Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”)
today announced financial results for its third quarter ended
October 31, 2017. 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)):
October
31,
2017
2016
Change
%
Change
For the Quarter Ended: Revenues $ 232,945 $ 175,444 $ 57,501
33 % Gross profit 37,718 36,578 1,140 3 Gross profit margins 16.2 %
20.8 % (4.6 ) (22 ) Net income attributable to the stockholders of
the Company $ 17,229 $ 18,073 $ (844 ) (5 ) Diluted per share 1.09
1.16 (0.07 ) (6 ) EBITDA attributable to the stockholders of the
Company 30,275 27,024 3,251 12 Diluted per share 1.92 1.73 0.19 11
For the Nine Months Ended: Revenues $ 723,237 $
468,287 $ 254,950 54 % Gross profit 129,221 108,892 20,329 19 Gross
profit margins 17.9 % 23.3 % (5.4 ) (23 ) Net income attributable
to the stockholders of the Company $ 64,993 $ 49,977 $ 15,016 30
Diluted per share 4.11 3.23 0.88 27 EBITDA attributable to the
stockholders of the Company 105,443 79,295 26,148 33 Diluted per
share 6.68 5.12 1.56 30
As of:
October
31,2017
January
31,2017
Change
%
Change
Cash, cash equivalents and short-term investments $ 483,681 $
522,994
$
(39,313
)
(8
)%
Billings in excess of costs and estimated earnings 146,863 209,241
(62,378 ) (30 ) Backlog 509,000 1,011,000 (502,000 ) (50 )
Third Quarter Results:
Revenues increased to $233 million, up 33% compared to the prior
year quarter, primarily due to Gemma Power Systems (GPS) having
reached peak and post-peak construction activities on four large,
natural gas-fired power plants. The power industry services segment
continues to drive our financial results and represents 91% of
consolidated revenues for the quarter ended October 31, 2017. Gross
profit increased 3% to $38 million, primarily due to the increased
revenues, while gross margin percentage decreased from 20.8% to
16.2% compared to the prior year quarter, which primarily reflected
the achievement of final completion of two natural gas-fired power
plant projects in the prior year period, as well as the effects of
increased labor and subcontractor cost estimates in the current
period for certain projects.
Selling, general and administrative expenses increased $0.3
million to $10.1 million, primarily reflecting the cost of a larger
organization necessary to support increased operations and to
expand into new markets. However, these expenses decreased as a
percentage of revenues to 4.3% from 5.6% in the prior year quarter.
Other income increased $1.0 million quarter over quarter, due to
increased yields and short-term investment balances. There was no
net income attributable to non-controlling interests for the
current quarter compared to $1.2 million in the prior year quarter,
as activities on two large power plant projects were completed last
year by the joint ventures. The income tax expense and effective
rate were higher in the current quarter as compared to the prior
year quarter due to certain favorable adjustments in the prior year
quarter compared to unfavorable adjustments in the current quarter.
Exclusive of adjustments, the estimated annual effective income tax
is 36.7% for the current year compared to 35.2% at this time last
year, an increase primarily due to the decrease in non-controlling
interests. These factors resulted in net income attributable to our
stockholders decreasing 5% to $17.2 million, or $1.09 per diluted
share, compared to $18.1 million, or $1.16 per diluted share, for
the prior year quarter. EBITDA attributable to the stockholders for
the quarter ended October 31, 2017 increased 12% to $30.3 million,
or $1.92 per diluted share, from $27.0 million, or $1.73 per
diluted share, for the prior year quarter.
Nine Month Results:
For the nine months ended October 31, 2017, consolidated
revenues increased 54% to a record $723 million over the prior year
period, primarily due to the ramped-up, peak and post-peak
construction activities of GPS on four large, natural gas-fired
power plants. The power industry services segment represented 92%
of consolidated revenues for the nine months ended October 31,
2017. Gross profit increased 19% to $129 million, primarily due to
the increased revenues, while gross margin percentage decreased
from 23.3% to 17.9% compared to the prior year period, reflecting
the reason discussed above, the changes in the mix and progress of
various power plant projects and the differences in their
respective gross margins.
For the reasons discussed above, for the nine months ended
October 31, 2017, selling, general and administrative expenses
increased $6.0 million to $30.4 million, other income increased
$2.9 million and net income attributable to non-controlling
interests decreased 96%, or $6.4 million over the prior year
period. In addition, as described above, income tax expense
increased $10.6 million due to higher pre-tax income, an increased
estimated annual effective income tax and other adjustments. These
factors resulted in net income attributable to our stockholders for
the nine months ended October 31, 2017 increasing 30% to $65.0
million, or $4.11 per diluted share, compared to $50.0 million, or
$3.23 per diluted share, for the prior year period. EBITDA
attributable to the stockholders for the nine months ended October
31, 2017 increased 33% to $105.4 million, or $6.68 per diluted
share, from $79.3 million, or $5.12 per diluted share, for the
prior year period.
The Company’s balance sheet continues to strengthen. As of
October 31, 2017, cash, cash equivalents and short-term investments
totaled $484 million and net liquidity was $292 million. The
Company has no bank debt. The work performed in the quarter reduced
the contract backlog to $0.5 billion as of October 31, 2017,
including Atlantic Projects Company’s (APC) contract to perform
certain EPC services for the expansion of an existing gas-fired
power station in Spalding, England that was added to backlog during
the quarter.
Commenting on Argan’s results, Rainer Bosselmann, Chairman and
Chief Executive Officer, stated, “On a trailing twelve-month basis,
we have reached $930 million in revenues, $85 million in net income
and $137 million in EBITDA. Our fiscal year results just two years
ago were less than half of each of these amounts. This growth is a
direct result of our execution on major EPC projects in this
increasingly challenging market over the past two years. We are
proud of this growth and these results, and we are pleased to have
added some great projects in the United Kingdom to our backlog, but
we know we need to add many more. We remain hard at work in those
efforts as we endeavor to continue increasing long term shareholder
value.”
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
performance of our power industry services business; (2) the
Company’s ability to successfully and profitably integrate
acquisitions; and (3) the Company’s ability to achieve 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 detailed from
time to time in Argan’s filings with the SEC. 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
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS
(In thousands, except per share data) (Unaudited)
Three Months EndedOctober
31,
Nine Months EndedOctober
31,
2017 2016 2017
2016 REVENUES $ 232,945 $ 175,444 $
723,237 $ 468,287 Cost of revenues 195,227 138,866
594,016 359,395
GROSS PROFIT
37,718 36,578 129,221 108,892 Selling, general and administrative
expenses 10,119 9,848 30,408 24,429 Impairment loss —
— — 1,979
INCOME FROM OPERATIONS
27,599 26,730 98,813 82,484 Other income, net 1,692
690 4,221 1,283
INCOME BEFORE INCOME
TAXES 29,291 27,420 103,034 83,767 Income tax expense
12,062 8,194 37,738 27,122
NET INCOME 17,229 19,226 65,296 56,645 Net income
attributable to non-controlling interests — 1,153
303 6,668
NET INCOME ATTRIBUTABLE TO THE
STOCKHOLDERS OF ARGAN, INC.
17,229 18,073 64,993
49,977
EARNINGS PER SHARE ATTRIBUTABLE TO THE
STOCKHOLDERS OF ARGAN, INC.
Basic $ 1.11 $ 1.19 $ 4.19 $ 3.34 Diluted $ 1.09 $
1.16 $ 4.11 $ 3.23
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic 15,545 15,137 15,509
14,974 Diluted 15,793 15,601 15,796
15,490
CASH DIVIDENDS PER SHARE $ 1.00 $ 1.00
$ 1.00 $ 1.00
ARGAN, INC. AND
SUBSIDIARIES Reconciliations to EBITDA (In
thousands)(Unaudited) Three Months Ended October
31, 2017 2016 Net income $ 17,229 $ 19,226
Less EBITDA attributable to noncontrolling interests — (1,153 )
Income tax expense 12,062 8,194 Depreciation 726 525 Amortization
of purchased intangible assets 258 232
EBITDA attributable to the stockholders of the Company $ 30,275
$ 27,024
Nine Months Ended October 31,
2017 2016 Net income $ 65,296 $ 56,645 Less EBITDA
attributable to noncontrolling interests (303 ) (6,668 ) Income tax
expense 37,738 27,122 Depreciation 1,936 1,444 Amortization of
purchased intangible assets 776 752
EBITDA attributable to the stockholders of the Company $ 105,443
$ 79,295
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)
October 31,2017
January 31,2017
ASSETS
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 149,708 $ 167,198 Short-term
investments 333,973 355,796 Accounts receivable 83,681 54,836 Costs
and estimated earnings in excess of billings 10,197 3,192 Prepaid
expenses and other current assets 6,236 6,927
TOTAL CURRENT ASSETS 583,795 587,949 Property, plant
and equipment, net 15,257 13,112 Goodwill 34,913 34,913 Other
intangible assets, net 7,405 8,181 Deferred taxes 383 241 Other
assets 548 92
TOTAL ASSETS $
642,301 $ 644,488
LIABILITIES AND
EQUITY CURRENT LIABILITIES Accounts payable $
114,448 $ 101,944 Accrued expenses 31,005 39,539 Billings in excess
of costs and estimated earnings 146,863
209,241
TOTAL CURRENT LIABILITIES 292,316 350,724
Deferred taxes 1,788 1,195
TOTAL
LIABILITIES 294,104 351,919
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; 15,551,952 and 15,461,452 shares
issued at October 31 and January 31, 2017, respectively; 15,548,719
and 15,458,219 shares outstanding at October 31 and January 31,
2017, respectively
2,333
2,319
Additional paid-in capital 141,766 135,426 Retained earnings
204,095 154,649 Accumulated other comprehensive losses (8 )
(762 )
TOTAL STOCKHOLDERS’ EQUITY 348,186 291,632
Noncontrolling interests 11 937
TOTAL EQUITY 348,197 292,569
TOTAL LIABILITIES AND EQUITY $ 642,301 $ 644,488
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version on businesswire.com: http://www.businesswire.com/news/home/20171206006165/en/
Argan, Inc.Company Contact:Rainer Bosselmann,
301-315-0027orInvestor Relations Contact:David Watson,
301-315-0027
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