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ARGAN INC

ARGAN INCAGXEarnings & Financial Report

NYSE · Industrials · Construction - Special Trade Contractors

Argan Inc. is a diversified holding company that provides comprehensive engineering, construction, project management and consulting services. Its core operating segments focus on power generation, telecommunications, industrial infrastructure and renewable energy projects, primarily serving public and private sector clients across North America.

What changed in ARGAN INC's 10-K — 2022 vs 2023

Top changes in ARGAN INC's 2023 10-K

556 paragraphs added · 592 removed · 377 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

98 edited+32 added−40 removed24 unchanged
Meanwhile, we believe that our gas-fired power plant construction business is valuable to the achievement of the net carbon emission reduction goals of the U.S., the U.K. and Ireland as we are recognized as an accomplished, dependable and cost-effective provider of construction services to gas-fired power plant owners.
Meanwhile, we believe that our gas-fired power plant construction business is valuable to the achievement of the net carbon emission reduction goals of the U.S., Ireland and the U.K. as we are recognized as an accomplished, dependable and cost-effective provider of construction services to gas-fired power plant owners.
Like the U.S., the U.K. and Ireland are committed to the increase in energy consumption sourced from wind and the sun on the pathway to net zero emissions. In those countries, there appears to be recognition that these sources of electrical power are inherently variable.
Like the U.S., Ireland and the U.K. are committed to the increase in energy consumption sourced from wind and the sun on the pathway to net zero emissions. In those countries, there appears to be recognition that these sources of electrical power are inherently variable.
We have maintained that the delays in the construction starts of these projects and the awards of new business awards to GPS relate to a variety of factors, especially in the northeastern and Mid-Atlantic regions of the U.S. where the electricity grid is run by PJM Interconnection LLC (“PJM”).
We have maintained that the delays in the construction starts of these projects and the awards of new business awards to GPS relate to a variety of factors, especially in the northeastern and Mid-Atlantic regions of the U.S. where the largest electricity grid is run by PJM Interconnection LLC (“PJM”).
Using state-of-the-art combined cycle technology and an air-cooling system, the Guernsey Power Station will be a cost-efficient, fuel-efficient, electricity generating power plant that protects air quality and conserves water with the capability to satisfy the electricity needs of approximately one million homes.
Using state-of-the-art combined cycle technology and air-cooling system, the Guernsey Power Station will be a cost-efficient, fuel-efficient, electricity generating power plant that protects air quality and conserves water with the capability to satisfy the electricity needs of approximately one million homes.
The Irish government has issued a policy statement on the security of the electricity supply in Ireland which confirms the requirement for the development of new support technologies to deliver on its commitment to have 80% of the country’s electricity generated from renewables by 2030.
For example, the Irish government has issued a policy statement on the security of the electricity supply in Ireland which confirms the requirement for the development of new support technologies to deliver on its commitment to have 80% of the country’s electricity generated from renewables by 2030.
Based on its reputation and quality performance, SMC was selected on a sole source basis to perform outside premises and structured cabling work at several secure overseas locations during Fiscal 2022, Fiscal 2021 and Fiscal 2020.
Based on its reputation and quality performance, SMC was selected on a sole source basis to perform outside premises and structured cabling work at several secure overseas locations during Fiscal 2022 and Fiscal 2021.
We retain qualified insurance brokerage assistance in the regular evaluation of the adequacy of insurance coverage amounts and the annual negotiation of premium amounts in the areas of property and casualty insurance, general liability, umbrella coverage, director and officer insurance and other specialty coverages.
We retain qualified insurance brokerage assistance in the regular evaluation of the adequacy of insurance coverage amounts and the annual negotiation of premium amounts in the areas of property and casualty insurance, general liability, umbrella coverage, director and officer insurance, cybersecurity insurance and other specialty coverages.
Copies of our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as our Proxy Statements, are available, as soon as reasonably practicable, after we electronically file such materials with, or furnish them to, the SEC, without charge and upon written request provided to our Corporate Secretary at Argan, Inc., One Church Street, Suite 201, Rockville, Maryland 20850. ​
Copies of our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the - 12 - Table of Contents Exchange Act, as well as our Proxy Statements, are available, as soon as reasonably practicable, after we electronically file such materials with, or furnish them to, the SEC, without charge and upon written request provided to our Corporate Secretary at Argan, Inc., One Church Street, Suite 201, Rockville, Maryland 20850.
The extensive design, construction, project management, start-up and operating experience of GPS has grown with installed capacity exceeding 15 gigawatts of mostly domestic power-generating capacity. Our power projects have included base-load combined-cycle facilities, simple-cycle peaking plants and boiler plant construction and renovation efforts.
The extensive design, construction, project management, start-up and operating experience of GPS has grown with installed capacity exceeding 16 gigawatts of mostly domestic power-generating capacity. Our power projects have included base-load combined-cycle facilities, simple-cycle peaking plants and boiler plant construction and renovation efforts.
Other technologies will be required to support these power sources and to provide electricity when power demands exceed the amount of electricity supplied by renewable energy sources. The existence of the necessary power reserve during the long transition period to zero emissions will require supporting conventional power generation sources, typically natural gas-fired power plants.
Other technologies will be required to support these power sources and to provide electricity when power demands exceed the amount of electricity supplied by renewable energy sources. The existence of the necessary power reserve during the long transition period to zero emissions will require supporting conventional power generation sources, often natural gas-fired power plants.
Competition has led to aggressive bidding on projects while certain contractors have accepted greater risks associated with the inability to anticipate unforeseen issues and the failure to include adequate contingencies to cover lower-than expected labor productivity, unfavorable execution challenges and unusual weather events, for example.
Competition led to aggressive bidding on projects while certain contractors accepted greater risks associated with the inability to anticipate unforeseen issues and the failure to include adequate contingencies to cover lower-than expected labor productivity, unfavorable execution challenges and unusual weather events, for example.
Materials Filed with the Securities and Exchange Commission The public may read any materials that we file with the Securities and Exchange Commission (the “SEC”) at the SEC’s public reference room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330.
Materials Filed with the Securities and Exchange Commission (the “SEC”) The public may read any materials that we file with the SEC at its public reference room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330.
Financing Arrangements During April 2021, we amended our Amended and Restated Replacement Credit Agreement (the “Credit Agreement”) with Bank of America (the “Bank”). The amendment extended the expiration date of the Credit Agreement to May 31, 2024 and reduced the borrowing rate.
Financing Arrangements During April 2021, we amended our Amended and Restated Replacement Credit Agreement (the “Credit Agreement”) with Bank of America, N.A. (the “Bank”). The amendment extended the expiration date of the Credit Agreement to May 31, 2024 and reduced the borrowing rate.
We also have experience in the renewable energy sector by providing EPC contracting and other services to the owners of alternative energy facilities, including biomass plants, wind farms and solar fields. Typically, the scope of work for GPS includes complete plant engineering and design, the procurement of equipment and construction from site development through electrical interconnection and plant testing.
GPS also has experience in the renewable energy sector by providing EPC contracting and other services to the owners of alternative energy facilities, including biomass plants, wind farms and solar fields. Typically, the scope of work for GPS includes complete plant engineering and design, the procurement of equipment and construction from site development through electrical interconnection and plant testing.
Customers For Fiscal 2022 and Fiscal 2021, our most significant customer was Guernsey Power Station LLC, the owner of the Guernsey Power Station project, which accounted for approximately 57% and 67% of our consolidated revenues for the corresponding years.
Customers For Fiscal 2023, Fiscal 2022 and Fiscal 2021, our most significant customer was Guernsey Power Station LLC, the owner of the Guernsey Power Station project, which accounted for approximately 38%, 57% and 67% of our consolidated revenues for the corresponding years.
Power Industry Services The most significant percentage of our power industry services has been performed by GPS which is a full-service engineering, procurement and construction (“EPC”) services firm that we have operated for over fifteen years since it was acquired by us in 2006. GPS has the proven abilities of designing, building and commissioning large-scale energy projects in the U.S.
Power Industry Services The most significant percentage of our power industry services has been performed by GPS which is a full-service engineering, procurement and construction (“EPC”) services firm that we have operated for over sixteen years since it was acquired in 2006. GPS has the proven abilities of designing, building and commissioning large-scale energy projects primarily in the U.S.
Telecommunications Infrastructure Services SMC represents our telecommunications infrastructure services reportable business segment and conducts business as SMC Infrastructure Solutions, which provides comprehensive technology wiring and utility construction solutions to customers primarily in the Mid-Atlantic region of the U.S. We perform both outside and inside plant cabling.
Telecommunications Infrastructure Services SMC represents our telecommunications infrastructure services reportable business segment and conducts business as SMC Infrastructure Solutions, which provides utility construction services and comprehensive technology wiring solutions to customers primarily in the Mid-Atlantic region of the U.S. SMC performs both outside and inside plant cabling.
The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, including us, at http://www.sec.gov. ​ - 12 - Table of Contents We maintain a website on the Internet at www.arganinc.com that includes access to financial data.
The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, including us, at http://www.sec.gov. We maintain a website on the Internet at www.arganinc.com that includes access to financial data.
The growing preference for renewable energy sources and the elimination of fossil-fueled power plants by the populations of the U.S. and the U.K. may result in such restrictions becoming more severe in the future.
The growing preference for renewable energy sources and the elimination of fossil-fueled power plants by the governments of the U.S., Ireland and the U.K. may result in such restrictions becoming more severe in the future.
Our OSHA reportable incident rates, weighted by hours worked for all of our subsidiaries, were 0.48, 0.55 and 0.40 for calendar years 2021, 2020 and 2019, respectively; our rates were significantly better than the national average rates in our industry (NAICS – 2379) for those years.
Our OSHA reportable incident rates, weighted by hours worked for all of our subsidiaries, were 0.60, 0.48, 0.55, 0.40 and 0.54 for calendar years 2022, 2021, 2020, 2019 and 2018, respectively; our rates were significantly better than the national average rates in our industry (NAICS – 2379) for those years.
We intend to make additional opportunistic acquisitions and/or investments by identifying companies with significant potential for profitable growth and realizable synergies with one or more of our existing businesses. However, we may have more than one industrial focus depending on the opportunity.
We may make additional opportunistic acquisitions and/or investments by identifying companies with significant potential for profitable growth and realizable synergies with one or more of our existing businesses. However, we may have more than one industrial focus depending on the opportunity and/or needs of our customers.
Employees The total number of personnel employed by us is subject to the volume of construction in progress and the relative amount of work performed by subcontractors. We had 1,358 employees at January 31, 2022, substantially all of whom were full-time. We believe that our employee relations are generally good.
Employees The total number of personnel employed by us is subject to the volume of construction in progress and the relative amount of work performed by subcontractors. We had 985 employees at January 31, 2023, substantially all of whom were full-time. We believe that our employee relations are generally good.
The revenues of SMC were $13.4 million, $7.6 million and $8.6 million for Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively, or approximately 3%, 2% and 3% of our consolidated revenues for the corresponding years, respectively. Late in Fiscal 2022, SMC acquired the business of Lee Telecommunications, Inc.
The revenues of SMC were $16.2 million, $13.4 million and $7.6 million for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively, or approximately 4%, 3% and 2% of our consolidated revenues for the corresponding years, respectively. Late in Fiscal 2022, SMC acquired the business of Lee Telecommunications, Inc.
Environmental, Social, and Governance (“ESG”) Matters Our on-going commitment to environmental, health and safety, corporate social responsibility, corporate governance, sustainability, and other public policy matters relevant to us is being supported by the ESG subcommittee of our board of directors, which was formed in Fiscal 2021.
Environmental, Social, and Governance (“ESG”) Matters Our on-going commitment to environmental, health and safety, corporate social responsibility, corporate governance, sustainability, and other public policy matters relevant to us is being supported by the ESG subcommittee of our board of directors, which was formed in Fiscal 2021 and elevated to full committee status in Fiscal 2023.
Information on our website is not incorporated by reference into this Annual Report on Form 10-K for the fiscal year ended January 31, 2022 (the “2022 Annual Report”).
Information on our website is not incorporated by reference into this Annual Report on Form 10-K for the fiscal year ended January 31, 2023 (the “2023 Annual Report”).
We also may compete with regional construction services companies in the markets where planned projects might be located. Typically, a condition for award is that the contractor perform on a fixed-price or lump-sum contract basis; smaller elements of a contract may be billable on an allowance or cost-reimbursable basis.
These competitors may be multi-billion-dollar companies that have thousands of employees. We also may compete with regional construction services companies in the markets where planned projects might be located. Typically, a condition for award is that the contractor perform on a fixed-price or lump-sum contract basis; smaller elements of a contract may be billable on an allowance or cost-reimbursable basis.
The outside premises services are primarily provided to state and local government agencies, regional communications service providers, electric utilities and other commercial customers. The wide range of inside premises wiring services that we provide to our customers include structured cabling, terminations and connectivity that provide the physical transport for high-speed data, voice, video and security networks.
The outside premises services are primarily provided to the area’s electricity cooperative, state and local government agencies, regional communications service providers and other commercial customers. The wide range of inside premises wiring services provided to SMC’s customers include structured cabling, terminations and connectivity that provide the physical transport for high-speed data, voice, video and security networks.
The Credit Agreement, as amended, includes the following features, among others: a lending commitment of $50.0 million including a revolving loan with interest at the 30-day LIBOR plus 1.6% (reduced from 2.0%), and an accordion feature which allows for an additional commitment amount of $10.0 million, subject to certain conditions.
The Credit Agreement includes the following features, among others: a lending commitment of $50.0 million including a revolving loan with a floating interest rate plus 1.6% (reduced from 2.0%), and an accordion feature which allows for an additional commitment amount of $10.0 million, subject to certain conditions.
The Bank’s consent is not required for acquisitions, divestitures, cash dividends or significant investments as long as certain conditions are met. The Bank requires that the Company comply with certain financial covenants at its fiscal year-end and at each of its fiscal quarter-ends.
The Company has pledged the majority of its assets to secure its financing arrangements. The Bank’s consent is not required for acquisitions, divestitures, cash dividends or significant investments as long as certain conditions are met. The Bank requires that the Company comply with certain financial covenants at its fiscal year-end and at each of its fiscal quarter-ends.
The Credit Agreement, as amended, includes other terms, covenants and events of default that are customary for a credit facility of its size and nature, including a requirement to achieve positive adjusted consolidated EBITDA, as defined, over each rolling twelve-month measurement period.
The Credit Agreement, as amended, includes other terms, covenants and events of default that are customary for a credit facility of its size and nature, including a requirement to achieve positive adjusted earnings before interest, taxes, depreciation and amortization, as defined, over each rolling twelve-month measurement period.
Over the past few years, GPS has provided top management guidance and project management expertise to APC as it completed its subcontract efforts for the TeesREP power plant and won the award of the project to build the new gas-fired power plant in Northern Ireland. APC has provided project management manpower to GPS on several of its EPC services contracts.
Over the past few years, GPS has provided top management guidance and project management expertise to APC as it successfully completed certain projects and won the award of the project to build a new gas-fired power plant in Northern Ireland. In turn, APC has provided manpower to GPS on several of its EPC services contracts.
GPS, APC, TRC and SMC each has an experienced full-time safety director committed to ensuring a safe work place, as well as compliance with applicable permits, insurance and local and environmental laws.
We regularly communicate with our employees to promote safety and to instill safe work habits. GPS, APC, TRC and SMC each has an experienced full-time safety director committed to ensuring a safe work place, as well as compliance with applicable permits, insurance and local and environmental laws.
The revenues of our power industry services business segment were $398.1 million, $319.4 million and $135.7 million for the years ended January 31, 2022 (“Fiscal 2022”), 2021 (“Fiscal 2021”) and 2020 (“Fiscal 2020”), respectively, or 78%, 81% and 57% of our consolidated revenues for the corresponding periods, respectively.
The revenues of our power industry services business segment were $346.0 million, $398.1 million and $319.4 million for the fiscal years ended January 31, 2023 (“Fiscal 2023”), 2022 (“Fiscal 2022”) and 2021 (“Fiscal 2021”), respectively, or 76%, 78% and 81% of our consolidated revenues for the corresponding periods, respectively.
In the U.S., it is fact that power plant carbon emissions declined by 35% during the period 2010 through 2020. The primary reason for this decline was the replacement of coal-fired power plants with efficient gas-fired power plants. Natural gas is relatively clean burning, cost-effective and reliable.
In the U.S., the Energy Information Administration illustrates that power plant carbon emissions declined by 20% during the period 2005 through 2022. The primary reason for this decline was the replacement of coal-fired power plants with efficient gas-fired power plants. Natural gas is relatively clean burning, cost-effective, reliable and abundant.
However, we are concerned that the supply chain uncertainties may be impacting project owners’ confidence in commencing new work which may adversely affect our expected levels of revenues until the supply chain disruptions dissipate.
However, we are concerned that the supply chain uncertainties may be impacting project owners’ confidence in commencing new work which may adversely affect our expected levels of revenues until the supply chain disruptions substantially dissipate. The costs of materials needed for the completion of our projects may fluctuate from time to time.
The skilled craft labor pool is unique in each region due to a variety of factors, including union versus non-union work environments, competing infrastructure projects located nearby our sites that utilize the same labor pool as us, and decreased and aging labor pools resulting from demographic trends.
Labor and Materials We perform work on job sites in different states and countries. The skilled craft labor pool is unique in each region due to a variety of factors, including different employment environments, competing infrastructure projects located near our sites that utilize the same labor pool as us, and decreased and aging labor pools resulting from demographic trends.
Our reported amount of project backlog at a point in time represents the total value of projects awarded to us that we consider to be firm as of that date less the amounts of - 4 - Table of Contents revenues recognized to date on the corresponding projects.
The comparable backlog amount as of January 31, 2022 was approximately $0.7 billion. Our reported amount of project backlog at a point in time represents the total value of projects awarded to us that we consider to be firm as of that date less the amounts of revenues recognized to date on the corresponding projects.
For example, the supply of solar panels to projects in the U.S has been slowed. We believe that we have protections in our contracts with major customers that provide certain relief that helps to mitigate certain financial risks. These protections could be limited depending on the underlying issues and the financial challenges of our customers.
In addition, we believe that we have protections in our contracts with major customers that provide certain relief that helps to mitigate certain financial risks. These protections could be limited depending on the underlying issues and the financial challenges of our customers.
Through GPS and APC, the Company provides a full range of engineering, procurement, construction, commissioning, operations management, maintenance, project development, technical and other consulting services to the power generation market including the renewable energy sector.
GPS and APC represent our power industry services reportable segment that provides a full range of engineering, procurement, construction, commissioning, maintenance, project development and technical consulting services to the power generation market, including the renewable energy sector.
The Guernsey Power Station will also use dry cooling technology to reduce water usage by as much as 95% compared to a water-cooled power plant. Because of its advanced design, the power plant will achieve the lowest possible air emissions.
The Guernsey Power Station will also use dry cooling technology to reduce water usage by as much as 95% compared to a water-cooled power plant. Because of its advanced design, the power plant will achieve extremely low emission levels from a gas-fired power plant of its type.
We believe that we compete favorably with the other companies in our market space by emphasizing our high-quality reputation, outstanding customer base, security-cleared personnel and highly motivated work force in competing for larger and more diverse contracts.
We compete with providers ranging from regional companies to larger firms servicing multiple regions, as well as large national and multi-national contractors. We believe that we compete favorably with the other companies in our market space by emphasizing our high-quality reputation, outstanding customer base, security-cleared personnel and highly motivated work force in competing for larger and more diverse contracts.
We have successfully completed these types of projects in the past and we are renewing efforts to obtain new work in the renewable power sector that will complement our natural gas-fired EPC services projects going forward, like the Maple Hill Solar energy project.
We have successfully completed certain of these types of projects in the past and we are renewing efforts to obtain new work in the renewable power sector that will complement our natural gas-fired EPC services projects going forward, like the Maple Hill Solar energy project as well as the three utility-scale solar and battery energy storage facilities in the Midwest for which we recently received limited notices to proceed.
The power plants that we build, and other energy facilities including the pipelines required to supply natural gas fuel to them, are also subject to a myriad of federal and state laws and regulations governing environmental protection, air quality, water quality and noise and height restrictions.
We believe that we have the licenses required to conduct our current operations and that we are in substantial compliance with applicable regulatory requirements. - 8 - Table of Contents The power plants that we build, and other energy facilities including the pipelines required to supply natural gas fuel to them, are also subject to a myriad of federal and state laws and regulations governing environmental protection, air quality, water quality and noise and height restrictions.
We expect that GPS and APC will continue to work together in the future given the apparent emerging new business opportunities in the U.K. and Ireland, the strength of the reputation of GPS for successfully completing large gas-fired power plant projects in the U.S. and the growing recognition in the power community in the British and Irish islands that APC is committed to and capable of tackling larger and more complex power projects.
We believe that GPS and APC working together provides a competitive advantage as we pursue emerging new business opportunities in Ireland and the U.K., based on the strength of the reputation of GPS for successfully completing large gas-fired power plant projects in the U.S. and the growing recognition in the power community in Ireland and the U.K. that APC is committed to and capable of tackling larger and more complex power projects.
Kilroot Power Station In October 2021, APC entered into an engineering and construction services contract with EPUKI London, U.K., which is an affiliate of EPUKI, a Czech company, to construct a 2 x 330 MW natural gas-fired power plant in the Carrickfergus area near Belfast, Northern Ireland, that will replace an existing coal-fired power plant at the site.
Kilroot Power Station In October 2021, APC entered into an engineering and construction services contract with EPUKI London, U.K., to construct a 2 x 330 MW natural gas-fired power plant in Carrickfergus, a location that is near Belfast, Northern Ireland. The “Kilroot” project was developed by EPNI Energy Limited.
No other customer of this reportable segment represented greater than 10% of consolidated revenues for Fiscal 2022, Fiscal 2021 or Fiscal 2020. - 8 - Table of Contents Regulation Our power industry services operations are subject to various federal, state, local and foreign laws and regulations including: licensing for contractors; building codes; permitting and inspection requirements applicable to construction projects; regulations relating to worker safety and environmental protection; and special bidding, procurement and employee compensation requirements.
Regulation Our power industry services operations are subject to various federal, state, local and foreign laws and regulations including: licensing for contractors; building codes; permitting and inspection requirements applicable to construction projects; regulations relating to worker safety and environmental protection; and special bidding, procurement and employee compensation requirements.
Through TRC, the industrial fabrication and field services reportable segment provides on-site services that support maintenance turnarounds, shutdowns and emergency mobilizations for industrial plants primarily located in the southeastern region of the U.S. and that are based on its expertise in producing, delivering and installing fabricated metal components such as piping systems and pressure vessels.
Through TRC, the industrial fabrication and field services reportable segment provides primarily on-site services that support new plant construction and additions, maintenance turnarounds, shutdowns and emergency mobilizations for industrial plants primarily located in the Southeast region of the U.S. and that may include the fabrication, delivery and installation of steel components such as piping systems and pressure vessels.
A summary of our ESG accomplishments in various areas over the past three years follows: ● We refreshed our Code of Conduct to strengthen the comprehensive anti-corruption, anti-discrimination and anti-harassment sections, to emphasize respect for human rights, and to make other updates; ● We increased the percentage of independent members of our board of directors while increasing its diversity; - 11 - Table of Contents ● We made investments in solar energy funds to secure portions of the available investment tax credits and tax depreciation, which facilitated the construction and deployment of multiple solar arrays; ● We made lighting and other energy efficiency upgrades at the office building that we own while our employees continue to participate in available recycling programs at all of our facilities; and ● We commenced a solicitation of recommendations from our employees by an ESG cross-subsidiary working group in order to identify additional actionable items including coordinated community service projects.
A summary of our ESG accomplishments in various areas over the past three years follows: ● We made investments in solar energy funds to secure portions of the available investment tax credits and tax depreciation, which facilitated the construction and deployment of multiple solar arrays; ● We made lighting and other energy efficiency upgrades at the office building that we own while our employees continue to participate in available recycling programs at all of our facilities; ● We executed an agreement to build a solar carport at our Glastonbury, Connecticut office, which is expected to break ground in the summer of 2023; and ● We commenced a solicitation of recommendations from our employees by an ESG cross-subsidiary working group in order to identify additional actionable items including coordinated community service projects.
A significant amount of effort was spent by senior and project management to ensure the safety of our employees during the COVID-19 pandemic while we continued to satisfy our customer obligations.
More information about our sustainability accomplishments can be found in the sustainability section we recently added to our website. - 11 - Table of Contents A significant amount of effort was spent by senior and project management to ensure the safety of our employees during the COVID-19 pandemic while we continued to satisfy our customer obligations.
(“LTI”) for consideration of $0.6 million in cash, which expanded the business footprint of SMC into the Tidewater area of Virginia. LTI provides a suite of communications infrastructure services similar to those provided by SMC. The largest customer of LTI is Newport News Shipbuilding, a division of Huntington Ingalls Industries, to which it has been providing services since 1995.
(“LTI”) for consideration of $0.6 million in cash, which expanded the business footprint of SMC into the Tidewater area of Virginia. LTI provides a suite of inside premises, communications infrastructure services similar to those provided by SMC.
Other APC Construction Works The Irish operations of APC are performing the design, build and operations of a dedicated power plant within a major data center. The size and configuration of the facility, consisting of up to nine (9) gas-fired turbines, is a first-of-a-kind within the Irish data center market.
During Fiscal 2023, the Irish operations of APC substantially completed the design and build of a dedicated power plant within a major data center. The size and configuration of the facility, consisting of nine gas-fired turbines, is a first-of-a-kind within the Irish data center market. During Fiscal 2023, the Irish operations also completed construction activities for a major chip manufacturer.
Maple Hill Solar In May 2021, we announced that GPS entered into an EPC services contract with CPV Maple Hill Solar, LLC, an affiliate of Competitive Power Ventures, Inc. (“CPV”), to construct the Maple Hill Solar facility. Project activities were begun by GPS immediately. Project completion is currently scheduled to occur during the second half of Fiscal 2023.
The completion of each power plant is expected to occur by the end of Fiscal 2024. Maple Hill Solar In May 2021, we announced that GPS entered into an EPC services contract with CPV Maple Hill Solar, LLC, an affiliate of Competitive Power Ventures, Inc.
Substantial completion of this project is expected to occur during the second half of our fiscal year ending January 31, 2023 (“Fiscal 2023”). Guernsey County is located in southeastern Ohio in the heart of the state’s Utica and Marcellus shale gas development area.
GPS expects to achieve the final completion of this project during the third quarter of the year ending January 31, 2024 (“Fiscal 2024”). Guernsey County is located in southeastern Ohio in the heart of the state’s Utica and Marcellus shale gas development area.
As of January 31, 2022, the U.K. operations of APC have nearly completed the installation of a synchronized condenser for the combined cycle, gas-fired power plant located at the Isle of Grain site in the Kent region of the U.K.
Both of these facilities are located near Dublin. Finally, during Fiscal 2023, the U.K. operations of APC completed the installation of a synchronized condenser for the combined cycle, gas-fired power plant located at the Isle of Grain site in the Kent region of the U.K.
The consequences may result in fewer gas-fired power plants being constructed in the future than are currently forecast offset by an increased number of renewable power facility opportunities.
The consequences may result in fewer gas-fired power plants being constructed in the future than are currently forecast offset by an increased number of renewable power facility opportunities. Industrial Fabrication and Field Services TRC was founded in 1977 and its fabrication facility and offices are located near Greenville, North Carolina.
We are not dependent upon any one source for major equipment components, like heat recovery steam generation units, steam turbines and air-cooled condensers, or any other construction materials that we use to complete a particular power project.
We are not dependent upon any one source for major equipment components, such as heat recovery steam generation units, steam turbines and air-cooled condensers, or any other construction materials that we use to complete a particular power project. - 6 - Table of Contents With our assistance, project owners frequently procure and supply certain major components of the power plants such as state-of-the-art natural gas turbines.
In May 2019, GPS entered into an EPC services contract to construct a 625 MW power plant in Harrison County, West Virginia. Caithness is partnered with ESC Harrison County Power, LLC to develop this project.
On the other hand, in May 2019, GPS entered into an EPC services contract to construct a 625 MW power plant in Harrison County, West Virginia.
For Fiscal 2022, Fiscal 2021 and Fiscal 2020, TRC reported revenues of $97.9 million, $65.3 million and $94.7 million, respectively, or approximately 19%, 17% and 40% of consolidated revenues for the corresponding years, respectively. TRC increased its income from operations to $8.3 million for Fiscal 2022 from $0.6 million for Fiscal 2021.
For Fiscal 2023, Fiscal 2022 and Fiscal 2021, TRC reported revenues of $92.8 million, $97.9 million and $65.3 million, respectively, or approximately 20%, 19% and 17% of consolidated revenues for the corresponding years, respectively.
Consistently, a major portion of SMC’s revenue-producing activity each year is performed pursuant to task or work orders issued under master agreements with SMC’s major customers such as Southern Maryland Electric Cooperative, a local electricity cooperative.
Customer facilities typically require regular upgrades to their wiring systems in order to accommodate improvements in security, telecommunications and network capabilities. - 9 - Table of Contents Consistently, a major portion of SMC’s revenue-producing activity each year is performed pursuant to task or work orders issued under master agreements with SMC’s major customers such as Southern Maryland Electric Cooperative, a local electricity cooperative.
Our successful experience includes the efficient completion and maintenance of natural gas-fired combined cycle and simple cycle power plants, wood/coal-fired plants, waste-to-energy plants, wind farms, solar fields and biofuel processing facilities, most performed on an EPC contract basis. - 7 - Table of Contents Through the power industry services segment, we provide a full range of competitively priced development, consulting, engineering, procurement, construction, commissioning, operations management and maintenance services to project owners.
Our successful experience includes the efficient completion and maintenance of natural gas-fired combined cycle and simple cycle power plants, wood/coal-fired plants, waste-to-energy plants, wind farms, solar fields and biofuel processing facilities, most performed on an EPC contract basis.
We sourced certain supplies, materials and equipment from countries stricken by the COVID-19 pandemic, as did certain of the major original equipment manufacturers for major components of natural gas-fired power plants.
For example, we sourced certain supplies, materials and equipment from countries stricken by the global COVID-19 pandemic, as did certain of the major original equipment manufacturers (“OEMs”) for major components of natural gas-fired power plants. Disruptions to these supply chains could have significantly affected the completion schedules for certain projects in an unfavorable manner.
In short, labor shortages are expected to persist into the next fiscal year as wages rise. - 6 - Table of Contents In connection with the engineering and construction of traditional power plants, biodiesel plants and other renewable energy systems, we procure materials for installation on our various projects.
In connection with the engineering and construction of traditional power plants, biodiesel plants and other renewable energy systems, we procure materials for installation on our various projects.
The wide range of customers includes independent power producers, public utilities, power plant equipment suppliers and global energy plant construction firms with projects located in the United States (the “U.S.”), the Republic of Ireland (“Ireland”) and the United Kingdom (the “U.K.”). GPS and APC represent the Company’s power industry services reportable segment.
The wide range of customers includes independent power project owners, public utilities, power plant heavy equipment suppliers and other commercial firms with significant power requirements. Projects are located in the United States (the “U.S.”), the Republic of Ireland (“Ireland”) and the United Kingdom (the “U.K.”).
Caithness Energy, L.L.C. (“Caithness”) led the development of this project. After receiving a full notice-to-proceed, GPS commenced substantial activities for this project in August 2019. The Guernsey Power Station is the largest, single-phase, gas-fired, power plant construction project in the U.S. For Fiscal 2022, Fiscal 2021 and Fiscal 2020, this project represented the major portions of consolidated revenues.
After receiving a full notice-to-proceed, GPS commenced substantial activities for this project in August 2019, which remains the largest, single-phase, gas-fired, power plant construction project in the U.S. For Fiscal 2023, Fiscal 2022 and Fiscal 2021, this project represented significant portions of consolidated revenues. The substantial completion milestones have been achieved for all three of this plant’s natural gas-fired turbines.
Safety, Risk Management, Insurance and Performance Bonds We are committed to ensuring that the employees of each of our businesses perform their work in a safe environment. We regularly communicate with our employees to promote safety and to instill safe work habits.
As of January 31, 2023, the Company was in compliance with the covenants of the Credit Agreement, as amended. - 10 - Table of Contents Safety, Risk Management, Insurance and Performance Bonds We are committed to ensuring that the employees of each of our businesses perform their work in a safe environment.
For Fiscal 2022 and Fiscal 2021, the amounts of revenues earned by us and associated with renewable energy projects were 13.4% and 10.8% of corresponding revenues for the power industry services segment. We expect that revenues associated with the performance of renewable energy projects will become a more meaningful percentage of our segment and consolidated revenues over the coming years.
For Fiscal 2023, Fiscal 2022 and Fiscal 2021, the amounts of revenues earned by us and associated with renewable energy projects were 9.6%, 13.4% and 10.8%, respectively, of corresponding revenues for the power industry services segment.
Many state and local regulations governing construction require permits and licenses to be held by individuals who have passed an examination or met other requirements. We believe that we have all the licenses required to conduct our current operations and that we are in substantial compliance with applicable regulatory requirements.
Many state and local regulations governing construction require permits and licenses to be held by individuals who have passed an examination or met other requirements.
As of January 31, 2022, the revenue value of our unsatisfied bonded performance obligations was approximately $235.1 million. In addition, there were bonds outstanding in the aggregate amount of approximately $1.0 million covering other risks including our warranty obligations related to completed activities. Not all of our projects require bonding.
As of January 31, 2023, the estimated amount of the Company’s unsatisfied bonded performance obligations, covering all of its subsidiaries, was approximately $0.6 billion. As of January 31, 2023, the outstanding amount of bonds covering other risks, including warranty obligations related to completed activities, was not material. Not all of our projects requires bonding.
The unique Maple Hill Solar project, which is located on previously cleared timber property in Cambria County, Pennsylvania, will be constructed using over 235,000 photovoltaic modules to generate approximately 100 MW of electricity which is enough to power more than 18,000 homes.
The unique Maple Hill Solar project, which is located in Cambria County, Pennsylvania, is being constructed using over 235,000 photovoltaic modules to generate up to approximately 100 MW alternating current electrical power.
As a limited notice to proceed with certain preliminary activities was received from the owner of this project at the time, the value of the contract was added to our project backlog. However, meaningful project development activities for the facility appear to be limited.
As a limited notice to proceed with certain preliminary activities was received from the owner of this project at the time (a repeat customer), the value of the contract was added to our project backlog. However, meaningful milestones were not achieved and management concluded that the value of this power plant should be removed from project backlog during Fiscal 2023.
The rising employment has been accompanied by higher wages that have risen by approximately 5.1% over the last year as well. However, in staffing each new project with the skilled craft labor needed to complete the job successfully, we may be challenged by labor shortages in the construction industry, rising wages, demographic trends and other factors.
To date, we have managed generally to staff each of our jobs safely and effectively. However, in staffing each new project with the skilled craft labor needed to complete each job successfully, we may be challenged by labor shortages in the construction industry, rising wages, demographic trends and other factors.
The track record of GPS has proven that fixed-price contracts can provide opportunities for higher margins if the corresponding projects are completed at lower-than-planned costs. We are confident that our project management teams have gained the experience necessary for successful execution on these types of contracts as we go forward although we are aware of the risks involved.
We are confident that our project management teams have gained the experience necessary for successful execution on these types of contracts as we go forward although we are aware of the risks involved.
We expect that companies acquired by Argan will be maintained in separate subsidiaries that will be operated in a manner that best provides cash flows for the Company and value for our stockholders. Argan is a holding company with current investments in GPS, APC, TRC and SMC.
Significant acquired companies will be operated in a manner that we believe will best provide long-term and enduring value for our stockholders. Argan is primarily a construction firm with current investments in GPS, APC, TRC and SMC.
Projects that are awarded to us may remain included in our backlog for extended periods of time as customers experience project delays. As we have discussed at previous reporting dates, GPS has been awarded other EPC services contracts for which commencement of project activities have been delayed.
Projects that are awarded to us may remain included in our backlog for extended periods of time as customers experience project delays.
The substantial portions of the revenues of this reportable segment reported for these three years were derived from the performance of activities by GPS and APC under EPC services and other construction contracts with the owners of power plant projects. - 3 - Table of Contents Guernsey Power Station In January 2019, GPS entered into an EPC services contract to construct an 1,875 MW natural gas-fired power plant in Guernsey County, Ohio (the “Guernsey Power Station”).
The substantial portions of the revenues of this reportable segment reported for these three years were derived from the performance of activities by GPS and APC under EPC services and other construction contracts with the owners of power plant projects. - 3 - Table of Contents Project Backlog At January 31, 2023, the project backlog for this reporting segment was approximately $0.7 billion.
Going forward, competition for labor may include employers outside the construction industry that can offer the one job benefit that construction companies can’t which is the opportunity to work remotely.
Going forward, competition for labor may include employers outside the construction industry that can offer the one job benefit that construction companies cannot, which is the opportunity to work remotely. In short, labor shortages may persist into the next fiscal year as inflation drives wages upwards. Overall, employment in the domestic construction industry has surpassed the pre-pandemic high.
While the market remains dynamic, we are moving into an era where there may be fewer competitors for new domestic gas-fired power plant EPC services project opportunities. Several major competitors have exited the market for a variety of reasons or have been acquired. Others have announced intentions to avoid entering into fixed-price contracts.
Several major competitors exited the market for a variety of reasons or have been acquired. Others have announced intentions to avoid entering into fixed-price contracts.
Nonetheless, fixed-price contracting in the U.S. has continued to occur due to intense competition that has increased the bargaining power of project owners and sustained the number of projects typically completed on a fixed-price basis.
As a result, construction and engineering companies incurred losses related to performance on fixed-price contracts, including some of the largest firms in the country. However, fixed-price contracting in the U.S. has continued to occur due to competition that has sustained the number of projects typically completed on a fixed-price basis.
TRC has achieved positive earnings before interest, taxes, depreciation and amortization (“EBITDA”), for each of the past six years of operations although the financial performance over this period has been uneven and inconsistent. Based on the current backlog and number of new business opportunities, we expect that TRC will report favorable results again for the newly commenced fiscal year.
Based on the current backlog and number of new business opportunities, we expect that TRC will report favorable results again for the newly commenced fiscal year.
Currently, we believe that the ability of the owners of fully developed gas-fired power plant projects to close on equity and permanent debt financing is challenged by uncertainty in the capital markets caused by multiple factors including delayed capacity auctions and mounting public and political opposition to fossil-fuel energy projects.
Currently, we also believe that the ability of the owners of fully developed gas-fired power plant projects to close on equity and permanent debt financing is challenged by uncertainty in the capital markets caused by multiple factors including delayed capacity auctions, mounting public and political opposition to fossil-fuel energy projects and rising interest rates. - 5 - Table of Contents Along with our commitment to the construction of state-of-the-art, natural gas-fired power plants that will serve as important elements of our country’s electricity-generation mix in the future, we are targeting certain business development efforts to win projects for the erection of utility-scale wind farms and solar fields, as well as the construction of other renewable energy projects.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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A failure to promptly recover on these types of customer submissions could have a negative impact on our liquidity and profitability in the future. The shortage of skilled craft labor may negatively impact our ability to execute on our long-term construction contracts.
A failure to promptly recover on these types of customer submissions could have a negative impact on our revenues, liquidity and profitability in the future. The shortage of skilled craft labor may negatively impact our ability to execute on our long-term construction contracts.
Our construction contracts frequently require that we obtain payment and performance bonds from surety companies on behalf of project owners as a condition to the contract award. Historically, we have had a strong bonding capacity.
Our construction contracts frequently require that we obtain payment and/or performance bonds from surety companies on behalf of project owners as a condition to the contract award. Historically, we have had a strong bonding capacity.
Various privacy and security laws in the US and abroad, including the General Data Protection Regulation (“GDPR”) in the European Union, require us to protect sensitive and confidential information and data from disclosure and we are bound by our client and other contracts, as well as our own business practices, to protect confidential and proprietary information and data (whether it be ours or a third party’s information entrusted to us) from unauthorized disclosure.
Various privacy and security laws in the U.S. and abroad, including the General Data Protection Regulation (“GDPR”) in the European Union, require us to protect sensitive and confidential information and data from disclosure and we are bound by our client and other contracts, as well as our own business practices, to protect confidential and proprietary information and data (whether it be ours or a third party’s information entrusted to us) from unauthorized disclosure.
In the future, we may not be able to successfully integrate such acquired companies with our other operations without substantial costs, delays or other operational or financial problems including: ● the diversion of management’s attention from other important operational or financial matters; - 23 - Table of Contents ● the inability to retain or maintain the focus of key personnel of acquired companies; ● the discovery of previously unidentified project costs or other liabilities; ● unforeseen difficulties encountered in the maintenance of uniform standards, controls, procedures and policies, including an effective system of internal control over financial reporting; and ● impairment losses related to acquired goodwill and other intangible assets.
In the future, we may not be able to successfully integrate such acquired companies with our other operations without substantial costs, delays or other operational or financial problems including: ● the diversion of management’s attention from other important operational or financial matters; ● the inability to retain or maintain the focus of key personnel of acquired companies; ● the discovery of previously unidentified project costs or other liabilities; ● unforeseen difficulties encountered in the maintenance of uniform standards, controls, procedures and policies, including an effective system of internal control over financial reporting; and ● impairment losses related to acquired goodwill and other intangible assets.
Our power industry service activities in any one fiscal reporting period are concentrated on a limited number of large construction projects for which we recognize revenues over time as we transfer control of the project asset to the customer. To a substantial extent, our contract revenues are based on the amounts of costs incurred.
Our power industry services activities in any one fiscal reporting period are concentrated on a limited number of large construction projects for which we recognize revenues over time as we transfer control of the project asset to the customer. To a substantial extent, our contract revenues are based on the amounts of costs incurred.
Operating in the international marketplace, which for us exists primarily in Ireland and the U.K., may expose us to a number of risks including: • abrupt changes in domestic and/or foreign government policies, laws, treaties (including those impacting trade), regulations or leadership; • embargoes or other trade restrictions, including sanctions; • restrictions on currency movement; • tax or tariff increases; • currency exchange rate fluctuations; • changes in labor conditions and difficulties in staffing and managing international operations; and • other social, political and economic instability.
Operating in the European marketplace, which for us exists primarily in Ireland and the U.K., may expose us to a number of risks including: • abrupt changes in domestic and/or foreign government policies, laws, treaties (including those impacting trade), regulations or leadership; • embargoes or other trade restrictions, including sanctions; • restrictions on currency movement; • tax or tariff increases; • currency exchange rate fluctuations; • changes in labor conditions and difficulties in staffing and managing overseas operations; and • other social, political and economic instability.
In particular, these types of events could shut-down our construction job sites or fabrication facilities for indefinite periods of time, break our product supply chain from the impacted region or could cause our customers to delay or cancel projects, which could impact our ability to operate.
In particular, these types of events could shut-down our construction job sites or fabrication facility for indefinite periods of time, break our product supply chain from the impacted region or could cause our customers to delay or cancel projects, which could impact our ability to operate.
Our tax estimates and tax positions could be materially affected by many factors including the final outcome of tax audits and related litigation, the introduction of new tax accounting standards, legislation, regulations and related interpretations, our global mix of earnings, the realization of deferred tax assets, changes in uncertain tax positions and changes in our tax strategies.
Our tax estimates and tax positions could be materially affected by many factors including the final outcome of tax audits and related appeals, the introduction of new tax accounting standards, legislation, regulations and related interpretations, our global mix of earnings, the realization of deferred tax assets, changes in uncertain tax positions and changes in our tax strategies.
This section of our 2022 Annual Report may include projections, assumptions and beliefs that are intended to be “forward looking statements.” They should be read in light of our cautionary statement regarding “forward looking statements” that is presented in Item 7 of this 2022 Annual Report.
This section of our 2023 Annual Report may include projections, assumptions and beliefs that are intended to be “forward looking statements.” They should be read in light of our cautionary statement regarding “forward looking statements” that is presented in Item 7 of this 2023 Annual Report.
Many of our customers require that we meet certain safety criteria to be eligible to bid on contracts. Further, regulatory changes implemented by OSHA or similar government agencies could impose additional costs on us. We maintain programs with the primary purpose of implementing effective health, safety and environmental procedures throughout our Company.
Many of our customers require that we meet certain safety criteria to be eligible to bid on contracts. - 21 - Table of Contents Further, regulatory changes implemented by OSHA or similar government agencies could impose additional costs on us. We maintain programs with the primary purpose of implementing effective health, safety and environmental procedures throughout our Company.
Projects that are awarded to us may remain included in our backlog for extended periods of time as customers experience project delays. Should any unexpected delay, suspension or termination of the work under such contracts occur, our results of operations may be materially and adversely affected.
Projects that are awarded to us may remain included in our backlog for extended periods of time as customers experience project delays. - 14 - Table of Contents Should any unexpected delay, suspension or termination of the work under such contracts occur, our results of operations may be materially and adversely affected.
Higher than expected natural gas prices, even for just the short term, could have adverse effects on the ability of independent power producers to obtain construction and permanent financing for new natural gas-fired power plants. - 17 - Table of Contents Soft demand for electrical power may cause deterioration in our financial outlook.
Higher than expected natural gas prices, even for just the short term, could have adverse effects on the ability of independent power producers to obtain construction and permanent financing for new natural gas-fired power plants. Soft demand for electrical power may cause deterioration in our financial outlook.
Stock issuances and financing, if obtained, may not be on terms favorable to us and could result in substantial dilution to our stockholders at the time(s) of these transactions. - 26 - Table of Contents Future stock option exercises and restricted stock issuances will dilute the ownership of the Company’s current stockholders.
Stock issuances and financing, if obtained, may not be on terms favorable to us and could result in substantial dilution to our stockholders at the time(s) of these transactions. Future stock option exercises and restricted stock issuances will dilute the ownership of the Company’s current stockholders.
Others have announced intentions to avoid entering into fixed-price contracts citing the disproportionate financial risks born by contractors. However, the market remains dynamic, and competitors include multi-billion-dollar companies with thousands of employees. Competing effectively in our market requires substantial financial resources, the availability of skilled personnel and equipment when needed and the effective use of technology.
Others have announced intentions to avoid entering into fixed-price contracts citing the disproportionate financial risks borne by contractors. However, the market remains dynamic, and remaining competitors include committed multi-billion-dollar companies with thousands of employees. Competing effectively in our market requires substantial financial resources, the availability of skilled personnel and equipment when needed and the effective use of technology.
If a supplier, manufacturer or subcontractor fails to provide supplies, equipment or services as required under a negotiated contract for any reason, we - 22 - Table of Contents may be required to self-perform unexpected work or obtain these supplies, equipment or services on an expedited basis or at a higher price than anticipated from a substitute source, which could impact contract profitability in an adverse manner.
If a supplier, manufacturer or subcontractor fails to provide supplies, equipment or services as required under a negotiated contract for any reason, we may be required to self-perform unexpected work or obtain these supplies, equipment or services on an expedited basis or at a higher price than anticipated from a substitute source, which could impact contract profitability in an adverse manner.
When the general level of economic activity deteriorates, the level of uncertainty about future business prospects rises. When this occurs, customers may delay or cancel new projects, maintenance on major power plant components, repairs to damaged or worn equipment or other plant outage work.
When the general level of economic activity deteriorates, the level of uncertainty about future business prospects rises. Accordingly, customers may delay or cancel new projects, maintenance on major power plant components, repairs to damaged or worn equipment or other plant outage work.
Future project interruptions or delays in the delivery of major power plant components that are related to a renewed spreading of an existing or mutated strain of the COVID-19 virus could impact our schedules, thereby affecting our ability to complete our fixed-price contract projects in accordance with current schedules.
Future project interruptions or delays in the delivery of major power plant components that are related to a renewed spreading of an existing or mutated strain of the COVID-19 virus or other contagion could impact our schedules, thereby affecting our ability to complete our fixed-price contract projects in accordance with established schedules.
In addition, the Company and certain of our major original equipment manufacturers source certain supplies, materials and equipment from countries afflicted by the outbreak.
In addition, the Company and certain of our major original equipment manufacturers source certain supplies, materials and equipment from countries that were afflicted by the outbreak.
Meaningful competition is expected to continue in the domestic market, and could increase in the Irish and British markets, presenting us with significant challenges to our achieving strong growth rates and acceptable profit margins.
Meaningful competition is expected to continue in the domestic market, and could increase in the Irish and U.K markets, presenting us with significant challenges to our achieving strong growth rates and acceptable profit margins.
In addition, from time to time, we and/or certain of our current or former directors, officers or employees may be named as parties to other types of lawsuits. - 21 - Table of Contents Litigation can involve complex factual and legal questions, and proceedings may occur over several years.
In addition, from time to time, we and/or certain of our current or former directors, officers or employees could be named as parties to other types of lawsuits. Litigation can involve complex factual and legal questions, and proceedings may occur over several years.
We also made special cash dividend payments in the amount of $1.00 per share of common stock in July 2020 and December 2020, and we paid regular and special cash dividends during earlier years.
We also made special cash dividend payments - 25 - Table of Contents in the amount of $1.00 per share of common stock in July 2020 and December 2020, and we paid regular and special cash dividends during earlier years.
Due primarily to the generally favorable operating results of GPS, the major business component of this segment, we have generated consolidated net income for eleven of the last twelve years. GPS earns the substantial portion of its revenues from execution on long-term EPC services contracts with project owners.
Due primarily to the generally favorable operating results of GPS, the major business component of this segment, we have generated consolidated net income for twelve of the last thirteen years. GPS earns the substantial portion of its revenues from execution on long-term natural gas-fired EPC services contracts with project owners.
Unexpected and adverse changes in the foreign countries in which we operate could result in project disruptions, increased cost and potential losses. ​ Our business is also subject to international economic and political conditions that change for reasons which are beyond our control. Such changes may have unfavorable consequences for us.
Unexpected and adverse changes in the foreign countries in which we operate could result in project disruptions, increased costs and potential losses. Our business is subject to overseas economic and political conditions that change for reasons which are beyond our control. Such changes may have unfavorable consequences for us.
Our results could be adversely affected by natural disasters or other catastrophic events such as the COVID-19 pandemic. Natural disasters, such as hurricanes, tornadoes, floods and other adverse weather conditions; or other catastrophic events such as global pandemics could disrupt our operations, or the operations of one or more of our vendors or customers.
Our results could be adversely affected by natural disasters, human-made disasters or other catastrophic events. Natural disasters, such as hurricanes, tornadoes, floods and other adverse weather conditions; or other catastrophic events such as global pandemics could disrupt our operations, or the operations of one or more of our vendors or customers.
The majority of our consolidated revenues relate to performance by the power industry services segment which represented 78%, 81% and 57% of consolidated revenues for Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively.
The majority of our consolidated revenues relate to performance by the power industry services segment which represented 76%, 78% and 81% of consolidated revenues for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.
We have successfully built utility-scale wind and solar farms, biomass fueled power plants and biodiesel energy facilities in the past and we have renewed the pursuit of renewable energy projects that will complement our natural gas-fired EPC services projects as a core business development focus going forward.
We have successfully built - 13 - Table of Contents utility-scale wind and solar farms, biomass fueled power plants and biodiesel energy facilities in the past, and we have renewed the pursuit of renewable energy projects that will complement our natural gas-fired EPC services projects which will remain the core business development focus going forward.
Intense global competition for engineering, procurement and construction contracts could reduce our market share. The competitive landscape in the EPC services market for natural gas-fired power plants has changed significantly over the last few years. Several significant competitors announced their exit from the market for a variety of reasons.
Intense global competition for engineering, procurement and construction contracts could reduce our market share. The competitive landscape in the EPC services market for natural gas-fired power plants was changed significantly several years ago as several significant competitors announced their exit from the market for a variety of reasons.
Unresolved disputes with a subcontractor or supplier regarding the scope of work or performance may escalate, resulting in arbitration proceedings or legal actions (see “Legal Proceedings” in Item 3 below). Unfavorable outcomes of such disputes may also impact contract profitability in an adverse manner.
Unresolved disputes with a subcontractor or supplier regarding the scope of work or performance may escalate, resulting in arbitration proceedings or legal actions. Unfavorable outcomes of such disputes may also impact contract profitability in an adverse manner.
We may make future acquisitions of other businesses that require the use of cash and issuances of common stock. To the extent that we intend to use cash for any acquisition, we may be required to raise additional equity and/or obtain debt financing. Equity financing may result in dilution for our then current stockholders.
We may make future acquisitions of other businesses that require the use of cash and issuances of common stock. To the extent that we intend to use cash for any acquisition, we may be required to raise additional equity and/or obtain debt financing.
Our OSHA reportable incident rates, weighted by hours worked for all of our subsidiaries, were 0.48, 0.55 and 0.40 for calendars 2021, 2020 and 2019, respectively. Our actual rates were significantly better than the national averages in our industry (NAICS – 2379) for those years.
Our OSHA reportable incident rates, weighted by hours worked for all of our subsidiaries, were 0.60, 0.48, 0.55, 0.40 and 0.54 for the calendar years 2022, 2021, 2020, 2019 and 2018, respectively. Our actual rates were significantly better than the national average rates in our industry (NAICS – 2379) for those years.
We could be adversely affected by violations of the Foreign Corrupt Practices Act and similar anti-bribery laws. The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010 and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to officials or others for the purpose of obtaining or retaining business.
Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010 and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to officials or others for the purpose of obtaining or retaining business.
We have protections in our contracts with major customers that provide certain relief that helps to mitigate certain financial risks. However, the effectiveness of these protections may be limited by factors including the financial strength of the customer. We are actively attempting to manage the project risks presented by the current pandemic.
We have protections in our contracts with major customers that provide certain relief that helps to mitigate certain financial risks. However, the effectiveness of these protections may be limited by factors including the financial strength of the customer.
If the price we are required to pay for subcontractors or equipment and supplies exceeds the corresponding amount that we have estimated, we may suffer a loss on the contract.
If the price we are required to pay for subcontractors or equipment and supplies exceeds the corresponding amount that we have estimated, we may suffer a reduction in the anticipated amount of gross profit or even a loss on the contract.
During Fiscal 2019, we completed a detailed review of the activities of our engineering staff on major EPC services projects in order to identify and quantify the amounts of estimated research and development tax credits that were available to reduce prior year income taxes. This study focused on project costs incurred during the three-year period ended January 31, 2018.
During the year ended January 31, 2019 (“Fiscal 2019”), we completed a detailed review of the activities of our engineering staff on major EPC services projects in order to identify and quantify the amounts of estimated research and development tax credits that were available to reduce prior year income taxes.
The research and development tax credits were included in amendments to our consolidated federal income tax returns for Fiscal 2016 and Fiscal 2017, that were filed in January 2019, and our consolidated federal income tax return for Fiscal 2018, that was filed in November 2018.
The research and development tax credits were included in amendments to our consolidated federal income tax returns for the year ended January 31, 2016 (“Fiscal 2016”) and the year ended January 31, 2017 (“Fiscal 2017”), that were filed in January 2019, and our consolidated federal income tax return for the year ended January 31, 2018 (“Fiscal 2018”), that was filed in November 2018.
Future revenues are dependent on the awards of new EPC projects to us, the receipt of corresponding full notices-to-proceed and our ability to successfully complete the projects that we start.
Future revenues are dependent on the awards of utility-scale natural gas-fired and renewable energy EPC projects to us, the receipt of corresponding full notices-to-proceed and our ability to successfully complete the projects that we start.
On the other hand, natural-gas fired power plants provided approximately 38% of the electricity generated by utility-scale power plants in the U.S. in 2021, representing an increase of 60% from the amount of electrical power generated by natural gas-fired power plants in 2010, which provided approximately 24% of net electricity generation for 2010.
On the other hand, natural-gas fired power plants provided approximately 39% of the electricity generated by utility-scale power plants in the U.S. in 2022, representing an increase of 69% from the amount of electrical power generated by natural gas-fired power plants in 2010, which was approximately 24% of net electricity generation in that year.
Should the pace of development for renewable energy facilities, including wind and solar power plants, accelerate at faster rates than projected, the number of future natural gas-fired construction project opportunities for us may fall, which could adversely affect our future revenues, profits and cash flows. The failure to obtain utility-scale renewable projects could have adverse effects on our growth.
Should the pace of development for renewable energy facilities, including wind and solar power plants, accelerate at faster rates as projected, the number of future natural gas-fired construction project opportunities for us may fall, which could adversely affect our future revenues, profits and cash flows.
In the 2022 reference case of the Energy Information Administration (“EIA”), net electricity generation from all renewable power sources is expected to represent over 44% of such generation by 2050.
In the reference case of the Energy Information Administration (“EIA”) Energy Outlook for 2023, net electricity generation from all renewable power sources is expected to represent approximately 63% of such generation by 2050.
Should future evidence confirm the concerns or should a major contamination or seismic episode occur in the future, the use of fracking may be suspended, limited, or curtailed by additional state and/or federal authorities.
Should future evidence confirm the concerns, the use of fracking may be suspended, limited, or curtailed by additional state and/or federal authorities.
Among the other areas currently requiring significant estimates by our management are the following: ● the assessment of the value of goodwill and recoverability of other purchased intangible assets; ● the determination of provisions for income taxes, the accounting for uncertain income tax positions and the establishment of valuation allowances associated with deferred income tax assets; ● the determination of the fair value of stock-based incentive awards; and ● accruals for estimated liabilities, including warranties and any losses related to legal matters. ​ Our actual business and financial results could differ from our estimates, which may impact future profits. ​ - 14 - Table of Contents Project backlog amounts may be uncertain indicators of future revenues as project realization may be subject to unexpected adjustments, delays and cancellations.
Among the other areas that could require significant estimates by our management are the following: ● the assessment of the value of goodwill and recoverability of other purchased intangible assets; ● the determination of provisions for income taxes, the accounting for uncertain income tax positions and the establishment of valuation allowances associated with deferred income tax assets; ● the determination of the fair value of stock-based incentive awards; and ● accruals for estimated liabilities, including any losses related to legal matters. ​ Our actual business and financial results could differ from our estimates, which may impact future profits.
When these types of events occur and unresolved matters are pending, we have used existing liquidity to cover cost overruns pending their resolution. The aggregate amounts of contract variations included in the transaction prices that were used to determine project-to-date revenues for all of our projects at January 31, 2022 and 2021 were $7.5 million and $16.6 million, respectively.
When these types of events occur and unresolved matters are pending, we have used existing liquidity to cover cost overruns pending their resolution. The aggregate amounts of contract variations included in the transaction prices that were still pending customer acceptance at January 31, 2023 and 2022 were $11.6 million and $7.5 million, respectively.
If the price of natural gas increases, the demand for our construction services could decline. The overall growth of our power business has been substantially based on the number of combined cycle gas-fired power plants built by us, as many coal-fired plants have been shut down. In 2010, coal-fired power plants accounted for about 45% of total electricity generation.
Risks Related to Our Market If the price of natural gas increases, the demand for our construction services could decline. The growth of our power business has been substantially based on the number of combined cycle gas-fired power plants built by us, as many coal-fired plants have been shut down.
The net amount of electricity generation in the U.S. provided by utility-scale wind and solar photovoltaic facilities continues to rise. Over the last two years, the net generation has increased by 34.8%. Together, such power facilities provided approximately 8.8%, 10.6% and 11.9% of the net amount of electricity generated by utility-scale power facilities in 2019, 2020 and 2021, respectively.
The net amount of electricity generation in the U.S. provided by utility-scale wind and solar photovoltaic facilities continues to rise. Together, such power facilities provided approximately 10.6%, 11.9% and 13.2% of the net amount of electricity generated by utility-scale power facilities in 2020, 2021 and 2022 respectively.
The failure to comply with such procedures, client contracts or applicable regulations could subject us to losses and liability, and adversely impact our ability to complete awarded projects as planned or to obtain projects in the future.
If we fail to implement appropriate safety procedures and/or if our procedures fail, our employees or others may suffer injuries or illness. The failure to comply with such procedures, client contracts or applicable regulations could subject us to losses and liability, and adversely impact our ability to complete awarded projects as planned or to obtain projects in the future.
If we fail to accurately estimate the resources required and time necessary to complete these types of contracts, or if we fail to complete these contracts within the costs and timeframes to which we have agreed, there could be material adverse impacts on our actual financial results, the accuracy of forecasted future results, as well as our business reputation. - 20 - Table of Contents Factors not discussed above that could result in contract cost overruns, project delays or other problems for us may include: ● delays in the scheduled deliveries of machinery and equipment ordered by us or a project owner (i.e., supply chain disruptions); ● unanticipated technical problems, including design or engineering issues; ● inadequate project execution tools for recording, tracking, forecasting and controlling future costs and schedules; ● unforeseen increases in the costs of labor, warranties, raw materials, components or equipment, or our failure or inability to obtain resources when needed; ● reliance on historical cost and/or execution data that is not representative of current conditions; ● delays or productivity issues caused by weather conditions, or other forces majeure (i.e., pandemics); ● incorrect assumptions related to labor productivity, scheduling estimates or future economic conditions, including the impacts of inflation on fixed-price contracts; ● workmanship deficiencies resulting in delays and costs associated with the performance by us of unanticipated rework; and ● modifications to projects that create unanticipated costs or delays.
Factors not discussed above that could result in contract cost overruns, project delays or other problems for us may include: ● the impacts of inflation on fixed-price contracts; ● delays in the scheduled deliveries of machinery and equipment ordered by us or a project owner (i.e., supply chain disruptions); ● unanticipated technical problems, including design or engineering issues; ● inadequate project execution tools for recording, tracking, forecasting and controlling future costs and schedules; ● unforeseen increases in the costs of labor, warranties, raw materials, components or equipment, or our failure or inability to obtain resources when needed; ● reliance on historical cost and/or execution data that is not representative of current conditions; ● delays or productivity issues caused by weather conditions, or other forces majeure (i.e., pandemics); - 19 - Table of Contents ● satisfying the requirements of the Inflation Reduction Act of 2022 (the “IRA”) for our customers in order to maximize its potential benefits; ● incorrect assumptions related to labor productivity, scheduling estimates or future economic conditions; ● workmanship deficiencies resulting in delays and costs associated with the performance by us of unanticipated rework; and ● modifications to projects that create unanticipated costs or delays.
As of January 31, 2022, the estimated value of future work covered by outstanding performance bonds was approximately $235 million.
As of January 31, 2023, the estimated value of future work covered by outstanding performance bonds was approximately $0.6 billion.
To the extent that our international business is affected by unexpected and adverse foreign economic changes, including trade retaliation from certain countries, we may experience project disruptions and losses which could significantly reduce our consolidated revenues and profits, or could cause losses reflected at the consolidated level.
To the extent that our international business is affected by unexpected and adverse foreign economic changes, including trade retaliation from certain countries, we may experience project disruptions and losses which could significantly reduce our consolidated revenues and profits, or could cause losses reflected at the consolidated level. - 17 - Table of Contents Risks Related to the Regulatory Environment We are required to comply with environmental laws and regulations that may add unforeseen costs to our business.
In particular, the viability of new natural gas-fired power plants depends on the availability of nearby sources of natural gas for fuel which may require the construction of new pipelines for the delivery of gas to a power plant location.
Without such a commitment, the project might be delayed or even terminated. The viability of new natural gas-fired power plants depends on the availability of nearby sources of natural gas for fuel which may require the construction of new pipelines for the delivery of natural gas to a power plant location.
The viability of the gas-fired power plants that we build is based substantially on the availability of inexpensive natural gas supplies provided through the use of hydraulic fracturing (“fracking”) combined with horizontal drilling techniques.
Future construction projects may depend on the continuing acceptability of the hydraulic fracturing process in certain states. The viability of the gas-fired power plants that we build is based substantially on the availability of inexpensive natural gas supplies provided through the use of fracking combined with horizontal drilling techniques.
To the extent any of these events occur, our operations and financial results could be adversely affected. As the COVID-19 outbreak became a global pandemic during Fiscal 2021, it challenged our ability to conduct operations normally in the U.S., Ireland and the U.K., because sustained labor productivity at our job sites is essential to the achievement of successful projects.
Such unfavorable effects may adversely impact our business. - 15 - Table of Contents As the COVID-19 outbreak became a global pandemic during Fiscal 2021, it challenged our ability to conduct operations normally in the U.S., Ireland and the U.K., because sustained labor productivity at our job sites is essential to the achievement of successful projects.
The developers of power projects may form single purpose entities, such as limited liability companies, limited partnerships or joint ventures, to perform the development activities, which are often funded by outside sources.
The development of a power plant construction project is expensive with a total cost that could approximate or exceed $10 million. The developers of power projects may form single purpose entities, such as limited liability companies, limited partnerships or joint ventures, to perform the development activities, which are often funded by outside sources.
There can be no assurances that we will benefit from the successful development of these projects or others that may arise in the future. Other project development support efforts have not been successful, resulting in the write-off of loan and interest balances, and the loss of the potential construction project.
In addition, the completed development efforts resulted in our receipt of success fees. There can be no assurances that we will benefit from the participation in such project development efforts in the future. Certain project development support efforts have not been successful, resulting in the write-off of loan and interest balances, and the loss of the potential construction project.
Future acquisitions and/or investments may not occur which could limit the growth of our business, and the integration of acquired companies may not be successful. Argan is a holding company with current investments in GPS, APC, TRC and SMC. We want to make additional acquisitions and/or investments that would provide positive cash flow to us and value to our stockholders.
Future acquisitions and/or investments may not occur which could limit the growth of our business, and the integration of acquired companies may not be successful. Argan is primarily a construction company with current investments in GPS, APC, TRC and SMC.
Any of these or other events could delay or prevent necessary operations (including the processing of transactions and the reporting of financial results). - 24 - Table of Contents While we believe that our reasonable safeguards will protect us from serious disruptions in the availability of our information technology assets, these safeguards may not be sufficient.
We may experience system availability disruptions. Unplanned interruptions could delay or prevent necessary operations. While we believe that our reasonable safeguards will protect us from serious disruptions in the availability of our information technology assets, these safeguards may not be sufficient.
Even if we do complete acquisitions in the future, acquired companies may fail to achieve the results we anticipate including the expected gross profit percentages. In general, we keep each of our subsidiary operations separate and distinct. However, we do attempt to integrate certain aspects to drive synergies and cost reductions.
Even if we do complete acquisitions in the future, acquired companies may fail to achieve the results we anticipate including the expected gross profit percentages. In general, we keep each of our subsidiary operations in a self-sustaining mode.
Under this scheme, governments could still set whatever corporate tax rate they want, but if companies pay lower rates in a particular country, their home governments could “top-off” their taxes to the 15% minimum.
Under this scheme, governments could still set whatever corporate tax rate they want, but if companies pay lower rates in a particular country, their home governments could “top-off” their taxes to the 15% minimum. In any event, we will pay higher U.S. income taxes going forward due to the impact of the Global Intangible Low Tax Income (“GILTI”) provision.
Our management liability insurance policies are on a “claims-made” basis covering only claims actually made during the policy period currently in effect. In addition, even where insurance is maintained for such exposures, the policies have deductibles resulting in our assuming exposure for a layer of coverage with respect to any such claims.
In addition, even where insurance is maintained for such exposures, the policies have deductibles resulting in our assuming exposure for a layer of coverage with respect to any such claims.
Any significant future breach of our information security could damage our reputation, result in litigation and/or regulatory fines and penalties, or have other material adverse effects on our business, financial condition, results of operations or cash flows. Should our management information systems become unavailable for any significant period of time, our business could be harmed.
That does not suggest that we may not be victimized by an additional breach in the future. Any significant future breach of our information security could damage our reputation, result in litigation and/or regulatory fines and penalties, or have other material adverse effects on our business, financial condition, results of operations or cash flows.
Our failure to overcome such risks could materially and adversely affect our business, financial condition and future results of operations, and could cause damage to our Company’s reputation. Our failure to protect our management information systems against security breaches could adversely affect our business and results of operations.
Our failure to protect our management information systems against security breaches could adversely affect our business and results of operations.
When it is determined that we have liability, we may not be covered by insurance or, if covered, the dollar amount of any liability may exceed our policy limits or self-insurance reserves.
When it is determined that we have liability, we may not be covered by insurance or, if covered, the dollar amount of any liability may exceed our policy limits or self-insurance reserves. - 20 - Table of Contents Further, we may elect not to carry insurance related to particular risks if our management believes that the cost of available insurance is excessive relative to the risks presented.
A party who circumvents our security measures, or those of our clients, contractors or other vendors, could misappropriate confidential or proprietary information, improperly manipulate data, or cause damage or interruptions to systems.
A party who circumvents our security measures, or those of our clients, contractors or other vendors, could misappropriate confidential or proprietary information, improperly manipulate data, or cause damage or interruptions to systems. Furthermore, we are heavily reliant on computer, information and communications technology and related systems, some of which are hosted by third party providers.
At January 31, 2022, the total value of our project backlog for all of our business units was $0.7 billion. Project cancellations or scope modifications may occur that could reduce the amount of our project backlog and the associated revenues and profits that we actually earn.
Project cancellations or scope modifications may occur that could reduce the amount of our project backlog and the associated revenues and profits that we actually earn.
Despite our commitment to the construction of state-of-the-art, natural gas-fired power plants as important elements of our country’s electricity-generation mix in the future, we are directing a meaningful portion of our business development efforts to winning projects for the erection of utility-scale wind farms and solar fields and for the construction of other renewable energy projects.
We are directing a meaningful portion of our business development efforts to winning projects for the erection of utility-scale wind farms and solar fields and for the construction of other renewable energy projects.
By January 31, 2022, we repurchased 527,752 shares at an aggregate price of approximately $20.4 million, or $38.60 per share. Since year-end, we have continued to make open market purchases pursuant to the approvals of our board of directors.
During Fiscal 2023, we repurchased 1,855,714 shares at an aggregate price of approximately $68.2 million, or $36.77 per share. Since year-end, we have continued to make open market purchases pursuant to the approvals of our board of directors.
This process is controversial due to concerns about the disposal of the waste water, the possible contamination of nearby water supplies and the risk of potential seismic events.
The new supplies of natural gas generally lowered the price of natural gas in the U.S. and reduced its volatility. However, the process of fracking is controversial due to concerns about the disposal of the waste water, the possible contamination of nearby water supplies and the risk of potential seismic events.
Applications for the variety of clean air, water purity and construction permits may be opposed by individuals or environmental groups, resulting in delays and possible denial of the permits.
The commencement and/or execution of the types of projects performed by our power industry services reporting segment are subject to numerous regulatory permitting processes. Applications for the variety of clean air, water purity and construction permits may be opposed by individuals or environmental groups, resulting in delays and possible denial of the permits.
This entity operates a capacity market which is a process to ensure long-term grid reliability by securing the appropriate amount of power supply resources needed to meet predicted future energy demands. A capacity auction for a particular delivery year is usually held during the month of May, three years prior to the actual delivery year.
This entity operates a capacity market which is a process to ensure long-term grid reliability by securing the appropriate amount of power supply resources needed to meet predicted future energy demands. Capacity payments represent meaningful portions of the revenue streams of qualifying power plants.
Accordingly, during the fourth quarter of Fiscal 2022, we recorded an impairment loss related to the capitalized project development costs of this project in the amount of $7.9 million, of which $2.5 million was attributed to the non-controlling interest. In March 2022, the project owner made a public announcement of the cancellation of the project.
For example, during the fourth quarter of Fiscal 2022, we recorded an impairment loss related to the capitalized project development costs of a project in the amount of $7.9 million, of which $2.5 million was attributed to a non-controlling interest. Future bonding requirements may adversely affect our ability to compete for new energy plant construction projects.
The outstanding time-based restricted stock units cover 82,250 shares of our common stock; these awards will fully vest in 2024. The number of shares of our common stock that will ultimately be issued in connection with the restricted stock unit awards is not known. Any issuance will result in the dilution of the stock ownership of current stockholders.
Additionally, the number of shares of our common stock that will ultimately be issued in connection with the restricted stock unit awards is not known. Any issuance will result in the dilution of the stock ownership of current stockholders. Our officers, directors and certain unaffiliated stockholders have substantial control over the Company.
Based on the detailed review, we identified and estimated significant amounts of income tax benefits that were not previously recognized in our operating results for any prior year reporting period. - 25 - Table of Contents As a result, we recorded an income tax benefit in the net amount of $16.6 million related to the research and development tax credits during Fiscal 2019, which was subsequently reduced by $0.4 million.
As a result, we recorded an income tax benefit in the net amount of $16.6 million related to the research and development tax credits during Fiscal 2019, which was subsequently reduced by $0.4 million.
Our project sites can place our employees and others near large and/or mechanized equipment, high voltage electrical equipment, moving vehicles, dangerous processes or highly regulated materials, and in challenging environments. Safety is a primary focus of our business and is critical to our reputation. Often, we are responsible for safety on the project sites where we work.
Failure to maintain safe work sites could result in significant losses as we work on projects that are inherently dangerous. Our project sites can place our employees and others near large and/or mechanized equipment, high voltage electrical equipment, moving vehicles, dangerous processes or highly regulated materials, and in challenging environments.
However, it is likely that any potential future acquisition or strategic investment transaction would require the use of cash and/or shares of our common stock as components of the purchase price. Using cash for acquisitions may limit our financial flexibility and make us more likely to seek additional capital through future debt or equity financings.
We cannot readily predict the timing or size of any future acquisitions or the capital we will need for these transactions. However, it is likely that any potential future acquisition or strategic investment transaction would require the use of cash and/or shares of our common stock as components of the purchase price.
Any future softness in the demand for electrical power in the U.S. due to any additional adverse impacts of the COVID-19 outbreak, or any other reason, could result in the delay, curtailment or cancellation of future gas-fired power plant projects, thus decreasing the overall demand for our EPC services and adversely impacting the financial outlook for our power industry services business.
For calendar year 2022, the total amount of electricity generated by utility-scale power plants increased by 2.8% as the U.S. economy continued to recover from the worst effects of the COVID-19 pandemic. - 16 - Table of Contents Any future softness in the demand for electrical power in the U.S. could result in the delay, curtailment or cancellation of future gas-fired power plant projects, thus decreasing the overall demand for our EPC services and adversely impacting the financial outlook for our power industry services business.
Biden’s path, but his election, in part, does represent an indication that public sentiment against fossil-fuel sourced energy is growing rapidly, which may create future obstacles for fossil fuel-based energy facility developers to obtain the permits necessary for the start of construction activities. Future construction projects may depend on the continuing acceptability of the hydraulic fracturing process in certain states.
Despite this recent decision by the administration, the election of President Biden, in part, does represent an indication of the growing popular sentiment against fossil-fuel sourced energy, which may create future obstacles for fossil fuel-based energy facility developers to obtain the permits necessary for the start of construction activities.
As a result, approval delays and public opposition to new oil and gas pipelines have become major potential hurdles for the developers of gas-fired power plants and other fossil fuel facilities. The slowdown in permitting processes is due, at least in part, to the increase in environmental activism that garners media attention and fosters public skepticism about new projects.
Approval delays and public opposition to new oil and gas pipelines have become major potential hurdles for the developers of gas-fired power plants and other fossil fuel facilities.
Future exercises of options to purchase shares of common stock at prices below prevailing market prices will result in ownership dilution for current stockholders.
We award stock options, time-based restricted stock units and performance-based restricted stock units to executives and other key employees (see Note 12 to the accompanying consolidated financial statements). Future exercises of options to purchase shares of common stock at prices below prevailing market prices will result in ownership dilution for current stockholders.
We periodically see business opportunities where we consider providing financial support to the ownership of a new project, typically during the development phase, in order to improve the probability of an EPC contract being awarded to us. In the past, we have been successful in lending funds to single purpose entities formed to develop gas-fired power plants.
We periodically see business opportunities where we consider providing financial support to the ownership of a new project, typically during the development phase, in order to enhance the likelihood that the development phase will be successful and to ensure that the EPC contract is awarded to us.
In any event, it is likely that we will pay higher U.S. income taxes going forward due to the impact of the Global Intangible Low Tax Income (“GILTI”) rate. GILTI is a federal tax provision that determines the amount of the current earnings of foreign subsidiaries that are included in the computation of the corporate tax of U.S. parent companies.
GILTI is a federal tax calculation that determines the amount of the current earnings of foreign subsidiaries that are included in the computation of the corporate tax of U.S. parent companies.
For new power projects, lack of visibility regarding future capacity revenue streams complicates the search for equity and debt financing considerably. Most of our recently completed and awarded EPC service contracts relate to the construction of natural gas-fired power plants located within the geographic footprint of the electric power system operated by PJM.
Most of our recently completed and awarded EPC service contracts relate to the construction of natural gas-fired power plants located within the Mid-Atlantic geographic footprint of the electric power system operated by PJM, which includes all or part of thirteen states and the District of Columbia.

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Item 2. Properties

Properties — owned and leased real estate

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ITEM 2. PROPERTIES. We occupy our corporate headquarters in Rockville, Maryland, under a lease that expires on May 31, 2024 covering 2,521 square feet of office space. GPS owns and occupies a three-story office building (23,380 square feet) and the underlying land (1.75 acres), located in Glastonbury, Connecticut.
ITEM 2. PROPERTIES. We occupy our corporate headquarters in Rockville, Maryland, under a lease that expires on May 31, 2024 covering 2,521 square feet of office space. GPS owns and occupies a three-story office building (23,380 square feet) and the underlying land (1.75 acres), located in Glastonbury, Connecticut, that serves as its headquarters.
SMC is located in Tracys Landing, Maryland, occupying facilities under a lease that expires in October 2026. Thereafter, the lease automatically renews for an additional year up to a total of five (5) additional years. The SMC facility includes approximately five acres of land, a 2,400 square foot maintenance facility and approximately 3,900 square feet of office space.
SMC is primarily located in Tracys Landing, Maryland, occupying facilities under a lease that expires in October 2026, which automatically renews for a total of up to five additional years, with a current annual rent of $88,800. The SMC facility includes approximately five acres of land, a 2,400 square foot maintenance facility and approximately 3,900 square feet of office space.
APC also leases office space in Derby, England, with a term that runs through August 2022 and an annual rent of approximately $51,850, and warehouse space in Billingham, England, with a term that runs through January 2025 and an annual rent of approximately $38,240.
APC also leases office space in Derby, England, with a term that runs through August 2024 at an annual rent of approximately $50,000, and warehouse space in Billingham, England, with a term that runs through January 2025 at an annual rent of approximately $35,000.
TRC also owns and occupies a one-story industrial fabrication and warehouse facility (90,000 square feet) containing approximately 5,400 square feet of office space and the underlying land (12.16 acres), which is also located in Winterville, North Carolina. APC owns and occupies a warehouse and ancillary offices that total 11,174 square feet in Nenagh, County Tipperary, in Ireland.
TRC owns and occupies a one-story industrial fabrication and warehouse facility (90,000 square feet) containing approximately 5,400 square feet of office space and the underlying land (12.16 acres), located in Winterville, North Carolina.
Our operations in the field may require us to occupy additional facilities for project support, staging or on customer premises or job sites. Accordingly, we may rent local office space, construction offices on or near job sites, storage yards for equipment and materials and temporary housing units; all under arrangements that are temporary or short-term in nature.
Accordingly, we may rent local office space, construction offices on or near job sites, storage yards for equipment and materials and temporary housing units; all under arrangements that are temporary or short-term in nature. These costs are expensed as incurred and are included substantially in the cost of revenues. - 26 - Table of Contents ​
The building includes office space (3,570 square feet) and warehouse space (11,460 square feet) and is sited on a land plot of approximately one (1) acre. The initial lease term covers five (5) years and includes a tenant option for one additional five (5) year period.
SMC also leases office space (3,570 square feet) and warehouse space (11,460 square feet) in Hampton, Virginia under a lease that commenced on December 31, 2021, at a current annual rent of $111,900, with a term that covers five years and that includes a tenant option for one additional five-year period.
We consider the Company’s owned and leased properties to be sufficient for continuation of our operations for the foreseeable future, without significant excess space, except that we intend to acquire office space in the Limerick area of Ireland for APC as disclosed above.
We consider the Company’s owned and leased properties to be sufficient for continuation of our operations for the foreseeable future. Our operations in the field may require us to occupy additional facilities for project support, staging or on customer premises or job sites.
Removed
TRC leases an 18.77-acre industrial facility (79,774 square feet) in Winterville, North Carolina, under a lease agreement with a term that expires on April 30, 2022. We expect to extend the term of this lease on commercially acceptable terms prior to its current expiration date.
Added
TRC also leases two offices (2,200 and 1,800 square feet) that are located close to one another in Winterville, North Carolina, with terms that run through August 2024, at a total annual rent of $39,600.
Removed
The facility consists of three fabrication and warehouse buildings totaling 60,356 square feet, a 9,700 square foot maintenance shop, an office building (7,793 square feet) and a 1,925 square foot modular office building. The lessor of this arrangement is the founder and current chief executive officer of TRC, John Roberts.
Added
APC owns and occupies the top two floors of an office building (3,500 square feet) located in Limerick, Ireland, that serves as its headquarters, and an operations support facility in Nenagh, Ireland, that includes approximately 10,663 square feet of warehouse and a small amount office space.
Removed
Effective April 1, 2016, based on third party market rent valuations, rent was set at $300,000 per annum payable in equal quarterly installments. TRC is responsible for normal repairs and maintenance, property taxes, utilities and insurance.
Removed
The property occupies a site of approximately 1.97 acres and includes secure yards, industrial units and modern offices. This site has been temporarily designated as the headquarters of APC as it moves the corporate offices from the Dublin area to Limerick where it plans to purchase an office building to serve as the new corporate headquarters.
Removed
The rent for the facility, which starts at $7,400 per month, escalates by approximately 3% on October 1, 2024, October 2026 and October 2029.
Removed
SMC also uses a nearby fenced-in storage lot and office structure under an operating lease with a 5-year term that expires on January 31, 2023 and with options to extend for five additional 2-year terms. ​ - 28 - Table of Contents In December 2021, SMC entered into a lease covering the building and adjacent parking and loading areas in Hampton, Virginia, that serve the operations of SMC’s newly acquired business in that area.
Removed
The monthly rent amounts applicable to the initial and extension terms are $9,325 and $9,885, respectively. The facility is owned indirectly by the former president of LTI.
Removed
These costs are expensed as incurred and are included substantially in the cost of revenues. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. LEGAL PROCEEDINGS. Note 11 to the accompanying consolidated financial statements included in Item 8 of Part II of this 2022 Annual Report presents a discussion of the legal proceedings that were settled in September 2021. In the normal course of business, we may have other pending claims and legal proceedings.
ITEM 3. LEGAL PROCEEDINGS. Note 11 to the accompanying consolidated financial statements included in Item 8 of Part II of this 2023 Annual Report presents a discussion of the legal proceedings that were settled in September 2021. In the normal course of business, we may have other pending claims and legal proceedings.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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The returns are calculated assuming that an investment with a value of $100 was made in our common stock and in each index at January 31, 2017, and that all dividends were reinvested in additional shares of common stock. The graph lines merely connect the measuring dates and do not reflect fluctuations between those dates.
The returns are calculated assuming that an investment with a value of $100 was made in our common stock and in each index at January 31, 2018, and that all dividends were reinvested in additional shares of common stock. The graph lines merely connect the measuring dates and do not reflect fluctuations between those dates.
See Note 12 to the accompanying consolidated financial statements included in Item 8 of Part II of this 2022 Annual Report for a description of the restricted stock units including the various vesting terms related to the awards. Unregistered Sales of Equity Securities and Use of Proceeds None.
See Note 12 to the accompanying consolidated financial statements included in Item 8 of Part II of this 2023 Annual Report for a description of the restricted stock units including the various vesting terms related to the awards. Unregistered Sales of Equity Securities and Use of Proceeds None.
The repurchases may occur in the open market or through investment banking institutions, privately-negotiated transactions, or direct purchases, and the timing and amount of stock repurchased will depend on market and business conditions, applicable legal and credit requirements and other corporate considerations.
The repurchases may occur in the open market or through investment banking institutions, privately-negotiated transactions, or direct purchases, and the timing and amount of stock repurchase transactions will depend on market and business conditions, applicable legal and credit requirements and other corporate considerations.
The statement cited our strong balance sheet with significant liquidity and no debt and the increased ramp-up of construction on the Guernsey Power Station, the largest project in our history. Each quarter, our board of directors evaluates the Company’s ongoing operational and financial performance in determining the amount of the regular dividend and any special dividend.
The statement cited our strong balance sheet with significant liquidity and no debt and, at that time, the increased ramp-up of construction on the Guernsey Power Station, the largest project in our history. Each quarter, our board of directors evaluates the Company’s ongoing operational and financial performance in determining the amount of the regular dividend and any special dividend.
Together, the 2020 Plan and the 2011 Plan are hereinafter referred to as the “Stock Plans.” ​ - 31 - Table of Contents Awards under the 2020 Plan may include nonqualified stock options, incentive stock options, and restricted or unrestricted stock. The specific provisions for each award are documented in a written agreement between the Company and the awardee.
Together, the 2020 Plan and the 2011 Plan are hereinafter referred to as the “Stock Plans.” Awards under the 2020 Plan may include nonqualified stock options, incentive stock options, and restricted or unrestricted stock. The specific provisions for each award are documented in a written agreement between the Company and the awardee.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Shares of our common stock trade under the symbol AGX on the New York Stock Exchange (the “NYSE”). As of April 11, 2022, we had approximately 58 stockholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Shares of our common stock trade under the symbol AGX on the New York Stock Exchange (the “NYSE”). As of April 10, 2023, we had approximately 57 stockholders of record.
The number of issuable shares of our common stock under outstanding stock options presented in the chart above does not include 222,250 shares of our common stock covered by awards of restricted stock units made to members of our board of directors, our CEO, our CFO and other key employees since April 2019 pursuant to the terms of the Stock Plans.
The number of issuable shares of our common stock under outstanding stock options presented in the chart above does not include an estimated 309,672 shares of our common stock covered by awards of restricted stock units made to members of our board of directors, our chief executive officer, our chief financial officer and other key employees since April 2019 pursuant to the terms of the Stock Plans.
The following table sets forth certain information, as of January 31, 2022, concerning securities authorized for issuance under options to purchase our common stock. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Securities ​ Weighted Average Exercise ​ Number of Securities ​ ​ Issuable under Outstanding ​ Price of Outstanding ​ Remaining Available for ​ Options Options Future Awards (1) Equity Compensation Plans Approved by the Stockholders (2) 1,404,901 ​ $ 44.35 407,250 Equity Compensation Plans Not Approved by the Stockholders — ​ — — Totals 1,404,901 ​ $ 44.35 407,250 (1) Represents the number of shares of common stock reserved for future stock awards.
The following table sets forth certain information, as of January 31, 2023, concerning securities authorized for issuance under options to purchase our common stock. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Securities ​ Weighted Average Exercise ​ Number of Securities ​ ​ Issuable under Outstanding ​ Price of Outstanding ​ Remaining Available for ​ Options Options Future Awards (1) Equity Compensation Plans Approved by the Stockholders (2) 1,439,668 ​ $ 43.84 188,879 Equity Compensation Plans Not Approved by the Stockholders — ​ — — Totals 1,439,668 ​ $ 43.84 188,879 (1) Represents the number of shares of common stock reserved for future stock awards, including restricted stock unit awards.
Common Stock Price Performance Graph The graph presented below compares the percentage change in the cumulative total stockholder return on our common stock for the last five years with the S&P 500 , a broad market index, and the Dow Jones US Heavy Construction TSM Index, a group index of companies where their focus is limited primarily to heavy civil construction.
As of April 11, 2023, we had repurchased 75,755 shares since year-end, all on the open market, for an aggregate price of approximately $3.0 million, or $39.60 per share, exclusive of share repurchase excise tax. - 27 - Table of Contents Common Stock Price Performance Graph The graph presented below compares the percentage change in the cumulative total stockholder return on our common stock for the last five years with the S&P 500 , a broad market index, and the Dow Jones US Heavy Construction TSM Index, a group index of companies where their focus is limited primarily to heavy civil construction.
The stock performance shown on the graph is not intended to be indicative of future stock performance. - 30 - Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended January 31, ​ 2017 2018 2019 2020 2021 2022 Argan, Inc. 100.00 60.01 59.59 60.84 66.80 58.71 S&P 500 100.00 126.41 123.48 150.26 176.18 217.21 Dow Jones US Heavy Civil Construction TSM 100.00 109.52 86.02 99.16 127.26 159.02 Equity Compensation Plan Information In June 2011, the stockholders approved the adoption of the Argan, Inc. 2011 Stock Plan (the “2011 Plan”) including 500,000 shares of our common stock reserved for issuance thereunder.
The stock performance shown on the graph is not intended to be indicative of future stock performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended January 31, ​ 2018 2019 2020 2021 2022 2023 Argan, Inc. $ 100.00 $ 99.30 $ 101.39 $ 111.32 $ 97.84 $ 105.62 S&P 500 100.00 97.69 118.87 139.37 171.83 157.71 Dow Jones US Heavy Civil Construction TSM 100.00 78.54 90.54 116.20 145.20 186.64 ​ ​ - 28 - Table of Contents Equity Compensation Plan Information In June 2011, the stockholders approved the adoption of the Argan, Inc. 2011 Stock Plan (the “2011 Plan”) including 500,000 shares of our common stock reserved for issuance thereunder.
Share Repurchase Program On January 24, 2022, we made a filing on Current Report Form 8-K announcing that our board of directors authorized an increase in our existing share repurchase program, from $25 million to $50 million, to acquire shares of the Company’s common stock (the “Repurchase Plan”).
There can be no assurance that these evaluations will result in the payments of cash dividends in the future. Share Repurchase Program On December 14, 2022, we made a filing on Current Report Form 8-K announcing that our board of directors authorized an increase in our share repurchase program, from $100 million to $125 million.
In accordance with the SEC’s Rule 10b5-1 and pursuant to the Repurchase Plan, we have allowed, and may in the future allow, the repurchase of our common stock during trading blackout periods by an investment banking firm or other institution agent acting on our behalf pursuant to predetermined parameters. ​ - 29 - Table of Contents The following table provides information regarding common stock repurchases during Fiscal 2022 (dollars in thousands, except per share data). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of ​ Approximate Dollar ​ ​ ​ ​ ​ ​ Shares Purchased as Part of ​ Value of Shares that May Yet ​ ​ Total Number of ​ Average Price Per ​ Publicly Announced ​ Be Purchased Under the Period Shares Repurchased Share Paid Plans or Programs Plans or Programs November 1 - 30, 2021 31,430 ​ $ 39.68 31,430 ​ $ 23,753 December 1 - 31, 2021 ​ 280,851 ​ $ 38.09 ​ 280,851 ​ $ 13,056 January 1 - 31, 2022 215,471 ​ $ 39.12 215,471 ​ $ 29,628 Total 527,752 ​ $ 38.60 527,752 ​ ​ ​ Subsequent to January 31, 2022, we continued to repurchase shares of our common stock pursuant to the Repurchase Plan through April 8, 2022.
Information related to our share repurchases for the fourth quarter of Fiscal 2023 follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate Dollar ​ ​ ​ ​ ​ ​ ​ Total Number of ​ Value of Shares That May Yet ​ ​ ​ ​ ​ ​ Shares Purchased as Part of ​ Be Purchased under the ​ ​ Total Number of ​ Average Price per ​ Publicly Announced ​ Plans or Programs Period Shares Repurchased Share Paid Plans or Programs (Dollars in Thousands) November 1 - 30, 2022 — ​ $ — — ​ $ 16,376 December 1 - 31, 2022 ​ 67,074 ​ $ 36.36 ​ 67,074 ​ $ 38,937 January 1 - 31, 2023 67,625 ​ $ 37.50 67,625 ​ $ 36,402 Total 134,699 ​ ​ ​ 134,699 ​ ​ ​ Subsequent to January 31, 2023, we continued to repurchase shares of our common stock pursuant to the Share Repurchase Plan through April 11, 2023.
Removed
There can be no assurance that these evaluations will result in the payment of cash dividends in the future.
Added
In accordance with the SEC’s Rule 10b5-1, and pursuant to the Share Repurchase Plan, we have allowed, and may in the future allow, the repurchase of common stock during trading blackout periods by an investment banking firm or other institution agent acting on our behalf pursuant to predetermined parameters.
Removed
As of April 8, 2022, we had repurchased 442,079 shares since year-end, all on the open market, for an aggregate price of approximately $17.1 million, or $38.69 per share. On April 13, 2022, we made a filing on Current Report Form 8-K announcing an additional authorized increase in our share repurchase program, from $50 million to $75 million.
Added
In our quarterly reports on Form 10-Q for the first three quarterly periods of Fiscal 2023, we provided the required disclosures of the number of shares repurchased during each month of the applicable quarter and the related information related to the costs of the repurchase transactions.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

148 edited+106 added−95 removed56 unchanged
We believe that it is also important to note that the plans for certain natural gas-fired power plant projects include the integration of hydrogen-burning capabilities.
We also believe that it is also important to note that the plans for certain natural gas-fired power plant projects include the integration of hydrogen-burning capabilities.
Treasury obligations and repurchase agreements secured by U.S. Treasury obligations. The major portion of our domestic operating bank account balances are maintained with the Bank. We do maintain certain Euro-based bank accounts in the Ireland and certain pound sterling-based bank accounts in the U.K. in support of the operations of APC.
Treasury obligations and repurchase agreements secured by U.S. Treasury obligations. The major portion of our domestic operating bank account balances are maintained with the Bank. We do maintain certain Euro-based bank accounts in Ireland and certain pound sterling-based bank accounts in the U.K. in support of the operations of APC.
Further, such additions to the power generation fleet provide the potential for the plants to burn 100% green hydrogen gas, which would provide both base load power and long duration backup power, when the sun is not shining and the wind is not blowing, for extended periods of time and without certain harmful air emissions.
Further, such additions to the power generation fleet provide the potential for the plants to burn 100% green hydrogen gas, which would provide both base load power and long duration backup power, when the sun is not shining or the wind is not blowing, for extended periods of time and without certain harmful air emissions.
Contracts may have multiple performance obligations. The amounts of revenue associated with each promise are recognized when, or as, the performance obligations are satisfied. However, complex contracts may include only one performance obligation if the multiple promises are not distinct within the context of the contract.
The amounts of revenue associated with each promise are recognized when, or as, the performance obligations are satisfied. However, complex contracts may include only one performance obligation if the multiple promises are not distinct within the context of the contract.
Now, the environmentalist opposition against coal-fired power generation has expanded meaningfully to target all fossil fuel energy projects, including power plants and pipelines, and has evolved into powerful support for renewable energy sources.
Now, the environmentalist opposition against coal-fired power generation has expanded meaningfully to target all fossil fuel energy projects, including both power plants and pipelines, and has evolved into powerful support for renewable energy sources.
However, the stewards of the electricity supply in Ireland recognize that the large increase in electricity demand presented by the growth of the data center industry represents an evolving, significant risk to the security of the supply.
The stewards of the electricity supply in Ireland recognize that the large increase in electricity demand presented by the growth of the data center industry represents an evolving, significant risk to the security of the supply.
When sufficient information about claims related to our performance on projects would be available and monetary damages or other costs or losses would be determined to be probable, we would record such losses.
When sufficient information about claims related to performance on projects would be available and monetary damages or other costs or losses would be determined to be probable, we would record such losses.
Accordingly, guidelines have been published recently with the intent to protect both electricity consumers and the security of supply while continuing to allow data centers to connect to the electricity system.
Accordingly, guidelines have been published with the intent to protect both electricity consumers and the security of supply while continuing to allow data centers to connect to the electricity system.
As our subsidiaries are wholly-owned, any actual liability related to contract performance is ordinarily reflected in the financial statement account balances determined pursuant to the Company’s accounting for contracts with customers. Any amounts that we may be required to pay in excess of the estimated costs to complete contracts in progress as of January 31, 2022 are not estimable.
As our subsidiaries are wholly-owned, any actual liability related to contract performance is ordinarily reflected in the financial statement account balances determined pursuant to the Company’s accounting for contracts with customers. Any amounts that we may be required to pay in excess of the estimated costs to complete contracts in progress as of January 31, 2023 are not estimable.
Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) We believe that EBITDA is a meaningful presentation that enables us to assess and compare our operating cash flow performance on a consistent basis by removing from our operating results the impacts of our capital structure, the effects of the accounting methods used to compute depreciation and amortization and the effects of operating in different income tax jurisdictions.
Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) We believe that EBITDA is a meaningful presentation that enables us to assess and compare our operating performance on a consistent basis by removing from our operating results the impacts of our capital structure, the effects of the accounting methods used to compute depreciation and amortization and the effects of operating in different income tax jurisdictions.
The following discussion summarizes the financial position of Argan, Inc. and its subsidiaries as of January 31, 2022, and the results of their operations for Fiscal 2022 and Fiscal 2021, and should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in Item 8 of this 2022 Annual Report. Please see “Item 7.
The following discussion summarizes the financial position of Argan, Inc. and its subsidiaries as of January 31, 2023, and the results of their operations for Fiscal 2023 and Fiscal 2022, and should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in Item 8 of this 2023 Annual Report. Please see “Item 7.
Variations from estimated contract costs, along with other risks inherent in fixed-price contracts, may result in actual revenues and gross profits differing from those we estimate and could result in losses on projects or other significant unfavorable impacts on our operating results for any fiscal quarter or year.
Actual costs may vary from the costs we estimate. Variations from estimated contract costs, along with other risks inherent in fixed-price contracts, may result in actual revenues and gross profits differing from those we estimate and could result in losses on projects or other significant unfavorable impacts on our operating results for any fiscal quarter or year.
We believe that cash on hand, our cash equivalents, cash that will be provided from the maturities of short-term investments and cash generated from our future operations, with or without funds available under our Credit Agreement, will be adequate to meet our general business needs in the foreseeable future.
We believe that cash on hand, our cash equivalents, cash that will be provided from the maturities of short-term investments and cash generated from our future operations, with or without funds available under our Credit Agreement, as amended, will be adequate to meet our general business needs in the foreseeable future.
The accuracy of our revenues and profit recognition in a given period depends on the accuracy of our estimates of the forecasted contract value, or transaction price, and the cost to complete the work for each project. Central to accounting for revenues from contracts with customers is a five-step revenue recognition model that requires reporting entities to: 1.
The accuracy of our revenues and profit recognition in a given period depends on the accuracy of our estimates of the forecasted contract value, or transaction price, and the cost to complete the work for each project. - 44 - Table of Contents Central to accounting for revenues from contracts with customers is a five-step revenue recognition model that requires reporting entities to: 1.
All comments concerning our expectations for future revenues and operating results are based on our forecasts for existing operations and do not include the potential impact of any future acquisitions. - 32 - Table of Contents Our forward-looking statements, by their nature, involve significant risks and uncertainties (some of which are beyond our control) and assumptions.
All comments concerning our expectations for future revenues and operating results are based on our forecasts for existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements, by their nature, involve significant risks and uncertainties (some of which are beyond our control) and assumptions.
During Fiscal 2020, a valuation allowance in the amount of $7.1 million was established against the deferred tax asset amount created by the NOL of APC’s subsidiary in the U.K. for Fiscal 2020.
During Fiscal 2020, a valuation allowance in the amount of $7.1 million was established against the deferred tax asset amount created by the NOL of APC’s subsidiary in the U.K. (“APC UK”) for Fiscal 2020.
Undoubtedly, the long-term historic decline in the use of coal as a power source in the U.S. was caused, to a significant extent, by the plentiful supply of domestic and generally inexpensive natural gas which made it the fuel of choice for power plant developers over this period.
The historic decline in the use of coal as a power source in the U.S. was caused, to a significant extent, by the plentiful supply of domestic and generally inexpensive natural gas which made it the fuel of choice for power plant developers over this period.
Crucial to the compliance with the accounting standard covering the recognition of revenues on contracts with customers is the identification of the promises made to the customer by us that are included in the contract. If a promise is distinct, as that concept is defined in the accounting standard, it represents a separate performance obligation.
Crucial to the compliance with the accounting standard covering the recognition of revenues on contracts with customers is the identification of the promises made to the customer by us that are included in the contract. If a promise is distinct, as that concept is defined in the accounting standard, it represents a separate performance obligation. Contracts may have multiple promises.
They are subject to change based upon various factors including, but not limited to, the risks and uncertainties described in Item 1A of this 2022 Annual Report.
They are subject to change based upon various factors including, but not limited to, the risks and uncertainties described in Item 1A of this 2023 Annual Report.
The Company may include an estimated amount of variable consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenues recognized on the particular contract will not occur when the uncertainty associated with the variable consideration is resolved.
The Company may include an estimated amount of variable consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenues recognized on the particular contract will not occur when the uncertainty - 45 - Table of Contents associated with the variable consideration is resolved.
The Irish government recently issued a policy statement on the security of the electricity supply in Ireland which confirms the requirement for the development of new support technologies to deliver on its commitment to have 80% of the country’s electricity generated from renewables by 2030.
Last year, the Irish government issued a policy statement on the security of the electricity supply in Ireland which confirms the requirement for the development of new support technologies to deliver on its commitment to have 80% of the country’s electricity generated from renewables by 2030.
While both of these - 37 - Table of Contents countries are committed to the increase in energy consumption sourced from wind and the sun on the pathway to net zero emissions, there is a recognition that these sources of electrical power are inherently variable.
While both of these countries are committed to the increase in energy consumption sourced from wind and the sun on the pathway to net zero emissions, there is a recognition that these sources of electrical power are inherently variable.
During Fiscal 2022, the significant legal matter described below, for which we have been providing regular disclosure in our filings, was settled.
During Fiscal 2022, the significant legal matter described below, for which we had been providing regular disclosure in our filings, was settled.
This tax rate differs from the statutory federal tax rate of 21% due primarily to the effects of state income taxes and nondeductible executive compensation.
This tax rate differed from the statutory federal tax rate of 21% due primarily to the effects of state income taxes and nondeductible executive compensation.
We do not have any significant obligations for materials or subcontracted services beyond those required to completed construction contracts awarded to us. - 43 - Table of Contents Special Purpose Entities As is common in our industry, EPC contractors and third parties form joint ventures, limited partnerships and limited liability companies for purposes of executing a project or program for a project owner.
We do not have any significant obligations for materials or subcontracted services beyond those required to complete construction contracts awarded to us. Special Purpose Entities As is common in our industry, EPC contractors and third parties form joint ventures, limited partnerships and limited liability companies for purposes of executing a project or program for a project owner.
We have made statements in this Item 2 and elsewhere in this 2022 Annual Report that may constitute “forward-looking statements.” The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “foresee,” “should,” “would,” “could,” or other similar expressions are intended to identify forward-looking statements.
We have made statements in this Item 7 and elsewhere in this 2023 Annual Report that may constitute “forward-looking statements.” The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “foresee,” “should,” “would,” “could,” or other similar expressions are intended to identify forward-looking statements.
We intend to make additional opportunistic acquisitions and/or investments by identifying companies with significant potential for profitable growth and realizable synergies with one or more of our existing businesses. However, we may have more than one industrial focus depending on the opportunity.
We may make additional opportunistic acquisitions and/or investments by identifying companies with significant potential for profitable growth and realizable synergies with one or more of our existing businesses. However, we may have more than one industrial focus depending on the opportunity and/or needs of our customers.
APC is actively pursuing new business opportunities in both the renewable and support sectors with its existing and new clients. The governments of Ireland and the U.K. have already made funds available to develop and support specific projects.
APC is actively pursuing other new business opportunities in both the renewable and support sectors with its existing and new clients. The governments of Ireland and the U.K. have already made funds available to develop and support specific - 37 - Table of Contents projects.
Partially offsetting these uses of cash, we received cash proceeds related to the exercise of stock options during Fiscal 2021 in the amount of $1.6 million. At January 31, 2022, most of our balance of cash and cash equivalents was invested in government and prime money market funds with most of their total assets invested in cash, U.S.
Partially offsetting these uses of cash, we received cash proceeds related to the exercise of stock options during Fiscal 2022 in the amount of $1.4 million. At January 31, 2023, a portion of our balance of cash and cash equivalents was invested in government and money market funds with most of their total assets invested in cash, U.S.
The remainder of the disclosed amount related primarily to open service arrangements. Outstanding commitments represented by open purchase orders and subcontracts related to our construction contracts have not been included in the disclosed amounts as such amounts are expected to be funded through contract billings to customers.
The remainder of such obligations relate primarily to open service arrangements. Outstanding commitments represented by open purchase orders and subcontracts related to our construction contracts have not been included in the estimated amounts of contractual obligations as such amounts are expected to be funded through contract billings to customers.
On the other hand, natural-gas fired power plants provided approximately 38% of the electricity generated by utility-scale power plants in the U.S. in 2021, representing an increase of 60% from the amount of electrical power generated by natural gas-fired power plants in 2010, which provided approximately 24% of net electricity generation for 2010.
On the other hand, natural-gas fired power plants provided approximately 39% of the electricity generated by utility-scale power plants in the U.S. in 2022, representing an increase of 69% from the amount of electrical power generated by natural gas-fired power plants in 2010, which provided approximately 24% of net electricity generation for 2010.
We believe that our expectations are valid and that our plans for the future continue to be based on reasonable assumptions. Comparison of the Results of Operations for the Years Ended January 31, 2022 and 2021 We reported net income attributable to our stockholders of $38.2 million, or $2.40 per share, for Fiscal 2022.
We believe that our expectations are valid and that our plans for the future continue to be based on reasonable assumptions. - 38 - Table of Contents Comparison of the Results of Operations for the Years Ended January 31, 2023 and 2022 We reported net income attributable to our stockholders of $33.1 million, or $2.33 per diluted share, for Fiscal 2023.
The abundant availability of cheap, less carbon-intense and higher efficiency natural gas in the U.S. should continue to be a significant factor in the economic assessment of future power generation capacity additions although the pace of new opportunities emerging may be restrained and the starts of awarded EPC projects may be delayed.
The future availability of less carbon-intense and higher efficiency natural gas in the U.S. should be a significant factor in the economic assessment of future power generation capacity additions, although the pace of new opportunities emerging may be restrained and the starts of awarded EPC projects may be delayed or cancelled due to the challenges described above.
Our forward-looking statements, including those relating to the potential effects of the COVID-19 pandemic on our business, financial position and results of operations, are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we anticipate.
Our forward-looking statements, financial position and results of operations, are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we anticipate.
We have successfully completed these types of projects in the past and we have renewed efforts to obtain new work in the renewable power sector that will complement our natural gas-fired EPC services projects going forward.
We have successfully completed renewable energy projects in the past and we have renewed efforts to obtain new work in other sectors of the power market that will complement our natural gas-fired EPC services projects going forward.
APC was awarded a significant contract late in Fiscal 2022 to build a clean burning natural gas-fired power plant in Northern Ireland so that existing coal-fired power sources there can be shut-down.
APC was awarded the significant Kilroot project late in Fiscal 2022 to build a clean burning natural gas-fired power plant in Northern Ireland so that existing coal-fired power sources there can be replaced.
The engineering and construction teams of APC are engaged in continuous discussions with particular stakeholders in certain of these projects and they are confident that APC will be part of their eventual execution.
The engineering and construction teams of APC are engaged in continuous discussions with particular stakeholders in certain of these other projects and APC’s management believes that it will be part of their eventual execution.
Income Taxes We recorded income tax expense for Fiscal 2022 in the net amount of approximately $11.4 million due to our reporting pre-tax income for financial reporting purposes in the amount of $47.1 million for the year. Our annual effective income tax rate for Fiscal 2022 was 24.1%.
See Note 13 to the accompanying consolidated financial statements. For Fiscal 2022, we recorded income tax expense of approximately $11.4 million primarily due to our reporting pre-tax income for financial reporting purposes in the amount of $47.1 million for the year. Our annual effective income tax rate for Fiscal 2022 was 24.1%.
Engineering, Procurement and Construction Service Contracts At January 31, 2022, our consolidated project backlog amount of $0.7 billion consisted substantially of the projects of the power industry services reporting segment. The comparable backlog amount as of January 31, 2021 was $0.8 billion.
Project Backlog At January 31, 2023, our consolidated project backlog amount of $0.8 billion consisted substantially of the projects of the power industry services reporting segment. The comparable backlog amount as of January 31, 2022 was $0.7 billion.
This may result in additional decisions to make investments in the development and/or ownership of new projects. Because we believe in the strength of our balance sheet, we are willing to consider certain opportunities that include reasonable and manageable risks in order to assure the award of the related engineering, procurement, construction or equipment installation services contracts to us.
Because we believe in the strength of our balance sheet, we are willing to consider certain opportunities that include reasonable and manageable risks in order to assure the award of the related engineering, procurement, construction or equipment installation services contracts to us.
The gross profit percentages of corresponding revenues for the power industry services, industrial services and the telecommunications infrastructure segments for Fiscal 2022 were 20.3%, 16.9% and 17.0%, respectively. For Fiscal 2021, we reported a consolidated gross profit of approximately $62.1 million which represented a gross profit percentage of approximately 15.8% of corresponding consolidated revenues.
For Fiscal 2022, we reported a consolidated gross profit of approximately $99.7 million, which represented a gross profit percentage of approximately 19.6% of corresponding consolidated revenues. The gross profit percentages of corresponding revenues for the power industry services, industrial fabrication and field services and the telecommunications infrastructure segments for Fiscal 2022 were 20.3%, 16.9% and 17.0% respectively.
President Biden proposes to make the electricity production in the U.S. carbon free by 2035 and to put the country on the path to achieve net zero carbon emissions by 2050. As soon as he was elected, Mr.
Presidential administration. President Biden proposes to make the electricity production in the U.S. carbon free by 2035 and to put the country on the path to achieve net zero carbon emissions by 2050.
The report emphasizes that this will require a combination of conventional generation (typically powered by natural gas), interconnection to other jurisdictions, demand flexibility and other technologies such as energy storage (i.e., batteries) and generation from renewable gases (i.e., biomethane and/or hydrogen produced from renewable sources).
The report emphasizes that this will require a combination of conventional generation (typically powered by natural gas), interconnection to other jurisdictions, demand flexibility and other technologies such as battery storage and generation from renewable gases.
For Fiscal 2022, our improved overall operating performance resulted in net income attributable to our stockholders in the amount of $38.2 million, or $2.40 per diluted share. For Fiscal 2021, we reported net income attributable to our stockholders in the amount of $23.9 million, or $1.51 per diluted share.
For Fiscal 2023, our overall operating performance resulted in net income attributable to our stockholders in the amount of $33.1 million, or $2.33 per diluted share. For Fiscal 2022, our overall operating performance resulted in net income attributable to our stockholders in the amount of $38.2 million, or $2.40 per diluted share.
Selling, General and Administrative Expenses These costs were $47.3 million and $39.0 million for Fiscal 2022 and Fiscal 2021, respectively, representing 9.3% and 10.0% of consolidated revenues for the corresponding periods, respectively.
Selling, General and Administrative Expenses These costs were $44.7 million and $47.3 million for Fiscal 2023 and Fiscal 2022, respectively, representing 9.8% and 9.3% of consolidated revenues for the corresponding periods, respectively.
We may enter into other support arrangements in the future in connection with power plant development opportunities when they arise and when we are confident that providing early financial support for the projects will lead to the award of the corresponding EPC contracts to us.
In each of these cases, we deconsolidated the corresponding VIE when we were no longer the primary beneficiary. - 43 - Table of Contents We may enter into other support arrangements in the future in connection with power plant development opportunities when they arise and when we are confident that providing early financial support for the projects will lead to the award of the corresponding EPC contracts to us.
Under current professional accounting guidance, income tax positions must meet a more-likely-than-not recognition threshold to be recognized. Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met.
Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met.
The net electricity generation from natural gas-fired power plants is projected to increase by 17% in the U.S. by 2050. The pace of the historic increase in the preference for natural gas as an electricity generating fuel source was energized, in part, by environmental activism and restrictive regulations targeting coal-fired power plants.
The pace of the historic increase in the preference for natural gas as an electricity generating fuel source also was energized, in part, by environmental activism and restrictive regulations targeting coal-fired power plants.
At January 31, 2022 and 2021, we were compliant with the covenants of the Credit Agreement, as amended. - 42 - Table of Contents In the normal course of business and for certain major projects, we may be required to obtain surety or performance bonding, to provide parent company guarantees, or to cause the issuance of letters of credit (or some combination thereof) in order to provide performance assurances to clients on behalf of one of our subsidiaries.
In the normal course of business and for certain major projects, we may be required to obtain surety or performance bonding, to provide parent company guarantees, or to cause the issuance of letters of credit (or some combination thereof) in order to provide performance assurances to clients on behalf of one of our subsidiaries.
For the prior year, we reported net income attributable to our stockholders of $23.9 million, or $1.51 per diluted share.
For the prior year, we reported net income attributable to our stockholders of $38.2 million, or $2.40 per diluted share.
For consolidated reporting purposes, these costs have been presented as project development costs and included in property, plant and equipment. During Fiscal 2022, as described in Note 3 to the accompanying consolidated financial statements, we recorded an impairment loss related to these costs in the amount of $7.9 million, of which $2.5 million was attributed to the non-controlling interest.
During Fiscal 2022, as described in Note 3 to the accompanying consolidated financial statements, we recorded an impairment loss related to the development costs associated with the project in the amount of $7.9 million, of which $2.5 million was attributed to the non-controlling interest.
The cost and profit estimates are determined at least quarterly for all significant contracts pursuant to a detailed “bottoms-up” review process. The results of the process are subjected to reviews by senior management at each subsidiary.
The cost and profit estimates are re-forecasted monthly for all significant contracts pursuant to a detailed “bottoms-up” determination and review process. The results of the process are subjected to reviews by senior management with the applicable project management personnel at each subsidiary.
We have entered into similar support arrangements with other independent parties in the past that resulted in the successful development of three separate gas-fired power plant projects where we were paid project development fees in the total amount of $29.6 million, and where our loans in the amount of $11.7 million were repaid in full plus interest in the amount of $2.3 million.
We have entered into similar support arrangements with other independent parties in the past that resulted in the successful development and our construction of three separate gas-fired power plant projects. We were paid project development fees for each project and our loans to the development entities were repaid in full plus interest.
Our ability to realize our deferred tax assets, including those related to the past NOLs incurred in the U.K., that applicable income tax rules will allow us to use in order to offset future amounts of applicable taxable income, depends primarily upon the generation of sufficient future taxable income to allow for the realization of our deductible temporary differences.
(that applicable income tax rules will allow us to use in order to offset future amounts of applicable taxable income), depends primarily upon the generation of sufficient future taxable income to allow for the realization of our deductible temporary differences.
Through TRC, the industrial fabrication and field services reportable segment provides on-site services that support maintenance turnarounds, shutdowns and emergency mobilizations for industrial plants primarily located in the southeast region of the U.S. and that are based on its expertise in producing, delivering and installing fabricated steel components such as piping systems and pressure vessels.
Through TRC, the industrial fabrication and field services reportable segment provides primarily on-site services that support new plant construction and additions, maintenance turnarounds, shutdowns and emergency mobilizations for industrial plants primarily located in the Southeast region of the U.S. and that may include the fabrication, delivery and installation of steel components such as piping systems and pressure vessels.
The Credit Agreement, as amended, includes the following features, among others: a lending commitment of $50.0 million including a revolving loan with interest at the 30-day LIBOR plus 1.6% (reduced from 2.0%), and an accordion feature which allows for an additional commitment amount of $10.0 million, subject to certain conditions.
The term of our Amended and Restated Replacement Credit Agreement with the Bank, as amended in April 2021, was scheduled to expire on May 31, 2024 (the “Credit Agreement”) and included the following features, among others: a lending commitment of $50.0 million including a revolving loan with interest at the 30-day LIBOR plus 1.6% (reduced from 2.0%), and an accordion feature which allows for an additional commitment amount of $10.0 million, subject to certain conditions.
The net amount of cash provided by operating activities for Fiscal 2021 was $176.0 million. Our net income for Fiscal 2021, adjusted favorably by the net amount of non-cash income and expense items, represented a source of cash in the total amount of $41.5 million.
The net amount of cash used in operating activities for Fiscal 2023 was $30.1 million. However, our net income for Fiscal 2023, adjusted favorably by the net amount of non-cash income and expense items, represented a source of cash in the total amount of $39.0 million.
The difficulty in obtaining project equity financing and the other factors identified above, may be adversely impacting the planning and initial phases for the construction of new natural gas-fired power plants. Perhaps the most significant uncertainty relates to the policies of the current U.S. Presidential administration.
The difficulty in obtaining project equity financing and the other factors identified above, may be adversely impacting the planning and initial phases for the construction of new natural gas-fired power plants.
Project completion is currently scheduled to occur during the second half of Fiscal 2023. The unique Maple Hill Solar project, which is located in Cambria County, will be constructed using over 235,000 photovoltaic modules to generate approximately 100 MW of electrical power.
The unique Maple Hill Solar project, which is located in Cambria County, is being constructed using over 235,000 photovoltaic modules to generate approximately 100 MW of electrical power.
In the event that any amounts of variable consideration that are reflected in the transaction price of a contract are not resolved in the Company’s favor, there could be reductions in, or reversals of, previously recognized revenues.
In the event that any amounts of variable consideration that are reflected in the transaction price of a contract are not resolved in the Company’s favor, there could be reductions in, or reversals of, previously recognized revenues. In most significant instances, modifications to our contracts do not represent the addition of new performance obligations.
During Fiscal 2022, APC received research and development grant payments from the government of the U.K. related to certain qualifying works performed during Fiscal 2019 in the total amount of approximately $1.7 million. In addition, APC received COVID-19 relief from the Irish government, which amounted to approximately $1.1 million.
During Fiscal 2023 and Fiscal 2022, APC recorded research and development awards from the U.K. government related to certain qualifying works performed in the total amounts of approximately $0.7 million and $1.7 million, respectively. In addition, during Fiscal 2022, APC received a cash payment for COVID-19 relief from the Irish government in the amount of approximately $1.1 million.
The amounts of liquidated damages owed to a project owner pursuant to the terms of a contract would represent reductions of the transaction price of the corresponding contract.
Each contract defines the conditions under which a project owner may make a claim for liquidated damages. The amounts of liquidated damages owed to a project owner pursuant to the terms of a contract would represent reductions of the transaction price of the corresponding contract.
While the plants will initially burn natural gas alone, it is planned by the respective project owners that the plants will eventually burn a mixture of natural gas and green hydrogen, thereby establishing power-generation flexibility for these plants.
While the plants will initially burn natural gas alone, it is planned by the respective project owners that the plants will eventually burn a mixture of natural gas and green hydrogen, thereby establishing power-generation flexibility for these plants. We believe this is a winning combination that provides inexpensive and efficient power, enhances grid reliability and addresses clean-air concerns.
The revenues of this business represented 78.2% of consolidated revenues for Fiscal 2022 and 81.4% of consolidated revenues for the prior year.
The revenues of this business represented approximately 20.4% of consolidated revenues for Fiscal 2023 and 19.2% of consolidated revenues for the prior year.
Contractual Obligations During 2022, there was no significant change in the nature or amounts of our contractual obligations. The amount of contract obligations disclosed as of January 31, 2021 was $8.2 million. The two largest items included in this total, operating leases and deferred compensation, are amounts included as liabilities in our consolidated balance sheet.
Contractual Obligations During Fiscal 2023, there was no significant change in the nature or amounts of our contractual obligations. We estimate that the balance of such contractual obligations as of January 31, 2023 was less than $10 million. The two largest items in this estimate, operating leases and deferred compensation, are amounts included as liabilities in our consolidated balance sheet.
At January 31, 2022, we had no outstanding borrowings, however the Bank has issued letters of credit in the total outstanding amount of $21.5 million in support of the activities of APC under new customer contracts.
At January 31, 2023, we had no outstanding borrowings, however the Bank has issued letters of credit in the total outstanding amount of $8.8 million in support of the activities of APC under new customer contracts. We have pledged the majority of our assets to secure the financing arrangements.
The most significant award occurred in October 2021 as APC entered into an engineering and construction services contract with EPUKI London, UK, to construct a 2 x 330 MW natural gas-fired power plant in Carrickfergus that is near Belfast, Northern Ireland, and that will replace coal-fired units at the site. The facility is being developed by EPNI Energy Limited.
A significant award occurred in October 2021 as APC entered into an engineering and construction services contract with EPUKI London, U.K., to construct a 2 x 330 MW natural gas-fired power plant in Carrickfergus that is near Belfast, Northern Ireland, in a structure that was initially designed to enclose coal-fired units.
The business development efforts conducted by our APC operations have resulted in a significant increase in the project backlog of this business.
The business development efforts conducted by our APC operations have resulted in a significant increase in the project backlog of this business, which amounted to approximately $154 million as of January 31, 2023.
With the enactment of the CARES Act, the asset amount was moved to income taxes receivable representing a complete utilization of the NOL within one year of its occurrence.
With the enactment of the CARES Act, the asset amount, which totals $12.7 million, was moved to income taxes receivable representing a complete utilization of the NOL within one year of its occurrence. The IRS has not completed the processing of our refund request.
Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s Annual Report on Form 10-K for the year ended January 31, 2021, that was filed with the SEC on April 14, 2021, for a discussion of financial trends, variance drivers and other significant matters for Fiscal 2021 as compared to Fiscal 2020.
Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s Annual Report on Form 10-K for the year ended January 31, 2022, that was filed with the SEC on April 13, 2022, for a discussion of financial trends, variance drivers and other significant matters for Fiscal 2022 as compared to Fiscal 2021. - 29 - Table of Contents Cautionary Statement Regarding Forward Looking Statements The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements.
Our reported amount of project backlog at a point in time represents the total value of projects awarded to us that we consider to be firm as of that date less the amounts of revenues recognized to date on the corresponding projects (project backlog is larger than the value of remaining unsatisfied performance obligations, or RUPO, on active contracts; see Note 4 to the accompanying consolidated financial statements).
Our reported amount of project backlog at a point in time represents the total value of projects awarded to us that we consider to be firm as of that date less the amounts of revenues recognized to date on the corresponding projects.
Nonetheless, we believe that relatively low natural gas prices will persist over the long-term. Together with the lower operating costs of natural gas-fired power plants, the higher energy generating efficiencies of modern gas turbines, and the requirements for grid resiliency should sustain the demand for modern combined cycle and simple cycle gas-fired power plants in the future.
Nevertheless, we believe that the lower operating costs of natural gas-fired power plants, the higher energy generating efficiencies of modern gas turbines, and the requirements for grid resiliency should sustain the demand for modern combined cycle and simple cycle gas-fired power plants in the future. Natural gas is relatively clean burning, generally cost-effective, reliable and abundant.
In 2010, coal-fired power plants accounted for about 45% of total electricity generation. For 2021, coal accounted for approximately 22% of net electricity generation.
In 2010, coal-fired power plants accounted for about 45% of net electricity generation in the U.S. For 2022, coal fueled approximately 20% of net electricity generation.
For Fiscal 2022, we reported a consolidated gross profit of approximately $99.7 million, which represented a gross profit percentage of approximately 19.6% of corresponding consolidated revenues.
These costs were $368.7 million and $409.6 million for Fiscal 2023 and Fiscal 2022, respectively. For Fiscal 2023, we reported a consolidated gross profit of approximately $86.4 million, which represented a gross profit percentage of approximately 19.0% of corresponding consolidated revenues.
The U.K. usually holds auctions for power capacity about four years in advance of the delivery date and another auction for a smaller amount of capacity around a year before delivery.
The U.K. usually holds auctions for power capacity about four years in advance of the delivery date and another auction for a smaller amount of capacity around a year before delivery. Evidence of the power production realities in the U.K. are reflected in the results for Britain’s auction to ensure enough electricity capacity for 2022/2023 that were released in 2022.
Over the past few years, GPS has provided top management guidance and project management expertise to APC as it completed its subcontract efforts for the TeesREP power plant and won the award of the project to build the new gas-fired power plant in Northern Ireland. APC has provided project management manpower to GPS on several of its EPC services contracts.
Over the past few years, GPS has provided top management guidance and project management expertise to APC as it completed its subcontract efforts for a biomass-burning power plant and won the awards of the projects to build new gas-fired power plant units near Belfast and Dublin.
We have also provided a financial guarantee on behalf of GPS to an original equipment manufacturer in the amount of $3.6 million to support project developmental efforts. During Fiscal 2022, the Company established a liability for an estimated loss related to this guarantee.
Not all of our projects require bonding. - 42 - Table of Contents We have also provided a financial guarantee in the amount of $3.6 million to support certain project developmental efforts. A liability was established for the estimated loss related to this guarantee during Fiscal 2022.
The research and development credits were included in amendments to our consolidated federal income tax returns for Fiscal 2016 and Fiscal 2017, that were filed in January 2019, and our consolidated federal income tax return for Fiscal 2018, that was filed in November 2018. During Fiscal 2022, the IRS issued its revenue agents reports that disagree with our credit amounts.
Most of this liability was included in accrued expenses as of January 31, 2022. The research and development credits were included in amendments to our consolidated federal income tax returns for Fiscal 2016 and Fiscal 2017, that were filed in January 2019, and our consolidated federal income tax return for Fiscal 2018, that was filed in November 2018.
We may also use the borrowing ability to cover other credit instruments issued by the Bank for our use in the ordinary course of business as defined by the Bank.
The Credit Agreement, as newly amended, continues to include customary terms, covenants and events of default for a credit facility of its size and nature. We may also use the borrowing ability to cover other credit instruments issued by the Bank for our use in the ordinary course of business as defined by the Bank.
Returns on money market instruments and certificates of deposit are currently minimal due to market conditions.
Returns on money market instruments and certificates of deposit were limited for some time due to market conditions.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+1 added−3 removed4 unchanged
Identified as factors that could cause contract cost overruns, project delays or other unfavorable effects on our contracts, among other circumstances and events, are delays in the scheduled deliveries of machinery and equipment ordered by us or project owners, unforeseen increases in the costs of labor, warranties, raw materials, components or equipment or the failure or inability to obtain resources when needed.
Identified as factors that could cause contract cost overruns, project delays or other unfavorable effects on our contracts, among other circumstances and events, are delays in the scheduled deliveries of machinery and equipment ordered by us or project owners, unforeseen inflationary increases in the costs of labor, warranties, raw materials, components or equipment or the failure or inability to obtain resources when needed.
To illustrate the potential impact of changes in interest rates on our results of operations, we present the following hypothetical analysis, which assumes that our consolidated balance sheet as of January 31, 2022 remains constant, and no further actions are taken to alter our existing interest rate sensitivity, including reinvestments.
To illustrate the potential impact of changes in interest rates on our results of operations, we present the following hypothetical analysis, which assumes that our consolidated balance sheet as of January 31, 2023 remains constant, and no further actions are taken to alter our existing interest rate sensitivity, including reinvestments.
In the “Risk Factors” section of this 2022 Annual Report (see Item 1A), we have included discussion of the risks to our fixed price contracts if actual contract costs rise above the estimated amounts of such costs that support corresponding contract prices.
In the “Risk Factors” section of this 2023 Annual Report (see Item 1A), we have included discussion of the risks to our fixed price contracts if actual contract costs rise above the estimated amounts of such costs that support corresponding contract prices.
While the management of the risks associated with the inability to obtain machinery, equipment and other materials when needed continues to include our best efforts, we are concerned that the supply chain uncertainties may be impacting project owners’ confidence in commencing new work which may adversely affect our expected levels of revenues until the supply chain disruptions dissipate. ITEM 8.
While the management of the risks associated with the inability to obtain machinery, equipment and other materials when needed continues to require our best efforts, we are concerned that the supply chain uncertainties may be impacting project owners’ confidence in commencing new work which may adversely affect our expected levels of revenues until the supply chain disruptions further dissipate.
We maintain a substantial amount of our temporarily investable cash in certificates of deposit and in government and prime money market funds (see Note 5 of the accompanying consolidated financial statements). As of January 31, 2022, the weighted average number of days until maturity for the short-term investments and money market funds is 336 days.
We maintain a substantial amount of our temporarily investable cash in certificates of deposit and in government money market funds (see Note 5 of the accompanying consolidated financial statements). As of January 31, 2023, the weighted average number of days until maturity for the short-term investments and money market funds was 302 days.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See the Index to the Consolidated Financial Statements on page 57 of this 2022 Annual Report. - 51 - Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See the Index to the Consolidated Financial Statements on page 55 of this 2023 Annual Report. - 49 - Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.
As the blended weighted average interest rate was 0.07% at January 31, 2022, the largest decrease in the interest rates presented below is 7 basis points (dollars in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Increase (Decrease) in ​ Increase (Decrease) in ​ Net Increase (Decrease) in Basis Point Change Interest Income Interest Expense Income (pre-tax) Up 300 basis points ​ $ 7,520 ​ $ — ​ $ 7,520 Up 200 basis points ​ ​ 5,013 ​ ​ — ​ ​ 5,013 Up 100 basis points ​ 2,507 ​ — ​ 2,507 Down 7 basis points ​ (146) ​ — ​ (146) With the consolidation of APC, we are subject to the effects of translating the financial statements of APC from its functional currency (Euros) into our reporting currency (U.S. dollars).
As the blended weighted average interest rate was 2.97% at January 31, 2023, the largest decrease in the interest rates presented below is 297 basis points (dollars in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Increase (Decrease) in ​ Increase (Decrease) in ​ Net Increase (Decrease) in Basis Point Change Interest Income Interest Expense Income (Pre-Tax) Up 300 basis points ​ $ 2,632 ​ $ — ​ $ 2,632 Up 200 basis points ​ ​ 1,754 ​ ​ — ​ ​ 1,754 Up 100 basis points ​ 877 ​ — ​ 877 Down 100 basis points ​ ​ (877) ​ ​ — ​ ​ (877) Down 200 basis points ​ ​ (1,685) ​ ​ — ​ ​ (1,685) Down 297 basis points ​ (2,448) ​ — ​ (2,448) ​ With the consolidation of APC, we are subject to the effects of translating the financial statements of APC from its functional currency (Euros) into our reporting currency (U.S. dollars).
Such effects are recognized in accumulated other comprehensive income (loss), which is net of tax when applicable. APC remeasures transactions and subsidiary financial statements denominated in local currencies to Euros. Gains and losses on the remeasurements are recorded in the other income line of our consolidated statement of earnings.
APC remeasures transactions and subsidiary financial statements denominated in local currencies to Euros. Gains and losses on the remeasurements are recorded in the other income line of our consolidated statement of earnings.
During Fiscal 2022, our operations were challenged by the well-publicized global supply chain disruptions.
Our operations have been challenged by the well-publicized global supply chain disruptions.
The weighted average annual interest rate of our certificates of deposit of $90.0 million, which are classified as short-term investments, and money market funds of $207.5 million was 0.07%.
The weighted average annual interest rate of our certificates of deposit of $149.8 million, which are classified as short-term investments, and the money market fund balance of $68.6 million was 2.97%.
As of January 31, 2022, we had no outstanding borrowings under our financing arrangements with the Bank as amended (see Note 9 to the accompanying consolidated financial statements), which provide a revolving loan with a maximum borrowing amount of $50.0 million that is available until May 31, 2024, with interest at 30-day LIBOR plus 1.6% going forward.
As of January 31, 2023, we had no outstanding borrowings under our financing arrangements with the Bank as amended (see Note 9 to the accompanying consolidated financial statements), which provide a revolving loan with a maximum borrowing amount of $50.0 million that is available until May 31, 2024 and that charged interest at 30-day LIBOR plus 1.6% until March 6, 2023, when the Credit Agreement was amended to replace the interest pricing with SOFR plus 1.6% going forward. - 48 - Table of Contents During Fiscal 2023, Fiscal 2022 and Fiscal 2021, we did not enter into derivative financial instruments for trading, speculation or other purposes that would expose us to market risk.
Removed
During Fiscal 2022, Fiscal 2021 and Fiscal 2020, we did not enter into derivative financial instruments for trading, speculation or other purposes that would expose us to market risk. - 50 - Table of Contents Financial markets around the globe are preparing for the pending discontinuation of LIBOR, which is the widely used indicator of basis for short-term lending rates.
Added
For example, the amounts of cash, revenues and backlog reported for APC in our consolidated financial statements declined during Fiscal 2023 as the Euro has depreciated versus the U.S. dollar. The effects of translation are recognized in accumulated other comprehensive loss, which is net of tax when applicable.
Removed
The transition from LIBOR is market driven, not a change required by regulation. The U.S. and other countries are currently working to replace LIBOR with alternative reference rates.
Removed
We do not expect that the replacement of LIBOR as the basis for the determination of our short-term borrowing rate will have any significant effects on our financial arrangements with the Bank or our financial reporting.

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