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/
Argan, Inc.Company Contact:Rainer Bosselmann,
301-315-0027orInvestor Relations Contact:David Watson,
301-315-0027
Argan (NYSE:AGX)
Historical Stock Chart
From Mar 2024 to Apr 2024
Argan (NYSE:AGX)
Historical Stock Chart
From Apr 2023 to Apr 2024