Date: 9/8/2022
Form: 8-K - Current report
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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Item 2.02. Results of Operations and Financial Condition.
On September 8, 2022, Argan, Inc. ("Argan”) issued a press release (the "Press Release”) announcing its financial results for the three months ended July 31, 2022.
Item 8.01. Other Events.
In addition, the Press Release announced that the Company’s Board of Directors (the "Board”) declared a regular quarterly cash dividend in the amount of $0.25 per share of common stock, payable October 31, 2022 to stockholders of record at the close of business on October 21, 2022.
The Press Release also announced that the Board approved an increase in the Company’s existing share repurchase program, from $75 million to $100 million, to acquire shares of the Company’s common stock. The Company has repurchased shares at a cost of approximately $74 million under the authorization to-date.
A copy of Argan’s Press Release is attached to this report as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d)Exhibits
Exhibit No. |
| Description |
99.1 |
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104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | |
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 hereunto duly authorized.
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| ARGAN, INC. | ||||
Date: September 8, 2022 |
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| By: |
| /s/ Richard H. Deily | |
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| Richard H. Deily | |||
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| Senior Vice President, Chief Financial Officer, Treasurer and Corporate Secretary | |||
Exhibit 99.1
Argan, Inc. Reports Second Quarter Results
| ● | Increases Share Repurchase Program to $100 Million |
| ● | Declares Regular Quarterly Dividend of $0.25 Per Share |
September 8, 2022 – ROCKVILLE, MD – Argan, Inc. (NYSE: AGX) ("Argan” or the "Company”) today announces financial results for its second quarter ended July 31, 2022. The Company also announces that its Board of Directors approved an increase to the Company’s existing share repurchase program from $75 million to $100 million and declared a regular quarterly cash dividend in the amount of $0.25 per share of common stock, payable October 31, 2022 to stockholders of record at the close of business on October 21, 2022. For additional information, please read the Company’s Quarterly Report on Form 10-Q, which the Company intends to file today with the U.S. Securities and Exchange Commission (the "SEC”). The Quarterly Report can be retrieved from the SEC’s website at www.sec.gov or from the Company’s website at www.arganinc.com.
Summary Information (dollars in thousands, except per share data)
| | July 31, | | | |
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| 2022 |
| 2021 |
| Change |
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For the Quarter Ended: | | |
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Revenues | | $ | 118,110 | | $ | 133,008 | | $ | (14,898) | |
Gross profit | |
| 24,387 | |
| 27,652 | |
| (3,265) | |
Gross margin % | |
| 20.6 | % |
| 20.8 | % |
| (0.2) | % |
Net income | | $ | 4,222 | | $ | 12,870 | | $ | (8,648) | |
Diluted per share | |
| 0.30 | |
| 0.81 | |
| (0.51) | |
EBITDA | | | 14,888 | | | 18,145 | | | (3,257) | |
Cash dividends per share | |
| 0.25 | |
| 0.25 | |
| — | |
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| July 31, | | January 31, |
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As of: | | 2022 | | 2022 | | Change |
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Cash, cash equivalents and short-term investments | | $ | 318,987 | | $ | 440,498 | | $ | (121,511) | |
Net liquidity (1) | |
| 236,181 | |
| 284,257 | |
| (48,076) | |
Share repurchase treasury stock, at cost | | | 73,573 | | | 20,405 | | | 53,168 | |
RUPO (2) | |
| 371,827 | |
| 397,023 | |
| (25,196) | |
(1) | | Net liquidity, or working capital, is defined as total current assets less total current liabilities. |
(2) | | The amount of remaining unsatisfied performance obligations ("RUPO”) represents the project backlog related to active contracts with customers, as determined under revenue recognition rules. |
"We were pleased to announce during the quarter that our Atlantic Projects Company ("APC”) subsidiary entered into engineering and construction services contracts with Ireland’s Electricity Supply Board ("ESB”) for 195 MW power projects in the Dublin area and construction has already commenced,” David Watson, President and Chief Executive Officer of Argan, said. "All of our companies continue to execute
well on their projects and our gross profit margins reflect those successful efforts by our teams. The Company’s Board recognizes our ability to execute now and into the future and has authorized an increase in the existing share repurchase program to $100 million to support this belief. All of our teams are working hard to convert business development efforts into active jobs. The timing of our future revenues is largely driven by major new power projects and we currently expect to announce the commencement of one in our third quarter, however, it is important to note that the start of new projects is primarily controlled by project owners. It is worth pointing out the significant fundamentals that remain in our core market of building gas-fired power plants. Plentiful supplies of relatively clean-burning, natural gas are available in the United States. Coal and nuclear plants generally are old and uneconomical, renewables are intermittent and power storage generally remains expensive. Gas-fired power is the primary source of power generation in our country and it provides 24/7 power.”
Consolidated revenues for the quarter ended July 31, 2022 were $118.1 million, which represented a decrease of $14.9 million, or 11.2%, from consolidated revenues of $133.0 million reported for the three months ended July 31, 2021. Consolidated revenues of our power industry services segment decreased by $7.7 million as construction activities associated with the Guernsey Power Station project have passed post-peak levels. The decline in revenues were partially offset by increasing revenues at several APC projects including the Kilroot Power Station and ESB’s FlexGen peaker plants. Even though revenues of our industrial fabrication and field services have increased two quarters in a row, they decreased by $7.1 million between periods as the amounts of field services and pipe and vessel fabrication in the prior year quarter were significant.
For the quarter ended July 31, 2022, we reported a consolidated gross profit of approximately $24.4 million which represented a gross profit percentage of approximately 20.6% of corresponding consolidated revenues. The gross profit percentages of corresponding revenues for the power industry services, industrial services and the telecommunications infrastructure segments were 22.0%, 15.1% and 21.6%, respectively, for the current quarter.
Selling, general and administrative expenses for the three months ended July 31, 2022 and 2021, were $11.0 million and $10.3 million, respectively, representing an increase of $0.7 million between the quarters, or 6.3%.
Due primarily to the unfavorable adjustment in the approximate amount of $6.2 million that was related to the settlement of the research and development credit claims with the Internal Revenue Service, we reported income tax expense in the amount of $9.7 million for the three months ended July 31, 2022. Excluding the effect of this adjustment, our effective tax rate for the three months ended July 31, 2022 was 25.2%.
For three months ended July 31, 2022, net income was $4.2 million, or $0.30 per diluted share. The unfavorable effect of the one-time tax adjustment on diluted net income per share was $0.43. For the three months ended July 31, 2021, we reported net income in the amount of $12.9 million, or $0.81 per diluted share. EBITDA for the quarter ended July 31, 2022 decreased to $14.9 million from $18.1 million for the prior year quarter. The Company paid its regular quarterly cash dividend of $0.25 per share in July.
For the six months ended July 31, 2022, we reported net income in the amount of $11.7 million, or $0.80 per diluted share, compared to $23.6 million of net income, or $1.48 per diluted share, in the prior year period. EBITDA for the six months ended July 31, 2022 decreased to $25.6 million from $33.8 million for the prior year period.
As of July 31, 2022, cash, cash equivalents and short-term investments totaled $319 million and net liquidity was $236 million; furthermore, the Company had no debt. The $122 million reduction in cash, cash equivalents and short-term investments from January 31, 2022 reflected the expected cash flow cycle of two significant projects, the payment of dividends and the repurchase of shares. During the three months ended July 31, 2022, the Company repurchased 701,713 shares of common stock at a cost of $26 million. Since last November, the Company has repurchased 1,940,344 shares of common stock, or approximately 12% of its outstanding shares, at a cost of approximately $74 million under the now $100 million share repurchase program authorization. The Company’s consolidated amount of RUPO was approximately $372 million as of July 31, 2022.
About Argan
Argan’s primary business is providing a full range of services to the power industry, including the renewable energy sector. Argan’s service offerings focus on the engineering, procurement and construction of natural gas-fired power plants and renewable energy facilities, along with related commissioning, operations management, maintenance, project development and consulting services, through its Gemma Power Systems and Atlantic Projects Company operations. Argan also owns The Roberts Company, which is a fully integrated fabrication, construction and industrial plant services company, and SMC Infrastructure Solutions, which provides telecommunications infrastructure services.
Certain matters discussed in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Reference is hereby made to the cautionary statements made by the Company with respect to risk factors set forth in its most recent reports on Form 10-K, Forms 10-Q and other SEC filings. The Company’s future financial performance is subject to risks and uncertainties including, but not limited to, the successful addition of new contracts to project backlog, the receipt of corresponding notices to proceed with contract activities, and the Company’s ability to successfully complete the projects that it obtains. The Company has several signed EPC contracts that have not started and may not start as forecasted due to market and other circumstances beyond its control. Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to the risk factors highlighted above and described regularly in the Company’s SEC filings.
Company Contact: |
David Watson |
301.315.0027 |
ARGAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
| | Three Months Ended | | Six Months Ended | ||||||||
| | July 31, | | July 31, | ||||||||
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| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
REVENUES | | $ | 118,110 | | $ | 133,008 | | $ | 218,387 | | $ | 259,349 |
Cost of revenues | |
| 93,723 | |
| 105,356 | |
| 174,262 | |
| 207,983 |
GROSS PROFIT | |
| 24,387 | |
| 27,652 | |
| 44,125 | |
| 51,366 |
Selling, general and administrative expenses | |
| 10,984 | |
| 10,331 | |
| 21,559 | |
| 20,223 |
INCOME FROM OPERATIONS | |
| 13,403 | |
| 17,321 | |
| 22,566 | |
| 31,143 |
Other income (expense), net | |
| 505 | |
| (260) | |
| 1,100 | |
| 452 |
INCOME BEFORE INCOME TAXES | |
| 13,908 | |
| 17,061 | |
| 23,666 | |
| 31,595 |
Income tax expense | |
| (9,686) | |
| (4,191) | |
| (11,959) | |
| (7,959) |
NET INCOME | |
| 4,222 | |
| 12,870 | |
| 11,707 | |
| 23,636 |
Foreign currency translation adjustments | |
| (687) | | | (139) | | | (1,951) | | | (257) |
COMPREHENSIVE INCOME | | $ | 3,535 | | $ | 12,731 | | $ | 9,756 | | $ | 23,379 |
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NET INCOME PER SHARE | |
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Basic | | $ | 0.30 | | $ | 0.82 | | $ | 0.81 | | $ | 1.50 |
Diluted | | $ | 0.30 | | $ | 0.81 | | $ | 0.80 | | $ | 1.48 |
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | |
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Basic | |
| 14,134 | |
| 15,769 | |
| 14,516 | |
| 15,748 |
Diluted | |
| 14,247 | |
| 15,982 | |
| 14,616 | |
| 15,978 |
| | | | | | | | | | | | |
CASH DIVIDENDS PER SHARE | | $ | 0.25 | | $ | 0.25 | | $ | 0.50 | | $ | 0.50 |
ARGAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| | July 31, | | January 31, | ||
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| 2022 |
| 2022 | ||
| | (Unaudited) | | | | |
ASSETS |
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CURRENT ASSETS |
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Cash and cash equivalents | | $ | 143,344 | | $ | 350,472 |
Short-term investments | |
| 175,643 | |
| 90,026 |
Accounts receivable, net | |
| 24,888 | |
| 26,978 |
Contract assets | |
| 8,678 | |
| 4,904 |
Other current assets | |
| 25,640 | |
| 34,904 |
TOTAL CURRENT ASSETS | |
| 378,193 | |
| 507,284 |
Property, plant and equipment, net | |
| 9,507 | |
| 10,460 |
Goodwill | |
| 28,033 | |
| 28,033 |
Other purchased intangible assets, net | |
| 2,941 | |
| 3,322 |
Right-of-use, deferred tax and other assets | |
| 4,396 | |
| 4,486 |
TOTAL ASSETS | | $ | 423,070 | | $ | 553,585 |
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LIABILITIES AND EQUITY | |
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CURRENT LIABILITIES | |
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| |
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Accounts payable | | $ | 38,180 | | $ | 41,822 |
Accrued expenses | |
| 39,816 | |
| 53,315 |
Contract liabilities | |
| 64,016 | |
| 127,890 |
TOTAL CURRENT LIABILITIES | |
| 142,012 | |
| 223,027 |
Noncurrent liabilities | |
| 4,022 | |
| 4,963 |
TOTAL LIABILITIES | |
| 146,034 | |
| 227,990 |
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COMMITMENTS AND CONTINGENCIES | |
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STOCKHOLDERS’ EQUITY | |
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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; 15,827,772 and 15,788,673 shares issued at July 31, 2022 and January 31, 2022, respectively; 13,884,195 and 15,257,688 shares outstanding at July 31, 2022 and January 31, 2022, respectively | |
| 2,374 | |
| 2,368 |
Additional paid-in capital | |
| 160,229 | |
| 158,190 |
Retained earnings | |
| 193,205 | |
| 188,690 |
Less treasury stock, at cost – 1,943,577 and 530,985 shares at July 31, 2022 and January 31, 2022, respectively | | | (73,573) | | | (20,405) |
Accumulated other comprehensive loss | |
| (4,402) | |
| (2,451) |
TOTAL STOCKHOLDERS’ EQUITY | |
| 277,833 | |
| 326,392 |
Non-controlling interest | |
| (797) | |
| (797) |
TOTAL EQUITY | |
| 277,036 | |
| 325,595 |
TOTAL LIABILITIES AND EQUITY | | $ | 423,070 | | $ | 553,585 |
ARGAN, INC. AND SUBSIDIARIES
Reconciliation to EBITDA
(In thousands)(Unaudited)
| | Three Months Ended | ||||
| | July 31, | ||||
|
| 2022 | | 2021 | ||
Net income, as reported | | $ | 4,222 | | $ | 12,870 |
Income tax expense | |
| 9,686 | |
| 4,191 |
Depreciation | |
| 747 | |
| 859 |
Amortization of purchased intangible assets | |
| 233 | |
| 225 |
EBITDA | | | 14,888 | | | 18,145 |
| | Six Months Ended | ||||
| | July 31, | ||||
| | 2022 | | 2021 | ||
Net income, as reported | | $ | 11,707 | | $ | 23,636 |
Income tax expense | |
| 11,959 | |
| 7,959 |
Depreciation | |
| 1,556 | |
| 1,741 |
Amortization of purchased intangible assets | |
| 399 | |
| 453 |
EBITDA | |
| 25,621 | |
| 33,789 |