Statement of Cash Flows for Johnson & Sons Heating, Plumbing, & Air

For Years Ended December 31, 2024 and December 31, 2023

CASH FLOW ACTIVITIES - INDIRECT METHOD 2024 % Rev 2023 Change
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (After S-Corp Tax Provision) $5,150,000 7.5% $4,608,580 $541,420
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation - Property, Plant and Equipment 850,000 1.2% 830,000 20,000
Buildings and Improvements (40-year life) 187,500 187,500 -
Fleet Vehicles (5-year MACRS) 425,000 415,000 10,000
Construction Equipment (7-year MACRS) 164,300 157,100 7,200
Technology & Office Equipment (5-year) 73,200 70,400 2,800
Amortization - Intangible Assets 368,000 0.5% 368,000 -
Customer Relationships (10-year) 220,000 220,000 -
Trade Name and Trademarks (10-year) 88,000 88,000 -
Non-Compete Agreements (5-year) 60,000 60,000 -
Non-Cash Charges and Credits:
Provision for Doubtful Accounts 140,000 0.2% 130,400 9,600
Warranty Reserve Provision 413,100 0.6% 391,200 21,900
Self-Insurance Reserve Adjustments 35,000 0.1% 32,000 3,000
Stock-Based Compensation - 0.0% - -
Loss on Disposal of Equipment 25,000 0.0% 20,000 5,000
Deferred Tax Asset Changes -15,000 0.0% -12,000 -3,000
Changes in Construction-Specific Operating Assets:
Contract-Related Receivables:
Progress Billings Receivable -490,000 -0.7% -448,500 -41,500
Current (0-30 days) -294,000 -269,100
Aging 31-60 days -147,000 -134,550
Aging 61-90 days -39,200 -35,880
Over 90 days -9,800 -8,970
Retainage Receivable -145,000 -0.2% -132,650 -12,350
Expected collection within 12 months -101,500
Expected collection 12-24 months -43,500
Completed Contract Receivables -60,000 -0.1% -54,900 -5,100
Change Order Receivables -145,000 -0.2% -132,650 -12,350
Back-charge Receivables -14,500 0.0% -13,265 -1,235
Contract Assets (Unbilled Revenue/WIP) -480,000 -0.7% -439,200 -40,800
Costs in Excess of Billings -240,000
Estimated Earnings Unbilled -192,000
Materials Stored for Future Use -48,000
Inventory and Materials:
HVAC Equipment Inventory -60,000 -0.1% -54,900 -5,100
Plumbing Materials -45,000 -0.1% -41,175 -3,825
Sheet Metal & Ductwork -18,000 0.0% -16,470 -1,530
Controls & Automation Components -12,000 0.0% -10,980 -1,020
Other Inventory Categories -15,000 0.0% -13,725 -1,275
Prepaid Expenses and Other Current Assets:
Prepaid Insurance -10,000 0.0% -9,150 -850
Prepaid Licenses & Bonds -7,500 0.0% -6,863 -637
Other Prepaid Expenses -7,500 0.0% -6,863 -637
Supplier Rebates Receivable -55,000 -0.1% -50,325 -4,675
Employee Advances -22,000 0.0% -20,130 -1,870
Income Tax Refunds Receivable -16,500 0.0% -15,098 -1,402
Other Receivables -16,500 0.0% -15,098 -1,402
Changes in Construction-Specific Operating Liabilities:
Trade and Subcontractor Payables:
Material Supplier Payables 212,500 0.3% 194,438 18,062
HVAC Equipment Suppliers 127,500
Plumbing Suppliers 63,750
Other Material Suppliers 21,250
Subcontractor Payables 127,500 0.2% 116,663 10,837
Operating Expense Payables 63,750 0.1% 58,331 5,419
Retainage Payable 21,250 0.0% 19,444 1,806
Accrued Liabilities and Benefits:
Accrued Payroll 37,500 0.1% 34,313 3,187
Accrued Union Benefits 18,750 0.0% 17,156 1,594
Accrued Bonuses 22,500 0.0% 20,588 1,912
Accrued Vacation/PTO 16,125 0.0% 14,754 1,371
Accrued Interest 8,750 0.0% 8,006 744
Accrued Workers Compensation 7,875 0.0% 7,206 669
Other Accrued Expenses 13,500 0.0% 12,353 1,147
Tax and Regulatory Liabilities:
Sales Tax Payable - Multi-State 18,250 0.0% 16,699 1,551
Arizona (5.6% rate) 9,125
Utah (4.85% + local) 5,475
Colorado (2.9% + local) 3,650
Payroll Tax Liabilities 14,600 0.0% 13,359 1,241
Contract Liabilities (Project-Based):
Billings in Excess of Costs 440,000 0.6% 402,600 37,400
Phoenix Medical Center 69,300
Salt Lake Multifamily 48,400
Other Projects 322,300
Customer Deposits 132,000 0.2% 120,780 11,220
Advance Billings on Contracts 220,000 0.3% 201,300 18,700
Deferred Revenue - Service Contracts 88,000 0.1% 80,520 7,480
Long-Term Liability Changes:
Deferred Compensation 50,000 0.1% 45,750 4,250
Self-Insurance Reserves 35,000 0.1% 32,025 2,975
Warranty Liability (Claims Paid) -391,200 -0.6% -357,948 -33,252
Net Cash Provided by Operating Activities 10,450,000 15.2% 9,440,780 1,009,220
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures by Category and Location:
Fleet Vehicle Acquisitions -742,500 -1.1% -813,000 70,500
Service Trucks - Phoenix (8 units) -360,000
Service Trucks - Salt Lake (5 units) -225,000
Service Trucks - Denver (3 units) -135,000
Management Vehicles -22,500
Construction Equipment -288,000 -0.4% -316,000 28,000
Fabrication Equipment -115,200
Lifting Equipment -86,400
Welding & Cutting Equipment -57,600
Testing Equipment -28,800
Shop Tools and Equipment -115,500 -0.2% -126,500 11,000
Technology and Office Equipment -136,500 -0.2% -149,500 13,000
Computer Hardware -41,000
Software Licenses (Capitalized) -54,600
Office Furniture -27,300
Communication Equipment -13,600
Building Improvements -375,000 -0.5% - -375,000
Phoenix Facility Renovations -225,000
Salt Lake City Warehouse Expansion -90,000
Denver Office Upgrades -60,000
Total Capital Expenditures -1,658,000 -2.4% -1,405,000 -253,000
Proceeds from Equipment Disposals 175,000 0.3% 195,000 -20,000
Fleet Vehicle Sales (12 units) 140,000
Equipment Trade-ins 35,000
Business Investments and Other:
Acquisition of Customer Lists - 0.0% -150,000 150,000
Life Insurance Cash Value Increase -8,000 0.0% -8,000 -
Security Deposits and Bonds -12,000 0.0% -10,000 -2,000
Note Receivable - Equipment Sale -25,000 0.0% - -25,000
Net Cash Used in Investing Activities -1,528,000 -2.2% -1,378,000 -150,000
CASH FLOWS FROM FINANCING ACTIVITIES
Debt Financing Activities:
Line of Credit Activity - Wells Fargo
Borrowings for Working Capital 8,250,000 12.0% 7,650,000 600,000
Q1 Project Funding 2,062,500
Q2 Project Funding 2,062,500
Q3 Project Funding 2,062,500
Q4 Project Funding 2,062,500
Repayments on Line of Credit -7,750,000 -11.3% -7,200,000 -550,000
Net Line of Credit Activity 500,000 0.7% 450,000 50,000
Equipment Financing
New Equipment Loans - Wells Fargo 425,000 0.6% 475,000 -50,000
Equipment Loan Principal Payments -525,000 -0.8% -495,000 -30,000
Vehicle Loans -315,000
Equipment Loans -210,000
Real Estate Financing
Mortgage Principal Payments -300,000 -0.4% -285,000 -15,000
Phoenix Facility -150,000
Salt Lake City Facility -90,000
Denver Facility -60,000
S-Corporation Distributions:
Regular Quarterly Distributions -4,000,000 -5.8% -3,600,000 -400,000
Q1 2024 Distribution (March 31) -1,000,000
Johnson Brother #1 (50%) -500,000
Johnson Brother #2 (50%) -500,000
Q2 2024 Distribution (June 30) -1,000,000
Q3 2024 Distribution (Sept 30) -1,000,000
Q4 2024 Distribution (Dec 31) -1,000,000
Tax Distributions (Pass-Through) -635,000 -0.9% -550,000 -85,000
Federal Tax Coverage (April) -430,650
State Tax Distributions -204,350
Arizona Tax (April) -86,965
Utah Tax (April) -72,833
Colorado Tax (April) -44,552
Other Financing Activities
Finance Lease Obligations -165,000 -0.2% -155,000 -10,000
Debt Issuance Costs -12,000 0.0% -10,000 -2,000
Net Cash Used in Financing Activities -5,312,000 -7.7% -4,770,000 -542,000
Effect of Exchange Rates on Cash - 0.0% - -
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,610,000 5.2% 3,292,780 317,220
Cash and Cash Equivalents, Beginning of Year 2,450,000 1,720,740
CASH AND CASH EQUIVALENTS, END OF YEAR $6,060,000 $5,013,520

Free Cash Flow Bridge Analysis

Component Amount Cumulative
EBITDA (Adjusted) $8,540,000 $8,540,000
Cash Interest Paid ($451,250) $8,088,750
Cash Taxes (S-Corp Distributions) ($635,000) $7,453,750
Working Capital Investment ($1,265,000) $6,188,750
Non-Cash Charges Added Back $1,586,100 $7,774,850
Other Operating Cash Items $2,675,150 $10,450,000
Operating Cash Flow $10,450,000 $10,450,000
Maintenance CapEx ($1,133,000) $9,317,000
Growth CapEx ($525,000) $8,792,000
Asset Sale Proceeds $175,000 $8,967,000
Other Investing Activities ($45,000) $8,922,000
Free Cash Flow (Unlevered) $8,922,000 $8,922,000
Deduct: Building Improvements (One-time) ($375,000) $8,547,000
Normalized Free Cash Flow $8,547,000 $8,547,000