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New words:
abreast, annuity, Augsburg, automated, Blackstone, Blitzer, broken, Carlson, CIO, CISO, CODM, commonly, confirmed, CSA, CSF, ECMT, FD, forensic, formation, gather, holistic, intelligence, Juno, layered, log, manual, MBA, moved, NIST, online, penetration, phishing, Pillar, relocation, rental, resigned, Simplification, SOC, tabletop, tabular, threat, undergraduate, VGE, VGEM, Xavier
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Aid, benchmark, Canadian, cease, comparison, defer, discontinuation, Eurocurrency, exceeded, finalization, forma, fulfilment, hand, lessor, noted, pandemic, payroll, released
Financial report summary
?Competition
SparxRisks
- We are a decentralized company and place significant decision-making authority with our subsidiaries’ management, supported by certain integrated policies and processes.
- As part of our business, we have entered into joint venture arrangements and likely will continue to do so. Our participation in joint ventures exposes us to liability and/or harm to our reputation for failures of our partners.
- Improperly managed projects or project delays may result in additional costs or claims against us, which could have a material adverse effect on our financial condition, operating results, and cash flows.
- Our business strategy includes acquiring companies and making investments that complement our existing businesses. These acquisitions and investments could be unsuccessful or consume significant resources, which could adversely affect our operating results.
- We may not realize the expected benefits of the Chubb Acquisition because of integration and transition difficulties or other challenges.
- Adverse developments in the credit markets could adversely affect the funding of significant projects and therefore reduce demand for our services.
- We may need additional capital in the future for working capital, capital expenditures or acquisitions, and we may not be able to access capital on favorable terms, or at all, which would impair our ability to operate our business or achieve our growth objectives.
- Our use of revenue recognition over time could result in a reduction or reversal of previously recorded revenue or profits.
- We carry a significant amount of goodwill and identifiable intangible assets on our consolidated balance sheets. Earnings for future periods may be impacted by impairment charges for goodwill and intangible assets.
- In connection with our preparation of our consolidated financial statements for the years ended December 31, 2023, 2022, and 2021, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting.
- Our substantial indebtedness may adversely affect our cash flow and our ability to operate our business and fulfill our obligations under our indebtedness.
- The terms of our indebtedness may limit our ability to borrow additional funds or capitalize on business opportunities, and our future debt level may limit our future financial and operating flexibility.
- Higher interest rates increase the interest costs on our credit facilities and on our other floating rate indebtedness and could impact adversely our ability to refinance existing indebtedness or to sell assets.
- We are effectively self-insured against many potential liabilities.
- We may not accurately estimate the costs associated with services provided under fixed price contracts, which could impair our financial performance.
- A portion of our contracts allocate the risk of price increases in supplies to us.
- Some of our subsidiaries are government contractors, and they are subject to complex rules and regulations governing government contractors, and their contracts with government entities are subject to audit. Violations of the applicable rules and regulations could result in a subsidiary being barred from future government contracts.
- Our backlog is subject to reduction or cancellation, and revenues may be realized in different periods than initially reflected in our backlog.
- Our unionized workforce and related obligations could adversely affect our operations.
- Our pension commitments and obligations to make cash contributions to meet our obligations in certain pension plans subject us to risks.
- We maintain a workforce based upon current and anticipated workloads. We could incur significant costs and reduced profitability from underutilization of our workforce if we do not receive future contract awards, if contract awards are delayed, or if there is a significant reduction in the level of services we provide. Shortages of skilled labor could impede our ability to provide timely, cost-effective services to our customers.
- We serve customers who are involved in energy exploration, production and transportation, and adverse developments affecting activities in these industries, reduced demand for oil and natural gas products, or increased regulation of exploration and production, could have a material adverse effect on our results of operations.
- A portion of our expected future growth is based on the ability and willingness of public and private entities to invest in infrastructure.
- Our businesses at times perform services under challenging conditions involving factors outside of our control.
- Our business is subject to operational hazards due to the nature of services we provide and the conditions in which we operate, including electricity, fires, explosions, mechanical failures and weather-related incidents.
- We are and may become subject to periodic litigation which may adversely affect our business and financial performance.
- We are exposed to workmanship warranty, casualty, negligence, construction defect, breach of contract, product liability, and other claims and legal proceedings.
- We are and may become subject to periodic regulatory proceedings, including Fair Labor Standards Act (“FLSA”) and state wage and hour class action lawsuits, which may adversely affect our business and financial performance.
- We have significant operations in highly competitive markets, and our failure to effectively compete could reduce our market share and harm our financial performance.
- Our businesses are impacted by levels of construction activity and an economic downturn in that industry could materially and adversely affect our business.
- The industries we serve can be seasonal, cyclical and affected by weather conditions at project sites and other variations, the combined effects of which can potentially delay cash flows and adversely impact our results of operations.
- A failure in the systems we construct and install, whether due to employee acts or omissions or faulty workmanship or design, may subject us to significant liability.
- Our failure to comply with environmental laws could result in significant liabilities and increased environmental regulations could result in increased costs.
- Certain of our businesses are party to personal injury litigation and could be named as defendants in similar cases in the future related to our use or disposal of hazardous materials, which could adversely affect our financial condition, results of operations and cash flows.
- We operate as a holding company and our principal source of operating cash is income received from our subsidiaries.
- We have equity instruments outstanding that would require us to issue additional shares of common stock. Therefore, you may experience significant dilution of your ownership interests and the future issuance of additional shares of our common stock, or the anticipation of such issuances, could have an adverse effect on our stock price.
- We may issue preferred stock in the future, and the terms of the preferred stock may reduce the value of our common stock.
- Delaware law and our organizational documents contain certain provisions, including anti-takeover provisions, which limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
- Our stockholders may be required to bring certain actions or proceedings relating to us in the Delaware Court of Chancery and certain actions asserting claims arising under the Securities Act in the federal district courts of the United States.
- Our stock price may be volatile and, as a result, you could lose a significant portion or all of your investment.
- In the event of a cybersecurity incident, we could experience operational interruptions, incur substantial additional costs, become subject to legal or regulatory proceedings or suffer damage to our reputation.
- Data privacy, identity protection and information security compliance may require significant resources and presents certain risks.
- Changes in accounting principles may cause unexpected fluctuations in our reported financial information.
- The loss of key senior management personnel or the failure to hire and retain highly skilled personnel could negatively affect our business.
- Increases in healthcare costs could adversely affect our financial results.
- We are subject to many laws and regulations in the jurisdictions in which we operate, and changes to such laws and regulations may result in additional costs and impact our operations.
Management Discussion
- Net revenues for the year ended December 31, 2023 were $6,928 million compared to $6,558 million for the year ended December 31, 2022, an increase of $370 million or 5.6%. The increase in net revenues was attributable to the Safety Services and Specialty Services segments and was primarily driven by growth in inspection, service, and monitoring revenue.
- Our gross profit for the year ended December 31, 2023 was $1,940 million compared to $1,714 million in the year ended December 31, 2022, an increase of $226 million, or 13.2%. Gross margin for the year ended December 31, 2023 was 28.0%, an increase of 190 basis points compared to the prior year, primarily due to disciplined project and customer selection, pricing improvements in our Safety Services segment, and an improved mix of inspection, service, and monitoring revenue, which generates higher margins.
- Our SG&A expenses for the year ended December 31, 2023, were $1,581 million compared to $1,552 million for the same period in 2022, an increase of $29 million. SG&A expenses as a percentage of net revenues was 22.8% during the year ended December 31, 2023 compared to 23.7% in 2022. The decrease in SG&A expenses as a percentage of net revenues was primarily driven by lower acquisition and integration related expenses incurred, partially offset by an impairment charge of $12 million related to assets sold in the current year and investments to support our Safety Services and Specialty Services segments. Our SG&A expenses excluding amortization and impairment for the year ended December 31, 2023 was $1,372 million, or 19.8% of net revenues, compared to $1,355 million or 20.7% of net revenues for 2022, primarily due to the factors discussed above. See the discussion and reconciliation of our non-U.S. GAAP financial measures below.