Index
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 02, 202101, 2022
OR
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number 000-11917
davey-20221001_g1.jpg
THE DAVEY TREE EXPERT COMPANY
(Exact name of registrant as specified in its charter)
Ohio34-0176110
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
1500 North Mantua Street
P.O. Box 5193
Kent, OH 44240
(Address of principal executive offices) (Zip code)
(330) 673-9511
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
N/AN/AN/A
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes    No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated FilerEmerging Growth Company
Non-Accelerated FilerSmaller Reporting Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes No
There were 44,645,64042,921,611 Common Shares, $.50$.50 par value, outstanding as of October 29, 2021. November 4, 2022. The registrant's Common Shares are not traded on a public market.


Index
The Davey Tree Expert Company
Quarterly Report on Form 10-Q
October 2, 20211, 2022

INDEX
Page
Part I.Financial Information
Item 1.Financial Statements (Unaudited)
 
"We," "us," "our," the "Company," "The Registrant," "Davey" and "Davey Tree," unless the context otherwise requires, means The Davey Tree Expert Company and its subsidiaries.
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Index
THE DAVEY TREE EXPERT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except per share data dollar amounts)
October 2,
2021
December 31,
2020
October 1,
2022
December 31,
2021
AssetsAssets  Assets  
Current assets:Current assets:  Current assets:  
CashCash$33,057 $16,201 Cash$22,844 $19,460 
Accounts receivable, netAccounts receivable, net283,702 252,921 Accounts receivable, net326,291 278,280 
Operating suppliesOperating supplies12,395 10,206 Operating supplies15,491 12,662 
Other current assetsOther current assets47,418 25,734 Other current assets46,881 37,853 
Total current assetsTotal current assets376,572 305,062 Total current assets411,507 348,255 
Property and equipment, netProperty and equipment, net229,575 204,717 Property and equipment, net262,701 227,985 
Right-of-use assets - operating leasesRight-of-use assets - operating leases81,789 55,893 Right-of-use assets - operating leases95,350 86,423 
Marketable securities and other investmentsMarketable securities and other investments46,473 25,401 
Other assetsOther assets20,880 29,756 Other assets14,304 17,264 
Intangible assets, netIntangible assets, net11,825 11,670 Intangible assets, net10,637 11,633 
GoodwillGoodwill55,072 48,256 Goodwill58,999 55,980 
Total assetsTotal assets$775,713 $655,354 Total assets$899,971 $772,941 
Liabilities and shareholders' equityLiabilities and shareholders' equity  Liabilities and shareholders' equity  
Current liabilities:Current liabilities:  Current liabilities:  
Accounts payableAccounts payable$43,013 $42,787 Accounts payable$45,942 $43,021 
Accrued expensesAccrued expenses92,665 98,441 Accrued expenses85,047 75,138 
Current portion of long-term debt and finance lease liabilitiesCurrent portion of long-term debt and finance lease liabilities33,488 21,813 Current portion of long-term debt and finance lease liabilities34,088 25,268 
Other current liabilitiesOther current liabilities61,671 56,831 Other current liabilities74,500 77,549 
Total current liabilitiesTotal current liabilities230,837 219,872 Total current liabilities239,577 220,976 
Long-term debtLong-term debt111,777 77,068 Long-term debt174,579 123,531 
Lease liabilities - finance leasesLease liabilities - finance leases7,886 6,479 Lease liabilities - finance leases9,704 8,646 
Lease liabilities - operating leasesLease liabilities - operating leases54,249 36,612 Lease liabilities - operating leases62,586 57,335 
Self-insurance accrualsSelf-insurance accruals88,051 71,573 Self-insurance accruals96,487 77,099 
Other noncurrent liabilitiesOther noncurrent liabilities11,456 10,689 Other noncurrent liabilities12,181 11,583 
Total liabilitiesTotal liabilities504,256 422,293 Total liabilities595,114 499,170 
Commitments and contingencies (Note O)
Redeemable common shares related to 401KSOP and Employee Stock Ownership Plan (ESOP); 9,762 and 10,226 shares at redemption value as of October 2, 2021 and December 31, 2020*160,097 153,387 
Common shareholders' equity:*  
Common shares, $0.50 par value, per share; 96,000 shares authorized; 76,066 and 75,602 shares issued and outstanding before deducting treasury shares and which excludes 9,762 and 10,226 shares subject to redemption as of October 2, 2021 and December 31, 202038,033 37,801 
Commitments and contingencies (Note P)Commitments and contingencies (Note P)
Redeemable common shares related to 401KSOP and Employee Stock Ownership Plan (ESOP) 9,288 and 9,392 shares at redemption value as of October 1, 2022 and December 31, 2021Redeemable common shares related to 401KSOP and Employee Stock Ownership Plan (ESOP) 9,288 and 9,392 shares at redemption value as of October 1, 2022 and December 31, 2021168,120 169,931 
Common shareholders' equity:Common shareholders' equity:  
Common shares, $.50 par value, per share; 96,000 shares authorized; 76,539 and 76,436 shares issued and outstanding before deducting treasury shares and which excludes 9,288 and 9,392 shares subject to redemption as of October 1, 2022 and December 31, 2021Common shares, $.50 par value, per share; 96,000 shares authorized; 76,539 and 76,436 shares issued and outstanding before deducting treasury shares and which excludes 9,288 and 9,392 shares subject to redemption as of October 1, 2022 and December 31, 202138,398 38,379 
Additional paid-in capitalAdditional paid-in capital125,178 110,069 Additional paid-in capital154,111 135,897 
Common shares subscribed, unissuedCommon shares subscribed, unissued23,954 — 
Retained earningsRetained earnings248,853 206,711 Retained earnings286,279 239,979 
Accumulated other comprehensive lossAccumulated other comprehensive loss(4,330)(4,547)Accumulated other comprehensive loss(6,839)(4,173)
407,734 350,034  495,903 410,082 
Less: Cost of common shares held in treasury; 41,089 shares at October 2, 2021 and 40,187 shares at December 31, 2020296,374 270,360 
Less: Cost of common shares held in treasury; 42,082 shares at October 1, 2022 and 41,325 shares at December 31, 2021Less: Cost of common shares held in treasury; 42,082 shares at October 1, 2022 and 41,325 shares at December 31, 2021338,532 306,242 
Common shares subscription receivableCommon shares subscription receivable20,634 — 
Total common shareholders' equityTotal common shareholders' equity111,360 79,674 Total common shareholders' equity136,737 103,840 
Total liabilities and shareholders' equityTotal liabilities and shareholders' equity$775,713 $655,354 Total liabilities and shareholders' equity$899,971 $772,941 
* Prior period has been adjusted for the 2-for-one stock split.
See notes to condensed consolidated financial statements (unaudited).See notes to condensed consolidated financial statements (unaudited).  See notes to condensed consolidated financial statements (unaudited).
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Index
THE DAVEY TREE EXPERT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share dollar amounts)
Three Months EndedNine Months Ended Three Months EndedNine Months Ended
October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
October 1,
2022
October 2,
2021
October 1,
2022
October 2,
2021
RevenuesRevenues$370,244 $337,453 $1,024,541 $944,980 Revenues$398,945 $370,244 $1,143,548 $1,024,541 
Costs and expenses:Costs and expenses:Costs and expenses:
OperatingOperating232,599 208,638 650,909 598,225 Operating254,661 232,599 740,422 650,909 
SellingSelling67,353 60,203 178,876 162,287 Selling72,364 67,353 201,315 178,876 
General and administrativeGeneral and administrative20,739 19,891 69,712 60,477 General and administrative27,964 20,739 87,014 69,712 
Depreciation and amortizationDepreciation and amortization14,127 13,825 41,287 42,553 Depreciation and amortization13,780 14,127 41,082 41,287 
Gain on sale of assets, netGain on sale of assets, net(1,507)(476)(4,174)(2,045)Gain on sale of assets, net(2,837)(1,507)(5,787)(4,174)
Total costs and expensesTotal costs and expenses333,311 302,081 936,610 861,497 Total costs and expenses365,932 333,311 1,064,046 936,610 
Income from operationsIncome from operations36,933 35,372 87,931 83,483 Income from operations33,013 36,933 79,502 87,931 
Other income (expense):Other income (expense):Other income (expense):
Interest expenseInterest expense(1,449)(1,579)(4,093)(5,477)Interest expense(2,164)(1,449)(5,312)(4,093)
Interest incomeInterest income39 1,688 161 1,885 Interest income303 39 489 161 
Other, netOther, net(2,298)(1,499)(5,548)(4,550)Other, net(3,371)(2,298)(8,241)(5,548)
Income before income taxesIncome before income taxes33,225 33,982 78,451 75,341 Income before income taxes27,781 33,225 66,438 78,451 
Income taxesIncome taxes8,298 9,447 20,554 20,945 Income taxes7,317 8,298 17,407 20,554 
Net incomeNet income$24,927 $24,535 $57,897 $54,396 Net income$20,464 $24,927 $49,031 $57,897 
Net income per share:*
Net income per share:Net income per share:
BasicBasic$.56 $.54 $1.28 $1.18 Basic$.46 $.56 $1.10 $1.28 
DilutedDiluted$.52 $.51 $1.21 $1.13 Diluted$.44 $.52 $1.05 $1.21 
Weighted-average shares outstanding:*
Weighted-average shares outstanding:Weighted-average shares outstanding:
BasicBasic44,885 45,748 45,257 45,912 Basic44,148 44,885 44,422 45,257 
DilutedDiluted47,951 47,708 47,785 48,005 Diluted46,405 47,951 46,719 47,785 
* Prior period has been adjusted for the 2-for-one stock split.
Certain amounts in the prior year have been recast as a result of the change in accounting principle as discussed in Note A.
See notes to condensed consolidated financial statements (unaudited).See notes to condensed consolidated financial statements (unaudited).See notes to condensed consolidated financial statements (unaudited).

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Index
THE DAVEY TREE EXPERT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(In thousands)
Three Months EndedNine Months EndedThree Months EndedNine Months Ended
October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
October 1,
2022
October 2,
2021
October 1,
2022
October 2,
2021
Net incomeNet income$24,927 $24,535 $57,897 $54,396 Net income$20,464 $24,927 $49,031 $57,897 
Components of other comprehensive income (loss), net of tax:Components of other comprehensive income (loss), net of tax:Components of other comprehensive income (loss), net of tax:
Foreign currency translation adjustmentsForeign currency translation adjustments(788)629 105 (610)Foreign currency translation adjustments(1,934)(788)(2,455)105 
Unrealized loss on available-for-sale securitiesUnrealized loss on available-for-sale securities(98)— (279)— 
Amortization of defined benefit pension items:Amortization of defined benefit pension items:Amortization of defined benefit pension items:
Net actuarial lossNet actuarial loss27 16 77 49 Net actuarial loss18 27 55 77 
Prior service costPrior service cost11 13 35 36 Prior service cost11 13 35 
Defined benefit pension plan adjustmentsDefined benefit pension plan adjustments38 29 112 85 Defined benefit pension plan adjustments22 38 68 112 
Other comprehensive income (loss), net of taxOther comprehensive income (loss), net of tax(750)658 217 (525)Other comprehensive income (loss), net of tax(2,010)(750)(2,666)217 
Comprehensive incomeComprehensive income$24,177 $25,193 $58,114 $53,871 Comprehensive income$18,454 $24,177 $46,365 $58,114 
Certain amounts in the prior year have been recast as a result of the change in accounting principle as discussed in Note A.
See notes to condensed consolidated financial statements (unaudited).See notes to condensed consolidated financial statements (unaudited).See notes to condensed consolidated financial statements (unaudited).


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Index
THE DAVEY TREE EXPERT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
(In thousands, except per share data)
Common
Shares
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss),
Net of Tax
Common
Shares
Held in
Treasury
Total
 Common
Shareholders'
Equity
Balances at July 3, 2021$38,049 $123,822 $224,707 $(3,580)$(290,253)$92,745 
Net income— — 24,927 — — 24,927 
Change in 401KSOP and ESOP related shares(16)(529)— — — (545)
Shares sold to employees— 1,655 — — 1,293 2,948 
Options exercised— (228)— — 1,828 1,600 
Stock-based compensation— 458— — — 458 
Dividends, $.015 per share *— — (781)— — (781)
Currency translation adjustments— — — (788)— (788)
Defined benefit pension plans— — — 38 — 38 
Shares purchased— — — — (9,242)(9,242)
Balances at October 2, 2021$38,033 $125,178 $248,853 $(4,330)$(296,374)$111,360 
Balances at January 1, 2021$37,801 $110,069 $206,711 $(4,547)$(270,360)$79,674 
Net income— — 57,897 — — 57,897 
Change in 401KSOP and ESOP related shares232 6,679 (13,628)— — (6,717)
Shares sold to employees— 7,098 — — 6,645 13,743 
Options exercised— (636)— — 3,849 3,213 
Stock-based compensation— 1,968 — — — 1,968 
Dividends, $.043 per share *— — (2,127)— — (2,127)
Currency translation adjustments— — — 105 — 105 
Defined benefit pension plans— — — 112 — 112 
Shares purchased— — — — (36,508)(36,508)
Balances at October 2, 2021$38,033 $125,178 $248,853 $(4,330)$(296,374)$111,360 
* Adjusted for the 2-for-one stock split.

Common
Shares
Additional
Paid-in
Capital
Common
Shares
Subscribed,
Unissued
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss),
Net of Tax
Common
Shares
Held in
Treasury
Common
Shares
Subscription
Receivable
Total
 Common
Shareholders'
Equity
Balances at July 2, 2022$38,645 $151,752 $— $266,745 $(4,829)$(333,611)$533 $119,235 
Net income— — — 20,464 — — — 20,464 
Change in 401KSOP and ESOP related shares(247)(4,215)— — — — (4,461)
Shares sold to employees— 3,354 — — — 2,623 — 5,977 
Options exercised— 35 — — — 137 — 172 
Subscription shares— 1,554 23,954 — — 1,212 (21,167)5,553 
Stock-based compensation— 1,631 — — — — — 1,631 
Dividends, $.020 per share— — — (931)— — — (931)
Currency translation adjustments— — — — (1,934)— — (1,934)
Defined benefit pension plans— — — — 22 — — 22 
Available-for-sale securities— — — — (98)— — (98)
Shares purchased— — — — — (8,893)— (8,893)
Balances at October 1, 2022$38,398 $154,111 $23,954 $286,279 $(6,839)$(338,532)$(20,634)$136,737 
Balances at January 1, 2022$38,379 $135,897 $— $239,979 $(4,173)$(306,242)$— $103,840 
Net income— — — 49,031 — — — 49,031 
Change in 401KSOP and ESOP related shares19 1,840 — (49)— — — 1,810 
Shares sold to employees— 11,714 — — — 9,623 — 21,337 
Options exercised— (1,122)— — — 2,742 — 1,620 
Subscription shares— 1,554 23,954 — — 1,212 (20,634)6,086 
Stock-based compensation— 4,228 — — — — — 4,228 
Dividends, $.058 per share— — — (2,682)— — — (2,682)
Currency translation adjustments— — — — (2,455)— — (2,455)
Defined benefit pension plans— — — — 68 — — 68 
Available-for-sale securities— — — (279)— — (279)
Shares purchased— — — — — (45,867)— (45,867)
Balances at October 1, 2022$38,398 $154,111 $23,954 $286,279 $(6,839)$(338,532)$(20,634)$136,737 


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Index
THE DAVEY TREE EXPERT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
(In thousands, except per share data) (continued)
Common
Shares
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss),
Net of Tax
Common
Shares
Held in
Treasury
Total
 Common
Shareholders'
Equity
Common
Shares
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss),
Net of Tax
Common
Shares
Held in
Treasury
Total
 Common
Shareholders'
Equity
Balances at June 27, 2020$37,784 $103,291 $202,843 $(6,586)$(262,210)$75,122 
Balances at July 3, 2021Balances at July 3, 2021$38,049 $123,822 $224,707 $(3,580)$(290,253)$92,745 
Net incomeNet income— — 24,535 — — 24,535 Net income— — 24,927 — — 24,927 
Change in 401KSOP and ESOP related sharesChange in 401KSOP and ESOP related shares(44)(1,067)— — — (1,111)Change in 401KSOP and ESOP related shares(16)(529)— — — (545)
Shares sold to employeesShares sold to employees— 1,119 — — 1,058 2,177 Shares sold to employees— 1,655 — — 1,293 2,948 
Options exercisedOptions exercised— 84— — 458 542 Options exercised— (228)— — 1,828 1,600 
Stock-based compensationStock-based compensation— 796— — — 796 Stock-based compensation— 458— — — 458 
Dividends, $.013 per share *— — (569)— — (569)
Dividends, $.015 per shareDividends, $.015 per share— — (781)— — (781)
Currency translation adjustmentsCurrency translation adjustments— — — 629 — 629 Currency translation adjustments— — — (788)— (788)
Defined benefit pension plansDefined benefit pension plans— — — 29 — 29 Defined benefit pension plans— — — 38 — 38 
Shares purchasedShares purchased— — — — (3,473)(3,473)Shares purchased— — — — (9,242)(9,242)
Balances at September 26, 2020$37,740 $104,223 $226,809 $(5,928)$(264,167)$98,677 
Balances at October 2, 2021Balances at October 2, 2021$38,033 $125,178 $248,853 $(4,330)$(296,374)$111,360 
Balances at January 1, 2020$37,767 $96,366 $177,711 $(5,403)$(246,595)$59,846 
Balances at January 1, 2021Balances at January 1, 2021$37,801 $110,069 $206,711 $(4,547)$(270,360)$79,674 
Net incomeNet income— — 54,396 — — 54,396 Net income— — 57,897 — — 57,897 
Change in 401KSOP and ESOP related sharesChange in 401KSOP and ESOP related shares(27)(661)(3,590)— — (4,278)Change in 401KSOP and ESOP related shares232 6,679 (13,628)— — (6,717)
Shares sold to employeesShares sold to employees— 7,269 — — 8,053 15,322 Shares sold to employees— 7,098 — — 6,645 13,743 
Options exercisedOptions exercised— (489)— — 1,864 1,375 Options exercised— (636)— — 3,849 3,213 
Stock-based compensationStock-based compensation— 1,738 — — — 1,738 Stock-based compensation— 1,968 — — — 1,968 
Dividends, $.038 per share *— — (1,708)— — (1,708)
Dividends, $.043 per shareDividends, $.043 per share— — (2,127)— — (2,127)
Currency translation adjustmentsCurrency translation adjustments— — — (610)— (610)Currency translation adjustments— — — 105 — 105 
Defined benefit pension plansDefined benefit pension plans— — — 85 — 85 Defined benefit pension plans— — — 112 — 112 
Shares purchasedShares purchased— — — — (27,489)(27,489)Shares purchased— — — — (36,508)(36,508)
Balances at September 26, 2020$37,740 $104,223 $226,809 $(5,928)$(264,167)$98,677 
*Adjusted for the 2-for-one stock split.
Certain amounts in the prior year have been recast as a result of the change in accounting principle as discussed in Note A.
Balances at October 2, 2021Balances at October 2, 2021$38,033 $125,178 $248,853 $(4,330)$(296,374)$111,360 
See notes to condensed consolidated financial statements (unaudited).See notes to condensed consolidated financial statements (unaudited).   See notes to condensed consolidated financial statements (unaudited).   
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Index
THE DAVEY TREE EXPERT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Nine Months EndedNine Months Ended
October 2,
2021
September 26,
2020
October 1,
2022
October 2,
2021
Operating activitiesOperating activities  Operating activities  
Net incomeNet income$57,897 $54,396 Net income$49,031 $57,897 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortizationDepreciation and amortization41,287 42,553 Depreciation and amortization41,082 41,287 
OtherOther(1,242)35 Other(683)(1,242)
Changes in operating assets and liabilities, net of assets acquired:Changes in operating assets and liabilities, net of assets acquired:Changes in operating assets and liabilities, net of assets acquired:
Accounts receivableAccounts receivable(30,268)(34,801)Accounts receivable(49,451)(30,268)
Accounts payable and accrued expensesAccounts payable and accrued expenses(9,471)28,389 Accounts payable and accrued expenses12,709 (9,471)
Self-insurance accrualsSelf-insurance accruals13,041 14,686 Self-insurance accruals13,306 13,041 
Prepaid expensesPrepaid expenses(13,442)(7,506)Prepaid expenses(10,724)(13,442)
Other, netOther, net(401)1,676 Other, net7,710 (401)


(496)45,032 

13,949 (496)
Net cash provided by operating activitiesNet cash provided by operating activities57,401 99,428 Net cash provided by operating activities62,980 57,401 
Investing activitiesInvesting activities  Investing activities  
Capital expenditures:Capital expenditures:  Capital expenditures:  
EquipmentEquipment(47,907)(38,071)Equipment(54,829)(47,907)
Land and buildingsLand and buildings(8,728)(2,408)Land and buildings(15,916)(8,728)
Purchases of businesses, net of cash acquired and debt incurredPurchases of businesses, net of cash acquired and debt incurred(10,227)(3,826)Purchases of businesses, net of cash acquired and debt incurred(4,453)(10,227)
Other7,085 2,691 
Proceeds from sales of property and equipmentProceeds from sales of property and equipment6,781 7,085 
Purchases of marketable securitiesPurchases of marketable securities(41,305)— 
Proceeds from sale of marketable securitiesProceeds from sale of marketable securities14,114 — 
Net cash used in investing activitiesNet cash used in investing activities(59,777)(41,614)Net cash used in investing activities(95,608)(59,777)
Financing activitiesFinancing activities  Financing activities  
Revolving credit facility borrowingsRevolving credit facility borrowings279,163 522,500 Revolving credit facility borrowings453,885 279,163 
Revolving credit facility paymentsRevolving credit facility payments(245,685)(554,500)Revolving credit facility payments(402,618)(245,685)
Purchase of common shares for treasuryPurchase of common shares for treasury(36,508)(27,489)Purchase of common shares for treasury(45,867)(36,508)
Sale of common shares from treasurySale of common shares from treasury16,956 16,698 Sale of common shares from treasury29,043 16,956 
Dividends paidDividends paid(2,127)(1,708)Dividends paid(2,682)(2,127)
Proceeds from notes payableProceeds from notes payable217,867 152,128 Proceeds from notes payable69,337 217,867 
Payments of notes payablePayments of notes payable(207,786)(149,843)Payments of notes payable(62,602)(207,786)
Payments of finance leasesPayments of finance leases(2,688)(1,525)Payments of finance leases(2,313)(2,688)
Net cash provided by (used in) financing activities19,192 (43,739)
Net cash provided by financing activitiesNet cash provided by financing activities36,183 19,192 
Effect of exchange rate changes on cashEffect of exchange rate changes on cash40 (17)Effect of exchange rate changes on cash(171)40 
Increase in cashIncrease in cash16,856 14,058 Increase in cash3,384 16,856 
Cash, beginning of periodCash, beginning of period16,201 11,000 Cash, beginning of period19,460 16,201 
Cash, end of periodCash, end of period$33,057 $25,058 Cash, end of period$22,844 $33,057 
Supplemental cash flow information follows:Supplemental cash flow information follows:  Supplemental cash flow information follows:  
Interest paidInterest paid$4,715 $6,408 Interest paid$3,764 $4,715 
Income taxes paidIncome taxes paid21,204 17,055 Income taxes paid9,869 21,204 
Certain amounts in the prior year have been recast as a result of the change in accounting principle as discussed in Note A.
See notes to condensed consolidated financial statements (unaudited).See notes to condensed consolidated financial statements (unaudited).  See notes to condensed consolidated financial statements (unaudited).  
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 20211, 2022
(Amounts in thousands, except share data)

A.Basis of Financial Statement Preparation
The condensed consolidated financial statements present the financial position, results of operations and cash flows of The Davey Tree Expert Company and its subsidiaries. When we refer to “we,” “us,” “our,” the "Company," “Davey,” or “Davey Tree”, we mean The Davey Tree Expert Company and its subsidiaries, unless otherwise expressly stated or the context indicates otherwise.
We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), as codified in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”("ASC"), and with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. The condensed consolidated financial statements include all adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal, recurring nature. All intercompany accounts and transactions have been eliminated in consolidation and certain amounts in the three and nine months ended September 26, 2020 have been recast to reflect the retrospective application of the change in accounting principle discussed in the Change in Accounting Method section of this note.consolidation.
Certain information and disclosures required by U.S. GAAP for complete financial statements have been omitted in accordance with the rules and regulations of the SEC. We suggest that these condensed consolidated financial statements be read in conjunction with the financial statements included in our annual report on Form 10-K for the year ended December 31, 20202021 (the “2020“2021 Annual Report”).
Per Common Share Information--All common share and per share data have been retroactively adjusted to recognize a 2-for-one stock split of our common shares effective October 1, 2021. On September 20, 2021, in connection with the stock split, the Company filed a Certificate of Amendment to its 2017 Amended Articles of Incorporation with the Secretary of State of the State of Ohio, which became effective upon filing and (1) proportionately increased the authorized number of common shares from 48,000,000 to 96,000,000 and (2) proportionately decreased the par value of the issued and unissued common shares from $1.00 per share to $.50 per share.
Use of Estimates in Financial Statement Preparation--The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect reported amounts. Our condensed consolidated financial statements include amounts that are based on management’s best estimates and judgments. Estimates are used for, but not limited to, accounts receivable valuation, depreciable lives of fixed assets, long-lived asset valuation, self-insurance accruals, income taxes, stock valuation and revenue recognition. Actual results could differ from those estimates.
While the coronavirus ("COVID-19") pandemic did not have a material adverse effect on our reported results for the first nine months of our 2021 fiscal year, the overall extent and duration of the impact of COVID-19 on businesses and economic activity generally remains unclear. The extentOur business continues to which our operations may be impacted by COVID-19 will depend largely on future developments, which are highly uncertain due to its continual evolution and cannot be accurately predicted,a number of macro-economic factors, including new information which may emerge concerning the severitytrailing impact of the outbreakCOVID-19 pandemic. Global supply chains and actions by government authorities to contain the pandemic or treat its impact, including reimposing previously-lifted measuresproduct availability remain highly challenged and implementing vaccine mandates, which could impact ourongoing global events in Eastern Europe have only exacerbated an already difficult operating environment. These factors, combined with higher fuel costs, rising interest rates and a highly competitive labor supplymarket, have created an inflationary environment and future results of operations, as well as the possibility additional measures will be put in place, especially as sporadic outbreaks of COVID-19 continue to occur, and the success of vaccine rollouts and the effectiveness of such vaccines, among other things.
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The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
cost pressures.
The Company’s fiscal quarters each contain thirteen operating weeks, with the exception of the fourth quarter of a 53-week fiscal year, which contains fourteen operating weeks. The Company’s fiscal quarter that ended October 1, 2022 is referred to as the third quarter of 2022, and the fiscal quarter ended October 2, 2021 is referred to as the third quarter of 2021, and the fiscal quarter ended September 26, 2020 is referred to as the third quarter of 2020.
Change in Accounting Method--During the year ended December 31, 2020, we changed our method of accounting for our workers' compensation accruals from measuring the liabilities on a discounted basis to an undiscounted basis. We believe that measuring the workers' compensation accruals on an undiscounted basis is preferable because it simplifies the accounting for the liabilities, provides consistency with our other lines of coverage (vehicle liability and general liability) and results in financial statement presentation consistent with our industry peers.
As a result of this change in method of accounting, our financial statements and corresponding footnotes for the three and nine months ended September 26, 2020 have been recast to reflect the retrospective application of the change in accounting principle. We recorded the cumulative effect for the change in accounting principle as a decrease of $1,693 to retained earnings as of January 1, 2018. This change decreased our retained earnings by $2,059 at December 31, 2019.
The following tables present the effects of the change in accounting principle to our financial statements included herein:
Three Months Ended
September 26, 2020
Nine Months Ended
September 26, 2020
Statement of OperationsPrior to
Change in
Accounting
Principle
Effect of
Change
RecastPrior to
Change in
Accounting
Principle
Effect of
Change
Recast
Operating expense$208,510 $128 $208,638 $597,963 $262 $598,225 
Total costs and expenses301,953 128 302,081 861,235 262 861,497 
Income from operations35,500 (128)35,372 83,745 (262)83,483 
Income before income taxes34,110 (128)33,982 75,603 (262)75,341 
Income tax expense (benefit)9,483 (36)9,447 21,018 (73)20,945 
Net income24,627 (92)24,535 54,585 (189)54,396 
Net income per share:
Basic$.54 $— $.54 $1.19 $(.01)$1.18 
Diluted$.52 $(.01)$.51 $1.14 $(.01)$1.13 
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The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
Nine Months Ended
September 26, 2020
Cash FlowPrior to
Change in
Accounting
Principle
Effect of
Change
Recast
Net income$54,585 $(189)$54,396 
Adjustments to reconcile net income to net cash provided by operating activities--other108 (73)35 
Self-insurance accruals14,424 262 14,686 
Net cash provided by operating activities99,428 — 99,428 
2021.
Recent Accounting Guidance
Accounting Standards Adopted in 2021
Accounting Standards Update 2019-12, Income Taxes (Topic 740)– Simplifying the Accounting for Income Taxes--In December 2019, the FASB issued Accounting Standards Update ("ASU") No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12)", which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including applicable interim periods. The Company adopted ASU 2019-12 beginning January 1, 2021. The adoption of ASU 2019-12 did not have a material effect on the Company's financial statements.
Accounting Standard Not Yet Adopted
Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848)--In March 2020, the FASB issued ASUAccounting Standards Update ("ASU") 2020-04, "Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting". The guidance of this ASU is designed to provide relief from the accounting analysis and impacts that may otherwise be required for modifications to agreements (e.g., loans, debt securities, derivatives, borrowings) necessitated by reference rate reform. It also
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The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
provides optional expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by reference rate reform. Application of the guidance is optional, is only available in certain situations, and is only available for companies to apply until December 31, 2022. In January 2021, the FASB amended ASU 2020-04 by issuing Accounting Standards Update No. 2021-01, Reference Rate Reform Scope ("ASU 2021-01"). ASU 2021-01 clarifies the scope of optional expedients and exceptions to derivatives that are affected by the discounting transition. The Company is currently reviewing its agreements impacted by the reference rate reform and does not expect this ASUthese ASUs to have a material impact to the Company’s financial statements.
B.    Seasonality of Business
Due to the seasonality of our business, our operating results for the three and nine months ended October 2, 20211, 2022 are not indicative of results that may be expected for any other interim period or for the year ending December 31, 2021.2022. Our business seasonality traditionally results in higher revenues during the second and third quarters as compared with the first and fourth quarters of the year, while the methods of accounting for fixed costs, such as depreciation expense, amortization, rent and interest expense, are not significantly impacted by business seasonality.
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)

C.    Accounts Receivable, Net and Supplemental Balance-Sheet Information
Accounts receivable, net, consisted of the following:
Accounts receivable, netAccounts receivable, netOctober 2,
2021
December 31,
2020
Accounts receivable, netOctober 1,
2022
December 31,
2021
Accounts receivableAccounts receivable$200,895 $214,887 Accounts receivable$236,903 $215,336 
Unbilled receivables(1)
Unbilled receivables(1)
85,064 42,251 
Unbilled receivables(1)
92,732 65,957 
285,959 257,138  329,635 281,293 
Less allowances for credit lossesLess allowances for credit losses2,257 4,217 Less allowances for credit losses3,344 3,013 
Accounts receivable, netAccounts receivable, net$283,702 $252,921 Accounts receivable, net$326,291 $278,280 
(1)    Unbilled receivables consist of work-in-process in accordance with the terms of contracts, primarily with utility services customers.
The following items comprised the amounts included in the balance sheets:
Other current assetsOctober 2,
2021
December 31,
2020
Refundable income taxes$2,215 $— 
Prepaid expenses38,543 24,956 
Other6,660 778 
Total$47,418 $25,734 
Property and equipment, netOctober 2,
2021
December 31,
2020
Land and land improvements$19,924 $19,731 
Buildings and leasehold improvements55,559 49,460 
Equipment653,656 623,847 
 729,139 693,038 
Less accumulated depreciation499,564 488,321 
Total$229,575 $204,717 
Other assets, noncurrentOctober 2,
2021
December 31,
2020
Other current assetsOther current assetsOctober 1,
2022
December 31,
2021
Refundable income taxesRefundable income taxes$364 $1,346 
Prepaid expensesPrepaid expenses41,619 30,911 
Assets invested for self-insuranceAssets invested for self-insurance$11,859 $19,359 Assets invested for self-insurance4,000 4,250 
Investment--cost-method affiliate1,258 1,258 
Deferred income taxes3,194 4,167 
OtherOther4,569 4,972 Other898 1,346 
TotalTotal$20,880 $29,756 Total$46,881 $37,853 
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The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 20211, 2022
(Amounts in thousands, except share data)
Accrued expensesOctober 2,
2021
December 31,
2020
Employee compensation$33,163 $36,108 
Accrued compensated absences12,399 14,534 
Self-insured medical claims1,221 2,065 
Income tax payable8,978 6,926 
Customer advances, deposits3,519 2,067 
Taxes, other than income28,681 30,354 
Other4,704 6,387 
Total$92,665 $98,441 
Property and equipment, netOctober 1,
2022
December 31,
2021
Land and land improvements$26,075 $22,129 
Buildings and leasehold improvements75,097 63,933 
Equipment664,518 646,552 
 765,690 732,614 
Less accumulated depreciation502,989 504,629 
Total$262,701 $227,985 
Other assets, noncurrentOctober 1,
2022
December 31,
2021
Investment--cost-method affiliate$1,258 $1,258 
Deferred income taxes5,032 4,937 
Cloud computing arrangements3,353 6,530 
Other4,661 4,539 
Total$14,304 $17,264 
Accrued expensesOctober 1,
2022
December 31,
2021
Employee compensation$34,727 $37,828 
Accrued compensated absences11,943 11,007 
Self-insured medical claims3,088 2,891 
Income tax payable6,685 145 
Customer advances, deposits6,957 4,009 
Taxes, other than income17,876 13,789 
Other3,771 5,469 
Total$85,047 $75,138 
Other current liabilitiesOctober 1,
2022
December 31,
2021
Current portion of:
Lease liability-operating leases$31,726 $28,682 
Self-insurance accruals42,774 48,867 
Total$74,500 $77,549 
Other current liabilitiesOctober 2,
2021
December 31,
2020
Notes payable$149 $— 
Current portion of:
Lease liability-operating leases27,253 19,124 
Self-insurance accruals34,269 37,707 
Total$61,671 $56,831 
Other noncurrent liabilitiesOther noncurrent liabilitiesOctober 2,
2021
December 31,
2020
Other noncurrent liabilitiesOctober 1,
2022
December 31,
2021
Non-qualified retirement plansNon-qualified retirement plans$8,516 $7,365 Non-qualified retirement plans$9,200 $8,713 
OtherOther2,940 3,324 Other2,981 2,870 
TotalTotal$11,456 $10,689 Total$12,181 $11,583 
D.    Business Combinations
Our cash investments in businesses during the first nine months of 20212022 were $16,376, including liabilities assumed of $3,662$4,453 and we issued debt, issued, in the form of notes payable to the sellers, of $2,487, and$1,233 which have been included in our Residential and Commercial and Utility segments. Measurement-periodIn the first nine months of 2022, we also made a payment of $100 for a contingent liability incurred in an acquisition made during the fourth quarter of 2021. Measurement-
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
period adjustments are not complete. The measurement period for purchase price allocations ends as soon as information of the facts and circumstances becomes available, but does not exceed one year from the acquisition date. During the year ended December 31, 2020,2021, our investmentcash investments in businesses was $11,150, including liabilities assumed of $613$11,725 and debt issued, in the form of notes payable to the sellers, of $2,472.

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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
was $2,961.
The following table summarizes the preliminary purchase price allocation of the estimated fair values of the assets acquired and liabilities assumed:
Nine Months Ended
October 2, 2021
Year Ended
December 31, 2020
Nine Months Ended
October 1, 2022
Year Ended
December 31, 2021
Detail of acquisitions:Detail of acquisitions:Detail of acquisitions:
Assets acquired:Assets acquired:  Assets acquired:  
CashCash$199 $— Cash$— $292 
ReceivablesReceivables511 10 Receivables— 509 
Operating suppliesOperating supplies976 22 Operating supplies39 1,044 
Prepaid expensePrepaid expense121 Prepaid expense— 203 
EquipmentEquipment3,750 1,932 Equipment1,186 4,049 
Deposits and otherDeposits and other1,574 — Deposits and other265 1,574 
Intangible assetsIntangible assets2,434 3,545 Intangible assets1,350 3,005 
GoodwillGoodwill6,811 5,635 Goodwill3,175 7,723 
Liabilities assumedLiabilities assumed(3,662)(613)Liabilities assumed(329)(3,713)
Debt issued for purchases of businessesDebt issued for purchases of businesses(2,487)(2,472)Debt issued for purchases of businesses(1,233)(2,961)
Cash paidCash paid$10,227 $8,065 Cash paid$4,453 $11,725 
The results of operations of acquired businesses have been included in the condensed consolidated statements of operations beginning as of the effective dates of acquisition. The effect of these acquisitions on our consolidated revenues and results of operations for the periodthree and nine months ended October 2, 20211, 2022 was not significant. Pro forma net sales and results of operations for the acquisitions, had they occurred at the beginning of the nine months ended October 2, 2021,1, 2022, are not material and, accordingly, are not provided.
The acquired intangible assets consist of tradenames, non-competition agreements and customer relationships. The tradenames and customer relationships were assigned an average useful life of seven years and the non-competition agreements were assigned an average useful life of five years.
Subsequent to October 1, 2022 and through November 8, 2022, we acquired one business approximating $1,450 with no liabilities assumed and debt issued of $470. The acquired company is in our Residential and Commercial segment and is located in North Carolina. We do not expect the effect of this acquisition on our consolidated revenues and results of operations to be significant.
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)

E.    Marketable Securities
The following table summarizes available-for-sale debt securities held at October 1, 2022 by asset type:
Available-For-Sale Debt Securities
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
(Net Carrying Amount)
October 1, 2022
Fixed maturity:
United States Government and agency securities$20,556 $$(301)$20,261 
Corporate notes and bonds315 — (58)257 
Total available-for-sale debt securities$20,871 $$(359)$20,518 
December 31, 2021
Fixed maturity:
United States Government and agency securities$3,244 $11 $(25)$3,230 
Corporate notes and bonds174 — 176 
Total available-for-sale debt securities$3,418 $13 $(25)$3,406 
Marketable securities are composed of available-for-sale debt securities and marketable equity securities and all marketable securities are held at fair value. We carry a portion of our marketable securities portfolio in long-term assets since they are generally held for the settlement of our insurance claims processed through our wholly owned captive insurance subsidiary.
Available-for-sale debt securities are included in marketable securities and other investments totaling $20,518 and $3,406 at October 1, 2022 and December 31, 2021, respectively. Realized gains and losses on sales of available-for-sale debt securities are recognized in net income on the specific identification basis. Changes in the fair values of available-for-sale debt securities that are determined to be holding gains or losses are recorded through accumulated other comprehensive income (loss) net of applicable taxes, within shareholders' equity. In assessing whether a credit loss exists, we evaluate our ability to hold the investment, the strength of the underlying collateral and the extent to which the investment's amortized cost or cost, as appropriate, exceeds its related fair value.
We held approximately $18,846 and $11,386 in marketable equity securities as of October 1, 2022 and December 31, 2021, respectively. Realized and unrealized gains and losses on marketable equity securities are included in other income (expense) in the Consolidated Statements of Operations.

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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
The net carrying values of available-for-sale debt securities at October 1, 2022 by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.
Amortized CostFair Value
Due:
Less than one year$12,999 $12,997 
One year through five years5,729 5,568 
Five years through ten years234 191 
After ten years1,909 1,762 
Total$20,871 $20,518 
F.    Identified Intangible Assets and Goodwill, Net
The carrying amounts of the identified intangible assets and goodwill acquired in connection with our acquisitions were as follows:
 October 2, 2021December 31, 2020
Carrying
Amount
Accumulated
Amortization
Carrying
Amount
Accumulated
Amortization
Amortized intangible assets:    
Customer lists/relationships$31,847 $23,576 $30,402 $22,040 
Employment-related9,822 8,161 9,320 7,755 
Tradenames8,426 6,533 7,938 6,195 
Amortized intangible assets50,095 $38,270 47,660 $35,990 
Less accumulated amortization38,270  35,990  
Identified intangible assets, net$11,825  $11,670  
Goodwill$55,072  $48,256  
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
 October 1, 2022December 31, 2021
Carrying
Amount
Accumulated
Amortization
Carrying
Amount
Accumulated
Amortization
Amortized intangible assets:    
Customer lists/relationships$33,498 $26,222 $32,294 $24,090 
Employment-related10,451 8,754 9,946 8,301 
Tradenames8,641 6,977 8,426 6,642 
Amortized intangible assets52,590 $41,953 50,666 $39,033 
Less accumulated amortization41,953  39,033  
Identified intangible assets, net$10,637  $11,633  
Goodwill$58,999  $55,980  
The changes in the carrying amounts of goodwill, by segment, for the nine months ended October 2, 20211, 2022 and the year ended December 31, 20202021 were as follows:
Balance at
January 1, 2021
AcquisitionsTranslation
and Other
Adjustments
Balance at
October 2, 2021
Balance at
January 1, 2022
AcquisitionsTranslation
and Other
Adjustments
Balance at
October 1, 2022
UtilityUtility$4,911 $— $— $4,911 Utility$4,911 $30 $— $4,941 
Residential and CommercialResidential and Commercial43,345 6,811 50,161 Residential and Commercial51,069 3,145 (156)54,058 
TotalTotal$48,256 $6,811 $$55,072 Total$55,980 $3,175 $(156)$58,999 
Balance at
January 1, 2020
AcquisitionsTranslation
and Other
Adjustments
Balance at
December 31, 2020
Balance at
January 1, 2021
AcquisitionsTranslation
and Other
Adjustments
Balance at
December 31, 2021
UtilityUtility$4,911 $— $— $4,911 Utility$4,911 $— $— $4,911 
Residential and CommercialResidential and Commercial37,374 5,635 336 43,345 Residential and Commercial43,345 7,723 51,069 
TotalTotal$42,285 $5,635 $336 $48,256 Total$48,256 $7,723 $$55,980 

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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
Estimated future aggregate amortization expense of intangible assets--The estimated future aggregate amortization expense of intangible assets, as of October 2, 2021,1, 2022, was as follows:
Estimated Future
Amortization Expense
Estimated Future
Amortization Expense
Remaining three months of 2021$743 
20222,884 
Remaining three months of 2022Remaining three months of 2022$820 
202320232,714 20233,073 
202420242,234 20242,752 
202520251,634 20251,970 
202620261,060 20261,132 
20272027648 
ThereafterThereafter556 Thereafter242 
$11,825 $10,637 


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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
F.G.    Short and Long-Term Debt and Commitments Related to Letters of Credit
We have short-term lines of credit with several banks totaling $11,091. At October 1, 2022, we had $8,971 available under the lines of credit and $2,120 committed through issued letters of credit. Borrowings outstanding generally bear interest at the banks' prime rate or LIBOR plus a margin adjustment of .75% to 1.50%.
Our long-term debt consisted of the following:
October 2,
2021
December 31,
2020
October 1,
2022
December 31,
2021
Revolving credit facility:Revolving credit facility:  Revolving credit facility:  
Swing-line borrowingsSwing-line borrowings$14,191 $— Swing-line borrowings$23,099 $16,832 
LIBOR borrowingsLIBOR borrowings20,000 — LIBOR borrowings75,000 30,000 
34,191 —  98,099 46,832 
Senior unsecured notes:Senior unsecured notes:Senior unsecured notes:
3.99% Senior unsecured notes3.99% Senior unsecured notes50,000 50,000 3.99% Senior unsecured notes50,000 50,000 
4.00% Senior unsecured notes4.00% Senior unsecured notes25,000 25,000 4.00% Senior unsecured notes25,000 25,000 
75,000 75,000 75,000 75,000 
Term loansTerm loans34,524 21,864 Term loans33,128 25,182 
143,715 96,864  206,227 147,014 
Less debt issuance costsLess debt issuance costs713 256 Less debt issuance costs558 674 
Less current portionLess current portion31,225 19,540 Less current portion31,090 22,809 
$111,777 $77,068  $174,579 $123,531 
Revolving Credit Facility--In August 2021, the Company amended and restated its revolving credit facility with its existing bank group. The amended and restated credit agreement, which expires in August 2026, permits borrowings, as defined, of up to $325,000, including a letter of credit sublimit of $150,000 and a swing-line commitment of $30,000. Under certain circumstances, the amount available under the revolving credit facility may be increased to $425,000. The revolving credit facility contains certain affirmative and negative covenants customary for this type of facility and includes financial covenant ratios with respect to a maximum leverage ratio (not to exceed 3.00 to 1.00 with exceptions in case of material acquisitions) and a minimum interest coverage ratio (not less than 3.00 to 1.00), in each case
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
subject to certain further restrictions as described in the credit agreement. As of October 2, 2021,1, 2022, we had unused commitments under the facility approximating $287,931,224,201, with $37,069$100,799 committed, consisting of borrowings of $34,19198,099 and issued letters of credit of $2,878.2,700.
Borrowings outstanding bear interest, at Davey Tree’s option, of either (a) the base rate or (b) LIBOR plus a margin adjustment ranging from .875% to 1.50%--with the margin adjustments based on the Company's leverage ratio at the time of borrowing. The base rate is the greater of (i) the agent bank’s prime rate, (ii) LIBOR plus 1.50%, or (iii) the federal funds rate plus .50%. A commitment fee ranging from .10% to .225% is also required based on the average daily unborrowed commitment.
3.99% Senior Unsecured Notes--On September 21, 2018, we issued 3.99% Senior Notes, Series A (the "3.99% Senior Notes"), in the aggregate principal amount of $50,000. The 3.99% Senior Notes are due September 21, 2028.
The 3.99% Senior Notes were issued pursuant to a Note Purchase and Private Shelf Agreement (the “Note Purchase and Shelf Agreement”) between the Company, PGIM, Inc. and the purchasers of the 3.99% Senior Notes, which was amended in September 2021. Among other things, the amendment increased the total facility limit to $150,000 and extended the issuance period for subsequent series of promissory notes to be issued and sold pursuant to the Note Purchase and Shelf Agreement to September 2024. The amendment also amended certain provisions and covenants to generally conform them to the corresponding provisions and covenants in the amended and restated revolving credit agreement. In addition, the amendment and restatement of the revolving credit agreement in August 2021 provided that the Company is permitted to incur indebtedness arising under the Note Purchase and Shelf Agreement in an aggregate
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
principal amount not to exceed $150,000. As the Company has previously issued notes in an aggregate amount of $75,000 under the Note Purchase and Shelf Agreement, it now has capacity to issue subsequent series of promissory notes pursuant to the Note Purchase and Shelf Agreement (the "Shelf Notes") in an aggregate amount of up to $75,000.
The 3.99% Senior Notes are equal in right of payment with our revolving credit facility and all other senior unsecured obligations of the Company. Interest is payable semiannually and 5five equal, annual principal payments commence on September 21, 2024 (the 6thsixth anniversary of issuance). The Note Purchase and Shelf Agreement contains customary events of default and covenants related to limitations on indebtedness and transactions with affiliates and the maintenance of certain financial ratios. The Company may prepay at any time all, or from time to time any part of, the outstanding principal amount of the 3.99% Senior Notes, subject to the payment of a make-whole amount.
4.00% Senior Unsecured Notes--On February 5, 2019, we issued 4.00% Senior Notes, Series B (the "4.00% Senior Notes") pursuant to the Note Purchase and Shelf Agreement in the aggregate principal amount of $25,000. The 4.00% Senior Notes are due September 21, 2028. The 4.00% Senior Notes are equal in right of payment with our revolving credit facility and all other senior unsecured obligations of the Company. Interest is payable semiannually and 5five equal, annual principal payments commence on September 21, 2024.
The net proceeds of all senior notes were used to pay down borrowings under our revolving credit facility.
Term loans--Periodically, the Company will enter into term loans for the procurement of insurance or to finance acquisitions.
Aggregate Maturities of Long-Term Debt--Aggregate maturities of long-term debt based on the principal amounts outstanding at October 2, 20211, 2022 were as follows: 2021--$9,583; 2022--$22,573;9,885; 2023--$1,472;21,635; 2024--$15,896;16,196; 2025--$15,000;15,411; 2026--$49,191;113,100; 2027--$15,000; and thereafter $30,000.$15,000.
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
Accounts Receivable Securitization Facility--In May 2021,June 2022, the Company amended its Accounts Receivable Securitization Facility (the "AR Securitization program") to extend the scheduled termination date for an additional one year-year period, to June 30, 2022.29, 2023. In addition to extending the termination date for another year, the amendment included a change toreplaced the letter of creditLondon Interbank Offered Rate (LIBOR) interest rate provisions with customary provisions based on the secured overnight financing rate ("LC"SOFR") issuance fee payable under the terms of the agreement, as described below..
The AR Securitization program has a limit of $100,000, of which $89,689 and $83,355 was issued for LCs as of both October 2, 20211, 2022 and December 31, 2020.2021, respectively.
Under the AR Securitization program, Davey Tree transfers by selling or contributing current and future trade receivables to a wholly-owned, bankruptcy-remote financing subsidiary which pledges a perfected first priority security interest in the trade receivables--equal to the issued LCs as of October 2, 2021--to1, 2022--to the bank in exchange for the bank issuing LCs.
Fees payable to the bank include: (a) an LC issuance fee, payable on each settlement date, in the amount of .90% per annum (1.00% prior to the May 2021 amendment) on the aggregate amount of all LCs outstanding plus outstanding reimbursement obligations (e.g., arising from drawn LCs), if any, and (b) an unused LC fee, payable monthly, equal to (i) .35% per annum for each day on which the sum of the total LCs outstanding plus any outstanding reimbursement obligations is greater than or equal to 50% of the facility limit and (ii) .45% per annum for each day on which the sum of the total LCs outstanding plus any outstanding reimbursement obligations is less than 50% of the facility limit. If an LC is drawn and the bank is not immediately reimbursed in full for the drawn amount, any outstanding reimbursement
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
obligation will accrue interest at a per annum rate equal to a reserve-adjusted LIBORthe term SOFR, plus 0.10% or, in certain circumstances, a base rate equal to the highergreatest of (i) the bank’s prime rate, and (ii) the federal funds rate plus .50% and (iii) 1.00% above the Daily one month SOFR plus 0.10% and, following any default, 2.00% plus the greater of (a) adjusted LIBORthe term SOFR plus 0.10% and (b) a base rate equal to the highergreatest of (i) the bank’s prime rate, (ii) and (ii) the federal funds rate plus .50%.(iii) above.
The agreements underlying the AR Securitization program contain various customary representations and warranties, covenants, and default provisions which provide for the termination and acceleration of the commitments under the AR Securitization program in circumstances including, but not limited to, failure to make payments when due, breach of a representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.
Total Commitments Related to Issued Letters of Credit--As of October 2, 2021,1, 2022, total commitments related to issued LCs were $88,363,$94,509, of which $2,878$2,700 were issued under the revolving credit facility, $83,355$89,689 were issued under the AR Securitization program, and $2,131$2,120 were issued under short-term lines of credit. As of December 31, 2020,2021, total commitments related to issued LCs were $88,242,$88,362, of which $2,877 were issued under the revolving credit facility, $83,355 were issued under the AR Securitization program, and $2,010$2,130 were issued under short-term lines of credit.
As of October 2, 2021,1, 2022, we were in compliance with all debt covenants.
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G.

Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
H.    Leases
We lease certain office and parking facilities, warehouse space, equipment, vehicles and information technology equipment under operating and finance leases. Lease expense for these leases is recognized within the Condensed Consolidated Statements of Operations on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred. The following table summarizes the amounts recognized in our Condensed Consolidated Balance Sheet related to leases:
Condensed Consolidated Balance Sheet
Classification
October 2,
2021
December 31,
2020
Assets 
Operating lease assetsRight-of-use assets - operating leases$81,789 $55,893 
Finance lease assetsProperty and equipment, net10,782 8,788 
Total lease assets $92,571 $64,681 
Liabilities 
Current operating lease liabilitiesOther current liabilities$27,253 $19,124 
Non-current operating lease liabilitiesLease liabilities - operating leases54,249 36,612 
Total operating lease liabilities 81,502 55,736 
Current portion of finance lease liabilitiesCurrent portion of long-term debt and finance lease liabilities2,263 2,273 
Non-current finance lease liabilitiesLease liabilities - finance leases7,886 6,479 
Total finance lease liabilities 10,149 8,752 
Total lease liabilities $91,651 $64,488 

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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
Condensed Consolidated Balance Sheet
Classification
October 1,
2022
December 31,
2021
Assets 
Operating lease assetsRight-of-use assets - operating leases$95,350 $86,423 
Finance lease assetsProperty and equipment, net13,268 11,592 
Total lease assets $108,618 $98,015 
Liabilities 
Current operating lease liabilitiesOther current liabilities$31,726 $28,682 
Non-current operating lease liabilitiesLease liabilities - operating leases62,586 57,335 
Total operating lease liabilities 94,312 86,017 
Current portion of finance lease liabilitiesCurrent portion of long-term debt and finance lease liabilities2,998 2,459 
Non-current finance lease liabilitiesLease liabilities - finance leases9,704 8,646 
Total finance lease liabilities 12,702 11,105 
Total lease liabilities $107,014 $97,122 
The components of lease cost recognized within our Condensed Consolidated Statements of Operations were as follows:
Three Months EndedNine Months EndedThree Months EndedNine Months Ended
Condensed Consolidated Statements
of Operations Classification
October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
Condensed Consolidated Statements
of Operations Classification
October 1,
2022
October 2,
2021
October 1,
2022
October 2,
2021
Operating lease costOperating lease costOperating expense$4,965 $2,877 $13,065 $7,776 Operating lease costOperating expense$6,649 $4,965 $19,095 $13,065 
Operating lease costOperating lease costSelling expense2,631 2,322 7,718 7,127 Operating lease costSelling expense2,926 2,631 8,492 7,718 
Operating lease costOperating lease costGeneral and administrative expense290 389 867 844 Operating lease costGeneral and administrative expense304 290 883 867 
Finance lease cost:Finance lease cost:Finance lease cost:
Amortization of right-of-use assetsAmortization of right-of-use assetsDepreciation and amortization752 570 1,985 1,404 Amortization of right-of-use assetsDepreciation and amortization889 752 2,334 1,985 
Interest expense on lease liabilitiesInterest expense on lease liabilitiesInterest expense52 45 134 103 Interest expense on lease liabilitiesInterest expense74 52 196 134 
Other lease cost (1)
Other lease cost (1)
Operating expense999 1,216 2,839 3,895 
Other lease cost (1)
Operating expense1,271 999 3,613 2,839 
Other lease cost (1)
Other lease cost (1)
Selling expense360 284 1,013 953 
Other lease cost (1)
Selling expense235 360 1,059 1,013 
Other lease cost (1)
Other lease cost (1)
General and administrative expense13 28 31 
Other lease cost (1)
General and administrative expense27 59 28 
Total lease costTotal lease cost$10,057 $7,716 $27,649 $22,133 Total lease cost$12,375 $10,057 $35,731 $27,649 
(1) Other lease cost includes short-term lease costs and variable lease costs.
We often have options to renew lease terms for buildings and other assets. The exercise of lease renewal options is generally at our sole discretion. In addition, certain lease agreements may be terminated prior to their original expiration date at our discretion. We evaluate each renewal and termination option at the lease commencement date to determine if we are reasonably certain to exercise the option on
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
the basis of economic factors. The weighted average remaining lease terms as of October 2, 20211, 2022 was 3.93.7 years for operating leases and 5.24.7 years for finance leases.
The discount rate implicit within our leases is generally not determinable and therefore the Company determines the discount rate based on its incremental borrowing rate. The incremental borrowing rate for each lease is determined based on its term and the currency in which lease payments are made, adjusted for the impacts of collateral. The weighted average discount rates used to measure our lease liabilities as of October 2, 20211, 2022 was 2.40%2.90% for operating leases and 2.04%2.72% for finance leases.
Supplemental Cash Flow Information Related to LeasesSupplemental Cash Flow Information Related to LeasesNine Months EndedSupplemental Cash Flow Information Related to LeasesNine Months Ended
October 2,
2021
September 26,
2020
October 1,
2022
October 2,
2021
Cash paid for amounts included in the measurement of lease liabilities:Cash paid for amounts included in the measurement of lease liabilities:Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leasesOperating cash flows from operating leases$(21,822)$(15,222)Operating cash flows from operating leases$(29,194)$(21,822)
Operating cash flows from finance leasesOperating cash flows from finance leases(134)(103)Operating cash flows from finance leases(196)(134)
Financing cash flows from finance leasesFinancing cash flows from finance leases(2,688)(1,525)Financing cash flows from finance leases(2,313)(2,688)
Right-of-use assets obtained in exchange for lease obligations:Right-of-use assets obtained in exchange for lease obligations:Right-of-use assets obtained in exchange for lease obligations:
Operating leasesOperating leases47,069 28,246 Operating leases38,403 47,069 
Finance leasesFinance leases4,174 7,339 Finance leases3,910 4,174 
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
Maturity Analysis of Lease LiabilitiesAs of October 2, 2021
Operating
Leases
Finance
Leases
Remaining three months of 2021$7,706 $554 
202227,259 2,361 
202320,061 2,151 
202413,395 2,029 
20259,607 1,510 
Thereafter7,313 2,069 
Total lease payments85,341 10,674 
Less interest3,839 525 
Total$81,502 $10,149 
Maturity Analysis of Lease LiabilitiesAs of October 1, 2022
Operating
Leases
Finance
Leases
Remaining three months of 2022$9,301 $747 
202331,878 3,237 
202424,610 3,106 
202516,964 2,472 
20269,277 2,101 
20273,343 1,123 
Thereafter4,061 732 
Total lease payments99,434 13,518 
Less interest5,122 816 
Total$94,312 $12,702 
H.I.    Stock-Based Compensation
Our shareholders approved the 2014 Omnibus Stock Plan (the “2014 Stock Plan”) at our annual meeting of shareholders on May 20, 2014. The 2014 Stock Plan replaced the expired 2004 Omnibus Stock Plan (the “2004 plan”) previously approved by the shareholders in 2004. The 2014 Stock Plan is administered by the Compensation Committee of the Board of Directors and has a term of ten years. All directors of the Company and employees of the Company and its subsidiaries are eligible to participate in the 2014 Stock Plan. The 2014 Stock Plan (similar to the 2004 plan) continues the maintenance of the Employee Stock Purchase Plan, as well as provisions for the grant of stock options and other stock-based incentives. The 2014 Stock Plan provides for the grant of 5five percent of the number of the Company’s common shares outstanding as of the first day of each fiscal year plus the number of common shares that were available for grant of awards, but not granted, in prior years. In no event, however, may the number of common shares available for the grant of awards in any fiscal year exceed 10ten percent of the common shares outstanding as of the first day of that fiscal year. Common shares subject to an award
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
that is forfeited, terminated, or canceled without having been exercised are generally added back to the number of shares available for grant under the 2014 Stock Plan.
Stock-based compensation expense under all share-based payment plans -- our Employee Stock Purchase Plan, stock option plans, stock-settled stock appreciation rights ("SSARs") and restricted stock units ("RSUs") -- was included in the results of operations as follows:
 Three Months EndedNine Months Ended
October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
Compensation expense, all share-based payment plans$1,167 $858 $3,432 $2,567 
 Three Months EndedNine Months Ended
October 1,
2022
October 2,
2021
October 1,
2022
October 2,
2021
Compensation expense, all share-based payment plans$1,658 $1,167 $5,244 $3,432 
Stock-based compensation consisted of the following:
Employee Stock Purchase Plan--Under the Employee Stock Purchase Plan, all full-time employees with one year of service are eligible to purchase, through payroll deduction, common shares. Employee purchases under the Employee Stock Purchase Plan are at 85% of the fair market value of the common shares--a 15% discount. We recognize compensation costs as payroll deductions are made. The 15% discount of total shares purchased under the plan resulted in compensation cost of $1,187$1,380 being recognized for the nine months ended October 2, 20211, 2022 and $1,067$1,187 for the nine months ended September 26, 2020.
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
2021.
Stock Option Plans--The stock options outstanding were awarded under a graded vesting schedule, measured at fair value, and have a term of ten years. Compensation costs for stock options are recognized over the requisite service period on the straight-line recognition method. Compensation cost recognized for stock options was $289 for the nine months ended October 1, 2022 and $343 for the nine months ended October 2, 2021 and $398 for the nine months ended September 26, 2020.2021. Beginning in 2021, management and the Compensation Committee replaced the issuance of stock options with performance-based restricted stock units ("PRSUs") for certain employees.
Stock-Settled Stock Appreciation Rights--A SSAR is an award that allows the recipient to receive common shares equal to the appreciation in the fair market value of our common shares between the date the award was granted and the conversion date of the shares vested. Effective January 1, 2019, management and the Compensation Committee replaced the issuance of future SSARs with PRSUs for certain management employees.

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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
The following table summarizes our SSARs as of October 2, 2021.1, 2022.
Stock-Settled
Stock Appreciation Rights
Stock-Settled
Stock Appreciation Rights
Number
of
Rights
Weighted-
Average
Award Date
Value
Weighted-
Average
Remaining
Contractual
Life
Unrecognized
Compensation
Cost
Aggregate
Intrinsic
Value
Stock-Settled
Stock Appreciation Rights
Number
of
Rights
Weighted-
Average
Award Date
Value
Weighted-
Average
Remaining
Contractual
Life
Unrecognized
Compensation
Cost
Aggregate
Intrinsic
Value
Unvested, January 1, 2021210,472 $1.87    
Unvested, January 1, 2022Unvested, January 1, 202287,534 $1.92    
GrantedGranted— —    Granted— —    
ForfeitedForfeited— —    Forfeited— —    
VestedVested(85,938)1.86    Vested(43,752)1.92    
Unvested, October 2, 2021124,534 $1.88 0.8 years$121 $2,042 
Unvested, October 1, 2022Unvested, October 1, 202243,782 $1.92 0.3 years$19 $792 

Compensation costs for SSARs are determined using a fair-value method and amortized over the requisite service period. “Intrinsic value” is defined as the amount by which the fair market value of a common share exceeds the grant date price of a SSAR. Compensation expense for SSARs was $65 for the nine months ended October 1, 2022 and $120 for the nine months ended October 2, 2021 and $214 for the nine months ended September 26, 2020.2021.
Restricted Stock Units--During the nine months ended October 2, 2021,1, 2022, the Compensation Committee awarded 330,714336,664 PRSUs to certain management employees and 19,20014,693 RSUs to nonemployee directors. The Compensation Committee made similar awards in prior periods. The awards vest over specified periods. The following table summarizes PRSUs and RSUs as of October 2, 2021.1, 2022.
Restricted Stock UnitsRestricted Stock UnitsNumber
of
Stock
Units
Weighted-
Average
Grant Date
Value
Weighted-
Average
Remaining
Contractual
Life
Unrecognized
Compensation
Cost
Aggregate
Intrinsic
Value
Restricted Stock UnitsNumber
of
Stock
Units
Weighted-
Average
Grant Date
Value
Weighted-
Average
Remaining
Contractual
Life
Unrecognized
Compensation
Cost
Aggregate
Intrinsic
Value
Unvested, January 1, 2021510,614 $10.05    
Unvested, January 1, 2022Unvested, January 1, 2022740,160 $12.49    
GrantedGranted349,914 14.82    Granted351,357 17.89    
ForfeitedForfeited— —    Forfeited(1,000)17.89    
VestedVested(120,368)8.86    Vested(181,176)11.04    
Unvested, October 2, 2021740,160 $12.49 2.4 years$6,182 $12,139 
Unvested, October 1, 2022Unvested, October 1, 2022909,341 $14.86 2.0 years$8,315 $13,517 
Employee PRSUsEmployee PRSUs673,268 $12.52 2.5 years$5,719 $11,042 Employee PRSUs851,640 $14.89 2.0 years$7,863 $12,685 
Nonemployee Director RSUsNonemployee Director RSUs66,892 $12.20 1.6 years$463 $1,097 Nonemployee Director RSUs57,701 $14.42 2.2 years$452 $832 

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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
Compensation cost for PRSUs and RSUs is determined using a fair-value method and amortized on the straight-line recognition method over the requisite service period. “Intrinsic value” is defined as the amount by which the fair market value of a common share exceeds the grant date price of a PRSU or an RSU. Compensation expense on PRSUs and RSUs totaled $3,510 for the nine months ended October 1, 2022 and $1,782 for the nine months ended October 2, 2021 and $888 for the nine months ended September 26, 2020.2021.
We estimated the fair value of each stock-based award on the date of grant using a binomial option-pricing model. The binomial model considers a range of assumptions related to volatility, risk-free interest rate and employee exercise behavior. Expected volatilities utilized in the binomial model are based on historical volatility of our stock prices and other factors. Similarly, the dividend yield is based on historical experience and expected future changes. The binomial model also incorporates exercise and forfeiture assumptions based on an
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
analysis of historical data. The expected life of the stock-based awards is derived from the output of the binomial model and represents the period of time that awards granted are expected to be outstanding.
The fair values of stock-based awards granted were estimated at the dates of grant with the following weighted-average assumptions.
Nine Months Ended Nine Months Ended
October 2,
2021
September 26,
2020
October 1,
2022
October 2,
2021
Volatility rateVolatility rate9.9 %9.7 %Volatility rate9.7 %9.9 %
Risk-free interest rateRisk-free interest rate.3 %.7 %Risk-free interest rate1.7 %.3 %
Expected dividend yieldExpected dividend yield.4 %.4 %Expected dividend yield.4 %.4 %
Expected life of awards (years)Expected life of awards (years)3.08.1Expected life of awards (years)3.03.0
General Stock Option Information--The following table summarizes activity under the stock option plans for the nine months ended October 2, 2021.1, 2022.
Stock OptionsStock OptionsNumber
of
Options
Outstanding
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
Stock OptionsNumber
of
Options
Outstanding
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
Outstanding, January 1, 20212,817,318 $8.34   
Outstanding, January 1, 2022Outstanding, January 1, 20222,350,934 $8.56   
GrantedGranted— —   Granted— —   
ExercisedExercised(307,180)7.11   Exercised(219,143)8.29   
ForfeitedForfeited(37,090)7.98   Forfeited(17,820)8.01   
Outstanding, October 2, 20212,473,048 $8.49 5.0 years$19,562 
Outstanding, October 1, 2022Outstanding, October 1, 20222,113,971 $8.59 4.2 years$20,104 
Exercisable, October 2, 20211,882,383 $7.71 4.1 years$16,353 
Exercisable, October 1, 2022Exercisable, October 1, 20221,725,879 $7.99 3.5 years$17,449 

As of October 2, 2021,1, 2022, there was approximately $904$489 of unrecognized compensation cost related to stock options outstanding. The cost is expected to be recognized over a weighted-average period of 3.70.8 years. “Intrinsic value” is defined as the amount by which the market price of a common share exceeds the exercise price of an option. 
Common shares are issued from treasury upon the exercise of stock options and SSARs, the vesting of RSUs and PRSUs or purchases under the Employee Stock Purchase Plan.
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
I.J.    Income Taxes
Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate and, if our estimated annual tax rate changes, we make a cumulative adjustment. The estimated annual effective tax rate for the nine months ended October 2, 20211, 2022 was 26.1%26.6%. Our actual effective tax rate was 25.0%26.3% and 27.8%25.0% for the three months ended October 1, 2022 and October 2, 2021, and September 26, 2020, respectively. Our actual effective tax rate was 26.2% and 27.8%26.2% for the nine months ended October 1, 2022 and October 2, 2021, and September 26, 2020, respectively. The change in the effective tax rate from statutory tax rates was primarily due to the impact of state and local taxes, which was partially offset by favorable discrete items.items which
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
are a set amount and therefore have a larger impact on the rate based on our net income before tax in the first nine months compared to the impact it will have on the rate for the full year.
As of October 2, 2021,1, 2022, we had unrecognized tax benefits of $754,$666, of which $307$293 would affect our effective rate if recognized, and accrued interest expense related to unrecognized benefits of $46.$45. At December 31, 2020,2021, we had unrecognized tax benefits of $1,183,$700, of which $735$327 would affect our effective rate if recognized, and accrued interest expense related to unrecognized benefits of $72.$56. Unrecognized tax benefits are the differences between a tax position taken, or expected to be taken, in a tax return, and the benefit recognized for financial reporting purposes.
We recognize interest accrued related to unrecognized tax benefits in income tax expense. Penalties, if incurred, would be recognized as a component of income tax expense.
The Company is routinely under audit by U.S. federal, state and local authorities and Canadian authorities in the area of income tax. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. With the exception of U.S. state jurisdictions and Canada, the Company is no longer subject to examination by tax authorities for the years through 2016.2018. As of October 2, 2021,1, 2022, we believe it is reasonably possible that the total amount of unrecognized tax benefits will not significantly increase or decrease.

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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
J.K.    Accumulated Other Comprehensive Income (Loss)
Comprehensive income (or loss) is comprised of net income (or net loss) and other components, including foreign currency translation adjustments and defined benefit pension plan adjustments.
The following summarizes the components of other comprehensive income (loss) accumulated in shareholders’ equity for the three and nine months ended October 1, 2022 and October 2, 2021 and September 26, 2020:
Three Months Ended October 2, 2021Foreign
Currency
Translation
Adjustments
Defined
Benefit
Pension
Plans
Accumulated
Other
Comprehensive
Income (Loss)
Balance at July 3, 2021$(2,845)$(735)$(3,580)
Other comprehensive income (loss) before reclassifications
Unrealized gains (losses)$(788)$— $(788)
Amounts reclassified from accumulated other comprehensive income (loss)— 51 51 
Tax effect— (13)(13)
Net of tax amount(788)38 (750)
Balance at October 2, 2021$(3,633)$(697)$(4,330)
Three Months Ended September 26, 2020Foreign
Currency
Translation
Adjustments
Defined
Benefit
Pension
Plans
Accumulated
Other
Comprehensive
Income (Loss)
Balance at June 27, 2020$(5,872)$(714)$(6,586)
Other comprehensive income (loss) before reclassifications
Unrealized gains (losses)$629 $— $629 
Amounts reclassified from accumulated other comprehensive income (loss)— 38 38 
Tax effect— (9)(9)
Net of tax amount629 29 658 
Balance at September 26, 2020$(5,243)$(685)$(5,928)
Nine Months Ended October 2, 2021Foreign
Currency
Translation
Adjustments
Defined
Benefit
Pension
Plans
Accumulated
Other
Comprehensive
Income (Loss)
Balance at January 1, 2021$(3,738)$(809)$(4,547)
Other comprehensive income (loss) before reclassifications
Unrealized gains (losses)$105 $— $105 
Amounts reclassified from accumulated other comprehensive income (loss)— 151 151 
Tax effect— (39)(39)
Net of tax amount105 112 217 
Balance at October 2, 2021$(3,633)$(697)$(4,330)
2021:
Three Months Ended October 1, 2022Foreign
Currency
Available for Sale SecuritiesDefined
Benefit
Pension
Plans
Accumulated
Other
Comprehensive
Income (Loss)
Balance at July 2, 2022$(4,175)$(181)$(473)$(4,829)
Other comprehensive income (loss) before reclassifications
Translation adjustment$(1,934)$— $— $(1,934)
Unrealized losses— (113)— (113)
Amounts reclassified from accumulated other comprehensive income (loss)— (11)30 19 
Tax effect— 26 (8)18 
Net of tax amount(1,934)(98)22 (2,010)
Balance at October 1, 2022$(6,109)$(279)$(451)$(6,839)
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 20211, 2022
(Amounts in thousands, except share data)
Nine Months Ended September 26, 2020Foreign
Currency
Translation
Adjustments
Defined
Benefit
Pension
Plans
Accumulated
Other
Comprehensive
Income (Loss)
Balance at January 1, 2020$(4,633)$(770)$(5,403)
Three Months Ended October 2, 2021Three Months Ended October 2, 2021Foreign
Currency
Available-for-Sale SecuritiesDefined
Benefit
Pension
Plans
Accumulated
Other
Comprehensive
Income (Loss)
Balance at July 3, 2021Balance at July 3, 2021$(2,845)$— $(735)$(3,580)
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications
Unrealized gains (losses)$(610)$— $(610)
Translation adjustmentTranslation adjustment$(788)$— $— $(788)
Amounts reclassified from accumulated other comprehensive income (loss)Amounts reclassified from accumulated other comprehensive income (loss)— 114 114 Amounts reclassified from accumulated other comprehensive income (loss)— — 51 51 
Tax effectTax effect— (29)(29)Tax effect— — (13)(13)
Net of tax amountNet of tax amount(610)85 (525)Net of tax amount(788)— 38 (750)
Balance at September 26, 2020$(5,243)$(685)$(5,928)
Balance at October 2, 2021Balance at October 2, 2021$(3,633)$— $(697)$(4,330)
Nine Months Ended October 1, 2022Nine Months Ended October 1, 2022Foreign
Currency
Available-for-Sale SecuritiesDefined
Benefit
Pension
Plans
Accumulated
Other
Comprehensive
Income (Loss)
Balance at January 1, 2022Balance at January 1, 2022$(3,654)$— $(519)$(4,173)
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications
Translation adjustmentTranslation adjustment$(2,455)$— $— $(2,455)
Unrealized lossesUnrealized losses— (350)— (350)
Amounts reclassified from accumulated other comprehensive income (loss)Amounts reclassified from accumulated other comprehensive income (loss)— (3)92 89 
Tax effectTax effect— 74 (24)50 
Net of tax amountNet of tax amount(2,455)(279)68 (2,666)
Balance at October 1, 2022Balance at October 1, 2022$(6,109)$(279)$(451)$(6,839)
Nine Months Ended October 2, 2021Nine Months Ended October 2, 2021Foreign
Currency
Available-for-Sale SecuritiesDefined
Benefit
Pension
Plans
Accumulated
Other
Comprehensive
Income (Loss)
Balance at January 1, 2021Balance at January 1, 2021$(3,738)$— $(809)$(4,547)
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications
Translation adjustmentTranslation adjustment$105 $— $— $105 
Amounts reclassified from accumulated other comprehensive income (loss)Amounts reclassified from accumulated other comprehensive income (loss)— — 151 151 
Tax effectTax effect— — (39)(39)
Net of tax amountNet of tax amount105 — 112 217 
Balance at October 2, 2021Balance at October 2, 2021$(3,633)$— $(697)$(4,330)
The change in defined benefit pension plans of $30 and $92 for the three and nine months ended October 1, 2022, respectively, and $51 and $151 for the three and nine months ended October 2, 2021, respectively and $38 and $114 for the three and nine months ended September 26, 2020, respectively, was included in net periodic pension expense classified in the condensed consolidated statement of operations as general and administrative expense or other income (expense).
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K.

Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
L.    Per Share Amounts and Common and Redeemable Shares Outstanding
We calculate our basic earnings per share by dividing net income or net loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share are calculated in a similar manner, but include the effect of dilutive securities. To the extent these securities are antidilutive, they are excluded from the calculation of earnings per share. The per share amounts were computed as follows (Adjusted for the 2-for-one stock split of our common shares effective October 1, 2021):follows:
Three Months EndedNine Months Ended
October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
Income available to common shareholders:
Net income$24,927 $24,535 $57,897 $54,396 
Weighted-average shares (in thousands):
Basic:
Basic weighted-average shares44,885 45,748 45,257 45,912 
Diluted:
Basic from above44,885 45,748 45,257 45,912 
Incremental shares from assumed:
Exercise of stock options and awards3,066 1,960 2,528 2,093 
Diluted weighted-average shares47,951 47,708 47,785 48,005 
Net income per share:
Basic$.56 $.54 $1.28 $1.18 
Diluted$.52 $.51 $1.21 $1.13 
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
Three Months EndedNine Months Ended
October 1,
2022
October 2,
2021
October 1,
2022
October 2,
2021
Income available to common shareholders:
Net income$20,464 $24,927 $49,031 $57,897 
Weighted-average shares (in thousands):
Basic:
Outstanding43,920 44,885 44,194 45,257 
Partially-paid share subscriptions228 — 228 — 
Basic weighted-average shares44,148 44,885 44,422 45,257 
Diluted:
Basic from above44,148 44,885 44,422 45,257 
Incremental shares from assumed:
Exercise of stock options and awards2,257 3,066 2,297 2,528 
Diluted weighted-average shares46,405 47,951 46,719 47,785 
Net income per share:
Basic$.46 $.56 $1.10 $1.28 
Diluted$.44 $.52 $1.05 $1.21 
Common and Redeemable Shares Outstanding--A summary of the activity of the common and redeemable shares outstanding for the nine months ended October 2, 20211, 2022 was as follows:
Common
Shares
Net of Treasury
Shares
Redeemable
Shares
TotalCommon
Shares
Net of Treasury
Shares
Redeemable
Shares
Total
Shares outstanding at January 1, 202135,414,536 10,225,768 45,640,304 
Shares outstanding at January 1, 2022Shares outstanding at January 1, 202235,110,432 9,391,790 44,502,222 
Shares purchasedShares purchased(1,434,170)(949,838)(2,384,008)Shares purchased(1,646,735)(881,136)(2,527,871)
Shares soldShares sold470,490 486,112 956,602 Shares sold472,110 777,725 1,249,835 
Stock subscription offering -- cash purchasesStock subscription offering -- cash purchases152,800 — 152,800 
Options and awards exercisedOptions and awards exercised526,492 — 526,492 Options and awards exercised368,402 — 368,402 
Shares outstanding at October 2, 202134,977,348 9,762,042 44,739,390 
Shares outstanding at October 1, 2022Shares outstanding at October 1, 202234,457,009 9,288,379 43,745,388 
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
On October 2, 2021,1, 2022, we had 44,739,39043,745,388 common and redeemable shares outstanding, and employee options exercisable to purchase 1,882,3831,725,879 common shares, partially-paid subscriptions for 1,318,450 common shares and purchase rights outstanding for 487,488 common shares.
Common Stock Split--On September 17, 2021, our board of directors approved and declared a 2-for-onetwo-for-one stock split in the form of a stock dividend, pursuant to which each of our shareholders of record at the close of business on October 1, 2021 received one additional common share for each then-held common share, which was paid on October 15, 2021. On September 20, 2021, in connection with the stock split, the Company filed a Certificate of Amendment to its 2017 Amended Articles of Incorporation with the Secretary of State of the State of Ohio, which became effective upon filing and (1) proportionately increased the authorized number of common shares from 48,000,000 to 96,000,000 and (2) proportionately decreased the par value of our common shares from $1.00 per share to $.50 per share.
2022 Subscription Offering
L.Beginning April 2022, the Company offered to eligible employees and nonemployee directors the right to subscribe to a maximum of 2,666,667 common shares of the Company (including shares that may be issued upon the exercise of stock rights) at $18.10 per share in accordance with the provisions of The Davey Tree Expert Company 2014 Omnibus Stock Plan and the rules of the Compensation Committee of the Company’s Board of Directors. The offering period ended on August 1, 2022 and resulted in the subscription of 1,476,250 common shares for $26,720 at $18.10 per share.
Participants in the subscription offering who purchased common shares for an aggregate purchase price of less than $5 were required to pay with cash. All participants (excluding Company directors and officers) purchasing common shares for an aggregate purchase price of $5 or more had an option to finance their purchase through a down-payment of at least 10% of the total purchase price and a seven-year promissory note for the balance due with interest at the greater of 2.00% or the applicable federal rate in effect as of August 1, 2022, which was 3.15%. Payments on the promissory note can be made either by payroll deductions or annual lump-sum payments of both principal and interest. Common shares purchased in the offering were pledged as security for the payment of the promissory note, and the common shares will not be issued until the promissory note is paid-in-full. Dividends will be paid on all subscribed shares, subject to forfeiture to the extent that payment is not ultimately made for the shares.
All participants in the offering who purchased in excess of $5 of common shares were granted a "right" to purchase one additional common share at a price of $18.10 per share for every three common shares purchased in the offering. As a result of the stock subscription, rights to purchase 489,169 common shares were granted. Each right may be exercised at the rate of one-seventh per year and will expire seven years after the date that the right was granted. A purchaser may not exercise a right once he or she ceases to be the Company's employee or non-employee director, as applicable.
M.    Operations by Business Segment
We provide a wide range of arboricultural, horticultural, environmental and consulting services to residential, utility, commercial and government entities throughout the United States and Canada. We have 2two reportable operating segments organized by type or class of customer: Residential and Commercial, and Utility.
Residential and Commercial--Residential and Commercial provides services to our residential and commercial customers including: the treatment, preservation, maintenance, removal and planting of trees, shrubs and other plant life; the practice of landscaping, grounds
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
maintenance, tree surgery, tree feeding and tree spraying; the application of fertilizer, herbicides and insecticides; and natural resource management and consulting, forestry research and development, and environmental planning.
Utility--Utility is principally engaged in providing services to our utility customers--investor-owned, municipal utilities, and rural electric cooperatives--including: the practice of line-clearing and vegetation management around power lines and rights-of-way and chemical brush control, natural resource management and consulting, forestry research and development, and environmental planning.
All other operating activities, including research, technical support and laboratory diagnostic facilities, are included in “All Other.”
Measurement of Segment Profit and Loss and Segment Assets--We evaluate performance and allocate resources based primarily on operating income and also actively manage business unit operating assets. Segment information, including reconciling adjustments, is presented consistent with the basis described in our 20202021 Annual Report.    

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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 20211, 2022
(Amounts in thousands, except share data)
Segment information reconciled to the condensed consolidated financial statements was as follows:
UtilityResidential
and
Commercial
All
Other
Reconciling
Adjustments
Consolidated
Three Months Ended October 1, 2022Three Months Ended October 1, 2022
RevenuesRevenues$217,305 $180,706 $934 $— $398,945 
Income (loss) from operationsIncome (loss) from operations16,790 21,204 (4,033)(948)(a)33,013 
Interest expenseInterest expense(2,164)(2,164)
Interest incomeInterest income303 303 
Other income (expense), netOther income (expense), net(3,371)(3,371)
Income before income taxesIncome before income taxes$27,781 
Segment assets, totalSegment assets, total$331,393 $305,216 $— $263,362 (b)$899,971 
UtilityResidential
and
Commercial
All
Other
Reconciling
Adjustments
Consolidated
Three Months Ended October 2, 2021Three Months Ended October 2, 2021Three Months Ended October 2, 2021
RevenuesRevenues$204,960 $164,737 $547 $— $370,244 Revenues$204,960 $164,737 $547 $— $370,244 
Income (loss) from operationsIncome (loss) from operations23,124 17,595 (2,701)(1,085)(a)36,933 Income (loss) from operations23,124 17,595 (2,701)(1,085)(a)36,933 
Interest expenseInterest expense(1,449)(1,449)Interest expense(1,449)(1,449)
Interest incomeInterest income39 39 Interest income39 39 
Other income (expense), netOther income (expense), net(2,298)(2,298)Other income (expense), net(2,298)(2,298)
Income before income taxesIncome before income taxes$33,225 Income before income taxes$33,225 
Segment assets, totalSegment assets, total$286,157 $278,847 $— $210,709 (b)$775,713 Segment assets, total$286,157 $278,847 $— $210,709 (b)$775,713 
Three Months Ended September 26, 2020
Nine Months Ended October 1, 2022Nine Months Ended October 1, 2022
RevenuesRevenues$185,500 $151,435 $518 $— $337,453 Revenues$637,900 $504,064 $1,584 $— $1,143,548 
Income (loss) from operationsIncome (loss) from operations20,301 20,273 (2,886)(2,316)(a)35,372 Income (loss) from operations49,260 50,759 (14,852)(5,665)(a)79,502 
Interest expenseInterest expense(1,579)(1,579)Interest expense(5,312)(5,312)
Interest incomeInterest income1,688 1,688 Interest income489 489 
Other income (expense), netOther income (expense), net(1,499)(1,499)Other income (expense), net(8,241)(8,241)
Income before income taxesIncome before income taxes$33,982 Income before income taxes$66,438 
Segment assets, totalSegment assets, total$296,519 $227,977 $— $147,188 (b)$671,684 Segment assets, total$331,393 $305,216 $— $263,362 (b)$899,971 
Nine Months Ended October 2, 2021Nine Months Ended October 2, 2021Nine Months Ended October 2, 2021
RevenuesRevenues$557,349 $465,524 $1,668 $— $1,024,541 Revenues$557,349 $465,524 $1,668 $— $1,024,541 
Income (loss) from operationsIncome (loss) from operations50,015 51,893 (11,367)(2,610)(a)87,931 Income (loss) from operations50,015 51,893 (11,367)(2,610)(a)87,931 
Interest expenseInterest expense(4,093)(4,093)Interest expense(4,093)(4,093)
Interest incomeInterest income161 161 Interest income161 161 
Other income (expense), netOther income (expense), net(5,548)(5,548)Other income (expense), net(5,548)(5,548)
Income before income taxesIncome before income taxes$78,451 Income before income taxes$78,451 
Segment assets, totalSegment assets, total$286,157 $278,847 $— $210,709 (b)$775,713 Segment assets, total$286,157 $278,847 $— $210,709 (b)$775,713 
Nine Months Ended September 26, 2020
Revenues$547,984 $396,293 $703 $— $944,980 
Income (loss) from operations56,817 42,242 (11,267)(4,309)(a)83,483 
Interest expense(5,477)(5,477)
Interest income1,885 1,885 
Other income (expense), net(4,550)(4,550)
Income before income taxes$75,341 
Segment assets, total$296,519 $227,977 $— $147,188 (b)$671,684 
Reconciling adjustments from segment reporting to the condensed consolidated financial statements include unallocated corporate items:
(a)Reclassification of depreciation expense and allocation of corporate expenses.
(b)Corporate assets include cash, prepaid expenses, corporate facilities, enterprise-wide information systems and other nonoperating assets. 
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 20211, 2022
(Amounts in thousands, except share data)
M.N.    Revenue Recognition
We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers.
Nature of Performance Obligations and Significant Judgments
At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promised good or service (or bundle of goods and services) that is distinct. To identify the performance obligations, the Company considers each of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.
Our contracts with our customers generally originate upon the completion of a quote for services for residential and commercial customers or the receipt of a purchase order (or similar work order) for utility customers. In some cases, our contracts are governed by master services agreements, in which case our contract under ASC 606 consists of the combination of the master services agreement and the quote/purchase order. Many of our contracts have a stated duration of one year or less or contain termination clauses that allow the customer to cancel the contract after a specified notice period, which is typically less than 90 days. Due to the fact that many of our arrangements allow the customer to terminate for convenience, the duration of the contract for revenue recognition purposes generally does not extend beyond the services that we have actually transferred. As a result, many of our contracts are, in effect, day-to-day or month-to-month contracts.
Disaggregation of Revenue
The following tables disaggregate our revenue for the three and nine months ended October 1, 2022 and October 2, 2021 and September 26, 2020 by major sources:
Three Months Ended October 2, 2021UtilityResidential
and
Commercial
All OtherConsolidated
Three Months Ended October 1, 2022Three Months Ended October 1, 2022UtilityResidential
and
Commercial
All OtherConsolidated
Type of service:Type of service:Type of service:
Tree and plant careTree and plant care$140,039 $96,961 $(29)$236,971 Tree and plant care$138,112 $105,108 $(28)$243,192 
Grounds maintenanceGrounds maintenance— 40,452 — 40,452 Grounds maintenance— 46,056 — 46,056 
Storm damage servicesStorm damage services10,052 2,688 — 12,740 Storm damage services7,004 2,564 — 9,568 
Consulting and otherConsulting and other54,869 24,636 576 80,081 Consulting and other72,189 26,978 962 100,129 
Total revenuesTotal revenues$204,960 $164,737 $547 $370,244 Total revenues$217,305 $180,706 $934 $398,945 
Geography:Geography:Geography:
United StatesUnited States$194,140 $153,009 $547 $347,696 United States$207,004 $168,405 $934 $376,343 
CanadaCanada10,820 11,728 — 22,548 Canada10,301 12,301 — 22,602 
Total revenuesTotal revenues$204,960 $164,737 $547 $370,244 Total revenues$217,305 $180,706 $934 $398,945 
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Index
The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 20211, 2022
(Amounts in thousands, except share data)
Three Months Ended September 26, 2020UtilityResidential
and
Commercial
All OtherConsolidated
Three Months Ended October 2, 2021Three Months Ended October 2, 2021UtilityResidential
and
Commercial
All OtherConsolidated
Type of service:Type of service:
Tree and plant careTree and plant care$140,039 $96,961 $(29)$236,971 
Grounds maintenanceGrounds maintenance— 40,452 — 40,452 
Storm damage servicesStorm damage services10,052 2,688 — 12,740 
Consulting and otherConsulting and other54,869 24,636 576 80,081 
Total revenuesTotal revenues$204,960 $164,737 $547 $370,244 
Geography:Geography:
United StatesUnited States$194,140 $153,009 $547 $347,696 
CanadaCanada10,820 11,728 — 22,548 
Total revenuesTotal revenues$204,960 $164,737 $547 $370,244 
Nine Months Ended October 1, 2022Nine Months Ended October 1, 2022UtilityResidential
and
Commercial
All OtherConsolidated
Type of service:Type of service:Type of service:
Tree and plant careTree and plant care$135,021 $90,049 $(10)$225,060 Tree and plant care$420,791 $294,206 $(155)$714,842 
Grounds maintenanceGrounds maintenance— 36,296 — 36,296 Grounds maintenance— 128,114 — 128,114 
Storm damage servicesStorm damage services7,061 4,069 — 11,130 Storm damage services10,136 6,162 — 16,298 
Consulting and otherConsulting and other43,418 21,021 528 64,967 Consulting and other206,973 75,582 1,739 284,294 
Total revenuesTotal revenues$185,500 $151,435 $518 $337,453 Total revenues$637,900 $504,064 $1,584 $1,143,548 
Geography:Geography:Geography:
United StatesUnited States$176,528 $140,571 $518 $317,617 United States$608,411 $469,042 $1,584 $1,079,037 
CanadaCanada8,972 10,864 — 19,836 Canada29,489 35,022 — 64,511 
Total revenuesTotal revenues$185,500 $151,435 $518 $337,453 Total revenues$637,900 $504,064 $1,584 $1,143,548 
Nine Months Ended October 2, 2021Nine Months Ended October 2, 2021UtilityResidential
and
Commercial
All OtherConsolidatedNine Months Ended October 2, 2021UtilityResidential
and
Commercial
 All Other Consolidated
Type of service:Type of service:Type of service:      
Tree and plant careTree and plant care$393,742 $271,682 $(224)$665,200 Tree and plant care$393,742 $271,682 $(224)$665,200 
Grounds maintenanceGrounds maintenance— 116,810 — 116,810 Grounds maintenance— 116,810 — 116,810 
Storm damage servicesStorm damage services13,997 5,486 — 19,483 Storm damage services13,997 5,486 — 19,483 
Consulting and otherConsulting and other149,610 71,546 1,892 223,048 Consulting and other149,610 71,546 1,892 223,048 
Total revenuesTotal revenues$557,349 $465,524 $1,668 $1,024,541 Total revenues$557,349 $465,524 $1,668 $1,024,541 
Geography:Geography:Geography:  
United StatesUnited States$525,818 $432,158 $1,668 $959,644 United States$525,818 $432,158 $1,668 $959,644 
CanadaCanada31,531 33,366 — 64,897 Canada31,531 33,366 — 64,897 
Total revenuesTotal revenues$557,349 $465,524 $1,668 $1,024,541 Total revenues$557,349 $465,524 $1,668 $1,024,541 
Nine Months Ended September 26, 2020UtilityResidential
and
Commercial
 All Other Consolidated
Type of service:      
Tree and plant care$408,371 $233,810 $(121)$642,060 
Grounds maintenance— 100,352 — 100,352 
Storm damage services8,087 6,047 — 14,134 
Consulting and other131,526 56,084 824 188,434 
Total revenues$547,984 $396,293 $703 $944,980 
Geography:  
United States$522,094 $369,297 $703 $892,094 
Canada25,890 26,996 — 52,886 
Total revenues$547,984 $396,293 $703 $944,980 

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The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 20211, 2022
(Amounts in thousands, except share data)
Contract Balances
Our contract liabilities consist of advance payments and billings in excess of costs incurred and deferred revenue. The Company recognized $616 and $1,676 of revenue for the three and nine months ended October 1, 2022, that was included in the contract liability balance at December 31, 2021 and $239 and $1,294 of revenue for the three and nine months ended October 2, 2021, respectively, that was included in the contract liability balance at December 31, 2020 and $150 and $1,411 of revenue for the three and nine months ended September 26, 2020, respectively, that was included in the contract liability balance at December 31, 2019.2020. Net contract liabilities consisted of the following:
October 2,
2021
 December 31,
2020
October 1,
2022
 December 31,
2021
Contract liabilities - currentContract liabilities - current$4,006 $3,242 Contract liabilities - current$4,599 $3,888 
Contract liabilities - noncurrentContract liabilities - noncurrent1,879  1,754 Contract liabilities - noncurrent1,951  1,845 
Net contract liabilities Net contract liabilities$5,885  $4,996  Net contract liabilities$6,550  $5,733 
N.O.    Fair Value Measurements and Financial Instruments
FASB ASC 820, “Fair Value Measurements and Disclosures" (“Topic 820”) defines fair value based on the price that would be received to sell an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers or sellers in the principal or most advantageous market for the asset or liability that are independent of the reporting entity, knowledgeable and able and willing to transact for the asset or liability.
Valuation Hierarchy--Topic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value. The hierarchy prioritizes the inputs into three broad levels:
Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
Level 2 inputs are observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.
Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

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The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 20211, 2022
(Amounts in thousands, except share data)
Our assets and liabilities measured at fair value on a recurring basis at October 2, 20211, 2022 were as follows:
 
Fair Value Measurements at
October 2, 2021 Using:
 
Fair Value Measurements at
October 1, 2022 Using:
Assets and Liabilities Recorded at
Fair Value on a Recurring Basis
Assets and Liabilities Recorded at
Fair Value on a Recurring Basis
Total
Carrying
Value at
October 2, 2021
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets and Liabilities Recorded at
Fair Value on a Recurring Basis
Total
Carrying
Value at
October 1, 2022
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:Assets:    Assets:
Assets invested for self-insurance, classified as other current assets, current$5,500 $5,500 $— $— 
Assets invested for self-insurance, classified as other assets, noncurrent11,859 11,859 — — 
Assets invested for self-insuranceAssets invested for self-insurance
Certificates of deposits, currentCertificates of deposits, current$4,000 $4,000 $— $— 
Certificates of deposits, noncurrentCertificates of deposits, noncurrent7,109 7,109 — — 
Available-for-sale debt securities:Available-for-sale debt securities:
United States Government and agency securitiesUnited States Government and agency securities20,261 20,261 — — 
Corporate notes and bondsCorporate notes and bonds257 257 — — 
Total available-for-sale debt securitiesTotal available-for-sale debt securities20,518 20,518 — — 
Marketable equity securities:Marketable equity securities:
Mutual fundsMutual funds14,894 14,894 — — 
Corporate stocksCorporate stocks2,819 2,819 — — 
Exchange traded fundsExchange traded funds1,133 1,133 — — 
Total marketable equity securitiesTotal marketable equity securities18,846 18,846 — — 
Liabilities:Liabilities:    Liabilities:
Deferred compensationDeferred compensation$4,299 $— $4,299 $— Deferred compensation$4,759 $— $4,759 $— 

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The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
Our assets and liabilities measured at fair value on a recurring basis at December 31, 20202021 were as follows:
 
Fair Value Measurements at
December 31, 2020 Using:
 
Fair Value Measurements at
December 31, 2021 Using:
Assets and Liabilities Recorded at
Fair Value on a Recurring Basis
Assets and Liabilities Recorded at
Fair Value on a Recurring Basis
Total
Carrying
Value at
December 31, 2020
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets and Liabilities Recorded at
Fair Value on a Recurring Basis
Total
Carrying
Value at
December 31, 2021
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:Assets:    Assets:
Assets invested for self-insurance, classified as other assets, noncurrent$19,359 $19,359 $— $— 
Assets invested for self-insuranceAssets invested for self-insurance
Certificates of deposits, currentCertificates of deposits, current$4,250 $4,250 $— $— 
Certificates of deposits, noncurrentCertificates of deposits, noncurrent10,609 10,609 — — 
Available-for-sale debt securities:Available-for-sale debt securities:
United States Government and agency securitiesUnited States Government and agency securities3,230 3,230 — — 
Corporate notes and bondsCorporate notes and bonds176 176 — — 
Total available-for-sale debt securitiesTotal available-for-sale debt securities3,406 3,406 — — 
Marketable equity securities:Marketable equity securities:
Mutual fundsMutual funds7,476 7,476 — — 
Corporate stocksCorporate stocks1,934 1,934 — — 
Exchange traded fundsExchange traded funds1,976 1,976 — — 
Total marketable equity securitiesTotal marketable equity securities11,386 11,386 — — 
Liabilities:Liabilities:    Liabilities:
Deferred compensationDeferred compensation$3,192 $— $3,192 $— Deferred compensation$4,333 $— $4,333 $— 
The assets invested for self-insurance are certificates of deposit--classifieddeposit, stocks, bonds, mutual funds and exchange traded funds--classified as Level 1--based on quoted market prices of the identical underlying securities in active markets. The estimated fair value of the deferred compensation--classified as Level 2--is based on the value of the Company's common shares, determined by independent valuation.

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The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
Fair Value of Financial Instruments--The fair values of our current financial assets and current liabilities, including cash, accounts receivable, accounts payable, and accrued expenses, among others, approximate their reported carrying values because of their short-term nature. Financial instruments classified as noncurrent assets and liabilities and their carrying values and fair values were as follows:
 October 2, 2021December 31, 2020
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
Revolving credit facility, noncurrent$34,191 $34,191 $— $— 
Senior unsecured notes, noncurrent75,000 78,772 75,000 81,424 
Term loans, noncurrent3,299 3,447 2,324 2,451 
Total$112,490 $116,410 $77,324 $83,875 
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The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
 October 1, 2022December 31, 2021
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
Assets:
Available-for-sale debt securities$20,518 $20,518 $3,406 $3,406 
Marketable equity securities18,846 18,846 11,386 11,386 
Liabilities:
Revolving credit facility, noncurrent$98,099 $98,099 $46,832 $46,832 
Senior unsecured notes, noncurrent75,000 73,396 75,000 78,432 
Term loans, noncurrent2,038 1,973 2,373 2,431 
Total$175,137 $173,468 $124,205 $127,695 
The carrying value of our revolving credit facility approximates fair value--classified as Level 2--as the interest rates on the amounts outstanding are variable. The fair value of our senior unsecured notes and term loans--classified as Level 2--is determined based on expected future weighted-average interest rates with the same remaining maturities.
Market Risk--In the normal course of business, we are exposed to market risk related to changes in foreign currency exchange rates, changes in interest rates and changes in fuel prices. We do not hold or issue derivative financial instruments for trading or speculative purposes. In prior years, we have used derivative financial instruments to manage risk, in part, associated with changes in interest rates and changes in fuel prices. Presently, we are not engaged in any hedging or derivative activities.
O.P.    Commitments and Contingencies
We are party to a number of lawsuits, threatened lawsuits and other claims arising out of the normal course of business. On a quarterly basis, we assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability in our consolidated financial statements. These legal accruals may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, we do not record a legal accrual, consistent with applicable accounting guidance. Based on information currently available to us, advice of counsel, and available insurance coverage, we believe that our established accruals are adequate and the liabilities arising from the legal proceedings will not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the inherent uncertainty in legal proceedings, there can be no assurance that the ultimate resolution of a matter will not exceed established accruals. As a result, the outcome of a particular matter or a combination of matters may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.
In November 2017, a suit was filed in Savannah, Georgia state court (“("State Court”Court") against Davey Tree, its subsidiary, Wolf Tree, Inc. ("Wolf Tree"), a former Davey employee, 2two Wolf Tree employees, and a former Wolf Tree employee alleging various acts of negligence
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The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
and seeking compensatory and punitive damages for wrongful death and assault and battery of the plaintiff’s husband, a Wolf Tree employee, who was shot and killed in August 2017.
In July 2018, a related survival action was filed by the deceased’s estate against Davey Tree, its subsidiary, Wolf Tree, and 4four current and former employees in Savannah, Georgia, which arises out of the same allegations, seeks compensatory and punitive damages and also includes 3three Racketeer Influenced and Corrupt Organizations Act ("RICO") claims under Georgia law seeking compensatory damages, treble damages, and punitive damages. The 2018 case was removed to the United States District Court for the Southern District of Georgia, Savannah Division (“("Federal Court”Court"), on August 2, 2018. The Company filed a motion to dismiss the RICO claims. Plaintiffs filed a motion to remand the case to state court, which the Company has opposed.
The cases were mediated unsuccessfully in December 2018 and the State Court case was originally set for trial on January 22, 2019. However, as discussed below, all of the civil cases were later stayed on December 28, 2018 and currently remain stayed.
On December 6, 2018, a former Wolf Tree employee pled guilty to conspiracy to conceal, harbor, and shield illegal aliens. On December 21, 2018, the United States federal prosecutors filed a motion to stay both actions on the grounds that on December 13, 2018, an
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The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
indictment was issued charging 2two former Wolf Tree employees and 1 otheranother individual with various crimes, including conspiracy to murder the deceased. OnTwo of the three individually charged defendants have pled guilty to charges related to their involvement with the murder and other illegal activities on March 28, 2022 and April 11, 2022. A third individual criminally charged defendant was scheduled to go to trial on October 25, 2022, and was convicted of charges for his role in the murder, harboring of illegal aliens; and money laundering conspiracy. All three criminal defendants have not yet been sentenced.
Previously, on December 17, 2018, the United States Attorney’s Office for the Southern District of Georgia informed the Company and Wolf Tree that they are also under investigation for potential violations of immigration and other laws relating to the subject matter of the ongoing criminal investigation referenced above. The Company and Wolf Tree are cooperating with the investigation and have met with both the civil and criminal divisions of the Department of Justice ("DOJ") to resolve the matter. Due to pandemic-related issues and delays on the side of the DOJ,To date, the matter currently remains unresolved.
On December 28, 2018, the State Court granted the United States’ motion to stay but indicated that it would nonetheless consider certain pending matters, including: (1) Plaintiff and a co-defendant’s motions that Davey Tree be forced to produce privileged documents and testimony, which had been submitted to a Special Master for recommendation; and (2) the Defendants’ motions for summary judgment. On January 11, 2019, the Special Master issued his recommendation that both Plaintiff and the co-defendant’s motions to force Davey to disclose privileged information be denied. The State Court judge has not yet moved on the recommendation. On January 29, 2019, the State Court heard oral argument on Defendants’ motions for summary judgment, and the motions remain pending during the stay of the cases.
On January 28, 2019, the Federal Court also granted the United States’ motion to stay. On January 29, 2019, the State Court ordered the parties to return to mediation, which occurred on April 17, 2019 but was unsuccessful in resolving the matters. All civil cases continue to remain stayed.stayed, although Plaintiffs' counsel has submitted a letter to the Court seeking a lift of the stay.
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The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
In both cases, the Company has denied all liability and is vigorously defending the action. It also has retained separate counsel for some of the individual defendants, each of whom has denied all liability and also is vigorously defending the action.
Northern California Wildfires
NaNFive lawsuits have been filed that name contractors for PG&E Corporation and its subsidiary, Pacific Gas and Electric Company (together, "PG&E"), including Davey Tree, with respect to claims arising from wildfires that occurred in Pacific Gas and Electric Company’s service territory in northern California beginning on October 8, 2017. An action was brought on August 8, 2019 in Napa County Superior Court, entitled Donna Walker, et al. v. Davey Tree Surgery Company, et al., Case No. 19CV001194. An action was brought on October 8, 2019 in San Francisco County Superior Court, entitled Quinisha Kyree Abram, et al. v. ACRT, Inc., et. al, Case No. CGC-19-579861.
NaNThree additional actions were brought on January 28, 2021 in San Francisco County Superior Court, by fire victims represented by a trust, which was assigned contractual rights in the PG&E bankruptcy proceedings. These cases are entitled John K. Trotter, Trustee of the PG&E Fire Victim Trust v. Davey Resource Group, Inc., et al., Case No. CGC-21-589438; John K. Trotter, Trustee of the PG&E Fire Victim Trust v. Davey Resource Group, Inc., et al., Case No. CGC-21-589439; and John K. Trotter, Trustee of the PG&E Fire Victim Trust v. ACRT Pacific, LLC, et al., Case No. CGC-21-589441. On September 22, 2021, the court granted Davey Tree's petition to coordinate all cases, including Walker, as a California Judicial Council Coordination Proceeding, In Re North Bay Fire Cases, JCCP No. 4955. As a result of the coordination order, all five of the individual actions are stayed in their home jurisdictions. The next case management conference in JCCP No. 4955 is scheduledwas held on February 24, 2022. At that case management conference, the Court ordered a mediation between the Plaintiffs and Davey Tree related to Davey Tree's contracts with PG&E. Separately, the court ordered that all parties shall participate in a mediation with the Plaintiffs prior to January 27, 2023. An initial mediation date for December 6, 2021. These actions are currently in preliminary stagesall the Plaintiffs and Davey Tree related to parties on the contractual issues was set for October 17, 2022 but did not resolve at this initial mediation.
The Defendants have also received evidence from the Plaintiff's Trust and PG&E collected by those parties during the PG&E bankruptcy proceedings and Davey Tree's experts have begun their initial inspection of pleadings, butthe evidence. Davey Tree has responded to all claims asserted by the Plaintiffs in these actions, denying all liability in these cases.cases and is vigorously defending against Plaintiffs' alleged claims.
In all cases, the Company denies all liability and will vigorously defend the actions.
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The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 2021
(Amounts in thousands, except share data)
P.Q.    The Davey 401KSOP and Employee Stock Ownership Plan
On March 15, 1979, the Company consummated a plan, which transferred control of the Company to its employees. As a part of this plan, the Company initially sold 120,000 common shares (presently, 46,080,000 common shares adjusted for stock splits) to its Employee Stock Ownership Trust (“ESOT”) for $2,700. The Employee Stock Ownership Plan (“ESOP”), in conjunction with the related ESOT, provided for the grant to certain employees of certain ownership rights in, but not possession of, the common shares held by the trustee of the ESOT. Annual allocations of shares have been made to individual accounts established for the benefit of the participants.
Defined Contribution and Savings Plans--Most employees are eligible to participate in The Davey 401KSOP and ESOP Plan. Effective January 1, 1997, the plan commenced operations and retained the existing ESOP participant accounts and incorporated a deferred savings plan (a “401(k) plan”) feature. Participants in the 401(k) plan are allowed to make before-tax contributions, within Internal Revenue Service established limits, through payroll deductions. Effective January 1, 2020, we match, in either cash or our common shares, 100% of
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The Davey Tree Expert Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 1, 2022
(Amounts in thousands, except share data)
the first 3three percent and 50% of the next 2two percent of each participant's before-tax contribution, limited to the first 5five percent of the employee’s compensation deferred each year. All nonbargaining domestic employees who attained age 21 and completed one year of service are eligible to participate. In May 2004, we adopted the 401K Match Restoration Plan, a defined contribution plan that supplements the retirement benefits of certain employees that participate in the savings plan feature of The Davey 401KSOP and ESOP Plan, but are limited in contributions because of tax rules and regulations.
Our common shares are not listed or traded on an established public trading market, and market prices are, therefore, not available. Semiannually, an independent stock valuation firm determinesassists with the appraisal of the fair market value of our common shares based upon our performance and financial condition. The Davey 401KSOP and ESOP Plan includes a put option for shares of the Company’s common stock distributed from the plan. Shares are distributed from the Davey 401KSOP and ESOP Plan to former participants of the plan, their beneficiaries, donees or heirs (each, a “participant”). Since our common stock is not currently traded on an established securities market, if the owners of distributed shares desire to sell their shares, the Company is required to purchase the shares at fair value for 2two 60-day periods after distribution of the shares from the Davey 401KSOP and ESOP. The fair value of distributed shares subject to the put option totaled $1,157$990 and $3,298$1,279 as of October 2, 20211, 2022 and December 31, 2020,2021, respectively. The fair value of the shares held in the Davey 401KSOP and ESOP totaled $158,940$167,130 and $150,089$168,652 as of October 2, 20211, 2022 and December 31, 2020,2021, respectively. Due to the Company’s obligation under the put option, the distributed shares subject to the put option and the shares held in the Davey 401KSOP and ESOP (collectively referred to as 401KSOP and ESOP related shares) are recorded at fair value, classified as temporary equity in the mezzanine section of the consolidated balance sheets and totaled $160,097$168,120 and $153,387$169,931 as of October 2, 20211, 2022 and December 31, 2020,2021, respectively. Changes in the fair value of the 401KSOP and ESOP Plan related shares are reflected in retained earnings while net share activity associated with the 401KSOP and ESOP Plan related shares are first reflected in additional paid-in capital and then retained earnings if additional paid-in capital is insufficient.
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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.
(Amounts in thousands, except share data)
Management’s Discussion and Analysis of Financial Condition and Results of Operations is provided as a supplement to the accompanying condensed consolidated financial statements and notes to help provide an understanding of our financial condition, cash flows and results of operations.
We provide a wide range of arboricultural, horticultural, environmental and consulting services to residential, utility, commercial and government entities throughout the United States and Canada.
Our Business--Our operating results are reported in two segments organized by type or class of customer: Residential and Commercial, and Utility. Residential and Commercial provides services to our residential and commercial customers including: the treatment, preservation, maintenance, removal and planting of trees, shrubs and other plant life; the practice of landscaping, grounds maintenance, tree surgery, tree feeding and tree spraying; the application of fertilizer, herbicides and insecticides; and natural resource management and consulting, forestry research and development, and environmental planning. Utility is principally engaged in providing services to our utility customers--investor-owned, municipal utilities, and rural electric cooperatives--including: the practice of line-clearing and vegetation management around power lines and rights-of-way and chemical brush control, natural resource management and consulting, forestry research and development, and environmental planning. All other operating activities, including research, technical support and laboratory diagnostic facilities, are included in "All Other."
On September 17, 2021, our board of directors approved and declared a two-for-one stock split in the form of a stock dividend, pursuant to which each of our shareholders of record at the close of business on October 1, 2021 received one additional common share for each then-held common share, which was paid on October 15, 2021. On September 20, 2021, in connection with the stock split, the Company filed a Certificate of Amendment to its 2017 Amended Articles of Incorporation with the Secretary of State of the State of Ohio, which became effective upon filing and (1) proportionately increased the authorized number of common shares from 48,000,000 to 96,000,000 and (2) proportionately decreased the par value of our common shares from $1.00 per share to $.50 per share.
Impact of COVID-19 and Recent Trends
While the coronavirus ("COVID-19") pandemic did not have a material adverse effect on our reported results for the first nine months of 2021,2022, the overall extent and duration of the impact of COVID-19 has had, and will continue to have, an impact on businesses financial markets and economic activity throughoutgenerally remains unclear due to the world.inherent uncertainty surrounding COVID-19, given its continual evolution.
We continue to takehave taken steps to support our employees and protect their health and safety, while also ensuring that our business can continue to operate and provide services to our customers. We continue to provide additional administrative leave for employees affected by COVID-19 directly or indirectly and converted our 2021 Annual Meeting of Shareholders to a virtual-only format.indirectly. During the second and third quarters of 2021, we began to bring employees back to our corporate headquarters on a limited basis with increased safety protocols and in compliance with public health and government guidance and also began to lift travel restrictions in situations where necessary. In the first nine months of 2021,2022, we incurred expenses of $1,058$1,530 as a result of the COVID-19 pandemic mainly for administrative leave and personal protective equipment.
The extentOur business continues to which our operations may be impacted by COVID-19 will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, includinga number of other macro-economic factors, in addition to the effects of new strainstrailing impact of the virus,COVID-19 pandemic. Global supply chains and product availability remain highly challenged and ongoing global events in Eastern Europe have only exacerbated an already difficult operating environment. These factors, combined with higher fuel costs, increasing interest rates and a highly competitive labor market, have created an inflationary environment and cost pressures.
In regard to consumer demand, since the availabilityonset of the COVID-19 pandemic, our business has experienced an increase in demand and effectiveness of vaccines, supply chain disruptionssales. It remains unclear, however, if these demand trends will remain intact or if they will revert to more historical levels over time, particularly as inflation begins to impact discretionary spending.
Inflation rates in the markets in which we operate have increased and actions by government authoritiesmay continue to containrise. Inflation over the pandemic or treat its impact,last several months has led us to experience higher costs, including reimposinghigher labor costs and costs for materials from suppliers and transportation costs, and, in the
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previously-lifted measurescompetitive markets in which we operate, we may not be able to increase our prices correspondingly to preserve our gross margins and implementing vaccine mandates, whichprofitability. If inflation rates continue to rise or remain elevated for a sustained period of time, they could impacthave a material adverse effect on our labor supply and futurebusiness, financial condition, results of operations and liquidity. We have generally been able to offset increases in these costs through various productivity and cost reduction initiatives, as well as adjusting our prices to pass through some of these higher costs to our customers; however, our ability to raise our prices depends on market conditions and competitive dynamics. Given the possibility that additional restrictions willtiming of our actions compared to the timing of these inflationary pressures, there may be putperiods during which we are unable to fully recover the increases in place, especially as sporadic outbreaksour costs.
2022 Subscription Offering
The Company offered to eligible employees and nonemployee directors the right to subscribe to a maximum of COVID-19 continue to occur, among other things.2,666,667 common shares of the Company at $18.10 per share in accordance with the provisions of The situation surrounding COVID-19 remains fluid,Davey Tree Expert Company 2014 Omnibus Stock Plan and the potential for a material impactrules of the Compensation Committee of the Company’s Board of Directors. The offering period ended on our business continues the longer COVID-19 impacts the level of economic activityAugust 1, 2022 and resulted in the U.S.subscription of 1,476,250 common shares for $26,720 at $18.10 per share. For additional information regarding the offering, see Note L, Per Share Amounts and globally. Even after the COVID-19 pandemic has subsided, we may experience an impact to our business as a result of any economic downturn or recession that has occurred or may occur in the future.Common and Redeemable Shares Outstanding.

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RESULTS OF OPERATIONS
The following table sets forth our consolidated results of operations as a percentage of revenues and the change in such percentages for the periods presented.
Three Months EndedNine Months Ended Three Months EndedNine Months Ended
October 2,
2021
September 26,
2020

Change
October 2,
2021
September 26,
2020

Change
October 1,
2022
October 2,
2021

Change
October 1,
2022
October 2,
2021

Change
RevenuesRevenues100.0 %100.0 %— %100.0 %100.0 %— %Revenues100.0 %100.0 %— %100.0 %100.0 %— %
Costs and expenses:Costs and expenses:Costs and expenses:
OperatingOperating62.8 61.8 1.0 63.5 63.2 .3 Operating63.8 62.8 1.0 64.7 63.5 1.2 
SellingSelling18.2 17.8 .4 17.5 17.2 .3 Selling18.1 18.2 (.1)17.6 17.5 .1 
General and administrativeGeneral and administrative5.6 5.9 (.3)6.8 6.4 .4 General and administrative7.0 5.6 1.4 7.6 6.8 .8 
Depreciation and amortizationDepreciation and amortization3.8 4.1 (.3)4.0 4.5 (.5)Depreciation and amortization3.5 3.8 (.3)3.6 4.0 (.4)
Gain on sale of assets, netGain on sale of assets, net(.4)(.1)(.3)(.4)(.2)(.2)Gain on sale of assets, net(.7)(.4)(.3)(.5)(.4)(.1)
Income from operationsIncome from operations10.0 10.5 (.5)8.6 8.9 (.3)Income from operations8.3 10.0 (1.7)7.0 8.6 (1.6)
Other income (expense):Other income (expense):Other income (expense):
Interest expenseInterest expense(.4)(.5).1 (.4)(.6).2 Interest expense(.5)(.4)(.1)(.5)(.4)(.1)
Interest incomeInterest income— .5 (.5)— .2 (.2)Interest income.1 — .1 — — — 
Other, netOther, net(.6)(.4)(.2)(.5)(.5)— Other, net(.9)(.6)(.3)(.7)(.5)(.2)
Income before income taxesIncome before income taxes9.0 10.1 (1.1)7.7 8.0 (.3)Income before income taxes7.0 9.0 (2.0)5.8 7.7 (1.9)
Income taxesIncome taxes2.3 2.8 (.5)2.0 2.2 (.2)Income taxes1.9 2.3 (.4)1.5 2.0 (.5)
Net incomeNet income6.7 %7.3 %(.6)%5.7 %5.8 %(.1)%Net income5.1 %6.7 %(1.6)%4.3 %5.7 %(1.4)%


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Third Quarter—Three Months Ended October 2, 20211, 2022 Compared to Three Months Ended September 26, 2020October 2, 2021
Our results of operations for the three months ended October 2, 20211, 2022 compared to the three months ended September 26, 2020October 2, 2021 were as follows:
Three Months Ended Three Months Ended
October 2,
2021
September 26,
2020
ChangePercentage
Change
October 1,
2022
October 2,
2021
ChangePercentage
Change
RevenuesRevenues$370,244 $337,453 $32,791 9.7 %Revenues$398,945 $370,244 $28,701 7.8 %
Costs and expenses:Costs and expenses:  Costs and expenses:  
OperatingOperating232,599 208,638 23,961 11.5 Operating254,661 232,599 22,062 9.5 
SellingSelling67,353 60,203 7,150 11.9 Selling72,364 67,353 5,011 7.4 
General and administrativeGeneral and administrative20,739 19,891 848 4.3 General and administrative27,964 20,739 7,225 34.8 
Depreciation and amortizationDepreciation and amortization14,127 13,825 302 2.2 Depreciation and amortization13,780 14,127 (347)(2.5)
Gain on sale of assets, netGain on sale of assets, net(1,507)(476)(1,031)216.6 Gain on sale of assets, net(2,837)(1,507)(1,330)88.3 
333,311 302,081 31,230 10.3  365,932 333,311 32,621 9.8 
Income from operationsIncome from operations36,933 35,372 1,561 4.4 Income from operations33,013 36,933 (3,920)(10.6)
Other income (expense):Other income (expense):  Other income (expense):  
Interest expenseInterest expense(1,449)(1,579)130 (8.2)Interest expense(2,164)(1,449)(715)49.3 
Interest incomeInterest income39 1,688 (1,649)(97.7)Interest income303 39 264 676.9 
Other, netOther, net(2,298)(1,499)(799)53.3 Other, net(3,371)(2,298)(1,073)46.7 
Income before income taxesIncome before income taxes33,225 33,982 (757)(2.2)Income before income taxes27,781 33,225 (5,444)(16.4)
Income taxesIncome taxes8,298 9,447 (1,149)(12.2)Income taxes7,317 8,298 (981)(11.8)
Net incomeNet income$24,927 $24,535 $392 1.6 %Net income$20,464 $24,927 $(4,463)(17.9)%
Revenues--Revenues of $370,244$398,945 increased $32,791$28,701 compared with $337,453$370,244 in the third quarter of 2020.2021. Utility Services increased $19,460$12,345 or 10.5%6.0% compared with the third quarter of 2020.2021. The increase was attributable to new accounts as well as increased work year-over-year and price increases on existing accounts. Residential and Commercial Services increased $13,302$15,969 or 8.8%9.7% from the third quarter of 2020.2021. Increases were primarily in tree and plant care revenues and grounds maintenance revenue and consulting and other revenue.
Operating Expenses--Operating expenses of $232,599$254,661 increased $23,961$22,062 compared with the third quarter of 2020.2021. Utility Services increased $13,803$14,694 or 10.5%10.0% compared with the third quarter of 2020 but,2021 and, as a percentage of revenue, remained atincreased to 73.7% from 71.0%. The increase was primarily attributable to additional expenses for labor and benefits expenses, fuel expense, crew meals and lodging expenses, subcontractor expense, and tools and parts expense and materials expense, which were partially offset by a decrease in rented equipment expense. Residential and Commercial Services increased $11,167$6,994 or 14.9%8.1% compared with the third quarter of 2020 and,2021 but, as a percentage of revenue, increaseddecreased to 52.4%51.6% from 49.7%52.4%. The increase was primarily attributable to increases in labor and benefits expenses, fuel expense, equipment maintenance expense, subcontractor expense, tools and parts expenses and materials expense.
Operating expenses for the third quarter of 20212022 also included $204$617 of expenses related directly to COVID-19, including $80$608 for additional administrative leave offered to employees who have been unable to work due to COVID-19 imposed restrictions, whether from the virus itself or government imposed restrictions or closures. For the third quarter of 2020,2021, the Company had $953$204 of expenses directly related to COVID-19.
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Fuel costs of $11,436$16,243 increased $3,336,$4,807, or 41.2%42.0%, from the $8,100$11,436 incurred in the third quarter of 20202021 and impacted operating expenses within all segments. The $3,336$4,807 increase included usage increases approximating $108$591 and price increases approximating $3,228.$4,216.
Selling Expenses--Selling expenses of $67,353$72,364 increased $7,150$5,011 compared with the third quarter of 2020 and,2021 but, as a percentage of revenues, increasedrevenue, decreased to 18.2%18.1% from 17.8%18.2%. Utility Services increased $2,219$3,517 or 10.9%15.6% compared to the third quarter of 2020 but,2021 and, as a percentage of revenue, remained atincreased to 12.0% from 11.0%. The increase was primarily attributable to increases in field management wages and incentive expense and travel expenses.expense. Residential and Commercial Services increased $4,671$2,052 or 11.4%4.5% from the third quarter of 2020 and,2021 but, as a percentage of revenue, increaseddecreased to 27.7%26.4% from 27.0%27.7%. The increase was primarily attributable to an increaseincreases in field management and sales wage expenses, marketing expenses and office rent.
General and Administrative Expenses--General and administrative expenses of $20,739$27,964 increased $848$7,225 from $19,891$20,739 in the third quarter of 2020.2021. The increase was primarily attributable to increases in professional services,salary expense, and travel and living expenses and office expenses, which werewas partially offset by a decrease in salaryprofessional services expense.
Depreciation and Amortization Expense--Depreciation and amortization expense of $14,127 increased $302$13,780 decreased $347 from $13,825$14,127 incurred in the third quarter of 2020.2021.
Gain on the Sale of Assets, Net--Gain on the sale of assets of $1,507$2,837 for the third quarter of 20212022 increased $1,031$1,330 from the $476$1,507 gain in the third quarter of 2020.2021. We sold more individuala greater number of units of equipment at a higher average gain per unit in the third quarter of 20212022 as compared with the third quarter of 2020.2021.
Interest Expense--Interest expense of $1,449 decreased $130$2,164 increased $715 from the $1,579$1,449 incurred in the third quarter of 2020.2021. The decreaseincrease was attributable to lowerhigher average borrowing and higher interest rates during the third quarter of 2021,2022, as compared with the third quarter of 2020.2021.
Other, Net--Other expense, net, of $2,298$3,371 increased $799$1,073 from the $1,499$2,298 of other expense incurred in the third quarter of 20202021 and consisted of nonoperating income and expense, including losses on marketable securities, pension expense and foreign currency transaction gains/losses on the intercompany account balances of our Canadian operations.
Income Taxes--Income taxes for the third quarter of 20212022 were $8,298,$7,317, as compared to $9,447$8,298 for the third quarter of 2020.2021. Our tax provision for interim periods is determined using an estimate of our annual effective tax rate adjusted for discrete items, if any, that are taken into account in the relevant period. The effective tax rate for the third quarter of 20212022 was 25.0%26.3% as compared with the third quarter of 20202021 effective tax rate of 27.8%25.0%.
Net Income--Net income of $24,927$20,464 for the third quarter of 20212022 was $392 more$4,463 less than the $24,535$24,927 net income for the third quarter of 2020.2021.

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First Nine Months—Nine Months Ended October 2, 20211, 2022 Compared to Nine Months Ended September 26, 2020October 2, 2021
Our results of operations for the nine months ended October 2, 20211, 2022 compared to the nine months ended September 26, 2020October 2, 2021 were as follows:
Nine Months Ended Nine Months Ended
October 2,
2021
September 26,
2020
ChangePercentage
Change
October 1,
2022
October 2,
2021
ChangePercentage
Change
RevenuesRevenues$1,024,541 $944,980 $79,561 8.4 %Revenues$1,143,548 $1,024,541 $119,007 11.6 %
Costs and expenses:Costs and expenses:    Costs and expenses:    
OperatingOperating650,909 598,225 52,684 8.8 Operating740,422 650,909 89,513 13.8 
SellingSelling178,876 162,287 16,589 10.2 Selling201,315 178,876 22,439 12.5 
General and administrativeGeneral and administrative69,712 60,477 9,235 15.3 General and administrative87,014 69,712 17,302 24.8 
Depreciation and amortizationDepreciation and amortization41,287 42,553 (1,266)(3.0)Depreciation and amortization41,082 41,287 (205)(.5)
Gain on sale of assets, netGain on sale of assets, net(4,174)(2,045)(2,129)104.1 Gain on sale of assets, net(5,787)(4,174)(1,613)38.6 
936,610 861,497 75,113 8.7  1,064,046 936,610 127,436 13.6 
Income from operationsIncome from operations87,931 83,483 4,448 5.3 Income from operations79,502 87,931 (8,429)(9.6)
Other income (expense):Other income (expense):   Other income (expense):   
Interest expenseInterest expense(4,093)(5,477)1,384 (25.3)Interest expense(5,312)(4,093)(1,219)29.8 
Interest incomeInterest income161 1,885 (1,724)(91.5)Interest income489 161 328 203.7 
Other, netOther, net(5,548)(4,550)(998)21.9 Other, net(8,241)(5,548)(2,693)48.5 
Income before income taxesIncome before income taxes78,451 75,341 3,110 4.1 Income before income taxes66,438 78,451 (12,013)(15.3)
Income taxesIncome taxes20,554 20,945 (391)(1.9)Income taxes17,407 20,554 (3,147)(15.3)
Net incomeNet income$57,897 $54,396 $3,501 6.4 %Net income$49,031 $57,897 $(8,866)(15.3)%
Revenues--Revenues of $1,024,541$1,143,548 increased $79,561$119,007 compared with $944,980$1,024,541 in the first nine months of 2020.2021. Utility Services increased $9,365$80,551 or 1.7%14.5% compared with the first nine months of 2020.2021. The increase was primarily attributable to new accounts, as well as increased work year-over-year on other accounts and price increases on existing accounts within both our U.S. and Canadian operations, which was partially offset by less emergency work on our PG&E account as compared to the first nine months of 2020.operations. Residential and Commercial Services increased $69,231$38,540 or 17.5%8.3% compared with the first nine months of 2020.2021. Increases were primarily in tree and plant care revenue, consulting and other revenue and grounds maintenance. In 2020, while our Residential and Commercial Services segment work was deemed essential services in most states, we experienced temporary shutdowns or work restrictions related to COVID-19 in a few states and certain Canadian provinces.maintenance revenue.
Operating Expenses--Operating expenses of $650,909$740,422 increased $52,684$89,513 compared with the first nine months of 2020 and, as a percentage of revenues, increased to 63.5% from 63.2%. Utility Services increased $14,553 or 3.7% compared with the first nine months of 20202021 and, as a percentage of revenue, increased to 72.5%64.7% from 71.0%63.5%. Utility Services increased $65,742 or 16.3% compared with the first nine months of 2021 and, as a percentage of revenue, increased to 73.6% from 72.5%. The increase was attributable to increases in labor and benefits expense, fuel expense, equipment expense, materials expense, crew meals and lodging expenses, and tools and parts expense which were partially offset by decreases in benefits expense, equipment expenses, and subcontractor expense. Residential and Commercial Services increased $40,875$23,107 or 20.1%9.5% compared with the first nine months of 20202021 and, as a percentage of revenue, increased to 52.5%53.0% from 51.3%52.5%. The increase was primarily attributable to increases in labor and benefits expense, fuel expense, subcontractor expense, equipment expense, tool expense, subcontractor expense and materials expense.
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Operating expenses for the first nine months of 20212022 also included $1,058$1,530 of expenses related directly to COVID-19, including $362$1,322 for additional administrative leave offered to employees who were unable to work due to COVID-19-related restrictions, whether from the virus itself or government imposed restrictions or closures.restrictions. For the first nine months of 2020,2021, the Company had $3,148$1,058 of expenses directly related to COVID-19.
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Fuel costs of $29,970$45,379 increased $6,732,$15,409, or 29.0%51.4%, from the $23,238$29,970 incurred in the first nine months of 20202021 and impacted operating expenses within all segments. The $6,732$15,409 increase included usage increases approximating $455$1,609 and price increases approximating $6,277.$13,800.
Selling Expenses--Selling expenses of $178,876$201,315 increased $16,589$22,439 compared with the first nine months of 20202021 and, as a percentage of revenue, increased to 17.5%17.6% from 17.2%17.5%. Utility Services increased $1,996$12,797 or 3.3%20.6% compared to the first nine months of 20202021 and, as a percentage of revenue, increased to 11.2%11.8% from 11.0%11.2%. The increase was primarily attributable to increases in field management wages and field management travel expense. Residential and Commercial Services experienced an increase of $14,885$9,843 or 14.2%8.2% compared to the first nine months of 20202021 but, as a percentage of revenue, decreased toremained at 25.7% from 26.4%. The increase was primarily attributable to increases in field management wages and incentive expense, travel expense, computermarketing expense and rent expense.
General and Administrative Expenses--General and administrative expenses of $69,712$87,014 increased $9,235$17,302 from $60,477$69,712 in the first nine months of 2020.2021. The increase was primarily attributable to increases in salary and incentive expense professional services expense and computer expenses.travel expense.
Depreciation and Amortization Expense--Depreciation and amortization expense of $41,287$41,082 decreased $1,266$205 from $42,553$41,287 incurred in the first nine months of 2020. The decrease was attributable to lower capital expenditures in recent years and an increased use of operating leases for equipment.2021.
Gain on the Sale of Assets, Net--Gain on the sale of assets of $4,174$5,787 for the first nine months of 20212022 increased $2,129$1,613 from the $2,045$4,174 gain in the first nine months of 2020.2021. We sold a comparable number ofmore units of equipment but at a higher average gain per unit during the first nine months of 20212022 as compared with the first nine months of 2020.2021.
Interest Expense--Interest expense of $4,093 decreased $1,384$5,312 increased $1,219 from the $5,477$4,093 incurred in the first nine months of 2020.2021. The decreaseincrease was attributable to lowerhigher average borrowing and increased interest rates during the first nine months of 2021,2022, as compared with the first nine months of 2020.2021.
Other, Net--Other expense, net, of $5,548$8,241 increased $998$2,693 from the $4,550$5,548 expense incurred in the first nine months of 20202021 and consisted of nonoperating income and expense, including losses on marketable securities, pension expense and foreign currency gains/losses on the intercompany account balances of our Canadian operations.
Income Taxes--Income taxes for the first nine months of 20212022 were $20,554,$17,407, as compared to $20,945$20,554 for the first nine months of 2020.2021. Our tax provision for interim periods is determined using an estimate of our annual effective tax rate adjusted for discrete items, if any, that are taken into account in the relevant period. The effective tax rate for the first nine months of 20212022 was 26.2%. Our effective tax rate for the first nine months of 20202021 was 27.8%26.2%. The change in the effective tax rate from statutory tax rates was primarily due to the impact of state and local taxes, which was partially offset by favorable discrete items.
Net Income--Net income of $49,031 for the first nine months of 2022 was $8,866 less than the net income of $57,897 for the first nine months of 2021 was $3,501 more than the net income of $54,396 for the first nine months of 2020.2021.

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LIQUIDITY AND CAPITAL RESOURCES
Our principal financial requirements are for capital spending, working capital and business acquisitions. Cash generated from operations, our revolving credit facility and note issuances are our primary sources of capital. We also engaged in a subscription offering of our common shares to eligible employees and nonemployee directors, which closed tn the third quarter of 2022 and resulted in the subscription of 1,476,250 common shares for $26,720 at $18.10 per share.
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Cash Flow Summary
Our cash flows from operating, investing and financing activities for the nine months ended October 1, 2022 and October 2, 2021 and September 26, 2020 were as follows:
Nine Months EndedNine Months Ended
October 2,
2021
September 26,
2020
October 1,
2022
October 2,
2021
Cash provided by (used in):Cash provided by (used in):  Cash provided by (used in):  
Operating activitiesOperating activities$57,401 $99,428 Operating activities$62,980 $57,401 
Investing activitiesInvesting activities(59,777)(41,614)Investing activities(95,608)(59,777)
Financing activitiesFinancing activities19,192 (43,739)Financing activities36,183 19,192 
Effect of exchange rate changes on cashEffect of exchange rate changes on cash40 (17)Effect of exchange rate changes on cash(171)40 
Increase in cashIncrease in cash$16,856 $14,058 Increase in cash$3,384 $16,856 
Cash Provided By Operating Activities--Cash provided by operating activities was $57,401$62,980 for the first nine months of 2021,2022, a $42,027 decrease$5,579 increase when compared to the first nine months of 2020.2021. The $42,027 decrease$5,579 increase in operating cash flow was primarily attributable to thea change of $37,860$22,180 related to accounts payable and accrued expenses, and the change of $5,936$8,111 related to prepaid expenses,other operating assets and liabilities, partially offset by athe change of $4,533$19,183 related to accounts receivable.
Overall, accounts receivable increased $49,451 during the first nine months of 2022, as compared to an increase of $30,268 during the first nine months of 2021, as compared to an increase of $34,801 during the first nine months of 2020.2021. With respect to the change in accounts receivable arising from business levels, the “days-sales-outstanding” in accounts receivable (sometimes referred to as “DSO”) at the end of the first nine months of 2021 decreased2022 increased by twofive days to 7075 days, compared to 7270 days at the end of the first nine months of 2020.2021.
Accounts payable and accrued expenses decreased $9,471increased $12,709 in the first nine months of 2021,2022, a change of $37,860$22,180 compared to the $28,389 increase$9,471 decrease in the first nine months of 2020.2021. The change was primarily related to the timing of estimated income tax payments and employer payroll taxes payable deferred in 2020 as a result of the Coronavirus Aid, Relief, and Economic Security Act.well as compensated absence accruals. Self-insurance accruals increased $13,041$13,306 in the first nine months of 2021,2022, which was $1,645 less$265 more than the increase of $14,686$13,041 experienced in the first nine months of 2020.2021. The increase was attributable to increased exposures within our workers compensation, general liability and vehicle liability lines of coverage.
Prepaid expensesOther operating assets and liabilities increased $13,442$7,710 in the first nine months of 2021,2022, a change of $5,936$8,111 compared to the $7,506 increase$401 decrease in the first nine months of 2020.2021. The increasechange was primarily attributable to an increase in prepaid insurance premiums.
As we cannot predict the duration or scope of the COVID-19 pandemic and its impact on our customers and suppliers (or workforce), any negative financial impact to our results cannot be reasonably estimated, but could be material. We are actively managing the business to maintain cash flow and we have significant liquidity. We believe that these factors will allow us to meet our anticipated funding requirements.
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cloud computing arrangements.
Cash Used In Investing Activities--Cash used in investing activities for the first nine months of 20212022 was $59,777,$95,608, a $18,163$35,831 increase when compared to the first nine months of 2020.2021. The increase was primarily the result of increases in purchases of businesses, equipment and land and buildings.buildings and marketable securities, partially offset by a decrease in purchases of businesses.
Cash Provided by (Used In)By Financing Activities--Cash provided by financing activities was $19,192$36,183 during the first nine months of 2021,2022, a change of $62,931$16,991 as compared with the $43,739 used$19,192 provided during the first nine months of 2020.2021. During the first nine months of 2021,2022, our revolving credit facility, net provided $33,478$51,267 in cash as compared with $32,000 used$33,478 provided during the first nine months of 2020.2021. We use the credit facility primarily for capital expenditures, redemptions of shares and payments of notes payable related to acquisitions. Notes payable increased $10,081$6,735 during the first nine months of 2021, an increase2022, a decrease of $7,796$3,346 when compared to the $2,285$10,081 increase in the first nine months of 2020.2021. Treasury share transactions (purchases and sales) used $19,552$16,824 for the first nine months of 2021, $8,7612022, $2,728 more than the $10,791$19,552 used in the first nine months of 2020.2021. Dividends paid of $2,127$2,682 during the first nine months of 20212022 increased $419$555 as
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compared with $1,708$2,127 paid in the first nine months of 2020,2021, in part due to the increase in dividend paid per share implemented during the fourth quarter of 2021 and the second quarter of 2021.2022.
The Company currently repurchases common shares at shareholders’ requests in accordance with the terms of the Davey 401KSOP and ESOP Plan and also repurchases common shares from time to time at the Company’s discretion. The amount of common shares offered to the Company for repurchase by the holders of shares distributed from the Davey 401KSOP and ESOP Plan is not within the control of the Company, but is at the discretion of the shareholders. The Company expects to continue to repurchase its common shares, as offered by its shareholders from time to time, at their then current fair value. However, other than for repurchases pursuant to the put option under the Davey 401KSOP and ESOP Plan, as described in Note P,Q, such purchases are not required, and the Company retains the right to discontinue them at any time. Repurchases of redeemable common shares at shareholders' request approximated $6,860$12,814 and $5,280$6,860 during the nine months ended October 1, 2022 and October 2, 2021, and September 26, 2020, respectively. Share repurchases, other than redeemable common shares, approximated $29,647$33,053 and $22,209$29,647 during the nine months ended October 1, 2022 and October 2, 2021, and September 26, 2020, respectively.
Contractual Obligations Summary and Commercial Commitments
As of October 2, 2021,1, 2022, total commitments related to issued letters of credit were $88,363,$94,509, of which $2,878$2,700 were issued under the revolving credit facility, $83,355$89,689 were issued under the AR Securitization program, and $2,131$2,120 were issued under short-term lines of credit. As of December 31, 2020,2021, total commitments related to issued letters of credit were $88,242,$88,362, of which $2,877 were issued under the revolving credit facility, $83,355 were issued under the AR Securitization program, and $2,010$2,130 were issued under short-term lines of credit.
Also, as is common in our industry, we have performance obligations that are supported by surety bonds, which expire during 20212022 through 2023.2026. We intend to renew the surety bonds where appropriate and as necessary.
Capital Resources
Cash generated from operations, our revolving credit facility and note issuances are our primary sources of capital.
Business seasonality traditionally results in higher revenues during the second and third quarters as compared with the first and fourth quarters of the year, while our methods of accounting for fixed costs, such as depreciation and amortization expense, rent and interest expense, are not significantly impacted by business seasonality. Capital resources during these periods are equally affected. We satisfy seasonal working capital needs and other financing requirements with the revolving credit facility and other short-term lines of credit. We continually review our existing sources of financing and evaluate alternatives. At October 2, 2021,1, 2022, we had working capital of $145,735,$171,930, short-term lines of credit approximating $9,052$8,971 and $287,931$224,201 available under our revolving credit facility, which was amended and
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restated in August 2021 and now permits up to $325,000 in borrowings. In addition, in September 2021, we amended the Note Purchase and Shelf Agreement, which among other things, increased the total facility limit by $50,000, to $150,000.facility.
For more information regarding our outstanding debt, see Note F,G, Short and Long-Term Debt and Commitments Related to Letters of Credit.
We believe our sources of capital, at this time, provide us with the financial flexibility to meet our capital-spending plans and to continue to complete business acquisitions for at least the next twelve months and for the reasonably foreseeable future. However, we cannot predict the full extent of the potential impact resulting from the COVID-19 pandemic on our business, results of operations and sources of capital.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented.
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As discussed in our 2021 annual report, on Form 10-K for the year ended December 31, 2020, we believe that our policies related to revenue recognition, the allowance for credit losses, stock valuation and self-insurance accruals are our “critical accounting policies and estimates”--those most important to the financial presentations and those that require the most difficult, subjective or complex judgments.
On an ongoing basis, we evaluate our estimates and assumptions, including those related to accounts receivable, specifically those receivables under contractual arrangements primarily with Utility customers; allowance for credit losses; and self-insurance accruals. We base our estimates on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. Our critical accounting policies have not changed materially from those discussed in our 2021 Annual Report.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements relate to future events or our future financial performance. In some cases, forward-looking statements may be identified by terminology such as "may," "will," "should," "could," "might," "expects," "plans," "anticipates," "believes," "estimates," "seeks," "predicts," "potential," "would," "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to differ materially from what is expressed or implied in these forward-looking statements.statements, some of which have been, and may further be, exacerbated by the COVID-19 pandemic. Some important factors that could cause actual results to differ materially from those in the forward-looking statements someor materially adversely affect our business, results of which have been, and may further be, exacerbated byoperations or financial condition include: the COVID-19 pandemic, include:
The continued impact of the COVID-19 pandemic and the responses thereto could have a material adverse effect onthereto; our business, results of operations, financial position or cash flows.
We may be unableinability to attract and retain a sufficient number of qualified employees for our field operations or qualified management personnel and weincreased wage rates that may be unableresult from our need to attract and retain qualified management personnel.
We have significant contracts with our utility, commercial and government customers that include liability risk exposure as part of those contracts. Consequently, we have substantial excess-umbrella liability insurance, andemployees; increases in the cost of obtaining adequate insurance, or the inadequacy of our self-insurance accruals or insurance coverages, could negatively impact our liquidity and financial condition.
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The unavailabilitycoverages; inability to obtain, or cancellation of, third-party insurance coverage may have a material adverse effect on our financial condition and resultscoverage; the impact of operations as well as disrupt our operations.
We could be materially adversely affected by wildfires in California and other areas, as well as other severe weather events and natural disasters, which events may worsen or increase due to the effects of climate change, including negative impacts to our business, reputation, financial condition, results of operations, liquidity and cash flows.
Our business, other than tree services to utility customers, is highly seasonal and weather dependent.
Significant customers, particularly utilities, may experience financial difficulties, resulting inchange; payment delays or delinquencies.
We are subject todelinquencies resulting from financial difficulties of our significant customers, particularly utilities; the outcome of litigation and third-party and governmental regulatory claims and adverse litigation judgments or settlements resulting from those claims could materially adversely affectagainst us; an increase in our business.
Significantoperating expenses due to significant increases in fuel prices for extended periods of time, will increasesuch as the recent increases and volatility arising from the effects of the Russia-Ukraine conflict; disruptions, delays or price increases within our operating expenses.
We are subjectsupply chain; our ability to withstand intense competition.
Variouscompetition; the effect of various economic factors that may adversely impact our customers’ spending and pricing for our services, including the impact of inflationary pressures, and impede our collection of accounts receivable.
Thereceivable; the impact of regulations initiated as a responseglobal climate change and related regulations; fluctuations in our quarterly results due to possible changing climate conditions could have a negative effect on our results of operations or our financial condition.
Thethe seasonal nature of our business andor changes in general and local economic conditions, among other factors, may cause our quarterly results to fluctuate, and our prior performance is not necessarily indicative of future results.
We may misjudge a competitive bid and befactors; being contractually bound to an unprofitable contract.
Acontract; a disruption in our information technology systems, including a disruption related to cybersecurity, or the impact of costs incurred to comply with cybersecurity or data privacy regulations, could adversely affect our financial performance.
We are dependent, in part, onregulations; damage to our reputation of quality, integrity and performance. Ifperformance; limitations on our reputation is damaged, we may be adversely affected.shareholders’ ability to sell their common shares due to the lack of public market for such shares; our ability to continue to declare cash dividends; our failure to comply with environmental laws resulting in significant liabilities, fines and/or penalties; difficulties obtaining surety bonds or letters of credit necessary to support our operations; uncertainties in the credit and financial markets, including the negative impacts of COVID-19 and the Russia-Ukraine conflict, supply chain shortages and disruptions, rising interest rates, labor shortages and inflationary cost pressures, among other factors, potentially limiting our access to capital; fluctuations in foreign currency exchange rates; significant
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increases in health care costs; the impact of corporate citizenship and environmental, social and governance matters and/or our reporting of such matters.
Because no public market exists formatters; our common shares,ability to successfully implement our new enterprise resource planning system in a cost-effective and timely manner; the ability of shareholders to sell their common shares is limited.
There can be no assurance that we will continue to declare cash dividends in the future, in any particular amounts or at all.
Our failure to comply with environmental laws could result in significant liabilities, fines and/or penalties.
We may encounter difficulties obtaining surety bonds or letters of credit necessary to support our operations.
The uncertainties in the credit and financial markets, including the negative impact of COVID-19, may limit our access to capital.
Fluctuations in foreign currency exchange rates may have a material adverse impact on our operating results.
Significant increases in health care costs could negatively impact our results of operations or financial position.
Our facilities could be damaged or our operations could be disrupted, or our customers or vendors may be adversely affected, by events such as natural disasters, public health epidemics or pandemics, such as COVID-19, or other public health concerns, terrorist attacks or other external events.
Ourevents; and our inability to properly verify the employment eligibility of our employees could adversely affect our business.
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employees.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this quarterly report on Form 10-Q to conform these statements to actual future results.results, except as required by applicable securities laws.
The factors described above, as well as other factors that may adversely impact our actual results, are discussed in "Part I - Item 1A. Risk Factors." of our 2021 annual report on Form 10-K for the year ended December 31, 2020.report.
Item 3.Quantitative and Qualitative Disclosures about Market Risk.
ThereWhile we have experience inflation and higher interest rates during 2022, there have been no material changes in our reported market risks or risk management policies since the filing of our 20202021 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 8, 2021.11, 2022.
Item 4.Controls and Procedures.
(a) Management’s Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report in ensuring that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended October 2, 20211, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II.    Other Information
Items 3, 4 and 5 are not applicable.
Item 1.    Legal Proceedings.
We are party to a number of lawsuits, threatened lawsuits and other claims arising out of the normal course of business. On a quarterly basis, we assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability in our consolidated financial statements. These legal accruals may be increased or decreased to reflect any relevant developments on a quarterly
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basis. Where a loss is not probable or the amount of the loss is not estimable, we do not record a legal accrual, consistent with applicable accounting guidance. Based on information currently available to us, advice of counsel, and available insurance coverage, we believe that our established accruals are adequate and the liabilities arising from the legal proceedings will not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the inherent uncertainty in legal proceedings, there can be no assurance that the ultimate resolution of a matter will not exceed established accruals. As a result, the outcome of a particular matter or a combination
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of matters may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.
In November 2017, a suit was filed in Savannah, Georgia state court (“("State Court”Court") against Davey Tree, its subsidiary, Wolf Tree, Inc. ("Wolf Tree"), a former Davey employee, two Wolf Tree employees, and a former Wolf Tree employee alleging various acts of negligence and seeking compensatory and punitive damages for wrongful death and assault and battery of the plaintiff’s husband, a Wolf Tree employee, who was shot and killed in August 2017.
In July 2018, a related survival action was filed by the deceased’s estate against Davey Tree, its subsidiary, Wolf Tree, and four current and former employees in Savannah, Georgia, which arises out of the same allegations, seeks compensatory and punitive damages and also includes three Racketeer Influenced and Corrupt Organizations Act ("RICO") claims under Georgia law seeking compensatory damages, treble damages, and punitive damages. The 2018 case was removed to the United States District Court for the Southern District of Georgia, Savannah Division (“("Federal Court”Court"), on August 2, 2018. The Company filed a motion to dismiss the RICO claims. Plaintiffs filed a motion to remand the case to state court, which the Company has opposed.
The cases were mediated unsuccessfully in December 2018 and the State Court case was originally set for trial on January 22, 2019. However, as discussed below, all of the civil cases were later stayed on December 28, 2018 and currently remain stayed.
On December 6, 2018, a former Wolf Tree employee pled guilty to conspiracy to conceal, harbor, and shield illegal aliens. On December 21, 2018, the United States federal prosecutors filed a motion to stay both actions on the grounds that on December 13, 2018, an indictment was issued charging two former Wolf Tree employees and one otheranother individual with various crimes, including conspiracy to murder the deceased. OnTwo of the three individually charged defendants have pled guilty to charges related to their involvement with the murder and other illegal activities on March 28, 2022 and April 11, 2022. A third individual criminally charged defendant was scheduled to go to trial on October 25, 2022, and was convicted of charges for his role in the murder, harboring of illegal aliens; and money laundering conspiracy. All three criminal defendants have not yet been sentenced.
Previously, on December 17, 2018, the United States Attorney’s Office for the Southern District of Georgia informed the Company and Wolf Tree that they are also under investigation for potential violations of immigration and other laws relating to the subject matter of the ongoing criminal investigation referenced above. The Company and Wolf Tree are cooperating with the investigation and have met with both the civil and criminal divisions of the Department of Justice ("DOJ") to resolve the matter. Due to pandemic-related issues and delays on the side of the DOJ,To date, the matter currently remains unresolved.
On December 28, 2018, the State Court granted the United States’ motion to stay but indicated that it would nonetheless consider certain pending matters, including: (1) Plaintiff and a co-defendant’s motions that Davey Tree be forced to produce privileged documents and testimony, which had been submitted to a Special Master for recommendation; and (2) the Defendants’ motions for summary judgment. On January 11, 2019, the Special Master issued his recommendation that both Plaintiff and the co-defendant’s motions to force Davey to disclose privileged information be denied. The State Court judge has not yet moved on the recommendation. On January 29, 2019, the
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State Court heard oral argument on Defendants’ motions for summary judgment, and the motions remain pending during the stay of the cases.
On January 28, 2019, the Federal Court also granted the United States’ motion to stay. On January 29, 2019, the State Court ordered the parties to return to mediation, which occurred on April 17, 2019 but was unsuccessful in resolving the matters. All civil cases continue to remain stayed.stayed, although Plaintiffs' counsel has submitted a letter to the Court seeking a lift of the stay.
In both cases, the Company has denied all liability and is vigorously defending the action. It also has retained separate counsel for some of the individual defendants, each of whom has denied all liability and also is vigorously defending the action.
Northern California Wildfires
Five lawsuits have been filed that name contractors for PG&E Corporation and its subsidiary, Pacific Gas and Electric Company (together, "PG&E"), including Davey Tree, with respect to claims arising from wildfires that occurred in Pacific Gas and Electric Company’s service territory in northern California beginning on October 8, 2017. An action was brought on August 8, 2019 in Napa County Superior Court, entitled Donna Walker, et al. v. Davey Tree Surgery Company, et al., Case No. 19CV001194. An action was brought on October 8, 2019 in San Francisco County Superior Court, entitled Quinisha Kyree Abram, et al. v. ACRT, Inc., et. al, Case No. CGC-19-579861.
- 45 -Three additional actions were brought on January 28, 2021 in San Francisco County Superior Court, by fire victims represented by a trust, which was assigned contractual rights in the PG&E bankruptcy proceedings. These cases are entitled John K. Trotter, Trustee of the PG&E Fire Victim Trust v. Davey Resource Group, Inc., et al., Case No. CGC-21-589438; John K. Trotter, Trustee of the PG&E Fire Victim Trust v. Davey Resource Group, Inc., et al., Case No. CGC-21-589439; and John K. Trotter, Trustee of the PG&E Fire Victim Trust v. ACRT Pacific, LLC, et al., Case No. CGC-21-589441. On September 22, 2021, the court granted Davey Tree's petition to coordinate all cases, including Walker, as a California Judicial Council Coordination Proceeding, In Re North Bay Fire Cases, JCCP No. 4955. As a result of the coordination order, all five of the individual actions are stayed in their home jurisdictions. The next case management conference in JCCP No. 4955 was held on February 24, 2022. At that case management conference, the Court ordered a mediation between the Plaintiffs and Davey Tree related to Davey Tree's contracts with PG&E. Separately, the court ordered that all parties shall participate in a mediation with the Plaintiffs prior to January 27, 2023. An initial mediation date for all the Plaintiffs and Davey Tree related to parties on the contractual issues was set for October 17, 2022 but did not resolve at this initial mediation.
The Defendants have also received evidence from the Plaintiff's Trust and PG&E collected by those parties during the PG&E bankruptcy proceedings and Davey Tree's experts have begun their initial inspection of the evidence. Davey Tree has responded to all claims asserted by the Plaintiffs in these actions, denying all liability in these cases and is vigorously defending against Plaintiffs' alleged claims.
In all cases, the Company denies all liability and will vigorously defend the actions.

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Item 1A.
Item 1A.Risk Factors.

Our Annual Report on Form 10-K for the year ended December 31, 2020,2021, includes a detailed discussion of our risk factors. There have been no material changes to the risk factors described in the 2020 Form 10-K during the nine months ended October 2, 2021, except as set forth below. Disclosure of risks should not be interpreted to imply that the risks have not already materialized.
The proposed new regulation regarding mandatory COVID-19 vaccination of employees could impact our workforce and There have abeen no material adverse effect on our business and results of operations.
On September 9, 2021, President Biden announced a proposed new rule that would require all employers with at least 100 employeeschanges to ensure that their employees are fully vaccinated or require unvaccinated workers to get a negative test at least once a week. The U.S. Department of Labor’s Occupational Safety and Health Administration ("OSHA") is drafting an emergency regulation to carry out this mandate, which may take effectthe risk factors described in the near future. As a company with more than 100 employees, it is anticipated that we would be subject to2021 Annual Report during the OSHA regulation concerning COVID-19 vaccination. At this time, it is not possible to predict with certainty the exact impact that the proposed new regulation will have on us or on our workforce. The proposed new regulation, when implemented, in addition to customer-imposed mandates that have or could be required, could result in increased costs, labor disruptions or employee attrition. If we lose employees, it may be difficult in the current competitive labor market to find replacement employees, and this could have an adverse effect on future revenues and costs, which could be material. In addition, additional uncertainty could be caused by competing and potentially conflicting laws and regulations, such as the recent executive order issued by the governor of Texas prohibiting vaccine mandates. Accordingly, the proposed new OSHA regulation, when implemented, could have a material adverse effect on our business and results of operations.nine months ended October 1, 2022.
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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.
The following table provides information on purchases of our common shares outstanding made by us during the first nine months of 2021. The numbers in the following table, as well as the number of shares authorized for repurchase, as described below, have been adjusted for a two-for-one stock split, effected in the form of a 100% stock dividend paid on October 15, 2021 to shareholders of record at the close of business on October 1, 2021.2022.
PeriodTotal
Number of
Shares
Purchased
Average
Price
Paid per
Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Number of
Shares that
May Yet Be Purchased
Under the Plans or
Programs
Fiscal 2021    
January 1 to January 303,162 $12.45 1,381,920
January 31 to February 27340 12.45 1,381,920
February 28 to April 3246,842 15.00 1,381,920
Total First Quarter250,344 14.96  
April 4 to May 1519,438 15.00 1,381,920
May 2 to May 29544,434 15.00 1,381,920
May 30 to July 3505,996 15.00 353,8741,028,046
Total Second Quarter1,569,868 15.00 353,874 
July 4 to July 31— 16.40 1,028,046
August 1 to August 28242,088 16.40 1,028,046
August 29 to October 2321,708 16.40 131,4183,896,628
Total Third Quarter563,796 16.40 131,418
Total Year-to-Date2,384,008 $15.33 485,292 
Period
Total
Number of
Shares
Purchased (1)
Average
Price
Paid per
Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Number of
Shares that
May Yet Be Purchased
Under the Plans or
Programs
Fiscal 2022    
January 1 to January 291,285 $18.10 3,845,851
January 30 to February 265,620 18.10 3,845,851
February 27 to April 2382,610 18.10 3,845,851
Total First Quarter389,515 18.10  
April 3 to April 30321,122 18.10 3,845,851
May 1 to May 28927,994 18.10 3,845,851
May 29 to July 2397,888 18.10 3,845,851
Total Second Quarter1,647,004 18.10  
July 3 to July 3016,083 18.10 3,845,851
July 31 to August 27108,358 18.10 3,845,851
August 28 to October 1366,911 18.10 3,845,851
Total Third Quarter491,352 18.10 
Total Year-to-Date2,527,871 $18.10  
(1) During the nine months ended October 1, 2022, the Company purchased 2,527,871 shares from shareholders excluding those purchased through publicly announced plans. The Company provides a ready market for all shareholders through our direct purchase of their common shares although we are under no obligation to do so (other than for repurchases pursuant to the put option under The Davey 401KSOP and ESOP Plan).
Our common shares are not listed or traded on an established public trading market and market prices are, therefore, not available. Semiannually, for purposes of the Davey 401KSOP and ESOP, an independent stock valuation firm assists with the appraisal of the fair market value of ourthe common shares, is determined by an independent stock valuation firm, based upon our performance and financial condition, using a peer group of comparable companies selected by that firm. The peer group currently consists of: ABM Industries Incorporated; Comfort Systems USA, Inc.; Dycom Industries, Inc.; FirstService Corporation; MYR Group, Inc.; Quanta Services, Inc.; Rollins, Inc.; and Scotts Miracle-Gro Company. The semiannual valuations are effective for a period of six months and the per-share price established by those valuations is the price at which our Board of Directors has determined our common shares will be bought and sold during that six-month period in transactions involving Davey Tree or one of its employee benefit or stock purchase plans. Since 1979, we have provided a ready market for all shareholders through our direct purchase of their common shares, although we are under no obligation to do so (other than for repurchases pursuant to the put option under The Davey 401KSOP and ESOP Plan, as described in Note P,Q, The Davey 401KSOP and Employee Stock Ownership Plan). The purchases described above were added to our treasury stock.
At the Annual Meeting of Shareholders of the Company held on May 16, 2017, the shareholders of the Company approved proposals to amend the Company's Articles of Incorporation to (i) expand the Company's right of first refusal with respect to proposed transfers of shares of the Company's common shares, (ii) clarify provisions regarding when the Company may provide notice of its decision to exercise
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its right of first refusal with respect to proposed transfers of common shares by the estate or personal representative of a deceased shareholder, and (iii) grant the Company a right to repurchase common shares held by certain shareholders of the Company.
On May 10, 2017, the Board of Directors of the Company adopted a policy regarding the Company's exercise of the repurchase rights granted to the Company through amendments to the Company's Articles of Incorporation, as approved by shareholders on May 16, 2017.
Until further action by the Board, it is the policy of the Company not to exercise its repurchase rights under the amended Articles with respect to shares of the Company's common shares held by current and retired employees and current and former directors of the Company (subject to exceptions set forth in the policy) (collectively, "Active Shareholders"), their spouses, their first-generation descendants and trusts established exclusively for their benefit.
Until further action by the Board, it is also the policy of the Company not to exercise its rights under the amended Articles to repurchase shares of the Company's common shares proposed to be transferred by an Active Shareholder to his or her spouse, a first-generation descendant, or a trust established exclusively for the benefit of one or more of an Active Shareholder, his or her spouse and first-generation descendants of an Active Shareholder, or upon the death of an Active Shareholder, such transfers from the estate or personal representative of a deceased Active Shareholder. The Board may suspend, change or discontinue the policy at any time without prior notice.
In accordance with the amendments to the Articles approved by the Company's shareholders at the 2017 Annual Meeting, on May 17, 2017, the Company's Board of Directors authorized the Company to repurchase up to 400,000 common shares, which authorization was increased by an additional 2,000,000 common shares in May 2018 and increased further by an additional 3,000,000 common shares in September 2021. Of the 5,400,000 total shares authorized, 3,896,6283,845,851 remained available under the program, as of October 2, 2021.1, 2022. Share repurchases may be made from time to time and the timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors. The Company is not obligated to purchase any shares, and repurchases may be commenced, suspended or discontinued from time to time without prior notice. The repurchase program does not have an expiration date.
Item 6.Exhibits.
See the Exhibit Index below.
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Exhibit IndexExhibits
Exhibit No.Description
Filed Herewith
Filed Herewith
Furnished Herewith
Furnished Herewith
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Exhibit No.Description
101The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended October 2, 2021,1, 2022, formatted in iXBRL (inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets (unaudited), (ii) the Condensed Consolidated Statements of Operations (unaudited), (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited), (iv) the Condensed Consolidated Statements of Shareholders' Equity (unaudited), (v) the Condensed Consolidated Statements of Cash Flows (unaudited), and (vi) Notes to Condensed Consolidated Financial Statements (unaudited). The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.Filed Herewith
104Cover Page Interactive Data File (embedded within the inline XBRL document)Filed Herewith
* Management contracts or compensatory plans or arrangements.


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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  THE DAVEY TREE EXPERT COMPANY
   
Date:November 3, 20218, 2022By:/s/ Joseph R. Paul
 Joseph R. Paul
  Executive Vice President, Chief Financial Officer and Assistant Secretary
  (Principal Financial Officer)
   
Date:November 3, 20218, 2022By:/s/ Thea R. Sears
  Thea R. Sears
  Vice President and Controller
  (Principal Accounting Officer)
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