Argan, Inc. Reports Second Quarter Results ROCKVILLE, Md.
Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”) today
announced financial results for its second quarter ended July 31, 2018.
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
(unaudited)):
|
|
|
|
|
|
|
|
|
|
|
July 31,
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
Change
|
|
% Change
|
For the Quarter Ended:
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
136,670
|
|
|
$
|
259,803
|
|
|
$
|
(123,133
|
)
|
|
(47
|
)%
|
Gross profit
|
|
|
|
30,708
|
|
|
|
51,407
|
|
|
|
(20,699
|
)
|
|
(40
|
)
|
Gross margins
|
|
|
|
22.5
|
%
|
|
|
19.8
|
%
|
|
|
2.7
|
%
|
|
14
|
|
Net income attributable to the stockholders of the Company
|
|
|
$
|
16,972
|
|
|
$
|
27,139
|
|
|
$
|
(10,167
|
)
|
|
(38
|
)
|
Diluted per share
|
|
|
|
1.08
|
|
|
|
1.72
|
|
|
|
(0.64
|
)
|
|
(37
|
)
|
EBITDA attributable to the stockholders of the Company
|
|
|
|
24,445
|
|
|
|
42,712
|
|
|
|
(18,267
|
)
|
|
(43
|
)
|
Diluted per share
|
|
|
|
1.56
|
|
|
|
2.71
|
|
|
|
(1.15
|
)
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended:
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
278,036
|
|
|
$
|
490,292
|
|
|
$
|
(212,256
|
)
|
|
(43
|
)%
|
Gross profit
|
|
|
|
46,160
|
|
|
|
91,503
|
|
|
|
(45,343
|
)
|
|
(50
|
)
|
Gross margins
|
|
|
|
16.6
|
%
|
|
|
18.7
|
%
|
|
|
(2.1
|
)%
|
|
(11
|
)
|
Net income attributable to the stockholders of the Company
|
|
|
$
|
21,809
|
|
|
$
|
47,764
|
|
|
$
|
(25,955
|
)
|
|
(54
|
)
|
Diluted per share
|
|
|
|
1.39
|
|
|
|
3.03
|
|
|
|
(1.64
|
)
|
|
(54
|
)
|
EBITDA attributable to the stockholders of the Company
|
|
|
|
32,592
|
|
|
|
75,168
|
|
|
|
(42,576
|
)
|
|
(57
|
)
|
Diluted per share
|
|
|
|
2.08
|
|
|
|
4.76
|
|
|
|
(2.68
|
)
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
As of:
|
|
|
July 31, 2018
|
|
January 31, 2018
|
|
Change
|
|
% Change
|
Cash, cash equivalents and short-term investments
|
|
|
$
|
361,742
|
|
|
$
|
434,015
|
|
|
$
|
(72,273
|
)
|
|
(17
|
)%
|
Net liquidity (1)
|
|
|
|
313,371
|
|
|
|
301,817
|
|
|
|
11,554
|
|
|
4
|
|
Project Backlog
|
|
|
|
429,000
|
|
|
|
379,000
|
|
|
|
50,000
|
|
|
13
|
|
(1) We define net liquidity, or working capital, as our
total current assets less our total current liabilities.
|
|
Second Quarter Results:
As successful execution by Gemma Power Systems (“GPS”) on four large
gas-fired power plant projects are reaching the final stages, revenues
saw a decline during the current quarter to $136.7 million compared to
$259.8 million in the prior year quarter. Construction activities for
these projects have matured from peak levels to the commissioning and
start up phases. The decline in revenues at GPS was partially offset by
record revenues at Atlantic Projects Company (“APC”) and The Roberts
Company (“TRC”) during the second quarter. Gross profits decreased by
40% to $30.7 million from $51.4 million for the prior year, reflecting
primarily the reduction in consolidated revenues between periods. Our
gross margin percentage increased to 22.5% from 19.8% for the prior year
quarter, reflecting execution on the commissioning and start-up phases
of four natural gas-fired power plant projects which have all recently
reached substantial completion.
The levels of selling, general and administrative expenses were
consistent between the two quarters. Other income increased $1.6 million
compared to the prior year quarter primarily reflecting a recorded gain
on the settlement in the current quarter of a previously disclosed
dispute. The Tax Cuts and Jobs Act had a favorable impact on our tax
rate, resulting in an estimated annual effective income tax rate of
27.5% for the current quarter, compared to an income tax rate of 36.2%
for the second quarter last year.
These factors resulted in net income attributable to our stockholders
decreasing 38% to $17.0 million for the current quarter, or $1.08 per
diluted share, from $27.1 million, or $1.72 per diluted share, for the
prior year quarter. EBITDA attributable to our stockholders for three
months ended July 31, 2018, decreased 43% to $24.4 million, or $1.56 per
diluted share, from $42.7 million, or $2.71 per diluted share, for the
prior year quarter. We paid our second regular quarterly cash dividend
of $0.25 per share in July.
Our balance sheet continues to be strong. As of July 31, 2018, our cash,
cash equivalents and short-term investments totaled $362 million and net
liquidity was $313 million; plus, we had no bank debt. Our project
backlog was $429 million as of July 31, 2018, up from $379 million at
the end of the prior year, mostly due to an EPC contract entered into by
GPS during the first quarter. During the second quarter, we announced
that GPS has also entered into an EPC contract to construct the
Chickahominy Power Station, a 1,600 MW natural gas-fired power plant, in
Virginia. We do not intend to include the value of this EPC contract in
project backlog until the project progresses closer to its anticipated
start date in early 2019. As previously reported, we remain encouraged
about our project pipeline as GPS has been selected to perform the EPC
work for several new power generation facilities with a collective
potential project value over $1.5 billion, including the Chickahominy
Power Station, and projected start dates ranging from later in 2018
through 2019.
Six Month Results:
For the six months ended July 31, 2018, consolidated revenues decreased
43% to $278.0 million compared to the prior year period, due to the same
reasons discussed above. Gross profit decreased 50% to $46.2 million
reflecting primarily the reduction in consolidated revenues between
periods. Our gross margin percentage decreased to 16.6% from 18.7% for
the prior year period, reflecting strong peak construction performance
on the four natural gas-fired power plant projects in the prior year
period.
The amounts of selling, general and administrative expenses for the
periods were consistent. For the same reasons discussed above, other
income increased and taxes decreased between the two periods. These
factors resulted in net income attributable to our stockholders for the
six months ended July 31, 2018 decreasing 54% to $21.8 million, or $1.39
per diluted share, compared to $47.8 million, or $3.03 per diluted
share, for the prior year period. EBITDA attributable to the
stockholders for the six months ended July 31, 2018 decreased 57% to
$32.6 million, or $2.08 per diluted share, from $75.2 million, or $4.76
per diluted share, for the prior year period.
Commenting on Argan’s results, Rainer Bosselmann, Chairman and Chief
Executive Officer, stated, “We experienced a meaningful rebound in our
margins and bottom line compared to the last several quarters resulting
from record performance at APC and TRC and the recent achievement of
substantial completion on four key power plant projects. These gas-fired
power plants can provide dependable and efficient power 24 hours a day
to over two million homes and remain a viable and large part of our
nation’s dynamic power supply. We continue to position our Company as an
accomplished builder of these complex gas-fired power plants and, as we
recently reported, we signed another EPC contract to build a large
gas-fired power plant. As we have indicated previously, we are focused
on identifying opportunities, rebuilding our backlog and remain
cautiously optimistic that we will add several more projects to backlog
this year and in calendar 2019. Nonetheless, this transition will result
in a decrease to our revenues in the coming quarters until work on new
projects is secured and ramps up in accordance with the normal
construction cycle of large EPC projects.”
About Argan, Inc.
Argan’s primary business is providing a full range of services to the
power industry, including 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 SMC Infrastructure Solutions, which provides
telecommunications infrastructure services, and The Roberts Company,
which is a fully integrated fabrication, construction and industrial
plant services company.
Certain matters discussed in this press release may constitute
forward-looking statements within the meaning of the federal securities
laws and are subject to risks and uncertainties including but not
limited to: (1) the continued strong operational performance of our
power industry services business; (2) the Company’s successful addition
of new contracts to backlog and the Company’s receipt of notices to
proceed with the corresponding contract activities; and (3) the
Company’s ability to execute on its business strategy while effectively
managing costs and expenses. Actual results and the timing of certain
events could differ materially from those projected in or contemplated
by the forward-looking statements due to a number of factors described
from time to time in Argan’s filings with the SEC. In addition,
reference is hereby made to the cautionary statements made by us with
respect to risk factors set forth in the Company’s most recent reports
on Form 10-K and 10-Q, and other SEC filings.
|
|
|
|
|
|
ARGAN, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
|
(In thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Six Months Ended July 31,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
|
$
|
136,670
|
|
|
$
|
259,803
|
|
$
|
278,036
|
|
|
$
|
490,292
|
Cost of revenues
|
|
|
|
105,962
|
|
|
|
208,396
|
|
|
231,876
|
|
|
|
398,789
|
GROSS PROFIT
|
|
|
|
30,708
|
|
|
|
51,407
|
|
|
46,160
|
|
|
|
91,503
|
Selling, general and administrative expenses
|
|
|
|
10,378
|
|
|
|
10,799
|
|
|
20,015
|
|
|
|
20,289
|
INCOME FROM OPERATIONS
|
|
|
|
20,330
|
|
|
|
40,608
|
|
|
26,145
|
|
|
|
71,214
|
Other income, net
|
|
|
|
2,928
|
|
|
|
1,311
|
|
|
3,692
|
|
|
|
2,529
|
INCOME BEFORE INCOME TAXES
|
|
|
|
23,258
|
|
|
|
41,919
|
|
|
29,837
|
|
|
|
73,743
|
Income tax expense
|
|
|
|
6,314
|
|
|
|
14,601
|
|
|
8,051
|
|
|
|
25,676
|
NET INCOME
|
|
|
|
16,944
|
|
|
|
27,318
|
|
|
21,786
|
|
|
|
48,067
|
Net (loss) income attributable to non-controlling interests
|
|
|
|
(28
|
)
|
|
|
179
|
|
|
(23
|
)
|
|
|
303
|
NET INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.
|
|
|
|
16,972
|
|
|
|
27,139
|
|
|
21,809
|
|
|
|
47,764
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
|
(693
|
)
|
|
|
789
|
|
|
(1,272
|
)
|
|
|
893
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN,
INC.
|
|
|
$
|
16,279
|
|
|
$
|
27,928
|
|
$
|
20,537
|
|
|
$
|
48,657
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN,
INC.
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
1.09
|
|
|
$
|
1.75
|
|
$
|
1.40
|
|
|
$
|
3.08
|
Diluted
|
|
|
$
|
1.08
|
|
|
$
|
1.72
|
|
$
|
1.39
|
|
|
$
|
3.03
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
15,568
|
|
|
|
15,514
|
|
|
15,568
|
|
|
|
15,491
|
Diluted
|
|
|
|
15,673
|
|
|
|
15,787
|
|
|
15,673
|
|
|
|
15,788
|
|
|
|
|
|
|
|
|
|
|
CASH DIVIDENDS PER SHARE
|
|
|
$
|
0.25
|
|
|
$
|
—
|
|
$
|
0.50
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARGAN, INC. AND SUBSIDIARIES
|
Reconciliations to EBITDA
|
(In thousands) (Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
|
2018
|
|
2017
|
Net income
|
|
|
$
|
16,944
|
|
$
|
27,318
|
|
Less EBITDA attributable to noncontrolling interests
|
|
|
|
28
|
|
|
(179
|
)
|
Interest expense
|
|
|
|
110
|
|
|
—
|
|
Income tax expense
|
|
|
|
6,314
|
|
|
14,601
|
|
Depreciation
|
|
|
|
796
|
|
|
638
|
|
Amortization of purchased intangible assets
|
|
|
|
253
|
|
|
334
|
|
EBITDA attributable to the stockholders of the Company
|
|
|
$
|
24,445
|
|
$
|
42,712
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
|
|
2018
|
|
2017
|
Net income
|
|
|
$
|
21,786
|
|
$
|
48,067
|
|
Less EBITDA attributable to noncontrolling interests
|
|
|
|
23
|
|
|
(303
|
)
|
Interest expense
|
|
|
|
659
|
|
|
—
|
|
Income tax expense
|
|
|
|
8,051
|
|
|
25,676
|
|
Depreciation
|
|
|
|
1,567
|
|
|
1,210
|
|
Amortization of purchased intangible assets
|
|
|
|
506
|
|
|
518
|
|
EBITDA attributable to the stockholders of the Company
|
|
|
$
|
32,592
|
|
$
|
75,168
|
|
|
Management uses EBITDA, a non-GAAP financial measure, for planning
purposes, including the preparation of operating budgets and the
determination of appropriate levels of operating and capital
investments. Management believes that EBITDA provides additional
insight for analysts and investors in evaluating the Company’s
financial and operational performance and in assisting investors in
comparing the Company’s financial performance to those of other
companies in the Company’s industry. However, EBITDA is not intended
to be an alternative to financial measures prepared in accordance
with GAAP and should not be considered in isolation from the
Company’s GAAP results of operations. Consistent with the
requirements of SEC Regulation G, reconciliations of the Company’s
non-GAAP financial results from net income are included in the
presentations above and investors are advised to carefully review
and consider this information as well as the GAAP financial results
that are presented in the Company’s SEC filings.
|
|
|
|
|
|
|
|
|
ARGAN, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(In thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
July 31, 2018
|
|
January 31, 2018
|
|
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
165,766
|
|
$
|
122,107
|
Short-term investments
|
|
|
|
195,976
|
|
|
311,908
|
Accounts receivable, net
|
|
|
|
46,137
|
|
|
24,756
|
Contract assets
|
|
|
|
34,792
|
|
|
13,847
|
Prepaid expenses and other current assets
|
|
|
|
10,542
|
|
|
12,410
|
TOTAL CURRENT ASSETS
|
|
|
|
453,213
|
|
|
485,028
|
Property, plant and equipment, net
|
|
|
|
18,882
|
|
|
15,299
|
Goodwill
|
|
|
|
34,329
|
|
|
34,329
|
Other purchased intangible assets, net
|
|
|
|
6,643
|
|
|
7,149
|
Deferred taxes
|
|
|
|
342
|
|
|
439
|
Other assets
|
|
|
|
394
|
|
|
426
|
TOTAL ASSETS
|
|
|
$
|
513,803
|
|
$
|
542,670
|
LIABILITIES AND EQUITY
CURRENT LIABILITIES
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
84,239
|
|
$
|
100,238
|
Accrued expenses
|
|
|
|
31,218
|
|
|
35,360
|
Contract liabilities
|
|
|
|
24,385
|
|
|
47,613
|
TOTAL CURRENT LIABILITIES
|
|
|
|
139,842
|
|
|
183,211
|
Deferred taxes
|
|
|
|
2,146
|
|
|
1,293
|
TOTAL LIABILITIES
|
|
|
|
141,988
|
|
|
184,504
|
|
|
|
|
|
|
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; 15,571,952 and 15,570,952 shares issued at July 31 and
January 31, 2018, respectively; 15,568,719 and 15,567,719 shares
outstanding at July 31 and January 31, 2018, respectively
|
|
|
|
2,336
|
|
|
2,336
|
Additional paid-in capital
|
|
|
|
144,135
|
|
|
143,215
|
Retained earnings
|
|
|
|
225,174
|
|
|
211,150
|
Accumulated other comprehensive income
|
|
|
|
150
|
|
|
1,422
|
TOTAL STOCKHOLDERS’ EQUITY
|
|
|
|
371,795
|
|
|
358,123
|
Non-controlling interests
|
|
|
|
20
|
|
|
43
|
TOTAL EQUITY
|
|
|
|
371,815
|
|
|
358,166
|
TOTAL LIABILITIES AND EQUITY
|
|
|
$
|
513,803
|
|
$
|
542,670
|
|
|
|
|
|
|
|
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20180905005877/en/ Copyright Business Wire 2018
Source: Business Wire
(September 5, 2018 - 4:15 PM EDT)
News by QuoteMedia
www.quotemedia.com
|