What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2025-03-20 compared with 2024-03-28 · 420 added, 297 removed, 871 unchanged (45% of the section changed)

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Market Information

Our common stock, par value $0.01 per share, trades on the NASDAQ Global Select Market under the trading symbol "SHIM".

Our common stock, par value $0.01 per share, trades on the Nasdaq Capital Market under the trading symbol "SHIM".

Substantially all of our stockholders maintain their shares in "street name" accounts and are not individually stockholders of record.

According to the records of our transfer agent, there were five stockholders of record as of March 25, 2024.

According to the records of our transfer agent, there were eight stockholders of record as of March 19, 2025.

We do not intend to declare or pay dividends on our common stock in the near-term.

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Not applicable as we are a “smaller reporting company,” as defined in the Exchange Act.

Use of Proceeds

On November 16, 2023, we completed our IPO, in which we issued and sold 3,575,000 shares of our common stock at an initial public offering price of $7.00 per share.

We raised net proceeds of approximately $19 million, after deducting the underwriting discount of $2 million and offering expenses of $4 million.

All shares sold in our IPO were registered pursuant to a registration statement on Form S-1 (File No.

333-274870) (as amended, the “Registration Statement”), declared effective by the SEC on November 13, 2023.

Roth Capital Partners, LLC acted as representative of the underwriters for the offering.

The offering terminated after the sale of all securities registered pursuant to the Registration Statement.

No payments for such expenses were made directly or indirectly to (i) any of our officers or directors or their associates, (ii) any persons owning 10% or more of any class of our equity securities, or (iii) any of our affiliates.

As contemplated in the Registration Statement, we used the net proceeds of the offering, together with cash on hand, to repay all outstanding borrowing under our Revolving Credit Facility.

There was no material change in the use of the net proceeds from our IPO from the expected use of proceeds described in the Registration Statement.

Unregistered Sales of Equity Securities

Except as previously disclosed in Current Reports on Form 8-K, no unregistered sales of the Company’s equity securities were made during the fiscal year ended January 3, 2025.

Issuer Repurchase of Equity Securities

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Investors should not consider non-GAAP financial measures in isolation or as substitutes for financial information presented in compliance with GAAP.

We are a leading provider of water and other critical infrastructure solutions nationwide.

Shimmick is an industry leader in delivering turnkey infrastructure solutions that strengthen critical markets across water, energy, climate resiliency, and sustainable transportation.

With a track record that spans over a century, Shimmick, headquartered in California, unites deep engineering heritage with entrepreneurial spirit to tackle today's most complex infrastructure challenges.

We integrate technical excellence with collaborative project delivery methods to provide innovative, technology-driven infrastructure solutions that accelerate economic growth and empower communities nationwide.

We have a long history of successfully completing complex water projects, ranging from the world’s largest wastewater recycling and purification system in California to the iconic Hoover Dam.

According to Engineering News Record, in 2023, Shimmick was nationally ranked as a top ten builder of water supply (#6), dams and reservoirs (#7), and water treatment and desalination plants (#7).

Shimmick is led by industry veterans, many with over 20 years of experience, and works closely with its customers to deliver complete solutions, including long-term operations and maintenance.

We selectively focus on infrastructure projects relating to water treatment, water resources and other critical infrastructure.

As of December 29, 2023, we had a backlog of projects of approximately $1.1 billion, with over half of that amount comprised of water projects.

We believe we have the ability to self-perform many of these projects, differentiating us from many of our competitors.

Self-performance enables us to better control the critical aspects of our projects, reducing the risk of cost and schedule overruns.

On November 16, 2023, the Company completed its initial public offering of 3,575,000 shares of common stock at a price to the public of $7.00 per share (the “IPO”).

The net proceeds to the Company from the IPO were approximately $23 million, after deducting underwriting discounts and commissions and before estimated offering expenses payable by the Company.

The Company’s common stock began trading on the NASDAQ Global Market on November 14, 2023.

Our History and the AECOM Sale Transactions

According to Engineering News Record, in 2024, we are nationally ranked as a top ten builder of water supply (#8), dams and reservoirs (#6), and water treatment and desalination plants (#7).

Our business includes construction operations from Morrison Knudsen and Washington Group International which were consolidated in 2017 by AECOM.

In 2021, we were sold by AECOM and became an independent company under new private ownership ("AECOM Sale Transaction").

In November 2023, we completed our initial public offering (the “IPO”) and currently our stock is listed for trading on the Nasdaq Capital Market under the symbol "SHIM".

We selectively focus on the following types of infrastructure projects:

Water Treatment and Resources

• Water and Wastewater Treatment .

We expand, rehabilitate, upgrade, build and rebuild water and wastewater treatment infrastructure including desalination plants.

We implement treatment technologies including ozonation, biological activated carbon, membrane filtration, reverse osmosis, chemical treatment, and oxidation.

Our projects aim to ensure access to clean and safe drinking water, protect public health and reduce waterborne diseases and contribute to protecting the environment by removing pollutants and contaminants from wastewater before it is released back into ecosystems.

• Water Resources .

We construct, rehabilitate and upgrade dams, reservoirs, and water conveyance and storage systems.

This includes flood control systems, pump stations, and coastal protection infrastructure.

Select projects of ours enable reliable water supply, generate hydroelectric power, and

control flooding, ensuring water availability and energy security.

Our work contributes to protecting communities from flood damage to safeguard lives, property and infrastructure.

Other Critical Infrastructure

We build, retrofit, expand, rehabilitate, operate and maintain our nation’s critical infrastructure, including mass transit, bridges and military infrastructure.

We work on projects that we believe are vital for economic growth, social connectivity, and accessibility.

We believe our projects enable smooth and efficient movement of people and goods, foster trade, address environmental sustainability and improve quality of life for individuals and communities.

Within critical infrastructure, we are focused primarily on the following types of projects:

• Climate Resilience .

We build and upgrade levees, flood walls, pump stations, drainage systems, and strengthen existing infrastructure both in preparation to withstand severe weather events and in response to such events to facilitate recovery.

• Transportation and Mobility .

We construct mass transit systems (light passenger rail and bus rapid transit), autonomous transportation solutions (personal rapid transit, autonomous fixed guideway people movers, and implement intelligent transportation technologies.

• Energy Transition .

We modify facilities to accommodate electric vehicle fleets for transit agencies and municipalities, implement renewable energy components in our projects, and support data center construction.

As of January 3, 2025, we had a backlog of projects of approximately $822 million, mostly located in California, with ongoing projects in six other states.

We self-perform many of these projects, which we believe allows us to better control critical aspects of construction, reduce cost and schedule risks, and deliver greater value to clients.

Our History, the AECOM Sale Transaction and 2024 Financing Transactions

Shimmick was founded in 1990 in California and operated as a regional infrastructure construction contractor throughout California for nearly 30 years.

In 2017, AECOM acquired Shimmick and consolidated it with its existing construction services, which included former construction operations from Morrison Knudsen, Washington Group International, and others.

In January 2021, we were sold by AECOM and began operating as an independent company under new private ownership ("AECOM Sale Transactions") under a December 2020 Purchase Agreement with SCC Group, a special purpose entity formed for the purpose of entering into and consummating the sale transactions including acquiring 100% of the stock of the Company and certain other assets related to our business and our subsidiaries to the extent owned by Seller Entities or their affiliates.

On November 19, 2021, SCC Group was merged with SCCI National Holdings, Inc., with SCCI National Holdings, Inc.

becoming the surviving entity.

In the intervening period between January 2, 2021 and November 19, 2021, SCC Group’s assets and liabilities consisted of its investment in SCCI National Holdings, Inc., as well as rights to receive any net working capital settlement and any obligation to pay contingent consideration related to its January 2, 2021 acquisition of SCCI National Holdings, Inc.

Retained Claim Reimbursements

The Purchase Agreement provides that the Seller Entities will retain the right to participate in a portion of the net proceeds of any cash, cash equivalents or other assets received or recovered from any claims relating to certain specified Legacy Projects that were ongoing at the time of closing.

AECOM is entitled to a percentage of proceeds we may receive, subject to a specified cap for each such Legacy Project.

Earn Out Considerations

As additional consideration, the Seller Entities were entitled to receive a one-time additional cash payment based on the performance of the business for the 36-month period beginning October 3, 2020 and ending September 29, 2023 based on specified aggregate Adjusted EBITDA (as defined in the Purchase Agreement) thresholds set forth in the Purchase Agreement.

No earnout was achieved based on the Company's calculation of Adjusted EBITDA (as defined in the Purchase Agreement) of the business to date and no corresponding additional cash payment has been made, or is expected to be made, to Seller Entities.

In January 2021, we were sold by AECOM and began operating as an independent company under new private ownership ("AECOM Sale Transaction") under a December 2020 Purchase Agreement with SCC Group, a special purpose entity formed for the purpose of entering into and consummating the sale transaction including acquiring 100% of the stock of the Company and certain other assets related to our business and our subsidiaries to the extent owned by Seller Entities or their affiliates.

After the transaction, we began a transformation to shift our strategy to meet the nation’s growing need for water and other critical infrastructure and grow our business.

We are also focusing more on smaller complex projects that we can largely self-perform and which we believe will have lower risk and higher margin.

On November 16, 2023, the Company completed its initial public offering of 3,575,000 shares of common stock at a price to the public of $7.00 per share (the “IPO”).

The net proceeds to the Company from the IPO were approximately $19 million, after deducting underwriting discounts and commissions and before estimated offering expenses payable by the Company.

Shimmick’s common stock began trading on November 14, 2023 and is currently listed for trading on the Nasdaq Capital Market under the symbol "SHIM".

AECOM Sale Transaction

• Shared Tax Benefits .

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We are obligated to share with AECOM actual tax benefits realized (i.e., in cash or through an actual reduction in liability for tax).

• Other Items .

We have agreed to indemnify the Seller Entities for any costs or expenses incurred under any outstanding letters of credit, surety bonds, guarantees, advance payment guarantees and other contractual obligations arising from or relating to the assets purchased or the liabilities assumed under the Purchase Agreement, including bonds relating to the Legacy Projects.

Further, the Seller Entities have provided a conditional guaranty required by any surety bonds and/or a bonding program relating to certain guaranteed obligations and payment obligations with respect to the certain other assets related to our business and our subsidiaries to the extent owned by Seller Entities or their affiliates.

For additional information regarding AECOM, see “ Risk Factors — Risks Related to Our Business and Industry — We are involved in ongoing disputes with our prior owner, AECOM, which could adversely impact our business ,” “ — We may be required to make additional payments to AECOM pursuant to contractual arrangements” and “— If AECOM defaults on its contractual obligations under agreements in which we are a beneficiary, our business could be materially and adversely impacted.

2024 Financing Transactions

• Credit Agreement .

On May 20, 2024, we entered into a revolving credit facility (the “Credit Agreement”).

See " Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Credit Agreement " for further discussion.

• Amendment to MidCap Credit Facility.

On May 20, 2024, we entered into Amendment No.

3 to our existing Revolving Credit Facility, dated March 27, 2023, with MidCap Financial Services, LLC.

See “ — Liquidity and Capital Resources — Revolving Credit Facility ” for further discussion.

• Side Letter .

We and AECOM entered into a side letter to the Credit Agreement, dated as of May 20, 2024 (the “Side Letter”).

Pursuant to the Side Letter, the Company (i) established a special committee of independent directors (the “Special Committee”), (ii) appointed a chief transformation officer, (iii) executed the Settlement Agreement and Mutual Release (as described below), and (iv) agreed to certain terms relating to AECOM’s registration rights under the Share Issuance Agreement (as described below).

• Settlement Agreement and Share Issuance .

We entered into a Settlement Agreement and Mutual Release with AECOM pursuant to which, among other things, we and our subsidiaries released AECOM from all claims available to us under the Purchase Agreement.

In return, AECOM released the Company and its subsidiaries from certain claims under the Purchase Agreement, specifically certain claims related to the Golden Gate Bridge Project, the Gerald Desmond Bridge Project and Chickamauga Lock Project and claims relating to certain earn-out payments.

As consideration, we also entered into a Share Issuance Agreement (the “Share Issuance Agreement”) with AECOM, pursuant to which we issued an aggregate 7,745,000 shares of common stock.

For additional information regarding AECOM, see “ Risk Factors — Risks Related to Our Business and Industry — We may be required to make additional payments to AECOM pursuant to contractual arrangements” and “— If AECOM defaults on its contractual obligations under agreements in which we are a beneficiary, our business could be materially and adversely impacted.

Ural Yal Appointed CEO of Shimmick

On November 12, 2024, Shimmick announced that it appointed Ural Yal as its new CEO and member of the Board of Directors effective December 2, 2024 and succeeded Steven Richards upon his retirement.

We believe Mr.

Yal brings deep expertise in both the California market and national infrastructure construction along with a proven track record of operational growth to lead the Company in capitalizing on market opportunities through operational excellence, safety and client satisfaction.

Key Factors Affecting Our Performance and Results of Operations

We expect that our results of operations will be affected by a number of factors which have discussed below.

We expect that our results of operations will be affected by a number of factors which we have discussed below.

Weather, natural disasters and emergencies.

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Our customers primarily award contracts using one of two methods:

the traditional public “competitive bid” method, in which price is the major determining factor, or through a “best value” proposal, where contracts are awarded based on a combination of technical qualifications, proposed project team, schedule, the ability to obtain

surety bonds, past performance on similar projects and price, which we believe creates a barrier to entry.

Contracts are principally awarded on a fixed-price basis, and we earn and recognize revenue using an input measure of total costs incurred divided by total costs expected to be incurred.

the traditional public “competitive bid” method, in which price is the major determining factor, or through a “best value” or collaborative contract proposal, where contracts are awarded based on a combination of technical qualifications, proposed project team,

schedule, the ability to obtain surety bonds, past performance on similar projects and price, which we believe creates a barrier to entry.

Many of our contracts are awarded on a fixed-price basis, and we earn and recognize revenue using an input measure of total costs incurred divided by total costs expected to be incurred.

Our Ability to Obtain Approval of Change Orders and Successfully Pursue Claims.

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Our Ability to Control Selling General and Administrative Costs .

Because we now exist as a public company, we will incur significant expenses on an ongoing basis that we did not incur as a private company.

We incur significant expenses on an ongoing basis as a public company that we did not incur as a private company.

Those costs include additional director and officer liability insurance expenses, stock exchange listing expenses, as well as third-party and internal resources related to accounting, auditing, Sarbanes-Oxley Act compliance, legal and investor and public relations expenses.

These costs will generally be selling, general and administrative expenses.

We have also implemented the 2023 Omnibus Incentive Plan to align our equity compensation program with public company plans and practices, which we expect will increase our stock-based compensation expense.

These costs are generally selling, general and administrative expenses.

We have also implemented the 2023 Omnibus Incentive Plan to align our equity compensation program with public company plans and practices, which increases our stock-based compensation expense.

Joint Ventures.

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Contract costs consist of all direct and indirect costs on contracts, including raw materials, labor, equipment costs, and subcontractor costs.

If the estimates of costs to complete fixed-price contracts indicate a further loss, the entire amount of the additional loss expected over the life of the project is recognized in the current period in the cost of revenue.

Selling, General, and Administrative Expenses

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Additional expenses include audit, consulting and professional fees, travel, insurance, office space rental costs, property taxes and other corporate and overhead expenses.

Equity in Earnings of Unconsolidated Joint Ventures

Equity in earnings of unconsolidated joint ventures includes our return on investment in unconsolidated joint ventures.

Equity in (Loss) Earnings of Unconsolidated Joint Ventures

Equity in (loss) earnings of unconsolidated joint ventures includes our return on investment in unconsolidated joint ventures.

Net loss represents earnings after consideration of all operating expenses and other income and expenses to measure loss to allocate resources and assess financial performance.

Results of Operations

The following table sets forth selected financial data for the fiscal year ended December 29, 2023 compared to the fiscal year ended December 30, 2022:

The following table sets forth selected financial data for the fiscal year ended January 3, 2025 compared to the fiscal year ended December 29, 2023:

Fiscal Year Ended

(In thousands, except percentage data)

January 3, 2025

December 29, 2023

January 3, 2025

December 29, 2023

Cost of revenue

Selling, general and administrative expenses

Amortization of intangibles

ERP pre-implementation asset impairment and associated costs

Total operating expenses

Equity in earnings of unconsolidated joint ventures

Equity in (loss) earnings of unconsolidated joint ventures

Gain on sale of assets

Income from operations

(Loss) income from operations

Interest expense

Other expense, net

Net (loss) income before income tax

Income tax expense

Net (loss) income

Net loss before income tax

Income tax benefit

Revenue and gross margin

The following table sets forth selected revenue and gross margin data for the fiscal year ended December 29, 2023 compared to the fiscal year ended December 30, 2022:

The following table sets forth disaggregated data on revenues and gross margin for the fiscal year ended January 3, 2025 compared to the fiscal year ended December 29, 2023:

Fiscal Year Ended

(In thousands, except percentage data)

January 3, 2025

December 29, 2023

Shimmick Projects

Gross Margin (%)

Legacy Projects

Consolidated Total

Fiscal Year 2023

Gross Margin (%)

Fiscal Year 2022

Foundations Projects

Gross Margin (%)

Variances Fiscal Year 2023 to Fiscal Year 2022 Increase (Decrease)

Consolidated Total

Gross Margin (%)

Shimmick Projects

Projects started after the AECOM Sale Transactions ("Shimmick Projects") have focused on water infrastructure and other critical infrastructure.

As a result of management's shift in job bidding strategy toward higher margin, lower risk jobs, total revenue recognized on these Shimmick Projects increased by $84 million to $434 million for the fiscal year ended December 29, 2023 as compared to $351 million for the fiscal year ended December 30, 2022 and gross margin increased $5 million, or 20%.

Projects started after the AECOM Sale Transaction ("Shimmick Projects") have focused on water infrastructure and other critical infrastructure.

Revenue recognized on Shimmick Projects was $356 million and $386 million for the fiscal years ended January 3, 2025 and December 29, 2023, respectively.

The $30 million decrease in revenue was primarily the result of a $82 million decrease from lower activity on existing projects and projects winding down partially offset by an aggregate of $52 million of revenue from a new water infrastructure project and ramp up of a transportation project.

Gross margin recognized on Shimmick Projects was $12 million and $38 million for the fiscal years ended January 3, 2025 and December 29, 2023, respectively.

The $26 million decrease in gross margin was primarily the result of a $37 million decrease from increased cost of revenue, schedule extensions and a decrease in revenue from existing projects that are winding down, partially offset by an aggregate of $11 million of gross margin from a new water infrastructure project and ramp up of a transportation project.

Legacy Projects

As part of the AECOM Sale Transactions, we assumed the Legacy Projects and backlog that were started under AECOM.

Legacy Projects revenue decreased $115 million and gross margin was negative $7 million, a decrease of $6 million as compared to fiscal year ended December 30, 2022, primarily as a result of projects winding down and an unfavorable settlement on a Legacy Project.

The negative gross margin is primarily the result of a subset of these projects (“Legacy Loss Projects”) that have experienced significant cost overruns due to the COVID pandemic, design issues and other factors.

On this subset, we have recognized the estimated costs to complete and the loss expected from these projects.

As these Legacy Loss Projects continue to wind down to completion, no further gross margin will be recognized and in some cases, there may be additional costs associated with these jobs.

Revenue recognized on these Legacy Loss Projects was $99 million and $123 million for the fiscal years ended December 29, 2023 and December 30, 2022, respectively.

Gross margin recognized on these Legacy Loss Projects was ($14) million and ($23) million for the fiscal years ended December 29, 2023 and December 30, 2022, respectively.

As part of the AECOM Sale Transaction, we acquired the Legacy Projects and backlog that were started under prior ownership.

Legacy Projects revenue was $93 million for the fiscal year ended January 3, 2025, a decline of $105 million as compared to the fiscal year ended December 29, 2023, as the Company works to complete these projects.

The decline in revenue was primarily driven by continued impacts of Legacy Projects winding down during fiscal 2024, the sale of non-core business contracts in the third quarter of 2023 as well as a non-cash adjustment to revenue on a Legacy Loss Project (as defined below) settlement recognized during the second quarter of 2024, partially offset by a settlement agreement in the Company's Golden Gate Bridge Project (the “GGB Project”) during the third quarter of 2024.

Gross margin was $(49) million for the fiscal year ended January 3, 2025 as compared to $(7) million for the fiscal year ended December 29, 2023, primarily as a result of the Legacy Loss Project settlement during the second quarter of 2024, projects winding down and additional cost overruns on Legacy Loss Projects that have experienced

additional increases in the cost to complete as well as additional legal fees to pursue contract modifications and recoveries, partially offset by the GGB Project settlement.

A subset of Legacy Projects ("Legacy Loss Projects") have experienced significant cost overruns due to the COVID pandemic, design issues, legal costs and other factors.

In the Legacy Loss Projects, we have recognized the estimated costs to complete and the loss expected from these projects.

If the estimates of costs to complete fixed-price contracts indicate a further loss, the entire amount of the additional loss expected over the life of the project is recognized as a period cost in the cost of revenue.

As these Legacy Loss Projects continue to wind down to completion, no further gross margin will be recognized and in some cases, there may be additional costs associated with these projects.

Revenue recognized on these Legacy Loss Projects was $68 million and $99 million for the fiscal years ended January 3, 2025 and December 29, 2023, respectively.

Gross margin recognized on these Legacy Loss Projects was $(45) million and $(14) million for the fiscal years ended January 3, 2025 and December 29, 2023, respectively.

The change in gross margin was primarily the result of a Legacy Loss Project settlement during the second quarter of 2024, additional increases in the cost to complete as well as additional legal fees to pursue contract modifications and recoveries, partially offset by the GGB Project settlement.

Foundations Projects

Projects that focus on foundation drilling are referred to as "Foundations Projects".

The Company entered into an agreement to sell the assets of our non-core Foundations Projects in the second quarter of 2024 and continued to wind down work during the 2024 fiscal year.

As a result, revenue recognized on Foundations Projects declined during the 2024 fiscal year.

Revenue recognized on Foundations Projects was $31 million and $48 million for the fiscal years ended January 3, 2025 and December 29, 2023, respectively.

The $17 million decline in revenue was the result of timing of multiple projects winding down following the asset sale.

Gross margin recognized on Foundations Projects was $(18) million and $(9) million for the fiscal years ended January 3, 2025 and December 29, 2023, respectively.

The decline in gross margin was the result of cost overruns and projects winding down.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $1 million, or 2%, primarily resulting from higher legal, professional services and other costs.

Equity in earnings of unconsolidated joint ventures

Equity in earnings of unconsolidated joint ventures decreased $42 million, or 80%, primarily due to a $56 million impact from the settlement of claims for three infrastructure projects during the fiscal year ended December 30, 2022 that did not re-occur in the fiscal year ended December 29, 2023.

Selling, general and administrative expenses remained approximately flat period over period.

ERP pre-implementation asset impairment and associated costs

ERP pre-implementation asset impairment and associated costs were $16 million due to the strategic decision to enhance the Company’s current ERP system rather than implementing a new platform which, due to prior capitalized costs and remaining contractual obligations, resulted in a charge of $16 million recorded in the f iscal year ended January 3, 2025 .

Equity in (loss) earnings of unconsolidated joint ventures

Equity in (loss) earnings of unconsolidated joint ventures was $(5) million, compared to earnings of $10 million in the prior year period, primarily due a favorable subcontractor settlement during the fiscal year ended December 29, 2023 that did not reoccur during the f iscal year ended January 3, 2025 and increased costs due to schedule extensions.

Gain on sale of assets

Gain on sale of assets increased $32 million driven by the sale of non-core business contracts for $30 million as discussed in Note 5 - Property, Plant and Equipment and Intangible Assets, of the notes to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K, as well as a gain on sale of an office building for $2 million.

Gain on sale of assets decreased by $11 million primarily due to the gain recognized on the sale of non-core business contracts for $30 million during the fiscal year ended December 29, 2023, partially offset by the $17 million gain recognized on the transaction for the sale-leaseback of our equipment yard in Tracy, California and $2

million gain recognized on the sale of the assets of our non-core Foundations Projects during the f iscal year ended January 3, 2025 .

Interest expense

Interest expense increased by $3 million primarily due to increased borrowings on the Credit Agreement, which was entered into on May 20, 2024 as well as interest charges on the Revolving Credit Facility which was not entered into until March 27, 2023.

Other expense, net

Other expense, net was $3 million for the fiscal year ended December 29, 2023, compared to $9 million in the fiscal year ended December 30, 2022.

Other expense, net for the fiscal year ended December 29, 2023 primarily related to interest expense on the Revolving Credit Facility while other expense, net during the fiscal year ended December 30, 2022 was primarily driven by a change in the fair value of contingent consideration from the AECOM Sale Transactions.

Income tax expense

No taxable income was recognized for the fiscal year ended December 29, 2023, thus no income tax expense was recorded.

For the fiscal year ended December 30, 2022, there was approximately $1 million of tax expense after accounting for the utilization of NOL carryforwards.

Net (loss) income

Net (loss) income decreased by $5 million to a net loss of $2 million for the fiscal year ended December 29, 2023, due to a decrease in income from operations primarily due to a decrease in equity in earnings of unconsolidated joint ventures partially offset by gain on sale of assets as well as a decrease in other expense, net.

Other expense, net remained approximately flat period over period.

Income tax benefit

Income tax benefit of $1 million was recognized for the fiscal year ended January 3, 2025, primarily as the result of a decrease in other taxes payable.

No taxable income was recognized for the fiscal year ended December 29, 2023, thus no income tax expense or benefit was recorded.

Net loss increased by $122 million from $2 million to a net loss of $125 million for the fiscal year ended January 3, 2025, primarily due to a decrease in gross margin of $78 million of which $52 million was a result of gross margin declines in the legacy and foundations projects.

In addition, the ERP pre-implementation asset impairment and associated costs of $16 million, a decrease of gain on the sale of assets of $11 million, an increase in equity in loss of unconsolidated joint ventures of $15 million as well as an increase in interest expense of $3 million added to the net loss increase, each as described above.

Non-GAAP financial measures

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However, management believes that certain non-GAAP financial measures provide investors with additional useful information in evaluating our performance.

Therefore, to supplement our consolidated financial statements, we provide investors with certain non-GAAP financial measures, including Adjusted net income and Adjusted EBITDA.

Adjusted net income

Adjusted net income represents Net (loss) income attributable to Shimmick Corporation adjusted to eliminate changes in fair value of contingent consideration, transaction-related costs, stock-based compensation, and legal fees and other costs for a Legacy Loss Project.

We have included Adjusted net income in this Annual Report on Form 10-K because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operational plans.

In particular, we believe that the exclusion of the income and expenses eliminated in calculating Adjusted net income can provide a useful measure for period-to-period comparisons of our core business.

Accordingly, we believe that Adjusted net income provides useful information to investors and others in understanding and evaluating our results of operations.

Our use of Adjusted net income as an analytical tool has limitations, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP.

Therefore, to supplement our consolidated financial statements, we provide investors with certain non-GAAP financial measures, including Adjusted net (loss) income and Adjusted EBITDA.

Adjusted net (loss) income

Adjusted net (loss) income represents Net loss attributable to Shimmick Corporation adjusted to eliminate stock-based compensation, ERP pre-implementation asset impairment and associated costs, legal fees and other costs for Legacy Projects and transaction-related costs and changes in fair value of contingent consideration remaining after the impact of transactions with our prior owner.

We have also made an adjustment for transformation costs we have incurred including advisory costs in connection with settling outstanding claims, exiting the Legacy Projects and transforming the Company to shift our strategy to meet the nation’s growing need for water and other critical infrastructure and grow our business.

We have included Adjusted net (loss) income in this Annual Report on Form 10-K because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operational plans.

In particular, we believe that the exclusion of the income and expenses eliminated in calculating Adjusted net (loss) income can provide a useful measure for period-to-period comparisons of our core business.

Accordingly, we believe that Adjusted net (loss) income provides useful information to investors and others in understanding and evaluating our results of operations.

Our use of Adjusted net (loss) income as an analytical tool has limitations, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP.

Some of these limitations are:

• Adjusted net income does not reflect changes in, or cash requirements for, our working capital needs,

• Adjusted net income does not reflect the potentially dilutive impact of stock-based compensation, and

• other companies, including companies in our industry, might calculate Adjusted net income or similarly titled measures differently, which reduces their usefulness as comparative measures.

Because of these and other limitations, you should consider Adjusted net income alongside Net (loss) income attributable to Shimmick Corporation, which is the most directly comparable GAAP measure.

See reconciliation below.

• Adjusted net (loss) income does not reflect changes in, or cash requirements for, our working capital needs,

• Adjusted net (loss) income does not reflect the potentially dilutive impact of stock-based compensation, and

• other companies, including companies in our industry, might calculate Adjusted net (loss) income or similarly titled measures differently, which reduces their usefulness as comparative measures.

Because of these and other limitations, you should consider Adjusted net (loss) income alongside Net loss attributable to Shimmick Corporation, which is the most directly comparable GAAP measure.

Adjusted EBITDA

Adjusted EBITDA represents our net (loss) income attributable to Shimmick Corporation before interest expense, income tax expense and depreciation and amortization, adjusted to eliminate changes in fair value of contingent consideration, transaction-related costs, stock-based compensation, and legal fees and other costs for a Legacy Loss Project.

Adjusted EBITDA represents our net loss attributable to Shimmick Corporation before interest expense, income tax benefit and depreciation and amortization, adjusted to eliminate stock-based compensation, ERP pre-implementation asset impairment and associated costs, legal fees and other costs for Legacy Projects and transaction-related costs and changes in fair value of contingent consideration remaining after the impact of transactions with our prior owner.

We have included Adjusted EBITDA in this Annual Report on Form 10-K because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operational plans.

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• other companies, including companies in our industry, might calculate Adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as comparative measures.

Because of these and other limitations, you should consider Adjusted EBITDA alongside Net (loss) income attributable to Shimmick Corporation, which is the most directly comparable GAAP measure.

See reconciliation below:

Because of these and other limitations, you should consider Adjusted EBITDA alongside Net loss attributable to Shimmick Corporation, which is the most directly comparable GAAP measure.

See reconciliations below:

Fiscal Year Ended

(In thousands)

Net (loss) income attributable to Shimmick Corporation

Changes in fair value of contingent consideration

Transaction-related costs

Net loss attributable to Shimmick Corporation

Transformation costs (1)

Stock-based compensation

Legal fees and other costs for a Legacy Loss Project (1)

Adjusted net income

ERP pre-implementation asset impairment and associated costs (2)

Legal fees and other costs for Legacy Projects (3)

Adjusted net (loss) income

Fiscal Year Ended

(In thousands)

Net (loss) income attributable to Shimmick Corporation

Depreciation and amortization

Net loss attributable to Shimmick Corporation

Interest expense

Income tax expense

Changes in fair value of contingent consideration

Transaction-related costs

Income tax benefit

Depreciation and amortization

Transformation costs (1)

Stock-based compensation

Legal fees and other costs for a Legacy Loss Project (1)

ERP pre-implementation asset impairment and associated costs (2)

Legal fees and other costs for Legacy Projects (3)

Adjusted EBITDA

(1) Consists of legal fees and other costs incurred in connection with claims relating to a Legacy Loss Project.

(1) Consists of transformation-related costs we have incurred including advisory costs in connection with settling outstanding claims in connection with exiting certain Legacy Projects as part of the Company’s growth strategy to address and capitalize on the nation’s growing need for water and other critical infrastructure.

(2) Reflects a strategic decision to enhance the Company’s current ERP system rather than implementing a new platform which, due to prior capitalized costs and remaining contractual obligations, resulted in a charge of $16 million in the third quarter of fiscal 2024.

(3) Consists of legal fees and other costs incurred in connection with claims relating to Legacy Projects.

(4) Consists of transaction-related costs and changes in fair value of contingent consideration remaining after the impact of transactions with our prior owner.

Liquidity and Capital Resources

Capital Requirements and Sources of Liquidity

During the fiscal year ended December 29, 2023, our capital expenditures were approximately $7 million compared to $10 million for the fiscal year ended December 30, 2022.

During the fiscal year ended January 3, 2025, our capital expenditures were approximately $10 million compared to $7 million for the fiscal year ended December 29, 2023.

Historically, we have had significant cash requirements in order to organically expand our business to undertake new projects.

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Our working capital needs are driven by the seasonality and growth of our business, with our cash requirements greater in periods of growth.

Additional cash requirements resulting from our growth include the costs of additional personnel, enhancing our information systems and, in the future, our integration of any acquisitions and our compliance with laws and rules applicable to being a public company.

Additional cash requirements resulting from our growth include the costs of additional personnel, enhancing our information systems, our compliance with laws and rules applicable to being a public company and, in the future, our integration of any acquisitions.

Unrestricted cash and cash equivalents at January 3, 2025 totaled $34 million and availability under the Revolving Credit Facility and Credit Agreement totaled $15 million and $51 million, respectively, resulting in total liquidity of $100 million.

We have historically relied upon cash available through operating activities, in addition to credit facilities and existing cash balances, to finance our working capital requirements and to support our growth.

On November 16, 2023, we completed our IPO pursuant to which we issued and sold an aggregate of 3,575,000 shares of common stock at a price to the public of $7.00 per share.

We received aggregate net proceeds of approximately $19 million after deducting underwriting discounts and commissions of $2 million and other offering expenses of $4 million.

We will continue to monitor the capital markets and may continue raising additional capital through the issuance of our common shares, authorized preferred shares or other securities.

We regularly monitor potential capital sources, including equity and debt financing, in an effort to meet our planned expenditures and liquidity requirements.

However, we regularly monitor other potential capital sources, including equity and debt financing, in an effort to meet our planned expenditures and liquidity requirements.

Our future success will be highly dependent on our ability to access outside sources of capital.

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Events that affect the insurance and bonding markets may result in bonding becoming more difficult to obtain in the future, or being available only at a significantly greater cost.

To date, we have not encountered difficulties or material cost increases in obtaining new surety bonds, and we believe our balance sheet position supports our ability to fulfill our surety bond requirements.

We believe that our operating, investing and financing cash flows are sufficient to fund our operations for at least the next twelve months.

However, future cash flows are subject to a number of variables, and significant additional expenditures will be required to conduct our operations.

Furthermore, as a result of the completion of our IPO on November 16, 2023, we expect to incur additional costs associated with being a public company.

There can be no assurance that operations and other capital resources will provide cash in sufficient amounts to maintain planned or future levels of expenditures.

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(In thousands)

December 29, 2023

January 3, 2025

December 29, 2023

Credit Agreement

Revolving Credit Facility

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On March 27, 2023, we entered into the Revolving Credit Facility with MidCap Financial Services, LLC, which originally provided a total commitment of $30 million.

The Revolving Credit Facility was subsequently amended on June 30, 2023 and September 22, 2023.

The Revolving Credit Facility has been subsequently amended, most recently on September 25, 2024.

As amended, the Revolving Credit Facility provides for a total commitment of $15 million and bears interest at an annual rate of adjusted term SOFR, subject to a 1.0% floor, plus 5.50%.

Further, the Revolving Credit Facility is subject to an annual collateral management fee of 0.50% and an annual unused line fee of 0.50%.

The Revolving Credit Facility Agreement matures on March 27, 2028 and requires the Company to maintain a leverage ratio that does not exceed 1.75 to 1.0.

The Company is not aware of any instances of noncompliance with financial covenants as of December 29, 2023.

Following the IPO, we used the net proceeds we received from our IPO, together with cash on hand, to repay all outstanding borrowing under our Revolving Credit Facility.

Subsequent to the repayment, we drew $30 million on our Revolving Credit Facility to fund working capital requirements.

Project Financing Agreement

On March 26, 2024, we entered into a Project Financing Agreement with Berkshire Hathaway Specialty Insurance Company, National Liability & Fire Insurance Company and National Indemnity Company (collectively "Berkshire") which provides an advance of up to $25 million in exchange for security interest in the assigned and secured collateral specified in the Project Financing Agreement.

If drawn, the advance will be used to satisfy bond and bonded contract obligations and bears interest at an annual rate of adjusted term SOFR, subject to a 1.0% floor, plus 4.50%.

All funds provided by Berkshire under the Project Financing Agreement as well as all accrued interest are due and payable in full on March 28, 2028.

The Revolving Credit Facility includes certain financial operating covenants, including a minimum liquidity requirement of $7.5 million.

We are not aware of any instances of noncompliance with the key financial covenants as of January 3, 2025.

The Revolving Credit Facility was terminated on March 13, 2025 upon the execution of the ACF Credit Agreement (as defined below).

During the fiscal year ended January 3, 2025, we repaid $30 million of the amount outstanding under the Revolving Credit Facility and paid $2 million in cash interest.

Credit Agreement

On May 20, 2024, we, as guarantor, and our wholly-owned subsidiaries as borrowers (“Borrowers”), Alter Domus (US) LLC, as agent, and AECOM and Berkshire Hathaway Specialty Insurance Company (“BHSI”) as lenders, entered into a revolving credit facility (the “Credit Agreement”), which was subsequently amended on September 25, 2024, January 30, 2025 and March 12, 2025 to, among other things, permit the Company’s concurrent

amendment to the Revolving Credit Facility and waive the specified noncompliance of the Material Project Documents covenant regarding entering into non-bonded contracts.

As amended, the Credit Agreement provides borrowing capacity up to $60 million.

The obligations under the Credit Agreement bear interest at a per annum rate equal to one month Term SOFR (as defined in the Credit Agreement), subject to a 1.00% floor, plus 3.50%.

Interest on any outstanding amounts drawn under the Credit Agreement will be payable, in kind or in cash at our election, on the last day of each month and upon prepayment.

Payment-in-kind interest accrued and capitalized shall not constitute loan outstanding amounts for the purposes of calculating loan availability.

During the fiscal year ended January 3, 2025, the Company paid $0.3 million in cash interest and accrued $2 million in non-cash payment-in-kind interest.

The Credit Agreement matures on May 20, 2029 (the “Maturity Date”), and the Borrowers may borrow, repay and reborrow amounts under the Credit Agreement until the Maturity Date.

Obligations of the Borrowers under the Credit Agreement are guaranteed by us and secured by a lien on substantially all of our and the Borrowers' assets.

The Credit Agreement contains customary affirmative and negative covenants for a transaction of this type, including covenants that limit liens, asset sales and investments, in each case subject to negotiated exceptions and baskets.

In addition, the Credit Agreement contains a maximum leverage ratio covenant as tested quarterly commencing with the close of the first quarter of 2026.

The Credit Agreement also contains representations and warranties and event of default provisions customary for a transaction of this type.

Subsequent to January 3, 2025, the Company was not in compliance with a non-financial covenant regarding entering into material non-bonded contracts as set forth in the Credit Agreement.

As of January 3, 2025 and following the March 12, 2025 amendment, we are not aware of any instances of noncompliance with non-financial or financial covenants.

As of January 3, 2025, $9 million was outstanding under the Credit Agreement.

The transactions with AECOM also included a mutual release and settlement of certain claims with AECOM and a corresponding agreement to issue 7,745,000 shares of our common shares to AECOM.

5,144,622 of the common shares were issued on May 20, 2024 and issuance of the remaining 2,600,378 shares was completed following stockholder approval on June 26, 2024.

Of the total common shares issued, 1,036,949 were held in escrow which resulted in an AECOM voting interest of 19.6% as of January 3, 2025.

The Company recognized a loss of $1 million in other expense, net within the consolidated statements of operations as a result of the share issuance which represented the excess of the $13 million fair market value of the common shares at the time of issuance over the $12 million carrying value of the contingent consideration liabilities settled with AECOM.

ACF Credit Agreement

On March 12, 2025, we entered into a Credit Agreement (“ACF Credit Agreement”) with ACF FINCO I LP, which provides a total commitment of $15 million and bears interest at an annual rate of adjusted term SOFR, subject to a 2.0% floor, plus 4.50%.

Further, the ACF Credit Agreement is subject to an annual unused line fee of 0.50%.

The ACF Credit Agreement includes certain financial operating covenants, including a minimum liquidity requirement of $5 million.

The ACF Credit Agreement matures on the earlier of March 12, 2028 or 90 days prior to the maturity date of the Credit Agreement.

Cash Flows Analysis

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Net cash provided by investing activities

Net cash provided by (used in) financing activities

Net (decrease) increase in cash, cash equivalents and restricted cash

Net cash (used in) provided by financing activities

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

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Operating Activities

During the fiscal year ended December 29, 2023, net cash used in operating activities was $88 million, compared to net cash used in operating activities of $3 million for the fiscal year ended December 30, 2022.

Cash flows used in operating activities were driven by reduced net income, adjusted for various non-cash items and changes in accounts receivable, due from unconsolidated joint ventures, contract assets, accounts payable, contract liabilities and accrued expenses balances (collectively, “Contract Capital”), as discussed below, accrued salaries and wages and other assets and liabilities.

Changes in Contract Capital—The change in operating assets and liabilities varies due to fluctuations and timing in operating activities and Contract Capital.

The changes in the components of Contract Capital during the fiscal years ended December 29, 2023 and December 30, 2022 were as follows:

During the fiscal year ended January 3, 2025, net cash used in operating activities was $21 million, compared to net cash used in operating activities of $88 million for the fiscal year ended December 29, 2023.

Cash flows used in operating activities were driven by a net loss, adjusted for various non-cash items and changes in accounts receivable, contract assets, contract liabilities, accounts payable and accrued expenses balances, accrued salaries and wages and other assets and liabilities as discussed below.

Operating assets and liabilities — The change in operating assets and liabilities varies due to fluctuations and timing in operating activities and operating assets and liabilities.

The changes in the components of operating assets and liabilities during the fiscal years ended January 3, 2025 and December 29, 2023 were as follows:

Fiscal Year Ended

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Accrued expenses

Changes in Contract Capital, net

During the fiscal year ended December 29, 2023, the decrease in Contract Capital was $68 million, which was primarily driven by decreases in contract liabilities and accrued expenses.

The Company’s Contract Capital fluctuations are impacted by the mix of projects in backlog, seasonality, the timing of new awards and related payments for work performed and the contract billings to the customer as projects are completed.

Contract Capital is also impacted at period-end by the timing of accounts receivable collections and accounts payable payments for projects.

The impact on cash flows from operations in the fiscal years ended December 29, 2023 and December 30, 2022 from Legacy Loss Projects was cash used of approximately $65 million and $96 million, respectively.

Accrued salaries, wages and benefits

Other assets and liabilities

Changes in operating assets and liabilities, net

During the fiscal year ended January 3, 2025, the increase in operating assets and liabilities was $83 million, which was primarily driven by decreases in contract assets and increases in contract liabilities and accrued expenses.

The Company’s operating assets and liabilities fluctuations are impacted by the mix of projects in backlog, seasonality, the timing of new awards and related payments for work performed and the contract billings to the customer as projects are completed.

Operating assets and liabilities are also impacted at period end by the timing of accounts receivable collections and accounts payable payments for projects.

The impact on net cash flows from operations in the fiscal years ended January 3, 2025 and December 29, 2023 from Legacy Loss Projects was cash proceeds of approximately $42 million in part due to settlements on claims during the year and cash used of $65 million, respectively.

Investing Activities

For the fiscal year ended December 29, 2023, net cash provided by investing activities was $22 million, which primarily consisted of cash proceeds from the sale of non-core business contracts of $30 million, proceeds from sale of assets of $6 million ($4 million due to sale of an office building), and return of investment in unconsolidated joint ventures of $16 million, partially offset by unconsolidated joint venture equity contributions of $23 million and purchases of property, plant and equipment of $7 million.

For the fiscal year ended December 30, 2022, net cash provided by investing activities was $4 million, which primarily consisted of a net working capital settlement in association with the AECOM Sale Transactions of $32 million and proceeds from sale of assets of $2 million, partially offset by unconsolidated joint venture equity contributions of $20 million, and purchases of property, plant and equipment of $10 million.

For the fiscal year ended January 3, 2025, net cash provided by investing activities was $15 million, which was primarily driven by proceeds from the sale of assets of $32 million, partially offset by purchases of property, plant and equipment of $10 million and contributions to unconsolidated joint ventures of $6 million.

ventures of $16 million, partially offset by unconsolidated joint venture equity contributions of $23 million and purchases of property, plant and equipment of $7 million.

Financing Activities

For the fiscal year ended January 3, 2025, net cash used in financing activities was $22 million, which primarily consisted of net repayments to credit facilities of $20 million and $2 million of debt issuance costs incurred for the Credit Agreement and associated amendment entered into during the second and third quarters of 2024.

For the fiscal year ended December 29, 2023, net cash provided by financing activities was $48 million, which primarily consisted of net proceeds from the Revolving Credit Facility borrowings of $30 million and IPO proceeds of $25 million, partially offset by payments of IPO costs of $6 million.

For the fiscal year ended December 30, 2022, net cash used in financing activities was $1 million, which primarily consisted of distributions to non-controlling interests.

Letters of Credit

We obtain standby letters of credit as required from time to time by our insurance carriers.

At December 29, 2023 and December 30, 2022, the total amounts of standby letters of credit outstanding were $0 and $8 million, respectively.

The Company did not have any letters of credit outstanding as of January 3, 2025 or December 29, 2023.

Contractual Obligations

Contractual obligations of the Company consisted of liabilities associated with remaining lease payments through the fiscal years ending through December 31, 2028 of approximately $10 million, $8 million, $4 million, $2 million and $2 million, respectively, and approximately $1 million in the aggregate thereafter based on balances outstanding as of December 29, 2023.

Contractual obligations of the Company consisted of liabilities associated with remaining lease payments through the fiscal years ending December 28, 2029 of approximately $7 million, $5 million, $4 million, $4 million and $3 million, respectively, and approximately $3 million in the aggregate thereafter based on balances outstanding as of January 3, 2025.

See Note 10 - Leases, of the notes to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

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Substantially all of the contracts in our backlog may be canceled or modified at the election of the customer.

As of December 29, 2023, we had a backlog of projects of approximately $1.1 billion, with over half of that amount comprised of water projects.

As of January 3, 2025, we had a backlog of projects of approximately $822 million, with over half of that amount comprised of water projects.

We believe we have the ability to self-perform many of these projects, enabling us to compete for complex projects and differentiating us from many of our competitors.

Self-performance also enables us to better control the critical aspects of our projects, reducing the risk of cost and schedule overruns.

The following table presents the Company's percentage of backlog by customer type, contract type and backlog recognized:

(In millions)

December 29, 2023

The following tables present the Company's percentage of backlog by customer type, contract type and backlog recognized:

January 3, 2025

Backlog by customer type:

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Total backlog

(In millions)

December 29, 2023

January 3, 2025

Backlog by contract type:

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Total backlog

(In millions)

December 29, 2023

January 3, 2025

Estimated backlog recognized:

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Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 29, 2023 and December 30, 2022

Consolidated Statements of Operations for the Fiscal Years Ended December 29, 2023 and December 30, 2022

Consolidated Statements of Stockholders’ Equity for the Fiscal Years Ended December 29, 2023 and December 30, 2022

Consolidated Statements of Cash Flows for the Fiscal Years Ended December 29, 2023 and December 30, 2022

Consolidated Balance Sheets as of January 3, 2025 and December 29, 2023

Consolidated Statements of Operations for the Fiscal Years Ended January 3, 2025 and December 29, 2023

Consolidated Statements of Stockholders’ (Deficit) Equity for the Fiscal Years Ended January 3, 2025 and December 29, 2023

Consolidated Statements of Cash Flows for the Fiscal Years Ended January 3, 2025 and December 29, 2023

Notes to Consolidated Financial Statements

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Shimmick Corporation (the "Company") as of December 29, 2023 and December 30, 2022, the related consolidated statements of operations, stockholders’ equity, and cash flows, for each of the two fiscal years in the period ended December 29, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2023 and December 30, 2022, and the results of its operations and its cash flows for each of the two fiscal years in the period ended December 29, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Shimmick Corporation and subsidiaries (the "Company") as of January 3, 2025 and December 29, 2023, the related consolidated statements of operations, stockholders’ (deficit) equity, and cash flows, for each of the two fiscal years in the period ended January 3, 2025, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 3, 2025 and December 29, 2023, and the results of its operations and its cash flows for each of the two fiscal years in the period ended January 3, 2025, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Deferred tax assets

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

CURRENT LIABILITIES

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Commitments and Contingencies (Note 12)

STOCKHOLDERS' EQUITY

Common stock, $ 0.01 par value, 100,000,000 shares authorized as of December 29, 2023 and December 30, 2022;

25,493,877 and 21,908,800 shares issued and outstanding as of December 29, 2023 and December 30, 2022, respectively

STOCKHOLDERS' (DEFICIT) EQUITY

Common stock, $ 0.01 par value, 100,000,000 shares authorized as of January 3, 2025 and December 29, 2023;

34,271,214 and 25,493,877 shares issued and outstanding as of January 3, 2025 and December 29, 2023, respectively

Additional paid-in-capital

Retained earnings

Retained (deficit) earnings

Non-controlling interests

TOTAL STOCKHOLDERS' EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

TOTAL STOCKHOLDERS' (DEFICIT) EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

See accompanying notes to the consolidated financial statements.

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Selling, general and administrative expenses

Amortization of intangibles

ERP pre-implementation asset impairment and associated costs

Total operating expenses

Equity in earnings of unconsolidated joint ventures

Equity in (loss) earnings of unconsolidated joint ventures

Gain on sale of assets

Income from operations

(Loss) income from operations

Interest expense

Other expense, net

Net (loss) income before income tax

Income tax expense

Net (loss) income

Net income (loss) attributable to non-controlling interests

Net (loss) income attributable to Shimmick Corporation

Net (loss) income attributable to Shimmick Corporation per common share

Net loss before income tax

Income tax benefit

Net income attributable to non-controlling interests

Net loss attributable to Shimmick Corporation

Net loss attributable to Shimmick Corporation per common share

See accompanying notes to the consolidated financial statements.

Shimmick Corporation

Consolidated Statements of Stock holders' Equity

Consolidated Statements of Stock holders' (Deficit) Equity

(In thousands, except share data)

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Stockholders'

(Deficit) Earnings

(Deficit) Equity

Balance as of December 30, 2022

Net income (loss)

Net (loss) income

Initial Public Offering, net of costs

Exercise of stock options

Stock-based compensation

Contributions from non-controlling interests

Distributions to non-controlling interests

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Stockholders'

(Deficit) Earnings

(Deficit) Equity

Balance as of December 29, 2023

Net (loss) income

Initial Public Offering, net of costs

Exercise of stock options

Issuance of common stock

Stock-based compensation

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Distributions to non-controlling interests

Balance as of December 29, 2023

Balance as of January 3, 2025

See accompanying notes to the consolidated financial statements.

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Cash Flows From Operating Activities

Net (loss) income

Adjustments to reconcile net (loss) income to net cash used in operating

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation

Depreciation and amortization

Equity in earnings of unconsolidated joint ventures

Equity in loss (earnings) of unconsolidated joint ventures

Return on investment in unconsolidated joint ventures

ERP pre-implementation asset impairment

Gain on sale of assets

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Cash Flows From Investing Activities

Net working capital settlement in association with business

Purchases of property, plant and equipment

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Cash Flows From Financing Activities

Payments on finance lease obligation

Net borrowings on revolving credit facility

Contributions from non-controlling interests

Distributions to non-controlling interests

Net borrowings on Credit Agreement

Net (repayments of) borrowings on Revolving Credit Facility

Proceeds from IPO

Payments of IPO costs

Net cash provided by (used in) financing activities

Net (decrease) increase in cash, cash equivalents and restricted cash

Net cash (used in) provided by financing activities

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

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In 2017, AECOM acquired Shimmick and consolidated it with its existing construction services, which included former legacy construction operations from Morrison Knudsen, Washington Group International, and others.

In January 2021, we consummated the AECOM Sale Transactions and began operating as an independent company under new private ownership (the "AECOM Sale Transactions").

In January 2021, we consummated the AECOM Sale Transaction and began operating as an independent company under new private ownership (the "AECOM Sale Transaction").

The accompanying consolidated financial statements include the accounts of Shimmick Corporation and its subsidiaries, unless otherwise indicated.

On September 12, 2023, the Company changed its name from SCCI National Holdings, Inc.

to Shimmick Corporation.

On November 16, 2023, Shimmick completed its initial public offering of 3,575,000 shares of common stock at a price to the public of $ 7.00 per share (the "IPO").

The net proceeds to Shimmick from the IPO were approximately $ 19 million after deducting underwriting discounts and commissions and other offering expenses of $ 6 million.

Shimmick’s common stock began trading on the NASDAQ Global Market on November 14, 2023.

Shimmick’s common stock began trading on November 14, 2023 and is currently listed for trading on the Nasdaq Capital Market under the symbol "SHIM".

Basis of Presentation and Summary of Significant Accounting Policies

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Change in Presentation

Certain prior period balances in the consolidated balance sheets and statements of cash flows and accompanying notes have been combined or rounded to conform to current period presentation.

These changes had no impact on net (loss) income, cash flows, assets and liabilities, or equity previously reported.

Certain prior period balances in the consolidated statements of operations and statements of cash flows and accompanying notes have been combined or rounded to conform to current period presentation.

These changes had no impact on net loss, cash flows, assets and liabilities, or (deficit) equity previously reported.

On October 23, 2023, the Board of Directors (the "Board") approved an amendment to the Company’s Certificate of Incorporation in order to effect a stock split of the Company’s Common Stock.

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The Company’s fiscal years consist of 52 or 53 weeks, ending on the Friday closest to December 31.

Fiscal year 2024 commenced on December 30, 2023 and ended on January 3, 2025.

Fiscal year 2023 commenced on December 31, 2022 and ended on December 29, 2023.

Fiscal year 2022 commenced on January 1, 2022 and ended on December 30, 2022.

Use of Estimates

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• accruals for estimated liabilities, including litigation accruals;

• fair value of assets and liabilities acquired under the Purchase Agreement;

• amounts owed to AECOM for contingent consideration.

Revenue Recognition

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Under time-and-materials price contracts, the Company negotiates hourly billing rates and charges its customers based on the actual time that it expends on a project.

In addition, customers reimburse the

Company for materials and other direct incidental expenditures incurred in connection with its performance under the contract.

In addition, customers reimburse the Company for materials and other direct incidental expenditures incurred in connection with its performance under the contract.

The Company applies a practical expedient to recognize revenue in the amount in which it has the right to invoice if its right to consideration is equal to the value of performance completed to date.

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There can be no assurance that audits by the DCAA or other governmental agencies will not result in material cost disallowances in the future.

There are no ongoing audits and or material adjustments related to noncompliance are required.

There are no ongoing audits or material adjustments related to noncompliance required.

The Company is in compliance with all federal and state regulations and is not aware of any material adjustments as of the consolidated balance sheet dates.

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Some of the Company’s joint ventures have no employees and minimal operating expenses.

For these joint ventures, the Company’s employees perform work for the joint venture, which is then billed to a third-party

client by the joint venture.

For these joint ventures, the Company’s employees perform work for the joint venture, which is then billed to a third-party client by the joint venture.

For consolidated joint ventures of this type, the Company records the entire amount of the services performed and the costs associated with these services, including the services provided by the other joint venture partners, in the Company’s results of operations.

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The Company’s cash equivalents include highly liquid investments which have an initial maturity of three months or less.

Cash and cash equivalents as of December 29, 2023 and December 30, 2022, include $ 1 million and $ 4 million, respectively, held by consolidated joint ventures that may not be distributed or used for certain other payments prescribed in the joint venture agreement without consent of the joint venture partners.

Cash and cash equivalents as of January 3, 2025 and December 29, 2023, include $ 2 million and $ 1 million, respectively, held by consolidated joint ventures that may not be distributed or used for certain other payments prescribed in the joint venture agreement without consent of the joint venture partners.

These balances are presented as restricted cash within the consolidated balance sheets.

Accounts Receivable and Allowance for Doubtful Accounts

The Company records its accounts receivable net of an allowance for doubtful accounts.

This allowance for doubtful accounts is estimated based on management’s evaluation of the contracts involved and the client’s ability and willingness to pay.

Allowances for doubtful accounts have been determined through specific identification of amounts considered to be uncollectible and potential write-offs, plus a non-specific allowance for other amounts for which some potential loss has been determined to be probable as of the consolidated balance sheet date based on current and past experience.

Accounts Receivable and Allowance for Credit Losses

The Company records its accounts receivable net of an allowance for credit losses.

This allowance for credit losses is estimated based on management’s evaluation of the contracts involved and the client’s ability and willingness to pay.

Allowances for credit losses have been determined through specific identification of amounts considered to be uncollectible and potential write-offs, plus a non-specific allowance for other amounts for which some potential loss has been determined to be probable as of the consolidated balance sheet date based on current and past experience.

Property, Plant and Equipment

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For property, plant and equipment assets to be disposed, impairment losses are recognized at the lower of the carrying amount or fair value less cost to sell.

There was no impairment to property, plant and equipment for the fiscal years ended December 29, 2023 and December 30, 2022.

Other than the enterprise resource planning (ERP) system impairment discussed in Note 5 - Property, Plant and Equipment and Intangible Assets, there was no impairment to property, plant and equipment for the fiscal years ended January 3, 2025 and December 29, 2023.

Intangible Assets

3 unchanged sentences

The Company considers events or circumstances that may warrant revised estimates of useful lives or that may indicate impairment.

There was no impairment to intangible assets for the fiscal years ended December 29, 2023 or December 30, 2022.

There was no impairment to intangible assets for the fiscal years ended January 3, 2025 and December 29, 2023.

Insurance Reserves

7 unchanged sentences

Operating lease liabilities are recognized as the present value of the future lease payments over the lease term as of the commencement date.

Operating lease expense is recognized based on the undiscounted future lease payments over

the remaining lease term on a straight-line basis.

Operating lease expense is recognized based on the undiscounted future lease payments over the remaining lease term on a straight-line basis.

Lease expense related to short-term leases is recognized on a straight-line basis over the lease term.

11 unchanged sentences

The classification of a financial asset or liability within the hierarchy is determined based on the lowest level (least observable) input that is significant to the fair value measurement.

Other than the contingent consideration, there were no assets and liabilities measured at fair value on a recurring basis as of December 29, 2023 or December 30, 2022.

Other than the contingent consideration, there were no assets and liabilities measured at fair value on a recurring basis as of January 3, 2025 or December 29, 2023.

The Company accounts for income taxes using the asset and liability method.

8 unchanged sentences

The Company records uncertain tax positions using a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in financial statements.

Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”) in making decisions on how to allocate resources and assess performance.

Based on how the Company’s Chief Executive Officer as the CODM reviews financial performance and allocates resources on a recurring basis, the Company has one operating segment and one reportable segment.

Reportable Segment Information

The Company is organized and operates as one operating and reportable segment:

infrastructure solutions.

All of the Company's revenue comes from customers in the United States.

This determination is based on the management approach which designates internal information regularly available to the Chief Operating Decision Maker (“CODM”) for making decisions and assessing performance as the source of determination of the Company’s reportable segments.

The Company’s CODM, the Chief Executive Officer, reviews financial information presented on a consolidated basis for the purpose of making operating decisions and assessing financial performance.

The accounting policies of the one reportable segment are the same as those described in the summary of significant accounting policies.

The CODM uses net income, as reported in our consolidated statements of operations, to measure segment profit or loss, assess performance, and make strategic capital resources allocations.

The measure of segment assets is reported on our consolidated balance sheets as total assets.

The significant expense categories regularly provided to the CODM are the expenses as noted on the face of the consolidated statements of operations.

Stock-Based Compensation

3 unchanged sentences

See Note 8 - Stock Compensation, for discussion of stock-based compensation and incentive plans.

Accounting Standards Not Yet Adopted

Accounting pronouncements not listed below were assessed and determined to be not applicable or are expected to have minimal impact on the consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07 to enhance disclosures of significant expense and segment profitability categories and amounts for reportable business segments.

The amendment is effective in annual periods beginning after December 15, 2023 and subsequent interim periods, with early adoption permitted.

The Company is currently evaluating the provisions of the amendments and the impact on its future consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09 to improve disclosures and presentation requirements to the transparency of the income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction.

The amendment is effective in annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the provisions of the amendments and the impact on it future consolidated financial statements.

Recently Adopted Accounting Standards

In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires the Company to expand the breadth and frequency of segment disclosures to include additional information about significant segment expenses, the chief operating decision maker (CODM) and other items, and also requires the annual disclosures on an interim basis.

This guidance is effective for annual periods beginning after December 15, 2023, with early adoption permitted.

The Company adopted ASU 2023-07 as of January 3, 2025 with no significant impact on its consolidated financial statements and related disclosures.

Recently Issued Accounting Standards

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes:

Improvements to Income Tax Disclosures , which requires disaggregation of certain components included in the Company’s effective tax rate and income taxes paid disclosures.

The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses, which requires public companies to disclose additional information about certain expenses in the notes to financial statements, enhancing transparency and providing more detailed insights for investors and other stakeholders.

This guidance is effective for annual periods beginning after December 15, 2026, and quarterly periods thereafter.

The Company is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements and related disclosures.

Revenue, Receivables and Contract Assets and Liabilities

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Total revenue

Projects started after the AECOM Sale Transactions ("Shimmick Projects") have focused on water infrastructure and other critical infrastructure.

Projects that started prior to consummation of the AECOM Sale Transactions are referred to as "Legacy Projects".

The following table presents the Company’s revenue disaggregated by Shimmick Projects and Legacy Projects:

Projects started after prior ownership ("Shimmick Projects") have focused on water infrastructure and other critical infrastructure.

Projects that started under prior ownership are referred to as "Legacy Projects".

Projects that focus on foundation drilling are referred to as "Foundations Projects".

The following table presents the Company’s revenue disaggregated by Shimmick Projects, Foundations Projects and Legacy Projects:

Fiscal Year Ended

2 unchanged sentences

Legacy Projects

Foundations Projects

Total revenue

Remaining performance obligations

The Company had $ 1.1 billion of remaining performance obligations yet to be satisfied as of December 29, 2023.

Our remaining performance obligations have a weighted average life of 2.0 years as of December 29, 2023.

The Company had $ 767 million of remaining performance obligations yet to be satisfied as of January 3, 2025.

Our remaining performance obligations have a weighted average life of 1.9 years as of January 3, 2025.

Contract Balances

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Unless reserved, the Company assumes that all amounts retained by customers under such provisions are fully collectible.

These assets and liabilities are reported in the consolidated balance sheets within “Contract assets, current,” “Contract assets, non-current,” “Contract liabilities, current" and “Contract liabilities, non-current." Costs and estimated earnings in excess of billings on uncompleted contracts consists of revenue recognized in excess of billings.

These assets and liabilities are reported in the consolidated balance sheets within “Contract assets, current,” “Contract assets, non-current,” “Contract liabilities, current" and “Contract liabilities, non-current." A certain portion of our retainage receivable contract asset balance is non-current, and therefore is not presented on a net basis against the associated contract liabilities that are current.

Costs and estimated earnings in excess of billings on uncompleted contracts consists of revenue recognized in excess of billings.

Billings on uncompleted contracts in excess of costs and estimated earnings consists of billings in excess of revenue recognized.

The Company recognized revenue of $ 73 million during the fiscal year ended December 29, 2023 that was included in contract liabilities as of December 30, 2022.

The Company recognized revenue of $ 45 million during the fiscal year ended January 3, 2025 that was included in contract liabilities as of December 29, 2023.

The Company’s timing of revenue recognition may not be consistent with its rights to bill and collect cash from its clients.

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Accounts receivable, net

Substantially all contract assets as of December 29, 2023 and December 30, 2022 are expected to be collected within the Company’s estimated operating cycle, except for retainage and claims pertaining to certain contracts.

Substantially all contract assets as of January 3, 2025 and December 29, 2023 are expected to be collected within the Company’s estimated operating cycle, except for retainage and claims pertaining to certain contracts.

The Company’s operating cycle may extend beyond one year.

4 unchanged sentences

Significant Customers as a Percentage of Accounts Receivable, Net

As of December 29, 2023

As of January 3, 2025

As of December 29, 2023

Customer three

Significant Customers as a Percentage of Revenue

Fiscal Year Ended December 29, 2023

Fiscal Year Ended January 3, 2025

Customer three

Customer four

Fiscal Year Ended December 29, 2023

Customer three

Customer four

Revisions in Estimates

Changes in contract estimates resulted in net decreases in gross margin of $ 63 million for the fiscal year ended January 3, 2025, primarily due to settlements of claims on two large projects and increased forecasted costs to complete on loss projects.

Changes in contract estimates resulted in net decreases in gross margin of $ 10 million for the fiscal year ended December 29, 2023, primarily due to increased forecasted costs to complete and an agreed upon contract settlement lower than previously estimated, partially offset by increases in gross margin on an outstanding claim.

The Company’s results of operations were materially impacted by an increase in the forecasted costs to complete on projects associated with a canal lock chamber, waterway canal and water desalination which reduced gross margin by a total of $ 18 million in fiscal year 2022.

The increases in forecasted costs were primarily due to significantly reduced productivity and schedule delays as a result of the COVID-19 pandemic, unexpected underwater soil conditions, project design modifications and associated scheduling delays.

Joint Ventures and Variable Interest Entities

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Cost of revenue

Other expense

Net (loss) income

Contractually required support provided to the Company’s joint ventures is discussed in Note 12 - Commitments and Contingencies.

4 unchanged sentences

(In thousands)

Amounts included in the consolidated balance sheets related to services provided to unconsolidated joint ventures for the periods ended December 29, 2023 and December 30, 2022 are as follows:

Amounts included in the consolidated balance sheets related to services provided to unconsolidated joint ventures for the years ended January 3, 2025 and December 29, 2023 are as follows:

(In thousands)

1 unchanged sentence

Property, Plant and Equipment and Intangible Assets

The following table summarizes the components of property, plant and equipment as of December 29, 2023 and December 30, 2022.

December 29, 2023

The following tables summarize the components of property, plant and equipment as of January 3, 2025 and December 29, 2023:

January 3, 2025

December 29, 2023

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Depreciation is recorded within cost of revenue and selling, general and administrative expenses and is calculated using the straight-line method over the estimated useful lives of the assets, or in the case of leasehold improvements and capitalized leases, the lesser of the remaining term of the lease or its estimated useful life.

The following table presents the Company’s finite-lived intangible assets, including the weighted- average useful lives for each major intangible asset category and in total:

December 29, 2023

During the fiscal year ended January 3, 2025, Shimmick completed the sale-leaseback of the Company's equipment yard in Tracy, California.

The agreement consummated the sale of the equipment yard for $ 20.5 million and allows us to continue using the property pursuant to a separately executed seven-year lease.

The Company received net proceeds of $ 17 million, after adjustments for prepaid rent through February 2026 and related closing costs, which were used to repay borrowings under the Revolving Credit Facility.

As a result of the sale, the Company recorded a gain of $ 17 million in gain on sale of assets within the consolidated statements of operations.

During the fiscal year ended January 3, 2025, Shimmick made the strategic decision to enhance the Company’s current ERP system rather than implementing a new platform which, due to prior capitalized pre-implementation

costs and remaining contractual obligations of $ 5 million included in accrued expenses in the accompanying consolidated balance sheets, resulted in a charge of $ 16 million recorded in the fiscal year ended January 3, 2025.

The following tables present the Company’s finite-lived intangible assets, including the weighted- average useful lives for each major intangible asset category and in total:

January 3, 2025

Weighted Average Remaining Useful Life

11 unchanged sentences

Customer contracts

Amortization of intangibles was $ 3 million for each of the fiscal years ended December 29, 2023 and December 30, 2022 and is recorded as amortization of intangibles within the consolidated statements of operations.

Amortization of intangibles was $ 3 million for each of the fiscal years ended January 3, 2025 and December 29, 2023 and is recorded in selling, general and administrative expenses within the consolidated statements of operations.

The Company’s estimated aggregate remaining amortization is as follows:

(In thousands)

Significant Transaction

The Company executed a $ 35 million Membership Interest Purchase Agreement on June 30, 2023 for the sale of non-core business contracts.

A gain on the sale of non-core business contracts of $ 30 million was recorded within gain on sale of assets after consummation of the transaction during the third quarter of 2023 after a $ 5 million adjustment to the purchase price.

The company received $ 30 million in cash during the third quarter of 2023.

Total debt outstanding is presented on the consolidated balance sheets as follows:

(In thousands)

December 29, 2023

January 3, 2025

December 29, 2023

Credit Agreement

Revolving Credit Facility

2 unchanged sentences

Revolving Credit Facility

On March 27, 2023, we entered into a Revolving Credit Facility Agreement (“Revolving Credit Facility”) with MidCap Financial Services, LLC, which originally provided a total commitment of $ 30 million.

The Revolving Credit Facility was subsequently amended on June 30, 2023 and September 22, 2023.

On March 27, 2023, we entered into the Revolving Credit Facility with MidCap Financial Services, LLC, which originally provided a total commitment of $ 30 million.

The Revolving Credit Facility has been subsequently amended, most recently on September 25, 2024 .

As amended, the Revolving Credit Facility provides for a total commitment of $ 15 million and bears interest at an annual rate of adjusted term SOFR, subject to a 1.0 % floor, plus 5.50 %.

Further, the Revolving Credit Facility is subject to an annual collateral management fee of 0.50 % and an annual unused line fee of 0.50 %.

The Revolving Credit Facility Agreement matures on March 27, 2028 and requires the Company to maintain a leverage ratio that does not exceed 1.75 to 1.0.

The Company is not aware of any instances of noncompliance with financial covenants as of December 29, 2023.

Following the IPO, we used the net proceeds we received from our IPO, together with cash on hand, to repay all outstanding borrowing under our Revolving Credit Facility.

Subsequent to the repayment, we drew $ 30 million on our Revolving Credit Facility to fund working capital requirements.

Project Financing Agreement

On March 26, 2024, we entered into a Project Financing Agreement with Berkshire Hathaway Specialty Insurance Company, National Liability & Fire Insurance Company and National Indemnity Company (collectively "Berkshire") which provides an advance of up to $ 25 million in exchange for security interest in the assigned and secured collateral specified in the Project Financing Agreement.

If drawn, the advance will be used to satisfy bond and bonded contract obligations and bears interest at an annual rate of adjusted term SOFR, subject to a 1.0 % floor, plus 4.50 %.

All funds provided by Berkshire under the Project Financing Agreement as well as all accrued interest are due and payable in full on March 28, 2028.

The Revolving Credit Facility includes certain financial operating covenants, including a minimum liquidity requirement of $ 7.5 million.

We are not aware of any instances of noncompliance with the key financial covenants as of January 3, 2025.

The Revolving Credit Facility was terminated on March 13, 2025 upon execution of the ACF Credit Agreement (as defined below).

During the fiscal year ended January 3, 2025, we repaid $ 30 million of the amount outstanding under the Revolving Credit Facility and paid $ 2 million in cash interest.

Credit Agreement

As amended, the Credit Agreement provides borrowing capacity up to $ 60 million.

The obligations under the Credit Agreement bear interest at a per annum rate equal to one month Term SOFR (as defined in the Credit Agreement), subject to a 1.00 % floor, plus 3.50 %.

Interest on any outstanding amounts drawn under the Credit Agreement will be payable, in kind or in cash at our election, on the last day of each month and upon prepayment.

Payment-in-kind interest accrued and capitalized shall not constitute loan outstanding amounts for the purposes of calculating loan availability.

During the fiscal year ended January 3, 2025, the Company paid $ 0.3 million in cash interest and accrued $ 2 million in non-cash payment-in-kind interest.

The Credit Agreement matures on May 20, 2029 (the “Maturity Date”), and the Borrowers may borrow, repay and reborrow amounts under the Credit Agreement until the Maturity Date.

Obligations of the Borrowers under the Credit Agreement are guaranteed by us and secured by a lien on substantially all of our and the Borrowers' assets.

In addition, the Credit Agreement contains a maximum leverage ratio covenant as tested quarterly commencing with the close of the first quarter of 2026 .

The Credit Agreement also contains representations and warranties and event of default provisions customary for a transaction of this type.

Subsequent to January 3, 2025, the Company was not in compliance with a non-financial covenant regarding entering into material non-bonded contracts as set forth in the Credit Agreement.

As of January 3, 2025 and following the March 12, 2025 amendment, we are not aware of any instances of noncompliance with non-financial or financial covenants.

As of January 3, 2025, $ 9 million was outstanding under the Credit Agreement.

The transactions with AECOM also included a mutual release and settlement of certain claims with AECOM and a corresponding agreement to issue 7,745,000 shares of our common shares to AECOM.

5,144,622 of the common shares were issued on May 20, 2024 and issuance of the remaining 2,600,378 shares was completed following stockholder approval on June 26, 2024.

Of the total common shares issued, 1,036,949 were held in escrow which resulted in an AECOM voting interest of 19.6 % as of January 3, 2025.

The Company recognized a loss of $ 1 million in other expense, net within the consolidated statements of operations as a result of the share issuance which

represented the excess of the $ 13 million fair market value of the common shares at the time of issuance over the $ 12 million carrying value of the contingent consideration liabilities settled with AECOM.

ACF Credit Agreement

On March 12, 2025, we entered into a Credit Agreement (“ACF Credit Agreement”) with ACF FINCO I LP, which provides a total commitment of $ 15 million and bears interest at an annual rate of adjusted term SOFR, subject to a 2.0 % floor, plus 4.50 %.

Further, the ACF Credit Agreement is subject to an annual unused line fee of 0.50 %.

The ACF Credit Agreement includes certain financial operating covenants, including a minimum liquidity requirement of $ 5 million.

The ACF Credit Agreement matures on the earlier of March 12, 2028 or 90 days prior to the maturity date of the Credit Agreement.

The components of the provision for income taxes are as follows:

Fiscal Year Ended

December 29, 2023

January 3, 2025

December 29, 2023

6 unchanged sentences

The differences between income taxes expected at the U.S.

federal statutory income tax rate of 21 % and the reported income tax (benefit) expense are summarized as follows:

federal statutory income tax rate of 21 % and the reported income tax benefit are summarized as follows:

Fiscal Year Ended

December 29, 2023

January 3, 2025

December 29, 2023

(In thousands)

Expected income tax (benefit) expense at federal statutory rate

Expected income tax benefit at federal statutory rate

State income taxes, net of federal income tax benefit

1 unchanged sentence

Permanent items

Contingent consideration

Change in valuation allowance

4 unchanged sentences

The components of deferred tax liabilities and assets are as follows:

December 29, 2023

January 3, 2025

December 29, 2023

18 unchanged sentences

Net deferred tax assets

As of December 29, 2023 and December 30, 2022, gross deferred tax assets were $ 141 million and $ 137 million, respectively.

The Company has recorded a valuation allowance of $ 124 million and $ 118 million as of December 29, 2023 and December 30, 2022, respectively.

As of January 3, 2025 and December 29, 2023, gross deferred tax assets were $ 178 million and $ 141 million, respectively.

The Company has recorded a valuation allowance of $ 170 million and $ 124 million as of January 3, 2025 and December 29, 2023, respectively.

The Company has performed an assessment of positive and negative evidence, including the nature, frequency, and severity of cumulative financial reporting losses in recent years, the future reversal of existing temporary differences, predictability of future taxable income exclusive of reversing temporary differences of the character necessary to realize the asset, relevant carryforward periods, taxable income in carry-back years if carry- back is permitted under tax law, and prudent and feasible tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax asset that would otherwise expire.

1 unchanged sentence

The Company recognizes interest and penalties related to tax matters as a component of selling, general and administrative expenses in the accompanying consolidated statements of operations.

At December 29, 2023, the Company had U.S.

At January 3, 2025, the Company had U.S.

federal and state net operating loss (“NOL”) carryforwards of $ 189 million and $ 188 million, respectively.

1 unchanged sentence

The state NOL carryforwards have both indefinite and limited carryforward periods, depending on state jurisdictions, and expire beginning in 2036 through 2043 .

At December 29, 2023, the Company had a full valuation allowance related to the tax-effected amount of these net operating losses.

The Company had no unrecognized tax benefits recorded at December 29, 2023.

At January 3, 2025, the Company had a full valuation allowance related to the tax-effected amount of these net operating losses.

The Company had no unrecognized tax benefits recorded at January 3, 2025.

The Company files income tax returns in numerous tax jurisdictions, including the U.S.

3 unchanged sentences

In connection with the separation, the Company entered into a tax matters agreement.

Under the tax matters agreement, AECOM is generally responsible for all taxes associated with consolidated federal and state filings imposed on AECOM and its subsidiaries (including Shimmick) with respect to taxable periods ended on or prior to January 1, 2021.

Under the tax matters agreement, AECOM is generally responsible for all taxes associated with consolidated federal and state filings imposed on AECOM and

its subsidiaries (including Shimmick) with respect to taxable periods ended on or prior to January 1, 2021.

Also, pursuant to this agreement, AECOM is generally responsible for all taxes associated with separately filed state and local tax filings imposed on Shimmick and its subsidiaries with respect to taxable periods ended on or prior to January 1, 2021.

6 unchanged sentences

The maximum aggregate number of shares of Common Stock available is 3,729,149 under the 2023 Omnibus Incentive Plan (equal to ten percent (10%) of the Company’s Common Stock outstanding immediately following the completion of the Company’s IPO on November 16, 2023 plus (ii) the reserved and authorized shares for awards under the Company’s 2021 Stock Plan that were not granted as of November 13, 2023).

The maximum aggregate number of shares of Common Stock that may be issued under the 2023 Omnibus Incentive Plan will automatically increase annually on the first day of each fiscal year, beginning with the 2024 fiscal year in an amount equal to five percent (5%) of Common Stock outstanding on the last day of the immediately preceding fiscal year unless the plan administration determines that a lesser amount should instead be issued.

The maximum aggregate number of shares of Common Stock that may be issued under the 2023 Omnibus Incentive Plan automatically increases annually on the first day of each fiscal year, beginning with the 2024 fiscal year in an amount equal to five percent (5%) of Common Stock outstanding on the last day of the immediately preceding fiscal year unless the plan administration determines that a lesser amount should instead be issued.

The shares reserved under the 2023 Omnibus Incentive Plan are for issuance of incentive instruments, including stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance units and other share-based awards.

Total compensation expense related to stock-based grants was $ 2 million for each of the fiscal years ended December 29, 2023 and December 30, 2022.

Unrecognized compensation expense related to stock-based grants to employees of Shimmick outstanding as of December 29, 2023 and December 30, 2022 was $ 3 million and $ 5 million, respectively, to be recognized on a straight-line basis over the awards’ weighted average remaining vesting period of 1.3 years and 2.3 years, respectively.

For the fiscal year ended December 29, 2023, stock option activity was as follows:

Total compensation expense related to stock-based grants was $ 6 million and $ 2 million for the fiscal years ended January 3, 2025 and December 29, 2023, respectively.

Unrecognized compensation expense related to stock-based grants to employees of Shimmick outstanding as of January 3, 2025 and December 29, 2023 was $ 6 million and $ 3 million, respectively, to be recognized on a straight-line basis over the awards’ weighted average remaining vesting period of 0.9 years and 1.3 years, respectively.

For the fiscal year ended January 3, 2025, stock option activity was as follows:

Stock Options

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Outstanding as of December 29, 2023

Exercisable as of December 29, 2023

Forfeited & expired

Outstanding as of January 3, 2025

Exercisable as of January 3, 2025

The following table summarizes the activities for unvested Shimmick restricted stock units for the fiscal year ended January 3, 2025:

Restricted Stock Units

Number of shares

Weighted average grant date fair value

Unvested as of December 29, 2023

Outstanding as of January 3, 2025

Ended vested as of January 3, 2025

Ended unvested as of January 3, 2025

Earnings Per Share

2 unchanged sentences

Stock options are considered dilutive whenever the exercise price is less than the average market price of the stock during the period and antidilutive whenever the exercise price exceeds the average market price of the common stock during the period.

All 4.1 and 4.5 million employee stock options were excluded from the calculation of diluted earnings per share for the fiscal years ended December 29, 2023 and December 30, 2022, respectively, as they are antidilutive to the EPS calculation.

All 3.3 million and 4.1 million employee stock options as of January 3, 2025 and December 29, 2023, respectively, and 3.0 million and 0.6 million restricted stock units as of January 3, 2025 and December 29, 2023, respectively, were excluded from the calculation of diluted earnings per share as they are antidilutive to the EPS calculation.

The computation of basic and diluted EPS is as follows:

1 unchanged sentence

(In thousands, except per share data)

Net (loss) income attributable to Shimmick Corporation

Net loss attributable to Shimmick Corporation

Numerator for basic and diluted EPS

2 unchanged sentences

Employee stock options

Restricted stock units

Dilutive potential common shares

3 unchanged sentences

(In thousands)

December 29, 2023

January 3, 2025

December 29, 2023

48 unchanged sentences

The Company sponsors a defined contribution profit sharing plan covering substantially all non-union persons employed by the Company, whereby employees may contribute a percentage of compensation, limited to maximum allowed amounts under the Internal Revenue Code.

The Company made matching contributions of $ 2 million for each of the fiscal years ended December 29, 2023 and December 30, 2022.

The Company made matching contributions of $ 2 million for each of the fiscal years ended January 3, 2025 and December 29, 2023.

Multiemployer Pension Plans

2 unchanged sentences

Under the Employee Retirement Income Security Act, a contributor to a multiemployer plan is liable, upon termination or withdrawal from a plan, for its proportionate share of a plan’s unfunded vested liability.

The Company’s aggregate contributions to these multiemployer plans were $ 15 million and $ 17 million for the fiscal years ended December 29, 2023 and December 30, 2022, respectively.

Our participation in significant plans for the fiscal years ended December 29, 2023 and December 30, 2022 is outlined in the table below.

The Company’s aggregate contributions to these multiemployer plans were $ 11 million and $ 15 million for the fiscal years ended January 3, 2025 and December 29, 2023, respectively.

Our participation in significant plans for the fiscal years ended January 3, 2025 and December 29, 2023 is outlined in the table below.

The “EIN/Pension Plan Number” column provides the Employer Identification Number (“EIN”) and the three digit plan number.

8 unchanged sentences

EIN/Pension Plan Number

FIP/RP Status Pending or Implemented

January 3, 2025

December 29, 2023

FIP/RP Status Pending or Implemented

January 3, 2025

December 29, 2023

2 unchanged sentences

Tri-State Carpenters & Joiners Pension Trust Fund

Described below (1)

Carpenters Pension Trust Fund for Northern California

Carpenters Pension Trust Fund for Northern CA

Laborers Pension Trust Fund for Northern CA

California Ironworkers Field Pension Fund

Laborers Pension Trust Fund for Northern California

Central Pension Fund of the IUOE & Participating Employers

Described below (1)

Ironworkers District Council of TN Valley & Vicinity Welfare Pension Plans

Described below (1)

Operating Engineers Trust Fund

Ironworkers District Council of TN Valley & Vicinity Welfare Pension and Annuity Plans

Described below (1)

Southwest Carpenters Pension Fund

San Diego County Construction Laborers Pension Trust Fund

Construction Laborers Pension Trust for Southern California

Described below (1)

Southern California IBEW-NECA Pension Trust Fund

Central Pension Fund of the IUOE & Participating Employers

Described below (1)

IBEW Local 595 Pension Plan

Described below (1)

Construction Laborers Pension Trust for Southern California

Southwest Carpenters Pension Fund

San Diego County Construction Laborers Pension Trust Fund

San Diego Electrical Pension Plan

Described below (1)

Southern California IBEW-NECA Pension Trust Fund

San Diego County Cement Masons Pension Plan

Described below (1)

Northern California Pipe Trades Pension Plan

Described below (1)

IBEW Local 595 Pension Plan

Contributions to other multiemployer plans

Total contributions made

(1) For the plans noted above, we have not received a funding notification that covers the fiscal year presented during the preparation of the financial statements.

(1) For the plans noted above, we have not received a funding notification that covers the fiscal year presented during the preparation of the consolidated financial statements.

Under Federal pension law, if a multiemployer pension plan is determined to be in critical or endangered status, the plan must provide notice of this status to participants, beneficiaries, the bargaining parties, the Pension Benefit Guaranty Corporation, and the Department of Labor.

13 unchanged sentences

These contracts define the conditions under which customers may make claims against the Company for liquidated damages.

Based upon the evaluation of performance and other commercial and legal analysis, management has recognized relevant probable liquidated damages as of December 29, 2023 and December 30, 2022, and believes that the ultimate resolution of such matters will not materially affect the Company's consolidated financial position, results of operations, or cash flows.

The Company has recorded contingent consideration as of December 29, 2023 and December 30, 2022 at its estimated fair value.

Based upon the evaluation of performance and other commercial and legal analysis, management has recognized relevant probable liquidated damages as of January 3, 2025 and December 29, 2023, and believes that the ultimate resolution of such matters will not materially affect the Company's consolidated financial position, results of operations, or cash flows.

The Company has recorded contingent consideration as of January 3, 2025 and December 29, 2023 at its estimated fair value.

The Company is unable to reasonably determine an estimated range of amounts of the payments that could be made due to the uncertainty of future events.

5 unchanged sentences

In the ordinary course of business and under certain contracts, the Company is required to post standby letters of credit for its insurance carriers.

At December 29, 2023 and December 30, 2022, the total amount of standby letters of credit outstanding were $ 0 and $ 8 million, respectively.

The Company did not have any letters of credit outstanding as of January 3, 2025 or December 29, 2023.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 5. Market for Registrant’s Common Equity