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, 1999
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)
924 Stevens Creek 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 November 15,
1999, is 2,520,835.
1
<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
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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, 1999
Condensed Consolidated Statements of Operations and Accumulated Deficit
Three month and nine month periods ended September 30, 1999 and 1998
Condensed Consolidated Statements of Cash Flows - Three month and nine
month periods ended September 30, 1999 and 1998
Notes to Condensed Consolidated Financial Statements
3
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CROWELL & CO., INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
ASSETS
PROPERTIES HELD FOR RESALE & DEVELOPMENT
Homes under construction and for sale $ 4,781,954
Developed residential 1,353,294
Land held for future development and other 30,014
-----------
6,165,262
-----------
CASH AND CASH EQUIVALENTS 313,748
-----------
RECEIVABLES 29,853
-----------
PROPERTY AND EQUIPMENT, NET OF DEPRECIATION 95,331
-----------
OTHER ASSETS 70,082
-----------
$ 6,674,276
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE TO BANKS $ 5,091,292
-----------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 265,914
-----------
STOCKHOLDERS' EQUITY
Preferred stock 1,011,899
Common stock 696,774
Paid-in capital 33,648
Accumulated deficit (425,251)
-----------
1,317,070
-----------
$ 6,674,276
===========
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,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
REVENUES
<S> <C> <C> <C> <C>
Home sales $ 2,740,587 $ 1,642,909 $ 7,316,035 $ 4,132,716
All other revenues 112,404 64,556 292,453 383,231
----------- ----------- ----------- -----------
2,852,991 1,707,465 7,608,488 4,515,947
----------- ----------- ----------- -----------
COST OF REVENUES
Homes 2,588,469 1,405,526 6,576,112 3,673,404
All other costs (60,218) 64,807 22,267 242,721
----------- ----------- ----------- -----------
2,528,251 1,470,333 6,598,379 3,916,125
----------- ----------- ----------- -----------
OPERATING EXPENSES 220,552 184,473 613,707 516,226
----------- ----------- ----------- -----------
OPERATING INCOME 104,189 52,659 396,403 83,596
----------- ----------- ----------- -----------
OTHER INCOME (LOSS) 171,559 (3,884) 186,781 22,521
----------- ----------- ----------- -----------
NET FINANCIAL EXPENSE 47,340 35,529 123,872 116,510
----------- ----------- ----------- -----------
INCOME (LOSS) 228,408 13,246 459,312 (10,393)
----------- ----------- ----------- -----------
ACCUMULATED DEFICIT
Beginning of period (653,659) (1,081,408) 884,563 (1,057,632)
Miscellaneous adjustment 0 0 0 (137)
End of period (425,251) (1,068,162) (425,251) (1,068,162)
----------- ----------- ----------- -----------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,520,835 2,520,835 2,520,835 2,520,835
NET INCOME (LOSS) PER COMMON SHARE
Primary income (loss) per share $ .08 $ .00 $ .16 ($ .03)
Fully diluted income (loss) .08 .00 .17 (.03)
</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,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income (loss) $ 228,408 $ 13,246 $ 459,312 $ (10,393)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities
Gain on sale of assets (165,000) -- (165,000) --
Depreciation and amortization 6,900 6,900 20,700 20,700
Net (increase) decrease in inventory,
receivables, prepaids, payables
& accruals (1,529,432) 137,856 (3,065,413) 331,128
----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities (1,459,124) 158,002 (2,750,401) 341,435
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (46,118) (14,102) (46,328) (56,217)
Sale of equipment 10,800 -- 10,800 --
Receipts on notes 143,340 9,936 164,090 29,174
----------- ----------- ----------- -----------
Net cash provided by (used in)
investing activities 108,022 (4,166) 128,562 (27,043)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 3,600,130 1,271,920 8,362,030 3,116,145
Payments of borrowings (2,279,441) (1,392,709) (5,670,497) (3,440,286)
----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities 1,320,689 (120,789) 2,691,533 (324,141)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (30,413) 33,047 69,694 (9,749)
CASH AT BEGINNING OF PERIOD 344,161 149,868 244,054 192,664
CASH AT END OF PERIOD $ 313,748 $ 182,915 $ 313,748 $ 182,915
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES
Interest paid, net of amount capitalized $ 40,609 $ 36,745 $ 113,292 $ 120,078
</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, 1999
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, 1998, 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, 1999 and 1998. 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 quarter ended
September 30, 1998, and for the nine months ended September 30, 1998.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED SEPTEMBER 30, 1999 AND 1998
The primary sources of revenue of Crowell & Co., Inc., and Subsidiaries (the
"Company") are the development of residential properties for resale and
homebuilding.
Total revenues for the quarter ended September 30, 1999, are $1,145,526 more
than revenues for the quarter ended September 30, 1998. This can be attributed
to a increase in home sales of $1,097,678.
Currently sales backlog on Company constructed homes is $2,203,900. Construction
on these homes is 77.7% 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 for the quarter ended September
30, 1999, as compared to the quarter ended September 30, 1998, from 14.4% to
5.6%.
Operating expenses increased by $36,079 for the quarter ended September 30,
1999, 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.
The Company had net income for the third quarter of 1999 of $228,408 compared to
a net income of $13,246 for the third quarter of 1998.
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.
8
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Residential home construction costs are expected to be met through the use of
existing commitments aggregating approximately $1,889,297 as of September 30,
1999, 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.
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 $5,091,292 as
of September 30, 1999) 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 $5,000,000. At September 30, 1999, 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
$1,770,000 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 $690,000. This amount is not reflected in the
financial statements.
RESULTS OF OPERATIONS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND
1998
Total revenues for the nine months ended September 30, 1999, are $3,092,541 more
than for the nine months ended September 30, 1998. This can be attributed
to an increase in home sales of $3,183,319.
Gross profit percent on home sales decreased from 11.1% for the nine months
ended September 30, 1998, to 10.1% for the nine months ended September 30, 1999.
Operating expenses increased by $97,481 for the nine months ended September 30,
1999, as compared to the nine months ended September 30, 1998.
Net income for the nine months ended September 30, 1999, was $459,312 compared
with a net loss of $10,393 for the nine months ended September 30, 1998.
9
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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 18, 1999 By: 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 313,748
<SECURITIES> 0
<RECEIVABLES> 29,853
<ALLOWANCES> 0
<INVENTORY> 6,165,262
<CURRENT-ASSETS> 0
<PP&E> 95,331
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,674,276
<CURRENT-LIABILITIES> 0
<BONDS> 5,091,292
696,724
0
<COMMON> 1,011,899
<OTHER-SE> (391,603)
<TOTAL-LIABILITY-AND-EQUITY> 6,674,276
<SALES> 7,316,035
<TOTAL-REVENUES> 7,608,488
<CGS> 6,576,112
<TOTAL-COSTS> 6,598,379
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 123,872
<INCOME-PRETAX> 459,312
<INCOME-TAX> 0
<INCOME-CONTINUING> 459,312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 459,312
<EPS-BASIC> 0.16
<EPS-DILUTED> 0.17
</TABLE>