SECURITIES AND EXCHANGE
-----------------------
COMMISSION
----------
WASHINGTON, D.C. 20549
----------------------
FORM 10-QSB
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[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
March 31, 1996.
- Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from
_________ to__________
Commission File No. 0-22388
EIF HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
HAWAII 99-0273889
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
727 South Ninth Avenue
City of Industry, CA 91745
----------------------------------------
(Address of principal Offices) (Zip Code)
Registrant's telephone number including area code: (818) 330-7221
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N/A
---------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 preceding 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 NO X
------- -------
The number of shares of common stock outstanding as of October 14,
1996 was 24,681,201.
<PAGE>
EIF HOLDINGS, INC.
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item I. Financial Statements -
Consolidated Balance Sheets as of March 31, 1996 and
September 30, 1995 3
Consolidated Unaudited Statements of Operations, six
months ended March 31, 1996 and 1995 and the three
months ended March 31, 1996 and 1995 4
Consolidated Unaudited Statements of Cash Flows, six
months ended March 31, 1996 and 1995 5
Notes to Consolidated Unaudited Interim Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. OTHER INFORMATION 9
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
EIF HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, September 30,
1996 1995
---------- -------------
ASSETS
Current assets
Cash 256,779 70,775
Contracts receivable, net
allowance for doubtful
accounts 4,517,844 5,579,506
Costs and estimated earnings
in excess of billings on
uncompleted contracts 115,205 349,512
Supplies inventory 521,676 529,954
Income tax receivable 206,303 265,916
Prepaid assets 332,857 701,485
---------- -----------
Total current assets 5,950,664 7,497,148
Machinery and equipment, net
of accumulated depreciation 1,543,207 1,679,957
Goodwill 907,589 933,493
Other assets 36,728 34,693
---------- -----------
$ 8,438,188 $10,145,291
=========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Outstanding checks payable $ 528,803 $ 478,696
Note payable, bank 2,710,645 1,710,504
Accounts payable and accrued
expenses 3,441,807 4,046,137
Billings in excess of cost
and estimated earnings on
uncompleted contracts 235,279 516,871
Current maturities of 254,000 219,313
long-term debt ---------- -----------
Total current liabilities 7,170,534 6,971,521
Long-term debt 1,448,570 2,537,396
Stockholders' equity
Common stock 3,019,246 2,019,246
Additional paid-in capital 804,696 804,696
Deficit (4,004,858) (2,187,568)
---------- -----------
(180,916) 636,374
---------- -----------
$ 8,438,188 $10,145,291
=========== ===========
See accompanying notes to consolidated financial statements
<PAGE>
EIF HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
------------------
1996 1995
---- ----
Contract revenues earned $ 5,018,611 $ 7,898,697
Cost of contract revenues 3,526,334 5,243,760
----------- -----------
Gross profit 1,492,277 2,654,937
Selling, general and 2,909,575 2,812,337
administrative ----------- -----------
Operating (loss) income (1,417,298) (157,400)
Other income (expense) 0 (228,381)
----------- -----------
Loss before interest
expense (1,417,298) (385,781)
Interest expense 107,773 90,444
----------- -----------
Loss before benefit for
income taxes (1,525,071) (476,225)
Benefit for income taxes (3,000) (110,000)
----------- -----------
Net loss $(1,522,071) $ (366,225)
=========== ===========
Net loss per common share $ (0.07) $ (0.02)
=========== ===========
Weighted average number 20,991,827 15,193,530
of shares outstanding =========== ===========
Six Months Ended
March 31,
-----------------
1996 1995
---- ----
Contract revenues earned $11,296,671 $15,985,756
Cost of contract revenues 7,720,047 10,608,608
----------- -----------
Gross profit 3,576,624 5,377,148
Selling, general and 5,235,668 5,363,372
administrative ----------- -----------
Operating (loss) income (1,659,044) 13,776
Other income (expense) 51,031 (296,775)
----------- -----------
Loss before interest
expense (1,608,013) (282,999)
Interest expense 209,277 177,662
----------- -----------
Loss before benefit for
income taxes (1,817,290) (460,661)
Benefit for income taxes 0 (103,000)
----------- -----------
Net loss $(1,817,290) $ (357,661)
=========== ===========
Net loss per common share $ (0.10) $ (0.02)
=========== ===========
Weighted average number 17,787,600 15,077,230
of shares outstanding =========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
EIF HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
Six Months Ended
March 31,
-----------------
1996 1995
---- ----
Net cash used in
operating activities $(810,105) $(141,200)
Cash flows from
investing activities
Cash acquired through
Kelar Controls, Inc.
acquisition - 17,087
Purchase of property - (115,517)
and equipment ----------- ---------
Net cash used in - (98,430)
investing activities ----------- ---------
Cash flows from
financing activities
Net advances from
notes payable,
bank 1,000,141 486,290
Proceeds from sale
of common stock 1,000,000 -
Advances on behalf
of officer - (12,500)
Payments on
long-term debt (1,054,139) (161,888)
Increase in
outstanding checks 50,107 113,309
payable ----------- ---------
Net cash provided by 996,109 425,211
financing activities ----------- ---------
Net increase in cash 186,004 185,581
Cash, beginning of 70,775 28,337
period ----------- ---------
Cash, end or period $ 256,779 $ 213,918
=========== =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
On December 31, 1994 the Company purchased all of the common
stock of Kelar Controls, Inc. in exchange for 200,000 shares of
Company stock plus closing costs. In conjunction with the
transaction, liabilities were assumed as follows:
Fair value of assets acquired $ 373,174
Consideration paid 96,200
---------
Liabilities assumed $ 276,974
=========
During the six months ended March 31, 1996, the company acquired
$150,512 of machinery and equipment under capitalized leases.
See accompanying notes to consolidated financial statements.
<PAGE>
EIF HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996
(UNAUDITED)
-----------
NOTE 1 - BASIS OF PRESENTATION:
The unaudited interim consolidated financial statements of EIF
Holdings, Inc. and its subsidiaries (the Company) have been
prepared pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These interim
consolidated financial statements should be read in conjunction
with the Company's consolidated financial statements and related
notes as contained in Form 10-KSB for the year ended September
30, 1995.
In the opinion of management, the interim consolidated financial
statements reflect all adjustments necessary for fair
presentation of the interim period.
NOTE 2 - NOTES PAYABLE, BANK:
Notes payable, bank includes a line of credit secured by VonGuard
Holdings, Inc.'s contracts receivable, inventory and machinery
and equipment. The note matured February 16, 1996. As of March
31, 1996 the outstanding balance on this note was $1,434,000.
The bank has extended the maturity of this note while the Company
and the bank continue to renegotiate new terms.
Notes payable, bank also includes a line of credit secured by P.
W. Stephens' contracts receivable and supplies inventory. As of
March 31, 1996 the outstanding balance on this note was
$2,410,000, and there had been no changes in the terms of this
note.
NOTE 3 - LONG-TERM DEBT:
In order to fund continuing operating needs and debt service, the
Company arranged to borrow funds from American Eco Corporation,
an Ontario corporation ("American Eco"), pursuant to a long-term
note that bears interest at prime plus 2.50%. At March 31, 1996
the outstanding balance on this note was $324,000.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
RESULTS OF OPERATIONS:
In February 1996 a new management team was assembled to begin to
assess and assist the management with the Company's operations.
Their first priority was to review the Company's financial
reporting and track operations. It became clear that the
financial affairs of the Company were not at acceptable levels
for the new team which included managers of American Eco. The
Company's operations were being directed by personnel that did
not clearly understand the financial status of the operations or
even of the projects specifically. The new management team
requested assistance from financial professionals to clarify the
accurate status of each project and of the Company as a whole.
The newly appointed executives of the Company delayed the release
of the interim financial information until such time as its
accuracy could be ascertained.
For the six months ended March 31, 1996, the net loss was
$1,817,290 compared to a net loss of $357,661 during the same
period in 1995. Continued decline during the most recent period
reflect a continuation of losses from the year ended September
30, 1995 stemming from the VonGuard companies and further losses
directly attributable to both the P. W. Stephens, Inc. whose
demand for service has fallen off substantially, and Kelar's
operations which continue in a start-up mode.
REVENUES:
Revenue declined $4,689,085 or 29.3% from $15,985,756 last year
to $11,296,671 for the six months ended March 31, 1996. P. W.
Stephens Contracting Inc., the Company's largest subsidiary, had
declines in revenues of $3,332,124 or 28.0% from the same period
last year. VonGuard's total revenues also ran behind last year
$1,222,097 or 34.0% and Kelar Controls follow suit with a decline
of $134,864 or 28.3%.
During the quarter ended March 31, 1996, sales for both VonGuard
and for P. W. Stephens have seriously declined as the Company has
not aggressively marketed its products. Much of the new
management's effort has been consumed negotiating with the former
owners and management and reorganizing the Company for the
future.
Revenues were also negatively impacted when Zurich American
Insurance chose not to bond the Company any longer based
primarily on the Company's prior performance. This lack of
bonding capability made operations somewhat more difficult for
the Company and the ability to successfully bid projects became
somewhat limited. Using American Eco's strength, the Company was
able to move their bonding and surety needs to AIG (American
International Group) on May 1, 1996. Under this new agreement,
American Eco became a co-indemnity with the Company on a new bond
line.
Actions have been undertaken to improve revenue generation as the
Company moved into the third quarter of operations, the full
impact of which will not be realized until the fourth quarter of
fiscal 1996 or early in fiscal 1997. A bona-fide sales department
is now operating within the VonGuard group. At P. W. Stephens,
efforts have also been put in place to expand the sales of its
operations primarily through the addition of QHI Stephens as a
new subsidiary that specializes in commercial asbestos and lead
abatement and other environmental services. Kelar Controls has
entered into a marketing agreement with CEW Lighting Company, the
fourth largest supplier of HID lighting products. This
agreement, finalized late in the first quarter, provides Kelar
with an instant nationwide sales force backed by a well respected
company. Activities related to this agreement began early in the
second quarter.
GROSS PROFIT:
During the six months ended March 31, 1996, the Company produced
an overall gross profit margin of 31.6% or $3,576,624 compared to
33.6% and $5,377,148 for the same period in 1995.
P. W. Stephens gross profit for the six months ending March 31,
1996 is at 35.7%. This is down from the first quarter average of
38.3% again reflecting the reduction in business taking place
during the second quarter as the new management restructured the
Company.
<PAGE>
VonGuard's gross profit also slipped from first quarter levels of
14.3% to a six months average of 12.4%. Negotiations with prior
management delayed the new management's opportunity to
aggressively begin the restructure of the Company until late in
the quarter.
Kelar Controls gross profit continued to improve due primarily to
recognition within the quarter of shared energy savings with the
San Jose School District. These savings are related to a project
completed in a prior year that entitled Kelar to receive a
percentage of energy savings generated by the project.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES:
Selling, general, and administrative expenses decreased $127,704
or 2.4% from March 31, 1995. Much of the decrease in costs is
attributable to the VonGuard companies as costs have been reduced
$340,795 compared to six month fiscal 1995, primarily due to cost
reductions implemented late in fiscal 1995.
P. W. Stephens second quarter costs ran $1,777,711 very near the
same level as first quarter figures of $1,729,000. Planned cost
reduction efforts were put into effect late in the second quarter
by the new management. The benefits of these cost reductions
should be seen in future periods.
VonGuard reduced overhead costs from $449,000 in the first
quarter to a level of $192,205 during the second quarter. This
reduction in costs reflects the efforts of changes made by the
new management in restructuring these companies, eliminating
waste, and combining multiple locations into one office.
Kelar's selling, general, & administrative expenses remain nearly
constant. No significant changes are expected in this company's
overhead levels.
INTEREST EXPENSE:
Interest expense for the Company amounted to $209,277 for the
first six months of fiscal 1996. This is an increase of $31,615
from the same period 1995. Losses during the period have been
funded by additional borrowings on the lines of credit and by
advances from American Eco. The continued need for working
capital has kept the lines of credit fully utilized and this has
increased interest costs.
LIQUIDITY AND CAPITAL RESOURCES:
Stephen's and VonGuard's lines of credit continue to be the
Company's main source of capital. These lines provide an
availability to borrow based on formulas involving contracts
receivable, certain inventory, and certain property and
equipment. As of March 31, 1996, the Company had borrowed the
maximum amount permitted under the aforementioned formulas.
As previously stated, VonGuard's line of credit matured on
February 16, 1996. As of September 25, 1996, $260,000 was
outstanding on this line of credit. The Company is continuing to
negotiate with the bank regarding an extension on a more
permanent basis and arrangements for a complete pay down of the
loan. In the interim, American Eco continues to support fundings
necessary for operations of the Company. As of March 31, 1996
American Eco had advanced $324,000 to the Company pursuant to a
long-term note that bears interest at prime plus 2.50%.
The Company also received $850,000 in net proceeds from a
February 1996 placement of its Common Stock. The Company entered
into an agreement with American Eco for the sale of 10,000,000
shares of the Company's Common Stock, at a price of $.10 per
share. The closing is subject to certain conditions, including
shareholder approval of an increase in the Company's authorized
Common Stock (see Item 5 of part II of this report).
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information
-----------------
On January 12, 1996, the Company and American Eco entered into a
Stock Purchase Agreement pursuant to which American Eco is to
purchase 10 million shares of the Company's Common Stock at $0.10
per share subject to the approval of the Company's shareholders
of an increase of the Company's authorized common stock. It is
anticipated that the shareholders' meeting will be held in the
fall 1996. During the interim period, a team of managers from
American Eco has assumed the management of the Company. Richard
Austin has stepped down as Chairman of the Company. Ken
Vonderahe has resigned as a Director of the Company and as
President of VonGuard Holdings, Inc., a St. Louis based
subsidiary of the Company. Ronald K. Mann has assumed the
Chairmanship of the Company's Board of Directors. Mr. Mann was
then a Director of American Eco. Mr. Michael E. McGinnis now
serves as the Company's President and Chief Executive Officer and
as a director. Mr. McGinnis currently is the President and Chief
Executive Officer and a Director of American Eco. Joseph Miller
has been appointed Executive Vice President and Chief Operating
Officer of the Company. Mr. Miller has acted as a consultant to
American Eco. Mr. Mann and Mr. McGinnis shall devote as much
time to the management of the Company as each, in his sole
discretion, shall deem necessary.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
b. A report on Form 8-K was filed for an event of February
2, 1996 to report on Item 1 thereof the interest that
American Eco had taken in the Company and in Item 5
thereof the completion of a securities placement.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
EIF HOLDINGS, INC.
------------------
Registrant
September 25, 1996 By:/s/ David L. Norris
--------------------------
David L. Norris
President and Duly Authorized
Officer
By:/s/ Lanell Matlock
----------------------------
Lanell Matlock
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
FINANCIAL DATA SCHEDULE
EIF HOLDINGS, INC.
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM EIF HOLDINGS, INC. FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 256,779
<SECURITIES> 0
<RECEIVABLES> 4,667,844
<ALLOWANCES> (150,000)
<INVENTORY> 521,676
<CURRENT-ASSETS> 5,950,664
<PP&E> 5,615,245
<DEPRECIATION> (4,072,038)
<TOTAL-ASSETS> 8,438,188
<CURRENT-LIABILITIES> 7,170,534
<BONDS> 0
<COMMON> 3,019,246
0
0
<OTHER-SE> (3,200,162)
<TOTAL-LIABILITY-AND-EQUITY> 8,438,188
<SALES> 11,296,671
<TOTAL-REVENUES> 11,296,671
<CGS> 7,720,047
<TOTAL-COSTS> 12,955,715
<OTHER-EXPENSES> (51,031)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 209,277
<INCOME-PRETAX> (1,817,290)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,817,290)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,817,290)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> 0
</TABLE>
