Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”) today
announced financial results for its fiscal year and fourth quarter
ended January 31, 2020. For additional information, please read the
Company’s Annual Report on Form 10-K, which the Company intends to
file today with the U.S. Securities and Exchange Commission (the
“SEC”). The Annual 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):
January
31,
2020
2019
Change
For the Fiscal Year Ended:
Revenues
$
238,997
$
482,153
$
(243,156
)
Gross (loss) profit
(6,820
)
82,438
(89,258
)
Gross margins
(2.9
)%
17.1
%
(20.0
)%
Net (loss) income attributable to the
stockholders of the Company
$
(42,689
)
$
52,036
$
(94,725
)
Diluted per share
(2.73
)
3.32
(6.05
)
Cash dividends paid per share
1.00
1.00
—
January
31,
As of:
2020
2019
Change
Cash, cash equivalents and short-term
investments
$
327,862
$
296,531
$
31,331
Net liquidity (1)
277,721
335,032
(57,311
)
RUPO (2)
781,400
99,400
682,000
Project backlog
1,334,000
1,094,000
240,000
(1)
We define net liquidity, or working
capital, as our total current assets less our total current
liabilities.
(2)
The amount of remaining unsatisfied
performance obligations (“RUPO”) represents the unrecognized
amounts of transaction price for active contracts with customers,
which is a subset of project backlog.
Fiscal Year 2020 Results:
Consolidated revenues for the year ended January 31, 2020 were
$239.0 million, which represented a decline of $243.2 million from
consolidated revenues of $482.2 million reported for the prior
year. As Gemma Power Systems (“GPS”) has prepared to proceed fully
with new projects, its revenues have remained at a low level.
However, the increasing construction activities for the Guernsey
Power Station should result in improved revenues over the coming
year. The revenues of the power industry services segment were
56.8% of consolidated revenues for the current year, compared to
76.3% for the prior year.
The industrial services business of The Roberts Company (“TRC”)
reported revenues of $94.7 million for the current year, which
represented a decrease of $7.0 million, or 6.9%, from revenues
reported by TRC for the prior year. Revenues provided by this
reportable business segment represented 39.6% and 21.1% of
corresponding consolidated revenues for the years ended January 31,
2020 and 2019, respectively.
The significant contract loss incurred during the current year
by Atlantic Projects Company (“APC”) in the amount of $33.6
million, primarily recognized in the first quarter, caused us to
report a consolidated gross loss of $6.8 million for the year. The
contract loss on the TeesREP project prompted us to record an
impairment loss related to the goodwill of APC in the amount of
$2.1 million during the first quarter as well. In addition,
primarily due to reductions in the amounts of forecasted future
revenues, we determined a goodwill impairment loss related to TRC
in the amount of $2.8 million, which was recorded in the last
quarter of the year ended January 31, 2020.
Selling, general and administrative expenses rose by 8.4%, to
$44.1 million for the current year from an amount of $40.7 million
for the prior year, primarily due to the cost of maintaining core
GPS staff whose time is typically charged to projects. Included in
other income for the current year, investment income was $5.0
million, which represented a decline from the amount earned last
year, $5.9 million, as investment balances were reduced during the
current year. An income tax benefit was recorded for each year,
with the current year amount of $7.1 million reflecting primarily a
bad debt loss on certain inter-company loans and the prior year
amount including a significant benefit related to the recognition
of research and development credits that were generated in prior
years. Financial results for the current year also reflected net
income attributable to non-controlling interests in the amount of
approximately $2.0 million.
Due substantially to the reduced level of revenues reported for
the current year, the APC contract loss and the goodwill impairment
losses that are identified above, we incurred a consolidated loss
before income taxes of $47.8 million for the year ended January 31,
2020. The net loss attributable to our stockholders was $42.7
million, or $(2.73) per diluted share, for the year ended January
31, 2020 compared to net income attributable to our stockholders of
$52.0 million, or $3.32 per diluted share, for the prior year. In
January 2020, the Company paid its fourth regular quarterly cash
dividend of $0.25 per share for total dividends paid during the
current year of $1.00 per share.
As of January 31, 2020, our cash, cash equivalents and
short-term investments totaled $328 million and net liquidity was
$278 million; plus, we had no debt. Our RUPO, which represents a
value for active work and is a subset of project backlog, has
increased to approximately $0.8 billion as of January 31, 2020 from
$0.1 billion as of January 31, 2019. Our project backlog has been
increased to approximately $1.3 billion as of January 31, 2020 from
$1.1 billion as of January 31, 2019.
Subsequent to the current year end, we announced that GPS had
entered into two engineering, procurement and construction (“EPC”)
services contracts. In February 2020, GPS entered into an EPC
services contract with ESC Brooke County Power I, LLC to construct
Brooke County Power, a 920 MW natural gas-fired power plant, in
Brooke County, West Virginia. In March 2020, GPS entered into an
EPC services contract with NTE Connecticut, LLC to construct
Killingly Energy Center, a 650 MW natural gas-fired power plant, in
Killingly, Connecticut.
The aggregate amount of the rated power represented by the
natural gas-fired power plants for which we have signed EPC
services contracts is approximately 7.3 gigawatts with an aggregate
contract value in excess of $3.0 billion. For those contracts not
already included in project backlog, we anticipate adding them
closer to their respective expected start dates when the projects
achieve remaining key development milestones and obtain financing
commitments. For all projects, the start date for construction is
generally controlled by the project owners.
Fourth Quarter Results:
Revenues decreased 22% to $68.0 million, compared to $87.7
million for the fourth quarter last year which primarily reflected
an overall decrease in revenues at APC and TRC of $40.2 million,
partially offset by an increase in revenues at GPS of $21.6 million
as construction work at the Guernsey Power Station begins to pick
up. Gross profit decreased 22% to $5.2 million, compared to $6.7
million for the prior year’s fourth quarter. The gross margin
percentage was 7.7% for both quarterly periods, as the results for
both quarters were negatively affected by TeesRep project margin
adjustments.
The other factors contributing to a decreased bottom line
between the fourth quarter of the current year and the prior year’s
fourth quarter were the increased selling, general and
administrative expenses of $2.8 million, increased goodwill
impairment loss of $1.3 million at TRC, and decreased other income
of $1.3 million partially offset by an increased tax benefit of
$2.0 million. As a result, net loss attributable to our
stockholders for the three months ended January 31, 2020 increased
to $7.2 million, or $(0.46) per diluted share, compared to a loss
of $2.2 million, or $(0.14) per diluted share, for the prior year’s
fourth quarter.
COVID-19 Impacts:
The world-wide outbreak of COVID-19 is having a significant
impact on our APC activities. Almost all planned power plant outage
and maintenance projects for APC have been postponed for an
indefinite period other than emergency tasks, which necessitated
the temporary lay-off of the majority of APC’s workers.
Construction on the TeesREP project was suspended on March 24, 2020
due to the COVID-19 pandemic, pending preparations being made by
the contractors and subcontractors to comply with new and evolving
government guidance concerning public health protocols. At the time
of the suspension of work on the TeesREP project, APC had completed
approximately 90% of its subcontracted work. The project shutdowns
will have a significant impact on the revenues and profitability of
APC for the foreseeable future until, at a minimum, the COVID-19
outbreak reduces materially.
GPS continues to progress the works on the Guernsey Power
Station in the state of Ohio. GPS has implemented measures to help
keep workers safe as required under the state order. To the extent
possible under the circumstances, current work on the project,
which includes primarily site preparation efforts, design
engineering and early phases of construction has continued.
However, as the project ramps-up into heavier construction phases
later this year, COVID-19 impacts could become more meaningful. GPS
is monitoring supply-chain issues for impacts on equipment delivery
delays related to the COVID-19 health crisis. The ultimate impacts
of the health crisis on this major GPS project and the related
future revenues and financial performance are not known. The force
majeure clauses of the Company’s fixed-price construction contracts
provide certain relief that helps to mitigate these adverse
effects.
The operational activities of our other subsidiaries have not
been meaningfully affected by the COVID-19 outbreak yet.
Nonetheless, revenues of these other businesses for the first few
quarters of the fiscal year ending January 31, 2021 are expected to
be less than revenues of the comparable periods of Fiscal 2020.
We intend to pursue, where possible, government assistance to
help offset the negative impacts of COVID-19 on our employees
primarily. Please understand that the Company is monitoring the
COVID-19 situation closely as it continues to evolve on a daily
basis. We expect that the Company’s future actions and decisions
will be responsive to the changing environment and are hopeful that
we will minimize the adverse effects of this crisis, to the extent
possible, on our employees, our customers, our operations and the
overall performance of the Company.
Management Comment:
Commenting on Argan’s results, Rainer Bosselmann, Chairman and
Chief Executive Officer, stated, “It has been a trying year for us
as we struggle to finish the TeesREP project, see a number of our
power plant project start dates push out to the right and manage
through this COVID-19 pandemic. However, there are a number of
reasons to be optimistic for Argan. We have great employees who are
very adaptable to the changing circumstances. We have over $325
million in cash and no debt which should enable us to withstand any
potential prolonged pandemic. We have over $3.0 billion in signed
EPC contracts for power plant projects, and have begun construction
on the Guernsey Power Station which is our largest project in
Company history. While many factors are out of our control, we are
optimistic that we will receive the go ahead to start construction
on several of these new projects over the next year and look
forward to a rebound in our revenues later in the year and into the
next. We appreciate our loyal shareholders and extend our best
wishes for safety during these challenging times.”
About Argan, Inc.
Argan’s primary business is providing a full range of services
to the power industry, including the engineering, procurement and
construction of natural gas-fired power plants, 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
SMC Infrastructure Solutions, which provides telecommunications
infrastructure services, and The Roberts Company, which is a fully
integrated fabrication, construction and industrial plant services
company.
Certain matters discussed in this press release may constitute
forward-looking statements within the meaning of the federal
securities laws and our future financial performance is subject to
risks and uncertainties including but not limited to the Company’s
ability to mitigate losses related to APC’s loss contract, the
Company’s successful addition of new contracts to project backlog,
the Company’s receipt of corresponding notices to proceed with
contract activities, the Company’s ability to successfully complete
the projects that it obtains, and the Company’s success in
minimizing the adverse impacts of the COVID-19 pandemic on our
businesses and asset valuations. The Company has entered into
several EPC contracts that have not started and may not start as
planned due to market and other circumstances out of the Company’s
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 number of factors described
from time to time in Argan’s filings with the SEC. In addition,
reference is hereby made to the cautionary statements made by us
with respect to risk factors set forth in the Company’s most recent
reports on Form 10-K, Forms 10-Q and other SEC filings.
ARGAN, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF EARNINGS
(In thousands, except per
share data)
Three Months Ended January
31,
Fiscal Years Ended January
31,
2020
2019
2020
2019
REVENUES
$
67,988
$
87,658
$
238,997
$
482,153
Cost of revenues
62,739
80,912
245,817
399,715
GROSS PROFIT (LOSS)
5,249
6,746
(6,820
)
82,438
Selling, general and administrative
expenses
12,364
9,548
44,125
40,710
Impairment losses
2,823
1,491
4,895
1,491
(LOSS) INCOME FROM OPERATIONS
(9,938
)
(4,293
)
(55,840
)
40,237
Other income, net
603
1,860
8,075
6,981
(LOSS) INCOME BEFORE INCOME
TAXES
(9,335
)
(2,433
)
(47,765
)
47,218
Income tax benefit
2,117
142
7,053
4,651
NET (LOSS) INCOME
(7,218
)
(2,291
)
(40,712
)
51,869
Net (loss) income attributable to
non-controlling interests
(30
)
(84
)
1,977
(167
)
NET (LOSS) INCOME ATTRIBUTABLE TO THE
STOCKHOLDERS OF ARGAN, INC.
(7,188
)
(2,207
)
(42,689
)
52,036
Foreign currency translation
adjustments
55
596
(770
)
(1,768
)
COMPREHENSIVE (LOSS) INCOME
ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.
$
(7,133
)
$
(1,611
)
$
(43,459
)
$
50,268
(LOSS) EARNINGS PER SHARE ATTRIBUTABLE
TO THE STOCKHOLDERS OF ARGAN, INC.
Basic
$
(0.46
)
$
(0.14
)
$
(2.73
)
$
3.34
Diluted
$
(0.46
)
$
(0.14
)
$
(2.73
)
$
3.32
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic
15,634
15,573
15,621
15,569
Diluted
15,634
15,573
15,621
15,693
CASH DIVIDENDS PER SHARE
$
0.25
$
0.25
$
1.00
$
1.00
ARGAN, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except share
and per share data)
As of January 31,
2020
2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
167,363
$
164,318
Short-term investments
160,499
132,213
Accounts receivable, net
37,192
36,174
Contract assets
33,379
58,357
Other current assets
23,322
25,286
TOTAL CURRENT ASSETS
421,755
416,348
Property, plant and equipment, net
22,539
19,778
Goodwill
27,943
32,838
Other purchased intangible assets, net
5,001
6,137
Deferred taxes
7,894
1,257
Right-of-use and other assets
2,408
290
TOTAL ASSETS
$
487,540
$
476,648
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable
$
35,442
$
39,870
Accrued expenses
35,907
33,097
Contract liabilities
72,685
8,349
TOTAL CURRENT LIABILITIES
144,034
81,316
Other noncurrent liabilities
2,476
960
TOTAL LIABILITIES
146,510
82,276
COMMITMENTS AND CONTINGENCIES
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; 15,638,202 and 15,577,102 shares
issued at January 31, 2020 and 2019, respectively; 15,634,969 and
15,573,869 shares outstanding at January 31, 2020 and 2019,
respectively
2,346
2,337
Additional paid-in capital
148,713
144,961
Retained earnings
189,306
247,616
Accumulated other comprehensive loss
(1,116
)
(346
)
TOTAL STOCKHOLDERS’ EQUITY
339,249
394,568
Non-controlling interests
1,781
(196
)
TOTAL EQUITY
341,030
394,372
TOTAL LIABILITIES AND EQUITY
$
487,540
$
476,648
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200414005964/en/
Company Contact: Rainer Bosselmann 301.315.0027
Investor Relations Contact: David Watson 301.315.0027
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