ARGAN INC (AGX)
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SEC company page: https://www.sec.gov/edgar/browse/?CIK=100591. Latest filing source: 0001104659-26-035216.
Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
|---|---|---|---|---|
| Revenue | 944,606,000 | USD | 2026 | 2026-03-26 |
| Net income | 137,774,000 | USD | 2026 | 2026-03-26 |
| Assets | 1,186,354,000 | USD | 2026 | 2026-03-26 |
Financials
Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-26. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000100591.json. Derived margins are computed from the extracted annual SEC facts.
| Metric | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 |
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 675,047,000 | 892,815,000 | 482,153,000 | 238,997,000 | 392,206,000 | 509,370,000 | 455,040,000 | 573,333,000 | 874,179,000 | 944,606,000 |
| Net income | 70,328,000 | 72,011,000 | 52,036,000 | -42,689,000 | 23,851,000 | 38,244,000 | 33,098,000 | 32,358,000 | 85,459,000 | 137,774,000 |
| Operating income | 112,254,000 | 106,977,000 | 40,237,000 | -55,840,000 | 23,026,000 | 44,510,000 | 41,669,000 | 36,458,000 | 88,195,000 | 134,701,000 |
| Gross profit | 146,711,000 | 149,325,000 | 82,438,000 | -6,820,000 | 62,067,000 | 99,732,000 | 86,361,000 | 80,834,000 | 140,989,000 | 193,678,000 |
| Diluted EPS | 4.50 | 4.56 | 3.32 | -2.73 | 1.51 | 2.40 | 2.33 | 2.39 | 6.15 | 9.74 |
| Assets | 644,488,000 | 542,669,000 | 476,648,000 | 487,540,000 | 602,630,000 | 553,585,000 | 489,487,000 | 598,229,000 | 836,227,000 | 1,186,354,000 |
| Liabilities | 351,919,000 | 184,541,000 | 82,276,000 | 146,510,000 | 280,222,000 | 227,990,000 | 208,590,000 | 307,290,000 | 484,370,000 | 724,092,000 |
| Stockholders' equity | 291,632,000 | 358,085,000 | 394,568,000 | 339,249,000 | 320,667,000 | 326,392,000 | 280,897,000 | 290,939,000 | 351,857,000 | 462,262,000 |
| Cash and cash equivalents | 167,198,000 | 122,107,000 | 164,318,000 | 167,363,000 | 366,671,000 | 350,472,000 | 173,947,000 | 197,032,000 | 145,263,000 | 339,481,000 |
| Net margin | 10.42% | 8.07% | 10.79% | -17.86% | 6.08% | 7.51% | 7.27% | 5.64% | 9.78% | 14.59% |
| Operating margin | 16.63% | 11.98% | 8.35% | -23.36% | 5.87% | 8.74% | 9.16% | 6.36% | 10.09% | 14.26% |
Financial Charts
Quarterly
Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-06-04. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000100591.json.
| Quarter | End Date | Revenue | Net Income | Diluted EPS | Method |
|---|---|---|---|---|---|
| 2023-Q2 | 2022-07-31 | 0.30 | reported discrete quarter | ||
| 2023-Q3 | 2022-10-31 | 0.56 | reported discrete quarter | ||
| 2024-Q1 | 2023-04-30 | 0.16 | reported discrete quarter | ||
| 2024-Q2 | 2023-07-31 | 141,349,000 | 12,767,000 | 0.94 | reported discrete quarter |
| 2024-Q3 | 2023-10-31 | 163,755,000 | 5,464,000 | 0.40 | reported discrete quarter |
| 2024-Q4 | 2024-01-31 | 164,554,000 | 12,018,000 | derived Q4 = FY annual - nine-month YTD | |
| 2025-Q1 | 2024-04-30 | 157,682,000 | 7,882,000 | 0.58 | reported discrete quarter |
| 2025-Q2 | 2024-07-31 | 227,015,000 | 18,198,000 | 1.31 | reported discrete quarter |
| 2025-Q3 | 2024-10-31 | 257,008,000 | 28,010,000 | 2.00 | reported discrete quarter |
| 2025-Q4 | 2025-01-31 | 232,474,000 | 31,369,000 | derived Q4 = FY annual - nine-month YTD | |
| 2026-Q1 | 2025-04-30 | 193,660,000 | 22,550,000 | 1.60 | reported discrete quarter |
| 2026-Q2 | 2025-07-31 | 237,743,000 | 35,275,000 | 2.50 | reported discrete quarter |
| 2026-Q3 | 2025-10-31 | 251,153,000 | 30,737,000 | 2.17 | reported discrete quarter |
| 2026-Q4 | 2026-01-31 | 262,050,000 | 49,212,000 | derived Q4 = FY annual - nine-month YTD | |
| 2027-Q1 | 2026-04-30 | 290,954,000 | 46,063,000 | 3.24 | reported discrete quarter |
Quarterly Charts
Macro Cross-References
- CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- UNRATE - Unemployment Rate
- FEDFUNDS - Federal Funds Effective Rate
- CES0500000003 - Average Hourly Earnings of All Employees, Total Private
- DFEDTARU - Federal Funds Target Range - Upper Limit
- DFEDTARL - Federal Funds Target Range - Lower Limit
- DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
- CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
- CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
- PCEPI - Personal Consumption Expenditures: Chain-type Price Index
- PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- PPIACO - Producer Price Index by Commodity: All Commodities
- T10YIE - 10-Year Breakeven Inflation Rate
- U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- PAYEMS - All Employees, Total Nonfarm
- CIVPART - Labor Force Participation Rate
- EMRATIO - Employment-Population Ratio
- UNEMPLOY - Unemployed
- CE16OV - Employment Level
- ICSA - Initial Claims
- JTSJOL - Job Openings: Total Nonfarm
- JTSQUR - Quits: Total Nonfarm
- GDPC1 - Real Gross Domestic Product
- A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
- INDPRO - Industrial Production: Total Index
- TCU - Capacity Utilization: Total Index
- HOUST - New Privately-Owned Housing Units Started: Total Units
- PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- RSAFS - Advance Retail Sales: Retail Trade
- PCE - Personal Consumption Expenditures
- DSPIC96 - Real Disposable Personal Income
- PSAVERT - Personal Saving Rate
- M2SL - M2
- BOPGSTB - U.S. International Trade in Goods and Services: Balance
- MSPUS - Median Sales Price of Houses Sold for the United States
- HSN1F - New One Family Houses Sold: United States
- RHORUSQ156N - Homeownership Rate in the United States
- TTLCONS - Total Construction Spending: Total Construction in the United States
- RRVRUSQ156N - Rental Vacancy Rate in the United States
- TOTALSL - Total Consumer Credit Owned and Securitized
- REVOLSL - Revolving Consumer Credit Owned and Securitized
- DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
- GDP - Gross Domestic Product
- GPDI - Gross Private Domestic Investment
- GCE - Government Consumption Expenditures and Gross Investment
- PCEC - Personal Consumption Expenditures
- NETEXP - Net Exports of Goods and Services
- GFDEBTN - Federal Debt: Total Public Debt
- GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- FYFSD - Federal Surplus or Deficit
- FGRECPT - Federal Government Current Receipts
- FGEXPND - Federal Government: Current Expenditures
- MANEMP - All Employees, Manufacturing
- USCONS - All Employees, Construction
- USTRADE - All Employees, Retail Trade
- USFIRE - All Employees, Financial Activities
- USGOVT - All Employees, Government
- AWHAETP - Average Weekly Hours of All Employees, Total Private
- DGORDER - Manufacturers' New Orders: Durable Goods
- NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- BUSINV - Total Business Inventories
- EXPGS - Exports of Goods and Services
- IMPGS - Imports of Goods and Services
- IR - Import Price Index (End Use): All Commodities
- PPIFIS - Producer Price Index by Commodity: Final Demand
Latest quarter (10-Q)
Latest 10-Q source: 0001104659-26-070536.
ITEM 2. 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 April 30, 2026, and the results of their operations for the three months ended April 30, 2026 and 2025, and should be read in conjunction with (i) the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report 15 on Form 10-Q and (ii) the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for Fiscal 2026 that was filed with the SEC on March 26, 2026 (the “Annual Report”). 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 2 and elsewhere in this Quarterly Report on Form 10-Q that may constitute “forward-looking statements.” The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “foresee,” “should,” “would,” “could,” or other similar expressions are intended to identify forward-looking statements. Our forward-looking statements, financial position and results of operations, are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for existing operations that do not include the potential impacts 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 this Quarterly Report on Form 10-Q and our Annual Report. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove to be 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 The Company is primarily an engineering and construction firm that conducts operations through its wholly-owned subsidiaries across three distinct reportable business segments: Power, Industrial, and Teledata. Power: Our Power segment provides a full range of engineering, procurement, construction, commissioning, maintenance, project development, and technical consulting services to the power generation market. The customers include primarily independent power producers, public utilities, power plant equipment suppliers, and other commercial firms with significant power requirements. Customer projects are located in the U.S., Ireland, and the U.K. Industrial: Our Industrial segment provides on-site services that support new plant construction and additions, maintenance turnarounds, shutdowns, and emergency mobilizations for industrial operations primarily located in the Southeast region of the U.S. and that may include the fabrication, delivery, and installation of metal components such as piping systems and pressure vessels. Teledata: Our Teledata segment provides project management, construction, installation, maintenance, repair, and emergency response services across power distribution and information, communications, and data networks. The segment’s customers include commercial and industrial organizations, as well as state and federal government agencies, primarily throughout the Mid-Atlantic region of the U.S. Together, these segments enable us to serve a wide range of client needs across power generation, industrial construction, and teledata infrastructure, establishing our presence as a diversified provider in the construction and engineering sectors. We may make opportunistic acquisitions and/or investments by identifying companies with significant potential for profitable growth and realizable synergies with one or more of our existing businesses. As a result, we may have more than one industrial focus depending on the opportunities and/or needs of our customers. Acquired companies will be operated in a manner that we believe will best provide long-term and enduring value for our stockholders. Market Outlook Most of our consolidated revenues relate to performance in the U.S. by the Power segment, which provides EPC services to design, build, and commission large-scale energy projects. In the U.S., electricity demand has reached its highest level in two decades, driven by the build-out of data centers supporting artificial intelligence technologies, the adoption of electric vehicles, and the reshoring of manufacturing activities. Keeping up with growing energy demand is further challenged by the aging fleet of traditional power facilities that are at or nearing the end of their operational lives. 16 Throughout the U.S., the risk of electricity shortages is rising as the retirement of traditional power plants outpaces their replacements. Grid operators have emphasized the need for additional dispatchable, reliable power sources to support system stability, particularly during periods of peak demand or reduced renewable output. Natural gas-fired power plants are expected to remain a key component of future capacity additions due to their cost-effectiveness, reliability, and ability to support intermittent energy sources. While utility-scale solar, wind, and battery storage projects continue to expand their prevalence – supported by declining capital costs, improved energy storage systems, and policy incentives – they often cannot provide the same level of consistent, around-the-clock power generation as thermal plants. Despite their increasing cost competitiveness and their rapid deployment over the past several years, the long-term trajectory of renewables may be influenced by shifts in energy policy, evolving regulatory frameworks, and grid integration challenges. The pace of new power generation development continues to be constrained by a limited number of experienced EPC contractors, equipment supply limitations, interconnection delays, and specialized labor availability. These dynamics have contributed to a supply-constrained environment for large-scale power generation construction, which we believe supports a strong pipeline of project opportunities for contractors with demonstrated execution experience. Our backlog growth over the past year reflects these conditions and the continued demand for experienced contractors capable of executing complex power generation projects. However, the timing and extent of future project awards remain subject to a variety of factors, including regulatory developments, financing conditions, permitting timelines, equipment availability, and broader economic conditions, any of which could affect the pace at which new power generation projects move forward. Recent changes in U.S. trade policy, including the implementation of new or increased tariffs, have introduced cost and supply chain uncertainties affecting certain construction materials and equipment. Tariffs on imported materials, including steel and aluminum, could significantly impact the cost of building power plants and may cause import delays, increasing lead times necessary for materials to arrive at our construction sites. The resulting rise in material costs and delivery delays could lead to higher overall project costs and changes to project timelines. As the current U.S. administration’s approach to tariffs remains fluid, the full extent of these effects remains uncertain. We continue to monitor developments closely, as prolonged or expanded trade restrictions could negatively affect project costs, timing, and customer demand. Project Backlog As of April 30, 2026 and January 31, 2026, our consolidated project backlog amounts of $2.8 billion and $2.9 billion, respectively, consisted substantially of projects within our Power segment. The amount of our project backlog reported at a point in time represents the expected revenue from the remaining work on projects where the scope is sufficiently defined and the contract value can be reasonably estimated. While the inclusion of contract values in project backlog involves management judgment based on the facts and circumstances, we typically include the value of the contract in project backlog upon receiving a notice to proceed from the project owner. In making the determination of project backlog, management may consider several factors, including terms of the contract, the degree of project financing and permitting, and historical experience with similar contracts. The start of new projects is primarily controlled by project owners and delays may occur that are beyond our control. 860 MW Thermal Project In October 2025, we entered into an EPC services contract and received the corresponding full notice to proceed (“FNTP”) for the construction of an approximately 860 MW natural gas-fired power plant located in the Electric Reliability Council of Texas (“ERCOT”) market. Construction began during the fourth quarter of Fiscal 2026, and the project has an expected completion date in calendar year 2028. 1.4 GW Thermal Project In October 2025, we received FNTP on an EPC services contract for a 1.4 GW combined-cycle natural gas-fired power plant in Ward County, Texas. Construction began during the fourth quarter of Fiscal 2026, and the project has an expected completion date in calendar year 2029. 17 170 MW Thermal Project In July 2025, we entered into an EPC services contract for the construction of a power plant with a planned electricity generation capacity of approximately 170 MW in County Meath, Ireland. Project activity commenced in the third quarter of Fiscal 2026. The project has an expected project completion date in calendar year 2028. Sandow Lakes Power Station In April 2025, we received a notice to proceed on an EPC services contract to build a 1.2 GW combined-cycle natural gas-fired power plant in Lee County, Texas. Project activity commenced in the second quarter of Fiscal 2026. The project has an expected completion date in calendar year 2028. Tarbert Next Generation Power Station In January 2025, we entered into an EPC services contract to build an approximately 300 MW biofuel power plant located in County Kerry, Ireland. The Tarbert Next Generation Power Station will run on 100% sustainable biofuels, specifically hydrotreated vegetable oil. Project activity commenced in the first quarter of Fiscal 2026. The project has an expected completion date towards the end of calendar year 2027. 700 MW Combined-Cycle Project In December 2024, we entered into an EPC services contract and received the corresponding FNTP to build an approximately 700 MW combined-cycle natural gas-fired power plant located in the U.S. Project activity commenced in the fourth quarter of Fiscal 2025. Project completion is scheduled for calendar year 2028. 405 MW Midwest Solar Project In August 2024, we received FNTP on an EPC services contract to construct a utility-scale solar field in Illinois with the capacity to provide 405 MW of electrical power. Project completion is scheduled for the fiscal year ending January 31, 2027 (“Fiscal 2027”). Midwest Solar and Battery Projects Between January and early May 2024, we received FNTPs for three state-of-the-art solar energy and battery energy storage facilities in Illinois. The three projects will cumulatively represent 160 MW of electrical power and 22 MW of energy storage. Two of these projects were completed in Fiscal 2025. Substantial completion for the remaining proje [Excerpt truncated for page length; source filing is linked above.]
Latest 10-K MD&A
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This section of our 2026 Annual Report may include projections, assumptions and beliefs that are intended to be “forward-looking statements.” They should be read while considering our cautionary statement regarding “forward-looking statements” presented at the beginning of this 2026 Annual Report. The following discussion summarizes the financial position of Argan, Inc. and its subsidiaries as of January 31, 2026, and the results of their operations for Fiscal 2026 and
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Fiscal 2025, and should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in Item 8 of this 2026 Annual Report.
Refer to “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, 2025, that was filed with the SEC on March 27, 2025, for a discussion of financial trends, variance drivers and other significant matters for Fiscal 2025 as compared with Fiscal 2024.
Overview
The Company is primarily a construction firm that conducts operations through its wholly-owned subsidiaries across three distinct reportable business segments.
Power: Our Power segment provides a full range of engineering, procurement, construction, commissioning, maintenance, project development and technical consulting services to the power generation market. The customers include primarily independent power producers, public utilities, power plant equipment suppliers and other commercial firms with significant power requirements. Customer projects are located in the U.S., Ireland and the U.K.
Industrial: Our Industrial segment provides field services supporting new plant construction and plant additions for industrial facilities primarily located in the Southeast region of the U.S. The segment also fabricates, delivers, and installs metal components, including piping systems and pressure vessels, and performs maintenance turnarounds, shutdowns, and emergency mobilizations.
Teledata: Our Teledata segment provides project management, construction, installation, maintenance, repair, and emergency response services across power distribution and information, communications, and data networks. The segment’s customers include commercial and industrial organizations, as well as state and federal government agencies, primarily throughout the Mid-Atlantic region of the U.S.
Project Backlog
As of January 31, 2026 and 2025, our consolidated project backlog amount of $2.9 billion and $1.4 billion, respectively, consisted substantially of projects within our Power segment.
The amount of our project backlog reported at a point in time represents the expected revenues from the remaining work on projects where the scope is sufficiently defined and the contract value can be reasonably estimated. While the inclusion of contract values in project backlog involves management judgment based on the facts and circumstances, we typically include the value of the contract in project backlog upon receiving a notice to proceed from the project owner. In making the determination of project backlog, management may consider several factors, including terms of the contract, the degree of project financing and permitting, and historical experience with similar contracts. The start of new projects is primarily controlled by project owners and delays may occur that are beyond our control.
We are committed to the construction of state-of-the-art, natural gas-fired power plants, as important elements of our country’s electricity-generation mix now and in the future. We target natural gas-fired power plants, renewable energy plants, energy storage, and industrial construction opportunities in the U.S., and natural gas-fired power plants and biomass power plants in Ireland and the U.K. Our vision is to safely contribute to the construction of the energy infrastructure and state-of-the-art industrial facilities that are essential to future economic prosperity in the areas where we operate. We intend to realize this vision with motivated, creative, high-energy and customer-driven teams that are committed to delivering the best possible project results each and every time.
860 MW Thermal Project
In October 2025, we entered an EPC services contract and received the corresponding full notice to proceed (“FNTP”) for the construction of an approximately 860 MW natural gas-fired power plant located in the ERCOT market. Construction began during the fourth quarter of Fiscal 2026, and the project has an expected completion date in calendar year 2028.
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1.4 GW Thermal Project
In October 2025, we received FNTP on an EPC services contract for a 1.4 GW combined-cycle natural gas-fired power plant in Ward County, Texas. Construction began during the fourth quarter of Fiscal 2026, and the project has an expected completion date in calendar year 2029.
170 MW Thermal Project
In July 2025, we entered an EPC services contract for the construction of a power plant with a planned electricity generation capacity of approximately 170 MW in County Meath, Ireland. Project activity commenced in the third quarter of Fiscal 2026. The project has an expected project completion date in calendar year 2028.
Sandow Lakes Power Station
In April 2025, we received a notice to proceed on an EPC services contract to build a 1.2 GW combined-cycle natural gas-fired power plant in Lee County, Texas. Project activity commenced in the second quarter of Fiscal 2026. The project has an expected completion date in calendar year 2028.
Tarbert Next Generation Power Station
In January 2025, we entered an EPC services contract to build an approximately 300 MW biofuel power plant located in County Kerry, Ireland. The Tarbert Next Generation Power Station will run on 100% sustainable biofuels, specifically hydrotreated vegetable oil. Project activity commenced in the first quarter of Fiscal 2026. The project has an expected completion date towards the end of calendar year 2027.
700 MW Combined-Cycle Project
In December 2024, we entered an EPC services contract and received the corresponding FNTP to build an approximately 700 MW combined-cycle natural gas-fired power plant located in the U.S. Project activity commenced in the fourth quarter of Fiscal 2025. Project completion is scheduled for calendar year 2028.
Louisiana LNG Facility
In June 2024, we entered a subcontract and received FNTP for the installation of five 90 MW gas turbines for the dedicated supply of power to a LNG facility in Louisiana. This project, led by our Power segment, was a collaboration with our Industrial segment. Project work was completed during the first half of Fiscal 2026.
405 MW Midwest Solar Project
In August 2024, we received FNTP on an EPC services contract to construct a utility-scale solar field in Illinois with the capacity to provide 405 MW of electrical power. Project completion is scheduled for Fiscal 2027.
Midwest Solar and Battery Projects
Between January and early May 2024, we received FNTPs for three state-of-the-art solar energy and battery energy storage facilities in Illinois. The three projects will cumulatively represent 160 MW of electrical power and 22 MW of energy storage. Two of these projects were completed in Fiscal 2025. Completion of the final project, which has experienced certain regulatory delays, is expected to occur within the first half of Fiscal 2027.
Trumbull Energy Center
In November 2022, we received FNTP related to an EPC services contract for the construction of a 950 MW combined-cycle natural gas-fired power plant in Lordstown, Ohio. Substantial completion of the project was reached during the fourth quarter of Fiscal 2026. Project completion is scheduled for the first half of Fiscal 2027.
Industrial Segment Project Backlog
As of January 31, 2026, our Industrial segment’s project backlog was approximately $253.0 million as compared to $53.2 million on January 31, 2025. During Fiscal 2026, the Industrial segment added contracts to its project backlog related to
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an automotive plant, data centers, an aluminum rolling and recycling facility, a water treatment plant, and facilities related to certain other industries.
Contract Termination
In prior fiscal years, our U.K subsidiary recognized an estimated contract loss related to an overseas project in the amount of approximately $13.4 million, of which $3.4 million was recorded during Fiscal 2025 and the remainder was recorded in Fiscal 2024. Our U.K subsidiary has significant billable receivables, unresolved contract variations and claims for extensions of time, among other issues, related to an overseas project (see Note 10 to the accompanying consolidated financial statements).
Market Outlook
Power Market Outlook
Electricity demand in the United States has increased to its highest levels in approximately two decades, driven by continued growth in data centers, increased electrification across transportation and industrial sectors, and ongoing onshoring of manufacturing activities. At the same time, a significant portion of the existing power generation fleet is aging or being retired, creating challenges for grid reliability as capacity additions struggle to keep pace with rising demand.
Grid operators have emphasized the need for additional dispatchable, reliable power sources to support system stability, particularly during periods of peak demand or reduced renewable output. These dynamics continue to influence investment decisions across the power generation sector. The timing and economics of power generation projects may also be influenced by evolving federal, state, and local regulatory requirements, permitting processes, and energy-related incentive programs, which can affect development schedules, financing, and project viability.
Natural gas remains the primary source of utility-scale electricity generation in the United States and continues to play a central role in maintaining grid reliability. The retirement of coal-fired facilities, combined with the efficiency, flexibility, and lower emissions profile of modern combined-cycle and simple-cycle gas plants, has supported sustained demand for natural gas-fired generation.
The pace of new gas-fired power plant development faces certain challenges, including equipment supply constraints, the limited number of EPC contractors, interconnection delays, evolving regulatory requirements, and financing considerations. In addition, long-term clean energy and decarbonization goals adopted by various jurisdictions may influence development timelines. However, recent actions by grid operators and state governments highlight a growing recognition of the importance of dispatchable generation in supporting reliability. Programs designed to incentivize new power capacity, including gas-fired facilities, reflect this focus. We believe that the operating efficiency, fuel availability, and operational flexibility of natural gas-fired power plants position them to remain a critical component of the U.S. generation mix, particularly as a complement to renewable energy resources.
Utility-scale solar generation and battery storage capacity continue to grow in the United States, supported by declining technology costs, advancements in energy storage, and available incentives. Battery storage, in particular, has become increasingly important in addressing the intermittency of renewable generation and enhancing grid flexibility. While renewable capacity additions are expected to continue, these resources typically require firm, dispatchable generation to ensure reliability. As a result, renewable energy development often requires natural gas-fired generation and energy storage solutions to support system balance and performance.
Behind-the-meter ("BTM") generation is becoming more prevalent among commercial and industrial customers, particularly data center developers facing tight timelines and interconnection constraints. As BTM resources expand alongside renewables, grid operators may require additional flexible dispatchable generation to maintain reliability, which could support continued demand for natural gas-fired power plants.
Nuclear energy may influence future generation capacity additions, with industry focus increasingly shifting toward small modular reactors ("SMRs") given the extended timelines, regulatory complexity, and high capital costs associated with
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conventional nuclear development. While interest in nuclear has grown due to its minimal carbon footprint, meaningful new capacity is generally not expected at scale for several years.
Our domestic operations of our Power segment historically has represented the predominant portion of our power-related revenues. However, overseas power markets may continue to provide important new power construction opportunities, particularly in Ireland and the United Kingdom. Both markets are pursuing ambitious renewable energy objectives while also emphasizing the need for flexible, dispatchable generation and grid-supporting technologies to maintain reliability as renewable penetration increases. In Ireland, energy policy continues to support the development of additional generation and grid support resources, including natural gas-fired generation, battery storage, and other technologies intended to enhance security of supply. In the U.K., energy policy continues to evolve, with ongoing efforts to expand renewable generation while recognizing the role of flexible conventional generation and grid infrastructure in supporting system reliability. We continue to pursue selective construction opportunities in these markets consistent with our experience in power generation and related infrastructure.
Across many of these markets, the demand for new power generation capacity and related infrastructure is occurring at a pace that exceeds the industry’s ability to construct new facilities in the near term. A limited number of experienced EPC contractors, along with constraints in specialized labor, major equipment manufacturing capacity, and project development timelines, have created a supply-constrained environment for large-scale power generation construction. As a result, project developers and utilities often rely on a relatively small group of contractors with demonstrated experience in the engineering and construction of large-scale power generation facilities.
We believe these market dynamics have contributed to a strong pipeline of project opportunities. Our backlog growth in recent periods reflects these conditions and the continued demand for experienced contractors capable of executing complex power generation projects. However, the timing and extent of future project awards remain subject to a variety of factors, including regulatory developments, financing conditions, permitting timelines, equipment availability, and broader economic conditions, any of which could affect the pace at which new power generation projects move forward.
Industrial Market Outlook
Industrial field services typically represent most of the revenues within our Industrial segment, with the remaining revenues derived primarily from metal fabrication projects. While the Industrial segment has executed projects across the U.S., its core operating footprint is concentrated in the Southeastern U.S., a region that continues to attract industrial investment due to favorable business climates, established transportation infrastructure, access to modern seaports, and supportive state and local economic development programs.
Demand for industrial construction services in this region continues to be driven by increased manufacturing investment, infrastructure upgrades, data center development, biotechnology and life sciences projects, energy storage deployment, and clean water and environmental initiatives. In addition, ongoing domestic manufacturing expansion, digital infrastructure investment, and supply chain realignment have supported construction activity across a range of industrial end markets, creating opportunities for large-scale, complex construction projects aligned with the Industrial segment’s capabilities.
While the industrial construction market continues to face headwinds such as rising labor costs, skilled labor availability constraints, and supply chain volatility, near-term activity levels are expected to remain supported by continued investment in manufacturing, data centers, infrastructure, and energy-related facilities. We believe the Industrial segment’s geographic footprint, project execution experience, and ability to support industrial customers across multiple end markets position it to compete effectively for projects within its core regions.
Teledata Market Outlook
In regards to our Teledata segment, demand for telecommunications and technology infrastructure continues to grow as utilities, businesses, and public sector entities invest in network capacity, connectivity, and digital infrastructure. Increased data center development, expansion of broadband and fiber networks, deployment of IoT-enabled systems, and ongoing grid modernization initiatives are driving demand for outside plant and inside plant construction and technology wiring services. In addition, utilities and commercial customers continue to upgrade communications infrastructure to support advanced metering, distributed energy resources, and other digital grid technologies. These trends are expected to support continued demand for the services provided by our Teledata segment.
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Comparison of the Results of Operations for Fiscal 2026 and Fiscal 2025
The following schedule compares our operating results for Fiscal 2026 and Fiscal 2025 (dollars in thousands, except per share data):
Years Ended January 31,
2026
2025
$ Change
% Change
REVENUES
Power
$
756,499
$
693,036
$
63,463
9.2
%
Industrial
167,553
167,624
(71)
NM
Teledata
20,554
13,519
7,035
52.0
Revenues
944,606
874,179
70,427
8.1
COST OF REVENUES
Power
587,160
577,563
9,597
1.7
Industrial
147,226
145,329
1,897
1.3
Teledata
16,542
10,298
6,244
60.6
Cost of revenues
750,928
733,190
17,738
2.4
GROSS PROFIT
193,678
140,989
52,689
37.4
Selling, general and administrative expenses
58,977
52,794
6,183
11.7
INCOME FROM OPERATIONS
134,701
88,195
46,506
52.7
Other income, net
25,808
23,009
2,799
12.2
INCOME BEFORE INCOME TAXES
160,509
111,204
49,305
44.3
Provision for income taxes
22,735
25,745
(3,010)
(11.7)
NET INCOME
$
137,774
$
85,459
$
52,315
61.2
%
DILUTED EARNINGS PER SHARE
$
9.74
$
6.15
$
3.59
58.5
%
NM – not meaningful
Revenues
Power Segment
The revenues of the Power segment increased by 9.2%, or $63.5 million, to $756.5 million for Fiscal 2026 compared with revenues of $693.0 million for Fiscal 2025. The increase was primarily attributable to increased construction activity for the 405 MW Midwest Solar Project, the 700 MW Combined-Cycle Project, and the commencement of several recently started gas-fired projects. The increase in revenues between years was partially offset by decreased construction activities associated with the Trumbull Energy Center, the Midwest Solar and Battery Projects, the Louisiana LNG Facility, the ESB FlexGen Peaker Plants, and the Shannonbridge Power Project, as those projects are in their later stages or have fully concluded. The revenues of this business represented approximately 80.1% of consolidated revenues for Fiscal 2026 and 79.3% of consolidated revenues for the prior fiscal year. The project backlog amounts for the Power reportable segment as of January 31, 2026 and 2025 were $2.7 billion and $1.3 billion, respectively.
Industrial Segment
The revenues of the Industrial segment were essentially flat at $167.6 million for Fiscal 2026 compared to $167.6 million for Fiscal 2025, as increased field services construction activities were largely offset by decreased supporting vessel fabrication work between periods. The revenues of this business represented approximately 17.7% of consolidated revenues for Fiscal 2026 and 19.2% of consolidated revenues for the prior fiscal year. The project backlog amounts for the Industrial segment as of January 31, 2026 and 2025 were $253.0 million and $53.2 million, respectively.
Teledata Segment
The revenues of the Teledata segment were $20.6 million for Fiscal 2026 compared with revenues of $13.5 million for Fiscal 2025. The project backlog amounts for the Teledata segment as of January 31, 2026 and 2025 were $8.4 million and $3.6 million, respectively.
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Cost of Revenues
Due primarily to the increase in consolidated revenues for Fiscal 2026 compared with revenues for Fiscal 2025, consolidated cost of revenues also increased. These costs were $750.9 million and $733.2 million for Fiscal 2026 and Fiscal 2025, respectively.
For Fiscal 2026, consolidated gross profit was $193.7 million, representing a gross profit percentage of approximately 20.5% of consolidated revenues, compared with $141.0 million, or approximately 16.1% of consolidated revenues, for Fiscal 2025. The increase in gross profit margin between periods was primarily attributable to the changing mix of projects and contract types. Our international operations experienced a significant improvement in profitability, reflecting strong execution and strategic discipline. In addition, disciplined execution on the Trumbull Energy Center reduced project costs and enabled us to achieve substantial completion ahead of schedule. The gross profit percentages of corresponding revenues for the Power, Industrial and Teledata segments for Fiscal 2026 were 22.4%, 12.1% and 19.5%, respectively. The gross profit percentages of corresponding revenues for the Power, Industrial and Teledata segments for Fiscal 2025 were 16.7%, 13.3% and 23.8%, respectively.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $59.0 million for Fiscal 2026 and $52.8 million for Fiscal 2025, representing 6.2% and 6.0% of consolidated revenues, respectively. The increase was primarily due to higher incentive and stock-based compensation.
Other Income, Net
For Fiscal 2026 and Fiscal 2025, the net amounts of other income were $25.8 million and $23.0 million, respectively, which primarily reflected income earned during the periods on investments, cash and cash equivalents.
Provision for Income Taxes
We recorded income tax expense for Fiscal 2026 in the net amount of approximately $22.7 million. Our annual effective income tax rate for Fiscal 2026 was 14.2%. This tax rate differed from the statutory federal tax rate of 21% due to the favorable effects of the windfall benefit from stock-based compensation and the change in valuation allowance for NOLs. Partially offsetting these benefits were the unfavorable effects of state income taxes and certain nondeductible expense amounts.
We recorded income tax expense for Fiscal 2025 in the net amount of approximately $25.7 million. Our annual effective income tax rate for Fiscal 2025 was 23.2%. This tax rate differed from the statutory federal tax rate of 21% due to the unfavorable effect of state income taxes and the unfavorable effects of certain nondeductible expense amounts. Partially offsetting these unfavorable effects were the investment tax credit effect recorded in Fiscal 2025 related to our solar fund investments and the windfall benefit from stock-based compensation.
Liquidity and Capital Resources
As of January 31, 2026 and 2025, our balances of cash and cash equivalents were $339.5 million and $145.3 million, respectively, which represented an increase of $194.2 million between years.
The net amount of cash provided by operating activities for Fiscal 2026 was $414.7 million. Our net income for Fiscal 2026, adjusted favorably by the net amount of non-cash income and expense items, represented a source of cash in the total amount of $157.3 million. The temporary increase in contract liabilities of $214.7 million represented a source of cash, primarily due to the net effect of the early phase of construction activities on certain projects. The decrease of accounts receivable in the amount of $42.3 million represented a source of cash during the period. The increase in the combined level of accounts payable and accrued expenses in the amount of $28.6 million represented a source of cash during the period as well. The increase in contract assets of $15.0 million and increase in other assets of $13.3 million represented uses of cash during the period.
For Fiscal 2026, we used $182.0 million for investing activities. During Fiscal 2026, we used $171.7 million, net of maturities, to invest in available-for-sale (“AFS”) securities consisting primarily of U.S. Treasury notes. We purchased $150.0 million of CDs issued by the Bank and maturities of $150.0 million during the period offset those purchases. We
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also used $11.5 million to fund our remaining capital contribution obligation to a solar energy project and $3.9 million for purchases of property, plant and equipment. Lastly, we received a $5.0 million repayment of a note receivable during the period.
For Fiscal 2026, we used $42.6 million for financing activities, including $24.3 million used for the payment of regular cash dividends and $9.9 million used to repurchase shares of common stock pursuant to our share repurchase program. We also used $8.4 million for share-based award settlements, which represented payments for withholding taxes reimbursed by shares of common stock, net of proceeds received from stock option exercises. As of January 31, 2026, there were no restrictions with respect to intercompany payments among the holding company and our subsidiaries.
As of January 31, 2026, certain amounts of our cash equivalents were invested in money market funds with assets invested in cash, U.S. Treasury obligations, other obligations issued by U.S. Government agencies and sponsored enterprises, and repurchase agreements secured by such obligations. Most of our operating bank account balances are maintained with the Bank. We do maintain certain Euro-based bank accounts in Ireland and certain pound sterling-based bank accounts in the U.K. in support of our overseas operations.
To monitor the actual and necessary levels of liquidity for our business, we focus on working capital, or net liquidity, in addition to our cash balances. Our net liquidity increased by $119.6 million to $421.0 million as of January 31, 2026 from $301.4 million as of January 31, 2025, due primarily to our net income, partially offset by the payment of cash dividends, common stock repurchases, and settlements of share-based awards, net of withholding taxes paid. As we have no debt service, as our fixed asset acquisitions in a reporting period are typically low, and as our net liquidity includes our short-term investments and AFS investments, our levels of working capital are not subjected to the volatility that affects our levels of cash and cash equivalents.
We believe that cash on hand, our cash equivalents, cash that will be provided from the maturities of short-term investments and other debt securities and cash generated from our future operations, with or without funds available under our Credit Agreement, will be adequate to meet our general business needs in the foreseeable future. In general, we maintain significant liquid capital in our consolidated balance sheet to ensure the maintenance of our bonding capacity and to provide parent company performance guarantees for EPC and other construction projects.
However, any significant future acquisition, investment, or other 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.
Financing Arrangements
On May 24, 2024, we executed with the Bank the Credit Agreement with an expiration date of May 31, 2027. The Credit Agreement, which was amended on October 23, 2025, has a base lending commitment amount of $35.0 million and establishes the interest rate for revolving loans at SOFR plus 1.85%. In addition to the base commitment, the credit facility includes an accordion feature that allows for an additional commitment amount of $30.0 million, subject to certain conditions. 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 in the Credit Agreement. Further, on May 31, 2024, we entered a companion facility, in the amount of $25.0 million, pursuant to which an overseas subsidiary of the Company may cause the Bank’s European entity to issue letters of credit on its behalf that are secured by a blanket parent company guarantee issued by Argan to the Bank.
As of January 31, 2026 and 2025, we did not have any borrowings outstanding under the Credit Agreement. However, the Bank has issued a letter of credit in the total outstanding amount of $0.3 million as of January 31, 2026. As of January 31, 2025, there were no outstanding letters of credit issued under the credit facilities.
We have pledged most of the Company’s assets to secure its financing arrangements. The Bank’s consent is not required for acquisitions, divestitures, cash dividends or significant investments if 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. The Credit Agreement includes other terms, covenants and events of default that are customary for a credit facility of its size and nature, including a requirement to achieve positive adjusted earnings before interest, taxes, depreciation and amortization, as defined, over each rolling twelve-month measurement period. As of January 31, 2026, we were in compliance with the covenants and other requirements of the Credit Agreement.
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Contractual Obligations
During Fiscal 2026, there was no significant change in the nature or amounts of our contractual obligations. We estimate that the balance of such contractual obligations as of January 31, 2026, was less than $20.0 million. The largest items in this estimate, operating leases and contractual and deferred compensation, are amounts included as liabilities in our consolidated balance sheet. The remainder of such obligations relate primarily to open service arrangements. Outstanding commitments represented by open purchase orders and subcontracts related to our construction contracts have not been included in the estimated amounts of contractual obligations as such amounts are expected to be funded through past or future contract billings to customers. We do not have any significant obligations for materials or subcontracted services beyond those required to complete construction contracts awarded to us.
Performance Bonds and 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) to provide performance assurances to clients on behalf of one of our subsidiaries.
If our services performed under a guaranteed project would not be completed, or if it would be determined to have resulted in a material defect or other material deficiency, then we could be responsible for monetary damages or other legal remedies. As is typically required by any surety bond, we would be obligated to reimburse the issuer of any surety bond provided on behalf of a subsidiary for any cash payments made thereunder. The commitments under performance bonds generally end concurrently with the expiration of the related contractual obligation.
As of January 31, 2026, the estimated amount of our unsatisfied bonded performance obligations of all our subsidiaries was approximately $0.5 billion. In addition, as of January 31, 2026, the outstanding amount of bonds covering other risks, including warranty obligations and contract payment retentions related to completed activities, was $44.7 million.
When sufficient information about claims related to performance on projects would be available and monetary damages or other costs or losses would be determined to be probable, we would record such losses. 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 our 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, 2026 are not estimable.
Solar Energy Project Investments
We make investments in limited liability companies that make equity investments in solar energy projects that are eligible to receive energy tax credits, for which we have received substantially all the income tax benefits associated with those investments.
In Fiscal 2024, we invested $5.1 million in a solar tax credit entity and paid an additional $3.3 million in early Fiscal 2025 to satisfy our remaining capital commitment. Later in Fiscal 2025, we entered an investment opportunity in an additional solar tax credit entity, where we contributed $13.0 million in Fiscal 2025, followed by $11.5 million of remaining contributions in Fiscal 2026. As of January 31, 2026, we had no remaining cash investment commitments related to the solar tax credit entities. It is likely that we will evaluate opportunities to make other alternative energy project investments in the future.
Development Financing
We selectively participate in power plant project development and related financing activities. As is common in our industry, EPC contractors and third parties periodically form joint ventures, limited partnerships and limited liability companies for purposes of executing a project or program for a project owner. These special purpose entities are typically dissolved upon completion of the project or program.
We have agreed to support arrangements with independent project developers, primarily by providing development financing to special purpose entities formed to advance natural gas-fired power plant projects. Several of these arrangements have resulted in our successful construction of gas-fired power plants. In each case, we received project development fees, and our loans were repaid in full plus interest and fees. Not all such business development endeavors are successful, and we have recorded impairment losses as a result in the past.
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In Fiscal 2025, we funded a loan to a special purpose entity in the amount of $5.0 million to support the development phase of a natural gas-fired power plant. During Fiscal 2026, the loan was repaid in full.
We may enter 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.
Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”)
We believe that EBITDA is a meaningful presentation that enables us to assess and compare our operating performance on a consistent basis by removing from our operating results the impacts of our capital structure, the effects of the accounting methods used to compute depreciation and amortization and the effects of operating in different income tax jurisdictions. Further, we believe that EBITDA is widely used by investors and analysts as a measure of performance.
However, as EBITDA is not a measure of performance calculated in accordance with U.S. GAAP, we do not believe that this measure should be considered in isolation from, or as a substitute for, the results of our operations presented in accordance with U.S. GAAP that are included in our consolidated financial statements. 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.
The following table presents the determinations of EBITDA for Fiscal 2026 and Fiscal 2025, respectively (amounts in thousands).
2026
2025
Net income, as reported
$
137,774
$
85,459
Provision for income taxes
22,735
25,745
Depreciation
1,912
1,905
Amortization of intangible assets
376
391
EBITDA
$
162,797
$
113,500
Deferred Tax Assets and Liabilities
Our consolidated balance sheet as of January 31, 2026, includes net deferred tax liabilities in the amount of approximately $6.6 million. The components of our deferred taxes are presented in Note 12 to the accompanying consolidated financial statements. These amounts reflect differences in the periods in which certain transactions are recognized for financial and income tax reporting purposes.
We consider whether it is more likely than not that some portion or all deferred tax assets will not be realized on a jurisdiction-by-jurisdiction basis. Our ability to realize our deferred tax assets 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 the deferred tax assets resulting in additional income tax expense in our consolidated statement of earnings.
As of January 31, 2026, we had deferred tax assets in a total amount of approximately $13.7 million related to the net operating loss (“NOL”) of our foreign subsidiaries, primarily the operations of our U.K. subsidiary. Prior to Fiscal 2024, we had reserved a portion of the deferred tax assets related to these NOLs. As a result of the unexpected difficulties with an overseas project and the loss that was recorded by our U.K. subsidiary, we increased the amount of the allowance by $2.1 million in Fiscal 2024. During Fiscal 2025, we increase the valuation allowance by $1.4 million related to additional operating losses incurred by our U.K. subsidiary during the fiscal year. As of January 31, 2026, the deferred tax assets associated with the NOLs of our U.K. subsidiary remain fully offset by a valuation allowance.
During the year ended January 31, 2020 (“Fiscal 2020”), we recorded a deferred tax asset associated with the income tax benefit of our domestic NOL for the year without any corresponding valuation allowance. The tax changes enacted by the Coronavirus, Aid, Relief and Economic Security Act signed into law in March 2020 (the “CARES Act”) included re-
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establishing a carryback period for certain losses to five years. The NOLs eligible for carryback under the CARES Act included the Company’s domestic loss for Fiscal 2020. In accordance with the provisions of the CARES Act, we filed for income tax refunds totaling approximately $12.7 million during the year ended January 31, 2021, for taxes paid in prior years. These amounts are included in income tax refunds receivable along with related accrued interest. The refund claims were primarily generated by a bad debt deduction recorded during Fiscal 2020. This deduction was selected for examination by the Internal Revenue Service (“IRS”). In January 2026, the IRS concluded its examination and proposed no changes to our Fiscal 2020 federal income tax return.
At this time, we believe that our historically strong earnings performance will provide sufficient income during the years when most of our other deferred tax assets become deductible in the U.S. 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 our net deferred tax assets.
Critical Accounting Policies
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 dates 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. We do periodically review these critical accounting policies and estimates with the audit committee of our board of directors.
We consider the accounting policies related to revenue recognition on long-term construction contracts to be most critical to the understanding of our financial position and results of operations.
Revenue Recognition
Our revenues are primarily derived from construction contracts that can span several quarters or years. We enter EPC and other long-term construction contracts principally based on 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 reporting segment, and most other large contracts awarded to our other companies, are often 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. The accuracy of our revenues and profit recognition in any period depends on the accuracy of our estimates of the forecasted contract value, or transaction price, and the cost to complete the work for each project.
The accounting for revenues from contracts with customers is based on 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 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 rules requires us to make important judgments 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 portions of estimated gross profit, are recognized as services are provided, based on costs incurred and estimated total contract costs using the cost-to-cost approach. The cost and profit estimates
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are re-forecasted monthly for all significant contracts pursuant to a detailed determination and review process. The results of the process are subjected to reviews by senior management with the applicable project management personnel at each subsidiary. The depth of the reviews may vary between projects depending on the percentage-of-completion for the projects, among other factors. The cost-to-cost method measures the ratio of costs incurred and accrued to date for each contract to the estimated, or forecasted, total cost for each contract at completion. This requires us to prepare on-going estimates of the forecasted cost 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, major equipment delivery delays, construction delays, weather 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. There are various factors that can contribute to changes in estimated contract costs, revenues and profitability.
Crucial to the compliance with the accounting standard covering the recognition of revenues on contracts with customers is the identification of the promises made to the customer by us that are included in the contract. If a promise is distinct, as that concept is defined in the accounting standard, it represents a separate performance obligation. Contracts may have multiple promises. 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 revenue 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.
We may include an estimated amount of variable consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenues recognized on the particular contract will not occur when the uncertainty associated with the variable consideration is resolved. Our 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. If any amounts of variable consideration that are reflected in the transaction price of a contract are not resolved in our 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, 2026 and 2025, the aggregate amounts of contract variations reflected in estimated transaction prices that were pending customer approval were $11.4 million and $8.0 million, respectively.
Most of our customer contracts include the right for customers to terminate contracts for convenience. The value of future work that companies are contractually obligated to perform pursuant to active customer contracts should not be included in the disclosure of remaining unsatisfied performance obligations (“RUPO”) when the corresponding contracts include termination for convenience clauses without substantial penalties accruing to the customers upon such terminations. In the application of this guidance, we assess whether the nature of the work being performed under contract is largely service-
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based and repetitive and should be considered a succession of one-month contracts for the duration of the identified term of the contract. Predominantly, our customers contract with us to construct assets, to fabricate materials or to perform emergency maintenance or outage services where we believe a substantial penalty or cost would be incurred upon a termination for convenience. We believe that in substantially all cases, there would be substantial costs incurred by a customer if it terminated a contract with us for convenience, including the costs of terminating subcontracts, canceling purchase orders, returning or otherwise disposing of delivered materials and equipment and restarting the effort with another contractor. Further, to the best of management’s knowledge, the Company has never had a customer terminate a material contract with us for convenience. Therefore, our disclosure of the value of RUPO on active customer contracts represents an amount based on contracts or orders received from customers that we believe are firm and where the parties are acting in accordance with their respective obligations (see Note 2 to the accompanying consolidated financial statements).
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 amounts of liquidated damages owed to a project owner pursuant to the terms of a contract would represent reductions of the transaction price of the corresponding contract.
At the outset of each of our contracts, the potential amounts of liquidated damages typically are not subtracted from the transaction price as we believe that we have included activities in its contract plan, and have reflected the associated costs in our forecasts of completed contract costs, that will be effective in preventing such damages. Of course, circumstances may change as we fulfill the corresponding contract. The transaction price is reduced when we no longer consider it probable that a significant reversal of revenue will not occur upon resolution of the matter. In making these assessments, we consider potential liquidated damages, related costs, and any mitigating factors in estimating forecasted revenues and costs to complete.
Recently Issued Accounting Pronouncements
See Note 1 to the accompanying consolidated financial statement for discussion of recently issued accounting pronouncements.