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What changed in Limbach Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Limbach Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+413 added−427 removedSource: 10-K (2024-03-13) vs 10-K (2023-03-08)

Top changes in Limbach Holdings, Inc.'s 2023 10-K

413 paragraphs added · 427 removed · 285 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

68 edited+37 added−52 removed38 unchanged
Biggest changeThe Company provides its ODR business services through both a variety of project delivery methodologies and other service and technical offerings: • Owner Direct Projects . Smaller than typical GCR construction projects, this work is contracted directly for a building owner for which the Company is capable of performing the same project delivery methodologies akin to its GCR offerings.
Biggest changeThis work is contracted directly for a building owner for which the Company can perform the same project delivery methodologies akin to its GCR offerings. On projects that are predominantly mechanical, plumbing, and/or electrical in scope, the Company may act as the “prime” general contractor. These projects are typically MEP infrastructure projects for existing buildings.
The Company’s Hearts & Minds program asks its employees to take direct responsibility for eliminating and preventing all incidents and injuries at home and in the workplace, which is done by: • Hiring the Right People. The Company is focused on hiring qualified employees who share in its Core Values. • Knowing the Details.
The Company’s Hearts and Minds program asks its employees to take direct responsibility for eliminating and preventing all incidents and injuries at home and in the workplace, which is done by: • Hiring the Right People. The Company is focused on hiring qualified employees who share in its Core Values. • Knowing the Details.
The Company’s core market sectors consist of the following customer base with mission-critical systems: • Healthcare , including research, acute care and inpatient hospitals for regional and national hospital groups, and pharmaceutical and biotech laboratories and manufacturing facilities; • Data Centers, including facilities composed of networked computers, storage systems and computing infrastructure that organizations use to assemble, process, store and disseminate large amounts of data; • Industrial and light manufacturing facilities , including automotive, energy and general manufacturing plants; • Higher Education, including both public and private colleges, universities and research centers; • Cultural and entertainment, including sports arenas, entertainment facilities (including casinos) and amusement rides and parks; and • Life sciences, including organizations and companies whose work is centered around research and development focused on living things.
The Company’s core market sectors consist of the following customer base with mission-critical systems: • Healthcare , including research, acute care and inpatient hospitals for regional and national hospital groups, and pharmaceutical and biotech laboratories and manufacturing facilities; • Industrial and manufacturing , including automotive, energy and general manufacturing plants; • Data Centers, including facilities composed of networked computers, storage systems and computing infrastructure that organizations use to assemble, process, store and disseminate large amounts of data; • Life sciences, including organizations and companies whose work is centered around research and development focused on living things; • Higher Education, including both public and private colleges, universities and research centers; and • Cultural and entertainment, including sports arenas, entertainment facilities (including casinos) and amusement rides and parks.
While compliance with existing laws, regulations and other requirements has not materially adversely affected the Company’s operations in the past, 14 and it is not aware of any proposed requirements that the Company anticipates will have a material impact on its operations, there can be no assurance that these requirements will not change or that compliance will not otherwise adversely affect the Company’s operations in the future.
While compliance with existing laws, regulations and other requirements has not materially adversely affected the Company’s operations in the past, and it is not aware of any proposed requirements that the Company anticipates will have a material impact on its operations, there can be no assurance that these requirements will not change or that compliance will not otherwise adversely affect the Company’s operations in the future.
This forum is composed of employees and leaders across the company who have made it their mission to maximize the potential of the Company’s employees by creating great opportunities through a diverse, fair and inclusive environment. The Embrace Forum focuses on several core areas: recruitment, development, promotion and employee resource groups (“ERGs”).
This forum is composed of employees and leaders across the company who have made it their mission to maximize the potential of the Company’s employees by creating great opportunities through a diverse, fair and inclusive environment. The Embrace Forum focuses on several core areas: culture, recruitment, development, promotion and employee resource groups (“ERGs”).
Factors influencing the Company’s competitiveness include price, reputation for quality, ability to reduce customer costs, experience and expertise, financial strength, surety bonding capacity, knowledge of local markets and conditions, availability and experience of craft labor, and customer relationships. Competitors tend to be regional firms that vary in size and depth of resources.
Factors influencing the Company’s competitiveness include price, reputation for quality, ability to reduce customer costs, experience and expertise, financial strength, surety bonding capacity, knowledge of local markets and conditions, availability and experience of craft labor, and customer 10 relationships. Competitors tend to be regional firms that vary in size and depth of resources.
The Company also is subject to compliance with numerous other laws and regulations of federal, state, local agencies, and authorities, including those relating to workplace safety, wage and hour, and other labor issues (including the requirements of the Occupational Safety and Health Act and comparable state laws), immigration controls, vehicle and equipment operations and other aspects of its business.
The Company also is subject to 13 compliance with numerous other laws and regulations of federal, state, local agencies, and authorities, including those relating to workplace safety, wage and hour, and other labor issues (including the requirements of the Occupational Safety and Health Act and comparable state laws), immigration controls, vehicle and equipment operations and other aspects of its business.
There are, however, significant national competitors that have greater national presence and breadth of expertise than the Company does. Materials & Equipment The Company purchases materials, including sheet metal, steel and copper piping, electrical conduit, wire and other various materials from numerous sources. The Company also purchases equipment from various manufacturers.
There are, however, significant national competitors that have greater national presence and breadth of expertise than the Company. Materials and Equipment The Company purchases materials, including sheet metal, steel and copper piping, electrical conduit, wire and other various materials from numerous sources. The Company also purchases equipment from various manufacturers.
Creating an engaging workplace environment that provides for competitive 11 pay and benefits, attractive career development opportunities, and a collaborative, respectful culture further enables the Company to achieve continued success. Employees.
Creating an engaging workplace environment that provides for competitive pay and benefits, attractive career development opportunities, and a collaborative, respectful culture further enables the Company to achieve continued success. Employees.
Segments The Company operates in two segments, (i) General Contractor Relationships (“GCR”), in which the Company generally manages new construction or renovation projects that involve primarily HVAC, plumbing, or electrical services awarded to the Company by general contractors or construction managers, and (ii) Owner Direct Relationships (“ODR”), in which the Company performs owner direct construction projects and/or provides maintenance or services primarily on HVAC, plumbing or electrical systems, building controls and specialty contracting projects direct to, or assigned by, building owners or property managers.
Segments The Company operates in two segments, (i) General Contractor Relationships (“GCR”), in which the Company generally manages new construction or renovation projects that involve primarily mechanical, plumbing, or electrical services awarded to the Company by general contractors or construction managers, and (ii) Owner Direct Relationships (“ODR”), in which the Company performs owner direct construction projects and/or provides maintenance or services primarily on mechanical, plumbing or electrical systems, building controls and specialty contracting projects direct to, or assigned by, building owners or property managers.
The Company seeks to attract and retain quality employees by providing them an enhanced career path that offers a stable income, attractive benefits packages and excellent advancement opportunities. The Company invests in its employees through safety and wellness programs, internal communication, career development training programs, recognition programs and succession planning initiatives. 9 Fully Integrated Operations .
The Company seeks to attract and retain quality employees by providing them an enhanced career path that offers a stable income, attractive 8 benefits packages and excellent advancement opportunities. The Company invests in its employees through safety and wellness programs, internal communication, career development training programs, recognition programs and succession planning initiatives. Fully Integrated Operations .
Projects are brought into backlog once the Company has been provided a written confirmation of award and the contract value has been established.
Projects are brought into backlog once the Company has been provided with a written confirmation of award and the contract value has been established.
The Company believes that its ODR services offerings provide a distribution channel through which it can continue to deliver an expanded offering of value-added services direct to building owners that further reinforces its value proposition and differentiated capabilities.
The Company believes that its ODR service offerings provide a distribution channel through which it can continue to deliver an expanded offering of value-added services direct to building 9 owners that further reinforces its value proposition and differentiated capabilities.
The Company offers its employees the opportunity to join ERGs. These groups foster professional development, social connectivity, and celebrate diversity throughout the Company. Each year, new ERGs are evaluated for consideration. Currently, there are two active ERGs at the Company: 12 • Women in Construction and Service (“WICS”) .
The Company offers its employees the opportunity to join ERGs. These groups foster professional development, social connectivity, and celebrate diversity throughout the Company. Each year, new ERGs are evaluated for consideration. Currently, there are four active ERGs at the Company: • Women in Construction and Service (“WICS”) .
The Company also offers services to building owners known as MEP Prime, a service where the Company acts as the general contractor on assignments that predominantly include a heavy concentration of mechanical HVAC, electrical, plumbing and building controls systems, along with other trades such as concrete and drywall, to offer a complete service package.
The Company also offers services to building owners known as MEP Prime, a service where the Company acts as the general contractor on assignments that predominantly include a heavy concentration of mechanical, electrical, plumbing and building controls systems, along with other trades such as concrete and drywall, to offer a complete service package. Growth through Acquisitions .
These services allow the Company to develop new revenue streams leveraging its professional services capabilities, to support multi-location regional and national customers in core end-markets, and to drive energy retrofit and performance optimization projects for building owners. Improved GCR Segment Margins.
These services allow the Company to develop new revenue streams, leveraging its professional services capabilities to support multi-location regional and national customers in core end-markets, and to drive energy retrofit and performance optimization projects for building owners.
Our people have access to resources that include a robust learning management system that provides company-wide access for employees to a number of online learning modules and support tools.
The Company’s people have access to resources that include a robust learning management system that provides company-wide access for employees to a number of online learning modules and support tools.
At any point in time, the Company has a substantial volume of projects that are specifically identified and advanced in negotiations and/or documentation, however those projects are not booked as backlog until the Company has received written confirmation from the owner or the GC/CM of their intention to award it the contract and they have directed the Company to begin engineering, designing, incurring construction labor costs or procuring needed equipment and material.
At any point, the Company has a substantial volume of projects that are specifically identified and advanced in negotiations and/or documentation, however those projects are not booked as backlog until the Company has received written confirmation from the owner or the general contractor / construction manager of their intention to award the contract and they have directed the Company to begin engineering, designing, incurring construction labor costs or procuring needed equipment and material.
“Risk Factors — Our contract backlog is subject to unexpected adjustments and cancellations and could be an uncertain indicator of our future earnings .” The Company’s GCR backlog was $302.9 million and $337.2 million as of December 31, 2022 and 2021, respectively.
“Risk Factors — Our contract backlog is subject to unexpected adjustments and cancellations and could be an uncertain indicator of our future earnings .” The Company’s GCR backlog was $186.9 million and $302.9 million as of December 31, 2023 and 2022, respectively.
The Company’s “ We Care ” survey, which has been issued for the past 15+ years, provides leadership with insights, including constructive ideas on how to improve the overall business for those who work for it. Training and Employee Development .
The Company’s “ We Care ” survey, which has been issued for more than fifteen years, provides leadership with insights, including constructive ideas on how to improve the overall business for those who work for it. Training and Employee Development .
Limbach Insights provides the means to manage facility and asset data to empower data driven decisions. The Company’s facility analytic solutions includes: i) energy management and sustainability through real-time tracking and monitoring, ii) asset management, iii) predictive maintenance and iv) virtual facility management services.
The Company provides the means to manage facility and asset data to empower data driven decisions. The Company’s facility analytic solutions include: (i) energy management and sustainability through real-time tracking and monitoring, (ii) asset management, (iii) predictive maintenance and (iv) virtual facility management services.
As of December 31, 2022, the Company had approximately 1,500 employees, including approximately 400 full-time salaried employees, comprised of project managers, estimators, superintendents and engineers who manage crews in its construction business and office staff. The Company also had approximately 1,100 craft employees, some of whom are represented by various labor unions.
As of December 31, 2023, the Company had approximately 1,400 employees, including approximately 400 full-time salaried employees, comprising project managers, estimators, superintendents and engineers who manage crews in its construction business and office staff. The Company also had approximately 1,000 craft employees, some of whom are represented by various labor unions.
The Company makes available, free of charge, on its Internet website copies of the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC.
The Company makes available, free of charge, on its Internet website copies of the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the United States Securities and Exchange Commission (the “SEC”).
See Note 3 – Acquisitions in the accompanying notes to the Company’s consolidated financial statements for further information on the Jake Marshall Transaction. Southern California Region. In February 2022, the Company announced its strategic decision to wind down its Southern California GCR and ODR operations.
See Note 3 – Acquisitions in the accompanying notes to the Company’s consolidated financial statements for further information on the ACME Transaction and the Industrial Air Transaction. Divestitures Southern California Region. In February 2022, the Company announced its strategic decision to wind down its Southern California GCR and ODR operations.
Based on historical trends, the Company estimates that 68% of its GCR backlog as of December 31, 2022 will be recognized as revenue during 2023. Additionally, the reduction in GCR backlog has been intentional as the Company looks to focus on higher margin projects than historically, as well as its focus on smaller, higher margin owner direct projects.
Based on historical trends, the Company currently estimates that 83% of its GCR backlog as of December 31, 2023 will be recognized as revenue during 2024. Additionally, the reduction in GCR backlog has been intentional as the Company continues to focus on higher margin projects than historically, as well as its focus on smaller, higher margin owner direct projects.
This objective begins with the Company's commitment to diversity and inclusion. We CARE , one of the Company’s Core Values, is the foundation of its efforts to create a diverse, fair and inclusive organization. Building a culture where all of its employees feel a sense of belonging is important to the Company.
We CARE , one of the Company’s Core Values, is the foundation of its efforts to create a diverse, fair and inclusive organization. Building a culture where all of its employees feel a sense of belonging is important to the Company.
The decision was made to better align the Company’s customer geographic focus and to reduce losses related to unprofitable locations. The Company is currently in the closeout phases on its remaining Southern California business unit projects and expects to fully exit the Southern California region in 2023 aside from certain operational warranty obligations.
The decision was made to better align the Company’s customer geographic focus and to reduce losses related to unprofitable locations. During 2023, the Company executed the closeout phases on its remaining Southern California business unit projects and has fully exited the Southern California region aside from certain operational warranty obligations.
Strategy The Company focuses on creating value for building owners by targeting opportunities for long-term relationships with the vision of becoming an indispensable partner to building owners with mission-critical systems.
Strategy The Company focuses on creating value for building owners by developing long-term relationships and becoming an indispensable partner to building owners with mission-critical systems.
The Company understands that diversity is truly a competitive advantage that helps drive growth and innovation, and it has increasingly focused on diversity and inclusion programs within the Company. Embrace Forum. The Company formed the Embrace Forum to continue to evolve its commitment to a culture of diversity and inclusion.
The Company understands that diversity is truly a competitive advantage that helps drive growth and innovation. Embrace Forum. The Company formed the Embrace Forum to continue to evolve its commitment to a culture of diversity and inclusion.
In the Company’s GCR segment, its efforts continue to focus on improving project execution and profitability by pursuing opportunities that are smaller in size and shorter in duration than historically, and where it can leverage its captive design and engineering services. Maintain a Diverse Customer, Geographic and Project Base .
In the Company’s GCR segment, its efforts continue to focus on improving project execution and profitability by pursuing opportunities that are smaller in size and shorter in duration than historically, and that leverage its captive design and engineering services.
The price and availability of materials and equipment may vary from year to year due to market conditions and industry production capacities. Economic disruptions resulting from the COVID-19 pandemic (defined below), including supply chain, production, and other logistical issues, as well as escalating commodity prices, have and may continue to negatively impact our business.
The price and availability of materials and equipment may vary from year to year due to market conditions and industry production capacities. Economic disruptions resulting from the coronavirus disease 2019 (“COVID-19”) pandemic, including supply chain, production, and other logistical issues, as well as escalating commodity prices, have and may continue to negatively impact the Company’s business.
The Company’s ODR revenue increased by 54.2% to $216.4 million for the year ended December 31, 2022 as compared to $140.3 million for the year ended December 31, 2021. The increase in year-over-year ODR segment revenue was primarily due to the Company's continued focus on the accelerated growth of its ODR business.
The Company’s ODR revenue increased by 21.1% to $262.0 million for the year ended December 31, 2023 as compared to $216.4 million for the year ended December 31, 2022. The increase in year-over-year ODR segment revenue was primarily due to the Company's continued focus on the accelerated growth of its ODR business.
The Company has a distribution of revenue across end-use sectors that it believes reduces its exposure to negative developments in any given sector. Currently, the Company also has significant geographical diversification across regions that are generally located in the eastern portions of the United States, again reducing its exposure to negative developments in any given region.
Currently, the Company also has significant geographical diversification across regions that are generally located in the eastern portions of the United States, again reducing its exposure to negative developments in any given region.
The Company believes it has strong relationships with many national commercial GC/CMs. As one of its core risk management processes, the Company is selective in choosing to work with GC/CMs that have similar core values, that have a solid payment history, that have experienced and available project management labor, and who value the Company’s services and reputation.
As one of its core risk management processes, the Company is selective in choosing to work with general contractors and construction managers that have similar core values, that have a solid payment history, that have experienced and available project management labor, and who value the Company’s services and reputation.
The Company actively seeks to increase the diversity of its workforce and to practice its commitment to diversity and inclusion in hiring, development, and training, which extends to its senior leadership and Board of Directors.
The Company believes that a diverse workforce is important to the long-term success of its business. The Company actively seeks to increase the diversity of its workforce and to practice its commitment to diversity and inclusion in hiring, development and training, which extends to its senior leadership and Board of Directors.
As a result of our efforts, in February 2023, the Company was recognized as one of the top training organizations in the world earning a 2023 Training APEX Award presented by Training magazine. Diversity and Inclusion.
As a result of its efforts, the Company was recognized as one of the top training organizations in the world earning a Training APEX Award from Training magazine in 2023 and 2024.
With Design/Assist, the specialty contractor is typically contracted early in the design process to provide design and preconstruction input as needed to assist the customer in maintaining the established budget and completing design and drawings.
Cost factors are usually limited to a fixed fee and expense estimate and an estimate of the cost of work. With Design/Assist, the specialty contractor is typically contracted early in the design process to provide design and preconstruction input as needed to assist the customer in maintaining the established budget and completing design and drawings.
The decrease in GCR revenue was primarily due to our continued focus on improving project execution and profitability by pursuing opportunities that are smaller in size, shorter in duration, and where we can leverage our captive design and engineering services.
The decrease in GCR revenue was primarily due to the Company’s continued focus on improving project execution and profitability by pursuing opportunities that are smaller in size, shorter in duration, and that leverage its captive design and engineering services. In addition, the Company continues to drive a disciplined shift to its higher margin ODR business.
The Company is focused on expanding the number and breadth of owner relationships that it serves on a direct basis and to leverage these expanded owner-direct relationships to deliver a broad suite of services. In addition, the Company proactively manages its current accounts and maintains a high standard of dedication to those account relationships.
The Company is focused on expanding the number and breadth of owner relationships that it serves on a direct basis and leveraging these expanded owner-direct relationships to deliver a broad 7 suite of services.
These amounts reflect unrecognized revenue expected to be recognized over the remaining terms of our service contracts and projects. 10 Based on historical trends, the Company estimates that 92% of its ODR backlog as of December 31, 2022 will be recognized as revenue during 2023. The Company believes its ODR backlog increased due to its continued focus on ODR growth.
Based on historical trends, the Company estimates that 95% of its ODR backlog as of December 31, 2023 will be recognized as revenue during 2024. The Company believes its ODR backlog increased due to its continued focus on the accelerated growth of its ODR business.
These disruptions have escalated in 2022 and have manifested themselves most notably through project delays and reduced labor productivity and efficiency, particularly within our GCR segment.
These disruptions escalated in 2022 and have manifested themselves most notably through project delays and reduced labor productivity and efficiency, particularly within its GCR segment. The elevated levels of cost inflation persisted throughout 2023, although at lower levels than experienced in 2022.
This was the first time a union mechanical contractor has earned such an honor in the United States. The Company strives to achieve this honor at its other business units. In the February 2020 issue of Safety+Health Magazine, the Company’s President and Chief Executive Officer (“CEO”), Charles A.
This was the first time a union mechanical contractor has earned such an honor in the United States. The Company strives to achieve this honor at its other business units. Seasonality Severe weather can impact the Company’s operations.
Most of the Company’s branches also maintain strong relationships with local and regional GC/CMs that fit its selection criteria. For the year ended December 31, 2022, one GCR segment customer accounted for approximately 11% of consolidated total revenue. For the year ended December 31, 2021, two GCR segment customers accounted for approximately 17% and 12% of consolidated total revenue, respectively.
Most of the Company’s branches also maintain strong relationships with local and regional general contractors and construction managers that fit its selection criteria. For the year ended December 31, 2023, no GCR segment customer accounted for more than 10% of the Company’s consolidated revenue.
Program Management Services provide the Company’s healthcare customers with advisory support and strategic guidance to help match their long-term facility needs. These services include the defining of capital program needs for new and existing facilities. In addition, these services offer assessments of existing facilities for project upgrades to improve the operations of the buildings tied to MEP systems.
These services include the defining of capital program needs for new and existing facilities. In addition, these services offer assessments of existing facilities for project upgrades to improve the operations of the buildings tied to MEP systems. The Company’s ODR business services profile offers the potential of reoccurring business opportunities.
The mission of this ERG is to create a supportive environment for Hispanic employees and provide a more diverse and inclusive environment where everyone feels safe, respected and valued. In addition, to help recruit the next generation of diverse industry leaders, the Company is actively involved with the ACE Mentor Program of America, Inc. (“ACE”).
The mission of this ERG is to create a supportive environment for Hispanic employees and provide a more diverse and inclusive environment where everyone feels safe, respected and valued. • Hearts & Hands .
The Company’s principal focus over the past few years, and a focus that the Company plans to continue in coming years, is the accelerated growth of its ODR segment, which includes maintenance services, small projects, building controls installation and service, building environment management and performance services, and other project opportunities performed direct for building owners.
The Company’s principal focus over the past few years, and a focus that the Company plans to continue in coming years, is the accelerated growth of its ODR segment.
Investment in continuous learning is essential to providing industry-leading expertise and service to our customers, continuous improvement across our organization, and meaningful career development opportunities for our people. From in-person to online courses, formalized and other specialized training, our employees benefit from opportunities to strengthen their leadership and management competencies, improve communication and interpersonal skills, and advance their technical proficiency.
From in-person to online courses, formalized and other specialized training, the Company’s employees benefit from opportunities to strengthen their leadership and management competencies, improve communication and interpersonal skills, and advance their technical proficiency.
See Note 14 – Leases in the accompanying notes to the Company’s consolidated financial statements for further information on the Southern California Sublease.
See Note 14 – Leases in the accompanying notes to the Company’s consolidated financial statements for further information on the Southern California Sublease. Customers The Company’s customer base primarily consists of building owners and their third-party representatives, general contractors and construction managers.
For example, the Company has experienced lead times significantly in excess of normal levels while also experiencing the effects of inflation through increases in fuel, material, and other commodity prices. These disruptions have escalated in 2022 and have manifested themselves most notably through project delays and reduced labor productivity and efficiency, particularly within our GCR segment.
For example, the Company has experienced lead times significantly in excess of normal levels while also experiencing the effects of inflation through increases in fuel, material, and other commodity prices to varying degrees throughout 2021 and 2022.
Plan & Spec bidding is a competitive bid process among multiple contractors bidding on nearly complete or completed design documents based on a lump sum price for delivery of the project. Price is the predominant selection criteria in this process. • Design/Assist. Design/Assist is a process in which a specialty contractor is selected among competing contractors using best value methodology.
GCR Segment. The Company provides its GCR segment services through the following project delivery methodologies: • Plan & Spec Bidding. Plan & Spec bidding is a competitive bid process among multiple contractors bidding on nearly complete or completed design documents based on a lump sum price for delivery of the project.
The Company believes it has strong employee retention rates as a result of its ability to hire, develop and retain top industry talent.
The Company believes it has strong employee retention rates because of its ability to hire, develop and retain top industry talent. Since 2021, the Company has reduced its salaried attrition rate by 32% through the effective implementation of human capital strategies.
In addition, due to the Company’s on-going contractual relationships with certain building owners established through certain of its service offerings, it is well positioned with those owners when they are ready to initiate capital construction projects. As a result, the Company's maintenance, time-and-materials, ATC, SPD and Limbach Insights often lead, drive and support the revenue associated with owner direct projects.
Due to the Company’s on-going relationships with certain building owners established through certain of its service offerings, the Company believes it is well positioned with those owners when they initiate capital construction projects.
Competition The HVAC, plumbing, electrical, and maintenance industry is highly competitive and the geographic markets in which the Company competes has numerous companies that provide similar services.
In addition, as of December 31, 2023, ODR backlog included approximately $1.2 million and $26.6 million of backlog associated with the operations of ACME and Industrial Air, respectively. Competition The mechanical, plumbing, electrical, and maintenance industry is highly competitive and the geographic markets in which the Company competes has numerous companies that provide similar services.
Mild weather tends to reduce demand for the Company’s maintenance services, whereas severe weather may increase the demand for its maintenance and time-and-materials services. Impact of the COVID-19 Pandemic In March 2020, the World Health Organization declared the outbreak of the coronavirus disease 2019 (“COVID-19”) a global pandemic.
Mild weather tends to reduce demand for the Company’s maintenance services, whereas severe weather may increase the demand for its maintenance and time-and-materials services.
The Company believes this combined offering is appealing to building owners who own and operate facilities with complex building systems.
A core growth strategy of the Company includes offering design, construction and maintenance services for the full complement of mechanical, plumbing and electrical services in all its business units. The Company believes this combined offering is appealing to building owners who own and operate facilities with complex building systems.
In many locations, the Company has added or upgraded its capabilities and the Company believes its investments and efforts have provided customer value and stimulated growth. To further enhance the Company’s ODR services within one of its largest market sectors, healthcare, the Company offers Program Management Services.
The Company is actively concentrating managerial and sales resources on training and hiring experienced employees to sell and profitably perform ODR-related services. In many locations, the Company has added or upgraded its capabilities and the Company believes its investments and efforts have provided customer value and stimulated growth within the segment.
The Company’s ODR backlog was $108.2 million and $98.0 million as of December 31, 2022 and 2021, respectively.
The Company’s ODR backlog was $147.0 million and $108.2 million as of December 31, 2023 and 2022, respectively. These amounts reflect unrecognized revenue expected to be recognized over the remaining terms of the Company’s service contracts and projects.
On December 2, 2021 (the “Effective Date”), the Company and Limbach Facility Services LLC (“LFS”), a Delaware limited liability company and a wholly-owned subsidiary of the Company, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with JMLLC and CSLLC (together with JMLLC, the “Acquired Companies” and each an “Acquired Company”) and the owners of the Acquired Companies (collectively, the “Sellers”), pursuant to which LFS purchased all of the outstanding membership interests in the Acquired Companies from the Sellers (the transactions contemplated by the Purchase Agreement collectively being the “Jake Marshall Transaction”).
On July 3, 2023 (the “ACME Effective Date”), the Company, Limbach Facility Services LLC (“LFS”), a Delaware limited liability company and a wholly-owned subsidiary of the Company, and ACME Industrial Piping, LLC (“ACME”), and the owner of ACME (the “ACME Seller”) entered into a Purchase Agreement (the “ACME Purchase Agreement”) pursuant to which LFS purchased all of the outstanding equity interests in ACME from the ACME Seller (the “ACME Transaction”).
The Company is committed to creating and supporting a diverse, fair and inclusive environment for its employees, We Care culture, and industry as a whole. The Company believes that a diverse workforce is important to the long-term success of its business.
The Company intends to continue to invest in additional training to support those employees directly working in customer-facing roles across the Company as it aims to grow the ODR business. Diversity and Inclusion. The Company is committed to creating and supporting a diverse, fair and inclusive environment for its employees, We Care culture and industry as a whole.
Limbach Insights is a tool used for customer facilities to help reduce operating costs, extend the life cycle of your equipment, and uncover energy savings to reduce your carbon footprint. The Company’s aforementioned ODR business services profile offers recurring and/or repeatable business opportunities.
This tool is used for customer facilities to help reduce operating costs, extend the life cycle of equipment, and uncover energy savings to reduce the customer’s carbon footprint. • Program Management Services . Program Management Services provide the Company’s healthcare customers with advisory support and strategic guidance to help match their long-term facility needs.
The Jake Marshall Transaction closed on the Effective Date. As a result of the Jake Marshall Transaction, each of the Acquired Companies became wholly-owned indirect subsidiaries of the Company. The acquisition expanded the Company’s market share within its existing product and service lines.
The Industrial Air Transaction closed on the Industrial Air Effective Date. As a result of the Industrial Air Transaction, Industrial Air became a wholly-owned indirect subsidiary of the Company.
The Company’s culture is driven by its Core Values: • We CARE • We Act with INTEGRITY • We Are INNOVATIVE • We Are ACCOUNTABLE The Company believes each employee is essential to its continued success and the Company seeks to provide every employee with the foundation and environment needed to achieve the employee’s goals.
We utilize the Entrepreneurial Operating System as our way of managing and leading the organization for top performance. The Company believes its employees are essential to its continued success and the Company seeks to provide every employee with the foundation and environment needed to achieve the employee’s goals. This objective begins with the Company's commitment to diversity and inclusion.
For additional financial information about the Company’s operating segments, see Note 12 – Operating Segments in the accompanying notes to the Company’s consolidated financial statements. Limbach Collaborative Services. Located in Orlando, Florida, LCS provides captive engineering capabilities, estimating and virtual design services.
By decentralizing these services, the Company believes that it maintains the ability to provide the same engineering capabilities but expands its opportunities to enhance and build relationships with building owners. For additional financial information about the Company’s operating segments, see Note 12 – Operating Segments in the accompanying notes to the Company’s consolidated financial statements.
This work is primarily performed under fixed price, modified fixed price, and time and material contracts over periods of typically less than two years. GCR Segment. The Company’s GCR revenue decreased by 19.9% to $280.4 million for the year ended December 31, 2022 as compared to $350.0 million for the year ended December 31, 2021.
The Company’s GCR revenue decreased by 9.3% to $254.4 million for the year ended December 31, 2023 as compared to $280.4 million for the year ended December 31, 2022.
In best value, a selection is made based primarily upon qualifications and project approach, and secondarily on select cost factors. Cost factors are usually limited to a fixed fee and expense estimate and an estimate of the cost of work.
The Company believes price is the predominant selection criteria in this process. • Design/Build or Design/Assist. Design/Build or Design/Assist is a process in which a specialty contractor is selected among competing contractors using best value methodology. In best value, the Company believes the selection is made based primarily upon qualifications and project approach, and secondarily on select cost factors.
Combined throughout the Company’s business, it maintains seven registered professional engineers on staff, who are supported by a staff of approximately 31 estimators and designers. LCS acts as the engineer of record for projects where the Company serves as a Design/Build specialty contractor. LCS engineers have experience in healthcare, institutional, commercial, hospitality, and industrial projects.
The Company also provides professional engineering, energy analysis, estimation, and detail design and three-dimensional building installation coordination services, direct to building owners. The Company maintains professional engineers on staff who are supported by estimators and designers. The Company’s engineers are experienced in healthcare, institutional, commercial, hospitality, and industrial projects.
Item 1. Business Limbach Holdings, Inc. (the “Company,” “we” or “us”), a Delaware corporation headquartered in Warrendale, Pennsylvania, was formed on July 20, 2016 as a result of a business combination with Limbach Holdings LLC (“LHLLC”).
Item 1. Business Limbach Holdings, Inc. (the “Company,” “we” or “us”), a Delaware corporation headquartered in Warrendale, Pennsylvania, is a building systems solution firm that partners with building owners and facilities managers who have mission critical mechanical (heating, ventilation, air conditioning), electrical, and plumbing infrastructure.
The key objectives of the 8 Company’s strategy is to improve profitability and generate quality growth in its operations, to enable sustainable and efficient building environments, to continue investing in its workforce and to acquire strategically synergistic businesses. In order to accomplish the Company’s objectives, it is currently focused on the following areas: ODR Growth Initiative .
The key objectives of the Company’s strategy are to improve profitability and generate quality growth in its operations by increasing the percentage of revenue from ODR, to expand margins through evolved service offerings and to scale the business through acquisitions. To accomplish its objectives, the Company currently is executing the following initiatives: ODR Growth .
Removed
The Company is a building systems solutions firm with expertise in the design, prefabrication, installation, management and maintenance of heating, ventilation, air-conditioning (“HVAC”), mechanical, electrical, plumbing and controls systems.
Added
The Company strives to be an indispensable partner to its customers by providing services that are essential to the operation of their businesses. The Company works with building owners primarily in six vertical markets: healthcare, industrial and manufacturing, data centers, life science, higher education and cultural and entertainment.
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The Company provides comprehensive facility services consisting of mechanical construction, full HVAC service and maintenance, energy audits and retrofits, engineering and design build services, constructability evaluation, equipment and materials selection, offsite/prefabrication construction, and the complete range of sustainable building solutions.
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The Company has more than 1,400 team members in 19 offices across the eastern United States.
Removed
The Company partners with institutions with mission-critical infrastructures, such as data centers and healthcare, industrial and light manufacturing, cultural and entertainment, higher education, and life science facilities. The Company operates primarily in the Northeast, Mid-Atlantic, Southeast and Midwest regions of the United States.
Added
The Company’s team members uniquely combine engineering expertise with field installation skills to provide custom solutions that leverage its full life-cycle capabilities, which allows it to address both the operational and capital projects needs of its customers. 2023 Highlights In 2023, the Company: • Generated $57.4 million of net cash provided by operating activities. • Expanded consolidated gross profit margin by 420 bps to 23.1%. • Revenue generated from the Company’s ODR (as defined below) segment increased 21.1% (versus 2022), achieving its 2023 target of a 50/50 segment revenue mix. • Increased diluted earnings per share by 175% (versus 2022) to $1.76 • Successfully completed the acquisitions of ACME and Industrial Air (as described in more detail below). • In June 2023, the Company was added to the Russell 3000 Index as part of the annual reconstitution of the Russell indexes.
Removed
As of December 31, 2022, the Company’s wholly-owned subsidiaries included Limbach Company LLC (“LC LLC”), which operates in New England, Eastern Pennsylvania, Western Pennsylvania, New Jersey, Ohio, Michigan and the Mid-Atlantic region; Limbach Company LP (“LC LP”), which operates in the Southern California region; Harper Limbach LLC (“Harper Limbach”), a Florida-based subsidiary, Jake Marshall, LLC (“JMLLC”) and Coating Solutions, LLC (“CSLLC”), both of which are Tennessee-based subsidiaries and Limbach Facility & Project Solutions LLC.
Added
This delivery option includes lump sum or guaranteed maximum price on a fixed fee basis. ODR Segment. The Company’s key business initiative for its ODR segment is to position itself as a value-added and indispensable partner to building owners in mission-critical markets, providing full life-cycle capabilities from concept design and engineering through system commissioning and recurring 24/7 service and maintenance.
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Each of our operations provide design, construction and maintenance services in some or all of the HVAC, plumbing and electrical fields. The Jake Marshall Transaction.
Added
The Company remains focused on the scalability of its organic business through partnering directly with building owners. The Company believes that its ODR services offerings provide a distribution channel through which it can continue to deliver an expanded offering of value-added services direct to building owners that further reinforces its value proposition and differentiated capabilities.
Removed
Gross profit improved to 13.8% for the year ended December 31, 2022 from 13.0% for the year ended December 31, 2021. The Company provides its GCR segment services through a variety of project delivery methodologies. 6 • Competitive Lump Sum Bidding (also referred to as “Plan & Spec” Bidding).
Added
In addition, by establishing successful, long-term partnerships with building owners, the Company has positioned itself to provide reoccurring 6 maintenance services, which it believes improves revenue predictability and could increase economic resilience. The Company provides its ODR business services through both a variety of project delivery methodologies and other service offerings: • Critical System Repairs.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeTo the extent we succeed in making acquisitions, a number of risks may result, including: • the assumption of material liabilities (including for environmental-related costs and multiemployer pension plans); • failure of due diligence to uncover situations that could result in legal exposure or to quantify the true liability exposure from known risks; 19 • the diversion of management’s attention from the management of daily operations to the integration of operations; • difficulties in the assimilation and retention of employees, in the assimilation of different cultures and practices, in the assimilation of broad and geographically dispersed personnel and operations, and the retention of employees generally; • the risk of additional financial and accounting challenges and complexities in areas such as tax planning, treasury management, financial reporting and internal controls; • the assumption of multiemployer pension plans (“MEPP”) liability in the event of an acquisition with existing unions, and an increased exposure to challenges to the structure of our union and non-union subsidiaries and operations if an open shop business is acquired; and • potential inability to realize the cost savings or other financial benefits anticipated prior to the acquisition.
Biggest changeTo the extent we succeed in making acquisitions, a number of risks may result, including: • the transaction may not effectively advance our business strategy, and its anticipated benefits may never materialize; • the assumption of material liabilities or inability to realize the cost savings or other financial benefits anticipated prior to acquisition (including environmental-related costs and multiemployer pension plans) through failure of due diligence to uncover situations that could result in legal exposure or to quantify the true liability exposure from known risks; • the assumption of multiemployer pension plans (“MEPP”) liability in the event of an acquisition with existing unions, and an increased exposure to challenges to the structure of our union and non-union subsidiaries and operations if an open shop business is acquired; and • any additional indebtedness incurred in connection with an acquisition may impact our financial position, results of operations, and cash flows.
In addition, the costs incurred and gross profit realized on our contracts can vary, sometimes substantially, from our original projections due to a variety of factors, including, but not limited to: • on-site conditions that differ from those described in the original bid or contract; 16 • failure to include required materials, equipment, or work in a bid, or the failure to properly estimate the quantities or costs needed to complete a lump sum or guaranteed maximum price contract; • contract or project modifications creating unanticipated costs not covered by change orders; • failure by the customer, owner or general contractor to properly approve and authorize change orders for work that is required and as a result, the inability to bill and collect for the value of the work performed; • failure by suppliers, vendors, subcontractors, designers, engineers, consultants, joint venture partners or customers to perform their obligations; • delays in quickly identifying and taking measures to address issues which arise during contract execution; • changes in availability, proximity and costs of materials and equipment, including pipe, sheet metal, other construction materials and mechanical HVAC, electrical and plumbing equipment; • claims or demands from third parties for alleged damages arising from the design, construction or use and operation of a project of which our work is part; • difficulties in obtaining required governmental permits or approvals; • availability and skill level of workers in the geographic location of a project; • citations issued by any governmental authority, including OSHA; • unexpected labor conditions, shortages or work stoppages causing delays in completion, or acceleration of the contracted work to maintain milestone completion dates, which could cause losses due to not meeting estimated production targets; • installation productivity rates different than the rate that was estimated; • changes in applicable tariffs, laws and regulations; • delays caused by weather conditions; • fraud, theft or other improper activities by suppliers, vendors, subcontractors, designers, engineers, consultants, joint venture partners, customers or our own personnel; and • mechanical or performance problems with equipment.
In addition, the costs incurred and gross profit realized on our contracts can vary, sometimes substantially, from our original projections due to a variety of factors, including, but not limited to: • on-site conditions that differ from those described in the original bid or contract; • failure to include required materials, equipment, or work in a bid, or the failure to properly estimate the quantities or costs needed to complete a lump sum or guaranteed maximum price contract; • contract or project modifications creating unanticipated costs not covered by change orders; • failure by the customer, owner or general contractor to properly approve and authorize change orders for work that is required and as a result, the inability to bill and collect for the value of the work performed; • failure by suppliers, vendors, subcontractors, designers, engineers, consultants, joint venture partners or customers to perform their obligations; • delays in quickly identifying and taking measures to address issues which arise during contract execution; • changes in availability, proximity and costs of materials and equipment, including pipe, sheet metal, other construction materials and mechanical, electrical and plumbing equipment; • claims or demands from third parties for alleged damages arising from the design, construction or use and operation of a project of which our work is part; • difficulties in obtaining required governmental permits or approvals; • availability and skill level of workers in the geographic location of a project; • citations issued by any governmental authority, including OSHA; • unexpected labor conditions, shortages or work stoppages causing delays in completion, or acceleration of the contracted work to maintain milestone completion dates, which could cause losses due to not meeting estimated production targets; • installation productivity rates different than the rate that was estimated; • changes in applicable tariffs, laws and regulations; • delays caused by weather conditions; • fraud, theft or other improper activities by suppliers, vendors, subcontractors, designers, engineers, consultants, joint venture partners, customers or our own personnel; and • mechanical or performance problems with equipment.
However, this practice can make it difficult to coordinate 18 procedures across our operations and presents certain risks, including the risk that we may be slower or less effective in our attempts to identify or react to problems affecting an important business issue than we would under a more centralized structure, or that we would be slower to identify a misalignment between a subsidiary’s and our overall business strategy.
However, this practice can make it difficult to coordinate procedures across our operations and presents certain risks, including the risk that we may be slower or less effective in our attempts to identify or react to problems affecting an important business issue than we would under a more centralized structure, or that we would be slower to identify a misalignment between a subsidiary’s and our overall business strategy.
In some cases, we may maintain and bear the cost of more ready work crews than are currently required in anticipation 17 of future needs for existing contracts or expected future contracts. If a project is delayed or an expected project award is not received, we would incur costs that could have a material adverse effect on our anticipated profit.
In some cases, we may maintain and bear the cost of more ready work crews than are currently required in anticipation of future needs for existing contracts or expected future contracts. If a project is delayed or an expected project award is not received, we would incur costs that could have a material adverse effect on our anticipated profit.
We place significant decision making powers with our business units’ management, which presents certain risks that may cause the operating results of individual branches to vary. We operate from various locations across the United States, supported by corporate executives and services, with local business unit management retaining responsibility for day-to-day operations and adherence to applicable laws.
We place significant decision making powers with our business units’ management, which presents certain risks that may cause the operating results of individual branches to vary. We operate from various locations across the eastern United States, supported by corporate executives and services, with local business unit management retaining responsibility for day-to-day operations and adherence to applicable laws.
Our ability to meet all of our existing or potential future debt service obligations (including those under our A&R Wintrust Credit Agreement, pursuant to which we may incur significant indebtedness), to refinance our existing or potential future indebtedness, and to fund our operations, working capital, acquisitions, capital expenditures, and other important business uses, depends on our ability to generate sufficient cash flow in the future.
Our ability to meet all of our existing or potential future debt service obligations (including those under our Second A&R Wintrust Credit Agreement, pursuant to which we may incur significant indebtedness), to refinance our existing or potential future indebtedness, and to fund our operations, working capital, acquisitions, capital expenditures, and other important business uses, depends on our ability to generate sufficient cash flow in the future.
It is impossible to predict the full nature and effect of judicial, legislative or regulatory developments relating to health and safety regulations and environmental protection regulations applicable to our operations. 30 Our failure to comply with immigration laws and labor regulations could affect our business. In certain markets, we rely heavily on our immigrant labor force.
It is impossible to predict the full nature and effect of judicial, legislative or regulatory developments relating to health and safety regulations and environmental protection regulations applicable to our operations. Our failure to comply with immigration laws and labor regulations could affect our business. In certain markets, we rely heavily on our immigrant labor force.
As a result, we would be forced to take other actions to meet those obligations, such as raising equity or delaying capital expenditures, any of which could have a 26 material adverse effect on us. Furthermore, we cannot assure that we will be able to effect any of these actions on favorable terms, or at all.
As a result, we would be forced to take other actions to meet those obligations, such as raising equity or delaying capital expenditures, any of which could have a material adverse effect on us. Furthermore, we cannot assure that we will be able to effect any of these actions on favorable terms, or at all.
Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, and not absolute, assurances that the objectives of the system are met. Any failure of our disclosure controls and procedures or internal controls over financial reporting could harm our financial condition and results of operations.
Any system of controls, however well designed and operated, is based in 32 part on certain assumptions and can provide only reasonable, and not absolute, assurances that the objectives of the system are met. Any failure of our disclosure controls and procedures or internal controls over financial reporting could harm our financial condition and results of operations.
For instance, incorporating greater resource efficiency into our solutions, whether to comply with upgraded building codes or recommended practices given a region’s particular exposure to climate conditions, or undertaken to satisfy demand from increasingly environmentally conscious customers or to meet our own sustainability goals, often raises our costs.
For instance, incorporating greater resource efficiency into our solutions, whether to comply with upgraded building codes or recommended practices given a region’s particular exposure to climate conditions, or undertaken to 26 satisfy demand from increasingly environmentally conscious customers or to meet our own sustainability goals, often raises our costs.
In addition, our board has the power, without stockholder approval, to set the terms of any series of preferred stock that may be issued, including voting rights, dividend rights, and preferences over our common stock with respect to dividends or in the event of a dissolution, liquidation or winding up and other terms.
In addition, our Board of Directors has the power, without stockholder approval, to set the terms of any series of preferred stock that may be issued, including voting rights, dividend rights, and preferences over our common stock with respect to dividends or in the event of a dissolution, liquidation or winding up and other terms.
If such an infectious disease broke out at one or more of our offices, facilities or work sites, our operations may be adversely and materially affected, our productivity may be affected, our ability to 27 complete projects in accordance with our contractual obligations may be affected, and we may incur increased labor and materials costs.
If such an infectious disease broke out at one or more of our offices, facilities or work sites, our operations may be adversely and materially affected, our productivity may be affected, our ability to complete projects in accordance with our contractual obligations may be affected, and we may incur increased labor and materials costs.
Failure to remain in compliance with covenants under our debt and credit agreements or service our indebtedness could adversely impact our business. Our A&R Wintrust Credit Agreement and other debt obligations include certain debt covenants, some of which are financial in nature, are further described in “Item 7.
Failure to remain in compliance with covenants under our debt and credit agreements or service our indebtedness could adversely impact our business. Our Second A&R Wintrust Credit Agreement and other debt obligations include certain debt covenants, some of which are financial in nature, are further described in “Item 7.
In addition, these systems, networks, and infrastructure may be vulnerable to deliberate cyber-attacks that interfere with their functionality or the confidentiality of our data or information or our customers’ data or information. Increasingly advanced cyber-attacks against rapidly evolving computer technologies pose a risk to the security of our systems, networks, information and data.
In addition, these systems, networks, and infrastructure may in the future be vulnerable to deliberate cyber-attacks that interfere with their functionality or the confidentiality of our data or information or our customers’ data or information. Increasingly advanced cyber-attacks against rapidly evolving computer technologies pose a risk to the security of our systems, networks, information and data.
These provisions prevent a stockholder from increasing the size of our Board of Directors and then gaining control of our Board of Directors by filling the resulting vacancies with its own nominees. This makes it more difficult to change the composition of our Board of Directors but promotes continuity of management. • Classified board.
These provisions prevent a stockholder from increasing the size of our Board of Directors and then gaining control of our Board of Directors by filling the resulting vacancies 31 with its own nominees. This makes it more difficult to change the composition of our Board of Directors but promotes continuity of management. • Classified board.
Our risk of such increased payments may be greater if any of the participating employers in these underfunded plans withdraws from the plan and is not able to contribute an amount sufficient to fund the unfunded liabilities associated with its participants in the plan.
Our risk of such increased payments may be greater if any of the 25 participating employers in these underfunded plans withdraws from the plan and is not able to contribute an amount sufficient to fund the unfunded liabilities associated with its participants in the plan.
We expect that these provisions might also 32 discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company. • Directors removed only for cause.
We expect that these provisions might also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company. • Directors removed only for cause.
Default under our debt agreements could result in, among other things, us no longer being entitled to borrow under one or more of the agreements, acceleration of the maturity of outstanding indebtedness under the agreements, and/or foreclosure on any collateral securing the obligations under the agreements.
Default under our debt agreements could result in, among other things, us no longer being entitled to borrow 24 under one or more of the agreements, acceleration of the maturity of outstanding indebtedness under the agreements, and/or foreclosure on any collateral securing the obligations under the agreements.
Timing of the award and performance of new contracts could have an adverse effect on our operating results and cash flow. The timing of project awards is unpredictable and outside of our control. Project awards often involve complex and lengthy negotiations and competitive bidding processes.
Timing of the award and performance of new contracts could have an adverse effect on our operating results and cash flow. 16 The timing of project awards is unpredictable and outside of our control. Project awards often involve complex and lengthy negotiations and competitive bidding processes.
If our estimates or assumptions prove to be inaccurate, due to changing circumstances or our failure to successfully execute the work, cost overruns may occur and we could experience reduced profits or a loss for affected projects.
If our estimates or assumptions prove to be inaccurate, due to changing circumstances or our failure to successfully execute the work, cost overruns may occur and we could experience reduced profits 15 or a loss for affected projects.
If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though any amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our 25 indebtedness, will correspondingly decrease.
If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though any amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.
If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management. Future sales of our common stock may cause our common stock price to decline.
If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management. 30 Future sales of our common stock may cause our common stock price to decline.
Our labor expenses may increase as a result of a shortage in the supply of skilled and other personnel. Labor shortages, increased labor costs or the loss of key personnel could reduce our profitability and negatively impact our business.
Our labor 20 expenses may increase as a result of a shortage in the supply of skilled and other personnel. Labor shortages, increased labor costs or the loss of key personnel could reduce our profitability and negatively impact our business.
Information technology system failures, including suppliers’ or vendors’ system failures, could disrupt our operations by causing transaction errors, processing inefficiencies, the loss of customers, other business disruptions, or the loss of employee personal information.
Information technology system failures, including suppliers’ or vendors’ system failures, could disrupt our 28 operations by causing transaction errors, processing inefficiencies, the loss of customers, other business disruptions, or the loss of employee personal information.
As such, if we were to experience an interruption or reduction in the availability of bonding capacity, it is likely we would be unable to compete for or work on certain projects. 23 Our insurance policies against many potential liabilities require high deductibles. Additionally, difficulties in the insurance markets may adversely affect our ability to obtain necessary insurance.
As such, if we were to experience an interruption or reduction in the availability of bonding capacity, it is likely we would be unable to compete for or work on certain projects. 22 Our insurance policies against many potential liabilities require high deductibles. Additionally, difficulties in the insurance markets may adversely affect our ability to obtain necessary insurance.
Costs incurred as a result of warranty claims could adversely affect our financial position, results of operations and cash flows. 24 Recent and potential changes in U.S. trade policies and retaliatory responses from other countries may significantly increase the costs or limit supplies of raw materials and products used in our operations.
Costs incurred as a result of warranty claims could adversely affect our financial position, results of operations and cash flows. 23 Recent and potential changes in U.S. trade policies and retaliatory responses from other countries may significantly increase the costs or limit supplies of raw materials and products used in our operations.
If the multiemployer pension plans in which we participate have significant underfunded liabilities, such underfunding could increase the size of our potential withdrawal liability. No liability for underfunding of multiemployer pension plans was recorded in our consolidated financial statements for the years ended December 31, 2022 or 2021. Increases in healthcare costs could adversely affect our financial results.
If the multiemployer pension plans in which we participate have significant underfunded liabilities, such underfunding could increase the size of our potential withdrawal liability. No liability for underfunding of multiemployer pension plans was recorded in our consolidated financial statements for the years ended December 31, 2023 or 2022. Increases in healthcare costs could adversely affect our financial results.
The utilization of our workforce is impacted by numerous factors, including: • our estimates of headcount requirements and our ability to manage attrition; • efficiency in scheduling projects and our ability to minimize downtime between project assignments; 20 • productivity; • labor disputes; and • availability of skilled labor at any given time.
The utilization of our workforce is impacted by numerous factors, including: 19 • our estimates of headcount requirements and our ability to manage attrition; • efficiency in scheduling projects and our ability to minimize downtime between project assignments; • productivity; • labor disputes; and • availability of skilled labor at any given time.
There can be no assurance that the regulatory environment in which we operate will not change significantly in the future. Various local, state and federal laws and regulations impose licensing standards on technicians who install and service HVAC systems.
There can be no assurance that the regulatory environment in which we operate will not change significantly in the future. Various local, state and federal laws and regulations impose licensing standards on technicians who install and service mechanical systems.
To date, we have not paid dividends on our common stock nor do we anticipate that we will pay dividends in the foreseeable future. As of December 31, 2022, we do not have any preferred stock outstanding that has any preferential dividends.
To date, we have not paid dividends on our common stock nor do we anticipate that we will pay dividends in the foreseeable future. As of December 31, 2023, we do not have any preferred stock outstanding that has any preferential dividends.
We cannot provide assurance that we will be able to identify suitable acquisition targets or that we will be able to consummate acquisitions on terms and conditions acceptable to us, or that acquired businesses will be profitable. Acquisitions may expose us to additional business risks different than those we have traditionally experienced.
We cannot provide assurances that we will be able to identify suitable acquisition targets or that we will be able to consummate acquisitions on terms and conditions acceptable to us, or that the acquired businesses will be profitable. Acquisitions may expose us to additional business risks different than those we have traditionally experienced.
Performing work under these conditions can increase the cost of such work or negatively affect efficiency and, therefore, our profitability. A pandemic, epidemic or outbreak of an infectious disease in the markets in which we operate or that otherwise impacts our facilities or suppliers could adversely impact our business.
Performing work under these conditions can increase the cost of such work or negatively affect efficiency and, therefore, our profitability. A pandemic, epidemic or outbreak of an infectious disease, such as the coronavirus (COVID-19), in the markets in which we operate or that otherwise impacts our facilities or suppliers could adversely impact our business.
As of December 31, 2022, our business units operate in 21 states, which exposes us to a variety of state and local laws and regulations, particularly those pertaining to contractor licensing requirements. These laws and regulations govern many aspects of our business, and there are often different standards and requirements in different locations.
As of December 31, 2023, our business units operate in 22 states, which exposes us to a variety of state and local laws and regulations, particularly those pertaining to contractor licensing requirements. These laws and regulations govern many aspects of our business, and there are often different standards and requirements in different locations.
Examples of such misconduct include employee or subcontractor theft, the failure to comply with safety standards, state-specific laws related to automobile operations (including mobile phone usage), customer requirements, environmental laws, Disadvantaged Business Enterprises (“DBE”) regulatory compliance, and any other applicable laws or regulations.
Examples of such misconduct include employee or subcontractor theft, the failure to comply with safety standards, state-specific laws related to automobile operations (including mobile phone usage), customer requirements, environmental laws, DBE regulatory compliance, and any other applicable laws or regulations.
Likewise, cyber incidents, including malicious cyber-attacks perpetrated on our employees and cyber incidents caused by third parties surreptitiously accessing our systems by other means, pose a risk to the security of the systems, networks, information and data of ours, our customers, subcontractors and suppliers.
Likewise, cyber incidents, including malicious cyber-attacks perpetrated on our employees and cyber incidents caused by third parties surreptitiously accessing our systems by other means, are an on-going risk to the security of the systems, networks, information and data of ours, our customers, subcontractors and suppliers.
Our contributions to these plans were approximately $12.6 million for the year ended December 31, 2022 and $14.3 million for the year ended December 31, 2021. The costs of providing benefits through such plans have increased in recent years.
Our contributions to these plans were approximately $11.6 million for the year ended December 31, 2023 and $12.6 million for the year ended December 31, 2022. The costs of providing benefits through such plans have increased in recent years.
We also expect increased competition from in-house service providers as some of our customers have employees who perform service and maintenance work similar to the services we provide as part of our ODR offering. Vertical consolidation is also expected to intensify competition in the industry.
We face competition from the in-house service organizations of our customers who have employees who perform service and maintenance work similar to the services we provide as part of our ODR offering. Vertical consolidation is also expected to intensify competition in the industry.
Overall, the potential impact of a pandemic, epidemic or outbreak of an infectious disease with respect to our markets or our facilities is difficult to predict and could adversely impact our business.
Overall, the potential impact of a pandemic, epidemic or outbreak of an infectious disease with respect to our markets or our facilities is difficult to predict and could adversely impact our business. Future climate change could adversely affect us.
The trading market for our common stock could be affected by equity research analysts’ research or reports about us and our business. The price of our stock could decline if one or more securities analysts downgrade our stock or if analysts issue other unfavorable commentary about us or our business.
If equity research analysts publish unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline. The trading market for our common stock could be affected by equity research analysts’ research or reports about us and our business.
Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. 14 Risks Related to Our Business and Industry Intense competition in our industry could reduce our market share and profit.
These events could impact our customers, suppliers, subcontractors, employees, our financial reporting and our reputation and lead to financial losses from remediation actions, loss of business or potential liability, or an increase in expense, all of which may have a material adverse effect on our business.
These events could impact our customers, suppliers, subcontractors, employees, our financial reporting and our reputation and lead to financial losses from remediation actions, loss of business or potential liability, or an increase in expense, all of which may have a material adverse effect on our business. Our systems implementations may also not result in productivity improvements at the levels anticipated.
System breaches can lead to disclosure, modification and destruction of proprietary business data, personally identifiable information, other sensitive information, production downtime or loss of business, and damage to our reputation, competitiveness and operations. Of special note is our risk when implementing new capabilities.
System breaches can lead to disclosure, modification and destruction of proprietary business data, personally identifiable information, other sensitive information, production downtime or loss of business, and damage to our reputation, competitiveness and operations.
Repercussions of severe weather conditions may include: • curtailment of services; • suspension of operations; • inability to meet performance schedules in accordance with contracts and potential liability for liquidated damages; • injuries or fatalities; • weather related damage to facilities; • disruption of information systems; • inability to receive machinery, equipment and materials at jobsites; and • loss of productivity. 29 Information technology system failures, network disruptions or cyber security breaches could adversely affect our business.
Repercussions of severe weather conditions may include: • curtailment of services; • suspension of operations; • inability to meet performance schedules in accordance with contracts and potential liability for liquidated damages; • injuries or fatalities; • weather related damage to facilities; • disruption of information systems; • inability to receive machinery, equipment and materials at jobsites; and • loss of productivity.
If we choose to raise capital by selling shares of our common stock for any reason, the issuance would have a dilutive effect on the holders of our common stock and could have a material negative effect on the market price of our common stock. 31 If equity research analysts publish unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline.
If we choose to raise capital by selling shares of our common stock for any reason, the issuance would have a dilutive effect on the holders of our common stock and could have a material negative effect on the market price of our common stock.
Although we may attempt to pass on certain of these increased costs to our customers, we may not be able to pass all of these cost increases on to our customers.
Although we may attempt to pass on certain of these increased costs to our customers, we may not be able to pass all of these cost increases on to our customers. As a result, our margins may be adversely impacted by such cost increases.
We use sophisticated information technology systems, networks, and infrastructure in conducting some of our day-to-day operations and providing services to certain customers, including technology used for building designs, project modeling and scheduling.
Information technology system failures, network disruptions or cyber security breaches could adversely affect our business. We use sophisticated information technology systems, networks, and infrastructure in conducting some of our day-to-day operations and providing services to certain customers, including technology used for building designs, project modeling and scheduling.
As of March 7, 2023, we had an aggregate of 10,449,689 shares of our outstanding common stock, of which 1,351,803 shares were held by our current directors and officers. There were no holders of greater than 10% of our common stock as of March 7, 2023.
As of March 12, 2024, we had an aggregate of 11,131,702 shares of our outstanding common stock, of which 1,095,177 shares were held by our current directors and officers. There were no holders of greater than 10% of our common stock as of March 12, 2024.
In addition, our subsidiaries that perform work for federal government entities are subject to additional federal laws and regulatory and contractual requirements. Changes in any of these laws, or any subsidiary’s material failure to comply with them, can adversely impact our operations by, among other things, increasing costs, distracting management’s time and attention from other items, and harming our reputation.
Changes in any of these laws, or any subsidiary’s material failure to comply with them, can adversely impact our operations by, among other things, increasing costs, distracting management’s time and attention from other items, and harming our reputation. 29 As Federal Government Contractors under applicable federal regulations, our subsidiaries are subject to a number of rules and regulations, and our contracts with government entities are subject to audit.
A change in tax laws or regulations of any federal or state jurisdiction in which we operate could increase our tax burden and otherwise adversely affect our financial position, results of operations, cash flows and liquidity.
A change in tax laws or regulations of any federal or state jurisdiction in which we operate could increase our tax burden and otherwise adversely affect our financial position, results of operations, cash flows and liquidity. 33 We continue to assess the impact of various U.S. federal or state legislative proposals that could result in a material increase to our U.S. federal or state taxes.
While we have safety protocols in place for our construction sites and take steps to safeguard our administrative functions, we can provide no assurance that we or our suppliers or other partners can successfully operate in areas experiencing a significant weather event or natural disaster, and we or they may be more impacted and take longer, and with higher costs, to resume operations in an affected location than other businesses, depending on the nature of the event or other circumstances. 28 International, federal, state and local authorities and legislative bodies have issued, implemented or proposed regulations, penalties, standards or guidance intended to restrict, moderate or promote activities consistent with resource conservation, GHG emission reduction, environmental protection or other climate-related objectives.
While we have safety protocols in place for our construction sites and take steps to safeguard our administrative functions, we can provide no assurance that we or our suppliers or other partners can successfully operate in areas experiencing a significant weather event or natural disaster, and we or they may be more impacted and take longer, and with higher costs, to resume operations in an affected location than other businesses, depending on the nature of the event or other circumstances.
Despite efforts to protect confidential business information, personal data of ours, our customers, employees, suppliers and subcontractors, our information technology systems and those of our third-party service providers may be subject to system breaches.
While we have security, internal control and technology measures in place to protect our systems and networks, confidential business information, personal data of ours, our customers, employees, suppliers and subcontractors, our information technology systems and those of our third-party service providers have been and may in the future be subject to system breaches.
Further, our relationship with some customers could suffer if we are unable to retain the employees with whom those customers primarily work and have established relationships. 21 Misconduct by our employees, subcontractors or partners, or our overall failure to comply with laws or regulations could harm our reputation, damage our relationships with customers, reduce our revenue and profits, and subject us to criminal and civil enforcement actions.
Misconduct by our employees, subcontractors or partners, or our overall failure to comply with laws or regulations could harm our reputation, damage our relationships with customers, reduce our revenue and profits, and subject us to criminal and civil enforcement actions.
In addition, new and emerging technologies and services are expected to significantly impact the industry in coming years. If we are unable to meet these competitive challenges, we could lose market share to our competitors and experience an overall reduction in our profits. In addition, our profitability could be impaired if we have to reduce prices to remain competitive.
If we are unable to meet these competitive challenges, we could lose market share to our competitors and experience an overall reduction in our profits. In addition, our profitability could be impaired if we have to reduce prices to remain competitive. We face competition from the in-house service organizations of our customers.
Federal Government Contractors must comply with many regulations and other requirements that relate to the award, administration and performance of government contracts. A violation of these laws and regulations could result in imposition of fines and penalties, the termination of a government contract, or debarment from bidding on government contracts in the future.
A violation of these laws and regulations could result in imposition of fines and penalties, the termination of a government contract, or debarment from bidding on government contracts in the future.
In addition, we have entered into an interest rate swap on our A&R Wintrust Term Loan that involves the exchange of variable for fixed rate interest payments in order to reduce interest rate volatility.
As of the December 31, 2023, we had $35.9 million of available borrowing capacity under the Second A&R Wintrust Revolving Loan (as defined below). In addition, we have entered into an interest rate swap on our Second A&R Wintrust Revolving Loan that involves the exchange of variable for fixed rate interest payments in order to reduce interest rate volatility.
Similarly, our backlog frequently reflects multiple contracts for a limited number of customers; therefore, one customer may comprise a significant percentage of backlog at a certain point in time.
For example, for the year ended December 31, 2022, one GCR segment customer accounted for approximately 11% of consolidated total revenue. Similarly, our backlog frequently reflects multiple contracts for a limited number of customers; therefore, one customer may comprise a significant percentage of backlog at a certain point in time.
We could be adversely affected by limitations on fuel supplies or increases in energy prices that result in higher transportation and equipment operation costs. Although we may be able to pass through the impact of energy price charges to some of our customers, we may not be able to pass all of these cost increases on to our customers.
Changes in energy prices may increase our costs, and we may not be able to pass along increased energy costs to our customers. Energy prices fluctuate based on events outside of our control. We could be adversely affected by limitations on fuel supplies or increases in energy prices that result in higher transportation and equipment operation costs.
The prices we pay for these materials and equipment may be impacted by transportation costs, government regulations, import duties and tariffs, changes in currency exchange rates, general economic conditions and other circumstances beyond our control.
These costs may be impacted by government regulations, import duties and tariffs, changes in currency exchange rates, general economic conditions and other circumstances beyond our control. We are also exposed to 21 increases in energy prices, particularly as they relate to fuel prices for our fleet vehicles.
Acquisitions, divestitures, and other strategic transactions could fail to achieve financial or strategic objectives, disrupt our ongoing business, and adversely impact our results of operations.
Acquisitions, divestitures, and other strategic transactions could fail to achieve financial or strategic objectives, disrupt our ongoing business, and adversely impact our results of operations. We may pursue selective acquisitions to expand, complement, or diversify our business as growing by acquisition is part of our stated growth strategy.
A failure to recover on these types of claims promptly and fully could have a negative impact on our financial position, results of operations, cash flows and liquidity. Moreover, our use of working capital to cover cost overruns related to pending claims may impact our ability to meet our credit agreement covenants or limit the use of our credit agreements.
Moreover, our use of working capital to cover cost overruns related to pending claims may impact our ability to meet our credit agreement covenants or limit the use of our credit agreements.
The participation clauses may be in the form of a goal or in the form of a minimum amount of work that must be subcontracted to a DBE firm.
We may be unable to identify and contract with qualified DBE contractors to perform as subcontractors. Certain of our projects include contract clauses requiring DBE participation. The participation clauses may be in the form of a goal or in the form of a minimum amount of work that must be subcontracted to a DBE firm.
Risks Related to Our Business and Industry Intense competition in our industry could reduce our market share and profit. The markets we serve are highly fragmented and competitive. The non-residential contracting industry is characterized by numerous companies, many of which are small and whose activities are often geographically concentrated.
The markets we serve are highly fragmented and competitive. The non-residential contracting industry is characterized by numerous companies, many of which are small and whose activities are often geographically concentrated. We compete on the basis of our technical expertise and experience, financial and operational resources, industry reputation and dependability.
We compete on the basis of our technical expertise and experience, financial and operational resources, industry reputation and dependability. While we believe our customers consider a number of these factors in awarding available contracts, price is often the principal factor in determining which contractor is selected, especially on smaller, less complex projects.
While we believe our customers consider a number of these factors in awarding available contracts, price is often the principal factor in determining which contractor is selected, especially on smaller, less complex projects. As such, smaller competitors are sometimes able to win bids for such projects based on price alone due to their lower cost and financial return requirements.
As Federal Government Contractors under applicable federal regulations, our subsidiaries are subject to a number of rules and regulations, and our contracts with government entities are subject to audit. Violations of the applicable rules and regulations could result in a subsidiary being barred from future government contracts.
Violations of the applicable rules and regulations could result in a subsidiary being barred from future government contracts. Federal Government Contractors must comply with many regulations and other requirements that relate to the award, administration and performance of government contracts.
When successful, we remain obligated to perform our services after most extraordinary events subject to relief that may be available pursuant to a force majeure clause.
When successful, we remain obligated to perform our services after most extraordinary events subject to relief that may be available pursuant to a force majeure clause. If we are not able to react quickly to force majeure events, our operations may be affected significantly, which may have a negative impact on our financial position, results of operations and cash flows.
Furthermore, the costs associated with a failed acquisition or attempted acquisition transaction could have an adverse effect on our financial position, results of operations and cash flows. Design/Build and Design/Assist contracts subject us to the risks of design errors and omissions. Design/Build projects provide the customer with a single point of responsibility for both design and construction.
Furthermore, the costs associated with a failed acquisition or attempted acquisition transaction could have an adverse effect on our financial position, results of operations and cash flows. Our failure to successfully integrate acquisitions could adversely affect our financial results.
Borrowings under our A&R Wintrust Credit Agreement (as defined below) are at variable rates of interest and expose us to interest rate risk.
If economic conditions remain uncertain or weaken, our revenue and profitability could be adversely affected. Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. Borrowings under our Second A&R Wintrust Credit Agreement (as defined below) are at variable rates of interest and expose us to interest rate risk.
As a result, our margins may be adversely impacted by such cost increases. 22 Changes in energy prices may increase our costs, and we may not be able to pass along increased energy costs to our customers. Energy prices fluctuate based on events outside of our control.
Although we may be able to pass through the impact of energy price charges to some of our customers, we may not be able to pass all of these cost increases on to our customers. As a result, our margins may be adversely impacted by such cost increases.
If we are not able to react quickly to force majeure events, our operations may be affected significantly, which may have a negative impact on our financial position, results of operations and cash flows. 34 Deliberate, malicious acts, including terrorism and sabotage, could damage our facilities, disrupt our operations or injure employees, contractors, customers or the public and result in liability to us.
Deliberate, malicious acts, including terrorism and sabotage, could damage our facilities, disrupt our operations or injure employees, contractors, customers or the public and result in liability to us.
As such, smaller competitors are sometimes able to win bids for such projects based on price alone due to their lower cost and financial return requirements. We expect competition to remain intense for the foreseeable future, presenting us with significant challenges in our ability to 15 maintain strong growth rates and acceptable profit margins.
We expect competition to remain intense for the foreseeable future, presenting us with significant challenges in our ability to maintain strong growth rates and acceptable profit margins. In addition, new and emerging technologies and services are expected to significantly impact the industry in coming years.
This may reduce the profit to be realized, or result in a loss, on a contract. Price increases in materials could affect our profitability. We purchase materials, including sheet metal, steel and copper piping, electrical conduit, wire and other various materials from numerous sources. We also purchase equipment from various manufacturers.
This may reduce the profit to be realized, or result in a loss, on a contract. An increase in the cost or the availability of materials and commodities could affect our profitability. We are exposed to market risks that may cause increases in the cost, or the availability of, materials, equipment and commodities utilized in our operations.
We continue to assess the impact of various U.S. federal or state legislative proposals that could result in a material increase to our U.S. federal or state taxes. We cannot predict whether any specific legislation will be enacted or the terms of any such legislation.
We cannot predict whether any specific legislation will be enacted or the terms of any such legislation.
These and related economic factors could have a material adverse effect on our financial position, results of operations, cash flows and liquidity. The ongoing military conflict between Ukraine and Russia has caused unstable market and economic conditions and is expected to have additional global consequences, such as heightened risks of cyberattacks.
These and related economic factors could have a material adverse effect on our financial position, results of operations, cash flows and liquidity. Continuing worldwide political and economic uncertainties may adversely affect our revenue and profitability.
These liabilities, if they materialize, could have a material adverse effect on our business, financial condition, results of operations and cash flows. Our future acquisitions may not be successful. We may pursue selective acquisitions to grow our business.
These disruptions could increase our operational expense as well as impact the management of our business operations, which could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.
Recent or potential acquisitions, divestitures, or other strategic transactions may involve a number of risks including, but not limited to: • the transaction may not effectively advance our business strategy, and its anticipated benefits may never materialize; • our ongoing operations may be disrupted, and management time and focus may be diverted; • clients or key employees of an acquired business may not remain, which could negatively impact our ability to grow that acquired business; • integration of an acquired business’s accounting, information technology, human resources, and other administrative systems may fail to permit effective management and expense reduction; • unforeseen challenges may arise in implementing internal controls, procedures, and policies; • any additional indebtedness incurred in connection with an acquisition may impact our financial position, results of operations, and cash flows; and • unanticipated or unknown liabilities may arise related to an acquired business.
Integrating acquired businesses involves a number of operational challenges and risks, including: • diversion of management’s attention from our existing business; • difficulties in the retention of management and other key employees, the assimilation of different cultures and practices, broad and geographically dispersed personnel and operations, and the retention of clients or key employees of an acquired business could negatively impact our business and the acquired business; • unanticipated issues in integrating an acquired business’s accounting, information technology, human resources, and other administrative systems may fail to permit effective management and expense reduction; and • the risk of additional financial and accounting challenges and complexities in areas such as tax planning, treasury management, financial reporting and internal controls.
Removed
For example, for the year ended December 31, 2022, one GCR segment customer accounted for approximately 11% of consolidated total revenue. For the year ended December 31, 2021, two GCR segment customers accounted for approximately 17% and 12% of consolidated total revenue, respectively.
Added
We can offer no assurance that our existing or prospective customers will continue to outsource specialty contracting services in the future. Our revenues and results of operations could be adversely affected if our existing or prospective customers reduce the specialty contracting services that are outsourced to us.
Removed
In connection with acquisitions or divestitures, we may become subject to unanticipated or unknown liabilities.
Added
A failure to recover on these types of claims promptly and fully could have a negative impact on our financial position, results of operations, cash 17 flows and liquidity.
Removed
In connection with any acquisitions, we may acquire liabilities or defects such as legal claims, including but not limited to third party liability and other tort claims; claims for breach of contract; employment-related claims; environmental liabilities, conditions or damage; permitting, regulatory or other compliance with law issues; or tax liabilities.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation (Business Unit) Owned or Leased Approximate Size Warrington, Pennsylvania (Eastern Pennsylvania) Leased 27,443 square feet Orlando, Florida (Limbach Collaborative Services) Leased 12,740 square feet Pontiac, Michigan (1) (Michigan) Leased 74,000 square feet Lansing, Michigan (Michigan) Leased 18,692 square feet Laurel, Maryland (Mid-Atlantic) Leased 50,133 square feet Wilmington, Massachusetts (New England) Leased 30,995 square feet East Brunswick, New Jersey (Eastern Pennsylvania) Leased 4,200 square feet Columbus, Ohio (Ohio - 4 locations) Leased 130,144 square feet Athens, Ohio (Ohio) Leased 3,000 square feet Lake Mary, Florida (Orlando) Leased 48,054 square feet Seal Beach, California (2) (Southern California) Leased 88,507 square feet Tampa, Florida (Corporate and Tampa) Leased 13,739 square feet Warrendale, Pennsylvania (Corporate and Western Pennsylvania) Leased 19,718 square feet Greensburg, Pennsylvania (Western Pennsylvania) Leased 5,000 square feet Bronxville, New York (Corporate) Leased 250 square feet Detroit, Michigan (Michigan) Leased 2,155 square feet Boynton Beach, Florida (Southeast Florida) Leased 9,631 square feet Orlando, Florida (Orlando) Leased 4,240 square feet Chattanooga, Tennessee (Jake Marshall) Leased 159,429 square feet (1) On September 29, 2022, Limbach Company LLC (“LC LLC”) and Royal Oak Acquisitions consummated the purchase of this real property under a sale and leaseback transaction.
Biggest changeBusiness Unit Office Location Owned or Leased Approximate Size ACME Industrial Piping, LLC Chattanooga, Tennessee Leased 51,766 square feet Eastern Pennsylvania Warrington, Pennsylvania Leased 27,443 square feet Limbach Facility & Project Solutions LLC Franklin, Tennessee (1) Leased N/A Industrial Air, LLC Greensboro, North Carolina Leased 71,672 square feet Jake Marshall LLC Chattanooga, Tennessee Leased 159,429 square feet Michigan Pontiac, Michigan (2) Leased 74,000 square feet Michigan Lansing, Michigan Leased 18,692 square feet Michigan Detroit, Michigan Leased 2,155 square feet Mid-Atlantic Laurel, Maryland Leased 50,133 square feet New England Wilmington, Massachusetts Leased 30,995 square feet New Jersey East Brunswick, New Jersey Leased 4,200 square feet Ohio Columbus, Ohio (4 locations) Leased 130,144 square feet Ohio Athens, Ohio Leased 3,000 square feet Orlando / Limbach Collaborative Services / Corporate Lake Mary, Florida Leased 60,794 square feet Orlando Orlando, Florida Leased 4,240 square feet Southeastern Florida Boynton Beach, Florida Leased 9,631 square feet Tampa / Corporate Tampa, Florida Leased 13,739 square feet Western Pennsylvania / Corporate Warrendale, Pennsylvania Leased 19,718 square feet Western Pennsylvania Greensburg, Pennsylvania Leased 5,000 square feet Other Properties: Southern California Seal Beach, California (3) Leased 88,507 square feet Corporate Bronxville, New York Leased 250 square feet (1) The Company holds a shared space working arrangement in which it pays a monthly fee to utilize certain co-working space and common office amenities.
See Note 7 – Debt in the accompanying notes to the Company’s consolidated financial statements for further information on the Sale-Leaseback Financing Transaction. 35 (2) In June, 2021, the Company entered into a sublease agreement with a third party for the entire ground floor of its leased space in Southern California, consisting of 71,787 square feet.
See Note 7 – Debt in the accompanying notes to the Company’s consolidated financial statements for further information on the Sale-Leaseback Financing Transaction. (3) In June 2021, the Company entered into a sublease agreement with a third party for the entire ground floor of its leased space in Southern California, consisting of 71,787 square feet.
Item 2. Properties As of December 31, 2022, the Company maintained its principal executive offices and corporate headquarters at 797 Commonwealth Drive, Warrendale, Pennsylvania. The Company has 17 offices throughout the United States. Those business units and offices (summarized below) are spread throughout the eastern portion of the country.
Item 2. Properties As of December 31, 2023, the Company maintained its principal executive offices and corporate headquarters at 797 Commonwealth Drive, Warrendale, Pennsylvania. The Company has 19 offices throughout the United States. Those business units and offices (summarized below) are spread throughout the eastern portion of the country.
In connection with the sale and leaseback transaction, LC LLC and Featherstone St Pontiac MI LLC entered into a lease agreement for the Pontiac facility.
(2) On September 29, 2022, Limbach Company LLC and Royal Oak Acquisitions consummated the purchase of this real property under a sale and leaseback transaction. In connection with the sale and leaseback transaction, LC LLC and Featherstone St Pontiac MI LLC entered into a lease agreement for the Pontiac facility.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeMcCann (1) 41 Executive Vice President and Chief Operating Officer (1) On January 17, 2023, the Company announced its planned transition succession, pursuant to which Charles A. Bacon, III would step down as President and Chief Executive Officer on March 28, 2023, and Michael M.
Biggest changeAngerosa (2) 47 President of Harper Limbach (1) On January 17, 2023, the Company announced its planned transition succession, pursuant to which Charles A. Bacon, III stepped down as President and Chief Executive Officer on March 28, 2023, and Michael M. McCann, the Company’s former Executive Vice President and Chief Operating Officer, was appointed President and Chief Executive Officer.
McCann has been the Company’s Executive Vice President and Chief Operating Officer since November 2019, after having been appointed Co-Chief Operating Officer, effective January 2019. Mr. McCann joined the Company in 2010 as Vice President and Branch Manager of Harper Limbach’s Tampa business unit. After growing the Tampa business for almost three years, Mr. McCann became President of Harper Limbach.
McCann served as the Company’s Executive Vice President and Chief Operating Officer since November 2019, after having been appointed Co-Chief Operating Officer, effective January 2019. Mr. McCann joined the Company in 2010 as Vice President and Branch Manager of Harper Limbach’s Tampa business unit. After growing the Tampa business for almost three years, Mr. McCann became President of Harper Limbach.
Brooks holds a Bachelor of Arts degree in Business Economics from the University of California at Santa Barbara and a Master of Business Administration degree from the Fuqua School of Business at Duke University. Mrs. Brooks is a Certified Public Accountant (active) licensed in California. Michael M.
Brooks holds a Bachelor of Arts degree in Business Economics from the University of California at Santa Barbara and a Master of Business Administration degree from the Fuqua School of Business at Duke University. Mrs. Brooks is a Certified Public Accountant (active) licensed in California. Jay A.
His duties included all aspects of the Company’s construction operations, with primary responsibilities including oversight of risk management, sharing of best practices, and development of operational talent. Mr. McCann has a Bachelor of Science in Mechanical Engineering from Worcester Polytechnic Institute and a Master of Business Administration degree from Drexel University. 36 Part II
His duties included all aspects of the Company’s construction operations, with primary responsibilities including oversight of risk management, sharing of best practices, and development of operational talent. Mr. McCann has a Bachelor of Science in Mechanical Engineering from Worcester Polytechnic Institute and a Master of Business Administration degree from Drexel University. Jayme L.
Item 4. Mine Safety Disclosures Not applicable. Information About Our Executive Officers Name Age Title Charles A. Bacon, III (1) 62 President, Chief Executive Officer and Director Jayme L. Brooks 52 Executive Vice President and Chief Financial Officer Michael M.
Item 4. Mine Safety Disclosures 36 Not applicable. Information About Our Executive Officers Name Age Title Michael M. McCann (1) 42 President, Chief Executive Officer and Director Jayme L. Brooks 53 Executive Vice President and Chief Financial Officer Jay A. Sharp (2) 58 President of Limbach Nicholas S.
Removed
McCann, the Company’s current Executive Vice President and Chief Operating Officer, will be appointed President and Chief Executive Officer. Charles A. Bacon, III has served as the President and Chief Executive Officer and a Director of the Company since July 2016.
Added
(2) In conjunction with the aforementioned planned transition succession, Jay A. Sharp was promoted to the position of President of the following entities: Limbach Company LLC, Limbach Company LP, Jake Marshall LLC and Limbach Facility & Project Solutions LLC. In addition, Nick S.
Removed
He joined Limbach Holdings LLC in early 2004 as President and Chairman of the Board of Managers and Chief Executive Officer, and was also an owner of the company. In that role, he was responsible for the overall performance and strategic direction of the business. Prior to joining Limbach, Mr.
Added
Angerosa continued as President of Harper Limbach LLC (“Harper Limbach”), a Florida-based subsidiary, and was elevated to join the senior management team. Michael M. McCann has served as the President and Chief Executive Officer and a Director of the Company since March 2023. Prior to his appointment as President and Chief Executive Officer and a Director of the Company, Mr.
Removed
Bacon was the President and CEO of the North and South American operations of Bovis Lend Lease. Starting as a superintendent in 1982, he worked his way through various management and leadership positions within the organization and was named President in 1996 and CEO in 1999. Mr.
Added
Sharp has served as President of the following entities: Limbach Company LLC, Limbach Company LP, Jake Marshall LLC and Limbach Facility & Project Solutions LLC since January 2023. Prior to his appointment as President to certain of the Company’s entities, Mr.
Removed
Bacon is also a founding member of the IIF CEO Forum, a group of construction executives that are dedicated to a goal of eliminating injuries within Limbach’s industry.
Added
Sharp served as the Company’s Executive Vice President, Regional Manager since March 2020, in which he had oversight for the Midwest region of the Company. Mr. Sharp also ran the Company’s Ohio business unit from August 2005 to March 2020 and served in various capacities at Limbach from 1990 to 2006. Mr.
Removed
He also supports the ACE Mentorship Program and serves on the Executive Committee of the ACE National Board as Vice Chairman, an opportunity to influence high school children to consider careers in the construction industry. He is also a member of the National Association of Corporate Directors.
Added
Sharp received his bachelor’s degree in 1988 from Messiah College through a partnership with Temple University in Philadelphia PA, and completed Columbia University’s Senior Executive Management program in 2013. Mr.
Removed
He was on the Executive Committee and Former Chairman of the Construction Industry Round Table (“CIRT”). Mr. Bacon also served on the board of Industrial and Infrastructure Contractors USA, a general construction company headquartered in Pittsburgh, Pennsylvania. That business was sold in 2019, at which time Mr. Bacon was no longer associated with the Company. Mr.
Added
Sharp has played an active role in the construction industry serving on the board of MCACO Board of Directors and has been a Labor Management Trustee for Local 24 from 2011 through 2021. Nicholas S. Angerosa has served as President of Harper Limbach since July 2020, which includes the following entities: Harper Limbach LLC and Harper Limbach Construction LLC.
Removed
Bacon has been a member of the Young Presidents Organization since 1997. Mr. Bacon received his bachelor’s degree from Utica College of Syracuse University and has attended Advanced Management Programs at Templeton School of Business, Oxford University and the Wharton School of Business at the University of Pennsylvania. Jayme L.
Added
Prior to his appointment as President of Harper Limbach, Mr. Angerosa served as the Company’s Senior Vice President and Branch Manager from May 2018 to July 2020, in which he oversaw the Tampa business unit. Before joining Harper Limbach, Mr.
Added
Angerosa worked as a Project Manager and Division Manager with The Poole & Kent Company of Florida, a specialty mechanical and general contractor, from October 1996 to May 2012. Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMarket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The Company’s common stock is traded on The Nasdaq Capital Market under the symbol “LMB” and its Public Warrants (as defined in Note 8 – Equity in the accompanying notes to the Company’s consolidated financial statements) were quoted on the OTCQB under the symbol “LMBHW.” On July 20, 2021, the Company’s Public Warrants expired by their terms.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 37 Market Information The Company’s common stock is traded on The Nasdaq Capital Market under the symbol “LMB”. Holders At March 12, 2024, there were 32 holders of record of the Company’s common stock.
Removed
Holders At March 7, 2023, there were 41 holders of record of the Company’s common stock. In addition, there were 5 holders of record of the Company’s $15 Exercise Price Warrants and 61 holders of record of its Merger Warrants (each defined in Note 8 – Equity in the accompanying notes to the Company’s consolidated financial statements).
Added
Shares Issued from the Exercise of Warrants During the year ended December 31, 2023, 600,000 $15 Exercise Price Sponsor Warrants and 606,476 Merger Warrants were exercised on a cashless basis by the holders of the warrants, which resulted in the warrants being converted into, and the Company issuing, 167,564 and 274,742 shares of the Company's common stock, respectively.
Removed
Purchases of Equity Securities by the Issuer and the Affiliated Purchasers In September 2022, the Company announced that its Board of Directors approved a share repurchase program (the “Share Repurchase Program”) to repurchase shares of its common stock for an aggregate purchase price not to exceed $2.0 million. The share repurchase authority is valid through September 29, 2023.
Added
The Company received no proceeds from the cashless exercise of the $15 Exercise Price Sponsor Warrants or the Merger Warrants. The remaining 23,167 unexercised Merger Warrants expired by their terms on July 20, 2023. See Note 8 – Equity in the accompanying notes to the Company’s consolidated financial statements for further information.
Removed
Share repurchases may be executed through various means, including, without limitation, open market transactions, privately negotiated transactions or by other means in accordance with federal securities laws.
Added
Securities Authorized for Issuance under Equity Compensation Plans Information The information called for by this item is incorporated herein by reference to the material under the caption, “Equity Compensation Plan Information” in the Proxy Statement. Item 6. [Reserved]
Removed
The Share Repurchase Program does not obligate the Company to acquire any particular amount of common stock, and the program may be suspended or terminated by the Company at any time at its discretion without prior notice.
Removed
As of December 31, 2022, approximately $2.0 million of common stock was repurchased under its Share Repurchase Program, which was funded from the Company’s available cash on hand.
Removed
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Approximate Dollar Value of Shares that May Yet Be Purchased Under the Share Repurchase Program September 29 - 30, 2022 — $ — — $ 2,000,000 October 1 - 31, 2022 — — — 2,000,000 November 1 - 30, 2022 78,116 10.50 78,116 1,177,742 December 1 - 31, 2022 101,536 11.57 101,536 5,540 Total 179,652 $ 11.10 179,652 $ 5,540 Securities Authorized for Issuance under Equity Compensation Plans Information The information called for by this item is incorporated herein by reference to the material under the caption, “Equity Compensation Plan Information” in the Proxy Statement.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeComparison of Results of Operations for the years ended December 31, 2022 and 2021 The following table presents operating results for the years ended December 31, 2022 and 2021 in dollars and expressed as a percentage of total revenue (except as indicated below): For the Years Ended December 31, (in thousands except for percentages) 2022 2021 Statement of Operations Data: Revenue: GCR $ 280,379 56.4 % $ 350,015 71.4 % ODR 216,403 43.6 % 140,336 28.6 % Total revenue 496,782 100.0 % 490,351 100.0 % Gross profit: GCR 38,622 13.8 % (1) 45,409 13.0 % (1) ODR 55,119 25.5 % (2) 40,501 28.9 % (2) Total gross profit 93,741 18.9 % 85,910 17.5 % Selling, general and administrative: GCR 36,332 13.0 % (1) 37,558 10.7 % (1) ODR 38,805 17.9 % (2) 31,277 22.3 % (2) Corporate 2,742 0.6 % 2,601 0.5 % Total selling, general and administrative 77,879 15.7 % 71,436 14.6 % Change in fair value of contingent consideration (Corporate) 2,285 5.9 % — — % Amortization of intangibles (Corporate) 1,567 0.3 % 484 0.1 % Operating income (loss): GCR 2,290 0.8 % (1) 7,851 2.2 % (1) ODR 16,314 7.5 % (2) 9,224 6.6 % (2) Corporate (6,594) — % (3,085) — % Total operating income 12,010 2.4 % 13,990 2.9 % Other expenses (Corporate) (2,402) (0.5) % (4,513) (0.9) % Total consolidated income before income taxes 9,608 1.9 % 9,477 1.9 % Income tax provision 2,809 0.6 % 2,763 0.6 % Net income $ 6,799 1.4 % $ 6,714 1.4 % (1) As a percentage of GCR revenue.
Biggest changeComparison of Results of Operations for the years ended December 31, 2023 and 2022 The following table presents operating results for the years ended December 31, 2023 and 2022 in dollars and expressed as a percentage of total revenue (except as indicated below): For the Years Ended December 31, (in thousands except for percentages) 2023 2022 Statement of Operations Data: Revenue: GCR $ 254,392 49.3 % $ 280,379 56.4 % ODR 261,958 50.7 % 216,403 43.6 % Total revenue 516,350 100.0 % 496,782 100.0 % Gross profit: GCR 43,200 17.0 % (1) 38,622 13.8 % (1) ODR 76,090 29.0 % (2) 55,119 25.5 % (2) Total gross profit 119,290 23.1 % 93,741 18.9 % Selling, general and administrative (3) 87,397 16.9 % 77,879 15.7 % Change in fair value of contingent consideration 729 0.1 % 2,285 0.5 % Amortization of intangibles 1,880 0.4 % 1,567 0.3 % Total operating income 29,284 5.7 % 12,010 2.4 % Other income (expenses) (1,184) (0.2) % (2,402) (0.5) % Total consolidated income before income taxes 28,100 5.4 % 9,608 1.9 % Income tax provision 7,346 1.4 % 2,809 0.6 % Net income $ 20,754 4.0 % $ 6,799 1.4 % (1) As a percentage of GCR revenue.
During the year ended December 31, 2022, the Company recorded material gross profit write-ups on three GCR projects for a total of $3.0 million and four material GCR project gross profit write-downs for a total of $2.8 million that had a net gross profit impact of $0.5 million or more.
During the year ended December 31, 2022, the Company recorded material gross profit write-ups of $3.0 million on three GCR projects and four material GCR project gross profit write-downs for a total of $2.8 million that had a net gross profit impact of $0.5 million or more.
Fixed price service contracts are generally performed evenly over the contract period, and accordingly, revenue is recognized on a pro rata basis over the life of the contract. Revenue derived from other service contracts are recognized when the services are performed. Expenses related to all service contracts are recognized as services are provided.
Fixed price service contracts are generally performed evenly over the contract period, and accordingly, revenue is recognized on a pro rata basis over the life of the contract. Revenue derived from other service contracts is recognized when the services are performed. Expenses related to all service contracts are recognized as services are provided.
The Company’s core market sectors consist of the following customer base with mission-critical systems: ◦ Healthcare , including research, acute care and inpatient hospitals for regional and national hospital groups, and pharmaceutical and biotech laboratories and manufacturing facilities; ◦ Data Centers, including facilities composed of networked computers, storage systems and computing infrastructure that organizations use to assemble, process, store and disseminate large amounts of data; ◦ Industrial and light manufacturing facilities , including automotive, energy and general manufacturing plants; ◦ Higher Education, including both public and private colleges, universities and research centers; ◦ Cultural and entertainment, including sports arenas, entertainment facilities (including casinos) and amusement rides and parks; and ◦ Life sciences, including organizations and companies whose work is centered around research and development focused on living things.
The Company’s core market sectors consist of the following customer base with mission-critical systems: • Healthcare , including research, acute care and inpatient hospitals for regional and national hospital groups, and pharmaceutical and biotech laboratories and manufacturing facilities; • Industrial and manufacturing , including automotive, energy and general manufacturing plants; • Data Centers, including facilities composed of networked computers, storage systems and computing infrastructure that organizations use to assemble, process, store and disseminate large amounts of data; • Life sciences, including organizations and companies whose work is centered around research and development focused on living things; • Higher Education, including both public and private colleges, universities and research centers; and • Cultural and entertainment, including sports arenas, entertainment facilities (including casinos) and amusement rides and parks.
See Note 4 – Revenue from Contracts with Customers in the accompanying notes to the Company’s consolidated financial statements for information related to unresolved change orders and claims. Variations from estimated project costs could have a significant impact on our operating results, depending on project size, and the recoverability of the variation via additional customer payments.
See Note 4 – Revenue from Contracts with Customers in the accompanying notes to the Company’s consolidated financial statements for information related to unresolved change orders and claims. Variations from estimated project costs could have a significant impact on the Company’s operating results, depending on project size, and the recoverability of the variation via additional customer payments.
Factors such as the Company’s contract mix, commercial terms, days sales outstanding (“DSO”) and delays in the start of projects may impact its working capital. In line with industry practice, the Company accumulates costs during a given month then bills those costs in the current month for many of its contracts.
Factors such as the Company’s contract mix, commercial terms, days sales outstanding (“DSO”) and delays in the start of projects may impact its working capital. In line with industry practice, the Company accumulates costs during a given month then bills those costs in 46 the current month for many of its contracts.
As work on the Company’s projects progress, it increases or decreases backlog to take into account its estimate of the effects of changes in estimated quantities, changes in conditions, change orders and other variations from initially 43 anticipated contract revenue, and the percentage of completion of the Company’s work on the projects.
As work on the Company’s projects progress, it increases or decreases backlog to take into account its estimate of the effects of changes in estimated quantities, changes in conditions, change orders and other variations from initially anticipated contract revenue, and the percentage of completion of the Company’s work on the projects.
The Company generally invoices customers on a monthly basis based on a schedule of values that breaks down the contract amount into discrete billing items. Costs and estimated earnings in excess of billings are recorded as a contract asset until billable under the contract terms.
The Company generally invoices customers monthly based on a schedule of values that breaks down the contract amount into discrete billing items. Costs and estimated earnings in excess of billings are recorded as a contract asset until billable under the contract terms.
Also included are 38 non-personnel costs, such as travel-related expenses, legal and other professional fees and other corporate expenses to support the growth of the Company’s business and to meet the compliance requirements associated with operating as a public company.
Also included are non-personnel costs, such as travel-related expenses, legal and other professional fees and other corporate expenses to support the growth of the Company's business and to meet the compliance requirements associated with operating as a public company.
If a participating employer stops contributing to an MEPP, the unfunded obligations of the MEPP may be borne by the remaining participating employers. An FIP or RP requires a particular MEPP to adopt measures to correct its underfunding status.
If a participating employer stops contributing to an MEPP, the unfunded obligations of the MEPP may be borne by the remaining participating employers. 50 An FIP or RP requires a particular MEPP to adopt measures to correct its underfunding status.
Factors that could impact funded status of an MEPP include, without limitation, investment performance, changes in the participant demographics, decline in the number of contributing employers, changes in actuarial assumptions and the utilization of extended amortization provisions. Assets contributed to the MEPPs by us may be used to provide benefits to employees of other participating employers.
Factors that could impact funded status of an MEPP include, without limitation, investment performance, changes in the participant demographics, decline in the number of contributing employers, changes in actuarial assumptions and the utilization of extended amortization provisions. Assets contributed to the MEPPs by the Company may be used to provide benefits to employees of other participating employers.
Billings in excess of costs and estimated earnings are recorded as a contract liability until the related revenue is recognizable. Cost of Revenue Cost of revenue primarily consists of the labor, equipment, material, subcontract, and other job costs in connection with fulfilling the terms of our contracts. Labor costs consist of wages plus taxes, fringe benefits, and insurance.
Billings in excess of costs and estimated earnings are recorded as a contract liability until the related revenue is recognizable. Cost of Revenue Cost of revenue primarily consists of the labor, equipment, material, subcontract and other job costs in connection with fulfilling the terms of the Company’s contracts. Labor costs consist of wages plus taxes, fringe benefits and insurance.
However, insurance liabilities are difficult to estimate due to unknown factors, including the severity of any injury, the determination of our liability in proportion to other parties, timely reporting of occurrences, ongoing treatment or loss mitigation, general trends in litigation recovery outcomes and the effectiveness of safety and risk management programs.
However, insurance liabilities are difficult to estimate due to unknown factors, including the severity of any injury, the determination of its liability in proportion to other parties, timely reporting of occurrences, ongoing treatment or loss mitigation, general trends in litigation recovery outcomes and the effectiveness of safety and risk management programs.
Projects are brought into backlog once the Company has been provided a written confirmation of award and the contract value has been established.
Projects are brought into backlog once the Company has been provided with a written confirmation of award and the contract value has been established.
Additionally, the Company believes that it can further increase its cash flow and operating income by acquiring strategically synergistic companies that will supplement the Company’s current business model, address capability gaps and enhance the breadth of its service offerings to better serve its clients.
Additionally, the Company believes that it can further increase its cash flow and operating income by acquiring strategically synergistic companies that will increase the Company’s geographic footprint, supplement the Company’s current business model, address capability gaps and enhance the breadth of its service offerings to better serve its clients.
Revisions to project costs and conditions can give rise to change orders under which the customer agrees to pay additional contract price. Revisions can also result in claims we might make against the customer to recover project variances that have not been satisfactorily addressed through change orders with the customer.
Revisions to project costs and conditions can give rise to change orders under which the customer agrees to pay additional contract price. Revisions also can result in claims the Company might make against the customer to recover project variances that have not been satisfactorily addressed through change orders with the customer.
See Note 2 – Significant Accounting Policies in the accompanying notes to the Company’s consolidated financial statements for further information regarding new accounting standards, including the anticipated dates of adoption and the effects on our consolidated financial position, results of operations, or liquidity.
See Note 2 – Significant Accounting Policies in the accompanying notes to the Company’s consolidated financial statements for further information regarding new accounting standards, including the anticipated dates of adoption and the effects on its consolidated financial position, results of operations, or liquidity.
The Company believes that its extensive experience in HVAC, plumbing, and electrical projects, and its internal cost review procedures during the bidding process, enable it to reasonably estimate costs and mitigate the risk of cost overruns on fixed price contracts.
The Company believes that its extensive experience in mechanical, plumbing, and electrical projects, and its internal cost review procedures during the bidding process, enable it to reasonably estimate costs and mitigate the risk of cost overruns on fixed price contracts.
The share repurchase authority is valid through September 29, 2023. Share repurchases may be executed through various means, including, without limitation, open market transactions, privately negotiated transactions or by other means in accordance with federal securities laws.
The share repurchase authority was valid through September 29, 2023. Share repurchases may be executed through various means, including, without limitation, open market transactions, privately negotiated transactions or by other means in accordance with federal securities laws.
In February 2022, the Company announced its strategic decision to wind down its 37 Southern California GCR and ODR operations. The decision was made to better align the Company’s customer geographic focus and to reduce losses related to unprofitable locations.
Divestitures In February 2022, the Company announced its strategic decision to wind down its Southern California GCR and ODR operations. The decision was made to better align the Company’s customer geographic focus and to reduce losses related to unprofitable locations.
As discussed above and in Note 7 – Debt in the accompanying notes to the Company’s consolidated financial statements, as of December 31, 2022, the Company was in compliance with all financial maintenance covenants as required by its credit facility.
As discussed above and in Note 7 – Debt in the accompanying notes to the Company’s consolidated financial statements, as of December 31, 2023, the Company was in compliance with all financial maintenance covenants as required by its credit facility.
The Company operates in two segments, (i) GCR, in which the Company generally manages new construction or renovation projects that involve primarily HVAC, plumbing, or electrical services awarded to the Company by general contractors or construction managers, and (ii) ODR, in which the Company performs owner direct projects and/or provides maintenance or service primarily on HVAC, plumbing or electrical systems, building controls and specialty contracting projects direct to, or assigned by, building owners or property managers.
The Company operates in two segments, (i) GCR, in which the Company generally manages new construction or renovation projects that involve primarily mechanical, plumbing, or electrical services awarded to the Company by general contractors or construction managers, and (ii) ODR, in which the Company performs owner direct projects and/or provides maintenance or 38 service primarily on mechanical, plumbing or electrical systems, building controls and specialty contracting projects direct to, or assigned by, building owners or property managers.
Currently, management believes the historical industry pricing and associated risks for this type of work does not align with the Company’s stakeholders’ expectations and therefore the Company is continuing to take steps to actively reduce these risks as it looks at future job selection and as it completes current jobs.
Currently, management believes the historical industry pricing and associated risks for this type of work does not align with the Company’s stakeholders’ expectations, and therefore, the Company continues to take steps to actively reduce these risks as it looks at future job selection and as it completes current jobs.
Subcontractor labor is recognized as the work is performed, but is generally subjected to approval as to milestones or other evidence of completion. Non-labor project costs consist of purchased equipment, prefabricated materials and other materials. Purchased equipment on our projects is substantially produced to job specifications and is a value added element to our work.
Subcontractor labor is recognized as the work is performed but is generally subjected to approval as to milestones or other evidence of completion. Non-labor project costs consist of purchased equipment, prefabricated materials and other materials. Purchased equipment on the Company’s projects is substantially produced to job specifications and is a value-added element to its work.
Off-Balance Sheet and Other Arrangements Aside from the $3.2 million and $3.4 million in irrevocable letters of credit outstanding in connection with the Company’s self-insurance program, at December 31, 2022 and 2021, respectively, the Company did not have any relationships with any entities or financial partnerships, such as structured finance or special purpose entities established for the purpose of facilitating off-balance sheet arrangements or other purposes.
Off-Balance Sheet and Other Arrangements Aside from the $4.1 million and $3.2 million in irrevocable letters of credit outstanding in connection with the Company’s self-insurance program, at December 31, 2023 and 2022, respectively, the Company did not have any relationships with any entities or financial partnerships, such as structured finance or special purpose entities established for the purpose of facilitating off-balance sheet arrangements or other purposes. 53
The current portion of the liability is included in accrued expenses and other current liabilities on the consolidated balance sheets. The non-current portion of the liability is included in other long-term liabilities on the consolidated balance sheets. We are self-insured related to medical and dental claims under policies with annual per-claimant and annual aggregate stop-loss limits.
The current portion of the liability is included in accrued expenses and other current liabilities on the consolidated balance sheets. The non-current portion of the liability is included in other long-term liabilities on the consolidated balance sheets. The Company is self-insured related to medical and dental claims under policies with annual per-claimant and annual aggregate stop-loss limits.
With respect to our service contracts, there are two basic types of service contracts: fixed price service contracts which are signed in advance for maintenance, repair, and retrofit work over a period, typically of one year, and service contracts not signed in advance for similar maintenance, repair, and retrofit work on an as-needed basis.
With respect to the Company’s service contracts, there are two basic types of service contracts: fixed price service contracts, which are signed in advance for maintenance, repair and retrofit work over a period, typically of one year, and service contracts not signed in advance for similar maintenance, repair and retrofit work on an as-needed basis.
Upon receiving the contract, these costs are included in contract costs. Selling, general, and administrative costs are charged to expense as incurred. Bidding and proposal costs are also recognized as an expense in the period in which such amounts are incurred. Total estimated contract costs are based upon management’s current estimate of total costs at completion.
Selling, general, and administrative costs are charged to expense as incurred. Bidding and proposal costs are also recognized as an expense in the period in which such amounts are incurred. Total estimated contract costs are based upon management’s current estimate of total costs at completion.
Our contributions to a particular MEPP are established by the applicable CBAs; however, required contributions may increase based on the funded status of an MEPP and legal requirements of the Pension Protection Act of 2006 (the “PPA”), which requires substantially underfunded MEPPs to implement a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) to improve their funded status.
The Company’s contributions to a particular MEPP are established by the applicable CBAs; however, required contributions may increase based on the funded status of an MEPP and legal requirements of the Pension Protection Act of 2006 (the “PPA”), which requires substantially underfunded MEPPs to implement a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) to improve its funded status.
Based on historical trends, the Company currently estimates that 68% of its GCR backlog as of December 31, 2022 will be recognized as revenue during 2023. Additionally, the reduction in GCR backlog has been intentional as the Company looks to focus on higher margin projects than historically, as well as its focus on smaller, higher margin owner direct projects.
Based on historical trends, the Company currently estimates that 83% of its GCR backlog as of December 31, 2023 will be recognized as revenue during 2024. Additionally, the reduction in GCR backlog has been intentional as the Company looks to focus on higher margin projects than historically, as well as its focus on smaller, higher margin owner direct projects.
See Note 13 – Commitments and Contingencies in the accompanying notes to the Company’s consolidated financial statements for further discussion. Multiemployer Plans We participate in approximately 40 MEPPs that provide retirement benefits to certain union employees in accordance with various collective bargaining agreements (“CBAs”).
See Note 13 – Commitments and Contingencies in the accompanying notes to the Company’s consolidated financial statements for further discussion. Multiemployer Plans The Company participates in approximately 40 MEPPs that provide retirement benefits to certain union employees in accordance with various collective bargaining agreements (“CBAs”).
Critical Accounting Policies Our critical accounting policies are based upon the significance of the accounting policy to our overall financial statement presentation, as well as the complexity of the accounting policy and our use of estimates and subjective assessments. Our most critical accounting policy is revenue recognition.
Critical Accounting Policies The Company’s critical accounting policies are based upon the significance of the accounting policy to its overall financial statement presentation, as well as the complexity of the accounting policy and its use of estimates and subjective assessments. The Company’s most critical accounting policy is revenue recognition.
At any point in time, the Company has a substantial volume of projects that are specifically identified and advanced in negotiations and/or documentation, however those projects are not booked as backlog until the Company has received written confirmation from the owner or the GC/CM of their intention to award it the contract and they have directed the Company to begin engineering, designing, incurring construction labor costs or procuring needed equipment and material.
At any point, the Company has a substantial volume of projects that are specifically identified and advanced in negotiations and/or documentation, however those projects are not booked as backlog until the Company has received written confirmation from the owner or the general contractor / construction manager of their intention to award it the contract and they have directed the Company to begin engineering, designing, incurring construction labor costs or procuring needed equipment and material.
The costs are considered to be incurred when title is transferred to us, which typically is upon delivery to the worksite. Prefabricated materials, such as ductwork and piping, are generally performed at our shops and recognized as contract costs when fabricated for the unique specifications of the job.
The costs are considered to be incurred when title is transferred to the Company, which typically is upon delivery to the worksite. Prefabricated materials, such as ductwork and piping, are generally performed at the Company’s shops and recognized as contract costs when fabricated for the unique specifications of the job.
In assessing the realizability of deferred tax assets, we must consider whether it is more likely than not some portion, or all, of the deferred tax assets will not be realized. We consider all available evidence, both 52 positive and negative, in determining whether a valuation allowance is required.
In assessing the realizability of deferred tax assets, it must consider whether it is more likely than not some portion, or all, of the deferred tax assets will not be realized. The Company considers all available evidence, both positive and negative, in determining whether a valuation allowance is required.
See Note 13 – Commitments and Contingencies in the accompanying notes to the Company’s consolidated financial statements for further discussion. Insurance and Self-Insurance We purchase workers’ compensation and general liability insurance under policies with per-incident deductibles of $250,000 per occurrence.
See Note 13 – Commitments and Contingencies in the accompanying notes to the Company’s consolidated financial statements for further discussion. Insurance and Self-Insurance The Company purchases workers’ compensation and general liability insurance under policies with per-incident deductibles of $250,000 per occurrence.
Losses are estimated and accrued based upon known facts, historical trends and industry averages. Estimated losses in excess of our deductible, which have not already been paid, are included in our accrual with a corresponding receivable from our insurance carrier.
Losses are estimated and accrued based upon known facts, historical trends and industry averages. Estimated losses in excess of the Company’s deductible, which have not already been paid, are included in the Company’s accrual with a corresponding receivable from its insurance carrier.
Based on historical trends, the Company currently estimates that 92% of its ODR backlog as of December 31, 2022 will be recognized as revenue during 2023. The Company believes its ODR backlog increased due to its continued focus on the accelerated growth of its ODR business.
Based on historical trends, the Company currently estimates that 95% of its ODR backlog as of December 31, 2023 will be recognized as revenue during 2024. The Company believes its ODR backlog increased due to its continued focus on the accelerated growth of its ODR business.
In addition, we believe that some of the more critical judgment areas in the application of accounting policies that affect our financial condition and results of operations are the impact of changes in the estimates and judgments pertaining to: (a) collectability or valuation of accounts receivable; (b) the recording of our self-insurance liabilities; (c) valuation of deferred tax assets; and (d) recoverability of goodwill and identifiable intangible assets.
In addition, the Company believes that some of the more critical judgment areas in the application of accounting policies that affect its financial condition and results of operations are the impact of changes in the estimates and judgments pertaining to: (a) collectability or valuation of accounts receivable; (b) the recording of its self-insurance liabilities; (c) valuation of deferred tax assets; and (d) recoverability of goodwill and identifiable intangible assets.
Goodwill and Identifiable Intangible Assets Goodwill is the excess of purchase price over the fair value of the net assets of acquired businesses. We assess goodwill for impairment each year, and more frequently if circumstances suggest an impairment may have occurred.
Goodwill and Identifiable Intangible Assets Goodwill is the excess of purchase price over the fair value of the net assets of acquired businesses. The Company assesses goodwill for impairment each year, and more frequently if circumstances suggest an impairment may have occurred.
We accrue for the unfunded portion of costs for both reported claims and claims incurred but not reported. The liability for unfunded reported claims and future claims is reflected on the consolidated balance sheets as a current liability in accrued expenses and other current liabilities.
The Company accrues for the unfunded portion of costs for both reported claims and claims incurred but not reported. The liability for unfunded reported claims and future claims is reflected on the consolidated balance sheets as a current liability in accrued expenses and other current liabilities.
Therefore, if actual experience differs from the assumptions and estimates used for recording the liabilities, adjustments may be required and would be recorded in the period that such experience becomes known. Deferred Tax Assets We regularly evaluate the need for valuation allowances related to deferred tax assets for which future realization is uncertain. We perform this evaluation quarterly.
Therefore, if actual experience differs from the assumptions and estimates used for recording the liabilities, adjustments may be required and would be recorded in the period that such experience becomes known. Deferred Tax Assets The Company regularly evaluates the need for valuation allowances related to deferred tax assets for which future realization is uncertain. The Company performs this evaluation quarterly.
Due to the varied nature of the Company’s services, and the risks associated therewith, contract costs as a percentage of contract revenue have historically fluctuated and it expects this fluctuation to continue in future periods.
Due to the varied nature of the Company's services, and the risks associated therewith, contract costs as a percentage of contract revenue have historically fluctuated, and this fluctuation is expected to continue in future periods.
Risk Factors — Our contract backlog is subject to unexpected adjustments and cancellations and could be an uncertain indicator of our future earnings .” The Company’s GCR backlog was $302.9 million and $337.2 million as of December 31, 2022 and 2021, respectively.
Risk Factors — Our contract backlog is subject to unexpected adjustments and cancellations and could be an uncertain indicator of our future earnings .” The Company’s GCR backlog was $186.9 million and $302.9 million as of December 31, 2023 and 2022, respectively.
Project contracts typically provide for a schedule of billings or invoices to the customer based on reaching agreed upon milestones or as we incur costs. The schedules for such billings usually do not precisely match the schedule on which costs are 51 incurred.
Project contracts typically provide for a schedule of billings or invoices to the customer based on reaching agreed upon milestones or as the Company incurs costs. The schedules for such billings usually do not precisely match the schedule on which costs are incurred.
Deferred financing costs are amortized to interest expense using the effective interest method. Provision for Income Taxes The Company is taxed as a C corporation and its financial results include the effects of federal income taxes which will be paid at the parent level.
Treasury Bills and the Company's interest rate swap agreement. Deferred financing costs are amortized to interest expense using the effective interest method. Provision for Income Taxes The Company is taxed as a C corporation and its financial results include the effects of federal income taxes, which will be paid at the parent level.
Due to uncertainty regarding future factors that could trigger withdrawal liability, we are unable to determine (a) the amount and timing of any future withdrawal liability, if any, and (b) whether our participation in these MEPPs could have a material adverse impact on our financial condition, results of operations or liquidity.
Due to uncertainty regarding future factors that could trigger withdrawal liability, the Company is unable to determine (a) the amount and timing of any future withdrawal liability, if any, and (b) whether its participation in these MEPPs could have a material adverse impact on its financial condition, results of operations or liquidity.
In accordance with industry practice, we classify as current all assets and liabilities relating to the performance of long-term contracts. The term of our contracts generally ranges from three months to two years and, accordingly, collection or payment of amounts relating to these contracts may extend beyond one year.
In accordance with industry practice, the Company classifies as current all assets and liabilities relating to the performance of long-term contracts. The term of the Company’s contracts generally ranges from three months to two years and, accordingly, collection or payment of amounts relating to these contracts may extend beyond one year.
In accordance with ASC Topic 280 – Segment Reporting , the Company has elected to aggregate all of the GCR work performed at individual business units into one GCR reportable segment and all of the ODR work performed at individual business units into one ODR reportable segment. All transactions between segments are eliminated in consolidation.
In accordance with ASC Topic 280 – Segment Reporting , the Company has elected to aggregate all GCR work performed at branches into one GCR reportable segment and all ODR work performed at branches into one ODR reportable segment. All transactions between segments are eliminated in consolidation.
Our ability to obtain surety bonds depends upon our capitalization, working capital, past performance, management expertise and external factors, including the capacity of the overall surety market. Surety companies consider such factors in light of the amount of our backlog that we have currently bonded and their current underwriting standards, which may change from time-to-time.
The Company’s ability to obtain surety bonds depends upon its capitalization, working capital, past performance, management expertise and external factors, including the capacity of the overall surety market. Surety companies consider such factors in light of the amount of the Company’s backlog that it has currently bonded and their current underwriting standards, which may change from time-to-time.
Amounts by which cumulative billings to the customer under a contract as of a given date exceed cumulative contract revenue recognized on the contract are reflected as a current liability in our balance sheet under the caption “contract liabilities”. The cost-to-cost method of accounting is also affected by changes in job performance, job conditions, and final contract settlements.
Amounts by which cumulative contract revenue recognized on a contract as of a given date exceed cumulative billings to the customer under the contract are reflected as a current asset in the Company’s balance sheet under the caption “contract assets.” Amounts by which cumulative billings to the customer under a contract as of a given date exceed cumulative contract revenue recognized on the contract are reflected as a current liability in the Company’s balance sheet under the caption “contract liabilities.” The cost-to-cost method of accounting is also affected by changes in job performance, job conditions, and final contract settlements.
These estimates are evaluated and adjusted as needed when additional information is received. Self-insurance Liabilities We are substantially self-insured for workers’ compensation, employer’s liability, auto liability, general liability and employee group health claims in view of the relatively high per-incident deductibles we absorb under our insurance arrangements for these risks.
These estimates are evaluated and adjusted as needed when additional information is received. Self-insurance Liabilities The Company is substantially self-insured for workers’ compensation, employer’s liability, auto liability, general liability and employee group health claims in view of the relatively high per-incident deductibles it absorbs under its insurance arrangements for these risks.
Income Taxes The Company’s income tax provision was $2.8 million for both years ended December 31, 2022 and 2021, and it had a 29.2% effective tax rate over those same periods. The Company’s effective tax rate changes based upon its relative profitability, or lack thereof, in states with varying tax rates and rules.
Income Taxes The Company’s income tax provision was $7.3 million and $2.8 million for the years ended December 31, 2023 and 2022, respectively, and it had a 26.1% and 29.2% effective tax rate over those same periods, respectively. The Company’s effective tax rate changes based upon its relative profitability, or lack thereof, in states with varying tax rates and rules.
The Company’s ODR backlog was $108.2 million and $98.0 million as of December 31, 2022 and 2021, respectively. These amounts reflect unrecognized revenue expected to be recognized over the remaining terms of our service contracts and projects.
The Company’s ODR backlog was $147.0 million and $108.2 million as of December 31, 2023 and 2022, respectively. These amounts reflect unrecognized revenue expected to be recognized over the remaining terms of its service contracts and projects.
We could also be obligated to make payments to MEPPs if we either cease to have an obligation to contribute to the MEPP or significantly reduce our contributions to the MEPP because we reduce the number of employees who are covered by the relevant MEPP for various reasons, including, but not limited to, layoffs or closure of a subsidiary assuming the MEPP has unfunded vested benefits.
The Company could also be obligated to make payments to MEPPs if it either ceases to have an obligation to contribute to the MEPP or significantly reduces its contributions to the MEPP because it reduces the number of employees who are covered by the relevant MEPP for various reasons, including, but not limited to, layoffs or closure of a subsidiary assuming the MEPP has unfunded vested benefits.
When appropriate, we include cost escalation factors into our bids and proposals, as well as limit the acceptance time of our bid. In addition, we are often able to mitigate the impact of future price increases by entering into fixed price purchase orders for materials and equipment and subcontracts on our projects.
When appropriate, the Company includes cost escalation factors into its bids and proposals, as well as limit the acceptance time of its bid. In addition, the Company is often able to mitigate the impact of future price increases by entering into fixed price purchase orders for materials and equipment and subcontracts on its projects.
We perform our annual goodwill impairment analysis at the reporting unit level. Each of our operating units represents an operating segment, and our operating segments are our reporting units. We also review intangible assets with definite lives subject to amortization whenever events or circumstances indicate that a carrying amount of an asset may not be recoverable.
The Company performs its annual goodwill impairment analysis at the reporting unit level. Each of the Company’s operating units represents an operating segment, and its operating segments are its reporting units. The Company also reviews intangible assets with definite lives subject to amortization whenever events or circumstances indicate that a carrying amount of an asset may not be recoverable.
In addition, we are self-insured related to medical and dental claims under policies with annual per-claimant and annual aggregate stop-loss limits. We accrue for the unfunded portion of costs for both reported claims and claims incurred but not reported. We believe the liabilities recognized on our balance sheets for these obligations are adequate.
In addition, the Company is self-insured related to medical and dental claims under policies with annual per-claimant and annual aggregate stop-loss limits. The Company accrues for the unfunded portion of costs for both reported claims and claims incurred but not reported. The Company believes the liabilities recognized on its balance sheets for these obligations are adequate.
The Company believes that its reserves for doubtful accounts are appropriate as of December 31, 2022 and 2021, but adverse changes in the economic environment may impact certain of its customers’ ability to access capital and compensate the Company for its services, as well as impact project activity for the foreseeable future.
The Company believes that its reserves for its expected credit losses are appropriate as of December 31, 2023, but adverse changes in the economic environment may impact certain of its customers’ ability to access capital and compensate the Company for its services, as well as impact project activity for the foreseeable future.
We perform our annual impairment testing as of October 1 and any impairment charges resulting from this process are reported in the fourth quarter. We segregate our operations into reporting units based on the degree of operating and financial independence of each unit and our related management of them.
The Company performs its annual impairment testing as of October 1, and any impairment charges resulting from this process are reported in the fourth quarter. The Company segregates its operations into reporting units based on the degree of operating and financial independence of each unit and its related management of them.
These financing cash outflows were partly offset by $5.4 million in proceeds from the Company’s sale-leaseback financing transaction and $0.3 million associated with proceeds from contributions to the Company’s Employee Stock Purchase Plan (“ESPP”).
These financing cash outflows were partly offset by $5.4 million in proceeds from the Company’s sale-leaseback financing transaction and $0.3 million associated with proceeds from contributions to the Company’s ESPP.
As one of many participating employers in these MEPPs, we are responsible with the other participating employers for any plan underfunding.
As one of many participating employers in these MEPPs, the Company is responsible with the other participating employers for any plan underfunding.
During the year ended December 31, 2022, the Company recognized a $0.8 million loss as a result of the early termination of its Pittsburgh operating lease. See Note 14 – leases in the accompanying notes to the Company’s consolidated financial statements for further information.
In addition, during 2022, the Company recognized a $0.8 million loss because of the early termination of its Pittsburgh operating lease. See Note 14 – Leases in the accompanying notes to the Company’s consolidated financial statements for further information.
In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our management’s expectations. Factors that could cause such differences are discussed in “Forward-Looking Statements”, “Risk Factor Summary” and “Risk Factors” in this Annual Report. We assume no obligation to update any of these forward-looking statements.
In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from its management’s expectations. Factors that could cause such differences are discussed in “Forward-Looking Statements”, “Risk Factor Summary” and “Risk Factors” in this Annual Report.
These accounting policies, as well as others, are described in Note 2 – Significant Accounting Policies in the accompanying notes to the Company’s consolidated financial statements. Revenue and Cost Recognition We believe our most significant accounting policy is revenue recognition from construction contracts for which we use the cost-to-cost method of accounting.
These accounting policies, as well as others, are described in Note 2 – Significant Accounting Policies in the accompanying notes to the Company’s consolidated financial statements. Revenue and Cost Recognition The Company believes its most significant accounting policy is revenue recognition from construction contracts for which it uses the cost-to-cost method of accounting.
The duration of the Company’s contracts generally ranges from three months to two years. Revenue from fixed price contracts is recognized on the cost-to-cost method, measured by the relationship of total cost incurred to total estimated contract costs. Revenue from time and materials service contracts is recognized as services are performed.
Revenue from fixed price contracts is recognized on the cost-to-cost method, measured by the relationship of total cost incurred to total estimated contract costs. Revenue from time and materials service contracts is recognized as services are performed.
Recent Accounting Pronouncements 50 We review new accounting standards to determine the expected financial impact, if any, that the adoption of such standards will have on our financial position and/or results of operations.
Recent Accounting Pronouncements The Company reviews new accounting standards to determine the expected financial impact, if any, that the adoption of such standards will have on its financial position and/or results of operations.
As discussed elsewhere in this Annual Report on Form 10-K, our business has two operating segments: (1) GCR, for which we account for using the cost-to-cost method and (2) ODR, for which we account for using the cost-to-cost method and for certain projects when revenue is recognized as services are provided.
As discussed elsewhere in this Annual Report on Form 10-K, the Company’s business has two operating segments: (i) GCR, for which it accounts for using the cost-to-cost method and (ii) ODR, for which it accounts for using the cost-to-cost method and for certain projects when revenue is recognized as services are provided.
As it relates to focusing on owner-direct work and the Company’s focus on job selection and processes, the Company believes that it is appropriate in the current contracting environment to reduce risk and exposure to large, complex, non-owner direct projects where the trend has been for such jobs to provide risks that are difficult to mitigate.
The Company believes that it is appropriate in the current contracting environment to reduce risk and exposure to large, complex, non-owner direct projects where the trend has been for such jobs to provide risks that are difficult to mitigate.
In focusing on profitability and cash flows, among other things, the Company has dedicated and continues to dedicate, its resources toward the growth of its ODR segment as the scope of services provided within the Company’s ODR segment 44 typically yield higher margins when compared to its GCR segment work.
In focusing on improved profitability and generating quality growth in its operation, the Company has dedicated and continues to dedicate, its resources toward the growth of its ODR segment as the scope of services provided within the Company’s ODR segment typically yield higher margins when compared to its GCR segment work.
The Company regularly assesses its receivables for collectability and provides allowances for doubtful accounts where appropriate.
The Company regularly assesses its receivables for collectability and provides allowances for credit losses where appropriate.
The amount of such payments (known as a complete or partial withdrawal liability) would equal our proportionate share of the MEPPs’ unfunded vested benefits. We believe that certain of the MEPPs in which we participate may have unfunded vested benefits.
The amount of such payments (known as a complete or partial withdrawal liability) would equal the Company’s proportionate share of the MEPPs’ unfunded vested benefits. The Company believes that certain of the MEPPs in which it participates may have unfunded vested benefits.
The carrying value of the Earnout Payments is subject to remeasurement at fair value at each reporting date through the end of the earnout periods with any changes in the fair value reported as a separate component of operating income in the consolidated statements of operations.
The carrying values of the Jake Marshall, ACME and IA Earnout Payments are subject to remeasurement at fair value at each reporting date through the end of the respective earnout periods with any changes in the fair value reported as a separate component of operating income in the condensed consolidated statements of operations.
During fiscal years 2022 and 2021, we have experienced higher cost of materials on specific projects and delays in our supply chain for equipment and service vehicles from the manufacturers, and we expect these higher costs and delays in our supply chain to persist in 2023.
During fiscal years 2023 and 2022, the Company experienced higher cost of materials on specific projects and delays in its supply chain for equipment and service vehicles from the manufacturers, and it expects these higher costs and delays in its supply chain to persist in 2024.
Cash Flows (Used in) Provided by Financing Activities Cash flows used in financing activities was $13.4 million for the year ended December 31, 2022 as compared to cash flows provided by financing activities of $15.9 million for the year ended December 31, 2021.
Cash Flows Used in Financing Activities Cash flows used in financing activities were $16.5 million for the year ended December 31, 2023 as compared to cash flows provided by financing activities of $13.4 million for the year ended December 31, 2022.
These contract costs are included in our results of operations under the caption “Cost of revenue.” Then, as we perform under those contracts, we measure costs incurred, compare them to total estimated costs to complete the contract, and recognize a corresponding proportion of contract revenue. Labor costs are considered to be incurred as the work is performed.
These contract costs are included in the Company’s results of operations under the caption “Cost of revenue.” Then, as the Company performs under those contracts, it measures costs incurred, compares them to total estimated costs to complete the contract, and recognizes a corresponding proportion of contract revenue. Labor costs are considered to be incurred as the work is performed.
During the year ended December 31, 2021, the Company recorded material gross profit write-downs on five GCR projects for a 41 total of $4.9 million and gross profit write-ups of $2.7 million on three GCR projects that had a net gross profit impact of $0.5 million or more.
During the year ended December 31, 2023, the Company recorded material gross profit write-ups on two GCR projects for a total of $2.2 million and two material GCR project gross profit write-downs for a total of $1.3 million that had a net gross profit impact of $0.5 million or more.
Seasonality, Cyclicality and Quarterly Trends Severe weather can impact the Company’s operations. In the northern climates where it operates, and to a lesser extent the southern climates as well, severe winters can slow the Company’s productivity on construction projects, which shifts revenue and gross profit recognition to a later period.
In the northern climates where it operates, and to a lesser extent the southern climates as well, severe winters can slow the Company’s productivity on construction projects, which shifts revenue and gross profit recognition to a later period. The Company’s maintenance operations may also be impacted by mild or severe weather.
The Share Repurchase Program does not obligate the Company to acquire any 48 particular amount of common stock, and the program may be suspended or terminated by the Company at any time at its discretion without prior notice. As of December 31, 2022, the Company has made share repurchases of $2.0 million under its Share Repurchase Program.
The Share Repurchase Program does not obligate the Company to acquire any particular amount of common stock, and the program may be suspended or terminated by the Company at any time at its discretion without prior notice.
Amortization of Intangibles For the Years Ended December 31, 2022 2021 Increase/(Decrease) (in thousands except for percentages) Amortization of intangibles $ 1,567 $ 484 $ 1,083 223.8 % Total amortization expense for the year ended December 31, 2022 increased by approximately $1.1 million compared to the year ended December 31, 2021.
Amortization of Intangibles For the Years Ended December 31, 2023 2022 Increase/(Decrease) (in thousands except for percentages) Amortization of intangibles $ 1,880 $ 1,567 $ 313 20.0 % Total amortization expense for the year ended December 31, 2023 increased by approximately $0.3 million compared to the year ended December 31, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act; therefore, pursuant to Item 301(c) of Regulation S-K, we are not required to provide the information required by this Item. 53
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk The Company is a smaller reporting company as defined in Rule 12b-2 of the Exchange Act; therefore, pursuant to Item 301(c) of Regulation S-K, it is not required to provide the information required by this Item. 54

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