<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period from to
------------------- ----------------------------------
Commission file number 0-13217
M/A/R/C INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-1781525
- ------------------------------- -------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7850 North Belt Line Road, Irving, Texas 75063
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(214) 506-3400
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark 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 report), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 2,890,594 shares as of
September 30, 1995.
<PAGE> 2
THE M/A/R/C GROUP
INDEX
(UNAUDITED)
<TABLE>
<CAPTION>
Page No.
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1995, and December 31, 1994 . . . . . . . . . . . . . . . . 1
Consolidated Statements of Income
Three Months Ended September 30, 1995, and 1994 . . . . . . . . . . . . . 2
Consolidated Statements of Income
Nine Months Ended September 30, 1995, and 1994 . . . . . . . . . . . . . 3
Consolidated Statement of Changes in Stockholders' Equity
Nine Months Ended September 30, 1995 . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1995, and 1994 . . . . . . . . . . . . . 5
Consolidated Notes to Financial Statements . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . 7-11
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
THE M/A/R/C GROUP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Sept. 30, 1995 Dec. 31, 1994
-------------- -------------
(Dollars in Thousands)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and short-term investments $ 1,625 $ 3,337
Trade accounts receivable, net 10,884 9,131
Expenditures billable to clients, net 5,870 3,242
Notes receivable 8 248
Prepaid expenses and other current assets 2,829 2,379
-------- -------
Total Current Assets 21,216 18,337
-------- -------
Notes receivable, less current portion 265 40
Property and equipment, less accumulated depreciation of
$13,660,000 and $12,069,000, respectively 7,428 7,149
Capitalized development cost, net 0 59
Investments at cost 9,264 9,384
Intangibles, less accumulated amortization of $2,720,000
and $2,537,000, respectively 742 931
Prepaid pension costs and other assets 5,111 4,984
-------- -------
TOTAL ASSETS $ 44,026 $40,884
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Trade accounts payable 743 2,876
Advance payments from clients 2,340 2,970
Other accrued liabilities 1,702 1,662
--------
Total Current Liabilities 4,785 7,508
Long-term debt, less current portion 2,336 123
Deferred taxes payable and other liabilities 3,581 3,181
-------- -------
Total Liabilities 10,702 10,812
-------- -------
Stockholders' Equity:
Common stock, $1 par value, 15,000,000 shares authorized,
3,759,293 and 3,544,666 issued, respectively 3,759 3,545
Capital in excess of par value 6,686 5,264
Retained earnings 33,992 32,346
Less treasury stock at cost, 868,699 and 861,444 shares, respectively (7,698) (7,546)
Unearned compensation (1,440) (1,440)
Unearned ESOP shares (1,975) (2,097)
-------- -------
Total Stockholders' Equity 33,324 30,072
-------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 44,026 $40,884
======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE> 4
THE M/A/R/C GROUP
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995, AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(Dollars in Thousands,
Except Per Share Data)
<S> <C>
Revenues $ 18,730 $ 17,025
Costs and expenses 17,673 16,026
--------- ---------
Operating income 1,057 999
Interest and other income net 291 131
--------- ---------
Income before taxes 1,348 1,130
Federal and state income tax provision 499 418
--------- ---------
NET INCOME $ 849 $ 712
========= =========
Net income per share $ .30 $ .27
========= =========
Weighted average common shares outstanding 2,882,000 2,577,000
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 5
THE M/A/R/C GROUP
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995, AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
-------- --------
(Dollars in Thousands,
Except Per Share Data)
<S> <C> <C>
Revenues $ 53,260 $ 49,490
Costs and expenses 50,477 47,106
--------- ---------
Operating income 2,783 2,384
Interest and other income net 742 445
--------- ---------
Income before taxes 3,525 2,829
Federal and state income tax provision 1,304 1,047
--------- ---------
NET INCOME $ 2,221 $ 1,782
========= =========
Net income per share $ .79 $ .63
========= =========
Weighted average common shares outstanding 2,825,000 2,848,200
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 6
THE M/A/R/C GROUP
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Common Capital in Unearned Cost of
Stock, $1 Excess of Retained Unearned ESOP Treasury
Par Value Par Value Earnings Compensation Shares Stock
--------- --------- -------- ------------ ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $3,545 $5,264 $32,346 ($1,440) ($2,097) ($7,546)
Exercise options/warrants 214 1,345
Purchase treasury stock (152)
Issued restricted stock
Release of ESOP shares 77 122
Cash dividends paid (575)
Net income 2,221
------ ------ ------- ------ ------ ------
Balance at June 30, 1995 $3,759 $6,686 $33,992 ($1,440) ($1,975) ($7,698)
====== ====== ======= ====== ====== ======
</TABLE>
4
<PAGE> 7
THE M/A/R/C GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995, AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
-------- --------
(Dollars in Thousands)
<S> <C> <C>
Net cash flow from operating activities:
Net income $ 2,221 $ 1,782
Noncash items:
Depreciation and amortization 1,882 1,964
Net (increase) in receivables and
expenditures billable to clients (4,657) (4,101)
Net (increase) decrease in prepaid expenses and other assets (661) (296)
Increase (decrease) in trade accounts payable (2,133) (779)
Increase (decrease) in accrued liabilities and other liabilities 791 604
-------- --------
Net cash provided (used) by operating activities (2,557) (826)
-------- --------
Cash flows from investing activities:
Acquisition of property and equipment (1,908) (1,799)
Disposition of property and equipment 3 17
Net (additions to) reductions in notes receivable 14 72
Net (increase in) reduction of investments 120 981
-------- --------
Net cash used by investing activities (1,771) (609)
-------- --------
Cash flows from financing activities:
Net (decrease) increase in customer advances (630) (220)
Proceeds (repayment) of long-term debt 2,213 3,226
Issuance of common stock 1,637 378
Cash dividends paid (574) 0
Loan to ESOP 122 0
Issue/(purchase of) treasury stock (152) (5,742)
-------- --------
Net cash provided (used) by financing activities 2,616 (2,358)
-------- --------
Net increase (decrease) in cash (1,712) (3,793)
Cash and short-term investments at December 31 3,337 7,007
-------- --------
Cash and short-term investments at September 30 $ 1,625 $ 3,214
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 8
THE M/A/R/C GROUP
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. In the opinion of management, the accompanying unaudited
condensed consolidated financial all adjustments necessary to present
fairly the Company's consolidated financial position as of September
30, 1995, the consolidated results of its operations for the nine
months ended September 30, 1995, and September 30, 1994, and its
consolidated cash flows for the nine months ended September 30,
1995, and September 30, 1994.
2. These condensed consolidated financial statements are presented
in accordance with the requirements of Form 10-Q and consequently do
not include all disclosures normally required by generally accepted
accounting principles or those normally made in the Company's Annual
Report on Form 10-K. Accordingly, the financial statements and
related notes in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994, should be read in conjunction with the
accompanying condensed consolidated financial statements.
6
<PAGE> 9
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The M/A/R/C Group is a marketing information services company, providing
service to over 200 clients nationwide. The majority of our clients are large
public companies. The Company offers a wide range of marketing information
services through its two operating companies: Marketing And Research
Counselors and Targetbase Marketing.
The following Management's Discussion is presented comparing the nine
months ended September 30, 1995, with the nine months ended September 30, 1994,
and the three months ended September 30, 1995, with the three months ended
September 30, 1994.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1995, WITH NINE MONTHS ENDED
SEPTEMBER 30, 1994
Revenues increased to $53,260,000 for the nine-month period ended
September 30, 1995, compared with revenues of $49,490,000 for the nine-month
period ended September 30, 1994. Production and administrative expenses were
94.8% of revenues, compared with 95.2% for the prior year.
The Company attributed the stronger financial performance primarily to
increased revenues in both of its core businesses. The business continued to
benefit from increased demand from existing clients and the addition of new
accounts.
7
<PAGE> 10
THE M/A/R/C GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Operating income increased to $2,783,000 from $2,384,000 last year for
the comparable nine months. Continued emphasis on the Company's cost
management program contributed to the improvement; the remainder can be
attributed to improved sales volume.
Interest and other income increased $297,000 to $742,000 for the
comparable nine-month period and included a nonrecurring income items amounting
to $170,000.
Net income for the nine-month period ended September 30, 1995, increased
$257,000 to $1,304,000 ($.79 a share) from $1,047,000 ($.63 a share) for the
comparable nine-month period ended September 30, 1994. Earnings per share rose
25.4%.
The weighted average number of shares outstanding decreased slightly to
2,825,675 from 2,848,239 last year. In accordance with Statement of Position
93-6, "Employers' Accounting for Employee Stock Option Plans," the Company did
not treat as outstanding for calculating earnings per share 264,782 shares held
in the Employee Shareholders Ownership Plan that have not been released to
participants. The Company repurchased 11,120 shares of its stock during the
nine-month period ended September 30, 1995.
8
<PAGE> 11
THE M/A/R/C GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1995, WITH THREE MONTHS ENDED
SEPTEMBER 30, 1994
Revenues increased to $18,730,000 for the three-month period ended
September 30, 1995, compared with revenues of $17,025,000 for the three-month
period ended September 30, 1994. Production and administrative expenses were
94.4% of revenues, compared with 94.1% for the prior year.
The Company experienced slightly declining margins on improved sales
volume for the comparable quarters. The decline was attributable primarily to
the Company's decision to expand its professional staff.
Operating income increased to $1,057,000 from $999,000 last year for the
comparable quarter and contained a nonrecurring income item amounting to
$70,000.
Interest and other income increased $160,000 to $291,000 for the
comparable three-month period.
9
<PAGE> 12
THE M/A/R/C GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Net income for the three-month period ended September 30, 1995,
increased $137,000 to $849,000 ($.30 a share) from $712,000 ($.27 a share) for
the comparable three-month period ended September 30, 1994.
The weighted average number of shares outstanding increased to 2,882,536
from 2,576,961 last year. The Company repurchased 408 shares of its stock
during the three-month period ended September 30, 1995.
CAPITAL RESOURCES AND LIQUIDITY
From December 31, 1994, to September 30, 1995, cash and short-term
investments decreased $1,712,000. During the nine-month period, $152,000 in
cash was used to repurchase common stock of the Company. The September 30,
1995, cash and short-term investments position of $1,625,100, the temporary
investment position of $9,264,459, the working capital position of $16,148,444,
and the existing and unused lines of bank credit totaling $3,000,000 are
adequate to support the Company's cash requirements for operating and capital
expenditures.
10
<PAGE> 13
THE M/A/R/C GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
EFFECT OF INFLATION ON OPERATIONS
Due to a wide diversity in terms of project size, costs and project
duration, the Company is unable to estimate accurately the effects of inflation
on its revenue and profit. The major consequence of inflation is mitigated by
controlling cost estimating procedures in a timely manner where possible.
11
<PAGE> 14
SIGNATURES
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 thereunto duly authorized.
The M/A/R/C Group
--------------------------------------
(Registrant)
Date: November 13, 1995 /s/ Sharon M. Munger
-------------------------- --------------------------------------
Sharon M. Munger
(President and
Chief Executive Officer)
Date: November 13, 1995 /s/ Harold R. Curtis
-------------------------- --------------------------------------
Harold R. Curtis
(Chief Financial Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995
<PERIOD-START> JAN-01-1994 JAN-01-1995
<PERIOD-END> SEP-30-1994 SEP-30-1995
<CASH> 3,337 1,625
<SECURITIES> 0 0
<RECEIVABLES> 9,131 10,884
<ALLOWANCES> 0 0
<INVENTORY> 3,242 5,870
<CURRENT-ASSETS> 18,337 21,216
<PP&E> 19,218 21,088
<DEPRECIATION> (12,069) (13,660)
<TOTAL-ASSETS> 40,884 44,026
<CURRENT-LIABILITIES> 7,508 4,785
<BONDS> 0 0
<COMMON> 3,545 3,759
0 0
0 0
<OTHER-SE> 26,527 29,565
<TOTAL-LIABILITY-AND-EQUITY> 40,884 44,026
<SALES> 49,490 53,260
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 47,106 50,477
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 445 742
<INCOME-PRETAX> 2,829 3,525
<INCOME-TAX> 1,047 1,304
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,782 2,221
<EPS-PRIMARY> 0.63 0.79
<EPS-DILUTED> 0.63 0.78
</TABLE>
