Everus Construction Group Inc
For the period ended Sep 30, 2024. Filed Nov 21, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 21, 2024
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Summary of Significant Accounting Policies
Note 3 –Summary of Significant Accounting Policies
New Accounting Standards
Changes to GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs.
The following table provides a brief description of the accounting pronouncements applicable to the Company and the potential impact on its financial statements and/or disclosures:
| Standard | Description | Effective Date | Impact on Financial Statements/Disclosures |
|---|---|---|---|
| Recently adopted ASUs | |||
| ASU 2022-06 – Reference Rate Reform (Topic 848): Deferral of Sunset Date | In December 2022, the FASB included a sunset provision within ASC 848 based on expectations of when the London Inter-Bank Offered Rate (“LIBOR”) would cease to be published. At the time ASU 2020-04 was issued, the UK Financial Conduct Authority had established its intent to cease overnight tenors of LIBOR after December 31, 2021. In March 2021, the UK Financial Conduct Authority announced that the intended cessation date of the overnight tenors of LIBOR would be June 30, 2023, which is beyond the current sunset date of ASC 848. The amendments in this Update defer the sunset date of ASC 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in ASC 848. Existing contracts referencing LIBOR or other reference rates expected to be discontinued must have identified a replacement rate by June 30, 2023. New contracts will incorporate a new reference rate, which includes the Secured Overnight Financing Rate (“SOFR”). | Effective upon issuance (December 21, 2022) through December 31, 2024. | The Company has updated its credit agreements to include language regarding the successor or alternate rate to LIBOR. The Company determined the adoption of the guidance did not have a material impact on its unaudited condensed consolidated financial statements. |
| Standard | Description | Effective Date | Impact on Financial Statements/Disclosures |
|---|---|---|---|
| Recently issued ASUs not yet adopted | |||
| ASU 2023-05 - Business Combinations - Joint Venture Formations - Recognition and Initial Measurement | In August 2023, the FASB issued guidance on accounting for contributions made to a joint venture, upon formation, in a joint venture's separate financial statement in order to provide decision useful information to investors and other allocators of capital (collectively investors) in a joint venture's financial statements and reduce diversity in practice. The new basis of accounting will require that a joint venture, upon formation, will recognize and initially measure its assets and liabilities at fair value (with the exceptions to fair value measurement that are consistent with the business combinations guidance). A joint venture that was formed before January 1, 2025, may elect to apply the guidance retrospectively if it has sufficient information. | Effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. | The Company is currently evaluating the impact the guidance will have on its interim and annual disclosures for the year ended December 31, 2025. |
| ASU 2023-07 - Segment Reporting - Improvements to Reportable Segment Disclosures | In November 2023, the FASB issued guidance on improving financial reporting by requiring disclosure on incremental segment information, primarily through enhanced disclosures about significant segment expenses on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. | Effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024, with prior periods disclosed in the period of adoption. | The Company is currently evaluating the impact the guidance will have on its disclosures for the year ended December 31, 2024, and future interim periods. |
| ASU 2023-09 - Income Taxes - Improvements to Income Tax Disclosures | The FASB issued guidance to address investors’ requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income tax paid information and effectiveness of income tax disclosures. | Effective for fiscal years beginning after December 15, 2024. | The Company is currently evaluating the impact the guidance will have on its disclosures for the year ended December 31, 2025. |
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the unaudited condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Estimates are used for items such as long-lived assets and goodwill; fair values of acquired assets and liabilities under the acquisition method of accounting; property depreciable lives; tax provisions; revenue recognized using the cost-to-cost measure of progress for contracts; expected credit losses; loss contingencies; costs on construction contracts; unbilled revenues; actuarially determined benefit costs; lease classification; present value of right-of-use assets and lease liabilities; and the valuation of stock-based compensation. As additional information becomes available, or actual amounts are determinable, the recorded estimates are revised. Consequently, operating results can be affected by revisions to prior accounting estimates.
Receivables and Allowance for Expected Credit Losses
Receivables consist primarily of trade receivables from the sale of goods and services net of expected credit losses. Receivables, net is summarized as follows:
| September 30, 2024 | December 31, 2023 | |
|---|---|---|
| (In thousands) | ||
| Trade receivables: | ||
| Completed contracts | $33,425 | $42,467 |
| Contracts in progress | 532,513 | 409,872 |
| Retention receivables | 67,279 | 84,474 |
| Other | 6,214 | 5,254 |
| Receivables, gross | 639,431 | 542,067 |
| Less: expected credit losses | 7,300 | 7,967 |
| Receivables, net | $632,131 | $534,100 |
The Company's trade receivables are all due in 12 months or less. The total balance of receivables past due 90 days or more was $74.5 million and $42.0 million as of September 30, 2024 and December 31, 2023, respectively.
Details of the Company's expected credit losses, disclosed within Receivables, net for the respective periods presented below, were as follows:
| Three months ended September 30, | Nine months ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| (In thousands) | ||||
| Balance at beginning of period | $7,257 | $4,717 | $7,967 | $2,161 |
| Current expected credit loss provision | 83 | 1,734 | (51) | 4,385 |
| Less: write-offs charged against the allowance | 84 | 27 | 672 | 181 |
| Credit loss recoveries collected | 44 | — | 56 | 59 |
| Balance at end of period | $7,300 | $6,424 | $7,300 | $6,424 |
Inventories
Inventories consist primarily of manufactured equipment held for resale and/or rental of $40.6 million and $37.2 million as of September 30, 2024 and December 31, 2023, respectively, and materials and supplies of $6.3 million and $5.5 million as of September 30, 2024 and December 31, 2023, respectively. These inventories are stated at the lower of average cost or net realizable value. The value of inventory may decrease due to obsolescence, physical deterioration, damage, costs to repair or other causes. Inventory valuation write-downs are determined based on specific facts and circumstances and were immaterial as of September 30, 2024 and December 31, 2023.
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