FORM 10-K--ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 - For the fiscal year ended December 31, 1994.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-14227
THE SOMERSET GROUP, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-1647888
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
135 N. Pennsylvania Street, #2800, Indianapolis, IN 46204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 317/634-1400
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
Common stock with par value None - Traded Over-The-Counter (NASDAQ)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $22,532,758 as of February 24, 1995.
As of February 24, 1995, there were 1,638,746 outstanding shares of the
Capital Stock of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the year ended December 31, 1994 are
incorporated by reference into Part III.
Portions of the Form 10-K of First Indiana Corporation for the year ended
December 31, 1994 are incorporated by reference into Part I.
THE SOMERSET GROUP, INC.
INDEX
PART I
Item 1. Business . . . . . . . . . .. . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings ... . . . . . . . . . . . . . . . . . . . . . 5
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . . . . . . 5
PART II
Item 5. Market for the Registrant's Common Equity
and Related Security Holder Matters . . . . . . . . . . . . . 5
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . 6
Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition and Liquidity . . . . . . . . . . . . . 6
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . 6
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . 6
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . .6
Item 11. Executive Compensation .. . . . . . . . . . . . . . . . . . . 7
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . . . 7
Item 13. Certain Relationships and Related Transactions . . . . . . . . 7
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . 8
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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PART I
ITEM 1 - BUSINESS
General Description of Business - The Somerset Group, Inc. ("the Registrant"
or "the Company"), is an Indiana Corporation, with its principal executive
offices located at 135 North Pennsylvania Street, Suite 2800, Indianapolis,
Indiana 46204.
The Registrant conducts business in two industry segments: construction
products and services and banking. The construction products and services
segment consists of operations conducted by the Registrant under the names
of American Precast Concrete and Span-Deck of Indiana, and through two
subsidiaries, Precast Concrete Systems Inc. and Concrete Carriers, Inc. The
banking segment is conducted through ownership by the Registrant of 1,509,983
shares (as of February 24, 1995) of the common stock of First Indiana
Corporation ("First Indiana"), a holding company which owns 100% of First
Indiana Bank. The 1,509,983 shares represent 21.0% of the issued and
outstanding First Indiana common shares.
Financial Information About Business Segments
Described below are the operations of the Company's segments. Financial
information about the segments is incorporated by reference to Note 8 of the
Company's consolidated financial statements on page 28 of this report.
Narrative Description of Business
I. Construction Products and Services Segment
Business - The Registrant manufactures and installs precast/prestressed
concrete products primarily in the seven-state area of Illinois, Indiana,
Kentucky, Michigan, Ohio, Pennsylvania, and West Virginia. Products are
distributed from the Indianapolis, Indiana; Westfield, Indiana; and Columbus,
Ohio manufacturing sites via commercial carrier, broker drivers or company-
operated trucks to the job site. The customers for these products are real
estate developers, general contractors and businesses which own and occupy
their own structures.
Competition - The products are sold on a contract basis. The contracts
are received either by competitive bids or through negotiation. The products
can be shipped on a competitive basis over a contiguous seven-state region
including Indiana and Ohio, with competition provided by firms located in
these states. Competition for precast/prestressed concrete is also provided
by other building products such as steel, wood, brick, concrete block, stone,
aluminum, and other materials.
Major Customers - 1994 net sales included net sales to an Indianapolis
based developer that amounted to 12% of total sales, including a shopping
center parking garage that amounted to 10% of net sales. Sales to another
Indianapolis based developer amounted to 10% of total sales.
<PAGE>
1993 net sales included net sales to an Indianapolis developer that
amounted to 26% of the total sales, including a single project (a shopping
mall parking garage) that amounted to 15% of net sales.
1992 net sales included net sales for construction of a sports stadium
at the University of Illinois that amounted to 25% of total sales during
1992. Products and services provided for construction of a parking structure
at an Indianapolis hospital amounted to 14% of total sales.
-3-
Backlog of Orders - The dollar amount of backlog is important to the
performance of the precast/ prestressed operations because all work is
performed under contract, and the dollar value of such backlog represents
sales for the immediate future. The sales backlogs at December 31, 1994,
1993, and 1992 were $8.8 million, $8.2 million, and $4.2 million,
respectively. The fluctuation in sales backlog is simply a function of the
amount of work obtained. The sales backlog is a good indication of the
following quarter's results, but not of results for the entire year. All
receivables and contracts in progress, unbilled, as of December 31, 1994, are
expected to be collected within one year.
Raw materials - Cement, aggregates, steel strand, steel reinforcing bars
and wire mesh are essential raw materials and are in adequate supply with
several available sources.
Franchise Agreements - The Registrant has an agreement for the
production and marketing of products under patents and/or trademarks owned
by another company. The agreement is with FABCON, Inc. for production of
precast products known as "Span-Deck".
Environmental Laws and Regulations - The construction operations are
subject to federal, state and local laws governing air, soil and water
pollution. However, the capital expenditures necessary to comply with these
requirements are not expected to have a material effect on the earnings or
competitive position of the Registrant.
Employees - Certain production and delivery employees of the
construction operations are represented by labor unions. During the year
ended December 31, 1994, various employees engaged in the concrete operations
were represented by two local unions. One labor contract expires in 1995 and
the other in 1996.
Seasonality of Business - Somerset's construction operations are
seasonal due to weather conditions. These operations are adversely affected
by periods of low temperatures, snow and rain, and are dependent on whether
the work available during such periods may be produced with weather-protected
facilities. The need of the concrete segment for working capital increases
in the spring, summer and fall months because of increases in trade accounts
receivable and inventories, and generally declines in the winter months.
II. Banking Segment
Information on the Registrant's bank affiliate, First Indiana
Corporation, is incorporated into this Report by reference to Item 1 of the
1994 Report on Form 10-K for First Indiana Corporation for the year ended
December 31, 1994, filed separately under commission file number 0-14354.
-4-
ITEM 2 - PROPERTIES
The following chart explains the general character of the Registrant's and
subsidiaries' principal properties, total acreage of each property and, where
applicable, the square footage of enclosed area.
Total
Location Acreage Use and Enclosed Area
Suite 2800 N/A Corporate office facility containing
First Indiana Plaza 950 sq. ft.
Indianapolis, IN
Precast/Prestressed Concrete:
1030 S. Kitley Ave. 38 Administration, accounting and
Indianapolis, IN engineering functions as well
as manufacturing, storage and
maintenance facility for precast
and prestressed concrete products.
Enclosed area totals 41,000 sq. ft.
17701 Springmill 27 Manufacturing,storage and maintenance
Westfield, IN facility for prestressed concrete
products. Enclosed area totals
totals 33,000 sq. ft.
3400 Jackson Pike 16.5 Manufacturing,storage and maintenance
Grove City, OH facility for prestressed concrete
products. Enclosed area totals
34,000 sq. ft.
ITEM 3 - LEGAL PROCEEDINGS
Information relative to this item is incorporated into this Report by
reference to Note 14 of the Notes to Consolidated Financial Statements, on
page 33 of this report.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the final
quarter of the fiscal period covered by this report.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY
HOLDER MATTERS
This information is set forth under the caption "Market for the Registrant's
Common Stock" on page 11 of this Report.
-5-
ITEM 6 - SELECTED FINANCIAL DATA
This information is set forth under the caption "Selected Financial Data" on
page 11 of this Report.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION AND LIQUIDITY
This information is set forth under the caption "Management's Discussion and
Analysis of Results of Operations and Financial Condition and Liquidity" on
Pages 12 through 17 of this Report.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information is contained in the Consolidated Financial Statements, Notes
to Consolidated Financial Statements and Independent Auditors' Report on
Pages 18 through 33 of this Report. Information on the Registrant's bank
affiliate, First Indiana Corporation, is incorporated by reference to Item
8 of the 1994 Report on Form 10-K for First Indiana Corporation, filed
separately under commission file number 0-14354.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Registrant had no changes in and no disagreements with its accountants
regarding accounting and financial disclosure.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
Information regarding Directors of the Registrant is incorporated into this
Report by reference to the definitive proxy statement of the Registrant for
the Annual Meeting of Shareholders to be held April 27, 1995, under the
caption "Proposal No. 1: Election of Directors", filed separately under
commission file number 0-14227.
Executive Officers
Name Office Held Relationship Age
Robert H. McKinney Chairman, CEO Father of President 69
and Director and Vice President
Marni McKinney President, COO Daughter of 38
Jakubovie and Director Chairman
Kevin K. McKinney Vice President Son of 37
and Director Chairman
Joseph M. Richter Exec. V. P., CFO, None 52
and Treasurer
Gary E. Oakes President of None 47
Precast Division
-6-
Terms of all officers of the Registrant continue until the first meeting of
the Board of Directors following the Annual Meeting of Shareholders on April
27, 1995.
A brief account of the business experience of each Executive Officer during
the past five years is as follows:
Robert H. McKinney - Chairman and Chief Executive Officer of the Registrant;
Chairman and Chief Executive Officer of First Indiana Corporation, a savings
bank holding company; Chairman of First Indiana Bank; Chief Executive Officer
until May 1992; retired Partner of Bose McKinney & Evans, attorneys; a
Director of First Indiana Corporation and Lilly Industries, Inc.; Chairman,
Federal Home Loan Bank Board (1977-1979).
Marni McKinney Jakubovie - President, Chief Operating Officer, and a Director
of the Registrant; Vice Chairman and a Director of First Indiana Corporation
and First Indiana Bank; formerly Executive Vice President of the Registrant
(1987-1992); formerly Vice President and Director of Strategic Planning of
First Indiana Bank.
Kevin K. McKinney - Vice President and a Director of the Registrant;
Publisher of NUVO Newsweekly and Chairman and President of NUVO, Inc.;
formerly President Mid America Media; formerly Chairman, Indianapolis Extra,
Ltd.
Joseph M. Richter - Executive Vice President, Chief Financial Officer and
Treasurer of the Registrant.
Gary E. Oakes - President of American Precast Concrete, division of the
Registrant, since February 1990; formerly Vice President of American Precast
Concrete.
ITEM 11 - EXECUTIVE COMPENSATION
Information relative to this item is incorporated into this Report by
reference to the definitive proxy statement of the Registrant for the Annual
Meeting of Shareholders to be held April 27, 1995, under the caption
"Compensation of Directors and Executive Compensation".
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relative to this item is incorporated into this Report by
reference to the definitive proxy statement of the Registrant for the Annual
Meeting of Shareholders to be held April 27, 1995, under the caption "Voting
Securities and Principal Holders Thereof".
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relative to this item is incorporated into this Report by
reference to the definitive proxy statement of the Registrant for the Annual
Meeting of Shareholders to be held April 27, 1995, under the caption "Certain
Transactions".
-7-
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. The financial statements listed in the accompanying Index to
Selected Financial Data, Management's Discussion and Analysis
of Results of Operations and Financial Condition and
Liquidity, Financial Statements and Financial Statement
Schedules are filed as part of this report.
2. The financial statement schedules listed in the accompanying
Index to Selected Financial Data, Management's Discussion and
Analysis of Results of Operations and Financial Condition and
Liquidity, Financial Statements and Financial Statement
Schedules are filed as part of this report.
Exhibit
Number Exhibit
3 Amended Articles of Incorporation and Amended and Restated By-
Laws thereto.
10 Material Contracts of the Registrant.
22 Subsidiaries of the Registrant.
23 Definitive Proxy Statement for Annual Meeting of Shareholders
to be held April 27, 1995.
24 Consent of Independent Certified Public Accountants, of report
dated March 21, 1995, for incorporation into Form S-8
registration statement.
99 First Indiana Corporation's form 10-K for the year ended
December 31, 1994.
All other exhibits are not attached since they are not
applicable to the Registrant.
(b) Reports on Form 8-K. No information need be disclosed.
(c) Financial Statement Schedules
-8-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
THE SOMERSET GROUP, INC.
By s/ Robert H. McKinney 03/22/95
Robert H. McKinney, Chairman and
Principal Executive Officer
By s/ Marni McKinney Jakubovie 03/22/95
Marni McKinney Jakubovie, President and
Principal Operating Officer
By s/ Joseph M. Richter 03/22/95
Joseph M. Richter, Executive Vice President
and Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
in the capacities indicated and on the date indicated.
Signatures Title Date
s/ Robert H. McKinney Director, Chairman 03/22/95
Robert H. McKinney Principal Executive Officer
s/ Marni McKinney Jakubovie Director, President 03/22/95
Marni McKinney Jakubovie and Principal Operating Officer
s/ Kevin K. McKinney Director and Vice President 03/22/95
Kevin K. McKinney
s/ H. J. Baker Director 03/22/95
H. J. Baker
s/ William L. Elder Director 03/22/95
William L. Elder
s/ Douglas W. Huemme Director 03/22/95
Douglas W. Huemme
s/ Michael L. Smith Director 03/22/95
Michael L. Smith
-9-
THE SOMERSET GROUP, INC.
Form 10-K for the Year Ended December 31, 1994
Items 5, 6, 7, 8, 14(a) (1) and (2), and 14(c)
Index to Selected Financial Data,
Management's Discussion and Analysis of Results of
Operations and Financial Condition and Liquidity,
Financial Statements and Financial Statement Schedules
Selected Financial Data, Management's Discussion and Analysis of Results
of Operations and Financial Condition and Liquidity, Financial Statements and
Schedules of the Registrant and its subsidiaries, required to be included in
Items 5, 6, 7, 8, 14(a) (1) and (2), and 14(c) are listed below:
MARKET FOR THE REGISTRANT'S COMMON STOCK 11
SELECTED FINANCIAL DATA 11
MANAGEMENT'S DISCUSSION AND ANALYSIS 12
FINANCIAL STATEMENTS:
Independent Auditors' Report 19
Consolidated Statements of Income for the years ended December
31, 1994, 1993, and 1992 19
Consolidated Balance Sheets as of December 31, 1994 and 1993 20
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1994, and 1993, and 1992 22
Consolidated Statements of Cash Flows for the years ended
December 31, 1994 1993, and 1992 23
Notes to Consolidated Financial Statements 24
Summarized Consolidated Statements of Subsidiary,
Not Consolidated with Registrant 34
FINANCIAL STATEMENT SCHEDULES:
Financial statement schedules have been omitted because the required
information is contained in the notes to the financial statements or because
such schedules are not required or are not applicable.
The individual financial statements of the Registrant have been omitted
since the Registrant is primarily an operating company and all subsidiaries
included in the consolidated statements being filed, in the aggregate, do not
have minority equity interest and/or indebtedness to any person other than
the Registrant or its consolidated subsidiaries in amounts which together
exceed 25% of consolidated net assets as shown by the most recent
consolidated balance sheet. All other schedules are omitted because they are
not applicable or the required information is shown in the financial
statements or the notes thereto.
-10-
THE SOMERSET GROUP, INC.
MARKET FOR THE REGISTRANT'S COMMON STOCK
The Company's common stock trades on The NASDAQ Stock Market under the symbol
SOMR. The quarterly range of prices for the Company's common stock for the
years ended December 31, 1994 and 1993 is presented below:
1994 1993
Quarter High Low High Low
First - ended March 31, $14.25 $9.75 $9.50 $6.75
Second - ended June 30, $12.50 $11.63 $9.75 $7.75
Third -ended September 30, $13.25 $11.13 $11.50 $9.50
Fourth -ended December 31, $13.50 $12.50 $11.00 $10.13
The Company paid a cash dividend of $.10 per share in the third quarter of
1994.
As of February 24, 1995, there were 234 shareholders of record and
approximately 707 beneficial owners.
SELECTED FINANCIAL DATA
(In thousands except per share amounts)
<TABLE>
Years Ended December 31,
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Net sales from continuing operation $23,467 $14,555 $15,875 $13,935 $19,685
Income from continuing operations 2,617 2,219 1,657 1,692 2,286
Net income 2,617 2,219 44 120 2,796
Income from continuing operations
per share 1.57 1.37 1.03 1.00 1.28
Net income per share 1.57 1.37 .03 .07 1.57
</TABLE>
<TABLE>
As of December 31,
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Working capital $6,852 $4,885 $4,897 $5,806 $6,415
Total assets 39,804 34,995 30,649 32,618 33,499
Long-term debt 5,500 5,500 5,587 7,013 5,929
Total liabilities 13,375 11,091 9,009 10,618 10,845
Shareholders' equity 26,429 23,904 21,640 22,000 22,654
Book value per share 16.13 14.89 13.49 13.75 13.17
</TABLE>
-11-
THE SOMERSET GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The Company earned $2,617,000 in 1994, compared to net income from the same
businesses of $2,219,000 in 1993 and $1,657,000 in 1992, an 18% increase over
1993 and a 58% increase over 1992. Operating income of the construction
products and services group improved during 1994, but was partially offset by
lower equity earnings from First Indiana Corporation.
Income from continuing operations, after allocation of income taxes, during
the three years ended December 31, 1994 was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Operating income from construction
products and services $1,752,000 $ 716,000 $521,000
Equity in earnings of First
Indiana Corporation 1,583,000 2,186,000 1,863,000
General corporate expenses
and other income (450,000) (374,000) (444,000)
Interest expense (268,000) (309,000) (283,000)
-------- -------- ---------
(718,000) (683,000) (727,000)
Net income from continuing
operations 2,617,000 2,219,000 1,657,000
Return on beginning equity 10.9% 10.3% 7.5%
</TABLE>
Operating income from construction products and services of $1,752,000
represented an increase of 145% over the $716,000 earned in 1993 and a 236%
increase over the $521,000 reported in 1992. However, the Company's net
income from equity earnings of First Indiana Corporation for 1994, of
$1,583,000, was 28% below 1993 results of $2,186,000, and 15% lower than the
$1,863,000 earned in 1992, and offset much of the gain made by the
construction operations.
Corporate expenses for 1994 were higher than both 1993 and 1992, and were
caused by the increase in sales and earnings of the construction operations
which necessitated increased personnel costs and variable expenses in
managing the operations. Interest expense decreased as a result of the
relatively strong cash position of the Company during 1994, compared to the
prior years, which reduced borrowing for working capital needs.
During 1994, the Company sold its 51% interest in a subsidiary that commenced
operations in the fall of 1993. The subsidiary manufactured prestressed
concrete girders and beams for use by the highway bridge construction
industry. The results of operations for this subsidiary are included in the
consolidated financial statements for 1993 and for the period owned in 1994.
The Company paid its first cash dividend since its inception during the third
quarter of 1994, of $.10 per share, under a policy of paying semi-annual
dividends. A dividend of $.10 per share has also been declared for payment
on March 17, 1995. Since its inception as a public company, The Somerset
Group, Inc. has retained its earnings to fund growth of operations and to
reduce long-term debt. The payment of cash dividends will not hinder the
Company's ability to pursue these objectives because of the increase in
earnings for 1994 and 1993.
-12-
Sales
Sales, gross profit, and the percentage of gross profit on sales of the
construction products and services group for the three years ended December
31, 1994 were as follows:
1994 1993 1992
Net Sales $23,467,000 $14,555,000 $15,875,000
Gross Profit 4,303,000 2,544,000 2,235,000
Percentage 18.3% 17.5% 14.1%
Net sales increased 61%, or $8.9 million during 1994, compared to 1993. When
compared to 1992, sales during 1994 represented a 48% increase, or $7.6
million. The increase in sales was a result of higher volume and increased
unit selling prices for products manufactured and an increase in the volume
of job site installation services. The decrease in 1993 sales compared to
1992 was a result of lower sales of installation services, partially offset
by an increase in average unit prices for manufactured products. Volume
increases of products sold in 1994 occurred in prestressed concrete
components used in the construction of the structural framing systems of
parking garages, sports stadiums, and prestressed concrete wall panels used
as internal and external wall units on new industrial, commercial, and retail
buildings. 1994 sales also include prestressed concrete bridge components
manufactured by the 51% owned subsidiary founded in late 1993 and sold in
1994. There were no sales of these products during 1993 and 1992. Sales of
these products in 1994 amounted to $2.5 million, and accounted for 17% of the
61% increase of 1994 over 1993, and 16% of the 48% increase of 1994 over
1992.
Average unit selling price increases resulted from the sale of higher priced
decorative wall panels and the sale of products designed and engineered
specifically for a particular project compared to standard products.
Increases in prices of standard products implemented during the year were
modest and reflected raw material and labor cost increases. Sales of
installation services accounted for 8.3% of the 1994 sales increase over 1993
and none of the 1994 increase over 1992. The increase primarily resulted
from volume with no significant price increases.
The higher percentage of gross profit on sales during 1994 compared to 1993
was caused by several factors. The primary factor was the increased volume
of product sales which allowed the fixed unit cost to manufacture the
products to be lower. Contributing to a lesser degree was the higher average
unit selling prices of products and higher volume of installation services
that allowed the fixed costs of these services to be a lower percentage of
the sales price.
The higher percentage of gross profit on sales during 1993 compared to 1992
was caused by lower sales of job site services, which are relatively low
margin, higher unit selling prices of manufactured products, and reduced
operating expenses from cost reduction and efficiency improvement programs
initiated in 1992.
As shown above, 1992 profit margins were low and are not representative of
historical margins. During 1992 the country was beginning to recover from
the nationwide recession that was at its peak in the construction industry
during 1991. During 1992 and the first half of 1993 the demand for
construction products and services, while improved over 1991, remained
depressed. Competition for available projects caused downward price
competition among alternative building methods and products that lowered
profit margins as our manufacturing facilities operated at lower efficiency
levels. Beginning in the last half of 1993, demand for our products and
services began a dramatic increase, as the construction economy
-13-
began to grow spurred by lower interest rates and a pent-up demand that had
built during the recession. The results for 1994 are indicative of the
increase in demand for new structures, particularly those for manufacturing,
warehousing, and distribution. As the midwest economy gained strength, we
experienced record setting sales volume for products and installation
services for these structures.
While the recent increases in interest rates will have some effect on demand,
indicators remain positive that demand during 1995 will remain at relatively
high levels. The Company's contracted backlog at December 31, 1994 stood at
$8.8 million, compared to $8.2 million at the end of 1993 and $4.2 million at
the end of 1992.
Equity in Earnings of First Indiana Corporation
The Company's equity in earnings of First Indiana Corporation, before income
taxes, amounted to $2,616,000 for the year ended December 31, 1994, compared
to $3,614,000 for the year ended December 31, 1993, and $3,080,000 in 1992.
The 1994 amount represented a decrease of 28% from 1993 earnings and were 15%
below earnings of 1992.
First Indiana's earnings for 1994 represented the second strongest year from
operations in the Bank's history. The decrease in earnings resulted
primarily from higher interest rates, which reduced loan originations and
gains from the sale of loans in the Bank's core mortgage business, and higher
operating expenses. Offsetting these decreases were increases in
originations of home equity and construction loans.
Net interest income rose to $49.2 million in 1994, compared to $45.9 million
in 1993 and $36.9 million in 1992. The increase in 1994 stems from First
Indiana's portfolio of adjustable-rate consumer and construction loans tied
to the Bank's prime lending rate, which rose throughout the year. First
Indiana's asset-sensitive balance sheet caused interest income to increase
faster than interest expense in the rising-rate environment.
First Indiana's net interest margin rose to a record 3.96% for 1994, compared
with 3.64% in 1993 and 3.28% in 1992. Net interest margin consists of two
components: interest-rate spread and the contribution of interest-free funds
(primarily shareholders' equity and other non-interest-bearing liabilities).
Interest-rate spread is the difference between the yield on total-earning
assets and the cost of total interest-bearing liabilities.
First Indiana's average interest-rate spread on average interest-earning
assets for the year ended December 31, 1994 was 3.71%, compared with 3.43% in
1993 and 3.05% in 1992. The increased spread arose when the Bank's interest-
earnings assets repriced faster than the liabilities funding them in the
rising rate environment of 1994.
The decrease in non-interest income in 1994 arose primarily from losses in
the Bank's trading account and upon the sale of residential mortgage loans in
the secondary market as part of the Bank's normal mortgage banking activity.
A sudden, unexpected increase in interest rates in the first quarter of 1994
led to losses in the Bank's trading account, which consisted primarily of
Treasurys and other government securities. (First Indiana has no investment
in derivative securities). That account was immediately closed and the
Bank's trading desk disbanded.
As with most mortgage bankers, losses from the sale of loans occurred during
the first quarter of 1994, when rates rose quickly and First Indiana was
committed to deliver loans to the secondary market which
-14-
had fallen in value between the time of their origination and the promised
date of delivery. First Indiana has since reduced the maximum amount
permitted to be held in its "pipeline" for sale to the secondary market, and
losses of the magnitude incurred in 1994 are not expected to recur.
First Indiana has managed its loan portfolio to reduce concentration of loan
types and to diversify assets geographically. Non-performing assets, which
consist of non-accrual and restructured loans, real estate owned, and other
repossessed assets, fell 20% during 1994 to $29.1 million at December 31 from
$36.5 million one year earlier.
First Indiana's assets grew in 1994 to almost $1.4 billion at year end,
compared to $1.3 billion at December 31, 1993. The tangible and core capital
of the Bank was almost $114 million, or 8.16% of assets, which exceeded
regulatory minimums at December 31, 1994.
Management of First Indiana has identified several strategies for improving
earnings in 1995 and beyond. These include further enhancements to its core
real estate lending business, including construction, home equity, and
residential mortgage lending; enhanced efficiencies and streamlined
processes, particularly in the mortgage banking unit; and the development and
acquisition of companies that will provide additional sources of non-interest
income. The Bank further intends to expand its business lending portfolio,
specializing in loans to smaller, independently owned companies with a
demonstrated history of strong performance.
Selling and General and Administrative Expenses
Selling expenses amounted to $568,000 during 1994, an increase of $80,000
from the $488,000 in 1993 and an increase of $94,000 from $474,000 in 1992.
As a percentage of sales, selling expenses were lower at 2.4% of 1994 sales,
compared to 3.4% in 1993, and 3.0% in 1992. The 1994 increase was a result
of the increase in sales of construction products and services that caused an
increase in commission compensation and increased costs for the promotion of
the highway bridge products subsidiary that was formed late in 1993.
General and administrative expenses amounted to $1,927,000 during 1994 and
represented an increase of $304,000 from the $1,623,000 incurred in 1993, and
an increase of $204,000 from the $1,723,000 spent in 1992. The 1994 increase
was caused by an increase in variable expenses directly related to the
increased sales and manufacturing volume of construction products, incentive
compensation of management personnel based on improved operating income from
the construction group, and additional expenses incurred for the start-up of
operations of the highway bridge products subsidiary. The $100,000 of lower
expenses for 1993 compared to 1992 was a result of the restructuring of
operations, consolidation of facilities and workforce reductions initiated in
1992 to reduce overhead costs.
Interest Expense
Interest expense decreased $73,000 in 1994 and occurred because of fewer
funds borrowed for operating needs that resulted from the strong cash
position of the Company throughout 1994. In spite of the rapid increase in
sales, and the increased need for cash to support the increase in accounts
receivable and contracts-in-progress, borrowing under the working capital
line-of-credit was minimal during the year. In addition, 1994 was the first
year to recognize the full effect of the lower interest rates on the
Company's long-term debt renegotiated in 1993. The increase of interest
expense of $44,000 recorded in 1993 compared to 1992 was caused by debt
origination fees and pay-off penalties associated with the renegotiation of
the long-term debt of the Company.
-15-
Current Accounting Issues
Implementation of pronouncements issued by the Financial Accounting Standards
Board during 1994 and to the date of this report are either not applicable or
will not have any material impact on the Company's Consolidated Financial
Statements when implemented.
FINANCIAL CONDITION AND LIQUIDITY
The financial condition of the Company was improved at December 31, 1994,
from a relatively sound position at the end of 1993. While the rapid
increase in sales during 1994 caused a heavy demand for working capital, the
Company was able to fund these requirements primarily from internal sources
with no increase in outside debt. Total assets grew $4.8 million or 13.7% to
$39.8 million at the end of 1994, from $35 million at the end of 1993.
The ratio of long-term debt to shareholders' equity improved to slightly less
than .21 to one at December 31, 1994, compared to .23 to one at December 31,
1993. Long-term debt was unchanged and stood at $5.5 million at both
December 31, 1994 and 1993.
The Company continued to have a strong ratio of current assets to current
liabilities. The current ratio stood at 3.0 to one at December 31, 1994,
compared to 3.6 to one at December 31, 1993. The decrease was due to the
timing of payment of certain current liabilities, that were higher at the end
of 1994 compared to 1993. More importantly, the amount of actual net working
capital increased almost $2.0 million, or 40%, and amounted to $6.9 million
compared to $4.9 million at the end of 1993.
Shareholders' equity increased to $26.4 million at December 31, 1994 from
$23.9 million at the end of 1993, or $16.13 per share compared to $14.89 per
share. The percentage of total assets represented by shareholders' equity
was 66% at December 31, 1994 compared to 68% at December 31, 1993. The
amounts represent "tangible book value" as there are no intangible assets at
either year end.
Operating activities used $155,000 of cash in 1994, compared to cash provided
of $2.4 million in 1993. The primary cause of this change was the increase
in working capital needed to support operations. Accounts receivable and
contracts-in-progress unbilled were $4.9 million higher at December 31, 1994
than at the beginning of the year. The net increase in operating assets and
liabilities (cash used) was $2.7 million, compared to a net decrease (cash
provided) during 1993 of $1.4 million, resulting in a total change in annual
cash flow of $4.1 million between 1994 and 1993.
Significant changes in cash flows are not unusual in the construction
industry. Several variables influence cash flows when compared on a year-to-
year basis, including the timing of individual project payments and changes
in the status and completion of projects from one year-end to another. As a
precaution against these fluctuations in cash flows, the Company maintains an
additional unused bank loan commitment of $3.0 million.
As of October 31, 1994 the Company sold its 51% interest in a subsidiary that
had been activated in 1993 to expand into a new product line of prestressed
concrete highway bridge girders and beams. During 1993 the Company had sold
a 49% interest in the subsidiary to an unrelated third party. The subsidiary
is included in the Company's consolidated financial statements since
inception of activity in the third quarter of 1993 to the sale of the 51%
ownership on October 31, 1994. Cash proceeds from the sale of this
subsidiary of $1,057,000, combined with a $525,000 additional capital
investment from the Company's minority owner, were used to fund $1,250,000 of
purchases of property, plant and equipment, that included
-16-
$564,000 of assets purchased by the subsidiary. The remainder of the asset
additions were for replacement and improvement of existing equipment and
facilities that did not significantly increase the capacity of the Company's
operations.
The Company also sold land and buildings to the subsidiary for $380,000 and
expended $595,000 for the open market purchase of 34,999 shares of First
Indiana Corporation's common stock.
At December 31, 1993 the Company had net operating loss carryforwards for
federal income tax purposes of $2,544,000. These operating loss
carryforwards were used to offset federal income tax payments during 1994 and
were a positive contribution to the cash flow of the Company during the year.
At December 31, 1994 the Company has $593,000 of such net operating loss
carryforwards remaining which can be used to offset future taxable income,
and will add to cash flow by reducing the amount of future income taxes to be
paid.
On October 1, 1993, the Company retired $2,446,000 of long-term subordinated
debentures under the terms of an optional early redemption clause of the
debenture agreement. The redemption was funded by additional long-term debt
due July 1, 1996.
Liquidity of the Company is considered more than adequate to fund future
operations. It is expected that future capital expenditures will be funded
through internally generated cash. Major expansions and any acquisitions may
be funded through additional long-term financing, or a combination of long-
term financing and shares of the Company's common stock. No material
increases in debt levels are anticipated in the near term.
-17-
KPMG PEAT MARWICK LLP
2400 First Indiana Plaza
135 N. Pennsylvania Street
Indianapolis, IN 46204-2452
The Board of Directors and Shareholders
The Somerset Group, Inc.:
We have audited the accompanying consolidated balance sheets
of The Somerset Group, Inc. and the subsidiaries as of
December 31, 1994 and 1993 and the related consolidated
statements of income, shareholders' equity, and cash flows
for each of the years in the three-year period ended
December 31, 1994. These consolidated financial statements
are the responsibility of The Somerset Group, Inc.'s
management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of The Somerset Group, Inc. and
subsidiaries at December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1994 in
conformity with generally accepted accounting principles.
As discussed in note 1 to the consolidated financial
statements, the Company adopted the provisions of the
Financial Accounting Standards Board's Statement of the
Financial Accounting Standards No. 109, Accounting for
Income Taxes, in 1992.
February 3, 1995
s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
-18-
THE SOMERSET GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
<TABLE>
1994 1993 1992
<S> <C> <C> <C>
-------- -------- --------
Income:
Net sales $23,467,000 $14,555,000 $15,875,000
Cost of sales 19,164,000 12,011,000 13,640,000
----------- ----------- -----------
Gross profit 4,303,000 2,544,000 2,235,000
Equity in earnings of First Indiana 2,616,000 3,614,000 3,080,000
Other 146,000 95,000 93,000
----------- ----------- -----------
Total income 7,065,000 6,253,000 5,408,000
Expenses:
Selling expenses 568,000 488,000 474,000
General and administrative expenses 1,927,000 1,623,000 1,723,000
Interest expense 438,000 511,000 467,000
----------- ----------- -----------
Total expenses 2,933,000 2,622,000 2,664,000
Operating income before income taxes
and minority interest 4,132,000 3,631,000 2,744,000
Income tax expense 1,608,000 1,437,000 1,087,000
----------- ----------- -----------
2,524,000 2,194,000 1,657,000
Minority interest in loss of subs 93,000 25,000 --
----------- ----------- -----------
Income from continuing operations $2,617,000 $2,219,000 1,657,000
----------- ----------- -----------
Discontinued operations (net of income tax)
Loss from operations (169,000)
Loss from sale of assets (1,444,000)
----------- ----------- -----------
Loss from discontinued operations (1,613,000)
----------- ----------- -----------
Net income $2,617,000 $2,219,000 $44,000
========== ========== ==========
Income (loss) per share
Continuing operations $1.57 $1.37 $1.03
Discontinued operations --- --- ($1.00)
------ ------ ------
Net income $1.57 $1.37 $0.03
====== ====== ======
</TABLE>
Average shares outstanding 1,662,255 1,620,190 1,601,868
See accompanying Notes to Consolidated Financial Statements
19
THE SOMERSET GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS As of December 31,
<TABLE>
1994 1993
<S> <C> <C>
Current assets
Cash and cash equivalents $2,006,000 $2,459,000
Trade accounts, notes receivables
less allowance for doubtful acct 6,070,000 2,730,000
Contracts in progress, unbilled 1,769,000 1,127,000
Inventories 390,000 365,000
Prepaid expenses 109,000 95,000
Deferred income taxes --- 23,000
---------- ----------
Total current assets 10,344,000 6,799,000
Investments
First Indiana Corp.(market values
of $23,782,000 and $24,890,000 24,265,000 21,873,000
Property, plant and equipment, at cost
Land 393,000 685,000
Buildings 2,738,000 2,773,000
Production and delivery equipment 6,593,000 6,145,000
Office furniture and equipment 556,000 506,000
Construction in progress --- 848,000
---------- ----------
10,280,000 10,957,000
Less accumulated depreciation 6,126,000 5,678,000
---------- ----------
4,154,000 5,279,000
Other assets 1,041,000 1,044,000
Total Assets $39,804,000 $34,995,000
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-20-
LIABILITIES AND SHAREHOLDERS' EQUITY December 31, 1994
1994 1993
<TABLE>
<S> <C> <C>
Current liabilities
Trade accounts payable $808,000 $805,000
Accrued compensation 837,000 432,000
Taxes, other than income taxes 194,000 184,000
Billings in excess of costs 451,000 147,000
Deferred income taxes 22,000 ---
Income taxes 437,000 ---
Other accrued expenses 743,000 346,000
---------- ----------
Total current liabilities 3,492,000 1,914,000
Long-term debt
Notes payable - banks 5,500,000 5,500,000
Deferred income taxes 4,383,000 3,163,000
Minority interest in subsidiary --- 514,000
Shareholders' equity
Common stock without par value,
4,000,000 shares, issued 1,829,408 1,829,000 1,829,000
Capital in excess of stated value 4,979,000 4,887,000
Retained earnings 20,999,000 18,751,000
---------- ----------
27,807,000 25,467,000
Less 190,662 and 224,510 treasury
Shares respectively, at cost 1,378,000 1,563,000
---------- ----------
Total shareholders' equity 26,429,000 23,904,000
Total Liabilities and Shareholders' Eq $39,804,000 $34,995,000
=========== ===========
</TABLE>
-21-
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Capital in
Common Excess of Retained Treasury
Stock Stated Value Earnings Shares Total
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1992 $1,829,000 $4,887,000 $16,878,000 ($1,594,000) $22,000,000
Net income --- --- 44,000 --- 44,000
Shares of common stock issued in
connection with 401(k) plan --- --- (1,000) 24,000 23,000
Equity in other capital changes of
First Indiana Corporation, net of --- --- (427,000) --- (427,000)
deferred income taxes
---------- ---------- ---------- ---------- ----------
Balance December 31, 1992 1,829,000 4,887,000 16,494,000 (1,570,000) 21,640,000
Net income --- --- 2,219,000 --- 2,219,000
Shares of common stock issued in
connection with 401(k) plan --- --- 3,000 7,000 10,000
Equity in other capital changes of
First Indiana Corporation, net of --- --- 35,000 --- 35,000
deferred income taxes
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1993 1,829,000 4,887,000 18,751,000 (1,563,000) 23,904,000
Net Income --- --- 2,617,000 --- 2,617,000
Shares of common stock issued in
connection with restricted stock
grants, 401(k) plan, and exercise
of stock option grants --- 92,000 (176,000) 311,000 227,000
Purchase of Treasury shares --- --- --- (126,000) (126,000)
Cash dividends paid --- --- (164,000) --- (164,000)
Equity in other capital changes of
First Indiana Corporation, net of
deferred income taxes --- --- (29,000) --- (29,000)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1994 $1,829,000 $4,979,000 $20,999,000 ($1,378,000) $26,429,000
========== ========== ========== ========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-22-
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C> <C> <C> <C>
Cash flows from operating activities: 1994 1993 1992
Income from continuing operations $2,617,000 $2,219,000 $1,657,000
Add (deduct) items not affecting cash
Depreciation and amortization 685,000 541,000 537,000
Deferred income taxes 1,265,000 1,363,000 287,000
Equity in earnings of First Indiana (2,616,000) (3,614,000) (3,080,000)
Dividends received from First Indian 782,000 531,000 413,000
Gain on sale of subsidiary (124,000)
Other, net (22,000) (39,000) 23,000
Changes in operating assets and liabilities:
Trade accounts, notes, and other (3,955,000) 544,000 1,610,000
Contracts in progress, unbilled (953,000) 303,000 (296,000)
Prepaid expenses (18,000) (50,000) 122,000
Accounts payable and accrued expen 2,184,000 497,000 (352,000)
Accrued and refundable income taxe --- 125,000 507,000
---------- ---------- ----------
Cash provided (used) by continuing opera (155,000) 2,420,000 1,428,000
Income (loss) from discontinued operatio (1,613,000)
Add (deduct) items not affecting cash
Net loss on sale of assets 1,444,000
Change in net assets of discontinued --- --- 609,000
---------- ---------- ----------
Cash provided by discontinued operations --- --- 440,000
---------- ---------- ----------
Net cash provided (used) by operating ac (155,000) 2,420,000 1,868,000
Cash flows from investing activities:
Increase in investment in First Indiana (595,000) (523,000)
Purchase of property, plant and equipment, including
discontinued operations in 1992 (1,250,000) (1,222,000) (313,000)
Proceeds from sale of assets, including
discontinued operations in 1992 380,000 7,000 1,403,000
Proceeds from sale of subsidiary 1,057,000
Increase in other assets (352,000) (45,000) (476,000)
---------- ---------- ----------
Net cash provided (used) by investing ac (760,000) (1,260,000) 91,000
Cash flows from financing activities:
Proceeds from long-term borrowings 2,500,000 1,300,000
Principal payments on long-term borrow (2,614,000) (2,726,000)
Purchase of treasury shares (126,000)
Issuance of treasury shares 227,000
Proceeds from minority investment in su 525,000 539,000
Dividends paid (164,000) --- ---
---------- ---------- ----------
Net cash provided (used) by financing ac 462,000 425,000 (1,426,000)
---------- ---------- ----------
Increase (decrease) in cash and cash equ (453,000) 1,585,000 533,000
Cash and cash equivalents at beginning 2,459,000 874,000 341,000
Cash and cash equivalents at end of year $2,006,000 $2,459,000 $874,000
========== ========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-23-
THE SOMERSET GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies
(a) Principles of Consolidation: The consolidated financial state-
ments include the accounts of The Somerset Group, Inc. ("the Company")
and its 100% owned subsidiaries for all periods and a 51% owned sub-
sidiary through its sale on October 31, 1994. The consolidated finan-
cial statements for 1992 included an 80% owned subsidiary that was
dissolved and its assets sold during 1992.
(b) Cash and Cash Equivalents: For purposes of reporting cash flows,
cash and cash equivalents include: cash on hand, cash in banks and
debt securities purchased with maturities of three months or less.
(c) Investment in First Indiana Corporation: First Indiana Corpora-
tion is a bank holding company whose primary subsidiary is a bank
which operates primarily in Indiana. The Company's investment in
First Indiana Corporation is stated at cost, adjusted for the
Company's share of undistributed earnings, and includes adjustments
under the purchase method of accounting. Capital changes of First
Indiana Corporation are reflected as a separate component of consoli-
dated retained earnings.
(d) Construction Contracts: The Company uses the percentage-of-com-
pletion method for reporting profits from construction contracts for
financial statement purposes. The units-of-production method is uti-
lized in the computation. Contracts in progress, unbilled, consists
of costs incurred under contracts plus gross profit for the units
completed that, in accordance with progress billing terms of the indi-
vidual contracts, are not yet billable to the customer.
At December 31, 1994 and 1993, the total value of work completed to
date for such contracts in progress was $8,820,000 and $5,993,000, of
which $7,502,000 and $5,013,000, respectively, had been billed.
(e) Inventories: Inventories are stated at the lower of cost or re-
placement market. Cost is determined principally by the first-in,
first-out method. Inventory consists of raw materials and supplies.
f) Property, Plant and Equipment: Property, plant and equipment are
stated at historical cost for financial reporting purposes, depreci-
ation is deter- mined using the straight-line method based upon the
estimated useful lives of the individual assets. Both straight-line
and accelerated methods are used for income tax purposes.
(g) Employee Benefit Plans: The Company maintains a non-contributory,
trusteed, defined benefit pension plan covering substantially all non-
bargaining unit employees. Benefits are based on years of service and
the employee's compensation. The Company makes contributions to the
plan which equal or exceed the minimum amounts required by the Employ-
ee Retirement Income Security Act of 1974.
The Company also sponsors an Employee Savings and Investment Plan,
which is qualified for tax deferred employee contributions under sec-
tion 401(k) of the Internal Revenue Code. The plan is a trusteed,
defined contribution plan with the Company matching a portion of the
employees' contributions in the form of shares of the Company's common
stock.
(h) Income Taxes: The Company adopted Statement of Financial Account-
ing Standards No. 109, Accounting for Income Taxes in 1992. The adop-
tion did not have a material effect on the consolidated financial
statements. The principal temporary differences between the financial
statement carrying amounts and the tax bases of existing assets and
liabilities which results in deferred taxes are the investment in
First Indiana Corporation, accounted for under the equity method of
accounting, and Property, Plant and Equipment.
<PAGE>
(i) Income (Loss) Per Share: Income (loss) per share is based on the
average number of common shares and common share equivalents (stock
options) outstanding during the year. The effect of outstanding stock
options on income per share on a fully diluted basis is not material.
(j) Treasury Shares: Treasury shares issued to fund employee benefit
plans are valued at average cost of all treasury shares at the date of
issuance.
-24-
Note 2. Discontinued Operations
The discontinued operations included in the financial statements for
the year ended December 31, 1992 represent the Company's withdrawal
from the environmental analytical laboratory industry. All of the
operating assets of TMS Analytical Services, Inc., and 80% owned sub-
sidiary, were sold for cash on July 31, 1992.
Note 3. Minority Interest - Sale of Subsidiary
During 1993, the Company sold a 49% interest in an inactive subsid-
iary. Following the sale, the subsidiary commenced building a new
facility for the manufacture of an additional product line for the
Company, that of prestressed concrete products intended for use in the
construction of highway bridges. Manufacturing commenced in January
1994. As of October 31, 1994, the Company sold its remaining 51%
ownership in the subsidiary. The results of operations for this sub-
sidiary from its inception in 1993 to October 31, 1994 and the accom-
panying minority interest are included in the consolidated financial
statements.
The net assets and the gain on sale of this subsidiary were as fol-
lows:
Selling price 1,057,000
----------
Net current assets 277,000
Property, plant and
equipment 1,310,000
Other assets 35,000
Long-term debt (589,000)
Minority interest (420,000)
--------
Net assets sold 933,000
Gain on sale before expenses
of dale and taxes 124,000
========
Note 4. Trade Accounts, Notes and Other Receivables
Trade accounts, notes and other receivables are net of allowances for
doubtful accounts of $8,000 and $25,000 at December 31, 1994 and 1993.
Activity concerning the allowances for doubtful accounts for the three
years ended December 31, 1994 was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Balance at beginning of period 25,000 51,000 9,000
Additions charged to costs and expenses 0 0 8,000
Additions charged to operating
loss of discontinued operations 0 0 40,000
Uncollected accounts written off,
net of recoveries (17,000) (6,000) (6,000)
Amount credited to costs and expenses 0 (20,000) 0
-------- -------- --------
Balance at end of period 8,000 25,000 51,000
</TABLE>
-25-
Note 5. Investment in First Indiana Corporation
The Company's percentage ownership in First Indiana Corporation was as
follows:
First Indiana
Shares Shares Percentage
Owned Outstanding Ownership
December 31, 1994 1,509,983 7,193,522 21.0%
December 31, 1993 1,474,984 7,150,408 20.6%
December 31, 1992 1,474,984 7,147,927 20.6%
The Company's equity in earnings of First Indiana was as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Equity in earnings of First
Indioana based on percentage
of ownership 2,169,000 3,115,000 2,545,000
Purchase price adjustments:
the Company's equity ownership
of First indiana's net assets
exceed the actual cost of its
shares. Under the purchase
price accounting method,
these purchase price adjustments
are being amortized to income
using both the declining-
balance method and straight
line methods and amortization
periods of 3 to 10 years 447,000 499,000 535,000
-------- -------- --------
2,616,000 3,614,000 3,080,000
========= ========= =========
</TABLE>
At December 31, 1994, the unamortized balance of the purchase price
adjustments was $1,081,000.
The charges to retained earnings for equity in other capital changes
of First Indiana Corporation primarily represents dilution of the
Company's percentage share of First Indiana's net worth that resulted
from shares of common stock issued by First Indiana at less than book
value.
<PAGE>
Equity in undistributed earnings and capital changes of First Indiana
of $11,569,000 and $10,796,000 are included in consolidated retained
earnings at December 31, 1994 and 1993, respectively.
First Indiana Corporation is not subject to any regulatory restric-
tions on the payment of dividends to its stockholders. However, the
Office of Thrift Supervision has promulgated regulations governing
dividend payments, stock redemptions, and other capital distributions,
including upstreaming of dividends by a savings institution to a hold-
ing company. Under these regulations, the Bank may make distributions
to First Indiana Corporation of up to 100 percent of the Bank's net
earnings over the most recent four-quarter period, less distributions
made during such four-quarter period. The Bank is required to give
the Office of Thrift Supervision 30 days advance notice before declar-
ing a dividend.
-26-
Note 6. Other Assets
Other assets were as follows:
<TABLE>
<CAPTION>
December 31
1994 1993
<S> <C> <C>
Long-trm note receivable in connectioin
with the sale of discontinued radio
broadcosting properties 487,000 461,000
Investment in split-dollar life insurance
contract for a key officer of the company
secured by cash value and contractual
guarantee of yield 460,000 460,000
Long-term note receivable in connection
with the sale of investment in Mid-
America Media, Inc. 24,000 36,000
Other 70,000 87,000
------- -------
1,041,000 1,044,000
========= =========
</TABLE>
Note 7. Long-Term Debt
Outstanding long-term debt is summarized below:
<TABLE>
<CAPTION>
December 31,1944 December 31,1993
Current Long-Term Current Long-Term
Portion Portion Portion
Portion
<S> <C> <C> <C> <C> <C> <C>
Notes Payable
Note payable to bank at 8.23%
due in full July 1, 1996 0 3,000,000 0 3,000,000
Note payable to bank at 6.85%
due in full July 1, 1996 0 2,500,000 0 2,500,000
--- --------- --- ---------
0 5,500,000 0 5,500,000
=== ========= === =========
</TABLE>
In addition to the above, the Company at December 31, 1994, has avail-
able a $3,000,000 line of credit that expires July 1, 1995, at the
prime rate of interest. The prime rate of interest in effect at De-
cember 31, 1994 and 1993 was 8.5% and 6% respectively.
The Company paid interest of $436,000, $637,000, and $601,000 during
the years ended December 31, 1994, 1993, and 1992 respectively.
-27-
Note 8. Business Segment
(in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
Construction products and services
<S> <C> <C> <C>
Net sale $23,467 $14,555 $15,875
Operating profit 2,715 1,144 863
Add (deduct)
Equity in First Indiana Corp 2,616 3,614 3,080
Other income 146 95 93
Interest expense (438) (511) (467)
General corporate expenses (907) (711) (825)
---------- --------- ----------
Income from continuing operations
before income tax 4,132 3,631 2,744
========= ========= =========
Identifiable assets
Construction products $11,834 $11,351 $10,315
Investment in First Indiana Corp. 24,265 21,873 18,731
Discontinued operations --- --- ---
Corporate assets 3,705 1,771 1,603
---------- ----------- ----------
Total assets $39,804 $34,995 $30,649
=========== =========== ===========
Depreciation and amortization
Construction products $ 670 $ 526 $ 521
Corporate assets 15 15 16
--------- --------- ---------
Continuing operations 685 541 537
Discontinued operations --- --- 182
--------- --------- ---------
Total depreciation/amortization $ 685 $ 541 $ 719
========= ========= =========
Capital expenditures:
Construction products $ 1,250 $ 1,222 $ 302
Discontinued operations --- --- 11
---------- ---------- ----------
$ 1,250 $ 1,222 $ 313
There were no intersegment sales. ========== ========== ==========
</TABLE>
-28-
Note 9. Income Taxes
Total income tax expense (benefit) for the three years ended December 31, 1994
was allocated as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Income from continuing operations $1,608,000 $ 1,437,000 $ 1,087,000
Discontinued operations --- --- (674,000)
Retained earnings for equity in other
in other capital changes of First
Indiana Corporation (9,000) 18,000 (285,000)
--------- ---------- ----------
$1,599,000 $ 1,455,000 $ 128,000
========== ========== ==========
</TABLE>
Income tax expense attributable to income from continuing operations consist
<TABLE>
<CAPTION>
Current Deferred Total
Year ended December 31, 1994:
<S> <C> <C> <C>
Federal $ 273,000 $ 997,000 $1,270,000
State and local 70,000 268,000 338,000
--------- --------- ----------
$ 343,000 $1,265,000 $1,608,000
========= ========= ==========
Year ended December 31, 1993:
Federal $ --- $1,135,000 $1,135,000
State and local --- 302,000 302,000
-------- ---------- ----------
$ $1,437,000 $1,437,000
======== ========== ==========
Year ended December 31, 1992:
Federal $ (99,000) $ 953,000 $ 854,000
State and local (26,000) 259,000 233,000
--------- ---------- ----------
$(125,000) $1,212,000 $1,087,000
======== ========== ==========
</TABLE>
Income tax expense attributable to income from continuing operations was
$1,608,000, $1,437,000, and $1,087,000 for the years ended December 31,
1994, 1993, and 1992, respectively, and differed from the amounts
computed by applying the federal income tax rate of 34%
to pretax income from continuing operations as a result of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Federal income tax at $1,405,000 $1,235,000 $ 933,000
statutory rate of 34%
Add (deduct) tax effect of:
State and local income taxes,
net of federal income tax 204,000 199,000 154,000
Other (1,000) 3,000 ---
---------- ---------- ----------
$1,608,000 $1,437,000 $1,087,000
========== ========== ==========
</TABLE>
The Company made income tax payments to state and local governments of
$24,000 during 1994 and received income tax refunds (net of payments made)
of $33,000 and $592,000 for the years ended December 31, 1993 and 1992,
respectively. See Note 5 for discussion of income taxes related to First
Indiana Corporation.
-29-
The tax effects of temporary differences that give rise to significant
portions of the net deferred tax liability at December 31, 1994 and 1993
are presented below:
<TABLE>
<CAPTION>
December 31,
Deferred tax assets: 1994 1993
<S> <C> <C>
Compensated absences (principally vacation earned)
accrued for financial reporting purposes $ 72,000 $ 65,000
Pension benefits accrued for financial
repoprting purposes 104,000 57,000
Net operating loss carryforwards 234,000 1,005,000
Other 105,000 33,000
Less valuation reserve (234,000) (593,000)
--------- ---------
Total deferred assets $ 281,000 $ 567,000
========== ==========
Deferred tax liabilities:
Investment in First Indiana Corporation 3,949,000 2,972,000
Plant and equipment 640,000 678,000
Contracts in progress - unbilled 97,000 57,000
---------- ---------
Total deferred liabilities 4,686,000 3,707,000
--------- --------
Net deferred tax liability 4,405,000 3,140,000
========== ==========
</TABLE>
At December 31, 1994 and 1993, the Company had net operating loss
carryforwards for federal income tax purposes of $593,000 and $2,544,000,
respectively, which are available to offset future federal taxable income
through 2008.
Note 10. Stock Incentive Plans
Stock Options
The Company's 1986 and 1991 Stock Incentive Plans provide for granting of
stock options to officers and other key employees at the quoted market
value of the Company's common stock on the date of the grant. The terms
and conditions of both the 1986 and 1991 Plans are identical. Options are
exercisable during a period of two to five years after the date of grant,
and expire five years from the date of grant. The 1986 Plan authorized
93,750 shares for granting options, and the 1991 Plan authorized 100,000
shares for granting options, with or without stock appreciation rights.
The Company also maintains a 1991 Director Stock Option Plan, which
authorized 50,000 shares. The plan provides for the granting of stock
options to non-employee directors of the Company. Grants issued are non-
qualified stock options, which do not afford favorable tax treatment to
recipients and which normally result in tax deductions to the Company.
Options are granted annually at the time of the annual meeting of the
shareholders, at the quoted market price on that date. The plan allows no
more than the grant of 10,000 shares annually. Director options have a
term of five years and are exercisable at any time during that term. The
following summary reflects changes in the options outstanding during the
three years ended December 31, 1994.
-30-
<TABLE>
<CAPTION>
Officers & Key
Employees Directors Price Range
Plans Plan Per Share
<S> <C> <C> <C> <C>
Balance at January 1, 1992 74,850 6,000 $6.25 - $17.00
Options granted 25,000 6,000 $6.625 - $7.50
Options expired (25,000) --- $6.25 - $17.00
Balance at December 31, 1992 74,850 12,000 $6.25 - $17.00
Options granted 22,600 5,000 $9.125 - $9.25
Options expired (3,400) (2,000) $6.50 - $9.375
Balance at December 31, 1993 94,050 15,000 $6.25 - $17.00
Options granted 23,600 4,000 $11.875 - $13.00
Options expired --- (3,000) $6.50 - $9.25
Options exercised (22,900) --- $6.25 - $6.625
Balance at December 31, 1994 94,750 16,000 $6.25 - $17.00
</TABLE>
Outstanding option shares at December 31, 1994, by exercise price per
share, were as follows:
<TABLE>
<CAPTION>
Officers & Key
Price Per Employees Directors
Share Plans Plan
<C> <C> <C>
$ 6.25 9,450 ---
6.50 17,100 4,000
6.625 9,700 ---
7.2875 6,500 ---
7.50 --- 4,000
9.125 22,600 ---
9.25 --- 4,000
9.375 2,800 ---
11.875 --- 4,000
13.00 23,600 ---
17.00 3,000 ---
------- --------
94,750 16,000
======= ========
</TABLE>
Stock Grants
The Company's 1986 and 1991 Stock Incentive Plans also provide for the
issuance of stock grants to key individuals for achievement of specific
results over a three-year period. On April 1, 1994, the Company awarded
10,000 shares of stock to each of two executive officers. These shares
are subject to recall by the Company in the event that certain specific
employment and performance objectives are not met by March 31, 1997. The
Company has charged expense for $62,000 during 1994 in connection with
these grants.
Reserved for future stock options and stock grants at December 31, 1994
are 56,000 shares under the Officers and Key Employees Plans and 34,000
shares under the Directors Stock Option Plan.
-31-
<PAGE>
Note 11. Retirement Plans
The Company maintains a non-contributory, defined benefit pension plan
covering non-bargaining unit employees and also made contributions during
the last three fiscal years to collectively bargained, multi-employer
pension plans in accordance with the provisions of negotiated labor
contracts.
Net periodic pension expense for the plan covering non-bargaining unit employees
consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C> <C> <C>
Service cost benefits earned
during the year 153,000 143,000 157,000
Interest cost on projected
benefit obligations 303,000 298,000 263,000
Return on plan asssets 40,000 (95,000) (326,000)
Net amortization and deferral (375,000) (254,000) (26,000)
-------- -------- --------
Net pension costs 121,000 92,000 68,000
======== ======== ========
</TABLE>
The funded status of the plan and the amounts reflected in the accompanying
consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Vested benefit obligation $ 2,913,000 $ 2,872,000
Non-vested benefit obligation 155,000 231,000
Accumulated benefit obligation 3,068,000 3,103,000
Effect of future salary increases and other events 1,085,000 1,206,000
Projected benefit obligation 4,153,000 4,309,000
Fair value of plan assets 3,800,000 4,027,000
Projected benefit obligations in excess of plan assets 353,000 282,000
Unrecognized net experience (gain) loss (328,000) (37,000)
Unrecognized net transition asset* 241,000 (100,000)
--------- ---------
Accrued pension cost $ 266,000 $ 145,000
========= =========
</TABLE>
* Amortized over 18 years
The projected benefit obligations were determined using an assumed
discount rate of 8.0% for the year ended December 31, 1994 and 7.5% for
the year ended December 31, 1993. The effect of this change in discount
rate was to decrease the projected benefit obligation $272,000 at December
31, 1994. The 7.5% rate used during 1993 was a decrease from 8.0% in
1992, and the effect of this change was to increase the projected benefit
obligations $303,000. Both years assumed a long-term salary increase of
6% compounded annually, and a long-term rate of return on plan assets of
8%. Plan assets consist primarily of U. S. government agency obligations
and exchange listed stocks and bonds.
The Company has contracts with certain employees represented by labor
unions, that require contributions to multi-employer pension plans.
Contributions made to these multi-employer pension plans are based on the
number of hours/weeks worked. Information from the plans' administrators
is not available to permit the Company to determine its share of unfunded
vested benefits. The amounts contributed for the years ended December 31,
1994, 1993, and 1992 for continuing operations were $156,000, $129,000,
and $139,000, respectively.
-32-
The Company also sponsors a 401(k) Savings Plan, which is qualified for
tax-deferred employee contributions under the Internal Revenue Code. The
plan was initiated in 1988, and is a defined contribution plan,
administered by an independent trustee. All non-bargaining unit employees
are eligible for participation in the plan after meeting minimal time-in-
service requirements. From 1988 through June 30, 1992, the Company
matched employee contributions to the plan at the rate of 50%, to a
maximum of 3% of the employee's base salary or wages. Beginning July 1,
1992, the Company matches employee contributions at the rate of 25%, to a
maximum of 3% of the employee's base salary or wages. The Company's
matching contribution is made in the form of shares of the Company's
common stock, valued at fair market price at the time of the contribution,
which is charged to operating expenses. The cost of matching
contributions charged to operating expenses and the number of shares used
were $16,000 and 1,311 shares, $10,000 and 994 shares, and $23,000 and
4,002 shares for the years ended December 31, 1994, 1993, and 1992,
respectively.
Note 12. Major Customers
1994 net sales included net sales to an Indianapolis based developer that
amounted to 12% of total sales, including a shopping center parking garage
project that amounted to 10% of net sales. Sales to another Indianapolis
based developer amounted to 10% of total sales.
1993 net sales included net sales to an Indianapolis developer that
amounted to 26% of total sales, including a shopping mall parking garage
project that amounted to 15% of net sales.
1992 net sales included net sales for construction of a sports stadium at
the University of Illinois that amounted to 25% of total sales during
1992. Products and services provided for construction of a parking
structure at an Indianapolis hospital amounted to 14% of total sales.
Note 13. Subsequent Event
On February 20, 1995, the Company entered into an agreement with Fabcon,
Incorporated for the sale of two of its three prestressed concrete
manufacturing facilities and the business associated with the product
lines manufactured by those facilities. The agreement calls for a selling
price of $5,000,000 for the property, plant and equipment plus a yet to be
determined amount for the carrying value of inventories and contracts in
progress - unbilled, accounts receivable, and other related current
assets. The Company estimates that it will report a before income taxes
gain from the sale of assets in the second quarter of 1995 of
approximately $2,000,000 as a result of this sale. The sale is subject to
approval of the shareholders of The Somerset Group, Inc.
Note 14. Commitments and Contingencies
The Company, in the normal course of business, is involved in various
claims and contingencies. After taking into consideration legal counsel's
evaluation and the extent of insurance coverage, management is of the
opinion that the outcome of claims and contingencies will not result in
any ultimate liability material to the consolidated financial statements.
-33-
<PAGE>
FIRST INDIANA CORPORATION
SUMMARIZED CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
(Dollars in Thousands) Year Ended December 31,
1994 1993 1992
Interest Income
<S> <C> <C> <C>
Loans $ 81,553 $ 78,660 $ 79,344
Mortgage-Backed Securities 5,473 10,178 10,779
Investments 9,784 7,568 5,098
Federal Funds Sold & Int Deposit 762 678 490
-------- -------- --------
Total Interest Income 97,572 97,084 95,711
Interest Expense
Deposits 39,342 43,431 51,043
Federal Home Loan Bank Advances 6,952 2,039 1,724
Short-Term Borrowings 330 421 140
Mortgage-Backed Bonds 1,719 2,287 2,509
Floating Rate Notes --- 3,001 3,437
-------- -------- --------
Total Interest Expense 48,343 51,179 58,853
Net Interest Income 49,229 45,905 36,858
Provision for Loan Losses 3,900 4,396 2,250
-------- -------- --------
Net Income After Prov. for Loan Losses 45,329 41,509 34,608
Non-Interest Income
Sale of Loans (706) 2,803 3,159
Loan Servicing Income 2,861 1,427 1,701
Loan Fees 2,378 2,408 1,688
Dividends on FHLB Stock 602 871 1,097
Other 5,190 6,328 4,511
-------- -------- --------
Total Non-Interest Income 10,325 13,837 12,156
Non-Interest Expense
Salaries and Benefits 19,465 17,370 13,791
Net Occupancy 2,989 2,771 2,364
Deposit Insurance 2,318 1,864 2,007
Real Estate Owned Operations - Net (26) (5) 800
Other 13,756 11,504 9,875
-------- -------- --------
Total Non-Interest Expense 38,502 33,504 28,837
Earnings Before Income Taxes and
Effect of Change in Accounting Principle 17,152 21,842 17,927
Income Taxes 6,516 6,741 8,443
Earnings Before Cumulative Effect of Change
in Accounting Principle 10,636 15,101 9,484
Effect of Change in Acct. --- --- 1,518
-------- -------- --------
Net Earnings $ 10,636 $ 15,101 $ 11,002
======== ======== ========
</TABLE>
-34-
FIRST INDIANA CORPORATION
SUMMARIZED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
Assets 1994 1993
<S> <C> <C> <C>
Cash and Cash Equivalents 39,684 50,438
Investments 149,529 113,165
Mortgage-Backed Securities 69,597 101,293
Loans Receivable - Net 1,078,494 978,053
Premises and Equipment 13,333 13,660
Accrued Interest Receivable 9,812 9,888
Real Estate Owned 5,796 12,478
Prepaid Expenses and Other 28,636 28,364
--------- --------
Total Assets 1,394,881 1,307,339
Liability and Shareholders' Equity
Liabilities
Deposits 1,018,163 1,015,308
Federal Home Loan Bank Advances 201,155 106,877
Short-Term Borrowings 35,922 ---
Mortgage-Backed Bonds --- 50,000
Accrued Interest Payable 1,696 3,107
Advances by Borrowers for Taxes & Ins. 2,356 2,079
Other Liabilities 7,296 7,857
--------- ---------
Total Liabilities 1,266,588 1,185,228
Negative Goodwill 7,581 8,528
Shareholders' Equity 120,712 113,583
Total Liabilities and Shareholders' Equity 1,394,881 1,307,339
========= =========
</TABLE>
-35-
FIRST INDIANA CORPORATION
SUMMARIZED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
Cash Flows from Operating Activities 1994 1993 1992
<S> <C> <C> <C>
Net Earnings $10,636 $15,101 $11,002
Adjustments to Reconcile Net Earnings to Net
Cash Provided (Used) by Operating Activities
(Gain) Loss on Sales of Loans, Mortgage-Backed
Securities, Investments and Assets 1,050 (3,155) (3,609)
Amortization 1,609 28 1,874
Depreciation 1,922 1,437 1,345
Proceeds From Sale of Mortgage-Backed
Securities Held For Sale --- 18,762 ---
Provision for Loan Losses 3,900 4,396 2,250
Net Proceeds Trading of Investments (335) 13,228 216
Net Sale of Loans Held for Resale 62,766 5,125 8,859
Net Change in all Other
Assets and Liabilities 1,223 (4,505) 10,849
------- ------- -------
Net Cash Provided by Operations 82,771 50,417 32,786
Cash Flows from Investing Activities
Proceeds from Sales of Securities --- 1,777 12,238
Proceeds from Maturities of Invest. 28,525 88,832 7,000
Purchase of Investment Securities (66,381) (122,796) (21,993)
Origination of Loans and Mortgage-Backed
Securities -- Net of Collections (135,640) (1,065) 18,296
Purchase of Mortgage-Backed Securities --- (20,092) (52,923)
Proceeds from Sale of Loans and Mortgage-Backed
Securities 1,819 11,148 19,048
Purchase of Premises and Equipment (1,615) (7,712) (1,152)
Other -- Net 10 265 13,808
--------- --------- ---------
Net Cash Used by Investing (173,282) (49,643) (5,678)
Cash Flows from Financing Activities
Net Change in Deposits 2,855 (26,731) 11,870
Net Change in Short-Term Borrowings 35,922 (2,469) 481
Net Change in FHLB Advances 94,278 85,718 (1,021)
Proceeds from Issuance of Common Stock -- 63 10,077
Maturity of Floating Rate Note (50,000) (70,000) ---
Other -- Net (3,298) (8,032) (3,578)
--------- --------- ---------
Net Cash Provided (Used) by Financing
Activities 79,757 (21,451) 17,829
--------- --------- ---------
Increase(Decrease)in Cash (10,754) (20,677) 44,937
========== ========= =========
</TABLE>
-36-
Exhibit 3
THE SOMERSET GROUP, INC.
Form 10-K Annual Report
Year Ended December 31, 1994
Amended Articles of Incorporation and Amended and Restated
By-Laws thereto.
The amended article of Incorporation and amended and
restated By-Laws are incorporated by reference to
Exhibit 3 of Form 10-K annual report of Registrant,
filed for year ended December 31, 1994, under
commission file number 0-14227. No changes accrued in
the year ended December 31, 1994.
-37-
Exhibit 10
THE SOMERSET GROUP, INC.
Form 10-K Annual Report
Year Ended December 31, 1994
Material Contracts of the Registrant
Material contracts are incorporated by reference to
Exhibit 10 of Form 10-K annual report of the
Registrant, filed for year ended December 31, 1994,
under commission file number 0-14227. No changes
accrued in the year ended December 31, 1994.
-38-
Exhibit 22
THE SOMERSET GROUP, INC.
Form 10-K Annual Report
Year Ended December 31, 1994
Subsidiaries of the Registrant
The following corporations are subsidiaries of the
Registrant:
% Ownership Name
100% Concrete Carriers, Inc.
1030 S. Kitley Ave.
Indianapolis, IN 46203
100% Precast concrete Systems,
Inc.
1030 S. Kitley Ave.
Indianapolis, IN 46203
21.0% First Indiana Corporation
First Indiana Plaza
135 N. Pennsylvania St.
Indianapolis, IN 46204
-39-
Exhibit 23
THE SOMERSET GROUP, INC.
Form 10-K Annual Report
Year Ended December 31, 1994
Definitive Proxy Statement for Annual Meeting of
Shareholders to be held April 27, 1995
The Registrant's Notice of Annual Meeting, Proxy
Statement and Form of Proxy are incorporated by
reference into this Form 10-K by reference to file No.
0-14227 for such information previously filed with the
commission, and submitted on February 28, 1995.
-40-
Exhibit 99
THE SOMERSET GROUP, INC.
Form 10-K Annual Report
Year Ended December 31, 1994
First Indiana Corporation's Form 10-K annual report for the
year ended December 31, 1994
First Indiana corporation's Form 10-K annual report for
the ear ended December 31, 1994, is incorporated herein
by reference to the First Indiana Corporation Form 10-K
annual report for the year ended December 31, 1994,
filed separately with the commission under file number
0-14354.
-41-
Exhibit 24
KPMG Peat Marwick, LLP
2400 First Indiana Plaza
135 N. Pennsylvania St.
Indianapolis, IN 46204-2452
Board of Directors and Shareholders
The Somerset Group, Inc.
We consent to incorporation by reference in the registration
statement on form S-8 of the Somerset Group, Inc. of our
report dated February 3, 1995 relating to the consolidated
balance sheets of The Somerset Group, Inc. and subsidiaries
as of December 31, 1994 and 1993, and the related
consolidated statements of income, shareholders' equity, and
cash flows and related schedules for each of the years in
the three-year period ended December 31, 1994, which report
appears in the December 31, 1994 annual report on Form 10-K
of The Somerset Group, Inc.
Our report refers to a change in accounting for income taxes
as The Somerset Group, Inc. adopted the provisions of
Statement of Financial Accounting Standards No. 109 in 1992.
s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
March 21, 1995
-42-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1993
<PERIOD-END> DEC-31-1994 DEC-31-1993
<CASH> 2006 2459
<SECURITIES> 0 0
<RECEIVABLES> 6078 2735
<ALLOWANCES> 8 5
<INVENTORY> 390 365
<CURRENT-ASSETS> 10344 6799
<PP&E> 10280 10957
<DEPRECIATION> 6126 5678
<TOTAL-ASSETS> 39804 34995
<CURRENT-LIABILITIES> 3492 1914
<BONDS> 0 0
<COMMON> 1829 1829
0 0
0 0
<OTHER-SE> 24600 22075
<TOTAL-LIABILITY-AND-EQUITY> 39804 34995
<SALES> 23467 14555
<TOTAL-REVENUES> 23767 14555
<CGS> 19164 12011
<TOTAL-COSTS> 19335 10924
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 24 10
<INTEREST-EXPENSE> 438 511
<INCOME-PRETAX> 4132 3631
<INCOME-TAX> 1608 1437
<INCOME-CONTINUING> 2524 2194
<DISCONTINUED> 93 25
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2617 2219
<EPS-PRIMARY> 1.57 1.37
<EPS-DILUTED> 1.57 1.37
</TABLE>
