Enhanced Investments - Financial Portal

Published: 2022-02-16

KPMG LLP2200, 10175 - 101 StreetEdmonton AB T5J 0H3Telephone (780) 429-7300Fax (780) 429-7379www.kpmg.ca
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of North American Construction Group Ltd.:
Opinion on Internal Control Over Financial Reporting
We have audited North American Construction Group Ltd. and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in al material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity, and cash flows for the years then ended, and the related notes (col ectively, the “consolidated financial statements”), and our report dated February 16, 2022 expressed an unqualified opinion on those consolidated financial statements.
The Company acquired DGI (Aust) Trading Pty Ltd. (“DGI”) during 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, DGI’s internal control over financial reporting representing approximately 2% of total assets, 2% of revenues and 1% net income, respectively, for the year ended December 31, 2021. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of DGI.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting in the accompanying Management’s Discussion and Analysis. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
	KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. KPMG Canada provides services to KPMG LLP

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in al material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with general y accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with general y accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate
Chartered Professional Accountants
Edmonton, Canada
February 16, 2022
	KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. KPMG Canada provides services to KPMG LLP

KPMG LLP2200, 10175 - 101 StreetEdmonton AB T5J 0H3Telephone (780) 429-7300Fax (780) 429-7379www.kpmg.ca
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of North American Construction Group Ltd.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of North American Construction Group Ltd. and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity, and cash flows for the years then ended, and the related notes (col ectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in al material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. general y accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 16, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as wel as evaluating the overal presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
	KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. KPMG Canada provides services to KPMG LLP

Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especial y chal enging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Estimation of total costs to be incurred for unit-price long-term contract revenue
As discussed in note 2(c) to the consolidated financial statements, the Company recognizes revenues under four principal types of contracts: lump-sum, unit-price, time-and-materials, and cost-plus. For the year ended December 31, 2021, total contract revenues recognized by the Company were $654.1 mil ion, including $82.4 mil ion recognized under unit-price contracts with defined scope that were in-progress at year-end. Under its unit-price contracts with defined scope, the Company recognizes revenue over time based on the ratio of actual costs incurred to date divided by the Company’s estimated total costs (ETC).
We identified the evaluation of ETC for in-progress unit-price contracts with defined scope as a critical audit matter. The evaluation of the ETC for in-progress unit-price contracts with defined scope involved complex auditor judgement, given these estimates are dependent upon a number of factors, including the accuracy of the estimates made at the period-end date, primarily consisting of labor hours, equipment usage, and material costs and quantities to be incurred over the remaining contract periods.
The fol owing are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls within the Company’s revenue recognition process. This included controls related to the review of the ETC for unit-price contracts with defined scope that were in-progress at year-end. For a selection of these contracts, we evaluated the reasonableness of the Company’s determination of ETC for the contract, including tracing a selection of costs in the ETC (material costs and quantities, labor hours, and equipment usage) to recent forecasts developed by project managers and comparing actual costs incurred subsequent to year-end for consistency with corresponding amounts included in the ETC at year-end. We inspected the executed contract with the customer to evaluate the Company’s identification of the performance obligation and the determined method for measuring contract progress. We conducted interviews with relevant project personnel to gain an understanding of the status of project activities and factors impacting the ETC of the selected contract, such as costs associated with scope changes; changes in productivity expectations; extended overhead due to owner, weather, and other delays; differences in site conditions from the original bid; the availability and skil level of workers in the geographic location of the project; and changes in the availability and proximity of equipment and materials. We evaluated the Company’s ability to estimate these amounts by comparing actual project margins to previous estimates.
We have served as the Company’s auditor since 1998.
Chartered Professional Accountants
Edmonton, Canada
February 16, 2022
	KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. KPMG Canada provides services to KPMG LLP

Consolidated Balance Sheets
As at December 31 (Expressed in thousands of Canadian Dol ars)
	2021	2020
			Note 22
AssetsCurrent assets
Cash				16,601 $	43,447
Accounts receivable	68,787	36,231
Contract assets	9,759	7,008
Inventories						44,544	19,151
Prepaid expenses and deposits				6,828	4,977
Assets held for sale				660	4,129
Derivative financial instruments	8(b)			—	4,334
				147,179	119,277
Property, plant and equipment, net of accumulated depreciation $339,505 (2020 –
						640,950	632,210
$302,161)
Operating lease right-of-use assets						14,768	18,192
Investments in affiliates and joint ventures						55,974	46,263
Other assets				6,000	6,336
Goodwil and intangible assets	12			4,407	378
Deferred tax assets						—	16,407
Total assets				869,278 $	839,063
Liabilities and shareholders' equityCurrent liabilities
Accounts payable				76,251 $	41,428
Accrued liabilities						33,389	19,382
Contract liabilities	3,349	1,512
Current portion of long-term debt						19,693	16,263
Current portion of finance lease obligations						25,035	26,895
Current portion of operating lease liabilities						3,317	4,004
				161,034	109,484
Long-term debt						306,034	341,396
Finance lease obligations						29,686	42,577
Operating lease liabilities						11,461	14,118
Other long-term obligations						26,400	18,850
Deferred tax liabilities						56,200	64,195
				590,815	590,620
Shareholders' equityCommon shares (authorized – unlimited number of voting common shares; issued and
outstanding – December 31, 2021 - 30,022,928 (December 31, 2020 – 31,011,831))	246,944	255,064
Treasury shares (December 31, 2021 - 1,564,813 (December 31, 2020 - 1,845,201))	(17,802)	(18,002)
Additional paid-in capital				37,456	46,536
Retained earnings (deficit)				11,863	(35,155)
Accumulated other comprehensive income				2	—
Shareholders' equity				278,463	248,443
Total liabilities and shareholders' equity				869,278 $	839,063
Contingencies						21
Approved on behalf of the Board
	/s/ Joseph Lambert							/s/ Bryan D. Pinney
Joseph Lambert, President and Chief Executive Officer					Bryan D. Pinney, Lead Director

See accompanying notes to consolidated financial statements.
Consolidated Financial Statements
December 31, 2021							F - 1	North American Construction Group Ltd.

Consolidated Statements of Operations andComprehensive Income
For the years ended December 31(Expressed in thousands of Canadian Dol ars, except per share amounts)
	2021	2020
			Note 22
Revenue					6			654,143 $	498,468
Project costs	2(b)				223,537	140,341
Equipment costs	2(b)				232,173	177,127
Depreciation					108,016	88,782
Gross profit					90,417	92,218
General and administrative expenses				2(b),6(d),12,19	35,374	24,437
(Gain) loss on disposal of property, plant and equipment					(85)	659
Operating income					55,128	67,122
Interest expense, net					18			19,032	18,656
Equity earnings in affiliates and joint ventures					11			(21,860)	(7,740)
Net realized and unrealized gain on derivative financial instruments	8(b)				(2,737)	(4,266)
Income before income taxes					60,693	60,472
Current income tax expense					13			1,000	—
Deferred income tax expense					13			8,285	11,264
Net income					51,408	49,208
Other comprehensive incomeUnrealized foreign currency translation gain
					(2)	—
Comprehensive income					51,410 $	49,208
Per share information
Basic net income per share	17(b)				1.81 $	1.75
Diluted net income per share	17(b)				1.64 $	1.60
See accompanying notes to consolidated financial statements.
Consolidated Financial Statements
December 31, 2021						F - 2	North American Construction Group Ltd.

Consolidated Statements of Changes in Shareholders’Equity
(Expressed in thousands of Canadian Dol ars)
					Accumulated
			Additional	Retained
	Common	Treasury				other
			paid-in	earnings			Total
	shares	shares			comprehensive
			capital	(deficit)
						income
Balance at December 31, 2019								$	225,966 $	(15,911) $	49,919 $	(79,855) $		— $	180,119
Net income									—	—	—	49,208		—	49,208
Dividends ($0.16 per share)									—	—	—	(4,508)		—	(4,508)
Exercise of stock options									895							—	(358)				—	—	537
Conversion of convertible
									38,066							—	—	—	—	38,066
debentures
Share purchase program									(9,863)							—	755				—	—	(9,108)
Purchase of treasury shares									—	(9,893)							—	—	—	(9,893)
Stock-based compensation									—	7,802	(3,780)							—	—	4,022
Balance at December 31, 2020								$	255,064 $	(18,002) $	46,536 $	(35,155) $		— $	248,443
Net income									—	—	—	51,408		—	51,408
Unrealized foreign currency
									—	—	—	—	2	2
translation gain
Dividends ($0.16 per share)									—	—	—	(4,390)		—	(4,390)
Exercise of stock options									859							—	(340)				—	—	519
Share purchase programs									(8,979)							—	(7,540)				—	—	(16,519)
Purchase of treasury shares									—	(5,500)							—	—	—	(5,500)
Stock-based compensation									—	5,700	(1,200)							—	—	4,500
Balance at December 31, 2021								$	246,944 $	(17,802) $	37,456 $	11,863 $		2 $	278,463
See accompanying notes to consolidated financial statements.
Consolidated Financial Statements
December 31, 2021										F - 3	North American Construction Group Ltd.

Consolidated Statements of Cash Flows
For the years ended December 31(Expressed in thousands of Canadian Dol ars)
					2021	2020
	Note 22
Cash provided byOperating activities:Net income
		51,408 $	49,208
Adjustments to reconcile net income to cash from operating activities:
Depreciation		108,016	88,782
Amortization of deferred financing costs					18	1,064	1,091
(Gain) loss on disposal of property, plant and equipment		(85)	659
Net realized and unrealized gain on derivative financial instruments		(2,737)	(4,266)
Stock-based compensation expense					19	11,606	1,944
Cash settlement of directors' deferred share unit plan					19(c)	(2,300)	(103)
Equity earnings in affiliates and joint ventures					11	(21,860)	(7,740)
Dividends and advances received from affiliates and joint ventures		11	11,270	8,621
Other adjustments to cash from operating activities		(158)	483
Deferred income tax expense		13	8,285	11,264
Net changes in non-cash working capital					20(b)	671	(3,393)
		165,180	146,550
Investing activities:
Acquisition of DGI (Aust) Trading Pty Limited, net of cash acquired					12	(11,395)	—
Purchase of property, plant and equipment		(112,563)	(117,069)
Additions to intangible assets		(1,228)	(272)
Proceeds on disposal of property, plant and equipment		17,141	2,784
Investment in affiliates and joint ventures		11	(1,959)	(1,810)
Net repayments of loans to affiliates and joint ventures		3,664	3,540
Settlement of derivative financial instruments		7,071	—
		(99,269)	(112,827)
Financing activities:
Proceeds from long-term debt					8	135,049	145,227
Repayment of long-term debt					8	(164,369)	(82,262)
Financing costs		(3,567)	(965)
Repayment of finance lease obligations		(33,949)	(34,649)
Dividend payments					17(c)	(4,423)	(4,371)
Proceeds from exercise of stock options		519	537
Share purchase program		(16,519)	(9,108)
Purchase of treasury shares					17(a)	(5,500)	(9,893)
		(92,759)	4,516
(Decrease) increase in cash		(26,848)	38,239
Effect of exchange rate on changes in cash and cash equivalents						2	—
Cash, beginning of year		43,447	5,208
Cash, end of year		16,601 $	43,447
Supplemental cash flow information (note 20(a))
See accompanying notes to consolidated financial statements.
Consolidated Financial Statements
December 31, 2021							F - 4	North American Construction Group Ltd.

Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020 (Expressed in thousands of Canadian Dol ars, except per share amounts or unless otherwise specified)
1. Nature of operations
North American Construction Group Ltd. ("NACG" or the “Company”), was formed under the Canada Business Corporations Act. The Company and its predecessors have been operating continuously since 1953 primarily in western Canada but also in other parts of Canada, the United States and Australia, providing a wide range of mining and heavy construction services to customers in the resource development and industrial construction sectors.
2. Significant accounting policies
a) Basis of presentation
These consolidated financial statements are prepared in accordance with United States general y accepted accounting principles ("US GAAP"). These consolidated financial statements include the accounts of the Company and its whol y-owned incorporated subsidiaries in Canada, the United States and Australia. Al significant intercompany transactions and balances are eliminated upon consolidation. The Company also holds ownership interests in other corporations, partnerships and joint ventures.
The Company consolidates variable interest entities (“VIE”) for which it is considered to be the primary beneficiary as wel as voting interest entities in which it has a control ing financial interest as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, and related standards. Investees and joint ventures over which the Company exercises significant influence are accounted for using the equity method and are included in “investments in affiliates and joint ventures” within the accompanying Consolidated balance sheets.
i) Change in significant accounting policy - Basis of presentation
Prior to July 1, 2021, the Company elected to apply the provision available to entities operating within the construction industry to apply proportionate consolidation to unincorporated entities that would otherwise be accounted for using the equity method. The Company elected to change this policy to account for these unincorporated entities using the equity method, resulting in a change to the consolidation method for Dene North Site Services ("DNSS") and Mikisew North American Limited Partnership ("MNALP"). This change al ows for consistency in the presentation of the Company's investments in affiliates and joint ventures (note 11).
The Company has accounted for the change retrospectively according to the requirements of US GAAP Accounting Standards Codification ("ASC") 250 by restating the comparative periods. The effect of the change in accounting policy for the current and comparable periods is summarized in note 22.
b) Use of estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures reported in these consolidated financial statements and accompanying notes and the reported amounts of revenues and expenses during the reporting period. Actual results could differ material y from those estimates. Significant estimates and judgments made by management include:
•	the assessment of the percentage of completion on time-and-materials, unit-price, lump-sum and cost-plus contracts with defined scope (including estimated total costs and provisions for estimated losses) and the recognition of claims and change orders on revenue contracts;
•	the determination of whether an acquisition meets the definition of a business combination;
•	the fair value of the assets acquired and liabilities assumed as part of an acquisition;
•	the evaluation of whether the Company is a primary beneficiary of an entity or has a control ing interest in an investee and is required to consolidate it;
•	assumptions used in impairment testing; and
Consolidated Financial Statements
December 31, 2021	F - 5	North American Construction Group Ltd.

•	estimates and assumptions used in the determination of the al owance for credit losses, the recoverability of deferred tax assets and the useful lives of property, plant and equipment and intangible assets.
The accuracy of the Company’s revenue and profit recognition in a given period is dependent on the accuracy of the estimates of the cost to complete each project. Cost estimates for al significant projects use a detailed “bottom up” approach and the Company believes its experience al ows it to provide reasonably dependable estimates. There are a number of factors that can contribute to changes in estimates of contract costs and profitability that are recognized in the period in which such adjustments are determined. The most significant of these include:
•	the completeness and accuracy of the original bid;
•	costs associated with added scope changes;
•	extended overhead due to owner, weather and other delays;
•	subcontractor performance issues;
•	changes in economic indices used for the determination of escalation or de-escalation for contractual rates on long-term contracts;
•	changes in productivity expectations;
•	site conditions that differ from those assumed in the original bid;
•	contract incentive and penalty provisions;
•	the availability and skil level of workers in the geographic location of the project; and
•	a change in the availability and proximity of equipment and materials.
The foregoing factors as wel as the mix of contracts at different margins may cause fluctuations in gross profit between periods. With many projects of varying levels of complexity and size in process at any given time, changes in estimates can offset each other without material y impacting the Company’s profitability. Major changes in cost estimates, particularly in larger, more complex projects, can have a significant effect on profitability.
In March 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. Governments worldwide, including Canada, enacted emergency measures to combat the spread of the virus, including the implementation of travel bans, quarantine periods and social distancing. These factors created material disruptions to businesses global y, resulting in an economic slowdown.

The situation continues to evolve while markets and economies have somewhat stabilized, with governments and industry implementing measures to mitigate the impacts of the pandemic. As populations in Canada and many other countries are being vaccinated, governments have loosened emergency measures. Should the pandemic worsen, the Company could be subject to additional or continued adverse impacts including, but not limited to, restrictions or limitations on the ability of employees, contractors, suppliers and customers to conduct business due to quarantines, closures or travel restrictions, including the potential for deferral or cessation of ongoing or planned projects.
The ultimate duration and magnitude of these impacts on the economy and the financial effect on the Company is not known. Estimates and judgments made by management in the preparation of these financial statements are difficult and subject to a higher degree of measurement uncertainty during this period. Management continues to monitor the situation and has taken steps to mitigate the likelihood of occurrence of the events described above.
In response to the economic slowdown caused by COVID-19, the Government of Canada introduced the Canada Emergency Wage Subsidy, an employer assistance program. For the year ended December 31, 2021, the Company recognized $13,244 of salary and wage subsidies presented as reductions of project costs, equipment costs and general and administrative expenses of $8,309, $4,180 and $755 respectively. For the year ended December 31, 2020, the Company recognized $28,041 of salary and wage subsidies presented as reduction of project costs, equipment costs and general and administrative expenses of $16,050, $9,107, and $2,884, respectively.
c) Revenue recognition
The Company's revenue source fal s into one of three categories: construction services, operations support, or equipment and component sales.
Consolidated Financial Statements
December 31, 2021	F - 6	North American Construction Group Ltd.

Construction services are related to mine development or expansion projects and are general y funded from customers' capital budgets. The Company provides construction services under lump-sum, unit-price, time-and materials and cost-plus contracts. When the commercial terms are lump-sum and unit-price, the contract scope and value is typical y defined. Time-and-materials and cost-plus contracts are general y undefined in scope and total price. Operations support services revenue is mainly generated under long-term site-services agreements with the customers (master service agreement and multiple use contracts). These agreements clearly define whether commitment to volume or scope of services over the life of the contract is included or excluded. When excluded, work under the agreement is awarded through shorter-term work authorizations under the general terms of the agreement. The Company general y provides operations support services under either time-and-materials or unit-price contracts depending on factors such as the degree of complexity, the completeness of engineering and the required schedule. Equipment and component sales revenue is generated from our equipment maintenance and rebuild activities, along with our mining component supplier business. The commercial terms for equipment and component sales are general y lump-sum, unit-price, or time-and-materials.
Significant estimates are required in the revenue recognition process including assessment of the percentage of completion, identification of performance obligations, and estimation of variable consideration, including the extent of any constraints.
The Company’s invoicing frequency and payment terms are in accordance with negotiated customer contracts. Customer invoicing can range between daily and monthly and payment terms general y range between net 15 and net 60 days. The Company does not typical y include extended payment terms in its contracts with customers. Under these payment terms, the customer pays progress payments based on actual work or milestones completed. When payment terms do not align with revenue recognition, the variance is recorded to either contract liabilities or contract assets, as appropriate. Customer contracts do not general y include a significant financing component because the Company does not expect the period between customer payment and transfer of control to exceed one year. The Company does not adjust consideration for the effects of a significant financing component if the period of time between the transfer of control and the customer payment is less than one year.
The Company accounts for a contract when it has approval and commitments from both parties, the rights of the parties are identified, the payment terms are identified, the contract has commercial substance and the col ectability of consideration is probable. Each contract is evaluated to determine if it includes more than one performance obligation. This evaluation requires significant judgement and the determination that the contract contains more than one performance obligation could change the amount of revenue and profit recorded in a given period. The majority of the Company's contracts with defined scope include one significant integrated service, where the Company is responsible for ensuring the individual goods and services are incorporated into one combined output. Such contracts are accounted for as one performance obligation. When more than one distinct good or service is contracted, the contract is separated into more than one performance obligation and the total transaction price is al ocated to each performance obligation based upon stand-alone sel ing prices. When a stand-alone sel ing price is not observable, it is estimated using a suitable method.
The total transaction price can be comprised of fixed consideration and variable consideration, such as profit incentives, discounts and performance bonuses or penalties. When a contract includes variable consideration, the amount included in the total transaction price is based on the expected value or the mostly likely amount, constrained to an amount that it is probable a significant reversal wil not occur. Significant judgement is involved in determining if a variable consideration amount should be constrained. In applying this constraint, the Company considers both the likelihood of a revenue reversal arising from an uncertain future event and the magnitude of the revenue reversal if the uncertain event were to occur or fail to occur. The fol owing circumstances are considered to be possible indicators of significant revenue reversals:
•	The amount of consideration is highly susceptible to factors outside the Company’s influence, such as judgement of actions of third parties and weather conditions;
•	The length of time between the recognition of revenue and the expected resolution;
•	The Company’s experience with similar circumstances and similar customers, specifical y when such items have predictive value;
•	The Company’s history of resolution and whether that resolution includes price concessions or changing payment terms; and
Consolidated Financial Statements
December 31, 2021		F - 7	North American Construction Group Ltd.

•	The range of possible consideration amounts.
The Company's performance obligations for construction services and operations support are typical y satisfied by transferring control over time, for which revenue is recognized using the percentage of completion method, measured by the ratio of costs incurred to date to estimated total costs. For defined scope contracts, the cost-to-cost method faithful y depicts the Company’s performance because the transfer of the asset to the customer occurs as costs are incurred. The costs of items that do not relate to the performance obligation, particularly in the early stages of the contract, are excluded from costs incurred to date. Pre-construction activities, such as mobilization and site setup, are recognized as contract costs on the Consolidated Balance Sheets and amortized over the life of the project. These costs are excluded from the cost-to- cost calculation. Equipment and component sales are typical y satisfied at a point in time, and revenue is recognized when control of the completed asset has been transferred to the customer, along with the cost of goods sold (project costs).
The Company has elected to apply the ‘as-invoiced’ practical expedient to recognize revenue in the amount to which the Company has a right to invoice for al contracts in which the value of the performance completed to date directly corresponds with the right to consideration. This wil be applied to al contracts, where applicable, and the majority of undefined scope work is expected to use this practical expedient.
The length of the Company’s contracts varies from less than one year for typical contracts to several years for certain larger contracts. Project costs include al direct labour, material, subcontract and equipment costs and those indirect costs related to contract performance such as indirect labour and supplies. General and administrative expenses are charged to expenses as incurred. If a loss is estimated on an uncompleted contract, a provision is made in the period in which such losses are determined.
Changes in project performance, project conditions, and estimated profitability, including those arising from profit incentives, penalty provisions and final contract settlements, may result in revisions to costs and revenue that are recognized in the period in which such adjustments are determined. Once a project is underway, the Company wil often experience changes in conditions, client requirements, specifications, designs, materials and work schedules. General y, a “change order” wil be negotiated with the customer to modify the original contract to approve both the scope and price of the change. Occasional y, disagreements arise regarding changes, their nature, measurement, timing and other characteristics that impact costs and revenue under the contract. When a change becomes a point of dispute between the Company and a customer, the Company wil assess the legal enforceability of the change to determine if a contract modification exists. The Company considers a contract modification to exist when the modification either creates new or changes the existing enforceable rights and obligations.
Most contract modifications are for goods and services that are not distinct from the existing contract due to the integrated services provided in the context of the contract and are accounted for as part of the existing contract. Therefore, the effect of a contract modification on the transaction price and the Company's measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue on a cumulative catch-up basis. If a contract modification is approved in scope and not price, the associated revenue is treated as variable consideration, subject to constraint. This can lead to a situation where costs are recognized in one period and revenue is recognized when customer agreement is obtained or claim resolution occurs, which can be in subsequent periods.
In certain instances, the Company’s long-term contracts al ow its customers to unilateral y reduce or eliminate scope of work without cause. These instances represent higher risk due to uncertainty of total contract value and estimated costs to complete; therefore, potential y impacting revenue recognition in future periods.
Revenue is measured based on consideration specified in the customer contract, and excludes any amounts col ected on behalf of third parties. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specified revenue producing transaction, that are col ected by the Company for a customer, are excluded from revenue.
d) Balance sheet classifications
A one-year time period is typical y used as the basis for classifying current assets and liabilities. However, there is a possibility that amounts receivable and payable under construction contracts (principal y holdbacks) may extend beyond one year.
Consolidated Financial Statements
December 31, 2021	F - 8	North American Construction Group Ltd.

e) Cash
Cash includes cash on hand and bank balances net of outstanding cheques.
f) Accounts receivable and contract assets
Accounts receivable are recorded when the Company has an unconditional right to consideration arising from performance of contracts with customers. Accounts receivable may be comprised of amounts bil ed to customers and amounts that have been earned but have not yet been bil ed. Such unbil ed but earned amounts general y arise when a bil ing period ends subsequent to the end of the reporting period. When this occurs, revenue equal to the earned and unbil ed amount is accrued. Such accruals are classified as accounts receivable on the balance sheet, even though they are not yet bil ed, as they represent consideration for work that has been completed prior to the period end where the Company has an unconditional right to consideration.
Contract assets include unbil ed amounts representing revenue recognized from work performed where the Company does not yet have an unconditional right to compensation. These balances general y relate to (i) revenue accruals on contracts where the percentage of completion method of revenue recognition requires an accrual over what has been bil ed and (i ) revenue recognized from variable consideration related to unpriced contract modifications.
The Company records al owance for credit losses using the expected credit loss model upon the initial recognition of financial assets. The estimate of expected credit loss considers historical credit loss information that is adjusted for current economic and credit conditions. Bad debt expense is charged to project costs in the Consolidated Statements of Operations and Comprehensive Income in the period the al owance is recognized. The counterparties to the majority of the Company's financial assets are major oil producers with a long history of no credit losses.
g) Contract costs
The Company occasional y incurs costs to obtain contracts (reimbursable bid costs) and to fulfil contracts (fulfil ment costs). If these costs meet certain criteria, they are capitalized as contract costs, included within other assets on the Consolidated Balance Sheets. Capitalized costs are amortized based on the transfer of goods or services to which the assets relate and are included in project costs. Reimbursable bid costs meet the criteria for capitalization when these costs wil be reimbursed by the owner regardless of the outcome of the bid. General y, this occurs when the Company has been selected as the preferred bidder for a project. The Company recognizes reimbursable bid costs an expense when incurred if the amortization period of the asset that the entity would have otherwise recognized is one year or less. Costs to fulfil a contract meet the criteria for capitalization if they relate directly to a specifical y identifiable contract, they generate or enhance resources that wil be used to satisfy future performance obligations and if the costs are expected to be recovered. The costs that meet this criterion are often mobilization and site set-up costs. Contract costs are recorded within other assets on the Consolidated Balance Sheets.
h) Remaining performance obligations
Remaining performance obligation represents the transaction price al ocated to performance obligations that are unsatisfied (or partial y unsatisfied) as of the end of the reporting period. Certain of the Company's long-term contracts can al ow customers to unilateral y reduce or eliminate the scope of the contracted work without cause. These long-term contracts represent higher risk due to uncertainty of total contract value and estimated costs to complete; therefore, potential y impacting revenue recognition in future periods. Excluded from this disclosure are amounts where the Company recognizes revenue as-invoiced (note 6(c)). Remaining performance obligations are recorded within contract assets and contract liabilities on the Consolidated Balance Sheets.
i) Contract liabilities
Contract liabilities consist of advance payments and bil ings in excess of costs incurred and estimated earnings on uncompleted contracts.
j) InventoriesInventories are carried at the lower of cost and net realizable value, and consist primarily of repair parts, parts and components held for resale, tires and track frames, fuel and lubricants, and customer rebuild work in progress. Cost is determined using the weighted-average method.
Consolidated Financial Statements
December 31, 2021	F - 9	North American Construction Group Ltd.

k) Property, plant and equipment
Property, plant and equipment are recorded at cost. Equipment under finance lease is recorded at the present value of minimum lease payments at the inception of the lease.
Major components of heavy construction equipment in use such as engines and drive trains are recorded separately. The capitalized interest is amortized at the same rate as the respective asset. Depreciation is not recorded until an asset is available for use. Depreciation is calculated based on the cost, net of the estimated residual value, over the estimated useful life of the assets on the fol owing bases and rates:
AssetsBasisRate
Heavy equipment	Units of production	3,000 - 120,000 hours
Major component parts in use	Units of production	2,500 - 70,000 hours
Other equipment	Straight-line	5 - 10 years
Licensed motor vehicles	Straight-line	5 - 10 years
Office and computer equipment	Straight-line	4 - 10 years
Furnishings, fixtures and facilities	Straight-line	10 - 30 years
BuildingsStraight-line	10 - 50 years
Leasehold improvements	Straight-line	Over shorter of estimated useful life and lease term
Land	No depreciation	No depreciation
The costs for periodic repairs and maintenance are expensed to the extent the expenditures serve only to restore the assets to their normal operating condition without enhancing their service potential or extending their useful lives.
l) Goodwill
Goodwil represents the excess of consideration over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in a business combination. Goodwil is reviewed annual y on October 1st for impairment or more frequently when there is an indication of potential impairment. Impairment is tested at the reporting unit level by comparing the reporting unit's carrying amount to its fair value. The process of determining fair values is subjective and requires management to exercise judgment in making assumptions about future results, including revenue and cash flow projections and discount rates. The annual test was performed on the acquired goodwil with no impairment identified.
m) Intangible assets
Acquired intangible assets with finite lives are recorded at historical cost net of accumulated amortization and accumulated impairment losses, if any. The cost of intangible assets acquired in an asset acquisition are recorded at cost based upon relative fair value as at the acquisition date. Costs incurred to increase the future benefit of intangible assets are capitalized. Intangible assets are recorded with goodwil on the Consolidated Balance Sheets.
Intangible assets with definite lives are amortized over their estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and method for an intangible asset with a finite useful life are reviewed at the end of each reporting period.
Estimated useful lives of definite lived intangible assets and corresponding amortization method are:
AssetsBasisRate
Internal-use software	Straight-line	4 years
Customer relationship	Straight-line	4 years
n) Impairment of long-lived assets
Long-lived assets or asset groups held and used including property, plant and equipment and identifiable intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the undiscounted future cash flows expected to result from the use and eventual disposition of an asset or group of assets is less than its carrying
Consolidated Financial Statements
December 31, 2021			F - 10	North American Construction Group Ltd.

amount, it is considered to be impaired. The Company measures the impairment loss as the amount by which the carrying amount of the asset or group of assets exceeds its fair value, which is charged to the Consolidated Statements of Operations and Comprehensive Income. In determining whether an impairment exists, the Company makes assumptions about the future cash flows expected from the use of its long-lived assets, such as: applicable industry performance and prospects; general business and economic conditions that prevail and are expected to prevail; expected growth; maintaining its customer base; and, achieving cost reductions. There can be no assurance that expected future cash flows wil be realized, or wil be sufficient to recover the carrying amount of long-lived assets. Furthermore, the process of determining fair values is subjective and requires management to exercise judgment in making assumptions about future results, including revenue and cash flow projections and discount rates.
At each reporting period, the Company reviews the carrying value of its long-lived assets for indications of impairment. At December 31, 2021, there were no impairment indicators identified, as there had been no material declines in the operating environment or expected financial results.
o) Assets held for sale
Long-lived assets are classified as held for sale when certain criteria are met, which include:
•	management, having the authority to approve the action, commits to a plan to sel the assets;
•	the assets are available for immediate sale in their present condition;
•	an active program to locate buyers and other actions to sel the assets have been initiated;
•	the sale of the assets is probable and their transfer is expected to qualify for recognition as a completed sale within one year;
•	the assets are being actively marketed at reasonable prices in relation to their fair value; and
•	it is unlikely that significant changes wil be made to the plan to sel the assets or that the plan wil be withdrawn.
Assets to be disposed of by sale are reported at the lower of their carrying amount or estimated fair value less costs to sel and are disclosed separately on the Consolidated Balance Sheets. These assets are not depreciated.
Equipment disposal decisions are made using an approach in which a target life is set for each type of equipment. The target life is based on the manufacturer’s recommendations and the Company’s past experience in the various operating environments. Once a piece of equipment reaches its target life it is evaluated to determine if disposal is warranted based on its expected operating cost and reliability in its current state. If the expected operating cost exceeds the target operating cost for the fleet or if the expected reliability is lower than the target reliability of the fleet, the unit is considered for disposal. Expected operating costs and reliability are based on the past history of the unit and experience in the various operating environments. Once the Company has determined that the equipment wil be disposed, and the criteria for assets held for sale are met, the unit is recorded in assets held for sale at the lower of depreciated cost or net realizable value.
p) Foreign currency translation
The functional currency of the Company and the majority of its subsidiaries is Canadian Dol ars. Transactions recorded within these subsidiaries that are denominated in foreign currencies are recorded at the rate of exchange on the transaction date. Monetary assets and liabilities within these subsidiaries denominated in foreign currencies are translated into Canadian Dol ars at the rate of exchange prevailing at the balance sheet date. The resulting foreign exchange gains and losses are included in the determination of earnings and included within general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income.
Accounts of the Company's Australia-based subsidiary, which has an Australian Dol ar functional currency and US- based subsidiaries, which have US Dol ar functional currency are translated into Canadian Dol ars using the current rate method. Assets and liabilities are translated at the rate of exchange in effect at the balance sheet date, and revenue and expense items are translated at the average rate of exchange for the period. The resulting unrealized exchange gains and losses from these translation adjustments are included as a separate component of shareholders’ equity in Accumulated Other Comprehensive Income. The effect of exchange rate changes on cash
Consolidated Financial Statements
December 31, 2021	F - 11	North American Construction Group Ltd.

balances held in foreign currencies is separately reported as part of the reconciliation of the change in cash and for the period.
q) Fair value measurement
Fair value measurements are categorized using a valuation hierarchy for disclosure of the inputs used to measure fair value, which prioritizes the inputs into three broad levels. Fair values included in Level 1 are determined by reference to quoted prices in active markets for identical assets and liabilities. Fair values included in Level 2 include valuations using inputs based on observable market data, either directly or indirectly other than the quoted prices. Level 3 valuations are based on inputs that are not based on observable market data. The classification of a fair value within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
r) Income taxes
The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period of enactment. A valuation al owance is recorded against any deferred tax asset if it is more likely than not that the asset wil not be realized.
The Company recognizes the effect of income tax positions only if those positions are more likely than not (greater than 50%) of being sustained. Changes in recognition or measurement are reflected in the period in which the change in judgement occurs. The Company accrues interest and penalties for uncertain tax positions in the period in which these uncertainties are identified. Interest and penalties are included in general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income.
s) Stock-based compensation
The Company has a Restricted Share Unit (“RSU”) Plan which is described in note 19(a). RSUs are general y granted effective July 1 of each fiscal year with respect to services to be provided in that fiscal year and the fol owing two fiscal years. The RSUs general y vest at the end of the three-year term. The Company settles RSUs with common shares purchased on the open market through a trust arrangement. Compensation expense is calculated based on the number of vested RSUs multiplied by the fair value of each RSU as determined by the volume weighted-average trading price of the Company’s common shares for the five trading days immediately preceding the day on which the fair market value was to be determined. The Company recognizes compensation cost over the three-year term in the Consolidated Statements of Operations and Comprehensive Income, with a corresponding increase to additional paid-in capital. When dividends are paid on common shares, additional dividend equivalent RSUs are granted to al RSU holders as of the dividend payment date. The number of additional RSUs to be granted is determined by multiplying the dividend payment per common share by the number of outstanding RSUs, divided by the fair market value of the Company's common shares on the dividend payment date. Such additional RSUs are granted subject to the same service criteria as the underlying RSUs.
The Company has a Performance Restricted Share Unit ("PSU") plan which is described in note 19(b). The PSUs vest at the end of a three-year term and are subject to the performance criteria approved by the Human Resources and Compensation Committee at the date of the grant. Such performance criterion includes the passage of time and is based upon the improvement of total shareholder return ("TSR") as compared to a defined company Canadian peer group. TSR is calculated using the fair market values of voting common shares at the grant date, the fair market value of voting common shares at the vesting date and the total dividends declared and paid throughout the vesting period. The grants are measured at fair value on the grant date using a Monte Carlo model. At the maturity date, the Human Resources and Compensation Committee wil assess actual performance against the performance criteria and determine the number of PSUs that have been earned. The Company intends to settle al PSUs with common shares purchased on the open market through a trust arrangement. The Company recognizes compensation cost over the three-year term of the PSU in the Consolidated Statements of Operations and Comprehensive Income, with a corresponding increase to additional paid-in capital.
The Company has a Deferred Stock Unit (“DSU”) Plan which is described in note 19(c). The DSU plan enables directors and executives to receive al or a portion of their annual fee or annual executive bonus compensation in
Consolidated Financial Statements
December 31, 2021	F - 12	North American Construction Group Ltd.

the form of DSUs and are settled in cash. Compensation expense is calculated based on the number of DSUs multiplied by the fair market value of each DSU as determined by the volume weighted-average trading price of the Company’s common shares for the 5 trading days immediately preceding the day on which the fair market value is to be determined, with any changes in fair value recognized in general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income. Compensation costs related to DSUs are recognized in ful upon the grant date as the units vest immediately. When dividends are paid on common shares, additional dividend equivalent DSUs are granted to al DSU holders as of the dividend payment date. The number of additional DSUs to be granted is determined by multiplying the dividend payment per common share by the number of outstanding DSUs, divided by the fair market value of the Company's common shares on the dividend payment date. Such additional DSUs are granted subject to the same service criteria as the underlying DSUs.
The Company had a Share Option Plan which is described in note 19(d). Effective November 17, 2021, this plan was terminated. The Company accounts for al stock-based compensation payments that are settled by the issuance of equity instruments at fair value. Compensation cost is measured using the Black-Scholes model at the grant date and is expensed on a straight-line basis over the award’s vesting period, with a corresponding increase to additional paid-in capital. Upon exercise of a stock option, share capital is recorded at the sum of proceeds received and the related amount of additional paid-in capital.
As stock-based compensation expense recognized in the Consolidated Statements of Operations and Comprehensive Income is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimated.
t) Net income per share
Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period (see note 17(b)). Diluted net income per share is computed by dividing net income available to common shareholders by the weighted-average number of shares outstanding during the year, adjusted for dilutive share amounts. The diluted per share amounts are calculated using the treasury stock method and the if-converted method.
u) Leases
For lessee accounting, the Company determines whether a contract is or contains a lease at inception of the contract. At the lease commencement date, the Company recognizes a right-of-use ("ROU") asset and a lease liability. The ROU asset for operating and finance leases are included in operating lease right-of-use assets and property, plant and equipment, respectively, on the Consolidated Balance Sheets. The lease liability for operating and finance leases are included in operating lease liabilities and finance lease obligations, respectively.
Operating and finance lease assets and liabilities are initial y measured at the present value of lease payments at the commencement date. Subsequently, finance lease liabilities are measured at amortized cost using the effective interest rate method and operating lease liabilities are measured at the present value of unpaid lease payments.
As most of the Company’s operating lease contracts do not provide the implicit interest rate, nor can the implicit interest rate be readily determined, the Company uses its incremental borrowing rate as the discount rate for determining the present value of lease payments. The Company's incremental borrowing rate for a lease is the rate that the Company would pay to borrow an amount equal to the lease payments on a col ateralized basis over a similar term. The Company uses the lease implicit interest rate when it is determinable.
The lease term for al of the Company's leases includes the non-cancel able period of the lease plus any period covered by options to extend (or not to terminate) the lease term when it is reasonably certain that the Company wil exercise that option.
Lease payments are comprised of fixed payments owed over the lease term and the exercise price of a purchase option if the Company is reasonably certain to exercise the option. The ROU assets for both operating and finance leases are initial y measured at cost, which consists of the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred, less any lease incentives received. Subsequently, the ROU assets for finance leases are amortized on a straight-line basis from the lease commencement date to the earlier of the end of its useful life or the end of the lease term. For finance leases, ROU asset depreciation expense is recognized and presented separately from interest expense on the
Consolidated Financial Statements
December 31, 2021	F - 13	North American Construction Group Ltd.

lease liability through depreciation and interest expense, net, respectively. The ROU asset for operating leases is measured at the amortized value of the ROU asset. For operating leases, amortization of the ROU asset is calculated as the current-period lease cost adjusted by the lease liability accretion to the then outstanding lease balance. Lease expense of the operating lease ROU asset is recognized on a straight-line basis over the remaining lease term through general and administrative expenses.
ROU assets for operating and finance leases are reduced by any accumulated impairment losses. The Company's existing accounting policy for impairment of long-lived assets is applied to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to be recognized.
The Company monitors for events or changes in circumstances that require a reassessment of one or more of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset.
The Company general y accounts for contracts with lease and non-lease components separately. This involves al ocating the consideration in the contract to the lease and non-lease components based on each component’s relative standalone price. For certain leases, the Company has elected to apply the practical expedient to account for the lease and non-lease components together as a single lease component. Non-lease components include common area maintenance and machine maintenance. For those leases, the lease payments used to measure the lease liability include al of the fixed consideration in the contract.
ROU assets and lease liabilities for al leases that have a lease term of 12 months or less ("short-term leases") are not recognized. The Company recognizes its short-term lease payments as an expense on a straight-line basis over the lease term. Short-term lease variable payments are recognized in the period in which the payment is assessed.
For lessor accounting, the Company entered into contracts to sublease certain operating property leases to third parties and general y accounts for lease and non-lease components of subleases separately. The Company also entered into agreements as a lessor for equipment leases.
If any of the fol owing criteria are met, the Company classifies the lease as a sales-type lease:
•	The lease transfers ownership of the underlying asset to the lessee by the end of the lease term;
•	The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise;
•	The lease term is for the major part of the remaining economic life of the underlying asset. However, if the commencement date fal s at or near the end of the economic life of the underlying asset, this criterion shal not be used for purposes of classifying the lease;
•	The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantial y al of the fair value of the underlying asset.
•	The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.
When none of these criteria are met, the Company classifies the lease as an operating lease unless both of the fol owing criteria are met, in which case the Company records the lease as a direct financing lease:
•	The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments and/or any other third party unrelated to the lessor equals or exceeds substantial y al of the fair value of the underlying asset.
•	It is probable that the lessor wil col ect the lease payments plus any amount necessary to satisfy a residual value guarantee.
For sales-type leases, the Company recognizes the net investment in the lease, and derecognizes the underlying asset on the Consolidated Balance Sheets. The interest income over the lease term is recognized in the Consolidated Statements of Operations and Comprehensive Income, with cash received from leases classified as operating cash flows in the Consolidated Statements of Cash Flows. The difference between the cash received from leases and the interest income is the reduction of the initial net investment. The net investment at the end of the lease term wil equate to the estimated residual value at lease inception. For operating leases, the Company
Consolidated Financial Statements
December 31, 2021	F - 14	North American Construction Group Ltd.

continues to recognize the underlying asset on the Consolidated Balance Sheets, and lease income is recognized in revenue, straight-line over the lease term in the Consolidated Statements of Operations and Comprehensive Income. The cash received from leases are classified as operating cash flows on the Consolidated Statements of Cash Flows.
v) Deferred financing costs
Underwriting, legal and other direct costs incurred in connection with the issuance of debt are presented as deferred financing costs. Deferred financing costs related to the mortgage and the issuance of Convertible Debentures are included within liabilities on the Consolidated Balance Sheets and are amortized using the effective interest rate method over the term to maturity. Deferred financing costs related to revolving facilities under the credit facilities are included within other assets on the Consolidated Balance Sheets and are amortized ratably over the term of the Credit Facility.
w) Investments in affiliates and joint ventures
Upon inception or acquisition of a contractual agreement, the Company performs an assessment to determine whether the arrangement contains a variable interest in a legal entity and whether that legal entity is a variable interest entity ("VIE"). Where it is concluded that the Company is the primary beneficiary of a VIE, the Company wil consolidate the accounts of that VIE. Other qualitative factors that are considered include decision-making responsibilities, the VIE capital structure, risk and rewards sharing, contractual agreements with the VIE, voting rights and level of involvement of other parties. The Company assesses the primary beneficiary determination for a VIE on an ongoing basis as changes occur in the facts and circumstances related to a VIE. If an entity is determined not to be a VIE, the voting interest entity model wil be applied. The maximum exposure to loss as a result of involvement with the VIE is the Company’s share of the investee’s net assets.
The Company utilizes the equity method to account for its interests in affiliates and joint ventures that the Company does not control but over which it exerts significant influence. The equity method is typical y used when it has an ownership interest of between 15% and 50% in an entity, provided the Company is able to exercise significant influence over the investee’s operations. Significant influence is the power to participate in the financial and operating policy decisions of the investee.
Under the equity method, the investment in an affiliate or a joint venture is initial y recognized at cost. Transaction costs that are incremental and directly attributable to the investment in the affiliate or joint venture are included in the cost. The total initial cost of the investment is attributable to the net assets in the equity investee at fair value and additional assets acquired including intangible assets.
The carrying amount of investment is adjusted to recognize changes in the Company’s share of net assets of the affiliate or joint venture since the acquisition date.
The aggregate of the Company’s share of profit or loss of affiliates and joint ventures is shown on the face of the Consolidated Statements of Operations and Comprehensive Income, representing profit or loss after in the subsidiaries of the affiliate or joint venture. Transactions between the Company and the affiliate or joint venture are eliminated to the extent of the interest in the affiliate or joint venture. When the Company earns revenue on downstream sales to affiliate or joint ventures, it eliminates its proportionate share of profit through revenue and project or equipment costs.
After application of the equity method, the Company determines whether it is necessary to recognize an impairment loss on its investment in its affiliate or joint venture. At each reporting date, the Company determines whether there is objective evidence that the investment in the affiliate or joint venture is impaired. If there is such evidence, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognizes the loss within "equity earnings in affiliates and joint ventures" in the Consolidated Statements of Operations and Comprehensive Income. Upon loss of significant influence over the associate or joint control over the joint venture, the Company measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognized in the Consolidated Statements of Operations and Comprehensive Income.
Consolidated Financial Statements
December 31, 2021	F - 15	North American Construction Group Ltd.

x) Government assistance
The Company may receive compensation from government-funded assistance, which provides compensation for expenses incurred. These amounts are recognized in the Consolidated Statements of Operations and Comprehensive Income on a systematic basis in the periods in which the expenses are recognized. These amounts are presented as a reduction to the related expense.
y) Derivative instruments
The Company may periodical y use derivative financial instruments to manage financial risks from fluctuations in share prices. These instruments included swap agreements related to the conversion of convertible debentures. Such instruments were only used for risk management purposes. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. Derivative financial instruments are subject to standard terms and conditions, financial controls, management and risk monitoring procedures including Board approval for al significant transactions. These derivative financial instruments were not designated as hedges for accounting purposes and were recorded at fair value with realized and unrealized gains and losses recognized in the Consolidated Statements of Operations and Comprehensive Income.
z) Business combinations
Business combinations are accounted for using the acquisition method. Assets acquired and liabilities assumed are recorded at the acquisition date at their fair values. The Company measures goodwil as the excess of the total cost of acquisition over the fair value of identifiable net assets of an acquired business at the acquisition date. Any contingent consideration payable is recognized at fair value at the acquisition date. The current portion of the consideration payable is recorded in accrued liabilities and long-term portion is recorded in other long-term obligations on the Consolidated Balance Sheets, with any subsequent changes to fair value recorded in other income in Consolidated Statement of Operations and Comprehensive Income. Acquisition-related costs are expensed when incurred in general and administrative charges.
3. Accounting pronouncements recently adopted
a) Business Combinations
In October 2021, the FASB issued ASU 2021-08, Business Combinations. The accounting standard update was issued to improve the accounting for acquired revenue contracts with customers in a business combination. This update requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 - Revenue from Contract with Customers. The adoption of this new standard did not have an impact to the consolidated financial statements.
b) Government Assistance
In November 2021, the FASB issued ASU 2021-10, Government Assistance. The accounting standard update was issued to increase the transparency of government assistance including the disclosure of 1) the type of assistance, 2) an entity's accounting for the assistance, and 3) the effect of the assistance on an entity's financial statements. The adoption of this new standard did not have a material impact to the consolidated financial statements.
4. Recent accounting pronouncements not yet adopted
a) Debt with Conversion and Other Options
In September 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity's own Equity. This accounting standard update was issued to address issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. This standard is effective January 1, 2022 with early adoption permitted. The Company is assessing the impact that the adoption of this standard may have on its consolidated financial statements.
Consolidated Financial Statements
December 31, 2021	F - 16	North American Construction Group Ltd.

5. Accounts receivable
		December 31,		December 31,

			2021

Trade	11	$	51,774 $
Holdbacks			380
Accrued trade receivables			12,266
Contract receivables		$	64,420 $
Other			4,367
		$	68,787 $
Year ended December 31,			2021

Operations support services		$	600,308 $
Equipment and component sales			28,603
Construction services			25,232
		$	654,143 $
Time-and-materials		$	388,998 $
Unit-price			253,840
Lump-sum			11,305
		$	654,143 $
As-invoiced		$	407,496 $
Cost-to-cost percent complete			218,044
Point-in-time			28,603
		$	654,143 $
Year ended December 31,			2021

Balance, beginning of year		$	7,008 $
Transferred to receivables from contract assets recognized at the beginning of the period			(7,008)
			8,838
Increases as a result of work completed, but not yet an unconditional right to consideration			921
Balance, end of year		$	9,759 $
Year ended December 31,			2021

Balance, beginning of year		$	1,512 $
Revenue recognized that was included in the contract liability balance at the beginning of the period			(899)
Increases due to cash received, excluding amounts recognized as revenue during the period			2,736
Balance, end of year		$	3,349 $
December 31, 2021					F - 17

The fol owing table provides information about revenue recognized from performance obligations that were satisfied (or partial y satisfied) in previous periods:
Year ended December 31,	2021	2020
Revenue recognized			$	3,572 $	1,403
These amounts relate to cumulative catch-up adjustments arising from changes in estimated project costs on cost-to-cost percent complete jobs and final settlement of constrained variable consideration.
c) Transaction price allocated to the remaining performance obligations
The fol owing table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partial y unsatisfied) at the end of the reporting period. Included is al consideration from contracts with customers, excluding amounts that are recognized using the as-invoiced method and any constrained amounts of revenue.
For the year ended December 31, 2022
				$	116,352
2023					10,500
2024					8,362
2025					6,226
				$	141,440
d) Contract costs
The fol owing table summarizes contract costs included within other assets on the Consolidated Balance Sheets.
			December 31,	December 31,
	2021	2020
Fulfil ment costs			$	2,673 $	1,432
Reimbursable bid costs				—	537
			$	2,673 $	1,969
During the year ended December 31, 2021, fulfil ment costs of $2,909 and reimbursable bid costs of $1,464 were capitalized (December 31, 2020 - $2,256 and $537, respectively). During the year ended December 31, 2021, fulfil ment costs of $1,668 and reimbursable bid costs of $2,001 were recognized (December 31, 2020 - $1,841 and $nil, respectively). Reimbursable bid costs received in excess of amounts capitalized have been recognized in general and administrative expenses as a recovery.
7. Inventory
The fol owing table summarizes the Company's major classes of inventory:
			December 31,	December 31,
	2021	2020
		Note 22
Repair parts			$	19,519 $	14,684
Parts, equipment and components held for resale				15,858	—
Tires and track frames				2,617	2,546
Fuel and lubricants				1,832	1,921
Customer rebuild work in process				4,718	—
			$	44,544 $	19,151
During the year ended December 31, 2021, parts and components held for resale increased upon the acquisition of DGI (Aust) Trading Pty Ltd. ("DGI") (note 12).
Consolidated Financial Statements
December 31, 2021					F - 18	North American Construction Group Ltd.

8. Long-term debt
		December 31,		December 31,

			2021

Credit Facility	8(a)	$	110,000 $
Convertible debentures	8(b)		129,750
Mortgages	8(e)		30,000
Financing obligations	8(c)		47,945
Promissory notes	8(d)		13,210
Unamortized deferred financing costs	8(f)		(5,178)
		$	325,727 $
Less: current portion of long-term debt			(19,693)
		$	306,034 $
•
					◦
					◦
					◦
•
					◦
December 31, 2021						F - 19

◦

The Fixed Charge Coverage Ratio is to be maintained at a ratio greater than 1.15:1.

The Credit Facility bears interest at Canadian prime rate, U.S. Dol ar Base Rate, Canadian bankers’ acceptance rate or London interbank offered rate ("LIBOR") (al such terms as used or defined in the Credit Facility), plus applicable margins. Effective December 31, 2021, LIBOR wil be discontinued for future contracts; however, it wil be available and published until June 2023 for contracts entered before 2022. During the transition, the Company wil either have the option to use LIBOR until June 2023 or to choose an alternative rate like Secured Overnight Financing Rate ("SOFR"). The Company is also subject to non-refundable standby fees, 0.40% to 0.75% depending on the Company's Total Debt to Bank EBITDA Ratio. Total debt ("Total Debt") is defined in the Credit Facility as long-term debt including finance leases and letters of credit, excluding convertible debentures, deferred financing costs, the mortgage related to NACG Acheson Ltd., and other non-recourse debt. The Credit Facility is secured by a first priority lien on al of the Company's existing and after-acquired property excluding the Company's first securities interests on the Business Development Bank of Canada ("BDC") mortgage.

On December 3, 2021, the Company entered into an agreement with a financial institution to provide guarantee on a revolving equipment lease credit facility of $45.0 mil ion for Mikisew North American Limited Partnership, an affiliate of the Company. This equipment lease credit facility wil al ow MNALP to avail the credit through a lease agreement and/or equipment finance contract with appropriate supporting documents. As at December 31, 2021, the available balance on this facility was $28.1 mil ion. At this time, there have been no instances or indication that payments wil not be made by MNALP. Therefore, no liability has been recorded.

b) Convertible debentures

December 31,

2021

2020

5.50% convertible debentures

74,750 $

—

5.00% convertible debentures

55,000

129,750 $

55,000

On June 1, 2021, the Company issued $65,000 aggregate principal amount of 5.50% convertible unsecured subordinated debentures. On June 4, 2021, the underwriters exercised the over-al otment option, in ful , purchasing an additional $9,750 aggregate principal amount of 5.50% convertible unsecured subordinated debentures.

The terms of the convertible debentures are summarized as fol ows:

Share equivalence

Debt issuance

Date of issuance

Maturity

Conversion price

per $1000

costs

debenture

5.50% convertible debentures

June 1, 2021

June 30, 2028

24.75 $

40.4040 $

3,531

5.00% convertible debentures

March 20, 2019

March 31, 2026

26.25 $

38.0952 $

2,691

Interest on the 5.50% convertible debentures is payable semi-annual y in arrears on June 30 and December 31 of each year, commencing on December 31, 2021. Interest on the 5.00% convertible debentures is payable semi-annual y on March 31 and September 30 of each year.

The 5.50% convertible debentures are not redeemable prior to June 30, 2024, except under certain exceptional circumstances. The 5.50% convertible debentures may be redeemed at the option of the Company, in whole or in part, at any time on or after June 30, 2024 at a redemption price equal to the principal amount provided that the market price of the common shares is at least 125% of the conversion price; and on or after June 30, 2026 at a redemption price equal to the principal amount. In each case, the Company wil pay accrued and unpaid interest on the debentures redeemed to the redemption date.

The 5.00% convertible debentures are redeemable under certain conditions after a change in control has occurred. If a change in control occurs, the Company is required to offer to purchase al of the 5.00% convertible debentures at a price equal to 101% of the principal amount plus accrued and unpaid interest to the date of purchase.

During the year ended December 31, 2021, the Company realized a gain of $7,071 (unrealized gain for the year ended December 31, 2020 of $4,334) on the swap agreement related to the 5.50% convertible debentures that were issued in 2017 and redeemed through issuance of 4,583,655 common shares in April 2020. This swap agreement was completed on September 30, 2021 and the derivative financial instrument recorded on the Consolidated Balance Sheet was extinguished at that time.

Consolidated Financial Statements

December 31, 2021

F - 20

North American Construction Group Ltd.

c) Financing obligations
During the year ended December 31, 2021, the Company recorded new financing obligations of $11,700. The financing contract expires on February 9, 2026. The Company is required to make monthly payments over the life of the contract with an annual interest rate of 2.23%. The financing obligations are secured by the corresponding property, plant and equipment.
d) Promissory note
During the year ended December 31, 2021, the Company recorded a new equipment promissory note of $4,300. The contract expires on August 5, 2025. The Company is required to make monthly payments over the life of the contract with an annual interest rate of 4.20%. The promissory note is secured by the corresponding property, plant and equipment. The Company also acquired a new promissory note of $370 upon acquisition of DGI (note 12).The contract expires in November 2023 and bears interest at 2.90%. During the year ended December 31, 2021, the Company made payments of $4,185 towards promissory notes.
e) Mortgage
On October 28, 2021, the Company entered into an updated mortgage agreement with BDC which increased the mortgage amount from $21.1 mil ion to $30.0 mil ion. The updated mortgage includes additional loan of $7.0 mil ion for a building expansion and a $1.9 mil ion cash advance. The mortgage has a maturity date of November 1, 2046 and bears variable interest at BDC's floating base rate of 5.60% minus a variance of 2.20%, equal to 3.40%.
f) Deferred financing costs
	December 31,		December 31,
		2021		2020
Cost	$	6,351 $		2,784
Accumulated amortization		1,173		588
	$	5,178 $		2,196
During the year ended December 31, 2021, the Company recognized accelerated amortization of $1,064 due to the early conversion of convertible debentures.
9. Property, plant and equipment
	Accumulated
December 31, 2021					Cost	Depreciation		Net Book Value
Owned assets
Heavy equipment						$	353,037 $	105,686 $		247,351
Major component parts in use							343,048	131,157		211,891
Other equipment							45,096	30,633		14,463
Licensed motor vehicles							15,113	10,838		4,275
Office and computer equipment							7,002	4,891		2,111
Buildings							29,406	3,748		25,658
Capital inventory							24,605	—		24,605
Land							10,472	—		10,472
							827,779	286,953		540,826
Assets under finance lease
Heavy equipment							92,690	28,504		64,186
Major component parts in use							52,679	21,996		30,683
Other equipment							4,633	1,281		3,352
Licensed motor vehicles							2,674	771		1,903
							152,676	52,552	100,124
Total property, plant and equipment						$	980,455 $	339,505 $		640,950
Consolidated Financial Statements
December 31, 2021							F - 21	North American Construction Group Ltd.

December 31, 2020
		Accumulated
	Cost	Depreciation	Net Book Value	Note 22Owned assets
Heavy equipment				$	351,842 $	102,469 $			249,373
Major component parts in use					304,205	111,583			192,622
Other equipment					41,784	26,918			14,866
Licensed motor vehicles					15,747	10,370			5,377
Office and computer equipment					6,337					4,137	2,200
Buildings					22,582					3,040	19,542
Capital inventory					21,817					—	21,817
Land					10,472					—	10,472
					774,786	258,517			516,269
Assets under finance lease
Heavy equipment					97,871	25,454			72,417
Major component parts in use					52,798	16,264			36,534
Other equipment					5,287					966	4,321
Licensed motor vehicles					3,629					960	2,669
					159,585	43,644			115,941
Total property, plant and equipment				$	934,371 $	302,161 $			632,210
10. Finance and operating leases
As a lessee, the Company has finance and operating leases for heavy equipment, shop facilities, vehicles and office facilities. These leases have terms of 1 to 15 years, with options to extend on certain leases for up to five years. The Company generates operating lease income from the sublease of certain office facilities and heavy equipment rentals.
a) Minimum lease payments and receipts
The future minimum lease payments and receipts from non-cancel able operating leases as at December 31, 2021 for the periods shown are as fol ows:
				Payments	Receipts
For the year ending December 31,							Finance Leases	Operating Leases		Operating leases
2022								$	26,398 $	3,845 $		5,497
2023									18,272	2,581		4,355
2024									9,743	1,371		493
2025									1,448	1,429			—
2026 and thereafter									1,148	8,902			—
Total minimum lease payments								$	57,009 $	18,128 $		10,345
Less: amount representing interest									(2,288)	(3,350)
Carrying amount of minimum lease payments								$	54,721 $	14,778
Less: current portion of leases									(25,035)	(3,317)
								$	29,686 $	11,461
b) Lease expenses and (income)
Year ended December 31,						2021	2020
Short-term lease expense		$	27,421 $			14,654
Operating lease expense						4,556	4,740
Operating lease income			(7,074)			(8,118)
During the year ended December 31, 2021, depreciation of equipment under finance leases was $21,343 (December 31, 2020 - $17,147).
Consolidated Financial Statements
December 31, 2021								F - 22	North American Construction Group Ltd.

c) Supplemental balance sheet information
	December 31,		December 31,
		2021		2020
Net book value of property, plant and equipment under finance leases	$	100,124 $		115,941
Weighted-average remaining lease term (in years):
Finance leases		2.5		3.0
Operating leases		8.3		8.1
Weighted-average discount rate:
Finance leases		3.22 %		3.66 %
Operating leases		4.68 %		4.72 %
11. Investments in affiliates and joint ventures
On October 13, 2021, the Company entered into the Limited Liability Company Agreement with Concessions Fargo Holdings, LLC, S&B USA Concessions – Fargo LP to form Red River Val ey Al iance, LLC (“RRVA”). On August 19, 2021, RRVA entered into an agreement with the Metro Flood Diversion Authority to design, construct, finance, operate and maintain a diversion channel and associated infrastructure that wil form part of the Fargo-Moorhead Metropolitan Area Flood Risk Management Project. The Company holds 15% interest in the investment and can exercise significant influence over the financial and operational policies of the joint venture through its voting rights, therefore the equity method of accounting is used to account for this investment.
On July 20, 2021, the Company entered into a Joint Venture Agreement with Acciona Construction USA Corp. (“Acciona”), and Shikun and Binui – America Inc. (“SBA”), to form ASN Constructors. The joint venture formalizes the relationship in terms of the participation in the Fargo Moorhead Area Diversion Project for which the ASN Constructors entered into a design and build contract with RRVA for the Fargo project agreement. The agreement was effective August 19, 2021. The Company holds 30% proportional share of interest and cost sharing through the joint venture agreement. The Company can exercise influence over the financial and operational policies of the joint venture through its voting rights, therefore the equity method of accounting is used to account for this investment.
The fol owing is a summary of the Company's interests in its various affiliates and joint ventures, which it accounts for using the equity method:
Affiliate or joint venture name:				Interest
Nuna Group of Companies
1229181 B.C Ltd.				49 %
North American Nuna Joint Venture				50 %
Nuna East Ltd.				37 %
Nuna Pang Contracting Ltd.				37 %
Nuna West Mining Ltd.				49 %
NAYL Realty Inc.				49 %
BNA Remanufacturing Limited Partnership				50 %
Dene North Site Services Partnership				49 %
Mikisew North American Limited Partnership				49 %
ASN Constructors				30 %
Red River Val ey Al iance LLC				15 %
The fol owing table summarizes the movement in the investments in affiliates and joint ventures balance during the year:
	December 31,		December 31,
		2021		2020
				Note 22
Balance, beginning of the year	$	46,263 $		45,015
Investments in affiliates and joint ventures		2,321		2,790
Share of net income		21,860		7,740
Dividends and advances received from affiliates and joint ventures		(11,270)			(8,621)
Other adjustments		(3,200)		(661)
Balance, end of the year	$	55,974 $		46,263
Consolidated Financial Statements
December 31, 2021					F - 23	North American Construction Group Ltd.

During the year ended December 31, 2021, the Company invested $1,959 in cash and $362 in property, plant and equipment for the investments in Mikisew North American Limited Partnership and BNA Remanufacturing Limited Partnership, respectively.
The financial information for the Company's share of the investments in affiliates and joint ventures accounted for using the equity method is summarized as fol ows:
Balance Sheets
	December 31,		December 31,
		2021		2020
				Note 22
Assets
Current assets	$	118,371 $			55,887
Non-current assets		42,406		43,020
Total assets	$	160,777 $			98,907
Liabilities
Current liabilities	$	82,926 $		27,772
Non-current liabilities		21,877		24,872
Total liabilities	$	104,803 $			52,644
Net investments in affiliates and joint ventures	$	55,974 $		46,263
Statements of Operations
Year ended December 31,		2021		2020
Revenue	$	332,440 $		159,054
Gross profit		33,641		17,220
Income before taxes		25,064		9,113
Net income		21,860		7,740
Related parties
The fol owing table provides the material aggregate outstanding balances with affiliates and joint ventures. Accounts payable and accrued liabilities due to joint ventures and affiliates do not bear interest, are unsecured and without fixed terms of repayment. Accounts receivable from certain joint ventures and affiliates bear interest at various rates, and al other accounts receivable amounts are non-interest bearing.
	December 31,		December 31,
		2021		2020
				Note 22
Accounts receivable	$	31,050 $		3,808
Other assets		2,162		1,432
Accounts payable and accrued liabilities		286		5,296
The Company enters into transactions with a number of its joint ventures and affiliates that involve providing services primarily consisting of subcontractor services, equipment rental revenue, equipment and component sales, and management fees. These transactions were conducted in the normal course of operations, which were established and agreed to as consideration by the related parties. For the years ended December 31, 2021 and 2020, revenue earned from these services was $356,592 and $191,104, respectively. The majority of services provided in the oil sands region are being completed through the Mikisew North American Limited Partnership. This joint venture performs the role of contractor and sub-contracts work to the Company.
Consolidated Financial Statements
December 31, 2021					F - 24	North American Construction Group Ltd.

12. Business acquisition
On July 1, 2021, the Company acquired al the shares and business of DGI (Aust) Trading Pty Ltd., a supplier of production-critical mining equipment and components based in Kempsey, New South Wales, Australia for total consideration of $18,441, comprised of a cash payment and contingent consideration in the form of an earn-out to be paid based on the earnings of DGI over the next four annual periods.
The fol owing table summarizes the total consideration paid for DGI shareholders and the fair value of the assets acquired and liabilities assumed at the acquisition date:
	July 1, 2021
Cash consideration	$	13,724
Earn-out at estimated fair value		4,717
Total consideration	$	18,441
Purchase price al ocation to assets acquired and liabilities assumed:Cash
	$	2,329
Accounts receivable		1,910
Inventory		13,713
Prepaid expenses and deposits		971
Property, plant and equipment		1,176
Operating lease right-of-use asset		749
Intangible assets		2,575
Accounts payable		(3,560)
Accrued liabilities		(718)
Long-term debt		(370)
Operating lease liability		(749)
Deferred tax liability		(128)
Total identifiable net assets at fair value	$	17,898
Goodwill arising on acquisition	$	543
The fair value of acquired identified intangible assets, consists of $595 in brand with an indefinite useful life and $1,980 in customer relationships with a useful life of four years.
The fair value of acquired inventory consists of used mining equipment and related components for resale.
During the year ended December 31, 2021, the Company recognized $209 of acquisition related costs associated with professional and legal advisory fees in general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income.
During the year ended December 31, 2021, the Company recognized $12,687 or 2% of revenue and $605 or 1% of net income from DGI recorded in the Consolidated Statement of Operations and Comprehensive Income.
The pro forma disclosures related to the effect of the acquisition have been excluded on the basis of immateriality.
Consolidated Financial Statements
December 31, 2021			F - 25	North American Construction Group Ltd.

13. Income taxes
Income tax expense differs from the amount that would be computed by applying the federal and provincial statutory income tax rates to income before income taxes. The reasons for the differences are as fol ows:
Year ended December 31,	2021	2020
Income before income taxes			$	60,693			$	60,472
Equity earnings in affiliates and joint ventures					(21,860)		(7,740)
			$	38,833			$	52,732
Tax rate	23.00 %	23.00 %
Expected expense			$	8,932			$	12,128
Adjustments related to:
Stock-based compensation				1,043				(113)
Foreign tax rate differential				233				—
Other				(923)				(751)
Total income tax expense			$	9,285			$	11,264
Current income tax expense			$	1,000			$	—
Deferred income tax expense				8,285				11,264
Total income tax expense			$	9,285			$	11,264
The deferred tax assets and liabilities are summarized below:
			December 31,	December 31,
	2021	2020
Deferred tax assets:
Non-capital and net capital loss carryforwards			$	40,367 $	40,758
Finance lease obligations				24,785	27,736
Stock-based compensation				4,029	2,872
Other				2,093	1,990
Subtotal			$	71,274 $	73,356
Less: valuation al owance				—	(391)
			$	71,274 $	72,965
Deferred tax liabilities:
Contract assets			$	932 $	1,524
Property, plant and equipment				124,265	117,768
Other				2,277	1,461
			$	127,474 $	120,753
Net deferred income tax liability			$	56,200 $	47,788
Classified as:
			December 31,	December 31,
	2021	2020
Deferred tax asset			$	— $	16,407
Deferred tax liability				(56,200)	(64,195)
			$	(56,200) $	(47,788)
The Company and its subsidiaries file income tax returns in the Canadian federal jurisdiction, multiple provincial jurisdictions, the U.S. federal jurisdiction, three U.S state jurisdictions and the Australia federal jurisdiction.
Consolidated Financial Statements
December 31, 2021						F - 26	North American Construction Group Ltd.

At December 31, 2021, the Company has a deferred tax asset of $40,367 resulting from non-capital loss carryforwards of $175,509, which expire as fol ows:
	December 31,

		2021
2026		3
2027		278
2032		176
2033		9,095
2036		1,213
2037		17,799
2038		86,979
2039		37,798
2040		18,188
2041		3,980
	$	175,509
14. Accrued liabilities
				December 31,	December 31,
			Note
					2021	2020
		Note 22
Payrol liabilities				$	16,888 $	11,869
Income and other taxes payable					5,064	3,205
Dividends payable			17(c)		1,137	1,167
Accrued interest payable					1,331	856
Liabilities related to short-term rentals					2,678	730
Funding obligations					3,022	—
Obligation related to acquisition earn-out liability					1,571	—
Other					1,698	1,555
				$	33,389 $	19,382
15. Other long-term obligations
				December 31,	December 31,
			Note
					2021	2020
		Note 22
Directors' deferred stock unit plan			19(c)	$	17,515 $	10,761
Deferred gain on sale-leaseback			15(a)		2,954	4,748
Obligation related to acquisition earn-out liability			12		3,098	—
Other					2,833	3,341
				$	26,400 $	18,850
a) Deferred gain on sale-leaseback
Changes in deferred gains on sale-leaseback transactions of heavy equipment are summarized below.
				December 31,	December 31,
					2021	2020
		Note 22
Balance, beginning of year				$	4,748 $	6,593
Amortization of deferred gain on sale-leaseback					(1,794)	(1,845)
Balance, end of year				$	2,954 $	4,748
The gain on sale was deferred and is being amortized under depreciation in the Consolidated Statements of Operations and Comprehensive Income over the expected useful life of the equipment.
16. Financial instruments and risk management
a) Fair value measurements
In determining the fair value of financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing on each reporting date. Standard market conventions and
Consolidated Financial Statements
December 31, 2021						F - 27	North American Construction Group Ltd.

techniques, such as discounted cash flow analysis are used to determine the fair value of the Company’s financial instruments. Al methods of fair value measurement result in a general approximation of fair value and such value may never actual y be realized.

The fair values of the Company’s cash, accounts receivable, contract assets, loans to affiliates and joint ventures (included in other assets), acquisition earn-out liability, accounts payable, accrued liabilities and contract liabilities approximate their carrying amounts due to the nature of the instrument or the relatively short periods to maturity for the instruments. The Credit Facility has a carrying value that approximates the fair value due to the floating rate nature of the debt. The promissory notes and mortgages have carrying values that are not material y different than their fair values due to similar instruments bearing similar interest rates.

Financial instruments with carrying amounts that differ from their fair values are as fol ows:

December 31, 2021

December 31, 2020

Fair Value

Carrying

Fair

Carrying

Fair

Hierarchy Level

Amount

Value

Amount

Value

Note 22

Convertible debentures

Level 1

129,750

135,963

55,000

52,250

Financing obligations

Level 2

47,945

47,010

50,923

49,743

b) Risk management

The Company is exposed to liquidity, market and credit risks associated with its financial instruments. The Company wil from time to time use various financial instruments to reduce market risk exposures from changes in foreign currency exchange rates and interest rates. Management performs a risk assessment on a continual basis to help ensure that al significant risks related to the Company and its operations have been reviewed and assessed to reflect changes in market conditions and the Company’s operating activities.

The Company is also exposed to concentration risk through its revenues which is mitigated by the customers being large investment grade organizations. The credit worthiness of new customers is subject to review by management through consideration of the type of customer and the size of the contract. The Company has further mitigated this risk through diversification of its operations. This diversification has primarily come through investments in joint ventures which are accounted for using the equity method. Revenues from these investments are not included in consolidated revenue.

c) Market risk

Market risk is the risk that the future revenue or operating expense related cash flows, the fair value or future cash flows of a financial instrument wil fluctuate because of changes in market prices such as foreign currency exchange rates and interest rates. The level of market risk to which the Company is exposed at any point in time varies depending on market conditions, expectations of future price or market rate movements and composition of the Company’s financial assets and liabilities held, non-trading physical assets and contract portfolios.

To manage the exposure related to changes in market risk, the Company has used various risk management techniques. Such instruments may be used to establish a fixed price for a commodity, an interest bearing obligation or a cash flow denominated in a foreign currency.

The sensitivities provided below are hypothetical and should not be considered to be predictive of future performance or indicative of earnings on these contracts.

i) Foreign exchange riskThe Company regularly transacts in foreign currencies when purchasing equipment and spare parts as wel as certain general and administrative goods and services. These exposures are general y of a short-term nature and the impact of changes in exchange rates has not been significant in the past. The Company may fix its exposure in either the Canadian Dol ar or the US Dol ar for these short term transactions, if material.

i ) Interest rate riskThe Company is exposed to interest rate risk from the possibility that changes in interest rates wil affect future cash flows or the fair values of its financial instruments. Interest expense on borrowings with floating interest rates, including the Company’s Credit Facility, varies as market interest rates change. At December 31, 2021, the Company held $110.0 mil ion of floating rate debt pertaining to its Credit Facility (December 31, 2020 – $220.0

Consolidated Financial Statements

December 31, 2021

F - 28

North American Construction Group Ltd.

mil ion). As at December 31, 2021, holding al other variables constant, a 100 basis point change to interest rates on the outstanding floating rate debt wil result in $1.1 mil ion corresponding change in annual interest expense.
The fair value of financial instruments with fixed interest rates fluctuate with changes in market interest rates. However, these fluctuations do not affect earnings, as the Company’s debt is carried at amortized cost and the carrying value does not change as interest rates change.
The Company manages its interest rate risk exposure by using a mix of fixed and variable rate debt.
d) Credit risk
Credit risk is the risk that financial loss to the Company may be incurred if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company manages the credit risk associated with its cash by holding its funds with what it believes to be reputable financial institutions. The Company is also exposed to credit risk through its accounts receivable and contract assets. Credit risk for trade and other accounts receivables and contract assets are managed through established credit monitoring activities. The fol owing customers accounted for 10% or more of total revenues:
Year ended December 31,	2021	2020
		Note 22
Customer A	38 %	45 %
Customer B	27 %	30 %
Customer C	17 %	11 %
Customer D	10 %	10 %
The concentration risk is mitigated primarily by the customers being large investment grade organizations. The credit worthiness of new customers is subject to review by management through consideration of the type of customer and the size of the contract. Where the Company generates revenue under its subcontracting arrangement with MNALP, the final end customer is represented in the table above and in the table below.
The fol owing customers represented 10% or more of accounts receivable and contract assets:
			December 31,	December 31,
	2021	2020
		Note 22
Customer 1	45 %	39 %
Customer 2	15 %	20 %
Customer 3	15 %	16 %
The Company’s exposure to credit risk for accounts receivable and contract assets is as fol ows:
			December 31,	December 31,
	2021	2020
		Note 22
Trade accounts receivable			$	51,774 $	23,637
Holdbacks				380	64
Accrued trade receivables				12,266	8,415
Contract receivables, included in accounts receivable			$	64,420 $	32,116
Other receivables				4,367	4,115
Total accounts receivable			$	68,787 $	36,231
Contract assets				9,759	7,008
Total			$	78,546 $	43,239
Consolidated Financial Statements
December 31, 2021					F - 29	North American Construction Group Ltd.

Payment terms are per the negotiated customer contracts and general y range between net 15 days and net 60 days. As at December 31, 2021 and December 31, 2020, trade receivables and holdbacks are aged as fol ows:
	December 31,		December 31,
		2021		2020
				Note 22
Not past due	$	31,531 $		21,677
Past due 1-30 days		19,209		1,814
Past due 31-60 days		1,250		85
More than 61 days		164		125
Total	$	52,154 $		23,701
As at December 31, 2021, the Company has recorded an al owance for credit losses of $nil (December 31, 2020 - $nil).
17. Shares
a) Common shares
			Common
					Common shares	Treasury shares		shares, net of
			treasury shares
Issued and outstanding at December 31, 2019						27,502,912	(1,725,467)		25,777,445
Issued upon exercise of stock options						109,100	—	109,100
Issued upon conversion of convertible debentures						4,622,916	—	4,622,916
Retired through share purchase program						(1,223,097)	—	(1,223,097)
Purchase of treasury shares							—	(534,834)		(534,834)
Settlement of certain equity classified stock-based compensation							—	415,100		415,100
Issued and outstanding at December 31, 2020						31,011,831	(1,845,201)		29,166,630
Issued upon exercise of stock options						125,000	—	125,000
Retired through share purchase program						(1,113,903)	—	(1,113,903)
Purchase of treasury shares							—	(21,503)		(21,503)
Settlement of certain equity classified stock-based compensation							—	301,891		301,891
Issued and outstanding at December 31, 2021						30,022,928	(1,564,813)		28,458,115
Upon settlement of certain equity classified stock-based compensation during the year ended December 31, 2021, the Company withheld 274,359 shares for $5,134 to satisfy the recipient tax withholding requirements (year ended December 31, 2020 - 372,628 shares for $3,576).
b) Net income per share
Year ended December 31,		2021		2020
Net income	$	51,408 $		49,208
Interest from convertible debentures (after tax)		4,410		2,370
Diluted net income available to common shareholders	$	55,818 $		51,578
Weighted-average number of common shares		28,325,489		28,165,130
Weighted-average effect of dilutive securities
Dilutive effect of treasury shares		1,707,718		1,949,717
Dilutive effect of stock options		47,767		90,741
Dilutive effect of 5.00% convertible debentures		2,095,236		2,095,236
Dilutive effect of 5.50% convertible debentures		1,770,747			—
Weighted-average number of diluted common shares		33,946,957		32,300,824
Basic net income per share	$	1.81 $		1.75
Diluted net income per share	$	1.64 $		1.60
For the year ended December 31, 2021, al securities were dilutive (year ended December 31, 2020, al securities were dilutive).
Consolidated Financial Statements
December 31, 2021								F - 30	North American Construction Group Ltd.

On April 9, 2021, the Company commenced a normal course issuer bid ("NCIB") under which a maximum number of 2,000,000 common shares were authorized to be purchased. During the year ended December 31, 2021, the Company purchased and subsequently cancel ed 37,000 shares under this NCIB, which resulted in a decrease of common shares of $300 and an increase to additional paid-in capital of $213. This NCIB wil be terminated no later than April 8, 2022.
During the year ended December 31, 2021, the Company completed the NCIB commenced on March 12, 2020 upon the purchases and cancel ation of 1,076,903 common shares. The purchases resulted in a decrease to common shares of $8,679 and a decrease to additional paid-in capital of $7,327. This completed the NCIB with the maximum number of authorized common shares purchased.
c) Dividends
			Shareholders on	Paid or payable to
	Date declared	Per share			Total paid or payable
			record as of	shareholders
Q1 2020	February 18, 2020					$	0.04	March 5, 2020	April 3, 2020	$		1,023
Q2 2020	May 5, 2020					$	0.04	May 29, 2020					July 3, 2020	$	1,162
Q3 2020	July 28, 2020					$	0.04	August 31, 2020	October 2, 2020	$		1,156
Q4 2020	October 27, 2020					$	0.04	November 30, 2020	January 8, 2021	$		1,040
Q1 2021	February 16, 2021					$	0.04	March 4, 2021	April 9, 2021	$		1,123
Q2 2021	April 27, 2021					$	0.04	May 28, 2021					July 9, 2021	$	1,123
Q3 2021	July 27, 2021					$	0.04	August 31, 2021	October 8, 2021	$		1,137
Q4 2021	October 26, 2021					$	0.04	November 30, 2021	January 7, 2022	$		1,137
18. Interest expense, net
Year ended December 31,					2021		2020
							Note 22
Credit Facility								$	6,559 $		8,189
Convertible debentures									5,148		3,299
Finance lease obligations									2,260		3,176
Mortgage									1,350		999
Promissory notes									450		664
Financing obligations									1,562		1,265
Amortization of deferred financing costs									1,064		1,091
Other interest expense									701		154
Interest expense								$	19,094 $	18,837
Other interest income									(62)		(181)
								$	19,032 $	18,656
Consolidated Financial Statements
December 31, 2021										F - 31	North American Construction Group Ltd.

19. Stock-based compensation
Stock-based compensation expenses included in general and administrative expenses are as fol ows:
Year ended December 31,	2021	2020
Restricted share unit plan	19(a)			2,335 $	1,991
Performance restricted share unit plan	19(b)			2,165	2,031
Deferred stock unit plan	19(c)			7,106	(2,078)
				11,606 $	1,944
a) Restricted share unit plan
Restricted Share Units (“RSU”) are granted each year to executives and other key employees with respect to services to be provided in that year and the fol owing two years. The majority of RSUs vest at the end of a three-year term. The Company settles RSUs with common shares purchased on the open market through a trust arrangement.
			Weighted-
			average
				Number of units
					exercise price
					$ per share
Outstanding at December 31, 2019				650,077	9.35
Granted				298,142	8.55
Vested				(269,484)	6.19
Forfeited				(37,264)	8.81
Outstanding at December 31, 2020				641,471	10.34
Granted				144,383	19.97
Vested				(220,116)	8.44
Forfeited				(12,327)	13.01
Outstanding at December 31, 2021				553,411	13.55
At December 31, 2021, there were approximately $4,339 of unrecognized compensation costs related to non-vested share-based payment arrangements under the RSU plan (December 31, 2020 – $3,290) and these costs are expected to be recognized over the weighted-average remaining contractual life of the RSUs of 1.4 years (December 31, 2020 – 1.6 years). During the year ended December 31, 2021, 220,116 units vested, which were settled with common shares purchased through a trust arrangement (December 31, 2020 - 269,484 units vested and settled).
b) Performance restricted share unit plan
Performance Restricted Share Units ("PSU") are granted each year to senior management employees with respect to services to be provided in that year and the fol owing two years. The PSUs vest at the end of a three-year term and are subject to performance criteria approved by the Human Resources and Compensation Committee at the grant date. The Company settles PSUs with common shares purchased through a trust arrangement.
			Weighted-
				Number of units	average
					exercise price
					$ per share
Outstanding at December 31, 2019				481,907	8.85
Granted				211,754	8.55
Vested				(201,104)	8.51
Forfeited				—	—
Outstanding at December 31, 2020				492,557	8.86
Granted				112,079	20.04
Vested				(178,067)	8.24
Outstanding at December 31, 2021				426,569	12.06
Consolidated Financial Statements
December 31, 2021						F - 32	North American Construction Group Ltd.

At December 31, 2021, there were approximately $3,702 of total unrecognized compensation costs related to non–vested share–based payment arrangements under the PSU plan (December 31, 2020 - $3,405) and these costs are expected to be recognized over the weighted-average remaining contractual life of the PSUs of 1.5 years (December 31, 2020 - 1.6 years). During the year ended December 31, 2021, 178,067 units vested, which were settled with common shares purchased through a trust arrangement at a factor of 2.0 common shares per PSU based on performance against grant date criteria (December 31, 2020 - 201,104 units at a factor of 2.0 vested and settled).
The Company estimated the fair value of the PSUs granted during the years ended December 31, 2021 and 2020 using a Monte Carlo simulation with the fol owing assumptions:
	2021	2020
Risk-free interest rate	0.65 %	0.30 %
Expected volatility	50.96 %	48.71 %
c) Director's deferred stock unit plan
Prior to January 1, 2021, under the Company’s shareholding guidelines non-officer directors of the Company were required to receive at least 50% and up to 100% of their annual fixed remuneration in the form of DSUs, at their election. The shareholding guidelines were amended effective January 1, 2021 to require directors to take at least 60% of their annual fixed remuneration in the form of DSUs if they do not meet shareholding guidelines, and to take between 0% and 100% of their annual fixed remuneration in the form of DSUs if they do meet shareholding guidelines. In addition to directors, eligible executives can elect to receive up to 50% of their annual short term incentive plan compensation in the form of DSUs.
The DSUs vest immediately upon issuance and are only redeemable upon departure, retirement or death of the participant. DSU holders that are not US taxpayers may elect to defer the redemption date until a date no later than December 1 of the calendar year fol owing the year in which the departure, retirement or death occurred.
			Number of units
Outstanding at December 31, 2019				901,045
Granted				114,020
Redeemed				(9,562)
Outstanding at December 31, 2020				1,005,503
Granted				66,265
Redeemed				(139,124)
Outstanding at December 31, 2021				932,644
At December 31, 2021, the fair market value of these units was $18.78 per unit (December 31, 2020 – $12.42 per unit). At December 31, 2021, the current portion of DSU liabilities of $nil was included in accrued liabilities (December 31, 2020 - $1,728) and the long-term portion of DSU liabilities of $17,515 was included in other long-term obligations (December 31, 2020 - $10,761) in the Consolidated Balance Sheets. During the year ended December 31, 2021, there were 139,124 units redeemed and settled in cash for $2,300 (December 31, 2020 - 9,562 units were redeemed and settled in cash for $103). There is no unrecognized compensation expense related to the DSUs since these awards vest immediately upon issuance.
Consolidated Financial Statements
December 31, 2021				F - 33	North American Construction Group Ltd.

d) Share option plan
Effective November 17, 2021, the Company terminated 2004 Amended and Restated Share Option Plan, which became effective in 2006. Under this plan, directors, officers, employees and certain service providers to the Company were eligible to receive stock options to acquire voting common shares in the Company. Each stock option provided the right to acquire one common share in the Company and expired ten years from the grant date or on termination of employment. There were no issued or outstanding options as at the date of termination.
		Weighted-average
	Number of options	exercise price
			$ per share
Outstanding at December 31, 2019				238,600	4.61
Exercised(i)				(109,100)	4.91
Forfeited or expired				(4,500)	10.13
Outstanding at December 31, 2020				125,000	4.16
Exercised(i)				(125,000)	4.16
Outstanding at December 31, 2021						—	—
(i) Al stock options exercised resulted in new common shares being issued (note 17(a)).
Cash received from options exercised for the year ended December 31, 2021 was $519 (2020 - $537). For the year ended December 31, 2021, the total intrinsic value of options exercised, calculated as the market value at the exercise date less exercise price, multiplied by the number of units exercised, was $1,909 (December 31, 2020 - $535).
At December 31, 2021, the Company had no outstanding exercisable options (December 31, 2020 – 125,000). At December 31, 2020, the weighted-average remaining contractual life of outstanding options was 1.9 years and the weighted-average exercise price was $4.16.
20. Other information
a) Supplemental cash flow information
Year ended December 31,						2021	2020
			Note 22
Cash paid during the year for:
Interest	$			17,028 $	18,518
Cash received during the year for:
Interest		69			151
Non-cash transactions:
Addition of property, plant and equipment by means of finance leases				19,198	27,882
Decrease to property, plant and equipment upon investment contribution to affiliates and joint ventures						(362)	(980)
Increase in assets held for sale, offset by property, plant and equipment				9,281	6,903
Non-cash working capital exclusions:
Net decrease in accounts receivable relating to other adjustments to investments in affiliates and joint
		—			(911)
ventures
Net increase in inventory due to transfer from property, plant and equipment		437			—
Net decrease in accrued liabilities related to conversion of bonus compensation to deferred stock units		223			294
Net decrease (increase) in accrued liabilities related to the current portion of deferred stock unit liability				1,725	(1,727)
Net decrease (increase) in accrued liabilities related to dividend payable		33			(137)
Non-cash working capital transactions related to acquisition of DGI: (note 12)
Increase in accounts receivable				1,910	—
Increase in inventory				13,713	—
Increase in prepaid expenses		971			—
Increase in accounts payable				(3,591)	—
Increase in accrued liabilities				(2,307)	—
Consolidated Financial Statements
December 31, 2021							F - 34	North American Construction Group Ltd.

b) Net change in non-cash working capital
The table below represents the cash (used in) provided by non-cash working capital:
Year ended December 31,	2021	2020
		Note 22
Operating activities:
Accounts receivable			$	(30,646) $	29,162
Contract assets				(2,751)	12,086
Inventories				(11,243)	2,476
Contract costs				(704)	(593)
Prepaid expenses and deposits				(735)	(953)
Accounts payable				31,232	(47,398)
Accrued liabilities				13,681	338
Contract liabilities				1,837	1,489
			$	671 $	(3,393)
21. Contingencies
During the normal course of the Company's operations, various disputes, legal and tax matters are pending. In the opinion of management involving the use of significant judgement and estimates, these matters wil not have a material effect on the Company's consolidated financial statements.
Consolidated Financial Statements
December 31, 2021				F - 35	North American Construction Group Ltd.

22. Change in significant accounting policy - Basis of presentation
The fol owing tables summarize the effect of the change in accounting policy which updated the consolidation method of DNSS and MNALP from proportionate to equity method (note 2 (a)(i)).
Consolidated Balance Sheets at December 31, 2021 and 2020:
	December 31, 2021	December 31, 2020
			Without		As original y
(in thousands)	Adjustments			As reported	Adjustments			As reported
			change		reported
AssetsCurrent assets
				156,963			(9,784)	147,179	119,958			(681)	119,277
Non-current assets				727,175			(5,076)	722,099	718,970			816	719,786
Total assets			$ 884,138 $			(14,860) $ 869,278 $ 838,928 $	135 $ 839,063
Liabilities and shareholders' equityCurrent liabilities
				168,635			(7,601)	161,034	109,198			286	109,484
Non-current liabilities				437,040			(7,259)	429,781	481,287			(151)	481,136
				605,675			(14,860)	590,815	590,485			135	590,620
Shareholders' equity				278,463			—	278,463	248,443	—	248,443
Total liabilities and shareholders' equity			$ 884,138 $			(14,860) $ 869,278 $ 838,928 $	135 $ 839,063
Consolidated Statements of Operations and Comprehensive Income for December 31, 2021 and 2020:
	December 31, 2021	December 31, 2020
			Without		As original y
(in thousands)	Adjustments			As reported	Adjustments			As reported
			change		reported
Revenue			$ 658,122 $			(3,979) $ 654,143 $ 500,374 $	(1,906) $ 498,468
Gross profit				93,927			(3,510)	90,417	94,382			(2,164)	92,218
Operating income				58,523			(3,395)	55,128	68,945			(1,823)	67,122
Equity earnings in affiliates and joint
				(18,475)			(3,385)	(21,860)	(5,942)			(1,798)	(7,740)
ventures
Income before income taxes				60,693			—	60,693	60,472	—			60,472
Net income				51,408			—	51,408	49,208	—			49,208
Comprehensive income			$	51,410 $			— $	51,410 $	49,208 $	— $			49,208
Consolidated Statements of Cash Flows for December 31, 2021 and 2020:
	December 31, 2021	December 30, 2020
			Without		As original y
(in thousands)	Adjustments			As reported	Adjustments As reported
			change		reported
Operating activities				168,893			(3,713)	165,180	147,272			(722)	146,550
Investing activities				(100,604)			1,335	(99,269)	(113,573)			746	(112,827)
Financing activities				(92,547)			(212)	(92,759)	4,672			(156)	4,516
Decrease in cash				(24,258)			(2,590)	(26,848)	38,371			(132)	38,239
Effect of exchange rate on changes in cash
				2					—			2		—	—
and cash equivalents
Cash, beginning of period				43,915			(468)	43,447	5,544			(336)	5,208
Cash, end of period			$	19,659 $			(3,058) $	16,601 $	43,915 $			(468) $	43,447
Consolidated Financial Statements
December 31, 2021						F - 36	North American Construction Group Ltd.