Back to GetFilings.com



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the quarterly period ended December 31, 2002
-------------------

OR

[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the transition period from _________ to __________

Commission File Number: 000-25423
---------------

EAGLE SUPPLY GROUP, INC.
- ----------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)

Delaware 13-3889248
- ----------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)


122 East 42nd Street, Suite 1618, New York, New York 10168
- ----------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)


212-986-6190
- ----------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed 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 [ ]

Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]


The number of shares outstanding of the Registrant's Common Stock, as
of February 7, 2003, was 10,055,455 shares.





EAGLE SUPPLY GROUP, INC.

INDEX TO FORM 10-Q

PAGE
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets as of December 31, 2002
(Unaudited) and June 30, 2002 3

Consolidated Statements of Operations (Unaudited) for
the Three Months and Six Months Ended December 31,
2002 and 2001 4

Consolidated Statement of Shareholders' Equity
(Unaudited) for the Six Months Ended December 31,
2002 5

Consolidated Statements of Cash Flows (Unaudited) for
the Six Months Ended December 31, 2002 and 2001 6

Notes to Unaudited Consolidated Financial Statements 7

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9

Item 3. Quantitative and Qualitative Disclosures about
Market Risk 19

Item 4. Controls and Procedures 19


PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of
Securityholders 20

Item 6. Exhibits and Reports on Form 8-K 20

SIGNATURES 21

CERTIFICATIONS 22






-2-




EAGLE SUPPLY GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------



December 31, June 30,
2002 2002
(Unaudited)

ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 1,770,155 $ 5,355,070
Accounts and notes receivable - trade
(net of allowance for doubtful accounts) 30,808,668 38,875,947
Inventories 27,094,385 32,690,546
Deferred tax asset 2,284,000 1,910,000
Assets of discontinued operation held
for sale 1,454,735 1,722,503
Federal and state income taxes receivable 39,859 -
Other current assets 993,881 1,072,394
------------ ------------
Total current assets 64,445,683 81,626,460

PROPERTY AND EQUIPMENT, net 3,187,454 3,602,897

COST IN EXCESS OF NET ASSETS ACQUIRED, net 14,412,014 14,412,014

NOTES RECEIVABLE AND OTHER ASSETS 3,286,312 57,664
------------ ------------
$ 85,331,463 $ 99,699,035
============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt $ 35,300,000 $ 2,900,000
Accounts payable 22,210,816 27,695,079
Accrued expenses and other current
liabilities 5,185,351 5,599,509
Federal and state income taxes payable - 222,444
------------ ------------
Total current liabilities 62,696,167 36,417,032

LONG-TERM DEBT 361,242 40,425,435

DEFERRED TAX LIABILITY 1,336,000 1,146,000
------------ ------------
Total liabilities 64,393,409 77,988,467
------------ ------------

SHAREHOLDERS' EQUITY:
Preferred Stock, $.0001 par value per
share, 10,000,000 shares authorized;
none issued and outstanding - -
Common Stock, $.0001 par value per
share, 30,000,000 shares authorized;
issued and outstanding - 9,055,455
shares 905 905
Class A Non-Voting Common Stock, $.0001
par value per share, 10,000,000 shares
authorized; none issued and outstanding - -
Additional paid-in capital 18,243,879 18,248,903
Retained earnings 2,693,270 3,460,760
------------ ------------
Total shareholders' equity 20,938,054 21,710,568
------------ ------------

$ 85,331,463 $ 99,699,035
============ ============



See notes to unaudited consolidated financial statements.


-3-




EAGLE SUPPLY GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001
- ----------------------------------------------------------------------



THREE MONTHS SIX MONTHS
2002 2001 2002 2001


REVENUES $ 51,668,421 $ 59,332,825 $ 112,058,048 $ 124,845,507

COST OF SALES 39,164,813 44,414,391 85,355,676 94,021,387
------------ ------------ ------------- -------------
12,503,608 14,918,434 26,702,372 30,824,120
------------ ------------ ------------- -------------

OPERATING EXPENSES 12,640,889 12,641,046 26,277,251 25,406,854

DEPRECIATION AND AMORTIZATION 185,279 349,349 513,448 680,860

AMORTIZATION OF DEFERRED
FINANCING COSTS 10,453 24,969 20,907 50,126
------------ ------------ ------------- -------------

12,836,621 13,015,364 26,811,606 26,137,840
------------ ------------ ------------- -------------

(LOSS) INCOME FROM
CONTINUING OPERATIONS (333,013) 1,903,070 (109,234) 4,686,280
------------ ------------ ------------- -------------

OTHER INCOME (EXPENSE):
Interest income 115,840 75,364 165,777 158,419
Interest expense (436,745) (568,910) (942,016) (1,278,755)
------------ ------------ ------------- -------------
(320,905) (493,546) (776,239) (1,120,336)
------------ ------------ ------------- -------------

(LOSS) INCOME FROM CONTINUING
OPERATIONS BEFORE (BENEFIT)
PROVISION FOR INCOME TAXES (653,918) 1,409,524 (885,473) 3,565,944

(BENEFIT) PROVISION FOR INCOME TAXES (227,000) 498,000 (309,000) 1,259,000
------------ ------------ ------------- -------------

NET (LOSS) INCOME FROM
CONTINUING OPERATIONS (426,918) 911,524 (576,473) 2,306,944
------------ ------------ ------------- -------------

DISCONTINUED OPERATION:
Loss from discontinued operation
(including loss on disposal of
$90,000) (181,594) (141,445) (306,017) (210,833)

Benefit for income taxes (68,000) (53,000) (115,000) (79,000)
------------ ------------ ------------- -------------
LOSS FROM DISCONTINUED OPERATION (113,594) (88,445) (191,017) (131,833)
------------ ------------ ------------- -------------

NET (LOSS) INCOME $ (540,512) $ 823,079 $ (767,490) $ 2,175,111
============ ============ ============= =============

BASIC AND DILUTED
NET (LOSS) INCOME PER SHARE:
Net (loss) income from
continuing operations $ (.05) $ .11 $ (.06) $ .27

Loss from discontinued
operation (.01) (.01) (.02) (.01)
------------ ------------ ------------- -------------
$ (.06) $ .10 $ (.08) $ .26
============ ============ ============= =============
COMMON SHARES USED IN BASIC AND
DILUTED NET (LOSS) INCOME PER SHARE 9,055,455 8,510,000 9,055,455 8,510,000
============ ============ ============= =============





See notes to unaudited consolidated financial statements.



-4-




EAGLE SUPPLY GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 2002
- ----------------------------------------------------------------------



Additional
Preferred Shares Common Shares Paid-In Retained
Shares Amount Shares Amount Capital Earnings Total


BALANCE, JULY 1, 2002 - $ - 9,055,455 $ 905 $ 18,248,903 $ 3,460,760 $ 21,710,568

Net loss - - - - - (767,490) (767,490)

Expenses relating to private
placement of Common Shares
and Warrants - - - - (5,024) - (5,024)
------ ------ --------- ------ ------------ ----------- ------------
BALANCE, DECEMBER 31, 2002 - $ - 9,055,455 $ 905 $ 18,243,879 $ 2,693,270 $ 20,938,054
====== ====== ========= ====== ============ =========== ============




See notes to unaudited consolidated financial statements.



-5-




EAGLE SUPPLY GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001
- ----------------------------------------------------------------------



2002 2002

OPERATING ACTIVITIES:
Net (loss) income $ (767,490) $ 2,175,111
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation and amortization 549,365 752,149
Deferred income taxes (184,000) (85,370)
Increase in allowance for doubtful accounts 922,501 714,655
Changes in assets and liabilities:
Decrease in accounts and notes receivable 3,895,223 673,306
Decrease in inventories 5,596,161 4,906,266
Decrease in assets of discontinued
operation held for sale 267,768 -
Decrease in other current assets 78,513 17,782
Decrease in accounts payable (5,484,263) (9,967,172)
(Decrease) increase in accrued expenses
and other current liabilities (414,158) 1,406,567
(Decrease) increase in federal and
state income taxes (262,303) 1,143,755
------------ ------------
Net cash provided by operating
activities 4,197,317 1,737,049
------------ ------------

INVESTING ACTIVITIES:
Capital expenditures (113,015) (269,682)
Payment of contingent consideration for
the purchase of JEH Co. - (314,864)
Payment of contingent consideration for
the purchase of MSI Co. - (225,981)
------------ ------------
Net cash used in investing activities (113,015) (810,527)
------------ ------------

FINANCING ACTIVITIES:
Principal borrowings on long-term debt 120,937,907 154,521,352
Principal reductions on long-term debt (128,602,100) (156,430,539)
Decrease in additional paid-in capital (5,024) -
------------ ------------

Net cash used in financing activities (7,669,217) (1,909,187)
------------ ------------

NET DECREASE IN CASH AND CASH EQUIVALENTS (3,584,915) (982,665)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,355,070 5,679,891
------------ ------------

CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,770,155 $ 4,697,226
============ ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 942,016 $ 1,278,755
============ ============

Cash paid during the period for income taxes $ 23,393 $ 230,957
============ ============


SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW INFORMATION:
Reclassification of notes receivable $ 3,249,555 $ -
============ ============



See notes to unaudited consolidated financial statements.



-6-




EAGLE SUPPLY GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------------

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated interim financial
statements of Eagle Supply Group, Inc. and its subsidiaries and
limited partnership (the "Company") have been prepared in
accordance with accounting principles generally accepted in the
United States of America for interim financial information and in a
manner consistent with that used in the preparation of the annual
consolidated financial statements of the Company at June 30, 2002.
In the opinion of management, the accompanying unaudited
consolidated interim financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position and results of
operations and cash flows for the periods presented.

Operating results for the three months and six months ended
December 31, 2002 and 2001 are not necessarily indicative of the
results that may be expected for a full year. In addition, the
unaudited consolidated interim financial statements do not include
all information and footnote disclosures normally included in
financial statements prepared in accordance with accounting
principles generally accepted in the United States of America.
These unaudited consolidated interim financial statements should be
read in conjunction with the consolidated financial statements and
related notes thereto which are included in the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 2002 filed
with the Securities and Exchange Commission.

Business Description - The Company is a majority-owned subsidiary
of TDA Industries, Inc. ("TDA") and was organized to acquire,
integrate and operate seasoned, privately-held companies which
distribute products to or manufacture products for the building
supplies/construction industry.

Basis of Presentation - All of the operations of the Company have
been included in the unaudited consolidated interim financial
statements. The Company operates in a single industry segment and
all of its revenues are derived from sales to third party customers
in the United States.

Basic Net Income (Loss) Per Share - Basic net income (loss) per
share was calculated by dividing net income (loss) by the weighted
average number of common shares outstanding during the periods
presented and excludes any potential dilution. Diluted net income
(loss) per share was calculated similarly and would generally
include potential dilution from the exercise of stock options and
warrants. There were no such dilutive options or warrants for the
periods presented.

Comprehensive Income (Loss) - For the three months and six months
ended December 31, 2002 and 2001, comprehensive income (loss) was
equal to net income (loss).

Reclassifications - Certain reclassifications have been made in the
prior periods' financial statements in order to conform to the
classifications in the current periods.




-7-




2. ACCOUNTS AND NOTES RECEIVABLE

Accounts and notes receivable are as follows:





December 31, June 30,
2002 2002


Accounts receivable $ 34,322,694 $ 44,076,938
Notes receivable 5,209,705 106,741
------------ ------------
39,532,399 44,183,679
Allowance for doubtful accounts (5,474,176) (4,551,675)
------------ ------------
$ 34,058,223 $ 39,632,004
============ ============

Current $ 30,808,668 $ 39,632,004
Long-term 3,249,555 -
------------ ------------
$ 34,058,223 $ 39,632,004
============ ============


* * * * *













-8-




Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations

This document contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934, 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, estimates, judgments and
projections about our business and our industry, and they involve
inherent risks and uncertainties. Although we believe our
expectations are based on reasonable assumptions, judgments and
estimates, 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 you should
consider 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 terms commercially reasonable to us;

* 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;

* there may be interruptions or cancellations of sources of
supply of products to be distributed or significant
increases in the costs of such products;

* there may be changes in the cost or pricing of, or
consumer demand for, our or our industry's distributed
products;

* we may be unable to collect our accounts or notes
receivables when due or within a reasonable period of time
after they become due and payable;

* there may be a significant increase in competitive
pressures; and

* there may be changes in accounting policies and practices,
as may be adopted by regulatory agencies as well as the
Financial Accounting Standards Board.

Many of these factors are beyond our control and you should read
carefully the factors described in "Risk Factors" in the Company's
filings (including its Forms 10-K and registration statements) with
the Securities and Exchange Commission for a description of some,
but not all, risks, uncertainties and contingencies. These
forward-looking statements speak only as of the date of this
document. We do not undertake any obligation to update or revise
any of these forward-looking statements to reflect events or
circumstances occurring after the date of this document or to
reflect the occurrence of unanticipated events.



-9-




Critical Accounting Policies and Estimates

The preparation of these unaudited financial statements in
conformity with generally accepted accounting principles requires
the Company to make estimates, assumptions and judgments that
affect the reported amounts of assets, liabilities, revenues and
expenses, and disclosures of contingent assets and liabilities at
the dates of the financial statements. Significant estimates which
are reflected in these consolidated financial statements relate to,
among other things, allowances for doubtful accounts and notes
receivable, amounts reserved for obsolete and slow-moving
inventories, net realizable value of inventories, estimates of
future cash flows associated with assets, asset impairments, and
useful lives for depreciation and amortization. On an on-going
basis, the Company evaluates its estimates, assumptions and
judgments, including those related to accounts and notes
receivable, inventories, intangible assets, investments, other
receivables, expenses, income items, income taxes and
contingencies. The Company bases its estimates on an assessment of
contractual obligations, historical experience and on various other
assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets, liabilities, certain
receivables, allowances, income items and expenses that are not
readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions, and
there can be no assurance that estimates, assumptions and judgments
that are made will prove to be valid in light of future conditions
and developments. If such estimates, assumptions or judgments
prove to be incorrect in the future, the Company's financial
condition, results of operations and cash flows could be materially
adversely affected.

The Company believes the following critical accounting policies are
based upon its more significant judgments and estimates used in the
preparation of its consolidated financial statements:

The Company maintains allowances for doubtful accounts and notes
receivable for estimated losses resulting from the inability of its
customers to make payments when due or within a reasonable period
of time thereafter. If the financial condition of the Company's
customers were to deteriorate, resulting in an impairment of their
ability to make required payments, additional allowances may be
required. Conversely, if the financial condition of the Company's
customers is stronger than that estimated by the Company, then the
Company's estimates of allowances for doubtful accounts and notes
receivable may prove to be too large and reductions in its
allowances for doubtful accounts and notes receivable may be
required. If additions are required to allowances for doubtful
accounts and notes receivable, the Company's financial condition,
results of operations and cash flows could be materially adversely
affected.

The Company writes down its inventories for estimated obsolete or
slow-moving inventories equal to the difference between the cost of
inventories and the estimated market value based upon assumed
market conditions. If actual market conditions are or become less
favorable than those assumed by management, additional inventory
write-downs may be required. If inventory write-downs are
required, the Company's financial condition, results of operations
and cash flows could be materially adversely affected.


-10-





The Company maintains accounts for goodwill and other intangible
assets in its financial statements. In conformity with accounting
principals generally accepted in the United States of America,
since goodwill and intangible assets with indeterminate lives are
not currently being amortized but are tested for impairment
annually, except in certain circumstances and whenever there is an
impairment, there is a possibility that, as a result of an annual
test for impairment or as the result of the occurrence of certain
circumstances or an impairment, the value of goodwill or intangible
assets with indeterminate lives may be written down or may be
written off either in one write-down or in a number of write-downs,
either at a fiscal year end or at any time during the fiscal year.
The Company analyzes the value of goodwill using the estimated
related future cash flows of the related business, the total market
capitalization of the Company, and other factors, and recognizes
any adjustment that may be required to the asset's carrying value.
Any such write-down or series of write-downs could be substantial
and could have a material adverse effect on the Company's reported
results of operations, and any such impairment could occur in
connection with a material adverse event or development and have a
material adverse impact on the Company's financial condition,
results of operations and cash flows.

The Company seeks revenue and income growth by expanding its
existing customer base, by opening new distribution centers and by
pursuing strategic acquisitions that meet the Company's various
criteria. If the Company's evaluation of the prospects for opening
a new distribution center or of acquiring an acquired company
misjudges its estimated future revenues or profitability, such a
misjudgment could impair the carrying value of the investment and
result in operating losses for the Company, which could materially
adversely affect the Company's profitability, financial condition
and cash flows.

The Company files income tax returns in every jurisdiction in which
it has reason to believe it is subject to tax. Historically, the
Company has been subject to examination by various taxing
jurisdictions. To date, none of these examinations has resulted in
any material additional tax. Nonetheless, any tax jurisdiction may
contend that a filing position claimed by the Company regarding one
or more of its transactions is contrary to that jurisdiction's laws
or regulations. In such an event, the Company may incur charges
which would adversely affect its net income and may incur
liabilities for taxes and related charges which may adversely
affect its financial condition.

The Company's discussion and analysis of financial condition and
results of operation are based upon the Company's unaudited
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States.


* * * * *



-11-




The following discussion and analysis should be read in conjunction
with the financial statements and related notes thereto which are
included in the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 2002 filed with the Securities and Exchange
Commission.

Results of Operations

Three Months Ended December 31, 2002
Compared to the Three Months Ended December 31, 2001

Revenues of the Company during the three-month period ended
December 31, 2002 decreased by approximately $7,664,000 (12.9%)
compared to the 2001 three-month period. This decrease may be
attributed primarily to a loss of revenues in certain of the
Company's market areas (approximately $9,635, 000) and by the loss
of revenues that had been generated from distribution centers
closed or consolidated (approximately $386,000), offset by a
general improvement in market conditions in certain of the
Company's other market areas and revenues generated by new
distribution centers opened since December 2001 (approximately
$2,357,000).

Cost of sales decreased between the 2002 and 2001 three-month
periods at a lesser rate than the decrease in revenues between
these three-month periods. Accordingly, cost of sales as a
percentage of revenues increased to 75.8% in the three-month period
ended December 31, 2002 from 74.9% in the three-month period ended
December 31, 2001, and gross profit as a percentage of revenues
decreased to 24.2% in the three-month period ended December 31,
2002 from 25.1% in the three-month period ended December 31, 2001.

Operating expenses (including non-cash charges for depreciation and
amortization) decreased by approximately $179,000 (1.4%) between
the 2002 and 2001 three-month periods presented. Of this decrease,
approximately $447,000 may be attributed to a reduction in payroll
and related expenses, decreased computer expenses of approximately
$76,000 and decreased office expenses of approximately $48,000,
offset by the operating expenses of new distribution centers of
approximately $288,000, an increase in the reserves for doubtful
accounts and notes receivable of approximately $116,000 and
increases in various other operating expenses. Depreciation and
amortization and amortization of deferred financing costs decreased
by an aggregate of approximately $179,000 (47.7%) between the 2002
and 2001 three-month periods. Operating expenses (including
depreciation and amortization) as a percentage of revenues were
24.8% in the three-month period ended December 31, 2002 compared to
21.9% in the three-month period ended December 31, 2001.

Interest income increased by approximately $40,000 (53.7%) between
the 2002 and 2001 three-month periods presented. This increase is
primarily attributable to interest earned on notes receivable of
approximately $63,000, offset by lower rates of interest earned on
short-term investments of approximately $23,000.

Interest expense decreased by approximately $132,000 (23.2%)
between the 2002 and 2001 three-month periods presented. This
decrease is due to lower rates of interest charged on borrowings
under the Company's revolving credit facility.


-12-





In January 2003, the Company sold its Birmingham, Alabama,
distribution center and realized a loss of approximately $90,000 on
the sale. The operations of this distribution center have been
reclassified as discontinued in the 2002 and 2001 three and six-
month periods presented, and, accordingly, the previously reported
results of operations for the 2001 three and six-month periods have
been restated to reflect this reclassification of the discontinued
operation.

Six Months Ended December 31, 2002
Compared to the Six Months Ended December 31, 2001

Revenues of the Company during the six-month period ended December
31, 2002 decreased by approximately $12,787,000 (10.2%) compared to
the 2001 six-month period. This decrease may be attributed
primarily to a loss of revenues in certain of the Company's market
areas (approximately $24,497,000) and by the loss of revenues that
had been generated from distribution centers closed or consolidated
(approximately $1,251,000), offset by a general improvement in
market conditions in certain of the Company's other market areas
and revenues generated by new distribution centers opened since
December 2001 (approximately $12,961,000).

Cost of sales decreased between the 2002 and 2001 six-month periods
at a lesser rate than the decrease in revenues between these six-
month periods. Accordingly, cost of sales as a percentage of
revenues increased to 76.2% in the six-month period ended December
31, 2002 from 75.3% in the six-month period ended December 31,
2001, and gross profit as a percentage of revenues decreased to
23.8% in the six-month period ended December 31, 2002 from 24.7% in
the six-month period ended December 31, 2001.

Operating expenses (including non-cash charges for depreciation and
amortization) increased by approximately $674,000 (2.6%) between
the 2002 and 2001 six-month periods presented. This increase may
be attributed to the operating expenses of new distribution centers
of approximately $610,000 and an increase in the reserves for
doubtful accounts and notes receivable of approximately $273,000,
offset by decreased computer expenses of approximately $76,000,
office expenses of approximately $48,000 and decreases in various
other operating expenses. Depreciation and amortization and
amortization of deferred financing costs decreased by an aggregate
of approximately $197,000 (26.9%) between the 2002 and 2001 six-
month periods. Operating expenses (including depreciation and
amortization) as a percentage of revenues were 23.9% in the six-
month period ended December 31, 2002 compared to 20.9% in the six-
month period ended December 31, 2001.

Interest income increased by approximately $7,000 (4.6%) between
the 2002 and 2001 six-month periods presented. This increase is
primarily attributable to interest earned on notes receivable of
approximately $65,000, offset by lower rates of interest earned on
short-term investments of approximately $58,000.

Interest expense decreased by approximately $337,000 (26.3%)
between the 2002 and 2001 six-month periods presented. This
decrease is due to lower rates of interest charged on borrowings
under the Company's revolving credit facility.

In January 2003, the Company sold its Birmingham, Alabama,
distribution center and realized a loss of approximately $90,000 on
the sale. The operations of this distribution center have been
reclassified as discontinued in the 2002 and 2001 three and six-




-13-




month periods presented, and, accordingly, the previously reported
results of operations for the 2001 three and six-month periods have
been restated to reflect this reclassification of the discontinued
operation.

Liquidity and Capital Resources

The Company's working capital was approximately $1,750,000 and
$45,209,000 at December 31, 2002 and June 30, 2002, respectively.
At December 31, 2002, the Company's current ratio was 1.03 to 1
compared to 2.24 to 1 at June 30, 2002. This decrease in both the
Company's working capital and current ratio is due to the
reclassification of the outstanding principal amount of the
Company's credit facility ($33,000,000) from long-term to current
as of December 31, 2002. The Company's existing credit facility
matures in October 2003, and this reclassification is required by
accounting principles generally accepted in the United States of
America. The Company currently is negotiating to renew or replace
its existing credit facility with a larger credit facility, and
management anticipates that the extended maturity date of the new
credit facility will enable it to be reclassified to long-term (see
Credit Facility).

Cash provided by operating activities for the six months ended
December 31, 2002 was approximately $4,197,000. Such amount
consisted primarily of depreciation and amortization of $549,000,
increased levels of allowance for doubtful accounts and notes
receivable of $922,000, and decreased levels of accounts and notes
receivable of $3,895,000 (see Recent Developments), inventories of
$5,596,000, assets of discontinued operation held for sale of
$268,000 and other current assets of $78,000, offset by a net loss
of $767,000, deferred income taxes of $184,000, decreased levels of
accounts payable of $5,484,000, accrued expenses and other current
liabilities of $414,000 and federal and state income taxes of
$262,000.

Cash used in investing activities during the six months ended
December 31, 2002 was approximately $113,000 for capital
expenditures. Management of the Company presently anticipates
capital expenditures in the next twelve months of not less than
$600,000, of which approximately $200,000 is anticipated to be
financed, for the purchase of trucks and forklifts for the
Company's currently existing operations in anticipation of
increased business and to upgrade its vehicles and upgrade and
maintain its facilities to compete in its market areas.

Cash used in financing activities during the six months ended
December 31, 2002 was approximately $7,669,000. Such amount
consisted primarily of a net decrease in principal borrowings on
long-term debt of $7,664,000.

Acquisitions

In July 1997, JEH/Eagle Supply, Inc. ("JEH Eagle"), currently a
wholly-owned subsidiary of the Company, acquired the business and
substantially all of the assets of JEH Company ("JEH Co."), a Texas
corporation, wholly-owned by the current President of the Company.
In addition to the initial purchase price, certain, potentially
substantial, contingent payments, as additional future
consideration to JEH Co. or its designee, was to be paid by JEH
Eagle. For the fiscal year ended June 30, 2001, additional
consideration of approximately $315,000 was paid to JEH Co. or its
designee. All of such additional consideration increased goodwill.
No additional consideration was payable to JEH Co. or its designee



-14-




for fiscal 2002, and the Company had no future obligation for such
additional consideration as of June 30, 2002. The balance of the
initial purchase price in the amount of $655,284 was paid on
October 15, 2002.

In October 1998, MSI Eagle Supply, Inc. ("MSI Eagle"), then a
wholly-owned subsidiary of TDA and later of the Company (see
below), which subsequently merged with and into JEH Eagle, acquired
the business and substantially all of the assets of Masonry Supply,
Inc. ("MSI Co."), a Texas corporation. In addition to the initial
purchase price, certain, potentially substantial, contingent
payments, as additional future consideration to MSI Co. or its
designee, are to be paid by JEH Eagle. (Effective May 31, 2000, MSI
Eagle was merged with and into JEH Eagle.) For the fiscal year
ended June 30, 2001, additional consideration of approximately
$226,000 was paid to MSI Co. or its designee. For the fiscal year
ended June 30, 2002, additional consideration of approximately
$315,000 is payable to MSI Co. or its designee. All of such
additional consideration increased goodwill.

JEH Eagle and MSI Eagle were originally wholly-owned subsidiaries
of TDA which were acquired by the Company simultaneously with the
consummation of our initial public offering in March 1999.

Credit Facilities

In June 2000, and as subsequently amended, the Company's credit
facilities were consolidated into an amended, restated and
consolidated loan agreement with the Company's subsidiaries and
limited partnership as borrowers. The loan agreement increased the
Company's credit facility by $5 million, to $44,975,000, and
lowered the average interest rate by approximately one-half of one
(1/2%) percent. Furthermore, up to $8 million in borrowing was
made available for acquisitions. This credit facility bears
interest as follows (with the alternatives at the Company's
election):

* Equipment Term Note - Libor (as defined), plus two and one-
half (2.5%) percent, or the lender's Prime Rate (as
defined), plus one-half of one (1/2%) percent.

* Acquisition Term Note - Libor, plus two and three-fourths
(2.75%) percent, or the lender's Prime Rate, plus three-
fourths of one (3/4%) percent.

* Revolving Credit Loans - Libor, plus two (2%) percent or
the lender's Prime Rate.

The credit facility is collateralized by substantially all of the
tangible and intangible assets of the borrowers, is guaranteed by
the Company and matures in October 2003. The Company currently is
negotiating to renew or replace its existing credit facility with a
larger credit facility.

In October 1998, in connection with the purchase of substantially
all of the assets and business of MSI Co. by MSI Eagle, TDA lent
MSI Eagle $1,000,000 pursuant to a 6% per annum two-year note. The
note was payable in full in October 2000, and TDA had agreed to
defer the interest payable on the note until its maturity. In
October 2000, interest on the note was paid in full, and TDA and
JEH Eagle (successor by merger to MSI Eagle) agreed to refinance
the $1,000,000 principal amount of the note pursuant to a new 8.75%
per annum demand promissory note.


-15-




Recent Developments

During the three-month period ended December 31, 2002, the Company
reclassified its notes receivable with maturity dates in excess of
12 months to long-term.

In February 2003, the Company's President, James E. Helzer,
invested $1,000,000 in cash in the Company by purchasing one
million newly issued, unregistered shares of the Company's common
stock and a newly issued, unregistered common stock purchase
warrant to purchase an additional one million shares of the
Company's common stock at an exercise price of $1.50 per share for
five years from the date of issuance. Pursuant to the terms of his
investment, the exercise price of the warrant is subject to typical
anti-dilution provisions as well as a provision providing for an
adjustment to the exercise price of the warrant in the event that
the Company enters into certain transactions in which the Company
issues and sells its common stock at a price below the then-current
exercise price of the warrant. Further, commencing on August 6,
2003, Mr. Helzer is entitled to demand the filing of a Form S-3
Registration Statement with the Securities and Exchange Commission
to register the shares of common stock that he purchased in the
transaction, as well as the shares issuable upon exercise of the
warrant.

Further, the Company's Chairman and Chief Executive Officer,
Douglas P. Fields, and its Executive Vice President and Chief
Financial Officer, Frederick M. Friedman, have each agreed to
accept $100,000 of their cash compensation for the Company's
current fiscal year ending June 30, 2003 in the form of 100,000
newly issued, unregistered shares of the Company's common stock in
lieu of such cash compensation.

Under the Nasdaq rules, one prerequisite to continued listing on
the Nasdaq SmallCap Market is the maintenance of a minimum closing
bid price of $1.00 per share. If a quoted company's closing bid
price falls below $1.00 per share for thirty (30) consecutive
trading days, such company may be subject to having its shares
delisted from Nasdaq. The closing bid price per share of the
Company's common stock fell below $1.00 per share for the thirty
(30) consecutive trading days prior to February 11, 2003. The
Company has received a letter from Nasdaq which notes the failure
to satisfy the minimum closing price rule and advises the Company
that Nasdaq will not commence any delisting action at this time.
In its letter, Nasdaq further advised the Company that if it can
come into compliance with its minimum closing bid rules at any time
during the one hundred and eighty (180) calendar days following
February 11, 2003, no delisting proceedings will be commenced. In
order to come into compliance with the minimum closing price rules,
the closing bid price per share of the Company's common stock must
be at least $1.00 for ten (10) consecutive trading days ("Minimum
Closing Price Requirement"). If the Company does not meet the
Minimum Closing Price Requirement during this one hundred and
eighty (180) calendar day time period (August 11, 2003), Nasdaq
will determine whether the Company is able to otherwise satisfy the
criteria for initial listing for the Nasdaq SmallCap Market. If
the Company can otherwise satisfy the initial listing criteria at
that time, Nasdaq will grant the Company an additional one hundred
and eighty (180) calendar day grace period to demonstrate
compliance with the Minimum Closing Price Requirement. As of the
date hereof, the Company has not met the Minimum Closing Price
Requirement and there can be no assurance that the Company will



-16-




meet said requirement or that the Company may not become subject
to delisting from the Nasdaq SmallCap Market in the future.

New Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 143, Accounting for Asset Retirement Obligations.
SFAS No. 143 addresses financial accounting and reporting for
obligations and costs associated with the retirement of tangible
long-lived assets. The Company implemented SFAS No. 143 on July 1,
2002. Management believes that the effect of implementing this
pronouncement does not have a material impact on the Company's
financial condition or results of operations.

The Company adopted SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, on July 1, 2002. SFAS No. 144
replaces SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, and establishes
accounting and reporting standards for long-lived assets to be
disposed of by sale. SFAS No. 144 requires that those assets be
measured at the lower of carrying amount or fair value less cost to
sell. SFAS No. 144 also broadens the reporting of discontinued
operations to include all components of an entity with operations
that can be distinguished from the rest of the entity that will be
eliminated from the ongoing operations of the entity in a disposal
transaction. Management believes that the effect of adopting this
pronouncement does not have a material impact on the Company's
financial condition or results of operations.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13,
and Technical Corrections. This statement rescinds SFAS No. 4,
Reporting Gains and Losses from Extinguishments of Debt, and an
amendment of that statement, SFAS No. 64, Extinguishment of Debt
Made to Satisfy Sinking-Fund Requirements. This statement also
rescinds SFAS No. 44, Accounting for Intangible Assets of Motor
Carriers. This statement amends SFAS No. 13, Accounting for
Leases, to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. This
statement also amends other existing authoritative pronouncements
to make various technical corrections, clarify meanings or describe
their applicability under changed conditions. The provisions of
this statement are effective for transactions occurring, and
financial statements issued, on or after May 15, 2002. The Company
adopted the provisions of SFAS No. 145 upon the relative effective
dates and does not expect it to have a material effect on the
Company's financial condition or results of operations.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 addresses
financial accounting and reporting for costs associated with exit
or disposal activities and nullifies EITF Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the
liability is incurred. This statement also established that fair
value is the objective for initial measurement of the liability.
The provisions of SFAS No. 146 are effective for exit or disposal
activities that are initiated after December 31, 2002. The Company
is currently evaluating the impact of SFAS No. 146 on its financial



-17-




condition and results of operations.

In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. This
interpretation elaborates on the disclosures to be made by a
guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. It also
clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. The disclosure
requirements of FIN 45 are effective for interim and annual periods
after December 15, 2002 and we have adopted those requirements for
our financial statements included in this Form 10-Q. The initial
recognition and initial measurement requirements of FIN 45 are
effective prospectively for guarantees issued or modified after
December 31, 2002. The Company is not a party to any agreement in
which it is a guarantor of indebtedness of others. Accordingly,
this pronouncement is currently not applicable to the Company.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure. SFAS No. 148
amends SFAS No. 123, Accounting for Stock-Based Compensation, and
provides alternative methods of transition for a voluntary change
to the fair value based method of accounting for stock-based
employee compensation. SFAS No. 148 also amends the disclosure
requirements of SFAS No. 123 to require more prominent and frequent
disclosures in financial statements about the effects of stock-
based compensation. The transition guidance and annual disclosure
provisions of SFAS No. 148 are effective for financial statements
issued for fiscal years ending after December 15, 2002. The
interim disclosure provisions are effective for financial reports
containing financial statements for interim periods beginning after
December 15, 2002. Adoption of SFAS No. 148 is not expected to
materially impact our Consolidated Financial Statements.

In January 2003, the FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities - an Interpretation of
ARB No. 51 ("FIN 46"). FIN 46 addresses consolidation by business
enterprises of variable interest entities (formerly special purpose
entities or SPEs). In general, a variable interest entity is a
corporation, partnership, trust or any other legal structure used
for business purposes that either (a) does not have equity
investors with voting rights or (b) has equity investors that do
not provide sufficient financial resources for the entity to
support its activities. The objective of FIN 46 is not to restrict
the use of variable interest entities but to improve financial
reporting by companies involved with variable interest entities.
FIN 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of
loss from the variable interest entity's activities or entitled to
receive a majority of the entity's residual returns or both. The
consolidation requirements of FIN 46 apply to variable interest
entities created after January 31, 2003. The consolidation
requirements apply to older entities in the first fiscal year or
interim period beginning after June 15, 2003. However, certain of
the disclosure requirements apply to financial statements issued
after January 31, 2003, regardless of when the variable interest
entity was established. The Company does not have any variable
interest entities as defined in FIN 46. Accordingly, this
pronouncement is currently not applicable to the Company.



-18-




Item 3. Quantitative and Qualitative Disclosures about Market
Risk

The Company's carrying value of cash, trade accounts receivable,
notes receivable, inventories, goodwill, accounts payable, accrued
expenses, taxes payable and its existing line of credit facility are
a reasonable approximation of their fair value.

The Company has not entered into, and does not expect to enter into,
financial instruments for trading or hedging purposes.

The Company is currently exposed to material future earnings or cash
flow fluctuations from changes in interest rates on long-term debt
obligations since the majority of the Company's long-term debt
obligations are at variable rates. Based on the amount outstanding
as of December 31, 2002, a 100 basis point change in interest rates
would result in an approximate $34,000,000 change to the Company's
annual interest expense. The Company does not currently anticipate
entering into interest rate swaps and/or other similar instruments.

The Company's business is subject to certain risks, including, but
not limited to, differing economic conditions, competition, loss of
significant customers or customers' inability to make required
payments, changes in political climate, differing tax structures and
other governmental regulations and restrictions. The Company's
future results could be materially and adversely impacted by changes
in these or other factors. (See also "Risk Factors" in the
Company's filings with the Securities and Exchange Commission
(including its Forms 10-K and registration statements) for a
description of some, but not all, risks, uncertainties and
contingencies.)

There have been no material changes in the Company's market risk
since June 30, 2002. For information regarding the Company's
market risk, please refer to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 2002.


Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures
------------------------------------------------

Our Chief Executive Officer and Chief Financial Officer have
evaluated the effectiveness of our disclosure controls and
procedures, as such term is defined in Rules 13a-14(c) and 15d-
14(c) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"). Based on
such evaluation, such officers have concluded that, as of the
Evaluation Date, our disclosure controls and procedures are
effective in alerting them on a timely basis to material
information relating to us, including our consolidated
subsidiaries, that is required to be included in our reports
filed or submitted under the Exchange Act.

(b) Changes in Internal Controls
----------------------------

Since the Evaluation Date, there have not been any significant
changes in our internal controls or in other factors that could
significantly affect such controls.


* * * * *



-19-




PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Securityholders

On December 13, 2002, the Company held its 2002 Annual Meeting of
Stockholders. Reference is made to the Company's Current Report on
Form 8-K, filed with the Securities and Exchange Commission on
December 20, 2002, which is incorporated herein by reference, for
the results of the voting by securityholders on the matters
submitted for vote.

Item 6. Exhibits and Reports on Form 8-K

(a) The following exhibits are being filed with this Report:

Exhibit Description
------- -----------

10.54 Modification Agreement to the Employment
Agreement, as amended, with Douglas P. Fields

10.55 Modification Agreement to the Employment
Agreement, as amended, with James E. Helzer

10.56 Modification Agreement to the Employment
Agreement, as amended, with Frederick M. Friedman

(b) Reports on Form 8-K:

On October 23, 2002, the Company filed a Current Report on Form
8-K under Item 9 reporting that the Company had issued a press
release relating to its expense reduction plan, a copy of which
was filed therewith as Exhibit 99.1.

On November 14, 2002, the Company filed a Current Report on Form
8-K under Item 9 reporting that the Company had issued a press
release relating to its first quarter results (September 30,
2002), a copy of which was filed therewith as Exhibit 99.1. The
press release included Condensed Statements of Operations of the
Company for the first quarters ended September 30, 2002 and 2001,
as well as selected balance sheet data for September 30, 2002 and
the fiscal year ended June 30, 2002.

On November 14, 2002, the Company filed a Current Report on Form
8-K under Item 9 to disclose that the certificates required by 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, were submitted to the Securities and
Exchange Commission in connection and simultaneously with the
filing of the Company's Form 10-Q for the quarter ended September
30, 2002. The Chief Executive Officer's certificate was filed
therewith as Exhibit 99.1 and the Chief Financial Officer's
certificate was filed therewith as Exhibit 99.2.

On December 20, 2002, the Company filed a Current Report on Form
8-K under Item 5 reporting that the Company had held its Annual
Meeting of Stockholders on December 13, 2002 and reported on the
securityholders voting on the matters submitted for vote.
Additionally, on December 16, 2002, the Company filed an
Amendment to its Certificate of Incorporation, a copy of which
was filed therewith as Exhibit 3.1(B).



-20-




SIGNATURES

In accordance with 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, thereunto duly authorized.


EAGLE SUPPLY GROUP, INC.




Dated: February 14, 2003 By: /s/ Douglas P. Fields
------------------------------------
Douglas P. Fields, Chairman of the
Board of Directors, Chief Executive
Officer and a Director (Principal
Executive Officer)





Dated: February 14, 2003 By: /s/ Frederick M. Friedman
------------------------------------
Frederick M. Friedman, Executive
Vice President, Treasurer, Secretary
and a Director (Principal Financial
and Accounting Officer)







-21-



CERTIFICATIONS
--------------

I, Douglas P. Fields, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Eagle
Supply Group, Inc.;

2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;

4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and we have:

(a) Designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;

(b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing of this quarterly report (the "Evaluation
Date"); and

(c) Presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):

(a) All significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and

6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: February 14, 2003
/s/Douglas P. Fields
--------------------------------
Douglas P. Fields
Chairman of the Board
of Directors
and Chief Executive Officer
(Principal Executive Officer)




-22-




CERTIFICATIONS
--------------

I, Frederick M. Friedman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Eagle
Supply Group, Inc.;

2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;

4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and we have:

(a) Designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;

(b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing of this quarterly report (the "Evaluation
Date"); and

(c) Presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):

(a) All significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and

6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: February 14, 2003
/s/ Frederick M. Friedman
-----------------------------------
Frederick M. Friedman
Chief Financial Officer
(Principal Financial Officer)


-23-