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Previous: COMPUTER ASSOCIATES INTERNATIONAL INC, SC 14D1/A, 1996-11-04 |
Next: AMERICAN FINANCIAL HOLDING INC /DE, 10KSB, 1996-11-04 |
<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, 1996
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: 3,274,323 shares as of
September 30, 1996.
<PAGE> 2
THE M/A/R/C GROUP
INDEX
(UNAUDITED)
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets September 30, 1996, and
December 31, 1995 . . . . . . . . . . . . . . . . 1
Consolidated Statements of Income Three Months Ended
September 30, 1996, and 1995 . . . . . . . . . . . 2
Consolidated Statements of Income Nine Months Ended
September 30, 1996, and 1995 . . . . . . . . . . . 3
Consolidated Statement of Changes in Stockholders'
Equity Nine Months Ended September 30, 1996 . . . 4
Consolidated Statements of Cash Flows Nine Months
Ended September 30, 1996, and 1995 . . . . . . . . 5
Consolidated Notes to Financial Statements . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . 7-11
<PAGE> 3
PART I. FINANCIAL INFORMATION
THE M/A/R/C GROUP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Sept. 30, 1996 Dec. 31, 1995
-------------- -------------
(Dollars in Thousands)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and short-term investments $ 3,181 $ 1,848
Trade accounts receivable, net 11,619 13,292
Expenditures billable to clients, net 7,064 3,204
Notes receivable 12 284
Prepaid expenses and other current assets 2,157 2,565
------- -------
Total Current Assets 24,033 21,193
------- -------
Notes receivable, less current portion 296 82
Property and equipment, less accumulated depreciation of
$14,747,000 and $14,055,000, respectively 28,050 7,377
Investments at cost 10,087 10,049
Intangibles, less accumulated amortization of $2,958,000
and $2,788,000, respectively 492 680
Prepaid pension costs and other assets 5,064 4,823
------- -------
TOTAL ASSETS $68,022 $44,204
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Current portion, long-term debt $ 1,644 $ 0
Trade accounts payable 983 2,530
Advance payments from clients 3,161 2,145
Other accrued liabilities 2,170 1,456
------- -------
Total Current Liabilities 7,958 6,131
Long-term debt, less current portion 18,421 5
Deferred taxes payable and other liabilities 5,436 5,627
-------- -------
Total Liabilities 31,815 11,763
-------- -------
Stockholders' Equity:
Common stock, $1 par value, 15,000,000 shares authorized,
4,174,565 and 3,783,541 issued, respectively 4,175 3,784
Capital in excess of par value 10,045 6,855
Retained earnings 37,056 34,758
Less treasury stock at cost, 900,242 and 877,059 shares, respectively (8,174) (7,760)
Unearned compensation (3,261) (1,440)
Pension liability (1,822) (1,822)
Unearned ESOP shares (1,812) (1,934)
------- -------
Total Stockholders' Equity 36,207 32,441
------- ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $68,022 $44,204
======= =======
The accompanying notes are an integral part of the financial statements.
</TABLE>
1
<PAGE> 4
THE M/A/R/C GROUP
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996, AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
(Dollars in Thousands,
Except Per Share Data)
<S> <C> <C>
Revenues $ 22,184 $ 18,730
Costs and expenses 19,961 17,673
---------- ----------
Operating income 2,223 1,057
Interest and other income net (326) 291
---------- ----------
Income before taxes 1,897 1,348
Federal and state income tax provision 683 499
---------- ----------
NET INCOME $ 1,214 $ 849
========== ==========
Net income per share $ .41 $ .30
========== ==========
Weighted average common shares outstanding $3,137,000 $2,882,000
========== ==========
</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, 1996, AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
(Dollars in Thousands,
Except Per Share Data)
<S> <C> <C>
Revenues $ 63,715 $ 53,260
Costs and expenses 58,185 50,477
---------- ----------
Operating income 5,530 2,783
Interest and other income net (468) 742
---------- ----------
Income before taxes 5,062 3,525
Federal and state income tax provision 1,822 1,304
---------- ----------
NET INCOME $ 3,240 $ 2,221
========== ==========
Net income per share $ 1.06 $ .79
========== ==========
Weighted average common shares outstanding $3,055,000 $2,825,000
========== ==========
</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, 1996
(UNAUDITED)
<TABLE>
Common Capital in Unearned Cost of
Stock, $1 Excess of Retained Pension Unearned ESOP Treasury
Par Value Par Value Earnings Liability Compensation Shares Stock
--------- ---------- -------- --------- ------------ -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 3,784 $ 6,855 $ 34,758 ($1,822) ($1,440) ($1,934) ($7,760)
Exercise options/warrants 375 1,973
Purchase treasury stock (414)
Issued restricted stock 210 2,940 (3,150)
Retire restricted stock (194) (1,869) 1,172
Amortization of
compensation expense 157
Release of ESOP shares 146 122
Dividends paid (942)
Net income 3,240
--------- --------- -------- -------- -------- ------- --------
Balance at September 30, 1996 $ 4,175 $ 10,045 $ 37,056 ($1,822) ($3,261) ($1,812) ($8,174)
========= ========= ======== ======== ======== ======= ========
</TABLE>
4
<PAGE> 7
THE M/A/R/C GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996, AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
(Dollars in Thousands)
<S> <C> <C>
Net cash flow from operating activities:
Net income $ 3,240 $ 2,221
Noncash items:
Depreciation and amortization 2,014 1,882
Net (increase) in receivables and
expenditures billable to clients (2,187) (4,657)
Net (increase) decrease in prepaid expenses and other assets (57) (661)
Increase (decrease) in trade accounts payable (1,547) (2,133)
Increase (decrease) in accrued liabilities and other liabilities 747 791
------- --------
Net cash provided (used) by operating activities 2,210 (2,557)
------- ---------
Cash flows from investing activities:
Acquisition of property and equipment (22,612) (1,908)
Disposition of property and equipment 112 3
Net (additions to) reductions in notes receivable 59 14
Net (increase in) reduction of investments (38) 120
------- --------
Net cash used by investing activities (22,479) (1,771)
------- --------
Cash flows from financing activities:
Net (decrease) increase in customer advances 1,016) (630)
Proceeds (repayment) of long-term debt 20,061 2,213
Issuance of common stock 3,581 1,637
Cash dividends paid (942) (574)
Loan to ESOP 122 122
Unearned compensation (1,821) 0
Issue/(purchase of) treasury stock (415) (152)
------- --------
Net cash provided (used) by financing activities 21,602 2,616
Net increase (decrease) in cash 1,333) (1,712)
Cash and short-term investments at December 31 1,848 3,337
------- --------
Cash and short-term investments at September 30 $ 3,181 $ 1,625
======= =======
</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 statements reflect all adjustments necessary to
present fairly the Company's consolidated financial position as of
September 30, 1996, the consolidated results of its operations for the
nine months ended September 30, 1996, and September 30, 1995, and its
consolidated cash flows for the nine months ended September 30, 1996, and
September 30, 1995.
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, 1995,
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, 1996, with the nine months ended September 30, 1995,
and the three months ended September 30, 1996, with the three months ended
September 30, 1995.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996, WITH NINE MONTHS ENDED
SEPTEMBER 30, 1995
Revenues increased to $63,715,000 for the nine-month period ended
September 30, 1996, compared with revenues of $53,260,000 for the nine-month
period ended September 30, 1995. Production and administrative expenses were
91.3% of revenues, compared with 94.8% for the prior year.
The Company attributed the stronger financial performance primarily to
increased revenues in its Targetbase business unit where revenues increased 50%
with a commensurate increase in profitability. The Company's Custom Research
business recorded a 5.8% increase in revenues and continued improvement in
profitability
7
<PAGE> 10
THE M/A/R/C GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
reflecting improved utilization of available resources and the benefits of some
cost reductions effected during the later part of 1995 and the first quarter of
1996. Revenues derived from the Company's ten largest clients this year were
48% higher in the first nine months of 1996 as compared with the same period
last year. In the first nine months of 1996, M/A/R/C had a total of 40
accounts with annualized revenues in excess of $50,000 that had no revenues in
the year-ago period.
Operating income increased to $5,530,000 from $2,783,000 last year for
the comparable nine months. Continued emphasis on the Company's cost
management program contributed to the improvement; the majority however can be
attributed to improved revenues.
Net interest and other income decreased $1,210,000 to ($468,000) for the
comparable nine-month period and includes $852,000 of interest expense
associated with the Company's corporate headquarters during the second and
third quarters. Previously a comparable number was reported as a part of the
Company's lease expense.
Net income for the nine-month period ended September 30, 1996, increased
$1,019,000 to $3,240,000 ($1.06 a share) from $2,221,000 ($.79 a share) for the
comparable nine-month period ended September 30, 1995.
The weighted average number of shares outstanding increased to 3,054,659
from 2,825,675 last year. In accordance with Statement of Position 93-6,
"Employers'
8
<PAGE> 11
THE M/A/R/C GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Accounting for Employee Stock Option Plans," the Company did not treat as
outstanding for calculating earnings per share 229,138 shares held in the
Employee Shareholders Ownership Plan that have not been released to
participants. The Company repurchased 23,266 shares of its stock during the
nine-month period ended September 30, 1996.
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1996, WITH THREE MONTHS ENDED
SEPTEMBER 30, 1995
Revenues increased to $22,184,000 for the three-month period ended
September 30, 1996, compared with revenues of $18,730,000 for the three-month
period ended September 30, 1995. Production and administrative expenses were
90% of revenues, compared with 94.4% for the prior year.
The Company's Targetbase business reflected a 41% increase in revenues
for the quarter with a commensurate increase in profits. The Custom Research
business recorded an 8% increase in sales for the quarter with continued
increase in profitability.
Operating income increased to $2,223,000 from $1,057,000 last year for
the comparable quarter.
Net interest and other income decreased $617,000 to ($326,000) for the
comparable three-month period primarily reflecting $442,000 in interest expense
associated with the
9
<PAGE> 12
THE M/A/R/C GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Company's corporate headquarters. Previously, a comparable figure was reported
as part of the Company's lease expense.
Net income for the three-month period ended September 30, 1996,
increased $365,000 to $1,214,000 ($.41 a share) from $849,000 ($.30 a share)
for the comparable three-month period ended September 30, 1995.
The weighted average number of shares outstanding increased to 3,136,824
from 2,882,536 last year. The Company repurchased 7,263 shares of its stock
during the three-month period ended September 30, 1996.
CAPITAL RESOURCES AND LIQUIDITY
From December 31, 1995, to September 30, 1996, cash and short-term
investments increased $1,333,000. During the nine-month period, $414,000 in
cash was used to repurchase common stock of the Company. The September 30,
1996, cash and short-term investments position of $3,181,000, the temporary
investment position of $10,087,000, the working capital position of
$16,075,000, 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 1, 1996 /s/ Sharon M. Munger
----------------------- --------------------------------------
Sharon M. Munger
(President and
Chief Executive Officer)
Date: November 1, 1996 /s/ Harold R. Curtis
----------------------- --------------------------------------
Harold R. Curtis
(Chief Financial Officer)
12
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JAN-01-1996
<PERIOD-END> SEP-30-1996 DEC-31-1996
<CASH> 3,181 1,848
<SECURITIES> 0 0
<RECEIVABLES> 11,619 13,292
<ALLOWANCES> 0 0
<INVENTORY> 7,064 3,204
<CURRENT-ASSETS> 24,033 21,193
<PP&E> 42,797 21,432
<DEPRECIATION> 14,747 14,055
<TOTAL-ASSETS> 68,022 44,204
<CURRENT-LIABILITIES> 7,958 6,131
<BONDS> 0 0
0 0
0 0
<COMMON> 4,175 3,784
<OTHER-SE> 32,032 28,657
<TOTAL-LIABILITY-AND-EQUITY> 36,207 32,441
<SALES> 0 0
<TOTAL-REVENUES> 22,184 18,730
<CGS> 0 0
<TOTAL-COSTS> 19,961 17,673
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 326 0
<INCOME-PRETAX> 1,897 1,348
<INCOME-TAX> 683 499
<INCOME-CONTINUING> 1,214 849
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,214 849
<EPS-PRIMARY> .41 .30
<EPS-DILUTED> .41 .30
</TABLE>
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