ENERGY SERVICES You should read the following discussion of the financial condition and results of operations of Energy Services in conjunction with the "Financial Statements" appearing in this report as well as the historical financial statements and related notes contained elsewhere herein. Among other things, those historical consolidated financial statements include more detailed information regarding the basis of presentation for the following information. The term "Energy Services" refers to the Company, West Virginia Pipeline, SQP,Tri-State Paving ,Ryan Construction , and C.J. Hughes and C.J. Hughes' wholly owned subsidiaries on a consolidated basis. Forward Looking Statements Within Energy Services' consolidated financial statements and this discussion and analysis of the financial condition and results of operations, there are included statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "project," "forecast," "may," "will," "should," "could," "expect," "believe," "intend" and other words of similar meaning. These forward-looking statements are not guarantees of future performance and involve or rely on a number of risks, uncertainties, and assumptions that are difficult to predict orbeyond Energy Services' control. Energy Services has based its forward-looking statements on management's beliefs and assumptions based on information available to management at the time the statements are made. Actual outcomes and results may differ materially from what is expressed, implied and forecasted by forward-looking statements and any or all of Energy Services' forward-looking statements may turn out to be wrong. The accuracy of such statements can be affected by inaccurate assumptions and by known or unknown risks and uncertainties. All of the forward-looking statements, whether written or oral, are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements or that are otherwise included in this report. In addition, Energy Services does not undertake and expressly disclaims any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this report
or otherwise. Company OverviewEnergy Services of America Corporation ("Energy Services" or the "Company"), formed in 2006, is a contractor and service company that operates primarily in the mid-Atlantic and central regions ofthe United States and provides services to customers in the natural gas, petroleum, water distribution, automotive, chemical, and power industries. For the gas industry, the Company is primarily engaged in the construction, replacement and repair of natural gas pipelines and storage facilities for utility companies and private natural gas companies. Energy Services is involved in the construction of both interstate and intrastate pipelines, with an emphasis on the latter. For the oil industry, the Company provides a variety of services relating to pipeline, storage facilities and plant work. For the power, chemical, and automotive industries, the Company provides a full range of electrical and mechanical installations and repairs including substation and switchyard services, site preparation, equipment setting, pipe fabrication and installation, packaged buildings, transformers, and other ancillary work with regards thereto. Energy Services' other services include liquid pipeline construction, pump station construction, production facility construction, water and sewer pipeline installations, various maintenance and repair services and other services related to pipeline construction. The Company has also added the ability to install residential, commercial, and industrial solar systems and perform civil and general contracting services.
Energy Services' customers include many of the leading companies in the industries it serves, including:
TransCanada Corporation NiSource, Inc. Marathon PetroleumMountaineer Gas American Electric PowerToyota Motor Manufacturing Bayer Chemical Dow ChemicalKentucky American Water West Virginia American Water
Various state, county and municipal public service districts.
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The majority of the Company's customers are inWest Virginia ,Virginia, Ohio ,Pennsylvania , andKentucky . However, the Company also performs work in other states includingAlabama ,Michigan ,Illinois ,Tennessee , andIndiana . Energy Services' sales force consists of industry professionals with significant relevant sales experience, who utilize industry contacts and available public data to determine how to market the Company's line of products most appropriately. The Company relies on direct contact between its sales force and customers' engineering and contracting departments to obtain new business.C.J. Hughes Construction Company, Inc. ("C.J. Hughes"), a wholly owned subsidiary of the Company, is a general contractor primarily engaged in pipeline construction for utility companies.Contractors Rental Corporation ("Contractors Rental"), a wholly owned subsidiary of C.J. Hughes, provides union building trade employees for projects managed by C.J. Hughes.Nitro Construction Services, Inc. ("Nitro"), a wholly owned subsidiary of C.J. Hughes, provides electrical, mechanical, HVAC/R, solar installation, and fire protection services to customers primarily in the automotive, chemical, and power industries.Revolt Energy, LLC andNitro Electric Company, LLC are newly formed, wholly owned subsidiaries of Nitro.Pinnacle Technical Solutions, Inc. ("Pinnacle"), a wholly owned subsidiary of Nitro, operates as a data storage facility within Nitro's office building. Pinnacle is supported by Nitro and has no employees of its own.
All C.J. Hughes, Nitro, and Contractors Rental construction personnel are union members of various related construction trade unions and are subject to collective bargaining agreements that expire at varying time intervals. The Company believes its relationship with its unionized workforce is good.
West Virginia Pipeline, Inc. ("West Virginia Pipeline" or "WVP"), a wholly owned subsidiary of Energy Services, operates as a gas and water distribution contractor primarily in southernWest Virginia . The employees ofWest Virginia Pipeline are non-union and are managed independently from the Company's union subsidiaries.SQP Construction Group, Inc. ("SQP"), a wholly owned subsidiary of Energy Services, operates as a general contractor primarily inWest Virginia . SQP engages in the construction and renovation of buildings and other civil construction projects for state and local government agencies and commercial customers. As a general contractor, SQP manages the overall construction project and subcontracts most of the work. The employees of SQP are non-union and are managed independently from the Company's union subsidiaries.Tri-State Paving & Sealcoating, Inc. ("TSP" or "Tri-State Paving"), a wholly owned subsidiary of Energy Services, completed the acquisition of substantially all of the assets ofTri-State Paving & Sealcoating, LLC ("Tri-State Paving, LLC ") onApril 29, 2022 .Tri-State Paving provides utility paving services to water distribution customers in theCharleston, West Virginia ,Lexington, Kentucky , andChattanooga, Tennessee markets. The employees of TSP are non-union and are managed independently from the Company's union subsidiaries.Ryan Construction Services Inc. ("Ryan Construction " or "RCS"), a wholly owned subsidiary of Energy Services, formed inAugust 2022 in connection with the acquisition of substantially all of the assets ofRyan Environmental, LLC andRyan Environmental Transport, LLC , provides directional drilling services for broadband service providers along with offering natural gas distribution services, cathodic protection and corrosion prevention services, and civil construction services.Ryan Construction operates primarily inWest Virginia andPennsylvania . The employees of RCS are non-union and are managed independently from the Company's union subsidiaries.
The Company's website address is www.energyservicesofamerica.com.
Seasonality: Fluctuation of Results
Our revenues and results of operations can and usually are subject to seasonal
variations. These variations are the result of weather, customer spending
patterns, bidding seasons and holidays. The first quarter of the calendar year
is typically the slowest in terms of revenues because inclement weather
conditions cause delays in production and customers usually do not plan large
projects during that time. While usually better than the first quarter, the
second calendar year quarter often has some inclement weather which can cause
delays in production, reducing the revenues the Company receives and/or
increasing the production costs. The third and fourth calendar year quarters
usually are less impacted by weather and usually have the largest number of
projects underway. Many projects are
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completed in the fourth calendar year quarter and revenues are often impacted by customers seeking to either spend their capital budget for the year or scale back projects due to capital budget overruns. In addition to the fluctuations discussed above, the pipeline industry can be highly cyclical, reflecting variances in capital expenditures in proportion to energy price fluctuations. As a result, our volume of business may be adversely affected by where our customers are in the cycle and thereby their financial condition as to their capital needs and access to capital to finance those needs.
Three Months Ended
The following is an overview of results from operations for the three months
ended
Three Months Ended Three Months Ended
December 31, December 31,
2022 2021
Revenue $ 60,042,585 $ 42,659,125
Cost of revenues 54,056,323 37,350,752
Gross profit 5,986,262 5,308,373
Selling and administrative expenses 5,316,138 3,632,595
Income from operations 670,124 1,675,778
Other income (expense)
Interest income 72 576
Other nonoperating expense (80,663) (153,428)
Interest expense (474,284) (197,559)
(Loss) gain on sale of equipment (31,343) 339,896
(586,218) (10,515)
Income before income taxes 83,906 1,665,263
Income tax (benefit) expense (79,612) 494,283
Net income 163,518 1,170,980
Weighted average shares outstanding-basic 16,667,185 16,247,898
Weighted average shares-diluted 16,667,185 16,247,898
Earnings per share-basic $ 0.01 $ 0.07
Earnings per share-diluted $ 0.01 $ 0.07
Results of Operations for the Three Months Ended
Revenues. A table comparing the Company's revenues for the three months endedDecember 31, 2022 , compared to the three months endedDecember 31, 2021 , is below: Three Months Ended Three Months Ended December 31, 2022 % of total December 31, 2021 % of total Change % Change Gas & Water Distribution $ 12,487,845 20.8
% $ 11,962,034 28.0 % 525,811 4.4 % Gas & Petroleum Transmission
16,840,150 28.0 % 11,238,517 26.3 % 5,601,633 49.8 %
Electrical, Mechanical, and General 30,714,590 51.2% 19,458,574 45.6 % 11,256,016 57.8 % Total $ 60,042,585 100.0 % $ 42,659,125 100.0 % 17,383,460 40.7 % Total revenues increased by$17.4 million to$60.0 million for the three months endedDecember 31, 2022 , as compared to$42.7 million for the three months endedDecember 31, 2021 . The increase was a result of increased work in all categories of business. 19 Table of Contents Gas & Water Distribution revenues totaled$12.5 million for the three months endedDecember 31, 2022 , a$526,000 increase from$12.0 million for the three months endedDecember 31, 2021 . The revenue increase was primarily related to paving services performed on water projects, partially offset by reduced customer spending on certain blanket contracts. Gas & Petroleum Transmission revenues totaled$16.8 million for the three months endedDecember 31, 2022 , a$5.6 million increase from$11.2 million for the three months endedDecember 31, 2021 . The revenue increase was primarily related to transmission work that was awarded during the fiscal year endedSeptember 30, 2022 and completed during the first quarter of fiscal year 2023. Electrical, Mechanical, & General construction services revenues totaled$30.7 million for the three months endedDecember 31, 2022 , an$11.3 million increase from$19.5 million for the three months endedDecember 31, 2021 . The revenue increase was primarily related to an increase in mechanical and electrical services performed during the three months endedDecember 31, 2022 , as compared to the same period in the prior year.
Cost of Revenues. A table comparing the Company's costs of revenues for the
three months ended
Three Months Ended Three Months Ended
December 31, 2022 % of total
$ 10,672,273 19.7 % $ 9,339,545 25.0 % 1,332,728 14.3 % Gas & Petroleum Transmission
14,026,448 25.9 % 9,734,489 26.1 % 4,291,959 44.1 %
Electrical, Mechanical, and General 29,061,294 53.8% 18,106,724 48.5 % 10,954,570 60.5 % Unallocated Shop Expenses 296,308 0.5 % 169,994 0.5 % 126,314 74.3 % Total $ 54,056,323 100.0 % $ 37,350,752 100.0 % 16,705,571 44.7 %
Total cost of revenues increased by$16.7 million to$54.0 million for the three months endedDecember 31, 2022 , as compared to$37.4 million for the three months endedDecember 31, 2021 . The cost of revenues increase was a result of increased work in all categories of business. Gas & Water Distribution cost of revenues totaled$10.7 million for the three months endedDecember 31, 2022 , a$1.3 million increase from$9.3 million for the three months endedDecember 31, 2021 . The cost of revenue increase was primarily related to paving services performed on water projects, partially offset by reduced customer spending on certain blanket contracts. Gas & Petroleum Transmission cost of revenues totaled$14.0 million for the three months endedDecember 31, 2022 , a$4.3 million increase from$9.7 million for the three months endedDecember 31, 2021 . The cost of revenue increase was primarily related to transmission work that was awarded during the fiscal year endedSeptember 30, 2022 and completed during the first quarter of fiscal year 2023. Electrical, Mechanical, & General construction services cost of revenues totaled$29.0 million for the three months endedDecember 31, 2022 , a$10.9 million increase from$18.1 million for the three months endedDecember 31, 2021 . The cost of revenue increase was primarily related to an increase in mechanical and electrical services performed during the three months endedDecember 31, 2022 , as compared to the same period in the prior year. Unallocated shop expenses totaled$296,000 for the three months endedDecember 31, 2022 , a$126,000 increase from$170,000 for the three months endedDecember 31, 2021 . The increase in unallocated shop expenses was due to decreased internal equipment charges to projects for the three months endedDecember 31, 2022 , as compared to the same period in the prior year. 20
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Gross Profit. A table comparing the Company's gross profit for the three months endedDecember 31, 2022 , compared to the three months endedDecember 31, 2021 , is below: Three Months Ended Three Months Ended December 31, 2022 % of total December 31, 2021 % of total Change % Change Gas & Water Distribution $ 1,815,572 30.3 % $ 2,622,489 49.4 % (806,917) (30.8) % Gas & Petroleum Transmission 2,813,702 47.0 % 1,504,028 28.3 % 1,309,674 87.1 % Electrical, Mechanical, and General 1,653,296 27.6 % 1,351,850 25.5 % 301,446 22.3 % Unallocated Shop Expenses (296,308) (4.9) % (169,994) (3.2) % (126,314) 74.3 % Total $ 5,986,262 100.0 % $ 5,308,373 100.0 % 677,889 12.8 % Gross profit percentage 10.0 % 12.4 % Total gross profit increased by$678,000 to$6.0 million for the three months endedDecember 31, 2022 , as compared to$5.3 million for the three months endedDecember 31, 2021 . Gas & Water Distribution gross profit totaled$1.8 million for the three months endedDecember 31, 2022 , a$807,000 decrease from$2.6 million for the three months endedDecember 31, 2021 . The gross profit decrease was primarily related to less profitable water projects performed during the three months endedDecember 31, 2022 as compared to the same period in the prior year. Gas & Petroleum Transmission gross profit totaled$2.8 million for the three months endedDecember 31, 2022 , a$1.3 million increase from$1.5 million for the three months endedDecember 31, 2021 . The gross profit increase was primarily related to transmission work that was awarded during the fiscal year endedSeptember 30, 2022 and completed during the first quarter of fiscal year 2023. Electrical, Mechanical, & General construction services gross profit totaled$1.7 million for the three months endedDecember 31, 2022 , a$301,000 increase from$1.4 million for the three months endedDecember 31, 2021 . The increase was primarily related to an increase in gross profit generated by mechanical and electrical services performed during the three months endedDecember 31, 2022 , as compared to the same period in the prior year. Selling and administrative expenses. Total selling and administrative expenses increased by$1.7 million to$5.3 million for the three months endedDecember 31, 2022 , as compared to$3.6 million for the same period in the prior year. Selling and administrative expense for operations acquired afterDecember 31, 2021 totaled$915,000 for the three months endedDecember 31, 2022 . The remaining increase primarily related to additional personnel hired to secure and manage work for expected growth in fiscal year 2023.
Other nonoperating (expense) income. Other nonoperating expense totaled
Interest expense. Interest expense totaled$474,000 for the three months endedDecember 31, 2022 , an increase of$276,000 from$198,000 for the same period in the prior year. The increase in interest expense was primarily due to the financing of the recent acquisitions, an increase in line of credit borrowings due to increased work, and an increase in interest rates. (Loss) Gain on sale of equipment. Loss on sale of equipment totaled ($31,000 ) for the three months endedDecember 31, 2022 , a decrease of$371,000 from a gain on sale of equipment of$340,000 for the same period in the prior year. The Company sold certain underutilized or non-working pieces of equipment at auction during the three months endedDecember 31, 2021 , with no comparable sale occuring during the three months endedDecember 31, 2022 . Net income. Income before income taxes was$84,000 for the three months endedDecember 31, 2022 , compared to$1.7 million for the same period in the prior year. The decrease was primarily related to the items mentioned above. Income tax benefit for the three months endedDecember 31, 2022 , was$80,000 compared to income tax expense of$494,000 for the same period in the prior year. The decrease in income tax expense was due to the decrease in taxable income for the three months endedDecember 31, 2022 as compared to the prior period.
Net income for the three months ended
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Comparison of Financial Condition at
The Company had total assets of
Accounts receivable, net of allowance for doubtful accounts, totaled$35.3 million atDecember 31, 2022 , a decrease of$3.2 million from the prior fiscal year end balance of$38.5 million . The decrease was primarily due to the timing of cash collections and project invoicing sinceSeptember 30, 2022 . Contract assets totaled$14.4 million atDecember 31, 2022 , a decrease of$1.7 million from the prior fiscal year end balance of$16.1 million . The decrease was due to a difference in the timing of project billings atDecember 31, 2022 , compared toSeptember 30, 2022 . Prepaid expenses and other totaled$3.2 million atDecember 31, 2022 , a decrease of$775,000 from the prior fiscal year end balance of$3.9 million . The decrease was primarily due to expensing prepaid insurance during the three months endedDecember 31, 2022 . Intangible assets, net totaled$3.7 million atDecember 31, 2022 , a decrease of$133,000 from the prior fiscal year end balance of$3.9 million . The decrease was due to the amortization of intangible assets during the three months endedDecember 31, 2022 . Right-of-use assets totaled$1.5 million atDecember 31, 2022 , a decrease of$133,000 from the prior fiscal year end balance of$1.6 million . The decrease was primarily due to the amortization of operating leases during the three months endedDecember 31, 2022 . The Company had property, plant and equipment of$33.2 million atDecember 31, 2022 , an increase of$551,000 from the prior fiscal year end balance of$32.7 million . The increase was due to$2.3 million in asset additions, partially offset by$1.7 million in depreciation and net equipment disposals of$124,000 . Retainage receivable totaled$5.0 million atDecember 31, 2022 , an increase of$546,000 from the prior fiscal year end balance of$4.4 million . The increase was primarily due to more current year projects that require retainages to be withheld. Cash and cash equivalents totaled$7.5 million atDecember 31, 2022 , an increase of$103,000 from the prior fiscal year end balance of$7.4 million . The increase was primarily due to$3.1 million in proceeds from long-term debt and a net$1.6 million provided from operating activities, partially offset by a net$2.3 million investment in equipment, and$2.3 million in net short-term and long-term debt repayments.Goodwill totaled$4.1 million atDecember 31, 2022 , andSeptember 30, 2022 .
The Company had total liabilities of
Accounts payable totaled$15.0 million atDecember 31, 2022 , a decrease of$5.3 million from the prior fiscal year end balance of$20.3 million . The decrease was due to the timing of accounts payable payments as compared toSeptember 30, 2022 . Accrued expenses and other current liabilities totaled$8.8 million atDecember 31, 2022 , a decrease of$2.5 million from the prior fiscal year end balance of$11.3 million . The decrease was due to the timing of accrued expense payments, as compared toSeptember 30, 2022 . Lines of credit and short-term borrowings totaled$12.5 million atDecember 31, 2022 , a decrease of$580,000 from the prior fiscal year end balance of$13.1 million . The decrease was due to the repayment of insurance premiums financed. Current and long-term operating lease liabilities totaled$1.5 million atDecember 31, 2022 , a decrease of$133,000 from the prior fiscal year end balance of$1.6 million . The decrease was due to payments made during the three months endedDecember 31, 2022 . 22 Table of Contents Deferred tax liabilities totaled$4.0 million atDecember 31, 2022 , a decrease of$422,000 from the prior fiscal year end balance of$4.5 million . The decrease was primarily related to the reduction of the net operating loss carry forward during the three months endedDecember 31, 2022 . Long-term debt totaled$19.0 million atDecember 31, 2022 , an increase of$1.5 million from the prior fiscal year end balance of$17.6 million . The increase in long-term debt was primarily due to$3.2 million in new debt agreements, partially offset by$1.7 million in debt repayments. The new long-term debt primarily related to the financing of the equipment obtained in theRyan Construction acquisition, which was a cash transaction at the time of the acquisition. Contract liabilities totaled$8.6 million atDecember 31, 2022 , an increase of$2.6 million from the prior fiscal year end balance of$6.0 million . The increase was due to a difference in the timing of project billings atDecember 31, 2022 , as compared toSeptember 30, 2022 .
Shareholders' equity was
Liquidity and Capital Resources
Operating Line of Credit and Short-Term Borrowings
OnJuly 13, 2022 , the Company received a one-year extension on its$15.0 million operating line of credit effectiveJune 28, 2022 . The interest rate on the line of credit is the "Wall Street Journal " Prime Rate (the index) with a floor of 4.99%. The interest rate atDecember 31, 2022 , was 7.5%. The interest rate atSeptember 30, 2022 , was 5.5%. The line of credit has a$12.5 million component and a$2.5 million component with additional borrowing requirements. Based on the borrowing base calculation, the Company borrowed all$12.5 million available on the line of credit as ofDecember 31, 2022 andSeptember 30, 2022 . The Company did not meet the requirements to borrow any from the$2.5 million component. OnJanuary 19, 2023 , the Company received an amendment to the agreement which increased the line of credit to$30.0 million . The maturity date remainsJune 28, 2023 , with a variable interest rate equal to the "Wall Street Journal " Prime Rate with a floor of 4.5%.
The modified financial covenants for the quarter ended
? Minimum tangible net worth of
? Minimum traditional debt service coverage of 1.50x on a rolling twelve- month
basis,
? Minimum current ratio of 1.20x,
? Maximum debt to tangible net worth ratio ("TNW") of 2.75x,
? Each ratio and covenant shall be determined, tested, and measured as of each
calendar quarter beginningDecember 31, 2022 , Borrower shall maintain a ratio of Maximum Senior Funded Debt ("SFD") to
Earnings before Interest, Taxes, Depreciation and Amortization ("EBDITA") equal
? to or less than 3.5:1. SFD shall mean any funded debt or lease of Borrower,
other than subordinated debt. The covenant shall be tested quarterly, as of
the end of each fiscal quarter, with EBITDA based on the preceding four
quarters.
The Company was compliance with all covenants at
The Company also finances insurance policy premiums on a short-term basis through a financing company. These insurance policies include workers' compensation, general liability, automobile, umbrella, and equipment policies. The Company makes a down payment in January and finances the remaining premium amount over eleven monthly payments. AtDecember 31, 2022 andSeptember 30, 2022 , respectively, the remaining balance of the insurance premiums was$0
and$580,000 . 23 Table of Contents Long-Term Debt
OnDecember 16, 2014 , the Company's Nitro subsidiary entered into a 20-year$1.2 million loan agreement with a bank to purchase the office building and property it had previously been leasing for$6,300 monthly. The interest rate on this loan agreement is 4.82% with monthly payments of$7,800 . The interest rate on this note is subject to change from time to time based on changes in theU.S. Treasury yield, adjusted to a constant maturity of three years as published by theFederal Reserve weekly. As ofDecember 31, 2022 , the Company had made principal payments of$346,000 . The loan is collateralized by the building purchased under this agreement. The note is currently held byPeoples Bank, Inc. , formerlyFirst Bank of Charleston, Inc. (West Virginia ). OnNovember 13, 2015 , the Company entered into a 10-year$1.1 million loan agreement withUnited Bank to purchase the fabrication shop and property Nitro had previously been leasing for$12,900 each month. The variable interest rate on the loan agreement is 8.75% atDecember 31, 2022 with monthly payments of$12,464 . As ofDecember 31, 2022 , the Company had made principal payments of$746,000 . The loan is collateralized by the building and property purchased under this agreement. OnDecember 31, 2020 ,West Virginia Pipeline Acquisition Company , later renamedWest Virginia Pipeline, Inc. , entered into a$3.0 million sellers' note agreement withDavid andDaniel Bolton for the remaining purchase price ofWest Virginia Pipeline, Inc. For the purchase price allocation, the$3.0 million note had a fair value of$2.85 million . As part of the$6.35 million acquisition price, the Company paid$3.5 million in cash in addition to the note. The unsecured five-year term note requires annual payments of at least$500,000 with a fixed interest rate of 3.25% on the$3.0 million sellers' note, which equates to 5.35% on the carrying value of the note. As ofDecember 31, 2022 , the Company had made annual installment payments of$1,250,000 , interest payments of$172,000 and expensed$38,000 in accreted interest. OnJanuary 4, 2021 , the Company entered into a$3.0 million Non-Revolving Note agreement withUnited Bank . This five-year agreement gave the Company access to a$3.0 million line of credit ("Equipment Line of Credit 2021"), specifically for the purchase of equipment, for a period of twelve months with a variable interest rate initially established at 4.25% as based on the Prime Rate as published by The Wall Street Journal. After twelve months, all borrowings against the Equipment Line of Credit 2021 were converted to a four-year term note agreement with a variable interest rate initially established at 4.25%. The loan is collateralized by the equipment purchased under this agreement. As ofDecember 31, 2022 , the Company borrowed$3.0 million against this line of credit with monthly payments of$68,150 that started inFebruary 2022 . The interest rate atDecember 31, 2022 was 8.75%. The Company has made principal payments of$609,000 on this note as ofDecember 31, 2022 . OnApril 2, 2021 , the Company entered into a$3.5 million Non-Revolving Note agreement withUnited Bank . This five-year agreement repaid the outstanding$3.5 million line of credit that was used for the down payment on theWest Virginia Pipeline acquisition. This loan has monthly installment payments of$64,853 and has a fixed interest rate of 4.25%. The loan is collateralized by the Company's equipment and receivables. As ofDecember 31, 2022 , the Company had made principal payments of$1.1 million . OnApril 29, 2022 , the Company entered into a$7.5 million Non-Revolving Note agreement withUnited Bank . This five-year agreement was used to finance the purchase ofTri-State Paving and has monthly payments of$129,910 with a fixed interest rate of 4.25%. The Company has made principal payments of$834,000 on this note as ofDecember 31, 2022 . OnOctober 10, 2022 , the Company entered into a$3.1 million promissory note agreement withUnited Bank . This five-year agreement financed the previous cash value of equipment purchased in theRyan Construction acquisition. This loan has monthly installment payments of$59,932 and has a fixed interest rate of 6.0%. The loan is collateralized by the Company's equipment and receivables. As ofDecember 31, 2022 , the Company had made principal payments of$89,000 . OnApril 29, 2022 , the Company entered into a$1.0 million promissory note agreement withCorns Enterprises , a related party, as partial consideration for the purchase ofTri-State Paving . This four-year agreement requires$250,000 principal installment payments on or before the end of each twelve (12) full calendar month period beginningApril 29, 2022 . Interest payments due shall be calculated on the principal balance remaining and shall be at the stated rate of 3.5% per year. The Company recorded$11,000 in accreted interest and has not made any principal payments on this note as ofDecember 31, 2022 . The Company leases office space for SQP for$1,500 per month. The lease, signed onMarch 25, 2021 , is for a period of two years with five one-year renewals available immediately following the end of the base term. Rental terms for the option periods shall be negotiated and agreed mutually between the parties and shall not exceed five percent increases to rent, if any. The lease is expensed monthly and not treated as a right-to-use asset as it does not have a material impact on the Company's consolidated financial statements. 24 Table of Contents Operating Leases The Company leases office space for SQP for$1,500 per month. The lease, signed onMarch 25, 2021 , is for a period of two years with five one-year renewals available immediately following the end of the base term. Rental terms for the option periods shall be negotiated and agreed mutually between the parties and shall not exceed five percent increases to rent, if any. The Company has two lease agreements for construction equipment with a combined amount of$160,000 . The leases have a term of twenty-two months with a stated interest rate of 0%, combined monthly installment payments of$6,645 and are cancellable at any time without penalty. The Company has the right to purchase the equipment at the expiration of the leases by applying the two-month deposit paid. The related assets and finance lease obligations associated with these lease agreements are included in the consolidated balance sheets within property, plant and equipment and long-term debt. The Company has two right-of-use operating leases acquired onApril 29, 2022 , as part of theTri-State Paving, LLC transaction. The first operating lease, for theHurricane, WV facility, had a net present value of$236,000 atApril 29, 2022 , and a carrying value of$186,000 atDecember 31, 2022 . The second operating lease, for theChattanooga, Tennessee facility, had a net present value of$144,000 atApril 29, 2022 , and a carrying value of$103,000 atDecember 31, 2022 . The 4.5% interest rate on the operating leases is based on the Company's incremental borrowing rate at inception. The Company has a right-of-use operating lease withEnterprise Fleet Management, Inc. acquired onAugust 11, 2022 , as part of the Ryan Environmental acquisition. This lease agreement was initially for 31 vehicles to be used forRyan Construction ; however, the Company plans to add vehicles as it finds necessary. This lease had a net present value of$1.2 million at inception, and carrying value of$1.1 million atDecember 31, 2022 . The 4.5% interest rate on the operating lease is based on the Company's incremental borrowing rate at inception. The Company has a right-of-use operating lease withRICA Developers, LLC acquired onAugust 12, 2022 , as part of the Ryan Environmental acquisition. This lease, for theBridgeport, WV facility, had a net present value of$140,000 at inception and a carrying value of$83,000 atDecember 31, 2022 . The 4.5% interest rate on the operating lease is based on the Company's incremental borrowing rate at inception.
Off-Balance Sheet Arrangements
Due to the nature of our industry, we often enter into certain off-balance sheet arrangements in the ordinary course of business that result in risks not directly reflected in our balance sheets. Though for the most part not material in nature, some of these are: Rental Agreements The Company rents equipment for use on construction projects with rental agreements being week to week or month to month. Rental expense can vary by reporting period due to equipment requirements on construction projects and the availability of Company owned equipment. Rental expense, which is included in cost of goods sold on the consolidated statements of income, was$2.7 million and$1.9 million for the three months endedDecember 31, 2022 , and 2021, respectively.
Letters of Credit
Certain customers or vendors may require letters of credit to secure payments that the vendors are making on our behalf or to secure payments to subcontractors and vendors on various customer projects. AtDecember 31, 2022 , the Company did not have any letters of credit outstanding.
Performance Bonds
Some customers, particularly new ones or governmental agencies require the
Company to post bid bonds, performance bonds and payment bonds (collectively,
performance bonds). These performance bonds are obtained through insurance
carriers and guarantee to the customer that we will perform under the terms of a
contract and that we will pay subcontractors and vendors. If the Company fails
to perform under a contract or to pay subcontractors and vendors, the customer
may demand that the insurer make payments or provide services under the bond.
The Company must reimburse the insurer for any expenses or outlays it is
required to make.
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Currently, the Company has an agreement with a surety company to provide bonding
which will suit the Company's immediate needs. The ability to obtain bonding for
future contracts is an important factor in the contracting industry with respect
to the type and value of contracts that can be bid. Depending upon the size and
conditions of a particular contract, the Company may be required to post letters
of credit or other collateral in favor of the insurer. Posting of these letters
or other collateral will reduce our borrowing capabilities. The Company does not
anticipate any claims in the foreseeable future. At December 31, 2022 , the
Company had $79.0 million in performance bonds outstanding.
Concentration of Credit Risk
In the ordinary course of business, the Company grants credit under normal payment terms, generally without collateral, to our customers, which include natural gas and oil companies, general contractors, and various commercial and industrial customers located withinthe United States . Consequently, the Company is subject to potential credit risk related to business and economic factors that would affect these companies. However, the Company generally has certain statutory lien rights with respect to services provided. Under certain circumstances such as foreclosure, the Company may take title to the underlying assets in lieu of cash in settlement of receivables. Please see the tables below for customers that represent 10.0% or more of the Company's revenue or accounts receivable, net of retention for the three months endedDecember 31, 2022 , and 2021: Three Months Ended Revenue December 31, 2022 December 31, 2021 NiSource 14.0 % * TransCanada Corporation 13.6 % 17.6 % All other 72.4 % 82.4 % Total 100.0 % 100.0 %
* Less than 10.0% and included in "All other" if applicable
at at
Accounts receivable, net of retention December 31, 2022 December 31, 2021
NiSource 19.5 % *
WV American Water * % 11.0 %
Kentucky American Water * % 10.9 %
All other 80.5 % 78.1 %
Total 100.0 % 100.0 %
* Less than 10.0% and included in "All other" if applicable
Litigation
InFebruary 2018 , the Company filed a lawsuit against a former customer ("Defendant") in theUnited States District Court for the Western District of Pennsylvania . The lawsuit is related to a dispute over work performed on a pipeline construction project. OnNovember 21, 2022 , a Judgment Order was issued, and the Company was awarded$13.1 million , of which$5.8 million was the jury award,$1.6 million was for attorney's fees, and$5.7 million was for penalties and interest. The amounts awarded by the Judgment Order have not been recognized in the Company's consolidated financial statements as ofDecember 31, 2022 . The Company's attorney's fees have been expensed as incurred. OnDecember 16, 2022 , the Defendant filed a notice of appeal with the court. OnNovember 12, 2021 , the Company received a withdrawal liability claim from a pension plan to which the Company made pension contributions for union construction employees performing covered work in a particular jurisdiction. The Company has not performed covered work in their jurisdiction since 2011; however, the Company disagrees with the withdrawal claim and believes it is covered by an exemption under federal law. The demand called for thirty-four quarterly installment payments of$41,000 startingDecember 15, 2021 . The Company must comply with the demand under federal pension law; however, the Company firmly believes no withdrawal liability exists. The Company is in negotiations with the pension fund to resolve the matter and all future payments have been suspended as part of the negotiation. The Company has expensed all$164,000 in payments made throughDecember 31, 2022 and does not expect any future liabilities related to this claim. 26
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Other than described above, atDecember 31, 2022 , the Company was not involved in any legal proceedings other than in the ordinary course of business. The Company is a party from time to time to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract and/or property damages, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims, and proceedings, we record reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. AtDecember 31, 2022 , the Company does not believe that any of these proceedings, separately or in aggregate, would be expected to have a material adverse effect on our financial position, results of operations or cash flows.
Related Party Transactions
We intend that all transactions between us and our executive officers, directors, holders of 10% or more of the shares of any class of our common stock and affiliates thereof, will be on terms no less favorable than those terms given to unaffiliated third parties and will be approved by a majority of our independent outside directors not having any interest in the transaction. OnDecember 16, 2014 , the Company's Nitro subsidiary entered into a 20-year$1.2 million loan agreement withFirst Bank of Charleston, Inc. (West Virginia ) to purchase the office building and property it had previously been leasing for$6,300 each month. The interest rate on the loan agreement is 4.82% with monthly payments of$7,800 . As ofDecember 31, 2022 , the Company had paid approximately$346,000 in principal and approximately$404,000 in interest since the beginning of the loan. Mr.Douglas Reynolds , President of Energy Services, was a director and secretary ofFirst Bank of Charleston . Mr.Samuel Kapourales , a director of Energy Services, was also a director ofFirst Bank of Charleston . OnOctober 15, 2018 ,First Bank of Charleston was merged intoPremier Bank, Inc. , a wholly owned subsidiary ofPremier Financial Bancorp, Inc. Mr.Marshall Reynolds , Chairman of theBoard of Energy Services , held the same position withPremier Financial Bancorp, Inc. Mr.Douglas Reynolds is the president and a director of Energy Services and was a director ofPremier Financial Bancorp, Inc. OnSeptember 17, 2021 , Peoples Bancorp, Inc., parent company ofPeoples Bank , completed an acquisition ofPremier Financial Bancorp, Inc. and its wholly owned subsidiaries, Premier Bank andCitizens Deposit Bank & Trust . OnOctober 26, 2021 , Mr.Douglas Reynolds was elected a director of Peoples Bancorp, Inc., and its subsidiaryPeoples Bank . OnApril 29, 2022 , the Company entered into a$1.0 million promissory note agreement withCorns Enterprises as partial consideration for the purchase ofTri-State Paving . This four-year agreement requires$250,000 principal installment payments on or before the end of each twelve (12) full calendar month period beginningApril 29, 2022 . Interest payments due shall be calculated on the principal balance remaining and shall be at the stated rate of 3.5% per year. Subsequent to theApril 29, 2022 acquisition ofTri-State Paving , the Company entered into an operating lease for facilities inHurricane, West Virginia withCorns Enterprises . This thirty-six-month lease is treated as a right to use asset and has payments of$7,000 per month. The total net present value at inception was$236,000 with a carrying value of$186,000 atDecember 31, 2022 . SQP made an equity investment of$156,000 in 1030Quarrier Development, LLC ("Development") inAugust 2022 . Development is a variable interest entity ("VIE") that is 75% owned by 1030Quarrier Ventures, LLC ("Ventures") and 25% owned by SQP. SQP is not the primary beneficiary of the VIE and therefore, will not consolidate Development into its consolidated financial statements. Instead, SQP will apply the equity method of accounting for its investment in Development. Development, a 1% owner, andUnited Bank , a 99% owner, formed 1030Quarrier Landlord, LLC ("Landlord"). Landlord decided to pursue the following development project (the "Project"): a historical building at1030 Quarrier Street ,Charleston, West Virginia as well as associated land (the "Property") was purchased to be developed/rehabilitated into a commercial project including apartments and commercial space. Upon the completion of development, the Property will be used to generate rental income. SQP has been awarded the construction contract for the Project.United Bank provided$5.0 million in loans to fund the Project. SQP and Ventures has jointly provided an unconditional guarantee for the$5.0 million of obligations associated with the Project.
Other than mentioned above, there were no new material related party
transactions entered into during the three months
Certain Energy Services subsidiaries routinely engage in transactions in the
normal course of business with each other, including sharing employee benefit
plan coverage, payment for insurance and other expenses on behalf of other
affiliates, and other services incidental to business of each of the affiliates.
All revenue and related expense transactions, as well as the related accounts
payable and accounts receivable have been eliminated in consolidation.
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Inflation
Most significant project materials, such as pipe or electrical wire, are
provided by the Company's customers. When possible, the Company attempts to lock
in pricing with vendors and include qualifications regarding material costs
increases in bids. Where allowed by contract, the Company will address fuel cost
increases with customers. Significant inflation or supply chain issues could
cause customers to delay or cancel planned projects; however, inflation did not
have a significant effect on our results for the three months ended December 31,
2022 and 2021.
Critical Accounting Estimates
The discussion and analysis of the Company's financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States . The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates. Management believes the following accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Revenues
The Company recognizes revenue as performance obligations are satisfied and
control of the promised good and service is transferred to the customer. For
Lump Sum and Unit Price contracts, revenue is ordinarily recognized over time as
control is transferred to the customers by measuring the progress toward
complete satisfaction of the performance obligation(s) using an input (i.e.,
"cost to cost") method. For Cost Plus and Time and Material ("T&M") contracts,
revenue is ordinarily recognized over time as control is transferred to the
customers by measuring the progress toward satisfaction of the performance
obligation(s) using an output method. The Company also does certain T&M service
work that is generally completed in a short duration and is recognized at a
point in time.
The accuracy of our revenue and profit recognition in a given period depends on
the accuracy of our estimates of the cost to complete each project. We believe
our experience allows us to create materially reliable estimates. There are a
number of factors that can contribute to changes in estimates of contract cost
and profitability.
The most significant of these include:
? the completeness and accuracy of the original bid;
? costs associated with scope changes;
? changes in costs of labor and/or materials;
? extended overhead and other costs due to owner, weather and other delays;
? subcontractor performance issues;
? changes in productivity expectations;
? site conditions that differ from those assumed in the original bid;
? changes from original design on design-build projects;
? the availability and skill level of workers in the geographic location of the
project;
? a change in the availability and proximity of equipment and materials;
? our ability to fully and promptly recover on affirmative claims and back
charges for additional contract costs; and
? the customer's ability to properly administer the contract.
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The foregoing factors, as well as the stage of completion of contracts in process and the mix of contracts at different margins may cause fluctuations in gross profit from period to period. Significant changes in cost estimates, particularly in our larger, more complex projects could have, a significant effect on our profitability.
Our contract assets include cost and estimated earnings in excess of billings that represent amounts earned and reimbursable under contracts, including claim recovery estimates, but have a conditional right for billing and payment such as achievement of milestones or completion of the project. With the exception of customer affirmative claims, generally, such unbilled amounts will become billable according to the contract terms and generally will be billed and collected over the next three months. Settlement with the customer of outstanding affirmative claims is dependent on the claims resolution process and could extend beyond one year. Based on our historical experience, we generally consider the collection risk related to billable amounts to be low. When events or conditions indicate that it is probable that the amounts outstanding become unbillable, the transaction price and associated contract asset is reduced. Our contract liabilities consist of provisions for losses and billings in excess of costs and estimated earnings. Provisions for losses are recognized in the consolidated statements of income at the uncompleted performance obligation level for the amount of total estimated losses in the period that evidence indicates that the estimated total cost of a performance obligation exceeds its estimated total revenue. Billings in excess of costs and estimated earnings are billings to customers on contracts in advance of work performed, including advance payments negotiated as a contract condition. Generally, unearned project-related costs will be earned over the next twelve months.
The following table presents our costs and estimated earnings in excess of
billings and billings in excess of costs and estimated earnings at
December 31, 2022 September 30, 2022
Costs incurred on contracts in progress $ 110,656,030 $ 192,957,145
Estimated earnings, net of estimated losses 16,806,651
28,150,060
127,462,681 221,107,205
Less billings to date 121,676,883 211,025,190
$ 5,785,798 $ 10,082,015
Costs and estimated earnings in excess of billed
on uncompleted contracts $ 14,397,681 $ 16,109,593
Less billings in excess of costs and estimated earnings on uncompleted contracts 8,611,883
6,027,578
$ 5,785,798 $ 10,082,015
Allowance for doubtful accounts
The Company provides an allowance for doubtful accounts when collection of an account is considered doubtful. Inherent in the assessment of the allowance for doubtful accounts are certain judgments and estimates relating to, among others, our customers' access to capital, our customers' willingness or ability to pay, general economic conditions and the ongoing relationship with the customers. While most of our customers are large well capitalized companies, should they experience material changes in their revenues and cash flows or incur other difficulties and not be able to pay the amounts owed, this could cause reduced cash flows and losses in excess of our current reserves. Materially incorrect estimates of bad debt reserves could result in an unexpected loss in profitability for the Company. Additionally, frequently changing reserves could be an indication of risky or unreliable customers. AtDecember 31, 2022 , the management review deemed that the allowance for doubtful accounts was adequate. 29 Table of Contents
Please see the allowance for doubtful accounts table below:
December 31, 2022 September 30, 2022
Balance at beginning of year $ 70,310 $ 70,310
Charged to expense - -
Deductions for uncollectible receivables written
off, net of recoveries (14,772) -
Balance at end of year $ 55,538 $ 70,310
Impairment of goodwill and intangible assets
The Company follows the guidance of ASC Topic 350, Intangibles-Goodwill and Other, which requires a company to record an impairment charge based on the excess of a reporting unit's carrying amount of goodwill over its fair value. Under the current guidance, companies can first choose to assess any impairment based on qualitative factors (Step 0). If a company fails this test or decides to bypass this step, it must proceed with a quantitative assessment of goodwill impairment. The Company did not have a goodwill impairment atDecember 31, 2022 orSeptember 30, 2022 .
Materially incorrect estimates could cause an impairment to goodwill or intangible assets and result in a loss in profitability for the Company.
A table of the Company's intangible assets subject to amortization is below:
Amortization and
Accumulated Accumulated Impairment Nine
Remaining Life at Amortization and Amortization and Months Ended Net Book
December 31, Impairment at Impairment at December 31, Value at
Intangible assets: 2022 Original Cost December 31, 2022 September 30, 2022 2022 December 31, 2022
West Virginia Pipeline:
Customer Relationships 96 months $ 2,209,724 $ 441,935 $ 386,693 $ 55,242 $ 1,767,789
Tradename 96 months 263,584 52,731 46,136 6,595 210,853
Non-competes 0 months 83,203 83,203 72,806 10,397 -
Revolt Energy:
Employment agreement/non-compete 16 months 100,000
81,946 77,779 4,167 18,054
Tri-State Paving:
Customer Relationships 112 months 1,649,159 $ 108,061 66,781 $ 41,280 1,541,098
Tradename 112 months 203,213 13,450 8,368 5,082 189,763
Non-competes 4 months 39,960 26,607 16,590 10,017 13,353
Total intangible assets $ 4,548,843 $ 807,933 $ 675,153 $ 132,780 $ 3,740,910
Depreciation and Amortization
The purpose of depreciation and amortization is to represent an accurate value
of assets on the books. Every year, as assets are used, their values are reduced
on the balance sheet and expensed on the income statement. As depreciation and
amortization are a noncash expense, the amount must be estimated. Each year a
certain amount of depreciation and amortization is written off and the book
value of the asset is reduced.
Property and equipment are recorded at cost. Costs which extend the useful lives
or increase the productivity of the assets are capitalized, while normal repairs
and maintenance that do not extend the useful life or increase productivity of
the asset are expensed as incurred. Property and equipment are depreciated
principally on the straight-line method over the estimated useful lives of the
assets: buildings 39 years; operating equipment and vehicles 5-7 years; and
office equipment, furniture and fixtures 5-7 years.
Acquired intangible assets subject to amortization are amortized on a
straight-line basis, which approximates the pattern in which the economic
benefit of the respective intangible assets is realized, over their respective
estimated useful lives. The definite-lived identifiable intangible assets
recognized as part of the Company's business combinations are recorded at their
estimated fair value.
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The Company's depreciation expense for the three months endedDecember 31, 2022 and 2021 was$1.8 million and$1.3 million , respectively. In general, depreciation is included in "cost of revenues" on the Company's consolidated statements of income.
The Company's intangible amortization expense for the three months ended
Materially incorrect estimates of depreciation and amortization and/or the useful lives of assets could significantly impact the value of long-lived assets on the Company's consolidated financial statements. A material over valuation could result in impairment charges and reduced profitability for the Company.
Income Taxes
The Company's income tax expense and deferred tax assets and liabilities reflect management's best estimate of current and future taxes to be paid. Significant judgments and estimates are required in the determination of the consolidated income tax expense. The Company's provision for income taxes is computed by applying a federal rate of 21.0% and a state rate of 6.0% to taxable income or loss after consideration of non-taxable and non-deductible items. Permanent income tax differences result in an increase or decrease to taxable income and impact the Company's effective tax rates, which were (94.9%) and 29.7% for the three months endedDecember 31, 2022 and 2021, respectively. Our tax rate is affected by recurring items, such as non-deductible expenses, which we expect to be fairly consistent in the near term. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, which will result in taxable or deductible amounts in the future. AtDecember 31, 2022 , the Company had a net deferred income tax liability of$4.0 million as compared to$4.5 million atSeptember 30, 2022 . The Company's deferred income tax liabilities atDecember 31, 2022 totaled$7.7 million and primarily related to depreciation on property and equipment. The Company's deferred income tax assets atDecember 31, 2022 , totaled$3.7 million and primarily related to a NOL carryforward. The Company believes that it is more likely than not that all NOL carryforwards will be realized.
New Accounting Pronouncements
OnOctober 28, 2021 , theFinancial Accounting Standards Board ("FASB") released Accounting Standards Update ("ASU") 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers". The amendments of this ASU require entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. The amendments are effective for public business entities for the fiscal years, including interim periods within those the fiscal years, beginning afterDecember 15, 2022 . For all other entities they are effective for the fiscal years, including interim periods within those the fiscal years, beginning afterDecember 15, 2023 . Entities should apply the amendments prospectively to business combinations that occur after the effective date. Early adoption is permitted, including in any interim period, for public business entities for periods for which financial statements have not yet been issued, and for all other entities for periods for which financial statements have not yet been made available for issuance. The Company is currently assessing the effect that ASU 2021-08 will have on their results of operations, financial position and cash flows; however, the Company does not expect a significant impact. The FASB recently issued ASU 2021-10, "Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance", which aims to provide increased transparency by requiring business entities to disclose information about certain types of government assistance they receive in the notes to the financial statements. Entities are required to provide the new disclosures prospectively for all transactions with a government entity that are accounted for under either a grant or a contribution accounting model and are reflected in the financial statements at the date of initially applying the new amendments, and to new transactions entered into after that date. Retrospective application of the guidance is permitted. The guidance in ASU 2021-10 is effective for financial statements of all entities for annual periods beginning afterDecember 15, 2021 , with early application permitted. ASU 2021-10 has not become effective for the Company; however, a significant impact is not expected. 31 Table of Contents Subsequent Events OnJanuary 18, 2023 , the Company's Board of Directors approved a special cash dividend of$0.05 per common share payable onFebruary 15, 2023 to shareholders of record as ofJanuary 31, 2023 . OnJanuary 19, 2023 , the Company received an amendment to increase its line of credit from$15.0 million to$30.0 million . The maturity date remainsJune 28, 2023 , with a variable interest rate equal to the "Wall Street Journal " Prime Rate with a floor of 4.5%. Management has evaluated all subsequent events for accounting and disclosure. There have been no other material events during the period, other than noted above, that would either impact the results reflected in the report or the Company's results going forward.
Outlook
The following statements are based on current expectations. These statements are forward looking, and actual results may differ materially.
The Company is seeing a significant increase in bid opportunities for natural gas transmission and distribution projects along with electrical, mechanical, and general construction projects. The Company's backlog atDecember 31, 2022 , was$206.9 million , as compared to$101.6 million and$142.3 million atDecember 31, 2021 , andSeptember 30, 2022 , respectively. While adding additional projects appears likely, no assurances can be given that the Company will be successful in bidding on projects that become available. Moreover, even if the Company obtains contracts, there can be no guarantee that the projects will go forward.
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