THE SOMERSET GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
Income: 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $4,819,000 $5,811,000 $11,178,000 $10,193,000
Cost of sales 4,507,000 4,585,000 9,529,000 8,388,000
Gross profit 312,000 1,226,000 1,649,000 1,805,000
Equity in earnings of First
Indiana Corporation 1,083,000 650,000 2,047,000 1,177,000
Realized investment gains 94,000 94,000
Gain on sale of assets 1,293,000 1,293,000
Interest income 78,000 13,000 133,000 38,000
-------- -------- -------- --------
Total income 2,860,000 1,889,000 5,216,000 3,020,000
Expenses:
Selling expenses 84,000 140,000 210,000 264,000
General and administrative 425,000 461,000 907,000 847,000
Interest expense 81,000 123,000 199,000 218,000
------- ------- -------- --------
Total expenses 590,000 724,000 1,316,000 1,329,000
Income before income taxes &
minority interest 2,270,000 1,165,000 3,900,000 1,691,000
Income tax expense 894,000 458,000 1,539,000 666,000
-------- -------- -------- --------
1,376,000 707,000 2,361,000 1,025,000
Minority interest in loss of
subsidiary -- 21,000 -- 47,000,000
Net income $1,376,000 $728,000 $2,361,000 $1,072,000
========= ======= ========= =========
Net income per share $.82 $.44 $1.41 $.65
Average shares outstanding 1,680,614 1,666,000 1,675,040 1,652,548
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 4,519
<SECURITIES> 3,440
<RECEIVABLES> 3,627
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,611
<PP&E> 244
<DEPRECIATION> 190
<TOTAL-ASSETS> 38,929
<CURRENT-LIABILITIES> 2,760
<BONDS> 0
<COMMON> 1,829
0
0
<OTHER-SE> 27,048
<TOTAL-LIABILITY-AND-EQUITY> 38,929
<SALES> 11,178
<TOTAL-REVENUES> 11,178
<CGS> 9,529
<TOTAL-COSTS> 10,646
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 199
<INCOME-PRETAX> 3,900
<INCOME-TAX> 1,539
<INCOME-CONTINUING> 2,361
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,361
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
</TABLE>
THE SOMERSET GROUP, INC. C
(unaudited)
<TABLE>
ASSETS June 30, December 31, June 30,
<S> <C> <C> <C>
1995 1994 1994
Current assets
Cash and cash equivalents $4,519,000 $2,006,000 $558,000
Short term investments 3,440,000
Trade accounts, notes and other
receivables less allowance
for doubtfull accounts 3,627,000 6,070,000 4,022,000
Contracts in progress, unbilled 1,769,000 2,283,000
Inventories 390,000 325,000
Prepaid expenses 25,000 109,000 100,000
Deferred income taxes --- --- 23,000
---------- --------- ---------
Total current assets 11,611,000 10,344,000 7,311,000
Investments
First Indiana Corporation
(market values of $29,822,000
$23,782,000, & $24,160,000 26,008,000 24,265,000 23,251,000
Property, plant and equipment, at cost
Land 0 393,000 685,000
Buildings 0 2,738,000 2,780,000
Production and delivery equipment 0 6,593,000 7,626,000
Office furniture and equipment 244,000 556,000 530,000
Construction in progress --- --- 33,000
------- --------- ---------
244,000 10,280,000 11,654,000
Less accumulated depreciation 190,000 6,126,000 5,938,000
------- --------- ---------
54,000 4,154,000 5,716,000
Other assets
Notes receivable 795,000 487,000 487,000
Other 461,000 554,000 750,000
-------- -------- --------
1,256,000 1,041,000 1,237,000
-------- -------- --------
Total Assets $38,929,000 $39,804,000 $37,515,000
========== ========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-3-
<TABLE>
_______________________________________________________________________________
LIABILITIES AND SHAREHOLDERS' EQUITY June 30, December 31, June 30,
<S> <C> <C> <C>
1995 1994 1994
Current liabilities
Current portion of long term debt $ $ $24,000
Trade accounts payable 618,000 808,000 831,000
Accrued compensation 321,000 837,000 422,000
Taxes, other than income taxes 177,000 194,000 210,000
Billings in excess of costs 451,000 181,000
Deferred income taxes 22,000
Income taxes 948,000 437,000
Other accrued expenses 696,000 743,000 454,000
-------- -------- --------
Total current liabilities 2,760,000 3,492,000 2,122,000
Long term debt, less current portion
Capitalized leases 48,000
Notes payable 2,500,000 5,500,000 5,500,000
-------- -------- --------
Total long term debt 2,500,000 5,500,000 5,548,000
Deferred income taxes 4,792,000 4,383,000 3,764,000
Minority interest in subsidiary - - 991,000
Shareholders' equity
Common stock without par value, authorized
4,000,000 issued 1,829,408 1,829,000 1,829,000 1,829,000
Capital in excess of stated value 4,985,000 4,979,000 4,980,000
Unrealized gains on investments 31,000
Retained earnings 23,311,000 20,999,000 19,592,000
---------- ---------- ----------
30,156,000 27,807,000 26,401,000
Less 172,631, 190,662, & 186,201
treasury shares, at cost 1,279,000 1,378,000 1,311,000
--------- --------- ---------
Total shareholders' equity 28,877,000 26,429,000 25,090,000
Total Liabilities and Shareholders'
Equity $38,929,000 $39,804,000 $37,515,000
========== ========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-4-
THE SOMERSET GROUP, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (unaudited)
For the Period January 1, 1994 to June 30, 1995
<TABLE>
Capital in Unrealized
Common Excess of Gains on Retained Treasury
Stock Stated ValueInvestments Earnings Shares Total
<S> <C> <C> <C> <C> <C>
Balance January 1, 1994 $1,829,000 $4,887,000 $ -- $18,751,000 ($1,563,000)$23,904,000
Net income Jan. 1 to June 30, 1994 --- --- --- 1,072,000 --- 1,072,000
Shares of common stock issued in
connection with restricted grants,
401(k) plan & exercise of options --- 93,000 --- (221,000) 252,000 124,000
Equity in other capital changes of
First Indiana Corporation, net
of deferred income taxes --- --- --- (10,000) --- (10,000)
_________ _________ _________ _________ _________ _________
Balance June 30, 1994 1,829,000 4,980,000 --- 19,592,000 (1,311,000) 25,090,000
Net income July 1 to Dec. 31, 1995 --- --- --- 1,545,000 --- 1,545,000
Shares of common stock issued in
connection with restricted grants,
401(k) plan & exercise of options --- (1,000) --- 45,000 59,000 103,000
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 --- --- --- (19,000) --- (19,000)
_________ _________ _________ _________ _________ _________
Balance December 31, 1994 1,829,000 4,979,000 --- 20,999,000 (1,378,000) 26,429,000
Net income Jan. 1 to June 30, 1995 --- --- --- 2,361,000 --- 2,361,000
Shares of common stock issued in
connection with restricted grants,
401(k) plan & exercise of options --- 6,000 --- 43,000 166,000 215,000
Purchase of treasury shares --- --- --- --- (67,000) (67,000)
Cash dividends paid --- --- --- (164,000) --- (164,000)
Unrealized gains on short term
investments --- --- 31,000 --- --- 31,000
Equity in other capital changes of
First Indiana Corporation, net of
deferred income taxes --- --- --- 72,000 --- 72,000
_________ _________ _________ _________ _________ _________
Balance June 30, 1995 $1,829,000 $4,985,000 $31,000 $23,311,000 ($1,279,000)$28,877,000
========= ========= ====== ========== ========= ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-5-
THE SOMERSET GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $1,376,000 $728,000 $2,361,000 $1,072,000
Add (deduct) items not affecting cash:
Minority interest in loss of subsidiary (21,000) (47,000)
Depreciation and amortization 96,000 183,000 246,000 356,000
Deferred income taxes 301,000 439,000 387,000 601,000
Gain on sale of assets (1,293,000) (1,293,000)
Equity in earnings of First Indiana Corp. (1,083,000) (650,000) (2,047,000) (1,177,000)
Dividends received from First Indiana 212,000 191,000 423,000 383,000
Other, net (22,000) (22,000)
Changes in operating assets and liabilities
Trade accounts, notes, and receivables 764,000 (933,000) 2,443,000 (1,292,000)
Contracts in progress, and inventories 2,086,000 128,000 1,708,000 (1,116,000)
Prepaid expenses 55,000 42,000 84,000 (5,000)
Accounts payable and accrued expenses (157,000) (88,000) (770,000) 184,000
Accrued income taxes payable (30,000) --- 511,000 --
-------- ------- -------- --------
Cash provided (used) by operating activities 2,327,000 (3,000) 4,053,000 (1,063,000)
Cash flows from investing activities:
Proceeds from sale of assets 5,144,000 5,144,000 3,000
Increase in investment in First Indiana (428,000) (573,000)
Purchase of property, plant and equipment (27,000) (217,000) (44,000) (796,000)
Decrease (increase) in other assets 77,000 (29,000) 93,000 (193,000)
Increase in long term notes receivable (308,000) (308,000)
Increase in short term investments (3,409,000) --- (3,409,000) ---
-------- ------- -------- --------
Net cash provided(used) by investing activity 1,477,000 (674,000) 1,476,000 (1,559,000)
Cash flows from financing activities:
Proceeds from minority interest invest-
ment in subsidiary 200,000 525,000
Proceeds from (repayment) long term debt (3,000,000) 72,000 (3,000,000) 72,000
Reissue of treasury stock 94,000 50,000 215,000 124,000
Purchase of treasury stock (28,000) (67,000)
Cash dividends paid -- --- (164,000) --
-------- ------- -------- -------
Net cash provided(used) by financing activity (2,934,000) 322,000 (3,016,000) 721,000
Increase (decrease) in cash and cash equivalent 870,000 (355,000) 2,513,000 (1,901,000)
Cash and cash equivalents at beginning of per 3,649,000 913,000 2,006,000 2,459,000
-------- ------- -------- --------
Cash and cash equivalents at end of period $4,519,000 $558,000 $4,519,000 $558,000
========= ======= ========= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-6-
THE SOMERSET GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1995
1. Basis of Presentation: The accompanying unaudited
consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required
by generally accepted accounting principles for complete
financial statement presentation.
In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
three and six months periods ended June 30, 1995, are not
necessarily indicative of the results that may be expected for
the year ending December 31, 1995.
For further information, refer to the corresponding financial
statements and footnotes thereto included in the Registrant's
annual report on Form 10-K for the year ended December 31,
1994.
2. Sale of Construction Operations: The Company sold its
construction operations during the second quarter of 1995.
The assets were sold to two buyers in separate transactions,
and included all property, plant and equipment applicable to
the operations and the assumption by the buyers of
construction projects under contract and in progress at the
closing dates. Inventories and receivables for contracts-in-
progress, unbilled, relating to the contracts assumed by the
buyers were also included in the sale transactions. Except
for a $300,000 promissory note secured by real estate and
buildings, the assets were sold for cash. The Company
realized a gain before income taxes of $1,293,000 from the
sale, that after income tax provisions amounted to net income
of $782,000, or $.47 per share.
3. Investment in First Indiana Corporation: 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 retained earnings. The
Company's percentage of ownership of First Indiana Corporation
was 22.1% at June 30, 1995, 21.0% at December 31, 1994, and
20.4% at June 30, 1994. The Company's equity in earnings of
First Indiana Corporation shown in the Consolidated Statements
of Income is before income taxes. Federal and state income
taxes applicable to the equity earnings are contained as a
component of total federal and state income tax expense.
-7-
PART I
Item 1 - Financial Statements
The information required by Rule 10.01 of Regulation S-X is
presented on the previous pages.
Item 2 - Management's Discussion and Analysis of Financial
Condition and
Results of Operations
Results of Operations.
Net income for the quarter rose 89% over the 1994 quarter and
amounted to $1,376,000, or $.82 per share, compared to $728,000, or
$.44 per share last year. For the first six months, net income
more than doubled that earned last year and reached $2,361,000, or
$1.41 per share, compared to $1,072,000 or $.65 for 1994. The 1995
amounts include a non-recurring gain from the sale of the
construction businesses. The Company realized a gain before income
taxes of $1,293,000 for the sale. Net income after taxes from the
gains on sale amounted to $782,000, and increased per share
earnings $.47 for the quarter and the six months.
The results of operations for the three and six months ended June
30, 1995 were impacted by the sale of the assets of the Company's
construction business segment during the second quarter. The
assets and business sold constituted all sales, cost of sales, and
gross profit contained in the Consolidated Statements of Income.
The sale of these assets and businesses were approved by the
shareholders at the annual meeting held on April 27, 1995.
The assets were sold to two buyers, in separate transactions, and
included the businesses operated under the trade names of American
Precast Concrete, Span Deck of Indiana, Concrete Carriers, Inc.,
and American Precast Concrete Systems, Inc. The assets sold
included property, plant and equipment applicable to the operations
and the assumption of the construction contracts with customers for
projects not completed at the closing dates. Inventories and the
contracts-in-progress unbilled receivables relating to the
contracts assumed by the buyers were also included in the sale
transaction.
Sales and gross profit results included in the second quarter
Statement of Income represent sales of the construction businesses
for an average of approximately 1.7 months of the quarter,
considering the closing dates of the sale transactions. Selling
and general and administrative expenses included costs associated
with transfer of the operations. These expenses are expected to
further decline in future periods.
Equity income from First Indiana Corporation increased 67% during
the quarter to $1,083,000, compared to $650,000 last year, and
increased 74% for the six months to $2,047,000, compared to
$1,177,000 in 1994. These improved earnings resulted from First
Indiana's ongoing repositioning as a focused provider of real
estate financing. Loan originations continued to grow during the
quarter, and net interest margin again exceeded four percent.
-8-
First Indiana Corporation files a separate Form 10-Q with the
Securities and Exchange Commission. For additional information on
First Indiana's operations, please refer to Commission File Number
0-14354.
Realized investment gains and interest income were significantly
higher than last year for both the quarter and the first six
months, as the Company temporarily invested the cash proceeds from
the asset sales. The Company expects these amounts to increase
over the short term until additional business operations are
acquired.
Selling and general and administrative expenses for the quarter
were reduced, as we continued to reduce staff following the asset
sales. Interest Expense was also lower during the quarter, as $3
million of the cash proceeds from the asset sales were used to
reduce long-term debt.
The sale of the construction operations was initiated as part of a
strategic plan to further expand the Company's involvement in
financial services. The Board of Directors and management saw
little opportunity for expansion of the construction business, and
the highly cyclical nature of the construction industry made if
difficult to maintain and increase profitability on a consistent
basis. The sale has enhanced the Company's ability to engage in a
full range of financial services that had been limited by federal
regulations, as a result of Somerset's status as a registered
federal savings and loan holding company, and has provided cash for
expansion in the financial services industry.
Management is pursing a strategic plan for expansion in the
financial services industry. Several specialized product areas are
being reviewed, and market research is being conducted in order to
evaluate competition and possible acquisition candidates. Firm
conclusions have not yet been reached in these areas. Management
believes progress is being made and hopes to soon be reporting on
the results of these endeavors.
Capital Resources and Liquidity.
The Company's liquidity and capital resources were greatly improved
from a relatively strong position at December 31, 1994, as a result
of the sale of the construction operations.
The ratio of current assets to current liabilities stood at 4.2 to
1.0 at June 30, 1995, compared to 3.0 to 1.0 at December 31, 1994
and 3.5 to 1.0 at June 30, 1994. Net working capital increased to
over $8.8 million, compared to $6.9 million at December 31, 1994,
and $5.2 million at June 30, 1994. These increases were a result
of the increase in net income during the first half of 1995 and
funds provided by the asset sales.
For the first six months of 1995, operations provided cash of over
$4 million compared to cash used by operations of over $1 million
for the same period of 1994. The discontinuance of the
construction operations caused a reduction in trade accounts, notes
and other receivables, contracts in progress, unbilled, and
inventories, as we commenced the liquidation of working capital
assets and liabilities of the construction operations that are not
being replaced with new activity.
-9-
The asset sales did not include accounts receivable and other
components of working capital. We will continue to generate cash
as we finalize the affairs of these operations. When completed, we
expect that we will have generated additional cash of $3 million.
The sale of construction related property, plant and equipment
provided $5 million of cash. $3 million of the proceeds were used
for early retirement of long-term debt, and an additional $3.4
million was invested in short-term bonds.
The Company paid $164,000 in cash dividends ($.10 per share) to
shareholders during the first half of 1995, with no such payment in
1994, and expects to pay cash dividends on a semi-annual basis in
the future.
The debt-to-equity ratio improved as a result of the increase in
shareholders' equity, primarily from improved net income and the
retirement of $3 million of long-term debt during the quarter. The
ratio was .09/1.00 at June 30, 1995, compared to .21/1.00 at
December 31, 1995 and .22/1.00 at June 30, 1994.
Shareholders' equity at June 30, 1995 amounted to $28.9 million, or
$17.43 per share, compared to $16.13 at December 31, 1994 and
$15.27 at June 30, 1994.
The strategic plan for expansion in the financial services industry
includes the possible placement of additional long-term debt in
order to increase the size of an acquisition. The amount of debt
(if any) will depend on the size and cash flow of any such
acquisition.
-10-
PART II
OTHER INFORMATION
Items 1 through 3.
The information required by these items has been omitted as it is
not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders.
The sale of the precast/prestressed concrete operations was
approved at the Shareholders' Meeting of April 27, 1995.
Information on this matter is incorporated herein by reference to
the Definitive Proxy Statement filed on April 11, 1995.
Items 5 and 6.
The information required by these items has been omitted as it is
not applicable.
Reports Filed on Form 8-K.
No Form 8-K was filed during the three months ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities and 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.
(Registrant)
s/Marni McKinney
Marni McKinney
President & COO
s/Joseph M. Richter
Joseph M. Richter
Executive Vice President
CFO & Treasurer
Date: August 8, 1995
-11-
