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 SEPTEMBER 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 Identification No.)
incorporation or organization)
120 STANDIFER DRIVE
HUMBLE, TEXAS 77338
(Address of principal executive offices) (Zip Code)
(281) 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 November 12, 1996 was 5,642,000.
Traditional Small Business Format: Yes [ ] No [ ]
<PAGE>
GOLDEN EAGLE GROUP, INC.
FORM 10Q
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1996
and December 31, 1995 3
Consolidated Statements of Income for the three
months and nine months ended September 30, 1996
and 1995 4
Consolidated Statements of Cash Flows for the
nine months ended September 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
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Current Assets:
Cash ............................................................................... $ 728,561 $ 396,812
Accounts receivable, net of allowance of $514,880 and $600,000 ..................... 7,521,720 7,777,766
Prepaid expenses ................................................................... 368,416 265,199
------------ ------------
Total current assets .......................................................... 8,618,697 8,439,777
Property and equipment, net of accumulated depreciation ............................ 832,587 910,726
Intangible assets , net of accumulated amortization ................................ 4,196,059 4,256,648
------------ ------------
Total assets .................................................................. $ 13,647,343 $ 13,607,151
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft ..................................................................... $ -- $ 445,346
Notes payable ...................................................................... 405,160 412,291
Accounts payable ................................................................... 4,715,393 5,754,259
Accrued expenses ................................................................... 520,189 293,779
Obligations under capital leases, current portion .................................. 43,665 40,117
------------ ------------
Total current liabilities ..................................................... 5,684,407 6,945,792
Long-term debt ..................................................................... 315,198 615,198
Obligations under capital leases, net of current portion ........................... 32,591 66,720
------------ ------------
Total liabilities ............................................................. 6,032,196 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; 5,642,000 shares issued and outstanding ............................. 56,420 53,070
Additional paid-in capital ......................................................... 9,119,174 8,733,980
Accumulated deficit ................................................................ (1,560,447) (2,807,609)
------------ ------------
Total shareholders' equity .................................................... 7,615,147 5,979,441
------------ ------------
Total liabilities and shareholders' equity .................................... $ 13,647,343 $ 13,607,151
============ ============
</TABLE>
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<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales .................................................. $ 15,483,927 $ 13,142,029 $ 48,883,757 $ 36,912,884
Cost of sales .......................................... 10,934,994 9,610,898 35,925,359 27,720,648
------------ ------------ ------------ ------------
Gross profit ..................................... 4,548,933 3,531,131 12,958,398 9,192,236
Selling, general and admininstrative expenses .......... 4,154,783 3,200,515 11,699,131 8,408,377
------------ ------------ ------------ ------------
Operating income ....................................... 394,150 330,616 1,259,267 783,859
------------ ------------ ------------ ------------
Other income (expense)
Gain (loss) on retirement of assets ................. -- (2,628) 500 (1,928)
Other income (expense) .............................. 8,151 3,060 29,313 3,060
Interest expense .................................... (23,021) (37,502) (76,643) (104,897)
Foreign currency gain (loss) ........................ 12,803 3,640 43,017 6,048
------------ ------------ ------------ ------------
(2,067) (33,430) (3,813) (97,717)
------------ ------------ ------------ ------------
Income before income taxes ............................. 392,083 297,186 1,255,454 686,142
------------ ------------ ------------ ------------
Provision for income taxes ........................... 8,231 -- 8,294 --
Net income ............................................. $ 383,852 $ 297,186 $ 1,247,160 $ 686,142
============ ============ ============ ============
Earnings per share ..................................... $ 0.07 $ 0.06 $ 0.22 $ 0.15
Weighted average number of shares ...................... 5,895,377 5,052,845 5,640,398 4,701,163
</TABLE>
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<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income ......................................................................... $ 1,247,162 $ 686,142
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization .................................................... 399,365 321,985
(Gain) Loss on sale of equipment ................................................. (500) 1,928
Changes in operating assets net of effects of acquisition:
Decrease (increase) in accounts receivable, net ............................... 256,046 458,500
Decrease (increase) in prepaid expenses ....................................... (103,217) (38,054)
Increase (decrease) in cash overdraft ......................................... (445,346) --
Increase (decrease) in accounts payable and ................................... (810,415) 198,256
accrued expenses
----------- -----------
Net cash provided by (used in) operating activities .......................... 543,095 1,628,757
----------- -----------
Cash flows from investing activities:
Payment for acquisition, including acquisition ..................................... (28,739) (1,192,026)
costs, less cash acquired
Proceeds from sale of equipment .................................................... 500 1,200
Capital expenditures ............................................................... (129,239) (168,755)
----------- -----------
Net cash provided by (used in) investing activities ......................... (157,478) (1,359,581)
----------- -----------
Cash flows from financing activities:
Proceeds from:
Notes payable ................................................................... 1,550,000 3,850,000
Issuance of common stock ........................................................ 288,844 --
Payments on:
Notes payable ................................................................... (1,857,131) (3,950,000)
Expenses to convert underwriter warrant ......................................... (5,000)
rights to common stock
Capital lease obligations ....................................................... (30,581) (89,447)
----------- -----------
Net cash flows provided by (used in) financing activities .................... (53,868) (189,447)
----------- -----------
Net increase (decrease) in cash and equivalents ........................................ 331,749 79,729
Cash and equivalents at beginning of period ............................................ 396,812 106,096
----------- -----------
Cash and equivalents at end of period .................................................. $ 728,561 $ 185,825
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest ........................................... $ 76,643 $ 104,897
=========== ===========
</TABLE>
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<PAGE>
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 nine months
ended September 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, other than alternative minimum
tax, for nine month period ended September 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-
<PAGE>
Pro forma unaudited results of operations for the three months and nine
months ended September 30, 1995, as if the transaction had occurred
January 1, 1995 are as follows:
Three months ended Nine months ended
September 30, 1995 September 30, 1995
Revenue $ 13,981,013 $ 43,088,933
Net Income $ 358,430 $ 863,711
Earnings per share $ .07 $ .16
Weighted average
number of shares 5,316,581 5,323,061
The pro forma information is not necessarily indicative of what actually
would have occurred had the transaction occurred at the beginning of the
periods presented. Such information also does not constitute a
prediction of the Company's future performance.
5. 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.
6. 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. Accordingly, escrowed shares will be
reflected for accounting purposes when released.
For financial reporting purposes, the transaction was accounted for
under the purchase method. Goodwill, cost in excess of assets acquired,
of $42,260 is being amortized over a period of 20 years. Proforma
results reflecting the acquisition have not been presented as results
would not be materially different from those historically reported.
-7-
<PAGE>
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 SEPTEMBER 30,1996 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30,1995
Revenue during the three months ended September 30, 1996, increased by
approximately 17.8% to $15,483,927 from $13,142,029 during the same period in
1995. Approximately $839,000, or 35.8% of the improvement in sales is
attributable to the acquisition on July 31, 1995 of WTT. The remaining increase
is attributable to increased sales to existing customers in all major markets
served by the Company.
Gross Profit, (sales less cost of sales), during the three months ended
September 30, 1996, increased approximately 28.8% or $1,017,802 to $4,548,933
from $3,531,131 for the same period in 1995. The increase is partially
attributable to an improvement in gross profit margin from 26.9% for the three
months ended September 30, 1995 to 29.4% for the three months ended September
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 September 30, 1996, increased $954,268 to $4,154,783, or approximately
29.8%, from $3,200,515 for the same period in 1995. As a percentage of sales,
selling, general and administrative expenses increased from 24.4% of sales for
the three months ended September 30, 1995 to 26.8% for the same period in 1996.
Furthermore, as a percentage of gross profit, selling, general and
administrative expenses increased from 90.6% for the three months ended
September 30, 1995 to 91.3% for the same period in 1996. The increase in
selling, general and administrative expenses as a percentage of gross profit is
primarily attributable to the addition of two key executives and the addition of
four new offices in July 1996 in conjunction with the Pulk/Reedy business
acquisition agreement.
The Company's operating and net income was $394,150 and $383,852,
respectively for the three months ended September 30, 1996, as compared to
operating and net income of $330,616 and $297,186, respectively for the three
months ended September 30, 1995. The Company attributes the approximately 19.2%
improvement in operating income and 29.2% improvement in net income primarily to
strong project and logistic activities of the Company's largest operation in
Houston, TX. Additionally, results for the three months ended September 30, 1996
include initial startup losses of approximately $53,000 on the four new offices
acquired pursuant to the Pulk/Reedy business acquisition agreement.
-8-
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30,1996 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30,1995
During the nine months ended September 30, 1996, revenues increased
$11,970,873, or approximately 32.4%, to $48,883,757 from $36,912,884 for the
nine months ended September 30, 1995. Approximately $6,508,000 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 seven months ended
July 31, 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 41.0% or $3,766,162 to $12,958,398
for the nine months ended September 30, 1996 from $ 9,192,236 for the same
period in 1995. Approximately $2,204,800 of the increase is directly
attributable to the addition of WTT operations as of July 1995. The remainder of
the increase is attributable to the period increase in sales as described above.
The gross profit margin increased to approximately 26.5% for the nine months
ended September 30, 1996 from approximately 24.9% 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. Many logistics management
services are not offset by direct shipping costs as is the case in many
traditional forwarding shipments and thus should generally improve gross
margins.
Selling, general and administrative expenses increased
approximately 39.1% from $8,408,377 for the nine months ended September 30, 1995
to $11,699,131 for the nine months ended September 30, 1996. Approximately
$1,861,700 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 22.8% for the nine months ended September 30, 1995
to approximately 23.9% for the same period in 1996. The increase in selling,
general and administrative expenses as a percentage of gross profit is partially
attributable to the addition of two key executives and the addition of four new
offices in July 1996 in conjunction with the Pulk/Reedy business acquisition
agreement as mentioned previously. Additionally, the Company has expanded
management information services functions to better react to customer demands
with the addition of new computer hardware and personnel.
The Company is reporting operating and net income of $1,259,267 and
$1,247,160, respectively for the nine months ended September 30, 1996, as
compared to operating and net income of $783,859 and $686,142, respectively for
the nine months ended September 30, 1995. The Company attributes the improvement
in operating and net income partially to the improvement in operating results at
it's Laredo, Texas location and the acquisition of WTT. See NOTE 4. The Laredo
location reported an operating loss of approximately $49,300 for the nine months
ended September 30, 1996 as compared to an operating loss of approximately
$229,400 for the same period in 1995.
-9-
<PAGE>
The Company has not provided a provision for income tax for nine month
period ended September 30, 1996 or 1995 due to the existence of net operating
loss carryforwards and a reduction in the deferred tax asset valuation
allowance. If the Company continues profitability, a provision for income tax
expense would be required in 1997.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had working capital of $2,933,090, as
compared to working capital of $1,493,985 at December 31, 1995. The Company's
primary sources of cash were generated 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 September 30, 1996.
Cash flows provided by operating activities were $543,095 for the
nine months ended September 30, 1996, as compared to cash flows provided by
operating activities of $1,628,757 for the nine months ended September 30, 1995.
The Company used available cash to reduce accounts payable balances and cash
overdrafts of approximately $1,255,761 during the nine months ended September
30, 1996.
The Company's expenditures for facilities and equipment were $129,239
for the nine months ended September 30, 1996 as compared to $168,755 in the same
period in 1995. Approximately, $50,000 of 1996 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 September 30, 1996, the Company had cash and equivalents of $728,561
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
<PAGE>
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.
-12-
<PAGE>
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: November 13, 1996 By: /S/ PATRICK H. WESTON
Patrick H. Weston, President and
Chief Executive Officer (Principal
Executive Officer)
Date: November 13, 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 10Q FOR THE PERIOD ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 728,561
<SECURITIES> 0
<RECEIVABLES> 7,521,720
<ALLOWANCES> 514,880
<INVENTORY> 0
<CURRENT-ASSETS> 8,618,697
<PP&E> 832,587
<DEPRECIATION> 2,465,425
<TOTAL-ASSETS> 13,647,343
<CURRENT-LIABILITIES> 5,685,607
<BONDS> 0
0
0
<COMMON> 56,420
<OTHER-SE> 7,558,727
<TOTAL-LIABILITY-AND-EQUITY> 13,647,343
<SALES> 48,883,757
<TOTAL-REVENUES> 43,883,757
<CGS> 35,925,359
<TOTAL-COSTS> 35,925,359
<OTHER-EXPENSES> 11,699,131
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,643
<INCOME-PRETAX> 1,255,454
<INCOME-TAX> 8,294
<INCOME-CONTINUING> 1,247,160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,247,160
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
