AECON GROUP INC 27 reasonable not absolute assurance to management and the Board of Directors regarding achievement of intended results Aecons current system of internal and disclosure controls places reliance on key personnel across the Company to perform a variety of control functions including key reviews analysis reconciliations and monitoring The failure of individuals to perform such functions or properly implement the controls as designed could adversely impact results INTEGRATION AND ACQUISITION RISK The integration of any acquisition raises a variety of issues including without limitation identifcation and execution of synergies elimination of cost duplication systems integration including accounting and information technology execution of the predeal business strategy in an uncertain economic market development of common corporate culture and values integration and retention of key staff retention of current clients as well as a variety of issues that may be specifc to Aecon and the industry in which it operates There can be no assurance that Aecon will maximize or realize the full potential of any of its recent acquisitions A failure to successfully integrate these acquisitions and execute a combined business plan could materially impact the future fnancial results of Aecon A failure to expand the existing client base and achieve suffcient utilization of the assets acquired could also materially impact the future fnancial results of Aecon CYCLICAL NATURE OF THE CONSTRUCTION INDUSTRY Fluctuating demand cycles are common in the construction industry and can have a signifcant impact on the degree of competition for available projects As such fuctuations in the demand for construction services or the ability of the private andor public sector to fund projects in the current economic climate could adversely affect backlog and margin and thus Aecons results Given the cyclical nature of the construction industry the fnancial results of Aecon similar to others in the industry may be impacted in any given period by a wide variety of factors beyond its control as outlined herein and as a result there may be from time to time signifcant and unpredictable variations in Aecons quarterly and annual fnancial results DEPENDENCE ON THE PUBLIC SECTOR A signifcant portion of Aecons revenues is derived from contracts with various governments or their agencies Consequently any reduction in demand for Aecons services by the public sector whether from traditional funding constraints the longterm impact of the recent economic crisis including future budgetary constraints concerns regarding defcits or an eroding tax base changing political priorities change in government or delays in projects caused by the election process would likely have an adverse effect on the Company if that business could not be replaced from within the private sector Large government sponsored projects typically have long and often unpredictable lead times associated with the government review and political assessment process The time delays and pursuit costs incurred as a result of this lengthy process as well as the often unknown political considerations that can be part of any fnal decision constitute a signifcant risk to those pursuing such projects LOSS OF KEY MANAGEMENT AND INABILITY TO ATTRACT AND RETAIN KEY STAFF The Companys future prospects depend to a signifcant extent on the continued service of its key executives and staff Furthermore the Companys continued growth and future success depends on its ability to identify recruit assimilate and retain key management technical project and business development personnel The competition for such employees particularly during periods of high demand in certain sectors is intense and there can be no assurance that the Company will be successful in identifying recruiting or retaining such personnel ADJUSTMENTS IN BACKLOG There can be no assurance that the revenues projected in Aecons backlog at any given time will be realized or if realized that they will perform as expected with respect to margin Projects may from time to time remain in backlog for an extended period of time prior to contract commencement and after commencement may occur unevenly over current and future earnings periods Project suspensions terminations or reductions in scope do occur from time to time in the construction industry due to considerations beyond the control of a contractor such as Aecon and may have a material impact on the amount of reported backlog with a corresponding impact on future revenues and proftability A variety of factors outlined in these Risk Factors including without limitation conditions in the oil sands and the impact of the recent global economic downturn could lead to project delays reductions in scope andor cancellations which could depending on severity negatively affect the ability of the Company to replace its existing backlog which may adversely impact results TAX ACCRUAL RISKS Aecon is subject to income taxes in both Canada and several foreign jurisdictions Signifcant judgment is required in determining the Companys worldwide provision for income taxes In the ordinary course of business there are many transactions and calculations where the ultimate tax determination is uncertain Although Aecon believes its tax estimates are reasonable there can be no assurance that the fnal determination of any tax audits and litigation will not be materially different from that refected in historical income tax provisions and accruals Although management believes it has adequately provided for any additional taxes that may be assessed as a result of an audit or litigation the occurrence of either of these events could have an adverse effect on the Companys current and future results and fnancial condition