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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
March 31, 2024
OR
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 36-3158643
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12121 Grant Street, Suite 610
Thornton, CO 80241
(Address of principal executive offices) (Zip Code)
(
303
)
286-8000
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
_____________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value MYRG The Nasdaq Stock Market, LLC
(Nasdaq Global Market)
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
x
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 ((s)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
x
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 x Accelerated filer
Non-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 is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes
No
x
As of April 26, 2024, there were
16,765,450
outstanding shares of the registrant's $0.01 par value common stock.
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Table of Contents
INDEX
Page
Part I-Financial Information
Item 1. Financial Statements 2
Consolidated Balance Sheets as of 2
March 31, 2024
(unaudited) and
December 31, 2023
Unaudited Consolidated Statements of 3
Operations and Comprehensive Income for the
Three
Months Ended
March 31, 2024
and
2023
Unaudited Consolidated Statements of S 4
hareholder
s' Equity for the
Three
Months Ended
March 31, 2024
and
2023
Unaudited Consolidated Statements of Cash Flows for the 5
Three Months Ended
March 31, 2024
and
2023
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of 20
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative 31
Disclosures About Market Risk
Item 4. Controls and Procedures 31
Part II-Other Information
Item 1. Legal Proceedings 32
Item 1A. Risk Factors 32
Item 2. Unregistered Sales of Equity Securities, Use of 32
Proceeds and Issuer Purchase of Equity Securities
Item 5. Other Information 32
Item 6. Exhibits 33
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.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MYR GROUP INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data) March 31, December 31,
2024 2023
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,911 $ 24,899
Accounts receivable, net of allowances of $ 527,069 521,893
946
and $
1,987
, respectively
Contract assets, net of allowances of $ 450,741 420,616
575
and $
610
, respectively
Current portion of receivable for insurance claims in excess of deductibles 8,215 8,267
Refundable income taxes 1,754 4,034
Prepaid expenses and other current assets 34,497 46,535
Total current assets 1,026,187 1,026,244
Property and equipment, net of accumulated depreciation of $ 272,569 268,978
383,009
and $
380,465
, respectively
Operating lease right-of-use assets 38,515 35,012
Goodwill 115,865 116,953
Intangible assets, net of accumulated amortization of $ 81,449 83,516
31,564
and $
30,534
, respectively
Receivable for insurance claims in excess of deductibles 33,594 33,739
Investment in joint ventures 9,461 8,707
Other assets 5,850 5,597
Total assets $ 1,583,490 $ 1,578,746
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 6,617 $ 7,053
Current portion of operating lease obligations 9,918 9,237
Current portion of finance lease obligations 1,845 2,039
Accounts payable 321,277 359,363
Contract liabilities 270,964 240,411
Current portion of accrued self-insurance 24,623 28,269
Accrued income taxes 1,185 237
Other current liabilities 95,929 100,593
Total current liabilities 732,358 747,202
Deferred income tax liabilities 47,829 48,230
Long-term debt 31,315 29,188
Accrued self-insurance 51,007 51,796
Operating lease obligations, net of current maturities 28,592 25,775
Finance lease obligations, net of current maturities 184 314
Other liabilities 28,485 25,039
Total liabilities 919,770 927,544
Commitments and contingencies
Shareholders' equity:
Preferred stock-$ - -
0.01
par value per share;
4,000,000
authorized shares;
none
issued and outstanding at March 31, 2024 and December 31, 2023
Common stock-$ 167 167
0.01
par value per share;
100,000,000
authorized shares;
16,761,942
and
16,684,492
shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively
Additional paid-in capital 158,791 162,386
Accumulated other comprehensive loss ( (
6,352 3,880
) )
Retained earnings 511,114 492,529
Total shareholders' equity 663,720 651,202
Total liabilities and shareholders' equity $ 1,583,490 $ 1,578,746
The accompanying notes are an integral part of these consolidated financial
statements.
2
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MYR GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Three months ended
March 31,
(in thousands, except per share data) 2024 2023
Contract revenues $ 815,562 $ 811,616
Contract costs 729,319 727,224
Gross profit 86,243 84,392
Selling, general and administrative expenses 62,233 56,964
Amortization of intangible assets 1,228 1,226
Gain on sale of property and equipment ( (
1,489 1,224
) )
Income from operations 24,271 27,426
Other income (expense):
Interest income 142 321
Interest expense ( (
1,054 586
) )
Other expense, net ( (
263 90
) )
Income before provision for income taxes 23,096 27,071
Income tax expense 4,157 3,908
Net income $ 18,939 $ 23,163
Income per common share:
-Basic $ 1.13 $ 1.39
-Diluted $ 1.12 $ 1.38
Weighted average number of common shares and potential common shares outstanding:
-Basic 16,711 16,618
-Diluted 16,837 16,824
Net income $ 18,939 $ 23,163
Other comprehensive income (loss):
Foreign currency translation adjustment ( 136
2,472
)
Other comprehensive income (loss) ( 136
2,472
)
Total comprehensive income $ 16,467 $ 23,299
The accompanying notes are an integral part of these consolidated financial
statements.
3
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MYR GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Preferred Common Stock Additional Accumulated Retained
Paid-In Other
Comprehensive
(in thousands) Stock Shares Amount Capital Income (Loss) Earnings Total
Balance at $ - 16,564 $ 165 $ 161,427 $ ( $ 404,908 $ 560,200
December 31, 2022 6,300
)
Net income - - - - - 23,163 23,163
Stock issued under - 211 2 18 - - 20
compensation plans, net
Stock-based - - - 1,982 - - 1,982
compensation expense
Shares repurchased related to tax - ( - ( - ( (
withholding for stock-based compensation 76 7,194 742 7,936
) ) ) )
Other comprehensive - - - - 136 - 136
income
Balance at $ - 16,699 $ 167 $ 156,233 $ ( $ 427,329 $ 577,565
March 31, 2023 6,164
)
Balance at $ - 16,684 $ 167 $ 162,386 $ ( $ 492,529 $ 651,202
December 31, 2023 3,880
)
Net income - - - - - 18,939 18,939
Stock issued under - 114 1 ( - - -
compensation plans, net 1
)
Stock-based - - 1,917 - - 1,917
compensation expense
Shares repurchased related to tax - ( ( ( - ( (
withholding for stock-based compensation 36 1 5,511 354 5,866
) ) ) ) )
Other comprehensive - - - - ( - (
loss 2,472 2,472
) )
Balance at $ - 16,762 $ 167 $ 158,791 $ ( $ 511,114 $ 663,720
March 31, 2024 6,352
)
The accompanying notes are an integral part of these consolidated financial
statements.
4
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MYR GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended
March 31,
(in thousands) 2024 2023
Cash flows from operating activities:
Net income $ 18,939 $ 23,163
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization of property and equipment 14,602 12,763
Amortization of intangible assets 1,228 1,226
Stock-based compensation expense 1,917 1,982
Gain on sale of property and equipment ( (
1,489 1,224
) )
Other non-cash items 656 62
Changes in operating assets and liabilities:
Accounts receivable, net ( 53,819
6,009
)
Contract assets, net ( (
30,962 31,868
) )
Receivable for insurance claims in excess of deductibles 197 (
601
)
Other assets 13,409 15,921
Accounts payable ( (
30,990 19,142
) )
Contract liabilities 30,758 (
6,312
)
Accrued self-insurance ( (
4,426 2,561
) )
Other liabilities ( (
140 10,070
) )
Net cash flows provided by operating activities 7,690 37,158
Cash flows from investing activities:
Proceeds from sale of property and equipment 1,879 1,539
Purchases of property and equipment ( (
25,783 19,615
) )
Net cash flows used in investing activities ( (
23,904 18,076
) )
Cash flows from financing activities:
Borrowings under revolving lines of credit 121,745 9,242
Repayments under revolving lines of credit ( (
117,463 22,157
) )
Payment of principal obligations under equipment notes ( (
2,591 1,980
) )
Payment of principal obligations under finance leases ( (
275 302
) )
Proceeds from exercise of stock options - 20
Payments related to tax withholding for stock-based compensation ( (
5,866 7,936
) )
Net cash flows used in financing activities ( (
4,450 23,113
) )
Effect of exchange rate changes on cash ( 30
324
)
Net decrease in cash and cash equivalents ( (
20,988 4,001
) )
Cash and cash equivalents:
Beginning of period 24,899 51,040
End of period $ 3,911 $ 47,039
The accompanying notes are an integral part of these consolidated financial
statements.
5
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MYR GROUP INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.
Organization, Business and Basis of Presentation
Organization and Business
MYR Group Inc. (the "Company") is a holding company of specialty electrical
construction service providers 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, clean
energy projects and electric vehicle charging infrastructure. T&D services
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 the 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, signalization and electric vehicle charging infrastructure.
Basis of Presentation
Interim Consolidated Financial Information
The accompanying unaudited consolidated financial statements of the Company
were prepared in accordance with accounting principles generally accepted in
the United States of America ("U.S. GAAP") for interim financial reporting
pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with U.S. GAAP
have been condensed or omitted pursuant to the rules and regulations of the
SEC. The Company believes that the disclosures made are adequate to make the
information presented not misleading. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary to
fairly state the financial position, results of operations, comprehensive
income, shareholders' equity and cash flows with respect to the interim
consolidated financial statements, have been included. The consolidated
balance sheet as of December 31, 2023 has been derived from the audited
financial statements as of that date. The results of operations and
comprehensive income are not necessarily indicative of the results for the
full year or the results for any future periods. These financial statements
should be read in conjunction with the audited financial statements and
related notes for the year ended December 31, 2023, included in the Company's
Annual Report on Form 10-K, which was filed with the SEC on February 28, 2024
(the "2023 Annual Report").
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. As of March
31, 2024, the Company did not have a controlling interest in any current joint
venture partnerships. Under the proportionate consolidation method, joint
venture activity is allocated to the appropriate line items found on the
consolidated statements of operations in proportion to the percentage of
participation the Company has in the joint venture. Under the equity method
the net investment in joint ventures is stated as a single item on the
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.
6
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For joint ventures in 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 typically 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.
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 (loss) 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 expense,
net" line on the Company's consolidated statements of operations. Foreign
currency losses and gains, recorded in other expense, net, for the three
months ended March 31, 2024 and 2023 were
no
t 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 U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the 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
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 quarter 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 March 31, 2024 and December 31, 2023, the Company had recognized
revenues of $
87.4
million and $
76.5
million, respectively, related to large 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.
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 three months ended March 31, 2024, changes in estimates
pertaining to certain projects decreased consolidated gross margin by
1.2
%, which resulted in decreases in operating income of $
9.8
million, net income of $
6.9
million and diluted earnings per common share of $
0.41
. Additional discussion on the impact of these estimate changes can be found
in Item 2, "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Consolidated Results of Operations."
During the three months ended March 31, 2023, changes in estimates pertaining
to certain projects decreased consolidated gross margin by
0.6
%, which resulted in decreases in operating income of $
5.1
million, net income of $
3.6
million and diluted earnings per common share of $
0.21
.
7
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Recent Accounting Pronouncements
Changes to U.S. 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 are either
not applicable to the Company or will have minimal impact on its consolidated
financial statements when adopted.
In November 2023, the FASB issued ASU No. 2023-07,
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,
which is intended to improve reportable segment disclosure requirements,
primarily through enhanced disclosures about significant reportable segment
expenses and other disclosure requirements. The update is effective for annual
reporting periods beginning after December 15, 2023, with early adoption
permitted. The guidance requires application on a retrospective basis. The
Company is currently evaluating the impact of the new standard on its
consolidated financial statements and disclosures.
In December 2023, the FASB issued ASU No. 2023-09,
Income Taxes (Topic 740): Improvements to Income Tax Disclosures,
which is intended to improve the transparency of income tax disclosures by
requiring consistent categories and greater disaggregation of information in
the rate reconciliation and income taxes paid disaggregated by jurisdiction.
The guidance also includes certain other amendments intended to improve the
effectiveness of income tax disclosures. The update is effective for annual
reporting periods beginning after December 15, 2024, with early adoption
permitted. The amendments in this pronouncement should be applied on a
prospective basis, with the option to apply them retrospectively. The Company
is currently evaluating the impact of the new standard on the Company's income
tax disclosures.
2.
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. These contracts 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 $
0.6
million as of March 31, 2024 and December 31, 2023, respectively.
Contract assets consisted of the following:
(in thousands) March 31, December 31, Change
2024 2023
Unbilled revenue, net $ 232,565 $ 217,083 $ 15,482
Contract retainages, net 218,176 203,533 14,643
Contract assets, net $ 450,741 $ 420,616 $ 30,125
The Company's consolidated balance sheets present contract liabilities that
contain deferred revenue and an accrual for contracts in a loss provision.
Contract liabilities consisted of the following:
(in thousands) March 31, December 31, Change
2024 2023
Deferred revenue $ 262,871 $ 231,604 $ 31,267
Accrued loss provision 8,093 8,807 (
714
)
Contract liabilities $ 270,964 $ 240,411 $ 30,553
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The following table provides information about contract assets and contract
liabilities from contracts with customers:
(in thousands) March 31, December 31, Change
2024 2023
Contract assets, net $ 450,741 $ 420,616 $ 30,125
Contract liabilities ( ( (
270,964 240,411 30,553
) ) )
Net contract assets $ 179,777 $ 180,205 $ (
428
)
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
revenue recognized in the period that were included in the opening contract
liability balances were $
28.6
million for the three months ended March 31, 2024. The amounts of revenue
recognized in the period that were included in the opening contract liability
balances were $
60.2
million for the three months ended March 31, 2023. This revenue consists
primarily of work performed on previous billings to customers.
The net asset position for contracts in process consisted of the following:
(in thousands) March 31, December 31,
2024 2023
Costs and estimated earnings on uncompleted contracts $ 6,667,250 $ 6,716,990
Less: billings to date 6,697,556 6,731,511
$ ( $ (
30,306 14,521
) )
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:
(in thousands) March 31, December 31,
2024 2023
Unbilled revenue $ 232,565 $ 217,083
Deferred revenue ( (
262,871 231,604
) )
$ ( $ (
30,306 14,521
) )
3.
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
ten years
, some of which may include options to extend the leases for up to
six 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 March 31, 2024, 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.
9
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The following is a summary of the lease-related assets and liabilities recorded:
March 31, December 31,
2024 2023
(in thousands) Classification on the Consolidated Balance Sheet
Assets
Operating lease right-of-use assets Operating lease right-of-use assets $ 38,515 $ 35,012
Finance lease right-of-use assets Property and equipment, net of accumulated depreciation 2,174 2,363
Total right-of-use lease assets $ 40,689 $ 37,375
Liabilities
Current
Operating lease obligations Current portion of operating lease obligations $ 9,918 $ 9,237
Finance lease obligations Current portion of finance lease obligations 1,845 2,039
Total current obligations 11,763 11,276
Non-current
Operating lease obligations Operating lease obligations, net of current maturities 28,592 25,775
Finance lease obligations Finance lease obligations, net of current maturities 184 314
Total non-current obligations 28,776 26,089
Total lease obligations $ 40,539 $ 37,365
The following is a summary of the lease terms and discount rates:
March 31, December 31,
2024 2023
Weighted-average remaining lease term - finance leases 0.6 0.9
years years
Weighted-average remaining lease term - operating leases 4.0 4.0
years years
Weighted-average discount rate - finance leases 3.2 % 3.1 %
Weighted-average discount rate - operating leases 4.0 % 4.0 %
The following is a summary of certain information related to the lease costs
for finance and operating leases:
(in thousands) Three months ended
March 31,
2024 2023
Lease cost:
Finance lease cost:
Amortization of right-of-use assets $ 1,892 $ 1,206
Interest on lease liabilities 16 24
Operating lease cost 3,713 3,590
Variable lease costs 93 89
Total lease cost $ 5,714 $ 4,909
The following is a summary of other information and supplemental cash flow
information related to finance and operating leases:
Three months ended March 31,
(in thousands) 2024 2023
Other information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases $ 3,650 $ 3,616
Right-of-use asset obtained in exchange for new operating lease obligations $ 4,864 $ 1,616
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The future undiscounted minimum lease payments, as reconciled to the
discounted minimum lease obligation indicated on the Company's consolidated
balance sheets, under financial leases, less interest, and under operating
leases, less imputed interest, as of March 31, 2024 were as follows:
(in thousands) Finance Operating Lease Total
Lease Obligations Obligations Lease
Obligations
Remainder of 2024 $ 1,743 $ 10,306 $ 12,049
2025 313 12,194 12,507
2026 - 9,960 9,960
2027 - 5,342 5,342
2028 - 4,087 4,087
2029 - 2,354 2,354
Thereafter - 892 892
Total minimum lease payments 2,056 45,135 47,191
Financing component ( ( (
27 6,625 6,652
) ) )
Net present value of minimum lease payments 2,029 38,510 40,539
Less: current portion of finance and operating lease obligations ( ( (
1,845 9,918 11,763
) ) )
Long-term finance and operating lease obligations $ 184 $ 28,592 $ 28,776
The financing component for finance lease obligations represents the interest
component of finance leases that will be recognized as interest expense in
future periods. 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 or below
market rental rates. Lease expense associated with these leases was $
0.6
million for the three months ended March 31, 2024 and 2023, respectively. As
of March 31, 2024, the minimum lease payments required under these leases
totaled $
12.1
million, which are due over the next
5.4
years.
4.
Fair Value Measurements
The Company uses the three-tier hierarchy of fair value measurement, which
prioritizes the inputs used in measuring fair value based upon their degree of
availability in external active markets. These tiers include: Level 1 (the
highest priority), defined as observable inputs, such as quoted prices in
active markets; Level 2, defined as inputs other than quoted prices in active
markets that are either directly or indirectly observable; and Level 3 (the
lowest priority), defined as unobservable inputs in which little or no market
data exists, therefore requiring an entity to develop its own assumptions.
As of March 31, 2024 and December 31, 2023, the Company determined that the
carrying value of cash and cash equivalents approximated fair value based on
Level 1 inputs. As of March 31, 2024 and December 31, 2023, the fair value of
the Company's long-term debt and finance lease obligations was based on Level
2 inputs. The Company's long-term debt was based on variable and fixed
interest rates at March 31, 2024 and December 31, 2023, 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 value of the Company's finance lease
obligations also approximated fair value.
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As of March 31, 2024, the fair value of the Company's contingent earn-out
consideration liability associated with the acquisition of Powerline Plus Ltd.
and its affiliate PLP Redimix Ltd. (collectively, the "Powerline Plus
Companies") on January 4, 2022, was based on Level 3 inputs. The contingent
earn-out consideration recorded represents the estimated fair value of future
amounts potentially payable to the former owners of the acquired Powerline
Plus Companies, if the Powerline Plus Companies achieve certain performance
targets over a three-year post-acquisition period. The fair value 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. As of the acquisition date, the fair value of the
contingent earn-out consideration was $
0.9
million. As of March 31, 2024 and December 31, 2023, the fair value of the
contingent earn-out consideration was
zero
. 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. There were
no
changes in contingent earn-out consideration during the three months ended
March 31, 2024 and 2023. Any changes in contingent earn-out consideration are
recorded in other income.
5.
Debt
The table below reflects the Company's total debt, including borrowings under
its credit agreement and master loan agreements for equipment notes:
(dollar amounts in thousands) Inception Date Stated Interest Payment Term Outstanding Outstanding
Rate (per annum) Frequency (years) Balance as of Balance as of
March 31, 2024 December 31, 2023
Credit Agreement
Revolving loans 5/31/2023 Variable Variable 5 $ 17,483 $ 13,201
Equipment Notes
Equipment Note 8 12/27/2019 2.75 Semi-annual 5 2,345 2,871
%
Equipment Note 10 8/26/2022 4.32 Semi-annual 5 18,064 20,125
%
Other equipment note 4/11/2022 4.55 Monthly 5 40 44
%
20,449 23,040
Total debt 37,932 36,241
Less: current portion of long-term debt ( (
6,617 7,053
) )
Long-term debt $ 31,315 $ 29,188
Credit Agreement
On May 31, 2023, the Company entered into a
five-year
third 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 $
490
million revolving credit facility (the "Facility"), subject to certain
financial covenants as defined in the Credit Agreement. The Facility allows
for revolving loans in Canadian dollars and other non-US currencies, up to the
U.S. dollar equivalent of $
150
million. Up to $
75
million of the Facility may be used for letters of credit, with an additional $
75
million available for letters of credit, subject to the sole discretion of
each issuing bank. The Facility also allows for $
15
million to be used for swingline loans. 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. The Credit Agreement provides for customary events of default. 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 to refinance existing
indebtedness, and to provide for future working capital, capital expenditures,
acquisitions and other general corporate purposes.
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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
0.25
% to
1.00
%; or (2) the Term Benchmark Rate (as defined in the Credit Agreement) plus an
applicable margin ranging from
1.25
% to
2.00
%. The applicable margin is determined based on the Company's Net Leverage
Ratio (as defined in the Credit Agreement). The Credit Agreement establishes
Adjusted Term Secured Overnight Financing Rate ("SOFR") (as defined in the
Credit Agreement) as the benchmark rate in replacement of LIBOR. Letters of
credit issued under the Facility are subject to a letter of credit fee of
1.25
% to
2.00
% for non-performance letters of credit or
0.625
% to
1.00
% for performance letters of credit, based on the Company's Net Leverage
Ratio. The Company is subject to a commitment fee of
0.20
% to
0.30
%, based on the Company's Net Leverage Ratio, on any unused portion of the
Facility. The Credit Agreement restricts certain types of payments when the
Company's Net Leverage Ratio, after giving pro forma effect thereto, exceeds
2.75
. The weighted average interest rate on borrowings outstanding on the Facility
for the three months ended March 31, 2024, was
7.56
% per annum.
Under the Credit Agreement, the Company is subject to certain financial
covenants including a maximum Net Leverage Ratio of
3.0
and a minimum Interest Coverage Ratio (as defined in the Credit Agreement) of
3.0
. 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 March 31, 2024.
As of March 31, 2024, the Company had $
17.5
million of borrowings outstanding under the Facility and letters of credit
outstanding under the Facility of approximately $
38.2
million, including $
27.1
million related to the Company's payment obligation under its insurance
programs and approximately $
11.1
million related to contract performance obligations.
As of December 31, 2023, the Company had $
13.2
million of borrowings outstanding under the Facility and letters of credit
outstanding under the Facility of approximately $
34.4
million, including $
27.1
million related to the Company's payment obligation under its insurance
programs and approximately $
7.3
million related to contract performance obligations.
The Company had remaining deferred debt issuance costs totaling $
2.1
million as of March 31, 2024, 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 March 31, 2024, 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 March 31,
2024, 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 all of the
Company's outstanding equipment notes as of March 31, 2024:
(in thousands) Future
Equipment Notes
Principal Payments
Remainder of 2024 $ 4,461
2025 4,364
2026 4,555
2027 7,069
2028 -
2029 -
Total future principal payments 20,449
Less: current portion of equipment notes (
6,617
)
Long-term principal obligations $ 13,832
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6.
Revenue Recognition
Disaggregation of Revenue
A majority of the Company's revenues are earned through contracts with
customers that normally provide for payment upon completion of specified work
or units of work as identified in the contract. Although there is considerable
variation in the terms of these contracts, they are primarily structured as
fixed-price contracts, under which the Company agrees to perform a defined
scope of a project for a fixed amount, or unit-price contracts, under which
the Company agrees to do the work at a fixed price per unit of work as
specified in the contract. The Company also enters into time-and-equipment and
time-and-materials contracts under which the Company is paid for labor and
equipment at negotiated hourly billing rates and for other expenses, including
materials, as incurred at rates agreed to in the contract. Finally, the
Company sometimes enters into cost-plus contracts, where the Company is paid
for costs plus a negotiated margin. On occasion, time-and-equipment,
time-and-materials and cost-plus contracts require the Company to include a
guaranteed not-to-exceed maximum price.
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 10-Segment Information.
The components of the Company's revenue by contract type for the three months
ended March 31, 2024 and 2023 were as follows:
Three months ended March 31, 2024
T&D C&I Total
(dollars in thousands) Amount Percent Amount Percent Amount Percent
Fixed price $ 243,000 49.5 % $ 264,800 81.5 % $ 507,800 62.3 %
Unit price 136,125 27.8 16,336 5.0 152,461 18.7
T&E 111,270 22.7 44,031 13.5 155,301 19.0
$ 490,395 100.0 % $ 325,167 100.0 % $ 815,562 100.0 %
Three months ended March 31, 2023
T&D C&I Total
(dollars in thousands) Amount Percent Amount Percent Amount Percent
Fixed price $ 229,234 51.5 % $ 305,621 83.4 % $ 534,855 65.9 %
Unit price 113,709 25.5 17,642 4.8 131,351 16.2
T&E 102,381 23.0 43,029 11.8 145,410 17.9
$ 445,324 100.0 % $ 366,292 100.0 % $ 811,616 100.0 %
14
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The components of the Company's revenue by market type for the three months
ended March 31, 2024 and 2023 were as follows:
Three months ended March 31, 2024 Three months ended March 31, 2023
(dollars in thousands) Amount Percent Segment Amount Percent Segment
Transmission $ 313,926 38.5 % T&D $ 298,098 36.7 % T&D
Distribution 176,469 21.6 T&D 147,226 18.2 T&D
Electrical construction 325,167 39.9 C&I 366,292 45.1 C&I
Total revenue $ 815,562 100.0 % $ 811,616 100.0 %
Remaining Performance Obligations
As of March 31, 2024, the Company had $
2.22
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. The timing of when remaining
performance obligations are recognized is evaluated quarterly and is largely
driven by the estimated start date and duration of the underlying projects.
The following table summarizes the amount of remaining performance obligations
as of March 31, 2024 that the Company expects to be realized and the amount of
the remaining performance obligations that the Company reasonably estimates
will be recognized within the next twelve months, and the amount estimated to
be recognized after the next twelve months.
Remaining Performance Obligations at March 31, 2024
(in thousands) Total Amount estimated to be Amount estimated to be
recognized within 12 months recognized after 12 months
T&D $ 674,812 $ 614,410 $ 60,402
C&I 1,544,717 1,109,414 435,303
Total $ 2,219,529 $ 1,723,824 $ 495,705
The Company estimates approximately
95
% or more
of the remaining performance obligations will be recognized within twenty-four
months, including approximately
80
% of the remaining performance obligations estimated to be recognized within
twelve months, although the timing of the Company's performance is not always
under its control. The timing of when remaining performance obligations are
recognized by the Company can vary considerably and is impacted by multiple
variables including, but not limited to: changes in the estimated versus
actual start time of a project; the availability of labor, equipment and
materials; changes in project workflow; weather; project delays and
accelerations; and the timing of final contract settlements. 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 2. "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
7.
Income Taxes
The U.S. federal statutory tax rate was
21
% for each of the three months ended March 31, 2024 and 2023. The Company's
effective tax rate for the three months ended March 31, 2024 was
18.0
% of pretax income compared to the effective tax rate for the three months
ended March 31, 2023 of
14.4
%.
The difference between the U.S. federal statutory tax rate and the Company's
effective tax rate for the three months ended March 31, 2024 and March 31,
2023, was primarily due to a favorable impact from stock compensation excess
tax benefits partially offset by state income taxes, Canadian taxes and other
permanent difference items.
The Company has recorded a liability for unrecognized tax benefits of
approximately $
0.8
million and $
0.5
million as of March 31, 2024 and December 31, 2023, respectively, which were
included in other liabilities in the accompanying consolidated balance sheets.
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The Company's policy is to recognize interest and penalties related to income
tax liabilities as a component of income tax expense in the consolidated
statements of operations. The amount of interest and penalties charged to
income tax expense related to unrecognized tax benefits was
no
t significant for the three months ended March 31, 2024 and 2023.
The Company is subject to taxation in various jurisdictions. The Company's
2020 through 2022 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 2019 through 2022.
8.
Commitments and Contingencies
Purchase Commitments
As of March 31, 2024, the Company had approximately $
26.9
million in outstanding purchase orders for certain construction equipment,
with cash payments scheduled to occur in 2024.
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. 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 current and long-term assets in the Company's consolidated balance sheets.
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 March 31, 2024, an aggregate of approximately $
2.59
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 $
660.8
million as of March 31, 2024.
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 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.
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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.
The Company is routinely subject to other civil claims, litigation and
arbitration, and regulatory investigations arising in the ordinary course of
business. These claims, lawsuits and other proceedings include claims related
to the Company's current services and operations, as well as our historic
operations.
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 condition, results of
operations or cash flows.
9.
Stock-Based Compensation
The Company maintains an equity compensation plan under which stock-based
compensation has been granted: the 2017 Long-Term Incentive Plan (Amended and
Restated as of April 23, 2020) (the "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 grants. The Company has outstanding grants of time-vested
stock awards in the form of restricted stock units and internal metric-based
and market-based performance stock units.
During the three months ended March 31, 2024, the Company granted time-vested
stock awards covering
35,743
shares of common stock under the LTIP, which vest ratably over
three years
for employee awards, at a weighted average grant date fair value of $
172.52
. During the three months ended March 31, 2024, time-vested stock awards
covering
36,015
shares of common stock vested at a weighted average grant date fair value of $
94.84
.
During the three months ended March 31, 2024, the Company granted
29,566
performance share awards under the LTIP at target, which will cliff vest, if
earned, on December 31, 2026, at a weighted average grant date fair value of $
197.89
. The number of shares ultimately earned under a performance award may vary from
zero
to
200
% of the target shares granted, based upon the Company's performance compared
to certain financial and other metrics. The metrics used were determined at
the time of the grant by the Compensation Committee of the Board of Directors
and were either based on internal measures, such as the Company's financial
performance compared to targets, or on a market-based metric, such as the
Company's stock performance compared to a peer group. Performance awards
granted cliff vest following the performance period if the stated performance
targets and minimum service requirements are attained and are paid in shares
of the Company's common stock.
The Company recognizes stock-based compensation expense related to 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 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 are expensed over the service period of approximately
2.8
years, and 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.
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10.
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 include safety costs,
professional fees, IT expenses and management fees. The accounting policies of
the segments are the same as those described in the Note 1-Organization,
Business and Significant Accounting Policies to the 2023 Annual Report.
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, clean energy projects
and electric vehicle charging infrastructure. The T&D segment also provides
emergency restoration services. 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, signalization and electric vehicle charging infrastructure. 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 C&I segment
has a diverse customer base with many long-standing relationships.
The information in the following table is derived from the segment's internal
financial reports used for corporate management purposes:
Three months ended
March 31,
(in thousands) 2024 2023
Contract revenues:
T&D $ 490,395 $ 445,324
C&I 325,167 366,292
$ 815,562 $ 811,616
Income from operations:
T&D $ 29,837 $ 32,821
C&I 11,423 10,627
General Corporate ( (
16,989 16,022
) )
$ 24,271 $ 27,426
11.
Earnings Per Share
The Company computes earnings per share using the treasury stock method. Under
the treasury stock method, basic earnings per share are computed by dividing
net income by the weighted average number of common shares outstanding during
the period, and diluted earnings per share are computed by dividing net income
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.
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Net income and the weighted average number of common shares used to compute
basic and diluted earnings per share were as follows:
Three months ended
March 31,
(in thousands, except per share data) 2024 2023
Numerator:
Net income $ 18,939 $ 23,163
Denominator:
Weighted average common shares outstanding 16,711 16,618
Weighted average dilutive securities 126 206
Weighted average common shares outstanding, diluted 16,837 16,824
Income per common share:
Basic $ 1.13 $ 1.39
Diluted $ 1.12 $ 1.38
For the three months ended March 31, 2024 and 2023, certain common stock
equivalents were excluded from the calculation of dilutive securities because
their inclusion would have been anti-dilutive.
The following table summarizes the shares of common stock underlying the
Company's unvested time-vested stock awards and performance awards that were
excluded from the calculation of dilutive securities:
Three months ended
March 31,
(in thousands) 2024 2023
Time-vested stock awards 36 45
Performance awards 30 33
Share Repurchases
During the three months ended March 31, 2024 the Company repurchased
36,397
shares of stock, for approximately $
5.9
million, from its employees to satisfy tax obligations on shares vested under
the LTIP. During the three months ended March 31, 2023 the Company repurchased
76,150
shares of stock, for approximately $
7.9
million, from its employees to satisfy tax obligations on shares vested under
the LTIP.
On November 1, 2023, the Company announced that its Board of Directors had
authorized a $
75.0
million share repurchase program (the "Repurchase Program"), which became
effective on November 9, 2023. The Repurchase Program will expire on May 8,
2024, or when the authorized funds are exhausted, whichever is earlier. During
the three months ended March 31, 2024, the Company had
no
repurchases of its common stock under the Repurchase Program. As of March 31,
2024, the Company had $
72.5
million of remaining availability to repurchase shares of the Company's common
stock under the Repurchase Program.
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ITEM 2. 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 accompanying unaudited consolidated financial statements
and with our Annual Report on Form 10-K for the year ended December 31, 2023
(the "2023 Annual Report"). 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 herein under the captions "Cautionary Statement
Concerning Forward-Looking Statements and Information" and "Risk Factors," as
well as in the 2023 Annual Report. We assume no obligation to update any of
these forward-looking statements.
Overview and Outlook
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 strive
to maintain our
status as a preferred provider to our T&D and C&I customers.
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 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, we expect
our financial results, in both of our segments, to continue to be affected by
delays and cost volatility through 2024, due to supply chain disruptions,
inflationary pressures, tariffs and regulatory slowdowns. These factors will
cause us to carry impacted projects at lower margins until their completion
and may result in decelerations in project opportunities and awards.
We had consolidated revenues for the three months ended March 31, 2024 of
$815.6 million, of which 60.1% was attributable to our T&D customers and 39.9%
was attributable to our C&I customers. Our consolidated revenues for the three
months ended March 31, 2023 were $811.6 million. For the three months ended
March 31, 2024, our net income and EBITDA
(1)
were $18.9 million and $39.8 million, respectively, compared to $23.2 million
and $41.3 million, respectively, for the three months ended March 31, 2023.
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 that we will
continue to see continued 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 the remainder of
2024 will not likely have a large impact on 2024 results. Bidding and
construction activity for small to medium-size transmission projects and
upgrades remain active, and we expect this trend to continue.
We believe there is a need for further investment by utilities on their
distribution systems to properly maintain or meet reliability requirements. We
continue to see strong bidding activity in some of our electric distribution
markets. We believe the increased storm activity and destruction caused by
wildfires will cause a push to strengthen utility distribution systems against
catastrophic damage. Distribution systems may also require upgrades to
accommodate additional distributed energy resources and increased
electrification. We expect to see an incremental increase in distribution
opportunities in some of the markets we serve during the rest of 2024.
(1)
EBITDA is a non-GAAP measure. Refer to "Non-GAAP Measure-EBITDA" for a
discussion of this measure.
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Although our C&I bidding opportunities remain strong, we may see impacts due
to continued market disruptions and overall market volatility which could
result in slower growth of our C&I segment. 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 an economic slowdown.
In addition, the United States has experienced decades of underfunded economic
expansion and aging infrastructure that have 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. Legislation and regulation that promotes domestic
manufacturing could also create opportunity for our C&I segment. We expect the
long-term growth in our C&I segment to generally track the overall growth of
the regions we serve.
We continue to implement strategies that are designed to further expand our
capabilities and effectively allocate capital. We have focused on
strengthening our balance sheet by maintaining a low level of variable rate
outstanding debt in the current higher interest rate environment and by
increasing our revolving credit facility to $490 million on May 31, 2023. This
expanded availability of liquidity will allow us to take advantage of future
opportunities as they arise. Additionally, as of March 31, 2024, we had $72.5
million of remaining availability to purchase shares under our share
repurchase program, which continues in effect until May 8, 2024, 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 respond to challenges and uncertainties in the markets we serve and give us
the flexibility to successfully execute our strategy. We continue to invest in
developing key management and craft personnel in both our T&D and C&I segments
and in procuring the specific specialty equipment and tooling needed to win
and execute projects of all sizes and complexity.
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." A customer's intention
to award us work under a fixed-price contract is not included in backlog
unless there is an actual written award 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 master service agreements that
typically have a one-year to three-year duration from execution. 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, may all take place
within the period. 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. Backlog should not be relied
upon as a stand-alone indicator of future events.
The difference between our backlog and remaining performance obligations is
due to the exclusion of a portion of our master service agreements 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 6-Revenue Recognition in the accompanying notes to our
Consolidated Financial Statements.
Our backlog was $2.43 billion at March 31, 2024, compared to $2.51 billion at
December 31, 2023 and $2.67 billion at March 31, 2023. Our backlog at March
31, 2024 decreased $87.1 million from December 31, 2023. Backlog in the T&D
segment decreased $106.4 million and C&I backlog increased $19.3 million
compared to December 31, 2023. Our backlog as of March 31, 2024 included our
proportionate share of joint venture backlog totaling $4.0 million, compared
to $18.9 million at December 31, 2023.
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The following table summarizes that amount of our backlog that we believe to
be firm as of the dates shown and the amount of our current backlog that we
reasonably estimate will not be recognized within the next twelve months, and
the amount estimated to be recognized after the next twelve months:
Backlog at March 31, 2024
(in thousands) Total Amount estimated to be Amount estimated to be Total backlog at December 31, 2023
recognized within 12 months recognized after 12 months
T&D $ 853,183 $ 792,781 $ 60,402 $ 959,553
C&I 1,572,134 1,136,831 435,303 1,552,846
Total $ 2,425,317 $ 1,929,612 $ 495,705 $ 2,512,399
Consolidated Results of Operations
The following table sets forth selected consolidated statements of operations
data and such data as a percentage of revenues for the periods indicated:
Three months ended
March 31,
2024 2023
(dollars in thousands) Amount Percent Amount Percent
Contract revenues $ 815,562 100.0 % $ 811,616 100.0 %
Contract costs 729,319 89.4 727,224 89.6
Gross profit 86,243 10.6 84,392 10.4
Selling, general and administrative expenses 62,233 7.6 56,964 7.0
Amortization of intangible assets 1,228 0.2 1,226 0.2
Gain on sale of property and equipment (1,489) (0.2) (1,224) (0.2)
Income from operations 24,271 3.0 27,426 3.4
Other income (expense):
Interest income 142 - 321 -
Interest expense (1,054) (0.1) (586) (0.1)
Other expense, net (263) - (90) -
Income before provision for income taxes 23,096 2.9 27,071 3.3
Income tax expense 4,157 0.6 3,908 0.4
Net income $ 18,939 2.3 % $ 23,163 2.9 %
Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
Revenues.
Revenues increased $4.0 million or 0.5%, to $815.6 million for the three
months ended March 31, 2024 from $811.6 million for the three months ended
March 31, 2023. The increase was primarily due to an increase of $29.3 million
in revenue on distribution projects and an increase of $15.8 million in
revenue on transmission projects, offset by a decrease of $41.1 million in C&I
revenue.
Gross margin.
Gross margin for the three months ended March 31, 2024 increased to 10.6%
compared to 10.4% for the three months ended March 31, 2023. Favorable joint
venture results increased gross margin by approximately 0.6% during the three
months ended March 31, 2024. This improvement in gross margin was partially
offset by significant changes in our estimated gross profit on certain
projects resulting in a net gross margin decrease of 1.2% for the three months
ended March 31, 2024, compared to a net decrease of 0.6% for the three months
ended March 31, 2023. During the three months ended March 31, 2024,
significant estimate changes negatively impacted gross margin by 3.0%, largely
related to labor and project inefficiencies, some of which were caused by
inclement weather experienced on certain projects, rising costs associated
with supply chain disruptions, an unfavorable change order and an unfavorable
job closeout. In addition, significant estimate changes in gross profit
positively impacted gross margin by 1.8% and mainly related to better-than-antic
ipated productivity, favorable change orders and a favorable job closeout.
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Gross profit.
Gross profit was $86.2 million for the three months ended March 31, 2024
compared to $84.4 million for the three months ended March 31, 2023. The
increase of $1.8 million, or 2.2%, was due to higher revenues and higher
margin.
Selling, general and administrative expenses.
Selling, general and administrative expenses were $62.2 million for the three
months ended March 31, 2024 compared to $57.0 million for the three months
ended March 31, 2023. The period-over-period increase of $5.2 million was
primarily due to an increase in employee-related expenses, an increase of $1.7
million related to contingent compensation expense related to a prior
acquisition and an increase in employee incentive compensation costs.
Gain on sale of property and equipment
. Gains from the sale of property and equipment for the three months ended
March 31, 2024 were $1.5 million compared to $1.2 million for the three months
ended March 31, 2023. Gains from the sale of property and equipment are
attributable to routine sales of property and equipment no longer useful or
valuable to our ongoing operations.
Interest expense.
Interest expense was $1.1 million for three months ended March 31, 2024
compared to $0.6 million for the three months ended March 31, 2023. This
increase was attributable to higher average outstanding debt balances and
higher interest rates, during the three months ended March 31, 2024 as
compared to the three months ended March 31, 2023.
Income tax expense.
Income tax expense was $4.2 million for the three months ended March 31, 2024,
with an effective tax rate of 18.0%, compared to the expense of $3.9 million
for the three months ended March 31, 2023, with an effective tax rate of
14.4%. The increase in the tax rate for the three months ended March 31, 2024
was primarily due to lower stock compensation excess tax benefits and higher
other permanent difference items.
Net income.
Net income was $18.9 million for the three months ended March 31, 2024
compared to $23.2 million for the three months ended March 31, 2023. The
decrease was primarily due to the reasons stated earlier.
Segment Results
The following table sets forth, for the periods indicated, statements of
operations data by segment, segment net sales as percentage of total net sales
and segment operating income as a percentage of segment net sales:
Three months ended March 31,
2024 2023
(dollars in thousands) Amount Percent Amount Percent
Contract revenues:
Transmission & Distribution $ 490,395 60.1 % $ 445,324 54.9 %
Commercial & Industrial 325,167 39.9 366,292 45.1
Total $ 815,562 100.0 % $ 811,616 100.0 %
Operating income (loss):
Transmission & Distribution $ 29,837 6.1 % $ 32,821 7.4 %
Commercial & Industrial 11,423 3.5 10,627 2.9
Total 41,260 5.1 43,448 5.4
General Corporate (16,989) (2.1) (16,022) (2.0)
Consolidated $ 24,271 3.0 % $ 27,426 3.4 %
Transmission & Distribution
Revenues for our T&D segment for the three months ended March 31, 2024 were
$490.4 million compared to $445.3 million for the three months ended March 31,
2023, an increase of $45.1 million, or 10.1%. The increase in revenue was
related to an increase of $29.3 million in revenue on distribution projects
and an increase of $15.8 million in revenue on transmission projects. Revenues
from transmission projects represented 64.0% and 66.9% of T&D segment revenue
for the three months ended March 31, 2024 and 2023, respectively.
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Operating income for our T&D segment for the three months ended March 31, 2024
was $29.8 million, a decrease of $3.0 million, or 9.1%, from the three months
ended March 31, 2023. As a percentage of revenues, operating income for our
T&D segment was 6.1% for the three months ended March 31, 2024 compared to
7.4% for the three months ended March 31, 2023. Operating income margin was
impacted by significant changes in our estimated gross profit on certain
projects resulting in a net operating income margin decrease of 2.5% for the
three months ended March 31, 2024, compared to a net decrease of 0.5% for the
three months ended March 31, 2023. During the three months ended March 31,
2024, significant estimated gross profit changes negatively impacted operating
income as a percentage of revenues by 3.1% and largely related to labor and
project inefficiencies, most of which related to clean energy projects,
primarily in one geographic area that also experienced inclement weather, as
well as an unfavorable change order. These decreases were partially offset by
positive significant estimated gross profit changes totaling 0.5% of revenues
mostly related to better-than-anticipated productivity. Additionally, T&D
operating income margin was positively impacted by an increase in work in
progress, partially offset by higher fleet depreciation and maintenance
expenses.
Commercial & Industrial
Revenues for our C&I segment for the three months ended March 31, 2024 were
$325.2 million compared to $366.3 million for the three months ended March 31,
2023, a decrease of $41.1 million, or 11.2%, which was primarily due to the
delayed start of certain projects, that are expected to begin later in 2024.
The decrease in revenue was related to a decrease of $40.8 million in revenue
on fixed priced contracts and a decrease of $1.3 million in revenues on unit
price work, partially offset by an increase of $1.0 million on T&E contracts.
Operating income for our C&I segment for the three months ended March 31, 2024
was $11.4 million, an increase of $0.8 million, over the three months ended
March 31, 2023. As a percentage of revenues, operating income for our C&I
segment was 3.5% for the three months ended March 31, 2024 compared to 2.9%
for the three months ended March 31, 2023. Operating income margin was
impacted by significant changes in our estimated gross profit on certain
projects resulting in a net operating income margin increase of 0.8% for the
three months ended March 31, 2024, compared to a net decrease of 0.7% for the
three months ended March 31, 2023. Significant estimated gross profit changes
positively impacted operating income as a percentage of revenues by 3.8% and
largely related to better-than-anticipated productivity, some of which related
to clean energy projects, favorable change orders and a favorable job
closeout. These increases were partially offset by negative significant
estimated gross profit changes totaling 3.0% of revenues largely related to
labor and project inefficiencies, some of which were caused by supply chain
disruptions and an unfavorable change order. Additionally, C&I operating
income margin was positively impacted by approximately 1.4% due to favorable
joint venture results, this increase was partially offset by a decrease in
work in progress, higher contingent compensation expense related to a prior
acquisition and higher fleet depreciation and maintenance expenses.
Non-GAAP Measure-EBITDA
We define EBITDA, a performance measure used by management, as net income plus
interest expense net of interest income, provision for income taxes and
depreciation and amortization. EBITDA, a non-GAAP financial measure, does not
purport to be an alternative to net income 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 and
book value of assets, useful lives placed on assets, capital structure and the
method by which assets were acquired. Because not all companies use identical
calculations, this presentation of EBITDA may not be comparable to other
similarly-titled measures of other companies. We use, and we believe investors
benefit from, the presentation of EBITDA in evaluating our operating
performance because it provides us and our investors with an additional tool
to compare our operating performance on a consistent basis by removing the
impact of certain items that management believes do not directly reflect our
core operations.
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Using EBITDA as a performance measure has material limitations as compared to
net income, or other financial measures as defined under accounting principles
generally accepted in the United States of America ("U.S. 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 a necessary element of our costs and ability
to generate revenue. Finally, EBITDA excludes income taxes; however, as we are
organized as a corporation, the payment of taxes is a necessary element of our
operations. As a result of these exclusions from EBITDA, any measure that
excludes interest expense net of interest income, depreciation and
amortization and income taxes has material limitations as compared to net
income. When using EBITDA as a performance measure, management compensates for
these limitations by comparing EBITDA to net income in each period, to allow
for the comparison of the performance of the underlying core operations with
the overall performance of the company on a full-cost, after-tax basis. Using
both EBITDA and net income to evaluate the business allows management and
investors to (a) assess our relative performance against our competitors and
(b) monitor our capacity to generate returns for our shareholders.
The following table provides a reconciliation of net income to EBITDA:
Three months ended
March 31,
(in thousands) 2024 2023
Net income $ 18,939 $ 23,163
Add:
Interest expense, net 912 265
Income tax expense 4,157 3,908
Depreciation & amortization 15,830 13,989
EBITDA $ 39,838 $ 41,325
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. 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 net leverage ratio, which is defined in the Credit
Agreement as Total Net 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.
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The following table provides a reconciliation of net cash flows provided by
operating activities to EBITDA:
Three months ended
March 31,
(in thousands) 2024 2023
Provided by Operating Activities:
Net cash flows provided by operating activities $ 7,690 $ 37,158
Add/(subtract):
Changes in operating assets and liabilities 28,163 814
Adjustments to reconcile net income to net cash flows provided by operating activities (16,914) (14,809)
Depreciation & amortization 15,830 13,989
Income tax expense 4,157 3,908
Interest expense, net 912 265
EBITDA $ 39,838 $ 41,325
Liquidity, Capital Resources and Material Cash Requirements
As of March 31, 2024, we had working capital of $293.8 million. We define
working capital as current assets less current liabilities. During the three
months ended March 31, 2024, operating activities of our business provided net
cash of $7.7 million, compared to $37.2 million of cash provided for the three
months ended March 31, 2023. Cash flow from operations is primarily influenced
by operating margins, timing of contract performance and the type of services
we provide to our customers. The $29.5 million year-over-year decrease in cash
provided by operating activities was primarily due to unfavorable net changes
in operating assets and liabilities of $27.3 million, and a decrease of $4.2
million in net income. The unfavorable change in operating assets and
liabilities was primarily due to the net unfavorable year-over-year changes in
various working capital accounts that relate primarily to construction
activities (accounts receivable, contract assets, accounts payable and
contract liabilities) of $33.7 million, partially offset by the favorable
change of $9.9 million in other liabilities. The net unfavorable changes of
$33.7 million in cash provided by working capital accounts, mainly related to
construction activities, was due to the timing of billings and payments under
our contracts. The favorable change of $9.9 million in other liabilities was
primarily due to the timing of employee related wage and tax payments.
In the three months ended March 31, 2024, we used net cash of $23.9 million in
investing activities consisting of $25.8 million for capital expenditures,
partially offset by $1.9 million of proceeds from the sale of equipment.
In the three months ended March 31, 2024, financing activities used net cash
of $4.5 million, consisting primarily of $5.9 million of shares repurchased to
satisfy tax obligations under our stock compensation programs and $2.6 million
of payments under our equipment notes, partially offset by $4.3 million of net
borrowings under our revolving line of credit.
We believe our $434.3 million borrowing availability under our revolving line
of credit as of March 31, 2024, future cash flow from operations and our
ability to utilize short-term and long-term leases will provide sufficient
liquidity for our short-term and long-term needs. Our primary short-term
liquidity needs include cash for operations, debt service requirements,
capital expenditures, and 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 segments
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 May 31, 2023, the Company entered into a five-year third 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
$490 million revolving credit facility (the "Facility"), subject to certain
financial covenants as defined in the Credit Agreement. The Facility allows
for revolving loans in Canadian dollars and other non-US currencies, up to the
U.S. dollar equivalent of $150 million. Up to $75 million of the Facility may
be used for letters of credit, with an additional $75 million available for
letters of credit, subject to the sole discretion of each issuing bank. The
Facility also allows for $15 million to be used for swingline loans. 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. The Credit Agreement provides for customary
events of default. 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 to refinance existing indebtedness, and to provide for future working
capital, capital expenditures, acquisitions 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 0.25% to 1.00%;
or (2) the Term Benchmark Rate (as defined in the Credit Agreement) plus an
applicable margin ranging from 1.25% to 2.00%. The applicable margin is
determined based on the Company's Net Leverage Ratio (as defined in the Credit
Agreement). The Credit Agreement establishes Adjusted Term Secured Overnight
Financing Rate ("SOFR") (as defined in the Credit Agreement) as the benchmark
rate in replacement of LIBOR. Letters of credit issued under the Facility are
subject to a letter of credit fee of 1.25% to 2.00% for non-performance
letters of credit or 0.625% to 1.00% for performance letters of credit, based
on the Company's Net Leverage Ratio. The Company is subject to a commitment
fee of 0.20% to 0.30%, based on the Company's Net Leverage Ratio, on any
unused portion of the Facility. The Credit Agreement restricts certain types
of payments when the Company's Net Leverage Ratio, after giving pro forma
effect thereto, exceeds 2.75.
Under the Credit Agreement, the Company is subject to certain financial
covenants including a maximum Net Leverage Ratio of 3.0 and a minimum Interest
Coverage Ratio (as defined in the Credit Agreement) of 3.0. 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 March 31, 2024.
We had $17.5 million and $13.2 million of borrowings outstanding under the
Facility as of March 31, 2024 and December 31, 2023, respectively.
Letters of Credit
Some of our vendors require letters of credit to ensure reimbursement for
amounts they are disbursing on our behalf, such as to beneficiaries under our
insurance programs. In addition, from time-to-time, certain customers require
us to post letters of credit to ensure payment to our subcontractors and
vendors under those contracts and to guarantee performance under our
contracts. Such letters of credit are generally issued by a bank or similar
financial institution. The letter of credit commits the issuer to pay
specified amounts to the holder of the letter of credit if the holder claims
that we have failed to perform specified actions in accordance with the terms
of the letter of credit. If this were to occur, we would be required to
reimburse the issuer of the letter of credit. Depending on the circumstances
of such a reimbursement, we may also have to record a charge to earnings for
the reimbursement. Currently, we do not believe it is likely that any claims
will be made under any letter of credit.
As of March 31, 2024, we had $38.2 million in letters of credit outstanding
under our Credit Agreement, including $27.1 million related to the Company's
payment obligation under its insurance programs and approximately $11.1
million related to contract performance obligations. As of December 31, 2023,
we had $34.4 million in letters of credit outstanding under our previous
credit agreement, including $27.1 million related to the Company's payment
obligations under its insurance programs and approximately $7.3 million
related to contract performance obligations.
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Equipment Notes
We have entered into multiple Master Loan Agreements with multiple finance
companies. 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 March 31, 2024 and December 31, 2023, we had two outstanding Equipment
Notes collateralized by equipment and vehicles owned by us. As of March 31,
2024 and December 31, 2023, we also had one other equipment note outstanding
collateralized by a vehicle owned by us. The outstanding balance of all
equipment notes was $20.4 million as of March 31, 2024 and $23.0 million as of
December 31, 2023. As of March 31, 2024, we had outstanding short-term and
long-term equipment notes of approximately $6.6 million and $13.8 million,
respectively. As of December 31, 2023, we had outstanding short-term and
long-term Equipment Notes of approximately $7.1 million and $16.0 million,
respectively.
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 ten years, some of which may include
options to extend the leases for up to six 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 on-going and the
purchase option price is attractive.
The outstanding balance of operating lease obligations was $38.5 million as of
March 31, 2024, consisting of short-term and long-term operating lease
obligations of approximately $9.9 million and $28.6 million, respectively. The
outstanding balance of operating lease obligations was $35.0 million as of
December 31, 2023, consisting of short-term and long-term operating lease
obligations of approximately $9.2 million and $25.8 million, respectively.
The outstanding balance of finance lease obligations was $2.0 million as of
March 31, 2024, consisting of short-term and long-term finance lease
obligations of approximately $1.8 million and $0.2 million, respectively. As
of December 31, 2023 we had $2.3 million outstanding finance lease
obligations, consisting of short-term and long-term finance lease obligations
of approximately $2.0 million and $0.3 million, respectively.
Purchase Commitments for Construction Equipment
As of March 31, 2024, we had approximately $26.9 million in outstanding
purchase obligations for certain construction equipment to be paid with cash
outlays scheduled to occur in 2024.
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 the issuers of the bonds, we may be required to grant them a security
interest relating to a particular project. We believe that it is unlikely that
we will have to fund significant claims under our surety arrangements. As of
March 31, 2024, an aggregate of approximately $2.59 billion in original face
amount of bonds issued by our sureties were outstanding. Our estimated
remaining cost to complete these bonded projects was approximately $660.8
million as of March 31, 2024.
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 normal 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 located in the United States.
Consequently, we are subject to potential credit risk related to changes in
business and economic factors throughout the United States. 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 March 31, 2024 and 2023, none of our
customers individually exceeded 10% of consolidated accounts receivable.
Management believes the terms and conditions in its contracts, billing and
collection policies are adequate to minimize the potential credit risk.
New Accounting Pronouncements
For a discussion regarding new accounting pronouncements, please refer to Note
1-Organization, Business and Basis of Presentation-Recent Accounting
Pronouncements in the accompanying notes to our Consolidated Financial
Statements.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of
operations are based on our consolidated financial statements, which have been
prepared in accordance with U.S. GAAP. The preparation of these consolidated
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 consolidated
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 we believe to be
reasonable under the circumstances. There can be no assurance that actual
results will not differ from those estimates. For further information
regarding our critical accounting policies and estimates, please refer to Item
7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations-Critical Accounting Policies" included in our 2023 Annual Report.
Cautionary Statement Concerning Forward-Looking Statements and Information
We are including the following discussion to inform you of some of the risks
and uncertainties that can affect our company and to take advantage of the
protections for forward-looking statements that applicable federal securities
law affords.
Statements in this Quarterly Report on Form 10-Q 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 Quarterly Report on
Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q. 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 under the caption "Forward-Looking Statements" and in Item 1A. "Risk
Factors" in our 2023 Annual Report, and in any risk factors or cautionary
statements contained in our other filings with the Securities and Exchange
Commission, 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.
These risks, contingencies and uncertainties include, but are not limited to,
the following:
.
Our operating results may vary significantly from period to period.
.
Our industry is highly competitive.
.
Negative economic and market conditions including tariffs on materials,
interest rates and recessionary conditions have in the past and may in the
future adversely impact our customers' spending and, as a result, our
operations and growth.
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.
We may be unsuccessful in generating internal growth, which could impact the
projects available to the Company.
.
Our inability to successfully execute or integrate acquisitions or joint
ventures may have an adverse impact on our growth strategy and business.
.
Project performance issues, including those caused by third parties, or
certain contractual obligations
have in the past and may in the future result in additional costs to us,
reductions or delays in revenues or the payment of penalties, including
liquidated damages.
.
We may be unable to attract and retain qualified personnel.
.
The timing of new contracts and termination of existing contracts may result
in unpredictable fluctuations in our cash flows and financial results.
.
During the ordinary course of our business, we have in the past and may in the
future become subject to lawsuits or indemnity claims.
.
Backlog may not be realized or may not result in profits and may not
accurately represent future revenue.
.
Our insurance has limits and exclusions that may not fully indemnify us
against certain claims or losses, including claims resulting from wildfires or
other natural disasters and 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.
.
Risks associated with operating in the Canadian market could impact our
profitability.
.
Changes in tax laws or our interpretations of tax laws could materially impact
our income tax liabilities.
.
The nature of our business exposes us to potential liability for warranty
claims and faulty engineering, which may reduce our profitability.
.
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.
.
Our dependence on suppliers, subcontractors and equipment manufacturers has in
the past and may in the future expose us to the risk of loss in our operations.
.
Our participation in joint ventures and other projects with third parties may
expose us to liability for failures of our partners.
.
Legislative or regulatory actions relating to electricity transmission and
clean energy may impact demand for our services.
.
We have in the past and may in the future 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 failure to comply with environmental and other laws and regulations could
result in significant liabilities.
.
Our business may be affected by seasonal and other variations, including
severe weather conditions and the nature of our work environment.
.
Opportunities associated with government contracts could lead to increased
governmental regulation applicable to us.
.
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.
.
Our use of percentage-of-completion accounting could result in a reduction or
reversal of previously recognized revenues and profits.
.
Our financial results are based upon estimates and assumptions that may differ
from actual results.
.
Our actual costs may be greater than expected in performing our fixed-price
and unit-price contracts.
.
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, wars, taxes, transportation costs and inflation
which could adversely affect our business.
.
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.
.
Unfavorable developments affecting the banking and financial services industry
could adversely affect our business, liquidity and financial condition and
overall results of operations.
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.
Work stoppages or other labor issues with our unionized workforce could
adversely affect our business, and we may be subject to unionization attempts.
.
Multi-employer pension plan obligations related to our unionized workforce
could adversely impact our earnings.
.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have operations within the United States and Canada, and we are exposed to
market risks in the ordinary course of our business, including the effects of
fluctuations in interest rates, foreign exchange rates, and commodity prices.
As of March 31, 2024, we were not party to any derivative instruments. We did
not use any material derivative financial instruments during the three months
ended March 31, 2024 and 2023, including instruments for trading, hedging, or
speculating on changes in interest rates, changes in foreign currency rates or
changes in commodity prices of materials used in our business.
Any borrowings under our Facility are based upon interest rates that will vary
depending upon the prime rate, Canadian prime rate, the NYFRB overnight bank
funding rate, CDOR, and Term SOFR Reference Rate. If the prime rate, Canadian
prime rate, the NYFRB overnight bank funding rate, CDOR, or Term SOFR
Reference Rate 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 March 31, 2024,
we had $17.5 million of borrowings outstanding under the Facility. If market
rates of interest on all our revolving debt as of March 31, 2024, 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 $0.2 million
annually. If market rates of interest on all our revolving debt, which is
subject to variable rates as of March 31, 2024, 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 $0.2 million
annually. Borrowings under our equipment notes are at fixed rates established
on the date the respective equipment note was executed.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision, and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we have evaluated the
effectiveness of our disclosure controls and procedures, as defined under
Exchange Act Rules 13a-15(e) and 15d-15(e), as of the end of the period
covered by this quarterly report. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of March 31, 2024.
Changes in Internal Control Over Financial Reporting
During the period covered by this report, there were no changes in our
internal control over financial reporting that materially affected, or that
are reasonably likely to materially affect, our internal control over
financial reporting.
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PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For discussion regarding legal proceedings, please refer to Note 8-Commitments
and Contingencies-Litigation and Other Legal Matters in the accompanying notes
to our Consolidated Financial Statements.
ITEM 1A. RISK FACTORS
We face a number of risks that could materially and adversely affect our
business, employees, liquidity, financial condition, results of operations and
cash flows. A discussion of our risk factors can be found in Item 1A. "Risk
Factors" in our 2023 Annual Report. As of the date of this filing, there have
been no material changes to the risk factors previously discussed in Item 1A.
"Risk Factors" in our 2023 Annual Report. An investment in our common stock
involves various risks. When considering an investment in the Company, you
should carefully consider all of the risk factors described in our 2023 Annual
Report. These risks and uncertainties are not the only ones facing us and
there may be additional matters that are not known to us or that we currently
consider immaterial. These risks and uncertainties could adversely affect our
business, employees, liquidity, financial condition, results of operations or
cash flows and, thus, the value of our common stock and any investment in the
Company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER
PURCHASES OF EQUITY SECURITIES
Purchases of Common Stock. 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 Average Price Total Number of Shares Approximate Dollar Value
Shares Purchased (1) Paid per Share Purchased as Part of Shares That May Yet
of Publicly Announced Be Purchased Under the
Plans or Programs Plans or Programs (2)
January 1, 2024 - - $ - - $ 72,487,423
January 31, 2024
February 1, 2024 - 22,983 $ 154.55 - $ 72,487,423
February 29, 2024
March 1, 2024 - 13,414 $ 172.52 - $ 72,487,423
March 31, 2024
Total 36,397 $ 161.17 -
(1) This column contains repurchases of common stock to satisfy tax
obligations on the vesting of performance and restricted stock under the 2017
Long-Term Incentive Plan (as amended).
(2) On November 1, 2023, 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 9, 2023. The Repurchase Program
will expire on May 8, 2024, or when the authorized funds are exhausted,
whichever is earlier. As of March 31, 2024, the Company had $72.5 million of
remaining availability to repurchase shares of the Company's common stock
under the Repurchase Program.
ITEM 5. OTHER INFORMATION
None
of the Company's directors or "officers" (as defined in Rule 16a-1(f)
promulgated under the Exchange Act) adopted, modified, or terminated a "Rule
10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement," as
each term is defined in Item 408 of Regulation S-K, during the Company's
fiscal quarter ended March 31, 2024.
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ITEM 6. EXHIBITS
Number Description
10.1 Employment Agreement, dated March 1, 2024 between the Company and Brian K. Stern +
10.2 Form of Restricted Stock Unit Award Agreement (Named Executive Officer). +
10.3 Form of Performance Shares Award Agreement (Named Executive Officer). +
31.1 Certification of Chief Executive Officer pursuant to SEC Rule 13a-14(a)/15d-14(a)
31.2 Certification of Chief Financial Officer pursuant to SEC Rule 13a-14(a)/15d-14(a)
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. (s)1350
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. (s)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 and contained in Exhibit 101)*
______________________________________
Filed herewith
* Electronically filed
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SIGNATURES
Pursuant to the requirements 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.
MYR GROUP INC.
(Registrant)
May 1, 2024 /s/ KELLY M. HUNTINGTON
Kelly M. Huntington
Senior Vice President and Chief Financial Officer
34
Exhibit 10.1
EMPLOYMENT AGREEMENT
Brian K. Stern
This
EMPLOYMENT AGREEMENT
, dated as of March 1, 2024 (this "
Agreement
"), is by and between MYR Group Inc., a Delaware corporation (the "
Company
"), and Brian K. Stern, (the "
Key Employee
").
W I T N E S S E T H:
WHEREAS
, the Company desires to secure the benefit of the Key Employee's experience
and ability by employing the Key Employee in the capacity and on the terms set
forth below, and the Key Employee desires to commit to serve the Company on
the terms herein provided;
NOW
,
THEREFORE
, in consideration of the foregoing and of the respective covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
1.1
Definitions
.
(a) "
Base Salary
" means the Key Employee's base salary as in effect from time to time, as
described in
Section 2.3(a)
.
(b) "
Board
" means the Board of Directors of the Company.
(c) "
Cause
" means:
(i) A material breach by the Key Employee of
Sections 3.9(b), (c), (d), (e) or (f)
of this Agreement (regarding the non-competition, non-solicitation and
confidentiality provisions);
(ii) The commission of a criminal act by the Key Employee against the
Company, including but not limited to fraud, embezzlement or theft;
(iii) The conviction or plea of no contest or
nolo contendere
of the Key Employee for any felony or any misdemeanor that may result in a
term of imprisonment greater than one (1) year; or
(iv) The Key Employee's failure or refusal to carry out, or comply with, in
any material respect, any lawful directive of the Board consistent with the
terms of this Agreement which is not remedied within thirty (30) days after
the Key Employee's receipt of written notice from the Company.
-------------------------------------------------------------------------------
Notwithstanding the foregoing, the Key Employee shall not be deemed to have
been terminated for Cause pursuant to this
Section 1.1(c)
unless and until there shall have been delivered to the Key Employee a copy of
a resolution duly adopted by at least seventy-five percent (75%) of the entire
membership of the Board (not including for this purpose the Key Employee if
the Key Employee is then a member of the Board) at a meeting of the Board
called and held for such purpose (after reasonable notice to the Key Employee
and a reasonable opportunity for the Key Employee, together with the Key
Employee's counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, the Key Employee engaged in conduct set forth in
this
Section 1.1(c)
.
(d) "
Change in Control
" means the occurrence of a "change in the ownership of the Company," a
"change in the effective control of the Company," or a "change in the
ownership of a substantial portion of the Company's assets," as defined in
Treasury Regulation (s)(s)1.409A-3(i)(5)(v), (vi) and (vii), respectively.
(e) "
COBRA
" means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(f) "
Code
" means the Internal Revenue Code of 1986, as amended and any regulations
thereunder.
(g) "
Disability
" means that, by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than twelve months, the Key Employee is
unable to engage in any substantial gainful activity or is receiving income
replacement benefits under an accident and health benefit plan covering
employees of the Company for a period of not less than three months.
(h) "
Good Reason
" means:
(i) a reduction of the Key Employee's Base Salary and/or annual target
bonus opportunity without the Key Employee's prior written consent;
(ii) the relocation of the Key Employee's primary work site to a location
greater than fifty (50) miles from the Key Employee's work site as of the
Effective Date; or
(iii) any other material breach by the Company of a material provision of
this Agreement for which the Key Employee shall have given the Company written
notice of such breach and the Company shall have failed to cure such breach
within thirty (30) days after receipt of such notice.
- 2 -
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Notwithstanding the foregoing, solely with respect to a termination of
employment by the Key Employee during the Protection Period, in addition to
clauses (i), (ii) and (iii), "Good Reason," shall also mean a material
reduction of the Key Employee's duties (without the Key Employee's prior
written consent) from those in effect as of the Effective Date or as
subsequently agreed to by the Key Employee and the Company for which the Key
Employee shall have given the Company written notice of such breach and the
Company shall have failed to cure such breach within thirty (30) days after
receipt of such notice.
(i) "
Post-Termination Period
" means the period beginning on the date that the Key Employee's employment
terminates and ending on the first anniversary of such date.
(j) "
Protection Period
" means the period beginning on the date of the occurrence of a Change in
Control and ending 12 months following the occurrence of a Change in Control.
(k) "
Severance Pay
" means
(i) two (2) times the sum of the Key Employee's annual Base Salary and
Target Bonus as of the date of the Key Employee's termination of employment
(without giving effect to any reduction that would otherwise constitute Good
Reason), in the case of a termination Without Cause outside the Protection
Period or a termination by the Key Employee with Good Reason outside the
Protection Period; and
(ii) three (3) times the sum of the Key Employee's annual Base Salary and
Target Bonus as of the date of the Key Employee's termination of employment,
or if higher, the Key Employee's annual Base Salary and Target Bonus for the
fiscal year immediately preceding the fiscal year in which there occurs a
Change in Control, in the case of a termination Without Cause during the
Protection Period or a termination by the Key Employee for Good Reason during
the Protection Period.
(l) "
Severance Period
" means the two (2) year period following the date of the Key Employee's
termination of employment, in the case of a termination Without Cause or a
termination by the Key Employee for Good Reason, whether or not during the
Protection Period.
(m) "
Without Cause
" means termination by the Company of the Key Employee's employment at the
Company's sole discretion for any reason, other than by reason of the Key
Employee's death or Disability, and other than a termination based upon Cause.
1.2
Interpretations
. In this Agreement, unless a clear contrary intention appears, (a) the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or other
subdivision; (b) reference to any Article or Section, means such Article or
Section hereof; and (c) the word "including" (and with correlative meaning
"include") means including, without limiting the generality of any description
preceding such term.
- 3 -
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ARTICLE II
EMPLOYMENT AND DUTIES
2.1
Term
. The term of this Agreement shall be for a period commencing on March 1, 2024
(the "
Effective Date
") and ending on March 1, 2025 (the "
Initial Term
"), provided, however, that this Agreement shall automatically be extended for
an additional one-year period at the end of the Initial Term and each one-year
anniversary thereafter (each a "
Renewal Term
" and together with the Initial Term being referred to herein as the "
Employment Term
"), unless not later than one-hundred eighty (180) days prior to the end of
the then-current period, either the Key Employee or the Company shall have
provided written notice to the other party that it does not wish to extend
this Agreement; provided, further, that if there occurs a Change in Control
during the Employment Term, the Employment Term shall automatically be
extended for an additional one-year period (in addition to any then remaining
Initial Term or a Renewal Term, as applicable).
2.2
Position, Duties and Services
. The Key Employee shall serve in the position of Senior Vice President and
Chief Operating Officer - T&D and shall have duties and responsibilities
consistent with an executive serving in such capacity. The Key Employee shall
perform such duties and responsibilities diligently and to the best of the Key
Employee's abilities. The Key Employee's employment will be subject to the
supervision and direction of the Chief Executive Officer of the Company and
the Board.
2.3
Compensation
.
(a)
Base Salary
. The Key Employee shall receive an initial Base Salary at the rate of Four
Hundred Fifty Thousand Dollars ($450,000.00) per annum payable in periodic
installments in accordance with the Company's normal payroll practices and
procedures, which Base Salary may be increased (but not decreased) by the
Board or (a committee thereof) from time to time.
(b)
Target Bonus
. During the Employment Term, the Key Employee shall be eligible to receive an
annual target bonus (the "
Target Bonus
") based on the achievement of annual performance objectives, as determined by
the Board (or a committee thereof) in its discretion.
(c)
Incentive, Savings, Profit Sharing, and Retirement Plans
. During the Employment Term, the Key Employee shall be entitled to
participate in all incentive, savings, profit sharing and retirement plans,
practices, policies and programs applicable generally, from time to time, to
other similarly situated employees of the Company.
(d)
Welfare Benefit Plans
. During the Employment Term, the Key Employee and/or the Key Employee's
family, as the case may be, shall be eligible for participation in and will
receive all benefits under the welfare benefit plans, practices, policies and
programs applicable generally, from time to time, to other similarly situated
employees of the Company.
- 4 -
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2.4
Severance Benefit
. The Key Employee shall be entitled to receive the severance benefits
described in
ARTICLE III
upon the Key Employee's termination of employment during the Employment Term,
provided the Key Employee satisfies the requirements outlined in
ARTICLE III
.
2.5
Indemnification
. The Company shall (i) indemnify, hold harmless and defend the Key Employee
to the extent permitted under applicable law from and against reasonable
costs, including reasonable attorney's fees, incurred by the Key Employee in
connection with or arising out of any acts or decisions made by the Key
Employee in the course and scope of the Key Employee's employment hereunder
and (ii) pay all reasonable expenses and reasonable attorney's fees actually
incurred by the Key Employee in connection with or relating to the defense of
any claim, action, suit or proceeding by any third party against the Key
Employee arising out of or relating to any acts or decisions made by the Key
Employee in the course and scope of the Key Employee's employment hereunder;
provided, however, that such indemnification shall not apply with respect to
the commission of a criminal act or any gross misconduct by the Key Employee.
This
Section 2.5
shall survive the termination or expiration of this Agreement.
ARTICLE III
EARLY TERMINATION
3.1
Death
. Upon the death of the Key Employee during the Employment Term, this
Agreement shall terminate and the Key Employee's estate shall be entitled to
payment of the Key Employee's Base Salary through the date of such termination
plus any compensation and benefits payable pursuant to the terms of the
compensation and benefit plans specified in
Section 2.3
in which the Key Employee is a participant. Payment of Base Salary through the
date of termination and the payment of any other cash compensation to which
the Key Employee is entitled under this Agreement that is not exempt from Code
Section 409A shall be made in a lump sum payment as soon as administratively
reasonable but not later than ninety (90) days following the date of the Key
Employee's death.
- 5 -
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3.2
Disability
. In the event of the Key Employee's Disability during the Employment Term,
this Agreement and the Key Employee's employment with the Company shall
terminate and the Key Employee shall be entitled to payment of the following
benefits: (a) the Key Employee's Base Salary through the date of such
termination; (b) long-term disability benefits pursuant to the terms of any
long-term disability policy provided to similarly situated employees of the
Company in which the Key Employee is a participant; and (c) any compensation
and benefits payable pursuant to the terms of the compensation and benefit
plans specified in
Section 2.3
in which the Key Employee is a participant. Subject to
Section 3.12(a)
, the payment of Base Salary through the date of termination and the payment
of any other cash compensation to which the Key Employee is entitled under
this Agreement that is not exempt from Code Section 409A shall be made in a
lump sum payment as soon as administratively reasonable but not later than
ninety (90) days following the date of the Key Employee's termination. Subject
to
Section 3.12(a)
and
Section 3.12(b)
, reimbursements or in-kind benefits to which the Key Employee is entitled
that are not exempt from Code Section 409A shall be paid as soon as
administratively reasonable following the date of payments as set forth in
this Agreement, or the applicable plan, practice, policy or program.
3.3
Termination for Cause by Company
. If the Key Employee's employment is terminated during the Employment Term
for Cause, the Company shall pay the Key Employee through the date of
termination (a) the Key Employee's Base Salary in effect at the time notice of
termination is given at the applicable payment date under the Company's
regular and customary payroll practices and (b) any compensation and benefits
payable pursuant to the terms of the compensation and benefit plans specified
in
Section 2.3
in which the Key Employee is a participant.
3.4
Termination Without Good Reason by the Key Employee
. If the Key Employee terminates the Key Employee's employment with the
Company during the Employment Term without Good Reason, whether or not during
the Protection Period, the Company shall pay the Key Employee through the date
of termination (a) the Key Employee's Base Salary in effect at the time notice
of termination is given at the applicable payment date under the Company's
regular and customary payroll practices and (b) any compensation and benefits
payable pursuant to the terms of the compensation and benefit plans specified
in
Section 2.3
in which the Key Employee is a participant.
3.5
Termination Without Cause or for Good Reason Outside the Protection Period
. If, during the Employment Term and outside the Protection Period, the Key
Employee's employment is terminated by the Company Without Cause or the Key
Employee terminates the Key Employee's employment with the Company for Good
Reason, the Key Employee shall be entitled to (a) the Key Employee's unpaid
Base Salary through the date of termination; (b) any compensation and benefits
payable pursuant to the terms of the compensation and benefit plans specified
in
Section 2.3
in which the Key Employee is a participant in accordance with the terms and
conditions of such compensation and benefit plans; (c) a lump sum payment
equal to the Key Employee's Severance Pay; and (d) a lump sum payment equal to
the product of (i) the number of months in the Severance Period multiplied by
(ii) the monthly cost of maintaining health benefits for the Key Employee (and
the Key Employee's spouse and eligible dependents) as of
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the date of the Key Employee's termination of employment under a group health
plan of the Company for purposes of COBRA, on an after-tax basis and excluding
any short-term or long-term disability insurance benefits. Unless otherwise
indicated in this Agreement and subject to
Section 3.12(a)
, the payment of Base Salary through the date of termination and the payment
of any other cash compensation to which the Key Employee is entitled under
this Agreement that is not exempt from Code Section 409A shall be made in a
lump sum payment as soon as administratively reasonable but not later than
ninety (90) days following the date of the Key Employee's termination. Subject
to
Section 3.12(a)
and
Section 3.12(b)
, reimbursements or in-kind benefits to which the Key Employee is entitled
that are not exempt from Code Section 409A shall be paid as soon as
administratively reasonable following the date of payments as set forth in
this Agreement, or the applicable plan, practice, policy or program. Subject to
Section 3.8
and
Section 3.12(a)
, the payment of any Severance Pay and any amounts in respect of health
benefits shall be made (or commence) in the month immediately following the
month in which the waiver and release of claims described in
Section 3.8
becomes non-revocable, except that, if the maximum period in which the waiver
and release of claims described in
Section 3.8
may be revoked ends in the year following the year in which Key Employee
incurs a "
Separation from Service
" (as such term is defined in Treasury regulations issued under Code Section
409A), then the date on which the waiver and release of claims described in
Section 3.8
becomes non-revocable will be deemed to be the later of the (A) the first
business day in the year following the year in which Key Employee incurs a
Separation from Service and (B) the date on which the waiver and release of
claims described in
Section 3.8
becomes non-revocable (without regard to this exception).
3.6
Termination Without Cause or for Good Reason During the Protection Period
. If, during the Employment Term and during the Protection Period, the Key
Employee's employment is terminated by the Company Without Cause or the Key
Employee terminates the Key Employee's employment with the Company for Good
Reason, the Key Employee shall be entitled to (a) the Key Employee's unpaid
Base Salary through the date of termination; (b) any compensation and benefits
payable pursuant to the terms of the compensation and benefit plans specified
in
Section 2.3
in which the Key Employee is a participant in accordance with the terms and
conditions of such compensation and benefit plans; (c) a lump sum payment
equal to the Key Employee's Severance Pay; and (d) a lump sum payment equal to
the product of (i) the number of months in the Severance Period multiplied by
(ii) the monthly cost of maintaining health benefits for the Key Employee (and
the Key Employee's spouse and eligible dependents) as of the date of the Key
Employee's termination of employment under a group health plan of the Company
for purposes of COBRA, on an after-tax basis and excluding any short-term or
long-term disability insurance benefits. Unless otherwise indicated in this
Agreement and subject to
Section 3.12(a)
, the payment of Base Salary through the date of termination and the payment
of any other cash compensation to which the Key Employee is entitled under
this Agreement that is not exempt from Code Section 409A shall be made in a
lump sum payment as soon as administratively reasonable but not later than
ninety (90) days following the date of the Key Employee's termination. Subject
to
Section 3.12(a)
and
Section 3.12(b)
, reimbursements or in-kind benefits to which the Key Employee is entitled
that are not exempt from Code Section 409A shall be paid as soon as
administratively reasonable following the date of payments as set forth in
this Agreement, or the applicable plan, practice, policy or program. Subject to
Section 3.8
and
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Section 3.12(a)
, the payment of any Severance Pay and any amounts in respect of health
benefits shall be made (or commence) in the month immediately following the
month in which the waiver and release of claims described in
Section 3.8
becomes non-revocable, except that, if the maximum period in which the waiver
and release of claims described in
Section 3.8
may be revoked ends in the year following the year in which Key Employee
incurs a Separation from Service, then the date on which the waiver and
release of claims described in
Section 3.8
becomes non-revocable will be deemed to be the later of the (A) the first
business day in the year following the year in which Key Employee incurs a
Separation from Service and (B) the date on which the waiver and release of
claims described in
Section 3.8
becomes non-revocable (without regard to this exception). In the event of the
Key Employee's termination under this
Section 3.6
, the Key Employee shall not be bound by the provisions of
Section 3.9(b)
.
3.7
Termination of Company's Obligations
. Upon termination of the Key Employee's employment for any reason, the
Company's obligations under this Agreement shall terminate and the Key
Employee shall be entitled to no compensation and benefits other than that
provided in this
ARTICLE III
and
Section 2.5
. Notwithstanding such termination, the parties' obligations under
Sections 2.5
and
3.9
of this Agreement shall remain in full force and effect.
3.8
Release
. Notwithstanding the foregoing provisions of this
ARTICLE III
, the Key Employee shall be entitled to the additional benefits specified in
Section 3.5
(regarding termination Without Cause or for Good Reason outside the Protection
Period) and
Section 3.6
(regarding termination Without Cause or for Good Reason during the Protection
Period) (i.e., those in addition to the payment of the Key Employee's Base
Salary through the date of termination and any benefits payable pursuant to
the terms of the compensation and benefit plans specified in
Section 2.3
in which the Key Employee is a participant), only upon the Key Employee's
execution (and non-revocation) and delivery to the Company of a waiver and
release of all claims substantially in the form used by the Company for
similarly situated employees, which execution (and non-revocation) and
delivery must occur before the forty-fifth (45th) day immediately following
the date of termination. The Company shall have no obligations under
Section 3.5
and
Section 3.6
, as applicable, if the Key Employee fails to deliver (and not revoke) the
executed waiver and release of claims to the Company within the specified
period of time. Notwithstanding the foregoing, if the Company does not deliver
the form of release to the Key Employee within three (3) business days
following the date of termination, then any requirement for the Key Employee
to execute (and not revoke) and deliver the release as a condition of
receiving any payments under
Section 3.5
and
Section 3.6
, as applicable, will have no effect, and the Key Employee will be entitled to
receive any payments to which the Key Employee otherwise qualifies under
Section 3.5
and
Section 3.6
, as applicable.
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3.9
Non-Competition; Non-Solicitation; Confidentiality
.
(a) The Key Employee acknowledges and agrees that: (i) the Company is
engaged in the business of power line and commercial/industrial electrical
construction services for electric utilities, telecommunication providers,
commercial/industrial facilities, and government agencies and electrical
construction and maintenance services for industrial and power generation
clients (the "
Business
"); (ii) the Business is intensely competitive; (iii) the Key Employee's
customer relationships are near permanent and but for the Key Employee's
association with the Company, the Key Employee would not have had contact with
the customers; (iv) the Key Employee will continue to develop and have access
to and knowledge of non-public information of the Company and its clients; (v)
the direct or indirect disclosure of any such confidential information to
existing or potential competitors of the Company would place the Company at a
competitive disadvantage and would do damage to the Company; (vi) the Key
Employee has developed goodwill with the Company's clients at the substantial
expense of the Company; (vii) but for the Key Employee entering into the
covenants set forth in this
Section 3.9
, the Company would not have entered into this Agreement; (viii) the Key
Employee engaging in any of the activities prohibited by this
Section 3.9
, would constitute improper appropriation and/or use of the Company's
confidential information and/or goodwill; (ix) the Key Employee's association
with the Company is expected to be critical to the success of the Company; (x)
the services to be rendered by the Key Employee to the Company are of a
special and unique character; (xi) the Company conducts the Business
throughout North America; (xii) the noncompetition and other restrictive
covenants and agreements set forth in this Agreement are fair and reasonable
and it would not be reasonable for the Company to enter into this Agreement
without obtaining such non-competition and other restrictive covenants and
agreements; and (xiii) in light of the foregoing and of the Key Employee's
education, skills, abilities and financial resources, the Key Employee
acknowledges and agrees that the Key Employee will not assert, and it should
not be considered, that enforcement of any of the covenants set forth in this
Section 3.9
would prevent the Key Employee from earning a living or otherwise are void,
voidable or unenforceable or should be voided or held unenforceable.
(b)
Agreement not to Compete
. The Key Employee will not, during the Key Employee's employment and the
Post-Termination Period, directly or indirectly, carry on or conduct, the
Business or any business of the nature in which the Company or its
subsidiaries are then engaged in any geographical area in which the Company or
its subsidiaries or affiliates engage in business at the time of such
termination or any new line of business with respect to which the Key Employee
has created, received or had access to confidential information (as set forth
below). The Key Employee agrees that the Key Employee will not so conduct or
engage in the Business or any such business in any capacity, including as an
individual on the Key Employee's own account or as a partner or joint venturer
or as an employee, agent, consultant or salesman for any other person or
entity, or as an officer or director of a corporation, provided, that the Key
Employee may be a shareholder in any public corporation if the Key Employee
does not own ten percent (10%) or more of any class of its stock.
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(c)
Confidential Information
. The Key Employee will not, directly or indirectly, during the Key Employee's
employment and at any time following termination of the Key Employee's
employment with the Company for any reason, reveal, divulge or make known to
any person or entity, or use for the Key Employee's personal benefit
(including for the purpose of soliciting business, whether or not competitive
with any business of the Company or its subsidiaries or affiliates), any
information acquired during the Employment Term with regard to the financial,
business or other affairs of the Company or its subsidiaries or affiliates
(including any list or record of persons or entities with which the Company or
its subsidiaries or affiliates has any dealings), other than (i) for purposes
of performing the Key Employee's duties and responsibilities pursuant to this
Agreement; (ii) information already in the public domain; or (iii) information
that the Key Employee is required to disclose under the following
circumstances: (A) at the direction of any authorized governmental entity; (B)
pursuant to a subpoena or other court process; (C) as otherwise required by
law or the rules, regulations, or orders of any applicable regulatory body; or
(D) as otherwise necessary, in the opinion of counsel for the Key Employee, to
be disclosed by the Key Employee in connection with any legal action or
proceeding involving the Key Employee in the Key Employee's capacity as an
employee, officer, director, or stockholder of the Company or any subsidiary
or affiliate of the Company.
(d) The Key Employee will, upon the earlier of (i) any time requested by
the Company or (ii) termination of the Key Employee's employment with the
Company for any reason, promptly deliver to the Company all documents,
memoranda, notes, reports, lists, files, customer lists, mailing lists,
software, disks, credit cards, door and file keys, computer access codes,
instructional manuals, and other physical or personal property which the Key
Employee received or prepared or helped to prepare in connection with the Key
Employee's relationship with the Company including, but not limited to, any
confidential information (as set forth above) of the Company or any of its
subsidiaries and affiliates which the Key Employee may then possess or have
under the Key Employee's control, and the Key Employee shall not retain any
copies, duplicates, reproductions or excerpts thereof.
(e)
Agreement not to Solicit
. During the Employment Term and for the Post-Termination Period, the Key
Employee shall not (except on behalf of or with the written consent of the
Company), either directly or indirectly, on the Key Employee's own behalf or
in the service or on behalf of others, (i) solicit, divert, or appropriate, or
(ii) attempt to solicit, divert, or appropriate, any person or entity that is
or was a customer of the Company or any of its affiliates at any time during
the twelve (12) months prior to the date of the Key Employee's termination and
with whom the Key Employee has had material contact.
(f)
Agreement not to Recruit
. During the Employment Term and for the Post-Termination Period, the Key
Employee shall not, either directly or indirectly, on the Key Employee's
behalf or in the service or on behalf of others, (i) solicit, divert, or hire
away, or (ii) attempt to solicit, divert, or hire away, any employee of or
consultant to the Company or its subsidiaries or affiliates.
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(g)
Reasonableness of Restrictions
. The Key Employee acknowledges that the geographic boundaries, scope of
prohibited activities, and time duration set forth in this
Section 3.9
are reasonable in nature and are no broader than are necessary to maintain the
goodwill of the Company and the confidentiality of its confidential
information and to protect the legitimate business interests of the Company,
and that the enforcement of such provisions would not cause the Key Employee
any undue hardship nor unreasonably interfere with the Key Employee's ability
to earn a livelihood. If any court determines that any portion of this
Section 3.9
is invalid or unenforceable, the remainder of this
Section 3.9
will not thereby be affected and will be given full effect without regard to
the invalid provisions. If any court construes any of the provisions of this
Section 3.9
, or any part thereof, to be unreasonable because of the duration or scope of
such provision, such court shall reduce the duration or scope of such
provision and enforce such provision as so reduced.
(h)
Enforcement
. Upon the Key Employee's employment with an entity that is not a subsidiary
or affiliate of the Company (a "
Successor Employer
") during the period that the provisions of this
Section 3.9
remain in effect, the Key Employee will provide such Successor Employer with a
copy of this Agreement and will notify the Company of such employment within
thirty (30) days thereof. The Key Employee agrees that in the event of a
breach or threatened breach of the terms and conditions of this
Section 3.9
by the Key Employee, the Company will be entitled, if it so elects, to
institute and prosecute proceedings, either in law or in equity, against the
Key Employee, to obtain damages for any such breach, or to enjoin (in the form
of specific performance, temporary restraining order, temporary or permanent
injunction or otherwise) the Key Employee from any conduct in violation of this
Section 3.9
, without having to post a bond.
3.10
Parachute Payments
.
(a) Notwithstanding anything to the contrary in this Agreement, in the
event that any payment or distribution to or for the Key Employee's benefit,
whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without limitation
any stock option, stock appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or exercisability of any of
the foregoing (all such payments and benefits, together, the "
Total Payments
"), would be subject (in whole or part), to any excise tax imposed under
Section 4999 of the Code, or any successor provision thereto (the "
Excise Tax
"), then, after taking into account any reduction in the Total Payments
provided by reason of Section 280G of the Code in such other agreement,
policy, plan, program or arrangement, the Company will reduce the Total
Payments to the extent necessary so that no portion of the Total Payments is
subject to the Excise Tax (but in no event to less than zero), in the
following order: (i) the payments that are payable in cash that are valued at
full value under Treasury Regulation Section 1.280G-1, Q&A 24(a) shall be
reduced (if necessary, to zero), with amounts that are payable last reduced
first; (ii) payments and benefits due in respect of any equity valued at full
value under Treasury Regulation Section 1.280G-1, Q&A 24(a), with the highest
values reduced first (as such values are determined under Treasury Regulation
Section 1.280G-1, Q&A 24) shall next be reduced; (iii) the payments that are
payable in cash that are valued at less than full value
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under Treasury Regulation Section 1.280G-1, Q&A 24, with amounts that are
payable last reduced first, shall next be reduced; (iv) payments and benefits
due in respect of any equity valued at less than full value under Treasury
Regulation Section 1.280G-1, Q&A 24, with the highest values reduced first (as
such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24)
shall next be reduced; and (v) all other non-cash benefits not otherwise
described in clauses (ii) or (iv) shall be next reduced pro-rata; provided,
however, that the Total Payments shall only be reduced if (A) the net amount
of such Total Payments, as so reduced (and after subtracting the net amount of
federal, state, municipal and local income taxes on such reduced Total
Payments and after taking into account the phase out of itemized deductions
and personal exemptions attributable to such reduced Total Payments), is
greater than or equal to (B) the net amount of such Total Payments without
such reduction (but after subtracting the net amount of federal, state,
municipal and local income taxes on such Total Payments and the amount of
Excise Tax to which the Key Employee would be subject in respect of such
unreduced Total Payments and after taking into account the phase out of
itemized deductions and personal exemptions attributable to such unreduced
Total Payments).
(b) For purposes of determining whether and the extent to which the Total
Payments will be subject to the Excise Tax: (i) no portion of the Total
Payments the receipt or enjoyment of which the Key Employee shall have waived
at such time and in such manner as not to constitute a "payment" within the
meaning of Section 280G(b) of the Code shall be taken into account; (ii) no
portion of the Total Payments shall be taken into account which, in the
opinion of tax counsel ("
Tax Counsel
") reasonably acceptable to the Key Employee and selected by the accounting
firm which was, immediately prior to the change in control, the Company's
independent auditor (the "
Auditor
"), does not constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the
Code) and, in calculating the Excise Tax, no portion of such Total Payments
shall be taken into account which, in the opinion of Tax Counsel, constitutes
reasonable compensation for services actually rendered, within the meaning of
Section 280G(b)(4)(B) of the Code, in excess of the "base amount" (as set
forth in Section 280G(b)(3) of the Code) that is allocable to such reasonable
compensation; and (iii) the value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall be determined by the
Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of
the Code.
(c) At the time that payments are made under this Agreement, the Company
shall provide the Key Employee with a written statement setting forth the
manner in which such payments were calculated and the basis for such
calculations, including any opinions or other advice the Company received from
Tax Counsel, the Auditor, or other advisors or consultants (and any such
opinions or advice which are in writing shall be attached to the statement).
If the Key Employee objects to the Company's calculations, the Company shall
pay to the Key Employee such portion of the Total Payments (up to 100%
thereof) as the Key Employee determines is necessary to result in the proper
application of this
Section 3.10
. All determinations required by this
Section 3.10
(or requested by either the Key Employee or the Company in connection with this
Section 3.10
) shall be at the expense of the Company.
3.11
Intentionally Omitted
.
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3.12
Payments Subject to Section 409A of the Code
.
(a) Notwithstanding the foregoing provisions of this
ARTICLE III
, to the extent required by Section 409A of the Code and applicable guidance
thereunder, payments that the Key Employee would otherwise be entitled to
receive hereunder during the first six months following the date of the Key
Employee's termination of employment will be accumulated and paid on the date
that is six months and one day after the date of the Key Employee's
termination of employment (or if such payment date does not fall on a business
day of the Company, the next following business day of the Company), or such
earlier date upon which such amount can be paid without adverse tax
consequences to the Key Employee under Section 409A of the Code; provided,
however, that no such delay shall apply with respect to payments to which the
Key Employee is entitled in the event of the Key Employee's death.
(b) Any reimbursement of expenses or in-kind benefits provided under this
Agreement, that is subject to and not exempt from Section 409A of the Code,
shall be subject to the following additional rules: (i) any reimbursement of
eligible expenses shall be paid as they are incurred (but not prior to the end
of the six-month delay period set forth in
Section 3.12(a)
); provided that the Key Employee first provides documentation thereof in
reasonable detail not later than sixty (60) days following the end of the
calendar year in which the eligible expenses were incurred; (ii) the amount of
expenses eligible for reimbursement, or in-kind benefits provided, during any
calendar year shall not affect the amount of expenses eligible for
reimbursement, or in-kind benefits to be provided, during any other calendar
year; and (iii) the right to reimbursement or in-kind benefits shall not be
subject to liquidation or exchange for another benefit.
(c) For purposes of determining the Key Employee's entitlement to payment
of any cash or other remuneration which is deferred compensation under Section
409A of the Code, any provision of this Agreement providing for payment of any
such cash or remuneration upon "termination," "termination of employment" or
other event which is a termination of an employment relationship with the
Company means that such payment is to be made upon a Separation from Service,
with the Company and all of its subsidiaries and affiliates, for any reason,
including without limitation, quit, discharge and retirement, and the Company
and the Key Employee reasonably anticipate that no further services will be
performed after such date or that the level of bona fide services performed
after such date (whether as an employee or as an independent contractor) will
permanently decrease to no more than twenty percent (20%) of the average level
of bona fide services performed (whether as an employee or an independent
contractor) over the immediately preceding 36-month period (or the full period
of services if the Key Employee has been providing services for less than 36
months).
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(d) It is intended that the payments and benefits provided under this
Agreement shall either be exempt from application of, or comply with, the
requirements of Section 409A of the Code. This Agreement shall be construed,
administered, and governed in a manner that affects such intent, and the
Company shall not take any action that would be inconsistent with such intent.
Without limiting the foregoing, the payments and benefits provided under this
Agreement may not be deferred, accelerated, extended, paid out, or modified in
a manner that would result in the imposition of an additional tax under
Section 409A of the Code. Although the Company shall use its best efforts to
avoid the imposition of taxation, interest and penalties under Section 409A of
the Code, the tax treatment of the benefits provided under this Agreement is
not warranted or guaranteed. The Company shall not be held liable for any
taxes, interest, penalties, or other monetary amounts owed by the Key Employee
or other taxpayers as a result of this Agreement.
ARTICLE IV
MISCELLANEOUS
4.1
Governing Law
. This Agreement is governed by and will be construed in accordance with the
laws of the State of Illinois, without regard to the conflicts of law
principles of such State.
4.2
Amendment and Waiver
. The provisions of this Agreement may be amended, modified or waived only
with the prior written consent of the Company and the Key Employee, and no
course of conduct or failure or delay in enforcing the provisions of this
Agreement will be construed as a waiver of such provisions or affect the
validity, binding effect or enforceability of this Agreement or any provision
hereof.
4.3
Severability
. Any provision in this Agreement which is prohibited or unenforceable in any
jurisdiction by reason of applicable law will, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability without
invalidating or affecting the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction will not invalidate or
render unenforceable such provision in any other jurisdiction.
4.4
Entire Agreement
. Except as provided in the written benefit plans and programs referenced in
Section 2.3(c)
and
Section 2.3(d)
, this Agreement embodies the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among
the parties, written or oral, which may have related to the employment of the
Key Employee or the subject matter hereof in any way.
4.5
Withholding of Taxes and Other Employee Deductions
. The Company may withhold from any benefits and payments made pursuant to
this Agreement all federal, state, city, and other taxes as may be required
pursuant to any law or governmental regulation or ruling and all other normal
employee deductions made with respect to the Company's employees generally.
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4.6
Legal Fees
. The Company shall reimburse the Key Employee for all reasonable legal fees
and expenses incurred by the Key Employee in a dispute regarding the Key
Employee's rights under this Agreement, within forty-five (45) days of when
such fees and expenses are incurred, but in no event later than the end of the
taxable year in which such fees and expenses are incurred, unless a court of
competent jurisdiction determines the Key Employee's position in such dispute
not to be bona fide.
4.7
Headings
. The paragraph headings have been inserted for purposes of convenience and
will not be used for interpretive purposes.
4.8
Actions by the Board
. Any and all determinations or other actions required of the Board (or a
committee thereof) hereunder that relate specifically to the Key Employee's
employment by the Company or the terms and conditions of such employment will
be made by the members of the Board or such committee other than the Key
Employee (if the Key Employee is a member of the Board or such committee), and
the Key Employee will not have any right to vote or decide upon any such
matter.
4.9
Construction
. The language used in this Agreement will be deemed to be the language chosen
by the parties to express their mutual intent, and no rule of strict
construction will be applied against any party.
[Signature Page Follows]
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INTENDING TO BE BOUND
, the parties hereto have executed this Agreement as of the date first set
forth above.
COMPANY:
MYR GROUP INC.
By: /s/ RICHARD S. SWARTZ
Name: Richard S. Swartz
Title : President & CEO
KEY EMPLOYEE:
By: /s/ BRIAN K. STERN
Brian K. Stern
- 16 -
Exhibit 10.2
MYR GROUP INC.
RESTRICTED STOCK UNITS AND DIVIDEND EQUIVALENTS
AWARD AGREEMENT
(Executive Officer)
This AGREEMENT (this "Agreement") is made as of ___________ __, 20__, by and
between MYR Group Inc., a Delaware corporation (the "Company"), and
[__________] (the "Participant").
1.
Grant of Restricted Stock Units
. Pursuant to the MYR Group Inc. 2017 Long-Term Incentive Plan (the "Plan")
and subject to the terms and conditions thereof and the terms and conditions
hereinafter set forth, the Company has granted, as of _________ __, 20__ (the
"Date of Grant"), to the Participant [____________] Restricted Stock Units.
2.
Rights of the Participant
. Each Restricted Stock Unit, upon becoming vested before its expiration,
represents a right to receive payment in the form of one (1) share of Common
Stock. Each tandem Dividend Equivalent represents a right to receive cash
payments equivalent to the amount of cash dividends declared and paid on one
(1) share of Common Stock after the Date of Grant and until the earlier of (a)
the time the Restricted Stock Units vest and become payable or (b) the date
the Restricted Stock Units are forfeited/expire. Restricted Stock Units and
Dividend Equivalents are used solely as units of measurement, and are not
shares of Common Stock and the Grantee is not, and has no rights as, a
shareholder of the Company by virtue of this Award. The Restricted Stock Units
and Dividend Equivalents subject to this Agreement have been awarded to the
Grantee in respect of services to be performed by the Participant during the
vesting period.
3.
Restrictions on Transfer
. The rights to the Restricted Stock Units may not be transferred, assigned or
subject to any encumbrance, pledge or charge;
provided
,
however
, that the Participant's rights with respect to the Restricted Stock Units may
be transferred by will or pursuant to the laws of descent and distribution.
Any purported transfer in violation of the provisions of this
Section 3
shall be void, and the other party to any such purported transaction shall not
obtain any rights to or interest in the Restricted Stock Units.
4.
Vesting of Restricted Stock Units
. Subject to the terms and conditions of this Agreement and the Plan, the
Restricted Stock Units shall vest in accordance with the vesting schedule set
forth on
Exhibit A
hereto provided the Participant remains continuously employed by the Company
until the applicable vesting date(s) listed on
Exhibit A
(or as otherwise provided in
Section 5
of this Agreement).
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5.
Accelerated Vesting
. Notwithstanding the provisions of
Section 4
hereof, the Restricted Stock Units covered by this Agreement shall become
immediately vested in full if any of the following circumstances apply:
(a)
Termination without Cause or Good Reason
: The Participant's employment with the Company is terminated without "Cause"
or with "Good Reason" (as each term is defined in the Participant's current
Employment Agreement with the Company, as may be amended from time to time
(the "Employment Agreement")).
(b)
Death or Disability
: The Participant's employment with the Company is terminated due to the
Participant's death or "Disability" (as such term is defined in the Employment
Agreement).
(c)
Change in Control
: A Change in Control occurs while the Participant is an employee of the
Company.
6.
Payment of Restricted Stock Units.
Except as provided in the next sentence, payment of any vested Restricted
Stock Units subject to this Agreement shall be made as soon as administratively
practicable following (but no later than thirty (30) days following) the date
that the Restricted Stock Units vest pursuant to
Section 4
or
5
hereof. To the extent applicable, if the Restricted Stock Units become payable
on the Participant's "separation from service" with the Company and its
Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code, the
Participant is a "specified employee" as determined pursuant to procedures
adopted by the Company in compliance with Section 409A of the Code, and the
amount payable hereunder constitutes a "deferral of compensation" (within the
meaning of Section 409A of the Code), then payment for the Restricted Stock
Units shall be made on the earlier of the first day of the seventh month after
the date of the Participant's "separation from service" with the Company and
its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code or
the Participant's death. Payment shall be in the form of delivery of one (1)
share of Common Stock for each vested Restricted Stock Unit.
To the extent that the Company is required to withhold any federal, state,
provincial, local or foreign taxes in connection with any delivery of shares
of Common Stock to the Participant, and the amounts available to the Company
for such withholding are insufficient, it shall be a condition to the receipt
of such delivery that the Participant shall pay such taxes by the Company's
retention of a portion of the shares of Common Stock otherwise deliverable to
the Participant. The shares so retained shall be credited against such
withholding requirement at the fair market value on the date of such delivery.
In the event additional taxes are required to be withheld by the Company the
Participant agrees to a payroll deduction for the amount of the withholding
requirement.
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The Participant acknowledges that, regardless of any action taken by the
Company, the ultimate liability for all income tax, social insurance, payroll
tax, fringe benefits tax, payment on account or other tax-related items
related to the Participant's participation in the Plan and legally applicable
to the Participant ("Tax-Related Items") is and remains the Participant's
responsibility and may exceed the amount actually withheld by the Company. The
Participant further acknowledges that the Company (1) makes no representations
or undertakings regarding the treatment of any Tax-Related Items in connection
with any aspect of the Restricted Stock Units, including, but not limited to,
the grant, vesting or settlement of the Restricted Stock Units, or the
subsequent sale of shares of Common Stock acquired pursuant to such settlement
and the receipt of any dividends and/or any dividend equivalents, and (2) does
not commit to and is under no obligation to structure the terms of the grant
or any aspect of the Restricted Stock Units to reduce or eliminate the
Participant's liability for Tax-Related Items or achieve any particular tax
result.
Except to the extent provided by Section 409A of the Code and permitted by the
Committee, no shares of Common Stock may be issued to the Participant at a
time earlier than otherwise expressly provided in this Agreement. The
Company's obligations to the Participant with respect to the Restricted Stock
Units will be satisfied in full upon the issuance of shares of Common Stock
corresponding to such Restricted Stock Units.
7.
Forfeiture/Expiration
. Except to the extent the Restricted Stock Units covered by this Agreement
have vested pursuant to
Section 4
or
5
hereof, the Participant's right to retain the Restricted Stock Units covered
by this Agreement shall be forfeited automatically and without further notice
on the date that the Participant ceases to be an employee of the Company for
any reason other than as described in
Section 5
.
8.
Dividend Equivalents Payments
. With respect to each of the Restricted Stock Units covered by this
Agreement, the Participant shall be credited on the records of the Company
with dividend equivalents in an amount equal to the amount per share of Common
Stock of any cash dividends declared by the Board on the outstanding shares of
Common Stock during the period beginning on the Date of Grant and ending
either on the date on which the Participant receives payment for the
Restricted Stock Units pursuant to
Section 6
hereof or at the time when the Restricted Stock Units are forfeited in
accordance with
Section 7
of this Agreement. These dividend equivalents will accumulate without interest
and, subject to the terms and conditions of this Agreement, will be paid in
cash at the same time and to the same extent as the Restricted Stock Units for
which the dividend equivalents were credited.
-------------------------------------------------------------------------------
9.
Restrictive Covenants
. If the Participant engages in any conduct in breach of any noncompetition,
nonsolicitation or confidentiality obligations to the Company under any
agreement, policy or plan, then such conduct shall also be deemed to be a
breach of the terms of the Plan and this Agreement. Upon such breach, the
Participant's right to retain the Restricted Stock Units covered by this
Agreement shall be forfeited automatically and without further notice and, if
and to the extent any Restricted Stock Units covered by this Agreement have
vested pursuant to
Section 4
or
5
within a period of 18 months prior to such breach, the Participant shall be
required to return to the Company, upon demand, any shares paid to the
Participant in settlement of the Restricted Stock Units (or the net proceeds
of any sales of such shares) and the value of any Dividend Equivalents paid.
For purposes of this
Section 9
, net proceeds shall mean the net amount realized upon the disposition of the
shares. Notwithstanding anything in this Agreement to the contrary, nothing in
this Agreement prevents the Participant from providing, without prior notice
to the Company, information to governmental authorities regarding possible
legal violations or otherwise testifying or participating in any investigation
or proceeding by any governmental authorities regarding possible legal
violations, and for purpose of clarity the Participant is not prohibited from
providing information voluntarily to the Securities and Exchange Commission
pursuant to Section 21F of the Exchange Act.
10.
Recovery of Restricted Stock Units
. This Agreement is subject to the Company's Compensation Clawback Policy,
adopted October 25, 2023, and attached as Exhibit B.
11.
Relation to Plan
. This Agreement is subject to the terms and conditions of the Plan. In the
event of any inconsistency between the provisions of this Agreement and the
Plan, the Plan shall govern. The Committee acting pursuant to the Plan, as
constituted from time to time, shall, except as expressly provided otherwise
herein or in the Plan, have the right to determine any questions that arise
and to exercise its discretionary authority under the Plan in connection with
the grant of the Restricted Stock Units. The number of Restricted Stock Units
subject to this Agreement, and the other terms and conditions of this award,
are subject to mandatory adjustment as provided in Section 3.2 of the Plan.
-------------------------------------------------------------------------------
12.
Miscellaneous
. All decisions or interpretations of the Committee with respect to any
question arising under the Plan or this Agreement shall be binding, conclusive
and final. The waiver by the Company of any provision of this Agreement shall
not operate as or be construed to be a subsequent waiver of the same provision
or of any other provision of this Agreement. The Participant agrees to execute
such other agreements, documents or assignments as may be necessary or
desirable to effect the purposes of this Agreement. The Company shall make
reasonable efforts to comply with all applicable federal and state securities
laws; provided, however, notwithstanding any other provision of the Plan and
this Agreement, the Company shall not be obligated to issue any shares of
Common Stock pursuant to this Agreement if the issuance thereof would result
in a violation of any such law. To the extent applicable, it is intended that
this Agreement and the Plan comply with the provisions of Section 409A of the
Code. This Agreement and the Plan shall be administered in a manner consistent
with this intent, and any provision that would cause this Agreement or the
Plan to fail to satisfy Section 409A of the Code shall have no force or effect
until amended to comply with Section 409A of the Code (which amendment may be
retroactive to the extent permitted by Section 409A of the Code and may be
made by the Company without the consent of the Participant). Any reference in
this Agreement to Section 409A of the Code will also include any proposed,
temporary or final regulations, or any other guidance, promulgated with
respect to such section by the U.S. Department of the Treasury or the Internal
Revenue Service.
13.
Capitalized Terms
. All capitalized terms used in this Agreement that are not defined herein
shall have the meanings given them in the Plan or resolutions adopted by the
Committee authorizing grants made under this Agreement, unless the context
clearly requires otherwise.
-------------------------------------------------------------------------------
14.
Nature of Grant
. Nothing in this Agreement will give the Participant any right to continue
service as an employee of the Company or interfere in any way with the right
of the Company to terminate the service of the Participant as an employee of
the Company. Furthermore, the Participant acknowledges and agrees that (a) the
grant of the Restricted Stock Units to the Participant is a voluntary,
discretionary award and it does not constitute a commitment to make any future
awards, (b) the Plan is established voluntarily by the Company, it is
discretionary in nature and it may be modified, amended, suspended or
terminated by the Company at any time, (c) all decisions with respect to
future Restricted Stock Units grants, if any, will be at the sole discretion
of the Company, (d) participation in the Plan is voluntary, (e) the future
value of the underlying shares of Common Stock is unknown and cannot be
predicted with certainty, and (f) in consideration of the grant of Restricted
Stock Units, no claim or entitlement to compensation or damages shall arise
from termination of the Restricted Stock Units or diminution in value of the
Restricted Stock Units or shares of Common Stock received upon vesting,
including (without limitation) any claim or entitlement resulting from
termination of the Participant's service with the Company (for any reason
whatsoever and whether or not in breach of local laws), and the Participant
hereby releases the Company and its Subsidiaries from any such claim that may
arise; if, notwithstanding the foregoing, any such claim is found by a court
of competent jurisdiction to have arisen, then, by signing this Agreement, the
Participant shall be deemed irrevocably to have waived the Participant's
entitlement to pursue such claim.
15.
Information
. The Participant explicitly and unambiguously consents to the collection, use
and transfer, in electronic or other form, of the Participant's personal data
by and among, as applicable, the Company and its Subsidiaries and affiliates,
namely MYR Group Inc. (located in the United States) for the exclusive purpose
of implementing, administering and managing the Participant's participation in
the Plan. The Participant hereby understands that the Company and its
Subsidiaries and affiliates hold (but only process or transfer to the extent
required or permitted by local law) the following personal information about
the Participant: the Participant's name, home address and telephone number,
date of birth, social insurance number or other identification number,
compensation, nationality, position, any shares of Common Stock or
directorships held in the Company, details of all Restricted Stock Units or
any other entitlement to shares of Common Stock awarded, canceled, exercised,
vested, unvested or outstanding in the Participant's favor, for the purpose of
implementing, administering and managing the Plan ("Data"). The Participant
hereby understands that Data may be transferred to any third parties assisting
in the implementation, administration and management of the Plan, that these
recipients may be located in the Participant's country or elsewhere (including
the United States of America), and that the recipient's country may have
different data privacy laws and protections than the Participant's country.
The Participant hereby understands that the Participant may request a list
with the names and addresses of any potential recipients of the Data by
contacting the Company's human resources representative. The Participant
authorizes the recipients to receive, possess, use, retain and transfer the
Data, in electronic or other form, for the purposes of implementing,
administering and managing the Participant's participation in the Plan,
including any
-------------------------------------------------------------------------------
requisite transfer of such Data as may be required to a broker or other third
party with whom the Participant may elect to deposit any shares acquired upon
vesting. The Participant hereby understands that Data will be held only as
long as is necessary to implement, administer and manage the Participant's
participation in the Plan and in accordance with local law. The Participant
hereby understands that the Participant may, at any time, view Data, request
additional information about the storage and processing of Data, require any
necessary amendments to Data or refuse or withdraw the consents herein, in any
case without cost, by contacting in writing the Company's human resources
representative. The Participant hereby understands, however, that refusing or
withdrawing the Participant's consent may affect the Participant's ability to
participate in the Plan. For more information on the consequences of the
Participant's refusal to consent or withdrawal of consent, the Participant
hereby understands that the Participant may contact the Company's human
resources representative.
* * *
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by its duly authorized officer, as of the day and year first above
written.
MYR GROUP INC.
By:______________________________________
Name: Kenneth M. Hartwick
Title: Chair of the Board
The undersigned Participant hereby acknowledges receipt of an executed copy of
this Agreement and accepts the right to receive any Restricted Stock Units or
other securities covered hereby, subject to the terms and conditions of the
Plan and the terms and conditions herein above set forth.
_________________________________
Participant
Date: ___________________________
Exhibit 10.3
MYR GROUP INC.
PERFORMANCE SHARES AWARD AGREEMENT
(Executive Officer)
This AGREEMENT (this "Agreement") is made as of __________ __, 20__, by and
between MYR Group Inc., a Delaware corporation (the "Company"), and
[_______________] (the "Participant").
1.
Grant of Performance Shares
. Pursuant to the MYR Group Inc. 2017 Long-Term Incentive Plan (the "Plan")
and subject to the terms and conditions thereof and the terms and conditions
hereinafter set forth, the Company has granted to the Participant, as of
_________ __, 20__ (the "Date of Grant"),
[______] target Performance Shares, a percentage of which may be earned in
accordance with the terms of this Agreement and contingent on the Company's
Return On Invested Capital ("ROIC") over the ROIC Performance Period (as
defined below) (such target amount, the "ROIC Target Performance Shares"), and
[_____] Target Performance Shares, a percentage of which may be earned in
accordance with the terms of this Agreement and contingent on the Company's
relative Total Stockholder Return ("TSR") over the TSR Performance Period (as
defined below) (such target amount, the "TSR Target Performance Shares") and
[_____] Target Performance Shares, a percentage of which may be earned in
accordance with the terms of this Agreement and contingent on the Company's
relative Institutional Shareholder Services ("ISS") composite Environmental,
Social, and Governance Scores (the total sum of the Company's overall ISS E&S
QualityScore decile rankings with its overall Governance QualityScore decile
rank) ("ESG") over the ESG Performance Period (as defined below) (such target
amount, the "ESG Target Performance Shares").
-------------------------------------------------------------------------------
The Performance Shares are not intended to be a Qualified-Performance Based
Award under the Plan.
2.
Earning of Target Performance Shares.
(a)
Performance Measure
: The Participant's right to receive all of, any portion of, or more than, the
number of ROIC Target Performance Shares, TSR Target Performance Shares or ESG
Target Performance Shares generally will be contingent upon the achievement of
specified levels of the Company's ROIC, relative TSR, and relative ESG, as set
forth in the "Statement of Performance Goals" established by the Committee in
connection with the Awards granted by this Agreement, and will be measured
over each fiscal year in the period from January 1, 20__ through December 31,
20__ for ROIC performance (the "ROIC Performance Period") and the arithmetic
average of the ROIC for the ROIC Performance Period, which shall be calculated
by dividing the sum of the Company's ROIC for each fiscal year in the ROIC
Performance Period by the number of years in the ROIC Performance Period (the
"Three-Year Average"), the Date of Grant through December 31, 20__ for TSR
performance (the "TSR Performance Period"), January 1, 20__ through December
31, 20__ for ESG performance, (the "ESG Performance Period"), , and together
with the ROIC Performance Period, the "Performance Periods").
(b)
Below Threshold
:
(i)
ROIC
: If, upon the conclusion of the ROIC Performance Period, ROIC for any fiscal
year in the ROIC Performance Period or the Three-Year Average ROIC for the
ROIC Performance Period falls below the threshold level, as set forth in the
ROIC Performance Matrix contained in the Statement of Performance Goals, no
Performance Shares for ROIC performance shall become earned for that fiscal
year and/or the Three-Year Average, as applicable.
(ii)
TSR
: If, upon conclusion of the TSR Performance Period, the Company's relative
TSR for the TSR Performance Period falls below the 25
th
percentile of TSR for the TSR Peer Group Companies (as defined below), no
Performance Shares for TSR performance shall become earned.
(iii)
ESG
: If, upon conclusion of the ESG Performance Period, the Company's relative
ESG for the ESG Performance Period falls below the 25
th
percentile of ESG for the ESG Peer Group Companies (as defined below), no
Performance Shares for ESG performance shall become earned.
-------------------------------------------------------------------------------
(c)
Threshold
:
(i)
ROIC
: If, upon the conclusion of the ROIC Performance Period, ROIC for any fiscal
year in the ROIC Performance Period and/or the Three-Year Average ROIC for the
ROIC Performance Period equals the threshold level, as set forth in the ROIC
Performance Matrix contained in the Statement of Performance Goals, 10% of the
ROIC Target Performance Shares shall be earned for each such fiscal year and
20% of the ROIC Target Performance Shares shall be earned for the Three Year
Average ROIC, with a fractional share from the total earned ROIC Target
Performance Shares rounded down to the next whole share.
(ii)
TSR
: If, upon conclusion of the TSR Performance Period, the Company's relative
TSR for the TSR Performance Period is at the 25
th
percentile of TSR for the TSR Peer Group Companies, 25% of the TSR Target
Performance Shares shall become earned, with a fractional share rounded down
to the next whole share.
(iii)
ESG
: If, upon conclusion of the ESG Performance Period, the Company's relative
ESG for the ESG Performance Period is at the 25
th
percentile of ESG for the ESG Peer Group Companies, 25% of the ESG Target
Performance Shares shall become earned, with a fractional share rounded down
to the next whole share.
(d)
Between Threshold and Target
:
(i)
ROIC:
If, upon the conclusion of the ROIC Performance Period, ROIC for any fiscal
year in the ROIC Performance Period and/or the Three-Year Average exceeds the
threshold level, but is less than the target level, as set forth in the ROIC
Performance Matrix contained in the Statement of Performance Goals, the
percentage of ROIC Target Performance Shares that shall become earned shall be
determined by the summation of the percentage of ROIC payout as determined by
mathematical straight-line interpolation of actual ROIC performance compared
to the ROIC performance metrics for each such fiscal year multiplied times 20%
and the Three Year Average ROIC performance compared to the ROIC performance
metrics multiplied times 40% between 50% (threshold) payout of the ROIC Target
Performance Shares and 100% (target) payout of the ROIC Target Performance
Shares, with a fractional share from the total earned ROIC Target Performance
Shares rounded down to the next whole share.
-------------------------------------------------------------------------------
(ii)
TSR
: If, upon the conclusion of the TSR Performance Period, the Company's
relative TSR exceeds the 25
th
percentile, but is less than the 50
th
percentile of TSR of the TSR Peer Group Companies, the percentage of TSR
Target Performance Shares that shall become earned shall be determined by
mathematical straight-line interpolation between 25% of the TSR Target
Performance Shares and 100% of the TSR Target Performance Shares, with a
fractional share rounded down to the next whole share.
(iii)
ESG
: If, upon the conclusion of the ESG Performance Period, the Company's
relative ESG exceeds the 25
th
percentile, but is less than the 50
th
percentile of ESG of the ESG Peer Group Companies, the percentage of ESG
Target Performance Shares that shall become earned shall be determined by
mathematical straight-line interpolation between 25% of the ESG Target
Performance Shares and 100% of the ESG Target Performance Shares, with a
fractional share rounded down to the next whole share.
(e)
Target
:
(i)
ROIC
: If, upon the conclusion of the ROIC Performance Period, ROIC for any fiscal
year in the ROIC Performance Period and/or the Three-Year Average equals the
target level, as set forth in the ROIC Performance Matrix contained in the
Statement of Performance Goals, 20% of the ROIC Target Performance Shares
shall be earned for each such fiscal year and 40% of the ROIC Target
Performance Shares shall be earned for the Three Year Average ROIC, with a
fractional share from the total earned ROIC Target Performance Shares rounded
down to the next whole share.
(ii)
TSR
: If, upon conclusion of the TSR Performance Period, the Company's relative
TSR for the TSR Performance Period is at the 50
th
percentile of TSR for the TSR Peer Group Companies, 100% of the TSR Target
Performance Shares shall become earned, with a fractional share rounded down
to the next whole share.
(iii)
ESG
: If, upon conclusion of the ESG Performance Period, the Company's relative
ESG for the ESG Performance Period is at the 50
th
percentile of ESG for the ESG Peer Group Companies, 100% of the ESG Target
Performance Shares shall become earned, with a fractional share rounded down
to the next whole share.
-------------------------------------------------------------------------------
(f)
Between Target and Maximum
:
(i)
ROIC:
If, upon the conclusion of the ROIC Performance Period, ROIC for any fiscal
year in the ROIC Performance Period and/or the Three-Year Average exceeds the
target level, but is less than the maximum level, as set forth in the ROIC
Performance Matrix contained in the Statement of Performance Goals, the
percentage of ROIC Target Performance Shares that shall become earned shall be
determined by the summation of the percentage of ROIC payout as determined by
mathematical straight-line interpolation of actual ROIC performance compared
to the ROIC performance metrics for each such fiscal year multiplied times 20%
and the Three Year Average ROIC performance compared to the ROIC performance
metrics multiplied times 40% between 100% (target) payout of the ROIC Target
Performance Shares and 200% (maximum) payout of the ROIC Target Performance
Shares, with a fractional share from the total earned ROIC Target Performance
Shares rounded down to the next whole share.
(ii)
TSR
: If, upon the conclusion of the TSR Performance Period, the Company's
relative TSR exceeds the 50
th
percentile, but is less than the 75
th
percentile of TSR for the TSR Peer Group Companies, the percentage of TSR
Target Performance Shares that shall become earned shall be determined by
mathematical straight-line interpolation between 100% of the TSR Target
Performance Shares and 200% of the TSR Target Performance Shares, with a
fractional share rounded down to the next whole share.
(iii)
ESG
: If, upon the conclusion of the ESG Performance Period, the Company's
relative ESG exceeds the 50
th
percentile, but is less than the 75
th
percentile of ESG for the ESG Peer Group Companies, the percentage of ESG
Target Performance Shares that shall become earned shall be determined by
mathematical straight-line interpolation between 100% of the ESG Target
Performance Shares and 200% of the ESG Target Performance Shares, with a
fractional share rounded down to the next whole share.
-------------------------------------------------------------------------------
(g)
Equals or Exceeds Maximum
:
(i)
ROIC
: If, upon the conclusion of the ROIC Performance Period, ROIC for any fiscal
year in the ROIC Performance Period and/or the Three-Year Average equals or
exceeds the maximum level, as set forth in the ROIC Performance Matrix
contained in the Statement of Performance Goals, 40% of the ROIC Target
Performance Shares shall be earned for each such fiscal year and 80% of the
ROIC Target Performance Shares shall be earned for the Three Year Average
ROIC, with a fractional share from the total earned ROIC Target Performance
Shares rounded down to the next whole share.
(ii)
TSR
: If, upon conclusion of the TSR Performance Period, the Company's relative
TSR for the TSR Performance Period equals or exceeds the 75
th
percentile of TSR for the TSR Peer Group Companies, 200% of the TSR Target
Performance Shares shall become earned, with a fractional share rounded down
to the next whole share.
(iii)
ESG
: If, upon conclusion of the ESG Performance Period, the Company's relative
ESG for the ESG Performance Period equals or exceeds the 75
th
percentile of ESG for the ESG Peer Group Companies, 200% of the ESG Target
Performance Shares shall become earned, with a fractional share rounded down
to the next whole share.
(h)
Conditions; Determination of Earned Award
: Except as otherwise provided herein, the Participant's right to receive any
Performance Shares is contingent upon his or her remaining in the continuous
employ of the Company or a Subsidiary through the end of the Performance
Periods. Following the Performance Periods, the Committee shall determine
whether and to what extent the goals relating to ROIC, TSR, and ESG have been
satisfied for the Performance Periods and shall determine the percent of ROIC
Target Performance Shares, TSR Target Performance Shares, and ESG Target
Performance Shares, if any, that may have become earned hereunder.
(i)
Determination Regarding ROIC
: ROIC for each fiscal year in the ROIC Performance Period is defined as net
income plus interest, net of taxes, plus amortization, net of taxes, less
dividends divided by the average invested capital (funded debt less cash and
marketable securities plus total stockholders' equity) at the beginning of
each fiscal year in the performance period, computed as follows:
ROIC = Net Income + ((Net Interest + Amortization)
x (1 - Tax Rate)) - Dividends
Average of (Funded Debt - Cash and Marketable Securities + Total Stockholders' Equity) at the beginning and the end of each
year in the performance period
-------------------------------------------------------------------------------
with all financial measures as determined from the Company's consolidated
financial statements for each year in the ROIC Performance Period
,
subject to any adjustment as determined by the Committee.
(j)
Determination Regarding TSR
: At the end of the TSR Performance Period, the percentile rank of the
Company's TSR in respect to the TSR of the TSR Peer Companies will be
calculated. TSR with respect to the Company and each of the TSR Peer Companies
means the change in the fair market value of common stock of the Company and
the TSR Peer Companies, assuming reinvestment of dividends, over the TSR
Performance Period. The measurement of change in fair market value over the
Performance Period shall be based on the average closing prices of the common
stock for the last 20 trading days preceding the Date of Grant and the last 20
trading days preceding the end of the TSR Performance Period (December 31,
20__), assuming reinvestment of dividends in common stock. Any TSR Peer
Company that is no longer publicly traded at any time during or at the end of
the TSR Performance Period shall be excluded from this calculation.
(k)
TSR Peer Companies:
The public companies against which the Company's TSR performance will be
compared (the "TSR Peer Group Companies") are identified in the Statement of
Performance Goals.
(l)
Determination Regarding ESG
: At the end of the ESG Performance Period, the decile rank of the Company's
ESG in respect to the ESG of the ESG Peer Companies will be calculated. The
scores utilized are the sum of the Environmental &Social Disclosure
QualityScore decile ranks and the Governance QualityScore decile rank
published by ISS for the Company and the respective ESG Peer Companies for the
last month of the ESG Performance Period. Any ESG Peer Company that is no
longer publicly traded at any time during or at the end of the ESG Performance
Period shall be excluded from this calculation.
(m)
ESG Peer Companies:
The public companies against which the Company's ESG performance will be
compared (the "ESG Peer Group Companies") are identified in the Statement of
Performance Goals.
3.
Pro Rata Earning of Target Performance Shares
.
(a)
Termination without Cause or Good Reason, Death, Disability or Retirement
: Notwithstanding
Section 2(h)
, if, during the Performance Period, but before the payment of any Performance
Shares as set forth in
Section 5
, the Participant's employment is terminated without "Cause" or with "Good
Reason" (as each term is defined in the Participant's current Employment
Agreement with the Company, as may be amended from time to time (the
"Employment Agreement")), the Participant dies or in the event of his
"Disability" (as such term is defined in the Employment Agreement) while in
the employ of the Company or in the event of
-------------------------------------------------------------------------------
the retirement of the Participant after having attained "normal retirement
age" (defined as the earlier of age 62 or 55 years old and 10 years of service
with the Company), then the Participant shall be entitled to receive such
percent of the ROIC Target Performance Shares, TSR Target Performance Shares,
and ESG Target Performance Shares, if any, as is determined pursuant to
Section 2
at the conclusion of the Performance Periods as if the Participant had
remained in the continuous employ of the Company through the end of the
Performance Periods, based on the Company's ROIC, TSR, and ESG performance
during the Performance Periods, prorated, based on the number of whole months
that the Participant was employed by the Company during the Performance
Periods.
(b)
Change in Control
: Notwithstanding
Section 2(h)
, if, during the Performance Periods, but before the payment of any
Performance Shares as set forth in
Section 5
, a Change in Control occurs while the Participant is an employee of the
Company, then the Participant shall be entitled to receive the number of ROIC
Target Performance Shares, the number of TSR Target Performance Shares, and
the number of ESG Target Performance Shares set out in
Section 1
.
4.
Forfeiture of Award
. Except to the extent the Participant has earned the right to receive
Performance Shares pursuant to
Section 2
or
3
hereof, the Participant's right to receive Performance Shares shall be
forfeited automatically and without further notice on the date that the
Participant ceases to be an employee of the Company or a Subsidiary prior to
the last day of the Performance Periods or, in the event that
Section 3(b)
applies, the date on which the Change in Control occurs.
5.
Payment of Performance Shares
.
(a) Subject to Section 5(c), Performance Shares earned as provided in
Section 2
or pursuant to
Section 3(a)
shall be paid to the Participant or his or her executor or administrator, as
the case may be, in shares of Common Stock in the calendar year immediately
following the close of the Performance Period to which the award relates, but
in no event later than two and one-half (2 1/2) months after the close of the
Performance Period.
(b) The ROIC Target Performance Shares, TSR Target Performance Shares and
ESG Performance Shares earned pursuant to
Section 3(b)
shall be paid to the Participant in shares of Common Stock as soon as
practicable following the Change in Control, but in no event later than two
and one-half (2 1/2) months following the end of the year in which the Change
in Control occurs.
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(c) Notwithstanding anything in this Agreement to the contrary, if the
Participant is a "specified employee" as determined pursuant to procedures
adopted by the Company in compliance with Section 409A of the Code, the ROIC
Target Performance Shares, TSR Target Performance Shares and ESG Target
Performance Shares become payable on the Participant's "separation from
service" with the Company and its Subsidiaries within the meaning of Section
409A(a)(2)(A)(i) of the Code, and the amount payable hereunder constitutes a
"deferral of compensation" (within the meaning of Section 409A of the Code),
then payment of the ROIC Target Performance Shares, TSR Target Performance
Shares and ESG Target Performance Shares shall be made on the earlier of the
first day of the seventh month after the date of the Participant's "separation
from service" with the Company and its Subsidiaries within the meaning of
Section 409A(a)(2)(A)(i) of the Code or the Participant's death.
6.
Transferability
. Transferability shall be as set forth in the Plan.
7.
No Employment Contract
. Nothing contained in this Agreement shall (a) confer upon the Participant
any right to be employed by or remain employed by the Company, or (b) limit or
affect in any manner the right of the Company to terminate the employment of
the Participant at any time.
8.
Taxes and Withholding
. To the extent that the Company is required to withhold any federal, state,
local or foreign taxes in connection with the payment of any Performance
Shares, it shall be a condition to the payment of any Performance Shares that
the Participant shall pay such taxes by the Company's retention of a portion
of the shares of Common Stock otherwise payable to the Participant. The shares
so retained shall be credited against such withholding requirement at the Fair
Market Value on the date of such delivery. In the event additional taxes are
required to be withheld by the Company the Participant agrees to a payroll
deduction for the amount of the withholding requirement.
9.
Rights of a Stockholder
. The Participant shall not have any rights of a stockholder with respect to
the Performance Shares prior to the date such shares are earned.
10.
Payment of Dividends
. No dividends or dividend equivalents shall be accrued or earned with respect
to any Performance Shares until such Performance Shares are earned by the
Participant as provided in this Agreement.
11.
Adjustments.
Notwithstanding any other provision hereof, the number of Performance Shares
subject to this Agreement, and the other terms and conditions of this award,
are subject to mandatory adjustment as provided in Section 3.2 of the Plan.
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12.
Restrictive Covenants
. If the Participant engages in any conduct in breach of any noncompetition,
nonsolicitation or confidentiality obligations to the Company under any
agreement, policy or plan, then such conduct shall also be deemed to be a
breach of the terms of the Plan and this Agreement. Upon such breach, the
Participant's right to receive Performance Shares covered by this Agreement
shall be forfeited automatically and without further notice and to the extent
that the Participant has received shares of Common Stock pursuant to
Section 5
within a period of 18 months prior to such breach, the Participant shall be
required to return to the Company, upon demand, such shares or the net
proceeds of any sales. For purposes of this
Section 12
, net proceeds shall mean the net amount realized upon the disposition of the
shares. Notwithstanding anything in this Agreement to the contrary, nothing in
this Agreement prevents the Participant from providing, without prior notice
to the Company, information to governmental authorities regarding possible
legal violations or otherwise testifying or participating in any investigation
or proceeding by any governmental authorities regarding possible legal
violations, and for purpose of clarity the Participant is not prohibited from
providing information voluntarily to the Securities and Exchange Commission
pursuant to Section 21F of the Exchange Act.
13.
Recovery of Performance Shares
. This Agreement is subject to the Company's Compensation Clawback Policy,
adopted October 25, 2023.
14.
Relation to Plan
. This Agreement is subject to the terms and conditions of the Plan. In the
event of any inconsistency between the provisions of this Agreement and the
Plan, the Plan shall govern. The Committee acting pursuant to the Plan, as
constituted from time to time, shall, except as expressly provided otherwise
herein or in the Plan, have the right to determine any questions that arise
and to exercise its discretionary authority under the Plan in connection with
the grant of ROIC Target Performance Shares, TSR Target Performance Shares and
ESG Target Performance Shares.
15.
Miscellaneous
. All decisions or interpretations of the Committee with respect to any
question arising under the Plan or this Agreement shall be binding, conclusive
and final. Additionally, with regard to the ESG Target Performance Shares, the
Committee reserves the right to modify the payout factor in the event of
material changes in the scoring methodology utilized. The waiver by the
Company of any provision of this Agreement shall not operate as or be
construed to be a subsequent waiver of the same provision or of any other
provision of this Agreement. The Participant agrees to execute such other
agreements, documents or assignments as may be necessary or desirable to
effect the purposes of this Agreement.
16.
Capitalized Terms
. All capitalized terms used in this Agreement that are not defined herein
shall have the meanings given them in the Plan or resolutions adopted by the
Committee authorizing grants made under this Agreement, unless the context
clearly requires otherwise.
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17.
Section 409A of the Code
. To the extent applicable, it is intended that this Agreement and the Plan
comply with, or be exempt from, the provisions of Section 409A of the Code.
This Agreement and the Plan shall be administered in a manner consistent with
this intent, and any provision that would cause this Agreement or the Plan to
fail to satisfy Section 409A of the Code shall have no force or effect until
amended to comply with Section 409A of the Code (which amendment may be
retroactive to the extent permitted by Section 409A of the Code and may be
made by the Company without the consent of the Participant). Any reference in
this Agreement to Section 409A of the Code will also include any proposed,
temporary or final regulations, or any other guidance, promulgated with
respect to such section by the U.S. Department of the Treasury or the Internal
Revenue Service.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by its duly authorized officer and the Participant has executed
this Agreement, as of the day and year first above written.
MYR GROUP INC.
By:______________________________________
Name: Kenneth M. Hartwick
Title: Chair of the Board
The undersigned Participant hereby acknowledges receipt of an executed copy of
this Agreement and accepts the right to receive any Performance Shares or
other securities covered hereby, subject to the terms and conditions of the
Plan and the terms and conditions herein above set forth.
_________________________________
Participant
Date: ___________________________
Exhibit 31.1
CERTIFICATIONS
Certification of Principal Executive Officer
I, Richard S. Swartz, Jr., certify that:
1.
I have reviewed this quarterly report on Form 10-Q of MYR Group Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the Financial Statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, 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;
c)
Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
May 1, 2024 /s/ RICHARD S. SWARTZ, JR.
(Principal Executive Officer)
Chief Executive Officer and President
Exhibit 31.2
CERTIFICATIONS
Certification of Principal Financial Officer
I, Kelly M. Huntington, certify that:
1. I have reviewed this quarterly report on Form 10-Q of MYR Group Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the Financial Statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, 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;
c)
Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
May 1, 2024 /s/ KELLY M. HUNTINGTON
(Principal Financial Officer)
Senior Vice President and Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER,
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard S. Swartz, Jr., Chief Executive Officer and President of MYR Group
Inc. (the "Company"), certify, pursuant to 18 U.S.C. (s) 1350, as adopted
pursuant to (s) 906 of the Sarbanes-Oxley Act of 2002, that:
1)
The Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 of the
Company fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
2)
The information contained in such report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
May 1, 2024 /s/ RICHARD S. SWARTZ, JR.
Chief Executive Officer and President
Exhibit 32.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Kelly M. Huntington, Senior Vice President and Chief Financial Officer of
MYR Group, Inc. (the "Company"), certify, pursuant to 18 U.S.C. (s) 1350, as
adopted pursuant to (s) 906 of the Sarbanes-Oxley Act of 2002, that:
1)
The Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 of the
Company fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
2)
The information contained in such report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
May 1, 2024 /s/ KELLY M. HUNTINGTON
Senior Vice President and Chief Financial Officer
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