UNITED STATES
SECURITES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
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{X} QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURTIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
OR
{ } TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
Commission File Number 0-22388
EIF HOLDINGS, INC.
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(Exact name of small business issuer as specified in its charter)
HAWAII 99-0273889
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15201 Pipeline Lane, Ste. B
Huntington Beach, California 92649
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(Address of principal executive offices)
(714) 897-9000
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(Issuer's telephone number)
Not applicable
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(Former name, former address and former fiscal year if changed since last report
Check whether the issuer(1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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
--- ---
State the number of shares outstanding of each of the issuer's classes
of common equity, as the latest practicable date.
Class Outstanding at August 12, 1997
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Common stock, no par value 24,618,201
Transitional Small Business Disclosure Format (Check one):
Yes ; No X
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<PAGE>
EIF HOLDINGS INC. AND SUBSIDIARIES
Table of Contents
PART I. FINANCIAL INFORMATION Page
Item 1 Financial Statements
Consolidated Unaudited Balance Sheets as of March 31, 1997
and December 31, 1996 3
Consolidated Unaudited Statements of Operations for the Six Months
and Three Months Ended March 31, 1997 and 1996 4
Consolidated Unaudited Statements of Cashflow for the Six Months
Ended March 31, 1997 and 1996 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
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<PAGE>
PART I. FINANCIAL INFORMATION
PART 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
EIF HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1997 1996
------------ ------------
ASSETS
<S> <C> <C>
Current assets
Cash $ 60,665 $ 178,231
Contracts receivable, net of allowance for doubtful accounts 5,856,830 7,299,059
Cost and estimated earnings in excess of billings on uncompleted
contracts 20,222 326,343
Supplies inventory 569,353 478,370
Prepaid assets 431,531 85,816
------------ ------------
Total current assets 6,938,601 8,367,819
Machinery and equipment, net of accumulated depreciation 1,304,596 1,275,087
Goodwill 777,849 881,680
Other assets -- 50,917
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$ 9,021,046 $ 10,575,503
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable, bank $ 2,941,887 1,856,751
Accounts payable and accrued expenses 6,227,716 6,428,112
Billings in excess of cost and estimated earnings on uncompleted
contracts -- 737,476
Notes payable, due to shareholders 6,680,642 4,908,317
Current maturities of long-term debt -- 144,311
------------ ------------
Total current liabilities 15,850,245 14,074,967
Long term debt 73,882
Stockholders' equity
Common stock 3,019,246 3,019,246
Additional paid-in capital 804,696 804,696
(Deficit) (10,653,141) (7,397,288)
------------ ------------
(6,829,199) (3,573,346)
------------ ------------
$ 9,021,046 $ 10,575,503
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
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<PAGE>
EIF HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months ended
March 31,
----------------------------------
1997 1996
---------------- --------------
Contract revenue $ 5,531,155 $ 5,018,611
Cost of contract revenue 3,629,698 3,526,334
------------ ------------
Gross profit 1,901,457 1,492,277
Selling, general and administrative 2,100,638 2,909,575
------------ ------------
Operating (loss) (199,181) (1,417,298)
Other income (expense) 0 0
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(Loss) before interest expense (199,181) (1,417,298)
Interest expense 295,990 107,773
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(Loss) before benefit for income taxes
(495,171) (1,525,071)
Benefit for income taxes 0 (3,000)
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Net (loss) $ (495,171) $ (1,522,071)
============ ============
Net (loss) per share $ (0.02) $ (0.07)
============ ============
Weighted average number of shares
outstanding 24,618,201 20,991,827
============ ============
Six Months ended
March 31,
---------------------------------
1997 1996
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Contract revenue $ 11,895,584 $ 11,296,671
Cost of contract revenue 10,321,572 7,720,047
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Gross profit 1,574,012 3,576,624
Selling, general and administrative 4,206,849 5,235,668
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Operating (loss) (2,632,837) (1,659,044)
Other income (expense) 0 51,031
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(Loss) before interest expense (2,632,837) (1,608,013)
Interest expense 623,016 209,277
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(Loss) before benefit for
income taxes (3,255,853) (1,817,290)
Benefit for income taxes 0 0
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Net (loss) $ (3,255,853) $ (1,817,290)
============ ============
Net (loss) per share $ (0.13) $ (0.10)
============ ============
Weighted average number of shares
outstanding 24,618,201 17,787,600
============ ============
See accompanying notes to consolidated financial statements
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<PAGE>
EIF HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASHFLOW
(UNAUDITED)
Six Months ended
March 31,
---------------------------
1997 1996
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Net cash provided (used) by operating activities $(2,559,161) $ (810,105)
Cash flow from investing activities
Purchase of machinery and equipment (197,673) --
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Net cash (used) in investing activities (197,673) --
Cash flow from financing activities
Net advances (payment) on notes payable, bank 1,116,349 1,000,141
Advances on notes payable due to shareholder 1,596,801
Proceeds from sale of common stock -- 1,000,000
Net payments on long-term debt (73,882) (1,054,139)
Increase in outstanding checks payable -- 50,107
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Net cash provided (used) in financing activities 2,639,268 996,109
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Net increase (decrease) in cash (117,566) 186,004
Cash, beginning of period 178,231 70,775
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Cash, end of period $ 60,665 $ 256,779
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the six months ended March 31, 1996, the Company acquired
$150,212 of machinery and equipment under capitalized leases.
See accompanying notes to consolidated financial statements
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<PAGE>
EIF HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 footnotes disclosure 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, 1996.
In the opinion of management, the interim consolidated
financial statements reflect all adjustments necessary for
fair presentation of the interim period. The results of
operations for interim periods are not indicative of results
of operations to be expected for the full year.
NOTE 2 - NOTE PAYABLE DUE TO SHAREHOLDER
During 1996, the Company entered into a line of credit with a
major shareholder. The line of credit maximum amount is
$5,250,000 and bears interest at the prime rate plus 2% per
annum. The line is unsecured and matures on July 31, 1997.
The balance outstanding at March 31, 1997 was $6,680,642.
See accompanying notes to consolidated financial ststements
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<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Results of Operations
- ---------------------
For the six months ended March 31, 1997, the net loss of
$3,255,853 compared to the net loss of $1,817,290 during the same
period of 1996. Losses during the six month period reflect the
continuation of losses from the year ended September 30, 1996.
Revenue:
Revenue from P.W. Stephens Contractors, Inc., QHI Stephens
Contractors, Inc. and P.W. Stephens Residential, Inc., (collectively
referred to as "P.W. Stephens"), increased by $368,000 or (5%) to
$8,056,000 for the six months ended March 31, 1997, from $7,688,000
during the same period in 1996. The both the commercial and
residential abatement business revenue remained constant during this
same period
P.W. Stephens Contractors, Inc. and P.W. Stephens Services,
Inc., formerly known as VonGuard Holdings, Inc., (now collectively
referred to as "P.W. Stephens St. Louis") revenue during the six
months ended December 31, 1996 increased by $74,000 or (3%) to
$2,891,000 compared to the same period of 1996.
Kelar Controls, Inc.'s, ("Kelar"), revenues during the six
months ended March 31, 1997 increased by $400,000 or (200%) to
$1,192,000 compared to the same period of 1996. Kelar's revenues
increased due to the recognition of revenue from its prior energy
savings sales contract, which was treated as a revenue for accounting
purposes during the current year.
Gross Profit:
P.W. Stephens achieved a gross profit of 3.3% during the six
months ended March 31, 1997, compared to 38.3% during the same period
in 1996. The decrease in gross profit margins reflect the impact of
two large jobs which the Company estimates will be at a loss. Reserves
for these losses were accrued for during the quarter ended December
31, 1996.
P.W. Stephens St. Louis achieved a gross profit of 23.6%
during the six months ended March 31, 1997, compared to 14.3% during
the same period in 1996. This increase reflect increased operating
efficiency.
Kelar's gross profit for the six months ended March 31,
1997, was 72.6%. This gross profit percentage includes $500,000 of
shared energy savings revenue. The project was completed in a prior
period and the cost incurred were charged to expense during that
period, as such only a minimal amount of costs are associated with
this revenue during the current period. Without this shared energy
savings revenue, Kelar's gross profit would have been substantially
less.
Selling, general and administrative expenses:
P.W. Stephens' selling, general and administrative expenses
during the quarter ended decreased by $574,000 (16%) to $2,933,000
compared to $3,507,000 during the six months ended March 31, 1996.
This decrease reflects a decline in administrative personnel and the
reduction in outside services.
P.W. Stephens St. Louis' selling, general and administrative
expenses during the six months increased by $21,000 (3.2%) to $662,00
compared to $641,000 during the six months ended March 31, 1996. This
decrease reflects the consolidation of office and warehouse into one
facility.
Kelar's selling, general and administrative expenses
remained constant with prior year.
EIF Holdings, Inc. ("EIF") administrative expenses for the
six months ended March 31, 1997 were $125,000, which did not
significantly change over the prior year.
Interest expense during the six months ended March 31, 1997,
was $623,000 compared to $209,000 during the prior year's six month
period ended March 31, 1996. The increase was mainly due to borrowing
from American Eco Corp. in order to fund the prior year's loss.
Liquidity and Capital Resources
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-7-
<PAGE>
The Company's borrowings from its shareholder, American Eco
Corp., under a line of credit arrangement remained the main source of
capital. Frank Fradella, the Company's President has entered into
discussions with American Eco Corp. to for an option to acquire
American Eco's interests in the Company. The discussion have included
the possibility of the conversion of the line of credit to equity of
the Company upon execution of the option. At the present time there is
no formal agreement between the parties nor is any assurance that the
transaction will be completed.
During the quarter ended March 31, 1997, P.W. Stephens and
P.W. Stephens St. Louis factored certain contract receivables in the
amount of $1,903,346 and $852,024. Under the factoring arrangement
P.W. Stephens and P.W. Stephens St. Louis are advanced 65% of the face
amount the receivable at the time of factoring. If the receivable is
not paid within 90 days of the invoice date, they must pay back the
advanced amount, plus any fees. The annualized effective interest rate
on this money is approximately 58%.
The Company was also able to borrow $100,000 at the rate of
12% per annum plus 33,333 warrants to purchase the Company's common
stock at a price of $0.28 per share. This loan and a prior loan of
$300,000, with the same company, are due on June 30, 1997.
At the present time the Company and it subsidiaries have no
bank line of credit to borrow upon.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(b) Report on Form 8-K
No report on Form 8-K were filed during this quarter.
-9-
<PAGE>
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
August 21, 1997 By: /s/ Joel J. Thomas
---------------------------------------
Joel J. Thomas
Corporate Secretary and Duly Authorized
Officer
-10-
<PAGE>
EXHIBIT INDEX
Exhibit Description
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27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
EIF HOLDINGS, INC. FORM 10-QSB FOR THE PERIOD ENDED MARCH 31, 1997
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-31-1997
<CASH> 60,665
<SECURITIES> 0
<RECEIVABLES> 5,856,830
<ALLOWANCES> 20,222
<INVENTORY> 569,353
<CURRENT-ASSETS> 6,938,601
<PP&E> 5,601,638
<DEPRECIATION> 4,297,042
<TOTAL-ASSETS> 9,021,046
<CURRENT-LIABILITIES> 15,850,245
<BONDS> 0
0
0
<COMMON> 3,019,246
<OTHER-SE> (9,848,445)
<TOTAL-LIABILITY-AND-EQUITY> 9,021,046
<SALES> 11,895,584
<TOTAL-REVENUES> 11,895,584
<CGS> 10,321,572
<TOTAL-COSTS> 10,321,572
<OTHER-EXPENSES> 4,206,849
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 623,016
<INCOME-PRETAX> (3,255,853)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,255,853)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,255,853)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
