SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q/A
(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 registrant 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
SEPTEMBER December 31,
30, 1995 1994
(Unaudited)
(in thousands)
ASSETS
Cash and cash equivalents, including
reverse repurchase agreements of
$216,000 in 1995 and $621,000 in 1994 $ 878 $ 278
Short-term investments, at cost 197 597
Loans Receivable:
Loans receivable 93,170 91,567
Notes receivable from related parties 235 169
Excess servicing receivable 2,082 1,872
Accrued interest receivable 1,356 927
Other receivables 553 701
-------- --------
97,396 95,236
Less allowances for credit losses (1,414) (1,730)
Less unearned discount (393) (1,359)
-------- --------
95,589 92,147
Investment in mortgage loans held for
sale 14,348 3,662
Investment in asset-backed securities 1,717 --
Property, plant and equipment 3,626 2,670
Less accumulated depreciation (838) (608)
-------- --------
2,788 2,062
Excess of cost over net assets of
acquired businesses, net of
accumulated amortization of
$552,000 in 1995 and $419,000 in 1994 2,900 2,991
Real estate and personal property held
for sale 3,741 3,603
Deposit base intangibles, net of
accumulated amortization of
$468,000 in 1995 and $384,000 in 1994 628 712
Net assets of discontinued operations 322 3,486
Other assets 1,175 891
-------- --------
TOTAL ASSETS $124,283 $110,429
======== ========
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 $722,000
in 1994 to related parties $ 76,368 $ 56,497
Subordinated debentures, including
$34,000 in 1995 and $69,000 in
1994 to related parties 15,040 20,998
-------- --------
Total investor savings 91,408 77,495
Notes payable to banks and other 19,623 17,520
Accounts payable 107 278
Accrued and sundry liabilities 1,539 3,546
Remittance due to loan participants 1,151 683
Accrued interest 531 471
-------- --------
114,359 99,993
Minority interest 181 736
-------- --------
TOTAL LIABILITIES 114,540 100,729
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 2,870 2,276
-------- --------
TOTAL SHAREHOLDERS' EQUITY 9,743 9,700
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $124,283 $110,429
======== ========
</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 (loss) on disposal, net
of income tax expense (2,320) 585 (2,253) 585
---------- ---------- ---------- ----------
(2,728) 523 (3,479) 1,135
---------- ---------- ---------- ----------
NET INCOME $ (1,352) $ 2,033 $ 593 $ 2,830
========== ========== ========== ==========
Income per share of Common Stock:
Continuing operations $ .41 $ .45 $ 1.21 $ .51
Discontinued operations (.81) .16 (1.04) .34
---------- ---------- ---------- ----------
$ (.40) $ .61 $ .17 $ .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 $ 593 $ 2,830
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 524 601
Provision for losses on finance
receivables 1,235 597
Provision for losses on other
real estate owned 385 548
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
Loss on disposal of property and
equipment 5 --
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
Minority interest in income of
subsidiaries 66 72
Changes in operating assets and liabilities increasing (decreasing) cash:
Accounts receivable (29) 293
Excess servicing receivable (210) (1,265)
Accounts payable, accrued and sundry
liabilities and income taxes payable 1,425 133
Remittance due loan participants 468 139
Accrued interest receivable (429) (65)
Accrued interest payable 59 (38)
Customer commitment deposits (287) 207
Other assets (287) (45)
Net cash provided by (used in)
operating activities in
discontinued operations 1,590 (521)
-------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,875 15,876
</TABLE>
7
<PAGE>
EMERGENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)--Continued
Nine Months Ended
September 30,
1995 1994
(in thousands)
INVESTING ACTIVITIES
Loans originated--held for investment $ (53,462) $ (56,160)
Principal proceeds from loans not sold 35,289 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 securitization of loans 15,357 --
Payments to securitization trustee for
cash reserve (652) --
Purchases of property and equipment (985) (267)
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) --
Proceeds from sale of investments in
mortgage loans 78,965 --
Cash received from sale of subsidiary
net of cash sold -- (88)
Proceeds from sale of investments 417 581
Principal collections on asset backed
securities 77 --
Net cash provided by (used in)
investing activities in discontinued
operations 194 (154)
--------- ---------
NET CASH (USED IN) INVESTING
ACTIVITIES (17,682) (34,605)
FINANCING ACTIVITIES
Advances under bank lines of credit 114,561 71,848
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 (used in) financing
activities in discontinued operations 40 (133)
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 15,407 14,620
--------- ---------
8
<PAGE>
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 600 (4,109)
Cash and cash equivalents at
beginning of year 278 4,960
--------- --------
CASH AND CASH EQUIVALENTS AT
SEPTEMBER 30 $ 878 $ 851
========== =========
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
$23,370 $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
(66) (1) (81) 39
- ------- ------- ----- ------
$ (66) $ 26 $(77) $ 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 $1,499,000 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
$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 $278,000 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 $2,875,000, cash used in
investing activities was $17,682,000 and cash provided by financing activities
was $15,407,000.
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.
In connection with the sale of YGI, the Company wrote off all amounts
due the Company from YGI as intercompany debt and amounts due to the Company
from the purchasers of the YGI stock, which amounts totaled $3,636,000,
net of income taxes. The Company wrote off these amounts due to its
concern over a decline in YGI's operating profits and the related impact on
YGI's and the purchasers' ability to repay these obligations.
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 February 23, 1996 /s/ Robert S. Davis
Robert S. Davis, Vice President,
Chief Financial Officer
18
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
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0
0
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