CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements included in this Annual Report on Form 10-K are “forward-looking statements” within the meaning of the U.S. federal securities laws. All statements other than historical factual information are forward-looking statements, including, without limitation, statements regarding our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of regulation and the economy, generally. Terminology such as “believe,” “anticipate,” “will,” “should,” “could,” “intend,” “plan,” “expect,” “estimate,” “project,” “target,” “may,” “possible,” “potential,” “forecast,” “positioned” and similar references to future periods are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words.
Specific forward-looking statements in this Annual Report on Form 10-K include:
•Our belief that our brand, scale, experience and fulsome service offerings comprise the necessary profile to attract and retain the best talent and to competitively position ourselves among the largest providers in the sector, while prioritizing the safety of our employees, customers and other stakeholders;
•Our belief that our cash and cash equivalents are managed by high credit quality financial institutions;
•Our belief that our capital resources, including existing cash balances, together with our operating cash flows and borrowings under our credit facilities, are sufficient to meet our financial obligations for at least the next 12 months;
•Our belief that the trends listed in “Factors Affecting our Results of Operations” represent a significant challenge for utilities, but also an opportunity for outsourced utility infrastructure services companies to build and maintain more efficient, sustainable infrastructure that can meet the energy needs of future generations;
•Our belief that we have taken steps to secure delivery of a sufficient amount of equipment and do not anticipate any significant disruptions with respect to our fleet in the near-term;
•Our belief that we are well positioned to serve the increased demand resulting from system integrity management programs to enhance safety pursuant to federal and state mandates;
•Our belief that we are well positioned to support growing customer attention in achieving environmental objectives through infrastructure construction and maintenance;
•Our belief that we will continue to renegotiate some of our major contracts to address the increased costs on future work;
•Our belief that any liabilities resulting from any known legal matters, including the City of Chicago matter described in “Note 18 — Commitments and Contingencies — Legal Proceedings”, will not have a material effect on the financial position, results of operations or cash flows;
•Our expectation that the Separation (as defined below)-related costs will continue through at least fiscal year 2025;
•Our expectation that we will continue to incur capital expenditures to meet anticipated needs for our services;
•Our belief that the responsibility under a guarantee could exceed the amount recoverable from the subsidiary alone and could materially and adversely affect our consolidated financial condition, results of operations and cash flows;
•Our belief that the timing of the recognition of remaining performance obligations of fixed-price contracts is largely within the control of the customer, including when the necessary equipment and materials required to complete the work will be provided by the customer;
•Our belief that rising fuel, labor and material costs could continue to have a negative effect on our results of operations or that fluctuations in the price or availability of materials and equipment could impact costs to complete projects or result in the postponement of projects;
•Our belief that changes in interest rates on our variable-rate debt could have an effect on our business, financial condition and results of operation; and
•Our belief that projects included in backlog can be subject to delays or cancellation as a result of regulatory requirements, adverse weather conditions, customer requirements and other factors that could cause actual revenue to differ significantly from the estimates, or cause revenue to be realized in periods other than originally expected.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Actual results may differ materially as a result of a number of factors, including, among other things:
•Customer project scheduling and duration;
•Weather, and general economic conditions;
•Results of bid work, differences between actual and anticipated outcomes of bid or other fixed-price construction agreements;
•Outcomes from contract and change order negotiations;
•Our ability to successfully procure new work and impacts from work awarded or failing to be awarded work from significant customers, the mix of work awarded, and the amount of work awarded to us following work stoppages or reduction;
•The results of productivity inefficiencies from regulatory requirements, customer supply chain challenges, or otherwise, delays in commissioning individual projects, the ability of management to successfully finance, close on and assimilate any acquired businesses, and changes in our mix of customers, projects, contracts and business;
•Regional or national and/or general economic conditions and demand for our services;
•Price, volatility, and expectations of future prices of natural gas and electricity;
•Increases in the costs to perform services caused by changing conditions;
•The termination, or expiration of existing agreements or contracts;
•Decisions of our customers as to whether to pursue capital projects due to economic impacts resulting from a pandemic or otherwise;
•The budgetary spending patterns of customers;
•Inflation and other increases in construction costs that we may be unable to pass through to our customers;
•Cost or schedule overruns on fixed-price contracts;
•Availability of qualified labor for specific projects;
•The need and availability of letters of credit, payment and performance bonds, or other security;
•Costs we incur to support growth, whether organic or through acquisitions;
•The timing and volume of work under contract;
•Losses experienced in our operations;
•The results of the review of prior period accounting on certain projects and the impact of adjustments to accounting estimates;
•Developments in governmental investigations and/or inquiries;
•Intense competition in the industries in which we operate;
•Existing or future litigation or regulatory proceedings, dispute resolution proceedings or claims, including claims for additional costs;
•Failure of our partners, suppliers or subcontractors to perform their obligations;
•Cyber-security breaches;
•Failure to maintain safe worksites;
•Risks or uncertainties associated with events outside of our control, including severe weather conditions, public health crises and pandemics, political crises or other catastrophic events, such as the conflict in the Middle East and the ongoing war in Ukraine;
•The impact of changes to federal policies, including those with respect to taxes, trade policies and tariffs, that affect U.S. relations with the rest of the world;
•Adverse developments affecting specific financial institutions or the broader financial services industry, including liquidity shortages or bank failures;
•Client delays or defaults in making payments;
•The cost and availability of credit and restrictions imposed by our debt agreements;
•The impact of credit rating actions and conditions in the capital markets on financing costs;
•Changes in construction expenditures and financing;
•Levels of or changes in operations and maintenance expenses;
•Our ability to continue to remain within the ratios and other limits in our debt covenants;
•Failure to implement strategic and operational initiatives;
•Risks or uncertainties associated with acquisitions, dispositions and investments;
•Possible information technology interruptions or inability to protect intellectual property;
•Our failure, or the failure of our agents or partners, to comply with laws;
•Our ability to secure appropriate insurance, licenses or permits;
•New or changing legal requirements, including those relating to environmental, health, licensing and safety matters;
•The loss of one or more clients that account for a significant portion of our revenue; and
•Asset impairments.
Forward-looking statements are based on assumptions and assessments made by our management in light of their experience and perceptions of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including,
but not limited to, the risks and uncertainties detailed from time to time in our reports filed with the Securities and Exchange Commission (the “SEC”), including in Item 1A Risk Factors in Part I of this Annual Report on Form 10-K.
Item 1. Business
Overview
Centuri is a leading North American utility infrastructure services company with over 115 years of operating history that partners with regulated utilities to maintain, upgrade and expand the energy network that powers millions of homes and businesses. We serve as a long-term strategic partner to, and an extension of, North America’s electric, gas and combination utility providers, delivering a wide range of infrastructure solutions that ensure safe, reliable and environmentally sustainable energy operations. Our service offerings primarily consist of the modernization of utility infrastructure through the replacement, maintenance, retrofitting and installation of electric and natural gas distribution and utility-scale transmission networks to meet current and future demands. We also serve complementary, attractive and growing end markets such as renewable energy associated with the expected energy transition, data centers and 5G datacom. Our essential services enable our customers to enhance the safety, reliability and environmental sustainability of the electric and natural gas networks that consumers rely upon to meet their essential and evolving energy needs. Guided by our values and unwavering commitment to serve as long-term partners to customers and communities, our more than 8,600 employees enable our customers to safely and reliably deliver electricity and natural gas and achieve their goals for environmental sustainability.
During the fiscal year ended December 29, 2024 (“fiscal 2024”), we served over 400 customers. Our customers include American Electric Power, Enbridge, Entergy, Exelon, NiSource, National Grid, Sempra Energy and Southern Company, among others. Our top 20 customers are almost exclusively investment-grade utilities and represented 67% of our revenues during fiscal 2024.
We believe our brand, scale, experience and fulsome service offerings comprise the necessary profile to attract and retain the best talent and to competitively position ourselves among the largest providers in the sector, while prioritizing the safety of our employees, customers and other stakeholders. We place a strong emphasis on employee training and development and have implemented a robust safety program that strives to ensure all projects are executed with the highest level of safety and quality standards.
We operate through a family of complementary companies that work together across different geographies, allowing us to establish solid customer relationships and a strong reputation for a wide range of capabilities. Operating across the utility value chain allows us to address diverse customer initiatives, and our knowledge, expertise and resources enable us to deliver successful projects that meet these ever-evolving needs. Furthermore, the composition of our workforce, which includes both union and non-union field labor, enables us to access a wide range of opportunities across regions, customers and projects.