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Argan, Inc. Reports Third Quarter Results ROCKVILLE, Md.
Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”) today
announced financial results for its third quarter ended October 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)):
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October 31,
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2018
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2017
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Change
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% Change
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For the Quarter Ended:
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Revenues
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$
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116,459
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$
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232,945
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$
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(116,486
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)
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(50
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)%
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|
Gross profit
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29,532
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37,718
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(8,186
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)
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(22
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)
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Gross margins
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25.4
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%
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16.2
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%
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9.2
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%
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57
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Net income attributable to the stockholders of the Company
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$
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32,434
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$
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17,229
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$
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15,205
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88
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Diluted per share
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2.07
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1.09
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0.98
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90
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EBITDA attributable to the stockholders of the Company
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21,025
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30,275
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(9,250
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)
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(31
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)
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Diluted per share
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1.34
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1.92
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(0.58
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)
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(30
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)
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As of:
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October 31,
2018
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January 31,
2018
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Change
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% Change
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Cash, cash equivalents and short-term investments
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$
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314,787
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$
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434,015
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$
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(119,228
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)
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(27
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) %
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Net liquidity (1)
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339,616
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301,817
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37,799
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13
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Project backlog
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365,000
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379,000
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(14,000
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)
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(4
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)
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(1) We define net liquidity, or working capital, as our
total current assets less our total current liabilities.
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As successful execution by Gemma Power Systems (“GPS”) on four large
gas-fired power plant projects has reached the final stages, revenues
saw a decline during the current quarter to $116.5 million compared to
$232.9 million in the prior year quarter. Construction activities for
these projects have matured from peak levels which the Company
experienced during the prior fiscal year, to the commissioning, start up
and final activities. The decline in revenues at GPS was partially
offset by increased revenues at Atlantic Projects Company, as it reached
peak construction activities on two power plant projects, and The
Roberts Company during the third quarter. Gross profits decreased by 22%
to $29.5 million from $37.7 million for the prior year, reflecting
primarily the reduction in consolidated revenues between periods. Our
gross margin percentage increased to 25.4% from 16.2% for the prior year
quarter, reflecting favorable project close-out adjustments to the gross
profits of certain projects that have reached substantial completion.
The levels of selling, general and administrative expenses rose by $1.0
million, or 10%, as compared to the prior year period due primarily to
increased non-chargeable staff costs.
During the current quarter, the Company completed a year-long detailed
review of the work performed by its engineering staff on major EPC
services projects in order to identify and quantify the amounts of
research and development (“R&D”) credits that may be available to reduce
current and prior year income taxes. Based on this review, the resulting
income tax benefits, associated with R&D activities conducted in prior
years, in the total amount of $16.5 million, or $1.05 per diluted share,
have been recognized in income taxes in the current quarter. Also, the
Tax Cuts and Jobs Act had a favorable impact on our tax rate, resulting
in an estimated annual effective income tax rate of 28% (before the
effects of R&D credits) for the current quarter, compared to an
estimated effective income tax rate of 37% for the third quarter last
year.
These factors resulted in net income attributable to our stockholders
increasing 88% to $32.4 million for the current quarter, or $2.07 per
diluted share, from $17.2 million, or $1.09 per diluted share, for the
prior year quarter. EBITDA attributable to our stockholders for three
months ended October 31, 2018 decreased 31% to $21.0 million, or $1.34
per diluted share, from $30.3 million, or $1.92 per diluted share, for
the prior year quarter. We paid our third regular quarterly cash
dividend of $0.25 per share in October.
As of October 31, 2018, our cash, cash equivalents and short-term
investments totaled $315 million and net liquidity was $340 million;
plus, we had no bank debt. Our project backlog was $365 million as of
October 31, 2018, slightly down from $379 million at the end of the
prior year, mostly due to year-to-date work on existing backlog
partially offset by the value of an EPC contract entered into by GPS
during the first quarter. 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 with projected start dates
extending through 2019.
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-Q and 10-K, and other SEC filings.
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ARGAN, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
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(In thousands, except per share data)
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(Unaudited)
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Three Months Ended
October 31,
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Nine Months Ended
October 31,
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2018
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2017
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2018
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2017
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REVENUES
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$
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116,459
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$
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232,945
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$
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394,495
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$
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723,237
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Cost of revenues
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86,927
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195,227
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318,803
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594,016
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GROSS PROFIT
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29,532
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37,718
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75,692
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129,221
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Selling, general and administrative expenses
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11,147
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10,119
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31,162
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30,408
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INCOME FROM OPERATIONS
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18,385
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27,599
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44,530
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98,813
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Other income, net
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1,429
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1,692
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5,121
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4,221
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INCOME BEFORE INCOME TAXES
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19,814
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29,291
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49,651
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103,034
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Income tax benefit (expense)
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12,560
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(12,062
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)
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4,509
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(37,738
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)
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NET INCOME
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32,374
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17,229
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54,160
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65,296
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Net (loss) income attributable to non-controlling interests
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(60
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)
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—
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(83
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)
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303
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NET INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.
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32,434
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17,229
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54,243
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64,993
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Foreign currency translation adjustments
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(1,092
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)
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(139
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)
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(2,364
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)
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754
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COMPREHENSIVE INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN,
INC.
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$
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31,342
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$
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17,090
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$
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51,879
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$
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65,747
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EARNINGS PER SHARE ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN,
INC.
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Basic
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$
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2.08
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$
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1.11
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$
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3.48
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$
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4.19
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Diluted
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$
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2.07
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$
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1.09
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$
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3.46
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$
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4.11
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
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Basic
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15,569
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15,545
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15,568
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15,509
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Diluted
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15,702
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15,793
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15,685
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15,796
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CASH DIVIDENDS PER SHARE
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$
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0.25
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$
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1.00
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$
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0.75
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$
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1.00
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ARGAN, INC. AND SUBSIDIARIES
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Reconciliations to EBITDA
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(In thousands) (Unaudited)
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Three Months Ended October 31,
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2018
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2017
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Net income
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$
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32,374
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$
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17,229
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Less EBITDA attributable to noncontrolling interests
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60
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—
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Interest expense
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—
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—
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Income tax (benefit) expense
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(12,560
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)
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12,062
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Depreciation
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|
898
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|
726
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Amortization of purchased intangible assets
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253
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258
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EBITDA attributable to the stockholders of the Company
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$
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21,025
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$
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30,275
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Nine Months Ended October 31,
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2018
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2017
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Net income
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$
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54,160
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$
|
65,296
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Less EBITDA attributable to noncontrolling interests
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83
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(303
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)
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Interest expense
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|
659
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|
—
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Income tax (benefit) expense
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(4,509
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)
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37,738
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|
Depreciation
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2,465
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|
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|
1,936
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Amortization of purchased intangible assets
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759
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|
776
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EBITDA attributable to the stockholders of the Company
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$
|
53,617
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$
|
105,443
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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.
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ARGAN, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
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(In thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
October 31, 2018
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January 31, 2018
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(Unaudited)
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ASSETS
|
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CURRENT ASSETS
|
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Cash and cash equivalents
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$
|
155,791
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|
$
|
122,107
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|
Short-term investments
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|
158,996
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|
|
311,908
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|
Accounts receivable, net
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|
43,612
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|
|
24,756
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|
Contract assets
|
|
|
55,628
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|
|
13,847
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|
Other current assets
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|
25,465
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|
|
12,410
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|
TOTAL CURRENT ASSETS
|
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|
439,492
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|
|
485,028
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|
Property, plant and equipment, net
|
|
|
19,866
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|
|
15,299
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|
Goodwill
|
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|
34,329
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|
|
34,329
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|
Other purchased intangible assets, net
|
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|
6,390
|
|
|
7,149
|
|
Deferred taxes
|
|
|
315
|
|
|
439
|
|
Other assets
|
|
|
377
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|
|
426
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|
TOTAL ASSETS
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$
|
500,769
|
|
$
|
542,670
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LIABILITIES AND EQUITY
CURRENT LIABILITIES
|
|
|
|
|
|
Accounts payable
|
|
$
|
64,987
|
|
$
|
100,238
|
|
Accrued expenses
|
|
|
25,111
|
|
|
35,360
|
|
Contract liabilities
|
|
|
9,778
|
|
|
47,613
|
|
TOTAL CURRENT LIABILITIES
|
|
|
99,876
|
|
|
183,211
|
|
Deferred taxes
|
|
|
1,388
|
|
|
1,293
|
|
TOTAL LIABILITIES
|
|
|
101,264
|
|
|
184,504
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
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|
|
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; 15,573,952 and 15,570,952 shares issued at October 31
and January 31, 2018, respectively; 15,570,719 and 15,567,719
shares outstanding at October 31 and January 31, 2018, respectively
|
|
|
2,336
|
|
|
2,336
|
|
Additional paid-in capital
|
|
|
144,507
|
|
|
143,215
|
|
Retained earnings
|
|
|
253,716
|
|
|
211,150
|
|
Accumulated other comprehensive (loss) income
|
|
|
(942
|
)
|
|
1,422
|
|
TOTAL STOCKHOLDERS’ EQUITY
|
|
|
399,617
|
|
|
358,123
|
|
Non-controlling interests
|
|
|
(112
|
)
|
|
43
|
|
TOTAL EQUITY
|
|
|
399,505
|
|
|
358,166
|
|
TOTAL LIABILITIES AND EQUITY
|
|
$
|
500,769
|
|
$
|
542,670
|
|
|
|
|
|
|
|
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20181206005104/en/ Copyright Business Wire 2018
Source: Business Wire
(December 6, 2018 - 8:00 AM EST)
News by QuoteMedia
www.quotemedia.com
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