<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, 1996
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 August 10, 1996
is 2,520,835.
<PAGE>
CROWELL & CO., INC.
INDEX
PAGE NO.
--------
PART 1 - FINANCIAL INFORMATION
ITEM 1 - Financial Statements.......................... 3
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
June 30, 1996
Condensed Consolidated Statements of Operations and Accumulated Deficit -
Three month and six month periods ended June 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows -
Three month and six month periods ended June 30, 1996 and 1995
Notes to Condensed Consolidated Financial Statements
3
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CROWELL & CO., INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
ASSETS
<TABLE>
<CAPTION>
<S> <C>
PROPERTIES HELD FOR RESALE & DEVELOPMENT
Homes under construction and for sale $3,026,515
Developed residential 843,074
Land held for future development and other 255,747
----------
4,125,336
----------
CASH, INCLUDING ESCROW FUNDS OF $ 25,955 33,841
----------
RECEIVABLES 135,496
----------
PROPERTY AND EQUIPMENT, NET OF DEPRECIATION 333,434
----------
OTHER ASSETS 35,454
----------
$ 4,663,561
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE TO BANKS $ 3,923,001
-----------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 172,000
-----------
STOCKHOLDERS' EQUITY
Preferred stock 1,011,899
Common stock 682,805
Paid-in capital 47,619
Accumulated deficit (1,173,763)
-----------
568,560
-----------
$ 4,663,561
===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
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,
------------------------- --------------------------
1996 1995 1996 1995
------------ ---------- ------------ -----------
<S> <C> <C> <C> <C>
REVENUES
Home sales $ 1,877,470 $1,985,509 $ 2,967,770 $2,922,449
All other revenues 334,251 135,040 607,909 393,940
----------- ---------- ----------- ----------
2,211,721 2,120,549 3,575,679 3,316,389
----------- ----------- ---------- -----------
COST OF REVENUES
Homes 1,572,569 1,862,331 2,616,697 2,713,496
All other costs 308,467 25,315 365,740 65,311
----------- ---------- ----------- ----------
1,881,036 1,887,646 2,982,437 2,778,807
---------- ---------- ---------- ----------
OPERATING EXPENSES 366,208 327,756 680,689 693,417
----------- ---------- ----------- ----------
OPERATING LOSS (35,523) (94,853) (87,447) (155,835)
----------- ---------- ---------- ----------
OTHER INCOME (EXPENSE) (1,357) 7,673 (1,357) 7,673
----------- ---------- ----------- ----------
NET FINANCIAL EXPENSE 73,071 111,521 145,880 206,784
----------- ---------- ----------- ----------
LOSS BEFORE INCOME TAXES (109,951) (198,701) (234,684) (354,946)
----------- ---------- ----------- ----------
INCOME TAX EXPENSE 0 4,003 0 5,503
----------- ---------- ----------- ----------
NET LOSS BEFORE DISCONTINUED OPERATIONS (109,951) (202,704) (234,684) (360,449)
----------- ---------- ----------- ----------
DISCONTINUED OPERATIONS 19,371 (52,212) 48,220 (117,472)
----------- ---------- ----------- ----------
NET LOSS (90,580) (254,916) (186,464) (477,921)
----------- ---------- ----------- ----------
ACCUMULATED DEFICIT
Beginning of period (1,083,183) (506,823) (987,299) (283,818)
End of period (1,173,763) (761,739) (1,173,763) (761,739)
----------- ---------- ----------- ----------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,520,835 2,520,835 2,520,835 2,520,835
NET LOSS PER COMMON SHARE
Primary earnings per share
Loss from continuing operations (.05) (.09) (.11) (.16)
Income (loss) from discontinued operations .01 (.02) .02 (.05)
---- ---- ---- ----
(.04) (.11) (.09) (.21)
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------- -----------------------------
JUNE 30, JUNE 30,
--------------------------- -----------------------------
1996 1995 1996 1995
----------- -------------- ----------- ----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $ ( 90,580) $ ( 254,916) $ ( 186,464) $( 477,921)
Adjustments to reconcile
net loss to net cash
provided by (used in)
Depreciation and amortization 20,700 50,219 41,400 80,151
operating activities
Net (increase) decrease in
inventory, recivables, prepaids,
payables and accruals 194,353 904,748 (212,824) 1,016,286
----------- ----------- ----------- ----------
Net cash provided by
(used in) operating
activities 124,473 700,051 (357,888) 618,516
----------- ----------- ----------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of property and equipment (13,041) 0 (35,156) (12,638)
Receipts on notes 0 200,000 0 269,883
----------- ----------- ----------- -----------
Net cash provided by
(used in) investing activities (13,041) 200,000 (35,156) 257,245
----------- --------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from borrowings 1,404,500 516,683 2,955,557 1,134,450
Payments of borrowings (1,682,181) (1,121,158) (2,797,236) (1,739,809)
Net cash provided by
(used in) financing
activities (277,681) (604,475) 158,321 (605,359)
----------- --------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (166,249) 295,576 (234,723) 270,402
CASH AT BEGINNING OF PERIOD 200,090 205,158 268,564 230,332
CASH AT END OF PERIOD $ 33,841 $ 500,734 $ 33,841 $ 500,734
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 0 $ 4,003 $ 0 $ 5,503
Interest paid, net of
amount capitalized $ 74,820 $ 99,012 $ 149,578 $ 197,773
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
CROWELL & CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
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, 1995, 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, 1996 and 1995. 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,
1996 and 1995, and for the six months ended June 30, 1996 and 1995.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED JUNE 30, 1996 AND 1995
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, 1996, are $91,172 more than
revenues for the quarter ended June 30, 1995.
Currently sales backlog on Company constructed homes is $2,387,643.
Construction on these homes is 69% 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 increase from 6.2% to 16.2% in the quarter
ended June 30, 1996, as compared to the quarter ended June 30, 1995. This
occurred because older, less profitable inventory was sold in the quarter ended
in 1995.
Operating expenses increased by $38,452 for the quarter ended June 30, 1996, as
compared to the same quarter last year. 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 1996 of $90,580 compared to
a net loss of $254,916 for the second quarter of 1995. Management believes the
company will sustain another loss for the third quarter of 1996 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.
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 $8,230 in unused
8
<PAGE>
development loan commitments available to use in the development of residential
properties as of June 30, 1996.
Residential home construction costs are expected to be met through the use of
existing commitments aggregating approximately $1,432,050 as of June 30, 1996,
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
$325,000 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
$3,923,001 as of June 30, 1996) 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 $3,600,000. At
June 30, 1996, 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
$2,050,000 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 $800,000. This amount is not reflected in the
financial statements.
RESULTS OF OPERATIONS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
Total revenues for the six months ended June 30, 1996, are $259,290 more than
for the six months ended June 30, 1995. This can be attributed primarily to an
increase in lot sales.
9
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Gross profit percent on home sales increased from 7.1% for the six months ended
June 30, 1995, to 11.8% for the six months ended June 30, 1996. Management
believes gross profit percent will remain stable for the next six months.
Operating expenses decreased by $12,728 for the six months ended June 30, 1996,
as compared to the six months ended June 30, 1995. Management believes
operating expenses will remain stable for the six months ending December 31,
1996.
Net loss for the six months ended June 30, 1995, was $186,464 compared with a
net loss of $477,921 for the six months ended June 30, 1996.
10
<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.
CROWELL & CO., INC.
August 12, 1996 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 33,841
<SECURITIES> 0
<RECEIVABLES> 135,496
<ALLOWANCES> 0
<INVENTORY> 4,125,336
<CURRENT-ASSETS> 0
<PP&E> 333,434
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,663,561
<CURRENT-LIABILITIES> 0
<BONDS> 3,923,001
696,776
0
<COMMON> 1,011,899
<OTHER-SE> (1,140,115)
<TOTAL-LIABILITY-AND-EQUITY> 4,663,561
<SALES> 2,967,770
<TOTAL-REVENUES> 3,575,679
<CGS> 2,616,697
<TOTAL-COSTS> 2,982,437
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 145,880
<INCOME-PRETAX> (234,683)
<INCOME-TAX> 0
<INCOME-CONTINUING> (234,683)
<DISCONTINUED> 48,220
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (186,464)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
