SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 11, 2003
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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 1618, 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.
Although Eagle Supply Group, Inc. (the "Company" or "we")
previously provided earnings guidance in April 2003, it is not
the policy of the Company to prepare forecasts or projections of
revenues and net income for public distribution, and we do not
intend to change this policy.
However, in view of various events which have taken place
since we last provided earnings guidance, the Company has
determined that it again should provide its stockholders with
guidance with respect to its preliminary estimated unaudited
fiscal 2003 fourth quarter revenues, net income, and basic
earnings per share and estimates of revenues, net income, and
basic earnings per share for the full 2004 fiscal year.
Accordingly, this Current Report on Form 8-K provides information
regarding the Company's preliminary unaudited fiscal 2003 fourth
quarter results and anticipated projected revenues, net income,
and basic earnings per share for our 2004 fiscal year ending June
30, 2004. References herein to our "2003 fiscal year" and our
"2004 fiscal year" shall mean the fiscal year ended June 30, 2003
and fiscal year ending June 30, 2004, respectively.
We developed the financial projections included in this
Current Report based on estimates and assumptions developed by
management. Although we believe the estimates and assumptions
are reasonable, projections are necessarily speculative and
depend completely on the estimates and assumptions used in
preparing them. Actual results realized during any future period
are likely to vary from the projections, and the variations may
be material and adverse. Further, unanticipated events and
circumstances are likely to occur, and such events and
circumstances could cause actual results to vary substantially
from the estimates and assumptions made and the projections
included in this Current Report. You also should be aware that
the preliminary results for the 2003 fourth quarter included
herein have not yet been audited and are subject to adjustment.
Any such adjustments may have a material adverse impact on the
preliminary fiscal 2003 fourth quarter results provided herein.
This information is being furnished solely for compliance
with, and in accordance with, Regulation FD and the rules and
regulations promulgated thereunder.
I. Preliminary Unaudited Estimated Results for the Fourth
Quarter of the 2003 Fiscal Year
Based on the preliminary unaudited internal financial
statements prepared by management, the Company preliminarily
estimates that, for the recently completed fourth quarter of the
2003 fiscal year, it will report revenues of approximately
$69,000,000 (excluding revenues from its discontinued
operations), net income of approximately $1,000,000 to
$1,300,000, and basic earnings per share of approximately $0.10
to $0.13. The discontinued operations relate to the Company's
Birmingham, Alabama distribution center which was sold in January
2003. The estimates set forth above relate only to the Company's
fourth quarter of the 2003 fiscal year, and no estimated
revenues, net income or earnings per share are provided for the
full fiscal year ended June 30, 2003.
The preliminary unaudited estimated results for the fourth
quarter of the 2003 fiscal year provided above includes all
adjustments (consisting of only normal recurring adjustments)
which our management considers necessary for a fair presentation
of the financial results for the period reported.
II. Earnings Guidance for 2004 Fiscal Year
Based on currently estimated, unaudited, internal management
plans, assumptions, budgets, and projections, the Company
anticipates that, for its 2004 fiscal year, it will achieve
revenue in the range of approximately $265 million to $285
million, net income in the range of approximately $3.2 million to
$4.2 million, and, if this level of net income is achieved, basic
earnings per share in the range of
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approximately $0.31 to $0.40. Diluted earnings per share would
be lower than basic earnings per share if the per share market
price for our common stock should exceed $1.50 per share.
If we are able to achieve the anticipated results and
projections set forth above, because of the disappointing results
reported during each of the first three quarters of our 2003
fiscal year and in light of our projections for the business of
our 2004 fiscal year, we would expect each of our quarterly
results for the 2004 fiscal year to result in favorable quarter-
to-quarter comparisons of revenues, net income, and basic
earnings per share when compared to the recently completed 2003
fiscal year.
III. Recent Developments Affecting Results of Operations
In addition to the assumptions set forth below, our
anticipated and projected revenues for the 2004 fiscal year also
are based on the anticipated impact of certain other developments
which have, or are expected to have, a direct impact on the
results of our operations, including, among other things, the
following:
1. As we have previously reported, unusual and severe
storm activity occurred last spring in certain of the Company's
existing market areas. The Company believes that these recent
storms have had and will likely continue to have a positive
impact on the Company's results of operations in the 2004 fiscal
year.
2. During the fourth quarter of our fiscal year ended June
30, 2002, we incurred a charge to our operating expenses for
additional reserves that we set aside for allowances for doubtful
accounts and notes receivables in excess of what had been our
historical exposure. During the 2003 fiscal year, we incurred
charges to our operating expenses for allowances for doubtful
accounts and notes receivables at a rate which was higher than
that incurred in prior periods. The Company's management has
implemented collection procedures intended to improve our
collections and, if successful, will result in a reduced rate of
such charges for reserves for doubtful accounts and notes
receivable in future periods. Reductions in such charges would
have a positive impact on our operating results. Of course,
there can be no assurance that we will be successful in improving
our collection of accounts and notes receivable or in reducing
our charges for reserves for doubtful accounts and notes
receivable.
3. The Company also has been seeking to improve its gross
profit margins by changing or improving its product mix in
certain market areas, repricing or relinquishing some lower
margin business, and repricing product lines at appropriate
opportunities.
4. During the 2003 fiscal year, our liquidity position
benefited from capital infusions made by the Company's executive
officers. On February 6, 2003, our President invested $1 million
in cash to purchase 1,000,000 newly issued, unregistered shares
of our common stock and a warrant exercisable for five years to
purchase an additional 1,000,000 shares of our common stock at
$1.50 per share, subject to adjustment. On April 11, 2003,
pursuant to an agreement entered into in February 2003, our Chief
Executive Officer and Chief Financial Officer each accepted
100,000 newly issued, unregistered shares of our common stock in
lieu of $100,000 cash compensation for each of them. Each of our
President, Chief Executive Officer, and Chief Financial Officer
agreed to make their investments in our common stock as described
above at a time when our common stock was trading at lower prices
on the Nasdaq Stock Market.
IV. Assumptions
The anticipated results, estimates, and projections included
herein for the full 2004 fiscal year were prepared assuming,
among other things, (i) growth in sales revenues as a result of
increased prices
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for our products, (ii) continued growth in housing starts and
re-roofing, including repair and renovations in our market
areas, (iii) no unusual storm activity (other than that described
above under "Recent Developments Affecting Results of
Operations"), (iv) improved collection experience of the
Company's accounts and notes receivables, (v) satisfactory
resolution of current Iraq-United States issues, (vi) no opening
of any new distribution centers, (vii) no acquisitions, closings
or divestitures of distribution centers (other than those
currently included in management's internal plans), (viii) no new
terrorist attacks, hostilities, or other acts which may disrupt
the economy of the United States generally or the market areas in
which we are conducting business, and (ix) no other unforeseen
events that adversely impact our operations. In addition, the
per share data assumes no new issuances (or assumed issuances for
accounting purposes) of the Company's equity securities, whether
as the result of sales of securities, the exercise of stock
options or warrants, or otherwise. We cannot assure you that the
estimates and projections set forth in this Current Report will
be achieved. These projections and the underlying estimates and
assumptions on which they are based are subject to various
factors, some of which are not in the Company's control, and most
or all of which may change at any time and from time to time.
Actual results for the 2004 fiscal year may differ materially and
adversely from these estimates and projections.
V. Other Recent Developments Affecting the Company
In addition to the recent developments described above which
have had, or are expected to have, a direct impact on our
operating results, there have been other recent developments
affecting the Company which may or may not have a direct or
indirect impact on our operations, prospects, or financial
condition. These other recent developments include, among other
things, the following:
1. During the last eighteen months, both the Company and
its operating subsidiaries have been approached as possible
acquisition targets by both financial and strategic buyers.
Potential financial acquirers that have approached the Company
and made purchase inquiries have suggested that, in valuing the
Company as a potential acquisition, they may make adjustments to
our reported earnings to add back certain expenses related to the
management of the Company as a public company or as it is
currently operated that may be in an amount in the low seven
figure area. Potential strategic acquirers that have approached
the Company and made purchase inquiries have suggested that, in
valuing the Company as a potential acquisition, they may make
adjustments to our reported earnings to add back certain
administrative expenses that they may be able to eliminate in an
amount in the mid seven figure area (in addition to the low seven
figure amount of expenses that a potential financial buyer may
consider adding back).
Our management believes that the Company's common stock is
undervalued and has stated that it intends to realize the value
of the Company's common stock "sooner rather than later."
Accordingly, if the market price and liquidity for our common
stock does not increase in value to reflect what we believe
adequately reflects the value of our Company or if the Company
receives a purchase offer which we believe adequately reflects
the value of the Company, we will consider a sale of the Company
to either a financial or strategic buyer in order to realize that
value. We will continue to evaluate proposals to purchase the
Company if, as, and when they are received. Of course, there can
be no assurance that any proposal to acquire the Company will be
made, that we would consider any such offer to be adequate, or
that any such proposed transaction will be consummated.
2. Some or all of the five institutional investors that
consummated the initial tranche of a private placement
transaction with us in May 2002 and purchased shares of our
common stock and warrants to purchase additional shares of our
common stock have advised us directly or through their
representatives that they would like to sell some or all of the
shares of common stock that they purchased from the Company at
that time. In connection with such a sale, some or all of these
investors may return
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to the Company some or all of the warrants that they purchased in
that transaction, and some or all may sign mutual general
releases with the Company.
3. During our 2003 fiscal year, we terminated our
relationship with our investor relations firm. We anticipate
that we will enter into a relationship with a new investor
relations firm beginning in September 2003.
VI. Forward-Looking Statements
All of the statements, projections, estimates and
assumptions referred to, discussed or set forth in this Current
Report on Form 8-K constitute forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, Section
21E of the Securities Exchange Act of 1934 and 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.
These statements relate to expectations concerning matters that
are not historical fact. Accordingly, statements that are based
on management's projections, estimates, assumptions and judgments
are forward-looking statements. These forward-looking statements
are typically identified by words or phrases such as "believes,"
"expects," "anticipates," "plans," "estimates," "approximately,"
"intend," and other similar words and phrases, or future or
conditional verbs such as "will," "should," "would," "could," and
"may." These forward-looking statements are based largely on our
current expectations, assumptions, plans, estimates, judgments
and projections about our business and our industry, and they
involve inherent risks and uncertainties. Although we believe
that these forward-looking statements are based upon reasonable
estimates and assumptions, we can give no assurance that our
expectations will in fact occur or that our estimates or
assumptions will be correct, and we caution that actual results
may differ materially and adversely from those in the forward-
looking statements. Forward-looking statements involve known and
unknown risks, uncertainties, contingencies and other factors
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 us and could cause our financial
condition, results of operations or cash flows to be materially
adversely affected.
In evaluating these statements, some of the factors that
could affect our future results and could cause our results to
differ materially and adversely from those expressed in this
Current Report on Form 8-K include the following:
* general economic and market conditions, either nationally
or in the markets where we conduct our business, may be
less favorable than expected;
* we may be unable to find suitable equity or debt
financing when needed on costs and terms as favorable to
us as our current financing or on terms that are
commercially reasonable to us;
* our costs of capital including interest rates and related
fees and expenses may increase;
* we may be unable to collect our accounts or notes
receivables when due, within a reasonable period of time
after they become due and payable, or at all;
* there may be a significant increase in competitive
pressures in our major market areas;
* weather conditions in our market areas may adversely
affect our business;
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* there may be interruptions or cancellations of sources of
supply of products that we distribute or significant
increases in the costs of such products, or changes in
the terms of purchase that may be less favorable to us;
* there may be changes in the cost or pricing of, or
consumer demand for, our or our industry's distributed
products that may adversely affect our ability to sell
our products at certain levels of markup (gross profit
margin);
* there may be changes in the new housing market or the
market for construction, renovation and repair relating
to the product lines that we sell in various market areas
that may adversely affect our business;
* we may be adversely affected by changes in our costs of
doing business including costs of fuel, labor and related
benefits, occupancy, and the cost and availability of
insurance;
* we may be unable to locate suitable facilities or
personnel to open or maintain distribution center
locations;
* we may be unable to identify suitable acquisition
candidates or, if identified, unable to consummate any
such acquisitions;
* the number of shares of common stock that the Company has
outstanding and the number of shares of common stock used
to calculate our basic and diluted earnings per share may
increase and adversely affect our earnings per share
calculations;
* there may be changes in accounting policies and practice
that may be adopted by regulatory agencies as well as the
Financial Accounting Standards Board; and
* certain risk factors and other conditions associated with
the Company as set forth in the reports that the Company
has filed with the Securities and Exchange Commission,
including the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 2002, and other factors,
both known and unknown.
The Company does not intend to report updates to these
estimates or projections on any regular basis or schedule but may
do so from time to time; or, at any time, the Company may
terminate filing any report of its internal budgets and
projections. We caution that the projections set forth in this
Current Report on Form 8-K are made only as of the date hereof
and are based upon currently available information. We are not
undertaking any obligation to update these projections or any
other information contained in this Current Report on Form 8-K as
conditions change or other information becomes available.
# # # # #
The information contained in this Current Report on Form 8-K
is furnished pursuant to Item 9 of Form 8-K and shall not be
deemed "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the
liability of that section. Further, the information in this
Current Report on Form 8-K is not to be incorporated by reference
into any of the Company's filings with the Securities and
Exchange Commission, whether filed prior to or after the filing
of this Current Report on Form 8-K, regardless of any general or
specific incorporation language in such filing.
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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: August 11, 2003 By: /s/Douglas P. Fields
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Douglas P. Fields
Chief Executive Officer
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