What changed in this filing

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Item 1A. Risk Factors

2022-03-11 compared with 2021-03-17 · 31 added, 51 removed, 349 unchanged (19% of the section changed)

6 unchanged sentences

The COVID-19 pandemic and health and safety measures intended to slow its spread have adversely affected, and may continue to adversely affect, our business, results of operations and financial condition.

The Covid-19 pandemic and efforts to limit its spread negatively impacted our business during the fiscal year ended January 1, 2021 and may continue to impact our business in the future.

In California and New York, the states in which we have historically derived a majority of our revenue, mandatory shutdown orders were issued on March 19, 2020 and March 20, 2020, respectively, negatively impacting our business, financial condition and results of operations.

The Covid-19 pandemic and efforts to limit its spread negatively impacted our business during fiscal year 2020 and continued to impact us, albeit to a lesser extent, during fiscal year 2021.

In California and New York, the states in which we have historically derived the majority of our revenue, mandatory shutdown orders were issued in March 2020.

In New York, phased re-openings began in June 2020, and all of our New York utility programs have restarted.

In California, phased re-openings began in May 2020, followed by periods of curtailments as a result of resurgences of Covid-19 cases, and subsequent re-openings.

As a result, the most significant pandemic related impacts to our business occurred in California to our direct install business.

During the last week of June 2021, our largest program for LADWP resumed, which was the last program suspended due to Covid-19.

The impact of the Covid-19 pandemic on our business subjects us to various risks and uncertainties that could materially adversely affect our business, results of operations and financial condition including:

the extent and length of shutdowns of our direct install programs for small businesses in our Energy segment, which have resulted and will continue to result in material decreases in our revenues during the period of such shutdowns and are subject to determination by governmental authorities of the states in which we operate and outside of our control;

the possibility that some of our clients will request deferral, modification or reduction in their contractual work orders with us or, in the case of those clients that we service under a purchase order model, if such clients reduce or cancel the amount of work requested relative to historical practices;

fewer subcontractors being available to complete our work if our subcontractors must limit or cease operations or declare bankruptcy as a result of the Covid-19 pandemic;

increased difficulty in estimating and controlling costs, in particular for our fixed-price contracts;

increased difficulty in our ability to make principal and interest payments on our debt obligations as they mature and our ability to comply with applicable financial covenants in our debt agreements in light of reduced revenues;

increased borrowing costs;

potential charges to our long-lived assets as a result of the measures implemented to contain the spread of Covid-19, including impairment of goodwill and other intangible assets;

potential changes to our effective tax rate and our valuation allowance against our deferred tax assets as a result of changes to our forecasted future profitability;

our clients becoming insolvent or initiating bankruptcy or similar proceedings, which would adversely affect our ability to collect contractual payments from such clients for work that may have already been completed and result in decreased revenues;

the impact on our results of operations and financial condition resulting from a temporary suspension in capital expenditures from our government clients;

increased difficulty in executing our growth strategy, which could result in fewer acquisition opportunities for us compared to historical levels;

increased employee absenteeism due to fear of infection and increased difficulty in maintaining our workforce during this uncertain time;

and the potential adverse impacting on productivity of management and our employees that are working remotely, including impacting our ability to maintain our financial reporting processes and related controls.

and increased difficulty in executing our growth strategy, which could result in fewer acquisition opportunities for us compared to historical levels.

Given the uncertainties associated with the duration of the pandemic, we cannot reasonably estimate the ultimate impacts of Covid-19 and efforts to limit its spread on our business, financial condition, results of operations or cash flows for the foreseeable future or whether our assumptions used to estimate our future liquidity requirements will be correct.

The extent of the impact of the Covid-19 pandemic on our business and financial results will depend on future developments, including the duration, severity and spread of the pandemic, health and safety actions taken to contain its spread, any possible resurgence of Covid-19 that may occur and how quickly and to what extent normal economic and operating conditions can resume within the markets in which we operate, each of which are highly uncertain at this time and outside of our control.

Even after the Covid-19 pandemic has ultimately subsided, we may continue to experience adverse impacts to our business and financial results as a result of its global economic impact,

including any economic downturn or recession that has occurred or may occur in the future.

Even after the Covid-19 pandemic has ultimately subsided, we may continue to experience adverse impacts to our business and financial results as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future.

The adverse impact of the Covid-19 pandemic on our business, results of operations and financial condition could be material.

48 unchanged sentences

Fixed price contracts require cost and scheduling estimates that are based on a number of assumptions, including those about future economic conditions, costs, and availability of labor, equipment and materials, and other exigencies.

estimate due to, among other things, unanticipated technical or equipment problems, difficulties in obtaining permits or approvals, changes in local laws or labor conditions, weather delays, changes in costs of raw materials, or the inability of our vendors or subcontractors to perform their obligations.

We could experience cost overruns if these estimates were initially inaccurate as a result of errors or ambiguities in the contract specifications, or become inaccurate as a result of a change in circumstances following the submission of the estimate due to, among other things, unanticipated technical or equipment problems, difficulties in obtaining permits or approvals, changes in local laws or labor conditions, weather delays, changes in costs of raw materials, or the inability of our vendors or subcontractors to perform their obligations.

If cost overruns occur, we could experience reduced profits or, in some cases, a loss for that project.

If a project is significant, or if there are one or more common issues that impact multiple projects, costs overruns could increase the unpredictability of our earnings, as well as have a material adverse impact on our business, results of operations and financial condition.

If a project is significant, or if there are one or more common issues that impact

multiple projects, costs overruns could increase the unpredictability of our earnings, as well as have a material adverse impact on our business, results of operations and financial condition.

Under our time-and-material contracts, we are generally paid for our efforts at negotiated hourly billing rates for our staff, plus reimbursement for subcontractors and other direct costs.

6 unchanged sentences

If a client determines not to proceed with the completion of the project or if the client defaults on its payment obligations, we may face difficulties in collecting payment of amounts due to us for the costs previously incurred or for the amounts previously expended to purchase equipment or supplies.

Supply chain constraints and labor shortages could negatively impact our business, financial condition and results of operations.

The global economy has been experiencing supply chain constraints and labor shortages.

These conditions have increased the costs for materials, other goods, and labor.

These conditions, combined with tightening labor markets resulting from elevated resignation rates among U.S.

workers, could increase the cost and difficulty of recruiting and retaining employees, which could negatively impact our operations and financial results.

Our use of the percentage-of-completion method of revenue recognition on our fixed price contracts could result in a reduction or reversal of previously recorded revenue and profits.

13 unchanged sentences

Our services involve significant risks of professional and other liabilities, which may substantially exceed the fees we derive from our services.

We maintain insurance coverage from third-party insurers as part of our overall risk

management strategy and because some of our contracts require us to maintain specific insurance coverage limits.

We maintain insurance coverage from third-party insurers as part of our overall risk management strategy and because some of our contracts require us to maintain specific insurance coverage limits.

From time to time, we assume liabilities as a result of indemnification provisions contained in our service contracts.

40 unchanged sentences

Actual, potential, and perceived conflicts limit the work we can do and, consequently, can limit our growth and adversely affect our operating results.

In addition, if we fail to address actual or potential conflicts properly, or even if we simply fail to recognize a perceived conflict, we may be in violation of our existing contracts, may otherwise incur liability, and may lose future business for not preventing the conflict from arising, and our reputation may suffer.

lose future business for not preventing the conflict from arising, and our reputation may suffer.

Particularly as we grow our commercial business, we anticipate that conflicts of interest and business conflicts will pose a greater risk.

5 unchanged sentences

making it more difficult to obtain financing in the future for working capital, capital expenditures, acquisitions or other general corporate purposes;

requiring us to use more of our excess cash flow to pay interest and principal on our debt, which will reduce the amount of money available to finance our operations and other

business activities;

requiring us to use more of our excess cash flow to pay interest and principal on our debt, which will reduce the amount of money available to finance our operations and other business activities;

increasing our vulnerability to general economic downturns and adverse industry conditions;

28 unchanged sentences

The covenants may impair our ability to finance future operations or capital needs or to engage in other favorable business activities.

Failing to comply with these covenants could result in an event of default under the Credit Agreement, which could result in us being

required to repay the amounts outstanding prior to maturity.

Failing to comply with these covenants could result in an event of default under the Credit Agreement, which could result in us being required to repay the amounts outstanding prior to maturity.

These prepayment obligations could have an adverse effect on our business, results of operations and financial condition.

1 unchanged sentence

In the event the lenders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.

Changes in banks’ inter-bank lending rate reporting practices or the method pursuant to which LIBOR is determined could impact the cost of our indebtedness.

London Interbank Offered Rate (“LIBOR”) and other indices which are deemed “benchmarks” are the subject of recent national, international, and other regulatory guidance and proposals for reform.

Some of these reforms are already effective while others are still to be implemented.

The Chief Executive of the U.K.

Financial Conduct Authority (the “FCA”), which regulates LIBOR, has announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021.

However, for U.S dollar LIBOR, it now appears that the relevant date may be deferred to June 30, 2023 for certain lengths of time to maturity (including overnight and one, three, six and 12 months), at which time the LIBOR administrator has indicated that it intends to cease publication of U.S.

dollar LIBOR.

Despite this potential deferral, the LIBOR administrator has advised that no new contracts using U.S.

dollar LIBOR should be entered into after December 31, 2021.

These actions indicate that the continuation of U.S.

LIBOR on the current basis cannot and will not be guaranteed after June 30, 2023.

Moreover, it is possible that U.S.

LIBOR will be discontinued or modified prior to June 30, 2023.

At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be implemented in the United Kingdom or elsewhere.

All of our debt outstanding under our credit agreement as of January 1, 2021 bears interest at a floating rate that uses LIBOR as the applicable reference rate to calculate the interest.

Our credit agreement provides that, if the administrative agent has determined that adequate means do not exist for ascertaining LIBOR or the lenders have advised the administrative agent that (i) LIBOR does not adequately and fairly reflect the cost to lenders for maintaining their loans or (ii) making or funding LIBOR loans has become impracticable for the lenders, then, unless we amend the credit agreement to replace LIBOR with an alternative reference rate, all of our outstanding loans under the credit agreement will be converted to Base Rate Loans and the component of the Base Rate based upon LIBOR will not be used in any determination of the Base Rate.

Further, the lenders under our credit agreement will no longer be obligated to make loans using LIBOR as the applicable reference rate.

Uncertainty as to the nature of potential changes to LIBOR, fallback provisions, alternative reference rates or other reforms could adversely impact our interest expense on our floating rate debt that currently uses LIBOR as the applicable reference rate.

In addition, any alternative reference rates to LIBOR may result in interest that does not correlate over time with the payments that would have been made on our indebtedness if LIBOR was available in its current form.

Further, the discontinuance or modification of LIBOR and uncertainty of an alternative reference rate may result in the increase in the cost of future indebtedness, which could have a material adverse effect on our financial condition, cash flow and results of operations.

Risks Related to Our Clients and Our Projects

15 unchanged sentences

A number of factors affect our ability to win new contracts and renew existing contracts, including, among other things, market conditions, financing arrangements, required governmental approvals, our client relationships and professional reputation.

For example, a client may require us to provide a bond or letter of credit to protect the client should we fail to perform under the terms of the contract.

For example, a client may require us to provide a bond or letter of credit to protect the client should we fail to perform under

the terms of the contract.

If negative market conditions arise, or if we fail to secure adequate financial arrangements or the required government approval, we may not be able to pursue particular projects, which could adversely affect our business, results of operations and financial condition.

15 unchanged sentences

tax jurisdictions.

in federal, state and local tax laws and regulations could adversely affect our business, results of operations and financial condition.

Changes in federal, state and local tax laws and regulations could adversely affect our business, results of operations and financial condition.

Because we primarily provide services to municipalities, public utilities and other public agencies, we are more susceptible to the unique risks associated with government contracts.

11 unchanged sentences

Each year, client funding for some of our government contracts may directly or indirectly rely on government appropriations or public-supported financing.

Legislatures may appropriate funds for a given project on a year-by-year basis, even though the project may take more than one year to perform.

Legislatures may appropriate funds for a given project on a

year-by-year basis, even though the project may take more than one year to perform.

In addition, public-supported financing such as state and local municipal bonds may be only partially raised to support existing projects.

74 unchanged sentences

To the extent economic conditions that would impact the future operations of our reporting units change, our goodwill may be deemed to be impaired, and we would be required to record a non-cash charge that could result in a material adverse effect on our business, results of operations and financial condition.

We had no goodwill impairment in fiscal 2020, 2019, or fiscal 2018.

We had no goodwill impairment in fiscal 2021, 2020, or 2019.

Risks Related to Our Regulatory Environment

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Many investment funds focus on positive ESG business practices and sustainability scores when making investments and may consider a company’s ESG or sustainability scores as a reputational or other factor in making an investment decision.

In addition, investors, particularly institutional investors, use these scores to benchmark companies against their peers and if a company is perceived as lagging, these investors may engage with such company to improve ESG disclosure or performance and may also make voting decisions, or take other actions, to hold these companies and their boards of directors accountable.

In addition, investors, particularly institutional investors, use these scores to benchmark companies against their peers and if a company is

perceived as lagging, these investors may engage with such company to improve ESG disclosure or performance and may also make voting decisions, or take other actions, to hold these companies and their boards of directors accountable.

Board diversity is an ESG topic that is, in particular, receiving heightened attention by investors, shareholders, lawmakers and listing exchanges.

8 unchanged sentences

In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace or remove our board of directors.

These provisions include eliminating the ability of stockholders to call special meetings

of stockholders;

These provisions include eliminating the ability of stockholders to call special meetings of stockholders;

requiring at least a supermajority vote of the outstanding shares of our common stock for stockholders to amend our bylaws or certain provisions of our certificate of incorporation;

12 unchanged sentences

We must ensure that we are at all times compliant with various privacy laws, rules, and regulations.

The risk of failing to comply with these laws, rules, and regulations increases as we continue to expand.

risk of failing to comply with these laws, rules, and regulations increases as we continue to expand.

We also rely in part on third-party software and information technology vendors to run certain parts of our information technology systems.

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors