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)