Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”)
today announced financial results for its third quarter ended
October 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)):
October
31,
2018
2017
Change
%
Change
For the Quarter Ended: Revenues $ 116,459 $ 232,945 $
(116,486 ) (50 )% Gross profit 29,532 37,718 (8,186 ) (22 ) Gross
margins 25.4 % 16.2 % 9.2 % 57 Net income attributable to the
stockholders of the Company $ 32,434 $ 17,229 $ 15,205 88 Diluted
per share 2.07 1.09 0.98 90 EBITDA attributable to the stockholders
of the Company 21,025 30,275 (9,250 ) (31 ) Diluted per share 1.34
1.92 (0.58 ) (30 )
As of:
October 31,
2018
January
31,2018
Change
%
Change
Cash, cash equivalents and short-term investments $ 314,787 $
434,015 $ (119,228 ) (27 ) % Net liquidity (1) 339,616 301,817
37,799 13 Project backlog 365,000 379,000 (14,000 ) (4 )
(1) We define net liquidity, or working
capital, as our total current assets less our total current
liabilities.
As successful execution by Gemma Power Systems (“GPS”) on four
large gas-fired power plant projects has reached the final stages,
revenues saw a decline during the current quarter to $116.5 million
compared to $232.9 million in the prior year quarter. Construction
activities for these projects have matured from peak levels which
the Company experienced during the prior fiscal year, to the
commissioning, start up and final activities. The decline in
revenues at GPS was partially offset by increased revenues at
Atlantic Projects Company, as it reached peak construction
activities on two power plant projects, and The Roberts Company
during the third quarter. Gross profits decreased by 22% to $29.5
million from $37.7 million for the prior year, reflecting primarily
the reduction in consolidated revenues between periods. Our gross
margin percentage increased to 25.4% from 16.2% for the prior year
quarter, reflecting favorable project close-out adjustments to the
gross profits of certain projects that have reached substantial
completion.
The levels of selling, general and administrative expenses rose
by $1.0 million, or 10%, as compared to the prior year period due
primarily to increased non-chargeable staff costs.
During the current quarter, the Company completed a year-long
detailed review of the work performed by its engineering staff on
major EPC services projects in order to identify and quantify the
amounts of research and development (“R&D”) credits that may be
available to reduce current and prior year income taxes. Based on
this review, the resulting income tax benefits, associated with
R&D activities conducted in prior years, in the total amount of
$16.5 million, or $1.05 per diluted share, have been recognized in
income taxes in the current quarter. Also, the Tax Cuts and Jobs
Act had a favorable impact on our tax rate, resulting in an
estimated annual effective income tax rate of 28% (before the
effects of R&D credits) for the current quarter, compared to an
estimated effective income tax rate of 37% for the third quarter
last year.
These factors resulted in net income attributable to our
stockholders increasing 88% to $32.4 million for the current
quarter, or $2.07 per diluted share, from $17.2 million, or $1.09
per diluted share, for the prior year quarter. EBITDA attributable
to our stockholders for three months ended October 31, 2018
decreased 31% to $21.0 million, or $1.34 per diluted share, from
$30.3 million, or $1.92 per diluted share, for the prior year
quarter. We paid our third regular quarterly cash dividend of $0.25
per share in October.
As of October 31, 2018, our cash, cash equivalents and
short-term investments totaled $315 million and net liquidity was
$340 million; plus, we had no bank debt. Our project backlog was
$365 million as of October 31, 2018, slightly down from $379
million at the end of the prior year, mostly due to year-to-date
work on existing backlog partially offset by the value of an EPC
contract entered into by GPS during the first quarter. 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 with projected start dates
extending through 2019.
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-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 October
31,
Nine Months Ended October 31, 2018
2017 2018 2017 REVENUES $
116,459 $ 232,945 $ 394,495 $ 723,237 Cost of revenues
86,927 195,227 318,803
594,016
GROSS PROFIT 29,532 37,718 75,692 129,221
Selling, general and administrative expenses 11,147
10,119 31,162 30,408
INCOME FROM OPERATIONS 18,385 27,599 44,530 98,813 Other
income, net 1,429 1,692 5,121
4,221
INCOME BEFORE INCOME TAXES 19,814
29,291 49,651 103,034 Income tax benefit (expense) 12,560
(12,062 ) 4,509 (37,738 )
NET
INCOME 32,374 17,229 54,160 65,296 Net (loss) income
attributable to non-controlling interests (60 ) —
(83 ) 303
NET INCOME ATTRIBUTABLE TO THE
STOCKHOLDERS OF ARGAN, INC.
32,434 17,229 54,243 64,993
Foreign currency translation adjustments (1,092 )
(139 ) (2,364 ) 754
COMPREHENSIVE INCOME
ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.
$
31,342
$ 17,090
$
51,879
$ 65,747
EARNINGS PER SHARE ATTRIBUTABLE TO THE
STOCKHOLDERS OF ARGAN, INC.
Basic $ 2.08 $ 1.11
$
3.48
$ 4.19 Diluted $ 2.07 $ 1.09 $ 3.46
$ 4.11
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic 15,569 15,545 15,568
15,509 Diluted 15,702
15,793 15,685 15,796
CASH DIVIDENDS PER SHARE $ 0.25 $ 1.00 $ 0.75
$ 1.00
ARGAN, INC. AND
SUBSIDIARIES Reconciliations to EBITDA
(In thousands) (Unaudited)
Three Months Ended October 31, 2018
2017 Net income $ 32,374 $ 17,229 Less EBITDA attributable
to noncontrolling interests 60 — Interest expense — — Income tax
(benefit) expense (12,560 ) 12,062 Depreciation 898 726
Amortization of purchased intangible assets 253
258 EBITDA attributable to the stockholders of the
Company $ 21,025 $ 30,275
Nine Months Ended
October 31, 2018 2017 Net income $ 54,160 $
65,296 Less EBITDA attributable to noncontrolling interests 83 (303
) Interest expense 659 — Income tax (benefit) expense (4,509 )
37,738 Depreciation 2,465 1,936 Amortization of purchased
intangible assets 759 776 EBITDA
attributable to the stockholders of the Company $ 53,617 $
105,443 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, 2018 January 31, 2018 (Unaudited)
ASSETS CURRENT ASSETS Cash and cash
equivalents $ 155,791 $ 122,107 Short-term investments 158,996
311,908 Accounts receivable, net 43,612 24,756 Contract assets
55,628 13,847 Other current assets 25,465 12,410
TOTAL CURRENT ASSETS 439,492 485,028 Property, plant and
equipment, net 19,866 15,299 Goodwill 34,329 34,329 Other purchased
intangible assets, net 6,390 7,149 Deferred taxes 315 439 Other
assets 377 426
TOTAL ASSETS $ 500,769 $
542,670
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable $ 64,987 $ 100,238 Accrued expenses 25,111 35,360
Contract liabilities 9,778 47,613
TOTAL CURRENT
LIABILITIES 99,876 183,211 Deferred taxes 1,388
1,293
TOTAL LIABILITIES 101,264 184,504
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; 15,573,952 and 15,570,952 shares
issued at October 31 and January 31, 2018, respectively; 15,570,719
and 15,567,719 shares outstanding at October 31 and January 31,
2018, respectively
2,336
2,336
Additional paid-in capital 144,507 143,215 Retained earnings
253,716 211,150 Accumulated other comprehensive (loss) income
(942 ) 1,422
TOTAL STOCKHOLDERS’ EQUITY
399,617 358,123 Non-controlling interests (112 ) 43
TOTAL EQUITY 399,505 358,166
TOTAL
LIABILITIES AND EQUITY $ 500,769 $ 542,670
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181206005104/en/
Company Contact:Rainer Bosselmann301.315.0027
Investor Relations Contact:David Watson301.315.0027
Argan (NYSE:AGX)
Historical Stock Chart
From Mar 2024 to Apr 2024
Argan (NYSE:AGX)
Historical Stock Chart
From Apr 2023 to Apr 2024