SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2000
--------------
OR
[ ] Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File Number: 000-25423
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EAGLE SUPPLY GROUP, INC.
------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3889248
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
122 East 42nd Street, Suite 1116, New York, New York 10168
- -----------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
212-986-6190
------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the past 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [__]
The number of shares outstanding of the Registrant's Common Stock, as of
May 10, 2000, was 8,510,000 shares.
<PAGE>
EAGLE SUPPLY GROUP, INC.
INDEX TO FORM 10-Q
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000
(Unaudited) and June 30, 1999 (Audited) 3
Consolidated Unaudited Statements of Operations
for the Three Months and Nine Months Ended
March 31, 2000 and 1999 4
Consolidated Unaudited Statement of Shareholders'
Equity for the Nine Months Ended March 31, 2000 5
Consolidated Unaudited Statements of Cash Flows for
the Nine Months Ended March 31, 2000 and 1999 6-7
Notes to Consolidated Unaudited Financial Statements 8-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-15
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
<PAGE>
EAGLE SUPPLY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
ASSETS (Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,961,810 $ 8,519,406
Accounts and notes receivable, net 26,950,139 27,172,426
Inventories 27,033,009 18,972,548
Deferred tax assets 998,909 654,474
Other current assets 1,203,152 1,342,827
-------------- -------------
Total current assets 62,147,019 56,661,681
PROPERTY AND EQUIPMENT, net 6,457,026 6,617,261
EXCESS COST OF INVESTMENTS OVER
NET ASSETS ACQUIRED, net 12,116,254 12,147,824
DEFERRED FINANCING COSTS, net 206,626 266,189
-------------- -------------
$ 80,926,925 $ 75,692,955
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 24,050,277 $ 20,138,146
Accrued expenses and other current liabilities 2,710,810 5,654,890
Current portion of long-term debt 2,166,639 2,523,843
Federal and state income taxes payable 1,023,854 608,160
Income taxes due to TDA Industries, Inc. 1,143,537 1,143,537
-------------- -------------
Total current liabilities 31,095,117 30,068,576
LONG-TERM DEBT 32,053,713 30,139,072
DEFERRED TAX LIABILITIES 97,512 97,512
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Total liabilities 63,246,342 60,305,160
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SHAREHOLDERS' EQUITY:
Preferred shares, $.0001 par value per share,
2,500,000 shares authorized; none issued and
outstanding - -
Common shares, $.0001 par value per share,
25,000,000 shares authorized; issued and
outstanding -
8,510,000 shares, March 31, 2000;
8,450,000 shares, June 30, 1999 851 845
Additional paid-in capital 16,958,141 16,658,147
Retained earnings (deficit) 721,591 (783,992)
-------------- -------------
17,680,583 15,875,000
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Less: Due from TDA Industries, Inc. - (487,205)
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Total shareholders' equity 17,680,583 15,387,795
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$ 80,926,925 $ 75,692,955
============== =============
</TABLE>
See notes to consolidated unaudited financial statements.
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<PAGE>
EAGLE SUPPLY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED MARCH 31, 2000 AND 1999
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUES $ 40,970,622 $ 39,647,732 $134,769,362 $113,870,347
COST OF SALES 30,951,231 30,181,967 101,456,053 87,123,878
------------ ------------ ------------ ------------
10,019,391 9,465,765 33,313,309 26,746,469
------------ ------------ ------------ ------------
OPERATING EXPENSES 9,116,988 7,694,118 27,633,992 20,688,830
DEPRECIATION AND AMORTIZATION 329,739 236,985 889,070 843,632
AMORTIZATION OF EXCESS COST
OF INVESTMENTS OVER
NET ASSETS ACQUIRED 155,391 146,608 466,203 206,087
AMORTIZATION OF DEFERRED
FINANCING COSTS 19,854 19,854 59,562 51,386
------------ ------------ ------------ ------------
9,621,972 8,097,565 29,048,827 21,789,935
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 397,419 1,368,200 4,264,482 4,956,534
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 154,015 34,353 414,986 58,561
Interest expense (764,304) (690,800) (2,276,885) (1,847,755)
------------ ------------ ------------ ------------
(610,289) (656,447) (1,861,899) (1,789,194)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES (212,870) 711,753 2,402,583 3,167,340
PROVISION (BENEFIT) FOR
INCOME TAXES (88,000) 260,673 897,000 1,190,000
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (124,870) $ 451,080 $ 1,505,583 $ 1,977,340
============ ============ ============ ============
BASIC AND DILUTED NET INCOME
(LOSS) PER SHARE $ (.01) $ .08 $ .18 $ .36
============ ============ ============ ============
COMMON SHARES USED IN BASIC
AND DILUTED NET INCOME
(LOSS) PER SHARE 8,510,000 5,908,333 8,510,000 5,566,971
============ ============ ============ ============
</TABLE>
See notes to consolidated unaudited financial statements.
-4-
<PAGE>
EAGLE SUPPLY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED MARCH 31, 2000
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional Due from
Preferred Shares Common Shares Paid-In Retained TDA
Shares Amount Shares Amount Capital Earnings Industries Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1999 - $ - 8,450,000 $ 845 $ 16,658,147 $ (783,992) $ (487,205) $15,387,795
Net income - - - - - 1,505,583 - 1,505,583
Shares issued in connection with
the acquisition of MSI Co. - - 60,000 6 299,994 - - 300,000
Net change in Due from TDA
Industries, Inc. - - - - - - 487,205 487,205
----- ------- --------- ------- ------------ ----------- ---------- -----------
BALANCE, MARCH 31, 2000 - $ - 8,510,000 851 $ 16,958,141 $ 721,591 $ - $17,680,583
===== ======= ========= ======= ============ =========== ========== ===========
</TABLE>
See notes to consolidated unaudited financial statements.
-5-
<PAGE>
EAGLE SUPPLY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 2000 AND 1999
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION
2000 1999
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,505,583 $ 1,977,340
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 1,414,835 1,101,105
Deferred income taxes (344,435) (262,849)
Increase in allowance for doubtful accounts 944,709 687,801
Changes in assets and liabilities:
Increase in accounts and notes receivable (722,422) (4,130,808)
Increase in inventories (8,060,461) (1,101,944)
Decrease in other current assets 139,675 399,797
Increase in accounts payable 3,912,131 72,018
(Decrease) increase in accrued expenses
and other current liabilities (2,944,080) 253,899
Increase in federal and state income taxes payable 415,694 72,582
Increase in income taxes due to TDA Industries, Inc. - 117,919
----------- -----------
Net cash used in operating activities (3,738,771) (813,140)
----------- -----------
INVESTING ACTIVITIES:
Capital expenditures (728,837) (1,301,025)
Payment of additional consideration pursuant to
the acquisition of JEH Co. (134,630) -
Payment for purchase of net assets of MSI Co. - (1,519,840)
----------- -----------
Net cash used in investing activities (863,467) (2,820,865)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from initial public offering, net of
related expenses - 10,358,748
Principal borrowings on long-term debt 143,918,946 121,815,008
Principal reductions on long-term debt (142,361,509) (122,101,189)
Proceeds from issuance of notes payable - shareholder - 200,000
Repayments of notes payable - shareholders - (500,000)
Capital contribution from TDA Industries, Inc. - 1,000,000
Cash dividends to TDA Industries, Inc. - (1,200,000)
Decrease in amounts due from TDA Industries, Inc. 487,205 70,255
----------- -----------
Net cash provided by financing activities 2,044,642 9,642,822
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,557,596) 6,008,817
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,519,406 1,686,003
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,961,810 $ 7,694,820
=========== ===========
</TABLE>
See notes to consolidated unaudited financial statements.
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<PAGE>
EAGLE SUPPLY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 2000 AND 1999
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 2,276,885 $ 1,847,755
=========== ===========
Cash paid during the period for income taxes $ 825,741 $ 999,499
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Non-cash dividend paid to TDA Industries, Inc. - net $ 3,067,002
===========
300,000 Common Shares issued in connection
with the acquisition of JEH Co. $ 1,500,000
===========
200,000 Common Shares issued in connection
with the acquisition of MSI Co. $ 1,000,000
===========
50,000 Common Shares issued as a principal
payment of a note payable $ 250,000
===========
60,000 Common Shares issued in connection
with the acquisition of MSI Co. $ 300,000
===========
Acquisition of MSI Co.:
Fair value of assets acquired $ 9,284,007
Liabilities assumed (1,359,698)
Notes issued to seller (2,045,972)
Due to related party (250,000)
Bank debt incurred (4,108,497)
-----------
Cash paid $ 1,519,840
===========
</TABLE>
See notes to consolidated unaudited financial statements.
-7-
<PAGE>
EAGLE SUPPLY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
- ----------------------------------------------------------------------
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated unaudited interim financial
statements of Eagle Supply Group, Inc. and subsidiaries (the
"Company") have been prepared in accordance with generally
accepted accounting principles for interim financial
information and in a manner consistent with that used in the
preparation of the annual financial statements of the Company
at June 30, 1999. In the opinion of management, the
accompanying consolidated unaudited interim financial
statements reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of
the financial position and results of operations and cash
flows for the periods presented.
Operating results for the three months and nine months ended
March 31, 2000 and 1999 are not necessarily indicative of the
results that may be expected for a full year. In addition,
the unaudited interim consolidated financial statements do
not include all information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles. These consolidated
unaudited interim financial statements should be read in
conjunction with the financial statements and related notes
thereto which are included in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1999 filed with
the Securities and Exchange Commission.
Business Description - The Company is a majority-owned
subsidiary of TDA Industries, Inc. ("TDA" or the "Parent")
and was organized to acquire, integrate and operate seasoned,
privately-held companies which distribute products to or
manufacture products for the building supplies/construction
industry.
Initial Public Offering - On March 17, 1999, the Company
completed the sale of 2,500,000 shares of Common Stock at
$5.00 per share and 2,875,000 Redeemable Common Stock
Purchase Warrants at $.125 per warrant in connection with its
initial public offering (the "Offering"). The net proceeds
to the Company aggregated approximately $10,206,000.
Acquisitions and Basis of Presentation - Upon consummation of
the Offering, the Company acquired all of the issued and
outstanding common shares of Eagle Supply, Inc. ("Eagle"),
JEH/Eagle Supply, Inc. ("JEH Eagle") and MSI/Eagle Supply,
Inc. ("MSI Eagle") (the "Acquisitions") from TDA for
consideration consisting of 3,000,000 of the Company's common
shares. The Acquisitions have been accounted for as the
combining of four entities under common control, similar to a
pooling of interests, with the net assets of Eagle, JEH Eagle
and MSI Eagle recorded at historical carryover values. The
3,000,000 common shares of the Company issued to TDA were
recorded at Eagle's, JEH Eagle's and MSI Eagle's historical
net book values at the date of acquisition. Accordingly,
-8-
<PAGE>
this transaction did not result in any revaluation of Eagle's, JEH
Eagle's or MSI Eagle's assets or the creation of any
goodwill. Upon the consummation of the Acquisitions, Eagle,
JEH Eagle and MSI Eagle became wholly-owned subsidiaries of
the Company and currently constitute the sole business
operations of the Company.
The unaudited interim financial statements of Eagle and JEH
Eagle have been included in the consolidated unaudited
interim financial statements for all periods presented, and
the unaudited interim financial statements of MSI Eagle have
been included in the consolidated unaudited interim financial
statements only for the periods subsequent to the acquisition
of Masonry Supply, Inc. ("MSI Co.") by MSI Eagle on October
22, 1998. Eagle, JEH Eagle and MSI Eagle operate in a single
industry segment and all of their revenues are derived from
sales to third party customers in the United States.
Basic Net Income (Loss) Per Share - Basic net income (loss)
per share was calculated by dividing net income (loss) by the
weighted average number of common shares outstanding during
the periods presented and excludes any potential dilution.
Diluted net income (loss) per share was calculated similarly
and would generally include potential dilution from the
exercise of stock options and warrants. There were no such
dilutive options or warrants for the periods presented.
Both basic and diluted net income (loss) per share includes,
for the periods presented, the 3,000,000 of the Company's
common shares issued to TDA in connection with the
Acquisitions.
Comprehensive Income (Loss) - For the three and nine months
ended March 31, 2000 and 1999 comprehensive income (loss) was
equal to net income (loss).
*****
-9-
<PAGE>
EAGLE SUPPLY GROUP, INC.
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
This document includes statements that may constitute
forward-looking statements made pursuant to the Safe Harbor
provisions of the Private Securities Litigation Reform Act of
1995. The Company would like to caution readers regarding
certain forward-looking statements in this document and in
all of its communications to shareholders and others, press
releases, securities filings, and all other communications.
Statements that are based on management's projections,
estimates and assumptions are forward-looking statements. The
words "believe," "expect," "anticipate," "intend," "will,"
and similar expressions generally identify forward-looking
statements. While the Company believes in the veracity of all
statements made herein, forward-looking statements are
necessarily based upon a number of estimates and assumptions
that, while considered reasonable by the Company, are
inherently subject to significant business, economic and
competitive uncertainties and contingencies and known and
unknown risks. Many of the uncertainties and contingencies
can affect events and the Company's actual results and could
cause its actual results to differ materially from those
expressed in any forward-looking statements made by, or on
behalf of, the Company. Some of the factors that could cause
actual results or future events to differ materially include
the Company's inability to find suitable acquisition
candidates or financing on terms commercially reasonable to
the Company, inability to find suitable facilities or
personnel to open or maintain new branch locations,
interruptions or cancellation of existing sources of supply,
the pricing of and demand for distributed products, the
presence of competitors with greater financial resources,
economic and market factors, and other factors. Please see
the "Risk Factors" in the Company's filings with the
Securities and Exchange Commission for a description of some,
but not all, risks, uncertainties and contingencies.
The following discussion and analysis should be read in
conjunction with the financial statements and related notes
thereto which are included in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1999 filed with
the Securities and Exchange Commission.
Results of Operations
Three Months Ended March 31, 2000
Compared to the Three Months Ended March 31, 1999
Revenues of the Company during the three-month period ended
March 31, 2000 increased by approximately $1,323,000 (3.3%)
compared to the 1999 three-month period. The increase may be
attributed to the opening of eight new distribution centers
since March 1999 (approximately $2,785,000), offset by
reductions in certain of the Company's market areas.
Cost of sales increased between the 2000 and 1999 three-month
periods at a lesser rate than the increase in revenues
between these three-month periods. Accordingly, cost of
sales as a percentage of revenues decreased to 75.5% in the
three-month period ended March 31, 2000 from 76.1% in the
three-month period ended March 31, 1999, and gross profit as
a percentage of revenues increased to 24.5% in the three-
month period ended March 31, 2000 from 23.9% in the three-
month period ended March 31, 1999.
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<PAGE>
Operating expenses of the Company increased by approximately
$1,423,000 (18.5%) between the 2000 and 1999 three-month
periods. Approximately $597,000 of this increase may be
attributed to the operating expenses of eight new
distribution centers opened since March 1999, and
approximately $358,000 consists of corporate operating
expenses incurred subsequent to the Offering. Of the
remaining increase, approximately $264,000 is attributable to
an increase in payroll costs and delivery expenses due
primarily to the need to service the increased sales
revenues, increased insurance premiums of approximately
$76,000, an increase in advertising costs of $77,000 and less
significant increases in other expense areas. Operating
expenses as a percentage of revenues was 22.3% in the 2000
three-month period compared to 19.4% in the 1999 three-month
period.
Depreciation and amortization, and amortization of excess
cost of investments over net assets acquired (goodwill) and
deferred financing costs increased by approximately $102,000
(25.2%) between the 2000 and 1999 three-month periods.
Approximately $93,000 of this increase is additional
depreciation and approximately $9,000 is additional
amortization of goodwill. The increase in amortization of
goodwill may be attributed primarily to the additional
consideration in the amount of approximately $1,773,000 paid
to JEH Co. for the fiscal year ended June 30, 1999. Such
additional consideration increased goodwill and is being
amortized over the remaining life of the goodwill (see
Acquisitions below).
Interest expense increased by approximately $74,000 (10.6%)
between the 2000 and 1999 three-month periods. This increase
is due to the increase in interest expense on borrowings
under revolving credit facilities ($80,000), offset by a
decrease in short-term borrowings by the Company ($6,000).
Nine Months Ended March 31, 2000
Compared to the Nine Months Ended March 31, 1999
Revenues of the Company during the nine-month period ended
March 31, 2000 increased by approximately $20,900,000 (18.4%)
compared to the 1999 nine-month period. Approximately
$4,267,000 of this increase may be attributed to the
acquisition on October 22, 1998 of MSI Co. by MSI Eagle. The
remaining increase may be attributed to the opening of eight
new distribution centers since March 1999 (approximately
$11,235,000) and a general improvement in market conditions.
Cost of sales increased between the 2000 and 1999 nine-month
periods at a lesser rate than the increase in revenues
between these nine-month periods. Accordingly, cost of sales
as a percentage of revenues decreased to 75.3% in the nine-
month period ended March 31, 2000 from 76.5% in the nine-
month period ended March 31, 1999, and gross profit as a
percentage of revenues increased to 24.7% in the nine-month
period ended March 31, 2000 from 23.5% in the nine-month
period ended March 31, 1999.
Operating expenses of the Company increased by approximately
$6,945,000 (33.6%) between the 2000 and 1999 nine-month
periods. Approximately $838,000 of this increase are
operating expenses of MSI Eagle. Further, approximately
$1,795,000 may be attributed to the operating expenses of
eight new distribution centers opened since March 1999, and
approximately $1,154,000 consists of corporate operating
expenses incurred subsequent to the Offering. Of the
remaining increase, approximately $2,413,000 is attributable
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<PAGE>
to an increase in payroll costs and delivery expenses due
primarily to the need to service the increased sales
revenues, an increase in rents of approximately $80,000, an
increase in advertising costs of approximately $130,000,
increased insurance premiums of approximately $156,000, an
increase in the allowance for doubtful accounts of
approximately $106,000, an increase in administrative and
office expenses and related costs of approximately $208,000
primarily related to the integration and relocation of the
administrative functions of the Company to Texas and
increased travel of approximately $169,000, offset by minor
reductions in other expense areas. Operating expenses as a
percentage of revenues was 20.5% in the 2000 nine-month
period compared to 18.2% in the 1999 nine-month period.
Depreciation and amortization, and amortization of goodwill
and deferred financing costs increased by approximately
$314,000 (28.5%) between the 2000 and 1999 nine-month
periods. Approximately $46,000 is additional depreciation,
$260,000 is additional amortization of goodwill and $8,000 is
additional amortization of deferred financing costs. The
increase in amortization of goodwill may be attributed
primarily to the additional consideration in the amount of
approximately $1,773,000 paid to JEH Co. for the fiscal year
ended June 30, 1999, and the goodwill that arose from the
acquisition of MSI Co. by MSI Eagle on October 22, 1998. The
additional consideration paid to JEH Co. increased goodwill
and is being amortized over the remaining life of the
goodwill (see Acquisitions below).
Interest expense increased by approximately $429,000 (23.2%)
between the 2000 and 1999 nine-month periods. This increase
is due to the increase in interest expense on borrowings
under revolving credit facilities ($271,000), increased debt
to finance the acquisition of MSI Co. by MSI Eagle on October
22, 1998 ($141,000), offset by a decrease in short-term
borrowings by the Company ($17,000).
Liquidity and Capital Resources
The Company's working capital was approximately $31,052,000
and $26,593,000 at March 31, 2000 and June 30, 1999,
respectively. At March 31, 2000, the Company's current ratio
was 2 to 1 compared to 1.88 to 1 at June 30, 1999.
Cash used in operating activities during the nine months
ended March 31, 2000 was approximately $3,739,000. Such
amount consisted primarily of increased levels of deferred
income taxes of $345,000, accounts and notes receivable of
$722,000, inventories of $8,061,000, and a decreased level of
accrued expenses and other current liabilities of $2,944,000,
offset by net income of $1,505,000, depreciation and
amortization of $1,415,000, an increase in the allowance for
doubtful accounts of $945,000, a decreased level of other
current assets of $140,000, and increased levels of accounts
payable of $3,912,000 and federal and state income taxes
payable of $416,000.
Cash used in investing activities during the nine months
ended March 31, 2000 was approximately $863,000. Such amount
consisted primarily of $729,000 for capital expenditures and
additional consideration paid to JEH Co. in the amount of
approximately $134,000. The additional consideration paid to
JEH Co. increased goodwill and is being amortized over the
remaining life of the goodwill (see Acquisitions below).
Management of the Company presently anticipates capital
expenditures in the next twelve months of not less than
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<PAGE>
$1,300,000, of which approximately $650,000 is anticipated to
be financed and used for the purchase of trucks and forklifts
for the Company's currently existing operations in
anticipation of increased business and to upgrade its
vehicles and facilities to compete better in its market
areas. Management's anticipation of increased business is
based on sales to be generated by the opening of new
distribution centers, the location of some of which have not
yet been decided.
Cash provided by financing activities during the nine months
ended March 31, 2000 was approximately $2,045,000. Such
amount consisted primarily of a net principal increase in
long-term debt of $1,558,000 and a change in the TDA
intercompany account of approximately $487,000.
Acquisitions
In July 1997, JEH Eagle acquired the business and
substantially all of the assets of JEH Co., a Texas
corporation, wholly-owned by James E. Helzer, now the
President of the Company. The purchase price, as adjusted,
including transaction expenses, was approximately
$14,774,000, consisting of $13,909,000 in cash, net of
$250,000 due from JEH Co., and a five-year note bearing
interest at the rate of 6% per annum in the principal amount
of $864,652. The purchase price and the note are subject to
further adjustments under certain conditions. Certain,
potentially substantial, contingent payments, as additional
future consideration to JEH Co., or its designee, are to be
paid by JEH Eagle. Upon consummation of the Offering, the
Company issued 300,000 of its common shares to James E.
Helzer, the designee of JEH Co., in fulfillment of certain of
such future consideration. For the fiscal year ended June
30, 1999, approximately $1,773,000 of additional
consideration was paid to JEH Co. Such additional
consideration increased goodwill and is being amortized over
the remaining life of the goodwill. No additional
consideration was payable to JEH Co. for fiscal 1999.
In October 1998, MSI Eagle acquired the business and
substantially all of the assets of MSI Co., a Texas
corporation, wholly-owned by Gary L. Howard, now a Vice
President of the Company. The purchase price, as adjusted,
including transaction expenses, was approximately $8,538,000,
consisting of $6,492,000 in cash and a five-year note bearing
interest at the rate of 8% per annum in the principal amount
of $2,045,972. The purchase price is subject to further
adjustment under certain conditions. Upon consummation of
the Offering, the Company issued 50,000 of its common shares
to Gary L. Howard, the designee of MSI Co., in payment of
$250,000 principal amount of the note. The balance of the
note was paid in full in March 1999 out of the proceeds of
the Offering. Certain, potentially substantial, contingent
payments, as additional future consideration to MSI Co., or
its designee, are to be paid by MSI Eagle. Upon consummation
of the Offering, the Company issued 200,000 of its common
shares, and, as of July 1, 1999, the Company issued 60,000 of
its common shares, to Gary L. Howard in fulfillment of
certain of such future consideration. All of such additional
consideration increased goodwill and is being amortized over
the remaining life of the goodwill. No additional
consideration was payable to MSI Co. for fiscal 1999.
-13-
<PAGE>
Credit Facilities
Eagle is a party to a loan agreement (last amended December
11, 1998) which provides for a credit facility in the
aggregate amount of $10,900,000. The credit facility
consists of a $10 million revolving credit loan and a
$900,000 equipment loan. The initial term of the credit
facility matures on October 22, 2003. Certain current assets
and automotive equipment of Eagle (aggregating approximately
$17,966,000 at March 31, 2000) collateralize the obligations
under the credit facility. The revolving credit and
equipment loans bear interest at the lender's prime rate,
plus one-half percent, or at the London inter-bank offered
rate, plus two and one-half percent, at the option of Eagle.
The equipment loan is payable in equal monthly installments,
based on a seventy-five month amortization schedule, each in
the amount of $11,000, with a balloon payment due on the
earlier of August 1, 2004 or at the end of the loan
agreement's initial or renewal term. This credit facility is
guaranteed by the Company and TDA.
In order to finance the purchase of substantially all of the
assets and business of JEH Co. and to provide for working
capital needs, JEH Eagle entered into a loan agreement (last
amended on December 11, 1998) for a credit facility in the
aggregate amount of $20 million which is collateralized by
substantially all of the tangible and intangible assets of
JEH Eagle. The initial term of the credit facility matures
on October 22, 2003 and consists of a $3,000,000 term loan, a
$2,475,000 equipment loan, and the balance in the form of a
revolving credit loan. The term loan is payable in 48 equal
monthly installments, each in the amount of $62,500; the
equipment loan is payable in equal monthly installments,
based on a seventy-six month amortization schedule, each in
the amount of $26,000, with a balloon payment due on the
earlier of August 1, 2004 or the end of the loan agreement's
initial or renewal term. The equipment and revolving credit
loans bear interest at the lender's prime rate, plus one-half
percent, or at the London inter-bank offered rate, plus two
and one-half percent, at the option of JEH Eagle. The term
loan bears interest at the lender's prime rate, plus one and
one-half percent, or at the London inter-bank offered rate,
plus three and one-quarter percent, at the option of JEH
Eagle. This credit facility is guaranteed by the Company and
TDA.
In order to finance the purchase of substantially all of the
assets and business of MSI Co. and to provide for working
capital needs, MSI Eagle entered into a loan agreement for a
credit facility in the aggregate amount of $9,075,000, which
is collateralized by substantially all of the tangible and
intangible assets of MSI. The credit facility has an initial
maturity of October 22, 2003 and consists of a $3,075,000
term loan and the balance in the form of a revolving credit
loan. The term loan is payable in equal monthly
installments, based on an eighty-three month amortization
schedule, each in the amount of $37,000, and a final payment
of the then outstanding principal amount. The revolving
credit loan bears interest at the lender's prime rate, plus
one-half percent, or at the London inter-bank offered rate,
plus two and one-half percent, at the option of MSI Eagle.
The term loan bears interest at the lender's prime rate, plus
one and one-half percent, or at the London inter-bank offered
rate, plus three and one-quarter percent, at the option of
MSI Eagle. This credit facility is guaranteed by the Company
and TDA.
-14-
<PAGE>
In October 1998, in connection with the purchase of
substantially all of the assets and business of MSI Co. by
MSI Eagle, TDA lent MSI Eagle $1,000,000 pursuant to a 6%
two-year note. The note is payable in full in October 2000,
and TDA has agreed to defer the interest payable on the note
until its maturity.
Impact of Inflation
General inflation in the economy has driven the operating
expenses of many businesses higher, and, accordingly, the
Company has experienced increased salaries and higher prices
for supplies, goods and services. The Company continuously
seeks methods of reducing costs and streamlining operations
while maximizing efficiency through improved internal
operating procedures and controls. While the Company is
subject to inflation as described above, the Company's
management believes that inflation currently does not have a
material effect on its operating results, but there can be no
assurance that this will continue to be so in the future.
-15-
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Uses of proceeds
On March 12, 1999, the Company's Registration Statement,
Securities and Exchange Commission ("SEC") File No. 333-
09951, became effective under the Securities Act of 1933 for
an offering of 2,500,000 shares of the Company's Common Stock
("Shares") and 2,500,000 Redeemable Common Stock Purchase
Warrants ("Warrants") exclusive of an additional 375,000
Shares and Warrants registered to cover an overallotment
option granted to the Underwriter. A closing of the offering
of 2,500,000 Shares and 2,875,000 Warrants was held on March
17, 1999 resulting in gross and net proceeds of approximately
$12,859,000 and $10,206,000, respectively. The Company
reported on its use and expenditures of the net proceeds in
filings previously made with the SEC. There have been no
material changes in such use or expenditures from those
previously reported.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is being filed with this Report:
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K. None.
-16-
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
EAGLE SUPPLY GROUP, INC.
Dated: May 15, 2000 By:/s/ Douglas P. Fields
Douglas P. Fields,
Chairman of the
Board of Directors,
Chief Executive Officer
and a Director (Principal
Executive Officer)
Dated: May 15, 2000 By:/s/ Frederick M. Friedman
Frederick M. Friedman,
Executive Vice President,
Treasurer, Secretary and a
Director (Principal
Financial and Accounting
Officer)
-17-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Summary Financial Data Schedule contains summary financial information
extraced from Balance Sheet, Statement of Operations, Statements of Cash Flows
and Notes thereto incorporated in Part II, Item 6 of this Form 10-Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,961,810
<SECURITIES> 0
<RECEIVABLES> 29,494,848
<ALLOWANCES> 2,544,709
<INVENTORY> 27,033,009
<CURRENT-ASSETS> 62,147,019
<PP&E> 11,215,482
<DEPRECIATION> 4,758,456
<TOTAL-ASSETS> 80,926,925
<CURRENT-LIABILITIES> 31,095,117
<BONDS> 32,053,713
0
0
<COMMON> 851
<OTHER-SE> 17,679,732
<TOTAL-LIABILITY-AND-EQUITY> 80,926,925
<SALES> 134,769,362
<TOTAL-REVENUES> 0
<CGS> 101,456,053
<TOTAL-COSTS> 29,048,827
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,276,885
<INCOME-PRETAX> 2,402,583
<INCOME-TAX> 897,000
<INCOME-CONTINUING> 1,505,583
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,505,583
<EPS-BASIC> .18
<EPS-DILUTED> .18
</TABLE>
