Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”) today announced financial results for its fiscal year and fourth quarter ended January 31, 2017. For additional information, please read the Company’s Annual Report on Form 10-K, which the Company intends to file today with the U.S. Securities and Exchange Commission (the “SEC”). The Annual 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):
January 31, | |||||||||||||||
2017 | 2016 | Change | % Change | ||||||||||||
| For the Fiscal Year Ended: | |||||||||||||||
| Revenues | $ | 675,047 | $ | 413,275 | $ | 261,772 | 63% | ||||||||
| Gross profit | 146,711 | 99,465 | 47,246 | 48 | |||||||||||
| Gross margins | 21.7% | 24.1% | (2.4)% | (10) | |||||||||||
| Net income attributable to the stockholders of the Company | $ | 70,328 | $ | 36,345 | $ | 33,983 | 94 | ||||||||
| Diluted per share | 4.50 | 2.42 | 2.08 | 86 | |||||||||||
| EBITDA attributable to the stockholders of the Company | 110,640 | 62,905 | 47,735 | 76 | |||||||||||
| Diluted per share | 7.09 | 4.19 | 2.90 | 69 | |||||||||||
| For the Quarter Ended (unaudited): | |||||||||||||||
| Revenues | $ | 206,760 | $ | 116,386 | $ | 90,374 | 78% | ||||||||
| Gross profit | 37,819 | 23,543 | 14,276 | 61 | |||||||||||
| Gross margins | 18.3% | 20.2% | (1.9)% | (9) | |||||||||||
| Net income attributable to the stockholders of the Company | $ | 20,351 | $ | 6,728 | $ | 13,623 | 202 | ||||||||
| Diluted per share | 1.29 | 0.45 | 0.84 | 190 | |||||||||||
| EBITDA attributable to the stockholders of the Company | 31,344 | 12,777 | 18,567 | 145 | |||||||||||
| Diluted per share | 1.99 | 0.85 | 1.14 | 135 | |||||||||||
| As of: | |||||||||||||||
| Cash, cash equivalents and short-term investments | $ | 522,994 | $ | 275,007 | $ | 247,987 | 90% | ||||||||
| Billings in excess of costs and estimated earnings | 209,241 | 105,863 | 103,378 | 98 | |||||||||||
| Backlog | 1,011,000 | 1,163,000 | (152,000) | (13) | |||||||||||
2017 Fiscal Year Results:
Revenues increased to an annual record $675 million, up 63% compared to the prior year, primarily due to Gemma Power Systems (GPS) ramping up work on four large, gas-fired power plants and the final completion of two large power plants. The increase also reflects a full year of revenues from Atlantic Projects Company (APC) and The Roberts Company (TRC), which were acquired in May and December 2015, respectively.
The power industry services segment continues to drive our financial results and represents 87% of consolidated revenues for the year ended January 31, 2017 (Fiscal 2017), a diversification improvement compared to 94% in the prior year. Gross profit increased 47% to $147 million, primarily due to the increased revenues, while gross margin percentage decreased from 24.1% to 21.7% compared to the prior year, which reflected primarily the changes in the mix and progress of our various power plant projects and the differences in their respective gross margins during the two comparative years, as well as lower margins contributed by our two new subsidiaries, APC and TRC.
Selling, general and administrative expenses increased $7 million to $32 million, primarily due to a full year of expenses related to APC and TRC, but decreased as a percentage of revenue to 4.8% from 6.1% in the prior year. Net income attributable to non-controlling interests decreased 49% to $7 million as activity wound down on two large power plant projects completed by joint ventures. These factors and a relatively consistent effective income tax rate result in net income attributable to our stockholders for Fiscal 2017 increasing 94% to $70 million, or $4.50 per diluted share, from $36 million, or $2.42 per diluted share, compared to the prior year. EBITDA attributable to our stockholders for Fiscal 2017 also increased 76% to $111 million, or $7.09 per diluted share, from $63 million, or $4.19 per diluted share, for the prior year.
Our balance sheet continues to strengthen. As of January 31, 2017, our cash, cash equivalents and short-term investments totaled $523 million and net liquidity was $237 million; plus, we had no bank debt. Our contract backlog was $1.0 billion as of January 31, 2017.
Fourth Quarter Results:
Revenues increased 78% over the prior year’s fourth quarter to a quarterly record $207 million, primarily due to the ramp up of construction work on four large, gas-fired power plants by GPS. Gross profit increased 61% to $38 million while gross margin percentage decreased from 21.2% to 18.3% compared to the prior year’s fourth quarter, reflecting lower margins at the power plant projects in progress and at our two new subsidiaries, APC and TRC.
Other factors contributing to an increased bottom line between the fourth quarter of Fiscal 2017 and the prior year’s fourth quarter included a reduced amount of net income shared with non-controlling interests ($2 million), a lower effective income tax rate ($1.5 million), reduced selling, general and administrative expenses ($1 million) and increased other income ($0.8 million). As a result, net income attributable to our stockholders for the three months ended January 31, 2017 increased 202% to $20 million, or $1.29 per diluted share, compared to $7 million, or $0.45 per diluted share, for the prior year’s fourth quarter. EBITDA attributable to our stockholders for the fourth quarter increased 145% to $31 million, or $1.99 per diluted share, from $13 million, or $0.85 per diluted share, for the prior year’s fourth quarter.
Commenting on Argan’s results, Rainer Bosselmann, Chairman and Chief Executive Officer, stated, “The record success of the Company during the year could not have been achieved without the operational excellence of our employees. Our continuing focus on safety and quality, cost containment, investing in our employees and ensuring the satisfaction of our customers is enabling us to progressively grow our business and to continue to post strong financial results. We believe we are well positioned for the future given our liquidity, strong balance sheet and project backlog of $1.0 billion.”
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 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, 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 CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data) | ||||||||||||||||
| Three Months Ended January 31, | Fiscal Year Ended January 31, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| REVENUES | ||||||||||||||||
| Power industry services | $ | 184,013 | $ | 99,688 | $ | 586,628 | $ | 387,636 | ||||||||
| Industrial fabrication and field services | 19,707 | 15,260 | 78,994 | 15,260 | ||||||||||||
| Telecommunications infrastructure services | 3,040 | 1,438 | 9,425 | 10,379 | ||||||||||||
| Revenues | 206,760 | 116,386 | 675,047 | 413,275 | ||||||||||||
| COST OF REVENUES | ||||||||||||||||
| Power industry services | 150,459 | 76,204 | 452,599 | 290,823 | ||||||||||||
| Industrial fabrication and field services | 15,863 | 15,527 | 68,354 | 15,527 | ||||||||||||
| Telecommunications infrastructure services | 2,619 | 1,112 | 7,383 | 7,460 | ||||||||||||
| Cost of revenues | 168,941 | 92,843 | 528,336 | 313,810 | ||||||||||||
| GROSS PROFIT | 37,819 | 23,543 | 146,711 | 99,465 | ||||||||||||
| Selling, general and administrative expenses | 8,049 | 9,082 | 32,478 | 25,060 | ||||||||||||
| Impairment loss | — | — | 1,979 | — | ||||||||||||
| INCOME FROM OPERATIONS | 29,770 | 14,461 | 112,254 | 74,405 | ||||||||||||
| Other income, net | 995 | 156 | 2,278 | 1,101 | ||||||||||||
| INCOME BEFORE INCOME TAXES | 30,765 | 14,617 | 114,532 | 75,506 | ||||||||||||
| Income tax expense | 9,984 | 5,457 | 37,106 | 25,302 | ||||||||||||
| NET INCOME | 20,781 | 9,160 | 77,426 | 50,204 | ||||||||||||
| Net income attributable to noncontrolling interests | 430 | 2,432 | 7,098 | 13,859 | ||||||||||||
NET INCOME ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC. | $ | 20,351 | $ | 6,728 | $ | 70,328 | $ | 36,345 | ||||||||
EARNINGS PER SHARE ATTRIBUTABLE TO THE STOCKHOLDERS OF ARGAN, INC. | ||||||||||||||||
| Basic | $ | 1.33 | $ | 0.45 | $ | 4.67 | $ | 2.46 | ||||||||
| Diluted | $ | 1.29 | $ | 0.45 | $ | 4.50 | $ | 2.42 | ||||||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | ||||||||||||||||
| Basic | 15,340 | 14,829 | 15,066 | 14,757 | ||||||||||||
| Diluted | 15,731 | 15,063 | 15,625 | 15,024 | ||||||||||||
| CASH DIVIDENDS PER SHARE | — | — | $ | 1.00 | $ | 0.70 | ||||||||||
ARGAN, INC. AND SUBSIDIARIES Reconciliations to EBITDA (Unaudited)(In thousands) | ||||||||||
| Three Months Ended January 31, | ||||||||||
| 2017 | 2016 | |||||||||
| Net income | $ | 20,781 | $ | 9,160 | ||||||
| Less EBITDA attributable to noncontrolling interests | (430 | ) | (2,432 | ) | ||||||
| Interest expense | — | 9 | ||||||||
| Income tax expense | 9,984 | 5,458 | ||||||||
| Depreciation | 599 | 334 | ||||||||
| Amortization of purchased intangible assets | 410 | 248 | ||||||||
| EBITDA attributable to the stockholders of Argan, Inc. | $ | 31,344 | $ | 12,777 | ||||||
| Fiscal Year Ended January 31, | ||||||||||
| 2017 | 2016 | |||||||||
| Net income | $ | 77,426 | $ | 50,204 | ||||||
| Less EBITDA attributable to noncontrolling interests | (7,098 | ) | (13,859 | ) | ||||||
| Interest expense | — | (8 | ) | |||||||
| Income tax expense | 37,106 | 25,258 | ||||||||
| Depreciation | 2,043 | 779 | ||||||||
| Amortization of purchased intangible assets | 1,163 | 531 | ||||||||
| EBITDA attributable to the stockholders of Argan, Inc. | $ | 110,640 | $ | 62,905 | ||||||
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 CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) | ||||||||||
| As of January 31, | ||||||||||
| 2017 | 2016 | |||||||||
| ASSETS | ||||||||||
| CURRENT ASSETS | ||||||||||
| Cash and cash equivalents | $ | 167,198 | $ | 160,909 | ||||||
| Short-term investments | 355,796 | 114,098 | ||||||||
| Accounts receivable, net | 54,836 | 64,185 | ||||||||
| Costs and estimated earnings in excess of billings | 3,192 | 4,078 | ||||||||
| Prepaid expenses and other current assets | 6,927 | 7,342 | ||||||||
| TOTAL CURRENT ASSETS | 587,949 | 350,612 | ||||||||
| Property, plant and equipment, net | 13,112 | 12,308 | ||||||||
| Goodwill | 34,913 | 37,405 | ||||||||
| Intangible assets, net | 8,181 | 9,344 | ||||||||
| Other assets | 92 | 122 | ||||||||
| TOTAL ASSETS | $ | 644,247 | $ | 409,791 | ||||||
| LIABILITIES AND EQUITY | ||||||||||
| CURRENT LIABILITIES | ||||||||||
| Accounts payable | $ | 101,944 | $ | 46,395 | ||||||
| Accrued expenses | 39,539 | 35,454 | ||||||||
| Billings in excess of costs and estimated earnings | 209,241 | 105,863 | ||||||||
| TOTAL CURRENT LIABILITIES | 350,724 | 187,712 | ||||||||
| Deferred income taxes | 954 | 224 | ||||||||
| TOTAL LIABILITIES | 351,678 | 187,936 | ||||||||
| 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; 15,461,452 and 14,839,702 shares issued at January 31, 2017 and 2016, respectively; 15,458,219 and 14,836,469 shares outstanding at January 31, 2017 and 2016, respectively | 2,319 | 2,226 | ||||||||
| Additional paid-in capital | 135,426 | 117,274 | ||||||||
| Retained earnings | 154,649 | 99,581 | ||||||||
| Accumulated other comprehensive loss | (762 | ) | (565 | ) | ||||||
| TOTAL STOCKHOLDERS’ EQUITY | 291,632 | 218,516 | ||||||||
| Noncontrolling interests | 937 | 3,339 | ||||||||
| TOTAL EQUITY | 292,569 | 221,855 | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | 644,247 | $ | 409,791 | ||||||
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Contacts:
Company Contact:
Rainer Bosselmann,
301-315-0027
or
Investor Relations Contact:
David
Watson, 301-315-0027
