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, 1997
[_] 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)
(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 August 11, 1997 was 5,748,500.
Traditional Small Business Format: Yes [_] No [X]
<PAGE>
GOLDEN EAGLE GROUP, INC.
FORM 10Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996 3
Consolidated Statements of Income for the three
months and six months ended June 30, 1997
and 1996 4
Consolidated Statements of Cash Flows for the
six months ended June 30, 1997 and 1996 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
June 30,
1997 December 31,
(Unaudited) 1996
------------ ------------
ASSETS
Current Assets:
Cash ......................................... $ 246,250 $ 513,842
Accounts receivable, net of allowance
of $541,000 and $564,000 ................... 9,978,984 8,721,219
Prepaid expenses ............................. 443,835 374,805
------------ ------------
Total current assets .................... 10,669,069 9,609,866
Property and equipment, net of
accumulated depreciation ................... 1,006,724 855,687
Deferred income taxes ........................ 431,541 552,891
Intangible assets , net of
accumulated amortization ................... 4,164,470 4,173,973
------------ ------------
Total assets ............................ $ 16,271,804 $ 15,192,417
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable ................................ $ 600,000 $ 400,000
Accounts payable ............................. 6,692,876 5,529,546
Accrued expenses ............................. 388,035 715,963
Obligations under capital leases,
current portion ............................ 53,900 38,395
------------ ------------
Total current liabilities ............... 7,734,811 6,683,904
Long-term debt ............................... -- 200,000
Obligations under capital leases,
net of current portion ..................... 4,414 40,645
Deferred income taxes ........................ 31,896 31,896
------------ ------------
Total liabilities ....................... 7,771,121 6,956,445
------------ ------------
Shareholders' equity:
Preferred stock, par value $.01, 1,000,000
shares authorized, none outstanding ....... -- --
Common stock, par value $.01, 10,000,000
shares authorized; 5,748,500 and
5,642,000 shares issued and outstanding
at June 30, 1997 and December 31, 1996,
respectively .............................. 57,485 56,420
Additional paid-in capital ................... 9,277,136 9,016,074
Stock subscriptions .......................... -- 247,520
Accumulated deficit .......................... (833,938) (1,084,042)
------------ ------------
Total shareholders' equity .............. 8,500,683 8,235,972
------------ ------------
Total liabilities and
shareholders' equity .................. $ 16,271,804 $ 15,192,417
============ ============
The accompanying notes are an integral part of these financial statements
-3-
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ---------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales .......................................... $ 18,519,314 $ 17,727,167 $ 35,665,536 $ 33,399,830
Cost of sales .................................. 13,825,605 13,299,031 26,636,791 24,990,365
------------ ------------ ------------ ------------
Gross profit ............................. 4,693,709 4,428,136 9,028,745 8,409,465
Selling, general and admininstrative expenses .. 4,370,143 3,850,615 8,633,754 7,544,348
------------ ------------ ------------ ------------
Operating income ............................... 323,566 577,521 394,991 865,117
------------ ------------ ------------ ------------
Other income (expense) ......................... (6,056) 18,946 16,218 (1,746)
------------ ------------ ------------ ------------
Income before provision for income taxes ....... 317,510 596,467 411,209 863,371
------------ ------------ ------------ ------------
Provision for income taxes ................... 128,057 63 161,105 63
Net income ..................................... $ 189,453 $ 596,404 $ 250,104 $ 863,308
============ ============ ============ ============
Income per share ............................... $ 0.03 $ 0.10 $ 0.04 $ 0.15
Weighted average number of shares .............. 5,809,184 6,186,949 5,834,544 5,874,175
</TABLE>
The accompanying notes are an integral part of these financial statements
-4-
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income ....................................................... $ 250,104 $ 863,308
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization .................................. 263,444 264,873
Deferred Income Taxes .......................................... 121,350 --
(Gain) Loss on sale of equipment ............................... (1,937) (500)
Changes in operating assets net of effects of acquisition:
Decrease (increase) in accounts receivable, net ............. (1,257,765) (1,782,472)
Decrease (increase) in prepaid expenses ..................... (69,030) (86,715)
Increase (decrease) in cash overdraft ....................... (445,346)
Increase (decrease) in accounts payable and
accrued expenses ...................................... 822,072 1,247,869
------------ ------------
Net cash provided by (used in) operating activities ........ 128,238 61,017
------------ ------------
Cash flows from investing activities:
Proceeds from sale of equipment .................................. 3,250 500
Capital expenditures ............................................. (345,616) (89,681)
Acquisition of business, net of cash acquired .................... (60,675) --
------------ ------------
Net cash provided by (used in) investing activities ........ (403,041) (89,181)
------------ ------------
Cash flows from financing activities:
Borrowings under notes payable and line of credit ................ 1,000,000 1,550,000
Issuance of common stock ......................................... 27,937 187,403
Payments under notes payable and line of credit .................. (1,000,000) (1,754,020)
Principal payments on capital lease obligations .................. (20,726) (22,520)
------------ ------------
Net cash flows provided by (used in) financing activities .. 7,211 (39,137)
------------ ------------
Net increase (decrease) in cash and equivalents .................... (267,592) (67,301)
Cash and equivalents at beginning of period ........................ 513,842 396,812
------------ ------------
Cash and equivalents at end of period .............................. $ 246,250 $ 329,511
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
-5-
<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-K for the year ended December 31, 1996 as filed with the
Securities and Exchange Commission. The December 31, 1996 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,
1997 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 the six months ended June 30,
1996 due to the valuation allowance on deferred tax assets.
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. DEBT
During January 1997, the Company repaid the term note payable to bank,
which was scheduled to mature through June 1998. The Company also has a
line of credit available, which was renewed in March 1997. The renewal
increased the maximum borrowings available to $2,000,000 and reduced the
interest rate from prime plus 1% to prime. Amounts available under the
line of credit are limited to 80% of the Company's eligible accounts
receivable. The line of credit is collateralized by substantially all of
the Company's assets and expires on or before May 31, 1998. Borrowings
under the line of credit were $600,000 at June 30, 1997.
5. PUBLIC WARRANTS
On June 20,1997 the Board of Directors voted to extend the expiration date
of the Company's 800,000 Redeemable Common Stock Purchase Warrants (the
"Warrants")
-6-
<PAGE>
for six months to May 23, 1998. Each Warrant entitles the registered
holder thereof to purchase one share of Common Stock at a price of $3.25
through May 23, 1998. With respect to their other characteristics, the
Warrants are described at length in the prospectus filed with the
Securities and Exchange Commission (File No. 33-49878-A) dated November
24, 1992 and are subject to the provisions of the Warrants and the warrant
agency agreement between the Company and Continental Stock Transfer &
Trust Company.
6. SUBSEQUENT EVENTS
July 1997, the Company entered into a non-binding letter of intent to
acquire Columbia Shipping Group, Inc. ("CSG"), a privately held New York
based freight forwarder and customs broker with additional offices in
Chicago, Philadelphia, Los Angeles and San Francisco. The transaction,
which will take the form of a merger with a newly-formed subsidiary of the
Company, is valued at approximately $6.86M in a combimnation of cash,
common stock and seller financing. The acquisition is subject to various
conditions, including the negotiation of a mutually acceptable merger
agreement, the receipt of all third party consents, including governmental
consents, the approval of the boards of directors of CSG and the Company,
completion of a financial audit, due diligence and certain other customary
matters. There can be no assurance that the transaction will be
consummated.
-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 JUNE 30,1997 COMPARED TO THREE MONTHS ENDED JUNE 30,1996
Revenue during the three months ended June 30, 1997, increased
approximately 4.5% or $792,147 to $18,519,314 from $17,727,167 during the same
period in 1996. Approximately, $765,000 of the increase in revenues is
attributable to the addition of four offices in July 1996 in conjunction with an
asset purchase agreement with Ryan Freight Services ("RFS"). The Company
attributes the remaining slight net change in revenues to an approximate 31%
decrease in project related revenues offset by an almost equivalent increase in
general forwarding. The reduction in project revenues is due to the substantial
completion of certain projects in which the Company's Houston operations were
involved through the third quarter of 1996 resulting in Houston's revenues for
the three months ended June 30, 1997 being approximately $2.3M lower than the
same period in 1996. During the three months ended June 30, 1997, general
forwarding through the remainder of the Company's operations increased
approximately $2.3M. Most notable improvement was from the Company's Miami
location which improved revenues approximately 97.2% over the same period in
1996, due to substantially increased volume.
Gross profit during the three months ended June 30, 1997, increased
approximately 6.0% or $265,573 to $4,693,709 from $4,428,136 for the same period
in 1996. The gross profit margin for the three months ended June 30, 1997 of
25.3% is comparable to the 25.0% reported for the same period in 1996.
Approximately $178,000 of the dollar increase is directly attributable to the
addition of the four offices from RFS while the remainder is attributable to the
slight improvement in gross margin.
Selling, general and administrative expenses during the three months ended
June 30, 1997, increased $519,528 to $4,370,143 or approximately 13.5%, from
$3,850,615 in the same period in 1996. As a percentage of sales, selling,
general and administrative expenses increased from 21.7% of sales for the three
months ended June 30, 1996 to 23.6% for the same period in 1997. Approximately
$198,000 of the increase is attributable to the addition of the four offices
from RFS. The remainder of the increase in expenses is attributable to increased
sales development costs including the addition of a corporate sales department,
which the Company has charged with developing more national account business.
The Company's operating and net income was $323,566 and $189,453,
respectively for the three months ended June 30, 1997, as compared to operating
and net income of $577,521 and $596,404, respectively, for the three months
ended June 30, 1996. For the three months ended June 30, 1997, the
-8-
<PAGE>
Company recorded a provision for income taxes of $128,057. There is no provision
for income taxes for the three months ended June 30, 1996 due to the valuation
allowance on deferred tax assets.
SIX MONTHS ENDED JUNE 30,1997 COMPARED TO SIX MONTHS ENDED JUNE 30,1996
During the six months ended June 30, 1997, revenues increased $2,265,706,
or 6.8%, to $35,665,536 from $33,399,830 for the six months ended June 30, 1996.
Approximately $1,567,800 of the increase is directly attributable to the
addition of four offices in 1996 in conjunction with the RFS asset purchase
agreement. Results for the six months ended June 30, 1996 precede the
acquisition. Excluding RFS, revenues for the six months ended June 30, 1997
improved only slightly at approximately 2.0%. The Company attributes this small
internal growth rate to a reduction in project revenues in the Company's Houston
operations due to the substantial completion of certain projects in the third
quarter of 1996. Houston revenues for the six months ended June 30, 1997 were
approximately $3.5M lower than the same period in 1996 while, at the same time,
the remainder of the Company's general forwarding operations reported increases
in sales of approximately $4.2M. Miami operations reported the most significant
improvement with revenues increasing by approximately 88%.
Gross profit increased approximately 7.4% or $619,280 to $9,028,745 for
the six months ended June 30, 1997 from $ 8,409,465 for the same period in 1996.
Approximately $372,000 of the increase is attributable to the addition of the
RFS offices as of July 1996. The remainder of the increase is directly
attributable to the period increase in sales as described above.
Selling, general and administrative expenses increased $1,089,406 or
approximately 14.4% from $7,544,348 for the six months ended June 30, 1996 to
$8,633,754 for the six months ended June 30, 1997. Selling, general and
administrative expenses, as a percentage of sales, increased from approximately
22.6% for the six months ended June 30 1996 to approximately 24.2% for the same
period in 1997. Approximately 38.4%, or $418,500 of the increase, is directly
attributable to the addition of RFS offices. The remainder of the increase in
selling, general and administrative expenses is attributable to increased sales
development costs including the addition of a corporate sales department, which
the Company has charged with developing more national account and project
business.
The Company is reporting operating and net income of $394,991 and
$250,104, respectively for the six months ended June 30, 1997, as compared to
operating and net income of $865,117 and $863,308, respectively for the six
months ended June 30, 1996. For the six months ended June 30, 1997, the Company
recorded a provision for income taxes of $161,105. There is no provision for
income taxes for the six months ended June 30, 1996 due to the valuation
allowance on deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had working capital of $2,934,258 as
compared to working capital of $2,925,962 at December 31, 1996. The Company's
primary sources of cash were generated from operations and a $2,000,000 line of
credit facility with a bank. Advances under the facility bear interest at the
bank's prime rate and are due and payable on May 31, 1998. Outstanding
borrowings
-9-
<PAGE>
under the facility as of June 30, 1997 were $600,000.
Cash flows provided by operating activities were $128,238 for the six
months ended June 30, 1997, as compared to cash flows provided by operating
activities of $61,017 for the six months ended June 30, 1996. Accounts
receivable increased $1,257,765 during the six months ended June 30, 1997 with a
corresponding increase in direct freight accounts payable of $822,072. The
increase in accounts receivable is attributable to the increase in sales in the
Company's Miami operations.
The Company used cash flows in investing activities of $403,041 and
$89,181 for the years ended June 30, 1997 and 1996 respectively. The Company's
expenditures for facilities and equipment were $345,616 for the six months ended
June 30, 1997 as compared to $89,681 in the same period in 1996. A majority of
the Company's capital expenditures have been related to the continued expansion
of the Company's warehouse logistics control systems and conversion of the
Company's data network to frame relay. The project is nearly complete and the
Company expects capital expenditure requirements to decrease for the remainder
of 1997.
At June 30, 1997, the Company had cash and equivalents of $246,250 as
compared to $513,842 at December 31, 1996 as a result of the activities
described above.
In July 1997, the Company entered into a non-binding letter of intent to
acquire Columbia Shipping Group, Inc. ("CSG"), a privately held New York based
freight forwarder and customs broker with additional offices in Chicago,
Philadelphia, Los Angeles and San Francisco. The transaction, which will take
the form of a merger with a newly-formed subsidiary of the Company, is valued at
approximately $6.86M in a combination of cash, common stock and seller
financing. The acquisition is subject to various conditions, including the
negotiation of a mutually acceptable Merger agreement, the receipt of
all third party consents, including governmental consents, the approval of the
boards of directors of CSG and the Company, completion of a financial audit, due
diligence and certain other customary matters. There can be no assurance that
the transaction will be consummated.
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. However, the Company will need
financing to consummate its acquisition of CSG. Although the Company has
received an offer to finance the CSG acquisition from the Company's primary
bank, this offer is subject to completion of the financial audit, due diligence
and various other clearances of the bank.
FORWARD LOOKING STATEMENTS
This Form 10-Q contains certain forward looking statements. Such
statements are typically punctuated by words or phrases such as "anticipate,"
"estimate," "projects," "should," "may," "management believes," and words or
phrases of similar import. Such statements are subject to certain risks,
uncertainties or assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, estimated or projected. Among the
key factors that may have a direct bearing on the Company's results of
operations and financial condition are: (i) competitive practices in the
industries in
-10-
<PAGE>
which the Company competes, (ii) the impact of current and future laws and
governmental regulations affecting the industry in general and the Company's
operations in particular, (iii) fuel and other costs of company's that do the
shipping for the Company that cannot be passed on to the Company's customers,
and (iv) political or economic strife in major markets to which the Company's
customers transport goods using the Company's services.
-11-
<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
The Company's Annual Meeting of Stockholders was held on June
20, 1997 where the stockholders voted as follows:
a) For election of each of the pproposed six Directors for the
ensuing year.
b) For the proposal to increase the number of shares of Common
Stock reserved for issuance pursuant to the Company's 1992
Stock Option Plan by 500,000 shares to 900,000 shares.
c) For the proposal to increase the number of shares of Common
Stock reserved for issuance pursuant to the Company's 1994
Director Stock Option Plan by 100,000 to 250,000 shares and
to amend the annual authorized share grants and grant
dates.
d) For the proposal to ratify the selection of Coopers &
Lybrand as independent auditors for the Company's fiscal
year ending December 31, 1997.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
None.
(b) REPORTS ON FORM 8-K:
On July 8, 1997, the Company filed a Current Report on Form
8-K with respect to the extension of the expiration date until
May 23,1998 ,of its 800,000 Redeemable Common Stock Purchase
Warrants.
-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: August 12, 1997 By: /S/ DONALD A. NODORFT
Donald A. Nodorft, Vice President-
Finance (Principal Financial and
Accounting Officer)
-13-
<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, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 246,250
<SECURITIES> 0
<RECEIVABLES> 9,978,984
<ALLOWANCES> 541,000
<INVENTORY> 0
<CURRENT-ASSETS> 10,669,069
<PP&E> 3,675,708
<DEPRECIATION> 2,668,984
<TOTAL-ASSETS> 16,271,804
<CURRENT-LIABILITIES> 7,734,811
<BONDS> 0
0
0
<COMMON> 57,485
<OTHER-SE> 8,443,198
<TOTAL-LIABILITY-AND-EQUITY> 16,271,804
<SALES> 35,665,536
<TOTAL-REVENUES> 35,665,536
<CGS> 26,636,791
<TOTAL-COSTS> 26,636,791
<OTHER-EXPENSES> 8,633,754
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,061
<INCOME-PRETAX> 411,209
<INCOME-TAX> 161,105
<INCOME-CONTINUING> 250,104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 250,104
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
