- Increases Share Repurchase Program to $100
Million
- Declares Regular Quarterly Dividend of
$0.25 Per Share
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,
2022
2021
Change
For the Quarter Ended:
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
—
July 31,
January 31,
As of:
2022
2022
Change
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.
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,
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
NET INCOME PER SHARE
Basic
$
0.30
$
0.82
$
0.81
$
1.50
Diluted
$
0.30
$
0.81
$
0.80
$
1.48
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
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,
2022
2022
(Unaudited)
ASSETS
CURRENT ASSETS
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
LIABILITIES AND EQUITY
CURRENT LIABILITIES
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
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; 15,827,772 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
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version on businesswire.com: https://www.businesswire.com/news/home/20220908005893/en/
Company Contact: David Watson 301.315.0027
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