<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) April 9, 1997
-------------
The Money Store Inc.
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 001-10785 22-2293022
-------------------------------- ------------- -------------
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) ID Number)
2840 Morris Avenue, Union, New Jersey 07083
----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number,
including area code: (908) 686-2000
--------------
N/A
- -------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. OTHER EVENTS.
In connection with The Money Store Inc.'s registration of certain
subsidiary guarantees with the Securities and Exchange Commission, The Money
Store, Inc. believes that it is required to present certain consolidating
financial data with respect to the guarantor and non-guarantor subsidiaries in
an additional footnote to its financial statements.
Attached hereto as Exhibit 99.1 are the audited consolidated financial
statements of The Money Store Inc. and subsidiaries as of December 31, 1996 and
1995 and for each of the years in the three year period ended December 31, 1996
with such additional footnote included as Note 16.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(c) Exhibits
--------
Exhibit No.
- -----------
23.1 Consent of KPMG Peat Marwick LLP.
99.1 Audited consolidated financial statements of The Money Store Inc. and
subsidiaries as of December 31, 1996 and 1995 and for each of the years in
the three year period ended December 31, 1996.
<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.
By: /s/ Morton Dear
-----------------------------------
Name: Morton Dear
Title: Executive Vice President
Dated: April 9, 1997
<PAGE>
EXHIBIT INDEX
Exhibit Description of Exhibit
- ------- ----------------------
23.1 Consent of KPMG Peat Marwick LLP.
99.1 Audited consolidated financial statements of The
Money Store Inc. and subsidiaries as of December
31, 1996 and 1995 and for each of the years in the
three year period ended December 31, 1996.
<PAGE>
EXHIBIT 23.1
Independent Auditors' Consent
-----------------------------
The Board of Directors and Shareholders
The Money Store Inc.:
We consent to incorporation by reference in the Registration Statements (No.
333-20817, 33-98972, 333-18877, 333-14075 and 333-24807) on Forms S-3 and the
Registration Statements (Nos. 33-66332 and 33-96830) on Forms S-8 of our report
dated February 12, 1997, except for Note 16 as to which the date is April 8,
1997, relating to the consolidated statements of financial condition of The
Money Store Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1996, which
report appears in the Current Report on Form 8-K of The Money Store Inc. dated
April 9, 1997.
/s/ KPMG Peat Marwick LLP
Sacramento, California
April 9, 1997
<PAGE>
EXHIBIT 99.1
Independent Auditors' Report
The Board of Directors and Shareholders
The Money Store Inc.:
We have audited the accompanying consolidated statements of financial
condition of The Money Store Inc. and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Money
Store Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Sacramento, CA
February 12, 1997,
except for Note 16,
as to which the
date is April 8, 1997
1
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Dollars in thousands)
<TABLE>
<CAPTION>
Assets
------ December 31,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash and cash equivalents (including $170,079 and
$136,159 in 1996 and 1995 which are restricted) $ 321,703 $ 178,781
Receivables, net of allowance for credit losses of
$19,895 and $15,591 in 1996 and 1995 1,385,934 1,029,853
Excess servicing asset 806,385 524,359
Property and equipment, net 73,458 33,762
Other 24,545 25,493
---------- ----------
$2,612,025 $1,792,248
========== ==========
Liabilities and Shareholders' Equity
------------------------------------
Liabilities:
Notes payable $1,319,197 $1,075,892
Accounts payable and other liabilities 333,283 226,443
Income taxes, principally deferred 147,197 94,928
Unearned insurance commissions 7,754 4,704
Allowance for credit losses on loans sold 220,085 125,155
---------- ----------
2,027,516 1,527,122
---------- ----------
Subordinated debt 2,000 24,000
---------- ----------
Commitments and contingencies (Note 10)
Shareholders' equity:
Preferred stock, no par; authorized
10,000,000 shares; issued and
outstanding 5,215,000 of $1.72
mandatory convertible shares in 1996
(aggregate liquidation value of $144,064) 133,363 --
Common stock, no par; authorized 250,000,000
shares; issued and outstanding 57,791,436 shares
in 1996 and 51,339,896 shares in 1995 188,276 59,603
Retained earnings 260,870 181,523
---------- ----------
582,509 241,126
---------- ----------
$2,612,025 $1,792,248
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Gain on sale of receivables $544,451 $353,995 $259,913
Finance income, fees earned and other 234,211 156,563 70,557
-------- -------- --------
778,662 510,558 330,470
-------- -------- --------
Expenses:
Salaries and employee benefits 170,296 119,423 85,596
Other operating expenses 194,098 123,394 96,188
Provision for credit losses 145,652 90,723 52,600
Interest 124,076 93,985 43,059
-------- -------- --------
634,122 427,525 277,443
-------- -------- --------
Income before income taxes 144,540 83,033 53,027
Income taxes 58,885 34,318 21,706
-------- -------- --------
Net income $ 85,655 $ 48,715 $ 31,321
======== ======== ========
Net income per common share:
Primary $ 1.44 $ 0.95 $ 0.62
======== ======== ========
Fully diluted $ 1.41 $ 0.95 $ 0.62
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
Total
Preferred Stock Common Stock Retained Shareholders'
Shares Amount Shares Amount Earnings Equity
---------- --------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 -- $ -- 50,805,000 $ 57,963 $107,350 $165,313
Net income 31,321 31,321
Purchase of fractional shares (37)
Common dividends (2,371) (2,371)
---------- --------- ---------- -------- -------- --------
Balance, December 31, 1994 -- -- 50,804,963 57,963 136,300 194,263
Net income 48,715 48,715
Proceeds from exercise
of stock options 534,933 1,640 1,640
Common dividends (3,492) (3,492)
---------- --------- ---------- -------- -------- --------
Balance, December 31, 1995 -- -- 51,339,896 59,603 181,523 241,126
Net income 85,655 85,655
Issuance of preferred stock 5,215,000 133,363 133,363
Issuance of common stock 5,937,500 122,128 122,128
Proceeds and related tax benefits
from exercise of stock options 514,040 6,545 6,545
Preferred dividends (621) (621)
Common dividends (5,687) (5,687)
---------- --------- ---------- -------- -------- --------
Balance, December 31, 1996 5,215,000 $ 133,363 57,791,436 $188,276 $260,870 $582,509
========== ========= ========== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 85,655 $ 48,715 $ 31,321
Adjustments to reconcile net income to net
cash used in operations:
Depreciation and amortization 15,630 8,446 5,475
Provision for deferred income taxes 47,887 13,430 16,437
Provision for credit losses 145,652 90,723 52,600
Net changes in operating assets
and liabilities:
Proceeds from loans sold 5,449,240 3,508,824 2,816,411
Loans originated and purchased (5,693,054) (3,822,971) (2,779,408)
Loans repurchased (6,971) (9,059) (14,314)
Increase in other receivables (156,693) (97,445) (110,116)
Excess Servicing Spread (534,550) (342,256) (208,156)
Amortization of Excess Servicing Asset 252,524 137,502 113,443
Increase in accounts payable and
other liabilities 24,001 18,469 10,186
Other, net 11,236 7,242 (936)
----------- ----------- -----------
Net cash used in operating
activities (359,443) (438,380) (67,057)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (48,612) (17,466) (15,487)
Payment for purchase of home improvement loan
company, net of cash acquired -- -- (2,748)
----------- ----------- -----------
Net cash used in investing activities (48,612) (17,466) (18,235)
----------- ----------- -----------
Cash flows from financing activities:
Net increase in credit facilities 302,415 99,472 24,784
Proceeds from unsecured senior notes 20,000 300,000 150,000
Principal payments on unsecured senior notes (83,000) -- --
Principal payments on subordinated debt (22,000) -- (17,000)
Debt issuance costs (1,413) (2,902) (2,169)
Net increase in collections payable 82,839 78,617 6,662
Net proceeds from issuance of preferred stock 133,363 -- --
Net proceeds from issuance of common stock 122,128 -- --
Proceeds from exercise of stock options 2,953 1,640 --
Dividends paid (6,308) (3,492) (2,371)
----------- ----------- -----------
Net cash provided by financing
activities 550,977 473,335 159,906
----------- ----------- -----------
Net increase in cash and cash equivalents 142,922 17,489 74,614
Cash and cash equivalents at beginning of year 178,781 161,292 86,678
----------- ----------- -----------
Cash and cash equivalents at end of year $ 321,703 $ 178,781 $ 161,292
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
Business
The Money Store Inc. together with its subsidiaries (the "Company") is a
financial services company engaged in the business of originating (including
purchasing), selling and servicing consumer and commercial loans of specified
types and offering related services. Loans originated by the Company primarily
consist of: (i) fixed and adjustable rate loans secured by mortgages on
residential real estate (collectively "Home Equity Loans") which include FHA
Title I home improvement loans ("FHA Title I Loans") insured by the Federal
Housing Authority (the "FHA") of the United States Department of Housing and
Urban Development ("HUD"), and other home improvement loans not insured by FHA
("Conventional Home Improvement Loans") and collectively with FHA Title I Loans,
("Home Improvement Loans"); (ii) loans guaranteed in part ("SBA Loans") by the
United States Small Business Administration (the "SBA") and commercial loans
generally secured by first mortgages ("Small Business Loans" and, together with
SBA Loans, "Commercial Loans"); (iii) government-guaranteed student loans
("Student Loans"); and (iv) motor vehicle retail installment sale contracts
purchased from automobile dealers ("Auto Loans").
Basis of Financial Statement Presentation
The consolidated financial statements include the accounts of The Money
Store Inc. and its subsidiaries, all of which are wholly-owned. The consolidated
financial statements are prepared in accordance with generally accepted
accounting principles. All significant intercompany accounts and transactions
have been eliminated in consolidation. In preparing the consolidated financial
statements, management is required to make estimates and assumptions which
affect the reported amounts of assets and liabilities as of the date of the
consolidated statements of financial condition and revenues and expenses for the
period. Actual results could differ from those estimates. These estimates
include, among other things, estimated prepayments and discount rates on loans
sold with servicing retained, valuation of collateral owned, and determination
of the allowance for credit losses.
Revenue Recognition
Gain on sale of receivables 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 after giving effect to prepayment assumptions (the "Excess
Servicing Spread"). Included in gain on sale of receivables in addition to the
Excess Servicing Spread are the following: (i) non-refundable fees and premiums
on loans sold; (ii) costs related to the sale of the loans; and (iii) gains or
losses on certain transactions structured as an economic hedge that are designed
to minimize risk of interest rate fluctuations. The Company recognizes such gain
on sale of loans on the settlement date. Gains on the sale of a portion of a
loan are based on the relative fair market value of the loan portion sold and
retained. Concurrently with recognizing such gain on sale, the Company records a
corresponding asset (the "Excess Servicing Asset") on its consolidated statement
of financial condition in an initial amount equal to the Excess Servicing
Spread.
6
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies (continued)
Revenue Recognition (continued)
The Excess Servicing Asset is amortized, as a charge to finance income, in
proportion to the income received from the differential retained over the
estimated lives of the underlying loans. Income from the differential retained
is recorded in finance income as received. In addition, finance income includes
servicing fees and interest income on loans retained by the Company. The Excess
Servicing Asset is carried at the lower of amortized cost or net realizable
value.
The carrying value of the Excess Servicing Asset is analyzed quarterly by
the Company on a disaggregated basis to determine whether prepayment experience
has had an impact on this carrying value. Expected cash flows of the underlying
loans sold are reviewed based upon current economic conditions and the type of
loans originated and are revised as necessary using the original discount rate
used in calculating the gain on sale. Adjustments arising from adverse
prepayment experience are recognized as a charge to earnings while favorable
experience is not recognized until realized.
The Company ceases to accrue finance income on loans receivable which
become 90 days delinquent. Finance income previously accrued and unpaid on loans
receivable which become 90 days delinquent is reversed.
Loans Receivable
Loans receivable held for sale are carried at the lower of aggregate cost
or market value. Market value is determined by outstanding commitments from
investors or current investor yield requirements. There was no allowance for
market losses on loans receivable held for sale at December 31, 1996 and 1995.
Credit Losses
Provision for credit losses is charged to income in amounts sufficient to
maintain the allowance at a level considered adequate to cover anticipated
losses resulting from liquidation of outstanding loans. The allowance for credit
losses is based upon periodic analysis of the portfolio, economic conditions and
trends, historical credit loss experience, borrowers' ability to repay and
collateral values. The allowance for credit losses on loans sold represents the
Company's best estimate of future credit losses likely to be incurred over the
life of the loans sold. The Company's charge-off policy is based on a review of
each individual receivable and the loan is charged-off when deemed
uncollectable.
7
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies (continued)
Property and Equipment, net
Property and equipment is stated at cost less accumulated depreciation and
amortization. Capital leases are included in property and equipment, at the
capitalized amount. Depreciation and amortization are computed primarily using
the straight-line method. Estimated useful lives range from three to seven years
for furniture and equipment, the lesser of ten years or the lease term for
leasehold improvements, and three to five years for capital leases.
Also included in property and equipment is the capitalization of costs
relating to the construction of an office building. Costs include expenditures
for the purchase of land, construction of the building along with related costs
and the amount of interest associated with the construction. Capitalized
interest is recorded as part of the asset cost and will be depreciated over its
useful life when it becomes operational.
Collateral Owned
Collateral owned consists of property acquired by foreclosure or in
settlement of loans receivable or repossession, and is carried at the lower of
carrying value or fair value less estimated costs to sell. Collateral owned is
$7,199,000 and $10,211,000 at December 31, 1996 and 1995, respectively, and is
included in other assets.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply in the year in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the
enactment date.
Unearned Insurance Commissions
The Company receives a commission from third party providers based upon the
insurance coverage sold to Home Equity Loan customers. For financial reporting,
this income is deferred and recognized over the expected life of the insurance
policy.
8
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies (continued)
Net Income Per Share
Net income per share of common stock is computed using the weighted average
number of common shares outstanding during each period, after giving effect to
common stock equivalents arising from the assumed conversion of the outstanding
$1.72 mandatory convertible preferred stock and the assumed exercise of stock
options. The primary weighted average number of common shares including common
stock equivalents is 59,085,322 for 1996, 51,023,609 for 1995 and 50,804,963 for
1994. The fully diluted weighted average number of common shares including
common stock equivalents is 60,821,321 for 1996, 51,023,609 for 1995 and
50,804,963 for 1994. All share and per share amounts have been restated to
reflect stock splits effected by the Company.
Statements of Cash Flows
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Supplemental disclosure of cash flow information is as follows:
Cash paid for interest expense is $122,531,000, $84,335,000 and $38,779,000
for the years ended December 31, 1996, 1995 and 1994, respectively. Cash paid
for income taxes is $9,253,000, $12,940,000 and $2,035,000 for the years ended
December 31, 1996, 1995 and 1994, respectively.
Supplemental disclosure of noncash investing and financing activities is as
follows:
Noncash investing and financing activities consist of capital lease
obligations of $3,890,000 for the year ended December 31, 1996, in connection
with leases for equipment.
Recent Accounting Developments
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 125 ("FAS 125"), Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities.
This Statement provides guidance for distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings. FAS 125
supersedes FAS 76, 77 and 122, while amending both FAS 65 and 115. The Statement
is effective January 1, 1997 and is to be applied prospectively. Earlier
implementation is not permitted.
9
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Recent Accounting Developments (Cont.)
A transfer of financial assets in which control is surrendered is accounted
for as a sale to the extent that consideration other than beneficial interests
in the transferred assets is received in the exchange. Liabilities and
derivatives incurred or obtained by the transfer of financial assets are
required to be measured at fair value, if practicable. Also, servicing assets
and other retained interests in the transferred assets must be measured by
allocating the previous carrying value between the asset sold and the interest
retained, if any, based on their relative fair values at the date of transfer.
For each servicing contract in existence before January 1, 1997, previously
recognized servicing rights and excess servicing receivables that do not exceed
contractually specified servicing are required to be combined, net of any
previously recognized servicing obligations under that contract, as a servicing
asset or liability. Previously recognized servicing receivables that exceed
contractually specified servicing fees are required to be reclassified as
interest-only strip receivables and the allowance for credit losses on loans
sold will be reclassified as a reduction of these receivables.
FAS 125 also requires an assessment of interest-only strips, loans, other
receivables and retained interests in securitizations. If these assets can be
contractually prepaid or otherwise settled such that the holder would not
recover substantially all of its recorded investment, the asset will be measured
like available-for-sale securities or trading securities, under FAS 115. This
assessment is required for financial assets held on or acquired after January 1,
1997.
It is expected that, upon implementation, FAS 125 will require the Company
to record an unrealized gain of approximately $15,000,000.
In May 1995, the FASB issued FAS 122, "Accounting for Mortgage Servicing
Rights" which became effective for years beginning after December 15, 1995. The
adoption of FAS 122 has no material impact on the financial condition or results
of operations of the Company.
10
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Receivables, net
<TABLE>
<CAPTION>
December 31,
---------------------------
1996 1995
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Loans held for sale:
Home Equity Loans $ 548,181 $ 460,310
Commercial Loans 264,655 235,157
Student Loans 187,498 106,413
Auto Loans 38,779 5,842
---------- ----------
1,039,113 807,722
Other 297,832 193,799
Accrued interest 68,884 43,923
---------- ----------
1,405,829 1,045,444
Less allowance for credit losses 19,895 15,591
---------- ----------
$1,385,934 $1,029,853
========== ==========
</TABLE>
Loans Held for Sale
Home Equity Loans
Home Equity Loans held for sale have contractual maturities of up to 30
years. Real property of the borrower is usually pledged as collateral. Home
Equity Loans are generally sold in securitization transactions with servicing
retained.
Commercial Loans
SBA Loans have contractual maturities of up to 25 years. SBA Loans are made
under the Small Business Act and are guaranteed in part by the Federal
government. The guaranteed and unguaranteed portions of SBA Loans are sold in
separate transactions while the Company retains the servicing rights. At
December 31, 1996 and 1995, the unguaranteed portion of SBA Loans held for sale
is $44,829,000 and $85,932,000, respectively.
Small Business Loans have maturities up to 30 years. At December 31, 1996
and 1995, Small Business Loans held for sale are $120,450,000 and $72,577,000,
respectively.
11
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Receivables, net (continued)
Student Loans
Student Loans have varying maturities. Loans are made through the
Guaranteed Student Loan Program and are at least insured 98% by agencies
approved by the United States Department of Education. Student Loans are
generally sold in securitization transactions with servicing retained.
Auto Loans
Auto Loans have contractual maturities up to seven years. The vehicle
purchased by the borrower is pledged as collateral. Auto Loans are generally
sold in securitization transactions with servicing retained.
Other Receivables
Other receivables consist primarily of cash advances made by the Company in
connection with certain securitization transactions designed to protect
investors from losses and repurchased loans.
Allowance for Credit Losses
The activity in the allowance for credit losses is summarized as follows:
<TABLE>
<CAPTION>
As of and for the
years ended December 31,
----------------------------------
1996 1995 1994
--------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Balance, beginning of year $ 140,746 $ 77,863 $ 45,542
Provision for credit losses 145,652 90,723 52,600
Loans charged-off and reclassification to collateral
owned (51,265) (30,118) (20,925)
Recoveries 4,847 2,278 646
--------- --------- --------
Balance, end of year $ 239,980 $ 140,746 $ 77,863
========= ========= ========
Allowance for credit losses $ 19,895 $ 15,591 $ 14,014
Allowance for credit losses on loans sold 220,085 125,155 63,849
--------- --------- --------
$ 239,980 $ 140,746 $ 77,863
========= ========= ========
</TABLE>
12
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Receivables, net (continued)
At December 31, 1996 and 1995, the gross allowance for credit losses on
loans sold was $292,055,000 and $158,424,000, respectively, which was discounted
using risk-free interest rates of 6.80% and 6.34% in 1996 and 1995,
respectively.
As of December 31, 1996 and 1995, loans retained by the Company totaling
$31,602,000 and $35,637,000, respectively, were on non-accrual status.
Serviced Loan Portfolio
The serviced loan portfolio, which consists of loans sold to investors and
loans retained by the Company, is as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1996 1995
----------- ----------
(Dollars in thousands)
<S> <C> <C>
Home Equity Loans $ 8,230,776 $5,751,677
Commercial Loans 2,282,384 1,907,050
Student Loans 1,203,739 845,501
Auto Loans 475,533 117,239
----------- ----------
$12,192,432 $8,621,467
=========== ==========
</TABLE>
(3) Excess Servicing Asset
The activity in the Excess Servicing Asset is summarized as follows:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
1996 1995 1994
--------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Balance, beginning of year $ 524,359 $ 319,605 $ 224,892
Excess Servicing Spread 534,550 342,256 208,156
Amortization (252,524) (137,502) (113,443)
--------- --------- ---------
Balance, end of year $ 806,385 $ 524,359 $ 319,605
========= ========= =========
</TABLE>
13
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Excess Servicing Asset (continued)
The Company discounts the cash flows on the underlying loans sold at a rate
it believes a purchaser would require as a rate of return. The weighted average
rates used to discount the cash flows are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Home Equity Loans 11.3% 11.6% 9.7%
Commercial Loans 10.5% 11.2% 9.4%
Student Loans 8.2% 8.7% 7.7%
Auto Loans 12.0% 12.0% --
</TABLE>
The carrying value of the Excess Servicing Asset is analyzed quarterly by
the Company on a disaggregated basis to determine whether prepayment experience
has had any impact on this carrying value.
The weighted average discount rate used in determining the carrying value
of the Excess Servicing Asset is 11.5%, 11.0% and 10.0% as of December 31, 1996,
1995 and 1994, respectively.
Included in gain on sale of receivables in addition to the Excess
Servicing Spread, is the following: (i) non-refundable fees and premiums on
loans sold; (ii) costs related to the sale of loans; and (iii) gains or losses
on certain transactions structured as an economic hedge that are designed to
minimize risk of interest rate fluctuations. The net amounts of these additions
to gain on sale are $9,901,000, $11,739,000 and $51,757,000 for the years ended
December 31, 1996, 1995 and 1994, respectively.
14
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Property and Equipment, net
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
-------- -------
(Dollars in thousands)
<S> <C> <C>
Land $ 7,296 $ 183
Buildings and improvements 6,182 4,398
Furniture and fixtures 75,085 47,662
Construction in progress (a) 16,182 --
-------- -------
104,745 52,243
Less accumulated depreciation
and amortization 31,287 18,481
-------- -------
$ 73,458 $33,762
======== =======
</TABLE>
(a) Capitalized interest is $803,000 for the year ended December 31, 1996.
(5) Notes Payable
<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1995
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Secured:
Warehouse notes $ 408,244 $ 355,114
Other notes 3,803 628
---------- ----------
412,047 355,742
Unsecured 907,150 720,150
---------- ----------
$1,319,197 $1,075,892
========== ==========
</TABLE>
Secured Notes
The Company has available lines of credit, which are subject to renewal
periodically, for warehousing of loans of $2,600,000,000 at December 31, 1996.
Outstanding borrowings under these credit facilities are collateralized by loans
of $411,682,000 and restricted cash in the amount of $6,083,000 at December 31,
1996. Upon the sale of loans, the notes are repaid.
15
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Notes Payable (continued)
In addition, other secured notes represent capital lease obligations of
$3,803,000 at December 31, 1996. The future minimum lease payments are as
follows: $1,602,000 in 1997, $1,528,000 in 1998, $637,000 in 1999, $464,000 in
2000 and $35,000 in 2001. Included in the above amounts is $463,000 representing
interest.
The following table presents data on warehouse notes payable:
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------
1996 1995 1994
----------- ----------- ------------
(Dollars in thousands)
<S> <C> <C> <C>
Weighted average interest rate for
the year 7.1% 7.7% 5.6%
Weighted average interest rate at
end of year 7.5% 6.6% 6.4%
Average amount outstanding for
the year $ 799,282 $ 548,733 $ 255,789
Maximum amount outstanding
at any month end $ 1,281,698 $ 916,426 $ 411,577
</TABLE>
Unsecured Notes
Unsecured notes at December 31, 1996 and 1995 included senior notes of
$637,000,000 and $655,000,000, respectively. The Company is required to pay
principal of $112,000,000 in 1997, $40,000,000 in 1998, $190,000,000 in 1999,
$110,000,000 in 2000, $35,000,000 in 2001 and $150,000,000 in 2002.
On August 16, 1996, the Company entered into a $400,000,000 unsecured
revolving credit facility (the "Credit Facility") which expires August 16, 1999.
At December 31, 1996 outstanding advances under the Credit Facility were
$250,000,000.
In addition, unsecured notes payable include bank loans due within one year
of $20,150,000 and $65,150,000 at December 31, 1996 and 1995, respectively.
The Company is required to comply with various operating and financial
covenants defined in the agreements governing the issuance of the senior notes.
In addition, the Credit Facility and certain of the Company's warehouse notes
incorporate the restriction contained in the senior notes or otherwise contain
similar restrictions. The covenants restrict the payment of certain
distributions including dividends. At December 31, 1996, the Company had
available $296,704,000 for the payment of such distributions under the most
restrictive of such covenants.
16
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Notes Payable (continued)
Costs incurred in connection with the issuance of the unsecured notes have
been deferred and are being amortized over the terms of the respective notes
using the straight line method. At December 31, 1996 and 1995, the unamortized
debt issuance cost is $4,875,000 and $5,473,000, respectively.
The following table presents data on unsecured notes payable:
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
Weighted average interest rate for
the year 8.2% 8.7% 8.3%
Weighted average interest rate at
end of year 7.8% 8.6% 8.7%
Average amount outstanding for
the year $ 822,833 $ 561,483 $ 279,562
Maximum amount outstanding
at any month end $ 1,010,150 $ 720,150 $ 405,150
</TABLE>
(6) Subordinated Debt
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
------- -------
(Dollars in thousands)
<S> <C> <C>
12% due December 31, 1996 (a) $ -- $22,000
7.8% due September 2, 1997 2,000 2,000
------- -------
$ 2,000 $24,000
======= =======
</TABLE>
(a) The notes provide for semi-annual interest payments and annual principal
payments of $11,000,000. The Company had an $11,000,000 payment due on
December 31, 1995 (not a business day) which was paid on January 2, 1996.
17
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) Subordinated Debt (continued)
In connection with the above notes, the Company is required to comply with
various operating and financial covenants as defined in the respective
agreements governing the issuance of the notes.
Costs incurred in connection with the issuance of the notes are deferred
and amortized over the terms of the respective notes using the straight line
method. The subordinated debt issuance cost is fully amortized at December 31,
1996 and at December 31, 1995, the unamortized subordinated debt issuance cost
is $434,000.
(7) Accounts Payable and Other Liabilities
Accounts payable and other liabilities includes $246,018,000 and
$163,179,000 at December 31, 1996 and 1995, respectively, of funds collected on
loans sold and serviced for others. The Company is responsible for the
collection of principal and interest which is remitted primarily in the month
following collection.
(8) Employee Benefit Plans
Defined Contribution Plan
The Company has a defined contribution plan (401(k)) for all eligible
employees. Contributions to the plan are in the form of employee salary
deferrals which may be subject to employer matching contributions up to a
specified limit. In addition, the Company may make an annual profit sharing
contribution on behalf of its employees. The Company's cost for the plan, net of
reallocated forfeitures, amounted to $4,851,000, $3,479,000 and $3,176,000 for
the years ended December 31, 1996, 1995 and 1994, respectively.
Profit Sharing Plan
The Company has a non-qualified profit sharing plan for certain employees.
Contributions to this plan are based on a percentage of pretax profits. The
Company's cost of the plan amounted to $8,771,000, $4,391,000 and $3,337,000 for
the years ended December 31, 1996, 1995 and 1994, respectively.
Pension Plan
The Company has a non-qualified, unfunded pension benefit plan. The purpose
of the plan is to supplement the existing employee benefit plans for certain key
executives. The benefits are based upon years of service and the employee's
highest average compensation as defined.
18
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Employee Benefit Plans (continued)
The following table sets forth the plan's status and amounts recognized in
the Company's consolidated financial statements:
<TABLE>
<CAPTION>
December 31,
--------------------
1996 1995
------- -------
(Dollars in thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $ 1,350 $ 1,262
Non-vested 1,979 1,758
------- -------
Accumulated benefit obligation 3,329 3,020
Effect of projected future compensation levels 94 146
------- -------
Projected benefit obligation 3,423 3,166
Unrecognized prior service cost (1,859) (2,069)
Unrecognized net gain (loss) 53 (16)
Additional minimum liability 1,712 1,939
------- -------
Total pension liability $ 3,329 $ 3,020
======= =======
</TABLE>
In determining the projected benefit obligation for the year ended December
31, 1996, the discount rate was 7.5% pre-retirement and 7.0% post-retirement.
For the year ended December 31, 1995, the discount rate was 7.0% for
pre-retirement and post-retirement. The rate of increase in the future
compensation levels was 4.0% in 1996 and 1995.
19
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Employee Benefit Plans (continued)
Net periodic pension cost includes the following components:
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Service cost $105 $144 $136
Interest cost on projected benefit obligation 222 206 174
Net amortization and deferral 210 210 211
---- ---- ----
Net periodic pension cost $537 $560 $521
==== ==== ====
</TABLE>
In determining the net periodic pension cost for the year ended December
31, 1996, the discount rate was 7.0% pre-retirement and post-retirement. For the
year ended December 31, 1995, the discount rate was 7.5% pre-retirement and 7.0%
post-retirement. The rate of increase in the future compensation levels was 4.0%
in 1996 and 1995. For the year ended December 31, 1994, the discount rate was
7.0% and the rate of increase in the future compensation levels was 4.0%.
Stock Option Plans
The Company's 1991 Stock Option Plan, as amended on April 15, 1993, and the
1995 Stock Incentive Plan dated August 15, 1995 (collectively the "Plans")
provide for a total of 5,484,375 shares for issuance.
Options granted under the Plans may be incentive stock options or
non-qualified stock options. The exercise price of both types of options will be
equal to 100% of the fair market value of the shares on the date of the grant.
20
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Employee Benefit Plans (continued)
Twenty percent of the options initially granted under the Plans are
exercisable by the holder one year after the date of grant, with an additional
20% of the options exercisable on the anniversary date of the grant for the next
four years. No options shall be granted under the 1991 Stock Option Plan or the
1995 Stock Incentive Plan after September 15, 2001 and August 15, 2005,
respectively. Changes in options outstanding are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------------------------------------------------------------
1996 1995 1994
----------------------------- ----------------------------- ----------------------------
Number of Weighted-Average Number of Weighted-Average Number of Weighted-Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year 3,168,090 $ 9.54 2,261,732 $ 4.27 794,996 $ 2.84
Options granted 983,091 24.01 1,697,909 14.16 1,466,736 5.05
Options canceled (276,605) 15.34 (241,376) 6.23 -- --
Options exercised (523,350) 6.13 (550,175) 3.57 -- --
--------- --------- ---------
Options outstanding at
end of year 3,351,226 13.95 3,168,090 9.54 2,261,732 4.27
========= ========= =========
Options exercisable 521,750 7.62 530,000 3.77 477,000 2.84
========= ========= =========
</TABLE>
21
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Employee Benefit Plans (continued)
<TABLE>
<CAPTION>
Weighted-
Weighted- Average
Average Remaining
Number of Exercise Contracted
Shares Price Life (in years)
------------- -------------- --------------
<S> <C> <C> <C>
Exercise prices:
$2.84
Options outstanding 195,249 $ 2.84 --
Options exercisable 195,249 2.84
$4.83 - $7.07
Options outstanding 1,133,940 5.47 3.2
Options exercisable 167,936 5.44
$9.57
Options outstanding 22,500 9.57 4.0
Options exercisable 4,500 9.57
$15.90 - $22.25
Options outstanding 1,508,287 17.76 4.3
Options exercisable 154,065 15.99
$25.00 - $26.69
Options outstanding 491,250 25.63 5.0
Options exercisable -- --
</TABLE>
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, Accounting for Stock-Based Compensation ("FAS 123"). This Statement
establishes a new fair value based accounting method for stock-based
compensation plans and encourages (but does not require) employers to adopt the
new method in place of the provisions of Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees ("APB 25"). Companies may continue
to apply the accounting provisions of APB 25 in determining net income; however,
they must apply the disclosure requirements of FAS 123 for all grants issued
after 1994. The Company elected to continue to apply the provisions of APB 25 in
accounting for the employee stock plans described above. Accordingly, no
compensation cost has been recognized.
22
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Employee Benefit Plans (continued)
Had compensation cost for these employee stock plans been determined
based on the new fair value method under FAS 123, the Company's net income and
net income per share would have been reduced based on the month of grant to the
pro forma amounts indicated as follows:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1996 1995
---- ----
(Dollars in thousands, except per share data)
<S> <C> <C>
Net income:
As reported $ 85,655 $ 48,715
Pro forma (1) 83,677 48,058
Net income per common share:
Primary:
As reported $ 1.44 $ 0.95
Pro forma (1) 1.41 0.94
Fully diluted:
As reported 1.41 0.95
Pro forma (1) 1.38 0.94
</TABLE>
(1) The pro forma amounts noted above only reflect the effects of stock-based
compensation grants made after 1994. Because stock options are granted each
year and generally vest over five years, these pro forma amounts may not
reflect the full effect of applying the (optional) fair value method
established by FAS 123 that would be expected if all outstanding stock
option grants were accounted for under this method.
The fair value of each option grant is estimated based on the date of
grant. In determining the fair value, the Company used a modified Black-Scholes
option-pricing model. For the fixed stock option plans, the following
weighted-average assumptions are used for 1996 and 1995, respectively: expected
dividend yield of 0.35% and 0.45%; expected volatility of 46.34% and 45.45%;
risk-free interest rates of 6.41% and 5.96%; and expected lives of five for both
years. The weighted-average grant-date fair value of options granted are $11.44
and $6.56 for the years ended December 31, 1996 and 1995, respectively.
23
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Income Taxes
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------
1996 1995 1994
------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Current $10,998 $20,888 $ 5,269
Deferred 47,887 13,430 16,437
------- ------- -------
$58,885 $34,318 $21,706
======= ======= =======
</TABLE>
A reconciliation between the expected Federal income tax expense and the
actual income tax expense is as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
1996 1995 1994
-------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Income before income taxes $144,540 $83,033 $53,027
Statutory Federal income tax rate 35% 35% 35%
-------- ------- -------
Computed expected income tax expense 50,589 29,062 18,559
State income taxes net of Federal income
tax benefit 8,296 5,256 3,147
-------- ------- -------
$ 58,885 $34,318 $21,706
======== ======= =======
</TABLE>
At December 31, 1996, the Company has state net operating loss
carryforwards available of $13,150,000, expiring on various dates through 2011.
24
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Income Taxes (continued)
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities is as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
-------- --------
(Dollars in thousands)
<S> <C> <C>
Deferred tax assets:
Provision for credit losses $ 98,993 $ 59,270
Interest on non-performing loans 12,307 6,864
Other 8,806 4,542
-------- --------
120,106 70,676
-------- --------
Deferred tax liabilities:
Gain on sale of receivables 253,587 159,153
Depreciation and amortization 2,883 --
-------- --------
256,470 159,153
-------- --------
Net deferred tax liability $136,364 $ 88,477
======== ========
</TABLE>
Management believes it is more likely than not that the Company will
realize the benefit of deferred tax assets and that such assets will reverse
during periods in which the Company generates net taxable income and reversal of
deferred tax liabilities.
25
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Commitments, Contingencies and Concentrations of Credit Risk
The Company is obligated under noncancellable operating leases for property
and equipment expiring at various dates through 2001. Minimum annual rental
payments at December 31, 1996, are as follows (dollars in thousands):
1997 $ 13,611
1998 11,535
1999 8,052
2000 3,827
2001 926
--------
$ 37,951
========
Rent expense amounted to $14,470,000, $10,113,000 and $7,201,000 for
the years ended December 31, 1996, 1995 and 1994, respectively.
The Company began development of an office building located in West
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 $85,000,000. The capitalized expenditures
including interest through December 31, 1996 are $23,295,000. The 400,000 square
foot building will help to centralize operations and support additional staff
from the anticipated growth of the business.
The Company has provided revolving credit facilities to various originators
of home equity loans. These facilities provide the originators with warehouse
financing prior to the sale of loans, usually to the Company. These agreements,
which are subject to renewal periodically, bear interest at rates between prime
plus 2.00% and 2.50% and are collateralized by the loans. Upon sale of the
loans, the advances are repaid. At December 31, 1996, the Company has made
available to originators, lines of credit of approximately $141,000,000. At
December 31, 1996 and 1995 advances outstanding were $8,291,000 and $6,447,000,
respectively, and are included in other receivables. The weighted average
amounts outstanding under these credit agreements were $11,192,000 and
$2,370,000 for the years ended December 31, 1996 and 1995, respectively.
In certain securitization transactions, the Company subordinates a portion
of its interest in excess cash flows to investors. The investors' protection
from losses is provided by the subordination of the Company's cash flows
including various combinations of cash deposits provided by the Company,
subordination accounts and credit enhancements provided by third parties. At
December 31, 1996, $163,996,000 of cash deposits held in interest-bearing
accounts are restricted, and $228,046,000 is advanced in connection with
subordination accounts. In senior subordinated structures, the senior
certificate holders are protected from losses by outstanding subordinated
certificates and credit enhancements provided by third parties.
26
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Commitments, Contingencies and Concentrations of Credit Risk (continued)
In an attempt to minimize the risk of interest rate fluctuations, one of
the strategies employed by the Company is to enter into pre-funding arrangements
in connection with securitization transactions that allow it to sell loans in
the future at an agreed upon price. At December 31, 1996, under the terms of the
agreements the Company had the right to deliver $176,716,000 of Home Equity
Loans, $31,679,000 of SBA Loans, $30,071,000 of Student Loans, and $49,913,000
of Auto Loans, within approximately 90 days of such date.
In addition, the Company from time to time purchases and sells government
securities at agreed upon prices as an economic hedge. Losses on these
transactions, which are included in gain on sale of receivables, amounted to
$1,435,000 and $5,110,000 for the years ended December 31, 1996 and 1995,
respectively. There were no purchases or sales during 1994.
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 loans receivable which are not included in
the accompanying consolidated financial statements. 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 $57,562,000 of Home Equity Loans at December 31, 1996,
which the Company may be required to repurchase in the future should such loans
become more than 90 days past due.
The Company's serviced loan portfolio is widely dispersed. At December 31,
1996, loans to borrowers in the State of California accounted for approximately
20% of the total serviced loan portfolio, while no other state accounted for
more than 9%.
In the normal course of business, the Company is subject to various legal
proceedings and claims, the resolution of which will not, in management's
opinion, have a material adverse effect on the consolidated financial position
or results of operations of the Company.
(11) Related Party Transactions
The Company leases corporate administrative offices in New Jersey from a
joint venture which includes a general partnership, whose partners are
shareholders and executive officers of the Company. The annual rent under this
lease, which expires in 2000, is subject to certain adjustments, and was
approximately $1,184,000 for the year ended December 31, 1996 and $1,200,000 for
the years ended December 31, 1995 and 1994.
27
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(12) Other Operating Expenses
Other operating expenses include the following:
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------
1996 1995 1994
-------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Advertising $ 52,227 $ 38,290 $40,318
Depreciation and amortization 15,630 8,446 5,475
Loan expenses 18,383 11,457 8,126
Office, stationery and supplies 41,471 27,172 15,353
Professional fees 16,417 6,529 4,382
Occupancy costs 14,470 10,113 7,201
Other expenses 35,500 21,387 15,333
-------- -------- -------
$194,098 $123,394 $96,188
======== ======== =======
</TABLE>
(13) Shareholders' Equity
In May 1996, the shareholders of the Company approved the increase in
authorized shares of the Company from 100,000,000 shares to 250,000,000 shares
of common stock.
In March 1996, the Company sold 5,937,500 shares of common stock for $21.50
per share, the net proceeds of which amounted to $122,128,000.
In November 1996, the Company sold 5,215,000 shares of $1.72 mandatory
convertible preferred stock for $26.50 per share, the net proceeds of which
amounted to $133,363,000. Each share will pay an annual dividend of $1.72 per
share, will be convertible at the option of the holder into 0.833 shares of
common stock and will automatically convert on December 1, 1999 into common
stock. The mandatory conversion rate, based on a formula, will range from 0.833
to 1.000 shares of common stock per share.
28
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Fair Values of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" ("FAS 107"), requires disclosure of fair
value information about financial instruments, whether or not recognized in the
statement of financial condition. Fair values are based on estimates using
present value or other valuation techniques in cases where quoted market prices
are not available. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. FAS 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Company.
Estimated fair values, carrying values and various methods and assumptions
used in valuing the Company's financial instruments are set forth below:
<TABLE>
<CAPTION>
December 31,
------------
1996 1995
--------------------------- ---------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
------------ ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents (a) $ 321,703 $ 321,703 $ 178,781 $ 178,781
Receivables (b) 1,405,829 1,479,000 1,045,444 1,100,000
Excess Servicing Asset (c) 806,385 822,000 524,359 603,000
Financial Liabilities:
Notes payable (excluding senior notes) (d) 682,197 682,197 420,892 420,892
Unsecured - senior notes (d) 637,000 648,000 655,000 693,000
Subordinated debt (e) 2,000 2,000 24,000 25,000
</TABLE>
(a) The carrying value of cash and cash equivalents is considered to be a
reasonable estimate of fair value.
(b) Since it is the Company's business to sell loans it originates, the fair
values were estimated using current investor yields or outstanding
commitments from investors. The fair value for non-performing loans was
based upon recent appraisals of collateral securing such loans. Included in
the carrying value and estimated fair value of receivables is the
mark-to-market effect of any open economic hedge transactions, which were
insignificant at December 31, 1996 and 1995.
(c) The fair value was estimated by discounting future cash flows using rates
available for instruments with similar terms and remaining maturities. In
determining the fair value, assumed prepayments utilized by the Company
were not significantly different from the Company's actual prepayment
experience.
(d) Warehouse and unsecured notes (excluding the senior notes) generally have
original maturities of less than 90 days; and therefore, the carrying value
is a reasonable estimate of fair value. Term notes are generally adjustable
rate and indexed to the prime rate, therefore, carrying value is a
reasonable estimate of fair value. The fair value of the senior notes was
estimated based on rates currently available for debt with similar terms
and remaining maturities.
(e) Fair value was estimated based on rates currently available for debt with
similar terms and remaining maturities.
29
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Fair Values of Financial Instruments (continued)
The fair value estimates made at December 31, 1996 and 1995, were based
upon pertinent market data and relevant information about the financial
instruments at that time. These estimates do not reflect any premium or discount
that could result from offering for sale at one time the entire portion of the
financial instrument. Because no market exists for a portion of the financial
instruments, fair value estimates may be based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments and other factors. These estimates are subjective
in nature and involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
Fair value estimates are based on existing on-and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. For instance, the Company has certain fee-generating
business lines (e.g., its loan servicing operations) that were not considered in
these estimates since these activities are not financial instruments. In
addition, the tax implications related to the realization of the unrealized
gains and losses can have a significant effect on fair value estimates and have
not been considered in any of the estimates.
30
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(15) Selected Quarterly Data (unaudited)
The following represents selected quarterly financial data of the Company,
which, in the opinion of management, reflects adjustments (comprising only
normal recurring adjustments) necessary for fair presentation.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------
March 31, June 30, September 30, December 31,
----------- ----------- ------------ -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
1996
- ----
Revenues $ 154,748 $ 178,372 $ 202,184 $ 243,358
Income before income taxes 23,734 31,667 38,057 51,082
Net income 14,204 18,897 22,720 29,834
Net income per common share - primary $ 0.27 $ 0.32 $ 0.38 $ 0.49
Weighted average number of common shares
outstanding - primary 52,738,400 59,399,392 59,090,793 59,385,914
Net income per common share - fully diluted $ 0.27 $ 0.32 $ 0.38 $ 0.48
Weighted average number of common shares
outstanding - fully diluted 52,738,400 59,399,392 59,346,543 62,235,498
1995
- ----
Revenues $ 91,758 $ 112,665 $ 145,261 $ 160,874
Income before income taxes 12,344 18,182 22,514 29,993
Net income 7,244 10,766 13,233 17,472
Net income per common share $ 0.14 $ 0.21 $ 0.26 $ 0.34
Weighted average number of common shares outstanding 50,805,206 50,899,050 51,096,575 51,287,503
</TABLE>
31
<PAGE>
THE MONEY STORE INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(16) Subsidiary Guarantors
The Company has filed with the Securities and Exchange Commission a
preliminary prospectus supplement with respect to a possible offering off the
Company's shelf registration statement of $250,000,000 of Senior Notes, a
portion of which will be due in 2002 and the remainder in 2004. The Senior Notes
will constitute unsecured and unsubordinated senior indebtedness of the Company.
The Senior Notes will be fully and unconditionally guaranteed (the "Subsidiary
Guarantees") on a senior unsecured, joint and several, basis by certain of the
Company's wholly-owned subsidiaries (the "Guarantors"), although the Subsidiary
Guarantees may terminate prior to maturity of the Senior Notes upon the
occurrence of certain circumstances. The Subsidiary Guarantees will rank equally
in right of payment, on a pari passu basis, with all existing and future
unsecured and unsubordinated indebtedness and guarantees of the Guarantors.
The ability of the Company's subsidiaries to pay dividends or make payments on
intercompany indebtedness will be subject to applicable state laws.
The following consolidating condensed financial data illustrate the
composition of the combined Guarantors. The Company believes that providing the
condensed consolidating information is of material interest to potential
investors in the Senior Notes and has not presented separate financial
statements for each of the Guarantors, because it was deemed that such financial
statements would not provide potential investors with any material additional
information.
Investments in subsidiaries are accounted for by the parent and
Subsidiary Guarantors on the equity method for the purposes of the consolidating
financial data. Earnings of subsidiaries are therefore reflected in the parent's
and Subsidiary Guarantor's investment accounts and earnings. The principal
elimination entries eliminate investments in subsidiaries and intercompany
balances and transactions. Certain sums in the following tables reflect
immaterial rounding differences.
32
<PAGE>
The Money Store Inc. and Subsidiaries
Consolidating Statements of Financial Condition
December 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
----------- --------------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
------
Cash and cash equivalents $ 194,532 $ (40,968) $ 168,139 $ - $ 321,703
Receivables, net 964,259 421,675 1,385,934
Excess servicing asset 806,385 806,385
Investment in subsidiaries 367,246 2,684 (369,930)
Property and equipment, net 71,636 1,822 73,458
Other 5,204 18,516 825 - 24,545
----------- ---------- ----------- ----------- -----------
$ 566,982 $1,016,127 $ 1,398,846 $ (369,930) $ 2,612,025
=========== ========== =========== =========== ===========
Liabilities and Shareholders' Equity
- -------------------------------------
Liabilities:
Notes payable $ 1,315,394 $ 3,803 $ - $ - $ 1,319,197
Income taxes, principally deferred (20,568) 147,545 20,220 147,197
Due to (from) parent and affiliates (1,334,279) 49,564 1,284,787 (72)
Allowance for credit losses on
loans sold 217,681 2,404 220,085
Unearned insurance commissions 7,754 7,754
Other 21,926 303,207 8,150 333,283
------------ ---------- ---------- ----------- -----------
(17,527) 729,554 1,315,561 (72) 2,027,516
------------ ---------- ---------- ----------- -----------
Subordinated debt 2,000 2,000
------------ ---------- ---------- ----------- -----------
Shareholders' equity:
Preferred stock 133,363 133,363
Common stock 188,276 20,413 3,190 (23,603) 188,276
Additional paid-in capital 9,103 47,897 (57,000)
Retained earnings 260,870 257,057 32,198 (289,255) 260,870
------------ ---------- ---------- ----------- ------------
582,509 286,573 83,285 (369,858) 582,509
------------ ---------- ---------- ----------- ------------
$ 566,982 $1,016,127 $1,398,846 $ (369,930) $ 2,612,025
============ ========== ========== =========== ============
</TABLE>
33
<PAGE>
The Money Store Inc. and Subsidiaries
Consolidating Statements of Financial Condition
December 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
Assets ----------- ------------ ------------ ------------ ------------
------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 168,367 $ (61,392) $ 71,807 $ - $ 178,781
Receivables, net 274 799,295 230,283 1,029,853
Excess servicing asset 524,359 524,359
Investment in subsidiaries 250,991 1,290 (252,281)
Property and equipment, net 32,208 1,554 33,762
Other 7,736 16,559 1,198 25,493
----------- ---------- ----------- ----------- ----------
$ 427,368 $ 787,960 $ 829,201 $ (252,281) $1,792,248
=========== ========== =========== =========== ==========
Liabilities and Shareholders' Equity
- ------------------------------------
Liabilities:
Notes payable $ 1,075,264 $ 628 $ - $ - $1,075,892
Income taxes, principally deferred (15,040) 97,233 12,735 94,928
Due to (from) parent and affiliates (919,133) 157,531 761,674 (73)
Allowance for credit losses on loans sold 123,652 1,503 125,155
Unearned insurance commissions 4,704 4,704
Other 21,151 198,025 7,267 226,443
----------- ---------- ----------- ----------- ----------
162,242 581,774 783,179 (73) 1,527,122
----------- ---------- ----------- ----------- ----------
Subordinated debt 24,000 24,000
----------- ---------- ----------- ----------- ----------
Shareholders' equity:
Preferred stock
Common stock 59,603 20,413 3,190 (23,603) 59,603
Additional paid-in capital 3,503 22,897 (26,400)
Retained earnings 181,523 182,270 19,935 (202,205) 181,523
----------- ---------- ----------- ----------- ----------
241,126 206,186 46,022 (252,208) 241,126
----------- ---------- ----------- ----------- ----------
$ 427,368 $ 787,960 $ 829,201 $ (252,281) $1,792,248
=========== ========== =========== =========== ==========
</TABLE>
34
<PAGE>
The Money Store Inc. and Subsidiaries
Consolidating Statements of Income
Year ended December 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Gain on sale of receivables $ 297 $ 520,915 $ 23,239 $ - $ 544,451
Finance income, fees earned and other 5,840 198,975 29,396 234,211
----------- ----------- ---------- ----------- -----------
6,137 719,890 52,635 778,662
----------- ----------- ---------- ----------- -----------
Expenses:
Operating expenses 4,814 338,922 20,658 364,394
Provision for credit losses 144,749 903 145,652
Interest 1,323 112,093 10,660 124,076
----------- ----------- ---------- ----------- -----------
6,137 595,763 32,222 634,122
----------- ----------- ---------- ----------- -----------
Income (loss) before income taxes and
undistributed income of subsidiaries 124,127 20,413 144,540
Income taxes 50,681 8,204 58,885
Equity in undistributed income of
subsidiaries 85,655 1,414 (87,069) -
----------- ----------- ---------- ----------- -----------
Net income (loss) $ 85,655 $ 74,860 $ 12,209 $ (87,069) $ 85,655
=========== =========== ========== =========== ===========
</TABLE>
35
<PAGE>
The Money Store Inc. and Subsidiaries
Consolidating Statements of Income
Year ended December 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------- -------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Gain on sale of receivables $ - $ 331,257 $ 22,738 $ $ 353,995
Finance income, fees earned and
other 6,363 133,430 16,770 156,563
--------- -------------- ------------- ------------ ------------
6,363 464,687 39,508 510,558
--------- -------------- ------------- ------------ ------------
Expenses:
Operating expenses 6,361 219,549 16,908 242,817
Provision for credit losses 90,295 428 90,723
Interest 2 82,438 11,544 93,985
--------- -------------- ------------- ------------ ------------
6,363 392,282 28,880 427,525
--------- -------------- ------------- ------------ ------------
Income (loss) before income taxes and
undistributed income of subsidiares 72,405 10,629 83,033
Income taxes 30,370 3,948 34,318
Equity in undistributed income of
subsidiaries 48,715 1,347 (50,062)
--------- -------------- ------------- ------------ ------------
Net income (loss) $ 48,715 $ 43,382 $ 6,680 $ (50,062) $ 48,715
========= ============== ============= ============ ============
</TABLE>
36
<PAGE>
The Money Store Inc. and Subsidiaries
Consolidating Statements of Income
Year ended December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Gain on sale of receivables $ - $229,569 $ 30,344 $ $ 259,913
Finance income, fees earned and other 2,208 55,562 12,786 70,557
------- -------- --------- -------- -----------
2,208 285,131 43,130 330,470
------- -------- --------- -------- -----------
Expenses:
Operating expenses 2,281 165,088 14,415 181,784
Provision for credit losses 51,492 1,108 52,600
Interest 38,395 4,664 43,059
------- -------- --------- -------- -----------
2,281 254,975 20,187 277,443
------- -------- --------- -------- -----------
Income (loss) before income taxes and
undistributed income of subsidiares (73) 30,157 22,943 53,027
Income taxes (90) 12,125 9,671 21,706
Equity in undistributed income of
subsidiaries 31,304 168 (31,472) -
------- -------- --------- -------- ---------
Net income (loss) $31,321 $ 18,200 $13,272 $(31,472) $31,321
======= ======== ========= ======== =========
</TABLE>
37
<PAGE>
The Money Store Inc. and Subsidiaries
Consolidating Statements of Cash Flows
Year ended December 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $85,655 $ 74,860 $ 12,209 $ (87,069) $ 85,655
Adjustments to reconcile net income to net
cash used in operations:
Equity in undistributed income of subsidiaries (85,655) (1,414) - 87,069 -
Depreciation & amortization 2,499 12,702 429 - 15,630
Provision for deferred income taxes - 41,912 5,975 - 47,887
Provision for credit losses - 144,749 903 145,652
Net change in operating assets and liabilities:
Proceeds from loans sold - 5,061,776 387,464 5,449,240
Loans originated & purchased - (5,234,595) (458,459) (5,693,054)
Loans repurchased - (6,971) - (6,971)
(Increase) decrease in other receivables 274 (36,596) (120,371) (156,693)
Excess Servicing Spread - - (534,550) (534,550)
Amortization of Excess Servicing Asset - - 252,524 252,524
Increase (decrease) in accounts payable and
other liabilities (5,556) 34,624 (5,067) 24,001
Other, net 5,091 4,248 1,897 11,236
-------- ------------ ------------- ------------ ------------
Net cash used in operating activities 2,308 95,295 (457,046) - (359,443)
-------- ------------ ------------- ------------ ------------
Cash flows from investing activities:
Purchase of property and equipment - (47,915) (697) (48,612)
Investment in and advances to subsidiaries (444,943) (103,128) 548,071 -
-------- ------------- -------------- ------------ -------------
Net cash used in investing activities (444,943) (151,043) 547,374 - (48,612)
-------- ------------- -------------- ------------ -------------
Cash flows from financing activities:
Net increase in credit facilities 303,131 (716) - 302,415
Proceeds from unsecured senior notes 20,000 - - 20,000
Principal payments on unsecured senior notes (83,000) - - (83,000)
Principal payments on subordinated debt (22,000) - - (22,000)
Debt issuance costs (1,467) - 54 (1,413)
Net increase in collections payable - 76,889 5,950 82,839
Net proceeds from issuance of preferred stock 133,363 - - 133,363
Net proceeds from issuance of common stock 122,128 - - 122,128
Proceeds from exercised stock options 2,953 - - 2,953
Dividends paid (6,308) - - (6,308)
-------- ------------ ------------- ------------ ------------
Net cash provided by financing activities 468,800 76,173 6,004 - 550,977
-------- ------------ ------------- ------------ ------------
Net increase (decrease) in cash and cash
equivalents 26,165 20,425 96,332 142,922
Cash and cash equivalents at beginning of year 168,367 (61,393) 71,807 178,781
--------- ------------ ------------- ------------ --------------
Cash and cash equivalents at the end of year $ 194,532 $ (40,968) $ 168,139 $ _ $ 321,703
========= ============== ============== ============ ==============
</TABLE>
38
<PAGE>
The Money Store Inc. and Subsidiaries
Consolidating Statements of Cash Flows
Year ended December 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 48,715 $ 43,382 $ 6,680 $ (50,062) $ 48,715
Adjustments to reconcile net income to net
cash used in operations:
Equity in undistributed income of subsidiaries (48,715) (1,347) - 50,062 -
Depreciation & amortization 1,888 6,234 324 - 8,446
Provision for deferred income taxes - 9,798 3,632 - 13,430
Provision for credit losses - 90,295 428 90,723
Net change in operating assets and liabilities:
Proceeds from loans sold - 3,129,486 379,338 3,508,824
Loans originated & purchased - (3,453,842) (369,129) (3,822,971)
Loans repurchased - (9,059) - (9,059)
(Increase) decrease in other receivables (191) (23,727) (73,527) (97,445)
Excess Servicing Spread - - (342,256) (342,256)
Amortization of Excess Servicing Asset - - 137,502 137,502
Increase (decrease) in accounts payable and
other liabilities 14,954 4,940 (1,425) 18,469
Other, net (2,198) 10,302 (862) 7,242
----------- ------------ ------------- ------------ -------------
Net cash used in operating activities 14,453 (193,538) (259,295) - (438,380)
----------- ------------ ------------- ------------ -------------
Cash flows from investing activities:
Purchase of property and equipment - (16,684) (782) (17,466)
Investment in and advances to subsidiaries (387,909) 114,748 273,161 -
----------- ------------ ------------- ------------ -------------
Net cash used in investing activities (387,909) 98,064 272,379 - (17,466)
----------- ------------ ------------- ------------ -------------
Cash flows from financing activities:
Net increase in credit facilities 99,859 (387) - 99,472
Proceeds from unsecured senior notes 300,000 - - 300,000
Principal payments on unsecured senior notes - - - -
Principal payments on subordinated debt - - - -
Debt issuance costs (2,902) - - (2,902)
Net increase in collections payable - 79,009 (392) 78,617
Net proceeds from issuance of preferred stock - - - -
Net proceeds from issuance of common stock - - - -
Proceeds from exercised stock options 1,640 - - 1,640
Dividends paid (3,492) - - (3,492)
----------- ------------ ------------- ------------ -------------
Net cash provided by financing activities 395,105 78,622 (392) - 473,335
----------- ------------ ------------- ------------ -------------
Net increase (decrease) in cash and cash equivalents 21,649 (16,852) 12,692 17,489
Cash and cash equivalents at beginning of year 146,718 (44,541) 59,115 161,292
----------- ------------ ------------- ------------ -------------
Cash and cash equivalents at the end of year $ 168,367 $ (61,393) $ 71,807 $ - $ 178,781
=========== ============ ============= ============ ============
</TABLE>
39
<PAGE>
The Money Store Inc. and Subsidiaries
Consolidating Statements of Cash Flows
Year ended December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 31,321 $ 18,200 $ 13,272 $ (31,472) $ 31,321
Adjustments to reconcile net income to net
cash used in operations:
Equity in undistributed income of subsidiaries (31,304) (168) - 31,472 -
Depreciation & amortization 1,626 3,616 233 5,475
Provision for deferred income taxes - 7,282 9,155 16,437
Provision for credit losses - 51,492 1,108 52,600
Net change in operating assets and liabilities:
Proceeds from loans sold - 2,530,597 285,814 2,816,411
Loans originated & purchased - (2,433,443) (345,965) (2,779,408)
Loans repurchased - (14,314) - (14,314)
(Increase) decrease in other receivables (83) (110,076) 43 (110,116)
Excess Servicing Spread - - (208,156) (208,156)
Amortization of Excess Servicing Asset - - 113,443 113,443
Increase (decrease) in accounts payable and
other liabilities 8,844 1,421 (79) 10,186
Other, net 78 (1,778) 764 (936)
----------- ------------ ------------- ------------ -------------
Net cash used in operating activities 10,482 52,829 (130,368) - (67,057)
----------- ------------ ------------- ------------ -------------
Cash flows from investing activities:
Purchase of property and equipment - (14,891) (596) (15,487)
Payment for purchase of home improvement
loan company, net of cash acquired - (2,748) (2,748)
Investment in and advances to subsidiaries (88,838) (57,426) 146,264 -
----------- ------------ ------------- ------------ -------------
Net cash used in investing activities (88,838) (75,065) 145,668 - (18,235)
----------- ------------ ------------- ------------ -------------
Cash flows from financing activities:
Net increase in credit facilities 24,211 573 - 24,784
Proceeds from unsecured senior notes 150,000 - - 150,000
Principal payments on unsecured senior notes - - - -
Principal payments on subordinated debt (17,000) - - (17,000)
Debt issuance costs (2,169) - - (2,169)
Net increase in collections payable - 7,240 (578) 6,662
Net proceeds from issuance of preferred stock - - -
Net proceeds from issuance of common stock - - -
Proceeds from exercised stock options - - - -
Dividends paid (2,371) - - (2,371)
----------- ------------ ------------- ------------ -------------
Net cash provided by financing activities 152,671 7,813 (578) - 159,906
----------- ------------ ------------- ------------ -------------
Net increase (decrease) in cash and cash equivalents 74,315 (14,423) 14,722 74,614
Cash and cash equivalents at beginning of year 72,403 (30,118) 44,393 86,678
----------- ------------ ------------- ------------ -------------
Cash and cash equivalents at the end of year $ 146,718 $ (44,541) $ 59,115 $ - $ 161,292
=========== ============ ============= ============ ============
</TABLE>
40
