Absolute Values

Sub-Working-Capital & Low Multiplier-Buys

www.hacketts.com

Greenwich Investment Research, Inc.

April 17, 2016

203. 550. 2853

_________________________________________________________________________________________________________________

Argan, Inc.
(Buy)
Backlog!

1,500 !

($millions)!

1,200 !
900 !
600 !

Share price
Average volume (000)
Market capitalization (000)
Enterprise value (000)
Price / earnings (TTM)
Price / FCF (TTM)
EV / earnings (TTM)
EV / EBITDA (TTM)
Current dividend yield

01/01/16!

01/01/15!

01/01/14!

01/01/13!

01/01/12!

01/01/11!

01/01/10!

01/01/09!

01/01/08!

0!

01/01/07!

300 !

33.53
133
533,374
259,698
14.7
15.4
7.1
4.2
2.1%
1

New [electrical] generation capacity added through the projection period [2040] includes 144 GW of natural
gas capacity, 77 GW of renewable capacity (45% wind and 44% solar), 9 GW of nuclear capacity, and 1 GW
2
of coal-fired capacity.
Argan, Inc. (AGX) is an engineering, procurement and construction (EPC) contractor that specializes in
electrical generating facilities. As of this writing, they have installed 14 GW of gas turbines, 435 MW of
wind turbines, and 12 MW of photovoltaic (PV) cells. AGX also builds biomass-fired generating plants
and runs a telecommunications infrastructure contracting business (~ 3% of revenue). The company is
conservatively financed ($17.29 cash and securities per share, no debt as of 1/31/2016) and consistently
generates high capital returns, e.g., 17% ROE (no adjustments) for the 12 months ending 1/31/2016. At
$33.53 per share, AGX is trading for 14.7 trailing earnings, 4.1x trailing EV/EBITDA and 7.1x trailing EV /
earnings: a modest valuation. What makes this valuation remarkable is that AGXs gas-turbine backlog
has grown substantially in the last six months to a record five projects totaling $1.5 billion (about two
years of work likely to produce at least $170 million of EBITDA). The conditions that contributed to AGXs
current backlog are likely to persist for the foreseeable future as older coal-fired boilers and steam
turbines are replaced by more efficient gas turbines. AGX management and directors own about 10% of
the company. Accordingly, we plan to purchase AGX shares in the near future.

GW stands for gigawatt (one billion watts); MW stands for megawatt (one million watts). The installed electrical generating
capacity in the U.S. was 1,068 GW in 2014.
2
Annual Energy Outlook 2015, U.S. Energy Information Administration, April 2015, PDF p. 25.
This report is intended only for institutional and accredited investors and only for informational purposes. This report is based on information available to the
public; no representation is made with regard to its accuracy or completeness. This document is neither an offer nor solicitation to buy or sell securities. We
may buy or sell securities mentioned in this report without notice. 2016 by Chris Hackett of Greenwich Investment Research, Inc., all rights reserved.

Absolute Values
Valuation and capital structure
The following table summarizes AGXs current capital structure and valuation.
(000 except share price)
Common shares outstanding, 4/15/2016
14,843
Stock options, 1/31/2016
1,064 7.2% WASP= 26.38
diluted share count
15,907
Share price, 4/15/2016
33.53
Market capitalization
533,374
Cash + securities, 1/31/2016
275,007
Operating lease obligations, 1/31/2016
1,331
Debt, 1/31/2016
Enterprise value, net
259,698
AGX had $275 million of cash and no debt as of 1/31/2016. In addition to providing a cushion in a cyclical business,
cash is important to AGX because it helps the company obtain bonding for its projects. This is more than academic
AGX needed to partner with a third party contractor (The Lane Construction Co.) in order to obtain bonding on two
projects it is now completing (Panda Patriot and Panda Liberty). AGXs contract for these two projects totaled $767
million. When AGX won these contracts, its net cash position was $175 million - the cost of obtaining Lanes
3
signature on the bond was in excess of $30 million. AGXs higher cash balance and added experience are likely to
allow it to obtain bonding on its current backlog without requiring a co-signer JV partner. Interestingly, AGX is able
to earn high capital returns despite its over-capitalized balance sheet. The column highlighted in green shows
pretax return on tangible invested capital.

Capital Returns (no adjustments)

12 ME 1/31/16
12 ME 1/31/15
12 ME 1/31/14
12 ME 1/31/13
12 ME 1/31/12
12 ME 1/31/11
12 ME 1/31/10
13 ME 1/31/09
14 ME 1/31/08
15 ME 1/31/07

EBITDA /
assets
15.1%
13.3%
20.4%
16.1%
7.1%
12.1%
10.5%
13.2%
2.2%
3.7%

EBIT /
(tan. assets - CL+ST debt)
34.5%
32.9%
47.5%
37.6%
17.2%
19.3%
17.4%
26.1%
-20.6%
4.6%

Earnings /
equity
16.6%
16.4%
25.7%
19.2%
9.2%
8.0%
8.0%
12.7%
-7.7%
-0.3%

Background
AGX is a holding company which owns four operating subsidiaries: Gemma Power Systems, Atlantic Projects Co.
4
(APC), Southern Maryland Cable (SMC), and The Roberts Company. Rainer Bosselmann (72), COB / CEO, took
control of AGX during Q1 2003 as the result of a $2 million investment he made in the company. At the time, AGX
was known as Puroflow, a maker of filters used in automotive airbags. Puroflow generated $7.2 million of revenue
and $196,000 earnings in 2002. Bosselmann acquired SMC on 7/17/2003 for $5 million, changed the corporate
name from Puroflow to Argan and divested the Puroflow business for $3.5 million on 10/31/2003. The following
table summarizes the acquisitions and divestitures executed under Bosselmanns leadership.
3

Phone interview with Rainer Bosselmann, COB / CEO of AGX. Bosselmann said that it cost AGX $14 million per year to have
Lanes backstop the Panda projects for bonding purposes.
4
Bosselmann had been the president of Jupiter National, Inc., a publicly traded business development company, from 1991 to
1995. From 1996 through 2002, Bosselmann was the COB / CEO of Arguss Communications, a publicly traded telecom
infrastructure company.

April 15, 2016

Absolute Values

AGX Acquisitions & Divestitures Since Q1 2003

Date
acquired
12/04/15
05/29/15
12/08/06
08/31/04
07/17/03
NA

Company
Roberts
APC
Gemma Power
Vitarich Labs
SMC
Puroflow

Business
Metal fabrications for process industries
Installs & maintains turbines, boilers large equip.
Builds generating plants (gas, wind, PV, biomass)
Vitamins (liquidated 3/11/11 for $3.2 million)
Facilities contractor to telecom & electric utilities
Filters for airbags (sold 10/31/03 for $3.5 million)

Acquisition
price (000)
17,000
11,101
33,100
12,650
4,971
NA

FY 2016
revenue
(000)
181,000
26,000
375,000
NA
10,400
NA

FY 2016
EBIT (000)
(17,000)
700
82,000
NA
1,596
NA

Bosselmann sold Puroflow well (36x 2002 earnings), did very well on the SMC acquisition and hit a home run with
the Gemma Power acquisition. Vitarich was a disaster - the jury is out on APC and Roberts.
APC, based in Dublin, Ireland, installs and maintains turbines used for electrical generation. APC has completed
projects in 30 countries on six continents and complements the Gemma business. Regarding Roberts, Bosselmann
had been a director of Roberts since 2008 when the company was acquired from its founder, John Roberts, by a
consortium of three private equity firms (Main Street Resources, Elston Capital and Ironwood Capital). Roberts
makes pressure vessels, heat transfer equipment and other fabricated products used in power plants, chemical
plants and paper mills. Under private equity ownership, Roberts management expanded revenue from
approximately $100 million to $180 million by winning projects at low margins. By 2015, Roberts was violating loan
covenants. John Roberts, the companys founder, came-out of retirement in mid-2015 to right the business; AGX
acquired the company for $500,000 cash and agreed to a second $500,000 contingent payment. AGX also
assumed and extinguished $16 million of Roberts bank debt and has subsequently extended $22 million of working
capital to Roberts. The plan is to return Roberts to a $100 million revenue subsidiary which produces $10 million of
EBITDA; Roberts capabilities are complementary to Gemma and APC.
To gain some perspective on Bosselmanns success with acquisitions, the following table summarizes AGXs
tangible book value per share growth since the acquisition of Gemma on 1/31/2006.

AGX Tangible Book Value / Share Growth

Date
01/31/06
01/31/07
01/31/08
01/31/09
01/31/10
01/31/11
01/31/12
01/31/13
01/31/14
01/31/15
01/31/16

Tan. BV / share
0.01
0.71
1.46
4.24
4.90
5.61
5.87
7.16
9.47
11.29
11.57

previous period

106%
190%
16%
14%
5%
22%
32%
19%
3%

The following analysis focuses on Gemma Power because it produces substantially all of AGXs revenue and
earnings, e.g., 98% of FY 2016 EBIT.

April 17, 2016

Absolute Values
Backlog
The following table summarizes AGXs current $1.6 billion backlog comprised of five projects to be executed by its
Gemma subsidiary. The contracts for the projects allow for three years to complete; however, AGX expects to
complete these projects in 2018.

AGX Backlog
Full
notice to
proceed
date
not yet
03/14/16
03/11/16
11/10/15
10/05/15

Project owner
Exelon
NTE Energy
CPV Towantic
Caithness Moxie Freedom
NTE Energy

Location
Medway, MA
Kings Mt., NC
Oxford, CT
Luzerne County, PA
Middletown, OH

Equipment
installed
Duel-fuel SCCT
CCCT
CCCT
CCCT
CCCT

Plant
capacity
(MW)
200
475
785
1,000
475
2,935

Contract
size (000)
99,000
285,000
500,000
402,000
285,000
1,571,000

Expected
Completion
mid 2018
spring 2018
2018
mid 2018
spring 2018

The current backlog is likely to produce margins similar to what the company generated during 2016, i.e., 15%
EBITDA / revenue. The following table summarizes AGXs margins since 2007 (the first full year they owned
Gemma Power Systems). Note that during 2014, AGX produced very high margins this was the result of two
projects (Panda Patriot and Panda Liberty) in which AGX financed the development costs (less than $10 million) in
exchange for enhanced upside. AGX does not typically finance project development costs, so we added an
adjusted column for Gross margin and EBITDA.

AGX Margins
Fiscal
year
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
mean
median

Gross
profit /
revenue
24%
22%
35%
18%
16%
16%
10%
15%
10%
15%

Adjusted
gross profit
/ revenue
24%
22%
26%
18%
16%
16%
10%
15%
10%
15%

EBITDA /
revenue
15%
14%
29%
14%
10%
9%
6%
8%
2%
6%

Adjusted
EBITDA /
revenue
15%
14%
19%
14%
10%
9%
6%
8%
2%
6%

Earnings /
revenue
9%
8%
18%
8%
7%
4%
3%
5%
-2%
0%

18.1%
16.1%

17.3%
16.1%

11.2%
9.4%

10.2%
9.4%

6.0%
5.5%

The data in the table suggest that margins peeked in fiscal 2014 and have subsequently softened (with or without
the enhanced earnings from the project development financing). The following table shows the EBITDA that AGX is
likely to produce from its current backlog under different margin assumptions.

Phone interview with Rainer Bosselmann, COB / CEO of AGX.

April 17, 2016

Absolute Values
Inferred EBITDA from Current Backlog
EBITDA /
Revenue
margin
15%
14%
13%
12%
11%
10%
9%

Inferred
EBITDA
235,650
219,940
204,230
188,520
172,810
157,100
141,390

EBITDA/YR
over year, 2
years
117,825
109,970
102,115
94,260
86,405
78,550
70,695

EBITDA/YR
over year, 3
years
78,550
73,313
68,077
62,840
57,603
52,367
47,130

The data in this table suggest that AGX is likely to produce as much or more EBITDA per year over the next two
years as it did in FY 2016: the companys earnings are likely to grow, perhaps substantially. This assumes that the
Roberts acquisition is not a significant drag and that the APC acquisition is either neutral or a net positive.
Continued positive results from their telecom contracting business represents free, all be it modest, upside
optionality. But what happens after 2018?

Trends
Electricity demand in the U.S. has been flat for a decade, e.g., the electricity consumed in 2015 was 98% of what it
6
was in 2007 while generating capacity is up by only 3%. However, over the last decade, gas-fired generating
capacity increased by 58% while coal-fired capacity declined by 20%. What is driving this shift during a period of
stagnate demand growth? We think there are two drivers:

Aging coal-fired steam turbine plants.

Superior economics of gas-fired turbines.

The following table summarizes the age of coal and nuclear electrical generating facilities in the U.S. as of 2010.

Age of U.S. Coal & Nuclear Generating Fleet (year-end 2010)7

more than 60 years old
51 to 60 years old
41 to 50 years old
31 to 40 years old
21 to 30 years old
11 to 20 years old
10 or fewer years old

Coal
1%
14%
21%
37%
20%
3%
4%

cumulative
1%
16%
36%
73%
93%
96%
100%

Nuclear
0%
0%
4%
42%
52%
2%
0%

cumulative
0%
0%
4%
46%
98%
100%
100%

The data in the above table show that as of late 2010, 73% of U.S. coal-fired generating facilities and nearly half of
U.S. nuclear plants were over 30 years old. Regardless of fuel used, power plants have finite lives one is left to
conclude that the U.S. fleet of coal and nuclear plants is long in the tooth. With that in mind, take a look at the data
in the following table:

AGX 10-K, 4/15/2016, PDF p. 29.

U.S. Energy Information Administration, Form EIA860 Annual Electric Generator Report, and Form EIA860M (see Table ES3
in the March 2011 Electric Power Monthly), Hackett analysis.

April 17, 2016

Absolute Values
Selected Power Plant Capital Costs and Operating Economics8
Plant!Characteristics!
Nominal!
Capacity!
(MW)!

!!
!!!Coal!

!!

Single'Unit'Advanced'pulverized*coal*(PC)'

Plant!Costs!(2012$)!
!
9

Heat!Rate !
(Btu/kWh)!
!!

10

Overnight !
Capital!Cost!
($/kW)!

!
!!
!!

!!

Fixed!O&M!Cost!
($/kWIyr)!

Variable!O&M!
Cost!($/MWh)!

!!

!!

650'

8,800'

''

$3,246''

$37.80''

$4.47''

Dual'Unit'Advanced'PC'
Single'Unit'Advanced'PC'with'carbon*
capture*&*storage*(CCS)'

1,300'

8,800'

''

$2,934''

$31.18''

$4.47''

650'

12,000'

''

$5,227''

$80.53''

$9.51''

Dual'Unit'Advanced'PC'with'CCS'
Single'Unit'integrate*combine*cycle*
gasification*(IGCC)''

1,300'

12,000'

''

$4,724''

$66.43''

$9.51''

600'

8,700'

''

$4,400''

$62.25''

$7.22''

Dual'Unit'IGCC'

1,200'

8,700'

''

$3,784''

$51.39''

$7.22''

520'

10,700'

''

$6,599''

$72.83''

$8.45''

Single'Unit'IGCC'with'CCS'
!!!Natural!Gas!

!!

!!

!!

!!

!!

!!

Conventional'combined*cycle*(CC)'

620'

7,050'

''

$917''

$13.17''

$3.60''

Advanced'CC'

400'

6,430'

''

$1,023''

$15.37''

$3.27''

Advanced'CC'with'CCS'

340'

7,525'

''

$2,095''

$31.79''

$6.78''

85'

10,850'

''

$973''

$7.34''

$15.45''

210'

9,750'

''

$676''

$7.04''

$10.37''

10'

9,500'

''

$7,108''

$0.00''

$43.00''

Conventional'combustion*turbine*(CT)'
Advanced'CT'
Fuel'Cells'
!!!Wind!

!!

!!

!!

!!

!!

!!

Onshore'Wind'

100'

N/A'

''

$2,213''

$39.55''

$0.00''

Offshore'Wind'

400'

N/A'

''

$6,230''

$74.00''

$0.00''

!!!Solar!

!!

Solar'Thermal''

!!

!!

!!

!!

!!

100'

N/A'

''

$5,067''

$67.26''

$0.00''

Photovoltaic'

20'

N/A'

''

$4,183''

$27.75''

$0.00''

Photovoltaic''

150'

N/A'

''

$3,873''

$24.69''

$0.00''

Assuming the data in the above table is about right, the following inferences can be made:
rd

1. Gas turbines cost about 1/3 the price of coal-fired steam turbine systems.
2. Fixed operating and maintenance costs of gas turbines is about half that of coal-fired systems.
3. Combined cycle gas turbines are about 27% more efficient than the most efficient coal-fired systems.
Based on the above data, gas turbines have a significant economic advantage over coal-fired systems, which
bodes well for demand for AGXs services beyond their current backlog. Gas also burns cleaner than coal, making it
more environmentally friendly, but what about fuel costs? The following chart compares the delivered cost of gas to
the delivered cost of coal on a Btu basis since 2000.
8

Updated Capital Cost Estimates for Utility Scale Electricity Generating Plants, U.S. Energy Information Administration, April
2013. PDF p.10.
9
Heat rate is a measure of how many Btus of energy are required to produce one kWh of electricity, i.e., the lower the heat rate,
the more efficient the generating equipment. For example, an advanced combined cycle gas turbine with a heat rate of 6,430 is
27% more efficient than an advanced pulverized coal plant operating at a heat rate of 8,800. Or, from the other perspective, the
coal plant is 37% more energy intensive than the gas plant.
10
Overnight capital cost is the cost of building a plant excluding capital costs, as if the facility could be built overnight.

April 17, 2016

Absolute Values

Source: U.S. Energy Information Administration, Electric Power Monthly, and Short-Term
Energy Outlook (March 2016).

The chart shows that gas prices have been volatile since 2000 while coal prices have experienced a more gentle
increase and more recently, a gentle softening. Interestingly, gas demand increased during the 2000 to 2008 period
largely due to the growing fleet of gas turbines; more recently, gas prices fell as a result of a fracking-induced
supply glut. Given that gas turbines have ~ 27% efficiency advantage over coal-fired systems, at current market
prices of $3.00 gas and $2.20 coal, the fuel costs are about the same. Here is the U.S. Department of Energys
(DOE) forecast of gas and coal prices through 2040; note that their 2016 forward price forecast is significantly lower
than their 2015 estimate.

Natural Gas prices are significantly lower than

AEO 2015
11

Future Coal vs. Natural Gas Prices (2015 estimates vs. 2016 estimates)
2013$/MMBtu
$9.00
$8.00
$7.00
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00

Coal- AEO2016 Reference

Coal-AEO2015 Reference

Coal-2015 EIA Clean Power Plan Study

Gas- AEO2016 Reference

Gas-AEO2015 Reference

Gas-2015 EIA Clean Power Plan Study

$0.00

Source:
AEO2016
NEMS
run ref2016.1.0203a.RAN,
Ref2015,
To the extent gas and
coal
prices
behave
as the DOEAEO2015
forecast,
gasrf15_111_all.0306a.RAN
turbines are likely to continue to enjoy an
WORKING
GROUP
PRESENTATION
DISCUSSION
economic advantageCoal
over
coal-fired
systems.
This
suggests
that
demand
forFOR
AGX
to build PURPOSES.
new gas-fired generating
Uranium and Analysis Team
DO NOT QUOTE OR CITE AS AEO2016 MODELING ASSUMPTIONS AND
4
Washington,
DC, February
9, 2016
plants is likely to remain
robust.
Other
industry
participants
seem
to
have
reached
a
similar conclusion.
For
INPUTS ARE SUBJECT TO CHANGE.
11

nd

Annual Energy Outlook 2016, 2 Coal Working Group, Slide Deck, Coal and Uranium Analysis Team, U.S. Energy Information
Administration, 2/9/2016, PDF p.4.

April 17, 2016

Absolute Values
12

instance, General Electric (GE), the worlds largest supplier of gas turbines for electrical generating applications
13
(50% market share), recently spent $2 billion developing its H-class gas turbine which it has just begun shipping.
GE estimates it will deliver 500 H-class turbines over the next 15 years. GE also acquired Alstom, a gas turbine
manufacturer based in France, on 11/2/2015 for $10.1 billion. It looks like GE is confident that there will be heavy
demand for gas turbines for the foreseeable future. Here is how the DOE currently expects U.S. electricity demand
renewables,
andbetween
coal-fired
generation,
AEO2015 Reference
to be met
now and
2040.

PP Study 2015 vs. preliminary AEO2016

U.S. Electrical Generation by Fuel 2016 Reference Case14

rs

Billion kilowatthours
2000
1800
1600

Coal-AEO2015 Reference
Gas-AEO2015 Reference

1400

Renew-AEO2015 Reference

1200
1000
800
600

Coal-AEO2016 Reference
Gas-AEO2016 Reference

400
Coal-2015 EIA Clean Power Plan Study
Gas-2015 EIA Clean Power Plan Study
Renew-2015 EIA Clean Power Plan Study

Renew-AEO2016 Reference

200
0

AEO2016 NEMS run ref2016.0206a.RAN, rf15_111_all.0306a.RAN

The chart suggests

that GROUP
the recent
surge in gas turbine
generating PURPOSES.
capacity is just getting started; to the extent this
WORKING
PRESENTATION
FOR DISCUSSION
and Analysisis
Team
DO NOT
QUOTE
OR CITE
AS AEO2016
MODELING
ASSUMPTIONS
the case, this
situation
is likely
to provide
AGX with
significant
opportunities AND
over coming
decades. Not bad for a
10
C, February 9, 2016
INPUTS
ARE
SUBJECT
TO CHANGE.
business valued
at 4.2x
trailing
EBITDA
which produced 35% pre-tax ROIC last year.

Risks and conclusion

While demand for gas turbine generating plants appears poised to grow considerably for the foreseeable future, it
does not translate that AGX will automatically capitalize on this growth. The most significant risk to AGXs business
is margin compression. After all, there are other capable contractors, Fluor and Bechtel at the high-end, perhaps
15
even GE, as well as a bevy of smaller companies. AGX enjoys lower overhead costs than big firms and has built
considerable expertise to compete against smaller firms and new entrants. (Even small gas turbine projects run in
excess of $100 million, so customers will tend to stick with proven contractors, all things equal). Part of AGXs
success to date was predicated on its willingness and ability to work with independent power developers, e.g.,
Moxie Energy LLC. Under these circumstances, AGX becomes a significant asset to the developer in the design
and budgeting of projects and, most importantly, AGX lends credibility to the project so that the developer can
arrange the financing and find a buyer for the project. The conditions that support this method of project
development may change, and that would likely result in less work for AGX and/or margin compression. AGX does

12

GE builds both gas turbines and steam turbines. Steam turbines are used in coal-fired power plants to drive the generator.
Steam turbines are also uses on the secondary cycle of combined cycle gas turbine plants.
13
Richard Clough, GE Makes Once-a-Decade Bet on Big Turbines as Energy Use Surges, Bloomberg, 4/1/2015.
14
nd
Annual Energy Outlook 2016, 2 Coal Working Group, Slide Deck, Coal and Uranium Analysis Team, U.S. Energy Information
Administration, 2/9/2016, PDF p. 10.
15
Three decades ago, the authors familys business sold equipment to a GE subsidiary which won contracts to build small coalfired generating facilities.

April 17, 2016

Absolute Values
have experience working with large-scale customers, e.g., the Medway project (current backlog) is owned by
Excelon Generation; however, we suspect that utility-scale customers will negotiate thinner margins than
independent developers.
Related to the risk of margin compression is the fact that AGXs contracts to date are fixed-price. This means that
AGX management must remain disciplined both in how it bids contracts as well as how it executes contracts,
especially in view of its rapid growth. So far, so good. Also, because AGX is small, it is highly reliant on a few
contracts. For instance, from 2013 through 2015, substantially all of AGXs revenue and earnings came from two
contracts which are now being completed. Over the next 24 to 36 months, the situation is improved AGX is now
heavily reliant on five contracts while five is better than two, this is not exactly a diversified revenue stream.
Finally, there is the risk that AGX will not be able to turnaround The Roberts Co. and/or it will make some other
acquisition that proves costly. As detailed above, Bosselmanns record is very good, but not perfect. On the
positive side, the evidence is that AGX acquired Roberts at a bargain price: 1) Bosselmann had been a director of
Roberts since 2008 so he knew the company well; 2) It appears that as Roberts violated loan covenants, the banks
forced the sale. Roberts also has expertise that complements the Gemma and APC businesses; there is a
reasonable chance that Roberts personnel and facilities can help Gemma fulfill its backlog and perhaps win new
business.
Considering AGXs over-capitalized balance sheet, what appears to be a tidal wave of demand for gas turbine
installations over the next decade and the companys modest valuation, AGX is likely to turnout to be a good
investment.

April 17, 2016

AGX Balance Sheets

(000)
1/31/16 1/31/15 1/31/14 1/31/13
1/31/12
1/31/11
Assets
Cash
160,909 333,691 272,209 175,142 156,524
84,535
a
Short-term investments
114,098
Escrowed cash
A/R
64,185
27,330
23,687
24,879
16,053
13,099
Costs & estimated earnings in excess of billings
4,078
455
527
1,178
2,781
1,443
Inventories, net
b
Notes receivable
1,974
1,786
204
Deferred income tax assets
1,111
178
1,303
691
91
Prepaid & other
5,368
1,092
1,754
1,606
4,528
520
Held for sale
6,354
current assets 351,723 364,354 298,559 204,108 180,577 106,042
PP&E, net
Goodwill
Intangible assets, net
Deferred income taxes & other
Other
Held for sale

12,308
37,405
9,344

6,518
18,476
1,845

4,183
18,476
2,088

9,468
18,476
2,331
341

2,761
18,476
2,574
864

1,478
18,476
2,908
1,013

total assets 410,902

391,193

323,306

234,724

205,252

625
130,542

46,395

37,691

22,589

32,699

29,524

8,555

35,454
105,863

15,976
161,564
201

7,912
134,736
292

9,488
73,359

6,751
68,004

13,035
9,916

current liabilities 187,712

215,432

165,529

115,546

104,279

1,362
32,868

1,335

809

total liabilities 189,047

216,241

165,529

10
115,556

10
104,289

29
32,897

1,469

1,749

301

156,308
135,744
272,209
2.1

120,917
100,110
175,142
1.9

101,264
80,214
156,524
2.0

122

Liabilities
A/P
Dividends payable
Accrued expenses
Billings in excess of costs
Deferred income taxes
Current debt
Held for sale

LT debt
Deferred income taxes
Other
b

Noncontrolling interest (variable interest entities)

Shareholders' equity
Tangible BV
Cash, net
Assets / equity
Return on capital metrics
EBITDA / assets
EBITDA / tangible assets
EBIT / (tan. assets - CL+ST debt)
Earnings / assets
Earnings / tangible assets
Earnings / equity
Earnings/ tangible equity

a
b

3,339
218,516
171,767
275,007
1.9

15.1%
17.1%
34.5%
8.8%
10.0%
16.6%
21.2%

(10,520)
185,472
165,151
333,691
2.1

13.3%
14.0%
32.9%
7.8%
8.2%
16.4%
18.4%

20.4%
21.8%
47.5%
12.4%
13.3%
25.7%
29.6%

16.1%
17.6%
37.6%
9.9%
10.9%
19.2%
23.2%

7.1%
7.9%
17.2%
4.5%
5.0%
9.2%
11.6%

97,645
76,261
84,535
1.3

12.1%
14.4%
19.3%
6.0%
7.1%
8.0%
10.2%

Certificates of deposit.
AGX executes development loan agreements with variable interest entities established to execute specific projects. As of
10/31/15, $4.866 mil of notes receivable were from the VIE called Moxie Freedom which is building a 1GW gas-fired
power plant. This loan was repaid in November 2015 when a substantial portion of Moxie Freedom was purchased by an
investor.
AGX acquired Gemma Power Systems on 12/8/2006 for $33.1 million.

Greenwich Investment Research, Inc.

AGX Income Statement

(000)
12 ME 1/31/16
Revenue
Power industry core services
387,636
b
Power industry: project development services
Industrial fabrication & field services
15,260
Telecom infrastructure services
10,379
Nutritional products
total revenue
413,275
Cost of services
Power
Industrial fabrication & field services (Roberts)
Telecom
Nutritional products a
gross profit
SG&A
Gain on deconsolidation of variable interest entity
Impairment loss
Other
Interest, net
Equity in unconsolidated subsidiary
Income taxes
Discontinued operations, net of taxes
c
Noncontrolling interest
Earnings, GAAP
adjustments
tax on adjustments, assume actual tax rate
Earnings, Adjusted
D+A
Capex
FCF
EBIT
EBITDA
Valuation metrics
Market capitalization / earnings
Market capitalization / FCF
Market capitalization / book value
Market capitalization / tangible book value
Market capitalization / (CA-all liabilities)
EV / earnings
EV / EBIT
EV / EBITDA

Greenwich Investment Research, Inc.

12 ME 1/31/15 12 ME 1/31/14b 12 ME 1/31/13

12 ME 1/31/12

12 ME 1/31/11a 12 ME 1/31/10

376,676

191,597
27,052

261,327

132,519

174,938

209,814

6,434

8,806

17,308

9,331

7,654

8,517

383,110

227,455

278,635

141,850

182,592

218,331

(294,643)

(141,807)

(214,817)

(111,193)

(146,976)

(188,983)

(4,864)

(6,800)

(13,683)

(7,555)

(6,493)

99,465

83,603

78,848

50,135

23,102

29,123

(6,629)
22,719

(25,060)
349

(19,470)

(12,918)
2,444

(14,350)

(11,186)

(12,129)

(11,999)

(290,823)
(15,527)
(7,460)

752

234

(4,556)
1,562
302
9,272

(7,037)
(2,233)

(3,219)
40,125

(13,640)
(285)
1,448
23,265

877
(76)
1,288
(4,508)
(1,261)

7,774

7,040

40,125
792
1,136
39,781
65,155
65,947

23,265
765
7,263
16,767
36,948
37,713

9,272
789
1,738
8,323
13,780
14,569

7,774
992
487
8,279
14,761
15,753

7,040
967
190
7,817
11,624
12,591

961

(25,302)

(20,912)

(25,991)

(13,859)
36,345

(13,010)
30,445

36,345
1,310
3,118
34,537
60,895
62,205

30,445
794
2,936
28,303
51,123
51,917

14.7
15.4
2.4
3.1
3.3
7.1
4.3
4.2

(43)

48

50

17.5
18.8

13.3
13.4

22.9
31.8

57.5
64.1

68.6
64.4

75.8
68.2

8.5
5.1
5.0

6.5
4.0
3.9

11.2
7.0
6.9

28.0
18.8
17.8

33.4
17.6
16.5

36.9
22.3
20.6

AGX Income Statement

Income statement notes:

a

AGX board approved disposal plan for Vitarich Labs during 12/2010. AGX sold Vitarich assets for $3.1 million. in March 2011.

AGX earned $27.65 million of revenue from project development services during 2014; this revenue was included in the power services revenue and was unusual in that
AGX financed the development (project planning, permits, arranging financing) on the two Moxie plants (now owned by Panda), effectively expanding their 2014 margins.

For FY 2015 and 2016, this was predominantly money paid to Lane Construction in exchange for Lane co-signing the Panda contracts so that AGX could obtain the bond
for these contracts.
AGX acquired Gemma Power Systems on 12/8/2006 for $33.1 million.

Greenwich Investment Research, Inc.