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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-14350
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MONEYGRAM PAYMENT SYSTEMS, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 84-1327808
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
7401 West Mansfield Avenue, Lakewood, Colorado 80235
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 303-716-6800
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NOT APPLICABLE
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(Former Name, Former Address and Former 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 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
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Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
NUMBER OF SHARES OUTSTANDING
TITLE OF EACH CLASS AS OF MAY 2, 1997
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Common Stock, $.01 par value 16,625,000
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INDEX
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PAGE
NUMBER
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheet at March 31, 1997
and December 31, 1996................................ 3
Statement of Operations for the
three months ended March 31, 1997 and 1996........... 4
Statement of Cash Flows for the
three months ended March 31, 1997 and 1996........... 5
Notes to Financial Statements........................ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................... 9
2
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MONEYGRAM PAYMENT SYSTEMS, INC.
BALANCE SHEET
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
MARCH DECEMBER
31, 1997 31, 1996
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................... $23,003 $17,996
Assets restricted to money transfer settlements..... 23,538 11,287
Fee revenue receivable.............................. 1,280 587
Receivable from IPS................................. 4,704 3,659
Prepaid and other current assets.................... 1,194 648
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Total current assets.................................. 53,719 34,177
Fixed assets at cost, net of depreciation;
1997- $8,759; 1996--$7,911......................... 10,011 9,127
Deferred tax asset................................... 51,106 52,250
Costs of acquiring agent contracts, net of
amortization: 1997--$6,018; 1996--$4,903........... 18,628 18,175
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Total Assets......................................... 133,464 $113,729
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Liabilities relating to outstanding money
transfer......................................... 23,538 11,287
Accounts payable and accrued liabilities........... 10,648 5,726
Commissions payable................................ 7,688 7,286
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Total current liabilities.......................... 41,874 24,299
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Stockholders' Equity:
Common stock, $.01 par value, authorized
100,000,000 shares; issued and outstanding
16,625,000 shares................................ 166 166
Capital surplus.................................... 85,089 85,089
Retained earnings.................................. 6,335 4,175
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Total stockholders' equity.................... 91,590 89,430
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Total liabilities and stockholders' equity........... 133,464 $113,729
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</TABLE>
See accompanying notes.
3
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MONEYGRAM PAYMENT SYSTEMS, INC.
STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31,
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1997 1996
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<S> <C> <C>
Revenue:
Fee and other revenue net of refunds................. $26,325 $27,567
Foreign exchange..................................... 6,068 8,044
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Total revenues............................... 32,393 35,611
Expenses:
Agent commissions and amortization of agent contract
acquisition costs.................................. 11,007 10,925
Processing........................................... 6,025 6,411
Advertising and promotion............................ 5,994 8,814
Selling and service.................................. 3,059 2,221
General and administrative........................... 2,768 1,802
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Total expenses............................... 28,853 30,173
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Income before income taxes............................. 3,540 5,438
Income tax expense..................................... 1,380 2,083
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Net Income............................................. $2,160 $3,355
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Net income per common share............................ $.13 $.20
Weighted average shares and equivalents outstanding.... 16,625 16,625
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</TABLE>
See accompanying notes.
4
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MONEYGRAM PAYMENT SYSTEMS, INC.
STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31,
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1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income................................................................. $ 2,160 $ 3,355
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization expense...................................... 1,953 1,375
Changes in operating assets and liabilities
Assets restricted to money transfer settlements.......................... (12,251) (271)
Accounts receivable...................................................... (693) (270)
Receivable from IPS...................................................... (1045)
Prepaid and other assets................................................. (546) 105
Utilization of deferred tax asset........................................ 1,144 --
Liabilities relating to outstanding money transfers...................... 12,251 271
Accounts payable and other liabilities................................... 5,324 (939)
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Net cash provided by operating activities.................................. 8,297 3,626
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Cash flows from investing activities:
Purchase of equipment and signage.......................................... (1,732) (1,019)
Costs of acquiring agent contracts......................................... (1,558) (5,673)
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Net Cash used for investing activities..................................... (3,290) (6,692)
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Cash flows from financing activities:
Net transfer from IPS...................................................... -- 3,066
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Net cash provided by financing activities.................................. -- 3,066
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Change in cash and cash equivalents........................................ $ 5,007 $ --
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</TABLE>
See accompanying notes.
5
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MONEYGRAM PAYMENT SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. MoneyGram Payment Systems, Inc. (the "Company") was, until December 11,
1996, a wholly owned subsidiary of Integrated Payment Systems, Inc,
("IPS"). The 1996 financial statements have been prepared as if the Company
were a separate company as of January 1, 1996. The 1996 financial
statements present the financial position, results of operations and cash
flows attributable to the Company, which was operated as a product line
of IPS. Certain prior year amounts have been reclassified to conform to
the current year's presentation.
The financial information should be read in conjunction with the Company's
annual financial statements and notes included in its Annual Report on Form
10-K for the year ended December 31,1996. These unaudited financial
statements reflect all material and normal recurring adjustments that are,
in the opinion of management, necessary for a fair presentation of the
results of the interim period. The results of the interim period are not
necessarily indicative of results to be expected for the full year.
2. In February 1997, the Company and Thomas Cook Group, Ltd. ("Thomas Cook")
announced the formation of a joint venture that is 51% owned by the Company.
This venture began operation in February and is accounted for as a wholly
owned subsidiary, with minority interest.
3. Net income per common share amounts are computed using the weighted-average
number of common shares. Common share equivalents were not used for the
first period of 1997 as their effect would have been dilutive.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Revenues The Company's revenues were $32.4 million in the first quarter of
1997 as compared with $35.6 million in 1996. This was the result of a 5% decline
in fee revenue and a 25% decline in foreign exchange revenue.
Fee revenue declined to $26.3 million from $27.6 million in the first
quarter of 1996, and foreign exchange revenue declined to $6.1 million from $8.0
million in 1996. These declines were due to a 15% decrease in transactions, to
1.3 million from 1.5 million, and a lower level of foreign exchange fees per
transaction. These decreases were partially offset by an 11% increase in the
average fee per transaction due to promotions during part of the 1996 quarter.
Expenses The Company's total operating expenses declined to $28.9 million
from $30.2 million in the first quarter of 1996 mainly as a result of the
decrease in transactions and lower advertising expense.
Agent commissions increased 1% to $11.0 million in 1997 from $10.9 million
in 1996. This increase was due mainly to amortization expense associated with
agent signing bonuses and higher guaranteed commissions. These were partially
offset by lower commissions due to the decline in fee revenue.
Processing costs declined 6% to $6.0 million in 1997 from $6.4 million in
1996, due to the lower transaction level.
Advertising and promotion expense decreased 32% to $6.0 million in 1997 from
$8.8 million in 1996. This was due to less advertising, particularly in January
1987.
Selling and services expense increased by 38% to $3.1 million in 1997 from
$2.2 million in 1996. This was due to an increase in the number of marketing,
sales and services employees hired to expand and support the Company as a
separate entity.
General and administrative expenses increased 54% to $2.8 million in 1997
from $1.8 million in 1996. This was due to costs associated with being a
separate legal entity and higher depreciation expense.
7
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LIQUIDITY AND CAPITAL RESOURCES
Total cash and cash equivalents, which is comprised of short term
investments, increased $5.0 million in the first quarter of 1997. In 1996 all
positive cash balances were transferred to IPS and all cash requirements were
provided in a transfer from IPS.
Cash flow from operations was $8.3 million in the first quarter of 1997 as
compared with $3.6 million in 1996. The 1997 results reflect reduced net income,
offset by increased depreciation and amortization, utilization of the deferred
tax asset and the culmination of the joint venture with Thomas Cook.
Cash used for investing activities was $3.3 million in 1997 as compared with
$6.7 million in 1996 as a result of unusually high payments in 1996 to agents
for assigning their contracts to the Company and extending the terms of those
contracts.
8
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits
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27. Financial Data Schedule
(b) Reports on Form 8-K
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None
9
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SIGNATURE
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.
MONEYGRAM PAYMENT SYSTEMS, INC.
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(REGISTRANT)
Dated: May 15, 1997 BY: /s/ JAMES F. CALVANO
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James F. Calvano
Chairman of the Board and
Chief Executive Officer
Dated: May 15, 1997 BY: /s/ JOHN M. FOWLER
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John M. Fowler
Executive Vice President and
Chief Financial Officer
(Principal Financial
and Accounting Officer)
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
MoneyGram Payment Systems, Inc's Form 10-Q for the period ended March
31, 1997 and is qualified entirely by reference to such Form 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 23,003
<SECURITIES> 0
<RECEIVABLES> 4,704
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 53,719
<PP&E> 10,011
<DEPRECIATION> 8,759
<TOTAL-ASSETS> 133,464
<CURRENT-LIABILITIES> 41,874
<BONDS> 0
0
0
<COMMON> 166
<OTHER-SE> 91,424
<TOTAL-LIABILITY-AND-EQUITY> 133,464
<SALES> 0
<TOTAL-REVENUES> 32,393
<CGS> 0
<TOTAL-COSTS> 28,853
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,540
<INCOME-TAX> 1,380
<INCOME-CONTINUING> 2,160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,160
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
