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, 1997
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
---------------------------------------------
(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,
1997 is 2,520,835.
<PAGE>
CROWELL & CO., INC.
INDEX
PAGE NO.
--------
PART 1 - FINANCIAL INFORMATION
ITEM 1 - Financial Statements ................................ 4
ITEM 2 - Management's Discussion and Analysis ................ 8
2
<PAGE>
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, 1997
Condensed Consolidated Statements of Operations and Accumulated Deficit
Three month and nine month periods ended September 30, 1997 and 1996
Condensed Consolidated Statements of Cash Flows -
Three month and nine month periods ended September 30, 1997 and
1996
Notes to Condensed Consolidated Financial Statements
3
<PAGE>
Crowell & Co., Inc., and Subsidiaries
Condensed Consolidated Balance Sheet
September 30, 1997
Assets
Properties held for resale & development
Homes under construction and for sale $ 1,839,775
Developed residential 1,157,476
Land held for future development and other 65,899
------------
3,063,150
------------
Cash and cash equivalents, including escrow funds of $2,634 162,693
------------
Receivables 108,051
------------
Property and equipment, net of depreciation 111,614
------------
Petersburg Racquet Club, net of depreciation 606,910
------------
Other assets 67,854
------------
$ 4,120,272
============
Liabilities and Stockholders' Equity
Notes payable to banks $ 3,151,024
------------
Accounts payable and accrued expenses 155,988
------------
Stockholders' equity
Preferred stock 1,011,899
Common stock 696,776
Paid-in capital 33,648
Accumulated deficit (929,063)
------------
813,260
------------
$ 4,120,272
============
See notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Crowell & Co., Inc., and Subsidiaries
Condensed Consolidated Statements of Operations and Accumulated Deficit
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues
<S> <C> <C> <C> <C>
Home sales $ 1,749,552 $ 2,201,385 $ 4,389,114 $ 5,169,155
All other revenues 567,100 177,047 1,153,449 595,606
----------- ----------- ----------- -----------
2,316,652 2,378,432 5,542,563 5,764,761
----------- ----------- ----------- -----------
Cost of revenues
Homes 1,703,793 2,002,129 4,140,646 4,618,826
All other costs 192,433 26,902 482,129 358,277
----------- ----------- ----------- -----------
1,896,226 2,029,031 4,622,775 4,977,103
----------- ----------- ----------- -----------
Operating expenses 267,306 218,342 755,372 697,736
----------- ----------- ----------- -----------
Operating income (loss) 153,120 131,059 164,416 89,922
----------- ----------- ----------- -----------
Other income 29,716 25,709 61,488 24,352
----------- ----------- ----------- -----------
Net financial expense 60,036 38,757 154,515 184,637
----------- ----------- ----------- -----------
Income (loss) before discontinued operations 122,800 118,011 71,389 (70,363)
----------- ----------- ----------- -----------
Discontinued Operations 0 (14,193) 0 (12,283)
----------- ----------- ----------- -----------
Income (loss) 122,800 103,818 71,389 (82,646)
----------- ----------- ----------- -----------
Accumulated deficit
Beginning of period (1,051,863) (1,173,763) (1,000,452) (987,299)
End of period (929,063) (1,069,945) (929,063) (1,069,945)
----------- ----------- ----------- -----------
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 $ .04 $ .04 $ .00 ($ .06)
Income (loss) from discontinued operations .00 (.01) .00 .00
------ ------- ------ ------
$ .04 $ .03 $ .00 ($ .06)
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
Crowell & Co., Inc., and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1997 1996 1997 1996
Cash flows from operating activities
<S> <C> <C> <C> <C>
Net income (loss) $ 122,800 $ 103,818 $ 71,389 ($ 82,646)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Depreciation and amortization 20,400 20,700 61,200 62,100
Net (increase) decrease in inventory,
receivables, prepaids, payables and accruals 610,442 842,640 516,926 629,816
--------- --------- --------- ---------
Net cash provided by operating activities 753,642 967,158 649,515 609,270
--------- --------- --------- ---------
Cash flows from investing activities
Purchases of property and equipment 0 (78,066) (159,752) (113,222)
Receipts on notes 11,500 0 25,871 0
--------- --------- --------- ---------
Net cash provided by (used in) investing activities 11,500 (78,066) (133,881) (113,222)
--------- --------- --------- ---------
Cash flows from financing activities
Proceeds from borrowings 936,891 762,717 3,347,237 3,718,274
Payments of borrowings (1,613,982) (1,390,961) (3,762,672) (4,188,197)
--------- --------- --------- ---------
Net cash used in financing activities (677,091) (628,244) (415,435) (469,923)
--------- --------- --------- ---------
Net increase in cash 88,051 260,848 100,199 26,125
Cash at beginning of period 74,642 33,841 62,494 268,564
Cash at end of period $ 162,693 $ 294,689 $ 162,693 $ 294,689
========= ========= ========= =========
Supplemental disclosures
Interest paid, net of amount capitalized $ 64,723 $ 51,229 $ 149,957 $ 200,807
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
CROWELL & CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
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, 1996, 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 income (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, 1997 and 1996. Because inclusion of convertible preferred
stock would have an anti-dilutive or no effect on the income (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, 1997 and 1996, and for the nine months ended September 30, 1997
and 1996.
7
<PAGE>
Item 2. Management's Discussion and Analysis
Results of Operations for the Quarters ended September 30, 1997 and 1996
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 operation of a pool and tennis facility, and
various other real estate related activities.
Total revenues for the quarter ended September 30, 1997, are $61,780 less than
revenues for the quarter ended September 30, 1996. This can be attributed to a
decrease in home sales of $451,833 and an increase in other revenues of
$390,053.
Currently sales backlog on Company constructed homes is $1,146,519. Construction
on these homes is 79% 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, 1997, as compared to the quarter ended September 30, 1996, from 9% to 3%.
Operating expenses increased by $48,964 for the quarter ended September 30,
1997, 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 1997 of $122,800 compared to
a net income of $103,818 for the third quarter of 1996.
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 $206,000 in unused
development
8
<PAGE>
loan commitments available to use in the development of residential properties
as of September 30, 1997.
Residential home construction costs are expected to be met through the use of
existing commitments aggregating approximately $1,070,000 as of September 30,
1997, 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, bank in the amount of approximately $584,000 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 $3,151,024 as
of September 30, 1997) 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 $2,600,000. At September 30, 1997, 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
$2,060,000 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, 1997 and
1996
Total revenues for the nine months ended September 30, 1997, are $222,198 less
than for the nine months ended September 30, 1996. This can be attributed
primarily to a decrease in home sales of $780,041 and an increase in other
revenues of $557,843.
Gross profit percent on home sales decreased from 11% for the nine months ended
September 30, 1996, to 6% for the nine months ended September 30, 1997.
9
<PAGE>
Operating expenses increased by $57,636 for the nine months ended September 30,
1997, as compared to the nine months ended September 30, 1996.
Net loss for the nine months ended September 30, 1996, was $82,646 compared with
a net income of $71,389 for the nine months ended September 30, 1997.
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.
November 13, 1997 By: /s/ Mark L. Gilliam
--------------------------
Mark L. Gilliam
Vice President on Behalf of
the registrant and as Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 162,693
<SECURITIES> 0
<RECEIVABLES> 108,051
<ALLOWANCES> 0
<INVENTORY> 3,063,150
<CURRENT-ASSETS> 0
<PP&E> 718,524
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,120,272
<CURRENT-LIABILITIES> 0
<BONDS> 3,151,024
696,776
0
<COMMON> 1,011,899
<OTHER-SE> (895,415)
<TOTAL-LIABILITY-AND-EQUITY> 4,120,272
<SALES> 4,389,114
<TOTAL-REVENUES> 5,542,563
<CGS> 4,140,646
<TOTAL-COSTS> 4,622,775
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 154,515
<INCOME-PRETAX> 71,389
<INCOME-TAX> 0
<INCOME-CONTINUING> 71,389
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71,389
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
