Argan(AGX) - 2021 Q2 - Quarterly Report

Financial Performance - Consolidated revenues for the three months ended July 31, 2020, were $87.5 million, an increase of $24.4 million, or 38.7%, from $63.1 million for the same period in 2019[112]. - For the six months ended July 31, 2020, consolidated revenues were $147.6 million, a 31.1% improvement from the same period in 2019[117]. - Revenues for the power industry services increased by 147.5%, or $41.1 million, to $69.0 million for the three months ended July 31, 2020, representing approximately 78.9% of consolidated revenues[148]. - Revenues from industrial fabrication and field services decreased by 49.8%, or $16.5 million, to $16.7 million for the three months ended July 31, 2020, contributing 19.1% of consolidated revenues[149]. - Consolidated gross profit for the three months ended July 31, 2020, was $15.6 million, or 17.9% of revenues, up from $3.0 million, or 4.7% of revenues, for the same period in 2019[114]. - Consolidated gross profit for the six months ended July 31, 2020, was $19.6 million, or 13.3% of revenues, compared to a gross loss of $18.1 million for the same period in 2019[118]. - Net income attributable to stockholders for the three months ended July 31, 2020, was $5.6 million, or $0.36 per diluted share, compared to $1.2 million, or $0.07 per diluted share, for the same period in 2019[116]. - For the six months ended July 31, 2020, net income attributable to stockholders was $4.8 million, or $0.31 per diluted share, compared to a net loss of $28.6 million, or $1.84 per diluted share, for the same period in 2019[121]. Project and Operational Insights - The power industry services segment, including GPS, represented 78.9% of consolidated revenues for the three months ended July 31, 2020, compared to 44.2% for the same period in 2019[112]. - The forecasted costs at completion for the TeesREP Project are expected to exceed projected revenues by approximately $32.3 million[110]. - The total amounts of accounts receivable and contract assets related to the TeesREP Project were $11.2 million as of July 31, 2020, down from $19.2 million as of January 31, 2020[110]. - The total rated electrical output for the natural gas-fired power plants with signed EPC services contracts is approximately 7.3 gigawatts, with an aggregate contract value exceeding $3.0 billion[126]. - Project backlog was approximately $1.2 billion as of July 31, 2020, down from $1.3 billion on January 31, 2020[126]. - The company anticipates construction activities for at least two of three new projects to commence within three to nine months, although exact start dates are uncertain[123]. - The competitive landscape for EPC services in natural gas-fired power plant construction has changed, with several competitors exiting the market[140]. - The development of natural gas-fired power generation facilities is expected to continue, although the pace of new opportunities may be restrained in the near term[142]. Cash Flow and Financial Position - Cash and cash equivalents increased to $382.4 million as of July 31, 2020, compared to $167.4 million as of January 31, 2020[173]. - Net cash provided by operating activities for the six months ended July 31, 2020, was $102.9 million, with a significant contribution from contract liabilities of $83.3 million[174]. - The company had no outstanding borrowings under its financing arrangements as of July 31, 2020, with a maximum borrowing amount of $50.0 million available until May 31, 2021[200]. - The balance of temporarily investable funds in a money market account as of July 31, 2020, was $298.8 million, yielding an annual return of 0.05%[202]. - The significant drop in interest rates during the six months ended July 31, 2020, resulted in a reduction of investment returns from money market funds, which previously yielded 1.49%[202]. - The company believes that cash on hand and cash generated from future operations will be adequate to meet general business needs in the foreseeable future[188]. Expenses and Taxation - Selling, general, and administrative expenses decreased to $9.1 million for the three months ended July 31, 2020, down from $10.0 million in the prior year, representing 10.4% of consolidated revenues[153]. - Consolidated cost of revenues decreased by 2.0% to $128.0 million for the six months ended July 31, 2020, compared to $130.7 million in 2019[163]. - Other income decreased by 72.5% to $0.5 million for the three months ended July 31, 2020, compared to $1.6 million for the same period in 2019[154]. - The company recorded an income tax benefit of approximately $3.1 million for the six months ended July 31, 2020, primarily due to a net operating loss carryback benefit of approximately $4.3 million[169]. - The company reported a current income tax benefit of $11,593 thousand for the six months ended July 31, 2020[194]. Market Trends and Future Outlook - Natural gas generation is forecasted to increase in 2020, reflecting favorable fuel costs and new generating capacity, before declining in 2021 as natural gas prices are expected to rise[137]. - The share of electricity generated by natural gas-fired power plants rose by 7.7% in 2019, representing 38.4% of total electric power generation in the US[135]. - The company is focused on expanding its position in power markets, expecting investments based on long-term electricity demand forecasts[143]. - The company expects selling, general, and administrative expenses as a percentage of consolidated revenues to trend downward through the remaining quarters of Fiscal 2021[166]. - There have been no material changes in the application of critical accounting policies during the six-month period ended July 31, 2020[196].