##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the Quarterly Period Ended July 31, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
 For the Transition Period from  to
 Commission File Number 001-31756
 Argan, Inc.
 (Exact Name of Registrant as Specified in Its Charter)
 Delaware
    
    13-1947195(State or Other Jurisdiction of Incorporation
    
    (I.R.S. Employer Identification No.)or Organization)
 One
Church Street, Suite 201, Rockville Maryland 20850
 (301) 315-0027  (Registrants Telephone Number, Including Area Code)
 (Former Name, Former Address and Former Fiscal Year,
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ




---



##### 



ARGAN, INC. AND SUBSIDIARIES
INDEX
 Page No.PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets  July 31, 2009 and January 31, 2009
    
    
    3Condensed Consolidated Statements of Operations for the Three and Six Months Ended July
31, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2009
and 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    28PART II. OTHER INFORMATION
    
    
    29Item 1. Legal Proceedings
    
    
    29Item 1A. Risk Factors
    
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3. Defaults in Senior Securities
    
    
    30Item 4. Submission of Matters to a Vote of Security Holders
    
    
    30Item 5. Other Information
    
    
    31Item 6. Exhibits
    
    
    31SIGNATURES
    
    
    31Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   - 2 -




---



##### Table of Contents



ARGAN, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
 July 31,
    
    
    January 31,2009
    
    
    2009(Unaudited)
    
    
    (Note 1)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    52,112,000
    
    
    $
    74,666,000Escrowed cash
    
    
    10,004,000
    
    
    
    10,000,000Accounts receivable, net of allowance for doubtful accounts
    
    
    23,841,000
    
    
    
    12,986,000Costs and estimated earnings in excess of billings
    
    
    10,231,000
    
    
    
    6,325,000Inventories, net of reserve for obsolescence
    
    
    2,140,000
    
    
    
    1,347,000Current deferred tax assets
    
    
    1,303,000
    
    
    
    1,660,000Prepaid expenses and other current assets
    
    
    1,145,000
    
    
    
    768,000TOTAL CURRENT ASSETS
    
    
    100,776,000
    
    
    
    107,752,000Property and equipment, net of accumulated depreciation
    
    
    1,071,000
    
    
    
    1,214,000Goodwill
    
    
    18,476,000
    
    
    
    18,476,000Intangible assets, net of accumulated amortization
    
    
    3,477,000
    
    
    
    3,655,000Investment in unconsolidated subsidiary
    
    
    3,125,000
    
    
    
    2,107,000Deferred tax assets
    
    
    1,766,000
    
    
    
    1,743,000Other assets
    
    
    136,000
    
    
    
    217,000TOTAL ASSETS
    
    $
    128,827,000
    
    
    $
    135,164,000LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    29,808,000
    
    
    $
    31,808,000Accrued expenses
    
    
    8,692,000
    
    
    
    14,992,000Billings in excess of costs and estimated earnings
    
    
    1,409,000
    
    
    
    5,102,000Current portion of long-term debt
    
    
    2,042,000
    
    
    
    2,301,000TOTAL CURRENT LIABILITIES
    
    
    41,951,000
    
    
    
    54,203,000Long-term debt
    
    
    833,000
    
    
    
    1,833,000Other liabilities
    
    
    28,000
    
    
    
    22,000TOTAL LIABILITIES
    
    
    42,812,000
    
    
    
    56,058,000COMMITMENTS AND CONTINGENCIES(Note 14)STOCKHOLDERS EQUITYPreferred 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;
13,519,184 and 13,437,684 shares issued at 7/31/09 and 1/31/09, and
13,515,951 and 13,434,451 shares outstanding at 7/31/09 and
1/31/09, respectively
    
    
    2,027,000
    
    
    
    2,015,000Warrants outstanding
    
    
    612,000
    
    
    
    738,000Additional paid-in capital
    
    
    86,120,000
    
    
    
    84,786,000Accumulated other comprehensive loss
    
    
    (26,000
    )
    
    
    (63,000
    )Accumulated deficit
    
    
    (2,685,000
    )
    
    
    (8,337,000
    )Treasury stock, at cost; 3,233 shares at 7/31/09 and 1/31/09
    
    
    (33,000
    )
    
    
    (33,000
    )TOTAL STOCKHOLDERS EQUITY
    
    
    86,015,000
    
    
    
    79,106,000TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    128,827,000
    
    
    $
    135,164,000
   - 3 -




---



##### Table of Contents



ARGAN, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Operations
 (unaudited)
 Three Months Ended July 31,
    
    
    Six Months Ended July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net revenuesPower industry services
    
    $
    59,804,000
    
    
    $
    70,639,000
    
    
    $
    117,839,000
    
    
    $
    114,647,000Nutritional products
    
    
    3,452,000
    
    
    
    2,226,000
    
    
    
    6,270,000
    
    
    
    4,625,000Telecommunications infrastructure services
    
    
    2,199,000
    
    
    
    2,233,000
    
    
    
    4,456,000
    
    
    
    4,232,000Net revenues
    
    
    65,455,000
    
    
    
    75,098,000
    
    
    
    128,565,000
    
    
    
    123,504,000Cost of revenuesPower industry services
    
    
    53,712,000
    
    
    
    63,108,000
    
    
    
    105,087,000
    
    
    
    101,684,000Nutritional products
    
    
    3,162,000
    
    
    
    2,395,000
    
    
    
    5,720,000
    
    
    
    4,718,000Telecommunications infrastructure services
    
    
    1,625,000
    
    
    
    1,875,000
    
    
    
    3,375,000
    
    
    
    3,649,000Cost of revenues
    
    
    58,499,000
    
    
    
    67,378,000
    
    
    
    114,182,000
    
    
    
    110,051,000Gross profit
    
    
    6,956,000
    
    
    
    7,720,000
    
    
    
    14,383,000
    
    
    
    13,453,000Selling, general and administrative expenses
    
    
    3,188,000
    
    
    
    4,016,000
    
    
    
    6,401,000
    
    
    
    8,027,000Impairment losses of Vitarich Laboratories, Inc.
    
    
    
    
    
    
    1,946,000
    
    
    
    
    
    
    
    1,946,000Income from operations
    
    
    3,768,000
    
    
    
    1,758,000
    
    
    
    7,982,000
    
    
    
    3,480,000Interest expense
    
    
    (52,000
    )
    
    
    (108,000
    )
    
    
    (114,000
    )
    
    
    (228,000
    )Investment income
    
    
    24,000
    
    
    
    432,000
    
    
    
    75,000
    
    
    
    936,000Equity in the earnings (loss) of unconsolidated
subsidiary
    
    
    408,000
    
    
    
    (165,000
    )
    
    
    1,018,000
    
    
    
    (165,000
    )Income from operations before income taxes
    
    
    4,148,000
    
    
    
    1,917,000
    
    
    
    8,961,000
    
    
    
    4,023,000Income tax expense
    
    
    (1,463,000
    )
    
    
    (1,111,000
    )
    
    
    (3,309,000
    )
    
    
    (1,662,000
    )Net income
    
    $
    2,685,000
    
    
    $
    806,000
    
    
    $
    5,652,000
    
    
    $
    2,361,000Earnings per share:Basic
    
    $
    0.20
    
    
    $
    0.07
    
    
    $
    0.42
    
    
    $
    0.21Diluted
    
    $
    0.19
    
    
    $
    0.07
    
    
    $
    0.41
    
    
    $
    0.20Weighted average number of shares outstanding:Basic
    
    
    13,492,000
    
    
    
    11,860,000
    
    
    
    13,469,000
    
    
    
    11,493,000Diluted
    
    
    13,771,000
    
    
    
    12,226,000
    
    
    
    13,756,000
    
    
    
    11,854,000
   - 4 -




---



##### Table of Contents



ARGAN, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
 Six Months Ended July 31,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    5,652,000
    
    
    $
    2,361,000Adjustments to reconcile net income to net cash (used in) provided by
operating activities:Equity in the (earnings) loss of the unconsolidated subsidiary
    
    
    (1,018,000
    )
    
    
    165,000Deferred income tax expense (benefit)
    
    
    375,000
    
    
    
    (1,501,000
    )Stock option compensation expense
    
    
    578,000
    
    
    
    788,000Amortization of purchased intangibles
    
    
    178,000
    
    
    
    1,174,000Depreciation and other amortization
    
    
    295,000
    
    
    
    683,000Provision for (recovery of) bad debts
    
    
    125,000
    
    
    
    (6,000
    )Provision for (recovery of) inventory obsolescence
    
    
    (74,000
    )
    
    
    171,000Impairment losses
    
    
    
    
    
    
    1,946,000Other
    
    
    (7,000
    )
    
    
    109,000Changes in operating assets and liabilities:Escrowed cash
    
    
    (4,000
    )
    
    
    4,086,000Accounts receivable
    
    
    (10,980,000
    )
    
    
    7,737,000Costs and estimated earnings in excess of billings
    
    
    (3,906,000
    )
    
    
    (56,000
    )Inventories
    
    
    (719,000
    )
    
    
    (25,000
    )Prepaid expenses and other assets
    
    
    (371,000
    )
    
    
    (715,000
    )Accounts payable and accrued expenses
    
    
    (8,219,000
    )
    
    
    9,115,000Billings in excess of costs and estimated earnings
    
    
    (3,693,000
    )
    
    
    (10,325,000
    )Other
    
    
    6,000
    
    
    
    (1,000
    )Net cash (used in) provided by operating activities
    
    
    (21,782,000
    )
    
    
    15,706,000CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (83,000
    )
    
    
    (259,000
    )Proceeds from sale of property and equipment
    
    
    13,000
    
    
    
    Payment of contingent acquisition price
    
    
    
    
    
    
    (2,000,000
    )Investment in unconsolidated subsidiary
    
    
    
    
    
    
    (600,000
    )Net cash used in investing activities
    
    
    (70,000
    )
    
    
    (2,859,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments on long-term debt
    
    
    (1,259,000
    )
    
    
    (1,292,000
    )Net proceeds from the exercise of stock options and warrants
    
    
    557,000
    
    
    
    637,000Net proceeds from the sale of common stock
    
    
    
    
    
    
    24,982,000Net cash (used in) provided by financing activities
    
    
    (702,000
    )
    
    
    24,327,000NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (22,554,000
    )
    
    
    37,174,000CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    74,666,000
    
    
    
    66,827,000CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    52,112,000
    
    
    $
    104,001,000SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid for interest and income taxes:Interest
    
    $
    114,000
    
    
    $
    228,000Income taxes
    
    $
    5,980,000
    
    
    $
    3,395,000Non-cash investing and financing activities:Net increase in the fair value of interest rate swaps
    
    $
    37,000
    
    
    $
    44,000
   - 5 -




---



##### Table of Contents



ARGAN, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 JULY 31, 2009
 (Unaudited)
 NOTE 1  DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
 Description of the Business
  Basis of Presentation
    NOTE 2  ADOPTED AND OTHER RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 Accounting Pronouncements Adopted During the Three Months Ended July 31, 2009
   - 6 -




---



##### Table of Contents



Recently Issued Accounting Pronouncements That Have Not Been Adopted
    - 7 -




---



##### Table of Contents



NOTE 3  CASH, CASH EQUIVALENTS AND ESCROWED CASH
    NOTE 4  ACCOUNTS RECEIVABLE; COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS
   NOTE 5  INVENTORIES
    - 8 -




---



##### Table of Contents



July 31,
    
    
    January 31,2009
    
    
    2009Raw materials
    
    $
    3,040,000
    
    
    $
    2,748,000Work-in process
    
    
    73,000
    
    
    
    118,000Finished goods
    
    
    484,000
    
    
    
    171,0003,597,000
    
    
    
    3,037,000Less  reserves
    
    
    (1,457,000
    )
    
    
    (1,690,000
    )Inventories, net
    
    $
    2,140,000
    
    
    $
    1,347,000
 NOTE 6  PROPERTY AND EQUIPMENT
   July 31,
    
    
    January 31,2009
    
    
    2009Leasehold improvements
    
    $
    829,000
    
    
    $
    829,000Machinery and equipment
    
    
    2,766,000
    
    
    
    2,738,000Trucks and other vehicles
    
    
    1,286,000
    
    
    
    1,263,0004,881,000
    
    
    
    4,830,000Less  accumulated depreciation
    
    
    (3,810,000
    )
    
    
    (3,616,000
    )Property and equipment, net
    
    $
    1,071,000
    
    
    $
    1,214,000
  - 9 -




---



##### Table of Contents



NOTE 7  INTANGIBLE ASSETS
  July 31, 2009Estimated
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    January 31,Useful
    
    
    Carrying
    
    
    Accumulated
    
    
    Net
    
    
    2009Life
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Net AmountIntangible assets
being amortized:Non-compete agreements
 GPS and VLI
    
    5 years
    
    $
    1,731,000
    
    
    $
    1,479,000
    
    
    $
    252,000
    
    
    $
    309,000Trade name  GPS
    
    15 years
    
    
    3,643,000
    
    
    
    642,000
    
    
    
    3,001,000
    
    
    
    3,122,000Intangible asset not
being amortized:Trade name  SMC
    
    Indefinite
    
    
    224,000
    
    
    
    
    
    
    
    224,000
    
    
    
    224,000Total intangible assets
    
    
    
    
    
    $
    5,598,000
    
    
    $
    2,121,000
    
    
    $
    3,477,000
    
    
    $
    3,655,000Goodwill
    
    Indefinite
    
    $
    18,476,000
    
    
    $
    
    
    
    $
    18,476,000
    
    
    $
    18,476,000
    NOTE 8   INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
   - 10 -




---



##### Table of Contents



NOTE 9  DEBT
      NOTE 10  PRIVATE PLACEMENT OF COMMON STOCK
   - 11 -




---



##### Table of Contents



NOTE 11  STOCK-BASED COMPENSATION
   Weighted-Weighted-
    
    
    Average
    
    
    Weighted-Average
    
    
    Remaining
    
    
    AverageExercise
    
    
    Contract
    
    
    FairOptions
    
    Shares
    
    
    Price
    
    
    Term (Years)
    
    
    ValueOutstanding, January 31, 2009
    
    
    512,000
    
    
    $
    8.31
    
    
    
    6.5
    
    
    $
    4.34Granted
    
    
    78,000
    
    
    $
    12.86Forfeited
    
    
    (3,000
    )
    
    $
    5.90Exercised
    
    
    (48,000
    )
    
    $
    6.18Outstanding, July 31, 2009
    
    
    539,000
    
    
    $
    9.17
    
    
    
    6.7
    
    
    $
    4.83Exercisable, July 31, 2009
    
    
    346,000
    
    
    $
    7.45
    
    
    
    6.9
    
    
    $
    4.13Exercisable, January 31, 2009
    
    
    277,000
    
    
    $
    5.22
    
    
    
    6.1
    
    
    $
    2.95
  Weighted-AverageShares
    
    
    Fair ValueNonvested, January 31, 2009
    
    
    235,000
    
    
    $
    5.96Granted
    
    
    78,000
    
    
    $
    7.43Vested
    
    
    (120,000
    )
    
    $
    6.68Nonvested, July 31, 2009
    
    
    193,000
    
    
    $
    6.11
   Six MonthsEnded July 31,2009Dividend yield
    
    
    Expected volatility
    
    
    63.1
    %Risk-free interest rate
    
    
    3.00
    %Expected life in years
    
    
    5.5
   - 12 -




---



##### Table of Contents



NOTE 12  INCOME TAXES
  Six Months
    
    
    Six MonthsEnded July 31,
    
    
    Ended July 31,2009
    
    
    2008Computed expected income tax expense
    
    $
    3,047,000
    
    
    $
    1,368,000State income taxes, net
    
    
    338,000
    
    
    
    150,000Permanent differences, net
    
    
    (76,000
    )
    
    
    144,000$
    3,309,000
    
    
    $
    1,662,000
   NOTE 13  NET INCOME PER SHARE
    - 13 -




---



##### Table of Contents



NOTE 14  LEGAL CONTINGENCIES
  Kevin Thomas Litigation
     Tampa Bay Nutraceutical Company
   - 14 -




---



##### Table of Contents



NOTE 15  SEGMENT REPORTING AND MAJOR CUSTOMERS
   TelecomPower Industry
    
    
    Nutritional
    
    
    InfrastructureThree Months Ended July 31, 2009
    
    Services
    
    
    Products
    
    
    Services
    
    
    Other
    
    
    ConsolidatedNet revenues
    
    $
    59,804,000
    
    
    $
    3,452,000
    
    
    $
    2,199,000
    
    
    $
    
    
    
    $
    65,455,000Cost of revenues
    
    
    53,712,000
    
    
    
    3,162,000
    
    
    
    1,625,000
    
    
    
    
    
    
    
    58,499,000Gross profit
    
    
    6,092,000
    
    
    
    290,000
    
    
    
    574,000
    
    
    
    
    
    
    
    6,956,000Selling, general and administrative
expenses
    
    
    1,110,000
    
    
    
    718,000
    
    
    
    456,000
    
    
    
    904,000
    
    
    
    3,188,000Income (loss) from operations
    
    
    4,982,000
    
    
    
    (428,000
    )
    
    
    118,000
    
    
    
    (904,000
    )
    
    
    3,768,000Interest expense
    
    
    (48,000
    )
    
    
    (4,000
    )
    
    
    
    
    
    
    
    
    
    
    (52,000
    )Investment income
    
    
    20,000
    
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    24,000Equity in the earnings of the
unconsolidated subsidiary
    
    
    408,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    408,000Income (loss) before income taxes
    
    $
    5,362,000
    
    
    $
    (432,000
    )
    
    $
    118,000
    
    
    $
    (900,000
    )
    
    
    4,148,000Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,463,000
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,685,000Amortization of purchased intangibles
    
    $
    86,000
    
    
    $
    3,000
    
    
    $
    
    
    
    $
    
    
    
    $
    89,000Depreciation and other amortization
    
    $
    48,000
    
    
    $
    
    
    
    $
    99,000
    
    
    $
    1,000
    
    
    $
    148,000Fixed asset additions
    
    $
    8,000
    
    
    $
    
    
    
    $
    43,000
    
    
    $
    
    
    
    $
    51,000Goodwill
    
    $
    18,476,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    18,476,000Total assets
    
    $
    85,248,000
    
    
    $
    5,470,000
    
    
    $
    2,680,000
    
    
    $
    35,429,000
    
    
    $
    128,827,000
  - 15 -




---



##### Table of Contents



TelecomPower Industry
    
    
    Nutritional
    
    
    InfrastructureThree Months Ended July 31, 2008
    
    Services
    
    
    Products
    
    
    Services
    
    
    Other
    
    
    ConsolidatedNet revenues
    
    $
    70,639,000
    
    
    $
    2,226,000
    
    
    $
    2,233,000
    
    
    $
    
    
    
    $
    75,098,000Cost of revenues
    
    
    63,108,000
    
    
    
    2,395,000
    
    
    
    1,875,000
    
    
    
    
    
    
    
    67,378,000Gross profit
    
    
    7,531,000
    
    
    
    (169,000
    )
    
    
    358,000
    
    
    
    
    
    
    
    7,720,000Selling, general and administrative
expenses
    
    
    1,579,000
    
    
    
    799,000
    
    
    
    408,000
    
    
    
    1,230,000
    
    
    
    4,016,000Impairment losses of VLI
    
    
    
    
    
    
    1,946,000
    
    
    
    
    
    
    
    
    
    
    
    1,946,000Income (loss) from operations
    
    
    5,952,000
    
    
    
    (2,914,000
    )
    
    
    (50,000
    )
    
    
    (1,230,000
    )
    
    
    1,758,000Interest expense
    
    
    (92,000
    )
    
    
    (16,000
    )
    
    
    
    
    
    
    
    
    
    
    (108,000
    )Investment income
    
    
    390,000
    
    
    
    
    
    
    
    
    
    
    
    42,000
    
    
    
    432,000Equity in the loss of the
unconsolidated subsidiary
    
    
    (165,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (165,000
    )Income (loss) before income taxes
    
    $
    6,085,000
    
    
    $
    (2,930,000
    )
    
    $
    (50,000
    )
    
    $
    (1,188,000
    )
    
    
    1,917,000Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,111,000
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    806,000Amortization of purchased intangibles
    
    $
    355,000
    
    
    $
    21,000
    
    
    $
    26,000
    
    
    $
    
    
    
    $
    402,000Depreciation and other amortization
    
    $
    51,000
    
    
    $
    149,000
    
    
    $
    141,000
    
    
    $
    3,000
    
    
    $
    344,000Fixed asset additions
    
    $
    40,000
    
    
    $
    75,000
    
    
    $
    31,000
    
    
    $
    
    
    
    $
    146,000Goodwill
    
    $
    18,476,000
    
    
    $
    
    
    
    $
    940,000
    
    
    $
    
    
    
    $
    19,416,000Total assets
    
    $
    130,399,000
    
    
    $
    4,980,000
    
    
    $
    4,243,000
    
    
    $
    30,373,000
    
    
    $
    169,995,000
  TelecomPower Industry
    
    
    Nutritional
    
    
    InfrastructureSix Months Ended July 31, 2009
    
    Services
    
    
    Products
    
    
    Services
    
    
    Other
    
    
    ConsolidatedNet revenues
    
    $
    117,839,000
    
    
    $
    6,270,000
    
    
    $
    4,456,000
    
    
    $
    
    
    
    $
    128,565,000Cost of revenues
    
    
    105,087,000
    
    
    
    5,720,000
    
    
    
    3,375,000
    
    
    
    
    
    
    
    114,182,000Gross profit
    
    
    12,752,000
    
    
    
    550,000
    
    
    
    1,081,000
    
    
    
    
    
    
    
    14,383,000Selling, general and administrative
expenses
    
    
    2,269,000
    
    
    
    1,274,000
    
    
    
    852,000
    
    
    
    2,006,000
    
    
    
    6,401,000Income (loss) from operations
    
    
    10,483,000
    
    
    
    (724,000
    )
    
    
    229,000
    
    
    
    (2,006,000
    )
    
    
    7,982,000Interest expense
    
    
    (104,000
    )
    
    
    (10,000
    )
    
    
    
    
    
    
    
    
    
    
    (114,000
    )Investment income
    
    
    57,000
    
    
    
    
    
    
    
    
    
    
    
    18,000
    
    
    
    75,000Equity in the earnings of the
unconsolidated subsidiary
    
    
    1,018,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,018,000Income (loss) before income taxes
    
    $
    11,454,000
    
    
    $
    (734,000
    )
    
    $
    229,000
    
    
    $
    (1,988,000
    )
    
    
    8,961,000Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,309,000
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,652,000Amortization of purchased intangibles
    
    $
    174,000
    
    
    $
    4,000
    
    
    $
    
    
    
    $
    
    
    
    $
    178,000Depreciation and other amortization
    
    $
    95,000
    
    
    $
    
    
    
    $
    196,000
    
    
    $
    4,000
    
    
    $
    295,000Fixed asset additions
    
    $
    10,000
    
    
    $
    
    
    
    $
    62,000
    
    
    $
    11,000
    
    
    $
    83,000
  - 16 -




---



##### Table of Contents



TelecomPower Industry
    
    
    Nutritional
    
    
    InfrastructureSix Months Ended July 31, 2008
    
    Services
    
    
    Products
    
    
    Services
    
    
    Other
    
    
    ConsolidatedNet revenues
    
    $
    114,647,000
    
    
    $
    4,625,000
    
    
    $
    4,232,000
    
    
    $
    
    
    
    $
    123,504,000Cost of revenues
    
    
    101,684,000
    
    
    
    4,718,000
    
    
    
    3,649,000
    
    
    
    
    
    
    
    110,051,000Gross profit
    
    
    12,963,000
    
    
    
    (93,000
    )
    
    
    583,000
    
    
    
    
    
    
    
    13,453,000Selling, general and administrative
expenses
    
    
    3,420,000
    
    
    
    1,515,000
    
    
    
    751,000
    
    
    
    2,341,000
    
    
    
    8,027,000Impairment losses of VLI
    
    
    
    
    
    
    1,946,000
    
    
    
    
    
    
    
    
    
    
    
    1,946,000Income (loss) from operations
    
    
    9,543,000
    
    
    
    (3,554,000
    )
    
    
    (168,000
    )
    
    
    (2,341,000
    )
    
    
    3,480,000Interest expense
    
    
    (195,000
    )
    
    
    (33,000
    )
    
    
    
    
    
    
    
    
    
    
    (228,000
    )Investment income
    
    
    894,000
    
    
    
    
    
    
    
    
    
    
    
    42,000
    
    
    
    936,000Equity in the loss of unconsolidated
subsidiary
    
    
    (165,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (165,000
    )Income (loss) before income taxes
    
    $
    10,077,000
    
    
    $
    (3,587,000
    )
    
    $
    (168,000
    )
    
    $
    (2,299,000
    )
    
    
    4,023,000Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,662,000
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,361,000Amortization of purchased intangibles
    
    $
    1,079,000
    
    
    $
    43,000
    
    
    $
    52,000
    
    
    $
    
    
    
    $
    1,174,000Depreciation and other amortization
    
    $
    99,000
    
    
    $
    297,000
    
    
    $
    283,000
    
    
    $
    4,000
    
    
    $
    683,000Fixed asset additions
    
    $
    84,000
    
    
    $
    131,000
    
    
    $
    44,000
    
    
    $
    
    
    
    $
    259,000
    NOTE 16  SUBSEQUENT EVENTS
    - 17 -




---



##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Cautionary Statement Regarding Forward Looking Statements
  Business Summary
  Overview and Outlook
    - 18 -




---



##### Table of Contents



- 19 -




---



##### Table of Contents



Letter of Intent with UNAMSCO
  Comparison of the Results of Operations for the Three Months Ended July 31, 2009 and 2008
  Three Months Ended July 31,2009
    
    
    2008Net revenuesPower industry services
    
    $
    59,804,000
    
    
    
    91.4
    %
    
    $
    70,639,000
    
    
    
    94.1
    %Nutritional products
    
    
    3,452,000
    
    
    
    5.3
    %
    
    
    2,226,000
    
    
    
    2.9
    %Telecommunications infrastructure services
    
    
    2,199,000
    
    
    
    3.3
    %
    
    
    2,233,000
    
    
    
    3.0
    %Net revenues
    
    
    65,455,000
    
    
    
    100.0
    %
    
    
    75,098,000
    
    
    
    100.0
    %Cost of revenues **Power industry services
    
    
    53,712,000
    
    
    
    89.8
    %
    
    
    63,108,000
    
    
    
    89.3
    %Nutritional products
    
    
    3,162,000
    
    
    
    91.6
    %
    
    
    2,395,000
    
    
    
    107.6
    %Telecommunications infrastructure services
    
    
    1,625,000
    
    
    
    73.9
    %
    
    
    1,875,000
    
    
    
    84.0
    %Cost of revenues
    
    
    58,499,000
    
    
    
    89.4
    %
    
    
    67,378,000
    
    
    
    89.7
    %Gross profit
    
    
    6,956,000
    
    
    
    10.6
    %
    
    
    7,720,000
    
    
    
    10.3
    %Selling, general and administrative expenses
    
    
    3,188,000
    
    
    
    4.9
    %
    
    
    4,016,000
    
    
    
    5.4
    %Impairment losses of VLI
    
    
    
    
    
    
    
    
    
    
    1,946,000
    
    
    
    2.6
    %Income from operations
    
    
    3,768,000
    
    
    
    5.7
    %
    
    
    1,758,000
    
    
    
    2.3
    %Interest expense
    
    
    (52,000
    )
    
    
    *
    
    
    
    (108,000
    )
    
    
    *Investment income
    
    
    24,000
    
    
    
    *
    
    
    
    432,000
    
    
    
    *Equity in the earnings (loss) of the unconsolidated subsidiary
    
    
    408,000
    
    
    
    *
    
    
    
    (165,000
    )
    
    
    *Income from operations before income taxes
    
    
    4,148,000
    
    
    
    6.3
    %
    
    
    1,917,000
    
    
    
    2.6
    %Income tax expense
    
    
    (1,463,000
    )
    
    
    (2.2
    )%
    
    
    (1,111,000
    )
    
    
    (1.5
    )%Net income
    
    $
    2,685,000
    
    
    
    4.1
    %
    
    $
    806,000
    
    
    
    1.1
    %
 *
    
    Less than 1%.**
    
    The cost of revenues percentage amounts represent the percentage of net revenues of
the applicable segment.  - 20 -




---



##### Table of Contents



Net Revenues
 Power Industry Services
   Nutritional Products
   Telecommunications Infrastructure Services
   Cost of Revenues
   - 21 -




---



##### Table of Contents



Selling, General and Administrative Expenses
  Other Income and Expense
    - 22 -




---



##### Table of Contents



Income Tax Expense
   Comparison of the Results of Operations for the Six Months Ended July 31, 2009 and 2008
  Six Months Ended July 31,2009
    
    
    2008Net revenuesPower industry services
    
    $
    117,839,000
    
    
    
    91.6
    %
    
    $
    114,647,000
    
    
    
    92.8
    %Nutritional products
    
    
    6,270,000
    
    
    
    4.9
    %
    
    
    4,625,000
    
    
    
    3.8
    %Telecommunications infrastructure services
    
    
    4,456,000
    
    
    
    3.5
    %
    
    
    4,232,000
    
    
    
    3.4
    %Net revenues
    
    
    128,565,000
    
    
    
    100.0
    %
    
    
    123,504,000
    
    
    
    100.0
    %Cost of revenues **Power industry services
    
    
    105,087,000
    
    
    
    89.2
    %
    
    
    101,684,000
    
    
    
    88.7
    %Nutritional products
    
    
    5,720,000
    
    
    
    91.2
    %
    
    
    4,718,000
    
    
    
    102.0
    %Telecommunications infrastructure services
    
    
    3,375,000
    
    
    
    75.6
    %
    
    
    3,649,000
    
    
    
    86.2
    %Cost of revenues
    
    
    114,182,000
    
    
    
    88.8
    %
    
    
    110,051,000
    
    
    
    89.1
    %Gross profit
    
    
    14,383,000
    
    
    
    11.2
    %
    
    
    13,453,000
    
    
    
    10.9
    %Selling, general and administrative expenses
    
    
    6,401,000
    
    
    
    5.0
    %
    
    
    8,027,000
    
    
    
    6.5
    %Impairment losses of VLI
    
    
    
    
    
    
    
    
    
    
    1,946,000
    
    
    
    1.6
    %Income from operations
    
    
    7,982,000
    
    
    
    6.2
    %
    
    
    3,480,000
    
    
    
    2.8
    %Interest expense
    
    
    (114,000
    )
    
    
    *
    
    
    
    (228,000
    )
    
    
    *Investment income
    
    
    75,000
    
    
    
    *
    
    
    
    936,000
    
    
    
    *Equity in the earnings (loss) of the unconsolidated subsidiary
    
    
    1,018,000
    
    
    
    *
    
    
    
    (165,000
    )
    
    
    *Income from operations before income taxes
    
    
    8,961,000
    
    
    
    7.0
    %
    
    
    4,023,000
    
    
    
    3.2
    %Income tax expense
    
    
    (3,309,000
    )
    
    
    (2.6
    )%
    
    
    (1,662,000
    )
    
    
    (1.3
    )%Net income
    
    $
    5,652,000
    
    
    
    4.4
    %
    
    $
    2,361,000
    
    
    
    1.9
    %
 *
    
    Less than 1%.**
    
    The cost of revenues percentage amounts represent the percentage of net revenues of
the applicable segment. Net Revenues
 Power Industry Services
   - 23 -




---



##### Table of Contents



Nutritional Products
  Telecommunications Infrastructure Services
  Cost of Revenues
    Selling, General and Administrative Expenses
   - 24 -




---



##### Table of Contents



Other Income and Expense
  Income Tax Expense
   Liquidity and Capital Resources as of July 31, 2009
    - 25 -




---



##### Table of Contents



Off-Balance Sheet Arrangements
     - 26 -




---



##### Table of Contents



Earnings before Interest, Taxes, Depreciation and Amortization (Non-GAAP Measurement)
  Three Months Ended July 31,2009
    
    
    2008Net income, as reported
    
    $
    2,685,000
    
    
    $
    806,000Interest expense
    
    
    52,000
    
    
    
    108,000Income tax expense
    
    
    1,463,000
    
    
    
    1,111,000Amortization of purchased intangible assets
    
    
    89,000
    
    
    
    402,000Depreciation and other amortization
    
    
    148,000
    
    
    
    344,000EBITDA
    
    $
    4,437,000
    
    
    $
    2,771,000
 Six Months Ended July 31,2009
    
    
    2008Net income, as reported
    
    $
    5,652,000
    
    
    $
    2,361,000Interest expense
    
    
    114,000
    
    
    
    228,000Income tax expense
    
    
    3,309,000
    
    
    
    1,662,000Amortization of purchased intangible assets
    
    
    178,000
    
    
    
    1,174,000Depreciation and other amortization
    
    
    295,000
    
    
    
    683,000EBITDA
    
    $
    9,548,000
    
    
    $
    6,108,000
  Reconciliations of EBITDASix Months Ended July 31,2009
    
    
    2008EBITDA
    
    $
    9,548,000
    
    
    $
    6,108,000Current income tax expense
    
    
    (2,934,000
    )
    
    
    (3,163,000
    )Interest expense
    
    
    (114,000
    )
    
    
    (228,000
    )Impairment losses
    
    
    
    
    
    
    1,946,000Non-cash stock option compensation expense
    
    
    578,000
    
    
    
    788,000Equity in
the (earnings) loss of the unconsolidated subsidiary
    
    
    (1,018,000
    )
    
    
    165,000(Increase) decrease in escrowed cash
    
    
    (4,000
    )
    
    
    4,086,000Increase in accounts receivable, net
    
    
    (10,980,000
    )
    
    
    7,737,000Decrease in accounts payable and accrued expenses
    
    
    (8,219,000
    )
    
    
    9,115,000Change related to the timing of scheduled billings
    
    
    (7,599,000
    )
    
    
    (10,381,000
    )Other, net
    
    
    (1,040,000
    )
    
    
    (467,000
    )Net cash (used in) provided by operations
    
    $
    (21,782,000
    )
    
    $
    15,706,000
  - 27 -




---



##### Table of Contents



Critical Accounting Policies
   Adopted and Other Recently Issued Accounting Pronouncements
  
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4.
    
    CONTROLS AND PROCEDURES
 Evaluation of disclosure controls and procedures.
 Changes in internal controls over financial reporting.
  - 28 -




---



##### Table of Contents



PART II
 OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
 Kevin Thomas Litigation
     Tampa Bay Nutraceutical Company
  Other Legal Proceedings
   - 29 -




---



##### Table of Contents



ITEM 1A.
    
    RISK FACTORS
   www.arganinc.com
 
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3.
    
    DEFAULTS IN SENIOR SECURITIES
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  1.
    
    Eight members were elected to the Board of Directors, each to serve until the next annual
meeting of the Company and until their respective successors have been elected to the Board of
Directors and qualified, by the stockholders of the Company:
 Rainer H. Bosselmann, DeSoto S. Jordan, William F. Leimkuhler, Daniel A. Levinson, W. G.
Champion Mitchell, James W. Quinn, Henry A. Crumpton and Cynthia A. Flanders.
  - 30 -




---



##### Table of Contents



Ms. Flanders and Mr. Leimkuhler were each elected with the affirmative vote of 11,480,834
shares of common stock, with votes representing 16,263 shares of common stock withheld; Mr.
Mitchell was elected with the affirmative vote of 11,480,530 shares of common stock, with
votes representing 16,567 shares of common stock withheld; Mr. Bosselmann was elected with the affirmative vote of 11,479,097 shares of common stock, with votes
representing 18,102 shares of common stock withheld; Mr. Jordan was elected with the
affirmative vote of 11,476,780 shares of common stock, with votes representing 20,317 shares
of common stock withheld; Mr. Levinson was elected with the affirmative vote of 11,475,749
shares of common stock, with votes representing 21,348 shares of common stock withheld; Mr.
Crumpton was elected with an affirmative vote of 11,211,073 shares of common stock, with votes
representing 286,024 shares of common stock withheld; and Mr. Quinn was elected with the
affirmative vote of 11,193,055 shares of common stock, with votes representing 304,042 shares
of common stock withheld.
 2.
    
    The stockholders of the Company ratified the appointment of Grant Thornton LLP as our
independent registered public accounting firm for the fiscal year ending January 31, 2010 with
an affirmative vote of 11,496,834 shares of common stock. Votes representing 63 shares of
common stock were cast against the proposal and there were 200
abstaining votes.
 
 ITEM 5.
    
    OTHER INFORMATION
  
 ITEM 6.
    
    EXHIBITS
 Exhibit No.
    
    TitleExhibit: 31.1
    
    Certification of Chief Executive Officer, pursuant to Rule 13a-14(c) under
the Securities Exchange Act of 1934Exhibit: 31.2
    
    Certification of Chief Financial Officer, pursuant to Rule 13a-14(c) under
the Securities Exchange Act of 1934Exhibit: 32.1
    
    Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350Exhibit: 32.2
    
    Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350
 
 SIGNATURES
  ARGAN, INC.September 8, 2009
    By:
    /s/ Rainer H. BosselmannRainer H. BosselmannChairman of the Board and Chief Executive OfficerSeptember 8, 2009
    By:
    /s/ Arthur F. TrudelArthur F. TrudelSenior Vice President, Chief Financial Officer
and Secretary  - 31 -