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Risk Factors Related to Our Business and Operations
−Removed: Our results of operations depend upon the award of new contracts and the timing of those awards.
+Added: Our results of operations depend upon the award of new contracts, the timing of those awards, and the progress of work for those contracts.
Our revenue is derived primarily from contracts awarded on a project-by-project basis.
Generally, it is difficult to predict whether and when we will be awarded a new contract due to lengthy and complex bidding and selection processes, changes in existing or forecasted market conditions, customers' access to financing, governmental regulations, permitting and environmental matters.
+Added: Many of these same factors can affect the commencement and progress of work under large contracts already awarded.
Because our revenue is derived from contract awards, our results of operations and cash flows can fluctuate materially from period to period.
−Removed: The uncertainty associated with the timing of contract awards may reduce our short-term profitability as we balance our current capacity with expectations of future contract awards.
+Added: The uncertainty associated with the timing of contract awards, and the commencement and progress of work for those awards, may reduce our short-term profitability as we balance our current capacity with expectations of future contract awards.
If an expected contract award is delayed or not received, we could incur costs to maintain an idle workforce that may have a material adverse effect on our results of operations.
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• the ability of energy and industrial companies to generate, access and deploy capital;
−Removed: • interest rates;
+Added: • interest rates and inflation;
• technological challenges and advances;
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Our business has been affected by inflation, supply chain disruptions and shortages of materials and labor.
−Removed: Following the onset of the pandemic and with the ongoing conflict between Ukraine and Russia in Europe, there has been a high degree of volatility in commodity and energy markets that affect our client's businesses.
−Removed: In addition, inflation in the United States has reached multi-decade highs.
−Removed: In some cases we have had to bid more competitively than before to win work, which has compressed margins somewhat given the higher inflation.
−Removed: It is uncertain how this market environment will impact our business, both positively or negatively.
+Added: We may experience increases in construction costs, including increases in the costs of materials and labor due to inflation or supply chain challenges.
+Added: To the extent we can, we mitigate these risks primarily by procuring materials upon contract execution to ensure that our purchase price approximates the costs included in the project estimate, and also by contract provisions that mitigate our exposure to fluctuations in material costs.
+Added: However, we may be unable to pass through some or all of these increases in costs to our customers which may materially affect our results of operations.
+Added: Additionally, our clients' interest in approving new projects, budgets for capital expenditures and need for our services have in the past been, and may in the future be, adversely affected by, among other things, poor economic conditions, including inflation, slow growth or recession, changes to governments' fiscal or monetary policy and higher interest rates.
+Added: These factors could materially and adversely affect the demand for our services.
Domestic and foreign trade tariffs could raise the price and reduce the availability of raw materials to us, which could negatively impact our operating results and financial condition.
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Under the terms of our contracts, at times we commit resources to customer projects prior to receiving payments from customers in amounts sufficient to cover expenditures on these projects as they are incurred.
−Removed: Many of our fixed-price or cost-
−Removed: plus contracts require us to satisfy specified progress milestones or performance standards in order to receive a payment.
+Added: Many of our fixed-price or cost-plus contracts require us to satisfy specified progress milestones or performance standards in order to receive a payment.
Under these types of arrangements, we may incur significant costs for labor, equipment and supplies prior to receipt of payment.
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Third-party systems on which we rely could also suffer system failure.
+Added: Additionally, as artificial intelligence ("AI") technologies become increasingly sophisticated, the security risks associated with their use and the potential for misuse also increase.
+Added: Hackers and malicious actors can harness the power of AI to develop more advanced cyberattacks, bypass security measures, and exploit vulnerabilities in systems.
+Added: Deepfake technology can be used to undermine organizations, spread false claims, misinform investors, and impact financial markets.
Any of these occurrences could disrupt our business, result in potential liability or reputational damage or otherwise have an adverse effect on our financial results.
−Removed: We have experienced cybersecurity threats to our information technology infrastructure and have experienced cyber-attacks, attempts to breach our systems and other similar incidents.
−Removed: Such prior events have not had a material impact on our financial condition, results of operations or liquidity.
−Removed: However, future threats could cause harm to our business and our reputation, as well as negatively impact our results of operations materially.
−Removed: Our insurance coverage may not be adequate to cover all the costs related to cyber-attacks or disruptions resulting from such events.
Any security breach resulting in the unauthorized use or disclosure of certain personal information could put individuals at risk of identity theft and financial or other harm and result in costs to us in investigation, remediation, legal defense and in liability to parties who are financially harmed.
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Furthermore, a material security breach could cause us to lose revenue, lose clients or cause damage to our reputation.
−Removed: To reduce organizational risk from cybersecurity threats, we carry cyber liability insurance and have undertaken several initiatives in recent years.
−Removed: We strengthened our identity and access management capabilities by requiring multi-factor authentication, increased the threat detection efficiencies within our security information and event management capacity, and completed projects designed to reduce our organization's external attack surface.
−Removed: In addition, in the area of security awareness and training, we have updated our foundational curriculum, established mandatory recurring training requirements, and commenced periodic phishing campaign assessments.
+Added: We have experienced cybersecurity threats to our information technology infrastructure and have experienced cyber-attacks, attempts to breach our systems and other similar incidents.
+Added: Such prior events have not had a material impact on our financial condition, results of operations or liquidity.
+Added: However, future threats could cause harm to our business and our reputation, as well as negatively impact our results of operations materially.
+Added: Our insurance coverage may not be adequate to cover all the costs related to cyber-attacks or disruptions resulting from such events.
We rely on internally and externally developed software applications and systems to support critical functions including project management, estimating, scheduling, human resources, accounting, and financial reporting.
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Software vendors may decide to discontinue further development, integration or long-term software maintenance support for our information systems, in which case we may need to abandon one or more of our current information systems and migrate some or all of our project management, human resources, estimating, scheduling, accounting and financial information to other systems, thus increasing our operational expense as well as disrupting the management of our business operations.
+Added: Additionally, we may use artificial intelligence in our business, and challenges with effectively managing associated processes, data, and models could result in reputational harm, competitive harm, and legal liability, and adversely affect our results of operations.
+Added: If the content, analyses, or recommendations that artificial intelligence applications assist in producing are, or are alleged to be, unstable, deficient, inaccurate, biased, or yield conclusions for which there is no actionable recourse for those affected by its decisions, our business, financial condition, and results of operations may be adversely affected.
Financial Risks
−Removed: Our borrowing capacity under our Credit Agreement is determined by the size of our borrowing base and if the size of our borrowing base does not provide adequate liquidity, then we may need to raise additional capital in the future for working capital, capital expenditures and/or acquisitions, and we may not be able to do so on favorable terms or at all, which would impair our ability to operate our business or achieve our strategic plan.
+Added: Our borrowing capacity under our Credit Agreement is determined by the size of our borrowing base and if the size of our borrowing base combined with our unrestricted cash does not provide adequate liquidity, then we may need to raise additional capital in the future for working capital letters of credit, capital expenditures and/or acquisitions, and we may not be able to do so on favorable terms or at all, which would impair our ability to operate our business or achieve our strategic plan.
Management believes it has sufficient cash on hand and will generate sufficient cash from operations to fund the business.
−Removed: However, should we require additional liquidity, there is risk that we will be unable access the amount of additional liquidity needed from our Credit Agreement if the level of assets included in the borrowing base is insufficient.
+Added: However, should we require additional liquidity, there is risk that we will be unable to access the amount of additional liquidity needed from our Credit Agreement if the level of assets included in the borrowing base is insufficient.
The borrowing base includes restricted cash plus a percentage of the value of certain accounts receivable, inventory and equipment, reduced for certain reserves.
−Removed: Accounts receivable eligible to be included in the borrowing base are generally limited to receivables associated with cost reimbursable work.
+Added: Accounts receivable eligible to be included in the borrowing base are generally limited to receivables associated with time and materials and other cost reimbursable contracts.
While receivables associated with fixed price work do not increase the borrowing base, such work often has upfront billings, which help support the liquidity needs of the business.
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Accounting Risks
−Removed: Our use of percentage-of-completion accounting for fixed-price contracts and our reporting of profits for cost-plus contracts prior to contract completion could result in a reduction or elimination of previously reported profits.
+Added: Our use of percentage-of-completion accounting for fixed-price contracts could result in a reduction or elimination of previously reported profits.
Revenue for fixed-price contracts is recognized using the percentage-of-completion method of accounting.
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As a result, we may adjust our estimates on one or more occasions as a result of changes in cost estimates, change orders to the original contract, or claims against the customer for increased costs incurred by us due to customer-induced delays and other factors.
+Added: See "Revenue Recognition" within Note 1 - Basis of Presentation and Significant Accounting Policies, for more discussion on our percentage-of-completion revenue recognition.
If estimates of costs to complete fixed-price contracts indicate a loss, a provision is made to accrue the total loss anticipated in the period the loss is determined.
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Economic, political and other risks associated with international operations could adversely affect our business.
−Removed: A small portion of our operations are conducted outside the United States, and accordingly, our business is subject to risks associated with doing business internationally, including changes in foreign currency exchange rates, instability in political or economic conditions, difficulty in repatriating cash proceeds, differing employee relations, differing regulatory environments,
−Removed: trade protection measures, and difficulty in administering and enforcing corporate policies which may be different than the normal business practices of local cultures.
−Removed: Unresolved Staff Comments
+Added: A small portion of our operations are conducted outside the United States, and accordingly, our business is subject to risks associated with doing business internationally, including changes in foreign currency exchange rates, instability in political or economic conditions, difficulty in repatriating cash proceeds, differing employee relations, differing regulatory environments, trade protection measures, and difficulty in administering and enforcing corporate policies which may be different than the normal business practices of local cultures.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.