<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, 1996
Commission File No. 0-7765
Crowell & Co., Inc.
---------------------------------------------------------------
(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
---------------------------------------------
(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,
1996 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
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, 1996
Condensed Consolidated Statements of Operations and Accumulated Deficit
Three month and nine month periods ended September 30, 1996
and 1995
Condensed Consolidated Statements of Cash Flows -
Three month and nine month periods ended September 30, 1996 and 1995
Notes to Condensed Consolidated Financial Statements
3
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Crowell & Co., Inc., and Subsidiaries
Condensed Consolidated Balance Sheet
September 30, 1996
<TABLE>
<CAPTION>
Assets
<S> <C>
Properties held for resale & development
Homes under construction and for sale $ 2,472,564
Developed residential 784,785
Land held for future development and other 256,786
-------
3,514,135
---------
Cash, including escrow funds of $ 9,600 294,689
-------
Receivables 92,246
------
Property and equipment, net of depreciation 390,800
-------
Other assets 35,454
------
$ 4,327,324
===========
Liabilities and Stockholders' Equity
Notes payable to banks $ 3,294,757
-----------
Accounts payable and accrued expenses 360,189
-------
Stockholders' equity
Preferred stock 1,011,899
Common stock 696,776
Paid-in capital 33,648
Accumulated deficit (1,069,945)
-----------
672,378
-------
$ 4,327,324
===========
</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 Nine Months Ended
September 30, September 30,
------------ ------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Home sales $ 2,201,385 $ 1,207,140 $ 5,169,155 $ 4,129,589
All other revenues 249,382 376,117 857,291 770,057
------- ------- ------- -------
2,450,767 1,583,257 6,026,446 4,899,646
--------- --------- --------- ---------
Cost of revenues
Homes 2,002,129 1,250,027 4,618,826 3,963,523
All other costs 41,049 131,611 406,789 196,922
------ ------- ------- -------
2,043,178 1,381,638 5,025,615 4,160,445
--------- --------- --------- ---------
Operating expenses 323,665 307,067 1,004,353 1,000,484
------- ------- --------- ---------
Operating income (loss) 83,925 (105,448) (3,522) (261,283)
------ -------- ------ --------
Other income 25,709 47,317 24,352 54,990
------ ------ ------ ------
Net financial expense 38,757 122,989 184,637 329,773
------ ------- ------- -------
Income (loss) before income taxes 70,877 (181,120) (163,807) (536,066)
------ -------- -------- --------
Income tax expense 0 0 0 5,503
------ -------- -------- -----
Income (loss) before discontinued operations 70,877 (181,120) (163,807) (541,569)
------ --------- -------- --------
Discontinued Operations 32,941 44,759 81,161 (72,713)
------ ------ ------ -------
Income (loss) 103,818 (136,361) (82,646) (614,282)
------- -------- ------- --------
Accumulated deficit
Beginning of period (1,173,763) (761,739) (987,299) (283,818)
End of period (1,069,945) (898,100) (1,069,945) (898,100)
--------- -------- ---------- --------
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
Income (loss) from continuing operations $ .02 ($ .08) ($ .09) ($ .24)
Income (loss) from discontinued operations .01 .02 .03 (.03)
--- --- --- ----
$ .03 ($ .06) ($ .06) ($ .27)
</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,
------------ ------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 103,818 ($ 136,361) ($ 82,646) ($ 614,282)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities
Depreciation and amortization 20,700 22,899 62,100 103,050
Net (increase) decrease in inventory,
receivables, prepaids, payables and accruals 842,640 (113,044) 629,816 903,242
---------- --------- ---------- ----------
Net cash provided by (used in) operating activities 967,158 (226,506) 609,270 392,010
---------- --------- ---------- ----------
Cash flows from investing activities
Purchases of property and equipment (78,066) (5,992) (113,222) (18,630)
Receipts on notes 0 215,747 0 485,630
---------- --------- ---------- ----------
Net cash provided by (used in) investing activities (78,066) 209,755 (113,222) 467,000
----------- --------- ---------- ----------
Cash flows from financing activities
Proceeds from borrowings 762,717 826,194 3,718,274 1,960,644
Payments of borrowings (1,390,961) (1,001,880) (4,188,197) (2,741,689)
----------- --------- ---------- ----------
Net cash used in financing activities (628,244) (175,686) (469,923) (781,045)
----------- --------- ---------- ----------
Net increase (decrease) in cash 260,848 (192,437) 26,125 77,965
Cash at beginning of period 33,841 500,734 268,564 230,332
Cash at end of period $ 294,689 $ 308,297 $ 294,689 $ 308,297
========== ========= ========== ==========
Supplemental disclosures
Income taxes paid 0 0 0 5,503
Interest paid, net of amount capitalized $ 51,229 $ 108,673 $ 200,807 $ 306,446
</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, 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 - 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, 1996 and 1995. 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 income (loss) per common
share assuming full dilution for the quarters ended September 30, 1996 and 1995,
and for the nine months ended September 30, 1996 and 1995.
7
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Item 2. Management's Discussion and Analysis
Results of Operations for the Quarters ended September 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 September 30, 1996, are $867,510 more than
revenues for the quarter ended September 30, 1995. This can be attributed to an
increase in home sales of $994,245.
Currently sales backlog on Company constructed homes is $1,021,490. Construction
on these homes is 53.1% 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 increased in the quarter ended September
30, 1996, as compared to the quarter ended September 30, 1995, from (3.6%) to
9.1%.
Operating expenses increased by $16,598 for the quarter ended September 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 net income for the third quarter of 1996 of $103,818 compared to
a net loss of $136,361 for the third quarter of 1995. Management believes the
company will sustain a loss for the fourth 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 $620,000 in unused
development
8
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loan commitments available to use in the development of residential properties
as of September 30, 1996.
Residential home construction costs are expected to be met through the use of
existing commitments aggregating approximately $600,000 as of September 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
$390,000 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 $3,294,757 as
of September 30, 1996) and funds for operations are expected to be met from the
proceeds of home, lot, and land sales. Notes maturing in the next twelve months
total approximately $2,900,000. At September 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 Nine Month Periods Ended September 30, 1996 and
1995
Total revenues for the nine months ended September 30, 1996, are $1,126,800 more
than for the nine months ended September 30, 1995. This can be attributed
primarily to an increase in home sales of $1,039,566.
9
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Gross profit percent on home sales increased from 4.0% for the nine months ended
September 30, 1995, to 10.6% for the nine months ended September 30, 1996.
Management believes gross profit percent will remain at 1996 levels for the next
nine months.
Operating expenses increased by $3,869 for the nine months ended September 30,
1996, as compared to the nine months ended September 30, 1995. Management
believes operating expenses will remain stable for the nine months ending June
30, 1997.
Net loss for the nine months ended September 30, 1995, was $614,282 compared
with a net loss of $82,646 for the nine months ended September 30, 1996.
Increased sales volume and higher gross margins 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 12, 1996 By: 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 294,689
<SECURITIES> 0
<RECEIVABLES> 92,246
<ALLOWANCES> 0
<INVENTORY> 3,514,135
<CURRENT-ASSETS> 0
<PP&E> 390,800
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,327,324
<CURRENT-LIABILITIES> 0
<BONDS> 3,294,757
0
1,011,899
<COMMON> 696,776
<OTHER-SE> (1,036,297)
<TOTAL-LIABILITY-AND-EQUITY> 4,327,324
<SALES> 5,169,155
<TOTAL-REVENUES> 6,026,446
<CGS> 4,615,526
<TOTAL-COSTS> 5,025,615
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 184,637
<INCOME-PRETAX> (163,807)
<INCOME-TAX> 0
<INCOME-CONTINUING> (163,807)
<DISCONTINUED> 81,161
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (82,646)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
