[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] MAY-31-1997
[PERIOD-END] AUG-31-1997
[CASH] 746
[SECURITIES] 0
[RECEIVABLES] 5933
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 8988
[PP&E] 4341
[DEPRECIATION] 3791
[TOTAL-ASSETS] 9738
[CURRENT-LIABILITIES] 8353
[BONDS] 4629
[PREFERRED-MANDATORY] 0
[PREFERRED] 5700
[COMMON] 36
[OTHER-SE] (8996)
[TOTAL-LIABILITY-AND-EQUITY] 9738
[SALES] 0
[TOTAL-REVENUES] 7969
[CGS] 0
[TOTAL-COSTS] 4506
[OTHER-EXPENSES] 3062
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 125
[INCOME-PRETAX] 276
[INCOME-TAX] 0
[INCOME-CONTINUING] 276
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 276
[EPS-PRIMARY] .03
[EPS-DILUTED] 0
/TABLE
<PAGE>
SEC Filing No. 0000823553
FORM 10-Q/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended August 31, 1996
Commission file number 1-11636 and 0-21050
ENCORE MARKETING INTERNATIONAL, INC.
(Exact name of Registrant as specified in its Charter)
Delaware 52-1439053
(State or other jurisdiction of (I.R.S.
Employer
incorporation or organization) Identification
No.)
4501 Forbes Boulevard, Lanham, Maryland
20706
(Address of Principal Executive Offices) (Zip
Code)
Registrant's telephone number, including area code 301-459-8020
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which
registered
Common Stock $.01 Par Value NASD Bulletin Board
4% Series A Convertible NASD Bulletin Board
Participating Preferred Stock
Par Value $10.00 per share
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 twelve (12)
months (or for such shorter period that the registrant was
required
to file such report(s)), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
As of September 30, 1996, there were 3,231,000 shares of Common
Stock $.01 par value, outstanding.
Number of pages in the report:
11
<PAGE>
FORM 10-Q/A
ENCORE MARKETING INTERNATIONAL, INC. AND SUBSIDIARIES
For the three months ended August 31, 1996
PART I - Financial Information
Item 1. Financial Statements.
General
The information contained in this report is furnished for the
Registrant, Encore Marketing International, Inc. and
subsidiaries. The unaudited, condensed consolidated financial
statements have been prepared in accordance with the instructions
to Form 10-Q and, therefore, omit or condense certain footnotes
and other information normally included in financial statements
prepared in accordance with generally accepted accounting
principles. In the opinion of management, the information in
this report reflects all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the
financial information for the interim periods presented. Results
of operations for the three months ended August 31, 1996, will
not be necessarily indicative of the results for the fiscal year
ending May 31, 1997. This report should be read in conjunction
with the Annual Report on Form 10-K for the year ended May 31,
1996.<PAGE>
FORM 10-Q/A
ENCORE MARKETING INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
August 31 May 31
1996 1996
ASSETS: (unaudited)
Current assets:
Cash and cash equivalents $ 746,000 $ 632,000
Cash and cash equivalents,
restricted 765,000 765,000
Accounts receivable
Membership 5,484,000 6,984,000
Other 449,000 380,000
Supplies and deferred
solicitations 1,376,000 1,633,000
Prepaid expenses 168,000 154,000
Total current assets 8,988,000 10,548,000
Property and equipment:
Furniture and equipment 2,354,000 3,750,000
Leasehold improvements 184,000 225,000
Furniture and equipment
under capital leases 1,803,000 2,028,000
4,341,000 6,003,000
Less accumulated depreciation
and amortization (3,791,000) (5,245,000)
Net property and equipment 550,000 758,000
Other assets:
Deferred financing cost, net of
amortization 49,000 59,000
Other 151,000 125,000
Total other assets 200,000 184,000
Total assets $ 9,738,000 $ 11,490,000
<PAGE>
FORM 10-Q/A
ENCORE MARKETING INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
August 31 May 31
1996 1996
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Current Liabilities:
Current portion of
Capital lease obligations $ 166,000 $ 171,000
Notes payable 833,000 805,000
Accounts payable 2,569,000 3,600,000
Other current liabilities 2,257,000 2,281,000
Reserve for cancellations 2,528,000 3,088,000
Total current liabilities 8,353,000 9,945,000
Long Term Debt, Net of Current Portion:
Capital lease obligations 300,000 338,000
Notes payable 4,329,000 4,530,000
Other 16,000 31,000
4,645,000 4,899,000
Stockholders' equity (deficit):
4% Series A Preferred stock 5,700,000 5,700,000
Common stock 36,000 36,000
Capital in excess of par 341,000 341,000
Accumulated deficit (5,524,000) (5,618,000)
553,000 459,000
Treasury stock at cost (3,813,000) (3,813,000)
Total stockholders' equity
(deficit) (3,260,000) (3,354,000)
Total liabilities and
stockholders' equity $ 9,738,000 $ 11,490,000
<PAGE>
FORM 10-Q/A
ENCORE MARKETING INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 1996 AND AUGUST 31, 1995
1996 1995
(unaudited) (unaudited)
Revenues $ 7,969,000 $ 10,562,000
Costs and expenses:
Direct membership fulfillment 932,000 1,474,000
Advertising and promotion 3,574,000 5,328,000
General and administrative
expenses 3,062,000 3,444,000
Total costs and expenses 7,568,000 10,246,000
Income from operations 401,000 316,000
Interest expense 125,000 100,000
Income before income taxes 276,000 216,000
Income tax expense - -
Net income 276,000 216,000
Preferred dividend requirement 182,000 182,000
Net income applicable to common stock $ 94,000 $ 34,000
Net income per share $ .03 $ .01
Weighted average number of
shares outstanding 3,231,000 3,232,000
<PAGE>
FORM 10-Q/A
ENCORE MARKETING INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED AUGUST 31, 1996 AND AUGUST 31, 1995
1996 1995
(unaudited) (unaudited)
Cash Flows From Operating Activities:
Net income $ 276,000 $ 216,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 225,000 174,000
Changes in operating assets and liabilities:
Decrease in accounts
receivable 1,431,000 3,313,000
Decrease (increase) in supplies, deferred
solicitations and prepaid expenses
243,000 (162,000)
Decrease in accounts payable
and other current
liabilities (1,055,000) (542,000)
Decrease in reserve
for cancellations (560,000) (2,036,000)
Net cash provided by operating
activities 560,000 963,000
Cash Flows From Investing Activities:
Purchases of property and equipment (7,000) (23,000)
(Increase) decrease in other assets (26,000) 2,000
Net cash used in investing activities (33,000) (21,000)
Cash Flows From Financing Activities:
Repayments under capital
lease obligations (43,000) (57,000)
Payments on notes payable (173,000) (258,000)
Payments on notes payable to
related party -- (28,000)
Proceeds of loan from related party -- 600,000
Decrease in other long-term debt (15,000) (41,000)
Preferred dividend paid (182,000) (182,000)
Net cash (used in) provided
by financing activities (413,000) 34,000
Increase in cash and cash equivalents 114,000 976,000
Cash and cash equivalents, beginning
of period 632,000 445,000
Cash and cash equivalents, end of period $ 746,000 $ 1,421,000
<PAGE>
FORM 10-Q/A
ENCORE MARKETING INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Cash and cash equivalents:
Restricted cash primarily represents amounts held in
interest-bearing accounts pursuant to arrangements with
credit card processors.
2. Earnings per share:
Earnings per share are based on the weighted average
shares outstanding during each period after giving
appropriate effect for preferred stock dividends. Fully
diluted earnings per share is not presented since the
assumed conversion of the Series A Preferred Stock after
adjustment for preferred dividends is not material.
3. In September 1996, the Company closed its facility in
North Huntingdon, Pennsylvania. As a result, the Company
has included $166,000 of costs associated with this in
general and administrative expenses for the first quarter
ended August 31, 1996.
<PAGE>
FORM 10-Q/A
ENCORE MARKETING INTERNATIONAL, INC. AND SUBSIDIARIES
For the Three Month Period Ended August 31, 1996
PART I - Financial Information
Item 2. Management's discussion and analysis of financial
condition and results of operations.
Three months ended August 31, 1996 (first quarter) as compared to
the three months ended August 31, 1995 (first quarter)
Revenues during the first quarter of fiscal 1997
decreased $2,593,000 (24.6%) to $7,969,000 from $10,562,000 for
the
corresponding period in fiscal 1996. Renewal revenues decreased
by
$154,000 (2.7%) to $5,452,000 for the first quarter of fiscal
1997
from $5,606,000 during the first quarter of fiscal 1996.
Revenues
from new member acquisitions decreased by $2,559,000 (59.3%) to
$1,759,000 during the first quarter of fiscal 1997 from
$4,318,000
for the corresponding period of 1996. The decline was a result
of
a decrease in response rates for mail solicitations,
unsatisfactory
results of new mail packages and a decrease in telemarketing.
The
Company is revising and will continue testing new packages.
Revenues from other sources increased to $758,000 for the first
quarter of 1997 from $638,000 for the corresponding period in
1996.
Direct membership fulfillment, which relates to
membership activity and includes the cost of directories,
membership cards, postage, printed materials, premiums and cash
rebates, decreased by $542,000 (36.8%) to $932,000 during the
first
quarter of fiscal 1997 from $1,474,000 for the corresponding
period
of the previous year. This decrease is principally due to a
decrease in cash rebates and reduced membership fulfillment
material.
Advertising and promotion, which are costs incurred in
acquiring members and includes solicitation postage, printed
materials, telemarketing, solicitation premiums and commissions
decreased by $1,754,000 (32.9%) to $3,574,000 during the first
quarter of fiscal 1997 from $5,328,000 during the first quarter
of
fiscal 1996. This decrease is a result of a decrease in new
member
acquisition programs.
General and administrative expenses decreased by
$382,000
(11.1%) to $3,062,000 during the first quarter of fiscal 1997
from
$3,444,000 during the first quarter of fiscal 1996. As a
percentage of revenues, general and administrative expenses were
37.9% versus 32.6% during the first quarter of fiscal 1997 and
1996, respectively. General and administrative expenses for the
first quarter of fiscal year 1997 include $166,000 in costs
associated with the closing of the Company's facility in North
Huntingdon, Pennsylvania.
Interest expense for the first quarter of fiscal 1997
increased by $25,000 (25.0%) to $125,000 as compared to $100,000
for the first quarter of 1996.
As a result of the above, the Company had net income
of
$276,000 for the first quarter of 1997 as compared to net income
of
$216,000 for the first quarter of 1996.
Liquidity and Capital Resources
For the three months ended August 31, 1996 cash flow
provided by operating activities was $560,000. Cash of $33,000
was
used in investing activities and $413,000 was used in financing
activities for the first three months of fiscal 1997. As a
result,
at August 31, 1996, cash and cash equivalents increased by
$114,000
to $746,000 as compared to $632,000 at May 31, 1996.
<PAGE>
FORM 10-Q/A
ENCORE MARKETING INTERNATIONAL, INC. AND SUBSIDIARIES
For the Three Month Period Ended August 31, 1996
and August 31, 1996
PART II - Other Information
Item 6. Exhibits and Other Reports on Form 8-K:
(a) Exhibits
none
(b) Reports on Form 8-K
none
<PAGE>
FORM 10-Q/A
ENCORE MARKETING INTERNATIONAL, INC. AND SUBSIDIARIES
For the Three Month Period Ended August 31, 1996
and August 31, 1996
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.
ENCORE MARKETING INTERNATIONAL,
INC.
AND SUBSIDIARIES
(Registrant)
October 15, 1996 By: /S/
Date Stanley Plotnick
President
By: /S/
Paula Jones
Controller
