8-K 1 grizzardsale.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 _______________________________________ FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: July 18, 2001 MARKETING SERVICES GROUP, INC. (Exact name of Registrant as specified in charter) Nevada 0-16730 88-0085608 -------------- ----------- ----------------- (State or other (Commission (I.R.S. Employer jurisdiction of File No.) Identification No.) incorporation) 333 Seventh Avenue New York, New York 10001 (Address of Principal Executive Offices) 917/339-7100 (Registrant's telephone number, including area code) 1 Item 2. Acquisition or Disposition of Assets Item 5. Other Events On July 31, 2001, Marketing Services Group, Inc. (the "Company" or "MSGI") completed its sale of all the outstanding capital stock of its Grizzard Communications Group, Inc ("Grizzard") subsidiary to Omnicom Group, Inc. The purchase price of the transaction was $91.3 million payable in cash, subject to a final working capital adjustment, pursuant to a definitive agreement entered into on July 18, 2001. The purchase price was determined through armslength negotiations between the purchaser and MSGI. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) N/A (b) Pro forma financial information (c) The following documents are filed herewith as exhibits to this Form 8-K: 2.1 Stock Purchase Agreement by and between Omnicom Group Inc. and Marketing Services Group, Inc., dated as of July 18, 2001 20.1 Press release of the Registrant dated July 18, 2001 20.2 Press release of the Registrant dated August 1, 2001 2 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 hereunto duly authorized. MARKETING SERVICES GROUP, INC. Date: August 15, 2001 By: /s/ Cindy H. Hill --------------- --------------------------------- Title: Chief Accounting Officer 3 UNAUDITED PRO FORMA FINANCIAL STATEMENTS (In thousands) On July 31, 2001, Marketing Services Group, Inc. (the "Company" or "MSGI") completed its sale of all the outstanding capital stock of its Grizzard Communications Group, Inc. ("Grizzard") subsidiary to Omnicom Group, Inc. The purchase price of the transaction was $91.3 million payable in cash, subject to a final working capital adjustment, pursuant to a definitive agreement entered into on July 18, 2001. The accompanying unaudited pro forma balance sheet gives effect to the consummation of the sale of all the outstanding capital stock of the Company's wholly owned subsidiary, Grizzard, as if the transaction occurred on March 31, 2001. The accompanying unaudited pro forma statements of operations give effect to the consummation of the sale of all the outstanding capital stock of the Company's wholly owned subsidiary, Grizzard, as if the transaction occurred as of July 1, 1999. The unaudited historical balance sheet and income statement of MSGI, less Grizzard's books and records, plus or minus the "Adjustments" arrive at the "Pro forma Adjusted" amounts. The unaudited pro forma financial statements should be read in conjunction with the accompanying notes and the historical financial statements of MSGI, and the notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" which have been previously filed. The unaudited pro forma financial statements do not purport to present the results of operations of MSGI had the transactions assumed herein occurred as of July 1, 1999, nor are they necessarily indicative of the results of operations which may be achieved in the future. 4 Marketing Services Group, Inc. Pro Forma Balance Sheet As of March 31, 2001 (Unaudited) (In thousands)
Marketing Grizzard Services Communications Group, Inc. Group, Inc. Pro Forma (A) (B) Adjustments Adjusted ----------- ---------------- ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 2,527 $ 875 $ 44,859 (C) $ 46,511 Accounts receivable, net 47,858 18,218 -- 29,640 Inventory 3,631 3,631 -- -- Other current assets 5,452 4,364 -- 1,088 --------- --------- --------- --------- Total current assets 59,468 27,088 $ 44,859 77,239 Investment 302 -- -- 302 Property and equipment, net 16,840 14,380 -- 2,460 Intangible assets, net 149,631 94,554 -- 55,077 Other assets 3,015 2,464 -- 551 --------- --------- --------- --------- Total assets $ 229,256 $ 138,486 $ 44,859 $ 135,629 ========= ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings 9,900 8,000 (G) 1,900 Accounts payable-trade 33,759 5,530 28,229 Accrued expenses and other current liabilities 12,236 6,453 5,783 Net liabilities of discontinued operation 2,114 -- 2,114 Current portion of long-term obligations 8,544 8,140 (G) 404 --------- --------- --------- Total current liabilities 66,553 28,123 38,430 Long-term obligations, net of current portion 31,030 26,518 (G) 4,512 Other liabilities 4,798 2,413 2,385 --------- --------- --------- Total liabilities 102,381 57,054 45,327 --------- --------- --------- Convertible preferred stock 29,360 -- 29,360 Minority interest in preferred stock of discontinued subsidiary 281 -- 281 Stockholders' equity: Common stock 325 1 $ 1 (D) 325 Additional paid-in capital 213,398 85,197 85,197 (E) 213,398 Accumulated deficit (115,095) (3,766) (40,339)(F) (151,668) Less: treasury stock at cost (1,394) -- -- (1,394) --------- --------- --------- --------- Total stockholders' equity 97,234 81,432 44,859 60,661 --------- --------- --------- --------- Total liabilities and stockholders' equity $ 229,256 $ 138,486 $ 44,859 $ 135,629 ========= ========= ========= =========
See Notes to Pro Forma Balance Sheet. 5 Marketing Services Group, Inc. Notes to Pro Forma Balance Sheet As of March 31, 2001 (Unaudited) (In thousands) (A) The MSGI's historical balance sheet has been derived from a previously filed Form 10Q. (B) Grizzard's balance sheet as of March 31, 2001 has been derived from the books and records of Grizzard. (C) Adjustments to cash: Sale price $91,300 Estimated working capital adjustment 780 Repayment of certain Grizzard bank debt and line-of-credit (42,421) Transaction fees (4,800) ------- $44,859 ======= (D) Common stock: Adjustment to eliminate Grizzard historical common stock $1 == (E) Additional paid-in capital: Adjustment to eliminate Grizzard historical paid in capital $85,197 ======= (F) Adjustment to restate accumulated deficit and record loss on sale: Sale price $ 91,300 Estimated working capital adjustment 780 Less: Value of net assets sold adjusted for $42,421 of short-term and long-term debt not assumed by the acquirer. (123,853) Less: transaction fees (4,800) -------- Loss on sale of Grizzard (36,573) Restate accumulated deficit of Grizzard (3,766) -------- $(40,339) ========= (G) Certain short-term and long-term financing in the amount in the amount of $42,421 was not assumed by the acquirer but was paid off in full out of the proceeds of the sale as a condition to the closing. 6 Marketing Services Group, Inc. Pro Forma Statement of Operations For the Year Ended June 30, 2000 (Unaudited) (In thousands, except per share data)
Grizzard Marketing Communications Services Group,Inc. Group, Inc. (Historical) Pro forma (A) (B) Adjustments Adjusted ---------- ---------- ---------- ---------- Revenues $ 128,607 $ 20,459 $ 108,148 Operating costs and expenses: Salaries and benefits 42,657 10,374 $ (276) (C) 32,007 Direct costs 77,907 8,361 69,546 Selling, general and administrative 13,308 1,102 12,206 Depreciation and amortization 6,028 2,387 3,641 --------- --------- --------- --------- Total operating costs and expenses 139,900 22,224 (276) 117,400 --------- --------- --------- --------- Loss from operations (11,293) (1,765) (276) (9,252) Loss on investments (27,216) -- -- (27,216) Other expense (2,356) (1,888) -- (468) --------- --------- --------- --------- Loss from continuing operations before income taxes (40,865) (3,653) (276) (36,936) Provision for income taxes (265) (100) -- (165) --------- --------- --------- --------- Loss from continuing operations $ (41,130) $ (3,753) $ (276) $ (37,101) ========= ========= ========= ========= Basic and diluted loss from continuing operations per common share $ (1.55) $ (1.40) ========= ========= Weighted average common shares outstanding 26,582 26,582 ========= =========
See Notes to Pro Forma Statement of Operations. 7 Marketing Services Group, Inc. Notes to Pro Forma Statement of Operations For the Year Ended June 30, 2000 (Unaudited) (In thousands) (A) MSGI's historical statement of operations for the year ended June 30, 2000 has been derived from a previously filed Form 10K. (B) Grizzard's statement of operations for the peroid from March 22, 2000, date of acquistion, through June 30, 2000 has been derived from Grizzard's books and records. (C) Salaries and benefits: Adjustment to reflect reduction of salaries and benefits for MSGI and Grizzard employees dedicated to the operations of Grizzard who will no longer be employed by the Company after the sale, net of the effects of replacing certain positions related to Company wide functions previously performed by Grizzard personnel. $ 276 ===== (D) The pro forma loss from continuing operations for the year ended June 30, 2000 does not include a non-recurring loss on sale of Grizzard in the amount of $36,573. 8 Marketing Services Group, Inc. Pro Forma Statement of Operations For the Nine Months Ended March 31, 2001 (Unaudited) (In thousands except per share data)
Grizzard Marketing Communications Services Group, Inc. Group, Inc. (Historical) Pro forma (A) (B) Adjustments Adjusted ------------- ------------- -------------- ------------- Revenues $ 154,566 $ 73,713 $ 80,853 --------- --------- --------- Operating costs and expenses: Salaries and benefits 54,656 25,958 $ (536)(C) 28,162 Direct costs 82,331 31,802 -- 50,529 Selling, general and administrative 16,212 4,389 (108)(D) 11,715 Depreciation and Amortization 8,750 6,005 -- 2,745 --------- --------- --------- --------- Total operating costs and expenses 161,949 68,154 (644) 93,151 --------- --------- --------- --------- (Loss)income from operations (7,383) 5,559 (644) (12,298) Other expense (13,278) (5,571) -- (7,707) --------- --------- --------- --------- Loss from continuing operations before income taxes (20,661) (12) (644) (20,005) Provision for income taxes (83) -- -- (83) --------- --------- --------- --------- Loss from continuing operations $ (20,744) $ (12) $ (644) $ (20,088) ========= ========= ========= ========= Basic and diluted loss from continuing operations per common share $ (0.66) $ (0.64) ========= ========= Weighted average common shares outstanding 31,316 31,316 ========= =========
See Notes to Pro Forma Statement of Operations 9 Marketing Services Group, Inc. Pro Forma Statement of Operations For the Nine Months Ended March 31, 2001 (Unaudited) (In thousands) (A) The MSGI statement of operations represents MSGI's historical statement of operations for the nine months ended March 31, 2001 and has been derived from a previously filed Form 10Q. (B) Grizzard's statement of operations for the nine months ended March 31, 2001 has been derived from Grizzard's books and records. (C) Salaries and benefits: Adjustment to reflect reduction of salaries and benefits for MSGI and Grizzard employees dedicated to the operations of Grizzard who will no longer be employed by the Company after the sale, net of the effects of replacing certain positions related to Company wide functions previously performed by Grizzard personnel. $ (536) ======= (D) Selling, general & administrative: Adjustment to reflect reduction of expenses directly related to MSGI and Grizzard employees dedicated to the operations of Grizzard who will no longer be employed by the company after the sale, net of the effects of replacing certain positions related to company wide functions previously performed by Grizzard personnel. $ (108) ======= 10