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, 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 August 8, 1997
is 2,520,835.
1
<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
<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
June 30, 1997
Condensed Consolidated Statements of Operations and Accumulated Deficit
Three month and six month periods ended June 30, 1997 and 1996
Condensed Consolidated Statements of Cash Flows -
Three month and six month periods ended June 30, 1997 and 1996
Notes to Condensed Consolidated Financial Statements
3
<PAGE>
Crowell & Co., Inc., and Subsidiaries
Condensed Consolidated Balance Sheet
June 30, 1997
<TABLE>
<CAPTION>
Assets
Properties held for resale & development
<S> <C>
Homes under construction and for sale $2,432,107
Developed residential 1,166,258
Land held for future development and other 199,234
----------
3,797,599
----------
Cash, including escrow funds of $ 3,084 74,642
----------
Receivables 179,297
----------
Property and equipment, net of depreciation 117,564
----------
Petersburg Racquet Club, net of depreciation 620,410
----------
Other assets 72,089
----------
$4,861,601
==========
Liabilities and Stockholders' Equity
Notes payable to banks $3,828,115
----------
Accounts payable and accrued expenses 343,026
----------
Stockholders' equity
Preferred stock 1,011,899
Common stock 696,774
Paid-in capital 33,650
Accumulated deficit (1,051,863)
----------
690,460
----------
$4,861,601
==========
</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,
-------- --------
1997 1996 1997 1996
---- ---- ---- ----
Revenues
<S> <C> <C> <C> <C>
Home sales $ 1,707,325 $ 1,877,470 $ 2,639,562 $ 2,967,770
All other revenues 325,443 238,096 586,349 418,559
----------- ----------- ----------- -----------
2,032,768 2,115,566 3,225,911 3,386,329
----------- ----------- ----------- -----------
Cost of revenues
Homes 1,554,021 1,572,569 2,436,853 2,616,697
All other costs 93,161 299,721 289,696 331,375
----------- ----------- ----------- -----------
1,647,182 1,872,290 2,726,549 2,948,072
----------- ----------- ----------- -----------
Operating expenses 261,528 261,448 488,066 479,394
----------- ----------- ----------- -----------
Operating (loss) income 124,058 (18,172) 11,296 (41,137)
----------- ----------- ----------- -----------
Other income (expense) (810) (1,357) 31,772 (1,357)
----------- ----------- ----------- -----------
Net financial expense 55,032 73,071 94,479 145,880
----------- ----------- ----------- -----------
Net loss before discontinued operations 68,216 (92,600) (51,411) (188,374)
----------- ----------- ----------- -----------
Discontinued operations 0 2,020 0 1,910
----------- ----------- ----------- -----------
Net gain (loss) 68,216 (90,580) (51,411) (186,464)
----------- ----------- ----------- -----------
Accumulated deficit
Beginning of period (1,120,079) (1,083,183) (1,000,452) (987,299)
End of period (1,051,863) (1,173,763) (1,051,863) (1,173,763)
----------- ----------- ----------- -----------
Weighted average common shares outstanding 2,520,835 2,520,835 2,520,835 2,520,835
Net income (loss) per common share
Primary earnings per share .02 (.04) (.04) (.09)
</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,
1997 1996 1997 1996
Cash flows from operating activities
<S> <C> <C> <C> <C>
Net (loss) income $ 68,216 ($ 90,580) ($ 51,411) ($ 186,464)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation and amortization 20,400 20,700 40,800 41,400
Net (increase) decrease in inventory,
receivables, prepaids, payables and
accruals (1,494) 194,353 (93,516) (212,824)
----------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities 87,122 124,473 (104,127) (357,888)
----------- ----------- ----------- -----------
Cash flows from investing activities
Purchases of property and equipment (56,094) (13,041) (159,752) (35,156)
Receipts on notes 8,054 0 14,371 0
----------- ----------- ----------- -----------
Net cash used in investing activities (48,040) (13,041) (145,381) (35,156)
----------- ----------- ----------- -----------
Cash flows from financing activities
Proceeds from borrowings 1,026,257 1,404,500 2,410,346 2,955,557
Payments of borrowings (1,065,152) (1,682,181) (2,148,690) (2,797,236)
----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities (38,895) (277,681) 261,656 158,321
----------- ----------- ----------- -----------
Net increase (decrease) in cash 187 (166,249) 12,148 (234,723)
Cash at beginning of period 74,455 200,090 62,494 268,564
Cash at end of period $ 74,642 $ 33,841 $ 74,642 $ 33,841
=========== =========== =========== ===========
Supplemental disclosures
Interest paid, net of amount capitalized $ 57,835 $ 74,820 $ 85,234 $ 149,578
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
CROWELL & CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 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 - 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, 1997 and 1996. 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,
1997 and 1996 and for the six months ended June 30, 1997 and 1996.
7
<PAGE>
Item 2. Management's Discussion and Analysis
Results of Operations for the Quarters ended June 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 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, 1997, are $82,798 less than
revenues for the quarter ended June 30, 1996.
Currently sales backlog on Company constructed homes is $2,133,869. 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 from 16% to 9% in the quarter
ended June 30, 1997, as compared to the quarter ended June 30, 1996. This
occurred because older, less profitable inventory was sold in the quarter ended
in 1997.
Operating expenses increased by $80 for the quarter ended June 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 second quarter of 1997 of $68,216 compared to
a net loss of $90,580 for the second 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 $330,000 in unused
development
8
<PAGE>
loan commitments available to use in the development of residential properties
as of June 30, 1997.
Residential home construction costs are expected to be met through the use of
existing commitments aggregating approximately $880,000 as of June 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, savings and loan institution in the amount of approximately
$590,000 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 $3,828,115 as
of June 30, 1997) 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 $3,300,000. At June 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 Six Month Periods Ended June 30, 1997 and 1996
Total revenues for the six months ended June 30, 1997, are $160,418 less than
for the six months ended June 30, 1996. This can be attributed primarily to a
decrease in home sales.
9
<PAGE>
Gross profit percent on home sales decreased from 12% for the six months ended
June 30, 1996, to 8% for the six months ended June 30, 1997. Management believes
gross profit percent will remain stable for the next six months.
Operating expenses increased by $8,672 for the six months ended June 30, 1997,
as compared to the six months ended June 30, 1996. Management believes operating
expenses will remain stable for the six months ending December 31, 1997.
Net loss for the six months ended June 30, 1997, was $51,411 compared with a net
loss of $186,464 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 8, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 74,642
<SECURITIES> 0
<RECEIVABLES> 179,297
<ALLOWANCES> 0
<INVENTORY> 3,797,599
<CURRENT-ASSETS> 0
<PP&E> 737,974
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,861,601
<CURRENT-LIABILITIES> 0
<BONDS> 3,828,115
696,776
0
<COMMON> 1,011,899
<OTHER-SE> (1,018,215)
<TOTAL-LIABILITY-AND-EQUITY> 4,861,601
<SALES> 2,639,562
<TOTAL-REVENUES> 3,225,911
<CGS> 2,436,853
<TOTAL-COSTS> 2,726,549
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94,479
<INCOME-PRETAX> (51,411)
<INCOME-TAX> 0
<INCOME-CONTINUING> (51,411)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (51,411)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
