<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM 10-K(A)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition 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 (IRS Employer Identification No.)
incorporation or organization)
7850 North Belt Line Road 75063
Irving, Texas (ZIP Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (972) 506-3400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
------------------- ---------------------
<S> <C>
Common stock NASDAQ
</TABLE>
Indicated by check mark whether the Registrant (1) has filed all reports 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 reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No .
---- ----
As of March 18, 1998, 5,215,415 common shares were outstanding, and the
aggregate market value of the common shares held by nonaffiliates (based upon
the closing price of these shares on the National Association of Securities
Dealers National Market System) was approximately $59,128,186 (including the
market value of shares is ESOT participants' accounts).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into the
indicated part or parts of this report:
The Registrant's Annual Report to Shareholders for the year ended December
31, 1997--Parts I, II and IV; the Registrant's definitive Proxy Statement to
be filed with the Securities and Exchange Commission not later than 120 days
after the end of the fiscal year covered by this report--Part III; and the
Exhibits listed on page 15. There is a total of 16 pages in this document.
<PAGE> 2
THE M/A/R/C GROUP
--------------
REPORT ON AUDITS OF FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
The M/A/R/C Group:
We have audited the accompanying consolidated balance sheets of The M/A/R/C
Group as of December 31, 1997, and 1996, and the related consolidated statements
of income, changes in shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
M/A/R/C Group as of December 31, 1997, and 1996, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Dallas, Texas
February 23, 1998
2
<PAGE> 4
THE M/A/R/C GROUP
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
ASSETS (dollars in thousands) 1997 1996
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,850 $ 6,075
Investments 2,524 3,252
Trade accounts receivable, less
allowance for doubtful accounts
of $341 and $241, respectively 14,512 11,308
Expenditures billable to clients 5,888 5,401
Notes receivable 12 232
Prepaid expenses 1,524 1,349
Federal income tax receivable 741 -
Deferred income taxes 400 261
Other current assets 783 707
------- -------
Total current assets 30,234 28,585
Notes receivable, less current portion 67 74
Property and equipment, net 29,344 28,317
Investments - noncurrent 7,365 7,640
Cash surrender value of life insurance 3,387 3,542
Intangibles, less accumulated amortization
of $3,039 and $2,865, respectively 1,987 603
Other assets 2,590 2,572
------- -------
Total assets $74,974 $71,333
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 5
THE M/A/R/C GROUP
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
LIABILITIES (dollars in thousands) 1997 1996
---- ----
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 1,425 $ 2,060
Current portion of long-term debt 747 1,634
Advance payments from clients 2,615 3,537
Income tax payable - 581
Accrued liabilities 1,709 2,093
------- -------
Total current liabilities 6,496 9,905
Long-term debt 17,453 17,961
Deferred income taxes 820 1,186
Deferred compensation and other 2,644 2,719
------- -------
Total liabilities 27,413 31,771
------- -------
Commitments and contingencies (Note 7)
SHAREHOLDERS' EQUITY (dollars in thousands,
except share amounts)
Common stock, $1.00 par value, 15,000,000 shares
authorized, 6,530,033 shares and 6,288,326
shares issued, respectively 6,530 6,288
Capital in excess of par value 10,951 8,152
Retained earnings 42,907 38,275
------- -------
60,388 52,715
Treasury stock at cost 1,356,197 and 1,350,333
shares, respectively (8,286) (8,174)
Unearned compensation (2,725) (3,208)
Unearned ESOP shares (1,816) (1,771)
------- -------
Total shareholders' equity 47,561 39,562
------- -------
Total liabilities and shareholders' equity $74,974 $71,333
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 6
THE M/A/R/C GROUP
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Operating revenues $ 96,709 $ 85,459 $ 74,387
Production and administrative expenses 87,328 77,487 70,242
--------- -------- ---------
Operating income 9,381 7,972 4,145
Other income (expense):
Interest and other income 1,880 880 976
Interest and other expense (2,240) (1,476) (121)
--------- -------- ---------
Income before taxes 9,021 7,376 5,000
Provision for income taxes 2,946 2,686 1,725
--------- -------- ---------
Net income $ 6,075 $ 4,690 $ 3,275
========= ======== =========
Earnings per share (basic) $ 1.27 $ 1.07 $ .85
--------- -------- --------
Earnings per share (diluted) $ 1,21 $ 1,01 $ .74
========= ======== =========
Weighted average shares outstanding (basic) 4,785,237 4,387,818 3,873,655
--------- --------- ---------
Weighted average shares outstanding (diluted) 5,034,307 4,696,017 4,432,406
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 7
THE M/A/R/C GROUP
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
Treasury Stock
Common Capital in --------------
Stock, $1 Excess of Retained
(dollars in thousands, except share amounts) Par Value Par Value Earnings Shares Cost
--------- --------- -------- ------ ----
Balance at January 1, 1995 $5,318 $ 3,492 $32,346 1,292,616 ($7,546)
------ ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Exercise of common stock options
and warrants 358 1,365
Purchase of treasury stock 22,972 (214)
Adjustment for minimum pension liability
Release of ESOP shares 106
Dividends paid ($.20 per share) (863)
Net income 3,275
------ ------- ------- --------- -------
Balance at December 31, 1995 $5,676 $ 4,963 $34,758 1,315,588 ($7,760)
------ ------- ------- --------- -------
Exercise of common stock options
and warrants 612 2,019
Purchase of treasury stock 130,098 (1,432)
Retirement of treasury stock (96) (922) (95,353) 1,018
Issued restricted stock 315 2,835
Retirement of restricted stock (219) (954)
Amortization of compensation expense
Adjustment for minimum pension liability
Release of ESOP shares 211
Dividends paid ($.27 per share) (1,173)
Net income 4,690
------ ------- ------- --------- -------
Balance at December 31, 1996 $6,288 $ 8,152 $38,275 1,350,333 ($8,174)
====== ======= ======= ========= =======
Exercise of common stock options 276 2,441
and warrants
Purchase of treasury stock 5,864 (112)
Retirement of restricted stock (34) (234)
Amortization of compensation expense
Release of ESOP shares 592
Dividends paid ($.30 per share) (1,443)
Net income 6,075
------ ------- ------- --------- -------
Balance at December 31, 1997 $6,530 $10,951 $42,907 1,356,197 ($8,286)
====== ======= ======= ========= =======
</TABLE>
<TABLE>
<CAPTION>
Unearned
Pension Unearned ESOP
(dollars in thousands, except share amounts) Liability Compensation Shares
--------- ------------ ------
Balance at January 1, 1995 - ($1,440) ($2,097)
-------- -------- ------
<S> <C> <C> <C>
Exercise of common stock options
and warrants
Purchase of treasury stock
Adjustment for minimum pension liability (1,822)
Release of ESOP shares 163
Dividends paid ($.20 per share)
Net income
------ ------- --------
Balance at December 31, 1995 ($1,822) ($1,440) ($1,934)
------ ------- --------
Exercise of common stock options
and warrants
Purchase of treasury stock
Retirement of treasury stock
Issued restricted stock (3,150)
Retirement of restricted stock 1,172
Amortization of compensation expense 210
Adjustment for minimum pension liability 1,822
Release of ESOP shares 163
Dividends paid ($.27 per share)
Net income
------- ------- --------
Balance at December 31, 1996 - ($3,208) ($1,771)
======= ======== =======
Exercise of common stock options
and warrants
Purchase of treasury stock
Retirement of restricted stock 268
Amortization of compensation expense 215
Release of ESOP shares (45)
Dividends paid ($.30 per share)
Net income
------- ------- --------
Balance at December 31, 1997 - ($2,725) ($1,816)
======= ======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 8
THE M/A/R/C GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended
December 31,
------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 6,075 $ 4,690 $ 3,275
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,862 3,039 2,563
Gain on sale of assets (12) (12) (27)
ESOP expense 547 374 269
(Loss) on equity-method investment (424) (226) --
(Increase) decrease in income taxes receivable (741) 56 113
(Decrease) increase in deferred income taxes (505) 994 (939)
(Decrease) increase in income taxes payable (581) 581 --
(Increase) decrease in receivables and
expenditures billable to clients (4,071) 13 (4,123)
Decrease (increase) in prepaids, intangibles, and
other assets 62 (929) (158)
(Decrease) increase in trade accounts payable (635) (12) (804)
(Decrease) increase in customer advances (922) 1,392 (825)
(Decrease) increase in accrued liabilities (384) 636 (205)
Increase (decrease) in deferred compensation
and other liabilities 408 (4,577) 3,405
Reduction (recognition) of pension liability, net of tax -- 1,822 (1,822)
-------- -------- --------
Net cash provided by operating activities 2,679 7,841 722
-------- -------- --------
Cash flows from investing activities:
Acquisition of property and equipment (4,433) (23,811) (2,287)
Proceeds from sale of assets 137 6 81
Purchase of investments - held to maturity (4,407) (600) (2,950)
Maturity of investments - held to maturity 3,805 1,445 1,857
Issuance of notes receivable -- -- (86)
Collection of notes receivable 227 60 8
-------- -------- --------
Net cash used in investing activities (4,671) (22,900) (3,377)
-------- -------- --------
Cash flows from financing activities:
(Decrease) increase in book overdraft -- (457) 457
Issuance of debt -- 20,920 --
Payment of debt (1,395) (1,332) (118)
Issuance of common stock 2,717 3,590 1,724
Purchase of treasury stock (112) (414) (214)
Payment of dividends (1,443) (1,173) (863)
-------- -------- --------
Net cash (used in) provided by financing activities (233) 21,134 986
-------- -------- --------
Net (decrease) increase in cash and cash equivalents (2,225) 6,075 (1,669)
Cash and cash equivalents at beginning of period 6,075 -- 1,669
-------- -------- --------
Cash and cash equivalents at end of period $ 3,850 $ 6,075
======== ========
</TABLE>
Cash payments for interest expense were $1,743, $1,080, and $121, and cash
payments for income taxes were $3,517, $1,055, and $1,875, for 1997, 1996, and
1995, respectively.
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 9
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
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 Fortune 500
companies. The M/A/R/C Group offers a wide range of marketing information
services through our two operating companies: M/A/R/C Research and Targetbase
Marketing.
The financial statements include the accounts of M/A/R/C Inc. (the Company) and
its wholly owned companies and corporations and equity investments ranging from
25-30%. All intercompany accounts have been eliminated in consolidation. The
Company refers to itself as The M/A/R/C Group.
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.
The preparation of these consolidated financial statements in conformity with
generally accepted accounting principles requires the use of management's
estimates. These estimates are subjective in nature and involve matters of
judgment. Actual amounts could differ from these estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents. The carrying amount approximates fair value due to the short
maturity of those instruments.
Revenues
Revenues from marketing research, database marketing, and consulting projects
are recognized as services are performed. The Company presents reimbursed client
printing and mailing list costs on a net basis.
Expenditures Billable to Clients
Expenditures billable to clients represent costs related to database marketing,
marketing research, and other services. Expenditures relating to presentations
to prospective clients are expensed as incurred.
8
<PAGE> 10
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are
provided principally using the straight-line method over estimated useful lives
as follows:
<TABLE>
<S> <C>
Buildings 20 to 40 years
Furniture and equipment 3 to 10 years
Leasehold improvements 1 to 10 years
</TABLE>
When assets are sold, retired, or disposed of, any resulting gain or loss is
recognized.
The Company periodically reviews the carrying value of its property and
equipment to determine if circumstances exist indicating an impairment in the
carrying value or that depreciation periods should be modified . If facts or
circumstances support the possibility of impairment, the Company will prepare a
projection of the undiscounted future operating cash flows. In cases when the
Company does not expect to recover its carrying value, the Company recognizes an
impairment loss. Management of the Company does not believe that there are any
factors or circumstances indicating impairment of any of its property and
equipment.
Maintenance and Repairs
Maintenance and repairs for equipment and facilities are expensed, except that
substantial renewals which prolong the life of the asset beyond the date
previously contemplated are capitalized. Amounts expensed were $621,000,
$641,000, and $641,000, for the years ended December 31, 1997, 1996, and 1995,
respectively.
Capitalized Software Costs
Capitalized development and software costs relate to amounts expended during the
development of various products. Capitalized costs are amortized over the
estimated useful life of the product, typically ranging from three to five
years. Upon completion of development, future costs associated with maintenance
of the product are expensed as incurred. Total amortization expense was $0, $0,
and $59,000, for the years ended December 31, 1997, 1996, and 1995,
respectively.
Investments
The Company has deemed all of its securities to be held-to-maturity securities,
which are securities that management has the positive intent and ability to hold
until maturity. These securities include tax-exempt governmental securities.
Held-to-maturity securities are stated at cost, adjusted for accretion of
discount or amortization of premium. Discounts or premiums are accreted or
amortized to interest income over the terms of the securities using the
straight-line method, which approximates the interest method. The fair values of
investments are based on quoted market prices for those or similar investments.
9
<PAGE> 11
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Pending Adoption of Authoritative Statements
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
Income." SFAS 130 requires that an enterprise classify items of other
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. SFAS 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. Management intends to adopt the
statement for the year ended December 31, 1998.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 specifies revised guidelines for determining an entity's
operating segments and the type and level of financial information to be
disclosed. SFAS 131 changes current practice by establishing a new framework on
which to base segment reporting, including the determination of a segment and
the financial information to be disclosed for each segment, referred to as the
"management" approach. The management approach requires that management identify
"operating segments" based on the way that management disaggregates the entity
for making internal operating decisions. FAS 131 is effective for fiscal years
beginning after December 31, 1997, and requires restatement of information for
earlier periods. Management intends to adopt the statement for the year ended
December 31, 1998.
In February 1998, the FASB issued Statement of Financial Accounting Standards
No. 132 ("SFAS 132"), "Employers' Disclosures About Pensions and Other
Postretirement Benefits." SFAS 132 revises the employers' disclosures about
pension and other postretirement benefit plans but does not change the
measurement or recognition of those plans. It standardizes the disclosure
requirements and requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis and eliminates certain other disclosures. SFAS 132 is effective for
fiscal years beginning after December 31, 1997, and statement of disclosures for
earlier periods provided for comparative purposes is required. Management
intends to adopt the statement for the year ended December 31, 1998.
Intangibles
Intangible assets are recorded at cost at the date of acquisition. Amortization
is provided using the straight-line method for periods of 7 to 30 years for
identifiable assets.
Federal Income Taxes
Deferred tax liabilities and assets are recognized for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
10
<PAGE> 12
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred income taxes arise from temporary differences between financial and tax
reporting, principally relating to depreciation, capitalized development costs,
the supplemental executive retirement plan, installment sales, and pension
costs. See Note 9 for the components of deferred tax assets and liabilities and
provision for income taxes.
Earnings Per Share
The Company adopted Statement of Financial Accounting Standards No. 128 ("SFAS
128"), "Earnings Per Share" ("EPS") beginning with the quarter ended December
31, 1997. SFAS 128 requires basic EPS to be computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period and diluted EPS to reflect the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. All prior-period EPS data
has been restated to conform to the provisions of SFAS 128. See Note 12 for the
computation and reconciliation of the numerators and the denominators of the
basic and diluted per-share computation.
Foreign Currency Translation
Financial statements of foreign subsidiaries not maintained using U.S. dollars
are remeasured into the U.S. dollar functional currency for consolidation and
reporting purposes. Assets and liabilities of non-U.S. operations are translated
into U.S. dollars at the exchange rate in effect at the balance sheet date.
Revenues and expenses of non-U.S. operations are translated at the weighted
average exchange rate during the year. Resulting translation adjustments are
reflected in stockholders' equity. Realized foreign currency gains and losses
are included in results of operations.
11
<PAGE> 13
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - NOTES RECEIVABLE
Notes receivable consisted of the following:
<TABLE>
<CAPTION>
December 31, December 31,
(dollars in thousands) 1997 1996
---- ----
<S> <C> <C>
Note receivable, monthly installments of $1
through September 1999, bearing interest of 7% $ 19 $ 30
Notes receivable from two directors bearing
interest at prime, due on demand - 222
Note receivable bearing interest at prime plus 1%, interest only through January
1998, thereafter due in equal annual installments through
January 2005 54 54
Note receivable from former employee bearing
interest at 4.66% due in equal monthly installments 6 -
------ -----
through April 2002 79 306
Less current portion 12 232
------ -----
$ 67 $ 74
====== =====
</TABLE>
The prime rate of interest at December 31, 1997, was 8.5%.
12
<PAGE> 14
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31, December 31,
(dollars in thousands) 1997 1996
---- ----
<S> <C> <C>
Land and buildings $22,653 $22,653
Furniture and equipment 19,838 16,814
Leasehold improvements 2,655 3,900
-------- --------
45,146 43,367
Less accumulated depreciation and amortization 15,802 15,050
------- -------
$29,344 $28,317
======= =======
</TABLE>
13
<PAGE> 15
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INVESTMENTS
The amortized cost and estimated market value of investment securities as
of December 31, 1997, and 1996, were (dollars in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
1997 Cost Gains Losses Fair Value
---- ---- ----- ------ ----------
<S> <C> <C> <C> <C>
Tax-exempt bonds:
Maturing within 1 year $2,524 $114 - $ 2,638
Maturing after 1 through 5 years 3,277 193 ($ 2) 3,468
Maturing after 5 through 10 years 1,407 32 (2) 1,436
Maturing after 10 years 2,681 301 (18) 2,965
------- ---- ---- -------
$9,889 $640 ($22) $10,507
======= ==== ==== =======
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
1996 Cost Gains Losses Fair Value
---- ---- ----- ------ ----------
<S> <C> <C> <C> <C>
Tax-exempt bonds:
Maturing within 1 year $ 3,252 $ 46 $ 7 $ 3,291
Maturing after 1 through 5 years 4,823 225 2 5,046
Maturing after 5 through 10 years 407 12 4 415
Maturing after 10 years 2,410 214 26 2,598
------- ---- --- -------
$10,892 $497 $39 $11,350
======= ==== === =======
</TABLE>
14
<PAGE> 16
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - LONG-TERM DEBT
In March 1996, the Company exercised its option to acquire the corporate
headquarters for $20,617,000. The Company financed $11,212,000 of the purchase
price with a conventional mortgage. The mortgage loan, which bears interest at a
fixed rate of 8.93%, is scheduled for ten years of payments on an amortization
of 25 years. Annual principal payments are approximately $147,000, with a final
payment of $9,307,000 due March 2006. The principal balance of the mortgage loan
at December 31, 1997, was $10,991,000. The remainder of the purchase price of
the corporate headquarters facility was financed under a four-year $12,000,000
revolving line of credit. Principal payments are scheduled quarterly at $150,000
plus interest with the final reduction of unpaid principle and interest due
April 1, 2001. Interest on the bank debt is based on either the bank's prime
rate or LIBOR plus 1.0% at the option of the Company. The principal balance of
the bank loan at December 31, 1997, was $7,438,000. The four-year revolving line
of credit with the bank requires the Company to maintain certain levels of debt
coverage, liabilities to net worth, and current assets to current liabilities.
The bank changes an unused facility fee of .38% annually.
Maturities of long-term debt for years ending December 31, are as follows:
<TABLE>
<S> <C>
1998 $ 747,000
1999 760,000
2000 775,000
2001 792,000
2002 and thereafter 15,126,000
------------
$ 18,200,000
============
</TABLE>
Based on the borrowing rates currently available to the Company for similar
types of borrowing arrangements, the fair value of the mortgage loan would be
$11,876,000. The bank debt associated with the purchase of the Company's
corporate headquarters is at an adjustable rate; therefore the carrying value
approximates fair value.
15
<PAGE> 17
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - EMPLOYEE BENEFIT PLANS
The Company has a defined benefit pension plan to provide pension benefits to
substantially all employees. The benefits are based on years of service and the
employee's compensation. The Company's funding policy is to make annual
contributions that meet or exceed minimum funding requirements.
Statement of Financial Accounting Standards No. 87, "Employers' Accounting for
Pension Costs," requires that an additional pension liability be recognized when
the accumulated pension benefit obligation exceeds the fair value of pension
plan assets. At December 31, 1995, this liability was the sum of the unfunded
accumulated benefit obligation and the prepaid pension asset. Shareholders'
equity was reduced by a corresponding amount, net of tax. No additional
liability was required at December 31, 1996, or 1997.
The following table sets forth the plan's funded status and amounts recognized
in the Company's financial statements:
<TABLE>
<CAPTION>
December 31, December 31,
(dollars in thousands) 1997 1996
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $5,085 $4,465
====== ======
Accumulated benefit obligation $5,696 $4,708
====== ======
Projected benefit obligation $7,072 $5,860
Plan assets at fair value, primarily stocks
and bonds 6,216 5,211
------ -----
Excess (deficit) of plan assets over projected
benefit obligation (856) (649)
Unrecognized net loss from experience,
different from actuarial assumptions 3,211 2,972
Prior service cost (credit) not yet recognized
in net periodic pension cost (52) (65)
Unrecognized transition asset
being amortized over 15 years (10) (13)
------ ------
Net pension asset $2,293 $2,245
====== ======
</TABLE>
16
<PAGE> 18
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - EMPLOYEE BENEFIT PLANS (Continued)
Pension costs are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
(dollars in thousands) 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Benefit cost for service during the year $395 $453 $255
Interest cost on projected benefit
obligations 483 488 378
Actual return on plan assets (951) (667) (611)
Net amortization and deferral 525 510 367
----- ----- -----
$452 $784 $389
==== ==== ====
</TABLE>
The expected long-term rate of return on assets was 12 % for the years ended
December 31, 1997, 1996, and 1995. The rate of salary progression was 3.9% for
the years ended December 31, 1997, 1996, and 1995. The settlement rates used to
determine the actuarial present value of projected benefits were 7.25% for the
year ended December 31, 1997, 7.75% for the year ended December 31, 1996, and
7.25% for the year ended December 31, 1995. The vested benefit obligation
includes the actuarial present value of the vested benefits to which an active
employee is entitled, if employment is terminated immediately. Benefits are
payable monthly commencing on the latter of age 65, 66, or 67 (in accordance
with Social Security retirement age policy), or the participant's date of
retirement.
Additionally, all salaried employees are eligible for participation in the
employer stock ownership plan (ESOP), the fully insured health and benefit
contract in 1997 and 1996, and the health and benefit trust in 1995. The
ESOP/401(k) allows employer contributions under Section 401(k) of the Internal
Revenue Code. Company contributions are determined by the Compensation Committee
of the Board of Directors based on the performance of the Company. The Company
absorbs the costs incurred for the administration of the ESOP/401(k). The health
and benefit trust charged health costs, as incurred, based upon amounts required
to pay insurance premiums and fund medical claims and administrative expenses
incurred. On January 1, 1996, the Company entered into a fully insured health
and benefit contract with a major insurance carrier. Included in the Company's
results of operations are the following costs:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
(dollars in thousands) 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Pension plan $ 452 $ 784 $ 389
ESOP/401(k) 317 552 345
Health and benefit 1,786 1,468 1,455
</TABLE>
17
<PAGE> 19
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - EMPLOYEE BENEFIT PLANS (Continued)
In January 1993, the Company loaned $2,500,000 to the ESOP for the acquisition
of 458,277 shares of the Company's common stock. The loan is being repaid over a
15-year period. The rate of interest on the loan is 7.04%. As of December 31,
1997, and 1996, shares allocated to plan participants totaled 152,760 and
122,208 shares, respectively. All remaining shares from the January 1993
acquisition are committed to be released ratably over the remaining life of the
ESOP loan. Dividends on allocated shares are paid to participant accounts.
Through 1996, dividends on the unallocated shares were reinvested in the
Company's common stock and allocated to participants. Beginning in 1997,
dividends on unallocated shares were used to repay the loan. The fair market
value of the unearned ESOP shares at December 31, 1997, and 1996, was $5,499,000
and $4,257,000, respectively.
Prior to October 1993, the Company had individual supplemental executive
retirement plans for 27 executives. In October 1993, the Compensation Committee
of the Board of Directors discontinued the plans for all participants except the
Chairman Emeritus and two Senior Vice Presidents. During 1995, one Senior Vice
President was reinstated and another was added to the plan. As of December 31,
1997, of the five participants, the Chairman Emeritus and two former Senior Vice
Presidents, or their beneficiaries, are vested in the plan and drawing benefits.
As of December 31, 1997, and 1996, the Company has accrued $1,904,000 and
$2,047,000, respectively, for benefits due under the plans. The Company
recognizes annual service cost for the plans, plus interest on the accumulated
balance. Amounts expensed, including interest, for the years ended December 31,
1997, 1996, and 1995, were $195,000, $229,000, and $372,000, respectively.
The Company follows the provisions of SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," which requires recognition of the
cost of providing postretirement benefits, such as medical and life insurance
coverage, over the employee service period based upon the estimated amount and
timing of future benefit payments. The Company currently provides medical and
life insurance benefits for five retired employees. Executive officers and their
dependents are also entitled to receive benefits upon retirement. The costs of
these benefits charged to expense during the years ended December 31, 1997,
1996, and 1995, were approximately $16,000, $16,000, and $12,000, respectively.
The Company's obligation under SFAS No. 106 at December 31, 1997, and 1996, was
not material.
18
<PAGE> 20
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Through March 1996, the Company leased space for its corporate headquarters
facility under an operating lease. Company exercised an option to purchase the
facility in March 1996. The Company also leases office space and certain
equipment under operating lease agreements that have an initial term or
remaining noncancelable lease term in excess of one year. Minimum annual future
rentals under the terms of the above leases are as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1998 $2,037,000
1999 1,233,000
2000 845,000
2001 594,000
2002 202,000
-----------
$4,911,000
===========
</TABLE>
Lease expense for facilities and equipment was $1,841,000, $2,559,000, and
$4,959,000, for the years ended December 31, 1997, 1996, and 1995, respectively.
The Company provides a letter of credit from a bank for $106,000, in lieu of
paying deposits for facility rentals.
19
<PAGE> 21
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - CONCENTRATIONS OF CREDIT RISK
The Company provides marketing information services primarily to
consumer-product companies. The Company performs ongoing credit evaluations of
its customers. The Company's ten largest customers accounted for approximately
48% of sales in 1997 and approximately 54% and 52% of trade accounts receivable
and work in process, respectively, at December 31, 1997. No single customer
accounted for 10% or more of total revenues in 1997.
Financial instruments that potentially subject the Company to concentration of
credit risk consist principally of cash investments. The Company maintains cash
and cash equivalents in accounts with major financial institutions in excess of
the amount insured by the Federal Deposit Insurance Corporation.
Management believes credit risk related to these deposits is minimal.
The Company invests its excess cash in deposits with major banks, government
securities, tax-exempt securities, and money market type securities. The Company
has $6,803,000 of its, $9,889,000 investment in tax-exempt bonds in the state of
Texas.
20
<PAGE> 22
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - INCOME TAXES
Income tax expense on income before income taxes consists of (dollars in
thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current provision:
Federal $2,794 $2,373 $ 1,556
State 397 259 169
------ ------ ------
3,191 2,632 1,725
Deferred provision (245) 54 -
------ ------ ------
Provision for income taxes charged
to operations 2,946 2,686 1,725
Stockholders' equity - pension component - 939 (939)
------ ------ -------
Comprehensive provision for income taxes $2,946 $3,625 $ 786
====== ====== =======
</TABLE>
Reconciliations of the U.S. corporate income tax rate and the effective tax rate
on income before income taxes are summarized below (dollars in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
U.S. corporate tax rate 34% 34% 34%
Income before taxes $9,021 $7,376 $5,000
------ ------ ------
Tax expense at statutory rates 3,067 2,508 1,700
Tax-exempt income (200) (203) (227)
Officers' life insurance (247) 41 (188)
Meals and entertainment 43 82 60
State income tax (135) (88) (23)
Differences between financial reporting
and tax bases of fixed assets 13 14 (28)
Other 8 73 262
------ ------ ------
Federal income tax 2,549 2,427 1,556
State income tax 397 259 169
------ ------ ------
Provision for income taxes charged
to operations 2,946 2,686 1,725
Stockholders' equity - pension component - 939 (939)
------ ------ ------
Comprehensive provision for income
taxes $2,946 $3,625 $ 786
====== ====== ======
</TABLE>
21
<PAGE> 23
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - INCOME TAXES (Continued)
The components of the net deferred tax liability as of December 31, 1997, and
1996, are as follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
Current Noncurrent Current Noncurrent
<S> <C> <C> <C> <C>
ASSETS
Differences between book and tax
bases of property and equipment,
excluding building - $ 427 - $338
Allowance for expenditures billable
to clients $284 - $179 -
Accounts receivable allowance for
doubtful accounts 116 - 82 -
Liability for director retirement plan - 237 - 226
Other liabilities - 294 - 128
Unrecognized net pension obligation - 177 - -
--- ----- ---- ------
Deferred tax asset 400 1,135 261 692
--- ----- ---- ------
LIABILITIES
Differences between financial reporting
and tax bases of building acquired - 928 - 937
Differences between financial reporting
and tax reporting of sales of fixed
assets - 232 - 215
Prepaid pension asset - 792 - 719
Excess tax over book amortization
of intangibles - 3 - 7
Deferred tax liability - 1,955 - 1,878
---- ----- ---- ------
Net current/noncurrent deferred tax
asset (liability) $400 ($820) $261 ($1,186)
---- ----- ---- ------
Net deferred tax liability ($420) ($ 925)
----- ======
</TABLE>
22
<PAGE> 24
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - STOCK OPTIONS AND WARRANTS
1983 Stock Option Plan
In March 1993, the 1983 Incentive Stock Option Plan approved by shareholders was
terminated, leaving no additional options available for grant under the plan.
The 1983 Plan provided for issuance of shares upon exercise of the options and
Limited Stock Appreciation Rights (Limited SARs).
Shares under option relating to the 1983 Stock Option Plan for the periods ended
December 31 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
Number Weighted Number Weighted Number Weighted
Of Shares Average Of Shares Average Of Shares Average
Underlying Exercise Underlying Exercise Underlying Exercise
Options Prices Options Prices Options Prices
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of period 44,868 $5.19 407,817 $ 4.21 573,789 $4.23
Options canceled (900) 5.17 (5,895) 5.17 (14,344) 4.80
Options exercised (22,828) 5.44 (357,054) 4.07 (151,628) 4.50
Options outstanding at
end of period 21,140 4.94 44,868 5.19 407,817 4.21
Options exercisable at
end of period 21,140 4.94 34,668 5.26 363,117 4.11
</TABLE>
23
<PAGE> 25
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - STOCK OPTIONS AND WARRANTS (Continued)
1991 Nonstatutory Executive Stock Plan
On April 19, 1991, the Board of Directors adopted a Nonstatutory Executive Stock
Plan, reserving 360,000 shares of the Company's common stock for issuance. The
term of each option shall not exceed ten years. The Committee may set the price,
vesting requirement, and exercise terms of options granted under the Plan at its
discretion. In September 1994, the Board of Directors amended the plan changing
the aggregate number of shares available for grant to 810,000 shares of common
stock. As of December 31, 1997, 234,780 shares had been exercised and 184,305
shares remained available for grant. There were no stock options granted under
the 1991 Nonstatutory Executive Stock plan during 1997.
Shares under option relating to the 1991 Nonstatutory Executive Stock Option
Plan for the periods ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
Number Weighted Number Weighted Number Weighted
Of Shares Average Of Shares Average Of Shares Average
Underlying Exercise Underlying Exercise Underlying Exercise
Options Prices Options Prices Options Prices
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of period 612,795 $7.91 465,525 $ 6.39 554,325 $6.35
Options granted - 188,250 11.26 - -
Options canceled (15,600) 7.46 (22,980) 6.33 (77,400) 6.03
Options exercised (205,380) 6.56 (18,000) 6.02 (11,400) 6.33
Options outstanding at
end of period 391,815 8.62 612,795 7.91 465,525 6.39
Options exercisable at
end of period 146,925 7.39 298,260 6.91 234,543 6.46
</TABLE>
24
<PAGE> 26
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - STOCK OPTIONS AND WARRANTS (Continued)
1997 Stock Option Plan
The M/A/R/C Group 1997 Stock Option Plan was approved by shareholders on April
17, 1997. The plan presently provides for the issuance of Incentive Stock
Options, Nonincentive Stock Options, and Limited SARs The aggregate number of
shares of common stock which may be issued upon exercise of options granted
under the plan is 500,000. During 1997, 244,930 options were granted at $18.50
per share and 14,000 options were granted at $19.63 under the plan leaving
241,070 underlying shares available for grant. As of December 31, 1997, none of
the outstanding options to acquire 258,930 shares were exercisable.
The following summarizes information about all stock options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------- -------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------ ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$4.33 to $6.33 230,945 2.61 $ 6.20 136,055 $ 6.11
$11.17 to $12.33 182,250 4.29 $ 11.27 32,250 $ 11.17
$18.50 to $19.63 258,930 7.45 $ 18.56 - -
- ---------------- ------- ---- ------- ------- -------
$4.33 to $19.63 672,125 4.93 $ 12.33 168,305 $ 7.08
</TABLE>
In 1995, the Financial Accounting Standards Board issued Statement No. 123,
"Accounting for Stock-Based Compensation," which provides the Company the option
of recognizing the cost of options granted based on fair values of the options
at the time of grant. The Company has decided not to elect the cost-recognition
provisions of SFAS 123.
The weighted-average fair value of the 258,930 options granted during 1997 was
$7.51 per option. The weighted-average fair value of the 188,250 options granted
during 1996 was $3.71 per option. The fair value of each stock option granted is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions for grants in 1997 and 1996: dividend
yield between 2% and 2.4%; risk-free interest rates range from 5.5% to 6.3%;
expected lives of the options range from four to five years; and volatility
factors from 35% to 60%.
Had the compensation expense for the 258,930 options granted during 1997 and the
188,250 options granted during 1996 been based on the fair value pricing model
described above, additional compensation expense (net of tax) of $370,000 and
$66,000 would have been recognized in 1997 and 1996, respectively.
The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of future amounts. SFAS 123 does not apply to awards prior to 1995. The Company
anticipates making awards in the future under its stock-based compensation
plans.
25
<PAGE> 27
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - STOCK OPTIONS AND WARRANTS (Continued)
Stock Warrants
The Company issued warrants on 500,400 shares of its common stock to seven
senior executives. The warrants were sold for their estimated fair market value
of $.55 each. Each warrant represented the right to purchase one share of the
Company's common stock at prices ranging from $4.30 to $5.00 per share prior to
March 1, 1997. On January 18, 1993, the Board of Directors authorized the
issuance of 500,400 shares of restricted common stock of the Company. Such
shares were issued in tandem with the 500,400 warrants. The exercise of a
warrant resulted in the corresponding loss of a restricted share.
All warrants for the 500,400 shares of common stock have been exercised, 51,300
of those in 1997. Concurrent with the exercise of the warrants, an equal number
of the restricted shares were returned to the Company and retired.
The Company has additional warrants on its common stock issued as follows:
<TABLE>
<CAPTION>
1997
----
Warrants Exercise Price
-------- --------------
<S> <C> <C>
Warrants outstanding at beginning
of period 75,000 $ 7.17
Warrants granted 57,500 $14.88 to $18.50
Warrants exercised (26,000) $ 7.17
Warrants outstanding at the end of
the period 106,500 $ 7.17
</TABLE>
Restricted Stock
In January 1996, the Company issued 315,000 shares of restricted common stock
valued at the then market price of $10 per share to the Chief Executive Officer
and one Executive Vice President of the Company. The related deferred
compensation is presented as a reduction to shareholders' equity. As the
restriction on these shares lapses ratably over a 15-year period, compensation
expense of $215,000 is being recognized annually.
26
<PAGE> 28
NOTE 11 - RELATED PARTY TRANSACTIONS
At December 31, 1997, and 1996, the Company had outstanding loans of $0 and
$316,000, respectively, to employees, directors, and officers of the Company.
The loans were for various periods up to one year and bore interest at the prime
rate.
The Company entered into a noncompetition agreement with the Vice Chairman of
the Board of Directors, under which the Vice Chairman provided certain
consulting services to the Company. It provided for the Company to pay fees of
$60,000 during each calendar year. The Company also provided certain benefits to
the Vice Chairman including an automobile, health insurance coverage, life
insurance coverage, and operating expenses. The agreement expired December 31,
1997.
The Company has a director retirement plan for all directors who are not
employees of the Company. Benefits are payable to any director who completes
five years or more of service when the director retires from the Board of
Directors and continue for a period of time equal to the term of service on the
Board. The directors' benefit under the plan is equal to the average of the
annual retainer and committee fees paid during the three years served with the
highest compensation. The amounts expensed in 1997, 1996, and 1995, were
approximately $70,000, $122,000, and $122,000, respectively. In January of 1997,
the Board of Directors approved the discontinuation of the retirement plan for
all outside directors whose initial term of service begins after January 24,
1997.
27
<PAGE> 29
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - EARNINGS PER SHARE
Computation of basic and diluted earnings per share in accordance with SFAS 128
are as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1997 December 31, 1996 December 31, 1995
-----------------------------------------------------------------
Basic Diluted Basic Diluted Basic Diluted
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income available to common
shareholders $6,075 $6,075 $4,690 $4,690 $3,275 $3,275
====== ====== ====== ====== ====== ======
Weighted average number of
common shares outstanding 4,785 4,785 4,388 4,388 3,873 3,873
====== ====== ======
Effect of dilutive securities:
Dilutive stock options and
warrants 249 308 559
------ ------ -----
5,034 4,696 4,432
====== ====== =====
Earnings per share:
Net income $ 1.27 $ 1.21 $ 1.07 $ 1.00 $ .85 $ .74
====== ====== ====== ====== ====== ======
</TABLE>
For the effect of SFAS 123 on the earnings per share, see Note 10.
28
<PAGE> 30
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - INTERIM FINANCIAL INFORMATION
(Unaudited)
The following represents unaudited interim financial information for the years
ended December 31, 1997, and 1996 (dollars in thousands, except per share and
share amounts).
<TABLE>
<CAPTION>
Year Ended December 31, 1997
------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $ 22,684 $ 26,019 $ 23,747 $ 24,259
Costs and expenses 20,472 23,529 21,187 22,140
-------- -------- -------- --------
Operating income 2,212 2,490 2,560 2,119
Interest and other income
(expense) (163) 340 (270) (267)
-------- -------- -------- --------
Income before taxes 2,049 2,830 2,290 1,852
Income taxes 738 765 802 641
-------- -------- -------- --------
Net income $ 1,311 $ 2,065 $ 1,488 $ 1,211
======== ======== ======== ========
Earnings per share (diluted) $ .27 $ .41 $ .29 $ .24
======== ======== ======== ========
Weighted average shares
outstanding (diluted) 4,858,600 5,062,552 5,170,366 5,135,300
</TABLE>
29
<PAGE> 31
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - INTERIM FINANCIAL INFORMATION (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
----------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $ 19,292 $ 22,240 $ 22,184 $ 21,743
Costs and expenses 18,315 19,910 19,961 19,301
-------- -------- -------- --------
Operating income 977 2,330 2,223 2,442
Interest and other income
(expense) 169 (311) (326) (128)
-------- --------- --------- ---------
Income before taxes 1,146 2,019 1,897 2,314
Income taxes 412 727 683 864
-------- -------- -------- --------
Net income $ 734 $ 1,292 $ 1,214 $ 1,450
======== ======== ======== ========
Earnings per share (diluted) $ .16 $ .27 $ .27 $ .30
======== ======== ======== ========
Weighted average shares
outstanding (diluted) 4,609,500 4,755,000 4,705,500 4,917,300
</TABLE>
30
<PAGE> 32
THE M/A/R/C GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - SUBSEQUENT EVENT
On November 3, 1997, the Company acquired 25% of Intelligent Database Marketing
Limited (idm), a database marketing company headquartered in Middlesbrough,
England. As part of the agreement, the Company had the option to acquire the
remaining 75% of idm over the next two years. The Company paid $1,300,000 in
cash for its 25% interest. On January 9, 1998, the Company announced it had
notified shareholders of idm of its intention to exercise its option to acquire
the remaining 75% effective January 31, 1998. The acquisition, anticipated to
close in late April, is expected to be "earnings neutral" to "slightly
accretive" in 1998. Intelligent Database Marketing generated revenues of
approximately $4,000,000 in 1996.
31
