SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-20514
CORPORATE RENAISSANCE GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3701354
[State or other jurisdiction of (I.R.S. Employer
incorporation or organization] Identification
Number)
1185 Avenue of the Americas
18th Floor
New York, New York 10036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 730-2000
Former name, former address and fiscal year, if changed since last report
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 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 _____
The number of shares outstanding of the Registrant's common stock is 658,750 (as
of May 6, 1999).
<PAGE>
CORPORATE RENAISSANCE GROUP, INC.
INDEX
Page
PART I - FINANCIAL INFORMATION
ITEM 1.
Statements of Assets and Liabilities as of March 31, 1999 and
September 30, 1998 3
Statements of Operations and Changes in Net Assets for the Quarters ended
March 31, 1999 and March 31, 1998 and for the Six Months ended March 31, 1999
and March 31, 1998 4
Statements of Cash Flows for the Six Months ended March 31, 1999 and
March 31, 1998 5
Schedule of Investments, March 31, 1999 6
Notes to Financial Statements 7
ITEM 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II - OTHER INFORMATION
<PAGE>
CORPORATE RENAISSANCE GROUP, INC.
STATEMENTS OF ASSETS AND LIABILITIES
(Unaudited)
<TABLE>
MARCH 31, 1999 SEPTEMBER 30, 1998
<S> <C> <C>
ASSETS
Investments in securities,
at market value (cost
$1,981,279 and $2,458,725
respectively) $ 3,427,118 $2,514,213
Cash 3,225,777 4,238,260
Income taxes receivable - 183,841
Accrued interest receivable 3,774 5,852
Other assets 25,149 3,917
Total Assets 6,681,818 6,946,083
LIABILITIES
Income taxes payable 212,929 -
Accounts payable and
accrued expenses 38,217 12,324
Total liabilities 251,146 12,324
Net assets $6,430,672 $6,933,759
NET ASSETS
Common stock, (par
value $.01 per
share 20,000,000
shares authorized:
940,350 shares
issued and 825,150
outstanding at
9/30/98, and 825,150
shares issued and
658,750 outstanding
at 3/31/99) $ 8,252 $ 9,404
Additional paid-in capital 6,961,382 7,690,280
Treasury stock, at cost
(115,200 shares at 9/30/98
and 166,400 shares
at 3/31/99) (1,120,962) (730,050)
Accumulated income (losses):
Accumulated net operating
loss before security
Transactions (912,270) (888,260)
Accumulated net realized
gains from sale of
investments 495,387 910,961
Net unrealized appreciation
of investments 998,883 (58,576)
582,000 (35,875)
Net assets $6,430,672 $ 6,933,759
___________ _____________
Net asset value per share of
common stock outstanding $ 9.76 $ 8.40
See notes to financial statements
</TABLE>
<PAGE>
CORPORATE RENAISSANCE GROUP, INC
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
For the For the For the Six For the Six
Quarter Quarter Months Months
Ended Ended Ended Ended
3/31/99 3/31/98 3/31/99 3/31/98
<S> <C> <C> <C> <C>
Income:
Dividend $ -- $ -- $ -- $ 30,967
Fee -- 8,954 -- 17,907
Interest 35,847 38,685 83,283 46,738
Total income 35,847 47,639 83,283 895,612
Expenses:
Financial advisory 42,500 50,000 87,244 100,000
Professional 29,950 12,300 40,143 24,600
Insurance 10,120 11,750 21,068 23,500
Board of directors 10,000 12,500 20,000 25,000
Other operating 3,525 3,466 6,945 6,500
Total expenses 96,095 90,016 175,400 179,600
Operating income/
(loss) before income
tax benefit (60,248) (42,377) (92,117) 716,012
Income tax (expense)
benefit 13,408 -- 68,105 (28,094)
Net operating income/
(loss) before security
transactions (46,840) (42,377) (24,012) 687,918
NET REALIZED AND UNREALIZED
GAINS FROM INVESTMENTS:
Net realized gains/(losses)
from sales of investments -- 256,764 (415,573) 284,297
Change in net unrealized
appreciation/(depreciation)
of investments 405,741 1,232,250 1,390,351 623,607
Income tax expense arising
from net realized
gains/(losses) and net
unrealized appreciation/
(depreciation) of
investments (167,512) (477,026) (332,891) (478,757)
Net realized and
unrealized gains/(losses)
on investments 238,229 1,011,988 641,887 429,147
NET INCREASE IN
NET ASSETS RESULTING
FROM OPERATIONS $ 191,389 $ 969,611 $ 617,875 $ 1,117,065
Net assets at beginning
of period $ 6,971.464 $ 7,696,411 $ 6,933,759 $ 7,548,957
Net decrease in net assets
resulting from treasury
stock purchases (732,181) (207,800) (1,120,962) (207,800)
Net assets at end of
period $ 6,430,672 $ 8,458,222 $6,430,672 $8,458,222
Per Share Data:
Net operating gain/(loss)
before security
transactions $ (.07) $ (.19) $ (.04) $ .75
Net realized and unrealized
gain/(losses) from sales of
investments .36 1.23 .97 .44
Net gain on treasury
stock transactions .31 .08 .43 .08
Net increase in net asset
value resulting from
operations .60 1.12 1.36 1.27
Net asset value per
common share at beginning
of the period 9.16 8.18 8.40 8.03
Net asset value per
common shares at end of
the period $ 9.76 $ 9.30 $ 9.76 $ 9.30
See notes to financial statements
</TABLE>
<PAGE>
CORPORATE RENAISSANCE GROUP, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
For the Six Months Ended For the Six Months Ended
March 31, 1999 March 31, 1998
<S> <C> <C>
Cash Flows from Operating Activities:
Net increase in net assets
resulting from operations $ 617,875 $ 1,117,065
Adjustments to reconcile net
increase/(decrease) in net
assets resulting from operations
to net cash provided by
operating activities:
Change in net unrealized
appreciation of investments (1,390,351) (623,607)
Realized (gains)/losses
from sale of investments 415,573 (284,297)
Deferred income tax provision 257,341 --
(Increase) in operating assets:
Income taxes receivable 138,533 9,755
Accrued interest receivable 2,078 (2,974)
Other assets (21,232) (23,500)
Increase (decrease) in
operating liabilities:
Deferred liability -- (17,907)
Income taxes payable 896 463,026
Accounts payable and
accrued expenses 25,893 (3,680)
Net cash flows provided
by operating activities 46,606 633,881
Cash Flows from Investing Activities:
Purchase of securities (119,412) (736,843)
Proceeds from recapitalized
investment -- 2,018,107
Proceeds from sale of securities 181,285 383,426
Net cash flows provided by
investing activities 61,873 1,664,690
Cash Flows from Financing Activities:
Purchase of treasury stock (1,120,962) (207,800)
Net cash flows (used in)
financing activities (1,120,962) (207,800)
Net increase/(decrease) in cash (1,012,483) 2,090,771
Cash at the beginning of the period 4,238,260 950,692
Cash at the end of the period $ 3,225,777 $ 3,041,463
Supplemental disclosure
(cash transactions):
Income taxes paid/(refunded),
net $ (131,088) $ 30,273
Supplemental disclosure
(non-cash transactions):
The company retired 115,200
shares of common stock
Previously held as treasury
stock for a total cost of $730,050.
See notes to financial statements
</TABLE>
<PAGE>
CORPORATE RENAISSANCE GROUP, INC.
SCHEDULE OF INVESTMENTS(1)
MARCH 31, 1999
(Unaudited)
<TABLE>
#SHARES TYPE OF ISSUE FAIR OR % OF
OR AND ORIGINAL MARKET NET
FACE VALUE NAME OF ISSUER COST VALUE ASSETS
Reorganized Companies
Common Stock
<S> <C> <C> <C> <C>
632,680 CVSI Acquisition Co., L.L.C (2) $632,680 $632,680 9.8%
33,042 Seaman Furniture - Class C (3) 607,223 1,608,485 25.0%
Total Reorganized Companies 1,239,903 2,241,165
Other Investments
Common Stock
1,533,000 Signet Group Plc 741,376 1,185,953 18.4%
Total Other Investments 741,376 1,185,953
Total Investments $1,981,279 $3,427,118
(1) Notes to Schedule of Investments:
The above investments are non-income producing except for CVSI
Acquisition Co., L.L.C. See note 8. Equity investments that have
not paid dividends within the last twelve months are considered
to be non-income producing.
See Note 1.
(2) Represents a beneficial interest in 513,310 shares of CVSI Inc.,
and a line of credit borrowing of $119,370 to CVSI, Inc., which are
not considered to be a readily marketable securities. See Note 8.
(3) Not considered to be a readily marketable security.
</TABLE>
<PAGE>
CORPORATE RENAISSANCE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
1. Organization and Operation of the Company
Corporate Renaissance Group, Inc. (the "Company") was incorporated under
the laws of the state of Delaware on June 19, 1992. The Company is a non-
diversified, closed-end investment company which has elected to be treated as a
business development company ("BDC") under the Investment Company Act of 1940,
as amended by the Small Business Incentive Act of 1980. The Company offers
investors the opportunity to participate in investments in companies which the
Company believes have viable existing businesses generating substantial revenues
in established markets, and have recently completed or are in the process of
undergoing financial restructuring ("Reorganized Companies") and where, as a
result, the Company can ultimately obtain an equity position at a discount from
market value for comparable companies that are not financially troubled. The
Company's investments are generally not expected to produce meaningful levels of
investment income. It is the Company's objective to select investment
opportunities which the Company believes offer the potential for substantial
capital appreciation.
The Company completed its initial public offering and commenced operations
on November 1, 1994. The Company consummated the initial public offering (the
"Domestic Offering") and an overseas offering (the "Overseas Placement") of
956,000 shares at $10.00 per share. Pursuant to the Domestic Offering, 600,000
shares were sold; 356,000 shares were sold in the Overseas Placement. The net
proceeds to the Company of both the Domestic Offering and Overseas Placement
were $7,823,821 after deducting all costs associated with the registration and
offering, resulting in an initial net asset value per share of $8.18.
On November 25, 1996, the Company's Board of Directors authorized the
implementation of an open market share repurchase program, pursuant to which the
Company, from time to time, may purchase up to an aggregate of 175,000 shares of
its common stock in open market transactions. On November 3, 1998, the
Company's Board of Directors increased the number of shares authorized for
repurchase under the Company's open market share repurchase program to 350,000
shares. The purpose of the program is to provide stockholders desiring to sell
their shares with enhanced market liquidity. At the same time, the Company
believes that open-market purchases of its shares at a discount from net asset
value will enhance long-term shareholder value. As of March 31, 1999, 297,350
shares have been repurchased at an average cost of $6.65 per share, of which
15,750 were retired in 1997 and 130,950115,200 on October 14, 1998. Subsequent
to March 31, 1998, no additional shares were purchased.
2. Significant Accounting Policies
a. Valuation of Securities
The Company's securities which are subject to last-sale reporting are
valued by reference to the market price on a national securities exchange or as
reported on the National Association of Securities Dealers Automated Quotation
("NASDAQ") System. Other unlisted securities are valued at representative "bid"
quotations if held long by the Company and representative "asked" quotations if
held short by the Company. The value of securities for which market quotations
are not readily available and securities as to which the Company believes the
method of valuation set forth above does not fairly reflect market value are
determined by one or more independent third parties selected by the Investment
Advisor.
<PAGE>
CORPORATE RENAISSANCE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
b. Recognition of Security Transactions and Related Investment Income
Security transactions are recorded on the date the order to buy or sell is
executed (the trade date). Dividend income is recognized on the ex-dividend
date and interest income is recognized on an accrual basis. The net realized
gains and losses on sales of securities are determined on a first-in, first-out
or specific identification basis.
c. Income Taxes
The Company is not entitled to the special treatment available to regulated
investment companies and is taxed as a regular corporation for federal and state
income tax purposes. The Company has accounted for income taxes in accordance
with FASB Statement No. 109, "Accounting for Income Taxes." The aggregate cost
of securities at March 31, 1999 for federal income tax purposes and financial
reporting purposes was the same.
d. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes.
3. Income Taxes
The components of income tax expense (benefit) on pre-tax income $882,661
in for the six months ended March 31, 1999, and pre-tax income $1,623,915 in for
the six months ended March 31, 1998 are as follows:
Federal: 1999 1998
Current $ 10,467 148,017
Deferred 230,447 311,986
240,914 460,003
State and Local:
Current (3,022) 8,765
Deferred 26,894 38,083
23,872 46,848
Total $ (264,786) 506,851
<PAGE>
CORPORATE RENAISSANCE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
3. Income Taxes (continued)
Deferred income taxes arise from temporary differences between the tax basis of
assets and liabilities and their reported amounts in the financial statements.
For example, unrealized gains or losses on investments are not recognized for
tax purposes until realized and therefore create a temporary difference. In
addition, the Company has federal and state net-operating losses which also
create a temporary difference. During the six months ended March 31, 1999, the
Company recorded a deferred tax benefit from operations of approximately $43,000
to reflect the change in the net operating loss carryforward for federal and
state taxes as of September 30, 1998, and management's expectation with respect
to the realization of this deferred tax asset at March 31, 1999. As of March
31, 1999 and September 30, 1998, there is a net deferred tax asset/(payable) of
$(146,204) and $111,136, respectively. A valuation allowance in the amount of
$66,725 was has been established to offset a portion of the deferred tax assets
which more likely than not will not provide a future benefit.
The Company's effective income tax rate is lower than the U.S. federal
statutory rate due to the benefit from the graduated federal tax rate.
4. Financial Advisory and Investment Banking Fees and
Other Transactions with Affiliates and Related Parties
The Company has retained M.D. Sass Investors Services, Inc. (the
"Investment Adviser") as the Company's investment adviser. The Investment
Adviser is a registered investment adviser under the Investment Advisers Act of
1940, as amended. The Investment Adviser is part of a group of affiliated
investment advisers and other affiliated entities comprising the M.D. Sass
organization ("M.D. Sass"). In November 1998, the Company renewed its Financial
Advisory Agreement with the Investment Adviser, pursuant to which the Investment
Adviser will receive a base fee of $170,000 per annum, for furnishing the
Company with administrative services, including necessary executive,
administrative, internal accounting and support services. In addition to the
base fee, the Investment Adviser will receive an incentive fee for its
investment advisory services equal to 20% of the increase in net asset value of
the Company's shares, as defined in the Financial Advisory Agreement. There
were no incentive fees earned or payable at March 31, 1999.
5. Board of Directors Fees
The Company pays each of its five independent directors an annual fee of
$8,000 for the directors' services as such.
6. Investment Transactions
As of March 31, 1999 the accumulated unrealized appreciation on investments
was $1,445,839.
7. Concentration of Credit Risk and Off-Balance Sheet Risk
The Company engages in security purchase and sale transactions with
regulated broker-dealers. In connection with these transactions, the Company
may be subject to credit risk in the event the counterparty or the Company's
regulated clearing brokers cannot fulfill their contractual obligations.
<PAGE>
CORPORATE RENAISSANCE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
7. Concentration of Credit Risk and Off-Balance Sheet Risk (continued)
The Company's activities with off balance sheet risk include the writing of
traded stock market index options. The Company is subject to market risk
associated with changes in the value of the underlying stock index. As a writer
of options, the Company receives a premium at the outset and then bears the risk
of unfavorable changes in the price of the stock index underlying the option.
There were no written options outstanding at March 31, 1999.
8. Investment in CVSI, Inc.
In July 1997, the Investment Adviser and certain of its affiliates,
including the Company (collectively, the "Buyer"), purchased a majority interest
in the Open Service Solutions business unit ("CVSI") of Computervision
Corporation ("Computervision"), through CVSI Acquisition Co., L.L.C., a newly
formed Delaware limited liability company. In the transaction, the Buyer paid
$7.6 million to Computervision for 76% of CVSI's Class A Voting Stock (the
"Class A Stock"). In addition, CVSI paid Computervision $25.0 million in cash
and issued Computervision a $10.0 million subordinated note (the "Subordinated
Note"). Further, Computervision retained its ownership of 24% of CVSI's Class A
Stock and 100% of CVSI's Class B Non-Voting Stock (the "Class B Stock"). The
Buyer also received options to purchase (i) the Class A Stock held by
Computervision should the Buyer retire the Subordinated Note within one year of
the transaction and (ii) the Class B Stock for $15.0 million. Moreover, if CVSI
does not achieve certain specified levels of product revenues and operating
margins from Computervision-initiated referrals, CVSI will have the option to
purchase, at a nominal price, some or all of the Class A Stock held by
Computervision. In addition, CVSI Acquisition Co. LLC provided CVSI with a five
year $2.5 million line of credit facility to support short-term working capital
needs of CVSI. Interest is accrued at a floating rate of LIBOR plus 3%. As of
March 31, 1999, CVSI has borrowed $2,000,000 in connection with this facility.
The Company along with certain of its affiliates contributed capital to CVSI
Acquisition Co. to satisfy this funding. The Company's proportionate share of
the contribution was $119,370.
In connection with the acquisition of CVSI, the Company received $89,535 of
investment banking fees and $35,814 of consulting fees. The consulting fees
were being amortized over a one-year period. The Investment Advisor and certain
of its clients and affiliates who acquired shares of CVSI also received
investment banking and consulting fees.
On June 30, 1998 CVSI, Inc., CVSI Acquisition Co. L.L.C., Computervision
Corporation and Computervision's parent Parametric Technology signed an
agreement in which CVSI Acqusition Co., L.L.C. agreed to exercise its option to
purchase 1 million shares held by Computervision, increasing its holdings to 86%
of CVSI, Inc. Computervision canceled the $10 million subordinated note and
retired its Class B Non-Voting Stock. In addition, Parametric appointed CVSI,
Inc. as a Preferred Systems Integrator/Platform Technology Service Provider
worldwide.
9. Investment in Seaman Furniture Company, Inc.
In August 1997, Seaman Furniture Company, Inc. ("Seamans") entered into an
Agreement and Plan of Merger, as amended on September 4, 1997 (the "Merger
Agreement") with SFC Merger Company ("Newco"), a Delaware corporation formed and
wholly owned by the Investment Adviser and its affiliates (including the
Company), T. Rowe Price Recovery Fund, L.P. ("Price") and Carl Marks Management
Co., L.P. ("Marks," and collectively with the Investment Adviser and Price, the
"Funds"), pursuant to which the Funds will acquire through a merger (the
"Merger") all of the outstanding common stock of Seamans not already owned by
the Funds (the "Public Stock"). Upon consummation of the Merger, Newco merged
with
<PAGE>
CORPORATE RENAISSANCE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
9. Investment in Seaman Furniture Company, Inc. (continued)
and into Seamans and each share of Public Stock (other than dissenting shares)
was converted into the right to receive $25.05 in cash and each existing Seamans
stock option was converted into the right to receive $25.05 in cash per share
purchasable thereunder, less the exercise price with respect thereto, other than
certain options of officers of the Company which will be cancelled and reissued
as options of equivalent or greater value following the Merger. Consummation of
the Merger took place on December 23, 1997.
Following consummation of the Merger, the Funds own all of the outstanding
shares of Seamans Common Stock of which approximately 47.5% is currently owned
by the Investment Adviser and its affiliates, including 4.1% by the Company. In
addition, 19.3% of Seamans Common Stock, on a fully diluted basis, was reserved
for issuance to certain officers and employees of Seamans upon the exercise of
options. The Funds have received a distribution of approximately $67.0 million
on the shares of Seamans held by them, of which approximately 30%
capitalrepresented a dividend and the balance a distribution in return of
capital. Approximately $2.84 million of this distribution was received by the
Company.
<PAGE>
PART II - OTHER INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This Report contains, in addition to historical information, forward-looking
statements regarding Corporate Renaissance Group, Inc. (the "Company"), which
represents the Company's expectations or beliefs including, but not limited to,
statements concerning the Company's operations, performance, financial
condition, business strategies and other information. For this purpose, any
statements contained in this Report that are not statements of historical fact
may be deemed to be forward-looking statements. Without limiting the generality
of the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "intend," "could," "estimate," or "continue," or the negative or
other variations thereof or comparable terminology are intended to identify
forward-looking statements. The statements by their nature involve substantial
risk and uncertainties, certain of which are beyond the Company's control, and
actual results may differ materially depending on a variety of important
factors, including those described in this Report and the Company's other
filings with the Securities and Exchange Commission (the "Commission").
Liquidity and Capital Resources
The Company is a non-diversified, closed-end management investment company which
has elected to be treated as a special type of investment company known as a
business development company ("BDC") under the Investment Company Act of 1940
(the "1940 Act") as amended by the Small Business Act of 1980. The Company's
primary investment objective is to achieve long-term capital appreciation
through investments in companies ("Portfolio Investments") which the Company
believes have viable existing businesses generating substantial revenues in
established markets, but which have recently completed, are in the process of
undergoing or are likely to undergo a financial restructuring pursuant to
bankruptcy or reorganization proceedings or on a negotiated basis outside of
bankruptcy or reorganization proceedings and where, as a result, the Company can
ultimately obtain an equity position (either common or preferred stock) at a
discount from market value for comparable companies that are not financially
troubled. Such investments are not generally available to the public because
they require large financial commitments and, in some cases, managerial
assistance. The Company may make these investments either on its own or, more
likely, jointly with other investors, including investment partnerships managed
or advised by M.D. Sass Investors Services, Inc. (the "Investment Adviser") and
its affiliates. Any investments with affiliates of the Company will be subject
to restrictions under the 1940 Act and conditions set forth in an exemptive
order granted by the Commission. A portion of the Company's portfolio is
invested in other securities, including securities of financially distressed
companies, where the Company believes that it can generate capital appreciation
by engaging in portfolio trading.
The Company has retained the Investment Adviser as the Company's investment
adviser to identify, negotiate, manage and liquidate investments for the
Company. The Company invests only in transactions recommended by the Investment
Adviser. The activities of the Investment Adviser on behalf of the Company are
subject to supervision by the independent directors of the Company.
The Company's primary source of working capital is funds generated from
investment activities. At March 31, 1999, the Company had cash of $3,225,777,
as compared to cash of $4,238,260 at September 30, 1998. The net decrease in
cash was primarily the result of purchases in treasury stock coupled with
proceeds from the sale of an investment in securities during the year.
<PAGE>
In November, 1996, the Company implemented an open market share repurchase
program, pursuant to the Company and was authorized, from time to time, to
purchase up to an aggregate of 175,000 shares of its Common Stock in open market
transactions. In November 1998, the Company's Board of Directors increased the
number of shares authorized for repurchase under the program from 175,000 shares
(substantially all of which had been repurchased at that time) to 350,000
shares. As of March 31, 1999, the Company had purchased 297,350 shares pursuant
to this program at an average cost of $6.65 per share.
Since mid-1998 the Board of Directors of the Company has been actively exploring
various strategic alternatives for enhancing stockholder value. In March 1999,
the Company received a proposal from a management-led group to acquire all of
the issued and outstanding shares of the Company's Common Stock. Martin D. Sass
(the Company's Chairman, Chief Executive Officer and a principal stockholder),
Hugh R. Lamle (the Company's Executive Vice President and a principal
stockholder) and Walter Kass and his affiliates (a principal stockholder of the
Company) proposed to offer to acquire all of the issued and outstanding Common
Stock of the Company by a merger of the Company with and into an entity
controlled by such persons (the "Merger"). Upon completion of the Merger, each
share of Common Stock (other than those held by Messrs. Sass, Lamle and Kass)
would be converted into the right to receive $8.00 in cash. The Company has
appointed a Special Committee of three independent directors to evaluate the
proposal and report to the Board. The Special Committee has retained an
investment banking firm to advise it, and is currently evaluating the proposal.
Results of Operations
Quarter ended March 31, 1999 as compared to Quarter ended March 31, 1998
During the quarter ended March 31, 1999, the Company had interest income of
$35,847, as compared to interest income of $38,685 in the 1998 quarter. During
the 1998 quarter, the Company also realized a distribution of $8,954 in
investment banking and consulting fees relating to a Portfolio Investment.
Operating expenses during the 1999 quarter were $96,095, as compared to $90,016
in the 1998 quarter. For the quarter ended March 31, 1999, the Company had a
pre-tax operating loss and net operating loss of $60,248 and $46,840
respectively, as compared to a pre-tax and net operating loss for the 1998
quarter of $42,377. Since the Company typically does not purchase securities
with the objective of generating investment income, net investment losses are
expected to routinely occur.
During the quarter ended March 31, 1999, the Company had no gains or losses from
the sale of investments, as compared to net realized gains from sale of
investments of $256,764 during the 1998 quarter. For the 1999 quarter, the
Company had net unrealized appreciation of investments of $405,741 as compared
to net unrealized appreciation of investments of $1,232,250 in the 1998 quarter.
For the 1999 quarter, the Company had net realized and unrealized gains on
investments of $238,229, as compared to net realized and unrealized gains on
investments of $1,011,988 for the 1998 quarter and, after giving effect to net
operating losses, an increase in net assets resulting from operations of
$191,389 in the 1999 quarter, as compared to an increase in net assets resulting
from operations of $969,611 in the 1998 quarter.
Six Months ended March 31, 1999 as compared to Six Months ended December
31, 1998
During the six months ended March 31, 1999, the Company had interest income
of $83,283, as compared to interest income of $46,738 in the 1998 period.
During the 1998 period, the Company also realized a distribution of $830,967
from one Portfolio Investment and $17,907 in investment banking and consulting
fees relating to another Portfolio Investment. Operating expenses during the
1999 period were $175,400, as compared to $179,600 in the 1998 period. For the
six months ended March 31, 1999, the Company had a pre-tax operating loss and
net operating loss of $92,117 and $24,012 respectively, as compared to pre-tax
operating income and net operating income for the 1998 period of $716,012 and
$687,918, respectively. The pre-tax and net operating income earned in the 1998
period was attributable to the distribution realized during the quarter on the
Portfolio Investment. Since the Company typically does not purchase securities
with the objective of generating investment income, net investment losses are
expected to routinely occur.
During the six months ended March 31, 1999, the Company had net losses from
sale of investments of $415,573, as compared to net realized gains from sale of
investments of $284,297 during the 1998 period. For the 1999 period, the
Company had net unrealized appreciation of investments of $1,390,351 as compared
to net unrealized appreciation of investments of $623,607 in the 1998 period.
For the 1999 period, the Company had net realized and unrealized gains on
investments of $641,887, as compared to net realized and unrealized gains on
investments of $429,147 for the 1998 period and, after giving effect to net
operating losses, an increase in net assets resulting from operations of
$617,875 in the 1999 period, as compared to an increase in net assets resulting
from operations of $1,117,065 in the 1998 period.
Net Asset Value
At March 31, 1999, the Company had a net asset value of $9.76 per share, an
increase of $1.36 per share from net asset value at September 30, 1998 of $8.40
per share. Shares outstanding at March 31, 1999 were 658,750 as compared to
825,150 at September 30, 1998 as a result of repurchases of 166,400 shares of
Common Stock during the year under the Company's open market share repurchase
program.
<PAGE>
PART II - OTHER INFORMATION
1. Legal Proceedings
Not applicable.
2. Changes in Securities
Not applicable.
3. Default Upon Senior Securities
Not applicable.
4. Submission of Matters to a Vote of Security Holders
Not applicable.
5. Other Information
Not applicable.
6. Exhibits and Reports on Form 8-K
a) Exhibit 27 - Financial Data Schedule (SEC use only)
b) Reports on Form 8-K -- none
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Date: May 14, 1999 CORPORATE RENAISSANCE GROUP,INC.
By:/s/ Martin D. Sass
___________________________________
Martin D. Sass, Chairman of the Board and
Chief Executive Officer
By:/s/ Martin E. Winter
____________________________________
Martin E. Winter, Secretary-Treasurer
(Principal Financial and Accounting
Officer)
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1999
<CASH> 3,225,777
<SECURITIES> 3,427,118
<RECEIVABLES> 3,774
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,149
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,681,818
<CURRENT-LIABILITIES> 251,146
<BONDS> 0
0
0
<COMMON> 8,252
<OTHER-SE> 6,422,420
<TOTAL-LIABILITY-AND-EQUITY> 6,430,672
<SALES> 0
<TOTAL-REVENUES> 1,058,061
<CGS> 0
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<OTHER-EXPENSES> 175,400
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<INCOME-PRETAX> 882,661
<INCOME-TAX> 264,786
<INCOME-CONTINUING> 617,875
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