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Argan, Inc. Reports Second Quarter Results

Gemma’s backlog as of July 31, 2011 was $300 million. Gemma received a full notice to proceed on the project to construct an 800 MW peaking plant energy facility in Southern California, which is included in our backlog with the value of $253 million at July 31, 2011.

Commenting on Argan’s results, Rainer Bosselmann and Chief Executive Officer stated, “Our Gemma net revenues continued to be soft during the first six months of our fiscal year due to completion of a large multi-year project during the first quarter of our fiscal year. For the remainder of the year, we should experience the positive impact on net revenues of our commencing the initial phases of construction activity from an 800 MW peaking plant in Southern California.”

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
Consolidated Statements of Operations
(unaudited)
 
 
    Three Months Ended July 31,     Six Months Ended July 31,
2011     2010 2011     2010
Net revenues
Power industry services $ 24,390,000 $ 50,373,000 $ 38,409,000 $ 101,769,000
Telecommunications infrastructure services   1,952,000     1,947,000     3,926,000     3,785,000  
Net revenues   26,342,000     52,320,000     42,335,000     105,554,000  
Cost of revenues
Power industry services 20,078,000 41,902,000 30,559,000 86,569,000
Telecommunications infrastructure services   1,617,000     1,638,000     3,231,000     3,431,000  
Cost of revenues   21,695,000     43,540,000     33,790,000     90,000,000  
Gross profit 4,647,000 8,780,000 8,545,000 15,554,000
Selling, general and administrative expenses   2,374,000     2,604,000     5,133,000     5,638,000  
Income from operations 2,273,000 6,176,000 3,412,000 9,916,000
Other income, net   29,000     9,000     51,000     7,000  
Income from continuing operations before income taxes 2,302,000 6,185,000 3,463,000 9,923,000
Income tax expense   782,000     2,228,000     1,198,000     3,611,000  
Income from continuing operations   1,520,000     3,957,000     2,265,000     6,312,000  
Discontinued operations

Income (loss) on discontinued operations (including gains on disposal of $1,076,000 and $1,228,000 for the three and six months ended July 31, 2011)

874,000 (963,000 ) 809,000 (1,489,000 )
Income tax (expense) benefit   (324,000 )   307,000     (398,000 )   501,000  
Income (loss) on discontinued operations   550,000     (656,000 )   411,000     (988,000 )
Net income $ 2,070,000   $ 3,301,000   $ 2,676,000   $ 5,324,000  
 
Earnings (loss) per share:
Continuing operations
Basic $ 0.11   $ 0.29   $ 0.17   $ 0.46  
Diluted $ 0.11   $ 0.29   $ 0.17   $ 0.46  
 
Discontinued operations
Basic $ 0.04   $ (0.05 ) $ 0.03   $ (0.07 )
Diluted $ 0.04   $ (0.05 ) $ 0.03   $ (0.07 )
 
Net income
Basic $ 0.15   $ 0.24   $ 0.20   $ 0.39  
Diluted $ 0.15   $ 0.24   $ 0.20   $ 0.39  
 
Weighted average number of shares outstanding
Basic   13,603,000     13,593,000     13,602,000     13,589,000  
Diluted   13,717,000     13,699,000     13,699,000     13,736,000  
 
 
ARGAN, INC. AND SUBSIDIARIES
Reconciliations to EBITDA
Continuing Operations (unaudited)
 
    Three Months Ended July 31,
2011     2010
Income from continuing operations $ 1,520,000 $ 3,957,000
Interest expense -- 11,000
Income tax expense 782,000 2,228,000
Amortization of purchased intangible assets 87,000 88,000
Depreciation and other amortization   114,000   196,000
EBITDA $ 2,503,000 $ 6,480,000
 
 
Reconciliations to EBITDA
Power Industry Services (unaudited)
 
Three Months Ended July 31,
2011 2010
Income before income taxes $ 3,004,000 $ 7,153,000
Interest expense -- 11,000
Amortization of purchased intangible assets 87,000 88,000
Depreciation and other amortization   51,000   98,000
EBITDA $ 3,142,000 $ 7,350,000
 
 
Reconciliations to EBITDA
Continuing Operations (unaudited)
 
Six Months Ended July 31,
2011 2010
Income from continuing operations $ 2,265,000 $ 6,312,000
Interest expense -- 25,000
Income tax expense 1,198,000 3,611,000
Amortization of purchased intangible assets 175,000 175,000
Depreciation and other amortization   231,000   364,000
EBITDA $ 3,869,000 $ 10,487,000
 
 
Reconciliations to EBITDA
Power Industry Services (unaudited)
 
Six Months Ended July 31,
2011 2010
Income before income taxes $ 5,144,000 $ 12,432,000
Interest expense -- 25,000
Amortization of purchased intangible assets 175,000 175,000
Depreciation and other amortization   100,000   164,000
EBITDA $ 5,419,000 $ 12,796,000
 

Management uses EBITDA, a non-GAAP financial measure, for planning purposes, including the preparation of operating budgets and to determine 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 our 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
 
 
    July 31,    

January 31,

2011 2011
ASSETS (unaudited) (Note 1)
CURRENT ASSETS:
Cash and cash equivalents $ 106,890,000 $ 83,292,000
Restricted cash -- 1,243,000
Accounts receivable, net of allowance for doubtful accounts 11,367,000 13,099,000
Costs and estimated earnings in excess of billings 560,000 1,443,000
Deferred income tax assets -- 91,000
Prepaid expenses and other current assets 3,344,000 520,000
Assets held for sale   695,000     6,354,000  
TOTAL CURRENT ASSETS 122,856,000 106,042,000
Property and equipment, net of accumulated depreciation 1,306,000 1,478,000
Goodwill 18,476,000 18,476,000
Intangible assets, net of accumulated amortization and impairment losses 2,733,000 2,908,000
Deferred income tax assets 923,000 999,000
Other assets 27,000 14,000
Assets held for sale   204,000     625,000  
TOTAL ASSETS $ 146,525,000   $ 130,542,000  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 14,700,000 $ 8,555,000
Accrued expenses 4,914,000 13,035,000
Billings in excess of costs and estimated earnings 26,122,000 9,916,000
Liabilities related to assets held for sale   44,000     1,362,000  
TOTAL CURRENT LIABILITIES 45,780,000 32,868,000
Other liabilities   27,000     29,000  
TOTAL LIABILITIES   45,807,000     32,897,000  
 
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; 13,610,227 and 13,602,227 shares issued at July 31 and January 31, 2011, and 13,606,994 and 13,598,994 shares outstanding at July 31 and January 31, 2011

2,042,000 2,040,000
Warrants outstanding 590,000 601,000
Additional paid-in capital 88,967,000 88,561,000
Retained earnings 9,152,000 6,476,000
Treasury stock, at cost; 3,233 shares at July 31 and January 31, 2011   (33,000 )   (33,000 )
TOTAL STOCKHOLDERS’ EQUITY   100,718,000     97,645,000  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 146,525,000   $ 130,542,000  
 

Note 1 – The condensed consolidated balance sheet as of January 31, 2011 has been derived from audited financial statements.



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