Argan, Inc. Reports Second Quarter Results

ROCKVILLE, Md.--()--Argan, Inc. (NYSE: AGX) today announced financial results for its second quarter and six month period ended July 31, 2015.

Second Quarter 2015 Highlights:

  • Revenues of $97.4 million for the current quarter vs. $85.5 million in the first quarter ended April 30th.
  • Revenues of $182.9 million for the six months ended July 31, 2015 vs. $153.2 million for the six months ended July 31, 2014.
  • Net income attributable to our stockholders was $11.3 million and $18.8 million for the quarter and six months ended July 31, 2015 vs. $8.6 million and $12.0 million for the quarter and six months ended July 31, 2014.
  • EBITDA attributable to our stockholders was $19.4 million for the current quarter and $31.9 million for the six months ended July 31, 2015.
  • Cash, cash equivalents and short-term investments totaled just under $300 million at quarter-end.

Our continued strong management of two large, gas-fired power plant projects has resulted in increased revenues and gross profit for the six months ending July 31, 2015 vs. the same period in 2014. Year to date revenues increased by $29.7 million to $182.9 million for the six months ended July 31, 2015. Our year to date gross profit increased to $49.7 million, or 27% of corresponding revenues, from $31.6 million, or 21% of corresponding revenues, for the six month period July 31, 2014. For the current quarter, revenues declined slightly to $97.4 million. However, our gross profit for the current quarter increased to $28.5 million, or 29% of corresponding revenues, from $21.6 million, or 21% of corresponding revenues, for last year’s second quarter.

Due primarily to the strong performance of the power industry services business, net income attributable to our stockholders for the second quarter was $11.3 million, or $0.75 per diluted share, compared with net income attributable to our stockholders of $8.6 million, or $0.58 per diluted share for the second quarter last year. Net income attributable to our stockholders for the six months ended July 31, 2015 was $18.8 million, or $1.26 per diluted share, and was $12.0 million, or $0.82 per diluted share, for the comparable period last year.

Likewise, consolidated EBITDA attributable to our stockholders increased by $5.5 million to $19.4 million for the current quarter, and increased by $12.5 million to $31.9 million for the six months ended July 31, 2015.

Contract backlog increased during the current quarter to $660 million from $345 million at the end of the first quarter due to the addition of our recently announced EPC contract with Moxie Freedom. Subsequent to the quarter ended July 31, 2015, we added contract value of approximately $650 million to our backlog as a result of three EPC contracts; a $100 million contract with Exelon and 2 contracts totaling $550 million with NTE Energy.

Commenting on Argan’s second quarter results, Rainer Bosselmann, Chairman and Chief Executive Officer, stated, “Our effective management of large gas-fired power projects has resulted in consistently strong revenues and gross margins. We look forward to the next three to five years, given our strong and improved 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 gas-fired and biomass-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 Southern Maryland Cable, which provides telecommunications infrastructure services.

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 our power industry services business. 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 July 31, Six Months Ended July 31,
2015   2014 2015   2014
REVENUES
Power industry services $ 93,471,000 $ 100,418,000 $ 176,355,000 $ 150,242,000
Telecommunications infrastructure services   3,963,000   1,612,000   6,566,000   2,979,000
Revenues   97,434,000   102,030,000   182,921,000   153,221,000
COST OF REVENUES
Power industry services 66,136,000 79,261,000 128,515,000 119,311,000
Telecommunications infrastructure services   2,805,000 1,205,000   4,746,000   2,296,000
Cost of revenues   68,941,000 80,466,000   133,261,000   121,607,000
GROSS PROFIT 28,493,000 21,564,000 49,660,000 31,614,000
Selling, general and administrative expenses   4,848,000   4,481,000   10,387,000   7,859,000
INCOME FROM OPERATIONS 23,645,000 17,083,000 39,273,000 23,755,000
Other income, net   128,000   41,000   212,000   63,000
INCOME BEFORE INCOME TAXES 23,773,000 17,124,000 39,485,000 23,818,000
Income tax expense   7,939,000   5,104,000   12,800,000   6,997,000
NET INCOME 15,834,000 12,020,000 26,685,000 16,821,000

Net income attributable to noncontrolling interests

  4,527,000   3,470,000   7,875,000   4,796,000
 
NET INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC. $ 11,307,000 $ 8,550,000 $ 18,810,000 $ 12,025,000

 

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

Basic $ 0.77 $ 0.59 $ 1.28 $ 0.84
Diluted $ 0.75 $ 0.58 $ 1.26 $ 0.82

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic   14,747,000   14,399,000   14,693,000   14,350,000
Diluted   15,003,000   14,655,000   14,952,000   14,641,000
 
ARGAN, INC. AND SUBSIDIARIES
Reconciliations to EBITDA
Consolidated Operations (Unaudited)
 
Three Months Ended July 31,
2015 2014
Net income $ 15,834,000 $ 12,020,000
Less net income attributable to noncontrolling interests (4,527,000 ) (3,470,000 )
Interest expense (34,000 ) --
Income tax expense 7,852,000 5,104,000
Depreciation 140,000 141,000
Amortization of purchased intangible assets   104,000   61,000
EBITDA attributable to the stockholders of Argan, Inc. $ 19,369,000 $ 13,856,000
 

Power Industry Services (Unaudited)

 
Three Months Ended July 31,
2015 2014
Income before income taxes $ 24,787,000 $ 18,428,000
Less pre-tax income attributable to noncontrolling interests (4,614,000 ) (3,470,000 )
Interest expense (34,000 ) --
Depreciation 95,000 96,000
Amortization of purchased intangible assets   104,000   61,000
EBITDA attributable to the stockholders of Argan, Inc. $ 20,338,000 $ 15,115,000
 

Consolidated Operations (Unaudited)

 
Six Months Ended July 31,
2015 2014
Net income $ 26,685,000 $ 16,821,000
Less net income attributable to noncontrolling interests (7,875,000 ) (4,796,000 )
Interest expense (101,000 ) --
Income tax expense 12,756,000 6,997,000
Depreciation 258,000 283,000
Amortization of purchased intangible assets   164,000   121,000
EBITDA attributable to the stockholders of Argan, Inc. $ 31,887,000 $ 19,426,000
 

Power Industry Services (Unaudited)

 
Six Months Ended July 31,
2015 2014
Income before income taxes $ 41,787,000 $ 26,437,000
Less pre-tax income attributable to noncontrolling interests (7,919,000 ) (4,796,000 )
Interest expense (101,000 ) --
Depreciation 170,000 192,000
Amortization of purchased intangible assets   164,000   121,000
EBITDA attributable to the stockholders of Argan, Inc. $ 34,101,000 $ 21,954,000
 

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, reconciliations between the Company's GAAP and non-GAAP financial results 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
CONSOLIDATED BALANCE SHEETS
 
July 31, 2015 January 31, 2015
ASSETS (Unaudited) (Note 1)
 
CURRENT ASSETS:
Cash and cash equivalents $182,136,000 $333,691,000
Short-term investments 117,064,000 --
Accounts receivable, net of allowance for doubtful accounts 38,839,000 27,330,000
Costs and estimated earnings in excess of billings 2,943,000 455,000
Notes receivable and accrued interest 6,281,000 1,786,000
Prepaid expenses and other current assets 2,856,000   1,092,000  
TOTAL CURRENT ASSETS 350,119,000 364,354,000
Property, plant and equipment, net of accumulated depreciation 5,189,000 6,518,000
Goodwill 22,887,000 18,476,000
Intangible assets, net of accumulated amortization 1,863,000   1,845,000  
TOTAL ASSETS $380,058,000   $391,193,000  
 
LIABILITIES AND EQUITY
 
CURRENT LIABILITIES:
Accounts payable $ 32,392,000 $ 37,691,000
Accrued expenses 24,022,000 15,976,000
Billings in excess of costs and estimated earnings 114,587,000 161,564,000
Deferred income tax liabilities 656,000   201,000  
TOTAL CURRENT LIABILITIES 171,657,000 215,432,000
Deferred income tax liabilities 821,000   809,000  
TOTAL LIABILITIES 172,478,000   216,241,000  
 
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; 14,792,702 and 14,634,434 shares issued at July 31 and January 31, 2015, respectively; 14,789,469 and 14,631,201 shares outstanding at July 31 and January 31, 2015, respectively

2,219,000

2,195,000

Additional paid-in capital 115,621,000 109,696,000
Retained earnings 92,418,000 73,614,000
Treasury stock, at cost – 3,233 shares at July 31 and January 31, 2015 (33,000 ) (33,000 )
TOTAL STOCKHOLDERS’ EQUITY 210,225,000 185,472,000
Noncontrolling interests (2,645,000 ) (10,520,000 )
TOTAL EQUITY 207,580,000   174,952,000  
TOTAL LIABILITIES AND EQUITY $380,058,000   $391,193,000  
 

Note 1 – The condensed consolidated balance sheet as of January 31, 2015 has been derived from audited consolidated financial statements.

Contacts

Argan, Inc.
Company Contact:
Rainer Bosselmann, 301-315-0027
or
Investor Relations Contact:
Cynthia Flanders, 301-315-0027

Contacts

Argan, Inc.
Company Contact:
Rainer Bosselmann, 301-315-0027
or
Investor Relations Contact:
Cynthia Flanders, 301-315-0027