Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”) today
announced financial results for its second quarter ended July 31,
2019. 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):
July
31,
2019
2018
Change
For the Quarter Ended:
Revenues
$
63,059
$
136,670
$
(73,611
)
Gross profit
2,965
30,708
(27,743
)
Gross profit margins
4.7
%
22.5
%
(17.8
)%
Net income attributable to the
stockholders of the Company
$
1,154
$
16,972
$
(15,818
)
Diluted per share
0.07
1.08
(1.01
)
EBITDA attributable to the
stockholders of the Company
(4,084
)
24,445
(28,529
)
Diluted per share
(0.26
)
1.56
(1.82
)
As of:
July
31,
2019
January
31,
2019
Cash, cash equivalents and
short-term investments
$
233,624
$
296,531
$
(62,907
)
Net liquidity (1)
294,423
335,032
(40,609
)
Project backlog
1,369,000
1,094,000
275,000
(1) We define net liquidity, or
working capital, as our total current assets less our total current
liabilities.
Our consolidated revenues for the three months ended July 31,
2019 were $63.1 million which represented a decline of $73.6
million from $136.7 million for the three months ended July 31,
2018. The decline is primarily due to Gemma Power Systems (“GPS”)
reaching substantial completion on four gas-fired power plant
projects during the year ended January 31, 2019 and concluding
activities on a fifth gas-fired power plant early in the first
quarter of the current fiscal year. We have not replaced those lost
revenues as new project starts have taken longer to occur than
anticipated. We expect this trend to reverse over the coming
quarters as GPS has received a full notice to proceed (“FNTP”) on
the largest project in its history. For the three months ended July
31, 2019, the majority of consolidated revenues were contributed by
our separate businesses of The Roberts Company (“TRC”), which
reported record quarterly revenues during the current quarter, and
Atlantic Project Company (“APC”). Together, TRC and APC contributed
94% of consolidated revenues for the three months ended July 31,
2019.
As previously disclosed, APC, our international subsidiary, has
encountered significant and escalating operational and contractual
challenges in completing a subcontract on a biomass-fired power
plant construction project in the United Kingdom. At this time, APC
continues to perform the works on the plant and is negotiating with
the customer in an effort to resolve differences. APC has conducted
multiple comprehensive reviews of the remaining contract work,
prepared updated timelines for the completion of the project and
assessed other factors. Currently, we estimate that the forecasted
costs to perform the contracted work will exceed projected revenues
by $30.9 million. The total amount of this loss was recognized in
our operating results for the six-month period ended July 31, 2019,
including $3.4 million reflected in our operating results for the
three months ended July 31, 2019.
However, an income tax benefit of $6.4 million, that was
recognized for the current quarter, offset the contract loss for
the quarter and resulted in net income attributable to our
stockholders of $1.2 million, or $0.07 earnings per diluted share,
for the three months ended July 31, 2019 compared to net income
attributable to our stockholders of $17.0 million, or $1.08
earnings per diluted share, for the prior year quarter. EBITDA
attributable to our stockholders for the quarter ended July 31,
2019 decreased to $(4.1) million, or $(0.26) per diluted share,
from $24.4 million, or $1.56 per diluted share, for the prior year
quarter. The Company paid its regular quarterly cash dividend of
$0.25 per share in July.
As of July 31, 2019, our cash, cash equivalents and short-term
investments totaled $234 million and net liquidity was $294
million; plus, we had no debt. As mentioned earlier, subsequent to
quarter-end we were pleased to announce that GPS received a FNTP
with engineering, procurement and construction activities under a
contract for a 1,875 MW natural gas-fired power plant in Guernsey
County, Ohio. Construction of this state-of-the-art combined cycle
facility has begun with completion scheduled in 2022. Also, during
the quarter, GPS entered into an EPC services contract to construct
a 625 MW natural gas-fired power plant in Harrison County, West
Virginia. Our project backlog has been increased to approximately
$1.4 billion as of July 31, 2019 from $1.1 billion as of January
31, 2019.
Commenting on Argan’s results, Rainer Bosselmann, Chairman and
Chief Executive Officer, stated, “We were delighted to receive a
FNTP on a major project for Gemma as we convert business
development efforts and project backlog into active jobs. We are
also pleased with record revenues at Roberts this quarter though
our overall bottom line was negatively impacted by an additional
$3.4 million loss on our APC project in the United Kingdom. We look
forward to increased revenues over the next couple of years as
Gemma starts new projects over the next several quarters.”
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 our future financial performance is subject to
risks and uncertainties including but not limited to: (1) the
strong operational performance of GPS; (2) the Company’s ability to
mitigate losses related to APC’s loss contract; (3) 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 (4) 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.
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,
2019
2018
2019
2018
REVENUES
$
63,059
$
136,670
$
112,603
$
278,036
Cost of revenues
60,094
105,962
130,664
231,876
GROSS PROFIT (LOSS)
2,965
30,708
(18,061
)
46,160
Selling, general and administrative
expenses
10,038
10,378
19,626
20,015
Impairment loss
—
—
2,072
—
(LOSS) INCOME FROM OPERATIONS
(7,073
)
20,330
(39,759
)
26,145
Other income, net
1,642
2,928
3,894
3,692
(LOSS) INCOME BEFORE INCOME
TAXES
(5,431
)
23,258
(35,865
)
29,837
Income tax benefit (expense)
6,411
(6,314
)
6,932
(8,051
)
NET INCOME (LOSS)
980
16,944
(28,933
)
21,786
Net loss attributable to non-controlling
interests
(174
)
(28
)
(287
)
(23
)
NET INCOME (LOSS) ATTRIBUTABLE TO THE
STOCKHOLDERS OF ARGAN, INC.
1,154
16,972
(28,646
)
21,809
Foreign currency translation
adjustments
(6
)
(693
)
(1,060
)
(1,272
)
COMPREHENSIVE INCOME (LOSS)
ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.
$
1,148
$
16,279
$
(29,706
)
$
20,537
EARNINGS (LOSS) PER SHARE ATTRIBUTABLE
TO THE STOCKHOLDERS OF ARGAN, INC.
Basic
$
0.07
$
1.09
$
(1.84
)
$
1.40
Diluted
$
0.07
$
1.08
$
(1.84
)
$
1.39
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic
15,633
15,568
15,608
15,568
Diluted
15,757
15,673
15,608
15,673
CASH DIVIDENDS PER SHARE
$
0.25
$
0.25
$
0.50
$
0.50
ARGAN, INC. AND
SUBSIDIARIES
Reconciliations to
EBITDA
(In
thousands)(Unaudited)
Three Months Ended July
31,
2019
2018
Net income
$
980
$
16,944
Less EBITDA attributable to noncontrolling
interests
172
28
Interest expense
—
110
Income tax (benefit) expense
(6,411
)
6,314
Depreciation
882
796
Amortization of purchased intangible
assets
293
253
EBITDA attributable to the stockholders of
the Company
$
(4,084
)
$
24,445
Six Months Ended July
31,
2019
2018
Net (loss) income
$
(28,933
)
$
21,786
Less EBITDA attributable to noncontrolling
interests
287
23
Interest expense
—
659
Income tax (benefit) expense
(6,932
)
8,051
Depreciation
1,711
1,567
Amortization of purchased intangible
assets
592
506
EBITDA attributable to the stockholders of
the Company
$
(33,275
)
$
32,592
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 results of operations presented in accordance with
GAAP. 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, 2019
January 31, 2019
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
170,710
$
164,318
Short-term investments
62,914
132,213
Accounts receivable, net
45,989
36,174
Contract assets
51,742
58,357
Other current assets
21,782
25,286
TOTAL CURRENT ASSETS
353,137
416,348
Property, plant and equipment, net
20,903
19,778
Goodwill
30,766
32,838
Other purchased intangible assets, net
5,545
6,137
Right-of-use assets
1,043
—
Deferred taxes
7,979
1,257
Other assets
351
290
TOTAL ASSETS
$
419,724
$
476,648
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable
$
26,028
$
39,870
Accrued expenses
30,928
33,097
Contract liabilities
1,758
8,349
TOTAL CURRENT LIABILITIES
58,714
81,316
Lease liabilities
616
—
Other noncurrent liabilities
1,325
960
TOTAL LIABILITIES
60,655
82,276
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; 15,636,535 and 15,577,102 shares
issued at July 31 and January 31, 2019, respectively; 15,633,302
and 15,573,869 shares outstanding at July 31 and January 31, 2019,
respectively
2,346
2,337
Additional paid-in capital
147,445
144,961
Retained earnings
211,167
247,616
Accumulated other comprehensive loss
(1,406
)
(346
)
TOTAL STOCKHOLDERS’ EQUITY
359,552
394,568
Non-controlling interests
(483
)
(196
)
TOTAL EQUITY
359,069
394,372
TOTAL LIABILITIES AND EQUITY
$
419,724
$
476,648
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190909005920/en/
Company Contact: Rainer Bosselmann 301.315.0027
Investor Relations Contact: David Watson 301.315.0027
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