Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”)
today announced financial results for its first quarter ended April
30, 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)):
April
30,
For the Quarter Ended:
2018
2017
Change
%
Change
Revenues $ 141,366 $ 230,489 $ (89,123 ) (39 ) % Gross profit
15,452 40,096 (24,644 ) (61 ) Gross margins 10.9 % 17.4 % (6.5 )%
(37 ) Net income attributable to the stockholders of the Company $
4,837 $ 20,625 $ (15,788 ) (77 ) Diluted per share 0.31 1.31 (1.00
) (76 ) EBITDA attributable to the stockholders of the Company
8,147 32,456 (24,309 ) (75 ) Diluted per share 0.52 2.06 (1.54 )
(75 )
As of:
April
30,
2018
January
31,
2018
Change
%
Change
Cash, cash equivalents and short-term investments $ 365,581 $
434,015 $ (68,434 ) (16 ) % Net liquidity (1) 300,319 301,817
(1,498 ) — Project Backlog 524,000 379,000 145,000 38
(1) We define net liquidity, or working
capital, as our total current assets less our total current
liabilities.
First Quarter Results:
As successful construction progress by Gemma Power Systems
(“GPS”) continued on four large gas-fired power plants, revenues
saw a decline during the quarter to $141.4 million compared to
$230.5 million in the prior year quarter, primarily due to the
construction activities moving from peak levels to the
commissioning and start up phases. Gross profits decreased by 61%
to $15.5 million from $40.1 million for the prior year, reflecting
primarily the reduction in consolidated revenues between periods.
Our gross margin percentage decreased to 10.9% from 17.4% for the
prior year quarter, reflecting the effects of increased labor and
subcontractor cost estimates for certain projects over the past
three quarters, one-time costs recorded related to the resolution
of a dispute with a former subcontractor and the changes in the
mix, progress and gross margin levels of multiple power plant
projects.
Selling, general and administrative expenses were consistent
between the two quarters. The recent Tax Cuts and Jobs Act had a
favorable impact on our tax rate, resulting in an estimated annual
effective income tax rate of 26.4% for the current quarter,
compared to an income tax rate of 34.8% for the first quarter last
year.
These factors resulted in net income attributable to our
stockholders decreasing 77% to $4.8 million, or $0.31 per diluted
share, from $20.6 million, or $1.31 per diluted share, for the
prior year quarter. EBITDA attributable to our stockholders for
three months ended April 30, 2018, decreased 75% to $8.1 million,
or $0.52 per diluted share, from $32.5 million, or $2.06 per
diluted share, for the prior year quarter. We paid our first
regular quarterly cash dividend of $0.25 per share in April.
Our balance sheet continues to be strong. As of April 30, 2018,
our cash, cash equivalents and short-term investments totaled $366
million and net liquidity was $300 million; plus, we had no bank
debt. Our project backlog was $524 million as of April 30, 2018, up
from $379 million at the end of the prior year, mostly due to an
EPC contract entered into by GPS during the quarter. 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 and
projected start dates ranging from later in 2018 through 2019.
Commenting on Argan’s results, Rainer Bosselmann, Chairman and
Chief Executive Officer, stated, “We are pleased to report that we
have achieved substantial completion on two key power plant
projects. Despite the challenges of constructing multiple
simultaneous projects with very complex technologies, we delivered
state of the art power facilities to our customers that exceeded
all performance guarantees. We are proud of the diligent
performance of our employees in completing these projects. However,
we were disappointed with the approximately $5.2 million
arbitration award in favor of a former subcontractor that
negatively impacted our financials. As we finish up our other large
GPS projects in the coming quarters, we are focused on rebuilding
our backlog and are cautiously optimistic that we will add several
more projects this year. Nonetheless, as we previously reported to
you, 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
CONSOLIDATED STATEMENTS OF
EARNINGS
(In thousands, except per share
data)
(Unaudited)
Three Months Ended April 30,
2018 2017 REVENUES $
141,366 $ 230,489 Cost of revenues 125,914
190,393
GROSS PROFIT 15,452 40,096 Selling, general and
administrative expenses 9,637 9,489
INCOME
FROM OPERATIONS 5,815 30,607 Other income, net 764
1,218
INCOME BEFORE INCOME TAXES 6,579 31,825
Income tax expense 1,737 11,076
NET
INCOME 4,842 20,749 Net income attributable to non-controlling
interests 5 124
NET INCOME ATTRIBUTABLE TO THE
STOCKHOLDERS OF ARGAN, INC.
4,837 20,625 Foreign currency translation
adjustments (579 ) 104
COMPREHENSIVE INCOME ATTRIBUTABLE TO
THE STOCKHOLDERS OF ARGAN, INC.
$ 4,258 $ 20,729
EARNINGS PER SHARE ATTRIBUTABLE TO THE
STOCKHOLDERS OF ARGAN, INC.
Basic $ 0.31 $ 1.33 Diluted $ 0.31 $ 1.31
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic 15,568 15,467 Diluted 15,656
15,771
CASH DIVIDENDS PER SHARE
$ 0.25 $ —
ARGAN, INC. AND SUBSIDIARIES
Reconciliations to EBITDA
(Unaudited)(In thousands)
Three Months Ended April 30,
2018 2017 Net income $ 4,842 $ 20,749
Less EBITDA attributable to noncontrolling interests (5 ) (124 )
Interest expense 549 — Income tax expense 1,737 11,076 Depreciation
771 572 Amortization of purchased intangible assets 253
183 EBITDA attributable to the stockholders of
Argan, Inc. $ 8,147 $ 32,456
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
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share
data)
April 30, 2018 January 31, 2018
(Unaudited) ASSETS CURRENT ASSETS Cash
and cash equivalents $ 151,523 $ 122,107 Short-term investments
214,058 311,908 Accounts receivable, net 35,623 24,756 Contract
assets 50,579 13,847 Prepaid expenses and other current assets
13,849 12,410
TOTAL CURRENT ASSETS 465,632
485,028 Property, plant and equipment, net 18,175 15,299 Goodwill
34,329 34,329 Other intangible assets, net 6,896 7,149 Deferred
taxes 435 439 Other assets 411 426
TOTAL
ASSETS $ 525,878 $ 542,670
LIABILITIES AND EQUITY
CURRENT LIABILITIES Accounts payable $ 97,453 $
100,238 Accrued expenses 37,397 35,360 Contract liabilities
30,463 47,613
TOTAL CURRENT LIABILITIES 165,313
183,211 Deferred taxes 1,460 1,293
TOTAL
LIABILITIES 166,773 184,504
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; 15,570,952 shares issued at April 30
and January 31, 2018, respectively; 15,567,719 shares outstanding
at April 30 and January 31, 2018, respectively
2,336
2,336
Additional paid-in capital 143,783 143,215 Retained earnings
212,095 211,150 Accumulated other comprehensive income 843
1,422
TOTAL STOCKHOLDERS’ EQUITY 359,057 358,123
Non-controlling interests 48 43
TOTAL EQUITY
359,105 358,166
TOTAL LIABILITIES AND EQUITY $
525,878 $ 542,670
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version on businesswire.com: https://www.businesswire.com/news/home/20180611006129/en/
Argan, Inc.Company Contact:Rainer Bosselmann,
301-315-0027orInvestor Relations Contact:David Watson,
301-315-0027
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