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Item 7. Management’s Discussion and Analysis

2025-05-01 compared with 2024-04-26 · 89 added, 84 removed, 194 unchanged (47% of the section changed)

11 unchanged sentences

Since the Company's revenues are significantly dependent upon discrete projects, the Company's operating results in any reporting period could be negatively impacted as a result of variations in the level of the Company's discrete project orders or delays in the timing of the specific project phases.

The tabular information presented throughout this MD&A is in thousands, except per share data, or unless otherwise specified.

Results of Operations

Consolidated Results of Operations

(In thousands, except per share data, or unless otherwise specified)

Year Ended January 31,

5 unchanged sentences

Interest expense

Other (expense) income

Other income (expense)

Income before income tax

Income tax (benefit) expense

Income tax expense (benefit)

Net income attributable to non-controlling interest

2 unchanged sentences

Net sales were $158.4 million and $150.7 million in the years ended January 31, 2025 and 2024, respectively.

The increase of $ 8.1 million was primarily a result of higher sales volumes in Saudi Arabia.

The increase of $7.7 million was primarily a result of higher sales volumes in the Middle East and Canada.

Gross profit was $53.2 million, or 34% of net sales and $41.5 million, or 28% of net sales, in the years ended January 31, 2025 and 2024, respectively.

The increase of $ 3.2 million was driven primarily by higher sales volumes and improved gross margins in Saudi Arabia.

The increase of $11.7 million was driven by higher sales volumes and improved gross margins in the Middle East and Canada.

General and administrative expense

General and administrative expenses were $28.0 million and $22.6 million in the years ended January 31, 2025 and 2024, respectively.

The increase of $ 0.6 million was primarily related to higher compensation costs.

The increase of $5.4 million was primarily related to higher compensation costs and professional fees.

Selling expenses

Selling expenses were $4.9 million and $5.5 million in the years ended January 31, 2025 and 2024, respectively.

The increase of $ 0.3 million was driven by higher payroll expenses.

The decrease of $0.6 million was driven by lower payroll expenses during the year.

Interest expense

Interest expense remained consistent and was $ 2.3 million and $ 2.1 million in the years ended January 31, 2024 and 2023 , respectively.

The increase of $ 0.2 million was related to increased borrowings and, to a lesser extent, higher interest rates.

Other expense

Other expense was $ 1.2 million, as compared to other income of $ 0.5 million in the years ended January 31, 2024 and 2023 , respectively.

The current year amount includes certain one-time adjustments, including a charge associated with the termination of the Company's pension plan and the settlement of a legal proceeding.

The prior year amount includes income from the release of the Company's liability for a past project and insurance recovery income, partially offset by a non-cash pre-tax settlement charge resulting from the termination of the Company's pension plan.

Interest expense was $1.9 million and $2.3 million in the years ended January 31, 2025 and 2024, respectively.

The decrease of $0.4 million was related to decreased borrowings and, to a lesser extent, lower interest rates.

Other income (expense)

Other income was $0.1 million, as compared to other expense of $(1.2) million in the years ended January 31, 2025 and 2024, respectively.

The change relates mainly to a certain one-time non-recurring charge in connection with a non-cash pre-tax settlement resulting from the termination of the Company's pension plan.

The Company's worldwide effective tax rates ("ETR") were 29.1% and (33.6%) in the years ended January 31, 2025 and 2024, respectively.

The change in ETR was largely due to a partial release of the U.S.

valuation allowance and changes in the mix of income and loss in various tax jurisdictions.

The change in ETR was largely due to changes in the mix of income and loss in various tax jurisdictions and the release of the partial domestic valuation allowance in the prior year.

For further information, see Note 7 - Income taxes, in the Notes to Consolidated Financial Statements.

1 unchanged sentence

Net income attributable to common stock was $9.0 million and $10.5 million in the years ended January 31, 2025 and 2024, respectively.

The increase in net income was a result of the changes discussed above, less amounts attributable to non-controlling interest.

The decrease in net income was a result of the changes discussed above, less amounts attributable to non-controlling interest.

Liquidity and capital resources

Cash and cash equivalents were $5.8 million as of January 31, 2024 and January 31, 2023 , respectively.

Cash and cash equivalents were $15.7 million and $5.8 million as of January 31, 2025 and January 31, 2024 , respectively.

On January 31, 2025 , approximately $ 0.3 million was held in the United States, and $ 15.4 million was held by the Company's foreign subsidiaries.

The Company's working capital was $54.7 million on January 31, 2025 compared to $41.1 million on January 31, 2024 .

As o f January 31, 2024 , the Company had $ 4.0 million of borrowing capacity under the Renewed Senior Credit Facility in North America and $ 15.4 million of borrowing capacity under its foreign revolving credit agreements.

As o f January 31, 2025, the Company had $3.7 million of borrowing capacity under the Renewed Senior Credit Facility (as defined below) in North America and $15.6 million of borrowing capacity under its foreign revolving credit agreements.

The Company had $6.8 million borrowed under the Renewed Senior Credit Facility and $4.8 million borrowed under its foreign revolving credit agreements at January 31, 2025.

Net cash from operating activities in the years ended January 31, 2024 and 2023 was $ 14.7 million and $ (1.2) million, respectively.

The current year increase of $ 15.9 million was due primarily to a rise customer deposits and accounts payable, partially offset by increases in accounts receivable, unbilled accounts receivable, and prepaid expenses and other current assets, as compared to the prior year.

Net cash from investing activities in the years ended January 31, 2024 and 2023 was $ 11.1 million and $ 6.4 million, respectively.

The increase of $ 4.7 million was primarily due to investments capital assets in the Middle East and Canada during the period.

Net cash from financing activities in the years ended January 31, 2024 and 2023 was $ (3.3) million and $ 4.5 million, respectively.

The decrease of $7.8 million during the year ended January 31, 2024 consisted of using the remaining $1.0 million authorized as part of the Company's share repurchase program to reacquire its outstanding shares of common stock, as compared to $0.1 million during the year ended January 31, 2023.

Additionally, a net repayment was made from borrowings under the Company's credit facilities of approximately $6.8 million, as compared to net proceeds received from borrowings of approximately $5.5 million during the year ended January 31, 2023 .

Further, d ebt totaled $ 25.7 million and $ 24.4 million as of January 31, 2024 and 2023 , respectively.

Net cash provided by operating activities in the years ended January 31, 2025 and 2024 was $13.9 million and $14.7 million, respectively.

The current year decrease of $0.8 million was due primarily to a decrease in accounts payable and customer deposits, partially offset by a reduction in receivables, prepaid expenses and other current assets, as compared to the prior year.

Net cash used in investing activities in the years ended January 31, 2025 and 2024 was $2.8 million and $11.1 million, respectively.

The decrease of $8.3 million was due to less investment activity in capital assets during the year, mainly in the United States and Canada.

Net cash used in financing activities in the years ended January 31, 2025 and 2024 was $0.9 million and $3.3 million, respectively.

The decrease of $2.4 million during the year ended January 31, 2025 consisted, in part, from no share repurchase activity as compared to the use of the remaining $1.0 million authorized as part of the Company's share repurchase program during the year ended January 31, 2024.

Additionally, a net repayment was made of borrowings under the Company's credit facilities of approximately $0.2 million, as compared to a net repayment of approximately $1.3 million during the year ended January 31, 2024.

Further, debt totaled $24.5 million and $25.7 million as of January 31, 2025 and 2024, respectively.

For additional information, see Note 5 - Debt, in the Notes to Consolidated Financial Statements.

1 unchanged sentence

There was no restricted cash held in the United States on January 31, 2025 or January 31, 2024.

Restricted cash held by foreign subsidiaries was $ 1.4 million and $ 1.0 million as of January 31, 2024 and 2023 , respectively.

Restricted cash held by foreign subsidiaries was $1.4 million as of January 31, 2025 and 2024, respectively.

Restricted cash held by foreign subsidiaries related to fixed deposits that also serve as security deposits and guarantees.

48 unchanged sentences

Loans outstanding under the Renewed Senior Credit Facility will bear interest at a rate of 2.00% per annum in excess of the otherwise applicable rate (i) while a bankruptcy event of default exists or (ii) upon the lender's request, during the continuance of any other event of default.

January 31, 2024

, the Company had borrowed an aggregate of $

January 31, 2025, the Company had borrowed an aggregate of $

6.8 million at a rate of

9.0% and had $

3.7 million available under the Renewed Senior Credit Facility.

January 31, 2023

, the Company had borrowed an aggregate of $

January 31, 2024, the Company had borrowed an aggregate of $

5.5 million and had $

4.0 million available under the Renewed Senior Credit Facility.

Revolving lines - foreign .

Revolving lines -

The Company also has credit arrangements used by its Middle Eastern subsidiaries in the U.A.E., Egypt, and Saudi Arabia as further described below:

3 unchanged sentences

Dirhams (approximately $

January 31, 2024

) from a bank in the U.A.E.

as of January 31, 2024, the facility has an interest rate of approximately

and is set to expire in May 2024.

The Company had borrowed an aggregate of $0.2 million and $0.6 million as of January 31, 2024 and January 31, 2023, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

As of January 31, 2024 and January 31, 2023, the Company had unused borrowing availability of approximately $1.9 million and $1.6 million, respectively.

2.2 million at

January 31, 2025) from a bank in the U.A.E.

January 31, 2025, the facility has an interest rate of approximately

7.9% and expires in July 2025.

The Company had borrowed an aggregate of $0.4 million and $0.2 million

as of January 31, 2025 and

January 31, 2024, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

January 31, 2025 and

January 31, 2024, the Company had unused borrowing availability of approximately $1.6 million and $1.9 million, respectively.

The Company has a revolving line for

1 unchanged sentence

Dirhams (approximately $

January 31, 2024

) from a bank in the U.A.E.

as of January 31, 2024, the facility has an interest rate of approximately

and is set to expire in May 2024.

The Company had borrowed an aggregate of $0.1 million and $1.0 million as of January 31, 2024 and January 31, 2023, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

As of January 31, 2024 and January 31, 2023, the Company had unused borrowing availability of approximately $1.0 million and $1.8 million, respectively.

In June 2021, and as renewed or amended subsequently thereafter, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of

100.0 million Egyptian Pounds (approximately $

17.7 million at

January 31, 2024).

January 31, 2025) from a bank in the U.A.E.

January 31, 2025, the facility has an interest rate of approximately

7.9% and expires

in August 2025.

The Company had borrowed an aggregate of $0.1 million as of January 31, 2025 and January 31, 2024, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

January 31, 2025 and

January 31, 2024, the Company had unused borrowing availability of approximately $9.0 million and $1.0 million, respectively.

In June 2021, and as renewed or amended subsequently thereafter, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of 100.0 million Egyptian Pounds (approximately $2.0 million at January 31, 2025).

This credit arrangement is in the form of project financing at rates competitive in Egypt.

1 unchanged sentence

Among other covenants, the credit arrangement established a maximum leverage ratio allowable and restricted the Company's Egyptian subsidiary's ability to undertake any additional debt.

January 31, 2024, the facility has an interest rate of approximately

20.75% and expired in August 2023.

This credit arrangement was subsequently renewed in November 2023 with substantially the same terms and conditions and expires in November 2024.

The Company had borrowed an aggregate of $1.4 million and $3.1 million

as of January 31, 2024 and

January 31, 2023, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

Further, as of

January 31, 2024 and January 31, 2023, the Company had unused borrowing capacity of $3.2 million and $2.0 million, respectively.

As of January 31, 2025, the facility has an interest rate of approximately 20.8%.

Additionally, this credit arrangement was renewed in November 2024 with substantially the same terms and conditions and expires in November 2025.

As of January 31, 2025 , the Company had an immaterial amount outstanding with respect to this credit arrangement, and approximately $1.4 million outstanding at January 31, 2024, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

Further, as of January 31, 2025 and January 31, 2024 , the Company had unused borrowing capacity of $2.0 million and $3.2 million, respectively.

In December 2021, the Company entered into a credit arrangement for project financing with a bank of Egypt for 28.2 million Egyptian Pounds.

As this project has progressed and the Company received collections, the facility has decreased to a current amount of

2.1 million Egyptian Pounds (approximately $

0.1 million at

2.1 million Egyptian Pounds (approximately $0.1 million at

January 31, 2025).

4 unchanged sentences

The facility will expire in connection with final customer balance collections and the completion of the project.

The Company had approximately $

0.1 million and $

0.4 million outstanding

as of January 31, 2024 and

January 31, 2025, the Company had an insignificant amount outstanding, and approximately $

0.1 million outstanding at

January 31, 2024, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

3 unchanged sentences

This credit arrangement is in the form of project financing at rates competitive in Saudi Arabia.

The line is secured by certain assets (such as accounts receivable) of the Company's Saudi Arabian subsidiary, and as of January 31, 2024, the facility has an interest rate of approximately

and is set to expire in May 2024.

The line is secured by certain assets (such as accounts receivable) of the Company's Saudi Arabian subsidiary.

The facility was renewed in May 2024 with substantially the same terms and conditions and expires in May 2025.

January 31, 2025

, the facility has an interest rate of approximately

The Company had borrowed an aggregate of $1.5 million and $3.2 million as of January 31, 2025 and January 31, 2024, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

The unused borrowing availability attributable to this credit arrangement at

January 31, 2024 and January 31, 2023, was $6.1 million and $2.3 million, respectively.

January 31, 2025 and

January 31, 2024, was $3.0 million and $6.1 million, respectively.

These credit arrangements are in the form of overdraft facilities and project financing at rates competitive in the countries in which the Company operates.

3 unchanged sentences

The Company guarantees only a portion of the subsidiaries' debt, including foreign debt.

The amount of foreign subsidiary debt guaranteed by the Company was approximately $0.1 at January 31, 2024

and January 31, 2023, respectively.

The Company was in compliance with the covenants under the credit arrangements in the U.A.E., Egypt and Saudi Arabia as of

The amount of foreign subsidiary debt guaranteed by the Company was approximately $10 million at

January 31, 2025 and

January 31, 2024.

, with the exception of those arrangements that may have expired and have not yet been renewed.

Although certain of the arrangements may have expired and the borrowings could be required to be repaid immediately by the banks, the Company is in regular communication with the respective banks throughout the renewal process and all of the arrangements have continued without interruption or penalty.

The Company was in compliance with the covenants under the credit arrangements in the U.A.E., Egypt and Saudi Arabia as of

January 31, 2025

, interest rates were based on (i) the Emirates Inter Bank Offered Rate plus 3.0% to 3.5% per annum for the U.A.E.

I nterest rates were based on (i) the Emirates Inter Bank Offered Rate plus 3.0% to 3.5% per annum for the U.A.E.

credit arrangements, two of which have a minimum interest rate of 4.5% per annum;

1 unchanged sentence

and (iii) the Saudi Inter Bank Offered Rate plus 3.5% for the Saudi Arabia credit arrangement.

Based on these rates, as of January 31, 2024, the Company's interest rates ranged from

Based on these rates, as of

January 31, 2025, the Company's interest rates ranged from

20.8%, with a weighted average rate of

3 unchanged sentences

16.9 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees.

Additionally, the Company had borrowed approximately $6.4 million and had an additional $15.4 million of remaining borrowing capacity available under the foreign revolving credit arrangements.

The foreign revolving line balances were included as current maturities of long-term debt in the Company's consolidated balance sheets as of January 31, 2024 and January 31, 2023, respectively.

In June 2023, the Company assumed a promissory note of approximately $2.8 million in connection with the formation of the joint venture with GIG.

Additionally, the Company had borrowed approximately $2.1 million and had an additional $

15.6 million of remaining borrowing capacity available under the foreign revolving credit arrangements.

The foreign revolving line balances were included as current maturities of long-term debt in the Company's consolidated balance sheets

as of January 31, 2025 and

January 31, 2024.

In June 2023, the Company assumed a promissory note of approximately $

2.8 million in connection with the formation of the joint venture with GIG.

In accordance with the promissory note, all principal is due and payable on the maturity date of April 9, 2026, with the option to prepay, in whole or in part, at any time prior to the maturity date, without premium or penalty.

2 unchanged sentences

The interest rate is variable, and was 7.1% at January 31, 2025.

The principal balance is included as a component of long-term debt, less current maturities in the Company's consolidated balance sheets and is presented net of issuance costs of $0.1 million as of January 31, 2024 and January 31, 2023, respectively.

Finance obligation - buildings and land.

On April 14, 2021, the Company entered into a purchase and sale agreement (the "Purchase and Sale Agreement").

On April 14, 2021, the Company entered into a purchase and sale agreement (the "Purchase and Sale Agreement") to sell its land and buildings in Lebanon, Tennessee (the "Property").

Pursuant to the terms of the Purchase and Sale Agreement, the Company sold the Property for $10.4 million.

4 unchanged sentences

Under the Lease Agreement, the Company has four consecutive options to extend the term of the lease by five years for each such option.

As of January 31, 2024 and 2023, the Company had a net book value relating to this asset of $1.9 million and $2.1 million, respectively.

January 31, 2025 and

2024, the Company had a net book value relating to this asset of

$1.8 million and $1.9 million, respectively.

In accordance with ASC 842, Leases , this transaction was recorded as a failed sale and leaseback as the present value of lease payments exceeded substantially all of the fair value of the underlying asset.

10 unchanged sentences

Of this retention amount, $ 1.2 million is classified in a long-term asset account.

The Company has been actively involved in ongoing efforts to collect the outstanding amount.

The Company continues to engage with the customer to ensure full payment of open balances, and at various times throughout 2023 and in June 2022, the Company received a partial payment to settle $0.6 million and $0.9 million of the customer's outstanding balances, respectively.

Further, the Company has been engaged by the customer to perform additional work in

under customary trade terms that supports the continued cooperation between the Company and the customer.

The Company continues to actively engage in ongoing collection efforts with the customer to ensure full payment of open balances, and at various times throughout

and 2023, the Company received a partial payment to settle $

million and $0.6 million of the customer's outstanding balances, respectively.

Additionally, the Company has been engaged by the customer to perform additional work in

under customary trade terms that support the continued cooperation between the Company and the customer.

As a result, the Company did not reserve any allowance against the remaining outstanding balances as of

5 unchanged sentences

On December 7, 2022, the Board of Directors authorized the use of $1.0 million remaining under the share repurchase program previously approved on October 4, 2021 that expired on October 3, 2022.

During the 12 months ended January 31, 2024, the Company used the remaining $1.0 million of the $3.0 million authorized to repurchase its outstanding shares of common stock.

During the twelve months ended January 31, 2024, the Company used the remaining $1.0 million of the $3.0 million authorized to repurchase its outstanding shares of common stock.

Accordingly, there was no repurchase activity with respect to the Company's shares of common stock during the twelve months ended January 31, 2025.

On August 29, 2024, the Company retired all remaining treasury stock previously acquired under the stock repurchase program.

The retirement was recorded as a reduction to common stock based on the par value of the shares, and the excess over par value was recorded as a decrease in retained earnings in accordance with ASC 505-30, Equity - Treasury Stock .

Critical accounting estimates and policies

18 unchanged sentences

The Company assesses its deferred tax assets for realizability at each reporting period.

The Company is now recognizing a tax benefit on losses in the United States after removal of a partial valuation allowance applied against its deferred tax assets.

The Company maintains a partial valuation allowance in the United States against certain deferred tax assets.

The Company recognizes a tax position in its consolidated financial statements only after determining that the relevant tax authority would more likely than not sustain the position following an audit.

3 unchanged sentences

See Recent accounting pronouncements in Note 2 - Significant accounting policies, in the Notes to Consolidated Financial Statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - Not applicable.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis