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Williams Industrial Services Group Inc. (WLMSQ)
:WLMSQ
Risk Overview Q2, 2023
Risk Distribution
38% Finance & Corporate
21% Legal & Regulatory
21% Production
11% Ability to Sell
6% Macro & Political
2% Tech & Innovation
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
Williams Industrial Services Group Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q2, 2023
Main Risk Category
Finance & Corporate
With 18 Risks
Finance & Corporate
With 18 Risks
Number of Disclosed Risks
47
+7
From last reportS&P 500 Average: 31
47
+7
From last reportS&P 500 Average: 31
Recent Changes
7Risks added
0Risks removed
0Risks changed
Since Jun 2023
7Risks added
0Risks removed
0Risks changed
Since Jun 2023
Number of Risk Changed
0
No changes from last report
S&P 500 Average: 3
0
No changes from last report
S&P 500 Average: 3
See the risk highlights of Williams Industrial Services Group in the last period.
Risk Word Cloud
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 47
Finance & Corporate
Total Risks: 18/47 (38%)Above Sector Average
Share Price & Shareholder Rights9 | 19.1%
Share Price & Shareholder Rights - Risk 1
If we are not able to obtain confirmation of a plan of reorganization, or if current liquidity is insufficient, we could be required to liquidate under Chapter 7 of the Bankruptcy Code.Added
Share Price & Shareholder Rights - Risk 2
Our common stock has been delisted from the NYSE American.Added
Our common stock began trading on the OTC Pink Market under the symbol "WLMSQ" on July 25, 2023. We can provide no assurance that our common stock will continue to trade on this market, whether broker-dealers will provide public quotes of our common stock on this market, whether the trading volume of our common stock will be sufficient to provide for an efficient trading market or whether quotes for our common stock will continue on this market in the future, which could result in significantly lower trading volumes and reduced liquidity for investors seeking to buy or sell our common stock. Furthermore, because of the limited market and generally low volume of trading in our common stock, the price of our common stock could be more likely to be affected by broad market fluctuations, general market conditions, changes in the markets' perception of our securities, and announcements made by us or third parties with interests in the Chapter 11 Cases.
Share Price & Shareholder Rights - Risk 3
Future sales of our common stock and any of our other efforts to raise additional capital may depress our stock price.Sales of a substantial number of shares of our common stock in the public market or otherwise, either by us, a member of management or a major stockholder, or the perception that such sales could occur, could depress the market price of our common stock and have a material adverse effect on our ability to raise capital through the sale of additional equity securities. We may seek additional capital through a combination of private and public equity and debt offerings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, investor ownership interest may be diluted, and the terms may include liquidation or other preferences that adversely affect investor rights as a stockholder. Additional debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring additional debt, making capital expenditures, or declaring dividends. Any of the above could cause a decline in our stock price.
Share Price & Shareholder Rights - Risk 4
Actions of activist shareholders could be disruptive and potentially costly, and the possibility that activist shareholders may seek changes that conflict with our strategic direction could cause uncertainty about the strategic direction of our business.Activist investors may attempt to effect changes in our strategic direction, including our pending review of strategic alternatives, and how our business is governed, or to acquire control over us. While we welcome varying opinions from all shareholders, activist campaigns that contest or conflict with our strategic direction could have an adverse effect on our results of operations and financial condition, as responding to proxy contests and other actions by activist shareholders can disrupt our operations, be costly and time consuming and divert the attention of our Board and senior management from the pursuit of business strategies, including the current review of strategic alternatives. In addition, perceived uncertainties as to our future direction as a result of changes to the composition of our Board may lead to the perception of a change in the direction of our business, instability or lack of continuity, which may be exploited by our competitors, may cause concern to our current or potential customers, may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel and business partners. These types of actions could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
Share Price & Shareholder Rights - Risk 5
We may issue a substantial number of shares of our common stock in the future, and stockholders may be adversely affected by the issuance of those shares.We may raise additional capital or refinance or restructure our debt by issuing shares of common stock, or other securities convertible into common stock, which would increase the number of shares of common stock outstanding and result in potentially substantial dilution in the equity interest of our current stockholders and may adversely affect the market price of our common stock. We have previously issued shares of our common stock pursuant to private placement exemptions from Securities Act registration requirements and may do so in the future in connection with financings, acquisitions, the settlement of litigation and other strategic transactions. We may also issue equity securities (including, but not limited to, warrants to purchase shares of our common stock) in connection with future financing transactions. The issuance, and the resale or potential resale, of shares of our common stock could adversely affect the market price of our common stock and could be dilutive to our stockholders.
Share Price & Shareholder Rights - Risk 6
We are subject to anti-takeover effects of certain charter and bylaw provisions and Delaware law, as well as of our substantial insider ownership.Provisions of our Second Amended and Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), Fourth Amended and Restated By-Laws (the "By-Laws") and Delaware law may discourage, delay or prevent a merger or acquisition that stockholders may consider favorable, including transactions in which investors might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our management and Board. These provisions include providing our Board the ability to set the number of directors and to fill vacancies on the Board occurring between stockholder meetings.
We are also subject to provisions of the Delaware corporation law that, in general, prohibit any business combination with a beneficial owner of 15% or more of our common stock for three years following the date the beneficial owner acquired at least 15% of our stock, unless various conditions are met, such as approval of the transaction by our Board. Together, these charter and statutory provisions could make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock.
The existence of the foregoing provisions and anti-takeover measures, as well as the significant amount of common stock beneficially owned by Wynnefield Capital, Inc. and its affiliates, the Company's largest equity investors, could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of us, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.
Share Price & Shareholder Rights - Risk 7
We may not be able to continue as a going concern and holders of our common stock could suffer a total loss of their investment.Added
Substantial doubt exists about the Company's ability to continue as a going concern. It is likely that our equity securities will be canceled and extinguished in connection with the Chapter 11 Cases, and that the holders thereof would not be entitled to receive, and would not receive or retain, any property or interest in property on account of such equity interests.
Share Price & Shareholder Rights - Risk 8
Trading in our common stock during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. It is likely that our common stock will be canceled or that holders of such common stock will not receive any distribution with respect to, or be able to recover any portion of, their investments.Added
It is likely that our equity securities will be canceled, or that holders of such equity will not receive any distribution with respect to, or be able to recover any portion of, their investments. Following the filing of the Chapter 11 Cases, our common stock was delisted from the NYSE American and is now quoted on the OTC Pink Market under the symbol "WLMSQ." Any trading in our common stock during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks to purchasers of our common stock. We urge extreme caution with respect to existing and future investments in our equity and other securities. There is a significant risk that the holders of our common stock will receive no recovery under the Chapter 11 Cases and that our common stock will be worthless.
Share Price & Shareholder Rights - Risk 9
The market price for our common stock has historically been volatile, and our stockholders may not be able to resell their shares of common stock at or above the purchase price paid.The market price of our common stock has historically fluctuated significantly and may be affected by numerous factors (some of which are beyond our control), including:
- The risk factors described in this Item 1A;- Actual or anticipated fluctuations in our operating results and financial condition;- Changes in laws or regulations and court rulings and trends in our industry;- The significant concentration of ownership of our common stock in the hands of a small number of investors;- Changes in supply and demand of components and materials;- Changes in tax or accounting standards affecting our industry;- A shortfall in operating revenue or net income from that expected by securities analysts and investors;- Changes in securities analysts' estimates of our financial performance or the financial performance of our competitors or companies in our industry;- Increase in inflation and higher commodity prices;- General conditions in our customers' industries; and - The degree of trading liquidity in our common stock, including our ability to remain listed on the NYSE American, and general market conditions.
Declines in the price of our common stock could impede our ability to obtain additional capital and attract and retain qualified employees and could reduce the liquidity of our common stock. In addition, a reduction in our stock price increases the cost to us, in terms of dilution, of using our equity for employee compensation.
The stock markets have experienced extreme volatility that has often been unrelated to the operating performance of similarly situated companies, including geopolitical instability. These broad market fluctuations may adversely affect the market price of our common stock.
Accounting & Financial Operations3 | 6.4%
Accounting & Financial Operations - Risk 1
We do not currently expect to pay any cash dividends on our common stock; as such, appreciation in the price of our common stock may be the only method for investors to realize a return on their investment.Accounting & Financial Operations - Risk 2
The dollar amount of our backlog, as stated at any time, is not necessarily indicative of our future revenue.Our backlog consists of firm orders or blanket authorizations from our customers. Backlog may vary significantly from reporting period to reporting period due to the timing of customer commitments. The time between receipt of an order and actual completion of services can vary. However, backlog may not be indicative of future operating results, and projects in our backlog may be cancelled, modified, or otherwise altered by our customers. To the extent projects are delayed, the timing of our revenue could be affected. If a customer cancels an order, we may be reimbursed for the costs we have incurred. Typically, however, we have no contractual right to the full amount of the revenue reflected in our backlog contracts in the event of cancellation. In addition, projects may remain in our backlog for extended periods of time. Furthermore, a portion of our backlog for multi-year service maintenance contracts is based on what we expect to realize in the future and is therefore not necessarily supported by a firm purchase order. If that work does not materialize, then our backlog would be negatively impacted, as that work would be considered a "cancellation." For example, our backlog was negatively affected by the loss of a multi-year contract in the nuclear decommissioning market in early 2022, as described further in Item 1. Business under "Backlog". Revenue recognition occurs over extended periods of time and is subject to unanticipated delays. Fluctuations in our reported backlog levels also result from the fact that we may receive a small number of relatively large orders in any given reporting period that may be included in our backlog. Because of these large orders, our backlog in that reporting period may reach levels that may not be sustained in subsequent reporting periods. Our backlog, therefore, is not necessarily indicative of our future revenue or of long-term industry trends.
Accounting & Financial Operations - Risk 3
Our future revenue and operating results may vary significantly from reporting period to reporting period.Our quarterly and annual revenue and earnings have varied in the past and are likely to vary in the future. Our service contracts contain customer-specific commercial terms that, coupled with other factors beyond our control, may result in uneven recognition of revenue and earnings over time. Customer-imposed delays can significantly impact the timing of revenue recognition and lengthen our cash conversion cycle, which can negatively impact our ability to fund our operations. Due to our relatively large average contract size, our volume during any given period may be concentrated to relatively few contracts, intensifying the magnitude of these fluctuations. Furthermore, some of our operating costs are fixed. As a result, we may have limited ability to reduce our operating costs in response to unanticipated decreases in our revenue or the demand for our services in any given reporting period. Therefore, our operating results in any reporting period may not be indicative of our future performance. Because we must make significant estimates related to potential costs when we recognize revenue on a percentage-of-completion basis, these costs may change significantly from reporting period to reporting period based on new project information.
Debt & Financing4 | 8.5%
Debt & Financing - Risk 1
If we become unable to obtain adequate surety bonding, or letters of credit, our ability to bid on new work could be reduced, which could, in turn, have a material adverse effect on our future revenue and business prospects.Debt & Financing - Risk 2
Any inability to finance our business or repay our outstanding indebtedness, including due to deterioration of the credit markets, could adversely affect our business.We intend to finance our operations with existing cash and cash equivalents, cash flows from operations, the Term Loan, the Revolving Credit Facility and the Wynnefield Notes. The Term Loan and the Revolving Credit Facility contain a number of restrictive covenants and other terms that limit our operating flexibility. Any deterioration in the credit markets could adversely affect the ability of many of our customers to pay us on time and the ability of many of our suppliers to meet our needs on a competitive basis. Any inability to pay amounts due under our indebtedness or access necessary additional funds on acceptable terms or at all may negatively impact our business or operations. In addition, we have required, and may require in the future, additional sources of funds in order to meet our working capital requirements and fund our ongoing operations. If we are unable to access sufficient capital from our existing lenders or otherwise, our business and operations would be adversely impacted. For additional information, please refer to "Part II-Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources" and "Note 2-Liquidity", "Note 11-Debt" and "Note 18-Subsequent Events" to the consolidated financial statements included in this Form 10-K.
Debt & Financing - Risk 3
The limitations and covenants in our debt facilities constrain our ability to borrow additional money, sell assets and make acquisitions, which may impair our ability to fully implement elements of our business strategy and otherwise adversely affect our liquidity and financial condition.Both the Term Loan and the Revolving Credit Facility contain certain limitations and covenants that limit our ability, and that of our subsidiaries, to, among other things, incur additional debt, make capital expenditures, incur liens, pay dividends or make other restricted payments, merge or sell assets, make acquisitions, and enter into transactions with affiliates.
The Term Loan and the Revolving Credit Facility also include restrictive covenants, including certain financial covenants. If we do not comply with the restrictive covenants, including failing to satisfy the required financial covenants, or obtain waivers as needed, our lenders could accelerate our debt and foreclose on our assets, and our stockholders may lose the full value of an investment in our common stock. Our ability to comply with the restrictive covenants in the debt facilities depends upon our ability to successfully implement our business strategy and liquidity plan, as well as other general economic and competitive conditions and financial, business and other factors, many of which are beyond our control. Our business has not generated sufficient cash flow from operations to fund our cash requirements and debt service obligations, which has required us to obtain additional debt and amend our outstanding debt, and we may continue to face significant liquidity constraints. For additional information, please refer to "Part II-Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources" and "Note 2-Liquidity", "Note 11-Debt" and "Note 18-Subsequent Events" to the consolidated financial statements included in this Form 10-K.
Debt & Financing - Risk 4
Our ability to continue to operate as a going concern depends on our ability to successfully implement our liquidity plan and, if necessary, raise additional capital in the future to continue funding our operations.Our ability to continue as a going concern is dependent on our ability to successfully implement our liquidity plan, which includes taking steps to address profitability of non-performing businesses, aggressively reducing operating expenses, shortening the collection cycle time on the Company's accounts receivable, and lengthening the payment cycle time on its accounts payable. The Company has continued to experience material intra-week liquidity pressure as it has attempted to manage the short-term negative cash flows that result from, among other things, having to fund significant weekly craft labor payrolls on large outage projects before those payrolls can be billed to the Company's customers and collected. Although the Company has utilized the Revolving Credit Facility to address such time period negative cash flows, contract terms restricting customer invoicing frequency, delays in customer payments, and underlying surety bonds have negatively impacted the Company's borrowing base and the availability of funds, and the Company has been required to amend its credit facilities to amend the covenants and to obtain additional capital.
While management believes its liquidity plan alleviates the substantial doubt regarding the Company's ability to continue as a going concern during the ensuing twelve-month period, the Company cannot provide any assurance that it will be able to implement its liquidity plan successfully or, even if successfully implemented, that the plan will ultimately result in the Company continuing as a going concern.
While the recent amendments to the Company's existing credit facilities and additional debt incurred may permit the Company to operate while it continues to engage in its process to explore strategic alternatives to maximize value for the Company and its shareholders or other stakeholders, additional liquidity support may be necessary. If the Company is unable to address any potential liquidity shortfalls that may arise in the future, it will need to seek additional funding from third party sources, which may not be available on reasonable terms, if at all, and the Company's inability to obtain this capital or execute an alternative solution to its liquidity needs could have a material adverse effect on the Company's shareholders and creditors. In addition, any such additional funding could only be obtained in compliance with the restrictions contained in the agreements governing the Company's existing indebtedness. If the Company is unable to comply with its covenants applicable to its indebtedness, or otherwise is unable to meet its obligations under such indebtedness, the Company's liquidity would be further adversely affected. In addition, such occurrences could result in an event of default under such indebtedness and the potential acceleration of outstanding indebtedness thereunder and the potential foreclosure on the collateral securing such debt, and would likely cause a cross-default under the Company's other outstanding indebtedness or obligations.
If the liquidity plan and recent amendments to agreements governing the Company's indebtedness do not have the intended effect of addressing the Company's liquidity problems through its review of strategic alternatives, including if the Company is unable to obtain future advances under the discretionary delayed draw term loans, the Company will continue to consider all strategic alternatives, including restructuring or refinancing its debt, seeking additional debt or equity capital, reducing or delaying the Company's business activities and strategic initiatives, or selling assets, other strategic transactions and/or other measures, including obtaining relief under the U.S. Bankruptcy Code. The Company's continuation as a going concern is dependent upon its ability to successfully implement its liquidity plan and obtain necessary debt or equity financing to address the Company's liquidity challenges and continue operations until the Company returns to generating positive cash flow or is otherwise able to execute on a transaction pursuant to its review of strategic alternatives, including a potential sale of the Company. For additional information, please refer to "Part II-Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources" and "Note 2-Liquidity" to the consolidated financial statements included in this Form 10-K.
Corporate Activity and Growth2 | 4.3%
Corporate Activity and Growth - Risk 1
Our strategic review may not result in an executed or consummated transaction or other strategic alternative, and the process of reviewing strategic alternatives or its conclusion could adversely affect our business and our stockholders.Corporate Activity and Growth - Risk 2
We may be unable to effectively manage our growth, including any expansion into international markets.We are subject to the risk that we may be unable to effectively manage our growth, which requires us to develop and improve our existing administrative and operational systems and our financial and management controls and further expand, train and manage our work force. As we continue this effort, we may incur substantial costs and expend substantial resources in connection with any such expansion due to different technology standards, legal considerations, and cultural differences. We may not be able to efficiently or effectively manage any future international operations and growth of such operations, compete effectively in such markets, or recruit top talent and train our personnel. Any failure to successfully manage our expansion may materially and adversely affect our business and future growth and may cause us to scale back or terminate such expansion efforts; for instance, we exited the Canadian market in 2022 and are no longer accepting large, fixed price water projects. In addition, acquisitions and other business transactions may disrupt or otherwise have a negative impact on our business, financial condition and results of operations, and any acquisitions of businesses and their respective assets also involve the risks that the businesses and assets acquired may prove to be less valuable than we expect, and we may assume unknown or unexpected liabilities, costs and problems.
Legal & Regulatory
Total Risks: 10/47 (21%)Above Sector Average
Regulation2 | 4.3%
Regulation - Risk 1
Limitations or modifications to indemnification regulations of the U.S. could adversely affect our business.Regulation - Risk 2
We are subject to anti-bribery laws, and failure to comply with these laws could result in our becoming subject to penalties and the disruption of our business activities.We are subject to laws in the U.S. that restrict the offer or payment of anything of value to government officials or other persons with the intent of gaining business or favorable government action. In addition to prohibiting certain bribery-related activity with U.S. officials and other persons, these laws provide for recordkeeping and reporting obligations. Any failure by us, our subcontractors, agents or others who work for us on our behalf to comply with these legal and regulatory obligations could impact us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties. The failure to comply with these legal and regulatory obligations could also result in the disruption of our business activities and have a material adverse effect on our business and results of operations.
Litigation & Legal Liabilities3 | 6.4%
Litigation & Legal Liabilities - Risk 1
We are subject to the risks and uncertainties associated with the Chapter 11 Cases.Added
Litigation & Legal Liabilities - Risk 2
The pursuit of the Chapter 11 Cases has consumed, and will continue to consume, a substantial portion of the time and attention of our corporate management and will impact how our business is conducted, which may have an adverse effect on our business and results of operations.Added
The requirements of the Chapter 11 Cases have consumed and will continue to consume a substantial portion of our corporate management's time and attention and leave them with less time to devote to the operations of our business. This diversion of corporate management's attention may have a material adverse effect on the conduct of our business, and, as a result, on our financial condition and results of operations, particularly if the Chapter 11 Cases are protracted.
Litigation & Legal Liabilities - Risk 3
Legal matters could divert management's focus, result in substantial expenses, and have an adverse impact on our reputation, financial condition, and results of operations.Lawsuits and investigations involving us, or our current or former officers and directors, could result in significant expenses and divert attention and resources of our management and other key employees. We could be required to pay damages or other penalties or have injunctions or other equitable remedies imposed against us or our current or former directors and officers. In addition, we are generally obligated to indemnify our current and former directors and officers in connection with lawsuits, governmental investigations and related litigation or settlement amounts. Such amounts could exceed the coverage provided under our insurance policies. Any of these factors could harm our reputation, business, financial condition, results of operations or cash flows.
Taxation & Government Incentives2 | 4.3%
Taxation & Government Incentives - Risk 1
Our ability to use NOL carryforwards or other tax attributes may be subject to limitations under the Code.Taxation & Government Incentives - Risk 2
Changes to tax regulations, laws, accounting principles, future business operations or examinations by tax authorities may adversely impact our provision for income taxes and ability to use deferred tax assets, increase our tax burden or otherwise adversely affect our financial condition, results of operations and cash flows.Changes in tax laws or exposures to additional tax liabilities could negatively impact our effective tax rate and results of operations. The evolving and at times overlapping regulatory regimes to which the Company is subject may change at any time, including as a result of changes in the U.S. political environment; for instance, various levels of government are increasingly focused on tax reform and other legislative actions to increase tax revenue, including the adoption of the Inflation Reduction Act of 2022, which includes a new corporate alternative minimum tax of 15% for certain large companies, and the reduction in the corporate income tax rate resulting from the Tax Cuts and Jobs Act (the "Tax Act") enacted into U.S. law in December 2017 could be reduced or rescinded by future tax law changes. In addition it is possible in the future that net operating loss ("NOL") and/or interest deductibility limitations implemented under the Tax Act could have the effect of causing us to incur income tax liability sooner than we otherwise would have incurred such liability or, in certain cases, could cause us to incur income tax liability that we might otherwise not have incurred, in the absence of these tax law changes.
In addition, our ability to use our deferred tax assets is subject to volatility and could be adversely affected by earnings differing materially from our projections, changes in the valuation of our deferred tax assets and liabilities, expiration of or lapses in tax credits, changes in ownership as defined by Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), and outcomes as a result of tax examinations or changes in tax laws, regulations and accounting principles. As a result, our income tax provisions are also subject to volatility from these changes, as well as changes in accounting for uncertain tax positions, or interpretations thereof.
Significant judgment is required in determining the recognition and measurement attributes prescribed in GAAP related to accounting for income taxes. In addition, GAAP applies to all income tax positions, including the potential recovery of previously paid taxes, which, if settled unfavorably, could adversely impact our provision for income taxes or additional paid-in capital. We could also be subject to examinations of our income tax returns by the Internal Revenue Service and other tax authorities. We assess the likelihood of adverse outcomes resulting from these examinations in determining the adequacy of our provision for income taxes. There may be exposure that the outcomes from these examinations will have an adverse effect on our operating results and financial condition.
Environmental / Social3 | 6.4%
Environmental / Social - Risk 1
Compliance with environmental, health, safety and other related laws and regulations is costly, and our ongoing operations may expose us to related liabilities.Environmental / Social - Risk 2
Our failure to comply with applicable governmental privacy laws and regulations in the U.S. could substantially impact our business, operations, financial position, and cash flows.We are subject to extensive and evolving federal and state privacy laws and regulations. Changes in privacy and data security laws or regulations or new interpretations of existing laws or regulations could have a negative effect on our operating methods and costs. Failure to comply with such regulations could result in the termination or loss of contracts, the imposition of contractual damages, private and government civil litigation, civil sanctions, damage to our reputation or, in certain circumstances, criminal penalties, any of which could have a material adverse effect on our results of operations, financial position, cash flows, business and prospects. Determining compliance with such regulations is complicated by the fact that many of these laws and regulations have not been fully interpreted by governing regulatory authorities or the courts, and many of the provisions of such laws and regulations are open to a range of interpretations. There can be no assurance that we are, or have been, in compliance with all applicable existing laws and regulations or that we will be able to comply with new laws or regulations, such as the California Consumer Privacy Act and the California Privacy Rights Act.
Environmental / Social - Risk 3
The increasing focus by stakeholders on environmental, social and governance policies and practices could result in additional costs and could adversely impact our reputation, consumer perception, employee retention and willingness of third parties to do business with us.There has been increased focus from stakeholders, including investors, consumers and employees, on our environmental, social, or governance ("ESG") policies and practices, including corporate citizenship and sustainability. Additionally, public interest and legislative pressure related to public companies' ESG practices continues to grow. If our ESG policies and practices fail to meet regulatory requirements or stakeholders' evolving expectations and standards for responsible corporate citizenship in areas including environmental stewardship, employee health and safety practices, Board and employee diversity, human capital management, corporate governance and transparency and employing ESG strategies in our operations, our brand, reputation and employee retention may be negatively impacted, and customers and suppliers may be unwilling to do business with us. We could also incur additional costs and require additional resources to monitor, report and comply with various ESG practices, as well as any initiatives or goals we may establish or announce, including those related to climate change. If we do establish such initiatives or goals, there can be no assurance that our stakeholders will agree with our strategy or that we will be successful in achieving such initiatives or goals, and we will remain subject to climate change risks regardless. As a result, the effects of climate change and increased focus by stakeholders on ESG matters could have short- and long-term impacts on our business and operations. Inconsistency of legislation and regulations among jurisdictions and expected additional regulations may also affect the costs of compliance with such laws and regulations. Any assessment of the potential impact of future climate change legislation, regulations or industry standards, as well as any international treaties and accords, is uncertain given the wide scope of potential regulatory change where we operate. If we fail to adopt ESG standards or practices as quickly as stakeholders desire, fail, or are perceived to fail, in our achievement of any initiatives or goals, or fail in fully and accurately reporting our progress on any such initiatives and goals, our reputation, business, financial performance and growth may be adversely impacted. Furthermore, there exists certain "anti-ESG" sentiment among some individuals and governments, and several states have enacted or proposed "anti-ESG" policies or legislation. As we establish ESG-related initiatives, we could face a negative reaction or legislation that impedes our activities or reflects poorly upon the Company, and our business and financial condition could be negatively impacted by such matters. Any such matters, or related corporate citizenship and sustainability matters, could have a material adverse effect on our business.
Production
Total Risks: 10/47 (21%)Below Sector Average
Manufacturing1 | 2.1%
Manufacturing - Risk 1
Our success is partially dependent upon maintaining our safety record, and an injury to or death of any of our employees, customers or vendors could result in material liabilities to our Company.Employment / Personnel4 | 8.5%
Employment / Personnel - Risk 1
Work disruptions resulting from the expiration of our collective bargaining agreements or otherwise could result in increased operating costs and adversely affect our operating performance.Employment / Personnel - Risk 2
Our participation in multiemployer pension plans could adversely impact our liquidity and results of operations.During 2022, we contributed to approximately 79 multiemployer pension plans throughout the U.S. and, historically, we have contributed to over 200 multiemployer pension plans in which we may have withdrawal liabilities. We believe that our responsibility for potential withdrawal liabilities associated with participating in multiemployer pension plans is limited because the building and construction trades exemption pursuant to the Employee Retirement Income Security Act of 1974 should apply to the substantial majority of our plan contributions. However, pursuant to the Pension Protection Act of 2006 and other applicable laws, we are exposed to other potential liabilities associated with plans that are underfunded. As of December 31, 2022, we had been notified that certain pension plans were in critical funding status. Currently, certain plans are developing, or have developed, a rehabilitation plan that may call for a reduction in participant benefits or an increase in future employer contributions. Therefore, in the future, we could be responsible for potential surcharges, excise taxes and/or additional contributions related to these plans, which could impact our liquidity and results of operations. While we continue to actively monitor, assess and take steps to limit our potential exposure to any surcharges, excise taxes, additional contributions and/or withdrawal liabilities, any market conditions or the number of participating employers remaining in each plan may result in a reorganization, insolvency or mass withdrawal that could have a material adverse effect on the funded status of the multiemployer plans and our potential withdrawal liability.
Employment / Personnel - Risk 3
We depend on a few highly skilled key employees to navigate the Chapter 11 Cases, and if we are unable to retain, manage, and appropriately compensate them, the outcome of the Chapter 11 Cases could be adversely affected.Added
Our ability to consummate a successful plan of reorganization is based on the continued service of our senior management team and other key employees, and on our ability to continue to motivate and appropriately compensate key employees. During the pendency of the Chapter 11 Cases, our employees will face considerable distraction and uncertainty, and we may experience increased levels of employee attrition. We may not be able to retain the services of our key employees in the future. If our key employees fail to work together effectively and to execute our plans and strategies, the Chapter 11 Cases could be prolonged or adversely affected.
Employment / Personnel - Risk 4
Our failure to attract and retain qualified personnel, skilled workers and key officers could have an adverse effect on us.Our ability to attract and retain qualified professional and/or skilled personnel in accordance with our needs, either through direct hiring, subcontracting or acquisition of other firms employing such professionals, is an important factor in determining our future success. The market for these professionals is competitive, and there can be no assurance that we will be successful in our efforts to attract and retain needed personnel. Our ability to successfully execute our business strategy depends, in part, on our ability to attract and retain highly qualified, experienced mechanical, design, structural and software engineers, service technicians and marketing and sales personnel who share our values and are able to operate effectively consistent with our culture. Demand for these workers can, at times, be high and the supply extremely limited, particularly for employees who can work remotely, as the impact of the COVID-19 pandemic has increased remote opportunities. In addition, we may be constrained in hiring and retaining sufficient qualified employees to support our strategy due to general labor shortages in our industry. A lack of qualified personnel or increased turnover rates within our employee base could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain qualified employees. Our success is also highly dependent upon the continued services of our key officers, and we do not maintain key employee insurance on any of our executive officers.
We have experienced significant turnover in our senior management team and reductions in our workforce over the past few years and have promoted or hired new employees to fill certain key roles. If we are unable to retain qualified personnel, the roles and responsibilities of those employees will need to be filled, which may require that we devote time and resources to identifying, hiring, and integrating new employees. In addition, the failure to attract and retain key employees, including officers, could impair our ability to successfully implement our business strategy, sustain or expand our operations, provide services to our customers, and conduct our business effectively. Furthermore, if key employees do not meet the expectations of their roles, we could experience operational and administrative inefficiencies and added costs that could adversely impact our results of operations, our stock price and our customer relationships and may make recruiting for future management positions more difficult.
Supply Chain3 | 6.4%
Supply Chain - Risk 1
Adverse changes in our relationships with suppliers, vendors, and subcontractors could have a material adverse effect on our liquidity and our business, reputation, and results of operations.Supply Chain - Risk 2
We are subject to potential insolvency or financial distress of third parties, including our customers and suppliers.We are exposed to the risk that third parties to various arrangements who owe us money or goods, or who purchase services from us, will be unable to perform their obligations or continue to place orders due to insolvency or financial distress. If such third parties fail to perform their obligations under arrangements with us, we may be forced to replace the underlying commitment at current or above market prices or on other terms that are less favorable to us, or we may have to write off receivables in the case of a customer failing to pay.
If a customer becomes insolvent or files for bankruptcy, our ability to recover accounts receivable from that customer would be adversely affected and any payment we received during the preference period prior to a bankruptcy filing may be potentially recoverable by the bankruptcy estate. Any of the foregoing could adversely impact our results of operations, financial position, and liquidity.
Supply Chain - Risk 3
If we are unable to control the delivery of services provided because of internal operational issues or poor subcontractor performances, our reputation could be adversely affected, and we could lose customers. In the event of subcontractor insolvency, if we are unable to recover any advance progress payments made to subcontractors, our profitability could be adversely affected.We rely on subcontractors to perform services on various projects for scopes of work that are outside of our current service offerings. Our subcontractors do not account for a significant percentage of our service costs. The quality and performance of our subcontractors are not entirely under our control. Our subcontractors may not always meet the requisite level of quality control or our delivery schedules. The failure of our subcontractors to perform quality services in a timely manner could adversely affect our reputation and result in the cancellation of orders for our services, significant warranty and repair costs and the loss of customers. In addition, our contracts with customers may contain liquidated damages, and triggering such provisions could result in significant financial penalties, or, even if not triggered, could affect our ability to recognize revenue in a given period.
Other potential consequences of the failure of our subcontractors to meet our standards include a potential need to change subcontractors, resulting in increased costs. At times, we make advance progress payments to subcontractors in anticipation of completion of services, and we may be unable to recover those advances if a subcontractor fails to complete the scope of work. In addition, we generally provide warranties for terms of two years or less on our services; defects with respect to services previously provided, whether caused by our actions or a subcontractor's, could require us to incur costs fixing such issues. The occurrence of any of the above may adversely affect our financial condition, profitability, and cash flow.
Costs2 | 4.3%
Costs - Risk 1
If our costs exceed the estimates we use to set the fixed prices on certain of our contracts, our earnings will be reduced.Costs - Risk 2
If we do not timely pay amounts due and comply with the covenants under our debt facilities, our business, financial condition, and ability to continue as a going concern would be materially and adversely impacted.Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The Term Loan and the Wynnefield Notes, among other things, require high interest payments, and both the Term Loan and the Revolving Credit Facility place encumbrances on our assets, and subject us to restrictive covenants that limit our operating flexibility. Any increase in applicable interest rates may negatively affect our cash flow and financial condition.
The terms of the Term Loan and the Revolving Credit Facility have been structured in such a way that, if we default under one, we will also default under the other; any default under such facilities will also result in a default under the Wynnefield Notes. In the event of a continuing default, our lenders would have the right to accelerate the then-outstanding amounts under each such facility to become immediately due and payable and to exercise their respective rights and remedies to collect such amounts, which, for the senior secured lenders, would include foreclosing on collateral constituting substantially all of our assets and those of our subsidiaries. Our obligations under the Term Loan are secured by first-priority security interests in substantially all of our assets and those of our subsidiaries guaranteeing our obligations, as well as a second-priority security interest on such entities' accounts receivable and inventory, while our obligations under the Revolving Credit Facility are secured by first-priority security interests on substantially all of our and certain subsidiaries' accounts and a second-priority security interest in substantially all other assets of such entities, in each case subject to the terms of an intercreditor agreement.
We do not currently have sufficient cash on hand to repay the outstanding balances, so if our lenders exercised their rights and remedies, we would likely be forced to seek bankruptcy protection and our investors could lose the full value of their investment in our common stock. Accordingly, a default would likely have a material adverse effect on our business.
For additional information, please refer to "Part II-Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources" and "Note 2-Liquidity", "Note 11-Debt" and "Note 18-Subsequent Events" to the consolidated financial statements included in this Form 10-K.
Ability to Sell
Total Risks: 5/47 (11%)Below Sector Average
Competition1 | 2.1%
Competition - Risk 1
We may not be able to compete successfully against current and future competitors.Demand3 | 6.4%
Demand - Risk 1
A small number of major customers account for a significant portion of our revenue, and the loss of any of these customers could negatively impact our business.Demand - Risk 2
Demand for our services is cyclical and vulnerable to economic slowdowns and reductions in private industry and government spending. In times of general economic contraction, our revenue, profits, and financial condition may be adversely affected and will not necessarily rise in tandem with general economic expansion.The industries we serve historically have been, and will likely continue to be, cyclical in nature and vulnerable to general slowdowns in the U.S. economy. Consequently, our results of operations have fluctuated and may continue to fluctuate depending on the level of demand for services from these industries.
Our bookings and revenue may rise or fall sharply as total industry orders tend to follow pronounced cycles of general expansion and contraction. During a contraction phase, limited investment in new projects, deferrals of planned projects and project cancellations may significantly reduce our potential recognition of revenue and profits. At the end of an expansion phase, any existence of excess capacity will negatively affect power prices, which will result in a reduction in new orders. In addition to being cyclical in nature, our revenue does not correlate precisely with changes in actual or forecasted new capacity due to timing differences in revenue recognition.
During periods of declining demand for power, many of our customers may face budget shortfalls or may delay capital expenditures, which could result in a decrease in the overall demand for our services. Our customers may find it more difficult to obtain project financing due to limitations on the availability of credit and other uncertainties in the global credit markets. In addition, our customers may demand better pricing terms and their ability to timely pay our invoices may be affected in times of economic slowdown. Any such reduction in private industry or government spending could have a material adverse effect on our revenue, net income, or overall financial condition.
The Company continues to monitor several factors that may cause our revenue, profits, and financial condition to differ from our historical results, including the impacts of inflation and increased interest rates.
Demand - Risk 3
A substantial portion of our revenue is related to services performed at nuclear power plants, and reduced investment in, or increased regulation related to, nuclear power plants could have a material adverse effect on our business and prospects.The demand for the services we provide at nuclear power plants is directly tied to the number of nuclear power facilities that utilize our services. Additionally, the demand for U.S. nuclear capacity and electricity generation is expected to decline due to an increase in domestic energy production supporting natural gas exports and the rapid expansion of low-cost renewable energy and new technologies in the U.S., displacing more traditional sources of power, including nuclear power. Declining demand for U.S. nuclear power generation and related construction and maintenance budgets could have a material adverse effect on our business, operations, and cash flow.
There are two new nuclear power plants at one U.S. site under construction, and several nuclear reactors are undergoing decommissioning. Pricing pressure has resulted in a decrease in the maintenance budgets for existing nuclear plants.
In addition, decreases in state and federal government subsidies and increased regulation could negatively impact the financial viability of merchant nuclear power plants, decreasing the demand for the services we provide.
Sales & Marketing1 | 2.1%
Sales & Marketing - Risk 1
We may not be able to maintain our NYSE American listing and may incur additional costs as a result of our NYSE American listing.Macro & Political
Total Risks: 3/47 (6%)Below Sector Average
Economy & Political Environment1 | 2.1%
Economy & Political Environment - Risk 1
Our business has been affected by numerous economic factors, including inflation, volatile financial markets, supply chain disruptions and shortages of materials and labor.International Operations1 | 2.1%
International Operations - Risk 1
We may become subject to risks associated with doing business outside the U.S.Natural and Human Disruptions1 | 2.1%
Natural and Human Disruptions - Risk 1
We operate our business in regions subject to natural disasters, including hurricanes, and other severe catastrophic events, such as public health emergencies, acts of war and terrorism, and any disruption to our business resulting from such events will adversely affect our revenue and results of operations.Tech & Innovation
Total Risks: 1/47 (2%)Below Sector Average
Cyber Security1 | 2.1%
Cyber Security - Risk 1
Information technology vulnerabilities and cyberattacks on our networks could have a material adverse impact on our business.See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.