Jun 7, 2017   SOURCE: BusinessWire

Argan, Inc. Reports First Quarter Results

Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”) today announced financial results for its first quarter ended April 30, 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)):

     

April 30,

2017

 

2016

Change

% Change

For the Quarter Ended:
Revenues $ 230,489 $ 130,348 $ 100,141 77 %
Gross profit 40,096 28,302 11,794 42
Gross margins 17.4 % 21.7 % (4.3 )% (20 )
Net income attributable to the stockholders of the Company $ 20,625 $ 12,230 $ 8,395 69
Diluted per share 1.31 0.81 0.50 62
EBITDA attributable to the stockholders of the Company 32,456 20,157 12,299 61
Diluted per share 2.06 1.34 0.72 54
 
As of:

April 30,
2017

January 31,
2017

Change

% Change

Cash, cash equivalents and short-term investments $ 563,439 $ 522,994 $ 40,445 8 %
Billings in excess of costs and estimated earnings 234,344 209,241 25,103 12
 
Backlog 867,000 1,011,000 (144,000 ) (14 )
 

First Quarter Results:

Revenues increased to a quarterly record of $230 million, up 77% compared to the prior year quarter, primarily due to Gemma Power Systems (GPS) having ramped up 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 April 30, 2017. Gross profit increased 42% to $40 million, primarily due to the increased revenues, while gross margin percentage decreased from 21.7% to 17.4% compared to the prior year quarter, which primarily reflected changes in the mix and progress of various power plant projects and the differences in their respective gross margins.

Selling, general and administrative expenses increased $2.4 million to $9.5 million, primarily due to increased incentive and stock option compensation and human capital costs reflective of larger operations, but decreased as a percentage of revenue to 4.1% from 5.4% in the prior year quarter. Other income from short-term investments increased $1.2 million from the prior year quarter due to higher yields and investment balances. Net income attributable to non-controlling interests decreased 93%, or $1.8 million, as activity on two large power plant projects was completed by joint ventures. These factors and a relatively consistent effective income tax rate resulted in first quarter net income attributable to our stockholders increasing 69% to $20.6 million, or $1.31 per diluted share, compared to $12.2 million, or $0.81 per diluted share, for the prior year quarter. EBITDA attributable to the stockholders for the quarter ended April 30, 2017 also increased 61% to $32.5 million, or $2.06 per diluted share, from $20.2 million, or $1.34 per diluted share, for the prior year quarter.

The Company’s balance sheet continues to strengthen. As of April 30, 2017, cash, cash equivalents and short-term investments totaled $563 million and net liquidity was $259 million. The Company has no bank debt. Although there were no major additions to backlog during the three months ended April 30, 2017, the contract backlog remains healthy with an aggregate value of approximately $867 million as of April 30, 2017. In addition, subsequent to the end of the quarter, Atlantic Projects Company won a contract for the erection of a 299 MW biomass boiler in Teesside, England.

Commenting on Argan’s results, Rainer Bosselmann, Chairman and Chief Executive Officer, stated, “This represents the eighth consecutive quarter of increasing revenues, fourth consecutive quarter with over $18 million in net income for our shareholders and fifth consecutive quarter of increasing net liquidity which stands at over $259 million today. As I have noted before, this consistent growth and the Company’s record success during these periods could not have been achieved without the operational excellence of our employees. We are committed to maintaining both the Company and employee successes; we are hard at work executing on our current projects; and we are focused on adding new projects to the backlog.”

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 Ended April 30,
  2017       2016  
 
REVENUES $ 230,489 $ 130,348
Cost of revenues   190,393     102,046  
GROSS PROFIT 40,096 28,302
Selling, general and administrative expenses   9,489     7,047  
INCOME FROM OPERATIONS 30,607 21,255
Other income, net   1,218     37  
INCOME BEFORE INCOME TAXES 31,825 21,292
Income tax expense   11,076     7,172  
NET INCOME 20,749 14,120
Net income attributable to noncontrolling interests   124     1,890  

NET INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.

$

20,625  

$

12,230  
 

EARNINGS PER SHARE ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.

Basic

$

1.33   $ 0.82  
Diluted $ 1.31   $ 0.81  
 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

Basic   15,467     14,842  
Diluted   15,771     15,055  
 
ARGAN, INC. AND SUBSIDIARIES
Reconciliations to EBITDA
(In thousands)(Unaudited)
 
Three Months Ended April 30,
2017   2016
Net income $ 20,749 $ 14,120
Less EBITDA attributable to noncontrolling interests (124 ) (1,890 )
Income tax expense 11,076 7,172
Depreciation 572 434
Amortization of purchased intangible assets   183   321
EBITDA attributable to the stockholders of the Company $ 32,456 $ 20,157
 

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)
 
April 30, 2017 January 31, 2017

ASSETS

(Unaudited)

CURRENT ASSETS

Cash and cash equivalents $ 167,347 $ 167,198
Short-term investments 396,092 355,796
Accounts receivable, net 71,331 54,836
Costs and estimated earnings in excess of billings 4,357 3,192
Prepaid expenses and other current assets   4,544     6,927  
TOTAL CURRENT ASSETS 643,671 587,949
Property, plant and equipment, net 14,434 13,112
Goodwill 34,913 34,913
Intangible assets, net 7,998 8,181

Deferred taxes

8,634 8,725
Other assets   276     92  
TOTAL ASSETS $ 709,926   $ 652,972  
 
LIABILITIES AND EQUITY
 
CURRENT LIABILITIES
Accounts payable $ 118,077 $ 101,944
Accrued expenses 32,258 39,539
Billings in excess of costs and estimated earnings   234,344     209,241  
TOTAL CURRENT LIABILITIES 384,679 350,724

Deferred taxes

  9,846     9,679  
TOTAL LIABILITIES   394,525     360,403  
 
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; 15,488,952 and 15,461,452 shares issued at April 30 and January 31, 2017, respectively; 15,485,719 and 15,458,219 shares outstanding at April 30 and January 31, 2017, respectively

 

2,323

2,319

Additional paid-in capital 137,401 135,426
Retained earnings 175,274 154,649
Accumulated other comprehensive losses   (658 )   (762 )
TOTAL STOCKHOLDERS’ EQUITY 314,340 291,632
Noncontrolling interests   1,061     937  
TOTAL EQUITY   315,401     292,569  
TOTAL LIABILITIES AND EQUITY $ 709,926   $ 652,972