-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C0rOOGu+k/mm3DxH3D70+Gc9QnIVQPGAnE0TLaGLTRKxFUZVRnfrNP78DYlziRQ3 +hegSmtTLKGlMikfXmLkog== 0000950168-95-001025.txt : 19951119 0000950168-95-001025.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950168-95-001025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMERGENT GROUP INC CENTRAL INDEX KEY: 0000277028 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 570513287 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08909 FILM NUMBER: 95591385 BUSINESS ADDRESS: STREET 1: P.O. BOX 17526 STREET 2: 233 NORTH MAIN STREET STE 350 CITY: GREENVILLE STATE: SC ZIP: 29606 BUSINESS PHONE: 8032358056 MAIL ADDRESS: STREET 1: P.O. BOX 17526 STREET 2: 15 SOUTH MAIN ST SUITE 750 CITY: GREENVILLE STATE: SC ZIP: 29606 FORMER COMPANY: FORMER CONFORMED NAME: NRUC CORP DATE OF NAME CHANGE: 19911002 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL RAILWAY UTILIZATION CORP DATE OF NAME CHANGE: 19840813 10-Q 1 EMERGENT 10-Q 40773 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934) For The Quarterly Period Ended September 30, 1995 Commission File Number 0-8909 EMERGENT GROUP, INC. (Exact name of small business issuer as specified in its charter) South Carolina 57-0513287 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P. O. Box 17526 Greenville, South Carolina 29606 (Address of principal executive offices) (803) 235-8056 (Issuer's telephone number) ---------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (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 ____ CLASS Outstanding at October 31, 1995 Common $.05 par value 60,020 Class A Common $.05 par value 3,119,881 PART 1 - FINANCIAL INFORMATION EMERGENT GROUP, INC. AND SUBSIDIARIES Set forth on pages 3 through 8 are the consolidated balance sheet as of December 31, 1994 and the unaudited consolidated balance sheet as of September 30, 1995 of Emergent Group, Inc. and subsidiaries and the unaudited consolidated statements of operations for the three-month and nine-month periods ended September 30, 1995 and 1994 and unaudited statements of cash flows for the nine-month periods ended September 30, 1995 and 1994. Elliott, Davis & Company, L.L.P. previously examined and reported on the Company's financial statements for the year ended December 31, 1994, from which the consolidated balance sheet as of that date is derived. 2 EMERGENT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 December 31, (Unaudited) 1994 (in thousands) ASSETS Cash and cash equivalents, including reverse repurchase agreements of $216,000 in 1995 and $621,000 in 1994 .......... $ 878 $ 384 Short-term investments, at cost .................. 197 597 Accounts receivable, net of allowance for doubtful accounts of $77,000 in 1994 ....... -- 532 Inventories, net of reserve for obsolete inventory of $262,000 in 1994 .................. -- 3,719 Loans Receivable: Loans receivable ............................... 92,404 88,023 Notes receivable from related parties .......... 235 169 Excess servicing receivable .................... 2,082 1,872 Note receivable ................................ 4,214 920 Accrued interest receivable .................... 1,356 927 Other receivables .............................. 553 366 --------- --------- 100,844 92,277 Less allowances for credit losses ................ (2,664) (1,433) Less unearned discount ........................... (393) (1,359) --------- --------- 97,787 89,485 Investment in mortgage loans held for sale ........................................... 14,348 3,662 Investment in asset-backed securities ............ 1,717 -- Property, plant and equipment .................... 5,388 6,836 Less accumulated depreciation .................. (2,247) (3,442) --------- --------- 3,141 3,394 Excess of cost over net assets of acquired businesses, net of accumulated amortization of $553,000 in 1995 and $462,000 in 1994 .......... 2,900 2,991 Real estate and personal property held for sale, net of allowance of $86,000 in 1995 and $297,000 in 1994 ................... 3,741 5,930 Deposit base intangibles, net of accumulated amortization of $468,000 in 1995 and $384,000 in 1994 .......... 628 712 Other assets ..................................... 1,363 1,288 --------- --------- TOTAL ASSETS ............................... $126,700 $112,694 ========= =========
3 EMERGENT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS--(Continued)
SEPTEMBER 30, 1995 December 31, (Unaudited) 1994 (in thousands LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Investor Savings: Notes payable to investors, including $777,000 in 1995 and $707,000 in 1994 to related parties .............................................. $ 76,368 $ 56,497 Subordinated debentures, including $34,000 in 1995 and $50,000 in 1994 to related parties ................................................. 15,040 20,998 -------- -------- Total investor savings ...................................................... 91,408 77,495 Notes payable to banks and other ............................................ 19,623 18,438 Accounts payable ............................................................ 182 1,242 Accrued and sundry liabilities .............................................. 1,554 3,922 Remittance due to loan participants ......................................... 1,151 683 Accrued interest ............................................................ 531 478 -------- -------- 114,449 102,258 Minority interest ........................................................... 181 736 -------- -------- TOTAL LIABILITIES ......................................................... 114,630 102,994 SHAREHOLDERS' EQUITY Common Stock, par value $.05 a share--authorized 4,000,000 shares in 1995 and 400,000 shares in 1994, issued and outstanding 60,020 in 1995 and 200,575 in 1994 ....................................................... 3 10 Class A Common Stock, par value $.05 a share--authorized 6,666,667 shares in 1995 and 20,000,000 shares in 1994; issued and outstanding 3,119,881 shares in 1995 and 9,803,438 shares in 1994 ................................................................... 156 490 Capital in excess of par value .............................................. 6,714 6,924 Retained earnings ........................................................... 5,197 2,276 -------- -------- TOTAL SHAREHOLDERS' EQUITY ................................................ 12,070 9,700 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $126,700 $112,694 ======== ========
See notes to unaudited financial statements 4 EMERGENT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 (in thousands except (in thousands except per share amounts) per share amounts) Revenues: Interest and finance charges $ 3,909 $ 2,840 $ 11,216 $ 7,711 Mortgage banking activities 65 996 63 1,248 Gain on sale of loans 660 1,697 3,175 2,932 Realized gain on investment sales 1,499 - 3,341 - Management fees 80 93 490 278 Other revenue 446 67 728 339 ---------- ----------- ----------- --------- Total revenues 6,659 5,693 19,013 12,508 Expenses: Interest expense 2,161 1,523 5,941 4,246 Provision for credit losses 290 108 1,235 597 Provision for loss on real estate and personal property held for sale 90 509 385 509 General and administrative expense 2,620 1,763 7,134 5,178 Other - 122 - 122 ---------- ----------- ----------- --------- Total expenses 5,161 4,025 14,695 10,652 ---------- ----------- ----------- --------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST 1,498 1,668 4,318 1,856 Provision for income taxes: Current 73 141 146 170 Deferred 14 2 34 (31) ---------- ----------- ----------- ---------- 87 143 180 139 ---------- ----------- ----------- --------- INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST 1,411 1,525 4,138 1,717 Minority interest in earnings of subsidiary (35) (15) (66) (22) ---------- ----------- ----------- ---------- INCOME FROM CONTINUING OPERATIONS 1,376 1,510 4,072 1,695
5 EMERGENT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)--Continued
Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 (in thousands except (in thousands except per share amounts) per share amounts) Discontinued Operations (NOTE D): (Loss) income from operations, net of income tax expense .......... (408) (62) (1,226) 976 Gain on sale of property and equipment .................. 7 585 74 585 ---------- ---------- ---------- ---------- (401) 523 (1,152) 1,135 ---------- ---------- ---------- ---------- NET INCOME $ 975 $ 2,033 $ 2,920 $ 2,830 ========== ========== ========== ========== Income per share of Common Stock: Continuing operations ............ $ .41 $ .45 $ 1.21 $ .51 Discontinued operations .......... (.12) .16 (.34) .34 ---------- ---------- ---------- ---------- $ .29 .61 .87 .85 ========== ========== ========== ========== Computed on the weighted average number of shares issued ......................... 3,352,570 3,337,976 3,352,570 3,337,976
See notes to unaudited financial statements 6 EMERGENT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 1995 1994 (in thousands) OPERATING ACTIVITIES Net income .............................................................. $ 2,920 $ 2,830 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ....................................... 533 865 Provision for losses on finance receivables ....................................................... 1,235 597 Provision for losses on other real estate owned ................................................. 385 548 Gain on sale of subsidiary .......................................... -- (585) Gain on sale of investments in mortgage loans .................................................... (3,341) -- Loss on sale of investments ........................................ -- 66 Net (decrease) increase in deferred premium income ................................................... (1,028) 356 Gain on disposal of property and equipment ......................................................... (61) -- Gain on reclassification of capital lease ..................................................... -- (265) Net increase in net deferred loan costs ............................................................. (161) -- Loans originated--held for sale ..................................... (20,287) (38,892) Principal proceeds from loans sold .................................. 22,584 50,860 Revenue recorded under an assigned operating lease ................................................... -- (592) Interest expense from assignment of an operating lease ................................................ -- 188 Minority interest in income of subsidiaries ...................................................... 66 72 Changes in operating assets and liabilities increasing (decreasing) cash: Accounts receivable ................................................... (29) 254 Excess servicing receivable ........................................... (210) (1,265) Accounts payable, accrued and sundry liabilities and income taxes payable ................................ 641 488 Remittance due loan participants ...................................... 468 139 Inventories ........................................................... -- 128 Accrued interest receivable ........................................... (429) (67) Accrued interest payable .............................................. 59 (35) Customer commitment deposits .......................................... (287) 207 Other assets .......................................................... (294) (21) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES ................................................. 2,764 15,876
7 EMERGENT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)--Continued
Nine Months Ended September 30, 1995 1994 (in thousands) INVESTING ACTIVITIES Loans originated--held for investment ................................. $ (53,462) $ (56,160) Principal proceeds from loans not sold ................................ 35,288 21,175 Purchase of investments in mortgage loans held for sale ................................................. (92,618) -- Proceeds from sale of real estate and personal property held for sale ................................. 2,098 633 Proceeds from sale of property & equip ................................ 112 -- Proceeds from securitization of loans ................................. 15,357 -- Payments to securitization trustee for cash reserve ........................................................ (652) -- Purchases of property and equipment ................................... (985) (421) Improvements and related costs incurred on real estate held for sale ........................................ (154) (363) Rents received on real estate held for sale ............................................................ 79 38 Increase in notes receivable from former subsidiary .......................................................... (2,287) -- Payments received on notes receivable ................................. 154 -- Proceeds from sale of investments in mortgage loans ...................................................... 78,965 -- Cash received from sale of subsidiary net of cash sold .................................................... (106) (88) Proceeds from sale of investments ..................................... 417 581 Principal collections on asset backed securities .......................................................... 77 -- --------- --------- NET CASH (USED IN) INVESTING ACTIVITIES ....................................................... (17,717) (34,605) FINANCING ACTIVITIES Advances under bank lines of credit ................................... 114,561 71,848 Payments of long-term debt and capital lease obligations ........................................... -- (133) Payments on bank lines of credit ...................................... (112,459) (62,069) Net increase in notes payable to investors ........................................................... 19,871 7,574 Net (decrease) in subordinated debentures (5,958) (2,470) Payments on mortgages payable ......................................... -- (80) (Decrease) in note payable to minority shareholder ......................................................... -- (50) Cash paid for stock purchase in tender offer ............................................................... (568) -- --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES .............................................. 15,447 14,620 --------- --------- 8 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......................................... 494 (4,109) Cash and cash equivalents at beginning of year ..................................................... 384 4,960 --------- --------- $ 878 $ 851 ========= ========= CASH AND CASH EQUIVALENTS AT SEPTEMBER 30
See notes to unaudited financial statements 9 EMERGENT GROUP, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE A--BASIS OF PREPARATION The accompanying consolidated financial statements are prepared in accordance with the SEC's rules regarding interim financial statements, and therefore do not contain all disclosures required by generally accepted accounting principles for annual financial statements. Reference should be made to the financial statements included in the Company's Annual Report on Form 10-K for 1994, including the footnotes thereto. The consolidated balance sheet as of September 30, 1995 and the consolidated statements of income for the three-month and nine-month periods ended September 30, 1995 and 1994 and the consolidated statements of cash flows for the nine-month periods ended September 30, 1995 and 1994 are unaudited and in the opinion of management contain all known adjustments necessary to present fairly the financial position, results of operations and cash flows. The Company considers all highly liquid investments readily convertible to known amounts of cash or having a maturity of three months or less to be cash equivalents. NOTE B--INTEREST AND INCOME TAXES For the nine-month period ended September 30, the Company paid interest of $5,900,000 in 1995 and $4,323,000 in 1994. For the nine-month period ended September 30, the Company paid income taxes of $164,000 in 1995 and $126,000 in 1994. NOTE C--CASH AND CASH EQUIVALENTS The Company maintains its primary checking accounts with two principal banks. The amounts maintained in the checking accounts are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $100,000. At September 30, 1995, the Company had no checking accounts with a balance in excess of $100,000. At September 30, 1995 the Company had $216,000 in overnight investments in reverse repurchase agreements, which are not insured by the FDIC. These reverse repurchase agreements were collateralized by U.S. Government securities. Short-term investments include certificates of deposit with Carolina First Bank in the face amount of $197,000 at September 30, 1995. The cost of the investments approximates market. NOTE D--SEGMENT INFORMATION The Company currently operates in a single industry segment: 10 1) The Financial Services segment consists of making first and second residential mortgage loans, construction loans, small business loans and consumer loans. The Company's operations in the Apparel Manufacturing segment were discontinued as of September 30, 1995 due to the sale of Young Generations, Inc. ("YGI"). The results of operations have been restated to exclude the Apparel Manufacturing segment from continuing operations. The Company's operations in the Transportation segment were discontinued in June of 1995. The results of operations have been restated to exclude the Transportation segment from continuing operations. Revenues applicable to the discontinued segments were: Three Months Ended Nine Months Ended SEPTEMBER 30, SEPTEMBER 30, 1995 1994 1995 1994 (in thousands) (in thousands) TRANSPORTATION $39 $929 $338 $1,812 ======= ======= ======= ======= APPAREL MANUFACTURING $2,370 $2,908 $7,212 $9,669 ======= ======== ======== ======== Income from operations attributable to the discontinued segments is reported net of income tax expense of: Three Months Ended Nine Months Ended SEPTEMBER 30, SEPTEMBER 30, 1995 1994 1995 1994 (in thousands) (in thousands) TRANSPORTATION $ 0 $ 27 $ 4 $ 39 APPAREL MANUFACTURING (7) (1) (22) 39 - ------- ------- ------- ------ $ (7) $ 26 $ (18) $ 78 ======= ======= ======= ====== 11 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Emergent Group, Inc. has operated in three industry segments for the past several years: Financial Services, Apparel Manufacturing and Transportation. The Company's operations in the Transportation segment were discontinued in June 1995. The Company's operations in the Apparel Manufacturing segment were discontinued as of September 30, 1995 due to the sale of YGI. The results of operations have been restated to exclude the Transportation and Apparel Manufacturing segments from continuing operations. The following discussion concentrates on the continuing operations of the Company which consists of the former Financial Services segment, unless otherwise noted. Income from continuing operations was $4,072,000 and $1,376,000 for the nine-month and three-month periods ended September 30, 1995 compared to $1,695,000 and $1,510,000 for the same periods in 1994. The improved results for the nine-month period were due principally to the increase in realized gains on investment sales. The operating companies: Carolina Investors, Inc. ("CII"), which makes first and second residential mortgage loans and home improvement loans and sells subordinated debentures and floating rate notes to investors in South Carolina; Emergent Business Capital, Inc. ("EBC"), which makes commercial loans partially guaranteed by the Small Business Administration ("SBA"); The Loan Pro$, Inc. ("Loan Pro$"), which makes consumer loans secured by preowned automobiles and Premier Financial Services, Inc. ("Premier"), which makes consumer loans secured by preowned automobiles; had net income of $3,735,000 for the nine-month period and net income of $1,382,000 for the three-month period in 1995 compared to net income of $1,378,000 for the nine-month period and net income of $1,067,000 for the three-month period in 1994. Revenues from continuing operations were $19,013,000 for the nine-month period and $6,659,000 for the three-month period in 1995 compared to revenues of $12,508,000 for the nine-month period and $5,693,000 for the three-month period in 1994. This increase was due principally to the increase in interest and finance charges and the increase in realized gains on investment sales. The increase in interest and finance charges was due principally to the increased loan and serviced portfolios at CII, EBC, Loan Pro$ and Premier. Interest and finance charges from these operating companies were $18,375,00 and $6,485,000 for the nine-month and three-month periods in 1995 compared to $12,183,000 and $5,592,000 for the nine-month and three-month periods in 1994. Realized gains on investment sales were $3,341,000 and $1,498,000 for the nine-month and three-month periods in 1995 compared to no activity in 1994. Expenses of continuing operations were $14,695,000 and $5,161,000 for 12 the nine-month and three-month periods in 1995 compared to expenses of $10,652,000 and $4,025,000 for the nine-month and three-month periods in 1994. The increase in expenses was due principally to the increase in interest expense as a result of increased borrowing by CII, EBC, Loan Pro$ and Premier to fund the growing loan volumes at each of the operating companies. CII had net income of $2,788,000 and $1,318,000 for the nine-month and three-month periods in 1995 compared to net income of $1,480,000 and $407,000 for the nine-month and three-month periods in 1994. This increase is due principally to the increase in interest and finance charges as a result of the increased loan portfolio and the increase in realized gain on investment sales. The loan portfolio at CII increased to $66,644,000 at September 30, 1995 from $55,101,000 at September 30, 1994. CII has placed certain loans on nonaccrual and has foreclosed on a number of properties due to nonperformance. The loss of interest income on these nonaccrual loans was approximately $70,000 for the nine-month period in 1995. EBC had net income of $901,000 and a net loss of $19,000 for the nine-month and three-month periods in 1995 compared to net income of $862,000 and net income of $676,000 for the nine-month and three-month periods in 1994. EBC securitized $15,357,000 of its retained loan portfolio during the second quarter of 1995. EBC received proceeds, net of placement agency fees, of approximately $15,139,000 as a result of the sale of these loans. EBC had interest income of $2,359,000 for the nine-month period and $729,000 for the three-month period in 1995 compared to $1,690,000 and $591,000 for the same periods in 1994. Premiums received on the guaranteed portion of loans made by EBC was $3,175,000 for the nine-month period and $660,000 for the three-month period in 1995 compared to $2,932,000 for the nine-month period and $1,697,000 for the three-month period in 1994.This increase in interest income, the recognition of certain deferred income items due to the securitization less the reduction in the premiums received on the sale of the guaranteed portion of loans made by EBC resulted in decreased revenue at EBC during the three-month period ended September 30, 1995. Restrictions put on the 7(a) lending program by the SBA, under which EBC operates, resulted in a reduction in loan volume at EBC during 1995. The maximum loan limit was reduced to $500,000 effective January 1, 1995 and SBA guarantees for certain refinancings were eliminated effective May 15, 1995. This reduction in loan volume resulted in a decrease in premiums received on the sale of the guaranteed portion of loans during the three-month period ended September 30, 1995. These restrictions were rescinded by the SBA as of October 1, 1995. The restrictions regarding lending for the purpose of refinancing and maximum loan limit were removed. The SBA did, however, reduce the guarantee percentage on certain loans and increased the fees to be paid to the SBA both from the borrower and the lender. The serviced loan portfolio at EBC increased to $101,045,000 at September 30, 1995 from $79,640,000 at September 30, 1994. 13 The operations of EBC are subject to the changes in regulations and operating procedures of the SBA. Management believes that although the changes made by the SBA during 1995 had an adverse effect on the results of operations of EBC, the rescission of these changes effective October 1, 1995 should allow EBC to show improved results for the remainder of 1995 and into 1996. Loan Pro$ had net income of $328,000 and $173,000 for the nine-month and three-month periods in 1995 compared to net income of $109,000 for the nine-month period and $77,000 for the three-month period in 1994. This increase is due principally to the increase in interest income resulting from the growing loan portfolio serviced by Loan Pro$. Interest income was $1,916,000 for the nine-month period and $690,000 for the three-month period in 1995 compared to interest income of $1,254,000 for the nine-month period and $606,000 for the three-month period in 1994. The increase in loan volume was due principally to the opening of a new loan production office by Loan Pro$ during the first quarter of 1995. The loan portfolio of Loan Pro$ has increased to $12,586,000 at September 30, 1995 from $5,948,000 at September 30, 1994. Premier had a net loss of $5,000 for the nine-month period and net income of $18,000 for the three-month period in 1995 compared to net income of $29,000 for the nine-month period and $17,000 for the three-month period in 1994. The opening of Premier's second loan production office during the first quarter of 1995 resulted in an increase in expenses which exceeded the increase in interest income due to the growing loan portfolio. Interest income increased to $555,000 for the nine-month period and $214,000 for the three-month period in 1995 from $485,000 for the nine-month period and $188,000 for the three-month period in 1994. Premier's loan portfolio increased to $3,797,000 at September 30, 1995 from $2,549,000 at September 30, 1994. Management believes that the Company will continue to operate profitably in 1995 due to the continued growth in loan portfolios. INTEREST Interest income from continuing operations was $11,216,000 for the nine-month period and $3,909,000 for the three-month period in 1995 compared to $7,711,000 for the nine-month period and $2,840,000 for the three-month period in 1994. This increase was due to the interest earned on the increased serviced loan portfolios at CII, EBC, Loan Pro$ and Premier. The increase in interest income resulting from the increase in serviced loan portfolios at each of these operating companies is discussed in the preceding "Results of Operations" section. Interest expense from continuing operations was $5,941,000 for the nine-month period and $2,161,000 for the three-month period in 1995 compared to interest expense of $4,246,000 for the nine-month period and $1,523,000 for the three-month period in 1994. Interest expense increased as a result of increased borrowings by CII, EBC, Loan Pro$ 14 and Premier in order to fund the growth in loan portfolios at each of these operating companies. GENERAL AND ADMINISTRATIVE EXPENSE General and administrative expense from continuing operations was $7,134,000 for the nine-month period and $2,620,000 for the three-month period in 1995 compared to $5,178,000 for the nine-month period and $1,763,000 for the three-month period in 1994. This increase in general and administrative expense was due principally to the relocation and expansion of the credit underwriting and loan servicing departments at CII and the expansion of loan production offices at both Loan Pro$ and Premier. CII had general and administrative expense of $3,237,000 for the nine-month period and $1,550,000 for the three-month period in 1995 compared to $1,593,000 for the nine-month period and $550,000 for the three-month period in 1994. This increase is also the result of the allocation of corporate general and administrative expense to the subsidiaries in 1995. EBC had general and administrative expense of $3,046,000 for the nine-month period and $942,000 for the three-month period in 1995 compared to $2,154,000 for the nine-month period and $787,000 for the three-month period in 1994. This increase was due principally to the expansion of the finance department and the expansion and centralization of the loan servicing departments due to EBC receiving "Preferred Lender" status from the SBA during 1995. This increase is also the result of the allocation of corporate general and administrative expense to the subsidiaries in 1995. Loan Pro$ had general and administrative expense of $772,000 for the nine-month period and $245,000 for the three-month period in 1995 compared to $527,000 for the nine-month period and $343,000 for the three-month period in 1994. This increase for the nine-month period was due primarily to the opening of a new loan production office by Loan Pro$ during the first quarter of 1995. This increase is also the result of the allocation of corporate general and administrative expense to the subsidiaries in 1995. Premier had general and administrative expense of $301,000 for the nine-month period and $102,000 for the three-month period in 1995 compared to $204,000 for the nine-month period and $69,000 for the three-month period in 1994. This increase was due primarily to the opening of a new loan production office by Premier. This increase is also the result of the allocation of corporate general and administrative expense to the subsidiaries in 1995. Net corporate general and administrative expense was relatively stable for the nine-month and three-month periods during 1995 compared to 1994, although there were some additional expenses incurred during 1995 as a result of the stock tender offer during April and the reverse stock split which was effective in June. During 1995 corporate general and administrative expense was allocated to the subsidiaries. 15 LIQUIDITY AND SOURCES OF CAPITAL Cash and cash equivalents increased from $384,000 at December 31, 1994 to $878,000 at September 30, 1995. Cash provided by operating activities for the nine-month period ended September 30, 1995 was $2,764,000, cash used in investing activities was $17,717,000 and cash provided by financing activities was $15,447,000. Cash used in investing activities was due principally to the net increase in loans originated by and the loans purchased and held for sale by CII. Cash provided by financing activities was derived principally from the increase in borrowing by CII through the sale of senior floating rate notes to investors. The continuing operations of the Company require continued access to long-term and short-term sources of capital. This capital requirement is currently being provided through the sale of senior floating rate notes and subordinated debentures, mortgage banking activities, realized gains on investment sales by CII, availability of lines of credit and sales into the secondary market of the guaranteed portions of loans originated by EBC, as well as the securitization of loans. These sources of capital have historically been sufficient to provide for the requirements of the operations of the Company. Although there can be no assurance as to this matter, management believes that the capital provided by these sources should provide the sources of capital necessary to continue the current and anticipated levels of operations. CII has available a line of credit in the amount of $20,000,000 of which $17,692,000 was available at September 30, 1995. EBC has a line of credit up to a maximum of $32,000,000 of which $2,023,000 was available at September 30, 1995. The amount that EBC can borrow under this line is limited to 80% of the unguaranteed portion of loans made by EBC through the SBA, plus 100% of the unsold guaranteed portion of loans. Loan Pro$ has available a line of credit in the amount of $8,000,000 of which $135,000 was available at September 30, 1995. Premier has available a line of credit in the amount of $3,000,000 of which $86,000 was available at September 30, 1995. Management believes that the Company's liquidity is adequate to continue operations on both a short-term and long-term basis. The Company has accrued a liability of $200,000 as a result of environmental clean-up required at two former operating locations. The Company believes, based on recommendations from the environmental engineering firms advising the Company in each situation and the advice of legal counsel, that the amount required for the clean-up of the two sites will not exceed the amounts recorded. The Company is in the process of upgrading its data processing system. The total cost of this project is estimated to be approximately $460,000. The Company has no additional significant capital requirements as of September 30, 1995. 16 PART 2 - OTHER INFORMATION Item 5. Other Information The Company discontinued its operations in the Transportation segment in June 1995. The results of operations have been restated to exclude the Transportation segment from continuing operations. The Company is actively seeking buyers for the remaining assets in the Transportation segment, which consist of the operations of the Pickens Railroad Company and the Pickens Car Repair Shop and 26 boxcars, of which 19 are leased. The Company discontinued its operations in the Apparel Manufacturing segment as of September 30, 1995 as a result of the sale of YGI to the management of YGI. The results of operations have been restated to exclude the Apparel Manufacturing segment from continuing operations. Item 6. Exhibits and Reports on Form 8-K a) Exhibits. None b) Reports on Form 8-K. The Company filed a report on Form 8-K dated October 17, 1995 reporting that on September 30, 1995, the Company entered into a Stock Purchase Agreement (the "Agreement") by and among the Company and fifteen individuals who comprise the management of YGI. Pursuant to the Agreement, the buyers shall pay to the Company pro rata in accordance with their share ownership, a purchase price of $600,000, payable at closing through a nonrecourse promissory note. The note is payable in full on September 30, 2000 and bears interest at 10% per annum. 17 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EMERGENT GROUP, INC. Date November 13, 1995 /s/ Robert S. Davis Robert S. Davis, Vice President, Chief Financial Officer 18 EX-27 2 EXHIBIT 27
5 1000 9-MOS JAN-01-1995 DEC-31-1995 SEP-30-1995 878 197 100,844 3,057 0 0 5,388 2,247 126,700 0 0 159 0 0 11,911 126,700 0 19,013 0 7,134 0 1,620 5,941 4,318 180 4,072 (1,152) 0 0 2,920 0.87 0.87 Unclassified Balance Sheet
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