ARGAN 8-K/A for 10-31-2003

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------

FORM 8-K/A

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
------------
Argan, Inc.
     ----------------------------------------------
(Exact name of registrant as specified in its charter)

Formerly Puroflow Incorporated

Delaware
     ----------------------------------------------
(State or other jurisdiction of incorporation)

001-31756

13-1947195

---------

-----------

(Commission File Number)

(I.R.S. Employer I.D. Number)

   
   

One Church Street
Suite 302
Rockville, MD

20850

-----------------------

-----

(Address of Principal Executive Offices)

(Zip Code)

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

 

 


Explanatory Note:

Argan, Inc. (the "Company" or " AI") is filing this amendment (this "Amendment") to amend its Form 8-K, dated October 31, 2003, that was filed with the Commission on November 14, 2003 (the original Form 8-K as filed on November 14, 2003 is referred to herein as the "Original Form 8-K").  The purpose of this Amendment to the Original Form 8-K is to restate the unaudited condensed pro forma financial statements contained in the Original Form 8-K. 

On March 11, 2004, the Company determined that there was an error in the calculation and classification of the deferred income tax liability associated with the identifiable intangible assets recorded in the purchase accounting of its acquisition of Southern Maryland Cable.  The error resulted in the overstatement of the customer contractual relationships, trade name and the deferred income tax liability and the understatement of goodwill.  The unaudited condensed pro forma financial statements contained in the Original Form 8-K have been restated to correct this error. 

The Company has amended and restated in its entirety the unaudited condensed pro forma financial statements contained in the Original Form 8-K.  This Amendment does not reflect events occurring after the filing of the Original Form 8-K, or modify or update those disclosures in any way, except as required to reflect the effects of the above-described restatement.

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.

 

 


 

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: March 15, 2004

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

(1,808,000)(2)

1,566,000

1,697,000
 

         Operating

               Income

395,000

(526,000)

303,000

172,000
 

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

(307,000)

230,000

99,000
 

Provision for Income

            Taxes

31,000

(15,000)(2)

23,000

39,000
 

Net Income from

   Continuing

      Operations

145,000

(292,000)

207,000

60,000
 

Recovery of Excess

Accrual for Disposal

   Of Segment

(172,000)

172,000

--------

--------
 

Net Income (Loss)

$ 317,000

($464,000)

 $207,000

$60,000
 

 

 


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-K/A 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/A for the six months ended July 31, 2003 filed with the Securities and Exchange Commission on March 15, 2004.

        (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-K/A 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

1,600,000

------

1,600,000
 

Tradename

680,000

------

680,000
 

Goodwill

1,548,000

------

1,548,000
 

Total assets

$16,975,000

($429,000)

$16,546,000

 

 


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

939,000

312,000(6)

1,251,000

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

$16,975,000

(429,000)

$16,546,000

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/A for the six months ended July 31, 2003 filed with the Securities and Exchange Commission on March 15, 2004.