Transcript “plan,” “project,”

AGAN, INC.
June 2010
June 2011
July 2012
Disclaimer
All statements in this presentation that are not historical are forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act
of 1934. Such forward-looking statements may be identified by words such as
“believe,” “intend,” “expect,” “may,” “could,” “would,” “will,” “should,”
“plan,” “project,” “contemplate,” “anticipate,” or similar statements. Because
these statements reflect the current views of Argan, Inc. (“Argan” or the
“Company”) concerning future events, these forward-looking statements are
subject to risks and uncertainties. Argan’s actual results could differ materially
from those anticipated in these forward-looking statements as a result of many
factors, which are described under the caption “Risk Factors” in Argan’s most
recent Forms 10-K and 10-Q filed with the Securities and Exchange
Commission. Argan undertakes no obligation to update publicly any forwardlooking statements contained in this presentation.
2
Investment Highlights
3

Demonstrated track record of performance

Substantial industry growth prospects

Strong backlog and bidding pipeline

Compelling financial characteristics

Experienced management team
Company Overview
4

Year founded – 1961

Headquarters – Rockville, MD

Ticker – NYSE AMEX:AGX

Market cap (7/12/12) – $198 million

FY 2012 Revenue – $142 million

FY 2012 EBITDA – $13 million

Q-1 (4/30/12) Revenue - $64 million

Q-1 (4/30/12) EBITDA - $7 million

Employees – 400

Backlog at 4/30/12 - $358 million
Senior Management Team
5

Rainer Bosselmann – Chairman and CEO

Arthur Trudel – Chief Financial Officer

Richard Deily – Corporate Controller

Management has an established track record of creating value for
the shareholders of Jupiter National, Inc. (AMEX:JPI), Arguss
Communications, Inc. (NYSE:ACX) and Argan, Inc. (NYSE
MKT:AGX)
Senior Gemma Management Team
6

William F. Griffin, Jr. – Co-Founder &
Chief Executive Officer

Daniel L. Martin – President

Bill and Dan have more than 60 years combined
experience in all facets of engineering, detailed design,
procurement, construction management and other support
services in the building of power plants and renewable
energy facilities.
Business Overview

Gemma Power Systems, LLC (“GPS”) – providesFY 2013 Q-1 Revenue by Subsidiary
engineering, procurement and construction
(“EPC”) services to power generation and
9%
renewable energy markets
–

7
GPS accounted for 91% of total revenues
during the three months ended April 30, 2012
Southern Maryland Cable, Inc. (“SMC”) –
provides telecommunications data infrastructure
services
91%
Industry Growth Drivers
8

Substantial capacity additions will be required to meet rising
electricity demand

The retirement of older and inefficient plants and coal-fired
generation facilities will further drive investment in new gas fired
generation capacity

Federal and state legislation, subsequent to the Fall 2012
elections, is needed to support energy produced by renewable
sources. Unless tax credits are renewed or new credits are passed,
the number of renewable energy projects will be substantially
diminished in the short run.
Overview of GPS








9
Acquired by Argan – December 2006
– Purchase price – $33.1 million
– $12.9 million in cash
– $20.2 million from issuance of 3.7 million shares
– Funded in part by $8.0 million secured four year amortizing
term loan, which has been paid-in-full.
Services – engineering, procurement and construction of natural
gas fired and alternative power energy facilities
Customers – utilities and independent power producers
FY 2012 revenue: $133 million
FY 2012 EBITDA: $16 million
Q-1 FY 2013 Revenue - $58 million
Q-1 FY 2013 EBITDA - $7 million
Backlog at 4/30/12: $358 million
Revenue and EBITDA Growth
GPS’s revenue and EBITDA have remained strong since the
acquisition by Argan in December 2006

Revenue for Years Ended January 31
* Represents 1st QTR FY2013 only
$ 209.8
$ 202.3
$ 180.4
$ 174.9
$ 134.4
$ 132.5
$ 57.7
$100.0 $ 48.6
$31.2
$30.0
$20.0
$10.0 $3.8 $5.4
$16.8
$22.2
$17.2
$15.7
$7.3
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* Represents 1st QTR FY2013 only
$0.0
$0.0
10
$40.0
($ in millions)
($ in millions)
$300.0
$200.0
EBITDA for Years Ended January 31
GPS Track Record
11

More than 12,000 megawatts of installed power plant capacity

More than 850 megawatts of power facility development

More than 350 million gallons per year of installed renewable
fuels capacity

40 projects completed on an EPC basis

51 major turnkey construction projects

Power experience includes combined cycle, combustion turbines,
coal/wood fueled projects, wind plants, solar facilities and waste
recovery facilities

Renewable fuels experience includes bio-diesel and ethanol
facilities
National Footprint

GPS has the ability to provide EPC services to customers
throughout the United States
Historical Project Locations
12
States in which GPS has completed projects.
Extensive Project Portfolio




13
Power facilities – simple cycle solution
–
CPV Sentinel Energy Project
–
A.L. Pierce Re-powering Project
–
Vandolah Power Project
–
DeSoto County Power Project
–
Indigo Energy Facility
–
Larkspur Energy Facility
–
Richmond County Phase I Power
–
Monroe Power Project
–
Richland Peaking Project
–
Rocky Road Unit 4 Project
–
Broad River Energy Center
–
Middletown, CT Project
Pollution solution
–
Brayton Point Power Station
–
La Rosita SCR Project
Biomass Power Facility
- Woodville, Texas
Solar Facility
Canton, MA




Power facilities – combined cycle solution
–
Colusa Generating Station
–
Roseville Energy Park
–
Hines PB-2 Power Project
–
Rowan County Power Project
–
Effingham County Power Project
–
Richmond County Phase II Power Project
Process facilities – biodiesel
–
Renewable BioFuels Port Neches
–
Galena Park
–
Green Earth Fuels Houston LLC
Process facilities – ethanol
–
Carleton Ethanol Facility
Wind Facilities
LaSalle County, Illinois
Vantage, Washington
Henry County, Illinois
Ebensburg, Pennsylvania
Current Projects

14
CPV Sentinel Peaking Facility – Southern
California Edison - design and construction of a
natural gas fired power plant near Palm Springs,
California
–
800 megawatt single cycle facility
–
Contract value: $269 million
–
Commenced project: Spring 2011
–
Expected completion: Summer 2013
Current Projects

15
East Texas Electric Cooperative, Inc. (ETEC) –
Woodville, Texas – engineer-procure-construct
(EPC) contract to design and build a 49.9 MW
biomass-fired power plant.
–
Contract Value: $167 million
–
Commenced Project: May 2012
–
Estimated Completion: December 2014
U.S. Natural Gas Development
16

Argan is participating in Marcellus Shale Region development activities with the
object of developing large-scale power plants. The approach is to take principal
positions in the initial stages of development, secure the rights for an EPC contract
for the large scale power plant to be built on the development site.

Argan then sells its equity interest in the site to the ultimate developer of the power
plant.
Wind Power Focus

June 2008 - Formed business partnership with Invenergy Wind
Management, LLC
–

Argan was the primary contractor for Invenergy sponsored construction
of wind farms in the United States and Canada
–

During 3Q09 GPS substantially completed the expansion of a
wind farm in LaSalle County, IL
December 2009 – Gemma acquired remaining ownership of the wind
power venture
–
17
Leveraged GPS’ historical expertise in wind power
Vantage Wind Energy awarded Gemma $33 million wind project
in Washington State.

November 2010 – Gemma awarded $59 million construction contract for
a 200 MW project in Henry County, Illinois

January 2012 – Gemma awarded $18 million construction contract for a
30 MW project near Ebensburg, Pennsylvania
Current Wind Projects


18
Henry County Illinois – design and build a wind
farm
-
Contract value: $62 million
-
Commenced project: November 2010
-
Completion: Summer 2012
Ebensburg, Pennsylvania – design and build a
wind farm
-
Contract value: $18 million
-
Commenced Project: January 2012
-
Completion: December 2012
Recent Wind Projects


LaSalle County, Illinois – design and build the
expansion of existing wind farm
–
Contract value: $46 million
–
Commenced project: August 2008
–
Completion: October 2009
Vantage, Washington
- Contract value: $32 million
- Commenced project: December 2009
- Completion: September 2010
19
Solar Power Focus

20
Canton, Massachusetts – design and build a 6 Mega Watt
solar energy facility
-
Contract value: $16 million
-
Commenced project: November 2011
-
Completion: Summer 2012
Competitive Landscape
Larger Projects / Traditional Fuels
21
Smaller Projects / Alternative Fuels
Growth Strategy
22

Establish additional strategic alliances in the EPC space

Make additional strategic acquisitions that complement
our unique market position

Partner with well capitalized investment entities to create
larger service opportunities in renewable energy projects

Exploit long-term relationships throughout the industry
to aggressively build backlog of traditional and renewable
energy projects

Make strategic investments in power plant development
projects as a means to create greater opportunities to build
backlog of large scale EPC contracts.
Backlog

Argan has significant contract backlog
Historical Contract Backlog as of January 31
**
*
April 30, 2012
2007
23
2008
2009
2010
2011
2012
2013
Investment Summary
24

Demonstrated track record of performance

Substantial industry growth prospects

Strong backlog and bidding pipeline

Compelling financial characteristics

Experienced management team
Financials
Consolidated Statements of Operations
Three Months Ended April 30,
2012
Year Ended January 31,
2011
2012
2011
(unaudited)
Net revenues
Power industry services
$
Telecommunications infrastructure services
Net revenues
57,728,000
$
14,019,000
$
132,519,000
$
174,938,000
5,962,000
63,690,000
1,974,000
15,993,000
9,331,000
141,850,000
7,654,000
182,592,000
48,984,000
10,481,000
111,193,000
146,976,000
4,605,000
53,589,000
10,101,000
3,028,000
7,073,000
(9,000 )
1,614,000
12,095,000
3,898,000
2,759,000
1,139,000
22,000
7,555,000
118,748,000
23,102,000
11,186,000
11,916,000
48,000
6,493,000
153,469,000
29,123,000
12,129,000
16,994,000
50,000
Income from continuing operations before income taxes
Income tax expense
7,064,000
2,517,000
1,161,000
416,000
11,964,000
4,556,000
17,044,000
7,037,000
Income from continuing operations
4,547,000
745,000
7,408,000
10,007,000
(405,000 )
120,000
(65,000 )
(74,000 )
282,000
1,280,000
(3,557,000 )
1,324,000
(285,000 )
(139,000 )
1,562,000
(2,233,000 )
606,000
8,970,000
7,774,000
Cost of revenues
Power industry services
Telecommunications infrastructure services
Cost of revenues
Gross profit
Selling, general and administrative expenses
Income from operations
Other (expense) income, net
Discontinued operations
Loss on discontinued operations (including gain on
disposal of $1,312,000 in January 2012 and
$152,000 in April 2011
Income tax benefit
Loss on discontinued operations
Net income
4,262,000
Less – Loss attributable to noncontrolling
interest (variable interest entities)
Net income attributable to Argan, Inc.stockholders
25
$
176,000
4,438,000
$
-606,000
$
302,000
9,272,000
$
-7,774,000
Financials
Consolidated Statements of Operations, continued
Earnings (loss) per share attributable to
Argan, Inc. stockholders
Continuing operations
Basic
Diluted
$
$
0.35
0.34
$
$
0.05
0.05
$
$
0.57
0.56
$
$
0.74
0.73
Discontinued operations
Basic
Diluted
$
$
(0.02 )
(0.02 )
$
$
(0.01 )
(0.01 )
$
$
0.11
0.11
$
$
(0.16 )
(0.16 )
$
$
0.32
0.32
$
$
0.04
0.04
$
$
0.68
0.67
$
$
0.57
0.57
Net income
Basic
Diluted
Weighted average number of shares outstanding
Basic
Diluted
26
13,663,000
13,950,000
13,601,000
13,679,000
13,612,000
13,792,000
13,593,000
13,709,000
Financials
Reconciliation to EBITDA, Continuing Operations
Three Months Ended April 30,
2012
Income from continuing operations
Interest expense
Income tax expense
$
Amortization of purchased intangible assets
Depreciation and other amortization
EBITDA
27
$
2011
4,547,000
12,000
2,517,000
$
745,000
-416,000
61,000
87,000
117,000
7,254,000
117,000
1,365,000
$
Financials
Reconciliation to EBITDA – Power Industry Services
Three Months Ended April 30,
Income before income taxes
Interest expense
$
Amortization of purchased intangible assets
Depreciation and other amortization
EBITDA
28
$
2012
7,177,000
12,000
$
2011
2,140,000
--
61,000
87,000
58,000
7,308,000
49,000
2,276,000
$
Financials
Consolidated Balance Sheets – April 30, 2012 & January 31, 2012
April 30,
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
Accounts receivable, net of allowance for doubtful accounts
29
January 31,
2012
2012
(Unaudited)
(Note 1)
175,309,000
$
156,524,000
18,516,000
16,053,000
Costs and estimated earnings in excess of billings
Deferred income tax assets
Prepaid expenses and other current assets
TOTAL CURRENT ASSETS
2,466,000
784,000
2,107,000
199,182,000
2,781,000
691,000
4,528,000
180,577,000
Property and equipment, net of accumulated depreciation
($2,413,000 and $1,469,000 related to variable interest entities as
of April 30, 2012 and January 31, 2012, respectively
Goodwill
Intangible assets, net of accumulated amortization
Deferred income tax and other assets
TOTAL ASSETS
3,775,000
18,476,000
2,513,000
743,000
224,689,000
2,761,000
18,476,000
2,574,000
864,000
205,252,000
$
$
Financials
Consolidated Balance Sheets, continued – April , 2012 & January 31, 2012
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable
Accrued expenses
Billings in excess of costs and estimated earnings
TOTAL CURRENT LIABILITIES
Other liabilities
TOTAL LIABILITIES
$
28,198,000
4,925,000
85,997,000
119,120,000
9,000
119,129,000
$
29,524,000
6,751,000
68,004,000
104,279,000
10,000
104,289,000
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;13,680,098 and 13,661,098 shares issued at April 30 and
January 31, 2012 respectively, 13,676,865 and 13,657,865 shares
outstanding at April 30 and January 31, 2012, respectively
Warrants outstanding
Additional paid-in capital
Retained stock,
earnings
Treasury
at cost; 3,233 shares at April 30, 2012 and January
31, 2012
TOTAL STOCKHOLDERS’ EQUITY
Noncontrolling interest (variable interest entities)
TOTAL EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
Note 1: The condensed consolidated balance sheet as of January 31, 2012
has been derived from audited consolidated financial statements.
30
$
2,052,000
576,000
90,060,000
13,381,000
2,049,000
590,000
89,714,000
8,955,000
(33,000 )
106,037,000
(477,000 )
105,560,000
224,689,000
(33,000 )
101,264,000
(301,000 )
100,963,000
205,252,000
$