ARGAN INC (AGX) SEC Filing 10-Q Quarterly report for the period ending Wednesday, October 31, 2018

PDFPDF Microsoft WordWord Microsoft ExcelExcel SubscribeRSS E-mailEmail Smartphone and TabletMobile last10k.com/sec-filings/agx/0001104659-18-071543.htm

Exhibit 99.1

 

 

Argan, Inc.  Reports Third Quarter Results

 

December 6, 2018 — ROCKVILLE, MD

 — 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 www.sec.gov or from the Company’s website at www.arganinc.com.

 

Summary Information: (dollars in thousands, except per share data (unaudited)):

 

 

 

October 31,

 

 

 

 

 

 

 

2018

 

2017

 

Change

 

% Change

 

For the Quarter Ended:

 

 

 

 

 

 

 

 

 

Revenues

 

$

116,459

 

$

232,945

 

$

(116,486

)

(50

)%

Gross profit

 

29,532

 

37,718

 

(8,186

)

(22

)

Gross margins

 

25.4

%

16.2

%

9.2

%

57

 

Net income attributable to the stockholders of the Company

 

$

32,434

 

$

17,229

 

$

15,205

 

88

 

Diluted per share

 

2.07

 

1.09

 

0.98

 

90

 

EBITDA attributable to the stockholders of the Company

 

21,025

 

30,275

 

(9,250

)

(31

)

Diluted per share

 

1.34

 

1.92

 

(0.58

)

(30

)

 

 

 

October 31,
2018

 

January 31,
2018

 

Change

 

% Change

 

As of:

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and short-term investments

 

$

314,787

 

$

434,015

 

$

(119,228

)

(27

)%

Net liquidity (1)

 

339,616

 

301,817

 

37,799

 

13

 

Project backlog

 

365,000

 

379,000

 

(14,000

)

(4

)

 


The following information was filed by ARGAN INC on Thursday, December 6, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

Sentiment Analysis off   on

Filter by Sentiment:
Filter by Category:

View our Sentiment Analysis Tour
Filter by Subcategory:
Click a sentiment analysis snippet below from ARGAN INC's Management Discussions to find these positive and negative remarks within their 10-Q Quarterly report:
  • 18471631_41
    Financial - Earnings
    However, despite these results, net income attributable to our stockholders declined by 17% to $54.2 million, or $3.46 per diluted share, for the nine months ended October 31, 2018.
  • 18471631_149
    Financial - Income
    The amount of this favorable adjustment more than offset the amount of income tax expense recorded for the current quarter based on our current estimated annual effective income tax rate (before the effects of the research and development tax credits and other discrete tax items) of approximately 28%.
  • 18471631_190
    Other - Other
    Similarly, due in part to increased activity at these operating subsidiaries, accounts receivable increased during the nine months ended October 31, 2018, a use of cash in the amount of $17.7 million.
  • 18471631_150
    Financial - Income
    This rate is higher than the new federal income tax rate of 21% due primarily to the estimated unfavorable effect of state income taxes, and the unfavorable effects of additional limitations on the deductibility of certain business expenses.
  • 18471631_174
    Financial - Income
    This tax rate is higher than the new federal income tax rate of 21% due primarily to the estimated unfavorable effect of state income taxes, and the unfavorable effects of additional limitations on the deductibility of certain business expenses.
  • 18471631_78
    Financial - Earnings
    The favorable effect of this amount on diluted earnings per share was $1.05 for both periods.
  • 18471631_230
    Revenue - Product
    We consider the accounting policies related to the recognition of revenues from customer contracts; the accounting for business combinations; the subsequent valuation of goodwill, other indefinite-lived assets and long-lived assets; income tax reporting; the valuation of employee stock options and the financial reporting associated with any significant legal matters to be most critical to the understanding of our financial position and results of operations, as well as the accounting and reporting for special purpose entities including joint ventures and VIEs.
  • 18471631_236
    Revenue - Product
    During the nine-month period ended October 31, 2018, there have been no material changes in the way we apply the critical accounting policies described therein except that the "Update to Significant Accounting Policies" section of Note 4 to the accompanying condensed consolidated financial statements presents the revised accounting policy for the recognition of revenues that was adopted on February 1, 2018.
  • 18471631_106
    Other - Other
    Nonetheless, natural gas is predicted to be a strong choice for new electricity generation plants in the future primarily due to favorable economics and the scheduled expiration of renewable energy tax credits.
  • 18471631_182
    Financial - Earnings
    Even though net income for the period, including the favorable adjustments related to non-cash income and expense items, provided cash in the total amount of $58.1 million, cash used in operations exceeded this amount.
  • 18471631_200
    Financial - Earnings
    Even though net income for the period, including the favorable adjustments related to non-cash income and expense items, provided cash in the total amount of $71.7 million, cash use exceeded this amount primarily due to the four major EPC projects.
  • 18471631_189
    Financial - Expense
    Accordingly, the amounts of costs incurred and estimated earnings recognized on certain active projects in excess of the amounts billed on those projects rose during the nine-month period in the amount of $38.8 million, which represents a use of cash.
  • 18471631_164
    Revenue - Product
    26 The revenues of the industrial fabrication and field services business increased by $18.4 million, or 37%, to $68.6 million for the nine months ended October 31, 2018 compared to $50.2 million for the nine months ended October 31, 2017 as business development efforts have succeeded in winning increased amounts of business from recurring as well as new customers.
  • 18471631_169
    Financial - Earnings
    Our overall gross profit percentage of 19% of consolidated revenues was higher for the nine months ended October 31, 2018 compared to a percentage of 18% for the same period of the prior year with the increase reflecting primarily the gross profit percentages achieved for the third quarter this year.
  • 18471631_146
    Financial - Expense
    The corresponding increase in forecasted costs to complete these contracts and the associated reductions in the amount of forecasted gross margins resulted in a reduction to the amount of consolidated gross profit reported for the quarter ended October 31, 2017.
  • 18471631_165
    Revenue - Product
    The revenues of this business segment were $9.7 million for the nine months ended October 31, 2018 compared with revenues of $10.9 million for the comparable period last year, reflecting revenue declines for both the outside premises and inside premises businesses, offset partially by the revenues associated with an overseas project completed for the federal government.
  • 18471631_145
    Financial - Expense
    At this time last year, we began to experience increased labor and subcontractor costs on certain projects to amounts greater than originally estimated.
  • 18471631_40
    Financial - Income
    The favorable effects of research and development credits and the reduction in the corporate income tax rate, which more than offset the decline in the amount of gross profit, were the primary causes of the increase in net income attributable to our stockholders to $32.4 million, or $2.07 per diluted share, for the three months ended October 31, 2018.
  • 18471631_85
    Financial - Shares / Equity
    EIA expects the share of total utility-scale electricity generation from natural gas-fired power plants in the United States to rise from 32% in 2017 to 34% in both 2018 and 2019.
  • 18471631_135
    Revenue - Product
    24 The revenues of the industrial fabrication and field services business (representing the business of TRC) increased by $7.5 million, or 45%, to $24.1 million for the three months ended October 31, 2018, representing 21% of consolidated revenues for the period, compared to $16.6 million for the three months ended October 31, 2017.
  • 18471631_111
    Financial - Shares / Equity
    Demands for electricity, the ample supply of natural gas, and the continuing retirement of inefficient and old coal and nuclear energy plants, should result in natural gas-fired energy plants representing a substantial portion of new power generation additions in the future and an increased share of the power generation mix.
  • 18471631_159
    Revenue - Product
    The decrease in revenues for the power industry services segment primarily reflected the general decline in construction activities performed for four EPC projects as they moved into the start-up, commissioning and final phases of the projects and reached substantial completion this year.
  • 18471631_12
    Other - Other
    Through GPS and APC, we provide a full range of engineering, procurement, construction, commissioning, operations management, maintenance, development, technical and consulting services to the power generation and renewable energy markets for a wide range of customers including independent power project owners, public utilities, power plant equipment suppliers and global energy plant construction firms.
  • 18471631_77
    Financial - Income
    Accordingly, the income tax benefits associated with research and development activities conducted in prior years in the total amount of $16.5 million have been recognized in income taxes for the three and nine months ended October 31, 2018.
  • 18471631_142
    Financial - Earnings
    However, our overall gross profit percentage of 25% of consolidated revenues was higher for the quarter ended October 31, 2018 compared to a percentage of 16% for the third quarter last year which was due to an improvement in the gross profit percentage of the power industry services segment.
  • 18471631_67
    Other - Other
    Nevertheless, in some cases, the new plan may encourage the continued operation of old coal plants that might otherwise be retired without any government intervention.
  • 18471631_119
    Revenue - Product
    We are committed to the rational pursuit of new construction projects and the future growth of our revenues.
  • 18471631_107
    Other - Other
    As a result, we continue to believe that the future prospects for natural gas-fired power plant construction are generally favorable as natural gas has become the primary source for power generation in our country.
  • 18471631_192
    Financial - Income
    Due primarily to the inclusion of expected income tax refunds, the balance of other assets increased by $15.9 million during the nine months ended October 31, 2018, representing a use of cash.
  • 18471631_30
    Revenue - Product
    Our consolidated revenues for the three months ended October 31, 2018 declined to $116.5 million from $232.9 million for the three months ended October 31, 2017; they have decreased to $394.5 million for the nine months ended October 31, 2018 from $723.2 million for the nine months ended October 31, 2017.
  • 18471631_218
    Other - Other
    At October 31, 2018, most of our balance of cash and cash equivalents was invested in a high-quality money market fund with at least 80% of its net assets invested in and repurchase agreements secured by United States Treasury obligations.
  • 18471631_51
    Other - Other
    The following table summarizes our large power plant projects: (1) Full Notice to Proceed ("FNTP") represents the formal notice provided by the customer instructing us to commence the activities covered by the corresponding contract; FNTP has not yet been received for the Reidsville project.
  • 18471631_206
    Financial - Dividend
    Cash was also used in other non-operating activities including the declaration and payment of a cash dividend of $15.5 million during the prior year period, and we used cash as our consolidated joint ventures made distributions to our joint venture partner in the total amount of $1.2 million.
  • 18471631_121
    Other - Other
    Because we believe in the strength of our balance sheet, we are willing to consider certain opportunities that include reasonable and manageable risks in order to assure the award of the related EPC services contract to us.
  • 18471631_172
    Financial - Expense
    Due to the sizable research and development cost base that has grown over the last three years and the meaningful decline in the amount of such activities during the current year, we do not expect a credit for the current year.
  • 18471631_36
    Revenue - Product
    We do anticipate adding new EPC services projects to our project backlog in the first half of calendar year 2019 as discussed below; however, it takes time for us to ramp-up meaningful revenues associated with new EPC projects due to the project life-cycles of gas-fired power plants.
  • 18471631_144
    Financial - Earnings
    These achievements resulted in our making favorable project close-out adjustments to the gross profits of certain projects.
  • 18471631_16
    MA - Other
    At the holding company level, we may make additional acquisitions of and/or investments in companies with potential for profitable growth.
  • 18471631_248
    Other - Other
    Note 2 to the accompanying condensed consolidated financial statements presents a brief description of the one pending accounting pronouncement issued by the FASB that may be relevant to our future financial reporting in a material way.
  • 18471631_187
    Revenue - Product
    As presented above, the operations of TRC and APC have experienced meaningful growth in revenues this year.
  • 18471631_73
    Financial - Income
    Based on the results of the study, we identified and estimated significant amounts of income tax benefits that have not previously been recognized in our financial results for the current or any prior year reporting period.
  • 18471631_239
    Financial - Income
    Based on the results of the study, we identified and estimated significant amounts of income tax benefits that have not previously been recognized in our financial results for the current or any prior year reporting period.
  • 18471631_86
    Financial - Shares / Equity
    The generation share from coal in both 2018 and 2019 is forecast to average 29%, down from 30% in 2017.
  • 18471631_215
    Other - Other
    28 As of October 31, 2018, we had approximately $15.5 million of credit outstanding under the Credit Agreement primarily to support our APC activities.
  • 18471631_63
    Revenue - Geography
    The new proposal, called the Affordable Clean Energy Rule, would be more favorable to the coal industry by allowing individual states greater authority to make their own plans for regulating greenhouse gas emissions from coal-fired power plants.
  • 18471631_151
    Financial - Income
    For the quarter ended October 31, 2017, we recorded income tax expense of $12.1 million reflecting an annual effective income tax rate estimated last year of approximately 37% (before the tax effect of discrete items).
  • 18471631_129
    Revenue - Product
    The decrease in revenues for the power industry services segment primarily reflected the commissioning, start-up and final activities of four EPC projects, which together represented approximately 40% of consolidated revenues for the quarter ended October 31, 2018.

 Please wait while we load the requested 10-Q Quarterly Report. If it does not load, please click the link below:

 https://www.last10k.com/sec-filings/report/100591/000110465918071543/a18-30100_110q.htm

Companies may provide additional information to their SEC Filings as exhibits. Click a link below to view an exhibit that was filed with this report:

Exhibit 31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION

 Please wait while we load the requested exhibit. If it does not load, please click the link below:

 https://www.last10k.com/sec-filings/report/100591/000110465918071543/a18-30100_1ex31d1.htm
Exhibit 31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATION

 Please wait while we load the requested exhibit. If it does not load, please click the link below:

 https://www.last10k.com/sec-filings/report/100591/000110465918071543/a18-30100_1ex31d2.htm
Exhibit 32.1 - SECTION 1350 CERTIFICATION

 Please wait while we load the requested exhibit. If it does not load, please click the link below:

 https://www.last10k.com/sec-filings/report/100591/000110465918071543/a18-30100_1ex32d1.htm
Exhibit 32.2 - SECTION 1350 CERTIFICATION

 Please wait while we load the requested exhibit. If it does not load, please click the link below:

 https://www.last10k.com/sec-filings/report/100591/000110465918071543/a18-30100_1ex32d2.htm
  • Form Type: Quarterly
  • Number of times amended: 0
  • Accession Number: 0001104659-18-071543
  • Submitted to the SEC: Thursday, December 6, 2018 8:16:41 AM EST
  • Accepted by the SEC: Thursday, December 6, 2018
  • Period ending: October 2018
  • Industry: Construction Special Trade Contractors