<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_______to_______
Commission File Number
1-10785
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THE MONEY STORE INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-2293022
---------- ----------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2840 Morris Avenue, Union, New Jersey 07083
- ------------------------------------- -----
(Address of principal executive office) (Zip Code)
(908) 686-2000
--------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether 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.
[X] Yes [_] No
APPLICABLE ONLY TO CORPORATE ISSUERS;
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 6, 1996: 57,535,948 shares.
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1996
Table of Contents Page
- ----------------- ----
Part I Financial Information
- ----------------------------
Item 1 - Financial Statements
Consolidated Statements of Financial Condition at
June 30, 1996 and December 31, 1995 2
Consolidated Statements of Income for the three and six months
ended June 30, 1996 and 1995 3
Consolidated Statements of Cash Flows for the six months
ended June 30, 1996 and 1995 4
Notes to Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-12
Part II Other Information
- -------------------------
Item 4 - Submission of Matters to a Vote of Securities Holders 13
1
<PAGE>
PART I FINANCIAL INFORMATION
THE MONEY STORE INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Dollars in thousands)
Assets
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
(unaudited)
<S> <C> <C>
Cash and cash equivalents (including
$122,108 and $136,159 in 1996 and
1995 which is restricted) $ 239,143 $ 178,781
Receivables, net of allowance for
credit losses of $12,842 and
$15,591 in 1996 and 1995 1,256,102 1,029,853
Excess servicing asset 634,324 524,359
Property and equipment, net 52,710 33,762
Other 25,478 25,493
------------ ------------
$ 2,207,757 $ 1,792,248
============= ============
Liabilities and Shareholders' Equity
Liabilities:
Notes payable $ 1,250,127 $ 1,075,892
Accounts payable and other liabilities 270,142 226,443
Income taxes, principally deferred 103,132 94,928
Unearned insurance commissions 5,864 4,704
Allowance for credit losses on loans
sold 168,954 125,155
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1,798,219 1,527,122
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Subordinated debt 13,000 24,000
------------- ------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par;
authorized 10,000,000 shares; none
issued and outstanding
Common stock, no par; authorized
250,000,000 shares; issued and
outstanding 57,521,480 shares in
1996 and 51,339,896 in 1995 182,831 59,603
Paid in capital 1,599 0
Retained earnings 212,108 181,523
------------- ------------
396,538 241,126
------------- ------------
$ 2,207,757 $ 1,792,248
============= ============
</TABLE>
See accompanying notes to consolidated financial statements
2
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THE MONEY STORE INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Gain on sale of receivables $ 113,621 $ 77,360 $ 215,812 $ 139,318
Finance income, fees earned and
other 64,751 35,305 117,308 65,105
----------- ----------- ------------ -----------
178,372 112,665 333,120 204,423
----------- ----------- ------------ -----------
Expenses:
Salaries and employee benefits 38,837 28,909 74,109 53,693
Other operating expenses 43,663 26,417 86,156 52,874
Provision for credit losses 33,506 16,426 59,021 27,952
Interest 30,699 22,731 58,433 39,378
----------- ----------- ------------ -----------
146,705 94,483 277,719 173,897
----------- ----------- ------------ -----------
Income before income taxes 31,667 18,182 55,401 30,526
----------- ----------- ------------ -----------
Income taxes (credits):
Current (3,525) (4,893) 459 (4,756)
Deferred 16,295 12,309 21,841 17,272
----------- ----------- ------------ -----------
12,770 7,416 22,300 12,516
----------- ----------- ------------ -----------
Net income $ 18,897 $ 10,766 $ 33,101 $ 18,010
=========== =========== ============ ===========
Net income per share $ 0.32 $ 0.21 $ 0.58 $ 0.35
=========== =========== ============ ===========
Weighted average number
of shares outstanding 59,399,392 50,899,050 55,108,424 50,804,963
=========== =========== ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
MONEY STORE INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
1996 1995
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 33,101 $ 18,010
Adjustments to reconcile net income to net
cash used in operations:
Depreciation and amortization 5,179 3,655
Provision for deferred income taxes 21,841 17,272
Provision for credit losses 59,021 27,952
Net changes in operating assets and liabilities:
Proceeds from loans sold 2,444,565 1,429,695
Loans originated and purchased (2,549,702) (1,675,967)
Loans repurchased (5,982) (4,715)
Increase in receivables (112,381) (48,099)
Excess Servicing Spread (212,545) (129,873)
Amortization of excess servicing asset 102,580 59,810
Net decrease in accounts payable and other liabilities (8,489) (3,403)
Other, net (31,211) (7,036)
---------------- ----------------
Net Cash used in operating activities (254,023) (312,699)
---------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment (22,810) (8,707)
---------------- ----------------
Cash flows from financing activities:
Net increase in credit facilities 174,063 157,684
Proceeds from other notes payable 0 150,000
Principal payments in subordinated debt (11,000) 0
Debt issuance costs (367) (1,350)
Net increase in collections payable 52,188 17,709
Net proceeds from issuance of common stock 122,075 0
Proceeds from exercised stock options 1,153 853
Tax benefit from exercise of stock option 1,599 0
Dividends paid (2,516) (1,491)
---------------- ----------------
Net cash provided by financing activities 337,195 323,405
---------------- ----------------
Net increase in cash and cash equivalents 60,362 1,999
Cash and equivalents at beginning of period 178,781 161,292
---------------- ----------------
Cash and cash equivalents at end of period $ 239,143 $ 163,291
================ ================
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
(1) Basis of Financial Statement Presentation
The consolidated financial statements include the accounts of The Money Store
Inc. and its subsidiaries (the "Company"), all of which are wholly-owned. All
significant intercompany accounts and transactions have been eliminated.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. It is suggested that these condensed
financial statements be read in conjunction with the Company's December 31, 1995
audited consolidated financial statements and notes thereto.
In the opinion of management all adjustments (which included only normal
recurring adjustments) necessary for a fair presentation of the financial
position and results of operations for these periods have been made. However,
results for such interim periods are subject to year-end adjustments, and are
not necessarily indicative of results for a full year.
(2) Net Income Per Share
Net income per share of common stock is computed using the weighted average
number of shares of common stock outstanding during each period, after giving
effect for common stock equivalents arising from the issuance of stock options.
All share and per share amounts have been restated to reflect the three-for-two
stock split on September 21, 1995 and the five-for-two stock split on December
1, 1995.
(3) Commitments and Contingencies
The Company generally sells its Home Equity Loans with servicing retained in
mortgage pass-through transactions and in whole loan transactions. In certain
whole loan transactions, the Company is subject to off-balance sheet credit risk
in the normal course of business due to commitments and obligations to service
and repurchase loan receivables which are not included in the accompanying
consolidated financial statements. These commitments and obligations do not
necessarily represent future cash flow obligations. The obligations to
repurchase Home Equity Loans are subject to various terms and conditions
including limitations on the amount of loans that may be required to be
repurchased in any given year. Based upon the terms of whole loan transactions
and management's estimates of the lives of the underlying portfolios, management
believes that there are $69,360,000 of Home Equity Loans at June 30, 1996 which
the Company may be required to repurchase in the future should such loans become
more than 90 days past due.
In an attempt to minimize the risk of interest rate fluctuations, one of the
strategies employed by the Company is to enter into agreements that allow it to
sell loans to certain trusts in the future at an agreed upon price. At June 30,
1996, under the terms of such agreements the Company had the right to deliver
$308,454,000 of Home Equity Loans and $50,000,000 of Auto Loans.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain Accounting Considerations
As a fundamental part of its business and financing strategy, the Company sells
the majority of its loans with the servicing retained. The majority of the
Company's revenue is recognized as gain on sale of loans, which represents the
present value of the difference between the interest rate charged by the Company
to a borrower and the interest rate received by the investor who purchased the
loan, in excess of normal loan servicing fees (the "Excess Servicing Spread")
and non-refundable fees and premiums on loans sold. The Company recognizes such
gain on sale of loans in the year that such loans are sold, although cash
(representing the Excess Servicing Spread and servicing fees) is received by the
Company over the lives of the loans. Concurrently with recognizing such gain on
sale, the Company records a corresponding asset on its consolidated statement of
financial condition in an initial amount equal to the Excess Servicing Spread
(the "Excess Servicing Asset"). The Excess Servicing Asset is computed, in part,
based upon, and amortized over, the estimated lives of the loans. The timing of
sales of the Company's loans may impact the Company's earnings from quarter to
quarter.
The Excess Servicing Asset is calculated utilizing certain estimates made by
management at the time loans are sold. The rate of prepayment of loans may be
affected by a variety of economic and other factors, including prevailing
interest rates and the availability of alternative financing to borrowers. The
effect of those factors on loan prepayment rates may vary depending on the type
of loan. Estimates of prepayment rates are made based on management's
expectations of future prepayment rates, which are based, in part, on the
historical rate of repayment of the Company's loans and other considerations.
There can be no assurance of the accuracy of management's prepayment estimates.
If actual prepayments with respect to sold loans occur more quickly than was
projected at the time such loans were sold, the carrying value of the Excess
Servicing Asset may have to be written down through a charge to earnings in the
period of adjustment. If actual prepayments with respect to sold loans occur
more slowly than estimated, the carrying value of the Excess Servicing Asset on
the Company's consolidated statement of financial condition would not increase,
although total income would exceed previously estimated amounts.
The Company has several strategies which it employs in an attempt to minimize
the risk of interest rate fluctuations during the period between the time it
originates loans and the time such loans are sold; i) the Company attempts to
package and sell loans on a regular basis, thereby minimizing the period during
which loans are held, ii) the Company usually does not fix the interest rate
applicable to fixed rate Home Equity Loans it originates until shortly prior to
the closing of the loan, iii) the Company from time to time purchases options to
sell government securities at agreed upon prices or sells securities not yet
purchased, and iv) in certain securitizations the Company enters into an
agreement that allows it to sell loans in the future at an agreed upon price.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
June 30, 1996
Cash and cash equivalents increased $60.3 million to $239.1 million at June 30,
1996 from $178.8 million at December 31, 1995. The increase in cash is primarily
due to an increase in funds collected on loans sold and serviced for others
("collections payable").
Receivables, net increased $226.2 million to $1.3 billion at June 30, 1996 from
$1.0 billion at December 31, 1995. This increase was primarily due to a net
increase in loans held for sale of $161.9 million, accrued interest receivable
of $9.6 million and other receivables of $52.0 million. The allowance for credit
losses decreased $2.7 million in 1996. The increase in loans held for sale was
primarily due to the fact that the Company originated $2.6 billion of loans
compared to loan sales of $2.4 billion. Originations increased 52% for the six
months ended June 30, 1996, compared to the six months ended June 30, 1995,
primarily as a result of the Company providing greater variety of products,
complemented by geographic expansion of the originations network and
diversification in the methods of loan origination. The increase in other
receivables is principally attributable to advances, designed to protect
investors from losses, made in connection with certain securitizations.
The balance of the repurchased loan portfolio was $35.2 at June 30, 1996
compared to $29.2 million at December 31, 1995. In the past, when the Company
sold Home Equity Loans as whole loans, it generally committed to repurchase
loans that became more than 90 days past due, up to a predetermined limit. The
Company has increased its use of securitizations and has been able to negotiate
whole loan sales without such a contingent repurchase obligation.
The Excess Servicing Asset increased by $109.9 million to $634.3 million at June
30, 1996 from $524.4 million at December 31, 1995. This increase was due to
gains on loans sold with servicing retained of $212.5 million offset by
amortization of $102.6 million.
Property, plant and equipment, net, increased by $18.9 million to $52.7 million
at June 30, 1996 from $33.8 million at December 31, 1995. The Company purchased
land and incurred development costs to date in the amount of $10.0 million, for
the construction of the Company's new building in Sacramento, California. The
building is expected to be completed in late 1997, with an anticipated total
cost of approximately $75.0 million. In addition, the Company purchased $5.0
million in computer equipment to enhance the branches' office automation to
support new product lines, provide system improvements and to purchase equipment
supporting electronic document generation, storage and retrieval. Furniture and
office equipment increased $3.6 million primarily for the employment growth in
the Home Equity Loan division and the Auto Loan division.
The primary source of funding the Company's receivables comes from borrowings
issued under credit facilities. At June 30, 1996 the Company had notes payable
of $1.3 billion, which compares with $1.1 billion at December 31, 1995, an
increase of $174.1 million. This increase is primarily a result of net increases
of $119.8 million in secured credit facilities and the net increase of $54.3
million of unsecured senior notes.
Accounts payable and other liabilities increased $43.7 million to $270.1 million
at June 30, 1996, from $226.4 million at December 31, 1996. The increase
resulted primarily from an increase in funds collected on loans sold and
serviced for others ("collections payable") of $52.2 million offset by a
decrease in other miscellaneous accounts payable and accrued expenses.
7
<PAGE>
Income taxes, principally deferred increased $8.2 million, from $94.9 million at
December 31, 1995 to $103.1 million at June 30, 1996. This increase resulted
from the net income for the six months ended June 30, 1996.
The allowance for credit losses on loans sold increased $43.8 from $125.2
million at December 31, 1995 to $169.0 million at June 30, 1996, due to an
increase in the amount of loans sold.
An additional source of funding the Company's receivables comes from
subordinated notes. Subordinated debt decreased $11.0 million to $13.0 million
at June 30, 1996, from $24.0 million at December 31, 1995. The Company had an
$11.0 million payment due on December 31, 1995, (not a business day) which was
paid on January 2, 1996.
Total shareholders' equity at June 30, 1996 was $396.5 million which compares
with $241.1 million at December 31, 1995, an increase of $155.4 million. During
the six months ended June 30, 1996, the Company completed a common stock
offering, the net proceeds of which amounted to $122 million. In addition, the
Company had net income of $33.1 million, received proceeds from exercised stock
options of $1.2 million and recorded $1.6 million in paid in capital
representing the tax benefit from the exercise by employees of nonqualified
stock options and disqualified incentive stock options. Shareholders' equity
decreased $2.5 million as a result of payment of cash dividends.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Net income for the six months ended June 30, 1996 was $33.1 million ($0.58 per
share) on 55,108,424 weighted average number of shares outstanding compared to
net income of $18.0 million ($0.35 per share) on 50,804,963 weighted average
number of shares outstanding for the six months ended June 30, 1995, an increase
of 84%. The increase in net income is primarily attributable to income derived
from gain on sale of receivables, as well as finance income and fees earned
caused by the growth in the Company's serviced loan portfolio.
Gain on sale of receivables totaled $215.8 million for the six months ended June
30, 1996, an increase of 55%, compared to $139.3 million for the six months
ended June 30, 1995. Loans sold for the six months ended June 30, 1996, totaled
$2.4 billion, compared to $1.4 billion for the six months ended June 30, 1995.
The increase was also affected in part by an increase in the Excess Servicing
Spread (i) on Home Equity Loans sold to 3.20% for the six months ended June 30,
1996 from 3.06% for the six months ended June 30, 1995 and (ii) on SBA Loans
sold including the sale of unguaranteed portions of SBA Loans to 2.32% for the
six months ended June 30, 1996 from 2.31% for the same period last year.
Offsetting this increase is a decrease in the Excess Servicing Spread on Student
Loans sold to 1.41% for the six months ended June 30, 1996 from 1.72% for the
six months ended June 30, 1995. The Excess Servicing Spread on Auto Loans was
9.82% for the six months ended June 30, 1996. There were no sales of loans for
the Auto Loan division for the six months ended June 30, 1995.
Finance income, fees earned and other totaled $117.3 million for the six months
ended June 30, 1996, an increase of 80%, compared to $65.1 million for the six
months ended June 30, 1995. The primary factor attributable to the growth in
finance income and fees is the increase in the Company's serviced loan portfolio
of 44% to $10.3 billion at June 30, 1996 as compared to $7.1 billion at June 30,
1995.
Salaries and employee benefits increased 38% to $74.1 million for the six
months ended June 30, 1996, compared to $53.7 million for the six months ended
June 30, 1995. This increase was a result of additional staff needed for the
growth in the Home Equity Loan division and the Auto Loan division.
Other operating expenses increased 63% to $86.2 million for the six months ended
June 30, 1996, compared to $52.9 million for the six months ended June 30, 1995.
The increase was primarily attributable to occupancy costs and related office
expenses associated with the opening of additional branch offices totaling $11.9
million. In addition, advertising expense increased $7.3 million, professional
fees increased $4.4 million primarily to support enhancing the branch offices'
computer system and loan expenses increased $2.0 million as a result of the
Company's growth in loan orignations.
The provision for credit losses increased $31.0 million to $59.0 million for the
six months ended June 30, 1996 from $28.0 million for the six months ended June
30, 1995. The provision increased to maintain the allowance for credit losses
and the allowance for credit losses on loans sold at a level considered adequate
to cover risk characteristics of the serviced loan portfolio and increased loan
originations and sales. Home Equity Loans delinquent 90 days-and-over increased
to 2.88% at June 30, 1996 from 1.79% at June 30, 1995. SBA Loans delinquent 90
days-and-over remained constant at 3.90% at June 30, 1996 and 1995. Auto Loans
delinquent 90 days-and-over were .26% at June 30, 1996.
Net charge-offs increased 81% to $19.5 million for the six months ended June 30,
1996 from $10.8 million for the six months ended June 30, 1995, due to the
increases in loans sold and the Company's serviced loan portfolio.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations (Cont)
Interest expense totaled $58.4 million for the six months ended June 30, 1996,
an increase of 48% from $39.4 million for the six months ended June 30, 1995.
The increase is attributable to the increase in the Company's average debt
outstanding during the six months ended June 30, 1996. The average annualized
cost of funds was 7.21% based on the daily average debt outstanding of $1.6
billion for the six months ended June 30, 1996.
Income taxes increased 78% to $22.3 million for the six months ended June 30,
1996 over the prior year due to an increase in pretax income. The effective tax
rate decreased to 40.2% for the six months ended June 30, 1996, compared to
41.0% for the six months ended June 30, 1995, as a result of a decrease in state
taxes.
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
Net income for the second quarter 1996 was $18.9 million ($0.32 per share) on
59,399,392 weighted average shares outstanding compared to net income of $10.8
million ($0.21 per share) on 50,899,050 weighted average shares outstanding for
the second quarter of 1995, an increase of 76%. The increase in net income is
primarily attributable to income derived from the gain on sale of receivables,
as well as finance income and fees earned caused by the growth in the Company's
serviced loan portfolio.
Gain on sale of receivables totaled $113.6 million for the second quarter of
1996, an increase of 47% compared to $77.4 million for the second quarter of
1995. The increase is primarily attributable to an increase of 119.4% in loans
sold from $592.5 million in the second quarter of 1995 to $1.3 billion in the
second quarter of 1996. Offsetting this increase is a decrease in the Excess
Servicing Spread (i) on Home Equity Loans sold to 2.94% for the second quarter
of 1996 from 3.69% for the second quarter of 1995, (ii) on SBA Loans sold
including the sale of unguaranteed portions of SBA Loans to 1.47% for the second
quarter of 1996 from 2.63% for the second quarter of 1995 and (iii) on Student
Loans sold to 1.33% for the second quarter of 1996 from 1.72% for the second
quarter of 1995. The Excess Servicing Spread on Auto Loans was 9.82% for the
second quarter of 1996. There were no sales of loans for the Auto Loan division
for the three months ended June 30, 1995.
Finance income, fees earned and other totaled $64.8 million for the second
quarter of 1996 an increase of 84% compared to $35.3 million for the second
quarter of 1995. The primary factor attributable to the growth in finance income
and fees is the increase in the Company's serviced loan portfolio of 44% to
$10.3 billion at June 30, 1996, compared to $7.1 billion at June 30, 1995.
Salaries and employee benefits increased 34% to $38.8 million for the second
quarter of 1996 from $28.9 million for the second quarter of 1995. This increase
was the result of additional staff needs for growth in the Home Equity Loan
division, as well as new offices for the Auto Loan division.
Other operating expenses increased 65% to $43.7 million during the second
quarter of 1996, compared to $26.4 million for the second quarter of 1995. The
increase is primarily attributable to an increase in occupancy costs and related
office expenses totaling $6.0 million associated with the opening of additional
branch and administrative offices, advertising expense of $4.9 million,
professional fees of $2.4 million, primarily to support enhancing the Branch
offices' computer system, and loan expenses of $0.6 million as a result of the
Company's growth in loan originations.
The provision for credit losses increased by 104% to $33.5 million for the
second quarter 1996 from $16.4 million for the second quarter of 1995. Charge-
offs, net of recoveries, were $9.9 million for the second quarter 1996 compared
to $5.4 million for the second quarter of 1995, due to the increase in loans
sold and the Company's serviced loan portfolio.
10
<PAGE>
Interest expense increased 35% to $30.7 million for the second quarter of 1996,
from $22.7 million for the second quarter of 1995. This increase resulted from
increases in notes payable used in part to fund the increase in receivables.
The average cost of funds was 6.96% based on the daily average debt
outstanding of $1.9 billion for the quarter ended June 30, 1996.
Income taxes increased 73% to $12.8 million for the second quarter of 1996, from
$7.4 million for the second quarter of 1995, due to an increase in pretax
income.
Liquidity and Capital Resources
The Company's business requires continual access to short- and long-term sources
of debt financing and equity capital. The Company's cash requirements arise from
loan originations and purchases, advances in securitizations designed to protect
investors from losses, loan repurchases, repayment of debt upon maturity,
payment of operating and interest expenses and capital expenditures. The
Company's primary sources of liquidity are sales into secondary markets of the
loans it originates, long term borrowing (senior notes and subordinated debt),
borrowing under term loans and credit facilities secured by pledges of its
loans, in most cases until such loans are sold and the lenders can by repaid,
and finance income and fees generated by the serviced loan portfolio.
In order to continue to originate loans, the Company will need to maintain and
renew its various credit facilities at least at current levels, or obtain new
credit facilities to replace existing facilities and its long term borrowing as
they become due.
Cash and cash equivalents were $239.1 million at June 30, 1996, an increase of
$60.3 million from December 31, 1995. At June 30, 1996, $122.1 million of cash
and cash equivalents were restricted. These restrictions are reduced as loans
are liquidated. This increase resulted from cash provided by financing
activities of $337.2 million primarily attributable to net proceeds from the
issuance of 5.9 million shares of the Company's common stock the net proceeds of
which were $122 million, and proceeds from the increase of warehouse notes
payables of $119.8 million offset by cash used in operating activities and
investing activities of $254.0 million and $22.8 million, respectively.
The Company from time to time sells certain of its receivables, primarily SBA
Loans and Student Loans, at a premium. This strategy does not significantly
effect reported earnings in the period of sales but allows the Company to
generate a higher level of cash flow from current operations. Such a strategy
also reduces the average Excess Servicing Spread, thereby reducing cash flows
received in the future.
The Company began development of its new West Coast headquarters office building
located in Sacramento, California in May 1996, with completion expected in late
1997. The project, which includes the purchase of land and building
construction, is estimated to cost approximately $75.0 million, and will be
funded out of the general working capital of the Company. The 400,000 square
foot building will help to centralize operations, and to support additional
staff from the growth of the business.
At June 30, 1996, the Company had $2.3 billion of credit facilities for
warehousing loans which are subject to periodic renewal and are used to finance
loans after origination and prior to sale. Of the amount available under these
facilities $1.8 billion was unused at June 30, 1996. At December 31, 1995, the
Company had $1.6 billion of availability of credit facilities for warehousing
loans, of which $1.2 billion was unused.
At June 30, 1996, the Company had $474.9 million of warehouse notes payable at a
weighted average interest rate of 6.26 %. In addition, at June 30, 1996, the
Company had outstanding $655 million of unsecured senior debt and $13 million of
subordinated debt which requires the Company to pay $31 million in 1996, $112
million in 1997, $40 million in 1998, $190 million in 1999, $110 million in
2000, $35 million in 2001 and $150 million in 2002. The unsecured senior and
subordinated debt bear interest at rates ranging from 7.63% to 12.00%, which a
weighted average interest rate of 8.64% at June 30, 1996.
11
<PAGE>
In addition, notes payable, unsecured includes bank loans due within one year of
approximately $119.3 million at June 30, 1996. These notes bear interest at
rates ranging from 8.00% to 9.25%.
The Company is required to comply with various operating and financial covenants
defined in these agreements including covenants which may restrict the Company's
ability to pay dividends. At June 30, 1996, under the most restrictive of these
dividends covenants, the Company had available $135.5 million for the payment of
dividends.
While the Company believes that it will be able to refinance or otherwise repay
its short term and unsecured debt in the normal course of its business, there
can be no assurance that the Company's existing lenders will agree to refinance
such debt, that other lenders will be willing to extend lines of credit to the
Company or that funds otherwise generated from operations will be sufficient to
satisfy such obligations. Future financing may involve the issuance of
additional common stock or other securities, including securities convertible
into or exercisable for common stock.
12
<PAGE>
PART II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of shareholders was held on May 15, 1996. At the meeting,
Marc Turtletaub and Harry Puglisi were elected as directors. Alan Turtletaub,
Anthony R. Medici, Alexander C. Schwartz, Jr., Anthony L. Watson and Morton Dear
continue to serve as members of the board.
Votes cast in favor of Mr. Turtletaub's election totaled 50,419,303 while
596,634 votes were withheld.
Votes cast in favor of Mr. Puglisi's election totaled 50,419,730 while 596,207
votes were withheld.
The shareholders also voted to amend the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock, no
par value, of the Company from 100,000,000 shares to 250,000,000 shares. Votes
cast in favor of this election were 35,657,613, against 15,159,408, abstain
62,041 and non-votes totaled 136,875.
13
<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.
The Money Store Inc.
--------------------
(Registrant)
By: /s/James K. Ransom
----------------------
James K. Ransom
Vice President and
Principal Accounting Officer
Dated: August 13, 1996
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1996 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 239,143
<SECURITIES> 0
<RECEIVABLES> 1,268,944
<ALLOWANCES> (12,842)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 52,710
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,207,757
<CURRENT-LIABILITIES> 0
<BONDS> 13,000
0
0
<COMMON> 182,831
<OTHER-SE> 213,707
<TOTAL-LIABILITY-AND-EQUITY> 2,207,757
<SALES> 0
<TOTAL-REVENUES> 333,120
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 160,265
<LOSS-PROVISION> 59,021
<INTEREST-EXPENSE> 58,433
<INCOME-PRETAX> 54,401
<INCOME-TAX> 22,300
<INCOME-CONTINUING> 33,101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,101
<EPS-PRIMARY> .58
<EPS-DILUTED> 0
</TABLE>
