SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported) January 8, 1998
MoneyGram Payment Systems, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-14350 84-1327808
- ------------------------ ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
7401 West Mansfield, Lakewood, Colorado 80235
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 716-6800
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N/A
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(Former name or former address, if changed since last report)
Item 7 Financial Statements, Pro Form Financial Information and Exhibits
(a) Financial Statements of Business Acquired
Attached hereto and made a part hereof are the financial statements,
as of December 31, 1996, of Mid-America Money Order Company, the
business acquired on January 8, 1998 by Registrant as set forth at
Item 2 of Registrant's Current Report of Form 8-K dated January 21,
1998.
(b) Pro Form Financial Information
Attached hereto and made a part hereof are the pro form financial
statements as of December 31, 1996 and September 30, 1997 for the
Registrant and the business acquired on January 8, 1998 by
Registrant as set forth at Item 2 of Registrant's Current Report of
Form 8-K dated January 21, 1998.
(c) Exhibits
None
2
The Board of Directors
Mid-America Money Order Company
We have audited the accompanying statement of assets and liabilities of the
acquired business of Mid-America Money Order Company (a wholly owned subsidiary
of Mid-America Bancorp) as of December 31, 1996, and the related statements of
income and expenses, stockholder's equity and cash flows of the acquired
business for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets and liabilities of the acquired business of
Mid-America Money Order Company as of December 31, 1996, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
December 23, 1997
Louisville, Kentucky /s/ KPMG Peat Marwick LLP
3
MID-AMERICA MONEY ORDER COMPANY
Statement of Assets and Liabilities Of The Acquired Business
In thousands September 30 December 31
------------ -----------
1997 1996
------------ -----------
Assets (unaudited)
Cash and cash equivalents $22,809 $ 5,346
Receivables 5,935 6,431
Inventory 96 201
Securities held to maturity 13,026 31,962
Furniture and equipment, net 669 912
Accrued interest receivable and other assets 409 207
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Total assets $42,944 $45,059
======= =======
Liabilities and Stockholder's Equity
Money orders outstanding $33,877 $35,983
Accounts payable, accrued expenses,
and other liabilities 88 722
------- -------
Total liabilities $33,965 $36,705
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Stockholder's equity:
Common stock, without par value. Authorized
1,000 shares; issued and outstanding 100
shares 500 500
Additional paid-in capital 4,817 4,817
Retained earnings 3,662 3,037
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Total stockholder's equity 8,979 8,354
------- -------
Total liabilities and stockholder's
equity $42,944 $45,059
======= =======
See accompanying notes to financial statements
4
MID-AMERICA MONEY ORDER COMPANY
Statement of Income and Expenses of the
Acquired Business
Year Ended
December 31,
In thousands 1996
------------
Revenues:
Money order fees $3,649
Interest income 2,235
Gain on sale of agent base 1,797
Miscellaneous income 77
------
Total revenue 7,758
------
Expenses:
Salaries and employee benefits 912
Rebates to agents 122
Occupancy expense 111
Depreciation expense 693
Equipment maintenance and repairs 569
Telephone expense 187
Supplies and printing 428
Courier and postage expense 144
Management fees 371
Data processing 601
Professional fees 57
Marketing expense 38
Taxes and licenses 100
Provision for money order losses 219
Other expenses 36
------
Total expenses 4,588
------
Income before income taxes 3,170
Income tax expense 1,204
------
Net Income $1,966
======
See accompanying notes to financial statements
5
MID-AMERICA MONEY ORDER COMPANY
Statements of Income and Expenses of the
Acquired Business
Nine Months
Ended September 30
(unaudited)
-------------------
In thousands 1997 1996
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Revenues:
Money order fees $ 1,844 $2,818
Interest income 1,429 1,683
Gain on sale of agent base -- 1,797
Miscellaneous income 12 63
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Total revenue 3,285 6,361
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Expenses:
Salaries and employee benefits 636 709
Rebates to agents 7 127
Occupancy expense 78 85
Depreciation expense 267 556
Equipment maintenance and repairs 316 438
Telephone expense 94 151
Supplies and printing 229 322
Courier and postage expense 43 114
Management fees 186 282
Data processing 362 439
Professional fees 16 46
Marketing expense 1 29
Taxes and licenses 37 59
Provision for money order losses (101) 212
Other expenses 29 38
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Total expenses 2,200 3,607
-------------------
Income before income taxes 1,085 2,754
Income tax expense 460 1,045
-------------------
Net Income $ 625 $ 1,709
===================
See accompanying notes to financial statements
6
MID-AMERICA MONEY ORDER COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY
OF THE AQUIRED BUSINESS
Year ended December 31, 1996 and Nine Months Ended September 30, 1997
(unaudited)
Common Additional Retained Total
Stock Paid-in Capital Earnings
------ --------------- -------- -----
Balance, December 31, 1995 $500 $4,817 $1,071 $6,388
Net Income -- -- 1,966 1,966
---- ------ ------ ------
Balance, December 31, 1996 500 4,817 3,037 8,354
Net Income -- -- 625 625
---- ------ ------ ------
Balance, September 30,1997 $500 $4,817 $3,662 $8,979
==== ====== ====== ======
See accompanying notes to financial statements.
7
MID AMERICA MONEY ORDER COMPANY
Statement of Cash Flows of The Acquired Business
Year Ended
In Thousands December 31
1996
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Cash flows from operating activities:
Net income 1,966
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization, and
accretion, net 693
Gain on sale of agent base (1,797)
Provision for money order losses 219
(Increase) decrease in receivables 14,230
(Increase) decrease in inventory 10
(Increase) decrease in accrued interest
receivable and other assets 36
Increase (decrease) in money orders outstanding (19,388)
Increase (decrease) in accounts payable, accrued
expenses, and other liabilities 145
-------
Net cash used in operating
activities (3,886)
-------
Cash flows from investing activities:
Purchases of securities held to maturity (18,932)
Proceeds from maturities of securities held
to maturity 24,725
Purchases of furniture and equipment (347)
Proceeds from sale of agent base 2,532
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Net cash provided by
investing activities 7,978
-------
Net increase in cash and cash equivalents 4,092
Cash and cash equivalents, beginning of the year 1,254
-------
Cash and cash equivalents, end of the year 5,346
=======
See accompanying notes to financial statements
8
MID AMERICA MONEY ORDER COMPANY
Statements of Cash Flows of The Acquired Business
Nine months ended
In Thousands September 30
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1997 1996
----------- -----------
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $ 625 $ 1,709
Adjustments to reconcile net income
to net cash provided by (used in) operating activities: -- --
Depreciation and amortization, and
accretion, net 267 556
Gain on sale of agent base -- (1,797)
Provision for money order losses (101) 212
(Increase) decrease in receivables 597 14,674
(Increase) decrease in inventory 105 49
(Increase) decrease in accrued interest
receivable and other assets (202) (120)
(Increase) decrease in money orders outstanding (2,106) (15,402)
Increase (decrease) in accounts payable, accrued
expenses, and other liabilities (634) 660
-------- --------
Net cash provided by (used in)
operating activities $ (1,449) $ 541
-------- --------
Cash flows from investing activities:
Purchases of securities held to maturity (5,028) --
Proceeds from maturities of securities held
to maturity 24,000 23,725
Purchases of furniture and equipment (60) (285)
Proceeds from sale of agent base -- 2,532
-------- --------
Net cash provided by
investing activities $ 18,912 $ 25,972
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Net increase in cash and cash equivalents 17,463 26,513
Cash and cash equivalents, beginning of the period 5,346 1,254
-------- --------
Cash and cash equivalents, end of the period $ 22,809 $ 27,767
======== ========
See accompanying notes to financial statements
9
MID-AMERICA MONEY ORDER COMPANY
Notes to Financial Statements
(1) Basis of Presentation
The accompanying financial statements present the assets and liabilities
acquired and the income and expenses of the money order and combination money
order and gift certificate business that was acquired by MoneyGram Payment
Systems, Inc. (Buyer), effective January 8, 1998 pursuant to the Asset Purchase
Agreement (the Agreement).
The assets and liabilities of the money order and combination money order and
gift certificate business as presented in the accompanying balance sheets
include allocated balances at December 31, 1996 and September 30, 1997. This
portion of the business has never operated as a separate business but rather as
an integral part of the entire money order and mall gift certificate business.
The income and expenses of the acquired money order and combination money order
and gift certificate business are allocated based on estimates and assumptions
as if the acquired business had been operated on a stand-alone basis during the
periods presented.
The applicable financial statement allocations were based primarily on
outstanding balances or number of agents. Management believes these allocations
were made on a reasonable basis, however, there can be no assurance that such
allocations will be indicative of future results of operations.
(2) Summary of Significant Accounting Policies
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(a) Business
Mid-America Money Order Company (the Company), a wholly-owned
subsidiary of Mid-America Bancorp (Bancorp), Louisville,
Kentucky, is engaged nationally in the issuance and sale of
retail money orders having a face value of not more than
$2,000. The Company is currently licensed to market money
orders and gift certificates throughout The United States.
10
(b) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash
equivalents include amounts due from banks.
(C) Inventory
Inventory consists of money order forms and certain related
supplies. Inventory is stated at the lower of cost or market
utilizing the first-in, first-out method.
(d) Securities
Debt securities intended to be held until maturity are
classified as securities held to maturity and carried at
amortized historical cost. Securities to be held for
indefinite periods of time and not intended to be held to
maturity are classified as securities available for sale and
carried at fair value with unrealized gains or losses, net of
tax effects, reflected in shareholder's equity. The Company
did not have any securities available for sale at December 31,
1996 and September 30, 1997. Amortization of premiums and
accretion of discounts are recorded on the interest method.
The specific identification method is used in determining
gains and losses on the sale of securities.
(e) Furniture and Equipment
Furniture and equipment are carried at cost less accumulated
depreciation. Depreciation is computed by the straight-line
method over the estimated useful lives of the assets.
(f) Income Taxes
The Company's results of operations are included in the
consolidated federal income tax return of Mid-America Bancorp.
Federal income taxes are computed as if the Company were
filing separately at its maximum federal tax rate. State
income taxes are computed on a separate return basis.
The Company utilizes the asset and liability method of
accounting for income taxes. The amounts provided for income
taxes are based upon the amounts of current and deferred taxes
payable or refundable at the date of the financial statements
as measured by the provisions of enacted laws and tax rates.
11
(3) Securities
The amortized cost and market value of securities held to maturity at September
30, 1997 (unaudited) and December 31,1996 and gross unrealized gains and losses
follow:
In thousands September 30, 1997
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(unaudited)
Unrealized
Amortized ---------- Market
Cost Gains Losses Value
---- ----- ------ -----
U.S. Treasury securities $10,030 $ 82 $-- $10,112
U.S. Government agency
securities 2,996 70 -- 3,066
---- -------
$13,026 $152 $-- $13,178
======= ==== ==== =======
In thousands December 31, 1996
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Unrealized
Amortized ---------- Market
Cost Gains Losses Value
---- ----- ------ -----
U.S. Treasury securities $14,030 $106 $-- $14,136
U.S. Government agency
securities 17,932 103 7 18,028
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$31,962 $209 $ 7 $32,164
======= ==== ==== =======
A summary of securities held to maturity at December 31, 1996 based on
contractual maturities is presented below.
Amortized Market
In thousands Cost Value
--------- ------
Due within one year $28,967 $29,040
Due after one year through five years 2,995 3,124
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$31,962 $32,164
======= =======
Securities with a market value of $10,264,000 at December 31, 1996 were pledged
primarily to fulfill bonding requirement with certain states.
12
(4) Receivables
Receivables primarily consist of amounts due from agents of the Company. The
Company maintains an allowance for uncollectable accounts, which is adjusted
periodically based on a review of the aged receivables. Receivables are charged
against the allowance when determined to be uncollectable. Normally, receivables
which are 90 days or more past due are determined to be uncollectable unless
payment arrangements have been made and payments are being received. The
allowance for uncollectable accounts included in receivables was $185,000 and
$90,000 at December 31, 1996 and September 30, 1997 (unaudited) respectively.
(5) Furniture and Equipment
A summary of furniture and equipment at September 30, 1997(unaudited) and
December 31, 1996 is as follows:
September 30 December 31
In thousands 1997 1996
(unaudited)
Furniture and equipment $3,220 $3,603
Less accumulated depreciation 2,561 2,691
------ ------
$ 659 $ 912
====== ======
(6) Income Taxes
Income tax expense (benefit) consists of the following:
Nine Months Ended Year Ended
September 30 December 31
In thousands 1997 1996 1996
(unaudited)
----------------------------------
Federal:
Current $ 300 $ 1,015 $ 1,155
Deferred 25 (135) (141)
State 135 165 190
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$ 460 $ 1,045 $ 1,204
==================================
Income tax expense differs from the Federal statutory rate of 34% due primarily
to state income taxes, net of Federal tax benefits.
Deferred income taxes result primarily from provisions for money order losses
and differences in depreciation methods used for financial and income tax
reporting purposes. A net deferred tax liability of approximately $35,000 and
$10,000, respectively, is included in the accompanying statements of assets and
liabilities of the acquired business at September 30, 1997 (unaudited) and
December 31, 1996.
13
(7) Related Party Transactions
The Company is a related party of Mid-America Bank of Louisville and Trust
Company, Mid-America Bank, FSB, and Mid-America Data Processing Company, Inc.,
collectively, the "Affiliates," by virtue of common ownership.
The amounts due from and revenues (expenses) related to the affiliates were as
follows:
In thousands 1996
--------
At December 31
Cash and cash equivalents $5,346
For the years ended December 31
Income from fees 16
Interest income 1,386
Miscellaneous income 77
Occupancy expense 111
Management and data processing 972
(8) Sale of Western Union "Program Agents"
In July 1996, Western Union Financial Services, Inc. exercised its contractual
option, under a Money Order Program Agreement entered into between the parties
in 1991, to purchase from the Company that part of the money order business
defined as "Program Agents". Under the Program Agreement, Western Union agents
contracted with the Company to issue the Company's money orders bearing the
Western Union name and mark. The Company was paid $2,532,000 for the "Program
Agents" and the money order machines used by the agents, which had a net book
value of $735,000. The Company recognized a net pre-tax gain of $1,797,000.
14
PROFORMA BALANCE SHEET
September 30, 1997
-------------------------------------------------
MoneyGram Money Order Pro-
Payment Business Forma
Systems, Inc Acquired Total
------------ -------- -----
(unaudited) unaudited) (unaudited)
Assets
- -------------------------------------------------------
Current Assets
Cash and cash equivalents $ 47,686 $22,809 $ 70,495
Securities -- 13,026 13,026
Agent receivable 4,189 5,935 10,124
Receivable from IPS 5,191 -- 5,191
Prepaid and other current assets 1,070 505 1,575
-------------------------------------------------
Total current assets 58,133 42,275 100,408
Fixed assets at cost, net of depreciation 10,201 669 10,870
Deferred tax asset 49,006 -- 49,006
Cost of acquiring agent contracts, net of amortization 16,911 -- 16,911
Other assets 1,142 -- 1,142
-------------------------------------------------
Total assets $135,393 $42,944 $178,337
=================================================
Liabilities and Stockholders' Equity
- -------------------------------------------------------
Current Liabilities:
Liabilities relating to unsettled transactions $ 20,690 $33,877 $ 54,567
Accounts payable and accrued liabilities 8,912 88 9,000
Commissions payable 7,069 -- 7,069
-------------------------------------------------
Total current liabilities 36,671 33,965 70,636
Stockholders' Equity
Common stock 166 500 666
Additional paid-in-capital 85,089 4,817 89,906
Retained earnings/(accumulated deficit) 13,467 3,662 17,129
-------------------------------------------------
Total stockholders' equity 98,722 8,979 107,701
-------------------------------------------------
Total liabilities and stockholders' equity $135,393 $42,944 $178,337
=================================================
15
PROFORMA STATEMENT OF OPERATIONS
September 30, 1997
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MoneyGram Money Order Pro-
Payment Business Forma
Systems, Inc Acquired Total
------------ -------- -----
(unaudited) (unaudited) (unaudited)
Revenues:
Fee Revenue: net of refunds $ 85,603 $ 1,856 $ 87,459
Foreign exchange 21,585 -- 21,585
Interest income -- 1,429 1,429
-------------------------------------------------
Total revenues 107,188 3,285 110,473
Expenses:
Agent commissions and amortization of agent
contract acquisition costs (including rebate costs) 35,717 7 35,724
Processing costs/management fees 18,754 186 18,940
Advertising and promotion 20,639 20,639
Selling and service 8,574 8,574
General and administrative 8,140 2,007 10,147
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Total expenses 91,824 2,200 94,024
Income before income taxes 15,364 1,085 16,449
Income tax expense 6,072 460 6,532
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Net income (loss) $ 9,292 $ 625 $ 9,917
=================================================
16
PROFORMA BALANCE SHEET
December 31, 1996
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MoneyGram Money Order Pro-
Payment Business Forma
Systems, Inc Acquired Total
------------ -------- -----
Assets
- ------------------------------------------------------
Current Assets
Cash and cash equivalents $ 17,996 $ 1,526 $ 19,522
Assets restricted to money transfer, money order
and gift certificate transactions 11,287 35,983 47,270
Agent receivable 587 6,431 7,018
Receivable from IPS 3,659 -- 3,659
Prepaid and other current assets 648 207 855
----------------------------------------------
Total current assets 34,177 44,147 78,324
Fixed assets at cost, net of depreciation 9,127 912 10,039
Deferred tax asset 52,250 -- 52,250
Cost of acquiring agent contracts, net of amortization 18,175 -- 18,175
----------------------------------------------
Total assets $113,729 $ 45,059 $158,788
===============================================
Liabilities and Stockholders' Equity
- ------------------------------------------------------
Current Liabilities:
Liabilities relating to unsettled transactions $ 11,287 $ 35,983 $ 47,270
Accounts payable and accrued liabilities 5,726 722 6,448
Commissions payable 7,286 -- 7,286
----------------------------------------------
Total current liabilities 24,299 36,705 61,004
Stockholders' Equity
Common stock 166 500 666
Additional paid-in-capital 85,089 4,817 89,906
Retained earnings/(accumulated deficit) 4,175 3,037 7,212
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Total stockholders' equity 89,430 8,354 97,784
----------------------------------------------
Total liabilities and stockholders' equity $113,729 $ 45,059 $158,788
===============================================
17
PROFORMA STATEMENT OF OPERATIONS
December 31, 1996
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MoneyGram Money Order Pro-
Payment Business Forma
Systems, Inc Acquired Total
------------ -------- -----
Revenues:
Fee Revenue: net of refunds $108,578 $3,726 $112,304
Foreign exchange 29,141 -- 29,141
Gain on sale of money order agent base -- 1,797 1,797
Interest Income -- 2,235 2,235
----------------------------------------------
Total revenues 137,719 7,758 145,477
Expenses:
Agent commissions and amortization of agent
contract acquisition costs (including rebate costs) 44,255 122 44,377
Processing costs/management fees 24,941 371 25,312
Advertising and promotion 29,113 -- 29,113
Selling and service 10,582 -- 10,582
General and administrative 5,152 4,095 9,247
----------------------------------------------
Total expenses 114,043 4,588 118,631
Income before income taxes 23,676 3,170 26,846
Income tax expense 9,045 1,204 10,249
----------------------------------------------
Net income (loss) $ 14,631 $1,966 $ 16,597
==============================================
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned, thereunto duly authorized.
MoneyGram Payment Systems, Inc.
(Registrant)
By: /s/ John M. Fowler
------------------
John M. Fowler
Executive Vice President,
Chief Financial Officer (Principal
Financial and Accounting Officer) and Treasurer
March 9, 1998