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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 September 30, 2020
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)
Delaware36-3158643
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
1701 Golf Road,Suite 3-1012
Rolling Meadows,IL60008
(Address of principal executive offices)(Zip Code)
(847) 290-1891
(Registrant’s telephone number, including area code)
_____________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueMYRGThe 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 (§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 ¨
Accelerated filer
x
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 October 23, 2020, there were 16,727,116 outstanding shares of the registrant’s $0.01 par value common stock.



Table of Contents

INDEX
Page
Consolidated Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019
Throughout this report, references to “MYR Group,” the “Company,” “we,” “us” and “our” refer to MYR Group Inc. and its consolidated subsidiaries, except as otherwise indicated or as the context otherwise requires.
1

Table of Contents
PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
MYR GROUP INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)September 30,
2020
December 31,
2019
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents$18,946 $12,397 
Accounts receivable, net of allowances of $1,761 and $3,364, respectively
400,998 388,479 
Contract assets, net of allowances of $502 and $147, respectively
221,591 217,109 
Current portion of receivable for insurance claims in excess of deductibles9,851 6,415 
Refundable income taxes 1,973 
Other current assets7,376 12,811 
Total current assets658,762 639,184 
Property and equipment, net of accumulated depreciation of $290,088 and $272,865, respectively
185,914 185,344 
Operating lease right-of-use assets22,620 22,958 
Goodwill66,055 66,060 
Intangible assets, net of accumulated amortization of $13,889 and $10,880, respectively
51,918 54,940 
Receivable for insurance claims in excess of deductibles24,437 30,976 
Investment in joint ventures4,972 4,722 
Other assets4,233 3,687 
Total assets$1,018,911 $1,007,871 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt$4,318 $8,737 
Current portion of operating lease obligations6,468 6,205 
Current portion of finance lease obligations607 1,135 
Accounts payable205,601 192,107 
Contract liabilities125,611 105,486 
Current portion of accrued self-insurance21,659 18,780 
Other current liabilities95,290 64,364 
Total current liabilities459,554 396,814 
Deferred income tax liabilities21,684 20,945 
Long-term debt65,876 157,087 
Accrued self-insurance42,884 48,024 
Operating lease obligations, net of current maturities16,230 16,884 
Finance lease obligations, net of current maturities 338 
Other liabilities4,079 3,304 
Total liabilities610,307 643,396 
Commitments and contingencies
Stockholders’ equity:
Preferred stock—$0.01 par value per share; 4,000,000 authorized shares; none issued and outstanding at September 30, 2020 and December 31, 2019
  
Common stock—$0.01 par value per share; 100,000,000 authorized shares;16,719,330 and 16,648,616 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
167 166 
Additional paid-in capital156,461 152,532 
Accumulated other comprehensive loss(403)(446)
Retained earnings252,375 212,219 
Total stockholders’ equity attributable to MYR Group Inc.408,600 364,471 
Noncontrolling interest4 4 
Total stockholders’ equity408,604 364,475 
Total liabilities and stockholders’ equity$1,018,911 $1,007,871 
The accompanying notes are an integral part of these consolidated financial statements.
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MYR GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Three months ended
September 30,
Nine months ended
September 30,
(in thousands, except per share data)2020201920202019
Contract revenues$607,901 $583,214 $1,639,422 $1,500,084 
Contract costs531,429 524,017 1,440,013 1,354,848 
Gross profit76,472 59,197 199,409 145,236 
Selling, general and administrative expenses51,443 41,667 137,688 108,598 
Amortization of intangible assets578 1,419 3,009 2,888 
Gain on sale of property and equipment(478)(1,151)(1,967)(2,548)
Income from operations24,929 17,262 60,679 36,298 
Other income (expense):
Interest income  6  
Interest expense(1,113)(2,125)(3,941)(4,498)
Other income (expense), net18 (922)(556)406 
Income before provision for income taxes23,834 14,215 56,188 32,206 
Income tax expense6,542 3,754 15,579 8,767 
Net income17,292 10,461 40,609 23,439 
Less: net income (loss) attributable to noncontrolling interest 106  (1,476)
Net income attributable to MYR Group Inc.$17,292 $10,355 $40,609 $24,915 
Income per common share attributable to MYR Group Inc.:
—Basic$1.04 $0.62 $2.44 $1.50 
—Diluted$1.02 $0.62 $2.42 $1.49 
Weighted average number of common shares and potential common shares outstanding:
—Basic16,698 16,614 16,670 16,576 
—Diluted16,882 16,714 16,798 16,692 
Net income$17,292 $10,461 $40,609 $23,439 
Other comprehensive income (loss):
Foreign currency translation adjustment(5)1 43 (199)
Other comprehensive income (loss):(5)1 43 (199)
Total comprehensive income17,287 10,462 40,652 23,240 
Less: net income (loss) attributable to noncontrolling interest 106  (1,476)
Total comprehensive income attributable to MYR Group Inc.$17,287 $10,356 $40,652 $24,716 
The accompanying notes are an integral part of these consolidated financial statements.
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MYR GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

PreferredCommon StockAdditional
Paid-In
Accumulated
Other
Comprehensive
RetainedMYR
Group Inc.
Stockholders’
Noncontrolling
(in thousands)StockSharesAmountCapitalIncome (Loss)EarningsEquityInterestTotal
Balance at December 31, 2018 16,565 $165 $148,276 $(193)$174,736 $322,984 $1,480 $324,464 
Net income (loss)— — — — — 7,353 7,353 (733)6,620 
Stock issued under compensation plans, net— 68 — 282 — — 282 — 282 
Stock-based compensation expense— — — 951 — — 951 — 951 
Shares repurchased— (23)— (571)— (207)(778)— (778)
Other comprehensive loss— — — — (77)— (77)— (77)
Stock issued - other— — 12 — — — 12 — 12 
Balance at March 31, 2019 16,610 177 148,938 (270)181,882 330,727 747 331,474 
Net income (loss)— — — — — 7,207 7,207 (849)6,358 
Stock issued under compensation plans, net— 33 1 1 — — 2 — 2 
Stock-based compensation expense — — — 1,202 — — 1,202 — 1,202 
Other comprehensive income— — — — (123)— (123)— (123)
Stock issued - other— 1 (12)36 — — 24 — 24 
Balance at June 30, 2019 16,644 166 150,177 (393)189,089 339,039 (102)338,937 
Net income— — — — — 10,355 10,355 106 10,461 
Stock issued under compensation plans, net— — — 41 — — 41 — 41 
Stock-based compensation expense— 2 — 1,108 — — 1,108 — 1,108 
Other comprehensive income— — — — 1 — 1 — 1 
Stock issued - other— 1 — 24 — — 24 — 24 
Balance at September 30, 2019$ 16,647 $166 $151,350 $(392)$199,444 $350,568 $4 $350,572 
Balance at December 31, 2019 16,649 $166 $152,532 $(446)$212,219 $364,471 $4 $364,475 
Net income— — — — — 9,932 9,932 — 9,932 
Adjustment to adopt ASC 326— — — — — (268)(268)— (268)
Stock issued under compensation plans, net— 55 — 82 — — 82 — 82 
Stock-based compensation expense— — — 1,080 — — 1,080 — 1,080 
Shares repurchased— (20)— (241)— (185)(426)— (426)
Other comprehensive income— — — — 87 — 87 — 87 
Stock issued - other— 1 — 24 — — 24 — 24 
Balance at March 31, 2020 16,685 166 153,477 (359)221,698 374,982 4 374,986 
Net income— — — — — 13,385 13,385 — 13,385 
Stock issued under compensation plans, net— 23 1 — — — 1 — 1 
Stock-based compensation expense — — — 1,093 — — 1,093 — 1,093 
Other comprehensive income— — — — (39)— (39)— (39)
Stock issued - other— 1 — 24 — — 24 — 24 
Balance at June 30, 2020 16,709 167 154,594 (398)235,083 389,446 4 389,450 
Net income— — — — — 17,292 17,292 — 17,292 
Stock issued under compensation plans, net— 10 — 224 — — 224 — 224 
Stock-based compensation expense— — — 1,631 — — 1,631 — 1,631 
Other comprehensive income— — — — (5)— (5)— (5)
Stock issued - other— — — 12 — — 12 — 12 
Balance at September 30, 2020$ 16,719 $167 $156,461 $(403)$252,375 $408,600 $4 $408,604 
The accompanying notes are an integral part of these consolidated financial statements.
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MYR GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended
September 30,
(in thousands)20202019
Cash flows from operating activities:
Net income$40,609 $23,439 
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization of property and equipment32,021 30,153 
Amortization of intangible assets3,009 2,888 
Stock-based compensation expense3,804 3,261 
Deferred income taxes712 339 
Gain on sale of property and equipment(1,967)(2,548)
Other non-cash items654 631 
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net(12,869)(27,327)
Contract assets, net(4,754)(38,910)
Receivable for insurance claims in excess of deductibles3,103 1,626 
Other assets7,074 (771)
Accounts payable7,596 37,874 
Contract liabilities20,161 (397)
Accrued self insurance(2,257)(358)
Other liabilities31,730 1,845 
Net cash flows provided by operating activities128,626 31,745 
Cash flows from investing activities:
Proceeds from sale of property and equipment2,147 2,898 
Cash paid for acquired business (79,720)
Purchases of property and equipment(27,470)(39,354)
Net cash flows used in investing activities(25,323)(116,176)
Cash flows from financing activities:
Net borrowings (repayments) under revolving lines of credit(65,189)67,668 
Borrowings under equipment notes 24,037 
Payment of principal obligations under equipment notes(30,441)(3,307)
Payment of principal obligations under finance leases(914)(857)
Proceeds from exercise of stock options306 325 
Debt refinancing costs (1,132)
Repurchase of common shares(426)(778)
Other financing activities60 60 
Net cash flows provided by (used in) financing activities(96,604)86,016 
Effect of exchange rate changes on cash(150)53 
Net increase in cash and cash equivalents6,549 1,638 
Cash and cash equivalents:
Beginning of period12,397 7,507 
End of period$18,946 $9,145 
The accompanying notes are an integral part of these consolidated financial statements.
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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 and is currently conducting operations through wholly owned subsidiaries, including: The L. E. Myers Co., a Delaware corporation; Harlan Electric Company, a Michigan corporation; Great Southwestern Construction, Inc., a Colorado corporation; Sturgeon Electric Company, Inc., a Michigan corporation; MYR Energy Services, Inc., a Delaware corporation; E.S. Boulos Company, a Delaware corporation; High Country Line Construction, Inc., a Nevada corporation; Sturgeon Electric California, LLC, a Delaware limited liability company; GSW Integrated Services, LLC, a Delaware limited liability company; Huen Electric, Inc., a Delaware corporation; CSI Electrical Contractors, Inc., a Delaware corporation; MYR Transmission Services Canada, Ltd., a British Columbia corporation; Northern Transmission Services, Ltd., a British Columbia corporation and Western Pacific Enterprises Ltd., a British Columbia corporation.
The Company performs construction services in two business segments: Transmission and Distribution (“T&D”), and Commercial and Industrial (“C&I”). T&D customers include investor-owned utilities, cooperatives, private developers, government-funded utilities, independent power producers, independent transmission companies, industrial facility owners and other contractors. T&D provides a broad range of services, which include design, engineering, procurement, construction, upgrade, maintenance and repair services, with a particular focus on construction, maintenance and repair. C&I customers include general contractors, commercial and industrial facility owners, 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, the installation of traffic networks and the installation of bridge, roadway and tunnel lighting.
Since March of 2020, the COVID-19 pandemic has had a significant impact on the global economy, including the US and Canadian economies. As the situation continues to evolve, the Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it impacts our customers, subcontractors, suppliers, vendors and employees. The COVID-19 pandemic caused a slowdown of certain projects due to specific state, local, municipal and customer mandated stay-at-home orders and new project requirements that were established to protect construction workers and the general public, most of which have impacted our C&I segment. Although the majority of stay-at-home orders have been phased out, we are still experiencing impacts associated with the COVID-19 project-specific protocols. We expect the project-specific requirements to remain in place which will continue to impact project schedules and workflow going forward.
The Company is unable to predict the ultimate impact that COVID-19 will have on our business, employees, liquidity, financial condition, results of operations and cash flows. Most of the Company’s operations are considered critical and essential businesses, making our projects generally exempt from stay-at-home or similar orders in certain parts of the United States and western Canada. However, if this pandemic persists for an extended timeframe our business could be more significantly impacted as a result of prolonged unfavorable economic conditions. The Company began implementing changes in March of 2020 in an effort to protect our employees and customers and to support appropriate health and safety protocols, including implementing alternative and flexible work arrangements where possible. As the conditions surrounding the ongoing COVID-19 pandemic remain fluid, and if disruptions do re-emerge, they could materially adversely impact our business. The key estimates that could potentially be impacted include estimates of costs to complete contracts, the recoverability of goodwill and intangibles and allowance for doubtful accounts.
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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, stockholders’ equity and cash flows with respect to the interim consolidated financial statements, have been included. Certain reclassifications were made to prior year amounts to conform to the current year presentation. The consolidated balance sheet as of December 31, 2019 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, 2019, included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on March 4, 2020 (the "2019 Annual Report").
Foreign Currency
The functional currency for the Company’s Canadian operations is the Canadian dollar. Assets and liabilities denominated in Canadian dollars are translated into U.S. dollars at the end-of-period exchange rate. Revenues and expenses are translated using average exchange rates for the periods reported. Equity accounts are translated at historical rates. Cumulative translation adjustments are included as a separate component of accumulated other comprehensive income in shareholders’ equity. Foreign currency transaction gains and losses, arising primarily from changes in exchange rates on short-term monetary assets and liabilities, and ineffective long-term monetary assets and liabilities are recorded in the “other income, net” line on the consolidated statements of operations. Foreign currency gains, recorded in other income, net, for the nine months ended September 30, 2020 were not significant. Foreign currency gains, recorded in other income, net, for the nine months ended September 30, 2019 were $0.1 million. Effective foreign currency transaction gains and losses, arising primarily from long-term monetary assets and liabilities, are recorded in the foreign currency translation adjustment line on the consolidated statements of comprehensive income.
Use of Estimates
The preparation of financial statements in conformity with 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, 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 September 30, 2020 and 2019, the Company had recognized revenues of $19.1 million and $31.1 million, respectively, related to significant change orders and/or claims that had been included as contract price adjustments on certain contracts, some of which are multi-year projects. These change orders and/or claims are in the process of being negotiated in the normal course of business, and a portion of these recognized revenues had been included in multiple periods.
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 September 30, 2020, changes in estimates pertaining to certain projects decreased consolidated gross margin by 0.3%, which resulted in decreases in operating income of $1.9 million, net income attributable to MYR Group Inc. of $1.5 million and diluted earnings per common share attributable to MYR Group Inc. of $0.09. During the nine months ended September 30, 2020, changes in estimates pertaining to certain projects decreased consolidated gross margin by 0.4%, which resulted in decreases in operating income of $7.6 million, net income attributable to MYR Group Inc. of $5.5 million and diluted earnings per common share attributable to MYR Group Inc. of $0.33.
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During the three months ended September 30, 2019, changes in estimates pertaining to certain projects increased consolidated gross margin by 0.2%, which resulted in increases in operating income of $0.9 million, net income attributable to MYR Group Inc. of $0.8 million and diluted earnings per common share attributable to MYR Group Inc. of $0.05. During the nine months ended September 30, 2019, changes in estimates pertaining to certain projects decreased consolidated gross margin by 0.5%, which resulted in decreases in operating income of $7.8 million, net income attributable to MYR Group Inc. of $3.3 million and diluted earnings per common share attributable to MYR Group Inc. of $0.20.
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 not listed below are either not applicable to the Company or adoption will have minimal impact on its consolidated financial statements.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial instruments, including trade receivables and off-balance sheet credit exposures. Under this guidance, an entity is required to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. This ASU also requires disclosure of information regarding how a company developed its allowance, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes. On January 1, 2020, the Company adopted this ASU resulting in a $0.3 million cumulative-effect adjustment to retained earnings associated with the increase in the Company’s allowance for doubtful accounts. Additionally, in connection with the adoption of this ASU the Company adjusted its presentation for allowance for doubtful accounts associated with unbilled revenue, which represents a portion of the Company’s contract assets, and were previously classified as accounts receivable net of allowances. Total allowance for doubtful accounts associated with contract assets as of September 30, 2020 and at the time of adopting this ASU were $0.5 million and $0.4 million, respectively. The Company’s consolidated balance sheet as of December 31, 2019 and consolidated statements of cash flows for the year ended December 31, 2019 have not been adjusted for this change in treatment of allowance for doubtful accounts associated with unbilled revenue. See Note 3–Contract Assets and Liabilities for further information related to the Company’s contract assets.
In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill, through the elimination of Step 2 from the goodwill impairment test. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The Company adopted this ASU on a prospective basis in January 2020 and there was no effect on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments in the fair value hierarchy. The Company adopted this ASU in January 2020 and there was no effect on the consolidated financial statements or disclosures.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company does not expect that this pronouncement will have a significant impact on its financial statements.
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2. Acquisition
CSI Electrical Contractors, Inc.
On July 15, 2019, the Company completed the acquisition of substantially all the assets of CSI Electrical Contractors, Inc. (“CSI”), an electrical contracting firm based in California. CSI provides services to a broad array of end markets under the Company’s C&I segment. The total consideration, after net asset adjustments of approximately $1.0 million, was $80.7 million, which was funded through borrowings under the Company’s credit facility. The Company finalized the purchase price accounting relating to the acquisition of CSI in 2019.
The purchase agreement also includes contingent consideration provisions for margin guarantee adjustments based upon contract performance subsequent to the acquisition. The contracts were valued at fair value at the acquisition date, causing no margin guarantee estimate or adjustments for fair value. Changes in contract estimates, such as modified costs to complete or change order recognition, will result in changes to these margin guarantee estimates. Changes in contingent consideration, subsequent to the acquisition, related to the margin guarantee adjustments on contracts of approximately $0.6 million, all of which occurred prior to June 30, 2020 were recorded in other expense for the nine months ended September 30, 2020. Future margin guarantee adjustments, if any, are expected to be recognized through 2020. The Company could also be required to make compensation payments contingent on the successful achievement of certain performance targets and continued employment of certain key executives of CSI. These payments are recognized as compensation expense on the Company’s consolidated statements of operations as incurred. For the three and nine months ended September 30, 2020, the Company recognized $1.4 million and $2.5 million, respectively, of compensation expense associated with these contingent payments.
3. Contract Assets and Liabilities
Contracts with customers usually stipulate the timing of payment, which is defined by the terms found within the various contracts under which work was performed during the period. Therefore, contract assets and liabilities are created when the timing of costs incurred on work performed does not coincide with the billing terms, which frequently include retention provisions contained in each contract.
The Company’s consolidated balance sheets present contract assets, which contain unbilled revenue and contract retainages associated with contract work that has been completed and billed but not paid by customers, pursuant to retainage provisions, that are generally due once the job is completed and approved. The allowance for doubtful accounts associated with contract assets was $0.5 million as of September 30, 2020 and $0.1 million as of December 31, 2019.
Contract assets consisted of the following:
(in thousands)September 30,
2020
December 31,
2019
Change
Unbilled revenue, net$128,785 $126,087 $2,698 
Contract retainages, net92,806 91,022 1,784 
Contract assets, net$221,591 $217,109 $4,482 
The Company’s consolidated balance sheets present contract liabilities which contain deferred revenue and an accrual for contracts in a loss provision.
Contract liabilities consisted of the following:
(in thousands)September 30,
2020
December 31,
2019
Change
Deferred revenue$123,301 $102,673 $20,628 
Accrued loss provision2,310 2,813 (503)
Contract liabilities$125,611 $105,486 $20,125 
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The following table provides information about contract assets and contract liabilities from contracts with customers:
(in thousands)September 30,
2020
December 31,
2019
Change
Contract assets, net$221,591 $217,109 $4,482 
Contract liabilities(125,611)(105,486)(20,125)
Net contract assets (liabilities)$95,980 $111,623 $(15,643)
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 $31.3 million and $57.7 million for the three and nine months ended September 30, 2020, respectively. The amounts of revenue recognized in the period that were included in the opening contract liability balances were $11.9 million and $39.4 million for the three and nine months ended September 30, 2019, respectively. This revenue consists primarily of work performed on previous billings to customers.
The net asset position for contracts in process consisted of the following:
(in thousands)September 30,
2020
December 31,
2019
Costs and estimated earnings on uncompleted contracts$3,710,876 $3,532,886 
Less: billings to date3,705,392 3,509,472 
$5,484 $23,414 
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)September 30,
2020
December 31,
2019
Unbilled revenue $128,785 $126,087 
Deferred revenue (123,301)(102,673)
$5,484 $23,414 

4. Lease Obligations
From time-to-time, the Company enters into non-cancelable leases for some of our facility, vehicle and equipment needs. These leases allow the Company to conserve cash by paying a monthly lease rental fee for the use of facilities, vehicles and equipment rather than purchasing them. The Company’s leases have remaining terms ranging from one to six years, some of which may include options to extend the leases for up to five years, and some of which may include options to terminate the leases within one year. Currently, all the Company’s leases contain fixed payment terms. The Company may decide to cancel or terminate a lease before the end of its term, in which case we are typically liable to the lessor for the remaining lease payments under the term of the lease. Additionally, all of the Company's month-to-month leases are cancelable, by the Company or the lessor, at any time and are not included in our right-of-use asset or liability. At September 30, 2020, the Company had several leases with residual value guarantees, due to the acquisition of CSI. Typically, the Company has purchase options on the equipment underlying its long-term leases and many of its short-term rental arrangements. The Company may exercise some of these purchase options when the need for equipment is on-going and the purchase option price is attractive. Leases are accounted for as operating or finance leases, depending on the terms of the lease.
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The following is a summary of the lease-related assets and liabilities recorded:
September 30,
2020
December 31,
2019
(in thousands)Classification on the Consolidated Balance Sheet
Assets
Operating lease right-of-use assetsOperating lease right-of-use assets$