<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 September 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
- -------------------------------- ---------------------------------
(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 October 31,
1995 is 2,520,835.
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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
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
September 30, 1995
Condensed Consolidated Statements of Operations and Accumulated Deficit -
Three month and nine month periods ended September 30, 1995 and 1994
Condensed Consolidated Statements of Cash Flows -
Three month and nine month periods ended September 30, 1995 and 1994
Notes to Condensed Consolidated Financial Statements
3
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CROWELL & CO., INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
ASSETS
PROPERTIES HELD FOR RESALE & DEVELOPMENT
Homes under construction and for sale $3,350,463
Developed residential 1,215,271
Land held for future development and other 379,550
----------
4,945,284
----------
CASH, INCLUDING ESCROW FUNDS OF $ 28,930 308,297
----------
RECEIVABLES 109,185
----------
PROPERTY AND EQUIPMENT, NET OF DEPRECIATION 479,208
----------
OTHER ASSETS 58,477
----------
$5,900,451
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE TO BANKS $4,733,992
----------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 322,236
----------
STOCKHOLDERS' EQUITY
Preferred stock 1,011,899
Common stock 682,805
Paid-in capital 47,619
Accumulated deficit (898,100)
----------
844,223
----------
$5,900,451
==========
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
[CAPTION]
<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
----- ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES
Home sales $1,207,140 $ 3,623,320 $4,129,589 $10,683,277
All other revenues 354,383 754,691 1,130,501 2,120,910
---------- ----------- ---------- -----------
1,561,523 4,378,011 5,260,090 12,804,187
---------- ----------- ---------- -----------
COST OF REVENUES
Homes 1,188,628 3,485,445 3,902,124 9,803,820
All other costs 102,399 294,496 372,789 954,388
---------- ----------- ---------- -----------
1,291,027 3,779,941 4,274,913 10,758,208
---------- ----------- ---------- -----------
OPERATING EXPENSES 331,185 580,185 1,419,173 1,906,344
---------- ----------- ---------- -----------
OPERATING INCOME (LOSS) (60,689) 17,885 (433,996) 139,635
---------- ----------- ---------- -----------
OTHER INCOME 47,317 0 154,990 0
---------- ----------- ---------- -----------
NET FINANCIAL EXPENSE 122,989 52,183 329,773 142,894
---------- ----------- ---------- -----------
LOSS BEFORE INCOME TAXES (136,361) (34,298) (608,779) (3,259)
---------- ----------- ---------- -----------
INCOME TAX (EXPENSE) BENEFIT 0 0 (5,503) 61,499
---------- ----------- ---------- -----------
NET INCOME (LOSS) (136,361) (34,298) (614,282) 58,240
---------- ----------- ---------- -----------
ACCUMULATED DEFICIT
Beginning of period (761,739) (577,992) (283,818) (610,578)
Preferred dividends 0 (21,000) 0 (80,952)
End of period (898,100) (633,290) (898,100) (633,290)
---------- ----------- ---------- -----------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,520,835 2,520,835 2,520,835 2,520,835
NET LOSS PER COMMON SHARE ($ 0.06) ($ 0.02) ($ 0.27) $ 0.00
</TABLE>
See notes to condensed consolidated financial statements.
5
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CROWELL & CO., INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> d<C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (136,361) $ (34,298) $ (614,282) $ 58,240
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 22,899 34,824 103,050 110,357
Net (increase) decrease in inventory,
receivables, prepaids, payables and accruals (113,044) 1,109,268 903,242 903,838
----------- ----------- ----------- -----------
Net cash provided by (used in) operating activities (226,506) 1,109,794 392,010 1,072,435
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (5,992) 0 (18,630) (33,211)
Receipts on notes 215,747 0 485,630 0
Net cash used in investing activities 209,755 0 467,000 (33,211)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 826,194 900,685 1,960,644 7,333,276
Payments of borrowings (1,001,880) (2,063,181) (2,741,689) (8,431,381)
Payments of preferred stock dividends 0 (21,000) 0 (80,952)
----------- ----------- ----------- -----------
Net cash used in financing activities (175,686) (1,183,496) (781,045) (1,179,057)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (192,437) (73,702) 77,965 (139,833)
CASH AT BEGINNING OF PERIOD 500,734 362,390 230,332 428,521
CASH AT END OF PERIOD $ 308,297 $ 288,688 $ 308,297 $ 288,688
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES
Income taxes paid 0 0 5,503 3,784
Interest paid, net of amount capitalized $ 108,673 $ 72,009 $ 306,446 $ 161,507
</TABLE>
See notes to condensed consolidated financial statements.
6
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CROWELL & CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 - LOSS PER SHARE
The loss per common share has been computed using the weighted average of
the number of shares outstanding during the three and nine month periods ended
September 30, 1995 and 1994. Because inclusion of convertible preferred stock
would have an anti-dilutive effect on the loss per common share, the
convertible preferred stock is excluded from the computation of the loss per
common share assuming full dilution for the quarters ended September 30, 1995
and 1994, and for the nine months ended September 30, 1995 and 1994.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED SEPTEMBER 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 September 30, 1995, are $2,816,488 less
than revenues for the quarter ended September 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 $1,865,950.
Construction on these homes is 69.7% 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
September 30, 1995, as compared to the quarter ended September 30, 1994, from
3.8% to 1.5% 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 $249,000 for the quarter ended September 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 continue to decrease from third quarter levels for the fourth 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 third quarter of 1995 of $136,361
compared to a net loss of $34,298 for the third quarter of 1994. Management
believes the company will sustain another loss for the fourth 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 $36,000
in unused development loan commitments available to use in the development of
residential properties as of September 30, 1995.
Residential home construction costs are expected to be met through the use
of existing commitments aggregating approximately $527,000 as of September 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 $330,000 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 $4,733,992 as of September 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 September 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 NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995
and 1994
Total revenues for the nine months ended September 30, 1995, are $7,544,097
less than for the nine months ended September 30, 1994. This can be attributed
primarily to a decrease in home sales of $6,553,688.
Gross profit percent on home sales decreased from 8.2% for the nine months
ended September 30, 1994, to 5.5% for the nine months ended September 30, 1995.
Management believes gross profit percent will remain at 1995 levels for the
next nine months.
Operating expenses decreased by $487,171 for the nine months ended September
30, 1995, as compared to the nine months ended September 30, 1994. Management
believes operating expenses will decrease for the nine months ending June 30,
1996, because of the disposition of the Company's residential brokerage
division.
Net loss for the nine months ended September 30, 1994, was $614,282 compared
with net income of $58,240 for the nine months ended September 30, 1995.
Decreased sales volume accounted for the difference.
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.
November 8, 1995 By: Mark L. Gilliam
-------------------
Mark L. Gilliam
Vice President on Behalf of
the registrant and as Chief
Financial Officer
9
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 308,297
<SECURITIES> 0
<RECEIVABLES> 109,185
<ALLOWANCES> 0
<INVENTORY> 4,945,284
<CURRENT-ASSETS> 0
<PP&E> 479,208
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,900,451
<CURRENT-LIABILITIES> 0
<BONDS> 4,733,992
<COMMON> 682,805
0
1,011,899
<OTHER-SE> (850,481)
<TOTAL-LIABILITY-AND-EQUITY> 844,223
<SALES> 4,129,589
<TOTAL-REVENUES> 5,260,090
<CGS> 3,902,124
<TOTAL-COSTS> 4,274,913
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 329,773
<INCOME-PRETAX> (608,779)
<INCOME-TAX> 5,503
<INCOME-CONTINUING> (608,779)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (614,282)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
