UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended October 31, ~~2017~~2019

o ~~TTRANSITION~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT

For the Transition Period from to

Commission File Number 001-31756

(Exact Name of Registrant as Specified in Its Charter)

Delaware		13-1947195
(State or Other Jurisdiction of Incorporation)		(I.R.S. Employer Identification No.)

One Church Street, Suite 201, Rockville, Maryland 20850

(Address of Principal Executive Offices) (Zip Code)

(301) 315-0027

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed since Last Report)

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 of 1934 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 x No o

Indicate by check mark whether the Registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 x No o

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

Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company o Emerging growth company o

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. o

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

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
Common Stock, $.15 par value		AGX		New York Stock Exchange

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.

Common stock, $0.15 par value: ~~15,548,719~~15,633,302 shares as of December ~~1, 2017.~~5, 2019.

Table of Contents

ARGAN, INC. AND SUBSIDIARIES

FORM 10-Q QUARTERLY REPORT

OCTOBER 31, ~~2017~~2019

INDEX

			Page No.

PART I.	FINANCIAL INFORMATION		3

Item 1.	Financial Statements		3

	Condensed Consolidated Statements of Earnings for the Three and Nine Months Ended October 31, ~~2017~~2019 and ~~2016~~2018		3

	Condensed Consolidated Balance Sheets as of October 31, ~~2017~~2019 and January 31, ~~2017~~2019		4

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended October 31, 2019 and 2018		5

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, ~~2017~~2019 and ~~2016~~2018	5	6

	Notes to Condensed Consolidated Financial Statements	6	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17	20

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29	32

Item 4.	Controls and Procedures	29	33

PART II.	OTHER INFORMATION	29	33

Item 1.	Legal Proceedings	29	33

Item 1A.	Risk Factors	30	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30	33

Item 3.	Defaults upon Senior Securities	30	34

Item 4.	Mine Safety Disclosures (not applicable to the Registrant)	30	34

Item 5.	Other Information	30	34

Item 6.	Exhibits	30	34

SIGNATURES			3134

CERTIFICATIONS

ARGAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)

Three Months Ended October 31,

Nine Months Ended October 31,

2017

2016

2017

2016

REVENUES

$
232,945

$
175,444

$
723,237

$
468,287

Cost of revenues

195,227

138,866

594,016

359,395

GROSS PROFIT

37,718

36,578

129,221

108,892

Selling, general and administrative expenses

10,119

9,848

30,408

24,429

Impairment loss (Note 7)

—

—

—

1,979

INCOME FROM OPERATIONS

27,599

26,730

98,813

82,484

Other income, net

1,692

690

4,221

1,283

INCOME BEFORE INCOME TAXES

29,291

27,420

103,034

83,767

Income tax expense

12,062

8,194

37,738

27,122

NET INCOME

17,229

19,226

65,296

56,645

Net income attributable to non-controlling interests

—

1,153

303

6,668

NET INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.

17,229

18,073

64,993

49,977

Foreign currency translation adjustments, net of tax

(139
)
(326
)
754

(192
)
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.

$
17,090

$
17,747

$
65,747

$
49,785

EARNINGS PER SHARE ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.

Basic

$
1.11

$
1.19

$
4.19

$
3.34

Diluted

$
1.09

$
1.16

$
4.11

$
3.23

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

Basic

15,545

15,137

15,509

14,974

Diluted

15,793

15,601

15,796

15,490

CASH DIVIDENDS PER SHARE (Note 11)

$
1.00

$
1.00

$
1.00

$
1.00

	Three Months Ended October 31,						Nine Months Ended October 31,
	2019			2018			2019			2018
REVENUES	$	58,406		$	116,459		$	171,009		$	394,495
Cost of revenues	52,414			86,927			183,078			318,803
GROSS PROFIT (LOSS) (Note 2)	5,992			29,532			(12,069		)	75,692
Selling, general and administrative expenses	12,135			11,147			31,761			31,162
Impairment loss (Note 5)	—			—			2,072			—
(LOSS) INCOME FROM OPERATIONS	(6,143		)	18,385			(45,902		)	44,530
Other income, net	3,578			1,429			7,472			5,121
(LOSS) INCOME BEFORE INCOME TAXES	(2,565		)	19,814			(38,430		)	49,651
Income tax (expense) benefit (Note 11)	(1,996		)	12,560			4,936			4,509
NET (LOSS) INCOME	(4,561		)	32,374			(33,494		)	54,160
Net income (loss) attributable to non-controlling interests	2,294			(60		)	2,007			(83		)
NET (LOSS) INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.	(6,855		)	32,434			(35,501		)	54,243
Foreign currency translation adjustments	235			(1,092		)	(825		)	(2,364		)
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.	$	(6,620	)	$	31,342		$	(36,326	)	$	51,879

(LOSS) INCOME PER SHARE ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC. (Note 12)
Basic	$	(0.44	)	$	2.08		$	(2.27	)	$	3.48
Diluted	$	(0.44	)	$	2.07		$	(2.27	)	$	3.46

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic	15,633			15,569			15,617			15,568
Diluted	15,633			15,702			15,617			15,685

CASH DIVIDENDS PER SHARE (Note 10)	$	0.25		$	0.25		$	0.75		$	0.75

The accompanying notes are an integral part of these condensed consolidated financial statements.

ARGAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(InDollars in thousands, except ~~share and~~ per share data)

	October 31, 2017			January 31, 2017
	(Unaudited)			(Note 1)			October 31, 2019			January 31, 2019
							(Unaudited)			(Note 1)
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	149,708		$	167,198		$	252,482		$	164,318
Short-term investments	333,973			355,796			42,107			132,213
Accounts receivable	83,681			54,836
Costs and estimated earnings in excess of billings	10,197			3,192
Prepaid expenses and other current assets	6,236			6,927
Accounts receivable, net							34,880			36,174
Contract assets							50,365			58,357
Other current assets							26,066			25,286
TOTAL CURRENT ASSETS	583,795			587,949			405,900			416,348
Property, plant and equipment, net	15,257			13,112			23,211			19,778
Goodwill	34,913			34,913			30,766			32,838
Other intangible assets, net	7,405			8,181
Other purchased intangible assets, net							5,273			6,137
Right-of-use assets (Note 7)							1,338			—
Deferred taxes	383			241			5,911			1,257
Other assets	548			92			318			290
TOTAL ASSETS	$	642,301		$	644,488		$	472,717		$	476,648

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Accounts payable	$	114,448		$	101,944		$	38,249		$	39,870
Accrued expenses	31,005			39,539
Billings in excess of costs and estimated earnings	146,863			209,241
Accrued expenses (Notes 2, 7 and 11)							22,287			33,097
Contract liabilities							58,421			8,349
TOTAL CURRENT LIABILITIES	292,316			350,724			118,957			81,316
Deferred taxes	1,788			1,195
Lease liabilities (Note 7)							563			—
Other noncurrent liabilities							1,779			960
TOTAL LIABILITIES	294,104			351,919			121,299			82,276

COMMITMENTS AND CONTINGENCIES (Notes 8 and 9)
COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)

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; 15,551,952 and 15,461,452 shares issued at October 31, 2017 and January 31, 2017, respectively; 15,548,719 and 15,458,219 shares outstanding at October 31, 2017 and January 31, 2017, respectively	2,333			2,319
Common stock, par value $0.15 per share — 30,000,000 shares authorized; 15,636,535 and 15,577,102 shares issued at October 31 and January 31, 2019, respectively; 15,633,302 and 15,573,869 shares outstanding at October 31 and January 31, 2019, respectively							2,346			2,337
Additional paid-in capital	141,766			135,426			148,031			144,961
Retained earnings	204,095			154,649			200,401			247,616
Accumulated other comprehensive loss	(8		)	(762		)	(1,171		)	(346		)
TOTAL STOCKHOLDERS’ EQUITY	348,186			291,632			349,607			394,568
Non-controlling interests	11			937			1,811			(196		)
TOTAL EQUITY	348,197			292,569			351,418			394,372
TOTAL LIABILITIES AND EQUITY	$	642,301		$	644,488		$	472,717		$	476,648

The accompanying notes are an integral part of these condensed consolidated financial statements.

ARGAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 2019 AND 2018

(InDollars in thousands)

(Unaudited)

Nine Months Ended October 31,

2017

2016

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$
65,296

$
56,645

Adjustments to reconcile net income to net cash (used in) provided by operating activities

Stock option compensation expense

3,573

1,774

Depreciation

1,936

1,444

Amortization of purchased intangible assets

776

752

Deferred income tax expense (benefit)

475

(1,693
)
Other

(317
)
(119
)
Impairment loss

—

1,979

Changes in operating assets and liabilities

Accounts receivable

(31,453
)
21,304

Prepaid expenses and other assets

758

(1,432
)
Accounts payable and accrued expenses

5,600

50,099

Billings in excess of costs and estimated earnings, net

(69,383
)
54,558

Net cash (used in) provided by operating activities

(22,739
)
185,311

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of short-term investments

(462,500
)
(375,000
)
Maturities of short-term investments

485,000

214,000

Purchases of property, plant and equipment

(4,006
)
(2,481
)
Loans made under notes receivable

(200
)
—

Net cash provided by (used in) investing activities

18,294

(163,481
)

CASH FLOWS FROM FINANCING ACTIVITIES

Cash dividends paid

(15,548
)
(15,260
)
Proceeds from the exercise of stock options

2,781

10,988

Distributions to joint venture partners

(1,229
)
(7,500
)
Net cash used in financing activities

(13,996
)
(11,772
)

EFFECTS OF EXCHANGE RATE CHANGES ON CASH

951

(192
)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(17,490
)
9,866

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

167,198

160,909

CASH AND CASH EQUIVALENTS, END OF PERIOD

$
149,708

$
170,775

SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for income taxes

$
36,922

$
26,364

	Common Stock			Additional					Accumulated Other			Non-
	Outstanding Shares	Par Value		Paid-in Capital		Retained Earnings			Comprehensive (Loss) Gain			Controlling Interests			Total Equity
Balances, August 1, 2019	15,633,302	$	2,346	$	147,445	$	211,167		$	(1,406	)	$	(483	)	$	359,069
Net (loss) income	—	—		—		(6,855		)	—			2,294			(4,561		)
Foreign currency translation gain	—	—		—		—			235			—			235
Stock compensation expense	—	—		586		—			—			—			586
Cash dividends	—	—		—		(3,911		)	—			—			(3,911		)
Balances, October 31, 2019	15,633,302	$	2,346	$	148,031	$	200,401		$	(1,171	)	$	1,811		$	351,418

Balances, August 1, 2018	15,568,719	$	2,336	$	144,135	$	225,174		$	150		$	20		$	371,815
Net income (loss)	—	—		—		32,434			—			(60		)	32,374
Foreign currency translation loss	—	—		—		—			(1,092		)	—			(1,092		)
Stock compensation expense	—	—		338		—			—			—			338
Stock option exercises	2,000	—		34		—			—			—			34
Cash dividends	—	—		—		(3,892		)	—			—			(3,892		)
Distributions to joint venture partners	—	—		—		—			—			(72		)	(72		)
Balances, October 31, 2018	15,570,719	$	2,336	$	144,507	$	253,716		$	(942	)	$	(112	)	$	399,505

Balances, February 1, 2019	15,573,869	$	2,337	$	144,961	$	247,616		$	(346	)	$	(196	)	$	394,372
Net (loss) income	—	—		—		(35,501		)	—			2,007			(33,494		)
Foreign currency translation loss	—	—		—		—			(825		)	—			(825		)
Stock compensation expense	—	—		1,512		—			—			—			1,512
Stock option exercises	59,433	9		1,558		—			—			—			1,567
Cash dividends	—	—		—		(11,714		)	—			—			(11,714		)
Balances, October 31, 2019	15,633,302	$	2,346	$	148,031	$	200,401		$	(1,171	)	$	1,811		$	351,418

Balances, February 1, 2018	15,567,719	$	2,336	$	143,215	$	211,112		$	1,422		$	43		$	358,128
Adoption of ASC Topic 606 (Note 1)	—	—		—		37			—			—			37
Net income (loss)	—	—		—		54,243			—			(83		)	54,160
Foreign currency translation loss	—	—		—		—			(2,364		)	—			(2,364		)
Stock compensation expense	—	—		1,244		—			—			—			1,244
Stock option exercises	3,000	—		48		—			—			—			48
Cash dividends	—	—		—		(11,676		)	—			—			(11,676		)
Distributions to joint venture partners	—	—		—		—			—			(72		)	(72		)
Balances, October 31, 2018	15,570,719	$	2,336	$	144,507	$	253,716		$	(942	)	$	(112	)	$	399,505

The accompanying notes are an integral part of these condensed consolidated financial statements.

ARGAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended October 31,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(33,494	)	$	54,160
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities
Deferred income tax benefit	(4,521		)	(153		)
Impairment loss	2,072			—
Depreciation	2,610			2,465
Stock compensation expense	1,512			1,244
Change in accrued interest on short-term investments	1,106			912
Amortization of purchased intangible assets	864			759
Gain on the settlement of litigation	—			(1,400		)
Other	525			119
Changes in operating assets and liabilities
Accounts receivable	1,274			(17,686		)
Contract assets	7,992			(41,781		)
Other assets	(1,588		)	(15,895		)
Accounts payable and accrued expenses	(12,523		)	(44,016		)
Contract liabilities	50,072			(37,835		)
Net cash provided by (used in) operating activities	15,901			(99,107		)

CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of short-term investments	164,000			310,000
Purchases of short-term investments	(75,000		)	(158,000		)
Purchases of property, plant and equipment	(6,308		)	(7,366		)
Changes in notes receivable	—			225
Net cash provided by investing activities	82,692			144,859

CASH FLOWS FROM FINANCING ACTIVITIES
Payments of cash dividends	(11,714		)	(11,676		)
Proceeds from the exercise of stock options	1,567			48
Distributions to joint venture partners	—			(72		)
Net cash used in financing activities	(10,147		)	(11,700		)

EFFECTS OF EXCHANGE RATE CHANGES ON CASH	(282		)	(368		)
NET INCREASE IN CASH AND CASH EQUIVALENTS	88,164			33,684
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	164,318			122,107
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	252,482		$	155,791

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes	$	3,062		$	2,625
Cash received from income tax refunds	$	7,917		$	—
Operating lease payments made (Note 7)	$	466		$	—
Cash paid for interest	$	—		$	659
Adoption of ASC Topic 842 (non-cash transaction, see Note 7)	$	1,341		$	—
Right-of-use assets obtained in exchange for new operating lease liabilities (non-cash transaction)	$	441		$	—

5The accompanying notes are an integral part of these condensed consolidated financial statements.

ARGAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, ~~2017~~2019

(Tabular dollar amounts in thousands, except per share data)

(Unaudited)

NOTE 1 — DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Description of the Business

~~The condensed consolidated financial statements include the accounts of~~ Argan, Inc. (“Argan”)~~, its wholly owned subsidiaries and its financially controlled joint ventures. Argan~~ conducts operations through its ~~wholly owned~~wholly-owned subsidiaries, Gemma Power Systems, LLC and affiliates (“GPS”)~~, which provided 89% and 83% of consolidated revenues for the nine months ended October 31, 2017 and 2016, respectively;~~; 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 ~~cumulatively~~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 consulting services to the power generation and renewable energy ~~markets for a~~markets. The wide range of customers ~~including~~includes independent power ~~project owners,~~producers, public utilities, power plant equipment suppliers and global energy plant construction firms. ~~GPS, including its~~Including consolidated joint ventures and variable interest entities (“VIEs”), GPS and APC represent ~~our~~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 ~~southern~~southeast United States and that are based on its expertise in producing, delivering and installing fabricated steel components such as piping systems and pressure ~~vessels, heat exchangers and piping systems.~~vessels. Through SMC, ~~conducting~~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.~~region of the United States.

Basis of Presentation

The condensed consolidated financial statements include the accounts of Argan, its wholly-owned subsidiaries and any VIEs for which the Company is deemed to be the primary beneficiary. All significant inter-company balances and transactions have been eliminated in consolidation. Certain amounts in the condensed consolidated balance sheet for the prior year-end were reclassified to conform to the current period-end presentation.

In Note ~~15,~~14, 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. ~~All significant inter-company balances~~In Note 13, the Company has provided certain financial information related to concentrations of businesses and ~~transactions have been eliminated in consolidation. The deferred tax amounts included in the comparative balance sheet were reclassified to conform to the current year presentation.~~customers. The Company’s fiscal year ends on January 31 of each year.

These condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“USU.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The accompanying condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements, the notes thereto, ~~(including the summary of significant accounting policies),~~ and the independent registered public accounting firm’s report thereon, that are included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, ~~2017.~~2019.

The condensed consolidated balance sheet as of October 31, ~~2017,~~2019, the condensed consolidated statements of earnings and stockholders’ equity for the three and nine months ended October 31, ~~2017~~2019 and ~~2016,~~2018, and the condensed consolidated statements of cash flows for the nine months ended October 31, ~~2017~~2019 and ~~2016~~2018 are unaudited. The condensed consolidated balance sheet as of January 31, ~~2017~~2019 has been derived from audited financial statements. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, which are of a normal and recurring nature, considered necessary to present fairly the financial position of the Company as of October 31, ~~2017,~~2019, and its earnings and cash flows for the interim periods presented. The results of operations for any interim period are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

Accounting Policies

6Effective February 1, 2019, the Company adopted Accounting Standards Update (“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 condensed consolidated balance sheet as of October 31, 2019 by adding assets for the right-of-use and liabilities for the obligations that are created by these leases (see Note 7). The Company elected to apply the transition requirements at the adoption date rather than at the beginning of the earliest comparative period presented herein. 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 the three and nine months ended October 31, 2019.

Effective February 1, 2018, the Company adopted ASU 2014-09, “Revenue ~~Recognition~~ from Contracts with Customers,” as amended, which herein is 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 the reporting periods which are included herein have been presented in accordance with the guidance of ASC Topic 606 (see Note 2). 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.

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.

The carrying value amounts presented in the condensed 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.

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 services contract that has been negotiated and announced. The account balances of the VIE are included in the condensed consolidated financial statements, including development costs incurred by the VIE during the three and nine-month periods ended October 31, 2019 and 2018, and a gain of $2.2 million related to the granting of a utility easement during the three months ended October 31, 2019. The total amounts of the project development costs included in the balances for property, plant and equipment as of October 31 and January 31, 2019 were $6.4 million and $2.1 million, respectively. At October 31 and January 31, 2019, the total amounts of notes receivable from the VIE and related accrued interest, which amounts are eliminated in consolidation, were $5.1 million and $2.1 million, respectively.

NOTE 2 — ~~Revenues~~REVENUES FROM CONTRACT WITH CUSTOMERS

The new 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. Most of 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,~~fixed-price or a time-and-materials basis, and primarily over time ~~and materials~~as performance obligations are satisfied due to the continuous transfer of control to the project owner or ~~cost-plus-fee basis, with typical durations of one month to three years.~~other customer. Revenues from ~~fixed price~~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~~percentage-of-completion method. If, at any time, the estimate of ~~completion method.~~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~~time-and-materials contracts are recognized when the related services are provided to the customer. ~~Revenues from cost-plus-fee construction~~

Most of the Company’s long-term contracts are considered to have a single performance obligation. Although multiple promises to transfer individual goods or services may exist in a single contract, they are not typically distinct within the context of the applicable contract because the contract promises are interrelated or they require the Company to perform critical integration so that the customer receives a completed project.

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 onas of the ~~basis~~balance sheet date. It may reflect amounts of ~~costs incurred~~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 ~~plus the amount~~ of ~~fee earned. Changes~~contract performance as circumstances evolve related to ~~total estimated contract costs or losses, if any, are recognized~~such items as changes in the ~~period in which they are determined.~~scope and price of contracts, claims, incentives and liquidated damages.

~~Unpriced change orders,~~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 ~~represent~~payment has been received. In addition, the definition of accounts receivable has been restated to effectively exclude billed amounts retained by project owners until a defined phase of a contract or project has been completed and accepted. Retentions 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 October 31 and January 31, 2019 were $20.3 million and $15.3 million, respectively.

Variable Consideration

Amounts for contract variations for which the Company has ~~project owner~~project-owner directive for additional work or ~~authorization for~~other scope ~~changes~~change, but not for the price associated with the corresponding ~~change,~~additional effort, are ~~reflected~~included in ~~revenues~~the transaction price when it is considered probable that the applicable costs will be recovered through a ~~change in~~modification to the contract price. ~~There were no significant unpriced change orders~~The aggregate amount of such contract variations included in the ~~total contract value amounts~~transaction prices that were used to determine project-to-date revenues ~~as of~~at October 31 2017. Amounts of identified change orders that are not yet considered probable as of the corresponding balance sheet date are excluded from forecasted revenues. Actual costs related to change orders are expensed as they are incurred. Contract results may be impacted by estimates of the amounts of change orders that we expect to receive.and January 31, 2019, were $20.6 million and $18.8 million, respectively. The effects of any ~~resulting revisions~~revision to ~~revenues and estimated costs~~a transaction price can be determined at any time and they could be material. ~~In general, contract claims are reflected~~The Company may include in ~~revenues only when an agreement on~~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.~~owner, the transaction price may be revised again to reflect the final resolution. 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.

~~Fair Values~~ — The ~~carrying value~~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 ~~presented~~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 ~~condensed consolidated balance sheets for~~form of liquidated damages. In general, the ~~Company’s cash and cash equivalents, short-term investments, accounts receivable and accounts payable are reasonable estimates of their fair values due to~~Company does not adjust the short-term nature of these instruments. The fair value amounts of reporting units (as needed for purposes of identifying indications of impairment to goodwill) are determined by averaging valuations that are calculated using several market-based and income-based approaches deemed appropriate in the circumstances.

~~NOTE 2 — RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS~~

~~There~~corresponding contract accounting until it is ~~no recently issued accounting guidance that has not yet been adopted~~probable that the ~~Company considers material to its condensed consolidated financial statements except for the following:~~

~~Revenue Recognition~~

~~In May 2014, the Financial Accounting Standards Board (the “FASB”) issued a new standard on revenue recognition, Accounting Standards Update 2014-09,~~ ~~Revenue from Contracts with Customers~~ (“ASU 2014-09”), in order to create a principles-based revenue recognition framework that may affect nearly every revenue-generating entity. ASU 2014-09 and a series of related amending pronouncements issued by the FASB become effective for public companies for fiscal years beginning after December 15, 2017. As a result, the Companyfavorable cost relief will be ~~required to adopt the new standard effective February 1, 2018.~~realized. Such adjustments have been and could be material.

The Company ~~is completing its evaluation of the impacts of ASU 2014-09, as amended,~~records adjustments to revenues and profits on ~~its consolidated financial statements. The Company expects to adopt the new standard~~contracts, including those associated with contract variations and estimated cost changes, using ~~the allowable modified retrospective method which will result in~~ a cumulative effect adjustment as of February 1, 2018. To date, the Company has examined an engineering, procurement and construction (“EPC”) contract of GPS that it believes is representative of the four other active EPC contracts of GPS, significant contracts that were awarded to TRC during the current year that the Company believes are representative of the large customer contracts that will be in place at the date of adoption, and the largest contract awarded to APC during the current year. Based on these reviews, it has come to preliminary conclusions oncatch-up method. Under this method, the impact of the new standard on the revenues of the Company using the 5-step process prescribed by ASU 2014-09, as amended. The Company does not believe that the adoption of the standard will have a significant impact on the revenue recognition patterns for its long-term contracts as compared to revenues recognized under the existing revenue guidance, assuming that contract structures similar to those in place are in effect at the time of the Company’s adoption. The Company expects that most of its future revenues will continue to be recognized over time utilizing the cost-to-cost measure of progress similar to current practice. However, there are certain industry-specific implementation issues that are still unresolved and, depending on the resolution of these matters, conclusions on the impact on the Company’s revenue recognition patterns could change. Through the date of adoption, the Company will continue to evaluate the impacts of ASU 2014-09, as amended, on its large EPC and its smaller long-term contracts to ensure that its preliminary conclusions continue to remain accurate for future revenues. Additionally, the Company is continuing its assessment of the impact of ASU 2014-09, as amended, on its financial statement disclosures which are expected to be more extensive based on the requirements of the new standard.

~~Leases~~

~~In February 2016, the FASB issued Accounting Standards Update 2016-02,~~ ~~Leases,~~ which amends the existing guidance and which will require recognition of operating leases with lease terms of more than twelve months on the balance sheet. For these leases, companies will record assets for the rights and liabilities for the obligations that are created by the leases. The pronouncement will require disclosures that provide qualitative and quantitative information for the lease assets and liabilities presented in the financial statements. Although the adoption of this pronouncement, which is effective for fiscal years beginning after December 15, 2018, will affect the Company’s condensed consolidated financial statements, the Company has not yet determined the complete extent or significance of the changes.

~~Goodwill~~

~~In January 2017, the FASB issued Accounting Standards Update 2017-04,~~ ~~Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment~~~~. Current guidance requires a public entity to perform a two-step test to determine the amount, if any, of goodwill impairment. In Step 1,~~ an entity compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the entity performs Step 2 and compares the implied fair value of goodwill with the carrying amount of that goodwill for that reporting unit. An impairment charge equal to the amount by which the carrying amount of goodwill for the reporting unit exceeds the implied fair value of that goodwill is recorded, limitedadjustment to the amount of ~~goodwill allocated~~revenues recognized to ~~that reporting unit. The amendments~~date is recorded in the ~~new pronouncement remove~~period that the ~~second step~~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 ~~test. An entity will apply~~adjusted amounts of transaction price and estimated contract costs.

In its Form 10-K Annual Report for the year ended January 31, 2019, the Company disclosed that APC is completing a ~~one-step quantitative test~~power-plant construction project in the United Kingdom that has encountered significant operational and ~~record~~contractual challenges, and that the ~~amount of goodwill impairment as~~consolidated operating results for the ~~excess of a reporting unit’s carrying amount over its fair value, not~~year ended January 31, 2019 reflected unfavorable gross profit adjustments related to ~~exceed~~this project. The disclosure explained that the ~~total amount of goodwill allocated~~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 ~~reporting unit. The new guidance does not amend the optional qualitative assessment~~release of ~~goodwill impairment.~~

As early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017, the Company intends to use the new guidance in the determination of any goodwill impairment loss determined in connection with the Company’s annual testing as of November 1, 2017, and in the future. The effect of the adoption of this new standard is not expected to be material to the Company’s consolidated financial ~~statements.~~

~~NOTE 3 — CONSTRUCTION JOINT VENTURES~~

~~GPS assigned its EPC contracts~~statements for two natural gas-fired power plants 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. The joint venture partner for both projects is a large civil contracting firm. The corresponding joint venture agreements, as amended, provide that GPS has the majority interest in any profits, losses, assets and liabilities resulting from the performance of the contracts. Final contractual completion of the two projects was achieved in October 2016 and December 2016, respectively. GPS has no significant remaining commitments under these arrangements except for the provision of services under the related warranty obligations.

Due to the financial control by GPS, the accounts of the joint ventures have been included in the Company’s condensed consolidated financial statements since the commencement of contract activities (near the end of the fiscal year ended January 31, ~~2014). The shares~~2019, APC’s estimates of the ~~profits~~unfavorable financial impacts of the ~~joint ventures~~difficulties on this particular project located in Teesside, England (the “TeesREP” project), including increased scope and design changes from original plans and various work interruptions, escalated substantially. APC has conducted 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, management expects that the forecasted costs for APC at contract completion will exceed projected revenues by approximately $31.2 million.

The total amount of the expected loss on this project has been reflected in the condensed consolidated financial statements for the nine months ended October 31, 2019, with most of the loss recorded in the first quarter ended April 30, 2019. The amount of the contract loss reserve, approximately $8.6 million as of October 31, 2019, has been included in accrued expenses in the accompanying condensed consolidated balance sheet. An effect of changes that the Company made during the three-month period ended April 30, 2019 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 last year.

Subsequent to October 31, 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 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 ~~been~~to be addressed through applicable dispute resolution mechanisms. While management is disappointed that a global settlement of past commercial differences could not be achieved at this time, management believes that it is in the Company’s best interests to complete the TeesREP project while the parties concurrently use good faith efforts to settle them. It is not possible currently 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 ~~percentages by which~~timing of major new contract awards and the occurrence and assessment of contract variations. At October 31, 2019, the Company ~~believes profits will ultimately~~had RUPO of $817.8 million. The largest portion of RUPO relates to engineering, construction and procurement service contracts with typical performance durations of 2 to 3 years. The Company estimates that the percentages of RUPO at October 31, 2019 expected to be ~~shared~~recognized as revenues during the three months ending January 31, 2020 and the year ending January 31, 2021 are 9% and 31%, respectively, with the remaining amount of RUPO expected to be recognizrd during the following two years. Although the amount of reported RUPO represents business that is considered to be firm, it is important to note that cancellations, deferrals or scope adjustments may occur. RUPO may be adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as applicable.

Disaggregation of Revenues

The consolidated revenues are disaggregated by reportable segment in Note 14 to the condensed consolidated financial statements. The amounts of revenues earned under fixed-price contracts during the nine-month periods ended October 31, 2019 and 2018, were approximately 76% and 91%, respectively, of the corresponding consolidated revenues for the periods.

The following table presents consolidated revenues for the three and nine months ended October 31, 2019 and 2018, disaggregated by the ~~joint venture partners.~~geographic area where the work was performed:

	Three Months Ended October 31,				Nine Months Ended October 31,
	2019		2018		2019		2018
United States	$	39,629	$	87,892	$	117,045	$	320,985
United Kingdom	10,349		19,708		35,631		53,866
Republic of Ireland	8,256		8,698		18,007		18,857
Other	172		161		326		787
Totals	$	58,406	$	116,459	$	171,009	$	394,495

NOTE 43 — CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

At October 31 and January 31, 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 U.S. Treasury obligations; obligations of U.S. Government agencies, authorities, instrumentalities or sponsored enterprises; and repurchase agreements secured by U.S. 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 October 31 ~~2017~~ and January 31, ~~2017~~2019 consisted solely of certificates of deposit purchased from Bank of America (the “Bank”) with weighted average initial maturities of ~~269~~147 days and ~~185~~250 days, respectively (the “CDs”). The Company has the intent and ability to hold ~~these securities~~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 October 31 ~~2017~~ and January 31, ~~2017~~2019 included accrued interest of ~~$1.5~~$0.1 million and ~~$0.8~~$1.2 million, respectively. Interest income is recorded when earned and is included in other income. ~~As of~~At October 31 ~~2017~~ and January 31, ~~2017,~~2019, the weighted average annual interest rates of the CDs ~~classified as short-term investments~~ were ~~1.36%~~1.9% and ~~1.13%~~2.6%, respectively.

~~The~~ In addition, the Company has a substantial portion of its cash on deposit at the Bank in excess of federally insured ~~limits at the Bank, has purchased CDs from the Bank, and has liquid mutual fund investments through an arrangement with the Bank.~~limits. Management does not believe that ~~maintaining substantially all such assets~~the combined amount of the CD investments and the cash deposited with the Bank represents a material risk.

NOTE 54 — ACCOUNTS AND NOTES RECEIVABLE

~~Amounts retained by project owners under construction contracts~~At October 31 and January 31, 2019, there were outstanding invoices, with balances included in accounts receivable asand contract assets, in the aggregate amounts of $19.6 million and $17.1 million, respectively, for which the collection time will most likely depend on the resolution of the outstanding legal dispute between the parties (see Note 8). At October 31 ~~2017~~ and January 31, 2017 were $65.0 million and $36.2 million, respectively. Such retainage amounts represent funds withheld by project owners until a defined phase of a contract or project has been completed and accepted by the project owner. Retention amounts and the length of retention periods may vary. Most of the amount outstanding as of October 31, 2017 will not be collected until the fiscal year ending January 31, 2019. Retainage amounts related to active contracts are classified as current assets regardless of the term of the applicable contract and amounts are generally collected by the completion of the applicable contract.

The Company monitors its exposure to credit losses and maintains an allowance for anticipated losses considered necessary under the circumstances based on historical experience with uncollected accounts and a review of its currently outstanding accounts and notes receivable. The amount of the2019, Company’s allowance for uncollectible accounts aswas insignificant. The amounts of ~~October 31, 2017 and January 31, 2017 was approximately $2.5 million and $1.9 million, respectively, and it related primarily to project development loans made in prior years. The~~the provision ~~amounts~~ for uncollectible accounts and notes receivable for the three and nine months ended October 31, ~~2017~~2019 and 2018 were ~~$0.1 million and $0.4 million, respectively. The Company did not record a provision for uncollectible accounts for the three and nine months ended October 31, 2016.~~also insignificant.

NOTE ~~6 — COSTS, ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS~~

The table below sets forth the aggregate amounts of costs charged to and earnings accrued on uncompleted contracts compared with the billings on those contracts through October 31, 2017 and January 31, 2017.

October 31,
2017

January 31,
2017

Costs charged to uncompleted contracts

$
1,074,974

$
485,629

Estimated accrued earnings

177,065

78,708

1,252,039

564,337

Less - billings to date

1,388,705

770,386

$
(136,666
)
$
(206,049
)

~~Amounts above are included in the accompanying condensed consolidated balance sheets under the following captions:~~

October 31,
2017

January 31,
2017

Costs and estimated earnings in excess of billings

$
10,197

$
3,192

Billings in excess of costs and estimated earnings

146,863

209,241

$
(136,666
)
$
(206,049
)

Costs charged to contracts include amounts billed to the Company for delivered goods and services where payments have been retained from subcontractors and suppliers. Retained amounts as of October 31, 2017 and January 31, 2017, which were included in the Company’s balance of accounts payable as of those dates, totaled $34.6 million and $17.2 million, respectively. Generally, such amounts are expected to be paid prior to the completion of the applicable project.

~~NOTE 7~~5 — PURCHASED INTANGIBLE ASSETS

~~At October 31, 2017,~~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 2 above, the Company recorded an impairment loss in the first quarter ended April 30, 2019 in the amount of $2.1 million, which was the balance of goodwill ~~balances~~associated with APC included in the condensed consolidated balance ~~sheets~~sheet as of January 31, 2019. At October 31 and January 31, 2019, the goodwill balances related to the acquisitions of GPS ~~TRC~~ and ~~APC~~TRC were $18.5 million ~~$14.4 million~~ and ~~$2.0~~$12.3 million, respectively. TRC’s management recently completed a reforecasting of its future financial results which provides essential data for the required annual goodwill assessment of TRC as of November 1, 2017. The new forecast presents a less favorable outlook for TRC, which represents the Company’s Industrial Fabrication and Field Services reportable business segment, than in the past. With this new information and using preliminary valuation analyses, including discounted net after tax cash flow estimates, management determined that the goodwill associated with this business may be impaired. Based on this currently available data, management estimates that the amount of possible loss ranges from an immaterial amount to $5.5 million, with the estimated federal income tax rate representing the most significant variable affecting the range. Depending on the completion of the goodwill assessment including the resolution of this uncertainty, the Company may be required to record an impairment loss relatedNo other changes were made to the ~~goodwill~~balances of TRC in the fourth quarter of the current year up to an amount of $5.5 million. However, the completion of the full valuation of the business of TRC could materially change this outcome. Last year, APC recorded a goodwill ~~impairment loss~~ during the ~~nine months~~nine-month periods ended October 31, ~~2016 of approximately $2.0 million.~~2019 or 2018.

The ~~other purchased~~Company’s purchased intangible assets, other than goodwill, consisted of the following elements as of October 31 ~~2017~~ and January 31, ~~2017.~~2019:

October 31, 2017

January 31,

Estimated
Useful Life

Gross
Amount

Accumulated
Amortization

Net
Amount

2017 (net
amount)

Trade names -

GPS/TRC

15 years

$
8,142

$
3,221

$
4,921

$
5,328

SMC

indefinite

181

—

181

181

Process certifications -

TRC

7 years

1,897

520

1,377

1,581

Customer relationships -

TRC/APC

4-10 years

1,346

423

923

1,072

Other intangibles

various

46

43

3

19

Totals

$
11,612

$
4,207

$
7,405

$
8,181

		October 31, 2019						January 31,
	Estimated Useful Life	Gross Amount		Accumulated Amortization		Net Amount		2019 (net amount)
Trade names	15 years	$	8,323	$	4,442	$	3,881	$	4,424
Process certifications	7 years	1,897		1,062		835		1,039
Customer relationships	4-10 years	1,346		789		557		674
Totals		$	11,566	$	6,293	$	5,273	$	6,137

NOTE 86 — 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, which superseded the Company’s prior arrangements with the Bank.~~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 ~~2.00%~~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. ~~The~~At October 31 and January 31, 2019, the Company ~~has approximately $14.9 million~~had letters of credit outstanding under the Credit Agreement, but no ~~borrowings.~~

borrowings, in the approximate amounts of $10.0 million and $15.2 million, respectively, most of which related to the TeesREP project (see Note 2). 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 October 31 and January 31, ~~2017,~~2019, the Company was compliant with the financial covenants of ~~its financing arrangements.~~the Credit Agreement.

NOTE 97 — COMMITMENTS

Leases

Management 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 the contract 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, upon adoption of ASC Topic 842, allows entities to not reassess whether any existing contracts are or contain leases.

The Company’s operating leases primarily cover office space that expire on various dates through May 2024; it has no finance leases. Certain leases contain renewal options, which are included in expected lease terms if they are reasonably certain of being exercised by the Company. 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 based on the information available at 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. Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term. Operating lease expense amounts for the three and nine months ended October 31, 2019 were $0.2 million and $0.5 million, respectively. For operating leases as of October 31, 2019, the weighted average lease term was 37 months and the weighted average discount rate was 4.3%.

The following is a schedule of future minimum lease payments for the operating leases that were recognized in the condensed consolidated balance sheet as of October 31, 2019:

Years ending January 31,
Remainder of 2020	$	193
2021	485
2022	378
2023	197
2024	140
Thereafter	23
Total lease payments	1,416
Less interest portion	98
Present value of lease payments	1,318
Less current portion (included in accrued expenses)	755
Non-current portion	$	563

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 amounts disclosed above) and included in costs of revenues for the three and nine months ended October 31, 2019 were $0.9 million and $3.2 million, respectively. Rent expense amounts incurred under these types of arrangements (including portions of the lease expense amounts disclosed above) and included in selling, general and administrative expenses for the three and nine months ended October 31, 2019 were $0.1 million and $0.5 million, respectively. Rent expense amounts incurred on construction projects and included in the costs of revenues for the three and nine months ended October 31, 2018 were approximately $1.7 million and $9.9 million, respectively. Rent expense amounts included in selling, general and administrative expenses for the three and nine months ended October 31, 2018 were $0.2 million and $0.5 million, respectively.

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 cause the issuance of letters of credit, or to provide parent company guarantees (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 is ordinarily reflected in the financial statement account balances determined pursuant to the Company’s accounting for contracts with customers. When sufficient information about 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 October 31, 2019 are not estimable. Argan has provided a parent company performance guarantee and has caused the Bank to issue certain letters of credit (see Note 6) to Técnicas Reunidas (“TR”), the engineering, procurement and construction services (“EPC”) contractor on the TeesREP Biomass Power Station Project, on behalf of APC, a major subcontractor to TR on this project.

Warranties

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 condensed consolidated balances sheets. The liability amounts may be periodically adjusted to reflect changes in the estimated size and number of expected warranty claims.

NOTE 8 — LEGAL MATTERS

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 condensed consolidated financial statements ~~other than~~except for the ~~one discussed~~matter described below. ~~The material amounts of any legal fees expected to be incurred in connection with legal matters are accrued when such amounts are estimable.~~

On February 1, 2016, TRC was sued in Person County, North Carolina, by a subcontractor, PPS Engineers, Inc. (“PPS”), in an attempt to force TRC to pay invoices for services rendered in the total amount of $2.3 million. PPS has placed liens on the property of the customers in several states where work was performed by PPS and it has alsoIn January 2019, GPS filed a ~~claim~~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 ~~bond issued on behalf~~schedule and the costs associated with the construction by GPS of ~~TRC relating~~a gas-fired power plant for Exelon in Massachusetts. Nonetheless, GPS continued to ~~one significant project located in Tennessee in~~perform the ~~amount of $2.5 million. On March 4, 2016, TRC filed responses to the claims of PPS. The positions of TRC are that PPS failed to deliver a number of items~~efforts required by the ~~applicable~~contract to complete the project. 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.

Among other actions, Exelon issued a contractual notice requiring GPS to vacate the construction site, made claims against GPS and withheld payments from GPS on invoices prepared and rendered in accordance with the terms of the EPC contract between the ~~parties~~parties. In summary, the Company’s position is that Exelon wrongfully terminated GPS, materially breached the EPC contract and ~~that~~received the ~~invoices rendered~~benefits of the construction work performed by PPS covering the disputed services will not be paid until such deliverables are supplied. Further, TRC maintains that certain sums are owed to it by PPS for services, furniture, fixtures, equipment, and software that were supplied by TRC on behalf of PPS that total approximately $2.2 million. The amounts invoiced by PPS are accrued by TRC and the corresponding liability amount was included in accounts payable in the condensed consolidated balance sheets as of October 31, 2017 and January 31, 2017. TRC has not recorded an account receivableGPS without making payments for the ~~amounts it believes are owed to it by PPS. A mediation effort was attempted in 2016 but it was unproductive and an impasse was declared.~~value received.

~~The Company intends to~~With vigor, GPS will continue to ~~defend against~~assert its rights under the ~~claim~~EPC contract, to pursue the collection from Exelon of ~~PPS~~amounts owed under the EPC contract (see Note 4) and to ~~pursue its claims~~defend itself against ~~PPS. Due~~Exelon’s allegations that GPS did not perform in accordance with the contract. The legal process associated with the lawsuit filed by GPS has begun as the parties recently agreed to the uncertainty of the ultimate outcomes of these legal proceedings, assurance cannot be provided by the Company that TRC will be successful in these efforts. Management does not believe that resolution of the matters discussed above will result in additional loss with material negative effect on the Company’s consolidated operating results in a future reporting period.discovery and confidentiality protocols.

NOTE 109 — STOCK-BASED COMPENSATION

The Company’s board of directors may make awards under ~~its~~the 2011 Stock Plan (the “Stock Plan”) to officers, directors and key employees. Awards may include incentive stock options (“ISOs”) or, nonqualified stock options (“NSOs”), and restricted or unrestricted ~~common~~ stock. ~~ISOs granted~~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 per share at the date of ~~grant,~~grant. ISOs shall have a term no longer than ten ~~years, and~~years; NSOs may have up to a ten-year term. In the past, stock options typically ~~become fully~~became exercisable one year from the date of ~~grant. 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~~award. Commencing in January 2018, stock options have ~~up to a ten-year term, and typically become exercisable one year from the date of award.~~

been awarded with three-year vesting schedules. As of October 31, ~~2017,~~2019, there were ~~1,061,650~~approximately 1.7 million shares of the Company’s common stock reserved for issuance under the Company’s ~~stock option plans (including the~~ Stock ~~Plan and an expired predecessor plan), including 330,000~~Plan. This number includes 443,500 shares of the Company’s common stock available for future ~~awards under the Stock Plan.~~awards.

Summaries of stock option activity under the Company’s stock option plans for the nine months ended October 31, ~~2017~~2019 and ~~2016,~~2018, along with corresponding weighted average per share amounts, are presented below (shares in thousands):

	Shares		Exercise Price		Remaining Term (years)	Fair Value		Shares		Exercise Price		Remaining Term (years)	Fair Value
Outstanding, February 1, 2017	707		$	39.04	7.82	$	10.22
Outstanding, February 1, 2019								1,140		$	44.01	7.54	$	11.22
Granted	125		$	63.58				168		$	46.67
Exercised	(90	)	$	30.74				(59	)	$	26.36
Forfeited	(10	)	$	71.75				(38	)	$	46.34
Outstanding, October 31, 2017	732		$	43.81	7.59	$	11.61
Exercisable, October 31, 2017	452		$	28.75	6.52	$	7.76
Outstanding, October 31, 2019								1,211		$	45.18	7.28	$	11.27
Exercisable, October 31, 2019								753		$	45.81	6.25	$	10.22

Shares

Exercise
Price

Remaining
Term (years)

Fair Value

Outstanding, February 1, 2016

1,064

$
26.38

6.36

$
6.91

Granted

105

$
36.09

Exercised

(444
)
$
24.77

Forfeited

(5
)
$
36.73

Outstanding, October 31, 2016

720

$
28.71

7.21

$
7.62

Exercisable, October 31, 2016

555

$
27.13

6.55

$
7.16

11

Shares

Exercise
Price

Remaining
Term (years)

Fair Value

Outstanding, February 1, 2018

889

$
44.83

7.91

$
11.74

Granted

192

$
40.32

Exercised

(3
)
$
17.33

Outstanding, October 31, 2018

1,078

$
44.11

7.63

$
11.33

Exercisable, October 31, 2018

709

$
44.57

6.69

$
11.77

The changes in the number of non-vested options to purchase shares of common stock for the nine months ended October 31, ~~2017~~2019 and ~~2016,~~2018, and the weighted average fair value per share for each number, are presented below (shares in thousands):

	Shares		Fair Value		Shares		Fair Value
Non-vested, February 1, 2017	270		$	14.93
Non-vested, February 1, 2019					375		$	10.05
Granted	125		$	16.19	168		$	10.32
Vested	(105	)	$	9.66	(57	)	$	9.28
Forfeited	(10	)	$	19.14	(28	)	$	10.47
Non-vested, October 31, 2017	280		$	17.83
Non-vested, October 31, 2019					458		$	10.22

	Shares		Fair Value		Shares		Fair Value
Non-vested, February 1, 2016	300		$	8.97
Non-vested, February 1, 2018					302		$	13.55
Granted	105		$	9.66	192		$	9.35
Vested	(240	)	$	7.63	(125	)	$	16.19
Non-vested, October 31, 2016	165		$	9.17
Non-vested, October 31, 2018					369		$	10.47

Compensation expense amounts related to stock options were $1.3 million and $0.5 million for the three months ended October 31, 2017 and 2016, respectively, and were $3.6 million and $1.8 million for the nine months ended October 31, 2017 and 2016, respectively. At October 31, 2017, there was $1.5 million in unrecognized compensation cost related to outstanding stock options. The Company expects to recognize the compensation expense for these awards over the next twelve months. The total intrinsic ~~values~~value of the stock options exercised during the nine months ended October 31, ~~2017 and 2016 were $3.1 million and $10.9 million, respectively.~~2019 was $1.4 million. The total intrinsic value of the stock options exercised during the nine months ended October 31, 2018 was $0.1 million. At October 31, ~~2017,~~2019, the aggregate market ~~values~~value amounts of the shares of common stock subject to outstanding and exercisable stock options that were “in-the-money” ~~as of October 31, 2017~~ exceeded the aggregate exercise prices of such options by ~~$18.7 million and $18.1 million, respectively.~~$3.0 million.

~~For companies with limited~~The Company estimates the fair value of each stock option ~~exercise experience, guidance provided by the SEC permits the use of a “simplified method” in developing the estimate of the expected term of a “plain-vanilla’’ share option, based~~ on the ~~average~~date of award using the ~~vesting period and the option term, which the~~Black-Scholes pricing model. The Company ~~used to estimate the expected terms of~~believes that its ~~stock options awarded in prior years. However, the Company’s~~past stock option exercise activity ~~has become~~is sufficient to provide it with a reasonable basis onupon which to estimate the expected life of newly awarded stock options. ~~Accordingly, the estimated expected life used in the determination of~~The fair value amounts for stock options ~~awarded so far in calendar year 2017 was 3.35 years. The simplified method would have resulted in the use of 5.50 years as the estimated expected life of each of these stock options.~~

As a result, the aggregate fair value of this group of stock options was reduced by $1.2 million, or approximately 19%. The effect of the change on the amount of stock option compensation expense recordedgranted during the ~~three and nine months ended October 31, 2017 were reductions of $0.3 million and $0.8 million, respectively. The fair values of each stock option granted in the nine-month~~ periods ~~ended October 31, 2017 and 2016~~presented herein were estimated on the corresponding dates of award ~~using the Black-Scholes option-pricing model~~ based on the following weighted average assumptions:

	Nine Months Ended October 31,				Nine Months Ended October 31,
	2017		2016		2019		2018
Dividend yield	1.1	%	2.0	%	2.2	%	2.5	%
Expected volatility	36.0	%	33.9	%	33.1	%	35.0	%
Risk-free interest rate	1.6	%	1.4	%	2.0	%	2.4	%
Expected life (in years)	3.4		5.5		3.3		3.3

In April 2019 and 2018, and pursuant to terms of the Stock Plan, the Company 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 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 $0.6 million and $0.3 million for the three months ended October 31, 2019 and 2018, respectively, and were $1.5 million and $1.2 million for the nine months ended October 31, 2019 and 2018, respectively. At October 31, 2019, there was $3.1 million in unrecognized compensation cost related to outstanding stock awards that the Company expects to expense over the next three years.

NOTE 1110 — CASH DIVIDENDS

InOn September ~~2017,~~10, 2019, the Company’s board of directors declared a regular quarterly cash dividend in the amount of ~~$1.00~~$0.25 per share of common stock, which was paid on October 31, ~~2017~~2019 to stockholders of record at the close of business on October ~~20, 2017.~~23, 2019. In ~~addition,~~April and June 2019, the ~~Company announced that its~~ board of directors ~~intends to declare a~~declared regular quarterly cash ~~dividend~~dividends of $0.25 per share of common stock, ~~starting in~~which were paid to stockholders on April 30, 2019 and July 31, 2019, respectively. During the ~~first quarter of its fiscal year ending January~~nine-month period ended October 31, ~~2019. In September 2016,~~2018, the ~~Company’s~~ board of directors declared regular ~~and special~~quarterly cash dividends, each in the amount of ~~$0.70 and $0.30~~$0.25 per share of common stock, ~~respectively,~~ which were paid to stockholders on October ~~28, 2016 to stockholders of record at the close of business on October 18, 2016.~~31, 2018, July 31, 2018 and April 30, 2018, respectively.

NOTE 1211 — INCOME TAXES

Income Tax Expense Reconciliation

The Company’s income tax ~~expense~~ amounts for the nine months ended October 31, ~~2017~~2019 and ~~2016~~2018 differed from corresponding amounts computed by applying the federal corporate income tax rate of ~~35%~~21% to ~~the amounts of~~loss or income before income taxes for the periods as shown in the table below.

Nine Months Ended October 31,

2017

2016

Computed expected income tax expense

$
36,062

$
29,318

Increase (decrease) resulting from:

State income taxes, net of federal tax benefit

4,633

3,296

Domestic production activities deduction

(3,036
)
(2,345
)
Stock option exercises

(866
)
(2,807
)
Exclusion of non-controlling interests

(106
)
(2,334
)
Adjustments and other differences

1,051

1,994

$
37,738

$
27,122

	Nine Months Ended October 31,
	2019			2018
Computed expected income tax benefit (expense)	$	8,070		$	(10,427	)
Differences resulting from:
State income taxes, net of federal tax effect	185			676
Federal research and development credits	—			13,866
Net operating loss deemed unrealizable	(6,280		)	1,730
Bad debt loss	5,026			—
Foreign tax differential	(766		)	—
Adjustments and other permanent differences	(1,299		)	(1,336		)
Income tax benefit	$	4,936		$	4,509

Foreign income tax expense amounts for the nine months ended October 31, 2019 and 2018 were not material. As presented above, a valuation allowance in the amount of $6.3 million was established against the deferred tax asset amount created by the net operation loss of APC’s subsidiary in the United Kingdom for the nine months ended October 31, 2019. However, this effect was substantially offset by an income tax benefit (federal and state) for the nine months ended October 31, 2019 in the amount of approximately $5.9 million which is the estimated favorable income tax impact of bad debt loss on loans made to APC from Argan, which were determined to be uncollectible during the nine-month period ended October 31, 2019.

Research and Development Tax Credits

During the three-month period ended October 31, 2018, 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 the consolidated financial statements last year was $16.6 million, which amount is before an unfavorable adjustment recorded in the nine-month period ended October 31, 2019 in the amount of $0.4 million. As described below, the Internal Revenue Service (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 anticipate 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 October 31, 2019 was $4.9 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 October 31, ~~2017 and January 31, 2017, the condensed consolidated balance sheets included prepaid income taxes in the amounts of $3.5 million and $3.9 million, respectively. As of October 31, 2017,~~2019, the Company does not believe that it has any other material uncertain income tax positions reflected in its accounts.

Income Tax Returns

The Company is subject to income taxes in the United States, ~~of America,~~ the Republic of Ireland, the United Kingdom and various other state and foreign jurisdictions. Tax ~~regulations~~treatments within each jurisdiction are subject to the interpretation of the related tax laws and regulations ~~and~~which require significant judgment to apply. The Company is no longer subject to income tax examinations by ~~tax~~ authorities for its fiscal years ended on or before January 31, ~~2014~~2016 except for ~~a few~~several notable exceptions ~~relevant to the Company~~ including the Republic of Ireland, the United Kingdom ~~California~~ and ~~Texas~~several states where the open periods are one year longer.

The ~~Company received notice from Internal Revenue Service on November 7, 2017 that its~~IRS conducted an examination of the Company’s original federal consolidated income tax return for the ~~tax~~ year ended January 31, ~~2016 has been selected for audit. At this time,~~2016. The IRS represented to the Company ~~does not have reason~~that no unfavorable adjustment items were noted during the examination. However, the Company has consented to ~~expect any material changes~~an extension of the audit timeline which will enable the IRS to ~~its~~examine the amendment to the income tax ~~liability resulting~~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.

At October 31 and January 31, 2019, the amounts of other current assets presented in the condensed consolidated balance sheets included income tax refunds and prepaid income taxes in the combined amounts of $14.9 million and $19.5 million, respectively. The income tax refunds are amounts expected to be received from taxing authorities based on the ~~outcome of this audit.~~amended tax returns claiming research and development tax credits in prior years.

NOTE 1312 — ~~EARNINGS~~(LOSS) INCOME PER SHARE ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.

~~Reconciliations of~~Basic and diluted (loss) income per share are computed as follows (shares in thousands except in note (1) below the ~~number of~~charts):

	Three Months Ended October 31,
	2019			2018
Net (loss) income attributable to the stockholders of Argan, Inc.	$	(6,855	)	$	32,434

Weighted average number of shares outstanding - basic	15,633			15,569
Effects of stock awards (1)	—			133
Weighted average number of shares outstanding - diluted	15,633			15,702

Net (loss) income per share attributable to the stockholders of Argan, Inc.
Basic	$	(0.44	)	$	2.08
Diluted	$	(0.44	)	$	2.07

	Nine Months Ended October 31,
	2019			2018
Net (loss) income attributable to the stockholders of Argan, Inc.	$	(35,501	)	$	54,243

Weighted average number of shares outstanding - basic	15,617			15,568
Effects of stock awards (1)	—			117
Weighted average number of shares outstanding - diluted	15,617			15,685

Net (loss) income per share attributable to the stockholders of Argan, Inc.
Basic	$	(2.27	)	$	3.48
Diluted	$	(2.27	)	$	3.46

(1) For the three and nine months ended October 31, 2019, the weighted average ~~basic~~numbers of shares determined on a dilutive basis excludes the effects of outstanding stock awards. All common stock equivalents are considered to be antidilutive for these periods as the ~~number of~~Company incurred net losses in each period. The weighted average ~~diluted shares outstanding and the computations of basic and diluted earnings per share~~numbers for the three and nine months ended October 31, ~~2017 and 2016 are as follows (shares~~2018 exclude the effects of antidilutive stock options covering 581,500 shares for each period; the options had exercise prices per share in ~~thousands):~~

Three Months Ended October 31,

2017

2016

Net income attributable to the stockholders of Argan, Inc.

$
17,229

$
18,073

Weighted average number of shares outstanding - basic

15,545

15,137

Effect of stock options (1)

248

464

Weighted average number of shares outstanding - diluted

15,793

15,601

Net income per share attributable to the stockholders of Argan, Inc.

Basic

$
1.11

$
1.19

Diluted

$
1.09

$
1.16

Nine Months Ended October 31,

2017

2016

Net income attributable to the stockholders of Argan, Inc.

$
64,993

$
49,977

Weighted average number of shares outstanding - basic

15,509

14,974

Effect of stock options (1)

287

516

Weighted average number of shares outstanding - diluted

15,796

15,490

Net income per share attributable to the stockholders of Argan, Inc.

Basic

$
4.19

$
3.34

Diluted

$
4.11

$
3.23

~~(1)~~ ~~Antidilutive shares excluded from~~excess of the ~~diluted computations were 155,000~~average market price per share for ~~the three and nine months ended October 31, 2017. The comparable numbers for the prior year were not material.~~each period.

NOTE 1413 — CUSTOMER CONCENTRATIONS ~~OF REVENUES AND ACCOUNTS RECEIVABLE~~

~~During the three and nine months ended October 31, 2017 and 2016,~~Historically, the majority of the Company’s consolidated revenues has related to ~~performance by~~ the power industry services segment which provided ~~91%~~61% and ~~86%~~76% of consolidated revenues for the three months ended October 31, ~~2017~~2019 and ~~2016,~~2018, respectively, and ~~92%~~49% and ~~86%~~80% of consolidated revenues for the nine months ended October 31, ~~2017~~2019 and ~~2016,~~2018, respectively. The industrial services segment represented 34% and 21% of consolidated revenues for the three months ended October 31, 2019 and 2018, respectively, and 47% and 17% of consolidated revenues for the nine months ended October 31, 2019 and 2018, respectively.

The Company’s most significant customer relationships for the three months ended October 31, ~~2017~~2019 included ~~three~~two power industry service customers, which accounted for ~~approximately 36%, 24%~~27% and ~~13%~~17% of consolidated revenues, ~~respectively.~~respectively, and one industrial services customer which accounted for 10% of consolidated revenues. The Company’s most significant customer relationships for the three months ended October 31, ~~2016~~2018 included four power industry service customers which accounted for ~~approximately 21%~~20%, ~~19%~~17%, ~~18%~~13% and ~~15%~~12% of consolidated revenues, respectively.

The Company’s most significant customer relationships for the nine months ended October 31, ~~2017~~2019 included ~~four~~two power industry service customers which accounted for ~~approximately 29%, 27%, 16%~~13% and ~~14%~~10% of consolidated revenues, respectively. The Company’s most significant customer relationships for the nine months ended October 31, ~~2016~~2018 included ~~five~~four power industry service customers which accounted for ~~approximately 17%~~18%, 16%, ~~16%, 14%~~12% and ~~14%~~11% of consolidated revenues, respectively.

~~Accounts~~The accounts receivable balances from ~~four major~~two customers ~~as of October 31, 2017~~ represented ~~22%, 22%, 16%~~21% and ~~15%~~14% of the corresponding ~~condensed~~ consolidated balance as of October 31, ~~2017, and accounts~~2019. Accounts receivable balances from ~~four major~~two customers represented ~~18%, 17%, 17%~~25% and ~~11%~~15% of the corresponding consolidated balance as of January 31, ~~2017.~~2019.

NOTE 1514 — SEGMENT REPORTING

~~Operating segments are defined as~~Segments represent components of an enterprise ~~about~~for which ~~separate~~discrete financial information is available that is evaluated regularly by the Company’s chief executive officer, who is the chief operating decision maker, ~~or decision making group,~~ in ~~deciding~~determining how to allocate resources and in assessing performance. The Company’s reportable segments ~~power industry services, industrial fabrication~~recognize revenues and ~~field services, and telecommunications infrastructure services,~~incur expenses, are organized in separate business units with different management teams, customers, talents and services, and may include more than one operating segment. ~~The intersegment~~Intersegment revenues ~~of our operations,~~ and the related cost of revenues are netted against the corresponding amounts of the segment receiving the intersegment services. For the three months and nine months ended October 31, ~~2017,~~2019, intersegment revenues totaled approximately ~~$0.2~~$1.1 million and ~~$1.8~~$2.5 million, respectively. For the three months and nine months ended October 31, ~~2016,~~2018, intersegment revenues ~~were insignificant. Intersegment revenues for the aforementioned periods related to services provided by our industrial fabrication~~totaled approximately $0.4 million and ~~field services segment to our power industry services segment.~~$0.8 million, respectively.

~~Presented~~Summarized below are ~~summarized~~certain operating results and ~~certain~~ financial position data of the Company’s reportable business segments for the three and nine months ended October 31, ~~2017~~2019 and ~~2016.~~2018. The “Other” column in each summary includes the Company’s corporate ~~and unallocated~~ expenses.

14
Three Months Ended
October 31, 2019

Power
Services

Industrial
Services

Telecom
Services

Other

Totals

Revenues

$
35,848

$
20,143

$
2,415

$
—

$
58,406

Cost of revenues

31,327

19,159

1,928

—

52,414

Gross profit

4,521

984

487

—

5,992

Selling, general and administrative expenses

7,672

2,018

485

1,960

12,135

(Loss) income from operations

(3,151
)
(1,034
)
2

(1,960
)
(6,143
)
Other income, net

3,447

—

—

131

3,578

Income (loss) before income taxes

$
296

$
(1,034
)
$
2

$
(1,829
)
(2,565
)
Income tax expense

(1,996
)
Net loss

$
(4,561
)

Amortization of purchased intangible assets

$
61

$
166

$
45

$
—

$
272

Depreciation

176

625

97

1

899

Property, plant and equipment additions

2,659

436

170

—

3,265

Current assets

$
292,618

$
28,373

$
2,861

$
82,048

$
405,900

Current liabilities

108,474

8,744

796

943

118,957

Goodwill

18,476

12,290

—

—

30,766

Total assets

324,535

55,814

4,370

87,998

472,717

Three Months Ended October 31, 2018	Power Services		Industrial Services			Telecom Services		Other			Totals
Revenues	$	88,724	$	24,091		$	3,644	$	—		$	116,459
Cost of revenues	61,943		22,203			2,781		—			86,927
Gross profit	26,781		1,888			863		—			29,532
Selling, general and administrative expenses	7,178		1,910			436		1,623			11,147
Income (loss) from operations	19,603		(22		)	427		(1,623		)	18,385
Other income, net	1,298		—			—		131			1,429
Income (loss) before income taxes	$	20,901	$	(22	)	$	427	$	(1,492	)	19,814
Income tax benefit											12,560
Net income											$	32,374

Amortization of purchased intangible assets	$	87	$	166		$	—	$	—		$	253
Depreciation	183		616			96		3			898
Property, plant and equipment additions	776		1,104			119		2			2,001

Current assets	$	347,883	$	30,519		$	3,964	$	57,126		$	439,492
Current liabilities	82,381		15,670			1,075		750			99,876
Goodwill	20,548		13,781			—		—			34,329
Total assets	376,871		60,933			5,623		57,342			500,769

Three Months Ended
October 31, 2017

Power
Services

Industrial
Services

Telecom
Services

Other

Totals

Revenues

$
212,493

$
16,574

$
3,878

$
—

$
232,945

Cost of revenues

178,472

13,797

2,958

—

195,227

Gross profit

34,021

2,777

920

—

37,718

Selling, general and administrative expenses

5,464

1,638

452

2,565

10,119

Income (loss) from operations

28,557

1,139

468

(2,565
)
27,599

Other income, net

1,623

—

—

69

1,692

Income (loss) before income taxes

$
30,180

$
1,139

$
468

$
(2,496
)
29,291

Income tax expense

12,062

Net income

$
17,229

Amortization of purchased intangible assets

$
87

$
171

$
—

$
—

$
258

Depreciation

226

425

71

4

726

Property, plant and equipment additions

476

463

265

—

1,204

Current assets

$
488,122

$
17,549

$
4,008

$
74,116

$
583,795

Current liabilities

280,538

9,546

1,525

707

292,316

Goodwill

20,548

14,365

—

—

34,913

Total assets

515,783

46,854

5,242

74,422

642,301

Three Months Ended
October 31, 2016

Power
Services

Industrial
Services

Telecom
Services

Other

Totals

Revenues

$
151,094

$
21,550

$
2,800

$
—

$
175,444

Cost of revenues

118,407

18,386

2,073

—

138,866

Gross profit

32,687

3,164

727

—

36,578

Selling, general and administrative expenses

6,391

1,410

316

1,731

9,848

Income (loss) from operations

26,296

1,754

411

(1,731
)
26,730

Other income, net

654

—

—

36

690

Income (loss) before income taxes

$
26,950

$
1,754

$
411

$
(1,695
)
27,420

Income tax expense

8,194

Net income

$
19,226

Amortization of purchased intangible assets

$
135

$
97

$
—

$
—

$
232

Depreciation

169

302

51

3

525

Property, plant and equipment additions

101

481

286

—

868

Current assets

$
410,143

$
19,269

$
2,649

$
67,909

$
499,970

Current liabilities

275,052

13,336

1,006

1,139

290,533

Goodwill

20,548

14,365

—

—

34,913

Total assets

435,208

50,363

3,297

69,975

558,843

15
Nine Months Ended
October 31, 2019

Power
Services

Industrial
Services

Telecom
Services

Other

Totals

Revenues

$
83,941

$
80,442

$
6,626

$
—

$
171,009

Cost of revenues

104,759

72,958

5,361

—

183,078

Gross (loss) profit

(20,818
)
7,484

1,265

—

(12,069
)
Selling, general and administrative expenses

18,977

5,959

1,535

5,290

31,761

Impairment loss

2,072

—

—

—

2,072

(Loss) income from operations

(41,867
)
1,525

(270
)
(5,290
)
(45,902
)
Other income, net

7,037

—

—

435

7,472

(Loss) income before income taxes

$
(34,830
)
$
1,525

$
(270
)
$
(4,855
)
(38,430
)
Income tax benefit

4,936

Net loss

$
(33,494
)

Amortization of purchased intangible assets

$
231

$
497

$
136

$
—

$
864

Depreciation

517

1,791

298

4

2,610

Property, plant and equipment additions

4,533

1,487

277

11

6,308

Nine Months Ended
October 31, 2017

Power
Services

Industrial
Services

Telecom
Services

Other

Totals

Revenues

$
662,131

$
50,203

$
10,903

$
—

$
723,237

Cost of revenues

540,986

44,634

8,396

—

594,016

Gross profit

121,145

5,569

2,507

—

129,221

Selling, general and administrative expenses

16,804

5,041

1,163

7,400

30,408

Income (loss) from operations

104,341

528

1,344

(7,400
)
98,813

Other income, net

4,043

—

—

178

4,221

Income (loss) before income taxes

$
108,384

$
528

$
1,344

$
(7,222
)
103,034

Income tax expense

37,738

Net income

$
65,296

Amortization of purchased intangible assets

$
262

$
514

$
—

$
—

$
776

Depreciation

580

1,144

202

10

1,936

Property, plant and equipment additions

691

2,800

513

2

4,006

Nine Months Ended
October 31, 2016

Power
Services

Industrial
Services

Telecom
Services

Other

Totals

Revenues

$
402,615

$
59,287

$
6,385

$
—

$
468,287

Cost of revenues

302,140

52,491

4,764

—

359,395

Gross profit

100,475

6,796

1,621

—

108,892

Selling, general and administrative expenses

13,688

4,532

944

5,265

24,429

Impairment loss

1,979

—

—

—

1,979

Income (loss) from operations

84,808

2,264

677

(5,265
)
82,484

Other income, net

1,192

—

—

91

1,283

Income (loss) before income taxes

$
86,000

$
2,264

$
677

$
(5,174
)
83,767

Income tax expense

27,122

Net income

$
56,645

Amortization of purchased intangible assets

$
385

$
367

$
—

$
—

$
752

Depreciation

459

841

135

9

1,444

Property, plant and equipment additions

944

1,082

453

2

2,481

Nine Months Ended October 31, 2018	Power Services		Industrial Services		Telecom Services		Other			Totals
Revenues	$	316,262	$	68,577	$	9,656	$	—		$	394,495
Cost of revenues	249,401		61,889		7,513		—			318,803
Gross profit	66,861		6,688		2,143		—			75,692
Selling, general and administrative expenses	18,563		5,698		1,286		5,615			31,162
Income (loss) from operations	48,298		990		857		(5,615		)	44,530
Other income, net	3,393		1,400		—		328			5,121
Income (loss) before income taxes	$	51,691	$	2,390	$	857	$	(5,287	)	49,651
Income tax benefit										4,509
Net income										$	54,160

Amortization of purchased intangible assets	$	262	$	497	$	—	$	—		$	759
Depreciation	548		1,640		267		10			2,465
Property, plant and equipment additions	2,318		4,379		666		3			7,366

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 October 31, ~~2017,~~2019, and the results of their operations for the three and nine months ended October 31, ~~2017~~2019 and ~~2016,~~2018, and should be read in conjunction with (i) the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2017~~2019 that was filed with the SEC on April ~~11, 2017.~~10, 2019 (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,” “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 ~~our~~ 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 Part II of~~ this Quarterly Report on Form 10-Q and ~~Item 1A of Part I of~~ our Annual ~~Report on Form 10-K for the year ended January 31, 2017.~~Report. 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 ~~Inc.~~ 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 ~~and~~markets, including renewable energy, ~~markets~~ for a wide range of customers, including independent power project owners, public utilities, ~~power plant~~ equipment suppliers and global energy plant construction firms. GPS ~~including its consolidated joint ventures,~~ 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 ~~southern~~southeast region of the United States and that are based on its expertise in producing, delivering and installing fabricated steel components such as pressure vessels ~~heat exchangers~~ and piping systems. Through SMC, now conducting 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.~~

Atregion of the ~~holding company level, we intend to~~United States.

We may make additional acquisitions of and/or investments in companies with ~~significant~~ potential for profitable ~~growth. We may have~~growth that reflect more than one industrial focus. We expect that ~~acquired companies~~they will be held in separate subsidiaries that will be operated in a manner that best provides ~~cash flows and~~ value for our stockholders.

Overview

~~Highlights~~In our Annual Report, we disclosed that APC had encountered significant operational and contractual challenges in completing a power-plant construction project in the United Kingdom, and that the consolidated operating results for the year ended January 31, 2019 reflected unfavorable gross profit adjustments related to this project, the Tees Renewable Energy Plant (“TeesREP”), which is a biomass-fired power plant under construction in Teesside. 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.

Subsequent to the filing of our Annual Report, APC’s estimates of the unfavorable financial impacts of the unique and numerous difficulties on this project, including increased scope and design changes from original plans and various work interruptions, escalated substantially. APC has 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 $31.2 million. The total amount of this loss was reflected in our operating results for the nine-month period ended October 31, 2019. Measured in the contract currency of British pounds, the estimated amount of the contract loss declined slightly during the third quarter, reflecting a slight improvement in project execution and an agreed upon path forward with the customer for completion of the project as discussed below. However, the translation of the contract value and the estimated amount of the total cost of this contract as of October 31, 2019 into U.S. dollars caused the contract loss amount to increase by $0.3 million for the third quarter.

Subsequent to October 31, 2019, APC and its customer, Técnicas Reunidas (“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 does 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 this time, we believe it is in our best interests to complete the TeesREP project while the parties concurrently use good faith efforts to settle them. 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 contract.

The combined net amount of accounts receivable (which are current) and contract assets included in the condensed consolidated balance sheet as of October 31, 2019, less the reserve for contract loss included in accrued expenses in the amount of $8.6 million, was $16.1 million. In addition, Argan has caused certain letters of credit to be issued to TR by Bank of America (our “Bank,” see Note 6 to the accompanying condensed consolidated financial statements) and has provided a parent company performance guarantee to TR related to the TeesREP project on behalf of APC.

As previously announced, during August 2019, GPS received a full notice to proceed (“FNTP”) with EPC activities under a contract to build a 1,875 MW natural gas-fired power plant in Guernsey County, Ohio. The value of this EPC services contract was added to the amount of remaining unsatisfied performance obligations, or “RUPO” (see Note 2 to the accompanying condensed consolidated financial statements) during the quarter ended October 31, 2019; the value was included in the amount of project backlog which we reported as of January 31, 2019.

The commencement of this project has resulted in favorable impacts on the consolidated financial statements including increased revenues for the power industry services segment for the third quarter of the current year ~~include~~compared to the ~~following:~~second quarter as well as improved cash flow.

· ~~Current year-to-date results for~~Nonetheless, consolidated revenues ~~gross profit, income before income taxes and net income attributable to our stockholders~~ for the ~~nine~~three months ended October 31, ~~2017 are strong as they increased by 54%, 19%, 23% and 30%, respectively,~~2019 were $58.4 million, which represented a decline of $58.1 million from ~~the corresponding amounts in the prior year period. The gross profit percentage was 17.9%~~consolidated revenues of $116.5 million reported for the ~~current year-to-date period.~~

· ~~EBITDA(1) attributable~~three months ended October 31, 2018. Consolidated revenues decreased to ~~the stockholders of Argan increased 33% to $105.4~~$171.0 million for the nine months ended October 31, ~~2017 as compared to $79.3~~2019 from $394.5 million for the ~~corresponding prior year period.~~

· Our international subsidiary, APC, has begun to capitalize on the opportunities foreseen when we acquired this business in 2015. During the current year, it has been awarded two large construction-type contracts related to power plants in the United Kingdom with a combined contract value in excess of $109 million.

· During the third quarter, we declared and paid a regular cash dividend of $1.00 per share to our stockholders. In addition, we announced our intent to declare and pay a regular quarterly cash dividend of $0.25 per share, starting in the first quarter ending April 30, 2018.

· ~~Our tangible net worth(2) increased 23% to $305.9 million as of October 31, 2017 from $248.5 million as of January 31, 2017.~~

· ~~Our liquidity, or working capital(3), increased 23% to $291.5 million as of October 31, 2017 from $237.2 million as of January 31, 2017.~~

~~(1)~~ ~~EBITDA, or earnings before interest, taxes, depreciation and amortization, is a measure not recognized under US GAAP.~~

~~(2)~~ ~~We define tangible net worth as our total stockholders’ equity less goodwill and other intangible assets, net.~~

~~(3)~~ ~~We define working capital as our total current assets less our total current liabilities.~~

Our revenues for the three months ended October 31, 2017 increased by 33% to $232.9 million from $175.4 million for the three months ended October 31, 2016, providing EBITDA attributable to our stockholders for the current quarter of $30.3 million, or 13% of corresponding revenues. Gross profits for the three months ended October 31, 2017 increased by 3% to $37.7 million from $36.6 million for the three months ended October 31, 2016. However, our gross profit percentage declined to 16.2% from 20.8% as we increased our estimated costs to complete certain EPC projects due to, primarily, increased labor and subcontractor costs. The corresponding reduction in the amount of forecasted gross margins had an unfavorable effect on gross profit for the current quarter which caused, in part, our consolidated gross profit percentage to decrease to 17.9% for the nine months ended October 31, ~~2017 from 23.3%~~2018. 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 ~~nine-month period ended October 31, 2016.~~

~~As explained below,~~Guernsey Power Station should result in improved revenues over the decline in the amount of income attributable to our joint venture partner and unfavorable discrete items for the current quarter caused our effective income tax rates to increase for current year periods compared with the corresponding periods last year. Income tax expense for the three months ended October 31, 2017 was $12.1 million, or 41.0% of income before income taxes. As a result, income tax expense for the nine months ended October 31, 2017 was pushed upwards to $37.7 million, or 36.6%coming periods. The revenues of the ~~corresponding amount~~power industry services segment represented 61.4% and 49.1% of ~~income before income taxes. Last year, the income tax rates for the comparable periods were 29.9% and 32.4%, respectively.~~

A decrease in gross profit percentage and an increase in income taxes, partially offset by increased revenues, were the primary causes of the decline in net income attributable to our stockholders to $17.2 million, or $1.09 per diluted share, for the three months ended October 31, 2017 from $18.1 million, or $1.16 per diluted share, for the three months ended October 31, 2016, a reduction of 4.7%.

~~Execution on Contract Backlog~~

~~At October 31, 2017, our contract backlog was $509 million. The following table summarizes our large power plant projects:~~

~~Current Project~~	~~Location~~	~~Facility Size~~	~~FNTP Received(1)~~	~~Scheduled Completion~~
~~Caithness Moxie Freedom Generating Station~~	~~Pennsylvania~~	~~1,040 MW~~	~~November 2015~~	~~2018~~
~~CPV Towantic Energy Center~~	~~Connecticut~~	~~785 MW~~	~~March 2016~~	~~2018~~
~~NTE Middletown Energy Center~~	~~Ohio~~	~~475 MW~~	~~October 2015~~	~~2018~~
~~NTE Kings Mountain Energy Center~~	~~North Carolina~~	~~475 MW~~	~~March 2016~~	~~2018~~
~~Exelon West Medway II Facility~~	~~Massachusetts~~	~~200 MW~~	~~April 2017~~	~~2018~~
~~TeesREP Biomass Power Station~~	~~Teesside (England)~~	~~299 MW~~	~~May 2017~~	~~2019~~
~~InterGen Spalding OCGT Expansion Project~~	~~Spalding (England)~~	~~298 MW~~	~~November 2017~~	~~2019~~

~~(1)~~ ~~Full Notice to Proceed (“FNTP”) represents the formal notice provided by the customer instructing us to commence the activities covered by the corresponding contract.~~

Contract backlog represents the total value of projects awarded less the amounts of revenues recognized to date on those contracts at a specific point in time. We believe contract backlog is an indicator of future revenues and earnings potential. Although contract backlog reflects business that we consider to be firm, cancellations or reductions may occur and may reduce contract backlog and our expected future revenues. Despite the new awards to APC that are identified above, the total

value of our contract backlog has declined by half during the current year which substantially reflects the amounts of revenues earned by GPS due to its performance on the first four projects identified above. New opportunities have been pursued and negotiations continue for several projects.

The first four projects identified in the chart above, all EPC contracts, were the most significant drivers of our financial results for the three and nine months ended October 31, 2017, which together represented approximately 82% and 87% of our consolidated revenues for the three and nine months ended October 31, ~~2017,~~2019, respectively. ~~Revenues~~For the three and nine months ended October 31, 2018, the percentage shares were 76.2% and 80.2%, respectively.

Significant amounts of consolidated revenues for ~~each~~the current year have been contributed by the industrial services business of TRC which reported revenues of $20.1 million and $80.4 million for the three and nine months ended October 31, 2019, respectively. These amounts were 34.5% and 47.0% of consolidated revenues for the three and nine months ended October 31, 2019, respectively, and represented a decrease in revenues of 16.4% and an increase in revenues of 17.3%, respectively, from the amounts of revenues for the comparable periods last year.

Consolidated gross profits for the three months ended October 31, 2019 and 2018 were $6.0 million and $29.5 million, respectively, reflecting primarily the reduction in consolidated revenues between periods. In addition, our gross margin percentage declined to 10.3% for the three months ended October 31, 2019 from 25.4% for the prior year quarter. Selling, general and administrative expenses were $12.1 million and $11.1 million for the three months ended October 31, 2019 and 2018, respectively. The net amounts of other income for the three-month period ended October 31, 2019 increased to $3.6 million from $1.4 million during the comparable period in 2018, primarily due to $2.2 million of other income provided by our consolidated VIE. Significantly impacting financial results for the third quarter last year in a favorable manner was the net income tax benefit recorded in the amount of $12.6 million which reflected primarily the effect of research and development credits earned in prior years as discussed below.

The significant contract loss incurred in the current year by APC, primarily recognized in the first quarter, caused us to report a consolidated gross loss of $12.1 million for the nine months ended October 31, 2019. The contract loss also prompted us to record an impairment loss related to the goodwill of APC in the amount of $2.1 million during the first quarter. Selling, general and administrative expenses were $31.8 million and $31.2 million for the nine months ended October 31, 2019 and 2018, respectively. The net amounts of other income for the nine-month periods ended October 31, 2019 and 2018 were $7.5 million and $5.1 million, respectively. Due substantially to the APC loss, we incurred a consolidated loss before income tax benefit of $38.4 million for the nine months ended October 31, 2019.

The income tax benefit of $4.9 million for the nine months ended October 31, 2019 reflects the favorable estimated tax impact of a bad debt loss on loans made to APC by Argan, which were determined to be uncollectible during the three-month period ended July 31, 2019. On the other hand, we have not recorded any income tax benefit for the operating loss of APC’s subsidiary in the United Kingdom for the nine months ended October 31, 2019 due to our expectation at this time that a minimal portion of the benefit will be utilized in future years. For the nine months ended October 31, 2018, our consolidated income tax benefit of $4.5 million reflected the favorable impact of the research and development tax credits recorded last year as discussed below.

We incurred a net loss attributable to the stockholders of Argan in the amount of $6.9 million for the three months ended October 31, 2019, or $0.44 per share on a diluted basis. Last year, for the three months ended October 31, 2018, we reported net income attributable to the stockholders of Argan in the amount of $32.4 million, or $2.07 per share on a diluted basis.

It takes time for us to ramp-up meaningful revenues associated with new construction projects due to the project life-cycles of gas-fired power plants. However, with the addition of the significant new project, we expect our quarterly revenues to increase sequentially until this project reaches the peak of its activity in the fiscal year ending January 31, 2022. We continue to evaluate new project opportunities, and final negotiations are proceeding with owners of several other major projects.

Research and Development Credits

During the three-month period ended October 31, 2018, 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 have been available to reduce prior year income taxes. This study was begun two years ago and 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 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 totaled $16.6 million, with $16.5 million recognized in income taxes for the three and nine months ended October 31, 2018. The favorable effect of this amount on diluted earnings per share was $1.05 for both periods.

Project Backlog

In August 2019, GPS received a FNTP with EPC activities under a contract to build an 1,875 MW natural gas-fired power plant in Guernsey County, Ohio. This project was announced early this year and its contract value was reflected in project backlog as of January 31, 2019. The Guernsey Power Station is being jointly developed by Caithness Energy, L.L.C. (“Caithness”) and Apex Power Group, LLC. Last year, we completed the construction of the Freedom Generating Station for Caithness, a 1,040 MW combined cycle natural gas-fired power plant located in Pennsylvania. In May 2019, GPS entered into an EPC services contract to construct a 625 MW natural gas-fired power plant in Harrison County, West Virginia, the value of which was added to project backlog at that time. Caithness partnered with Energy Solutions Consortium, LLC to develop this project.

Both of these new facilities will be state-of-the-art combined cycle power plants, with power islands based on natural gas-fired turbines supplied by General Electric, providing electricity to the PJM grid. As indicated above, construction activities for the power generating facility in Guernsey have begun with completion scheduled in 2022. A limited notice to proceed (“LNTP”) with certain preliminary activities was received from the owners of the project in Harrison County. However, the construction commencement dates for this power plant, as well as a project to build a gas-fired power plant in Reidsville, North Carolina (the value of which was also included in project backlog as of January 31, 2019), have been pushed out and we cannot predict with certainty the start dates at this time. For all projects, the start date for construction is generally controlled by the project owners. However, at this time we believe it is probable that both of these projects will ~~decline over~~commence next year.

Our project backlog amount was approximately $1.4 billion and $1.1 billion as of October 31 and January 31, 2019, respectively. Our reported amount of project backlog at a point in time represents the ~~next several quarters~~total value of projects awarded to us that we consider to be firm as ~~they progress beyond peak construction~~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, or “RUPO”, on active contracts; see Note 2 to the accompanying condensed consolidated financial statements). Cancellations or reductions may occur that may reduce project backlog and our expected future revenues. We include the value of an EPC services contract in ~~their~~ project ~~life-cycles. In August 2017,~~backlog when we believe that it is probable that the project ~~owner provided us with the necessary authorization under the turnkey~~will commence within a reasonable timeframe, among other factors.

As announced in Fiscal 2019, GPS entered into an EPC services contract to ~~start construction of~~construct the Chickahominy Power Station, a ~~dual-fuel, simple cycle~~1,740 MW natural gas-fired power plant, in ~~Medway, Massachusetts. The~~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 can not predict when construction will commence, if at all. As stated above, we continue to evaluate new ~~facility will feature two 100 MW combustion turbine generators with state-of-the-art noise mitigating improvements.~~project opportunities, and final negotiations are in process for several other major projects.

~~In May 2017, APC announced~~We believe that ~~it has received from Técnicas Reunidas, S.A. (“TR”)~~the delays in new business awards to GPS and the project construction starts of certain previously awarded projects relate to a ~~contract for the erection~~variety of ~~a biomass boiler, a critical component of a new power plant being constructed~~factors, especially in ~~Teesside, which is near~~ the northeast coast of England. Work began this summer with completion scheduled in 2019. TR is a Spain-based global general contractor. In addition, in October 2017, APC was awarded a contract to perform certain engineering, procurement and ~~construction services for InterGen, a company that develops, constructs and operates power projects around the world. The Spalding Energy Expansion plan includes APC’s project for the expansion~~mid-Atlantic regions of the existing gas-fired power station in Spalding (located in the East Midlands region of England) with an open cycle gas turbine unit with a planned capacity of 298 MW. Substantial completion for this projectUnited States. For example, there is ~~also scheduled for 2019.~~

~~Despite these positive developments, we believe that the~~some remaining uncertainty surrounding the level of regulatory support for coal as part of the energy mix, ~~the~~an increase in the amount of power generating capacity provided by renewable energy assets, improvements and ~~the improvements~~decreasing prices in renewable energy storage solutions and increased environmental activism. Together with the difficulty in obtaining project equity financing, these factors may be impacting the planning and ~~initiation~~initial phases for the construction of new natural gas-fired power plants which continue to be ~~delayed~~deferred by project owners.

Although the downward trend was interrupted last year, our country has experienced a 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 ~~may~~ include ~~the potential for future volatility in natural gas prices that appears to be giving a short-term boost to coal-fired power generation and disappointing~~challenging energy capacity auctions ~~during the current year~~ for new power generating ~~assets.~~

Inassets, the ~~current year, we have also seen approval delays and public opposition to new oil and gas pipelines develop as hurdles for gas-fired power plant developers. Interstate pipelines require the approval~~impacts of the Federal Energy Regulatory Commission (“FERC”), whose members require a quorum to act. The lack of a quorum for a period of six months earlier this year left FERC unable to provide approval decisions on major energy projects. New members have been appointed and approved, but progress in reducing the number of pending decisions has been slow. In addition, a continued increase in environmental activism ~~has garnered~~and the resolve of several states to move towards 100% renewable energy. 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 ~~potentially new~~planned gas-fired power plant sites, thereby increasing the risk of power plant project delays or cancellations.

~~Possible Impairment Loss~~

TRC’s management recently completed a reforecasting of its future financial results which provides essential data for the required annual goodwill assessment of TRC as of November 1, 2017. The new forecast presents a less favorable outlook for TRC, which represents our Industrial Fabrication and Field Services reportable business segment, than in the past. With this new information and using preliminary valuation analyses including discounted net after tax cash flow estimates, management determined that the goodwill associated with this business may be impaired. Based on this currently available data, management estimates that the amount of possible loss ranges from an immaterial amount to $5.5 million, with the estimated federal income tax rate representing the most significant variable. Depending on the completion of the goodwill assessment including the resolution of this uncertainty, we may be required to record an impairment loss related to the goodwill of TRC in the fourth quarter of the current year up to an amount of $5.5 million. However, the completion of the full valuation of the business of TRC could materially change this outcome.

Market Outlook

~~Transition from Coal to Natural Gas Will Take Time~~

The total annual amount of electricity generated by utility-scale facilities in the United States in calendar year 2018 was the highest amount generated since 2007. In its latest base-case outlook, the U.S. Energy Information Administration (the “EIA”) ~~expects~~forecasts steady growth in net electricity generation through 2050 with average annual increases of approximately 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. Nonetheless, the EIA forecasts continued growth for natural gas-fired electricity generation through 2050 with average annual increases of 1.2% per year. In the reference case included in its Annual Energy Outlook 2019 released in January 2019, EIA forecasts the share of total utility-scale electricity generation from natural gas-fired power plants in the United States to rise from 34% in 2018 to 37% in 2022 and to 39% by 2050. The generation share from coal is forecast to fall steadily during these periods, from 28% in 2018 to 23% in 2022 to 17% by 2050. In its Short-Term Energy Outlook issued in October 2019, EIA forecasts that the share of utility-scale electricity net generation fueled by natural gas will reach 37% for 2019.

As reported by EIA, net electricity generation at utility-scale facilities in our country rose by 3.4% during 2018 as net generation from natural gas, ~~will fall~~wind and solar sources increased by 13.3%, 7.2% and 19.8%, respectively. The share of net electricity generation fueled by natural gas rose from ~~an average of 34% in 2016 to about 31%~~approximately 32.1% in 2017 ~~as a result~~to 35.2% for 2018. The net electricity generation from coal declined by 5.0% for the year. Net electricity generation by utility-scale facilities in our country declined by 2.0% for the seven months ended July 31, 2019 compared with the same period of ~~higher~~2018. However, the net generation from natural gas ~~prices~~rose by 5.7% between the seven-month periods and ~~increased~~represented a 36.6% share of net generation from ~~renewables and coal. Coal’s generation share is forecast to rise from 30% last year to 31% in 2017. This reversal of the relative~~all fuel sources. The net electricity generation ~~share position for~~from coal decreased by 13.1% between the comparable seven-month periods and ~~natural gas is forecast to be short lived. The projected annual generation shares for natural gas and coal in 2018 are predicted to be 32% and 31%, respectively. In 2016, natural gas overtook coal as~~ the ~~leading source of power generation in the United States. Electricity~~net electricity generation from renewable energy sources (other than hydroelectric power) increased by 3.6%. The shares of net generation from coal and other ~~than hydropower is predicted to grow from 8% in 2016 to about 9% in 2017~~renewable sources for the seven-month period ended July 31, 2019 were 24.0% and ~~10% in 2018. Generation from nuclear energy accounts for almost 20% of total generation in each year from 2016 through 2018.~~11.2%, respectively.

~~The Demand for Electrical Power Remains Modest~~

~~Government forecasts project an annual increase in~~In summary, the share of the electrical power generation ~~of less than 1% per year for~~mix fueled by natural gas has continued to increase, while the ~~next 25 years. However, our industry sector~~share fueled by coal has ~~not fully recovered from~~continued its fall. Over the ~~recessionary decline~~ten-year period ended in 2018, the ~~demand for power in the United States. For both calendar years 2016 and 2015, the total~~ amount of ~~electricity~~utility-scale power generated in the United States ~~was approximately 98%~~by coal fell by 42.2% while the amount of such power fueled by natural gas increased by 66.3%. This dramatic shift is a primary cause of the ~~peak~~reductions in the annual power ~~generation level~~plant emissions of ~~2007. Total electric power generation from all sources has decreased slightly during three~~carbon dioxide, sulfur dioxide and nitrogen oxides over this same ten-year period of 24.5%, 79.9% and 55.4%, respectively.

Over the ~~last five~~next few years, ~~with only a slight increase in 2016. For 2017,~~ EIA forecasts that ~~total generation~~new wind and photovoltaic solar capacity will ~~decline again by approximately 1.5%, before increasing by 1.7%~~continue to be added to the utility-scale power fleet in ~~2018.~~

~~Natural Gas-Fired Power Positioned~~the United States at a brisk pace substantially attributable to ~~Fill the Gap~~

Since the year 2000, more than 53 GW of coal-fired capacity has been retired; most of the retired plants were older, smaller, less efficient coal-fired power plants. However, announcements by electric utilities of the retirement of coal-fired power plants continue, citingdeclining equipment costs and the availability of ~~cheap~~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, persistent low natural gas existing environmental regulations and the significant costs of refurbishment and relicensing. Almost 5 GW of nuclear capacity has been retired over the last four to five years. The future of new nuclearprices, lower power plant ~~construction has been further clouded with~~operating costs and higher energy generating efficiencies should sustain the bankruptcy of Westinghouse, one of the few major nuclear providers of fuel, services, technology, plant design and equipment, and the decisions by several utilities to either abandon construction or development of nuclear projects, leaving just one site under construction today (the Vogtle plant units 3 and 4)demand for modern combined cycle gas-fired power plants in the ~~United States. The retirements of coal and nuclear plants typically result in the need for new capacity, and new natural gas-fired plants are~~future. Natural gas is relatively cheaper to build than coal, nuclear, or renewable plants, they are substantially more environmentally friendly than conventional coal-fired power plants, and they represent the most economical way to meet base loads and peak demands. Relatively clean burning, cost-effective and ~~reliable, the~~reliable; its benefits ~~of natural gas~~ as a source of power ~~generation~~ are undeniable. As the use of coal declines, the use of nuclear energy stalls, the integration of increasing amounts of wind and solar power into energy grids continues, power providers should continue to value gas-fired electricity generation, especially when needed to support intermittent renewable energy supplies.

Current projections of future power generation assume the sustained increase in domestic natural gas production, which should lead to stable natural gas prices continuing into the future including the near term. The availability of competitively priced natural gas, the significant increases in the efficiency of combined cycle power plants, the existence of certain programs encouraging renewable fuel use, and the implementation of a series of environmental rules, primarily directed toward the reductions of air pollution and the emissions of greenhouse gases, should further reduce future coal use and continue to increase the shares of the power generation mix represented by natural gas-fired power plants, wind farms and solar fields. Even without the implementation of the Clean Power Plan, natural gas and renewable energy sources are still predicted to be the top choices for new electricity generation plants in the future primarily due to low natural gas prices.compelling.

We ~~continue to~~ believe that the future prospects for natural gas-fired power plant construction are favorable as natural gas ~~has generally become~~is the primary source for power generation in our country. Major advances in horizontal drilling and the practice of hydraulic fracturing ~~have~~ led to the boom in natural gas ~~supply.~~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 ~~continuing~~future retirement of coal, nuclear and inefficient ~~and old coal and nuclear~~gas-fired energy plants, should result in modern natural gas-fired ~~and renewable~~ energy plants representing ~~the~~a substantial ~~majority~~portion of new power generation additions in the future and an increased share of the power generation mix. 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. 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.

~~In summary,~~We believe that the development of natural gas-fired ~~and renewable~~ power generation facilities in the United States should continue to provide new construction opportunities for us, although the pace of new opportunities emerging may ~~decrease~~be restrained in the near ~~term.~~term as discussed above. We ~~are encouraged by the results of the business development activities conducted by APC since its acquisition by us that have lead to new power industry construction contracts outside of this country.~~

~~We Are Positioned to Succeed~~

We have been successful in the completion of our EPC and other projects. Our four largest EPC projects continue to progress beyond the peak construction phases of their project life-cycles and toward completion. Consequently, the level of revenues associated with each one will continue to decline. While we are disappointed that we have not added a new major EPC contract to our backlog so far this year due, in part, to the intensely competitive business environment, 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. ~~With~~

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 and with~~services. 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 ~~plans~~ continue to be based on reasonable assumptions. Our performance on current projects should provide a stable base of business activity through the next fiscal year as we pursue new opportunities that should continue to emerge for all of our businesses.

~~Possible Changes to the United States Income Tax Code (the “US Tax Code”)~~

The United States Congress is considering sweeping revisions to the US Tax Code which would, among other changes, reduce the corporate income tax rate to as low as 20% from 35%, change international business tax rules and temporarily lower individual taxes. A final, reconciled bill would require passage by both the House and Senate before it would be presented to the President for signature. The outcome of this legislation is unknown, and the final impacts of it on our business have not been determined, although we would expect them to be favorable.

Comparison of the Results of Operations for the Three Months Ended October 31, ~~2017~~2019 and ~~2016~~2018

We reported a net ~~income~~loss attributable to our stockholders of ~~$17.2~~$6.9 million, or ~~$1.09~~$0.44 per diluted share, for the three months ended October 31, ~~2017.~~2019. For the three months ended October 31, ~~2016,~~2018, we reported a comparable net income amount of ~~$18.1~~$32.4 million, or ~~$1.16~~$2.07 per diluted share.

The following schedule compares our operating results for the three months ended October 31, ~~2017~~2019 and ~~2016~~2018 (dollars in thousands).:

	Three Months Ended October 31,									Three Months Ended October 31,
	2017		2016		$ Change			% Change		2019			2018			$ Change			% Change
REVENUES
Power industry services	$	212,493	$	151,094	$	61,399		40.6	%	$	35,848		$	88,724		$	(52,876	)	(59.6	)%
Industrial fabrication and field services	16,574		21,550		(4,976		)	(23.1	)	20,143			24,091			(3,948		)	(16.4	)
Telecommunications infrastructure services	3,878		2,800		1,078			38.5		2,415			3,644			(1,229		)	(33.7	)
Revenues	232,945		175,444		57,501			32.8		58,406			116,459			(58,053		)	(49.8	)
COST OF REVENUES
Power industry services	178,472		118,407		60,065			50.7		31,327			61,943			(30,616		)	(49.4	)
Industrial fabrication and field services	13,797		18,386		(4,589		)	(25.0	)	19,159			22,203			(3,044		)	(13.7	)
Telecommunications infrastructure services	2,958		2,073		885			42.7		1,928			2,781			(853		)	(30.7	)
Cost of revenues	195,227		138,866		56,361			40.6		52,414			86,927			(34,513		)	(39.7	)
GROSS PROFIT	37,718		36,578		1,140			3.1		5,992			29,532			(23,540		)	(79.7	)
Selling, general and administrative expenses	10,119		9,848		271			2.8		12,135			11,147			988			8.9
INCOME FROM OPERATIONS	27,599		26,730		869			3.3
(LOSS) INCOME FROM OPERATIONS										(6,143		)	18,385			(24,528		)	N/M
Other income, net	1,692		690		1,002			145.2		3,578			1,429			2,149			(150.4	)
INCOME BEFORE INCOME TAXES	29,291		27,420		1,871			6.8
Income tax expense	12,062		8,194		3,868			47.2
NET INCOME	17,229		19,226		(1,997		)	(10.4	)
Net income attributable to non-controlling interests	—		1,153		(1,153		)	(100.0	)
NET INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.	$	17,229	$	18,073	$	(844	)	(4.7	)%
(LOSS) INCOME BEFORE INCOME TAXES										(2,565		)	19,814			(22,379		)	N/M
Income tax (expense) benefit										(1,996		)	12,560			(14,556		)	N/M
NET (LOSS) INCOME										(4,561		)	32,374			(36,935		)	N/M
Net income (loss) attributable to non-controlling interests										2,294			(60		)	2,354			N/M
NET (LOSS) INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.										$	(6,855	)	$	32,434		$	(39,289	)	N/M

21N/M — Not meaningful.

Revenues

Power Industry Services

The revenues of the power industry services business ~~increased~~decreased by ~~41%~~60%, or ~~$61.4~~$52.9 million, to ~~$212.5~~$35.8 million for the three months ended October 31, ~~2017~~2019 compared with revenues of ~~$151.1~~$88.7 million for the three months ended October 31, ~~2016.~~2018. The revenues of this business represented approximately ~~91%~~61% of consolidated revenues for the current quarter and approximately ~~86%~~76% of consolidated revenues for the prior year quarter. ~~The~~GPS reached substantial completion on four gas-fired power plant projects during the year ended January 31, 2019 and concluded activities on a fifth gas-fired power plant early in the first quarter of the current ~~quarter increase in~~fiscal year. These five power plants provided revenues of $59.5 million for the three months ended October 31, 2018, which represented approximately 51% of consolidated revenues for the period. 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 the current year. Additionally, the TeesREP project experienced reduced revenues for the third quarter as compared to the corresponding quarter last year as the project progresses to the later stages of construction. GPS revenue levels have been negatively impacted by the delay in new project startups. However, sequential quarterly GPS revenues are expected to rise as GPS recently commenced full construction efforts on an 1,875 MW natural gas-fired power ~~industry services segment primarily reflected the peak and post-peak construction activities of four EPC projects, which together~~plant. Revenues related to this project represented ~~approximately 82%~~a significant portion of consolidated revenues for the current quarter. The percent-complete for these four projects ranged from 76% to 87% as of October 31, 2017. As these projects continue to progress beyond peak construction in their life-cycles, the level of quarterly revenues associated with each project will continue to decline. All four jobs are currently scheduled to be completed during the fiscal year ending January 31, 2019.

Last year, the combined revenues associated with these four natural gas-fired power plant projects, which were all in earlier phases of construction, represented approximately 73% of consolidated revenues for the third quarter. Additionally, construction activity related to two other natural gas-fired power plant projects that were completed last year represented 9% of consolidated revenues for the three months ended October 31, 2016.

Industrial Fabrication and Field Services

The revenues of ~~the~~ industrial fabrication and field services ~~business~~ (representing the business of TRC) provided 34% of consolidated revenues for the three months ended October 31, 2019. However, revenues decreased by ~~23%~~$3.9 million, or 16%, ~~or $5.0 million,~~ to ~~$16.6~~$20.1 million for the three months ended October 31, ~~2017~~2019, compared ~~with~~to revenues of ~~$21.6~~$24.1 million for the three months ended October 31, ~~2016.~~2018. Last year, TRC was successful in obtaining business from several large new customers while expanding the volume of business from recurring industrial customers. With the completion of several of the large projects this year, TRC is focused on rebuilding project backlog. The largest portion of ~~TRC’s~~the revenues ~~continue~~of TRC continues to be provided by industrial field ~~services, which included $7.3 million in revenue from a large mining company in the prior year period. TRC’s~~services. The major customers of TRC include some of North America’s largest forest products companies, large fertilizer producers as well as other chemical and ~~fertilizer producers.~~energy companies with plants located in the southeast region of the United States.

Telecommunications Infrastructure Services

The revenues of this business segment (representing the business of SMC) ~~increased by approximately 39%, or $1.1 million, to $3.9~~were $2.4 million for the three months ended October 31, ~~2017~~2019 compared with revenues of ~~$2.8~~$3.6 million for the three months ended October 31, ~~2016, as SMC has been successful in increasing~~2018. The decrease was primarily due to the completion of a large fiber cabling project that contributed a major portion of revenues ~~related to both outside premises and inside premises projects.~~last year.

Cost of Revenues

Due primarily to the ~~substantial increase~~decrease in consolidated revenues for the three months ended October 31, ~~2017~~2019 compared with last year’s third quarter, ~~the corresponding~~ consolidated cost of revenues also ~~increased.~~decreased. These costs were ~~$195.2~~$52.4 million and ~~$138.9~~$86.9 million for the three months ended October 31, ~~2017~~2019 and ~~2016,~~2018, respectively; a reduction of approximately 40%. For the three months ended October 31, 2019, we reported a consolidated gross profit of approximately $6.0 million which represented a gross profit percentage of approximately 10% of corresponding consolidated revenues. Both the gross profit amount and percentage for the quarter ended October 31, 2019 were adversely affected by unfavorable contract adjustments at TRC and the lack of gross profit for the TeesREP project. The gross profit percentages of corresponding revenues for the power industry services, industrial services and the telecommunications infrastructure segments were 12.6%, 4.9% and 20.2%, respectively, for the current quarter.

For the three months ended October 31, 2018, we reported a gross profit of approximately $29.5 million which represented a consolidated gross profit percentage of approximately 25% of corresponding consolidated revenues which reflected strong performance by the power industry services segment. The results for last year’s third quarter 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 the period. The gross profit percentages of corresponding revenues for the power industry services, industrial services and the telecommunications infrastructure segments for the third quarter last year were 30.2%, 7.8% and 23.7%, respectively. ~~Gross profit amounts~~

Other Income

Other income for the three months ended October 31, ~~2017 and 2016 were $37.7~~2019 included a pre-tax gain of $2.2 million ~~and $36.6 million, respectively. Our overall gross profit percentage~~recorded by the consolidated variable interest entity in connection with the grant of ~~16.2%~~a utility easement at the planned site of ~~consolidated revenues was lower in the current quarter compared to~~ a ~~percentage of 20.8% for the prior year quarter, which reflected the favorable achievement of contractual final completion of two natural~~new gas-fired power ~~plant projects last year. These achievements eliminated a number of significant risks and the related estimated costs associated with them, resulting in increased gross margins.~~

~~The current quarter gross profit percentage~~plant. This gain is also reflected continued execution on the peak and post-peak construction activities of four natural gas-fired power plant projects of GPS. However, while all of these projects are progressing, certain of the natural gas-fired power plant projects have experienced increased labor and subcontractor costs to amounts greater than originally estimated. The increase in forecasted costs to complete these contracts and the corresponding reductions in the amount of ~~forecasted gross margins resulted in a reduction~~net income attributable to ~~consolidated gross profit being realized in the current quarter. The aggregate gross profit percentage of the combined revenues of TRC, APC and SMC increased between the periods.~~

~~Selling, General and Administrative Expenses~~

~~These costs~~non-controlling interests for the three months ended October 31, ~~2017 and 2016 represented approximately 4.3% and 5.6% of consolidated revenues~~2019. Investment income decreased by $0.5 million for the ~~corresponding periods, respectively. In general,~~three-month period ended October 31, 2019 from the ~~increase~~amount earned in ~~costs is reflective of a larger organization necessary~~the comparable period last year due to ~~support increased operations and to expand into new markets.~~reduced current year investment balances.

Income Tax ~~Expense~~(Expense) Benefit

~~For the quarter ended October 31, 2017, we~~We recorded income tax expense for the three months ended October 31, 2019 in the amount of ~~$12.1~~approximately $2.0 million ~~reflecting~~which primarily reflected the unfavorable forecasted tax impact of permanent differences for the current year. We reported an income tax benefit for the three months ended October 31, 2018 in the amount of $12.6 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 $16.5 million that we recorded in the quarter. The amount of this favorable adjustment more than offset the amount of income tax expense recorded for last year’s third quarter which was based on an estimated annual effective income tax rate (before the effects of the research and development tax credits and other discrete tax items) for the year ending January 31, 2019 of approximately ~~36.7% (before the tax effect of discrete items for the current quarter), or $10.8 million, the catch-up effect in the current quarter of increasing the estimated~~28%. This rate from 36.2%, or $0.4 million, and the unfavorable effect of discrete adjustments to the income tax provision for the current quarter in the net amount of $0.9 million. The estimated annual income tax rate iswas higher than the federal income tax rate of ~~35%~~21% due primarily to the estimated unfavorable effect of state income taxes, ~~offset partially by~~and the ~~domestic production activities deduction.~~

For the three months ended October 31, 2016, we recorded income tax expense of $8.2 million reflecting an annual effective income tax rate (before the tax effect of discrete items for the prior quarter) estimated at the time to be approximately 35.2%. The estimated unfavorable ~~effect of state income taxes were substantially offset by the favorable~~ effects of additional limitations on the ~~estimated amounts~~deductibility of permanent differences. Income tax expense for the third quarter last year also reflected the treatment of the excess income tax benefits associated with the large number of stock options exercised during the quarter as discrete items which reduced income tax expense by $2.0 million.certain business expenses.

The current year estimated annual effective income tax rate is higher than the prior year estimated annual rate primarily due to a slight increase in the effective state tax rate as well as the significant decrease in the income tax impact of our joint ventures. As the construction joint ventures that are discussed below are treated as partnerships for income tax reporting purposes, we report only our share of the taxable income of the entities. For financial reporting purposes, the excluded income amounts attributable to the joint venture partner are treated as permanent differences between income before income taxes and taxable income resulting in a favorable effect on our effective income tax rate. The net income attributable to non-controlling interests (the joint venture partner) last year was significant.

~~Net Income Attributable to Non-controlling Interests~~

As discussed in Note 3 to the accompanying condensed consolidated financial statements, we entered separate construction joint ventures related to two power plant construction projects. Because we have financial control, the joint ventures are included in our condensed consolidated financial statements. Our joint venture partner’s share of the earnings is reflected in the line item captioned net income attributable to non-controlling interests included in the accompanying statements of earnings for the three months ended October 31, 2016 in the amount of $1.2 million. There were no amounts of net income attributable to non-controlling interest for the current quarter. The reduction in the amount between quarters primarily reflects the contractual completion of the projects last year, with the provision of warranty services being the primary remaining obligations of the joint ventures.

Comparison of the Results of Operations for the Nine Months Ended October 31, ~~2017~~2019 and ~~2016~~2018

We reported net ~~income~~loss attributable to our stockholders of ~~$65.0~~$35.5 million, or ~~$4.11~~$2.27 per diluted share, for the nine months ended October 31, ~~2017.~~2019. For the nine months ended October 31, ~~2016,~~2018, we reported ~~a comparable~~ net income attributable to our stockholders in the amount of ~~$50.0~~$54.2 million, or ~~$3.23~~$3.46 per diluted share.

The following schedule compares our operating results for the nine months ended October 31, ~~2017~~2019 and ~~2016~~2018 (dollars in thousands).:

	Nine Months Ended October 31,									Nine Months Ended October 31,
	2017		2016		$ Change			% Change		2019			2018			$ Change			% Change
REVENUES
Power industry services	$	662,131	$	402,615	$	259,516		64.5	%	$	83,941		$	316,262		$	(232,321	)	(73.5	)%
Industrial fabrication and field services	50,203		59,287		(9,084		)	(15.3	)	80,442			68,577			11,865			17.3
Telecommunications infrastructure services	10,903		6,385		4,518			70.8		6,626			9,656			(3,030		)	(31.4	)
Revenues	723,237		468,287		254,950			54.4		171,009			394,495			(223,486		)	(56.7	)
COST OF REVENUES
Power industry services	540,986		302,140		238,846			79.1		104,759			249,401			(144,642		)	(58.0	)
Industrial fabrication and field services	44,634		52,491		(7,857		)	(15.0	)	72,958			61,889			11,069			17.9
Telecommunications infrastructure services	8,396		4,764		3,632			76.2		5,361			7,513			(2,152		)	(28.6	)
Cost of revenues	594,016		359,395		234,621			65.3		183,078			318,803			(135,725		)	(42.6	)
GROSS PROFIT	129,221		108,892		20,329			18.7
GROSS (LOSS) PROFIT										(12,069		)	75,692			(87,761		)	N/M
Selling, general and administrative expenses	30,408		24,429		5,979			24.5		31,761			31,162			599			1.9
Impairment loss	—		1,979		(1,979		)	(100.0	)	2,072			—			2,072			N/M
INCOME FROM OPERATIONS	98,813		82,484		16,329			19.8
(LOSS) INCOME FROM OPERATIONS										(45,902		)	44,530			(90,432		)	N/M
Other income, net	4,221		1,283		2,938			229.0		7,472			5,121			2,351			45.9
INCOME BEFORE INCOME TAXES	103,034		83,767		19,267			23.0
Income tax expense	37,738		27,122		10,616			39.1
NET INCOME	65,296		56,645		8,651			15.3
Net income attributable to non-controlling interests	303		6,668		(6,365		)	(95.5	)
NET INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.	$	64,993	$	49,977	$	15,016		30.0	%
(LOSS) INCOME BEFORE INCOME TAXES										(38,430		)	49,651			(88,081		)	N/M
Income tax benefit										4,936			4,509			427			9.5
NET (LOSS) INCOME										(33,494		)	54,160			(87,654		)	N/M
Net income (loss) attributable to non-controlling interests										2,007			(83		)	2,090			N/M
NET (LOSS) INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.										$	(35,501	)	$	54,243		$	(89,744	)	N/M

N/M — Not meaningful.

Revenues

Power Industry Services

The revenues of the power industry services business ~~increased~~decreased by ~~65%~~74%, or ~~$259.5~~$232.3 million, to ~~$662.1~~$83.9 million for the nine months ended October 31, ~~2017~~2019 compared with revenues of ~~$402.6~~$316.3 million for the nine months ended October 31, ~~2016.~~2018. The revenues of this business represented approximately ~~92%~~49% of consolidated revenues for the current year nine-month period, and approximately ~~86%~~80% of consolidated revenues for the ~~corresponding~~comparable prior year period. ~~The increase in revenues for the power industry services segment primarily reflected the ramped-up, peak and post-peak construction activities of~~GPS reached substantial completion on four ~~natural~~ gas-fired power plant ~~construction~~ projects ~~which represented approximately 87%~~during the year ended January 31, 2019 and concluded activities on a fifth gas-fired power plant early in the first quarter of ~~consolidated~~the current fiscal year. These five power plants provided revenues of $238.3 million for the ~~current nine-month period. Last~~nine months ended October 31, 2018. The construction activities performed for the four EPC projects completed last year included the ~~combined~~start-up, commissioning and final phases of the projects. Reflecting primarily the ramp-up of construction activities on the projects in Teesside and Spalding to peak levels, the revenues ~~associated with these four projects, which were all in their earlier phases,~~of our APC subsidiary represented ~~approximately 62%~~19% of consolidated revenues for the nine months ended October 31, ~~2016. Construction~~2018. Due to the reduction of activity ~~related~~on the TeesREP project as it moves to ~~two other natural-gas fired power plant projects that were completed last year represented 20%~~the later stages of ~~consolidated~~construction and the completion of the project at Spalding, the revenues of APC for the nine months ended October 31, ~~2016.~~2019 represented a reduction of 27% from the level of revenues earned by APC during the nine months ended October 31, 2018.

Industrial Fabrication and Field Services

The revenues of the industrial fabrication and field services ~~segment decreased~~business provided 47% of consolidated revenues for the nine months ended October 31, 2019. Revenues increased by ~~15%~~$11.9 million, or 17%, ~~or $9.1 million,~~ to ~~$50.2~~$80.4 million for the nine months ended October 31, ~~2017~~2019, compared ~~with revenues of $59.3~~to $68.6 million for the nine months ended October 31, 2016. The largest portion of TRC’s revenues were provided by industrial field services. The decrease in revenues is primarily attributable to revenues included in the prior year period associated with large loss projects with former customers that were in-process on the date of our acquisition of TRC and which were primarily completed during the nine months ended October 31, 2016.2018.

Telecommunications Infrastructure Services

The revenues of this business segment ~~increased by approximately 71%, or $4.5 million, to $10.9~~were $6.6 million for the nine months ended October 31, ~~2017~~2019 compared with revenues of ~~$6.4~~$9.7 million for the nine months ended October 31, ~~2016, as SMC~~2018. As indicated above, prior year revenues were bolstered by the revenues associated with a large fiber cabling project that has been ~~successful in increasing the revenues related to both outside premises, including $4.7 million related to a fiber-to-the-home project for a municipal customer, and inside premises projects.~~completed.

Cost of Revenues

Due primarily to the substantial ~~increase~~decrease in consolidated revenues for the nine months ended October 31, ~~2017~~2019 compared with ~~last year’s comparable~~the nine-month period ended October 31, 2018, the corresponding consolidated cost of revenues also ~~increased.~~decreased. These costs were ~~$594.0~~$183.1 million and ~~$359.4~~$318.8 million for the nine months ended October 31, ~~2017~~2019 and ~~2016, respectively. Gross profit amounts for~~2018, respectively; a reduction of approximately 43%. The loss recorded by APC on the ~~corresponding nine-month periods were $129.2 million and $108.9 million, respectively. Our overall gross profit percentage of 17.9% of consolidated revenues was lower~~TeesREP project in the ~~current period compared to a percentage~~amount of 23.3% for the prior year nine-month period, which primarily reflected the favorable achievement of the contractual final completion of two power plant projects as identified above. Current period gross profit percentages substantially reflected continued execution of construction activities on four EPC natural gas-fired power plant projects of GPS and the gross margin reduction realized in the current quarter that is discussed above. The aggregate gross profit percentage of the combined revenues of TRC, APC and SMC increased between the periods.

~~Selling, General and Administrative Expenses~~

~~These costs were $30.4 million and $24.4~~$31.2 million for the nine months ended October 31, ~~2017 and 2016, respectively, representing approximately 4.2% and 5.2% of consolidated revenues~~2019 had a significant unfavorable effect on the Company’s gross profit for the ~~corresponding periods, respectively. Approximately $3.8 million of the increase between the periods was due~~period, causing us to ~~an overall increase in incentive compensation costs and salary expense. In addition, stock option compensation expense~~report a consolidated gross loss for ~~the nine months ended October 31, 2017 increased by approximately $1.8 million between the periods, driven primarily by the increased market price of our common stock.~~

~~Impairment Loss~~

Last year, the revenues of APC declined and it reported operating losses. In July 2016, work was suspended on APC’s largest project at the time, which represented over 90% of APC’s contract backlog. Additionally, APC’s primary market isthis current nine-month period in the United Kingdom, which voted to leave the European Union on June 23, 2016 (“Brexit”). The resulting pound sterling drop, financial market uncertainty and recessionary pressures were thought to likely impact the availabilityamount of financing for future power plant developments. Given these circumstances at the time, analyses were performed mid-year in order to determine whether an impairment loss related to goodwill had been incurred. Using income and market approaches, the assessment analysis indicated that the carrying value of the business exceeded its fair value. As a result, APC recorded an impairment loss during the nine months ended October 31, 2016 of approximately $2.0$12.1 million.

~~Income Tax Expense~~

For the nine months ended October 31, ~~2017,~~2018, we reported a gross profit of approximately $75.7 million which represented a consolidated gross profit percentage of approximately 19% of corresponding consolidated revenues. For comparison, after removing the revenues and costs related to the TeesREP project, our overall gross profit percentage for the nine months ended October 31, 2019 would have been 13.3% of corresponding consolidated revenues. For the nine months ended October 31, 2019, the gross profit percentages of corresponding revenues for the industrial services and the telecommunications infrastructure segments were 9.3% and 19.1%, respectively, which compares with the gross profit percentages reported for the nine months ended October 31, 2018 of 9.8% and 22.2%, respectively.

Impairment Loss

We considered the magnitude of the contract loss related to the TeesREP project to be an event triggering a re-assessment of the goodwill 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 the nine months ended October 31, 2019 included the pre-tax gain of $2.2 million recorded by the consolidated variable interest entity during the period. This gain is also reflected in the amount of income attributable to non-controlling interests for the nine months ended October 31, 2019. Other income for the current period also included interest income accrued during the period in the amount of $0.7 million on income tax refunds that we expect to receive related to amended prior year income tax returns. Investment income decreased by $0.4 million for the nine-month period ended October 31, 2019 from the amount earned in the comparable period last year due to reduced current year investment balances. For the nine months ended October 31, 2018, the amount of this line item also included a gain on TRC’s settlement of a lawsuit in the amount of $1.4 million and reflected interest expense in the amount of $0.7 million related to the resolution of a separate legal dispute.

Income Tax Benefit

We recorded an income tax benefit for the nine months ended October 31, 2019 in the amount of approximately $4.9 million which primarily reflected the favorable tax impact of bad debt loss realized on loans made to APC by Argan that was recorded in the second quarter We have not recorded any income tax benefit related to the net loss reported by the subsidiary operations of APC located in the United Kingdom for the current year due to our expectation at this time that a minimal portion of the benefit will be utilized in future years. The income tax benefit for the nine months ended October 31, 2019 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 loss.

As discussed above, we recorded benefits of prior year research and development tax credits in the third quarter last year in the amount of $16.5 million, which resulted in an income tax ~~expense~~benefit reported for the nine months ended October 31, 2018 in the amount of ~~$37.7 million reflecting~~approximately $4.5 million. Before the effect of the tax credit adjustment and other discrete items, we estimated an annual effective income tax rate of approximately ~~36.7% (before~~28% at this time last year. This estimated tax rate was higher than the income tax effect of discrete items for the current period) that is identified above. The net favorable effect of discrete items on income tax expense for the nine months ended October 31, 2017 was not significant.

~~For the nine months ended October 31, 2016, we recorded income tax expense of $27.1 million reflecting an estimated annual effective~~federal income tax rate of ~~approximately 35.2%. In addition,~~21% due primarily to the ~~net~~estimated unfavorable effect of ~~discrete items last year reduced~~state income ~~tax expense by $2.4 million for~~taxes, and the ~~period primarily due to~~unfavorable effects of additional limitations on the ~~treatment~~deductibility of ~~the excess income tax benefits associated with the large number of stock options exercised during the period as discrete items.~~certain business expenses.

~~Net Income Attributable to Non-controlling Interests~~

Our joint venture partner’s share amounts of the earnings of the construction joint ventures were $0.3 million and $6.7 million, respectively. The reduction in the amount between periods primarily reflected the contractual completion of the projects last year. Current year activity relates to changes in estimated costs to fulfill warranty obligations.

Liquidity and Capital Resources as of October 31, ~~2017~~2019

~~As of~~At October 31 ~~2017~~ and January 31, ~~2017,~~2019, our balances of cash and cash equivalents were ~~$149.7~~$252.5 million and ~~$167.2~~$164.3 million, respectively. During this same period, our working capital ~~increased~~decreased by ~~$54.3~~$48.1 million to ~~$291.5~~$286.9 million as of October 31, ~~2017~~2019 from ~~$237.2~~$335.0 million as of January 31, ~~2017.~~2019 due primarily to the losses incurred on the TeesREP project.

The net amount of cash provided by operating activities for the nine months ended October 31, 2019 was $15.9 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 $29.3 million. The Company also used cash during the nine months ended October 31, 2019 in the amount of $12.5 million to reduce the level of accounts payable and accrued expenses. However, these uses of cash were more than offset by the receipt of payments on the initial billings for EPC project work, which caused the balance of contract liabilities to increase temporarily by $50.1 million during the nine months ended October 31, 2019, a substantial source of cash.

The primary source of cash for the nine months ended October 31, 2019 was the net maturities of short-term investments, certificates of deposit issued by our Bank, in the amount of $89.0 million. Cash proceeds in the amount of $1.6 million were received from the exercise of stock options during the nine-month period ended October 31, 2019. Non-operating activities used cash during the nine months ended October 31, 2019, including the payment of three quarterly cash dividends in the total amount of $11.7 million and capital expenditures in the amount of $6.3 million. As of October 31, 2019, there were no restrictions with respect to inter-company payments from GPS, TRC, APC or SMC to the holding company. However, during the nine-month period ended October 31, 2019, certain loans made by Argan to APC were determined to be uncollectible (see Note 11 to the accompanying condensed consolidated financial statements).

During the nine months ended October 31, 2018, our balance of cash and cash equivalents increased by $33.7 million to $155.8 million while our working capital increased by $37.8 million during the period to $339.6 million as of October 31, 2018. The net amount of cash used by operating activities for the nine months ended October 31, ~~2017~~2018 was ~~$22.7~~$99.1 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 ~~$71.7~~$58.1 million, cash ~~use~~used elsewhere in operations exceeded this ~~amount primarily due to our~~amount.

As discussed above, four major EPC ~~projects. Because~~projects achieved substantial completion last year, representing the primary driver for a use of cash in the amount of $79.6 million represented by the increase in contract assets of $41.8 million and the decrease in contract liabilities in the amount of $37.8 million. At that time, these projects ~~are~~were well past the peak of their respective milestone billing ~~schedules, we experienced net decreases during~~schedules. Due primarily to these projects, the ~~period~~amount of billings in excess of the amounts of ~~billings on current projects in excess of~~the corresponding costs and estimated earnings declined by $93.1 million during the nine months ended October 31, 2018, which represented a substantial use of cash. Partially offsetting this effect, the Company collected amounts of billings previously retained by project owners which provided $55.5 million in cash during the period. The operations of TRC and APC experienced meaningful growth in revenues during the nine months ended October 31, 2018. The increase in the level of business at these subsidiaries resulted in an increase in the amount of working capital required to support the growth. Accordingly, the amounts of costs incurred and estimated earnings recognized on certain active projects in excess of the amounts billed on those projects rose during the nine-month period in the amount of $38.8 million, which represented a use of ~~cash~~cash.

Similarly, due in ~~the amount of $69.4 million. In general, we expect this unfavorable cash-flow trend~~part to ~~continue until the projects are completed~~increased activity at TRC and ~~new EPC projects are added to the backlog. Primarily due to increasing project owner retainage amounts on current construction contracts,~~APC, accounts receivable increased during the nine months ended October 31, ~~2017, which represented~~2018, a use of cash in the amount of ~~$31.5~~$17.7 million. ~~On the other hand, we experienced a net increase during the period~~The Company also used cash in the ~~amounts~~amount of $44.0 million to reduce the level of accounts payable and accrued ~~expenses, which represented a source~~liabilities. Due primarily to the inclusion of ~~cash in~~expected income tax refunds, the ~~amount of $5.6 million.~~

Our primary source of this cash during the nine months ended October 31, 2017 was the net maturity of CDs in the amount of $22.5 million. In addition, the exercise of options to purchase 90,500 shares of our common stock provided us with cash proceeds in the approximate amount of $2.8 million. Non-operating activity cash uses included the declaration and payment of a cash dividend of $15.5 million during the current period, and we also used cash as our consolidated joint ventures made distributions to our joint venture partner in the total amount of $1.2 million. Our operating subsidiaries used cash during the current period in the amount of $4.0 million for capital expenditures.

~~During the nine months ended October 31, 2016, our combined~~ balance of ~~cash and cash equivalents~~other assets increased by $9.9 million to $170.8 million as of October 31, 2016 from a balance of $160.9 million as of January 31, 2016. During this same period, our working capital increased by $46.5 million to $209.4 million as of October 31, 2016 from $162.9 million as of January 31, 2016. Net income for the nine months ended October 31, 2016, including the favorable adjustments related to noncash expense items, provided cash in the total amount of $60.8 million. In addition, we experienced a net decrease of $21.3 million in accounts receivable during the period primarily due to the receipt of retainages on two other natural gas-fired power plant projects as we achieved final completion during the prior year period. We had a net increase of $54.6 million in the amount of billings on current projects that temporarily exceeded the corresponding amounts of costs and estimated earnings, which primarily reflected the early-stage activities of GPS on its four significant EPC contracts which were new at that time. Our net accounts payable and accrued expenses were also impacted with increased early-stage activities related to several of our subcontractors and suppliers, increasing this balance by $50.1$15.9 million during the nine months ended October 31, ~~2016. Primarily due to these factors, the net amount~~2018, representing another use of cash.

The primary source of cash provided by operating activities for the nine-month period ended October 31, 2016 was $185.3 million. The exercise of stock options during the prior year nine-month period provided us with cash proceeds in the amount of $11.0 million.

~~Our primary use of this cash~~required to fund operations during the nine months ended October 31, ~~2016~~2018 was the net ~~purchase~~maturities of ~~CDs~~short-term investments in the amount of ~~$161.0~~$152.0 million. ~~Other non-operating activity~~Non-operating activities used cash ~~uses~~ during the ~~prior year~~ period, ~~included~~including primarily the ~~declaration and~~ payment of athree quarterly cash ~~dividend of $15.3 million and the distribution of cash to our joint venture partner~~dividends in the total amount of ~~$7.5~~$11.7 million. Our operating subsidiaries also used cash during the ~~prior year~~nine-month period ended October 31, 2018 in the amount of ~~$2.5~~$7.4 million ~~for~~to fund capital expenditures.

~~On May 15, 2017, we entered into~~At October 31, 2019, 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, U.S. Treasury obligations and repurchase agreements secured by U.S. Treasury obligations. Most of our domestic operating bank accounts are maintained with the ~~Credit Agreement~~Bank. We do maintain certain Euro-based bank accounts in the Republic of Ireland and certain pound sterling-based bank accounts in the United Kingdom in support of the operations of APC.

Our credit agreement with the Bank, aswhich expires on May 31, 2021, includes the ~~lender, which replaced~~following features, among others: a ~~predecessor agreement by modifying its features to, among other things:~~

· ~~increase the Bank’s~~ lending commitment ~~amount from $10 million to $50~~of $50.0 million including a revolving loan with interest at the 30-day LIBOR plus ~~2.00%;~~

· ~~add~~2.0%, and an accordion feature which allows for an additional commitment amount of ~~$10~~$10.0 million, subject to certain ~~conditions; and~~

· ~~extend~~conditions. We may use the ~~maturity date three years from May~~borrowing ability to cover letters of credit issued by the Bank for our use in the ordinary course of business as defined by the Bank. At October 31, ~~2018~~2019, we had approximately $10.0 million of outstanding letters of credit issued under the Credit Agreement that relate substantially to ~~May 31, 2021, which effectively provided a four-year credit commitment.~~the TeesREP project. However, we had no outstanding borrowings.

~~As with the predecessor agreement, we~~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 will continue to require~~Credit Agreement requires that we comply with certain financial covenants at our fiscal year-end and at each ~~of our~~ fiscal ~~quarter-ends. The Credit Agreement~~quarter-end, and includes other terms, covenants and events of default that are customary for a credit facility of its size and nature. ~~As of~~At October 31 ~~2017~~ and January 31, ~~2017,~~2019, we were compliant with the financial covenants of the Credit ~~Agreement~~Agreement. However, certain financial covenant requirements are based on the amount of earnings before interest, taxes, depreciation and ~~predecessor~~amortization, as defined in the credit agreement, ~~respectively.~~reported by us on a rolling twelve-month basis. The loss incurred by us for the nine-month period ended October 31, 2019 has reduced the financial covenant compliance margins considerably.

WeIn the normal course of business and for certain major projects, we may ~~use~~be required to obtain surety or performance bonding, to cause the ~~borrowing ability~~issuance of letters of credit, or to ~~cover other credit issued by the Bank for~~provide parent company guarantees (or some combination thereof) in order to provide performance assurances to clients on behalf of one of our ~~use~~contractor subsidiaries. As these subsidiaries are wholly-owned, any actual liability is ordinarily reflected in the ~~ordinary course~~financial statement account balances determined pursuant to the Company’s accounting for contracts with customers. If the services provided by one of ~~business. As~~our subsidiaries 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. Any amounts that we may be required to pay in excess of the estimated costs to complete contracts in progress as of October 31, ~~2017, we had approximately $14.9 million~~2019 are not estimable.

Argan has provided a parent company performance guarantee and has caused the Bank to issue certain letters of credit ~~outstanding under~~(see Note 6 to the ~~Credit Agreement although we had no outstanding borrowings.~~accompanying condensed consolidated financial statements) to Técnicas Reunidas (“TR”), the engineering, procurement and construction services (“EPC”) contractor on the TeesREP Biomass Power Station Project, on behalf of APC, a major subcontractor to TR on this project.

AtThe Company would be obligated to reimburse the issuer of any surety bond issued on behalf of a subsidiary for any payments made. 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 October 31, ~~2017, most~~2019, the amount of ~~our balance~~the Company’s unsatisfied bonded performance obligations was approximately equal to the value of ~~cash and cash equivalents was invested~~RUPO disclosed in ~~a high-quality money market fund with at least 80%~~Note 2 to the accompanying condensed consolidated financial statements. In addition, as of its net assets invested in U.S. Treasury obligations and repurchase agreements secured by United States Treasury obligations. Most of our domestic operating bank accounts are maintained with the Bank. We do maintain certain Euro-based bank accountsOctober 31, 2019, there were bonds outstanding in the ~~Republic~~aggregate amount of ~~Ireland and insignificant bank accounts in~~approximately $140.7 million covering other ~~countries in support of~~risks including warranty obligations related to projects completed by GPS; these bonds expire at various dates over the ~~operations of APC.~~next fifteen (15) months.

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 ~~and obtain~~ bonding capacity ~~for current~~ and ~~future~~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.

Earnings before Interest, Taxes, Depreciation and Amortization ~~(Non-GAAP Measurement)~~(“EBITDA”)

We believe that EBITDA is a meaningful presentation that ~~is widely used by investors and analysts as a measure of performance. It~~ 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.

~~The following tables present the determinations of EBITDA for the three and nine months ended October 31, 2017 and 2016, respectively (amounts in thousands).~~

Three Months Ended October 31,

2017

2016

Net income, as reported

$
17,229

$
19,226

Income tax expense

12,062

8,194

Depreciation

726

525

Amortization of purchased intangible assets

258

232

EBITDA

30,275

28,177

Less EBITDA attributable to non-controlling interests

—

1,153

EBITDA attributable to the stockholders of Argan, Inc.

$
30,275

$
27,024

Nine Months Ended October 31,

2017

2016

Net income, as reported

$
65,296

$
56,645

Income tax expense

37,738

27,122

Depreciation

1,936

1,444

Amortization of purchased intangible assets

776

752

EBITDA

105,746

85,963

Less EBITDA attributable to non-controlling interests

303

6,668

EBITDA attributable to the stockholders of Argan, Inc.

$
105,443

$
79,295

As Further, we believe that ~~our net cash flow provided~~EBITDA is widely used by ~~operations is the most directly comparable performance~~investors and analysts as a measure ~~determined in accordance with US GAAP, the following table reconciles the amounts~~ of ~~EBITDA for the applicable periods,~~performance. However, as presented above, to the corresponding amounts of net cash flows (used in) provided by operating activities that are presented in our condensed consolidated statements of cash flows for the nine months ended October 31, 2017 and 2016 (amounts in thousands).

Nine Months Ended October 31,

2017

2016

EBITDA

$
105,746

$
85,963

Current income tax expense

(37,263
)
(28,815
)
Impairment loss

—

1,979

Stock option compensation expense

3,573

1,774

Other noncash items

(317
)
(119
)
(Increase) decrease in accounts receivable

(31,453
)
21,304

(Decrease) increase in billings in excess of costs and estimated earnings, net

(69,383
)
54,558

Decrease (increase) in prepaid expenses and other assets

758

(1,432
)
Increase in accounts payable and accrued expenses

5,600

50,099

Net cash (used in) provided by operating activities

$
(22,739
)
$
185,311

As EBITDA is not a measure of performance calculated in accordance with USU.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 USU.S. GAAP that are included in our condensed 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 the three and nine months ended October 31, 2019 and 2018, respectively (amounts in thousands):

	Three Months Ended October 31,
	2019			2018
Net (loss) income, as reported	$	(4,561	)	$	32,374
Income tax expense (benefit)	1,996			(12,560		)
Depreciation	899			898
Amortization of purchased intangible assets	272			253
EBITDA	(1,394		)	20,965
EBITDA of non-controlling interests	2,294			(60		)
EBITDA attributable to the stockholders of Argan, Inc.	$	(3,688	)	$	21,025

	Nine Months Ended October 31,
	2019			2018
Net (loss) income, as reported	$	(33,494	)	$	54,160
Interest expense	—			659
Income tax benefit	(4,936		)	(4,509		)
Depreciation	2,610			2,465
Amortization of purchased intangible assets	864			759
EBITDA	(34,956		)	53,534
EBITDA of non-controlling interests	2,007			(83		)
EBITDA attributable to the stockholders of Argan, Inc.	$	(36,963	)	$	53,617

As we believe that our net cash flow provided by operations is the most directly comparable performance measure determined in accordance with U.S. GAAP, the following table reconciles the amounts of EBITDA for the applicable periods, as presented above, to the corresponding amounts of net cash flows used in operating activities that are presented in our condensed consolidated statements of cash flows for the nine months ended October 31, 2019 and 2018 (amounts in thousands).

	Nine Months Ended October 31,
	2019			2018
EBITDA	$	(34,956	)	$	53,534
Current income tax benefit	415			4,356
Interest expense	—			(659		)
Stock option compensation expense	1,512			1,244
Impairment loss	2,072			—
Gain on settlement of litigation	—			(1,400		)
Other non-cash items	1,631			1,031
Decrease (increase) in accounts receivable	1,274			(17,686		)
Increase in other assets	(1,588		)	(15,895		)
Decrease in accounts payable and accrued expenses	(12,523		)	(44,016		)
Change in contracts in progress, net	58,064			(79,616		)
Net cash provided by (used in) operating activities	$	15,901		$	(99,107	)

Critical Accounting Policies

We consider the accounting policies related to ~~revenue~~the recognition ~~on long-term construction~~of revenues from customer contracts; the accounting for business ~~combinations,~~combinations; the subsequent valuation of goodwill, other indefinite-lived assets and long-lived assets; income tax reporting; the valuation of employee stock ~~options; income tax reporting~~options and the financial reporting associated with any significant 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.~~ VIEs.

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, ~~and~~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.

An expanded discussion of our critical accounting policies is included in Item 7 of Part II of our Annual ~~Report on Form 10-K for the year ended January 31, 2017.~~Report. During the nine-month period ended October 31, ~~2017,~~2019, there have been no material changes in the way we apply the critical accounting policies described ~~therein.~~therein except that Note 7 to the accompanying condensed consolidated financial statements presents the revised accounting policy for leases that was adopted on February 1, 2019.

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 $31.2 million. As disclosed in Note 5 to the accompanying condensed consolidated financial statements, this loss prompted us to record an impairment loss in the first quarter of the current fiscal year in the amount of approximately $2.1 million, which effectively wrote-off the remaining balance of goodwill related to APC. In addition, we have estimated the amount of income tax benefit in the amount of $5.9 million related to bad debt loss incurred by Argan on its loans to APC, which were made at the time for the purpose of funding the performance on the TeesREP project; this amount is included in the income tax benefit amount presented in the condensed consolidated statements of earnings for the nine months ended October 31, 2019.

Recently Issued Accounting Pronouncements

~~Note 2 to the accompanying condensed consolidated financial statements presents descriptions of pending accounting pronouncements issued by~~In 2016, the FASB ~~that are relevant to our future financial reporting. These include~~issued Accounting Standards Update ~~(ASU) 2014-09,~~2016-13, ~~Revenue from Contracts with Customers~~~~, which was issued in May 2014 and which has been amended multiple times, ASU 2016-02,~~ ~~Leases~~~~, which was issued in February 2016 and ASU 2017-04,~~ ~~Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment~~Measurement of Credit Losses on Financial Instruments. ~~ASU 2014-09 represents an effort~~The scope of this new standard covers, among other provisions, the methods that businesses shall use to ~~create a~~estimate amounts of uncollectible accounts receivable. As subsequently amended, we do not expect that the requirements of this new ~~principles-based revenue recognition framework~~guidance, which becomes effective for ~~all companies that will be adopted by~~ us on February 1, ~~2018. ASU 2016-02, which~~2020, will bematerially affect our consolidated financial statements. There are no other recently issued accounting pronouncements that have not yet been adopted by us on February 1, 2019, will require the recognition on the balance sheet of all operating leases with terms greater than one year. ASU 2017-04 removes the second step in the goodwill impairment test, andthat we ~~intend~~consider material to ~~use the new guidance, if applicable, for~~ our ~~annual testing as of November 1, 2017.~~consolidated financial statements.

ITEM 3. 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 October 31, ~~2017,~~2019, we had no outstanding borrowings under our financing arrangements with the Bank (see Note 86 to the accompanying condensed consolidated financial statements), which ~~provides~~provide a revolving loan with a maximum borrowing amount of ~~$50~~$50.0 million that is available until May 31, 2021 with interest at 30-day LIBOR plus ~~2.00%~~2.0%.

As of October 31, ~~2017, our balance of short-term investments, which consisted entirely of CDs, was $333 million (excluding accrued interest) with a~~2019, the weighted average initial maturity term of 269 days. This exposes us to a certain amount of risk should interest rates suddenly rise. However, we believe that this risk is minimal, and mitigated somewhat by the manner in which we have scheduled the future maturity dates. As of October 31, 2017, the weighted averageannual interest rate on our ~~CDs~~short-term investments of $42.1 million was ~~1.36%~~1.9%. During the nine months ended October 31, 2019 and 2018, we did not enter into derivative financial instruments for trading, speculation or other purposes that would expose us to market risk. To illustrate the potential impact of changes in interest rates on our results of operations, we have performed the following hypothetical analysis, which assumes that our consolidated balance sheet as of October 31, 2019 remains constant, and no further actions are taken to alter our existing interest rate sensitivity (dollars in thousands). As the weighted average annual interest rate on our short-term investments held at October 31, 2019 was 1.9%, the largest decrease in the interest rates presented below is 189 basis points.

Basis Point Change	Increase (Decrease) in Interest Income			Increase (Decrease) in Interest Expense		Net Decrease (Increase) in Loss (pre-tax)
Up 300 basis points	$	420		$	—	$	420
Up 200 basis points	280			—		280
Up 100 basis points	140			—		140
Down 100 basis points	(140		)	—		(140		)
Down 189 basis points	(258		)	—		(258		)

~~The accompanying condensed consolidated financial statements~~With the consolidation of APC, we are ~~presented in US Dollars. The financial results reported by APC and included in our condensed consolidated financial statements are affected by foreign currency volatility. The~~subject to the effects of translating the financial statements of APC from its functional currency (Euros) into ~~the Company’s~~our reporting currency ~~(US Dollars)~~(U.S. dollars). Such effects are recognized ~~as translation adjustments~~ in accumulated other comprehensive ~~loss. When the US Dollar depreciates against the Euro, the reported assets, liabilities, revenues, costs and earnings~~loss, which is net of APC, after translation into US Dollars, are greater than what they would have been had the value of the US Dollar appreciated against the Euro or if there had been no change in the exchange rate. During the nine-month period ended October 31, 2017, the US Dollar depreciated against the Euro. We generally do not hedge our exposure to potential foreign currency translation adjustments.

Another form of exposure to fluctuating exchange rates relates to the effects of transacting in currencies other than those of our entity’s functional currencies. We do not engage in currency speculation, and we generally do not utilize foreign currency exchange rate derivatives on an ongoing basis to hedge against certain foreign currency related operating exposures. We incurred a net foreign currency transaction loss for the nine months ended October 31, 2017 that was insignificant.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.~~these commodities. 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 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of October 31, ~~2017.~~2019. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of October 31, ~~2017,~~2019, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective ~~at the~~to provide reasonable assurance ~~level.~~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 the Company and its consolidated subsidiaries is made known to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure in the reports.

Changes in internal controls over financial reporting. There have been no significant changes in our internal control over financial reporting (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) during the fiscal quarter ended October 31, ~~2017~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

Included in Note 98 to the condensed consolidated financial statements that are included in Item 1 of Part I of this Quarterly Report on Form 10-Q is athe discussion of the status of a specific legal ~~proceedings for the nine-month period ended~~proceeding as of October 31, ~~2017.~~2019. In the normal course of business, ~~the Company~~we may have other pending claims and legal proceedings. It is our opinion, based on information available at this time, that any other current claim or proceeding will not have a material effect on our condensed consolidated financial statements.

ITEM 1A. RISK FACTORS

There have been no material changes from our risk factors as disclosed in our Annual ~~Report on Form 10-K for the year ended January 31, 2017.~~Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES (not ~~applicable to us)~~applicable)

ITEM 5.OTHER INFORMATION

None

ITEM 6. EXHIBITS~~EXHIBITS~~

Exhibit No.		Title

Exhibit 10.1		~~Separation~~Third Amended and Restated Employment Agreement, dated ~~as of~~ November ~~7, 2017,~~15, 2019, by and ~~between Daniel L. Martin and~~among Gemma Power Systems, LLC, ~~its subsidiaries~~Gemma Power, Inc., Gemma Power Systems California, Inc., Gemma Power Hartford, LLC, Gemma Renewable Power, LLC, Gemma Power Operations, LLC and ~~affiliate entities~~William F. Griffin, Jr.
Exhibit 10.2		Employment Agreement, dated November 15, 2019, by and ~~its parent company, Argan,~~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.
Exhibit 10.3		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.
Exhibit 31.1		Certification of Chief Executive Officer, pursuant to Rule 13a-14(c) under the Securities Exchange Act of ~~1934~~1934.
Exhibit 31.2		Certification of Chief Financial Officer, pursuant to Rule 13a-14(c) under the Securities Exchange Act of ~~1934~~1934.
Exhibit 32.1		Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section ~~1350~~1350. *
Exhibit 32.2		Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section ~~1350~~1350. *

Exhibit 101.INS#		XBRL Instance ~~Document~~Document.
Exhibit 101.SCH#		XBRL Schema ~~Document~~Document.
Exhibit 101.CAL#		XBRL Calculation Linkbase ~~Document~~Document.
Exhibit 101.LAB#		XBRL Labels Linkbase ~~Document~~Document.
Exhibit 101.PRE#		XBRL Presentation Linkbase ~~Document~~Document.
Exhibit 101.DEF#		XBRL Definition Linkbase ~~Document~~Document.

* The certification is being furnished and shall not be considered filed as part of this report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ARGAN, INC.


December ~~6, 2017~~10, 2019	By:	/s/ Rainer H. Bosselmann
		Rainer H. Bosselmann
		Chairman of the Board and Chief Executive Officer


December ~~6, 2017~~10, 2019	By:	/s/ David H. Watson
		David H. Watson
		Senior Vice President, Chief Financial Officer,
		Treasurer and Secretary

3134

	October 31, 2017			January 31, 2017
Costs charged to uncompleted contracts	$	1,074,974		$	485,629
Estimated accrued earnings	177,065			78,708
	1,252,039			564,337
Less - billings to date	1,388,705			770,386
	$	(136,666	)	$	(206,049	)

Three Months Ended October 31, 2019	Power Services			Industrial Services			Telecom Services		Other			Totals
Revenues	$	35,848		$	20,143		$	2,415	$	—		$	58,406
Cost of revenues	31,327			19,159			1,928		—			52,414
Gross profit	4,521			984			487		—			5,992
Selling, general and administrative expenses	7,672			2,018			485		1,960			12,135
(Loss) income from operations	(3,151		)	(1,034		)	2		(1,960		)	(6,143		)
Other income, net	3,447			—			—		131			3,578
Income (loss) before income taxes	$	296		$	(1,034	)	$	2	$	(1,829	)	(2,565		)
Income tax expense												(1,996		)
Net loss												$	(4,561	)

Amortization of purchased intangible assets	$	61		$	166		$	45	$	—		$	272
Depreciation	176			625			97		1			899
Property, plant and equipment additions	2,659			436			170		—			3,265

Current assets	$	292,618		$	28,373		$	2,861	$	82,048		$	405,900
Current liabilities	108,474			8,744			796		943			118,957
Goodwill	18,476			12,290			—		—			30,766
Total assets	324,535			55,814			4,370		87,998			472,717

Three Months Ended October 31, 2017	Power Services		Industrial Services		Telecom Services		Other			Totals
Revenues	$	212,493	$	16,574	$	3,878	$	—		$	232,945
Cost of revenues	178,472		13,797		2,958		—			195,227
Gross profit	34,021		2,777		920		—			37,718
Selling, general and administrative expenses	5,464		1,638		452		2,565			10,119
Income (loss) from operations	28,557		1,139		468		(2,565		)	27,599
Other income, net	1,623		—		—		69			1,692
Income (loss) before income taxes	$	30,180	$	1,139	$	468	$	(2,496	)	29,291
Income tax expense										12,062
Net income										$	17,229

Amortization of purchased intangible assets	$	87	$	171	$	—	$	—		$	258
Depreciation	226		425		71		4			726
Property, plant and equipment additions	476		463		265		—			1,204

Current assets	$	488,122	$	17,549	$	4,008	$	74,116		$	583,795
Current liabilities	280,538		9,546		1,525		707			292,316
Goodwill	20,548		14,365		—		—			34,913
Total assets	515,783		46,854		5,242		74,422			642,301

Three Months Ended October 31, 2016	Power Services		Industrial Services		Telecom Services		Other			Totals
Revenues	$	151,094	$	21,550	$	2,800	$	—		$	175,444
Cost of revenues	118,407		18,386		2,073		—			138,866
Gross profit	32,687		3,164		727		—			36,578
Selling, general and administrative expenses	6,391		1,410		316		1,731			9,848
Income (loss) from operations	26,296		1,754		411		(1,731		)	26,730
Other income, net	654		—		—		36			690
Income (loss) before income taxes	$	26,950	$	1,754	$	411	$	(1,695	)	27,420
Income tax expense										8,194
Net income										$	19,226

Amortization of purchased intangible assets	$	135	$	97	$	—	$	—		$	232
Depreciation	169		302		51		3			525
Property, plant and equipment additions	101		481		286		—			868

Current assets	$	410,143	$	19,269	$	2,649	$	67,909		$	499,970
Current liabilities	275,052		13,336		1,006		1,139			290,533
Goodwill	20,548		14,365		—		—			34,913
Total assets	435,208		50,363		3,297		69,975			558,843

Nine Months Ended October 31, 2019	Power Services			Industrial Services		Telecom Services			Other			Totals
Revenues	$	83,941		$	80,442	$	6,626		$	—		$	171,009
Cost of revenues	104,759			72,958		5,361			—			183,078
Gross (loss) profit	(20,818		)	7,484		1,265			—			(12,069		)
Selling, general and administrative expenses	18,977			5,959		1,535			5,290			31,761
Impairment loss	2,072			—		—			—			2,072
(Loss) income from operations	(41,867		)	1,525		(270		)	(5,290		)	(45,902		)
Other income, net	7,037			—		—			435			7,472
(Loss) income before income taxes	$	(34,830	)	$	1,525	$	(270	)	$	(4,855	)	(38,430		)
Income tax benefit												4,936
Net loss												$	(33,494	)

Amortization of purchased intangible assets	$	231		$	497	$	136		$	—		$	864
Depreciation	517			1,791		298			4			2,610
Property, plant and equipment additions	4,533			1,487		277			11			6,308

Nine Months Ended October 31, 2017	Power Services		Industrial Services		Telecom Services		Other			Totals
Revenues	$	662,131	$	50,203	$	10,903	$	—		$	723,237
Cost of revenues	540,986		44,634		8,396		—			594,016
Gross profit	121,145		5,569		2,507		—			129,221
Selling, general and administrative expenses	16,804		5,041		1,163		7,400			30,408
Income (loss) from operations	104,341		528		1,344		(7,400		)	98,813
Other income, net	4,043		—		—		178			4,221
Income (loss) before income taxes	$	108,384	$	528	$	1,344	$	(7,222	)	103,034
Income tax expense										37,738
Net income										$	65,296

Amortization of purchased intangible assets	$	262	$	514	$	—	$	—		$	776
Depreciation	580		1,144		202		10			1,936
Property, plant and equipment additions	691		2,800		513		2			4,006

Nine Months Ended October 31, 2016	Power Services		Industrial Services		Telecom Services		Other			Totals
Revenues	$	402,615	$	59,287	$	6,385	$	—		$	468,287
Cost of revenues	302,140		52,491		4,764		—			359,395
Gross profit	100,475		6,796		1,621		—			108,892
Selling, general and administrative expenses	13,688		4,532		944		5,265			24,429
Impairment loss	1,979		—		—		—			1,979
Income (loss) from operations	84,808		2,264		677		(5,265		)	82,484
Other income, net	1,192		—		—		91			1,283
Income (loss) before income taxes	$	86,000	$	2,264	$	677	$	(5,174	)	83,767
Income tax expense										27,122
Net income										$	56,645

Amortization of purchased intangible assets	$	385	$	367	$	—	$	—		$	752
Depreciation	459		841		135		9			1,444
Property, plant and equipment additions	944		1,082		453		2			2,481