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Item 1A. Risk Factors

2024-11-20 compared with 2023-12-06 · 169 added, 134 removed, 133 unchanged (69% of the section changed)

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Our business is subject to the cyclical nature of the end markets that we serve.

This has had, and may continue to have, an adverse effect on our future operating results.

This cyclicality has had, and may continue to have, an adverse effect on our operating results.

The end markets that we serve have historically been cyclical and will continue to be vulnerable to general downturns, which in turn could materially and adversely affect the demand for our products and services.

Our customer projects, budgets for capital expenditures and the need for our services have in the past, and may in the future, be adversely affected by, among other things, the price of oil and gas, poor economic conditions, commodity prices, political uncertainties, cost of capital, and currency fluctuations.

These variables may impact the number and/or the amount of new awards, delays in the timing of awards or potential cancellation of projects.

These variables may impact the number or the amount of new awards, delays in the timing of awards or potential cancellation of projects.

Changes in product mix or services can have a significant impact on our gross margins on a quarterly and annual basis.

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Our failure to compete effectively and secure projects could adversely affect future revenues and could have an adverse impact on our business and results of operations.

Our backlog is subject to unexpected adjustments, cancellations and scope reductions and, therefore, may not be a reliable indicator of our future earnings.

We have a backlog of uncompleted contracts.

Backlog represents management’s best estimate of the remaining performance obligation from work to be performed on our firm orders under uncompleted contracts and customer purchase orders, including approved change orders as well as new contractual agreements on which work has not begun.

From time to time, projects are cancelled, delayed or modified due to customer, industry or macroeconomic conditions.

While we may be reimbursed for certain costs, we may not have a contractual right to the total revenue reflected in our backlog.

The ultimate realization of the future revenue in our backlog is based upon our ability to complete the contracted projects, and we cannot control all of the various factors that might impact the timely delivery of our projects to our customers.

We may be unable to recover certain costs on our anticipated margin, and cancelled or suspended projects may also result in additional unrecoverable costs due to the underutilization of our assets and personnel.

Accordingly, our inability to realize the full amount of our contract backlog may have an adverse impact on our business and results of operations.

Failure to place competitive bids and adequately project costs may result in losses on our fixed-price contracts with customers.

Our products and services are typically awarded in competitive bid situations.

When placing bids, we may fail to adequately project costs for our customers’ projects, which may lead to us winning a bid that does not adequately compensate us for our costs.

Such failure could adversely impact our results of operations.

Factors that could impact our ability to adequately project costs for our bids include, but are not limited to:

the impacts of inflation;

labor shortage;

delays incurred by the failure of third-party suppliers to deliver in the quality or quantity required;

unanticipated technical problems, including design or engineering issues.

Additionally, we bear the risk of cost overruns and delays in most of our contracts and, as a result, if we fail to adequately manage such cost overruns or delays, our results of operations and our business may be adversely impacted.

Supplier concentration and limited supplier capacity may adversely impact our business and results of operations.

We rely on a limited number of suppliers for certain of our components and raw materials and, in some instances, a single supplier.

Switching suppliers can be costly and disruptive to business operations.

If one or more of our suppliers or subcontractors experiences difficulties that result in a reduction, delay or interruption in supply to us, or they fail to meet our manufacturing requirements, our business could be adversely impacted, and we may incur liquidated damages until we are able to secure alternative sources.

Our suppliers may experience and some of our suppliers have experienced financial difficulties, delivery delays and other performance problems, which may cause us to incur additional costs or be unable to meet commitments to our customers.

The time and effort associated with the selection and qualification of a new supplier and changes in our design and testing to accommodate similar components from other suppliers could be significant.

In any such event, we may not be able to contract for and receive suitable alternative supply or manufacturing abilities in a timely manner for our customers, if at all, which may impair our ability to meet scheduled deliveries of our products to customers and adversely impact our business and results of operations.

Our business requires skilled and unskilled labor, and we may be unable to attract and retain qualified employees.

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Labor shortages or increased labor costs could impair our ability to maintain our business, meet customer commitments or grow our revenues, and could adversely impact our business and results of operations.

Revenues recognized over time from our fixed-price contracts could result in volatility in our results of operations.

As discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” and in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report, the majority of our revenues are recognized over time.

Since revenue is recognized as work is performed and as costs are incurred, the determination of the revenue recognized requires the use of estimates of costs to be incurred for the performance of the contract.

Estimates of revenue and of costs to complete are adjusted based on ongoing reviews of estimated contract performance, and previously recorded estimates of revenues and costs are adjusted as the project progresses and circumstances change.

The timing of the costs incurred may lead to fluctuations in revenue recognized on a quarterly and annual basis, which could have an adverse impact on our business and our results of operations.

While the cost estimation process is based upon the professional knowledge and experience of our management teams, engineers, project managers and financial professionals, we may fail to adequately estimate our costs or revenue (or, we may fail to adequately adjust previously recorded estimates of revenue and costs).

Such failure could result in additional changes to our revenue and cost estimates which could have an adverse impact on our results of operations.

We are exposed to risks relating to the use of subcontractors.

We hire subcontractors to perform work on some projects and may depend on third-party labor suppliers to provide the personnel necessary to engineer, manufacture and ship our products.

If our subcontractors do not perform as expected for any reason, we may experience delays in completing our projects or incur additional costs.

In addition, we may have disputes with these independent subcontractors arising from, among other things, the price, quality or timeliness of the work performed.

Some of the third parties we engage in support of our operations operate internationally, and thus we may be impacted by the economic, political and labor conditions in those regions as well as uncertainty caused by international relations issues between the United States and those countries.

Any of these factors could adversely impact our business and results of operations.

Technological innovations may make existing products and production methods obsolete.

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The industries in which we operate are characterized by intense competition and are highly sensitive to technological innovation and customer requirements.

It is possible for competitors (both domestic and international) to develop products or production methods that will make current products or methods obsolete or at a minimum hasten their obsolescence;

therefore, we cannot be certain that our competitors will not develop the expertise, experience and resources to provide products and services that are superior in both price and quality.

Our future success will depend, in part, on our ability to anticipate and offer products that meet changing industry and customer specifications as well as fund our research and development costs.

Consumer demand for further automation is changing the markets we operate in.

Failure to successfully develop new products, or to enhance existing products, could result in the loss of existing customers to competitors, the inability to attract new business or an overall reduction in our competitive position, any of which could adversely affect our business and results of operations.

Our competitors may develop products or production methods that are superior in price or quality, or incorporate artificial intelligence (AI) into their products that will make current products or services offered by us obsolete.

Our future success will depend, in part, on our ability to anticipate and offer products that meet changing industry and customer specifications, including by funding our research and development costs.

For example, consumer demand for further automation is changing the markets in which we operate.

Failure to successfully develop new products, or to enhance existing products, could result in the loss of existing customers to competitors, the inability to attract new business or an overall reduction of our competitive position, any of which could adversely affect our business and results of operations.

We may not be successful in our AI initiatives, which could adversely affect our business, reputation, and results of operations.

The algorithms and models utilized in generative AI systems may have limitations, including biases, errors, or inability to handle certain data types or scenarios.

Furthermore, there is a risk of system failures, disruptions, or vulnerabilities that could compromise the integrity, security, or privacy of the generated content.

These limitations or failures could result in reputational damage, legal liabilities, or loss of customer/user confidence.

Cybersecurity threats and the techniques used in cyberattacks change, develop and evolve rapidly, including from emerging technologies, such as advanced forms of AI and quantum computing.

Because AI technology is highly complex and rapidly developing, it is not possible to predict all of the legal, operational or technological risks that may arise relating to our use of AI.

Unforeseen difficulties with expansions, relocations, or consolidations of existing facilities could adversely affect our operations.

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We provide warranties to our customers for our products and services, and the cost to satisfy customer warranty claims, which may include, among other things, costs for the repair or replacement of products could adversely impact our business and results of operations.

Many of our contracts contain performance obligations that may subject us to penalties or additional liabilities.

Many of our customer contracts have schedule and performance obligation clauses that, if we fail to meet, could subject us to penalty provisions, liquidated damages or claims against us, or our outstanding letters of credit or performance bonds.

In addition, some customer contracts stipulate protection against our gross negligence or willful misconduct.

Each individual contract seeks to define the conditions under which the customer may make a claim against us.

Due to the growth in our backlog, our manufacturing and fabrication capacity as well as ability to recruit and retain qualified labor is challenged resulting in an increased risk of meeting delivery dates and other contract performance obligations.

It is possible that adjustments arising from such claims, or our failure to manage our contract risk, may not be covered by insurance and could have an adverse impact on our results of operations.

Growth and product diversification through strategic acquisitions involve a number of risks.

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however, we may be unable to successfully implement this strategy.

Acquisitions involve certain risks, including difficulties in the integration of operations and systems;

Acquisitions involve certain risks, including distraction of management, difficulties in the integration of operations and systems;

failure to realize cost savings;

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Any failure to successfully complete or successfully integrate acquisitions could have a material adverse effect on our business and results of operations.

We are exposed to risks relating to the use of subcontractors.

We hire subcontractors to perform work on some projects and may depend on third-party labor suppliers to provide the personnel necessary to engineer, manufacture and ship our products.

If our subcontractors do not perform as expected for any reason, we may experience delays in completing our projects or incur additional costs.

In addition, we may have disputes with these independent subcontractors arising from, among other things, the price, quality or timeliness of the work performed.

Some of the third parties we engage in support of our operations operate internationally and thus we may be impacted by the economic, political and labor conditions in those regions as well as uncertainty caused by international relations issues between the U.S.

and those countries.

Any of these factors could adversely impact our business and results of operations.

Misconduct by our employees or subcontractors, or a failure to comply with laws or regulations, could harm our reputation, damage our relationships with customers and subject us to criminal and civil enforcement actions.

Misconduct by our employees or subcontractors, or a failure to comply with applicable laws or regulations, could harm our reputation, damage our relationships with customers and subject us to criminal and civil enforcement actions.

Misconduct, fraud, non-compliance with applicable laws and regulations or other improper activities by one or more of our employees or subcontractors could have a significant negative impact on our business and reputation.

While we take precautions to prevent and detect these activities, such precautions may not be effective and are subject to inherent limitations, including human error and fraud.

Acts of misconduct, or our failure to comply with applicable laws or regulations, could subject us to fines and penalties, harm our reputation, and/or damage our relationships with customers and could adversely impact our business and results of operations.

Acts of misconduct, or our failure to comply with applicable laws or regulations, could subject us to fines and penalties, harm our reputation, or damage our relationships with customers and could adversely impact our business and results of operations.

Unsatisfactory safety performance may subject us to penalties, negatively impact customer relationships, result in higher operating costs, and negatively impact employee morale and turnover.

We place great emphasis on workplace safety in our entire organization through various safety initiatives and training.

We have both indoor and outdoor manufacturing and fabrication facilities that are susceptible to numerous industrial safety risks that can lead to personal injury, loss of life, damage to property and equipment, as well as potential environmental damage.

While we take every precaution to avoid incidents, we have experienced accidents in the past and may again in the future, which can negatively affect our safety record.

While we take precautions to avoid incidents, we have experienced accidents in the past and may again in the future, which can negatively affect our safety record.

A poor safety record can harm our reputation with existing and potential customers, jeopardize our relationship with employees, increase our insurance and operating costs and could adversely impact our business and results of operations.

Catastrophic events, including natural disasters, health epidemics, acts of war and terrorism, among others, could disrupt our business.

The occurrence of catastrophic events, ranging from natural disasters and extreme weather conditions to health epidemics, to acts of war and terrorism, among others, could increase operating costs and/or disrupt or delay our ability to operate our business and complete projects for our customers and could potentially expose us to third-party liability claims or delay damages under our contracts.

A significant portion of our operations are located near the Texas Gulf Coast;

as a result, our operations have been and are subject to the potential impacts of weather-related events, including but not limited to hurricanes and flooding.

Future weather events could cause significant damage to our property and equipment or customer projects and adversely impact our operations.

We may declare the existence of a force majeure event under our contracts in certain situations;

however, a customer may dispute our force majeure claim, which may result in additional liabilities.

Losses or delays arising from such events may or may not be fully covered by our various insurance policies or may be subject to deductibles or exceed coverage limits.

In addition, such events could result in temporary or long-term delays of existing projects as well as cancellations of orders for raw materials from our suppliers that could impact our project execution.

These situations or other disruptions are outside of our control and may adversely impact our business and results of operations.

Risk Factors Related to our Financial Condition and Markets

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Additionally, the loss of significant volume from one particular customer at one of our facilities could adversely impact the operating results of that facility.

If one or more of our suppliers or subcontractors experiences difficulties that result in a reduction, delay or interruption in supply to us, or they fail to meet our manufacturing requirements, our business could be adversely impacted, and we may incur delay damages until we are able to secure alternative sources.

Furthermore, our ability to maintain or expand our business would be limited in the future if we are unable to maintain or increase our bonding capacity or our bank credit facility on favorable terms or at all.

Our ability to maintain or expand our business would be limited in the future if we are unable to maintain or increase our bonding capacity or our bank credit facility on favorable terms or at all.

Similarly, disruptions in the capital markets or increased interest rates may also adversely impact our customer's ability to finance projects, which could result in contract cancellations or delays.

These disruptions could lead to reduced demand for our products and services and cancellation of existing projects, and could have an adverse impact on our business, financial condition and results of operations.

Our backlog is subject to unexpected adjustments, cancellations and scope reductions and, therefore, may not be a reliable indicator of our future earnings.

We have a backlog of uncompleted contracts.

Backlog represents management's best estimate of the remaining performance obligation from work to be performed on our firm orders under uncompleted contracts and customer purchase orders, including approved change orders as well as new contractual agreements on which work has not begun.

From time to time, projects are cancelled, delayed or modified due to customer, industry or macroeconomic conditions.

While we may be reimbursed for certain costs, we may not have a contractual right to the total revenue reflected in our backlog.

The ultimate realization of the future revenue in our backlog is based upon our ability to complete the projects, and we cannot control all of the various factors that might impact the timely delivery of our projects to our customers.

We may be unable to recover certain costs and an anticipated margin, and cancelled or suspended projects may also result in additional unrecoverable costs due to the underutilization of our assets and personnel.

Accordingly, the amounts recorded in backlog may not be a reliable indicator of our future operating results and may not be indicative of continuing revenue performance over future fiscal years or quarters.

Revenues recognized over time from our fixed-price contracts could result in volatility in our results of operations.

Revenues are recognized as work is performed and costs are incurred.

The revenue earned to date is calculated by multiplying the total contract price by the percentage of performance to date, which is based on total costs incurred to date compared to the total estimated costs at completion.

The determination of the revenue recognized requires the use of estimates of costs to be incurred for the performance of the contract.

The timing of the costs incurred may lead to fluctuations in revenue recognized on a quarterly and annual basis.

The cost estimation process is based upon the professional knowledge and experience of our management teams, engineers, project managers and financial professionals.

We bear the risk of cost overruns and delays in most of our contracts, which may result in reduced profits.

Contract losses are recognized in full when determined, and estimates of revenue and cost to complete are adjusted based on ongoing reviews of estimated contract performance.

Previously recorded estimates of revenues and costs are adjusted as the project progresses and circumstances change.

In certain circumstances, it is possible that such adjustments to estimated costs and revenues could have an adverse impact on our results of operations.

Many of our contracts contain performance obligations that may subject us to penalties or additional liabilities.

In addition, some customer contracts stipulate protection against our gross negligence or willful misconduct.

Each individual contract seeks to define the conditions under which the customer may make a claim against us.

It is possible that adjustments arising from such claims, or our failure to manage our contract risk, may not be covered by insurance and could have an adverse impact on our results of operations.

Fluctuations in the price and supply of materials used to manufacture our products may reduce our profits and could adversely impact our ability to meet commitments to our customers.

Our material costs represented 49% of our consolidated revenues for Fiscal 2023.

Unanticipated shortages in raw material and components, rising prices due to overall inflationary pressure, the imposition of tariffs, changes in supplier availability, delays in production or transportation, or supplier consolidation could increase production costs or lead times and adversely affect profitability as fixed-price contracts may prohibit our ability to charge the customer for the increase in raw material prices.

We purchase a wide variety of materials and component parts from various suppliers around the world to manufacture our products, including steel, aluminum, copper and various components.

Our supply base for certain key components and raw materials is limited and may come from a single supplier.

If we are unable to obtain key components and raw materials from these suppliers, the key components and raw materials may not be readily available from other suppliers or available with acceptable terms and price levels.

Our success depends on our ability to meet customer commitments and could be negatively impacted if a supplier experiences a disruption or discontinuance in their operations, or we experience a delay in transportation of materials and components from our suppliers.

Additionally, we rely on certain competitors for key materials used in our products.

This could result in damages and negatively impact our ability to manufacture our products if the relationships change or become unfavorable and could have an adverse impact on our results of operations.

We typically mitigate our inventory risks by increasing the levels of inventory for certain key components and raw materials and entering into commodity hedges when appropriate.

Such increased inventory levels may not be adequate to meet future demand and may increase the potential for excess and obsolete inventories, which could have an adverse impact on our business and results of operations.

Our material costs equaled approximately 47% of our consolidated revenues for Fiscal 2024.

Unanticipated shortages in raw material and components, rising prices due to overall inflationary pressure, the imposition of tariffs, or delays in production or transportation could increase production costs or lead times and adversely affect profitability as fixed-price contracts may prohibit our ability to charge the customer for the increase in raw material prices.

While we typically mitigate our inventory risks by increasing the levels of inventory for certain key components and raw materials and entering into commodity hedges when appropriate, such increased inventory levels may not be adequate to meet future demand and may increase the potential for excess and obsolete inventories, which could have an adverse impact on our business and results of operations.

Obtaining surety bonds, letters of credit, bank guarantees, or other financial assurances may be necessary for us to successfully bid on and obtain certain contracts.

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Failure to remain in compliance with covenants or obtain waivers or amendments under our credit agreement could adversely impact our business.

Our credit agreement contains various financial covenants and restrictions, which are described in Note G of the Notes to Consolidated Financial Statements.

Our credit agreement contains various financial covenants and restrictions, which includes maintaining a consolidated net leverage ratio of less than 3.0 to 1.0 and a consolidated interest coverage ratio of greater than 3.0 to 1.0.

For more information on our credit agreement and the restrictions thereunder, see Note G of the Notes to Consolidated Financial Statements.

Our ability to remain in compliance with such financial covenants and restrictions may be affected by factors beyond our control, including general or industry-specific economic downturns.

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Any of these factors could adversely impact our business and results of operations.

A significant portion of our revenues may be concentrated among a small number of customers.

A significant portion of our revenues may be concentrated among a small number of customers and may be subject to the risks of particular industries.

Due to the nature and timing of large projects, a significant percentage of our revenues in a given period may result from one specific contract, customer or industry.

We believe the reduction in business volume from a particular industry or the loss of a major customer could have an adverse effect on our business.

From time to time, one of our manufacturing facilities may have significant volume from one particular customer or industry that would be material to that facility.

If during that time the customer were to experience financial distress, a decline in business or circumstances that would otherwise necessitate a cancellation of a project with us, our revenue and results of operations could be adversely impacted.

We carry insurance against many potential liabilities, but our management of risk may leave us exposed to unidentified or unanticipated risks.

Although we maintain insurance policies with respect to our estimated exposures, including certain casualty, property, professional, employee liability, business interruption, cybersecurity and self-insured medical programs, these policies contain deductibles, self-insured retentions and limits of coverage.

In addition, we may not be able to continue to obtain insurance at commercially reasonable rates, or at the policy limits we may require or may be faced with liabilities not covered by insurance, such as, but not limited to, cybersecurity, environmental contamination, acts of war or terrorist attacks.

We estimate our liabilities for known claims and unpaid claims and expenses based on information available as well as projections for claims incurred but not reported.

However, insurance liabilities, some of which are self-insured, are difficult to estimate due to various factors.

If any of our insurance policies, coverage limits or programs are not effective in mitigating our risks, we may incur losses that are not covered by our insurance policies, that are subject to deductibles or that exceed our estimated accruals or our insurance policy limits, which could adversely impact our business and results of operations.

For instance, we have a significant concentration of customers in the oil and gas, petrochemical and electric utility industries.

Additionally, from time to time, one of our manufacturing facilities may have significant volume from one particular customer or industry that would be material to that facility.

If such customers were to experience financial distress or a decline in business, or if the industries our customers concentrated in were to experience a significant change in the demand for such industry’s products or services, our revenue and results of operations could be adversely impacted.

Our international operations expose us to risks that are different from, or possibly greater than, the risks we are exposed to domestically and may adversely affect our operations.

Revenues associated with projects located outside of the U.S., including revenues generated from our operations in the U.K.

Revenues associated with projects located outside of the United States, including revenues generated from our operations in the U.K.

and Canada, accounted for approximately 16% of our consolidated revenues in Fiscal 2024.

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the application of foreign labor regulations;

currency fluctuations, devaluations and conversion restrictions and/or governmental activities that limit or disrupt markets, restrict payments or limit the movement of funds and trade restrictions or economic embargoes imposed by the U.S.

or other countries.

Additionally, compliance with foreign and domestic import and export regulations and anti-corruption laws, such as the U.S.

Foreign Corrupt Practices Act, General Data Protection Regulation, or similar laws of other jurisdictions outside the U.S., could adversely impact our ability to compete for contracts in such jurisdictions.

currency fluctuations, devaluations and conversion restrictions or governmental activities that limit or disrupt markets, restrict payments or limit the movement of funds and trade restrictions or economic embargoes imposed by the United States or other countries.

Additionally, compliance with foreign and domestic import and export regulations, including laws and regulations of the U.S.

Treasury Department’s Office of Foreign Assets Control, and anti-corruption laws, such as the U.S.

Foreign Corrupt Practices Act or the U.K.

Bribery Act 2010, and similar laws of other jurisdictions outside the United States, could adversely impact our ability to compete for contracts in the applicable governing jurisdiction.

Moreover, the violation of such laws or regulations, by us or our representatives, could result in severe penalties including monetary fines, criminal proceedings and suspension of export privileges.

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dollar, and such fluctuations could adversely impact our financial position and results of operations.

Failures or weaknesses in our internal controls over financial reporting could adversely affect our ability to report on our financial condition and results of operations accurately and/or on a timely basis.

We are required to comply with Section 404 of the Sarbanes-Oxley Act of 2002, which requires, among other things, an assessment by our management of our internal control over financial reporting.

Preparing our financial statements involves a number of complex processes, many of which are performed manually and dependent upon individual data input or review.

We are continually working to maintain and strengthen our internal controls over operational and financial reporting, however, any system of controls has limitations, including the possibility of human error, availability of qualified personnel, circumvention or overriding of controls and/or fraud.

Our failure to maintain effective internal controls over financial reporting could adversely affect our ability to report our financial results on a timely and accurate basis, which could result in a loss of investor confidence in our financial reports or a decline in our stock price, or have an adverse impact on our business and results of operations.

Risk Factors Related to our Common Stock

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A reduction in or elimination of our dividend payments could have a material negative effect on our stock price.

We may issue preferred stock on terms that could adversely affect the voting power or value of our common stock.

Our certificate of incorporation authorizes us to issue, without the approval of our shareholders, one or more classes or series of preferred stock having such preferences, powers and relative, participating, optional and other rights, including preferences over our common stock respecting dividends and distributions, as our board of directors may determine.

The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock.

For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions.

Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock.

Risk Factors Related to Legal and Regulatory Matters

Our operations could be adversely impacted by the effects of government regulations.

We are subject to various government regulations in the U.S.

as well as various international locations where we operate.

We are subject to various government regulations in the United States as well as various international locations where we operate.

These regulations cover several areas including Environmental, Social, and Governance (ESG) compliance, import and export controls, economic sanctions, data and privacy protection, transfer pricing rules, anti-bribery, anti-trafficking and anti-trust provisions.

These laws and regulations are administered by various state, federal and international agencies.

Changes in policy, laws or regulations, including those affecting oil and gas exploration and development activities or climate change matters and the resulting decisions by customers and other industry participants, could reduce demand for our products and services, which would have a negative impact on our operations.

Changes in laws or regulations, or policy goals, including those affecting oil and gas exploration and development activities or climate change matters and the resulting decisions by customers of ours and other industry participants, could reduce demand for our products and services or for those of our customers, which would have a negative impact on our operations.

For example, the Inflation Reduction Act contains tax inducements and other provisions that incentivize investment, development and deployment of alternative energy sources and technologies, and at the United Nations Climate Change Conference in the United Arab Emirates in 2023, more than 190 governments reached a non-binding agreement to transition away from fossil fuels and encourage the growth and expansion of renewable energy.

In addition, regulations may limit or prohibit the use of a class of chemicals known as per- and polyfluoroalkyl substances (PFAS), which are found in parts, components, and other materials used in products we manufacture or utilize.

Such chemicals are critical to the manufacturing and functioning of many products, and there are limited technically and commercially feasible alternatives to them.

These restrictions could adversely impact our business and results of operations by increasing our expenses or requiring us to alter manufacturing and assembly processes.

Increased regulations and reporting requirements around the world may adversely affect the operators in the markets we serve.

Further, we cannot predict future changes in any country in which we operate or do business and how those changes may affect our ability to perform projects in those regions.

We cannot predict future changes in any country in which we operate or do business and how those changes may affect our ability to perform projects in those regions.

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires disclosure of use of "conflict" minerals mined from the Democratic Republic of Congo and adjoining countries and our efforts to prevent the use of such minerals.

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Also, we may face challenges with our customers and suppliers if we are unable to sufficiently verify that the metals used in our products are "conflict-free."

Provisions of our charter documents or Delaware law could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult to change management.

Because we are governed by Delaware law, we are subject to the provisions of Section 203 of the Delaware General Corporation Law.

These provisions prohibit a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally, a person who, together with its affiliates, owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

In addition, provisions of our Certificate of Incorporation and bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders might otherwise consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares.

These provisions may frustrate or prevent any attempt by our stockholders to replace or remove our current management by making it more difficult to replace or remove our Board of Directors.

Actual and potential claims, lawsuits and proceedings could ultimately reduce our profitability and liquidity and weaken our financial condition.

We are currently involved or may be involved in legal, regulatory and other proceedings.

These proceedings may include, without limitation, product liability matters, intellectual property matters, contract disputes or claims, pending or threatened litigation, governmental investigations, as well as employment, tax, environmental, or other matters.

We could be named as a defendant in legal proceedings that claim damages in connection with the operation of our business.

Most of the actions against us arise out of the normal course of our performing services or manufacturing equipment.

These proceedings could lead to law enforcement actions, adverse changes to our business practices, fines and penalties, business remedies, or the assertion of private litigation claims or damages that could be material, and which could adversely impact our business and results of operations.

Even if the proceedings we face or may face in the future are decided in our favor, or are unfounded, we may incur material expenses and such matters may require significant management attention, and may harm our reputation with customers, employees or investors.

When appropriate, we establish estimated provisions against certain legal exposures, and we adjust such provisions from time to time according to ongoing developments related to each exposure, as well as any potential recovery from our insurance, if applicable.

If, in the future, our assumptions and estimates related to such exposures prove to be inadequate or wrong, or our insurance coverage is insufficient, our business and results of operations could be adversely affected.

In addition, claims, lawsuits and proceedings may harm our reputation or divert management resources away from operating our business.

Losses arising from such events may or may not be fully covered by our various insurance policies or may be subject to deductibles or exceed coverage limits.

Changes in tax laws and regulations may change our effective tax rate and could have a material effect on our financial results.

We are subject to income taxes in the United States and numerous foreign jurisdictions.

A change in tax laws, deductions or credits, treaties or regulations, or their interpretation, in the countries in which we operate, could result in a higher tax rate on our pre-tax income, which could have a material impact on our net income.

For example, several jurisdictions have implemented or are expected to implement in the future, the Organization for Economic Co-operation and Development Pillar 2, which is aimed at preventing base erosion and profit shifting, ensuring income is subject to a minimum level of taxation and preventing treaty misuse.

The application of these provisions is not always certain, and jurisdictions are still developing their rules and interpretations with regard to the same.

We are regularly under audit by tax authorities, and our tax estimates and tax positions could be materially affected by many factors including the final outcome of tax audits and related litigation, the introduction of new tax accounting standards, legislation, regulations and related interpretations, our global mix of earnings, the extent to which deferred tax assets are realized and changes in uncertain tax positions.

A significant increase in our statutory tax rates or loss of our ability to claim Research and Development Tax Credits could have a material impact on our net income or loss and cash flow.

Failure to develop, obtain, enforce, and protect intellectual property rights or third-party claims that we are infringing on their intellectual property could harm our business.

We hold various patents, trademarks, servicemarks, copyrights and licenses.

Our success depends in part on our ability to develop technologies and inventions and other intellectual property, and obtain intellectual property rights and enforce such intellectual property rights worldwide.

We cannot be certain we will be able to obtain patents or other intellectual property rights in our new technologies and inventions, or if we do, the scope of such rights may not be sufficiently broad to afford us any significant commercial advantage over our competitors.

The technologies and inventions developed by us in the future may not be considered valuable by customers or provide us with a competitive advantage, or competitors may develop similar or identical technologies and inventions independently of us and before we do.

Effective protection of intellectual property rights is expensive and difficult to maintain, both in terms of application and maintenance costs, as well as the costs of defending and enforcing those rights.

Competitors and other third parties may also challenge the ownership, validity, or enforceability of our patents or other intellectual property rights.

Moreover, the laws of certain foreign jurisdictions do not recognize intellectual property rights or protect them to the same extent as do the laws of the United States.

To the extent we do assert our intellectual property rights against third parties, we may not be successful and adequate remedies may not be available in the event of infringement or unauthorized use of our intellectual property rights, or disclosure of our trade secrets.

Third parties may in the future assert that we have infringed, misappropriated, or otherwise violated their intellectual property rights.

We cannot assure that our current or future technologies are not infringing or violating intellectual property rights of third parties.

In the event we face claims of infringement or misappropriation, we may face expensive litigation or indemnification obligations, be required to enter into licenses, and may be prevented from selling existing products and pursuing product development or commercialization.

Even if such claims are without merit, we may be required to expend significant time and resources on the defense of such claims.

If we are unable to sufficiently protect our patent and other proprietary rights or if we infringe on or misappropriate proprietary rights of others, our business, financial condition, results of operations, and cash flows could be adversely impacted.

Provisions of our charter documents or Delaware law could delay or prevent a change in control of our company, even if that change would be beneficial to our shareholders.

The existence of some provisions in our corporate documents and certain aspects of Delaware law could delay or prevent a change of control of our company, even if that change would be beneficial to our shareholders.

Provisions of our certificate of incorporation and our bylaws include provisions related to the classification, nomination and removal of directors and the ability of our shareholders to bring matters for action at our annual meetings, among other provisions.

Provisions of Delaware law include certain restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock.

Such provisions may discourage, delay or prevent a merger, acquisition or other change in control that shareholders might otherwise consider favorable, including transactions in which shareholders might otherwise receive a premium for their shares, and may frustrate or prevent any attempt by our shareholders to replace or remove our current management by making it more difficult to replace or remove our Board of Directors.

Significant developments arising from tariffs and other economic proposals could adversely impact our business.

Additional restrictions or economic disincentives on U.S.

or international trade such as significant increases in tariffs on goods could adversely impact our business.

Changes in U.S.

or international social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently develop and sell our products, and any negative sentiment towards the U.S.

as a result of such changes, could adversely impact our business and results of operations.

Additional restrictions or economic disincentives on United States or international trade such as significant increases in tariffs on goods could adversely impact our business.

Changes in United States or international social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently develop and sell our products, and any negative sentiment towards the United States as a result of such changes, could adversely impact our business and results of operations.

We are required to comply with Section 404 of the Sarbanes-Oxley Act of 2002, which requires, among other things, an assessment by our management of our internal control over financial reporting.

Preparing our financial statements involves a number of complex processes, many of which are performed manually and dependent upon individual data input or review.

We seek to maintain and strengthen our internal controls over operational and financial reporting.

However, any system of controls has limitations, including the possibility of human error, availability of qualified personnel, circumvention or overriding of controls or fraud.

General Risk Factors

We carry insurance against many potential liabilities, but our management of risk may leave us exposed to unidentified or unanticipated risks.

We estimate our liabilities for known claims and unpaid claims and expenses based on information available as well as projections for claims incurred but not reported.

However, insurance liabilities, some of which are self-insured, are difficult to estimate due to various factors.

Catastrophic events, including natural disasters, health epidemics, acts of war and terrorism, cl imate change, among others, could disrupt our business.

The occurrence of catastrophic events, ranging from natural d isasters and extreme weather conditions to health epidemics, to acts of war and terrorism, among others, could increase operating costs or disrupt or delay our ability to operate our business and complete projects for our customers and could potentially expose us to third-party liability claims or liquidated damages under our contracts.

A significant portion of our operations are located near the Texas Gulf Coast;

as a result, our operations have been and are subject to the potential impacts of weather-related events, including but not limited to hurricanes and flooding.

Future weather events could cause significant damage to our property and equipment or customer projects and adversely impact our operations.

In addition, global climate change may result in significant natural disasters occurring more frequently or with greater intensity, such as drought, wildfires, storms, sea-level rise, changing precipitation and flooding.

Such events may adversely impact critical infrastructure, have the potential to disrupt our business, our third-party suppliers or the business of our customers, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations.

We may declare the existence of a force majeure event under our contracts in certain situations;

however, a customer may dispute our force majeure claim, which may result in additional liabilities.

Losses or delays arising from such events may or may not be fully covered by our various insurance policies or may be subject to deductibles or exceed coverage limits.

These situations or other disruptions are outside of our control and may adversely impact our business and results of operations.

A failure in our business systems or cybersecurity attacks on any of our facilities, or those of third parties, could adversely affect our business, results of operations and reputation.

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Depending on their nature and scope, such threats could potentially lead to the compromise of confidential information and communications, improper use of our systems and networks, manipulation and destruction of data, defective products, production downtimes and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations.

We are continuously working to improve our information technology systems, together with creating security boundaries around our critical and sensitive assets.

We provide security awareness education to our employees and contractors that focuses on various aspects of the cybersecurity world.

All of these steps are taken in order to mitigate the risk of attack and to ensure our readiness to responsibly handle any security violation or attack.

If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures and our products could be harmed.

We could lose potential projects and existing customers, our ability to operate our business could be impaired, we may incur significant liabilities, we could suffer harm to our reputation and competitive position, and our operating results could be negatively impacted.

We utilize the National Institute of Standards and Technology Framework for Improving Critical Infrastructure Cybersecurity (NIST Framework), a toolkit for organizations to manage cybersecurity risk in its assessment of cybersecurity capabilities and in developing cybersecurity priorities.

In addition to internal assessments, our cybersecurity strategy and capabilities are evaluated and audited against the NIST Framework and industry best practices by independent, third-party, leading specialists in cybersecurity.

We strive to create a culture of cybersecurity resilience and awareness.

This tone is set from the top and continuously reinforced with our employees and contractors through regular education and testing.

We continue to mature our programs and invest in the security of our systems, operations, people, infrastructure, and cloud environments.

The Board of Directors is briefed on our strategy and roadmap in alignment with NIST Cybersecurity Framework.

The Board receives quarterly updates on program maturity, cybersecurity risks, threat landscape and overall program progress.

While cybersecurity resilience is the responsibility of every employee and contractor, the cybersecurity program is led by the Chief Information Officer.

The Information Technology Cybersecurity team meets regularly and reviews trending risks and remediation efforts.

When necessary, we assign resources to mitigate and elevate risks to the enterprise level as part of our Enterprise Risk Management program.

Any significant disruption or failure of our business systems and/or cybersecurity infrastructure could damage our reputation and have a material adverse effect on our business and results of operations.

Our insurance coverage may not be sufficient to compensate for all liability relating to any actual or potential disruption or other security breach or incident.

We cannot be certain that our coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.

The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.

Any significant disruption or failure of our business systems or cybersecurity infrastructure could damage our reputation and have a material adverse effect on our business and results of operations.

Data privacy, data protection, and information security may require significant resources and present certain risks.

We collect, store, and otherwise process certain confidential or sensitive data, including personal data and other information that is subject to laws, regulations, customer-imposed controls, or other actual or asserted obligations.

The laws, regulations, standards, and other actual and asserted obligations relating to privacy and information security to which we may be subject, in the United States and globally, are evolving.

For example, in the European Union, the General Data Protection Regulation imposes stringent requirements applicable to processing personal data and provides for substantial penalties for noncompliance, and in the United States, California and numerous other states have adopted comprehensive privacy laws, with other states considering such laws.

Many jurisdictions around the world have passed or are considering laws and regulations relating to privacy, data protection, and cybersecurity, including laws that impose cross-border data transfer restrictions and require certain personal data to be maintained on local servers.

Any actual or perceived failure to comply with applicable laws, regulations, or contractual or other actual or asserted obligations to which we are or are alleged to be subject relating to privacy, data protection, or cybersecurity could result in claims, litigation, and regulatory investigations and other proceedings, as well as damage to our reputation.

These could result in substantial costs, diversion of resources, fines, penalties, and other damages and liabilities, and harm to our customer relationships, our market position, and our ability to attract new customer engagements.

Any of these could harm our business, financial condition, results of operations, and cash flows, potentially in a material manner.

Changes in and compliance with ESG initiatives could adversely impact our business.

We strive to achieve ESG initiatives while maintaining the rights and interests of our employees and shareholders.

There has been an increased focus on ESG matters by consumers, investors, as well as by governmental and non-governmental organizations.

For example, organizations that provide ESG information to investors have developed ratings processes for evaluating a business entity’s approach to ESG matters.

Although currently no universal rating standards exist, certain investors use these scores to benchmark businesses against their peers and, if a business entity is perceived as lagging, these investors may engage with the entity to demand improved ESG disclosure or performance.

Consequently, a low sustainability score could result in exclusion of our securities from consideration by certain investment funds, engagement by investors seeking to improve such scores and a negative perception of our operations by certain investors.

To the extent that our ESG initiatives are deemed to be insufficient by stakeholders, this could adversely impact our business, results of operations, stock price or competitive position.

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The potential for future ESG and climate risk reporting requirements may result in additional costs to monitor, track and report sustainability measures.

Additionally, increased attention to climate change, conservation measures, energy transition and consumer demand for alternatives to hydrocarbons could reduce the demand for oil and gas applications and have an adverse impact on the demand for the products produced by our customers and therefore reduce demand for our products, which could adversely impact our business and results of operations.

Actual and potential claims, lawsuits and proceedings could ultimately reduce our profitability and liquidity and weaken our financial condition.

We could be named as a defendant in legal proceedings that claim damages in connection with the operation of our business.

Most of the actions against us arise out of the normal course of our performing services or manufacturing equipment.

From time to time, we may be a plaintiff in legal proceedings against customers in which we seek to recover payment of contractual amounts due to us, as well as claims for increased costs incurred by us.

In addition, claims, lawsuits and proceedings may harm our reputation or divert management resources away from operating our business.

Losses arising from such events may or may not be fully covered by our various insurance policies or may be subject to deductibles or exceed coverage limits.

Changes in tax laws and regulations may change our effective tax rate and could have a material effect on our financial results.

We are subject to income taxes in the U.S.

and numerous foreign jurisdictions.

A significant increase in our statutory tax rates or loss of our ability to claim Research and Development Tax Credits could have a material impact on our net income or loss and cash flow.

Additionally, increased attention to climate change, conservation measures, energy transition, negative attitudes toward oil and natural gas production and consumer demand for alternatives to hydrocarbons could reduce the demand for oil and gas applications.

This, in turn, could adversely impact the demand for the products produced by our customers and, therefore, reduce demand for our products, which could adversely impact our business and results of operations.

The departure of key personnel could disrupt our business.

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The loss of key personnel, or the inability to hire, train and retain qualified employees, could negatively impact our ability to perform and manage our business.

Unresolved Staff Comments

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.

What changed 10-K

Item 1A. Risk Factors