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<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 June 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: 3,160,978 shares as of June
30, 1996.
<PAGE> 2
THE M/A/R/C GROUP
INDEX
(UNAUDITED)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<S> <C> <C>
Page No.
Consolidated Balance Sheets
June 30, 1996, and December 31, 1995 . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Income
Three Months Ended June 30, 1996, and 1995 . . . . . . . . . . . . . . . 2
Consolidated Statements of Income
Six Months Ended June 30, 1996, and 1995 . . . . . . . . . . . . . . . . 3
Consolidated Statement of Changes in Stockholders' Equity
Six Months Ended June 30, 1996 . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows
Six Months Ended June 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
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
THE M/A/R/C GROUP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, 1996 Dec. 31, 1995
------------- -------------
(Dollars in Thousands)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and short-term investments $ 2,337 $1,848
Trade accounts receivable, net 13,065 13,292
Expenditures billable to clients, net 6,322 3,204
Notes receivable 12 284
Prepaid expenses and other current assets 2,016 2,565
------- -------
Total Current Assets 23,752 21,193
------- -------
Notes receivable, less current portion 299 82
Property and equipment, less accumulated depreciation of
$14,191,000 and $14,055,000, respectively 27,825 7,377
Investments at cost 10,185 10,049
Intangibles, less accumulated amortization of $2,914,000
and $2,788,000, respectively 554 680
Prepaid pension costs and other assets 5,025 4,823
------- -------
TOTAL ASSETS $67,640 $44,204
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Current portion, long-term debt $ 1,644 $ 0
Trade accounts payable 2,011 2,530
Advance payments from clients 3,465 2,145
Other accrued liabilities 1,554 1,456
------- -------
Total Current Liabilities 8,674 6,131
Long-term debt, less current portion 19,132 5
Deferred taxes payable and other liabilities 5,407 5,627
-------- -------
Total Liabilities 33,213 11,763
-------- -------
Stockholders' Equity:
Common stock, $1 par value, 15,000,000 shares authorized,
4,053,968 and 3,783,541 issued, respectively 4,054 3,784
Capital in excess of par value 9,364 6,855
Retained earnings 36,159 34,758
Less treasury stock at cost, 892,990 and 877,059 shares, respectively (8,035) (7,760
Unearned compensation (3,441) (1,440
Pension liability (1,822) (1,822
Unearned ESOP shares (1,852) (1,934)
------- -------
Total Stockholders' Equity 34,427 32,441
------- ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $67,640 $44,204
======= =======
</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 JUNE 30, 1996, AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
(Dollars in Thousands,
Except Per Share Data)
<S> <C> <C>
Revenues $22,240 $18,020
Costs and expenses 19,910 17,023
------- -------
Operating income 2,330 997
Net interest and other income (311) 255
------- -------
Income before taxes 2,019 1,252
Federal and state income tax provision 727 463
------- -------
NET INCOME $ 1,292 $ 789
======= =======
Net income per share $ .41 $ .28
======= =======
Weighted average common shares outstanding 3,169,775 2,841,436
========= =========
</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 SIX MONTHS ENDED JUNE 30, 1996, AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
(Dollars in Thousands,
Except Per Share Data)
<S> <C> <C>
Revenues $41,531 $34,530
Costs and expenses 38,224 32,805
------ ------
Operating income 3,307 1,725
Net interest and other income (142) 451
---- ------
Income before taxes 3,165 2,176
Federal and state income tax provision 1,139 805
----- ---
NET INCOME $ 2,026 $ 1,371
======= =======
Net income per share $ .65 $ .49
======= =======
Weighted average common shares outstanding 3,089,583 2,802,812
========= =========
</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 SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
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 254 1,438
Purchase treasury stock (275)
Issued restricted stock 210 2,940 (3,150)
Retire restricted stock (194) (1,869) 1,149
Release of ESOP shares 82
Dividends paid (625)
Net income 2,026
------ ------ ------- ------- ------- -------- -------
Balance at June 30, 1996 $4,054 $9,364 $36,159 ($1,822) ($3,441) ($1,852) ($8,035)
====== ====== ======= ======= ======= ======== =======
</TABLE>
4
<PAGE> 7
THE M/A/R/C GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996, AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
(Dollars in Thousands)
<S> <C> <C>
Net cash flow from operating activities:
Net income $2,026 $ 1,371
Noncash items:
Depreciation and amortization 1,320 1,269
Net (increase) in receivables and
expenditures billable to clients (2,891) (3,598)
Net (increase) decrease in prepaid expenses and other assets (124) (1,004)
Increase (decrease) in trade accounts payable (519) (2,019)
Increase (decrease) in accrued liabilities and other liabilities 101 629
------- -------
Net cash provided (used) by operating activities 161 (3,352)
------- ------
Cash flows from investing activities:
Acquisition of property and equipment (21,710) (1,351)
Disposition of property and equipment 68 2
Net (additions to) reductions in notes receivable 56 12
Net (increase in) reduction of investments (137) 150
-------- --------
Net cash used by investing activities (21,723) (1,187)
-------- --------
Cash flows from financing activities:
Net (decrease) increase in customer advances (1,320) (106)
Proceeds (repayment) of long-term debt 20,771 2,551
Issuance of common stock 635 1,533
Cash dividends paid (625) (286
Loan to ESOP 82 81
Issue/(purchase of) treasury stock (132) (148)
-------- -------
Net cash provided (used) by financing activities 22,051 3,625
------- -------
Net increase (decrease) in cash (489) (914)
Cash and short-term investments at December 31 1,848 3,337
------- -------
Cash and short-term investments at June 30 $ 2,337 $ 2,423
======= =======
</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 June
30, 1996, the consolidated results of its operations for the six months
ended June 30, 1996, and June 30, 1995, and its consolidated cash flows
for the six months ended June 30, 1996, and June 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 six
months ended June 30, 1996, with the six months ended June 30, 1995, and the
three months ended June 30, 1996, with the three months ended June 30, 1995.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996, WITH SIX MONTHS ENDED JUNE 30,
1995
Revenues increased to $41,531,000 for the six-month period ended June
30, 1996, compared with revenues of $34,530,000 for the six-month period ended
June 30, 1995. Production and administrative expenses were 92.0% of revenues,
compared with 95.0% for the prior year.
The Company attributed the stronger financial performance primarily to
increased revenues in its Targetbase business unit where revenues increased 55%
with a commensurate increase in profitability. The Company's Custom Research
business recorded a 5% increase in revenues and a substantial improvement in
profitability. Revenues derived from the Company's ten largest clients this
year were 67.0% higher in
7
<PAGE> 10
THE M/A/R/C GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
the first six months of 1996 as compared with the same period last year. In
the 1996 first six months, M/A/R/C had a total of 49 accounts with annualized
revenues in excess of $50,000 that had no revenues in the year-ago period.
Operating income increased to $3,307,000 from $1,725,000 last year for
the comparable six months. Though the Company's cost management work during
the latter part of 1995 and the first quarter of 1996 contributed to the
improvement; the large majority of the increase can be attributed to improved
sales volume.
Net interest and other income decreased $593,000 to ($142,000) for the
comparable six-month period and includes $410,000 of interest expense
associated with the Company's corporate headquarters during the second quarter.
Previously a comparable number was reported as a part of the Company's lease
expense.
Net income for the six-month period ended June 30, 1996, increased
$655,000 to $2,026,000 ($.65 a share) from $1,371,000 ($.49 a share) for the
comparable six-month period ended June 30, 1995.
The weighted average number of shares outstanding increased to 3,089,583
from 2,802,812 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 244,414 shares held in
the Employee Shareholders
8
<PAGE> 11
THE M/A/R/C GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Ownership Plan that have not been released to participants. The Company
repurchased 16,003 shares of its stock during the six-month period ended June
30, 1996.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1996, WITH THREE MONTHS ENDED
JUNE 30, 1995
Revenues increased to $22,240,000 for the three-month period ended June
30, 1996, compared with revenues of $18,020,000 for the three-month period
ended June 30, 1995. Production and administrative expenses were 89.5% of
revenues, compared with 94.5% for the prior year.
The Company's Targetbase business reflected a 58% 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 a strong
increase in profitability reflecting improved utilization of available
resources and benefits of some cost reductions effected during the later part
of 1995 and the first quarter of 1996.
Operating income increased to $2,330,000 from $997,000 last year for the
comparable quarter.
Net interest and other income decreased $566,000 to ($311,000) for the
comparable three-month period primarily reflecting $410,000 in interest expense
associated with the Company's corporate headquarters. Previously, a comparable
figure was reported as part of the Company's lease expense.
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 June 30, 1996, increased
$503,000 to $1,292,000 ($.41 a share) from $789,000 ($.28 a share) for the
comparable three-month period ended June 30, 1995.
The weighted average number of shares outstanding increased to 3,169,775
from 2,841,436 last year. The Company repurchased 10,906 shares of its stock
during the three-month period ended June 30, 1996.
CAPITAL RESOURCES AND LIQUIDITY
The Company purchased its headquarters facility at the end of the first
quarter for approximately $20,000,000, financed with a combination of a
mortgage and bank debt. The purchase will have the effect of reducing
occupancy costs by an estimated $100,000 on an annualized basis.
From December 31, 1995, to June 30, 1996, cash and short-term
investments increased $489,000. During the six- month period, $132,000 in cash
was used to repurchase common stock of the Company. The June 30, 1996, cash
and short- term investments position of $2,337,000 and the temporary investment
position of $10,185,000, the working capital position of $15,078,000, 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: August 1, 1994 /s/ Sharon M. Munger
------------------------------ -------------------------------------
Sharon M. Munger
(President and
Chief Executive Officer)
Date: August 1, 1994 /s/ Harold R. Curtis
------------------------------ -------------------------------------
Harold R. Curtis
(Chief Financial Officer)
12
<PAGE> 15
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,337
<SECURITIES> 10,185
<RECEIVABLES> 14,005
<ALLOWANCES> (641)
<INVENTORY> 6,322
<CURRENT-ASSETS> 23,752
<PP&E> 42,016
<DEPRECIATION> (14,191)
<TOTAL-ASSETS> 67,640
<CURRENT-LIABILITIES> 8,674
<BONDS> 19,132
<COMMON> 4,054
0
0
<OTHER-SE> 30,373
<TOTAL-LIABILITY-AND-EQUITY> 67,640
<SALES> 41,531
<TOTAL-REVENUES> 41,531
<CGS> 37,891
<TOTAL-COSTS> 37,891
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 333
<INTEREST-EXPENSE> 142
<INCOME-PRETAX> 3,165
<INCOME-TAX> 1,139
<INCOME-CONTINUING> 2,026
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,026
<EPS-PRIMARY> .65
<EPS-DILUTED> .64
</TABLE>
|
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