What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-10 compared with 2024-08-12 · 220 added, 273 removed, 362 unchanged (58% of the section changed)

2 unchanged sentences

Among other things, those historical consolidated financial statements include more detailed information regarding the basis of presentation for the following information.

The term “Energy Services” refers to the Company, West Virginia Pipeline, SQP, Tri-State Paving, Ryan Construction, and C.J.

The term “Energy Services” refers to the Company, West Virginia Pipeline, SQP, Tri-State Paving, Ryan Construction, Tribute, and C.J.

Hughes and C.J.

62 unchanged sentences

Ryan Construction Services Inc.

(“Ryan Construction” or “RCS”), a wholly owned subsidiary of Energy Services, formed in August 2022 in connection with the acquisition of substantially all the assets of Ryan Environmental, LLC and Ryan Environmental Transport, LLC (collectively “Ryan Environmental”), provides directional drilling services for broadband service providers along with offering natural gas distribution services, cathodic protection and corrosion prevention services, and civil construction services.

Ryan Construction operates primarily in West Virginia and Pennsylvania.

(“Ryan Construction” or “RCS”), a wholly owned subsidiary of Energy Services, provides directional drilling services for broadband service providers along with offering natural gas distribution services, cathodic protection and corrosion prevention services, and civil construction services.

Ryan Construction operates primarily in West Virginia, Tennessee, and Pennsylvania.

The employees of RCS are non-union and are managed independently of the Company’s union subsidiaries.

Tribute Contracting & Consultants, Inc.

(“Tribute” or “TCC”), a wholly owned subsidiary of Energy Services, was formed in October 2024 in connection with the acquisition of substantially all the assets of Tribute Contracting & Consultants, LLC (“Tribute LLC”).

The acquisition of Tribute LLC closed on December 2, 2024.

Tribute constructs water distribution and wastewater systems primarily for public municipalities in West Virginia, Ohio, and Kentucky.

The employees of TCC are non-union and are managed independently of the Company’s union subsidiaries.

The Company’s website address is www.energyservicesofamerica.com.

2 unchanged sentences

These variations are the result of weather, customer spending patterns, bidding seasons and holidays.

The first quarter of the calendar year is typically the slowest in terms

of revenues because inclement weather conditions cause delays in production and customers usually do not plan large projects during that time.

The first quarter of the calendar year is typically the slowest in terms of revenues because inclement weather conditions cause delays in production and customers usually do not plan large projects during that time.

While usually better than the first quarter, the second calendar year quarter often has some inclement weather which can cause delays in production, reducing the revenues the Company receives and/or increasing the production costs.

3 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 and nine months ended June 30, 2024 and 2023 Overview

The following is an overview of results from operations for the three and nine months ended June 30, 2024 and 2023:

Three months ended December 31, 2024 and 2023 Overview

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

Three Months Ended

Nine Months Ended

Cost of revenues

Cost of revenue

Selling and administrative expenses

1 unchanged sentence

Other income (expense)

Interest income

Other nonoperating expense

Income from lawsuit judgement

Other nonoperating (expense) income

Interest expense

Gain on sale of equipment

Gain (loss) on sale of equipment

Income before income taxes

2 unchanged sentences

Weighted average shares-diluted

Earnings per share-basic

Earnings per share-diluted

Results of Operations for the Three and Nine Months Ended June 30, 2024 Compared to the Three and Nine Months Ended June 30, 2023

A table comparing the Company’s revenues for the three and nine months ended June 30, 2024 compared to the three and nine months ended June 30, 2023 is below:

Earnings per share available to common shareholders

Earnings per share-diluted available to common shareholders

Results of Operations for the Three months Ended December 31, 2024 Compared to the Three months Ended December 31, 2023

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

Three Months Ended

June 30, 2024

June 30, 2023

Gas & Water Distribution

Gas & Petroleum Transmission

Electrical, Mechanical, and General

Nine Months Ended

June 30, 2024

June 30, 2023

December 31, 2024

December 31, 2023

Gas & Water Distribution

Gas & Petroleum Transmission

Electrical, Mechanical, and General

Total revenues increased by $394,000 to $85.9 million for the three months ended June 30, 2024, as compared to $85.5 million for the three months ended June 30, 2023.

Total revenues increased by $48.0 million to $247.2 million for the nine months ended June 30, 2024, as compared to $199.2 million for the nine months ended June 30, 2023.

The increases were a result of increased work in all categories of business except for an $11.3 million decrease in Gas & Petroleum Transmission work for the three months ended June 30, 2024 as compared to the same period in 2023.

Gas & Water Distribution revenues totaled $22.5 million for the three months ended June 30, 2024, a $4.6 million increase from $17.9 million for the three months ended June 30, 2023.

Gas & Water Distribution revenues totaled $53.9 million for the nine months ended June 30, 2024, a $10.1 million increase from $43.8 million for the nine months ended June 30, 2023.

The revenue increases were primarily related to increased paving and gas and water distribution services performed during the three and nine months ended June 30, 2024, as compared to the same periods in 2023.

Gas & Petroleum Transmission revenues totaled $17.1 million for the three months ended June 30, 2024, an $11.4 million decrease from $28.5 million for the three months ended June 30, 2023.

Gas & Petroleum Transmission revenues totaled $55.5 million for the nine months ended June 30, 2024, a $4.8 million increase from $50.7 million for the nine months ended June 30, 2023.

The revenue decrease for the three months ended June 30, 2024, as compared to the same period in 2023, was primarily due to transmission work starting later in 2024 as compared to 2023 and the Company having a large transmission project that started in the third fiscal year quarter of 2023 that was not replaced in the third quarter of fiscal year 2024.

The revenue increase for the nine months ended June 30, 2024, as compared to the same period in 2023, was primarily due to projects that started later in fiscal year 2023 and continued into fiscal year 2024.

Electrical, Mechanical, & General construction services revenues totaled $46.2 million for the three months ended June 30, 2024, a $7.1 million increase from $39.1 million for the three months ended June 30, 2023.

Electrical, Mechanical, & General construction services revenues totaled $137.9 million for the nine months ended June 30, 2024, a $33.2 million increase from $104.7 million for the nine months ended June 30, 2023.

The revenue increases were primarily related to an increase in general contracting and electrical services performed during the three and nine months ended June 30, 2024, as compared to the same period in the prior year.

Electrical, Mechanical, & General

Total revenues increased by $10.5 million to $100.6 million for the three months ended December 31, 2024, as compared to $90.2 million for the three months ended December 31, 2023.

The increase was a result of $14.2 million and $6.4 million in increased work in the Gas & Water Distribution and Electrical, Mechanical, & General categories, respectively, partially offset by a $10.1 million decrease in Gas & Petroleum Transmission work for the three months ended December 31, 2024 as compared to the same period in 2023.

Gas & Water Distribution revenues totaled $31.3 million for the three months ended December 31, 2024, a $14.2 million increase from $17.1 million for the three months ended December 31, 2023.

The revenue increase was primarily related to increased water distribution services performed during the three months ended December 31, 2024, as compared to the same period in 2023.

Gas & Petroleum Transmission revenues totaled $18.5 million for the three months ended December 31, 2024, a $10.1 million decrease from $28.6 million for the three months ended December 31, 2023.

The revenue decrease was primarily due to more transmission work being completed by the end of fiscal year 2024 as compared to 2023 and less transmission work being competed in the first fiscal quarter of 2025 as compared to the same period in 2024.

Electrical, Mechanical, & General construction services revenues totaled $50.9 million for the three months ended December 31, 2024, a $6.4 million increase from $44.5 million for the three months ended December 31, 2023.

The revenue increase was primarily related to an increase in general contracting and electrical services performed during the three months ended December 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 and nine months ended June 30, 2024, compared to the three and nine months ended June 30, 2023, is below:

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

Three Months Ended

June 30, 2024

June 30, 2023

Gas & Water Distribution

Gas & Petroleum Transmission

Electrical, Mechanical, & General

Unallocated Shop Expense

Nine Months Ended

June 30, 2024

June 30, 2023

December 31, 2024

December 31, 2023

Gas & Water Distribution

2 unchanged sentences

Unallocated Shop Expense

Total cost of revenues decreased by $4.0 million to $70.6 million for the three months ended June 30, 2024, as compared to $74.7 million for the three months ended June 30, 2023.

Total cost of revenues increased by $36.3 million to $214.8 million for the nine months ended June 30, 2024, as compared to $178.5 million for the nine months ended June 30, 2023.

The cost of revenues decreases for the three months ended June 30, 2024, as compared to the same period in 2023, as a result of Gas & Petroleum Transmission work starting later in 2024 as compared to 2023 and the Company having a large transmission project that started in the third fiscal year quarter of 2023 that was not replaced in the third quarter of fiscal year 2024.

The cost of revenue increase for the nine months ended June 30, 2024, as compared to the nine months ended June 30, 2023, as a result of increased work in all categories of business.

Gas & Water Distribution cost of revenues totaled $16.1 million for the three months ended June 30, 2024, a $2.9 million increase from $13.3 million for the three months ended June 30, 2023.

Gas & Water Distribution cost of revenues totaled $41.1 million for the nine months ended June 30, 2024, a $6.6 million increase from $34.5 million for the nine months ended June 30, 2023.

The cost of revenues increase was primarily related to increased paving and gas and water distribution services performed during the nine months ended June 30, 2024, as compared to the same periods in 2023.

Gas & Petroleum Transmission cost of revenues totaled $12.5 million for the three months ended June 30, 2024, a $12.0 million decrease from $24.5 million for the three months ended June 30, 2023.

Gas & Petroleum Transmission cost of revenues totaled $47.2 million for the nine months ended June 30, 2024, a $2.9 million increase from $44.4 million for the nine months ended June 30, 2023.

The cost of revenues decreases for the three months ended June 30, 2024, as compared to the same period in 2023, were primarily due to Gas & Petroleum Transmission work starting later in 2024 as compared to 2023 and the Company having a large transmission project that started in the third fiscal year quarter of 2023 that was not replaced in the third quarter of fiscal year 2024.

The cost of revenues increased for the nine months ended June 30, 2024, as compared to the same period in 2023, primarily due to projects that started later in fiscal year 2023 and continued into fiscal year 2024.

Electrical, Mechanical, & General construction services cost revenues totaled $40.2 million for the three months ended June 30, 2024, a $3.6 million increase from $36.6 million for the three months ended June 30, 2023.

Electrical, Mechanical, & General construction services cost of revenues totaled $123.7 million for the nine months ended June 30, 2024, a $25.5 million increase from $98.1 million for the nine months ended June 30, 2023.

The cost of revenues increase was primarily related to an increase in general contracting and electrical services performed during the three and nine months ended June 30, 2024, as compared to the same period in the prior year.

Unallocated shop expenses totaled $1.7 million for the three months ended June 30, 2024, a $1.5 increase from $249,000 for the three months ended June 30, 2023.

Unallocated shop expenses totaled $2.8 million for the nine months ended June 30, 2024, a $1.3 million increase from $1.5 million for the nine months ended June 30, 2023.

The changes in unallocated shop expenses were primarily due to changes in the amount of internal equipment charged to projects for the three and nine months ended June 30, 2024, as compared to the same period in the prior year.

Total cost of revenues increased by $11.1 million to $90.4 million for the three months ended December 31, 2024, as compared to $79.3 million for the three months ended December 31, 2023.

The cost of revenues increase was the result of increased work in the Gas & Water Distribution and Electrical, Mechanical, & General business categories, partially offset by a decrease in Gas & Petroleum Transmission work.

Gas & Water Distribution cost of revenues totaled $26.1 million for the three months ended December 31, 2024, a $13.0 million increase from $13.1 million for the three months ended December 31, 2023.

The cost of revenues increase was primarily related to increased water distribution services performed during the three months ended December 31, 2024, as compared to the same period in 2023.

Gas & Petroleum Transmission cost of revenues totaled $17.5 million for the three months ended December 31, 2024, a $7.6 million decrease from $25.2 million for the three months ended December 31, 2023.

The cost of revenues decrease for the three months ended December 31, 2024 was primarily due to more transmission work being completed by the end of fiscal year 2024 as compared to 2023 and less transmission work being competed in first fiscal year quarter of 2025 as compared to 2024.

Additionally, Gas & Petroleum work was more impacted by inclement weather in the first fiscal quarter of 2025, as compared to the same period in the prior fiscal year.

This resulted in less efficient production and more costs than expected.

Electrical, Mechanical, & General construction services cost revenues totaled $46.1 million for the three months ended December 31, 2024, a $5.0 million increase from $41.1 million for the three months ended December 31, 2023.

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

Unallocated shop expenses totaled $674,000 for the three months ended December 31, 2024, a $669,000 increase from $5,000 for the three months ended December 31, 2023.

The increase in unallocated shop expenses was primarily due to a decrease in the amount of internal equipment charged to projects for the three months ended December 31, 2024, as compared to the same period in the prior year.

Gross Profit (Loss) .

A table comparing the Company’s gross profit (loss) for the three and nine months ended June 30, 2024, compared to the three and nine months ended June 30, 2023, is below:

A table comparing the Company’s gross profit for the three months ended December 31, 2024, compared to the three months ended December 31, 2023, is below:

Three Months Ended

June 30, 2024

June 30, 2023

Gas & Water Distribution

Gas & Petroleum Transmission

Electrical, Mechanical, & General

Unallocated Shop Expense

Nine Months Ended

June 30, 2024

June 30, 2023

December 31, 2024

December 31, 2023

Gas & Water Distribution

2 unchanged sentences

Unallocated Shop Expense

Total gross profit increased by $4.4 million to $15.3 million for the three months ended June 30, 2024, as compared to $10.9 million for the three months ended June 30, 2023.

Total gross profit increased by $11.6 million to $32.4 million for the nine months ended June 30, 2024, as compared to $20.8 million for the nine months ended June 30, 2023.

Gas & Water Distribution gross profit totaled $6.4 million for the three months ended June 30, 2024, a $1.7 million increase from $4.6 million for the three months ended June 30, 2023.

Gas & Water Distribution gross profit totaled $12.8 million for the nine months ended June 30, 2024, a $3.5 million increase from $9.3 million for the nine months ended June 30, 2023.

The gross profit increase was primarily related to increased paving and gas and water distribution services performed during the three and nine months ended June 30, 2024, as compared to the same period in 2023.

Gas & Petroleum Transmission gross profit totaled $4.6 million for the three months ended June 30, 2024, a $618,000 increase from $4.0 million for the three months ended June 30, 2023.

Gas & Petroleum Transmission gross profit totaled $8.2 million for the nine months ended June 30, 2024, a $1.9 million increase from $6.4 million for the nine months ended June 30, 2023.

The gross profit increase for the three months ended June 30, 2024, as compared to the same period in 2023, was primarily related to the unexpected receipt of project changes orders for work performed earlier in fiscal year 2023.

The gross profit increase for the nine months ended June 30, 2024, as compared to the same period in 2023, was primarily related to projects that started later in fiscal year 2023 and continued into fiscal year 2024.

Electrical, Mechanical, & General construction services gross profit totaled $6.0 million for the three months ended June 30, 2024, a $3.5 million increase from $2.5 million for the three months ended June 30, 2023.

Electrical, Mechanical, & General construction services gross profit totaled $14.2 million for the nine months ended June 30, 2024, a $7.6 million increase from $6.6 million for the nine months ended June 30, 2023.

The gross profit increases were primarily related to an increase in general contracting and electrical services performed during the three and nine months ended June 30, 2024, as compared to the same periods in the prior year.

In addition, the Company completed several milestones on a significant project nearing completion during the third quarter of fiscal year 2024 with a higher than expected profits.

Gross loss attributable to unallocated shop expenses totaled ($1.7) million for the three months ended June 30, 2024, a $1.5 increase from ($249,000) for the three months ended June 30, 2023.

Gross loss attributable to unallocated shop expenses totaled ($2.8) million for the nine months ended June 30, 2024, a $1.3 million increase from ($1.5) million for the nine months ended June 30, 2023.

The changes in unallocated shop expenses were due to changes in the amount of internal equipment charged to projects for the three and nine months ended June 30, 2024, as compared to the same periods in the prior year.

Total gross profit decreased by $575,000 to $10.3 million for the three months ended December 31, 2024, as compared to $10.8 million for the three months ended December 31, 2023.

The decrease was primarily due to decreased profit in Gas & Petroleum Transmission work during the first quarter of fiscal year 2025, as compared to the same period in the prior year.

Gas & Water Distribution gross profit totaled $5.2 million for the three months ended December 31, 2024, a $1.2 million increase from $4.0 million for the three months ended December 31, 2023.

The gross profit increase was primarily related to increased water distribution services performed during the three months ended December 31, 2024, as compared to the same period in 2023.

However, the gross profit percentage decreased for the first quarter of fiscal year 2025, as compared to the prior fiscal year.

This was primarily due to decreased volume and less efficient water-related paving services.

Gas & Petroleum Transmission gross profit totaled $934,000 for the three months ended December 31, 2024, a $2.5 million decrease from $3.4 million for the three months ended December 31, 2023.

The gross profit decrease for the three months ended December 31, 2024 was primarily due to more transmission work being completed by the end of fiscal year 2024 as compared to 2023 and less transmission work being competed in first fiscal year quarter of 2025 as compared to 2024.

Additionally, Gas & Petroleum work was more impacted by inclement weather in the first quarter of fiscal year 2025, as compared to the same period in the prior fiscal year.

This resulted in less efficient production and more costs than expected.

Electrical, Mechanical, & General construction services gross profit totaled $4.8 million for the three months ended December 31, 2024, a $1.4 million increase from $3.5 million for the three months ended December 31, 2023.

The gross profit increase was primarily related to an increase in general contracting and electrical services performed during the three months ended December 31, 2024, as compared to the same period in the prior fiscal year.

Gross loss attributable to unallocated shop expenses totaled ($674,000) for the three months ended December 31, 2024, a $669,000 increase from ($5,000) for the three months ended December 31, 2023.

The increase in gross loss related to unallocated shop expenses was primarily due to a decrease in the amount of internal equipment charged to projects for the three months ended December 31, 2024, as compared to the same period in the prior year.

Selling and administrative expenses .

Total selling and administrative expenses increased by $1.5 million to $6.8 million for the three months ended June 30, 2024, as compared to $5.3 million for the same period in the prior year.

Total selling and administrative expenses increased by $4.8 million to $21.3 million for the nine months ended June 30, 2024, as compared to $16.5 million for the same

period in the prior year.

Total selling and administrative expenses increased by $1.4 million to $8.6 million for the three months ended December 31, 2024, as compared to $7.2 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 expense .

Other nonoperating expenses totaled $27,000 for the three months ended June 30, 2024, as compared to $72,000 for the same period in the prior year.

Other nonoperating expenses totaled $34,000 for the nine months ended June 30, 2024, as compared to $164,000 for the same period in the prior year.

The change for the nine months ended June 30, 2024, as compared to the same period in 2023, was primarily related to an immaterial legal settlement that recouped costs expended in a prior period.

Income from Lawsuit Judgement .

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

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

On November 21, 2022, the District Court issued a judgment in favor of the Company.

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

In May 2024, the Appeals Court denied petitions for a rehearing.

This upheld the award granted by the District Court in November 2022.

The Company received an approximately $15.6 million payment related to the lawsuit in May 2024.

Other non-operating (expense) income .

Other non-operating expenses totaled $48,000 for the three months ended December 31, 2024, as compared to $75,000 in non-operating income for the same period in the prior year.

The change for the three months ended December 31, 2024, as compared to the same period in the prior year, was primarily related to a minor legal settlement received during the three months ended December 31, 2023 that recouped employee benefit costs expended in a prior period.

Interest expense .

Interest expense totaled $547,000 for the three months ended June 30, 2024, a decrease of $93,000 from $640,000 for the same period in the prior year.

The decrease was primarily due to the Company paying off its operating line of credit in late May 2024.

Interest expense totaled $1.8 million for the nine months ended June 30, 2024, an increase of $58,000 from $1.7 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, partially offset by the Company paying off its operating line of credit in late May 2024.

Interest expense totaled $484,000 for the three months ended December 31, 2024, a decrease of $118,000 from $602,000 for the same period in the prior year.

The decrease was primarily due to less interest expense related to line of credit borrowings during the three months ended December 31, 2024, as compared to same period in the prior fiscal year.

Gain on sale of equipment .

Gain on sale of equipment totaled $600 for the three months ended June 30, 2024, a decrease of $29,400 from $30,000 for the same period in the prior year.

Gain on sale of equipment totaled $292,000 for the nine months ended June 30, 2024, an increase of $245,000 from $47,000 for the same period in the prior year.

The Company sold certain underutilized or non-working pieces of equipment during the nine months ended June 30, 2024, with no comparable sale occurring during the nine months ended June 30, 2023.

Income before income taxes was $23.6 million for the three months ended June 30, 2024, as compared to $4.9 million for the same period in the prior year.

Income before income taxes was $25.2 million for the nine months ended June 30, 2024, as compared to income before income taxes of $2.4 million for the same period in the prior year.

The increases were primarily related to the items mentioned above.

Income tax expense for the three months ended June 30, 2024, was $6.0million compared to $1.5 million for the same period in the prior year.

Income tax expense for the nine months ended June 30, 2024, was $6.7 million compared to income tax expense of $768,000 for the same period in the prior year.

The increases in income tax expenses were due to an increase in taxable income primarily related to $15.6 million recognized as income from the receipt of a lawsuit judgement during the three and nine months ended June 30, 2024.

Net income for the three months ended June 30, 2024, was $17.5 million, as compared to $3.4 million for the same period in the prior year.

Net income for the nine months ended June 30, 2024 was $18.4 million, as compared to a net loss of $1.7 million for the same period in 2023.

Comparison of Financial Condition at June 30, 2024, and September 30, 2023

The Company had total assets of $148.8 million at June 30, 2024, an increase of $6.3 million from the prior fiscal year end balance of $142.5 million.

Contract assets totaled $21.0 million at June 30, 2024, an increase of $5.1 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 June 30, 2024, compared to September 30, 2023.

Retainage receivable totaled $10.3 million at June 30, 2024, an increase of $2.7 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.

The Company had net property, plant and equipment of $37.9 million at June 30, 2024, an increase of $1.4 million from the prior fiscal year end balance of $36.5 million.

The increase was due to $8.4 million in asset additions, partially offset by $6.3 million in depreciation and net equipment disposals of $703,000.

Prepaid expenses and other totaled $4.2 million at June 30, 2024, an increase of $726,000 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 expensed in the next twelve months.

Other receivables totaled $1.1 million at June 30, 2024, an increase of $605,000 from the prior fiscal year end balance of $517,000.

The increase was primarily due to an advance made to the variable interest entity referenced in Related Party Transactions.

Cash and cash equivalents totaled $14.5 million at June 30, 2024, a decrease of $1.9 million from the prior fiscal year end balance of $16.4 million.

The decrease was primarily due to a net $5.7 million investment in equipment, and a net $15.7 million used in financing activities, partially offset by a net $19.5 million provided from operating activities.

Accounts receivable, net of allowance for doubtful accounts, totaled $50.1 million at June 30, 2024, a decrease of $1.1 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.

Right-of-use assets totaled $2.5 million at June 30, 2024, a decrease of $829,000 from the prior fiscal year end balance of $3.3 million.

The decrease was primarily due to the amortization of operating leases during the nine months ended June 30, 2024, partially offset by a net increase in leased vehicles.

Intangible assets, net totaled $3.1 million at June 30, 2024, a decrease of $324,000 from the prior fiscal year end balance of $3.4 million.

The decrease was due to the amortization of intangible assets during the nine months ended June 30, 2024.

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

The Company had total liabilities of $96.8 million at June 30, 2024, a decrease of $11.1 million from the prior fiscal year end balance of $107.9 million.

Lines of credit and short-term borrowings totaled $10.3 million at June 30, 2024, a decrease of $9.6 million from the prior fiscal year end balance of $19.8 million.

The decrease was primarily due to repayment of the operating line of credit and financed insurance premiums.

The remaining balance relates to PPP loans.

Gain on sale of equipment totaled $196,000 for the three months ended December 31, 2024, an increase of $209,000 from a loss of ($13,000) 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, 2024, with no comparable sale occurring during the three months ended December 31, 2023.

Income before income taxes was $1.3 million for the three months ended December 31, 2024, as compared to $3.1 million for the same period in the prior year.

The decrease was primarily related to the items mentioned above.

Income tax expense for the three months ended December 31, 2024, was $455,000 compared to $1.1 million for the same period in the prior year.

The decrease in income tax expense was due to a decrease in taxable income during the three months ended December 31, 2024, as compared to the same period in the prior year.

Net income for the three months ended December 31, 2024, was $854,000, as compared to $2.0 million for the same period in the prior year.

Comparison of Financial Condition at December 31, 2024, and September 30, 2024

The Company had total assets of $192.1 million at December 31, 2024, an increase of $33.9 million from the prior fiscal year end balance of $158.2 million.

The Company had net property, plant and equipment of $53.3 million at December 31, 2024, an increase of $15.2 million from the prior fiscal year end balance of $38.1 million.

The increase was due to $14.9 million in asset additions related to the Tribute acquisition, $3.1 million in other asset additions, partially offset by $2.6 million in depreciation and net equipment disposals of $300,000.

Accounts receivable, net of allowance for doubtful accounts, totaled $63.9 million at December 31, 2024, an increase of $7.8 million from the prior fiscal year end balance of $56.1 million.

The increase was primarily due to the timing of cash collections and project invoicing since September 30, 2024 and $3.8 million in accounts receivable related to Tribute at December 31, 2024.

Cash and cash equivalents totaled $20.3 million at December 31, 2024, an increase of $7.4 million from the prior fiscal year end balance of $12.9 million.

The increase was primarily due to a net $8.5 million provided by operating activities, and a net $21.7 million provided by financing activities, partially offset by a $20.8 million investment in the acquisition of Tribute and a net $2.0 million investment in equipment.

Retainage receivable totaled $15.2 million at December 31, 2024, an increase of $3.5 million from the prior fiscal year end balance of $11.7 million.

The increase was primarily due to $2.9 million in retainage receivables related to Tribute at December 31, 2024.

Goodwill totaled $7.4 million at December 31, 2024, an increase of $3.3 million from the prior fiscal year end balance of $4.1 million.

The increase was due to the acquisition of Tribute.

Other receivables totaled $2.8 million at December 31, 2024, an increase of $1.7 million from the prior fiscal year end balance of $1.0 million.

The increase was primarily due to a $1.7 million receivable related to a working capital adjustment as part of the Tribute acquisition.

Intangible assets, net totaled $3.9 million at December 31, 2024, an increase of $869,000 from the prior fiscal year end balance of $3.1 million.

The increase was primarily due to intangible assets acquired as part of the Tribute acquisition, partially offset by the amortization of intangible assets during the three months ended December 31, 2024.

Right-of-use assets totaled $2.6 million at December 31, 2024, an increase of $85,000 from the prior fiscal year end balance of $2.5 million.

The increase was primarily due to an increase in leased vehicles, partially offset by the amortization of operating leases during the three months ended December 31, 2024.

Contract assets totaled $19.5 million at December 31, 2024, a decrease of $5.1 million from the prior fiscal year end balance of $24.6 million.

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

Prepaid expenses and other totaled $3.1 million at December 31, 2024, a decrease of $986,000 from the prior fiscal year end balance of $4.1 million.

The decrease was primarily due to a decrease in prepaid insurance that was expensed during the three months ended December 31, 2024.

The Company had total liabilities of $131.0 million at December 31, 2024, an increase of $31.4 million from the prior fiscal year end balance of $99.6 million.

The aggregate balance of current maturities of long-term debt and long-term debt totaled $49.3 million at December 31, 2024, an increase of $25.7 million from the prior fiscal year-end balance of $23.6 million.

The increase was primarily due to $16.0 million related to financing the acquisition of Tribute and assumption of $3.8 million of Tribute equipment debt, $200,000 in additional equipment financing and $7.5 million in line of credit borrowings due by June 28, 2026, partially offset by $1.8 million in long-term debt payments.

Contract liabilities totaled $22.5 million at December 31, 2024, an increase of $5.5 million from the prior fiscal year end balance of $17.0 million.

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

Accounts payable totaled $26.8 million at December 31, 2024, an increase of $3.1 million from the prior fiscal year end balance of $23.7 million.

The increase was due to the timing of accounts payable payments as compared to September 30, 2024 and $1.6 million in accounts payable for Tribute at December 31, 2024.

Income tax payable totaled $2.3 million at December 31, 2024, an increase of $98,000 from the prior fiscal year end balance of $2.2 million.

The increase was primarily related to the taxable income generated during the three months ended December 31, 2024.

Current and long-term operating lease liabilities totaled $2.6 million at December 31, 2024, an increase of $85,000 from the prior fiscal year end balance of $2.5 million.

The increase was primarily due to an increase in leased vehicles, partially offset by payments made during the three months ended December 31, 2024.

Lines of credit and short-term borrowings totaled $10.3 million at December 31, 2024, an increase of $25,000 from the prior fiscal year end balance.

The increase was due to interest accrued on PPP Loans.

Refer to Note 3 “Accounting for PPP Loans” in the accompanying consolidated financial statements for additional details.

Long-term debt totaled $21.7 million at June 30, 2024, a decrease of $3.3 million from the prior fiscal year end balance of $25.0 million.

The decrease in long-term debt was primarily due to $5.0 million in payments on long-term debt, partially offset by $1.7 million in new equipment financing.

Accounts payable totaled $19.4 million at June 30, 2024, a decrease of approximately $2.6 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 $12.0 million at June 30, 2024, a decrease of $1.1 million from the prior fiscal year end balance of $13.1 million.

Accrued expenses and other current liabilities totaled $10.3 million at December 31, 2024, a decrease of $3.6 million from the prior fiscal year end balance of $13.9 million.

The decrease was due to the timing of accrued expense payments, as compared to September 30, 2024.

Current and long-term operating lease liabilities totaled $2.5 million at June 30, 2024, a decrease of $864,000 from the prior fiscal year end balance of $3.6 million.

The decrease was due to payments made during the nine months ended June 30, 2024.

Income tax payable totaled $5.7 million at June 30, 2024, an increase of $5.7 million from the prior fiscal year end.

The increase was primarily related to the taxable income generated during the nine months ended June 30, 2024.

Deferred tax liabilities totaled $7.3 million at June 30, 2024, an increase of $412,000 from the prior fiscal year end balance of $6.9 million.

The increase was primarily related to a $910,000 reduction of a tax asset related to a net operating loss carry forward during the nine months ended June 30, 2024, partially offset by a $460,000 decrease in deferred taxes related to property and equipment.

Contract liabilities totaled $17.9 million at June 30, 2024, an increase of $202,000 from the prior fiscal year end balance of $17.7 million.

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

Shareholders’ equity was $52.0 million at June 30, 2024, an increase of $17.4 million from the prior fiscal year end balance of $34.6 million.

The increase was primarily due to net income of $18.4 million for the nine months ended June 30, 2024, partially offset by an annual cash dividend payment of $994,000 on January 2, 2024 .

Deferred tax liabilities totaled $6.9 million at December 31, 2024, an increase of $378,000 from the prior fiscal year end balance of $6.5 million.

The increase was primarily related to a $1.9 million increase related to bonus depreciation on equipment acquired, partially offset by a $1.5 million increase in federal and state NOL carryforwards.

Shareholders’ equity was $61.0 million at December 31, 2024, an increase of $2.3 million from the prior fiscal year end balance of $58.7 million.

The increase was primarily due to net income of $854,000 for the three months ended December 31, 2024 and $2,000,000 in common stock issued as part of the Tribute acquisition, partially offset by a $501,000 declared quarterly dividend that was paid on January 2, 2025.

Liquidity and Capital Resources

Operating Line of Credit

On January 19, 2023, the Company received an amendment to its $15.0 million operating line of credit which increased the line of credit to $30.0 million with a maturity date of June 28, 2023.

On August 8, 2024, the Company renewed its $30.0 million line of credit with a maturity date of June 28, 2026.

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

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

The Company is working with its lender and expects the operating line of credit to be extended in the Company’s fourth quarter of fiscal year 2024.

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

June 30, 2024

December 31, 2024

September 30, 2024

3 unchanged sentences

Interest rate

The modified financial covenants for the quarter ended June 30, 2023, and all subsequent quarters, are below:

The Company’s $12.0 million and $4.5 million line of credit borrowings are recorded as a long-term debt as of December 31, 2024 and September 30, 2024, respectively.

The financial covenants required by the Company’s lender are below:

● Minimum tangible net worth of $28.0 million,

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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 June 30, 2024.

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

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

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

At June 30, 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 June 30, 2024.

The Company has no insurance premiums financed as of June 30, 2024.

Paycheck Protection Program Loans

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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 as a 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.

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

As of June 30, 2024, the Company had made principal payments of $425,000.

As of December 31, 2024, the Company had made principal payments of $450,000.

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

The note is currently held by Peoples Bank, Inc., formerly First Bank of Charleston, Inc.

(West Virginia).

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 June 30, 2024.

As of June 30, 2024, the Company had made principal payments of $900,000.

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

The note is currently held by Peoples Bank, Inc.

On December 31, 2020, West Virginia Pipeline Acquisition Company, later renamed West Virginia Pipeline, Inc., entered into a $3.0 million sellers’ note agreement with David and Daniel Bolton for the remaining purchase price of West Virginia Pipeline, Inc.

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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 June 30, 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 June 30, 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 June 30, 2023 was 9.5%.

The Company has made principal payments of $1.6 million on this note as of June 30, 2024.

As of December 31, 2024, the Company had made annual installment payments of $2,500,000.

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

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

As of June 30, 2024, the Company had made principal payments of $2.2 million.

As of December 31, 2024, the Company had made principal payments of $2.5 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 $2.8 million on this note as of June 30, 2024.

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

This five-year agreement financed the previous cash value of equipment purchased in the Ryan Construction acquisition.

This loan has monthly installment payments of $59,932 and has a fixed interest rate of 6.0%.

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

As of June 30, 2024, the Company had made principal payments of $928,000.

As of December 31, 2024, the Company had made principal payments of $3.5 million.

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.

Corns remained as president of Tri-State Paving.

Corns continued his role as President of the Company’s Tri-State Paving Subsidiary.

This four-year agreement requires $250,000 principal installment payments on or before the end of each twelve (12) full calendar month period beginning April 29, 2022.

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 June 30, 2024.

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

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

This five-year agreement financed the previous cash value of equipment purchased in the Ryan Construction acquisition.

This loan has monthly

installment payments of $60,000 and has a fixed interest rate of 6.0%.

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

As of December 31, 2024, the Company had made principal payments of $1.2 million.

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

This five-year agreement gave the Company access to a $9.3 million line of credit (“Equipment Line of Credit 2023”), specifically for the purchase of equipment, for a period of six months with a fixed interest rate of 7.25%.

After six months, all borrowings against the Equipment Line of Credit 2023 will convert to a fifty-four-month term note agreement with a fixed interest rate of 7.25%.

After six months, all borrowings against the Equipment Line of Credit 2023 converted to a fifty-four-month term note agreement with a fixed interest rate of 7.25%.

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

As of June 30, 2024, the Company had borrowed $9.3 million against this line of credit and made $1.0 million in principal payments.

As of December 31, 2024, the Company had borrowed $9.3 million against this line of credit and made $1.8 million in principal payments.

On August 8, 2024, the Company renewed its $30.0 million line of credit with a maturity date of June 28, 2026.

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

The outstanding balance on the operating line of credit at December 31, 2024 was $12.0 million with an interest rate of 7.5%.

On August 8, 2024, the Company entered into a $5.0 million Non-Revolving Note agreement with United Bank.

This five-year agreement gave the Company access to a $5.0 million equipment line of credit, specifically for the purchase of equipment, for a period of twelve months with a variable interest rate based on the “ Wall Street Journal ” Prime Rate (the index) and initially at 8.5%.

After twelve months, all borrowings against the equipment line of credit will be converted to a forty-eight month term note agreement with a fixed interest rate equal to the “U.S.

Treasury Rate” plus 2.75% per annum.

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

As of December 31, 2024, the Company had not borrowed against this line of credit.

On December 2, 2024, the Company entered into a $16.0 million loan agreement with United Bank to finance the acquisition of Tribute.

This six-year agreement has monthly payments of $272,000 including a fixed interest rate of 6.9%.

As of December 31, 2024, the Company had not made any principal payments on this loan.

Operating Leases

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

The Company had two lease agreements for construction equipment with a combined amount of $160,000 that were paid in full as of June 30, 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 $69,000 at June 30, 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 $6,000 at June 30, 2024.

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 $25,000 at December 31, 2024.

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

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

The lease was renewed for a two-year period with a net present value of $140,000 and had a carrying value of $105,000 at December 31, 2024.

The 8.5% 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 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 seventy-one vehicles on lease at June 30, 2024.

The right-of-use operating lease has a carrying value of $2.2 million at June 30, 2024.

The Company had eighty vehicles on lease at December 31, 2024.

The right-of-use operating lease has a carrying value of $2.4 million at December 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 $21,000 at June 30, 2024.

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

The Company leases office and shop space for Ryan Construction’s headquarters in Bridgeport, West Virginia.

The Company renewed the lease for one year effective October 1, 2024 through September 30, 2025.

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

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 $169,000 at June 30, 2024.

This lease, for the Winchester, Kentucky facility, had a net present value of $290,000 at inception and a carrying value of $136,000 at December 31, 2024.

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

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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 $3.3 million and $2.5 million, respectively, for the three months ended June 30, 2024 and 2023.

Rental expenses were $12.0 million and $6.8 million, respectively, for the nine months ended June 30, 2024 and 2023.

Rental expense, which is included in cost of goods sold on the consolidated statements of income, was $5.0 million and $5.4 million, respectively, for the three months ended December 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 June 30, 2024, the Company did not have any letters of credit outstanding.

At December 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 June 30, 2024, the Company had $94.5 million in performance bonds outstanding.

At December 31, 2024, the Company had $90.3 million in performance bonds outstanding.

Concentration of Credit Risk

In the ordinary course of business, the Company grants credit under normal payment terms, generally without collateral, to our customers, which include natural gas and oil companies, general contractors, and various commercial and industrial customers located within the United States.

Consequently, the Company is subject to potential credit risk related to business and economic factors that

would affect these companies.

Consequently, the Company is subject to potential credit risk related to business and economic factors that would affect these companies.

However, the Company generally has certain statutory lien rights with respect to services provided.

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 and nine months ended June 30, 2024 and 2023:

Please see the tables below for customers that represent 10.0% or more of the Company’s revenue for the three months ended December 31, 2024 and 2023:

Three Months Ended

Nine Months Ended

TransCanada Corporation

1 unchanged sentence

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

Please see the tables below for customers that represent 10.0% or more of the Company’s accounts receivable, net of retention at December 31, 2024 and September 30, 2024:

Accounts receivable, net of retention

at June 30, 2024

at December 31, 2024

at September 30, 2024

Walbridge Aldinger

TransCanada Corporation

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

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

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

On November 21, 2022, the District Court issued a judgment in favor of the Company.

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

In May 2024, the Appeals Court denied petitions for a rehearing.

This upheld the award granted by the District Court in November 2022.

The Company received an approximately $15.6 million payment related to the lawsuit in May 2024.

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.

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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 and nine months ended June 30, 2024.

Other than described above, at June 30, 2024, 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 months ended December 31, 2024.

Other than described above, at December 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 June 30, 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.

At December 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

We intend that all transactions between us and our executive officers, directors, holders of 10% or more of the shares of any class of our common stock and affiliates thereof, will be on terms no less favorable than those terms given to unaffiliated third parties and will be approved by a majority of our independent outside directors not having any interest in the transaction.

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

This four-year agreement requires $250,000 principal installment payments on or before the end of each twelve (12) full calendar month period beginning April 29, 2022.

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 June 30, 2024.

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, 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 $69,000 at June 30, 2024.

The total net present value at inception was $236,000 with a carrying value of $25,000 at December 31, 2024.

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

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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 and nine months ended June 30, 2024.

CJ Hughes entered into an agreement, cancelable at any time, with Construction Specialty Services (“CSS”), which is owned by Chuck Austin, the President of CJ Hughes.

CSS rents equipment, periodically, to and as requested by CJ Hughes.

The equipment rental rates are below the rates that the equipment can be rented from any unaffiliated rental company.

CJ Hughes is not obliged to rent any equipment and does so only when CJ Hughes does not have equipment available of its own and would otherwise need to rent such equipment as the demand increases throughout the construction season.

During the three months ended December 31, 2024 and 2023, the rental amounts were $53,000 and $19,000, respectively.

Other than mentioned above, there were no new material related party transactions entered into during the quarter ended December 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 and nine months ended June 30, 2024 and 2023.

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

Critical Accounting Estimates

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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 June 30, 2024 and September 30, 2023:

June 30, 2024

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, 2024 and September 30, 2024:

December 31, 2024

September 30, 2024

10 unchanged sentences

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

At June 30, 2024, the management review deemed that the allowance for doubtful accounts was adequate.

Please see the allowance for doubtful accounts table below as of and for the nine months ended June 30, 2024 and as of and for the twelve months ended September 30, 2023:

June 30, 2024

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

Please see the allowance for doubtful accounts table below as of and for the three months ended December 31, 2024 and as of fiscal year ended September 30, 2024:

December 31, 2024

September 30, 2024

7 unchanged sentences

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 June 30, 2024.

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

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

3 unchanged sentences

and Impairment

(in months) at

3 unchanged sentences

Net Book Value

at December 31,

at September 30,

Ended June 30,

Ended December 31,

at December 31,

at September 30,

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Employment agreement/non-compete

Heritage Painting

Customer relationships

Tri-State Paving:

Customer relationships

Tribute Contracting & Consultants

Customer relationships

Total intangible assets

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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 June 30, 2024 and 2023 were $2.2 million and $1.7 million, respectively.

The Company’s depreciation expenses for the nine months ended June 30, 2024 and 2023 were $6.3 million and $5.4 million, respectively.

The Company’s depreciation expenses for the three months ended December 31, 2024 and 2023 were $2.6 million and $2.1 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 June 30, 2024 and 2023 were $108,142 and $135,820, respectively.

The Company’s amortization expenses for the nine months ended June 30, 2024 and 2023 were $324,426 and $401,221, respectively.

The Company’s amortization expenses for the three months ended December 31, 2024 and 2023 were $130,863 and $108,842, respectively.

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

1 unchanged sentence

A material overvaluation could result in impairment charges and reduced profitability for the Company.

The Company’s income tax expenses and deferred tax assets and liabilities reflect management’s best estimate of current and future taxes to be paid.

The Company’s income tax expense and deferred tax assets and liabilities reflect management’s best estimate of current and future taxes to be paid.

Significant judgments and estimates are required in the determination of the consolidated income tax expense.

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 June 30, 2024 was $6.0 million as compared to $1.5 million for the three months ended June 30, 2023.

The income tax expense for the nine months ended June 30, 2024 was $6.7 million as compared to 768,000 for the nine months ended June 30, 2023.

The changes were due to an increase in taxable income for the three and nine months ended June 30, 2024, as compared to the same period in 2023.

The effective income tax rate for the three and nine months ended June 30, 2024, was 25.6% and 30.5%, respectively, as compared to 26.7% and 31.4%, respectively, for the same periods in 2023.

The Company’s provision for income taxes is computed by applying a federal rate of 21.0% and a blended state rate of approximately 5.0% to 6.0% to taxable income or loss after consideration of non-taxable and non-deductible items.

The effective income tax rate for the three months ended December 31, 2024 was 34.8%, as compared to 34.1%, for the same period 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.

Major items that can affect the effective tax rate include amortization of goodwill and intangible assets and non-deductible amounts for per diem expenses.

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, which will result in taxable or deductible amounts in the future.

A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company had $6.5 million and $0 million of federal net operating loss carryforwards at December 31, 2024 and September 30, 2024, respectively.

The Company had $30.4 million and $20.5 million of state net operating loss carryforwards at December 31, 2024 and September 30, 2024, respectively.

The state net operating loss carryforwards begin to expire in 2025.

The increases in federal and state NOL carryforwards were primarily due to a temporary difference resulting from bonus depreciation on equipment obtained as part of the Tribute acquisition.

The Company does not believe that it has any unrecognized tax benefits included in its consolidated financial statements that require recognition.

The Company has not had any settlements in the current period with taxing authorities, nor has it recognized tax benefits as a result of a lapse of the applicable statute of limitations.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits, if applicable, in general and administrative expenses.

Accounting for PPP Loans

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The amendments are effective for public business entities for the fiscal years, including interim periods within those the fiscal years, beginning after December 15, 2022.

For all other entities they are effective for the fiscal years,

including interim periods within those the fiscal years, beginning after December 15, 2023.

For all other entities they are effective for the fiscal years, including interim periods within those the fiscal years, beginning after December 15, 2023.

Entities should apply the amendments prospectively to business combinations that occur after the effective date.

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 its results of operations, financial position and cash flows;

however, the Company does not expect a significant impact.

ASU 2021-08 has not had a significant impact on the Company’s results of operations, financial position or cash flows.

On November 27, 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

This update aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss.

The update also requires disclosure regarding the chief operating decision maker and expands the interim segment disclosure requirements.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial statements.

Subsequent Events

On July 11, 2024, the Company’s Nitro subsidiary completed the acquisition of substantially all the physical assets of Heritage Painting, LLC, a West Virginia corporation located in Poca, West Virginia for $300,000 cash.

On January 2, 2025, the Company paid a quarterly dividend of $0.03 per common share totaling $501,164.

Management has evaluated all subsequent events for accounting and disclosure.

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These statements are forward-looking, and actual results may differ materially.

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 unaudited backlog at June 30, 2024, was $250.9 million, as compared to $185.9 million and $229.8 million at June 30, 2023, and September 30, 2023, respectively.

The Company is receiving significant bid opportunities for water and wastewater projects, natural gas transmission and distribution projects and electrical, mechanical, and general construction projects.

The Company’s unaudited backlog at December 31, 2024, was $260.2 million, as compared to $185.9 million and $243.2 million at December 31, 2023, and September 30, 2024, 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