Centuri Holdings, Inc. (CTRI) FY 2024 MD&A

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and corresponding notes in Item 8 — Financial Statements and Supplementary Data within Part II of this Annual Report on Form 10-K. Unless the context otherwise requires, references to “we,” “is,” “our,” and “our company” refer to Centuri Holdings, Inc. and its consolidated subsidiaries. As discussed in “Note 1 — Description of Business” to the consolidated financial statements, all financial information presented herein is the financial information of Centuri Holdings, Inc. and its subsidiaries, including Centuri Group, Inc. (“the Operating Company”). This discussion contains forward-looking statements that are based upon current expectations and are subject to uncertainty and changes in circumstances. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed within Item 1A — Risk Factors within part I of this Annual Report on Form 10-K. See “Cautionary Note Regarding Forward-Looking Statements.”

We use a 52/53-week fiscal year that ends on the Sunday closest to the end of the calendar year. Unless otherwise stated, references to months and years throughout relate to fiscal months and years rather than calendar months and years. Fiscal years 2024, 2023 and 2022 ended on December 29, 2024, December 31, 2023 and January 1, 2023, respectively, and each year had 52 weeks.

Overview

Company Overview

We are a leading North American utility infrastructure services company that partners with regulated utilities to maintain, upgrade and expand the energy network that powers millions of homes and businesses. We serve as long-term strategic partners to, and an extension of, North America’s electric, gas and combination utility providers, delivering a wide range of infrastructure solutions. Our service offerings primarily consist of the modernization of utility infrastructure through the replacement, maintenance, retrofitting and installation of electric and natural gas distribution and utility-scale transmission networks, and building capacity to meet current and future demands. We also serve complementary, attractive and growing end markets such as renewable energy associated with the expected energy transition, data centers and 5G datacom. Our essential services enable our customers to enhance the safety, reliability and environmental sustainability of the electric and natural gas networks that consumers rely upon to meet their essential and evolving energy needs. Guided by our values and our unwavering commitment to serve as long-term partners to customers and communities, our more than 8,600 employees enable our customers to safely and reliably deliver electricity and natural gas and achieve their goals for environmental sustainability.

Separation from Southwest Gas Holdings

We were incorporated in Delaware in June 2023 as a wholly owned subsidiary of Southwest Gas Holdings, Inc. (“Southwest Gas Holdings”). We were formed for the purpose of completing an initial public offering, facilitating the separation of the Operating Company from Southwest Gas Holdings and other related transactions in order to carry on the business of the Operating Company, our predecessor for financial reporting purposes. Prior to April 13, 2024, Southwest Gas Holdings owned 1,000 shares of our common stock, representing 100% of the issued and outstanding shares of our common stock. On April 13, 2024, we issued 71,664,592 shares of common stock to Southwest Gas Holdings as consideration for the transfer of assets and assumption of liabilities of the Operating Company (the “Separation”). Following the completion of the Separation, the Operating Company became our wholly owned subsidiary, and all of our operations are conducted through the Operating Company.

On April 17, 2024, the IPO Registration Statement was declared effective, and our common stock began trading on the NYSE under the ticker “CTRI” (the “Centuri IPO”) on April 18, 2024. On April 22, 2024, the Centuri IPO was completed through the sale of 14,260,000 shares of our common stock, par value $0.01 per share, including the underwriters’ full exercise of their option to purchase 1,860,000 shares to cover over-allotments, at an initial public offering price of $21.00 per share. On the same day, the Icahn Group purchased 2,591,929 shares of our common stock in a concurrent private placement at a price per share equal to the IPO price, for gross proceeds of approximately $54.4 million. The total net proceeds to us from the Centuri IPO and the concurrent private placement, after deducting underwriting discounts and commissions of $18.0 million and offering expenses payable of $8.3 million, were $327.7 million. As of the closing of the Centuri IPO, Southwest Gas Holdings owned 71,665,592 shares of our common stock, or approximately 81% of the total outstanding shares of our common stock.

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We are incurring certain costs in connection with our establishment as a standalone public company (the “Separation-related costs”). We expect the Separation-related costs to continue through at least fiscal year 2025. Additionally, see “Note 17 — Related Parties” to the consolidated financial statements for a summary of agreements we entered into with Southwest Gas Holdings on April 11, 2024 governing our relationship with Southwest Gas Holdings following the Centuri IPO.

Segment Information

As of and prior to December 31, 2023, we reported our results under the following two reportable segments: Gas Utility Services and Electric Utility Services. In January 2024, we underwent an internal personnel reorganization, causing us to re-evaluate our reportable segments based on the information reviewed by our Chief Operating Decision Maker. We determined that it was appropriate to re-align our reporting structure to the following four reportable segments: (i) U.S. Gas Utility Services (“U.S. Gas”); (ii) Canadian Gas Utility Services (“Canadian Gas”); (iii) Union Electric Utility Services (“Union Electric”); and (iv) Non-Union Electric Utility Services (“Non-Union Electric”). The U.S. Gas and Canadian Gas businesses had historically been part of our Gas Utility Services segment, and the Union Electric and Non-Union Electric businesses had historically been part of our Electric Utility Services segment. Subsequently, in December 2024, NPL Canada Ltd. (“NPL Canada”), the operating company that made up Canadian Gas, amalgamated with WSN Construction Inc. (“WSN Construction”), a subsidiary previously included within the Other caption. As a result, Canadian Gas now also includes the results of the historical WSN Construction entity for all periods presented, and Other now primarily consists of corporate transactions and unallocated costs. All prior year segment financial information has been recast to reflect our current segment structure.

Factors Affecting Our Results of Operations

Our financial results may be impacted by economic conditions that impact businesses generally, such as inflationary impacts on goods and services consumed in the business, regulatory or environmental influences, rising interest rates, labor markets and costs (including in regard to contracted or professional services), and the availability of those resources. Accordingly, our operating results in any particular period may not be indicative of the results that can be expected for any other period.

Market Developments

North America relies on electric and natural gas delivery infrastructure to maintain its dynamic economy, but existing infrastructure is subject to degradation and is often decades old. Governments have increased regulatory stringency and enacted legislation to support the necessary infrastructure investments in the sector, aimed at preventing disruption, enhancing safety and readying to meet current and future demands. Additionally, labor market constraints and a changing utility workforce have led utilities to become increasingly reliant on external outsourced utility infrastructure service providers, creating an overall growing market well-positioned for consolidation. We believe these trends represent a significant challenge for utilities, but also an opportunity for outsourced utility infrastructure services companies to build and maintain more efficient, sustainable infrastructure that can meet the energy needs of future generations.

Rising fuel, labor and material costs have had, and could continue to have, a negative effect on our results of operations, to the extent we cannot pass these costs through to our customers. While we actively monitor economic, industry and market factors that could adversely impact our business, we cannot predict the effect that changes in such factors could have on our future results of operations, financial position and cash flows.

Generally, our contracts provide that the customer is responsible for supplying the materials for their projects. Fluctuations in the price or availability of materials and equipment that we or our customers utilize could impact (positively or negatively, as applicable) costs to complete projects or result in the postponement of projects. Although certain of our customers have experienced recent disruptions in their supply chain for certain project materials, most of our customers have generally been able to procure the necessary materials in a timely manner.

Our operations also depend on the availability of certain equipment to perform services. We believe we have taken steps to secure delivery of a sufficient amount of equipment and do not anticipate any significant disruptions with respect to our fleet in the near-term.

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Demand for Services

The seasonal nature of the industry we serve affects demand for our services. In addition to weather conditions, capital expenditure and maintenance budgets of our customers, as well as the related timing of approvals and seasonal spending patterns, influence our contract revenue and results of operations. Factors affecting our customers and their capital expenditure budgets include, but are not limited to, overall economic conditions, the introduction of new technologies, and our customers’ capital resources, financial performance, and strategic plans. Other factors that may impact our customers and their capital expenditure budgets include new regulations or regulatory actions, merger or acquisition activity involving our customers and the physical maintenance needs of our customers’ infrastructure.

Fluctuations in market prices for oil, gas and other energy sources can impact demand for our services. Such fluctuations can affect the level of activity in energy generation projects as well as pipeline construction projects. The availability of transportation and transmission capacity can also impact demand for our services, including energy generation, electric grid and pipeline construction projects. These fluctuations, as well as the highly competitive nature of our industry, can result in changes in the levels of activity, project mix and moreover the profitability of the services we provide.

Utilities continue to implement or modify system integrity management programs to enhance safety pursuant to federal and state mandates. These programs have resulted in multi-year utility system replacement programs throughout the U.S., and we believe that we are well-positioned to serve the increased demand resulting from these programs.

Our services support customers’ environmental goals, such as reducing methane emissions from pipeline leaks through pipe repair and replacement, hardening electric infrastructure to prevent damage from storms or otherwise, and assisting gas and electric customers with their renewable and sustainable energy infrastructure initiatives. We believe that we are well-positioned to support growing customer attention in achieving environmental objectives through infrastructure construction and maintenance.

Project Variability

Margins for our projects may vary from period to period due to changes in the volume or type of work performed and the pricing structure of our projects. Additionally, factors such as site conditions, project location, labor shortages, weather events, environmental restrictions, regulatory delays, protests, political activity, legal challenges, or the performance of third parties may adversely impact our project performance.

In certain circumstances, such as with large bid contracts (especially those of a longer duration), or unit-price contracts with revenue caps, results may be impacted by differences between costs incurred and those anticipated when the work was originally bid. Work awarded, or failing to be awarded, by individual large customers can impact our results of operations.

Seasonality and Severe Weather Events

Generally, our revenue is lowest during the first quarter of the year due to less favorable winter weather and related working conditions in many of the areas where we perform work. Revenue typically improves as more favorable weather conditions occur during the summer and fall months. In cases of severe weather, such as following a regional storm, we may be engaged to perform restoration activities related to above-ground utility infrastructure, which typically results in higher margins due to higher equipment utilization and the absorption of fixed costs. Alternatively, these severe weather events can also delay projects, negatively impacting our results of operations. Severe weather events and the related impacts on our performance and results are not solely within the control of management and cannot always be predicted or mitigated.

Inflation

Our operations are affected by increases in prices, whether caused by inflation, rising interest rates or other economic factors. We attempt to recover anticipated increases in the cost of labor, equipment, fuel and materials through price escalation provisions that allow us to adjust billing rates for certain major contracts annually; by considering the estimated effect of such increases when bidding or pricing new work; or by entering into back-to-back contracts with suppliers and subcontractors. However, the annual adjustment provided by certain contracts is typically subject to a cap and there can be an extended period of time between the impact of inflation on our costs and when billing rates are adjusted. Our actual costs at times can exceed the contractual caps, and therefore negatively impact our operations. Additionally, rising interest

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rates on our variable-rate debt could have a negative effect on our business, financial condition and results of operations. Overall, our results for fiscal year 2024 were not significantly impacted by inflation when compared to prior years (particularly fiscal year 2022), as we have begun to see slower growth in prices in recent periods.

Backlog

Backlog represents estimates of revenue to be realized under long-term MSAs and bid agreements. Backlog differs from remaining performance obligations disclosed in “Note 3 — Revenue and Related Balance Sheet Accounts” to the consolidated financial statements, as remaining performance obligations are limited to contractually obligated revenue on our contracts that exceed one year, which is typically only bid projects, whereas backlog is inclusive of all contracts regardless of length and includes estimated future work under MSAs. Generally, customers are not contractually committed to specific volumes of work under MSAs, and MSAs may be terminated by either party upon notice. Revenue estimates for MSAs are based on historical customer trends. As backlog only includes revenue estimates over the contractual life of MSAs, backlog tends to fluctuate based on the timing of MSA renewals. Projects included in backlog can be subject to delays or cancellation as a result of regulatory requirements, adverse weather conditions, customer requirements and other factors that could cause actual revenue to differ significantly from the estimates, or cause revenue to be realized in periods other than originally expected. Backlog as of December 29, 2024 and December 31, 2023 was approximately $3.7 billion and $5.1 billion, respectively. For both periods, approximately 90% of backlog related to MSAs.

Results of Operations

Our results of operations, on a consolidated basis and by segment, for the fiscal years ended December 29, 2024 and December 31, 2023 are set forth and compared below. Additionally, revenue and gross profit results under our new segment structure for the fiscal years ended December 31, 2023 and January 1, 2023 are set forth and compared below.

For a detailed discussion of the period-over-period changes in consolidated financial results for the fiscal years ended December 31, 2023 and January 1, 2023, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our final IPO prospectus filed on April 18, 2024 with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended relating to our Registration Statement on Form S-1.

Consolidated Results

Fiscal Year Ended December 29, 2024 compared to the fiscal year ended December 31, 2023

The following tables and discussion summarize our consolidated results of operations for the fiscal years ended December 29, 2024, and December 31, 2023 including as a percentage of revenue, as well as the dollar and percentage change between fiscal years.

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Revenue and Gross Profit

The following table summarizes our revenue, gross profit and gross margin for the periods indicated by segment as well as the dollar and percentage change from the prior year period. The discussion that follows highlights key revenue and gross margin changes at the segment level. Changes in gross profit correspond with the discussed changes in revenue and gross margin.

NM — Percentage is not meaningful

•Revenue from our U.S. Gas segment totaled $1.3 billion in the fiscal year ended December 29, 2024, reflecting a decrease of $96.9 million, or 7.1%, compared to the prior year. This decrease was largely due to a reduction in net volumes under existing customer MSAs stemming primarily from delayed or unfavorable regulatory decisions faced by key customers. As a percentage of revenue, gross profit decreased to 5.5% in the fiscal year ended December 29, 2024 from 9.1% in the prior year. Profitability was negatively affected by lower margins on bid work, as the prior year benefited from a high margin bid job that was substantially complete during the prior year and the fiscal year ended December 29, 2024 included several bid projects with lower margins. Additionally, the fiscal year ended December 31, 2023 reflected higher utilization of fixed costs due to increased volumes on both MSA and bid projects. Revenue from Southwest Gas Corporation totaled $106.8 million for the fiscal year ended December 29, 2024 compared to $116.4 million in the prior year.

•Revenue from our Canadian Gas segment totaled $197.9 million in the fiscal year ended December 29, 2024, reflecting a decrease of $36.9 million, or 15.7%, compared to the prior year. This decrease was primarily due to a decrease in bid revenue which varies from year to year based on project timing, as well as a reduction in net volumes under existing MSAs. As a percentage of revenue, gross profit increased to 15.8% in the fiscal year ended December 29, 2024 as compared to 14.1% in the prior year primarily due to favorable changes in mix of work.

•Revenue from our Union Electric segment totaled $693.5 million in the fiscal year ended December 29, 2024, reflecting a decrease of $139.6 million, or 16.8%, compared to the prior year. This decrease was driven by a planned decline in offshore wind revenue of $114.4 million due to timing of projects, as well as a reduction in net volumes under certain existing customer MSAs. Emergency restoration services revenue for the Union Electric segment was $29.6 million for the fiscal year ended December 29, 2024 compared to $27.2 million for the prior year. As a percentage of revenue, gross profit increased to 8.4% in the fiscal year ended December 29, 2024 as compared to 6.9% in the prior year due to improved profitability on certain MSA contracts and in part from cost savings realized due to restructuring activities which occurred earlier in fiscal 2024.

•Revenue from our Non-Union Electric segment totaled $485.3 million in the fiscal year ended December 29, 2024, reflecting an increase of $11.3 million, or 2.4%, compared to the prior year. This increase was primarily driven by an increase in emergency restoration services revenue of $47.9 million (which was $107.1 million in the fiscal year ended December 29, 2024 compared to $59.2 million in the prior year), partially offset by a decrease in volumes under existing MSAs. As a percentage of revenue, gross profit increased to 12.7% in the fiscal year ended December 29, 2024, compared to 12.3% in the prior year. Profitability benefited from increased emergency restoration services work,

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although this benefit was partially offset by unfavorable changes in mix of work and underutilization of fixed costs on certain existing MSAs during the first half of fiscal 2024.

Selling, General and Administrative Expenses

Selling, general and administrative costs decreased by $3.1 million, or 2.8%, in the fiscal year ended December 29, 2024 compared to the prior year, primarily due to lower incentive compensation during the fiscal year ended December 29, 2024 and reductions in corporate salary and benefit costs stemming in part from the restructuring activities that have taken place, partially offset by severance paid as part of these restructuring activities and incremental administrative costs associated with operating as a publicly traded company.

Amortization of Intangible Assets

Amortization expense remained consistent year-over-year as there were no changes to our amortizable base of intangible assets.

Goodwill impairment

We did not incur goodwill impairment during the fiscal year ended December 29, 2024. During the fiscal year ended December 31, 2023, we recorded goodwill impairment of $214.0 million related to a reporting unit in our Union Electric segment. Refer to “Note 9 — Goodwill and Intangible Assets” to the consolidated financial statements for additional details.

Interest Expense, Net

Interest expense, net decreased by $7.0 million year-over-year due to a reduction in average debt balance. This reduction was partially offset by an incremental $1.7 million recorded in interest expense in the fiscal year ended December 29, 2024 related to a write-off of debt issuance costs. This write-off occurred due to a prepayment we made on our term loan using proceeds from our accounts receivable securitization facility (the “Securitization Facility”).

Income Tax

Our effective tax rate for the fiscal years ended December 29, 2024 and December 31, 2023 was (103.3%) and (5.4%), respectively. The effective tax rate for the fiscal year ended December 29, 2024 was impacted by the disproportionate amount of non-deductible expenses in relation to loss before income taxes, while in the prior year the effective tax rate was impacted by goodwill impairment, a significant portion of which was nondeductible for tax purposes.

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Recast segments results for the fiscal year ended December 31, 2023 compared to the fiscal year ended January 1, 2023

As discussed above, we have recast prior year segment information based on changes in our organization structure. The following table which is based on our current segment structure summarizes our revenue, gross profit and gross margin for the periods indicated by segment as well as the dollar and percentage change from the prior year period. The discussion that follows highlights key revenue and gross margin changes at the segment level. Changes in gross profit correspond with the discussed changes in revenue and gross margin.

NM — Percentage is not meaningful

•Revenue from our U.S. Gas segment totaled $1.4 billion in the fiscal year ended December 31, 2023, reflecting an increase of $12.4 million, or 0.9%, compared to the prior year. This increase was largely due to incremental bid revenue from the commencement of a large project that was substantially complete in the third quarter of 2023, net of reductions in volumes under existing MSAs. As a percentage of revenue, gross profit increased to 9.1% in the fiscal year ended December 31, 2023 from 6.4% in the prior year. The increase in gross profit as a percentage of revenue was primarily due to changes in the mix of work and the easing of inflation, with fuel costs alone decreasing $7.2 million, or 17.4%, year-over-year. Additionally, during the fiscal year ended January 1, 2023, the U.S. Gas segment incurred a loss of $7.5 million related to higher-than-anticipated costs and scheduling delays on a bid project that was substantially completed in 2022. Revenue from Southwest Gas Corporation totaled $116.4 million during the fiscal year ended December 31, 2023 compared to $134.7 million in the prior year.

•Revenue from our Canadian Gas segment totaled $234.8 million in the fiscal year ended December 31, 2023, reflecting a decrease of $85.1 million, or 26.6%, compared to the prior year. This decrease was primarily due to a reduction in net volumes under existing MSAs. As a percentage of revenue, gross profit increased to 14.1% in the fiscal year ended December 31, 2023 as compared to 12.8% in the prior year primarily due to a reduction in rental equipment utilized as a percentage of revenue.

•Revenue from our Union Electric segment totaled $833.1 million in the fiscal year ended December 31, 2023, reflecting an increase of $195.9 million, or 30.7%, compared to the prior year. This increase was driven primarily by higher offshore wind revenue, which increased $120.4 million year-over-year, as well as increases in volumes under existing MSAs. Emergency restoration services revenue for the Union Electric segment was $27.2 million for the fiscal year ended December 31, 2023 compared to $30.5 million for the prior year. As a percentage of revenue, gross profit increased to 6.9% in the fiscal year ended December 31, 2023 compared to 5.9% in the prior year primarily due to the easing of inflation and improved operating efficiencies related to equipment utilization and absorption of fixed costs.

•Revenue from our Non-Union Electric segment totaled $473.9 million in the fiscal year ended December 31, 2023, reflecting an increase of $15.8 million, or 3.5%, compared to the prior year. This increase was primarily driven by an increase in volumes under existing MSAs and an increase in emergency restoration services revenue of $20.0 million (which was $59.2 million in the fiscal year ended December 31, 2023 compared to $39.2 million in the prior year). As a percentage of revenue, gross profit increased to 12.3% in the fiscal year ended December 31, 2023, compared to

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10.8% in the prior year. The increase in gross profit as a percentage of revenue was primarily attributable to the increase in emergency restoration services revenue and the easing of inflation.

Non-GAAP Financial Measures

We prepare and present our financial statements in accordance with GAAP. However, management believes that EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Diluted Earnings per Share, all of which are measures not presented in accordance with GAAP, provide investors with additional useful information in evaluating our performance. We use these non-GAAP measures internally to evaluate performance and to make financial, investment and operational decisions. We believe that presentation of these non-GAAP measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparisons of results. Management also believes that providing these non-GAAP measures helps investors evaluate the Company’s operating performance, profitability and business trends in a way that is consistent with how management evaluates such matters.

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for (i) non-cash stock-based compensation expense, (ii) strategic review costs, (iii) severance costs, (iv) securitization facility transaction fees, (v) CEO transition costs and (vi) goodwill impairment. Adjusted EBITDA Margin is defined as the percentage derived from dividing Adjusted EBITDA by revenue. Management believes that EBITDA helps investors compare our performance to our peers and gain an understanding of the factors affecting our ongoing cash earnings from which capital investments are made and debt is serviced, and that Adjusted EBITDA provides additional insight by removing certain expenses that are non-recurring and/or non-operational in nature. Management believes that Adjusted EBITDA Margin is useful for the same reason as Adjusted EBITDA, and also provides an additional understanding of how Adjusted EBITDA is impacted by factors other than changes in revenue.

Adjusted Net Income is defined as net loss adjusted for (i) strategic review costs, (ii) severance costs, (iii) amortization of intangible assets, (iv) securitization facility transaction fees, (v) CEO transition costs, (vi) loss on debt extinguishment, (vii) non-cash stock-based compensation expense, (viii) goodwill impairment and (ix) the income tax impact of adjustments that are subject to tax, which is determined using the incremental statutory tax rates of the jurisdictions to which each adjustment relates for the respective periods. Management believes that Adjusted Net Income helps investors understand the profitability of our business when excluding certain expenses that are non-recurring and/or non-operational in nature. Adjusted Diluted Earnings per Share is defined as Adjusted Net Income divided by weighted average diluted shares outstanding.

Using EBITDA as a performance measure has material limitations as compared to net loss, or other financial measures as defined under GAAP, as it excludes certain recurring items, which may be meaningful to investors. EBITDA excludes interest expense net of interest income; however, as we have borrowed money to finance transactions and operations, or invested available cash to generate interest income, interest expense and interest income are elements of our cost structure and can affect our ability to generate revenue and returns for our stockholders. Further, EBITDA excludes depreciation and amortization; however, as we use capital and intangible assets to generate revenue, depreciation and amortization are necessary elements of our costs and ability to generate revenue. Finally, EBITDA excludes income taxes; however, as we are organized as a corporation, the payment of taxes is a necessary element of our operations. As a result of these exclusions from EBITDA, any measure that excludes interest expense net of interest income, depreciation and amortization and income taxes has material limitations as compared to net loss. When using EBITDA as a performance measure, management compensates for these limitations by comparing EBITDA to net income/loss in each period, to allow for the comparison of the performance of the underlying core operations with the overall performance of the Company on a full-cost, after-tax basis.

As to certain of the items related to Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Diluted Earnings per Share: (i) non-cash stock-based compensation expense varies from period to period due to changes in the estimated fair value of performance-based awards, forfeitures and amounts granted; (ii) strategic review and related costs incurred in connection with the separation and stand up of Centuri as its own public company are non-recurring; (iii) severance costs relate to non-recurring restructuring activities, (iv) securitization facility transaction fees represent legal and other professional fees incurred to establish our Securitization Facility, (v) CEO transition costs represent incremental costs incurred to find and hire a replacement CEO, (vi) loss on debt extinguishment relates to the write-off of debt issuance costs on the Company’s term loan and (vii) goodwill impairment can vary from period to period depending on economic and other factors. Because EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted Net Income, as defined, exclude some, but not all, items that affect net loss, such measures may not be comparable to similarly titled measures of

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other companies. The most comparable GAAP financial measure, net loss, and information reconciling the GAAP and non-GAAP financial measures, are set forth below.

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin

The following table presents reconciliations of net loss to EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin for the specified periods:

Adjusted Net Income and Adjusted Diluted Earnings Per Share:

The following table presents reconciliations of net loss to Adjusted Net Income for the specified periods:

(1)Calculated based on a blended statutory tax rate of 25%.

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The following table presents reconciliations of diluted loss per share attributable to common stock to Adjusted Diluted Earnings Per Share:

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Liquidity and Capital Resources

Sources and Uses of Liquidity

Our primary liquidity needs have historically related to supporting working capital requirements, funding capital expenditures and servicing our debt.

As of December 29, 2024 and December 31, 2023, cash and cash equivalents were $49.0 million and $33.4 million, respectively. Historically, our primary sources of liquidity have been cash flows from operations and debt financing. As discussed in “Note 1 — Description of Business” to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, the Centuri IPO and concurrent private placement have led to changes in our capital structure and sources of liquidity. As part of the Centuri IPO and concurrent private placement which closed on April 22, 2024, we received total net proceeds of $327.7 million in exchange for 16,851,929 shares of our common stock, with $316.0 million of the proceeds being used to pay down our existing debt. In September 2024, we entered into our Securitization Facility with PNC Bank, National Association ("PNC") to improve cash flows from trade accounts receivable and used all of the proceeds to pay down our existing debt. Under the Securitization Facility, certain designated subsidiaries of the Company have sold and/or contributed, and will continue to sell and/or contribute, their accounts receivable and contract assets generated in the ordinary course of their business and certain related assets to an indirect wholly owned bankruptcy-remote Special Purpose Entity (“SPE”) of the Company created specifically for this purpose. The SPE transfers ownership and control of accounts receivable to PNC for payments as set forth in the agreement. The Company accounts for accounts receivable sold to the banking counterparty as a sale of financial assets and has derecognized the accounts receivable from the consolidated balance sheet for the current period. The total outstanding balance of accounts receivable that have been sold and derecognized is $125.0 million as of December 29, 2024. As of December 29, 2024, we had no available capacity under the Securitization Facility. We believe our capital resources, including existing cash balances, together with our operating cash flows and borrowings under our credit facilities, are sufficient to meet our financial obligations for at least the next 12 months.

We evaluate our working capital requirements on a regular basis and regularly monitor financial markets and assess general economic conditions for possible impacts to our financial position. Our capital requirements may change to the extent we identify acquisition opportunities, if we experience difficulties collecting amounts due from customers, increase our working capital in connection with new or existing customer programs or repay certain credit facilities.

Cash Flows

The following table presents a summary of our cash flows:

Operating Activities

Cash flows provided by operating activities are impacted by changes in the timing of demand for our services and related operating margins but can also be affected by working capital needs. Working capital is primarily affected by changes in accounts receivable, contract assets, prepaid expenses and other current assets, accounts payable, accrued expenses, contract liabilities, and income tax accounts, which are primarily related to changes in revenue and related costs of revenue. These working capital balances are affected by changes in revenue resulting from the timing and volume of work performed, variability in the timing of customer billings and collections of receivables, as well as settlement of payables and other liabilities.

Net cash provided by operating activities for the fiscal year ended December 29, 2024 was $158.2 million, compared to $167.5 million for the fiscal year ended December 31, 2023, representing a decrease in operating cash flows of $9.3 million. This decrease was driven by lower income (excluding the impact of goodwill impairment) in the current year, as well as a decrease in contract liabilities as we recognized revenue in the current year on several projects that had outstanding contract liability balances at the end of the previous year. This decrease was partially offset by the decrease in

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our accounts receivable, which was due to $125.0 million sold in the Securitization Facility, net of an increase in certain accounts receivable balances due to timing of billings and payments.

Investing Activities

Net cash used in investing activities was $89.4 million in the fiscal year ended December 29, 2024 compared to $94.9 million for the fiscal year ended December 31, 2023, a decrease of $5.5 million.

The construction industry is capital intensive, and we expect to continue to incur capital expenditures to meet anticipated needs for our services. For the fiscal year ended December 29, 2024 and December 31, 2023, we had capital expenditures of $99.3 million and $106.7 million, respectively.

These items were partially offset by proceeds from the sale of property and equipment of $10.0 million and $11.8 million for the fiscal years ended December 29, 2024 and December 31, 2023, respectively.

Financing Activities

Net cash used in financing activities was $52.6 million for the fiscal year ended December 29, 2024 compared to $103.4 million for the fiscal year ended December 31, 2023. This decrease was driven by significant changes in financing activities during fiscal 2024, including cash inflows from net proceeds from the Centuri IPO and private placement of $327.7 million, and cash flow outflows for the $316.0 million payment we made on our debt with Centuri IPO proceeds, $125.0 million payment on our term loan with proceeds from the Securitization Facility, and our redemption of the redeemable noncontrolling interests in Linetec Services, LLC and Riggs Distler, Drum Parent LLC for $92.9 million. Borrowings on our line of credit also increased from the prior year due to timing of collections from customers in relation to the timing of payroll and vendor payments.

Foreign Operations

While we primarily operate in the United States, we also have operations in Canada. Therefore, changes in the value of Canadian dollars affect our financial statements when translated into U.S. dollars. The revenue from our Canadian operations was approximately 8% of total revenue for the fiscal years ended December 29, 2024, and December 31, 2023. At times, we also enter into transactions in foreign currencies, primarily in Canadian dollars, that subject us to currency risks. We regularly monitor our foreign currency exposure to determine the most effective foreign currency risk mitigation strategies. Currently, we are not party to any foreign currency exchange contracts.

Credit Facilities

Term Loan and Revolving Credit Facility

We have a senior secured revolving credit and term loan multi-currency facility. The line of credit portion comprises $400 million, and associated amounts borrowed and repaid are available to be re-borrowed. The term loan facility portion provided approximately $1.145 billion in financing as of August 27, 2021. The term loan facility expires on August 27, 2028, and the revolving credit facility expires on August 27, 2026. This multi-currency facility allows us to request loan advances in either Canadian dollars or U.S. dollars. The obligations under the credit agreement are secured by present and future ownership interests in substantially all of our direct and indirect subsidiaries, substantially all of our tangible and intangible personal property, and all products, profits and proceeds of the foregoing. Assets securing the facility totaled $2.0 billion as of December 29, 2024 and $2.1 billion as of December 31, 2023. During the fiscal year ended December 29, 2024, the maximum amount outstanding on the combined facility was $1.117 billion, at which point $991.4 million was outstanding on the term loan portion of the facility. As of December 29, 2024 and December 31, 2023, $113.5 million and $77.1 million, respectively, was outstanding on the revolving credit facility, in addition to $706.4 million and $994.2 million, respectively, that was outstanding on the term loan portion of the facility. Also as of December 29, 2024 and December 31, 2023, there was approximately $226.1 million and $246.5 million, respectively, net of outstanding letters of credit, of unused capacity under the line of credit. We had $64.6 million and $48.6 million of unused letters of credit available as of December 29, 2024 and December 31, 2023, respectively.

On March 22, 2024, we amended the financial covenants of the revolving credit facility (the “2024 Credit Facility Amendment”) to increase the maximum net leverage ratio. The terms of the amended revolving credit facility required us to maintain certain net leverage ratios, which have since been superseded as noted in the paragraph below.

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With the proceeds obtained from the Centuri IPO, we paid down $156.0 million of debt under our revolving credit facility and $160.0 million of debt under our term loan facility. Pursuant to the terms of our 2024 Credit Facility Amendment, completion of the Qualified IPO resulted in a change to the maximum net leverage ratio based on the amount of proceeds received. We are now required to maintain a net leverage ratio of less than a maximum of 5.25 to 1.00 from April 18, 2024 through June 30, 2024, 5.00 to 1.00 from July 1, 2024 through September 29, 2024, and 4.25 to 1.00 from September 30, 2024 through December 29, 2024, and 4.00 to 1.00 thereafter.

We made additional prepayments on our term loan debt of $100.0 million in September 2024 and $25.0 million in November 2024 with the proceeds from our Securitization Facility.

Equipment Term Loans

We currently have seven equipment term loans with initial amounts totaling approximately $170 million, with certain owned equipment used as collateral. The loans are serviced in U.S. dollars. These term loans have prepayment penalties for the first three years of the agreements. We did not incur any material prepayment penalties on any of our equipment loans during fiscal years 2024, 2023, or 2022.

Financial Covenants

Certain of our debt instruments have leverage ratio caps and interest coverage ratio requirements. As of December 29, 2024 and December 31, 2023, we were in compliance with all of our debt covenants. Under the most restrictive of the covenants, as of December 29, 2024 and December 31, 2023, we could have issued approximately $151 million and $108 million, respectively, in additional debt and met the leverage ratio requirement. As of December 29, 2024 and December 31, 2023, we had approximately $28 million and $15 million, respectively, of cushion relating to the minimum interest coverage ratio requirement. Our revolving credit and term loan facilities are secured by our assets. Cash dividends are limited to a calculated available amount, generally defined as 50% of our net income since the beginning of the fourth fiscal quarter of 2020, adjusted for certain items, such as parent contributions, Linetec redeemable noncontrolling interest payments or dividend payments, among other adjustments, as applicable.

Off Balance Sheet Arrangements

Accounts Receivable Securitization Facility

In September 2024, we entered into our Securitization Facility with PNC to improve cash flows from trade accounts receivable and used all of the proceeds to pay down our existing debt. During fiscal 2024, certain of our subsidiaries sold and/or contributed their accounts receivable and contract assets generated in the ordinary course of their business and certain related assets to an indirect wholly owned bankruptcy-remote SPE created specifically for this purpose. We account for accounts receivable sold to the banking counterparty as a sale of financial assets and have derecognized the accounts receivable from the consolidated balance sheet for the current period. The total outstanding balance of accounts receivable that have been sold and derecognized is $125.0 million as of December 29, 2024. As of December 29, 2024, we had no available capacity under the Securitization Facility. We have concluded that there is generally no material risk of loss to us from non-payment of the sold receivables.

Contractual Obligations

As of December 29, 2024, we had $843.9 million and $30.0 million of long-term and short-term debt, respectively, outstanding, excluding finance lease liabilities.

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The following table presents a summary of our contractual obligations as of December 29, 2024 (in thousands):

(1)Represents interest on term debt and excludes interest on our revolving line of credit as borrowings vary from period to period for the line of credit. Fixed-rate interest payments assume that principal payments are made as originally scheduled. Estimated interest payments on variable-rate debt is based on the interest rates in effect as of December 29, 2024.

(2)Includes related interest. Certain leases require property tax payments, insurance and maintenance costs that have been excluded from the above table as they are variable in nature.

Fees paid on our Securitization Facility are excluded from the table above, but would be approximately $8 million per year based on the interest rate in effect as of December 29, 2024 and assuming our balance of sold receivables stays consistent at $125.0 million.

The above table does not include potential obligations under multiemployer pension plans in which some of our employees participate. The multiemployer pension plan contribution rates generally are specified in the collective bargaining agreements (usually on an annual basis), and contributions are made to the plans on a “pay-as-you-go” basis based on our union employee payrolls. Obligations for future periods cannot be determined because we cannot predict the number of employees that we will employ at any given time nor the plans in which they may participate. We may also have additional liabilities imposed by law as a result of our participation in multiemployer defined benefit pension plans. The amount of additional funds, if any, that we may be obligated to contribute to these plans in the future cannot be estimated due to uncertainty of the future levels of work that require the specific use of union employees covered by these plans, as well as the future contribution levels and possible surcharges on contributions applicable to these plans.

The liability for unrecognized tax benefits for uncertain tax positions was approximately $0.5 million as of December 29, 2024 and December 31, 2023 and is included in other liabilities on the consolidated balance sheets included elsewhere in this Annual Report on Form 10-K. These amounts have been excluded from the above table as we are unable to reasonably estimate the timing of the resolution of the underlying tax positions with the relevant tax authorities.

We have various other noncancellable obligations consisting primarily of software licensing fees and consulting and other outsourced services.

Recently Issued Accounting Pronouncements

Refer to “Note 2 — Basis of Presentation and Summary of Significant Accounting Policies” to our consolidated financial statements for a discussion of recent accounting standards and pronouncements.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments. Judgments regarding future events include the likelihood of success of particular projects, legal and regulatory challenges and the fair value of certain assets and liabilities. It is possible that materially different amounts could be recorded if these estimates and judgments change or if actual results differ from these estimates and judgments. These estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. On an ongoing basis, we evaluate our estimates utilizing historical experience, consultation with experts and other methods we consider reasonable. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the information that gives rise to the revision becomes known. Actual results could materially differ from those that result from using the estimates under different assumptions or conditions.

Our significant accounting policies are summarized in “Note 2 — Basis of Presentation and Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. We identify our most critical accounting policies as those that are the most pervasive and important to the portrayal of our

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financial position and results of operations, and that require the most difficult, subjective and/or complex judgments by management regarding estimates about matters that are inherently uncertain.

The following critical accounting estimates are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. Management’s estimates are based on the relevant information available at the end of each period.

Revenue Recognition

We generally have two types of agreements with our customers: MSAs and bid contracts. Our MSAs and bid contracts are characterized as either fixed-price, unit-price or T&M for revenue recognition purposes. Most of our contracts are considered to have a single performance obligation. Performance obligations related to fixed-price contracts are satisfied over time because our performance typically creates or enhances an asset that the customer controls. For fixed-price contracts, we recognize revenue as performance obligations are satisfied and control of the promised good or service is transferred to the customer by measuring the progress toward complete satisfaction of the performance obligation(s) using an input method. Input methods result in the recognition of revenue based on the entity’s effort to satisfy the performance obligation relative to the total expected effort to satisfy the performance obligation. Under the cost-to-cost method, costs incurred to-date are generally the best depiction of the transfer of control. For unit-price and time and materials contracts, an output method is used to measure progress towards satisfaction of a performance obligation.

Actual revenue and project costs can vary, sometimes substantially, from previous estimates due to changes in a variety of factors, including unforeseen circumstances not originally contemplated. These factors, along with other risks inherent in performing fixed-price contracts, may cause actual revenue and gross profit for a project to differ from previous estimates and could result in reduced profitability or losses on projects. Changes in these factors may result in revisions to estimates of costs and earnings. Revisions to estimates of costs and earnings during the course of work are reflected in the accounting period in which the facts requiring revision become known. At the time a loss on a contract becomes known or is anticipated, the entire amount of the estimated ultimate loss is recognized in the financial statements. Once identified, these types of conditions continue to be evaluated for each project throughout the project term and ongoing revisions in management’s estimates of contract value, contract cost and contract profit are recognized as necessary in the period determined.

Subsequent to the inception of a fixed-price contract, the contract price could change for various reasons, including the executed or estimated amount of change orders and unresolved contract modifications and claims to or from owners. Changes that are accounted for as an adjustment to existing performance obligations are allocated on the same basis as established at contract inception. Otherwise, changes are accounted for as a separate performance obligation(s) and the separate contract price is allocated as discussed above.

Contracts can have consideration that is variable. For MSAs, variable consideration is evaluated at the customer level as the terms creating variability in pricing are included within the MSA and are not specific to a work authorization. For multi-year MSAs, variable consideration items are typically determined for each year of the contract and not for the full contract term. For bid contracts, variable consideration is evaluated at the individual contract level. The expected value method or most likely amount method is used based on the nature of the variable consideration. Types of variable consideration include liquidated damages, delay penalties, performance incentives, safety bonuses, payment discounts and volume rebates. We typically estimate variable consideration and adjust financial information, as necessary.

Change orders involve a modification in scope, price, or both to the current contract, and are typically agreed to in writing by both parties. Once approved, the change order is either treated as a separate contract or as part of the existing contract as appropriate under the circumstances. When the scope is agreed upon in the change order but not the price, we estimate the change to the transaction price.

In all forms of contracts, we estimate the collectability of contract amounts at the same time we estimate project costs. If we anticipate that there may be challenges associated with the collectability of the full amount calculated as the transaction price, we may reduce the amount recognized as revenue to reflect the uncertainty associated with realization of the eventual cash collection.

On occasion, we recognize revenue related to contract claims, which arise when there is a dispute between a customer and us regarding a change in the scope of work and associated price for work already performed. We record estimated claims as variable consideration based on the most likely amount we expect to receive, and to the extent it is probable that a

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significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

Goodwill and Long-Lived Assets

Goodwill

Goodwill represents the excess of cost over the fair market value of net tangible and identifiable intangible assets of acquired businesses and is stated at cost. We have recorded goodwill in connection with certain of its historical business acquisitions. Goodwill is required to be measured for impairment at the reporting unit level, which represents the operating entity level or one level below the operating entity level for which discrete financial information is available. During fiscal year 2024, we changed our reporting units to align with changes in our organization structure, and as a result, we have four reporting units.

Goodwill is tested for impairment annually on the first day of the fourth quarter, or more frequently if events or circumstances arise which indicate that the fair value of a reporting unit with goodwill is below its carrying amount. We assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Qualitative factors assessed for each reporting unit include, among other things, deterioration in macroeconomic conditions; declining financial performance; deterioration in the operational environment; a significant change in market, management, business strategy or business climate; a loss of a significant customer; increased competition; or a decrease in the estimated fair value of a reporting unit.

If we believe that, as a result of our qualitative assessment, it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative impairment test is required. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recorded in the consolidated statement of operations.

In connection with the annual goodwill assessment for fiscal years 2024, 2023 and 2022, we performed a qualitative goodwill assessment of its reporting units. Other than the Union Electric reporting unit in fiscal year 2024 and the Riggs Distler reporting unit in fiscal year 2023 and 2022, the results of the qualitative assessment did not indicate that it was more likely than not that the fair value of each reporting unit analyzed was less than the carrying value including goodwill, and no goodwill impairment was recognized.

For the Union Electric reporting unit in fiscal year 2024 (and in fiscal years 2023 and 2022, the Riggs Distler reporting unit), we determined that triggering events occurred, and performed a quantitative assessment as of each of the fiscal year 2024, 2023, and 2022 assessment dates utilizing a weighted combination of the income approach (discounted cash flow method) and a market approach (guideline public company method). Under the discounted cash flow method, we determined fair value based on the estimated future cash flows of the reporting unit, discounted to present value using a risk-adjusted industry weighted average cost of capital, which reflects the overall level of inherent risk for the reporting unit and the rate of return an outside investor would expect to earn. Under the guideline public company method, we determined the estimated fair value by applying public company multiples to the reporting units’ historical and projected results, including a reasonable control premium. The public company multiples are based on peer group multiples adjusted for size, volatility and risk.

The inputs used in the fair value measurement of the reporting units was the lowest level (Level 3) inputs. The key assumptions used to determine the fair value of the reporting units during the annual impairment assessment were: (a) expected cash flow for a period of five years based on our best estimate of revenue growth rates and projected operating margins; (b) a terminal value based upon terminal growth rates; (c) a discount rate based on the our best estimate of the weighted average cost of capital adjusted for risks associated with the reporting units; (d) the selection of the reporting units peer group; and (e) an implied control premium based on our best estimate of the premium that would be appropriate to convert the reporting unit value to a controlling interest basis. Recent operating performance, along with key assumptions for specific customer and industry opportunities, were also utilized during the annual impairment assessment.

For fiscal 2024, the terminal growth rate used in the assessment was 3.0%. The discount rate used in the assessment was 10.0%, and the control premium supportable by market research and available data was 15.0%. The assessment resulted in the fair value of Union Electric being significantly above its carrying value and no goodwill impairment was recognized.

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For fiscal 2023, the terminal growth rate used in the assessment was 3.0%. The discount rate used in the assessment was 12.5%, and the control premium supportable by market research and available data was 15.0%. The assessment resulted in the fair value of Riggs Distler being below its carrying value. As a result, we recognized an impairment charge of $214.0 million in the fourth quarter of 2023. Key drivers of the impairment included the cancellation of an offshore wind project in the fourth quarter of fiscal year, as well as lower than expected earnings during fiscal 2023. The goodwill impairment charge did not affect our compliance with our financial covenants and conditions under our credit agreements.

For fiscal 2022, the terminal growth rate used in the assessment was 3.0%. The discount rate used in the assessment was 14.0%, and the control premium supportable by market research and available data was 15.0%. The assessment resulted in a fair value of the Riggs Distler being below its carrying value. As a result, we recognized an impairment charge of $177.1 million. The key driver of the impairment was earnings shortfalls during fiscal 2022 resulting from changes in the mix of work combined with inflation and higher fuel costs. The goodwill impairment charge did not affect our compliance with our financial covenants and conditions under our credit agreements.

Long-Lived Assets

We review the carrying value of our long-lived assets, including property and equipment and intangible assets with finite useful lives, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. Such circumstances may include a significant decrease in the market price of an asset, a significant adverse change in its physical condition or the manner in which the asset is being used or a history of operating or cash flow losses associated with the use of the asset.

Impairment losses could occur when the carrying amount of an asset exceeds the anticipated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded, if any, is calculated as the excess of the asset’s carrying value over its estimated fair value. The estimate of future cash flows requires management to make assumptions and to apply judgments, including forecasting future sales and expenses and estimating useful lives of the assets. These estimates can be affected by a number of factors, including, among others, future results, demand for our services and economic conditions, many of which can be difficult to predict. Actual future prices, operating expenses and discount rates could vary from the assumptions used in our estimates and may have a material impact on the assessment of the fair value of the respective assets and ultimately, our results of operations.

Income Taxes

We file income tax returns in various states and in Canada. In the U.S. federal jurisdiction and certain states, we have historically filed income tax returns as part of a consolidated group with Southwest Gas Holdings. For purposes of our consolidated financial statements, we have adopted the separate return approach under the asset and liability method. The income tax provisions and related deferred tax assets and liabilities reflected in our consolidated financial statements have been estimated as if we were a separate taxpayer.

Our annual tax expense is based on our income, statutory tax rates and tax incentives available to us in the various jurisdictions in which we operate. Changes in existing tax laws or rates could significantly impact the estimate of our tax liabilities. Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income rely heavily on estimates, and we use our historical experience as well as our short-and long-range business forecasts to provide insight.

Significant judgment is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties. We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the relevant taxing authorities based on the technical merits of the position. Our policy is to adjust these reserves when facts and circumstances change, such as the settlement or effective settlement of positions with the relevant taxing authorities. We have provided for the amounts we believe will ultimately result from these changes; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. Such differences will be reflected as increases or decreases to income tax expense in the period in which they are determined.

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Management intends to continue to permanently reinvest any future foreign earnings in Canada. Distributions of cash to the U.S. as dividends generally will not be subject to U.S. federal income tax. The Company has not provided foreign withholding or state income taxes on the undistributed earnings of its foreign subsidiaries, over which the Company will have sufficient influence to control the distribution of such earnings and has determined that substantially all such earnings have been reinvested indefinitely. These earnings could become subject to foreign withholding tax if they are remitted as dividends.

See “Note 14 — Income Taxes” to the annual consolidated financial statements for further information on income taxes.