Business Wire | Apr 14, 2021 04:15PM EDT

Argan, Inc. Reports Year-End and Fourth Quarter Results

Apr. 14, 2021

ROCKVILLE, Md.--(BUSINESS WIRE)--Apr. 14, 2021--Argan, Inc. (NYSE:AGX) ("Argan" or the "Company") today announced financial results for its fiscal year and fourth quarter ended January 31, 2021. 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,

2021 2020 Change

For the Fiscal Years Ended:

Revenues $ 392,206 $ 238,997 $ 153,209

Gross profit (loss) 62,067 (6,820 ) 68,887

Gross margin % 15.8 % (2.9 ) 18.7 % %

Net income (loss) attributable to $ 23,851 $ (42,689 ) $ 66,540 the stockholders of the Company

Diluted per share 1.51 (2.73 ) 4.24

EBITDA attributable to the 29,544 (45,093 ) 74,637 stockholders of the Company

Diluted per share 1.87 (2.89 ) 4.76

Cash dividends per share 3.00 1.00 2.00



January 31,

As of: 2021 2020 Change

Cash, cash equivalents and $ 456,726 $ 327,862 $ 128,864 short-term investments

Net liquidity ^(1) 270,133 277,721 (7,588 )

RUPO ^(2) 552,531 781,400 (228,869 )

(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.

"It was a tremendous Fiscal 2021 for Argan operationally and financially compared to last year," Rainer Bosselmann, Chairman and Chief Executive Officer of Argan, said. "The $75 million EBITDA turnaround during the COVID-19 pandemic is a testament to our conservative approach and dedicated employees. While promoting safety, all of our business segments improved profitability as a percent of revenues and decreased their operating costs, translating to an improved bottom line. With the successes of the just concluded fiscal year and other prior years as well, we were pleased to return almost $50 million in value back to our shareholders by paying $3.00 per share in dividends during the course of the year."

Summarizing the results for the year, he continued, "Gemma Power Systems continues to drive our business with increased execution on the Guernsey Power Station project which is the largest in our history. APC reduced its loss on a major project in the UK and is working hard to help its customer successfully complete the project. Additionally, all of our subsidiaries have generally increased the number of revenue opportunities.

"As I have noted before, while certain EPC project development timelines have proven to be longer than originally anticipated and it is possible that some of these projects ultimately will not be built, we have multiple signed EPC contracts for power plant projects totaling several billion dollars in work for us. Even though many factors are out of our control, we are optimistic that we will receive the construction go ahead on several of these projects and others in this new year. We are negotiating exclusively with the owners of several significant renewable power projects for which we expect to begin EPC services contract activities during the year. These additions should grow our renewable power sector business as complementary to our core gas-fired power plant business," he concluded.

Fiscal Year 2021 Results:

Consolidated revenues for the year ended January 31, 2021 ("Fiscal 2021") were $392.2 million, which represented an increase of $153.2 million, or 64.1%, from consolidated revenues of $239.0 million reported for the year ended January 31, 2020 ("Fiscal 2020"). The increase was primarily due to increasing revenues at Gemma Power Systems ("GPS") associated with the construction of the Guernsey Power Station, which did not commence until the third quarter of Fiscal 2020. While we were able to increase profitability as a percent of revenues at all of our non-GPS subsidiaries, we did experience an overall decrease in revenues for the year at each of them compared to the prior year. We believe that all of our businesses were adversely impacted, to some degree, by continuing difficulties presented by the COVID-19 pandemic. These difficulties include, among others, delayed project awards and starts, restrictive and reduced work environments, additional health and safety costs, and compliance with various government lockdowns and other requirements.

Consolidated gross profit for Fiscal 2021 was $62.1 million, or 15.8% of the corresponding consolidated revenues, which reflected the favorable impacts of the higher consolidated revenues. This contrasts significantly to the consolidated gross loss for Fiscal 2020 in the amount of $6.8 million, which was driven by the subcontract loss incurred by Atlantic Projects Company in the reported amount of $33.6 million, related to the TeesREP project.

Selling, general and administrative expenses decreased by 11.5%, to $39.0 million for Fiscal 2021 from an amount of $44.1 million for the prior year. In addition, during Fiscal 2020, we recorded an impairment loss related to the goodwill of two of our subsidiaries in the aggregate amount of $4.9 million. Offsetting some of these cost savings, due significantly to the extremely low rates of return on amounts invested in cash equivalents and short-term investments during Fiscal 2021, other income declined to $1.9 million from $8.1 million for Fiscal 2020 despite the increase in the amount of invested funds between years.

Due primarily to the consolidated pre-tax book income reported for Fiscal 2021 in the amount of $24.9 million, we reported income tax expense in the amount of $1.1 million for the year, which amount is net of a $4.4 million net operating loss carryback benefit, substantially all of which was recorded in the first quarter of Fiscal 2021. The consolidated income tax benefit of $7.1 million for Fiscal 2020 related substantially to the loss before income taxes incurred during the year.

For Fiscal 2021, our improved overall operating performance resulted in net income attributable to our stockholders in the amount of $23.9 million, or $1.51 per diluted share. Last year, we reported a net loss attributable to our stockholders in the amount of $42.7 million, or $2.73 per dilutive share. In December 2020, the Company paid its fourth regular quarterly cash dividend of $0.25 per share of common stock for Fiscal 2021, and a special cash dividend payment of $1.00 per share of common stock.

As of January 31, 2021, cash, cash equivalents and short-term investments totaled $457 million and net liquidity was $269 million; furthermore, the Company had no debt. The Company's consolidated amount of RUPO was approximately $0.6 billion as of January 31, 2021.

Fourth Quarter Results:

Revenues increased 72% to $117.2 million for the fourth quarter of Fiscal 2021, compared to $68.0 million for the fourth quarter last year, as we experienced increased business activity at all of our subsidiaries which reflected increased project work as the COVID-19 impacts begin to abate and the increasing activities on the Guernsey Power Station project. Gross profits increased 319% to $22.1 million for the fourth quarter of Fiscal 2021 from $5.2 million for last fourth quarter, generally reflecting the reasons discussed in the full year results above.

Selling, general and administrative expenses decreased by 17.4%, to $10.2 million for the current quarter from an amount of $12.4 million included in the results for the prior year quarter which also included a goodwill impairment loss of $2.8 million. Due to our profitable fourth quarter for Fiscal 2021, we recorded income tax expense in the amount of $2.5 million.

As a result, net income attributable to our stockholders for the three months ended January 31, 2021 increased to $9.6 million, or $0.60 per diluted share, compared to a loss of $7.2 million, or $0.46 per diluted share, for last year's fourth quarter.

Quarterly Dividend:

On Monday, April 12, 2021, our Board of Directors declared a regular quarterly cash dividend in the amount of $0.25 per share of common stock, payable April 30, 2021 to stockholders of record at the close of business on April 22, 2021.

About Argan, Inc.

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, 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 and 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, 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 the Company's businesses. 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 number of factors described from time to time in the Company's SEC filings. In addition, 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.

^ Net liquidity, or working capital, is defined as total current assets(1) less total current liabilities.

^ The amount of remaining unsatisfied performance obligations ("RUPO")(2) represents the project backlog related to active contracts with customers, as determined under revenue recognition rules.

"It was a tremendous Fiscal 2021 for Argan operationally and financially compared to last year," Rainer Bosselmann, Chairman and Chief Executive Officer of Argan, said. "The $75 million EBITDA turnaround during the COVID-19 pandemic is a testament to our conservative approach and dedicated employees. While promoting safety, all of our business segments improved profitability as a percent of revenues and decreased their operating costs, translating to an improved bottom line. With the successes of the just concluded fiscal year and other prior years as well, we were pleased to return almost $50 million in value back to our shareholders by paying $3.00 per share in dividends during the course of the year."

Summarizing the results for the year, he continued, "Gemma Power Systems continues to drive our business with increased execution on the Guernsey Power Station project which is the largest in our history. APC reduced its loss on a major project in the UK and is working hard to help its customer successfully complete the project. Additionally, all of our subsidiaries have generally increased the number of revenue opportunities.

"As I have noted before, while certain EPC project development timelines have proven to be longer than originally anticipated and it is possible that some of these projects ultimately will not be built, we have multiple signed EPC contracts for power plant projects totaling several billion dollars in work for us. Even though many factors are out of our control, we are optimistic that we will receive the construction go ahead on several of these projects and others in this new year. We are negotiating exclusively with the owners of several significant renewable power projects for which we expect to begin EPC services contract activities during the year. These additions should grow our renewable power sector business as complementary to our core gas-fired power plant business," he concluded.

Fiscal Year 2021 Results:

Consolidated revenues for the year ended January 31, 2021 ("Fiscal 2021") were $392.2 million, which represented an increase of $153.2 million, or 64.1%, from consolidated revenues of $239.0 million reported for the year ended January 31, 2020 ("Fiscal 2020"). The increase was primarily due to increasing revenues at Gemma Power Systems ("GPS") associated with the construction of the Guernsey Power Station, which did not commence until the third quarter of Fiscal 2020. While we were able to increase profitability as a percent of revenues at all of our non-GPS subsidiaries, we did experience an overall decrease in revenues for the year at each of them compared to the prior year. We believe that all of our businesses were adversely impacted, to some degree, by continuing difficulties presented by the COVID-19 pandemic. These difficulties include, among others, delayed project awards and starts, restrictive and reduced work environments, additional health and safety costs, and compliance with various government lockdowns and other requirements.

Consolidated gross profit for Fiscal 2021 was $62.1 million, or 15.8% of the corresponding consolidated revenues, which reflected the favorable impacts of the higher consolidated revenues. This contrasts significantly to the consolidated gross loss for Fiscal 2020 in the amount of $6.8 million, which was driven by the subcontract loss incurred by Atlantic Projects Company in the reported amount of $33.6 million, related to the TeesREP project.

Selling, general and administrative expenses decreased by 11.5%, to $39.0 million for Fiscal 2021 from an amount of $44.1 million for the prior year. In addition, during Fiscal 2020, we recorded an impairment loss related to the goodwill of two of our subsidiaries in the aggregate amount of $4.9 million. Offsetting some of these cost savings, due significantly to the extremely low rates of return on amounts invested in cash equivalents and short-term investments during Fiscal 2021, other income declined to $1.9 million from $8.1 million for Fiscal 2020 despite the increase in the amount of invested funds between years.

Due primarily to the consolidated pre-tax book income reported for Fiscal 2021 in the amount of $24.9 million, we reported income tax expense in the amount of $1.1 million for the year, which amount is net of a $4.4 million net operating loss carryback benefit, substantially all of which was recorded in the first quarter of Fiscal 2021. The consolidated income tax benefit of $7.1 million for Fiscal 2020 related substantially to the loss before income taxes incurred during the year.

For Fiscal 2021, our improved overall operating performance resulted in net income attributable to our stockholders in the amount of $23.9 million, or $1.51 per diluted share. Last year, we reported a net loss attributable to our stockholders in the amount of $42.7 million, or $2.73 per dilutive share. In December 2020, the Company paid its fourth regular quarterly cash dividend of $0.25 per share of common stock for Fiscal 2021, and a special cash dividend payment of $1.00 per share of common stock.

As of January 31, 2021, cash, cash equivalents and short-term investments totaled $457 million and net liquidity was $269 million; furthermore, the Company had no debt. The Company's consolidated amount of RUPO was approximately $0.6 billion as of January 31, 2021.

Fourth Quarter Results:

Revenues increased 72% to $117.2 million for the fourth quarter of Fiscal 2021, compared to $68.0 million for the fourth quarter last year, as we experienced increased business activity at all of our subsidiaries which reflected increased project work as the COVID-19 impacts begin to abate and the increasing activities on the Guernsey Power Station project. Gross profits increased 319% to $22.1 million for the fourth quarter of Fiscal 2021 from $5.2 million for last fourth quarter, generally reflecting the reasons discussed in the full year results above.

Selling, general and administrative expenses decreased by 17.4%, to $10.2 million for the current quarter from an amount of $12.4 million included in the results for the prior year quarter which also included a goodwill impairment loss of $2.8 million. Due to our profitable fourth quarter for Fiscal 2021, we recorded income tax expense in the amount of $2.5 million.

As a result, net income attributable to our stockholders for the three months ended January 31, 2021 increased to $9.6 million, or $0.60 per diluted share, compared to a loss of $7.2 million, or $0.46 per diluted share, for last year's fourth quarter.

Quarterly Dividend:

On Monday, April 12, 2021, our Board of Directors declared a regular quarterly cash dividend in the amount of $0.25 per share of common stock, payable April 30, 2021 to stockholders of record at the close of business on April 22, 2021.

About Argan, Inc.

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, 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 and 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, 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 the Company's businesses. 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 number of factors described from time to time in the Company's SEC filings. In addition, 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.

ARGAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)



Three Months Ended Years Ended

January 31, January 31,

2021 2020 2021 2020

REVENUES $ 117,235 $ 67,988 $ 392,206 $ 238,997

Cost of revenues 95,150 62,739 330,139 245,817

GROSS PROFIT (LOSS) 22,085 5,249 62,067 (6,820 )

Selling, general and 10,214 12,364 39,041 44,125 administrative expenses

Impairment losses - 2,823 - 4,895

INCOME (LOSS) FROM 11,871 (9,938 ) 23,026 (55,840 )OPERATIONS

Other income, net 145 603 1,859 8,075

INCOME (LOSS) BEFORE 12,016 (9,335 ) 24,885 (47,765 )INCOME TAXES

Income tax (expense) (2,465 ) 2,117 (1,074 ) 7,053 benefit

NET INCOME (LOSS) 9,551 (7,218 ) 23,811 (40,712 )

Net (loss) incomeattributable to - (30 ) (40 ) 1,977 non-controllinginterests

NET INCOME (LOSS)ATTRIBUTABLE TO THE 9,551 (7,188 ) 23,851 (42,689 )STOCKHOLDERS OF ARGAN,INC.

Foreign currency 685 55 35 (770 )translation adjustments

COMPREHENSIVE INCOME(LOSS) ATTRIBUTABLE TO $ 10,236 $ (7,133 ) $ 23,886 $ (43,459 )THE STOCKHOLDERS OFARGAN, INC.



NET INCOME (LOSS) PERSHARE ATTRIBUTABLE TO THE STOCKHOLDERS OFARGAN, INC.

Basic $ 0.61 $ (0.46 ) $ 1.52 $ (2.73 )

Diluted $ 0.60 $ (0.46 ) $ 1.51 $ (2.73 )



WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

Basic 15,697 15,634 15,668 15,621

Diluted 15,880 15,634 15,825 15,621



CASH DIVIDENDS PER SHARE $ 1.25 $ 0.25 $ 3.00 $ 1.00

ARGAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

January 31,

2021

2020

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

366,671

$

167,363

Short-term investments

90,055

160,499

Accounts receivable, net

28,713

37,192

Contract assets

26,635

33,379

Other current assets

34,146

23,322

TOTAL CURRENT ASSETS

546,220

421,755

Property, plant and equipment, net

20,361

22,539

Goodwill

27,943

27,943

Other purchased intangible assets, net

4,097

5,001

Deferred taxes

249

7,894

Right-of-use and other assets

3,760

2,408

TOTAL ASSETS

$

602,630

$

487,540

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable

$

53,295

$

35,442

Accrued expenses

50,750

35,907

Contract liabilities

172,042

72,685

TOTAL CURRENT LIABILITIES

276,087

144,034

Other noncurrent liabilities

4,135

2,476

TOTAL LIABILITIES

280,222

146,510

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; 15,706,202 and 15,638,202 shares issued at January 31, 2021 and 2020, respectively; 15,702,969 and 15,634,969 shares outstanding at January 31, 2021 and 2020, respectively

2,356

2,346

Additional paid-in capital

153,282

148,713

Retained earnings

166,110

189,306

Accumulated other comprehensive loss

(1,081

)

(1,116

)

TOTAL STOCKHOLDERS' EQUITY

320,667

339,249

Non-controlling interests

1,741

1,781

TOTAL EQUITY

322,408

341,030

TOTAL LIABILITIES AND EQUITY

$

602,630

$

487,540

ARGAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)



January 31,

2021 2020



ASSETS

CURRENT ASSETS

Cash and cash equivalents $ 366,671 $ 167,363

Short-term investments 90,055 160,499

Accounts receivable, net 28,713 37,192

Contract assets 26,635 33,379

Other current assets 34,146 23,322

TOTAL CURRENT ASSETS 546,220 421,755

Property, plant and equipment, net 20,361 22,539

Goodwill 27,943 27,943

Other purchased intangible assets, net 4,097 5,001

Deferred taxes 249 7,894

Right-of-use and other assets 3,760 2,408

TOTAL ASSETS $ 602,630 $ 487,540



LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable $ 53,295 $ 35,442

Accrued expenses 50,750 35,907

Contract liabilities 172,042 72,685

TOTAL CURRENT LIABILITIES 276,087 144,034

Other noncurrent liabilities 4,135 2,476

TOTAL LIABILITIES 280,222 146,510



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; 15,706,202 and15,638,202 shares issued at January 31, 2021 and 2,356 2,346 2020, respectively; 15,702,969 and 15,634,969shares outstanding at January 31, 2021 and 2020,respectively

Additional paid-in capital 153,282 148,713

Retained earnings 166,110 189,306

Accumulated other comprehensive loss (1,081 ) (1,116 )

TOTAL STOCKHOLDERS' EQUITY 320,667 339,249

Non-controlling interests 1,741 1,781

TOTAL EQUITY 322,408 341,030

TOTAL LIABILITIES AND EQUITY $ 602,630 $ 487,540

ARGAN, INC. AND SUBSIDIARIES

Reconciliations to EBITDA

(In thousands)(Unaudited)

Three Months Ended

January 31,

2021

2020

Net income (loss), as reported

$

9,551

$

(7,218

)

Income tax expense (benefit)

2,465

(2,117

)

Depreciation

917

903

Amortization of purchased intangible assets

227

272

EBITDA

13,160

(8,160

)

EBITDA of non-controlling interests

-

30

EBITDA attributable to the stockholders of Argan, Inc.

$

13,160

$

(8,130

)

Years Ended

January 31,

2021

2020

Net income (loss), as reported

$

23,811

$

(40,712

)

Income tax expense (benefit)

1,074

(7,053

)

Depreciation

3,715

3,513

Amortization of purchased intangible assets

904

1,136

EBITDA

29,504

(43,116

)

EBITDA of non-controlling interests

40

(1,977

)

EBITDA attributable to the stockholders of Argan, Inc.

$

29,544

$

(45,093

)

View source version on businesswire.com: https://www.businesswire.com/news/home/20210414005899/en/

CONTACT: Company: Rainer Bosselmann 301.315.0027

CONTACT: Investor Relations: David Watson 301.315.0027