<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 March 31, 1997
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)
(972) 506-3400
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
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(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: 5,112,950 shares as of March
31, 1997.
<PAGE> 2
THE M/A/R/C GROUP
INDEX
(UNAUDITED)
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1997, and December 31, 1996 . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Income
Three Months Ended March 31, 1997, and 1996 . . . . . . . . . . . . . . . 2
Consolidated Statement of Changes in Stockholders' Equity
Three Months Ended March 31, 1997 . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997, and 1996 . . . . . . . . . . . . . . . 4
Consolidated Notes to Financial Statements . . . . . . . . . . . . . . . 5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . 7-9
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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>
March 31, 1997 Dec. 31, 1996
-------------- -------------
(Dollars in Thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments $ 5,608 $ 9,327
Trade accounts receivable, net 13,206 11,308
Expenditures billable to clients, net 7,958 5,401
Notes receivable 185 232
Prepaid expenses and other current assets 2,670 2,317
-------- --------
Total Current Assets 29,627 28,585
-------- --------
Notes receivable, less current portion 71 74
Property and equipment, less accumulated depreciation of
$13,227,000 and $15,051,000, respectively 28,294 28,318
Investments at cost 7,629 7,640
Intangibles, less accumulated amortization of $2,980,000
and $2,865,000, respectively 581 603
Prepaid pension costs and other assets 6,308 6,113
-------- --------
TOTAL ASSETS $ 72,510 $ 71,333
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion, long-term debt $ 1,634 $ 1,634
Trade accounts payable 1,263 2,060
Advance payments from clients 2,898 3,537
Other accrued liabilities 2,869 2,674
-------- --------
Total Current Liabilities 8,664 9,905
Long-term debt, less current portion 17,934 17,961
Deferred taxes payable and other liabilities 3,776 3,905
-------- --------
Total Liabilities 30,374 31,771
-------- --------
Stockholders' Equity:
Common stock, $1 par value, 15,000,000 shares authorized,
6,463,253 and 6,288,326 issued, respectively 6,463 6,288
Capital in excess of par value 9,220 8,152
Retained earnings 39,238 38,275
Less treasury stock at cost, 1,350,303 and 1,350,333 shares, respectively (8,174) (8,174)
Unearned compensation (2,881) (3,208)
Unearned ESOP shares (1,730) (1,771)
-------- --------
Total Stockholders' Equity 42,136 39,562
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 72,510 $ 71,333
======== ========
</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 MARCH 31, 1997, AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- ----------
(Dollars in Thousands,
Except Per Share Data)
<S> <C> <C>
Revenues $ 22,684 $ 19,292
Costs and expenses 20,472 18,315
----------- ----------
Operating income 2,212 977
Interest and other income (expense) net (163) 169
----------- ----------
Income before taxes 2,049 1,146
Federal and state income tax provision 738 412
----------- ----------
NET INCOME $ 1,311 $ 734
=========== ==========
Net income per share $ .27 $ .16
=========== ==========
Weighted average common shares outstanding 4,858,600 4,609,200
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 5
THE M/A/R/C GROUP
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(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, 1996 $6,288 $8,152 $38,275 ($3,208) ($1,771) ($8,174)
Exercise options/warrants 209 1,241
Purchase treasury stock
Retire restricted stock (34) (239) 274
Amortization of compensation 53
Dividends paid (348)
Release of ESOP shares 66 41
Net income 1,311
------ ------ ------- ------- ------- -------
Balance at March 31, 1997 $6,463 $9,220 $39,238 ($2,881) ($1,730) ($8,174)
====== ====== ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 6
THE M/A/R/C GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------- --------
(Dollars in Thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,311 $ 734
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 818 621
ESOP expense 107 0
Amortization of unearned compensation 53 0
(Gain) loss on sale of property and equipment 3 7
Changes in assets and liabilities:
Net (increase) decrease in receivables and WIP (4,455) 187
Net decrease (increase) in prepaids and other (579) (1,432)
(Decrease) increase in trade accounts payable (797) (1,104)
Increase (decrease) in accrueds and other liabilities 66 (359)
------- --------
Net cash provided by operating activities (3,473) (1,346)
------- --------
Cash flows from investing activities:
Purchases of property and equipment (718) (21,138)
Proceeds from sale of property and equipment 0 0
Net (additions to) reduction of notes receivable 50 63
Net (increase) reduction of investments (14) (198)
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Net cash used in investing activities (682) (21,273)
------- --------
Cash flows from financing activities:
Net (decrease) increase in advances from clients (639) 995
Term bank borrowing 0 1,644
Acquisition of (payments on) long-term debt (27) 19,316
Issuance of common stock 1,450 173
Cash dividends paid (348) (309)
Issue (purchase) of treasury stock 0 (83)
------- --------
Net cash used in financing activities 436 21,736
------- --------
Net decrease in cash (3,719) (883)
Cash at beginning of period 9,327 1,848
------- --------
Cash at end of period $ 5,608 $ 965
======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 7
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 March
31, 1997, the consolidated results of its operations for the three months
ended March 31, 1997, and March 31, 1996, and its consolidated cash flows
for the three months ended March 31, 1997, and March 31, 1996. Certain
prior-period amounts have been reclassified to be consistent with
current-year presentation.
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, 1996,
should be read in conjunction with the accompanying condensed consolidated
financial statements.
3. On January 24, 1997, the Board of Directors of the Company
authorized a three-for-two stock split to be effected in the form of a 50%
stock dividend. All share, per share, option and warrant amounts, and
related prices have been restated for all periods presented to reflect the
split paid on February 28, 1997, to shareholders of record on February 7,
1997.
5
<PAGE> 8
THE M/A/R/C GROUP
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
(Continued)
4. The Company will adopt Statement of Financial Accounting Standards
No. 128, Earnings Per Share (SFAS 128) for the period ending December 31,
1997. SFAS 128 specifies the computation, presentation, and disclosure
requirements for basic and fully diluted earnings per share. If SFAS 128
had been adopted for the quarters ending March 31, 1997, and 1996, basic
and fully diluted shares would be as follows.
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, 1997
--------------
Net Per Share
(dollars in thousands except Income Shares Amount
per share data) ------ ------ ------
(Numerator) (Denominator)
<S> <C> <C> <C>
Basic earnings per share $1,311 4,628,482 $0.28
=====
Effect of dilutive securities 230,072
------ ----------
Diluted earnings per share $1,311 4,858,554 $0.27
====== ========== =====
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, 1996
--------------
Net Per Share
(dollars in thousands except Income Shares Amount
------ ------ ------
per share data) (Numerator) (Denominator)
<S> <C> <C> <C>
Basic earnings per share $ 734 4,190,036 $0.18
=====
Effect of dilutive securities 421,628
------- ---------
Diluted earnings per share $ 734 4,611,664 $0.16
======= ========= =====
</TABLE>
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.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997, WITH THREE MONTHS ENDED
MARCH 31, 1996
Revenues increased to $22,684,000 for the three-month period ended March
31, 1997, compared with revenues of $19,292,000 for the three-month period
ended March 31, 1996. Production and administrative expenses were 90.2% of
revenues, compared with 94.9% for the prior year.
The Company attributed the stronger quarterly financial performance
primarily to increased revenues in both of its core businesses. Targetbase
Marketing, in particular, had a strong quarter driven by increased sales
activity with existing clients. Targetbase experienced the best performing
quarter in its history in terms of revenues and profits. M/A/R/C Research also
posted a strong quarter generating higher revenues and solid profitability
after being marginally profitable in the comparable period last year.
Operating income increased to $2,212,000 from $977,000 last year for the
comparable quarter.
Net interest and other income (expense) decreased $332,000 to ($163,000)
for the comparable three-month period. The decrease in net interest and other
income (expense) resulted primarily from the interest expense associated with
the purchase of the corporate headquarters facility in March of 1996.
7
<PAGE> 10
THE M/A/R/C GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
For the comparable three-month period in 1995, equivalent costs associated with
the corporate headquarters were recorded as lease expense and carried in our
production and administrative costs and expenses.
Net income for the three-month period ended March 31, 1997, increased
$577,000 to $1,311,000 ($.27 a share) from $734,000 ($.16 a share) for the
comparable three-month period ended March 31, 1996.
The weighted average number of shares outstanding increased to 4,858,600
from 4,609,200 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 328,431 shares held in
the Employee Shareholders Ownership Plan that have not been released to
participants. The Company did not repurchase any of its stock during the
three-month period ended March 31, 1997.
8
<PAGE> 11
THE M/A/R/C GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
CAPITAL RESOURCES AND LIQUIDITY
From December 31, 1996, to March 31, 1997, cash and short-term
investments decreased $3,719,000 primarily because working capital needs during
the quarter increased. The March 31, 1997, cash and short-term investments
position of $5,608,000 and the temporary investment position of $7,629,000, the
working capital position of $20,963,000, 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.
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.
9
<PAGE> 12
PART II--OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On April 17, 1997, subsequent to the close of the first quarter, The M/A/R/C
Group held its annual shareholders' meeting for the fiscal year ended December
31, 1996. The shareholders voted on the following proposals:
A. To elect three directors, Sharon M. Munger, Thomas J. Tierney, and
Edward R. Anderson, to hold office for a three-year term expiring at the
2000 shareholders' meeting or until their successors are elected and have
qualified. Of the 4,329,696 votes represented by proxy, 4,311,110 voted
for Ms. Munger, 4,303,919 voted for Mr. Tierney, and 4,302,557 voted for
Mr. Anderson.
Incumbent directors serving for a three-year term expiring at the
1998 shareholders' meeting are Cecil B. Phillips, Rolan G. Tucker, and
Jack D. Wolf. Incumbent director serving for a three-year term expiring
at the 1999 shareholders' meeting is Elmer L. Taylor, Jr.
B. To consider and vote on a proposal to adopt The M/A/R/C Group 1997
Stock Option Plan (with Limited Stock Appreciation Rights). Of the
4,329,696 votes represented by proxy, 2,906,763 voted to adopt the plan.
C. No other matters were voted on at the meeting.
10
<PAGE> 13
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.
<TABLE>
<S> <C> <C>
The M/A/R/C Group
---------------------------------------
(Registrant)
Date: May 15, 1997 /s/ Sharon M. Munger
---------------------------- ----------------------------------------
Sharon M. Munger
(President and
Chief Executive Officer)
Date: May 15, 1997 /s/ Harold R. Curtis
---------------------------- -------------------------------------------
Harold R. Curtis
(Chief Financial Officer)
</TABLE>
11
<PAGE> 14
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>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,608
<SECURITIES> 7,629
<RECEIVABLES> 13,206
<ALLOWANCES> 385
<INVENTORY> 7,958
<CURRENT-ASSETS> 29,627
<PP&E> 28,294
<DEPRECIATION> 13,227
<TOTAL-ASSETS> 72,510
<CURRENT-LIABILITIES> 8,664
<BONDS> 17,934
0
0
<COMMON> 6,463
<OTHER-SE> 35,673
<TOTAL-LIABILITY-AND-EQUITY> 72,510
<SALES> 22,684
<TOTAL-REVENUES> 22,684
<CGS> 0
<TOTAL-COSTS> 20,472
<OTHER-EXPENSES> 163
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,049
<INCOME-TAX> 738
<INCOME-CONTINUING> 1,311
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,311
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
