UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _____________
COMMISSION FILE NO. 1-11480
GOLDEN EAGLE GROUP, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 65-0353755
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 STANDIFER DRIVE
HUMBLE, TEXAS 77338
(Address of principal executive offices) (Zip Code)
(713) 446-2656
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required 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 issuer's Common Stock, $.01 Par Value,
as of August 12, 1996 was 5,420,000.
Traditional Small Business Format: Yes [ ] No [ ]
<PAGE>
GOLDEN EAGLE GROUP, INC.
FORM 10
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1996
and December 31, 1995 3
Consolidated Statements of Income for the three
months and six months ended June 30, 1996
and 1995 4
Consolidated Statements of Cash Flows for the
six months ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of
Operation 8
PART II. OTHER INFORMATION 11
Signatures 12
-2-
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash .......................................................... $ 329,511 $ 396,812
Accounts receivable, net of allowance of $517,777 and $600,000 9,560,238 7,777,766
Prepaid expenses .............................................. 351,914 265,199
------------ ------------
Total current assets ..................................... 10,241,663 8,439,777
------------ ------------
Property and equipment, net of accumulated depreciation ...... 800,551 910,726
Intangible assets , net of accumulated amortization .......... 4,177,943 4,256,648
------------ ------------
Total assets ............................................. $ 15,220,157 $ 13,607,151
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft ................................................ $ -- $ 445,346
Notes payable ................................................. 408,271 412,291
Accounts payable .............................................. 7,229,361 5,754,259
Accrued expenses .............................................. 52,856 293,779
Obligations under capital leases, current portion ............ 35,846 40,117
------------ ------------
Total current liabilities ................................ 7,726,334 6,945,792
Long-term debt ................................................ 415,198 615,198
Obligations under capital leases, net of current portion ..... 48,468 66,720
------------ ------------
Total liabilities ........................................ 8,190,000 7,627,710
------------ ------------
Shareholders' equity:
Preferred stock, par value $.01, 1,000,000
shares authorized, none outstanding ....................... -- --
Common stock, par value $.01, 10,000,000 shares
authorized; 5,420,000 shares issued and outstanding ....... 54,200 53,070
Additional paid-in capital .................................... 8,920,256 8,733,980
Accumulated deficit ........................................... (1,944,299) (2,807,609)
------------ ------------
Total shareholders' equity ............................... 7,030,157 5,979,441
------------ ------------
Total liabilities and shareholders' equity ............... $ 15,220,157 $ 13,607,151
============ ============
</TABLE>
-3-
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales ........................................ $ 17,727,167 $ 12,526,915 $ 33,399,830 $ 23,770,855
Cost of sales ................................ 13,299,031 9,550,053 24,990,365 18,109,750
------------ ------------ ------------ ------------
Gross profit ........................... 4,428,136 2,976,862 8,409,465 5,661,105
Selling, general and admininstrative expenses 3,850,615 2,662,112 7,544,348 5,207,862
------------ ------------ ------------ ------------
Operating income ............................. 577,521 314,750 865,117 453,243
------------ ------------ ------------ ------------
Other income (expense)
Gain (loss) on retirement of assets ....... -- -- 500 700
Other income (expense) .................... 21,162 -- 21,162 --
Interest expense .......................... (18,593) (32,718) (53,622) (67,395)
Foreign currency gain (loss) .............. 16,377 1,222 30,214 2,408
------------ ------------ ------------ ------------
18,946 (31,496) (1,746) (64,287)
------------ ------------ ------------ ------------
Income before income taxes ................... 596,467 283,254 863,371 388,956
------------ ------------ ------------ ------------
Provision for income taxes ................. 63 -- 63 --
Net income ................................... $ 596,404 $ 283,254 $ 863,308 $ 388,956
============ ============ ============ ============
Earnings per share ........................... $ 0.10 $ 0.06 $ 0.15 $ 0.09
Weighted average number of shares ............ 6,186,949 4,520,290 5,874,175 4,522,407
</TABLE>
-4-
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income .................................................... $ 863,310 $ 388,956
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ............................... 264,871 210,472
(Gain) Loss on sale of equipment ............................ (500) (700)
Changes in operating assets net of effects of acquisition:
Decrease (increase) in accounts receivable, net ......... (1,782,472) 8,501
Decrease (increase) in prepaid expenses .................. (86,715) (71,592)
Increase (decrease) in cash overdraft .................... (445,346) --
Increase (decrease) in accounts payable and .............. 1,247,869 290,237
accrued expenses
----------- -----------
Net cash provided by (used in) operating activities ..... 61,017 825,874
----------- -----------
Cash flows from investing activities:
Proceeds from sale of equipment ............................... 500 700
Capital expenditures .......................................... (89,681) (61,650)
----------- -----------
Net cash provided by (used in) investing activities .... (89,181) (60,950)
----------- -----------
Cash flows from financing activities:
Proceeds from:
Notes payable .............................................. 1,550,000 2,050,000
Issuance of common stock ................................... 187,403 --
Payments on:
Notes payable .............................................. (1,754,020) (2,550,000)
Capital lease obligations .................................. (22,520) (65,269)
----------- -----------
Net cash flows provided by (used in) financing activities (39,137) (565,269)
----------- -----------
Net increase (decrease) in cash and equivalents .................... (67,301) 199,655
Cash and equivalents at beginning of period ........................ 396,812 106,096
----------- -----------
Cash and equivalents at end of period .............................. $ 329,511 $ 305,751
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest ...................... $ 53,622 $ 67,395
=========== ===========
</TABLE>
-5-
GOLDEN EAGLE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements, which are
for interim periods, do not include all disclosures provided in the
annual consolidated financial statements. These unaudited consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the footnotes thereto contained in the Annual
Report on Form 10-KSB for the year ended December 31, 1995 as filed with
the Securities and Exchange Commission. The December 31, 1995 balance
sheet included herein was derived from audited financial statements, but
does not include all disclosures required by generally accepted
accounting principles. In the opinion of the Company, the accompanying
unaudited consolidated statements contain all adjustments (which are of
a normal recurring nature) necessary for a fair presentation of the
financial statements. The results of operations for the six months ended
June 30, 1996 are not necessarily indicative of the results to be
expected for the full year.
2. INCOME TAXES
There is no provision for income tax for six month period ended June 30,
1996 or 1995 due to the existence of net operating loss carryforwards
and a reduction in the deferred tax asset valuation allowance.
3. PER SHARE DATA
Per share data is calculated based upon the weighted average number of
shares of common stock and dilutive stock options outstanding. See Note
5.
4. PURCHASE OF WORLD TRADE TRANSPORT OF VIRGINIA, INC.
Effective July 31, 1995, the Company acquired all of the outstanding
capital stock of World Trade Transport of Virginia, Inc. ("WTT"), a
privately held full-service regional freight forwarder and customs
broker with headquarters in the Washington D.C. area and three
facilities in the Washington, D.C. and Baltimore area. Pursuant to the
terms of the acquisition, the WTT Stockholders conveyed their WTT Stock
to the Company in exchange for the issuance of an aggregate of 800,000
shares of the Company's Common Stock, $.01 par value, and payment of an
aggregate of $1.0 million in cash to them.
For financial reporting purposes, the transaction was accounted for
under the purchase method. Goodwill, cost in excess of assets acquired,
of $1,773,000 is being amortized over a period of 40 years.
-6-
Pro forma unaudited results of operations for the three months and six
months ended June 30, 1995, as if the transaction had occurred January
1, 1995 are as follows:
Three months ended Six months ended
June 30, 1995 June 30, 1995
Revenue ................................ $14,817,196 $29,107,920
Net Income ............................. $ 313,641 $ 505,281
Earnings per share ..................... $ .06 $ .09
Weighted average
number of shares ................... 5,320,290 5,322,407
The pro forma information is not necessarily indicative of what actually
would have occurred had the transaction occurred at the beginning of the
periods present.
5. SUBSEQUENT EVENTS:
UNDERWRITER WARRANTS PURSUANT TO COMPANY'S INITIAL PUBLIC OFFERING
Effective August 12, 1996, the Company agreed to issue 160,000 shares of
Common Stock and pay $5,000 in expenses in exchange for warrants to
purchase common stock and warrants to purchase common stock warrants
(collectively, the "Underwriter Warrants") issued to various
underwriters in connection with the Company's initial public offering in
November 1992.
ACQUISITIONS
Effective July 16, 1996 the Company consummated an agreement to purchase
certain assets of Ryan Freight Services, Inc. of Dallas, Texas in
exchange for 30,000 shares of the Company's common stock. In conjunction
with the asset purchase agreement, the Company entered into a business
acquisition agreement with Mr. David Pulk and Mr. Ed Reedy, "Pulk/Reedy"
whereby Pulk/Reedy agree to transfer their existing and future customer
list to the Company in exchange for 120,000 shares of common stock and
110,000 non-qualified share options to purchase common stock.
The shares issued to Pulk/Reedy will be escrowed and release of escrowed
shares and share options will be contingent on results of business
activity generated by Pulk/Reedy. The transaction will be accounted for
under the purchase method. The purchase has not been deemed material to
the Company's financial results.
-7-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
INTRODUCTION
Golden Eagle Group, Inc. ("GEGP" or the "Company"), through its
wholly-owned subsidiaries, is engaged in the business of providing international
transportation logistics and related services.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30,1996 COMPARED TO THREE MONTHS ENDED JUNE
30,1995
Revenue during the three months ended June 30, 1996, increased by
approximately 41.6% to $17,727,167 from $12,526,915 during the same period in
1995. The improvement in sales is attributable to the acquisition on July 31,
1995 of WTT and increased sales to existing customers in all major markets
served by the Company. WTT revenues for the three months ended June 30, 1996
were approximately $2,772,200 or approximately 53.3% of the increased revenue.
Gross Profit, (sales less cost of sales), during the three months ended
June 30, 1996, increased approximately 48.8% or $1,451,274 to $4,428,136 from
$2,976,862 for the same period in 1995. The increase is partially attributable
to an improvement in gross profit margin from 23.8% for the three months ended
June 30, 1995 to 25.0% for the three months ended June 30, 1996. The improvement
in gross margin is a result of increased sales of logistics management services
by existing Company offices and the July 1995 acquisition of WTT, which
specializes in logistics management. Logistics management services are not
offset by direct shipping costs as is the case in many traditional forwarding
shipments and thus will generally improve gross margins. The remainder of the
improvement is directly attributable to the aforementioned increase in sales.
Selling, general and administrative expenses during the three months
ended June 30, 1996, increased $1,188,503 to $3,850,615 or approximately 44.6%,
from $2,662,112 in the same period in 1995. As a percentage of sales, selling,
general and administrative expenses increased slightly from 21.3% of sales for
the three months ended June 30, 1995 to 21.7% for the same period in 1996.
However, as a percentage of gross profit, selling, general and administrative
expenses decreased from 89.4% for the three months ended June 30, 1995 to 87.0%
for the same period in 1996. The actual dollar increase in selling, general and
administrative expenses is primarily a result of the acquisition of WTT and
additional personnel costs required to service the increase in sales.
The Company's operating and net income was $577,621 and $596,404,
respectively for the three months ended June 30, 1996, as compared to operating
and net income of $314,750 and $283,254, respectively for the three months ended
June 30, 1995. The Company attributes the approximately 83.5% improvement in
operating income and 110.6% improvement in net income primarily to adjustments
made in operations in Laredo after the January 1995 Mexican Peso devaluation
combined with the acquisition of WTT in July of 1995. Laredo operations reported
a profit for the three months ended June 30, 1996 of approximately $4,300 as
compared to a loss of approximately $67,300 for the same period in 1995.
-8-
SIX MONTHS ENDED JUNE 30,1996 COMPARED TO SIX MONTHS ENDED JUNE 30,1995
During the six months ended June 30, 1996, revenues increased
$9,628,975, or 40.5%, to $33,399,830 from $23,770,855 for the six months ended
June 30, 1995. Approximately $5,677,900 of the increase is directly attributable
to the combination of the operations of WTT as a result of the July 31, 1995
purchase transaction. Results for the six months ended June 30, 1995 precede the
acquisition. See "Purchase of World Trade Transport of Virginia, Inc." in "Notes
to Consolidated Financials". The remaining improvement is due to a continued
growth and strength across all markets served by the Company's service
locations.
Gross profit increased approximately 48.5% or $2,748,360 to $8,409,465
for the six months ended June 30, 1996 from $ 5,661,105 for the same period in
1995. Approximately $1,859,100 of the increase is attributable to the addition
of WTT operations as of July 1995. The remainder of the increase is directly
attributable to the period increase in sales as described above. The gross
profit margin increased to approximately 25.2% for the six months ended June 30,
1996 from approximately 23.8% for the same period in 1995. The improvement in
gross margin is a result of increased sales of logistics management services by
existing Company offices and the July 1995 acquisition of WTT, which specializes
in logistics management. As noted previously, many logistics management services
are not offset by direct shipping costs as is the case in many traditional
forwarding shipments and thus will generally improve gross margins.
Selling, general and administrative expenses increased approximately
44.8% from $5,207,862 for the six months ended June 30, 1995 to $7,544,348 for
the six months ended June 30, 1996. Approximately $1,557,000 of the increase is
directly attributable to the addition of WTT. Selling, general and
administrative expenses as a percentage of sales increased slightly from
approximately 21.9% for the six months ended June 30 1995 to approximately 22.6%
for the same period in 1996. The increase is partially attributable to the
expansion of the Company's management information services functions and the
addition of new computer hardware and personnel.
The Company is reporting operating and net income of $865,117 and
$863,308, respectively for the six months ended June 30, 1996, as compared to
operating and net income of $453,243 and $388,956, respectively for the six
months ended June 30, 1995. The Company attributes the improvement in operating
and net income primarily to the improvement in Laredo operating results and the
acquisition of WTT. See NOTE 4. Laredo reported an operating loss of
approximately $13,000 for the six months ended June 30, 1996 as compared a loss
of approximately $176,000 for the same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had working capital of $2,515,329, as
compared to working capital of $1,493,985 at December 31, 1995. The Company's
primary sources of cash were generated
-9-
from operations and a $1,000,000 line of credit facility with a bank. Advances
under the facility bear interest at the bank's prime rate plus 1% and are due
and payable on May 2, 1997. The Company had no borrowings under the facility as
of June 30, 1996.
Cash flows provided by operating activities were $61,017 for the six
months ended June 30, 1996, as compared to cash flows provided by operating
activities of $825,874 for the three months ended June 30, 1995. Accounts
receivable increased approximately $1,782,472 during the six months ended June
30, 1996 due to the increase in sales. A majority of the increase is offset by a
corresponding increase in direct freight accounts payable of approximately
$1,247,869 related to these receivables.
The Company's expenditures for facilities and equipment were $89,681 for
the six months ended June 30, 1996 as compared to $61,650 in the same period in
1995. Approximately, $50,000 of the expenditures are related to modification of
existing warehouse space to handle new logistics business in the Company's
facilities. In January 1996, the Company signed a three year agreement with
C.S.I., a distributor of upscale table top products, to manage C.S.I.'s
inventory and fulfill all North American distribution requirements. The Company
has built a dedicated climate controlled warehouse environment in existing
facilities to provide the pick and pack services related to this contract.
At June 30, 1996, the Company had cash and equivalents of $329,511 as
compared to $396,812 at December 31, 1995 as a result of the financing
activities described above.
The Company's primary financing needs relate to the expansion of its
business in existing markets. The Company believes that its present capital
resources, when combined with revenues generated from operations, are adequate
to fund its present level of operations.
-10-
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
None.
(B) REPORTS ON FORM 8-K:
None.
-11-
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GOLDEN EAGLE GROUP, INC.
Date: August 12, 1996 By: /s/ PATRICK H. WESTON
Patrick H. Weston, President and
Chief Executive Officer (Principal
Executive Officer)
Date: August 12, 1996 By: /s/ DONALD A. NODORFT
Donald A. Nodorft, Vice President-
Finance (Principal Financial and
Accounting Officer)
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 329,511
<SECURITIES> 0
<RECEIVABLES> 9,560,238
<ALLOWANCES> 517,777
<INVENTORY> 0
<CURRENT-ASSETS> 10,241,663
<PP&E> 800,551
<DEPRECIATION> 2,404,152
<TOTAL-ASSETS> 15,220,157
<CURRENT-LIABILITIES> 7,726,334
<BONDS> 0
0
0
<COMMON> 54,200
<OTHER-SE> 6,975,957
<TOTAL-LIABILITY-AND-EQUITY> 7,030,157
<SALES> 33,399,830
<TOTAL-REVENUES> 33,399,830
<CGS> 24,990,365
<TOTAL-COSTS> 24,990,365
<OTHER-EXPENSES> 7,544,348
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,622
<INCOME-PRETAX> 863,371
<INCOME-TAX> 63
<INCOME-CONTINUING> 863,308
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 863,308
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
