_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
_________________________
For the Quarterly Period ended Commission File Number
June 30, 1995 0-12926
_________________________
JMC GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2627415
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9710 Scranton Road, Suite 100, San Diego, California 92121
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 619-450-0055
_________________________
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 reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---------- ----------
As of June 30, 1995, the registrant had 6,198,898 shares of
its common stock, $.01 par value, issued and outstanding.
_________________________________________________________________
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements as of and for the periods
ended June 30, 1995 reflect all adjustments which are,
in the opinion of management, necessary for a fair
presentation of the financial position and the results
of operations for the periods presented.
The balance sheet at December 31, 1994 has been derived
from the audited financial statements at that date. It
is recommended that these financial statements be read
in conjunction with the Company's financial statements
and notes thereto included in the Company's Form 10-K
for the year ended December 31, 1994. Certain balance
sheet items at December 31, 1994 were reclassified to
conform with the format of the balance sheet at June
30, 1995.
<PAGE>
JMC GROUP,INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
1995 1994
ASSETS ------------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 2,067,700 $ 3,610,888
Short-term investments 1,000,000 536,000
Cash segregated under securities regulations 911,791 47,746
Receivables from insurance companies 1,443,488 1,425,466
Receivable from financial institution 581,275 -
Income taxes receivable 509,310 168,992
Deferred tax asset 321,572 424,584
Other assets 506,589 354,261
------------- -----------
TOTAL CURRENT ASSETS 7,341,725 6,567,937
Furniture, equipment and leasehold improvements-
net of accumulated depreciation and
amortization of $1,504,120 in 1995 and
$1,321,307 in 1994 558,921 677,155
Asset based fees purchased - net of accumulated
amortization of $341,107 in 1995 and $261,290
in 1994 1,056,023 1,135,839
------------- -----------
TOTAL ASSETS $ 8,956,669 $ 8,380,931
------------- -----------
------------- -----------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued fees to financial institutions $ 896,536 $ 978,542
Due to customers 911,791 47,746
Accrued expenses and other liabilities 789,728 878,172
Deferred tax liability 261,307 -
Accrued restructuring expenses 141,792 294,675
Allowance for contract cancellations 297,080 390,539
Accrued payroll and related expenses 314,545 531,559
------------- -----------
TOTAL CURRENT LIABILITIES 3,612,779 3,121,233
STOCKHOLDERS' EQUITY
Preferred stock, no par value; authorized
5,000,000 shares - -
Common stock, $.01 par value; authorized
20,000,000 shares; issued and outstanding
6,198,898 shares in 1995 and 1994 61,989 61,989
Additional paid-in-capital 624,851 624,851
Retained earnings 4,657,050 4,572,858
------------- -----------
TOTAL STOCKHOLDERS' EQUITY 5,343,890 5,259,698
------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $8,956,669 $ 8,380,931
------------- -----------
------------- -----------
<PAGE>
JMC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended,
June 30,
1995 1994
------------- -------------
REVENUES
Commissions $ 4,139,820 $ 9,620,564
Interest 58,717 38,568
Other 15,336 7,578
------------- -------------
TOTAL REVENUES 4,213,873 9,666,710
------------- -------------
EXPENSES
Employee compensation and benefits 2,000,526 3,510,891
Fees to financial institutions 1,871,565 3,799,992
Professional fees 161,280 526,214
Rent 134,348 174,815
Telephone 93,507 138,555
Depreciation and amortization 99,687 317,093
Other general and administrative expenses 412,027 626,184
------------- -------------
TOTAL EXPENSES 4,772,940 9,093,744
------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES (559,067) 572,966
INCOME TAX PROVISION (BENEFIT) (223,933) 317,438
------------- -------------
NET INCOME (LOSS) $ (335,134) $ 255,528
------------- -------------
------------- -------------
EARNINGS (LOSS) PER SHARE:
NET INCOME (LOSS) $ (0.05) $ 0.04
------------- -------------
------------- -------------
WEIGHTED AVERAGE SHARES 6,198,898 6,527,935
<PAGE>
JMC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended,
June 30,
1995 1994
REVENUES ------------- -------------
Commissions $ 8,694,158 $19,065,781
Interest 114,720 70,318
Other 1,358,946 57,237
------------- -------------
TOTAL REVENUES 10,167,824 19,193,336
------------- -------------
EXPENSES
Employee compensation and benefits 4,193,864 7,338,798
Fees to financial institutions 3,875,210 7,861,681
Professional fees 411,945 1,095,918
Rent 265,203 351,521
Telephone 195,247 281,301
Depreciation and amortization 202,705 638,486
Other general and administrative expenses 870,849 1,325,530
------------- -------------
TOTAL EXPENSES 10,015,023 18,893,235
------------- -------------
INCOME BEFORE INCOME TAXES 152,801 300,101
INCOME TAX PROVISION 68,609 262,412
------------- -------------
NET INCOME $ 84,192 $ 37,689
------------- -------------
------------- -------------
EARNINGS PER SHARE:
NET INCOME $ 0.01 $ 0.01
------------- -------------
------------- -------------
WEIGHTED AVERAGE SHARES 6,198,898 6,524,934
<PAGE>
JMC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended,
June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES: ------------- -----------
Net income $ 84,192 $ 37,689
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 202,705 638,486
Amortization of asset based fees purchased 79,816 87,062
Deferred tax provision 364,319 281,366
Changes in assets and liabilities:
Receivables from insurance companies (18,022) (55,196)
Receivable from financial institution (581,275) -
Income taxes receivable (340,318) (187,108)
Other assets (179,836) (127,146)
Accrued fees to financial institutions (82,006) (82,753)
Accrued expenses and other liabilities (88,444) (129,179)
Accrued restructuring expenses (152,883) -
Allowance for contract cancellations (93,459) (127,852)
Accrued payroll and related expenses (217,014) (27,225)
Reserve for discontinued operations - (412,338)
------------- -----------
NET CASH USED BY OPERATING ACTIVITIES (1,022,225) (104,194)
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture, equipment and leasehold
improvements (56,963) (107,890)
Purchase of short-term investments (464,000) (1,007,421)
Redemption of short-term investments - 2,259,055
------------- -----------
NET CASH PROVIDED (USED) BY INVESTING (520,963) 1,143,744
ACTIVITIES ------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock - (1,963,331)
Proceeds from stock options exercised - 57,360
Dividends paid - (478,391)
------------- -----------
NET CASH USED BY FINANCING ACTIVITIES - (2,384,362)
------------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,543,188) (1,344,812)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,610,888 1,418,936
------------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,067,700 $ 74,124
------------- -----------
------------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 42 $ 2,324
Income taxes $ 13,600 $ 62,425
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Second Quarter 1995 Compared to Second Quarter 1994
The Company realized a net loss of $335,000 (or $0.05 per share)
in the second quarter of 1995 compared to net income of $256,000
(or $0.04 per share) for the second quarter of last year. For
the six months ended June 30, 1995, the Company had net income of
$84,000 (or $0.01 per share) compared to net income of $38,000
(or $0.01 per share) during the first six months of 1994.
Included in the 1995 first half was revenue related to a client
financial institution's payment for the right to hire certain
employees of the Company's wholly-owned subsidiary and certain
other services in the amount of $1,308,000 ($785,000 or $0.13 per
share after tax provision of $523,000). Without this non-
recurring revenue, the Company would have posted a net loss of
$701,000 (after tax benefit of $454,000) or $0.11 per share for
the first six months of 1995.
Total revenues for the quarter ended June 30, 1995 were
$4,214,000, a decrease of $5,453,000 or 56% from $9,667,000 in
the second quarter of 1994. The reduction in revenues is
primarily a result of lower sales volume in the second quarter of
1995. Gross sales volume declined $90 million or 64% from the
second quarter of 1994, primarily as a result of the
reconfiguring of the Company's Florida operations. In addition,
interest rate competition, particularly from certificates of
deposit ("CDs"), and the ongoing regulatory climate negatively
impacted sales volume. See "Trends and Uncertainties." Annuity
sales volume decreased 72% while mutual fund sales volume
increased 26%.
Total revenues (including non-recurring revenue) for the first
six months of 1995 were $10,168,000 versus $19,193,000 for the
comparable prior year period, a decrease of $9,025,000 or 47%.
This decrease in revenues is also primarily attributable to a
decrease in overall gross sales volume, which declined 63%.
Total expenses for the quarters ended June 30, 1995 and 1994 were
$4,773,000 and $9,094,000, respectively. This $4,321,000 or 48%
decrease is attributable to:
- - A $1,928,000 or 51% reduction in fees to financial
institutions due to lower sales volume. The reduction in such
fees is not in proportion to the reduction in sales volume due to
the increase in fee rates paid to certain institutions which
extended their contracts with the Company during the second half of 1994.
In addition, asset-based fees to financial institutions increased
due to an increase in the average accumulated value of assets on
which such fees are paid since the second quarter of 1994.
- - A $1,800,000 or 41% reduction in the remaining base
operating expenses (which includes amortization of goodwill in
the second quarter of 1994) primarily due to the restructuring
and downsizing of the Company's administrative and sales
management functions during 1994 and early 1995 and a reduction
in the number of field sales personnel due primarily to the
reconfiguring of the Company's Florida operations.
<PAGE>
- - A $298,000 or 57% reduction in salespersons' commissions
also due to lower sales volume. The decrease in salespersons'
commissions is not in proportion to the decrease in sales volume
due to a revised incentive compensation structure which increased
salespersons' commission rates beginning in the first quarter of
1995.
- - A $295,000 or 85% reduction in legal fees related to the
Company's ongoing administrative proceedings with the Florida
Department of Insurance.
For the same reasons, total expenses for the six months ended
June 30, 1995 decreased $8,878,000 or 47% to $10,015,000 from
$18,893,000 in the first half of 1994.
Second Quarter 1995 Compared to First Quarter 1995
The Company realized a net loss of $335,000 (after a tax benefit
of $224,000) or $0.05 per share in the second quarter of 1995
compared to net income of $419,000 (after tax provision of
$293,000) or $.07 per share in the first quarter of 1995.
Included in the first quarter of 1995 was non-recurring revenue
related to a client financial institution's payment for the right
to hire certain employees of the Company and certain other
services in the amount of $1,308,000 (or $785,000 after tax
provision of $523,000). Without the non-recurring revenue, the
Company would have posted a net loss of $366,000 (after a tax
benefit of $230,000) or $0.06 per share for the first quarter of
1995.
Total revenues for the second quarter of 1995 were $4,214,000
compared to $4,646,000 (excluding the non-recurring revenue
mentioned above) in the first quarter of 1995. Total expenses in
the second quarter of 1995 were $4,773,000 versus $5,242,000 in
the first quarter of 1995, a reduction of $469,000.
Decreasing sales production levels, mostly due to the
reconfiguring of the Florida operations and interest rate competition,
was the primary factor contributing to the results of operations (excluding
non-recurring revenue).
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of June 30, 1995, the Company had cash and cash equivalents
plus short-term investments of approximately $3,068,000, a
decrease of approximately $1,079,000 from $4,147,000 in cash and
cash equivalents plus short-term investments as of December 31,
1994. Significant uses of such amounts include the following:
- - Payments totaling approximately $370,000 made in the first
and second quarters of 1995 which consist of payments made in
connection with the Company's restructuring and payroll related
expenses. The payroll related expenses were primarily vacation
accruals for employees terminated during the first quarter of
1995. All of these amounts were accrued as of December 31, 1994.
<PAGE>
- - Pre-tax amounts used in operations of $501,000 in the first
six months of 1995; while pre-tax income for the six months was
$153,000, pre-tax income includes revenues of $654,000 to be
received in monthly cash installments during the second half of
1995 from the previously mentioned non-recurring income of
$1,308,000 recorded in the first quarter of 1995.
Due to the Company's cash position and in light of the payments
due over the remaining six months of 1995 from one of the
Company's financial institution clients, management expects the
Company will meet its operating and capital expenditure needs for
the remainder of its current fiscal year.
TRENDS AND UNCERTAINTIES
- ------------------------
Barnett Banks, Inc.
During the past six months, the Company has restructured its relationship
with its Florida client, Barnett Banks, Inc. ("Barnett"), with
Barnett hiring many of the Company's Florida-based sales employees for an
internal sales staff. Early in the second quarter of 1995, the Company
proposed a newly-developed program of integrated support services
to Barnett. Pursuant to this proposal, Barnett would assume all
sales and marketing activities related to the annuity sales
program and the Company would continue to provide back-office and
customer support services. Discussions continue regarding the
future relationship between the Company and Barnett, if any. In the
meantime, the number of appointments made for the Company's specialists
during the second quarter was significantly lower than in the
comparable 1994 period and management cannot predict when or if
this situation will improve.
Declining Revenues
During the second quarter of 1995, the Company experienced a
continued decline in revenues due to declining sales volumes.
Gross sales volume declined 11% from the first quarter. Over 78%
of this decline resulted from a sales volume decrease of almost
26% at Barnett.
A slow start-up of Barnett's internal single point referral
program was the primary reason for the reduced sales volume in
the Company's Florida operations. The number of initial
appointments dropped 78% from the fourth quarter 1994 level. As
in past quarters, management believes that the changing
regulatory climate and negative news media coverage about the
sales of annuities, insurance and mutual funds products through
financial institutions also contributed to the low production.
Interest rate competition also affected sales volumes during the
second quarter. Our financial institution clients continued
aggressively pursuing deposit growth by offering attractive
interest rates on bank deposits which compete with the Company's
products. As a result, the spread between fixed annuity rates
offered by the Company's provider companies and one-year CD rates
available at our financial institution clients remained narrow.
<PAGE>
Most of these factors are outside the Company's control and,
accordingly, management cannot predict when or if they will
change or cease to affect sales volumes.
Regulatory Environment
The Company and its financial institution clients operate in a
highly regulated environment. Both state and federal laws govern
the manner in which insurance agencies, broker-dealers and
financial institutions may make annuities, insurance products and
mutual funds available to customers of financial institutions.
Recently, federal banking regulators, the Securities and Exchange
Commission and the National Association of Securities Dealers,
Inc. have focused attention in this area. In addition,
legislation is pending before the U.S. Congress that would impact
the ability of financial institutions to market and underwrite
annuities and insurance products as well as mutual funds and
other securities. Changes in, or interpretations of, the laws
and regulations governing these activities or changes in the
implementation or enforcement of such laws and regulations could
affect the ability of, and the means by which, the Company and
its financial institution clients make annuities, insurance
products and mutual funds available to customers of banks,
savings and loan associations and thrifts.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of JMC Group, Inc.
was held on May 1, 1995. The following matter was
submitted to a vote of security holders:
Election of Directors: James K. Mitchell, Brian J.
Finneran and Robert G. Sharp were elected to serve a
three-year term, until the annual meeting of
stockholders in 1998, or until their successors are
duly elected.
The tally of voting for each nominee was as
follows:
For Withheld
James K. Mitchell 5,060,500 68,770
Brian J. Finneran 5,084,057 45,213
Robert G. Sharp 5,084,057 45,213
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a.) Exhibits.
The following exhibit is filed herewith:
27 Financial Data Schedule
b.) Reports on Form 8-K. None.
<PAGE>
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.
Date: August 11, 1995 /s/James K. Mitchell
-------------------------------------
James K. Mitchell, Chairman and
Chief Executive Officer
Date: August 11, 1995 /s/D. Mark Carlson
-------------------------------------
D. Mark Carlson, Senior Vice
President and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from JMC Group,
Inc.'s 1995 second quarter 10-Q and is qualified in its entirety by reference to
such 10-Q filing.
</LEGEND>
<CIK> 0000746425
<NAME> JMC GROUP, INC.
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