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): July 8, 1997
CRW Financial, Inc.
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(Exact Name of registrant as specified in its charter)
Delaware 0-26015 23-2691986
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
443 South Gulph Road, King of Prussia, Pennsylvania 19406
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 878-7400
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(Former name or former address, if changed since last report)
<PAGE>
Item 2. Disposition of Assets.
On July 8, 1997, CRW Financial, Inc. (the "Registrant") completed the sale
of 345,178 shares of common stock of NCO Group, Inc. ("NCO") in an underwritten
secondary offering of NCO common stock to the public conducted by NCO, receiving
net proceeds of $27.88 per share after underwriting commissions, for aggregate
net proceeds of approximately $9.6 million. The Registrant immediately utilized
such net proceeds to fully retire its 7.5 million of outstanding bank debt, and
intends to utilize the remaining proceeds to reduce other current liabilities
and for general working capital of the Registrant. The Registrant had acquired
the NCO common stock, as well as a warrant to purchase 250,000 additional shares
of NCO common stock at an exercise price of $27.625 per share, in connection
with the sale of its collection business to NCO in February 1997. The sale of
the NCO common stock will result in an after tax gain of approximately $800,000.
Subsequent to sale of the NCO common stock, the Registrant has three
principal assets: (i) 6,238,413 shares of TeleSpectrum Worldwide Inc.
("TeleSpectrum") common stock, (ii) a warrant to purchase 250,000 shares of
restricted NCO common stock at an exercise price of $27.625 per share, with
respect to which the Registrant has certain registration rights, and (iii) the
Registrant's wholly-owned subsidiary, Casino Money Centers, Inc. ("CMC").
The Registrant is currently contemplating a divestiture of CMC. The
Registrant does not currently intend to pursue any further acquisitions.
The Registrant currently has 6,255,433 shares of common stock outstanding.
In addition, 2,150,771 shares of the Registrant's common stock are currently
issuable pursuant to vested stock options and warrants issued by the Registrant.
The exercise of currently vested stock options and warrants would result in cash
proceeds to the Registrant of approximately $4.8 million.
Item 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
The following pro forma financial information is filed as part of this
report and is set forth in the pages attached hereto:
1. Basis of Presentation
2. Pro Forma Condensed Consolidated Statements of Operations for the
year ended December 31, 1996 and three months ended March 31,
1997.
3. Pro Forma Condensed Consolidated Balance Sheet at March 31, 1997.
4. Notes of Pro Forma Condensed Consolidated Financial Information.
<PAGE>
CRW FINANCIAL, INC.
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
BASIS OF REPRESENTATION
The attached unaudited pro forma condensed consolidated balance sheet
at March 31, 1997, and the unaudited pro forma condensed consolidated statements
of operations for the year ended December 31, 1996 and for the three months
ended March 31, 1997, give effect to the sale of the Registrant's 345,178 shares
of NCO Group, Inc. common stock as if the sale of such stock occurred on January
1, 1996. The pro forma financial data is presented for informational purposes
only and should not be construed to be indicative of the actual results of
operations of the company for periods presented or future results of operations
of the Company. The pro forma adjustments are described in the accompanying
notes presented herein.
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
(In Thousands - Except Share Amounts)
<S> <C> <C> <C>
NET REVENUES $3,412 $ -- $3,412
------- ----- ------
OPERATING EXPENSES:
Compensation 2,986 -- 2,986
Special compensation charges 1,319 -- 1,319
Other operating costs 2,518 -- 2,518
Depreciation and amortization 162 -- 162
------- ----- ------
Operating loss (3,573) -- (3,573)
INTEREST EXPENSE (825) -- (825)
EQUITY IN EARNINGS OF TLSP 774 -- 774
OTHER INCOME 1,136 1,323(A) 2,459
------- ----- ------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX BENEFIT (2,488) 1,323 (1,165)
INCOME TAX BENEFIT (855) 502(A) (353)
------- ----- ------
LOSS FROM CONTINUING OPERATIONS (1,633) 821 (812)
GAIN ON SALE OF DISCONTINUED OPERATIONS, NET -- 1,481 1,481
LOSS FROM DISCONTINUED OPERATIONS, net of income
tax benefit of $(754) (1,152) -- (1,152)
------- ----- ------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (2,785) 2,302 (483)
EXTRAORDINARY LOSS ON EXTINGUISHMENT OF DEBT (1,132) -- (1,132)
------- ----- -------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS ($3,917) $2,302 ($1,615)
======= ====== =======
NET INCOME (LOSS) PER COMMON SHARE:
Continuing operations $(0.43) $0.22 $(0.21)
Discontinued operations and gain on merger (0.30) 0.39 0.09
Extraordinary item (0.30) -- (0.30)
------ ----- ------
$(1.03) $0.61 $(0.42)
======= ===== ======
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: 3,793,846 3,793,846
</TABLE>
<PAGE>
CRW FINANCIAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ----------
(In Thousands, except share amounts)
<S> <C> <C> <C>
NET REVENUES 1,266 $ -- $1,266
OPERATING EXPENSES, excluding
Non-cash charges 1,544 -- 1,544
DEPRECIATION AND AMORTIZATION 39 -- 39
------ ------ ------
Operating Loss (317) -- (317)
INTEREST EXPENSE (206) -- 206
EQUITY IN EARNINGS OF TELESPECTRUM WORLDWIDE INC. 805 -- 805
OTHER INCOME -- 1,323(A) 1,323
------ ------ ------
Income (loss) from continuing operations
before income taxes 282 1,323 1,605
INCOME TAXES (BENEFIT) 107 502 609
------ ------ ------
INCOME FROM CONTINUING OPERATIONS 175 821 996
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET (59) -- (59)
GAIN ON SALE OF DISCONTINUED OPERATIONS, NET 1,481 -- 1,481
------ ------ ------
NET INCOME $1,597 $ 821 $2,418
====== ====== ======
NET INCOME (LOSS) PER COMMON SHARE:
Continuing Operations $ 0.02 $ 0.11 $ 0.13
Discontinued Operations 0.19 -- 0.19
------ ------ ------
$ 0.21 $ 0.11 $ 0.32
====== ====== ======
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING: 7,621,183 7,621,183 7,621,183
</TABLE>
<PAGE>
CRW FINANCIAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
------ ---------- ----------- ---------
<S> <C> <C> <C>
CURRENT ASSETS: (In Thousands, Except Share Amounts)
Cash $ 1,831 $ 3,123 (A) $ 4,954
Net assets of discontinued operation -- -- --
Other current assets 630 -- 630
Investment in NCO Group, Inc. 8,231 (7,481)(A) 750
-------- -------- --------
Total current assets 10,692 (4,358) 6,334
PROPERTY AND EQUIPMENT, net 191 -- 191
INTANGIBLE ASSETS, net 500 -- 500
INVESTMENT IN TELESPECTRUM WORLDWIDE INC. 55,460 -- 55,460
DEFERRED INCOME TAX ASSET 1,519 (502)(A) 1,017
OTHER ASSETS 104 -- 104
-------- -------- --------
$ 68,466 $ (4,860) $ 63,606
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit $ 6,500 $(6,500)(A) $ --
Current portion of long-term debt 350 -- 350
Accounts payable 450 -- 450
Accrued expenses 2,976 -- 2,976
-------- -------- --------
Total current liabilities 10,276 (6,500) 3,776
-------- -------- --------
LONG-TERM DEBT 223 -- 223
-------- -------- --------
OTHER LONG-TERM LIABILITIES 160 -- 160
-------- -------- --------
DEFFERED INCOME TAXES 21,898 -- 21,898
-------- -------- --------
STOCKHOLDERS' EQUITY:
Preferred Stock, no par value, 500,000 shares authorized,
no shares issued and outstanding -- -- --
Common Stock $.01 par value, 20,000,000 shares authorized
5,884,984 shares issued and outstanding 59 -- 59
Additional paid-in capital 39,939 -- 39,939
Unrealized loss on investment in NCO Group, Inc. (819) 819 (A) --
Accumulated deficit (3,270) 821 (A) (2,449)
-------- -------- --------
Total stockholders' equity 35,909 1,640 37,549
-------- -------- --------
$ 68,466 $ (4,860) $ 63,606
======== ======== ========
</TABLE>
<PAGE>
CRW FINANCIAL, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
(A) On July 8, 1997, the Company completed the sale of its 345,178 shares of
NCO Group Inc. common stock receiving net proceeds of $9,623,000. The
Company will record a gain of $821,000, net of a 38% effective tax rate
as shown below (in thousands):
Proceeds from sale of stock $9,623
Carrying value of stock 8,300
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Pre-tax gain 1,323
Utilization of net operating loss carryforward 502
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Gain on sale of stock, net $ 821
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CRW FINANCIAL, INC.
Date: July 23, 1997 By: /s/Jonathan P. Robinson
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Jonathan P. Robinson, Vice President
and Chief Financial Officer
