2
0
2
2
A
N
N
U
A
L
R
E
P
O
R
T
ANNUAL
REPORT
$3.01B
2022 ANNUAL REVENUE
TOP 5 ENR
U.S. SPECIALTY ELECTRICAL
CONTRACTORS FOR 25+ YEARS
IN A ROW WITH ENGINEERING
NEWS-RECORD (ENR)
STRONG SAFETY
PERFORMANCE
TOTAL CASE INCIDENT RATE – 1.14
LOST TIME INCIDENT RATE – 0.09
TOP-TIER
GOVERNANCE
RECEIVED A QUALITY SCORE
OF 1 (HIGHEST RATING) BY
INSTITUTIONAL SHAREHOLDER
SERVICES (ISS) FOR OUR
GOVERNANCE PRACTICES
*As of January 2023
A recognized leader in large-scale electrical construction,
building the pathway to a clean energy future across the
United States and Canada
Since 1891, MYR Group has
delivered some of the largest, most
complex electrical infrastructure and
commercial and industrial projects.
Our integrated solutions, extensive
expertise, and comprehensive
approach to providing superior
electrical construction services
drive strong project outcomes with
exceptional customer service and
value. This legacy of success can
be attributed to our skilled and
dedicated workforce, strategic
business initiatives, and continual
drive to improve and adapt.
Together, we are paving the way for
a clean energy future in a dynamic
energy landscape.
1891
130+ YEARS OF BUILDING
& MAINTAINING CRITICAL
ELECTRICAL INFRASTRUCTURE
8,500+
EMPLOYEES THROUGHOUT
U.S. & CANADA
65
OFFICE LOCATIONS
THROUGHOUT U.S. & CANADA
NOTEWORTHY
HIGHLIGHTS
Record Revenue
Strong Safety Performance
Essential Clean Energy Contractor
Reliable & Nimble Partner
Proven Operational Strength
FEBRUARY 22, 2023
DEAR SHAREHOLDER,
Our accomplishments this past year were made possible
by the tremendous dedication of our employees, whose
daily effort and commitment create the foundation of our
organizational and operational strength. Time-tested values
built over a century form our culture and drive our mission
to provide superior specialty electrical contracting services.
This culture enables us to foster deep client relationships,
execute long- and near-term strategies, and affirm our
position as a leading electrical construction company.
Our continued expansion of strong customer relationships,
emphasis on employee training and development, combined
with the country’s robust investment in infrastructure
improvement and clean energy transformation projects,
resulted in solid financial returns. We are well positioned
for ongoing success thanks to a robust pipeline of project
opportunities, sound business strategies, and positive
growth forecasts in the core markets we serve.
AN ESSENTIAL PARTNER IN THE CLEAN ENERGY
TRANSFORMATION
This past year saw renewed commitment to and financial
support for the clean energy transformation, highlighting the
growing need for grid modernization, reliability improvement,
and system hardening. Through our Transmission &
Distribution (T&D) and Commercial & Industrial (C&I) service
offerings, we played a pivotal role in the clean energy
transformation and served as a strong partner for our
customers as they strive to achieve a carbon neutral future.
Increased demand for solar installations, battery storage, and
electrical vehicle charging stations, coupled with the need
to integrate clean resources to the electric grid, fostered
increased project opportunities throughout our business.
In our T&D segment, we actively bid and execute
transmission, distribution, substation, and clean energy work
across the U.S. and Canada, constructing projects of varied
capacity, size, and complexity. The work we perform is critical
for making clean energy viable sources of power and will
keep expanding our business as we continually strengthen
our reputation as a reliable, strong, and experienced
partner for both existing and new customers. Our nation’s
aging infrastructure, increased grid demand, reliability,
decarbonization goals, and legislative funding are the primary
drivers that will create numerous opportunities and long-term
growth for MYR Group.
Our C&I segment continued to see steady work in our core
markets, including healthcare, data centers, water treatment,
and clean energy, backed by the strength of our customer
relationships and proactive approach to mitigate challenges
and successfully complete projects. Managing work
intelligently and in close collaboration with our customers
creates a strong foundation that enables us to overcome
hurdles. Economic upturn, improved construction spend, and
pent-up demand are drivers that could elevate opportunities
moving forward.
Further strengthening our many longstanding customer
relationships and multi-year service agreements, and
strategically forging new partnerships remains a primary
strategy. By working together in a collaborative environment
and sharing best practices and key learnings, MYR Group
remains a reliable, safe and trusted partner that provides
integrated, turnkey offerings, and successful project
execution for our customers.
COMMITTED TO LEADING BY EXAMPLE
MYR Group’s role as an industry leader is hard-earned over
more than a century and it is our commitment to remain at the
forefront and lead by example. Protecting the safety and well-
being of our people, reducing our environmental impact, and
supporting our local communities are top priorities in all areas
of our business.
execution of projects while offering unparalleled value to
customers, remaining disciplined in bidding, and proactively
managing risks. Our commitment to delivering exceptional
value to our clients, communities, and shareholders while
supporting the success and safety of our dedicated, talented
employees, and strategically growing our business through
sound investments will never waver.
The coming years are encouraging with the tremendous
investments being made in electrical infrastructure
across the markets we’ve successfully served for over a
century. Our legacy of long-term alliances and deep client
relationships position us well for future work and maintain
MYR Group’s hard-earned status as a trusted partner in the
electrical construction industry. The past year saw many
accomplishments we are proud to acknowledge as we now
turn our focus to the future and the important work before us.
Best regards,
Rick Swartz
President and
Chief Executive Officer
Ken Hartwick
Chair of the Board
We continually invest in our employees because, ultimately,
our growth and ability to remain a strong partner for our clients
stems from the skills and expertise of our talented teams.
Diversity of all our teams is a critical component of our overall
success. This begins with our diverse and highly experienced
group of leaders and is reflected throughout the rest of our
organization. We are proud of the investments we make
in our people and encouragement of unique backgrounds,
talents, and skills. By offering ample training and development
opportunities at all levels, the next generation of leaders in our
company will propel us to a bright future.
At MYR Group, we strive to fulfill our Environmental, Social,
and Governance (ESG) responsibilities on a daily basis,
integrating them into our long-term strategy, core values,
vision for the future, and day-to-day business operations.
Our commitment to these responsibilities and staying at the
forefront of our industry helps us deliver long-term value to our
clients and shareholders.
AN EXPERIENCED PARTNER HERE FOR THE LONG HAUL
A strong sense of purpose and understanding of who we are,
while embracing growth and innovation, has allowed us to
operate successfully throughout our history and will enable
us to do so into the future. There is healthy competition in
our market segments and our response is to provide superior
ESSENTIAL CLEAN
ENERGY PARTNER
BONNY EAGLE,
RUMFORD, & BERLIN
BATTERY STORAGE
Providing EPC services for two
8MW two-hour duration utility
scale battery systems and one
14MW two-hour duration utility
scale battery system.
MESQUITE SOLAR &
BATTERY STORAGE
Providing turnkey, EPC services
for 52.5 MWac and 60 MWac solar
photovoltaic facilities and four-hour
battery energy storage systems.
FUTURE ENERGY®
EV CONSTRUCTION
Installing electric vehicle (EV)
construction projects for Future
Energy® in various automotive
dealership lots throughout the
U.S. and Canada.
The clean energy transformation is underway, but cannot succeed
without meeting the storage, integration, reliability, and increased
demand challenges ahead. For more than 130 years, we have provided
the industry-leading electrical construction services that power our
lives, and our role as strong infrastructure partners has never been
more essential. As our clients strive to meet energy goals and evolve
how they produce energy, their business models are undergoing
significant change, driving increased investments in infrastructure,
technology, and efficiency across the clean energy space. Our
capabilities are expanding to support increased demand – growing our
work in areas such as battery storage and interconnect work for solar
and wind generation as well as electric vehicle charging stations are
ways we enable the clean energy transformation. Applying the same
proactive approaches and by working collaboratively with our clients,
MYR Group will remain an essential partner in the clean energy
transformation well into the future.
DEPTH OF KNOWLEDGE
& RELATIONSHIPS
We pride ourselves on serving
clients as a strong and nimble
partner. Our reliability and
extensive experience help us
foster long-term relationships
through established alliance
agreements while solidifying
our hard-earned reputation to
form new business partners.
Our collaborative network of
companies freely shares industry
knowledge, best practices,
streamlined processes, and
unified resources, enhancing
our ability to provide exceptional
value and expertise to our
customers throughout the U.S.
and Canada.
We remain steadfastly committed to our skilled workforce, offering industry-leading training,
education, and mentorship to create the leadership of tomorrow. Every challenge is an
opportunity, and we are poised to overcome them together with our clients, driven by the
belief that by working together, we will positively impact the communities we serve. The
foundation of tomorrow is built today.
DISTRIBUTION
POLE HAULING
For two decades, MYR Group has
managed the DTE pole yard in
Michigan, responsible for every
wood and steel pole delivered across
a 7,600-square-mile service territory.
TORONTO HYDRO
ALLIANCE
This longstanding relationship
of overhead and underground
distribution work with Toronto Hydro
has been in place for 25+ years.
CENTRAL 70
PROJECT
Crews provided electrical
construction services for the Central
70 Project, which reconstructed and
expanded 10 miles of Interstate 70.
A DIVERSE &
SUSTAINABLE
COMPANY
As a company, we are a reflection of the people who make
us. It is our amazing, diverse employees that fuel our
success and push us forward as a sustainably conscious
organization. This is why we commit to our workforce,
investing in all areas that help them grow personally and
professionally. We encourage and welcome diversity, equity,
and inclusion, striving to assess and enact recruitment
efforts that attract a wide talent pool to support and drive
our long-term business goals. With a strong sense of
environmental stewardship, we are focused on reducing the
impact of our operations, operating in a responsible manner,
and partnering with our customers to serve as a strong ally
in the clean energy transformation.
Our commitment to acting sustainably and responsibly
begins at the highest levels of leadership, with our diverse
Board of Directors, independent chair, and committees
forming the cornerstone of the organization’s corporate
governance. A consistent sharing of knowledge,
backgrounds, and experience continually positions MYR
Group at the forefront of our industry.
EXCELLENCE IN
SAFETY PERFORMANCE
Safety is a constant state of mind, ingrained into our attitudes, values, goals, and behaviors
because simply having the best training, tools, equipment, processes, and procedures is
not enough to keep us safe. Our behavioral commitment to safety and strong culture is built
upon tenacious dedication from management, employee involvement, excellent training
programs, industry involvement, and a constant focus on innovation and improvement. Our
dedication and efforts result in outstanding safety performance and our industry-leading
reputation as a top specialty electrical contractor.
OSHA VPP STAR
STATUS MEMBER
14Consecutive years
maintaining exemplary
achievement
2Decades of
Excellence Awards
46 SAFETY AWARDS
Over the last five years, MYR Group companies have won
46 Zero-Injury Awards & Safety Excellence Awards from
The National Electrical Contractors Association’s (NECA)
elite safety program in recognition of our excellence in the
field of health & safety.
FINANCIAL
SUMMARY
SUMMARY
BALANCE
SHEET
(Dollars in thousands, except per share data)
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
2022
890,291
$
2021
748,390
$
233,175
115,847
87,557
71,988
$
1,398,858
$
666,960
$
$
35,479
136,219
560,200
196,092
66,065
49,054
61,491
1,121,092
498,599
3,464
99,927
519,102
Total liabilities and stockholders’ equity
$
1,398,858
$
1,121,092
SUMMARY
INCOME
STATEMENT
Contract revenues
Gross profit
Income from operations
Net income
Diluted earnings per share
OTHER
SUMMARY
DATA
Backlog
Net cash provided by operating activities
Expenditures for property and equipment
EBITDA (1)
$
$
$
$
$
$
$
$
$
3,008,542
343,962
114,907
83,381
4.91
2,501,827
167,484
77,056
175,750
$
$
$
$
$
$
$
$
$
2,498,289
324,981
118,560
85,006
4.95
1,789,144
137,228
52,361
164,240
NOTES
(1) 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 “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations.”
INVESTOR
INFORMATION
STOCK TICKER
SYMBOL
NASDAQ: MYRG
AUDITORS
Crowe LLP
1 Mid America Plaza
Suite 700
Oakbrook Terrace, IL 60181
REGISTRAR AND
TRANSFER AGENT
American Stock Transfer
& Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
800.937.5449
SHAREHOLDER
INQUIRIES
Dresner Corporate Services
David Gutierrez, Senior VP
10 South LaSalle Street,
Suite 2170
Chicago, IL 60603
312.780.7204
dguiterrez@dresnerco.com
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
_____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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.)
12121 Grant Street, Suite 610
Thornton, CO 80241
(Address of principal executive offices, including zip code)
(303) 286-8000
(Registrant’s telephone number, including area code)
__________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value
Trading Symbol(s)
MYRG
Name of each exchange on which registered
The Nasdaq Stock Market LLC
(Nasdaq Global Market)
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 ☐ No ☒
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 ☐ No ☒
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 ☒ No ☐
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 ☒ No ☐
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
☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 30, 2022 (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 $1.21 billion, 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 February 17, 2023 there were 16,665,262 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 2023
annual meeting of shareholders expected to be held on April 20, 2023, are incorporated into Part III hereof.
MYR GROUP INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2022
TABLE OF CONTENTS
PART I
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Properties
Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities
Item 6.
[Reserved]
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.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection
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 Shareholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibit and Financial Statement Schedules
Item 16. Form 10-K Summary
Page
3
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83
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84
86
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.
1
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,” “likely,” “may,” “objective,” “outlook,” “plan,” “project,”
“possible,” “potential,” “should,” “unlikely,” 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 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.
2
Item 1. Business
General
PART I
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. We primarily
provide electrical construction services through a network of local offices located throughout the United States and 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 12121 Grant Street, Suite 610, Thornton, Colorado 80241. The telephone
number of our principal executive offices is (303) 286-8000.
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 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 transmission and distribution industry since 1891. We are
one of the largest U.S. contractors servicing the T&D sector of the electric utility industry. Our T&D segment provides a broad
range of services on electric transmission and distribution networks, substation facilities which include design, engineering,
procurement, construction, upgrade and 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 Ontario, Canada. Our T&D services include
the construction and maintenance of high voltage transmission lines, substations, lower voltage underground and overhead
distribution systems, clean energy projects and limited gas construction services. The T&D segment also provides emergency
restoration services in response to, wildfire, ice or other damage.
In our T&D segment, we generally serve the electric utility industry and power generation companies 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 commercial and industrial
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 intelligent transportation systems, roadway lighting and signalization 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, commercial and industrial facilities, clean energy projects, manufacturing plants, processing
facilities, water/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 in the C&I industry, but also contract directly with facility owners. The C&I segment has 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 17 — Segment Information to our Financial Statements.
3
Customers
Our T&D customers include many of the leading providers 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, governmental agencies and developers.
We have long-standing relationships with many of our customers, and we cultivate these relationships at all levels of our
organization. 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, emphasis on safety and customer service contribute to obtaining new
contracts with both existing and new customers.
For the years ended December 31, 2022, 2021 and 2020, our top 10 customers accounted for 35.4%, 34.9%, and 32.7%, of
our revenues, respectively. For the years ended December 31, 2022, 2021 and 2020, no single customer accounted for more than
10.0% of annual revenues.
For the years ended December 31, 2022, 2021 and 2020, revenues derived from T&D customers accounted for 58.0%, 52.1%
and 51.4% of our total revenues, respectively, and revenues derived from C&I customers accounted for 42.0%, 47.9% and 48.6%
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. 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. 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 defined scope 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 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.
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, time-and-equipment, cost-plus, and unit-price agreements. Fixed-price contracts
accounted for 62.7% of total revenue for the year ended December 31, 2022, including 47.8% of our total revenue for our T&D
segment and 83.3% 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.
4
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. 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 bidding 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 and engineering 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. When we perform work as a subcontractor we are
often only paid after the general or prime contractor is paid. On larger projects, we may require performance and payment
bonding from subcontractors, where we deem appropriate, based on the risk involved.
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 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;
• reputation and relationships with the customer;
• technical expertise and experience;
• management team experience;
• 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 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 “Item 1A. Risk Factors — Our industry is highly
competitive.”
5
T&D Competition
Our T&D segment competes with a number of companies in the local markets where we operate, ranging from small local
independent companies, to medium size regional firms, to large national competitors.
There are a number of barriers to entry into the transmission markets, including the cost of equipment and tooling necessary
to perform transmission work, availability of qualified labor, scope of typical transmission projects and 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 while 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 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 we will encounter when
bidding on any particular project.
A major competitive factor in our C&I segment is the individual relationships that we have developed with general
contractors who typically manage the bid process, along with the willingness to be an exclusive partner with the general
contractor on pursuits requiring the complete finance, design and construction services for the project. 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 procure the required materials and equipment of a particular
project may impact the competition that we encounter. We differentiate ourselves from our competitors by bidding for larger and
more technically complex projects, which we believe many of our smaller competitors may not be capable of executing
effectively. We believe that we have a favorable competitive position in the markets that we serve, due in part to our strong
operating history, strong local market share, our reputation and our 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 pay subcontractors and
vendors, the customer may demand that the surety make payments or provide services under the bond. We are required to
reimburse the surety for its expenses incurred in performing its obligations under the bond. 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. These bonds are typically issued at the face value of the contract awarded. As of December 31, 2022, we had
approximately $541.5 million in original face amount of bonds outstanding for projects in our T&D segment and approximately
$1.43 billion for projects in our C&I segment. Our estimated remaining cost to complete these bonded projects for both segments
was approximately $880.2 million as of December 31, 2022. As of December 31, 2021, we had approximately $406.0 million in
original face amount of bonds outstanding for projects in our T&D segment and approximately $983.3 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.
From time to time we guarantee the obligations of our 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 subsidiaries, which
reduces the borrowing availability under our credit facility.
6
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 12 — Revenue Recognition to our 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 current estimates of customer requirements, 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 estimate of 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:
(in thousands)
T&D
C&I
Total
Backlog at December 31, 2022
Total
$ 1,065,476 $
1,436,351
$ 2,501,827 $
Amount estimated
to not be recognized
within 12 months
Total backlog at
December 31, 2021
115,881 $
676,130
335,935
1,113,014
451,816 $
1,789,144
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, 2022 and 2021 included our proportionate share of unconsolidated joint
venture backlog totaling $30.8 million and $5.4 million, respectively.
7
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 Energy Services, Inc.; E.S. Boulos Company;
High Country Line Construction, Inc.; Sturgeon Electric California, LLC; GSW Integrated Services, LLC; Huen Electric, Inc. and
CSI Electrical Contractors, Inc. We operate in Canada under the following trade names: MYR Transmission Services Canada,
Ltd.; Northern Transmission Services, Ltd; Western Pacific Enterprises Ltd; Powerline Plus Ltd. and PLP Redimix 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, 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 equipment allows us to streamline training, maintenance and parts costs. We operate a centralized fleet
facility, as well as numerous regional maintenance shops throughout the United States, that are staffed with mechanics and
equipment managers who service our fleet. Our ability to internally service our fleet 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 that provide our business units with appropriate pricing levels to estimate their bids for new
projects more accurately. The fleet management group works with 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. Certain 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 contractors, 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 revocation of our operating licenses. We do not expect that continued
compliance with such regulations will have a material effect upon capital expenditures, earnings, or our competitive position.
8
We are also required to comply with increasingly complex and changing laws and regulations enacted to protect business and
personal data regarding privacy, data protection and data security, including those related to the collection, storage, use,
transmission and protection of personal information and other customer, vendor or employee data. In addition, health and safety
regulations may require increased operating costs or capital investments to promote a safe working environment. With respect to
the laws and regulations noted above, as well as other applicable laws and regulations, the Company's compliance programs may
under certain circumstances involve material investments in the form of additional processes, training, personnel, information
technology and capital. For a discussion of the risks associated with certain applicable laws and regulations, see “Item 1A. Risk
Factors."
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 into 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 financial condition, results of operations and cash flows.
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 or 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 are well-positioned to adapt our business to meet new regulations.
Furthermore, we perform a significant amount of services for customers that operate electrical power infrastructure assets in
locations and climates that are more susceptible to wildfires or other natural disasters. See “Item 1A. Risk Factors — Our failure
to comply with environmental and other laws and regulations could result in significant liabilities” and “Item 1A. Risk Factors —
We are subject to risks associated with climate change including financial risks and physical risks such as an increase in extreme
weather events (such as floods, wildfires or hurricanes), rising sea levels and limitations on water availability and quality."
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 variation can be influenced by a number of factors such as
weather, daylight hours, availability of workforce, asset readiness and holidays.
Human Capital Resources
We believe that our people are our greatest assets and the success and growth of our business depend in large part on our
ability to attract, develop and retain a diverse population of talented, qualified and highly skilled employees at all levels of our
organization, including the individuals who comprise our workforce as well as our executive officers and other key personnel. We
have developed key recruitment and retention strategies, objectives and measures that serve as the framework for our human
capital management approach and guide the overall management of our business. These strategies, objectives and measures are
advanced through a number of programs, policies and initiatives, including those related to: health and safety; inclusion, diversity,
and equality; employee recruitment, training and development; and compensation and benefits programs.
9
We seek to attract and retain highly qualified craft employees by providing a superior work environment through our
emphasis on safety, competitive compensation, and high-quality fleet of equipment. The number of individuals we employ varies
significantly throughout the year, including the number of craft employees fluctuates depending on the number and size of
projects at any particular time. As of December 31, 2022, we had approximately 8,500 employees, consisting of approximately
1,600 salaried employees, including executive officers, district managers, project managers, superintendents, estimators, office
managers, administrative staff, clerical personnel and approximately 6,900 craft employees. Approximately 86% 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.
Information about our Executive Officers
Name
Richard S. Swartz
Betty R. Johnson
Tod M. Cooper
William F. Fry
Jeffrey J. Waneka
Age on
February 22, 2023
Position
59
64
58
48
61
President and Chief Executive Officer
Senior Vice President and Chief Financial Officer
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 in January 2017 and has served as a member of our
Board of Directors since April 2019. Prior to his current role, he served as executive vice president and chief operating officer of
MYR Group from September 2016 to December 2016 and as senior vice president and chief operating officer of MYR Group
from May 2011 to September 2016. Mr. Swartz served as senior vice president of MYR Group from August 2009 to May 2011,
and as a group vice president of MYR Group 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 has served as senior vice president, chief financial officer since October 2015. From October 2015 to
November 2020, she also served as our treasurer. 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. Ms. Johnson also currently serves on the board
of directors of Atkore Inc., a publicly-traded manufacturer of electrical products company.
Tod M. Cooper was appointed senior vice president and chief operating officer of our T&D segment in January 2017. Prior to
his current role, he served as senior vice president of MYR Group from August 2013 to December 2016. Mr. Cooper served as
group vice president, east of MYR Group from 2009 to 2013 and vice president T&D, east of MYR Group 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 in January 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
to 2018. 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 from 2006 to 2012, ultimately serving as their general counsel.
Jeffrey J. Waneka was appointed senior vice president and chief operating officer of our C&I segment in January 2017. Prior
to his current role, he served as president of our subsidiary company, Sturgeon Electric Company, Inc., from February 2015 to
December 2016. Mr. Waneka served as group vice president, C&I of MYR Group from 2014 to 2015 and vice president, C&I of
MYR Group 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.
10
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 practicable after they are electronically filed with, or
furnished to, the SEC. The information on our website is not 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. Although the risks are organized by heading, and each risk is
described separately, many of the risks are interrelated. Additional risks we do not yet know of, or that we currently think are
immaterial, may also affect our operations. You should not interpret the disclosure of any risk factor to imply that the risk has not
already materialized. If any of the events or circumstances described in the following risks actually occurs, our business, financial
condition, results of operations and cash flows could be affected and our stock price could decline.
Industry & Market Risks
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;
• decreased equipment utilization;
• delays on projects due to permitting, regulatory issues or customer-caused delays;
• 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;
• changes in the demand for our services;
• schedule delays, equipment and materials availability and increasing insurance, equipment, labor and material costs related
to supply chain disruptions, inflationary pressures, recessionary conditions, tariffs, regulatory slowdowns and market
disruptions;
• the timing and integration of acquisitions and the magnitude of the related acquisition and integration costs;
• the loss of a major customer;
• changes in the mix of our customers, contracts and business;
• the amount of subcontractor and material costs in our projects;
• payment risk associated with the financial condition of our customers;
• increases in design, construction and operating costs, due to inflation or other unforeseen causes, 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;
• costs we incur to support growth internally or otherwise;
• availability of qualified labor for specific projects;
11
• supply chain interruptions, including as a result of natural disasters, wildfires, weather, labor disputes, pandemic outbreak
of disease, fire or explosions and power outages;
• liabilities associated with participation in joint ventures related to third party failures;
• the inability to secure sufficient funding to finance continuing operations, fund growth or to provide the required financial
resources certain large projects may require;
• significant fluctuations in foreign currency exchange rates;
• significant fluctuations in interest rates;
• changes in bonding requirements applicable to existing and new agreements;
• costs associated with our multi-employer pension plan obligations;
• the availability or increased cost of equipment;
• 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.
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. Any organization that has adequate financial
resources and access to technical expertise may become one of our competitors. Competition in the industry depends on many
factors, including pricing of the construction services, the reputation for safety and the quality and reliability of the contractor.
Some of our competitors 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. Additionally, we
may face competition from in-house service organizations of our existing or prospective customers including electric utility
companies and others which 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.
Negative economic and market conditions including tariffs on materials and recessionary conditions may in the future
adversely impact our customers’ spending and, as a result, our operations and growth.
The demand for our 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 could result in
the delay, reduction or cancellation of certain projects and could cause our customers to outsource less work, which could
adversely affect us in the future. 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, or at all. 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 also 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.
Changes to U.S. policies related to global trade and tariffs, as well as retaliatory trade measures implemented by other
countries, have resulted in uncertainty surrounding the future of the global economy. Increases in the cost of imported raw
materials or finished goods as a result of tariffs or trade policies may impact customer spending, and reductions in customer
spending could lead to fewer project awards and more competition We cannot predict the outcome of these changing trade
policies or other unanticipated political conditions, nor can we predict the timing or strength of any economic recovery or
downturn worldwide or its impact on our customers’ markets.
12
New Project and Growth Risks
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 support internal growth. If we are unsuccessful, we may not be able to achieve internal growth, expand our
operations and grow our business.
Our inability to successfully execute or integrate acquisitions or joint ventures may have an adverse impact on our growth
strategy and business.
From time to time, our business strategy includes expanding our presence in the industries we serve through strategic
acquisitions of companies or entry into joint ventures that complement or diversify our business. Future 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 limit our
ability to grow through acquisitions or could raise the prices of acquisitions, adversely impacting any accretion that might be
achieved. Failure to consummate future acquisitions could negatively affect our future growth strategies. Additionally, the
acquisitions we pursue may involve significant cash expenditures, the incurrence or assumption of debt or burdensome regulatory
requirements.
Any acquisition may ultimately have a negative impact on our business, financial condition, results of operations or cash
flows. We may not realize the anticipated benefits and synergies of an acquisition, and our attempts at integrating an acquired
business may not be successful. Acquisitions or joint ventures may expose us to operational and financial challenges and risks,
including:
• the disruption of our ongoing business;
• significant diversion of resources and management’s attention from our existing business;
• reductions of cash and other resources available for operations and other uses;
• exposure to risks specific to the acquired businesses, services, or technologies to which we are not currently exposed;
• the failure to retain key personnel or customers of an acquired business;
• difficulties integrating new operations and personnel;
• failure of acquired companies to achieve the results we expect; and
• 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.
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Business and Operating Risks
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, rights-of-way or to 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. Any delay or failure by suppliers or by third-party 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, clean energy projects, or other facilities. We may not be able to recover the costs we incur that are
caused by delays. Certain contracts have guarantee provisions regarding 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. Delays or cancellations
may impact our reputation or relationships with customers and adversely affect our ability to secure new contracts. Larger projects
present additional performance risks due to complexity of the work and duration of the project.
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 change orders or failure by others to timely deliver items,
such as engineering drawings or materials.
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 not be
recovered until the claim is resolved. Additionally, 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 some instances,
these claims can be the subject of lengthy legal proceedings, and it is difficult to accurately predict when or if they will be fully
resolved. A failure to promptly recover on these types of claims in the future could have a negative impact on our business,
financial condition, results of operations and cash flows. Additionally, any such claims may harm our future relationships with our
customers.
We may be unable to attract and retain qualified personnel.
Our ability to maintain our productivity and our operating results may be limited by our ability to employ, train and retain
qualified personnel 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
personnel 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
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 personnel with the requisite skills, we may also be
forced to incur significant training expenses.
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In addition, the success of our business depends upon the continued efforts and abilities of our employees. The relationships
between our employees and our customers are important to obtaining and retaining business. We are also dependent on recruiting
effective personnel for our projects. There can be no assurance that any individual employee 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 or higher costs to retain and hire key personnel. The loss of key personnel, or the
inability to hire and retain qualified personnel, could negatively impact our ability to manage our business and relationships with
our customers.
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 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 when, or whether, 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 contracts, resulting in a decrease in our revenue, net income and liquidity.
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 open to competitive bidding
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.
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, sexual harassment, workplace misconduct 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, financial condition, results of operations
and cash flows.
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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 insurance has limits and exclusions that may not fully indemnify us against certain claims or losses, including claims
resulting from wildfires or other natural disasters and an increase in cost, or the unavailability or cancellation of third-party
insurance coverages would increase our overall risk exposure and could disrupt our operations and reduce our profitability.
We maintain insurance coverages from third party insurers as part of our overall risk management strategy and most of our
customer contracts require us to maintain specific insurance coverage limits. We maintain insurance policies with respect to
automobile liability, general liability, employer’s liability, workers’ compensation, our employee group health program, and other
types of coverages, but these policies are subject to high deductibles, and we are self-insured up to the amount of those
deductibles. 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. Insurance liabilities are difficult to assess and estimate due to unknown factors, including the
frequency and severity of injuries, the magnitude of damage to or loss of property or the environment, the determination of our
liability in proportion to other parties, estimates of incidents not reported and the effectiveness of our safety programs, and as a
result, our actual losses may exceed our estimates. 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 generally 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 available at reasonable and competitive rates or at the required
limits. The cost of our insurance has significantly increased and may continue to increase in the future. In addition, insurers may
fail, cancel our coverage, increase the cost of 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. For example, due to the recent increase in wildfire losses
and related insurance claims, insurers have reduced coverage availability and increased the cost of insurance coverage for such
events in recent years, and our current levels of coverage may not be sufficient to cover potential losses. If our risk exposure
increases as a result of adverse changes in our insurance coverages, we could be subject to increased liabilities that could
negatively affect our business, financial condition, results of operations and cash flow.
In addition, 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 or the environment, and interruption of operations. Furthermore, we perform a
significant amount of services for customers that operate electrical power infrastructure assets in locations and climates that are
more susceptible to wildfires or other natural disasters. In locations or environments where claims have become more frequent or
severe in recent years, insurance may become difficult or impossible to obtain. Our contracts may require us to indemnify our
customers, project owners and other parties for injury, damage or loss arising out of our presence at our customers’ location, or in
the performance of our work, in both cases regardless of fault, 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, and 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. 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 business, financial position, results of operations and cash flows.
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Risks associated with operating in the Canadian market could impact our profitability.
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 including laws related to the U.S. Foreign Corrupt Practices Act (“FCPA”) and similar laws 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 United States. 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.
Changes in tax laws or our interpretations of tax laws could materially impact our income tax liabilities.
We have operations in the United States and Canada and are subject to the jurisdiction of 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 tax laws, could materially impact our income tax liabilities The Inflation Reduction Act was
enacted on August 16, 2022, and includes a number of provisions that may impact the Company, including a corporate alternative
minimum tax on certain large corporations, incentives to address climate change mitigation and other non-income tax provisions,
including an excise tax on the repurchase of our stock. We are assessing these impacts on our condensed consolidated financial
statements.
The nature of our business exposes us to potential liability for warranty claims and faulty engineering, which may reduce our
profitability.
Our customer contracts typically include a warranty for the services that we provide against certain defects in workmanship
and material. Additionally, materials used in construction are often provided by the customer or are warranted against defects
from the supplier. Certain projects have longer warranty periods and include facility performance warranties that may be broader
than the warranties we generally provide. 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
because of warranty claims could adversely affect our business, financial condition, results of operations 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. 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 or underinsured claim could
have an adverse impact on our business, financial condition, results of operations and cash flows.
Pandemic outbreaks of disease, such as the COVID-19 pandemic, have in the past had and may in the future have an adverse
impact on our business, employees, liquidity, financial condition, results of operations and cash flows.
Future pandemic outbreaks of disease may further disrupt global supply chains and create significant additional volatility and
disruption of financial markets, which may require us to make changes to our business and, implement new health and safety
protocols. Any such future health outbreaks could result in higher operating costs and could adversely impact our business,
including certain operational, reporting, accounting or other processes. In addition, an extended period of remote work
arrangements could impair our ability to effectively manage our business, and introduce additional operational risks, including but
not limited to cybersecurity risks and increased vulnerability to security breaches, cyber-attacks, computer viruses, ransomware,
or other similar events and intrusions.
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We are unable to predict the ultimate impact of any pandemic outbreak of disease, which could adversely affect our business,
financial condition, results of operations and cash flows. Such effects may be material and the potential impacts include, but are
not limited to:
• disruptions in our supply chain due to transportation delays, travel restrictions, raw material cost increases and shortages,
and closures of businesses or facilities;
• reductions in our operating effectiveness due to workforce disruptions resulting from “shelter-in-place” and “stay-at-home”
orders, and the unavailability of key personnel necessary to conduct our business activities; and
• volatility in the global financial markets, which could have a negative impact on our ability to access capital and additional
sources of financing in the future.
Should a future health outbreak persist for a prolonged period, any of the above factors and others that are unknown, may
have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, we cannot
predict the ultimate impact of any pandemic outbreak of disease will have on our customers and suppliers, and any adverse
impacts on these parties may have a material adverse impact on our business.
Third Party Partner Risks
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. We may experience difficulties in acquiring equipment or materials due to supply chain interruptions, including as a
result of natural disasters, weather, labor disputes, pandemic outbreak of disease, fire or explosions and power outages. To the
extent we cannot engage subcontractors or acquire equipment or materials, we could experience losses in the performance of our
operations. 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.
Regulatory and Environmental Risks
Legislative or regulatory actions relating to electricity transmission and clean energy may impact demand for our services.
Current and future legislative or regulatory actions may impact demand for our services, require utilities to meet reliability
standards, and encourage installation of new electric transmission and clean energy generation facilities. However, it is unclear
whether these initiatives will create sufficient incentives for projects or result in increased demand for our services.
Because most of our T&D revenue is derived from the electric utility industry, regulatory and environmental requirements
affecting that industry could adversely affect our business, financial condition, results of operations and cash flows. 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, or at all.
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In addition, while many states have mandates in place that require specified percentages of electricity to be generated from
clean energy sources, states could reduce those mandates or make them optional, which could reduce, delay or eliminate clean
energy development in the affected states. Additionally, clean energy is generally more expensive to produce and may require
additional power generation sources as backup. The locations of clean 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 clean energy initiatives may not be available. These factors could result in fewer clean energy projects
and a delay in the construction of these projects and the related infrastructure, which could negatively impact our business.
We may incur liabilities and suffer negative financial or reputational impacts relating to occupational health and safety
matters, including those related to environmental hazards such as wildfires and other natural disasters.
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. Furthermore, we perform a significant amount of services for
customers that operate electrical power infrastructure assets in locations and climates that are more susceptible to wildfires or
other natural disasters. 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.
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, financial condition, results of operations and cash flows.
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 business, financial condition, results of operations
and cash flows. 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 due to our large fleet. In addition, if our operations are perceived to result in high greenhouse gas
emissions, our reputation could suffer.
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We are also subject to laws and regulations protecting endangered species, artifacts and archaeological 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. We are also subject to immigration laws and regulations, for which noncompliance could be
material and adversely affect our business, financial condition, results of operations and cash flows.
Furthermore, 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 under-utilized personnel 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.
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.
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.
We are subject to risks associated with climate change including financial risks and physical risks such as an increase in
extreme weather events (such as floods, wildfires or hurricanes), rising sea levels and limitations on water availability and
quality.
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, wildfires 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. Certain risks associated with climate change could include but are not
limited to:
• changes in insurance coverage, availability of coverage, availability of adequate insurance limits, higher insurance
premiums, and larger self-insured retentions/deductibles,
• changes in market demand based on climate change as well as legal and regulatory requirements and trends,
• operational disruptions and accompanying project inefficiencies and delays that may not be recoverable from clients due to
severe weather events,
• damage from severe weather events to construction work in progress,
• damage to our assets from severe weather events,
• reputational risk due to perceptions of the company’s sustainability efforts, and
• increased reporting and compliance costs due to new regulatory requirements, customer, shareholder, and stakeholder
requests targeting climate change.
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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.
From time to time, we establish strategies and expectations related to climate change and other environmental matters. Our
ability to achieve any such strategies or expectations is subject to numerous factors and conditions, many of which are outside of
our control. Examples of such factors include, but are not limited to, evolving legal, regulatory, and other standards, processes,
and assumptions, the pace of scientific and technological developments, increased costs, the availability of requisite financing,
and changes in carbon markets. Failures or delays (whether actual or perceived) in achieving our strategies or expectations related
to climate change and other environmental matters could adversely affect our business, operations, and reputation, and increase
risk of litigation.
Accounting Risks
Our use of percentage-of-completion accounting could result in a reduction or reversal of previously recognized revenues and
profits.
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 costs 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. See “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, for a
discussion on how percentage-of-completion accounting impacts our business.
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. These estimates and assumptions 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, acquisition-related contingent
earn-out consideration liabilities, the recoverability of goodwill and intangibles, and accounts receivable reserves.
Our business, financial condition, results of operations and cash flows 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 business, financial condition, results of
operations and cash flows.
21
Pricing and Cost Risks
Our actual costs may be greater than expected in performing our fixed-price and unit-price contracts.
We 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 or availability 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;
• 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; and
• quality issues requiring rework.
An increase in the cost or availability for items such as materials, parts, commodities, equipment and tooling may also be
impacted by trade regulations, tariffs, global relations, taxes, transportation costs and inflation which could adversely affect
our business.
For certain contracts, we are exposed to market risks that may cause increases in the cost, or the availability of, parts,
commodities, equipment and tooling, utilized in our operations. We have experienced, and may continue to experience, delays
and cost volatility of these items due to recent supply chain disruptions, inflationary pressures, tariffs, regulatory slowdowns and
the continued market disruption from the COVID-19 pandemic. In addition, our customers’ capital budgets may be impacted by
cost increases and reduced customer spending could lead to fewer project awards and more competition. These costs could be
materially impacted by general market conditions and other factors, including U.S. trade relationships with other countries or the
imposition of tariffs. We are also exposed to increases in energy prices, particularly as they relate to fuel prices for our fleet
vehicles. While we believe we can increase our prices to adjust for cost increases, there can be no assurance that future cost
increases would be recoverable. Additionally, some of our fixed price contracts do not allow us to adjust our prices and, as a
result, increases in the cost of parts, commodities, equipment and tooling or fuel costs could reduce our profitability with respect
to such projects and could have a material adverse effect on our business, financial condition, results of operations and cash flows
Capital and Credit Risks
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.
22
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.
Employee Risks
Work stoppages or other labor issues with our unionized workforce could adversely affect our business, and we may be subject
to unionization attempts.
As of December 31, 2022, approximately 86% of our craft labor employees were covered by collective bargaining
agreements. Although most 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. From time to time, we have experienced attempts to unionize our
nonunion businesses. Such efforts often delay work and present the risk of labor unrest. If nonunion employees were to unionize,
we could experience higher ongoing labor costs.
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, 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.
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.
Cybersecurity and Information Technology Risks
We rely on information, communications and data systems in our operations and we or our business partners may be subject
to failures, interruptions or breaches of such systems, which could affect our operations or our competitive position, expose
sensitive information or damage our reputation.
We and our business partners are heavily reliant on information and communications technology and related systems to
conduct our business. We also rely on third-party software and information technology to run certain of our critical accounting,
project management and financial information systems. Furthermore, in connection with our business we may collect and retain
personally identifiable and other sensitive information of our customers and personnel, 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 business, financial position, results of operations and cash flows, and significant costs could be incurred to remediate any
problem.
Increased IT security threats and more sophisticated computer crimes, including advanced persistent threats, computer
viruses, ransomware, other types of malicious code, hacking, phishing and social engineering schemes designed to provide access
to our networks or data, pose a potential risk to the security of our IT systems, networks and services, as well as the
confidentiality, availability and integrity of our data. If the IT systems, networks or service providers we rely upon fail to function
properly, or if we suffer a loss or disclosure of sensitive information, we may suffer interruptions in our ability to manage
operations, be subject to government enforcement actions, litigation, and reputational, competitive and business harm which may
adversely impact our business, financial position, results of operations and cash flows, competitive position and reputation.
23
As techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not recognized
until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. As
cyber threats continue to evolve, we may be required to expend additional resources to comply with new cyber-related
regulations, continue to enhance our information security measures or investigate and remediate any information security
vulnerabilities. Our remediation efforts may not be successful and could result in interruptions, delays or cessation of service. This
could also impact the cost and availability of cyber insurance to us. Additionally, due to recent increases in cyber losses by the
insurance industry, cyber insurance coverage may be limited and/or subject to a significant increase in cost. Furthermore, our
relationships with, and access provided to, third parties and their vendors may create difficulties in anticipating and implementing
adequate preventative measures or mitigating harms after an attack or breach occurs.
During the normal course of business, we have experienced and expect to continue to experience attempts to compromise our
information and communications technology and related systems. To date, no cybersecurity incident or attack has had a material
impact on our business or results of operations. If a material, actual or perceived breach of our security occurs, the public
perception of the effectiveness of our security measures could be harmed and we could lose customers. Any such material
disruptions or breaches of security would have a material adverse effect on our business, financial position, results of operations
and cash flows.
In addition, current and future laws and regulations governing data privacy and the unauthorized disclosure of confidential
information may pose complex compliance challenges and/or result in additional costs. A failure to comply with such laws and
regulations could result in penalties or fines, legal liabilities and/or harm our reputation. The continuing and evolving threat of
cyber-attacks has also resulted in increased regulatory focus on risk management and prevention. New cyber-related regulations
or other requirements could cause us to incur significant costs, which could have an adverse effect on our business, financial
position, results of operations and cash flows.
Item 1B.
Unresolved Staff Comments
None.
Item 2. Properties
Our principal executive offices are located at 12121 Grant Street, Suite 610, Thornton, Colorado 80241, the lease term of
which expires on November 30, 2029. In addition to our executive offices, certain legal, accounting and other personnel are
located in this building. As of December 31, 2022, we owned 18 operating facilities and leased many other properties in various
locations throughout our service territories. Most of our properties are used as operational 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 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 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 these claims are 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.
24
PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder 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 February 17, 2023, we had 6 holders of record of our common stock. This number does not include shareholders whose
shares are held in the names of banks, security brokers, dealers, and registered clearing agencies.
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.
Purchases of Common Stock
The following table includes all of the Company’s repurchases of common stock for the periods shown. Repurchased shares
are retired and returned to authorized but unissued common stock.
Period
Total Number of Shares
Purchased
October 1, 2022 - October 31, 2022
November 1, 2022 - November 30, 2022
December 1, 2022 - December 31, 2022
Total
Average Price
Paid per Share
82.12
—
—
82.12
44,015 $
— $
— $
44,015 $
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Approximate Dollar
Value of Shares That
May Yet Be Purchased
Under the Plans or
Programs (1)
44,015 $
— $
— $
44,015
38,018,311
75,000,000
75,000,000
(1) On November 2, 2022, the Company announced that its Board of Directors had authorized a new $75.0 million share
repurchase program (the "Repurchase Program"), which became effective on November 8, 2022. The Repurchase Program will
expire on May 8, 2023, or when the authorized funds are exhausted, whichever is earlier. As of December 31, 2022, the Company
had $75.0 million of remaining availability to repurchase shares of the Company’s common stock under the Repurchase Program.
The Company’s prior $75.0 million repurchase program that was announced on May 4, 2022 and commenced on May 5, 2022
expired on November 7, 2022.
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, 2017 to December 31, 2022, the cumulative total
shareholder 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 eleven publicly traded
companies within our industry (the “Peer Group”). The comparison assumes that $100 was invested on December 31, 2017 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.
25
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. The Peer Group is composed of the following companies:
Astec Industries, Inc.
Granite Construction Incorporated
Primoris Services Corporation*
Comfort Systems USA, Inc.
IES Holdings, Inc.
Dycom Industries, Inc.
MasTec, Inc.*
EMCOR Group*
Matrix Service Company
___________________________
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
*$100 invested on 12/31/2017 in stock or including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2023 Standard & Poor's, a division of S&P Global. All rights reserved
Copyright© 2023 Russell Investment Group. All right reserved.
12/31/2017
12/31/2018
12/31/2019
12/31/2020
12/31/2021
12/31/2022
100.00
100.00
100.00
100.00
78.84
95.62
88.99
76.05
91.21
125.72
111.70
101.40
168.21
148.85
134.00
132.33
309.40
191.58
153.85
190.33
257.68
156.89
122.41
200.51
MYR Group Inc.
S&P 500
Russell 2000
Peer Group
Item 6. [Reserved]
26
MYR Group Inc.S&P 500Russell 2000Peer Group12/1712/1812/1912/2012/2112/22$0$50$100$150$200$250$300$350
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This management’s discussion and analysis provides a narrative on the Company’s financial performance and condition that
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.
Presentation of Information
The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the
fiscal years ended December 31, 2021 and 2022. For a discussion of changes from the fiscal year ended December 31, 2020 to the
fiscal year ended December 31, 2021, refer to Management’s Discussion and Analysis of Financial Condition and Results of
Operations in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 (filed February 23,
2022).
Overview-Introduction
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. We manage and report our operations through two electrical contracting service segments:
Transmission and Distribution (“T&D”) and Commercial and Industrial (“C&I”).
We have operated in the transmission and distribution industry since 1891. We are one of the largest U.S. contractors
servicing the T&D sector of the electric utility industry and provide T&D services throughout the United States and in Ontario,
Canada. Our T&D customers include many of the leading companies in the electric utility industry. We have provided electrical
contracting services for commercial and industrial construction since 1912. Our C&I segment provides services 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 more complex projects.
We had revenues for the year ended December 31, 2022 of $3.01 billion compared to $2.50 billion for the year ended
December 31, 2021. For the year ended December 31, 2022, net income was $83.4 million compared to $85.0 million for the year
ended December 31, 2021.
Overview-Segments
Transmission and Distribution segment. Our T&D segment provides comprehensive solutions to providers 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, substation facilities and clean energy
projects, which include design, engineering, procurement, construction, upgrade and maintenance and repair services. Our T&D
services include the construction and maintenance of high voltage transmission lines, substations, lower voltage underground and
overhead distribution systems, clean energy 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, 2022, our T&D revenues were $1.75 billion, or 58.0%, of our revenue, compared to $1.30
billion, or 52.1%, of our revenue for the year ended December 31, 2021 and $1.15 billion, or 51.4%, of our revenue for the year
ended December 31, 2020. Revenues from transmission projects represented 62.1%, 62.0%, and 64.6% of T&D segment revenue
for the years ended December 31, 2022, 2021 and 2020, respectively.
Our T&D segment also provides restoration services in response to hurricanes, ice storms or other storm related events,
which accounted for less than 5% of our annual revenues in 2022, 2021 and 2020.
27
Measured by revenues in our T&D segment, we provided 47.8%, 43.0% and 44.0% of our T&D services under fixed-price
contracts during the years ended December 31, 2022, 2021 and 2020, respectively.
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, the installation of intelligent transportation systems, roadway
lighting and signalization. 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, commercial and industrial facilities, clean energy projects, manufacturing plants,
processing facilities, water/waste-water treatment facilities, mining facilities and transportation control and management systems.
For the year ended December 31, 2022, our C&I revenues were $1.26 billion, or 42.0%, of our revenue, compared to $1.20
billion, or 47.9%, of our revenue for the year ended December 31, 2021 and $1.09 billion, or 48.6%, of our revenue for the year
ended December 31, 2020.
Measured by revenues in our C&I segment, we provided 83.3%, 80.5% and 82.7% of our services under fixed-price contracts
for the years ended December 31, 2022, 2021 and 2020, respectively.
Overview-Revenue and Gross Margins
Revenue Recognition. 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 utilize 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.
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 of 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.
28
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, 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 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 in different locations, including but not limited to, difficult terrain, sites which may have been exposed to
harsh and hazardous conditions, and in large urban centers where delivery of materials and availability of labor may be impacted.
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 Canada. We are optimistic about infrastructure spending and believe that 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 clean energy portfolio standards, the aging of the electric grid, and potential overall
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 believe legislative actions aimed at supporting infrastructure improvements in the United States may positively impact
long-term demand, particularly in connection with electric power infrastructure, transportation and clean energy spending. We
believe the legislative actions are likely to provide greater long-term opportunity in both of our reporting segments. However both
of our segments and supporting operations may be subject to delays and cost volatility due to supply chain disruptions,
inflationary pressures, tariffs and regulatory slowdowns which may result in decelerations in project opportunities and awards.
We believe there is an ongoing need for utilities to sustain investment in their transmission systems to improve reliability,
reduce congestion and connect to new clean energy sources. Consequently, we believe we will continue to see significant bidding
activity on large transmission projects going forward. The timing of multi-year transmission project awards and substantial
construction activity is difficult to predict due to regulatory requirements and the permitting needed to commence construction.
Significant construction on any large, multi-year projects awarded in 2023 will not likely have a large impact on our 2023 results.
Bidding and construction activity for small to medium-size transmission projects and upgrades remain active, and we expect this
trend to continue.
29
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
2022, we continued to see increased bidding activity in some of our electric distribution markets, as economic conditions
improved in those areas. We believe the increased storm activity and destruction caused by wildfires will cause a push to
strengthen utility distribution systems against catastrophic damage. Several industry and market trends are also prompting
customers in the electric utility industry to seek outsourcing partners rather than performing projects internally. 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.
Our C&I bidding opportunities could be impacted by market disruptions, and as a result, the growth of our C&I market will
be heavily dependent on the timing and pace of the overall market recovery. We believe that the primary markets we serve, such
as health care, transportation, data centers, warehousing, clean energy and water/waste-water projects, may be somewhat less
vulnerable to economic slowing.
In addition, the United States has experienced decades of underfunded economic expansion and aging infrastructure which
has challenged the capacity of public water and transportation infrastructure forcing states and municipalities to seek creative
means to fund needed expansion and repair. We believe the need for expanding public infrastructure will offer opportunity in our
C&I segment for several years. We expect the long-term growth in our C&I segment to generally track the overall growth of the
regions we serve.
We strive to maintain our status as a preferred provider to our T&D and C&I customers. We continued to implement
strategies that further expand our capabilities and effectively allocate capital. We have focused on strengthening our balance sheet
by reducing our variable rate outstanding debt in the current higher interest rate environment, which has increased our liquidity
and allows us to take advantage of future opportunities as they arise. Additionally, on January 4, 2022, we acquired all issued and
outstanding shares of capital stock of Powerline Plus Ltd. and its affiliate (collectively, the “Powerline Plus Companies"), which
expanded our distribution operations in Ontario, Canada. During 2022, the Company repurchased 442,167 shares of its common
stock under repurchase programs at a weighted-average price of $83.64 per share. As of December 31, 2022, we had $75.0
million of remaining availability to purchase shares under our current program, which continues in effect until May 8, 2023, or
until the authorized funds are exhausted.
We continue to manage our increasing operating costs, including increasing insurance, equipment, labor and material costs.
We believe that our financial position, positive cash flows and other operational strengths will enable us to manage our markets
and give us the flexibility to successfully execute our strategies. We continue to invest in developing key management and craft
personnel in both our T&D and C&I markets and in procuring the specific specialty equipment and tooling needed to win and
execute projects of all sizes and complexity. In 2022 and 2021, we invested in capital expenditures of approximately $77.1
million and $52.4 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.
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.
30
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, equipment availability 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. Additionally, 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 25% to 45% 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. 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 and claims 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, whereas 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. Generally, 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 finance lease amortization in contract costs.
This is common practice in our industry, but can make comparability to other companies difficult. We spend 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.
31
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 for such shortfalls. Additionally, we are required to allocate more working capital to projects when
we are required to provide materials.
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 Availability, Cost, Utilization, Estimation, and Bidding. We operate a centrally-managed fleet in the United States in
an effort to control rising costs and achieve efficient 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.
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 the quantity or costs of materials. 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 add to our labor and equipment cost.
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.
32
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:
Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021
(dollars in thousands)
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 loss attributable to noncontrolling interest
For the year ended December 31,
2022
2021
$ 3,008,542
100.0 % $ 2,498,289
100.0 %
2,664,580
343,962
222,424
9,009
(2,378)
114,907
187
(3,563)
2,673
114,204
30,823
83,381
—
88.6
11.4
7.4
0.3
(0.1)
3.8
—
(0.1)
0.1
3.8
1.0
2.8
—
2,173,308
324,981
207,208
2,311
(3,098)
118,560
70
(1,799)
(525)
116,306
31,300
85,006
(4)
87.0
13.0
8.3
0.1
(0.1)
4.7
—
(0.1)
—
4.6
1.2
3.4
—
Net income attributable to MYR Group Inc.
$
83,381
2.8 % $
85,010
3.4 %
Revenues. Revenues increased $510.2 million, or 20.4%, to $3.01 billion for the year ended December 31, 2022 from $2.50
billion for the year ended December 31, 2021. The increase was primarily due to an increase in revenue on transmission projects,
an increase in revenues on distribution projects, including incremental distribution revenues from the Powerline Plus Companies,
and an increase in C&I revenue in certain geographical areas.
Gross margin. Gross margin decreased to 11.4% for the year ended December 31, 2022 from 13.0% for the year ended
December 31, 2021. The decrease in gross margin was primarily due to overall cost increases mainly associated with supply chain
disruptions and inflation. Gross margin was also negatively impacted by labor and equipment inefficiencies, unfavorable change
order adjustments and inclement weather experienced on certain projects. These margin decreases were partially offset by
favorable job close outs, better-than-anticipated productivity on certain projects and favorable change order adjustments on
certain projects. Changes in estimates of gross profit on certain projects resulted in a gross margin decrease of 0.4% and an
increase of 0.4% for the years ended December 31, 2022 and 2021, respectively.
Gross profit. Gross profit increased $19.0 million, or 5.8%, to $344.0 million for year ended December 31, 2022 from
$325.0 million for the year ended December 31, 2021, due to higher revenues, partially offset by lower margins.
Selling, general and administrative expenses. SG&A, was $222.4 million for the year ended December 31, 2022, an
increase of $15.2 million from $207.2 million for the year ended December 31, 2021. The year-over-year increase was primarily
due to the acquisition of the Powerline Plus Companies and an increase in employee-related expenses to support the growth in our
operations, partially offset by a decrease in employee incentive compensation costs.
Amortization of intangible assets. Amortization of intangible assets was $9.0 million for the year ended December 31, 2022
compared to $2.3 million for the year ended December 31, 2021. The period-over-period increase of $6.7 million was primarily
due to amortization related to certain intangibles acquired with the Powerline Plus Companies.
Gain on sale of property and equipment. Gains from the sale of property and equipment in the year ended December 31,
2022 were $2.4 million compared to $3.1 million in the year ended December 31, 2021. Gains from the sale of property and
equipment are attributable to routine sales of property and equipment that is no longer useful or valuable to our ongoing
operations.
33
Interest expense. Interest expense was $3.6 million for the year ended December 31, 2022 compared to $1.8 million for the
year ended December 31, 2021. This increase was primarily attributable to higher outstanding debt and interest rates during the
year ended December 31, 2022 as compared to the year ended December 31, 2021.
Other income (expense), net. Other income was $2.7 million for the year ended December 31, 2022 compared to other
expense of $0.5 million for the year ended December 31, 2021. The change was largely due to funds received under the Canadian
Emergency Wage Subsidy program, which were attributable to a C&I segment company. Other income was also positively
impacted by an adjustment to contingent earn-out consideration related to the acquisition of the Powerline Plus Companies.
Income tax expense. Income tax expense was $30.8 million for the year ended December 31, 2022, with an effective tax rate
of 27.0%, compared to $31.3 million for the year ended December 31, 2021, with an effective tax rate of 26.9%. The increase in
the tax rate for the year ended December 31, 2022 was primarily due to adjustments associated with the prior year global
intangible low tax income (“GILTI”), partially offset by a favorable impact from stock compensation excess tax benefits.
Net income. Net income decreased to $83.4 million for the year ended December 31, 2022 from $85.0 million for the year
ended December 31, 2021. The decrease 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,
2022
2021
Amount
Percent
Amount
Percent
$ 1,745,792
1,262,750
$ 3,008,542
58.0 % $ 1,301,587
42.0
1,196,702
$ 2,498,289
100.0
$
$
138,886
43,159
182,045
(67,138)
114,907
$
8.0
3.4
6.0
(2.2)
3.8 % $
132,738
54,418
187,156
(68,596)
118,560
52.1 %
47.9
100.0
10.2
4.5
7.5
(2.7)
4.8 %
Revenues for our T&D segment for the year ended December 31, 2022 were $1.75 billion compared to $1.30 billion for the
year ended December 31, 2021, an increase of $444.2 million, or 34.1%. The increase in revenue was primarily related to an
increase in revenue on transmission projects, and an increase in revenues on distribution projects, including incremental
distribution revenues from the Powerline Plus Companies.
Operating income for our T&D segment for the year ended December 31, 2022 was $138.9 million compared to $132.7
million for the year ended December 31, 2021, an increase of $6.2 million, or 4.6%. The increase in T&D operating income from
the prior year was primarily due to higher revenues and a favorable job close-out. These increases were partially offset by the
additional $6.7 million of amortization related to certain intangibles acquired with the Powerline Plus Companies and an
unfavorable change order adjustment on a project. Operating income was also negatively impacted by overall cost increases from
supply chain disruptions, labor inefficiencies, inflation and inclement weather experienced on certain projects. Operating income,
as a percentage of revenues, for our T&D segment decreased to 8.0% for the year ended December 31, 2022 from 10.2% for the
year ended December 31, 2021.
Commercial & Industrial
Revenues for our C&I segment for the year ended December 31, 2022 were $1.26 billion compared to $1.20 billion for the
year ended December 31, 2021, an increase of $66.1 million, or 5.5%, primarily due to an increase in revenue in certain
geographic areas.
34
Operating income for our C&I segment for the year ended December 31, 2022 was $43.2 million compared to $54.4 million
for the year ended December 31, 2021, a decrease of $11.2 million, or 20.7%. The year-over-year decrease in operating income
was primarily due to overall cost increases mainly associated with supply chain disruptions and inflation. Operating income was
also negatively impacted by labor inefficiencies on certain projects and an unfavorable change order adjustment on a project. The
decrease in operating income was partially offset by better-than-anticipated productivity on various projects, favorable change
order adjustments on certain projects and a favorable job close out. Operating income, as a percentage of revenues, for our C&I
segment decreased to 3.4% for the year ended December 31, 2022 from 4.5% for the year ended December 31, 2021.
Corporate
The decrease in corporate expenses for the year ended December 31, 2022 was primarily attributable to a decrease in
employee incentive compensation costs, partially offset by an increase in employee-related expenses to support the growth in our
operations.
Non-GAAP Measures
EBITDA
EBITDA is a non-GAAP measure used by management that we define as net income attributable to MYR Group Inc. plus net
income from noncontrolling interests, interest expense net of interest income, income tax expense and depreciation and
amortization, as shown in the following table. EBITDA 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.
We believe that EBITDA is useful to investors and other external users of our Consolidated 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, book value of assets, useful lives placed on assets, capital
structure and the method by which assets were acquired. Because not all companies define EBITDA as we do, 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.
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 shareholders. Further, EBITDA excludes depreciation and amortization; however, as we
use capital and intangible assets to generate revenues, depreciation and amortization are necessary elements 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 shareholders.
35
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 loss - noncontrolling interests
Net income
Interest expense, net
Income tax expense
Depreciation and amortization
EBITDA
For the year ended December 31,
2022
2021
2020
$
83,381 $ 85,010 $ 58,759
—
83,381
3,376
30,823
58,170
(4)
—
85,006
1,729
31,300
46,205
58,759
4,554
22,626
46,453
$ 175,750 $ 164,240 $ 132,392
We also use EBITDA as a liquidity measure. Certain material covenants contained within our credit agreement (the “Credit
Agreement”) are based on EBITDA with certain additional adjustments as defined in the Credit Agreement. Non-compliance with
these financial covenants under the Credit Agreement — our interest coverage ratio which is defined in the Credit Agreement as
Consolidated EBITDA (as defined in the Credit Agreement) divided by interest expense (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 operating activities
Add/(subtract)
Changes in operating assets and liabilities
Adjustments to reconcile net income to net cash flows provided by operating
activities
Depreciation and amortization
Income tax expense
Interest expense, net
EBITDA
Working Capital
For the year ended December 31,
2022
2021
2020
$ 167,484 $ 137,228 $ 175,167
(8,522)
6,554
(67,770)
(75,581)
(58,776)
(48,638)
58,170
46,205
46,453
30,823
3,376
22,626
4,554
$ 175,750 $ 164,240 $ 132,392
31,300
1,729
Working capital is a non-GAAP measure. We believe working capital is useful to investors and other external users of our
Consolidated Financial Statements in evaluating our operating performance. The Company defines working capital as total
current assets less total current liabilities. The following table provides the Company’s calculation of working capital:
(in thousands)
Total current assets
Less: total current liabilities
Working capital
As of December 31,
2022
2021
2020
$ 890,291 $ 748,390 $ 636,684
(666,960)
(498,599)
(443,400)
$ 223,331 $ 249,791 $ 193,284
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Liquidity, Capital Resources and Material Cash Requirements
As of December 31, 2022 and 2021, we had working capital of $223.3 million and $249.8 million, respectively. During the
year ended December 31, 2022, our operating activities provided cash of $167.5 million, compared to $137.2 million for the year
ended December 31, 2021. 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 $30.3 million year-over-year increase in
cash provided by operating activities was primarily due to favorable net changes in operating assets and liabilities of $15.1
million, partially offset by a $1.6 million decrease in net income. The favorable change in operating assets and liabilities was
primarily due to the favorable change of $27.0 million in prepaid expenses and other assets, partially offset by the net unfavorable
changes of $16.6 million in other liabilities. The favorable change in prepaid expenses and other assets was primarily due to the
timing of insurance payments and the prepayment of materials required for certain projects. The unfavorable change in other
liabilities was primarily due to lower bonus and profit sharing accruals, and payments related to our deferral under the
Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") partially offset by the timing of other employee related
wage and tax payments. In addition, the net favorable year-over-year changes in various working capital accounts that relate
primarily to the timing of costs incurred on work performed that does not coincide with the billing terms (accounts receivable,
contract assets, accounts payable and contract liabilities) was $0.3 million.
During the years ended December 31, 2022 and 2021, we used net cash of $185.7 million and $49.3 million, respectively, in
investing activities. The $185.7 million of cash used in investing activities in the year ended December 31, 2022 consisted of
$110.7 million to acquire the Powerline Plus Companies, $77.1 million for capital expenditures, partially offset by $2.0 million of
proceeds from the sale of equipment. The $49.3 million of cash used in investing activities in the year ended December 31, 2021
consisted of $52.4 million for capital expenditures, partially offset by $3.1 million of proceeds from the sale of equipment.
During the years ended December 31, 2022 and 2021, we used cash of $9.3 million, and $28.1 million, respectively in
financing activities. The $9.3 million of cash used in financing activities in the year ended December 31, 2022 consisted primarily
of $37.0 million of shares repurchases under our share repurchase program, $6.8 million of shares repurchased to satisfy tax
obligations under our stock compensation programs, $1.6 million of repayments of finance lease obligations and $1.0 million of
net repayments under our master equipment loan agreements. These uses of cash during the year ended December 31, 2022, were
partially offset by $24.2 million of borrowing under our equipment notes and $12.9 million of net borrowing under our revolving
line of credit. The $28.1 million of cash used in financing activities in the year ended December 31, 2021 consisted primarily of
$24.9 million of net repayments under our master equipment loan agreements, and $3.4 million of cash used to purchase shares
surrendered by employees to satisfy tax obligations under our stock compensation programs.
We believe our $349.3 million borrowing availability under our revolving line of credit at December 31, 2022, future cash
flow from operations and our ability to utilize short-term and long-term leases will provide sufficient liquidity for our short-tern
and long-term needs. Our primary short-term liquidity needs include cash for operations, debt service requirements, capital
expenditures, acquisition and joint venture opportunities. We believe we have adequate sources of liquidity to meet our long-term
liquidity needs and foreseeable material cash requirements, including those associated with funding future acquisition
opportunities. We continue to invest in developing key management and craft personnel in both our T&D and C&I markets and in
procuring the specific specialty equipment and tooling needed to win and execute projects of all sizes and complexity.
We have not historically paid dividends and currently do not expect to pay dividends.
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Debt Instruments
Credit Agreement
On September 13, 2019, 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. The Credit Agreement provides for a facility
of $375 million (the “Facility”), subject to certain financial covenants as defined in the Credit Agreement, that may be used for
revolving loans of which $150 million may be used for letters of credit. The Facility also allows for revolving loans and letters of
credit in Canadian dollars and other currencies, up to the U.S. dollar equivalent of $75 million. 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 $200 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 Facility are used for refinancing existing debt, working capital, capital expenditures, acquisitions,
share 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 0.75%; or (2) Adjusted LIBO Rate
(as defined in the Credit Agreement) plus an applicable margin ranging from 1.00% to 1.75%. Once LIBOR is no longer
available, we will amend the Credit Agreement to transition from LIBOR to the Secured Overnight Financing Rate (“SOFR”) or
will elect the Alternate Base Rate. The applicable margin is determined based on our consolidated leverage ratio (“Leverage
Ratio”) which is defined in the Credit Agreement as Consolidated Total Indebtedness (as defined in the Credit Agreement)
divided by Consolidated EBITDA (as defined in the Credit Agreement). Letters of credit issued under the Facility are subject to a
letter of credit fee of 1.00% to 1.75% for non-performance letters of credit or 0.50% to 0.875% for performance letters of credit,
based on our consolidated Leverage Ratio. We are subject to a commitment fee of 0.15% to 0.25%, 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 2.50 or our consolidated Liquidity (as defined in the Credit Agreement) is less than $50
million.
Under the Credit Agreement, we are subject to certain financial covenants and are limited to a maximum consolidated
Leverage Ratio of 3.0 and a minimum interest coverage ratio of 3.0. The minimum interest coverage ratio 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. We were in compliance with all of the financial covenants under the Credit Agreement as of
December 31, 2022.
As of December 31, 2022 we had $12.9 million debt outstanding under the Facility. We had no debt outstanding under the
Facility as of December 31, 2021.
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 and guarantee performance under our contracts. Such letters of credit are
generally issued by a bank or similar financial institution typically pursuant to our senior credit facility. Each 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. 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.
As of December 31, 2022, and 2021 we had $12.8 million and $12.3 million, respectively, in nonperformance letters of credit
outstanding under our Credit Agreement which were almost entirely related to the Company's payment obligation under its
insurance programs. These are irrevocable, standby letters of credit with maturities expiring at various times throughout 2023. We
expect to renew the letters of credit related to the insurance programs for subsequent one-year periods upon their maturity. We are
not aware of any claims currently asserted or threatened under any of these letters of credit that are material, individually or in the
aggregate. However, to the extent payment is required for any of such claims, the amount paid could be material and could
adversely affect cash flows.
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Equipment Notes
We have entered into multiple Master Loan Agreements with multiple banks. The Master Loan Agreements may be used for
financing of equipment between us and the lenders 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, 2022, we had two outstanding Equipment Notes collateralized by equipment and vehicles owned by us.
As of December 31, 2022, we also had one other equipment note outstanding collateralized by a vehicle owned by us. The
outstanding balance of all Equipment Notes was $27.6 million as of December 31, 2022, of which $5.1 million was due in the
next twelve months. As of December 31, 2021, we had one outstanding Equipment Note collateralized by equipment and vehicles
owned by us. The outstanding balance of these Equipment Notes was $4.5 million as of December 31, 2021, of which $1.0
million was due in the next twelve months.
Lease Obligations
From time to time, the Company enters into non-cancelable leases for some of our facility, vehicle and equipment needs.
These leases allow the Company to conserve cash by paying a monthly lease rental fee for the use of facilities, vehicles and
equipment rather than purchasing them. The Company’s leases have remaining terms ranging from one to seven years, some of
which may include options to extend the leases for up to five years, and some of which may include options to terminate the
leases within one year. Typically, the Company has purchase options on the equipment underlying its long-term leases and many
of its short-term rental arrangements. The Company may exercise some of these purchase options when the need for equipment is
ongoing and the purchase option price is attractive.
The outstanding balance of operating lease obligations was $30.5 million as of December 31, 2022. As of December 31,
2022, we had outstanding short-term and long-term operating lease obligations of approximately $9.7 million and $20.8 million,
respectively. The outstanding balance of operating lease obligations was $21.0 million as of December 31, 2021. As of
December 31, 2021, we had outstanding short-term and long-term operating lease obligations of approximately $7.8 million and
$13.2 million, respectively.
As of December 31, 2022, we had $3.4 million outstanding finance lease obligations, consisting of short-term and long-term
finance lease obligations of approximately $1.1 million and $2.3 million, respectively. As of December 31, 2021, we had no
outstanding finance lease obligations.
Purchase Commitments for Construction Equipment
As of December 31, 2022, we had approximately $14.1 million in outstanding purchase obligations for certain construction
equipment to be paid with cash outlays scheduled to occur over the first four months of 2023.
Performance and Payment Bonds 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 must reimburse our
sureties for any expenses or outlays they incur. Under our continuing indemnity and security agreements with our sureties, with
the consent of our lenders under the Credit Agreement, we have granted security interests in certain of 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, 2022, an
aggregate of approximately $1.97 billion in original face amount of bonds issued by our sureties were outstanding. Our estimated
remaining cost to complete these bonded projects was approximately $880.2 million as of December 31, 2022.
From time to time we guarantee the obligations of our wholly-owned subsidiaries, including obligations under certain
contracts with customers, certain lease agreements, and, in some states, obligations in connection with obtaining contractors’
licenses. 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.
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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, 2022 and 2021, none of our customers individually exceeded 10.0% of our accounts receivable.
New Accounting Pronouncements
For a discussion of recent accounting pronouncements, see Note 1 — Organization, Business and 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. 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.
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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. As of December 31, 2022 and 2021, we recognized revenues of $19.6 million and $2.4
million, respectively, related to significant change orders and/or claims that had been included as contract price adjustments on
certain contracts, some of which are multi-year projects.
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. During the year ended December 31, 2022, changes in estimates
pertaining to certain projects decreased consolidated gross margin by 0.4%. During the year ended December 31, 2021, changes
in estimates pertaining to certain projects increased consolidated gross margin by 0.4%. During the year ended December 31,
2020, changes in estimates pertaining to certain projects decreased consolidated gross margin by 0.8%.
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.
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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 stop-loss limits of up to $0.2
million, for qualified individuals. Losses up to the deductible and stop-loss amounts are accrued based upon 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. While recorded
accruals are based on the ultimate liability, which includes amounts in excess of the deductible, a corresponding receivable for
amounts in excess of the deductible is included in current assets on our consolidated balance sheets.
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 ratably over the vesting period. We use the straight-line
amortization method to recognize compensation expense related to stock-based awards, such as restricted stock and restricted
stock units, that have only service conditions. This method recognizes stock compensation expense on a straight-line basis over
the requisite service period for the entire award. 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 which
may vary from zero to 200% of the target performance awards. We recognize compensation expense related to performance
awards with market-based performance metrics on a straight-line basis over the requisite service period. We recognize forfeitures
as they occur. 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 perform either a qualitative or quantitative
assessment to review goodwill and intangible assets with indefinite lives for impairment on an annual basis. This assessment is
performed at the beginning of the fourth quarter, or when circumstances change, such as a significant adverse change in the
business climate or the decision to sell a business, both of which would indicate that impairment may have occurred. Intangible
assets with finite lives are also reviewed for impairment and tested for recoverability whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
A qualitative assessment considers financial, industry, segment and macroeconomic factors, if the qualitative assessment
indicates a potential for impairment, a quantitative assessment is performed to determine if impairment exists. The quantitative
assessment begins with a comparison of the fair value of the reporting unit or intangible asset with its carrying value. If the
carrying amount of the reporting unit or intangible asset exceeds its fair value, an impairment loss would be recognized in an
amount equal to that excess, limited to the total amount of the goodwill allocated to the reporting unit or intangible asset. If the
carrying value of goodwill or other indefinite lived assets exceeds its implied fair value, an impairment charge would be recorded
in the statement of operations.
As a result of the annual qualitative review process in 2022 and 2020, we determined it was not necessary to perform a
qualitative assessment. In 2021, we performed a quantitative assessment on our goodwill and intangible assets with indefinite
lives, this assessment did not indicate that our goodwill or indefinite lived intangible assets were impaired.
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. The allowance for doubtful accounts associated with
account receivables was $2.1 million as of December 31, 2022 and $2.4 million as of December 31, 2021.
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.
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Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
We were not parties to any derivative instruments and had no derivative financial instruments during the years ended
December 31, 2022, 2021 or 2020.
Any borrowings under our Facility are based upon interest rates that will vary depending upon the prime rate, Canadian prime
rate, federal funds effective rate, the NYFRB overnight bank funding rate, CDOR, and LIBOR (or any interest rate replacing
LIBOR). If the prime rate, Canadian prime rate, federal funds effective rate, the NYFRB overnight bank funding rate, CDOR, or
LIBOR (or any interest rate replacing LIBOR) rises, any interest payment obligations would increase and have a negative effect
on our cash flow and financial condition. We currently do not maintain any hedging contracts that would limit our exposure to
variable rates of interest when we have outstanding borrowings. As of December 31, 2022, we had $12.9 million of borrowings
under our Facility. If market rates of interest on all our revolving debt as of December 31, 2022, 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 $0.1 million annually. If market rates of interest on all our revolving
debt, which is subject to variable rates as of December 31, 2022, 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 approximately $0.1 million
annually.
Borrowings under our Equipment Notes are at fixed rates established on the date the note was executed.
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Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm(1)
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2022,
2021 and 2020
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020
Notes to Financial Statements
___________________________
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(1) The report of MYR Group’s independent registered public accounting firm (PCAOB ID:173) with respect to the above-
referenced financial statements and their report on internal control over financial reporting are included in Item 8 of this Form
10-K at the page number referenced above.
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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, 2022 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,
2022 excluded the internal control over financial reporting of Powerline Plus Ltd. and its affiliate PLP Redimix Ltd. (collectively,
the “Powerline Plus Companies"), which were acquired on January 4, 2022. The Powerline Plus Companies represented a total of
approximately 3.2% and 1.1% of total out of scope assets and net assets, respectively as of December 31, 2022, and 2.6% and
6.7% of contract revenues and out of scope 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, the independent registered public accounting firm that audited and reported on the 2022 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, 2022 and has issued an attestation report on MYR Group’s internal control over financial reporting
which appears herein.
February 22, 2023
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of MYR Group Inc.
Thornton, CO
Opinions on the Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of MYR Group Inc. (the “Company”) as of December 31, 2022
and 2021, the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for
each of the years in the three-year period ended December 31, 2022, 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, 2022,
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, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-
year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework: (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the
Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding
of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk. As permitted, the Company has excluded the operations
of Powerline Plus Ltd. and its affiliate PLP Redimix Ltd. acquired during 2022, 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.
46
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.
Critical Audit Matter
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
Evaluation of estimated costs to complete and variable consideration for fixed price construction contracts
As described in Note 1 of the Company’s consolidated financial statements, Organization, Business, and Significant Accounting
Policies, and Note 12, Revenue Recognition, the Company recognizes revenue on fixed price construction projects over time
using the cost-to-cost method. The amount of contract revenues and gross profit recognized on fixed price construction contracts
is dependent on the contract price, the actual contract costs incurred, and the forecasted contract revenues and contract costs for
construction projects. The recognition of revenue on fixed price construction contracts involves significant estimates due to the
unique complexities of each construction project, uncertainty about estimates of costs to complete, and uncertainty in the outcome
of discussions with customers on the valuation of change orders and claims. The Company measures progress towards completion
using the cost-to-cost method, which measures the progress as the ratio of actual contract costs incurred to date to the estimated
costs at completion. The Company recognizes revenue related to change orders only when it is probable that the change order will
result in an addition to contract value and can be reliably estimated. The Company evaluates change orders and claims based on
historical experience with the customer, similar contracts, and on an individual basis, which involves significant judgment. The
Company recognizes these estimated amounts of variable consideration in transaction price to the extent that it is probable there
will not be a significant reversal of revenue.
We identified auditing management’s estimates of variable consideration for change orders and claims and estimated costs to
complete on select fixed price construction contracts to be a critical audit matter. The critical audit matter relates to select fixed
price construction contracts, based on the magnitude of estimated costs to complete and the stage of completion of the contract.
These estimates require management to make assumptions about future events and, as a result, a high degree of auditor judgment
is involved in auditing these estimates. Due to the factors above, auditing management’s estimates of costs to complete and
variable consideration required extensive audit procedures.
Our audit procedures to address the critical audit matter included the following:
–
–
Tested the design, implementation, and operating effectiveness of controls that are designed to address the
reasonableness of estimates of costs to complete contracts and estimates of variable consideration recognized on
contracts;
Evaluated the reasonableness of management’s estimates of cost to complete for a sample of fixed price construction
contracts through testing the key components of the estimated costs to complete, including materials, labor, and
subcontractor costs;
– Agreed a sample of contract costs incurred to supporting documentation;
–
Performed inquiries of management and project personnel regarding facts and circumstances relevant to the accounting
for such contracts;
– Recalculated revenue recognition based on the percentage of completion of projects;
–
–
Evaluated variable consideration recognized related to construction projects by comparing estimates made by
management to subsequent actual data, evaluating the contracts and other documents that support estimates made by
management, and obtaining legal opinions from internal and external counsel; and
Performed retrospective review procedures to assess management’s historical ability to accurately estimate the
transaction price and cost to complete of construction contracts.
47
Valuation of contingent earn-out consideration and customer relationships acquired associated with the acquisition of Powerline
Plus Companies
As described in Note 2 to the financial statements, the Company completed the acquisition of Powerline Plus Ltd. and its affiliate
PLP Redimix Ltd. (collectively, the “Powerline Plus Companies") in 2022 for total consideration of approximately $111.5
million, net of cash acquired. Total consideration included approximately $0.9 million of contingent earn-out consideration
measured at fair value as of the acquisition date. Assets acquired included approximately $39.8 million of customer relationships
(intangible assets) that were valued at fair value as of the acquisition date. Auditing the valuation of contingent earn-out
consideration and customer relationships acquired involved a high degree of subjectivity. Significant auditor judgment was
involved in evaluating the valuation methodology (used in estimating the contingent earn-out consideration and the significant
assumptions used in the valuations of both the contingent earn-out consideration and customer relationships intangible asset. The
estimates included certain assumptions that involved a high degree of subjectivity and auditor judgment. As a result, extensive
audit procedures were involved in auditing the estimates and significant assumptions.
Our audit procedures related to testing the valuation of contingent earn-out consideration and customer relationships acquired
included the following:
–
Tested controls over the accounting for the acquisition, including controls over the recognition and measurement of
customer relationships and contingent earn-out consideration;
– Read the purchase agreement and compared the terms of the purchase agreement to management’s application of
purchase accounting for this acquisition;
–
Evaluated the methods used in developing the fair value estimates and tested the recognition of the contingent earn-out
consideration and customer relationships at fair value;
– Assessed whether all intangible assets were properly identified;
–
Evaluated the reasonableness of the significant assumptions used in valuing the contingent earn-out considerations and
customer relationships, including estimated revenue and revenue growth rates, attrition rate, income tax rate, projected
profit margins, and discount rates. Specifically, we considered the past performance of the Powerline Plus Companies
and considered whether significant assumptions used were consistent with evidence obtained in other areas of the audit;
– Assessed the terms of the contingent earn-out consideration, which included projected revenue and operating profit
projection criteria; and
–
Evaluated management’s classification of earn-out payments to continuing employees as either contingent consideration
in the business combination or employee compensation.
We have served as the Company’s auditor since 2017.
Oak Brook, Illinois
February 22, 2023
/s/ Crowe LLP
48
MYR GROUP INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net of allowances of $2,073 and $2,441, respectively
Contract assets, net of allowances of $499 and $385, respectively
Current portion of receivable for insurance claims in excess of deductibles
Refundable income taxes
Prepaid expenses and other current assets
Total current assets
Property and equipment, net of accumulated depreciation of $351,753 and $322,128, respectively
Operating lease right-of-use assets
Goodwill
Intangible assets, net of accumulated amortization of $25,439 and $16,779, respectively
Receivable for insurance claims in excess of deductibles
Investment in joint venture
Other assets
Total assets
Current liabilities
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current portion of long-term debt
Current portion of operating lease obligations
Current portion of finance lease obligations
Accounts payable
Contract liabilities
Current portion of accrued self-insurance
Accrued income taxes
Other current liabilities
Total current liabilities
Deferred income tax liabilities
Long-term debt
Accrued self-insurance
Operating lease obligations, net of current maturities
Finance lease obligations, net of current maturities
Other liabilities
Total liabilities
Commitments and contingencies
Shareholders’ equity
Preferred stock – $0.01 par value per share; 4,000,000 authorized shares; none issued and outstanding at
December 31, 2022 and December 31, 2021
Common stock – $0.01 par value per share; 100,000,000 authorized shares; 16,563,767 and 16,870,636
shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
$
$
$
December 31,
2022
2021
51,040 $
472,543
300,615
9,325
8,944
47,824
890,291
233,175
30,544
115,847
87,557
34,210
3,697
3,537
1,398,858 $
82,092
375,353
225,075
11,078
9,228
45,564
748,390
196,092
20,971
66,065
49,054
32,443
3,978
4,099
1,121,092
5,074 $
9,711
1,127
315,323
227,055
28,752
—
79,918
666,960
45,775
35,479
51,287
20,845
2,313
15,999
838,658
1,039
7,765
—
200,744
167,931
24,242
2,021
94,857
498,599
24,620
3,464
50,816
13,230
—
11,261
601,990
—
—
165
161,427
(6,300)
404,908
560,200
1,398,858 $
168
163,754
173
355,007
519,102
1,121,092
$
The accompanying notes are an integral part of these Financial Statements.
49
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 loss attributable to noncontrolling interest
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
Less: net loss attributable to noncontrolling interest
Year ended December 31,
2022
2021
2020
$ 3,008,542 $ 2,498,289 $ 2,247,392
2,664,580
2,173,308
1,971,539
343,962
222,424
9,009
324,981
207,208
2,311
(2,378)
(3,098)
114,907
118,560
187
70
(3,563)
(1,799)
2,673
114,204
30,823
83,381
—
(525)
116,306
31,300
85,006
(4)
275,853
188,535
3,586
(2,813)
86,545
9
(4,563)
(606)
81,385
22,626
58,759
—
$
$
$
83,381 $
85,010 $
58,759
4.98 $
4.91 $
5.05 $
4.95 $
3.52
3.48
16,760
16,980
16,838
17,161
16,684
16,890
$
83,381 $
85,006 $
58,759
(6,473)
(6,473)
76,908
—
150
150
85,156
(4)
469
469
59,228
—
Total comprehensive income attributable to MYR Group Inc.
$
76,908 $
85,160 $
59,228
The accompanying notes are an integral part of these Financial Statements.
50
MYR GROUP INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
Common Stock
Preferred
Stock
Shares
Amount
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
MYR
Group Inc.
Shareholders’
Equity
Noncontrolling
Interest
Total
16,649 $
166 $ 152,532 $
(446) $ 212,219 $ 364,471 $
4 $ 364,475
Balance at December 31, 2019
$
Net income
Adjustment to adopt ASC 326
Stock issued under compensation plans, net
Stock-based compensation expense
Shares repurchased related to tax withholding
for stock-based compensation
Other comprehensive income
Stock issued – other
Balance at December 31, 2020
Net income
Stock issued under compensation plans, net
Stock-based compensation expense
Shares repurchased related to tax withholding
for stock-based compensation
Other comprehensive income
Stock issued – other
Balance at December 31, 2021
Net income
Stock issued under compensation plans, net
Stock-based compensation expense
Shares repurchased related to tax withholding
for stock-based compensation
Settlement of stock repurchase program
Other comprehensive loss
Balance at December 31, 2022
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
108
—
(25)
—
2
—
—
1
—
—
—
—
—
—
748
5,688
(422)
—
72
16,734
167
158,618
—
187
—
—
2
—
—
496
7,496
(51)
(1)
(2,868)
—
1
—
—
—
12
—
—
—
—
—
469
—
23
—
—
—
—
150
—
—
204
—
(69)
(442)
—
—
2
—
—
—
38
7,922
(6,124)
(5)
(4,163)
—
—
—
—
—
58,759
58,759
(268)
(268)
—
—
749
5,688
(230)
(652)
—
—
270,480
85,010
—
—
469
72
429,288
85,010
498
7,496
(483)
(3,352)
—
—
83,381
—
—
150
12
519,102
83,381
40
7,922
(667)
(6,791)
(32,813)
(36,981)
16,871
168
163,754
173
355,007
—
—
—
—
—
—
—
58,759
(268)
749
5,688
(652)
469
72
4
429,292
(4)
85,006
—
—
—
—
—
—
—
—
—
—
—
—
498
7,496
(3,352)
150
12
519,102
83,381
40
7,922
(6,791)
(36,981)
(6,473)
—
—
(6,473)
—
(6,473)
16,564 $
165 $ 161,427 $
(6,300) $ 404,908 $ 560,200 $
— $ 560,200
The accompanying notes are an integral part of these Financial Statements.
51
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 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:
Accounts receivable, net
Contract assets, net
Receivable for insurance claims in excess of deductibles
Prepaid expenses and other assets
Accounts payable
Contract liabilities
Accrued self-insurance
Other liabilities
Net cash flows provided by 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 equipment notes
Payment of principal obligations under finance leases
Borrowings under equipment notes
Proceeds from exercise of stock options
Repurchase of common stock
Payments related to tax withholding for stock-based compensation
Other financing activities
Net cash flows 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:
Income taxes payments
Interest payments
Noncash investing activities:
Year ended December 31,
2022
2021
2020
$
83,381 $
85,006 $
58,759
49,161
9,009
7,922
9,573
(2,378)
2,294
(86,939)
(64,421)
(14)
1,640
109,008
58,001
4,999
(13,752)
167,484
1,990
(110,660)
(77,056)
(185,726)
12,915
(1,047)
(1,592)
24,184
40
(36,981)
(6,791)
—
(9,272)
(3,538)
(31,052)
43,894
2,311
7,496
6,281
(3,098)
1,892
10,659
(39,266)
(4,619)
(25,320)
34,348
9,573
5,233
2,838
137,228
3,062
—
(52,361)
(49,299)
—
(24,917)
(336)
—
498
—
(3,352)
12
(28,095)
(410)
59,424
42,867
3,586
5,688
(2,641)
(2,813)
1,951
2,903
31,360
(1,511)
(15,458)
(43,079)
52,918
3,010
37,627
175,167
3,429
—
(44,355)
(40,926)
(103,820)
(32,584)
(1,238)
—
749
—
(652)
13,249
(124,296)
326
10,271
$
$
82,092
51,040 $
22,668
82,092 $
12,397
22,668
20,462 $
2,736
30,009 $
1,444
24,185
4,071
Acquisition of property and equipment for which payment is pending
2,218
4,120
349
The accompanying notes are an integral part of these Financial Statements.
52
MYR GROUP INC.
NOTES TO FINANCIAL STATEMENTS
1. Organization, Business and Significant Accounting Policies
Organization and Business
MYR Group Inc. (the “Company”) is a holding company of specialty electrical construction service providers and is currently
conducting operations through wholly-owned subsidiaries. The Company performs construction services in two business
segments: Transmission and Distribution (“T&D”) and Commercial and Industrial (“C&I”). T&D customers include investor-
owned utilities, cooperatives, private developers, government-funded utilities, independent power producers, independent
transmission companies, industrial facility owners and other contractors. T&D provides a broad range of services on electric
transmission, distribution networks, substation facilities and clean energy projects include design, engineering, procurement,
construction, upgrade, maintenance and repair services. C&I customers include general contractors, commercial and industrial
facility owners, government agencies and developers. C&I provides a broad range of services, which include design, installation,
maintenance and repair of commercial and industrial wiring. Typical C&I contracts cover electrical contracting services for
airports, hospitals, data centers, hotels, stadiums, commercial and industrial facilities, clean energy projects, manufacturing plants,
processing facilities, water/waste-water treatment facilities, mining facilities, intelligent transportation systems, roadway lighting
and signalization.
Significant Accounting Policies
Consolidation
The accompanying Financial Statements include the results of operations of the Company and its subsidiaries. Significant
intercompany transactions and balances have been eliminated. Certain reclassifications were made to prior year amounts to
conform to the current year presentation.
Revenue Recognition
The Company recognizes revenue to depict the transfer of goods or services to customers in an amount that reflects the
consideration the Company expects to be entitled to in exchange for goods or services provided. Revenue associated with
contracts with customers is recognized over time as the Company’s performance creates or enhances customer-controlled assets
or creates or enhances an asset with no alternative use, for which the Company has an enforceable right to receive compensation
as defined under the contract. To determine the amount of revenue to recognize over time, the Company estimates profit by
determining the difference between total estimated revenue and total estimated cost of a contract. In addition, the Company
estimates a cost accrual every quarter that represents unbilled invoicing activity for services performed by subcontractors and
suppliers during the quarter, and estimates revenue from the contract cost portion of this accrual based on current gross margin
rates to be consistent with its cost method of revenue recognition. The estimated value of unbilled amounts are determined using a
regression analysis that estimates value based on the Company’s historical experience, and is adjusted for large individual
projects. The profit and corresponding revenue is recognized over the contract term based on costs incurred under the cost-to-cost
method. The Company utilizes the cost-to-cost method as it believes cost incurred best represents the amount of work completed
and remaining on projects, and is the most common basis for computing percentage of completion in the industry. For purposes of
recognizing revenue, the Company follows the five-step approach outlined in Accounting Standards Codification (“ASC”)
606-10-25.
As the cost-to-cost method is driven by incurred cost, the Company calculates the percentage of completion by dividing costs
incurred to date by the total estimated cost. The percentage of completion is then multiplied by estimated revenues to determine
inception-to-date revenue. Revenue recognized for the period is the current inception-to-date recognized revenue less the prior
period inception-to-date recognized revenue. If a contract is projected to result in a loss, the entire contract loss is recognized in
the period when the loss was first determined and the amount of the loss is updated in subsequent reporting periods. Because the
Company’s billings are based on contract terms and do not coincide with our progress in a project, revenue recognition also
includes an amount related to a contract asset or contract liability. If the recognized revenue is greater than the amount billed to
the customer, a contract asset is recorded. Additionally, the contract asset includes retainage billed to the customer that cannot be
collected until the contract work has been completed and approved. Conversely, if the amount billed to the customer is greater
than the recognized revenue, a contract liability is recorded. Additionally, the contract liability includes a liability for the excess
of costs over revenues for all contracts that are in a loss position.
53
Contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract.
Changes in the job performance, job conditions and final contract settlements are factors that influence management’s assessment
of total contract value and the total estimated costs to complete those contracts, and therefore, profit and revenue recognition.
Additionally, the Company estimates costs to complete on fixed price contracts which are determined on an individual contract
basis by evaluating each project’s status as of the balance sheet date, and using our historical experience with the level of effort
required to complete the underlying project. Claims and change orders are also measured based on our historical experience with
individual customers and similar contracts, and are evaluated by management individually. A change order is a modification to a
contract that changes the provisions of the contract, typically resulting from changes in scope, specifications, design, manner of
performance, facilities, equipment, materials, sites, or period of completion of the work under the contract. A claim is an amount
in excess of the agreed-upon contract price that the Company seeks to collect from its clients or others for client-caused delays,
errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both
scope and price, or other causes. The Company includes these estimated amounts of variable consideration to the extent that it is
probable there will not be a significant reversal of revenue.
Some of the Company’s contracts may have contract terms that include variable consideration such as safety or performance
bonuses or liquidated damages. In accordance with ASC 606-10-32, the Company estimates the variable consideration using one
of two methods. In contracts in which there is a binary outcome, the most likely amount method is used. In instances in which
there is a range of possible outcomes, the expected value method is used. In accordance with ASC 606-10-32-11, the Company
includes the estimated amount of variable consideration in the transaction price only to the extent that it is probable that a
significant reversal in the amount of cumulative recognized revenue will not occur when the final outcome of the variable
consideration is determined. In contracts in which a significant reversal may occur, the Company uses constraint in recognizing
revenue on variable consideration. Although the Company often enters into contracts that contain liquidated damage clauses, the
Company rarely incurs them, and as such, the Company does not include amounts associated with liquidated damage clauses until
it is probable that liquidated damages will occur. These items are continually monitored by multiple levels of management
throughout the reporting period.
A portion of the work the Company performs requires financial assurances in the form of performance and payment bonds or
letters of credit at the time of execution of the contract. Many of the Company’s contracts include retention provisions of up to
10%, which are generally withheld from each progress payment as retainage until the contract work has been completed and
approved.
The Company provides warranties to customers on a basis customary to the industry; however, the warranty period does not
typically exceed one year. Historically, warranty claims have not been material to the Company.
Total revenues do not include sales tax as the Company considers itself a pass-through conduit for collecting and remitting
sales taxes. Sales tax collected from customers is included in other current liabilities on the Company’s consolidated balance
sheets.
Joint Ventures and Noncontrolling Interests
The Company accounts for investments in joint ventures using the proportionate consolidation method for income statement
reporting and under the equity method for balance sheet reporting, unless the Company has a controlling interest causing the joint
venture to be consolidated with equity owned by other joint venture partners recorded as noncontrolling interests. Under the
proportionate consolidation method, joint venture activity is allocated to the appropriate line items found on the consolidated
statements of operations in proportion to the percentage of participation the Company has in the joint venture. During the years
ended December 31, 2022, 2021 and 2020, the Company recognized its proportionate share of joint venture revenues of $11.3
million, $26.1 million, and $27.2 million, respectively. Under the equity method the net investment in joint ventures is stated as a
single item on the Company’s consolidated balance sheets. If an investment in a joint venture contains a recourse or unfunded
commitments to provide additional equity, distributions and/or losses in excess of the investment a liability is recorded in other
current liabilities on the Company’s consolidated balance sheets. For joint ventures which the Company does not have a
controlling interest, the Company’s share of any profits and assets and its share of any losses and liabilities are recognized based
on the Company’s stated percentage partnership interest in the joint venture, and are normally recorded by the Company one
month in arrears. The investments in joint ventures are recorded at cost and the carrying amounts are adjusted to recognize the
Company’s proportionate share of cumulative income or loss, additional contributions made and dividends and capital
distributions received. The Company records the effect of any impairment or any other-than-temporary decrease in the value of
the joint venture investment as incurred, which may or may not be one month in arrears, depending on when the Company obtains
the joint venture activity information. Additionally, the Company continually assesses the fair value of its investment in
unconsolidated joint ventures despite using information that is one month in arrears for regular reporting purposes. The Company
includes only its percentage ownership of each joint venture in its backlog.
54
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 intercompany loans that are not deemed long-term investment accounts are recorded in the “other income
(expense), net” line on the Company’s consolidated statements of operations. Foreign currency losses, recorded in other income
(expense), net, for the year ended December 31, 2022, were not significant. Foreign currency translation gains and losses, arising
from intercompany loans that are deemed long-term investment accounts are recorded in the foreign currency translation
adjustment line on the Company’s consolidated statements of comprehensive income.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses
during the period reported. Actual results could differ from those estimates.
The most significant estimates are related to estimates of costs to complete on contracts, pending change orders and claims,
shared savings, insurance reserves, income tax reserves, estimates surrounding stock-based compensation, acquisition-related
contingent earn-out consideration liabilities, the recoverability of goodwill and intangibles and allowance for doubtful accounts.
The Company estimates a cost accrual every period that represents costs incurred but not invoiced for services performed or
goods delivered during the period, and estimates revenue from the contract cost portion of these accruals based on current gross
margin rates to be consistent with its cost method of revenue recognition.
As of December 31, 2022 and 2021, the Company recognized revenues of $19.6 million and $2.4 million, respectively,
related to significant change orders and/or claims that had been included as contract price adjustments on certain contracts, some
of which are multi-year projects. These change orders and/or claims are in the process of being negotiated in the normal course of
business, and a portion of these recognized revenues had been included in multiple periods. These aggregate amounts, which were
included in “Contract assets” in the accompanying consolidated balance sheets, represent the Company’s estimates of additional
contract revenues that were earned and probable of collection, however, the amount ultimately realized could be significantly
higher or lower than the estimated amount.
The cost-to-cost method of accounting requires the Company to make estimates about the expected revenue and gross profit
on each of its contracts in process. During the year ended December 31, 2022, changes in estimates pertaining to certain projects
decreased consolidated gross margin by 0.4%, which resulted in decreases in operating income of $9.8 million, net income of $6.9
million and diluted earnings per common share attributable to MYR Group Inc. of $0.41. The estimates are reviewed and revised
quarterly, as needed.
During the year ended December 31, 2021, changes in estimates pertaining to certain projects increased consolidated gross
margin by 0.4%, which resulted in increases in operating income of $9.2 million, net income of $6.6 million and diluted earnings
per common share attributable to MYR Group Inc. of $0.39.
During the year ended December 31, 2020, changes in estimates pertaining to certain projects decreased consolidated gross
margin by 0.8%, which resulted in decreases in operating income of $18.0 million, net income attributable to MYR Group Inc. of
$12.8 million and diluted earnings per common share attributable to MYR Group Inc. of $0.76.
Advertising
Advertising costs are expensed when incurred. Advertising costs, included in selling, general and administrative expenses,
were $1.2 million, $0.8 million and $0.7 million for the years ended December 31, 2022, 2021 and 2020, 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.
55
Interest and penalties related to uncertain income tax positions are included in income tax expense on the Company’s
consolidated statements of operations. Interest and penalties actually incurred are charged to the interest expense and the “other
income (expense), net” line, respectively.
Stock-Based Compensation
The Company determines compensation expense for stock-based awards based on the estimated fair values at the grant date
and recognize the related compensation expense over the vesting period. The Company uses the straight-line amortization method
to recognize compensation expense related to stock-based awards, such as restricted stock and restricted stock units, that have
only service conditions. This method recognizes stock compensation expense on a straight-line basis over the requisite service
period for the entire award. The Company recognizes compensation expense related to performance awards that vest based on
internal performance metrics and service conditions on a straight-line basis over the service period, but adjust inception-to-date
expense based upon our determination of the potential achievement of the performance target at each reporting date. The
Company recognizes compensation expense related to performance awards with market-based performance metrics on a straight-
line basis over the requisite service period. The Company recognizes forfeitures as they occur. Shares issued under the
Company’s stock-based compensation program are taken out of authorized but unissued shares.
Earnings Per Share
The Company computes earnings per share using the treasury stock method. Under the treasury stock method, basic earnings
per share attributable to MYR Group Inc. are computed by dividing net income attributable to MYR Group Inc. by the weighted
average number of common shares outstanding during the period. Diluted earnings per share attributable to MYR Group Inc. are
computed by dividing net income attributable to MYR Group Inc. by the weighted average number of common shares outstanding
during the period plus all potentially dilutive common stock equivalents, except in cases where the effect of the common stock
equivalent would be anti-dilutive.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash
equivalents. As of December 31, 2022 and 2021, the Company held its cash in checking accounts or in highly liquid money
market funds. The Company’s banking arrangements allow the Company to fund outstanding checks when presented to financial
institutions for payment. The Company funds all intraday bank balances overdrafts during the same business day. Checks issued
and outstanding in excess of bank balance are recorded in accounts payable on the Company’s consolidated balance sheets and are
reflected as a financing activity on the Company’s Consolidated Statements of Cash Flows.
Accounts Receivable and Allowance for Doubtful Accounts
The Company does not charge interest to its customers and carries its customer receivables at their face amounts, net of
contract retainage, less an allowance for doubtful accounts. Based on the Company’s experience in recent years, the majority of
customer balances at each balance sheet date are collected within twelve months. As is common practice in the industry, the
Company classifies all accounts receivable as current assets.
The Company grants trade credit, on a non-collateralized basis (with the exception of lien rights against the property in
certain cases), to its customers and is subject to potential credit risk related to changes in business and overall economic activity.
The Company analyzes specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic
trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event
that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful
accounts.
Classification of Contract Assets and Liabilities
The Company recognizes revenue associated with its contracts with customers over time, for which the Company has an
enforceable right to receive compensation. Many of our contracts contain specific provisions that determine when the Company
can bill for its work performed under these contracts.
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.
56
The Company’s consolidated balance sheets present contract liabilities that contain deferred revenue that represent any costs
incurred on contracts in process for which revenue has not yet been recognized. Additionally, accruals for contracts in a loss
provision are included in contract liabilities.
Property and Equipment
Property and equipment is carried at cost, except for assets acquired in a business combination which are recorded at fair
value at the date of acquisition. Depreciation is computed using the straight-line method over estimated useful lives. Major
modifications or refurbishments which extend the useful life of the assets are capitalized and depreciated over the adjusted
remaining useful life of the assets. Upon retirement or disposition of property and equipment, the cost and related accumulated
depreciation are removed and any resulting gain or loss is recognized in income from operations. The cost of maintenance and
repairs is charged to expense as incurred. Property and equipment is reviewed for impairment and tested for recoverability
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value of
property and equipment exceeds its fair value, an impairment charge would be recorded in the statement of operations.
Leases
The Company enters into non-cancelable leases for some of our facility, vehicle and equipment needs. These leases allow the
Company to conserve cash by paying a monthly lease rental fee for the use of facilities, vehicles and equipment rather than
purchasing them. The Company’s leases have remaining terms ranging from one to seven years, some of which may include
options to extend the leases for up to five years, and some of which may include options to terminate the leases within one year.
Currently, all the Company’s leases contain fixed payment terms. The Company may decide to cancel or terminate a lease before
the end of its term, in which case we are typically liable to the lessor for the remaining lease payments under the term of the lease.
Additionally, all of the Company’s month-to-month leases are cancelable, by the Company or the lessor, at any time and are not
included in our right-of-use asset or liability. As of December 31, 2022, the Company had several leases with residual value
guarantees. The total amount probable of being owed of residual leases guarantees is not significant. Typically, the Company has
purchase options on the equipment underlying its long-term leases and many of its short-term rental arrangements. The Company
may exercise some of these purchase options when the need for equipment is ongoing and the purchase option price is attractive.
Nonperformance-related default covenants, cross-default provisions, subjective default provisions and material adverse change
clauses contained in material lease agreements, if any, are also evaluated to determine whether those clauses affect lease
classification in accordance with ASC Topic 842-10-25. Leases are accounted for as operating or finance leases, depending on the
terms of the lease.
Finance Leases. The Company leases some vehicles and certain equipment under finance leases. The economic substance of
the leases is a financing transaction for acquisition of the vehicles and equipment. Accordingly, the right-of-use assets for these
leases are included on the Company’s consolidated balance sheets in property and equipment, net of accumulated depreciation,
with a corresponding amount recorded in current portion of finance lease obligations or finance lease obligations, net of current
maturities, as appropriate. The finance lease assets are amortized over the life of the lease or, if shorter, the life of the leased asset,
on a straight-line basis and included in depreciation expense. The financing component associated with finance lease obligations
is included in interest expense. Generally, for the Company’s finance leases an implicit rate to calculate present value is provided
in the lease agreement. However, if a rate in not provided the Company determines this rate by estimating the Company’s
incremental borrowing rate, utilizing the borrowing rates associated with the Company’s various debt instruments.
Operating Right-of-Use Leases. Operating right-of-use leases are included in operating lease right-of-use assets, current
portion of operating lease obligations and operating lease obligations, net of current maturities on the Company’s consolidated
balance sheets, as appropriate. Operating lease right-of-use assets and operating lease liabilities are recognized based on the
present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases
do not provide an implicit rate to calculate present value, the Company determines this rate by estimating the Company’s
incremental borrowing rate, utilizing the borrowing rates associated with the Company’s various debt instruments. The operating
lease right-of-use asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. Our
lease terms may include options to extend or terminate the lease, which are considered in the present value calculations when it is
reasonably certain we will exercise those options.
57
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 stop-loss limit of up to $0.2
million, for qualified individuals. Losses up to the deductible amounts are accrued based upon the Company’s estimates of the
ultimate liability for claims reported and an estimate of claims incurred but not yet reported.
The insurance and claims accruals are based on known facts, actuarial estimates and historical trends. While recorded
accruals are based on the ultimate liability, which includes amounts in excess of the deductible, a corresponding receivable for
amounts in excess of the deductible is included in current assets on the Company’s consolidated balance sheets.
Goodwill and Intangible Assets
Goodwill and intangible assets with indefinite lives are not amortized. Intangible assets with finite lives are amortized on a
straight-line basis over their estimated useful lives. The Company performs either a qualitative or quantitative assessment to
review goodwill and intangible assets with indefinite lives for impairment on an annual basis. This assessment is performed at the
beginning of the fourth quarter, or when circumstances change, such as a significant adverse change in the business climate or the
decision to sell a business, both of which would indicate that impairment may have occurred. Intangible assets with finite lives are
also reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable.
A qualitative assessment considers financial, industry, segment and macroeconomic factors, if the qualitative assessment
indicates a potential for impairment, a quantitative assessment is performed to determine if impairment exists. The quantitative
assessment begins with a comparison of the fair value of the reporting unit or intangible asset with its carrying value. If the
carrying amount of the reporting unit or intangible asset exceeds its fair value, an impairment loss would be recognized in an
amount equal to that excess, limited to the total amount of the goodwill allocated to the reporting unit or intangible asset. If the
carrying value of goodwill or other indefinite lived assets exceeds its implied fair value, an impairment charge would be recorded
in the statement of operations.
As a result of the annual qualitative review process in 2022 and 2020, the Company determined it was not necessary to
perform a quantitative assessment. In 2021, the Company performed a quantitative assessment on goodwill and intangible assets
with indefinite lives, this assessment did not indicate that the Company’s goodwill or indefinite lived intangible assets were
impaired.
Concentrations
Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash and
cash equivalents and accounts receivable. The Company maintains substantially all of its cash and cash equivalent balances with
large financial institutions which are believed to be high quality institutions.
The Company is subject to a concentration of risk because it derives a significant portion of its revenues from a few
customers. The Company’s top ten customers accounted for approximately 35.4%, 34.9%, and 32.7% of consolidated revenues
for the years ended December 31, 2022, 2021 and 2020, respectively. For the years ended December 31, 2022, 2021 and 2020, 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, 2022 and 2021, none of the Company’s customers individually exceeded
10.0% of accounts receivable. The Company believes the terms and conditions in its contracts, billing and collection policies are
adequate to minimize the potential credit risk.
As of December 31, 2022, approximately 86% 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.
58
Canadian Emergency Wage Subsidy (CEWS)
In 2020 and 2021, certain C&I segment Canadian operations of the Company qualified for and applied for a wage subsidy
under the Canada Emergency Wage Subsidy (“CEWS”) program. Payroll subsidies received under CEWS totaled $2.3 million
and were initially recorded in the "other current liabilities" line on the Company’s consolidated balance sheets. Once the
qualification criteria was met in 2022, these funds were recorded to the “other income (expense), net” line on the Company’s
consolidated statements of operations. The Company does not have any outstanding applications for further government
assistance.
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 October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets
and Contract Liabilities from Contracts with Customers, which is intended to improve the accounting for acquired revenue
contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition
of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. Under the
new guidance the acquirer is required to recognize contract assets and contract liabilities acquired in a business combination in
accordance with Topic 606 as if the acquirer had originated the contracts. The update is effective for fiscal years beginning after
December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in an interim
period, for any period for which financial statements have not yet been issued. However, adoption in an interim period other than
the first fiscal quarter requires an entity to apply the new guidance to all prior business combinations that have occurred since the
beginning of the annual period in which the new guidance is adopted. The Company adopted this ASU in January 2022 and there
was no material effect on the consolidated financial statements or disclosures.
2. Acquisition
Powerline Plus Ltd
On January 4, 2022, the Company acquired all issued and outstanding shares of capital stock of Powerline Plus Ltd. and
its affiliate PLP Redimix Ltd. (collectively, the “Powerline Plus Companies"), a full-service electrical distribution construction
company based in Toronto, Ontario. Cash consideration paid, funded through a combination of cash on hand and borrowings
under the Facility (as defined below), including $0.1 million of net asset and other adjustments, was $110.7 million, net of cash
acquired. The addition of the Powerline Plus Companies expanded our distribution operations in Ontario, Canada.
Additionally, the acquisition includes contingent earn-out consideration that may be payable if the Powerline Plus
Companies achieve certain performance targets over a three-year post-acquisition period. As of the acquisition date, the fair value
of the contingent earn-out consideration was $0.9 million. The future payout of the contingent earn-out consideration, if any, is
unlimited and could be significantly higher than the acquisition date fair value. If the minimum thresholds of the performance
targets are achieved the contingent earn-out consideration payment will be approximately $16.6 million. Changes in contingent
earn-out consideration, subsequent to the acquisition, of approximately $0.7 million were recorded in other income, for the year
ended December 31, 2022. The results of the Powerline Plus Companies are included in the Company’s consolidated financial
statements beginning on the transaction date. During the year ended December 31, 2022, the Company recognized approximately
$0.5 million, of acquisition-related costs associated with this acquisition.
The purchase agreement also includes contingent consideration provisions for down-side margin guarantee adjustments
based upon certain contract performance subsequent to the acquisition. The contracts were valued at fair value at the acquisition
date, causing no margin guarantee estimate or adjustments for fair value. Unfavorable changes in contract estimates, such as
modified costs to complete or change order recognition, will result in changes to these margin guarantee estimates. No changes in
margin guarantee adjustments on contracts, subsequent to the acquisition, have been recorded for the year ended December 31,
2022. Future margin guarantee adjustments, if any, will be recognized in other income in 2023.
59
The following table summarizes the allocation of the opening balance sheet as of the date of the Powerline Plus
Companies acquisition:
(in thousands)
Cash paid
Contingent consideration - fair value at acquisition date
Net asset and other adjustments
Total consideration, net of estimated net asset adjustments
Less: Acquired cash
Total consideration less cash acquired, net of net asset and other
adjustments
Cash and cash equivalents
Accounts receivable
Contract assets
Refundable income taxes
Prepaid expenses and other current assets
Property and equipment
Operating lease right-of-use assets
Intangible assets
Accounts payable
Contract liabilities
Current portion of operating lease obligations
Current portion of finance lease obligations
Deferred income tax liabilities
Operating lease obligations, net of current maturities
Finance lease obligations, net of current maturities
Net identifiable assets and liabilities
Unallocated intangible assets
Total acquired assets and liabilities
Goodwill
January 4, 2022
acquisition date
(initial estimates)
Measurement
Period
Adjustments
Final
Acquisition
Allocation
114,429 $
10,608
563
125,600
(3,853)
— $
(9,743)
(479)
(10,222)
—
114,429
865
84
115,378
(3,853)
121,747 $
(10,222) $
111,525
$
$
$
3,853 $
12,131
12,443
394
1,233
10,366
6,631
—
(8,095)
(1,597)
(1,224)
(1,492)
(1,358)
(4,897)
(3,243)
25,145
56,650
81,795
— $
(52)
148
482
(121)
1,577
(511)
50,246
(466)
(95)
—
—
3,853
12,079
12,591
876
1,112
11,943
6,120
50,246
(8,561)
(1,692)
(1,224)
(1,492)
(13,991)
(15,349)
—
—
37,217
(56,650)
(19,433)
(4,897)
(3,243)
62,362
—
62,362
53,016
$
43,805 $
9,211 $
The following table summarizes the estimated fair values of identifiable intangible assets and the related weighted
average amortization periods as of the acquisition date of the Powerline Plus Companies.
Amortizable Intangible Assets
Customer relationships
Backlog
Below market lease
Total amortizable intangible assets
Indefinite-lived Intangible Assets
Trade names
Total intangible assets
60
Estimated Fair
Value at
Acquisition Date
(in thousands)
Weighted Average
Amortization
Period at
Acquisition Date
(in years)
$
$
$
39,757
4,007
511
44,275
5,971
50,246
15.0
1.0
5.0
14.9
Indefinite
The acquisition date fair values of intangible assets were determined using the income approach, which discounts the
projected future cash flows using a discount rate that appropriately reflects the risks associated with the projected cash flows.
Under the income approach, the acquisition date fair value of the customer relationships and backlog were estimated using a
multi-period excess earnings valuation method and the acquisition date fair value of the trade names was estimated using a relief
from royalty valuation method. The fair value of the acquired operating lease obligation and operating right of use asset was
estimated by applying the income approach. The fair value of the operating lease obligation was determined by comparing the
difference between the annual lease contract rent over the remaining contractual term to a market rate cash flow stream,
discounted to the present value. The Company calculated the fair value of the operating right of use asset based on the fair values
of the operating lease obligation adjusted for a below market lease positions. The contractual value of the acquired accounts
receivable is equal to the fair market value.
The Company has developed estimates of fair value of the assets acquired and liabilities assumed for the purposes of
allocating the purchase price. During the year ended December 31, 2022, the Company recorded certain measurement period
adjustments related to various working capital, property and equipment, intangible asset and deferred tax accounts determined
during our purchase price allocation procedures. 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 Powerline Plus
Companies will function as an individual business within the Company’s operating structure. Per applicable Canadian Revenue
Authority regulations, $42.4 million of the goodwill and intangibles for tax purposes related to the acquisition of the Powerline
Plus Companies will be tax deductible.
3. Contract Assets and Liabilities
Contracts with customers usually stipulate the timing of payment, which is defined by the terms found within the various
contracts under which work was performed during the period. Therefore, contract assets and liabilities are created when the
timing of costs incurred on work performed does not coincide with the billing terms, which frequently include retention
provisions contained in each contract.
The Company’s consolidated balance sheets present contract assets, which contain unbilled revenue and contract retainages
associated with contract work that has been completed and billed but not paid by customers, pursuant to retainage provisions, that
are generally due once the job is completed and approved. The allowance for doubtful accounts associated with contract assets
was $0.5 million as of December 31, 2022 and $0.4 million as of December 31, 2021.
Contract assets consisted of the following at December 31:
(in thousands)
Unbilled revenue, net
Contract retainages, net
Contract assets, net
2022
2021
Change
$
156,266 $
134,187 $
144,349
90,888
$
300,615 $
225,075 $
22,079
53,461
75,540
The Company’s consolidated balance sheets present contract liabilities which contain deferred revenue and an accrual for
contracts in a loss provision.
Contract liabilities consisted of the following at December 31:
(in thousands)
Deferred revenue
Accrued loss provision
Contract liabilities
2022
2021
Change
$
223,654 $
165,699 $
57,955
3,401
2,232
1,169
$
227,055 $
167,931 $
59,124
The following table provides information about contract assets and contract liabilities from contracts with customers at
December 31:
(in thousands)
Contract assets
Contract liabilities
Net contract assets
2022
2021
Change
$
300,615 $
225,075 $
75,540
(227,055)
(167,931)
(59,124)
$
73,560 $
57,144 $
16,416
61
The difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily
results from the timing of the Company’s billings in relation to its performance of work. The amounts of revenues recognized in
the period that were included in the opening contract liability balances were $117.3 million and $116.5 million for the year ended
December 31, 2022 and 2021, respectively. This revenue consists primarily of work performed on previous billings to customers.
The net asset position for contracts in process consisted of the following at December 31:
(in thousands)
Costs and estimated earnings on uncompleted contracts
Less: billings to date
2022
2021
$ 5,390,535 $ 4,130,621
5,457,923
4,162,133
$
(67,388) $
(31,512)
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, net
Deferred revenue
4. Lease Obligations
2022
2021
$
156,266 $
134,187
(223,654)
(165,699)
$
(67,388) $
(31,512)
From time to time, the Company enters into non-cancelable leases for some of our facility, vehicle and equipment needs.
These leases allow the Company to conserve cash by paying a monthly lease rental fee for the use of facilities, vehicles and
equipment rather than purchasing them. The Company’s leases have remaining terms ranging from one to seven years, some of
which may include options to extend the leases for up to five years, and some of which may include options to terminate the
leases within one year. Currently, all the Company’s leases contain fixed payment terms. The Company may decide to cancel or
terminate a lease before the end of its term, in which case we are typically liable to the lessor for the remaining lease payments
under the term of the lease. Additionally, all of the Company's month-to-month leases are cancelable, by the Company or the
lessor, at any time and are not included in our right-of-use asset or liability. At December 31, 2022, the Company had several
leases with residual value guarantees. Typically, the Company has purchase options on the equipment underlying its long-term
leases and many of its short-term rental arrangements. The Company may exercise some of these purchase options when the need
for equipment is ongoing and the purchase option price is attractive. Leases are accounted for as operating or finance leases,
depending on the terms of the lease.
The following is a summary of the lease-related assets and liabilities recorded:
(in thousands)
Assets
Classification on the Consolidated Balance Sheet
December 31,
2022
December 31,
2021
Operating lease right-of-use assets
Operating lease right-of-use assets
$
30,544 $
20,971
Finance lease right-of-use assets
Property and equipment, net of accumulated depreciation
3,238
—
Total right-of-use lease assets
$
33,782 $
20,971
Liabilities
Current
Operating lease obligations
Current portion of operating lease obligations
$
9,711 $
7,765
Finance lease obligations
Total current obligations
Non-current
Current portion of finance lease obligations
Operating lease obligations
Operating lease obligations, net of current maturities
Finance lease obligations
Finance lease obligations, net of current maturities
Total non-current obligations
Total lease obligations
1,127
10,838
20,845
2,313
23,158
—
7,765
13,230
—
13,230
$
33,996 $
20,995
62
The following is a summary of the lease terms and discount rates:
Weighted-average remaining lease term – finance leases
Weighted-average remaining lease term – operating leases
Weighted-average discount rate – finance leases
Weighted-average discount rate – operating leases
December 31,
2022
December 31,
2021
1.9 years
3.6 years
3.0 %
3.8 %
0.0 years
2.9 years
— %
3.9 %
The following is a summary of certain information related to the lease costs for finance and operating leases:
(in thousands)
Lease cost:
Finance lease cost:
Amortization of right-of-use assets
Interest on lease liabilities
Operating lease cost
Variable lease costs
Total lease cost
Year ended December 31,
2022
2021
$
1,138 $
128
13,428
415
—
—
10,217
317
$
15,109 $
10,534
The following is a summary of other information and supplemental cash flow information related to finance and operating
leases:
(in thousands)
Other information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
Right-of-use asset obtained in exchange for new operating lease obligations
Right-of-use asset obtained in exchange for new finance lease obligations
Year ended December 31,
2022
2021
$
$
$
13,287 $
10,451
21,663 $
7,459
517 $
—
Information on operating and financing lease right of use assets and corresponding lease obligations acquired with the
Powerline Plus Companies is provided in Note 2–Acquisitions to the Financial Statements.
The future undiscounted minimum lease payments, as reconciled to the discounted minimum lease obligation indicated on the
Company’s consolidated balance sheets, under current portion of operating lease obligations and operating lease obligations, net
of current maturities, as of December 31, 2022 were as follows:
(in thousands)
2023
2024
2025
2026
2027
Thereafter
Total minimum lease payments
Financing component
Net present value of minimum lease payments
Less: current portion of operating lease obligations
Long-term operating lease obligations
Finance
Lease
Obligations
Operating Lease
Obligations
Total
Lease
Obligations
$
1,212 $
12,810 $
9,217
6,786
5,233
1,578
2,905
38,529
(7,973)
30,556
14,022
11,258
7,102
5,233
1,578
2,905
42,098
(8,102)
33,996
2,041
316
—
—
—
3,569
(129)
3,440
(1,127)
(9,711)
(10,838)
$
2,313 $
20,845 $
23,158
63
The financing component for operating lease obligations represents the effect of discounting the lease payments to their
present value.
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,
2022, the minimum lease payments required under these leases totaled $7.1 million, which are due over the next 4.0 years.
5. Fair Value Measurements
The Company uses the three-tier hierarchy of fair value measurement, which prioritizes the inputs used in measuring fair
value based upon their degree of availability in external active markets. These tiers include: Level 1 (the highest priority), defined
as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets
that are either directly or indirectly observable; and Level 3 (the lowest priority), defined as unobservable inputs in which little or
no market data exists, therefore requiring an entity to develop its own assumptions.
As of December 31, 2022 and 2021, the Company determined that the carrying value of cash and cash equivalents
approximated fair value based on Level 1 inputs. As of December 31, 2022 and 2021, the fair value of the Company’s long-term
debt and finance lease obligations were based on Level 2 inputs. The Company’s long-term debt was based on variable and fixed
interest rates at December 31, 2022 and 2021. Long-term debt, if any, with variable interest rates are based on rates for new issues
with similar remaining maturities, and approximated carrying value. In addition, based on borrowing rates currently available to
the Company for borrowings with similar terms, the carrying values of the Company’s long term debt with fixed interest rates also
approximated fair value.
As of December 31, 2022, the fair values of the Company’s contingent earn-out consideration liability associated with the
acquisition of the Powerline Plus Companies was based on Level 3 inputs. The contingent earn-out consideration recorded
represents the estimated fair values of future amounts potentially payable to the former owners of the acquired Powerline Plus
Companies and was initially determined using a Monte Carlo simulation valuation methodology based on probability-weighted
performance projections and other inputs, including a discount rate and an expected volatility factor. The fair value of this
contingent earn-out consideration liability will be evaluated on an ongoing basis by management. Accordingly, the level of inputs
used for these fair value measurements is the lowest level (Level 3). Significant changes in any of these assumptions could result
in a significantly higher or lower potential liability.
6. Accounts Receivable
Accounts receivable consisted of the following at December 31:
(in thousands)
Contract receivables
Other
Less: allowance for doubtful accounts
2022
2021
$
471,724 $
374,826
2,892
474,616
(2,073)
472,543 $
$
2,968
377,794
(2,441)
375,353
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
2022
2021
2020
$
2,441 $
1,696 $
320
45
(3)
(764)
19
—
3,364
1,296
375
3
$
2,073 $
2,441 $
1,696
64
7. Prepaid Expenses and Other Current Assets
Prepaid expense and other current assets consisted of the following at December 31:
(in thousands)
Prepaid expenses
Other current assets
8. 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
2022
2021
$
$
45,977 $
44,677
1,847
887
47,824 $
45,564
Estimated
Useful Life
in Years
2022
2021
—
$
10,226 $
3 to 39
3 to 12
3 to 10
40,480
519,421
14,801
584,928
10,226
35,600
455,011
17,383
518,220
(351,753)
(322,128)
$
233,175 $
196,092
Construction equipment includes assets under finance leases — see additional information provided in Note 4 — Lease
Obligations to the Financial Statements.
Depreciation and amortization expense of property and equipment for the years ended December 31, 2022, 2021 and 2020
was $49.2 million, $43.9 million and $42.9 million, respectively.
9. Goodwill and Intangible Assets
Goodwill and intangible assets consisted of the following at December 31:
Gross
Carrying
Amount
2022
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
2021
Accumulated
Amortization
Net
Carrying
Amount
$
93,240 $
— $
93,240 $
40,224 $
— $
C&I
Foreign currency translation
25,830
(3,223)
—
—
25,830
(3,223)
25,830
11
—
—
Total goodwill
$
115,847 $
— $
115,847 $
66,065 $
— $
Amortizable Intangible Assets
Backlog
$
9,296 $
9,296 $
— $
5,289 $
5,289 $
Customer relationships
71,138
16,094
55,044
31,381
11,179
Trade names
Below market lease
Foreign currency translation
Indefinite-lived Intangible
Assets
Trade names
Foreign currency translation
695
511
(2,689)
357
102
(410)
338
409
(2,279)
695
—
1
34,412
(367)
—
—
34,412
(367)
28,441
26
311
—
—
—
—
40,224
25,830
11
66,065
—
20,202
384
—
1
28,441
26
Total intangible assets
$
112,996 $
25,439 $
87,557 $
65,833 $
16,779 $
49,054
65
(in thousands)
Goodwill
T&D
The increase in goodwill as of December 31, 2022 compared to December 31, 2021 was primarily due to the allocation of
$53.0 million of goodwill related to the acquisition of the Powerline Plus Companies identified during the purchase accounting.
The increase in intangible assets also related to the acquisition of the Powerline Plus Companies and are being amortized on a
straight-line basis over periods ranging up to 15 years. Additional financial information related to this acquisition is provided in
Note 2–Acquisitions to the Financial Statements.
Customer relationships, amortizable trade names and backlog are being amortized on a straight-line method over an estimated
useful life ranging up to 15 years and the remaining life of the contract, respectively, and have been determined to have no
residual value. Certain trade names have indefinite lives and, therefore, are not being amortized. Intangible asset amortization
expense was $9.0 million, $2.3 million and $3.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.
As of December 31, 2022, estimated future intangible asset amortization expense for the each of the next five years and
thereafter was as follows:
(in thousands)
2023
2024
2025
2026
2027
Thereafter
Total
10. Accrued Liabilities
Other current liabilities consisted of the following at December 31:
(in thousands)
Payroll and incentive compensation
Union dues and benefits
Taxes
Profit sharing and thrift plan
Other
Future
Amortization
Expense
$
$
4,897
4,897
4,897
4,897
4,760
29,164
53,512
2022
2021
$
31,355 $
21,500
6,574
9,119
11,370
$
79,918 $
46,485
19,994
4,605
11,175
12,598
94,857
66
11. Debt
The table below reflects the Company’s total debt, including borrowings under its credit agreement and equipment notes:
(dollars in thousands)
Credit Agreement
Revolving loans
Equipment Notes
Equipment Note 8
Equipment Note 10
Other equipment note
Total debt
Less: current portion of long-term debt
Long-term debt
Credit Agreement
Stated
Interest
Rate
(per annum)
Inception
Date
Payment
Frequency
Term
(years)
Outstanding
Balance as of
December 31,
2022
Outstanding
Balance as of
December 31,
2021
9/13/2019
Variable
Variable
12/27/2019
8/26/2022
4/11/2022
2.75%
4.32%
4.55%
Semi-annual
Semi-annual
Monthly
5
5
5
5
$
12,915 $
—
3,464
24,119
55
27,638
40,553
(5,074)
$
35,479 $
4,503
—
—
4,503
4,503
(1,039)
3,464
On September 13, 2019, the Company entered into a five-year amended and restated credit agreement (the “Credit
Agreement”) with a syndicate of banks led by JPMorgan Chase Bank, N.A. and Bank of America, N.A, that provides for a $375
million facility (the “Facility”), subject to certain financial covenants as defined in the Credit Agreement, that may be used for
revolving loans of which $150 million may be used for letters of credit. The Facility also allows for revolving loans and letters of
credit in Canadian dollars and other currencies, up to the U.S. dollar equivalent of $75 million. The Company has an expansion
option to increase the commitments under the Facility or enter into incremental term loans, subject to certain conditions, by up to
an additional $200 million upon receipt of additional commitments from new or existing lenders. Subject to certain exceptions,
the Facility is secured by substantially all of the assets of the Company and its domestic subsidiaries, and by a pledge of
substantially all of the capital stock of the Company’s domestic subsidiaries and 65% of the capital stock of the direct foreign
subsidiaries of the Company. Additionally, subject to certain exceptions, the Company’s domestic subsidiaries also guarantee the
repayment of all amounts due under the Credit Agreement. If an event of default occurs and is continuing, on the terms and
subject to the conditions set forth in the Credit Agreement, amounts outstanding under the Facility may be accelerated and may
become or be declared immediately due and payable. Borrowings under the Credit Agreement are used for refinancing existing
indebtedness, working capital, capital expenditures, acquisitions, share repurchases, and other general corporate purposes.
Amounts borrowed under the Credit Agreement bear interest, at the Company’s option, at a rate equal to either (1) the
Alternate Base Rate (as defined in the Credit Agreement), plus an applicable margin ranging from 0.00% to 0.75%; or
(2) Adjusted LIBO Rate (as defined in the Credit Agreement) plus an applicable margin ranging from 1.00% to 1.75%. Once
LIBOR is no longer available, the Company will amend the Credit Agreement to transition from LIBOR to the Secured Overnight
Financing Rate (“SOFR”) or will elect the Alternate Base Rate. The applicable margin is determined based on the Company’s
consolidated leverage ratio (the “Leverage Ratio”) which is defined in the Credit Agreement as Consolidated Total Indebtedness
(as defined in the Credit Agreement) divided by Consolidated EBITDA (as defined in the Credit Agreement). Letters of credit
issued under the Facility are subject to a letter of credit fee of 1.00% to 1.75% for non-performance letters of credit or 0.50% to
0.875% for performance letters of credit, based on the Company’s consolidated Leverage Ratio. The Company is subject to a
commitment fee of 0.15% to 0.25%, based on the Company’s consolidated Leverage Ratio, on any unused portion of the Facility.
The Credit Agreement restricts certain types of payments when the Company’s consolidated Leverage Ratio exceeds 2.50 or the
Company’s consolidated Liquidity (as defined in the Credit Agreement) is less than $50 million. The weighted average interest
rate on borrowings outstanding on the Facility for the year ended December 31, 2022, was 3.06% per annum.
Under the Credit Agreement, the Company is subject to certain financial covenants and is limited to a maximum consolidated
Leverage Ratio of 3.0 and a minimum interest coverage ratio of 3.0, which is defined in the Credit Agreement as Consolidated
EBITDA (as defined in the Credit Agreement) divided by interest expense (as defined in the Credit Agreement). The Credit
Agreement also contains covenants including limitations on asset sales, investments, indebtedness and liens. The Company was in
compliance with all of its financial covenants under the Credit Agreement as of December 31, 2022.
67
As of December 31, 2022, the Company had $12.9 million debt outstanding under the Facility and letters of credit
outstanding under the Facility of approximately $12.8 million, which were almost entirely related to the Company's payment
obligation under its insurance programs.
As of December 31, 2021, the Company had no debt outstanding under the Facility and letters of credit outstanding under the
Facility of approximately $12.3 million, which were almost entirely related to the Company's payment obligation under its
insurance programs.
The Company had remaining deferred debt issuance costs totaling $0.5 million as of December 31, 2022, related to the line of
credit. As permitted, debt issuance costs have been deferred and are presented as an asset within other assets, which is amortized
as interest expense over the term of the line of credit.
Equipment Notes
The Company has entered into Master Equipment Loan and Security Agreements (the “Master Loan Agreements”) with
multiple finance companies. The Master Loan Agreements may be used for the financing of equipment between the Company and
the lenders pursuant to one or more equipment notes (“Equipment Note”). Each Equipment Note executed under the Master Loan
Agreements constitutes a separate, distinct and independent financing of equipment and a contractual obligation of the Company,
which may contain prepayment clauses.
As of December 31, 2022, the Company had two Equipment Notes outstanding under the Master Loan Agreements that are
collateralized by equipment and vehicles owned by the Company. As of December 31, 2022, the Company had one other
equipment note outstanding that is collateralized by a vehicle owned by the Company. The following table sets forth our
remaining principal payments for the Company’s outstanding Equipment Note as of December 31, 2022:
(in thousands)
2023
2024
2025
2026
2027
Thereafter
Total future principal payments
Less: current portion of equipment notes
Long-term principal obligations
12. Revenue Recognition
Disaggregation of Revenue
Future
Equipment
Notes
Principal
Payments
$
$
$
5,074
6,578
4,364
4,555
7,067
—
27,638
(5,074)
22,564
A majority of the Company’s revenues are earned through contracts with customers that normally provide for payment upon
completion of specified work or units of work as identified in the contract. Although there is considerable variation in the terms of
these contracts, they are primarily structured as fixed-price contracts, under which the Company agrees to perform a defined
scope of a project for a fixed amount, or unit-price contracts, under which the Company agrees to do the work at a fixed price per
unit of work as specified in the contract. The Company also enters into time-and-equipment and time-and-materials contracts
under which the Company is paid for labor and equipment at negotiated hourly billing rates and for other expenses, including
materials, as incurred at rates agreed to in the contract. Finally, the Company sometimes enters into cost-plus contracts, where the
Company is paid for costs plus a negotiated margin. On occasion, time-and-equipment, time-and-materials and cost-plus contracts
require the Company to include a guaranteed not-to-exceed maximum price.
68
Historically, fixed-price and unit-price contracts have had the highest potential margins; however, they have had a greater
risk in terms of profitability because cost overruns may not be recoverable. Time-and-equipment, time-and-materials and cost-
plus contracts have historically had less margin upside, but generally have had a lower risk of cost overruns. The Company also
provides services under master service agreements (“MSAs”) and other variable-term service agreements. MSAs normally cover
maintenance, upgrade and extension services, as well as new construction. Work performed under MSAs is typically billed on a
unit-price, time-and-materials or time-and-equipment basis. MSAs are typically one to three years in duration; however, most of
the Company’s contracts, including MSAs, may be terminated by the customer on short notice, typically 30 to 90 days, even if the
Company is not in default under the contract. Under MSAs, customers generally agree to use the Company for certain services in
a specified geographic region. Most MSAs include no obligation for the contract counterparty to assign specific volumes of work
to the Company and do not require the counterparty to use the Company exclusively, although in some cases the MSA contract
gives the Company a right of first refusal for certain work. Additional information related to the Company’s market types is
provided in Note 17–Segment Information to the Financial Statements.
The components of the Company’s revenue by contract type were as follows for the year ended December 31:
T&D
2022
C&I
Total
(dollars in thousands)
Amount
Percent
Amount
Percent
Amount
Percent
Fixed price
Unit price
T&E(1)
$
835,288
47.8 % $ 1,051,428
83.3 % $ 1,886,716
62.7 %
475,276
435,228
27.2
25.0
78,714
132,608
6.2
10.5
553,990
567,836
18.4
18.9
$ 1,745,792
100.0 % $ 1,262,750
100.0 % $ 3,008,542
100.0 %
T&D
2021
C&I
Total
(dollars in thousands)
Amount
Percent
Amount
Percent
Amount
Percent
Fixed price
Unit price
T&E(1)
$
559,861
43.0 % $
963,477
80.5 % $ 1,523,338
61.0 %
369,710
372,016
28.4
28.6
73,826
159,399
6.2
13.3
443,536
531,415
17.7
21.3
$ 1,301,587
100.0 % $ 1,196,702
100.0 % $ 2,498,289
100.0 %
T&D
2020
C&I
Total
(dollars in thousands)
Amount
Percent
Amount
Percent
Amount
Percent
Fixed price
Unit price
T&E(1)
$
507,634
44.0 % $
904,024
82.7 % $ 1,411,658
338,611
29.3
77,331
7.1
415,942
308,133
$ 1,154,378
26.7
111,659
100.0 % $ 1,093,014
10.2
419,792
100.0 % $ 2,247,392
62.8 %
18.5
18.7
100.0 %
(1) The Company T&E contract type includes time-and-equipment, time-and-materials and cost-plus contracts.
The components of the Company’s revenue by market type were as follows for the year ended December 31:
(dollars in thousands)
Segment
Amount
Percent
Amount
Percent
Amount
Percent
2022
2021
2020
Transmission
Distribution
T&D $ 1,083,415
36.0 % $
806,367
32.3 % $
745,599
33.2 %
Electrical construction
C&I
1,262,750
T&D
662,377
22.0
42.0
495,220
1,196,702
19.8
47.9
408,779
1,093,014
18.2
48.6
Total revenue
$ 3,008,542
100.0 % $ 2,498,289
100.0 % $ 2,247,392
100.0 %
Remaining Performance Obligations
On December 31, 2022, the Company had $2.33 billion of remaining performance obligations. The Company’s remaining
performance obligations include projects that have a written award, a letter of intent, a notice to proceed or an agreed upon work
order to perform work on mutually accepted terms and conditions.
69
The following table summarizes the amount of remaining performance obligations as of December 31, 2022 that the
Company expects to be realized and the amount of the remaining performance obligations that the Company reasonably estimates
will not be recognized within the next twelve months.
(in thousands)
T&D
C&I
Total
Remaining Performance Obligations as of December 31, 2022
Total
Amount estimated to not be
recognized within 12 months
$
$
898,617 $
1,428,257
2,326,874 $
115,881
335,935
451,816
The Company expects a vast majority of the remaining performance obligations to be recognized within twenty-four months,
although the timing of the Company’s performance is not always under its control. Additionally, the difference between the
remaining performance obligations and backlog is due to the exclusion of a portion of the Company’s MSAs under certain
contract types from the Company’s remaining performance obligations as these contracts can be canceled for convenience at any
time by the Company or the customer without considerable cost incurred by the customer. Additional information related to
backlog is provided in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this
Annual Report.
13. Income Taxes
Income before income taxes by geographic area was, for the years ended December 31:
(in thousands)
Federal
Foreign
2022
2021
2020
$
104,185 $
106,956 $
77,195
10,019
9,350
4,190
$
114,204 $
116,306 $
81,385
Income tax expense consisted of the following for the years ended December 31:
(in thousands)
Current
Federal
Foreign
State
Deferred
Federal
Foreign
State
2022
2021
2020
$
13,948 $
16,512 $
19,014
2,148
5,154
21,250
7,739
465
1,369
9,573
1,947
6,560
25,019
5,061
287
933
6,281
—
6,363
25,377
(2,519)
963
(1,195)
(2,751)
22,626
Income tax expense
$
30,823 $
31,300 $
70
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
State income taxes, net of U.S. federal income tax expense
Change in valuation allowance
Tax differential on foreign earnings
Non-deductible meals and entertainment
Stock compensation excess tax benefits
Uncertain tax positions
Provision to return adjustments, net
Global intangible low tax income
Section 162(m) limitation
Other income, net
Effective rate
2022
2021
2020
21.0 %
21.0 %
21.0 %
4.5
—
0.6
0.2
4.7
—
0.5
0.1
5.0
0.1
0.3
0.4
(2.4)
(0.8)
(0.6)
0.1
0.7
—
2.4
—
0.4
—
1.1
0.3
0.4
0.9
0.5
(0.1)
27.0 %
(0.1)
26.9 %
(0.5)
27.8 %
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
Accrued vacation
Accrued profit sharing
Operating lease liabilities
Non-U.S. operating loss
Other
Total deferred income tax assets before valuation allowances
Less: valuation allowances
Total deferred income tax assets
Deferred income tax liabilities:
Property and equipment — tax over book depreciation
Non-U.S. intangible assets — tax over book amortization
Intangible assets — tax over book amortization
Right-of-use operating lease assets
Non-U.S. deferred income tax liabilities
Contract revenue adjustment
Other
Total deferred income tax liabilities
Net deferred income taxes
2022
2021
$
2,979 $
842
2,071
8,656
2,227
2,030
6,691
2,402
1,112
29,010
(2,402)
26,608
(42,413)
(11,086)
(3,331)
(6,688)
(4,709)
(4,023)
(133)
2,138
541
1,633
8,373
1,977
2,665
5,404
2,520
2,628
27,879
(2,593)
25,286
(36,856)
—
(2,913)
(5,398)
—
(4,526)
(213)
(72,383)
(49,906)
$
(45,775) $
(24,620)
The Company determined that it is more-likely-than-not that it will not realize certain deferred tax assets related to net
operating loss carryforwards on certain Canadian subsidiaries and therefore recorded a valuation allowance against the deferred
tax assets for those entities.
71
As of December 31, 2022, the Company had no undistributed earnings of our Canadian subsidiaries. We expect future
earnings to be reinvested. Accordingly, as of December 31, 2022, no expense for U.S. income taxes or foreign withholding taxes
was recorded.
The Company is subject to taxation in various jurisdictions. The Company’s 2019 through 2021 tax returns are subject to
examination by U. S. federal authorities. The Company’s tax returns are subject to examination by various state authorities for
the years 2018 through 2021.
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, 2022 was primarily due to the lapses in the
applicable statutes of limitations. The total unrecognized tax benefits is expected to be reduced by less than $0.2 million within
the next 12 months. Interest and penalties related to uncertain income tax positions are included as a component of income tax
expense in the Financial Statements.
The following is a reconciliation of the beginning and ending liability for unrecognized tax benefits at December 31:
(in thousands)
Balance at beginning of period
Gross increases in current period tax positions
Reductions in tax positions due to lapse of statutory limitations
Balance at end of period
Accrued interest and penalties at end of period
Total liability for unrecognized tax benefits
2022
2021
$
328 $
83
(21)
390
99
$
489 $
353
45
(70)
328
72
400
The liability for unrecognized tax benefits, including accrued interest and penalties, was included in other liabilities on the
accompanying consolidated balance sheets. The amount of interest and penalties charged or credited to income tax expense as a
result of the unrecognized tax benefits was not significant in the years ended December 31, 2022, 2021 and 2020.
14. Commitments and Contingencies
Purchase Commitments
As of December 31, 2022, the Company had approximately $14.1 million in outstanding purchase orders for certain
construction equipment, with cash payments scheduled to occur over the next four months.
Insurance and Claims Accruals
The Company carries insurance policies, which are subject to certain deductibles and limits, for workers’ compensation,
general liability, automobile liability and other insurance coverage. The deductible per occurrence for each line of coverage is up
to $1.0 million, except for wildfire coverage which has a deductible of $2.0 million. The Company’s health benefit plans are
subject to stop-loss limits of up to $0.2 million for qualified individuals. Losses up to the deductible and stop-loss amounts are
accrued based upon the Company’s estimates of the ultimate liability for claims reported and an estimate of claims incurred but
not yet reported.
The insurance and claims accruals are based on known facts, actuarial estimates and historical trends. While recorded
accruals are based on the ultimate liability, which includes amounts in excess of the deductible, a corresponding receivable for
amounts in excess of the deductible is included in total assets on the Company’s consolidated balance sheets. The following table
includes the Company’s accrued short- and long-term insurance liabilities at December 31:
(in thousands)
Balance at beginning of period
Net increases in accrued self-insurance
Net payments made
Balance at end of period
2022
2021
$
75,058 $
76,299
69,823
62,819
(71,318)
(57,584)
$
80,039 $
75,058
72
Insurance expense, including premiums, for workers’ compensation, general liability, automobile liability, employee health
benefits, and other coverages for the years ended December 31, 2022, 2021 and 2020 was $77.1 million, $65.1 million and $56.4
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 sureties for any expenses paid out under
these bonds. As of December 31, 2022, an aggregate of approximately $1.97 billion in original face amount of bonds issued by
the Company’s sureties were outstanding. The Company estimated the remaining cost to complete these bonded projects was
approximately $880.2 million as of December 31, 2022.
From time to time the Company guarantees the obligations of wholly-owned subsidiaries, including obligations under certain
contracts with customers, certain lease agreements and, in some states, obligations in connection with obtaining contractors’
licenses. Additionally, from time to time the Company is required to post letters of credit to guarantee the obligations of its
wholly-owned subsidiaries, which reduces the borrowing availability under the Facility.
Indemnities
From time to time, pursuant to its service arrangements, the Company indemnifies its customers for claims related to the
services it provides under those service arrangements. These indemnification obligations may subject the Company to indemnity
claims, liabilities and related litigation. The Company is not aware of any material unrecorded liabilities for asserted claims in
connection with these indemnification obligations.
Collective Bargaining Agreements
Most of the Company’s subsidiaries’ craft labor employees are covered by collective bargaining agreements. The agreements
require the subsidiaries to pay specified wages, provide certain benefits and contribute certain amounts to multi-employer pension
plans. If a subsidiary withdraws from any of the multi-employer pension plans or if the plans were to otherwise become
underfunded, the subsidiary could incur liabilities for additional contributions related to these plans. Although the Company has
been informed that the status of some multi-employer pension plans to which its subsidiaries contribute have been classified as
“critical” the Company is not currently aware of any potential liabilities related to this issue. See Note 16 — Employee Benefit
Plans to the Financial Statements for further information related to the Company’s participation in multi-employer plans.
Litigation and Other Legal Matters
The Company is from time to time party to various lawsuits, claims, and other legal proceedings that arise in the ordinary
course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract,
property damages, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such
lawsuits, claims and proceedings, the Company records reserves when it is probable that a liability has been incurred and the
amount of loss can be reasonably estimated. The Company does not believe that any of these proceedings, separately or in the
aggregate, would be expected to have a material adverse effect on the Company’s financial position, results of operations or cash
flows.
The Company is routinely subject to other civil claims, litigation and arbitration, and regulatory investigations arising in the
ordinary course of our present business as well as in respect of our divested businesses. Some of these claims and litigations
include claims related to the Company’s current services and operations, the Company believes that it has strong defenses to these
claims as well as insurance coverages that could contribute to any settlement or liability in the event claims are not resolved in our
favor. These claims have not had a material impact on the Company to date, and the Company believes that the likelihood that a
future material adverse outcome will result from these claims is remote. However, if facts and circumstances change in the future,
the Company cannot be certain that an adverse outcome of one or more of these claims would not have a material adverse effect
on the Company’s financial condition, results of operations or cash flows.
73
15. Stock-Based Compensation
The Company maintains two equity compensation plans under which stock-based compensation has been granted, the 2017
Long-Term Incentive Plan (Amended and Restated as of April 23, 2020) (the “LTIP”) and the 2007 Long-Term Incentive Plan
(Amended and Restated as of May 1, 2014) (the “2007 LTIP” and, collectively with the LTIP, the “Long-Term Incentive Plans”).
Upon the initial adoption of the LTIP in 2017, awards were no longer granted under the 2007 LTIP. The LTIP was approved by
our shareholders and provides for grants of (a) incentive stock options qualified as such under U.S. federal income tax laws,
(b) stock options that do not qualify as incentive stock options, (c) stock appreciation rights, (d) restricted stock awards,
(e) restricted stock units, (f) performance awards, (g) phantom stock, (h) stock bonuses, (i) dividend equivalents, or (j) any
combination of such awards. The LTIP permits the granting of up to 1,500,000 shares to directors, officers and other employees
of the Company. Grants of awards to employees are approved by the Compensation Committee of the Board of Directors and
grants to independent members of the Board of Directors are approved by the Board of Directors. All awards are made with an
exercise price or base price, as the case may be, that is not less than the full fair market value per share on the date of grant. No
stock option or stock appreciation right may be exercised more than 10 years from the date of grant.
Shares issued as a result of stock option exercises or stock grants are made available from authorized unissued shares of
common stock or treasury stock.
Stock Options
The Company has not awarded any stock options since 2013. Stock options granted to the Company’s employees or directors
were granted with an exercise price equal to the market price of the Company’s stock on the date of grant. The Company used the
Black-Scholes-Merton option-pricing model to estimate the fair value of options as of the date of grant. All stock options were
fully expensed as of December 31, 2016.
Following is a summary of stock option activity for the three-year period ended December 31, 2022:
Outstanding at January 1, 2020
Exercised
Expired
Outstanding and Exercisable at December 31, 2020
Exercised
Expired
Outstanding and Exercisable at December 31, 2021
Exercised
Expired
Outstanding and Exercisable at December 31, 2022
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
(in thousands)
22.26
21.82
19.66
22.94
22.84
24.68
23.74
23.67
19.37
24.68
1.9 years
$
912
1.1 years
$
235
0.2 years
$
63
Options
59,586 $
(34,388) $
(641) $
24,557 $
(21,806) $
(42) $
2,709 $
(1,680) $
(160) $
869 $
During the years ended December 31, 2022, 2021 and 2020, the intrinsic value of stock options exercised was $0.1 million,
$1.2 million and $0.7 million, respectively.
The following table summarizes information with respect to stock options outstanding and exercisable under the Company’s
plans at December 31, 2022:
Exercise Price
$24.68 – $24.68
Options Outstanding and Exercisable
Number Of
Options
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Term
869 $
24.68
0.2 years
74
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 2022
vest ratably on an annual basis, over three years. Time-vested stock awards granted under the LTIP to non-employee directors in
2022 vest over a one year period.
The Company recognizes stock-based compensation expense related to restricted stock awards and restricted stock units
based on the grant date fair value, which was the closing price of the Company’s stock on the date of grant. The fair value is
expensed over the service period, which is generally three years for time-vested stock awards granted to eligible employees and
one year for non-employee directors.
During the years ended December 31, 2022, 2021 and 2020, time-vested stock vesting activity settled in common stock had
an intrinsic value, at the time of vesting, of $7.0 million, $5.7 million and $2.5 million, respectively.
Following is a summary of time-vested stock awards activity for the three-year period ended December 31, 2022:
Outstanding unvested at January 1, 2020
Granted
Vested
Forfeited
Outstanding unvested at December 31, 2020
Granted
Vested
Forfeited
Outstanding unvested at December 31, 2021
Granted
Vested
Forfeited
Outstanding unvested at December 31, 2022
Performance Awards
Per Share
Weighted-
Average
Grant Date
Fair Value
32.29
26.75
32.09
29.80
28.96
66.80
29.20
40.60
44.88
76.93
42.47
58.43
69.70
Shares
158,382 $
104,857 $
(93,669) $
(3,781) $
165,789 $
57,196 $
(87,584) $
(2,904) $
132,497 $
45,992 $
(73,373) $
(2,500) $
102,616 $
The Company grants performance awards under the LTIP. Under these awards, shares of the Company’s common stock may
be earned based on the Company’s performance compared to defined metrics. The number of shares earned under a performance
award may vary from zero to 200% of the target shares awarded, based upon the Company’s performance compared to the
metrics. The metrics used for the grant are determined by the Compensation Committee of the Board of Directors and may be
either based on internal measures such as the Company’s financial performance compared to target or on a market-based metric
such as the Company’s stock performance compared to a peer group. Performance awards cliff vest upon attainment of at least the
minimum stated performance targets and minimum service requirements and are paid in the Company’s common stock.
For performance awards, the Company recognizes stock-based compensation expense based on the grant date fair value of
the award. The fair value of internal metric-based performance awards is determined by the closing stock price of the Company’s
common stock on the date of the grant. The fair value of market-based performance awards is computed using a Monte Carlo
simulation. Performance awards granted in 2022 are expensed over the service period of approximately 2.8 years. The Company
adjusts the stock-based compensation expense related to internal metric-based performance awards according to its determination
of the shares expected to vest at each reporting date. Stock-based compensation expense related to market metric-based
performance awards is expensed at their grant date fair value regardless of performance.
During the years ended December 31, 2022, 2021 and 2020, performance award vesting activity settled in common stock had
an intrinsic value, at the time of vesting, of $15.7 million, $12.7 million and $4.8 million, respectively.
75
Following is a summary of performance share award activity for the three-year period ended December 31, 2022:
Outstanding unvested at January 1, 2020
Granted at target
Earned for performance above target
Vested
Forfeited
Outstanding unvested at December 31, 2020
Granted at target
Earned for performance above target
Vested
Forfeited
Outstanding unvested at December 31, 2021
Granted at target
Earned for performance above target
Vested
Forfeited
Outstanding unvested at December 31, 2022
Stock-based Compensation Expense
Per Share
Weighted-
Average
Grant Date
Fair Value
37.02
34.10
69.45
48.86
36.28
36.54
80.11
40.41
39.26
39.25
50.06
Shares
138,245 $
79,788 $
14,962 $
(78,260) $
(4,396) $
150,339 $
42,091 $
58,461 $
(128,920) $
(644) $
121,327 $
31,603 $
118.82
78,684 $
(157,368) $
(738) $
73,508 $
34.10
34.10
45.71
96.75
The Company recognized stock-based compensation expense of approximately $7.9 million, $7.5 million and $5.7 million
for the years ended December 31, 2022, 2021 and 2020, respectively, in selling, general and administrative expenses on the
Company’s consolidated statements of operations. As of December 31, 2022, there was approximately $8.8 million of
unrecognized stock-based compensation expense related to awards granted under the Long-Term Incentive Plans. This included
$4.3 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 1.2 years and $4.5 million of unrecognized compensation cost
related to unvested performance awards, expected to be recognized over a remaining weighted average vesting period of
approximately 1.4 years.
16. Employee Benefit Plans
The Company sponsors multiple defined contribution plans for eligible employees not covered by collective bargaining
agreements. The plans include various features such as voluntary employee pre-tax and Roth-based contributions and matching
contributions made by the Company. In addition, at the discretion of our Board of Directors, we may make additional profit
sharing contributions to the plans. Company contributions under these defined contribution plans are based upon a percentage of
income with limitations as defined by each plan. Total contributions for the years ended December 31, 2022, 2021 and
2020 amounted to $15.7 million, $17.8 million, and $16.8 million, respectively.
The Company contributes to a number of multiemployer defined benefit pension plans under the terms of collective-
bargaining agreements that cover its union-represented employees, who are represented by more than 300 local unions. The
related collective-bargaining agreements between those organizations and the Company, which specify the rate at which the
Company must contribute to the multi-employer defined pension plan, expire at different times between 2023 and 2025.
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
2)
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.
76
3)
If the Company chooses to stop participating in a multiemployer plan, it may be required to pay the plan an amount
based on the underfunded status of the plan, referred to as a withdrawal liability.
The amount of additional funds, if any, that the Company may be obligated to contribute to these plans in the future cannot be
estimated due to uncertainty of the future levels of work that require the specific use of union employees covered by these plans,
as well as the future contribution levels and possible surcharges on contributions applicable to these plans.
The following table summarizes plan information relating to the Company’s participation in multi-employer defined benefit
pension plans, including company contributions for the last three years, the status under the Pension Protection Act of 2006, as
amended by the Consolidated and Further Continuing Appropriations Act of 2015 (“PPA”) of the plans and whether the plans are
subject to a funding improvement or rehabilitation plan, or contribution surcharges. The most recent zone status is for the plan’s
year-end indicated in the table. The zone status is based on information that the Company received from the plan, as well as from
publicly available information on the U.S. Department of Labor website. The PPA zone status for the plan year ended on
December 31, 2022 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
2022
2021
2020
(in thousands)
Defined Benefit Plans:
Southern California IBEW-NECA
Pension Trust Fund
95-6392774 001
Yellow
6/30/2021
Yellow
6/30/2020
$ 40,810
$ 39,529
$ 32,791
Yes
Eighth District Electrical Pension
Fund
84-6100393 001
National Electrical Benefit Fund
53-0181657 001
IBEW Local 332 Pension Plan Part A 94-2688032 004
Green
Green
Green
3/31/2022
12/31/2021
12/31/2021
Green
Green
Green
3/31/2021
15,097
12,007
10,998
12/31/2020
13,804
11,627
10,850
12/31/2020
5,723
6,409
3,418
IBEW Local 769 Management
Pension Plan A
IBEW Local Union 1249 Pension
Fund
Defined Contribution Plans:
86-6049763 001
Green
6/30/2021
Green
6/30/2020
5,061
3,446
3,866
15-6035161 001
Green
12/31/2021
Green
12/31/2020
3,791
3,684
2,126
National Electrical Annuity Plan
52-6132372 001
Eighth District Electrical Pension
Fund Annuity Plan
San Mateo Country Electrical
Construction Industry Retirement
Plan
84-6100393 002
51-6052127 001
All other plans:
Total contributions:
n/a
n/a
n/a
n/a
n/a
n/a
36,982
27,974
25,037
3,347
5,097
4,915
2,953
5,976
3,202
n/a
28,270
30,131
24,647
$ 155,838
$ 145,880
$ 121,850
No
No
No
No
No
n/a
n/a
No
No
No
No
No
No
n/a
n/a
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 five percent of the total contributions to that plan for the plan years ended March 31, 2022, 2021 and 2020 and in the IBEW
local 769 Management Pension Plan A’s Form 5500 as providing more than five percent of the total contributions to that plan for
the plan years ended June 30, 2021, 2020 and 2019. Another of the company’s subsidiaries was listed in the Southern California
IBEW-NECA Pension Trust Fund Plan’s Form 5500 as providing more than 5 percent of the total contributions to that plan for
the plan year ended June 30, 2021 and 2020.
77
17. Segment Information
MYR Group is a holding company of specialty contractors serving electrical utility infrastructure and commercial
construction markets in the United States and Canada. The Company has two reporting segments, each a separate operating
segment, which are referred to as T&D and C&I. Performance measurement and resource allocation for the reporting segments
are based on many factors. The primary financial measures used to evaluate the segment information are contract revenues and
income from operations, excluding general corporate expenses. General corporate expenses include corporate facility and staffing
costs, which includes safety costs, professional fees, IT expenses and management fees.
Transmission and Distribution: The T&D segment provides a broad range of services on electric transmission and
distribution networks and substation facilities which include design, engineering, procurement, construction, upgrade,
maintenance and repair services with a particular focus on construction, maintenance and repair. T&D services include the
construction and maintenance of high voltage transmission lines, substations and lower voltage underground and overhead
distribution systems and clean energy projects. The T&D segment also provides emergency restoration services in response to
hurricane, wildfire, ice or other damage. T&D customers include investor-owned utilities, cooperatives, private developers,
government-funded utilities, independent power producers, independent transmission companies, industrial facility owners and
other contractors.
Commercial and Industrial: The C&I segment provides services such as the design, installation, maintenance and repair of
commercial and industrial wiring, the installation of intelligent transportation systems, roadway lighting and signalization. Typical
C&I contracts cover electrical contracting services for airports, hospitals, data centers, hotels, stadiums, commercial and industrial
facilities, clean energy projects, manufacturing plants, processing facilities, water/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:
T&D
C&I
Income from operations:
T&D
C&I
General Corporate
For the Year ended December 31,
2022
2021
2020
$ 1,745,792 $ 1,301,587 $ 1,154,378
1,262,750
1,196,702
1,093,014
$ 3,008,542 $ 2,498,289 $ 2,247,392
$
138,886 $
132,738 $
109,387
43,159
(67,138)
54,418
(68,596)
37,247
(60,089)
$
114,907 $
118,560 $
86,545
The Company does not identify capital expenditures and total assets by segment in its internal financial reports due in part to
the shared use of a centralized fleet of vehicles and specialized equipment. Identifiable assets, consisting of contract receivables,
contract assets, construction materials inventory, goodwill and intangibles for each segment are as follows as of December 31:
(in thousands)
T&D
C&I
General Corporate
2022
2021
$
500,568 $
303,685
473,101
425,189
408,896
408,511
$ 1,398,858 $ 1,121,092
78
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,
2022
2021
2020
$
$
50,825 $
7,345
38,668 $
7,537
58,170 $
46,205 $
37,254
9,199
46,453
As of December 31, 2022 and 2021, there were $146.1 million and $23.1 million, respectively, of identifiable assets
attributable to Canadian operations.
18. 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.
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:
Net income
Less: net loss attributable to noncontrolling interest
Net income attributable to MYR Group Inc.
Denominator:
Weighted average common shares outstanding
Weighted average dilutive securities
Weighted average common shares outstanding, diluted
Net income per share attributable to MYR Group Inc.:
Basic
Diluted
For the Year ended December 31,
2022
2021
2020
$
$
$
$
83,381 $
85,006 $
58,759
—
(4)
—
83,381 $
85,010 $
58,759
16,760
220
16,980
16,838
323
17,161
16,684
206
16,890
4.98 $
4.91 $
5.05 $
4.95 $
3.52
3.48
For the years ended December 31, 2022, 2021 and 2020, certain common stock equivalents were excluded from the
calculation of dilutive securities because their inclusion would either have been anti-dilutive or, for stock options, the exercise
prices of those stock options were greater than the average market price of the Company’s common stock for the period. All of the
Company’s non-participating unvested restricted shares were included in the computation of weighted average dilutive securities.
The following table summarizes the shares of common stock underlying the Company’s unvested performance awards that were
excluded from the calculation of dilutive securities:
(in thousands)
Performance awards
Share Repurchase Program
2022
2021
2020
13
—
34
On November 2, 2022, the Company announced that its Board of Directors had authorized a new $75.0 million share
repurchase program (the "Repurchase Program") which became effective on November 8, 2022. The Repurchase Program will
expire on May 8, 2023, or when the authorized funds are exhausted, whichever is earlier. The Company’s prior $75.0 million
repurchase program that commenced on May 5, 2022 expired on November 7, 2022.
79
During 2022 the Company repurchased 442,167 shares of its common stock under its repurchase programs at a weighted-
average price of $83.64 per share. All of the shares repurchased were retired. The shares repurchased resulted in no change to
authorized shares and an increase to unissued shares. As of December 31, 2022, the Company had $75.0 million of remaining
availability to repurchase shares of the Company’s common stock under the Repurchase Program.
During 2022 and 2021, the Company repurchased 68,675 and 51,113 shares of stock, respectively, for approximately $6.8
million and $3.4 million, respectively, from its employees to satisfy tax obligations on shares vested under the Long-Term
Incentive Plans. All of the shares repurchased were retired and returned to authorized but unissued stock.
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, 2022.
We completed our acquisition of the Powerline Plus Companies on January 4, 2022 and have not yet included the Powerline
Plus Companies in our assessment of the effectiveness of our internal control over financial reporting. We are currently
integrating the Powerline Plus Companies into our operations, compliance programs and internal control processes. Accordingly,
pursuant to the SEC's general guidance that an assessment of a recently acquired business may be omitted from the scope of an
assessment in the year of acquisition, the scope of our assessment of the effectiveness of our disclosure controls and procedures
does not include the Powerline Plus Companies. As of December 31, 2022, the Powerline Plus Companies represented a total of
approximately 3.2% and 1.1% of out of scope total assets and net assets, respectively, and 2.6% and 6.7% of contract revenues
and out of scope income before income taxes, respectively, for the year then ended.
Management’s 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. Based on this evaluation, our management has
concluded that our internal control over financial reporting was effective, as of December 31, 2022, in providing reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes
in accordance with GAAP. Management’s annual report on internal control over financial reporting is included in “Item 8.
Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
For the year ended December 31, 2022, management’s assessment of our internal control over financial reporting excluded
the internal control over financial reporting of the Powerline Plus Companies, which was acquired on January 4, 2022. 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 the Powerline Plus Companies. As of December 31, 2022, the Powerline
Plus Companies represented a total of approximately 3.2% and 1.1% of out of scope total assets and net assets, respectively, and
2.6% and 6.7% of contract revenues and out of scope income before income taxes, respectively, for the year then ended.
80
In addition, Crowe LLP, an independent registered public accounting firm, audited and reported on the 2022 Financial
Statements included in this Annual Report on Form 10-K, and has issued an attestation report on our internal control over
financial reporting. The report is included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on
Form 10-K.
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,
2022 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.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
81
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Information required by this Item 10 related to our directors is incorporated by reference to the information to be included
under “Proposal 1. Election of Three Class I Director Nominees for Three-Year Terms” of our definitive Proxy Statement for our
Annual Meeting of Shareholders scheduled expected to be held April 20, 2023 (the “2023 Proxy Statement”). Information
regarding the procedures by which our shareholders may recommend nominees to our Board of Directors is incorporated by
reference to the information to be included under the heading “Nominating, Environmental, Social and Corporate Governance
Committee Matters and “2024 Annual Meeting of Shareholders” in the 2023 Proxy Statement. There were no material changes to
the procedures by which security holders may recommend nominees to our board of directors in 2022. 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 “Corporate Governance—Committee Membership and Meeting Attendance” and
“Audit Committee Matters” in the 2023 Proxy Statement. Information related to our executive officers is contained in the section
entitled “Information about our 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, including our principal executive
officer, principal financial officer and principal accounting officer. 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 that applies to our
principal executive officer, principal financial officer and principal accounting officer requiring disclosure under applicable SEC
and Nasdaq Stock Market rules will be disclosed on our website. The information on our website is not 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 the 2023 Proxy
Statement under the headings “Proposal 1. Election of Three Class I Director Nominees for Three-Year Terms - Non Employee
Director Compensation,” “Compensation Discussion and Analysis,” “Executive Compensation Tables” and “Compensation
Committee Matters”.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder 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 (Amended and Restated as of April 23, 2020) (the
“LTIP”) as of December 31, 2022. At December 31, 2022, our only active equity compensation plan was the LTIP.
Equity Compensation Plan Information
Number of securities
to be issued upon
exercise of
outstanding
options, warrants
and rights
(a)
407,869 (1)
Weighted-average
exercise price
of outstanding
options, warrants
and rights
(b)
$
24.68 (2)
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding shares
reflected in
column(a))
(c)
591,881 (3)
—
407,869 (1)
—
24.68 (2)
—
591,881 (3)
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security
holders
Total
___________________________________________
(1) Includes (i) 869 shares subject to outstanding option awards granted under the 2007 Plan, (ii) 304,384 shares subject to
outstanding performance share awards granted in 2020, 2021 and 2022 under the LTIP (actual performance for 2020 which
vested on December 31, 2022 and were issued on February 15, 2023 and assumes maximum performance for 2021 and 2022)
and (iii) 102,616 shares subject to outstanding restricted stock units granted under the LTIP.
(2) The weighted-average exercise price 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 or time-based conditions
without any cash consideration payable for those shares.
82
(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 the 2023 Proxy
Statement under the headings “Ownership of Equity Securities.”
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 the 2023 Proxy
Statement under the headings “Certain Relationships and Related Person Transactions” and “Corporate Governance — Director
Independence.”
Item 14. Principal Accountant Fees and Services
The information required by this Item 14 is incorporated by reference to the information to be included in the 2023 Proxy
Statement under the heading “Audit Committee Matters.”
83
Item 15. Exhibit 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) Report of Independent Registered Public Accounting Firms
(c) Consolidated Balance Sheets
(d) Consolidated Statements of Operations
(e) Consolidated Statements of Comprehensive Income
(f) Consolidated Statements of Shareholders’ 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.
iii) Exhibit List
Number
3.1
Description
Restated Certificate of Incorporation, incorporated by reference to exhibit 3.1 of the Company’s Current Report on
Form 8-K (File No. 001-08325), filed with the SEC on May 7, 2014
3.2
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
Amended and Restated By-Laws, incorporated by reference to exhibit 3.1 of the Company’s Current Report on
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
Description of Securities incorporated by reference to exhibit 4.2 of the Company’s Annual Report on Form 10-K
for the year ended December 31, 2019 (File No. 001-08325), filed with the SEC on March 4, 2020
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 Current Report on 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 Quarterly Report on Form 10-Q for the quarter ended
March 31, 2010 (File No. 001-08325), filed with the SEC on May 10, 2010+
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 Quarterly Report on 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 Current Report on 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+
Employment agreement with Betty R. Johnson, incorporated by reference to exhibit 10.1 of the Company’s
Quarterly Report on 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 Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 001-
08325), filed with the SEC on March 3, 2016+
84
Number
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
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
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 Annual Report on 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 Annual Report on 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 Annual Report on Form 10-K for the year ended December 31, 2016
(File No. 001-08325), filed with the SEC on March 9, 2017+
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 Annual Report on 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 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 Quarterly 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 Quarterly 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 Quarterly Report on Form 10-Q (File No.
001-08325), filed with the SEC on May 2, 2018+
Employment Agreement, dated January 21, 2019, between the Company and William F. Fry, incorporated by
reference to exhibit 10.33 of the Company’s Annual Report on Form 10-K (File No. 001-08325), filed with the SEC
on March 6, 2019+
Form of Performance Shares Award Agreement (Named Executive Officer) under the 2017 Long-Term Incentive
Plan, incorporated by reference to exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (File No.
001-08325), filed with the SEC on May 1, 2019+
Form of Non-Employee Directors Restricted Stock Unit Award Agreement under the 2017 Long-Term Incentive
Plan, incorporated by reference to exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (File No.
001-08325), filed with the SEC on July 31, 2019+
Asset Purchase Agreement, dated as of July 15, 2019, by and among MYR Group, Inc., certain subsidiaries of MYR
Group, Inc., as purchasers, and CSI Electrical Contractors, Inc., incorporated by reference to exhibit 10.3 of the
Company’s Quarterly Report on Form 10-Q (File No. 001-08325), filed with the SEC on July 31, 2019
Second Amended and Restated Credit Agreement, dated September 13, 2019, by and among MYR Group Inc., the
lenders party thereto, Bank of Montreal and Wells Fargo Bank, National Association, as Co-Documentation Agents,
Bank of America, N.A., as Syndication Agent and JPMorgan Chase Bank, N.A., as Administrative Agent,
incorporated by reference to exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (File No. 001-08325),
filed with the SEC on October 30, 2019
10.23 MYR Group Inc. 2017 Long-Term Incentive Plan (Amended and Restated as of April 23, 2020), 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 April 27, 2020+
85
Number
10.24
10.25
10.26
Description
Form of Performance Shares Award Agreement (Named Executive Officer) under the 2017 Long-Term Incentive
Plan, incorporated by reference to exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (File No.
001-08325), filed with the SEC on April 28, 2021+
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 Quarterly Report on Form 10-Q (File No.
001-08325), filed with the SEC on April 27, 2022+
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 Quarterly Report on Form 10-Q (File No.
001-08325), filed with the SEC on April 27, 2022+
10.27
Employment Agreement, dated January 9, 2023 between the Company and Kelly M. Huntington†+
21.1
23.1
24.1
31.1
31.2
32.1
32.2
List of Subsidiaries†
Consent of Crowe 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
Inline XBRL Instance Document*
101.SCH Inline XBRL Taxonomy Extension Schema Document*
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document*
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document*
104
Cover Page Interactive Data File (formatted as Inline XBRL document and contained in Exhibit 101)
___________________________________________
† Filed herewith.
+
Indicates management contract or compensatory plan or arrangement.
* Electronically filed.
Item 16. Form 10-K Summary
Not applicable.
86
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
February 22, 2023
MYR GROUP INC.
(Registrant)
/s/ BETTY R. WYNN (NÉE JOHNSON)
Name: Betty R. Wynn (née Johnson)
Title:
Senior Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
*
Richard S. Swartz
President, Chief Executive Officer and Director (Principal
Executive Officer)
February 22, 2023
/s/ BETTY R. WYNN (NÉE JOHNSON)
Betty R. Wynn (née Johnson)
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
February 22, 2023
Chairman of the Board of Directors
February 22, 2023
February 22, 2023
February 22, 2023
February 22, 2023
February 22, 2023
February 22, 2023
February 22, 2023
February 22, 2023
February 22, 2023
*
Kenneth M. Hartwick
*
Bradley T. Favreau
*
Ajoy H. Karna
*
Jennifer E. Lowry
*
Donald C.I. Lucky
*
Shirin S. O'Connor
*
Maurice E. Moore
*
William D. Patterson
Director
Director
Director
Director
Director
Director
Director
*By:
/s/ BETTY R. WYNN (NÉE JOHNSON)
(Betty R. Wynn (née Johnson))
(Attorney-in-fact)
87
BOARD OF DIRECTORS
COMPANY OFFICERS
KENNETH M. HARTWICK
Chair since 2018
Director since 2015
RICHARD S. SWARTZ
President and Chief
Executive Officer since 2017
Director since 2019
LARRY C. BAKER
Vice President
A. JAMES BARRETT
Vice President, Human Resources
BRADLEY T. FAVREAU
Director since 2016
AJOY H. KARNA
Director since 2022
JENNIFER E. LOWRY
Director since 2018
DONALD C.I. LUCKY
Director since 2015
MAURICE E. MOORE
Director since 2010
SHIRIN S. O’CONNOR
Director since 2020
WILLIAM D. PATTERSON
Director since 2007
EXECUTIVE OFFICERS
RICHARD S. SWARTZ
President and
Chief Executive Officer
BETTY R. JOHNSON
Senior Vice President and
Chief Financial Officer
TOD M. COOPER
Senior Vice President and
Chief Operating Officer T&D
JEFFREY J. WANEKA
Senior Vice President and
Chief Operating Officer C&I
WILLIAM F. FRY
Vice President, Chief Legal
Officer and Secretary
TOM J. BUTTERFIELD
President, Western Pacific Enterprises Ltd.
WENDY L. DAVIDSON
Vice President, Business Development
KEVIN J. DETERS
President, MYR Energy Services, Inc.
DON A. EGAN
President, C&I, Sturgeon Electric Company, Inc.
and President, Huen Electric, Inc.
MARK A. ENOS
Vice President, Fleet
JIM R. FOLEY
Vice President, Safety
JENNIFER L. HARPER
Vice President and Treasurer
RUSSELL A. HINNEN
Vice President, Corporate Accounting
D. SCOTT LAMONT
President, Harlan Electric Company,
President, E.S. Boulos Company, and
President, The L.E. Myers Co.
BRANDON M. LARK
President, Great Southwestern
Construction Company, Inc.
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
BRIAN K. STERN
President, T&D, Sturgeon Electric Company, Inc.,
President, Sturgeon Electric California, LLC, and
President, MYR Group Construction Canada, Ltd.
R. CLAY THOMSON
President, High Country Line Construction, Inc.
STEVEN M. WATTS
Chief Executive Officer,
CSI Electrical Contractors, Inc.
BEN MATIN
President, Powerline Plus Ltd., and
President, PLP Redimix Ltd.
myrgroup.com
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MYR GROUP INC. IS AN EQUAL OPPORTUNITY EMPLOYER | ©2023 MYR GROUP INC. | NASDAQ: MYRG |