Argan Annual Report 2020

FY2020 Annual Report · Argan

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ANNUAL REPORT

2 0
2 0

One Church Street
Suite 201
Rockville, MD 20850
301-315-0027
fax 301-315-0064
www.arganinc.com

May 6, 2020

Dear Fellow Stockholders:

This was a difficult year for Argan. We recorded a net loss attributable to our stockholders of $42.7
million, or $(2.73) per diluted share, for the year ended January 31, 2020 (“Fiscal 2020”). This was
primarily driven by the significant contract loss incurred on our biomass plant construction project
(“TeesREP”) during the current year by Atlantic Projects Company (“APC”) in the amount of $33.6
million, which was primarily recognized in the first quarter. Our operating results were also adversely
impacted by a 50% reduction in revenues for Fiscal 2020 as major project starts have been delayed. In
addition, income for Fiscal 2020 reflected goodwill impairment losses in the amount of $4.9 million that
we recorded during the year. Despite this difficult year and the current challenges confronting our
businesses related to the world-wide COVID-19 outbreak, we believe the seeds have been sown that
should grow into a strong future.

Gemma Power Systems has begun construction on the Guernsey Power Station which is the largest
project that we have undertaken in our history. This project has already begun to provide a meaningful
contribution to our quarterly operating results. In addition to the contract for the Guernsey project which
is located in the state of Ohio, we have entered into six other engineering, procurement and construction
(“EPC”) services contracts to build natural gas-fired electricity generation plants. The aggregate rated
electrical output amount for these seven, natural gas-fired power plants is approximately 7.3 gigawatts
and the aggregate contract value represented by these projects exceeds $3.0 billion. Even though
construction on the TeesREP project was suspended on March 24, 2020 due to the COVID-19 pandemic,
we are much closer to concluding this difficult project as APC has completed approximately 90% of its
subcontracted work. We have conservatively maintained a rock-solid balance sheet in anticipation of a
number of the major projects beginning over the next few years. As of January 31, 2020, our cash, cash
equivalents and short-term investments totaled approximately $328 million. Our net liquidity was $278
million; plus, we had no debt.

We believe that our continuing focus on safety and quality, cost containment, the care of our employees
and the satisfaction of our customers with the work that we perform for them has positioned Argan for
future success. Despite the difficulties of Fiscal 2020, over the last four years, we have increased our
tangible book value by over 75% while, at the same time, we paid $4.00 per share in cash dividends to
our stockholders.

Our pipeline of signed EPC service contracts relates to natural gas-fired power plants. The share of the
electrical power generation mix fueled by natural gas, the sun and wind has continued to increase, while
the share fueled by coal has continued its fall. Over the ten-year period ended in 2019, the amount of
utility-scale power generated in the United States by coal fell by 45% while the amount of such power
fueled by natural gas increased by 72%. We expect this trend to be sustained. Renewables may continue
to garner the greater amount of publicity and news headlines, and their utilization is indeed growing at a
meaningful rate. However, grid resilience will demand additional growth in the 24/7 electrical power
provided by highly efficient, reliable, gas-fired power plants and we expect them to continue to be a
preferred choice for replacing large, old, uneconomical and inefficient coal, nuclear and gas-fired plants,
as the country moves forward with meeting its energy needs while combating the causes of harmful
climate change.

In summary, it has been a trying year for us as we have struggled to finish the TeesREP project, as we
have been frustrated by the start-up delays experienced by a number of our pending power plant projects
and now as we manage through the challenges of the COVID-19 pandemic and its effects on our
businesses. However, as explained above, there are a number of reasons to be optimistic for Argan. We
do have very skilled and dedicated employees who are proving to be very adaptable in the changing
circumstances. In the midst of this COVID-19 crisis, we have managed to begin early construction phases
of the Guernsey Power Station Project. We have ample balances of cash and liquid investments and we
have no debt which should enable us to sustain our businesses through any potential prolonged pandemic.
We are poised to begin meaningful project activity on our $3.0 billion pipeline of signed EPC contracts
for power plant projects. We are optimistic that we will receive the go ahead to proceed fully with
construction activities on several of these new projects over the next year and we look forward to a
rebound in our revenues later in the year and into the next.

Finally, we appreciate our loyal stockholders and extend our best wishes for your safety during these
challenging times.

Sincerely,

Rainer H. Bosselmann
Chairman and Chief Executive Officer

 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the Fiscal Year Ended January 31, 2020

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)

ARGAN, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

13-1947195

Delaware

(State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification No.)

13-1947195

(State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification No.)

One Church Street, Suite 201, Rockville, Maryland

(Address of Principal Executive Offices)

20850

(Zip Code)

(301) 315-0027

(Issuer’s Telephone Number, Including Area Code)

(301) 315-0027

(Issuer’s Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act:

Title of Each Class on Which Registered

Name of Each Exchange

Common Stock, $0.15 par value

Title of Each Class on Which Registered

NYSE

Common Stock, $0.15 par value

NYSE

Securities registered under Section 12(g) of the Exchange Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes No 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes No 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the

Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports),

and (2) has been subject to such filing requirements for the past 90 days. Yes  No

Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports),

and (2) has been subject to such filing requirements for the past 90 days. Yes  No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was

required to submit and post such files). Yes  No

pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was

required to submit and post such files). Yes  No

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
UNITED STATES
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FORM 10-K

 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the Fiscal Year Ended January 31, 2020
For the Fiscal Year Ended January 31, 2020
or
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from _____________ to _____________
For the transition period from _____________ to _____________
Commission File Number 001-31756
Commission File Number 001-31756

ARGAN, INC.
(Exact Name of Registrant as Specified in its Charter)
ARGAN, INC.
(Exact Name of Registrant as Specified in its Charter)

Delaware
Delaware
(State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification No.)
(State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification No.)
One Church Street, Suite 201, Rockville, Maryland
One Church Street, Suite 201, Rockville, Maryland
(Address of Principal Executive Offices)
(Address of Principal Executive Offices)

20850
20850

13-1947195
13-1947195

(Zip Code)
(Zip Code)

(301) 315-0027
(301) 315-0027
(Issuer’s Telephone Number, Including Area Code)
(Issuer’s Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act:
Securities registered under Section 12(b) of the Exchange Act:

Common Stock, $0.15 par value
Common Stock, $0.15 par value

Title of Each Class on Which Registered
Title of Each Class on Which Registered

Name of Each Exchange
Name of Each Exchange

NYSE
NYSE

Securities registered under Section 12(g) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No 
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No 
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes  No
Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes  No
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was
required to submit and post such files). Yes  No
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was
required to submit and post such files). Yes  No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller
reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer Accelerated filer  Non-accelerated filer Smaller reporting company

Emerging growth company

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No


If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

The aggregate market value of the common stock held by non-affiliates of the Registrant was approximately $407,001,688 on
July 31, 2019 (the last business day of the Registrant’s second fiscal quarter), based upon the closing price on the NYSE as
reported for that date. Shares of common stock held by each officer and director and by each person who owns 5% or more of
the outstanding common shares have been excluded because such persons may be deemed to be affiliates. The determination
of affiliate status is not necessarily a conclusive determination for other purposes.

Number of shares of common stock outstanding as of April 9, 2020: 15,644,929 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for the 2020 Annual Meeting of Stockholders to be held on June 23, 2020 are
incorporated by reference in Part III.

- 2 -

ARGAN, INC. AND SUBSIDIARIES

2020 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I

PAGE

ITEM 1. BUSINESS ......................................................................................................................................................... - 4 -

ITEM 1A. RISK FACTORS .......................................................................................................................................... - 11 -

ITEM 1B. UNRESOLVED STAFF COMMENTS ...................................................................................................... - 26 -

ITEM 2. PROPERTIES ................................................................................................................................................. - 26 -

ITEM 3. LEGAL PROCEEDINGS ............................................................................................................................... - 27 -

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND

ISSUER PURCHASES OF EQUITY SECURITIES.................................................................................................... - 27 -

ITEM 6. SELECTED FINANCIAL DATA .................................................................................................................. - 29 -

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FININCIAL CONDITION AND RESULTS OF

OPERATIONS ................................................................................................................................................................. - 30 -

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ........................ - 47 -

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ............................................................. - 48 -

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE .......................................................................................................................................... - 48 -

ITEM 9A. CONTROLS AND PROCEDURES............................................................................................................ - 48 -

ITEM 9B. OTHER INFORMATION ........................................................................................................................... - 49 -

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ................................. - 50 -

ITEM 11. EXECUTIVE COMPENSATION ............................................................................................................... - 50 -

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND

RELATED STOCKHOLDER MATTERS ................................................................................................................... - 50 -

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE ...…………………………………………………………………………………………………….- 50 -

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES ............................................................................ - 50 -

ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS ........................................................................................ - 51 -

SIGNATURES ................................................................................................................................................................. - 52 -

PART III

PART IV

- 3 -

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller

reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller

reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer Accelerated filer  Non-accelerated filer Smaller reporting company

Emerging growth company

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No



If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period

for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

The aggregate market value of the common stock held by non-affiliates of the Registrant was approximately $407,001,688 on

July 31, 2019 (the last business day of the Registrant’s second fiscal quarter), based upon the closing price on the NYSE as

reported for that date. Shares of common stock held by each officer and director and by each person who owns 5% or more of

the outstanding common shares have been excluded because such persons may be deemed to be affiliates. The determination

of affiliate status is not necessarily a conclusive determination for other purposes.

Number of shares of common stock outstanding as of April 9, 2020: 15,644,929 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for the 2020 Annual Meeting of Stockholders to be held on June 23, 2020 are

incorporated by reference in Part III.

ARGAN, INC. AND SUBSIDIARIES
2020 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PAGE
PART I

ITEM 1. BUSINESS ......................................................................................................................................................... - 4 -

ITEM 1A. RISK FACTORS .......................................................................................................................................... - 11 -

ITEM 1B. UNRESOLVED STAFF COMMENTS ...................................................................................................... - 26 -

ITEM 2. PROPERTIES ................................................................................................................................................. - 26 -

ITEM 3. LEGAL PROCEEDINGS ............................................................................................................................... - 27 -

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.................................................................................................... - 27 -

ITEM 6. SELECTED FINANCIAL DATA .................................................................................................................. - 29 -

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FININCIAL CONDITION AND RESULTS OF
OPERATIONS ................................................................................................................................................................. - 30 -

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ........................ - 47 -

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ............................................................. - 48 -

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE .......................................................................................................................................... - 48 -

ITEM 9A. CONTROLS AND PROCEDURES............................................................................................................ - 48 -

ITEM 9B. OTHER INFORMATION ........................................................................................................................... - 49 -

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ................................. - 50 -

ITEM 11. EXECUTIVE COMPENSATION ............................................................................................................... - 50 -

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND
RELATED STOCKHOLDER MATTERS ................................................................................................................... - 50 -

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE ...…………………………………………………………………………………………………….- 50 -

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES ............................................................................ - 50 -

ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS ........................................................................................ - 51 -

SIGNATURES ................................................................................................................................................................. - 52 -

PART IV

- 2 -

- 3 -
- 3 -

ITEM 1. BUSINESS.

PART I

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”). Through GPS and APC, we
provide a full range of engineering, procurement, construction, commissioning, operations management, maintenance, project
development, technical and consulting services to the power generation and renewable energy markets. The wide range of
customers includes independent power producers, public utilities, power plant equipment suppliers and global energy plant
construction firms. Including its consolidated joint ventures and variable interest entities (“VIEs”), GPS and APC represent the
Company’s power industry services reportable segment. Through TRC, the industrial fabrication and field services reportable
segment provides on-site services that support maintenance turnarounds, shutdowns and emergency mobilizations for industrial
plants primarily located in the southeast region of the United States (the “US”) and that are based on its expertise in producing,
delivering and installing fabricated steel components such as piping systems, pressure vessels and heat exchangers. 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 US.

Holding Company Structure

Argan was organized as a Delaware corporation in May 1961. We intend to make additional opportunistic acquisitions and/or
investments by identifying companies with significant potential for profitable growth. We may have more than one industrial
focus. We expect that companies acquired in each of these industrial groups will be held in separate subsidiaries that will be
operated in a manner that best provides cash flows for the Company and value for our stockholders. Argan is a holding company
with no operations other than its continuing investments in GPS, APC, TRC and SMC.

Power Industry Services

In most years, 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 thirteen years since it
was acquired by us in 2006. GPS has the proven abilities of designing, building and commissioning large-scale energy projects
in the US. The extensive design, construction, project management, start-up and operating experience of GPS has grown with
installed capacity exceeding 15 gigawatts of mostly domestic power-generating capacity. Our power projects have included
base-load combined-cycle facilities, simple-cycle peaking plants and boiler plant construction and renovation efforts. We also
have experience in the renewable energy sector by providing EPC contracting and other services to the owners of alternative
energy facilities, including biomass plants, wind farms and solar fields. Typically, the scope of work for GPS includes complete
plant engineering and design, the procurement of equipment and construction from site development through electrical
interconnection and plant testing. The durations of our construction projects typically range between 2 to 3 years. However,
the length of certain significant construction projects may exceed three years.

This reportable business segment also includes APC, a company formed in Dublin, Ireland, over 45 years ago, and its affiliated
companies, which we acquired in May 2015. APC provides turbine, boiler and large rotating equipment installation,
commissioning and outage services to original equipment manufacturers, global construction firms and plant owners
worldwide. APC has successfully completed projects in more than 30 countries on six continents. With its presence in Ireland
and its other offices located in the United Kingdom (the “UK”), Hong Kong and Atlanta, APC expanded our operations
internationally for the first time.

The revenues of our power industry services business segment were $135.7 million, $367.8 million and $814.5 million for the
years ended January 31, 2020 (“Fiscal 2020”), 2019 (“Fiscal 2019”) and 2018 (“Fiscal 2018”), respectively, or 57%, 76% and
91% of our consolidated revenues for the corresponding periods, respectively. The substantial portions of the revenues of this
reportable segment reported for all three of these 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. For Fiscal 2020, the amounts of revenues
recognized by GPS and APC were about the same.

During Fiscal 2020, we were focused on securing contracts to build gas-fired power plants that were prominent in our business
development pipeline of new projects as we began the year. Since January 2019, GPS was awarded EPC services contracts for
the construction of the following state-of-the-art combined cycle natural gas-fired power plants:



In January 2019, GPS entered into an EPC services contract to construct a 1,875 MW power plant in Guernsey County,

Ohio. Caithness Energy, L.L.C. (“Caithness”) partnered with Apex Power Group, LLC to develop this project. During

August 2019, GPS received a full notice to proceed (“FNTP”) with engineering, procurement and construction

activities under the contract for this project.

In May 2019, GPS entered into an EPC services contract to construct a 625 MW power plant in Harrison County,

West Virginia. Caithness partnered with Energy Solutions Consortium, LLC (“ESC”) to develop this project. A limited

notice to proceed (“LNTP”) with certain preliminary activities was received from the owners of this project.

Construction activities for the facility are not scheduled to begin until financial close is achieved.

In January 2020, GPS entered into an EPC services contract with Harrison Power, LLC (“Harrison Power”) to

construct a 1,085 MW natural gas-fired power plant in Harrison County, Ohio. The project is being developed by

EmberClear, the parent company of Harrison Power. Construction activities for the facility are scheduled to begin in

2020 once financial close is achieved.

 On March 10, 2020, we announced that in late February 2020 GPS entered into an EPC services contract with ESC

Brooke County Power I, LLC to construct Brooke County Power, a 920 MW natural gas-fired power plant, in Brooke

County, West Virginia. The facility is being developed by ESC and construction activities are scheduled to start in

2020 once financial close is achieved.

 On March 12, 2020, we announced that GPS recently entered into an EPC services contract with NTE Connecticut,

LLC to construct Killingly Energy Center, a 650 MW natural gas-fired power plant, in Killingly, Connecticut. The

facility is being developed by NTE Energy, LLC (“NTE”). Construction activities are scheduled to start in 2020 once

financial close is achieved.

During Fiscal 2020, our APC operation successfully completed a gas-fired power plant construction project in Spalding,

England, and a major turbine refurbishment project for the Moneypoint Power Station, the largest source of electrical power in

Ireland. At January 31, 2020, major project activity for our power industry services business segment included the provision

of EPC services to one other natural gas-fired power plant project and the erection of the boiler, a critical component, for a

biomass-fired power plant.

During Fiscal 2019, GPS reached substantial completion for four natural gas-fired power plant EPC services projects, including

a 1,040 MW facility built in Pennsylvania, a 785 MW facility built in Connecticut and two 475 MW facilities, one built in Ohio

and the other in North Carolina.

During Fiscal 2018, GPS was engaged with ramping-up the construction efforts on the four major power plant EPC projects to

peak activity levels. In addition, it commenced the provision of EPC services on the two other gas-fired facilities and APC

began construction tasks related to the biomass power plant project.

Project Backlog

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. Cancellations or

reductions may occur that would reduce project backlog and our expected future revenues. 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. However, we may include the value of an EPC services contract prior to the receipt of a notice to

proceed if we believe that it is probable that the project will commence within a reasonable timeframe, among other factors. At

January 31, 2020, the project backlog for this reporting segment was approximately $1.3 billion. The comparable backlog

amount as of January 31, 2019 was approximately $1.1 billion.

During August 2019, GPS received a FNTP with EPC activities under a contract to build a state-of-the-art, 1,875 MW,

combined cycle natural gas-fired power plant in Guernsey County, Ohio. The commencement of this project favorably impacted

the consolidated financial statements during the latter portion of Fiscal 2020 resulting in increased revenues for the power

industry services segment as well as improved consolidated cash flow. Completion of this project is currently scheduled to

occur during 2022.

- 4 -
- 4 -

- 5 -

ITEM 1. BUSINESS.

PART I

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”). Through GPS and APC, we

provide a full range of engineering, procurement, construction, commissioning, operations management, maintenance, project

development, technical and consulting services to the power generation and renewable energy markets. The wide range of

customers includes independent power producers, public utilities, power plant equipment suppliers and global energy plant

construction firms. Including its consolidated joint ventures and variable interest entities (“VIEs”), GPS and APC represent the

Company’s power industry services reportable segment. Through TRC, the industrial fabrication and field services reportable

segment provides on-site services that support maintenance turnarounds, shutdowns and emergency mobilizations for industrial

plants primarily located in the southeast region of the United States (the “US”) and that are based on its expertise in producing,

delivering and installing fabricated steel components such as piping systems, pressure vessels and heat exchangers. 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 US.

Holding Company Structure

Argan was organized as a Delaware corporation in May 1961. We intend to make additional opportunistic acquisitions and/or

investments by identifying companies with significant potential for profitable growth. We may have more than one industrial

focus. We expect that companies acquired in each of these industrial groups will be held in separate subsidiaries that will be

operated in a manner that best provides cash flows for the Company and value for our stockholders. Argan is a holding company

with no operations other than its continuing investments in GPS, APC, TRC and SMC.

Power Industry Services

In most years, 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 thirteen years since it

was acquired by us in 2006. GPS has the proven abilities of designing, building and commissioning large-scale energy projects

in the US. The extensive design, construction, project management, start-up and operating experience of GPS has grown with

installed capacity exceeding 15 gigawatts of mostly domestic power-generating capacity. Our power projects have included

base-load combined-cycle facilities, simple-cycle peaking plants and boiler plant construction and renovation efforts. We also

have experience in the renewable energy sector by providing EPC contracting and other services to the owners of alternative

energy facilities, including biomass plants, wind farms and solar fields. Typically, the scope of work for GPS includes complete

plant engineering and design, the procurement of equipment and construction from site development through electrical

interconnection and plant testing. The durations of our construction projects typically range between 2 to 3 years. However,

the length of certain significant construction projects may exceed three years.

This reportable business segment also includes APC, a company formed in Dublin, Ireland, over 45 years ago, and its affiliated

companies, which we acquired in May 2015. APC provides turbine, boiler and large rotating equipment installation,

commissioning and outage services to original equipment manufacturers, global construction firms and plant owners

worldwide. APC has successfully completed projects in more than 30 countries on six continents. With its presence in Ireland

and its other offices located in the United Kingdom (the “UK”), Hong Kong and Atlanta, APC expanded our operations

internationally for the first time.

The revenues of our power industry services business segment were $135.7 million, $367.8 million and $814.5 million for the

years ended January 31, 2020 (“Fiscal 2020”), 2019 (“Fiscal 2019”) and 2018 (“Fiscal 2018”), respectively, or 57%, 76% and

91% of our consolidated revenues for the corresponding periods, respectively. The substantial portions of the revenues of this

reportable segment reported for all three of these 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. For Fiscal 2020, the amounts of revenues

recognized by GPS and APC were about the same.

During Fiscal 2020, we were focused on securing contracts to build gas-fired power plants that were prominent in our business

development pipeline of new projects as we began the year. Since January 2019, GPS was awarded EPC services contracts for

the construction of the following state-of-the-art combined cycle natural gas-fired power plants:

- 4 -



In January 2019, GPS entered into an EPC services contract to construct a 1,875 MW power plant in Guernsey County,
Ohio. Caithness Energy, L.L.C. (“Caithness”) partnered with Apex Power Group, LLC to develop this project. During
August 2019, GPS received a full notice to proceed (“FNTP”) with engineering, procurement and construction
activities under the contract for this project.

In May 2019, GPS entered into an EPC services contract to construct a 625 MW power plant in Harrison County,
West Virginia. Caithness partnered with Energy Solutions Consortium, LLC (“ESC”) to develop this project. A limited
notice to proceed (“LNTP”) with certain preliminary activities was received from the owners of this project.
Construction activities for the facility are not scheduled to begin until financial close is achieved.

In January 2020, GPS entered into an EPC services contract with Harrison Power, LLC (“Harrison Power”) to
construct a 1,085 MW natural gas-fired power plant in Harrison County, Ohio. The project is being developed by
EmberClear, the parent company of Harrison Power. Construction activities for the facility are scheduled to begin in
2020 once financial close is achieved.

 On March 10, 2020, we announced that in late February 2020 GPS entered into an EPC services contract with ESC
Brooke County Power I, LLC to construct Brooke County Power, a 920 MW natural gas-fired power plant, in Brooke
County, West Virginia. The facility is being developed by ESC and construction activities are scheduled to start in
2020 once financial close is achieved.

 On March 12, 2020, we announced that GPS recently entered into an EPC services contract with NTE Connecticut,
LLC to construct Killingly Energy Center, a 650 MW natural gas-fired power plant, in Killingly, Connecticut. The
facility is being developed by NTE Energy, LLC (“NTE”). Construction activities are scheduled to start in 2020 once
financial close is achieved.

During Fiscal 2020, our APC operation successfully completed a gas-fired power plant construction project in Spalding,
England, and a major turbine refurbishment project for the Moneypoint Power Station, the largest source of electrical power in
Ireland. At January 31, 2020, major project activity for our power industry services business segment included the provision
of EPC services to one other natural gas-fired power plant project and the erection of the boiler, a critical component, for a
biomass-fired power plant.

During Fiscal 2019, GPS reached substantial completion for four natural gas-fired power plant EPC services projects, including
a 1,040 MW facility built in Pennsylvania, a 785 MW facility built in Connecticut and two 475 MW facilities, one built in Ohio
and the other in North Carolina.

During Fiscal 2018, GPS was engaged with ramping-up the construction efforts on the four major power plant EPC projects to
peak activity levels. In addition, it commenced the provision of EPC services on the two other gas-fired facilities and APC
began construction tasks related to the biomass power plant project.

Project Backlog

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. Cancellations or
reductions may occur that would reduce project backlog and our expected future revenues. 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. However, we may include the value of an EPC services contract prior to the receipt of a notice to
proceed if we believe that it is probable that the project will commence within a reasonable timeframe, among other factors. At
January 31, 2020, the project backlog for this reporting segment was approximately $1.3 billion. The comparable backlog
amount as of January 31, 2019 was approximately $1.1 billion.

During August 2019, GPS received a FNTP with EPC activities under a contract to build a state-of-the-art, 1,875 MW,
combined cycle natural gas-fired power plant in Guernsey County, Ohio. The commencement of this project favorably impacted
the consolidated financial statements during the latter portion of Fiscal 2020 resulting in increased revenues for the power
industry services segment as well as improved consolidated cash flow. Completion of this project is currently scheduled to
occur during 2022.

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- 5 -

The project backlog amount as of January 31, 2020 identified above includes the value of the Guernsey Power Station, the
project with Caithness located in Harrison, West Virginia, and the project for NTE located in Reidsville, North Carolina. We
announced that GPS entered into an EPC services contract with NTE Carolinas II, LLC, an affiliate of NTE, to construct an
approximately 500 MW natural gas-fired power plant in Rockingham County, North Carolina, in March 2018. The Reidsville
Energy Center will be similar to two gas-fired power plants substantially completed by GPS for NTE during Fiscal 2019, the
Kings Mountain Energy Center located in Kings Mountain, North Carolina, and the Middletown Energy Center located in
Middletown, Ohio. Due to project owner delays, including a grid connection dispute between the project owner and a public
utility, contract activities have not yet started for this new project. If the dispute with the public utility is not resolved on terms
that move the project forward, we will most likely remove the Reidsville Energy Center from project backlog.

Including all of the GPS power plant projects discussed above and the Chickahominy Power Station discussed below, the
aggregate amount of the rated power represented by the natural gas-fired power plants for which we have signed EPC services
contracts is approximately 7.3 gigawatts with an aggregate contract value in excess of $3.0 billion. For those contracts not
already included in project backlog, we anticipate adding them closer to their respective expected start dates when the projects
achieve remaining key development milestones and obtain financing commitments. For all projects, the start date for
construction is generally controlled by the project owners.

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. In prior years, we partnered with a developer to take principal
positions in the initial stages of development for three projects in the Marcellus Shale region of the eastern US. All three
developmental efforts were successfully completed resulting in GPS receiving the repayment of all project development loans
and the related accrued interest, being paid success fees and building three large-scale natural gas-fired power plants. GPS
completed construction of two of the plants in Fiscal 2017 and the third in Fiscal 2019.

In January 2018, we were deemed to be the primary beneficiary of a VIE that is performing the project development activities
related to the construction of the Chickahominy Power Station, a 1,740 MW natural gas-fired power plant, planned for Charles
City County, Virginia. Even though we are providing financial and technical support to the project development effort through
a consolidated VIE and project development milestones continue to be achieved, we have not included the value of this contract
in our project backlog. Due to several factors that are slowing the pace of the development of this project, including additional
time being required to secure the natural gas supply for the plant and to obtain the necessary equity financing, we currently
cannot predict when construction will commence, if at all. Consideration for the Company’s engineering and financial support
includes the right to build the power plant pursuant to a turnkey EPC services contract that has been negotiated and announced.
The account balances of the VIE are included in the consolidated financial statements, including development costs incurred
by the VIE during Fiscal 2020 and Fiscal 2019, which are included in the balances for property, plant and equipment as of
January 31, 2020 and 2019 in the amounts of $6.9 million and $2.1 million, respectively.

EPC contractors in our industry also periodically execute certain contracts jointly with third parties through joint ventures,
limited partnerships and limited liability companies for the purpose of completing a project or program for a project owner.
These special purpose entities are generally dissolved upon completion of the corresponding project or program. Accordingly,
GPS assigned its EPC contracts for two natural gas-fired power plants to two separate joint ventures that were formed in order
to build the power plants and to spread the bonding risk of each project. The power plants were substantially completed during
Fiscal 2017. Both joint ventures were dissolved in October 2018 and final cash distributions were made to the venture partners
during Fiscal 2019. Due to the financial control of GPS, the accounts of the joint ventures were included in the Company’s
consolidated financial statements.

Materials and Labor

In connection with the engineering and construction of traditional power plants, biodiesel plants and other renewable energy
systems, we procure materials for installation on our various projects. We are not dependent upon any one source for major
equipment components, like heat recovery steam generation units, steam turbines and air-cooled condensers, or any other
construction materials that we use to complete a particular power project. In general, we have not experienced significantly
harmful schedule delays related to the procurement or delivery of the necessary materials for our major projects in the past.

With our assistance, project owners frequently procure and supply certain major components of the power plants such as heavy-

duty 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. Our personnel possess the skills and experience needed to overcome the

plant design, development and construction challenges presented by each EPC services project, thereby steadily eliminating

uncertainties throughout the development lifecycle and construction phases of each project.

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 union versus non-union work environments, competing infrastructure projects located nearby our

sites that utilize the same labor pool as us, and decreased and aging labor pools resulting from demographic trends. As such,

we take a carefully considered and tailored approach at each job site to acquire and retain the required personnel resources

when we need them, especially craft labor, and to maintain optimum productivity on each of our projects. Depending on the

project, we may utilize direct hires, subcontractors, existing internal personnel, or a combination of the three. To date, we have

managed to staff each of our jobs safely and effectively. However, to staff each new project with the skilled craft labor needed

to complete the job successfully, we are challenged by the widely reported labor shortages in the construction industry, rising

wages, demographic trends and other factors.

We source certain supplies, materials and equipment from countries stricken by the COVID-19 pandemic, as do certain of the

major original equipment manufacturers for major components of natural gas-fired power plants. Disruptions to these supply

chains, or the supply and productivity of labor at job sites, due to the global COVID-19 pandemic could impact our schedules,

and may ultimately affect our ability to complete our large fixed-price contract projects in accordance with original schedules.

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. We

are actively attempting to manage these risks during this period of uncertainty regarding the duration and extent of the COVID-

19 outbreak. The extent of the operational and financial impacts on us probably will depend on how long and widespread the

disruptions prove to be. 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.

Competition

We compete with large and well capitalized private and public firms in the construction and engineering services industry,

including two of the largest construction firms in the country, Bechtel Corporation and Kiewit Corporation. Other large

competitors include, but are not limited to, Black & Veatch, John Wood Group PLC, Burns & McDonnell Engineering

Company and Zachry Group, global firms providing engineering, procurement, construction and project management services.

These and other competitors are multi-billion-dollar companies with thousands of employees. We also may compete with

regional construction services companies in the markets where planned projects might be located. Typically, a condition for

award is that the contractor perform on a fixed-price or lump-sum contract basis; smaller elements of a contract may be billable

on an allowance or cost-reimbursable basis. 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 cost-effective choice for the design, build and

commissioning of natural gas-fired and alternative energy power systems. Our successful experience includes the efficient

completion 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, all performed on an EPC contract basis. Through the power industry

services segment, we provide a full range of competitively priced development, consulting, engineering, procurement,

construction, commissioning, operations management and maintenance services to project owners. We are able to react quickly

to their requirements while bringing a strong, experienced team to help navigate through difficult technical, scheduling and

construction issues. We believe that the cultures of GPS and APC encourage motivated, creative, high energy and customer-

focused teams that deliver results. Our projects are directed by dedicated on-site project management teams and our project

owner customers have direct access to our senior management at these companies.

The competitive landscape in the EPC services market for natural gas-fired power plant construction has changed significantly

over the last several years. While the market remains dynamic, we are moving into an era where there may be fewer competitors

for new gas-fired power plant EPC services project opportunities. Several major competitors have announced that they are

exiting the market for a variety of reasons or have been acquired. Others have announced intentions to avoid entering into

fixed-price contracts.

- 6 -
- 6 -

- 7 -

The project backlog amount as of January 31, 2020 identified above includes the value of the Guernsey Power Station, the

project with Caithness located in Harrison, West Virginia, and the project for NTE located in Reidsville, North Carolina. We

announced that GPS entered into an EPC services contract with NTE Carolinas II, LLC, an affiliate of NTE, to construct an

approximately 500 MW natural gas-fired power plant in Rockingham County, North Carolina, in March 2018. The Reidsville

Energy Center will be similar to two gas-fired power plants substantially completed by GPS for NTE during Fiscal 2019, the

Kings Mountain Energy Center located in Kings Mountain, North Carolina, and the Middletown Energy Center located in

Middletown, Ohio. Due to project owner delays, including a grid connection dispute between the project owner and a public

utility, contract activities have not yet started for this new project. If the dispute with the public utility is not resolved on terms

that move the project forward, we will most likely remove the Reidsville Energy Center from project backlog.

Including all of the GPS power plant projects discussed above and the Chickahominy Power Station discussed below, the

aggregate amount of the rated power represented by the natural gas-fired power plants for which we have signed EPC services

contracts is approximately 7.3 gigawatts with an aggregate contract value in excess of $3.0 billion. For those contracts not

already included in project backlog, we anticipate adding them closer to their respective expected start dates when the projects

achieve remaining key development milestones and obtain financing commitments. For all projects, the start date for

construction is generally controlled by the project owners.

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. In prior years, we partnered with a developer to take principal

positions in the initial stages of development for three projects in the Marcellus Shale region of the eastern US. All three

developmental efforts were successfully completed resulting in GPS receiving the repayment of all project development loans

and the related accrued interest, being paid success fees and building three large-scale natural gas-fired power plants. GPS

completed construction of two of the plants in Fiscal 2017 and the third in Fiscal 2019.

In January 2018, we were deemed to be the primary beneficiary of a VIE that is performing the project development activities

related to the construction of the Chickahominy Power Station, a 1,740 MW natural gas-fired power plant, planned for Charles

City County, Virginia. Even though we are providing financial and technical support to the project development effort through

a consolidated VIE and project development milestones continue to be achieved, we have not included the value of this contract

in our project backlog. Due to several factors that are slowing the pace of the development of this project, including additional

time being required to secure the natural gas supply for the plant and to obtain the necessary equity financing, we currently

cannot predict when construction will commence, if at all. Consideration for the Company’s engineering and financial support

includes the right to build the power plant pursuant to a turnkey EPC services contract that has been negotiated and announced.

The account balances of the VIE are included in the consolidated financial statements, including development costs incurred

by the VIE during Fiscal 2020 and Fiscal 2019, which are included in the balances for property, plant and equipment as of

January 31, 2020 and 2019 in the amounts of $6.9 million and $2.1 million, respectively.

EPC contractors in our industry also periodically execute certain contracts jointly with third parties through joint ventures,

limited partnerships and limited liability companies for the purpose of completing a project or program for a project owner.

These special purpose entities are generally dissolved upon completion of the corresponding project or program. Accordingly,

GPS assigned its EPC contracts for two natural gas-fired power plants to two separate joint ventures that were formed in order

to build the power plants and to spread the bonding risk of each project. The power plants were substantially completed during

Fiscal 2017. Both joint ventures were dissolved in October 2018 and final cash distributions were made to the venture partners

during Fiscal 2019. Due to the financial control of GPS, the accounts of the joint ventures were included in the Company’s

consolidated financial statements.

Materials and Labor

In connection with the engineering and construction of traditional power plants, biodiesel plants and other renewable energy

systems, we procure materials for installation on our various projects. We are not dependent upon any one source for major

equipment components, like heat recovery steam generation units, steam turbines and air-cooled condensers, or any other

construction materials that we use to complete a particular power project. In general, we have not experienced significantly

harmful schedule delays related to the procurement or delivery of the necessary materials for our major projects in the past.

With our assistance, project owners frequently procure and supply certain major components of the power plants such as heavy-
duty 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. Our personnel possess the skills and experience needed to overcome the
plant design, development and construction challenges presented by each EPC services project, thereby steadily eliminating
uncertainties throughout the development lifecycle and construction phases of each project.

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 union versus non-union work environments, competing infrastructure projects located nearby our
sites that utilize the same labor pool as us, and decreased and aging labor pools resulting from demographic trends. As such,
we take a carefully considered and tailored approach at each job site to acquire and retain the required personnel resources
when we need them, especially craft labor, and to maintain optimum productivity on each of our projects. Depending on the
project, we may utilize direct hires, subcontractors, existing internal personnel, or a combination of the three. To date, we have
managed to staff each of our jobs safely and effectively. However, to staff each new project with the skilled craft labor needed
to complete the job successfully, we are challenged by the widely reported labor shortages in the construction industry, rising
wages, demographic trends and other factors.

We source certain supplies, materials and equipment from countries stricken by the COVID-19 pandemic, as do certain of the
major original equipment manufacturers for major components of natural gas-fired power plants. Disruptions to these supply
chains, or the supply and productivity of labor at job sites, due to the global COVID-19 pandemic could impact our schedules,
and may ultimately affect our ability to complete our large fixed-price contract projects in accordance with original schedules.
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. We
are actively attempting to manage these risks during this period of uncertainty regarding the duration and extent of the COVID-
19 outbreak. The extent of the operational and financial impacts on us probably will depend on how long and widespread the
disruptions prove to be. 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.

Competition

We compete with large and well capitalized private and public firms in the construction and engineering services industry,
including two of the largest construction firms in the country, Bechtel Corporation and Kiewit Corporation. Other large
competitors include, but are not limited to, Black & Veatch, John Wood Group PLC, Burns & McDonnell Engineering
Company and Zachry Group, global firms providing engineering, procurement, construction and project management services.
These and other competitors are multi-billion-dollar companies with thousands of employees. We also may compete with
regional construction services companies in the markets where planned projects might be located. Typically, a condition for
award is that the contractor perform on a fixed-price or lump-sum contract basis; smaller elements of a contract may be billable
on an allowance or cost-reimbursable basis. 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 cost-effective choice for the design, build and
commissioning of natural gas-fired and alternative energy power systems. Our successful experience includes the efficient
completion 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, all performed on an EPC contract basis. Through the power industry
services segment, we provide a full range of competitively priced development, consulting, engineering, procurement,
construction, commissioning, operations management and maintenance services to project owners. We are able to react quickly
to their requirements while bringing a strong, experienced team to help navigate through difficult technical, scheduling and
construction issues. We believe that the cultures of GPS and APC encourage motivated, creative, high energy and customer-
focused teams that deliver results. Our projects are directed by dedicated on-site project management teams and our project
owner customers have direct access to our senior management at these companies.

The competitive landscape in the EPC services market for natural gas-fired power plant construction has changed significantly
over the last several years. While the market remains dynamic, we are moving into an era where there may be fewer competitors
for new gas-fired power plant EPC services project opportunities. Several major competitors have announced that they are
exiting the market for a variety of reasons or have been acquired. Others have announced intentions to avoid entering into
fixed-price contracts.

- 6 -

- 7 -
- 7 -

Nonetheless, a recently published report by a leading industry observer maintains that the engineering and construction sector
is shifting towards more fixed-price contracts despite their currently reported negative impacts on contractors and the
construction industry. According to the report, the shift to fixed-price contracts has occurred due to intense competition that
has increased the bargaining power of project owners and a change in the mix of projects typically completed on a fixed-price
basis. However, construction and engineering companies are consistently incurring more charges on fixed-price contracts,
including some of the largest firms in the country and our competitors.

Competition has led to more aggressive bidding on projects while contractors have accepted greater risks associated with the
inability to anticipate unforeseen issues and failure to include adequate contingencies to cover lower-than expected labor
productivity, unfavorable execution challenges and unusual weather events, for example.

As described more fully in later sections of this report, we recorded a contract loss in the amount of $33.6 million on a major
fixed-price construction subcontract in the UK during Fiscal 2020 where we have suffered from many unforeseen events and
circumstances. Nonetheless, we try to be particularly selective in pursuing new project opportunities and will be reluctant to
enter into fixed-price contracts that represent 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
very confident that our project management teams have gained the experience necessary for successful execution on these types
of contracts as we go forward.

Customers

For Fiscal 2020, our most significant power industry services customers were Guernsey Power Station LLC, the owner of the
Guernsey Power Station project, and Técnicas Reunidas UK Limited (“TR”), APC’s customer for the Tees Renewable Energy
Project (“TeesREP”), which is the loss project referenced above, located in Teesside, England. Each customer accounted for
more than 10% of our consolidated revenues and together they represented 37% of consolidated revenues for the year.

For Fiscal 2019, the Company’s most significant power industry services customers were Exelon West Medway II; Moxie
Freedom LLC; TR and NTE Carolinas LLC, each of which accounted for more than 10% of our consolidated revenues and
which together represented 51% of consolidated revenues for the year.

For Fiscal 2018, the Company’s most significant power industry services customers accounting for more than 10% of
consolidated revenues were NTE Ohio LLC; CPV Towantic, LLC; Moxie Freedom LLC and NTE Carolinas LLC. Together,
these customers represented 84% of consolidated revenues for Fiscal 2018.

Regulation

Our power industry services operations are subject to various federal, state, local and foreign laws and regulations including:
licensing for contractors; building codes; permitting and inspection requirements applicable to construction projects;
regulations relating to worker safety and environmental protection; and special bidding, procurement and employee
compensation requirements. Many state and local regulations governing construction require permits and licenses to be held
by individuals who have passed an examination or met other requirements. We believe that we have all the licenses required
to conduct our current operations and that we are in substantial compliance with applicable regulatory requirements.

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 growing preference for renewable energy sources and the elimination of fossil-
fueled power plants by the populations of the US and the UK may result in such restrictions becoming more severe in the
future. The consequences may result in fewer gas-fired power plants being constructed in the future than are currently forecast.

Relating to the COVID-19 pandemic, local and national government health agencies in the US, the UK and the Republic of
Ireland may continue to issue increasingly onerous restrictions on places and/or events where people gather in close proximity
to others. We do believe that our office-based employees can continue to work effectively on a remote basis if necessary, for
extended periods of time. However, such restrictions could severely hamper our abilities to conduct construction activities on
job-sites, or could shut-down such sites completely.

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- 8 -

Industrial Fabrication and Field Services

TRC was founded in 1977 and is located near Greenville, North Carolina. Its facilities include steel fabrication plants and

support structures. TRC is principally an industrial field services provider and steel pipe and vessel fabricator for industrial

organizations primarily in the southeast region of the US.

Historically, TRC was a profitable company that incurred a pre-acquisition net loss in 2015, primarily due to it taking on large

contracts before the acquisition that resulted in significant losses. With the reengagement and leadership of TRC’s founder, our

financial support and the substantial completion of these loss contracts, we acquired TRC with the belief that it was positioned

to succeed in the future with a return to profitable operations. Significant efforts have been expended since the acquisition to

sustain a financial turnaround with growing revenues and profitable operating results. Although actual results for Fiscal 2019

were encouraging, results of operations sagged in Fiscal 2020. There can be no assurances that TRC will re-establish the

positive trend in revenues or improve profitability in the future. Since the acquisition, we have provided TRC with an additional

$25.0 million in net cash so that it could fund the completion of the work on loss contracts in progress on the date of the

acquisition, enhance working capital in support of business growth and stability, acquire capital equipment to assure efficient

and competitive fabrication and field operations and support other general corporate needs. Most of this cash was provided in

the year period following the acquisition. The operating results for Fiscal 2020 and the resulting revisions to forecasted results

caused us to record a goodwill impairment loss in the amount of $2.8 million, which followed impairment losses recorded in

Fiscal 2019 and Fiscal 2018 in the amounts of $1.5 million and $0.6 million, respectively.

TRC operates within its own reportable business segment, industrial field services and fabrication. Its major customers include

North America’s largest forest products companies such as Weyerhaeuser Company and Domtar Corporation; large fertilizer

companies such as Nutrien Ltd. (formerly Potash Corp.); EPC firms such as Fluor Corporation and GPS; mining companies

such as OceanaGold Corporation; a world leading supplier of industrial gases, Air Liquide S.A., and various petrochemical

companies. For Fiscal 2020, Fiscal 2019 and Fiscal 2018, TRC reported revenues of $94.7 million, $101.7 million and $65.3

million, respectively, or approximately 40%, 21% and 7% of consolidated revenues for the corresponding years, respectively.

Telecommunications Infrastructure Services

SMC represents our telecommunications infrastructure services reportable business segment and conducts business as SMC

Infrastructure Solutions, which provides comprehensive technology wiring and utility construction solutions to customers

primarily in the mid-Atlantic region of the US. We perform both outside and inside plant cabling.

Services provided to our outside premises customers include trenchless directional boring and excavation for underground

communication and power networks, aerial cabling services, and the installation of buried cable, high and low voltage electric

lines, and private area outdoor lighting systems. The outside premises services are primarily provided to state and local

government agencies, regional communications service providers, electric utilities and other commercial customers. The wide

range of inside premises wiring services that we provide to our customers include the structuring, cabling, terminations and

connectivity that provide the physical transport for high speed data, voice, video and security networks. These services are

provided primarily to federal government facilities, including cleared facilities, on a direct and subcontract basis. Such facilities

typically require regular upgrades to their wiring systems in order to accommodate improvements in security,

telecommunications and network capabilities.

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. Over the last three years, these major customers have included

the city of Westminster, Maryland, certain state government agencies in Maryland, counties and municipalities located in

Maryland; DXC Technology Company; Science Applications International Corporation (SAIC) and Southern Maryland

Electric Cooperative, a local electricity cooperative. The revenues of SMC were $8.6 million, $12.7 million and $13.0 million

for Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively, or approximately 3%, 3% and 1% of our consolidated revenues for

the corresponding years, respectively.

SMC operates in the fragmented and competitive telecommunication and infrastructure services industry. 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. Based on its reputation and quality performance, SMC was selected on a sole source

basis to perform outside premises and structured cabling work at several secure overseas location which it completed

successfully during Fiscal 2020 and Fiscal 2019.

- 9 -

Nonetheless, a recently published report by a leading industry observer maintains that the engineering and construction sector

is shifting towards more fixed-price contracts despite their currently reported negative impacts on contractors and the

construction industry. According to the report, the shift to fixed-price contracts has occurred due to intense competition that

has increased the bargaining power of project owners and a change in the mix of projects typically completed on a fixed-price

basis. However, construction and engineering companies are consistently incurring more charges on fixed-price contracts,

including some of the largest firms in the country and our competitors.

Competition has led to more aggressive bidding on projects while contractors have accepted greater risks associated with the

inability to anticipate unforeseen issues and failure to include adequate contingencies to cover lower-than expected labor

productivity, unfavorable execution challenges and unusual weather events, for example.

As described more fully in later sections of this report, we recorded a contract loss in the amount of $33.6 million on a major

fixed-price construction subcontract in the UK during Fiscal 2020 where we have suffered from many unforeseen events and

circumstances. Nonetheless, we try to be particularly selective in pursuing new project opportunities and will be reluctant to

enter into fixed-price contracts that represent 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

very confident that our project management teams have gained the experience necessary for successful execution on these types

of contracts as we go forward.

Customers

For Fiscal 2020, our most significant power industry services customers were Guernsey Power Station LLC, the owner of the

Guernsey Power Station project, and Técnicas Reunidas UK Limited (“TR”), APC’s customer for the Tees Renewable Energy

Project (“TeesREP”), which is the loss project referenced above, located in Teesside, England. Each customer accounted for

more than 10% of our consolidated revenues and together they represented 37% of consolidated revenues for the year.

For Fiscal 2019, the Company’s most significant power industry services customers were Exelon West Medway II; Moxie

Freedom LLC; TR and NTE Carolinas LLC, each of which accounted for more than 10% of our consolidated revenues and

which together represented 51% of consolidated revenues for the year.

For Fiscal 2018, the Company’s most significant power industry services customers accounting for more than 10% of

consolidated revenues were NTE Ohio LLC; CPV Towantic, LLC; Moxie Freedom LLC and NTE Carolinas LLC. Together,

these customers represented 84% of consolidated revenues for Fiscal 2018.

Regulation

Our power industry services operations are subject to various federal, state, local and foreign laws and regulations including:

licensing for contractors; building codes; permitting and inspection requirements applicable to construction projects;

regulations relating to worker safety and environmental protection; and special bidding, procurement and employee

compensation requirements. Many state and local regulations governing construction require permits and licenses to be held

by individuals who have passed an examination or met other requirements. We believe that we have all the licenses required

to conduct our current operations and that we are in substantial compliance with applicable regulatory requirements.

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 growing preference for renewable energy sources and the elimination of fossil-

fueled power plants by the populations of the US and the UK may result in such restrictions becoming more severe in the

future. The consequences may result in fewer gas-fired power plants being constructed in the future than are currently forecast.

Relating to the COVID-19 pandemic, local and national government health agencies in the US, the UK and the Republic of

Ireland may continue to issue increasingly onerous restrictions on places and/or events where people gather in close proximity

to others. We do believe that our office-based employees can continue to work effectively on a remote basis if necessary, for

extended periods of time. However, such restrictions could severely hamper our abilities to conduct construction activities on

job-sites, or could shut-down such sites completely.

Industrial Fabrication and Field Services

TRC was founded in 1977 and is located near Greenville, North Carolina. Its facilities include steel fabrication plants and
support structures. TRC is principally an industrial field services provider and steel pipe and vessel fabricator for industrial
organizations primarily in the southeast region of the US.

Historically, TRC was a profitable company that incurred a pre-acquisition net loss in 2015, primarily due to it taking on large
contracts before the acquisition that resulted in significant losses. With the reengagement and leadership of TRC’s founder, our
financial support and the substantial completion of these loss contracts, we acquired TRC with the belief that it was positioned
to succeed in the future with a return to profitable operations. Significant efforts have been expended since the acquisition to
sustain a financial turnaround with growing revenues and profitable operating results. Although actual results for Fiscal 2019
were encouraging, results of operations sagged in Fiscal 2020. There can be no assurances that TRC will re-establish the
positive trend in revenues or improve profitability in the future. Since the acquisition, we have provided TRC with an additional
$25.0 million in net cash so that it could fund the completion of the work on loss contracts in progress on the date of the
acquisition, enhance working capital in support of business growth and stability, acquire capital equipment to assure efficient
and competitive fabrication and field operations and support other general corporate needs. Most of this cash was provided in
the year period following the acquisition. The operating results for Fiscal 2020 and the resulting revisions to forecasted results
caused us to record a goodwill impairment loss in the amount of $2.8 million, which followed impairment losses recorded in
Fiscal 2019 and Fiscal 2018 in the amounts of $1.5 million and $0.6 million, respectively.

TRC operates within its own reportable business segment, industrial field services and fabrication. Its major customers include
North America’s largest forest products companies such as Weyerhaeuser Company and Domtar Corporation; large fertilizer
companies such as Nutrien Ltd. (formerly Potash Corp.); EPC firms such as Fluor Corporation and GPS; mining companies
such as OceanaGold Corporation; a world leading supplier of industrial gases, Air Liquide S.A., and various petrochemical
companies. For Fiscal 2020, Fiscal 2019 and Fiscal 2018, TRC reported revenues of $94.7 million, $101.7 million and $65.3
million, respectively, or approximately 40%, 21% and 7% of consolidated revenues for the corresponding years, respectively.

Telecommunications Infrastructure Services

SMC represents our telecommunications infrastructure services reportable business segment and conducts business as SMC
Infrastructure Solutions, which provides comprehensive technology wiring and utility construction solutions to customers
primarily in the mid-Atlantic region of the US. We perform both outside and inside plant cabling.

Services provided to our outside premises customers include trenchless directional boring and excavation for underground
communication and power networks, aerial cabling services, and the installation of buried cable, high and low voltage electric
lines, and private area outdoor lighting systems. The outside premises services are primarily provided to state and local
government agencies, regional communications service providers, electric utilities and other commercial customers. The wide
range of inside premises wiring services that we provide to our customers include the structuring, cabling, terminations and
connectivity that provide the physical transport for high speed data, voice, video and security networks. These services are
provided primarily to federal government facilities, including cleared facilities, on a direct and subcontract basis. Such facilities
typically require regular upgrades to their wiring systems in order to accommodate improvements in security,
telecommunications and network capabilities.

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. Over the last three years, these major customers have included
the city of Westminster, Maryland, certain state government agencies in Maryland, counties and municipalities located in
Maryland; DXC Technology Company; Science Applications International Corporation (SAIC) and Southern Maryland
Electric Cooperative, a local electricity cooperative. The revenues of SMC were $8.6 million, $12.7 million and $13.0 million
for Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively, or approximately 3%, 3% and 1% of our consolidated revenues for
the corresponding years, respectively.

SMC operates in the fragmented and competitive telecommunication and infrastructure services industry. 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. Based on its reputation and quality performance, SMC was selected on a sole source
basis to perform outside premises and structured cabling work at several secure overseas location which it completed
successfully during Fiscal 2020 and Fiscal 2019.

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Employees

ITEM 1A. RISK FACTORS.

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 approximately 1,154 employees at January 31, 2020, substantially all of whom
were full-time. We believe that our employee relations are generally good.

Financing Arrangements

We have financing arrangements with Bank of America (the “Bank”) that are described in an Amended Replacement Credit
Agreement (the “Credit Agreement”), dated May 15, 2017. The Credit Agreement provides a revolving loan with a maximum
borrowing amount of $50.0 million that is available until May 31, 2021 with interest at the 30-day LIBOR plus 2.0%. 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.
At January 31, 2020, the Company had credit outstanding under the Credit Agreement, but no borrowings, in the approximate
amount of $9.9 million. Approximately 80% of the outstanding credit was issued for the benefit of TR relating to the TeesREP
project. Additionally, in support of the current project development activities of the active VIE discussed above, the Bank
issued a letter of credit in the approximate amount of $3.4 million, outside of the scope of the Credit Agreement, for which the
Company has provided cash collateral. We have pledged the majority of our assets to secure the 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 we comply with certain financial covenants at our fiscal year-end and at each of our
fiscal quarter-ends. The Credit Agreement includes other terms, covenants and events of default that are customary for a credit
facility of its size and nature. As of January 31, 2020, we were in compliance with the financial covenants of the Credit
Agreement. We believe we will continue to comply with the financial covenants of the Credit Agreement.

Safety, Risk Management, Insurance and Performance Bonds

statements for the year ended January 31, 2020.

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. GPS, APC, TRC and SMC each
have 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. Our OSHA reportable incident rates, weighted by hours worked for all
of our subsidiaries, were 0.40 and 0.54 for calendar years 2019 and 2018, respectively; our rates were significantly better than
the national average rates in our industry (NAICS - 2379) for those years.

We retain qualified insurance brokerage assistance in the regular evaluation of the adequacy of insurance coverage amounts
and the annual negotiation of premium amounts in the areas of property and casualty insurance, general liability, umbrella
coverage, director and officer insurance and other specialty coverages. We believe that our insurance coverage amounts are
adequate, but not excessive, and provide the proper amount 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 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. As of January 31,
2020, the revenue value of our unsatisfied bonded performance obligations was approximately $734 million. In addition, there
were bonds outstanding in the aggregate amount of approximately $152 million covering other risks including our warranty
obligations related to EPC services projects completed by GPS during Fiscal 2019. Not all of our projects require bonding.

Materials Filed with the Securities and Exchange Commission

The public may read any materials that we file with the Securities and Exchange Commission (the “SEC”) at the SEC’s public
reference room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the public
reference room by calling the SEC at 1-800-SEC-0330. 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.
Information on our website is not incorporated by reference into this Annual Report on Form 10-K. 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 Securities Exchange Act of 1934, 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.

Our business is challenged by a changing environment that involves many known and unknown risks and uncertainties. The

risks described below discuss factors that have affected and/or could affect us in the future. There may be others. We may be

affected by risks that are currently unknown to us or are immaterial at this time. If any such events did occur, our business,

financial condition and results of operations could be adversely affected in a material manner. Our future results may also be

impacted by other risk factors listed from time to time in our future filings with the SEC, including, but not limited to, our

Annual Reports on Form 10-K and our Quarterly Reports on Form 10-Q. As the most significant portion of our consolidated

entity is represented by the power industry services reportable business segment, the risk factor discussions included below are

focused on that business. 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.

This section of our Form 10-K Annual Report for the year ended January 31, 2020 (our “2020 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 our 2020 Annual Report.

Risks Related to Our Business

The completion of the TeesREP project may require the booking of additional contract losses.

Management expects that the forecasted costs for APC at the completion of the TeesREP project will exceed projected revenues

by approximately $33.6 million. The entire amount of this loss was recorded and reflected in our consolidated financial

In December 2019, APC and its customer, the engineering, procurement and construction services contractor on the TeesREP

project, agreed to operational and commercial terms for the completion of the project. This framework generally addresses

project schedule, payment terms, scope, performance guarantees and other terms and conditions for APC reaching substantial

completion of its portion of the total project by mid-2020. The framework does not resolve significant past commercial

differences which may have to be addressed through applicable dispute resolution mechanisms. It is not possible currently to

predict precisely how, when and on what terms (if any) the past commercial differences will be resolved. Failure to negotiate

the favorable resolution of the commercial differences may cause us to record additional losses on this project that may be

material. Additional losses may also be incurred during the completion of the project due to a variety of possible causes

including weather delays, work stoppages, the COVID-19 pandemic, productivity declines, construction schedule delays, the

financial instability of our customer or other causes beyond the control of APC. Our failure to recover the unforeseen costs that

may be incurred by us related to such events may result in our recording additional losses. In summary, until we have completed

all activities on this project and have resolved all commercial differences with our customer, it is possible that we may be

required to record additional losses related to this project that may be material to our future consolidated results of operations.

Future revenues and earnings are dependent on the awards of new EPC projects, the receipt of corresponding full notices-to-

proceed and our ability to successfully complete the projects that we start.

The majority of the Company’s consolidated revenues related to performance by the power industry services segment which

provided 57%, 76% and 91% of consolidated revenues for Fiscal 2020, 2019 and 2018, respectively. Due primarily to the

favorable operating results of GPS, the major business component of this segment, we have generated consolidated net income

for nine of the last ten years. Revenues for the power industry services reporting segment decreased from the prior year by 63%

for Fiscal 2020 and 55% for Fiscal 2019. Fiscal 2020 operating results for this segment were adversely affected in a material

manner by the contract loss incurred by our APC subsidiary in the UK and the delay in the project starts on EPC services

contracts in the US. However, the aggregate amount of the rated output of electrical power for the five planned gas-fired power

plants for which we had signed EPC services contracts as of January 31, 2020 was 5.8 gigawatts. Subsequently, GPS signed

EPC services contracts for two additional natural gas-fired power plants which will provide an additional 1.6 gigawatts of

electrical output. Our ability to achieve sustained profitable operations depends on many factors including the ability of the

power industry services business to gain significant new EPC projects, to obtain the corresponding full notices-to-proceed and

to complete its projects successfully. We have received a full notice to proceed for only one of these new EPC projects and

there is always a possibility that one or more of the other projects will not be built. Should we fail to commence construction

activities on some of these major projects during the year ending January 31, 2021 (“Fiscal 2021”), the growth in revenues and

profits that we expect for Fiscal 2021 will be adversely affected.

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Employees

ITEM 1A. RISK FACTORS.

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 approximately 1,154 employees at January 31, 2020, substantially all of whom

were full-time. We believe that our employee relations are generally good.

Financing Arrangements

We have financing arrangements with Bank of America (the “Bank”) that are described in an Amended Replacement Credit

Agreement (the “Credit Agreement”), dated May 15, 2017. The Credit Agreement provides a revolving loan with a maximum

borrowing amount of $50.0 million that is available until May 31, 2021 with interest at the 30-day LIBOR plus 2.0%. 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.

At January 31, 2020, the Company had credit outstanding under the Credit Agreement, but no borrowings, in the approximate

amount of $9.9 million. Approximately 80% of the outstanding credit was issued for the benefit of TR relating to the TeesREP

project. Additionally, in support of the current project development activities of the active VIE discussed above, the Bank

issued a letter of credit in the approximate amount of $3.4 million, outside of the scope of the Credit Agreement, for which the

Company has provided cash collateral. We have pledged the majority of our assets to secure the 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 we comply with certain financial covenants at our fiscal year-end and at each of our

fiscal quarter-ends. The Credit Agreement includes other terms, covenants and events of default that are customary for a credit

facility of its size and nature. As of January 31, 2020, we were in compliance with the financial covenants of the Credit

Agreement. We believe we will continue to comply with the financial covenants of the Credit Agreement.

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. GPS, APC, TRC and SMC each

have 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. Our OSHA reportable incident rates, weighted by hours worked for all

of our subsidiaries, were 0.40 and 0.54 for calendar years 2019 and 2018, respectively; our rates were significantly better than

the national average rates in our industry (NAICS - 2379) for those years.

We retain qualified insurance brokerage assistance in the regular evaluation of the adequacy of insurance coverage amounts

and the annual negotiation of premium amounts in the areas of property and casualty insurance, general liability, umbrella

coverage, director and officer insurance and other specialty coverages. We believe that our insurance coverage amounts are

adequate, but not excessive, and provide the proper amount 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 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. As of January 31,

2020, the revenue value of our unsatisfied bonded performance obligations was approximately $734 million. In addition, there

were bonds outstanding in the aggregate amount of approximately $152 million covering other risks including our warranty

obligations related to EPC services projects completed by GPS during Fiscal 2019. Not all of our projects require bonding.

Materials Filed with the Securities and Exchange Commission

The public may read any materials that we file with the Securities and Exchange Commission (the “SEC”) at the SEC’s public

reference room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the public

reference room by calling the SEC at 1-800-SEC-0330. 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.

Information on our website is not incorporated by reference into this Annual Report on Form 10-K. 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 Securities Exchange Act of 1934, 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.

- 10 -

Our business is challenged by a changing environment that involves many known and unknown risks and uncertainties. The
risks described below discuss factors that have affected and/or could affect us in the future. There may be others. We may be
affected by risks that are currently unknown to us or are immaterial at this time. If any such events did occur, our business,
financial condition and results of operations could be adversely affected in a material manner. Our future results may also be
impacted by other risk factors listed from time to time in our future filings with the SEC, including, but not limited to, our
Annual Reports on Form 10-K and our Quarterly Reports on Form 10-Q. As the most significant portion of our consolidated
entity is represented by the power industry services reportable business segment, the risk factor discussions included below are
focused on that business. 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.

This section of our Form 10-K Annual Report for the year ended January 31, 2020 (our “2020 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 our 2020 Annual Report.

Risks Related to Our Business

The completion of the TeesREP project may require the booking of additional contract losses.

Management expects that the forecasted costs for APC at the completion of the TeesREP project will exceed projected revenues
by approximately $33.6 million. The entire amount of this loss was recorded and reflected in our consolidated financial
statements for the year ended January 31, 2020.

In December 2019, APC and its customer, the engineering, procurement and construction services contractor on the TeesREP
project, agreed to operational and commercial terms for the completion of the project. This framework generally addresses
project schedule, payment terms, scope, performance guarantees and other terms and conditions for APC reaching substantial
completion of its portion of the total project by mid-2020. The framework does not resolve significant past commercial
differences which may have to be addressed through applicable dispute resolution mechanisms. It is not possible currently to
predict precisely how, when and on what terms (if any) the past commercial differences will be resolved. Failure to negotiate
the favorable resolution of the commercial differences may cause us to record additional losses on this project that may be
material. Additional losses may also be incurred during the completion of the project due to a variety of possible causes
including weather delays, work stoppages, the COVID-19 pandemic, productivity declines, construction schedule delays, the
financial instability of our customer or other causes beyond the control of APC. Our failure to recover the unforeseen costs that
may be incurred by us related to such events may result in our recording additional losses. In summary, until we have completed
all activities on this project and have resolved all commercial differences with our customer, it is possible that we may be
required to record additional losses related to this project that may be material to our future consolidated results of operations.

Future revenues and earnings are dependent on the awards of new EPC projects, the receipt of corresponding full notices-to-
proceed and our ability to successfully complete the projects that we start.

The majority of the Company’s consolidated revenues related to performance by the power industry services segment which
provided 57%, 76% and 91% of consolidated revenues for Fiscal 2020, 2019 and 2018, respectively. Due primarily to the
favorable operating results of GPS, the major business component of this segment, we have generated consolidated net income
for nine of the last ten years. Revenues for the power industry services reporting segment decreased from the prior year by 63%
for Fiscal 2020 and 55% for Fiscal 2019. Fiscal 2020 operating results for this segment were adversely affected in a material
manner by the contract loss incurred by our APC subsidiary in the UK and the delay in the project starts on EPC services
contracts in the US. However, the aggregate amount of the rated output of electrical power for the five planned gas-fired power
plants for which we had signed EPC services contracts as of January 31, 2020 was 5.8 gigawatts. Subsequently, GPS signed
EPC services contracts for two additional natural gas-fired power plants which will provide an additional 1.6 gigawatts of
electrical output. Our ability to achieve sustained profitable operations depends on many factors including the ability of the
power industry services business to gain significant new EPC projects, to obtain the corresponding full notices-to-proceed and
to complete its projects successfully. We have received a full notice to proceed for only one of these new EPC projects and
there is always a possibility that one or more of the other projects will not be built. Should we fail to commence construction
activities on some of these major projects during the year ending January 31, 2021 (“Fiscal 2021”), the growth in revenues and
profits that we expect for Fiscal 2021 will be adversely affected.

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Our dependence on a few customers could adversely affect us.

Project backlog amounts may be uncertain indicators of future revenues as project realization may be subject to unexpected

The size of the energy plant construction projects of our power industry services segment frequently results in a limited number
of projects contributing a substantial portion of our consolidated revenues each year. For Fiscal 2020, the Company’s most
significant customer relationships included two power industry service customers which together accounted for 37% of
consolidated revenues. For Fiscal 2019, the Company’s most significant customer relationships included four power industry
service customers which together accounted for 51% of consolidated revenues. For Fiscal 2018, the Company’s most significant
customer relationships included four power industry service customers which together represented 84% of consolidated
revenues. Should we fail to obtain the award of any one new major project that we expect, substantial portions of future
consolidated revenues and profits may be adversely affected.

Our dependence on large construction contracts may result in uneven financial results.

Our power industry service activities in any one fiscal reporting period are concentrated on a limited number of large
construction projects for which we recognize revenues over time as we transfer control of the project asset to the customer. To
a substantial extent, our contract revenues are based on the amounts of costs incurred. As the timing of equipment purchases,
subcontractor services and other contract events may not be evenly distributed over the terms of our contracts, the amount of
total contract costs may vary from quarter to quarter, creating uneven amounts of quarterly and/or annual consolidated revenues.
In addition, the timing of contract commencements and completions may exacerbate the uneven pattern. 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.

Actual results could differ from the assumptions and estimates used to prepare our financial statements.

To prepare consolidated financial statements in conformity with accounting principles generally accepted in the US, we are
required to make estimates, assumptions and judgments as of the date of such financial statements, which affect the reported
values of assets and liabilities, revenues and expenses, and disclosures of contingent assets and liabilities. For example, we
have recognized revenues over the life of a contract based on the proportion of costs incurred to date compared to the total
costs estimated to be incurred for the entire project. We review and make necessary revisions to such costs on a monthly basis.
In addition, contract results may be impacted by our estimates of the amounts of change orders that we expect to receive and
our assessment of any contract disputes that may arise.

In accordance with the new accounting rules governing revenue recognition, we recognize substantial portions of our revenues
over time as performance obligations are completed by us. In most cases, such progress will be measured in a manner similar
to past accounting practices using a cost-to-cost method. This methodology allows us to recognize revenues over the life of a
contract by comparing the amount of the costs incurred to date against the total amount of costs expected to be incurred, and
using the resulting percentage to update the recorded amounts of project-to-date revenues. 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. 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.

Other areas requiring significant estimates by our management include:

•
•

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;
• the identification of the primary beneficiary of entities in which we may have variable interests;
•
• the initial valuation of assets acquired and liabilities assumed in connection with business combinations.

accruals for estimated liabilities, including warranties and losses and expenses related to legal matters; and

Our actual business and financial results could differ from our estimates, which may impact future profits.

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adjustments, delays and cancellations.

At January 31, 2020, the total value of our project backlog was $1.3 billion. Project cancellations or scope modifications may

occur that could reduce the amount of our project backlog and the associated revenues and profits that we actually earn. Projects

that are awarded to us may remain included in our backlog for extended periods of time as customers experience project delays.

Should any unexpected delay, suspension or termination of the work under such contracts occur, our results of operations may

be materially and adversely affected. For example, in March 2018, GPS entered into an EPC services contract to build a 500

MW natural gas-fired power plant that was added to project backlog. However, due to customer delays including a grid

connection dispute, contract activities have not yet started. We cannot guarantee that revenues projected by us based on our

project backlog at January 31, 2020 will be recognized or will result in profitable operating results.

If financing for new energy plants is unavailable or too expensive, construction of such plants may not occur.

Historically, natural gas-fired power plants have been constructed typically for large utility companies. To a large extent, the

construction of new energy plants by us is performed for independent power producers. This type of project owner may be

challenged in obtaining the equity financing necessary to commence the project. Accordingly, debt financing for the

construction of new facilities may not be available or it may become cost prohibitive, thereby adversely affecting the likelihood

that the planned projects will be built and jeopardizing potential sources of future revenues for us.

Unsuccessful efforts to develop energy plant projects could result in write-offs and the loss of future business.

The development of a power plant construction project is expensive with a total cost that could approximate or exceed $10

million. The commercial developers of power projects may form single purpose entities, such as limited liability companies,

limited partnerships or joint ventures, to perform the development activities, which are often funded by outside sources. We

periodically see business opportunities where we consider providing financial support to the ownership of a new project, at

least during the development phase, in order to improve the probability of an EPC contract being awarded to us.

In the past, we have been successful in lending funds to single purpose entities formed to develop gas-fired power plants. Each

successful involvement resulted in repayment of the loans to us and, more critically, the award to us of the EPC contacts for

the construction of the corresponding plant. In addition, the completed development efforts resulted in our receipt of success

fees. Other project development support efforts have not been successful, resulting in the write-off of loan and interest balances.

At present, we are supporting the development efforts for certain new gas-fired power plant projects including funding provided

under development loans and other forms of credit support. There can be no assurances that we will benefit from the successful

development of these projects or others that may arise in the future. The failure of owners to complete the development of

power plants could result in the loss of future potential construction business and could result in write-off adjustments related

to the balance of any project development costs or amounts lent or credit extended to potential project owners. Further, our

failure to obtain the opportunity to support future power plant development projects and the potential to build the associated

power plants could be detrimental to future growth. Large unfavorable adjustments related to current and/or future

developmental projects could have a material adverse impact on our operating results for a future reporting period.

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 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. 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. As of January

31, 2020, the estimated value of future work covered by outstanding performance bonds was approximately $734 million. In

addition, there were bonds outstanding in the aggregate amount of approximately $152 million covering other risks including

our warranty obligations related to four EPC services projects substantially completed by GPS during Fiscal 2019.

Market conditions, changes in our performance or financial position, changes in our surety’s assessment of its own operating

and financial risk or larger future projects could cause our surety company to decline to issue, or substantially reduce the amount

of bonds for our work and could increase our bonding costs. These actions can be taken on short notice. 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.

- 13 -

Our dependence on a few customers could adversely affect us.

The size of the energy plant construction projects of our power industry services segment frequently results in a limited number

of projects contributing a substantial portion of our consolidated revenues each year. For Fiscal 2020, the Company’s most

significant customer relationships included two power industry service customers which together accounted for 37% of

consolidated revenues. For Fiscal 2019, the Company’s most significant customer relationships included four power industry

service customers which together accounted for 51% of consolidated revenues. For Fiscal 2018, the Company’s most significant

customer relationships included four power industry service customers which together represented 84% of consolidated

revenues. Should we fail to obtain the award of any one new major project that we expect, substantial portions of future

consolidated revenues and profits may be adversely affected.

Our dependence on large construction contracts may result in uneven financial results.

Our power industry service activities in any one fiscal reporting period are concentrated on a limited number of large

construction projects for which we recognize revenues over time as we transfer control of the project asset to the customer. To

a substantial extent, our contract revenues are based on the amounts of costs incurred. As the timing of equipment purchases,

subcontractor services and other contract events may not be evenly distributed over the terms of our contracts, the amount of

total contract costs may vary from quarter to quarter, creating uneven amounts of quarterly and/or annual consolidated revenues.

In addition, the timing of contract commencements and completions may exacerbate the uneven pattern. 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.

Actual results could differ from the assumptions and estimates used to prepare our financial statements.

To prepare consolidated financial statements in conformity with accounting principles generally accepted in the US, we are

required to make estimates, assumptions and judgments as of the date of such financial statements, which affect the reported

values of assets and liabilities, revenues and expenses, and disclosures of contingent assets and liabilities. For example, we

have recognized revenues over the life of a contract based on the proportion of costs incurred to date compared to the total

costs estimated to be incurred for the entire project. We review and make necessary revisions to such costs on a monthly basis.

In addition, contract results may be impacted by our estimates of the amounts of change orders that we expect to receive and

our assessment of any contract disputes that may arise.

In accordance with the new accounting rules governing revenue recognition, we recognize substantial portions of our revenues

over time as performance obligations are completed by us. In most cases, such progress will be measured in a manner similar

to past accounting practices using a cost-to-cost method. This methodology allows us to recognize revenues over the life of a

contract by comparing the amount of the costs incurred to date against the total amount of costs expected to be incurred, and

using the resulting percentage to update the recorded amounts of project-to-date revenues. 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. 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.

Other areas requiring significant estimates by our management include:

•

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;

• the identification of the primary beneficiary of entities in which we may have variable interests;

•

accruals for estimated liabilities, including warranties and losses and expenses related to legal matters; and

• the initial valuation of assets acquired and liabilities assumed in connection with business combinations.

Our actual business and financial results could differ from our estimates, which may impact future profits.

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, 2020, the total value of our project backlog was $1.3 billion. Project cancellations or scope modifications may
occur that could reduce the amount of our project backlog and the associated revenues and profits that we actually earn. Projects
that are awarded to us may remain included in our backlog for extended periods of time as customers experience project delays.
Should any unexpected delay, suspension or termination of the work under such contracts occur, our results of operations may
be materially and adversely affected. For example, in March 2018, GPS entered into an EPC services contract to build a 500
MW natural gas-fired power plant that was added to project backlog. However, due to customer delays including a grid
connection dispute, contract activities have not yet started. We cannot guarantee that revenues projected by us based on our
project backlog at January 31, 2020 will be recognized or will result in profitable operating results.

If financing for new energy plants is unavailable or too expensive, construction of such plants may not occur.

Historically, natural gas-fired power plants have been constructed typically for large utility companies. To a large extent, the
construction of new energy plants by us is performed for independent power producers. This type of project owner may be
challenged in obtaining the equity financing necessary to commence the project. Accordingly, debt financing for the
construction of new facilities may not be available or it may become cost prohibitive, thereby adversely affecting the likelihood
that the planned projects will be built and jeopardizing potential sources of future revenues for us.

Unsuccessful efforts to develop energy plant projects could result in write-offs and the loss of future business.

The development of a power plant construction project is expensive with a total cost that could approximate or exceed $10
million. The commercial developers of power projects may form single purpose entities, such as limited liability companies,
limited partnerships or joint ventures, to perform the development activities, which are often funded by outside sources. We
periodically see business opportunities where we consider providing financial support to the ownership of a new project, at
least during the development phase, in order to improve the probability of an EPC contract being awarded to us.

In the past, we have been successful in lending funds to single purpose entities formed to develop gas-fired power plants. Each
successful involvement resulted in repayment of the loans to us and, more critically, the award to us of the EPC contacts for
the construction of the corresponding plant. In addition, the completed development efforts resulted in our receipt of success
fees. Other project development support efforts have not been successful, resulting in the write-off of loan and interest balances.

At present, we are supporting the development efforts for certain new gas-fired power plant projects including funding provided
under development loans and other forms of credit support. There can be no assurances that we will benefit from the successful
development of these projects or others that may arise in the future. The failure of owners to complete the development of
power plants could result in the loss of future potential construction business and could result in write-off adjustments related
to the balance of any project development costs or amounts lent or credit extended to potential project owners. Further, our
failure to obtain the opportunity to support future power plant development projects and the potential to build the associated
power plants could be detrimental to future growth. Large unfavorable adjustments related to current and/or future
developmental projects could have a material adverse impact on our operating results for a future reporting period.

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 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. 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. As of January
31, 2020, the estimated value of future work covered by outstanding performance bonds was approximately $734 million. In
addition, there were bonds outstanding in the aggregate amount of approximately $152 million covering other risks including
our warranty obligations related to four EPC services projects substantially completed by GPS during Fiscal 2019.

Market conditions, changes in our performance or financial position, changes in our surety’s assessment of its own operating
and financial risk or larger future projects could cause our surety company to decline to issue, or substantially reduce the amount
of bonds for our work and could increase our bonding costs. These actions can be taken on short notice. 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.

- 12 -

- 13 -
- 13 -

We may be unable to make alternative arrangements in a timely manner, on acceptable terms, or at all. Accordingly, if we were
to experience an interruption, reduction or other alteration in the availability of bonding capacity, we may be unable to compete
for or work on certain projects.

The uncertainty relating to PJM capacity auctions may continue to disrupt capital markets for project owners. The

commencement of new EPC service power plant projects by us may be delayed until PJM receives FERC approval of new

capacity auction bidding rules and definitive future capacity auction schedules are announced.

Our results could be adversely affected by natural disasters or other catastrophic events.

The decline in electricity capacity market prices may discourage future investment in new gas-fired power plant development.

Natural disasters, such as hurricanes, tornadoes, floods and other adverse weather and climate conditions; or other catastrophic
events could disrupt our operations, or the operations of one or more of our vendors or customers. In particular, these types of
events could shut-down our construction job sites or fabrication facilities for indefinite periods of time, break our product
supply chain from the impacted region or could cause our customers to delay or cancel projects, which could impact our ability
to operate. To the extent any of these events occur, our operations and financial results could be adversely affected.

Effects of the coronavirus (COVID-19) outbreak will adversely impact our business (see Note 19 to the accompanying
financial statements for disclosure of subsequent events related to the outbreak).

Like many other companies, the coronavirus outbreak is impacting our supply chain. The Company and certain of its major
original equipment manufacturers source certain supplies, materials and equipment from countries afflicted by the
outbreak. Production disruptions related to the spreading of this virus could impact our schedules, thereby affecting our ability
to complete large fixed-price contract projects in accordance with original schedules. Now that the outbreak has become a
global pandemic, it could further challenge our ability to conduct operations normally, especially at job sites where sustained
labor productivity is essential to the achievement of successful projects. We have protections in our contracts with major
customers that provide certain relief that helps to mitigate certain financial risks. The effectiveness of these protections may be
limited by underlying issues and financial challenges at our customers. We are actively attempting to manage these various
risks. However, due to the uncertainty regarding the duration and extent of the COVID-19 outbreak, the extent of the operational
and financial impacts on the Company will depend on how long and how disperse the disruptions prove to be in a variety of
areas, including the capital markets, the Company’s customers and supply chains, and the Company’s labor force. The current
impacts of the outbreak on the Company’s businesses are not quantifiable at this time.

Risks Related to Our Market

Continued disruption of PJM’s Base Residual Auction schedule may delay the start of planned power projects.

PJM Interconnection LLC (“PJM”), founded in 1927, ensures the reliability of the high-voltage electric power system serving
65 million people in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina,
Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. PJM coordinates and directs the
operation of the region’s transmission grid; administers a competitive wholesale electricity market; and plans regional
transmission expansion improvements to maintain grid reliability and relieve congestion. PJM operates a capacity market,
called the Reliability Pricing Model (“RPM”), which is a process to ensure long-term grid reliability by securing the appropriate
amount of power supply resources needed to meet predicted future energy demands. An RPM base residual auction for a
particular delivery year is usually held during the month of May, three years prior to the actual delivery year.

The accuracy and viability of future power revenue forecasts by power plant operators and project owners depends, to a
significant degree, on the amount of future capacity supply secured for a particular power source located within PJM’s region.
For new power projects, lack of visibility regarding future capacity revenue streams complicates the search for equity and debt
financing considerably. Most of our recently completed and awarded EPC service contracts relate to natural gas-fired power
plants located in the PJM region.

In December 2019, the Federal Energy Regulatory Commission (“FERC”) voted to effectively raise the bids of subsidized
resources selling their power into PJM’s wholesale capacity market. New resources receiving subsidies will now be subject to
a rule which raises the price floor for those resources attempting to sell their power into the wholesale market. The move was
intended to prevent potential unacceptable market distorting effects caused by state clean energy policies. Clean energy
advocates and other market observers fear FERC's move will severely hinder incentives intended to bring new zero emissions
resources online, while favoring incumbent fossil fuels. Pursuant to FERC’s requirements, PJM submitted its compliance filing
with FERC on March 18, 2020, attempting to balance disparate stakeholder input. In the filing, PJM proposes to run the
2022/2023 delivery year auction six months after FERC approves its compliance filing, as long as the auction is concluded no
later than March 2021, and to run subsequent auctions with as little as six months in between to help maintain an orderly process
for each auction while working to return to a normal auction schedule. PJM had previously suspended all auction activities and
deadlines relating to the RPM base residual auctions for the 2022/2023 and 2023/2024 electricity delivery years.

- 14 -
- 14 -

The results for PJM’s most recent capacity auction (posted in May 2018) included a general clearing price that increased by

more than 82% from the corresponding price in the previous year, but was still 15% below the price three years previous. With

the exception of the most recent auction, decreased capacity pricing reflects increased participation by new generation capacity

resources mostly represented by new or updated gas-fired power plants. The electricity generation units clearing the most recent

auction did not include any new gas-fired power plants. If future capacity auction clearing prices were to resume their fall in

the US, power plant developers may be discouraged from commencing the development and construction of new power plants

which would adversely impact our business.

If the pace of future shutdown of existing coal-fired power plants slows or future policy changes encourage coal-fired and/or

nuclear power-plant operations, the demand for our construction services could decline.

The overall growth of our power business has been substantially based on the number of combined cycle gas-fired power plants

built by us, as many coal-fired plants have been shut down and the enthusiasm for nuclear-powered electricity generation has

waned in the US. Over the last ten years, the electricity-generation capacity represented by coal-fired power plants in the US

declined by approximately 30%. During 2019, power companies retired or converted roughly 15,100 megawatts (MW) of coal-

fired electricity generation, enough to power about 15 million homes. That retirement capacity reduction was second only to

the record 19,300 MW of capacity shut down in 2015. In 1990, coal-fired power plants accounted for about 52% of total

electricity generation. By the end of 2019, coal accounted for less than 24% of total electricity generation. The use of coal as a

power source has been adversely affected primarily by the inexpensive supply of natural gas. Most nuclear power plants were

built before 1990. Nuclear energy’s share of total US electricity generation has held steady at about 20% since 1990. The future

of nuclear power plant construction is clouded. The abandonment of the partially completed reactors at the V.C. Summer

nuclear power generation plant in South Carolina was accompanied by the project owner’s announcement of a reluctance to

saddle customers with increasing costs. Just two nuclear power plant reactors are under construction in the US today (the Vogtle

plant units 3 and 4).

The pace of these changes has been energized by environmental activism, environmental regulations targeting coal-fired power

plants and public fear of nuclear power plants. In the reference case of the Annual Energy Outlook 2020, the Energy Information

Administration (“EIA”) predicts that coal-fired and nuclear power generation capacity will decline approximately 47% and

20% by 2050, respectively, and will represent only 14% and 13% shares of the electricity generation mix by 2050, respectively.

However, the policies and actions of the federal government may present risks to our power industry services business. The

administration of President Trump may continue to reduce or eliminate environmental rules and regulations aimed at curbing

greenhouse gas emissions and may support coal and nuclear-fired power plants for the sake of grid resilience. Should the federal

government weaken or eliminate anti-pollution regulations or adopt policies that advance support for the operation of nuclear

power plants, power plant operators may slow the rate of coal-fired and nuclear-powered electricity generation plant shutdowns,

thereby reducing the number of future gas-fired power plant construction opportunities for us in the future.

Soft demand for electrical power may cause deterioration in our financial outlook.

During 2018 and for the first time in 12 years, the total annual amount of electricity generated by utility-scale facilities in the

US surpassed the total amount generated in the peak power generation year of 2007 as the total amount of electricity generation

was approximately 100.5% of the level for 2007. The recently published government reference-case outlook forecasts average

increases to utility-scale electricity generation in the US of less than 1% per year through 2050.

However, for calendar year 2019, the total amount of electricity generated by utility-scale power plants declined by 1.3%. Prior

to 2018, total electric power generation from all sources had decreased over three years. Power demand gains related to

economic growth and population increases have been offset by the effects of private electricity generation and energy efficient

devices. The largest share of electricity generation by utility-scale power sources in the US is fueled by natural gas. Further

softening of future demand for electrical power in the US, which will likely occur in the near term due to adverse impacts of

the COVID-19 outbreak, 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.

- 15 -

We may be unable to make alternative arrangements in a timely manner, on acceptable terms, or at all. Accordingly, if we were

to experience an interruption, reduction or other alteration in the availability of bonding capacity, we may be unable to compete

for or work on certain projects.

The uncertainty relating to PJM capacity auctions may continue to disrupt capital markets for project owners. The
commencement of new EPC service power plant projects by us may be delayed until PJM receives FERC approval of new
capacity auction bidding rules and definitive future capacity auction schedules are announced.

Our results could be adversely affected by natural disasters or other catastrophic events.

The decline in electricity capacity market prices may discourage future investment in new gas-fired power plant development.

Natural disasters, such as hurricanes, tornadoes, floods and other adverse weather and climate conditions; or other catastrophic

events could disrupt our operations, or the operations of one or more of our vendors or customers. In particular, these types of

events could shut-down our construction job sites or fabrication facilities for indefinite periods of time, break our product

supply chain from the impacted region or could cause our customers to delay or cancel projects, which could impact our ability

to operate. To the extent any of these events occur, our operations and financial results could be adversely affected.

Effects of the coronavirus (COVID-19) outbreak will adversely impact our business (see Note 19 to the accompanying

financial statements for disclosure of subsequent events related to the outbreak).

Like many other companies, the coronavirus outbreak is impacting our supply chain. The Company and certain of its major

original equipment manufacturers source certain supplies, materials and equipment from countries afflicted by the

outbreak. Production disruptions related to the spreading of this virus could impact our schedules, thereby affecting our ability

to complete large fixed-price contract projects in accordance with original schedules. Now that the outbreak has become a

global pandemic, it could further challenge our ability to conduct operations normally, especially at job sites where sustained

labor productivity is essential to the achievement of successful projects. We have protections in our contracts with major

customers that provide certain relief that helps to mitigate certain financial risks. The effectiveness of these protections may be

limited by underlying issues and financial challenges at our customers. We are actively attempting to manage these various

risks. However, due to the uncertainty regarding the duration and extent of the COVID-19 outbreak, the extent of the operational

and financial impacts on the Company will depend on how long and how disperse the disruptions prove to be in a variety of

areas, including the capital markets, the Company’s customers and supply chains, and the Company’s labor force. The current

impacts of the outbreak on the Company’s businesses are not quantifiable at this time.

Risks Related to Our Market

Continued disruption of PJM’s Base Residual Auction schedule may delay the start of planned power projects.

PJM Interconnection LLC (“PJM”), founded in 1927, ensures the reliability of the high-voltage electric power system serving

65 million people in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina,

Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. PJM coordinates and directs the

operation of the region’s transmission grid; administers a competitive wholesale electricity market; and plans regional

transmission expansion improvements to maintain grid reliability and relieve congestion. PJM operates a capacity market,

called the Reliability Pricing Model (“RPM”), which is a process to ensure long-term grid reliability by securing the appropriate

amount of power supply resources needed to meet predicted future energy demands. An RPM base residual auction for a

particular delivery year is usually held during the month of May, three years prior to the actual delivery year.

The accuracy and viability of future power revenue forecasts by power plant operators and project owners depends, to a

significant degree, on the amount of future capacity supply secured for a particular power source located within PJM’s region.

For new power projects, lack of visibility regarding future capacity revenue streams complicates the search for equity and debt

financing considerably. Most of our recently completed and awarded EPC service contracts relate to natural gas-fired power

plants located in the PJM region.

In December 2019, the Federal Energy Regulatory Commission (“FERC”) voted to effectively raise the bids of subsidized

resources selling their power into PJM’s wholesale capacity market. New resources receiving subsidies will now be subject to

a rule which raises the price floor for those resources attempting to sell their power into the wholesale market. The move was

intended to prevent potential unacceptable market distorting effects caused by state clean energy policies. Clean energy

advocates and other market observers fear FERC's move will severely hinder incentives intended to bring new zero emissions

resources online, while favoring incumbent fossil fuels. Pursuant to FERC’s requirements, PJM submitted its compliance filing

with FERC on March 18, 2020, attempting to balance disparate stakeholder input. In the filing, PJM proposes to run the

2022/2023 delivery year auction six months after FERC approves its compliance filing, as long as the auction is concluded no

later than March 2021, and to run subsequent auctions with as little as six months in between to help maintain an orderly process

for each auction while working to return to a normal auction schedule. PJM had previously suspended all auction activities and

deadlines relating to the RPM base residual auctions for the 2022/2023 and 2023/2024 electricity delivery years.

- 14 -

The results for PJM’s most recent capacity auction (posted in May 2018) included a general clearing price that increased by
more than 82% from the corresponding price in the previous year, but was still 15% below the price three years previous. With
the exception of the most recent auction, decreased capacity pricing reflects increased participation by new generation capacity
resources mostly represented by new or updated gas-fired power plants. The electricity generation units clearing the most recent
auction did not include any new gas-fired power plants. If future capacity auction clearing prices were to resume their fall in
the US, power plant developers may be discouraged from commencing the development and construction of new power plants
which would adversely impact our business.

If the pace of future shutdown of existing coal-fired power plants slows or future policy changes encourage coal-fired and/or
nuclear power-plant operations, the demand for our construction services could decline.

The overall growth of our power business has been substantially based on the number of combined cycle gas-fired power plants
built by us, as many coal-fired plants have been shut down and the enthusiasm for nuclear-powered electricity generation has
waned in the US. Over the last ten years, the electricity-generation capacity represented by coal-fired power plants in the US
declined by approximately 30%. During 2019, power companies retired or converted roughly 15,100 megawatts (MW) of coal-
fired electricity generation, enough to power about 15 million homes. That retirement capacity reduction was second only to
the record 19,300 MW of capacity shut down in 2015. In 1990, coal-fired power plants accounted for about 52% of total
electricity generation. By the end of 2019, coal accounted for less than 24% of total electricity generation. The use of coal as a
power source has been adversely affected primarily by the inexpensive supply of natural gas. Most nuclear power plants were
built before 1990. Nuclear energy’s share of total US electricity generation has held steady at about 20% since 1990. The future
of nuclear power plant construction is clouded. The abandonment of the partially completed reactors at the V.C. Summer
nuclear power generation plant in South Carolina was accompanied by the project owner’s announcement of a reluctance to
saddle customers with increasing costs. Just two nuclear power plant reactors are under construction in the US today (the Vogtle
plant units 3 and 4).

The pace of these changes has been energized by environmental activism, environmental regulations targeting coal-fired power
plants and public fear of nuclear power plants. In the reference case of the Annual Energy Outlook 2020, the Energy Information
Administration (“EIA”) predicts that coal-fired and nuclear power generation capacity will decline approximately 47% and
20% by 2050, respectively, and will represent only 14% and 13% shares of the electricity generation mix by 2050, respectively.

However, the policies and actions of the federal government may present risks to our power industry services business. The
administration of President Trump may continue to reduce or eliminate environmental rules and regulations aimed at curbing
greenhouse gas emissions and may support coal and nuclear-fired power plants for the sake of grid resilience. Should the federal
government weaken or eliminate anti-pollution regulations or adopt policies that advance support for the operation of nuclear
power plants, power plant operators may slow the rate of coal-fired and nuclear-powered electricity generation plant shutdowns,
thereby reducing the number of future gas-fired power plant construction opportunities for us in the future.

Soft demand for electrical power may cause deterioration in our financial outlook.

During 2018 and for the first time in 12 years, the total annual amount of electricity generated by utility-scale facilities in the
US surpassed the total amount generated in the peak power generation year of 2007 as the total amount of electricity generation
was approximately 100.5% of the level for 2007. The recently published government reference-case outlook forecasts average
increases to utility-scale electricity generation in the US of less than 1% per year through 2050.

However, for calendar year 2019, the total amount of electricity generated by utility-scale power plants declined by 1.3%. Prior
to 2018, total electric power generation from all sources had decreased over three years. Power demand gains related to
economic growth and population increases have been offset by the effects of private electricity generation and energy efficient
devices. The largest share of electricity generation by utility-scale power sources in the US is fueled by natural gas. Further
softening of future demand for electrical power in the US, which will likely occur in the near term due to adverse impacts of
the COVID-19 outbreak, 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.

- 15 -
- 15 -

Intense global competition for engineering, procurement and construction contracts could reduce our market share.

Uncertain economic and political conditions may increase the difficulty of forecasting future domestic business levels.

The competitive landscape in the EPC services market for natural gas-fired power plants has changed significantly over the
last few years. Several significant competitors announced their exit from the market for a variety of reasons. Others have
announced intentions to avoid entering into fixed-price contracts citing the disproportionate financial risks born by contractors.
However, the market remains dynamic, and competitors include, among others, Kiewit Corporation, Bechtel Corporation and
Black & Veatch Corporation. These and other competitors are multibillion-dollar companies with thousands of employees.
Competing effectively in our market requires substantial financial resources, the availability of skilled personnel and equipment
when needed and the effective use of technology.

Competition places downward pressure on our contract prices and profit margins and may force us to accept contractual terms
and conditions that are not normal or customary, thereby increasing the risk that we may incur losses on such contracts.
Meaningful competition is expected to continue in our market, presenting us with significant challenges to our achieving strong
growth rates and acceptable profit margins. If we are unable to meet these competitive challenges and start 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.

Our revenues and profitability may be adversely affected by a reduced level of activity in the hydrocarbon industry.

Changes in oil or natural gas prices or activities in the hydrocarbon industry could adversely affect the demand for our services.
The vast new supplies of natural gas have caused, in part, low prices for natural gas in the US. Future predictions of power
generation are based in large part on the belief that natural gas supplies will remain plentiful resulting in a relatively low and
stable price for natural gas in the foreseeable future. However, future oil or natural gas prices that are too low may result in
cutbacks in exploration, extraction and production activities which may lead to reductions in future supplies of natural gas.

Subsequent to January 31, 2020, the global price of oil became very unstable. In March 2020, the global price for a barrel of
oil tumbled by 25% during one day, and the price in the US hit an 18-year low. The continuing oil price war between Saudi
Arabia and Russia showed no signs of abating. A sustained depression in the price of oil may have the opposite effect on the
future price of natural gas. The low price of oil could result in the curtailment of all drilling activities, thereby decreasing
supplies of natural gas and increasing natural gas prices. A meaningful rise in natural gas prices, which could also be caused
or exacerbated by the significant exporting of liquefied natural gas, may adversely impact the favorable economic factors for
project owners as they consider the construction of natural gas-fired power plants in the future. Any reduction in the number
of future power plant project construction or improvement opportunities could adversely affect our power industry service
business.

In addition, certain of our existing customers have meaningful exposure to the oil business. Continued instability in the oil
markets could negatively impact their businesses and associated liquidity and potentially result in an inability to pay monies
owed to us.

The continuous rise in renewables could reduce the number of future gas-fired power plant projects.

The share of electricity generation in the US provided by utility-scale wind and solar photovoltaic facilities continues to
gradually increase. Together, such power facilities provided approximately 9.6%, 9.9% and 10.8% of the total amount of
electricity generated by utility-scale power facilities in 2017, 2018 and 2019, respectively. In EIA’s 2020 reference case,
electricity generating capacity from wind and solar powered sources is expected to increase by more than 360%, representing
over 30% of total capacity, by 2050. 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 amount of renewable power plant component and power storage costs
and the increase in the scale of energy storage capacity. Should the pace of development for renewable energy facilities,
including wind and solar power plants, accelerate at faster rates than forecast, the number of future natural gas-fired
construction project opportunities for us may fall. We have successfully built utility-scale wind and solar farms in the past, and
we have renewed the pursuit of such projects as a core business development focus. Failure to obtain future awards for the
erection of wind and solar-powered utility-scale power projects could have adverse effects on our future revenues, profits and
cash flows.

Certain regulatory and political conditions in the US may make it more difficult for our customers, our subcontractors and

suppliers and us to predict accurately future business levels and to plan future business activities. For example, changes to

policies have resulted in uncertainty regarding the future of global trade due to actual and threatened trade restrictions in the

US as well as possible retaliatory trade measures that may be implemented by other countries. The availability of construction

and manufacturing materials, such as steel, aluminum and lumber, at predictable and reasonable prices when we need them is

crucial to the ability of GPS and TRC to complete projects profitably, particularly those performed under fixed-price contract

basis. We cannot predict the outcome of these changing trade policies or other unanticipated regulatory or political conditions

or their ultimate effects on our ability to manage our businesses profitably.

Unexpected and adverse changes in the foreign countries in which we operate could result in project disruptions, increased

cost and potential losses.

Our business is also subject to international economic and political conditions that change for reasons which are beyond our

control. Such changes may have unfavorable consequences for us. Operating in the international marketplace, which for us

exists primarily in the Republic of Ireland and the UK, may expose us to a number of risks including:

• abrupt changes in domestic and/or foreign government policies, laws, treaties (including those impacting trade),

regulations or leadership;

• embargoes or other trade restrictions, including sanctions;

•

restrictions on currency movement;

tax or tariff increases;

• currency exchange rate fluctuations;

• changes in labor conditions and difficulties in staffing and managing international operations; and

• other social, political and economic instability.

Further, the ultimate impacts of the UK’s exit from the European Economic Union (“Brexit”) on the economies of the UK and

the Republic of Ireland and the stability of their currencies are currently unknown.

Our level of exposure to these risks will vary on each significant project we perform there, depending on the location and the

particular stage of the project. 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 cause losses at the consolidated level.

Risks Related to the Regulatory Environment

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 hydraulic fracturing (“fracking”) combined with horizontal drilling techniques. Certain

technological advancements led to the widespread use of fracking and horizontal drilling enabling drillers to reach natural gas

and oil deposits previously trapped within shale rock formations deep under the earth’s surface. The access to new oil and gas

reserves are transforming the oil and gas industry in the US. In particular, the new supplies of natural gas have lowered the

price of natural gas in the US and reduced its volatility, making the operation of natural gas-fired power plants more

economically appealing. However, the process of fracking uses large volumes of highly pressurized water to break-up the shale

rock formations and to free the trapped natural gas and oil. This process is controversial due to concerns about the disposal of

the waste water, the possible contamination of nearby water supplies and the risk of potential seismic events.

As a result, not all states permit the use of fracking. In addition, contenders for the Democratic Presidential nomination in 2020

threatened that the practice would be further limited or suspended across the country. Should future evidence confirm the

concerns, should a major contamination or seismic episode occur in the future or should the political control of the White House

change in 2020, the use of fracking may be suspended, limited, or curtailed by state and/or federal authorities. 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 may

be jeopardized. A reduction in the pace of the construction of new gas-fired power plants would have a significantly adverse

effect on our future operating results.

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- 17 -

The competitive landscape in the EPC services market for natural gas-fired power plants has changed significantly over the

last few years. Several significant competitors announced their exit from the market for a variety of reasons. Others have

announced intentions to avoid entering into fixed-price contracts citing the disproportionate financial risks born by contractors.

However, the market remains dynamic, and competitors include, among others, Kiewit Corporation, Bechtel Corporation and

Black & Veatch Corporation. These and other competitors are multibillion-dollar companies with thousands of employees.

Competing effectively in our market requires substantial financial resources, the availability of skilled personnel and equipment

when needed and the effective use of technology.

Competition places downward pressure on our contract prices and profit margins and may force us to accept contractual terms

and conditions that are not normal or customary, thereby increasing the risk that we may incur losses on such contracts.

Meaningful competition is expected to continue in our market, presenting us with significant challenges to our achieving strong

growth rates and acceptable profit margins. If we are unable to meet these competitive challenges and start 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.

Our revenues and profitability may be adversely affected by a reduced level of activity in the hydrocarbon industry.

Changes in oil or natural gas prices or activities in the hydrocarbon industry could adversely affect the demand for our services.

The vast new supplies of natural gas have caused, in part, low prices for natural gas in the US. Future predictions of power

generation are based in large part on the belief that natural gas supplies will remain plentiful resulting in a relatively low and

stable price for natural gas in the foreseeable future. However, future oil or natural gas prices that are too low may result in

cutbacks in exploration, extraction and production activities which may lead to reductions in future supplies of natural gas.

Subsequent to January 31, 2020, the global price of oil became very unstable. In March 2020, the global price for a barrel of

oil tumbled by 25% during one day, and the price in the US hit an 18-year low. The continuing oil price war between Saudi

Arabia and Russia showed no signs of abating. A sustained depression in the price of oil may have the opposite effect on the

future price of natural gas. The low price of oil could result in the curtailment of all drilling activities, thereby decreasing

supplies of natural gas and increasing natural gas prices. A meaningful rise in natural gas prices, which could also be caused

or exacerbated by the significant exporting of liquefied natural gas, may adversely impact the favorable economic factors for

project owners as they consider the construction of natural gas-fired power plants in the future. Any reduction in the number

of future power plant project construction or improvement opportunities could adversely affect our power industry service

business.

owed to us.

The continuous rise in renewables could reduce the number of future gas-fired power plant projects.

The share of electricity generation in the US provided by utility-scale wind and solar photovoltaic facilities continues to

gradually increase. Together, such power facilities provided approximately 9.6%, 9.9% and 10.8% of the total amount of

electricity generated by utility-scale power facilities in 2017, 2018 and 2019, respectively. In EIA’s 2020 reference case,

electricity generating capacity from wind and solar powered sources is expected to increase by more than 360%, representing

over 30% of total capacity, by 2050. 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 amount of renewable power plant component and power storage costs

and the increase in the scale of energy storage capacity. Should the pace of development for renewable energy facilities,

including wind and solar power plants, accelerate at faster rates than forecast, the number of future natural gas-fired

construction project opportunities for us may fall. We have successfully built utility-scale wind and solar farms in the past, and

we have renewed the pursuit of such projects as a core business development focus. Failure to obtain future awards for the

erection of wind and solar-powered utility-scale power projects could have adverse effects on our future revenues, profits and

cash flows.

Intense global competition for engineering, procurement and construction contracts could reduce our market share.

Uncertain economic and political conditions may increase the difficulty of forecasting future domestic business levels.

Certain regulatory and political conditions in the US may make it more difficult for our customers, our subcontractors and
suppliers and us to predict accurately future business levels and to plan future business activities. For example, changes to
policies have resulted in uncertainty regarding the future of global trade due to actual and threatened trade restrictions in the
US as well as possible retaliatory trade measures that may be implemented by other countries. The availability of construction
and manufacturing materials, such as steel, aluminum and lumber, at predictable and reasonable prices when we need them is
crucial to the ability of GPS and TRC to complete projects profitably, particularly those performed under fixed-price contract
basis. We cannot predict the outcome of these changing trade policies or other unanticipated regulatory or political conditions
or their ultimate effects on our ability to manage our businesses profitably.

Unexpected and adverse changes in the foreign countries in which we operate could result in project disruptions, increased
cost and potential losses.

Our business is also subject to international economic and political conditions that change for reasons which are beyond our
control. Such changes may have unfavorable consequences for us. Operating in the international marketplace, which for us
exists primarily in the Republic of Ireland and the UK, may expose us to a number of risks including:

• abrupt changes in domestic and/or foreign government policies, laws, treaties (including those impacting trade),

regulations or leadership;

restrictions on currency movement;
tax or tariff increases;

• embargoes or other trade restrictions, including sanctions;
•
•
• currency exchange rate fluctuations;
• changes in labor conditions and difficulties in staffing and managing international operations; and
• other social, political and economic instability.

In addition, certain of our existing customers have meaningful exposure to the oil business. Continued instability in the oil

markets could negatively impact their businesses and associated liquidity and potentially result in an inability to pay monies

Risks Related to the Regulatory Environment

Further, the ultimate impacts of the UK’s exit from the European Economic Union (“Brexit”) on the economies of the UK and
the Republic of Ireland and the stability of their currencies are currently unknown.

Our level of exposure to these risks will vary on each significant project we perform there, depending on the location and the
particular stage of the project. 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 cause losses at the consolidated level.

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 hydraulic fracturing (“fracking”) combined with horizontal drilling techniques. Certain
technological advancements led to the widespread use of fracking and horizontal drilling enabling drillers to reach natural gas
and oil deposits previously trapped within shale rock formations deep under the earth’s surface. The access to new oil and gas
reserves are transforming the oil and gas industry in the US. In particular, the new supplies of natural gas have lowered the
price of natural gas in the US and reduced its volatility, making the operation of natural gas-fired power plants more
economically appealing. However, the process of fracking uses large volumes of highly pressurized water to break-up the shale
rock formations and to free the trapped natural gas and oil. This process is controversial due to concerns about the disposal of
the waste water, the possible contamination of nearby water supplies and the risk of potential seismic events.

As a result, not all states permit the use of fracking. In addition, contenders for the Democratic Presidential nomination in 2020
threatened that the practice would be further limited or suspended across the country. Should future evidence confirm the
concerns, should a major contamination or seismic episode occur in the future or should the political control of the White House
change in 2020, the use of fracking may be suspended, limited, or curtailed by state and/or federal authorities. 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 may
be jeopardized. A reduction in the pace of the construction of new gas-fired power plants would have a significantly adverse
effect on our future operating results.

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- 17 -
- 17 -

We may be affected by regulatory responses to the fear of climate change.

Risks Related to Our Operational Execution

Growing concerns about climate change caused by greenhouse gas emissions may result in the imposition of additional
environmental regulations on the operators of fossil-fuel burning power plants. Legislation, international protocols or new
regulations and other restrictions on emissions promulgated by government agencies could affect those entities, including our
customers in some cases, who are involved in the exploration, production or refining of fossil fuels or emit greenhouse gases
through the combustion of fossil fuels. Concerns about global warming, climate change and other conditions provided
motivation for the Green New Deal Resolution promoted by progressive members of the US Congress which is supported by
numerous environmental groups. The plan pushes for transitioning the US to use 100% renewable, zero-emission energy
sources and implementing the “social cost of carbon” within 10 years.

We cannot predict when or whether any of these various proposals may be enacted or what their effect will be on or customers
or on us. Such policy changes could increase the costs of natural gas-fired power plant projects for our customers or decrease
the cost of competing renewable power projects through subsidies or other means, thereby, in some cases, ruining the economic
or regulatory viability of a future gas-fired power plant development project. The impact could be a reduction of the need for
our services, which would in turn have a material adverse impact on our business, financial condition, and results of operations.

The inability of power project developers to receive or to avoid delay in receiving the applicable regulatory approvals relating
to new power plants may result in lost or postponed revenues for us.

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. There
are no assurances that our project owner customers will obtain the necessary permits for these projects, or that the necessary
permits will be obtained in order to allow construction work to proceed as scheduled. Failure to commence or complete
construction work as anticipated could have material adverse impacts on our future revenues, profits and cash flows.

The viability of new natural gas-fired power plants depends on the availability of nearby sources of natural gas for fuel which
may require the construction of new pipelines for the delivery of gas to a power plant location. A planned plant may also depend
on the erection of transmission lines for the delivery of the newly generated electricity to the grid. Concerns about climate
change have also resulted in increased environmental activism that represents opposition to the regulatory approval of any
fossil-fuel energy project. Approval delays and public opposition to new oil and gas pipelines have become major potential
hurdles for the developers of gas-fired power plants and other fossil fuel facilities. The slowdown in permitting processes is
due, at least in part, to the increase in environmental activism that garners media attention and fosters public skepticism about
new projects. In particular, pipeline projects are delayed by onsite protest demonstrations, indecision by local officials and
lawsuits. Approval difficulties may jeopardize projects that are needed to bring supplies of natural gas to proposed gas-fired
power plant sites or electricity to the grid thereby increasing the risk of gas-fired power plant delays or cancellations.

We could be subject to compliance with environmental laws and regulations that would add costs to our business.

Our operations are subject to compliance with federal, state and local environmental laws and regulations, including those
relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste, and the cleanup of
properties affected by hazardous substances. Certain environmental laws impose substantial penalties for non-compliance and
others, such as the federal Comprehensive Environmental Response, Compensation and Liability Act, impose strict, retroactive,
and joint and several liability upon persons responsible for releases of hazardous substances. We continually evaluate whether
we must take additional steps to ensure compliance with environmental laws, however, there can be no assurance that these
requirements will not change and that compliance will not adversely affect our operations in the future.

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.
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. A
lengthy strike or the occurrence of other work stoppages or slowdowns at any of our current or future construction project sites
could have an adverse effect on us, resulting in cost overruns and schedule delays that could be significant. In addition, it is
possible that labor incidents result in negative publicity for us thereby damaging our business reputation and perhaps harming
our prospects for the receipt of future construction contract awards in certain locales.

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- 18 -

We may experience reduced profits or incur losses under fixed price contracts if costs increase above estimates.

Primarily, our business is performed under long-term, fixed price contracts at prices that reflect our estimates of corresponding

costs and schedules. Inaccuracies in these estimates may lead to cost overruns that may not be paid by our project owner

customers. 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 impacts

on our financial results as well as our business reputation.

Factors that could result in contract cost overruns, project delays or other problems for us may include:

• delays in the scheduled deliveries of machinery and equipment ordered by us or a project owner;

difficulties or delays in our obtaining permits, rights of way or approvals;

unanticipated technical problems, including design or engineering issues;

• inadequate project execution tools for recording, tracking, forecasting and controlling future costs and schedules;

•

unforeseen increases in the costs of labor, warranties, raw materials, components or equipment, or our failure or

inability to obtain resources when needed;

• reliance on historical cost and/or execution data that is not representative of current conditions;

delays or productivity issues caused by weather conditions, or other forces majeure (i.e., pandemics);

incorrect assumptions related to labor productivity, scheduling estimates or future economic conditions, including

•

the impacts of inflation on fixed-price contracts; and

• modifications to projects that create unanticipated costs or delays.

These risks tend to be exacerbated for longer-term contracts because there is increased risk that the circumstances under which

we based our original cost estimates or project schedules will change with a resulting increase in costs or delays in achieving

scheduled milestones. In such events, our financial condition and results of operations could be negatively impacted. We try to

mitigate these risks by reflecting in our overall cost estimates the reasonable possibility that a number of different and

potentially unfavorable outcomes might occur. If certain risk scenarios transpire and a cost overrun occurs on a project, it is

possible that our overall cost estimate can absorb the cost overrun. There are no assurances that our estimates will be sufficient.

If not, our misjudgments may lead to decreased profits or losses. In some cases, as certain risk scenarios are eliminated or our

concerns regarding certain potential cost and/or schedule issues diminish, we may estimate that the likelihood of an unforeseen

cost overrun has reduced and, accordingly, we may increase the estimated gross margin on the project by decreasing the

remaining overall cost estimate.

Our work on the TeesREP project in the UK has been performed primarily pursuant to a fixed-price subcontract. Based on the

completed analyses that have been updated multiple times through Fiscal 2020, management expects that the forecasted costs

for APC at contract completion will exceed projected revenues by approximately $33.6 million. The entire amount of this loss

was recorded and is reflected in our operating results for Fiscal 2020. However, as stated above, it is reasonably possible that

unforeseen future difficulties on this project resulting in costs that cannot be recovered from the customer will cause us to

record additional loss related to this project in the future.

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. Subsequently, we may fail to

complete the project on time or equipment that we install may not meet guaranteed performance standards. In those cases, we

may be held responsible for costs incurred by the customer resulting from any delay or any modification to the plant made in

order to achieve the performance standards, generally in the form of contractually agreed-upon liquidated damages or

obligations to re-perform substandard work. If we are required to pay such costs, the total costs of the project would likely

exceed our original estimate, and we could experience reduced profits or a loss related to the applicable project.

We may be involved in litigation, liability claims and contract disputes which could reduce our profits and cash flows.

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 that they incurred in excess of what they expected to incur, or

- 19 -

Growing concerns about climate change caused by greenhouse gas emissions may result in the imposition of additional

environmental regulations on the operators of fossil-fuel burning power plants. Legislation, international protocols or new

regulations and other restrictions on emissions promulgated by government agencies could affect those entities, including our

customers in some cases, who are involved in the exploration, production or refining of fossil fuels or emit greenhouse gases

through the combustion of fossil fuels. Concerns about global warming, climate change and other conditions provided

motivation for the Green New Deal Resolution promoted by progressive members of the US Congress which is supported by

numerous environmental groups. The plan pushes for transitioning the US to use 100% renewable, zero-emission energy

sources and implementing the “social cost of carbon” within 10 years.

We cannot predict when or whether any of these various proposals may be enacted or what their effect will be on or customers

or on us. Such policy changes could increase the costs of natural gas-fired power plant projects for our customers or decrease

the cost of competing renewable power projects through subsidies or other means, thereby, in some cases, ruining the economic

or regulatory viability of a future gas-fired power plant development project. The impact could be a reduction of the need for

our services, which would in turn have a material adverse impact on our business, financial condition, and results of operations.

The inability of power project developers to receive or to avoid delay in receiving the applicable regulatory approvals relating

to new power plants may result in lost or postponed revenues for us.

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. There

are no assurances that our project owner customers will obtain the necessary permits for these projects, or that the necessary

permits will be obtained in order to allow construction work to proceed as scheduled. Failure to commence or complete

construction work as anticipated could have material adverse impacts on our future revenues, profits and cash flows.

The viability of new natural gas-fired power plants depends on the availability of nearby sources of natural gas for fuel which

may require the construction of new pipelines for the delivery of gas to a power plant location. A planned plant may also depend

on the erection of transmission lines for the delivery of the newly generated electricity to the grid. Concerns about climate

change have also resulted in increased environmental activism that represents opposition to the regulatory approval of any

fossil-fuel energy project. Approval delays and public opposition to new oil and gas pipelines have become major potential

hurdles for the developers of gas-fired power plants and other fossil fuel facilities. The slowdown in permitting processes is

due, at least in part, to the increase in environmental activism that garners media attention and fosters public skepticism about

new projects. In particular, pipeline projects are delayed by onsite protest demonstrations, indecision by local officials and

lawsuits. Approval difficulties may jeopardize projects that are needed to bring supplies of natural gas to proposed gas-fired

power plant sites or electricity to the grid thereby increasing the risk of gas-fired power plant delays or cancellations.

We could be subject to compliance with environmental laws and regulations that would add costs to our business.

Our operations are subject to compliance with federal, state and local environmental laws and regulations, including those

relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste, and the cleanup of

properties affected by hazardous substances. Certain environmental laws impose substantial penalties for non-compliance and

others, such as the federal Comprehensive Environmental Response, Compensation and Liability Act, impose strict, retroactive,

and joint and several liability upon persons responsible for releases of hazardous substances. We continually evaluate whether

we must take additional steps to ensure compliance with environmental laws, however, there can be no assurance that these

requirements will not change and that compliance will not adversely affect our operations in the future.

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.

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. A

lengthy strike or the occurrence of other work stoppages or slowdowns at any of our current or future construction project sites

could have an adverse effect on us, resulting in cost overruns and schedule delays that could be significant. In addition, it is

possible that labor incidents result in negative publicity for us thereby damaging our business reputation and perhaps harming

our prospects for the receipt of future construction contract awards in certain locales.

We may be affected by regulatory responses to the fear of climate change.

Risks Related to Our Operational Execution

We may experience reduced profits or incur losses under fixed price contracts if costs increase above estimates.

Primarily, our business is performed under long-term, fixed price contracts at prices that reflect our estimates of corresponding
costs and schedules. Inaccuracies in these estimates may lead to cost overruns that may not be paid by our project owner
customers. 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 impacts
on our financial results as well as our business reputation.

Factors that could result in contract cost overruns, project delays or other problems for us may include:

difficulties or delays in our obtaining permits, rights of way or approvals;
unanticipated technical problems, including design or engineering issues;

• delays in the scheduled deliveries of machinery and equipment ordered by us or a project owner;
•
•
• inadequate project execution tools for recording, tracking, forecasting and controlling future costs and schedules;
•

unforeseen increases in the costs of labor, warranties, raw materials, components or equipment, or our failure or
inability to obtain resources when needed;

• reliance on historical cost and/or execution data that is not representative of current conditions;
•
•

delays or productivity issues caused by weather conditions, or other forces majeure (i.e., pandemics);
incorrect assumptions related to labor productivity, scheduling estimates or future economic conditions, including
the impacts of inflation on fixed-price contracts; and

• modifications to projects that create unanticipated costs or delays.

These risks tend to be exacerbated for longer-term contracts because there is increased risk that the circumstances under which
we based our original cost estimates or project schedules will change with a resulting increase in costs or delays in achieving
scheduled milestones. In such events, our financial condition and results of operations could be negatively impacted. We try to
mitigate these risks by reflecting in our overall cost estimates the reasonable possibility that a number of different and
potentially unfavorable outcomes might occur. If certain risk scenarios transpire and a cost overrun occurs on a project, it is
possible that our overall cost estimate can absorb the cost overrun. There are no assurances that our estimates will be sufficient.
If not, our misjudgments may lead to decreased profits or losses. In some cases, as certain risk scenarios are eliminated or our
concerns regarding certain potential cost and/or schedule issues diminish, we may estimate that the likelihood of an unforeseen
cost overrun has reduced and, accordingly, we may increase the estimated gross margin on the project by decreasing the
remaining overall cost estimate.

Our work on the TeesREP project in the UK has been performed primarily pursuant to a fixed-price subcontract. Based on the
completed analyses that have been updated multiple times through Fiscal 2020, management expects that the forecasted costs
for APC at contract completion will exceed projected revenues by approximately $33.6 million. The entire amount of this loss
was recorded and is reflected in our operating results for Fiscal 2020. However, as stated above, it is reasonably possible that
unforeseen future difficulties on this project resulting in costs that cannot be recovered from the customer will cause us to
record additional loss related to this project in the future.

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. Subsequently, we may fail to
complete the project on time or equipment that we install may not meet guaranteed performance standards. In those cases, we
may be held responsible for costs incurred by the customer resulting from any delay or any modification to the plant made in
order to achieve the performance standards, generally in the form of contractually agreed-upon liquidated damages or
obligations to re-perform substandard work. If we are required to pay such costs, the total costs of the project would likely
exceed our original estimate, and we could experience reduced profits or a loss related to the applicable project.

We may be involved in litigation, liability claims and contract disputes which could reduce our profits and cash flows.

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 that they incurred in excess of what they expected to incur, or

- 18 -

- 19 -
- 19 -

for which they believe they are not contractually liable. 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. 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 below for allegations made against us). These legal matters generally arise in the normal
course of our business. In addition, from time to time, we and/or certain of our current or former directors, officers or employees
may be named as parties to other types of lawsuits.

Litigation can involve complex factual and legal questions, and proceedings may occur over several years. As a result, it is
typically not possible to predict the likely outcome of legal actions with certainty, but it is likely that any significant lawsuit or
other claim against us that involves lengthy legal maneuvering may have a material adverse effect on us regardless of the
outcome. Any claim that is successfully asserted against us could result in our payment of significant sums for damages and
other losses. Even if we were to prevail, any litigation may be costly and time-consuming, and would likely divert the attention
of our management and key personnel from our business operations over multi-year periods. Either outcome may result in
adverse effects on our financial condition, results of operations and cash flows.

In accordance with customary industry practices, we maintain insurance coverage against some, but not all, potential losses in
order to protect against the risks we face. 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. 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. In addition, we cannot insure fully against pollution and environmental risks. 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 liability not covered by our insurance, in excess of our
insurance limits and self-insurance reserves or, if covered by insurance but subject to a high deductible, could result in a
significant loss for us, which claims may reduce our future profits and cash available for operations.

Our failure to recover adequately on contract variations submitted to project owners could have a material effect on our
financial results.

We may submit contract variations to project owners for additional costs exceeding the contract price or for amounts not
included in the original contract price. For example, in January 2019, we filed a lawsuit against a project owner for breach of
contract and failure to remedy various conditions which negatively affected the schedule and costs associated with the
construction of a gas-fired power plant. APC has submitted a number of meaningful contract variation requests to its customer
on the TeesREP project. Both of these matters remained unresolved at January 31, 2020. These variations occur due to matters
such as owner-caused delays or changes from the initial project scope, both of which may result in additional costs. At times,
contract variation submissions can be the subject of lengthy arbitration or litigation proceedings, and it is difficult to accurately
predict when these differences will be fully resolved. 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 amount of contract variations
included in the transaction prices that were used to determine project-to-date revenues for all of our projects at January 31,
2020 was $20.6 million. A failure to promptly recover on these types of customer submissions could have a negative impact
on our liquidity and profitability in the future.

The shortage of skilled craft labor may negatively impact our ability to execute on our long-term construction contracts.

Increased infrastructure spending and general economic expansion has increased the demand for employees with the types of
skills we desire. There is a risk that our construction project schedules become unachievable or that labor expenses will increase
unexpectedly as a result of a shortage in the supply of skilled personnel available to us. 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.

Our dependence upon third parties to complete many of our contracts may adversely affect our performance under current and
future construction contracts.

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. If we are unable to hire qualified

- 20 -
- 20 -

subcontractors or find qualified equipment manufacturers or suppliers, our ability to successfully complete a project could be

adversely impacted. If the price we are required to pay for subcontractors or equipment and supplies exceeds the corresponding

amount that we have estimated, we may suffer a loss on the contract. If a supplier, manufacturer or subcontractor fails to provide

supplies, equipment or services as required under a negotiated contract for any reason, we may be required to self-perform

unexpected work or obtain these supplies, equipment or services on an expedited basis or at a higher price than anticipated

from a substitute source, which could impact contract profitability in an adverse manner. Unresolved disputes with a

subcontractor or supplier regarding the scope of work or performance may escalate, resulting in arbitration proceedings or legal

actions (see Legal Proceedings in Item 3 below). Unfavorable outcomes of such disputes may also impact contract profitability

in an adverse manner. In addition, if a subcontractor fails to pay its subcontractors, suppliers or employees, liens may be placed

on our project requiring us to incur the costs of reimbursing such parties in order to have the liens removed or to commence

litigation.

If we are unable to collect amounts billed to project owners as scheduled, our cash flows may be adversely affected.

Many of our contracts require us to satisfy specified design, engineering, procurement or construction milestones in order to

receive payment for work completed or equipment or supplies procured prior to achievement of the applicable contract

milestone. As a result, under these types of arrangements, we may incur significant costs or perform significant amounts of

services prior to receipt of payment. If the project owner determines not to proceed with the completion of the project,

terminates the contract, delays in making payment of billed amounts or defaults on its payment obligations, we may face delays

or other difficulties in collecting payment of amounts due to us for the costs previously incurred or for the amounts previously

expended to purchase equipment or supplies. The lawsuit that we filed in January 2019 as discussed above, among other

recoveries, seeks to compel a project owner to make payments to us for overdue outstanding invoices that were billed in

accordance with the corresponding EPC contract. Such problems may impact the planned cash flows of affected projects and

result in unanticipated reductions in the amounts of future cash flows from operations.

Failure to maintain safe work sites could result in significant losses as we work on projects that are inherently dangerous.

We often work on large-scale and complex projects, sometimes in geographically remote locations. Our project sites can place

our employees and others near large and/or mechanized equipment, high voltage electrical equipment, moving vehicles,

dangerous processes or highly regulated materials, and in challenging environments. Safety is a primary focus of our business

and is critical to our reputation. Often, we are responsible for safety on the project sites where we work. Many of our customers

require that we meet certain safety criteria to be eligible to bid on contracts. Further, regulatory changes implemented by OSHA

or similar government agencies could impose additional costs on us. We maintain programs with the primary purpose of

implementing effective health, safety and environmental procedures throughout our Company. If we fail to implement

appropriate safety procedures and/or if our procedures fail, our employees or others may suffer injuries. 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 obtain projects in the future. Our OSHA reportable incident rates, weighted by hours worked for all of our

subsidiaries, were 0.40 and 0.54 for calendar 2019 and 2018, respectively. Our actual rates were significantly better than the

national averages in our industry (NAICS - 2379) for those years.

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 are a holding company with no operations other than our investments in GPS, APC, TRC and SMC. We want to make

additional acquisitions and/or investments that would provide positive cash flow to us and value to our stockholders. However,

additional companies meeting these criteria and that provide products and/or services in growth industries and that are available

for purchase at attractive prices are difficult to find. Discussions with the principal(s) of potential acquisition targets may be

protracted and ultimately terminated for a variety of reasons. Further, due diligence investigations of attractive target companies

may uncover unfavorable data, and the negotiation and consummation of acquisition agreements may not be successful.

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. Using cash for acquisitions may limit our financial

flexibility and make us more likely to seek additional capital through future debt or equity financings. Our ability to obtain

such additional financing in the future may depend upon prevailing capital market conditions, the strength of our future

operating results and financial condition as well as conditions in our business, and the amount of outside financing sought by

us. These factors may affect our efforts to arrange additional financing on terms that are acceptable to us. Our ability to use

shares of our common stock as future acquisition consideration may be limited by a variety of factors, including the future

- 21 -

for which they believe they are not contractually liable. 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. 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 below for allegations made against us). These legal matters generally arise in the normal

course of our business. In addition, from time to time, we and/or certain of our current or former directors, officers or employees

may be named as parties to other types of lawsuits.

Litigation can involve complex factual and legal questions, and proceedings may occur over several years. As a result, it is

typically not possible to predict the likely outcome of legal actions with certainty, but it is likely that any significant lawsuit or

other claim against us that involves lengthy legal maneuvering may have a material adverse effect on us regardless of the

outcome. Any claim that is successfully asserted against us could result in our payment of significant sums for damages and

other losses. Even if we were to prevail, any litigation may be costly and time-consuming, and would likely divert the attention

of our management and key personnel from our business operations over multi-year periods. Either outcome may result in

adverse effects on our financial condition, results of operations and cash flows.

In accordance with customary industry practices, we maintain insurance coverage against some, but not all, potential losses in

order to protect against the risks we face. 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. 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. In addition, we cannot insure fully against pollution and environmental risks. 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 liability not covered by our insurance, in excess of our

insurance limits and self-insurance reserves or, if covered by insurance but subject to a high deductible, could result in a

significant loss for us, which claims may reduce our future profits and cash available for operations.

Our failure to recover adequately on contract variations submitted to project owners could have a material effect on our

financial results.

We may submit contract variations to project owners for additional costs exceeding the contract price or for amounts not

included in the original contract price. For example, in January 2019, we filed a lawsuit against a project owner for breach of

contract and failure to remedy various conditions which negatively affected the schedule and costs associated with the

construction of a gas-fired power plant. APC has submitted a number of meaningful contract variation requests to its customer

on the TeesREP project. Both of these matters remained unresolved at January 31, 2020. These variations occur due to matters

such as owner-caused delays or changes from the initial project scope, both of which may result in additional costs. At times,

contract variation submissions can be the subject of lengthy arbitration or litigation proceedings, and it is difficult to accurately

predict when these differences will be fully resolved. 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 amount of contract variations

included in the transaction prices that were used to determine project-to-date revenues for all of our projects at January 31,

2020 was $20.6 million. A failure to promptly recover on these types of customer submissions could have a negative impact

on our liquidity and profitability in the future.

The shortage of skilled craft labor may negatively impact our ability to execute on our long-term construction contracts.

Increased infrastructure spending and general economic expansion has increased the demand for employees with the types of

skills we desire. There is a risk that our construction project schedules become unachievable or that labor expenses will increase

unexpectedly as a result of a shortage in the supply of skilled personnel available to us. 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.

Our dependence upon third parties to complete many of our contracts may adversely affect our performance under current and

future construction contracts.

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. If we are unable to hire qualified

- 20 -

subcontractors or find qualified equipment manufacturers or suppliers, our ability to successfully complete a project could be
adversely impacted. If the price we are required to pay for subcontractors or equipment and supplies exceeds the corresponding
amount that we have estimated, we may suffer a loss on the contract. If a supplier, manufacturer or subcontractor fails to provide
supplies, equipment or services as required under a negotiated contract for any reason, we may be required to self-perform
unexpected work or obtain these supplies, equipment or services on an expedited basis or at a higher price than anticipated
from a substitute source, which could impact contract profitability in an adverse manner. Unresolved disputes with a
subcontractor or supplier regarding the scope of work or performance may escalate, resulting in arbitration proceedings or legal
actions (see Legal Proceedings in Item 3 below). Unfavorable outcomes of such disputes may also impact contract profitability
in an adverse manner. In addition, if a subcontractor fails to pay its subcontractors, suppliers or employees, liens may be placed
on our project requiring us to incur the costs of reimbursing such parties in order to have the liens removed or to commence
litigation.

If we are unable to collect amounts billed to project owners as scheduled, our cash flows may be adversely affected.

Many of our contracts require us to satisfy specified design, engineering, procurement or construction milestones in order to
receive payment for work completed or equipment or supplies procured prior to achievement of the applicable contract
milestone. As a result, under these types of arrangements, we may incur significant costs or perform significant amounts of
services prior to receipt of payment. If the project owner determines not to proceed with the completion of the project,
terminates the contract, delays in making payment of billed amounts or defaults on its payment obligations, we may face delays
or other difficulties in collecting payment of amounts due to us for the costs previously incurred or for the amounts previously
expended to purchase equipment or supplies. The lawsuit that we filed in January 2019 as discussed above, among other
recoveries, seeks to compel a project owner to make payments to us for overdue outstanding invoices that were billed in
accordance with the corresponding EPC contract. Such problems may impact the planned cash flows of affected projects and
result in unanticipated reductions in the amounts of future cash flows from operations.

Failure to maintain safe work sites could result in significant losses as we work on projects that are inherently dangerous.

We often work on large-scale and complex projects, sometimes in geographically remote locations. Our project sites can place
our employees and others near large and/or mechanized equipment, high voltage electrical equipment, moving vehicles,
dangerous processes or highly regulated materials, and in challenging environments. Safety is a primary focus of our business
and is critical to our reputation. Often, we are responsible for safety on the project sites where we work. Many of our customers
require that we meet certain safety criteria to be eligible to bid on contracts. Further, regulatory changes implemented by OSHA
or similar government agencies could impose additional costs on us. We maintain programs with the primary purpose of
implementing effective health, safety and environmental procedures throughout our Company. If we fail to implement
appropriate safety procedures and/or if our procedures fail, our employees or others may suffer injuries. 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 obtain projects in the future. Our OSHA reportable incident rates, weighted by hours worked for all of our
subsidiaries, were 0.40 and 0.54 for calendar 2019 and 2018, respectively. Our actual rates were significantly better than the
national averages in our industry (NAICS - 2379) for those years.

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 are a holding company with no operations other than our investments in GPS, APC, TRC and SMC. We want to make
additional acquisitions and/or investments that would provide positive cash flow to us and value to our stockholders. However,
additional companies meeting these criteria and that provide products and/or services in growth industries and that are available
for purchase at attractive prices are difficult to find. Discussions with the principal(s) of potential acquisition targets may be
protracted and ultimately terminated for a variety of reasons. Further, due diligence investigations of attractive target companies
may uncover unfavorable data, and the negotiation and consummation of acquisition agreements may not be successful.

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. Using cash for acquisitions may limit our financial
flexibility and make us more likely to seek additional capital through future debt or equity financings. Our ability to obtain
such additional financing in the future may depend upon prevailing capital market conditions, the strength of our future
operating results and financial condition as well as conditions in our business, and the amount of outside financing sought by
us. These factors may affect our efforts to arrange additional financing on terms that are acceptable to us. Our ability to use
shares of our common stock as future acquisition consideration may be limited by a variety of factors, including the future

- 21 -
- 21 -

market price of shares of our common stock and a potential seller’s assessment of the liquidity of our common stock. If adequate
funds or the use of our common stock are not available to us, or are not available on acceptable terms, we may not be able to
take advantage of desirable acquisitions or other investment opportunities that would benefit our business. Even if we do
complete acquisitions in the future, acquired companies may fail to achieve the results we anticipate including the expected
gross profit percentages.

In general, we keep each of our subsidiary operations separate and distinct. However, we do integrate certain aspects to drive
synergies and cost reductions. 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:

•
•
•
•
•
•

diversion of management’s attention from other important operational matters;
difficulties integrating the operations and personnel of acquired companies;
inability to retain key personnel of acquired companies;
risks associated with unanticipated events or liabilities;
the potential disruptions to our current business;
unforeseen difficulties 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.

As discussed in Note 7 to the accompanying consolidated financial statements, circumstances have caused us to record
impairment losses related to the goodwill of TRC during the last three fiscal years in the aggregate amount of $4.9 million, and
related to the goodwill of APC in the amount of $2.1 million during Fiscal 2020. Since Fiscal 2016, the year that both APC
and TRC were acquired, we have recorded impairment losses representing 34% of the goodwill amount originally established
for TRC and 100% of the original amount of goodwill related to APC. The continuing inability of either TRC or APC to achieve
sustained profitable operating results will adversely affect our future consolidated operating results, including gross profits,
gross profit percentages and cash flows from operations and, in the case of TRC, may result in additional goodwill impairment
losses.

If one of our acquired companies suffers performance problems, the reputation of our Company could be materially and
adversely affected. 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. In summary, integrating
acquired companies involves a number of special risks. Our failure to overcome such risks could materially and adversely
affect our business, financial condition and future results of operations. Further, we may conclude that the divestiture of a
troubled business will satisfy the best interests of our stockholders. Any divesting transaction could result in a material loss for
us.

Our failure to protect our management information systems against security breaches could adversely affect our business and
results of operations.

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. A party who
circumvents our security measures, or those of our clients, contractors or other vendors, could misappropriate confidential or
proprietary information, improperly manipulate data, or cause damage or interruptions to systems.

Various privacy and security laws in the US and abroad, including the General Data Protection Regulation (“GDPR”) in the
European Union (the “EU”), 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. 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. Further, as these security threats continue to evolve, we may be required to devote additional
resources to protect, prevent, detect and respond against such threats. 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 are fortunate to report that we are unaware of any meaningful security breaches at any of our business locations.

Nonetheless, any significant breach of our information security could damage our reputation, result in litigation and/or

regulatory fines and penalties, or have other material adverse effects on our business, financial condition, results of operations

or cash flows.

harmed.

Should our management information systems become unavailable for any significant period of time, our business could be

The efficient operation of our business is dependent on computer hardware and software systems. We are heavily reliant on

computer, information and communications technology and related systems, some of which are hosted by third party providers,

in order to operate effectively. We may experience system availability disruptions that may or may not occur as the result of

planned procedures. Unplanned interruptions may include natural disasters, power loss, telecommunications failures, acts of

terrorism, computer viruses, physical or electronic break-ins and similar cybersecurity intrusions as discussed above. Any of

these or other events could delay or prevent necessary operations (including the processing of transactions and the reporting of

financial results). While we believe that our reasonable safeguards will protect us from serious disruptions in the availability

of our information technology assets, these safeguards may not be sufficient. We may also be required to expend significant

resources to protect against or alleviate damage caused by systems interruptions and delays.

We do evaluate the need to upgrade and/or replace our systems and network infrastructure to protect our computing

environment, to stay current on vendor-supported products, to improve the efficiency of our systems and for other business

reasons. The implementation of new systems and information technology could adversely impact our operations by imposing

substantial capital expenditures, demands on management time and risks of delays or difficulties in transitioning to new

systems. The unavailability of the information systems or the failure of the systems to perform as anticipated for any reason

could disrupt our business and could result in decreased performance and increased overhead costs, causing our business to

suffer. Any significant interruption or failure of our information systems could disrupt the conduct of our business in a

meaningful manner, possibly causing material adverse effects on our business, financial condition, results of operations or cash

flows.

Changes in our effective tax rate and tax positions may vary.

We are subject to income taxes in the US and several foreign jurisdictions and significant judgment is required in order to

determine our worldwide provision for income taxes for each quarterly and annual reporting period. In the ordinary course of

our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Our tax estimates

and tax positions could be materially affected by many factors including the final outcome of tax audits and related litigation,

the introduction of new tax accounting standards, legislation, regulations and related interpretations, our global mix of earnings,

the realization of deferred tax assets, changes in uncertain tax positions and changes in our tax strategies.

A change in tax laws, treaties or regulations, or their interpretation, in any country in which we operate could result in a higher

tax rate on our pre-tax earnings. The results of current or future income tax return audits could result in unfavorable adjustments

to the amounts of income taxes previously recorded and/or paid. Any such future event or determination related to income

taxes could have a material impact on our net earnings and cash flows from operations.

We are periodically audited by income tax authorities. Currently, the Internal Revenue Service (the “IRS”) is conducting

examinations of the amendments to our federal consolidated tax returns for Fiscal 2016 and Fiscal 2017 with a focus on the

significant amounts of research and development credits claimed by us in the amended income tax returns for each year. 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 that may be available to reduce prior year income

taxes. This study focused on project costs incurred during the three-year period ended January 31, 2018. Based on the results

of the study, management identified and estimated significant amounts of income tax benefits that were not previously

recognized in our operating results for any prior year reporting period. We recorded an aggregate income tax benefit in the

amount of $16.6 million related to the research and development credits during Fiscal 2019.

We evaluate our income tax positions using the more-likely-than-not threshold in order to determine the amount of benefit to

be recognized. We do not anticipate any significant changes to the income tax benefit recorded; however, the IRS is conducting

examinations, as noted above, and, if previously recognized tax positions no longer meet the more-likely-than-not threshold,

the related benefit amounts will be derecognized in the first financial reporting period in which that threshold is no longer met,

which could materially and adversely affect our future financial condition and operating results.

- 22 -
- 22 -

- 23 -

market price of shares of our common stock and a potential seller’s assessment of the liquidity of our common stock. If adequate

funds or the use of our common stock are not available to us, or are not available on acceptable terms, we may not be able to

take advantage of desirable acquisitions or other investment opportunities that would benefit our business. Even if we do

complete acquisitions in the future, acquired companies may fail to achieve the results we anticipate including the expected

gross profit percentages.

In general, we keep each of our subsidiary operations separate and distinct. However, we do integrate certain aspects to drive

synergies and cost reductions. 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:

diversion of management’s attention from other important operational matters;

difficulties integrating the operations and personnel of acquired companies;

inability to retain key personnel of acquired companies;

risks associated with unanticipated events or liabilities;

the potential disruptions to our current business;

•

effective system of internal control over financial reporting; and

• impairment losses related to acquired goodwill and other intangible assets.

unforeseen difficulties in the maintenance of uniform standards, controls, procedures and policies, including an

As discussed in Note 7 to the accompanying consolidated financial statements, circumstances have caused us to record

impairment losses related to the goodwill of TRC during the last three fiscal years in the aggregate amount of $4.9 million, and

related to the goodwill of APC in the amount of $2.1 million during Fiscal 2020. Since Fiscal 2016, the year that both APC

and TRC were acquired, we have recorded impairment losses representing 34% of the goodwill amount originally established

for TRC and 100% of the original amount of goodwill related to APC. The continuing inability of either TRC or APC to achieve

sustained profitable operating results will adversely affect our future consolidated operating results, including gross profits,

gross profit percentages and cash flows from operations and, in the case of TRC, may result in additional goodwill impairment

losses.

us.

If one of our acquired companies suffers performance problems, the reputation of our Company could be materially and

adversely affected. 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. In summary, integrating

acquired companies involves a number of special risks. Our failure to overcome such risks could materially and adversely

affect our business, financial condition and future results of operations. Further, we may conclude that the divestiture of a

troubled business will satisfy the best interests of our stockholders. Any divesting transaction could result in a material loss for

Our failure to protect our management information systems against security breaches could adversely affect our business and

results of operations.

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. A party who

circumvents our security measures, or those of our clients, contractors or other vendors, could misappropriate confidential or

proprietary information, improperly manipulate data, or cause damage or interruptions to systems.

Various privacy and security laws in the US and abroad, including the General Data Protection Regulation (“GDPR”) in the

European Union (the “EU”), 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. 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. Further, as these security threats continue to evolve, we may be required to devote additional

resources to protect, prevent, detect and respond against such threats. 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 are fortunate to report that we are unaware of any meaningful security breaches at any of our business locations.
Nonetheless, any significant breach of our information security could damage our reputation, result in litigation and/or
regulatory fines and penalties, or have other material adverse effects on our business, financial condition, results of operations
or cash flows.

Should our management information systems become unavailable for any significant period of time, our business could be
harmed.

The efficient operation of our business is dependent on computer hardware and software systems. We are heavily reliant on
computer, information and communications technology and related systems, some of which are hosted by third party providers,
in order to operate effectively. We may experience system availability disruptions that may or may not occur as the result of
planned procedures. Unplanned interruptions may include natural disasters, power loss, telecommunications failures, acts of
terrorism, computer viruses, physical or electronic break-ins and similar cybersecurity intrusions as discussed above. Any of
these or other events could delay or prevent necessary operations (including the processing of transactions and the reporting of
financial results). While we believe that our reasonable safeguards will protect us from serious disruptions in the availability
of our information technology assets, these safeguards may not be sufficient. We may also be required to expend significant
resources to protect against or alleviate damage caused by systems interruptions and delays.

We do evaluate the need to upgrade and/or replace our systems and network infrastructure to protect our computing
environment, to stay current on vendor-supported products, to improve the efficiency of our systems and for other business
reasons. The implementation of new systems and information technology could adversely impact our operations by imposing
substantial capital expenditures, demands on management time and risks of delays or difficulties in transitioning to new
systems. The unavailability of the information systems or the failure of the systems to perform as anticipated for any reason
could disrupt our business and could result in decreased performance and increased overhead costs, causing our business to
suffer. Any significant interruption or failure of our information systems could disrupt the conduct of our business in a
meaningful manner, possibly causing material adverse effects on our business, financial condition, results of operations or cash
flows.

Changes in our effective tax rate and tax positions may vary.

We are subject to income taxes in the US and several foreign jurisdictions and significant judgment is required in order to
determine our worldwide provision for income taxes for each quarterly and annual reporting period. In the ordinary course of
our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Our tax estimates
and tax positions could be materially affected by many factors including the final outcome of tax audits and related litigation,
the introduction of new tax accounting standards, legislation, regulations and related interpretations, our global mix of earnings,
the realization of deferred tax assets, changes in uncertain tax positions and changes in our tax strategies.

A change in tax laws, treaties or regulations, or their interpretation, in any country in which we operate could result in a higher
tax rate on our pre-tax earnings. The results of current or future income tax return audits could result in unfavorable adjustments
to the amounts of income taxes previously recorded and/or paid. Any such future event or determination related to income
taxes could have a material impact on our net earnings and cash flows from operations.

We are periodically audited by income tax authorities. Currently, the Internal Revenue Service (the “IRS”) is conducting
examinations of the amendments to our federal consolidated tax returns for Fiscal 2016 and Fiscal 2017 with a focus on the
significant amounts of research and development credits claimed by us in the amended income tax returns for each year. 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 that may be available to reduce prior year income
taxes. This study focused on project costs incurred during the three-year period ended January 31, 2018. Based on the results
of the study, management identified and estimated significant amounts of income tax benefits that were not previously
recognized in our operating results for any prior year reporting period. We recorded an aggregate income tax benefit in the
amount of $16.6 million related to the research and development credits during Fiscal 2019.

We evaluate our income tax positions using the more-likely-than-not threshold in order to determine the amount of benefit to
be recognized. We do not anticipate any significant changes to the income tax benefit recorded; however, the IRS is conducting
examinations, as noted above, and, if previously recognized tax positions no longer meet the more-likely-than-not threshold,
the related benefit amounts will be derecognized in the first financial reporting period in which that threshold is no longer met,
which could materially and adversely affect our future financial condition and operating results.

- 22 -

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- 23 -

Foreign currency risks could have an adverse impact on our revenues, earnings, net assets and backlog.

Certain of the contracts of APC subject us to foreign currency risk, particularly when project revenues are denominated in a
currency different than the contract costs. In addition, our cash balances, though predominately held in US dollars, may consist
of different currencies at various points in time in order to execute our projects globally and meet transactional requirements.
In the future, we may attempt to minimize our exposure to foreign currency risk by obtaining contract provisions that protect
us from foreign currency fluctuations and/or by using derivatives as hedging instruments. However, these actions may not
always eliminate all foreign currency risk and, as a result, our profitability on certain projects could be adversely affected.

Revenues, costs and earnings of foreign subsidiaries with functional currencies other than the US dollar are translated into
dollars for consolidated reporting purposes. Our monetary assets and liabilities denominated in foreign currencies are subject
to currency fluctuations when measured period to period for financial reporting purposes. In addition, the US dollar value of
APC’s project backlog may from time to time increase or decrease due to foreign currency volatility. The future amounts of
revenues and earnings of foreign subsidiaries could be affected by foreign currency volatility. If the dollar depreciates against
a foreign subsidiary’s non-US dollar functional currency, we will report greater consolidated revenues, earnings, net assets and
backlog amounts in dollars than we would if the dollar appreciates against the same foreign currency or if there is no change
in the exchange rate. During Fiscal 2020, the US dollar appreciated against the Euro, which is the functional currency of APC.
There can be no assurance that the dollar will not appreciate against the Euro to a greater extent in future reporting periods
which would reduce the amounts of APC’s revenues, earnings and net assets included in our consolidated financial statements,
and the reported amount of our project backlog.

A weaker British pound compared to the US dollar during a reporting period causes local currency results of our UK contracts,
denominated in the British pound, to be translated into fewer dollars. Despite Brexit fears, the British pound strengthened
against the Euro and depreciated only slightly against the US dollar during Fiscal 2020. Future volatility in exchange rates may
occur as the UK exits from the EU. In the longer term, any impact from Brexit on our international operations will depend, in
part, on the outcome of tariff, trade, regulatory and other negotiations and could adversely affect our results of operations.

We could be adversely affected by violations of the Foreign Corrupt Practices Act and similar anti-bribery laws.

The US Foreign Corrupt Practices Act, the UK 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. Our policies mandate compliance with these anti-bribery laws. We may operate in parts of the world that
have experienced corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict
with local customs and practices. We train our personnel concerning anti-bribery laws and issues, and we also inform our
partners, subcontractors, suppliers and others who work for us or on our behalf that they must comply with anti-bribery law
requirements. We also have procedures and controls in place to monitor compliance.

We cannot assure that our internal controls and procedures always will protect us from the possible reckless or criminal acts
committed by our employees or others. If we are found to be liable for anti-bribery law violations (either due to our own acts
or our inadvertence, or due to the acts or inadvertence of others including our partners, subcontractors or suppliers), we could
suffer from criminal or civil penalties or other sanctions, including contract cancellations or debarment, and loss of reputation,
any of which could have a material adverse effect on our business. Litigation or investigations relating to alleged or suspected
violations of anti-bribery laws, even if such litigation or investigations demonstrate ultimately that we did not violate anti-
bribery laws, could be costly and could divert management’s attention away from other aspects of our business.

Our continued success requires us to retain and hire talented personnel.

During Fiscal 2020, we reached agreement with William F. Griffin, the co-founder of GPS, on the terms of the change in his
role from Chief Executive Officer to Non-Executive Chairman of GPS, effective November 15, 2019. The change in Mr.
Griffin’s role was an important step in the leadership transition that was planned to occur at GPS.

Its Co-Presidents, Charles Collins IV and Terrence Trebilcock, have assumed policy-making leadership roles at GPS and are
now included among our named executive officers. Mr. Griffin will continue to advise, to mentor, to support, and to engage in
various key activities at GPS as needed. The change in role allowed Mr. Griffin to provide valuable guidance to APC’s
management on the TeesREP project and other matters. In addition, Mr. Griffin remains a key contributing member of our
Board of Directors. We believe that our future success is substantially dependent on the continued service and performance of
the members of our current executive team and the senior management members of our businesses, including Messrs. Griffin,
Collins and Trebilcock, and John Roberts, the chief executive officer and founder of TRC.

Undoubtedly, unforeseen future changes in our management will occur. Therefore, we cannot be certain that any key executive

or manager will continue in such capacity while performing at a high level for any particular period of time, nor can we be

certain that events will permit us to complete smooth management transitions should they occur. Our ability to operate

productively and profitably, particularly in the power industry, may be limited by the sudden loss of key personnel or our

inability to attract, employ, retain and train skilled personnel necessary to meet our future requirements. We cannot be certain

that we will be able to maintain experienced management teams and adequately skilled groups of employees necessary to

execute our long-term construction contracts successfully and to support our future growth strategy. 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.

We may make future acquisitions of other businesses that require the use of cash and issuances of common stock. To the extent

that we intend to use cash for any acquisition, we may be required to raise additional equity and/or obtain debt financing. Equity

financing may result in dilution for our then current stockholders. Stock issuances and financing, if obtained, may not be on

terms favorable to us and could result in substantial dilution to our stockholders at the time(s) of these transactions.

Future stock option exercises and restricted stock issuances may dilute the ownership of the Company’s current stockholders.

As of January 31, 2020, the closing market price for a share of our common stock was $42.11. The average of the monthly

closing prices for our common stock for Fiscal 2020 was $42.79 per share. During Fiscal 2020, the exercise of stock options

by our employees and directors resulted in the issuance of 61,100 shares of our common stock at a weighted average purchase

price of $26.67 per share. As of January 31, 2020, there were outstanding options to purchase 1,271,000 shares of our common

stock at a weighted average purchase price of $44.83 per share, including 420,000 shares related to in-the-money exercisable

stock options with a weighted average purchase price of $31.14 per share. Future exercises of options to purchase shares of

common stock at prices below prevailing market prices may result in ownership dilution for current stockholders.

Further, in April 2019 and 2018, we awarded performance-based restricted stock units to two senior executives covering up to

36,000 shares of common stock at each date plus a number of shares to be determined based on the amount of cash dividends

deemed paid on shares earned pursuant to the awards. The release of the stock restrictions will depend on the total shareholder

return performance of the Company’s common stock measured against the performance of a peer-group of common stocks

over three-year periods.

Our officers, directors and certain unaffiliated stockholders have substantial control over the Company.

As of January 31, 2020, our executive officers and directors as a group owned approximately 8.2% of our voting shares

including an aggregate of 546,328 shares of common stock that may be purchased upon the exercise of stock options held by

our executive officers and directors (and deemed exercisable at January 31, 2020), a total of 327,411 shares of common stock

beneficially owned by Rainer H. Bosselmann (our chairman of the board and chief executive officer) and a total of 286,150

shares beneficially owned by William F. Griffin, (a co-founder of GPS and member of our board of directors). An additional

1.8% of the outstanding shares are controlled by Allen & Company entities (“Allen”). One of our independent directors is an

officer of Allen. In addition, five other stockholders owned approximately 40.4% of our shares in total as of December 31,

2019. These groups of stockholders may have significant influence over corporate actions such as the election of directors,

amendments to our certificate of incorporation, the consummation of any merger, the sale of all or substantially all of our assets

or other actions requiring stockholder approval.

We may not pay cash dividends 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. We paid four regular quarterly dividends of $0.25 per share for a

total of $1.00 per share during Fiscal 2020 and 2019, a regular dividend of $1.00 per share during Fiscal 2018, regular and

special cash dividends of $0.70 and $0.30 per share, respectively, for a total of $1.00 per share during Fiscal 2017, a regular

cash dividend in the amount of $0.70 per share during Fiscal 2016, and we paid special cash dividends during earlier years.

However, there can be no assurance that the evaluations of our board of directors will result in the payment of cash dividends

in the future.

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Foreign currency risks could have an adverse impact on our revenues, earnings, net assets and backlog.

Certain of the contracts of APC subject us to foreign currency risk, particularly when project revenues are denominated in a

currency different than the contract costs. In addition, our cash balances, though predominately held in US dollars, may consist

of different currencies at various points in time in order to execute our projects globally and meet transactional requirements.

In the future, we may attempt to minimize our exposure to foreign currency risk by obtaining contract provisions that protect

us from foreign currency fluctuations and/or by using derivatives as hedging instruments. However, these actions may not

always eliminate all foreign currency risk and, as a result, our profitability on certain projects could be adversely affected.

Revenues, costs and earnings of foreign subsidiaries with functional currencies other than the US dollar are translated into

dollars for consolidated reporting purposes. Our monetary assets and liabilities denominated in foreign currencies are subject

to currency fluctuations when measured period to period for financial reporting purposes. In addition, the US dollar value of

APC’s project backlog may from time to time increase or decrease due to foreign currency volatility. The future amounts of

revenues and earnings of foreign subsidiaries could be affected by foreign currency volatility. If the dollar depreciates against

a foreign subsidiary’s non-US dollar functional currency, we will report greater consolidated revenues, earnings, net assets and

backlog amounts in dollars than we would if the dollar appreciates against the same foreign currency or if there is no change

in the exchange rate. During Fiscal 2020, the US dollar appreciated against the Euro, which is the functional currency of APC.

There can be no assurance that the dollar will not appreciate against the Euro to a greater extent in future reporting periods

which would reduce the amounts of APC’s revenues, earnings and net assets included in our consolidated financial statements,

and the reported amount of our project backlog.

A weaker British pound compared to the US dollar during a reporting period causes local currency results of our UK contracts,

denominated in the British pound, to be translated into fewer dollars. Despite Brexit fears, the British pound strengthened

against the Euro and depreciated only slightly against the US dollar during Fiscal 2020. Future volatility in exchange rates may

occur as the UK exits from the EU. In the longer term, any impact from Brexit on our international operations will depend, in

part, on the outcome of tariff, trade, regulatory and other negotiations and could adversely affect our results of operations.

We could be adversely affected by violations of the Foreign Corrupt Practices Act and similar anti-bribery laws.

The US Foreign Corrupt Practices Act, the UK 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. Our policies mandate compliance with these anti-bribery laws. We may operate in parts of the world that

have experienced corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict

with local customs and practices. We train our personnel concerning anti-bribery laws and issues, and we also inform our

partners, subcontractors, suppliers and others who work for us or on our behalf that they must comply with anti-bribery law

requirements. We also have procedures and controls in place to monitor compliance.

We cannot assure that our internal controls and procedures always will protect us from the possible reckless or criminal acts

committed by our employees or others. If we are found to be liable for anti-bribery law violations (either due to our own acts

or our inadvertence, or due to the acts or inadvertence of others including our partners, subcontractors or suppliers), we could

suffer from criminal or civil penalties or other sanctions, including contract cancellations or debarment, and loss of reputation,

any of which could have a material adverse effect on our business. Litigation or investigations relating to alleged or suspected

violations of anti-bribery laws, even if such litigation or investigations demonstrate ultimately that we did not violate anti-

bribery laws, could be costly and could divert management’s attention away from other aspects of our business.

Our continued success requires us to retain and hire talented personnel.

During Fiscal 2020, we reached agreement with William F. Griffin, the co-founder of GPS, on the terms of the change in his

role from Chief Executive Officer to Non-Executive Chairman of GPS, effective November 15, 2019. The change in Mr.

Griffin’s role was an important step in the leadership transition that was planned to occur at GPS.

Its Co-Presidents, Charles Collins IV and Terrence Trebilcock, have assumed policy-making leadership roles at GPS and are

now included among our named executive officers. Mr. Griffin will continue to advise, to mentor, to support, and to engage in

various key activities at GPS as needed. The change in role allowed Mr. Griffin to provide valuable guidance to APC’s

management on the TeesREP project and other matters. In addition, Mr. Griffin remains a key contributing member of our

Board of Directors. We believe that our future success is substantially dependent on the continued service and performance of

the members of our current executive team and the senior management members of our businesses, including Messrs. Griffin,

Collins and Trebilcock, and John Roberts, the chief executive officer and founder of TRC.

- 24 -

Undoubtedly, unforeseen future changes in our management will occur. Therefore, we cannot be certain that any key executive
or manager will continue in such capacity while performing at a high level for any particular period of time, nor can we be
certain that events will permit us to complete smooth management transitions should they occur. Our ability to operate
productively and profitably, particularly in the power industry, may be limited by the sudden loss of key personnel or our
inability to attract, employ, retain and train skilled personnel necessary to meet our future requirements. We cannot be certain
that we will be able to maintain experienced management teams and adequately skilled groups of employees necessary to
execute our long-term construction contracts successfully and to support our future growth strategy. 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.

We may make future acquisitions of other businesses that require the use of cash and issuances of common stock. To the extent
that we intend to use cash for any acquisition, we may be required to raise additional equity and/or obtain debt financing. Equity
financing may result in dilution for our then current stockholders. Stock issuances and financing, if obtained, may not be on
terms favorable to us and could result in substantial dilution to our stockholders at the time(s) of these transactions.

Future stock option exercises and restricted stock issuances may dilute the ownership of the Company’s current stockholders.

As of January 31, 2020, the closing market price for a share of our common stock was $42.11. The average of the monthly
closing prices for our common stock for Fiscal 2020 was $42.79 per share. During Fiscal 2020, the exercise of stock options
by our employees and directors resulted in the issuance of 61,100 shares of our common stock at a weighted average purchase
price of $26.67 per share. As of January 31, 2020, there were outstanding options to purchase 1,271,000 shares of our common
stock at a weighted average purchase price of $44.83 per share, including 420,000 shares related to in-the-money exercisable
stock options with a weighted average purchase price of $31.14 per share. Future exercises of options to purchase shares of
common stock at prices below prevailing market prices may result in ownership dilution for current stockholders.

Further, in April 2019 and 2018, we awarded performance-based restricted stock units to two senior executives covering up to
36,000 shares of common stock at each date plus a number of shares to be determined based on the amount of cash dividends
deemed paid on shares earned pursuant to the awards. The release of the stock restrictions will depend on the total shareholder
return performance of the Company’s common stock measured against the performance of a peer-group of common stocks
over three-year periods.

Our officers, directors and certain unaffiliated stockholders have substantial control over the Company.

As of January 31, 2020, our executive officers and directors as a group owned approximately 8.2% of our voting shares
including an aggregate of 546,328 shares of common stock that may be purchased upon the exercise of stock options held by
our executive officers and directors (and deemed exercisable at January 31, 2020), a total of 327,411 shares of common stock
beneficially owned by Rainer H. Bosselmann (our chairman of the board and chief executive officer) and a total of 286,150
shares beneficially owned by William F. Griffin, (a co-founder of GPS and member of our board of directors). An additional
1.8% of the outstanding shares are controlled by Allen & Company entities (“Allen”). One of our independent directors is an
officer of Allen. In addition, five other stockholders owned approximately 40.4% of our shares in total as of December 31,
2019. These groups of stockholders may have significant influence over corporate actions such as the election of directors,
amendments to our certificate of incorporation, the consummation of any merger, the sale of all or substantially all of our assets
or other actions requiring stockholder approval.

We may not pay cash dividends 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. We paid four regular quarterly dividends of $0.25 per share for a
total of $1.00 per share during Fiscal 2020 and 2019, a regular dividend of $1.00 per share during Fiscal 2018, regular and
special cash dividends of $0.70 and $0.30 per share, respectively, for a total of $1.00 per share during Fiscal 2017, a regular
cash dividend in the amount of $0.70 per share during Fiscal 2016, and we paid special cash dividends during earlier years.
However, there can be no assurance that the evaluations of our board of directors will result in the payment of cash dividends
in the future.

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- 25 -

As our common stock is thinly traded at times, the stock price may be volatile and investors may have difficulty disposing of
their investments at prevailing market prices.

Our common stock is listed for trading on the NYSE stock exchange and trades under the symbol AGX. Despite the listing on
this national stock exchange, our common stock may trade thinly and sporadically at times and no assurances can be given that
a larger market will ever develop, or if developed, that it will be maintained.

Provisions of our certificate of incorporation and Delaware law could deter takeover attempts.

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 issuance of preferred stock by us could adversely affect the rights of holders of common stock by, among
other factors, establishing dividend rights, liquidation rights and voting rights that are superior to the rights of the holders of
the 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.

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.

TRC leases an 18.77-acre industrial facility (79,774 square feet) in Winterville, North Carolina under a lease agreement
expiring in April 30, 2021. We expect to extend the term of this lease further on commercially acceptable terms prior to its
current expiration date. The facility consists of three fabrication and warehouse buildings totaling 60,356 square feet, a 9,700
square foot maintenance shop, an office building (7,793 square feet) and a 1,925 square foot modular office building. The lessor
of this arrangement is the founder and current chief executive officer of TRC, John Roberts. Effective April 1, 2016, based on
third party market rent valuations, rent was set at $300,000 per annum payable in equal quarterly installments. TRC is
responsible for normal repairs and maintenance, property taxes, utilities and insurance. TRC also owns and occupies a one-
story industrial fabrication and warehouse facility (90,000 square feet) containing approximately 5,400 square feet of office
space and the underlying land (12.16 acres) in the City of Winterville, Pitt County, North Carolina.

APC owns and occupies a warehouse and ancillary offices that total 8,406 square feet in Nenagh, County Tipperary, in the
Republic of Ireland. The property occupies a site of approximately 1.97 acres and includes secure yards, industrial units and
modern offices. APC also leases a townhouse structure in Dun Laoghaire, which is near Dublin and serves as the headquarters
office. Previously, APC occupied this space under a lease with a former APC shareholder who sold the property to certain
current and former executives at APC during Fiscal 2017. Effective January 1, 2017, a lease between APC and the new owners
was executed with an initial term of 7 years. Based on two third-party market rent valuations, rent was set at 50,000 Euros per
annum payable in equal quarterly installments. APC also leases office space in Derby, UK, with a term that runs through August
2022 and an annual rent of approximately 38,600 British pounds sterling.

SMC is located in Tracys Landing, Maryland, occupying facilities under a lease that expired on December 31, 2019. We are
negotiating the extension of the term of this lease on commercially acceptable terms while we continue to occupy the facilities
on amicable terms. The SMC facility includes approximately four acres of land, a 2,400 square foot maintenance facility and
approximately 3,900 square feet of office space. SMC also uses a nearby fenced-in storage lot and office structure under an
operating lease with a 5-year term that expires on January 31, 2023 and with options to extend for five additional 2-year terms.

We consider the Company’s owned and leased properties to be sufficient for continuation of our operations for the foreseeable

future without significant excess space. 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. These costs are expensed as incurred and are included substantially in the cost of revenues.

ITEM 3. LEGAL PROCEEDINGS.

Included below and in Note 11 to the accompanying consolidated financial statements included in Item 8 of Part II of this

Annual Report on Form 10-K are discussions of the specific significant legal proceedings active at January 31, 2020. In the

normal course of business, the Company 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 adverse effect on our

consolidated financial statements.

In January 2019, GPS sued Exelon West Medway II, LLC and Exelon Generation Company, LLC (collectively “Exelon”) for

Exelon’s breach of contract and failure to remedy various events which negatively impacted the schedule and costs of the

Exelon West Medway II Facility, resulting in Exelon receiving the benefits of the construction efforts of GPS and the

corresponding progress on the project without making payments for the value received. On March 7, 2019, Exelon notified us

of its termination of the EPC services contract with GPS on the Exelon West Medway II Facility, asserting that GPS had

breached a number of its obligations under the contract and was in default. Exelon has also withheld payments of amounts

billed on invoices rendered to Exelon in accordance with the terms of the EPC contract between the parties. At that time, the

project was nearly complete and all units had reached first fire. GPS will vigorously assert its rights and claims in order to

recover its lost value and to collect any remaining monies owed, and it will defend itself against the allegations of Exelon that

GPS did not perform in accordance with the contract. During Fiscal 2020, most of the litigation activities have focused on pre-

trial preparations by the legal teams. All discovery is currently scheduled to close on April 30, 2020.

PART II

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 NYSE stock exchange. As of April 9, 2019, we had

approximately 62 stockholders of record.

During the fiscal years ended January 31, 2020 and 2019, our board of directors declared and paid regular quarterly cash

dividends of $0.25 per share, totaling $1.00 per share for each year.

Prior to November 2011, we did not pay cash dividends on our common stock, choosing to retain earnings in order to finance

the development and expansion of our business. Subsequently, the confidence of the members of our board of directors in the

strength of GPS resulted in the payment of special cash dividends to stockholders of $0.70 per share in November 2014, $0.75

per share in November 2013, $0.60 per share in November 2012 and $0.50 per share in November 2011. Beginning in

November 2015, our board of directors declared a regular cash dividend to stockholders of $0.70 per share reflecting increased

confidence and a commitment to paying dividends into the future. In October 2016, our board of directors declared regular and

special cash dividends of $0.70 and $0.30 per share, respectively, for a total of $1.00 per share. In September 2017, our board

of directors declared a regular cash dividend of $1.00 per share and announced its intention to maintain a regular quarterly

dividend going forward.

cash dividends in the future.

Each year, our board of directors intends to evaluate the Company’s ongoing operational and financial performance in

determining the amount of the regular dividend. There can be no assurance that these evaluations will result in the payment of

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- 26 -

- 27 -

As our common stock is thinly traded at times, the stock price may be volatile and investors may have difficulty disposing of

their investments at prevailing market prices.

Our common stock is listed for trading on the NYSE stock exchange and trades under the symbol AGX. Despite the listing on

this national stock exchange, our common stock may trade thinly and sporadically at times and no assurances can be given that

a larger market will ever develop, or if developed, that it will be maintained.

Provisions of our certificate of incorporation and Delaware law could deter takeover attempts.

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 issuance of preferred stock by us could adversely affect the rights of holders of common stock by, among

other factors, establishing dividend rights, liquidation rights and voting rights that are superior to the rights of the holders of

the 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.

We occupy our corporate headquarters in Rockville, Maryland, under a lease that expires on May 31, 2024 covering 2,521

None.

ITEM 2. PROPERTIES.

square feet of office space.

Glastonbury, Connecticut.

TRC leases an 18.77-acre industrial facility (79,774 square feet) in Winterville, North Carolina under a lease agreement

expiring in April 30, 2021. We expect to extend the term of this lease further on commercially acceptable terms prior to its

current expiration date. The facility consists of three fabrication and warehouse buildings totaling 60,356 square feet, a 9,700

square foot maintenance shop, an office building (7,793 square feet) and a 1,925 square foot modular office building. The lessor

of this arrangement is the founder and current chief executive officer of TRC, John Roberts. Effective April 1, 2016, based on

third party market rent valuations, rent was set at $300,000 per annum payable in equal quarterly installments. TRC is

responsible for normal repairs and maintenance, property taxes, utilities and insurance. TRC also owns and occupies a one-

story industrial fabrication and warehouse facility (90,000 square feet) containing approximately 5,400 square feet of office

space and the underlying land (12.16 acres) in the City of Winterville, Pitt County, North Carolina.

APC owns and occupies a warehouse and ancillary offices that total 8,406 square feet in Nenagh, County Tipperary, in the

Republic of Ireland. The property occupies a site of approximately 1.97 acres and includes secure yards, industrial units and

modern offices. APC also leases a townhouse structure in Dun Laoghaire, which is near Dublin and serves as the headquarters

office. Previously, APC occupied this space under a lease with a former APC shareholder who sold the property to certain

current and former executives at APC during Fiscal 2017. Effective January 1, 2017, a lease between APC and the new owners

was executed with an initial term of 7 years. Based on two third-party market rent valuations, rent was set at 50,000 Euros per

annum payable in equal quarterly installments. APC also leases office space in Derby, UK, with a term that runs through August

2022 and an annual rent of approximately 38,600 British pounds sterling.

SMC is located in Tracys Landing, Maryland, occupying facilities under a lease that expired on December 31, 2019. We are

negotiating the extension of the term of this lease on commercially acceptable terms while we continue to occupy the facilities

on amicable terms. The SMC facility includes approximately four acres of land, a 2,400 square foot maintenance facility and

approximately 3,900 square feet of office space. SMC also uses a nearby fenced-in storage lot and office structure under an

operating lease with a 5-year term that expires on January 31, 2023 and with options to extend for five additional 2-year terms.

We consider the Company’s owned and leased properties to be sufficient for continuation of our operations for the foreseeable
future without significant excess space. 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. These costs are expensed as incurred and are included substantially in the cost of revenues.

ITEM 3. LEGAL PROCEEDINGS.

Included below and in Note 11 to the accompanying consolidated financial statements included in Item 8 of Part II of this
Annual Report on Form 10-K are discussions of the specific significant legal proceedings active at January 31, 2020. In the
normal course of business, the Company 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 adverse effect on our
consolidated financial statements.

In January 2019, GPS sued Exelon West Medway II, LLC and Exelon Generation Company, LLC (collectively “Exelon”) for
Exelon’s breach of contract and failure to remedy various events which negatively impacted the schedule and costs of the
Exelon West Medway II Facility, resulting in Exelon receiving the benefits of the construction efforts of GPS and the
corresponding progress on the project without making payments for the value received. On March 7, 2019, Exelon notified us
of its termination of the EPC services contract with GPS on the Exelon West Medway II Facility, asserting that GPS had
breached a number of its obligations under the contract and was in default. Exelon has also withheld payments of amounts
billed on invoices rendered to Exelon in accordance with the terms of the EPC contract between the parties. At that time, the
project was nearly complete and all units had reached first fire. GPS will vigorously assert its rights and claims in order to
recover its lost value and to collect any remaining monies owed, and it will defend itself against the allegations of Exelon that
GPS did not perform in accordance with the contract. During Fiscal 2020, most of the litigation activities have focused on pre-
trial preparations by the legal teams. All discovery is currently scheduled to close on April 30, 2020.

GPS owns and occupies a three-story office building (23,380 square feet) and the underlying land (1.75 acres), located in

PART II

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 NYSE stock exchange. As of April 9, 2019, we had
approximately 62 stockholders of record.

During the fiscal years ended January 31, 2020 and 2019, our board of directors declared and paid regular quarterly cash
dividends of $0.25 per share, totaling $1.00 per share for each year.

Prior to November 2011, we did not pay cash dividends on our common stock, choosing to retain earnings in order to finance
the development and expansion of our business. Subsequently, the confidence of the members of our board of directors in the
strength of GPS resulted in the payment of special cash dividends to stockholders of $0.70 per share in November 2014, $0.75
per share in November 2013, $0.60 per share in November 2012 and $0.50 per share in November 2011. Beginning in
November 2015, our board of directors declared a regular cash dividend to stockholders of $0.70 per share reflecting increased
confidence and a commitment to paying dividends into the future. In October 2016, our board of directors declared regular and
special cash dividends of $0.70 and $0.30 per share, respectively, for a total of $1.00 per share. In September 2017, our board
of directors declared a regular cash dividend of $1.00 per share and announced its intention to maintain a regular quarterly
dividend going forward.

Each year, our board of directors intends to evaluate the Company’s ongoing operational and financial performance in
determining the amount of the regular dividend. There can be no assurance that these evaluations will result in the payment of
cash dividends in the future.

- 26 -

- 27 -
- 27 -

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 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, 2015, 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 stock performance shown on the graph is not intended to be indicative of future stock
performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Argan, Inc., the S&P 500 Index
and the Dow Jones US Heavy Construction TSM Index

$300

$250

$200

$150

$100

$50

1/15

1/16

1/17

1/18

1/19

1/20

None.

Argan, Inc.

S&P 500

Dow Jones US Heavy Construction TSM

ITEM 6. SELECTED FINANCIAL DATA.

*$100 invested on 1/31/15 in stock or index, including reinvestment of dividends.
Fiscal year ending January 31.

Argan, Inc.

S&P 500

Dow Jones US Heavy Civil Construction TSM

Equity Compensation Plan Information

Years Ended January 31,

2015

100.00

2016

101.01

99.33

92.93

2017

251.83

119.24

133.02

2018

151.12

150.73

145.69

2019
150.06
147.24
114.42

2020

153.21

179.17

131.91

In June 2011, the stockholders approved the adoption of the 2011 Stock Plan (the “Stock Plan”) including 500,000 shares of
our common stock reserved for issuance thereunder. In June 2013, the stockholders approved an amendment to the Stock Plan
which increased the number of shares reserved for issuance thereunder to 1,250,000. In June 2015, the stockholders approved
an amendment to the Stock Plan which increased the number of shares reserved for issuance thereunder to 2,000,000. In June
2018, the stockholders approved an amendment to the Stock Plan which increased the number of shares reserved for issuance
thereunder to 2,750,000.

- 28 -
- 28 -

- 29 -

We may make awards under the Stock Plan to officers, directors and key employees. Awards may include incentive stock

options (“ISOs”), nonqualified stock options (“NSOs”), and restricted or unrestricted stock. ISOs granted under the Stock Plan

shall have an exercise price per share at least equal to the common stock’s market value per share at the date of grant and

typically have a five to ten-year term. NSOs may be granted at an exercise price per share that differs from the common stock’s

market value per share at the date of grant, may have up to a ten-year term, and may become exercisable as determined by our

board of directors. Commencing in January 2018, all new stock option awards become fully exercisable three years from the

date of grant under three-year ratable vesting schedules. Previously, our stock options were awarded typically with one-year

vesting schedules.

The following table sets forth certain information, as of January 31, 2020, 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

Future Issuance (1)

Equity Compensation Plans Approved by

the Stockholders (2)

Equity Compensation Plans Not Approved

by the Stockholders

Totals

1,271,567

—

1,271,567

$44.83

—

$44.83

381,833

—

381,833

(1) Represents the number of shares of common stock reserved for future awards; excludes the number of securities reflected in the first column.

(2) Approved plans include the Company’s 2011 Stock Plan, and a predecessor plan that expired in 2011.

In April 2019 and 2018 and pursuant to terms of the Stock Plan, we awarded performance-based restricted stock units to two

senior executives covering up to 36,000 shares of common stock for each year plus a number of shares to be determined based

on the amount of cash dividends deemed paid on shares earned pursuant to the awards. The release of the stock restrictions

depends on the total shareholder return performance of our common stock measured against the performance of a peer-group

of common stocks over three-year periods.

Recent Sales of Unregistered Securities

The following selected consolidated financial data should be read in conjunction with Management’s Discussion and Analysis

of Financial Condition and Results of Operations, the Consolidated Financial Statements and the notes thereto, and the other

financial information appearing elsewhere in this Annual Report on Form 10-K (in thousands, except per share data, number

of employees and the gross profit percentages).

Statement of Earnings Data

2020

For the Years Ended January 31,

Revenues

Gross (loss) profit

Gross (loss) profit %

(Loss) income from operations

Net (loss) income

Net (loss) income attributable to our

stockholders (1)

(Loss) income per share attributable to

our stockholders

Basic

Diluted

Cash dividends per share

238,997

(6,820 )

(2.9)%

(55,840 )

(40,712 )

(42,689 )

2019

482,153

82,438

40,237

51,869

52,036

17.1%

16.7%

21.7%

24.1%

2018

892,815

149,325

106,977

72,346

72,011

2017

675,047

146,711

112,254

77,426

70,328

2016

413,275

99,465

74,405

50,204

36,345

(2.73 )

1.00

3.34

3.32

1.00

4.64

4.56

1.00

4.67

4.50

1.00

2.46

2.42

0.70

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 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, 2015, 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 stock performance shown on the graph is not intended to be indicative of future stock

performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Argan, Inc., the S&P 500 Index

and the Dow Jones US Heavy Construction TSM Index

$300

$250

$200

$150

$100

$50

1/15

We may make awards under the Stock Plan to officers, directors and key employees. Awards may include incentive stock
options (“ISOs”), nonqualified stock options (“NSOs”), and restricted or unrestricted stock. ISOs granted under the Stock Plan
shall have an exercise price per share at least equal to the common stock’s market value per share at the date of grant and
typically have a five to ten-year term. NSOs may be granted at an exercise price per share that differs from the common stock’s
market value per share at the date of grant, may have up to a ten-year term, and may become exercisable as determined by our
board of directors. Commencing in January 2018, all new stock option awards become fully exercisable three years from the
date of grant under three-year ratable vesting schedules. Previously, our stock options were awarded typically with one-year
vesting schedules.

The following table sets forth certain information, as of January 31, 2020, concerning securities authorized for issuance under
options to purchase our common stock.

Number of Securities
Issuable under Outstanding
Options

Weighted Average Exercise
Price of Outstanding
Options

Number of Securities
Remaining Available for
Future Issuance (1)

Equity Compensation Plans Approved by
the Stockholders (2)
Equity Compensation Plans Not Approved
by the Stockholders

Totals

1,271,567

—
1,271,567

$44.83

—
$44.83

381,833

—
381,833

(1) Represents the number of shares of common stock reserved for future awards; excludes the number of securities reflected in the first column.
(2) Approved plans include the Company’s 2011 Stock Plan, and a predecessor plan that expired in 2011.

In April 2019 and 2018 and pursuant to terms of the Stock Plan, we awarded performance-based restricted stock units to two
senior executives covering up to 36,000 shares of common stock for each year plus a number of shares to be determined based
on the amount of cash dividends deemed paid on shares earned pursuant to the awards. The release of the stock restrictions
depends on the total shareholder return performance of our common stock measured against the performance of a peer-group
of common stocks over three-year periods.

Recent Sales of Unregistered Securities

1/16

1/17

1/18

1/19

1/20

None.

Argan, Inc.

S&P 500

Dow Jones US Heavy Construction TSM

ITEM 6. SELECTED FINANCIAL DATA.

*$100 invested on 1/31/15 in stock or index, including reinvestment of dividends.

Fiscal year ending January 31.

Argan, Inc.

S&P 500

Dow Jones US Heavy Civil Construction TSM

Equity Compensation Plan Information

Years Ended January 31,

2015

100.00

2016

101.01

99.33

92.93

2017

251.83

119.24

133.02

2018

2019

151.12

150.06

150.73

147.24

145.69

114.42

2020

153.21

179.17

131.91

In June 2011, the stockholders approved the adoption of the 2011 Stock Plan (the “Stock Plan”) including 500,000 shares of

our common stock reserved for issuance thereunder. In June 2013, the stockholders approved an amendment to the Stock Plan

which increased the number of shares reserved for issuance thereunder to 1,250,000. In June 2015, the stockholders approved

an amendment to the Stock Plan which increased the number of shares reserved for issuance thereunder to 2,000,000. In June

2018, the stockholders approved an amendment to the Stock Plan which increased the number of shares reserved for issuance

thereunder to 2,750,000.

The following selected consolidated financial data should be read in conjunction with Management’s Discussion and Analysis
of Financial Condition and Results of Operations, the Consolidated Financial Statements and the notes thereto, and the other
financial information appearing elsewhere in this Annual Report on Form 10-K (in thousands, except per share data, number
of employees and the gross profit percentages).

For the Years Ended January 31,

Statement of Earnings Data
Revenues
Gross (loss) profit
Gross (loss) profit %

(Loss) income from operations
Net (loss) income
Net (loss) income attributable to our

stockholders (1)

(Loss) income per share attributable to

our stockholders

Basic
Diluted

Cash dividends per share

2020
238,997
(6,820 )

(2.9)%

(55,840 )
(40,712 )

(42,689 )

(2.73 )
(2.73 )
1.00

2019
482,153
82,438
17.1%

40,237
51,869

52,036

3.34
3.32
1.00

2018
892,815
149,325
16.7%

106,977
72,346

72,011

4.64
4.56
1.00

2017
675,047
146,711
21.7%

112,254
77,426

70,328

4.67
4.50
1.00

2016
413,275
99,465
24.1%

74,405
50,204

36,345

2.46
2.42
0.70

- 28 -

- 29 -
- 29 -

Balance Sheet Data (2)
Total assets
Total liabilities
Total equity

Other Data
Project backlog
Number of employees

As of January 31,

2020
487,540
146,510
341,030

2019
476,648
82,276
394,372

$ 1,333,776
1,154

$ 1,093,960
1,487

2018
542,669
184,541
358,128

2017
644,488
351,919
292,569

2016
409,791
187,936
221,855

379,486
1,552

$ 1,010,772
1,286

$ 1,162,569
1,188

(1)

For the years ended January 31, 2020, 2019, 2018, 2017 and 2016, the amounts of net income (loss) attributable to non-controlling interests were
$2.0 million, $(0.2) million, $0.3 million, $7.1 million and $13.9 million, respectively (see Note 3 to our accompanying consolidated financial
statements).

(2) During the five-year period ended January 31, 2020, we did not have any long-term obligations or redeemable preferred stock.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

The following discussion summarizes the financial position of Argan, Inc. and its subsidiaries as of January 31, 2020, and the
results of their operations for Fiscal 2020 and Fiscal 2019, and should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere in Item 8 of this Annual Report on Form 10-K (the “2020 Annual Report”).

Please see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the
Company’s Annual Report on Form 10-K for the year ended January 31, 2019, that was filed with the SEC on April 10, 2019,
for a discussion of financial trends, variance drivers and other significant matters for Fiscal 2019 as compared to Fiscal 2018.

Cautionary Statement Regarding Forward Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. We have
made statements in this Item 7 and elsewhere in this Annual Report on Form 10-K that may constitute “forward-looking
statements.” The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” or other
similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on our
current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance
that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future
revenues and operating results are based on our forecasts for existing operations and do not include the potential impact of any
future acquisitions. Our forward-looking statements, by their nature, involve significant risks and uncertainties (some of which
are beyond our control) and assumptions. They are subject to change based upon various factors including, but not limited to,
the risks and uncertainties described in Item 1A of this Annual Report on Form 10-K. Should one or more of these risks or
uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from
those projected in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.

Business Description

Argan is a holding company that conducts operations through its wholly-owned subsidiaries, GPS, APC, SMC and TRC.
Through GPS and APC, we provide a full range of engineering, procurement, construction, commissioning, operations
management, maintenance, development, technical and consulting services to the power generation markets, including the
renewable energy sector, for a wide range of customers, including independent power project owners, public utilities,
equipment suppliers and global energy plant construction firms. GPS and APC represent our power industry services reportable
segment. Through TRC, the industrial fabrication and field services reportable segment provides on-site services that support
maintenance turnarounds, shutdowns and emergency mobilizations for industrial plants primarily located in the southeast
region of the US and that are based on its expertise in producing, delivering and installing fabricated steel components such as
pressure vessels and piping systems. 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 US.

We may make additional acquisitions of and/or investments in companies with potential for profitable growth that reflect more
than one industrial focus. We expect that they will be held in separate subsidiaries that will be operated in a manner that best
provides value for our stockholders.

- 30 -
- 30 -

Overview

Operating Results

Consolidated revenues for Fiscal 2020 were $239.0 million, which represented a decline of $243.2 million from consolidated

revenues of $482.2 million reported for Fiscal 2019. As GPS has prepared to proceed fully with new projects, its revenues have

remained at a low level. However, the increasing construction activities for the Guernsey Power Station should result in

improved revenues over the coming year. The revenues of the power industry services segment represented 56.8% of

consolidated revenues for Fiscal 2020; for Fiscal 2019, the percentage share of consolidated revenues represented by this

reportable segment was 76.3%.

The industrial services business of TRC reported revenues of $94.7 million for Fiscal 2020. This amount represented a decrease

of $7.0 million, or 6.9%, from revenues reported by TRC for Fiscal 2019. Revenues provided by this reportable business

segment represented 39.6% and 21.1% of corresponding consolidated revenues for Fiscal 2020 and Fiscal 2019, respectively.

The significant contract loss incurred in Fiscal 2020 by APC in the amount of $33.6 million, primarily recognized in the first

quarter, caused us to report a consolidated gross loss of $6.8 million for the year (see an expanded discussion of the contract

loss below). The contract loss prompted us to record an impairment loss related to the goodwill of APC in the amount of $2.1

million during the first quarter as well. In addition, primarily due to reductions in the amounts of forecasted future revenues,

we determined a goodwill impairment loss related to TRC in the amount of $2.8 million, which was recorded in the last quarter

of Fiscal 2020. Selling, general and administrative expenses rose by 8.4%, to $44.1 million for Fiscal 2020 from an expenses

amount of $40.7 million for Fiscal 2019, primarily due to the cost of maintaining core GPS staff whose time is typically charged

to projects. Included in other income for Fiscal 2020, we recorded investment income of $5.0 million, which represented a

decline from the amount earned last year, $5.9 million, as investment balances were reduced during Fiscal 2020. Financial

results for Fiscal 2020 also reflected net income attributable to non-controlling interests in the amount of approximately $2.0

million.

The consolidated income tax benefit of $7.1 million for Fiscal 2020 reflects substantially the favorable estimated tax impact of

a bad debt loss on certain loans made to APC by Argan, which were determined to be uncollectible during the year. On the

other hand, we have not recorded any income tax benefit for the Fiscal 2020 operating loss of APC’s subsidiary in the UK due

to our expectation at this time that only a minimal portion of the benefit will be utilized in future years. For Fiscal 2019, our

consolidated income tax benefit of $4.7 million reflected the favorable impact of the research and development tax credits

recorded last year as discussed below.

During Fiscal 2019, we completed a detailed review of the activities performed by our engineering staff on major EPC services

projects in order to identify and quantify the amounts of research and development credits that may be available to reduce prior

year income taxes. Based on the results of the study, we identified and estimated significant amounts of income tax benefits

that had not previously been recognized in our financial results for any prior year reporting period. Accordingly, the income

tax benefits associated with research and development activities conducted in prior years and recorded in Fiscal 2019 totaled

$16.6 million.

Due substantially to the sharply reduced level of revenues reported for Fiscal 2020, the APC contract loss and the goodwill

impairment losses that are identified above, we incurred a consolidated loss before income tax benefit of $47.8 million for

Fiscal 2020. The net loss attributable to our stockholders of $42.7 million, or $(2.73) per share of our common stock, reflected

the favorable income tax benefit of the bad debt deduction. For Fiscal 2019, we reported consolidated income before income

taxes of $47.2 million, and net income attributable to our stockholders in the amount of $52.0 million, or $3.32 per diluted

share, which reflected the favorable income tax benefit of the research and development credits recorded last year.

The Tees Renewable Energy Plant (“TeesREP”)

Events related to the subcontracted efforts of APC to erect the biomass-fired boiler for the TeesREP project were significant to

the operating results and changes in financial position during Fiscal 2020.

Last year, we disclosed that APC had encountered significant operational and contractual challenges in completing this power-

plant boiler construction project, and that the consolidated operating results for Fiscal 2019 reflected unfavorable gross profit

adjustments related to the TeesREP project, which is located in Teesside, England. The disclosure explained that the project

progress was behind the schedule originally established for the job and warned that the project may continue to impact the

Company’s consolidated operating results negatively until it reaches completion.

- 31 -

Balance Sheet Data (2)

Total assets

Total liabilities

Total equity

Other Data

Project backlog

Number of employees

statements).

OPERATIONS.

As of January 31,

2020

487,540

146,510

341,030

2019

476,648

82,276

394,372

2018

542,669

184,541

358,128

2017

644,488

351,919

292,569

2016

409,791

187,936

221,855

$ 1,333,776

$ 1,093,960

379,486

$ 1,010,772

$ 1,162,569

1,154

1,487

1,552

1,286

1,188

(1)

For the years ended January 31, 2020, 2019, 2018, 2017 and 2016, the amounts of net income (loss) attributable to non-controlling interests were

$2.0 million, $(0.2) million, $0.3 million, $7.1 million and $13.9 million, respectively (see Note 3 to our accompanying consolidated financial

(2) During the five-year period ended January 31, 2020, we did not have any long-term obligations or redeemable preferred stock.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

The following discussion summarizes the financial position of Argan, Inc. and its subsidiaries as of January 31, 2020, and the

results of their operations for Fiscal 2020 and Fiscal 2019, and should be read in conjunction with the consolidated financial

statements and notes thereto included elsewhere in Item 8 of this Annual Report on Form 10-K (the “2020 Annual Report”).

Please see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the

Company’s Annual Report on Form 10-K for the year ended January 31, 2019, that was filed with the SEC on April 10, 2019,

for a discussion of financial trends, variance drivers and other significant matters for Fiscal 2019 as compared to Fiscal 2018.

Cautionary Statement Regarding Forward Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. We have

made statements in this Item 7 and elsewhere in this Annual Report on Form 10-K that may constitute “forward-looking

statements.” The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” or other

similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on our

current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance

that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future

revenues and operating results are based on our forecasts for existing operations and do not include the potential impact of any

future acquisitions. Our forward-looking statements, by their nature, involve significant risks and uncertainties (some of which

are beyond our control) and assumptions. They are subject to change based upon various factors including, but not limited to,

the risks and uncertainties described in Item 1A of this Annual Report on Form 10-K. Should one or more of these risks or

uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from

those projected in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking

statements, whether as a result of new information, future events or otherwise.

Business Description

Argan is a holding company that conducts operations through its wholly-owned subsidiaries, GPS, APC, SMC and TRC.

Through GPS and APC, we provide a full range of engineering, procurement, construction, commissioning, operations

management, maintenance, development, technical and consulting services to the power generation markets, including the

renewable energy sector, for a wide range of customers, including independent power project owners, public utilities,

equipment suppliers and global energy plant construction firms. GPS and APC represent our power industry services reportable

segment. Through TRC, the industrial fabrication and field services reportable segment provides on-site services that support

maintenance turnarounds, shutdowns and emergency mobilizations for industrial plants primarily located in the southeast

region of the US and that are based on its expertise in producing, delivering and installing fabricated steel components such as

pressure vessels and piping systems. 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 US.

We may make additional acquisitions of and/or investments in companies with potential for profitable growth that reflect more

than one industrial focus. We expect that they will be held in separate subsidiaries that will be operated in a manner that best

provides value for our stockholders.

Overview

Operating Results

Consolidated revenues for Fiscal 2020 were $239.0 million, which represented a decline of $243.2 million from consolidated
revenues of $482.2 million reported for Fiscal 2019. As GPS has prepared to proceed fully with new projects, its revenues have
remained at a low level. However, the increasing construction activities for the Guernsey Power Station should result in
improved revenues over the coming year. The revenues of the power industry services segment represented 56.8% of
consolidated revenues for Fiscal 2020; for Fiscal 2019, the percentage share of consolidated revenues represented by this
reportable segment was 76.3%.

The industrial services business of TRC reported revenues of $94.7 million for Fiscal 2020. This amount represented a decrease
of $7.0 million, or 6.9%, from revenues reported by TRC for Fiscal 2019. Revenues provided by this reportable business
segment represented 39.6% and 21.1% of corresponding consolidated revenues for Fiscal 2020 and Fiscal 2019, respectively.

The significant contract loss incurred in Fiscal 2020 by APC in the amount of $33.6 million, primarily recognized in the first
quarter, caused us to report a consolidated gross loss of $6.8 million for the year (see an expanded discussion of the contract
loss below). The contract loss prompted us to record an impairment loss related to the goodwill of APC in the amount of $2.1
million during the first quarter as well. In addition, primarily due to reductions in the amounts of forecasted future revenues,
we determined a goodwill impairment loss related to TRC in the amount of $2.8 million, which was recorded in the last quarter
of Fiscal 2020. Selling, general and administrative expenses rose by 8.4%, to $44.1 million for Fiscal 2020 from an expenses
amount of $40.7 million for Fiscal 2019, primarily due to the cost of maintaining core GPS staff whose time is typically charged
to projects. Included in other income for Fiscal 2020, we recorded investment income of $5.0 million, which represented a
decline from the amount earned last year, $5.9 million, as investment balances were reduced during Fiscal 2020. Financial
results for Fiscal 2020 also reflected net income attributable to non-controlling interests in the amount of approximately $2.0
million.

The consolidated income tax benefit of $7.1 million for Fiscal 2020 reflects substantially the favorable estimated tax impact of
a bad debt loss on certain loans made to APC by Argan, which were determined to be uncollectible during the year. On the
other hand, we have not recorded any income tax benefit for the Fiscal 2020 operating loss of APC’s subsidiary in the UK due
to our expectation at this time that only a minimal portion of the benefit will be utilized in future years. For Fiscal 2019, our
consolidated income tax benefit of $4.7 million reflected the favorable impact of the research and development tax credits
recorded last year as discussed below.

During Fiscal 2019, we completed a detailed review of the activities performed by our engineering staff on major EPC services
projects in order to identify and quantify the amounts of research and development credits that may be available to reduce prior
year income taxes. Based on the results of the study, we identified and estimated significant amounts of income tax benefits
that had not previously been recognized in our financial results for any prior year reporting period. Accordingly, the income
tax benefits associated with research and development activities conducted in prior years and recorded in Fiscal 2019 totaled
$16.6 million.

Due substantially to the sharply reduced level of revenues reported for Fiscal 2020, the APC contract loss and the goodwill
impairment losses that are identified above, we incurred a consolidated loss before income tax benefit of $47.8 million for
Fiscal 2020. The net loss attributable to our stockholders of $42.7 million, or $(2.73) per share of our common stock, reflected
the favorable income tax benefit of the bad debt deduction. For Fiscal 2019, we reported consolidated income before income
taxes of $47.2 million, and net income attributable to our stockholders in the amount of $52.0 million, or $3.32 per diluted
share, which reflected the favorable income tax benefit of the research and development credits recorded last year.

The Tees Renewable Energy Plant (“TeesREP”)

Events related to the subcontracted efforts of APC to erect the biomass-fired boiler for the TeesREP project were significant to
the operating results and changes in financial position during Fiscal 2020.

Last year, we disclosed that APC had encountered significant operational and contractual challenges in completing this power-
plant boiler construction project, and that the consolidated operating results for Fiscal 2019 reflected unfavorable gross profit
adjustments related to the TeesREP project, which is located in Teesside, England. The disclosure explained that the project
progress was behind the schedule originally established for the job and warned that the project may continue to impact the
Company’s consolidated operating results negatively until it reaches completion.

- 30 -

- 31 -
- 31 -

In fact, during Fiscal 2020, APC’s estimates of the unfavorable financial impacts of the unique and numerous difficulties on
this project escalated substantially. APC conducted multiple comprehensive reviews of the remaining contract work, prepared
updated timelines for the completion of the project and assessed other factors, such as worker productivity metrics. Currently,
we estimate that the forecasted costs to perform the contracted work will exceed projected revenues by $33.6 million. The total
amount of this loss was reflected in our operating results for Fiscal 2020.

In December 2019, APC and its customer, TR, the engineering, procurement and construction services contractor on this
project, agreed to operational and commercial terms for the completion of the project. APC is a major subcontractor to TR.
This framework generally addresses project schedule, payment terms, scope, performance guarantees and other terms and
conditions for reaching substantial completion of APC’s portion of the total project by mid-2020. The framework did not
resolve significant past commercial differences which may have to be addressed through applicable dispute resolution
mechanisms. While we are disappointed that a global settlement of past commercial differences could not be achieved at that
time and that little negotiation progress has been made since then, we believe it is in our best interests to continue completion
efforts on the TeesREP project while the parties are obligated to concurrently use good faith efforts to settle the differences. It
is not currently possible to predict how, when and on what terms (if any) the past commercial differences will be resolved. We
continue to reserve our rights under the subcontract.

The net amounts of accounts receivable and contract assets included in the consolidated balance sheet as of January 31, 2020
were $9.0 million and $10.2 million, respectively; the comparable balances as of January 31, 2019 were $8.9 million and $24.0
million, respectively. In the aggregate, the reduction in balances between years was $13.7 million, or 42%. Argan has caused
certain letters of credit to be issued to TR by our Bank (see Note 6 to the accompanying consolidated financial statements) and
has provided a parent company guarantee to TR related to APC’s completion of its portion of the TeesREP project.

Engineering, Procurement and Construction Service Contracts

During August 2019, GPS received a FNTP with EPC activities to build a state-of-the-art, 1,875 MW, combined cycle natural
gas-fired power plant in Guernsey County, Ohio. The Guernsey Power Station was jointly developed by Caithness and Apex
Power Group, LLC. The commencement of this project favorably impacted the consolidated financial statements during the
latter portion of Fiscal 2020 resulting in increased revenues for the power industry services segment as well as improved
consolidated cash flow. Completion of this project is currently scheduled to occur during 2022. Also, GPS has been awarded
the following EPC services contracts for the construction of state-of-the-art combined cycle natural gas-fired power plants
since the beginning of Fiscal 2020.



In January 2020, GPS entered into an EPC services contract with Harrison Power, LLC to construct a 1,085 MW
natural gas-fired power plant in Harrison County, Ohio. The project is being developed by EmberClear, the parent
company of Harrison Power. Construction activities for the facility are scheduled to begin in 2020 once financial close
is achieved.

 On March 10, 2020, we announced that in late February 2020 GPS entered into an EPC services contract with ESC
Brooke County Power I, LLC to construct Brooke County Power, a 920 MW natural gas-fired power plant, in Brooke
County, West Virginia. The facility is being developed by Energy Solutions Consortium, LLC and construction
activities are scheduled to start in 2020 once financial close is achieved.

 On March 12, 2020, we announced that GPS recently entered into an EPC services contract with NTE Connecticut,
LLC to construct Killingly Energy Center, a 650 MW natural gas-fired power plant, in Killingly, Connecticut. The
facility is being developed by NTE Energy, LLC. Construction activities are scheduled to start in 2020 once financial
close is achieved.

At this time, for all of the contract awards with pending start dates including the four new contracts identified above, we cannot
predict with certainty when the projects will commence. The start date for construction is generally controlled by the project
owners. The aggregate rated electrical output amount for the natural gas-fired power plants for which we have signed EPC
services contracts is approximately 7.3 gigawatts with an aggregate contract value in excess of $3.0 billion.

- 32 -
- 32 -

Our project backlog amounts were approximately $1.3 billion and $1.1 billion as of January 31, 2020 and 2019, respectively.

Our reported amount of project backlog at a point in time represents the total value of projects awarded to us that we consider

to be firm as of that date less the amounts of revenues recognized to date on the corresponding projects (project backlog is

larger than the value of remaining unsatisfied performance obligations on active contracts, or “RUPO”; see Note 4 to the

accompanying consolidated financial statements). Cancellations or reductions may occur that reduce project backlog and

expected revenues. We include the value of an EPC services contract in project backlog when we believe that it is probable

that the project will commence within a reasonable timeframe, among other factors. We anticipate adding the value of each of

the last three of the four new contracts identified above to project backlog at times closer to their expected start dates.

As announced in Fiscal 2019, GPS entered into an EPC services contract to construct the Chickahominy Power Station, a 1,740

MW natural gas-fired power plant, in Charles City County, Virginia. Even though we are providing financial and technical

support to the project development effort through a consolidated VIE and project development milestones continue to be

achieved, we have not included the value of this contract in our project backlog. Due to several factors that are slowing the

pace of the development of this project, including additional time being required to secure the natural gas supply for the plant

and to obtain the necessary equity financing, we currently cannot predict when construction will commence, if at all.

We have maintained that the delays in new business awards to GPS and the project construction starts of certain previously

awarded projects relate to a variety of factors, especially in the northeast and mid-Atlantic regions of the US. Currently, we

believe that the ability of the owners of fully developed gas-fired power plant projects to close on equity and permanent debt

financing has been challenged by uncertainty in the capital markets.

The accuracy and viability of future power revenue forecasts by power plant owners and operators, particularly independent

power producers, depends, to a significant degree, on the amount of future capacity supply secured for a particular power source

located within PJM’s region. For new power projects, lack of visibility regarding future capacity revenue streams complicates

the search for equity and debt financing considerably. Most of our recently completed and awarded EPC service contracts relate

to natural gas-fired power plants located within the geographic footprint of the electric power system operated by PJM.

In December 2019, Federal regulators voted to effectively raise the bids of subsidized resources selling their power into the

PJM wholesale capacity market. Clean energy advocates and other market observers fear the controversial move by the

regulators will severely hinder incentives intended to bring new zero emissions resources online, while favoring incumbent

fossil fuels. PJM was provided 90 days to comply with the order and to provide regulators with a timeline for its next capacity

auction. PJM had previously suspended all activities and deadlines relating to the base capacity auctions for the 2022/2023 and

2023/2024 electricity delivery years. PJM has submitted its compliance filing response to FERC for review and approval,

including a proposed plan for restarting the capacity auctions. Uncertainty relating to PJM capacity auctions may continue to

disrupt capital markets for project owners. As a result, our commencement of the new EPC power plant projects could be

delayed until PJM releases new capacity auction bidding rules approved by the FERC regulators and announces future capacity

auction schedules.

In addition, there is some remaining uncertainty surrounding the level of regulatory support for coal as part of the energy mix.

Our country has experienced a general decline in carbon dioxide emissions from power plants as the supply of inexpensive

natural gas and the growth in renewable energy have moved more energy producers away from coal. The aging coal-fired

power plant fleet remains expensive to operate and the plants are generally not competitive in the marketplace. Nevertheless,

in some cases, new support may encourage the continued operation of old coal plants that might otherwise be retired without

any government intervention.

Other unfavorable factors include an increase in the amount of power generating capacity provided by renewable energy assets,

improvements and decreasing prices in renewable energy storage solutions and increased environmental activism. Protests

against fossil-fuel related energy projects continue to garner media attention and stir public skepticism about new pipelines

resulting in project delays due to onsite protest demonstrations, indecision by local officials and lawsuits. Pipeline approval

delays may jeopardize projects that are needed to bring supplies of natural gas to planned gas-fired power plant sites, thereby

increasing the risk of power plant project delays or cancellations.

In addition, various cities, counties and states are adopting clean energy and carbon-free goals or objectives with achievement

expected by a certain future date, typically 10 to 30 years out. These aspirational goals 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. The difficulty in obtaining project equity financing and the other factors identified above,

may be adversely impacting the planning and initial phases for the construction of new natural gas-fired power plants which

continue to be deferred by project owners.

- 33 -

In fact, during Fiscal 2020, APC’s estimates of the unfavorable financial impacts of the unique and numerous difficulties on

this project escalated substantially. APC conducted multiple comprehensive reviews of the remaining contract work, prepared

updated timelines for the completion of the project and assessed other factors, such as worker productivity metrics. Currently,

we estimate that the forecasted costs to perform the contracted work will exceed projected revenues by $33.6 million. The total

amount of this loss was reflected in our operating results for Fiscal 2020.

In December 2019, APC and its customer, TR, the engineering, procurement and construction services contractor on this

project, agreed to operational and commercial terms for the completion of the project. APC is a major subcontractor to TR.

This framework generally addresses project schedule, payment terms, scope, performance guarantees and other terms and

conditions for reaching substantial completion of APC’s portion of the total project by mid-2020. The framework did not

resolve significant past commercial differences which may have to be addressed through applicable dispute resolution

mechanisms. While we are disappointed that a global settlement of past commercial differences could not be achieved at that

time and that little negotiation progress has been made since then, we believe it is in our best interests to continue completion

efforts on the TeesREP project while the parties are obligated to concurrently use good faith efforts to settle the differences. It

is not currently possible to predict how, when and on what terms (if any) the past commercial differences will be resolved. We

continue to reserve our rights under the subcontract.

The net amounts of accounts receivable and contract assets included in the consolidated balance sheet as of January 31, 2020

were $9.0 million and $10.2 million, respectively; the comparable balances as of January 31, 2019 were $8.9 million and $24.0

million, respectively. In the aggregate, the reduction in balances between years was $13.7 million, or 42%. Argan has caused

certain letters of credit to be issued to TR by our Bank (see Note 6 to the accompanying consolidated financial statements) and

has provided a parent company guarantee to TR related to APC’s completion of its portion of the TeesREP project.

Engineering, Procurement and Construction Service Contracts

During August 2019, GPS received a FNTP with EPC activities to build a state-of-the-art, 1,875 MW, combined cycle natural

gas-fired power plant in Guernsey County, Ohio. The Guernsey Power Station was jointly developed by Caithness and Apex

Power Group, LLC. The commencement of this project favorably impacted the consolidated financial statements during the

latter portion of Fiscal 2020 resulting in increased revenues for the power industry services segment as well as improved

consolidated cash flow. Completion of this project is currently scheduled to occur during 2022. Also, GPS has been awarded

the following EPC services contracts for the construction of state-of-the-art combined cycle natural gas-fired power plants

since the beginning of Fiscal 2020.



In May 2019, GPS entered into an EPC services contract to construct a 625 MW power plant in Harrison County,

West Virginia. Caithness partnered with Energy Solutions Consortium, LLC to develop this project. An LNTP with

certain preliminary activities was received from the owners of this project.

In January 2020, GPS entered into an EPC services contract with Harrison Power, LLC to construct a 1,085 MW

natural gas-fired power plant in Harrison County, Ohio. The project is being developed by EmberClear, the parent

company of Harrison Power. Construction activities for the facility are scheduled to begin in 2020 once financial close

is achieved.

 On March 10, 2020, we announced that in late February 2020 GPS entered into an EPC services contract with ESC

Brooke County Power I, LLC to construct Brooke County Power, a 920 MW natural gas-fired power plant, in Brooke

County, West Virginia. The facility is being developed by Energy Solutions Consortium, LLC and construction

activities are scheduled to start in 2020 once financial close is achieved.

 On March 12, 2020, we announced that GPS recently entered into an EPC services contract with NTE Connecticut,

LLC to construct Killingly Energy Center, a 650 MW natural gas-fired power plant, in Killingly, Connecticut. The

facility is being developed by NTE Energy, LLC. Construction activities are scheduled to start in 2020 once financial

close is achieved.

At this time, for all of the contract awards with pending start dates including the four new contracts identified above, we cannot

predict with certainty when the projects will commence. The start date for construction is generally controlled by the project

owners. The aggregate rated electrical output amount for the natural gas-fired power plants for which we have signed EPC

services contracts is approximately 7.3 gigawatts with an aggregate contract value in excess of $3.0 billion.

Our project backlog amounts were approximately $1.3 billion and $1.1 billion as of January 31, 2020 and 2019, respectively.
Our reported amount of project backlog at a point in time represents the total value of projects awarded to us that we consider
to be firm as of that date less the amounts of revenues recognized to date on the corresponding projects (project backlog is
larger than the value of remaining unsatisfied performance obligations on active contracts, or “RUPO”; see Note 4 to the
accompanying consolidated financial statements). Cancellations or reductions may occur that reduce project backlog and
expected revenues. We include the value of an EPC services contract in project backlog when we believe that it is probable
that the project will commence within a reasonable timeframe, among other factors. We anticipate adding the value of each of
the last three of the four new contracts identified above to project backlog at times closer to their expected start dates.

As announced in Fiscal 2019, GPS entered into an EPC services contract to construct the Chickahominy Power Station, a 1,740
MW natural gas-fired power plant, in Charles City County, Virginia. Even though we are providing financial and technical
support to the project development effort through a consolidated VIE and project development milestones continue to be
achieved, we have not included the value of this contract in our project backlog. Due to several factors that are slowing the
pace of the development of this project, including additional time being required to secure the natural gas supply for the plant
and to obtain the necessary equity financing, we currently cannot predict when construction will commence, if at all.

We have maintained that the delays in new business awards to GPS and the project construction starts of certain previously
awarded projects relate to a variety of factors, especially in the northeast and mid-Atlantic regions of the US. Currently, we
believe that the ability of the owners of fully developed gas-fired power plant projects to close on equity and permanent debt
financing has been challenged by uncertainty in the capital markets.

The accuracy and viability of future power revenue forecasts by power plant owners and operators, particularly independent
power producers, depends, to a significant degree, on the amount of future capacity supply secured for a particular power source
located within PJM’s region. For new power projects, lack of visibility regarding future capacity revenue streams complicates
the search for equity and debt financing considerably. Most of our recently completed and awarded EPC service contracts relate
to natural gas-fired power plants located within the geographic footprint of the electric power system operated by PJM.

In December 2019, Federal regulators voted to effectively raise the bids of subsidized resources selling their power into the
PJM wholesale capacity market. Clean energy advocates and other market observers fear the controversial move by the
regulators will severely hinder incentives intended to bring new zero emissions resources online, while favoring incumbent
fossil fuels. PJM was provided 90 days to comply with the order and to provide regulators with a timeline for its next capacity
auction. PJM had previously suspended all activities and deadlines relating to the base capacity auctions for the 2022/2023 and
2023/2024 electricity delivery years. PJM has submitted its compliance filing response to FERC for review and approval,
including a proposed plan for restarting the capacity auctions. Uncertainty relating to PJM capacity auctions may continue to
disrupt capital markets for project owners. As a result, our commencement of the new EPC power plant projects could be
delayed until PJM releases new capacity auction bidding rules approved by the FERC regulators and announces future capacity
auction schedules.

In addition, there is some remaining uncertainty surrounding the level of regulatory support for coal as part of the energy mix.
Our country has experienced a general decline in carbon dioxide emissions from power plants as the supply of inexpensive
natural gas and the growth in renewable energy have moved more energy producers away from coal. The aging coal-fired
power plant fleet remains expensive to operate and the plants are generally not competitive in the marketplace. Nevertheless,
in some cases, new support may encourage the continued operation of old coal plants that might otherwise be retired without
any government intervention.

Other unfavorable factors include an increase in the amount of power generating capacity provided by renewable energy assets,
improvements and decreasing prices in renewable energy storage solutions and increased environmental activism. Protests
against fossil-fuel related energy projects continue to garner media attention and stir public skepticism about new pipelines
resulting in project delays due to onsite protest demonstrations, indecision by local officials and lawsuits. Pipeline approval
delays may jeopardize projects that are needed to bring supplies of natural gas to planned gas-fired power plant sites, thereby
increasing the risk of power plant project delays or cancellations.

In addition, various cities, counties and states are adopting clean energy and carbon-free goals or objectives with achievement
expected by a certain future date, typically 10 to 30 years out. These aspirational goals 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. The difficulty in obtaining project equity financing and the other factors identified above,
may be adversely impacting the planning and initial phases for the construction of new natural gas-fired power plants which
continue to be deferred by project owners.

- 32 -

- 33 -
- 33 -

Market Outlook

The total annual amount of electricity generated by utility-scale facilities in the US in calendar year 2018 was the highest
amount generated since 2007. Although the comparable amount of total electricity generation in calendar year 2019 declined
by 1.3% from 2018, the 2019 amount was the second highest total annual amount of electricity generated by utility-scale power
plants since 2010. In the reference case included in its Annual Energy Outlook 2020 released in January 2020, the EIA again
forecasts slow but steady growth in net electricity generation through 2050 with average annual increases of slightly less than
1.0% per year. The growth rate is tempered by new electricity-efficient devices and production processes replacing older, less-
efficient appliances, heating, cooling and ventilation systems and capital equipment. Further, it is likely that the COVID-19
outbreak will adversely impact the demand for electricity in the near term.

Despite the overall decline in the amount of electricity generated in the US in 2019 and the increases in the amounts of electricity
provided by utility-scale wind and solar power sources, the amount of electricity generated by natural gas-fired power plants
rose by 7.7% during 2019, and it represented 38.4% of the total electric power generated in the US in 2019. For comparison,
the combined amount of power generated by the wind and the sun represented 10.8% of total utility-scale power generation in
2019. For 2018, the corresponding power shares were 35.2% and 9.9%, respectively.

The amount of electricity generated from coal decreased by 15.7% in 2019 from its generation amount for 2018, and coal’s
share of the total, utility-scale electricity generation mix declined from 27.4% for 2018 to 23.5% for 2019. During 2019, power
companies retired or converted roughly 15,100 megawatts (MW) of coal-fired electricity generation, enough to power about
15 million homes. That retirement capacity reduction was second only to the record 19,300 MW of capacity shut down in 2015.

In summary, the share of the electrical power generation mix fueled by natural gas, the sun and wind has continued to increase,
while the share fueled by coal has continued its fall. Over the ten-year period ended in 2019, the amount of utility-scale power
generated in the US by coal fell by 45% while the amount of such power fueled by natural gas increased by 72%. This dramatic
shift is a primary cause of the significant reductions in the annual power plant emissions of carbon dioxide, sulfur dioxide and
nitrogen oxides over this same ten-year period.

In the reference case of the 2020 outlook identified above, the EIA predicts that coal-fired and nuclear power generating
capacity will decline approximately 47% and 20% by 2050, respectively, and will represent only 13% and 12% shares of the
electricity generation mix by 2050, respectively. It is important to note that most of the reduction in the coal-fired and nuclear
capacity is predicted to occur in the period 2020-2025. On the other hand, natural gas-fired power generating capacity will rise
by 26% over the next five years and by 67% by 2050.

As electricity demand grows, the primary drivers for new electricity generating capacity in EIA’s reference case are the
retirements of older, less efficient fossil-fuel burning power plants, the near-term availability of renewable energy tax credits
and the continued decline in the cost of capital for renewables, especially for solar photovoltaic facilities. Low natural gas
prices and favorable costs for renewables result in natural gas, solar and wind as the primary sources of new electrical power
generating capacity through 2050. However, the predictions in the base case regarding the power generating mix are sensitive
to the price of natural gas and the growth in electricity demand. Lower than expected natural gas prices and increased growth
in electricity demand would result in an even brighter forecast for natural gas capacity.

Over the next few years, EIA forecasts that new wind and photovoltaic solar capacity will continue to be added to the utility-
scale power fleet in the US at a brisk pace substantially attributable to declining equipment costs and the availability of valuable
tax credits. As these credits decline and then expire early in the next decade as currently scheduled, the wind capacity additions
are expected to slow. Although tax incentives related to solar power also expire, the continuing decline in the cost of solar
power equipment is predicted to sustain the growth of photovoltaic solar power generation facilities. Nonetheless, persistently
low natural gas prices, lower power plant operating costs, higher energy generating efficiencies and the maintenance of grid
resiliency should sustain the demand for modern combined cycle gas-fired power plants in the future. Natural gas is relatively
clean burning, cost-effective and reliable; its benefits as a source of power are compelling.

We believe that the future prospects for natural gas-fired power plant construction are generally favorable as natural gas is the
primary source for power generation in our country. Major advances in horizontal drilling and the practice of hydraulic
fracturing led to the boom in natural gas supply which is available at consistently low prices now and in the foreseeable future.
The abundant availability of cheap, less carbon-intense and higher efficiency natural gas should continue to be a significant
factor in the economic assessment of future power generation capacity additions. As indicated above, the demand for electric
power in this country is expected to grow slowly but steadily over the long term.

- 34 -
- 34 -

Demands for electricity, the ample supply of natural gas, and the future retirement of coal, nuclear and inefficient gas-fired

energy plants, particularly over the next five years, should result in modern natural gas-fired energy plants representing a

substantial portion of new power generation additions in the future. Moreover, the competitive landscape in the EPC services

market for natural gas-fired power plant construction has changed significantly. Last year, several significant competitors

announced that they were exiting the market for a variety of reasons. Others have announced intentions to avoid entering into

fixed-price contracts. While the competitive market remains dynamic, we expect that there will be fewer competitors for new

gas-fired power plant EPC project opportunities in the foreseeable future.

We believe that the development of natural gas-fired power generation facilities in the US should continue to provide new

construction opportunities for us, although the pace of new opportunities emerging may be restrained in the near term as

discussed above. We are committed to the rational pursuit of new construction projects and the future growth of our revenues.

This may result in our decision to make investments in the development and/or ownership of new projects. Because we believe

in the strength of our balance sheet, we are willing to consider certain opportunities that include reasonable and manageable

risks in order to assure the award of the related EPC services contract to us.

We believe that the Company has a growing reputation as an accomplished and cost-effective provider of EPC and other large

project construction contracting services. We are convinced that the recent series of new EPC projects awarded to us confirms

the soundness of our belief. With the proven ability to deliver completed power facilities, particularly combined cycle, natural

gas-fired power plants, we are focused on expanding our position in the power markets where we expect investments to be

made based on forecasts of electricity demand covering decades into the future. We believe that our expectations are valid and

that our plans for the future continue to be based on reasonable assumptions.

Comparison of the Results of Operations for the Years Ended January 31, 2020 and 2019

We reported net loss attributable to our stockholders of $42.7 million, or $(2.73) per share, for Fiscal 2020. For the prior year,

we reported net income of $52.0 million, or $3.32 per diluted share. The following schedule compares our operating results for

Fiscal 2020 and Fiscal 2019 (dollars in thousands).

REVENUES

Power industry services

Industrial fabrication and field services

Telecommunications infrastructure services

Revenues

COST OF REVENUES

Power industry services

Industrial fabrication and field services

Telecommunications infrastructure services

Cost of revenues

GROSS (LOSS) PROFIT

Selling, general and administrative expenses

Impairment losses

Other income, net

(LOSS) INCOME FROM OPERATIONS

(LOSS) INCOME BEFORE INCOME TAXES

Income tax benefit

NET (LOSS) INCOME

N/M – Not meaningful.

Years Ended January 31,

2020

2019

$ Change

% Change

$ 135,729

$ 367,812

$ (232,083)

(63.1) %

(6,991)

(4,082)

(243,156)

(145,077)

(6,238)

(2,583)

(153,898)

(89,258)

3,415

101,673

12,668

482,153

297,931

92,097

9,687

399,715

82,438

40,710

1,491

40,237

6,981

47,218

4,651

51,869

3,404

228.3

(96,077)

N/M

(94,983)

N/M

1,094

2,402

(92,581)

2,144

(6.9)

(32.2)

(50.4)

(48.7)

(6.8)

(26.7)

(38.5)

N/M

8.4

15.7

51.6

N/M

94,682

8,586

238,997

152,854

85,859

7,104

245,817

(6,820)

44,125

4,895

(55,840)

8,075

(47,765)

7,053

(40,712)

- 35 -

Net income (loss) attributable to non-controlling interests

1,977

(167)

NET (LOSS) INCOME ATTRIBUTABLE TO

THE STOCKHOLDERS OF ARGAN, INC.

$ (42,689)

$ 52,036

$ (94,725)

N/M %

Market Outlook

The total annual amount of electricity generated by utility-scale facilities in the US in calendar year 2018 was the highest

amount generated since 2007. Although the comparable amount of total electricity generation in calendar year 2019 declined

by 1.3% from 2018, the 2019 amount was the second highest total annual amount of electricity generated by utility-scale power

plants since 2010. In the reference case included in its Annual Energy Outlook 2020 released in January 2020, the EIA again

forecasts slow but steady growth in net electricity generation through 2050 with average annual increases of slightly less than

1.0% per year. The growth rate is tempered by new electricity-efficient devices and production processes replacing older, less-

efficient appliances, heating, cooling and ventilation systems and capital equipment. Further, it is likely that the COVID-19

outbreak will adversely impact the demand for electricity in the near term.

Despite the overall decline in the amount of electricity generated in the US in 2019 and the increases in the amounts of electricity

provided by utility-scale wind and solar power sources, the amount of electricity generated by natural gas-fired power plants

rose by 7.7% during 2019, and it represented 38.4% of the total electric power generated in the US in 2019. For comparison,

the combined amount of power generated by the wind and the sun represented 10.8% of total utility-scale power generation in

2019. For 2018, the corresponding power shares were 35.2% and 9.9%, respectively.

The amount of electricity generated from coal decreased by 15.7% in 2019 from its generation amount for 2018, and coal’s

share of the total, utility-scale electricity generation mix declined from 27.4% for 2018 to 23.5% for 2019. During 2019, power

companies retired or converted roughly 15,100 megawatts (MW) of coal-fired electricity generation, enough to power about

15 million homes. That retirement capacity reduction was second only to the record 19,300 MW of capacity shut down in 2015.

In summary, the share of the electrical power generation mix fueled by natural gas, the sun and wind has continued to increase,

while the share fueled by coal has continued its fall. Over the ten-year period ended in 2019, the amount of utility-scale power

generated in the US by coal fell by 45% while the amount of such power fueled by natural gas increased by 72%. This dramatic

shift is a primary cause of the significant reductions in the annual power plant emissions of carbon dioxide, sulfur dioxide and

nitrogen oxides over this same ten-year period.

In the reference case of the 2020 outlook identified above, the EIA predicts that coal-fired and nuclear power generating

capacity will decline approximately 47% and 20% by 2050, respectively, and will represent only 13% and 12% shares of the

electricity generation mix by 2050, respectively. It is important to note that most of the reduction in the coal-fired and nuclear

capacity is predicted to occur in the period 2020-2025. On the other hand, natural gas-fired power generating capacity will rise

by 26% over the next five years and by 67% by 2050.

As electricity demand grows, the primary drivers for new electricity generating capacity in EIA’s reference case are the

retirements of older, less efficient fossil-fuel burning power plants, the near-term availability of renewable energy tax credits

and the continued decline in the cost of capital for renewables, especially for solar photovoltaic facilities. Low natural gas

prices and favorable costs for renewables result in natural gas, solar and wind as the primary sources of new electrical power

generating capacity through 2050. However, the predictions in the base case regarding the power generating mix are sensitive

to the price of natural gas and the growth in electricity demand. Lower than expected natural gas prices and increased growth

in electricity demand would result in an even brighter forecast for natural gas capacity.

Over the next few years, EIA forecasts that new wind and photovoltaic solar capacity will continue to be added to the utility-

scale power fleet in the US at a brisk pace substantially attributable to declining equipment costs and the availability of valuable

tax credits. As these credits decline and then expire early in the next decade as currently scheduled, the wind capacity additions

are expected to slow. Although tax incentives related to solar power also expire, the continuing decline in the cost of solar

power equipment is predicted to sustain the growth of photovoltaic solar power generation facilities. Nonetheless, persistently

low natural gas prices, lower power plant operating costs, higher energy generating efficiencies and the maintenance of grid

resiliency should sustain the demand for modern combined cycle gas-fired power plants in the future. Natural gas is relatively

clean burning, cost-effective and reliable; its benefits as a source of power are compelling.

We believe that the future prospects for natural gas-fired power plant construction are generally favorable as natural gas is the

primary source for power generation in our country. Major advances in horizontal drilling and the practice of hydraulic

fracturing led to the boom in natural gas supply which is available at consistently low prices now and in the foreseeable future.

The abundant availability of cheap, less carbon-intense and higher efficiency natural gas should continue to be a significant

factor in the economic assessment of future power generation capacity additions. As indicated above, the demand for electric

power in this country is expected to grow slowly but steadily over the long term.

Demands for electricity, the ample supply of natural gas, and the future retirement of coal, nuclear and inefficient gas-fired
energy plants, particularly over the next five years, should result in modern natural gas-fired energy plants representing a
substantial portion of new power generation additions in the future. Moreover, the competitive landscape in the EPC services
market for natural gas-fired power plant construction has changed significantly. Last year, several significant competitors
announced that they were exiting the market for a variety of reasons. Others have announced intentions to avoid entering into
fixed-price contracts. While the competitive market remains dynamic, we expect that there will be fewer competitors for new
gas-fired power plant EPC project opportunities in the foreseeable future.

We believe that the development of natural gas-fired power generation facilities in the US should continue to provide new
construction opportunities for us, although the pace of new opportunities emerging may be restrained in the near term as
discussed above. We are committed to the rational pursuit of new construction projects and the future growth of our revenues.
This may result in our decision to make investments in the development and/or ownership of new projects. Because we believe
in the strength of our balance sheet, we are willing to consider certain opportunities that include reasonable and manageable
risks in order to assure the award of the related EPC services contract to us.

We believe that the Company has a growing reputation as an accomplished and cost-effective provider of EPC and other large
project construction contracting services. We are convinced that the recent series of new EPC projects awarded to us confirms
the soundness of our belief. With the proven ability to deliver completed power facilities, particularly combined cycle, natural
gas-fired power plants, we are focused on expanding our position in the power markets where we expect investments to be
made based on forecasts of electricity demand covering decades into the future. We believe that our expectations are valid and
that our plans for the future continue to be based on reasonable assumptions.

Comparison of the Results of Operations for the Years Ended January 31, 2020 and 2019

We reported net loss attributable to our stockholders of $42.7 million, or $(2.73) per share, for Fiscal 2020. For the prior year,
we reported net income of $52.0 million, or $3.32 per diluted share. The following schedule compares our operating results for
Fiscal 2020 and Fiscal 2019 (dollars in thousands).

REVENUES

Power industry services
Industrial fabrication and field services
Telecommunications infrastructure services

Revenues
COST OF REVENUES

Power industry services
Industrial fabrication and field services
Telecommunications infrastructure services

Cost of revenues

GROSS (LOSS) PROFIT
Selling, general and administrative expenses
Impairment losses
(LOSS) INCOME FROM OPERATIONS
Other income, net
(LOSS) INCOME BEFORE INCOME TAXES
Income tax benefit
NET (LOSS) INCOME
Net income (loss) attributable to non-controlling interests
NET (LOSS) INCOME ATTRIBUTABLE TO

2020

$ 135,729
94,682
8,586
238,997

Years Ended January 31,
$ Change
2019

% Change

$ 367,812
101,673
12,668
482,153

$ (232,083)

(63.1) %

(6,991)
(4,082)
(243,156)

(6.9)
(32.2)
(50.4)

152,854
85,859
7,104
245,817
(6,820)
44,125
4,895
(55,840)
8,075
(47,765)
7,053
(40,712)
1,977

297,931
92,097
9,687
399,715
82,438
40,710
1,491
40,237
6,981
47,218
4,651
51,869
(167)

(145,077)
(6,238)

(2,583)
(153,898)
(89,258)
3,415
3,404
(96,077)
1,094
(94,983)
2,402
(92,581)
2,144

(48.7)
(6.8)
(26.7)
(38.5)
N/M
8.4
228.3
N/M
15.7
N/M
51.6
N/M
N/M

THE STOCKHOLDERS OF ARGAN, INC.

$ (42,689)

$ 52,036

$ (94,725)

N/M %

N/M – Not meaningful.

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Revenues

Power Industry Services

The revenues of the power industry services business decreased by 63.1%, or $232.1 million, to $135.7 million for Fiscal 2020
compared with revenues of $367.8 million for Fiscal 2019. The revenues of this business represented 56.8% of consolidated
revenues for Fiscal 2020 and 76.3% of consolidated revenues for the prior year. The amount of revenues earned by this segment
during Fiscal 2020 were negatively impacted by the delay in new EPC project startups by GPS. However, upon the receipt of
a full notice-to-proceed in August 2019, the construction activities on the Guernsey Power Station commenced; revenues earned
on this project represented approximately 22.0% of consolidated revenues for Fiscal 2020.

GPS reached substantial completion on four gas-fired power plant projects during Fiscal 2019 and concluded activities on a
fifth gas-fired power plant early in the first quarter of Fiscal 2020. These five power plants provided revenues of $251.8 million
for Fiscal 2019, which represented approximately 52.2% of consolidated revenues for the year. The revenues of this segment
last year also included revenues related to the InterGen Spalding OCGT Expansion Project which was completed by APC in
the second quarter of Fiscal 2020. Additionally, the revenues earned on the TeesREP project for Fiscal 2020 were less than the
revenues recorded for this project last year as the pace of work during Fiscal 2020 was interrupted several times during the
current year due to contractual, financial, labor and subcontractor challenges. Nonetheless, revenues earned during Fiscal 2020
on the TeesREP project represented approximately15.3% of consolidated revenues for the year.

Industrial Fabrication and Field Services

The revenues of industrial fabrication and field services (representing the business of TRC) provided 39.6% of consolidated
revenues for Fiscal 2020. However, revenues decreased by $7.0 million, or 6.9%, to $94.7 million for Fiscal 2020. With the
completion of several of the large projects during Fiscal 2020, TRC is focused on rebuilding project backlog.

Last year, the revenues of the industrial fabrication and field services segment increased by 55.7% to $101.7 million, which
represented 21.1% of consolidated revenues, as business development efforts succeeded in winning increased amounts of
business from recurring as well as new customers. The largest portion of TRC’s revenues were provided by industrial field
services. TRC’s major customers include some of North America’s largest forest products companies and fertilizer producers
as well as energy and mining companies with plants located in the southeast region of the US.

Telecommunications Infrastructure Services

The revenues of this business segment (representing the business of SMC) were $8.6 million for Fiscal 2020 compared with
revenues of $12.7 million for Fiscal 2019. The decrease was primarily due to the completion of a large and successful, multi-
year, fiber-to-the-premises project for a municipal customer located in the state of Maryland that contributed a major portion
of revenues last year.

Cost of Revenues

Due primarily to the decrease in consolidated revenues for Fiscal 2020 compared with revenues for Fiscal 2019, consolidated
cost of revenues also decreased. These costs were $245.8 million and $399.7 million for Fiscal 2020 and Fiscal 2019,
respectively. Despite the reduction in costs, we reported a gross loss for Fiscal 2020 in the amount of $6.8 million which
reflected the amount of contract loss, $33.6 million, that was recorded for the TeesREP project. Excluding the loss from the
calculations, the pro forma gross profit percentages of corresponding revenues for the power industry services, industrial
services and the telecommunications infrastructure segments for Fiscal 2020 were 17.3%, 9.3% and 17.3%, respectively.

The consolidated gross profit amount and percentage last year of $82.4 million and 17.1% were primarily driven by execution
on the commissioning, start-up and final phases of four natural gas-fired power plant projects, all of which reached substantial
completion. These achievements resulted in our making favorable project close-out adjustments to the gross profits of certain
projects during Fiscal 2019. The gross (loss) profit percentages of corresponding revenues for the power industry services,
industrial services and the telecommunications infrastructure segments for Fiscal 2019 were (10.9)%, 9.4% and 23.5%,
respectively.

Selling, General and Administrative Expenses

These costs were $44.1 million and $40.7 million for Fiscal 2020 and 2019, respectively, representing an increase of 8.4%

between the years. The increase for Fiscal 2020 was primarily due to the cost of maintaining core members of the operations

staff at GPS whose time is typically charged to active projects, offset partially by decreased incentive compensation expenses.

Impairment losses were recorded during Fiscal 2020 and Fiscal 2019 related to the goodwill of TRC in the amounts of $2.8

million and $1.5 million, respectively. The business valuations, which were performed for each year based on a blend of results

determined by several income and market approaches, indicated that the carrying value of the business exceeded its fair value

at each testing date. Drivers for the impairment loss recorded in Fiscal 2020 included a reduction in forecasted revenues,

increased working capital requirements, reduced profit margins and appropriate changes to certain statistical factors. We

considered the magnitude of the contract loss related to the TeesREP project during the first quarter of Fiscal 2020 to be an

event triggering a re-assessment of the goodwill of APC which resulted in our conclusion that the remaining value was

impaired. Accordingly, an impairment loss was recorded in April 2019 in the amount of $2.1 million.

Impairment Losses

Other Income

Other income for Fiscal 2020 included a pre-tax gain of $2.2 million recorded by the consolidated variable interest entity in

connection with the grant of a utility easement at the planned site of a new gas-fired power plant. This gain is also reflected in

the amount of net income attributable to non-controlling interests for Fiscal 2020. Investment income decreased by $0.9 million

for Fiscal 2020 from the amount earned in Fiscal 2019 due to reduced current year investment balances.

In July 2018 and as discussed in Note 11 to the accompanying consolidated financial statements, TRC and PPS Engineers, Inc.

(“PPS”) agreed to a settlement of all claims made against each other with TRC agreeing to make a payment to PPS in the

amount of $0.9 million. As the total of previously accrued amounts exceeded the negotiated settlement amount, we recorded a

gain on the settlement in the amount of $1.4 million that was included in other income for Fiscal 2019.

Income Tax Benefits

We recorded an income tax benefit for Fiscal 2020 in the amount of approximately $7.1 million which primarily reflects the

favorable tax impact of bad debt loss realized on loans made to APC by Argan. We have not recorded any income tax benefit

related to the net loss reported by the subsidiary operations of APC located in the UK for Fiscal 2020 due to our expectation at

this time that only a minimal portion of the benefit will be realized in future years. The income tax benefit for Fiscal 2020 does

reflect the unfavorable expected effects of state income taxes and permanent differences associated with nondeductible travel

and entertainment expenses, certain nondeductible executive compensation expense and the goodwill impairment losses.

We reported an income tax benefit for Fiscal 2019 in the amount of $4.7 million which reflected an estimated amount of

benefits associated with research and development credits for the three-year period ended January 31, 2018 in the amount of

$16.6 million.

The Tax Cuts and Jobs Act (the “Tax Act”), which was signed into law on December 22, 2017, significantly changed tax law

in the US by, among other changes, reducing the federal corporate income tax rate from a maximum of 35% to 21% (effective

January 1, 2018). As expected, our annual effective income tax rate for Fiscal 2019, before the benefits of the research and

development credits discussed above and a favorable net operating loss carryforward adjustment, decreased meaningfully to

29.5% from the comparable effective tax rate for Fiscal 2018 of 35.8%, primarily due to the lower statutory tax rate. However,

certain modifications of the Tax Act negatively impacted our effective rate, including the elimination of the domestic

production activities deduction, the expansion of the limitation on the deductibility of certain meals and entertainment expenses

and additional limits on the deductibility of certain executive compensation. However, our effective tax rate of 29.5% was

higher than the new federal income tax rate of 21% due primarily to the unfavorable effect of state income taxes.

Liquidity and Capital Resources as of January 31, 2020

At January 31, 2020 and 2019, our balances of cash and cash equivalents were $167.4 million and $164.3 million, respectively.

Our working capital decreased by $57.3 million to $277.7 million as of January 31, 2020 from $335.0 million as of January

31, 2019 due primarily to the loss incurred and recorded on the TeesREP project during Fiscal 2020.

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- 37 -

Revenues

Power Industry Services

The revenues of the power industry services business decreased by 63.1%, or $232.1 million, to $135.7 million for Fiscal 2020

compared with revenues of $367.8 million for Fiscal 2019. The revenues of this business represented 56.8% of consolidated

revenues for Fiscal 2020 and 76.3% of consolidated revenues for the prior year. The amount of revenues earned by this segment

during Fiscal 2020 were negatively impacted by the delay in new EPC project startups by GPS. However, upon the receipt of

a full notice-to-proceed in August 2019, the construction activities on the Guernsey Power Station commenced; revenues earned

on this project represented approximately 22.0% of consolidated revenues for Fiscal 2020.

GPS reached substantial completion on four gas-fired power plant projects during Fiscal 2019 and concluded activities on a

fifth gas-fired power plant early in the first quarter of Fiscal 2020. These five power plants provided revenues of $251.8 million

for Fiscal 2019, which represented approximately 52.2% of consolidated revenues for the year. The revenues of this segment

last year also included revenues related to the InterGen Spalding OCGT Expansion Project which was completed by APC in

the second quarter of Fiscal 2020. Additionally, the revenues earned on the TeesREP project for Fiscal 2020 were less than the

revenues recorded for this project last year as the pace of work during Fiscal 2020 was interrupted several times during the

current year due to contractual, financial, labor and subcontractor challenges. Nonetheless, revenues earned during Fiscal 2020

on the TeesREP project represented approximately15.3% of consolidated revenues for the year.

Industrial Fabrication and Field Services

The revenues of industrial fabrication and field services (representing the business of TRC) provided 39.6% of consolidated

revenues for Fiscal 2020. However, revenues decreased by $7.0 million, or 6.9%, to $94.7 million for Fiscal 2020. With the

completion of several of the large projects during Fiscal 2020, TRC is focused on rebuilding project backlog.

Last year, the revenues of the industrial fabrication and field services segment increased by 55.7% to $101.7 million, which

represented 21.1% of consolidated revenues, as business development efforts succeeded in winning increased amounts of

business from recurring as well as new customers. The largest portion of TRC’s revenues were provided by industrial field

services. TRC’s major customers include some of North America’s largest forest products companies and fertilizer producers

as well as energy and mining companies with plants located in the southeast region of the US.

Telecommunications Infrastructure Services

The revenues of this business segment (representing the business of SMC) were $8.6 million for Fiscal 2020 compared with

revenues of $12.7 million for Fiscal 2019. The decrease was primarily due to the completion of a large and successful, multi-

year, fiber-to-the-premises project for a municipal customer located in the state of Maryland that contributed a major portion

of revenues last year.

Cost of Revenues

Due primarily to the decrease in consolidated revenues for Fiscal 2020 compared with revenues for Fiscal 2019, consolidated

cost of revenues also decreased. These costs were $245.8 million and $399.7 million for Fiscal 2020 and Fiscal 2019,

respectively. Despite the reduction in costs, we reported a gross loss for Fiscal 2020 in the amount of $6.8 million which

reflected the amount of contract loss, $33.6 million, that was recorded for the TeesREP project. Excluding the loss from the

calculations, the pro forma gross profit percentages of corresponding revenues for the power industry services, industrial

services and the telecommunications infrastructure segments for Fiscal 2020 were 17.3%, 9.3% and 17.3%, respectively.

The consolidated gross profit amount and percentage last year of $82.4 million and 17.1% were primarily driven by execution

on the commissioning, start-up and final phases of four natural gas-fired power plant projects, all of which reached substantial

completion. These achievements resulted in our making favorable project close-out adjustments to the gross profits of certain

projects during Fiscal 2019. The gross (loss) profit percentages of corresponding revenues for the power industry services,

industrial services and the telecommunications infrastructure segments for Fiscal 2019 were (10.9)%, 9.4% and 23.5%,

respectively.

Selling, General and Administrative Expenses

These costs were $44.1 million and $40.7 million for Fiscal 2020 and 2019, respectively, representing an increase of 8.4%
between the years. The increase for Fiscal 2020 was primarily due to the cost of maintaining core members of the operations
staff at GPS whose time is typically charged to active projects, offset partially by decreased incentive compensation expenses.

Impairment Losses

Impairment losses were recorded during Fiscal 2020 and Fiscal 2019 related to the goodwill of TRC in the amounts of $2.8
million and $1.5 million, respectively. The business valuations, which were performed for each year based on a blend of results
determined by several income and market approaches, indicated that the carrying value of the business exceeded its fair value
at each testing date. Drivers for the impairment loss recorded in Fiscal 2020 included a reduction in forecasted revenues,
increased working capital requirements, reduced profit margins and appropriate changes to certain statistical factors. We
considered the magnitude of the contract loss related to the TeesREP project during the first quarter of Fiscal 2020 to be an
event triggering a re-assessment of the goodwill of APC which resulted in our conclusion that the remaining value was
impaired. Accordingly, an impairment loss was recorded in April 2019 in the amount of $2.1 million.

Other Income

Other income for Fiscal 2020 included a pre-tax gain of $2.2 million recorded by the consolidated variable interest entity in
connection with the grant of a utility easement at the planned site of a new gas-fired power plant. This gain is also reflected in
the amount of net income attributable to non-controlling interests for Fiscal 2020. Investment income decreased by $0.9 million
for Fiscal 2020 from the amount earned in Fiscal 2019 due to reduced current year investment balances.

In July 2018 and as discussed in Note 11 to the accompanying consolidated financial statements, TRC and PPS Engineers, Inc.
(“PPS”) agreed to a settlement of all claims made against each other with TRC agreeing to make a payment to PPS in the
amount of $0.9 million. As the total of previously accrued amounts exceeded the negotiated settlement amount, we recorded a
gain on the settlement in the amount of $1.4 million that was included in other income for Fiscal 2019.

Income Tax Benefits

We recorded an income tax benefit for Fiscal 2020 in the amount of approximately $7.1 million which primarily reflects the
favorable tax impact of bad debt loss realized on loans made to APC by Argan. We have not recorded any income tax benefit
related to the net loss reported by the subsidiary operations of APC located in the UK for Fiscal 2020 due to our expectation at
this time that only a minimal portion of the benefit will be realized in future years. The income tax benefit for Fiscal 2020 does
reflect the unfavorable expected effects of state income taxes and permanent differences associated with nondeductible travel
and entertainment expenses, certain nondeductible executive compensation expense and the goodwill impairment losses.

We reported an income tax benefit for Fiscal 2019 in the amount of $4.7 million which reflected an estimated amount of
benefits associated with research and development credits for the three-year period ended January 31, 2018 in the amount of
$16.6 million.

The Tax Cuts and Jobs Act (the “Tax Act”), which was signed into law on December 22, 2017, significantly changed tax law
in the US by, among other changes, reducing the federal corporate income tax rate from a maximum of 35% to 21% (effective
January 1, 2018). As expected, our annual effective income tax rate for Fiscal 2019, before the benefits of the research and
development credits discussed above and a favorable net operating loss carryforward adjustment, decreased meaningfully to
29.5% from the comparable effective tax rate for Fiscal 2018 of 35.8%, primarily due to the lower statutory tax rate. However,
certain modifications of the Tax Act negatively impacted our effective rate, including the elimination of the domestic
production activities deduction, the expansion of the limitation on the deductibility of certain meals and entertainment expenses
and additional limits on the deductibility of certain executive compensation. However, our effective tax rate of 29.5% was
higher than the new federal income tax rate of 21% due primarily to the unfavorable effect of state income taxes.

Liquidity and Capital Resources as of January 31, 2020

At January 31, 2020 and 2019, our balances of cash and cash equivalents were $167.4 million and $164.3 million, respectively.
Our working capital decreased by $57.3 million to $277.7 million as of January 31, 2020 from $335.0 million as of January
31, 2019 due primarily to the loss incurred and recorded on the TeesREP project during Fiscal 2020.

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- 37 -
- 37 -

The net amount of cash provided by operating activities for Fiscal 2020 was $53.6 million. Our net loss for the current fiscal
year period, offset partially by the favorable adjustments related to non-cash income and expense items, represented a use of
cash in the total amount of $33.8 million. The Company also used cash during Fiscal 2020 in the amount of $3.3 million to
reduce the level of accounts payable, accrued expenses and lease liabilities. However, these uses of cash were more than offset
by the temporary $64.3 million increase in the balance of contract liabilities during Fiscal 2020, a substantial source of cash.
In addition, the balance of contract assets declined during Fiscal 2020, due primarily to decreases in the amounts of revenues
recognized in excess of amounts billed on projects in the UK and Ireland, representing a source of cash in the amount of $25.0
million.

With the net cash provided by operations and proceeds from the net maturities of short-term investments, we purchased new
certificates of deposit issued by our Bank, in the amount of $195.0 million. Cash proceeds in the amount of $1.6 million were
received from the exercise of stock options during Fiscal 2020. Non-operating activities used cash during Fiscal 2020 including
the payment of quarterly cash dividends in the total amount of $15.6 million and capital expenditures in the amount of $7.1
million. As of January 31, 2020, there were no restrictions with respect to inter-company payments from GPS, TRC, APC or
SMC to the holding company. However, during Fiscal 2020, certain loans made by Argan to APC were determined to be
uncollectible (see Note 13 to the accompanying consolidated financial statements).

During Fiscal 2019, our balance of cash and cash equivalents increased by $42.2 million to $164.3 million while our working
capital increased by $33.2 million to $335.0 million as of January 31, 2019. The net amount of cash used in operating activities
during Fiscal 2019 was $112.3 million. Even though net income for the period, including the favorable adjustments related to
non-cash income and expense items, provided cash in the total amount of $57.0 million, cash used in operations exceeded this
amount. Four major EPC projects achieved substantial completion during Fiscal 2019, representing the primary driver for the
use of cash by contracts-in-progress during the year. These projects were well past the peak of their respective milestone billing
schedules. Due primarily to these projects, the amounts of billings in excess of the amounts of the corresponding costs and
estimated earnings declined during Fiscal 2019 by $99.7 million, which represented a substantial use of cash. Partially offsetting
these effects, the Company collected amounts of billings previously retained by project owners during the year in the amount
of $48.7 million. As presented above, the operations of TRC and APC experienced meaningful growth in revenues during
Fiscal 2019. As expected, the increase in the level of business resulted in an increase in the amount of working capital required
to support the growth. Accordingly, the amounts of revenues recognized on certain active projects in excess of the amounts
billed on those projects rose during Fiscal 2019 in the amount of $33.8 million, which represents a use of cash. Similarly, due
in part to increased activity at these operating subsidiaries, accounts receivable increased during Fiscal 2019, a use of cash in
the amount of $10.2 million. The Company also used cash in the amount of $60.2 million to reduce the level of accounts
payable and accrued liabilities. Due primarily to the inclusion of expected income tax refunds, the balance of other assets
increased by $15.2 million during Fiscal 2019, representing a use of cash.

The primary source of cash required to fund operations during Fiscal 2019 was the net maturity of short-term investments in
the amount of $179.0 million. Non-operating activities used cash during Fiscal 2019, including primarily the payment of four
quarterly cash dividends in the total amount of $15.6 million. Our operating subsidiaries also used cash during Fiscal 2019 in
the amount of $8.6 million to fund capital expenditures.

At January 31, 2020, most of our balance of cash and cash equivalents was invested in a money market fund with most of its
total assets invested in cash, US Treasury obligations and repurchase agreements secured by US Treasury obligations. Most of
our domestic operating bank accounts are maintained with the Bank. We do maintain certain Euro-based bank accounts in the
Republic of Ireland and certain pound sterling-based bank accounts in the UK in support of the operations of APC.

Our credit agreement with the Bank, which expires on May 31, 2021, includes the following features, among others: a lending
commitment of $50.0 million including a revolving loan with interest at the 30-day LIBOR plus 2.0%, and an accordion feature
which allows for an additional commitment amount of $10.0 million, subject to certain conditions (the “Credit Agreement”).
We may use the borrowing ability to cover other credit instruments issued by the Bank for our use in the ordinary course of
business as defined by the Bank. At January 31, 2020, we had $9.9 million of outstanding letters of credit issued under the
Credit Agreement; about 80% of the outstanding amount relates to the TeesREP project. However, we had no outstanding
borrowings. Additionally, in connection with the current project development activities by a VIE, the Bank issued a letter of
credit, outside the scope of the Credit Agreement, in the approximate amount of $3.4 million for which the Company has
provided cash collateral.

We have pledged the majority of our assets to secure the 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 Credit Agreement
requires that we comply with certain financial covenants at our fiscal year-end and at each fiscal quarter-end, and includes

other terms, covenants and events of default that are customary for a credit facility of its size and nature. At January 31, 2020

and 2019, we were compliant with the financial covenants of the Credit Agreement. However, certain financial covenant

requirements are based on the amount of earnings before interest, taxes, depreciation and amortization, as defined in the credit

agreement, reported by us on a rolling twelve-month basis. The loss incurred by us for Fiscal 2020 has reduced the financial

covenant compliance margins considerably. However, we maintain sufficient cash balances with the Bank that would allow us

to extinguish any outstanding credit amounts.

We believe that cash on hand, 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 line of credit, will be adequate to meet our general business

needs in the foreseeable future. In particular, we maintain significant liquid capital on our balance sheet to help ensure our

ability to maintain bonding capacity and to provide parent company performance guarantees for EPC and other construction

projects. Any future acquisitions, or other significant unplanned cost or cash requirement, may require us to raise additional

funds through the issuance of debt and/or equity securities. There can be no assurance that such financing will be available on

terms acceptable to us, or at all.

Contractual Obligations

Contractual obligations outstanding as of January 31, 2020 are summarized below (dollars in thousands):

Contractual Obligations

Operating leases

Purchase commitments (1)

Amount of Commitment Expiration per Period

Less Than

One Year

$ 1,239

1,589

2-3 Years

$ 885

343

4-5 Years

$ 204

—

Over 5

Years

$ —

—

Total

Commitment

$ 2,328

1,932

Totals

$ 2,828

$ 1,228

$ 204

$ —

$ 4,260

(1) Amounts represent primarily service arrangements. Commitments pursuant to purchase orders and subcontracts related to construction contracts are not

included as such amounts are expected to be funded under contract billings. We have no significant obligation for materials or subcontract services

beyond those required to complete contracts awarded to us.

Off-Balance Sheet Arrangements

Performance Commitments, Letters of Credit and Financial Guarantees

In the normal course of business and for certain major projects, we may be required to obtain surety or performance bonding,

to provide parent company guarantees, or to cause the issuance of letters of credit (or some combination thereof) in order to

provide performance assurances to clients on behalf of one of our contractor subsidiaries.

For example, we maintain a variety of commitments that are generally made available to provide support for various

commercial provisions in our construction contracts. For certain projects, we are required by project owners to provide

guarantees related to our services or work. If our services under a guaranteed project would not be completed or would be

determined to have resulted in a material defect or other material deficiency, then we may be responsible for monetary damages

or other legal remedies. Certain project owners may request that we obtain surety bonds for their benefit in connection with

EPC services contract performance obligations. As is typically required by any surety bond, the Company 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. However, as of January 31, 2020, the revenue value of the Company’s unsatisfied

bonded performance obligations was approximately equal to the value of RUPO disclosed in Note 4 to the accompanying

consolidated financial statements. In addition, as of January 31, 2020, there were bonds outstanding in the aggregate amount

of approximately $152 million covering other risks including warranty obligations related to projects completed by GPS; these

bonds expire at various dates during the years ending January 31, 2021 and 2022.

When sufficient information about claims related to our performance on projects would be available and monetary damages or

other costs or losses would be determined to be probable, we would record such guaranteed losses. 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, 2020 are not estimable.

- 38 -
- 38 -

- 39 -

The net amount of cash provided by operating activities for Fiscal 2020 was $53.6 million. Our net loss for the current fiscal

year period, offset partially by the favorable adjustments related to non-cash income and expense items, represented a use of

cash in the total amount of $33.8 million. The Company also used cash during Fiscal 2020 in the amount of $3.3 million to

reduce the level of accounts payable, accrued expenses and lease liabilities. However, these uses of cash were more than offset

by the temporary $64.3 million increase in the balance of contract liabilities during Fiscal 2020, a substantial source of cash.

In addition, the balance of contract assets declined during Fiscal 2020, due primarily to decreases in the amounts of revenues

recognized in excess of amounts billed on projects in the UK and Ireland, representing a source of cash in the amount of $25.0

million.

With the net cash provided by operations and proceeds from the net maturities of short-term investments, we purchased new

certificates of deposit issued by our Bank, in the amount of $195.0 million. Cash proceeds in the amount of $1.6 million were

received from the exercise of stock options during Fiscal 2020. Non-operating activities used cash during Fiscal 2020 including

the payment of quarterly cash dividends in the total amount of $15.6 million and capital expenditures in the amount of $7.1

million. As of January 31, 2020, there were no restrictions with respect to inter-company payments from GPS, TRC, APC or

SMC to the holding company. However, during Fiscal 2020, certain loans made by Argan to APC were determined to be

uncollectible (see Note 13 to the accompanying consolidated financial statements).

During Fiscal 2019, our balance of cash and cash equivalents increased by $42.2 million to $164.3 million while our working

capital increased by $33.2 million to $335.0 million as of January 31, 2019. The net amount of cash used in operating activities

during Fiscal 2019 was $112.3 million. Even though net income for the period, including the favorable adjustments related to

non-cash income and expense items, provided cash in the total amount of $57.0 million, cash used in operations exceeded this

amount. Four major EPC projects achieved substantial completion during Fiscal 2019, representing the primary driver for the

use of cash by contracts-in-progress during the year. These projects were well past the peak of their respective milestone billing

schedules. Due primarily to these projects, the amounts of billings in excess of the amounts of the corresponding costs and

estimated earnings declined during Fiscal 2019 by $99.7 million, which represented a substantial use of cash. Partially offsetting

these effects, the Company collected amounts of billings previously retained by project owners during the year in the amount

of $48.7 million. As presented above, the operations of TRC and APC experienced meaningful growth in revenues during

Fiscal 2019. As expected, the increase in the level of business resulted in an increase in the amount of working capital required

to support the growth. Accordingly, the amounts of revenues recognized on certain active projects in excess of the amounts

billed on those projects rose during Fiscal 2019 in the amount of $33.8 million, which represents a use of cash. Similarly, due

in part to increased activity at these operating subsidiaries, accounts receivable increased during Fiscal 2019, a use of cash in

the amount of $10.2 million. The Company also used cash in the amount of $60.2 million to reduce the level of accounts

payable and accrued liabilities. Due primarily to the inclusion of expected income tax refunds, the balance of other assets

increased by $15.2 million during Fiscal 2019, representing a use of cash.

The primary source of cash required to fund operations during Fiscal 2019 was the net maturity of short-term investments in

the amount of $179.0 million. Non-operating activities used cash during Fiscal 2019, including primarily the payment of four

quarterly cash dividends in the total amount of $15.6 million. Our operating subsidiaries also used cash during Fiscal 2019 in

the amount of $8.6 million to fund capital expenditures.

At January 31, 2020, most of our balance of cash and cash equivalents was invested in a money market fund with most of its

total assets invested in cash, US Treasury obligations and repurchase agreements secured by US Treasury obligations. Most of

our domestic operating bank accounts are maintained with the Bank. We do maintain certain Euro-based bank accounts in the

Republic of Ireland and certain pound sterling-based bank accounts in the UK in support of the operations of APC.

Our credit agreement with the Bank, which expires on May 31, 2021, includes the following features, among others: a lending

commitment of $50.0 million including a revolving loan with interest at the 30-day LIBOR plus 2.0%, and an accordion feature

which allows for an additional commitment amount of $10.0 million, subject to certain conditions (the “Credit Agreement”).

We may use the borrowing ability to cover other credit instruments issued by the Bank for our use in the ordinary course of

business as defined by the Bank. At January 31, 2020, we had $9.9 million of outstanding letters of credit issued under the

Credit Agreement; about 80% of the outstanding amount relates to the TeesREP project. However, we had no outstanding

borrowings. Additionally, in connection with the current project development activities by a VIE, the Bank issued a letter of

credit, outside the scope of the Credit Agreement, in the approximate amount of $3.4 million for which the Company has

provided cash collateral.

We have pledged the majority of our assets to secure the 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 Credit Agreement

requires that we comply with certain financial covenants at our fiscal year-end and at each fiscal quarter-end, and includes

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other terms, covenants and events of default that are customary for a credit facility of its size and nature. At January 31, 2020
and 2019, we were compliant with the financial covenants of the Credit Agreement. However, certain financial covenant
requirements are based on the amount of earnings before interest, taxes, depreciation and amortization, as defined in the credit
agreement, reported by us on a rolling twelve-month basis. The loss incurred by us for Fiscal 2020 has reduced the financial
covenant compliance margins considerably. However, we maintain sufficient cash balances with the Bank that would allow us
to extinguish any outstanding credit amounts.

We believe that cash on hand, 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 line of credit, will be adequate to meet our general business
needs in the foreseeable future. In particular, we maintain significant liquid capital on our balance sheet to help ensure our
ability to maintain bonding capacity and to provide parent company performance guarantees for EPC and other construction
projects. Any future acquisitions, or other significant unplanned cost or cash requirement, may require us to raise additional
funds through the issuance of debt and/or equity securities. There can be no assurance that such financing will be available on
terms acceptable to us, or at all.

Contractual Obligations

Contractual obligations outstanding as of January 31, 2020 are summarized below (dollars in thousands):

Contractual Obligations

Operating leases
Purchase commitments (1)

Less Than
One Year

$ 1,239
1,589

Amount of Commitment Expiration per Period
Over 5
Years
$ —
—

4-5 Years
$ 204
—

2-3 Years
$ 885
343

Total
Commitment
$ 2,328
1,932

Totals

$ 2,828

$ 1,228

$ 204

$ —

$ 4,260

(1) Amounts represent primarily service arrangements. Commitments pursuant to purchase orders and subcontracts related to construction contracts are not
included as such amounts are expected to be funded under contract billings. We have no significant obligation for materials or subcontract services
beyond those required to complete contracts awarded to us.

Off-Balance Sheet Arrangements

Performance Commitments, Letters of Credit and Financial Guarantees

In the normal course of business and for certain major projects, we may be required to obtain surety or performance bonding,
to provide parent company guarantees, or to cause the issuance of letters of credit (or some combination thereof) in order to
provide performance assurances to clients on behalf of one of our contractor subsidiaries.

For example, we maintain a variety of commitments that are generally made available to provide support for various
commercial provisions in our construction contracts. For certain projects, we are required by project owners to provide
guarantees related to our services or work. If our services under a guaranteed project would not be completed or would be
determined to have resulted in a material defect or other material deficiency, then we may be responsible for monetary damages
or other legal remedies. Certain project owners may request that we obtain surety bonds for their benefit in connection with
EPC services contract performance obligations. As is typically required by any surety bond, the Company 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. However, as of January 31, 2020, the revenue value of the Company’s unsatisfied
bonded performance obligations was approximately equal to the value of RUPO disclosed in Note 4 to the accompanying
consolidated financial statements. In addition, as of January 31, 2020, there were bonds outstanding in the aggregate amount
of approximately $152 million covering other risks including warranty obligations related to projects completed by GPS; these
bonds expire at various dates during the years ending January 31, 2021 and 2022.

When sufficient information about claims related to our performance on projects would be available and monetary damages or
other costs or losses would be determined to be probable, we would record such guaranteed losses. 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, 2020 are not estimable.

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- 39 -

As described in Note 9 to the accompanying consolidated financial statements, we have a line of credit committed by the Bank
in the amount of $50.0 million for general purposes. We may use the borrowing ability to cover standby letters of credit issued
by the Bank for our use in the ordinary course of business. As of January 31, 2020, we had approximately $9.9 million of credit
outstanding under the Credit Agreement, but no borrowings. On behalf of APC, Argan provided a parent company performance
guarantee to TR, the engineering, procurement and construction services contractor on the TeesREP project, and caused the
Bank to issue letters of credit as security (see Notes 9 and 10 to the accompanying consolidated financial statements). These
letters of credit represent approximately 80% of the amount of outstanding credit under the Credit Agreement as of January 31,
2020. Additionally, in connection with the project development activities of the active VIE that is identified below, and outside
the scope of the Credit Agreement, the Bank issued a letter of credit in the approximate amount of $3.4 million for which the
Company has provided cash collateral.

We have also provided a financial guarantee on behalf of GPS to an original equipment manufacturer in the amount of $3.6
million to support project developmental efforts which resulted in the award of an EPC services contract to GPS.

Special Purpose Entities

EBITDA attributable to the stockholders of Argan, Inc.

$ (45,093)

52,478

As is common in our industry, EPC contractors and third parties form joint ventures, limited partnerships and limited liability
companies for purposes of executing a project or program for a project owner. These teaming arrangements are typically
dissolved upon completion of the project or program. We had financial control of construction joint ventures formed for the
purpose of building two power plants, which were completed in Fiscal 2017, and for which the respective warranty periods
have expired. The statutory partnerships representing the joint ventures were dissolved during Fiscal 2019. The accounts of the
joint ventures were included in our consolidated financial statements during the periods of their existence.

In addition, we may obtain interests in VIEs formed by its owners for a specific purpose. The evaluation of whether such
interests represent our financial control of a VIE requires analysis and judgement. We concluded that we are the primary
beneficiary of a VIE formed by an independent firm for the purpose of developing a natural gas-fired power plant in Virginia.
As a result, the VIE is included in our consolidated financial statements until we determine that our financial control of the
entity has passed to another party. Pursuant to agreements negotiated with the developer, we are lending funds to the VIE to
cover certain costs of the project development effort. The development phase activities of the VIE are focused on 1) obtaining
the necessary permits to build and operate the power plant, 2) completing arrangements to connect the power plant to the fuel
supply and the electricity grid, 3) engaging energy plant operators in negotiations for the purchase of project ownership
interests, and 4) securing permanent financing for the project.

We have entered into similar support arrangements with other independent parties in the past that resulted in the successful
development and construction of three separate gas-fired power plants. In each case, we deconsolidated the corresponding VIE
when we were no longer the primary beneficiary. 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.

Inflation

Our monetary assets, consisting primarily of cash, cash equivalents and accounts receivables, and our non-monetary assets,
consisting primarily of property, plant, equipment goodwill and other purchased intangible assets, are not affected significantly
by inflation. We believe that replacement costs of our building, improvements, equipment and furniture will not materially
affect our operations.

We do procure steel and other commodities for use in our construction projects. These materials can be subject to significant
price fluctuations that may be caused by the ramifications of import tariffs imposed by the US. During Fiscal 2020, the well-
publicized shortage of skilled construction workers has been accompanied by corresponding wage increases at rates higher
than those experienced since the recession in 2007. These factors did not have significant effects on us during Fiscal 2020 as,
unfortunately, the amount of EPC project activity conducted during the year was at a low level. These factors, may begin to
impact us more materially as construction activity on the Guernsey Power Station ramps up and when we received FNTPs on
other projects awarded to us and commence EPC activities. We strive to include the anticipated increases in the prices of
equipment and commodity materials and the expected rise in labor rates as we estimate costs and prepare prices associated with
bidding for new work. Although we have not been adversely affected by price fluctuations and wage increases to any significant
extent in the past, there is no assurance that we will not be in the future.

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- 40 -

Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”)

The following table presents the determinations of EBITDA for Fiscal 2020 and Fiscal 2019, respectively (amounts in

thousands).

Net (loss) income, as reported

$ (40,712)

51,869

Interest expense

Income tax benefit

Depreciation

Amortization of purchased intangible assets

EBITDA

EBITDA of noncontrolling interests

2020

2019

—

(7,053)

3,513

1,136

(43,116)

1,977

659

(4,651)

3,422

1,012

52,311

(167)

As we believe that our net cash flow provided by or used in operations is the most directly comparable performance measure

determined in accordance with accounting principles generally accepted in the US (“US GAAP”), the following table reconciles

the amounts of EBITDA for the applicable years, as presented above, to the corresponding amounts of net cash flows provided

by (used in) operating activities that are presented in our consolidated statements of cash flows for Fiscal 2020 and Fiscal 2019

(amounts in thousands).

EBITDA

Current income tax benefit

Impairment losses

Interest expense

Stock compensation expense

Other noncash items

Increase in accounts receivable

Decrease (increase) in other assets

Decrease in accounts payable and accrued

expenses

Change in contracts in progress, net

2020

2019

$ (43,116)

$ 52,311

52,311

2,131 1,645

413

4,895

—

1,179

(1,038)

2,357

(3,284)

89,314

2,512

1,491

(659)

(996)

(10,200)

(15,160)

(60,187)

(83,774)

Changes in accrued interest on short-term investments

714 695

Net cash provided by (used in) operating activities

$ 53,565

$ (112,322)

We believe that EBITDA, a non-US GAAP financial measurement, is a meaningful presentation that enables us to assess and

compare our operating cash flow performance on a consistent basis by removing from our operating results the impacts of our

capital structure, the effects of the accounting methods used to compute depreciation and amortization and the effects of

operating in different income tax jurisdictions. 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 US 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. In addition, our EBITDA

does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our

cash needs.

Critical Accounting Policies

Descriptions of the Company’s significant accounting policies, including those discussed below, are included in Note 1 to the

accompanying consolidated financial statements for the year ended January 31, 2020. We consider the accounting policies

related to revenue recognition on long-term construction contracts; income tax reporting; the accounting for business

combinations; the subsequent valuation of goodwill, other indefinite-lived assets and long-lived assets; the valuation of

employee stock options; and the financial reporting associated with any significant claims or legal matters to be most critical

to the understanding of our financial position and results of operations, as well as the accounting and reporting for special

purpose entities including joint ventures and variable interest entities.

- 41 -

As described in Note 9 to the accompanying consolidated financial statements, we have a line of credit committed by the Bank

in the amount of $50.0 million for general purposes. We may use the borrowing ability to cover standby letters of credit issued

by the Bank for our use in the ordinary course of business. As of January 31, 2020, we had approximately $9.9 million of credit

outstanding under the Credit Agreement, but no borrowings. On behalf of APC, Argan provided a parent company performance

guarantee to TR, the engineering, procurement and construction services contractor on the TeesREP project, and caused the

Bank to issue letters of credit as security (see Notes 9 and 10 to the accompanying consolidated financial statements). These

letters of credit represent approximately 80% of the amount of outstanding credit under the Credit Agreement as of January 31,

2020. Additionally, in connection with the project development activities of the active VIE that is identified below, and outside

the scope of the Credit Agreement, the Bank issued a letter of credit in the approximate amount of $3.4 million for which the

Company has provided cash collateral.

We have also provided a financial guarantee on behalf of GPS to an original equipment manufacturer in the amount of $3.6

million to support project developmental efforts which resulted in the award of an EPC services contract to GPS.

Special Purpose Entities

As is common in our industry, EPC contractors and third parties form joint ventures, limited partnerships and limited liability

companies for purposes of executing a project or program for a project owner. These teaming arrangements are typically

dissolved upon completion of the project or program. We had financial control of construction joint ventures formed for the

purpose of building two power plants, which were completed in Fiscal 2017, and for which the respective warranty periods

have expired. The statutory partnerships representing the joint ventures were dissolved during Fiscal 2019. The accounts of the

joint ventures were included in our consolidated financial statements during the periods of their existence.

In addition, we may obtain interests in VIEs formed by its owners for a specific purpose. The evaluation of whether such

interests represent our financial control of a VIE requires analysis and judgement. We concluded that we are the primary

beneficiary of a VIE formed by an independent firm for the purpose of developing a natural gas-fired power plant in Virginia.

As a result, the VIE is included in our consolidated financial statements until we determine that our financial control of the

entity has passed to another party. Pursuant to agreements negotiated with the developer, we are lending funds to the VIE to

cover certain costs of the project development effort. The development phase activities of the VIE are focused on 1) obtaining

the necessary permits to build and operate the power plant, 2) completing arrangements to connect the power plant to the fuel

supply and the electricity grid, 3) engaging energy plant operators in negotiations for the purchase of project ownership

interests, and 4) securing permanent financing for the project.

We have entered into similar support arrangements with other independent parties in the past that resulted in the successful

development and construction of three separate gas-fired power plants. In each case, we deconsolidated the corresponding VIE

when we were no longer the primary beneficiary. 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.

Inflation

affect our operations.

Our monetary assets, consisting primarily of cash, cash equivalents and accounts receivables, and our non-monetary assets,

consisting primarily of property, plant, equipment goodwill and other purchased intangible assets, are not affected significantly

by inflation. We believe that replacement costs of our building, improvements, equipment and furniture will not materially

We do procure steel and other commodities for use in our construction projects. These materials can be subject to significant

price fluctuations that may be caused by the ramifications of import tariffs imposed by the US. During Fiscal 2020, the well-

publicized shortage of skilled construction workers has been accompanied by corresponding wage increases at rates higher

than those experienced since the recession in 2007. These factors did not have significant effects on us during Fiscal 2020 as,

unfortunately, the amount of EPC project activity conducted during the year was at a low level. These factors, may begin to

impact us more materially as construction activity on the Guernsey Power Station ramps up and when we received FNTPs on

other projects awarded to us and commence EPC activities. We strive to include the anticipated increases in the prices of

equipment and commodity materials and the expected rise in labor rates as we estimate costs and prepare prices associated with

bidding for new work. Although we have not been adversely affected by price fluctuations and wage increases to any significant

extent in the past, there is no assurance that we will not be in the future.

Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”)

The following table presents the determinations of EBITDA for Fiscal 2020 and Fiscal 2019, respectively (amounts in
thousands).

2020

2019

Net (loss) income, as reported
Interest expense
Income tax benefit
Depreciation
Amortization of purchased intangible assets
EBITDA
EBITDA of noncontrolling interests
EBITDA attributable to the stockholders of Argan, Inc.

$ (40,712)
—
(7,053)
3,513
1,136
(43,116)
1,977
$ (45,093)

51,869
659
(4,651)
3,422
1,012
52,311
(167)
52,478

As we believe that our net cash flow provided by or used in operations is the most directly comparable performance measure
determined in accordance with accounting principles generally accepted in the US (“US GAAP”), the following table reconciles
the amounts of EBITDA for the applicable years, as presented above, to the corresponding amounts of net cash flows provided
by (used in) operating activities that are presented in our consolidated statements of cash flows for Fiscal 2020 and Fiscal 2019
(amounts in thousands).

2020

2019

EBITDA
Current income tax benefit
Impairment losses
Interest expense
Stock compensation expense
Other noncash items
Changes in accrued interest on short-term investments
Increase in accounts receivable
Decrease (increase) in other assets
Decrease in accounts payable and accrued

expenses

Change in contracts in progress, net
Net cash provided by (used in) operating activities

$ (43,116)
413
4,895
—

$ 52,311
52,311
2,512
1,491
(659)
2,131 1,645
(996)
1,179
714 695
(10,200)
(15,160)

(1,038)
2,357

(3,284)
89,314
$ 53,565

(60,187)
(83,774)
$ (112,322)

We believe that EBITDA, a non-US GAAP financial measurement, is a meaningful presentation that enables us to assess and
compare our operating cash flow performance on a consistent basis by removing from our operating results the impacts of our
capital structure, the effects of the accounting methods used to compute depreciation and amortization and the effects of
operating in different income tax jurisdictions. 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 US 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. In addition, our EBITDA
does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our
cash needs.

Critical Accounting Policies

Descriptions of the Company’s significant accounting policies, including those discussed below, are included in Note 1 to the
accompanying consolidated financial statements for the year ended January 31, 2020. We consider the accounting policies
related to revenue recognition on long-term construction contracts; income tax reporting; the accounting for business
combinations; the subsequent valuation of goodwill, other indefinite-lived assets and long-lived assets; the valuation of
employee stock options; and the financial reporting associated with any significant claims or legal matters to be most critical
to the understanding of our financial position and results of operations, as well as the accounting and reporting for special
purpose entities including joint ventures and variable interest entities.

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- 41 -
- 41 -

Critical accounting policies are those related to the areas where we have made what we consider to be particularly subjective
or complex judgments in arriving at estimates and where these estimates can significantly impact our financial results under
different assumptions and conditions.

These estimates, judgments, and assumptions affect the reported amounts of assets, liabilities and equity, the disclosure of
contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during
the reporting periods. We base our estimates on historical experience and various other assumptions that we believe are
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of
assets, liabilities and equity that are not readily apparent from other sources. Actual results and outcomes could differ from
these estimates and assumptions.

Revenue Recognition

We recognize revenues in accordance with the provisions of Accounting Standards Update 2014-09, “Revenue from Contracts
with Customers,” and a series of amendments which together we identify as “ASC Topic 606”. This new accounting standard,
which we adopted on February 1, 2018 using the permitted modified retrospective method, outlines a single comprehensive
model for entities to use in accounting for revenues arising from contracts with customers. The new standard supersedes most
previous revenue recognition guidance, including industry-specific guidance.

As discussed above, APC has confronted significant operational and contractual challenges in its efforts to complete the
TeesREP project. Comprehensive reviews of forecasted costs to complete the project and the expected amounts of contract
variation recoveries have resulted in our current estimate that APC will incur a loss on this contract in the amount of $33.6
million. Significant judgement has been used by management in developing estimates that are critical and material to the
amount of loss recorded. These types of judgements may change over time, resulting in unfavorable adjustments to our
estimates.

We enter into EPC and other long-term construction contracts principally on the basis of competitive bids or in conjunction
with our support of the development of power plant projects. The types of contracts may vary. However, the EPC contracts of
our power industry services reporting segment, and most other large contracts awarded to our other companies, are fixed-price
contracts. Revenues are recognized primarily over time as performance obligations are satisfied due to the continuous transfer
of control to the project owner or other customer.

Central to the new revenue recognition guidance is a five-step revenue recognition model that requires reporting entities to:

1. Identify the contract,
2. Identify the performance obligations of the contract,
3. Determine the transaction price of the contract,
4. Allocate the transaction price to the performance obligations, and
5. Recognize revenue.

The guidance focuses on the transfer of the contractor’s control of the goods and/or services to the customer, as opposed to the
transfer of risk and rewards. 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. In general, application of the new rules requires us to make important
judgements and meaningful estimates that may have significant impact on the amounts of revenues recognized by us for any
reporting period.

Revenues from fixed price contracts, including a portion of estimated profit, are recognized over time, based on costs incurred
and estimated total contract costs using the percentage-of-completion method. The cost and profit estimates are determined at
least quarterly for all significant contracts pursuant to a detailed process. The results of the process are subjected to reviews by
senior management at each subsidiary. The percentage-of-completion method measures the ratio of costs incurred and accrued
to date for each contract to the estimated total costs for each contract at completion. This requires us to prepare on-going
estimates of the costs to complete each contract as the project progresses. In preparing these estimates, we make significant
judgments and assumptions about our significant costs, including materials, labor and equipment, and we evaluate
contingencies based on possible schedule variances, production delays or other productivity factors.

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. If a current estimate

of total contract cost indicates a loss on a contract, the projected loss is recognized in full when determined, without regard to

the percentage of completion. At the end of the first quarter of Fiscal 2020, we realized that the previous estimates made

regarding costs to complete the APC project were understated based on the receipt of subsequent information. Management

concluded that the costs for APC to complete the work that remained for the project would exceed projected revenues by

approximately $27.6 million. By January 31, 2020, we had increased the estimated loss to $33.6 million. This amount of

expected loss on the project has been reflected in our consolidated financial statements for Fiscal 2020.

Crucial to the compliance with the new standard for revenue recognition is the identification of the promises made to the

customer by us that are included in the contract. If a promise is distinct, as that concept is defined in the new standard, it

represents a separate performance obligation. Contracts may have multiple performance obligations. The amounts of revenue

associated with each promise are recognized when, or as, the performance obligations are satisfied. However, complex contracts

may include only one performance obligation if the multiple promises are not distinct within the context of the contract. For

example, if the promises that could be considered distinct are interrelated or require us to perform integration so that the

customer receives a complete product, the contract is considered to include only one performance obligation. Most of our long-

term contracts have a single performance obligation as the promises to transfer individual goods or services are not separately

identifiable from other promises within the context of the contract. Our EPC contracts require us to deliver a complete and

functioning power plant, not just functioning components.

The transaction price of a contract represents the value used to determine the amount of revenues recognized as of the balance

sheet date. It may reflect amounts of variable consideration, which could be either increases or decreases to the transaction

price. These adjustments can be made from time-to-time during the period of contract performance as circumstances evolve

related to such items as variations in the scope and price of contracts, claims, incentives and liquidated damages.

The Company includes the estimated amount of variable consideration in the transaction price to the extent it is probable that

a significant reversal of cumulative revenues recognized on the particular contract will not occur when the uncertainty

associated with the variable consideration is resolved. The Company’s determination of the amount of variable consideration

to be included in the transaction price of a particular contract is based largely on an assessment of the Company’s anticipated

performance and all information (historical, current and forecasted) that is reasonably available. The effect of any revisions to

the transaction price on the amount of previously recognized revenues that is due to the addition or reduction of variable

consideration is recorded currently as an adjustment to revenues on a cumulative catch-up basis. In the event that any amounts

of variable consideration that are reflected in the transaction price of a contract are not resolved in the Company’s favor, there

could be reductions in, or reversals of, previously recognized revenues. In most significant instances, modifications to our

contracts do not represent the addition of new performance obligations.

Contract results may be impacted by estimates of the amounts of contract variations that we expect to receive. The effects of

any resulting revisions to revenues and estimated costs can be determined at any time and they could be material. As of January

31, 2020, the aggregate amount of contract variations reflected in estimated transaction prices was $20.6 million including

amounts related to the TeesREP project.

Our long-term contracts typically have schedule dates and other performance obligations that, if not achieved, could subject us

to liquidated damages. These contract requirements generally relate to specified activities that must be completed by an

established date or by achievement of a specified level of output or efficiency. Each contract defines the conditions under which

a project owner may make a claim for liquidated damages. The amount of liquidated damages owed to a project owner pursuant

to the terms of a contract would represent a reduction of the transaction price of the corresponding contract.

At the outset of each of the Company’s contracts, the potential amounts of liquidated damages typically are not constrained, or

subtracted, from the transaction price as the Company believes that it has included activities in its contract plan, and has

reflected the associated costs in its forecasts of completed contract costs, that will be effective in preventing such damages. Of

course, circumstances may change as the Company executes the corresponding contract. The transaction price is reduced by

an applicable amount when the Company no longer considers it probable that a future reversal of revenues will not occur when

the matter is resolved. In general, we consider potential liquidated damages, the costs of other related items and potential

mitigating factors in determining the estimates of forecasted revenues and the adequacy of our estimates of completed contract

costs.

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Critical accounting policies are those related to the areas where we have made what we consider to be particularly subjective

or complex judgments in arriving at estimates and where these estimates can significantly impact our financial results under

different assumptions and conditions.

These estimates, judgments, and assumptions affect the reported amounts of assets, liabilities and equity, the disclosure of

contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during

the reporting periods. We base our estimates on historical experience and various other assumptions that we believe are

reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of

assets, liabilities and equity that are not readily apparent from other sources. Actual results and outcomes could differ from

these estimates and assumptions.

Revenue Recognition

We recognize revenues in accordance with the provisions of Accounting Standards Update 2014-09, “Revenue from Contracts

with Customers,” and a series of amendments which together we identify as “ASC Topic 606”. This new accounting standard,

which we adopted on February 1, 2018 using the permitted modified retrospective method, outlines a single comprehensive

model for entities to use in accounting for revenues arising from contracts with customers. The new standard supersedes most

previous revenue recognition guidance, including industry-specific guidance.

As discussed above, APC has confronted significant operational and contractual challenges in its efforts to complete the

TeesREP project. Comprehensive reviews of forecasted costs to complete the project and the expected amounts of contract

variation recoveries have resulted in our current estimate that APC will incur a loss on this contract in the amount of $33.6

million. Significant judgement has been used by management in developing estimates that are critical and material to the

amount of loss recorded. These types of judgements may change over time, resulting in unfavorable adjustments to our

estimates.

We enter into EPC and other long-term construction contracts principally on the basis of competitive bids or in conjunction

with our support of the development of power plant projects. The types of contracts may vary. However, the EPC contracts of

our power industry services reporting segment, and most other large contracts awarded to our other companies, are fixed-price

contracts. Revenues are recognized primarily over time as performance obligations are satisfied due to the continuous transfer

of control to the project owner or other customer.

Central to the new revenue recognition guidance is a five-step revenue recognition model that requires reporting entities to:

1. Identify the contract,

2. Identify the performance obligations of the contract,

3. Determine the transaction price of the contract,

4. Allocate the transaction price to the performance obligations, and

5. Recognize revenue.

The guidance focuses on the transfer of the contractor’s control of the goods and/or services to the customer, as opposed to the

transfer of risk and rewards. 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. In general, application of the new rules requires us to make important

judgements and meaningful estimates that may have significant impact on the amounts of revenues recognized by us for any

reporting period.

Revenues from fixed price contracts, including a portion of estimated profit, are recognized over time, based on costs incurred

and estimated total contract costs using the percentage-of-completion method. The cost and profit estimates are determined at

least quarterly for all significant contracts pursuant to a detailed process. The results of the process are subjected to reviews by

senior management at each subsidiary. The percentage-of-completion method measures the ratio of costs incurred and accrued

to date for each contract to the estimated total costs for each contract at completion. This requires us to prepare on-going

estimates of the costs to complete each contract as the project progresses. In preparing these estimates, we make significant

judgments and assumptions about our significant costs, including materials, labor and equipment, and we evaluate

contingencies based on possible schedule variances, production delays or other productivity factors.

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. If a current estimate
of total contract cost indicates a loss on a contract, the projected loss is recognized in full when determined, without regard to
the percentage of completion. At the end of the first quarter of Fiscal 2020, we realized that the previous estimates made
regarding costs to complete the APC project were understated based on the receipt of subsequent information. Management
concluded that the costs for APC to complete the work that remained for the project would exceed projected revenues by
approximately $27.6 million. By January 31, 2020, we had increased the estimated loss to $33.6 million. This amount of
expected loss on the project has been reflected in our consolidated financial statements for Fiscal 2020.

Crucial to the compliance with the new standard for revenue recognition is the identification of the promises made to the
customer by us that are included in the contract. If a promise is distinct, as that concept is defined in the new standard, it
represents a separate performance obligation. Contracts may have multiple performance obligations. The amounts of revenue
associated with each promise are recognized when, or as, the performance obligations are satisfied. However, complex contracts
may include only one performance obligation if the multiple promises are not distinct within the context of the contract. For
example, if the promises that could be considered distinct are interrelated or require us to perform integration so that the
customer receives a complete product, the contract is considered to include only one performance obligation. Most of our long-
term contracts have a single performance obligation as the promises to transfer individual goods or services are not separately
identifiable from other promises within the context of the contract. Our EPC contracts require us to deliver a complete and
functioning power plant, not just functioning components.

The transaction price of a contract represents the value used to determine the amount of revenues recognized as of the balance
sheet date. It may reflect amounts of variable consideration, which could be either increases or decreases to the transaction
price. These adjustments can be made from time-to-time during the period of contract performance as circumstances evolve
related to such items as variations in the scope and price of contracts, claims, incentives and liquidated damages.

The Company includes the estimated amount of variable consideration in the transaction price to the extent it is probable that
a significant reversal of cumulative revenues recognized on the particular contract will not occur when the uncertainty
associated with the variable consideration is resolved. The Company’s determination of the amount of variable consideration
to be included in the transaction price of a particular contract is based largely on an assessment of the Company’s anticipated
performance and all information (historical, current and forecasted) that is reasonably available. The effect of any revisions to
the transaction price on the amount of previously recognized revenues that is due to the addition or reduction of variable
consideration is recorded currently as an adjustment to revenues on a cumulative catch-up basis. In the event that any amounts
of variable consideration that are reflected in the transaction price of a contract are not resolved in the Company’s favor, there
could be reductions in, or reversals of, previously recognized revenues. In most significant instances, modifications to our
contracts do not represent the addition of new performance obligations.

Contract results may be impacted by estimates of the amounts of contract variations that we expect to receive. The effects of
any resulting revisions to revenues and estimated costs can be determined at any time and they could be material. As of January
31, 2020, the aggregate amount of contract variations reflected in estimated transaction prices was $20.6 million including
amounts related to the TeesREP project.

Our long-term contracts typically have schedule dates and other performance obligations that, if not achieved, could subject us
to liquidated damages. These contract requirements generally relate to specified activities that must be completed by an
established date or by achievement of a specified level of output or efficiency. Each contract defines the conditions under which
a project owner may make a claim for liquidated damages. The amount of liquidated damages owed to a project owner pursuant
to the terms of a contract would represent a reduction of the transaction price of the corresponding contract.

At the outset of each of the Company’s contracts, the potential amounts of liquidated damages typically are not constrained, or
subtracted, from the transaction price as the Company believes that it has included activities in its contract plan, and has
reflected the associated costs in its forecasts of completed contract costs, that will be effective in preventing such damages. Of
course, circumstances may change as the Company executes the corresponding contract. The transaction price is reduced by
an applicable amount when the Company no longer considers it probable that a future reversal of revenues will not occur when
the matter is resolved. In general, we consider potential liquidated damages, the costs of other related items and potential
mitigating factors in determining the estimates of forecasted revenues and the adequacy of our estimates of completed contract
costs.

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Goodwill

Uncertain Income Tax Positions

In connection with the acquisitions of GPS, TRC and APC, we recorded substantial amounts of goodwill and other purchased
intangible assets including contractual and other customer relationships, non-compete agreements, trade names and certain
fabrication process certifications. We utilized the assistance of a professional appraisal firm in the initial determinations of
goodwill and the other purchased intangible assets for these acquisitions. Other than goodwill, most of our purchased intangible
assets were determined to have finite useful lives.

At January 31, 2020, the goodwill balances related to the acquisitions of GPS and TRC in the amounts of $18.5 million and
$9.5 million, respectively, which together represented approximately 5.7% of consolidated total assets. The Company performs
its required annual assessments of the carrying value of goodwill as of November 1 each year. We also test for impairment of
goodwill more frequently if events or changes in circumstances indicate that the carrying value of goodwill might be impaired.
During the first quarter of Fiscal 2020, primarily due to the significant reduction in the fair value of the business of APC deemed
to have occurred as a result of the substantial contract loss discussed above, we recorded an impairment loss in the amount of
$2.1 million, which was the remaining balance of goodwill associated with APC included in the consolidated balance sheet as
of January 31, 2019.

In accordance with current accounting guidance, we perform testing for the impairment of goodwill by comparing the fair value
of a reporting unit with the carrying amount of the unit reflected in the consolidated financial statements, including goodwill.
If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recorded for the excess, not to exceed
the total amount of goodwill allocated to the reporting unit.

In certain situations, we use a simplified approach which allows us to first assess qualitative factors to decide whether it is
necessary to perform the more complex quantitative goodwill impairment test. We are not required to calculate the fair value
of a reporting unit unless we determine, based on a qualitative assessment, that it is more likely than not that its fair value is
less than the corresponding carrying value. The professional guidance includes discussions of the types of factors which should
be considered in conducting the qualitative assessment including macroeconomic, industry, market and entity-specific factors.
Using this approach, we concluded that it was more likely than not that the fair value of the GPS reporting unit exceeded the
corresponding carrying value as of November 1, 2019. Therefore, completion of the complicated quantitative impairment
assessment was considered to be unnecessary. No events associated with the business of GPS occurred in the period from the
assessment date through January 31, 2020 that would cause us to reconsider that conclusion.

We performed goodwill impairment assessment for TRC as of November 1, 2019, 2018 and 2017 with the assistance of a
professional business valuation firm. At each date, it was determined that the fair value of TRC was less than the corresponding
carrying value, and goodwill impairment losses of approximately $2.8 million, $1.5 million and $0.6 million were recorded
during the applicable year, respectively. As in the past, the fair value amount for TRC determined as of November 1, 2019
reflected a weighting of results determined using various business valuation approaches. At each testing date, the majority of
the weighted average fair value was based on the result of modeling discounted future cash flows of the business. The
discounted cash flows of TRC were based on our forecasts of operating results at the time and other relevant assumptions. The
size of the loss for Fiscal 2020 relates the current soft demand for the services of TRC, a reduced financial outlook for TRC
and increased working capital requirements for this business.

Although we believe that the projected financial results used for the most recent assessment are reasonable, any future results
that would compare unfavorably with the projected results could result in additional material goodwill impairment losses.
Further, unless TRC demonstrates that it can contribute strong operating results that would justify favorable modifications to
certain profitability assumptions, thereby supporting an increased fair value of the business in the future, additional goodwill
impairment losses may occur. No events related to TRC occurred during the fourth quarter of Fiscal 2020 that caused us to
perform a subsequent impairment assessment.

With the assistance of a professional business valuation firm, we also performed a full assessment of the fair value of APC
during Fiscal 2019. The result concluded that no additional impairment of goodwill had occurred as the operating results and
business prospects of APC were improving. As discussed above, the triggering event represented by the TeesREP contract loss
convinced us to reconsider that conclusion, As described above, we recorded an impairment loss early in Fiscal 2020 that, in
effect, wrote-off the remaining goodwill balance.

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As 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. This study focused on project costs incurred during the three-year period ended January 31, 2018. Based on the results

of the study, we identified and estimated significant amounts of income tax benefits that were not previously recognized in our

financial results for any prior year reporting period. In the determination of the amount of such benefits to recognize, we were

required to apply the professional accounting guidance related to meaningful uncertain income tax positions for the first time.

Under this 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. Fiscal 2019 was the initial reporting period in which we had sufficient data on

which to make an evaluation and to reach a conclusion on the amount of income tax credit benefits related to prior year project

costs that, more likely than not, qualified as research and development costs under the IRC and the rules and regulations of

certain states. The net amount of the credits that we recognized in income taxes during Fiscal 2019 was $16.6 million. Based

on our judgement, the amount of income tax benefits related to identified research and development income tax credits that we

assessed as not meeting the threshold criteria for recognition was $5.1 million, for which we established a liability related to

uncertain income tax return positions that was included in accrued expenses as of January 31, 2019. During Fiscal 2020, this

amount was adjusted modestly; the liability amount as of January 31, 2020 was $5.0 million.

The Internal Revenue Service (the “IRS”) is examining the research and development credits that were included in the

amendments of our consolidated federal income tax returns for the years ended January 31, 2016 and 2017 that we filed in

January 2019. We do understand that the IRS is not expecting to conclude its examinations until late in our fiscal year ending

January 31, 2021. At this time, we do not have reason to expect that any significant unfavorable changes to our income taxes

might arise from the completion of these examinations.

Deferred Tax Assets and Liabilities

Our consolidated balance sheet as of January 31, 2020 included deferred tax assets in the amount of $7.9 million. The

components of our deferred taxes are presented in Note 13 to the consolidated financial statements. These amounts reflect

differences in the periods in which certain transactions are recognized for financial and income tax reporting purposes.

We consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized on a

jurisdiction by jurisdiction basis. Our ability to realize our deferred tax assets, including those related to the net operating losses

incurred in the US and the UK that applicable income tax rules will allow us to use in order to offset future amounts of applicable

taxable income, depends primarily upon the generation of sufficient future taxable income to allow for the realization of our

deductible temporary differences. If such estimates and assumptions regarding income amounts change in the future, we may

be required to record additional valuation allowances against some or all of the deferred tax assets resulting in additional income

tax expense in our consolidated statement of earnings. During Fiscal 2020, a valuation allowance in the amount of $7.1 million

was established against the deferred tax asset amount created by the net operation loss of APC’s subsidiary in the UK for Fiscal

2020. 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 our deferred tax assets become deductible in the US in order for us to realize

the applicable temporary income tax differences. Accordingly, we believe that it is more likely than not that we will realize the

benefit of significantly all of our net deferred tax assets.

Stock Options

We measure the cost of equity compensation to our employees and independent directors based on the estimated grant-date fair

value of stock option awards and we recognize the corresponding expense amounts over the vesting periods which were

typically one year. However, starting in January 2018, we began to award stock options with three-year vesting periods, with

one-third of the vesting occurring on each anniversary date of the corresponding award. Pursuant to our accounting, we continue

to record expense for the fair value of each stock option award ratably over the corresponding vesting period, which is three

years for options awarded since January 2018. Options to purchase 238,500, 257,000 and 301,500 shares of our common stock

were awarded during Fiscal 2020, 2019 and 2018, respectively, with weighted average fair value per share amounts of $9.60,

$9.31 and $13.55, respectively. The amounts of compensation expense recorded during the corresponding years related to

vesting stock option awards were $1.7 million, $1.5 million and $4.7 million, respectively. The decline in the expense amounts

for Fiscal 2020 and Fiscal 2019 reflects the longer vesting periods of recent stock awards.

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Goodwill

Uncertain Income Tax Positions

In connection with the acquisitions of GPS, TRC and APC, we recorded substantial amounts of goodwill and other purchased

intangible assets including contractual and other customer relationships, non-compete agreements, trade names and certain

fabrication process certifications. We utilized the assistance of a professional appraisal firm in the initial determinations of

goodwill and the other purchased intangible assets for these acquisitions. Other than goodwill, most of our purchased intangible

assets were determined to have finite useful lives.

At January 31, 2020, the goodwill balances related to the acquisitions of GPS and TRC in the amounts of $18.5 million and

$9.5 million, respectively, which together represented approximately 5.7% of consolidated total assets. The Company performs

its required annual assessments of the carrying value of goodwill as of November 1 each year. We also test for impairment of

goodwill more frequently if events or changes in circumstances indicate that the carrying value of goodwill might be impaired.

During the first quarter of Fiscal 2020, primarily due to the significant reduction in the fair value of the business of APC deemed

to have occurred as a result of the substantial contract loss discussed above, we recorded an impairment loss in the amount of

$2.1 million, which was the remaining balance of goodwill associated with APC included in the consolidated balance sheet as

of January 31, 2019.

In accordance with current accounting guidance, we perform testing for the impairment of goodwill by comparing the fair value

of a reporting unit with the carrying amount of the unit reflected in the consolidated financial statements, including goodwill.

If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recorded for the excess, not to exceed

the total amount of goodwill allocated to the reporting unit.

In certain situations, we use a simplified approach which allows us to first assess qualitative factors to decide whether it is

necessary to perform the more complex quantitative goodwill impairment test. We are not required to calculate the fair value

of a reporting unit unless we determine, based on a qualitative assessment, that it is more likely than not that its fair value is

less than the corresponding carrying value. The professional guidance includes discussions of the types of factors which should

be considered in conducting the qualitative assessment including macroeconomic, industry, market and entity-specific factors.

Using this approach, we concluded that it was more likely than not that the fair value of the GPS reporting unit exceeded the

corresponding carrying value as of November 1, 2019. Therefore, completion of the complicated quantitative impairment

assessment was considered to be unnecessary. No events associated with the business of GPS occurred in the period from the

assessment date through January 31, 2020 that would cause us to reconsider that conclusion.

We performed goodwill impairment assessment for TRC as of November 1, 2019, 2018 and 2017 with the assistance of a

professional business valuation firm. At each date, it was determined that the fair value of TRC was less than the corresponding

carrying value, and goodwill impairment losses of approximately $2.8 million, $1.5 million and $0.6 million were recorded

during the applicable year, respectively. As in the past, the fair value amount for TRC determined as of November 1, 2019

reflected a weighting of results determined using various business valuation approaches. At each testing date, the majority of

the weighted average fair value was based on the result of modeling discounted future cash flows of the business. The

discounted cash flows of TRC were based on our forecasts of operating results at the time and other relevant assumptions. The

size of the loss for Fiscal 2020 relates the current soft demand for the services of TRC, a reduced financial outlook for TRC

and increased working capital requirements for this business.

Although we believe that the projected financial results used for the most recent assessment are reasonable, any future results

that would compare unfavorably with the projected results could result in additional material goodwill impairment losses.

Further, unless TRC demonstrates that it can contribute strong operating results that would justify favorable modifications to

certain profitability assumptions, thereby supporting an increased fair value of the business in the future, additional goodwill

impairment losses may occur. No events related to TRC occurred during the fourth quarter of Fiscal 2020 that caused us to

perform a subsequent impairment assessment.

With the assistance of a professional business valuation firm, we also performed a full assessment of the fair value of APC

during Fiscal 2019. The result concluded that no additional impairment of goodwill had occurred as the operating results and

business prospects of APC were improving. As discussed above, the triggering event represented by the TeesREP contract loss

convinced us to reconsider that conclusion, As described above, we recorded an impairment loss early in Fiscal 2020 that, in

effect, wrote-off the remaining goodwill balance.

As 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. This study focused on project costs incurred during the three-year period ended January 31, 2018. Based on the results
of the study, we identified and estimated significant amounts of income tax benefits that were not previously recognized in our
financial results for any prior year reporting period. In the determination of the amount of such benefits to recognize, we were
required to apply the professional accounting guidance related to meaningful uncertain income tax positions for the first time.

Under this 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. Fiscal 2019 was the initial reporting period in which we had sufficient data on
which to make an evaluation and to reach a conclusion on the amount of income tax credit benefits related to prior year project
costs that, more likely than not, qualified as research and development costs under the IRC and the rules and regulations of
certain states. The net amount of the credits that we recognized in income taxes during Fiscal 2019 was $16.6 million. Based
on our judgement, the amount of income tax benefits related to identified research and development income tax credits that we
assessed as not meeting the threshold criteria for recognition was $5.1 million, for which we established a liability related to
uncertain income tax return positions that was included in accrued expenses as of January 31, 2019. During Fiscal 2020, this
amount was adjusted modestly; the liability amount as of January 31, 2020 was $5.0 million.

The Internal Revenue Service (the “IRS”) is examining the research and development credits that were included in the
amendments of our consolidated federal income tax returns for the years ended January 31, 2016 and 2017 that we filed in
January 2019. We do understand that the IRS is not expecting to conclude its examinations until late in our fiscal year ending
January 31, 2021. At this time, we do not have reason to expect that any significant unfavorable changes to our income taxes
might arise from the completion of these examinations.

Deferred Tax Assets and Liabilities

Our consolidated balance sheet as of January 31, 2020 included deferred tax assets in the amount of $7.9 million. The
components of our deferred taxes are presented in Note 13 to the consolidated financial statements. These amounts reflect
differences in the periods in which certain transactions are recognized for financial and income tax reporting purposes.

We consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized on a
jurisdiction by jurisdiction basis. Our ability to realize our deferred tax assets, including those related to the net operating losses
incurred in the US and the UK that applicable income tax rules will allow us to use in order to offset future amounts of applicable
taxable income, depends primarily upon the generation of sufficient future taxable income to allow for the realization of our
deductible temporary differences. If such estimates and assumptions regarding income amounts change in the future, we may
be required to record additional valuation allowances against some or all of the deferred tax assets resulting in additional income
tax expense in our consolidated statement of earnings. During Fiscal 2020, a valuation allowance in the amount of $7.1 million
was established against the deferred tax asset amount created by the net operation loss of APC’s subsidiary in the UK for Fiscal
2020. 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 our deferred tax assets become deductible in the US in order for us to realize
the applicable temporary income tax differences. Accordingly, we believe that it is more likely than not that we will realize the
benefit of significantly all of our net deferred tax assets.

Stock Options

We measure the cost of equity compensation to our employees and independent directors based on the estimated grant-date fair
value of stock option awards and we recognize the corresponding expense amounts over the vesting periods which were
typically one year. However, starting in January 2018, we began to award stock options with three-year vesting periods, with
one-third of the vesting occurring on each anniversary date of the corresponding award. Pursuant to our accounting, we continue
to record expense for the fair value of each stock option award ratably over the corresponding vesting period, which is three
years for options awarded since January 2018. Options to purchase 238,500, 257,000 and 301,500 shares of our common stock
were awarded during Fiscal 2020, 2019 and 2018, respectively, with weighted average fair value per share amounts of $9.60,
$9.31 and $13.55, respectively. The amounts of compensation expense recorded during the corresponding years related to
vesting stock option awards were $1.7 million, $1.5 million and $4.7 million, respectively. The decline in the expense amounts
for Fiscal 2020 and Fiscal 2019 reflects the longer vesting periods of recent stock awards.

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We use the Black-Scholes option pricing model to compute the fair value of stock options. The Black-Scholes model requires
the use of highly subjective assumptions in the computations, which are disclosed in Note 12 to the accompanying consolidated
financial statements and include the risk-free interest rate, dividend yield, the expected volatility of the market price of our
common stock and the expected life of each stock option. Changes in these assumptions can cause significant fluctuations in
the fair value of stock option awards. We believe that our stock option exercise activity is sufficient to provide us with a
reasonable basis upon which to estimate expected lives. Accordingly, the estimated expected life used in the determination of
the fair value of each stock option awarded since January 2017 is approximately 3.3 years. Based on the results of our most
recent option duration analysis, we will increase the estimated life for future stock option awards to 3.4 years. The use of the
longer estimated expected life in our fair value calculations will result in higher fair value amounts per share.

Variable Interest Entities

We must consolidate any VIE in which we have variable interests if we are deemed to be the primary beneficiary of the VIE;
that is, if we have both (1) the power to direct the economically significant activities of the entity and (2) the obligation to
absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. Such a
determination requires management to evaluate circumstances and relationships and to make a significant judgment, and to
repeat the evaluation at each subsequent reporting date. In the past, our evaluations have affirmed that, despite not having
ownership interests in certain power plant development VIEs, GPS was the corresponding primary beneficiary due primarily
to the significance of its loans to each entity, the risk that GPS could absorb significant losses if the development project was
not successful, the opportunity for GPS to receive a development success fee and the commitment of the project developer in
each case to award the large EPC contract for the construction of the power plant to GPS. As a result, the accounts of each VIE
were included in our consolidated financial statements until project development efforts progressed on each one such that
financial support was thereafter provided substantially by a pending investor. At this point in the life of each VIE, we
deconsolidated it.

Currently, we are the primary beneficiary of a VIE that is performing project development activities for the construction of a
new natural gas-fired power plant. Consideration for the engineering and financial support being provided to the entity by GPS
included the right to negotiate the corresponding turnkey EPC contract for the project. The account balances of the VIE were
included in our consolidated financial statements as of January 31, 2020 and 2019. As of January 31, 2020, the amount of
capitalized development costs included in our consolidated net balance for property, plant and equipment was $6.9 million. We
would be required to assess the carrying value of this asset for impairment if our assessment of the likelihood that this
development project will be completed successfully becomes negative.

Legal Contingencies

We do become involved in legal matters where litigation has been initiated or claims have been made against us. At this time,
we do not believe that any additional material loss is probable related to any of the current matters discussed herein. However,
we do maintain accrued expense balances for the estimated amounts of legal costs expected to be billed related to each matter.
We review the status of each matter and assess the adequacy of the accrued expense balances at the end of each fiscal quarter,
and make adjustments to the balances if necessary. Should our assessments of the outcomes of these legal matters change,
significant losses or additional costs may be recorded.

In January 2019, GPS filed a lawsuit against Exelon West Medway II, LLC and Exelon Generation Company, LLC (together
referred to as “Exelon”) for Exelon’s breach of contract and failure to remedy various conditions which negatively impacted
the schedule and the costs associated with the construction by GPS of a gas-fired power plant for Exelon in Massachusetts. As
a result, we believe that Exelon has received the benefits of our construction efforts and the corresponding progress made on
the project without making payments to GPS for the value received. On March 7, 2019, Exelon provided GPS with a notice
intending to terminate the EPC contract under which GPS had been providing services to Exelon. At that time, the construction
project was nearly complete and both of the power generation units included in the plant had successfully reached first fire.
The completion of various prescribed performance tests and the clearance of punch-list items were the primary tasks necessary
to be accomplished by GPS in order to achieve substantial completion of the power plant. Nevertheless, and among other
actions, Exelon provided contractual notice requiring GPS to vacate the construction site, asserting that GPS had failed to
perform certain obligations under the contract and was in default, and has withheld payments from GPS on invoices rendered
to Exelon in accordance with the terms of the EPC contract between the parties. With vigor, GPS intends to assert its rights
under the EPC contract, to pursue the collection from Exelon of amounts owed under the contract and to defend itself against
the allegations that GPS has not performed in accordance with the contract.

Accounts Receivables and Contract Assets

As described in Note 6 to the accompanying consolidated financial statements, our loss experience related to uncollectible

amounts billed to customers has not been significant in the past. However, there is collection risk related to accounts receivable

and retainage amounts due from the customer involved in the legal dispute discussed above. We believe that the underlying

invoices were prepared and submitted to the customer pursuant to the terms of the contract, but the customer did not pay them

when due. The last payment received from the customer was in January 2019. We believe that we are entitled to receive

payments for these billings and we are confident that payments will be received ultimately. However, the collection time for

these amounts may be extended substantially and could depend on the resolution of the outstanding legal matter. As of January

31, 2020, the total amount of outstanding accounts receivable, retainages and other contract assets related to this customer was

$24.5 million.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update 2016-02,

Leases, which amends the existing guidance and requires the recognition of operating leases in the balance sheet. For these

leases, companies are required to record assets for the rights and liabilities for the obligations that are created by the leases. The

pronouncement requires disclosures that provide qualitative and quantitative information for the lease assets and liabilities

presented in the financial statements. We adopted this pronouncement on February 1, 2019 using the permitted modified

retrospective approach. Accordingly, prior year financial statements were not restated, and we have made the required additions

to the consolidated balance sheet for right-of-use assets and the corresponding lease liabilities for operating leases existing on

the adoption date and for those operating leases added during Fiscal 2020. As of January 31, 2020, the aggregate amount of the

present value of remaining lease payments for these operating leases was $2.2 million.

We have made the “short-term” election, as permitted by the new standard, not to apply the new accounting to those leases

with terms of twelve (12) months or less and that do not include options to purchase the underlying assets that we are reasonably

certain to exercise. Based on the results of our analyses, other arrangements for the use of equipment, particularly by TRC and

APC, do not constitute leases or should be treated as short-term leases. Our most significant operating leases, representing

arrangements with initial lease terms greater than one year, primarily cover office and manufacturing facilities. We do not have

any material finance leases as of January 31, 2020.

In 2016, the FASB also issued Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments.

The scope of this new standard covers, among other provisions, the methods that businesses shall use to estimate amounts of

uncollectible accounts receivable. As subsequently amended, we do not expect that the requirements of this new guidance,

which becomes effective for us on February 1, 2020, will materially affect our consolidated financial statements.

There are no other recently issued accounting pronouncements that have not yet been adopted that we consider material to our

consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

In the normal course of business, our results of operations may be subject to risks related to fluctuations in interest rates. As of

January 31, 2020, we had no outstanding borrowings under our financing arrangements with the Bank (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, 2021 with interest at 30-day LIBOR plus 2.0%.

Financial markets around the globe are preparing for the discontinuation of LIBOR at the end of 2021 as the widely used

indicator of basis for short-term lending rates. The transition from LIBOR is market-driven, not a change required by regulation.

The US and other countries are currently working to replace LIBOR with alternative reference rates. We do not expect that the

replacement of LIBOR as the basis for the determination of our short-term borrowing rate will have significant effects on the

financial arrangements with the Bank or our financial reporting.

As of January 31, 2019, the weighted average annual interest rate on our short-term investments of $160.0 million was 1.8%.

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, 2020 remains constant, and no further actions

are taken to alter our existing interest rate sensitivity (dollars in thousands). As the weighted average interest rate on our short-

term investments was 1.8% at January 31, 2020, the largest decrease in the interest rates presented above is 180 basis points.

- 46 -
- 46 -

- 47 -

We use the Black-Scholes option pricing model to compute the fair value of stock options. The Black-Scholes model requires

the use of highly subjective assumptions in the computations, which are disclosed in Note 12 to the accompanying consolidated

financial statements and include the risk-free interest rate, dividend yield, the expected volatility of the market price of our

common stock and the expected life of each stock option. Changes in these assumptions can cause significant fluctuations in

the fair value of stock option awards. We believe that our stock option exercise activity is sufficient to provide us with a

reasonable basis upon which to estimate expected lives. Accordingly, the estimated expected life used in the determination of

the fair value of each stock option awarded since January 2017 is approximately 3.3 years. Based on the results of our most

recent option duration analysis, we will increase the estimated life for future stock option awards to 3.4 years. The use of the

longer estimated expected life in our fair value calculations will result in higher fair value amounts per share.

Variable Interest Entities

We must consolidate any VIE in which we have variable interests if we are deemed to be the primary beneficiary of the VIE;

that is, if we have both (1) the power to direct the economically significant activities of the entity and (2) the obligation to

absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. Such a

determination requires management to evaluate circumstances and relationships and to make a significant judgment, and to

repeat the evaluation at each subsequent reporting date. In the past, our evaluations have affirmed that, despite not having

ownership interests in certain power plant development VIEs, GPS was the corresponding primary beneficiary due primarily

to the significance of its loans to each entity, the risk that GPS could absorb significant losses if the development project was

not successful, the opportunity for GPS to receive a development success fee and the commitment of the project developer in

each case to award the large EPC contract for the construction of the power plant to GPS. As a result, the accounts of each VIE

were included in our consolidated financial statements until project development efforts progressed on each one such that

financial support was thereafter provided substantially by a pending investor. At this point in the life of each VIE, we

deconsolidated it.

Currently, we are the primary beneficiary of a VIE that is performing project development activities for the construction of a

new natural gas-fired power plant. Consideration for the engineering and financial support being provided to the entity by GPS

included the right to negotiate the corresponding turnkey EPC contract for the project. The account balances of the VIE were

included in our consolidated financial statements as of January 31, 2020 and 2019. As of January 31, 2020, the amount of

capitalized development costs included in our consolidated net balance for property, plant and equipment was $6.9 million. We

would be required to assess the carrying value of this asset for impairment if our assessment of the likelihood that this

development project will be completed successfully becomes negative.

Legal Contingencies

We do become involved in legal matters where litigation has been initiated or claims have been made against us. At this time,

we do not believe that any additional material loss is probable related to any of the current matters discussed herein. However,

we do maintain accrued expense balances for the estimated amounts of legal costs expected to be billed related to each matter.

We review the status of each matter and assess the adequacy of the accrued expense balances at the end of each fiscal quarter,

and make adjustments to the balances if necessary. Should our assessments of the outcomes of these legal matters change,

significant losses or additional costs may be recorded.

In January 2019, GPS filed a lawsuit against Exelon West Medway II, LLC and Exelon Generation Company, LLC (together

referred to as “Exelon”) for Exelon’s breach of contract and failure to remedy various conditions which negatively impacted

the schedule and the costs associated with the construction by GPS of a gas-fired power plant for Exelon in Massachusetts. As

a result, we believe that Exelon has received the benefits of our construction efforts and the corresponding progress made on

the project without making payments to GPS for the value received. On March 7, 2019, Exelon provided GPS with a notice

intending to terminate the EPC contract under which GPS had been providing services to Exelon. At that time, the construction

project was nearly complete and both of the power generation units included in the plant had successfully reached first fire.

The completion of various prescribed performance tests and the clearance of punch-list items were the primary tasks necessary

to be accomplished by GPS in order to achieve substantial completion of the power plant. Nevertheless, and among other

actions, Exelon provided contractual notice requiring GPS to vacate the construction site, asserting that GPS had failed to

perform certain obligations under the contract and was in default, and has withheld payments from GPS on invoices rendered

to Exelon in accordance with the terms of the EPC contract between the parties. With vigor, GPS intends to assert its rights

under the EPC contract, to pursue the collection from Exelon of amounts owed under the contract and to defend itself against

the allegations that GPS has not performed in accordance with the contract.

Accounts Receivables and Contract Assets

As described in Note 6 to the accompanying consolidated financial statements, our loss experience related to uncollectible
amounts billed to customers has not been significant in the past. However, there is collection risk related to accounts receivable
and retainage amounts due from the customer involved in the legal dispute discussed above. We believe that the underlying
invoices were prepared and submitted to the customer pursuant to the terms of the contract, but the customer did not pay them
when due. The last payment received from the customer was in January 2019. We believe that we are entitled to receive
payments for these billings and we are confident that payments will be received ultimately. However, the collection time for
these amounts may be extended substantially and could depend on the resolution of the outstanding legal matter. As of January
31, 2020, the total amount of outstanding accounts receivable, retainages and other contract assets related to this customer was
$24.5 million.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update 2016-02,
Leases, which amends the existing guidance and requires the recognition of operating leases in the balance sheet. For these
leases, companies are required to record assets for the rights and liabilities for the obligations that are created by the leases. The
pronouncement requires disclosures that provide qualitative and quantitative information for the lease assets and liabilities
presented in the financial statements. We adopted this pronouncement on February 1, 2019 using the permitted modified
retrospective approach. Accordingly, prior year financial statements were not restated, and we have made the required additions
to the consolidated balance sheet for right-of-use assets and the corresponding lease liabilities for operating leases existing on
the adoption date and for those operating leases added during Fiscal 2020. As of January 31, 2020, the aggregate amount of the
present value of remaining lease payments for these operating leases was $2.2 million.

We have made the “short-term” election, as permitted by the new standard, not to apply the new accounting to those leases
with terms of twelve (12) months or less and that do not include options to purchase the underlying assets that we are reasonably
certain to exercise. Based on the results of our analyses, other arrangements for the use of equipment, particularly by TRC and
APC, do not constitute leases or should be treated as short-term leases. Our most significant operating leases, representing
arrangements with initial lease terms greater than one year, primarily cover office and manufacturing facilities. We do not have
any material finance leases as of January 31, 2020.

In 2016, the FASB also issued Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments.
The scope of this new standard covers, among other provisions, the methods that businesses shall use to estimate amounts of
uncollectible accounts receivable. As subsequently amended, we do not expect that the requirements of this new guidance,
which becomes effective for us on February 1, 2020, will materially affect our consolidated financial statements.

There are no other recently issued accounting pronouncements that have not yet been adopted that we consider material to our
consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

In the normal course of business, our results of operations may be subject to risks related to fluctuations in interest rates. As of
January 31, 2020, we had no outstanding borrowings under our financing arrangements with the Bank (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, 2021 with interest at 30-day LIBOR plus 2.0%.

Financial markets around the globe are preparing for the discontinuation of LIBOR at the end of 2021 as the widely used
indicator of basis for short-term lending rates. The transition from LIBOR is market-driven, not a change required by regulation.
The US and other countries are currently working to replace LIBOR with alternative reference rates. We do not expect that the
replacement of LIBOR as the basis for the determination of our short-term borrowing rate will have significant effects on the
financial arrangements with the Bank or our financial reporting.

As of January 31, 2019, the weighted average annual interest rate on our short-term investments of $160.0 million was 1.8%.
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, 2020 remains constant, and no further actions
are taken to alter our existing interest rate sensitivity (dollars in thousands). As the weighted average interest rate on our short-
term investments was 1.8% at January 31, 2020, the largest decrease in the interest rates presented above is 180 basis points.

- 46 -

- 47 -
- 47 -

Basis Point Change
Up 300 basis points
Up 200 basis points
Up 100 basis points

Down 100 basis points
Down 180 basis points

Increase (Decrease) in
Interest Income
$1,378
919
459
(459)
(808)

Increase (Decrease) in
Interest Expense

$ —
—
—
—
—

Net Increase (Decrease) in
Earnings (pre-tax)
$1,378
919
459
(459)
(808)

During Fiscal 2020, Fiscal 2019 or Fiscal 2018, we did not enter into derivative financial instruments for trading, speculation
or other purposes that would expose us to market risk.

With the acquisition of APC, we are subject to the effects of translating the financial statements of APC from its functional
currency (Euros) into our reporting currency (US dollars). Such effects are recognized in accumulated other comprehensive
income (loss), which is net of tax when applicable.

In addition, we are subject to fluctuations in prices for commodities including copper, concrete, steel products and
fuel. Although we attempt to secure firm quotes from our suppliers, we generally do not hedge against increases in prices for
copper, concrete, steel or fuel. Commodity price risks may have an impact on our results of operations due to the fixed-price
nature of many of our contracts. We attempt to include the anticipated amounts of price increases or decreases in the costs of
our bids.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See the Index to the Consolidated Financial Statements on page 53 of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL

DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Attached as exhibits to this Annual Report on Form 10-K are certifications of our Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”), which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). This “Controls and Procedures” section includes information concerning the controls and
controls evaluation referred to in the certifications and a reference to the report of Grant Thornton LLP, our independent
registered public accounting firm, regarding its audit of our internal control over financial reporting. This section should be
read in conjunction with the certifications and the report of Grant Thornton LLP for a more complete understanding of the
topics presented.

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures”
(“Disclosure Controls”) as of the end of the year covered by this Annual Report on Form 10-K. The controls evaluation was
conducted under the supervision and with the participation of management, including our CEO and CFO. Disclosure Controls
are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under
the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized, and reported within the time
periods specified in the SEC’s rules and forms. Disclosure Controls are also designed to reasonably assure that such information
is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions
regarding required disclosure. Our quarterly evaluation of Disclosure Controls includes an evaluation of some components of
our internal control over financial reporting, and internal control over financial reporting is also separately evaluated on an
annual basis for purposes of providing the management report, which is set forth below.

Based on the controls evaluation, our CEO and CFO have concluded that, as of the end of the year covered by this Annual
Report on Form 10-K, our Disclosure Controls were effective to provide reasonable assurance that information required to be
disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified by
the SEC, and the material information related to Argan, Inc. and its consolidated subsidiaries is made known to management,
including the CEO and CFO, particularly during the period when our periodic reports are being prepared.

- 48 -
- 48 -

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide

reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external

purposes in accordance with US GAAP. Internal control over financial reporting includes those policies and procedures that

(i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions

of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation

of financial statements in accordance with authorizations of management and directors of the Company; and (iii) provide

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s

assets that could have a material effect on the consolidated financial statements.

Management assessed our internal control over financial reporting as of January 31, 2020, the end of the fiscal year, based on

assessment criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring

Organizations of the Treadway Commission. Management’s assessment included evaluation of elements such as the design

and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall

control environment.

Based on its assessment, management has concluded that our internal control over financial reporting was effective as of the

end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of

financial statements for external reporting purposes in accordance with US GAAP. We reviewed the results of management’s

assessment with the audit committee of our board of directors. In addition, on a quarterly basis, we will evaluate any changes

to our internal control over financial reporting to determine if material change occurred.

Attestation Report of the Independent Registered Public Accounting Firm

The effectiveness of our internal control over financial reporting as of January 31, 2020 has been audited by Grant Thornton

LLP, our independent registered public accounting firm, who also audited our consolidated financial statements included in

this Annual Report on Form 10-K, as stated in their reports which appear with our accompanying consolidated financial

statements.

Changes in Internal Controls

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange

Act) occurred during the fiscal quarter ended January 31, 2020 that has materially affected, or is reasonably likely to materially

affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

The Company’s management, including the CEO and CFO, does not expect that our Disclosure Controls or our internal control

over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and

operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of

a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative

to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute

assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within

the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be

faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual

acts of some persons, by collusion of two or more people, or by management override of the controls.

The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there

can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections

of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate

because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

ITEM 9B. OTHER INFORMATION.

Not Applicable.

- 49 -

Basis Point Change

Up 300 basis points

Up 200 basis points

Up 100 basis points

Down 100 basis points

Down 180 basis points

$1,378

919

459

(459)

(808)

$ —

—

$1,378

919

459

(459)

(808)

During Fiscal 2020, Fiscal 2019 or Fiscal 2018, we did not enter into derivative financial instruments for trading, speculation

or other purposes that would expose us to market risk.

With the acquisition of APC, we are subject to the effects of translating the financial statements of APC from its functional

currency (Euros) into our reporting currency (US dollars). Such effects are recognized in accumulated other comprehensive

income (loss), which is net of tax when applicable.

In addition, we are subject to fluctuations in prices for commodities including copper, concrete, steel products and

fuel. Although we attempt to secure firm quotes from our suppliers, we generally do not hedge against increases in prices for

copper, concrete, steel or fuel. Commodity price risks may have an impact on our results of operations due to the fixed-price

nature of many of our contracts. We attempt to include the anticipated amounts of price increases or decreases in the costs of

our bids.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See the Index to the Consolidated Financial Statements on page 53 of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL

DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Attached as exhibits to this Annual Report on Form 10-K are certifications of our Chief Executive Officer (“CEO”) and Chief

Financial Officer (“CFO”), which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as

amended (the “Exchange Act”). This “Controls and Procedures” section includes information concerning the controls and

controls evaluation referred to in the certifications and a reference to the report of Grant Thornton LLP, our independent

registered public accounting firm, regarding its audit of our internal control over financial reporting. This section should be

read in conjunction with the certifications and the report of Grant Thornton LLP for a more complete understanding of the

topics presented.

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures”

(“Disclosure Controls”) as of the end of the year covered by this Annual Report on Form 10-K. The controls evaluation was

conducted under the supervision and with the participation of management, including our CEO and CFO. Disclosure Controls

are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under

the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized, and reported within the time

periods specified in the SEC’s rules and forms. Disclosure Controls are also designed to reasonably assure that such information

is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions

regarding required disclosure. Our quarterly evaluation of Disclosure Controls includes an evaluation of some components of

our internal control over financial reporting, and internal control over financial reporting is also separately evaluated on an

annual basis for purposes of providing the management report, which is set forth below.

Based on the controls evaluation, our CEO and CFO have concluded that, as of the end of the year covered by this Annual

Report on Form 10-K, our Disclosure Controls were effective to provide reasonable assurance that information required to be

disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified by

the SEC, and the material information related to Argan, Inc. and its consolidated subsidiaries is made known to management,

including the CEO and CFO, particularly during the period when our periodic reports are being prepared.

- 48 -

Increase (Decrease) in

Net Increase (Decrease) in

Interest Income

Interest Expense

Earnings (pre-tax)

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide
reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external
purposes in accordance with US GAAP. Internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions
of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with authorizations of management and directors of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s
assets that could have a material effect on the consolidated financial statements.

Management assessed our internal control over financial reporting as of January 31, 2020, the end of the fiscal year, based on
assessment criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Management’s assessment included evaluation of elements such as the design
and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall
control environment.

Based on its assessment, management has concluded that our internal control over financial reporting was effective as of the
end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external reporting purposes in accordance with US GAAP. We reviewed the results of management’s
assessment with the audit committee of our board of directors. In addition, on a quarterly basis, we will evaluate any changes
to our internal control over financial reporting to determine if material change occurred.

Attestation Report of the Independent Registered Public Accounting Firm

The effectiveness of our internal control over financial reporting as of January 31, 2020 has been audited by Grant Thornton
LLP, our independent registered public accounting firm, who also audited our consolidated financial statements included in
this Annual Report on Form 10-K, as stated in their reports which appear with our accompanying consolidated financial
statements.

Changes in Internal Controls

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) occurred during the fiscal quarter ended January 31, 2020 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

The Company’s management, including the CEO and CFO, does not expect that our Disclosure Controls or our internal control
over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of
a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative
to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within
the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be
faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management override of the controls.

The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections
of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate
because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

ITEM 9B. OTHER INFORMATION.

Not Applicable.

- 49 -

PART III

PART IV

The information required by the items of the Annual Report on Form 10-K, Part III, that are identified below will be
incorporated by reference to our 2020 Proxy Statement relating to the election of directors and other matters, which is expected
to be filed by us pursuant to Regulation 14A, within 120 days after the close of our fiscal year.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS.

The following exhibits are filed as part of this Annual Report on Form 10-K:

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Exhibit No.

Description

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND

RELATED STOCKHOLDER MATTERS.

April 15, 2009.

Description of Registrant’s Securities. (a)

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Statement filed on Schedule 14A on May 7, 2018.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

- 50 -

3.1

Certificate of Incorporation, as amended. Incorporated by reference to Exhibit 3.1 to the Registrant’s Annual

Report on Form 10-K filed on April 10, 2019.

3.2

Bylaws. Incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K filed on

10.1 Argan, Inc. 2011 Stock Plan (Revised as of 4-10-18). Incorporated by reference to the Registrant’s Proxy

10.2

Employment Agreement dated as of January 3, 2005 by and between Argan, Inc. and Rainer H. Bosselmann.

Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 5,

2005.

10, 2015.

10, 2019.

10.3 Employment Agreement dated as of October 13, 2015 by and between Argan, Inc. and David H. Watson.

Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on December

10.4

Third Amended and Restated Employment Agreement, dated November 15, 2019, by and among Gemma

Power Systems, LLC, Gemma Power, Inc., Gemma Power Systems California, Inc., Gemma Power Hartford,

LLC, Gemma Renewable Power, LLC, Gemma Power Operations, LLC and William F. Griffin, Jr.

Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on December

10.5

Employment Agreement, dated November 15, 2019, by and among Gemma Power Systems, LLC, Gemma

Power, Inc., Gemma Power Systems California, Inc., Gemma Power Hartford, LLC, Gemma Renewable

Power, LLC, Gemma Power Operations, LLC and Charles Collins IV. Incorporated by reference to Exhibit

10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on December 10, 2019.

10.6

Employment Agreement, dated November 15, 2019, by and among Gemma Power Systems, LLC, Gemma

Power, Inc., Gemma Power Systems California, Inc., Gemma Power Hartford, LLC, Gemma Renewable

Power, LLC, Gemma Power Operations, LLC and Terrence Trebilcock. Incorporated by reference to Exhibit

10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on December 10, 2019.

10.7 Replacement Credit Agreement, dated August 10, 2015, among Argan, Inc. (and certain subsidiaries of Argan,

Inc.) and Bank of America, N.A. Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report

on Form 10-Q filed on December 10, 2015.

10.6 Deferred Compensation Plan, adopted by Gemma Power Systems, effective as of April 6, 2017. Incorporated

by reference to Exhibit 10.7 of the Registrant’s Annual Report on Form 10-K filed on April 11, 2017.

14.1 Code of Ethics. Incorporated by reference to the Registrant’s Annual Report on Form 10-KSB filed on April

27, 2004.

14.2 Argan, Inc. Code of Conduct (Amended January 2007). Incorporated by reference to the Registrant’s

Annual Report on Form 10-KSB filed on April 26, 2007.

Subsidiaries of the Company. Incorporated by reference to Exhibit 21 to the Registrant’s Annual Report on

Form 10-K filed on April 10, 2019.

23.1 Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm. (a)

31.1

31.2

32.1

32.2

Certification of CEO required by Section 302 of the Sarbanes-Oxley Act of 2002. (a)

Certification of CFO required by Section 302 of the Sarbanes-Oxley Act of 2002. (a)

Certification of CEO required by Section 906 of the Sarbanes-Oxley Act of 2002. (a)

Certification of CFO required by Section 906 of the Sarbanes-Oxley Act of 2002. (a)

101.INS#

101.SCH#

101.CAL#

101.LAB#

101.PRE#

101.DEF#

XBRL Instance Document. (a)

XBRL Schema Document. (a)

XBRL Calculation Linkbase Document. (a)

XBRL Labels Linkbase Document. (a)

XBRL Presentation Linkbase Document. (a)

XBRL Definition Linkbase Document. (a)

___________

(a) Filed herewith.

- 51 -

The information required by the items of the Annual Report on Form 10-K, Part III, that are identified below will be

incorporated by reference to our 2020 Proxy Statement relating to the election of directors and other matters, which is expected

to be filed by us pursuant to Regulation 14A, within 120 days after the close of our fiscal year.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS.

The following exhibits are filed as part of this Annual Report on Form 10-K:

PART III

PART IV

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND

RELATED STOCKHOLDER MATTERS.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Exhibit No.

3.1

3.2

Description
Certificate of Incorporation, as amended. Incorporated by reference to Exhibit 3.1 to the Registrant’s Annual
Report on Form 10-K filed on April 10, 2019.
Bylaws. Incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K filed on
April 15, 2009.
Description of Registrant’s Securities. (a)

4
10.1 Argan, Inc. 2011 Stock Plan (Revised as of 4-10-18). Incorporated by reference to the Registrant’s Proxy

10.2

Statement filed on Schedule 14A on May 7, 2018.
Employment Agreement dated as of January 3, 2005 by and between Argan, Inc. and Rainer H. Bosselmann.
Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 5,
2005.

10.4

10.3 Employment Agreement dated as of October 13, 2015 by and between Argan, Inc. and David H. Watson.
Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on December
10, 2015.
Third Amended and Restated Employment Agreement, dated November 15, 2019, by and among Gemma
Power Systems, LLC, Gemma Power, Inc., Gemma Power Systems California, Inc., Gemma Power Hartford,
LLC, Gemma Renewable Power, LLC, Gemma Power Operations, LLC and William F. Griffin, Jr.
Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on December
10, 2019.
Employment Agreement, dated November 15, 2019, by and among Gemma Power Systems, LLC, Gemma
Power, Inc., Gemma Power Systems California, Inc., Gemma Power Hartford, LLC, Gemma Renewable
Power, LLC, Gemma Power Operations, LLC and Charles Collins IV. Incorporated by reference to Exhibit
10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on December 10, 2019.
Employment Agreement, dated November 15, 2019, by and among Gemma Power Systems, LLC, Gemma
Power, Inc., Gemma Power Systems California, Inc., Gemma Power Hartford, LLC, Gemma Renewable
Power, LLC, Gemma Power Operations, LLC and Terrence Trebilcock. Incorporated by reference to Exhibit
10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on December 10, 2019.

10.6

10.5

10.7 Replacement Credit Agreement, dated August 10, 2015, among Argan, Inc. (and certain subsidiaries of Argan,
Inc.) and Bank of America, N.A. Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report
on Form 10-Q filed on December 10, 2015.

10.6 Deferred Compensation Plan, adopted by Gemma Power Systems, effective as of April 6, 2017. Incorporated

by reference to Exhibit 10.7 of the Registrant’s Annual Report on Form 10-K filed on April 11, 2017.

14.1 Code of Ethics. Incorporated by reference to the Registrant’s Annual Report on Form 10-KSB filed on April

27, 2004.

14.2 Argan, Inc. Code of Conduct (Amended January 2007). Incorporated by reference to the Registrant’s

Annual Report on Form 10-KSB filed on April 26, 2007.
Subsidiaries of the Company. Incorporated by reference to Exhibit 21 to the Registrant’s Annual Report on
Form 10-K filed on April 10, 2019.

23.1 Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm. (a)
Certification of CEO required by Section 302 of the Sarbanes-Oxley Act of 2002. (a)
31.1
Certification of CFO required by Section 302 of the Sarbanes-Oxley Act of 2002. (a)
31.2
Certification of CEO required by Section 906 of the Sarbanes-Oxley Act of 2002. (a)
32.1
Certification of CFO required by Section 906 of the Sarbanes-Oxley Act of 2002. (a)
32.2
101.INS#
101.SCH#
101.CAL#
101.LAB#
101.PRE#
101.DEF#

XBRL Instance Document. (a)
XBRL Schema Document. (a)
XBRL Calculation Linkbase Document. (a)
XBRL Labels Linkbase Document. (a)
XBRL Presentation Linkbase Document. (a)
XBRL Definition Linkbase Document. (a)

___________

(a) Filed herewith.

- 51 -
- 51 -

- 50 -

ARGAN, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2020

The following financial statements (including the notes thereto and the Reports of Independent Registered Public

Accounting Firm with respect thereto), are filed as part of this Annual Report on Form 10-K.

Page No.

Reports of Grant Thornton LLP, Independent Registered Public Accounting Firm ............................................. - 54 -

Consolidated Statements of Earnings for the years ended January 31, 2020, 2019 and 2018 .................................. - 56 -

Consolidated Balance Sheets as of January 31, 2020 and 2019 .................................................................................... - 57 -

Consolidated Statements of Stockholders’ Equity for the years ended January 31, 2020, 2019 and 2018 ........... - 58 -

Consolidated Statements of Cash Flows for the years ended January 31, 2020, 2019 and 2018 ..................................... - 59 -

Notes to Consolidated Financial Statements ......................................................................................................... - 60 -

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

SIGNATURES

April 14, 2020

ARGAN, INC.

By:

/s/ David H. Watson

David H. Watson
Senior Vice President, Chief Financial Officer,

Treasurer and Secretary
(Principal Accounting and Financial Officer)

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.

Name

Title

/s/ Rainer H. Bosselmann
Rainer H. Bosselmann

Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)

/s/ Cynthia A. Flanders
Cynthia A. Flanders

/s/ Peter W. Getsinger
Peter W. Getsinger

/s/ William F. Griffin
William F. Griffin

/s/ John R. Jeffrey
John R. Jeffrey

/s/ Mano Koilpillai
Mano Koilpillai

/s/ William F. Leimkuhler
William F. Leimkuhler

Director

/s/ W. G. Champion Mitchell
W. G. Champion Mitchell

Director

/s/ James W. Quinn
James W. Quinn

Director

Date

April 14, 2020

- 52 -
- 52 -

- 53 -

ARGAN, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2020

The following financial statements (including the notes thereto and the Reports of Independent Registered Public
Accounting Firm with respect thereto), are filed as part of this Annual Report on Form 10-K.

Reports of Grant Thornton LLP, Independent Registered Public Accounting Firm ............................................. - 54 -

Consolidated Statements of Earnings for the years ended January 31, 2020, 2019 and 2018 .................................. - 56 -

Consolidated Balance Sheets as of January 31, 2020 and 2019 .................................................................................... - 57 -

Page No.

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant

Consolidated Statements of Stockholders’ Equity for the years ended January 31, 2020, 2019 and 2018 ........... - 58 -

Consolidated Statements of Cash Flows for the years ended January 31, 2020, 2019 and 2018 ..................................... - 59 -

Notes to Consolidated Financial Statements ......................................................................................................... - 60 -

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the

undersigned, thereunto duly authorized.

SIGNATURES

April 14, 2020

ARGAN, INC.

By:

/s/ David H. Watson

David H. Watson

Senior Vice President, Chief Financial Officer,

Treasurer and Secretary

(Principal Accounting and Financial Officer)

and in the capacities and on the dates indicated.

Name

Title

Date

/s/ Rainer H. Bosselmann

Chairman of the Board and Chief Executive Officer

April 14, 2020

Rainer H. Bosselmann

(Principal Executive Officer)

/s/ Cynthia A. Flanders

Director

Cynthia A. Flanders

/s/ Peter W. Getsinger

Peter W. Getsinger

/s/ William F. Griffin

William F. Griffin

/s/ John R. Jeffrey

John R. Jeffrey

/s/ Mano Koilpillai

Mano Koilpillai

Director

/s/ William F. Leimkuhler

Director

William F. Leimkuhler

/s/ W. G. Champion Mitchell

Director

W. G. Champion Mitchell

/s/ James W. Quinn

James W. Quinn

Director

April 14, 2020

- 52 -

- 53 -

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Argan, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Argan, Inc. (a Delaware corporation) and subsidiaries (the
“Company”) as of January 31, 2020 and 2019, the related consolidated statements of earnings, changes in stockholders’ equity,
and cash flows for each of the three years in the period ended January 31, 2020, and the related notes (collectively referred to
as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of January 31, 2020 and 2019, and the results of its operations and its cash flows for each of the
three years in the period ended January 31, 2020, in conformity with accounting principles generally accepted in the United
States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of January 31, 2020, based on criteria established in
the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”), and our report dated April 14, 2020 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due
to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2007.

Philadelphia, Pennsylvania
April 14, 2020

Board of Directors and Stockholders

Argan, Inc.

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of Argan, Inc. (a Delaware corporation) and subsidiaries (the

“Company”) as of January 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued

by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company

maintained, in all material respects, effective internal control over financial reporting as of January 31, 2020, based on criteria

established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)

(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended January 31, 2020, and our

report dated April 14, 2020 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its

assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report

on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control

over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be

independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the

audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all

material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk

that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the

assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit

provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally

accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures

that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and

dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit

preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and

expenditures of the company are being made only in accordance with authorizations of management and directors of the

company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or

disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,

projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate

because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania

April 14, 2020

- 54 -
- 54 -

- 55 -

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Argan, Inc.

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of Argan, Inc. (a Delaware corporation) and subsidiaries (the
“Company”) as of January 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of January 31, 2020, based on criteria
established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended January 31, 2020, and our
report dated April 14, 2020 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania
April 14, 2020

- 55 -
- 55 -

ARGAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED JANUARY 31,
(In thousands, except per share data)

ARGAN, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JANUARY 31,

(Dollars in thousands, except per share data)

REVENUES
Cost of revenues
GROSS (LOSS) PROFIT
Selling, general and administrative expenses
Impairment losses
(LOSS) INCOME FROM OPERATIONS
Other income, net
(LOSS) INCOME BEFORE INCOME TAXES
Income tax benefit (expense)
NET (LOSS) INCOME
Net income (loss) attributable to non-controlling interests
NET (LOSS) INCOME ATTRIBUTABLE TO

2020

2019

2018

$ 238,997
245,817
(6,820)
44,125
4,895
(55,840)
8,075
(47,765)
7,053
(40,712)
1,977

$ 482,153
399,715
82,438
40,710
1,491
40,237
6,981
47,218
4,651
51,869
(167)

$ 892,815
743,490
149,325
41,764
584
106,977
5,648
112,625
(40,279)
72,346
335

THE STOCKHOLDERS OF ARGAN, INC.

(42,689)

52,036

72,011

Foreign currency translation adjustments
COMPREHENSIVE (LOSS) INCOME
ATTRIBUTABLE TO THE

STOCKHOLDERS OF ARGAN, INC.

(LOSS) INCOME PER SHARE ATTRIBUTABLE TO

THE STOCKHOLDERS OF ARGAN, INC.

(770)

(1,768)

2,184

$ (43,459)

$ 50,268

$ 74,195

Basic
Diluted

$ (2.73)
$ (2.73)

$ 3.34
$ 3.32

$ 4.64
$ 4.56

WEIGHTED AVERAGE NUMBER OF

SHARES OUTSTANDING

Basic
Diluted

15,621
15,621

15,569
15,693

15,522
15,780

CASH DIVIDENDS PER SHARE (Note 15)

$ 1.00

ASSETS

CURRENT ASSETS

Cash and cash equivalents

Short-term investments

Accounts receivable, net

Contract assets

Other current assets

TOTAL CURRENT ASSETS

Property, plant and equipment, net

Goodwill

Deferred taxes

Other purchased intangible assets, net

Right-of-use and other assets (Note 10)

TOTAL ASSETS

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable

Accrued expenses (Notes 4, 10 and 13)

Contract liabilities

TOTAL CURRENT LIABILITIES

Other noncurrent liabilities (Note 10)

TOTAL LIABILITIES

COMMITMENTS AND CONTINGENCIES (Notes 10 and 11)

STOCKHOLDERS’ EQUITY

Preferred stock, par value $0.10 per share –

500,000 shares authorized; no shares issued and outstanding

Common stock, par value $0.15 per share – 30,000,000 shares authorized;

15,638,202 and 15,577,102 shares issued at January 31, 2020 and 2019,

respectively; 15,634,969 and 15,573,869 shares outstanding at January

31, 2020 and 2019, respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss

TOTAL STOCKHOLDERS’ EQUITY

Non-controlling interests

TOTAL EQUITY

TOTAL LIABILITIES AND EQUITY

2020

2019

164,318

487,540

476,648

39,870

—

167,363

160,499

37,192

33,379

23,322

421,755

22,539

27,943

5,001

7,894

2,408

35,442

35,907

72,685

144,034

2,476

146,510

2,346

148,713

189,306

(1,116)

339,249

1,781

341,030

487,540

132,213

36,174

58,357

25,286

416,348

19,778

32,838

6,137

1,257

290

33,097

8,349

81,316

960

82,276

2,337

144,961

247,616

(346)

394,568

(196)

394,372

476,648

The accompanying notes are an integral part of these consolidated financial statements.

- 56 -
- 56 -

The accompanying notes are an integral part of these consolidated financial statements.

- 57 -

ARGAN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

FOR THE YEARS ENDED JANUARY 31,

(In thousands, except per share data)

ARGAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31,
(Dollars in thousands, except per share data)

REVENUES

Cost of revenues

GROSS (LOSS) PROFIT

Selling, general and administrative expenses

Impairment losses

Other income, net

(LOSS) INCOME FROM OPERATIONS

(LOSS) INCOME BEFORE INCOME TAXES

Income tax benefit (expense)

NET (LOSS) INCOME

Net income (loss) attributable to non-controlling interests

NET (LOSS) INCOME ATTRIBUTABLE TO

THE STOCKHOLDERS OF ARGAN, INC.

Foreign currency translation adjustments

COMPREHENSIVE (LOSS) INCOME

ATTRIBUTABLE TO THE

STOCKHOLDERS OF ARGAN, INC.

(LOSS) INCOME PER SHARE ATTRIBUTABLE TO

THE STOCKHOLDERS OF ARGAN, INC.

Basic

Diluted

Basic

Diluted

WEIGHTED AVERAGE NUMBER OF

SHARES OUTSTANDING

2020

2019

2018

$ 238,997

$ 482,153

$ 892,815

245,817

(6,820)

44,125

4,895

(55,840)

8,075

(47,765)

7,053

(40,712)

1,977

399,715

82,438

40,710

1,491

40,237

6,981

47,218

4,651

51,869

(167)

743,490

149,325

41,764

584

106,977

5,648

112,625

(40,279)

72,346

335

(42,689)

52,036

72,011

(770)

(1,768)

2,184

$ (43,459)

$ 50,268

$ 74,195

$ (2.73)

$ 3.34

$ 3.32

$ 4.64

$ 4.56

15,621

15,569

15,693

15,522

15,780

CASH DIVIDENDS PER SHARE (Note 15)

$ 1.00

ASSETS

CURRENT ASSETS

Cash and cash equivalents
Short-term investments
Accounts receivable, net
Contract assets
Other current assets

TOTAL CURRENT ASSETS
Property, plant and equipment, net
Goodwill
Other purchased intangible assets, net
Deferred taxes
Right-of-use and other assets (Note 10)
TOTAL ASSETS

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable
Accrued expenses (Notes 4, 10 and 13)
Contract liabilities

TOTAL CURRENT LIABILITIES
Other noncurrent liabilities (Note 10)
TOTAL LIABILITIES

2020

2019

167,363
160,499
37,192
33,379
23,322
421,755
22,539
27,943
5,001
7,894
2,408
487,540

35,442
35,907
72,685
144,034
2,476
146,510

164,318
132,213
36,174
58,357
25,286
416,348
19,778
32,838
6,137
1,257
290
476,648

39,870
33,097
8,349
81,316
960
82,276

COMMITMENTS AND CONTINGENCIES (Notes 10 and 11)

STOCKHOLDERS’ EQUITY

Preferred stock, par value $0.10 per share –

500,000 shares authorized; no shares issued and outstanding

Common stock, par value $0.15 per share – 30,000,000 shares authorized;
15,638,202 and 15,577,102 shares issued at January 31, 2020 and 2019,
respectively; 15,634,969 and 15,573,869 shares outstanding at January
31, 2020 and 2019, respectively

Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
TOTAL STOCKHOLDERS’ EQUITY

Non-controlling interests

TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY

—

2,346
148,713
189,306
(1,116)
339,249
1,781
341,030
487,540

2,337
144,961
247,616
(346)
394,568
(196)
394,372
476,648

The accompanying notes are an integral part of these consolidated financial statements.

- 56 -

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ARGAN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JANUARY 31,

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

Net (loss) income

Adjustments to reconcile net (loss) income to net

cash provided by (used in) operating activities

Impairment losses (Note 7)

Depreciation

Stock compensation expense

Amortization of purchased intangible assets

Operating lease expense

Changes in accrued interest on short-term investments

Deferred income tax benefit

Other

Changes in operating assets and liabilities

Accounts receivable

Contract assets

Other assets

Accounts payable and accrued expenses

Contract liabilities

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Maturities of short-term investments

Purchases of short-term investments

Purchases of property, plant and equipment

Changes in notes receivable

CASH FLOWS FROM FINANCING ACTIVITIES

Payments of cash dividends

Proceeds from the exercise of stock options

Distributions to joint venture partners

Net cash used in financing activities

2020

2019

2018

(40,712)

$ 51,869

$ 72,346

4,895

3,513

2,131

1,136

1,004

714

(6,640)

175

(1,038)

24,978

2,357

(3,284)

64,336

53,565

1,491

3,422

1,645

1,012

—

695

(2,139)

(996)

(10,200)

(44,510)

(15,160)

(60,187)

(39,264)

(112,322)

166,000

(195,000)

(7,058)

—

370,000

(191,000)

(8,599)

225

584

2,779

4,651

1,032

—

(1,112)

(64)

(136)

(5,687)

(6,646)

(4,574)

(6,164)

(129,802)

(72,793)

587,500

(542,500)

(4,826)

(1,500)

38,674

(15,621)

1,630

—

(13,991)

(15,570)

102

(72)

(15,540)

(15,548)

3,155

(1,229)

(13,622)

Net cash (used in) provided by investing activities

(36,058)

170,626

EFFECTS OF EXCHANGE RATE CHANGES ON CASH

(471)

(553)

2,650

NET INCREASE (DECREASE) IN CASH AND

CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

3,045

164,318

42,211

122,107

(45,091)

167,198

CASH AND CASH EQUIVALENTS, END OF YEAR

$ 167,363

$ 164,318

$ 122,107

SUPPLEMENTAL CASH FLOW INFORMATION (Notes 2, 10 and 13)

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The accompanying notes are an integral part of these consolidated financial statements.

- 59 -

ARGAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31,
(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities

Impairment losses (Note 7)
Depreciation
Stock compensation expense
Amortization of purchased intangible assets
Operating lease expense
Changes in accrued interest on short-term investments
Deferred income tax benefit
Other

Changes in operating assets and liabilities

Accounts receivable
Contract assets
Other assets
Accounts payable and accrued expenses
Contract liabilities

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Maturities of short-term investments
Purchases of short-term investments
Purchases of property, plant and equipment
Changes in notes receivable

Net cash (used in) provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Payments of cash dividends
Proceeds from the exercise of stock options
Distributions to joint venture partners

Net cash used in financing activities

EFFECTS OF EXCHANGE RATE CHANGES ON CASH
NET INCREASE (DECREASE) IN CASH AND

CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR

2020

2019

2018

(40,712)

$ 51,869

$ 72,346

4,895
3,513
2,131
1,136
1,004
714
(6,640)
175

(1,038)
24,978
2,357
(3,284)
64,336
53,565

1,491
3,422
1,645
1,012
—
695
(2,139)
(996)

(10,200)
(44,510)
(15,160)
(60,187)
(39,264)
(112,322)

166,000
(195,000)
(7,058)
—
(36,058)

370,000
(191,000)
(8,599)
225
170,626

584
2,779
4,651
1,032
—
(1,112)
(64)
(136)

(5,687)
(6,646)
(4,574)
(6,164)
(129,802)
(72,793)

587,500
(542,500)
(4,826)
(1,500)
38,674

(15,621)
1,630
—
(13,991)

(15,570)
102
(72)
(15,540)

(15,548)
3,155
(1,229)
(13,622)

(471)

(553)

2,650

3,045
164,318
$ 167,363

42,211
122,107
$ 164,318

(45,091)
167,198
$ 122,107

SUPPLEMENTAL CASH FLOW INFORMATION (Notes 2, 10 and 13)

The accompanying notes are an integral part of these consolidated financial statements.

- 59 -
- 59 -

ARGAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2020, 2019 AND 2018
(Tabular amounts in thousands, except per share data)

NOTE 1 – DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Description of the Business

Argan, Inc. (“Argan”) conducts operations through its wholly owned subsidiaries, Gemma Power Systems, LLC and
affiliates (“GPS”); The Roberts Company, Inc. (“TRC”); Atlantic Projects Company Limited and affiliates (“APC”) and
Southern Maryland Cable, Inc. (“SMC”). Argan and these consolidated subsidiaries are hereinafter collectively referred to
as the “Company.”

Through GPS and APC, the Company provides a full range of engineering, procurement, construction, commissioning,
operations management, maintenance, project development, technical and other consulting services to the power generation
and renewable energy markets. The wide range of customers includes independent power producers, public utilities, power
plant equipment suppliers and global energy plant construction firms with projects located in the continental United States
(the “US”), the Republic of Ireland and the United Kingdom (the “UK”). Including consolidated joint ventures and variable
interest entities (“VIEs”), GPS and APC represent the Company’s power industry services reportable segment. Through
TRC, the industrial fabrication and field services reportable segment provides on-site services that support maintenance
turnarounds, shutdowns and emergency mobilizations for industrial plants primarily located in the southeast region of the
US and that are based on its expertise in producing, delivering and installing fabricated steel components such as piping
systems and pressure vessels. 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 US.

Basis of Presentation and Significant Accounting Policies

The consolidated financial statements include the accounts of Argan, its wholly owned subsidiaries, and its financially-
controlled joint ventures and other VIEs (see Note 3). All significant inter-company balances and transactions have been
eliminated in consolidation. Certain comparative amounts in the consolidated balance sheet and the consolidated statements
of cash flows were reclassified to conform to the current year presentation. In Note 16, the Company has provided certain
financial information relating to the operating results and assets of its reportable segments based on the manner in which
management disaggregates the Company’s financial reporting for purposes of making internal operating decisions. The
Company’s fiscal year ends on January 31 of each year.

Use of Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, revenues, expenses, and certain financial statement disclosures. Management believes that
the estimates, judgments and assumptions upon which it relies are reasonable based upon information available to it at the
time that these estimates, judgments and assumptions are made. Estimates are used for, but are not limited to, the Company’s
accounting for revenues, the valuation of assets with long and indefinite lives including goodwill, the valuation of restricted
stock and options to purchase shares of the Company’s common stock, the evaluation of contingent obligations and uncertain
income tax return positions, the valuation of deferred taxes, and the determination of the allowance for doubtful accounts.
Actual results could differ from these estimates.

Property, Plant and Equipment – Property, plant and equipment are stated at cost less accumulated depreciation. Such assets
acquired in a business combination are initially included in the Company’s consolidated balance sheet at fair values. The
Company capitalizes the power plant project development costs incurred by its consolidated variable interest entities. Should
these construction preparation efforts be unsuccessful, the costs would be written-off at that time. Depreciation amounts are
determined using the straight-line method over the estimated useful lives of the assets, other than land, which are generally
from five to thirty-nine years. Building and leasehold improvements are amortized on a straight-line basis over the shorter
of the estimated useful life of the related asset or the lease term, as applicable. The costs of maintenance and repairs are
expensed as incurred and major improvements are capitalized. When an asset is sold or retired, the cost and related
accumulated depreciation amounts are removed from the accounts and the resulting gain or loss is included in earnings.

- 60 -
- 60 -

Goodwill – At least annually, the Company reviews the carrying value of goodwill amounts for impairment. Each goodwill

impairment assessment is performed using the quantitative business valuation process except in those circumstances when a

simplified qualitative approach performed by management results in a conclusion that it is unlikely that an impairment of

the applicable goodwill amount has occurred.

The Company identifies a potential impairment loss by comparing the fair value of a reporting unit with its carrying amount,

including goodwill. In the quantitative approach, the fair value of the reporting unit is estimated using various market-based

and income-based valuation techniques as applicable in the particular circumstances. If the fair value of the reporting unit

exceeds its carrying amount, goodwill of the reporting unit is not deemed to be impaired. If the carrying amount of the

reporting unit exceeds its fair value, a goodwill impairment loss is recorded in an amount equal to the excess of the unit’s

carrying value over its fair value, not to exceed the amount of goodwill allocated to the reporting unit. Nonetheless, the

Company evaluates amounts of goodwill for impairment at any time when events or changes in circumstances indicate that

goodwill value may be impaired.

The simplified method allows the Company to first assess qualitative factors to decide whether it is necessary to perform the

more complex quantitative goodwill impairment test. It is not required to calculate the fair value of a reporting unit unless

management concludes, based on a qualitative assessment, that it is more likely than not that its fair value is less than its

carrying amount. The professional guidance for this evaluation identifies the types of factors which the Company should

consider in conducting the qualitative assessment including macroeconomic, industry, market and entity-specific factors.

Long-Lived Assets – Long-lived assets, consisting primarily of purchased intangible assets with definite lives, property, plant

and equipment, are subject to review for impairment whenever events or changes in circumstances indicate that a carrying

amount should be assessed. In such circumstances, the Company would compare the carrying value of the long-lived asset

to the undiscounted future cash flows expected to result from the use of the asset. In the event that the Company would

determine that the carrying value of the asset is not recoverable, a loss would be recognized based on the amount by which

the carrying value exceeds the fair value of the asset. Fair value would be determined by using quoted market prices or

valuation techniques such as the present value of expected future cash flows, appraisals, or other pricing models as

appropriate. The useful lives and amortization of purchased intangible assets are described in Note 7.

Revenue Recognition – Effective February 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09,

“Revenue from Contracts with Customers,” and a series of related amendments which together hereinafter are referred to as

“ASC Topic 606”, using the permitted modified retrospective method. Accordingly, the new guidance was applied

retrospectively to contracts that were not completed as of the adoption date. Results for Fiscal 2020 and Fiscal 2019 have

been presented in accordance with the new guidance. Operating results for the year ended January 31, 2018 were not adjusted

and are presented in accordance with previous guidance. The differences between the Company’s reported operating results

for Fiscal 2020 and Fiscal 2019, which reflect the application of the new standard on the Company’s contracts, and the results

that would have been reported if the accounting was performed pursuant to the accounting standards previously in effect, are

not material. The effect of the adoption on retained earnings as of February 1, 2018 was an income tax-effected increase of

less than $0.1 million.

The revenue recognition standard outlines a single comprehensive five-step model for entities to use in accounting for

revenues arising from contracts with customers that requires reporting entities to:

1. Identify the contract,

2. Identify the performance obligations of the contract,

3. Determine the transaction price of the contract,

4. Allocate the transaction price to the performance obligations, and

5. Recognize revenue.

The Company focuses on the transfer of the contractor’s control of the goods and/or services to the customer, as opposed to

the transfer of risk and rewards. Major provisions of the new standard cover the determination of which goods and services

are distinct and represent separate performance obligations, the appropriate treatments for variable consideration, and the

evaluation of whether revenues should be recognized at a point in time or over time.

When a performance obligation is satisfied over time, the related revenues are recognized over time. The Company’s

revenues are recognized primarily under various types of long-term construction contracts, including those for which

revenues are based on either a fixed-price or a time-and-materials basis, and primarily over time as performance obligations

are satisfied due to the continuous transfer of control to the project owner or other customer.

- 61 -

ARGAN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2020, 2019 AND 2018

(Tabular amounts in thousands, except per share data)

NOTE 1 – DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Description of the Business

Argan, Inc. (“Argan”) conducts operations through its wholly owned subsidiaries, Gemma Power Systems, LLC and

affiliates (“GPS”); The Roberts Company, Inc. (“TRC”); Atlantic Projects Company Limited and affiliates (“APC”) and

Southern Maryland Cable, Inc. (“SMC”). Argan and these consolidated subsidiaries are hereinafter collectively referred to

as the “Company.”

Through GPS and APC, the Company provides a full range of engineering, procurement, construction, commissioning,

operations management, maintenance, project development, technical and other consulting services to the power generation

and renewable energy markets. The wide range of customers includes independent power producers, public utilities, power

plant equipment suppliers and global energy plant construction firms with projects located in the continental United States

(the “US”), the Republic of Ireland and the United Kingdom (the “UK”). Including consolidated joint ventures and variable

interest entities (“VIEs”), GPS and APC represent the Company’s power industry services reportable segment. Through

TRC, the industrial fabrication and field services reportable segment provides on-site services that support maintenance

turnarounds, shutdowns and emergency mobilizations for industrial plants primarily located in the southeast region of the

US and that are based on its expertise in producing, delivering and installing fabricated steel components such as piping

systems and pressure vessels. 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 US.

Basis of Presentation and Significant Accounting Policies

The consolidated financial statements include the accounts of Argan, its wholly owned subsidiaries, and its financially-

controlled joint ventures and other VIEs (see Note 3). All significant inter-company balances and transactions have been

eliminated in consolidation. Certain comparative amounts in the consolidated balance sheet and the consolidated statements

of cash flows were reclassified to conform to the current year presentation. In Note 16, the Company has provided certain

financial information relating to the operating results and assets of its reportable segments based on the manner in which

management disaggregates the Company’s financial reporting for purposes of making internal operating decisions. The

Company’s fiscal year ends on January 31 of each year.

Use of Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally

accepted in the United States of America requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities, revenues, expenses, and certain financial statement disclosures. Management believes that

the estimates, judgments and assumptions upon which it relies are reasonable based upon information available to it at the

time that these estimates, judgments and assumptions are made. Estimates are used for, but are not limited to, the Company’s

accounting for revenues, the valuation of assets with long and indefinite lives including goodwill, the valuation of restricted

stock and options to purchase shares of the Company’s common stock, the evaluation of contingent obligations and uncertain

income tax return positions, the valuation of deferred taxes, and the determination of the allowance for doubtful accounts.

Actual results could differ from these estimates.

Property, Plant and Equipment – Property, plant and equipment are stated at cost less accumulated depreciation. Such assets

acquired in a business combination are initially included in the Company’s consolidated balance sheet at fair values. The

Company capitalizes the power plant project development costs incurred by its consolidated variable interest entities. Should

these construction preparation efforts be unsuccessful, the costs would be written-off at that time. Depreciation amounts are

determined using the straight-line method over the estimated useful lives of the assets, other than land, which are generally

from five to thirty-nine years. Building and leasehold improvements are amortized on a straight-line basis over the shorter

of the estimated useful life of the related asset or the lease term, as applicable. The costs of maintenance and repairs are

expensed as incurred and major improvements are capitalized. When an asset is sold or retired, the cost and related

accumulated depreciation amounts are removed from the accounts and the resulting gain or loss is included in earnings.

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Goodwill – At least annually, the Company reviews the carrying value of goodwill amounts for impairment. Each goodwill
impairment assessment is performed using the quantitative business valuation process except in those circumstances when a
simplified qualitative approach performed by management results in a conclusion that it is unlikely that an impairment of
the applicable goodwill amount has occurred.

The Company identifies a potential impairment loss by comparing the fair value of a reporting unit with its carrying amount,
including goodwill. In the quantitative approach, the fair value of the reporting unit is estimated using various market-based
and income-based valuation techniques as applicable in the particular circumstances. If the fair value of the reporting unit
exceeds its carrying amount, goodwill of the reporting unit is not deemed to be impaired. If the carrying amount of the
reporting unit exceeds its fair value, a goodwill impairment loss is recorded in an amount equal to the excess of the unit’s
carrying value over its fair value, not to exceed the amount of goodwill allocated to the reporting unit. Nonetheless, the
Company evaluates amounts of goodwill for impairment at any time when events or changes in circumstances indicate that
goodwill value may be impaired.

The simplified method allows the Company to first assess qualitative factors to decide whether it is necessary to perform the
more complex quantitative goodwill impairment test. It is not required to calculate the fair value of a reporting unit unless
management concludes, based on a qualitative assessment, that it is more likely than not that its fair value is less than its
carrying amount. The professional guidance for this evaluation identifies the types of factors which the Company should
consider in conducting the qualitative assessment including macroeconomic, industry, market and entity-specific factors.

Long-Lived Assets – Long-lived assets, consisting primarily of purchased intangible assets with definite lives, property, plant
and equipment, are subject to review for impairment whenever events or changes in circumstances indicate that a carrying
amount should be assessed. In such circumstances, the Company would compare the carrying value of the long-lived asset
to the undiscounted future cash flows expected to result from the use of the asset. In the event that the Company would
determine that the carrying value of the asset is not recoverable, a loss would be recognized based on the amount by which
the carrying value exceeds the fair value of the asset. Fair value would be determined by using quoted market prices or
valuation techniques such as the present value of expected future cash flows, appraisals, or other pricing models as
appropriate. The useful lives and amortization of purchased intangible assets are described in Note 7.

Revenue Recognition – Effective February 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09,
“Revenue from Contracts with Customers,” and a series of related amendments which together hereinafter are referred to as
“ASC Topic 606”, using the permitted modified retrospective method. Accordingly, the new guidance was applied
retrospectively to contracts that were not completed as of the adoption date. Results for Fiscal 2020 and Fiscal 2019 have
been presented in accordance with the new guidance. Operating results for the year ended January 31, 2018 were not adjusted
and are presented in accordance with previous guidance. The differences between the Company’s reported operating results
for Fiscal 2020 and Fiscal 2019, which reflect the application of the new standard on the Company’s contracts, and the results
that would have been reported if the accounting was performed pursuant to the accounting standards previously in effect, are
not material. The effect of the adoption on retained earnings as of February 1, 2018 was an income tax-effected increase of
less than $0.1 million.

The revenue recognition standard outlines a single comprehensive five-step model for entities to use in accounting for
revenues arising from contracts with customers that requires reporting entities to:

The Company focuses on the transfer of the contractor’s control of the goods and/or services to the customer, as opposed to
the transfer of risk and rewards. Major provisions of the new standard cover the determination of which goods and services
are distinct and represent separate performance obligations, the appropriate treatments for variable consideration, and the
evaluation of whether revenues should be recognized at a point in time or over time.

When a performance obligation is satisfied over time, the related revenues are recognized over time. The Company’s
revenues are recognized primarily under various types of long-term construction contracts, including those for which
revenues are based on either a fixed-price or a time-and-materials basis, and primarily over time as performance obligations
are satisfied due to the continuous transfer of control to the project owner or other customer.

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Revenues from fixed-price contracts, including a portion of estimated gross profit, are recognized as services are provided,
based on costs incurred and estimated total contract costs using the percentage-of-completion method. If, at any time, the
estimate of contract profitability indicates an anticipated loss on a contract, the Company will recognize the total loss in the
reporting period that it is identified and an amount is estimable. Revenues from time-and-materials contracts are recognized
when the related services are provided to the customer.

The carrying value amounts presented in the consolidated balance sheets for the Company’s current assets, which primarily

include cash and cash equivalents, short-term investments, accounts receivable and contract assets, and its current liabilities

are reasonable estimates of their fair values due to the short-term nature of these items. The fair value amounts of reporting

units (as needed for purposes of identifying goodwill impairment losses) are determined by averaging valuations that are

calculated using market-based and income-based approaches deemed appropriate in the circumstances (see Note 7).

Almost all of the Company’s fixed-price contracts are considered to have a single performance obligation. Although multiple
promises to transfer individual goods or services may exist, they are not typically distinct within the context of such contracts
because contract promises included therein are interrelated or the contracts require the Company to perform critical
integration so that the customer receives a completed project. Warranties provided under the Company’s contracts with
customers are assurance-type and are included as elements of the single performance obligations.

The transaction price for a contract represents the value of the contract awarded to the Company that is used to determine
the amount of revenues recognized as of the balance sheet date. It may reflect amounts of variable consideration, which could
be either increases or decreases to the transaction price. These adjustments can be made from time-to-time during the period
of contract performance as circumstances evolve related to such items as changes in the scope and price of contracts, claims,
incentives and liquidated damages.

Contract assets are defined in the new standard to include amounts that represent the rights to receive payment for goods or
services that have been transferred to the project owner, with the rights conditional upon something other than the passage
of time. Contract liabilities are defined in the new standard to include the amounts that reflect obligations to provide goods
or services for which payment has been received. In addition, the definition of accounts receivable was revised to effectively
exclude billed amounts which, pursuant to the terms of the applicable contract, are not paid by project owners until a defined
phase of a contract or project has been completed and accepted. These retained amounts were historically included in
accounts receivable, but are now reflected in contract assets or contract liabilities depending on the net contract position of
the particular contract. Retention amounts and the length of retention periods may vary. Retainage amounts related to active
contracts are considered current regardless of the term of the applicable contract; such amounts are generally collected by
the completion of the applicable contract. The total of amounts retained by project owners under construction contracts at
January 31, 2020 and 2019 were $20.0 million and $15.3 million, respectively.

Income Taxes – Deferred taxes are recognized using enacted tax rates for the effects of temporary differences between the
book and tax bases of assets and liabilities. If management believes that it is more likely than not that some portion or all of
a deferred tax asset will not be realized, the carrying value will be reduced by a valuation allowance.

The Company accounts for uncertain tax positions in accordance with current accounting guidance which prescribes a
recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be
taken, on the income tax returns of the Company. Management evaluates and the Company records the effect of any uncertain
tax position based on the amount that management deems is more likely than not (i.e., greater than a 50% probability) to be
sustained upon examination and ultimate settlement with the tax authorities in the applicable tax jurisdiction (see Note 13).

Interest incurred related to overdue income taxes is included in income tax expense; franchise taxes and income tax penalties
are included in selling, general and administrative expenses.

Share-Based Payments – The Company measures and recognizes compensation expense for all stock options awarded to
employees and directors based upon estimates of fair value determined at the dates of award using an option pricing model.
The compensation expense for each stock option is recognized on a straight-line basis over the corresponding vesting period
which is typically three years. The fair value amounts associated with restricted stock awards, which are determined on the
dates of award, are being recorded in stock compensation expense over the three-year contractual lapsing periods for the
corresponding restrictions. For each exercise of a stock option, the Company determines whether the difference between the
deduction for income tax reporting purposes created at that time and the related compensation expense previously recorded
for financial reporting purposes results in either an excess income tax benefit or an income tax deficiency which is recognized,
accordingly, as income tax benefit or expense in the corresponding consolidated statement of earnings.

Fair Values – Current professional accounting guidance applies to all assets and liabilities that are being measured and
reported on a fair value basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous
market.

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Foreign Currency Translation – The accompanying consolidated financial statements are presented in the currency of the

United States (“US Dollars”). The effects of translating the financial statements of APC from its functional currency (Euros)

into the Company’s reporting currency (US Dollars) are recognized as translation adjustments in accumulated other

comprehensive (loss) income. There are no applicable income taxes. The translation of assets and liabilities to US Dollars is

made at the exchange rate in effect at the consolidated balance sheet date, while equity accounts are translated at historical

rates. The translation of the statement of earnings amounts is made monthly based generally on the average currency

exchange rate for the month. Net foreign currency transaction gains and losses were included in other income in the

consolidated statements of earnings for the years ended January 31, 2020, 2019 and 2018; such amounts were not material.

NOTE 2 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Effective February 1, 2019, the Company adopted ASU 2016-02, “Leases,” as amended, which herein is referred to as “ASC

Topic 842.” Accordingly, operating leases with lease terms of more than twelve (12) months have been presented in the

consolidated balance sheet as of January 31, 2020 by including assets for the right-of-use and liabilities for the obligations

that are created by these leases (see Note 10). The Company elected to apply the transition requirements at the adoption date

rather than at the beginning of the earliest comparative period presented herein. The aggregate amount of right-of-use assets

and the related lease liabilities added to the Company’s consolidated balance sheet as of February 1, 2019 was $1.3 million.

There was no cumulative effect adjustment that had to be made to retained earnings at the adoption date, and prior year

consolidated financial statements were not restated. The new accounting for leases did not have a material effect on the

Company’s operating results for Fiscal 2020.

In 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Measurement of Credit Losses on

Financial Instruments. The scope of this new standard covers, among other provisions, the methods that businesses shall use

to estimate amounts of uncollectible notes and accounts receivable. As subsequently amended, the Company does not expect

that the requirements of this new guidance, which becomes effective for the Company on February 1, 2020, will materially

affect its consolidated financial statements.

There are no other recently issued accounting pronouncements that have not yet been adopted that the Company considers

material to its consolidated financial statements.

NOTE 3 – SPECIAL PURPOSE ENTITIES

Variable Interest Entity

In January 2018, the Company was deemed to be the primary beneficiary of a VIE that is performing the project development

activities related to the planned construction of a new natural gas-fired power plant. Consideration for the Company’s

engineering and financial support includes the right to build the power plant pursuant to a turnkey engineering, procurement

and construction (“EPC”) services contract that has been negotiated and announced. The account balances of the VIE are

included in the consolidated financial statements, including development costs incurred by the VIE during Fiscal 2020 and

Fiscal 2019, and a gain of $2.2 million related to the granting of a utility easement that is included in other income for Fiscal

2020. The total amounts of the project development costs included in the balances for property, plant and equipment as of

January 31, 2020 and 2019 were $6.9 million and $2.1 million, respectively. At January 31, 2020 and 2019, the total amounts

of notes receivable from the VIE and related accrued interest, which amounts are eliminated in consolidation, were $6.0

million and $2.1 million, respectively.

Construction Joint Ventures

GPS assigned its EPC contracts for two natural gas-fired power plants, which were substantially completed during Fiscal

2018, to two separate joint ventures that were formed in order to perform the work for the applicable project and to spread

the bonding risk of each project. Both joint ventures were liquidated in October 2018 and final cash distributions in the

amount of approximately $0.1 million were made to the Company’s joint venture partner. Due to the financial control of

GPS, the accounts of the joint ventures were included in the Company’s consolidated financial statements.

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Revenues from fixed-price contracts, including a portion of estimated gross profit, are recognized as services are provided,

based on costs incurred and estimated total contract costs using the percentage-of-completion method. If, at any time, the

estimate of contract profitability indicates an anticipated loss on a contract, the Company will recognize the total loss in the

reporting period that it is identified and an amount is estimable. Revenues from time-and-materials contracts are recognized

when the related services are provided to the customer.

The carrying value amounts presented in the consolidated balance sheets for the Company’s current assets, which primarily
include cash and cash equivalents, short-term investments, accounts receivable and contract assets, and its current liabilities
are reasonable estimates of their fair values due to the short-term nature of these items. The fair value amounts of reporting
units (as needed for purposes of identifying goodwill impairment losses) are determined by averaging valuations that are
calculated using market-based and income-based approaches deemed appropriate in the circumstances (see Note 7).

Almost all of the Company’s fixed-price contracts are considered to have a single performance obligation. Although multiple

promises to transfer individual goods or services may exist, they are not typically distinct within the context of such contracts

because contract promises included therein are interrelated or the contracts require the Company to perform critical

integration so that the customer receives a completed project. Warranties provided under the Company’s contracts with

customers are assurance-type and are included as elements of the single performance obligations.

The transaction price for a contract represents the value of the contract awarded to the Company that is used to determine

the amount of revenues recognized as of the balance sheet date. It may reflect amounts of variable consideration, which could

be either increases or decreases to the transaction price. These adjustments can be made from time-to-time during the period

of contract performance as circumstances evolve related to such items as changes in the scope and price of contracts, claims,

incentives and liquidated damages.

Contract assets are defined in the new standard to include amounts that represent the rights to receive payment for goods or

services that have been transferred to the project owner, with the rights conditional upon something other than the passage

of time. Contract liabilities are defined in the new standard to include the amounts that reflect obligations to provide goods

or services for which payment has been received. In addition, the definition of accounts receivable was revised to effectively

exclude billed amounts which, pursuant to the terms of the applicable contract, are not paid by project owners until a defined

phase of a contract or project has been completed and accepted. These retained amounts were historically included in

accounts receivable, but are now reflected in contract assets or contract liabilities depending on the net contract position of

the particular contract. Retention amounts and the length of retention periods may vary. Retainage amounts related to active

contracts are considered current regardless of the term of the applicable contract; such amounts are generally collected by

the completion of the applicable contract. The total of amounts retained by project owners under construction contracts at

January 31, 2020 and 2019 were $20.0 million and $15.3 million, respectively.

Income Taxes – Deferred taxes are recognized using enacted tax rates for the effects of temporary differences between the

book and tax bases of assets and liabilities. If management believes that it is more likely than not that some portion or all of

a deferred tax asset will not be realized, the carrying value will be reduced by a valuation allowance.

The Company accounts for uncertain tax positions in accordance with current accounting guidance which prescribes a

recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be

taken, on the income tax returns of the Company. Management evaluates and the Company records the effect of any uncertain

tax position based on the amount that management deems is more likely than not (i.e., greater than a 50% probability) to be

sustained upon examination and ultimate settlement with the tax authorities in the applicable tax jurisdiction (see Note 13).

Interest incurred related to overdue income taxes is included in income tax expense; franchise taxes and income tax penalties

are included in selling, general and administrative expenses.

Share-Based Payments – The Company measures and recognizes compensation expense for all stock options awarded to

employees and directors based upon estimates of fair value determined at the dates of award using an option pricing model.

The compensation expense for each stock option is recognized on a straight-line basis over the corresponding vesting period

which is typically three years. The fair value amounts associated with restricted stock awards, which are determined on the

dates of award, are being recorded in stock compensation expense over the three-year contractual lapsing periods for the

corresponding restrictions. For each exercise of a stock option, the Company determines whether the difference between the

deduction for income tax reporting purposes created at that time and the related compensation expense previously recorded

for financial reporting purposes results in either an excess income tax benefit or an income tax deficiency which is recognized,

accordingly, as income tax benefit or expense in the corresponding consolidated statement of earnings.

Fair Values – Current professional accounting guidance applies to all assets and liabilities that are being measured and

reported on a fair value basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a

liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous

market.

Foreign Currency Translation – The accompanying consolidated financial statements are presented in the currency of the
United States (“US Dollars”). The effects of translating the financial statements of APC from its functional currency (Euros)
into the Company’s reporting currency (US Dollars) are recognized as translation adjustments in accumulated other
comprehensive (loss) income. There are no applicable income taxes. The translation of assets and liabilities to US Dollars is
made at the exchange rate in effect at the consolidated balance sheet date, while equity accounts are translated at historical
rates. The translation of the statement of earnings amounts is made monthly based generally on the average currency
exchange rate for the month. Net foreign currency transaction gains and losses were included in other income in the
consolidated statements of earnings for the years ended January 31, 2020, 2019 and 2018; such amounts were not material.

NOTE 2 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Effective February 1, 2019, the Company adopted ASU 2016-02, “Leases,” as amended, which herein is referred to as “ASC
Topic 842.” Accordingly, operating leases with lease terms of more than twelve (12) months have been presented in the
consolidated balance sheet as of January 31, 2020 by including assets for the right-of-use and liabilities for the obligations
that are created by these leases (see Note 10). The Company elected to apply the transition requirements at the adoption date
rather than at the beginning of the earliest comparative period presented herein. The aggregate amount of right-of-use assets
and the related lease liabilities added to the Company’s consolidated balance sheet as of February 1, 2019 was $1.3 million.
There was no cumulative effect adjustment that had to be made to retained earnings at the adoption date, and prior year
consolidated financial statements were not restated. The new accounting for leases did not have a material effect on the
Company’s operating results for Fiscal 2020.

In 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Measurement of Credit Losses on
Financial Instruments. The scope of this new standard covers, among other provisions, the methods that businesses shall use
to estimate amounts of uncollectible notes and accounts receivable. As subsequently amended, the Company does not expect
that the requirements of this new guidance, which becomes effective for the Company on February 1, 2020, will materially
affect its consolidated financial statements.

There are no other recently issued accounting pronouncements that have not yet been adopted that the Company considers
material to its consolidated financial statements.

NOTE 3 – SPECIAL PURPOSE ENTITIES

Variable Interest Entity

In January 2018, the Company was deemed to be the primary beneficiary of a VIE that is performing the project development
activities related to the planned construction of a new natural gas-fired power plant. Consideration for the Company’s
engineering and financial support includes the right to build the power plant pursuant to a turnkey engineering, procurement
and construction (“EPC”) services contract that has been negotiated and announced. The account balances of the VIE are
included in the consolidated financial statements, including development costs incurred by the VIE during Fiscal 2020 and
Fiscal 2019, and a gain of $2.2 million related to the granting of a utility easement that is included in other income for Fiscal
2020. The total amounts of the project development costs included in the balances for property, plant and equipment as of
January 31, 2020 and 2019 were $6.9 million and $2.1 million, respectively. At January 31, 2020 and 2019, the total amounts
of notes receivable from the VIE and related accrued interest, which amounts are eliminated in consolidation, were $6.0
million and $2.1 million, respectively.

Construction Joint Ventures

GPS assigned its EPC contracts for two natural gas-fired power plants, which were substantially completed during Fiscal
2018, to two separate joint ventures that were formed in order to perform the work for the applicable project and to spread
the bonding risk of each project. Both joint ventures were liquidated in October 2018 and final cash distributions in the
amount of approximately $0.1 million were made to the Company’s joint venture partner. Due to the financial control of
GPS, the accounts of the joint ventures were included in the Company’s consolidated financial statements.

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NOTE 4 – REVENUES FROM CONTRACTS WITH CUSTOMERS

Variable Consideration

Amounts for contract variations for which the Company has project-owner directive for additional work or other scope
change, but not for the price associated with the corresponding additional effort, are included in the transaction price when
it is considered probable that the applicable costs will be recovered through a modification to the contract price. The effects
of any revision to a transaction price can be determined at any time and they could be material. The Company may include
in the corresponding transaction price a portion of the amount claimed in a dispute that it expects to receive from a project
owner. Once a settlement of the dispute has been reached with the project owner, the transaction price may be revised again
to reflect the final resolution. The aggregate amount of such contract variations included in the transaction prices that were
used to determine project-to-date revenues at January 31, 2020 and 2019, were $20.6 million and $18.8 million, respectively.
Variations related to the Company’s contracts typically represent modifications to the existing contracts and performance
obligations, and do not represent new performance obligations. Actual costs related to any changes in the scope of the
corresponding contract are expensed as they are incurred. Changes to total estimated contract costs and losses, if any, are
reflected in operating results for the period in which they are determined.

The Company’s long-term contracts typically have schedule dates and other performance objectives that if not achieved
could subject the Company to liquidated damages. These contract requirements generally relate to specified activities that
must be completed by an established date or by the achievement of a specified level of output or efficiency. Each applicable
contract defines the conditions under which a project owner may be entitled to liquidated damages. At the outset of each of
the Company’s contracts, the potential amounts of liquidated damages typically are not constrained, or subtracted, from the
transaction price as the Company believes that it has included activities in its contract plan, and the associated costs, that will
be effective in preventing such damages. Of course, circumstances may change as the Company executes the corresponding
contract. The transaction price is reduced by an applicable amount when the Company no longer considers it probable that a
future reversal of revenues will not occur when the matter is resolved. The Company considers potential liquidated damages,
the costs of other related items and potential mitigating factors in determining the adequacy of its regularly updated estimates
of the amounts of gross profit expected to be earned on active projects.

In other cases, the Company may have the grounds to assert liquidated damages against subcontractors, suppliers, project
owners or other parties related to a project. Such circumstances may arise when the Company’s activities and progress are
adversely affected by delayed or damaged materials, challenges with equipment performance or other events out of the
Company’s control where the Company has rights to recourse, typically in the form of liquidated damages. In general, the
Company does not adjust the corresponding contract accounting until it is probable that the favorable cost relief will be
realized. Such adjustments have been and could be material.

The Company records adjustments to revenues and profits on contracts, including those associated with contract variations
and estimated cost changes, using a cumulative catch-up method. Under this method, the impact of an adjustment to the
amount of revenues recognized to date is recorded in the period that the adjustment is identified. Estimated variable
consideration amounts are determined by the Company based primarily on the single most likely amount in the range of
possible consideration amounts. Revenues and profits in future periods of contract performance are recognized using the
adjusted amounts of transaction price and estimated contract costs.

Accounting for a Loss Contract

In its Form 10-K Annual Report for the year ended January 31, 2019, the Company disclosed that APC was completing a
power-plant construction project in the UK that had encountered significant operational and contractual challenges, and that
the consolidated operating results for the year ended January 31, 2019 reflected unfavorable gross profit adjustments related
to this project. The disclosure explained that the project progress was behind the schedule originally established for the job
and warned that the project may continue to impact consolidated operating results negatively until it reaches completion.

Subsequent to the release of the Company’s consolidated financial statements for Fiscal 2019, APC’s estimates of the
unfavorable financial impacts of the difficulties on this particular project located in Teesside, England (the “TeesREP”
project) escalated substantially. APC then conducted new comprehensive reviews of the remaining contract work, prepared
new timelines for the completion of the project and assessed other factors. Based on the completed analyses that have been
updated multiple times through Fiscal 2020, management expects that the forecasted costs for APC at contract completion
will exceed projected revenues by approximately $33.6 million.

The total amount of the expected loss on this project has been reflected in the consolidated financial statements for Fiscal

2020. In addition, an effect of changes that the Company made during Fiscal 2020 to transaction prices and to estimates of

the costs-to-complete active contracts, including changes primarily related to the loss contract, was a net reversal of $1.4

million in revenues that were recognized during Fiscal 2019. The amount of the remaining contract loss reserve as of January

31, 2020, approximately $5.8 million, was included in accrued expenses in the accompanying consolidated balance sheet.

The total amounts of accounts receivable and contract assets related to the TeesREP project and included in the consolidated

balance sheets were $19.2 million as of January 31, 2020 and $32.9 million as of January 31, 2019.

During the fourth quarter of Fiscal 2020, APC and its customer, the engineering, procurement and construction services

contractor on the TeesREP project, agreed to operational and commercial terms for the completion of the project. This

framework generally addresses project schedule, payment terms, scope, performance guarantees and other terms and

conditions for reaching substantial completion of APC’s portion of the total project by mid-2020. The framework does not

resolve significant past commercial differences which may have to be addressed through applicable dispute resolution

mechanisms. While management was disappointed that a global settlement of past commercial differences could not be

achieved at the same time, management believes that it is in the Company’s best interests to complete the TeesREP project

while the Company continues efforts to settle them. Currently, it is not possible to predict precisely how, when and on what

terms (if any) the past commercial differences will be resolved. The Company continues to reserve its rights under the

contract.

Remaining Unsatisfied Performance Obligations (“RUPO”)

The amount of RUPO represents the unrecognized revenue value of active contracts with customers as determined under

ASC Topic 606. Increases to RUPO during a reporting period represent the transaction prices associated with new contracts,

as well as additions to the transaction prices of existing contracts. The amounts of such changes may vary significantly each

reporting period based on the timing of major new contract awards and the occurrence and assessment of contract variations.

At January 31, 2020, the Company had RUPO of $781.4 million. The largest portion of RUPO at any date usually relates to

service contracts with typical performance durations of 2 to 3 years. However, the length of certain significant construction

projects may exceed three years.

The Company estimates that approximately 39% of the RUPO amount at January 31, 2020 will be included in the amount

of consolidated revenues that will be recognized during the fiscal year ending January 31, 2021. Most of the remaining

amount of the RUPO at January 31, 2020 is expected to be recognized in revenues over the following two fiscal years. It is

important to understand that the amounts of consolidated revenues that the Company expects to report for each of the next

three fiscal years exceeds the portions of RUPO at January 31, 2020 that it anticipates recognizing during each of the years.

Revenues for future periods will also include amounts related to customer contracts started or awarded subsequent to January

31, 2020. It is also important to note that estimates may be changed in the future and that cancellations, deferrals, scope

adjustments may occur related to work included in RUPO at January 31, 2020. Accordingly, RUPO may be adjusted to

reflect project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations, and project deferrals,

or to revise estimates, as their effects become known. Such adjustments may materially reduce future revenues below

Company estimates.

Disaggregation of Revenues

The following table presents consolidated revenues for Fiscal 2020, Fiscal 2019 and Fiscal 2018, disaggregated by the

geographic area where the work was performed:

United States

United Kingdom

Republic of Ireland

Other

2020

2019

2018

$ 169,299

$ 371,609

$ 870,029

49,028

20,342

328

81,319

28,352

873

12,244

10,542

—

Consolidated Revenues

$ 238,997

$ 482,153

$ 892,815

Each year, the majority of consolidated revenues are recognized pursuant to fixed-price contracts with most of the remaining

portions earned pursuant to time and material contracts. Consolidated revenues are disaggregated by reportable segment in

Note 16 to the consolidated financial statements.

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NOTE 4 – REVENUES FROM CONTRACTS WITH CUSTOMERS

Variable Consideration

Amounts for contract variations for which the Company has project-owner directive for additional work or other scope

change, but not for the price associated with the corresponding additional effort, are included in the transaction price when

it is considered probable that the applicable costs will be recovered through a modification to the contract price. The effects

of any revision to a transaction price can be determined at any time and they could be material. The Company may include

in the corresponding transaction price a portion of the amount claimed in a dispute that it expects to receive from a project

owner. Once a settlement of the dispute has been reached with the project owner, the transaction price may be revised again

to reflect the final resolution. The aggregate amount of such contract variations included in the transaction prices that were

used to determine project-to-date revenues at January 31, 2020 and 2019, were $20.6 million and $18.8 million, respectively.

Variations related to the Company’s contracts typically represent modifications to the existing contracts and performance

obligations, and do not represent new performance obligations. Actual costs related to any changes in the scope of the

corresponding contract are expensed as they are incurred. Changes to total estimated contract costs and losses, if any, are

reflected in operating results for the period in which they are determined.

The Company’s long-term contracts typically have schedule dates and other performance objectives that if not achieved

could subject the Company to liquidated damages. These contract requirements generally relate to specified activities that

must be completed by an established date or by the achievement of a specified level of output or efficiency. Each applicable

contract defines the conditions under which a project owner may be entitled to liquidated damages. At the outset of each of

the Company’s contracts, the potential amounts of liquidated damages typically are not constrained, or subtracted, from the

transaction price as the Company believes that it has included activities in its contract plan, and the associated costs, that will

be effective in preventing such damages. Of course, circumstances may change as the Company executes the corresponding

contract. The transaction price is reduced by an applicable amount when the Company no longer considers it probable that a

future reversal of revenues will not occur when the matter is resolved. The Company considers potential liquidated damages,

the costs of other related items and potential mitigating factors in determining the adequacy of its regularly updated estimates

of the amounts of gross profit expected to be earned on active projects.

In other cases, the Company may have the grounds to assert liquidated damages against subcontractors, suppliers, project

owners or other parties related to a project. Such circumstances may arise when the Company’s activities and progress are

adversely affected by delayed or damaged materials, challenges with equipment performance or other events out of the

Company’s control where the Company has rights to recourse, typically in the form of liquidated damages. In general, the

Company does not adjust the corresponding contract accounting until it is probable that the favorable cost relief will be

realized. Such adjustments have been and could be material.

The Company records adjustments to revenues and profits on contracts, including those associated with contract variations

and estimated cost changes, using a cumulative catch-up method. Under this method, the impact of an adjustment to the

amount of revenues recognized to date is recorded in the period that the adjustment is identified. Estimated variable

consideration amounts are determined by the Company based primarily on the single most likely amount in the range of

possible consideration amounts. Revenues and profits in future periods of contract performance are recognized using the

adjusted amounts of transaction price and estimated contract costs.

Accounting for a Loss Contract

In its Form 10-K Annual Report for the year ended January 31, 2019, the Company disclosed that APC was completing a

power-plant construction project in the UK that had encountered significant operational and contractual challenges, and that

the consolidated operating results for the year ended January 31, 2019 reflected unfavorable gross profit adjustments related

to this project. The disclosure explained that the project progress was behind the schedule originally established for the job

and warned that the project may continue to impact consolidated operating results negatively until it reaches completion.

Subsequent to the release of the Company’s consolidated financial statements for Fiscal 2019, APC’s estimates of the

unfavorable financial impacts of the difficulties on this particular project located in Teesside, England (the “TeesREP”

project) escalated substantially. APC then conducted new comprehensive reviews of the remaining contract work, prepared

new timelines for the completion of the project and assessed other factors. Based on the completed analyses that have been

updated multiple times through Fiscal 2020, management expects that the forecasted costs for APC at contract completion

will exceed projected revenues by approximately $33.6 million.

The total amount of the expected loss on this project has been reflected in the consolidated financial statements for Fiscal
2020. In addition, an effect of changes that the Company made during Fiscal 2020 to transaction prices and to estimates of
the costs-to-complete active contracts, including changes primarily related to the loss contract, was a net reversal of $1.4
million in revenues that were recognized during Fiscal 2019. The amount of the remaining contract loss reserve as of January
31, 2020, approximately $5.8 million, was included in accrued expenses in the accompanying consolidated balance sheet.
The total amounts of accounts receivable and contract assets related to the TeesREP project and included in the consolidated
balance sheets were $19.2 million as of January 31, 2020 and $32.9 million as of January 31, 2019.

During the fourth quarter of Fiscal 2020, APC and its customer, the engineering, procurement and construction services
contractor on the TeesREP project, agreed to operational and commercial terms for the completion of the project. This
framework generally addresses project schedule, payment terms, scope, performance guarantees and other terms and
conditions for reaching substantial completion of APC’s portion of the total project by mid-2020. The framework does not
resolve significant past commercial differences which may have to be addressed through applicable dispute resolution
mechanisms. While management was disappointed that a global settlement of past commercial differences could not be
achieved at the same time, management believes that it is in the Company’s best interests to complete the TeesREP project
while the Company continues efforts to settle them. Currently, it is not possible to predict precisely how, when and on what
terms (if any) the past commercial differences will be resolved. The Company continues to reserve its rights under the
contract.

Remaining Unsatisfied Performance Obligations (“RUPO”)

The amount of RUPO represents the unrecognized revenue value of active contracts with customers as determined under
ASC Topic 606. Increases to RUPO during a reporting period represent the transaction prices associated with new contracts,
as well as additions to the transaction prices of existing contracts. The amounts of such changes may vary significantly each
reporting period based on the timing of major new contract awards and the occurrence and assessment of contract variations.
At January 31, 2020, the Company had RUPO of $781.4 million. The largest portion of RUPO at any date usually relates to
service contracts with typical performance durations of 2 to 3 years. However, the length of certain significant construction
projects may exceed three years.

The Company estimates that approximately 39% of the RUPO amount at January 31, 2020 will be included in the amount
of consolidated revenues that will be recognized during the fiscal year ending January 31, 2021. Most of the remaining
amount of the RUPO at January 31, 2020 is expected to be recognized in revenues over the following two fiscal years. It is
important to understand that the amounts of consolidated revenues that the Company expects to report for each of the next
three fiscal years exceeds the portions of RUPO at January 31, 2020 that it anticipates recognizing during each of the years.
Revenues for future periods will also include amounts related to customer contracts started or awarded subsequent to January
31, 2020. It is also important to note that estimates may be changed in the future and that cancellations, deferrals, scope
adjustments may occur related to work included in RUPO at January 31, 2020. Accordingly, RUPO may be adjusted to
reflect project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations, and project deferrals,
or to revise estimates, as their effects become known. Such adjustments may materially reduce future revenues below
Company estimates.

Disaggregation of Revenues

The following table presents consolidated revenues for Fiscal 2020, Fiscal 2019 and Fiscal 2018, disaggregated by the
geographic area where the work was performed:

United States
United Kingdom
Republic of Ireland
Other

Consolidated Revenues

2020
$ 169,299
49,028
20,342
328
$ 238,997

2019
$ 371,609
81,319
28,352
873
$ 482,153

2018
$ 870,029
12,244
10,542
—
$ 892,815

Each year, the majority of consolidated revenues are recognized pursuant to fixed-price contracts with most of the remaining
portions earned pursuant to time and material contracts. Consolidated revenues are disaggregated by reportable segment in
Note 16 to the consolidated financial statements.

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- 65 -

NOTE 5 – CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

At January 31, 2020 and 2019, a significant amount of cash and cash equivalents was invested in a mutual fund with net
assets invested in high-quality money market instruments. Such investments include US Treasury obligations; obligations of
US government agencies, authorities, instrumentalities or sponsored enterprises; and repurchase agreements secured by US
government obligations. The Company considers all liquid investments with original maturities of three months or less at
the time of purchase to be cash equivalents.

Short-term investments as of January 31, 2020 and 2019 consisted solely of certificates of deposit purchased from Bank of
America (the “Bank”) with weighted average initial maturities of 165 days and 250 days, respectively (the “CDs”). The
Company has the intent and ability to hold the CDs until they mature, and they are carried at cost plus accrued interest which
approximates fair value. The total carrying value amounts as of January 31, 2020 and 2019 included accrued interest of $0.5
million and $1.2 million, respectively. Interest income is recorded when earned and is included in other income. As of January
31, 2020 and 2019, the weighted average annual interest rates of the CDs were 1.8% and 2.6%, respectively. In addition, the
Company has a substantial portion of its cash on deposit in the US at the Bank in excess of federally insured limits.
Management does not believe that the combined amount of the CD investments and the cash deposited with the Bank
represents a material risk. The Company also maintain certain Euro-based bank accounts in the Republic of Ireland and
certain pound sterling-based bank accounts in the UK in support of the operations of APC.

NOTE 6 – ACCOUNTS AND NOTES RECEIVABLE

The Company generally extends credit to a customer based on an evaluation of the customer’s financial condition without
requiring collateral. Exposure to losses on accounts and notes receivable is expected to differ by customer due to the varying
financial condition of each customer. The Company monitors its exposure to credit losses and maintains an allowance for
anticipated losses considered necessary under the circumstances based on a review of each currently outstanding account
and considers its historical experience with customers having overdue amounts. As of January 31, 2020, there were
outstanding invoices, with balances included in accounts receivable and contract assets in the aggregate amount of $24.5
million, for which the collection time will most likely depend on the resolution of the outstanding legal dispute between the
parties (see Note 11). At January 31, 2020 and 2019, the balances of the Company’s allowance for uncollectible accounts
were insignificant.

The amounts of the provision for uncollectible accounts and notes receivable were $0.2 million and $0.3 million for Fiscal
2019 and 2018, respectively, and were included in selling, general and administrative expenses for the corresponding year.
The amount for Fiscal 2020 was immaterial.

NOTE 7 – PURCHASED INTANGIBLE ASSETS

Primarily due to the significant reduction of the fair value of the business of APC deemed to have occurred as a result of the
substantial contract loss discussed in Note 4 above, the Company recorded an impairment loss during Fiscal 2020 in the
amount of $2.1 million, which was the remaining balance of goodwill associated with APC.

The Company performed a goodwill impairment assessment for TRC as of November 1, 2019 with the assistance of a
professional business valuation firm. It was determined that the fair value of TRC was less than the corresponding carrying
value and an additional goodwill impairment loss of approximately $2.8 million was recorded (see the following paragraph).
The fair value amount for TRC determined as of November 1, 2019 reflected a weighting of results determined using various
business valuation approaches. As in the past, the majority of the weighted average fair value was based on the result of
modeling discounted future net-after-tax cash flows of the business. The discounted cash flows of TRC were based on a
management forecast of operating results. The forecast reflects an average annual growth in revenues of approximately 4.7%
over the next seven years, with a terminal value annual growth rate of 3%, with forecasted annual earnings before interest
and taxes increasing from 4.8% of revenues for the year ending January 31, 2021 to 6.5% of revenues by the year ending
January 31, 2027.

The goodwill impairment assessments performed for TRC as of November 1, 2018 and 2017 determined that the fair value
of TRC was less than the corresponding carrying value at each date, and goodwill impairment losses of approximately $1.5
million $0.6 million were recorded for Fiscal 2019 and Fiscal 2018, respectively. The fair value amounts for TRC determined
at each date reflected a weighting of results determined using various business valuation approaches. The majority of the
weighted average fair value was based on the result of modeling discounted future net-after-tax cash flows of the business
that were forecasted at the time.

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- 66 -

Although the Company believes that the projected financial results as of November 1, 2019 are reasonable considering recent

operating and current business prospects, any future results that would compare unfavorably with the projected results could

result in additional material goodwill impairment losses. The results of the impairment assessment performed for Fiscal 2020

indicate that TRC was unable to achieve forecasts made in prior years and that working capital requirements have increased.

No events related to TRC occurred during the fourth quarter of Fiscal 2020 that caused the Company to perform a subsequent

impairment assessment.

The changes in the balances of goodwill for Fiscal 2020, Fiscal 2019 and Fiscal 2018 were as follows:

Balances, February 1, 2017

Impairment loss

Balances, January 31, 2018

Impairment loss

Balances, January 31, 2019

Impairment losses

Balances, January 31, 2020

GPS

$ 18,476

—

18,476

—

18,476

—

$ 18,476

TRC

$ 14,365

(584)

13,781

(1,491)

12,290

(2,823)

$ 9,467

APC

$ 2,072

—

2,072

—

2,072

(2,072)

Totals

$ 34,913

(584)

34,329

(1,491)

32,838

(4,895)

$ —

$ 27,943

The impairment losses recorded by the Company since Fiscal 2016, the year that both APC and TRC were acquired,

represents 34% of the goodwill amount originally established for TRC and 100% of the original amount of goodwill related

to APC. For income tax reporting purposes, goodwill related to acquisitions in the approximate amount of $16.4 million is

being amortized on a straight-line basis over periods of 15 years. The other amounts of the Company’s goodwill are not

amortizable for income tax reporting purposes.

Purchased intangible assets, other than goodwill, consisted of the following elements as of January 31, 2020.

Trade names

TRC

GPS

SMC

Totals

Process certifications

Customer relationships

15 years

—

7 years

4-10 years

4,499

3,643

181

1,897

1,346

Estimated

Useful Life

Gross

Accumulated

Amounts

Amortization

Net

Amounts

3,249

2020

1,250

3,193

181

1,129

812

6,565

2019

Net

Amounts

3,549

694

181

1,039

674

6,137

450

—

768

534

11,566

5,001

The Company determined the fair values of the trade names using a relief-from-royalty methodology. The Company believes

that the useful lives of the trade names for GPS and TRC represent the remaining number of years that such intangibles are

expected to contribute to future cash flows. In order to value the process certifications of TRC, the Company applied a

reproduction cost method that required the estimation of the costs to replace the assets with certifications that would have

the same functionality or utility as the acquired assets. The balance for customer relationships as of January 31, 2020 is

associated primarily with TRC; the corresponding gross amount was determined at the time of the acquisition of TRC by

discounting cash flows expected from existing significant customer relationships. There were no additions to other purchased

intangible assets during Fiscal 2020, Fiscal 2019 and Fiscal 2018, nor were there any impairment losses related to the assets

for those years. Amortization expense related to purchased intangible assets for Fiscal 2020, 2019 and 2018 were $1.1

million, $1.0 million and $1.0 million, respectively.

The future amounts of amortization related to purchased intangibles are presented below for the years ending January 31,

2021

2022

2023

2024

2025

Thereafter

Total

905

870

617

392

391

1,826

5,001

- 67 -

NOTE 5 – CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

At January 31, 2020 and 2019, a significant amount of cash and cash equivalents was invested in a mutual fund with net

assets invested in high-quality money market instruments. Such investments include US Treasury obligations; obligations of

US government agencies, authorities, instrumentalities or sponsored enterprises; and repurchase agreements secured by US

government obligations. The Company considers all liquid investments with original maturities of three months or less at

the time of purchase to be cash equivalents.

Short-term investments as of January 31, 2020 and 2019 consisted solely of certificates of deposit purchased from Bank of

America (the “Bank”) with weighted average initial maturities of 165 days and 250 days, respectively (the “CDs”). The

Company has the intent and ability to hold the CDs until they mature, and they are carried at cost plus accrued interest which

approximates fair value. The total carrying value amounts as of January 31, 2020 and 2019 included accrued interest of $0.5

million and $1.2 million, respectively. Interest income is recorded when earned and is included in other income. As of January

31, 2020 and 2019, the weighted average annual interest rates of the CDs were 1.8% and 2.6%, respectively. In addition, the

Company has a substantial portion of its cash on deposit in the US at the Bank in excess of federally insured limits.

Management does not believe that the combined amount of the CD investments and the cash deposited with the Bank

represents a material risk. The Company also maintain certain Euro-based bank accounts in the Republic of Ireland and

certain pound sterling-based bank accounts in the UK in support of the operations of APC.

NOTE 6 – ACCOUNTS AND NOTES RECEIVABLE

The Company generally extends credit to a customer based on an evaluation of the customer’s financial condition without

requiring collateral. Exposure to losses on accounts and notes receivable is expected to differ by customer due to the varying

financial condition of each customer. The Company monitors its exposure to credit losses and maintains an allowance for

anticipated losses considered necessary under the circumstances based on a review of each currently outstanding account

and considers its historical experience with customers having overdue amounts. As of January 31, 2020, there were

outstanding invoices, with balances included in accounts receivable and contract assets in the aggregate amount of $24.5

million, for which the collection time will most likely depend on the resolution of the outstanding legal dispute between the

parties (see Note 11). At January 31, 2020 and 2019, the balances of the Company’s allowance for uncollectible accounts

were insignificant.

The amounts of the provision for uncollectible accounts and notes receivable were $0.2 million and $0.3 million for Fiscal

2019 and 2018, respectively, and were included in selling, general and administrative expenses for the corresponding year.

The amount for Fiscal 2020 was immaterial.

NOTE 7 – PURCHASED INTANGIBLE ASSETS

Primarily due to the significant reduction of the fair value of the business of APC deemed to have occurred as a result of the

substantial contract loss discussed in Note 4 above, the Company recorded an impairment loss during Fiscal 2020 in the

amount of $2.1 million, which was the remaining balance of goodwill associated with APC.

The Company performed a goodwill impairment assessment for TRC as of November 1, 2019 with the assistance of a

professional business valuation firm. It was determined that the fair value of TRC was less than the corresponding carrying

value and an additional goodwill impairment loss of approximately $2.8 million was recorded (see the following paragraph).

The fair value amount for TRC determined as of November 1, 2019 reflected a weighting of results determined using various

business valuation approaches. As in the past, the majority of the weighted average fair value was based on the result of

modeling discounted future net-after-tax cash flows of the business. The discounted cash flows of TRC were based on a

management forecast of operating results. The forecast reflects an average annual growth in revenues of approximately 4.7%

over the next seven years, with a terminal value annual growth rate of 3%, with forecasted annual earnings before interest

and taxes increasing from 4.8% of revenues for the year ending January 31, 2021 to 6.5% of revenues by the year ending

January 31, 2027.

The goodwill impairment assessments performed for TRC as of November 1, 2018 and 2017 determined that the fair value

of TRC was less than the corresponding carrying value at each date, and goodwill impairment losses of approximately $1.5

million $0.6 million were recorded for Fiscal 2019 and Fiscal 2018, respectively. The fair value amounts for TRC determined

at each date reflected a weighting of results determined using various business valuation approaches. The majority of the

weighted average fair value was based on the result of modeling discounted future net-after-tax cash flows of the business

that were forecasted at the time.

- 66 -

Although the Company believes that the projected financial results as of November 1, 2019 are reasonable considering recent
operating and current business prospects, any future results that would compare unfavorably with the projected results could
result in additional material goodwill impairment losses. The results of the impairment assessment performed for Fiscal 2020
indicate that TRC was unable to achieve forecasts made in prior years and that working capital requirements have increased.
No events related to TRC occurred during the fourth quarter of Fiscal 2020 that caused the Company to perform a subsequent
impairment assessment.

The changes in the balances of goodwill for Fiscal 2020, Fiscal 2019 and Fiscal 2018 were as follows:

Balances, February 1, 2017

Impairment loss

Balances, January 31, 2018

Impairment loss

Balances, January 31, 2019

Impairment losses

Balances, January 31, 2020

GPS
$ 18,476
—
18,476
—
18,476
—
$ 18,476

TRC
$ 14,365
(584)
13,781
(1,491)
12,290
(2,823)
$ 9,467

APC
$ 2,072
—
2,072
—
2,072
(2,072)
$ —

Totals

$ 34,913
(584)
34,329
(1,491)
32,838
(4,895)
$ 27,943

The impairment losses recorded by the Company since Fiscal 2016, the year that both APC and TRC were acquired,
represents 34% of the goodwill amount originally established for TRC and 100% of the original amount of goodwill related
to APC. For income tax reporting purposes, goodwill related to acquisitions in the approximate amount of $16.4 million is
being amortized on a straight-line basis over periods of 15 years. The other amounts of the Company’s goodwill are not
amortizable for income tax reporting purposes.

Purchased intangible assets, other than goodwill, consisted of the following elements as of January 31, 2020.

Estimated
Useful Life

Gross
Amounts

Accumulated
Amortization

Net
Amounts

2020

Trade names
TRC
GPS
SMC

Process certifications
Customer relationships

Totals

15 years
15 years
—
7 years
4-10 years

4,499
3,643
181
1,897
1,346
11,566

1,250
3,193
181
1,129
812
6,565

3,249
450
—
768
534
5,001

2019
Net
Amounts

3,549
694
181
1,039
674
6,137

The Company determined the fair values of the trade names using a relief-from-royalty methodology. The Company believes
that the useful lives of the trade names for GPS and TRC represent the remaining number of years that such intangibles are
expected to contribute to future cash flows. In order to value the process certifications of TRC, the Company applied a
reproduction cost method that required the estimation of the costs to replace the assets with certifications that would have
the same functionality or utility as the acquired assets. The balance for customer relationships as of January 31, 2020 is
associated primarily with TRC; the corresponding gross amount was determined at the time of the acquisition of TRC by
discounting cash flows expected from existing significant customer relationships. There were no additions to other purchased
intangible assets during Fiscal 2020, Fiscal 2019 and Fiscal 2018, nor were there any impairment losses related to the assets
for those years. Amortization expense related to purchased intangible assets for Fiscal 2020, 2019 and 2018 were $1.1
million, $1.0 million and $1.0 million, respectively.

The future amounts of amortization related to purchased intangibles are presented below for the years ending January 31,

2021
2022
2023
2024
2025
Thereafter
Total

905
870
617
392
391
1,826
5,001

- 67 -
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NOTE 8 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following at January 31, 2020 and 2019:

Land and improvements
Building and improvements
Furniture, machinery and equipment
Trucks and other vehicles
Project development costs (Note 3)

Less - accumulated depreciation

Property, plant and equipment, net

2020
$ 863
5,696
18,900
5,213
6,853
37,525
14,986
$ 22,539

2019

$ 863
6,000
17,779
4,918
2,149
31,709
11,931
$ 19,778

Project development costs have been incurred by the Company’s consolidated variable interest entity in preparation for
building a new gas-fired power plant. Such costs include engineering costs, professional fees and permitting fees.
Depreciation for property, plant and equipment was $3.5 million, $3.4 million and $2.8 million for Fiscal 2020, 2019 and
2018, respectively, which amounts were charged substantially to selling, general and administrative expenses in each year.
The costs of maintenance and repairs were $3.4 million, $3.1 million and $2.4 million for Fiscal 2020, 2019 and 2018,
respectively, which amounts were charged substantially to selling, general and administrative expenses each year as well.

NOTE 9 – FINANCING ARRANGEMENTS

The Company maintains financing arrangements with the Bank that are described in an Amended and Restated Replacement
Credit Agreement (the “Credit Agreement”), dated May 15, 2017. The Credit Agreement provides a revolving loan with a
maximum borrowing amount of $50.0 million that is available until May 31, 2021 with interest at the 30-day London
Interbank Offered Rate (“LIBOR”) plus 2.0%. The Company may also use the borrowing ability to cover other credit
instruments issued by the Bank for the Company’s use in the ordinary course of business. As of January 31, 2020 and 2019,
the Company had credit outstanding under the Credit Agreement, but no borrowings, in the approximate amounts of $9.9
million and $15.2 million, respectively; approximately 80% of the outstanding amount as of January 31, 2020 relates to the
TeesREP project (see Note 4). Additionally, in support of the current project development activities of a VIE (see Note 3),
the Bank issued a letter of credit, outside the scope of the Credit Agreement, in the amount of $3.4 million for which the
Company has provided cash collateral.

The Company has pledged the majority of its assets to secure its financing arrangements. The Bank’s consent is not required
for acquisitions, divestitures, cash dividends or significant investments as long as certain conditions are met. The Bank
requires that the Company comply with certain financial covenants at its fiscal year-end and at each of its fiscal quarter-ends.
The Credit Agreement also includes other terms, covenants and events of default that are customary for a credit facility of
its size and nature. As of January 31, 2020 and 2019, the Company was in compliance with the financial covenants.

NOTE 10 – COMMITMENTS

Leases

The Company determines if a contract is or contains a lease at inception or upon modification of the contract. A contract is
or contains a lease if it conveys the right to control the use of an identified asset for a period in exchange for consideration.
Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic
benefits from the use of the asset and (b) the right to direct the use of the asset. The Company has made the election, as
permitted by the new standard, not to apply the new accounting to those leases with terms of twelve (12) months or less and
that do not include options to purchase the underlying assets that the Company is reasonably certain to exercise. Finally, the
Company elected to utilize the package of permitted practical expedients that allowed entities to not reassess whether any
existing contracts were or contained leases.

The Company’s operating leases primarily cover office space that expire on various dates through May 2024; it has no
finance leases. Most of the equipment used by the Company in the performance of its construction services contracts is
rented, with periods of expected usage less than one year, or owned. Certain leases contain renewal options, which are
included in expected lease terms if they are reasonably certain of being exercised by the Company.

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Other equipment leases are embedded in broader agreements with subcontractors or construction equipment suppliers. None

of the operating leases include significant amounts for incentives, rent holidays or price escalations. Under certain lease

agreements, the Company is obligated to pay property taxes, insurance, and maintenance costs.

Operating lease right-of-use assets and associated lease liabilities are recognized in the balance sheet at the lease

commencement date based on the present value of future minimum lease payments to be made over the expected lease term.

As the implicit rate is not determinable in most of the Company’s leases, management uses the Company’s incremental

borrowing rate (LIBOR plus 2%) at the commencement date in determining the present value of future payments. The

expected lease term includes an option to extend or to terminate the lease when it is reasonably certain the Company will

exercise such option. The aggregate amount of new right-of-use assets and the related lease liabilities added to the Company’s

consolidated balance sheet during Fiscal 2020 was approximately $2.0 million.

Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term. Operating

lease expense for Fiscal 2020 and operating lease payments made during Fiscal 2020 were both approximately $1.0 million.

For operating leases as of January 31, 2020, the weighted average lease term was 33 months and the weighted average

discount rate was 4.1%. The following is a schedule of future minimum lease payments for the operating leases that were

recognized in the consolidated balance sheet as of January 31, 2020:

Years Ending January 31,

2021

2022

2023

2024

2025

Total lease payments

Less interest portion

Present value of lease payments

Less current portion (included in accrued expenses)

Non-current portion

$ 636

$ 1,239

639

246

179

2,328

118

2,210

1,574

The future minimum lease payments presented above include amounts due under a long-term lease covering the primary

offices and plant for TRC with the founder and current chief executive officer of TRC at an annual rate of $0.3 million

through April 30, 2021, as well as amounts due under a long-term lease covering the primary offices for APC with several

of its current and former executives at an annual rate of less than $0.1 million through December 31, 2023.

The Company also uses equipment and occupies other facilities under short-term rental agreements. Rent expense amounts

incurred under operating leases and short-term rental agreements (including portions of the lease expense amount disclosed

above) and included in costs of revenues were $4.0 million, $11.4 million and $20.3 million for Fiscal 2020, 2019 and 2018.

Rent expense amounts incurred under these types of arrangements (including portions of the lease expense amount disclosed

above) and included in selling, general and administrative expenses were approximately $0.7 million for each year.

Performance Bonds and Guarantees

In the normal course of business and for certain major projects, the Company may be required to obtain surety or performance

bonding, to provide parent company guarantees, or to cause the issuance of letters of credit (or some combination thereof)

in order to provide performance assurances to clients on behalf of its contractor subsidiaries. As these 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. When sufficient information about

performance claims on guaranteed projects would be available and monetary damages or other costs or losses would be

determined to be probable, the Company would record such guarantee losses. Any amounts that may be required to be paid

in excess of the estimated costs to complete contracts in progress as of January 31, 2020 are not estimable.

Argan has provided a parent company performance guarantee and has caused the Bank to issue certain letters of credit (see

Notes 4 and 9) to Técnicas Reunidas (“TR”), the EPC services contractor on the TeesREP project, on behalf of APC, a major

subcontractor to TR on this project. As of January 31, 2020, the Company has also provided a financial guarantee on behalf

of GPS to an original equipment manufacturer in the amount of $3.6 million in support of business developmental efforts

which did result in the award of an EPC services contract to GPS for the construction of a gas-fired plant project.

- 69 -

NOTE 8 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following at January 31, 2020 and 2019:

Land and improvements

Building and improvements

Furniture, machinery and equipment

Trucks and other vehicles

Project development costs (Note 3)

Less - accumulated depreciation

Property, plant and equipment, net

2020

2019

$ 863

5,696

18,900

5,213

6,853

37,525

14,986

6,000

17,779

4,918

2,149

31,709

11,931

$ 22,539

$ 19,778

Project development costs have been incurred by the Company’s consolidated variable interest entity in preparation for

building a new gas-fired power plant. Such costs include engineering costs, professional fees and permitting fees.

Depreciation for property, plant and equipment was $3.5 million, $3.4 million and $2.8 million for Fiscal 2020, 2019 and

2018, respectively, which amounts were charged substantially to selling, general and administrative expenses in each year.

The costs of maintenance and repairs were $3.4 million, $3.1 million and $2.4 million for Fiscal 2020, 2019 and 2018,

respectively, which amounts were charged substantially to selling, general and administrative expenses each year as well.

NOTE 9 – FINANCING ARRANGEMENTS

The Company maintains financing arrangements with the Bank that are described in an Amended and Restated Replacement

Credit Agreement (the “Credit Agreement”), dated May 15, 2017. The Credit Agreement provides a revolving loan with a

maximum borrowing amount of $50.0 million that is available until May 31, 2021 with interest at the 30-day London

Interbank Offered Rate (“LIBOR”) plus 2.0%. The Company may also use the borrowing ability to cover other credit

instruments issued by the Bank for the Company’s use in the ordinary course of business. As of January 31, 2020 and 2019,

the Company had credit outstanding under the Credit Agreement, but no borrowings, in the approximate amounts of $9.9

million and $15.2 million, respectively; approximately 80% of the outstanding amount as of January 31, 2020 relates to the

TeesREP project (see Note 4). Additionally, in support of the current project development activities of a VIE (see Note 3),

the Bank issued a letter of credit, outside the scope of the Credit Agreement, in the amount of $3.4 million for which the

Company has provided cash collateral.

The Company has pledged the majority of its assets to secure its financing arrangements. The Bank’s consent is not required

for acquisitions, divestitures, cash dividends or significant investments as long as certain conditions are met. The Bank

requires that the Company comply with certain financial covenants at its fiscal year-end and at each of its fiscal quarter-ends.

The Credit Agreement also includes other terms, covenants and events of default that are customary for a credit facility of

its size and nature. As of January 31, 2020 and 2019, the Company was in compliance with the financial covenants.

NOTE 10 – COMMITMENTS

Leases

The Company determines if a contract is or contains a lease at inception or upon modification of the contract. A contract is

or contains a lease if it conveys the right to control the use of an identified asset for a period in exchange for consideration.

Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic

benefits from the use of the asset and (b) the right to direct the use of the asset. The Company has made the election, as

permitted by the new standard, not to apply the new accounting to those leases with terms of twelve (12) months or less and

that do not include options to purchase the underlying assets that the Company is reasonably certain to exercise. Finally, the

Company elected to utilize the package of permitted practical expedients that allowed entities to not reassess whether any

existing contracts were or contained leases.

The Company’s operating leases primarily cover office space that expire on various dates through May 2024; it has no

finance leases. Most of the equipment used by the Company in the performance of its construction services contracts is

rented, with periods of expected usage less than one year, or owned. Certain leases contain renewal options, which are

included in expected lease terms if they are reasonably certain of being exercised by the Company.

- 68 -

Other equipment leases are embedded in broader agreements with subcontractors or construction equipment suppliers. None
of the operating leases include significant amounts for incentives, rent holidays or price escalations. Under certain lease
agreements, the Company is obligated to pay property taxes, insurance, and maintenance costs.

Operating lease right-of-use assets and associated lease liabilities are recognized in the balance sheet at the lease
commencement date based on the present value of future minimum lease payments to be made over the expected lease term.
As the implicit rate is not determinable in most of the Company’s leases, management uses the Company’s incremental
borrowing rate (LIBOR plus 2%) at the commencement date in determining the present value of future payments. The
expected lease term includes an option to extend or to terminate the lease when it is reasonably certain the Company will
exercise such option. The aggregate amount of new right-of-use assets and the related lease liabilities added to the Company’s
consolidated balance sheet during Fiscal 2020 was approximately $2.0 million.

Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term. Operating
lease expense for Fiscal 2020 and operating lease payments made during Fiscal 2020 were both approximately $1.0 million.
For operating leases as of January 31, 2020, the weighted average lease term was 33 months and the weighted average
discount rate was 4.1%. The following is a schedule of future minimum lease payments for the operating leases that were
recognized in the consolidated balance sheet as of January 31, 2020:

Years Ending January 31,

2021
2022
2023
2024
2025

Total lease payments

Less interest portion
Present value of lease payments
Less current portion (included in accrued expenses)

Non-current portion

$ 1,239
639
246
179
25
2,328
118
2,210
1,574
$ 636

The future minimum lease payments presented above include amounts due under a long-term lease covering the primary
offices and plant for TRC with the founder and current chief executive officer of TRC at an annual rate of $0.3 million
through April 30, 2021, as well as amounts due under a long-term lease covering the primary offices for APC with several
of its current and former executives at an annual rate of less than $0.1 million through December 31, 2023.

The Company also uses equipment and occupies other facilities under short-term rental agreements. Rent expense amounts
incurred under operating leases and short-term rental agreements (including portions of the lease expense amount disclosed
above) and included in costs of revenues were $4.0 million, $11.4 million and $20.3 million for Fiscal 2020, 2019 and 2018.
Rent expense amounts incurred under these types of arrangements (including portions of the lease expense amount disclosed
above) and included in selling, general and administrative expenses were approximately $0.7 million for each year.

Performance Bonds and Guarantees

In the normal course of business and for certain major projects, the Company may be required to obtain surety or performance
bonding, to provide parent company guarantees, or to cause the issuance of letters of credit (or some combination thereof)
in order to provide performance assurances to clients on behalf of its contractor subsidiaries. As these 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. When sufficient information about
performance claims on guaranteed projects would be available and monetary damages or other costs or losses would be
determined to be probable, the Company would record such guarantee losses. Any amounts that may be required to be paid
in excess of the estimated costs to complete contracts in progress as of January 31, 2020 are not estimable.

Argan has provided a parent company performance guarantee and has caused the Bank to issue certain letters of credit (see
Notes 4 and 9) to Técnicas Reunidas (“TR”), the EPC services contractor on the TeesREP project, on behalf of APC, a major
subcontractor to TR on this project. As of January 31, 2020, the Company has also provided a financial guarantee on behalf
of GPS to an original equipment manufacturer in the amount of $3.6 million in support of business developmental efforts
which did result in the award of an EPC services contract to GPS for the construction of a gas-fired plant project.

- 69 -
- 69 -

Warranties

Settled Legal Matters

The Company generally provides assurance-type warranties for work performed under its construction contracts which do
not represent separate performance obligations. The warranties cover defects in equipment, materials, design or
workmanship, and most warranty periods typically run from nine to twenty-four months after the completion of construction
on a particular project. Because of the nature of the Company’s projects, including project owner inspections of the work
both during construction and prior to substantial completion, the Company has not experienced material unexpected warranty
costs in the past. Warranty costs are estimated based on experience with the type of work and any known risks relative to
each completed project. The accruals of liabilities, which are established to cover estimated future warranty costs, are
recorded as the contracted work is performed, and they are included in the amounts of accrued expenses in the consolidated
balances sheets. The liability amounts may be periodically adjusted to reflect changes in the estimated size and number of
expected warranty claims.

Self-Insurance

TRC uses a self-insurance program for exposures related to worker’s compensation and certain employee health insurance
claims. Liabilities in excess of contractually limited amounts are the responsibility of an insurance carrier. Beginning in
calendar year 2017, the employee health benefits for the employees of TRC, which were previously self-insured, are fully
insured.

To the extent that the Company retains the risks for these exposures, including claims incurred but not reported, and for any
loss amounts related to the deductibility clauses included in its other insurance policies, liabilities have been accrued based
upon the Company’s best estimates, with input from legal and insurance advisors. Changes in assumptions, as well as changes
in actual experience, could cause these estimates to change in the near-term. Management believes that reasonably possible
losses, if any, for these matters, to the extent not otherwise disclosed and net of recorded accruals, will not have a material
adverse effect on the Company’s future results of operations, financial position or cash flow. At January 31, 2020 and 2019,
the aggregate amounts established to cover retained losses and remaining self-insured claims were included in the balances
of accrued expenses in the corresponding consolidated balance sheets.

NOTE 11 – LEGAL CONTINGENCIES

In the normal course of business, the Company may also have pending claims and legal proceedings. It is the opinion of
management, based on information available at this time, that there are no current claims and proceedings that could have a
material adverse effect on the Company’s consolidated financial statements except for the outstanding matter described
below.

Outstanding Legal Matter

In January 2019, GPS filed a lawsuit against Exelon West Medway II, LLC and Exelon Generation Company, LLC (together
referred to as “Exelon”) for Exelon’s breach of contract and failure to remedy various conditions which negatively impacted
the schedule and the costs associated with the construction by GPS of a gas-fired power plant for Exelon in Massachusetts.
As a result, the Company believes that Exelon has received the benefits of the construction efforts of GPS and the
corresponding progress made on the project without making payments to GPS for the value received (see Note 6). On March
7, 2019, Exelon provided GPS with a notice intending to terminate the EPC contract under which GPS had been providing
services to Exelon. At that time, the construction project was nearly complete and both of the power generation units included
in the plant had successfully reached first fire. The completion of various prescribed performance tests and the clearance of
punch-list items were the primary tasks necessary to be accomplished by GPS in order to achieve substantial completion of
the power plant. Nevertheless, and among other actions, Exelon provided contractual notice requiring GPS to vacate the
construction site, asserting that GPS had failed to fulfill certain obligations under the contract and was in default, and has
withheld payments from GPS on invoices rendered to Exelon in accordance with the terms of the EPC contract between the
parties.

With vigor, GPS intends to assert its rights under the EPC contract, to pursue the collection from Exelon of amounts owed
under the contract and to defend itself against the allegations that GPS has not performed in accordance with the contract.
During Fiscal 2020, most of the litigation activities have focused on pre-trial preparations by the legal teams. All discovery
is scheduled to close on April 30, 2020.

In another legal matter, GPS was in a dispute with a former subcontractor on one of its power plant construction projects that

was settled pursuant to binding arbitration in June 2018. The arbitration panel awarded approximately $5.2 million, plus

interest of $0.7 million and arbitration fees, to the subcontractor. The substantial portion of the total amount, which was paid

by GPS to the subcontractor in July 2018, was charged to cost of revenues during Fiscal 2019. In connection with the

settlement, the legal claims made by the parties against each other were dismissed with prejudice and without costs to the

parties, all liens filed by the subcontractor related to the project were released, and each party provided the other with a

release from future claims related to this matter.

On February 1, 2016, TRC was sued in Person County, North Carolina, by a subcontractor, PPS Engineers, Inc. (“PPS”),

which also made other claims, in an attempt to force TRC to pay invoices for services rendered in the total amount of $2.3

million. On March 4, 2016, TRC filed responses to the claims of PPS. The amounts invoiced by PPS were accrued by TRC

and the corresponding liability amounts were included in accounts payable in the consolidated balance sheet as January 31,

2018. TRC did not record an account receivable for the amounts it believed were owed to it by PPS. After an attempted

mediation effort was unproductive in resolving the disputes and the litigation process was begun, the parties agreed to a

settlement of all claims made against each other with TRC agreeing to make a payment to PPS in the amount of $0.9 million.

As the total of the previously accrued amounts exceeded the negotiated settlement amount, the Company recorded a gain on

the settlement in the amount of $1.4 million that was included in other income for Fiscal 2019.

NOTE 12 – STOCK-BASED COMPENSATION

The Company’s board of directors may make awards under the 2011 Stock Plan (the “Stock Plan”) to officers, directors and

key employees. Awards may include nonqualified stock options (“NSOs”), incentive stock options (“ISOs”), and restricted

or unrestricted stock. The specific provisions for each award made pursuant to the terms of the Stock Plan are documented

in a written agreement between the Company and the awardee.

All stock options awarded under the Stock 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. Commencing in January 2018,

stock options have been awarded with one-third of each stock option vesting on each of the first three anniversaries of the

corresponding award date. Earlier stock option awards typically became exercisable one year from the date of award. As of

January 31, 2020, there were approximately 1.7 million shares of the Company’s common stock reserved for issuance under

the Stock Plan; this number includes 381,833 shares of common stock available for future awards.

Summaries of stock option activity under the Company’s stock option plans for Fiscal 2020, 2019 and 2018, along with

corresponding weighted average per share amounts, are presented below (shares in thousands):

Exercise

Remaining

Term (years)

7.82

Fair Value

$10.22

Outstanding, February 1, 2017

Outstanding, January 31, 2018

Outstanding, January 31, 2019

Granted

Exercised

Forfeited

Granted

Exercised

Granted

Exercised

Forfeited

Outstanding, January 31, 2020

707

302

(110)

(10)

889

257

1,140

238

(61)

(46)

1,271

(6)

Price

$39.04

$53.49

$28.81

$71.75

$44.83

$40.54

$17.19

$44.01

$44.76

$26.67

$48.47

$44.83

Exercisable, January 31, 2020

823

$45.58

7.91

7.54

7.18

6.20

$11.74

$11.22

$11.06

$11.78

- 70 -
- 70 -

- 71 -

Warranties

Settled Legal Matters

The Company generally provides assurance-type warranties for work performed under its construction contracts which do

not represent separate performance obligations. The warranties cover defects in equipment, materials, design or

workmanship, and most warranty periods typically run from nine to twenty-four months after the completion of construction

on a particular project. Because of the nature of the Company’s projects, including project owner inspections of the work

both during construction and prior to substantial completion, the Company has not experienced material unexpected warranty

costs in the past. Warranty costs are estimated based on experience with the type of work and any known risks relative to

each completed project. The accruals of liabilities, which are established to cover estimated future warranty costs, are

recorded as the contracted work is performed, and they are included in the amounts of accrued expenses in the consolidated

balances sheets. The liability amounts may be periodically adjusted to reflect changes in the estimated size and number of

expected warranty claims.

Self-Insurance

TRC uses a self-insurance program for exposures related to worker’s compensation and certain employee health insurance

claims. Liabilities in excess of contractually limited amounts are the responsibility of an insurance carrier. Beginning in

calendar year 2017, the employee health benefits for the employees of TRC, which were previously self-insured, are fully

insured.

To the extent that the Company retains the risks for these exposures, including claims incurred but not reported, and for any

loss amounts related to the deductibility clauses included in its other insurance policies, liabilities have been accrued based

upon the Company’s best estimates, with input from legal and insurance advisors. Changes in assumptions, as well as changes

in actual experience, could cause these estimates to change in the near-term. Management believes that reasonably possible

losses, if any, for these matters, to the extent not otherwise disclosed and net of recorded accruals, will not have a material

adverse effect on the Company’s future results of operations, financial position or cash flow. At January 31, 2020 and 2019,

the aggregate amounts established to cover retained losses and remaining self-insured claims were included in the balances

of accrued expenses in the corresponding consolidated balance sheets.

NOTE 11 – LEGAL CONTINGENCIES

In the normal course of business, the Company may also have pending claims and legal proceedings. It is the opinion of

management, based on information available at this time, that there are no current claims and proceedings that could have a

material adverse effect on the Company’s consolidated financial statements except for the outstanding matter described

below.

Outstanding Legal Matter

In January 2019, GPS filed a lawsuit against Exelon West Medway II, LLC and Exelon Generation Company, LLC (together

referred to as “Exelon”) for Exelon’s breach of contract and failure to remedy various conditions which negatively impacted

the schedule and the costs associated with the construction by GPS of a gas-fired power plant for Exelon in Massachusetts.

As a result, the Company believes that Exelon has received the benefits of the construction efforts of GPS and the

corresponding progress made on the project without making payments to GPS for the value received (see Note 6). On March

7, 2019, Exelon provided GPS with a notice intending to terminate the EPC contract under which GPS had been providing

services to Exelon. At that time, the construction project was nearly complete and both of the power generation units included

in the plant had successfully reached first fire. The completion of various prescribed performance tests and the clearance of

punch-list items were the primary tasks necessary to be accomplished by GPS in order to achieve substantial completion of

the power plant. Nevertheless, and among other actions, Exelon provided contractual notice requiring GPS to vacate the

construction site, asserting that GPS had failed to fulfill certain obligations under the contract and was in default, and has

withheld payments from GPS on invoices rendered to Exelon in accordance with the terms of the EPC contract between the

parties.

With vigor, GPS intends to assert its rights under the EPC contract, to pursue the collection from Exelon of amounts owed

under the contract and to defend itself against the allegations that GPS has not performed in accordance with the contract.

During Fiscal 2020, most of the litigation activities have focused on pre-trial preparations by the legal teams. All discovery

is scheduled to close on April 30, 2020.

In another legal matter, GPS was in a dispute with a former subcontractor on one of its power plant construction projects that
was settled pursuant to binding arbitration in June 2018. The arbitration panel awarded approximately $5.2 million, plus
interest of $0.7 million and arbitration fees, to the subcontractor. The substantial portion of the total amount, which was paid
by GPS to the subcontractor in July 2018, was charged to cost of revenues during Fiscal 2019. In connection with the
settlement, the legal claims made by the parties against each other were dismissed with prejudice and without costs to the
parties, all liens filed by the subcontractor related to the project were released, and each party provided the other with a
release from future claims related to this matter.

On February 1, 2016, TRC was sued in Person County, North Carolina, by a subcontractor, PPS Engineers, Inc. (“PPS”),
which also made other claims, in an attempt to force TRC to pay invoices for services rendered in the total amount of $2.3
million. On March 4, 2016, TRC filed responses to the claims of PPS. The amounts invoiced by PPS were accrued by TRC
and the corresponding liability amounts were included in accounts payable in the consolidated balance sheet as January 31,
2018. TRC did not record an account receivable for the amounts it believed were owed to it by PPS. After an attempted
mediation effort was unproductive in resolving the disputes and the litigation process was begun, the parties agreed to a
settlement of all claims made against each other with TRC agreeing to make a payment to PPS in the amount of $0.9 million.
As the total of the previously accrued amounts exceeded the negotiated settlement amount, the Company recorded a gain on
the settlement in the amount of $1.4 million that was included in other income for Fiscal 2019.

NOTE 12 – STOCK-BASED COMPENSATION

The Company’s board of directors may make awards under the 2011 Stock Plan (the “Stock Plan”) to officers, directors and
key employees. Awards may include nonqualified stock options (“NSOs”), incentive stock options (“ISOs”), and restricted
or unrestricted stock. The specific provisions for each award made pursuant to the terms of the Stock Plan are documented
in a written agreement between the Company and the awardee.

All stock options awarded under the Stock 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. Commencing in January 2018,
stock options have been awarded with one-third of each stock option vesting on each of the first three anniversaries of the
corresponding award date. Earlier stock option awards typically became exercisable one year from the date of award. As of
January 31, 2020, there were approximately 1.7 million shares of the Company’s common stock reserved for issuance under
the Stock Plan; this number includes 381,833 shares of common stock available for future awards.

Summaries of stock option activity under the Company’s stock option plans for Fiscal 2020, 2019 and 2018, along with
corresponding weighted average per share amounts, are presented below (shares in thousands):

Outstanding, February 1, 2017

Granted
Exercised
Forfeited

Outstanding, January 31, 2018

Granted
Exercised

Outstanding, January 31, 2019

Granted
Exercised
Forfeited

Outstanding, January 31, 2020

707
302
(110)
(10)
889
257
(6)
1,140
238
(61)
(46)
1,271

Exercise
Price
$39.04
$53.49
$28.81
$71.75
$44.83
$40.54
$17.19
$44.01
$44.76
$26.67
$48.47
$44.83

Exercisable, January 31, 2020

823

$45.58

Remaining
Term (years)
7.82

Fair Value
$10.22

7.91

7.54

7.18

6.20

$11.74

$11.22

$11.06

$11.78

- 70 -

- 71 -
- 71 -

The changes in the number of non-vested options to purchase shares of common stock for Fiscal 2020, 2019 and 2018, and
the weighted average fair value per share for each number, are presented below (shares in thousands):

Non-vested, February 1, 2017

Granted
Vested
Forfeitures

Non-vested, January 31, 2018

Granted
Vested

Non-vested, January 31, 2019

Granted
Vested
Forfeitures

Non-vested, January 31, 2020

270
302
(260)
(10)
302
257
(184)
375
238
(134)
(31)
448

Fair Value
$14.93
$13.55
$15.31
$19.14
$13.55
$ 9.31
$14.75
$10.05
$ 9.60
$10.25
$10.28
$ 9.74

Pursuant to the terms of the Stock Plan and as described in the corresponding written agreements with the executives, the
Company awarded performance-based restricted stock units to two senior executives in April 2019 and 2018 covering up to
36,000 shares of common stock at each date plus a number of shares to be determined based on the amount of cash dividends
deemed paid on shares earned pursuant to the awards. The release of the stock restrictions depends on the total shareholder
return performance of the Company’s common stock measured against the performance of a peer-group of common stocks
over three-year periods. The award-date fair value amounts for restricted stock units were determined by using the per share
market price of the Company’s common stock on the dates of award and the target number of shares for the awards, by
assigning equal probabilities to the thirteen possible payout outcomes at the ends of the three-year vesting periods, and by
computing the weighted average of the outcome amounts. For each case, the estimated fair value amount was calculated to
be 88.5% of the aggregate market value of the target number of shares on the award date.

The fair values of stock options and restricted stock units are recorded as stock compensation expense over the vesting
periods of the corresponding awards. Expense amounts related to stock awards were $2.1 million, $1.6 million and $4.7
million for Fiscal 2020, 2019 and 2018, respectively. At January 31, 2020, there was $4.4 million in unrecognized
compensation cost related to outstanding stock awards that the Company expects to expense over the next three years.

The total intrinsic values for the stock options exercised during Fiscal 2020, 2019 and 2018 were $1.4 million, $0.2 million
and $3.6 million, respectively. At January 31, 2020, the aggregate market value amounts of the shares of common stock
subject to outstanding and exercisable stock options that were “in-the-money” exceeded the aggregate exercise prices of such
options by $5.1 million and $4.6 million, respectively.

The Company estimates the weighted average fair value of stock options on the date of award using a Black-Scholes option
pricing model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. The Company believes that its past stock option exercise activity is sufficient to provide it with a
reasonable basis upon which to estimate the expected life of newly awarded stock options. Risk-free interest rates are
determined by blending the rates for three to five year US Treasury notes. The dividend yield is based on the Company’s
current annual dividend amount. The calculations of the expected volatility factors are based on the monthly closing prices
of the Company’s common stock for the five-year periods preceding the dates of the corresponding awards.

The fair value amounts of each stock option granted in Fiscal 2020, 2019 and 2018 were estimated on the corresponding date
of award using the Black-Scholes option-pricing model based on the following weighted average assumptions:

Dividend yield
Expected volatility
Risk-free interest rate
Expected life (in years)

2020
2.3%
32.5%
1.9%
3.3

2019

2.5%
34.5%
2.7%
3.3

2018
1.7%
37.3%
1.8%
3.3

The Company maintains 401(k) savings plans pursuant to which the Company makes discretionary contributions for the

eligible and participating employees. The Company’s expense amounts related to these defined contribution plans were

approximately $1.7 million, $2.4 million and $2.8 million for Fiscal 2020, 2019 and 2018, respectively. The Company also

maintains nonqualified plans whereunder the payments of certain amounts of incentive compensation earned by key

employees are deferred for periods of five to seven years; payments are conditioned on continuous employment.

NOTE 13 – INCOME TAXES

The Tax Cuts and Jobs Act (the “Tax Act”)

The Tax Act was signed into law on December 22, 2017 and significantly changed tax law in the United States by, among

other items, reducing the federal corporate income tax rate from a maximum of 35% to 21% (effective January 1, 2018). The

Tax Act embraces a territorial system for the taxation of future foreign earnings and modifies certain business deductions

by, among other changes, repealing the domestic production activities deduction, further limiting the deductibility of certain

executive compensation and increasing the limitation on the deductibility of certain meals and entertainment expenses. As a

result of the net reduction in the corporate income tax rate, the Company revalued its deferred taxes as of December 22, 2017

and recognized an income tax benefit of $0.8 million for Fiscal 2018.

The Company did not record a liability as of January 31, 2018 related to the transition tax as it did not have any unremitted

foreign earnings. Its foreign operations had incurred a cumulative net operating loss since the acquisition of APC in May

2015. The Global Intangible Low-Taxed Income, or GILTI, provision of the Tax Act has not had a material impact on the

Company’s consolidated income taxes.

The Company has not performed any accounting for income taxes related to the Tax Act based on information or regulatory

guidance that it believes to be incomplete. Consequently, in the event that any new guidance related to the Tax Act is issued

by the Internal Revenue Service (the “IRS”) or any other regulatory or standard-setting body, the Company will conduct

additional analysis and may make adjustments that could materially impact income tax expense for the period in which such

adjustments are made.

Reconciliations of Income Tax Benefit (Expense)

The components of the amounts of income tax benefit (expense) for Fiscal 2020, 2019 and 2018 are presented below:

Current:

Federal

State

Deferred:

Federal

State

Income tax benefit (expense)

2020

2019

2018

$ 3,603

$ (32,490)

336

413

(1,091)

2,512

(7,853)

(40,343)

6,825

(185)

6,640

971

1,168

2,139

7,053

$ 4,651

$ (40,279)

Foreign income tax expense amounts for Fiscal 2020, Fiscal 2019 and 2018 were not material. The amounts of interest and

penalties related to income taxes that were incurred by the Company during Fiscal 2020, 2019 and 2018 were not material.

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The changes in the number of non-vested options to purchase shares of common stock for Fiscal 2020, 2019 and 2018, and

the weighted average fair value per share for each number, are presented below (shares in thousands):

Non-vested, February 1, 2017

Non-vested, January 31, 2018

Non-vested, January 31, 2019

Granted

Vested

Forfeitures

Granted

Vested

Granted

Vested

Forfeitures

Non-vested, January 31, 2020

Fair Value

(260)

270

302

(10)

302

257

(184)

375

238

(134)

(31)

448

$14.93

$13.55

$15.31

$19.14

$13.55

$ 9.31

$14.75

$10.05

$ 9.60

$10.25

$10.28

$ 9.74

Pursuant to the terms of the Stock Plan and as described in the corresponding written agreements with the executives, the

Company awarded performance-based restricted stock units to two senior executives in April 2019 and 2018 covering up to

36,000 shares of common stock at each date plus a number of shares to be determined based on the amount of cash dividends

deemed paid on shares earned pursuant to the awards. The release of the stock restrictions depends on the total shareholder

return performance of the Company’s common stock measured against the performance of a peer-group of common stocks

over three-year periods. The award-date fair value amounts for restricted stock units were determined by using the per share

market price of the Company’s common stock on the dates of award and the target number of shares for the awards, by

assigning equal probabilities to the thirteen possible payout outcomes at the ends of the three-year vesting periods, and by

computing the weighted average of the outcome amounts. For each case, the estimated fair value amount was calculated to

be 88.5% of the aggregate market value of the target number of shares on the award date.

The fair values of stock options and restricted stock units are recorded as stock compensation expense over the vesting

periods of the corresponding awards. Expense amounts related to stock awards were $2.1 million, $1.6 million and $4.7

million for Fiscal 2020, 2019 and 2018, respectively. At January 31, 2020, there was $4.4 million in unrecognized

compensation cost related to outstanding stock awards that the Company expects to expense over the next three years.

The total intrinsic values for the stock options exercised during Fiscal 2020, 2019 and 2018 were $1.4 million, $0.2 million

and $3.6 million, respectively. At January 31, 2020, the aggregate market value amounts of the shares of common stock

subject to outstanding and exercisable stock options that were “in-the-money” exceeded the aggregate exercise prices of such

options by $5.1 million and $4.6 million, respectively.

The Company estimates the weighted average fair value of stock options on the date of award using a Black-Scholes option

pricing model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions

and are fully transferable. The Company believes that its past stock option exercise activity is sufficient to provide it with a

reasonable basis upon which to estimate the expected life of newly awarded stock options. Risk-free interest rates are

determined by blending the rates for three to five year US Treasury notes. The dividend yield is based on the Company’s

current annual dividend amount. The calculations of the expected volatility factors are based on the monthly closing prices

of the Company’s common stock for the five-year periods preceding the dates of the corresponding awards.

The fair value amounts of each stock option granted in Fiscal 2020, 2019 and 2018 were estimated on the corresponding date

of award using the Black-Scholes option-pricing model based on the following weighted average assumptions:

Dividend yield

Expected volatility

Risk-free interest rate

Expected life (in years)

2020

2.3%

32.5%

1.9%

3.3

2019

2.5%

34.5%

2.7%

3.3

2018

1.7%

37.3%

1.8%

3.3

The Company maintains 401(k) savings plans pursuant to which the Company makes discretionary contributions for the
eligible and participating employees. The Company’s expense amounts related to these defined contribution plans were
approximately $1.7 million, $2.4 million and $2.8 million for Fiscal 2020, 2019 and 2018, respectively. The Company also
maintains nonqualified plans whereunder the payments of certain amounts of incentive compensation earned by key
employees are deferred for periods of five to seven years; payments are conditioned on continuous employment.

NOTE 13 – INCOME TAXES

The Tax Cuts and Jobs Act (the “Tax Act”)

The Tax Act was signed into law on December 22, 2017 and significantly changed tax law in the United States by, among
other items, reducing the federal corporate income tax rate from a maximum of 35% to 21% (effective January 1, 2018). The
Tax Act embraces a territorial system for the taxation of future foreign earnings and modifies certain business deductions
by, among other changes, repealing the domestic production activities deduction, further limiting the deductibility of certain
executive compensation and increasing the limitation on the deductibility of certain meals and entertainment expenses. As a
result of the net reduction in the corporate income tax rate, the Company revalued its deferred taxes as of December 22, 2017
and recognized an income tax benefit of $0.8 million for Fiscal 2018.

The Company did not record a liability as of January 31, 2018 related to the transition tax as it did not have any unremitted
foreign earnings. Its foreign operations had incurred a cumulative net operating loss since the acquisition of APC in May
2015. The Global Intangible Low-Taxed Income, or GILTI, provision of the Tax Act has not had a material impact on the
Company’s consolidated income taxes.

The Company has not performed any accounting for income taxes related to the Tax Act based on information or regulatory
guidance that it believes to be incomplete. Consequently, in the event that any new guidance related to the Tax Act is issued
by the Internal Revenue Service (the “IRS”) or any other regulatory or standard-setting body, the Company will conduct
additional analysis and may make adjustments that could materially impact income tax expense for the period in which such
adjustments are made.

Reconciliations of Income Tax Benefit (Expense)

The components of the amounts of income tax benefit (expense) for Fiscal 2020, 2019 and 2018 are presented below:

Current:

Federal
State

Deferred:
Federal
State

Income tax benefit (expense)

2020

2019

2018

77
336
413

$ 3,603
(1,091)
2,512

$ (32,490)
(7,853)
(40,343)

6,825
(185)
6,640
7,053
$

971
1,168
2,139
$ 4,651

2
62
64
$ (40,279)

Foreign income tax expense amounts for Fiscal 2020, Fiscal 2019 and 2018 were not material. The amounts of interest and
penalties related to income taxes that were incurred by the Company during Fiscal 2020, 2019 and 2018 were not material.

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The Company’s income tax amounts differed from corresponding amounts computed by applying the federal corporate
income tax rate of 21% to the (loss) income before income taxes for Fiscal 2020 and 2019, and by applying the blended
federal tax rate of approximately 34% to income before income taxes for Fiscal 2018, as shown in the table below.

Deferred Taxes

the following:

The tax effects of temporary differences that are reflected in deferred tax assets as of January 31, 2020 and 2019 included

Computed expected income tax benefit (expense)
Difference resulting from:

State income taxes, net of federal tax effect
Elimination of net operating loss benefit
Utilization of net operating loss carryforward
Bad debt loss
Foreign tax rate differential
Goodwill impairment losses
Stock options
Domestic production activities deduction
Other permanent differences, net
Federal research and development tax credits
Adjustments and other differences

Income tax benefit (expense)

2020
$ 10,030

2019

$ (9,916)

2018
$ (38,078)

81
(7,239)

—
6,205

(722)
(763)
210
—

(599)

—

(150)
7,053
$

683
—
1,730
—
86
(266)
32
—

(1,319)
13,866
(245)
$ 4,651

(5,042)
—
—
—
(301)
(168)
962
3,204
(973)
—
117
$ (40,279)

A valuation allowance in the amount of $7.1 million was established against the deferred tax asset amount created by the net
operation loss of APC’s subsidiary in the UK for Fiscal 2020. However, this effect was substantially offset by an income tax
benefit (federal and state) for Fiscal 2020 in the amount of approximately $6.8 million which is the estimated favorable
income tax impact of bad debt loss on certain loans made to APC from Argan, which were determined to be uncollectible
during Fiscal 2020. The amount of state income tax benefit for Fiscal 2019 that is presented above reflects recognized
research and development state tax credits of $2.8 million, net of federal tax-effect.

Research and Development Tax Credits

During Fiscal 2019, the Company completed a detailed review of the activities of its engineering staff on major EPC services
projects in order to identify and quantify the amounts of research and development credits that may be available to reduce
prior year income taxes. This study focused on project costs incurred during the three-year period ended January 31, 2018.

Based on the results of the study, management identified and estimated significant amounts of income tax benefits that were
not previously recognized in the Company’s operating results for any prior year reporting period. The amount of research
and development tax credit benefit recognized in Fiscal 2019 was $16.6 million. During Fiscal 2020, deferred tax assets
related to the research and development tax credits were reduced by $0.4 million. As described below, the IRS is examining
the research and development credits that were included in the amendments of the Company’s consolidated federal income
tax returns for the years ended January 31, 2016 and 2017 that were filed in January 2019. The Company does not have
reason to expect any significant unfavorable changes to its income taxes to arise from the completion of these examinations.

The amount of identified but unrecognized income tax benefits related to research and development credits as of January 31,
2020 was $5.0 million, for which the Company has established a liability for uncertain income tax return positions, most of
which is included in accrued expenses. The amount of the liability was $5.1 million as of January 31, 2019. The final outcome
of these uncertain tax positions is not yet determinable. However, the Company does not expect that the amount of
unrecognized tax benefits will significantly change due to any settlement and/or expiration of statutes of limitation over the
next 12 months. As of January 31, 2020, the Company does not believe that it has any other material uncertain income tax
positions reflected in its accounts.

As of January 31, 2020, the balance of other current assets in the consolidated balance sheet included income tax refunds
and prepaid income taxes in the total amount of approximately $14.5 million. The income tax refunds are amounts expected
to be received after the filing of the amended tax returns claiming research and development tax credits for prior years. At
January 31, 2019, the consolidated balance sheet included prepaid income taxes in the amount of $19.5 million.

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Assets:

Net operating loss carryforwards

Stock awards

Research and development credit carryforwards

Purchased intangibles

Accrued expenses and other

Liabilities:

Purchased intangibles

Construction contracts

Property and equipment

Other

Valuation Allowances

Deferred tax assets

2020

2019

$ 22,683

8,228

2,367

134

415

994

26,593

(3,317)

(1,618)

(1,983)

(193)

(7,111)

(11,588)

2,188

631

604

758

12,409

(3,373)

(454)

(1,986)

(145)

(5,958)

(5,194)

7,894

$ 1,257

The Company acquired unused net operating losses (“NOLs”) for federal income tax reporting purposes from TRC that are

subject to limitations imposed by Section 382 of the Internal Revenue Code of 1986, as amended. These losses are subject

to annual limits that reduce the aggregate amount of NOLs available to the Company in the future to approximately $9.5

million. These NOLs are available to offset future taxable income and, if not utilized, begin expiring during 2032.

The Company incurred an NOL for federal income tax reporting purposes in the total amount of $38.5 million for Fiscal

2020, including the amount of the aforementioned bad debt loss. Pursuant to the Tax Act, this NOL amount may be carried

forward indefinitely, however, its utilization will be limited to 80% of taxable income in any tax year.

The Company also has certain NOLs that will be available to the Company for state income tax reporting purposes that are

substantially similar to the federal NOLs.

The Company’s ability to realize deferred tax assets, including those related to the NOLs discussed above, depends primarily

upon the generation of sufficient future taxable income to allow for the Company’s use of temporarily deferred deductions

and tax planning strategies. If such estimates and assumptions change in the future, the Company may be required to record

additional valuation allowances against some or all of its deferred tax assets resulting in additional income tax expense in

the future. At this time, based substantially on the strong earnings performance of the Company’s power industry services

reporting segment, management believes that it is more likely than not that the Company will realize the benefit of

significantly all of its deferred tax assets.

Income Tax Returns

The Company is subject to income taxes in the US, the Republic of Ireland, the UK and various other state and foreign

jurisdictions. Tax treatments within each jurisdiction are subject to the interpretation of the related tax laws and regulations

which require significant judgment to apply. The Company is no longer subject to income tax examinations by authorities

for its fiscal years ended on or before January 31, 2016 except for several notable exceptions including the Republic of

Ireland, the UK and several states where the open periods are one year longer.

The IRS conducted an examination of the Company’s original federal consolidated income tax return for the year ended

January 31, 2016. The IRS represented to the Company that no unfavorable adjustment items were noted during the

examination. However, the Company has consented to an extension of the audit timeline which will enable the IRS to

examine the amendment to the income tax return, which includes the research and development credit for the year. In

addition, the IRS has commenced an examination of the Company’s amended consolidated income tax return for the year

ended January 31, 2017. To date, the Company has provided supporting documentation related to the credits and written

responses to certain questions as requested by the IRS. No audit findings have been communicated to the Company yet.

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The Company’s income tax amounts differed from corresponding amounts computed by applying the federal corporate

income tax rate of 21% to the (loss) income before income taxes for Fiscal 2020 and 2019, and by applying the blended

federal tax rate of approximately 34% to income before income taxes for Fiscal 2018, as shown in the table below.

Computed expected income tax benefit (expense)

$ 10,030

$ (9,916)

$ (38,078)

2020

2019

2018

Difference resulting from:

State income taxes, net of federal tax effect

Elimination of net operating loss benefit

Utilization of net operating loss carryforward

Bad debt loss

Foreign tax rate differential

Goodwill impairment losses

Stock options

Domestic production activities deduction

Other permanent differences, net

Federal research and development tax credits

Adjustments and other differences

Income tax benefit (expense)

683

(5,042)

(7,239)

—

6,205

(722)

(763)

210

—

1,730

—

(266)

(599)

(1,319)

—

(150)

7,053

13,866

(245)

$ 4,651

—

(301)

(168)

962

3,204

(973)

—

117

$ (40,279)

A valuation allowance in the amount of $7.1 million was established against the deferred tax asset amount created by the net

operation loss of APC’s subsidiary in the UK for Fiscal 2020. However, this effect was substantially offset by an income tax

benefit (federal and state) for Fiscal 2020 in the amount of approximately $6.8 million which is the estimated favorable

income tax impact of bad debt loss on certain loans made to APC from Argan, which were determined to be uncollectible

during Fiscal 2020. The amount of state income tax benefit for Fiscal 2019 that is presented above reflects recognized

research and development state tax credits of $2.8 million, net of federal tax-effect.

Research and Development Tax Credits

During Fiscal 2019, the Company completed a detailed review of the activities of its engineering staff on major EPC services

projects in order to identify and quantify the amounts of research and development credits that may be available to reduce

prior year income taxes. This study focused on project costs incurred during the three-year period ended January 31, 2018.

Based on the results of the study, management identified and estimated significant amounts of income tax benefits that were

not previously recognized in the Company’s operating results for any prior year reporting period. The amount of research

and development tax credit benefit recognized in Fiscal 2019 was $16.6 million. During Fiscal 2020, deferred tax assets

related to the research and development tax credits were reduced by $0.4 million. As described below, the IRS is examining

the research and development credits that were included in the amendments of the Company’s consolidated federal income

tax returns for the years ended January 31, 2016 and 2017 that were filed in January 2019. The Company does not have

reason to expect any significant unfavorable changes to its income taxes to arise from the completion of these examinations.

The amount of identified but unrecognized income tax benefits related to research and development credits as of January 31,

2020 was $5.0 million, for which the Company has established a liability for uncertain income tax return positions, most of

which is included in accrued expenses. The amount of the liability was $5.1 million as of January 31, 2019. The final outcome

of these uncertain tax positions is not yet determinable. However, the Company does not expect that the amount of

unrecognized tax benefits will significantly change due to any settlement and/or expiration of statutes of limitation over the

next 12 months. As of January 31, 2020, the Company does not believe that it has any other material uncertain income tax

positions reflected in its accounts.

As of January 31, 2020, the balance of other current assets in the consolidated balance sheet included income tax refunds

and prepaid income taxes in the total amount of approximately $14.5 million. The income tax refunds are amounts expected

to be received after the filing of the amended tax returns claiming research and development tax credits for prior years. At

January 31, 2019, the consolidated balance sheet included prepaid income taxes in the amount of $19.5 million.

Deferred Taxes

The tax effects of temporary differences that are reflected in deferred tax assets as of January 31, 2020 and 2019 included
the following:

Assets:

Net operating loss carryforwards
Stock awards
Research and development credit carryforwards
Purchased intangibles
Accrued expenses and other

Liabilities:

Purchased intangibles
Construction contracts
Property and equipment
Other

Valuation Allowances
Deferred tax assets

2020

$ 22,683
2,367
134
415
994
26,593

(3,317)
(1,618)
(1,983)
(193)
(7,111)
(11,588)
7,894

2019

8,228
2,188
631
604
758
12,409

(3,373)
(454)
(1,986)
(145)
(5,958)
(5,194)
$ 1,257

The Company acquired unused net operating losses (“NOLs”) for federal income tax reporting purposes from TRC that are
subject to limitations imposed by Section 382 of the Internal Revenue Code of 1986, as amended. These losses are subject
to annual limits that reduce the aggregate amount of NOLs available to the Company in the future to approximately $9.5
million. These NOLs are available to offset future taxable income and, if not utilized, begin expiring during 2032.

The Company incurred an NOL for federal income tax reporting purposes in the total amount of $38.5 million for Fiscal
2020, including the amount of the aforementioned bad debt loss. Pursuant to the Tax Act, this NOL amount may be carried
forward indefinitely, however, its utilization will be limited to 80% of taxable income in any tax year.

The Company also has certain NOLs that will be available to the Company for state income tax reporting purposes that are
substantially similar to the federal NOLs.

The Company’s ability to realize deferred tax assets, including those related to the NOLs discussed above, depends primarily
upon the generation of sufficient future taxable income to allow for the Company’s use of temporarily deferred deductions
and tax planning strategies. If such estimates and assumptions change in the future, the Company may be required to record
additional valuation allowances against some or all of its deferred tax assets resulting in additional income tax expense in
the future. At this time, based substantially on the strong earnings performance of the Company’s power industry services
reporting segment, management believes that it is more likely than not that the Company will realize the benefit of
significantly all of its deferred tax assets.

Income Tax Returns

The Company is subject to income taxes in the US, the Republic of Ireland, the UK and various other state and foreign
jurisdictions. Tax treatments within each jurisdiction are subject to the interpretation of the related tax laws and regulations
which require significant judgment to apply. The Company is no longer subject to income tax examinations by authorities
for its fiscal years ended on or before January 31, 2016 except for several notable exceptions including the Republic of
Ireland, the UK and several states where the open periods are one year longer.

The IRS conducted an examination of the Company’s original federal consolidated income tax return for the year ended
January 31, 2016. The IRS represented to the Company that no unfavorable adjustment items were noted during the
examination. However, the Company has consented to an extension of the audit timeline which will enable the IRS to
examine the amendment to the income tax return, which includes the research and development credit for the year. In
addition, the IRS has commenced an examination of the Company’s amended consolidated income tax return for the year
ended January 31, 2017. To date, the Company has provided supporting documentation related to the credits and written
responses to certain questions as requested by the IRS. No audit findings have been communicated to the Company yet.

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Supplemental Cash Flow Information

The amounts of cash paid for income taxes during the years ended January 31, 2020, 2019 and 2018 were $3.1 million, $3.9
million and $44.3 million, respectively. During the year ended January 31, 2020, the Company received cash refunds of
previously paid income taxes from various taxing authorities in the total amount of $8.4 million. No meaningful amounts of
refunds were received in either Fiscal 2019 or Fiscal 2018.

NOTE 14 – (LOSS) INCOME PER SHARE ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.

Basic and diluted income per share are computed as follows (shares in thousands except in note (1) below the chart):

2020

2019

2018

Net (loss) income attributable to the stockholders of Argan, Inc.

$ (42,689)

52,036

72,011

Weighted average number of shares outstanding – basic
Effect of stock awards (1)
Weighted average number of shares outstanding – diluted

15,621
—
15,621

15,569
124
15,693

15,522
258
15,780

(Loss) income per share attributable to the stockholders of Argan,

Inc.

Basic
Diluted

$
(2.73)
$ (2.73)

$ 3.34
$ 3.32

$ 4.64
4.56
$

(1) For Fiscal 2020, the weighted average number of shares determined on a dilutive basis excludes any effect of outstanding
stock awards which represented 1,303,000 shares of the Company’s common stock as of January 31, 2020. All common
stock equivalents are considered to be antidilutive for Fiscal 2020 as the Company incurred a net loss for the year. The
weighted average numbers for Fiscal 2019 and 2018 exclude the effects of antidilutive stock options covering 646,500 shares
and 260,000 shares, respectively; the options had exercise prices per share in excess of the average market price per share
for each year.

NOTE 15 – CASH DIVIDENDS

In April, July, October 2019 and January 2020, the Company made regular quarterly cash dividend payments based on a per
share amount of $0.25. During Fiscal 2019, the Company also made regular quarterly cash dividend payments based on a
per share amount of $0.25. During Fiscal 2018, the Company’s board of directors declared a regular annual cash dividend of
$1.00 per share of common stock, which was paid to stockholders in October 2017.

NOTE 16 – SEGMENT REPORTING

Segments represent components of an enterprise for which discrete financial information is available that is evaluated
regularly by the Company’s chief executive officer, who is the chief operating decision maker, in determining how to allocate
resources and in assessing performance. The Company’s reportable segments recognize revenues and incur expenses, are
organized in separate business units with different management teams, customers, talents and services, and may include more
than one operating segment.

Intersegment revenues and the related cost of revenues, are netted against the corresponding amounts of the segment
receiving the intersegment services. For Fiscal 2020, 2019 and 2018, intersegment revenues totaled approximately $3.3
million, $0.8 million and $2.2 million, respectively. Intersegment revenues for the aforementioned periods primarily related
to services provided between the industrial fabrication and field services segment and the power industry services segment
and were based on prices negotiated by the parties.

Summarized below are certain operating results and financial position data of the Company’s reportable business segments

for Fiscal 2020, 2019 and 2018. The “Other” column in each summary includes the Company’s corporate expenses.

Year Ended January 31, 2020

Revenues

Cost of revenues

Gross (loss) profit

Selling, general and

administrative expenses

Impairment losses

Loss from operations

Other income, net

Income tax benefit

Net loss

Industrial

Services

Telecom

Services

$ 94,682

Power

Services

$ 135,729

152,854

(17,125)

26,835

2,072

(46,032)

7,535

85,859

8,823

7,810

2,823

(1,810)

—

8,586

7,104

1,482

2,135

—

(653)

—

(653)

Other

$ —

—

7,345

—

(7,345)

540

(6,805)

Totals

$ 238,997

245,817

(6,820)

44,125

4,895

(55,840)

8,075

(47,765)

7,053

$ (40,712)

Loss before income taxes

$ (38,497)

$ (1,810)

Depreciation

Amortization of intangibles

Property, plant and equipment additions

Current assets

Current liabilities

Goodwill

Total assets

$ 694

$ 2,418

396

$ 3,513

$ 320,257

21,766

2,938

$ 76,794

$ 421,755

291

5,069

135,518

18,476

352,034

664

1,638

6,441

9,467

46,321

181

—

340

1,136

7,058

796

—

4,549

1,279

—

84,636

144,034

27,943

487,540

Year Ended January 31, 2019

Revenues

Cost of revenues

Gross profit

Selling, general and

administrative expenses

Impairment loss

Income (loss) from operations

Other income, net

Income tax benefit

Net income

Power

Services

Industrial

Services

Telecom

Services

$ 367,812

$ 101,673

12,668

297,931

69,881

23,741

—

46,140

5,120

92,097

9,576

7,904

1,491

181

1,400

Other

$ —

—

7,277

—

(7,277)

461

Totals

$ 482,153

399,715

82,438

40,710

1,491

40,237

6,981

47,218

4,651

$ 51,869

Income (loss) before income taxes

$ 51,260

$ 1,581

1,193

(6,816)

Depreciation

Amortization of intangibles

Property, plant and equipment additions

$ 749

$ 2,293

$ 3,422

350

3,156

662

4,750

—

1,012

8,599

Current assets

Current liabilities

Goodwill

Total assets

$ 317,708

28,878

3,691

$ 66,071

$ 416,348

66,085

20,548

347,189

13,384

12,290

57,168

968

—

67,019

81,316

32,838

476,648

9,687

2,981

1,788

—

1,193

—

366

—

690

879

—

5,272

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Supplemental Cash Flow Information

The amounts of cash paid for income taxes during the years ended January 31, 2020, 2019 and 2018 were $3.1 million, $3.9

million and $44.3 million, respectively. During the year ended January 31, 2020, the Company received cash refunds of

previously paid income taxes from various taxing authorities in the total amount of $8.4 million. No meaningful amounts of

refunds were received in either Fiscal 2019 or Fiscal 2018.

NOTE 14 – (LOSS) INCOME PER SHARE ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.

Basic and diluted income per share are computed as follows (shares in thousands except in note (1) below the chart):

2020

2019

2018

Net (loss) income attributable to the stockholders of Argan, Inc.

$ (42,689)

52,036

72,011

Weighted average number of shares outstanding – basic

Effect of stock awards (1)

Weighted average number of shares outstanding – diluted

15,621

—

15,621

15,569

124

15,693

15,522

258

15,780

(Loss) income per share attributable to the stockholders of Argan,

Inc.

Basic

Diluted

(2.73)

$ 3.34

$ 4.64

$ (2.73)

$ 3.32

4.56

(1) For Fiscal 2020, the weighted average number of shares determined on a dilutive basis excludes any effect of outstanding

stock awards which represented 1,303,000 shares of the Company’s common stock as of January 31, 2020. All common

stock equivalents are considered to be antidilutive for Fiscal 2020 as the Company incurred a net loss for the year. The

weighted average numbers for Fiscal 2019 and 2018 exclude the effects of antidilutive stock options covering 646,500 shares

and 260,000 shares, respectively; the options had exercise prices per share in excess of the average market price per share

for each year.

NOTE 15 – CASH DIVIDENDS

In April, July, October 2019 and January 2020, the Company made regular quarterly cash dividend payments based on a per

share amount of $0.25. During Fiscal 2019, the Company also made regular quarterly cash dividend payments based on a

per share amount of $0.25. During Fiscal 2018, the Company’s board of directors declared a regular annual cash dividend of

$1.00 per share of common stock, which was paid to stockholders in October 2017.

NOTE 16 – SEGMENT REPORTING

Segments represent components of an enterprise for which discrete financial information is available that is evaluated

regularly by the Company’s chief executive officer, who is the chief operating decision maker, in determining how to allocate

resources and in assessing performance. The Company’s reportable segments recognize revenues and incur expenses, are

organized in separate business units with different management teams, customers, talents and services, and may include more

than one operating segment.

Intersegment revenues and the related cost of revenues, are netted against the corresponding amounts of the segment

receiving the intersegment services. For Fiscal 2020, 2019 and 2018, intersegment revenues totaled approximately $3.3

million, $0.8 million and $2.2 million, respectively. Intersegment revenues for the aforementioned periods primarily related

to services provided between the industrial fabrication and field services segment and the power industry services segment

and were based on prices negotiated by the parties.

Summarized below are certain operating results and financial position data of the Company’s reportable business segments
for Fiscal 2020, 2019 and 2018. The “Other” column in each summary includes the Company’s corporate expenses.

Year Ended January 31, 2020

Revenues
Cost of revenues
Gross (loss) profit
Selling, general and

administrative expenses

Impairment losses
Loss from operations
Other income, net
Loss before income taxes
Income tax benefit
Net loss

Power
Services
$ 135,729
152,854
(17,125)

26,835
2,072
(46,032)
7,535
$ (38,497)

Industrial
Services
$ 94,682
85,859
8,823

7,810
2,823
(1,810)
—
$ (1,810)

Telecom
Services

8,586
7,104
1,482

2,135
—
(653)
—
(653)

Other
$ —
—
—

7,345
—
(7,345)
540
(6,805)

Depreciation
Amortization of intangibles
Property, plant and equipment additions

$ 694
291
5,069

Current assets
Current liabilities
Goodwill
Total assets

$ 320,257
135,518
18,476
352,034

$ 2,418
664
1,638

21,766
6,441
9,467
46,321

396

181
340

2,938
796
—
4,549

5
—
11

$ 76,794
1,279
—
84,636

Year Ended January 31, 2019

Revenues
Cost of revenues
Gross profit
Selling, general and

administrative expenses

Impairment loss
Income (loss) from operations
Other income, net
Income (loss) before income taxes
Income tax benefit
Net income

Power
Services
$ 367,812
297,931
69,881

23,741
—
46,140
5,120
$ 51,260

Industrial
Services
$ 101,673
92,097
9,576

7,904
1,491
181
1,400
$ 1,581

Depreciation
Amortization of intangibles
Property, plant and equipment additions

$ 749
350
3,156

$ 2,293
662
4,750

Current assets
Current liabilities
Goodwill
Total assets

$ 317,708
66,085
20,548
347,189

28,878
13,384
12,290
57,168

Telecom
Services

12,668
9,687
2,981

1,788
—
1,193
—
1,193

366
—
690

3,691
879
—
5,272

Other
$ —
—
—

7,277
—
(7,277)
461
(6,816)

14
—
3

$ 66,071
968
—
67,019

Totals
$ 238,997
245,817
(6,820)

44,125
4,895
(55,840)
8,075
(47,765)
7,053
$ (40,712)

$ 3,513
1,136
7,058

$ 421,755
144,034
27,943
487,540

Totals
$ 482,153
399,715
82,438

40,710
1,491
40,237
6,981
47,218
4,651
$ 51,869

$ 3,422
1,012
8,599

$ 416,348
81,316
32,838
476,648

- 76 -

- 77 -
- 77 -

Year Ended January 31, 2018

Revenues
Cost of revenues
Gross profit
Selling, general and

administrative expenses

Impairment loss
Income (loss) from operations
Other income, net
Income (loss) before income taxes
Income tax expense
Net income

Power
Services
$ 814,544
675,362
139,182

23,356
—
115,826
5,391
$ 121,217

Industrial
Services
$ 65,303
58,283
7,020

7,401
584
(965)
—
(965)

Depreciation
Amortization of intangibles
Property, plant and equipment additions

885
350
1,362

1,607
682
2,837

Goodwill
Total assets

20,548
432,932

$ 13,781
44,849

NOTE 17 – CUSTOMER CONCENTRATIONS

Telecom
Services
12,968
9,845
3,123

1,395
—
1,728
—
1,728

Other
$ —
—
—

9,612
—
(9,612)
257
$ (9,355)

Totals
$892,815
743,490
149,325

41,764
584
106,977
5,648
112,625
(40,279)
$ 72,346

$ 2,779
1,032
4,826

274
—
625

$ 13
—
2

—
4,873

$ —
60,015

$ 34,329
542,669

The majority of the Company’s consolidated revenues relate to performance by the power industry services segment which
provided 57%, 76% and 91% of consolidated revenues for Fiscal 2020, 2019 and 2018, respectively.

For Fiscal 2020, the Company’s most significant customer relationships included two power industry service customers
which accounted for 22% and 15% of consolidated revenues, respectively. For Fiscal 2019, the Company’s most significant
customer relationships included four power industry service customers which accounted for 16%, 14%, 12% and 10% of
consolidated revenues, respectively. For Fiscal 2018, the Company’s most significant customer relationships included four
power industry service customers which accounted for 29%, 26%, 15% and 14% of consolidated revenues, respectively.

Invoiced amounts retained by three project owners were $6.5 million, $5.9 million and $4.0 million as of January 31, 2020,
respectively, which in the aggregate represented 82% of the total customer retention amount at that date. Amounts retained
by five project owners were $5.8 million, $4.5 million, $1.6 million, $1.3 million and $1.0 million as of January 31, 2019,
respectively, which in the aggregate represented 93% of the total customer retention amount at that date.

The accounts receivable balances from three major customers represented 24%, 21% and 12% of the corresponding
consolidated balance as of January 31, 2020, and accounts receivable balances from two major customers represented 25%
and 15% of the corresponding consolidated balance as of January 31, 2019.

NOTE 18 – QUARTERLY FINANCIAL INFORMATION (unaudited)

Certain unaudited financial information reported for the quarterly periods ended April 30, July 31, October 31 and January
31 included in the years ended January 31, 2020 and 2019 is presented below:

2020

Revenues
Gross (loss) profit
Loss from operations
Net (loss) income (1)
(Loss) income per share (1,2)
Basic
Diluted

April 30 (3)
$

49,544

(21,026)
(32,686)
(29,800)

July 31 (3)
$ 63,059
2,965
(7,073)
1,154

October 31
58,406
5,992
(6,143)
(6,855)

January 31 (3)
$ 67,988
5,249
(9,938)
(7,188)

Full Year
$ 238,997
(6,820)
(55,840)
(42,689)

$
$

(1.91)
(1.91)

$
$

0.07
0.07

$
$

(0.44)
(0.44)

$
$

(0.46)
(0.46)

$ (2.73)
$ (2.73)

- 78 -
- 78 -

- 79 -

2019

Revenues

Gross profit

Income (loss) from operations

Net income (loss) (1)

Income (loss) per share (1,2)

Basic

Diluted

April 30

July 31

$ 141,366

$ 136,670

October 31 (4)

116,459

January 31

Full Year

$ 87,658

$ 482,153

15,452

5,815

4,837

30,708

20,330

16,972

29,532

18,385

32,434

6,746

(4,293)

(2,207)

82,438

40,237

52,036

0.31

1.09

1.08

2.08

2.07

(0.14)

$ 3.34

$ 3.32

(1) The net (loss) income and (loss) income per share amounts are attributable to the stockholders of Argan, Inc.

(2)

(Loss) income per share amounts for the quarter periods may not cross-foot to the corresponding full-year amounts as the amounts for

each quarter are calculated independently of the calculations for the full-year amounts.

(3) The losses for the quarterly periods ended April 30, 2019, July 31, 2019 and January 31, 2020 were caused by the recognition of losses

on the TeesREP project by APC in the amounts of $27.6 million, $3.4 million and $2.6 million, respectively.

(4) The net income reported by the Company for the quarterly period ended October 31, 2018 reflected a favorable adjustment recorded to

recognize research and development tax credits in the amount of $16.5 million (see Note 13).

NOTE 19 – SUBSEQUENT EVENTS

The world-wide outbreak of COVID-19 is having a major impact on the normal business activities in the Republic of Ireland

(“Ireland”) and the UK. Almost all planned power plant outage and maintenance projects in Ireland have been postponed for

an indefinite period other than emergency tasks, which necessitated the temporary lay-off of the majority of APC’s skilled

and semi-skilled workers. Construction on the TeesREP project was suspended on March 24, 2020 due to the COVID-19

pandemic, pending preparations being made by the contractors and subcontractors to comply with new and evolving

government guidance concerning public health protocols. This action was taken for the protection of the health and safety of

the large workforce on site, while allowing consideration of whether a reduced workforce can return to the site to continue

key construction activities safely. Currently, only a small number of critical maintenance staff remains on site, following all

social distancing protocols in compliance with UK central government guidance. At the time of the suspension of work on

the TeesREP project, APC had completed approximately 90% of its subcontracted work. APC intends to pursue all

emergency governmental payroll subsidies and other government support for the emergency that may be available in Ireland

and the UK. Nonetheless, the project shutdowns will have a significant impact on the revenues and profitability of APC for

the foreseeable future until, at a minimum, the COVID-19 outbreak reduces materially.

In late March 2020, the governor of the state of Ohio announced a stay-at-home order that closes non-essential businesses

and limits the reasons people may leave their homes during the outbreak. However, construction and building trades are

among the professions allowed to keep working. Guernsey County, Ohio, is the location of the Company’s largest active

project. GPS has implemented measures to help keep workers safe as required under the state order. To the extent possible

under the circumstances, current work on the project, which includes primarily site preparation efforts, design

engineering and early phases of construction, has continued. However, as the project ramps-up into heavier construction

phases later this year, COVID-19 impacts could become more meaningful. GPS is monitoring supply-chain issues for

impacts on equipment delivery delays related to the COVID-19 health crisis. The ultimate impacts of the health crisis

on this significant GPS project and on the future revenues and financial performance of GPS are not known. The force

majeure clauses of the Company’s fixed-price construction contracts provide certain relief that helps to mitigate these

adverse effects.

The operational activities of TRC and SMC have not been meaningfully affected by the COVID-19 outbreak yet.

Nonetheless, revenues of these other businesses for the first few quarters of the fiscal year ending January 31, 2021 are

expected to be less than revenues of the comparable periods of Fiscal 2020. Most of the employees of the Company who

ordinarily work in the various offices of the Company located in the US, Ireland and the UK, have continued to perform

essential tasks remotely in compliance with various local and state orders and requests.

In a response to the crisis, the US Congress passed the Coronavirus, Aid, Relief, and Economic Security Act ( the “CARES

Act”) that was signed into law on March 27, 2020. This wide-ranging legislation is an emergency economic stimulus package

that includes spending and tax breaks aimed at strengthening the US economy and funding a nationwide effort to curtail the

effects of the outbreak of COVID-19. Some of the tax changes may impact the Company’s consolidated financial statements

positively including the removal of limitations on the future utilization of certain net operating losses and the re-establishment

of a loss carryback period for certain losses to five years. Due to the recent enactment of the sweeping emergency legislation,

the Company has not yet determined the impact, if any, that the tax changes and other provisions of the CARES Act will

have on its financial position, results of operations and cash flows.

Year Ended January 31, 2018

Revenues

Cost of revenues

Gross profit

Selling, general and

administrative expenses

Impairment loss

Income (loss) from operations

Other income, net

Income tax expense

Net income

Power

Services

Industrial

Services

$ 814,544

$ 65,303

675,362

139,182

58,283

7,020

23,356

—

115,826

5,391

7,401

584

(965)

—

Telecom

Services

12,968

9,845

3,123

1,395

—

1,728

—

Other

$ —

—

9,612

—

(9,612)

257

Income (loss) before income taxes

$ 121,217

(965)

1,728

$ (9,355)

Depreciation

Amortization of intangibles

Property, plant and equipment additions

350

1,362

682

2,837

885

1,607

274

Goodwill

Total assets

20,548

$ 13,781

432,932

44,849

NOTE 17 – CUSTOMER CONCENTRATIONS

—

625

—

4,873

$ 13

—

$ —

60,015

Totals

$892,815

743,490

149,325

41,764

584

106,977

5,648

112,625

(40,279)

$ 72,346

$ 2,779

1,032

4,826

$ 34,329

542,669

The majority of the Company’s consolidated revenues relate to performance by the power industry services segment which

provided 57%, 76% and 91% of consolidated revenues for Fiscal 2020, 2019 and 2018, respectively.

For Fiscal 2020, the Company’s most significant customer relationships included two power industry service customers

which accounted for 22% and 15% of consolidated revenues, respectively. For Fiscal 2019, the Company’s most significant

customer relationships included four power industry service customers which accounted for 16%, 14%, 12% and 10% of

consolidated revenues, respectively. For Fiscal 2018, the Company’s most significant customer relationships included four

power industry service customers which accounted for 29%, 26%, 15% and 14% of consolidated revenues, respectively.

Invoiced amounts retained by three project owners were $6.5 million, $5.9 million and $4.0 million as of January 31, 2020,

respectively, which in the aggregate represented 82% of the total customer retention amount at that date. Amounts retained

by five project owners were $5.8 million, $4.5 million, $1.6 million, $1.3 million and $1.0 million as of January 31, 2019,

respectively, which in the aggregate represented 93% of the total customer retention amount at that date.

The accounts receivable balances from three major customers represented 24%, 21% and 12% of the corresponding

consolidated balance as of January 31, 2020, and accounts receivable balances from two major customers represented 25%

and 15% of the corresponding consolidated balance as of January 31, 2019.

NOTE 18 – QUARTERLY FINANCIAL INFORMATION (unaudited)

Certain unaudited financial information reported for the quarterly periods ended April 30, July 31, October 31 and January

31 included in the years ended January 31, 2020 and 2019 is presented below:

2020

Revenues

Gross (loss) profit

Loss from operations

Net (loss) income (1)

(Loss) income per share (1,2)

Basic

Diluted

April 30 (3)

49,544

July 31 (3)

October 31

January 31 (3)

Full Year

$ 63,059

58,406

$ 67,988

$ 238,997

(21,026)

(32,686)

(29,800)

2,965

(7,073)

1,154

5,992

(6,143)

(6,855)

5,249

(9,938)

(7,188)

(6,820)

(55,840)

(42,689)

(1.91)

0.07

(0.44)

(0.46)

$ (2.73)

2019

Revenues
Gross profit
Income (loss) from operations
Net income (loss) (1)
Income (loss) per share (1,2)
Basic
Diluted

April 30
$ 141,366
15,452
5,815
4,837

July 31
$ 136,670
30,708
20,330
16,972

October 31 (4)
116,459
29,532
18,385
32,434

January 31
$ 87,658
6,746
(4,293)
(2,207)

Full Year
$ 482,153
82,438
40,237
52,036

$
$

0.31
0.31

$
$

1.09
1.08

$
$

2.08
2.07

$
$

(0.14)
(0.14)

$ 3.34
$ 3.32

(1) The net (loss) income and (loss) income per share amounts are attributable to the stockholders of Argan, Inc.
(2)

(Loss) income per share amounts for the quarter periods may not cross-foot to the corresponding full-year amounts as the amounts for
each quarter are calculated independently of the calculations for the full-year amounts.

(3) The losses for the quarterly periods ended April 30, 2019, July 31, 2019 and January 31, 2020 were caused by the recognition of losses

on the TeesREP project by APC in the amounts of $27.6 million, $3.4 million and $2.6 million, respectively.

(4) The net income reported by the Company for the quarterly period ended October 31, 2018 reflected a favorable adjustment recorded to

recognize research and development tax credits in the amount of $16.5 million (see Note 13).

NOTE 19 – SUBSEQUENT EVENTS

The world-wide outbreak of COVID-19 is having a major impact on the normal business activities in the Republic of Ireland
(“Ireland”) and the UK. Almost all planned power plant outage and maintenance projects in Ireland have been postponed for
an indefinite period other than emergency tasks, which necessitated the temporary lay-off of the majority of APC’s skilled
and semi-skilled workers. Construction on the TeesREP project was suspended on March 24, 2020 due to the COVID-19
pandemic, pending preparations being made by the contractors and subcontractors to comply with new and evolving
government guidance concerning public health protocols. This action was taken for the protection of the health and safety of
the large workforce on site, while allowing consideration of whether a reduced workforce can return to the site to continue
key construction activities safely. Currently, only a small number of critical maintenance staff remains on site, following all
social distancing protocols in compliance with UK central government guidance. At the time of the suspension of work on
the TeesREP project, APC had completed approximately 90% of its subcontracted work. APC intends to pursue all
emergency governmental payroll subsidies and other government support for the emergency that may be available in Ireland
and the UK. Nonetheless, the project shutdowns will have a significant impact on the revenues and profitability of APC for
the foreseeable future until, at a minimum, the COVID-19 outbreak reduces materially.

In late March 2020, the governor of the state of Ohio announced a stay-at-home order that closes non-essential businesses
and limits the reasons people may leave their homes during the outbreak. However, construction and building trades are
among the professions allowed to keep working. Guernsey County, Ohio, is the location of the Company’s largest active
project. GPS has implemented measures to help keep workers safe as required under the state order. To the extent possible
under the circumstances, current work on the project, which includes primarily site preparation efforts, design
engineering and early phases of construction, has continued. However, as the project ramps-up into heavier construction
phases later this year, COVID-19 impacts could become more meaningful. GPS is monitoring supply-chain issues for
impacts on equipment delivery delays related to the COVID-19 health crisis. The ultimate impacts of the health crisis
on this significant GPS project and on the future revenues and financial performance of GPS are not known. The force
majeure clauses of the Company’s fixed-price construction contracts provide certain relief that helps to mitigate these
adverse effects.

The operational activities of TRC and SMC have not been meaningfully affected by the COVID-19 outbreak yet.
Nonetheless, revenues of these other businesses for the first few quarters of the fiscal year ending January 31, 2021 are
expected to be less than revenues of the comparable periods of Fiscal 2020. Most of the employees of the Company who
ordinarily work in the various offices of the Company located in the US, Ireland and the UK, have continued to perform
essential tasks remotely in compliance with various local and state orders and requests.

In a response to the crisis, the US Congress passed the Coronavirus, Aid, Relief, and Economic Security Act ( the “CARES
Act”) that was signed into law on March 27, 2020. This wide-ranging legislation is an emergency economic stimulus package
that includes spending and tax breaks aimed at strengthening the US economy and funding a nationwide effort to curtail the
effects of the outbreak of COVID-19. Some of the tax changes may impact the Company’s consolidated financial statements
positively including the removal of limitations on the future utilization of certain net operating losses and the re-establishment
of a loss carryback period for certain losses to five years. Due to the recent enactment of the sweeping emergency legislation,
the Company has not yet determined the impact, if any, that the tax changes and other provisions of the CARES Act will
have on its financial position, results of operations and cash flows.

- 78 -

- 79 -
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ARGAN, INC.

Senior Management
Rainer H. Bosselmann
Chairman of the Board of Directors and
Chief Executive Officer

David H. Watson
Senior Vice President, Chief Financial Officer,
Treasurer and Secretary

Richard H. Deily
Vice President, Corporate Controller

Directors
Rainer H. Bosselmann
Cynthia A. Flanders
Peter W. Getsinger
William F. Griffin, Jr.
John R. Jeffrey, Jr.
Mano Koilpillai
William F. Leimkuhler
W.G. Champion Mitchell
James W. Quinn

(This page intentionally left blank)

ABOUT US

CORPORATE HEADQUARTERS
Argan, Inc.
One Church Street, Suite 201
Rockville, Maryland 20850
301-315-0027 / 301-315-0064 (fax)
www.arganinc.com

STOCKHOLDER INFORMATION
Common Stock Market Data
Our Common Stock is listed on the NYSE under the symbol
AGX. The following table sets forth the high and low closing
prices for our Common Stock for each of the quarters during
the fiscal years ended January 31, 2020, 2019 and 2018.

Fiscal Year Ended January 31, 2020
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter

Fiscal Year Ended January 31, 2019
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter

Fiscal Year Ended January 31, 2018
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter

High
Close
$ 51.88
$50.87
$43.73
$43.39
High
Close
$ 44.80
$41.40
$45.40
$46.83
High
Close
$ 74.50
$72.05
$69.60
$68.90

Low
Close
$41.62
$38.40
$37.54
$34.10
Low
Close
$36.80
$35.30
$38.65
$35.92
Low
Close
$63.85
$58.70
$ 58.95
$41.85

Copies of the 2020 Annual Report on Form 10-K as filed with the
Securities and Exchange Commission are available without
charge to Stockholders of record as of April 30, 2020 upon
request at the Corporate Headquarters address.

SUBSIDIARIES
Gemma Power Systems
www.gemmapower.com
The Roberts Company
www.robertscompany.com
Atlantic Projects Company
www.atlanticprojects.com
SMC Infrastructure Solutions
www.smcinc.biz

CORPORATE INFORMATION
Annual Meeting
The Annual Meeting of Argan, Inc. will be held
on June 23, 2020 at 11:00 a.m. in the Conference Center,
Suite 104, One Church Street, Rockville, Maryland 20850

Auditors
Grant Thornton LLP
Philadelphia, Pennsylvania

Counsel
Culhane Meadows PLLC
New York, New York

Transfer Agent
Continental Stock Transfer & Trust Company
New York, New York

ONE CHURCH STREET

SUITE 201

ROCKVILLE, MD 20850

301-315-0027