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 ~~September~~March 30, ~~2023~~2024


☐			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

THE DAVEY TREE EXPERT COMPANY

(Exact name of registrant as specified in its charter)


Ohio									34-0176110
(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 class

Trading Symbol(s)

Name of each exchange on which registered

N/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 Filer

☐

Accelerated Filer

☐

Emerging Growth Company

☐

Non-Accelerated Filer

☒

Smaller 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 ~~41,178,710~~41,067,447 Common Shares, $.50 par value, outstanding as of ~~November 10, 2023.~~May 3, 2024. The registrant's Common Shares are not traded on a public market.

Index

The Davey Tree Expert Company

Quarterly Report on Form 10-Q

~~September~~March 30, ~~2023~~2024

INDEX


						Page
Part I.	Financial Information

Item 1.	Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets				2
		Condensed Consolidated Statements of Operations				3
		Condensed Consolidated Statements of Comprehensive Income				4
		Condensed Consolidated Statements of Shareholders' Equity				5
		Condensed Consolidated Statements of Cash Flows				76
		Notes to Condensed Consolidated Financial Statements
			A	—	Basis of Financial Statement Preparation	87
			B	—	Seasonality of Business	98
			C	—	Accounts Receivable, Net and Supplemental Balance-Sheet Information	98
			D	—	Business Combinations	1110
			E	—	Marketable Securities	1210
			F	—	Identified Intangible Assets and Goodwill, Net	1311
			G	—	Short and Long-Term Debt and Commitments Related to Letters of Credit	1412
			H	—	Leases	1716
			I	—	Stock-Based Compensation	1817
			J	—	Income Taxes	2120
			K	—	Accumulated Other Comprehensive Income (Loss)	2220
			L	—	Per Share Amounts and Common and Redeemable Shares Outstanding	2422
			M	—	Operations by Business Segment	2524
			N	—	Revenue Recognition	2725
			O	—	Fair Value Measurements and Financial Instruments	2927
			P	—	Commitments and Contingencies	3230
			Q	—	The Davey 401KSOP and Employee Stock Ownership Plan	3533

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations					3735
		Results of Operations				3836
		Liquidity and Capital Resources				4238
			Cash Flow Summary			4339
			Contractual Obligations Summary and Commercial Commitments			4440
			Capital Resources			4440
		Critical Accounting Policies and Estimates				4540
		Note Regarding Forward-Looking Statements				4541

Item 3.	Quantitative and Qualitative Disclosures about Market Risk					4642

Item 4.	Controls and Procedures					4642

Part II.	Other Information					4743

Item 1.	Legal Proceedings					4743

Item 1A.	Risk Factors					5046

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds ~~and Issuer Purchases of Equity Securities~~					5046

Item 5.	Other Information					5147

Item 6.	Exhibits					5247

Exhibit Index						5248

Signatures						5349

“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.

- 1 -

Index

THE DAVEY TREE EXPERT COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands, except per share data dollar amounts)


		September 30, 2023		December 31, 2022
	March 30, 2024						March 30, 2024	December 31, 2023
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash	Cash	$	13,791	$	18,526
Accounts receivable, net	Accounts receivable, net	366,989		321,810
Operating supplies	Operating supplies	17,779		17,976
Other current assets	Other current assets	114,692		83,952
Total current assets	Total current assets	513,251		442,264

Property and equipment, net	Property and equipment, net	295,543		268,539

Property and equipment, net

Property and equipment, net
Right-of-use assets - operating leases	Right-of-use assets - operating leases	108,149		104,612
Marketable securities and other investments	Marketable securities and other investments	37,337		28,909
Insurance receivable
Other assets	Other assets	210,909		22,841
Intangible assets, net	Intangible assets, net	20,440		18,949
Goodwill	Goodwill	80,924		70,107
Total assets	Total assets	$	1,266,553	$	956,221
Liabilities and shareholders' equity	Liabilities and shareholders' equity					Liabilities and shareholders' equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	50,226	$	50,171
Accrued expenses	Accrued expenses	71,775		77,454
Current portion of long-term debt and finance lease liabilities	Current portion of long-term debt and finance lease liabilities	52,971		26,872
Other current liabilities	Other current liabilities	98,564		90,873
Total current liabilities	Total current liabilities	273,536		245,370
Long-term debt	Long-term debt	274,267		230,768
Lease liabilities - finance leases	Lease liabilities - finance leases	10,538		9,481
Lease liabilities - operating leases	Lease liabilities - operating leases	69,748		68,878
Self-insurance accruals	Self-insurance accruals	85,421		77,926
Litigation accruals
Other noncurrent liabilities	Other noncurrent liabilities	213,018		24,020
Total liabilities	Total liabilities	926,528		656,443
Commitments and contingencies (Note P)	Commitments and contingencies (Note P)
Redeemable common shares related to 401KSOP and Employee Stock Ownership Plan (ESOP) 8,728 and 9,188 shares at redemption value as of September 30, 2023 and December 31, 2022		181,543		169,978
Redeemable common shares related to 401KSOP and Employee Stock Ownership Plan (ESOP) 8,645 and 8,499 shares at redemption value as of March 30, 2024 and December 31, 2023
Redeemable common shares related to 401KSOP and Employee Stock Ownership Plan (ESOP) 8,645 and 8,499 shares at redemption value as of March 30, 2024 and December 31, 2023
Redeemable common shares related to 401KSOP and Employee Stock Ownership Plan (ESOP) 8,645 and 8,499 shares at redemption value as of March 30, 2024 and December 31, 2023
Common shareholders' equity:	Common shareholders' equity:					Common shareholders' equity:
Common shares, $.50 par value, per share; 96,000 shares authorized; 77,100 and 76,640 shares issued and outstanding before deducting treasury shares and which excludes 8,728 and 9,188 shares subject to redemption as of September 30, 2023 and December 31, 2022		38,993		38,550
Common shares, $.50 par value, per share; 96,000 shares authorized; 77,183 and 77,328 shares issued and outstanding before deducting treasury shares and which excludes 8,645 and 8,499 shares subject to redemption as of March 30, 2024 and December 31, 2023
Additional paid-in capital	Additional paid-in capital	184,813		162,828
Common shares subscribed, unissued	Common shares subscribed, unissued	22,742		23,864
Retained earnings	Retained earnings	329,971		293,993
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(5,646)		(5,588)
		570,873		513,647
Less: Cost of common shares held in treasury; 43,896 shares at September 30, 2023 and 43,110 shares at December 31, 2022		395,497		363,502
Less: Cost of common shares held in treasury; 44,323 shares at March 30, 2024 and 44,480 shares at December 31, 2023
Common shares subscription receivable	Common shares subscription receivable	16,894		20,345
Total common shareholders' equity	Total common shareholders' equity	158,482		129,800
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	1,266,553	$	956,221

See notes to condensed consolidated financial statements (unaudited).	See notes to condensed consolidated financial statements (unaudited).

See notes to condensed consolidated financial statements (unaudited).

See notes to condensed consolidated financial statements (unaudited).

- 2 -

Index

THE DAVEY TREE EXPERT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share dollar amounts)


		Three Months Ended				Nine Months Ended
		September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022

						March 30, 2024
						March 30, 2024
						March 30, 2024
Revenues
Revenues
Revenues	Revenues	$	450,634	$	398,945	$	1,267,174	$	1,143,548

Costs and expenses:	Costs and expenses:

Costs and expenses:

Costs and expenses:
Operating
Operating
Operating	Operating	285,019		254,661		808,509		740,422
Selling	Selling	84,982		72,364		229,480		201,315
Selling
Selling
General and administrative
General and administrative
General and administrative	General and administrative	31,155		27,964		95,041		87,014
Depreciation and amortization	Depreciation and amortization	14,935		13,780		43,479		41,082
Depreciation and amortization
Depreciation and amortization
Gain on sale of assets, net	Gain on sale of assets, net	(1,694)		(2,837)		(6,530)		(5,787)
Gain on sale of assets, net
Gain on sale of assets, net
Total costs and expenses
Total costs and expenses
Total costs and expenses	Total costs and expenses	414,397		365,932		1,169,979		1,064,046

Income from operations	Income from operations	36,237		33,013		97,195		79,502

Income from operations

Income from operations

Other income (expense):

Other income (expense):

Other income (expense):	Other income (expense):
Interest expense	Interest expense	(4,751)		(2,164)		(13,588)		(5,312)
Interest expense
Interest expense
Interest income
Interest income
Interest income	Interest income	502		303		1,329		489
Other, net	Other, net	(2,890)		(3,371)		(4,365)		(8,241)
Other, net
Other, net

Income before income taxes		29,098		27,781		80,571		66,438
(Loss) income before income taxes

Income taxes		8,401		7,317		21,835		17,407
(Loss) income before income taxes

Net income		$	20,697	$	20,464	$	58,736	$	49,031
(Loss) income before income taxes

Net income per share:
Income tax (benefit) expense

Income tax (benefit) expense

Income tax (benefit) expense

Net (loss) income

Net (loss) income

Net (loss) income

Net (loss) income per share:

Net (loss) income per share:

Net (loss) income per share:

Basic	Basic	$	.48	$	.46	$	1.35	$	1.10

Basic

Basic
Diluted
Diluted
Diluted	Diluted	$	.46	$	.44	$	1.29	$	1.05

Weighted-average shares outstanding:	Weighted-average shares outstanding:

Weighted-average shares outstanding:

Weighted-average shares outstanding:

Basic	Basic	43,123		44,148		43,394		44,422

Basic

Basic
Diluted
Diluted
Diluted	Diluted	45,186		46,405		45,501		46,719

See notes to condensed consolidated financial statements (unaudited).	See notes to condensed consolidated financial statements (unaudited).

See notes to condensed consolidated financial statements (unaudited).

See notes to condensed consolidated financial statements (unaudited).

- 3 -

Index

THE DAVEY TREE EXPERT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In thousands)

Three Months Ended Nine Months Ended
September 30,
2023 October 1,
2022 September 30,
2023 October 1,
2022
Net income $ 20,697 $ 20,464 $ 58,736 $ 49,031
Components of other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (515) (1,934) 81 (2,455)
Unrealized gain (loss) on available-for-sale securities 2 (98) (139) (279)
Amortization of defined benefit pension items:
Net actuarial loss — 18 — 55
Prior service cost — 4 — 13
Defined benefit pension plan adjustments — 22 — 68
Other comprehensive loss, net of tax (513) (2,010) (58) (2,666)
Comprehensive income $ 20,184 $ 18,454 $ 58,678 $ 46,365
See notes to condensed consolidated financial statements (unaudited).


	Three Months Ended
		March 30, 2024		April 1, 2023
Net (loss) income		$	(2,275)	$	5,996
Components of other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(581)		31
Unrealized loss on available-for-sale securities		(136)		(59)





Other comprehensive loss, net of tax		(717)		(28)

Comprehensive (loss) income		$	(2,992)	$	5,968



See notes to condensed consolidated financial statements (unaudited).

- 4 -

Index

THE DAVEY TREE EXPERT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

(In thousands, except per share data)


	Common Shares																	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

		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 1, 2023		$	39,083	$	182,039	$	23,493	$	310,348	$	(5,133)	$	(385,081)	$	(19,342)	$	145,407
Net income		—		—		—		20,697		—		—		—		20,697

Balances at January 1, 2024

Balances at January 1, 2024

Balances at January 1, 2024
Net loss
Change in 401KSOP and ESOP related shares	Change in 401KSOP and ESOP related shares	(90)		(960)		—		1		—		—		—		(1,049)
Shares sold to employees	Shares sold to employees	—		1,831		—		—		—		2,558		—		4,389
Options exercised	Options exercised	—		11		—		—		—		58		—		69
Subscription shares	Subscription shares	—		198		(751)		—		—		176		2,448		2,071
Stock-based compensation	Stock-based compensation	—		1,694		—		—		—		—		—		1,694
Dividends, $.020 per share		—		—		—		(1,075)		—		—		—		(1,075)
Dividends, $.025 per share

Other comprehensive income		—		—		—		—		(513)		—		—		(513)
Other comprehensive loss
Other comprehensive loss
Other comprehensive loss

Shares purchased	Shares purchased	—		—		—		—		—		(13,208)		—		(13,208)
Balances at September 30, 2023		$	38,993	$	184,813	$	22,742	$	329,971	$	(5,646)	$	(395,497)	$	(16,894)	$	158,482

Balances at January 1, 2023		$	38,550	$	162,828	$	23,864	$	293,993	$	(5,588)	$	(363,502)	$	(20,345)	$	129,800
Net income		—		—		—		58,736		—		—		—		58,736
Change in 401KSOP and ESOP related shares		443		7,951		—		(19,951)		—		—		—		(11,557)
Shares sold to employees		—		11,036		—		—		—		13,914		—		24,950
Options exercised		—		(1,639)		—		—		—		3,368		—		1,729
Subscription shares		—		640		(1,122)		—		—		559		3,451		3,528
Stock-based compensation		—		3,997		—		—		—		—		—		3,997
Dividends, $.060 per share		—		—		—		(2,807)		—		—		—		(2,807)

Other comprehensive income		—		—		—		—		(58)		—		—		(58)

Shares purchased	Shares purchased	—		—		—		—		—		(49,836)		—		(49,836)
Balances at September 30, 2023		$	38,993	$	184,813	$	22,742	$	329,971	$	(5,646)	$	(395,497)	$	(16,894)	$	158,482

Shares purchased
Balances at March 30, 2024

~~- 5 -~~

~~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		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)		—		1		—		—		—		(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)
Other comprehensive loss		—		—		—		—		(2,010)		—		—		(2,010)
	Common Shares																	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

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

Balances at January 1, 2023

Balances at January 1, 2023

Balances at January 1, 2023
Net income	Net income	—		—		—		49,031		—		—		—		49,031
Change in 401KSOP and ESOP related shares	Change in 401KSOP and ESOP related shares	19		1,840		—		(49)		—		—		—		1,810
Shares sold to employees	Shares sold to employees	—		11,714		—		—		—		9,623		—		21,337
Options exercised	Options exercised	—		(1,122)		—		—		—		2,742		—		1,620
Subscription shares	Subscription shares	—		1,554		23,954		—		—		1,212		(20,634)		6,086
Stock-based compensation	Stock-based compensation	—		4,228		—		—		—		—		—		4,228

Dividends, $.058 per share		—		—		—		(2,682)		—		—		—		(2,682)
Dividends, $.020 per share

Other comprehensive income		—		—		—		—		(2,666)		—		—		(2,666)
Dividends, $.020 per share

Dividends, $.020 per share

Other comprehensive loss
Other comprehensive loss
Other comprehensive loss

Shares purchased	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

Shares purchased

Shares purchased
Balances at April 1, 2023

See notes to condensed consolidated financial statements (unaudited).	See notes to condensed consolidated financial statements (unaudited).
See notes to condensed consolidated financial statements (unaudited).
See notes to condensed consolidated financial statements (unaudited).

- 65 -

Index

THE DAVEY TREE EXPERT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)


			Nine Months Ended
			September 30, 2023		October 1, 2022
		Three Months Ended							Three Months Ended
		March 30, 2024						March 30, 2024		April 1, 2023
Operating activities	Operating activities						Operating activities
Net income			$	58,736	$	49,031
Adjustments to reconcile net income to net cash provided by operating activities:
Net (loss) income
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization	Depreciation and amortization		43,479		41,082
Other	Other		(1,331)		(683)
Changes in operating assets and liabilities, net of assets acquired:	Changes in operating assets and liabilities, net of assets acquired:
Accounts receivable
Accounts receivable
Accounts receivable	Accounts receivable		(44,944)		(49,451)
Accounts payable and accrued expenses	Accounts payable and accrued expenses		(10,213)		12,709
Self-insurance accruals	Self-insurance accruals		5,760		13,306
Prepaid expenses	Prepaid expenses		(14,069)		(10,724)
Mitigation bank credit inventory	Mitigation bank credit inventory		(14,520)		—
Income taxes receivable
Other, net	Other, net		13,440		7,710
			(22,398)		13,949
Net cash provided by operating activities			36,338		62,980
Net cash provided by (used in) operating activities
Investing activities	Investing activities						Investing activities
Capital expenditures:	Capital expenditures:						Capital expenditures:
Equipment	Equipment		(48,872)		(54,829)
Land and buildings	Land and buildings		(15,408)		(15,916)
Purchases of businesses, net of cash acquired and debt incurred	Purchases of businesses, net of cash acquired and debt incurred		(18,002)		(4,453)
Proceeds from sales of property and equipment	Proceeds from sales of property and equipment		10,116		6,781
Purchases of marketable securities	Purchases of marketable securities		(36,331)		(41,305)
Proceeds from sale of marketable securities	Proceeds from sale of marketable securities		30,086		14,114
Net cash used in investing activities	Net cash used in investing activities		(78,411)		(95,608)
Financing activities	Financing activities						Financing activities
Revolving credit facility borrowings	Revolving credit facility borrowings		549,226		453,885
Revolving credit facility payments	Revolving credit facility payments		(493,398)		(402,618)
Purchase of common shares for treasury	Purchase of common shares for treasury		(49,836)		(45,867)
Sale of common shares from treasury	Sale of common shares from treasury		30,212		29,043
Dividends paid	Dividends paid		(2,807)		(2,682)

Proceeds from notes payable	Proceeds from notes payable		58,317		69,337
Proceeds from notes payable
Proceeds from notes payable
Payments of notes payable	Payments of notes payable		(51,444)		(62,602)
Payments of finance leases	Payments of finance leases		(2,943)		(2,313)
Net cash provided by financing activities	Net cash provided by financing activities		37,327		36,183
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash		11		(171)
(Decrease) increase in cash	(Decrease) increase in cash		(4,735)		3,384

Cash, beginning of period	Cash, beginning of period		18,526		19,460
Cash, beginning of period
Cash, beginning of period
Cash, end of period	Cash, end of period		$	13,791	$	22,844
Supplemental cash flow information follows:	Supplemental cash flow information follows:						Supplemental cash flow information follows:
Interest paid	Interest paid		$	13,914	$	3,764
Income taxes paid	Income taxes paid		20,633		9,869

See notes to condensed consolidated financial statements (unaudited).	See notes to condensed consolidated financial statements (unaudited).
See notes to condensed consolidated financial statements (unaudited).
See notes to condensed consolidated financial statements (unaudited).

- 76 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~September~~March 30, ~~2023~~2024

(Amounts in thousands, except share data)

A.Basis of Financial Statement Preparation

The 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”), 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.

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, ~~2022~~2023 (the ~~“2022~~“2023 Annual Report”).

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 and goodwill valuation, self-insurance accruals, income taxes, stock valuation and revenue recognition.

Our mitigation banking business creates and sells wetland, stream and other environmental credits and provides services to those engaged in permittee-responsible mitigation and environmental restoration. We record mitigation bank credit inventory at the lower of cost or net realizable value. Inventory costs are based on estimated total costs for each mitigation bank, which could change as we perform mitigation banking activities.

Our business continues to be impacted by a number of macro-economic factors, including higher fuel costs, ~~rising~~ interest rates and a highly competitive labor market, which have created an inflationary environment and 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 ~~September~~March 30, 2024 is referred to as the first quarter of 2024, and the fiscal quarter ended April 1, 2023 is referred to as the ~~third~~first quarter of ~~2023, and the fiscal quarter ended October 1, 2022 is referred to as the third quarter of 2022.~~2023.

Recent Accounting Guidance

Accounting Standards not yet Adopted ~~in 2023~~

Accounting Standards Update ~~2020-04, Reference Rate Reform~~2023-07, Segment Reporting (Topic ~~848)~~280): Improvements to Reportable Segment Disclosures--~~--In March 2020,~~In November 2023, the FASB issued ~~Accounting Standards Update ("ASU") 2020-04, "Reference Rate Reform~~ASU 2023-07, Segment Reporting (Topic ~~848)—Facilitation of the Effects of Reference Rate Reform on Financial~~280): Improvements to Reportable Segment Disclosures. The

- 87 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~September~~March 30, ~~2023~~2024

(Amounts in thousands, except share data)

~~Reporting".~~new standard provides improvements to reportable segment disclosure requirements through amendments that require disclosure of significant segment expenses and other segment items on an interim and annual basis and requires all annual disclosures about a reportable segment’s profit or loss and assets to be made on an interim basis. The ~~guidance of this ASU is designed to provide relief from~~standard also requires 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 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. In December 2022, the FASB issued ASU 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. ASU 2022-06 defers the sunset date included within Topic 848 from December 31, 2022, to December 31, 2024. In January 2023, we adopted ASU 2020-04 and amended our amended and restated credit agreement to replace the reference rate from LIBOR to the Secured Overnight Financing Rate ("SOFR"). The amendment did not have a material impact to the Company’s financial statements.

~~Accounting Standards Update 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations--~~In September 2022, the FASB issued ASU No. 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. This guidance requires annual and interim disclosure of the ~~key terms~~chief operating decision maker’s (“CODM”) title and position and an explanation of ~~outstanding supplier finance programs~~how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The standard also clarifies that if the CODM uses more than one measure in assessing segment performance and deciding how to allocate resources, a ~~roll-forward of~~company may report the ~~related obligations.~~additional segment profit or loss measure(s) and that companies with a single reportable segment must provide all disclosures required by this amendment. The new standard does not affect the recognition, measurement or financial statement presentation of the supplier finance program obligations. These amendments are effective for fiscal years beginning after December 15, 2022, except for the amendment on roll-forward information, whichASU is effective for fiscal years beginning after December 15, ~~2023. We adopted~~2023, and interim periods within fiscal years beginning after December 15, 2024. The standard should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.

Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures--In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The new standard was issued to improve transparency and decision usefulness of income tax disclosures by providing information that helps investors better understand how an entity’s operations, tax risks, tax planning and operational opportunities affect its tax rate and prospects for future cash flows. The amendments in this update primarily relate to requiring greater disaggregated disclosure of information in the rate reconciliation, income taxes paid, income (loss) from continuing operations before income tax expense (benefit), and income tax expense (benefit) from continuing operations. The ASU is effective for fiscal years beginning after December 15, 2024, and early adoption is permitted. The standard can be applied prospectively or retrospectively. The Company is currently evaluating this guidance to determine the impact it may have ~~no material supplier finance program obligations.~~on its consolidated financial statements.

B. Seasonality of Business

Due to the seasonality of our business, our operating results for the three ~~and nine~~ months ended ~~September~~March 30, ~~2023~~2024 are not indicative of results that may be expected for any other interim period or for the year ending December 31, ~~2023.~~2024. 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.

C. Accounts Receivable, Net and Supplemental Balance-Sheet Information

Accounts receivable, net, consisted of the following:


Accounts receivable, net	Accounts receivable, net	September 30, 2023		December 31, 2022		Accounts receivable, net	March 30, 2024	December 31, 2023
Accounts receivable	Accounts receivable	$	258,569	$	242,427
Unbilled receivables(1)	Unbilled receivables(1)	110,576		82,605
		369,145		325,032
Less allowances for credit losses	Less allowances for credit losses	2,156		3,222
Accounts receivable, net	Accounts receivable, net	$	366,989	$	321,810

(1) Unbilled receivables consist of work-in-process in accordance with the terms of contracts, primarily with utility services customers.

- 8 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 30, 2024

(Amounts in thousands, except share data)

The following items comprised the amounts included in the balance sheets:


Other current assets	March 30, 2024		December 31, 2023
Refundable income taxes	$	3,545	$	—
Prepaid expenses	30,947		44,534

Mitigation bank credit inventory	24,636		28,385
Assets invested for self-insurance	21,183		20,959
Payroll taxes refundable	21,618		22,591
Other	163		302
Total	$	102,092	$	116,771


Property and equipment, net	March 30, 2024		December 31, 2023
Land and land improvements	$	28,435	$	28,177
Buildings and leasehold improvements	106,854		99,964
Equipment	704,250		684,562
	839,539		812,703
Less accumulated depreciation	502,018		500,025
Total	$	337,521	$	312,678


Other assets, noncurrent	March 30, 2024		December 31, 2023
Investment--cost-method affiliate	$	1,630	$	1,405
Deferred income taxes	6,001		6,001
Cloud computing arrangements	67		107

Other	4,309		4,362
Total	$	12,007	$	11,875


Accrued expenses	March 30, 2024		December 31, 2023
Employee compensation	$	17,387	$	40,656
Accrued compensated absences	14,913		14,483
Self-insured medical claims	1,189		2,309
Income tax payable	808		1,135
Customer advances, deposits	3,296		1,275
Taxes, other than income	6,970		6,017

Other	13,827		16,069
Total	$	58,390	$	81,944


Other current liabilities	March 30, 2024		December 31, 2023
Notes payable	$	2,499	$	543

Current portion of:
Lease liability-operating leases	39,602		39,043
Self-insurance accruals	49,043		50,379
Total	$	91,144	$	89,965

- 9 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~September~~March 30, ~~2023~~2024

(Amounts in thousands, except share data)

~~The following items comprised the amounts included in the balance sheets:~~

Other current assets September 30,
2023 December 31,
2022
Refundable income taxes $ 381 $ 14
Prepaid expenses 46,298 32,080
Mitigation bank credit inventory 27,573 6,351
Assets invested for self-insurance 20,658 24,828
Payroll taxes refundable 14,264 18,283
Other 5,518 2,396
Total $ 114,692 $ 83,952

Property and equipment, net September 30,
2023 December 31,
2022
Land and land improvements $ 25,798 $ 26,023
Buildings and leasehold improvements 92,861 80,768
Equipment 674,020 663,207
792,679 769,998
Less accumulated depreciation 497,136 501,459
Total $ 295,543 $ 268,539

Other assets, noncurrent September 30,
2023 December 31,
2022
Investment--cost-method affiliate $ 933 $ 1,258
Deferred income taxes 4,602 6,828
Cloud computing arrangements 474 2,652
Insurance receivable 200,000 7,500
Other 4,900 4,603
Total $ 210,909 $ 22,841

Accrued expenses September 30,
2023 December 31,
2022
Employee compensation $ 36,118 $ 35,536
Accrued compensated absences 14,827 13,034
Self-insured medical claims 2,573 2,806
Income tax payable 8,174 6,573
Customer advances, deposits 2,148 7,736
Taxes, other than income 2,386 5,764
Other 5,549 6,005
Total $ 71,775 $ 77,454

Other current liabilities September 30,
2023 December 31,
2022
Mitigation bank liabilities $ 6,106 $ —
Current portion of:
Lease liability-operating leases 37,972 34,652
Self-insurance accruals 54,486 56,221
Total $ 98,564 $ 90,873

~~- 10 -~~

~~Index~~

~~The Davey Tree Expert Company~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~September 30, 2023~~

~~(Amounts in thousands, except share data)~~


Other noncurrent liabilities	Other noncurrent liabilities	September 30, 2023		December 31, 2022		Other noncurrent liabilities	March 30, 2024	December 31, 2023
Non-qualified retirement plans	Non-qualified retirement plans	$	5,465	$	8,336

Litigation accrual		200,000		7,500

Other

Other

Other	Other	7,553		8,184
Total	Total	$	213,018	$	24,020

D. Business Combinations

~~Our~~We had no cash investments in businesses during the first ~~nine~~three months of 2023 were $18,250 and we issued debt, in the form of notes payable to the sellers, of $5,572 which have been included in our Residential and Commercial segment. Measurement-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.2024. During the year ended December 31, ~~2022,~~2023, our cash investments in businesses was ~~$23,192~~$21,746 and debt issued, in the form of notes payable to the sellers, was ~~$7,445.~~

~~The following table summarizes the preliminary purchase price allocation of the estimated fair values of the assets acquired and liabilities assumed:~~

Nine Months Ended
September 30, 2023
Year Ended
December 31, 2022
Detail of acquisitions:
Assets acquired:
Cash $ 249 $ 1,365
Receivables 211 10,794
Mitigation bank credit inventory — 6,351
Operating supplies 1,538 48
Prepaid expense 149 126
Equipment 5,208 2,309
Deposits and other 2,649 412
Intangible assets 6,233 10,569
Goodwill 13,441 14,255
Liabilities assumed (5,856) (15,592)
Debt issued for purchases of businesses (5,572) (7,445)
Cash paid $ 18,250 $ 23,192

$7,046. 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 three and nine months ended September 30, 2023 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 September 30, 2023, 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.

~~- 11 -~~

~~Index~~

~~The Davey Tree Expert Company~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~September 30, 2023~~

~~(Amounts in thousands, except share data)~~

E. Marketable Securities

The following table summarizes available-for-sale debt securities held at ~~September~~March 30, ~~2023~~2024 and December 31, ~~2022~~2023 by asset type:


			Available-For-Sale Debt Securities
			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value (Net Carrying Amount)
September 30, 2023
		Available-For-Sale Debt Securities											Available-For-Sale Debt Securities
		Amortized Cost									Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value (Net Carrying Amount)
March 30, 2024
Fixed maturity:	Fixed maturity:
Fixed maturity:
Fixed maturity:
United States Government and agency securities
United States Government and agency securities
United States Government and agency securities	United States Government and agency securities		$	40,123	$	262	$	(295)	$	40,090
Corporate notes and bonds	Corporate notes and bonds		577		—		(57)		520
Total available-for-sale debt securities	Total available-for-sale debt securities		$	40,700	$	262	$	(352)	$	40,610

December 31, 2022
December 31, 2023
December 31, 2023
December 31, 2023
Fixed maturity:	Fixed maturity:
Fixed maturity:
Fixed maturity:
United States Government and agency securities
United States Government and agency securities
United States Government and agency securities	United States Government and agency securities		$	25,485	$	84	$	(315)	$	25,254
Corporate notes and bonds	Corporate notes and bonds		315		—		(51)		264
Total available-for-sale debt securities	Total available-for-sale debt securities		$	25,800	$	84	$	(366)	$	25,518

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 other current assets and marketable securities and other investments totaling ~~$40,610~~$35,206 and ~~$25,518~~$37,062 at ~~September~~March 30, ~~2023~~2024 and December 31, ~~2022,~~2023, 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.

- 10 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 30, 2024

(Amounts in thousands, except share data)

We held ~~approximately $10,276~~$13,510 and ~~$18,110~~$12,102 in marketable equity securities as of ~~September~~March 30, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively. Realized and unrealized gains and losses on marketable equity securities are included in other income (expense) in the Consolidated Statements of Operations.

The net carrying values of available-for-sale debt securities at ~~September~~March 30, ~~2023~~2024 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 Cost		Fair Value
		Amortized Cost					Amortized Cost	Fair Value
Due:	Due:
Less than one year
Less than one year
Less than one year	Less than one year		$	21,037	$	21,267
One year through five years	One year through five years		17,335		17,210
Six years through ten years	Six years through ten years		534		492
After ten years	After ten years		1,794		1,641
Total	Total		$	40,700	$	40,610

~~- 12 -~~

~~Index~~

~~The Davey Tree Expert Company~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~September 30, 2023~~

~~(Amounts in thousands, except share data)~~

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:

September 30, 2023 December 31, 2022
Carrying
Amount Accumulated
Amortization Carrying
Amount Accumulated
Amortization
Amortized intangible assets:
Customer lists/relationships $ 40,927 $ 28,437 $ 36,745 $ 26,243
Employment-related 12,850 9,714 12,242 8,931
Tradenames 12,684 7,870 12,219 7,083
Amortized intangible assets 66,461 $ 46,021 61,206 $ 42,257
Less accumulated amortization 46,021 42,257
Identified intangible assets, net $ 20,440 $ 18,949
Goodwill $ 80,924 $ 70,107

~~Adjustments related to the carrying values are related to measurement period adjustments for acquisitions made in 2022 for which purchase accounting is not finalized.~~

~~The changes in the carrying amounts of goodwill, by segment, for the nine months ended September 30, 2023 and the year ended December 31, 2022 were as follows:~~

Balance at
January 1, 2023
Acquisitions Translation
and Other
Adjustments
Balance at
September 30, 2023
Utility $ 4,941 $ — $ — $ 4,941
Residential and Commercial 65,166 13,441 (2,624) 75,983
Total $ 70,107 $ 13,441 $ (2,624) $ 80,924
Balance at
January 1, 2022
Acquisitions Translation
and Other
Adjustments
Balance at
December 31, 2022
Utility $ 4,911 $ 30 $ — $ 4,941
Residential and Commercial 51,069 14,225 (128) 65,166
Total $ 55,980 $ 14,255 $ (128) $ 70,107


	March 30, 2024				December 31, 2023
	Carrying Amount		Accumulated Amortization		Carrying Amount		Accumulated Amortization
Amortized intangible assets:
Customer lists/relationships	$	41,535	$	29,962	$	41,679	$	29,252
Employment-related	13,139		10,342		13,007		9,957
Tradenames	12,856		8,383		12,860		8,123

Amortized intangible assets	67,530		$	48,687	67,546		$	47,332

Less accumulated amortization	48,687				47,332

Identified intangible assets, net	$	18,843			$	20,214

Goodwill	$	84,739			$	84,800

- 1311 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~September~~March 30, ~~2023~~2024

(Amounts in thousands, except share data)

The changes in the carrying amounts of goodwill, by segment, for the three months ended March 30, 2024 and the year ended December 31, 2023 were as follows:


	Balance at January 1, 2024		Acquisitions		Translation and Other Adjustments		Balance at March 30, 2024
Utility	$	4,941	$	—	$	—	$	4,941
Residential and Commercial	79,859		—		(61)		79,798

Total	$	84,800	$	—	$	(61)	$	84,739


	Balance at January 1, 2023		Acquisitions		Translation and Other Adjustments		Balance at December 31, 2023
Utility	$	4,941	$	—	$	—	$	4,941
Residential and Commercial	65,166		14,758		(65)		79,859

Total	$	70,107	$	14,758	$	(65)	$	84,800

Estimated future aggregate amortization expense of intangible assets--The estimated future aggregate amortization expense of intangible assets, as of ~~September~~March 30, ~~2023,~~2024, was as follows:


			Estimated Future Amortization Expense		Estimated Future Amortization Expense
Remaining three months of 2023			$	1,231
2024			4,960
Remaining nine months of 2024
2025	2025		4,174
2026	2026		3,335
2027	2027		2,809
2028	2028		1,965
2029
Thereafter	Thereafter		1,966
			$	20,440
		$

G. Short and Long-Term Debt and Commitments Related to Letters of Credit

We have short-term lines of credit with several banks totaling ~~$11,111.~~$11,108. At ~~September~~March 30, ~~2023,~~2024, we had ~~$8,729~~$6,340 available under the lines of credit with no borrowings outstanding of $2,499 and ~~$2,382~~$2,269 committed through issued letters of credit. Borrowings outstanding generally bear interest at the ~~banks'~~bank’s prime rate or SOFR plus a margin adjustment of 1.86%.

- 12 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 30, 2024

(Amounts in thousands, except share data)

Our long-term debt consisted of the following:


		September 30, 2023		December 31, 2022
	March 30, 2024						March 30, 2024	December 31, 2023
Revolving credit facility:	Revolving credit facility:					Revolving credit facility:
Swing-line borrowings	Swing-line borrowings	$	26,262	$	25,433

SOFR borrowings
SOFR borrowings
SOFR borrowings	SOFR borrowings	180,000		125,000
		206,262		150,433
Senior unsecured notes:	Senior unsecured notes:

3.99% Senior unsecured notes	3.99% Senior unsecured notes	50,000		50,000

3.99% Senior unsecured notes

3.99% Senior unsecured notes
4.00% Senior unsecured notes	4.00% Senior unsecured notes	25,000		25,000
		75,000		75,000
6.19% Senior unsecured notes
	150,000
Term loans	Term loans	42,284		29,680
		323,546		255,113
Less debt issuance costs	Less debt issuance costs	404		519
Less current portion	Less current portion	48,875		23,826
		$	274,267	$	230,768

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

~~- 14 -~~

~~Index~~

~~The Davey Tree Expert Company~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~September 30, 2023~~

~~(Amounts in thousands, except share data)~~

subject to certain further restrictions as described in the credit agreement. As of ~~September~~March 30, ~~2023,~~2024, we had unused commitments under the facility approximating $~~116,114,~~153,718, with ~~$208,886~~$171,282 committed, consisting of borrowings of $~~206,262~~168,658 and issued letters of credit of $2,624.

In January 2023, we amended the amended and restated credit agreement to update the benchmark interest rate provisions to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”). Following the amendment, borrowings outstanding bear interest, at Davey Tree’s option, of either (a) the base rate or (b) SOFR 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) Adjusted Term SOFR 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

- 13 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 30, 2024

(Amounts in thousands, except share data)

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 principal amount not to exceed $150,000. As the Company has previously issued notes in an aggregate amount of ~~$75,000~~$150,000 under the Note Purchase and Shelf Agreement, it ~~now~~no longer has capacity to issue subsequent series of promissory notes pursuant to the Note Purchase and Shelf Agreement (the ~~“Shelf Notes”~~"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 five equal, annual principal payments commence on September 21, 2024 (the sixth 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 five equal, annual principal payments commence on September 21, 2024.

6.19%Senior Unsecured Notes--On November 28, 2023, we issued 6.19% Senior Notes, Series C (the "6.19% Senior Notes") pursuant to the Note Purchase and Shelf Agreement in the aggregate principal amount of $75,000. The 6.19% Senior Notes are due November 28, 2028. The 6.19% 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 quarterly and three annual principal payments commence on November 28, 2026.

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 ~~September~~March 30, ~~2023~~2024 were as follows: ~~2023--$11,244;~~ 2024--$~~39,921;~~31,150; 2025--$~~19,404;~~19,848; 2026--$~~222,977;~~200,824; 2027--$~~15,000;~~45,000; 2028--$45,000; and ~~2028--~~2029 and thereafter--$~~15,000.~~0.

~~- 15 -~~

~~Index~~

~~The Davey Tree Expert Company~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~September 30, 2023~~

~~(Amounts in thousands, except share data)~~

Accounts Receivable Securitization Facility--In June 2023, the Company amended its Accounts Receivable Securitization Facility (the “AR Securitization program”) to extend the scheduled termination date for an additional one-year period, to July 21, 2024. In addition to extending the termination date for another year, the amendment allows the borrower, a wholly-owned subsidiary of the Company, under certain circumstances, to increase the limit of its AR Securitization facility to $150,000.

The AR Securitization program has a limit of ~~$100,000,~~$90,000, of which $89,689 was issued for LCs as of ~~September~~March 30, ~~2023~~2024 and December 31, ~~2022.~~2023.

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 ~~September~~March 30, ~~2023--to~~2024--to the bank in exchange for the bank issuing LCs.

- 14 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 30, 2024

(Amounts in thousands, except share data)

Fees payable to the bank include: (a) an LC issuance fee, payable on each settlement date, in the amount of .90% per annum 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 obligation will accrue interest at a per annum rate equal to the term SOFR, plus .10% or, in certain circumstances, a base rate equal to the greatest of (i) the bank’s prime rate, (ii) the federal funds rate plus .50% and (iii) 1.00% above the Daily one month SOFR plus .10% and, following any default, 2.00% plus the greater of (a) the term SOFR plus .10% and (b) a base rate equal to the greatest of (i), (ii) and (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 ~~September~~March 30, ~~2023,~~2024, total commitments related to issued LCs were ~~$94,695,~~$94,582, of which $2,624 were issued under the revolving credit facility, $89,689 were issued under the AR Securitization program, and ~~$2,382~~$2,269 were issued under short-term lines of credit. As of December 31, ~~2022,~~2023, total commitments related to issued LCs were ~~$94,435,~~$94,702, of which $2,624 were issued under the revolving credit facility, $89,689 were issued under the AR Securitization program, and ~~$2,122~~$2,389 were issued under short-term lines of credit.

As of ~~September~~March 30, ~~2023,~~2024, we were in compliance with all debt covenants.

- 1615 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~September~~March 30, ~~2023~~2024

(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	September 30, 2023		December 31, 2022
	Condensed Consolidated Balance Sheet Classification						Condensed Consolidated Balance Sheet Classification	March 30, 2024	December 31, 2023
Assets	Assets
Operating lease assets
Operating lease assets
Operating lease assets	Operating lease assets	Right-of-use assets - operating leases	$	108,149	$	104,612
Finance lease assets	Finance lease assets	Property and equipment, net	15,102		12,948
Total lease assets	Total lease assets		$	123,251	$	117,560
Liabilities	Liabilities
Current operating lease liabilities
Current operating lease liabilities
Current operating lease liabilities	Current operating lease liabilities	Other current liabilities	$	37,972	$	34,652
Non-current operating lease liabilities	Non-current operating lease liabilities	Lease liabilities - operating leases	69,748		68,878
Total operating lease liabilities	Total operating lease liabilities		107,720		103,530
Current portion of finance lease liabilities	Current portion of finance lease liabilities	Current portion of long-term debt and finance lease liabilities	4,096		3,046
Non-current finance lease liabilities	Non-current finance lease liabilities	Lease liabilities - finance leases	10,538		9,481
Total finance lease liabilities	Total finance lease liabilities		14,634		12,527
Total lease liabilities	Total lease liabilities		$	122,354	$	116,057

The components of lease cost recognized within our Condensed Consolidated Statements of Operations were as follows:


			Three Months Ended				Nine Months Ended
		Condensed Consolidated Statements of Operations Classification	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
					Three Months Ended
					Three Months Ended
					Three Months Ended
	Condensed Consolidated Statements of Operations Classification										Condensed Consolidated Statements of Operations Classification	March 30, 2024	April 1, 2023

Operating lease cost	Operating lease cost	Operating expense	$	8,028	$	6,649	$	23,642	$	19,095
Operating lease cost	Operating lease cost	Selling expense	3,258		2,926		9,665		8,492
Operating lease cost	Operating lease cost	General and administrative expense	260		304		925		883
Operating lease cost
Operating lease cost
Finance lease cost:	Finance lease cost:
Amortization of right-of-use assets
Amortization of right-of-use assets
Amortization of right-of-use assets	Amortization of right-of-use assets	Depreciation and amortization	1,123		889		2,965		2,334
Interest expense on lease liabilities	Interest expense on lease liabilities	Interest expense	123		74		324		196
Other lease cost (1)	Other lease cost (1)	Operating expense	2,619		1,271		5,443		3,613
Other lease cost (1)	Other lease cost (1)	Selling expense	485		235		1,467		1,059
Other lease cost (1)	Other lease cost (1)	General and administrative expense	4		27		78		59
Total lease cost	Total lease cost		$	15,900	$	12,375	$	44,509	$	35,731

(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

- 1716 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~September~~March 30, ~~2023~~2024

(Amounts in thousands, except share data)

the basis of economic factors. The weighted average remaining lease terms as of ~~September~~March 30, ~~2023~~2024 was ~~3.4~~3.6 years for operating leases and ~~4.2~~4.4 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 ~~September~~March 30, ~~2023~~2024 were ~~4.10%~~4.20% for operating leases and ~~3.72%~~4.47% for finance leases.

Supplemental Cash Flow Information Related to Leases

Nine Months Ended

Supplemental Cash Flow Information Related to Leases

Three Months Ended

September 30,
2023

October 1,
2022

March 30,
2024

April 1,
2023

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

(33,546)

(29,194)

Operating cash flows from finance leases

(325)

(196)

Financing cash flows from finance leases

(2,943)

(2,313)

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

35,666

38,403

Operating leases

Finance leases

5,231

3,910

Maturity Analysis of Lease Liabilities As of September 30, 2023
Operating
Leases Finance
Leases
Remaining three months of 2023 $ 11,126 $ 1,043
2024 39,410 4,516
2025 30,295 3,879
2026 18,295 3,034
2027 10,633 1,765
2028 3,599 608
Thereafter 2,552 1,074
Total lease payments 115,910 15,919
Less interest 8,190 1,285
Total $ 107,720 $ 14,634


Maturity Analysis of Lease Liabilities		As of March 30, 2024
		Operating Leases		Finance Leases
	Remaining nine months of 2024	$	33,266	$	4,789
	2025	36,683		5,632
	2026	24,365		4,761
	2027	13,719		2,863
	2028	6,256		2,033
	2029	2,492		1,242
	Thereafter	3,433		886
	Total lease payments	120,214		22,206
	Less interest	8,598		2,021
	Total	$	111,616	$	20,185

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 five 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 ten percent of the common shares outstanding as of the first day of that fiscal year. Common shares subject to an award

- 1817 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~September~~March 30, ~~2023~~2024

(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 Ended Nine Months Ended
September 30,
2023 October 1,
2022 September 30,
2023 October 1,
2022
Compensation expense, all share-based payment plans $ 1,700 $ 1,658 $ 5,105 $ 5,244


	Three Months Ended
		March 30, 2024		April 1, 2023
Compensation expense, all share-based payment plans		$	1,907	$	1,690

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 ~~$1,338~~$487 being recognized for the ~~nine~~three months ended ~~September~~March 30, ~~2023~~2024 and ~~$1,380~~$445 for the ~~nine~~three months ended ~~October~~April 1, ~~2022.~~2023.

Stock Options Plan--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 ~~$173~~$39 for the ~~nine~~three months ended ~~September~~March 30, ~~2023~~2024 and ~~$289~~$65 for the ~~nine~~three months ended ~~October~~April 1, ~~2022.~~2023. 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.

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. During 2022, all remaining SSARs awards vested. There was no compensation expense for SSARs for the nine months ended September 30, 2023 and $65 for the nine months ended October 1, 2022.

~~- 19 -~~

~~Index~~

~~The Davey Tree Expert Company~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~September 30, 2023~~

~~(Amounts in thousands, except share data)~~

Restricted Stock Units--During the ~~nine~~three months ended ~~September~~March 30, ~~2023,~~2024, the Compensation Committee awarded ~~224,540~~72,245 PRSUs to certain management ~~employees and 14,378 RSUs to nonemployee directors.~~employees. The Compensation Committee made similar awards in prior periods. The awards vest over specified periods. The following table summarizes PRSUs and RSUs as of ~~September~~March 30, ~~2023.~~2024.


Restricted Stock Units	Restricted Stock Units	Number of Stock Units	Weighted- Average Grant Date Value		Weighted- Average Remaining Contractual Life	Unrecognized Compensation Cost		Aggregate Intrinsic Value		Restricted Stock Units	Number of Stock Units		Weighted- Average Grant Date Value		Weighted- Average Remaining Contractual Life	Unrecognized Compensation Cost	Aggregate Intrinsic Value
Unvested, January 1, 2023		766,267	$	14.95
Unvested, January 1, 2024										Unvested, January 1, 2024	933,843		$	16.02
Granted	Granted	238,918	18.29							Granted	72,245	21.94		21.94
Forfeited	Forfeited	—	—							Forfeited	(5,341)	15.89		15.89
Vested	Vested	(71,342)	12.18							Vested	(187,695)	14.32		14.32
Unvested, September 30, 2023		933,843	$	16.02	1.5 years	$	6,963	$	19,424
Unvested, March 30, 2024
Employee PRSUs	Employee PRSUs	885,572	$	15.97	1.5 years	$	6,523	$	18,420
Nonemployee Director RSUs	Nonemployee Director RSUs	48,271	$	16.79	1.6 years	$	440	$	1,004

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

- 18 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 30, 2024

(Amounts in thousands, except share data)

grant date price of a PRSU or an RSU. Compensation expense on PRSUs and RSUs totaled ~~$3,594~~$1,381 for the ~~nine~~three months ended ~~September~~March 30, ~~2023~~2024 and ~~$3,510~~$1,180 for the ~~nine~~three months ended ~~October~~April 1, ~~2022.~~2023.

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 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
September 30,
2023 October 1,
2022
Volatility rate 9.6 % 9.7 %
Risk-free interest rate 4.1 % 1.7 %
Expected dividend yield .4 % .4 %
Expected life of awards (years) 3.0 3.0

~~- 20 -~~

~~Index~~

~~The Davey Tree Expert Company~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~September 30, 2023~~

~~(Amounts in thousands, except share data)~~


	Three Months Ended
	March 30, 2024		April 1, 2023
Volatility rate	9.5	%	9.6	%
Risk-free interest rate	4.3	%	4.6	%
Expected dividend yield	.4	%	.4	%
Expected life of awards (years)	3.0		3.0

General Stock Option Information--The following table summarizes activity under the stock option plans for the ~~nine~~three months ended ~~September~~March 30, ~~2023.~~2024.


Stock Options	Stock Options	Number of Options Outstanding	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value		Stock Options	Number of Options Outstanding		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding, January 1, 2023		2,072,949	$	8.59
Outstanding, January 1, 2024								Outstanding, January 1, 2024	1,688,831		$	9.04
Granted	Granted	—	—					Granted	—	—		—
Exercised	Exercised	(206,253)	6.72					Exercised	(12,256)	8.08		8.08
Forfeited	Forfeited	(120,800)	5.80					Forfeited	—	—		—
Outstanding, September 30, 2023		1,745,896	$	9.01	3.6 years	$	20,584
Outstanding, March 30, 2024

Exercisable, September 30, 2023		1,545,520	$	8.67	3.3 years	$	18,747
Exercisable, March 30, 2024
Exercisable, March 30, 2024
Exercisable, March 30, 2024

As of ~~September~~March 30, ~~2023,~~2024, there was approximately ~~$198~~$116 of unrecognized compensation cost related to stock options outstanding. The cost is expected to be recognized over a weighted-average period of ~~1.1~~0.7 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.

- 19 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 30, 2024

(Amounts in thousands, except share data)

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~~three months ended ~~September~~March 30, ~~2023~~2024 was ~~27.4%~~29.2%. Our actual effective tax rate was ~~28.9%~~51.3% and ~~26.3%~~18.8% for the three months ended ~~September~~March 30, ~~2023~~2024 and ~~October~~April 1, ~~2022, respectively. Our actual effective tax rate was 27.1% and 26.2% for the nine months ended September 30,~~ 2023, ~~and October 1, 2022,~~ respectively. The change in the effective tax rate from statutory tax rates was primarily due to the impact of favorable discrete items which are a set amount and therefore have a larger impact on the rate based on our net income before tax in the first ~~nine~~three months compared to the impact they will have on the rate for the full year.

As of ~~September~~March 30, ~~2023,~~2024, we had unrecognized tax benefits of ~~$699,~~$1,047, of which ~~$371~~$397 would affect our effective rate if recognized, and accrued interest expense related to unrecognized benefits of ~~$56.~~$51. At December 31, ~~2022,~~2023, we had unrecognized tax benefits of ~~$638,~~$1,022, of which ~~$311~~$369 would affect our effective rate if recognized, and accrued interest expense related to unrecognized benefits of ~~$53.~~$47. 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.

~~- 21 -~~

~~Index~~

~~The Davey Tree Expert Company~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~September 30, 2023~~

~~(Amounts in thousands, except share data)~~

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 2018. As of ~~September~~March 30, ~~2023,~~2024, we believe it is reasonably possible that the total amount of unrecognized tax benefits will not significantly increase or decrease.

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 September 30, 2023 and October 1, 2022:~~

Three Months Ended September 30, 2023 Foreign
Currency Available for Sale Securities Defined
Benefit
Pension
Plans Accumulated
Other
Comprehensive
Income (Loss)
Balance at July 1, 2023 $ (4,915) $ (340) $ 122 $ (5,133)
Other comprehensive income (loss) before reclassifications
Translation adjustment $ (515) $ — $ — $ (515)
Unrealized gains — 3 — 3
Amounts reclassified from accumulated other comprehensive income (loss) — — — —
Tax effect — (1) — (1)
Net of tax amount (515) 2 — (513)
Balance at September 30, 2023 $ (5,430) $ (338) $ 122 $ (5,646)
Three Months Ended October 1, 2022 Foreign
Currency Available-for-Sale Securities Defined
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)

- 2220 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~September~~March 30, ~~2023~~2024

(Amounts in thousands, except share data)

Nine Months Ended September 30, 2023 Foreign
Currency Available-for-Sale Securities Defined
Benefit
Pension
Plans Accumulated
Other
Comprehensive
Income (Loss)
Balance at January 1, 2023 $ (5,511) $ (199) $ 122 $ (5,588)
Other comprehensive income (loss) before reclassifications
Translation adjustment $ 81 $ — $ — $ 81
Unrealized losses — (156) — (156)
Amounts reclassified from accumulated other comprehensive income (loss) — (19) — (19)
Tax effect — 36 — 36
Net of tax amount 81 (139) — (58)
Balance at September 30, 2023 $ (5,430) $ (338) $ 122 $ (5,646)
Nine Months Ended October 1, 2022 Foreign
Currency Available-for-Sale Securities Defined
Benefit
Pension
Plans Accumulated
Other
Comprehensive
Income (Loss)
Balance at January 1, 2022 $ (3,654) $ — $ (519) $ (4,173)
Other comprehensive income (loss) before reclassifications
Translation adjustment $ (2,455) $ — $ — $ (2,455)
Unrealized losses — (350) — (350)
Amounts reclassified from accumulated other comprehensive income (loss) — (3) 92 89
Tax effect — 74 (24) 50
Net of tax amount (2,455) (279) 68 (2,666)
Balance at October 1, 2022 $ (6,109) $ (279) $ (451) $ (6,839)
The following summarizes the components of other comprehensive income (loss) accumulated in shareholders’ equity for the three months ended March 30, 2024 and April 1, 2023:
























Three Months Ended March 30, 2024	Foreign Currency		Available-for-Sale Securities		Defined Benefit Pension Plans		Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2024	$	(4,922)	$	92	$	45	$	(4,785)
Other comprehensive income (loss) before reclassifications
Translation adjustment	$	(581)	$	—	$	—	$	(581)
Unrealized losses	—		(152)		—		(152)


Tax effect	—		16		—		16
Net of tax amount	(581)		(136)		—		(717)
Balance at March 30, 2024	$	(5,503)	$	(44)	$	45	$	(5,502)

Three Months Ended April 1, 2023	Foreign Currency		Available-for-Sale Securities		Defined Benefit Pension Plans		Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2023	$	(5,511)	$	(199)	$	122	$	(5,588)
Other comprehensive income (loss) before reclassifications
Translation adjustment	$	31	$	—	$	—	$	31
Unrealized losses	—		(49)		—		(49)

Amounts reclassified from accumulated other comprehensive income (loss)	—		(26)		—		(26)
Tax effect	—		16		—		16
Net of tax amount	31		(59)		—		(28)
Balance at April 1, 2023	$	(5,480)	$	(258)	$	122	$	(5,616)

There ~~was~~were no ~~change~~changes in defined benefit pension plans for either the three ~~and nine~~ months ended ~~September~~March 30, ~~2023 and $30 and $92 for the three and nine months ended October~~2024 or April 1, ~~2022, which was~~2023. Changes in defined benefit pension plans are included in net periodic pension expense classified in the condensed consolidated statement of operations as general and administrative expense or other income (expense).

- 2321 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~September~~March 30, ~~2023~~2024

(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:


		Three Months Ended					Nine Months Ended
		September 30, 2023		October 1, 2022			September 30, 2023		October 1, 2022
				Three Months Ended
				Three Months Ended
				Three Months Ended
						March 30, 2024					March 30, 2024	April 1, 2023
Income available to common shareholders:	Income available to common shareholders:
Net income		$	20,697	$	20,464		$	58,736	$	49,031
Net (loss) income
Net (loss) income
Net (loss) income

Weighted-average shares (in thousands):	Weighted-average shares (in thousands):
Weighted-average shares (in thousands):
Weighted-average shares (in thousands):
Basic:	Basic:
Basic:
Basic:
Outstanding
Outstanding
Outstanding	Outstanding	42,809		43,920			42,452		44,194
Partially-paid share subscriptions	Partially-paid share subscriptions	314		228			942		228
Basic weighted-average shares	Basic weighted-average shares	43,123		44,148			43,394		44,422

Diluted:	Diluted:
Diluted:
Diluted:
Basic from above
Basic from above
Basic from above	Basic from above	43,123		44,148			43,394		44,422
Incremental shares from assumed:	Incremental shares from assumed:
Exercise of stock subscription purchase rights
Exercise of stock subscription purchase rights
Exercise of stock subscription purchase rights	Exercise of stock subscription purchase rights	38		—			38		—
Exercise of stock options and awards	Exercise of stock options and awards	2,025		2,257			2,068		2,297
Diluted weighted-average shares	Diluted weighted-average shares	45,186		46,405			45,501		46,719

Net income per share:
Net (loss) income per share:
Net (loss) income per share:
Net (loss) income per share:

Basic

Basic

Basic	Basic	$	.48	$	.46		$	1.35	$	1.10

Diluted	Diluted	$	.46	$	.44		$	1.29	$	1.05
Diluted
Diluted

Antidilutive amounts excluded from Calculation:
Antidilutive amounts excluded from Calculation:
Antidilutive amounts excluded from Calculation:
Exercise of stock subscription purchase rights
Exercise of stock subscription purchase rights
Exercise of stock subscription purchase rights
Exercise of stock options and awards

The potentially dilutive shares were excluded from the calculation of diluted net loss per share for the three months ended March 30, 2024 because their effect would have been anti-dilutive.

- 22 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 30, 2024

(Amounts in thousands, except share data)

Common and Redeemable Shares Outstanding--A summary of the activity of the common and redeemable shares outstanding for the ~~nine~~three months ended ~~September~~March 30, ~~2023~~2024 was as follows:

Common
Shares
Net of Treasury
Shares Redeemable
Shares Total
Shares outstanding at January 1, 2023 33,529,474 9,188,010 42,717,484
Shares purchased (1,641,224) (974,395) (2,615,619)
Shares sold 789,553 514,397 1,303,950
Stock subscription offering -- cash purchases 12,336 — 12,336
Options and awards exercised 513,305 — 513,305
Shares outstanding at September 30, 2023 33,203,444 8,728,012 41,931,456

~~- 24 -~~

~~Index~~

~~The Davey Tree Expert Company~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~September 30, 2023~~

~~(Amounts in thousands, except share data)~~



	Common Shares Net of Treasury Shares	Redeemable Shares	Total
Shares outstanding at January 1, 2024	32,848,308	8,499,086	41,347,394
Shares purchased	(365,026)	(19,555)	(384,581)
Shares sold	32	165,353	165,385

Options and awards exercised	376,296	—	376,296
Shares outstanding at March 30, 2024	32,859,610	8,644,884	41,504,494

On ~~September~~March 30, ~~2023,~~2024, we had ~~41,931,456~~41,504,494 common and redeemable shares outstanding, employee options exercisable to purchase ~~1,545,520~~1,498,678 common shares, partially-paid subscriptions for ~~1,256,250~~1,259,250 common shares and purchase rights outstanding for ~~462,473~~455,754 common shares.

2022 Subscription Offering

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.

- 23 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 30, 2024

(Amounts in thousands, except share data)

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 two 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 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.

~~- 25 -~~

~~Index~~

~~The Davey Tree Expert Company~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~September 30, 2023~~

~~(Amounts in thousands, except share data)~~

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 ~~2022~~2023 Annual Report.

Segment information reconciled to the condensed consolidated financial statements was as follows:


	Utility												Utility	Residential and Commercial	All Other	Reconciling Adjustments	Consolidated

		Utility		Residential and Commercial		All Other		Reconciling Adjustments			Consolidated
Three Months Ended September 30, 2023

Three Months Ended March 30, 2024

Three Months Ended March 30, 2024

Three Months Ended March 30, 2024
Revenues
Revenues
Revenues	Revenues	$	247,478	$	201,753	$	1,403	$	—		$	450,634
Income (loss) from operations	Income (loss) from operations	17,656		24,398		(4,188)		(1,629)		(a)	36,237
Interest expense	Interest expense							(4,751)			(4,751)
Interest income	Interest income							502			502
Other income (expense), net	Other income (expense), net							(2,890)			(2,890)
Income before income taxes	Income before income taxes										$	29,098
Segment assets, total	Segment assets, total	$	372,114	$	368,062	$	—	$	526,377	(b)	$	1,266,553

Three Months Ended October 1, 2022
Three Months Ended April 1, 2023
Three Months Ended April 1, 2023
Three Months Ended April 1, 2023
Revenues
Revenues
Revenues	Revenues	$	217,305	$	180,706	$	934	$	—		$	398,945
Income (loss) from operations	Income (loss) from operations	16,790		21,204		(4,033)		(948)		(a)	33,013
Interest expense	Interest expense							(2,164)			(2,164)
Interest income	Interest income							303			303
Other income (expense), net	Other income (expense), net							(3,371)			(3,371)
Income before income taxes	Income before income taxes										$	27,781
Segment assets, total	Segment assets, total	$	331,393	$	305,216	$	—	$	263,362	(b)	$	899,971

Nine Months Ended September 30, 2023
Revenues		$	700,378	$	563,942	$	2,854	$	—		$	1,267,174
Income (loss) from operations		51,197		61,312		(11,439)		(3,875)		(a)	97,195
Interest expense								(13,588)			(13,588)
Interest income								1,329			1,329
Other income (expense), net								(4,365)			(4,365)
Income before income taxes											$	80,571
Segment assets, total		$	372,114	$	368,062	$	—	$	526,377	(b)	$	1,266,553

Nine Months Ended October 1, 2022
Revenues		$	637,900	$	504,064	$	1,584	$	—		$	1,143,548
Income (loss) from operations		49,260		50,759		(14,852)		(5,665)		(a)	79,502
Interest expense								(5,312)			(5,312)
Interest income								489			489
Other income (expense), net								(8,241)			(8,241)
Income before income taxes											$	66,438
Segment assets, total		$	331,393	$	305,216	$	—	$	263,362	(b)	$	899,971

- 2624 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~September~~March 30, ~~2023~~2024

(Amounts in thousands, except share data)

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.

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 September 30, 2023 and October 1, 2022 by major sources:~~

Three Months Ended September 30, 2023 Utility Residential
and
Commercial All Other Consolidated
Type of service:
Tree and plant care $ 147,125 $ 110,487 $ (202) $ 257,410
Grounds maintenance — 50,603 — 50,603
Storm damage services 5,192 4,240 — 9,432
Consulting and other 95,161 36,423 1,605 133,189
Total revenues $ 247,478 $ 201,753 $ 1,403 $ 450,634
Geography:
United States $ 229,046 $ 189,044 $ 1,403 $ 419,493
Canada 18,432 12,709 — 31,141
Total revenues $ 247,478 $ 201,753 $ 1,403 $ 450,634

- 2725 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~September~~March 30, ~~2023~~2024

(Amounts in thousands, except share data)

Three Months Ended October 1, 2022 Utility Residential
and
Commercial All Other Consolidated
Type of service:
Tree and plant care $ 138,112 $ 105,108 $ (28) $ 243,192
Grounds maintenance — 46,056 — 46,056
Storm damage services 7,004 2,564 — 9,568
Consulting and other 72,189 26,978 962 100,129
Total revenues $ 217,305 $ 180,706 $ 934 $ 398,945
Geography:
United States $ 207,004 $ 168,405 $ 934 $ 376,343
Canada 10,301 12,301 — 22,602
Total revenues $ 217,305 $ 180,706 $ 934 $ 398,945
Nine Months Ended September 30, 2023 Utility Residential
and
Commercial All Other Consolidated
Type of service:
Tree and plant care $ 425,701 $ 309,558 $ (344) $ 734,915
Grounds maintenance — 138,451 — 138,451
Storm damage services 11,340 12,446 — 23,786
Consulting and other 263,337 103,487 3,198 370,022
Total revenues $ 700,378 $ 563,942 $ 2,854 $ 1,267,174
Geography:
United States $ 658,021 $ 529,540 $ 2,854 $ 1,190,415
Canada 42,357 34,402 — 76,759
Total revenues $ 700,378 $ 563,942 $ 2,854 $ 1,267,174
Nine Months Ended October 1, 2022 Utility Residential
and
Commercial All Other Consolidated
Type of service:
Tree and plant care $ 420,791 $ 294,206 $ (155) $ 714,842
Grounds maintenance — 128,114 — 128,114
Storm damage services 10,136 6,162 — 16,298
Consulting and other 206,973 75,582 1,739 284,294
Total revenues $ 637,900 $ 504,064 $ 1,584 $ 1,143,548
Geography:
United States $ 608,411 $ 469,042 $ 1,584 $ 1,079,037
Canada 29,489 35,022 — 64,511
Total revenues $ 637,900 $ 504,064 $ 1,584 $ 1,143,548
Disaggregation of Revenue

The following tables disaggregate our revenue for the three months ended March 30, 2024 and April 1, 2023 by major sources:




























Three Months Ended March 30, 2024	Utility		Residential and Commercial		All Other		Consolidated
Type of service:
Tree and plant care	$	149,419	$	82,752	$	(480)	$	231,691
Grounds maintenance	—		32,745		—		32,745
Storm damage services	4,932		2,737		—		7,669
Consulting and other	86,985		44,616		1,103		132,704
Total revenues	$	241,336	$	162,850	$	623	$	404,809

Geography:
United States	$	228,007	$	153,449	$	623	$	382,079
Canada	13,329		9,401		—		22,730
Total revenues	$	241,336	$	162,850	$	623	$	404,809

Three Months Ended April 1, 2023	Utility		Residential and Commercial		All Other		Consolidated
Type of service:
Tree and plant care	$	142,589	$	81,824	$	(137)	$	224,276
Grounds maintenance	—		28,023		—		28,023
Storm damage services	3,973		5,022		—		8,995
Consulting and other	78,014		31,339		687		110,040
Total revenues	$	224,576	$	146,208	$	550	$	371,334

Geography:
United States	$	213,819	$	137,740	$	550	$	352,109
Canada	10,757		8,468		—		19,225
Total revenues	$	224,576	$	146,208	$	550	$	371,334

- 2826 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~September~~March 30, ~~2023~~2024

(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 ~~$351 and $2,048~~$1,201 of revenue for the three ~~and nine~~ months ended ~~September~~March 30, 2024, that was included in the contract liability balance at December 31, 2023 and $1,280 of revenue for the three months ended April 1, 2023, that was included in the contract liability balance at December 31, ~~2022 and $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.~~2022. Net contract liabilities consisted of the following:


		September 30, 2023		December 31, 2022		March 30, 2024	December 31, 2023
Contract liabilities - current	Contract liabilities - current	$	2,584	$	3,723
Contract liabilities - noncurrent	Contract liabilities - noncurrent	3,044		4,145
Net contract liabilities	Net contract liabilities	$	5,628	$	7,868

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.

- 2927 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~September~~March 30, ~~2023~~2024

(Amounts in thousands, except share data)

Our assets and liabilities measured at fair value on a recurring basis at ~~September~~March 30, 2024 were as follows:


			Fair Value Measurements at March 30, 2024 Using:
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	Total Carrying Value at March 30, 2024		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Assets invested for self-insurance
Certificates of deposits, current	$	2,859	$	2,859	$	—	$	—
Certificates of deposits, noncurrent	3,500		3,500		—		—


Available-for-sale debt securities:
United States Government and agency securities	34,946		34,946		—		—
Corporate notes and bonds	260		260		—		—
Total available-for-sale debt securities	35,206		35,206		—		—

Marketable equity securities:
Mutual funds	11,910		11,910		—		—
Corporate stocks	6		6		—		—

Exchange traded funds	1,594		1,594		—		—

Total marketable equity securities	13,510		13,510		—		—

Liabilities:
Deferred compensation	$	1,671	$	—	$	—	$	1,671

Our assets and liabilities measured at fair value on a recurring basis at December 31, 2023 were as follows:

Fair Value Measurements at
September 30, 2023 Using:
Assets and Liabilities Recorded at
Fair Value on a Recurring Basis
Total
Carrying
Value at
September 30, 2023
Quoted
Prices in
Active
Markets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Assets:
Assets invested for self-insurance
Certificates of deposits, current $ 2,359 $ 2,359 $ — $ —
Certificates of deposits, noncurrent 4,750 4,750 — —
Available-for-sale debt securities:
United States Government and agency securities 40,090 40,090 — —
Corporate notes and bonds 520 520 — —
Total available-for-sale debt securities 40,610 40,610 — —
Marketable equity securities:
Mutual funds 5,558 5,558 — —
Corporate stocks 3,385 3,385 — —
Exchange traded funds 1,333 1,333 — —
Total marketable equity securities 10,276 10,276 — —
Liabilities:
Deferred compensation $ 1,488 $ — $ — $ 1,488


			Fair Value Measurements at December 31, 2023 Using:
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	Total Carrying Value at December 31, 2023		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Assets invested for self-insurance
Certificates of deposits, current	$	2,859	$	2,859	$	—	$	—
Certificates of deposits, noncurrent	3,500		3,500		—		—


Available-for-sale debt securities:
United States Government and agency securities	36,802		36,802		—		—
Corporate notes and bonds	260		260		—		—
Total available-for-sale debt securities	37,062		37,062		—		—

Marketable equity securities:
Mutual funds	6,842		6,842		—		—
Corporate stocks	3,780		3,780		—		—

Exchange traded funds	1,480		1,480		—		—

Total marketable equity securities	12,102		12,102		—		—

Liabilities:
Deferred compensation	$	1,572	$	—	$	—	$	1,572

- 3028 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~September~~March 30, ~~2023~~2024

(Amounts in thousands, except share data)

~~Our assets and liabilities measured at fair value on a recurring basis at December 31, 2022 were as follows:~~

Fair Value Measurements at
December 31, 2022 Using:
Assets and Liabilities Recorded at
Fair Value on a Recurring Basis
Total
Carrying
Value at
December 31, 2022
Quoted
Prices in
Active
Markets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Assets:
Assets invested for self-insurance
Certificates of deposits, current $ 3,750 $ 3,750 $ — $ —
Certificates of deposits, noncurrent 6,359 6,359 — —
Available-for-sale debt securities:
United States Government and agency securities 25,254 25,254 — —
Corporate notes and bonds 264 264 — —
Total available-for-sale debt securities 25,518 25,518 — —
Marketable equity securities:
Mutual funds 13,873 13,873 — —
Corporate stocks 3,007 3,007 — —
Exchange traded funds 1,230 1,230 — —
Total marketable equity securities 18,110 18,110 — —
Liabilities:
Deferred compensation $ 4,597 $ — $ 4,597 $ —

The assets invested for self-insurance are certificates of deposit, 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 3--is based on the value of the Company's common shares.

The Company's 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, the fair market value of the common shares is determined by an independent stock valuation firm. The semiannual valuations utilize two approaches in determining the fair value of the common shares, a market approach and an income approach. Each approach utilizes Company performance and financial condition, using a peer group of comparable companies selected by the firm as well as significant unobservable inputs such as projected earnings and cash flow, EBITDA and cost of capital. The results of each valuation approach are utilized in a weighted average calculation to arrive at the fair market value.

The peer group at ~~September~~March 30, ~~2023~~2024 consisted 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 the Board of Directors of the Company has determined that the common shares will be bought and sold during that six-month period in transactions involving the Company or one of its employee benefit or stock purchase plans. The Company provides a ready market for all shareholders

~~- 31 -~~

~~Index~~

~~The Davey Tree Expert Company~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~September 30, 2023~~

~~(Amounts in thousands, except share data)~~

through its direct purchase of their common shares, although the Company is under no obligation to do so (other than for repurchases pursuant to the put option, as described in Note Q).

Management has evaluated the classification of the common shares and determined that due to significant unobservable inputs used in the independent stock valuation, the shares are more appropriately categorized as Level 3 investments.

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:


			September 30, 2023				December 31, 2022				March 30, 2024		December 31, 2023
			Carrying Value		Fair Value		Carrying Value		Fair Value
		Carrying Value										Carrying Value		Fair Value	Carrying Value	Fair Value
Assets:	Assets:
Available-for-sale debt securities
Available-for-sale debt securities
Available-for-sale debt securities	Available-for-sale debt securities		$	40,610	$	40,610	$	25,518	$	25,518
Marketable equity securities	Marketable equity securities		10,276		10,276		18,110		18,110

Liabilities:	Liabilities:
Liabilities:
Liabilities:
Revolving credit facility, noncurrent
Revolving credit facility, noncurrent
Revolving credit facility, noncurrent	Revolving credit facility, noncurrent		$	206,262	$	206,262	$	150,433	$	150,433
Senior unsecured notes, noncurrent	Senior unsecured notes, noncurrent		60,000		57,335		75,000		74,968
Term loans, noncurrent	Term loans, noncurrent		8,409		8,420		5,854		5,610
Total	Total		$	274,671	$	272,017	$	231,287	$	231,011

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.

- 29 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 30, 2024

(Amounts in thousands, except share data)

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.

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 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 an 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

~~- 32 -~~

~~Index~~

~~The Davey Tree Expert Company~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~September 30, 2023~~

~~(Amounts in thousands, except share data)~~

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.

Georgia ~~wrongful death suit~~Wrongful Death Suit

In November 2017, a wrongful death lawsuit was filed in Savannah, Georgia in the State Court of Chatham County (“State Court”) against Davey Tree, its subsidiary, Wolf Tree, Inc. (“Wolf Tree”), a former Davey employee, a Wolf Tree employee, and two former Wolf Tree employees. That complaint, as subsequently amended, alleges various acts of negligence and seeks compensatory damages for the wrongful death 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 in Savannah, Georgia by the deceased’s estate against Davey Tree, its subsidiary, Wolf Tree, and four current and former employees, 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 treble damages. The 2018 case was removed to the United States District Court for the Southern District of Georgia, Savannah Division (“Federal Court”), on August 2, 2018.

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, the two civil cases were ultimately stayed for more than four years.

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 Department of Justice (“DOJ”) filed a motion to stay both actions on the grounds that on December 7, 2018, an indictment was issued charging two former Wolf Tree employees and another individual with various crimes, including conspiracy to murder the deceased. The State Court case was stayed on December 28, 2018 and the Federal Court case was stayed on January 8, 2019.

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Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 30, 2024

(Amounts in thousands, except share data)

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.

By November 2022, all three of the individually charged defendants had either been convicted at trial or pled guilty to Federal criminal charges in the Federal Court related to their involvement with the murder and other illegal activities. All three criminal defendants have now been sentenced.

Since the individual defendants' criminal matters are now resolved, the State Court permitted limited additional discovery and amended motions for summary judgment. The ~~Company filed a~~Company’s motion for summary judgment ~~and plaintiffs have responded, and the motion remains pending~~was argued before the State ~~Court.~~Court in October 2023 and remained pending as of the end of the first quarter of 2024. On March 6, 2024, the State Court granted the plaintiff’s motion to drop less than all parties from the lawsuit. As a result, Davey Tree is the only remaining defendant in the State Court case. The State Court has ~~not yet~~ set a civil jury trial ~~date.~~for the week of July 29 to August 2, 2024.

The stay in the Federal Court case was lifted on April 4, 2023. The ~~case will now proceed to the early stages of litigation. The~~ Company ~~filed a request for a motion~~moved to dismiss the alleged civil RICO claims, ~~by plaintiffs and~~ further filed a motion to stay the case until the motion to dismiss was ~~decided.~~decided, and moved for partial summary judgment on certain state law claims. The Federal Court granted the Company’s motion to stay ~~with two limited exceptions for ongoing discovery.~~discovery pending resolution of the motion to dismiss. On March 27, 2024, the Federal Court ordered the plaintiff to refile a deficient RICO statement, dismissed the Company’s motion to dismiss without prejudice and leave to refile once the plaintiff’s RICO statement has been refiled, and set a briefing schedule. The Federal Court has not yet set a trial date.

~~- 33 -~~

~~Index~~

~~The Davey Tree Expert Company~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~September 30, 2023~~

~~(Amounts in thousands, except share data)~~

Previously, on December 17, 2018, the United States ~~Attorney's~~Attorney’s Office for the Southern District of Georgia (“United States Attorney”) informed the Company and Wolf Tree that they are also under investigation for potential civil or other violations of immigration and other laws relating to the subject matters of the criminal investigation referenced above. The Company and Wolf Tree fully cooperated with the investigation.

On July 12, 2023, the Company and Wolf Tree entered into a non-prosecution and settlement agreement (the “settlement agreement”) with the United States Attorney’s Office for the Southern District of Georgia and the United States Department of Homeland Security (“DHS”), resolving the investigation for potential violations of immigration and other laws by the Company and Wolf Tree.

The United States Attorney recognized that, since August 2017, both the Company and Wolf Tree have fully cooperated with the criminal and civil investigation and, in entering into the settlement agreement, the United States Attorney took into consideration the Company’s and Wolf Tree’s implementation of a significant compliance program.

The Company and Wolf Tree agreed to pay $3,984 as part of the settlement agreement, including civil penalties, forfeiture and restitution, an amount the Company and Wolf Tree had previously reserved. The United States Attorney agreed that it will not bring any criminal charges against the Company or Wolf Tree concerning the subject matter of the investigation and released the Company and Wolf Tree from civil liability concerning certain immigration code provisions. The DHS also agreed to release the Company and Wolf Tree from administrative liability relating to the subject matter of the investigation, all of which are subject to standard reservations of rights and certain reserved claims. The settlement agreement closes the investigation by the United States Attorney and DHS. The settlement is not an admission of liability by the Company or Wolf Tree.

- 31 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 30, 2024

(Amounts in thousands, except share data)

The civil cases in the State Court of Chatham County in Georgia and the United States District Court for the Southern District of Georgia, Savannah Division relating to the same subject matter, remain pending. In both civil cases, the Company and Wolf Tree have denied all liability and are vigorously defending against the actions. The Company also has retained separate counsel for some of the individual defendants, each of whom has denied all liability and also are vigorously defending the actions.

Northern California Wildfires

Five lawsuits were 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~~a wildfire event 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. An action was brought on October 7, 2019 in San Francisco Superior Court, entitled Adams, et al. v. Davey Resource Group, Inc., et al., Case No. CGC-19-579828. An action was brought on October 8, 2019 in Sacramento Superior Court, entitled Antone, et al. v. ACRT, Inc. et al., Case No. 34-2019-00266662. An action was brought on October 7, 2019 in Sacramento Superior Court, entitled Bennett, et al. v. ACRT, Inc. et al., Case No. 2019-00266501.

~~- 34 -~~

~~Index~~

~~The Davey Tree Expert Company~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~September 30, 2023~~

~~(Amounts in thousands, except share data)~~

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~~Court granted Davey ~~Tree's~~Tree’s petition to coordinate all cases as a California Judicial Council Coordination Proceeding, In Re North Bay Fire Cases, JCCP No. 4955. As a result of the coordination order, all of the actions ~~are~~were stayed in their home jurisdictions. At a case management conference in JCCP No. 4955 on February 24, 2022, the Court ordered that Davey Tree and the plaintiffs participate in a mediation. An initial mediation took place on October 17, 2022. The matter did not resolve at this initial mediation and mediation efforts are ongoing.jurisdictions, subject to further court order.

In November 2022, Davey Tree filed a cross-complaint against the Plaintiffs’ Trust and PG&E related to the contractual obligations of limitation of liability and hold harmless. Since that time, Davey Tree has dismissed the cross-complaint against PG&E without prejudice. The Plaintiffs’ Trust filed a demurrer which challenged Davey Tree’s claim that the hold harmless provisions in its contracts with PG&E are an obligation of the Plaintiffs’ Trust. In response to the demurrer, Davey Tree filed an amended cross-complaint against the Plaintiffs’ Trust on April 13, 2023. The Plaintiffs’ Trust has since filed another demurrer seeking to dismiss the cross complaint by Davey Tree, and Davey Tree has filed a response. The Plaintiffs’ Trust filed a motion for summary adjudication which challenged the limitation of liability as set forth in the assigned contracts. The Court denied the motion for summary adjudication in an order entered April 12, 2023.

At a case management conference in JCCP No. 4955 on February 24, 2022, the Court ordered that Davey Tree and the plaintiffs participate in a mediation. The ~~court~~mediation commenced on October 17, 2022. At a case management conference on September 26, 2023, the parties reported to the Court that they had reached a settlement in principle and needed additional time to work on a long form settlement agreement. The parties jointly requested that the Court continue trial dates and other proceedings while the parties attempt to reach final terms on a global resolution. The Court originally set a trial date for October 2, 2023 involving the claim of the Plaintiffs’ Trust as to the Atlas burn location. On July 26, 2023, based on a joint request by the parties, the ~~court~~Court vacated the October 2, 2023 Atlas trial date and reset the Atlas trial for February 26, ~~2024.~~2024, which has been vacated.

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Index

The ~~parties have~~Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 30, 2024

(Amounts in thousands, except share data)

On November 10, 2022, the Court authorized the plaintiff’s to contact Napa County Superior Court for the purpose of setting a trial date in the Walker case for claims related to the Patrick burn location. On December 15, 2022, the Court in the Walker case set a trial date of March 4, 2024. Pursuant to the parties’ stipulation, that trial date has been continued to mediate all of the claims alleged in the consolidated cases. The parties jointly requested that the Court suspend trial dates and other proceeding while the parties attempt to reach final terms on a global resolution. The court granted the parties request and stayed the trial scheduled dates for 60 days.August 19, 2024.

Davey Tree has responded to all claims asserted by the plaintiffs in these actions, denying all liability, and is vigorously defending against plaintiffs' alleged claims. However, we believe that a range of losses is probable and we have accrued our best estimate within this range which is also equal to our total coverage limits under our self-insurance and third party insurance providers for the 2017-2018 policy year of ~~$218,000.~~$220,000. We believe that any losses would be recovered through our self-insurance and third party insurance providers and have accrued a corresponding insurance recoverable within our Condensed Consolidated Balance Sheet as of ~~September 30,~~December 31, 2023.

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 the first three percent and 50% of the next two percent of each participant's before-tax contribution, limited to the first five percent of the

~~- 35 -~~

~~Index~~

~~The Davey Tree Expert Company~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~September 30, 2023~~

~~(Amounts in thousands, except share data)~~

employee’s compensation deferred each year. All non-bargaining 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 assists 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 two 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 ~~$1,342~~$5,229 and ~~$1,833~~$5,272 as of ~~September~~March 30, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively. The fair value of the shares held in the Davey 401KSOP and ESOP totaled ~~$180,201~~$186,687 and ~~$168,145~~$183,408 as of ~~September~~March 30, ~~2023~~2024 and December 31, ~~2022,~~2023, 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

- 33 -

Index

The Davey Tree Expert Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 30, 2024

(Amounts in thousands, except share data)

section of the consolidated balance sheets and totaled ~~$181,543~~$191,916 and ~~$169,978~~$188,680 as of ~~September~~March 30, ~~2023~~2024 and December 31, ~~2022,~~2023, 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.

- 3634 -

Index

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.”

Recent Trends

Our business continues to be impacted by a number of macro-economic ~~factors, in addition to the trailing impact of the COVID-19 pandemic.~~factors. Global supply chains and product availability remain highly challenged and ongoing global events in Eastern Europe, as well as the Israel-Hamas war, have only exacerbated an already difficult operating environment. These factors, combined with higher fuel costs, ~~increasing~~higher interest rates and a highly competitive labor market, have created an inflationary environment and cost pressures.

In regard to consumer demand, since the onset of the COVID-19 pandemic, our business has experienced an increase in demand and sales. 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 may continue to rise. Inflation has led us to experience higher costs, including higher labor costs and costs for materials from suppliers and transportation costs, and, in the competitive markets in which we operate, we may not be able to increase our prices correspondingly to preserve our gross margins and profitability. If inflation rates continue to rise or remain elevated for a sustained period of time, they could have a material adverse effect on our business, 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 timing of our actions compared to the timing of these inflationary pressures, there may be periods during which we are unable to fully recover the increases in our costs.

~~2022 Subscription Offering~~

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 at $18.10 per share in accordance with the provisions of The Davey Tree Expert Company 2014 Omnibus Stock Plan and

- 3735 -

Index

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. For additional information regarding the offering, see “Part I - Item 1 Note L - Per Share Amounts and Common and Redeemable Shares Outstanding.”

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 Ended							Nine Months Ended
		September 30, 2023		October 1, 2022		Change			September 30, 2023		October 1, 2022		Change
																Three Months Ended
								March 30, 2024													March 30, 2024			April 1, 2023	Change
Revenues	Revenues	100.0	%	100.0	%	—	%		100.0	%	100.0	%	—	%	Revenues		100.0	%	100.0	%		—	%

Costs and expenses:	Costs and expenses:
Costs and expenses:
Costs and expenses:
Operating
Operating
Operating	Operating	63.2		63.8		(.6)			63.8		64.7		(.9)
Selling	Selling	18.9		18.1		.8			18.1		17.6		.5
General and administrative	General and administrative	6.9		7.0		(.1)			7.5		7.6		(.1)
Depreciation and amortization	Depreciation and amortization	3.2		3.5		(.3)			3.4		3.6		(.2)
Gain on sale of assets, net	Gain on sale of assets, net	(.3)		(.7)		.4			(.5)		(.5)		—

Income from operations	Income from operations	8.0		8.3		(.3)			7.7		7.0		.7
Income from operations
Income from operations

Other income (expense):	Other income (expense):
Other income (expense):
Other income (expense):
Interest expense
Interest expense
Interest expense	Interest expense	(1.1)		(.5)		(.6)			(1.1)		(.5)		(.6)
Interest income	Interest income	.1		.1		—			.1		—		.1
Other, net	Other, net	(.5)		(.9)		.4			(.4)		(.7)		.3

Income before income taxes		6.5		7.0		(.5)			6.4		5.8		.6
(Loss) income before income taxes
(Loss) income before income taxes
(Loss) income before income taxes

Income taxes		1.9		1.9		—			1.7		1.5		.2
Income tax (benefit) expense
Income tax (benefit) expense
Income tax (benefit) expense

Net income		4.6	%	5.1	%	(.5)	%		4.6	%	4.3	%	.3	%
Net (loss) income
Net (loss) income
Net (loss) income																	(.6)	%	1.6	%		(2.2)	%

- 3836 -

Index

~~Third Quarter—~~First Three Months—Three Months Ended ~~September~~March 30, ~~2023~~2024 Compared to Three Months Ended ~~October~~April 1, ~~2022~~2023

Our results of operations for the three months ended ~~September~~March 30, ~~2023~~2024 compared to the three months ended ~~October~~April 1, ~~2022~~2023 were as follows:


		Three Months Ended									Three Months Ended
		September 30, 2023		October 1, 2022		Change		Percentage Change
	March 30, 2024													March 30, 2024				April 1, 2023				Change					Percentage Change
Revenues	Revenues	$	450,634	$	398,945	$	51,689	13.0	%	Revenues	$	404,809	$		$	371,334	$		$	33,475	9.0			9.0		%

Costs and expenses:
Costs and expenses:
Costs and expenses:	Costs and expenses:
Operating	Operating	285,019		254,661		30,358		11.9
Selling	Selling	84,982		72,364		12,618		17.4
General and administrative	General and administrative	31,155		27,964		3,191		11.4
Depreciation and amortization	Depreciation and amortization	14,935		13,780		1,155		8.4
Gain on sale of assets, net	Gain on sale of assets, net	(1,694)		(2,837)		1,143		(40.3)
		414,397		365,932		48,465		13.2

Income from operations	Income from operations	36,237		33,013		3,224		9.8
Income from operations
Income from operations
Other income (expense):	Other income (expense):
Interest expense
Interest expense
Interest expense	Interest expense	(4,751)		(2,164)		(2,587)		119.5
Interest income	Interest income	502		303		199		65.7
Other, net	Other, net	(2,890)		(3,371)		481		(14.3)
Income before income taxes		29,098		27,781		1,317		4.7
(Loss) income before income taxes

Income taxes		8,401		7,317		1,084		14.8
Income tax (benefit) expense
Income tax (benefit) expense
Income tax (benefit) expense

Net income	Net income	$	20,697	$	20,464	$	233	1.1	%
Net income
Net income											$	(2,275)			$	5,996			$	(8,271)			(137.9)		%

Revenues--Revenues of ~~$450,634~~$404,809 increased ~~$51,689~~$33,475 compared with ~~$398,945~~$371,334 in the ~~third quarter~~first three months of ~~2022.~~2023. Utility Services increased ~~$30,173~~$16,760 or 13.9% compared with the third quarter of 2022. 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 $21,047 or 11.6% from the third quarter of 2022. Increases were primarily in tree and plant care revenues, grounds maintenance revenue and consulting and other revenue.

~~Operating Expenses~~--Operating expenses of $285,019 increased $30,358 compared with the third quarter of 2022. Utility Services increased $23,306 or 14.6% compared with the third quarter of 2022 and, as a percentage of revenue, increased to 74.2% from 73.7%. The increase was attributable to additional expenses for labor and benefits expenses, materials expenses, crew meals and lodging expenses and subcontractor expense, which were partially offset by decreases in fuel expense and tools and parts expense.Residential and Commercial Services increased $8,119 or 8.7% compared with the third quarter of 2022 but, as a percentage of revenue, decreased to 50.3% from 51.6%. The increase was attributable to increases in labor and benefits expenses, subcontractor expense and materials expense, which were partially offset by decreases in tools and parts expense and fuel expense.

Fuel costs of $13,615 decreased $2,628, or 16.2%, from the $16,243 incurred in the third quarter of 2022 and impacted operating expenses within all segments. The $2,628 decrease included usage increases approximating $108 and price decreases approximating $2,736.

~~- 39 -~~

~~Index~~

~~Selling Expenses~~--Selling expenses of $84,982 increased $12,618 compared with the third quarter of 2022 and, as a percentage of revenue, increased to 18.9% from 18.1%. Utility Services increased $4,734 or 18.2% compared to the third quarter of 2022 and, as a percentage of revenue, increased to 12.4% from 12.0%. The increase was primarily attributable to increases in field management wages and incentive expense and travel expenses. Residential and Commercial Services increased $6,848 or 14.4% from the third quarter of 2022 and, as a percentage of revenue, increased to 27.0% from 26.4%. The increase was primarily attributable to increases in field management and sales wage expenses, personnel development and office expenses.

~~General and Administrative Expenses~~--General and administrative expenses of $31,155 increased $3,191 from $27,964 in the third quarter of 2022. The increase was primarily attributable to an increase in salary and benefits expense and professional services expense.

~~Depreciation and Amortization Expense--Depreciation and amortization expense of $14,935 increased $1,155 from $13,780 incurred in the third quarter of 2022.~~

~~Gain on the Sale of Assets, Net~~--Gain on the sale of assets of $1,694 for the third quarter of 2023 decreased $1,143 from the $2,837 gain in the third quarter of 2022. We sold a greater number of units of equipment at a lower average gain per unit in the third quarter of 2023 as compared with the third quarter of 2022.

~~Interest Expense--Interest expense of $4,751 increased $2,587 from the $2,164 incurred in the third quarter of 2022.The increase was attributable to higher average borrowing and higher interest rates during the third quarter of 2023, as compared with the third quarter of 2022.~~

~~Other, Net~~--Other expense, net, of $2,890 decreased $481 from the $3,371 of other expense incurred in the third quarter of 2022 and consisted of nonoperating income and expense, including gains and losses on marketable securities, pension expense and foreign currency translation adjustments.

~~Income Taxes~~--Income taxes for the third quarter of 2023 were $8,401, as compared to $7,317 for the third quarter of 2022. 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 2023 was 28.9% as compared with the third quarter of 2022 effective tax rate of 26.3%.

~~Net Income~~--~~Net income of $20,697 for the third quarter of 2023 was $233 more than the $20,464 of net income for the third quarter of 2022.~~

~~- 40 -~~

~~Index~~

~~Nine Months—Nine Months Ended September 30, 2023 Compared to Nine Months Ended October 1, 2022~~

~~Our results of operations for the nine months ended September 30, 2023 compared to the nine months ended October 1, 2022 were as follows:~~

Nine Months Ended
September 30,
2023 October 1,
2022 Change Percentage
Change
Revenues $ 1,267,174 $ 1,143,548 $ 123,626 10.8 %
Costs and expenses:
Operating 808,509 740,422 68,087 9.2
Selling 229,480 201,315 28,165 14.0
General and administrative 95,041 87,014 8,027 9.2
Depreciation and amortization 43,479 41,082 2,397 5.8
Gain on sale of assets, net (6,530) (5,787) (743) 12.8
1,169,979 1,064,046 105,933 10.0
Income from operations 97,195 79,502 17,693 22.3
Other income (expense):
Interest expense (13,588) (5,312) (8,276) 155.8
Interest income 1,329 489 840 171.8
Other, net (4,365) (8,241) 3,876 (47.0)
Income before income taxes 80,571 66,438 14,133 21.3
Income taxes 21,835 17,407 4,428 25.4
Net income $ 58,736 $ 49,031 $ 9,705 19.8 %

~~Revenues--Revenues of $1,267,174 increased $123,626 compared with $1,143,548 in the first nine months of 2022. Utility Services increased $62,478 or 9.8%~~7.5% compared with the first ~~nine~~three months of ~~2022.~~2023. The increase was primarily attributable to new accounts, as well as increased work year-over-year on accounts and price increases on existing accounts within both our U.S. and Canadian operations. Residential and Commercial Services increased ~~$59,878~~$16,642 or ~~11.9%~~11.4% compared with the first ~~nine~~three months of ~~2022.~~2023. Increases were primarily in ~~tree and plant care revenue,~~ grounds maintenance and consulting and other ~~revenue and storm damage~~ revenue.

Operating Expenses--Operating expenses of ~~$808,509~~$280,779 increased ~~$68,087~~$31,710 compared with the first ~~nine~~three months of ~~2022 but, as a percentage of revenue, decreased to 63.8% from 64.7%. Utility Services increased $46,648 or 9.9% compared with the first nine months of 2022~~2023 and, as a percentage of revenue, increased to ~~73.8%~~69.4% from 67.1%. Utility Services increased $18,249 or 11.0% compared with the first three months of 2023 and, as a percentage of revenue, increased to 76.0% from 73.6%. The increase was attributable to increases in labor and benefits expense, subcontractor expense, materials expense, ~~crew meals and lodging expenses which were partially offset by decreases in~~ tools and parts expense and fuel expense. Residential and Commercial Services increased ~~$24,980~~$13,611 or ~~9.3%~~16.1% compared with the first ~~nine~~three months of ~~2022 but,~~2023 and, as a percentage of revenue, ~~decreased~~increased to ~~51.8%~~60.3% from ~~53.0%~~57.8%. The increase was primarily attributable to increases in labor and benefits expense, material expense, equipment expense, ~~and~~ subcontractor ~~expense, which were partially offset by decreases in fuel~~ expense, and tools and parts expense.

~~- 41 -~~

~~Index~~

Fuel costs of ~~$39,594~~$11,293 decreased ~~$5,785,~~$1,368, or ~~12.7%~~10.8%, from the ~~$45,379~~$12,661 incurred in the first ~~nine~~three months of ~~2022~~2023 and impacted operating expenses within all segments. The ~~$5,785~~$1,368 decrease included usage ~~increases~~decreases approximating ~~$1,375~~$550 and price decreases approximating ~~$7,160.~~$818.

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Index

Selling Expenses--Selling expenses of ~~$229,480~~$69,976 increased ~~$28,165~~$1,753 compared with the first ~~nine~~three months of ~~2022 and,~~2023 but, as a percentage of revenue, ~~increased~~decreased to ~~18.1%~~17.3% from ~~17.6%~~18.4%. Utility Services increased ~~$10,305~~$182 or ~~13.7%~~.7% compared to the first ~~nine~~three months of ~~2022 and,~~2023 but, as a percentage of revenue, ~~increased~~decreased to ~~12.2%~~11.5% from ~~11.8%~~12.2%. The increase was primarily attributable to an increase in field management travel expense which was partially offset by decreases in field management wages and taxes. Residential and Commercial Services experienced an increase of $1,565 or 3.7% compared to the first three months of 2023 but, as a percentage of revenue, decreased to 26.7% from 28.7%. The increase was primarily attributable to increases in field management wages, office expenses and field management travel expense. Residential and Commercial Services experienced an increase of $17,832 or 13.8% compared to the first nine months of 2022 and, as a percentage of revenue, increased to 26.1% from 25.7%. The increase was primarily attributable to increases in field management wages, office rent, ~~employee development expense~~professional services and field management travel expense.

General and Administrative Expenses--General and administrative expenses of ~~$95,041~~$38,491 increased ~~$8,027~~$7,054 from ~~$87,014~~$31,437 in the first ~~nine~~three months of ~~2022.~~2023. The increase was primarily attributable to increases in salary and incentive expense ~~professional services expense, rent expense~~ and ~~travel~~office supplies expense.

Depreciation and Amortization Expense--Depreciation and amortization expense of ~~$43,479~~$16,408 increased ~~$2,397~~$2,414 from ~~$41,082~~$13,994 incurred in the first ~~nine~~three months of ~~2022.~~2023 which was primarily attributable to placing our enterprise software in service.

Gain on the Sale of Assets, Net--Gain on the sale of assets of ~~$6,530~~$1,079 for the first ~~nine~~three months of ~~2023 increased $743~~2024 decreased $1,817 from the ~~$5,787~~$2,896 gain in the first ~~nine~~three months of ~~2022.~~2023. We sold ~~more~~fewer units of equipment ~~but~~ at a lower average gain per unit during the first ~~nine~~three months of ~~2023~~2024 as compared with the first ~~nine~~three months of ~~2022.~~2023.

Interest Expense--Interest expense of ~~$13,588~~$4,067 increased ~~$8,276~~$196 from the ~~$5,312~~$3,871 incurred in the first ~~nine~~three months of ~~2022.~~2023. The increase was attributable to higher average borrowing and increased interest rates during the first ~~nine~~three months of ~~2023,~~2024, as compared with the first ~~nine~~three months of ~~2022.~~2023.

Other, Net--Other expense, net, of ~~$4,365 decreased $3,876~~$1,364 increased $713 from the ~~$8,241~~$651 expense incurred in the first ~~nine~~three months of ~~2022~~2023 and consisted of nonoperating income and expense, including gains and losses on marketable securities, pension expense and foreign currency translation adjustments.

Income ~~Taxes~~Tax (Benefit) Expense--Income ~~taxes~~tax benefit for the first ~~nine~~three months of ~~2023 were $21,835,~~2024 was $2,396, as compared to ~~$17,407~~expense of $1,388 for the first ~~nine~~three months of ~~2022.~~2023. 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~~three months of ~~2023~~2024 was ~~27.1%~~51.3%. Our effective tax rate for the first ~~nine~~three months of ~~2022~~2023 was ~~26.2%~~18.8%. The change in the effective tax rate from statutory tax rates was primarily due to the impact of discrete items and state and local taxes.

Net (loss) Income--Net ~~income~~loss of ~~$58,736~~$2,275 for the first ~~nine~~three months of ~~2023~~2024 was ~~$9,705 more~~$8,271 less than the net income of ~~$49,031~~$5,996 for the first ~~nine~~three months of ~~2022.~~2023.

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. During 2022, we also engaged in a subscription offering of our common shares to eligible employees and nonemployee directors, which closed in the third quarter of 2022 and resulted in the subscription of 1,476,250 common shares for $26,720 at $18.10 per share.

- 4238 -

Index

Cash Flow Summary

Our cash flows from operating, investing and financing activities for the ~~nine~~three months ended ~~September~~March 30, ~~2023~~2024 and ~~October~~April 1, ~~2022~~2023 were as follows:


		Nine Months Ended
	Three Months Ended								Three Months Ended
		September 30, 2023		October 1, 2022			March 30, 2024	April 1, 2023
Cash provided by (used in):	Cash provided by (used in):					Cash provided by (used in):
Operating activities	Operating activities	$	36,338	$	62,980
Investing activities	Investing activities	(78,411)		(95,608)
Financing activities	Financing activities	37,327		36,183
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	11		(171)
(Decrease) increase in cash		$	(4,735)	$	3,384
Increase in cash

Cash Provided By Operating Activities--Cash provided by operating activities was ~~$36,338~~$23,121 for the first ~~nine~~three months of ~~2023,~~2024, a ~~$26,642 decrease~~change of $37,246 when compared to the first ~~nine~~three months of ~~2022.~~2023. The ~~$26,642 decrease~~$37,246 increase in operating cash flow was primarily attributable to the change of ~~$22,922~~$40,710 related to accounts ~~payable and accrued expenses~~receivable and the change of ~~$14,520 attributable~~$13,556 related to ~~mitigation bank credit inventory,~~prepaid expenses, which was partially offset by the change of ~~$5,730~~$9,717 related to other operating assets and ~~liabilities and the change of $4,507 related to accounts receivable.~~liabilities.

Overall, accounts receivable ~~increased $44,944~~decreased $14,954 during the first ~~nine~~three months of ~~2023,~~2024, as compared to an increase of ~~$49,451~~$25,756 during the first ~~nine~~three months of ~~2022.~~2023. 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~~three months of ~~2023 was unchanged at 75~~2024 decreased by 12 days to 74 days, when compared to 86 days at the end of the first ~~nine~~three months of ~~2022.~~2023. As we continue to grow and expand our service offerings, our DSO will be influenced by various factors such as individual contract terms, the nature of the work performed and special situations such as storm work.

~~Accounts payable and accrued~~Prepaid expenses decreased ~~$10,213~~$13,534 in the first ~~nine~~three months of ~~2023,~~2024, a change of ~~$22,922~~$13,556 compared to the ~~$12,709~~$22 increase in the first ~~nine~~three months of ~~2022.~~2023. The change was primarily related to the timing of estimated income tax payments, employer payroll taxes payable and customer deposits. Self-insurance accruals increased $5,760 in the first nine months of 2023, which was $7,546 less than the increase of $13,306 experienced in the first nine months of 2022. The increase in both the first nine months of 2023 and 2022 were attributable to increased exposures within our workers compensation, general liability and vehicle liability lines of coverage.

Mitigation bank credit inventory increased $14,520 in the first nine months of 2023. Mitigation bank credit inventory grew as a result of the acquisition of Restoration Systems in December, 2022. This service involves the creation of mitigation credits that are available to sell to third parties through remediation of properties such as stream or wetland restoration.prepaid insurance premiums.

Other operating assets and liabilities ~~decreased $13,440~~increased $4,996 in the first ~~nine~~three months of ~~2023,~~2024, a change of ~~$5,730~~$9,717 compared to the ~~$7,710~~$4,721 decrease in the first ~~nine~~three months of ~~2022.~~2023. The change was primarily attributable to ~~decreases~~increases in operating supplies and ~~other current assets and an increase in other liabilities.~~prepaid income taxes.

Cash Used In Investing Activities--Cash used in investing activities for the first ~~nine~~three months of ~~2023~~2024 was ~~$78,411,~~$35,298, a ~~$17,197 decrease~~$10,400 increase when compared to the first ~~nine~~three months of ~~2022.~~2023. The ~~decrease~~increase was primarily the result of ~~decreases~~increases in capital expenditures for land and ~~purchases of marketable securities~~buildings and ~~increases in proceeds from the sale of marketable securities and property and equipment, which were partially offset by an increase in expenditures for the purchases of businesses.~~equipment.

~~- 43 -~~

~~Index~~

Cash Provided By Financing Activities--Cash provided by financing activities was ~~$37,327~~$16,248 during the first ~~nine~~three months of ~~2023, an increase~~2024, a decrease of ~~$1,144~~$28,914 as compared with the ~~$36,183~~$45,162 provided during the first ~~nine~~three months of ~~2022.~~2023. During the first ~~nine~~three months of ~~2023,~~2024, our revolving credit facility, net provided ~~$55,828~~$27,041 in cash as compared with ~~$51,267~~$61,566 provided during the first ~~nine~~three months of ~~2022.~~2023. We use the credit facility primarily for capital expenditures, redemptions of shares and payments of notes payable related to acquisitions. Notes payable ~~increased $6,873~~decreased $7,310 during the first ~~nine~~three months of ~~2023, an increase~~2024, a change of ~~$138~~$2,027 when compared to the ~~$6,735 increase~~$9,337 decrease in the first ~~nine~~three months of ~~2022.~~2023. Treasury share transactions (purchases and sales) used ~~$19,624~~$1,265 for the first ~~nine~~three months of ~~2023, $2,800~~2024, $4,166 more than the ~~$16,824~~$5,431 used in the first ~~nine~~three months of ~~2022.~~2023. Dividends paid of ~~$2,807~~$1,070 during the first ~~nine~~three months of ~~2023~~2024 increased ~~$125~~$193 as compared with ~~$2,682~~$877 paid in the first ~~nine~~three months of ~~2022.~~2023.

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Index

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 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 ~~$14,922~~$133 and ~~$12,814~~$19 during the ~~nine~~three months ended ~~September~~March 30, ~~2023~~2024 and ~~October~~April 1, ~~2022,~~2023, respectively. Share repurchases, other than redeemable common shares, approximated ~~$34,914~~$8,400 and ~~$33,053~~$8,400 during the ~~nine~~three months ended ~~September~~March 30, ~~2023~~2024 and ~~October~~April 1, ~~2022,~~2023, respectively.

Contractual Obligations Summary and Commercial Commitments

As of ~~September~~March 30, ~~2023,~~2024, total commitments related to issued letters of credit were ~~$94,695,~~$94,582, of which $2,624 were issued under the revolving credit facility, $89,689 were issued under the AR Securitization program, and ~~$2,382~~$2,269 were issued under short-term lines of credit. As of December 31, ~~2022,~~2023, total commitments related to issued letters of credit were ~~$94,435,~~$94,702, of which $2,624 were issued under the revolving credit facility, $89,689 were issued under the AR Securitization program, and ~~$2,122~~$2,389 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 ~~2023~~2024 through 2027. 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 ~~September~~March 30, ~~2023,~~2024, we had working capital of ~~$239,715,~~$234,519, availability under short-term lines of credit approximating ~~$8,729~~$6,340 and ~~$116,114~~$153,718 available under our revolving credit facility.

For more information regarding our outstanding debt, see “Part I - Item 1 - Note G, Short and Long-Term Debt and Commitments Related to Letters of Credit.”

~~- 44 -~~

~~Index~~

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.

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.

- 40 -

Index

As discussed in our ~~2022~~2023 Annual Report, 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 ~~2022~~2023 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). 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, many of which are difficult to predict and are outside of our control, 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. Some important factors that could cause actual results to differ materially from those in the forward-looking statements or materially adversely affect our business, results of operations or financial condition include: an overall decline in the health of the economy or our industry, including as a result of rising inflation or interest rates, instability in the global banking system, geopolitical conditions, the possibility of an economic recession, or public health crises; our inability to attract and retain a sufficient number of qualified employees for our field operations or qualified management personnel and the possibility that increased wage rates may result from our need to attract and retain employees; increases in the cost of obtaining adequate insurance, or the inadequacy of our self-insurance accruals or insurance coverages; inability to obtain, or cancellation of, third-party insurance coverage; the impact of 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; payment delays or delinquencies resulting from financial difficulties of our significant customers, particularly utilities; the outcome of litigation and third-party and governmental regulatory claims against us; an increase in our operating expenses due to significant increases in fuel prices for extended periods of time, and recent volatility arising from the effects of the Russia-Ukraine conflict and the Israel-Hamas war; disruptions, delays or price increases within our supply chain; our ability to withstand intense competition; the potential impact of acquisitions or other strategic transactions; the effect of various economic factors, including inflationary pressures, that may adversely impact our customers’ spending and pricing for our services, and impede our collection of accounts receivable; the impact of global climate change and related regulations; fluctuations in our quarterly

~~- 45 -~~

~~Index~~

results due to the seasonal nature of our business or changes in general and local economic conditions, among other factors; being contractually bound to an unprofitable contract; 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; damage to our reputation of quality, integrity and performance; limitations on our shareholders’ ability to sell their common shares due to the lack of a 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 the Russia-Ukraine conflict and the Israel-Hamas war, supply chain

- 41 -

Index

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 increases in health care costs; the impact of corporate citizenship and environmental, social and governance matters and/or our reporting of such matters; our ability to successfully implement our new enterprise resource planning system in a cost-effective and timely manner; the impact of events such as natural disasters, public health epidemics or pandemics, such as COVID-19, terrorist attacks or other external events; the impact of tax increases and changes in tax rules; and our inability to properly verify the employment eligibility of our 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, 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 ~~2022~~2023 Annual Report.

Item 3.Quantitative and Qualitative Disclosures about Market Risk.

While we have experienced inflation and higher interest rates during ~~2023,~~2024, there have been no material changes in our reported market risks or risk management policies since the filing of our ~~2022~~2023 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March ~~16, 2023.~~11, 2024.

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.

~~- 46 -~~

~~Index~~

(b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended ~~September~~March 30, ~~2023~~2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of

- 42 -

Index

the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Part II. Other Information

Items 3 and 4 are not applicable.

Item 1. Legal Proceedings.

Georgia ~~wrongful death suit~~Wrongful Death Suit

~~- 47 -~~

~~Index~~

- 43 -

Index

The Company and Wolf Tree agreed to pay $3,984,325 as part of the settlement agreement, including civil penalties, forfeiture and restitution, an amount the Company and Wolf Tree had previously reserved. The United States Attorney agreed that it will not bring any criminal charges against the Company or Wolf Tree concerning the subject matter of the investigation and released the Company and Wolf Tree from civil liability concerning certain immigration code provisions. The DHS also agreed to release the Company and Wolf Tree from administrative liability relating to the subject matter of the investigation, all of which are subject to standard reservations of rights and certain reserved claims. The settlement agreement closes the investigation by the United States Attorney and DHS. The settlement is not an admission of liability by the Company or Wolf Tree.

~~- 48 -~~

~~Index~~

- 44 -

Index

Northern California Wildfires

Three additional actions were brought on January 28, 2021 in San Francisco County Superior Court, by fire victims represented by a trust (“Plaintiffs’ 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~~Court granted Davey ~~Tree's~~Tree’s petition to coordinate all cases as a California Judicial Council Coordination Proceeding, In Re North Bay Fire Cases, JCCP No. 4955. As a result of the coordination order, all of the actions ~~are~~were stayed in their home jurisdictions. At a case management conference in JCCP No. 4955 on February 24, 2022, the Court ordered that Davey Tree and the plaintiffs participate in a mediation. An initial mediation took place on October 17, 2022. The matter did not resolve at this initial mediation and mediation efforts are ongoing.jurisdictions, subject to further court order.

~~The parties have~~On November 10, 2022, the Court authorized the plaintiff’s to contact Napa County Superior Court for the purpose of setting a trial date in the Walker case for claims related to the Patrick burn location. On December 15, 2022, the Court in the Walker case set a trial date of March 4, 2024. Pursuant to the parties’ stipulation, that trial date has been continued to mediate all of the claims alleged in the consolidated cases. The parties jointly requested that the Court suspend trial dates and other proceeding while the parties attempt to reach final terms on a global resolution. The court granted the parties request and stayed the trial scheduled dates for 60 days.August 19, 2024.

~~- 49 -~~

~~Index~~

which is also equal to our total coverage limits under our self-insurance and third party insurance providers for the 2017-2018 policy year

- 45 -

Index

of ~~$218,000,000.~~$220,000,000. We believe that any losses would be recovered through our self-insurance and third party insurance providers and have accrued a $200,000,000 corresponding insurance recoverable within our Condensed Consolidated Balance Sheet as of ~~September~~March 30, ~~2023.~~2024.

Item 1A.Risk Factors.

Our ~~2022~~2023 Annual Report includes a detailed discussion of our risk factors. Disclosure of risks should not be interpreted to imply that the risks have not already materialized. There have been no material changes to the risk factors described in the ~~2022~~2023 Annual Report during the ~~nine~~three months ended ~~September~~March 30, ~~2023.~~2024.

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds and Issuer Purchases of Equity Securities.~~Proceeds.

The following table provides information on purchases of our common shares outstanding made by us during the first ~~nine~~three months of ~~2023.~~2024.

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 2023
January 1 to January 28 35 $ 18.10 — 3,323,819
January 29 to February 25 10,122 18.10 — 3,323,819
February 26 to April 1 445,198 18.50 — 3,323,819
Total First Quarter 455,355 18.49 —
April 2 to April 29 650,351 18.50 — 3,323,819
April 30 to May 27 638,773 18.50 — 3,323,819
May 28 to July 1 235,631 18.50 116,147 3,207,672
Total Second Quarter 1,524,755 18.50 116,147
July 2 to July 29 4,314 18.50 — 3,207,672
July 30 to August 26 38,621 20.80 — 3,207,672
August 27 to September 30 592,574 20.80 — 3,207,672
Total Third Quarter 635,509 20.78 —
Total Year-to-Date 2,615,619 $ 19.05 116,147
(1) During the nine months ended September 30, 2023, the Company purchased 2,499,472 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).


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 2024
January 1 to January 27	2,262	$	20.80	—	2,798,291
January 28 to February 24	77	20.80		—	2,798,291
February 25 to March 30	382,242	22.20		—	2,798,291
Total First Quarter	384,581	22.19		—











Total Year-to-Date	384,581	$	22.19	—

(1) During the three months ended March 30, 2024, the Company purchased 384,581 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 the common shares, 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

~~- 50 -~~

~~Index~~

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 “Part I - Item 1 - Note 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

- 46 -

Index

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, ~~3,207,672~~2,798,291 remained available under the program, as of ~~September~~March 30, ~~2023.~~2024. 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 5. Other Information.

Rule 10b5-1 Trading Plans

The Company's securities are not traded on a public market. During the quarter ended ~~September~~March 30, ~~2023,~~2024, none of the Company’s directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of Rule ~~10b5-1(c)~~10b5-1© of the Exchange Act or any “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K).

~~- 51 -~~

~~Index~~

Item 6.Exhibits.

See the Exhibit Index below.

- 47 -

Index

Exhibits

Exhibit No.

Description

10.1 *

The Davey Tree Expert Company Board of Directors Revised Compensation Plan (January 1, 2024 Restatement) (Incorporated by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 11, 2024).

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed Herewith

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed Herewith

32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

Furnished Herewith

32.2

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

Furnished Herewith

101

The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended ~~September~~March 30, ~~2023,~~2024, 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 (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

104

Cover Page Interactive Data File (embedded within the inline XBRL document)

Filed Herewith

* Certain of the schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Company agrees to furnish a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request.

Management contracts or compensatory plans or arrangements.

- 5248 -

Index

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 14, 2023~~May 9, 2024

By:

/s/ Joseph R. Paul

Joseph R. Paul

Executive Vice President, Chief Financial Officer and Assistant Secretary

(Principal Financial Officer)

Date:

~~November 14, 2023~~May 9, 2024

By:

/s/ Thea R. Sears

Thea R. Sears

Vice President and Controller

(Principal Accounting Officer)

- 5349 -


	Nine Months Ended September 30, 2023		Year Ended December 31, 2022
Detail of acquisitions:
Assets acquired:
Cash	$	249	$	1,365
Receivables	211		10,794
Mitigation bank credit inventory	—		6,351
Operating supplies	1,538		48
Prepaid expense	149		126
Equipment	5,208		2,309
Deposits and other	2,649		412
Intangible assets	6,233		10,569
Goodwill	13,441		14,255

Liabilities assumed	(5,856)		(15,592)
Debt issued for purchases of businesses	(5,572)		(7,445)
Cash paid	$	18,250	$	23,192


Maturity Analysis of Lease Liabilities		As of September 30, 2023
		Operating Leases		Finance Leases
	Remaining three months of 2023	$	11,126	$	1,043
	2024	39,410		4,516
	2025	30,295		3,879
	2026	18,295		3,034
	2027	10,633		1,765
	2028	3,599		608
	Thereafter	2,552		1,074
	Total lease payments	115,910		15,919
	Less interest	8,190		1,285
	Total	$	107,720	$	14,634


Three Months Ended September 30, 2023	Foreign Currency		Available for Sale Securities		Defined Benefit Pension Plans		Accumulated Other Comprehensive Income (Loss)
Balance at July 1, 2023	$	(4,915)	$	(340)	$	122	$	(5,133)
Other comprehensive income (loss) before reclassifications
Translation adjustment	$	(515)	$	—	$	—	$	(515)
Unrealized gains	—		3		—		3

Amounts reclassified from accumulated other comprehensive income (loss)	—		—		—		—
Tax effect	—		(1)		—		(1)
Net of tax amount	(515)		2		—		(513)
Balance at September 30, 2023	$	(5,430)	$	(338)	$	122	$	(5,646)

Three Months Ended October 1, 2022	Foreign Currency		Available-for-Sale Securities		Defined 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)


			Fair Value Measurements at September 30, 2023 Using:
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	Total Carrying Value at September 30, 2023		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Assets invested for self-insurance
Certificates of deposits, current	$	2,359	$	2,359	$	—	$	—
Certificates of deposits, noncurrent	4,750		4,750		—		—


Available-for-sale debt securities:
United States Government and agency securities	40,090		40,090		—		—
Corporate notes and bonds	520		520		—		—
Total available-for-sale debt securities	40,610		40,610		—		—

Marketable equity securities:
Mutual funds	5,558		5,558		—		—
Corporate stocks	3,385		3,385		—		—

Exchange traded funds	1,333		1,333		—		—

Total marketable equity securities	10,276		10,276		—		—

Liabilities:
Deferred compensation	$	1,488	$	—	$	—	$	1,488