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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): February 2, 1997
CRW Financial, Inc.
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(Exact Name of registrant as specified in its charter)
Delaware 0-26015
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(State or other jurisdiction of (Commission File Number)
incorporation)
23-2691986
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(I.R.S. Employer 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)
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Item 2. Disposition of Assets
On February 2, 1997, CRW Financial, Inc. (the "Registrant")
sold all assets of its accounts receivable management and debt collection
division, including its wholly-owned subsidiaries Kaplan & Kaplan, Inc., CRW
Texas, Inc. and CRW California, Inc. (collectively, the "Division"), to NCO
Group, Inc. ("NCO") for a purchase price valued at approximately $12.8 million
and consisting of (i) $3,750,000 in cash, (ii) 345,178 shares of restricted NCO
common stock, (iii) warrants to purchase 250,000 additional shares of restricted
NCO common stock at an exercise price of $27.625 per share and (iv) assumption
by NCO of certain current liabilities of the Division. The purchase price for
the Division was determined as a result of arm's length negotiations between the
parties.
The cash portion of the purchase price for the Division will
be used by the Registrant to reduce its outstanding bank debt and to increase
working capital.
Subsequent to sale of the Division, the Registrant has three
principal assets: (i) 6,162,130 shares of TeleSpectrum Worldwide Inc.
("TeleSpectrum") common stock, (ii) 345,178 shares of restricted NCO common
stock and warrants to purchase 250,000 additional shares of restricted NCO
common stock acquired in the foregoing sale, with respect to which the Company
has certain registration rights, and which together represent approximately 8.1%
of the currently outstanding shares of common stock of NCO and (iii) the
Registrant's wholly-owned subsidiary, Casino Money Centers, Inc. ("CMC").
The Registrant currently anticipates that CMC may file a
registration statement with the Securities and Exchange Commission at some time
during the second calendar quarter of 1997 in order to permit the Registrant to
effect a distribution of all CMC shares currently held by the Registrant to the
Registrant's shareholders.
The sale of the Division and the planned distribution of CMC
common stock to the Registrant's shareholders are intended to facilitate the
Registrant's shareholders valuing their common stock in the Registrant based on
the value of the Registrant's TeleSpectrum common stock, the value realized from
the sale of the Division and the value which may be realized from the
distribution of the CMC common stock. There can be no assurance, however, that
the distribution of CMC common stock will occur, or even if it does occur, that
the Registrant's shareholders could not have realized greater value from their
shares of common stock in the Registrant if the sale of the Division and the
distribution of CMC common stock had not occurred.
The Registrant currently has 5,412,672 shares of common stock
outstanding. In addition, 3,043,049 shares of the Registrant's common stock are
currently issuable pursuant to vested stock options and warrants issued by the
Registrant. The exercise
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of currently vested stock options and warrants would result in cash proceeds to
the Registrant of approximately $5.6 million.
Item 7. Pro Forma Financial Information and Exhibits
(b) Pro Forma Financial Information
The following pro forma financial information is filed as a 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, 1995 and nine months ended September 30, 1996
3. Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1996
4. Notes to Pro Forma Condensed Consolidated Financial Information
(c) Exhibits
Description Exhibit Number
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Asset Acquisition Agreement dated February 2, 1997 by 10.1
and among the Registrant, Kaplan & Kaplan, Inc., NCO,
CRWF Acquisition, Inc. and K & K Acquisition, Inc.
(without exhibits or schedules)
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CRW FINANCIAL, INC.
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Basis of Presentation
The attached unaudited pro forma condensed consolidated balance sheet
at September 30, 1996 and the unaudited pro forma condensed consolidated
statements of operations for the year ended December 31, 1995 and for the nine
months ended September 30, 1996 give effect to the sale of the Registrants
accounts receivable management and debt collection division as if the sale
occurred on January 1, 1995. 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.
CRW FINANCIAL,INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(in thousands, except per share data)
CRW Pro forma CRW
historical adjustments Pro forma
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(unaudited)
REVENUES $ 31,691 ($28,742)(a) $ 2,949
OPERATING EXPENSES, excluding 30,203 (26,746)(a) 3,457
non-cash charges
DEPRECIATION 766 (741)(a) 25
AMORTIZATION 709 (686)(a) 23
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OPERATING INCOME (LOSS) 13 (569) (556)
INTEREST EXPENSE (655) 210 (c) (445)
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Loss from continuing operations
before income taxes (642) (359) (1,001)
INCOME TAXES (BENEFIT) --
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Loss from continuing operations ($ 642) ($ 359) ($ 1,001)
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Primary loss per share from continuing
operations ($ 0.55) ($ 0.30) ($ 0.85)
CRW FINANCIAL,INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(in thousands, except per share data)
CRW Pro forma CRW
historical adjustments Pro forma
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(unaudited)
REVENUES $ 23,069 ($20,444)(a) $ 2,625
OPERATING EXPENSES, excluding 23,144 (19,075)(a) 4,069
non-cash charges
SPECIAL COMPENSATION CHARGE 1,319 (690)(a) 629
DEPRECIATION 699 (669)(a) 30
AMORTIZATION 370 (350)(a) 20
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OPERATING INCOME (LOSS) (2,463) 340 (2,123)
GAIN ON SALE OF TWI STOCK 1,176 -0- 1,176
INTEREST EXPENSE (593) 158(c) (435)
Income (loss) from continuing
operations before income taxes (1,880) 498 (1,382)
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INCOME TAXES (BENEFIT) (639) (169) (470)
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Income (loss) from continuing
operations $ (1,241) $ 329 $ (912)
Primary loss per share from continuing
operations ($ 0.34) ($ 0.10) ($ 0.25)
CRW FINANCIAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(in thousands)
CRW Pro forma CRW
historical adjustments Pro forma
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ASSETS
CURRENT ASSETS:
CASH $ 1,461 ($63)(b) $ 1,398
CASH HELD FOR CLIENTS 2,774 (2,774)(b) --
ACCOUNTS RECEIVABLE, NET 3,506 (3,408)(b) 98
OTHER CURRENT ASSETS 773 (401)(b) 372
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TOTAL CURRENT ASSETS 8,514 (6,646) 1,868
PROPERTY AND EQUIPMENT,NET 3,150 (3,055)(b) 95
INTANGIBLE ASSETS, NET 4,993 (4,658)(b) 335
INVESTMENT IN TELESPECTRUM WORLDWIDE INC 53,368 53,368
INVESTMENT IN NCO GROUP, INC. -- 12,800 (b) 12,800
OTHER ASSETS 666 (664)(b) 2
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LIABILITIES AND STOCKHOLDERS' EQUITY $ 70,691 ($ 2,223) $ 68,468
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CURRENT LIABILITIES:
COLLECTIONS DUE TO CLIENTS $ 2,774 ($2,774)(b) $ 0
ACCOUNTS PAYABLE 2,390 (2,307)(b) 83
ACCRUED EXPENSES 2,015 (1,125)(b) 890
CURRENT PORTION OF LONG-TERM DEBT 7,886 (2,000)(b) 5,886
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TOTAL CURRENT LIABILITIES 15,065 (8,206) 6,859
LONG-TERM DEBT 427 -- 427
DEFERRED INCOME TAXES 19,475 -- 19,475
OTHER LONG-TERM LIABILITIES 414 (100)(b) 314
STOCKHOLDERS' EQUITY:
PREFERRED STOCK 2,382 -- 2,382
COMMON STOCK 39 -- 39
ADDITIONAL PAID IN CAPITAL 36,359 4,783(b) 41,142
ACCUMULATED DEFICIT (3,470) 1,300(b) (2,170)
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TOTAL STOCKHOLDERS' EQUITY 35,310 6,083 41,393
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$ 70,691 ($ 2,223) $ 68,468
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CRW FINANCIAL, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(A) To reclassify the accounts receivable management and debt
collection division as a discontinued operation.
(B) To record the sale of the accounts receivable management and debt
collection division. The Company used $2 million of the $3.75
million cash portion of the purchase price to reduce its bank debt.
In addition, $1 million of direct expenses for professional fees
and retention pay to key employees were paid by the Company. The
division cash balances were included in the sale. These cash
balances totaled approximately $687,000 at September 30, 1996.
(C) To reduce interest expense for the $2 million repayment of bank
debt made by the Company from the cash portion of the purchase
price.
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.
By: /s/ Jonathan P. Robinson
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Jonathan P. Robinson, Vice President
and Chief Financial Officer
Date: February 18, 1997