THIS DOCUMENT IS A COPY OF THE JUNE 30, 1995 FORM 10-Q FILED ON AUGUST
15, 1995 PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
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 June 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 July 31, 1995
Common $.05 par value 60,020
Class A Common $.05 par value 3,119,881
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 June 30, 1995 of Emergent Group, Inc. and subsidiaries and
the unaudited consolidated statements of income for the three-month and
six-month periods ended June 30, 1995 and 1994 and unaudited
statements of cash flows for the six-month periods ended June 30,
1995 and 1994.
Elliott, Davis & Company 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.
EMERGENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
1995 December 31,
(Unaudited) 1994
(in thousands)
<S> <C> <C>
ASSETS
Cash and cash equivalents, including
reverse repurchase agreements of
$502,000 in 1995 and $378,000 in 1994 $ 2,760 $ 384
Short-term investments, at cost 197 597
Accounts receivable, net of allowance
for doubtful accounts of $286,000 in
1995 and $271,000 in 1994 637 898
Inventories, net of reserve for obsolete
inventory of $262,000 in 1995 and 1994 4,383 3,719
Loans Receivable:
Loans receivable 87,868 88,023
Notes receivable from related parties 130 169
Excess servicing receivable 1,973 1,872
Note Receivable 844 920
Accrued interest receivable 1,402 927
92,217 91,911
Less allowance for credit losses (1,286) (1,433)
Less unearned discount (492) (1,359)
90,439 89,119
Investment in mortgage loans held for
sale 10,127 3,662
Investment in asset-backed securities 1,378 -
Property, plant and equipment 6,760 6,836
Less accumulated depreciation (3,666) (3,442)
3,094 3,394
Excess of cost over net assets of
acquired businesses, net of
accumulated amortization of
$606,000 in 1995 and $517,000 in 1994 2,902 2,991
Real estate and personal property
held for sale, net of allowance of
$267,000 in 1995 and $297,000 in 1995 5,172 5,930
Deposit base intangibles, net of
accumulated amortization of
$468,000 in 1995 and $412,000 in 1994 656 712
Other assets 1,786 1,288
TOTAL ASSETS $123,531 $112,694
</TABLE>
EMERGENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--(Continued)
<TABLE>
<CAPTION>
June 30,
1995 December 31,
(Unaudited) 1994
(in thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Investor Savings:
Notes payable to investors,
including $749,000 in 1995 and
$722,000 in 1994 to related parties $ 71,351 $ 56,497
Subordinated debentures, including
$61,000 in 1995 and $69,000 in 1994
to related parties 13,105 20,998
Total investor savings 84,456 77,495
Notes payable to banks and other 21,428 18,438
Accounts payable 953 1,242
Accrued and sundry liabilities 2,889 3,922
Remittance due to loan participants 1,990 683
Accrued interest 567 478
27,827 24,763
Minority interest 146 736
TOTAL LIABILITIES 112,429 102,994
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 6,722 6,924
Retained Earnings 4,221 2,276
TOTAL SHAREHOLDERS' EQUITY 11,102 9,700
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $123,531 $112,694
</TABLE>
See notes to unaudited financial statements
EMERGENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(in thousands except (in thousands except
per share amounts) per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Financial Services:
Interest and finance charges $ 3,903 $ 2,602 $ 7,253 $ 4,832
Mortgage banking activities - 31 - 65
Gain on sale of loans 2,071 855 2,515 1,422
Realized gain on investment
sales 1,077 - 1,843 -
Other income 128 161 281 272
7,179 3,649 11,892 6,591
Apparel manufacturing sales 1,537 1,748 4,876 5,534
Other interest income 25 9 56 21
Life insurance proceeds - 1,250 - 1,250
Management fees 330 80 410 161
Total revenues 9,071 6,736 17,234 13,557
Expenses:
Financial Services:
Interest expense 2,068 1,403 3,813 2,701
Provision for credit losses 694 286 944 488
Provision for loss on real
estate and personal property
held for sale 56 - 295 -
General and administrative
expense 1,746 1,537 3,810 2,820
4,564 3,226 8,862 6,009
Cost of apparel manufacturing
sales 882 1,105 3,091 3,283
Other interest expense 61 84 117 194
Provision for obsolete
inventory - 300 - 300
Other selling, general and
administrative expense 1,782 1,499 3,235 3,131
Total expenses 7,289 6,214 15,305 12,917
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES AND MINORITY INTEREST 1,782 522 1,929 640
</TABLE>
EMERGENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)--Continued
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(in thousands except (in thousands except
per share amounts) per share amounts)
<S> <C> <C> <C> <C>
Provision for income taxes:
Current 40 185 61 184
Deferred 47 117 18 (148)
87 302 79 36
INCOME FROM CONTINUING
OPERATIONS BEFORE MINORITY
INTEREST 1,695 220 1,850 604
Minority interest in earnings
of subsidiary (23) (83) (31) (89)
INCOME FROM CONTINUING
OPERATIONS 1,672 137 1,819 515
Discontinued Transportation
Segment: (NOTE D)
Income from operations, net of
income tax expense 39 149 61 282
Gain on sale of property and
equipment 65 - 65 -
104 149 126 282
NET INCOME $ 1,776 $ 286 $ 1,945 $ 797
Income per share of Common Stock:
Continuing operations $0.50 $0.04 $0.54 $0.16
Discontinued operations $0.03 $0.05 $0.04 $0.09
$0.53 $0.09 $0.58 $0.24
Computed on the weighted
average number of shares
issued 3,345,304 3,273,868 3,345,304 3,273,868
</TABLE>
See notes to unaudited financial statements
EMERGENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,945 $ 797
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 455 583
Provision for credit losses 944 350
Provision for losses on other
real estate owned 294 139
Gain on sale of investments
in mortgage loans (1,843) -
Gain on disposal of property
and equipment (60) -
Loss on sale of investments - 68
Net increase (decrease) in
deferred premium income (1,140) 223
Loans originated--held for sale (14,664) (17,130)
Principal proceeds from loans sold 14,491 22,555
Net increase in funds collected
and not remitted to participants
on loans sold 1,307 233
Revenue recorded under an assigned
operating lease - (394)
Interest expense from assignment of
an operating lease - 129
Minority interest in income of
subsidiaries 31 89
Changes in operating assets and liabilities
increasing (decreasing) cash:
Accounts receivable and factor reserves 276 47
Life insurance proceeds receivable - (1,293)
Excess servicing receivable (102) (239)
Customer commitment deposits (282) -
Inventories (664) 64
Deferred premium income receivable - 242
Accrued interest payable 89 (70)
Accounts payable, accrued and sundry
liabilities and income taxes payable (1,162) 615
Accrued interest receivable (475) (59)
Other assets (534) 182
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (1,094) 7,131
EMERGENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)--Continued
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
(in thousands)
<S> <C> <C>
INVESTING ACTIVITIES
Loans originated--held for investment $(38,529) $(34,529)
Principal collections on loans not sold 22,214 15,324
Purchase of investments in mortgage
loans held for sale (51,456) -
Proceeds from securitization of loans 15,357 -
Payments to securitization trustee for
cash reserve (341) -
Proceeds from sale of investments in
mortgage loans 45,258 -
Proceeds from sale of short-term
investments 417 579
Proceeds from sale of real estate and
personal property held for sale 1,414 497
Proceeds from sale of property and
equipment 111 -
Payments received on notes receivable 75 -
Purchases of property and equipment (387) (282)
Rent received on real estate held for
sale 59 17
Improvements and related costs incurred
on real estate held for sale (112) (346)
NET CASH (USED IN) INVESTING
ACTIVITIES (5,920) (18,740)
FINANCING ACTIVITIES
Advances under bank lines of credit 86,823 36,068
Payments on bank lines of credit (83,755) (30,774)
Net decrease in notes payable - (10)
Net increase in notes payable to
investors 14,854 2,296
Net (decrease) increase in subordinated
debentures (7,894) 922
Payments of long-term debt and capital
lease obligations (78) (90)
Cash paid for stock purchased in
Tender Offer (560) -
NET CASH PROVIDED BY FINANCING
ACTIVITIES 9,390 8,412
Net increase (decrease) in cash and
cash equivalents 2,376 (3,197)
Cash and cash equivalents at
beginning of year 384 4,960
CASH AND CASH EQUIVALENTS AT JUNE 30 $ 2,760 $ 1,763
</TABLE>
See notes to unaudited financial statements
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 for 1994 including the
footnotes thereto.
The consolidated balance sheet as of June 30, 1995 and the
consolidated statements of income for the three-month and six-month
periods ended June 30, 1995 and 1994 and the consolidated statements
of cash flows for the six-month periods ended June 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 six-month period ended June 30, the Company paid interest of
$4,935,000 in 1995 and $2,834,000 in 1994.
For the six-month period ended June 30, the Company paid income
taxes of $67,000 in 1995 and $70,000 in 1994.
NOTE C--CASH AND CASH EQUIVALENTS
The Company maintains its primary checking accounts with two
principal banks and makes overnight investments in reverse
repurchase agreements with those same banks. The amounts maintained
in the checking accounts are insured by the Federal Deposit
Insurance Corporation ("FDIC") up to $100,000. At June 30, 1995 the
amounts maintained in overnight investments in reverse repurchase
agreements, which are not insured by the FDIC, totaled $502,000 all
of which was with Carolina First Bank. The investments were
collateralized by U.S. Government securities held by the bank.
Short-term investments include certificates of deposit with Carolina
First Bank in the face amount of $197,000. The cost of the
investments approximates market.
NOTE D--SEGMENT INFORMATION
The Company currently operates in two industry segments:
1) The Financial Services segment consists of making first and
second residential mortgage loans, construction loans, small business
loans and consumer loans.
2) The Apparel Manufacturing segment consists of design, manufacture,
and marketing of dresses for children.
3) The Transportation segment, which was discontinued in June of
1995, consisted of short line railroad operations, leasing of
boxcars and railcar repair operations. The results of operations
have been restated to exclude the Transportation segment from
continuing operations.
Revenues applicable to the discontinued Transportation segment were:
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(in thousands) (in thousands)
$190 $433 $299 $883
Income from operations attributable to the discontinued
Transportation segment is reported net of income tax expense of:
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(in thousands) (in thousands)
$4 $6 $5 $12
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. In June 1995, the Company decided to discontinue
the Transportation segment. The results of operations have been
restated to exclude the Transportation segment from continuing
operations. The following discussion concentrates on the continuing
operations of the Financial Services and Apparel Manufacturing
segments unless otherwise noted.
Income from continuing operations was $1,819,000 and $515,000 for
the six-month and three-month period ended June 30, 1995 compared to
$1,672,000 and $137,000 for the same periods in 1994. The improved
results were due principally to the increase in interest and finance
charges revenue and the increase in the gains on sale of loans and
the realized gain on investment sales by the Financial Services
segment. The Financial Services segment, which consists of Carolina
Investors, Inc. ("CII"), Emergent Business Capital, Inc. ("EBC"),
The Loan Pro$, Inc. ("Loan Pro$") and Premier Financial Services,
Inc. ("Premier") had net income of $2,352,000 and $1,959,000 for the
six-month and three-month periods in 1995 compared to $281,000 and
$207,000 for the comparable periods in 1994.
The Apparel Manufacturing segment, which consists of Young
Generations, Inc. ("YGI") reported a net loss of $878,000 and
$539,000 for the six-month and three-month periods in 1995 compared
to net income of $412,000 and $300,000 for the comparable periods in
1994. This decrease was due to the lower sales volume in 1995 of the
children's dresses manufactured by YGI and the receipt in 1994 of
$1,250,000 in proceeds from a life insurance policy due to the death
of the former President of YGI.
FINANCIAL SERVICES
Revenues attributable to the Financial Services segment in 1995 were
$11,890,000 and $7,179,000 for the six-month and three-month periods
compared to $6,587,000 and $3,644,000 for the comparable periods in
1994. The increase in revenue was due principally to the increased
interest income as a result of the increased serviced loan
portfolios of CII, EBC, Loan Pro$ and Premier. Interest income and
finance charges from the Financial Services segment was $7,253,000
and $3,916,000 for the six-month and three-month periods in 1995
compared to $4,832,000 and $2,602,000 for the same periods in 1994.
Operating costs of the Financial Services segment were $8,862,000
for the six-month period and $4,565,000 for the three-month period
in 1995 compared to $6,009,000 and $3,227,000 for the same periods
in 1994. This increase in operating costs was due principally to
the increase in interest expense as a result of increased borrowing
by the Financial Services segment to fund the growing loan volume at
CII, EBC, Loan Pro$ and Premier.
CII had net income of $1,470,000 for the six-month period and
$811,000 for the three-month period in 1995 compared to $1,073,000
and $1,079,000 for the same periods in 1994. This increase is due
principally to the increase in interest income as a result of the
larger loan portfolio and the increase in realized gains on
investment sales. The loan portfolio at CII has increased to
$61,944,000 at June 30, 1995 from $49,529,000 at June 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 $90,000 for the
six-month period in 1995.
EBC had net income of $920,000 for the six-month period and
$1,142,000 for the three-month period in 1995 compared to $190,000
for the six-month period and $125,000 for the three-month period in
1994. The increase is due to the recognition of certain deferred
income items as a result of the securitization of $15,357,000 of
EBC's retained loan portfolio. EBC received proceeds, net of
placement agency fees, of approximately $15,139,000 due to the sale
of these loans. EBC also had interest income of $1,630,000 for the
six-month period and $931,000 for the three-month period in 1995
compared to $806,000 and $459,000 for the same periods in 1994. The
serviced loan portfolio at EBC increased to $97,726,000 at June 30,
1995 from $72,885,000 at June 30, 1994.
Loan Pro$ had net income of $155,000 for the six-month period and
$117,000 for the three-month period in 1995 compared to $32,000 and
$20,000 for the same periods in 1994. This increase is due to the
increase in interest income as a result of the larger loan portfolio
serviced by Loan Pro$. Interest income was $1,099,000 for the
six-month period and $643,000 for the three-month period in 1995
compared to $606,000 and $333,000 for the same periods in 1994. The
increase in loan volume is due principally to the opening of new
loan production offices by Loan Pro$; one in January 1994 and one in
January 1995. Loan Pro$ currently has four loan production offices.
The loan portfolio of Loan Pro$ has increased to $10,974,000 at June
30, 1995 from $5,326,000 at June 30, 1994. The increase in interest
income was offset by the increase in interest expense due to
increased borrowings to fund the growth in loan volume. Interest
expense was $349,000 for the six-month period and $136,000 for the
three-month period in 1995 compared to $158,000 and $71,000 for the
same periods in 1994.
Premier had a net loss of $23,000 for the six-month period and a net
loss of $16,000 for the three-month period in 1995 compared to net
income of $24,000 and net income of $14,000 for the same periods in
1994. Even though Premier had an increase in interest income as a
result of growth in loan volume, the increase in expenses due to the
opening and start-up costs of Premier's second loan
production office exceeded the increase in revenues. Premier's loan
portfolio has grown to $3,374,000 at June 30, 1995 from $2,652,000 at
June 30, 1994.
Management believes that the Financial Services segment will
continue to operate profitably in 1995 due to the continued growth
in loan portfolios and the increase in realized gains on investment
sales at CII.
The operations of EBC are subject to the changes in regulations and
operating procedures of the SBA. The SBA reduced the total amount
of any single loan which it would guarantee from $1,000,000 to
$500,000 effective January 1, 1995 and discontinued federal
guaranties for certain refinancings as of May 15, 1995. The SBA
will continue to guarantee refinancings for debts to suppliers.
Management believes that these changes may have an adverse effect on
the volume of loans made by EBC. Management anticipates that these
policy changes by the SBA may be subject to review and possible
revision and improvement as the fiscal 1996 budget of the U. S.
Government is finalized.
Management has determined that other lending opportunities are
available which may provide additional volume and profitability to
EBC.
APPAREL MANUFACTURING
YGI had a net loss of $878,000 for the six-month period and a net
loss of $539,000 for the three-month period ending June 30, 1995
compared to net income of $412,000 for the six-month period and
$300,000 for the three-month period in 1994. This reduction in net
income was the result of YGI's receipt of $1,250,000 in life
insurance proceeds in 1994 due to the death of the former President
of YGI. Were it not for the life insurance proceeds, YGI would have
had a net loss of $813,000 for the six-month period and a net loss
of $925,000 for the three-month period ending June 30, 1994.
YGI had revenues of $4,876,000 for the six-month period and
$1,537,000 for the three-month period in 1995 compared to revenues
of $5,536,000 for the six-month period and $1,748,000 for the
three-month period in 1994. This decrease in revenues was due
principally to the reduction in the number of children's specialty
stores in the market and the reduction in orders placed by retail
department stores. Net sales at wholesale to specialty and
department stores were $2,671,000 for the six-month period and
$339,000 for the three-month period in 1995 compared to $3,287,000
for the six-month period and $736,000 for the three-month
period in 1994. Sales in the retail outlet stores were $2,205,000 for
the six-month period and $1,197,000 for the three-month period in 1995
compared to $2,247,000 for the six-month period and $1,012,000 for
the three-month period in 1994. This reduction in sales volume at
the retail outlet stores is due principally to the generally poor
condition of the retail market throughout the country. YGI
currently has thirteen retail factory outlet stores.
Cost of sales at YGI was $3,091,000 for the six-month period and
$881,000 for the three-month period in 1995 compared to $3,283,000
for the six-month period and $1,106,000 for the three-month period
in 1994. The reduction in cost of sales was due to the lower sales
volume as discussed in the preceding paragraph.
Management has increased its efforts to improve the quality and
styling of the children's dresses being manufactured by YGI and has
increased marketing efforts, principally to major department stores,
in order to try to recover YGI's market share of children's dresses.
There is, however, no assurance that these efforts will be
successful.
INTEREST
Interest income for the six-month period was $7,309,000 and
$3,928,000 for the three-month period in 1995 compared to $4,853,000
for the six-month period and $2,611,000 for the three-month period
in 1994. This increase was due principally to the interest earned
on the increased loan portfolios at CII and EBC. CII had interest
income of $3,904,000 for the six-month period and $1,726,000 for the
three-month period in 1995 compared to $2,791,000 for the six-month
period and $1,482,000 for the three-month period in 1994. EBC had
interest income of $1,630,000 for the six-month period and $931,000
for the three-month period in 1995 compared to $812,000 for the
six-month period and $459,000 for the three-month period in 1994.
Interest expense for the six-month period was $3,930,000 and
$2,130,000 for the three-month period in 1995 compared to $3,024,000
for the six-month period and $1,550,000 for the three-month period
in 1994. Interest expense increased due to increased borrowings by
the Financial Services segment in order to fund the growth in loan
portfolios principally at CII and EBC.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense was $7,068,000 for the
six-month period and $3,540,000 for the three-month period in 1995
compared to $6,021,000 for the six-month period and $3,061,000 for
the three-month period in 1994. This increase is due principally to
the increase in general and administrative expense in the Financial
Services segment.
General and administrative expense in the Financial Services segment
was $3,810,000 for the six-month period and $1,747,000 for the
three-month period in 1995 compared to $2,862,000 for the six-month
period and $1,580,000 for the three-month period in 1994. This
increase was due principally to the expansion of the credit
underwriting department at CII and the opening of one new loan
production office at both Loan Pro$ and Premier.
The Apparel Manufacturing segment had selling, general and
administrative expense of $2,496,000 for the six-month period and
$1,092,000 for the three-month period in 1995 compared to $2,536,000
for the six-month period and $1,217,000 for the three-month period
in 1994. The relative stability of selling, general and
administrative expense is indicative of YGI's efforts to control
costs while increasing efforts in the sales of their product line.
Net corporate selling, general and administrative expense was
$740,000 for the six-month period and $398,000 for the three-month
period in 1995 compared to $599,000 for the six-month period and
$286,000 for the three-month period in 1994. This increase is due
principally to the expenses relative to the Stock Tender Offer
during April 1995 and the reverse stock split approved by the
Company's shareholders at the June 9 Annual Meeting of shareholders.
LIQUIDITY AND SOURCES OF CAPITAL
Cash and cash equivalents increased from $384,000 at December 31,
1994 to $2,760,000 at June 30, 1995. Cash used in operating
activities for the six-month period ended June 30, 1995 was
$1,094,000, cash used in investing activities was $5,920,000 and
cash provided by financing activities was $9,390,000.
Cash used in investing activities was due principally to the net
increase in loans originated and held for sale by the Financial
Services segment. Cash provided by financing activities was due
principally to the increase in borrowing by the Financial Services
segment, both through bank financing and through the sale of senior
floating rate notes.
The Financial Services segment requires continual 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, utilization
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 Financial Services segment. Although there can be no assurance
as to this matter, management believes, based on historical
retention of invested funds, 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 $17,666,000 was available at June 30, 1995. EBC has a line of
credit up to a maximum of $32,000,000 of which $942,000 was
available at June 30, 1995. The amount that EBC can borrow under
this line is limited to 80% of the unguaranteed portion of loans
made by EBC through the SBA, plus 100% of the unsold guaranteed
portion of loans. Loan Pro$ has available a line of credit in the
amount of $8,000,000 of which $1,289,000 was available at June 30,
1995. Premier has available a line of credit in the amount of
$3,000,000 of which $215,000 was available at June 30, 1995. YGI
has available a line of credit in the amount of $250,000 of which
none was available at June 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 has plans to upgrade its data processing system during
1995. The total cost of this project has not yet been determined.
The Company has no additional significant capital requirements as of
June 30, 1995.
PART 2 - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
In addition to the election of eight persons to the Company's
Board of Directors and the ratification of independent auditors for
fiscal year 1995, the shareholders of the Company voted on the
following matters at the annual meeting of shareholders on June 9,
1995:
a) The proposal to adopt an amendment to the Company's
Articles of Incorporation to effect a one-for-three reverse split of the
Company's Common and Class A Common stock;
Common Class A Common
For 141,224 7,292,795
Against 1,047 97,872
Abstain 92 4,312
Broker Non-Vote 834 20,051
b) The proposal to adopt an amendment to the Company's
Articles of Incorporation to increase the authorized shares of
Common stock to 4,000,000 shares;
Common Class A Common
For 140,828 7,265,823
Against 931 99,714
Abstain 605 29,441
Broker Non-Vote 833 20,502
c) The approval of the Company's 1995 Employee and Officer
Stock Option Plan;
Common Class A Common
For 139,921 7,032,597
Against 1,031 54,129
Abstain 1,411 69,457
Broker Non-Vote 834 258,847
d) The approval of the Company's 1995 Director Stock
Option Plan;
Common Class A Common
For 139,830 7,034,017
Against 1,072 50,748
Abstain 1,461 71,417
Broker Non-Vote 834 258,848
Item 5. Other Information
The Company decided to discontinue 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 29
boxcars, of which 20 are leased.
On March 31, 1995, the Company sent to all shareholders
offers to purchase for cash up to a total of 20,000 shares of its
Common stock and up to a total of 980,000 shares of its Class A
Common stock at a price, net to the seller in cash, of $1.15 per
share upon the terms and subject to the conditions set forth in the
Tender Offer. The offer expired, including the extended expiration
date, on May 8, 1995. The Company purchased 19,377 shares of its
Common stock and 467,288 shares of its Class A Common stock pursuant
to the Tender Offer. The Company paid approximately $560,000 for
the purchase of the tendered shares.
On June 14, 1995, the Company effected a one-for-three reverse stock
split with respect to the Company's shares of Common stock and Class A
Common stock. Following the consummation of the reverse split, there
were outstanding 60,020 shares of Common stock and 3,119,881 shares of
Class A stock.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits. None
b) Reports of Form 8-K.
The Company filed a report on Form 8-K dated July 13,
1995 reporting that on June 29, 1995, Emergent Business Capital,
Inc. ("EBC"), a wholly-owned subsidiary of Emergent Group, Inc. (the
"Company") entered into the Pooling and Servicing Agreement (the
"Pooling Agreement") dated as of June 29, 1995 between EBC, as
Seller and Master Servicer, and First Union National Bank of North
Carolina, as Trustee (the "Trustee"), which Pooling Agreement
established a trust (the "Trust").
Pursuant to the Pooling Agreement and the Certificate Purchase
Agreement entered into between EBC and Prudential Securities
Incorporated, the Company (through the Trust) issued and sold to
Prudential Securities Incorporated $15,357,000 aggregate principal
amount of Emergent SBA Loan-Backed Adjustable Rate Certificates,
Series 1995-1, Class A (the "Class A Certificates"). The Class A
Certificates, together with the Emergent SBA Loan-Backed Adjustable
Rate Certificates, Series 1995-1, Class B, represent the entire
undivided ownership interest in certain unguaranteed interests in a
pool of loans partially guaranteed by the U.S. Small Business
Administration.
In connection with the transactions described above, EBC received
proceeds, net of placement agency fees and expenses, of
approximately $15,139,000.
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 8/14/95
/s/ Robert S. Davis
Robert S. Davis, Vice President,
Chief Financial Officer
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