AGX Argan Inc

Argan, Inc. (NYSE: AGX) today announced financial results for the three and nine months ended October 31, 2013.

For the quarter ended October 31, 2013, net revenues were $63.5 million compared to $74.5 million for the quarter ended October 31, 2012. Gemma Power Systems LLC and affiliates (Gemma) contributed $61.1 million, or 96% of net revenues in the third quarter of fiscal 2014, compared to $70.5 million, or 95% of net revenues in the third quarter of fiscal 2013.

For the nine months ended October 31, 2013, net revenues were $168.0 million compared to $220.8 million during the nine months ended October 31, 2012. Gemma contributed $160.4 million, or 96% of net revenues in the first nine months of fiscal 2014, compared to $206.4 million, or 93% of net revenues in the first nine months of fiscal 2013.

Argan reported consolidated EBITDA (Earnings before interest, taxes, depreciation and amortization) from continuing operations of $20.8 million for the quarter ended October 31, 2013 compared to $9.6 million for the same prior year period. Gemma recorded $21.7 million in EBITDA for the third quarter of fiscal 2014 compared to $10.5 million for the third quarter of fiscal 2013. Argan reported EBITDA from continuing operations of $53.4 million for the nine months ended October 31, 2013 compared to $26.6 million for the same prior year period. Gemma, for its segment, recorded $53.8 million in EBITDA for the first nine months of fiscal 2014 compared to $27.9 million for the first nine months of fiscal 2013.

In the third quarter of fiscal 2014, the Company reported income from continuing operations before income taxes of $20.6 million compared to income from continuing operations before income taxes of $9.3 million in the third quarter of fiscal 2013.

For the first nine months of fiscal 2014, the Company reported income from continuing operations before income taxes of $52.8 million compared to income from continuing operations before income taxes of $26.0 million for the first nine months of fiscal 2013.

Net income attributable to the stockholders of Argan for the quarter ended October 31, 2013, was $11.9 million, or $0.83 per diluted share based on 14,365,000 diluted shares outstanding, compared to net income attributable to the stockholders of Argan of $6.1 million, or $0.43 per diluted share based on 14,106,000 diluted shares outstanding for the quarter ended October 31, 2012.

Net income attributable to the stockholders of Argan for the nine months ended October 31, 2013 was $31.0 million, or $2.16 per diluted share based on 14,302,000 diluted shares outstanding, compared to net income attributable to the stockholders of Argan of $16.7 million, or $1.19 per diluted share based on 14,075,000 diluted shares outstanding for the nine months ended October 31, 2012.

Argan had consolidated cash of $206.3 million as of October 31, 2013 and was debt free. Consolidated working capital increased during the current fiscal year to date to approximately $121.3 million as of October 31, 2013 and consolidated tangible net worth increased to $124.6 million in the same period.

Gemma’s backlog as of October 31, 2013 was $832 million compared to $236 million as of October 31, 2012. The October 31, 2013 backlog includes the combined cycle gas fired power plants for Panda Liberty and Moxie Patriot. We anticipate the financial close for Moxie Patriot in our fiscal fourth quarter.

During the third quarter of fiscal 2014, Argan announced that a third party investor, an affiliate of Panda Power Funds, completed the purchase and permanent financing of Moxie Liberty. In connection with the closing, Gemma Power, Inc., a wholly owned subsidiary of Argan, received cash from Moxie Liberty in the amount of $14.2 million related to development success fees and $5.1 million for the repayment of notes receivable and accrued interest. Also, Gemma received a full notice to proceed with the engineering, equipment procurement and construction efforts pursuant to the Liberty EPC contract.

Commenting on Argan’s financial results, Rainer Bosselmann, Chairman and Chief Executive Officer stated, “We are pleased with the third quarter financial performance of Gemma which is transitioning from the successful completion of the Sentinel project to commencing construction of the Panda Liberty and Moxie Patriot power plants. Recognition of the development success fees have given a strong boost to our operations in our third quarter.”

About Argan, Inc.

Argan’s primary business is designing and building energy plants through its Gemma Power Systems subsidiary. These energy plants include traditional gas as well as alternative energy including biodiesel, ethanol, and renewable energy sources such as wind power. Argan also owns Southern Maryland Cable, Inc.

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 Company’s ability to achieve its business strategy while effectively managing costs and expenses; (2) the Company’s ability to successfully and profitably integrate acquisitions; and (3) the continued strong performance of the energy sector. 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 detailed from time to time in Argan’s filings with the Securities and Exchange Commission. In addition, reference is hereby made to cautionary statements 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 Operations

(Unaudited)

  Three Months Ended October 31, Nine Months Ended October 31, 2013   2012 2013   2012 Net revenues Power industry services $ 61,103,000 $ 70,527,000 $ 160,392,000 $ 206,364,000 Telecommunications infrastructure services   2,349,000   3,959,000     7,572,000   14,430,000   Net revenues   63,452,000   74,486,000     167,964,000   220,794,000   Cost of revenues Power industry services 38,012,000 58,173,000 104,062,000 173,339,000 Telecommunications infrastructure services   1,564,000   3,177,000     5,741,000   11,339,000   Cost of revenues   39,576,000   61,350,000     109,803,000   184,678,000   Gross profit 23,876,000 13,136,000 58,161,000 36,116,000 Selling, general and administrative expenses   3,545,000   3,780,000     8,589,000   10,105,000   Income from operations 20,331,000 9,356,000 49,572,000 26,011,000 Gains on the deconsolidation of variable interest entities -- -- 2,444,000 -- Other income (expense), net   261,000   (11,000 )   827,000   (29,000 )

Income from continuing operations before income taxes

20,592,000 9,345,000 52,843,000 25,982,000 Income tax expense   8,143,000   3,632,000     19,531,000   9,741,000   Income from continuing operations   12,449,000   5,713,000     33,312,000   16,241,000   Discontinued operations Loss on discontinued operations before income taxes -- -- -- (405,000 ) Income tax benefit   --   --     --   120,000   Loss on discontinued operations   --   --     --   (285,000 ) Net income 12,449,000 5,713,000 33,312,000 15,956,000 Income (loss) attributable to noncontrolling interests   521,000   (352,000 )   2,351,000   (748,000 ) Net income attributable to the stockholders of Argan $ 11,928,000 $ 6,065,000   $ 30,961,000 $ 16,704,000    

Earnings (loss) per share attributable to the stockholders of Argan:

Continuing operations Basic $ 0.85 $ 0.44   $ 2.21 $ 1.24   Diluted $ 0.83 $ 0.43   $ 2.16 $ 1.21     Discontinued operations Basic $ -- $ --   $ -- $ (0.02 ) Diluted $ -- $ --   $ -- $ (0.02 )   Net income Basic $ 0.85 $ 0.44   $ 2.21 $ 1.22   Diluted $ 0.83 $ 0.43   $ 2.16 $ 1.19     Weighted average number of shares outstanding Basic   14,093,000   13,822,000     14,022,000   13,728,000   Diluted   14,365,000   14,106,000     14,302,000   14,075,000     Cash dividend declared per common share $ 0.75 $ 0.60   $ 0.75 $ 0.60      

ARGAN, INC. AND SUBSIDIARIES

Reconciliations to EBITDA

Continuing Operations (Unaudited)

  Three Months Ended October 31, 2013   2012 Income from continuing operations $ 12,449,000 $ 5,713,000 Interest expense -- 17,000 Income tax expense 8,143,000 3,632,000 Amortization of purchased intangible assets 61,000 61,000 Depreciation   142,000   136,000 EBITDA $ 20,795,000 $ 9,559,000  

Reconciliations to EBITDA

Power Industry Services (Unaudited)

  Three Months Ended October 31, 2013   2012 Income before income taxes $ 21,537,000 $ 10,300,000 Interest expense -- 17,000 Amortization of purchased intangible assets 61,000 61,000 Depreciation   96,000   77,000 EBITDA $ 21,694,000 $ 10,455,000  

Reconciliations to EBITDA

Continuing Operations (Unaudited)

  Nine Months Ended October 31, 2013   2012 Income from continuing operations $ 33,312,000 $ 16,241,000 Interest expense 10,000 44,000 Income tax expense 19,531,000 9,741,000 Amortization of purchased intangible assets 182,000 182,000 Depreciation   407,000   385,000

EBITDA

$ 53,442,000 $ 26,593,000  

Reconciliations to EBITDA

Power Industry Services (Unaudited)

  Nine Months Ended October 31, 2013   2012 Income before income taxes $ 53,345,000 $ 27,461,000 Interest expense 10,000 44,000 Amortization of purchased intangible assets 182,000 182,000 Depreciation   268,000   205,000 EBITDA $ 53,805,000 $ 27,892,000   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. Pursuant to the requirements of SEC Regulation G, a reconciliation between the Company’s GAAP and non-GAAP financial results is provided 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

  October 31, 2013 January 31, 2013 (Unaudited) (Note 1)

ASSETS

 

CURRENT ASSETS:

Cash and cash equivalents $ 206,350,000 $ 175,142,000 Accounts receivable, net of allowance for doubtful accounts 20,609,000 24,879,000 Notes receivable and accrued interest 5,435,000 -- Costs and estimated earnings in excess of billings 276,000 1,178,000 Deferred income tax assets 311,000 1,303,000 Prepaid expenses and other current assets   2,718,000     1,606,000   TOTAL CURRENT ASSETS 235,699,000 204,108,000

Property, plant and equipment, net ($5,309,000 related to variable interest entities as of January 31, 2013)

4,124,000 9,468,000 Goodwill 18,476,000 18,476,000 Intangible assets, net of accumulated amortization 2,149,000 2,331,000 Deferred income tax and other assets   --     341,000   TOTAL ASSETS $ 260,448,000   $ 234,724,000    

LIABILITIES AND EQUITY

 

CURRENT LIABILITIES:

Accounts payable $ 18,978,000 $ 32,699,000 Dividends payable 10,640,000 -- Accrued expenses 9,592,000 9,488,000 Billings in excess of costs and estimated earnings   75,215,000     73,359,000   TOTAL CURRENT LIABILITIES 114,425,000 115,546,000 Deferred tax and other liabilities   208,000     10,000   TOTAL LIABILITIES   114,633,000     115,556,000     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; 14,200,284 and 13,977,560 shares issued at October 31 and January 31, 2013, respectively; 14,197,051 and 13,974,327 shares outstanding at October 31 and January 31, 2013, respectively

2,130,000

2,096,000

Additional paid-in capital 98,946,000 95,004,000 Retained earnings 44,171,000 23,850,000

Treasury stock, at cost – 3,233 shares at October 31 and January 31, 2013

 

(33,000

)

 

(33,000

)

TOTAL STOCKHOLDERS’ EQUITY 145,214,000 120,917,000 Noncontrolling interests   601,000     (1,749,000 ) TOTAL EQUITY   145,815,000     119,168,000   TOTAL LIABILITIES AND EQUITY $ 260,448,000   $ 234,724,000            

Note 1 – The condensed consolidated balance sheet as of January 31, 2013 has been derived from audited consolidated financial statements.

 

Argan, Inc.Company Contact:Rainer Bosselmann, 301-315-0027orInvestor Relations Contact:Arthur Trudel, 301-315-9467