<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended June 30, 1995
Commission File No. 0-7765
CROWELL & CO., INC.
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(Exact Name of small business issuer as specified in its charter)
GEORGIA 58-1021933
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
432 South Belair Road, Augusta, Georgia 30907
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(Address of principal executive offices)
Issuer's telephone number, including area code (706) 855-1099
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 and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of issuer's common equity as of August 10,
1995 is 2,520,835.
1
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CROWELL & CO., INC.
INDEX
PAGE NO.
PART 1 - FINANCIAL INFORMATION
ITEM 1 - Financial Statements ........................... 4
ITEM 2 - Management's Discussion and Analysis ........... 8
PART 2 - OTHER INFORMATION
ITEM 5 - Other Information ............................... 10
ITEM 6 - Exhibits and Reports on Form 8-K ............... 10
2
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following condensed consolidated financial statements of Crowell & Co.,
Inc., and Subsidiaries are included in Item 1:
Condensed Consolidated Balance Sheet
June 30, 1995
Condensed Consolidated Statements of Operations and Accumulated Deficit -
Three month and six month periods ended June 30, 1995 and 1994
Condensed Consolidated Statements of Cash Flows -
Three month and six month periods ended June 30, 1995 and 1994
Notes to Condensed Consolidated Financial Statements
3
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CROWELL & CO., INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1995
ASSETS
<TABLE>
<CAPTION>
<S> <C>
PROPERTIES HELD FOR RESALE & DEVELOPMENT
Homes under construction and for sale $ 3,316,750
Developed residential 1,156,220
Land held for future development and other 379,550
-----------
4,852,520
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CASH, INCLUDING ESCROW FUNDS OF $ 50,505 500,734
-----------
RECEIVABLES 309,299
-----------
PROPERTY AND EQUIPMENT, NET OF DEPRECIATION 372,372
-----------
OTHER ASSETS 55,066
-----------
$ 6,089,991
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE TO BANKS $ 4,909,678
-----------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 199,730
-----------
STOCKHOLDERS' EQUITY
Preferred stock 1,011,899
Common stock 682,805
Paid-in capital 47,619
Accumulated deficit (761,740)
-----------
980,583
-----------
$ 6,089,991
===========
</TABLE>
See notes to condensed consolidated financial statements.
4
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CROWELL & CO., INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
Home sales $1,985,509 $3,675,421 $2,922,449 $7,059,957
All other revenues 342,365 746,182 776,118 1,366,219
---------- ---------- ---------- ----------
2,327,874 4,421,603 3,698,567 8,426,176
---------- ---------- ---------- ----------
COST OF REVENUES
Homes 1,862,331 3,336,143 2,713,496 6,318,375
All other costs 133,285 380,955 270,390 659,892
---------- ---------- ---------- ----------
1,995,616 3,717,098 2,983,886 6,978,267
---------- ---------- ---------- ----------
OPERATING EXPENSES 579,323 607,588 1,087,988 1,326,159
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) (247,065) 96,917 (373,307) 121,750
---------- ---------- ---------- ----------
OTHER INCOME 107,673 0 107,673 0
---------- ---------- ---------- ----------
NET FINANCIAL EXPENSE 111,521 40,999 206,784 90,711
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (250,913) 55,918 (472,418) 31,039
---------- ---------- ---------- ----------
INCOME TAX (EXPENSE) BENEFIT (4,003) 0 (5,503) 61,499
---------- ---------- ---------- ----------
NET INCOME (LOSS) (254,916) 55,918 (477,921) 92,538
---------- ---------- ---------- ----------
ACCUMULATED DEFICIT
Beginning of period (506,823) (633,910) (283,818) (610,578)
Preferred dividends 0 0 0 59,952
End of period (761,739) (577,992) (761,739) (577,992)
---------- ---------- ---------- ----------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,520,835 2,520,835 2,520,835 2,520,835
NET INCOME (LOSS) PER COMMON SHARE $(0.1) $0.01 $(0.21) $0.02
</TABLE>
See notes to condensed consolidated financial statements.
5
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CROWELL & CO., INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ($ 254,916) $ 55,918 ($ 477,921) $ 92,538
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 50,219 34,825 80,151 75,533
Net (increase) decrease in inventory,
receivables, prepaids, payables and accruals 904,748 261,067 1,016,286 (205,430)
---------- --------- ---------- ---------
Net cash used in operating activities 700,051 351,810 618,516 (37,359)
---------- --------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment 0 (6,710) (12,638) (33,211)
Receipts on notes 200,000 0 269,883 0
---------- --------- ---------- ---------
Net cash provided by (used in) investing activities 200,000 (6,710) 257,245 (33,211)
---------- --------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 516,683 2,993,617 1,134,450 6,432,591
Payments of borrowings (1,121,158) (3,322,879) (1,739,809) (6,368,200)
Payments of preferred stock dividends 0 0 0 (59,952)
---------- --------- ---------- ---------
Net cash provided by (used in) financing activities (604,475) (329,262) (605,359) 4,439
---------- --------- ---------- ---------
NET INCREASE (DECREASE) IN CASH 295,576 15,838 270,402 (66,131)
CASH AT BEGINNING OF PERIOD 205,158 346,552 230,332 428,521
CASH AT END OF PERIOD $ 500,734 $ 362,390 $ 500,734 $ 362,390
========== ========= ========== =========
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 4,003 $ 3,784 $ 5,503 0
Interest paid, net of amount capitalized $197,773 $ 39,786 $ 99,012 $ 89,498
</TABLE>
See notes to condensed consolidated financial statements.
6
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CROWELL & CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements are presented in accordance with the
requirements of Form 10-QSB and consequently do not include all of the
disclosures normally required by generally accepted accounting principles or
those normally made in the Company's annual Form 10-KSB filing. Accordingly,
the reader of this Form 10-QSB may wish to refer to the Company's Form 10-KSB
for the year ended December 31, 1994, for further information.
The financial information has been prepared in accordance with the Company's
customary accounting practices and has not been audited. In the opinion of
management, the information presented reflects all adjustments necessary for a
fair statement of interim results. All such adjustments are of a normal and
recurring nature.
NOTE 2 - INCOME (LOSS) PER SHARE
The income or loss per common share has been computed using the weighted
average of the number of shares outstanding during the three and six month
periods ended June 30, 1995 and 1994. Because inclusion of convertible
preferred stock would have an anti-dilutive effect on the income or loss per
common share, the convertible preferred stock is excluded from the computation
of the income or loss per common share assuming full dilution for the quarters
ended June 30, 1995 and 1994, and for the six months ended June 30, 1995 and
1994.
7
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATION FOR THE QUARTERS ENDED JUNE 30, 1995 AND 1994
The primary sources of revenue of Crowell & Co., Inc., and Subsidiaries (the
"Company") are the development of residential properties for resale and
homebuilding.
Other sources of revenue include sales of computer software and hardware,
operation of a pool and tennis facility, and various other real estate related
activities.
Total revenues for the quarter ended June 30, 1995, are $2,093,729 less than
revenues for the quarter ended June 30, 1994. Management believes the
uncertainty regarding large layoffs at Savannah River Site caused the decrease
in sales. As the uncertainty regarding the layoffs is alleviated, management
believes sales activity will increase.
Currently sales backlog on Company constructed homes is $1,287,900.
Construction on these homes is 71% complete. Backlog represents signed
contracts for the purchase of homes where the property has not been closed.
Therefore, the Company still holds legal title and has not recognized any
income.
The gross profit margin on home sales decreased in the quarter ended June
30, 1995, as compared to the quarter ended June 30, 1994, from 9.2 % to 6.2 %
because of competitive pressures caused by the Savannah River Site layoffs.
Management believes gross profit margin will improve when sales activity
increases.
Operating expenses decreased by $28,265 for the quarter ended June 30, 1995,
as compared to the same quarter last year. This is a result of decreases in
legal fees, advertising and sales promotion and general decreases in several
other operating expense categories. Management believes operating expenses
will decrease from second quarter levels for the third quarter because of the
disposition of the Company's residential brokerage division. Operating
expenses include salaries, office expenses, occupancy, depreciation,
advertising and promotion, taxes and licenses, legal and accounting,
communications, and other expenses. These expenses are fixed in nature and
normally do not fluctuate with different revenue levels.
The Company had a net loss for the second quarter of 1995 of $254,916
compared to net income of $55,918 for the second quarter of 1994. Management
believes the company will sustain another loss for the third quarter of 1995
based on sales activity in new home sales.
LIQUIDITY AND CAPITAL RESOURCES
The Company has obtained financing historically by borrowing from
conventional lending sources using land acquired for development as security
for loans.
8
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Current and future liquidity needs are expected to be met by use of the
proceeds from home, lot, and land sales and the proceeds from loans, using
lands purchased for development as collateral. Existing development loans and
commitments available to the Company have been made by various financial
institutions and are secured by raw land and the improved lots held for resale.
Payments of interest are due monthly or quarterly and a portion of the
principal is repaid as each lot is sold. The Company has approximately
$135,000 in unused development loan commitments available to use in the
development of residential properties as of June 30, 1995.
Residential home construction costs are expected to be met through the use
of existing commitments aggregating approximately $255,000 as of June 30,
1995, and through the use of additional commitments also using the improved
lots as collateral. Lot acquisition costs and home construction costs are
financed by construction loans from a number of conventional lending sources,
generally lending 90-95% of the costs of the home, secured by the lot and
improvements. These loans are repaid upon the sale of the home. These loans
are negotiated and closed on a project-by-project and lot-by-lot basis.
In addition to the development loans, the Company has a loan agreement with
an Augusta, Georgia, savings and loan institution in the amount of
approximately $335,000 which is secured by real property.
The Company also has several other loans with various lenders which are
secured by various Company assets.
Financing arrangements for long-term needs have not been made. Such
arrangements in the land development business are generally made on a
project-by-project basis. Debt service on all existing loans (loan balances
totaled $4,909,678 as of June 30, 1995) and funds for operations are expected
to be met from the proceeds of home, lot, and land sales, and brokerage
commissions. Notes maturing in the next twelve months total approximately
$4,500,000. At June 30, 1995, available cash and proceeds from home, lot, and
land sales were expected to be sufficient to meet the Company's requirements
for the following quarter. The Company historically has renewed these notes as
is common in the development business. The notes will eventually be repaid
from proceeds of land, lot, and home sales.
The Company expects to, as it has done in the past, sell land it presently
owns to meet liquidity needs. Coupled with revenues from normal sources, such
sales would be expected to generate sufficient cash to meet liquidity
requirements.
The Company has net operating loss carryforwards available of approximately
$1,370,000 to offset against future federal and state taxable income. The
current value of these carryforwards computed at maximum federal and state
income tax rates is approximately $530,000. This amount is not reflected in
the financial statements.
9
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RESULTS OF OPERATIONS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1995 AND 1994
Total revenues for the six months ended June 30, 1995, are $4,727,609 less
than for the six months ended June 30, 1994. This can be attributed primarily
to a decrease in home sales of $4,132,508.
Gross profit percent on home sales decreased from 10.5% for the six months
ended June 30, 1994, to 7.1% for the six months ended June 30, 1995.
Management believes gross profit percent will remain at 1995 levels for the
next six months.
Operating expenses decreased by $238,171 for the six months ended June 30,
1995, as compared to the six months ended June 30, 1994. Management believes
operating expenses will decrease for the six months ending December 31, 1995,
because of the disposition of the Company's residential brokerage division.
Net loss for the six months ended June 30, 1994, was $477,921 compared with
net income of $92,538 for the six months ended June 30, 1995. Decreased sales
volume accounted for the difference.
PART 2 - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On August 9, 1995, the Board of Directors of the Company appointed Mark L.
Gilliam as a director to fill the vacancy caused by the resignation of a former
director. Prior to appointment as a director, Mr. Gilliam served as Vice
President, Secretary, and Chief Financial Officer of the Company. Mr. Gilliam
will retain those duties.
For the quarter ended June 30, 1995, the Company launched an additional
building operation, Keystone Homes, Inc., to build in the lower-priced housing
market.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
One Report was filed on Form 8-K for the quarter ended June 30, 1995, and is
incorporated by reference herein.
Report on Form 8-K filed on May 25, 1995, reporting the disposition of the
Company's residential real estate brokerage division on May 24, 1995.
10
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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.
CROWELL & CO., INC.
August 11, 1995 By: /s/ Mark L. Gilliam
-----------------------------
Mark L. Gilliam
Vice President on Behalf of
the registrant and as Chief
Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 500,734
<SECURITIES> 0
<RECEIVABLES> 309,299
<ALLOWANCES> 0
<INVENTORY> 4,852,520
<CURRENT-ASSETS> 0
<PP&E> 372,372
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,089,991
<CURRENT-LIABILITIES> 0
<BONDS> 4,909,678
<COMMON> 682,805
0
1,011,899
<OTHER-SE> 714,121
<TOTAL-LIABILITY-AND-EQUITY> 980,583
<SALES> 2,922,449
<TOTAL-REVENUES> 3,698,567
<CGS> 2,713,496
<TOTAL-COSTS> 2,983,886
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 206,784
<INCOME-PRETAX> (472,418)
<INCOME-TAX> 5,503
<INCOME-CONTINUING> (472,418)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (477,921)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
