Argan, Inc. Reports Third Quarter Results
ROCKVILLE, Md.--(BUSINESS WIRE)--Dec 6, 2018--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 or from the Company’s website at .
Summary Information: (dollars in thousands, except per share data (unaudited)):
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.
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INDUSTRY KEYWORD: ENERGY OIL/GAS UTILITIES
SOURCE: Argan, Inc.
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PUB: 12/06/2018 08:00 AM/DISC: 12/06/2018 08:01 AM