<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934)
For The Quarterly Period Ended September 30, 1995
Commission File Number 0-8909
EMERGENT GROUP, INC.
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0513287
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 17526
Greenville, South Carolina 29606
(Address of principal executive offices)
(803) 235-8056
(Issuer's telephone number)
----------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since
last report
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 ____
CLASS Outstanding at October 31, 1995
Common $.05 par value 60,020
Class A Common $.05 par value 3,119,881
<PAGE>
PART 1 - FINANCIAL INFORMATION
EMERGENT GROUP, INC. AND SUBSIDIARIES
Set forth on pages 3 through 8 are the consolidated balance sheet as of
December 31, 1994 and the unaudited consolidated balance sheet as of
September 30, 1995 of Emergent Group, Inc. and subsidiaries and the
unaudited consolidated statements of operations for the three-month and
nine-month periods ended September 30, 1995 and 1994 and unaudited
statements of cash flows for the nine-month periods ended September 30,
1995 and 1994.
Elliott, Davis & Company, L.L.P. previously examined and reported on the
Company's financial statements for the year ended December 31, 1994,
from which the consolidated balance sheet as of that date is derived.
2
<PAGE>
EMERGENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER
30, 1995 December 31,
(Unaudited) 1994
(in thousands)
ASSETS
<S> <C> <C>
Cash and cash equivalents, including
reverse repurchase agreements of
$216,000 in 1995 and $621,000 in 1994 .......... $ 878 $ 384
Short-term investments, at cost .................. 197 597
Accounts receivable, net of allowance
for doubtful accounts of $77,000 in 1994 ....... -- 532
Inventories, net of reserve for obsolete
inventory of $262,000 in 1994 .................. -- 3,719
Loans Receivable:
Loans receivable ............................... 92,404 88,023
Notes receivable from related parties .......... 235 169
Excess servicing receivable .................... 2,082 1,872
Note receivable ................................ 4,214 920
Accrued interest receivable .................... 1,356 927
Other receivables .............................. 553 366
--------- ---------
100,844 92,277
Less allowances for credit losses ................ (2,664) (1,433)
Less unearned discount ........................... (393) (1,359)
--------- ---------
97,787 89,485
Investment in mortgage loans held for
sale ........................................... 14,348 3,662
Investment in asset-backed securities ............ 1,717 --
Property, plant and equipment .................... 5,388 6,836
Less accumulated depreciation .................. (2,247) (3,442)
--------- ---------
3,141 3,394
Excess of cost over net assets of
acquired businesses, net of
accumulated amortization of
$553,000 in 1995 and $462,000 in 1994 .......... 2,900 2,991
Real estate and personal property held
for sale, net of allowance of $86,000
in 1995 and $297,000 in 1994 ................... 3,741 5,930
Deposit base intangibles, net of
accumulated amortization of
$468,000 in 1995 and $384,000 in 1994 .......... 628 712
Other assets ..................................... 1,363 1,288
--------- ---------
TOTAL ASSETS ............................... $126,700 $112,694
========= =========
</TABLE>
3
<PAGE>
EMERGENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--(Continued)
<TABLE>
<CAPTION>
SEPTEMBER
30, 1995 December 31,
(Unaudited) 1994
(in thousands
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Investor Savings:
Notes payable to investors, including
$777,000 in 1995 and $707,000
in 1994 to related parties .............................................. $ 76,368 $ 56,497
Subordinated debentures, including
$34,000 in 1995 and $50,000 in
1994 to related parties ................................................. 15,040 20,998
-------- --------
Total investor savings ...................................................... 91,408 77,495
Notes payable to banks and other ............................................ 19,623 18,438
Accounts payable ............................................................ 182 1,242
Accrued and sundry liabilities .............................................. 1,554 3,922
Remittance due to loan participants ......................................... 1,151 683
Accrued interest ............................................................ 531 478
-------- --------
114,449 102,258
Minority interest ........................................................... 181 736
-------- --------
TOTAL LIABILITIES ......................................................... 114,630 102,994
SHAREHOLDERS' EQUITY
Common Stock, par value $.05 a share--authorized 4,000,000 shares in 1995 and
400,000 shares in 1994, issued and outstanding 60,020 in 1995
and 200,575 in 1994 ....................................................... 3 10
Class A Common Stock, par value $.05 a
share--authorized 6,666,667 shares in 1995 and 20,000,000 shares in 1994;
issued and outstanding 3,119,881 shares in 1995 and 9,803,438 shares
in 1994 ................................................................... 156 490
Capital in excess of par value .............................................. 6,714 6,924
Retained earnings ........................................................... 5,197 2,276
-------- --------
TOTAL SHAREHOLDERS' EQUITY ................................................ 12,070 9,700
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $126,700 $112,694
======== ========
</TABLE>
See notes to unaudited financial statements
4
<PAGE>
EMERGENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(in thousands except (in thousands except
per share amounts) per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Interest and finance charges $ 3,909 $ 2,840 $ 11,216 $ 7,711
Mortgage banking activities 65 996 63 1,248
Gain on sale of loans 660 1,697 3,175 2,932
Realized gain on investment
sales 1,499 - 3,341 -
Management fees 80 93 490 278
Other revenue 446 67 728 339
---------- ----------- ----------- ---------
Total revenues 6,659 5,693 19,013 12,508
Expenses:
Interest expense 2,161 1,523 5,941 4,246
Provision for credit losses 290 108 1,235 597
Provision for loss on real
estate and personal
property held for sale 90 509 385 509
General and administrative
expense 2,620 1,763 7,134 5,178
Other - 122 - 122
---------- ----------- ----------- ---------
Total expenses 5,161 4,025 14,695 10,652
---------- ----------- ----------- ---------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES AND MINORITY INTEREST 1,498 1,668 4,318 1,856
Provision for income taxes:
Current 73 141 146 170
Deferred 14 2 34 (31)
---------- ----------- ----------- ----------
87 143 180 139
---------- ----------- ----------- ---------
INCOME FROM CONTINUING
OPERATIONS BEFORE MINORITY
INTEREST 1,411 1,525 4,138 1,717
Minority interest in earnings
of subsidiary (35) (15) (66) (22)
---------- ----------- ----------- ----------
INCOME FROM CONTINUING
OPERATIONS 1,376 1,510 4,072 1,695
</TABLE>
5
<PAGE>
EMERGENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)--Continued
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(in thousands except (in thousands except
per share amounts) per share amounts)
<S> <C> <C> <C> <C>
Discontinued Operations (NOTE D):
(Loss) income from operations, net
of income tax expense .......... (408) (62) (1,226) 976
Gain on sale of property
and equipment .................. 7 585 74 585
---------- ---------- ---------- ----------
(401) 523 (1,152) 1,135
---------- ---------- ---------- ----------
NET INCOME $ 975 $ 2,033 $ 2,920 $ 2,830
========== ========== ========== ==========
Income per share of Common Stock:
Continuing operations ............ $ .41 $ .45 $ 1.21 $ .51
Discontinued operations .......... (.12) .16 (.34) .34
---------- ---------- ---------- ----------
$ .29 .61 .87 .85
========== ========== ========== ==========
Computed on the weighted
average number of shares
issued ......................... 3,352,570 3,337,976 3,352,570 3,337,976
</TABLE>
See notes to unaudited financial statements
6
<PAGE>
EMERGENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income .............................................................. $ 2,920 $ 2,830
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization ....................................... 533 865
Provision for losses on finance
receivables ....................................................... 1,235 597
Provision for losses on other
real estate owned ................................................. 385 548
Gain on sale of subsidiary .......................................... -- (585)
Gain on sale of investments in
mortgage loans .................................................... (3,341) --
Loss on sale of investments ........................................ -- 66
Net (decrease) increase in deferred
premium income ................................................... (1,028) 356
Gain on disposal of property and
equipment ......................................................... (61) --
Gain on reclassification of
capital lease ..................................................... -- (265)
Net increase in net deferred loan
costs ............................................................. (161) --
Loans originated--held for sale ..................................... (20,287) (38,892)
Principal proceeds from loans sold .................................. 22,584 50,860
Revenue recorded under an assigned
operating lease ................................................... -- (592)
Interest expense from assignment of
an operating lease ................................................ -- 188
Minority interest in income of
subsidiaries ...................................................... 66 72
Changes in operating assets and liabilities increasing (decreasing) cash:
Accounts receivable ................................................... (29) 254
Excess servicing receivable ........................................... (210) (1,265)
Accounts payable, accrued and sundry
liabilities and income taxes payable ................................ 641 488
Remittance due loan participants ...................................... 468 139
Inventories ........................................................... -- 128
Accrued interest receivable ........................................... (429) (67)
Accrued interest payable .............................................. 59 (35)
Customer commitment deposits .......................................... (287) 207
Other assets .......................................................... (294) (21)
-------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES ................................................. 2,764 15,876
</TABLE>
7
<PAGE>
EMERGENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)--Continued
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
(in thousands)
<S> <C> <C>
INVESTING ACTIVITIES
Loans originated--held for investment ................................. $ (53,462) $ (56,160)
Principal proceeds from loans not sold ................................ 35,288 21,175
Purchase of investments in mortgage
loans held for sale ................................................. (92,618) --
Proceeds from sale of real estate
and personal property held for sale ................................. 2,098 633
Proceeds from sale of property & equip ................................ 112 --
Proceeds from securitization of loans ................................. 15,357 --
Payments to securitization trustee for
cash reserve ........................................................ (652) --
Purchases of property and equipment ................................... (985) (421)
Improvements and related costs incurred
on real estate held for sale ........................................ (154) (363)
Rents received on real estate held
for sale ............................................................ 79 38
Increase in notes receivable from former
subsidiary .......................................................... (2,287) --
Payments received on notes receivable ................................. 154 --
Proceeds from sale of investments in
mortgage loans ...................................................... 78,965 --
Cash received from sale of subsidiary
net of cash sold .................................................... (106) (88)
Proceeds from sale of investments ..................................... 417 581
Principal collections on asset backed
securities .......................................................... 77 --
--------- ---------
NET CASH (USED IN) INVESTING
ACTIVITIES ....................................................... (17,717) (34,605)
FINANCING ACTIVITIES
Advances under bank lines of credit ................................... 114,561 71,848
Payments of long-term debt and
capital lease obligations ........................................... -- (133)
Payments on bank lines of credit ...................................... (112,459) (62,069)
Net increase in notes payable to
investors ........................................................... 19,871 7,574
Net (decrease) in subordinated debentures (5,958) (2,470)
Payments on mortgages payable ......................................... -- (80)
(Decrease) in note payable to minority
shareholder ......................................................... -- (50)
Cash paid for stock purchase in tender
offer ............................................................... (568) --
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES .............................................. 15,447 14,620
--------- ---------
8
<PAGE>
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS ......................................... 494 (4,109)
Cash and cash equivalents at
beginning of year ..................................................... 384 4,960
--------- ---------
$ 878 $ 851
========= =========
CASH AND CASH EQUIVALENTS AT
SEPTEMBER 30
</TABLE>
See notes to unaudited financial statements
9
<PAGE>
EMERGENT GROUP, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE A--BASIS OF PREPARATION
The accompanying consolidated financial statements are prepared in
accordance with the SEC's rules regarding interim financial statements,
and therefore do not contain all disclosures required by generally
accepted accounting principles for annual financial statements.
Reference should be made to the financial statements included in the
Company's Annual Report on Form 10-K for 1994, including the
footnotes thereto.
The consolidated balance sheet as of September 30, 1995 and the
consolidated statements of income for the three-month and nine-month
periods ended September 30, 1995 and 1994 and the consolidated
statements of cash flows for the nine-month periods ended September 30,
1995 and 1994 are unaudited and in the opinion of management contain all
known adjustments necessary to present fairly the financial position,
results of operations and cash flows.
The Company considers all highly liquid investments readily convertible
to known amounts of cash or having a maturity of three months or less to
be cash equivalents.
NOTE B--INTEREST AND INCOME TAXES
For the nine-month period ended September 30, the Company paid interest of
$5,900,000 in 1995 and $4,323,000 in 1994.
For the nine-month period ended September 30, the Company paid income taxes of
$164,000 in 1995 and $126,000 in 1994.
NOTE C--CASH AND CASH EQUIVALENTS
The Company maintains its primary checking accounts with two principal banks.
The amounts maintained in the checking accounts are insured by the Federal
Deposit Insurance Corporation ("FDIC") up to $100,000. At September 30, 1995,
the Company had no checking accounts with a balance in excess of $100,000. At
September 30, 1995 the Company had $216,000 in overnight investments in reverse
repurchase agreements, which are not insured by the FDIC. These reverse
repurchase agreements were collateralized by U.S. Government securities.
Short-term investments include certificates of deposit with Carolina
First Bank in the face amount of $197,000 at September 30, 1995.
The cost of the investments approximates market.
NOTE D--SEGMENT INFORMATION
The Company currently operates in a single industry segment:
10
<PAGE>
1) The Financial Services segment consists of making first and
second residential mortgage loans, construction loans, small
business loans and consumer loans.
The Company's operations in the Apparel Manufacturing segment were
discontinued as of September 30, 1995 due to the sale of Young
Generations, Inc. ("YGI"). The results of operations have been restated
to exclude the Apparel Manufacturing segment from continuing
operations.
The Company's operations in the Transportation segment were discontinued
in June of 1995. The results of operations have been restated
to exclude the Transportation segment from continuing operations.
Revenues applicable to the discontinued segments were:
Three Months Ended Nine Months Ended
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
(in thousands) (in thousands)
TRANSPORTATION
$39 $929 $338 $1,812
======= ======= ======= =======
APPAREL MANUFACTURING
$2,370 $2,908 $7,212 $9,669
======= ======== ======== ========
Income from operations attributable to the discontinued segments is reported
net of income tax expense of:
Three Months Ended Nine Months Ended
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
(in thousands) (in thousands)
TRANSPORTATION
$ 0 $ 27 $ 4 $ 39
APPAREL MANUFACTURING
(7) (1) (22) 39
- ------- ------- ------- ------
$ (7) $ 26 $ (18) $ 78
======= ======= ======= ======
11
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
Emergent Group, Inc. has operated in three industry segments for the
past several years: Financial Services, Apparel Manufacturing and
Transportation. The Company's operations in the Transportation segment
were discontinued in June 1995. The Company's operations in the Apparel
Manufacturing segment were discontinued as of September 30, 1995 due to
the sale of YGI. The results of operations have been restated to exclude
the Transportation and Apparel Manufacturing segments from continuing
operations. The following discussion concentrates on the continuing
operations of the Company which consists of the former Financial
Services segment, unless otherwise noted.
Income from continuing operations was $4,072,000 and $1,376,000 for the
nine-month and three-month periods ended September 30, 1995 compared to
$1,695,000 and $1,510,000 for the same periods in 1994. The improved
results for the nine-month period were due principally to the increase
in realized gains on investment sales. The operating companies: Carolina
Investors, Inc. ("CII"), which makes first and second residential
mortgage loans and home improvement loans and sells subordinated
debentures and floating rate notes to investors in South Carolina;
Emergent Business Capital, Inc. ("EBC"), which makes commercial loans
partially guaranteed by the Small Business Administration ("SBA"); The
Loan Pro$, Inc. ("Loan Pro$"), which makes consumer loans secured by
preowned automobiles and Premier Financial Services, Inc. ("Premier"),
which makes consumer loans secured by preowned automobiles; had net
income of $3,735,000 for the nine-month period and net income of
$1,382,000 for the three-month period in 1995 compared to net income of
$1,378,000 for the nine-month period and net income of $1,067,000 for
the three-month period in 1994.
Revenues from continuing operations were $19,013,000 for the nine-month
period and $6,659,000 for the three-month period in 1995 compared to
revenues of $12,508,000 for the nine-month period and $5,693,000 for the
three-month period in 1994. This increase was due principally to the
increase in interest and finance charges and the increase in realized
gains on investment sales. The increase in interest and finance charges
was due principally to the increased loan and serviced portfolios at
CII, EBC, Loan Pro$ and Premier. Interest and finance charges from these
operating companies were $18,375,00 and $6,485,000 for the nine-month
and three-month periods in 1995 compared to $12,183,000 and $5,592,000
for the nine-month and three-month periods in 1994.
Realized gains on investment sales were $3,341,000 and $1,498,000 for the
nine-month and three-month periods in 1995 compared to no activity in 1994.
Expenses of continuing operations were $14,695,000 and $5,161,000 for
12
<PAGE>
the nine-month and three-month periods in 1995 compared to expenses of
$10,652,000 and $4,025,000 for the nine-month and three-month periods in
1994. The increase in expenses was due principally to the increase in
interest expense as a result of increased borrowing by CII, EBC, Loan
Pro$ and Premier to fund the growing loan volumes at each of the
operating companies.
CII had net income of $2,788,000 and $1,318,000 for the nine-month and
three-month periods in 1995 compared to net income of $1,480,000 and
$407,000 for the nine-month and three-month periods in 1994. This
increase is due principally to the increase in interest and finance
charges as a result of the increased loan portfolio and the increase in
realized gain on investment sales. The loan portfolio at CII increased
to $66,644,000 at September 30, 1995 from $55,101,000 at September 30,
1994. CII has placed certain loans on nonaccrual and has foreclosed on a
number of properties due to nonperformance. The loss of interest income
on these nonaccrual loans was approximately $70,000 for the nine-month
period in 1995.
EBC had net income of $901,000 and a net loss of $19,000 for the
nine-month and three-month periods in 1995 compared to net income of
$862,000 and net income of $676,000 for the nine-month and three-month
periods in 1994. EBC securitized $15,357,000 of its retained loan
portfolio during the second quarter of 1995. EBC received proceeds, net
of placement agency fees, of approximately $15,139,000 as a result of
the sale of these loans. EBC had interest income of $2,359,000 for the
nine-month period and $729,000 for the three-month period in 1995
compared to $1,690,000 and $591,000 for the same periods in 1994.
Premiums received on the guaranteed portion of loans made by EBC was
$3,175,000 for the nine-month period and $660,000 for the three-month
period in 1995 compared to $2,932,000 for the nine-month period and
$1,697,000 for the three-month period in 1994.This increase in interest
income, the recognition of certain deferred income items due to the
securitization less the reduction in the premiums received on the sale
of the guaranteed portion of loans made by EBC resulted in decreased
revenue at EBC during the three-month period ended September 30, 1995.
Restrictions put on the 7(a) lending program by the SBA, under which EBC
operates, resulted in a reduction in loan volume at EBC during 1995. The
maximum loan limit was reduced to $500,000 effective January 1, 1995 and
SBA guarantees for certain refinancings were eliminated effective May
15, 1995. This reduction in loan volume resulted in a decrease in
premiums received on the sale of the guaranteed portion of loans during
the three-month period ended September 30, 1995. These restrictions were
rescinded by the SBA as of October 1, 1995. The restrictions regarding
lending for the purpose of refinancing and maximum loan limit were
removed. The SBA did, however, reduce the guarantee percentage on
certain loans and increased the fees to be paid to the SBA both from the
borrower and the lender.
The serviced loan portfolio at EBC increased to $101,045,000 at September 30,
1995 from $79,640,000 at September 30, 1994.
13
<PAGE>
The operations of EBC are subject to the changes in regulations and
operating procedures of the SBA. Management believes that although the
changes made by the SBA during 1995 had an adverse effect on the results
of operations of EBC, the rescission of these changes effective October
1, 1995 should allow EBC to show improved results for the remainder of
1995 and into 1996.
Loan Pro$ had net income of $328,000 and $173,000 for the nine-month and
three-month periods in 1995 compared to net income of $109,000 for the
nine-month period and $77,000 for the three-month period in 1994. This
increase is due principally to the increase in interest income resulting
from the growing loan portfolio serviced by Loan Pro$. Interest income
was $1,916,000 for the nine-month period and $690,000 for the
three-month period in 1995 compared to interest income of $1,254,000 for
the nine-month period and $606,000 for the three-month period in 1994.
The increase in loan volume was due principally to the opening of a new
loan production office by Loan Pro$ during the first quarter of 1995.
The loan portfolio of Loan Pro$ has increased to $12,586,000 at
September 30, 1995 from $5,948,000 at September 30, 1994.
Premier had a net loss of $5,000 for the nine-month period and net
income of $18,000 for the three-month period in 1995 compared to net
income of $29,000 for the nine-month period and $17,000 for the
three-month period in 1994. The opening of Premier's second loan
production office during the first quarter of 1995 resulted in an
increase in expenses which exceeded the increase in interest income due
to the growing loan portfolio. Interest income increased to $555,000 for
the nine-month period and $214,000 for the three-month period in 1995
from $485,000 for the nine-month period and $188,000 for the three-month
period in 1994. Premier's loan portfolio increased to $3,797,000 at
September 30, 1995 from $2,549,000 at September 30, 1994.
Management believes that the Company will continue to operate profitably
in 1995 due to the continued growth in loan portfolios.
INTEREST
Interest income from continuing operations was $11,216,000 for the
nine-month period and $3,909,000 for the three-month period in 1995
compared to $7,711,000 for the nine-month period and $2,840,000 for the
three-month period in 1994. This increase was due to the interest earned
on the increased serviced loan portfolios at CII, EBC, Loan Pro$ and
Premier. The increase in interest income resulting from the increase in
serviced loan portfolios at each of these operating companies is
discussed in the preceding "Results of Operations" section.
Interest expense from continuing operations was $5,941,000 for the
nine-month period and $2,161,000 for the three-month period in 1995
compared to interest expense of $4,246,000 for the nine-month period and
$1,523,000 for the three-month period in 1994. Interest expense
increased as a result of increased borrowings by CII, EBC, Loan Pro$
14
<PAGE>
and Premier in order to fund the growth in loan portfolios at each of these
operating companies.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense from continuing operations was
$7,134,000 for the nine-month period and $2,620,000 for the three-month
period in 1995 compared to $5,178,000 for the nine-month period and
$1,763,000 for the three-month period in 1994. This increase in general
and administrative expense was due principally to the relocation and
expansion of the credit underwriting and loan servicing departments at
CII and the expansion of loan production offices at both Loan Pro$ and
Premier.
CII had general and administrative expense of $3,237,000 for the
nine-month period and $1,550,000 for the three-month period in 1995
compared to $1,593,000 for the nine-month period and $550,000 for the
three-month period in 1994. This increase is also the result of the
allocation of corporate general and administrative expense to the
subsidiaries in 1995.
EBC had general and administrative expense of $3,046,000 for the
nine-month period and $942,000 for the three-month period in 1995
compared to $2,154,000 for the nine-month period and $787,000 for the
three-month period in 1994. This increase was due principally to the
expansion of the finance department and the expansion and centralization
of the loan servicing departments due to EBC receiving "Preferred
Lender" status from the SBA during 1995. This increase is also the
result of the allocation of corporate general and administrative expense
to the subsidiaries in 1995.
Loan Pro$ had general and administrative expense of $772,000 for the
nine-month period and $245,000 for the three-month period in 1995
compared to $527,000 for the nine-month period and $343,000 for the
three-month period in 1994. This increase for the nine-month period was
due primarily to the opening of a new loan production office by Loan
Pro$ during the first quarter of 1995. This increase is also the result
of the allocation of corporate general and administrative expense to the
subsidiaries in 1995.
Premier had general and administrative expense of $301,000 for the
nine-month period and $102,000 for the three-month period in 1995
compared to $204,000 for the nine-month period and $69,000 for the
three-month period in 1994. This increase was due primarily to the
opening of a new loan production office by Premier. This increase is
also the result of the allocation of corporate general and
administrative expense to the subsidiaries in 1995.
Net corporate general and administrative expense was relatively stable
for the nine-month and three-month periods during 1995 compared to 1994,
although there were some additional expenses incurred during 1995 as a
result of the stock tender offer during April and the reverse stock
split which was effective in June. During 1995 corporate general and
administrative expense was allocated to the subsidiaries.
15
<PAGE>
LIQUIDITY AND SOURCES OF CAPITAL
Cash and cash equivalents increased from $384,000 at December 31, 1994
to $878,000 at September 30, 1995. Cash provided by operating
activities for the nine-month period ended September 30, 1995 was
$2,764,000, cash used in investing activities was $17,717,000 and cash
provided by financing activities was $15,447,000.
Cash used in investing activities was due principally to the net
increase in loans originated by and the loans purchased and held for
sale by CII. Cash provided by financing activities was derived
principally from the increase in borrowing by CII through the sale of
senior floating rate notes to investors.
The continuing operations of the Company require continued access to
long-term and short-term sources of capital. This capital requirement is
currently being provided through the sale of senior floating rate notes
and subordinated debentures, mortgage banking activities, realized gains
on investment sales by CII, availability of lines of credit and sales
into the secondary market of the guaranteed portions of loans originated
by EBC, as well as the securitization of loans. These sources of capital
have historically been sufficient to provide for the requirements of the
operations of the Company. Although there can be no assurance as to this
matter, management believes that the capital provided by these sources
should provide the sources of capital necessary to continue the current
and anticipated levels of operations.
CII has available a line of credit in the amount of $20,000,000 of which
$17,692,000 was available at September 30, 1995. EBC has a line of
credit up to a maximum of $32,000,000 of which $2,023,000 was available
at September 30, 1995. The amount that EBC can borrow under this line is
limited to 80% of the unguaranteed portion of loans made by EBC through
the SBA, plus 100% of the unsold guaranteed portion of loans. Loan Pro$
has available a line of credit in the amount of $8,000,000 of which
$135,000 was available at September 30, 1995. Premier has available a
line of credit in the amount of $3,000,000 of which $86,000 was
available at September 30, 1995.
Management believes that the Company's liquidity is adequate to continue
operations on both a short-term and long-term basis.
The Company has accrued a liability of $200,000 as a result of
environmental clean-up required at two former operating locations. The
Company believes, based on recommendations from the environmental
engineering firms advising the Company in each situation and the advice
of legal counsel, that the amount required for the clean-up of the two
sites will not exceed the amounts recorded.
The Company is in the process of upgrading its data processing system.
The total cost of this project is estimated to be approximately
$460,000.
The Company has no additional significant capital requirements as of
September 30, 1995.
16
<PAGE>
PART 2 - OTHER INFORMATION
Item 5. Other Information
The Company discontinued its operations in the Transportation segment in
June 1995. The results of operations have been restated to exclude the
Transportation segment from continuing operations. The Company is
actively seeking buyers for the remaining assets in the Transportation
segment, which consist of the operations of the Pickens Railroad Company
and the Pickens Car Repair Shop and 26 boxcars, of which 19 are leased.
The Company discontinued its operations in the Apparel Manufacturing
segment as of September 30, 1995 as a result of the sale of YGI to the
management of YGI. The results of operations have been restated to
exclude the Apparel Manufacturing segment from continuing operations.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits. None
b) Reports on Form 8-K.
The Company filed a report on Form 8-K dated October 17, 1995 reporting
that on September 30, 1995, the Company entered into a Stock Purchase
Agreement (the "Agreement") by and among the Company and fifteen
individuals who comprise the management of YGI. Pursuant to the
Agreement, the buyers shall pay to the Company pro rata in accordance
with their share ownership, a purchase price of $600,000, payable at
closing through a nonrecourse promissory note. The note is payable in
full on September 30, 2000 and bears interest at 10% per annum.
17
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
EMERGENT GROUP, INC.
Date November 13, 1995 /s/ Robert S. Davis
Robert S. Davis, Vice President,
Chief Financial Officer
18
<PAGE>
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