Custom Truck One Source, Inc.

Previous wording

We are a specialty equipment provider to the electric utility transmission and distribution, telecommunications, rail and other infrastructure-related industries in North America. Our core business relates to our new equipment inventory and rental fleet of specialty equipment that is utilized by service providers in infrastructure development and improvement work. We offer our specialized equipment to a diverse customer base, including utilities and contractors, for the maintenance, repair, upgrade, and installation of critical infrastructure assets, including distribution and transmission electric lines, telecommunications networks and rail systems, as well as for lighting and signage. We rent, produce, sell and service a broad range of new and used equipment, including bucket trucks, digger derricks, dump trucks, cranes, service trucks, and heavy-haul trailers. We manage the business in three reporting segments: Equipment Rental Solutions (“ERS”), Truck and Equipment Sales (“TES”) and Aftermarket Parts and Services (“APS”).

Current wording

We are a specialty equipment provider to the electric utility transmission and distribution, telecommunications, rail and other infrastructure-related industries in North America. Our core business relates to our new equipment inventory and rental fleet of specialty equipment that is utilized by service providers in infrastructure development and improvement work. We offer our specialized equipment to a diverse customer base, including utilities and contractors, for the maintenance, repair, upgrade, and installation of critical infrastructure assets, including distribution and transmission electric lines, telecommunications networks and rail systems, as well as for lighting and signage. We rent, produce, sell and service a broad range of new and used equipment, including bucket trucks, digger derricks, dump trucks, cranes, service trucks, and heavy-haul trailers. Through December 31, 2025, we managed the business in three reporting segments: Equipment Rental Solutions (“ERS”), Truck and Equipment Sales (“TES”) and Aftermarket Parts and Services (“APS”).

Previous wording

Depreciation of rental equipment —Depreciation of rental equipment is comprised of depreciation expense on the rental fleet. We allocate the cost of rental equipment generally over the rentable life of the equipment. The depreciation allocation is based upon estimated lives ranging from five to seven years. The cost of equipment is depreciated to an estimated residual value using the straight-line method.

Current wording

Depreciation of rental equipment —Depreciation of rental equipment is comprised of depreciation expense on the rental fleet. We allocate the cost of rental equipment generally over the rentable life of the equipment. The depreciation allocation is based upon estimated lives ranging from one to seven years. The cost of equipment is depreciated to an estimated residual value using the straight-line method.

Previous wording

Financing and other (income) expense — Financing and other expense (income) reflects the financing expense (income) associated with lease agreements qualifying to be accounted for as a sales-type lease, foreign currency gains and losses related to our Canadian operations, as well as other miscellaneous gains or losses from non-operating activities. Also included in financing and other expense (income) are the unrealized remeasurement gains and losses related to our interest rate collar and redeemable warrants.

Current wording

Financing and other (income) expense — Financing and other expense (income) reflects the financing expense (income) associated with lease agreements qualifying to be accounted for as a sales-type lease, foreign currency gains and losses related to our Canadian operations, as well as other miscellaneous gains or losses from non-operating activities. Also included in financing and other expense (income) are the unrealized remeasurement gains and losses related to derivative financial instruments.

Previous wording

Interest expense — Interest expense consists of contractual interest expense on outstanding debt obligations, floor plan financing facilities, amortization of deferred financing costs and other related to derivative financial instruments.

Current wording

Interest expense — Interest expense consists of contractual interest expense on outstanding debt obligations, floor plan financing facilities, amortization of deferred financing costs and other related financing expenses.

Previous wording

We operate in three reportable operating segments: Equipment Rental Solutions, Truck and Equipment Sales and Aftermarket Parts and Services.

Current wording

Through December 31, 2025, we reported our results under three reportable operating segments: Equipment Rental Solutions, Truck and Equipment Sales and Aftermarket Parts and Services.

Previous wording

Equipment Rental Solutions (“ERS”) Segment — We own a broad range of new and used specialty equipment, including truck-mounted aerial lifts, cranes, service trucks, dump trucks, trailers, digger derricks and other machinery and equipment. As of December 31, 2024, this equipment (the “rental fleet”) is comprised of more than 10,000 units. The majority of our rental fleet can be used across a variety of end-markets, which coincides with the needs of many of our customers who operate in multiple end-markets. As is customary for equipment rental companies, we sell used equipment out of our rental fleet to end user customers. These sales are often made in response to specific customer requests. These sales offer customers an opportunity to buy well-maintained equipment with long remaining useful lives and enable us to effectively manage the age and mix of our rental fleet to match current market demand. We also employ rental purchase options (“RPOs”) on a select basis, which provide a buyout option with an established purchase price that decreases over time as rental revenue is collected. Customers are given credit against such purchase price for a portion of the amounts paid over the life of the rental, allowing customers the flexibility of a rental with the option to purchase at any time at a known price. Activities in our ERS segment consist of the rental and sale from the rental fleet of the foregoing products.

Current wording

Equipment Rental Solutions (“ERS”) Segment — We own a broad range of new and used specialty equipment, including truck-mounted aerial lifts, cranes, service trucks, dump trucks, trailers, digger derricks and other machinery and equipment. As of December 31, 2025, this equipment (the “rental fleet”) is comprised of more than 10,400 units. The majority of our rental fleet can be used across a variety of end-markets, which coincides with the needs of many of our customers who operate in multiple end-markets. As is customary for equipment rental companies, we sell used equipment out of our rental fleet to end user customers. These sales are often made in response to specific customer requests. These sales offer customers an opportunity to buy well-maintained equipment with long remaining useful lives and enable us to effectively manage the age and mix of our rental fleet to match current market demand. We also employ rental purchase options (“RPOs”) on a select basis, which provide a buyout option with an established purchase price that decreases over time as rental revenue is collected. Customers are given credit against such purchase price for a portion of the amounts paid over the life of the rental, allowing customers the flexibility of a rental with the option to purchase at any time at a known price. Activities in our ERS segment consist of the rental and sale from the rental fleet of the foregoing products.

Previous wording

We continue to focus on six primary end-markets: Electric Utility Transmission and Distribution, or T&D, Telecom, Rail, Forestry, Waste Management, and Infrastructure. In the T&D end-market, we continue to observe demand for new generation assets resulting in the development of new transmission lines as well as repair projects to address advanced-age transmission and distribution grids to replace existing lines and poles. These factors resulted in continued demand from our customers of the Company’s products and services. Telecom, specifically the continued expansion of 5G, has seen some positive trends over the last few years. Our existing T&D related contactor customers will continue to deliver the roll-out, and our existing equipment portfolio aligns well with the needs of this market. Rail investment, both in the freight and commuter markets, remains robust. The existing rail infrastructure is aged and in need of maintenance. Infrastructure also provides potential growth opportunities as seen by the major road and bridge maintenance work experienced across the United States.

Current wording

We continue to focus on six primary end-markets: Electric Utility Transmission and Distribution, or T&D, Telecom, Rail, Forestry, Waste Management, and Infrastructure. In the T&D end-market, we continue to observe demand for new generation assets resulting in the development of new transmission lines as well as repair projects to address advanced-age transmission and distribution grids to replace existing lines and poles. These factors resulted in continued demand from our customers of the Company’s products and services. Telecom, specifically the continued expansion of 5G, has seen some positive trends over the last few years. Our existing T&D related contractor customers will continue to deliver the roll-out, and our existing equipment portfolio aligns well with the needs of this market. Rail investment, both in the freight and commuter markets, remains robust. The existing rail infrastructure is aged and in need of maintenance. Infrastructure also provides potential growth opportunities as seen by the major road and bridge maintenance work experienced across the United States.

Previous wording

Cost of Revenue, Excluding Rental Equipment Depreciation - The decrease in cost of revenue, excluding rental equipment depreciation was driven primarily by the decrease in equipment sales volume during the year ended December 31, 2024.

Current wording

Cost of Revenue, Excluding Rental Equipment Depreciation - The increase in cost of revenue, excluding rental equipment depreciation was driven primarily by the increase in equipment sales volume during the year ended December 31, 2025.

Previous wording

Gain on Sale Leaseback Transaction - During 2024, the Company closed on a sale leaseback transaction with an unrelated third party which resulted in a gain of $23.5 million. See further discussion of this transaction in Note 7: Rental Equipment and Property and Equipment and Note 9: Leases as Lessee in the Notes to the Consolidated Financial Statements under Part II, Item 8.

Current wording

Gain on Sale Leaseback Transaction - During 2024, the Company closed on a sale leaseback transaction with an unrelated third party which resulted in a gain of $23.5 million.

Previous wording

Total Other Operating Expenses -Other Operating expenses increased for the year ended December 31, 2024, primarily as a result of an increase in transaction expenses and other due to new site openings and launch of new line of businesses.

Current wording

Total Other Operating Expenses -Other operating expenses remained flat for the year ended December 31, 2025.

Previous wording

Income Tax Expense - Our overall effective tax rate is affected by a number of factors, such as the relative amounts of income we earn in differing tax jurisdictions, tax law changes, certain non-deductible expenses (non-taxable income), such as compensation disallowance and mark-to-market adjustments on derivative financial instruments, and changes in the valuation allowance we establish against deferred tax assets. The rate is also affected by discrete items that may occur in any given year, such as legislative enactments and changes in our corporate structure that may occur. These discrete items may not be consistent from year to year. For the year ended December 31, 2024, the changes in the effective tax rates were primarily due to pre-tax book loss and the effects of permanent adjustments in the current period, resulting in an overall effective tax rate in the period of 1.8%, $0.5 million of tax expense being recognized. For the year ended December 31, 2023, the impact of state income taxes and a tax benefit from the reduction to the valuation allowance resulted in an overall effective tax rate in the period of 12.7%, $7.4 million of tax expense recognized.

Current wording

Income Tax Expense (Benefit) - Our overall effective tax rate is affected by a number of factors, such as the relative amounts of income we earn in differing tax jurisdictions, tax law changes, certain non-deductible expenses (non-taxable income), such as compensation disallowance and mark-to-market adjustments on derivative financial instruments, and changes in the valuation allowance we establish against deferred tax assets. The rate is also affected by discrete items that may occur in any given year, such as legislative enactments and changes in our corporate structure. These discrete items may not be consistent from year to year. For the year ended December 31, 2025, the changes in the effective tax rates were primarily due to taxable income in states that do not follow federal deductibility rules and foreign sourced income, resulting in an overall effective tax rate of (10.4)%, with $2.9 million of tax expense being recognized. For the year ended December 31, 2024, pre-tax book loss and the effects of permanent adjustments in the period resulted in an overall effective tax rate of 1.8%, with a $0.5 million tax benefit recognized.

Previous wording

Cost of Revenue -The decrease in total cost of revenue for the year ended December 31, 2024, compared to the year ended December 31, 2023, was largely due to the decrease in rental equipment sales volume.

Current wording

Cost of Rental Revenue -The increase in cost of rental revenue for the year ended December 31, 2025, compared to the year ended December 31, 2024, was largely due to the increase in rental activity.

Previous wording

Gross Profit - The decrease in gross profit for the year ended December 31, 2024, compared to the year ended December 31, 2023, was due to the decrease in rental revenues and rental equipment sales.

Current wording

Gross Profit - The decrease in gross profit for the year ended December 31, 2025, compared to the year ended December 31, 2024, was due to continued pricing pressures on truck sales.

Previous wording

Gross Profit - The decrease in gross profit for the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily driven by the decrease in tools and accessories rentals with an increase in costs of materials driving gross profit down.

Current wording

Gross Profit - The increase in gross profit for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily driven by the increase in rental revenue which has lower costs associated with it.

Previous wording

Our principal sources of liquidity include cash generated by operating activities and borrowings under revolving credit facilities as described below. We believe that our liquidity sources and operating cash flows are sufficient to address our operating, debt service and capital requirements, including investments in our rental fleet, over the next 12 months and beyond. As of December 31, 2024, we had $3.8 million in cash and cash equivalents compared to $10.3 million as of December 31, 2023. As of December 31, 2024, we had

Current wording

Our principal sources of liquidity include cash generated by operating activities and borrowings under revolving credit facilities as described below. We believe that our liquidity sources and operating cash flows are sufficient to address our operating, debt service and capital requirements, including investments in our rental fleet, over the next 12 months and beyond. As of December 31, 2025, we had $6.3 million in cash and cash equivalents compared to $3.8 million as of December 31, 2024. As of December 31, 2025, we had $698.0 million of outstanding borrowings under our ABL Facility compared to $582.9 million of outstanding borrowings as of December 31, 2024. Availability under the ABL Facility was $248.1 million as of December 31, 2025, and based on our borrowing base, we have an additional $200.8 million of suppressed availability that we can potentially utilize by upsizing our existing facility. For further information on the ABL Facility, see Note 8: Long-Term Debt in the Notes to the Consolidated Financial Statements.

Previous wording

The Company presents Net Leverage Ratio, which is equivalent to Consolidated Total Net Leverage Ratio in our ABL Credit Agreement and Consolidated Total Debt Ratio in the Indenture, is defined as Net Debt over Adjusted EBITDA for the previous twelve-month period. Net debt is defined as total debt (calculated as current and long-term debt, excluding deferred financing fees, plus current and long-term finance lease obligations) minus cash and cash equivalents.

Current wording

The Company presents Net Leverage Ratio, which is equivalent to Consolidated Total Net Leverage Ratio in our ABL Credit Agreement and Consolidated Total Debt Ratio in the Indenture. Net Leverage Ratio is defined as Net Debt over Adjusted EBITDA for the previous twelve-month period. Net debt is defined as total debt (calculated as current and long-term debt, excluding deferred financing fees, plus current and long-term finance lease obligations) minus cash and cash equivalents.

Previous wording

Our expected material contractual cash requirements over the next twelve months primarily consist of minimum operating lease obligations of $14.4 million, debt principal and interest payments of $7.8 million and $99.5 million, respectively, and the repayment of floor plan borrowings. We enter into purchase agreements with manufacturers and suppliers of chassis, parts and components and attachments, for our rental fleet and inventory. The purchase agreements are cancellable within a specified notification period to the supplier. Such amounts are not estimable as of December 31, 2024.

Current wording

Our expected material contractual cash requirements over the next twelve months primarily consist of minimum operating lease obligations of $17.4 million, debt principal and interest payments of $25.9 million and $100.2 million, respectively, and the repayment of floor plan borrowings. We enter into purchase agreements with manufacturers and suppliers of chassis, parts and components and attachments, for our rental fleet and inventory. The purchase agreements are cancellable within a specified notification period to the supplier. Such amounts are not estimable as of December 31, 2025.

Previous wording

Operating Lease Payments. We have short-term and long-term minimum cash requirements for operating lease payments of $14.4 million and $158.4 million, respectively. The total amounts do not equal the carrying amount due to imputed interest. See Note 9: Leases as Lessee in the Notes to the Consolidated Financial Statements under Part II, Item 8, for a summary of the estimated future repayment terms for the operating lease amounts.

Current wording

Operating Lease Payments. We have short-term and long-term minimum cash requirements for operating lease payments of $17.4 million and $176.1 million, respectively. The total amounts do not equal the carrying amount due to imputed interest. See Note 9: Leases as Lessee in the Notes to the Consolidated Financial Statements under Part II, Item 8, for a summary of the estimated future repayment terms for the operating lease amounts.

Previous wording

Floor Plan Financing. We have floor plan payables of $801.3 million at December 31, 2024 that represent financing arrangement to facilitate our purchase of chassis, parts, components and attachments inventory. All floor plan payables are collateralized by the inventory financed. These payables become due and payable upon the sale, transfer, or reclassification of each unit to inventory. See Note 6: Floor Plan Financing in the Notes to the Consolidated Financial Statements under Part II, Item 8, for obligations related to trade and non-trade floor plan financings.

Current wording

Floor Plan Financing. We have floor plan payables of $657.4 million at December 31, 2025 that represent financing arrangements to facilitate our purchase of chassis, parts, components and attachments inventory. All floor plan payables are collateralized by the inventory financed. These payables become due and payable upon the sale, transfer, or reclassification of each unit to inventory. See Note 6: Floor Plan Financing in the Notes to the Consolidated Financial Statements under Part II, Item 8, for obligations related to trade and non-trade floor plan financings.

Previous wording

Notes Payable and Loan Principal and Interest Payments. We have short-term and long-term cash requirements of $7.8 million and $1,539.8 million, respectively, for the payment of principal related to notes payable and loans as of December 31, 2024. The total amount does not equal the carrying amount due to unamortized deferred charges. See Note 8: Long-Term Debt in the Notes to the Consolidated Financial Statements under Part II, Item 8 for more information.

Current wording

Notes Payable and Loan Principal and Interest Payments. We have short-term and long-term cash requirements of $25.9 million and $1,634.9 million, respectively, for the payment of principal related to notes payable and loans as of December 31, 2025. The total amount does not equal the carrying amount due to unamortized deferred charges. See Note 8: Long-Term Debt in the Notes to the Consolidated Financial Statements under Part II, Item 8 for more information.

Previous wording

As of December 31, 2024, we had cash and cash equivalents of $3.8 million, a decrease of $6.5 million from December 31, 2023. Generally, we manage our cash flow by using any excess cash, after considering our working capital and capital expenditure needs, including paying down the outstanding balance under our ABL Facility, and availability under our credit facilities.

Current wording

As of December 31, 2025, we had cash and cash equivalents of $6.3 million, an increase of $2.5 million from December 31, 2024. Generally, we manage our cash flow by using any excess cash, after considering our working capital and capital expenditure needs, including paying down the outstanding balance under our ABL Facility, and availability under our credit facilities.

Previous wording

Net cash from operating activities was $122.0 million for the year ended December 31, 2024, as compared to $30.9 million used for operating activities in the same period of 2023. The change year over year is driven by lower levels of inventory production throughout 2024 compared to 2023.

Current wording

Net cash from operating activities was $310.1 million for the year ended December 31, 2025, as compared to $122.0 million in 2024. The increase in net cash from operating activities is driven by lower levels of inventory production throughout 2025 compared to 2024.

Previous wording

Net cash used in investing activities was $187.5 million for the year ended December 31, 2024, as compared to cash used in investing activities of $176.6 million in 2023. The increase in cash used in investing activities is due to an increase in purchases for rental equipment of $34.1 million, cash paid for acquisitions of businesses (net of cash acquired) of $6.0 million, and a decrease in proceeds from sales and disposals of rental equipment of $25.0 million partially offset by proceeds from the sale leaseback transaction (net of expenses) of $52.5 million.

Current wording

Net cash used in investing activities was $282.5 million for the year ended December 31, 2025, as compared to cash used in investing activities of $187.5 million in 2024. The increase in cash used in investing activities is due to an increase in purchases of rental equipment of $58.7 million and a decrease in proceeds from sale leaseback transaction (net of expenses) of $52.5 million, partially offset by a decrease in purchases of non-rental property and cloud computing arrangements of $8.7 million.

Previous wording

Our rentable equipment consists of aftermarket parts and specialized rental equipment. Purchases of our equipment are recorded at cost and we depreciate the cost to an estimated salvage value. We depreciate our aftermarket parts over their estimated useful rentable life of five years. We depreciate our rental equipment over its estimated useful rentable life of one to seven years with an estimated residual value of 0% to 35% of the cost, using the straight-line method. Useful life is estimated based upon the expected period the equipment will be in the fleet as a rentable unit. A salvage value is estimated to approximate the value of the equipment at the end of its useful (i.e., rentable) life, allowing for a reasonable profit margin on the sale of the equipment when we remove the unit from the fleet. In establishing useful lives and salvage values, we consider factors related to customer demand of differing types of equipment in order for us to hold and maintain an optimal mix of equipment types in our fleet. We also continuously evaluate factors related to the condition and serviceability of the equipment in our fleet in order to make estimates of useful life and expected end-of-life value. Depreciation of our equipment is recognized as a component of our cost of revenue. For sold equipment, the carrying value of an item is recognized as cost of equipment sale within cost of revenue. Changes in estimated useful life and/or salvage value would impact our gross profit in our consolidated financial statements. To the extent that the useful lives of our rental equipment were to increase or decrease by one year, we estimate that our annual depreciation expense would increase or decrease by approximately $36.1 million, respectively. Similarly, to the extent the estimated salvage values of our rental equipment were to increase or decrease by one percentage point, we estimate that our annual depreciation expense would change by approximately $1.9 million. Any change in depreciation expense as a result of a hypothetical change in either useful lives or salvage values would generally result in a proportional increase or decrease in the gross profit we would recognize upon the ultimate sale of the asset.

Current wording

Our rentable equipment consists of aftermarket parts and specialized rental equipment. Purchases of our equipment are recorded at cost and we depreciate the cost to an estimated salvage value. We depreciate our aftermarket parts over their estimated useful rentable life of five years. We depreciate our rental equipment over its estimated useful rentable life of one to seven years with an estimated residual value of 0% to 35% of the cost, using the straight-line method. Useful life is estimated based upon the expected period the equipment will be in the fleet as a rentable unit. A salvage value is estimated to approximate the value of the equipment at the end of its useful (i.e., rentable) life, allowing for a reasonable profit margin on the sale of the equipment when we remove the unit from the fleet. In establishing useful lives and salvage values, we consider factors related to customer demand of differing types of equipment in order for us to hold and maintain an optimal mix of equipment types in our fleet. We also continuously evaluate factors related to the condition and serviceability of the equipment in our fleet in order to make estimates of useful life and expected end-of-life value. Depreciation of our equipment is recognized as a component of our cost of revenue. For sold equipment, the carrying value of an item is recognized as cost of equipment sale within cost of revenue. Changes in estimated useful life and/or salvage value would impact our gross profit in our consolidated financial statements. To the extent that the useful lives of our rental equipment were to increase or decrease by one year, we estimate that our annual depreciation expense would increase or decrease by approximately $197.0 million, respectively. Similarly, to the extent the estimated salvage values of our rental equipment were to increase or decrease by one percentage point, we estimate that our annual depreciation expense would change by approximately $4.3 million. Any change in depreciation expense as a result of a hypothetical change in either useful lives or salvage values would generally result in a proportional increase or decrease in the gross profit we would recognize upon the ultimate sale of the asset.

Previous wording

Quantitative Impairment Test – The quantitative impairment test involves a comparison of the estimated fair value of a reporting unit to its carrying amount with the fair value of a reporting being unit being estimated by using a discounted cash flow model (the “income approach”) that calculates fair value as the present value of expected cash flows of the reporting unit. Additionally, a market analysis is performed that encompasses an analysis of comparable publicly-traded companies (the “market approach”).

Current wording

Quantitative Impairment Test – The quantitative impairment test involves a comparison of the estimated fair value of a reporting unit to its carrying amount with the fair value of a reporting unit being estimated by using a discounted cash flow model (the “income approach”) that calculates fair value as the present value of expected cash flows of the reporting unit. Additionally, a market analysis is performed that encompasses an analysis of comparable publicly-traded companies (the “market approach”).

Previous wording

•The risk adjusted cost of capital varies by reporting unit and was in the range of 10.5% to 11.0% and represents our estimate of the overall after-tax rate of return required by equity and debt holders of a business enterprise.

Current wording

•The risk adjusted cost of capital varies by reporting unit and was in the range of 9.5% to 10.0% and represents our estimate of the overall after-tax rate of return required by equity and debt holders of a business enterprise.

Previous wording

•Our projections were based on our assessment of macroeconomic variables, industry trends and market opportunities, as well as our strategic objectives and future growth plans. Revenue growth rates assumed ranged from approximately 7% to 14% for 2025 and from approximately 3% to 14% for 2026 and beyond. EBITDA Margin assumed ranged from approximately 6% to 43% for 2025 and from approximately 8% to 48% for 2026 and beyond.

Current wording

•Our projections were based on our assessment of macroeconomic variables, industry trends and market opportunities, as well as our strategic objectives and future growth plans. Revenue growth rates assumed ranged from approximately 4% to 10% for 2026 and from approximately 3% to 12% for 2027 and beyond. EBITDA Margin assumed ranged from approximately 4% to 45% for 2026 and from approximately 5% to 47% for 2027 and beyond.

Previous wording

As a result of completing our October 1, 2024 quantitative impairment test, we determined that the fair value of the ERS, TES and APS reporting units exceeded their carrying values by 13%, 82% and 33%, respectively. While there is no “bright line” to determine whether or not a reporting unit’s fair value is substantially in excess of its carrying amount (“cushion”), significant adverse changes in business climate, weakness in an industry in which our reporting units operate (for example, electric utility T&D, telecom, rail and general infrastructure) or significant cash or operating losses and changes in expectations of profitability could reduce the amounts of cushion applicable to our reporting units and result in impairment of one or more of our reporting units’ goodwill. As a result of our analyses, the Company determined that there was no impairment of goodwill.

Current wording

As a result of completing our October 1, 2025 quantitative impairment test, we determined that the fair value of the ERS, TES and APS reporting units exceeded their carrying values by 34%, 14% and 81%, respectively. While there is no “bright line” to determine whether or not a reporting unit’s fair value is substantially in excess of its carrying amount (“cushion”), significant adverse changes in business climate, weakness in an industry in which our reporting units operate (for example, electric utility T&D, telecom, rail and general infrastructure) or significant cash or operating losses and changes in expectations of profitability could reduce the amounts of cushion applicable to our reporting units and result in impairment of one or more of our reporting units’ goodwill. As a result of our analyses, the Company determined that there was no impairment of goodwill.

Previous wording

While we remain in a financial reporting loss position based on a cumulative pre-tax loss for the three-year period ended December 31, 2024, the determination of the valuation allowance is based on our evaluation of the periods over which future taxable items are expected to be utilized to offset tax loss and deduction carryforward items in those future periods. That is, future forecasts of our taxable income are not considered in the evaluation of realizability of our deferred tax assets. Therefore, changes in our deferred tax asset valuation allowances will primarily be affected by changes in the estimates of the time periods over which those future taxable items will occur. At December 31, 2024, our deferred tax asset valuation allowance was $72.4 million.

Current wording

While we no longer remain in a financial reporting loss position based on a cumulative pre-tax loss for the three-year period ended December 31, 2025, the determination of the valuation allowance is based on our evaluation of the periods over which future taxable items are expected to be utilized to offset tax loss and deduction carryforward items in those future periods. That is, future forecasts of our taxable income are not considered in the evaluation of realizability of our deferred tax assets. Therefore, changes in our deferred tax asset valuation allowances will primarily be affected by changes in the estimates of the time periods over which those future taxable items will occur. At December 31, 2025, our deferred tax asset valuation allowance was $85.4 million.