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 December 31, 1996
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)
475 N. Muller St., Anaheim, CA 92801
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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 11, 1997
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Common stock, no par value 24,618,201
Transitional Small Business Disclosure Format (Check one):
Yes ; No
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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 December 31, 1996
and September 30, 1996 3
Consolidated Unaudited Statements of Operations for the Three Months
Ended December 31, 1996 and 1995 4
Consolidated Unaudited Statements of Cashflow for the Three Months
Ended December 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 10
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EIF HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
--------------- ----------
ASSETS
<S> <C> <C>
Current assets
Cash $ 378,548 $ 178,231
Contracts receivable, net of allowance for doubtful accounts 5,329,148 7,299,059
Cost and estimated earnings in excess of billings on uncompleted
contracts 289,748 326,343
Supplies inventory 505,296 478,370
Prepaid assets 717,854 85,816
------------ ------------
Total current assets 7,220,594 8,367,819
Machinery and equipment, net of accumulated depreciation 1,368,922 1,275,087
Goodwill 786,691 881,680
Other assets 692 50,917
------------ ------------
$ 9,376,899 $ 10,575,503
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable, bank $ 2,333,237 $ 1,856,751
Accounts payable and accrued expenses 6,357,011 6,428,112
Billings in excess of cost and estimated earnings on uncompleted
contracts 1,067,561 737,476
Note payable due to shareholder 5,953,120 4,908,317
Current maturities of long-term debt -- 144,311
------------ ------------
Total current liabilities 15,710,929 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) (10,157,972) (7,397,288)
------------ ------------
(6,334,030) (3,573,346)
------------ ------------
$ 9,376,899 $ 10,575,503
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
-3-
<PAGE>
EIF HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months ended
December 31,
-----------------------------
1996 1995
------------ --------------
Contract revenue $ 6,364,429 $ 6,278,060
Cost of contract revenue 6,691,874 4,193,713
------------ ------------
Gross profit (327,445) 2,084,347
Selling, general and administrative 2,106,211 2,326,093
------------ ------------
Operating (loss) (2,433,656) (241,746)
Other income (expense) -- 51,031
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(Loss) before interest expense (2,433,656) (190,715)
Interest expense 327,028 101,504
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(Loss) before provision for income taxes (2,760,384) (292,219)
Provision for income taxes -- 3,000
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Net (loss) $ (2,760,384) $ (295,219)
============ ============
Net (loss) per share $ (0.11) $ (0.02)
============ ============
Weighted average number of shares outstanding 24,618,201 14,618,201
============ ============
See accompanying notes to consolidated financial statements
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<PAGE>
EIF HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASHFLOW
(UNAUDITED)
Three Months ended
December 31,
---------------------------
1996 1995
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Net cash (used) provided by operating activities $ (898,572) $ 151,990
Cash flow from investing activities
Purchase of machinery and equipment (204,207) (8,469)
----------- -----------
Net cash used in investing activities (204,207) (8,469)
Cash flow from financing activities
Net advances (payment) on notes payable 1,376,978 10,241
Net payments on long-term debt (73,882) (284,420)
Increase in outstanding checks payable -- 86,684
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Net cash used in financing activities 1,303,096 (187,495)
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Net (decrease) increase in cash 200,317 (43,974)
Cash, beginning of period 178,231 70,775
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Cash, end of period $ 378,548 $ 26,801
=========== ===========
Supplemental disclosure of Non-cash Investing and Financing Activities
During the three months ended December 31, 1995, the Company acquired
$150,212 of machinery and equipment under capitalized leases.
See accompaying notes to consolidated financial statements
-5-
<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
10KSB 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.
Total interest accrued on this line of credit amounted to
$283,000 as of December 31, 1996.
See accompanying notes to consolidated financial statements
-6-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations:
- ----------------------
For the three months ended December 31, 1996, the net loss
of $2,760,000 compared to the net loss of $295,000 during the same
period of 1995. Losses during the most recent period reflect a
continuation of losses from the year ended September 30, 1996, and are
primarily due to decreased gross profit margins and losses on two
specific large jobs.
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"), declined by $306,000 or (7%) to
$4,172,000 during the recent quarter from $4,478,000 during the same
period in 1995. P.W. Stephens revenues remained relatively flat
compared to the prior year, and were aided by two large revenue jobs,
the General Dynamics facility in San Diego and San Francisco Civic
Center.
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 quarter
ended December 31, 1996 increased by $723,000 or (57%) to $1,985000
from $1,262,000 during the same period of 1995. This increase is due
to increased sales efforts and the awarding of new contracts to P.W.
Stephens St. Louis
Kelar Controls, Inc.'s, ("Kelar"), revenues during the
quarter ended December 31, 1996 decreased by $68,000 or (25%) to
$201,000 from $269,000 during the same period of 1995. Kelar's revenue
decreased mainly due to reduction of contracts signed and for which
construction commenced during the period. Kelar completed a project
for a Northern California school district in 1995, which entitles
Kelar to a percentage of energy savings generated by the project.
Kelar received $112,000 of revenues from this project compared to
$142,000 during the same period in 1995.
Gross Profit:
P.W. Stephens had a negative gross margin of (20.0)% during
the quarter ended December 31, 1996, compared to positive 38.3% during
the same period in 1995. The decrease in gross profit margins reflect
the impact of two large jobs which the Company estimates will be at a
significant loss when completed.
P.W. Stephens St. Louis achieved a gross profit of 20.3%
during the quarter ended December 31, 1996, compared to 14.3% during
the same period in 1995. The increase in gross profit is primarily due
to better operating efficiency due to the consolidation of branches
which occurred in the spring of 1996.
Kelar's gross profit for the three months ended December 31,
1996, was 35.7%. This gross profit percentage includes the previously
mentioned $112,000 of shared energy savings. The project was completed
in a prior period and the costs incurred were expensed during that
period, as such only minimal costs associated with this revenue was
expensed 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 December 31, 1996 decreased by 203,000 (12%)
to $1,526,000 compared to $1,729,000 during the quarter ended December
31, 1995. 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 quarter ended December 31, 1996 decreased by
$59,000 (13%) to $390,000 compared to $449,000 during the quarter
ended December 31, 1995. This decrease reflects the consolidation of
an office and warehouse into one facility.
Kelar's selling, general and administrative expenses during
the quarter ended December 31, 1996 increased by $26,000 (22%) to
$145,000 compared to $119,000 during the quarter ended December 31,
1995. This increase is due to the additional sales effort to expanded
Kelar's customer base and revenues.
-7-
<PAGE>
EIF Holdings, Inc. ("EIF") administrative expenses for the
quarter ended December 31, 1996 were $45,000, compared to $30,000 in
the prior year. This increase is mainly due to professional fees
associated with settlement of certain lawsuits.
Interest expense during the quarter ended December 31, 1996,
was $327,000 compared to $101,000 during the prior year's quarter
ended December 31, 1995. The increase was mainly due to borrowings
from its shareholder, American Eco Corp. in order to fund the prior
year loss.
Liquidity and Capital Resources:
- --------------------------------
The Company's borrowings from its shareholder, American Eco
Corp., remained the main source of capital. The Company is negotiating
with the American Eco Corp. to exchange all or part of its line of
credit for additional shares of the Company's common stock. Prior to
any exchange, the Company will need shareholders' approval to increase
its authorized number of shares of common stock which may be issued
and an agreement as to the number of shares to be issued in exchanged
for debt. There can be no assurance these can be accomplished.
During the quarter ended December 31, 1996, P.W. Stephens
St. Louis factored certain contract receivables in the amount of
$1,860,035. Under the factoring arrangement P.W. Stephens St. Louis
receives 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, P.W. Stephens St. Louis 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 $300,000 at the rate of
12% per annum plus 100,000 warrants to purchase the Company's common
stock at a price of $0.28 per share. This loan matures on March 13,
1997.
P.W. Stephens was paying off its line credit with its bank
at the rate of $200,000 per month. The outstanding bank loan balance
at December 31, 1996 was $800,000.
At the present time the Company and it subsidiaries have no
bank line of credit to borrow upon.
-8-
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On August 15, 1996 David L. Norris was hired as President
and Chief Executive Officer of EIF Holdings, Inc. to
replaced Michael E. McGinnis. Mr. McGinnis continued as the
chairman of the board. Mr. Mann also resigned as a director
of the Company at which time Mr. Norris was elected by the
board as a replacement for Mr. Mann. Mr. Norris is also a
Vice President of American Eco Corp. Mr. Norris has an
employment agreement with American Eco Corp. which the
Company has agreed to pay all compensation due under the
agreement while Mr. Norris was President of the Company. In
May of 1997, Mr. Frank Fradella was hired to take over the
operations of the Company. Mr. Norris resigned his position
with the Company and from the board of directors and was
replaced by Mr. Fradella.
On October 22, 1996, Mr. Joel J. Thomas was hired as Chief
Financial Officer of the Company. Mr. Thomas has an
employment agreement with the Company which calls for an
annual salary of $100,000 plus a auto allowance. This
agreement is for three years and guaranteed by American Eco
Corp.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(b) Report on Form 8-K
No reports 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 DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1996
<CASH> 378,548
<SECURITIES> 0
<RECEIVABLES> 5,329,148
<ALLOWANCES> 289,748
<INVENTORY> 505,296
<CURRENT-ASSETS> 7,220,594
<PP&E> 5,520,638
<DEPRECIATION> 4,151,716
<TOTAL-ASSETS> 9,376,899
<CURRENT-LIABILITIES> 15,710,929
<BONDS> 0
0
0
<COMMON> 3,019,246
<OTHER-SE> (9,353,276)
<TOTAL-LIABILITY-AND-EQUITY> 9,376,899
<SALES> 6,364,429
<TOTAL-REVENUES> 6,364,429
<CGS> 6,691,874
<TOTAL-COSTS> 6,691,874
<OTHER-EXPENSES> 2,106,211
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 327,028
<INCOME-PRETAX> (2,760,384)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,760,384)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,760,384)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
