Financial Risks and Conditions - The company may be required to make additional payments to AECOM under certain contractual arrangements, which could adversely impact its business [109]. - AECOM serves as the credit support provider for surety bonds related to the company's Legacy Projects; any financial distress at AECOM could materially affect the company's operations [110]. - The company is dependent on a limited number of customers, and the loss of business from any significant customer could materially affect its financial condition [118]. - The company may need to raise additional capital for working capital, capital expenditures, and acquisitions, which could impair operational capabilities if not obtained on favorable terms [137]. - The company’s financial results could be impacted by uncertainty in U.S. trade policy, including changes in tariffs and trade agreements [154]. - The company may face challenges in meeting financial covenants due to events beyond its control, which could lead to an event of default under debt agreements [136]. - Changes in tax laws could increase the company's tax burden and adversely affect its financial condition [164]. - The company has incurred increased costs associated with being a public entity, including compliance with Sarbanes-Oxley Act requirements, which diverts management's focus from revenue-generating activities [173]. - The company may face legal proceedings and liability claims that could reduce profits and impact cash flow [165]. Operational Risks - The timing of project awards is unpredictable and can significantly impact the company's revenue and earnings, as a substantial portion of revenue is generated from large-scale project awards [112]. - The company may incur costs related to maintaining equipment and work crews in anticipation of future contracts, which could adversely affect anticipated profits if contracts are delayed [113]. - Delays in revenue, earnings, and cash flows can occur due to various factors, including adverse weather conditions and labor shortages, impacting current and future results [114]. - Strikes or work stoppages, despite existing agreements prohibiting them, could negatively impact operations and customer relationships [119]. - The company relies on third-party subcontractors and suppliers for materials, and any inability to secure these could impair contract completion and profitability [121]. - The company is exposed to operational risks related to occupational health and safety, which could result in significant liabilities and impact profitability [163]. Economic and Market Conditions - Continuing inflation and elevated interest rates could negatively impact the company's financial condition and results of operations if costs cannot be offset through price increases [153]. - Deterioration of the U.S. economy could negatively affect government funding for infrastructure projects, impacting the company's financial condition and operations [171]. - The company is exposed to significant commodity price fluctuations, including cement, steel, and diesel fuel, which could adversely affect financial condition and results of operations [151]. Environmental and Regulatory Risks - The company is subject to stringent environmental laws and regulations, which could significantly increase climate-related costs and disclosure obligations if new emissions regulations are implemented [156]. - The company may incur substantial liabilities for remediating contaminated properties, which could expose it to material losses and increased operational costs [157]. - Non-compliance with environmental laws could result in severe penalties, including administrative, civil, or criminal sanctions, and may disrupt operations [158]. - The company faces risks related to climate change, including increased costs for energy, production, and compliance with new regulations, which could adversely impact operations [167]. Corporate Governance and Internal Controls - The controlling stockholder owns over 60% of the outstanding shares, allowing substantial influence over corporate matters [175]. - The company does not anticipate paying any cash dividends in the foreseeable future, focusing on retaining funds for business development [177]. - The company is classified as a "controlled company" under Nasdaq and SEC rules, which may limit certain corporate governance protections for stockholders [176]. - As of January 3, 2025, the company has identified material weaknesses in its internal control over financial reporting [187]. - The company has hired additional accounting and finance staff to address identified material weaknesses and improve financial reporting processes [188]. - The company may incur additional expenses if it becomes subject to Section 404(b) of the Sarbanes-Oxley Act, which requires an independent audit of internal controls [185]. - The company has not yet complied with certain provisions of the Sarbanes-Oxley Act, which could affect investor confidence in financial statements [184]. - The company may take advantage of exemptions from certain disclosure requirements, potentially making its financial statements less comparable to those of other public companies [194]. - The company is classified as a "smaller reporting company" under the Exchange Act, thus market risk disclosures are not applicable [325]. Technology and Cybersecurity Risks - Cybersecurity risks are heightened due to the rapid evolution of technology, which may lead to significant costs for maintaining security systems [143]. - The company relies on IT systems for operations, and any disruption or failure could materially affect business performance and financial condition [141].
Shimmick (SHIM) - 2025 Q4 - Annual Report