TeleSpectrum Merges With Shareholder CRW

In an attempt to strengthen its financial position, TeleSpectrum Worldwide Inc., is finalizing an agreement to merge with its largest shareholder, CRW Financial Inc.

Targeting the fourth quarter for the deal to be finalized and effective, TeleSpectrum said the move serves to consolidate ownership and to strengthen the company's capital structure. While the two groups have signed a binding memorandum, the actual agreement is still pending and will require FTC approval.

“For TeleSpectrum this is a clean up of our ownership structure,” said Richard Schwenk, Jr., chief financial officer. “We will issue a stock swap that will yield a slight improvement in lowering our number of shares outstanding.” The publicly-traded company was trading at approximately $7.31 at press time.

Since the first quarter when the company named Keith E. Alessi as its chairman, president and chief executive, the company has been on a mission to focus on its core business following a spurt of account losses and the sale of some non-teleservices divisions.

In April the company shed Harris Direct Mail and Fulfillment division to DDS Distribution Services, LTD., a division of FirstService Corporation, for $23 million in cash and up to $4 million in contingent payments based on future performance of the direct mail and fulfillment business conducted by FirstService. The decision to sell the Harris division was in line with an effort to strengthen its financial position through a sharpened focus on teleservices. Proceeds from that sale are being used to repay debt.

The accumulated efforts have aimed to reshape the company after shuttering an estimated 15 of its 25 call centers nationwide following the loss of its largest account last year with MBNA America Bank. MBNA is believed to be the country's largest independent credit card lender. It recently named Marketing Services Group Inc., NY, to handle a regionally targeted affinity program through a five-year contract. TeleSpectrum, King of Prussia, PA, shuttered the last of targeting closings in April.

But in July TeleSpectrum was hit with another loss when National Telephone & Communications Inc. (see related story this page) pulled its services. NTC represented 10.2 percent of TeleSpectrum's revenues in the second quarter, ended June 30. During the period, the company posted a net loss of 44 percent, to $711,000 from $1.26 million, on revenues of $40.3 million. Revenues for the quarter were down about 22 percent, from $49.2 million, compared to the same period a year ago.

The latest move with CRW is expected to see TeleSpectrum issue 4.6 million new shares of common stock in exchange for all outstanding CRW common stock, which represents 6.9 million shares. The pending deal also calls and for the acquisition of CRW's projected $1.5 million in cash assets.

Although the company is looking to pour between $7 million – $10 million into capital improvements this year, TeleSpectrum will fund those projects with its existing cash flow. “The last of our call center closings occurred in April,” said Alessi in a prepared statement during the release of its second quarter earnings. “We are now focusing our efforts on improving our call center operations, maintaining excellent customer service, positioning our brand in the marketplace and leveraging our infrastructure.”

Despite the company's second quarter earnings report, call center operations are running close to capacity. We are operating more cost efficiently and more cost effectively with our existing centers,” Schwenk said. The company's targeted closures throughout such cities as Boston and Philadelphia have helped improve operating costs. The company is maintaining monthly outbound call volumes of about 400,000, Schwenk said.

“Our call centers operated at approximately 72 percent capacity during the quarter, and 82 percent in June, up from approximately 60 percent in the first quarter,” Alessi said.

TeleSpectrum provides inbound and outbound services to industries that span financial services, telecommunications, high tech, insurance, utilities, consumer products, pharmaceutical and government.

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