Edgar Filing: ARGAN INC

Argan, Inc. - Form 8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 31, 2003
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Argan, Inc.
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(Exact name of registrant as specified in its charter)

Formerly Puroflow Incorporated

Delaware
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(State or other jurisdiction of incorporation)

001-31756	13-1947195
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(Commission File Number)	(I.R.S. Employer I.D. Number)

One Church Street Suite 302 Rockville, MD	20850
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(Address of Principal Executive Offices)	(Zip Code)

(301) 315-0027
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(Registrant's telephone number; including area code)

ITEM 2. Acquisition or Disposition of Assets:

On October 31, 2003, Argan, Inc. (AI) sold, in a cash transaction, its subsidiary, Puroflow Incorporated, to Western Filter Corporation (WFC). The sale price of approximately $3,500,000 was satisfied in cash of which $300,000 is being held in escrow for one year to protect WFC from any breach of representations and warranties under the Stock Purchase Agreement ( Item 10.01 below). The proceeds from the sale will be used for AI’s ongoing acquisition program and for working capital in expanding the business of Southern Maryland Cable, Inc., its wholly owned subsidiary which it acquired on July 17, 2003.

ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits:

(b) Pro Forma Financial Information:

Unaudited pro forma condensed combined statements of operations for the fiscal years ended January 31, 2003 and 2002, respectively, and for the six months ended July 31, 2003 and unaudited pro forma condensed combined balance sheet as of July 31, 2003.

10.01 Stock Purchase Agreement by and between Argan, Inc., a Delaware corporation, and Western Filter Corporation, a California corporation, dated as of October 31, 2003.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ARGAN, INC.

Date: November 14, 2003	BY /s/ Rainer H. Bosselmann --------------------------------
	Rainer H. Bosselmann Chairman of the Board and Chief Executive Officer

The accompanying unaudited pro forma condensed combined statements of operations present the results of operations of AI as if the sale of PMD had occurred as of February 1, 2001 and the purchase of SMC had occurred on February 1, 2002. PMD is accounted for as a discontinued operation for all periods for which condensed combined proforma statements of operations are presented. The pro forma unaudited condensed combined balance sheet reflects the unaudited pro forma condensed combined financial position of AI as if the sale of PMD had occurred July 31, 2003. (See Item 2., above, for details.)

The pro forma financial data is not necessarily indicative of what the results would have been if the sale of PMD and the acquisition of SMC had occurred on the dates indicated and are not necessarily representative of the Company’s financial position or results of operations for any future period. Because SMC and the Company were not under common control prior to July 17, 2003, historical combined results may not be comparable to, or indicative of, future performance.

Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended January 31, 2002

		AI as			Pro Forma
Reported(A)			Adjustments		Adjusted

Net Sales	$7,236,000		($7,236,000)(1)		----------

Cost of
Goods Sold	5,137,000		(5,137,000)(1)			----------

Gross Profit		2,099,000	(2,099,000)			----------


Selling General
And
Administrative	1,728,000		(1,513,000)(1)		215,000
Operating
Income	371,000		(586,000)		(215,000)

Interest Expense	(47,000)		(47,000)(1)			----------

Other Income		2,000	(2,000)(1)			----------

Income from Cont-
inuing Operations
Before Tax	326,000		(541,000)		(215,000)

Provision for Income
Taxes		130,000	(130,000)(1)		----------

Net Income from
Continuing
Operations		196,000	(411,000)		(215,000)
Loss on disposal
of manufacturing
subsidiary	----------		(320,000)(1)		(320,000)

Loss on discontinued
operations	(155,000)		(155,000)(1)
Loss on Disposal
Of Discontinued
Operations		(560,000)	(560,000)(1)		----------

Net Income(Loss)		$ (519,000)		$ (16,000)		$ (535,000)

Earnings Per Share:
Basic - Continuing
Operations	$ .40	$ (.43)

Basic – Discontinued
Operations	(1.45)	(.65)

Total	$ (1.05)	$ (1.08)


Diluted – Continuing
Operations	$ .40	$ (.43)

Diluted – Discontinued
Operations	(1.45)	(.65)

Total	$ (1.05)	$ (1.08)

Notes to unaudited pro forma condensed combined statement of operations

(1)	To adjust for the sale of PMD as if the transaction had occurred on February 1, 2001. The net loss on disposal of the manufacturing subsidiary was calculated on a pro forma basis utilizing PMD’s July 31, 2003 net book value including estimated deal costs of $150,000 see (7) and (8) below.
	(A)	Reported on Form 10-KSB for the year ended January 31, 2003 filed with the Securities and Exchange Commission on March 20, 2003.

Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended January 31, 2003

	AI as			Proforma		SMC		Pro Forma
	Reported(B)			Adjustments	Acquisition(C)			Adjusted

Net Sales		$ 6,834,000		($6,834,000)(2)		$8,808,000			$8,808,000
Cost of
Goods Sold		4,500,000		(4,500,000)(2)		6,939,000			6,939,000

Gross Profit	2,334,000			(2,334,000)		1,869,000			1,869,000

Selling General
And
Administrative		1,939,000		(1,741,000)(2)		1,646,000			1,844,000

Operating
Income		395,000		(593,000)		223,000				25,000

Interest Expense		(26,000)		(26,000)(2)		(90,000)			(90,000)
Other Income		57,000		(57,000)(2)		17,000			17,000
Write-down of Excess
and Obsolete
Inventory		(250,000)		(250,000)(2)		--------			--------

Income from Cont-
inuing Operations
Before Tax		176,000		(374 ,000)		150,000			(48,000)

Provision for Income
Taxes			31,000	(31,000)(2)		(9,000)				(9,000)

Net Income from
Continuing
Operations		145,000		(343,000)		141,000			(57,000)

Recovery of Excess
Accrual for Disposal
Of Segment		(172,000)		(172,000)		--------			--------

Net Income (Loss)			$ 317,000	($515,000)			$141,000			($57,000)

Earnings Per Share(3)
Basic - Continuing
Operations	$.29	$(.03)

Basic – Discontinued
Operations	$.35	----

Total	$.64	$(.03)


Diluted – Continuing
Operations	$.29	$(.03)

Diluted – Discontinued
Operations	$.35	----

Total	$.64	$(.03)

Notes to unaudited pro forma condensed combined statement of operations

(2)
To adjust for the sale of PMD as if it occurred on February 1, 2001.

(3)
The number of shares outstanding were increased to 1,798,000 to reflect the impact of the Company’s private placement consummated on April 29, 2003, a portion of whose proceeds were used to acquire SMC.

(B)
Reported on Form 10-KSB for the year ended January 31, 2003 filed with the Securities and Exchange Commission on March 20, 2003.

(C)
Gives effect to the acquisition of Southern Maryland Cable, Inc. (SMC) as if the transaction had occurred on February 1, 2002. SMC was acquired on July 17, 2003. The adjustments reflecting the impact of the acquisition of SMC contained herein are the combination of the historical results of SMC and the proforma adjustments as previously reported on the Company’s Form 8-KA filed with the Securities and Exchange Commission on September 24, 2003.

Unaudited Pro Forma Condensed Combined Statement of Operations
For the Six Months Ended July 31, 2003

	AI as		Pro Forma	SMC		Pro Forma
	Reported (D)		Adjustments	Acquisition(E)		Adjusted

Net Sales		$4,166,000	($3,603,000)(4)		$4,277,000	$4,840,000
Cost of
Goods Sold	2,979,000		(2,515,000)(4)	3,300,000		3,764,000

Gross Profit	1,187,000		(1,088,000)		977,000		1,076,000

Selling General
And
Administrative	1,359,000		(1,128,000)(4)		806,000		1,037,000

Operating
Income (Loss)		(172,000)	40,000		171,000			39,000

Interest Expense		(12,000)	8,000(4)		(36,000)			(40,000)
Other Income		27, 000	------		16,000			43,000

Pretax (Loss)
Income	(157,000)		48,000		151,000		42,000

Provision for Income
Taxes		245,000	(245,000)(4)		145,000		145,000


Net (Loss) Income		$(402,000)	293,000		$6,000		$(103,000)


Earnings Per Share(5):
Basic and Diluted		$.(34)					$.(06)

Notes to unaudited pro forma condensed combined statement of operations

(4)To adjust for the sale of PMD as if it had occurred on February 1, 2001.

(5)The number of shares outstanding were increased to 1,798,000 to reflect the impact of the Company’s private placement consummated on April 29, 2003, a portion of whose proceeds were used to acquire SMC.

(D) Reported on Form 10-QSB for the six months ended July 31, 2003 filed with the Securities and Exchange Commission on September 12, 2003

(E) Gives effect to the acquisition of Southern Maryland Cable, Inc. (SMC) as if the transaction had occurred on February 1, 2002. SMC was acquired on July 17, 2003. The adjustments reflecting the impact of the acquisition of SMC contained herein are the combination of the historical results of SMC and the pro forma adjustments as previously reported on Form 8-KA filed with the Securities and Exchange Commission on September 24, 2003.

Unaudited Pro Forma Condensed Combined Balance Sheet As of July 31, 2003

		AI as	Pro Forma		Pro Forma
		Reported(F)	Adjustments		Adjusted

Cash and cash equivalents		$5,875,000	(79,000)(6)			$8,846,000
			3,050,000(7)
Accounts receivable, net
of allowance for doubtful
accounts of $35,000		2,444,000	(1,164,000)(6)			1,280,000
Estimated earnings in
excess of billings		226,000	------			226,000

Inventories		1,688,000	(1,688,000)(6)			------

Prepaid expenses and other
current assets		305,000	(181,000)(6)			124,000
Funds escrowed from
Acquisition and disposition		260,000	300,000(7)			560,000

Total current assets		10,798,000		238,000		11,036,000
Leasehold improvements		469,000	(317,000)(6)			152,000
Machinery and equipment		4,720,000	(3,785,000)(6)			935,000
Trucks		615,000				615,000
Tooling and dies		413,000	(413,000)(6)			------

		6,217,000	(4,515,000)			1,702,000
Less accumulated
depreciation and
amortization		3,868,000	(3,848,000)(6)			20,000

Net property and equipment		2,349,000	(667,000)			1,682,000


Contractual customer
relationships		2,655,000		------		2,655,000

Tradename	1,133,000			------		1,133,000

Goodwill		636,000		------		636,000

Total assets		$17,571,000		($429,000)		$17,142,000

Unaudited Pro Forma Condensed Combined Balance Sheet (continued)
As of July 31, 2003

		AI as	Pro Forma	Pro Forma
		Reported(F)	Adjustments	Adjusted


Accounts Payable		$1,163,000	(463,000)(6)		$700,000
Billings in excess of
estimated earnings		196,000			196,000
Accrued expenses		459,000	(141,000)(6)		318,000
Accrued income taxes		96,000			96,000
Deferred income tax
liability, net		128,000	195,000(6)		323,000

Current portion of long-term
debt		427,000	------		427,000

Total current liabilities		2,469,000	(409,000)	2,060,000


Deferred income tax liability,
net of current portion		1,535,000	312,000(6)	1,847,000
Long-term debt		531,000	(12,000)(6)		519,000

Common stock, par value
$.15 per share, authorized -	.
12,000,000 shares - issued
1,804,304 shares at
July 31, 2003		270,000			270,000
Warrants outstanding		849,000		849,000
Additional paid-in capital		14,092,000		14,092,000
Accumulated deficit		(2,142,000)	(320,000)(8)	(2,462,000)
Treasury stock, at cost		(33,000)			(33,000)
Total stockholders’ equity		13,036,000	(320,000)		12,716,000


Total liabilities and
stockholders’ equity		$17,571,000	(429,000)		$17,142,000

Notes to unaudited pro forma condensed combined balance sheet

(6)	To adjust for the sale of PMD as if it had occurred on July 31, 2003.
(7)	To reflect the proceeds of the sale of PMD of $3,500,000, of which $300,000 is being held in escrow. Cash proceeds have been reduced by $150,000 in employee and legal deal related costs.
(8)	To adjust the net assets for the sale of PMD based on July 31, 2003 net book value including deal related costs in (7) above.
(F)	Reported on Form 10-QSB for the six months ended July 31, 2003 filed with the Securities and Exchange Commission on September 12, 2003.

(2)	To adjust for the sale of PMD as if it occurred on February 1, 2001.
(3)	The number of shares outstanding were increased to 1,798,000 to reflect the impact of the Company’s private placement consummated on April 29, 2003, a portion of whose proceeds were used to acquire SMC.

(B)	Reported on Form 10-KSB for the year ended January 31, 2003 filed with the Securities and Exchange Commission on March 20, 2003.

(C)	Gives effect to the acquisition of Southern Maryland Cable, Inc. (SMC) as if the transaction had occurred on February 1, 2002. SMC was acquired on July 17, 2003. The adjustments reflecting the impact of the acquisition of SMC contained herein are the combination of the historical results of SMC and the proforma adjustments as previously reported on the Company’s Form 8-KA filed with the Securities and Exchange Commission on September 24, 2003.