COMMITMENTS

9 Months Ended

Oct. 31, 2023

COMMITMENTS

COMMITMENTS

NOTE 7 – COMMITMENTS

Leases

The Company’s leases are primarily operating leases that cover office space, expiring on various dates through December 2031, and certain equipment used by the Company in the performance of its construction services contracts. Some of these equipment leases may be embedded in broader agreements with subcontractors or construction equipment suppliers. The Company has no material finance leases. None of the operating leases includes significant amounts for incentives, rent holidays or price escalations. Under certain leases, the Company is obligated to pay property taxes, insurance, and maintenance costs. For leases that contain both lease and non-lease components, fixed and variable payments are allocated to each component relative to observable or estimated standalone prices.

Operating lease right-of-use assets and associated lease liabilities are recorded 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 at the commencement date in determining the present value of future payments. The expected lease term includes any option to extend or to terminate the lease when it is reasonably certain the Company will exercise such option. Right-of-use assets at October 31, 2023 and January 31, 2023, were $4.1 million and $4.8 million, respectively.

Operating lease expense amounts are recorded on a straight-line basis over the expected lease terms. Operating lease expenses for the three and nine months ended October 31, 2023 were $0.5 million and $1.3 million, respectively, and they were $0.6 million and $1.9 million for the three and nine months ended October 31, 2022, respectively.

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, 2023:

Years Ending January 31,
2024 (remainder)	$	436
2025		1,466
2026		1,194
2027		276
2028		221
Thereafter		818
Total lease payments		4,411
Less imputed interest		254
Present value of lease payments		4,157
Less current portion (included in accrued expenses)		1,447
Noncurrent portion (included in noncurrent liabilities)	$	2,710

For operating leases as of October 31, 2023, the weighted average lease term and weighted average discount rate were 53 months and 3.8%, respectively. For operating leases as of January 31, 2023, the weighted average lease term and weighted average discount rate were 58 months and 3.7%, respectively.

The Company also uses equipment and occupies other facilities under short-term rental agreements. The Company classifies as short-term leases any lease with an initial noncancellable term of twelve months or less that does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. Rent expense amounts incurred under short-term rentals during the three and nine months ended October 31, 2023 were $3.4 million and $10.1 million, respectively, and they were $3.5 million and $8.8 million for the three and nine months ended October 31, 2022, respectively. Right-of-use assets and lease liabilities related to short-term leases are excluded from the consolidated balance sheets.

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 or bonded projects would be available and monetary damages or other costs or losses would be determined to be probable, the Company would record such losses. Any such amounts that may be required to be paid in excess of the estimated costs to complete contracts in progress as of October 31, 2023 are not estimable.

As of October 31, 2023 and January 31, 2023, the estimated amounts of the Company’s unsatisfied bonded performance obligations, covering all of its subsidiaries, were approximately $0.5 billion and $0.6 billion, respectively. As of October 31, 2023 and January 31, 2023, the outstanding amount of bonds covering other risks, including warranty obligations related to completed activities, was not material. Not all of our projects require bonding. The Company also provided a financial guarantee, subject to certain terms and conditions, in the amount of $3.6 million in support of business

development efforts. A liability was established for the estimated loss related to this guarantee during the year ended January 31, 2022 (“Fiscal 2022”).

Warranties

The Company generally provides assurance-type warranties for work performed under its construction contracts. 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.