What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-08 compared with 2024-02-12 · 232 added, 183 removed, 387 unchanged (52% of the section changed)

6 unchanged sentences

Forward Looking Statements

Within Energy Services’ (as defined below) consolidated financial statements and this Annual Report on Form 10-K, there are included statements reflecting assumptions, expectations, projections, intentions, or beliefs about future events that are intended as “forward-looking statements” under the Private Securities Litigation Reform Act of 1995.

Within Energy Services’ (as defined below) consolidated financial statements and this Quarterly Report on Form 10-Q, there are included statements reflecting assumptions, expectations, projections, intentions, or beliefs about future events that are intended as “forward-looking statements” under the Private Securities Litigation Reform Act of 1995.

You can identify these statements by the fact that they do not relate strictly to historical or current facts.

26 unchanged sentences

The majority of the Company’s customers are in West Virginia, Virginia, Ohio, Pennsylvania, and Kentucky.

However, the Company also performs work in other states including Alabama, Michigan, Illinois, Tennessee, and Indiana.

However, the Company also performs work in other states including Alabama, Michigan, Illinois, Tennessee, North Carolina, and Indiana.

Energy Services’ sales force consists of industry professionals with significant relevant sales experience, who utilize industry contacts and available public data to determine how to market the Company’s line of products most appropriately.

43 unchanged sentences

As a result, our volume of business may be adversely affected by where our customers are in the cycle and thereby their financial condition as to their capital needs and access to capital to finance those needs.

Three Months Ended December 31, 2023 and 2022 Overview

The following is an overview of results from operations for the three months ended December 31, 2023 and 2022:

Three and Six Months Ended March 31, 2024 and 2023 Overview

The following is an overview of results from operations for the three and six months ended March 31,2024 and 2023:

Three Months Ended

Six Months Ended

Cost of revenues

Selling and administrative expenses

Income from operations

(Loss) income from operations

Other income (expense)

Interest income

Other nonoperating income (expense)

Other nonoperating expense

Interest expense

Loss on sale of equipment

Income before income taxes

Income tax expense (benefit)

Gain on sale of equipment

(Loss) income before income taxes

Income tax (benefit) expense

Net (loss) income

Weighted average shares outstanding-basic

Weighted average shares-diluted

Earnings per share-basic

Earnings per share-diluted

Results of Operations for the Three Months Ended December 31, 2023 Compared to the Three Months Ended December 31, 2022

A table comparing the Company’s revenues for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, is below:

(Loss) earnings per share-basic

(Loss) earnings per share-diluted

Results of Operations for the Three and Six Months Ended March 31, 2024 Compared to the Three and Six Months Ended March 31, 2023

A table comparing the Company’s revenues for the three and six months ended March 31, 2024 compared to the three and six months ended March 31, 2023 is below:

Three Months Ended

December 31, 2023

December 31, 2022

March 31, 2024

March 31, 2023

Gas & Water Distribution

Gas & Petroleum Transmission

Electrical, Mechanical, & General

Total revenues increased by $30.1 million to $90.1 million for the three months ended December 31, 2023, as compared to $60.0 million for the three months ended December 31, 2022.

The increase was a result of increased work in all categories of business.

Gas & Water Distribution revenues totaled $17.1 million for the three months ended December 31, 2023, a $4.7 million increase from $12.4 million for the three months ended December 31, 2022.

The revenue increase was primarily related to increased paving services performed on water projects and increased gas and water distribution work.

Gas & Petroleum Transmission revenues totaled $28.6 million for the three months ended December 31, 2023, an $11.7 million increase from $16.8 million for the three months ended December 31, 2022.

The revenue increase was primarily related to gas transmission work that was awarded during the fiscal year ended September 30, 2023 and continued into the first quarter of fiscal year 2024.

Electrical, Mechanical, & General construction services revenues totaled $44.5 million for the three months ended December 31, 2023, a $13.7 million increase from $30.8 million for the three months ended December 31, 2022.

The revenue increase was primarily related to an increase in general contracting and electrical services performed during the three months ended December 31, 2023, as compared to the same period in the prior year.

Electrical, Mechanical, and General

Six Months Ended

March 31, 2024

March 31, 2023

Gas & Water Distribution

Gas & Petroleum Transmission

Electrical, Mechanical, and General

Total revenues increased by $17.5 million to $71.1 million for the three months ended March 31, 2024, as compared to $53.7 million for the three months ended March 31, 2023.

Total revenues increased by $47.6 million to $161.3 million for the six months ended March 31, 2024, as compared to $113.7 million for the six months ended March 31, 2023.

The increases were a result of increased work in all categories of business.

Gas & Water Distribution revenues totaled $14.3 million for the three months ended March 31, 2024, an $842,000 increase from $13.4 million for the three months ended March 31, 2023.

Gas & Water Distribution revenues totaled $31.4 million for the six months ended March 31, 2024, a $5.4 million increase from $25.9 million for the six months ended March 31, 2023.

The revenue increases were primarily related to increased paving and gas and water distribution services performed during the three and six months ended March 31, 2024, as compared to the same periods in 2023.

Gas & Petroleum Transmission revenues totaled $9.8 million for the three months ended March 31, 2024, a $4.5 million increase from $5.3 million for the three months ended March 31, 2023.

Gas & Petroleum Transmission revenues totaled $38.3 million for the six months ended March 31, 2024, a $16.1 million increase from $22.2 million for the six months ended March 31, 2023.

The revenue increases were primarily related to gas transmission work that was awarded during the fiscal year ended September 30, 2023 and continued into fiscal year 2024.

Electrical, Mechanical, & General construction services revenues totaled $47.1 million for the three months ended March 31, 2024, a $12.2 million increase from $34.9 million for the three months ended March 31, 2023.

Electrical, Mechanical, & General construction services revenues totaled $91.6 million for the six months ended March 31, 2024, a $26.0 million increase from $65.6 million for the six months ended March 31, 2023.

The revenue increases were primarily related to an increase in general contracting and electrical services performed during the three and six months ended March 31, 2024, as compared to the same period in the prior year.

Cost of Revenues.

A table comparing the Company’s costs of revenues for the three months ended December 31, 2023, compared to the three months ended December 31, 2022, is below:

A table comparing the Company’s costs of revenues for the three and six months ended March 31, 2024, compared to the three and six months ended March 31, 2023, is below:

Three Months Ended

December 31, 2023

December 31, 2022

March 31, 2024

March 31, 2023

Gas & Water Distribution

2 unchanged sentences

Unallocated Shop Expense

Total cost of revenues increased by $25.3 million to $79.3 million for the three months ended December 31, 2023, as compared to $54.1 million for the three months ended December 31, 2022.

The cost of revenues increase was a result of increased work in all categories of business, partially offset by less unallocated shop expenses.

Gas & Water Distribution cost of revenues totaled $13.1 million for the three months ended December 31, 2023, a $2.5 million increase from $10.6 million for the three months ended December 31, 2022.

The cost of revenue increase was primarily related to increased paving services performed on water projects and increased gas and water distribution work.

Gas & Petroleum Transmission cost of revenues totaled $25.2 million for the three months ended December 31, 2023, an $11.1 million increase from $14.0 million for the three months ended December 31, 2022.

The cost of revenue increase was primarily related to gas transmission work that was awarded during the fiscal year ended September 30, 2023 and continued into the first quarter of fiscal year 2024.

Electrical, Mechanical, & General construction services cost of revenues totaled $41.1 million for the three months ended December 31, 2023, an $11.9 million increase from $29.2 million for the three months ended December 31, 2022.

The cost of revenue increase was primarily related to an increase in general contracting and electrical services performed during the three months ended December 31, 2023, as compared to the same period in the prior year.

Unallocated shop expenses totaled $5,500 for the three months ended December 31, 2023, a $291,000 decrease from $296,000 for the three months ended December 31, 2022.

The decrease in unallocated shop expenses was due to increased internal equipment charges to projects for the three months ended December 31, 2023, as compared to the same period in the prior year.

Six Months Ended

March 31, 2024

March 31, 2023

Gas & Water Distribution

Gas & Petroleum Transmission

Electrical, Mechanical, & General

Unallocated Shop Expense

Total cost of revenues increased by $15.1 million to $64.9 million for the three months ended March 31, 2024, as compared to $49.8 million for the three months ended March 31, 2023.

Total cost of revenues increased by $40.4 million to $144.2 million for the six months ended March 31, 2024, as compared to $103.8 million for the six months ended March 31, 2023.

The cost of revenues increases were a result of increased work in all categories of business, partially offset by less unallocated shop expenses for the three and six months ended March 31, 2024 as compared to the same period in 2023.

Gas & Water Distribution cost of revenues totaled $11.9 million for the three months ended March 31, 2024, a $1.3 million increase from $10.6 million for the three months ended March 31, 2023.

Gas & Water Distribution cost of revenues totaled $25.0 million for the six months ended March 31, 2024, a $3.7 million increase from $21.3 million for the six months ended March 31, 2023.

The cost of revenues increases were primarily related to increased paving and gas and water distribution services performed during the six months ended March 31, 2024, as compared to the same periods in 2023.

Gas & Petroleum Transmission cost of revenues totaled $9.5 million for the three months ended March 31, 2024, a $3.8 million increase from $5.8 million for the three months ended March 31, 2023.

Gas & Petroleum Transmission cost of revenues totaled $34.7 million for the six months ended March 31, 2024, a $14.9 million increase from $19.8 million for the six months ended March 31, 2023.

The cost of revenues increases were primarily related to gas transmission work that was awarded during the fiscal year ended September 30, 2023 and continued into fiscal year 2024.

Electrical, Mechanical, & General construction services cost of revenues totaled $42.4 million for the three months ended March 31, 2024, a $9.9 million increase from $32.5 million for the three months ended March 31, 2023.

Electrical, Mechanical, & General construction services cost of revenues totaled $83.4 million for the six months ended March 31, 2024, a $21.9 million increase from $61.5 million for the six months ended March 31, 2023.

The cost of revenues increases were primarily related to an increase in general contracting and electrical services performed during the three and six months ended March 31, 2024, as compared to the same period in the prior year.

Unallocated shop expenses totaled $1.1 million for the three months ended March 31, 2024, a $173,000 increase from $935,000 for the three months ended March 31, 2023.

Unallocated shop expenses totaled $1.1 million for the six months ended March 31, 2024, a $118,000 decrease from $1.2 million for the six months ended March 31, 2023.

The changes in unallocated shop expenses were due to changes in the amount of internal equipment charged to projects for the three and six months ended March 31, 2024, as compared to the same period in the prior year.

Gross Profit (Loss) .

A table comparing the Company’s gross profit for the three months ended December 31, 2023, compared to the three months ended December 31, 2022, is below:

A table comparing the Company’s gross profit (loss) for the three and six months ended March 31, 2024, compared to the three and six months ended March 31, 2023, is below:

Three Months Ended

December 31, 2023

December 31, 2022

March 31, 2024

March 31, 2023

Gas & Water Distribution

2 unchanged sentences

Unallocated Shop Expense

Gross profit percentage

Total gross profit increased by $4.9 million to $10.8 million for the three months ended December 31, 2023, as compared to $6.0 million for the three months ended December 31, 2022.

Gas & Water Distribution gross profit totaled $4.0 million for the three months ended December 31, 2023, a $2.2 million increase from $1.8 million for the three months ended December 31, 2022.

The gross profit increase was primarily related to increased paving services provided for water projects and increase water distribution services performed during the three months ended December 31, 2023 as compared to the same period in the prior year.

Gas & Petroleum Transmission gross profit totaled $3.4 million for the three months ended December 31, 2023, a $583,000 increase from $2.8 million for the three months ended December 31, 2022.

The gross profit increase was primarily related to gas transmission work that was awarded during the fiscal year ended September 30, 2023 and continued into the first quarter of fiscal year 2024.

Electrical, Mechanical, & General construction services gross profit totaled $3.5 million for the three months ended December 31, 2023, a 1.8 million increase from $1.7 million for the three months ended December 31, 2022.

The increase was primarily related to an increase in general contracting and electrical services performed during the three months ended December 31, 2023, as compared to the same period in the prior year.

Gross loss attributable to unallocated shop expenses totaled $5,500 for the three months ended December 31, 2023, a $291,000 decrease from $296,000 for the three months ended December 31, 2022.

The decrease in unallocated shop expenses was due to increased internal equipment charges to projects for the three months ended December 31, 2023, as compared to the same period in the prior year.

Six Months Ended

March 31, 2024

March 31, 2023

Gas & Water Distribution

Gas & Petroleum Transmission

Electrical, Mechanical, & General

Unallocated Shop Expense

Total gross profit increased by $2.4 million to $6.2 million for the three months ended March 31, 2024, as compared to $3.9 million for the three months ended March 31, 2023.

Total gross profit increased by $7.2 million to $17.1 million for the six months ended March 31, 2024, as compared to $9.9 million for the six months ended March 31, 2023.

Gas & Water Distribution gross profit totaled $2.4 million for the three months ended March 31, 2024, a $438,000 decrease from $2.8 million for the three months ended March 31, 2023.

The gross profit decrease was primarily due to inclement weather conditions and training and certification expenses incurred during the three months ended March 31, 2024.

Gas & Water Distribution gross profit totaled $6.4 million for the six months ended March 31, 2024, a $1.7 million increase from $4.7 million for the six months ended March 31, 2023.

The gross profit increase was primarily related to increased paving and gas and water distribution services performed during the six months ended March 31, 2024, as compared to the same period in 2023.

Gas & Petroleum Transmission gross profit totaled $231,000 for the three months ended March 31, 2024, a $651,000 increase from ($420,000) for the three months ended March 31, 2023.

Gas & Petroleum Transmission gross profit totaled $3.6 million for the six months ended March 31, 2024, a $1.2 million increase from $2.4 million for the six months ended March 31, 2023.

The gross profit increases were primarily related to gas transmission work that was awarded during the fiscal year ended September 30, 2023 and continued into fiscal year 2024.

Electrical, Mechanical, & General construction services gross profit totaled $4.7 million for the three months ended March 31, 2024, a $2.3 million increase from $2.4 million for the three months ended March 31, 2023.

Electrical, Mechanical, & General construction services gross profit totaled $8.2 million for the six months ended March 31, 2024, a $4.1 million increase from $4.1 million for the six months ended March 31, 2023.

The gross profit increases were primarily related to an increase in general contracting and electrical services performed during the three and six months ended March 31, 2024, as compared to the same periods in the prior year.

Gross loss attributable to unallocated shop expenses totaled $1.1 million for the three months ended March 31, 2024, a $173,000 increase from $935,000 for the three months ended March 31, 2023.

Gross loss attributable to unallocated shop expenses totaled $1.1 million for the six months ended March 31, 2024, a $118,000 decrease from $1.2 million for the six months ended March 31, 2023.

Selling and administrative expenses .

Total selling and administrative expenses increased by $1.9 million to $7.2 million for the three months ended December 31, 2023, as compared to $5.3 million for the same period in the prior year.

Total selling and administrative expenses increased by $1.4 million to $7.3 million for the three months ended March 31, 2024, as compared to $5.9 million for the same period in the prior year.

Total selling and administrative expenses increased by $3.3 million to $14.5 million for the six months ended March 31, 2024, as compared to $11.2 million for the same period in the prior year.

The increase was primarily related to additional personnel hired to secure and manage work for expected growth.

Other nonoperating income (expense) .

Other nonoperating income totaled $75,000 for the three months ended December 31, 2023, as compared to a nonoperating expense of ($81,000) for the same period in the prior year.

Other nonoperating expenses totaled $81,000 for the three months ended March 31, 2024, as compared to $11,000 for the same period in the prior year.

The change was primarily related to an increase in charitable contributions.

Other nonoperating expenses totaled $6,000 for the six months ended March 31, 2024, as compared to $91,000 for the same period in the prior year.

The change was primarily related to an immaterial legal settlement that recouped costs expended in a prior period.

Interest expense .

Interest expense totaled $602,000 for the three months ended December 31, 2023, an increase of $102,000 from $499,000 for the same period in the prior year.

Interest expense totaled $623,000 for the three months ended March 31, 2024, an increase of $48,000 from $575,000 for the same period in the prior year.

Interest expense totaled $1.2 million for the six months ended March 31, 2024, an increase of $150,000 from $1.1 million for the same period in the prior year.

The increase in interest expense was primarily due to interest paid for equipment financing added in late fiscal year 2023 and an increase in interest rates.

Loss Gain on sale of equipment .

Loss on sale of equipment totaled $13,000 for the three months ended December 31, 2023, a decrease of $18,000 from $31,000 for the same period in the prior year.

The Company sold certain underutilized or non-working pieces of equipment during the three months ended December 31, 2023, with no comparable sale occurring during the three months ended December 31, 2022.

Income before income taxes was $3.1 million for the three months ended December 31, 2023, as compared to $59,000 for the same period in the prior year.

The increase was primarily related to the items mentioned above.

Income tax expense for the three months ended December 31, 2023, was $1.1 million compared to an income tax benefit of ($80,000) for the same period in the prior year.

The increase in income tax expense was due to the increase in taxable income for the three months ended December 31, 2023, as compared to the prior period.

Net income for the three months ended December 31, 2023, was $2.0 million, as compared to $138,000 for the same period in the prior year.

Comparison of Financial Condition at December 31, 2023, and September 30, 2023

The Company had total assets of $136.4 million at December 31, 2023, a decrease of $6.1 million from the prior fiscal year end balance of $142.5 million.

Accounts receivable, net of allowance for doubtful accounts, totaled $43.2 million at December 31, 2023, a decrease of $8.0 million from the prior fiscal year end balance of $51.2 million.

Gain on sale of equipment .

Gain on sale of equipment totaled $305,000 for the three months ended March 31, 2024, an increase of $257,000 from $48,000 for the same period in the prior year.

Gain on sale of equipment totaled $292,000 for the six months ended March 31, 2024, an increase of $275,000 from $17,000 for the same period in the prior year.

The Company sold certain underutilized or non-working pieces of equipment during the three and six months ended March 31, 2024, with no comparable sale occurring during the three and six months ended March 31, 2023.

Net income (loss) .

Loss before income taxes was $1.5 million for the three months ended March 31, 2024, as compared to $2.5 million for the same period in the prior year.

Income before income taxes was $1.6 million for the six months ended March 31, 2024, as compared to a loss before income taxes of $2.5 million for the same period in the prior year.

The increases were primarily related to the items mentioned above.

Income tax benefit for the three months ended March 31, 2024, was $373,000 compared to $650,000 for the same period in the prior year.

The decrease in income tax benefit was due to the increase in taxable income for the three months ended March 31, 2024, as compared to the prior period.

Income tax expense for the six months ended March 31, 2024, was $685,000 compared to an income tax benefit of $730,000 for the same period in the prior year.

The increase in income tax expense was due to the increase in taxable income for the six months ended March 31, 2024, as compared to the prior year period.

Net loss for the three months ended March 31, 2024, was $1.1 million, as compared to $1.9 million for the same period in the prior year.

Net income for the six months ended March 31, 2024 was $933,000, as compared to a net loss of $1.7 million for the same period in 2023.

Comparison of Financial Condition at March 31, 2024, and September 30, 2023

The Company had total assets of $136.1 million at March 31, 2024, a decrease of $6.4 million from the prior fiscal year end balance of $142.5 million.

Accounts receivable, net of allowance for doubtful accounts, totaled $46.4 million at March 31, 2024, a decrease of $4.8 million from the prior fiscal year end balance of $51.2 million.

The decrease was primarily due to the timing of cash collections and project invoicing since September 30, 2023.

Cash and cash equivalents totaled $11.3 million at December 31, 2023, an increase of $5.2 million from the prior fiscal year end balance of $16.4 million.

The decrease was primarily due to a net $2.9 million provided from operating activities, partially offset by a net $1.0 million investment in equipment, and $7.0 million in net short-term and long-term debt repayments.

Prepaid expenses and other totaled $2.7 million at December 31, 2023, a decrease of $833,000 from the prior fiscal year end balance of $3.5 million.

The decrease was primarily due to expensing prepaid insurance during the three months ended December 31, 2023.

Right-of-use assets totaled $2.9 million at December 31, 2023, a decrease of $409,000 from the prior fiscal year end balance of $3.3 million.

The decrease was primarily due to the amortization of operating leases during the three months ended December 31, 2023, partially offset by a net increase in leased vehicles.

The Company had net property, plant and equipment of $36.3 million at December 31, 2023, a decrease of $248,000 from the prior fiscal year end balance of $36.5 million.

The decrease was due to $2.2 million in asset additions, partially offset by $2.1 million in depreciation and net equipment disposals of $379,000.

Intangible assets, net totaled $3.3 million at December 31, 2023, a decrease of $108,000 from the prior fiscal year end balance of $3.4 million.

The decrease was due to the amortization of intangible assets during the three months ended December 31, 2023.

Contract assets totaled $21.8 million at December 31, 2023, an increase of $5.8 million from the prior fiscal year end balance of $16.0 million.

The increase was due to a difference in the timing of project billings at December 31, 2023, compared to September 30, 2023.

Retainage receivable totaled $9.7 million at December 31, 2023, an increase of $2.1 million from the prior fiscal year end balance of $7.6 million.

Cash and cash equivalents totaled $12.1 million at March 31, 2024, a decrease of $4.3 million from the prior fiscal year end balance of $16.4 million.

The decrease was primarily due to a net $2.6 million investment in equipment, and a net $1.9 million used in financing activities, partially offset by a net $183,000 provided from operating activities.

Contract assets totaled $14.6 million at March 31, 2024, a decrease of $1.3 million from the prior fiscal year end balance of $16.0 million.

The decrease was due to a difference in the timing of project billings at March 31, 2024, compared to September 30, 2023.

Right-of-use assets totaled $2.8 million at March 31, 2024, a decrease of $560,000 from the prior fiscal year end balance of $3.3 million.

The decrease was primarily due to the amortization of operating leases during the six months ended March 31, 2024, partially offset by a net increase in leased vehicles.

Intangible assets, net totaled $3.2 million at March 31, 2024, a decrease of $216,000 from the prior fiscal year end balance of $3.4 million.

The decrease was due to the amortization of intangible assets during the six months ended March 31, 2024.

Retainage receivable totaled $10.1 million at March 31, 2024, an increase of $2.5 million from the prior fiscal year end balance of $7.6 million.

The increase was primarily due to more current year projects that require retainages to be withheld.

Goodwill totaled $4.1 million at December 31, 2023 and September 30, 2023.

The Company had total liabilities of $100.7 million at December 31, 2023, a decrease of $7.2 million from the prior fiscal year end balance of $107.9 million.

Lines of credit and short-term borrowings totaled $14.9 million at December 31, 2023, a decrease of $4.9 million from the prior fiscal year end balance of $19.8 million.

The decrease was due to repayments on the line of credit and insurance premiums financed.

Accrued expenses and other current liabilities totaled $11.6 million at December 31, 2023, a decrease of $1.5 million from the prior fiscal year end balance of $13.1 million.

Prepaid expenses and other totaled $5.1 million at March 31, 2024, an increase of $1.6 million from the prior fiscal year end balance of $3.5 million.

The increase was primarily due to an increase in prepaid insurance that will be expense throughout fiscal year 2024.

The Company had net property, plant and equipment of $37.0 million at March 31, 2024, an increase of $448,000 from the prior fiscal year end balance of $36.5 million.

The increase was due to $5.3 million in asset additions, partially offset by $4.2 million in depreciation and net equipment disposals of $652,000.

Goodwill totaled $4.1 million at March 31, 2024 and September 30, 2023.

The Company had total liabilities of $101.6 million at March 31, 2024, a decrease of $6.4 million from the prior fiscal year end balance of $107.9 million.

Accounts payable totaled $18.7 million at March 31, 2024, a decrease of approximately $3.3 million from the prior fiscal year end balance of $22.0 million.

The decrease was due to the timing of accounts payable payments as compared to September 30, 2023.

Accrued expenses and other current liabilities totaled $10.9 million at March 31, 2024, a decrease of $2.2 million from the prior fiscal year end balance of $13.1 million.

The decrease was due to the timing of accrued expense payments, as compared to September 30, 2023.

Long-term debt totaled $23.8 million at December 31, 2023, a decrease of $1.2 million from the prior fiscal year end balance of $25.0 million.

The decrease in long-term debt was primarily due to $2.1 million in payments on long-term debt, partially offset by $813,000 in new equipment financing.

Current and long-term operating lease liabilities totaled $2.9 million at December 31, 2023, a decrease of $430,000 from the prior fiscal year end balance of $3.4 million.

The decrease was due to payments made during the three months ended December 31, 2023.

Contract liabilities totaled $17.7 million at December 31, 2023, a decrease of $79,000 from the prior fiscal year end balance of $17.7 million.

The decrease was due to a difference in the timing of project billings at December 31, 2023, as compared to September 30, 2023.

Deferred tax liabilities totaled $7.7 million at December 31, 2023, an increase of $782,000 from the prior fiscal year end balance of $6.9 million.

The decrease was primarily related to the reduction of the net operating loss carry forward during the three months ended December 31, 2023.

Accounts payable totaled $22.3 million at December 31, 2023, an increase of approximately $0.2 million from the prior fiscal year end balance of $22.0 million.

The increase was due to the timing of accounts payable payments as compared to September 30, 2023.

Shareholders’ equity was $35.6 million at December 31, 2023, an increase of $1.0 million from the prior fiscal year end balance of $34.6 million.

The increase was due to net income of $2.0 million for the three months ended December 31, 2023, partially offset by an annual cash dividend declaration of $994,000 paid on January 2, 2024.

Long-term debt totaled $23.2 million at March 31, 2024, a decrease of $1.8 million from the prior fiscal year end balance of $25.0 million.

The decrease in long-term debt was primarily due to $3.5 million in payments on long-term debt, partially offset by $1.8 million in new equipment financing.

Contract liabilities totaled $16.3 million at March 31, 2024, a decrease of $1.4 million from the prior fiscal year end balance of $17.7 million.

The decrease was due to a difference in the timing of project billings at March 31, 2024, as compared to September 30, 2023.

Current and long-term operating lease liabilities totaled $2.8 million at March 31, 2024, a decrease of $569,000 from the prior fiscal year end balance of $3.4 million.

The decrease was due to payments made during the six months ended March 31, 2024.

Lines of credit and short-term borrowings totaled $22.5 million at March 31, 2024, an increase of $2.6 million from the prior fiscal year end balance of $19.8 million.

The increase was primarily due to additional line of credit borrowings.

Deferred tax liabilities totaled $7.2 million at March 31, 2024, an increase of $331,000 from the prior fiscal year end balance of $6.9 million.

The increase was primarily related to the reduction of the net operating loss carry forward during the six months ended March 31, 2024.

Shareholders’ equity was $34.6 million at March 31, 2024, a decrease of $25,000 from the prior fiscal year end balance of $34.6 million.

The increase was primarily due to net income of $933,000 for the six months ended March 31, 2024, mostly offset by an annual cash dividend payment of $994,000 on January 2, 2024.

Liquidity and Capital Resources

2 unchanged sentences

The interest rate on the line of credit is the “ Wall Street Journal ” Prime Rate (the index) with a floor of 4.99%.

On January 19,

2023, the Company received an amendment to the agreement which increased the line of credit to $30.0 million with a maturity date of June 28, 2023.

On January 19, 2023, the Company received an amendment to the agreement which increased the line of credit to $30.0 million with a maturity date of June 28, 2023.

On June 1, 2023, the agreement was renewed through June 28, 2024.

The line of credit is limited to a borrowing base calculation as summarized below:

December 31, 2023

March 31, 2024

September 30, 2023

13 unchanged sentences

The Company’s lender has agreed to omit the effect of the PPP loan restatement from the Company’s covenant compliance calculations while a final decision on PPP loan forgiveness remains in question.

Thus, the Company was in compliance with all covenants at December 31, 2023.

Thus, the Company was in compliance with all covenants at March 31, 2024.

The Company projects to meet all covenant requirements for the next twelve months.

Insurance Premiums Financed

The Company financed its captive insurance policy premiums on a short-term basis through a financing company for the calendar years ended December 31, 2023 and 2022.

The Company financed its captive insurance policy premiums on a short-term basis through a financing company for the calendar year ended December 31, 2023.

These insurance policies include workers’ compensation, general liability, automobile, umbrella, and equipment policies.

The Company made down payments in January 2023 and 2022 and financed the remaining premium amount over eleven monthly payments.

At December 31, 2023 and September 30, 2023, the remaining balance of the insurance premiums was $0 and $950,000, respectively.

The Company made a down payment in January 2023 and financed the remaining premium amount over eleven monthly payments.

At March 31, 2024 and September 30, 2023, the remaining balance of the insurance premiums was $0 and $950,000, respectively.

For the calendar year beginning January 1, 2024, the Company’s insurance company is accepting quarterly payments on certain insurance policies and the Company has prepaid the balance of the remaining policies as of March 31, 2024.

The Company has no insurance premiums financed as of March 31, 2024.

Paycheck Protection Program Loans

17 unchanged sentences

Borrowers must retain PPP documentation for at least six years after the date the loan is forgiven or paid in full, and the SBA and SBA Inspector General must be granted these files upon request.

The SBA could revisit its forgiveness decision and determine that the Company does not qualify in whole or in part for loan forgiveness and demand repayment of the loans.

The SBA could revisit its forgiveness decision and determine that

the Company does not qualify in whole or in part for loan forgiveness and demand repayment of the loans.

In addition, it is unknown what type of penalties could be assessed against the Company if the SBA disagrees with the Company’s certification.

5 unchanged sentences

Treasury yield, adjusted to a constant maturity of three years as published by the Federal Reserve weekly.

As of December 31, 2023, the Company had made principal payments of $402,000.

As of March 31, 2024, the Company had made principal payments of $413,000.

The loan is collateralized by the building purchased under this agreement.

2 unchanged sentences

On November 13, 2015, the Company entered into a 10-year $1.1 million loan agreement with United Bank to purchase the fabrication shop and property Nitro had previously been leasing.

The variable interest rate on the loan agreement is 9.5% at December 31, 2023.

As of December 31, 2023, the Company had made principal payments of $836,000.

The variable interest rate on the loan agreement is 9.5% at March 31, 2024.

As of March 31, 2024, the Company had made principal payments of $868,000.

The loan is collateralized by the building and property purchased under this agreement.

3 unchanged sentences

The unsecured five-year term note requires annual payments of at least $500,000 with a fixed interest rate of 3.25% on the $3.0 million sellers’ note, which equates to 5.35% on the carrying value of the note.

As of December 31, 2023, the Company had made annual installment payments of $2.1 million.

As of March 31, 2024, the Company had made annual installment payments of $2.1 million.

On January 4, 2021, the Company entered into a $3.0 million Non-Revolving Note agreement with United Bank.

This five-year agreement gave the Company access to a $3.0 million line of credit (“Equipment Line of Credit 2021”), specifically for the purchase of equipment, for a period of twelve months with a variable interest rate initially established at 4.25% as based on the Prime Rate as

published by The Wall Street Journal.

After twelve months, all borrowings against the Equipment Line of Credit 2021 were converted to a four-year term note agreement with a variable interest rate initially established at 4.25%.

The loan is collateralized by the equipment purchased under this agreement.

As of December 31, 2023, the Company borrowed $3.0 million against this line of credit with monthly payments of $68,150 that started in February 2022.

The interest rate at December 31, 2022 was 9.5%.

The Company has made principal payments of $1.3 million on this note as of December 31, 2023.

As of March 31, 2024, the Company borrowed $3.0 million against this line of credit with monthly payments of $68,150 that started in February 2022.

The interest rate at March 31, 2023 was 9.5%.

The Company has made principal payments of $1.5 million on this note as of March 31, 2024.

On April 2, 2021, the Company entered into a $3.5 million Non-Revolving Note agreement with United Bank.

2 unchanged sentences

The loan is collateralized by the Company’s equipment and receivables.

As of December 31, 2023, the Company had made principal payments of $1.8 million.

As of March 31, 2024, the Company had made principal payments of $2.0 million.

On April 29, 2022, the Company entered into a $7.5 million Non-Revolving Note agreement with United Bank.

This five-year agreement was used to finance the purchase of Tri-State Paving and has monthly payments of $129,910 with a fixed interest rate of 4.25%.

The Company has made principal payments of $2.1 million on this note as of December 31, 2023.

The Company has made principal payments of $2.5 million on this note as of March 31, 2024.

On October 10, 2022, the Company entered into a $3.1 million promissory note agreement with United Bank.

2 unchanged sentences

The loan is collateralized by the Company’s equipment and receivables.

As of December 31, 2022, the Company had made principal payments of $640,000.

As of March 31, 2024, the Company had made principal payments of $783,000.

On April 29, 2022, the Company entered into a $1.0 million promissory note agreement with Corns Enterprises, a related party, as partial consideration for the purchase of Tri-State Paving.

2 unchanged sentences

Interest payments due shall be calculated on the principal balance remaining and shall be at the stated rate of 3.5% per year.

The Company has made principal payments of $750,000 on this note as of December 31, 2023.

The Company has made principal payments of $750,000 on this note as of March 31, 2024.

On June 1, 2023, the Company entered into a $9.3 million Non-Revolving Note agreement with United Bank.

2 unchanged sentences

The loan is collateralized by the equipment purchased under this agreement.

As of December 31, 2023, the Company had borrowed $9.3 million against this line of credit and made $144,000 in principal payments.

As of March 31, 2024, the Company had borrowed $9.3 million against this line of credit and made $588,000 in principal payments.

Operating Leases

2 unchanged sentences

The Company has only committed to a one-year renewal and is evaluating the intent to renew for additional periods.

The Company has two lease agreements for construction equipment with a combined amount of $160,000.

The leases have a term of twenty-two months with a stated interest rate of 0%, combined monthly installment payments of $6,645 and are cancellable at any time without penalty.

The Company has the right to purchase the equipment at the expiration of the leases by applying the two-month deposit paid.

The related assets and finance lease obligations associated with these lease agreements are included in the consolidated balance sheets within property, plant and equipment and long-term debt.

The Company had two lease agreements for construction equipment with a combined amount of $160,000 that were paid in full as of March 31, 2024.

The leases had a term of twenty-two months with a stated interest rate of 0%, combined monthly installment payments of $6,645 and were cancellable at any time without penalty.

The Company exercised the right to purchase the equipment at the expiration of the leases by applying the two-month deposit paid.

The related assets and finance lease obligations associated with these lease agreements had been included in the consolidated balance sheets within property, plant and equipment and long-term debt.

The Company has two right-of-use operating leases acquired on April 29, 2022, as part of the Tri-State Paving, LLC transaction.

The first operating lease, for the Hurricane, West Virginia facility, had a net present value of $236,000 at inception, and a carrying value of $106,000 at December 31, 2023.

The second operating lease, for the Chattanooga, Tennessee facility, had a net present value of $144,000 at inception, and a carrying value of $40,000 at December 31, 2023.

The first operating lease, for the Hurricane, West Virginia facility, had a net present value of $236,000 at inception, and a carrying value of $86,000 at March 31, 2024.

The second operating lease, for the Chattanooga, Tennessee facility, had a net present value of $144,000 at inception, and a carrying value of $24,000 at March 31, 2024.

The 4.5% interest rate on the operating leases is based on the Company’s incremental borrowing rate at inception.

The Company has a right-of-use operating lease with Enterprise acquired on August 11, 2022, as part of the Ryan Environmental acquisition.

The Company has a right-of-use operating lease with Enterprise Fleet Management, Inc.

(Enterprise) acquired on August 11, 2022, as part of the Ryan Environmental acquisition.

This lease agreement was initially for thirty-one vehicles with a net present value of $1.2 million.

The Company had sixty-nine vehicles on lease at December 31, 2023.

The right-of-use operating lease has a carrying value of $2.5 million at December 31, 2023.

The Company had seventy-one vehicles on lease at March 31, 2024.

The right-of-use operating lease has a carrying value of $2.4 million at March 31, 2024.

Each vehicle leased under the master lease program has its own implicit rate ranging from 12.8% to 15.6%.

The Company has a right-of-use operating lease with RICA Developers, LLC acquired on August 12, 2022 and renewed for one year effective October 1, 2023.

This lease, for the Bridgeport, West Virginia facility, had a net present value of $125,000 at inception and a carrying value of $83,000 at December 31, 2023.

This lease, for the Bridgeport, West Virginia facility, had a net present value of $125,000 at inception and a carrying value of $64,000 at March 31, 2024.

The 8.5% interest rate on the operating lease was based on the Company’s incremental borrowing rate at renewal.

The Company has a right-of-use operating lease acquired on March 28, 2023.

This lease, for the Winchester, Kentucky facility, had a net present value of $290,000 at inception and a carrying value of $231,000 at December 31, 2023.

This lease, for the Winchester, Kentucky facility, had a net present value of $290,000 at inception and a carrying value of $209,000 at March 31, 2024.

The 7.75% interest rate on the operating lease is based on the Company’s incremental borrowing rate at inception.

5 unchanged sentences

Rental expense can vary by reporting period due to equipment requirements on construction projects and the availability of Company owned equipment.

Rental expense, which is included in cost of goods sold on the consolidated statements of income, was $5.4 million and $2.7 million, respectively, for the three months ended December 31, 2023 and 2022.

Rental expense, which is included in cost of goods sold on the consolidated statements of income, was $3.3 million and $1.5 million, respectively, for the three months ended March 31, 2024 and 2023.

Rental expenses were $8.7 million and $4.2 million, respectively, for the six months ended March 31, 2024 and 2023.

Letters of Credit

Certain customers or vendors may require letters of credit to secure payments that the vendors are making on our behalf or to secure payments to subcontractors and vendors on various customer projects.

At December 31, 2023, the Company did not have any letters of credit outstanding.

At March 31, 2024, the Company did not have any letters of credit outstanding.

Performance Bonds

8 unchanged sentences

The Company does not anticipate any claims in the foreseeable future.

At December 31, 2023, the Company had $98.4 million in performance bonds outstanding.

At March 31, 2024, the Company had $94.9 million in performance bonds outstanding.

Concentration of Credit Risk

3 unchanged sentences

Under certain circumstances such as foreclosure, the Company may take title to the underlying assets in lieu of cash in settlement of receivables.

Please see the tables below for customers that represent 10.0% or more of the Company’s revenue or accounts receivable, net of retention for the three months ended December 31, 2023 and 2022:

Please see the tables below for customers that represent 10.0% or more of the Company’s revenue or accounts receivable, net of retention for the three and six months ended March 31, 2024 and 2023:

Three Months Ended

December 31, 2023

December 31, 2022

NiSource and subsidiaries

Six Months Ended

TransCanada Corporation

1 unchanged sentence

Accounts receivable, net of retention

at December 31, 2023

at September 30, 2023

NiSource and subsidiaries

at March 31, 2024

at March 31, 2023

Yates Construction

* Less than 10.0% and included in “All other” if applicable

In February 2018, the Company filed a lawsuit against a former customer in the United States District Court for the Western District of Pennsylvania.

In February 2018, the Company filed a lawsuit against a former customer (the “Defendant”) in the United States District Court for the Western District of Pennsylvania.

The lawsuit is related to a dispute over work performed on a pipeline construction project.

On November 21, 2022, a Judgment Order was issued, and the Company was awarded $13.1 million, of which $5.8 million was the jury award, $1.6 million was for attorney’s fees, and $5.7 million was for penalties and interest.

The amounts awarded by the Judgment Order have not been recognized in the Company’s consolidated financial statements as of December 31, 2023.

The Company’s attorney’s fees have been expensed as incurred.

The case has been appealed to the United States Court of Appeals for the Third Circuit and is expected to be heard within the next 12 months.

The amounts awarded by the Judgment Order have not been recognized in the Company’s consolidated financial statements as of March 31, 2024.

The Company’s attorney’s

fees have been expensed as incurred.

On April 17, 2024, the United States Court of Appeals for the Third Circuit (the “Appeals Court”) affirmed the decision of the United States District Court for the Western District of Pennsylvania.

On May 1, 2024, the Defendant filed a Petition for Rehearing or Rehearing En Banc with the Appeals Court.

On November 12, 2021, the Company received a withdrawal liability claim from a pension plan to which the Company made pension contributions for union construction employees performing covered work in a particular jurisdiction.

6 unchanged sentences

The Company has expensed all $164,000 in payments made through September 30, 2022 and does not expect any future liabilities related to this claim.

The Company did not make any payments during the three months ended December 31, 2023.

Other than described above, at December 31, 2023, the Company was not involved in any legal proceedings other than in the ordinary course of business.

The Company did not make any payments during the three and six months ended March 31, 2024.

Other than described above, at March 31, 2024, the Company was not involved in any legal proceedings other than in the ordinary course of business.

The Company is a party from time to time to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business.

1 unchanged sentence

With respect to all such lawsuits, claims, and proceedings, we record reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.

At December 31, 2023, the Company does not believe that any of these proceedings, separately or in aggregate, would be expected to have a material adverse effect on our financial position, results of operations or cash flows.

At March 31, 2024, the Company does not believe that any of these proceedings, separately or in aggregate, would be expected to have a material adverse effect on our financial position, results of operations or cash flows.

Related Party Transactions

2 unchanged sentences

Interest payments due shall be calculated on the principal balance remaining and shall be at the stated rate of 3.5% per year.

The Company has made $750,000 in principal payments on this note as of December 31, 2023.

The Company has made $750,000 in principal payments on this note as of March 31, 2024.

Subsequent to the April 29, 2022 acquisition of Tri-State Paving, the Company entered into an operating lease for facilities in Hurricane, West Virginia with Corns Enterprises.

This thirty-six-month lease is treated as a right to use asset and has payments of $7,000 per month.

The total net present value at inception was $236,000 with a carrying value of $106,000 at December 31, 2023.

The total net present value at inception was $236,000 with a carrying value of $86,000 at March 31, 2024.

SQP made an equity investment of $156,000 in 1030 Quarrier Development, LLC (“Development”) in August 2022.

9 unchanged sentences

SQP and Ventures have jointly provided an unconditional guarantee for the $5.0 million of obligations associated with the Project.

Other than mentioned above, there were no new material related party transactions entered into during the three months ended December 31, 2023.

Other than mentioned above, there were no new material related party transactions entered into during the three and six months ended March 31, 2024.

Certain Energy Services subsidiaries routinely engage in transactions in the normal course of business with each other, including sharing employee benefit plan coverage, payment for insurance and other expenses on behalf of other affiliates, and other services incidental to business of each of the affiliates.

4 unchanged sentences

Significant inflation or supply chain issues could cause customers to delay or cancel planned projects;

however, inflation did not have a significant effect on our results for the three months ended December 31, 2023 and 2022.

however, inflation did not have a significant effect on our results for the three and six months ended March 31, 2024 and 2023.

Critical Accounting Estimates

5 unchanged sentences

The Company recognizes revenue as performance obligations are satisfied and control of the promised goods and service is transferred to the customer.

For Lump Sum and Unit Price contracts, revenue is ordinarily recognized over time as control is transferred to the customers by measuring the progress toward complete satisfaction of the performance obligation(s) using an input (i.e., “cost to

cost”) method.

For Cost Plus and Time and Material (“T&M”) contracts, revenue is ordinarily recognized over time as control is transferred to the customers by measuring the progress toward satisfaction of the performance obligation(s) using an output method.

21 unchanged sentences

Settlement with the customer of outstanding affirmative claims is dependent on the claims resolution process and could extend beyond one year.

Based on our historical experience, we generally consider the collection risk related to billable amounts to be low.

on our historical experience, we generally consider the collection risk related to billable amounts to be low.

When events or conditions indicate that it is probable that the amounts outstanding become unbillable, the transaction price and associated contract asset is reduced.

3 unchanged sentences

Generally, unearned project-related costs will be earned over the next twelve months.

The following table presents our costs and estimated earnings in excess of billings and billings in excess of costs and estimated earnings at December 31, 2023 and September 30, 2023:

December 31, 2023

The following table presents our costs and estimated earnings in excess of billings and billings in excess of costs and estimated earnings at March 31, 2024 and September 30, 2023:

March 31, 2024

September 30, 2023

10 unchanged sentences

Additionally, frequently changing reserves could be an indication of risky or unreliable customers.

At December 31, 2022, the management review deemed that the allowance for doubtful accounts was adequate.

At March 31, 2024, the management review deemed that the allowance for doubtful accounts was adequate.

Please see the allowance for doubtful accounts table below:

December 31, 2023

March 31, 2024

September 30, 2023

5 unchanged sentences

The Company follows the guidance of Accounting Standards Codification (“ASC”) 350-20-35-3 “Intangibles-Goodwill and Other (Topic 350)” which requires a company to record an impairment charge based on the excess of a reporting unit’s carrying amount of goodwill over its fair value.

Under the current guidance, companies can first choose to assess any impairment based on qualitative factors (Step 0).

Under the current guidance, companies can first choose to assess any impairment based on qualitative

factors (Step 0).

If a company fails this test or decides to bypass this step, it must proceed with a quantitative assessment of goodwill impairment.

The Company did not have a goodwill impairment at December 31, 2023.

The Company did not have a goodwill impairment at March 31, 2024.

Materially incorrect estimates could cause an impairment of goodwill or intangible assets and result in a loss in profitability for the Company.

A table of the Company’s intangible assets subject to amortization is below:

Remaining Life

and Impairment

Remaining Life

Amortization and

and Impairment

(in months) at

Impairment at

Ended December 31,

and Impairment

Net Book Value

at September 30,

Ended March 31,

at September 30,

Intangible assets:

December 31, 2023

Original Cost

December 31, 2023

September 30, 2023

at December 31, 2023

at September 30, 2023

West Virginia Pipeline:

18 unchanged sentences

The definite-lived identifiable intangible assets recognized as part of the Company’s business combinations are initially recorded at their estimated fair value.

The Company’s depreciation expenses for the three months ended December 31, 2023 and 2022 was $2.1 million and $1.8 million, respectively.

The Company’s depreciation expenses for the three months ended March 31, 2024 and 2023 were $2.1 million and $1.8 million, respectively.

The Company’s depreciation expenses for the six months ended March 31, 2024 and 2023 were $4.2 million and $3.6 million, respectively.

In general, depreciation is included in “cost of revenues” on the Company’s consolidated statements of income.

The Company’s amortization expenses for the three months ended December 31, 2023 and 2022 were $108,142 and $132,780, respectively.

The Company’s amortization expenses for the three months ended March 31, 2024 and 2023 were $108,142 and $132,621, respectively.

The Company’s amortization expenses for the six months ended March 31, 2024 and 2023 were $216,284 and $265,401, respectively.

In general, amortization is included in “cost of revenues” on the Company’s consolidated statements of income.

4 unchanged sentences

The Company’s provision for income taxes is computed by applying a federal rate of 21.0% and a state rate of 6.0% to taxable income or loss after consideration of non-taxable and non-deductible items.

The income tax expense for the three months ended December 31, 2023 was $1.1 million as compared to an income tax benefit of ($80,000) for the three months ended December 31, 2022.

The increase was due to an increase in taxable income for the three months ended December 31, 2023, as compared to the same period in 2022.

The effective income tax rate for the three months ended December 31, 2023, was 34.1%, as compared to (135.5) % for the same period in 2022.

The income tax benefit for the three months ended March 31, 2024 was $373,000 as compared to $650,000 for the three months ended March 31, 2023.

The income tax expense for the six months ended March 31, 2024 was $685,000 as compared to an income tax benefit of $730,000 for the six months ended March 31, 2023.

The changes were due to an increase in taxable income for the three and six months ended March 31, 2024, as compared to the same period in 2023.

The effective income tax rate for the three and six months ended March 31, 2024, was (25.2%) and 42.3%, respectively, as compared to (25.8%) and (29.6%), respectively, for the same periods in 2023.

Effective income tax rates are estimates and may vary from period to period due to changes in the amount of taxable income and non-deductible expenses.

12 unchanged sentences

Early adoption is permitted, including in any interim period, for public business entities for periods for which financial statements have not yet been issued, and for all other entities for periods for which financial statements have not yet been made available for issuance.

The Company is currently assessing the effect that ASU 2021-08 will have on their results of operations, financial position and cash flows;

The Company is currently assessing the effect that ASU 2021-08 will have on its results of operations, financial position and cash flows;

however, the Company does not expect a significant impact.

The FASB recently issued ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance , which aims to provide increased transparency by requiring business entities to disclose information about certain types of government assistance they receive in the notes to the financial statements.

Entities are required to provide the new disclosures prospectively for all transactions with a government entity that are accounted for under either a grant or a contribution accounting model and are reflected in the financial statements at the date of initially applying the new amendments, and to new transactions entered into after that date.

Retrospective application of the guidance is permitted.The Company adopted ASU 2021-10 on October 1, 2022, and its adoption did not have a significant impact on the Company’s consolidated financial statements.

Subsequent Events

On November 15, 2023, the Company’s Board of Directors approved an annual dividend of $0.06 per common share.

The 2024 dividend was paid on January 2, 2024 to holders of record as of December 15, 2023.

While this is expected to be an annual dividend, factors such as income from operations, cash flows, and overall financial outlook may affect future dividend payments.

On April 17, 2024, the United States Court of Appeals for the Third Circuit (the “Court”) affirmed the decision of the United States District Court for the Western District of Pennsylvania in a lawsuit filed by the Company against a former customer (“Defendant”) related to a dispute over work performed on a pipeline contract.

On May 1, 2024, the Defendant filed a Petition for Rehearing or Rehearing En Banc with the Court.

Please see Litigation on page 31 for further details.

Management has evaluated all subsequent events for accounting and disclosure.

3 unchanged sentences

The Company is seeing a significant increase in bid opportunities for natural gas transmission and distribution projects along with electrical, mechanical, and general construction projects.

The Company’s backlog at December 31, 2023, was $185.9 million, as compared to $206.9 million and $229.8 million at December 31, 2022, and September 30, 2023, respectively.

The Company’s backlog at March 31, 2024, was $222.8 million, as compared to $224.6 million and $229.8 million at March 31, 2023, and September 30, 2023, respectively.

While adding additional projects appears likely, no assurances can be given that the Company will be successful in bidding on projects that become available.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis