0.1)
3.4

—
(0.1)
0.1

3.4
1.5
1.9

—

Group Inc.

. . . . . . . . . . . . . . . . $

31,087

2.0% $

21,154

1.5% $

21,431

1.9%

Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017

Revenues. Revenues increased $127.9 million, or 9.1%, to $1.531 billion for the year ended

December 31, 2018 from $1.403 billion for the year ended December 31, 2017. The increase was primarily
due to higher C&I revenues, including revenues from our recent acquisition, and increases in our distribution
revenues. These increases were partially offset by lower revenue from large transmission projects.

Gross margin. Gross margin increased to 10.9% for the year ended December 31, 2018 from 8.9% for

the year ended December 31, 2017. The increase in gross margin was primarily due to improvements in
efficiency, ﬂeet utilization and organic expansion results. Our prior year gross margin was signiﬁcantly
impacted by write-downs on three projects. Gross margin also beneﬁted from $3.9 million in estimate changes
on certain contracts associated with the acquisition of the Huen Companies. These changes in estimates are
subject to margin guarantees and represent potential contingent consideration for which an offset is recognized
in other expense. These margin improvements were partially offset by changes in estimates of gross proﬁt on
certain projects. Excluding estimate changes on our recent acquisition noted above, changes in estimates
resulted in gross margin decreases of 0.7% for the year ended December 31, 2018. These estimate changes are
discussed further in our segment results provided below. Changes in estimates of gross proﬁt on certain
projects resulted in gross margin decreases of 0.7% for the year ended December 31, 2017.

Gross proﬁt. Gross proﬁt increased $42.1 million, or 33.6%, to $167.1 million for year ended

December 31, 2018 from $125.0 million for the year ended December 31, 2017, due to increased margins and
higher revenues.

Selling, general and administrative expenses. SG&A, which were $118.7 million for the year ended

December 31, 2018, an increase of $20.1 million from $98.6 million for the year ended December 31, 2017.
The year-over-year increase was primarily due to higher bonus and proﬁt sharing costs, SG&A expenses

related to the acquired Huen Companies and higher employee-related expenses to support operations. As
a percentage of revenues, SG&A increased to 7.8% for the year ended December 31, 2018 from 7.0% for the
year ended December 31, 2017.

Gain on sale of property and equipment. Gains from the sale of property and equipment in the year
ended December 31, 2018 were $3.8 million compared to $3.7 million in the year ended December 31, 2017.
Gains from the sale of property and equipment are attributable to routine sales of property and equipment no
longer useful or valuable to our ongoing operations.

Interest expense.

Interest expense was $3.7 million for the year ended December 31, 2018 compared to

$2.6 million for the year ended December 31, 2017. This increase was primarily attributable to increased
borrowing related to the acquisition of the Huen Companies and an increase in our weighted average interest
rate during 2018 as compared to 2017.

Other expense. Other expense was $3.6 million for the year ended December 31, 2018 compared to
other expense of $2.3 million for the year ended December 31, 2017. The change was primarily attributable to
contingent consideration related to margin guarantees on certain contracts associated with the acquisition of
the Huen Companies recognized in 2018.

Income tax expense. The provision for income taxes was $11.8 million for the year ended December 31,

2018, with an effective tax rate of 27.3%, compared to a provision of $3.5 million for the year ended
December 31, 2017, with an effective tax rate of 14.1%. The effective tax rate for 2017 was lower than 2018
largely because we revalued our net deferred tax liability as of December 31, 2017, in conjunction with the
enactment of the 2017 Tax Act. Our inability to utilize losses experienced in certain Canadian operations
negatively impacted the effective tax rate in 2018 and 2017, partially offset by excess tax beneﬁts pertaining
to the vesting of stock awards and the exercise of stock options.

Net income attributable to MYR Group Inc. Net income attributable to MYR Group Inc. increased to

$31.1 million for the year ended December 31, 2018 from $21.2 million for the year ended December 31,
2017. The increase was primarily for the reasons stated above.

Segment Results

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

(dollars in thousands)
Contract revenues:
Transmission & Distribution . . . . . . . . . . . . . . . . . .
Commercial & Industrial
. . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating income (loss):
Transmission & Distribution . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Commercial & Industrial
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transmission & Distribution

For the Year Ended December 31,

2018

2017

Amount

Percent

Amount

Percent

$ 893,108
638,061
$1,531,169

58.3% $ 879,372
523,945
41.7
$1,403,317
100.0

62.7%
37.3
100.0

57,242
34,112
91,354
(41,042)
50,312

6.4
5.3
6.0
(2.7)
3.3% $

39,631
25,048
64,679
(35,121)
29,558

4.5
4.8
4.6
(2.5)
2.1%

Revenues for our T&D segment for the year ended December 31, 2018 were $893.1 million compared to
$879.4 million for the year ended December 31, 2017, an increase of $13.7 million, or 1.6%. The increase in
revenue was primarily due to an increase in distribution revenues partially offset by lower revenue from large
transmission projects.

Revenues from transmission projects represented 62.6% and 68.5% of T&D segment revenue for
the years ended December 31, 2018 and 2017, respectively. Additionally, for the year ended December 31,
2018, measured by revenue in our T&D segment, we provided 40.5% of our T&D services under ﬁxed-price
contracts, as compared to 31.4% for the year ended December 31, 2017.

Operating income for our T&D segment for the year ended December 31, 2018 was $57.2 million
compared to $39.6 million for the year ended December 31, 2017, an increase of $17.6 million, or 44.4%.
The increase in T&D operating income from the prior year was primarily due to improvements in efficiency,
ﬂeet utilization and organic expansion results. Our prior year operating income was signiﬁcantly impacted by
write-downs on three projects. This improvement from the prior year was partially offset by changes in
estimates of gross proﬁt on certain projects. These estimate changes were primarily due to low productivity on
three projects, of which two projects incurred signiﬁcant startup costs with a new customer relationship and
the other project suffered from inclement weather. Operating income, as a percentage of revenues, for our
T&D segment increased to 6.4% for the year ended December 31, 2018 from 4.5% for the year ended
December 31, 2017.

Commercial & Industrial

Revenues for our C&I segment for the year ended December 31, 2018 were $638.1 million compared to
$523.9 million for the year ended December 31, 2017, an increase of $114.2 million, or 21.8%, primarily due
to the acquisition of the Huen Companies, increased spending from new and existing customers and increased
volume at certain organic expansion locations.

Measured by revenue in our C&I segment, we provided 71.0% of our services under ﬁxed-price contracts

for the year ended December 31, 2018, compared to 63.7% for the year ended December 31, 2017.

Operating income for our C&I segment for the year ended December 31, 2018 was $34.1 million

compared to $25.0 million for the year ended December 31, 2017, an increase of $9.1 million, or 36.2%. The
year-over-year increase in operating income was primarily attributable to higher revenue, primarily due to the
acquisition of the Huen Companies, and improved margins, including improvements experienced at our
organic expansion locations. This margin improvement was slightly offset by changes in estimates of gross
proﬁt on certain projects. These estimate changes were primarily due to the settlement of a project scope and
delay claim and weather delays. As a percentage of revenues, operating income for our C&I segment was
5.3% and 4.8% for the years ended December 31, 2018 and 2017, respectively.

Corporate

The increase in corporate expenses in 2018 was primarily attributable to higher bonus and proﬁt sharing

costs and higher payroll costs to support operations.

Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

Revenues. Revenues increased $260.8 million, or 22.8%, to $1.403 billion for the year ended

December 31, 2017 from $1.142 billion for the year ended December 31, 2016. The increase was primarily
due to increased spending from existing C&I customers, the Western Paciﬁc Enterprises Ltd. (‘‘WPE’’)
acquisition in late 2016, higher revenue from large transmission projects and an increase in distribution
projects.

Gross margin. Gross margin decreased to 8.9% for the year ended December 31, 2017 from 11.8% for
the year ended December 31, 2016. The decrease in gross margin was primarily due to write-downs on three
projects. Two projects in the Midwest U.S. were signiﬁcantly impacted by weather resulting in unanticipated
costs associated with right-of-way access, lower productivity and increased road damage and repair
requirements. As a result, we wrote down $4.8 million for these projects in 2017. One T&D project in Canada
experienced cost impacts mainly associated with project delays and schedule extensions. Although we worked
with our clients to recover these costs, we had not recognized all of the revenues relating to various pending
project claims and change orders, which resulted in write-downs on this project of $4.4 million. Margins were
also negatively impacted from signiﬁcant revenue on a large transmission project that had lower than average
margins due to a high mix of material and subcontractor costs and lower than average margin on a certain
distribution project, as well as costs associated with organic and acquisition growth. In addition, during 2017

we had a higher mix of revenue in our C&I segment and distribution work, compared to transmission work
which generally carries a higher margin. These impacts were partially offset by project efficiencies and
settlements related to previously unrecognized revenues on a project claim and pending change orders.
Changes in estimates of gross proﬁt on certain projects, including those discussed above, resulted in gross
margin decreases of 0.7% for the year ended December 31, 2017. Changes in estimates of gross proﬁt on
certain projects resulted in gross margin decreases of 0.2% for the year ended December 31, 2016.

Gross proﬁt. Gross proﬁt decreased $9.7 million, or 7.2%, to $125.0 million for year ended
December 31, 2017 from $134.7 million for the year ended December 31, 2016, primarily due to lower
overall gross margin, partially offset by higher revenue.

Selling, general and administrative expenses. SG&A, which were $98.6 million for the year ended

December 31, 2017, increased $2.2 million from $96.4 million for the year ended December 31, 2016. The
year-over-year increase was primarily due to $6.8 million of incremental costs associated with our expansion
into new geographic markets and strategic acquisitions as well as higher payroll costs to support operations,
largely offset by lower bonus and proﬁt sharing costs. Additionally, $1.0 million of costs associated with
activist investor activities were incurred in 2016. As a percentage of revenues, SG&A decreased to 7.0% for
the year ended December 31, 2017 from 8.4% for the year ended December 31, 2016.

Gain on sale of property and equipment. Gains from the sale of property and equipment in the year
ended December 31, 2017 were $3.7 million compared to $1.3 million in the year ended December 31, 2016.
Gains from the sale of property and equipment are attributable to routine sales of property and equipment no
longer useful or valuable to our ongoing operations.

Interest expense.

Interest expense was $2.6 million for the year ended December 31, 2017 compared to

$1.3 million for the year ended December 31, 2016. This increase was primarily attributable to the amount
and duration of borrowings outstanding under our line of credit during the year ended December 31, 2017 as
compared to the year ended December 31, 2016.

Other income (expense). Other expense was $2.3 million for the year ended December 31, 2017
compared to other income of $0.9 million for the year ended December 31, 2016. The change was largely due
to a $2.3 million reversal of previously recognized contingent consideration related to the ﬁnalization of
margin guarantees on certain contracts associated with the acquisition of WPE.

Income tax expense. The provision for income taxes was $3.5 million for the year ended December 31,

2017, with an effective tax rate of 14.1%, compared to a provision of $16.9 million for the year ended
December 31, 2016, with an effective tax rate of 44.1%. The decrease in the tax rate for the year ended
December 31, 2017 was primarily caused by the revaluation of the Company’s net deferred tax liabilities to
reﬂect the recently enacted 21% federal corporate tax rate. In addition, we recognized excess tax beneﬁts of
approximately $0.8 million pertaining to the vesting of stock awards and the exercise of stock options. This
was partially offset by our inability to utilize losses experienced in certain Canadian operations.

Net income attributable to MYR Group Inc. Net income attributable to MYR Group Inc. decreased to

$21.2 million for the year ended December 31, 2017 from $21.4 million for the year ended December 31,
2016. The decrease was primarily for the reasons stated above.

Segment Results

(dollars in thousands)
Contract revenues:
Transmission & Distribution . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Commercial & Industrial
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transmission & Distribution

For the Year Ended December 31,

2017

2016

Amount

Percent

Amount

Percent

$ 879,372
523,945
$1,403,317

62.7% $ 818,972
323,515
37.3
$1,142,487
100.0

71.7%
28.3
100.0

39,631
25,048
64,679
(35,121)
29,558

4.5
4.8
4.6
(2.5)
2.1% $

63,459
13,920
77,379
(38,625)
38,754

7.7
4.3
6.8
(3.4)
3.4%

Revenues for our T&D segment for the year ended December 31, 2017 were $879.4 million compared to
$819.0 million for the year ended December 31, 2016, an increase of $60.4 million, or 7.4%. The increase in
revenue was primarily due to higher revenue from large transmission projects and an increase in distribution
projects.

Revenues from transmission projects represented 68.5% and 75.8% of T&D segment revenue for
the years ended December 31, 2017 and 2016, respectively. Additionally, for the year ended December 31,
2017, measured by revenue in our T&D segment, we provided 31.4% of our T&D services under ﬁxed-price
contracts, as compared to 56.9% for the year ended December 31, 2016.

Operating income for our T&D segment for the year ended December 31, 2017 was $39.6 million
compared to $63.4 million for the year ended December 31, 2016, a decrease of $23.8 million, or 37.5%. The
decline in T&D operating income was primarily due to lower margins caused by write-downs experienced on
two projects in the Midwest U.S. and on one project in Canada. Margins were also negatively impacted from
signiﬁcant revenue on certain large transmission projects that had lower than average margins due to a high
mix of material and subcontractor costs. Operating income, as a percentage of revenues, for our T&D segment
decreased to 4.5% for the year ended December 31, 2017 from 7.7% for the year ended December 31, 2016.

Commercial & Industrial

Revenues for our C&I segment for the year ended December 31, 2017 were $523.9 million compared to
$323.5 million for the year ended December 31, 2016, an increase of $200.4 million, or 62.0%, primarily due
to increased spending from existing customers, the WPE acquisition in late 2016 and organic expansion into
new markets.

Measured by revenue in our C&I segment, we provided 63.7% of our services under ﬁxed-price contracts

for the year ended December 31, 2017, compared to 73.4% for the year ended December 31, 2016.

Operating income for our C&I segment for the year ended December 31, 2017 was $25.0 million

compared to $13.9 million for the year ended December 31, 2016, an increase of $11.1 million, or 79.9%. The
year-over-year increase in operating income compared to the year ended December 31, 2016 was primarily
attributable to higher revenue from large projects, the settlement of a project claim that was previously not
recognized in revenue and improved productivity on certain jobs. These were partially offset by costs
associated with organic and acquisition growth. As a percentage of revenues, operating income for our C&I
segment was 4.8% and 4.3% for the years ended December 31, 2017 and 2016, respectively.

Corporate

The decrease in corporate expenses in 2017 was primarily attributable to lower bonus and proﬁt sharing

costs offset by higher payroll costs to support operations. Additionally in 2016 we incurred $1.0 million of
costs associated with activist investor activities.

Liquidity and Capital Resources

As of December 31, 2018 and 2017, we had working capital of $191.8 million and $191.2 million,
respectively. We deﬁne working capital, a non-GAAP measure, as current assets less current liabilities. During
the year ended December 31, 2018, operating activities of our business provided cash of $84.8 million,
compared to using cash of $9.2 million for the year ended December 31, 2017. Cash ﬂow from operations is
primarily inﬂuenced by demand for our services, operating margins, timing of contract performance and the
type of services we provide to our customers. The $94.0 million of incremental cash provided by operating
activities compared to last year was primarily due to favorable net changes in operating assets and liabilities
of $76.1 million, an increase of $10.1 million in net income and an $8.7 million favorable change in deferred
income taxes. The favorable change in operating assets and liabilities was primarily due to the net favorable
year-over-year increases in various working capital accounts that relate primarily to construction activities
(accounts receivable, contract assets, accounts payable and contract liabilities) of $58.5 million and a
favorable change of $16.4 million in other liabilities. The increase in cash provided by other liabilities was
due to the timing of wage and employment taxes and higher bonus and proﬁt sharing accruals.

During the years ended December 31, 2018 and 2017 we used net cash of $93.2 million and

$26.5 million, respectively, in investing activities. The $93.2 million of cash used in investing activities in the
year ended December 31, 2018 consisted of $50.7 million for capital expenditures and $47.1 million to
acquire the Huen Companies, partially offset by $4.6 million of proceeds from the sale of equipment. The
$26.5 million of cash used in investing activities in the year ended December 31, 2017 consisted of
$30.8 million for capital expenditures, partially offset by $4.3 million of proceeds from the sale of equipment.

Financing activities provided cash of $10.6 million, compared to $16.9 million of cash provided, during
the years ended December 31, 2018 and 2017, respectively. The $10.6 million of cash provided in ﬁnancing
activities in the year ended December 31, 2018 consisted primarily of $31.5 million of borrowings under our
Master Loan Agreement with BofA and $1.9 million of proceeds from the exercise of stock options, partially
offset by $20.7 million of repayments under our revolving lines of credit, $1.1 million of payments under our
capital lease obligations and $1.0 million of cash used to purchase shares surrendered by employees to satisfy
employee tax obligations under our stock compensation program. The $16.9 million of cash provided in
ﬁnancing activities in the year ended December 31, 2017 consisted primarily of $19.9 million of borrowings
under our revolving lines of credit, partially offset by $3.0 million of share repurchases. The $3.0 million of
cash used to purchase shares of our common stock consisted of $2.2 million to purchase shares surrendered
by employees to satisfy employee tax obligations under our stock compensation program and $0.8 million
purchased under our share repurchase program.

On July 26, 2018, the Company’s Board of Directors approved a new $20.0 million share repurchase
program that began when the previous share repurchase program expired. The new share repurchase program
will expire on August 15, 2019, or when the authorized funds are exhausted, whichever is earlier.

We anticipate that our $170.5 million borrowing availability under our credit facility at December 31,

2018, Master Loan Agreement and future cash ﬂow from operations will provide sufficient cash to enable us
to meet our future operating needs, debt service requirements, capital expenditures, acquisition and joint
venture opportunities, and share repurchases. Although we believe that we have adequate cash and availability
under our Credit Agreement (as deﬁned below) to meet our liquidity needs, any large projects or acquisitions
may require additional capital.

We have not historically paid dividends and currently do not expect to pay dividends.

Debt Instruments

Credit Agreement

On June 30, 2016, we 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. On
September 28, 2018 we amended the Credit Agreement. This amendment, among other things, reduced the
amount available to be used for letters of credit. The Credit Agreement provides for a facility of $250 million
(the ‘‘Facility’’) 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 $50 million. We have an expansion option to increase the commitments under
the Facility or enter into incremental term loans, subject to certain conditions, by up to an additional
$100 million upon receipt of additional commitments from new or existing lenders. Subject to certain
exceptions, the Facility is secured by substantially all of our assets and the assets of our domestic subsidiaries
and by a pledge of substantially all of the capital stock of our domestic subsidiaries and 65% of the capital
stock of our direct foreign subsidiaries. Additionally, subject to certain exceptions, our 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 were used to reﬁnance existing debt and are expected to be
used for working capital, capital expenditures, acquisitions, stock repurchases and other general corporate
purposes.

Amounts borrowed under the Credit Agreement bear interest, at our option, at a rate equal to either
(1) the Alternate Base Rate (as deﬁned in the Credit Agreement), plus an applicable margin ranging from
0.00% to 1.00%; or (2) Adjusted LIBO Rate (as deﬁned in the Credit Agreement) plus an applicable margin
ranging from 1.00% to 2.00%. The applicable margin is determined based on our consolidated leverage ratio
(Leverage Ratio) which is deﬁned in the Credit Agreement as Consolidated Total Indebtedness 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 1.125% to 2.125% for non-performance letters of credit or 0.625% to
1.125% for performance letters of credit, based on the our consolidated Leverage Ratio. We are subject to a
commitment fee of 0.20% to 0.375%, based on our consolidated Leverage Ratio, on any unused portion of the
Facility. The Credit Agreement restricts certain types of payments when our consolidated Leverage Ratio
exceeds 2.25.

Under the Credit Agreement, we are subject to certain ﬁnancial covenants and must maintain a maximum

consolidated Leverage Ratio of 3.0 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 a number of covenants, including
limitations on asset sales, investments, indebtedness and liens. In connection with any permitted acquisition
where the total consideration exceeds $50 million, we may request that the maximum permitted consolidated
Leverage Ratio increase from 3.0 to 3.5. Any such increase, if given effect, shall begin in the quarter in which
such permitted acquisition is consummated and shall continue in effect for four consecutive ﬁscal quarters. We
were in compliance with all of the ﬁnancial covenants under the Credit Agreement as of December 31, 2018.

As of December 31, 2018, we had $58.3 million of debt outstanding under the Facility and letters of

credit outstanding of approximately $21.2 million. As of December 31, 2017, we had $79.0 million of debt
outstanding under the Facility and irrevocable letters of credit outstanding of approximately $20.9 million.

Equipment Notes

On September 28, 2018, we entered into the Master Loan Agreement with BofA. The Master Loan
Agreement may be used for ﬁnancing of equipment between us and BofA pursuant to one or more equipment
notes (‘‘Equipment Notes’’). Each Equipment Note constitutes a separate, distinct and independent ﬁnancing
of equipment and contractual obligation.

As of December 31, 2018, we have executed ﬁve Equipment Notes that are collateralized by equipment

and vehicles owned by us. The outstanding balance of these Equipment Notes was $31.5 million as of
December 31, 2018.

Off-Balance Sheet Arrangements

As is common in our industry, we enter into certain off-balance sheet arrangements in the ordinary course

of business that result in risks not directly reﬂected in our balance sheets. Our signiﬁcant off-balance sheet
transactions include liabilities associated with non-cancelable operating leases, letter of credit obligations and
bond guarantees entered into in the normal course of business. We have not engaged in any off-balance sheet
ﬁnancing arrangements through special purpose entities.

Leases

We enter into non-cancelable leases for some of our facility, vehicle and equipment needs. These leases

allow us to conserve cash by paying a monthly lease rental fee for the use of facilities, vehicles and
equipment rather than purchasing them. Leases are accounted for as operating or capital leases, depending on
the terms of the lease. We 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. At
December 31, 2018, we had no leases with residual value guarantees.

We typically have purchase options on the equipment underlying our long-term operating leases and
many of our short-term rental arrangements. We exercise some of these purchase options when the need for
equipment is on-going and the purchase option price is attractive.

Purchase Commitments for Construction Equipment

As of December 31, 2018, we had approximately $15.0 million in outstanding purchase obligations for
certain construction equipment to be paid, with cash outlay scheduled to occur over the ﬁrst nine months of
2019.

Letters of Credit

Some of our vendors require letters of credit to ensure reimbursement for amounts they are disbursing on

our behalf, such as to beneﬁciaries under our insurance programs. In addition, from time-to-time certain
customers require us to post letters of credit to ensure payment to our subcontractors and vendors under those
contracts and to guarantee performance under our contracts. Such letters of credit are generally issued by a
bank or similar ﬁnancial institution. The letter of credit commits the issuer to pay speciﬁed amounts to the
holder of the letter of credit if the holder claims that we have failed to perform speciﬁed actions in accordance
with the terms of the letter of credit. If this were to occur, we would be required to reimburse the issuer of
the letter of credit. Depending on the circumstances of such a reimbursement, we may also have to record a
charge to earnings for the reimbursement. Currently, we do not believe that it is likely that any claims will be
made under any letter of credit.

At December 31, 2018, we had $21.2 million in letters of credit outstanding under our Credit Agreement,

including $17.6 million, at an interest rate of 1.125%, related to the Company’s payment obligation under its
insurance programs and approximately $3.6 million, at an interest rate of 0.625%, related to contract
performance obligations. At December 31, 2017, we had $20.9 million in letters of credit outstanding under
our Credit Agreement, including $17.6 million, at an interest rate of 1.125%, related to the Company’s
payment obligation under its insurance programs and approximately $3.3 million, at an interest rate of
0.625%, related to contract performance obligations.

Performance and Payment Bonds and Parent Guarantees

our assets to collateralize our obligations to the surety. We may be required to post letters of credit or other
collateral in favor of the surety or our customers. Posting letters of credit in favor of the surety or our
customers reduces the borrowing availability under the Credit Agreement. To date, we have not been required
to make any reimbursements to any of our sureties for bond-related costs. We believe that it is unlikely that
we will have to fund signiﬁcant claims under our surety arrangements. As of December 31, 2018, an
aggregate of approximately $614.9 million in original face amount of bonds issued by our sureties were
outstanding. Our estimated remaining cost to complete these bonded projects was approximately
$324.7 million as of December 31, 2018.

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. Additionally, from time to time we are required to post letters of credit to
guarantee the obligations of our wholly owned subsidiaries, which reduces the borrowing availability under
our credit facility.

Indemnities

From time to time, pursuant to our service arrangements, we indemnify our customers for claims related

to the services we provide under those service arrangements. These indemniﬁcation obligations may subject us
to indemnity claims, liabilities and related litigation. We are not aware of any material unrecorded liabilities
for asserted claims in connection with these indemniﬁcation obligations.

Contractual Obligations

As of December 31, 2018, our future contractual obligations are as follows:

(in thousands)
Short and long term debt . . . . . .
. . . .
Operating lease obligations
Capital lease obligations . . . . . .
Purchase obligations . . . . . . . . .
Income tax contingencies . . . . . .
. . . . . . . . . . . . . . . . . . .
Total

Total
$ 89,792
17,395
2,735
14,986
375
$125,283

Less than
1 Year
$ 3,681
4,829
1,185
14,986
—
$24,681

1 − 3 Years
$66,137
6,725
1,550
—
—
$74,412

3 − 5 Years
$11,490
3,714
—
—
—
$15,204

More than
5 Years
$ 8,484
2,127
—
—
—
$10,611

Other
$ —
—
—
—
375
$375

Excluded from the above table are interest and fees associated with our short term and long term debt

and letters of credit outstanding under our Facility, because the applicable interest rates and fees are variable.
We have also excluded our multi-employer pension plan contributions, which are determined annually, based
on our union employee payrolls, and which cannot be determined for future periods in advance.

The amount of income tax contingencies has been presented in the ‘‘Other’’ column in the table above
due to the fact that the period of future payment cannot be reliably estimated. For further information, refer to
Note 10 — Income Taxes to our Financial Statements.

Concentration of Credit Risk

We grant trade credit under contractual payment terms, generally without collateral, to our customers,
which include high credit quality electric utilities, governmental entities, general contractors and builders,
owners and managers of commercial and industrial properties. Consequently, we are subject to potential credit
risk related to changes in business and economic factors. However, we generally have certain statutory lien
rights with respect to services provided. Under certain circumstances such as foreclosures or negotiated
settlements, we may take title to the underlying assets in lieu of cash in settlement of receivables. As of
December 31, 2018 and 2017, none of our customers individually exceeded 10.0% of accounts receivable.

Inﬂation

Inﬂation did not have a signiﬁcant effect on our results during the years ended December 31, 2018, 2017

or 2016.

New Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 1 — Organization, Business and

Summary of Signiﬁcant Accounting Policies in the Notes to our Financial Statements.

Critical Accounting Policies

The discussion and analysis of our ﬁnancial condition and results of operations are based on our

Financial Statements, which have been prepared in accordance with GAAP. The preparation of these Financial
Statements requires us to make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosures of contingent assets and liabilities known to exist at the date of the Financial Statements
and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on
an ongoing basis, based on historical experience and on various other assumptions that are believed to be
reasonable under the circumstances. There can be no assurance that actual results will not differ from those
estimates. We believe the following accounting policies affect our more signiﬁcant judgments and estimates
used in the preparation of our Financial Statements:

Revenue Recognition. On January 1, 2018, we adopted ASU No. 2014-09, Revenue from Contracts with

Customers (Topic 606) using the modiﬁed retrospective method for contracts that were not completed as of
January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under this new
pronouncement, while prior period amounts were not adjusted and continue to be reported under the
accounting standard Revenue Recognition Topic 605, which was in effect for those periods. Differences in
revenue recognition under Topic 606 were due to accelerated recognition of contract provisions related to
variable consideration previously not permitted to be recognized under Topic 605 until no remaining
contingency existed related to this consideration.

Under Topic 606, we recognize revenue to depict the transfer of goods or services to customers in an

amount that reﬂects the consideration that we expect to be entitled to in exchange for goods or services
provided. Revenue associated with contracts with customers is recognized over time as our performance
creates or enhances customer controlled assets or creates or enhances an asset with no alternative use, for
which we have an enforceable right to receive compensation as deﬁned under the contract. To determine the
amount of revenue to recognize over time, we estimate proﬁt by determining the difference between total
estimated revenue and total estimated cost of a contract. In addition, we estimate a cost accrual every quarter
that represents unbilled invoicing activity for services performed by subcontractors and suppliers during the
quarter, and estimate revenue from the contract cost portion of this accrual based on current gross margin
rates to be consistent with our cost method of revenue recognition. The estimated value of unbilled amounts
are determined using a regression analysis that estimates value based on our 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. We utilized the cost-to-cost method as we believe
cost incurred best represents the amount of work completed and remaining on our projects, and is the most
common basis for computing percentage of completion in our industry. For purposes of recognizing revenue,
we follow the ﬁve-step approach outlined in Accounting Standards Codiﬁcation (‘‘ASC’’) 606-10-25.

As the cost-to-cost method is driven by incurred cost, we calculate 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 our billings are
based on contract terms and do not coincide with our progress in a project, revenue recognition also includes
an amount related to our 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.

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, we estimate 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 we seek to collect from our 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. We include these estimated amounts of variable consideration to the extent that it is probable
there will not be a signiﬁcant reversal of revenue.

Some of our 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, we estimate 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, we include 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, we use constraint in recognizing revenue
on variable consideration. Although we often enter into contracts that contain liquidated damage clauses, we
rarely incur them, and as such, we do 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 we perform 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 our 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 accuracy of our revenue and proﬁt recognition in a given period is dependent on the accuracy of our
estimates of the cost to complete each project. Cost estimates for all of our signiﬁcant projects use a detailed
‘‘bottoms up’’ approach and we believe our experience typically allows us to provide materially reliable
estimates. There are a number of factors that can contribute to changes in estimates of contract cost and
proﬁtability. The most signiﬁcant of these include, among others:

•

the completeness and accuracy of the original bid;

costs associated with scope changes, change orders or claims;

costs of labor and/or materials;

extended overhead due to owner, weather and other delays;

subcontractor performance issues;

changes in productivity expectations;

site conditions that differ from those assumed in the original bid (to the extent contract remedies are
unavailable);

the availability and skill level of workers in the geographic location of the project; and

a change in the availability and proximity of equipment and materials.

The foregoing factors as well as the stage of completion of contracts in process and the mix of contracts

at different margins may cause ﬂuctuations in gross proﬁt between periods.

We provide 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.

Total revenues do not include sales tax as we consider ourselves 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 our consolidated balance sheets.

Prior to January 1, 2018 we reported revenue under the accounting standard Revenue Recognition

Topic 605, under which revenues under contracts were accounted for using the percentage-of-completion
method of accounting. Under the percentage-of-completion method, we estimated proﬁt as the difference
between total estimated revenue and total estimated cost of a contract and recognized that proﬁt over the
contract term based on costs incurred under the cost-to-cost method.

Under Topic 605, revenues from our construction services were performed under ﬁxed-price,

time-and-equipment, time-and-materials, unit-price, and cost-plus fee contracts. For ﬁxed-price and unit-price
contracts, we used the ratio of cost incurred on the contract (excluding uninstalled direct materials) to
management’s estimate of the contract’s total cost, to determine the percentage of completion on each
contract. This method was used as management considered expended costs to be the best available measure of
progression of these contracts. Contract cost included all direct costs on contracts, including labor and
material, subcontractor costs and those indirect costs related to contract performance, such as supplies,
fuel, tool repairs and depreciation. We recognized revenues from construction services with fees based on
time-and-materials, or cost-plus fee as the services were performed and amounts were earned. If contracts
included contract incentive or bonus provisions, they were included in estimated contract revenues only when
the achievement of such incentive or bonus was reasonably certain.

Under Topic 605, contract costs incurred to date and expected total contract costs were continuously
monitored during the term of the contract. Changes in job performance, job conditions and ﬁnal contract
settlements were factors that inﬂuenced management’s assessment of total contract value and the total
estimated costs to complete those contracts and therefore, our proﬁt recognition. These changes, which
included contracts with estimated costs in excess of estimated revenues, were recognized in contract costs in
the period in which the revisions were determined. At the point we anticipated a loss on a contract, we
estimated the ultimate loss through completion and recognized that loss in the period in which the possible
loss was identiﬁed.

Insurance. We carry insurance policies, which are subject to certain deductibles, for workers’
compensation, general liability, automobile liability and other coverages. Our deductible for each line of
coverage is up to $1.0 million, except for wildﬁre coverage which has a deductible of $2.0 million. Certain
health beneﬁt plans are subject to a deductible up to $0.2 million, for qualiﬁed individuals. Losses up to the
deductible amounts are accrued based upon our 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.

Stock-Based Compensation. We determine 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.
We use the straight-line amortization method to recognize compensation expense related to stock-based
awards, such as restricted stock, restricted stock units and phantom 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. We recognize 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 expected achievement of the
performance target at each reporting date. We recognize compensation expense related to performance awards

with market-based performance metrics on a straight-line basis over the requisite service period. Upon
adoption ASU No. 2016-09, Compensation — Stock Compensation (Topic 718) in January of 2017, we elected
to discontinue estimating future forfeitures and recognize forfeitures as they occur. Prior to the adoption, we
used historical data to estimate the forfeiture rate applied to stock grants. Shares issued under the Company’s
stock-based compensation program are taken out of authorized but unissued shares.

Goodwill and Intangibles. 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. We
review goodwill and intangible assets with indeﬁnite lives for impairment on an annual basis 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. We may
perform either a qualitative assessment or a two-step goodwill impairment test. The qualitative assessment
considers ﬁnancial, industry, segment and macroeconomic factors. If the qualitative assessment indicates a
potential for impairment, the two-step method is used to determine if impairment exists. The two-step method
begins with a comparison of the fair value of the reporting unit with its carrying value. If the carrying amount
of the reporting unit exceeds its fair value, the second step of the process involves a comparison of the
implied fair value and carrying value of the goodwill of that reporting unit. The company also performs a
qualitative assessment on intangible assets with indeﬁnite lives. If the qualitative assessment indicates a
potential for impairment, a quantitative impairment test would be performed to compare the fair value of the
indeﬁnite-lived intangible asset with its carrying value. 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 2017 and 2016, we determined it was not

necessary to perform a two-step analysis.

In 2018, we performed a two-step analysis on our goodwill and intangible assets with indeﬁnite lives.

The ﬁrst step involves a comparison of the fair value of the reporting unit with its carrying value. If the
carrying amount of the reporting unit exceeds its fair value, the second step of the process involves a
comparison of the implied fair value and carrying value of the goodwill of that reporting unit. If the carrying
value of goodwill exceeds its implied fair value, an impairment charge is recorded in the statement of
operations. The step-one analysis did not indicate that our goodwill or indeﬁnite lived intangible assets were
impaired. As a result, no step-two analysis was performed.

Accounts Receivable and Allowance for Doubtful Accounts. We do not generally charge interest to our

customers, and we carry our customer receivables at their face amounts, less an allowance for doubtful
accounts. Based on our 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, we classify all accounts
receivable as current assets.

We grant trade credit, on a non-collateralized basis (with the exception of lien rights against the property

in certain cases) to our customers, and we are subject to potential credit risk related to changes in business
and overall economic activity. We analyze 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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

As of December 31, 2018, we were not parties to any derivative instruments. We did not use any

derivative ﬁnancial instruments during the years ended December 31, 2018, 2017 or 2016.

Borrowings under our Facility are based upon interest rates that will vary depending upon the prime rate,
Canadian prime rate, federal funds rate and LIBOR. If the prime rate, Canadian prime rate, federal funds rate
or LIBOR rises, our interest payment obligations will increase and have a negative effect on our cash ﬂow
and ﬁnancial condition. We currently do not maintain any hedging contracts that would limit our exposure to

variable rates of interest when we have outstanding borrowings. If market rates of interest on all our revolving
debt as of December 31, 2018, which is subject to variable rates, permanently increased by 1%, the increase
in interest expense on all revolving debt would decrease future income before provision for income taxes and
cash ﬂows by approximately $0.6 million annually. If market rates of interest on all our revolving debt, which
is subject to variable rates as of December 31, 2018, permanently decreased by 1%, the decrease in interest
expense on all debt would increase future income before provision for income taxes and cash ﬂows by the
same amount.

Borrowings under our Equipment Notes are at ﬁxed rates established on the date the note was executed.

Item 8.

Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

Management’s Report on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . .

Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Balance Sheets as of December 31, 2018 and 2017 . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Operations and Comprehensive Income for the years ended

December 31, 2018, 2017 and 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2018, 2017

and 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016 . . .

Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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, 2018 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.

Management’s assessment of and conclusion on the Company’s internal control over ﬁnancial reporting
as of December 31, 2018 excluded the internal control over ﬁnancial reporting of Huen Electric, Inc., which
was acquired on July 2, 2018. Huen Electric, Inc. represented a total of approximately 9.6% and 9.8% of total
assets and net assets, respectively, as of December 31, 2018, and 4.5% and 1.1% of contract revenues and
income before income taxes, respectively, for the year then ended. Such exclusion is in accordance with
Securities and Exchange Commission guidance that the assessment of a recently acquired business may be
omitted in management’s report on internal controls over ﬁnancial reporting, provided the acquisition took
place during the ﬁscal year being assessed.

Crowe LLP, an independent registered public accounting ﬁrm, who audited and reported on the 2018
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, 2018 as stated in their report which
appears herein.

March 6, 2019

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of MYR Group Inc.
Rolling Meadows, IL

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, 2018 and 2017, the related consolidated statements of operations and comprehensive income,
stockholders’ equity, and cash ﬂows for the years then ended, 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, 2018, 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, 2018 and 2017, and the results of its operations and its cash
in conformity with accounting principles generally accepted in the
ﬂows for
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, 2018, based on criteria established in Internal
Control — Integrated Framework: (2013) issued by COSO.

the years then ended,

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. As permitted,
the Company has excluded the operations of Huen Electric, Inc. acquired during 2018, which is described in
Note 2 of the consolidated ﬁnancial statements, from the scope of management’s report on internal control over
ﬁnancial reporting. As such, it has also been excluded from the scope of our audit of internal control over
ﬁnancial reporting. 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.

limitations,

internal control over ﬁnancial reporting may not prevent or detect
Because of its inherent
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.

/s/ Crowe LLP

We have served as the Company’s auditor since 2017.

Oak Brook, Illinois
March 6, 2019

Report of Independent Registered Public Accounting Firm

To Board of Directors and Stockholders of
MYR Group Inc.

We have audited the accompanying consolidated statements of operations and comprehensive income,
stockholders’ equity and cash ﬂows for the year ended December 31, 2016. These ﬁnancial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these ﬁnancial
statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight

Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the ﬁnancial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the ﬁnancial statements. An
audit also includes assessing the accounting principles used and signiﬁcant estimates made by management, as
well as evaluating the overall ﬁnancial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.

In our opinion, the ﬁnancial statements referred to above present fairly, in all material respects, the
consolidated results of its operations and its cash ﬂows for the year ended December 31, 2016, in conformity
with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Chicago, Illinois
March 9, 2017

MYR GROUP INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

ASSETS

Current assets

December 31,

2018

2017

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowances of $1,331 and $605, respectively . . . .
Contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of receivable for insurance claims in excess of deductibles . . .
Refundable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7,507
288,427
160,281
10,572
—
8,847
475,634

5,343
240,276
120,992
4,221
391
8,513
379,736

Property and equipment, net of accumulated depreciation of $253,495 and

$231,391, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Goodwill
Intangible assets, net of accumulated amortization of $7,031 and $5,183,

respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivable for insurance claims in excess of deductibles . . . . . . . . . . . . . . . . .
Investment in joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Current portion of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract liabilities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of accrued self-insurance . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued self-insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Capital lease obligations, net of current maturities
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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, 2018 and December 31,
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Common stock − $0.01 par value per share; 100,000,000 authorized shares;

Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings

16,564,961 and 16,464,757 shares issued and outstanding at December 31,
2018 and December 31, 2017, respectively . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total stockholders’ equity attributable to MYR Group Inc.

Noncontrolling interest

161,892
56,588

148,084
46,994

33,266
17,173
1,324
2,878
$748,755

3,681
1,119
139,480
58,534
19,633
61,358
283,805
17,398
86,111
34,406
1,514
1,057
424,291

10,852
14,295
168
3,659
$603,788

—
1,086
110,383
30,224
13,138
33,733
188,564
13,452
78,960
32,225
2,629
919
316,749

—

165
148,276
(193)
174,736
322,984
1,480
324,464
$748,755

163
143,934
(299)
143,241
287,039
—
287,039
$603,788

The accompanying notes are an integral part of these Financial Statements.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

MYR GROUP INC.

(in thousands, except per share data)
Contract revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract costs
Gross proﬁt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . .
Gain on sale of property and equipment . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .

Income from operations

Other income (expense):

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense
. . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net
Income before provision for income taxes . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net income − noncontrolling interests . . . . . . . . . . . . . .
. . . . . . . . . . . . .
Net income attributable to MYR Group Inc.

Income per common share attributable to MYR Group Inc.:

− Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
− Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted average number of common shares and potential

common shares outstanding:
− Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
− Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other comprehensive income (loss):

Foreign currency translation adjustment

. . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . .
Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . .
Total comprehensive income attributable to MYR Group Inc. . .

2018
$1,531,169
1,364,109
167,060
118,737
1,843
(3,832)
50,312

Year ended December 31,
2017
$1,403,317
1,278,313
125,004
98,611
499
(3,664)
29,558

2016
$1,142,487
1,007,764
134,723
96,424
886
(1,341)
38,754

24
(3,652)
(3,616)
43,068
11,774
31,294
207
31,087

1.89
1.87

16,441
16,585
31,294

106
106
31,400
207
31,193

$
$

4
(2,603)
(2,319)
24,640
3,486
21,154
—
21,154

1.30
1.28

16,273
16,496
21,154

134
134
21,288
—
21,288

$
$

5
(1,299)
885
38,345
16,914
21,431
—
21,431

1.25
1.23

17,109
17,461
21,431

(549)
(549)
20,882
—
20,882

$
$

The accompanying notes are an integral part of these Financial Statements.

MYR GROUP INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)
Balance at December 31,

2015 . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . .
Stock issued under compensation

plans, net

. . . . . . . . . . . . .

Tax beneﬁt from stock-based

awards . . . . . . . . . . . . . . .

Stock-based compensation

expense

. . . . . . . . . . . . . .
Shares repurchased . . . . . . . . .
Other comprehensive loss . . . . .
Stock issued − other
. . . . . . . .
Balance at December 31,

2016 . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . .
Adjustment to adopt

ASU No. 2016-09 . . . . . . . .

Stock issued under compensation

plans, net

. . . . . . . . . . . . .

Stock-based compensation

expense

. . . . . . . . . . . . . .
Shares repurchased . . . . . . . . .
Other comprehensive income . . .
. . . . . . . .
Stock issued − other
Balance at December 31,

2017 . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . .
Adjustment to adopt ASC 606 . .
Stock issued under compensation

plans, net

. . . . . . . . . . . . .

Stock-based compensation

expense

. . . . . . . . . . . . . .
Shares repurchased . . . . . . . . .
Noncontrolling interest

acquired . . . . . . . . . . . . . .
Other comprehensive income . . .
. . . . . . . .
Stock issued − other
Balance at December 31,

2018 . . . . . . . . . . . . . . . .

Preferred
Stock

Common Stock

Amount

Additional
Paid-In
Capital

Accumulated
Other
Comprehensive
Income (loss)

MYR
Group Inc
Shareholders’
Equity

Retained
Earnings

Noncontrolling
Interest

Total

$—
—

19,969
—

$198
—

$161,342
—

$ 116
—

$168,224
21,431

$ 329,880
21,431

$ —
—

$ 329,880
21,431

—

—
—
—
—

—
—

—

—
—
—
—

—
—
—

—

—
—

—
—
—

589

—

—
(4,228)
—
3

16,333
—

—

224

—
(93)
—
1

16,465
—
—

132

—
(33)

—
—
1

—

—
(42)
—
—

162
—

—

—
(1)
—
—

163
—
—

—
—

—
—
—

6,213

2,044

4,674
(34,235)
—
62

140,100
—

225

1,230

4,376
(2,025)
—
28

143,934
—
—

1,895

3,165
(756)

—
—
38

—

—
—
(549)
—

(433)
—

—

—
—
134
—

(299)
—
—

—

—
—

—
106
—

—

6,219

2,044

—
(66,310)
—
—

4,674
(100,587)
(549)
62

123,345
21,154

263,174
21,154

(225)

—

1,232

—
(1,033)
—
—

4,376
(3,059)
134
28

143,241
31,087
695

287,039
31,087
695

—

1,897

—
(287)

3,165
(1,043)

—
—
—

—
106
38

—

—
—
—
—

—
—

—

—
—
—
—

—
207
—

—

—
—

1,273
—
—

6,219

2,044

4,674
(100,587)
(549)
62

263,174
21,154

—

1,232

4,376
(3,059)
134
28

287,039
31,294
695

1,897

3,165
(1,043)

1,273
106
38

$—

16,565

$165

$148,276

$(193)

$174,736

$ 322,984

$1,480

$ 324,464

The accompanying notes are an integral part of these Financial Statements.

MYR GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)
Cash ﬂows from operating activities:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash ﬂows provided by

(used in) operating activities −
Depreciation and amortization of property and equipment
. . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of property and equipment
. . . . . . . . . . . . . . . . . .
Other non-cash items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in operating assets and liabilities, net of acquisitions

Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivable for insurance claims in excess of deductibles . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets
Accounts payable
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued self-insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash ﬂows provided by (used in) operating activities . . .

Cash ﬂows from investing activities:

Proceeds from sale of property and equipment
. . . . . . . . . . . . . . .
Cash paid for acquisitions, net of cash acquired . . . . . . . . . . . . . .
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . .
Net cash ﬂows used in investing activities . . . . . . . . . . . . .

Cash ﬂows from ﬁnancing activities:

Net borrowings (repayments) under revolving lines of credit . . . . . .
Payment of principal obligations under capital leases . . . . . . . . . . .
Borrowings under equipment notes . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . .
Repurchase of common shares . . . . . . . . . . . . . . . . . . . . . . . . . .
Other ﬁnancing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash ﬂows provided by (used in) ﬁnancing activities . . .
Effect of exchange rate changes on cash . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . .

Cash and cash equivalents:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplemental Cash Flow Information:
Cash paid during the period for:

Year ended December 31,
2017

2016

2018

$ 31,294

$ 21,154

$ 21,431

38,070
1,843
3,165
3,649
(3,832)
237

(15,871)
(28,141)
(9,229)
2,280
19,953
22,551
8,701
10,119
84,789

4,583
(47,082)
(50,704)
(93,203)

(20,655)
(1,081)
31,486
1,897
(1,043)
38
10,642
(64)
2,164

38,077
499
4,376
(5,091)
(3,664)
1,194

(35,944)
(17,857)
(39)
(2,213)
8,149
(14,317)
2,765
(6,287)
(9,198)

4,342
—
(30,843)
(26,501)

19,890
(1,203)
—
1,232
(3,058)
28
16,889
307
(18,503)

38,236
886
4,674
4,205
(1,341)
194

(22,473)
(22,013)
(7,187)
3,730
17,322
790
5,617
10,419
54,490

3,299
(12,056)
(25,371)
(34,128)

59,070
(740)
—
6,218
(101,483)
1,396
(35,539)
(774)
(15,951)

5,343
$ 7,507

23,846
$ 5,343

39,797
$ 23,846

Income taxes payments
Interest payments

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7,247
3,097

$ 6,597
2,259

6,274
1,114

Noncash investing activities:

Acquisition of property and equipment for which payment is

pending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of property under capital lease arrangements . . . . . . .

Noncash ﬁnancing activities:

Capital lease obligations initiated . . . . . . . . . . . . . . . . . . . . . . .

953
—

—

2,050
—

614
5,658

—

5,658

The accompanying notes are an integral part of these Financial Statements.

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 including: The
L. E. Myers Co., a Delaware corporation; Harlan Electric Company, a Michigan corporation; Great
Southwestern Construction, Inc., a Colorado corporation; Sturgeon Electric Company, Inc., a Michigan
corporation; MYR Transmission Services, Inc., a Delaware corporation; E.S. Boulos Company, a Delaware
corporation; High Country Line Construction, Inc., a Nevada corporation; Sturgeon Electric California, LLC, a
Delaware limited liability company; GSW Integrated Services, LLC, a Delaware limited liability company;
Huen Electric, Inc., a Delaware corporation; MYR Transmission Services Canada, Ltd., a British Columbia
corporation; Northern Transmission Services, Ltd., a British Columbia corporation and Western Paciﬁc
Enterprises Ltd., a British Columbia corporation.

The Company performs construction services in two business segments: Transmission and Distribution

(‘‘T&D’’), and Commercial and Industrial (‘‘C&I’’). T&D customers include investor-owned utilities,
cooperatives, private developers, government-funded utilities, independent power producers, independent
transmission companies, industrial facility owners and other contractors. 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, local governments 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.

In connection with the adoption of Revenue from Contracts with Customers (Topic 606), the Company
adjusted its presentation of costs and estimated earnings in excess of billings on uncompleted contracts and
billings in excess of costs, which impacted both the Company’s consolidated balance sheet as of
December 31, 2017 and consolidated statements of cash ﬂows for the years ended December 31, 2017 and
2016. Speciﬁcally, costs and estimated earnings in excess of billings became contract assets in the Company’s
consolidated balance sheets and $42.7 million of contract retainages previously classiﬁed as accounts
receivable, net of allowances were reclassiﬁed into contract assets as of December 31, 2017. Additionally,
billings in excess of costs and estimated earnings on uncompleted contracts became contract liabilities in the
Company’s consolidated balance sheets and accruals for contracts in a loss position previously classiﬁed in
other current liabilities were reclassiﬁed into contract liabilities as of December 31, 2017. See Note 3 —
Revenue Recognition to the Financial Statements for additional information.

Revenue Recognition

On January 1, 2018, the Company adopted accounting standards update (‘‘ASU’’) No. 2014-09, Revenue

from Contracts with Customers (Topic 606) using the modiﬁed retrospective method for contracts that were
not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are
presented under this new pronouncement, while prior period amounts were not adjusted and continue to be
reported under the accounting standard Revenue Recognition (Topic 605), which was in effect for those
periods. Differences in revenue recognition under Topic 606 were due to accelerated recognition of contract
provisions related to variable consideration previously not permitted to be recognized under Topic 605 until no
remaining contingency existed related to this consideration.

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

1. Organization, Business and Signiﬁcant Accounting Policies − (continued)

Under Topic 606, 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.

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

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

1. Organization, Business and Signiﬁcant Accounting Policies − (continued)

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.

Prior to January 1, 2018 the Company reported revenue under the accounting standard Revenue

Recognition (Topic 605), under which revenues from long-term contracts were accounted for using
the percentage-of-completion method of accounting. Under the percentage-of-completion method, the
Company estimated proﬁt as the difference between total estimated revenue and total estimated cost of a
contract and recognized that proﬁt over the contract term based on costs incurred under the cost-to-cost
method.

Under Topic 605, revenues from the Company’s construction services were performed under ﬁxed-price,
time-and-equipment, time-and-materials, unit-price, and cost-plus fee contracts. For ﬁxed-price and unit-price
contracts, the Company used the ratio of cost incurred to date on the contract to management’s estimate of the
contract’s total cost, to determine the percentage of completion on each contract. This method was used as
management considered expended costs to be the best available measure of progression of these contracts.
Contract cost included all direct costs on contracts, including labor and material, subcontractor costs and those
indirect costs related to contract performance, such as supplies, fuel, tool repairs and depreciation. The
Company recognized revenues from construction services with fees based on time-and-materials, or cost-plus
fee as the services were performed and amounts were earned. If contracts included contract incentive or bonus
provisions, they were included in estimated contract revenues only when the achievement of such incentive or
bonus was reasonably certain.

Under Topic 605, contract costs incurred to date and expected total contract costs were continuously
monitored during the term of the contract. Changes in job performance, job conditions and ﬁnal contract
settlements were factors that inﬂuenced management’s assessment of total contract value and the total
estimated costs to complete those contracts and therefore, the Company’s proﬁt recognition. These changes,
which included contracts with estimated costs in excess of estimated revenues, were recognized in contract
costs in the period in which the revisions were determined. At the point the Company anticipated a loss on a
contract, the Company estimated the ultimate loss through completion and recognized that loss in the period
in which the possible loss was identiﬁed.

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

1. Organization, Business and Signiﬁcant Accounting Policies − (continued)

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. Under the equity method
the net investment in joint ventures is stated as a single item on the 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 16 — Noncontrolling Interests to the
Financial Statements for further information related to joint ventures in which the Company has a majority
controlling interest.

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
consolidated statements of operations. For the year ended December 31, 2018, the Company recorded an
insigniﬁcant amount of foreign currency losses. 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 consolidated statements of comprehensive income.

Use of Estimates

The preparation of ﬁnancial statements in conformity with 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 accounts receivable reserves. Actual results
could differ from these estimates.

In 2018, the Company recognized revenues of $3.4 million related to signiﬁcant change orders and/or
claims that had been included as contract price adjustments on certain contracts which were in the process of
being negotiated in the normal course of business.

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

1. Organization, Business and Signiﬁcant Accounting Policies − (continued)

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, 2018,
changes in estimates pertaining to certain projects decreased consolidated gross margin by 0.7%, which
resulted in decreases in operating income of $10.5 million, net income attributable to MYR Group Inc. of
$8.2 million and diluted earnings per common share attributable to MYR Group Inc. of $0.49. The estimates
are reviewed and revised quarterly, as needed. During the year ended December 31, 2017, changes in
estimates pertaining to certain projects decreased consolidated gross margin by 0.7%, which resulted in
decreases in operating income of $10.4 million, net income attributable to MYR Group Inc. of $6.2 million
and diluted earnings per common share attributable to MYR Group Inc. of $0.38. During the year ended
December 31, 2016, changes in estimates pertaining to certain projects decreased consolidated gross margin
by 0.2%, which resulted in decreases in operating income of $2.6 million, net income attributable to MYR
Group Inc. of $1.4 million and diluted earnings per common share attributable to MYR Group Inc. of $0.08.

Advertising

Advertising costs are expensed when incurred. Advertising costs, included in selling, general and
administrative expenses, were $0.7 million, $0.7 million and $0.6 million for the years ended December 31,
2018, 2017 and 2016, respectively.

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 in the

accompanying 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, restricted stock units and phantom 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. Upon adoption ASU No. 2016-09, Compensation — Stock Compensation (Topic 718) in January of
2017, the Company elected to discontinue estimating future forfeitures and recognize forfeitures as they occur.
Prior to the adoption, the Company used historical data to estimate the forfeiture rate applied to stock grants.
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

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

1. Organization, Business and Signiﬁcant Accounting Policies − (continued)

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, 2018 and 2017, 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 in the Consolidated Balance Sheets and are reﬂected as a
ﬁnancing activity in the 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, 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. 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 allowance for collection of
contract retainage was not signiﬁcant as of December 31, 2018 and 2017.

The Company’s consolidated balance sheets present contract liabilities which 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. 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.

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

1. Organization, Business and Signiﬁcant Accounting Policies − (continued)

Leases

The Company leases certain real estate, construction equipment and office equipment. Real estate is
generally leased for terms up to ten years in duration. The terms and conditions of leases (such as renewal or
purchase options and escalation clauses), if material, are reviewed at inception to determine the classiﬁcation
(operating or capital) of the lease. 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 840-10-25.

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. Certain
health beneﬁt plans are subject to a deductible 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.

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 reviews goodwill and
intangible assets with indeﬁnite lives for impairment on an annual basis 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. The Company may perform either a
qualitative assessment or a two-step goodwill impairment test. The qualitative assessment considers ﬁnancial,
industry, segment and macroeconomic factors. If the qualitative assessment indicates a potential for
impairment, the two-step method is used to determine if impairment exists. The two-step method begins with
a comparison of the fair value of the reporting unit with its carrying value. If the carrying amount of the
reporting unit exceeds its fair value, the second step of the process involves a comparison of the implied fair
value and carrying value of the goodwill of that reporting unit. The company also performs a qualitative
assessment on intangible assets with indeﬁnite lives. If the qualitative assessment indicates a potential for
impairment, a quantitative impairment test would be performed to compare the fair value of the indeﬁnite-
lived intangible asset with its carrying value. 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 2017 and 2016, the Company determined it was

not necessary to perform a two-step analysis.

In 2018, the Company performed a two-step analysis on goodwill and intangible assets with indeﬁnite
lives. The ﬁrst step involves a comparison of the fair value of the reporting unit with its carrying value. If the
carrying amount of the reporting unit exceeds its fair value, the second step of the process involves a
comparison of the implied fair value and carrying value of the goodwill of that reporting unit. If the carrying
value of goodwill exceeds its implied fair value, an impairment charge is recorded in the statement of
operations. The step-one analysis did not indicate that the Company’s goodwill or indeﬁnite-lived intangible
assets were impaired. As a result, no step-two analysis was performed.

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

1. Organization, Business and Signiﬁcant Accounting Policies − (continued)

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 32.9%, 40.4%, and
46.4% of consolidated revenues for the years ended December 31, 2018, 2017 and 2016, respectively. For the
year ended December 31, 2017, one T&D customer accounted for 10.7% of our revenues. For the years ended
December 31, 2018 and 2016, 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, 2018 and 2017, none of our 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, 2018, approximately 88% 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.

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 May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).

The amendments under this pronouncement changed how an entity recognizes revenue from contracts it enters
to transfer goods, services or nonﬁnancial assets to its customers. These changes created a comprehensive
framework for all entities in all industries to apply in the determination of when to recognize revenue, and,
therefore, supersede virtually all existing revenue recognition requirements and guidance. This framework is
expected to result in less complex guidance in application while providing a consistent and comparable
methodology for revenue recognition. The core principle of the guidance is that an entity should recognize
revenue to depict the transfer of promised goods or services to customers in an amount that reﬂects the
consideration to which the entity expects to be entitled in exchange for those goods or services. In addition,
the amendments require expanded disclosure to enable the users of the ﬁnancial statements to understand the
nature, timing and uncertainty of revenue and cash ﬂow arising from contracts with customers. On January 1,
2018, the Company adopted this ASU on a modiﬁed retrospective basis. Results for reporting periods
beginning after January 1, 2018 are presented under Revenue from Contracts with Customers (Topic 606),
while prior period amounts reported on the Company’s consolidated statement of operations were not adjusted
and continue to be reported in accordance with the Company’s historical accounting under Revenue

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

1. Organization, Business and Signiﬁcant Accounting Policies − (continued)

Recognition Topic 605. See Note 3 — Revenue Recognition to the Financial Statements for further
information related to the Company’s accounting policy and transition disclosures associated with the adoption
of this pronouncement.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the
Deﬁnition of a Business, which clariﬁed the deﬁnition of a business with the objective of adding guidance to
assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of
assets or businesses. The Company adopted this ASU on a prospective basis in January 2018 and there was no
effect on the Company’s ﬁnancial position, results of operations or cash ﬂows.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of

Assets Other Than Inventory, which modiﬁed existing guidance and intended to reduce the diversity in
practice with respect to the accounting for income tax consequences of intra-entity transfers of assets. This
update requires entities to immediately recognize the tax consequences on intercompany asset transfers
(excluding inventory) at the transaction date, and eliminated the recognition exception within previous
guidance. The Company adopted this ASU using a modiﬁed retrospective approach in January 2018 and there
was no effect on the Company’s ﬁnancial position, results of operations or cash ﬂows.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classiﬁcation

of Certain Cash Receipts and Cash Payments, which intended to reduce diversity in practice in how eight
speciﬁc transactions are classiﬁed in the statement of cash ﬂows. The Company adopted this ASU on a
retrospective basis in January 2018 and there was no effect on the Company’s ﬁnancial position, results of
operations or cash ﬂows.

Recently Issued Accounting Pronouncements

In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment, which simpliﬁes the subsequent measurement of goodwill,
through elimination of Step 2 from the goodwill impairment test. Instead, an entity should perform its annual,
or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.
The update is effective for any annual or interim goodwill impairment tests in ﬁscal years beginning after
December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on
testing dates after January 1, 2017. The guidance requires application on a prospective basis. The Company
does not expect that this pronouncement will have a signiﬁcant impact on its ﬁnancial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments under this

pronouncement will change the way all leases with durations in excess of one year are treated. Under this
guidance, lessees will be required to recognize virtually all leases on the balance sheet as a right-of-use asset
and an associated ﬁnancing lease liability or capital lease liability. The right-of-use asset represents the
lessee’s right to use, or control the use of, a speciﬁed asset for the speciﬁed lease term. The lease liability
represents the lessee’s obligation to make lease payments arising from the lease, measured on a discounted
basis. Based on certain characteristics, leases are classiﬁed as ﬁnancing leases or operating leases. Financing
lease liabilities, which contain provisions similar to capitalized leases, are amortized like capital leases under
current accounting, as amortization expense and interest expense in the statement of operations. Operating
lease liabilities are amortized on a straight-line basis over the life of the lease as lease expense in the
statement of operations. This update is effective for annual reporting periods, and interim periods within those
reporting periods, beginning after December 15, 2018. The Company intends to adopt this new guidance using
the cumulative effect method, which would apply to all new lease contracts initiated on or after January 1,
2019. For existing lease contracts that have remaining obligations as of January 1, 2019, the difference
between the recognition criteria in the new guidance and the Company’s current practices would be
recognized using a cumulative effect adjustment to the opening balance of retained earnings.

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

1. Organization, Business and Signiﬁcant Accounting Policies − (continued)

The Company continues to evaluate the impact that this pronouncement, and all amendments relating to

this pronouncement, will have on its policies and procedures pertaining to its existing and future lease
arrangements, disclosure requirements and on the Company’s ﬁnancial statements. The Company has
appointed a committee to transition its policies and procedures based on the requirements of this
pronouncement and has purchased lease software to support the additional requirements relating to this
pronouncement. When this pronouncement is adopted in 2019, the Company expects that most existing
operating lease commitments that extend beyond twelve months at the time of adoption will be recognized as
lease liabilities and right-of-use (‘‘ROU’’) assets upon adoption. Based on preliminary evaluations, the
Company estimates that the value of lease liabilities will be between $17 million and $19 million upon
adoption with corresponding ROU assets of the same amount based on the present value of the remaining
minimum lease payments under current leasing standards. Additionally, we expect to elect the ’package of
practical expedients,’ which permits the Company to not reassess under the new standard our prior
conclusions about lease identiﬁcation, lease classiﬁcation and initial direct costs. The Company currently does
not expect to elect the use of the hindsight practical expedient or the practical expedient pertaining to land
easements. The Company, however, expects to elect the short-term lease recognition exemption for all leases
that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease
liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of
those assets in transition. The Company also currently expects to elect the practical expedient to not separate
lease and non-lease components for our real estate and vehicle leases. While the Company is still evaluating
the requirements of this update, it currently does not expect the adoption to have a material impact on the
recognition, measurement or presentation of lease expenses within the Consolidated Statements of Operations
and Comprehensive Income or Consolidated Statements of Cash Flows. See Note 12 — Lease Obligations to
the Financial Statements for further information related to the Company’s future minimum lease payments and
the timing of those payments.

2. Acquisitions

Huen Electric, Inc.

On July 2, 2018, the Company completed the acquisition of substantially all of the assets of Huen

Electric, Inc., an electrical contracting ﬁrm based in Illinois, Huen Electric New Jersey Inc., an electrical
contracting ﬁrm based in New Jersey, and Huen New York, Inc., an electrical contracting ﬁrm based in New
York (collectively, the ‘‘Huen Companies’’). The Huen Companies provide a wide range of commercial and
industrial electrical construction capabilities under the Company’s C&I segment in Illinois, New Jersey and
New York. The total consideration paid was approximately $47.1 million, subject to working capital and net
asset adjustments, which was funded through borrowings on the line of credit. Total consideration paid may
include a portion subject to potential net asset adjustments which are expected to be ﬁnalized in early 2019.
The Company’s preliminary estimate of these net asset adjustments was approximately $10.7 million as of the
July 2, 2018 closing date and approximately $11.2 million as of December 31, 2018, which will increase the
total consideration to be paid, and is recorded in other current liabilities on the consolidated balance sheets.

The purchase agreement also includes contingent consideration provisions for margin guarantee
adjustments based upon performance subsequent to the acquisition on certain contracts. The contracts are
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, have resulted
and will continue to result in changes to these margin guarantee estimates. Changes in contingent
consideration, subsequent to the acquisition, related to the margin guarantee adjustments on certain contracts
of approximately $3.9 million were recorded in other expense for the year ended December 31, 2018. Future
margin guarantee adjustments, if any, are expected to be recognized through 2019. 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 the Huen Companies. These payments are

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

2. Acquisitions − (continued)

recognized as compensation expense in the consolidated statements of operations as incurred. For the year
ended December 31, 2018 the Company recognized $0.6 million of compensation expense associated with
these contingent payments.

The results of operations for Huen Companies are included in the Company’s consolidated statement of
operations and the C&I segment from the date of acquisition. Costs of approximately $0.3 million related to
the acquisition were included in selling, general and administrative expenses in the consolidated statement of
operations for the year ended December 31, 2018.

The following table summarizes the preliminary allocation of the opening balance sheet from the date of

acquisition through December 31, 2018:

(in thousands)
Consideration paid . . . . . . . . . . . . . . . . . . . . . . . . . .
Preliminary estimated net asset adjustments . . . . . . . . .
Total consideration, net of net asset adjustments . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . .
Contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current and long term assets . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . .
Net identiﬁable assets and liabilites . . . . . . . . . . . . .
Unallocated intangible assets . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
Fair value of aquired noncontrolling interests . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill

Total aquired assets and liabilites

(as of
acquisition date)
July 2, 2018
$47,082
10,749
$57,831
$33,903
10,570
88
3,188
—
(9,592)
(6,394)
(6,570)
25,193
9,800
34,993
(1,273)
$24,111

$
$

Measurement
Period
Adjustments
—
$
461
461
206
1,010
1
—
24,300
(1,274)
525
—
24,768
(9,800)
14,968
(7)
$(14,500)

Adjusted
acquisition
amounts as of
December 31, 2018
$ 47,082
11,210
$ 58,292
$ 34,109
11,580
89
3,188
24,300
(10,866)
(5,869)
(6,570)
49,961
—
49,961
(1,280)
$ 9,611

The Company has developed preliminary estimates of fair value of the assets acquired and liabilities
assumed for the purposes of allocating the purchase price. In conjunction with the acquisition of the Huen
Companies, the Company acquired a majority-ownership of an ongoing joint venture. The assets acquired
within the joint venture are recorded at their fair value at the time of the acquisition, relate to a speciﬁc
contract, and no assets or liabilities outside of the operations of the contract existed at the acquisition date.
The goodwill to be recognized, which represents the excess of the purchase price over the net amount of the
fair values assigned to assets acquired and liabilities assumed, is primarily attributable to the value of an
assembled workforce and other non-identiﬁable assets. No synergies were anticipated in the acquisition as the
three companies will function as individual districts within the Company’s operating structure. There may be
further adjustments to the total consideration as the net asset adjustments are ﬁnalized. Additionally, the
Company will perform an analysis of the purchase price allocation and make appropriate adjustments based on
the analysis. All of the goodwill and identiﬁable intangible assets are expected to be tax deductible per
applicable Internal Revenue Service regulations.

The following unaudited supplemental pro forma results of operations have been provided for illustrative

purposes only and do not purport to be indicative of the actual results that would have been achieved by the
combined companies for the periods presented or that may be achieved by the combined companies in the

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

2. Acquisitions − (continued)

future. Future results may vary signiﬁcantly from the results reﬂected in the following pro forma ﬁnancial
information because of future events and transactions, as well as other factors:

(In thousands, except per share data)

Contract revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Net income attributable to MYR Group, Inc.

Income per common share:

Year ended December 31,

2018
(unaudited)
$ 1,612,618
35,872
$
34,947
$

2017
(unaudited)
$ 1,523,328
26,531
$
25,561
$

− Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
− Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

2.13
2.11

$
$

1.57
1.55

Weighted average number of common shares and potential

common shares outstanding:
− Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
− Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,441
16,585

16,273
16,496

The pro forma combined results of operations for years ended December 31, 2018 and 2017 were
prepared by adjusting the historical results of the Company to include the historical results of the Huen
Companies as if the acquisition occurred on January 1, 2017. These pro forma results were adjusted for the
following:

•

To include additional depreciation associated with the estimated step-up in fair value of the property
and equipment acquired.

To record the net reduction in lease expense associated with the revised real estate lease contracts
that were completed at the time of the acquisition.

To record transaction costs associated with the acquisition.

To record the estimated amortization related to the acquired intangible assets discussed above.

To record the additional interest expense related to the incremental borrowings of $47.1 million on
the Company’s credit facility as if the borrowing occurred on January 1, 2017.

To reﬂect the income tax effect of pro forma adjustments at the statutory tax rate.

To record estimated compensation payments contingent on the successful achievement of certain
performance targets.

Revenues of approximately $69.0 million and income before income taxes of approximately $0.5 million,

were included in the Company’s consolidated results of operations for the year ended December 31, 2018
related to the acquisition of the Huen Companies.

Western Paciﬁc Enterprises Ltd.

On October 28, 2016, the Company completed the acquisition of substantially all of the assets of Western

Paciﬁc Enterprises GP and Western Paciﬁc Enterprises Ltd., except for certain real estate owned by Western
Paciﬁc Enterprises Ltd., with the company continuing operations under the name Western Paciﬁc Enterprises
Ltd. (‘‘WPE’’), an electrical contracting ﬁrm in western Canada. With its main headquarters in Coquitlam,
British Columbia, WPE provides a wide range of commercial and industrial electrical construction capabilities
under the Company’s C&I segment. WPE also provides substation construction capabilities under the
Company’s T&D segment. The total consideration paid was approximately $12.1 million, which was funded

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

2. Acquisitions − (continued)

through borrowings from our line of credit. Total consideration paid included $2.2 million subject to potential
net asset adjustments. These net asset adjustments were approximately $0.8 million as of the October 28, 2016
closing date and as of December 31, 2017. The Company accounted for the net asset adjustments as a
reduction to consideration paid which was funded through the return of funds held in a $1.9 million escrow
account, established at the time of purchase. The purchase agreement also included provisions for margin
guarantee adjustments based upon performance subsequent to the acquisition on certain contracts. In early
2018, the Company ﬁnalized an agreement to settle all amounts outstanding under the margin guarantee
adjustment provision as well as previous contingent compensation agreements that were being recognized as
compensation expense in the consolidated statement of operations as incurred. As a result, the Company
recorded other expense of $2.3 million for the year ended December 31, 2017 and reversed the compensation
expense that was previously recorded. The Company had previously recognized other income of $1.4 million
relating to the margin guarantee adjustments provision for the year ended December 31, 2016.

3. Revenue Recognition

Change in Accounting Policy

On January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers
(Topic 606) using the modiﬁed retrospective method for contracts that were not completed as of January 1,
2018. Results on the Company’s consolidated statement of operations for reporting periods beginning after
December 31, 2017 are presented under this new pronouncement, while prior period amounts reported on the
Company’s consolidated statement of operations are not adjusted and continue to be reported under the
accounting standard Revenue Recognition Topic 605, which was in effect for prior periods. In connection with
the adoption of this ASU, certain changes have been made to the Company’s consolidated balance sheet. The
accounts previously named ‘‘Costs and estimated earnings in excess of billings on uncompleted contracts’’ and
‘‘Billings in excess of costs and estimated earnings on uncompleted contracts’’ have been renamed ‘‘Contract
assets’’ and ‘‘Contract liabilities’’, respectively. In addition, contract retainages previously classiﬁed in
accounts receivable, net of allowances were reclassiﬁed into contract assets and accruals for contracts in a loss
position previously classiﬁed in other current liabilities were reclassiﬁed into contract liabilities.

The Company recorded an increase to opening retained earnings of $0.7 million, net of tax, as of

January 1, 2018 due to the cumulative impact of adopting Topic 606, representing revenues which would have
been recognized in prior periods under Topic 606. The impact of adopting Topic 606 for 2018 was an increase
of $0.2 million to revenue. The cumulative adjustment and the impact experienced during 2018 were due to
accelerated recognition of contract provisions related to variable consideration previously not permitted to be
recognized under Topic 605 until no remaining contingency existed related to this consideration. For
additional information related to impact of this pronouncement, see Note 1 — Organization, Business and
Summary of Signiﬁcant Accounting Policies to our Financial Statements.

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 do the entire 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.

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

3. Revenue Recognition − (continued)

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 16 — Segment Information to the Financial Statements.

The components of the Company’s revenue by contract type for the year ended December 31, 2018 were

as follows:

(dollars in thousands)
Fixed price . . . . . . . . . . . .
Unit price . . . . . . . . . . . . .
T&E . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . .

T&D

2018

C&I

Total

Amount
$361,699
181,179
305,581
44,649
$893,108

Percent

Amount
40.5% $452,732
51,590
20.3
34,938
34.2
98,801
5.0
100.0% $638,061

Percent

Amount

Percent

71.0% $ 814,431
232,769
8.1
340,519
5.4
15.5
143,450
100.0% $1,531,169

53.2%
15.2
22.2
9.4
100.0%

The components of the Company’s revenue by market type for the year ended December 31, 2018 were

as follows:

(dollars in thousands)

Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Electrical construction . . . . . . . . . . . . . . . . . . . . . . .
Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount
$ 559,467
333,641
638,061
$1,531,169

2018
Percent

36.5%
21.8
41.7
100.0%

Segment
T&D
T&D
C&I

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.

The Company’s consolidated balance sheets present contract assets which contains unbilled revenue
(previously identiﬁed as costs and estimated earnings in excess of billings) and contract retainages associated
with contract work that has been completed and billed but not paid by customers, pursuant to retainage
provisions, which are generally due once the job is completed and approved. The allowance for collection of
contract retainage was not signiﬁcant as of December 31, 2018 and 2017.

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

3. Revenue Recognition − (continued)

Contract assets consisted of the following at December 31:

(in thousands)
Unbilled revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract retainages, net . . . . . . . . . . . . . . . . . . . . . . . . .
Contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2018
$111,153
49,128
$160,281

2017
$ 78,260
42,732
$120,992

Change
$32,893
6,396
$39,289

The Company’s consolidated balance sheets present contract liabilities which contains deferred revenue
(previously identiﬁed as billings in excess of costs and estimated earnings on uncompleted contracts) and an
accrual for contracts in a loss provision.

Contract liabilities consisted of the following at December 31:

(in thousands)
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued loss provision . . . . . . . . . . . . . . . . . . . . . . . . .
Contract liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2018
$57,051
1,483
$58,534

2017
$28,919
1,305
$30,224

Change
$28,132
178
$28,310

The following table provides information about contract assets and contract liabilities from contracts with

customers:

(in thousands)
Contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Net contract assets (liabilities)

2018
$160,281
(58,534)
$101,747

2017
$120,992
(30,224)
$ 90,768

Change
$ 39,289
(28,310)
$ 10,979

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 performance and customer payment. The amount
of revenue recognized in the period that was included in the opening contract liability balances was
$22.1 million for 2018. 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)
Costs and estimated earnings on uncompleted contracts . . . . . . . . .
Less: Billings to date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2018
$2,718,713
2,664,611
54,102

2017
$1,978,981
1,929,640
49,341

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)
Unbilled revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2018
$111,153
(57,051)
$ 54,102

2017
$ 78,260
(28,919)
$ 49,341

Remaining Performance Obligations

On December 31, 2018, the Company had $1.06 billion of remaining performance obligations. The
Company’s remaining performance obligations includes 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.
The following table summarizes that amount of remaining performance obligations that the Company expects

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

3. Revenue Recognition − (continued)

to be realized as of December 31, 2018 and the amount of the remaining performance obligations that the
Company reasonably estimates will not be recognized within the next twelve months.

(In thousands)
T&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C&I
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total
$ 418,178
644,547
$1,062,725

Amount estimated to
not be recognized
within 12 months
$ 19,698
167,652
$187,350

Remaining Performance Obligations as of
December 31, 2018

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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

4. 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, 2018 and 2017, the Company determined that the carrying value of cash and cash

equivalents approximated fair value based on Level 1 inputs. As of December 31, 2018 and 2017, the fair
value of the Company’s long-term debt and capital lease obligations, were based on Level 2 inputs. The
Company’s long-term debt was based on variable and ﬁxed interest rates at December 31, 2018 and variable
interest rates at December 31, 2017. Long-term debt with variable interest rates was 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 capital lease obligations and long term debt with ﬁxed interest rates also approximated fair value.

5. Accounts Receivable

Accounts receivable consisted of the following at December 31:

(in thousands)
Contract receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

Less: Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . .

2018
$282,283
7,475
289,758
(1,331)
$288,427

2017
$231,808
9,073
240,881
(605)
$240,276

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

5. Accounts Receivable − (continued)

The roll-forward of activity in the allowance for doubtful accounts was as follows for the years ended

December 31:

(in thousands)
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . .
Less: Reduction in (provision for) allowances . . . . . . . . .
Less: Write offs, net of recoveries . . . . . . . . . . . . . . . . .
Change in foreign currency translation . . . . . . . . . . . . . .
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . .

2018
$ 605
(860)
123
11
$1,331

2017
$ 432
(263)
92
(2)
$ 605

2016
$ 376
(146)
90
—
$ 432

6. Property and Equipment

Property and equipment consisted of the following at December 31:

(dollars in thousands)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements
. . . . . . . . . . . . . . . . . .
Construction equipment . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Office equipment

Less: Accumulated depreciation and amortization . . . .

Estimated
Useful Life
in Years
—
3 to 39
3 to 12
3 to 10

2018

2017

8,475
23,228
371,941
11,743
415,387
(253,495)
$ 161,892

7,733
22,718
340,060
8,964
379,475
(231,391)
$ 148,084

Construction equipment includes assets under capital leases — see additional information provided in

Note 12 — Lease Obligations to the Financial Statements.

Depreciation and amortization expense of property and equipment for the years ended December 31,

2018, 2017 and 2016 was $38.1 million, $38.1 million and $38.2 million, respectively.

7. Goodwill and Intangible Assets

Goodwill and intangible assets consisted of the following at December 31:

(in thousands)
Goodwill

2018

2017

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

T&D . . . . . . . . . . . . . . . . . .
C&I . . . . . . . . . . . . . . . . . . .
Total goodwill . . . . . . . . . . . .

$40,224
16,364
$56,588

Amortizable Intangible Assets

Backlog . . . . . . . . . . . . . . . .
Customer relationships . . . . . .
Trade names . . . . . . . . . . . . .

$ 2,789
17,280
695

$ —
—
$ —

$1,889
4,970
172

$40,224
16,364
$56,588

$40,224
6,770
$46,994

900
12,310
523

989
5,277
695

$ —
—
$ —

$ 989
4,069
125

Net
Carrying
Amount

$40,224
6,770
$46,994

$ —
1,208
570

Indeﬁnite-lived Intangible Assets
Trade names . . . . . . . . . . . . .
. . . . . .
Total Intangible assets

19,533
$40,297

—
$7,031

19,533
$33,266

9,074
$16,035

—
$5,183

9,074
$10,852

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

7. Goodwill and Intangible Assets − (continued)

The increase in goodwill as of December 31, 2018 compared to December 31, 2017 was due to the
allocation of $9.6 million of goodwill related to the acquisition of the Huen Companies identiﬁed during the
ongoing analysis of the purchase accounting. The increase in intangible assets also related to the acquisition of
the Huen Companies and are being amortized on a straight-line basis over periods ranging up to 12 years.
Additional ﬁnancial information related to this acquisition is provided in Note 2 — Acquisitions to the
Financial Statements. Immaterial foreign currency translation adjustments related to goodwill and intangible
assets are netted with the amounts indicated above.

Customer relationships and backlog are being amortized on a straight-line method over an estimated

useful life ranging up to 12 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 $1.8 million, $0.5 million and
$0.9 million for the years ended December 31, 2018, 2017 and 2016, respectively.

As of December 31, 2018, estimated future intangible asset amortization expense for the each of the next

ﬁve years and thereafter was as follows:

(In thousands)
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Future
Amortization
Expense
$ 2,037
1,137
1,137
1,137
1,137
7,148
$13,733

8. Accrued Liabilities

Other current liabilities consisted of the following at December 31:

(in thousands)
Payroll and incentive compensation . . . . . . . . . . . . . . . . . . . . . . . . . .
Net asset adjustments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Union dues and beneﬁts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proﬁt sharing and thrift plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes, other than income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

2018
$21,641
11,210
11,465
1,215
7,999
7,828
$61,358

2017
$ 9,146
—
12,494
443
6,807
4,843
$33,733

See additional information on net asset adjustments provided in Note 2 — Acquisitions to the Financial

Statements.

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

9. Debt

The table below reﬂects the Company’s total debt, including borrowings under its credit agreement and

master loan agreement for equipment notes:

(dollar amounts in thousands)
Credit Agreement
Revolving loans

. . . . . .

Equipment Notes

Inception Date

Stated Interest
Rate
(per annum)

Payment
Frequency

Term
(years)

6/30/2016

Variable

9/28/2018
Equipment Note 1 . . . . .
Equipment Note 2 . . . . .
9/28/2018
Equipment Note 3 . . . . . 12/31/2018
Equipment Note 4 . . . . . 12/31/2018
Equipment Note 5 . . . . . 12/31/2018

4.16% Semi-annual
4.23% Semi-annual
3.97% Semi-annual
4.02% Semi-annual
4.01% Semi-annual

Total Debt
Less: Current Portion of

. . . . . . . . . . . .

long-term debt

. . . . . . .
Long-term debt . . . . . . . . .

Credit Agreement

5
7
5
7
7

Outstanding
Balance as of
December 31,
2018

Outstanding
Balance as of
December 31,
2017

$58,306

$78,960

12,655
12,279
2,291
2,313
1,948
31,486
89,792

—
—
—
—
—
—
78,960

(3,681)
$86,111

—
$78,960

On June 30, 2016, the Company entered into a ﬁve-year amended and restated credit agreement, as

amended from time to time (the ‘‘Credit Agreement’’), with a syndicate of banks led by JPMorgan Chase
Bank, N.A. and Bank of America, N.A, that provided for a $250 million facility (the ‘‘Facility’’), which could
be used for revolving loans and letters of credit. On September 28, 2018, the Company amended the Credit
Agreement. This amendment, among other things, reduces the amount of the Facility available to be used for
letters of credit to a maximum of $150 million. The Facility also allows for revolving loans and letters of
credit in Canadian dollars and other currencies, up to the U.S. dollar equivalent of $50 million. The Company
has an expansion option to increase the commitments under the Facility or enter into incremental term loans,
subject to certain conditions, by up to an additional $100 million upon receipt of additional commitments
from new or existing lenders. Subject to certain exceptions, the Facility is secured by substantially all of the
assets of the Company and its domestic subsidiaries and by a pledge of substantially all of the capital stock of
the Company’s domestic subsidiaries and 65% of the capital stock of the direct foreign subsidiaries of the
Company. Additionally, subject to certain exceptions, the Company’s domestic subsidiaries also guarantee the
repayment of all amounts due under the Credit Agreement. If an event of default occurs and is continuing, on
the terms and subject to the conditions set forth in the Credit Agreement, amounts outstanding under the
Facility may be accelerated and may become or be declared immediately due and payable. Borrowings under
the Credit Agreement are used for working capital, capital expenditures, acquisitions, stock 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 1.00%; or (2) Adjusted LIBO Rate (as deﬁned in the Credit Agreement) plus an applicable
margin ranging from 1.00% to 2.00%. 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 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 1.125% to 2.125% for non-performance letters
of credit or 0.625% to 1.125% for performance letters of credit, based on the Company’s consolidated
Leverage Ratio. The Company is subject to a commitment fee of 0.20% to 0.375%, based on the Company’s

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

9. Debt − (continued)

consolidated Leverage Ratio, on any unused portion of the Facility. The Credit Agreement restricts certain
types of payments when the Company’s consolidated Leverage Ratio exceeds 2.25. The weighted average
interest rate on borrowings outstanding on the Facility for the year ended December 31, 2018 was 3.08% per
annum.

Under the Credit Agreement, the Company is subject to certain ﬁnancial covenants and must maintain a
maximum consolidated Leverage Ratio of 3.0 and a minimum interest coverage ratio of 3.0, which is deﬁned
in the Credit Agreement as Consolidated EBITDA (as deﬁned in the Credit Agreement) divided by interest
expense (as deﬁned in the Credit Agreement). The Credit Agreement also contains a number of covenants,
including limitations on asset sales, investments, indebtedness and liens. In connection with any permitted
acquisition where the total consideration exceeds $50 million, the Company may request that the maximum
permitted consolidated Leverage Ratio increase from 3.0 to 3.5. Any such increase shall begin in the quarter
in which such permitted acquisition is consummated and shall continue in effect for four consecutive ﬁscal
quarters. The Company was in compliance with all of its ﬁnancial covenants under the Credit Agreement as of
December 31, 2018.

As of December 31, 2018, the Company had letters of credit outstanding under the Facility of

approximately $21.2 million, including $17.6 million related to the Company’s payment obligation under its
insurance programs and approximately $3.6 million related to contract performance obligations. As of
December 31, 2017, the Company had letters of credit outstanding under the Facility of approximately
$20.9 million, including $17.6 million related to the Company’s payment obligation under its insurance
programs and approximately $3.3 million related to contract performance obligations.

The Company has remaining deferred debt issuance costs totaling $0.6 million as of December 31, 2018,
related to the line of credit. As permitted under ASU No. 2015-15, debt issuance costs have been deferred and
are presented as an asset within other assets, which is amortized as interest expense over the term of the line
of credit.

Equipment Notes

On September 28, 2018, the Company entered into a Master Equipment Loan and Security Agreement

(the ‘‘Master Loan Agreement’’) with Banc of America Leasing & Capital, LLC (‘‘BofA’’). The Master Loan
Agreement may be used for the ﬁnancing of equipment between the Company and BofA pursuant to one or
more ‘‘Equipment Notes’’. Each Equipment Note executed under the Master Loan Agreement 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, 2018, we have ﬁve Equipment Notes outstanding under the Master Loan Agreement

that are collateralized by equipment and vehicles owned by the Company. The following table sets forth our
remaining principal payments for the Company’s outstanding Equipment Notes as of December 31, 2018:

(In thousands)
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total future principal payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Current portion of equipment notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term principal obligations

Future
Equipment
Notes Principal
Payments
$ 3,681
3,835
3,996
4,163
7,327
8,484
$31,486
(3,681)
$27,805

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

10. Income Taxes

Income before income taxes by geographic area was, for the years ended December 31:

(in thousands)
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2018
$48,393
(5,325)
$43,068

2017
$33,830
(9,190)
$24,640

2016
$39,419
(1,074)
$38,345

The income tax provision consisted of the following for the years ended December 31:

(in thousands)
Current

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . .

2018

2017

2016

$ 5,155
3,310
8,465

4,936
(822)
(805)
3,309
$11,774

$ 7,020
1,557
8,577

(1,453)
(875)
(2,763)
(5,091)
$ 3,486

$ 9,838
2,871
12,709

2,491
481
1,233
4,205
$16,914

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:

U.S federal statutory rate . . . . . . . . . . . . . . . . . . . . . . . .
Deferred balance adjustments due to Tax Act, net . . . . . . . .
State income taxes, net of U.S. federal income tax expense. .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . .
Domestic production/manufacturing deduction . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Tax differential on foreign earnings
Deferred state tax adjustments, net . . . . . . . . . . . . . . . . . .
Non-deductible meals and entertainment . . . . . . . . . . . . . .
Stock compensation excess tax beneﬁts . . . . . . . . . . . . . . .
Uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Provision to return adjustments, net
Non-controlling interest
. . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net
Effective rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2018
21.0%
—
5.2
1.2
—
(0.5)
—
0.8
(0.1)
0.1
(0.2)
(0.5)
0.3
27.3%

2017
35.0%
(31.6)
5.3
6.4
(1.6)
3.2
(2.4)
1.7
(3.1)
2.0
(0.3)
—
(0.5)
14.1%

2016
35.0%
—
5.2
1.6
(1.9)
0.6
1.6
1.0
—
—
0.8
—
0.2
44.1%

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

10. Income Taxes − (continued)

The net deferred tax assets and (liabilities) arising from temporary differences was as follows at

December 31:

(in thousands)
Deferred income tax assets:

Self insurance reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract loss reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonus
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. deferred income tax assets, net . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred income tax assets before valuation allowances

Less: valuation allowances

Deferred income tax liabilities:

Property and equipment − tax over book depreciation . . . . . . . . . . .
Intangible assets − tax over book amortization . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . .
Net deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2018

2017

$ 4,299
350
1,143
3,271
2,672
1,526
1,958
15,219
(2,672)
12,547

(26,030)
(1,890)
(2,025)
(29,945)
$(17,398)

$ 4,555
317
1,571
590
2,173
773
1,359
11,338
(2,173)
9,165

(18,792)
(2,186)
(1,639)
(22,617)
$(13,452)

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.

As of December 31, 2018, the Company had no undistributed earnings of our Canadian subsidiaries. We
expect future earnings to be reinvested. Accordingly, as of December 31, 2018 no provision for U.S. income
taxes or foreign withholding taxes has been made.

The Company is subject to taxation in various jurisdictions. The Company is currently under examination

by U. S. federal authorities for its 2016 tax returns and its 2017 tax return is subject to examination by U. S.
federal authorities. The Company’s tax returns are subject to examination by various state authorities for
the years 2014 through 2017.

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, 2018 was primarily due to the reclassiﬁcation of reserves for state tax expenses from
unrecognized tax beneﬁts to deferred tax liability during the year ended December 31, 2018. These state tax
expenses were deducted on the federal tax returns for the 2011 through 2017. 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.

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

10. Income Taxes − (continued)

The following is a reconciliation of the beginning and ending liability for unrecognized tax beneﬁts at

December 31:

(in thousands)
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross increases in current period tax positions . . . . . . . . . . . . . . . . . . . .
Gross increases in prior period tax positions . . . . . . . . . . . . . . . . . . . . .
Reductions in tax positions due to lapse of statutory limitations . . . . . . . .
Reclass from unrecognized tax beneﬁts to deferred tax liability . . . . . . . .
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest and penalties at end of period . . . . . . . . . . . . . . . . . . .
Total liability for unrecognized tax beneﬁts . . . . . . . . . . . . . . . . . . . .

2018
$ 751
25
—
(8)
(441)
327
48
$ 375

2017
$271
63
434
(17)
—
751
36
$787

The liability for unrecognized tax beneﬁts, including accrued interest and penalties, was included in other

liabilities in 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, 2018, 2017 and 2016.

11. Commitments and Contingencies

Purchase Commitments

As of December 31, 2018, the Company had approximately $15.0 million in outstanding purchase orders

for certain construction equipment, with cash outlay scheduled to occur over the next nine months.

Insurance and Claims Accruals

The Company carries insurance policies, which are subject to certain deductibles, for workers’

compensation, general liability, automobile liability and other coverages. The deductible per occurrence for
each line of coverage is up to $1.0 million, except for wildﬁre coverage which has a deductible of
$2.0 million. The Company’s health beneﬁt plans are subject to deductibles 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 total assets in the
consolidated balance sheets. The following table includes the Company’s accrued short- and long-term
insurance liabilities at December 31:

(in thousands)
Balance at beginning of period . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Net increases in reserves
Net payments made . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of period . . . . . . . . . . . . . . . . . . . . . .

2018
$ 45,363
31,193
(22,517)
$ 54,039

2017
$ 42,584
22,938
(20,159)
$ 45,363

2016
$ 36,967
25,139
(19,522)
$ 42,584

Insurance expense, including premiums, for workers’ compensation, general liability, automobile liability,

employee health beneﬁts, and other coverages for the years ended December 31, 2018, 2017 and 2016 was
$30.4 million, $29.5 million and $25.6 million, respectively.

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

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

11. Commitments and Contingencies − (continued)

sureties for any expenses paid out under these bonds. As of December 31, 2018, an aggregate of
approximately $614.9 million in original face amount of bonds issued by the Company’s sureties were
outstanding. Our estimated remaining cost to complete these bonded projects was approximately
$324.7 million as of December 31, 2018.

From time to time the Company guarantees the obligations of wholly owned subsidiaries, including

obligations under certain contracts with customers, certain lease agreements, and 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 our 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 14 — 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
operation 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, and asbestos-related claims concerning historic operations of a predecessor affiliate. 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 any asbestos-related claim is not resolved in the Company’s 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.

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

12. Lease Obligations

From time to time, the Company enters into leasing arrangements for real estate, vehicles and
construction equipment. In 2017, the Company entered into master leasing arrangements for vehicles and
construction equipment. Some of the leases entered into under these agreements met the requirements for
capitalization and were recorded as capital leases, while others were treated as operating leases. As of
December 31, 2018, the Company had no outstanding commitments to enter into future leases under its master
lease agreements.

Capital Leases

The Company leases vehicles and certain equipment under capital leases. The economic substance of
the leases is a ﬁnancing transaction for acquisition of the vehicles and equipment and, accordingly, the leases
are included in the balance sheets in property and equipment, net of accumulated depreciation, with a
corresponding amount recorded in current portion of capital lease obligations or capital lease obligations, net
of current maturities, as appropriate. The capital lease assets are amortized on a straight-line basis over the life
of the lease or, if shorter, the life of the leased asset, and included in depreciation expense in the statements of
operations. The interest associated with capital leases is included in interest expense in the statements of
operations.

As of December 31, 2018, the Company had approximately $2.7 million of capital lease obligations

outstanding, $1.1 million of which was classiﬁed as a current liability.

As of December 31, 2018 and 2017, $2.6 million and $3.7 million, respectively, of leased assets were

capitalized in construction equipment, net of accumulated depreciation. Additional information related to
property and equipment is provided in Note 6 — Property and Equipment to the Financial Statements.

Operating Leases

The Company leases real estate, construction equipment and office equipment under operating leases with

remaining terms ranging from one to eight years.

Rent expense includes lease payments as well as rent on items that are rented under cancellable rental
agreements. Total rent expense for the years ended December 31, 2018, 2017 and 2016, was $60.5 million,
$44.6 million and $44.9 million, respectively.

The future minimum lease payments required under capital leases, less interest, and future minimum

lease payments required under operating leases as of December 31, 2018 were as follows:

(In thousands)
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net present of minimum lease payments
. . . . . . . . . . . . . . . . . . . .
Less: Current portion of capital lease obligations . . . . . . . . . . . . . . .
Long-term capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . .

Operating
Lease
Obligations
$ 4,829
3,754
2,971
2,379
1,335
2,127
$17,395

Capital
Lease
Obligations
$1,185
1,185
365
—
—
—
$2,735

(102)
2,633
1,119
$1,514

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

12. Lease Obligations − (continued)

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, 2018, the minimum lease payments required under these leases
totaled approximately $2.8 million, which is to be paid over the next 4.5 years.

13. Stock-Based Compensation

The Company maintains two equity compensation plans under which stock-based compensation has been
granted, the 2017 Long-Term Incentive Plan, (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 adoption of the LTIP, 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 900,000 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 employees

or directors vested ratably over a three- or four-year vesting period and 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 ending December 31, 2018:

Weighted-
Average
Exercise
Price
$16.40
$14.03
$24.68
$21.40
$19.82
$15.43
$21.92
$21.54
$21.16
$22.33

Options
730,605
(443,283)
(933)
(40,672)
245,717
(79,797)
165,920
(88,053)
(1,103)
76,764

Weighted-
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value
(in thousands)

4.4 years

$4,396

4.2 years

$2,292

2.9 years

$ 446

Outstanding at January 1, 2016 . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding and Exercisable at December 31, 2016 . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding and Exercisable at December 31, 2017 . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding and Exercisable at December 31, 2018 . . . .

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

13. Stock-Based Compensation − (continued)

Other data relating to option activity for the years ended December 31 are as follows:

(dollars in thousands)
Intrinsic value of options exercised . . . . . . . . . . . . . . . . .
Fair value of options vested . . . . . . . . . . . . . . . . . . . . . .

2018
$1,277
—

2017
$1,721
—

2016
$7,832
372

The following table summarizes information with respect to stock options outstanding and exercisable

under the Company’s plans at December 31, 2018:

Exercise Price
$17.18 − $17.18 . . . . . . . . . . . . . . . . . . .
$17.48 − $17.48 . . . . . . . . . . . . . . . . . . .
$24.18 − $24.18 . . . . . . . . . . . . . . . . . . .
$24.68 − $24.68 . . . . . . . . . . . . . . . . . . .

Options Outstanding and Exercisable

Number Of
Options
7,587
15,654
17,948
35,575
76,764

Weighted-
Average
Exercise
Price
$17.18
$17.48
$24.18
$24.68
$22.35

Weighted-
Average
Remaining
Contractual
Term
1.2 years
3.1 years
2.2 years
3.5 years
2.9 years

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 2018 generally vest ratably, on an annual basis,
over three years. Time-vested stock awards granted under the LTIP to non-employee directors in 2018 vest
over a one year period.

Following is a summary of time-vested stock awards activity for the three-year period ending

December 31, 2018:

Outstanding unvested at January 1, 2016 . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding unvested at December 31, 2016 . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding unvested at December 31, 2017 . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding unvested at December 31, 2018 . . . . . . . . . . . . . . . . .

Shares
201,949
112,912
(88,301)
(3,144)
223,416
66,352
(99,774)
(1,346)
188,648
93,280
(96,840)
(9,657)
175,431

Per Share
Weighted-
Average
Grant Date
Fair Value
$24.58
$24.66
$25.18
$26.09
$25.26
$37.49
$25.19
$31.22
$29.55
$30.22
$28.91
$27.02
$30.40

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

13. Stock-Based Compensation − (continued)

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 common shares of the
Company’s stock. During 2018, management concluded that it was probable that the minimum performance
threshold would not be met for certain performance shares that were granted during 2016 and 2017. As a
result, the Company reversed $0.7 million in stock compensation from previous accruals.

The Company recognizes stock-based compensation expense related to market-based performance awards

based on the grant date fair value, which is computed using a Monte Carlo simulation. The Company
recognizes stock-based compensation expense related to internal measure-based performance awards based on
the grant date fair value, which is the closing price of the Company’s stock on the date of grant. The
Company adjusts the stock-based compensation expense related to internal metric-based performance awards
according to its determination of the potential achievement of the performance target at each reporting date.
The fair value of performance grants are expensed over the service period of approximately 2.8 years.

Following is a summary of performance share award activity for the three-year period ending

December 31, 2018:

Outstanding at January 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted at target . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earned for performance above target
. . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . .
Granted at target . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Forfeited for performance below target
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . .
Granted at target . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited for performance below target
. . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . .

Shares
143,608
79,661
20,650
(98,270)
(1,626)
144,023
47,454
(24,873)
(39,407)
(222)
126,975
66,764
(42,584)
(29,655)
(9,247)
112,253

Per Share
Weighted-
Average
Grant Date
Fair Value
$32.68
$28.25
$31.01
$27.74
$32.96
$32.92
$47.12
$36.40
$40.15
$37.22
$35.29
$34.52
$29.73
$33.35
$30.85
$39.73

Stock-based Compensation Expense

The Company recognized stock-based compensation expense of approximately $3.2 million, $4.4 million
and $4.7 million for the years ended December 31, 2018, 2017 and 2016, respectively, in selling, general and
administrative expenses. As of December 31, 2018, there was approximately $4.4 million of total

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

13. Stock-Based Compensation − (continued)

unrecognized stock-based compensation expense related to awards granted under the Plans. This included
$2.6 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 1.6 years and $1.8 million of
unrecognized compensation cost related to unvested performance awards, expected to be recognized over a
remaining weighted average vesting period of approximately 1.6 years. Time-vested stock awards granted to
non-employee directors in 2018 vest at the end of a one year period and those granted prior to 2018 vest over
a period of three years. The grant provision of the time-vested stock awards granted to non-employee directors
prior to 2018 contain provisions which call for the vesting of all shares awarded upon a change in control or
resignation from the board for any reason except breach of ﬁduciary duty. As a result of these provisions, the
fair value of time-vested stock awards granted to the non-employee directors after 2013 and all directors after
2016, was expensed on the date of the grant.

14. Employee Beneﬁt Plans

The Company has a proﬁt sharing and thrift employee beneﬁt plan in effect for all eligible employees.

Company contributions under this deﬁned contribution plan are based upon a percentage of income with
limitations as deﬁned by the plan. Contributions for the years ended December 31, 2018, 2017 and
2016 amounted to $4.7 million, $3.4 million, and $4.6 million, respectively. The Company also has an
employee beneﬁt plan in effect for certain non-union hourly employees. Company contributions under this
deﬁned contribution plan are based upon a percentage of income with limitations as deﬁned by the plan.
Contributions for the years ended December 31, 2018, 2017 and 2016 amounted to $1.0 million, $0.6 million
and $0.6 million, respectively. The Company also has a registered retirement saving plan for certain Canadian
employees, contributions to this plan for the years ended December 31, 2018 and 2017 amounted to
$0.1 million.

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 over
100 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 2019 and 2021.

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.

If a participating employer stops contributing to a plan, the unfunded obligations of the plan may be
borne by the remaining participating employers.

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

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

14. Employee Beneﬁt Plans − (continued)

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, 2018 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

Status

Plan Year
End

Status

Plan Year
End

Contributions to Plan for the
Year Ended December 31,

Funding
Plan

Surcharge
Imposed

2018

2017
(in thousands)

2016

Deﬁned Beneﬁt Plans:
National Electrical Beneﬁt Fund . . 53-0181657 001 Green 12/31/2017 Green 12/31/2016 $ 9,840 $ 9,542 $ 9,040
Eighth District Electrical Pension

Fund . . . . . . . . . . . . . . . . . 84-6100393 001 Green

3/31/2018 Green

3/31/2017

9,707

7,908

7,519

Indiana/Kentucky/Ohio Regional
Council of Carpenters Pension
Fund . . . . . . . . . . . . . . . . . 51-6123713 001 Green

IBEW Local 769 Management

6/30/2017 Green

6/30/2016

1,157

2,515

696

Pension Plan A . . . . . . . . . . . 86-6049763 001 Green

6/30/2016
Alaska Electrical Pension Plan . . . 92-6005171 001 Green 12/31/2017 Green 12/31/2016

6/30/2017 Green

2,587
2,723

2,115
1,951

1,709
1,873

Deﬁned Contribution Plans:
National Electrical Annuity Plan . . 52-6132372 001
Eighth District Electrical Pension

Fund Annuity Plan . . . . . . . . . 84-6100393 002

n/a

All other plans:
. . . . . . . . . . . .
Total Contributions: . . . . . . . . . .

n/a

26,559

27,633

22,840

4,785

4,109

4,883

13,062
5,236
$70,420 $64,888 $53,796

9,115

No
No

n/a

No
No

n/a

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.

One of the Company’s subsidiaries was listed in the Eighth District Electrical Pension Fund’s Form 5500

as providing more than 5 percent of the total contributions to that plan for the plan years ended March 31,
2018, 2017 and 2016 and the IBEW local 769 Management Pension Plan A’s Form 5500 as providing more
than 5 percent of the total contributions to that plan for the plan years ended June 30, 2017 and 2016.

15. Segment Information

MYR Group is a holding company of specialty contractors serving electrical utility infrastructure and

commercial construction markets in the United States and western 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, management fees, and intangible
amortization. The accounting policies of the segments are the same as those described in the Summary of
Signiﬁcant Accounting Policies.

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

15. Segment Information − (continued)

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 and lower voltage underground and overhead distribution systems. The T&D segment also
provides emergency restoration services in response to hurricane, ice or other storm-related damage. T&D
customers include investor-owned utilities, cooperatives, private developers, government-funded utilities,
independent power producers, independent transmission companies, industrial facility owners and other
contractors.

Commercial and Industrial: The C&I segment provides services 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, manufacturing plants, processing facilities,
waste-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:

(in thousands)
Contract revenues:

For the Year Ended December 31,
2017

2016

2018

T&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C&I

$ 893,108
638,061
$1,531,169

$ 879,372
523,945
$1,403,317

$ 818,972
323,515
$1,142,487

Income from operations:

T&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C&I
General Corporate . . . . . . . . . . . . . . . . . . . . . .

57,242
34,112
(41,042)
50,312

39,631
25,048
(35,121)
29,558

63,459
13,920
(38,625)
38,754

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, costs and estimated earnings in excess of billings on uncompleted
contracts, construction materials inventory, goodwill and intangibles for each segment are as follows as of
December 31:

(in thousands)

T&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C&I
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2018
$274,038
257,049
217,668
$748,755

2017
$257,834
152,207
193,747
$603,788

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

15. Segment Information − (continued)

An allocation of total depreciation, including depreciation of shared construction equipment, and

amortization to each segment is as follows:

(in thousands)
Depreciation and amortization

T&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C&I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the Year Ended December 31,
2016
2017

2018

$33,977
5,936
$39,913

$34,990
3,586
$38,576

$35,947
3,175
$39,122

For the years ended December 31, 2018, 2017 and 2016 the Company had Canadian contract revenues of

$53.8 million, $84.1 million and $36.5 million, respectively. Canadian contract revenues for the years ended
December 31, 2018 and 2017 were predominantly in the C&I segment and Canadian contract revenues for the
year ended December 31, 2016 were predominantly in the T&D segment. As of December 31, 2018 and 2017,
there were $20.5 million and $40.0 million, respectively, of identiﬁable assets attributable to Canadian
operations.

16. 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 in the Company’s consolidated
ﬁnancial statements. The equity owned by the other joint venture partners has been recorded as noncontrolling
interests in the Company’s consolidated balance sheets, and their portions, if material, of net income and other
comprehensive income shown as net income or other comprehensive income attributable to noncontrolling
interests in the Company’s consolidated statements of operations and other comprehensive income.
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 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, 2018. Additionally, there have been no
changes in ownership during the year ended December 31, 2018. The project is expected to be completed in
2019. The balance of the Company’s noncontrolling interest consists of the preliminary fair value of
noncontrolling interest acquired on July 2, 2018 with the Huen Companies. Net income attributable to the
noncontrolling interest, subsequent to the acquisition through December 31, 2018, was $0.2 million.

17. 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.

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

17. Earnings Per Share − (continued)

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:

(in thousands, except per share data)
Numerator:

For the Year Ended December 31,
2016
2017

2018

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net income − noncontrolling interests
. . . . . . . . . .
Net income attributable to MYR Group Inc. . . . . . . . . . .

$31,294
207
$31,087

$21,154
—
$21,154

$21,431
—
$21,431

Denominator:

Weighted average common shares outstanding . . . . . . . .
Weighted average dilutive securities . . . . . . . . . . . . . . .
Weighted average common shares outstanding, diluted . . .

16,441
144
16,585

16,273
223
16,496

17,109
352
17,461

Net income per share attributable to MYR Group Inc.:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.89
$ 1.87

$
$

1.30
1.28

$
$

1.25
1.23

For the years ended December 31, 2018, 2017 and 2016, certain common stock equivalents were

excluded from the calculation of dilutive securities because their inclusion would either have been anti-dilutive
or, for stock options, the exercise prices of those stock options were greater than the average market price of
the Company’s common stock for the period. All of the Company’s non-participating unvested restricted
shares were included in the computation of weighted average dilutive securities. The following table
summarizes the shares of common stock underlying the Company’s unvested stock options and performance
awards that were excluded from the calculation of dilutive securities:

(In thousands)
Time-vested stock awards
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2018
1
67

2017
44
97

2016
—
63

Share Repurchase Program

On July 26, 2018, the Company’s Board of Directors approved a new $20.0 million share repurchase
program that began when the previous share repurchase program expired on August 15, 2018. The new share
repurchase program will expire on August 15, 2019, or when the authorized funds are exhausted, whichever is
earlier. No shares were repurchased under the new program in 2018. The remaining availability to purchase
shares under the Repurchase Program was $20.0 million as of December 31, 2018.

During 2018, the Company repurchased 32,857 shares of stock for approximately $1.0 million from its

employees to satisfy tax obligations on shares vested under the Plans. All of the shares repurchased were
retired and returned to authorized but unissued stock.

During 2017, the Company repurchased 92,987 shares of its common stock at a weighted-average price
of $32.90 per share; 35,338 of those shares were purchased under its Repurchase Program for approximately
$0.8 million. Additionally, the Company repurchased 57,649 shares of stock for approximately $2.2 million
from its employees to satisfy tax obligations on shares vested under the 2007 LTIP. All of the shares
repurchased were retired and returned to authorized but unissued stock.

MYR GROUP INC.

NOTES TO FINANCIAL STATEMENTS

18. Quarterly Financial Data (Unaudited)

The following table presents the unaudited consolidated operating results by quarter for the years ended

December 31, 2018 and 2017:

(in thousands, except per share data)
2018:

Revenues
. . . . . . . . . . . . . . . . . . . . . . . . . .
Gross proﬁt . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to MYR Group . . . . . .
Basic earnings per share attributable to MYR

Group . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted earnings per share attributable to MYR

Group . . . . . . . . . . . . . . . . . . . . . . . . . . .

2017:

Group . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted earnings per share attributable to MYR

Group . . . . . . . . . . . . . . . . . . . . . . . . . . .

March 31,

$345,611
35,753
5,644

0.35

0.34

$300,129
25,740
1,200

0.07

For the Three Months Ended
September 30,
June 30,

December 31,(a)

$339,676
38,630
6,835

0.42

0.41

$356,185
27,517
1,230

0.08

0.07

$399,537
45,286
7,957

0.48

$373,502
34,853
5,145

0.32

0.31

$446,345
47,391
10,651

0.65

0.64

$373,501
36,894
13,579

0.83

0.82

(a) Results for the fourth quarter of 2017 include a net 2017 Tax Act beneﬁt of $7.8 million, or $0.48 and

$0.47 per basic and diluted share, respectively.

Earnings per share amounts for each quarter are required to be computed independently using the

weighted average number of shares outstanding during the period. As a result, the sum of the individual
quarterly earnings per share amounts may not agree to the earnings per share calculated for the year.

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that

information required to be disclosed in the reports we ﬁle or submit pursuant to the Exchange Act is recorded,
processed, summarized and reported within the time periods speciﬁed in the rules and forms of the SEC, and
that such information is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management, together with our Chief Executive Officer and Chief Financial Officer, has evaluated the

effectiveness of our disclosure controls and procedures (as deﬁned in Exchange Act Rules 13a-15(e) and
15d-15(e)) as of the end of the period covered by this Annual Report on Form 10-K. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective and provided reasonable assurance related to the matters stated in the above
paragraph as of December 31, 2018.

Evaluation of Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over ﬁnancial

reporting, as such term is deﬁned in Exchange Act Rule 13a-15(f). Under the supervision and with the
participation of our management, including our principal executive officer and principal ﬁnancial officer, we
conducted an evaluation of the effectiveness of our internal control over ﬁnancial reporting based on the
framework set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Management’s annual report on internal control over ﬁnancial
reporting and the report of our independent registered public accounting ﬁrm appear in Part II, Item 8
‘‘Financial Statements and Supplementary Data’’ of this Annual Report on Form 10-K.

This Annual Report on Form 10-K includes a report of management’s assessment regarding internal
control over ﬁnancial reporting (see ‘‘Management’s Report on Internal Control over Financial Reporting’’)
and an attestation report of our independent registered public accounting ﬁrm regarding internal control over
ﬁnancial reporting (see ‘‘Report of Independent Registered Public Accounting Firm’’).

For the year ended December 31, 2018, management’s assessment of our internal control over ﬁnancial
reporting excluded the internal control over ﬁnancial reporting of Huen Electric, Inc., which was acquired on
July 2, 2018. Pursuant to the SEC’s general guidance that a recently acquired business may be omitted from
the scope of an assessment in the year of the acquisition, the scope of our assessment does not include Huen
Electric, Inc. As of December 31, 2018, Huen Electric, Inc. represented a total of approximately 9.6% and
9.8% of total assets and net assets, respectively, and 4.5% and 1.1% of contract revenues and income before
income taxes, respectively, for the year then ended.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over ﬁnancial reporting during the fourth quarter
ended December 31, 2018 that have materially affected, or that are reasonably likely to materially affect, our
internal control over ﬁnancial reporting.

Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that
our disclosure controls and procedures or our internal control over ﬁnancial reporting will detect or prevent all
errors and all fraud. A control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a
control system must reﬂect the fact that there are resource constraints, and the beneﬁts of controls must be
considered relative to their costs. 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. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the control. The design of any system of
controls also is based in part upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Over time, controls may become inadequate because of changes in conditions, or the degree of compliance
with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information required by this Item 10 related to our directors is incorporated by reference to the

information to be included under ‘‘Proposal No. 1. Election of Directors’’ of our deﬁnitive Proxy Statement
for our Annual Meeting of Stockholders scheduled to be held April 25, 2019 (‘‘2019 Proxy Statement’’).
Information about compliance with Section 16(a) of the Exchange Act is incorporated by reference to the
information to be included under the heading ‘‘Section 16(a) Beneﬁcial Ownership Reporting Compliance’’ in
our 2019 Proxy Statement. Information regarding the procedures by which our stockholders may recommend
nominees to our board of directors is incorporated by reference to the information to be included under the
heading ‘‘Nominating and Corporate Governance Committee Matters — Criteria for Nomination to the Board
of Directors and Diversity’’ in our 2019 Proxy Statement. Information about our Audit Committee, including
its members, and our Audit Committee ﬁnancial experts, is incorporated by reference to the information to be
included under the headings ‘‘Audit Committee Matters’’ in our 2019 Proxy Statement. The balance of the
information required by this item is contained in the discussion entitled ‘‘Executive Officers’’ in Part I of this
Annual Report on Form 10-K.

We have a code of ethics that applies to all of our directors, officers and other employees. This code is
publicly available on our website at www.myrgroup.com. Amendments to the code of ethics or any grant of a
waiver from a provision of the code requiring disclosure under applicable SEC and Nasdaq Global Market
rules will be disclosed on our website or, if so required, disclosed in a Current Report on Form 8-K ﬁled with
the SEC. The information on our website is not, and shall not be deemed to be, a part of this Annual Report
on Form 10-K or incorporated into any other ﬁlings we make with the SEC.

Item 11.

Executive Compensation

The information required by this Item 11 is incorporated by reference to the information to be included
in our 2019 Proxy Statement under the headings ‘‘Director Compensation,’’ ‘‘Compensation Discussion and
Analysis,’’ ‘‘Executive Compensation Tables’’ and ‘‘Compensation Committee Matters — Compensation
Committee Report for the Year Ended December 31, 2018.’’

Item 12.

Security Ownership of Certain Beneﬁcial Owners and Management and Related Stockholder
Matters

Equity Compensation Plan Information

The following table sets forth certain information regarding our 2007 Long-Term Incentive Plan

(Amended and Restated as of May 1, 2014) (the ‘‘2007 Plan’’) and our 2017 Long-Term Incentive Plan (the
‘‘LTIP’’) as of December 31, 2018. At December 31, 2018, our only active equity compensation plan was the
LTIP.

Plan Category
Equity compensation plans approved by security holders
. . . .
Equity compensation plans not approved by security holders . .

Number of
securities to
be issued
upon exercise
of outstanding
options,
warrants and
rights(1)
562,367
—

Weighted-
average
exercise price
of outstanding
options,
warrants and
rights(2)
$22.33
$ —

Number of
securities
remaining
available for
future issuance
under equity
compensation
plans(3)
663,439
—

(1)

Includes (i) 249,042 shares committed to be issued for phantom stock and performance awards granted in
2016 and 2017 under the 2007 Plan (assumes actual performance for performance awards granted in
2016; assumes maximum performance for performance awards granted in 2017), (ii) 76,764 shares
subject to outstanding option awards granted under the 2007 Plan, (iii) 131,622 shares committed to be
issued for performance awards granted in 2018 under the LTIP (assumes maximum performance) and
(iv) 104,939 shares subject to outstanding restricted stock units granted under the LTIP.

100

(2) The calculation in this column includes only option awards because the shares underlying other

outstanding awards will be issued upon vesting or satisfaction of relevant performance criteria without
any cash consideration payable for those shares.

(3) Reﬂects securities remaining available for future issuance under our LTIP. No further awards will be

granted under the 2007 Plan.

Other information required by this Item 12 is incorporated by reference to the information to be included

in our 2019 Proxy Statement under the headings ‘‘Ownership of Equity Securities’’ and ‘‘Compensation
Discussion and Analysis.’’

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item 13 is incorporated by reference to the information to be included

in our 2019 Proxy Statement under the headings ‘‘Certain Relationships and Related Person Transactions’’ and
‘‘Corporate Governance — Director Independence.’’

Item 14.

Principal Accounting Fees and Services

The information required by this Item 14 is incorporated by reference to the information to be included
in our 2019 Proxy Statement under the heading ‘‘Audit Committee Matters — Independent Auditors’ Fees.’’

101

Item 15.

Exhibits and Financial Statement Schedules

i) Documents ﬁled as part of this Report

PART IV

(1) The following Financial Statements are ﬁled herewith in Item 8 of Part II above.

(a) Report of Management

(b) Reports of Independent Registered Public Accounting Firms

(d) Consolidated Statements of Operations

(e) Consolidated Statements of Comprehensive Income

(f) Consolidated Statements of Stockholders’ Equity

(g) Consolidated Statements of Cash Flows

(h) Notes to Financial Statements

ii) Financial Statement Schedules

All other supplemental schedules are omitted because of the absence of conditions under which they
are required, or the required information is shown in the notes to the Financial Statements.

Item 16.

Form 10-K Summary

Registrants may voluntarily include a summary of information required by Form 10-K under the Item.

16. The Company has elected not to included such summary information.

iii) Exhibit List

Number
3.1

3.2

4.1

10.1

10.2

10.3

10.4

10.5

Description

Restated Certiﬁcate of Incorporation, incorporated by reference to exhibit 3.1 of the Company’s
Form 8-K (File No. 001-08325), ﬁled with the SEC on May 7, 2014
Amended and Restated By-Laws, incorporated by reference to exhibit 3.1 of the Company’s
Form 8-K (File No. 001-08325), ﬁled with the SEC on December 22, 2015
Specimen Common Stock Certiﬁcate, incorporated by reference to exhibit 4.2 of the Company’s
Registration Statement on Form S-1/A (File No. 333-148864), ﬁled with the SEC on July 14, 2008
Credit Agreement, dated December 21, 2011, between the Registrant and J.P. Morgan Chase Bank,
N.A., Bank of America, N.A., PNC Bank, National Association, BMO Harris Bank N.A and Wells
Fargo Bank, National Association, incorporated by reference to exhibit 10.1 of the Company’s
Current Report on Form 8-K (File No. 001-08325), ﬁled with the SEC on December 23, 2011
Pledge and Security Agreement, dated December 21, 2011, between the Registrant, certain of its
Subsidiaries and J.P. Morgan Chase Bank, N.A., in its capacity as administrative agent for the
lenders party to the Credit Agreement, incorporated by reference to exhibit 10.2 of the Company’s
Current Report on Form 8-K (File No. 001-08325), ﬁled with the SEC on December 23, 2011
Guaranty, dated December 21, 2011, between certain Subsidiaries of the Registrant in favor of
J.P. Morgan Chase Bank, N.A., as administrative agent for the beneﬁt of the Holders of Secured
Obligations under the Credit Agreement, incorporated by reference to exhibit 10.3 of the
Company’s Current Report on Form 8-K (File No. 001-08325), ﬁled with the SEC on
December 23, 2011
MYR Group Inc. 2007 Long-Term Incentive Plan (Amended and Restated as of May 1, 2014),
incorporated by reference to exhibit 10.1 of the Company’s Form 8-K (File No. 001-08325), ﬁled
with the SEC on May 7, 2014+
Form of Named Executive Officer Nonqualiﬁed Stock Option Award under the 2007 Long-Term
Incentive Plan, incorporated by reference to exhibit 10.1 of the Company’s Form 10-Q for the
quarter ended March 31, 2010 (File No. 001-08325), ﬁled with the SEC on May 10, 2010+

102

Number
10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20

10.21

10.22

Description

Form of Employment Agreement, dated March 11, 2010, between the Registrant and Executive
Officer, incorporated by reference to exhibit 10.5 of the Company’s Form 10-Q for the quarter
ended March 31, 2010 (File No. 001-08325), ﬁled with the SEC on May 10, 2010+
Form of Indemniﬁcation Agreement for Directors and Officers, incorporated by reference to exhibit
10.1 of the Company’s Form 8-K (File No. 001-08325), ﬁled with the SEC on May 11, 2011+
MYR Group Senior Management Incentive Plan, Amended and Restated as of May 1, 2014,
incorporated by reference to exhibit 10.2 of the Company’s Current Report on Form 8-K
(File No. 001-08325), ﬁled with the SEC on May 7, 2014+
Form of Named Executive Officer Restricted Stock Award under 2007 Long-Term Incentive Plan,
incorporated by reference to exhibit 10.15 of the Company’s Form 10-K for the year ended
December 31, 2013 (File No. 001-08325), ﬁled with the SEC on March 5, 2014+
Form of Named Executive Officer Performance Share Award under 2007 Long-Term Incentive
Plan, incorporated by reference to exhibit 10.16 of the Company’s Form 10-K for the year ended
December 31, 2013 (File No. 001-08325), ﬁled with the SEC on March 5, 2014+
Form of Independent Director Restricted Stock Award under 2007 Long-Term Incentive Plan,
incorporated by reference to exhibit 10.17 of the Company’s Form 10-K for the year ended
December 31, 2013 (File No. 001-08325), ﬁled with the SEC on March 5, 2014+
Form of Independent Director Phantom Stock and Dividend Equivalents Award under the 2007
Long-Term Incentive Plan, incorporated by reference to exhibit 10.1 of the Company’s Form 10-Q
for the quarter ended June 30, 2015 (File No. 001-08325), ﬁled with the SEC on August 5, 2015+
Employment agreement with Betty R. Johnson, incorporated by reference to exhibit 10.1 of the
Company’s Form 10-Q for the quarter ended September 30, 2015 (File No. 001-08325), ﬁled with
the SEC on November 4, 2015+
Employment Agreement, dated April 29, 2015 between the Company and Tod Cooper, incorporated
by reference to exhibit 10.21 of the Company’s Form 10-K for the year ended December 31, 2015
(File No. 001- 08325), ﬁled with the SEC on March 3, 2016
Agreement, dated March 22, 2016, by and among MYR Group Inc., Engine Capital Management,
LLC, Engine Capital, L.P., Engine Jet Capital, L.P., Engine Airﬂow Capital, L.P., Engine
Investments, LLC, Engine Investments II, LLC, Arnaud Ajdler and John P. Schauerman,
incorporated by reference to exhibit 10.1 of the Company’s Current Report on Form 8-K
(File No. 001-08325), ﬁled with the SEC on March 23, 2016
Amended and Restated Credit Agreement, dated June 30, 2016, incorporated by reference to
exhibit 10.1 of the Company’s Current Report on Form 8-K (File No. 001-08325), ﬁled with the
SEC on July 7, 2016
Joinder, Amendment No. 1 and Reaffirmation of Pledge and Security Agreement, dated June 30,
2016, incorporated by reference to exhibit 10.2 of the Company’s Current Report on Form 8-K
(File No. 001-08325), ﬁled with the SEC on July 7, 2016
Joinder, Amendment No. 1 and Reaffirmation of Guaranty, dated June 30, 2016, incorporated by
reference to exhibit 10.3 of the Company’s Current Report on Form 8-K (File No. 001-08325),
ﬁled with the SEC on July 7, 2016
Amended and Restated Employment Agreement, dated January 1, 2017, between the Company and
William A. Koertner, incorporated by reference to exhibit 10.24 of the Company’s Form 10-K for
the year ended December 31, 2016 (File No. 001-08325), ﬁled with the SEC on March 9, 2017+
Amendment to the Employment Agreement, dated January 1, 2017, between the Company and
Richard S. Swartz, Jr., incorporated by reference to exhibit 10.25 of the Company’s Form 10-K for
the year ended December 31, 2016 (File No. 001-08325), ﬁled with the SEC on March 9, 2017+
Amendment to the Employment Agreement, dated January 1, 2017, between the Company and Tod
M. Cooper, incorporated by reference to exhibit 10.26 of the Company’s Form 10-K for the year
ended December 31, 2016 (File No. 001-08325), ﬁled with the SEC on March 9, 2017+
Employment Agreement, dated January 1, 2017, between the Company and Jeffrey J. Waneka,
incorporated by reference to exhibit 10.27 of the Company’s Form 10-K for the year ended
December 31, 2016 (File No. 001-08325), ﬁled with the SEC on March 9, 2017+

103

Number
10.23

10.24

10.25

10.26

10.27

10.28

10.29

10.30

10.31

10.32

10.33
21.1
23.1
23.2
24.1
31.1
31.2
32.1
32.2

Description
Agreement, dated January 30, 2017, by and among MYR Group Inc., Engine Capital Management,
LLC, Engine Capital, L.P., Engine Jet Capital, L.P., Engine Airﬂow Capital, L.P., Engine
Investments, LLC, Engine Investments II, LLC and Bradley Favreau, incorporated by reference to
exhibit 10.28 of the Company’s Form 10-K for the year ended December 31, 2016
(File No. 001-08325), ﬁled with the SEC on March 9, 2017
Form of Restricted Stock Award Agreement (Named Executive Officer), incorporated by reference
to exhibit 10.1 of the Company’s Current Report on Form 8-K (File No. 001-08325) under the
2007 Long-Term Incentive Plan, ﬁled with the SEC on April 28, 2017+
Form of Performance Shares Award Agreement (Named Executive Officer) under the 2007
Long-Term Incentive Plan, incorporated by reference to exhibit 10.2 of the Company’s Current
Report on Form 8-K (File No. 001-08325), ﬁled with the SEC on April 28, 2017+
Form of Restricted Stock Units Award Agreement (Non-Employee Director) under the 2017
Long-Term Incentive Plan, incorporated by reference to exhibit 10.3 of the Company’s Current
Report on Form 8-K (File No. 001-08325), ﬁled with the SEC on April 28, 2017+
Form of Restricted Stock Units Award Agreement (Director) under the 2017 Long-Term Incentive
Plan, incorporated by reference to exhibit 10.4 of the Company’s Current Report on Form 8-K
(File No. 001-08325), ﬁled with the SEC on April 28, 2017+
Amendment to the Amended and Restated Employment Agreement, dated April 11, 2017, between
the Company and Richard S. Swartz, Jr., incorporated by reference to exhibit 10.1 of the
Company’s Current Report on Form 10-Q (File No. 001-08325), ﬁled with the SEC on May 3,
2017+
Form of Restricted Stock Unit Award Agreement (Named Executive Officer) under the 2017
Long-Term Incentive Plan, incorporated by reference to exhibit 10.1 of the Company’s Current
Report on Form 10-Q (File No. 001-08325), ﬁled with the SEC on May 2, 2018+
Form of Performance Shares Award Agreement (Named Executive Officer) under the 2017
Long-Term Incentive Plan, incorporated by reference to exhibit 10.2 of the Company’s Current
Report on Form 10-Q (File No. 001-08325), ﬁled with the SEC on May 2, 2018+
Asset Purchase Agreement, dated as of July 2, 2018, by and among MYR Group, Inc., certain
subsidiaries of MYR Group, Inc., as purchasers, and Huen Electric, Inc., incorporated by reference
to exhibit 10.1 of the Company’s Current Report on Form 10-Q (File No. 001-08325), ﬁled with
the SEC on August 1, 2018
Amendment No. 1 to Amended and Restated Credit Agreement, dated September 28, 2018,
incorporated by reference to exhibit 10.1 of the Company’s Current Report on Form 10-Q
(File No. 001-08325), ﬁled with the SEC on October 31, 2018
Employment Agreement, dated January 21, 2019, between the Company and William F. Fry+†
List of Subsidiaries†
Consent of Crowe LLP†
Consent of Ernst & Young LLP†
Power of Attorney†
Certiﬁcation of Chief Executive Officer pursuant to SEC Rule 13a-14(a)/15d-14(a)†
Certiﬁcation of Chief Financial Officer pursuant to SEC Rule 13a-14(a)/15d-14(a)†
Certiﬁcation of Chief Executive Officer pursuant to 18 U.S.C. §1350†
Certiﬁcation of Chief Financial Officer pursuant to 18 U.S.C. §1350†

101.INS XBRL Instance Document*
101.SCH XBRL Taxonomy Extension Schema Document*
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF XBRL Taxonomy Extension Deﬁnition Linkbase Document*
101.LAB XBRL Taxonomy Extension Label Linkbase Document*
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document*

†
+
*

Filed herewith.
Indicates management contract or compensatory plan or arrangement.
Electronically ﬁled.

104

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the

registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

March 6, 2019

MYR GROUP INC.
(Registrant)

/s/ BETTY R. JOHNSON
Name: Betty R. Johnson
Title: Senior Vice President, Chief Financial Offıcer
and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the

following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature

Title

*
Richard S. Swartz

/s/ BETTY R. JOHNSON
Betty R. Johnson

President and Chief Executive Officer
(Principal Executive Officer)

Senior Vice President, Chief Financial Officer
and Treasurer (Principal Financial Officer and
Principal Accounting Officer)

Date

March 6, 2019

*
Kenneth M. Hartwick

*
Larry F. Altenbaumer

*
Bradley T. Favreau

*
Henry W. Fayne

*
Gary R. Johnson

*
William A. Koertner

*
Jennifer E. Lowry

*
Donald C.I. Lucky

*
Maurice E. Moore

*
William D. Patterson

*By:

/s/ BETTY R. JOHNSON
(Betty R. Johnson)
(Attorney-in-fact)

Chairman of the Board of Directors

March 6, 2019

Director

105

[This page intentionally left blank.]

BOARD OF DIRECTORS

From left to right

KENNETH M. HARTWICK
Chairman since 2018 (Director
since 2015)

LARRY F. ALTENBAUMER
Director since 2006

BRADLEY T. FAVREAU
Director since 2016

HENRY W. FAYNE
Director since 2007

GARY R. JOHNSON
Director since 2007

WILLIAM A. KOERTNER
Director since 2007

DONALD C.I. LUCKY
Director since 2015

JENNIFER E. LOWRY
Director since 2018

MAURICE E. MOORE
Director since 2010

WILLIAM D. PATTERSON
Director since 2007

EXECUTIVE
OFFICERS

RICHARD S. SWARTZ
President and
Chief Executive Officer

BETTY R. JOHNSON
Senior Vice President, Chief
Financial Officer and Treasurer

TOD M. COOPER
Senior Vice President and Chief
Operating Officer - Transmission
& Distribution

JEFFREY J. WANEKA
Senior Vice President and Chief
Operating Officer - Commercial
& Industrial

WILLIAM F. FRY
Vice President, Chief Legal
Officer and Secretary

COMPANY OFFICERS
Larry C. Baker
Group Vice President, C&I

Russell A. Hinnen
Vice President,
Corporate Accounting

Steven D. Cavanaugh
Vice President, Safety

Wayne D. Dorris
Group Vice President, C&I
Sturgeon Electric Company, Inc.

John W. Dougherty
President & CEO,
Huen Electric, Inc.

Don A. Egan
Group Vice President, C&I
Sturgeon Electric Company, Inc.

Mark A. Enos
Vice President, Fleet

David D. Fettback
President, Western Pacific
Enterprises Ltd.

William H. Green
President, MYR Group
Construction Canada, Ltd.

Elaine K. Hughes
Vice President,
Business Development

Doreen L. Keller
Vice President,
Human Resources

D. Scott Lamont
President, Harlan Electric
Company and President,
E.S. Boulos Company

Brandon M. Lark
President, Great
Southwestern Construction
Company, Inc. and
President, GSW Integrated
Services, LLC

Jean A. Luber
Vice President,
Information Technology

Mindie W. McIff
Vice President,
Corporate Estimating

Michael L. Orndahl
Vice President, Assistant
General Counsel

Marisa A. Owens
Vice President,
Operational Accounting

Richard A. Pieper
President, MYR Transmission
Services, Inc.

Terry C. Roberts
President, Sturgeon Electric
Company, Inc.

Brian K. Stern
President, The L.E.
Myers Co.

R. Clay Thompson
President, High Country Line
Construction, Inc.

CORPORATE HEADQUARTERS
1701 GOLF ROAD, SUITE 3-1012
ROLLING MEADOWS, IL 60008

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