SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
(Mark One)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended _____________March 31, 1996____________
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES
EXCHANGE ACT OF 1934
For the transition period from____________________ to ______________
Commission file number ________0-26015____________
CRW Financial, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 23-2691986
- - --------------------------------------- ------------------
(State or other jurisdiction or (I.R.S. employer
incorporation or organization) identification no.)
443 South Gulph Road King of Prussia, PA 19406
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: ______610/962-5100_________
------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed
since last report.
Indicated by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No ____
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of the registrant's Common and Prefered Stock
outstanding as of March 31, 1996 was 1,190,684 Common Shares and 430,293
Preferred Shares.
<PAGE>
CRW FINANCIAL, INC.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1- FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, 1995 AND MARCH 31, 1996 3
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS FOR THE THIRTEEN WEEKS ENDED
APRIL 1, 1995 AND MARCH 31, 1996 4
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE THIRTEEN WEEKS ENDED
APRIL 1, 1995 AND MARCH 31, 1996 5
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 8
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 12
<PAGE>
CRW FINANCIAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS DECEMBER 31, 1995 MARCH 31, 1996
- - ------ ----------------- --------------
(unaudited)
CURRENT ASSETS:
CASH $ 2,074,000 $ 936,000
CASH HELD FOR CLIENTS 3,333,000 3,728,000
ACCOUNTS RECEIVABLE, NET 3,094,000 4,575,000
OTHER CURRENT ASSETS 419,000 802,000
------------ ------------
TOTAL CURRENT ASSETS 8,920,000 10,041,000
PROPERTY AND EQUIPMENT, NET 3,320,000 3,214,000
INTANGIBLE ASSETS, NET 5,338,000 5,213,000
OTHER ASSETS 967,000 953,000
------------ ------------
$ 18,545,000 $ 19,421,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
COLLECTIONS DUE CLIENTS $ 3,333,000 $ 3,728,000
CURRENT PORTION OF LONG-TERM DEBT 1,385,000 1,385,000
ACCOUNTS PAYABLE 2,774,000 1,927,000
ACCRUED EXPENSES 1,845,000 1,322,000
------------ ------------
TOTAL CURRENT LIABILITIES 9,337,000 8,362,000
OTHER LONG-TERM LIABILITIES 299,000 275,000
LONG-TERM DEBT 5,723,000 5,120,000
STOCKHOLDERS' EQUITY:
PREFERRED STOCK -- 2,391,000
COMMON STOCK 11,000 11,000
ADDITIONAL PAID IN CAPITAL 4,125,000 4,125,000
ACCUMULATED DEFICIT (950,000) (863,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 3,186,000 5,664,000
------------ ------------
$ 18,545,000 $ 19,421,000
============ ============
See notes to condensed consolidated financial statements
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<PAGE>
CRW FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the For the
thirteen weeks ended thirteen weeks ended
April 1, 1995 March 31, 1996
------------- --------------
<S> <C> <C>
NET REVENUES $8,009,000 $8,850,000
OPERATING EXPENSES, excluding
Non-cash charges 7,259,000 8,182,000
DEPRECIATION 148,000 223,000
AMORTIZATION 242,000 125,000
---------- ----------
Operating Income 360,000 320,000
INTEREST EXPENSE 112,000 175,000
---------- ----------
Income from continuing operations
before income taxes 248,000 145,000
INCOME TAXES 92,000 58,000
---------- ----------
INCOME FROM CONTINUING OPERATIONS 156,000 87,000
INCOME FROM DISCONTINUED OPERATIONS
OF CENTRAL CREDIT, INC., NET OF TAX 480,000 --
---------- ----------
NET INCOME $ 636,000 $ 87,000
========== ==========
PRIMARY AND FULLY DILUTED NET INCOME
PER COMMON SHARE (Note 3): (Pro Forma)(Note 3) Historical
------------------- ----------
INCOME PER COMMON SHARE FROM CONTINUING
OPERATIONS $ 0.13 $ 0.05
INCOME PER COMMON SHARE FROM DISCONTINUED
OPERATION 0.39 --
---------- ----------
NET INCOME PER COMMON SHARE $ 0.52 $ 0.05
========== ==========
</TABLE>
See notes to condensed consolidated financial statements
- 4 -
<PAGE>
CRW FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THIRTEEN WEEKS ENDED
----------------------------
APRIL 1, 1995 MARCH 31, 1996
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 636,000 $ 87,000
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 390,000 348,000
Deferred tax provision 92,000 58,000
(Increase)decrease in assets
Accounts receivable (387,000) (1,481,000)
Other assets (99,000) (427,000)
Net assets of CCI 130,000 --
Increase (decrease) in liabilities
Accounts payable (250,000) (847,000)
Accrued expenses (596,000) (547,000)
----------- -----------
Net cash used in operating activities (84,000) (2,809,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (163,000) (117,000)
----------- -----------
Net cash used in investing activities (163,000) (117,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of preferred stock, net -- 2,391,000
Repayments of long term debt (176,000) (603,000)
----------- -----------
Net cash provided by (used in) financing activities (176,000) 1,788,000
----------- -----------
DECREASE IN CASH (423,000) (1,138,000)
----------- -----------
CASH, BEGINNING OF PERIOD 1,174,000 2,074,000
----------- -----------
CASH, END OF PERIOD $ 751,000 $ 936,000
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
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<PAGE>
CRW FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND:
CRW Financial, Inc. ("CRW") performs receivables management,
administration and debt collection services for clients primarily in the health
care, student loan, credit card and utility industries, and to commercial
clients through its wholly owned subsidiary Kaplan & Kaplan, Inc. CRW's
subsidiary Casino Money Centers, Inc. ("CMC"), provides financial support
services to the casino industry. CRW's subsidiaries were subsidiaries of Casino
& Credit Services, Inc. ("CCS") prior to May 11, 1995, and CRW's operations were
a division of CCS from July 1992 to May 11, 1995 when CCS contributed all of its
assets and subsidiaries other than Central Credit, Inc. ("CCI") to a newly
formed subsidiary, CRW Financial, Inc. CCS then spun-off CRW in a distribution
of CRW stock to CCS Shareholders on May 11, 1995. The historical financial
statements of CRW have been deemed to be those of CCS, restated to present CCI
as a discontinued operation.
2. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements have been
prepared in conformity with generally accepted accounting principles. The
interim financial information, while unaudited, reflects all normal recurring
adjustments which are, in the opinion of management, necessary for a fair
presentation of the interim financial statements. The results for the three
months ended March 31, 1996 are not necessarily indicative of results expected
for the full year. These financial statements should be read in conjuncion with
the audited financial statements and the notes thereto included in the CRW
Financial, Inc. Annual Report on Form 10-K for the year ended December 31, 1995.
3. NET INCOME PER COMMON SHARE
Net income per common share is computed using the weighted average
number of shares of CRW Common Stock and CRW common stock equivalents
outstanding during the period. If the inclusion of CRW common stock equivalents
has an anti-dilutive effect in the aggregate, it was excluded from the
calculation. The weighted average number of shares outstanding for 1996 for
purposes of computing primary and fully diluted net income per common shares was
2,230,707 and 2,435,835, respectively. Net income per common share has been
presented on a pro forma basis for 1995 as if the 882,929 shares and the 339,000
shares of CRW common stock issuable pursuant to the CCS redeemable warrants were
issued on January 1, 1995. For the thirteen weeks ended March 31, 1996, the
Company's total outstanding common stock options and warrants exceed 20% of the
total outstanding common stock. Therefore, the income per share computations
are modified, as required under Accounting Principles Board Opinion No. 15, to
assume all outstanding common stock options and warrants were exercised and the
related proceeds were used to repurchase up to 20% of the total outstanding
common stock. Any remaining proceeds are assumed to be used to reduce
borrowings, thereby reducing interest expense, net of tax.
- 6 -
<PAGE>
CRW FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. CRW ACQUISITION CORP.
CRW Acquisition Corp., a wholly owned subsidiary of CRW, has agreed to
acquire, conditional upon an initial public offering, five teleservices
companies and one direct mail and fulfillment company in separate transactions
for a combination of cash and stock. CRW expects to retain a significant
interest in the new public company after completion of the initial public
offering. However, there can be no assurance that any of the acquisitions or the
initial public offering will be completed.
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Continuing Operations
Below is a summary of operating results (in thousands) for the
Company's two business segments, CRW Financial and Casino Money Centers.
Thirteen Weeks Ended March 31, 1996
-----------------------------------
CRW Casino
Financial Money Centers Total
--------- ------------- -----
Net Revenues $8,004 $ 846 $8,850
Operating Expenses,
excluding non-cash charges 7,418 764 8,182
Depreciation 218 5 223
Amortization 119 6 125
------ ------ ------
Operating Income $ 249 $ 71 $ 320
====== ====== ======
Thirteen Weeks Ended April 1, 1995
----------------------------------
CRW Casino
Financial Money Centers Total
--------- ------------- -----
Net Revenues $7,417 $ 592 $8,009
Operating Expenses,
excluding non-cash charges 6,759 500 7,259
Depreciation 147 1 148
Amortization 237 5 242
------ ------ ------
Operating Income $ 274 $ 86 $ 360
====== ====== ======
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<PAGE>
Thirteen Weeks Ended March 31, 1996 and April 1, 1995
Net Revenues. Net revenues for the thirteen weeks ended March 31, 1996
increased $841,000 (10.5%) to $8,850,000 from $8,009,000 for the thirteen weeks
ended April 1, 1995.
CRW Financial's revenues for the thirteen weeks ended March 31, 1996
increased $587,000 (7.9%) to $8,004,000 compared to $7,417,000 for the thirteen
weeks ended April 1, 1995, primarily due to $694,000 of revenue from its new
market research division, partially offset by the loss of approximately $250,000
of revenue from Bell South. Placements increased $30,490,000 (12%) to
$284,199,000 for the thirteen weeks ended March 31, 1996 from $253,709,000 for
the thirteen weeks primarily due to an increase in placements from the
California Student Aid Commission and several other new clients.
Casino Money Centers, Inc. revenues for the thirteen weeks ended March
31, 1996 increased $254,000 (43%) to $846,000 from $592,000 for the thirteen
weeks ended April 1, 1995 primarily due to increased revenues from the CMC
facility in the Oneida Casino in Green Bay, Wisconsin and the opening of a CMC
facility at the Mohican Northstar facility in December 1995.
Operating Expenses. Operating expenses increased $881,000 (11.5%) to
$8,530,000 for the thirteen weeks ended March 31, 1996 from $7,649,000 for the
thirteen weeks ended April 1, 1995.
CRW Financial's operating expenses increased $612,000 (8.6%) to
$7,755,000 for the thirteen weeks ended March 31, 1996 from $7,143,000 for the
thirteen weeks ended April 1, 1995 primarily due to the opening of the Market
Research Division, partially offset by lower operating expenses due to the loss
of revenue from Bell South and lower data processing expenses due to the
termination of the Company's outsourcing services agreement.
Casino Money Centers, Inc.'s operating expenses increased $269,000 to
$775,000 for the thirteen weeks ended March 31, 1996 from $506,000 for the
thirteen weeks ended April 1, 1995 due to the increase in revenue in the Oneida
facility and the opening of the Northstar facility.
Operating Income. Operating income was $320,000 for the thirteen weeks
ended March 31, 1996 compared to $360,000 for the thirteen weeks ended April 1,
1995 due to the $841,000 increase in net revenues, offset by the $881,000
increase in operating expenses.
Interest Expense. Interest expense increased $63,000 to $175,000 for
the thirteen weeks ended March 31, 1996 from $112,000 for the thirteen weeks
ended April 1, 1995 due to an increase in long-term debt of approximately
$2,000,000 during 1995. The increase in long-term debt was due to borrowings
made in 1995 to increase working capital.
Income Taxes. Income taxes were $58,000 for the thirteen weeks ended
March 31, 1996 compared to $92,000 for the three months ended April 1, 1995. The
effective income tax rate increased 3% to approximately 40% for the thirteen
weeks ended March 31, 1996 from 37% for the thirteen weeks ended April 1, 1995
due to a higher provision for state income taxes.
- 9 -
<PAGE>
Discontinued Operations
Below is a summary of the operating results for CCI, which as discussed
in Note 1 has been classified as a discontinued operation. (In thousands)
Thirteen Weeks Ended
April 1, 1995
-------------
Net Revenues $2,295
Operating Expenses,
excluding non-cash charges 1,233
Depreciation 51
Amortization 284
---------
Operating Income 727
Income Taxes 247
---------
Net Income $ 480
========
INFLATION
Inflation has not had a significant impact on the Company's operations
to date.
LIQUIDITY AND CAPITAL RESOURCES
During the thirteen weeks ended March 31, 1996 net cash used in
operating activities was ($2,809,000) compared to ($84,000) of cash used in
operating activities for the thirteen weeks ended April 1, 1995. The increase in
cash used in operating activities in the 1996 period was primarily due to the
$1,481,000 increase in accounts receivable, the $847,000 decrease in accounts
payable and the $547,000 decrease in accrued expenses. The increase in accounts
receivable was due to approximately $400,000 of receivables from the Market
Research Division and temporarily increased receivables from several of CRW's
larger collection clients.
Net cash used in investing activities during the thirteen weeks ended
March 31, 1996 decreased $46,000 to $117,000 from $163,000 for the thirteen
weeks ended April 1, 1995 due to a $46,000 decrease in capital expenditures.
- 10 -
<PAGE>
Net cash used in financing activities during the thirteen weeks ended
April 1, 1995 was $176,000 used to repay long-term debt. Net cash provided by
financing activities was $1,788,000 for the thirteen weeks ended March 31, 1996
and consisted of $2,391,000 of net proceeds from the sale of preferred stock,
partially offset by $603,000 of repayments of long-term debt.
The Company believes that its existing cash on hand and cash to be
generated from future operations will be adequate to meet its needs for the
foreseeable future.
- 11 -
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
None
- 12 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
CRW FINANCIAL, INC.
-------------------
(Registrant)
Date: May 14, 1996 _____________________________________________
Jonathan P. Robinson, Chief Financial Officer
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 4,664
<SECURITIES> 0
<RECEIVABLES> 4,575
<ALLOWANCES> 0
<INVENTORY> 802
<CURRENT-ASSETS> 10,041
<PP&E> 13,515
<DEPRECIATION> 4,135
<TOTAL-ASSETS> 19,421
<CURRENT-LIABILITIES> 8,362
<BONDS> 5,395
0
2,391
<COMMON> 11
<OTHER-SE> 3,262
<TOTAL-LIABILITY-AND-EQUITY> 19,421
<SALES> 8,850
<TOTAL-REVENUES> 8,850
<CGS> 8,530
<TOTAL-COSTS> 8,530
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 175
<INCOME-PRETAX> 145
<INCOME-TAX> 58
<INCOME-CONTINUING> 87
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
