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Argan, Inc. Reports Third Quarter Earnings

AGX

Argan, Inc. (NYSE: AGX) today announced financial results for the three and nine months ended October 31, 2014.

For the quarter ended October 31, 2014, revenues were $127.6 million compared to $63.5 million for the quarter ended October 31, 2013. Gemma Power Systems LLC and affiliates (Gemma) contributed $125.7 million, or 99% of revenues in the third quarter of fiscal 2015, compared to $61.1 million, or 96% of revenues in the third quarter of fiscal 2014.

For the nine months ended October 31, 2014, revenues were $280.8 million compared to $168.0 million during the nine months ended October 31, 2013. Gemma contributed $275.9 million, or 98% of revenues in the first nine months of fiscal 2015, compared to $160.4 million, or 95% of revenues in the first nine months of fiscal 2014.

Argan reported consolidated EBITDA (Earnings before interest, taxes, depreciation and amortization) attributable to the stockholders of Argan, Inc. of $20.9 million for the quarter ended October 31, 2014 compared to $20.3 million for the same prior year period. Gemma recorded $22.3 million in EBITDA for the third quarter of fiscal 2015 compared to $21.2 million for the third quarter of fiscal 2014. Argan reported EBITDA attributable to the stockholders of Argan, Inc. of $40.3 million for the nine months ended October 31, 2014 compared to $50.5 million for the same prior year period. Gemma, for its segment, recorded $44.3 million in EBITDA for the first nine months of fiscal 2015 compared to $51.9 million for the first nine months of fiscal 2014.

In the third quarter of fiscal 2015, the Company reported income before income taxes of $24.9 million compared to income before income taxes of $20.6 million in the third quarter of fiscal 2014.

For the first nine months of fiscal 2015, the Company reported income before income taxes of $48.8 million compared to income before income taxes of $52.8 million for the first nine months of fiscal 2014.

Net income attributable to the stockholders of Argan for the quarter ended October 31, 2014 was $12.4 million, or $0.84 per diluted share based on 14,795,000 diluted shares outstanding, compared to net income attributable to the stockholders of Argan of $11.9 million, or $0.83 per diluted share based on 14,365,000 diluted shares outstanding, for the quarter ended October 31, 2013.

Net income attributable to the stockholders of Argan for the nine months ended October 31, 2014 was $24.4 million, or $1.66 per diluted share based on 14,761,000 diluted shares outstanding, compared to net income attributable to the stockholders of Argan of $31.0 million, or $2.16 per diluted share based on 14,302,000 diluted shares outstanding, for the nine months ended October 31, 2013.

Argan had consolidated cash of $361.0 million as of October 31, 2014 and was debt free. Consolidated working capital increased during the current fiscal year to date to approximately $162.0 million as of October 31, 2014 and consolidated tangible net worth increased to $156.6 million in the same period.

Gemma’s backlog as of October 31, 2014 was $520 million compared to $832 million as of October 31, 2013. The October 31, 2014 backlog includes primarily the combined cycle gas fired power plants for Panda Liberty and Panda Patriot.

Commenting on Argan’s financial results, Rainer Bosselmann, Chairman and Chief Executive Officer stated, “We are pleased with the operational performance of Gemma which is in the middle of constructing the Panda Liberty and Panda Patriot power plants. In comparing both the fiscal 2015 third quarter and year to date results to the same periods in the prior year, Gemma has excelled in construction activities in the current year while last fiscal year results included substantial development fees which are not recurring in fiscal 2015.”

About Argan, Inc.

Argan’s primary business is designing and building energy plants through its Gemma Power Systems subsidiary. These energy plants include traditional gas as well as alternative energy including biodiesel, ethanol, and renewable energy sources such as wind power. Argan also owns Southern Maryland Cable, Inc.

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 the energy sector. 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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three Months Ended October 31, Nine Months Ended October 31,
2014   2013 2014   2013
REVENUES  
Power industry services $ 125,660,000 $ 61,103,000 $ 275,902,000 $ 160,392,000
Telecommunications infrastructure services   1,904,000   2,349,000   4,883,000   7,572,000
Revenues   127,564,000   63,452,000   280,785,000   167,964,000
COST OF REVENUES
Power industry services 95,863,000 38,012,000 215,174,000 104,062,000
Telecommunications infrastructure services   1,388,000   1,564,000   3,684,000   5,741,000
Cost of revenues   97,251,000   39,576,000   218,858,000   109,803,000
GROSS PROFIT 30,313,000 23,876,000 61,927,000 58,161,000
Selling, general and administrative expenses   5,473,000   3,545,000   13,332,000   8,589,000
INCOME FROM OPERATIONS 24,840,000 20,331,000 48,595,000 49,572,000
Gains on the deconsolidation of variable interest entities -- -- -- 2,444,000
Other income, net   99,000   261,000   162,000   827,000
INCOME BEFORE INCOME TAXES 24,939,000 20,592,000 48,757,000 52,843,000
Income tax expense   8,180,000   8,143,000   15,177,000   19,531,000
NET INCOME 16,759,000 12,449,000 33,580,000 33,312,000

NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

  4,337,000   521,000   9,133,000   2,351,000

NET INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC.

$ 12,422,000 $ 11,928,000 $ 24,447,000 $ 30,961,000
 

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

Basic $ 0.86 $ 0.85 $ 1.70 $ 2.21
Diluted $ 0.84 $ 0.83 $ 1.66 $ 2.16
 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

Basic   14,470,000   14,093,000   14,390,000   14,022,000
Diluted   14,795,000   14,365,000   14,761,000   14,302,000
 

CASH DIVIDEND DECLARED, PER COMMON SHARE

$ 0.70 $ 0.75 $ 0.70 $ 0.75
 
ARGAN, INC. AND SUBSIDIARIES
Reconciliations to EBITDA
Consolidated Operations (Unaudited)
 
Three Months Ended October 31,
2014   2013
Net income $ 16,759,000 $ 12,449,000
Less income attributable to noncontrolling interests (4,337,000 ) (521,000 )
Interest expense -- --
Income tax expense 8,259,000 8,143,000
Depreciation 140,000 142,000
Amortization of purchased intangible assets   61,000   61,000
EBITDA attributable to the stockholders of Argan, Inc. $ 20,882,000 $ 20,274,000
 
Reconciliations to EBITDA
Power Industry Services (Unaudited)
 
Three Months Ended October 31,
2014   2013
Income before income taxes $ 26,409,000 $ 21,537,000
Less pre-tax income attributable to noncontrolling interests (4,258,000 ) (521,000 )
Interest expense -- --
Depreciation 94,000 96,000
Amortization of purchased intangible assets   61,000   61,000
EBITDA attributable to the stockholders of Argan, Inc. $ 22,306,000 $ 21,173,000
 
Reconciliations to EBITDA
Consolidated Operations (Unaudited)
 
Nine Months Ended October 31,
2014   2013
Net income $ 33,580,000 $ 33,312,000
Less income attributable to noncontrolling interests (9,133,000 ) (2,351,000 )
Interest expense -- (161,000 )
Income tax expense 15,256,000 19,100,000
Depreciation 423,000 407,000
Amortization of purchased intangible assets   182,000   182,000
EBITDA attributable to the stockholders of Argan, Inc. $ 40,308,000 $ 50,489,000
 
Reconciliations to EBITDA
Power Industry Services (Unaudited)
 
Nine Months Ended October 31,
2014 2013
Income before income taxes $ 52,846,000 $ 54,345,000
Less pre-tax income attributable to noncontrolling interests (9,054,000 ) (2,782,000 )
Interest expense -- (161,000 )
Depreciation 286,000 268,000
Amortization of purchased intangible assets   182,000   182,000
EBITDA attributable to the stockholders of Argan, Inc. $ 44,260,000 $ 51,852,000
 

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
CONDENSED CONSOLIDATED BALANCE SHEETS
 
October 31, 2014 January 31, 2014
ASSETS (Unaudited) (Note 1)
 
CURRENT ASSETS
Cash and cash equivalents $ 361,021,000 $ 272,209,000
Accounts receivable, net of allowance for doubtful accounts 22,905,000 23,687,000
Costs and estimated earnings in excess of billings 314,000 527,000
Prepaid expenses 1,977,000 1,754,000
Notes receivable and accrued interest 1,711,000 204,000
Deferred income tax assets   517,000     178,000  
TOTAL CURRENT ASSETS 388,445,000 298,559,000

Property, plant and equipment, net of accumulated depreciation (including $1,617,000 in costs related to a variable interest entity as of October 31, 2014)

5,551,000 4,183,000
Goodwill 18,476,000 18,476,000
Intangible assets, net of accumulated amortization   1,906,000     2,088,000  
TOTAL ASSETS $ 414,378,000   $ 323,306,000  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
CURRENT LIABILITIES
Accounts payable $ 44,941,000 $ 22,589,000
Dividends payable 10,166,000 --
Accrued expenses 15,228,000 7,912,000
Billings in excess of costs and estimated earnings   156,159,000     134,736,000  
TOTAL CURRENT LIABILITIES 226,494,000 165,237,000
Deferred income tax liabilities   295,000     292,000  
TOTAL LIABILITIES   226,789,000     165,529,000  
 
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; 14,532,434 and 14,289,134 shares issued at October 31 and January 31, 2014, respectively; 14,529,201 and 14,285,901 shares outstanding at October 31 and January 31, 2014, respectively

2,180,000

2,143,000

Additional paid-in capital

107,223,000 100,863,000
Retained earnings 67,616,000 53,335,000
Treasury stock at cost – 3,233 shares at October 31 and January 31, 2014   (33,000 )   (33,000 )
TOTAL STOCKHOLDERS’ EQUITY 176,986,000 156,308,000
Noncontrolling interests   10,603,000     1,469,000  
TOTAL EQUITY   187,589,000     157,777,000  
TOTAL LIABILITIES AND EQUITY $ 414,378,000   $ 323,306,000  
 

Note 1 – The condensed consolidated balance sheet as of January 31, 2014 has been derived from audited consolidated financial statements.

Argan, Inc.
Company Contact:
Rainer Bosselmann, 301-315-0027
or
Investor Relations Contact:
Arthur Trudel, 301-315-9467



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