Argan Inc 10-Q for FY2023 Q3

Argan Inc (AGX)

10-Q 2022-12-07 For: 2022-10-31

Added on April 04, 2026

About this 10-Q

Argan Inc filed this 10-Q on December 7, 2022, covering the quarter ended October 31, 2022 (FY2023 Q3).

Headline figures

Quarter ended October 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $117.88M; down 5.3% from $124.45M a year earlier
Net income: $7.76M; down 37.4% from net income of $12.39M a year earlier
Diluted EPS: $0.56; down 28.2% from $0.78 a year earlier

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Delaware		13-1947195
(State or Other Jurisdiction of Incorporation)		(I.R.S. Employer Identification No.)


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.15 par value	AGX	New York Stock Exchange


	Three Months Ended				Nine Months Ended
	October 31,				October 31,
	2022		2021		2022		2021
REVENUES	$	117,875	$	124,451	$	336,262	$	383,800
Cost of revenues		95,667		98,316		269,929		306,299
GROSS PROFIT		22,208		26,135		66,333		77,501
Selling, general and administrative expenses		12,667		11,590		34,226		31,813
INCOME FROM OPERATIONS		9,541		14,545		32,107		45,688
Other income, net		768		1,117		1,868		1,569
INCOME BEFORE INCOME TAXES		10,309		15,662		33,975		47,257
Income tax expense		(2,551)		(3,269)		(14,510)		(11,228)
NET INCOME		7,758		12,393		19,465		36,029
Foreign currency translation adjustments		(650)		(471)		(2,601)		(728)
COMPREHENSIVE INCOME	$	7,108	$	11,922	$	16,864	$	35,301

NET INCOME PER SHARE
Basic	$	0.56	$	0.79	$	1.36	$	2.29
Diluted	$	0.56	$	0.78	$	1.36	$	2.25

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic		13,781		15,774		14,268		15,757
Diluted		13,812		15,963		14,350		15,980

CASH DIVIDENDS PER SHARE	$	0.25	$	0.25	$	0.75	$	0.75


	October 31,		January 31,
	2022		2022
	(Unaudited)		(Note 1)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	136,065	$	350,472
Short-term investments		150,566		90,026
Accounts receivable, net		37,899		26,978
Contract assets		11,551		4,904
Other current assets		28,884		34,904
TOTAL CURRENT ASSETS		364,965		507,284
Property, plant and equipment, net		10,504		10,460
Goodwill		28,033		28,033
Other purchased intangible assets, net		2,730		3,322
Right-of-use, deferred tax and other assets		4,671		4,486
TOTAL ASSETS	$	410,903	$	553,585

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$	45,268	$	41,822
Accrued expenses		40,243		53,315
Contract liabilities		49,031		127,890
TOTAL CURRENT LIABILITIES		134,542		223,027
Noncurrent liabilities		4,621		4,963
TOTAL LIABILITIES		139,163		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 October 31, 2022 and January 31, 2022, respectively; 13,575,772 and 15,257,688 shares outstanding at October 31, 2022 and January 31, 2022, respectively		2,374		2,368
Additional paid-in capital		161,305		158,190
Retained earnings		197,567		188,690
Less treasury stock, at cost – 2,252,000 and 530,985 shares at October 31, 2022 and January 31, 2022, respectively		(83,657)		(20,405)
Accumulated other comprehensive loss		(5,052)		(2,451)
TOTAL STOCKHOLDERS’ EQUITY		272,537		326,392
Non-controlling interest		(797)		(797)
TOTAL EQUITY		271,740		325,595
TOTAL LIABILITIES AND EQUITY	$	410,903	$	553,585


	Common Stock			Additional						Accumulated
	Outstanding	Par		Paid-in		Retained		Treasury		Other Comprehensive		Non-controlling		Total
	Shares	Value		Capital		Earnings		Stock		Loss		Interest		Equity
Balances, August 1, 2022	13,884,195	$	2,374	$	160,229	$	193,205	$	(73,573)	$	(4,402)	$	(797)	$	277,036
Net income	—		—		—		7,758		—		—		—		7,758
Foreign currency translation loss	—		—		—		—		—		(650)		—		(650)
Stock compensation expense	—		—		1,076		—		—		—		—		1,076
Common stock repurchases	(308,423)		—		—		—		(10,084)		—		—		(10,084)
Cash dividends	—		—		—		(3,396)		—		—		—		(3,396)
Balances, October 31, 2022	13,575,772	$	2,374	$	161,305	$	197,567	$	(83,657)	$	(5,052)	$	(797)	$	271,740

Balances, August 1, 2021	15,769,440	$	2,366	$	155,937	$	181,862	$	(33)	$	(1,338)	$	1,741	$	340,535
Net income	—		—		—		12,393		—		—		—		12,393
Foreign currency translation loss	—		—		—		—		—		(471)		—		(471)
Stock compensation expense	—		—		913		—		—		—		—		913
Stock option exercises	15,000		2		370		—		—		—		—		372
Cash dividends	—		—		—		(3,947)		—		—		—		(3,947)
Balances, October 31, 2021	15,784,440	$	2,368	$	157,220	$	190,308	$	(33)	$	(1,809)	$	1,741	$	349,795

Balances, February 1, 2022	15,257,688	$	2,368	$	158,190	$	188,690	$	(20,405)	$	(2,451)	$	(797)	$	325,595
Net income	—		—		—		19,465				—		—		19,465
Foreign currency translation loss	—		—		—		—		—		(2,601)		—		(2,601)
Stock compensation expense	—		—		3,055		—		—		—		—		3,055
Stock option exercises and other share-based award settlements	39,099		6		60		—		—		—		—		66
Common stock repurchases	(1,721,015)		—		—		—		(63,252)		—		—		(63,252)
Cash dividends	—		—		—		(10,588)		—		—		—		(10,588)
Balances, October 31, 2022	13,575,772	$	2,374	$	161,305	$	197,567	$	(83,657)	$	(5,052)	$	(797)	$	271,740

Balances, February 1, 2021	15,702,969	$	2,356	$	153,315	$	166,110	$	(33)	$	(1,081)	$	1,741	$	322,408
Net income	—		—		—		36,029		—		—		—		36,029
Foreign currency translation loss	—		—		—		—		—		(728)		—		(728)
Stock compensation expense	—		—		2,521		—		—		—		—		2,521
Stock option exercises and other share-based award settlements	81,471		12		1,384		—		—		—		—		1,396
Cash dividends	—		—		—		(11,831)		—		—		—		(11,831)
Balances, October 31, 2021	15,784,440	$	2,368	$	157,220	$	190,308	$	(33)	$	(1,809)	$	1,741	$	349,795


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT


	Nine Months Ended October 31,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	19,465	$	36,029
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Stock compensation expense		3,055		2,521
Depreciation		2,296		2,560
Lease expense		1,871		3,017
Equity in (income) loss of solar energy investments		(1,112)		404
Amortization of purchased intangible assets		611		680
Deferred income tax (benefit) expense		(209)		383
Other		(770)		(14)
Changes in operating assets and liabilities
Accounts receivable		(10,921)		(7,084)
Contract assets		(6,647)		16,727
Other assets		6,184		2,070
Accounts payable and accrued expenses		(7,952)		(19,966)
Contract liabilities		(78,859)		4,372
Net cash (used in) provided by operating activities		(72,988)		41,699

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments		(249,750)		(90,000)
Maturities of short-term investments		190,000		90,000
Purchases of property, plant and equipment		(2,582)		(1,123)
Investments in solar energy projects		—		(4,085)
Net cash used in investing activities		(62,332)		(5,208)

CASH FLOWS FROM FINANCING ACTIVITIES
Common stock repurchases		(63,252)		—
Payments of cash dividends		(10,588)		(11,831)
Proceeds from the exercise of stock options		66		1,396
Net cash used in financing activities		(73,774)		(10,435)

EFFECTS OF EXCHANGE RATE CHANGES ON CASH		(5,313)		(1,164)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(214,407)		24,892
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		350,472		366,671
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	136,065	$	391,563

SUPPLEMENTAL CASH FLOW INFORMATION (see Notes 7 and 10)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2022		2021		2022		2021
United States	$	81,810	$	110,196	$	256,031	$	349,066
Republic of Ireland		21,833		9,698		47,019		21,947
United Kingdom		14,232		4,496		33,212		12,283
Other		—		61		—		504
Consolidated Revenues	$	117,875	$	124,451	$	336,262	$	383,800


		October 31, 2022						January 31,
	Estimated	Gross		Accumulated		Net		2022, (net
	Useful Life	Amounts		Amortization		Amounts		amounts)

Trade name	15 years	$	4,499	$	2,075	$	2,424	$	2,650
Process certifications	7 years		1,897		1,874		23		226
Customer relationships	10 years		916		633		283		351
Customer contracts	< 1 year		114		114		—		95
Totals		$	7,426	$	4,696	$	2,730	$	3,322


Years Ending January 31,
2023 (remainder)	$	396
2024		600
2025		395
2026		249
2027		231
Thereafter		1,028
Total lease payments		2,899
Less interest portion		177
Present value of lease payments		2,722
Less current portion (included in accrued expenses)		796
Non-current portion (included in noncurrent liabilities)	$	1,926


		Exercise		Remaining
	Shares	Price		Term (years)	Fair Value
Outstanding, February 1, 2022	1,405	$	44.35	6.17	$	10.31
Granted	38	$	36.78
Exercised	(2)	$	32.68
Forfeited	(36)	$	48.98
Outstanding, October 31, 2022	1,405	$	44.04	5.61	$	10.17
Exercisable, October 31, 2022	1,188	$	44.76	5.11	$	10.69

Outstanding, October 31, 2021	1,381	$	44.64	6.32	$	10.46
Exercisable, October 31, 2021	1,053	$	45.51	5.66	$	11.18


	Shares	Fair Value
Non-vested, February 1, 2022	295	$	7.80
Granted	38	$	6.68
Vested	(116)	$	8.32
Non-vested, October 31, 2022	217	$	7.33

Non-vested, October 31, 2021	328	$	8.13


Three Months Ended	Power		Industrial		Telecom
October 31, 2022	Services		Services		Services		Other		Totals
Revenues	$	90,682	$	22,137	$	5,056	$	—	$	117,875
Cost of revenues		72,725		18,737		4,205		—		95,667
Gross profit		17,957		3,400		851		—		22,208
Selling, general and administrative expenses		6,745		1,823		796		3,303		12,667
Income (loss) from operations		11,212		1,577		55		(3,303)		9,541
Other income, net		592		—		—		176		768
Income (loss) before income taxes	$	11,804	$	1,577	$	55	$	(3,127)		10,309
Income tax expense										(2,551)
Net income									$	7,758

Amortization of intangibles	$	—	$	166	$	46	$	—	$	212
Depreciation		142		501		96		1		740
Property, plant and equipment additions		774		928		238		4		1,944

Current assets	$	237,575	$	31,355	$	4,076	$	91,959	$	364,965
Current liabilities		110,383		21,560		1,420		1,179		134,542
Goodwill		18,476		9,467		90		—		28,033
Total assets		261,994		48,766		7,434		92,709		410,903


	Increase (Decrease) in		Increase (Decrease) in		Net Increase (Decrease) in
Basis Point Change	Interest Income		Interest Expense		Income (Pre-Tax)
Up 300 basis points	$	3,177	$	—	$	3,177
Up 200 basis points		2,118		—		2,118
Up 100 basis points		1,059		—		1,059
Down 100 basis points		(1,059)		—		(1,059)
Down 200 basis points		(1,880)		—		(1,880)
Down 257 basis points		(2,324)		—		(2,324)


	Nine Months Ended October 31,
	2022		2021		$ Change		% Change
REVENUES
Power industry services	$	255,958	$	295,736	$	(39,778)	(13.5)	%
Industrial fabrication and field services		67,660		78,213		(10,553)	(13.5)
Telecommunications infrastructure services		12,644		9,851		2,793	28.4
Revenues		336,262		383,800		(47,538)	(12.4)
COST OF REVENUES
Power industry services		202,985		233,682		(30,697)	(13.1)
Industrial fabrication and field services		56,968		64,519		(7,551)	(11.7)
Telecommunications infrastructure services		9,976		8,098		1,878	23.2
Cost of revenues		269,929		306,299		(36,370)	(11.9)
GROSS PROFIT		66,333		77,501		(11,168)	(14.4)
Selling, general and administrative expenses		34,226		31,813		2,413	7.6
INCOME FROM OPERATIONS		32,107		45,688		(13,581)	(29.7)
Other income, net		1,868		1,569		299	19.1
INCOME BEFORE INCOME TAXES		33,975		47,257		(13,282)	(28.1)
Income tax expense		(14,510)		(11,228)		(3,282)	(29.2)
NET INCOME	$	19,465	$	36,029	$	(16,564)	(46.0)	%


				Total Number of	Value of Shares That May Yet
				Shares Purchased as Part of	Be Purchased under the
	Total Number of	Average Price per		Publicly Announced	Plans or Programs
Period	Shares Repurchased	Share Paid		Plans or Programs	(Dollars in Thousands)
August 1 - 31, 2022	—	$	—	—	$	1,460
September 1 - 30, 2022	164,200	$	32.70	164,200	$	21,090
October 1 - 31, 2022	144,223	$	32.68	144,223	$	16,376
Total	308,423	$	32.69	308,423


Exhibit No.		Title
Exhibit 10.1		Retirement Agreement, dated as of August 16, 2022, by and between Argan, Inc. and Rainer H. Bosselmann. Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 18, 2022.
Exhibit 10.2		Employment Agreement, dated September 8, 2022, by and between Argan, Inc. and David H. Watson. Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on September 8, 2022.
Exhibit 10.3		Employment Agreement, dated September 8, 2022, by and between Argan, Inc. and Richard H. Deily. Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on September 8, 2022.
Exhibit 31.1		Certification of Chief Executive Officer, pursuant to Rule 13a-14(c) under the Securities Exchange Act of 1934.
Exhibit 31.2		Certification of Chief Financial Officer, pursuant to Rule 13a-14(c) under the Securities Exchange Act of 1934.
Exhibit 32.1		Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350. *
Exhibit 32.2		Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350. *

Exhibit 101: Exhibit 101.INS		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Exhibit 101.SCH		Inline XBRL Taxonomy Extension Schema.
Exhibit 101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase.
Exhibit 101.LAB		Inline XBRL Taxonomy Label Linkbase.
Exhibit 101.PRE		Inline XBRL Taxonomy Presentation Linkbase.
Exhibit 101.DEF		Inline XBRLTaxonomy Extension Definition Document.
Exhibit 104		Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.


	ARGAN, INC.

December 7, 2022	By:	/s/ David H. Watson
		David H. Watson
		President and Chief Executive Officer

December 7, 2022	By:	/s/ Richard H. Deily
		Richard H. Deily
		Senior Vice President, Chief Financial Officer,
		Treasurer and Corporate Secretary


Date: December 7, 2022	By:	/s/ David H. Watson
		David H. Watson
		President and Chief Executive Officer
		(Principal Executive Officer)