16.  LEASE OBLIGATIONS

The Company leases office space for SQP at a rate of $1,500 per month. The lease, originally executed on March 25, 2021, has a two-year base term with five one-year renewal options available following expiration of the base term. As of March 31, 2026, the Company has committed to a one-year renewal period and is evaluating the exercise of additional renewal options.

The Company has two right-of-use operating leases acquired on April 29, 2022, as part of the Tri-State Paving, LLC acquisition. The first lease, for the Hurricane, West Virginia facility, had a net present value of $236,000 at inception and a carrying value of $0 at March 31, 2026. The lease bears interest at 4.5%, based on the Company’s incremental borrowing rate at inception. The Company executed an amendment to extend the lease for one additional year following the expiration of the original term. As of March 31, 2026, the Company has committed to one renewal period and is evaluating additional renewals.

The second lease, for the Chattanooga, Tennessee facility, had a net present value of $144,000 at inception and expired on August 31, 2024. The lease was renewed for a two - year term with a net present value of $140,000 and had a carrying value of $17,000 at March 31, 2026. The lease bears interest at 8.5%, based on the Company’s incremental borrowing rate at inception.

The Company has a right-of-use operating lease with Enterprise Fleet Management, acquired on August 11, 2022, as part of the Ryan Environmental acquisition. The master lease initially covered 31 vehicles with a net present value of $1.2 million. The Company subsequently added 58 additional vehicles under the arrangement. The lease had a carrying value of $1.8 million at March 31, 2026. Each vehicle under the master lease arrangement carries its own implicit rate.

The Company has a right-of-use operating lease acquired on March 28, 2023 for the Winchester, Kentucky facility. The lease had a net present value of $290,000 at inception and a carrying value of $0 at March 31, 2026. The lease bears interest at 7.5%, based on the Company’s incremental borrowing rate at inception. The lease was renewed for a three-year term in April 2026.

The Company has a right-of-use operating lease acquired on December 1, 2025 for the Columbus, Ohio facility. The lease had a net present value of $255,000 at inception and a carrying value of $236,000 at March 31, 2026. The lease bears interest at 6.75%, based on the Company’s incremental borrowing rate at inception.

The Company has a right-of-use operating lease acquired on January 1, 2026 for the Oklahoma City, Oklahoma facility. The lease had a net present value of $208,000 at inception and a carrying value of $186,000 at March 31, 2026. The lease bears interest at 6.75%, based on the Company’s incremental borrowing rate at inception.

The Company also has a right-of-use operating lease acquired on January 1, 2026 for the Louisville, Kentucky facility. The lease had a net present value of $128,000 at inception and a carrying value of $128,000 at March 31, 2026. The lease bears interest at 6.75%, based on the Company’s incremental borrowing rate at inception. Lease payments do not commence until April 1, 2026.

Schedules related to the Company’s operating leases for the three and six months ended March 31, 2026 and 2025 and at March 31, 2026 can be found below:

Operating Lease-Weighted Average Remaining Term

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The Company rents equipment for use on construction projects with rental agreements week to week or month to month. Rental expense can vary by fiscal year due to equipment requirements on construction projects and the availability of Company owned equipment. Rental expenses, which is included in cost of goods sold on the consolidated statements of income, were $4.8 million and $3.9 million for the three months ended March 31, 2026, and 2025, respectively, and $11.8 million and $9.0 million for the six months ended March 31, 2026 and 2025, respectively.