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TMCNet:  Argan, Inc. Reports Strong Third Quarter Results

[December 13, 2012]

Argan, Inc. Reports Strong Third Quarter Results

ROCKVILLE, Md. --(Business Wire)--

Argan, Inc. (NYSE MKT: AGX) today announced financial results for the three and nine months ended October 31, 2012.

For the quarter ended October 31, 2012, net revenues were $74.5 million compared to $43.6 million during the quarter ended October 31, 2011. Gemma Power Systems (Gemma) contributed $70.5 million or 95% of net revenues from continuing operations in the third quarter of fiscal 2013, compared to $41.3 million or 95% of net revenues from continuing operations in the third quarter of fiscal 2012. The substantial increase in comparative net revenues was due primarily to significant levels of construction activity at a large gas-fired power plant in Southern California and commencement of full construction activity at a biomass power project in Texas.

For the nine months ended October 31, 2012, net revenues were $220.8 million compared to $85.9 million during the nine months ended October 31, 2011. Gemma contributed $206.4 million or 93% of net revenues from continuing operations in the first nine months of fiscal 2013 compared to $79.7 million or 93% of net revenues from continuing operations in the first nine months of fiscal 2012.

The Company reported EBITDA (Earnings before interest, taxes, depreciation and amortization) from continuing operations of $9.6 million for the quarter ended October 31, 2012 compared to $4.0 million for the same prior year period. Gemma, for its segment, provided $10.5 million in EBITDA for the third quarter of fiscal 2013 compared to $4.7 million in the third quarter of fiscal 2012. The Company reported EBITDA from continuing operations of $26.6 million for the nine months ended October 31, 2012 compared to $7.8 million for the same prior year period. Gemma, for its segment, provided $27.9 million in EBITDA for the first nine months of fiscal 2013 compared to $10.1 million for the first nine months of fiscal 2012.

In the third quarter of fiscal 2013, the Company reported income from continuing operations before income taxes of $9.3 million compared to income from continuing operations before income taxes of $3.8 million in the third quarter of fiscal 2012.

For the first nine months of fiscal 2013, the Company reported income from continuing operations before income taxes of $26.0 million compared to income from continuing operations before income taxes of $7.2 million for the first nine months of fiscal 2012.

Net income attributable to the stockholders of Argan for the quarter ended October 31, 2012 was $6.1 million or $0.43 per diluted share based on 14,106,000 diluted shares outstanding, compared to $2.0 million or $0.15 per diluted share based on 13,744,000 diluted shares outstanding for the quarter ended October 31, 2011.

Net income attributable to the stockholders of Argan for the nine months ended October 31, 2012 was $16.7 million or $1.19 per diluted share based on 14,075,000 diluted shares outstanding compared to net income of $4.7 million or $0.34 per diluted share based on 13,715,000 diluted shares outstanding for the nine months ended October 31, 2011.

Argan had consolidated cash of $196.1 million as of October 31, 2012 and was debt free. Consolidated working capital was approximately $82.7 million as of October 31, 2012.

Contract backlog as of October 31, 2012 was $236 million compared to $415 million as of January 31, 2012.

Commenting on Argan's results, Rainer Bosselmann, Chairman and Chief Executive Officer stated, "Our Gemma team has been fueling the strong Argan performance during fiscal 2013. We appreciate their efforts."

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 facilities 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 (News - Alert) filings.

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ARGAN, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
 
 
    Three Months Ended October 31,     Nine Months Ended October 31,
2012     2011 2012     2011
Net revenues
Power industry services $ 70,527,000 $ 41,269,000 $ 206,364,000 $ 79,678,000
Telecommunications infrastructure services   3,959,000     2,328,000     14,430,000     6,254,000  
Net revenues   74,486,000     43,597,000     220,794,000     85,932,000  
Cost of revenues
Power industry services 58,173,000 35,248,000 173,339,000 65,807,000
Telecommunications infrastructure services   3,177,000     1,882,000     11,339,000     5,113,000  
Cost of revenues   61,350,000     37,130,000     184,678,000     70,920,000  
Gross profit 13,136,000 6,467,000 36,116,000 15,012,000
Selling, general and administrative expenses   3,780,000     2,735,000     10,105,000     7,868,000  
Income from operations 9,356,000 3,732,000 26,011,000 7,144,000
Other (expense) income, net   (11,000 )   33,000     (29,000 )   84,000  

Income from continuing operations before income taxes

9,345,000 3,765,000 25,982,000 7,228,000
Income tax expense   3,632,000     1,460,000     9,741,000     2,658,000  
Income from continuing operations   5,713,000     2,305,000     16,241,000     4,570,000  
Discontinued operations

Income (loss) on discontinued operations (including gains on disposal of $58,000 and $1,286,000 for the three and nine months ended October 31, 2011, respectively)

-- (365,000 ) (405,000 ) 444,000
Income tax benefit (expense)   --     72,000     120,000     (326,000 )
Income (loss) on discontinued operations   --     (293,000 )   (285,000 )   118,000  
Net income 5,713,000 2,012,000 15,956,000 4,688,000
Add - Loss attributable to noncontrolling interest   352,000     --     748,000     --  
Net income attributable to the stockholders of Argan $ 6,065,000   $ 2,012,000   $ 16,704,000   $ 4,688,000  
 

Earnings (loss) per share attributable to the stockholders of Argan:

Continuing operations
Basic $ 0.44   $ 0.17   $ 1.24   $ 0.34  
Diluted $ 0.43   $ 0.17   $ 1.21   $ 0.33  
 
Discontinued operations
Basic $ --   $ (0.02 ) $ (0.02 ) $ 0.01  
Diluted $ --   $ (0.02 ) $ (0.02 ) $ 0.01  
 
Net income
Basic $ 0.44   $ 0.15   $ 1.22   $ 0.34  
Diluted $ 0.43   $ 0.15   $ 1.19   $ 0.34  
 
Weighted average number of shares outstanding
Basic   13,822,000     13,609,000     13,728,000     13,605,000  
Diluted   14,106,000     13,744,000     14,075,000     13,715,000  
 
Cash dividend declared per common share $ $0.60   $ 0.50   $ 0.60   $ 0.50  
 
 
ARGAN, INC. AND SUBSIDIARIES
Reconciliations to EBITDA
Continuing Operations (Unaudited)
 
      Three Months Ended October 31,
2012       2011
Income from continuing operations $ 5,713,000 $ 2,305,000
Interest expense 17,000 --
Income tax expense 3,632,000 1,460,000
Amortization of purchased intangible assets 61,000 87,000
Depreciation   136,000   112,000
EBITDA $ 9,559,000 $ 3,964,000
 
 
Reconciliations to EBITDA
Power Industry Services (Unaudited)
 
Three Months Ended October 31,
2012 2011
Income before income taxes $ 10,300,000 $ 4,533,000
Interest expense 17,000 --
Amortization of purchased intangible assets 61,000 87,000
Depreciation   77,000   53,000
EBITDA $ 10,455,000 $ 4,673,000
 
 
Reconciliations to EBITDA
Continuing Operations (Unaudited)
 
Nine Months Ended October 31,
2012 2011
Income from continuing operations $ 16,241,000 $ 4,570,000
Interest expense 44,000 --
Income tax expense 9,741,000 2,658,000
Amortization of purchased intangible assets 182,000 262,000
Depreciation   385,000   344,000
EBITDA $ 26,593,000 $ 7,834,000
 
 
Reconciliations to EBITDA
Power Industry Services (Unaudited)
 
Nine Months Ended October 31,
2012 2011
Income before income taxes $ 27,461,000 $ 9,678,000
Interest expense 44,000 --
Amortization of purchased intangible assets 182,000 262,000
Depreciation   205,000   153,000
EBITDA $ 27,892,000 $ 10,093,000
 

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, a reconciliation between the Company's GAAP and non-GAAP financial results is provided 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,

2012

     

January 31,

2012

(Unaudited) (Note 1)
ASSETS
 
CURRENT ASSETS:
Cash and cash equivalents $ 196,056,000 $ 156,524,000
Accounts receivable, net 25,761,000 16,053,000
Costs and estimated earnings in excess of billings 1,000,000 2,781,000
Deferred income tax assets 991,000 691,000
Prepaid expenses and other current assets   1,916,000     4,528,000  
TOTAL CURRENT ASSETS 225,724,000 180,577,000

Property and equipment, net ($4,728,000 and $1,469,000 related to variable interest entities as of October 31 and January 31, 2012, respectively)

8,270,000 2,761,000
Goodwill 18,476,000 18,476,000
Intangible assets, net 2,392,000 2,574,000
Deferred income tax and other assets   123,000     864,000  
TOTAL ASSETS $ 254,985,000   $ 205,252,000  

LIABILITIES AND EQUITY

 

CURRENT LIABILITIES:

Accounts payable $ 43,790,000 $ 29,524,000
Accrued expenses 8,315,000 6,751,000
Dividends payable 8,359,000 --
Billings in excess of costs and estimated earnings   82,558,000     68,004,000  
TOTAL CURRENT LIABILITIES 143,022,000 104,279,000
Other liabilities   10,000     10,000  
TOTAL LIABILITIES   143,032,000     104,289,000  
 
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; 13,940,598 and 13,661,098 shares issued at October 31 and January 31, 2012, respectively; 13,937,365 and 13,657,865 shares outstanding at October 31 and January 31, 2012, respectively

 

 

2,091,000

 

 

2,049,000

Warrants outstanding 15,000 590,000
Additional paid-in capital 93,640,000 89,714,000
Retained earnings 17,289,000 8,944,000
Treasury stock, at cost - 3,233 shares at October 31 and January 31, 2012   (33,000 )   (33,000 )
TOTAL STOCKHOLDERS' EQUITY 113,002,000 101,264,000
Noncontrolling interest (variable interest entities)   (1,049,000 )   (301,000 )
TOTAL EQUITY   111,953,000     100,963,000  
TOTAL LIABILITIES AND EQUITY $ 254,985,000   $ 205,252,000  
 

Note 1 - The condensed consolidated balance sheet as of January 31, 2012 has been derived from audited financial statements.


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