[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section details Argan, Inc.'s unaudited condensed consolidated financial statements and management's analysis [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Presents unaudited condensed consolidated financial statements and detailed notes for Q1 2020 and 2019 [Condensed Consolidated Statements of Earnings](index=3&type=page&id=Condensed%20Consolidated%20Statements%20of%20Earnings) Net loss significantly reduced in Q1 2020 due to increased revenues and a shift to gross profit Condensed Consolidated Statements of Earnings (Three Months Ended April 30, $ thousands) | Metric | Three Months Ended April 30, 2020 ($ thousands) | Three Months Ended April 30, 2019 ($ thousands) | | :---------------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | REVENUES | 60,148 | 49,544 | | Cost of revenues | 56,139 | 70,570 | | GROSS PROFIT (LOSS) | 4,009 | (21,026) | | Selling, general and administrative expenses | 10,344 | 9,588 | | Impairment loss | — | 2,072 | | LOSS FROM OPERATIONS | (6,335) | (32,686) | | Other income, net | 1,088 | 2,252 | | LOSS BEFORE INCOME TAXES | (5,247) | (30,434) | | Income tax benefit | 4,454 | 521 | | NET LOSS | (793) | (29,913) | | Net loss attributable to non-controlling interests | (30) | (113) |\ | NET LOSS ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC. | (763) | (29,800) | | Basic Net Loss Per Share | (0.05) | (1.91) | | Diluted Net Loss Per Share | (0.05) | (1.91) | | Cash Dividends Per Share | 0.25 | 0.25 | [Condensed Consolidated Balance Sheets](index=4&type=page&id=Condensed%20Consolidated%20Balance%20Sheets) Cash, equivalents, and total assets increased, while liabilities rose and equity slightly decreased Condensed Consolidated Balance Sheets (as of period end, $ thousands) | Metric | April 30, 2020 (Unaudited, $ thousands) | January 31, 2020 (Note 1, $ thousands) | | :---------------------------- | :-------------------------------------- | :------------------------------------- | | Cash and cash equivalents | 262,927 | 167,363 | | Short-term investments | 100,617 | 160,499 | | Accounts receivable, net | 22,212 | 37,192 |\ | Contract assets | 33,035 | 33,379 |\ | Other current assets | 36,945 | 23,322 |\ | TOTAL CURRENT ASSETS | 455,736 | 421,755 |\ | Property, plant and equipment, net | 22,124 | 22,539 |\ | Goodwill | 27,943 | 27,943 |\ | Other purchased intangible assets, net | 4,776 | 5,001 |\ | Deferred taxes | — | 7,894 |\ | Right-of-use and other assets | 2,385 | 2,408 |\ | TOTAL ASSETS | 512,964 | 487,540 |\ | Accounts payable | 34,322 | 35,442 |\ | Accrued expenses | 28,959 | 35,907 |\ | Contract liabilities | 109,825 | 72,685 |\ | TOTAL CURRENT LIABILITIES | 173,106 | 144,034 |\ | Deferred taxes | 320 | — |\ | Other noncurrent liabilities | 2,638 | 2,476 |\ | TOTAL LIABILITIES | 176,064 | 146,510 |\ | TOTAL STOCKHOLDERS' EQUITY | 335,149 | 339,249 |\ | Non-controlling interests | 1,751 | 1,781 |\ | TOTAL EQUITY | 336,900 | 341,030 |\ | TOTAL LIABILITIES AND EQUITY | 512,964 | 487,540 | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=page&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Details changes in equity from net loss, currency, stock compensation, options, and dividends Condensed Consolidated Statements of Stockholders' Equity (Three Months Ended April 30, $ thousands) | Item | Three Months Ended April 30, 2020 ($ thousands) | Three Months Ended April 30, 2019 ($ thousands) | | :-------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Balances, February 1 | 341,030 | 394,372 | | Net loss | (763) | (29,800) | | Foreign currency translation loss | (246) | (1,054) | | Stock compensation expense | 642 | 413 | | Stock option exercises | 177 | 1,567 | | Cash dividends | (3,910) | (3,895) | | Balances, April 30 | 336,900 | 361,490 | [Condensed Consolidated Statements of Cash Flows](index=5&type=page&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow significantly improved in Q1 2020, boosting cash and cash equivalents Condensed Consolidated Statements of Cash Flows (Three Months Ended April 30, $ thousands) | Cash Flow Activity | Three Months Ended April 30, 2020 ($ thousands) | Three Months Ended April 30, 2019 ($ thousands) | | :-------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Net cash provided by (used in) operating activities | 40,187 | (36,382) | | Net cash provided by investing activities | 59,316 | 7,015 | | Net cash used in financing activities | (3,733) | (2,328) | | EFFECTS OF EXCHANGE RATE CHANGES ON CASH | (206) | (235) | | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 95,564 | (31,930) | | CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 167,363 | 164,318 | | CASH AND CASH EQUIVALENTS, END OF PERIOD | 262,927 | 132,388 | [Notes to Condensed Consolidated Financial Statements](index=7&type=page&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes explain business, accounting policies, revenue, financial instruments, and segment performance [NOTE 1 – DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION](index=7&type=page&id=NOTE%201%20%E2%80%93%20DESCRIPTION%20OF%20THE%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) Argan operates through subsidiaries in power, industrial, and telecom services; statements are unaudited per SEC rules - Argan, Inc. conducts operations through wholly-owned subsidiaries: Gemma Power Systems (GPS), The Roberts Company (TRC), Atlantic Projects Company (APC), and Southern Maryland Cable (SMC)[15](index=15&type=chunk) - Business segments include power industry services (GPS and APC), industrial fabrication and field services (TRC), and telecommunications infrastructure services (SMC)[15](index=15&type=chunk) - The condensed consolidated financial statements are unaudited and prepared under SEC rules, condensing certain US GAAP disclosures, and should be read in conjunction with the annual Form 10-K[18](index=18&type=chunk)[19](index=19&type=chunk) [NOTE 2 – REVENUES FROM CONTRACT WITH CUSTOMERS](index=8&type=page&id=NOTE%202%20%E2%80%93%20REVENUES%20FROM%20CONTRACT%20WITH%20CUSTOMERS) Revenue from long-term contracts, TeesREP project loss and COVID-19 suspension, RUPO at **$761.8 million** - Revenue recognition follows a five-step model, primarily over time for long-term construction contracts (fixed-price or time-and-materials) using the percentage-of-completion method[26](index=26&type=chunk)[28](index=28&type=chunk) - The TeesREP project incurred a **$27.6 million** **net loss** in Q1 2019, with an additional **$2.7 million** **net loss** recorded in Q1 2020, bringing the **total expected loss** at completion to approximately **$36.2 million**[37](index=37&type=chunk)[38](index=38&type=chunk)[110](index=110&type=chunk) - Construction on the TeesREP project was suspended on March 24, 2020, due to the COVID-19 pandemic, with approximately **90%** of subcontracted work completed[40](index=40&type=chunk)[112](index=112&type=chunk) Consolidated Revenues by Geographic Area (Three Months Ended April 30) | Geographic Area | 2020 ($ thousands) | 2019 ($ thousands) | | :------------------ | :----------------- | :----------------- | | United States | 48,865 | 39,766 | | United Kingdom | 10,296 | 5,644 | | Republic of Ireland | 987 | 4,003 | | Other | — | 111 | | **Totals** | **60,148** | **49,544** | - **Remaining Unsatisfied Performance Obligations** (RUPO) were **$761.8 million** at April 30, 2020, with an estimated **36%** expected to be recognized in the final three quarters of fiscal year ending January 31, 2021[42](index=42&type=chunk) [NOTE 3 – CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS](index=11&type=page&id=NOTE%203%20%E2%80%93%20CASH,%20CASH%20EQUIVALENTS%20AND%20SHORT-TERM%20INVESTMENTS) Company holds significant cash and short-term investments, with much of it exceeding insured limits - A **significant amount** of cash and cash equivalents is invested in a mutual fund with net assets in high-quality money market instruments[46](index=46&type=chunk) - Short-term investments consist solely of certificates of deposit (CDs) from Bank of America, with weighted average initial maturities of **187 days** (April 30, 2020) and **165 days** (January 31, 2020)[47](index=47&type=chunk) - The weighted average annual interest rate of the CDs was **1.8%** at both April 30 and January 31, 2020[47](index=47&type=chunk) [NOTE 4 – ACCOUNTS AND NOTES RECEIVABLE](index=11&type=page&id=NOTE%204%20%E2%80%93%20ACCOUNTS%20AND%20NOTES%20RECEIVABLE) Credit extended based on customer financial condition; **$24.5 million** in receivables tied to a legal dispute - Outstanding invoices and unbilled costs from one former customer totaled **$24.5 million** as of April 30, 2020, with recovery dependent on the resolution of a legal dispute[48](index=48&type=chunk) - **Expected credit losses** were **insignificant** as of April 30, 2020, and February 1, 2020[49](index=49&type=chunk) [NOTE 5 – PURCHASED INTANGIBLE ASSETS](index=12&type=page&id=NOTE%205%20%E2%80%93%20PURCHASED%20INTANGIBLE%20ASSETS) **$2.1 million** goodwill impairment for APC in Q1 2019; other goodwill and intangibles detailed - An **impairment loss** of **$2.1 million** was recorded in Q1 2019 for APC's goodwill due to a **significant contract loss**[50](index=50&type=chunk) - Goodwill balances for GPS and TRC were **$18.5 million** and **$9.5 million**, respectively, at April 30, 2020, and January 31, 2020, with **no changes** during the three-month periods[50](index=50&type=chunk) Purchased Intangible Assets (Net Amount at April 30, 2020) | Asset Type | Net Amount ($ thousands) | | :------------------- | :----------------------- | | Trade names | 3,564 | | Process certifications | 700 | | Customer relationships | 512 | | **Totals** | **4,776** | [NOTE 6 – FINANCING ARRANGEMENTS](index=12&type=page&id=NOTE%206%20%E2%80%93%20FINANCING%20ARRANGEMENTS) **$50.0 million** revolving loan facility with **$9.3 million** in outstanding LCs, no borrowings, and covenant compliance - The company has a Credit Agreement providing a **$50.0 million** revolving loan facility available until May 31, 2021, with interest at 30-day LIBOR plus **2.0%**[52](index=52&type=chunk) - As of April 30, 2020, outstanding credit under the Credit Agreement was approximately **$9.3 million** (primarily related to the TeesREP project), with **no borrowings**[52](index=52&type=chunk) - The company was **in compliance** with all financial covenants of the Credit Agreement as of April 30 and January 31, 2020[53](index=53&type=chunk) [NOTE 7 – COMMITMENTS](index=12&type=page&id=NOTE%207%20%E2%80%93%20COMMITMENTS) Commitments include operating leases, performance bonds, parent guarantees, and assurance warranties - Operating leases primarily cover office space, expiring through May 2024, with a weighted average lease term of **33 months** and a discount rate of **4.0%** as of April 30, 2020[55](index=55&type=chunk)[57](index=57&type=chunk) Future Minimum Lease Payments for Operating Leases (April 30, 2020) | Year | Amount ($ thousands) | | :------------------ | :------------------- | | Remainder of 2021 | 941 | | 2022 | 790 | | 2023 | 344 | | 2024 | 178 | | 2025 | 26 | | **Total lease payments** | **2,279** | | Less interest portion | 123 | | **Present value of lease payments** | **2,156** | | Less current portion | 1,593 | | **Non-current portion** | **563** | - Argan has provided a **parent company performance guarantee** and caused the Bank to issue letters of credit for the TeesREP project on behalf of APC[62](index=62&type=chunk) - A **financial guarantee** of **$3.6 million** was provided on behalf of GPS to an original equipment manufacturer, supporting a new EPC services contract award[63](index=63&type=chunk) - **Assurance-type warranties** are provided for construction contracts, typically **9-24 months**, with accruals for estimated future costs included in accrued expenses[64](index=64&type=chunk) [NOTE 8 – LEGAL CONTINGENCIES](index=14&type=page&id=NOTE%208%20%E2%80%93%20LEGAL%20CONTINGENCIES) GPS sued Exelon in January 2019 for breach of contract and withheld payments; litigation is ongoing - GPS **filed a lawsuit** against Exelon in January 2019 for breach of contract and failure to remedy conditions impacting the schedule and costs of a gas-fired power plant project[66](index=66&type=chunk) - Exelon **terminated the EPC contract** and withheld payments despite the project being nearly complete, asserting GPS failed to fulfill obligations[66](index=66&type=chunk) - Litigation activities in Fiscal 2021 have focused on pre-trial preparations, with potential delays in discovery due to COVID-19 restrictions[67](index=67&type=chunk) [NOTE 9 – STOCK-BASED COMPENSATION](index=14&type=page&id=NOTE%209%20%E2%80%93%20STOCK-BASED%20COMPENSATION) Company uses 2011/2020 Stock Plans; Q1 2020 expense increased, **$3.6 million** unrecognized costs remain - The 2011 Stock Plan allows awards of nonqualified stock options, incentive stock options, and restricted/unrestricted stock to officers, directors, and key employees[68](index=68&type=chunk) - The board approved the 2020 Stock Plan in April 2020, pending stockholder approval, allocating **500,000 shares**, with features similar to the 2011 Plan[70](index=70&type=chunk) - **Stock compensation expense** was **$0.6 million** for Q1 2020, up from **$0.4 million** in Q1 2019[74](index=74&type=chunk) - As of April 30, 2020, **$3.6 million** in **unrecognized compensation cost** related to outstanding stock awards is expected to be expensed over the next three years[74](index=74&type=chunk) Weighted Average Assumptions for Black-Scholes Option-Pricing Model (Three Months Ended April 30) | Assumption | 2020 | 2019 | | :---------------------- | :---- | :---- | | Dividend yield | 3.0% | 2.0% | | Expected volatility | 30.0% | 34.0% | | Risk-free interest rate | 0.5% | 2.4% | | Expected life (in years)| 3.4 | 3.3 | [NOTE 10 – INCOME TAXES](index=16&type=page&id=NOTE%2010%20%E2%80%93%20INCOME%20TAXES) Significant Q1 2020 income tax benefit from CARES Act NOL carryback; R&D credits under IRS review Income Tax Benefit (Three Months Ended April 30, $ thousands) | Metric | 2020 ($ thousands) | 2019 ($ thousands) | | :--------------------- | :----------------- | :----------------- | | Income tax benefit | 4,454 | 521 | - The CARES Act enabled a carryback of the Fiscal 2020 **net operating loss** (approximately **$38.5 million**) to Fiscal 2015, resulting in an estimated **$4.2 million** rate **income tax benefit** recorded in Q1 2020[80](index=80&type=chunk)[163](index=163&type=chunk) - **Unrecognized income tax benefits** related to research and development credits totaled **$5.0 million** as of April 30, 2020, with ongoing IRS examinations for Fiscal 2016 and 2017[83](index=83&type=chunk)[86](index=86&type=chunk) - Balances of **income tax refunds and prepaid income taxes** in other current assets were approximately **$21.4 million** at April 30, 2020, up from **$14.5 million** at January 31, 2020[84](index=84&type=chunk) [NOTE 11 – NET LOSS PER SHARE ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.](index=18&type=page&id=NOTE%2011%20%E2%80%93%20NET%20LOSS%20PER%20SHARE%20ATTRIBUTABLE%20TO%20THE%20STOCKHOLDERS%20OF%20ARGAN,%20INC.) Basic and diluted net loss per share improved to **$(0.05)** in Q1 2020; all equivalents were antidilutive Net Loss Per Share Attributable to Stockholders (Three Months Ended April 30, $) | Metric | 2020 ($) | 2019 ($) | | :------------------------------------ | :------- | :------- | | Basic Net Loss Per Share | (0.05) | (1.91) | | Diluted Net Loss Per Share | (0.05) | (1.91) | - All common stock equivalents (**1,483,151 shares** in 2020 and **1,190,913 shares** in 2019) were considered **antidilutive** due to the **net loss** incurred in each period[89](index=89&type=chunk) [NOTE 12 – CASH DIVIDENDS](index=18&type=page&id=NOTE%2012%20%E2%80%93%20CASH%20DIVIDENDS) Regular quarterly cash dividend of **$0.25 per share** paid in April 2020 and 2019 - A regular quarterly **cash dividend** of **$0.25 per share** of common stock was declared and paid on April 30, 2020, and April 30, 2019[90](index=90&type=chunk) [NOTE 13 – CUSTOMER CONCENTRATIONS](index=18&type=page&id=NOTE%2013%20%E2%80%93%20CUSTOMER%20CONCENTRATIONS) Significant customer concentration, with power services driving most revenues and receivables - The power industry services segment accounted for **81%** of consolidated revenues in Q1 2020, a **significant increase** from **41%** in Q1 2019[91](index=91&type=chunk) - Two power industry service customers accounted for **61%** and **17%** of consolidated revenues, respectively, for the three months ended April 30, 2020[92](index=92&type=chunk) - One major customer's accounts receivable balance represented **33%** of the consolidated balance as of April 30, 2020[93](index=93&type=chunk) [NOTE 14 – SEGMENT REPORTING](index=18&type=page&id=NOTE%2014%20%E2%80%93%20SEGMENT%20REPORTING) Disaggregated financial data for Power, Industrial, and Telecom segments, detailing revenues, costs, and assets Segment Operating Results (Three Months Ended April 30, 2020, $ thousands) | Metric | Power Services | Industrial Services | Telecom Services | Other | Totals | | :----------------------------- | :------------- | :------------------ | :--------------- | :---- | :----- | | Revenues | 48,612 | 9,744 | 1,792 | — | 60,148 | | Cost of revenues | 45,710 | 8,982 | 1,447 | — | 56,139 | | Gross profit | 2,902 | 762 | 345 | — | 4,009 | | Selling, general and administrative expenses | 5,928 | 2,123 | 488 | 1,805 | 10,344 | | Loss from operations | (3,026) | (1,361) | (143) | (1,805) | (6,335) | Segment Assets (April 30, 2020, $ thousands) | Metric | Power Services | Industrial Services | Telecom Services | Other | Totals | | :---------------- | :------------- | :------------------ | :--------------- | :------ | :------ |\ | Current assets | 316,753 | 22,916 | 2,434 | 113,633 | 455,736 |\ | Current liabilities | 163,674 | 8,184 | 793 | 455 | 173,106 |\ | Goodwill | 18,476 | 9,467 | — | — | 27,943 |\ | Total assets | 348,577 | 46,411 | 4,013 | 113,963 | 512,964 | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=20&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management analyzes Q1 2020 and 2019 financials, operations, market, COVID-19 impacts, and accounting policies [Business Description](index=20&type=page&id=Business%20Description) Argan is a holding company operating through subsidiaries in power, industrial, and telecom services - Argan is a holding company operating through GPS and APC (power industry services), TRC (industrial fabrication and field services), and SMC (telecommunications infrastructure services)[105](index=105&type=chunk) - The company seeks additional acquisitions and/or investments in companies with potential for profitable growth across various industrial focuses[106](index=106&type=chunk) [Overview](index=20&type=page&id=Overview) Q1 2020 results impacted by TeesREP loss and COVID-19; revenues increased, net loss significantly reduced - The TeesREP project continued to incur **net loss**es, with an additional **$2.7 million** recorded in Q1 2020, bringing the **total expected loss** to **$36.2 million**. Construction was suspended on March 24, 2020, due to COVID-19[110](index=110&type=chunk)[112](index=112&type=chunk) - The ramp-up of the Guernsey Power Station project favorably impacted Q1 2020 revenues and consolidated cash flow[114](index=114&type=chunk) - Consolidated revenues for Q1 2020 **increased by 21.4%** to **$60.1 million** (from **$49.5 million** in Q1 2019), primarily due to GPS's increasing revenues[115](index=115&type=chunk) - All businesses were adversely impacted by the COVID-19 outbreak, leading to project postponements (APC), challenges in managing projects (GPS), and project delays (TRC, SMC)[116](index=116&type=chunk) - Consolidated **net loss attributable to stockholders** was **$(0.8) million**, or **$(0.05) per diluted share**, for Q1 2020, a **significant improvement** from **$(29.8) million**, or **$(1.91) per diluted share**, in Q1 2019[121](index=121&type=chunk) [Major Customer Contracts](index=22&type=page&id=Major%20Customer%20Contracts) GPS secured new EPC contracts, building a **$1.3 billion** backlog, but project starts face delays - GPS entered into new EPC services contracts for the **920 MW** Brooke County Power plant and the **650 MW** Killingly Energy Center, with construction scheduled to start in 2020 pending financial close[122](index=122&type=chunk) - **Project backlog** was approximately **$1.3 billion** at both April 30 and January 31, 2020[126](index=126&type=chunk) - **Delays in new business awards** and project starts are attributed to capital market uncertainty, PJM Interconnection LLC regulatory changes (raising bids for subsidized resources), and increased environmental activism against fossil-fuel projects[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) - The aggregate rated electrical output for signed EPC services contracts is approximately **7.3 gigawatts** with an aggregate contract value exceeding **$3.0 billion**[126](index=126&type=chunk) [Market Outlook](index=23&type=page&id=Market%20Outlook) Favorable natural gas power market outlook despite COVID-19 generation decline; fewer EPC competitors - In 2019, natural gas-fired power plants generated **38.4%** of total US electric power (up from **35.2%** in 2018), while wind and solar combined for **10.8%** (up from **9.9%**), and coal **declined to 23.5%** (from **27.4%**)[133](index=133&type=chunk) - The EIA forecasts a **5% decline** in total US electric power generation in 2020 due to COVID-19, with coal-fired generation falling **25%**, natural gas remaining relatively flat, and renewables growing **11%**[136](index=136&type=chunk) - Long-term EIA outlook (2020) predicts natural gas-fired power generating capacity to **increase by 67%** by 2050, while coal and nuclear capacity are expected to decline significantly[137](index=137&type=chunk) - The competitive landscape for EPC services in natural gas-fired power plant construction has **fewer competitors**, with some exiting the market or avoiding fixed-price contracts[138](index=138&type=chunk) - The company is **committed to pursuing new construction projects** and is willing to make investments in project development/ownership to secure related EPC services contracts, leveraging its strong balance sheet[140](index=140&type=chunk) [Impacts of the COVID-19 Pandemic on Our Business Operations](index=25&type=page&id=Impacts%20of%20the%20COVID-19%20Pandemic%20on%20Our%20Business%20Operations) COVID-19 caused project delays and revenue decline, but CARES Act provided tax benefits - Overseas operations (APC) experienced **postponement of power plant outage/maintenance projects** in Ireland, temporary furloughs, and suspension of the TeesREP project, leading to a **~25% decline in APC's Q1 2020 revenues**[143](index=143&type=chunk)[144](index=144&type=chunk) - US projects, like the Guernsey Power Station, **continued construction** under health and safety restrictions, with GPS monitoring supply-chain issues[145](index=145&type=chunk) - TRC and SMC revenues were **negatively impacted by project delays** attributable to the restrictive COVID-19 business environment[147](index=147&type=chunk) - Lower interest rates during the pandemic **reduced cash investment returns**, but the CARES Act allowed a **net operating loss** (NOL) carryback, providing a **favorable income tax benefit**[148](index=148&type=chunk) - Internal controls over financial reporting remained **materially effective** despite the shift to remote work arrangements[149](index=149&type=chunk) [Comparison of the Results of Operations for the Three Months Ended April 30, 2020 and 2019](index=26&type=page&id=Comparison%20of%20the%20Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20April%2030,%202020%20and%202019) Q1 2020 net loss reduced by revenue growth and lower costs; tax benefit from CARES Act NOL carryback Operating Results Comparison (Three Months Ended April 30, $ thousands) | Metric | 2020 | 2019 | Change | % Change | | :---------------------------------------------- | :------ | :------ | :------ | :------- | | REVENUES | 60,148 | 49,544 | 10,604 | 21.4 | | Power industry services | 48,612 | 20,203 | 28,409 | 140.6 | | Industrial fabrication and field services | 9,744 | 27,069 | (17,325)| (64.0) | | Telecommunications infrastructure services | 1,792 | 2,272 | (480) | (21.1) | | COST OF REVENUES | 56,139 | 70,750 | (14,611)| (20.7) | | GROSS PROFIT (LOSS) | 4,009 | (21,026)| 25,035 | N/M | | Selling, general and administrative expenses | 10,344 | 9,588 | 756 | 7.9 | | Impairment loss | — | 2,072 | (2,072) | (100.0) | | LOSS FROM OPERATIONS | (6,335) | (32,686)| 26,351 | 80.6 | | Other income, net | 1,088 | 2,252 | (1,164) | (51.7) | | LOSS BEFORE INCOME TAXES | (5,247) | (30,434)| 25,187 | 82.8 | | Income tax benefit | 4,454 | 521 | 3,933 | 755.9 | | NET LOSS ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC. | (763) | (29,800)| 29,037 | 97.4 | - The power industry services segment's revenues **increased by 140.6%** to **$48.6 million** in Q1 2020, primarily due to the Guernsey Power Station construction, while industrial fabrication and telecommunications services saw declines[153](index=153&type=chunk)[154](index=154&type=chunk)[156](index=156&type=chunk) - Consolidated **gross profit** of **$4.0 million** in Q1 2020 (**6.7% of revenues**) contrasts with a **gross loss** of **$21.0 million** in Q1 2019, which included a **$27.6 million net loss** from the TeesREP project[157](index=157&type=chunk)[158](index=158&type=chunk) - Other income, net, **decreased by 51.7%** due to a **significant drop in interest rates** affecting investment returns[161](index=161&type=chunk) - The **income tax benefit** of **$4.5 million** in Q1 2020 primarily reflects a **$4.2 million benefit** from the CARES Act's **net operating loss carryback** provision[162](index=162&type=chunk)[163](index=163&type=chunk) [Liquidity and Capital Resources as of April 30, 2020](index=28&type=page&id=Liquidity%20and%20Capital%20Resources%20as%20of%20April%2030,%202020) Liquidity improved with increased cash and operating cash flow, driven by contract liabilities and tax refund Cash and Working Capital (as of period end, $ thousands) | Metric | April 30, 2020 | January 31, 2020 | | :---------------------- | :------------- | :--------------- | | Cash and cash equivalents | 262,900 | 167,400 | | Working capital | 282,600 | 277,700 | - **Net cash provided by operating activities** was **$40.2 million** for Q1 2020, a **significant improvement** from cash used in operations in Q1 2019[167](index=167&type=chunk) - Sources of cash included a **temporary increase in contract liabilities** (**$37.1 million**) and a **reduction in accounts receivable** (**$15.0 million**)[167](index=167&type=chunk) - An **expected federal income tax refund** of **$12.3 million** from the **NOL carryback** is included in other current assets[167](index=167&type=chunk) - The company's Credit Agreement provides a **$50.0 million** revolving loan facility, with **$9.3 million** in outstanding letters of credit and **no borrowings** as of April 30, 2020[173](index=173&type=chunk) - Management decided to temporarily maintain larger balances of cash and cash equivalents to assure **optimum liquidity** and **mitigate market risks** during the COVID-19 pandemic[180](index=180&type=chunk) [Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA")](index=30&type=page&id=Earnings%20before%20Interest,%20Taxes,%20Depreciation%20and%20Amortization%20(%22EBITDA%22)) EBITDA significantly improved in Q1 2020, reflecting better operating cash flow performance EBITDA (Three Months Ended April 30, $ thousands) | Metric | 2020 | 2019 | | :---------------------------------------------- | :------ | :------ | | Net loss, as reported | (793) | (29,913)| | Income tax benefit | (4,454) | (521) | | Depreciation | 937 | 829 | | Amortization of purchased intangible assets | 225 | 299 | | **EBITDA** | **(4,085)** | **(29,306)**| | EBITDA of non-controlling interests | (30) | (115) | | **EBITDA attributable to the stockholders of Argan, Inc.** | **(4,055)** | **(29,191)**| Reconciliation of EBITDA to Net Cash Provided by (Used in) Operating Activities (Three Months Ended April 30, $ thousands) | Item | 2020 | 2019 | | :---------------------------------------- | :------ | :------ | | EBITDA | (4,085) | (29,306)| | Current income tax benefit | 12,668 | 780 | | Stock option compensation expense | 642 | 413 | | Impairment loss | — | 2,072 | | Other non-cash items | 328 | 25 | | Decrease (increase) in accounts receivable| 14,980 | (12,049)| | (Increase) decrease in other assets | (13,600)| 3,808 | | Decrease in accounts payable and accrued expenses | (8,230) | (10,497)| | Change in contracts in progress, net | 37,484 | 8,372 | | **Net cash provided by (used in) operating activities** | **40,187**| **(36,382)**| [Critical Accounting Policies](index=31&type=page&id=Critical%20Accounting%20Policies) Critical accounting policies involve subjective judgments; no material changes occurred in Q1 2020 - **Critical accounting policies** include revenue recognition on long-term construction contracts, income tax reporting, accounting for business combinations, valuation of goodwill and other long-lived assets, employee stock options, and significant claims/legal matters[186](index=186&type=chunk) - **No material changes** in the application of **critical accounting policies** occurred during the three-month period ended April 30, 2020[186](index=186&type=chunk) [Recently Issued Accounting Pronouncements](index=31&type=page&id=Recently%20Issued%20Accounting%20Pronouncements) Reviewed FASB ASUs 2019-12 and 2016-13; neither expected to materially affect financials - ASU 2019-12, Simplifying the Accounting for Income Taxes, effective February 1, 2021, is **not expected to alter** the company's current accounting for income taxes[187](index=187&type=chunk) - ASU 2016-13, Measurement of Credit Losses on Financial Instruments, adopted February 1, 2020, did **not affect** the company's consolidated financial statements[188](index=188&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=31&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Market risks include interest rates and commodity prices; no borrowings, LIBOR transition not material - The company had **no outstanding borrowings** under its **$50.0 million** revolving loan facility as of April 30, 2020[190](index=190&type=chunk) - The discontinuation of LIBOR at the end of 2021 is **not expected to have significant effects** on the company's financial arrangements or reporting[191](index=191&type=chunk) Hypothetical Impact of Interest Rate Changes on Pre-tax Loss (April 30, 2020, $ thousands) | Basis Point Change | Net Decrease (Increase) in Loss (pre-tax) | | :----------------- | :---------------------------------------- | | Up 300 | 509 | | Up 200 | 339 | | Up 100 | 170 | | Down 100 | (170) | | Down 175 | (288) | - The annual yield on money market funds **decreased significantly** from **1.49%** at January 31, 2020, to **0.19%** at April 30, 2020, due to lower interest rates, reducing investment returns[193](index=193&type=chunk) - The company is subject to commodity price fluctuations (copper, concrete, steel, fuel) but generally does not hedge, attempting to include anticipated price changes in its bids for fixed-price contracts[195](index=195&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=32&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls were effective; no significant changes in internal control reported - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were **effective** as of April 30, 2020, providing reasonable assurance for timely and accurate reporting[196](index=196&type=chunk) - **No significant changes** in internal control over financial reporting during the fiscal quarter ended April 30, 2020[197](index=197&type=chunk) [PART II. OTHER INFORMATION](index=32&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides other information, including legal proceedings, risk factors, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=32&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Refers to Note 8 for legal proceedings; other claims not expected to materially affect financials - The status of a specific legal proceeding is discussed in Note 8 to the condensed consolidated financial statements[198](index=198&type=chunk) - Management believes that any other current claims or legal proceedings will **not have a material adverse effect** on the company's condensed consolidated financial statements[198](index=198&type=chunk) [ITEM 1A. RISK FACTORS](index=33&type=page&id=ITEM%201A.%20RISK%20FACTORS) No material changes to risk factors previously disclosed in the Annual Report - **No material changes** to the risk factors disclosed in the company's Annual Report have occurred[199](index=199&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=33&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) No unregistered sales of equity securities or use of proceeds to disclose [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=33&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) No defaults upon senior securities to disclose [ITEM 4. MINE SAFETY DISCLOSURES](index=33&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company [ITEM 5. OTHER INFORMATION](index=33&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No other information to disclose [ITEM 6. EXHIBITS](index=33&type=section&id=ITEM%206.%20EXHIBITS) Lists all exhibits filed with Form 10-Q, including CEO/CFO certifications and XBRL documents - Exhibits include certifications of the Chief Executive Officer (**31.1**, **32.1**) and Chief Financial Officer (**31.2**, **32.2**), along with XBRL Instance, Schema, Calculation, Labels, Presentation, and Definition Documents[199](index=199&type=chunk) [SIGNATURES](index=33&type=section&id=SIGNATURES) Report duly signed by Chairman/CEO and SVP/CFO/Treasurer/Secretary of Argan, Inc - The report was **duly signed** by Rainer H. Bosselmann, Chairman of the Board and Chief Executive Officer, and David H. Watson, Senior Vice President, Chief Financial Officer, Treasurer and Secretary, on June 9, 2020[200](index=200&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the Fiscal Year Ended January 31, 2020 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from _____________ to _____________ Commission File Number 001-31756 ARGAN, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 13-1947195 (State or Other Jurisdiction ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended October 31, 2019 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT For the Transition Period from to Commission File Number 001-31756 (Exact Name of Registrant as Specified in Its Charter) Delaware 13-1947195 (State or Other Jurisdiction of Inc ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended July 31, 2019 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT For the Transition Period from to Commission File Number 001-31756 (Exact Name of Registrant as Specified in Its Charter) Delaware 13-1947195 (State or Other Jurisdiction of Incorp ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended April 30, 2019 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT For the Transition Period from to Commission File Number 001-31756 (Exact Name of Registrant as Specified in Its Charter) Delaware 13-1947195 (State or Other Jurisdiction of Incor ...

Part I [Business](index=4&type=section&id=ITEM%201.%20BUSINESS) Argan, Inc operates through four subsidiaries, with the power industry services segment being its primary revenue driver - Argan, Inc operates as a holding company with four main subsidiaries: Gemma Power Systems (GPS), Atlantic Projects Company (APC), The Roberts Company (TRC), and Southern Maryland Cable (SMC)[5](index=5&type=chunk)[6](index=6&type=chunk) Revenue Contribution by Segment (Fiscal Years 2017-2019) | Segment | Fiscal 2019 Revenue | Fiscal 2018 Revenue | Fiscal 2017 Revenue | % of Total (2019) | % of Total (2018) | % of Total (2017) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Power Industry Services (GPS & APC) | $367.8 million | $814.5 million | $586.6 million | 76% | 91% | 87% | | Industrial Fabrication & Field Services (TRC) | $101.7 million | $65.3 million | $79.0 million | 21% | 7% | 12% | | Telecommunications Infrastructure (SMC) | $12.7 million | $13.0 million | $9.4 million | 3% | 1% | 1% | - The company's project backlog increased significantly to approximately **$1.1 billion** as of January 31, 2019, compared to **$0.4 billion** as of January 31, 2018[13](index=13&type=chunk) Large Power Plant Projects as of January 31, 2019 | Current Project | Location | Facility Size | FNTP Received | Scheduled Completion | | :--- | :--- | :--- | :--- | :--- | | Exelon West Medway II Facility | Massachusetts | 200 MW | April 2017 | Discontinued Mar 2019 | | TeesREP Biomass Power Station | Teesside (England) | 299 MW | May 2017 | 2019 | | InterGen Spalding OCGT Expansion | Spalding (England) | 298 MW | November 2017 | 2019 | | NTE Reidsville Energy Center | North Carolina | 475 MW | Not Received | Not Established | | Guernsey Power Station | Ohio | 1,875 MW | Limited Notice | 2022 | - The company has a high customer concentration, with the top four power industry customers accounting for **51%** of consolidated revenues in Fiscal 2019, down from **84%** in Fiscal 2018[24](index=24&type=chunk)[25](index=25&type=chunk) [Risk Factors](index=10&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces significant business, market, and operational risks, including contract dependency, backlog uncertainty, and fixed-price contract exposures - The company's financial performance is highly dependent on securing new large contracts, and a failure to replace completed projects could adversely affect future revenues and profits[46](index=46&type=chunk)[47](index=47&type=chunk) - Project backlog, valued at **$1.1 billion** at January 31, 2019, is an uncertain indicator of future revenue due to potential cancellations, scope modifications, and customer-driven delays[57](index=57&type=chunk)[58](index=58&type=chunk) - The company operates primarily under long-term, fixed-price contracts, which exposes it to risks of cost overruns and reduced profits if costs increase above original estimates[113](index=113&type=chunk)[114](index=114&type=chunk) - International operations, particularly in the UK and Ireland, expose the company to risks from political and economic instability, currency fluctuations, and trade restrictions, including uncertainties related to Brexit[95](index=95&type=chunk)[96](index=96&type=chunk) - The company faces litigation risks, as demonstrated by a lawsuit filed against a project owner in January 2019 for breach of contract, which could impact liquidity and profitability if claims are not recovered[120](index=120&type=chunk)[125](index=125&type=chunk) - A significant portion of voting shares is controlled by executive officers, directors (**8.1%**), and a few large stockholders (**28.1%**), giving them substantial influence over corporate actions[169](index=169&type=chunk) [Unresolved Staff Comments](index=24&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company has no unresolved comments from the SEC staff - There are no unresolved staff comments[174](index=174&type=chunk) [Properties](index=24&type=section&id=ITEM%202.%20PROPERTIES) The company and its subsidiaries operate from a mix of owned and leased properties sufficient for current operations - Key properties include a leased corporate headquarters in Rockville, MD, and an owned office building for GPS in Glastonbury, CT[175](index=175&type=chunk) - Subsidiaries TRC, APC, and SMC utilize a mix of owned and leased facilities, including industrial plants, warehouses, and offices, which are considered sufficient for current operations[176](index=176&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk) [Legal Proceedings](index=24&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company resolved two legal matters in Fiscal 2019 and initiated a new lawsuit against Exelon for breach of contract - A dispute with subcontractor PPS Engineers, Inc was settled in July 2018, resulting in a **$1.4 million gain** for the company in Fiscal 2019[181](index=181&type=chunk)[183](index=183&type=chunk) - GPS settled a dispute with a former subcontractor via binding arbitration in June 2018, paying an award of approximately **$5.2 million** plus interest and fees[184](index=184&type=chunk) - In January 2019, GPS sued Exelon for breach of contract; on March 7, 2019, Exelon terminated the EPC services contract for the nearly complete Exelon West Medway II Facility, and GPS intends to vigorously pursue its claims[185](index=185&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=25&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock (NYSE: AGX) has a consistent dividend policy, and its stock plan was amended to increase share issuance - The company's common stock is traded on the NYSE under the symbol AGX[186](index=186&type=chunk) - During Fiscal 2019, the company declared and paid regular quarterly cash dividends of **$0.25 per share**, for a total of **$1.00 per share** for the year[186](index=186&type=chunk) - The company's 2011 Stock Plan was amended in June 2018, increasing the number of shares reserved for issuance to **2,750,000**[192](index=192&type=chunk) [Selected Financial Data](index=27&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) The company's five-year financial data shows a revenue decline in Fiscal 2019 but significant growth in project backlog Five-Year Selected Financial Data (in thousands, except per share data) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $482,153 | $892,815 | $675,047 | $413,275 | $383,110 | | **Gross Profit** | $82,438 | $149,325 | $146,711 | $99,465 | $83,603 | | **Net Income Attributable to Stockholders** | $52,036 | $72,011 | $70,328 | $36,345 | $30,445 | | **Diluted EPS** | $3.32 | $4.56 | $4.50 | $2.42 | $2.05 | | **Cash Dividends per Share** | $1.00 | $1.00 | $1.00 | $0.70 | $0.70 | | **Total Assets** | $476,648 | $542,669 | $644,488 | $409,791 | $391,193 | | **Project Backlog** | $1,093,960 | $379,486 | $1,010,772 | $1,162,569 | $423,877 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=29&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Fiscal 2019 saw decreased revenue due to project completions, but improved gross margins and a substantial backlog signal future activity [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Fiscal 2019 revenues fell 46.0% due to project completions, though net income decline was softened by a large R&D tax credit Comparison of Operating Results (Fiscal 2019 vs 2018, in thousands) | Item | 2019 | 2018 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $482,153 | $892,815 | ($410,662) | (46.0)% | | Power industry services | $367,812 | $814,544 | ($446,732) | (54.8)% | | Industrial fabrication | $101,673 | $65,303 | $36,370 | 55.7% | | **Gross Profit** | $82,438 | $149,325 | ($66,887) | (44.8)% | | **Income from Operations** | $40,237 | $106,977 | ($66,740) | (62.4)% | | **Net Income Attributable to Stockholders** | $52,036 | $72,011 | ($19,975) | (27.7)% | - The company recorded an income tax benefit of **$4.7 million** in Fiscal 2019, primarily due to recognizing **$16.6 million** in research and development credits from prior years[249](index=249&type=chunk) - A goodwill impairment loss of **$1.5 million** related to the TRC segment was recorded in Fiscal 2019, following a **$0.6 million** loss in Fiscal 2018[248](index=248&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position despite negative operating cash flow from the winding down of major projects Key Liquidity Metrics (as of Jan 31) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $164.3 million | $122.1 million | | Working capital | $334.1 million | $301.8 million | - Net cash used in operating activities was **$112.3 million** in Fiscal 2019, compared to **$72.8 million** used in Fiscal 2018, primarily due to a **$99.7 million** decline in billings in excess of costs as four major projects reached completion[271](index=271&type=chunk)[297](index=297&type=chunk) - The company maintains a **$50.0 million** revolving credit facility, which had **$15.2 million** of credit outstanding (primarily for letters of credit) but no borrowings as of January 31, 2019[278](index=278&type=chunk)[280](index=280&type=chunk) [Critical Accounting Policies](index=42&type=section&id=Critical%20Accounting%20Policies) Key accounting policies involve significant judgment in revenue recognition, goodwill impairment testing, and uncertain tax positions - The company adopted the new revenue recognition standard, ASC Topic 606, on February 1, 2018, which did not have a material impact on retained earnings or reported results for Fiscal 2019[303](index=303&type=chunk) - Goodwill is tested for impairment annually as of November 1, resulting in a **$1.5 million** impairment loss for the TRC reporting unit in Fiscal 2019[319](index=319&type=chunk)[321](index=321&type=chunk)[322](index=322&type=chunk) - The company recognized **$16.6 million** in research and development tax credits in Fiscal 2019 after determining the amount met the 'more-likely-than-not' recognition threshold[325](index=325&type=chunk)[326](index=326&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to interest rate, foreign currency, and commodity price risks, which it does not typically hedge with derivatives - The company had no outstanding borrowings as of January 31, 2019, but its short-term investments are subject to interest rate risk[346](index=346&type=chunk)[347](index=347&type=chunk) - Foreign currency risk exists due to the translation of APC's financial statements from its functional currency (Euros) into US dollars for reporting purposes[349](index=349&type=chunk) - The company is exposed to commodity price fluctuations for materials like copper, concrete, and steel, which can impact profitability on fixed-price contracts[350](index=350&type=chunk) [Financial Statements and Supplementary Data](index=48&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section refers to the consolidated financial statements and supplementary data included from page 50 of the report - This item refers to the Index to the Consolidated Financial Statements located on page 50 of the report[351](index=351&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=48&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reported no changes in or disagreements with its accountants on accounting and financial disclosure matters - None reported[351](index=351&type=chunk) [Controls and Procedures](index=49&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and internal control over financial reporting were effective - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of January 31, 2019[356](index=356&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of January 31, 2019, and this assessment was audited by Grant Thornton LLP, which provided an unqualified opinion[359](index=359&type=chunk)[360](index=360&type=chunk) - No material changes to the internal control over financial reporting occurred during the fourth quarter of Fiscal 2019[362](index=362&type=chunk) [Other Information](index=50&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) There is no other information to report under this item - Not Applicable[365](index=365&type=chunk) Part III [Directors, Executive Compensation, Security Ownership, and Related Matters](index=50&type=section&id=ITEMS%2010-14) Required information on directors, compensation, and ownership is incorporated by reference from the 2019 Proxy Statement - Information for Items 10, 11, 12, 13, and 14 will be incorporated by reference from the Registrant's Proxy Statement for the 2019 Annual Meeting of Stockholders[366](index=366&type=chunk)[367](index=367&type=chunk) Part IV [Exhibits and Financial Statements](index=50&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENTS) This section lists all exhibits filed with the report and references the location of the consolidated financial statements - This section provides a list of all exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and required certifications[367](index=367&type=chunk)[368](index=368&type=chunk)