Argan Inc 10-Q for FY2023 Q2

Argan Inc (AGX)

10-Q 2022-09-08 For: 2022-07-31

Added on April 04, 2026

About this 10-Q

Argan Inc filed this 10-Q on September 8, 2022, covering the quarter ended July 31, 2022 (FY2023 Q2).

Headline figures

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

Revenue: $118.11M; down 11.2% from $133.01M a year earlier
Net income: $4.22M; down 67.2% from net income of $12.87M a year earlier
Diluted EPS: $0.30; down 63.0% from $0.81 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, $.15 par value	AGX	New York Stock Exchange


	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


	July 31,		January 31,
	2022		2022
	(Unaudited)		(Note 1)
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


	Common Stock			Additional						Accumulated
	Outstanding	Par		Paid-in		Retained		Treasury		Other Comprehensive		Non-controlling		Total
	Shares	Value		Capital		Earnings		Stock		Loss		Interest		Equity
Balances, May 1, 2022	14,585,908	$	2,374	$	159,170	$	192,463	$	(47,482)	$	(3,715)	$	(797)	$	302,013
Net income	—		—		—		4,222		—		—		—		4,222
Foreign currency translation loss	—		—		—		—		—		(687)		—		(687)
Stock compensation expense	—		—		1,059		—		—		—		—		1,059
Common stock repurchases	(701,713)		—		—		—		(26,091)		—		—		(26,091)
Cash dividends	—		—		—		(3,480)		—		—		—		(3,480)
Balances, July 31, 2022	13,884,195	$	2,374	$	160,229	$	193,205	$	(73,573)	$	(4,402)	$	(797)	$	277,036

Balances, May 1, 2021	15,769,440	$	2,366	$	155,007	$	172,934	$	(33)	$	(1,199)	$	1,741	$	330,816
Net income	—		—		—		12,870		—		—		—		12,870
Foreign currency translation loss	—		—		—		—		—		(139)		—		(139)
Stock compensation expense	—		—		930		—		—		—		—		930
Cash dividends	—		—		—		(3,942)		—		—		—		(3,942)
Balances, July 31, 2021	15,769,440	$	2,366	$	155,937	$	181,862	$	(33)	$	(1,338)	$	1,741	$	340,535

Balances, February 1, 2022	15,257,688	$	2,368	$	158,190	$	188,690	$	(20,405)	$	(2,451)	$	(797)	$	325,595
Net income	—		—		—		11,707				—		—		11,707
Foreign currency translation loss	—		—		—		—		—		(1,951)		—		(1,951)
Stock compensation expense	—		—		1,979		—		—		—		—		1,979
Stock option exercises and other share-based award settlements	39,099		6		60		—		—		—		—		66
Common stock repurchases	(1,412,592)		—		—		—		(53,168)		—		—		(53,168)
Cash dividends	—		—		—		(7,192)		—		—		—		(7,192)
Balances, July 31, 2022	13,884,195	$	2,374	$	160,229	$	193,205	$	(73,573)	$	(4,402)	$	(797)	$	277,036

Balances, February 1, 2021	15,702,969	$	2,356	$	153,315	$	166,110	$	(33)	$	(1,081)	$	1,741	$	322,408
Net income	—		—		—		23,636		—		—		—		23,636
Foreign currency translation loss	—		—		—		—		—		(257)		—		(257)
Stock compensation expense	—		—		1,609		—		—		—		—		1,609
Stock option exercises and other share-based award settlements	66,471		10		1,013		—		—		—		—		1,023
Cash dividends	—		—		—		(7,884)		—		—		—		(7,884)
Balances, July 31, 2021	15,769,440	$	2,366	$	155,937	$	181,862	$	(33)	$	(1,338)	$	1,741	$	340,535


☑	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


	Six Months Ended July 31,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	11,707	$	23,636
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Stock compensation expense		1,979		1,609
Depreciation		1,556		1,741
Lease expense		1,319		1,938
Equity in (income) loss of solar energy investments		(1,070)		325
Deferred income tax expense		373		1,001
Amortization of purchased intangible assets		399		453
Other		(609)		(96)
Changes in operating assets and liabilities
Accounts receivable		2,090		(14,407)
Contract assets		(3,774)		1,258
Other assets		9,252		(3,161)
Accounts payable and accrued expenses		(16,124)		(8,793)
Contract liabilities		(63,874)		41,680
Net cash (used in) provided by operating activities		(56,776)		47,184

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments		(175,000)		—
Maturities of short-term investments		90,000		50,000
Purchases of property, plant and equipment		(638)		(1,011)
Investments in solar energy projects		—		(4,085)
Net cash (used in) provided by investing activities		(85,638)		44,904

CASH FLOWS FROM FINANCING ACTIVITIES
Common stock repurchases		(53,168)		—
Payments of cash dividends		(7,192)		(7,884)
Proceeds from the exercise of stock options		66		1,023
Net cash used in financing activities		(60,294)		(6,861)

EFFECTS OF EXCHANGE RATE CHANGES ON CASH		(4,420)		(483)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(207,128)		84,744
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		350,472		366,671
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	143,344	$	451,415

SUPPLEMENTAL CASH FLOW INFORMATION (see Notes 7 and 10)


	Three Months Ended July 31,				Six Months Ended July 31,
	2022		2021		2022		2021
United States	$	93,949	$	123,380	$	174,221	$	238,871
Republic of Ireland		15,532		7,556		25,186		12,249
United Kingdom		8,629		1,630		18,980		7,787
Other		—		442		—		442
Consolidated Revenues	$	118,110	$	133,008	$	218,387	$	259,349


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

Trade name	15 years	$	4,499	$	2,000	$	2,499	$	2,650
Process certifications	7 years		1,897		1,807		90		226
Customer relationships	10 years		916		610		306		351
Customer contracts	< 1 year		114		68		46		95
Totals		$	7,426	$	4,485	$	2,941	$	3,322


Years Ending January 31,
2023 (remainder)	$	640
2024		540
2025		380
2026		250
2027		231
Thereafter		1,025
Total lease payments		3,066
Less interest portion		182
Present value of lease payments		2,884
Less current portion (included in accrued expenses)		894
Non-current portion (included in noncurrent liabilities)	$	1,990


		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	(10)	$	56.27
Outstanding, July 31, 2022	1,431	$	44.08	5.79	$	10.19
Exercisable, July 31, 2022	1,192	$	44.83	5.27	$	10.74

Outstanding, July 31, 2021	1,398	$	44.42	6.51	$	10.41
Exercisable, July 31, 2021	1,022	$	45.34	5.76	$	11.20


	Shares	Fair Value
Non-vested, February 1, 2022	295	$	7.80
Granted	38	$	6.68
Vested	(94)	$	8.24
Non-vested, July 31, 2022	239	$	7.45

Non-vested, July 31, 2021	376	$	8.27


Three Months Ended	Power		Industrial		Telecom
July 31, 2022	Services		Services		Services		Other		Totals
Revenues	$	91,327	$	23,022	$	3,761	$	—	$	118,110
Cost of revenues		71,225		19,551		2,947		—		93,723
Gross profit		20,102		3,471		814		—		24,387
Selling, general and administrative expenses		6,058		1,685		808		2,433		10,984
Income (loss) from operations		14,044		1,786		6		(2,433)		13,403
Other income (expense), net		437		—		(1)		69		505
Income (loss) before income taxes	$	14,481	$	1,786	$	5	$	(2,364)		13,908
Income tax expense										(9,686)
Net income									$	4,222

Amortization of intangibles	$	—	$	165	$	68	$	—	$	233
Depreciation		138		508		100		1		747
Property, plant and equipment additions		42		336		22		—		400

Current assets	$	258,771	$	31,960	$	4,745	$	82,717	$	378,193
Current liabilities		124,320		15,055		1,991		646		142,012
Goodwill		18,476		9,467		90		—		28,033
Total assets		282,783		49,097		8,198		82,992		423,070


Current assets	$	389,998	$	29,084	$	3,751	$	174,823	$	597,656
Current liabilities		293,002		12,099		1,563		683		307,347
Goodwill		18,476		9,467		—		—		27,943
Total assets		422,902		48,655		5,274		175,158		651,989


	Three Months Ended July 31,
	2022		2021		$ Change		% Change
REVENUES
Power industry services	$	91,327	$	99,004	$	(7,677)	(7.8)	%
Industrial fabrication and field services		23,022		30,153		(7,131)	(23.6)
Telecommunications infrastructure services		3,761		3,851		(90)	(2.3)
Revenues		118,110		133,008		(14,898)	(11.2)
COST OF REVENUES
Power industry services		71,225		78,496		(7,271)	(9.3)
Industrial fabrication and field services		19,551		23,847		(4,296)	(18.0)
Telecommunications infrastructure services		2,947		3,013		(66)	(2.2)
Cost of revenues		93,723		105,356		(11,633)	(11.0)
GROSS PROFIT		24,387		27,652		(3,265)	(11.8)
Selling, general and administrative expenses		10,984		10,331		653	6.3
INCOME FROM OPERATIONS		13,403		17,321		(3,918)	(22.6)
Other income (expense), net		505		(260)		765	NM
INCOME BEFORE INCOME TAXES		13,908		17,061		(3,153)	(18.5)
Income tax expense		(9,686)		(4,191)		(5,495)	(131.1)
NET INCOME	$	4,222	$	12,870	$	(8,648)	(67.2)	%


	Six Months Ended July 31,
	2022		2021		$ Change		% Change
REVENUES
Power industry services	$	165,276	$	196,176	$	(30,900)	(15.8)	%
Industrial fabrication and field services		45,523		56,811		(11,288)	(19.9)
Telecommunications infrastructure services		7,588		6,362		1,226	19.3
Revenues		218,387		259,349		(40,962)	(15.8)
COST OF REVENUES
Power industry services		130,260		157,165		(26,905)	(17.1)
Industrial fabrication and field services		38,231		45,816		(7,585)	(16.6)
Telecommunications infrastructure services		5,771		5,002		769	15.4
Cost of revenues		174,262		207,983		(33,721)	(16.2)
GROSS PROFIT		44,125		51,366		(7,241)	(14.1)
Selling, general and administrative expenses		21,559		20,223		1,336	6.6
INCOME FROM OPERATIONS		22,566		31,143		(8,577)	(27.5)
Other income (expense), net		1,100		452		648	143.4
INCOME BEFORE INCOME TAXES		23,666		31,595		(7,929)	(25.1)
Income tax expense		(11,959)		(7,959)		(4,000)	(50.3)
NET INCOME	$	11,707	$	23,636	$	(11,929)	(50.5)	%


	Increase (Decrease) in		Increase (Decrease) in		Net Increase (Decrease) in
Basis Point Change	Interest Income		Interest Expense		Income (Pre-Tax)
Up 300 basis points	$	3,681	$	—	$	3,681
Up 200 basis points		2,454		—		2,454
Up 100 basis points		1,227		—		1,227
Down 100 basis points		(1,227)		—		(1,227)
Down 117 basis points		(1,337)		—		(1,337)


				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)
May 1 - 31, 2022	377,482	$	37.09	377,482	$	13,550
June 1 - 30, 2022	197,622	$	37.85	197,622	$	6,069
July 1 - 31, 2022	126,609	$	36.40	126,609	$	1,460
Total	701,713	$	37.18	701,713


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.
Exhibit 10.3		Employment Agreement, dated September 8, 2022, by and between Argan, Inc. and Richard H. Deily.
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.

September 8, 2022	By:	/s/ David H. Watson
		David H. Watson
		President and Chief Executive Officer

September 8, 2022	By:	/s/ Richard H. Deily
		Richard H. Deily
		Senior Vice President, Chief Financial Officer,
		Treasurer and Corporate Secretary


Date: September 8, 2022	By:	/s/ David H. Watson
		David H. Watson
		President and Chief Executive Officer
		(Principal Executive Officer)