SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 19, 2002
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EAGLE SUPPLY GROUP, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 000-25423 13-3889248
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(State or Other Jurisdiction (Commission File (IRS Employer
Incorporation) Number) Identification Number)
122 East 42nd Street, Suite 1116, New York, NY 10168
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 986-6190
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Item 9. Regulation FD Disclosure.
In response to analysts' requests, set forth below is more
detailed information regarding the business, operations, and plans of
Eagle Supply Group, Inc. (referred to herein as "us", "our", "we", the
"Company", or "Eagle Supply"). This information is intended to
supplement and add to the disclosures contained in the Company's
previous filings with the Securities and Exchange Commission (the
"Commission") and not to replace such disclosures. Accordingly, the
disclosures provided herein should be read in conjunction with our
Annual Report on Form 10-K for the fiscal year ended June 30, 2001 and
our quarterly reports on Form 10-Q for the quarters ended September
30, 2001, December 31, 2001, and March 31, 2002, each of which are
incorporated herein by reference. Although all material information
about us has been fully described as required in our prior filings
with the Commission, we have decided to provide the additional level
of detail requested by the analysts in an effort to assist the
investment community in evaluating the Company.
Background
Eagle Supply, with its corporate offices in New York and
operations headquartered in Mansfield, Texas, believes it is one of
the largest wholesale distributors of residential roofing and masonry
supplies and related products in the United States. We sell primarily
to contractors and subcontractors engaged in roofing repair and
construction of new residences and commercial properties through our
own distribution facilities and direct sales force. Although our
revenues are subdivided into several categories, historically
approximately 70% of our revenues have been derived from sales to
contractors and subcontractors engaged in re-roofing or repair and 30%
from new construction. Additionally, approximately 90% of our
revenues are derived from the sale of residential building products
and only 10% from the sale of commercial products. Moreover, our
product mix is heavily weighted to roofing supplies and related
products, with 87% of revenues derived from roofing products and 13%
from masonry, drywall, and plywood products. We currently operate a
network of 33 distribution centers in 10 states, which consists of
locations in Texas (11), Florida (9), Colorado (5), Alabama (2), and
one each in Illinois, Indiana, Minnesota, Mississippi, Missouri, and
Nebraska.
We operate our business through two wholly-owned subsidiaries.
These subsidiaries are Eagle Supply, Inc. ("Eagle Sub") and JEH/Eagle
Supply, Inc. ("JEH"). Eagle Sub distributes roofing supplies and
related products to contractors engaged in residential and commercial
roofing repair and the construction of new residential and commercial
properties. Through its 12 distribution centers and direct sales
force, Eagle Sub sells to more than 4,500 customers in Florida,
Alabama, and the southern portions of Georgia and Mississippi. Eagle
Sub does not sell masonry products. JEH has 21 distribution centers
from which it sells its products to more than 4,400 customers located
in Texas, Colorado, Illinois, Indiana, Minnesota, Missouri, and
Nebraska. JEH sells roofing, masonry, and drywall products to
contractors and builders in Texas and sells primarily roofing products
in the six other states.
Eagle Supply employs approximately 574 full-time employees,
including 6 executives, 29 managerial employees, 110 salespersons, 312
warehouse persons, drivers, and helpers, and 117 clerical and
administrative persons. Between our two subsidiaries, we have
approximately 550 units of equipment from conveyor trucks to material
handlers and forklifts. The type of equipment differs from site to
site due to the type of delivery market and other factors. Certain
markets are referred to as "roof load" in which the supplier loads the
building materials on the roof on the job site rather than the ground.
This type of delivery requires trucks with cranes or conveyor systems
and other such equipment, which are more expensive and increase
potential liability.
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Distribution Centers
Our typical distribution center consists of showroom space,
office space, warehouse and receiving space, secure outdoor holding
space, and receiving and shipping facilities, including loading docks.
Distribution centers range in size from approximately 10,000 to
110,000 square feet of indoor space, with a typical size of
approximately 30,000 square feet of indoor office and storage space
and additional outdoor storage. Currently, our largest distribution
center based on sales is located in Mansfield, Texas, and also houses
the Company's operational headquarters.
Each distribution center location is managed by a distribution
center manager who oversees the center's employees, including various
sales and office personnel, as well as delivery and warehouse
personnel. The Company requires that each distribution center develop
a sales strategy specific to the local market but maintains direction
of the region in directing sale efforts and altering the product mix
of a given center to meet local market demands and Company objectives.
Our internal management and administration computer software provides
data which allows our executives to view sales and inventory in real
time and monthly and other periodic operations and profitability
reports from all 33 distribution centers. A low performing or
unprofitable distribution center will be shut down unless management
expects a turn-around in sales or profitability. The Company operates
smaller-sized distribution centers with roughly $200,000 to $300,000
in monthly sales if such center continues to service important
customers and generate an acceptable return on investment.
We operate two types of distribution centers: "Greenfield" or
"Storm" distribution centers. Greenfield centers are distribution
centers in areas where our market analysis indicates a potential for
strong and sustainable demand for our products over the long term.
The opening of a Greenfield center typically requires approximately
six months of planning and a net capital investment by the Company of
approximately $650,000 - $750,000 per center. Our management analyzes
a Greenfield opportunity on the basis of competition, number of roofs,
type of market ("ground" or "roof" load), and availability of
qualified personnel, among other factors. The Company is currently
analyzing several new markets, and we may consider opening new
Greenfield centers in future fiscal years.
The Company's "Storm" centers are opened by the Company to
service areas recently affected by severe or catastrophic weather
conditions such as hailstorms and hurricanes. Sales of building and
roofing products increase dramatically during and after severe storms,
especially sizeable hurricanes and hail storms, which can cause a
significant amount of roof damage. This sharp increase in demand
provides an opportunity for the Company to generate additional
revenues. New Storm centers typically require a net capital
investment by the Company of approximately $650,000 to $1,000,000 or
more in inventory, equipment, and other expenditures and may be
staffed by personnel from our other centers. The amount of this net
capital investment can vary widely depending on many circumstances.
After the sales from reconstruction and reroofing generated by the
storm related demand slow down, Storm centers generally are closed and
the remaining inventory returned to one of the Company's other
distribution centers. Because the opening of a Storm center is in
response to the occurrence of extreme weather conditions and other
factors, the Company cannot anticipate how many new Storm centers will
be opened, if any. On occasion, the Company may determine that the
market area in which a Storm center is located will support a
permanent distribution center. In that event, the distribution center
is not closed but becomes part of the distribution center network of
the Company.
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Products
Roofing and Related Products
Eagle Supply distributes a variety of roofing supplies and
related products and accessories for use in commercial and residential
roofing renovation and repair, new home, and new commercial
construction. The following is a sampling of our roofing and related
supplies product offerings:
* Residential Roofing Products: shingles (asphalt, cedar, ceramic,
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slate, clay, concrete, cement fibered, fiberglass, tile), felt,
installation, waterproof underlying, and ventilation systems.
* Commercial Roofing Products: asphalt, fiberglass rolls (including
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fire retardant), organic rolls, insulation, cements, tar, other
coatings, single plies, modified bitumen, and roll roofings.
* Sheet Metal Products: aluminum, copper, galvanized, and stainless
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sheet metal.
* Drywall/Plywood Products: sheet rock and plywood.
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* Slate and Antique Tile: black slates, Vermont and other slates,
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historical slates, antique clay tile, new clay tile, Ludowici clay
tile, and antique tile.
* Other Retail Products: tools, nails and accessory products.
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Masonry Products
Eagle Supply distributes a variety of cement and masonry supplies
and related products and accessories for use in residential and
commercial construction. The following is a sampling of our masonry
supply product offerings:
* Concrete and Masonry Products: Portland cement, masonry cement,
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sand, gravel, underwater cement, concrete, and asphalt "patching"
compounds.
* Angle Iron: iron forged at 90 degree angle cut to customer's
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specifications.
* Brick and Stones: bricks, used bricks, firewall bricks, "cultured"
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(man-made) stones in a variety of colors and shades, cinder blocks,
and glass blocks.
* Fireplace Products: fireboxes, dampers, flues, fireplace tools, and
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accessories.
* Swimming Pool Products: cements and molds used in pool
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construction.
Purchasing
Eagle Supply purchases its products directly from over 40 major
manufacturers, including GAF, Tamko, Atlas, Elk Corporation of
America, Owens Corning, Johns Manville, and Certainteed. Payment,
discount, and volume purchase programs are negotiated directly by the
Company with its major suppliers, with a significant portion of the
Company's purchases made from suppliers offering discount programs.
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Sales and Marketing
The Company's sales staff reports to their local distribution
center managers and regional sales managers and are supported by
inside customer service representatives at the distribution center or
at the main administration center in Mansfield, Texas. Additional
sales support comes from a number of regional sales and merchandising
managers who educate the Company's sales personnel regarding technical
specifications and how to market and sell products recently added to
our product line. Our marketing and advertising efforts, although
nominal, are targeted towards local markets, generally consisting of
advertisements in regional trade magazines. The Company's suppliers
such as GAF have a vested interest in marketing their products to the
end user; therefore, they provide a wide variety of promotional
material including instructional videos, product and educational
materials, and in-store displays. Additionally, the suppliers heavily
market their products in industry publications, contractors' trade
magazines, and trade shows.
Infrastructure and Technology
Eagle Supply maintains a computer system and software from J.D.
Edwards for internal inventory, sales management, and financial
control and planning. Eagle Supply maintains this centralized
computer and data processing system to support decision making at many
levels of operations from checking a customer's credit to inventory
controls to accounts receivable credit and collections. This system
helps each distribution center respond to specific customer needs and
local market demand. Centralizing key functions helps top management
achieve economies of scale and maximize profitability for the
organization as a whole. Company executives are able to view monthly
and other periodic profitability and other financial data of any
individual distribution center. This type of quick reporting is
essential in the Company's ability to react to severe weather
conditions and open Storm centers. Additionally, the Company recently
invested in implementing the At-Road GPS tracking system for its
delivery trucks to improve and control the Company's through-put of
deliveries. The system runs on the Nextel backbone and allows for
exact positioning and tracking of the Company's 100 plus vehicles. We
believe that the cost per truck per month, which includes lifetime
free upgrades, is reasonable. The Company already has the package
implemented in all 21 of its JEH facilities and expects to have the
system implemented in almost all of its other facilities by January 1,
2003.
Competition
We continue to face substantial competition in the wholesale
distribution of roofing, drywall, cement and masonry supplies and
related products from a variety of different competitors. We
anticipate continued future competition to come primarily from the
larger companies in the marketplace such as American Builders &
Contractors Supply Co. Inc., Bradco Supply Corporation, Allied
Building Products Co., among others.
Business Strategy
The Company intends to continue to operate its business as it has
in the past and will seek to identify attractive acquisition
opportunities. However, there can be no assurance that we will be
able to locate any such acquisition candidates and, if so identified,
that we will be able successfully to negotiate and consummate an
acquisition transaction on terms favorable to the Company or at all.
In addition, from time to time we have been approached about a
potential sale of the Company. Although we are not currently seeking
a sale of the Company and none of these preliminary indications of
interest have resulted in any sustained negotiations or offers at
acceptable terms and values, we may, in the future, consider firm
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offers that maximize shareholder value if deemed appropriate at the
time.
Financial Condition and Capital Expenditures
In response to analysts' requests, set forth below is additional
detail regarding certain aspects of our financial condition,
liquidity, and capital expenditures. As indicated above, this
discussion supplements prior disclosures made by the Company in its
prior filings with the Commission which have been incorporated herein
by reference and should be read in conjunction therewith.
Capital Expenditures:
The Company currently intends to spend approximately $1 million
per year for equipment such as additional computer equipment, delivery
trucks, forklifts, and material handlers, through 2005 (although this
amount may vary from year to year based on future circumstances).
Depreciation and Amortization:
Of the Company's approximately 550 units of delivery and material
handling equipment, approximately 85% are leased and, depending on the
actual unit, average six to ten years or so of useful life.
Liquidity:
Currently, Eagle Supply is in discussions to refinance our asset-
based credit facility of $45 million to obtain more favorable terms
and to increase the credit line to $60 million. We anticipate
completing these discussions and negotiating a revised credit facility
in the first quarter of 2003.
Accounts Receivable:
Eagle Supply has recently hired additional personnel to manage
accounts receivable. The Company grants credit to customers based on
an evaluation of the customer's financial condition and other factors
and, in certain instances, obtains collateral in the form of liens on
both business and personal assets of its customers as well as the
project on which the Company's materials are installed.
# # # # #
This Current Report on Form 8-K contains certain forward-looking
statements within the meaning of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995, such as statements
relating to our financial condition, results of operations, plans,
objectives, future performance and business operations. Such forward-
looking statements reflect management's current expectations, beliefs,
estimates, and projections regarding the Company, its industry, and
future events, and are based upon certain assumptions made by
management. These forward-looking statements are not guarantees of
future performance and necessarily are subject to risks,
uncertainties, and other factors (many of which are outside the
control of the Company) which could cause actual results to differ
materially from those anticipated. These forward-looking statements
are typically identified by words or phrases such as "believes",
"expects", "anticipates", "plan", "estimates", "approximately",
"intend", and other similar words and phrases, or future or
conditional verbs such as "will", "should", "would", "could", and
"may". Although we believe our expectations are based on reasonable
assumptions and estimates, forward-looking statements involve known
and unknown risks, uncertainties, contingencies, and other factors
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that could cause our or our industry's actual results, level of
activity, performance or achievement to differ materially from those
discussed in or implied by any forward-looking statements made by or
on behalf of the Company. These risks, uncertainties, and other
factors include, among others: general economic and market
conditions, either nationally or in the markets where we conduct our
business, may be less favorable than expected; inability to find
suitable equity or debt financing when needed on terms commercially
reasonable to us; inability to locate suitable facilities or personnel
to open or maintain distribution center locations; inability to
identify suitable acquisition candidates or, if identified, an
inability to consummate any such acquisitions; interruptions or
cancellation of sources of supply of raw materials or significant
increases in the costs of such supplies; changes in the cost or
pricing of, or consumer demand for, our or our industry's distributed
products; an inability to collect our accounts or notes receivables
when due or within a reasonable period of time after they become due
and payable; a significant increase in competitive pressures; changes
in accounting policies and practices, as may be adopted by regulatory
agencies as well as the Financial Accounting Standards Board; and
other risks described in the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 2001 and as described from time to time
by the Company in other reports and registration statements filed by
it with the Securities and Exchange Commission. Any forward-looking
statement speaks only to the date on which the statement is made and
the Company disclaims any obligation to update any forward-looking
statement, whether as a result of new information, future events, or
otherwise.
Although the Company has provided the additional information contained
in this Current Report on Form 8-K/A in response to analysts'
requests, it is the policy of the Company to NOT make or disclose any
projections, estimates, or predictions with respect to future
financial performance or results. Accordingly, the Company disclaims
any such use made of these materials, if any, and specifically
disclaims that it has or will give any guidance as to projections,
estimates, or predictions relating to our future financial results,
and we express no view as to any analysis made with respect to any
such future financial projections, estimates, or predictions.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
EAGLE SUPPLY GROUP, INC.
Date: June 24, 2002 By: /s/ Douglas P. Fields
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Douglas P. Fields
Chief Executive Officer
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