Concrete Pumping Holdings Inc

Note13. Commitments and Contingencies

Insurance

Commercial Self-Insured Losses

The Company retains a significant portion of the risk for workers' compensation, automobile, and general liability losses (“self-insured commercial liability”). Reserves have been recorded that reflect the undiscounted estimated liabilities including claims incurred butnot reported. When a recognized liability is covered bythird-party insurance, the Company records an insurance claim receivable to reflect the covered liability. Amounts estimated to be paid withinone year have been included in Accrued expenses and other current liabilities, with the remainder included in Other liabilities, non-current on the Consolidated Balance Sheets. Insurance claims receivables that are expected to be received fromthird-party insurance withinone year have been included in Prepaid expenses and other current assets, with the remainder included in Other non-current assets on the Consolidated Balance Sheets.

The following table summarizes as of* January 31, 2024* and* October 31, 2023* for (1) recorded liabilities, related to both asserted as well as unasserted insurance claims and (2) any related insurance claims receivables.

Medical Self-Insured Losses

The Company offers employee health benefits via a partially self-insured medical benefit plan. Participant claims exceeding certain limits are covered by a stop-loss insurance policy. The Company contracts with athird-party administrator for tasks including, butnot limited to, processing claims and remitting benefits. As of* January 31, 2024* and* October 31, 2023*, the Company had accrued $1.4 million and $1.2 million, respectively, for estimated health claims incurred butnot reported based on historical claims amounts and average lag time. These accruals are included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets. The Company contracts with athird-party administrator to process claims, remit benefits, etc. Thethird-party administrator required the Company to maintain a bank account to facilitate the administration of claims.

Litigation

The Company is currently involved in certain legal proceedings and other disputes withthird parties that have arisen in the ordinary course of business. Management believes that the outcomes of these matters willnot have a material impact on the Company’s financial statements and doesnot believe that any amounts need to be recorded for contingent liabilities in the Company’s consolidated balance sheet.

Washington Department of Revenue Sales Tax Issue

Historically, the Company hasnot charged sales tax to its state of Washington customers that provide a reseller certificate, treating this as a wholesale transaction rather than as a retail sale. Effective* April 1, 2020,the state of Washington Department of Revenue (“DOR”) published a rule which amended Washington Administrative Code458*-20-211, otherwise known as Rule211, by designating sales of stand-alone concrete pumping services as solely retail transactions. The Company believes the DOR improperly amended Rule211 and is strongly defending this position. As such, for the period from* April 1, 2020through January 31, 2024,the Company didnot* charge sales tax where its customers provide a reseller certificate and petitioned for declaratory relief from the rule.

In* February 2023,the Company received an adverse ruling from the Thurston County superior court regarding its position, which it has appealed. In February 2024,oral arguments were heard in the Court of Appeals in Tacoma and the Company received an unfavorable judgement during the same month. As of October 31, 2023,no liability had been recorded in connection with this contingency as a loss wasnot deemed probable at that time. However, as a result of the unfavorable judgment in February 2024,the Company has concluded the loss is now probable and therefore has recorded a loss of $3.5 million in the quarter ended January 31, 2024.The loss is included in general and administrative expenses in the Company’s condensed consolidated financial statements. During the quarter ended January 31, 2024,the Company made a payment of $1.8 million to the DOR. Beginning with thesecond* quarter of fiscal year2024, the Company started assessing sales tax related to its customers in the state of Washington.

Letters of credit

The ABL Facility provides for up to $22.5 million of standby letters of credit. As of* January 31, 2024*, total outstanding letters of credit totaled $8.5 million, the vast majority of which had been committed to the Company’s general liability insurance provider.

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Note14. Stockholders’** Equity**

Share Repurchase Program

In* March 2024,the board of directors of the Company approved a $15.0 million increase to the Company’s share repurchase program. This authorization will expire on March 31, 2025and is in addition to the repurchase authorization of up to $10.0 million to expire March 31, 2025that was previously approved in January 2023.In January 2023,the board of directors of the Company approved a $10.0 million increase to the Company’s share repurchase program that was set to expire on March 31, 2024.On January 4, 2024,the board of directors approved an extension of this authorization through March 31, 2025.This is in addition to the repurchase authorization of up to $10.0 million through June 15, 2023,that was previously approved in June 2022.The repurchase program permits shares to be repurchased in the open market, by block purchase, in privately negotiated transactions, inone* or more transactions from time to time, or pursuant to any trading plan adopted in accordance with Rule10b5-1 of the Securities Exchange Act of1934, as amended, (the “Exchange Act”). Open market purchases will be conducted in accordance with the limitations set forth in Rule10b-18 of the Exchange Act and other applicable legal and regulatory requirements. The repurchase program* may*be suspended, terminated, extended or otherwise modified by the Board without notice at any time for any reason, including, without limitation, market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, capital and liquidity objectives, and other factors deemed appropriate by the Company's management.

The following table summarizes the shares repurchased, total cost of shares repurchased and average price per share for thethree months ended:

Note15. Stock-Based Compensation

Pursuant to the Concrete Pumping Holdings, Inc.2018 Omnibus Incentive Plan, the Company granted stock-based awards to certain employees in the U.S. and U.K.

The following table summarizes realized compensation expense related to stock options and restricted stock awards in the accompanying condensed consolidated statements of operations:

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Note16. Earnings Per Share

The table below shows our basic and diluted EPS calculations for thethree months ended* January 31, 2024* and2023:

For thethree months ended* January 31, 2024,*2.5 million shares of Series A Preferred Stock,0.5 million of unvested restricted stock awards,1.1 million of unexercised stock options and 0.2 million outstanding unexercised non-qualified stock options were excluded from the computation of diluted EPS because their effect would have been anti-dilutive.

For thethree months ended* January 31, 2023*,13.0 million warrants to purchase shares of common stock at an exercise price of $11.50,2.5 million shares of Series A Preferred Stock, and 2.0 million of unvested restricted stock awards were excluded from the computation of diluted EPS because their effect would have been anti-dilutive.

Note17. Supplemental Cash Flow Information

The table below shows supplemental cash flow information for thethree months ended* January 31, 2024* and2023:

The table below shows property, plant and equipment acquired but nor yet paid for as of* January 31, 2024* and2023:

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Note18. Segment Reporting

The Company’s revenues are derived from three reportable segments: U.S. Concrete Pumping, U.K. Operations and U.S. Concrete Waste Management Services. Any differences between segment reporting and consolidated results are reflected in Intersegment or Other below. All Other non-segmented assets primarily include cash and cash equivalents and intercompany eliminations. The Company evaluates the performance of each segment based on revenue, and measures segment performance based upon EBITDA (earnings before interest, taxes, depreciation and amortization).

During thefirst quarter of fiscal year2024, the Company moved certain assets and associated revenues and expenses previously part of the Company's Other activities into the U.S. Concrete Pumping segment based on the way our chief operating decision maker ("CODM") allocates resources and measures performance. As a result, segment results for prior periods have been reclassified to conform to the current period presentation.

The table below shows changes from the recast of segment results for thethree months ended* January 31, 2023:*

The U.S. and U.K. regions each individually accounted for more than10% of the Company's revenue for the periods presented.

The following provides operating information about the Company's reportable segments and geographic locations for the periods presented:

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The Company doesnot disclose total assets by segment as such information isnot provided to the CODM. The total assets by geographic location is provided to the CODM and is presented below. Total assets and property, plant and equipment, net by geographic location for the periods presented are as follows:

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