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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 — 2023 vs 2024

Top changes in ARGAN INC's 2024 10-K

512 paragraphs added · 575 removed · 379 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

91 edited+15 added−47 removed16 unchanged
We believe that our insurance coverage amounts are adequate, but not excessive, and provide the proper amounts of coverage where we believe insurable risks may exist. Contracts with customers in each of our reportable business segments may require performance bonds or other means of financial assurance to secure contractual performance.
We believe that our insurance coverage amounts are adequate, but not excessive, and provide the proper amounts of coverage where we believe insurable risks may exist. Contracts with customers in each of our reportable business segments may require performance bonds, payment bonds, or other means of financial assurance to secure contractual performance.
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”).
We have maintained that the delays in the construction starts of these projects and the awards of new business awards 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”).
In January 2018, we determined that we were the primary beneficiary of a variable interest entity that was performing the project development activities related to the construction of the Chickahominy Power Station. GPS provided financing to the entity for the development efforts pursuant to promissory notes.
In January 2018, we determined that we were the primary beneficiary of a variable interest entity (“VIE”) that was performing the project development activities related to the construction of the Chickahominy Power Station. GPS provided financing to the entity for the development efforts pursuant to promissory notes.
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.
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.
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.
The comparable backlog amount as of January 31, 2023 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.
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 policy 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).
During Fiscal 2023, we believe in general that we effectively confronted the economic challenges to our active jobs represented by the inflationary surge in prices. C ompetition GPS and APC compete with large and well capitalized private and public firms in the construction and engineering services industry including firms that have global businesses.
During recent fiscal years, we believe in general that we effectively confronted the economic challenges to our active jobs represented by the inflationary surge in prices. C ompetition GPS and APC compete with large and well capitalized private and public firms in the construction and engineering services industry including firms that have global businesses.
Special Purpose Entities We selectively participate in power plant project development and related financing activities 1) to maintain a proprietary pipeline for future EPC services contract opportunities, 2) to secure exclusive rights to EPC contracts, and 3) to generate profits through interest income and project development success fees.
Development Financing We selectively participate in power plant project development and related financing activities 1) to maintain a proprietary pipeline for future EPC services contract opportunities, 2) to secure exclusive rights to EPC contracts, and 3) to generate profits through interest income and project development success fees.
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.
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 cable installation services.
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.
Through TRC, the industrial construction services reportable segment provides field services and project management 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.
Additionally, during Fiscal 2023, TRC consolidated its metal fabrication plants and support structures into one industrial fabrication and warehouse facility that includes over 90,000 square feet. The consolidation reduced fixed costs and notably streamlined the business, which has permitted TRC to primarily focus on its field service opportunities.
During Fiscal 2023, TRC consolidated its metal fabrication plants and support structures into one industrial fabrication and warehouse facility that totals over 90,000 square feet. The consolidation reduced fixed costs and notably streamlined the business, which has permitted TRC to focus primarily on its industrial field service opportunities, which includes construction projects.
For example, through variable interest entities, we entered into support arrangements with independent parties in the past that resulted in the successful development and our construction of three separate gas-fired power plant. We were paid project development fees for each project and our loans to the development entities were repaid in full plus interest.
For example, through variable interest entities, we have entered into support arrangements with independent parties in the past that resulted in the successful development and our construction of three separate gas-fired power plants in Pennsylvania. We were paid project development fees for each project and our loans to the development entities were repaid in full plus interest.
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.
Our OSHA reportable incident rates, weighted by hours worked for all of our subsidiaries, were 0.43, 0.60, 0.48, 0.55 and 0.40 for calendar years 2023, 2022, 2021, 2020 and 2019, respectively; our rates were significantly better than the national average rates in our industry (NAICS – 2379) for those years.
The recent emphasis on these field services opportunities influenced the strategic decision to consolidate the pipe and vessel fabrication facilities to reduce fixed costs, streamline operations and better support a growing and scalable business model.
The emphasis on these opportunities influenced the strategic decision to consolidate the pipe and vessel fabrication facilities to reduce fixed costs, streamline operations and better support a growing and scalable business model.
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.
Our successful experience includes the efficient completion and maintenance of natural gas-fired combined cycle and simple cycle power plants, biomass plants, waste-to-energy facilities, solar fields, wind farms and biofuel processing facilities, most performed on an EPC services contract basis.
As explained below, there are risks of unrecovered costs, among other features, associated with these types of contracts. To compete with these firms, we emphasize our proven track record as a value-add choice for the design, build and commissioning of natural gas-fired and alternative energy power systems.
As explained below, there are risks of unrecovered costs, among other aspects, associated with these types of contracts. - 5 - Table of Contents To compete with these firms, we emphasize our proven track record as a value-add choice for the design, build and commissioning of natural gas-fired and alternative energy power systems.
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.
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 1,214 employees at January 31, 2024, substantially all of whom were full-time. We believe that our employee relations are generally good.
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.
Additionally, we have protections in our contracts with major customers that provide certain relief that helps to mitigate certain financial risks, but these protections could be limited depending on the underlying issues and the financial challenges of our customers.
ITEM 1. BUSINESS. Argan, Inc. (“Argan”) conducts operations through its wholly owned subsidiaries, Gemma Power Systems, LLC and affiliates (“GPS”), Atlantic Projects Company Limited and affiliates (“APC”), The Roberts Company, Inc. (“TRC”) and Southern Maryland Cable, Inc. (“SMC”) (together referred to as the “Company,” “we,” “us,” or “our”).
ITEM 1. BUSINESS. Argan, Inc. (“Argan”) is primarily a construction firm that conducts operations through its wholly-owned subsidiaries, Gemma Power Systems, LLC and affiliates (“GPS”), Atlantic Projects Company Limited and affiliates (“APC”), The Roberts Company, Inc. (“TRC”) and Southern Maryland Cable, Inc. (“SMC”) (together referred to as the “Company,” “we,” “us,” or “our”).
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.
For Fiscal 2024, Fiscal 2023 and Fiscal 2022, the amounts of revenues earned by us and associated with renewable energy projects were 6.9%, 9.6% and 13.4%, respectively, of corresponding revenues for the power industry services segment.
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.
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. Project Backlog At January 31, 2024, the project backlog for this reporting segment was approximately $0.6 billion.
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.
In the U.S., the Energy Information Administration illustrates that carbon emissions from the electric power sector declined by approximately 36% 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.
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.
Responsible Business 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 responsible business committee of our board of directors, which was formed initially as a subcommittee in Fiscal 2021 and was elevated to full committee status in Fiscal 2023.
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.
The extensive design, construction, project - 3 - Table of Contents management, start-up and operating experience of GPS has grown with installed capacity exceeding 18 gigawatts of mostly domestic power-generating capacity. These projects have included base-load combined-cycle facilities, simple-cycle peaking plants and boiler plant construction and renovation efforts.
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.
The revenues of SMC were $14.3 million, $16.2 million and $13.4 million for Fiscal 2024, Fiscal 2023 and Fiscal 2022, respectively, or approximately 2%, 4% and 3% of our consolidated revenues for the corresponding years, respectively. In Fiscal 2022, SMC acquired the business of Lee Telecommunications, Inc.
For example, we may hold quotes related to materials in our industrial fabrication and field services segment for only three days. For major fixed price contracts in our power industry services segment, we may mitigate material cost risks by procuring the majority of the equipment and construction supplies during the early phases of a project.
For example, we may hold quotes related to materials in our industrial construction services segment for short periods of time. For major fixed price contracts in our power industry services segment, we may mitigate material cost risks by procuring the majority of the equipment and construction supplies during the early phases of a project.
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.”).
The customers include primarily independent power project owners, public utilities, power plant heavy equipment suppliers and other commercial firms with significant power requirements with customer projects located in the United States (the “U.S.”), the Republic of Ireland (“Ireland”) and the United Kingdom (the “U.K.”).
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.
Argan operates as a holding company that may make 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.
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.
Supply chain uncertainties may impact project owners’ confidence in commencing new work which may adversely affect our expected levels of revenues until supply chain disruptions substantially dissipate. The costs of materials needed for the completion of our projects may fluctuate from time to time.
The project backlog of TRC has grown by over 175% since January 31, 2022 to approximately $123.5 million as of January 31, 2023, reflecting a business development emphasis on the award of larger industrial construction projects.
The project backlog of TRC has grown by over 175% since January 31, 2022 to approximately $127.5 million as of January 31, 2024, reflecting a business development emphasis on the award of larger field service construction projects.
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.
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, and decreased and aging labor pools resulting from demographic trends.
The durations of our construction projects typically range between one to three years. However, the length of certain significant construction projects may exceed three years. This reportable business segment also includes APC, a company formed in Ireland over 45 years ago, and its affiliated companies, which we acquired in May 2015.
The durations of these projects typically range between one to three years, with the length of certain significant construction projects exceeding three years. This reportable business segment also includes APC, a company formed in Ireland almost 50 years ago, and its affiliated companies, which we acquired in May 2015.
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 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 we comply with certain financial covenants at its fiscal year-end and at each of its fiscal quarter-ends.
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.
The revenues of our power industry services business segment were $416.3 million, $346.0 million and $398.1 million for the fiscal years ended January 31, 2024 (“Fiscal 2024”), 2023 (“Fiscal 2023”) and 2022 (“Fiscal 2022”), respectively, or 73%, 76% and 78% of our consolidated revenues for the corresponding periods, respectively.
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.
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”), which extended the expiration date of the Credit Agreement to May 31, 2024 and reduced the borrowing rate. On March 6, 2023, we entered into the Second Amendment (the “Second Amendment”) to the Credit Agreement.
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.
For example, the Irish government’s current policy related to the security of the electricity supply in Ireland 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 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.
For Fiscal 2024, Fiscal 2023 and Fiscal 2022, TRC reported revenues of $142.8 million, $92.8 million and $97.9 million, respectively, or approximately 25%, 20% and 19% of consolidated revenues for the corresponding years, respectively.
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.
GPS and APC constitute our power industry services reportable segment, delivering a comprehensive suite of engineering, procurement, construction, commissioning, maintenance, project development and technical consulting services to the power generation market, including the renewable energy sector.
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.
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 laws.
Recently, we purchased uncertain tax position insurance related to the research and development tax credits we claimed in our amended federal income tax returns for Fiscal 2022 and 2021 (see Note 13 to the accompanying consolidated financial statements).
In Fiscal 2023, we purchased specialty insurance related to the full recovery of the research and development tax credits we claimed in our amended federal income tax returns for Fiscal 2022 and 2021 (see Note 12 to the accompanying consolidated financial statements).
TRC operates within its own reportable business segment, industrial fabrication and field services. Industrial field services typically represent over 75% of TRC’s annual revenues with the remaining revenues contributed by projects consisting solely of metal fabrication.
TRC operates within its own reportable business segment, industrial construction services. Such services typically represent the majority of TRC’s annual revenues with the remaining revenues contributed by projects consisting primarily of metal fabrication.
These recent experiences have demonstrated that the two companies can combine resources effectively. As a result, GPS and APC currently are working as a team under limited notices to proceed with project activities related to an emergency gas-fired power plant in the central region of Ireland.
These experiences have demonstrated that the two companies can combine resources effectively. GPS and APC currently are working as a team on the Shannonbridge Power Project, an emergency gas-fired power plant in the central region of Ireland.
For example, in January 2023, inflation rose by 0.5% for the month and 6.4% over the prior year, according to the consumer price index data released by the U.S. Bureau of Labor Statistics. In times of increased volatility similar to those being experienced currently, we take steps to reduce our risks.
For example, in January 2024, inflation rose by 0.3% for the month and 3.1 % over the prior year, down from 6.4% over the same period in the prior year, according to the consumer price index data released by the U.S. Bureau of Labor Statistics. In times of increased volatility, we take steps to reduce our risks.
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.
As of January 31, 2024, we were in compliance with the covenants of the Credit Agreement, as amended. 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.
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 Credit Agreement, as amended, includes the following features, among others: a lending commitment of $50.0 million including a revolving loan and an accordion feature which allows for an additional commitment amount of $10.0 million, subject to certain conditions.
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.
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 awards of projects to build new thermal power plants in Ireland and the U.K. In turn, APC has provided specialist resources to GPS on several of its EPC services contracts.
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 in the Credit Agreement. On March 6, 2023, we entered into the Second Amendment (the “Second Amendment”) to the Credit Agreement.
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 in the Credit Agreement.
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 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.
As we go forward, there may be unscheduled delays in the delivery of materials and equipment ordered by us or a project owner or other unanticipated challenges to our ability to complete major job tasks when planned, among other impacts, none of which are quantifiable at this time.
As we go forward, there may be unscheduled delays in the delivery of materials, machinery and equipment ordered by us or a project owner or other unanticipated challenges to our ability to complete major job tasks when planned, among other impacts. We actively attempt to manage these risks during periods of uncertainty.
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.
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.
Through SMC, which conducts business as SMC Infrastructure Solutions, the telecommunications infrastructure services segment provides project management, construction, installation and maintenance services to commercial, local government and federal government customers primarily in the Mid-Atlantic region of the U.S. Holding Company Structure Argan was organized as a Delaware corporation in May 1961.
Through SMC, doing business as SMC Infrastructure Solutions, the telecommunications infrastructure services segment provides project management, construction, installation and maintenance services to commercial, local government and federal government customers primarily in the Mid-Atlantic region of 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.
Power Industry Services GPS, which we acquired in 2006, historically provides the most significant percentage of our power industry services. As a full-service engineering, procurement and construction (“EPC”) services firm, GPS has the proven abilities of designing, building and commissioning large-scale energy projects primarily in the U.S.
Historically, APC primarily provided turbine, boiler and large rotating equipment engineering, procurement, installation, commissioning and outage services to power plants in Ireland.
Historically, APC primarily provided turbine, boiler and large rotating equipment engineering, procurement, installation, commissioning and outage services to power plants in Ireland. Since its acquisition in 2015, APC has expanded operations to the U.K.
We have significant experience in delivering EPC projects with the latest turbine technology and working with all three major gas-fired turbine manufacturers to meet each project owner’s specific power plant requirements. EPC project requirements may vary considerably.
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. We have significant experience in delivering EPC projects with the latest turbine technology and working with all three major gas-fired turbine manufacturers to meet each project owner’s specific power plant requirements. EPC project requirements may vary considerably.
As a result, employees from all levels of our Company have participated in projects such as Habitat for Humanity, Toys for Tots, school supply drives and Company-sponsored youth programs, while supporting meaningful apprenticeships and internships within our companies.
As a result, employees from all levels of our Company have participated in projects such as Habitat for Humanity, Toys for Tots, Coats for Kids, school supply drives, clothing drives, food bank donation programs and Company-sponsored youth programs, while supporting meaningful apprenticeships and internships within our companies; and ● We provided training and issued periodic newsletters focused on diversity, equality and inclusion.
(“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.
(“LTI”) for $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. The largest customer of LTI is Newport News Shipbuilding, a division of Huntington Ingalls Industries, to which it has been providing services since 1995.
The major customers of TRC currently include Nutrien Ltd., the global fertilizer company; Livent Corporation, a global lithium technology company; Jacobs Solutions Inc., an international engineering and construction firm that is building a significant biotechnology manufacturing facility in the research triangle area of North Carolina; OceanaGold Corporation, a gold-mining company located in South Carolina; Air Liquide S.A., a world-leading supplier of industrial gases; as well as Weyerhaeuser Company and Domtar Corporation, two of North America’s largest forest products companies; and various other industrial companies.
Recent and current major customers of TRC include Nutrien Ltd., the global fertilizer company; Jacobs Solutions Inc., an international engineering and construction firm that is building a significant biotechnology manufacturing facility in the research triangle area of North Carolina; and North America’s largest forest products companies such as Weyerhaeuser - 7 - Table of Contents Company, International Paper and Domtar Corporation; and various other industrial companies.
Typically, we include the total value of EPC services and other major construction contracts in project backlog when we receive a corresponding notice to proceed from the project owner.
Typically, we include the total value of EPC services and other major construction contracts in project backlog upon receiving a notice to proceed from the project owner. When provided with only the limited notice to proceed (“LNTP”), we do not add the value of the full contract to project backlog until we receive the full notice to proceed.
TRC is a construction and field services firm with steel pipe and vessel fabrication capabilities serving industrial organizations primarily in the Southeast region of the U.S.
Industrial Construction Services TRC was founded in 1977 and its fabrication facility and offices are located near Greenville, North Carolina. TRC is an industrial construction and field services firm with steel pipe and vessel fabrication capabilities serving industrial organizations primarily in the Southeast region of the U.S.
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.
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, solar panels or any other construction materials we use to complete a particular power project.
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.
As of January 31, 2024, the outstanding amount of bonds covering other risks, including warranty obligations related to completed activities, was not material. Not all of our projects require bonding.
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.
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.
Since the acquisition of APC in 2015, it has expanded operations to the U.K. and more recently focused on the performance of engineering and construction services for the major electric utility in Ireland, independent power plant owners, major data center operators and original equipment manufacturers. With its primary presence in Ireland and the U.K., APC leads this segment’s international focus.
APC currently focuses on the performance of engineering and construction services for the major electric utility in Ireland, independent power plant owners, major data center operators and original equipment manufacturers. APC’s business in Ireland and the U.K. represent this segment’s primary international operations.
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.
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, the local electricity cooperative.
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.
Its charter requires it to assist our senior management in: (a) setting our general strategy relating to responsible business matters, as well as developing, implementing, and monitoring initiatives and policies for us based on that strategy; (b) overseeing communications with employees, investors, and other stakeholders with respect to responsible business matters; and (c) anticipating and monitoring developments relating to, and improving management’s understanding of, responsible business matters. - 9 - Table of Contents A summary of our responsible business 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 array facilities; ● 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 broke ground in Fiscal 2024; ● We commenced a solicitation of recommendations from our employees by a cross-subsidiary working group in order to identify additional actionable items including coordinated community service projects.
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.
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.
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.
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.
We maintain material amounts of cash, cash equivalents and short-term investments, and, as indicated above, we have the commitment of the Bank to issue irrevocable standby letters of credit up to an aggregate amount of $50.0 million in support of our bonding collateral and other business requirements.
We maintain material amounts of cash, cash equivalents and short-term investments, and, as indicated above, we have the commitment of the Bank to issue irrevocable standby letters of credit up to an aggregate amount of $50.0 million. As of January 31, 2024, the estimated amount of our unsatisfied bonded performance obligations, covering all of its subsidiaries, was approximately $0.5 billion.
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.
As a result, construction and engineering companies, including some of the largest firms in the country, incurred losses related to performance on fixed-price contracts. Despite these challenges, sustained competition has supported the continuation of fixed-price contracting in the U.S., maintaining the typical volume of projects completed under these terms. The firms that remain in our market are very effective competitors.
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.
GPS also has experience in the renewable energy sector providing EPC contracting and other services to owners of alternative energy facilities, including biomass plants, solar fields and wind farms.
Major Projects The significant currently active projects of our power industry services segment include the construction of the facilities described below, which together represent nearly 3.8 gigawatts of potential electrical power and require the significant engagements of our technical, project support and project management teams.
Nevertheless, the inclusion of contract values in project backlog requires management judgement based on the facts and circumstances. The significant currently active projects of our power industry services segment include the construction of facilities which together represent approximately 4.1 gigawatts of potential electrical power and require the significant engagements of our technical, project support and project management teams.
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.
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.
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.
Like the U.S., Ireland and the U.K. are committed to the increase in energy consumption sourced from the sun and the wind on the pathway to net zero emissions. 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.
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.
Many state and local regulations governing construction require permits and - 6 - Table of Contents licenses to be held by individuals who have passed an examination or met other requirements. We believe that we have the licenses required to conduct our current operations and that we are in substantial compliance with applicable regulatory requirements.
Nonetheless, we try to be particularly selective in pursuing new project opportunities and are reluctant to enter into fixed-price contracts with perceived high-risk profiles. 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 not immune to the risks of losses on major projects. Nonetheless, we try to be particularly selective in pursuing new project opportunities and are reluctant to enter into fixed-price contracts with perceived high-risk profiles that are unacceptable.
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.
They are constructed on relatively small sites and, upon completion, do not typically disturb the surrounding areas that are often green. - 10 - Table of Contents 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 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 public may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. 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.
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.
To date, we generally have managed to successfully staff each of our jobs effectively, but going forward we may be challenged by labor shortages in the construction industry due to rising wages, demographic trends and other factors. The competition for labor may also include employers outside the construction industry, which can offer the opportunity to work remotely.
We expect that revenues associated with the performance of renewable energy projects will continue to contribute meaningfully to our power industry services segment and consolidated revenues over the coming years.
Based on our current project backlog of renewable projects in the amount of $175 million as of January 31, 2024 and subsequent contract awards, we expect that revenues associated with the performance of renewable energy projects will grow meaningfully and will represent significant portions of our power industry services segment and consolidated revenues over the coming years.
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.
Currently, we also believe that the ability of owners of fully developed gas-fired power plant projects to close on equity and permanent debt financing is challenged by uncertainty in capital markets caused by multiple factors including delayed capacity auctions, public and political opposition to fossil-fuel energy projects, stranded asset concerns and high interest rates.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Our computer systems face the threat of unauthorized access, computer hackers, viruses, malicious code, cyberattacks, phishing and other security incursions and system disruptions, including attempts to improperly access our confidential and proprietary information as well as the confidential and proprietary information of our customers and other business partners.
Our information systems face the threat of unauthorized access, computer hackers, viruses, malicious code, cyberattacks, phishing and other security incursions and system disruptions, including attempts to improperly access our confidential and proprietary information as well as the confidential and proprietary information of our customers and other business partners.
If our surety company were to limit or eliminate our access to new bonds, our alternatives would include seeking bonding capacity from other surety companies, joint venturing with other construction firms, increasing business with clients that do not require bonds and posting other forms of collateral for project performance, such as letters of credit or cash.
If our surety company were to limit or eliminate our access to new bonds, our alternatives would include seeking bonding capacity from other surety companies, joint venturing with other construction firms, increasing business with clients that do not require bonds or posting other forms of collateral for project performance, such as letters of credit or cash.
If we are unable to meet these competitive challenges and to win the awards of new projects that provide desirable margins, we could lose market share to our competitors, experience overall reductions in future revenues and profits or incur losses. The continuous rise in renewables could reduce the number of future gas-fired power plant projects.
If we are unable to meet these competitive challenges and to win the awards of new projects that provide desirable margins, we could lose market share to our competitors, experience overall reductions in future revenues and profits or incur losses. The continuous rise in renewables could possibly reduce the number of future gas-fired power plant projects.
We have been, are, and may be in the future, named as a defendant in legal proceedings where parties may allege breach of contract and seek recovery for damages or other remedies with respect to our projects or other matters (see Legal Proceedings in Item 3). These legal matters generally arise in the normal course of our business.
We have been, and may be in the future, named as a defendant in legal proceedings where parties may allege breach of contract and seek recovery for damages or other remedies with respect to our projects or other matters (see Legal Proceedings in Item 3). These legal matters generally arise in the normal course of our business.
For each of our fixed price customer contracts, we recognize revenues over the life of the contract as performance obligations are completed by us based on the proportion of costs incurred to date compared to the total costs estimated to be incurred for the entire project, and by using the resulting percentage to update the recorded amounts of project-to-date revenues.
For each of our fixed price customer contracts, we recognize revenues over the life of the contract as performance obligations are completed by us based on the proportion of costs incurred to date compared with the total costs estimated to be incurred for the entire project, and by using the resulting percentage to update the recorded amounts of project-to-date revenues.
If we guarantee the timely completion or the performance of a project, we could incur additional costs to fulfill such obligations. In many of our fixed price long-term contracts, we guarantee that we will complete a project by a scheduled date. We sometimes provide that the project, when completed, will also achieve certain performance standards.
If we guarantee the timely completion or the performance of a project, we could incur additional costs to fulfill such obligations. In certain of our fixed price long-term contracts, we guarantee that we will complete a project by a scheduled date. We sometimes provide that the project, when completed, will also achieve certain performance standards.
However, under standard terms, surety companies issue bonds on a project-by-project basis and can decline to issue bonds at any time or require the posting of additional collateral as a condition to issuing any bonds. Not all of our projects require bonding.
Under standard terms, surety companies issue bonds on a project-by-project basis and can decline to issue bonds at any time or require the posting of additional collateral as a condition to issuing any bonds. Not all of our projects require bonding.
Uncertainty in this market, including the difficulties experienced by PJM in perfecting a capacity auction design that all of its stakeholders consider to be fair, the repeated capacity auction delays, and the shrinking annual capacity auction prices, may discourage potential power plant owners from commencing the development of new power plants in this area thereby reducing potential new business opportunities for us.
Uncertainty in this market, including the difficulties experienced by PJM in implementing a capacity auction design that all of its stakeholders consider to be fair, the repeated capacity auction delays, and the shrinking annual capacity auction prices, may discourage potential power plant owners from commencing the development of new power plants in this area thereby reducing potential new business opportunities for us.
We believe that we have deployed industry-accepted security measures and technology to securely maintain confidential and proprietary information retained within our information systems, including compliance with GDPR specifically at APC. However, these measures and technology may not adequately prevent unanticipated security breaches. There can be no assurance that our efforts will prevent these threats.
We believe that we have deployed industry-accepted security measures and technologies to securely maintain confidential and proprietary information retained within our information systems, including compliance with GDPR specifically at APC. However, these measures and technologies may not adequately prevent unanticipated security breaches. There can be no assurance that our efforts will prevent these threats.
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 award stock options, time-based restricted stock units, market-based restricted stock units and performance-based restricted stock units to executives and other key employees (see Note 11 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.
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.
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. - 15 - 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 businesses.
Project backlog amounts may be uncertain indicators of future revenues as project realization may be subject to unexpected adjustments, delays and cancellations. At January 31, 2023, the total value of our project backlog for all of our business units was $0.8 billion.
Project backlog amounts may be uncertain indicators of future revenues as project realization may be subject to unexpected adjustments, delays and cancellations. At January 31, 2024, the total value of our project backlog for all of our business units was $0.8 billion.
As a result of the foregoing, future reported amounts of consolidated revenues, cash flow from operations, net income and earnings per share may vary in an uneven pattern and may not be indicative of the operating results expected for any other fiscal period, thus rendering consecutive quarter comparisons of our consolidated operating results a less meaningful way to assess the growth of our business.
As a result of the foregoing, future reported amounts of consolidated revenues, cash flow from operations, net income and earnings per share may vary in uneven patterns and may not be indicative of the operating results expected for any other fiscal period, thus rendering consecutive quarter comparisons of our consolidated operating results a less meaningful way to assess the growth of our business.
The effects on revenues of changes to the amounts of contract values and estimated costs typically will be recorded as catch-up adjustments when the amounts are known and can be reasonably estimated. These revisions can occur at any time and could be material.
The effects on revenues of changes to the amounts of contract values and estimated costs are recorded as catch-up adjustments when the amounts are known and can be reasonably estimated. These revisions can occur at any time and could be material.
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.
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 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. - 12 - Table of Contents ​ Our actual business and financial results could differ from our estimates, which may impact future profits.
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.
We have successfully built utility-scale solar and wind 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.
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.
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 (i.e., “Brexit”). Such changes may have unfavorable consequences for us.
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.
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 altered several years ago as several significant competitors announced their exit from the market for a variety of reasons.
The loss of key personnel, the inability to complete management transitions without significant loss of effectiveness, or the inability to hire and retain qualified employees in the future could negatively impact our ability to manage our business in the future. Risks Related to an Investment in Our Securities Our acquisition strategy may result in dilution to our stockholders.
The loss of key personnel, the inability to complete management transitions without significant loss of effectiveness, or the inability to hire and retain qualified employees in the future could negatively impact our ability to manage our business in the future. - 22 - Table of Contents Risks Related to an Investment in Our Securities Our acquisition strategy may result in dilution to our stockholders.
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.
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. - 18 - Table of Contents Litigation can involve complex factual and legal questions, and proceedings may occur over several years.
However, as a large number of these same risks exist for our other reportable segments, (1) industrial fabrication and field services, and (2) telecommunications infrastructure services, a review and assessment of the following risk factors should be performed with that in mind.
However, as a large number of these same risks exist for our other reportable segments, (1) industrial construction services, and (2) telecommunications infrastructure services, a review and assessment of the following risk factors should be performed with that in mind.
Although we believe that the customer commitments represented by project backlog are firm, we cannot guarantee that revenues projected by us based on our project backlog at January 31, 2023 will be recognized or will result in profitable operating results. Unsuccessful efforts to develop energy plant projects could result in write-offs and the loss of future business.
Although we believe that the customer commitments represented by project backlog are firm, we cannot guarantee that revenues projected by us based on our project backlog will be recognized or will result in profitable operating results. Unsuccessful efforts to develop energy plant projects could result in write-offs and the loss of future business.
While we believe that our policies and oversight in this area are strong, we cannot provide assurances that our internal controls and procedures always will protect us from the possible reckless or criminal acts committed by our employees or others.
While we believe that our policies and oversight in this area are comprehensive and effective, we cannot provide assurances that our internal controls and procedures always will protect us from the possible reckless or criminal acts committed by our employees or others.
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.
Unresolved disputes with a subcontractor or supplier regarding the scope of work or performance may escalate, resulting in arbitration proceedings or legal actions. - 19 - Table of Contents Unfavorable outcomes of such disputes may also impact contract profitability in an adverse manner.
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.
Our OSHA reportable incident rates, weighted by hours worked for all of our subsidiaries, were 0.43, 0.60, 0.48, 0.55 and 0.40 for the calendar years 2023, 2022, 2021, 2020 and 2019, respectively. Our actual rates were significantly better than the national average rates in our industry (NAICS – 2379) for those years.
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.
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.
In addition, Delaware law limits transactions between us and persons that acquire significant amounts of our stock without approval of our board of directors. ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
In addition, Delaware law limits transactions between us and persons that acquire significant amounts of our stock without approval of our board of directors. - 23 - Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
Impetus for this growth has been provided by various factors including laws and regulations that discourage new fossil-fuel burning power plants, environmental activism, income tax advantages that promote the growth of wind and solar power, the decline in the costs of renewable power plant components and power storage, and the increase in the scale of energy storage capacity.
Impetus for this growth has been provided by various factors including laws and regulations that discourage new fossil-fuel burning power plants, federal support for new carbon-reduction technologies, environmental activism, income tax advantages that promote the growth of solar and wind power, the decline in the costs of renewable power plant components and power storage, and the increase in the scale of energy storage capacity.
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.
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, 2024 and 2023 were $8.4 million and $11.6 million, respectively.
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.
Even though current natural gas prices are extremely low, higher than expected natural gas prices in the future, 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.
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.
In the reference case of the EIA Energy Outlook for 2023, net electricity generation from all renewable power sources is expected to represent approximately 63% of such generation by 2050.
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.
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.
Given the uncertainties associated with the types of customer contracts that we are awarded, it is possible for contract values and actual costs to vary from estimates previously made, which may result in reductions or reversals of previously recorded revenues and profits.
Given the uncertainties associated with the types of customer contracts that we are awarded, it is possible for contract values and actual costs to vary from estimates previously made, which may result in reductions or reversals of previously recorded revenues and profits. Our disclosures of Critical Accounting Policies and Estimates (see Item 7.
In 2010, coal-fired power plants accounted for about 45% of total electricity generation in the U.S. For 2022, coal accounted for approximately 20% of net electricity generation.
In 2010, coal-fired power plants accounted for about 45% of total electricity generation in the U.S. For 2023, coal accounted for approximately 17% of net electricity generation.
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.
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 from unauthorized disclosure.
As of January 31, 2023, the estimated value of future work covered by outstanding performance bonds was approximately $0.6 billion.
As of January 31, 2024, the estimated value of future work covered by outstanding performance bonds was approximately $0.5 billion.
As of January 31, 2023, our executive officers and directors as a group owned approximately 7.3% of our voting shares. In addition, four (4) other stockholders owned approximately 34.6% of our shares in total as of December 31, 2022.
As of January 31, 2024, our executive officers and directors as a group directly owned approximately 7.3% of our voting shares. In addition, four other stockholders owned approximately 30.6% of our shares in total as of December 31, 2023.
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.
This section of our 2024 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” presented at the beginning of this 2024 Annual Report.
However, GILTI has become an unfavorable permanent component of our federal taxable income in the U.S. as the overseas operations have become profitable, and it may become more meaningfully unfavorable to us if our operations in Ireland and the U.K. increase their profitability in the future.
GILTI is an unfavorable permanent component of our federal taxable income in the U.S. when our foreign operations are profitable, and it may become more meaningfully unfavorable to us if our operations in Ireland and the U.K. increase their profitability in the future.
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.
Should the pace of development for renewable energy facilities, including solar and wind power plants, accelerate at faster rates than projected or drive a faster migration from base load to peak load power plants, the number and/or value 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 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.
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. - 20 - Table of Contents Future acquisitions could result in issuances of equity securities that would reduce our stockholders’ ownership interests, the issuance of sizable amounts of debt and the incurrence of contingent liabilities.
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.
Projects that were awarded to us in the past remained in our backlog for extended periods of time as customers experienced project delays. Should any unexpected delay, suspension or termination of the work under such projects occur, our results of operations may be materially and adversely affected.
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.
Our results could be adversely affected by natural disasters, human-made disasters or other catastrophic events. Natural disasters, such as hurricanes, tornadoes, blizzards, floods and other adverse weather conditions; or other catastrophic events such as public health crises, geopolitical conflicts, terrorism and civil disturbances could disrupt our operations or the operations of one or more of our vendors or customers.
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 net amount of electricity generation in the U.S. provided by utility-scale solar and wind facilities continues to rise. Together, such power facilities provided approximately 12%, 13%, and 15% of the net amount of electricity generated by utility-scale power facilities in 2021, 2022 and 2023 respectively.
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.
Future bonding requirements may adversely affect our ability to compete for new energy plant construction projects. 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.
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.
On the other hand, natural-gas fired power plants provided approximately 42% of the electricity generated by utility-scale power plants in the U.S. in 2023, representing an increase of 70% in the amount of electrical power generated by natural gas-fired power plants, which provided approximately 24% of net electricity generation for 2010.
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.
When the general level of economic activity deteriorates, uncertainty about future business prospects increases, prompting clients to potentially delay or cancel projects. This includes new construction projections, maintenance on major power plant components, repairs to damaged or worn equipment or other plant outage work.
Our projects generally provide our customers the right to terminate the existing contract unilaterally at their convenience as long as they compensate us for work already completed and the additional costs incurred by us to terminate corresponding subcontract and equipment orders, demobilize and vacate construction sites. To the best of management’s knowledge, this has not happened to us.
Our projects generally provide our customers the right to terminate the existing contract unilaterally at their convenience as long as they compensate us for work already completed and the additional costs incurred by us to terminate corresponding subcontract and equipment orders, demobilize and vacate construction sites. These costs would most likely be meaningful.
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.
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. - 17 - Table of Contents Factors not specifically discussed in these risk factors 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; ● 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 for estimation purposes that is not representative of current conditions; ● delays or productivity issues caused by weather conditions, or other forces majeure; ● 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.
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.
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.
Our board of directors evaluates our ongoing operational and financial performance in order to determine what role strategically aligned dividends should play in creating shareholder value. Starting in Fiscal 2019, we have paid regular quarterly cash dividends in the amount of $0.25 per share of common stock.
Our board of directors evaluates our ongoing operational and financial performance in order to determine what role strategically aligned dividends should play in creating shareholder value. We have paid regular and special cash dividends in the past.
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 construction of renewable energy projects.
Investors and lenders may be generally unwilling to provide capital for energy projects to increase the domestic production and transmission of oil and natural gas. The election of President Biden resulted in additional regulatory hurdles for fossil-fuel energy facilities.
Investors and lenders may be generally unwilling to provide capital for energy projects to increase the domestic production and transmission of oil and natural gas. The Biden Administration poses additional regulatory hurdles for fossil-fuel energy facilities. The Biden Administration’s approach to environmental regulation poses significant risks to the development and operation of fossil-fuel energy facilities.
Failure to commence or complete construction work as anticipated could have material adverse impacts on our future revenues, profits and cash flows. Work stoppages, union negotiations and other labor problems could adversely affect us. The performance of certain large-scale construction contracts results in the hiring of employees represented by labor unions.
Failure to commence or complete construction work as anticipated by fossil-fuel project owners could have material adverse impacts on our future revenues, profits and cash flows. Work stoppages, union negotiations and other labor problems could adversely affect us.
For Fiscal 2023, Fiscal 2022 and Fiscal 2021, a majority portion of consolidated revenues related to EPC services provided to a single power industry services customer on a project that achived substantial completion during the early part of Fiscal 2024.
During Fiscal 2023 and Fiscal 2022, a majority portion of consolidated revenues related to EPC services provided to a single power industry services customer on a project that achieved substantial completion during the early part of Fiscal 2024. At times, we may be awarded contracts for which commencement of project activities are delayed or cancelled.
We do make sincere efforts to maintain favorable relationships and conduct good-faith negotiations with union officials. However, there can be no assurances that such efforts will eliminate the possibilities of unfavorable conflicts in the future.
The performance of certain large-scale construction contracts results in the hiring of employees in the U.S. and overseas who are represented by labor unions. We make sincere efforts to maintain favorable relationships and conduct good-faith negotiations with union officials. However, there can be no assurances that such efforts will eliminate the possibilities of unfavorable conflicts in the future.
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.
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. In particular, pipeline projects may be delayed by onsite protest demonstrations, indecision by local officials and lawsuits.
We do believe that our business represents a low value target for cyberterrorists as we are not a company in the high technology space and we do not maintain large files of sensitive or confidential personal information. However, we do maintain a cybersecurity insurance policy to help protect ourselves from various types of losses relating to computer security breaches.
We believe that our business represents a low value target for cyberextortionists as we are not a company in the high technology space and we do not maintain large files of sensitive or confidential personal information.
In other cases, project owners may withhold retention and/or contract payments, for which they believe they do not contractually owe us or based on their interpretation of the contract, or even terminate the contract.
In other cases, project owners may withhold retention and/or contract payments they believe they do not contractually owe us, or they believe offset amounts owed to them by us. They may even terminate the contract.
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.
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.
Any divesting transaction could result in a material loss for us. - 22 - Table of Contents In summary, integrating acquired companies may involve unique and significant risks. 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.
In summary, integrating acquired companies may involve unique and significant risks. 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.
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.
Safety is a primary focus of our business and is critical to our reputation. 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.
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.
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.
Among other things, our board of directors may issue up to 500,000 shares of our preferred stock and may determine the price, rights, preferences, privileges and restrictions, including voting and conversion rights, of these shares.
Provisions of our certificate of incorporation and Delaware law could delay, prevent, or make more difficult a merger, tender offer or proxy contest involving us. Among other things, our board of directors may issue up to 500,000 shares of our preferred stock and may determine the price, rights, preferences, privileges and restrictions, including voting and conversion rights, of these shares.
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.
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.
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.
In particular, these types of events could shut down our construction job sites or fabrication facility for indefinite periods of time, disrupt our product supply chain or - 13 - Table of Contents could cause our customers to delay or cancel projects. To the extent any of these events occur, our operations and financial results could be adversely affected.
We also rely on third-party manufacturers or suppliers to provide much of the equipment and most of the materials (such as copper, concrete and steel) needed to complete our construction projects. If we are unable to hire qualified subcontractors or to find qualified equipment manufacturers or suppliers, our ability to successfully complete a project could be adversely impacted.
Certain of the work performed under our energy plant construction contracts is actually performed by third-party subcontractors we hire. We also rely on third-party manufacturers or suppliers to provide much of the equipment and most of the materials (such as copper, concrete and steel) needed to complete our construction projects.
To the extent any of these events occur, our operations and financial results could be adversely affected. The adverse effects of the war in Ukraine have spread globally. The prolonged interruption of the supply of oil and natural gas by Russia to Western European nations has adversely affected the economies of those countries and may further disrupt global supply chains.
The adverse effects of the war in Ukraine have spread globally. The prolonged disruption by Russia of the supply and prices of oil and natural gas provided to Western European nations adversely affected the economies of those countries.
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.
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. 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.
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.
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. The new supplies of natural gas generally lowered the price of natural gas in the U.S. and reduced its volatility.
In addition, the nature of our business results in project owners, subcontractors and vendors occasionally presenting claims against us for recovery of costs that they incurred in excess of what they expected to incur, or for which they believe they are not contractually liable.
We build large and complex energy plants where design, construction or systems failures can result in substantial injury or damage to third parties. In addition, the nature of our business results in project owners, subcontractors and vendors occasionally presenting claims against us for recovery of costs for which they believe they are not contractually liable.
As disclosed in our Current Report on Form 8-K that we filed on March 10, 2023, we were targeted by a complex criminal scheme earlier in the month, which resulted in fraudulently-induced outbound wire transfers to a third-party account.
As previously disclosed, we were targeted by a complex criminal scheme in March 2023, which resulted in fraudulently-induced outbound wire transfers to a third-party account (see Note 18 to the accompanying consolidated financial statements).
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.
However, 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, - 14 - Table of Contents thus decreasing the overall demand for our EPC services and adversely impacting the financial outlook for our power industry services business.
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.
We may continue to be impacted in varying degrees by the Global Intangible Low Tax Income (“GILTI”) provision based on the results of our foreign operations. 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.
Should future evidence confirm the concerns, the use of fracking may be suspended, limited, or curtailed by additional state and/or federal authorities.
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. Should future evidence confirm the concerns, the use of fracking may be suspended, limited, or curtailed by additional state and/or federal authorities.
The extent to which pandemics will harm us depends on the impact on our customers, supply chains, labor forces and numerous other evolving factors. Continuing disruptions to capacity auctions and corresponding prices could reduce the demand for power plants in our primary business region.
Continuing disruptions to capacity auctions and corresponding prices could reduce the demand for power plants in our primary business region.
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.
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. Although the rules for the Global Minimum Tax provide a framework for its application, countries may incorporate the rules into their laws differently.
Labor shortages, productivity decreases or increased labor costs could impair our ability to maintain our business or grow our revenues. The inability to hire and retain qualified skilled employees in the future, including workers in the construction crafts, could negatively impact our ability to complete our long-term construction contracts successfully.
The inability to hire and retain qualified skilled employees in the future, including workers in the construction crafts, could negatively impact our ability to complete our long-term construction contracts successfully. Our dependence upon third parties to complete many of our contracts may adversely affect our performance under current and future construction contracts.
As a result, the supply of inexpensive natural gas may not be available in the future and the economic viability of gas-fired power plants that we build may be jeopardized. - 18 - Table of Contents The inability of power project developers to receive or to avoid delay in receiving the applicable regulatory approvals relating to energy projects, including new natural gas pipelines, may result in lost or postponed revenues for us.
As a result, the supply of inexpensive natural gas may not be available in the future and the economic viability of gas-fired power plants that we build may be jeopardized.
There can be no assurance that the evaluations of our board of directors will result in the payment of regular or special cash dividends in the future. We may discontinue the repurchase of our common stock in the future. We began to repurchase shares of our common stock on the open market in November 2021.
Since Fiscal 2019, we paid a regular quarterly cash dividend of $0.25 per share of common stock, which was increased to $0.30 per share of common stock for October 2023. There can be no assurance that the evaluations of our board of directors will result in the payment of regular or special cash dividends in the future.

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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, that serves as its headquarters.
ITEM 2. PROPERTIES. We occupy our corporate headquarters in Rockville, Maryland, under a lease 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.
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.
APC owns the top two floors (3,500 square feet) and leases an additional floor (2,000 square feet) of an office building located in Limerick, Ireland, that serves as its headquarters. In addition, APC owns an operations support facility in Nenagh, Ireland, that includes approximately 10,663 square feet of warehouse and a small amount of office space.
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.
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. TRC also leases two offices (2,200 and 1,800 square feet) that are located close to one another in Winterville, North Carolina.
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 ​
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.
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, and warehouse space in Billingham, England. SMC is primarily located in Tracys Landing, Maryland, and leases facilities that include approximately five acres of land, a 2,400 square foot maintenance facility and approximately 3,900 square feet of office space.
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.
SMC also leases office space (3,570 square feet) and warehouse space (11,460 square feet) in Hampton, Virginia. - 25 - Table of Contents We consider the Company’s owned and leased properties to be sufficient for continuation of our operations for the foreseeable future.
Removed
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.
Added
These costs are expensed as incurred and are included substantially in the cost of revenues.
Removed
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.
Removed
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.

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 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 3. LEGAL PROCEEDINGS. Note 10 to the accompanying consolidated financial statements included in Item 8 of Part II of this 2024 Annual Report presents a discussion of our legal matters. In the normal course of business, we may have other pending claims and legal proceedings.
It is our opinion, based on information available at this time, that any other current claim or proceeding will not have a material effect on our consolidated financial statements. PART II
It is our opinion, based on information available at this time, that any other current claim or proceeding will not have a material effect on our consolidated financial statements. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. ​ ​ - 26 - Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
In accordance with the SEC’s Rule 10b5-1, and pursuant to our 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.
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.
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, 2019, 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.
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.
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 6, 2024, we had approximately 52 stockholders of record.
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.
In our reports on Form 10-Q for the first three quarterly periods of Fiscal 2024, we disclosed the number of shares repurchased during each month of the applicable quarter and information related to the costs of the repurchase transactions.
Dividends Since Fiscal 2019, our board of directors has declared and we have paid regular quarterly cash dividends of $0.25 per share, totaling $1.00 per share for each year.
Prior to that increase and since Fiscal 2019, our board of directors declared and we paid regular quarterly cash dividends of $0.25 per share, totaling $1.00 per share for each year. During Fiscal 2021, our board of directors also declared and we paid two special cash dividends of $1.00 per share each.
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.
Also during the month ended January 31, 2024, we repurchased 73,000 shares of common stock in a direct purchase from a director of the Company for an aggregate price of approximately $3.2 million, or $43.50 per share. - 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 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 timing and amount of stock repurchase transactions will depend on market and business conditions, applicable legal and credit requirements and other corporate considerations.
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.
Information related to our share repurchases for the fourth quarter of Fiscal 2024 follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate Dollar ​ ​ ​ ​ ​ ​ Total Number of ​ Value of Shares That May Yet ​ ​ ​ ​ ​ ​ Shares Purchased as Part ​ Be Purchased under the ​ ​ Total Number of ​ Average Price per ​ of Publicly Announced ​ Plans or Programs Period Shares Repurchased Share Paid Plans or Programs (Dollars in Thousands) November 1 - 30, 2023 ​ 4,881 ​ $ 44.40 ​ 4,881 ​ $ 27,758 December 1 - 31, 2023 ​ 7,721 ​ $ 43.60 ​ 7,721 ​ $ 27,422 January 1 - 31, 2024 ​ 80,125 ​ $ 43.67 ​ 78,117 ​ $ 24,018 Total 92,727 ​ ​ ​ 90,719 ​ ​ ​ In January 2024, we accepted 2,008 shares of our common stock at the average price per share of $47.61 for the exercise price and/or tax withholding in connection with stock option exercises and/or restricted stock unit settlements that occurred during the month.
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.
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. There can be no assurance that these evaluations will result in the payments of cash dividends in the future.
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.
The stock performance shown on the graph is not intended to be indicative of future stock performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended January 31, ​ 2019 2020 2021 2022 2023 2024 Argan, Inc. $ 100.00 $ 102.10 $ 112.11 $ 98.53 $ 106.37 $ 124.16 S&P 500 100.00 121.68 142.67 175.90 161.45 195.06 Dow Jones US Heavy Construction TSM 100.00 115.28 147.95 184.87 237.63 267.42 Unregistered Sales of Equity Securities and Use of Proceeds None. - 28 - Table of Contents ITEM 6. [RESERVED]
Removed
During Fiscal 2021, our board of directors also declared and we paid two special cash dividends of $1.00 per share each, and we issued a statement expressing confidence in the future of our business and satisfaction with the opportunity to return a portion of our accumulated earnings to the stockholders during a year marked by the challenges presented by the COVID-19 pandemic.
Added
This number does not include shareholders for whom shares were held in “street name.” Dividends In September 2023, our board of directors increased our regular quarterly cash dividend by 20% from $0.25 to $0.30 per share of common stock for the cash dividend that was paid in October 2023.
Removed
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.
Added
Share Repurchase Program During Fiscal 2023, our board of directors authorized an increase in our share repurchase program from $100 million to $125 million. The repurchases may occur in the open market or through investment banking institutions, privately-negotiated transactions, or direct purchases.
Removed
The stockholders approved a succession of amendments to the 2011 Plan, a ten-year plan, in subsequent years increasing the number of shares of common stock reserved for issuance thereunder to 2,750,000.
Removed
On June 23, 2020, our stockholders approved the adoption of the Argan, Inc. 2020 Stock Plan (the “2020 Plan”), and the allocation of 500,000 shares of the Company’s common stock for issuance thereunder. The Company’s board of directors may make share-based awards under the 2020 Plan to officers, directors and key employees.
Removed
The 2020 Plan succeeds the 2011 Stock Plan as our authority to make awards pursuant to the 2011 Plan expired in July 2021. The features of the 2020 Plan are similar to those included in the 2011 Plan.
Removed
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.
Removed
All stock options awarded under the 2020 Plan shall have an exercise price per share at least equal to the common stock’s market value on the date of grant. Stock options shall have terms no longer than ten years.
Removed
Typically, stock options are awarded with one-third of each stock option vesting on each of the first three anniversaries of the corresponding award date.
Removed
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.
Removed
(2) Approved plans include the Company’s Stock Plans.
Removed
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.
Removed
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.

Item 7. Management's Discussion & Analysis

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

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We believe that the benefits of natural gas as a source of power are compelling, especially as a complement to the deployment of wind and solar powered energy sources, and that the future long-term prospects for natural gas-fired power plant construction remain generally favorable as natural gas continues to be the primary source for power generation in our country.
We believe that the benefits of natural gas as a source of power are compelling, especially as a complement to the deployment of solar and wind powered energy sources, and that the future long-term prospects for natural gas-fired power plant construction remain generally favorable as natural gas continues to be the primary source for power generation in our country.
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.
While both of these countries are committed to the increase in energy consumption sourced from the sun and wind on the pathway to net zero emissions, there is a recognition that these sources of electrical power are inherently variable.
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.
The future availability of less carbon-intense, higher efficiency and inexpensive 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.
Declining capital costs for solar panels, wind turbines and battery storage, as well as government subsidies like those included in the Inflation Reduction Act (the “IRA”) will result in renewables becoming increasingly cost effective compared with the alternatives when the costs of building new power capacity are considered.
Declining capital costs for solar panels, wind turbines and battery storage, as well as government subsidies like those included in the Inflation Reduction Act of 2022 (the “IRA”), will result in renewables becoming increasingly cost effective compared with the alternatives when the costs of building new power capacity are considered.
It has been stated that the current scramble for electricity, regardless of source, caused by the Russian invasion of Ukraine has clarified that the 100% transition to renewable energy is in the distant future and has prompted, in part, renewed interest in not only carbon capture techniques, but carbon removal technologies as well.
It has been stated that the scramble for electricity, regardless of source, caused by the Russian invasion of Ukraine clarified that the 100% transition to renewable energy is in the distant future and has prompted, in part, renewed interest in not only carbon capture techniques, but carbon removal technologies as well.
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.
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”).
Uncertain Income Tax Positions As we have disclosed in the “Research and Development Tax Credits” section of Note 13 to the accompanying consolidated financial statements, 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 research and development credits available to reduce prior year income taxes.
Uncertain Income Tax Positions As we have disclosed in the “Research and Development Tax Credits” section of Note 12 to the accompanying consolidated financial statements, 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 research and development credits available to reduce prior year income taxes.
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.
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, 2024 are not estimable.
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.
Through TRC, the industrial construction services reportable segment provides primarily field 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.
As is typically required by any surety bond, we would be obligated to reimburse the issuer of any surety bond issued on behalf of a subsidiary for any cash payments made thereunder. The commitments under performance bonds generally end concurrently with the expiration of the related contractual obligation. Not all of our projects require bonding.
As is typically required by any surety bond, we would be obligated to reimburse the issuer of any surety bond provided on behalf of a subsidiary for any cash payments made thereunder. The commitments under performance bonds generally end concurrently with the expiration of the related contractual obligation. Not all of our projects require bonding.
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.
The following discussion summarizes the financial position of Argan, Inc. and its subsidiaries as of January 31, 2024, and the results of their operations for Fiscal 2024 and Fiscal 2023, and should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in Item 8 of this 2024 Annual Report. Please see “Item 7.
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.
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.
Further, to the best of management’s knowledge, the Company has never had a customer terminate a contract with us for convenience.
Further, to the best of management’s knowledge, the Company has never had a customer terminate a material contract with us for convenience.
Therefore, our disclosure in Note 4 of the value of remaining unsatisfied performance obligations on active customer contracts represents an amount based on contracts or orders received from customers that the Company believes are firm and where the parties are acting in accordance with their respective obligations.
Therefore, our disclosure in Note 2 of the value of remaining unsatisfied performance obligations on active customer contracts represents an amount based on contracts or orders received from customers that the Company believes are firm and where the parties are acting in accordance with their respective obligations.
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.
During Fiscal 2022, as described in Note 15 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.
Non-operating activities during Fiscal 2023 used cash to increase the level of our short-term investments, which consist entirely of CDs issued by the Bank, by $59.8 million and to make capital expenditures in the amount of $3.4 million.
Non-operating activities during Fiscal 2023 used cash to increase the level of our short-term investments, which consisted entirely of CDs issued by the Bank, by $59.8 million and to make capital expenditures in the amount of $3.4 million.
In addition, we have been directing certain business development efforts to winning projects for the erection of utility-scale wind farms and solar fields and for the construction of hydrogen-based energy and other industrial projects in order to diversify the sources of revenues.
In addition, we have been directing meaningful business development efforts to winning projects for the erection of utility-scale solar fields and wind farms and for the construction of hydrogen-based energy and other industrial projects in order to diversify the sources of revenues.
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.
We have successfully completed alternative 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.
These aspirational goals may increase the risk of a new power plant becoming a stranded asset long before the end of its otherwise useful economic life, which is a risk that potential equity capital providers may be unwilling to take.
These aspirational goals may increase the risk of a new power plant becoming a stranded asset long before the end of its otherwise useful economic life, a risk that potential equity capital providers may be unwilling to take.
The paper indicates that the growth rate of electricity demand in the PJM footprint is likely to increase from electrification (i.e., shifts to electric-powered automobiles, electric appliances, etc.) coupled with the proliferation of high-demand data centers in the region.
The study indicates that the growth rate of electricity demand in the PJM footprint is likely to increase from electrification (i.e., shifts to electric-powered automobiles, electric appliances, etc.) coupled with the proliferation of high-demand data centers in the region.
The components of our deferred taxes are presented in Note 13 to the accompanying consolidated financial statements. These amounts reflect differences in the periods in which certain transactions are recognized for financial and income tax reporting purposes.
The components of our deferred taxes are presented in Note 12 to the accompanying consolidated financial statements. These amounts reflect differences in the periods in which certain transactions are recognized for financial and income tax reporting purposes.
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.
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 national focus on infrastructure improvements, biotechnology advancements and energy storage have resulted in firms that are focused on these trends recently choosing TRC to participate in major construction projects in the region.
The national focus on infrastructure improvements, biotechnology advancements, energy storage and clean water have resulted in firms that are focused on these trends recently choosing TRC to participate in major construction projects in the region.
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.
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 back-up power, when the sun is not shining or the wind is not blowing, for extended periods of time and without certain harmful air emissions.
We are committed to the rational pursuit of new construction projects, including those with overseas locations and unique deployments of power-generation turbines, and the future growth of our revenues. This may result in additional decisions to make investments in the development and/or ownership of new projects.
The EPC Competitive Landscape We are committed to the rational pursuit of new construction projects, including those with overseas locations and unique deployments of power-generation turbines, and the future growth of our revenues. This may result in additional decisions to make investments in the development and/or ownership of new projects.
As we have no debt service, our fixed asset acquisitions in a reporting period are typically low, and net liquidity includes our short-term investments, our levels of working capital are not subjected to the volatility that affects our levels of cash and cash equivalents.
As we have no debt service, as our fixed asset acquisitions in a reporting period are typically low, and as our net liquidity includes our short-term investments and available-for-sale investments, our levels of working capital are not subjected to the volatility that affects our levels of cash and cash equivalents.
Major provisions cover the determination of which goods and services are distinct and represent separate performance obligations, the appropriate treatment of variable consideration, and the evaluation of whether revenues should be recognized at a point in time or over time.
Major provisions cover the determination of which goods and services are distinct and represent - 44 - Table of Contents separate performance obligations, the appropriate treatment of variable consideration, and the evaluation of whether revenues should be recognized at a point in time or over time.
GAAP, we do not believe that this measure should be considered in isolation from, or as a substitute for, the results of our operations presented in accordance with US GAAP that are included in our consolidated financial statements.
GAAP, we do not believe that this measure should be considered in isolation from, or as a substitute for, the results of our operations presented in accordance with U.S. GAAP that are included in our consolidated financial statements.
Current accounting guidance indicates that the value of future work that companies are contractually obligated to perform pursuant to active customer contracts should not be included in the disclosure of remaining unsatisfied performance obligations when the corresponding contracts include termination for convenience clauses without substantial penalties accruing to the customers upon such terminations.
The value of future work that companies are contractually obligated to perform pursuant to active customer contracts should not be included in the disclosure of remaining unsatisfied performance obligations when the corresponding contracts include termination for convenience clauses without substantial penalties accruing to the customers upon such terminations.
Additionally, the reduction in the balance of contract liabilities in the amount of $31.6 million represented a use of cash during the year to fund, on a net basis, the satisfaction of performance obligations on certain of our contracts.
Additionally, the reduction in the balance of contract liabilities in the amount of $31.6 million represented a use of cash during Fiscal 2023 to fund, on a net basis, the satisfaction of performance obligations on certain of our contracts.
Further, we believe that EBITDA is widely used by investors and analysts as a measure of performance. However, as EBITDA is not a measure of performance calculated in accordance with U.S.
Further, we believe that EBITDA is widely used by investors and analysts as a measure of performance. - 43 - Table of Contents However, as EBITDA is not a measure of performance calculated in accordance with U.S.
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.
Contractual Obligations During Fiscal 2024, 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, 2024 was less than $20.0 million. The two largest items in this estimate, operating leases and deferred compensation, are amounts included as liabilities in our consolidated balance sheet.
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 EPC or equipment installation services contracts to us.
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.
We believe that cash on hand, our cash equivalents, cash that will be provided from the maturities of short-term investments and other debt securities 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 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.
Hydrogen Power It is important to note that the plans for certain natural gas-fired power plant projects include the integration of hydrogen-burning capabilities.
Through SMC Infrastructure Solutions, the telecommunications infrastructure services segment provides project management, construction, installation and maintenance services to commercial, local government and federal government customers primarily in the Mid-Atlantic region of the U.S.
Through SMC, which conducts business as SMC Infrastructure Solutions, the telecommunications infrastructure services segment provides project management, construction, installation and maintenance services to commercial, local government and federal government customers primarily in the Mid-Atlantic region of the U.S.
Prior to deconsolidation, however, the VIE settled on amounts owed for certain impaired development costs and recognized a gain of $1.6 million, all of which was attributed to the non-controlling interest.
In Fiscal 2023, prior to deconsolidation, the VIE settled on amounts owed for certain impaired development costs and recognized a gain of $1.6 million, all of which was attributed to the non-controlling interest.
At January 31, 2023, we were compliant with the covenants of the Credit Agreement, as amended.
At January 31, 2024, we were compliant with the covenants of the Credit Agreement, as amended.
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.
We 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.
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 PJM, which as indicated above operates a capacity market to ensure long-term grid reliability by securing the appropriate amount of power supply resources needed to meet predicted future energy demands.
Capacity Auctions 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 PJM, which operates a capacity market to ensure long-term grid reliability by securing the appropriate amount of power supply resources needed to meet predicted future energy demands in its region.
The increase in the combined level of accounts payable and accrued expenses in the amount of $9.1 million, represented a source of cash for the year.
The increase in the combined level of accounts payable and accrued expenses in the amount of $9.1 million, represented a source of cash for Fiscal 2023.
Subsequent to January 31, 2023, we obtained an insurance policy covering our tax position in the event that we would suffer a loss related to our research and development claims. Deferred Tax Assets and Liabilities Our consolidated balance sheet as of January 31, 2023 includes net deferred tax assets in the amount of approximately $3.7 million.
In Fiscal 2024, we obtained an insurance policy covering our tax position in the event that we would suffer a loss related to our research and development claims. Deferred Tax Assets and Liabilities Our consolidated balance sheet as of January 31, 2024 includes net deferred tax assets in the amount of approximately $2.3 million.
As of January 31, 2023 and 2022, the estimated amounts of the Company’s unsatisfied bonded performance obligations, covering all of its subsidiaries, were approximately $0.6 billion and $0.2 billion, respectively. In addition, as of January 31, 2023 and 2022, the outstanding amounts of bonds covering other risks, including warranty obligations related to completed activities, were not material.
As of January 31, 2024 and 2023, the estimated amounts of our unsatisfied bonded performance obligations, covering all of its subsidiaries, were approximately $0.5 billion and $0.6 billion, respectively. In addition, as of January 31, 2024 and 2023, the outstanding amounts of bonds covering other risks, including warranty obligations related to completed activities, were not material.
At this time, we believe that the historically strong earnings performance of our power industry services segment will provide sufficient income during the years when most of our other deferred tax assets become deductible in the U.S. in order for us to realize the applicable temporary income tax differences.
The IRS has not completed the examination of our refund request. At this time, we believe that the historically strong earnings performance of our power industry services segment will provide sufficient income during the years when most of our other deferred tax assets become deductible in the U.S. in order for us to realize the applicable temporary income tax differences.
For example, during Fiscal 2023, the highly publicized probe by the U.S. Commerce Department into whether Chinese solar manufacturers were circumventing trade tariffs on solar panels had the effect of halting imports of key components needed to build new solar farms and effectively brought most of the U.S. solar industry to a temporary standstill.
For example, during Fiscal 2023, the highly publicized probe by the U.S. Commerce Department into whether Chinese solar manufacturers were circumventing trade tariffs on solar panels had the effect of halting imports of key components needed to build new solar farms.
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.
On the other hand, natural-gas fired power plants provided approximately 42% of the electricity generated by utility-scale power plants in the U.S. in 2023, representing an increase of 70% in the amount of electrical power generated by natural gas-fired power plants, which provided approximately 24% of net electricity generation for 2010.
During Fiscal 2023, APC UK continued a turnaround of its operating results such that we believe it has a stable earnings history upon which APC UK can reliably forecast future profitable operations.
During Fiscal 2023, APC UK continued a turnaround of its operating results such that we believed it had a stable earnings history upon which APC UK could reliably forecast future profitable operations.
The increase by the U.S. in its use of nuclear power for electricity generation could have unfavorable effects on the demand for new natural gas-fired and additional renewable energy facilities in the future.
The increase by the U.S. in its use of nuclear power for electricity generation could have unfavorable effects on the demand for new natural gas-fired and additional renewable energy facilities in the future, but could provide balance-of-plant construction opportunities for GPS.
We also used $82.8 million cash in financing activities during Fiscal 2023, including $68.2 million used to repurchase shares of common stock pursuant to our Share Repurchase Plan (see Item 5 in Part II of this Annual Report), and $14.0 million used for the payment of regular cash dividends.
We also used $82.8 million cash in financing activities during Fiscal 2023, including $68.2 million used to repurchase shares of common stock pursuant to our Share Repurchase Plan, and $14.0 million used for the payment of regular cash dividends.
It has been reported that the average age of the active plants in the coal-fired fleet approximates 45 years old with an average life span of 50 years; the last coal-fired power plant built in the U.S. was constructed in 2015.
For 2023, coal fueled approximately 17% of net electricity generation. It has been reported that the average age of the active plants in the coal-fired fleet approximates 45 years old with an average life span of 50 years; the last coal-fired power plant built in the U.S. was constructed in 2015.
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, and the unfavorable effects of our settlement with the IRS related to research and development credits at an amount lower than we had previously recorded; partially offset by the favorable recognition of tax benefits related to research and development tax credits recognized in the current year and the partial reversal of a valuation allowance of deferred tax assets related to prior year NOLs of APC’s subsidiary in the U.K.
This tax rate differed from the statutory federal tax rate of 21% due primarily to the effects of state income taxes, nondeductible executive compensation and the unfavorable effects of our settlement with the IRS related to research and development credits at an amount lower than we had previously recorded, partially offset by the favorable recognition of tax benefits related to research and development tax credits recognized in the current year and favorable deferred tax adjustments.
The foregoing discussion in this “Market Outlook” does focus on the state of the domestic power market as the EPC services business of GPS provides the predominant amount of our revenues. However, overseas power markets provide important new power construction opportunities for us especially across Ireland and the U.K.
International Power Markets The foregoing discussion in this “Market Outlook” has focused on the state of the domestic power market as the EPC services business of GPS historically provides the predominant portion of our revenues. However, overseas power markets provide important new power construction opportunities for APC especially across Ireland and the U.K.
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.
For Fiscal 2024, our overall operating performance resulted in net income attributable to our stockholders in the amount of $32.4 million, or $2.39 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.
Two of the power plants, the Poolbeg and Ringsend FlexGen Power Plants, will be located on the Poolbeg Peninsula, and the Corduff FlexGen Power Plant will be built in nearby Goddamendy.
Two of the power plants, the Poolbeg and Ringsend FlexGen Power Plants, are located on the Poolbeg Peninsula, and the Corduff FlexGen Power Plant is located in nearby Goddamendy.
New gas-fired power plants incorporate major advances in gas-fired turbine technologies that have provided increased power plant efficiencies while providing the quick starting capabilities and the reliability that are necessary to balance the inherent intermittencies of wind and solar power plants.
Natural gas is relatively clean burning, generally cost-effective, dependable and abundant. New gas-fired power plants incorporate major advances in gas-fired turbine technologies that have provided increased power plant efficiencies while providing the quick starting capabilities and the reliability that are necessary to balance the inherent intermittencies of solar and wind power plants.
Based on the forecast that rests on the belief that meaningful investments will be made in the power infrastructure of the U.K. for the foreseeable future, we now believe it is more likely than not that a certain portion of the deferred tax asset will be realized.
Based on the forecast, which rested on the belief that meaningful investments would be made in the power infrastructure of the U.K. for the foreseeable future, we believed that it was more likely than not that a certain portion of the deferred tax asset would be realized.
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.
Project Backlog At January 31, 2024 and 2023, our consolidated project backlog amount of $0.8 billion consisted substantially of the projects of the power industry services reporting segment.
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.
Selling, General and Administrative Expenses Selling, general and administrative expenses were $44.4 million and $44.7 million for Fiscal 2024 and Fiscal 2023, respectively, representing 7.7% and 9.8% of consolidated revenues for the corresponding periods, respectively.
In May 2022, APC entered into engineering and construction services contracts with Ireland’s Electricity Supply Board (“ESB”) to construct three 65 MW aero-derivative gas turbine flexible generation power plants in and around the city of Dublin, Ireland.
ESB FlexGen Peaker Plants In May 2022, APC entered into engineering and construction services contracts with the ESB to construct three 65 MW aero-derivative gas turbine flexible generation power plants in and around the city of Dublin, Ireland (“ESB FlexGen Peaker Plants”).
As of January 31, 2023, there were no restrictions with respect to intercompany payments between GPS, TRC, APC, SMC and the holding company. During Fiscal 2022, our balance of cash and cash equivalents declined by a net amount of $16.2 million. The net amount of cash provided by operating activities for Fiscal 2022 was $28.4 million.
As of January 31, 2024, there were no restrictions with respect to intercompany payments between GPS, TRC, APC, SMC and the holding company. During Fiscal 2023, our balance of cash and cash equivalents declined by a net amount of $176.6 million. The net amount of cash used in operating activities for Fiscal 2023 was $30.1 million.
Due primarily to the consolidated pre-tax book income reported for Fiscal 2023 in the amount of $46.0 million, we reported income tax expense in the amount of $11.3 million for the year. For Fiscal 2022, we reported consolidated pre-tax book income of $47.1 million and recorded income tax expense in the amount of $11.4 million.
Due primarily to the consolidated pre-tax book income reported for Fiscal 2024 in the amount of $48.9 million, we reported income tax expense in the amount of $16.6 million for the year. For Fiscal 2023, we reported consolidated pre-tax book income of $46.0 million and recorded income tax expense in the amount of $11.3 million.
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.
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.
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.
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. However, the headwinds confronting a significant resurgence in the pace of planning new developments of gas-fired power plants are strong.
Significant acquired companies will be operated in a manner that we believe will best provide long-term and enduring value for our stockholders. Overview Operating Results Consolidated revenues for Fiscal 2023 were $455.0 million, which represented a decrease of $54.4 million, or 10.7%, from consolidated revenues of $509.4 million reported for Fiscal 2022.
Significant acquired companies will be operated in a manner that we believe will best provide long-term and enduring value for our stockholders. Overview Operating Results Consolidated revenues for Fiscal 2024 were $573.3 million, which represented an increase of $118.3 million, or 26.0%, from consolidated revenues of $455.0 million reported for Fiscal 2023.
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.
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.
This combined cycle power station will consist of two Siemens Energy SGT6-8000H gas fired, high efficiency, combustion turbines with two heat recovery steam generators and a single steam turbine, and contract completion is scheduled for the end of Fiscal 2026.
This combined cycle power station will consist of two Siemens Energy SGT6-8000H gas-fired, high efficiency, combustion turbines with two heat recovery steam generators and a single steam turbine. Project completion is scheduled for early in the year ending January 31, 2027.
As a result, during the three-month period ended July 31, 2022, we made an unfavorable adjustment to income tax expense for Fiscal 2023 in the amount of $6.2 million.
As a result, we made an unfavorable adjustment to income tax expense for Fiscal 2023 in the amount of $6.2 million.
In the reference case of its Annual Energy Outlook 2023, the Energy Information Administration (“EIA”) projects that economic growth paired with increasing electrification in end-user sectors will result in the stable growth of electricity demand in the U.S. through 2050.
In the reference case of its most recently published Annual Energy Outlook released in March 2023, the EIA projects that economic growth paired with increasing electrification in end-user sectors will result in notable growth of electricity demand in the U.S. through 2050.
EIA projects that new wind and photovoltaic solar capacity will continue to be added to the utility-scale power fleet in the U.S. at a brisk pace substantially attributable to declines in the amount of renewable power plant component and power storage costs, an increase in the scale of energy storage capacity (i.e., battery farms and other energy storage technologies), the availability of valuable tax credits and the overall political commitment to renewable energy.
EIA projects that new wind and photovoltaic solar capacity will continue to be added to the utility-scale power fleet in the U.S. at a brisk pace substantially attributable to declines in the amount of renewable power plant component and power storage costs, an increase in the scale of energy storage capacity (i.e., battery farms and other energy storage technologies), the availability of valuable tax credits and the overall political commitment to renewable energy. - 33 - Table of Contents The surge in renewable energy is propelled by significant factors, including a nearly 90% reduction in solar power costs and a two-thirds decrease in onshore wind costs between 2009 and 2023.
The net amount of this additional income tax benefit, which we recorded in Fiscal 2021, was $4.4 million. We have made the appropriate filing with the IRS requesting carryback refunds of income taxes paid in prior years.
The net amount of this additional income tax benefit, which we recorded in Fiscal 2021, was $4.4 million. We have made the appropriate filings with the IRS requesting carryback refunds of income taxes paid in prior years. With the enactment of the CARES Act, the asset amount, which totals $12.7 million, was moved to income taxes receivable.
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.
Outlook for Natural Gas-Fired Power Plants Despite the headwinds, 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.
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 Regulatory Landscape We believe that significant uncertainty relates to the policies of the current U.S. 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.
Power grids are feeling the strain as the U.S. makes the historic transition from conventional power plants fueled by coal and natural gas to cleaner forms of energy such as wind and solar power, and aging nuclear plants are slated for retirement.
The strain on power grids mounts as the U.S. makes the historic transition from conventional power plants fueled by coal and natural gas to renewable forms of energy such as solar and wind power.
As a result, we filed amended federal income tax returns for those years, including research and development tax credits in the total amount of $5.8 million.
As a result, we filed amended federal income tax returns for those years, including research and development tax credits in the total amount of $5.8 million. With the application of current accounting guidance, we have recognized approximately 59% of this benefit.
Other Income, Net For Fiscal 2023 and Fiscal 2022, the net amounts of other income were $4.3 million and $2.6 million, respectively, which represented an increase of 69.7% between the comparable periods.
Other Income, Net For Fiscal 2024 and Fiscal 2023, the net amounts of other income were $12.5 million and $4.3 million, respectively, which represented an increase of 188.0% between the comparable periods.
Coal-fired and old gas-fired power generation facilities are retiring at a rapid pace due to government and private sector policies as well as economics. The risk is that these retirements may outpace the construction of new power-generating facilities as PJM’s interconnection queue includes primarily intermittent and limited-duration renewable energy resources.
Coal-fired and old gas-fired power generation facilities are being retired at a rapid pace, possibly creating the risk that such retirements may outpace the construction of new power-generating facilities as PJM’s interconnection queue includes primarily intermittent and limited-duration renewable energy resources.
Together, such power facilities provided approximately 12%, 13% and 15% of the net amount of electricity generated by utility-scale power facilities in 2020, 2021 and 2022, respectively.
Solar and Wind Power The net amount of electricity generation in the U.S. provided by utility-scale solar photovoltaic and wind facilities continues to rise. Together, such power facilities provided approximately 12%, 13% and 15% of the net amount of electricity generated by utility-scale power facilities in 2021, 2022 and 2023, respectively.
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 net amount of cash provided by operating activities for Fiscal 2024 was $116.9 million. Our net income for Fiscal 2024, adjusted favorably by the net amount of non-cash income and expense items, represented a source of cash in the total amount of $38.9 million.
Lenders, who have become more wary of funding oil-related ventures as environmental, social and governance ideals influence investment decisions, may be generally unwilling to provide capital for energy projects to increase the domestic production and transmission of oil and natural gas. In addition, a recent announcement by Chubb Insurance may signal new difficulties for certain oil and gas projects.
Lenders, who have become more wary of funding fossil-fuel ventures as environmental, social and governance ideals influence financing decisions, may be generally unwilling to provide capital for energy projects to increase the domestic production and transmission of oil and natural gas.
In particular, the insurance underwriter will require oil and gas industry clients to implement plans to reduce methane emissions, that are among the most severe greenhouse gases, and will not provide insurance coverage for oil and gas projects in government-protected conservation areas that do not allow for sustainable use. - 33 - Table of Contents We believe that significant uncertainty relates to the policies of the current U.S.
In addition, insurance underwriters may require oil and gas industry clients to implement plans to reduce methane emissions, that are among the most severe greenhouse gases, and will not provide insurance coverage for oil and gas projects in government-protected conservation areas that do not allow for sustainable use.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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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.
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.
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.
In the “Risk Factors” section of this 2024 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.
We attempt to include the anticipated amounts of price increases or decreases in the costs of our bids. In times of increased supply cost volatility, we may take other steps to reduce our risks. For example, we may hold quotes related to materials in our industrial fabrication and field services segment for very short periods.
We attempt to include the anticipated amounts of price increases or decreases in the costs of our bids. In times of increased supply cost volatility, we may take other steps to reduce our risks. For example, we may hold quotes related to materials in our industrial construction services segment for very short periods.
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.
While 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 impact project owners’ confidence in commencing new work which may adversely affect our expected levels of revenues until the supply chain disruptions substantially dissipate. ITEM 8.
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.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See the Index to the Consolidated Financial Statements on page 55 of this 2024 Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.
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.
The effects of translation are recognized in accumulated other comprehensive 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.
For major fixed price contracts in our power industry services segment, we may mitigate material cost risks by procuring the majority of the equipment and construction supplies during the early phases of a project. The profitability of our active jobs has not suffered meaningfully from the periodic global surges in non-residential construction material costs.
For major fixed price contracts in our power industry services segment, we may mitigate material cost risks by procuring the majority of the equipment and construction supplies during the early phases of a project.
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.
As of January 31, 2024, we had no outstanding borrowings under our financing arrangements with the Bank (see Note 8 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 SOFR plus 1.6%.
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).
It assumes that our consolidated balance sheet as of January 31, 2024 remains constant, and no further actions are taken to alter our existing interest rate sensitivity, including reinvestments (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 ​ $ 10,565 ​ $ — ​ $ 10,565 Up 200 basis points ​ ​ 7,043 ​ ​ — ​ ​ 7,043 Up 100 basis points ​ 3,522 ​ — ​ 3,522 Down 100 basis points ​ ​ (3,522) ​ ​ — ​ ​ (3,522) Down 200 basis points ​ ​ (7,043) ​ ​ — ​ ​ (7,043) Down 300 basis points ​ (10,565) ​ — ​ (10,565) 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).
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.
Treasury notes and a U.S. corporate debt security (see Note 3 of the accompanying consolidated financial statements). As of January 31, 2024, the weighted average number of days remaining until maturity for the certificates of deposit, U.S. Treasury notes and U.S. corporate debt security was 393 days.
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.
To illustrate the potential impact of changes in the overall interest rate associated with our investable cash balance at January 31, 2024 on our annual results of operations, we present the following hypothetical analysis.
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%.
The weighted average annual interest rate of our certificates of deposit of $105.0 million, the money market fund balance of $126.6 million, the U.S. Treasury notes face value of $95.0 million and the U.S. corporate debt security face value of $9.2 million was 5.1%.
Our operations have been challenged by the well-publicized global supply chain disruptions.
The profitability of our active jobs has not suffered meaningfully from the periodic global surges in non-residential construction material costs. - 48 - Table of Contents Our operations have been challenged by the well-publicized global supply chain disruptions.
Removed
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.
Added
During Fiscal 2024, Fiscal 2023 and Fiscal 2022, we did not enter into any material derivative financial instruments for trading, speculation or other purposes that would expose us to market risk. We maintain a substantial amount of our temporarily investable cash in certificates of deposit, a money market fund, U.S.

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