The Davey Tree Expert Company
03/09/2026 | Press release | Distributed by Public on 03/09/2026 12:29
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
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 ("MD&A") is provided as a supplement to the accompanying consolidated financial statements and notes to help provide an understanding of our financial condition, cash flows and results of operations. MD&A is organized as follows:
▪Overview of 2025 Results;
▪Results of Operations, including fiscal 2025 compared to fiscal 2024;
▪Liquidity and Capital Resources, including cash flow summary, contractual obligations summary, off-balance sheet arrangements, and capital resources;
▪Recent Accounting Guidance;
▪Critical Accounting Policies and Estimates; and
▪Market Risk Information, including interest rate risk and foreign currency exchange rate risk.
OVERVIEW OF 2025 RESULTS
General
We provide a wide range of arboricultural, horticultural, environmental and consulting services to residential, utility, commercial and governmental entities throughout the United States and Canada.
Our Business--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.
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. Ongoing changes in U.S. trade policy and ongoing geopolitical instability have only exacerbated an already difficult operating environment. These factors, combined with fluctuating interest rates and a highly competitive labor market, have created an inflationary environment and cost pressures.
We continue to monitor macroeconomic trends and uncertainties and changes in international trade relations and trade policy, including those related to tariffs. The U.S. government has previously announced new and additional tariffs on goods imported into the United
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States, which has prompted retaliatory tariffs from other countries. Furthermore, on February 20, 2026, the U.S. Supreme Court rendered a decision invalidating tariffs imposed under the International Emergency Economic Powers Act, introducing further uncertainty regarding trade policy actions and any potential refund processes. Incremental tariffs and updated trade policies did not have a significant impact on our financial results in 2025, but could adversely impact our results in the future. As a result of the fluctuating U.S. tariff policy, and potential tariff modifications or the imposition of tariffs or export controls by other countries, combined with the challenges of higher inflation, we anticipate continued supply chain challenges, commodity cost volatility, economic uncertainty, and economic pressures on customers and consumers. While we are implementing measures to mitigate these potential impacts, we are continuing to evaluate these factors and their potential effects on our profitability.
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.
RESULTS OF OPERATIONS
The following table sets forth our consolidated results of operations as a percentage of revenues and the percentage change in dollar amounts of the results of operations for the periods presented:
| Year Ended December 31, | Percentage Change | ||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 |
2025/2024
|
2024/2023
|
|||||||||||||||||||||||||
| Revenues | 100.0 | % | 100.0 | % | 100.0 | % | 5.8 | % | 8.8 | % | |||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||||||||
| Operating | 66.8 | 64.6 | 64.4 | 9.5 | 9.1 | ||||||||||||||||||||||||
| Selling | 17.6 | 17.5 | 18.0 | 6.5 | 5.6 | ||||||||||||||||||||||||
| General and administrative | 8.0 | 8.2 | 7.8 | 3.5 | 14.2 | ||||||||||||||||||||||||
| Depreciation | 3.8 | 3.5 | 3.2 | 13.6 | 20.5 | ||||||||||||||||||||||||
| Amortization of intangible assets | .3 | .3 | .3 | (6.4) | 7.1 | ||||||||||||||||||||||||
| Gain on sale of assets, net | (.2) | (.3) | (.4) | (18.2) | (20.4) | ||||||||||||||||||||||||
| 96.3 | 93.8 | 93.3 | 8.6 | 9.4 | |||||||||||||||||||||||||
| Income from operations | 3.7 | 6.2 | 6.7 | (37.1) | .4 | ||||||||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||||||||
| Interest expense | (1.1) | (1.1) | (.8) | 7.0 | 47.9 | ||||||||||||||||||||||||
| Interest income | .1 | .2 | .1 | (15.0) | 69.8 | ||||||||||||||||||||||||
| Other | (.3) | (.5) | (.3) | (35.1) | 63.6 | ||||||||||||||||||||||||
| Income before income taxes | 2.4 | 4.8 | 5.7 | (46.5) | (8.3) | ||||||||||||||||||||||||
| Income taxes | .7 | 1.3 | 1.5 | (41.0) | (2.8) | ||||||||||||||||||||||||
| Net income | 1.7 | % | 3.5 | % | 4.2 | % | (48.6) | % | (10.2) | % | |||||||||||||||||||
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Fiscal 2025 Compared to Fiscal 2024
A comparison of our fiscal year 2025 results to 2024 follows:
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | Change | % Change | ||||||||||||||||||||
| Revenues | $ | 1,947,969 | $ | 1,841,687 | $ | 106,282 | 5.8 | % | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Operating | 1,301,601 | 1,188,557 | 113,044 | 9.5 | |||||||||||||||||||
| Selling | 343,696 | 322,801 | 20,895 | 6.5 | |||||||||||||||||||
| General and administrative | 156,696 | 151,361 | 5,335 | 3.5 | |||||||||||||||||||
| Depreciation | 73,368 | 64,562 | 8,806 | 13.6 | |||||||||||||||||||
| Amortization of intangible assets | 5,084 | 5,432 | (348) | (6.4) | |||||||||||||||||||
| Gain on sale of assets, net | (4,669) | (5,710) | 1,041 | (18.2) | |||||||||||||||||||
| 1,875,776 | 1,727,003 | 148,773 | 8.6 | ||||||||||||||||||||
| Income from operations | 72,193 | 114,684 | (42,491) | (37.1) | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest expense | (21,764) | (20,331) | (1,433) | 7.0 | |||||||||||||||||||
| Interest income | 2,733 | 3,216 | (483) | (15.0) | |||||||||||||||||||
| Other | (5,441) | (8,378) | 2,937 | (35.1) | |||||||||||||||||||
| Income before income taxes | 47,721 | 89,191 | (41,470) | (46.5) | |||||||||||||||||||
| Income taxes | 14,396 | 24,395 | (9,999) | (41.0) | |||||||||||||||||||
| Net income | $ | 33,325 | $ | 64,796 | $ | (31,471) | (48.6) | % | |||||||||||||||
Revenues--Revenues of $1,947,969 increased $106,282 compared with the $1,841,687 reported in 2024. Utility Services increased $54,214, or 5.4%, from the prior year. The increase was attributable to new accounts as well as price increases on existing accounts, partially offset by lower storm damage revenue. Residential and Commercial Services increased $57,163, or 7.0%, from 2024. The increase was primarily attributable increases in tree and plant care revenue, grounds maintenance revenue and consulting and other services, partially offset by a decrease in storm damage service.
Operating Expenses--Operating expenses of $1,301,601 increased $113,044 from the prior year, and as a percentage of revenues increased to 66.8% from 64.6%. Utility Services increased $49,294, or 6.6%, from 2024, and as a percentage of revenues increased to 74.8% from 74.0%. The increase was attributable to increases in labor and benefits expenses, subcontractor expenses and materials expenses. Residential and Commercial Services increased $31,594, or 7.2%, compared with 2024 and as a percentage of revenue increased to 53.4% from 53.2%. The increase was primarily attributable to increases in labor and benefits expense, subcontractor expenses, materials expenses and equipment expenses partially offset by a decrease in professional services expenses. The remaining increase from prior year was primarily attributable to a one-time $34,500 increase in self insurance related expenses driven by specific large loss claims within our general liability and vehicle liability classifications.
Fuel costs decreased in 2025 as compared with fuel costs for 2024 and impacted operating expenses within both segments. During 2025, fuel expense of $48,957 decreased $3,326, or 6.4%, from the $52,283 incurred in 2024. The $3,326 decrease included price decreases approximating $4,756 and usage increases approximating $1,430.
Selling Expenses--Selling expenses of $343,696 increased $20,895 from 2024 and as a percentage of revenues increased to 17.6% from 17.5%. Utility Services increased $6,188, or 5.4%, from 2024 and as a percentage of revenue remained at 11.4%. The increase was
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primarily attributable to increases in wages and benefits expenses and travel expenses partially offset by a decrease in professional services expenses. Residential and Commercial Services increased $19,414, or 9.3%, from 2024 and as a percentage of revenue increased to 26.0% from 25.5%. The increase was primarily attributable to increases in wages and benefits expenses, advertising expenses and office rent expenses.
General and Administrative Expenses--General and administrative expenses of $156,696 increased $5,335 from 2024 but as a percentage of revenues decreased to 8.0% from 8.2%. The increase was attributable to increases in salary and benefits expenses, information technology infrastructure related expenses and personnel development expenses partially offset by a decrease in professional services expenses.
Depreciation and Amortization Expense--Depreciation and amortization expense of $78,452 increased $8,458 from the prior year and as a percentage of revenues increased to 4.1% from 3.8%. This increase was primarily attributable to an increased mix of equipment purchased or leased under finance leases rather than operating leases, along with depreciation on our corporate office expansion.
Gain on Sale of Assets--Gain on the sale of assets of $4,669 decreased $1,041 from the $5,710 recognized in 2024. The decrease was the result of the sale of fewer vehicles and equipment at a lower average gain per unit in 2025 as compared with our average gain in 2024.
Interest Expense--Interest expense of $21,764 increased $1,433 from the $20,331 incurred in 2024. The increase was attributable to higher average debt levels necessary to fund operations, capital expenditures and purchases of treasury shares, partially offset by lower average interest rates.
Interest Income--Interest income of $2,733 decreased $483 from the $3,216 of interest income in 2024. The decrease was attributable to decreases in market interest rates and a decrease in the balance of marketable securities investments in our captive insurance subsidiary.
Other, Net--Other expense, net of $5,441 decreased $2,937 from the $8,378 experienced in 2024. The decrease was primarily driven by an increase of $3,126 in gains on marketable securities. Other expense, net consisted of nonoperating income and expense, including gains and losses on marketable securities, pension expense and foreign currency transaction adjustments.
Income Taxes--Income taxes for 2025 were $14,396, an effective tax rate of 30.2%, compared with income taxes for 2024 of $24,395, or an effective tax rate of 27.4%. The increase of 2.8% in the effective tax rate as compared to 2024 was primarily attributable to increases in non-deductible expenses and state income taxes, partially offset by tax credits and the effect of Canadian income taxes.
Fiscal 2024 Compared to Fiscal 2023
A detailed discussion of the prior year 2024 to 2023 year-over-year changes has been omitted from this Form 10-K and can be found in Part II, Item 7. Management's Discussion and Analysis, in the 2024 Annual Report on Form 10-K filed with the SEC on March 10, 2025; which specific discussion is incorporated herein by reference.
Goodwill-Impairment Tests
Annually, we perform the impairment tests for goodwill during the fourth quarter. Impairment of goodwill is tested at the reporting-unit level, which for us are also our business segments. Impairment of goodwill is tested by comparing the reporting unit's carrying value, including goodwill, to the fair value of the reporting unit. The fair values of the reporting units are estimated using discounted projected cash flows. If the carrying value of the reporting unit exceeds its fair value, goodwill is considered impaired and an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the carrying value of the
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goodwill allocated to that reporting unit. We conducted our annual impairment tests and determined that no impairment loss was required to be recognized in 2025 or for any prior periods. There were no events or circumstances from the date of our assessment through December 31, 2025 that would impact this conclusion.
The fair values of the reporting units were estimated using discounted projected cash flows for the goodwill impairment analysis that required assumptions related to revenues, operating margins, growth rates, discount rates, and working capital requirements. In determining those assumptions, we consider data for each reporting unit, including its annual budget for the upcoming year, its longer-term performance expectations, anticipated future cash flows and market data. Assumptions were also made for perpetual growth rates for periods beyond the forecast period. The assumptions used to calculate the fair value of a reporting unit may change from year to year based on operating results, market conditions and other factors. Changes in these assumptions could materially affect the determination of the fair value for each reporting unit.
If the fair values of the reporting units were less than the carrying values of the reporting units (including recorded goodwill), determined through the discounted projected cash flow methodology, goodwill impairment may be present. In such an instance, an impairment charge would be recognized for the amount by which the reporting unit's carrying amount of goodwill exceeded the reporting unit's fair value of goodwill, not to exceed the carrying value of the goodwill allocated to that reporting unit.
The carrying value of the recorded goodwill for all reporting units totaled approximately $98,723 at December 31, 2025. Based upon the goodwill impairment analysis conducted in the fourth quarter 2025, the determined fair value of the reporting units exceeded their carrying value by a significant amount.
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.
Cash Flow Summary
Our cash flows from operating, investing and financing activities, as reflected in the Consolidated Statements of Cash Flow for the years ended December 31, 2025 and December 31, 2024, are summarized as follows:
| 2025 | 2024 | ||||||||||
|
Cash (used in) provided by:
|
|||||||||||
| Operating activities | $ | 154,574 | $ | 144,546 | |||||||
| Investing activities | (125,266) | (169,643) | |||||||||
| Financing activities | (34,588) | 31,787 | |||||||||
| Effect of exchange rate changes on cash | 206 | (289) | |||||||||
|
(Decrease) Increase in cash
|
$ | (5,074) | $ | 6,401 | |||||||
Net Cash Provided by Operating Activities--Operating activities in 2025 provided cash of $154,574 as compared to $144,546 provided in 2024. The $10,028 increase in operating cash flow was primarily attributable to an increase of $49,066 in cash provided by accounts receivable and the increase of $20,728 in cash provided by self-insurance accruals partially offset by the increase of $11,466 in cash used by accounts payable and accrued expenses, the increase of $19,089 cash used by other operating assets and liabilities, the increase of $6,146 in cash used by prepaid expenses and the increase of $2,208 in cash used by mitigation credit inventories.
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Overall, accounts receivable decreased $12,475 in 2025 as compared to the increase of $36,591 in 2024. 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 2025 decreased by 6 days to 70 days, when compared to 76 days at December 31, 2024. 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.
Self-insurance accruals increased $30,901 in 2025, a change of $20,728 compared to the increase of $10,173 in 2024. This was primarily attributable to a one-time increase of $34,500 in reserves related to specific large loss claims within our general liability and vehicle liability classifications that the Company anticipates will be settled in 2026.
Accounts payable and accrued expenses increased $965 in 2025, a $11,466 change from the increase of $12,431 in 2024. The change was primarily related to decreases in income taxes payable and taxes other than income payable and the timing of accrued compensated absences, partially offset by an increase in accounts payable.
Other operating assets and liabilities, net used cash of $5,716 in 2025, an $19,089 decrease compared to $13,373 of cash provided in 2024. The change was primarily related to a lower amount of payroll taxes refundable collected in 2025 compared to 2024, an increase in income taxes refundable and an increase in operating supplies partially offset by a change in deferred income taxes payable and deposits.
Prepaid expenses increased $1,320 in 2025, a change of $6,146 compared to the $4,826 decrease in 2024. The change was primarily related to prepaid insurance premiums.
Mitigation bank credit inventories increased by $3,138 in 2025, a change of $2,208 compared to the increase of $930 in 2024. Mitigation bank credit inventory levels are affected by the timing of credit inventory sales. Mitigation bank credit inventories are composed of credits that are available to sell to third parties through remediation of properties such as stream or wetland restoration.
Net Cash Used in Investing Activities--Investing activities used $125,266 in cash, $44,377 less than the $169,643 used in 2024. The decrease was primarily the result of a decrease in capital expenditures for equipment of $12,543, a decrease in capital expenditures for land and buildings of $11,611, a decrease in purchases of businesses of $11,235 and an increase in net proceeds from sale of marketable securities of $9,581.
Net Cash Used in Financing Activities--Financing activities used $34,588 in cash in 2025, a decrease of $66,375 compared with the $31,787 of cash provided in 2024. Our net borrowing and repayment activity on our revolving credit facility resulted in a net cash outflow of $88,463 in 2025, a change of $159,793 as compared with $71,330 of cash provided by net borrowings during 2024. We use the credit facility primarily for capital expenditures, redemptions of shares and payments of notes payable related to acquisitions. Net proceeds from notes payable totaled $109,006 in 2025, a change of $105,364 when compared to the $3,642 net proceeds in 2024. Treasury share transactions (purchases and sales) used cash of $42,456 in 2025, $10,028 more than the $32,428 used in 2024. Dividends paid during 2025 totaled $4,314.
The Company currently repurchases common shares at the shareholders' request 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 N, such purchases are not required, and the Company retains the right to
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discontinue them at any time. Repurchases of redeemable common shares from the Davey 401KSOP and ESOP at the shareholders' request approximated $26,891 and $15,988 in 2025 and 2024, respectively. Purchases of common shares, other than redeemable common shares, approximated $70,859 and $60,148 in 2025 and 2024, respectively.
Revolving Credit Facility--In July 2024, the Company amended and restated its revolving credit facility with its existing bank group. The amended and restated credit agreement, which expires in July 2029, permits borrowings, as defined, of up to $400,000, including a combined term loan and letter of credit sublimit of $150,000 and a swing-line commitment of $50,000. Under certain circumstances, the Company may increase the revolving credit commitments and/or establish new incremental term loan commitments in an aggregate amount of up to $150,000. 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 3.25 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 subject to certain further restrictions as described in the credit agreement. The revolving credit facility allows for an adjustment to earnings before interest, taxes, depreciation and amortization of up to $55,000 for four quarters in the event certain legal claims are settled. In May 2025, the Company further amended its revolving credit facility with its existing bank group to, among other things, allow for certain intercompany advances among the Company and its subsidiaries, and in January 2026, the Company amended the revolving credit facility to revise the definition of Consolidated Earnings Before Interest and Taxes. As of December 31, 2025, we had unused commitments under the revolving credit facility approximating $272,319 and $127,681 committed, which consisted of borrowings of $125,431 and issued letters of credit of $2,250.
Borrowings outstanding bear interest, at the Company'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. As of December 31, 2025, the base rate was 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 August 2024. Among other things, the amendment increased the total facility limit to $250,000 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 August 2027. The amendment also amended certain provisions and covenants to generally conform them to the corresponding provisions and covenants in the amended and restated revolving credit agreement. In addition, the amendment and restatement of the revolving credit agreement in August 2024 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 $250,000. In May 2025, the Company further amended its Note Purchase and Shelf Agreement with its existing purchasers to, among other things, allow for certain intercompany advances among the Company and its subsidiaries, and in January 2026, the Company amended the Note Purchase and Shelf Agreement to revise the definition of Consolidated Earnings Before Interest and Taxes. As the Company has previously issued notes with an aggregate amount outstanding of $220,000 under the Note Purchase and Shelf Agreement, as of December 31, 2025, it has the capacity to issue subsequent series of promissory notes pursuant to the Note Purchase and Shelf Agreement in the amount of $30,000.
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 commenced on September 21, 2024 (the sixth
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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 commenced 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.
5.19% Senior Unsecured Notes--On September 22, 2025, we issued 5.19% Senior Notes, Series D (the "5.19% Senior Notes") pursuant to the Note Purchase and Shelf Agreement in the aggregate principal amount of $100,000. The 5.19% Senior Notes are due September 22, 2030. The 5.19% 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 in arrears, beginning December 22, 2025, with the principal due in full on September 22, 2030.
The net proceeds of all senior notes were used to pay down borrowings under our revolving credit facility and for general corporate purposes.
Term loans--Periodically, the Company will enter into term loans for the procurement of insurance or to finance acquisitions.
Term Loans, Weighted-Average Interest Rate--The weighted-average interest rate on the term loans approximated 5.24% at December 31, 2025 and 5.80% at December 31, 2024.
Aggregate Maturities of Long-Term Debt--Aggregate maturities of long-term debt for the five years subsequent to December 31, 2025 were as follows:
| Amount | ||||||||
| Year ending December 31, 2026 | $ | 111,598 | ||||||
| 2027 | 47,407 | |||||||
| 2028 | 45,479 | |||||||
| 2029 | 125,431 | |||||||
| 2030 | 100,000 | |||||||
| $ | 429,915 | |||||||
Accounts Receivable Securitization Facility--In July 2025, the Company amended its Accounts Receivable Securitization Facility (as amended, the "AR Securitization program") to, among other things, extend the scheduled termination date for an additional one-year period, to July 17, 2026, and increase the AR Securitization facility limit to $175,000. In addition, certain subsidiaries of the Company entered into a joinder agreement, pursuant to which such subsidiaries agreed to serve as originators of receivables under the AR Securitization program. The lender may also issue loans, in addition to letters of credit, under the AR Securitization program.
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The AR Securitization program has a limit of $175,000, of which $99,071 and $97,104 were issued for letters of credit ("LCs") as of December 31, 2025 and December 31, 2024, respectively, and loans were issued in the amounts of $55,000 and $25,000 as of December 31, 2025 and December 31, 2024, respectively.
Under the AR Securitization program, Davey Tree transfers by selling or contributing current and future trade receivables to a wholly-owned, bankruptcy-remote financing subsidiary which pledges a perfected first priority security interest in the trade receivables--equal to the issued LCs as of December 31, 2025--to the bank in exchange for the bank issuing LCs.
Fees payable to the bank include: (a) an LC issuance fee, payable on each settlement date, in the amount of .90% per annum 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 obligation 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 obligation 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.
As of December 31, 2025, we were in compliance with all debt covenants.
Contractual Obligations Summary
The following is a summary of our long-term contractual obligations, at December 31, 2025, to make future payments for the periods indicated:
| Contractual Obligations Due -- Year Ending December 31, | ||||||||||||||||||||||||||||||||||||||||||||
| Description | Total | 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | |||||||||||||||||||||||||||||||||||||
| Revolving credit facility | $ | 125,431 | $ | - | $ | - | $ | - | $ | 125,431 | $ | - | $ | - | ||||||||||||||||||||||||||||||
| Senior unsecured notes | 258,460 | 41,630 | 55,102 | 52,646 | 5,190 | 103,892 | - | |||||||||||||||||||||||||||||||||||||
| Term loans | 85,357 | 82,242 | 2,592 | 523 | - | - | - | |||||||||||||||||||||||||||||||||||||
| Financing lease obligations | 42,479 | 11,102 | 9,029 | 7,958 | 6,010 | 4,001 | 4,379 | |||||||||||||||||||||||||||||||||||||
| Operating lease obligations | 72,371 | 31,173 | 19,362 | 10,622 | 5,751 | 2,306 | 3,157 | |||||||||||||||||||||||||||||||||||||
| Self-insurance accruals | 194,908 | 85,110 | 42,332 | 26,518 | 15,902 | 7,554 | 17,492 | |||||||||||||||||||||||||||||||||||||
| Purchase obligations | 40,729 | 40,729 | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Litigation accrual | 254,447 | 254,447 | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Other liabilities | 16,641 | 2,980 | 2,624 | 2,705 | 2,575 | 2,858 | 2,899 | |||||||||||||||||||||||||||||||||||||
| $ | 1,090,823 | $ | 549,413 | $ | 131,041 | $ | 100,972 | $ | 160,859 | $ | 120,611 | $ | 27,927 | |||||||||||||||||||||||||||||||
The self-insurance accruals in the summary above reflect the total of the undiscounted amount accrued, for which amounts estimated to be due each year may differ from actual payments required to fund claims. Purchase obligations in the summary above represent open purchase-order amounts that we anticipate will become payable within the next year for goods and services we have negotiated for delivery
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as of December 31, 2025. Litigation accrual includes the amount accrued for losses related to California wild fire claims that we believe will be paid in 2026. A corresponding insurance receivable has also been recorded. See Item 3. Legal Proceedings for more information. Other liabilities include estimates of future expected funding requirements related to retirement plans and other sundry items. Because their future cash outflows are uncertain, accrued income tax liabilities for uncertain tax positions, as of December 31, 2025, have not been included in the summary above. Noncurrent deferred taxes are also not included in the summary.
As of December 31, 2025, total commitments related to issued letters of credit were $101,659, of which $2,250 were issued under the revolving credit facility, $99,071 were issued under the AR Securitization program, and $338 were issued under short-term lines of credit. As of December 31, 2024, total commitments related to issued letters of credit were $100,050, of which $2,624 were issued under the revolving credit facility, $97,104 were issued under the AR Securitization program, and $322 were issued under short-term lines of credit.
Also, as is common with our industry, we have performance obligations that are supported by surety bonds, which expire during 2026 through 2033. We intend to renew the performance bonds where appropriate and as necessary.
There are no "off-balance sheet arrangements" as that term is defined in Regulation S-K, Item 303(a)(4)(ii) under the Securities Exchange Act of 1934, as amended.
Capital Resources
Cash generated from operations, our revolving credit facility and note issuances are our primary sources of capital.
Cash of $12,397 as of December 31, 2025 included $8,218 in the U.S. and $4,179 in Canada, all of which is subject to U.S. federal income taxes and Canadian taxes if repatriated to the U.S. Currently, we do not expect to repatriate any portion of our 2025 Canadian earnings to satisfy our 2026 U.S. based cash flow needs.
Business seasonality generally 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 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 several other short-term lines of credit. We are continually reviewing our existing sources of financing and evaluating alternatives. At December 31, 2025, we had working capital of $130,111, unused short-term lines of credit approximating $755, and $272,319 available under our revolving credit facility.
Our sources of capital presently allow us the financial flexibility to meet our capital spending plan and to complete business acquisitions for at least the next twelve months and for the foreseeable future.
RECENT ACCOUNTING GUIDANCE
See Note C- Recent Accounting Guidance for a discussion of our recent accounting guidance.
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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.
On an ongoing basis, we evaluate our estimates and assumptions, including those related to accounts receivable, specifically those receivables under contractual arrangements primarily arising from 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.
We believe the following 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.
Revenue Recognition--We recognize revenue in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. Performance obligations are satisfied as our services are provided to customers. See Note S for a detailed description of our revenue recognition policy.
Allowance for Credit Losses--In determining the allowance for credit losses, we evaluate the collectability of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific customer's inability to meet its financial obligations to us (e.g., bankruptcy filings), we evaluate each specific situation to determine the collectability given the facts and circumstances and if necessary, record a specific allowance for credit losses against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers, we recognize allowances for credit losses based on the length of time the receivables are past due. If circumstances change (e.g., unexpected material adverse changes in a major customer's ability to meet its financial obligation to us or higher than expected customer defaults), our estimates of the recoverability of amounts could differ from the actual amounts recovered.
Self-Insurance Accruals--We are generally self-insured for losses and liabilities related primarily to workers' compensation, vehicle liability and general liability claims. We use commercial insurance as a risk-reduction strategy to minimize catastrophic losses. Self-insurance accruals consist of the projected settlement value of reported and unreported claims. Ultimate losses are accrued based upon estimates of the aggregate liability for claims incurred using certain actuarial assumptions followed in the insurance industry and based on Company-specific experience.
Our self-insurance accruals include claims for which the ultimate losses will develop over a period of years. Estimating ultimate losses of reported and unreported claims is subject to a high degree of variability as it involves complex estimates that are generally derived using a variety of actuarial estimation techniques and numerous assumptions and expectations about future events, many of which are highly uncertain. Accordingly, our estimates of ultimate losses can change as claims mature. Our accruals also are affected by changes in the number of new claims incurred and claim severity. The methods for estimating the ultimate losses and the total cost of claims were determined by third-party consulting actuaries; the resulting accruals are reviewed by management, and any adjustments arising from changes in estimates are reflected in income.
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Our self-insurance accruals are based on estimates and, while we believe that the amounts accrued are adequate and not excessive, the ultimate claims may be in excess of or less than the amounts provided. Changes in claims incurred, claim severity, or other estimates and judgments used by management could have a material impact on the amount and timing of expense for any period.
Stock Valuation--On March 15, 1979, we consummated a plan, which transferred control of the Company to our employees. The Employee Stock Ownership Plan ("ESOP"), in conjunction with the related Employee Stock Ownership Trust ("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. 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.
Because there is no trading of the Company's common stock on an established securities market, the market price of the Company's common stock is determined by the Company. As part of the process to determine the market price, an independent valuation is obtained, which is approved by the Company's Board of Directors. The process includes comparing the Company's financial results to those of comparable companies that are publicly traded ("comparable publicly traded companies"). The purpose of the process is to determine a value for the Company's common stock that is comparable to the stock value of comparable publicly traded companies by considering both the results of the stock market and the relative financial results of comparable publicly traded companies. The valuation of the shares utilizes two valuation approaches, the Market Approach and the Income Approach, to derive a basis of value. Key assumptions used in the stock valuation include growth rate, discount rate, rate of capital expenditures, net worth, earnings and appropriate valuation multiples.
If circumstances change (e.g., change in the macro economic factors, key assumptions included within valuation), our estimates of the share price could differ from time to time.
MARKET RISK INFORMATION
In the normal course of business, we are exposed to market risk related to changes in interest rates, changes in foreign currency exchange rates and changes in the price of fuel. We do not hold or issue derivative financial instruments for trading or speculative purposes. We use derivative financial instruments to manage risk, in part, associated with changes in interest rates and changes in fuel prices.
Interest Rate Risk
We are exposed to market risk related to changes in interest rates on long-term debt obligations. We regularly monitor and measure our interest rate risk and, to the extent that we believe we are exposed, from time-to-time we have entered into interest rate swap contracts--derivative financial instruments--with the objective of altering interest rate exposures related to a portion of our variable debt.
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The following table provides information, as of December 31, 2025, about our debt obligations, including principal cash flows, weighted-average interest rates by expected maturity dates and fair values. Weighted-average interest rates used for variable-rate obligations are based on rates as derived from published spot rates, in effect as of December 31, 2025.
| Expected Maturity Date |
Fair Value
December 31,
2025
|
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| 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | |||||||||||||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
| Long-term debt: | |||||||||||||||||||||||||||||||||||||||||||||||
| Fixed rate | $ | 56,597 | $ | 47,408 | $ | 45,479 | $ | - | $ | 100,000 | $ | - | $ | 249,484 | $ | 250,604 | |||||||||||||||||||||||||||||||
| Average interest rate | 5.2 | % | 5.5 | % | 5.5 | % | - | % | 5.2 | % | - | % | |||||||||||||||||||||||||||||||||||
| Variable rate | $ | 55,000 | $ | - | $ | - | $ | 125,431 | $ | - | $ | - | $ | 180,431 | $ | 180,431 | |||||||||||||||||||||||||||||||
| Average interest rate | 4.7 | % | - | % | - | % | 5.3 | % | - | % | - | % | |||||||||||||||||||||||||||||||||||
The interest rate on the variable-rate debt, as of December 31, 2025, ranged from 4.7% to 5.4%.
Foreign Currency Exchange Rate Risk
We are exposed to market risk related to foreign currency exchange rate risk resulting from our operations in Canada, where we provide a comprehensive range of horticultural services. Our financial results could be affected by factors such as changes in the foreign currency exchange rate or differing economic conditions in the Canadian markets as compared with the markets for our services in the United States. Our earnings are affected by translation exposures from currency fluctuations in the value of the U.S. dollar as compared to the Canadian dollar. Similarly, the Canadian dollar-denominated assets and liabilities may result in financial exposure as to the timing of transactions and the net asset / liability position of our Canadian operations.
For the year ended December 31, 2025, the result of a hypothetical 10% uniform change in the value of the U.S. dollar as compared with the Canadian dollar would not have a material effect on our results of operations or our financial position. Our sensitivity analysis of the effect of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices. Presently, we do not engage in hedging activities related to our foreign currency exchange rate risk.
Commodity Price Risk
We are subject to market risk from fluctuating prices of fuel--both diesel and gasoline. In prior years we have used fuel derivatives as "economic hedges" related to fuel consumed by Davey Tree service vehicles. Presently, we are not engaged in any hedging or derivative activities.
Impact of Inflation
We have been impacted by ongoing inflation and fluctuating interest rates affecting the U.S. economy. These inflationary pressures have increased our costs for labor and materials. The inflationary pressures, to the extent we have been unable to offset these costs through increases in our prices or other measures, have had a negative impact to our operating results.
The Davey Tree Expert Company published this content on March 09, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 09, 2026 at 18:29 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]