<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
NOVEMBER 25, 1997
SNYDER COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-12145 52-1983617
(STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
TWO DEMOCRACY CENTER, 6903 ROCKLEDGE DRIVE
15TH FLOOR, BETHESDA, MARYLAND 20817
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(301) 468-1010
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
================================================================================
<PAGE>
ITEM 5. OTHER EVENTS
Supplemental Consolidated Financial Statements. Subsequent to September 30,
1997, the Registrant acquired GEM Communications, Inc., a Connecticut
corporation ("GEM"), Rapid Deployment Group Limited, a company incorporated in
England and Wales ("RDL") and PharmFlex, Inc., a New Jersey corporation
("PharmFlex") in transactions accounted for as poolings of interests. The
accompanying supplemental consolidated financial statements have been
retroactively restated to reflect the combined supplemental financial position
and combined supplemental results of operations and cash flows of the
Registrant, GEM, RDL and PharmFlex for all periods presented, giving effect to
the acquisitions of GEM, RDL and PharmFlex as if they had occurred at the
beginning of the earliest period presented. Generally accepted accounting
principles prohibit giving effect to a consummated business combination
accounted for by the pooling of interests method in financial statements that
do not include the date of consummation of the business combination. The
accompanying supplemental consolidated financial statements do not extend
through the dates of consummation of the GEM, RDL and PharmFlex business
combinations; however, they will become the historical consolidated financial
statements of the Registrant after financial statements covering the dates of
consummation of these business combinations are issued.
2
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SNYDER COMMUNICATIONS, INC.
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
Supplemental Report of Independent Public Accountants..................... F- 2
Supplemental Consolidated Balance Sheet as of December 31, 1995 and 1996,
and September 30, 1997 (unaudited)....................................... F- 3
Supplemental Consolidated Statement of Income, including pro forma data,
for the years ended December 31, 1994, 1995 and 1996, and for the nine
months ended September 30, 1996 and 1997 (unaudited)..................... F- 4
Supplemental Consolidated Statement of Equity for the years ended December
31, 1994, 1995 and 1996, and for the nine months ended September 30, 1997
(unaudited).............................................................. F- 5
Supplemental Consolidated Statement of Cash Flows for the years ended
December 31, 1994, 1995 and 1996, and for the nine months ended September
30, 1996 and 1997 (unaudited)............................................ F- 6
Notes to Supplemental Consolidated Financial Statements................... F- 8
BRANN HOLDINGS LIMITED
Report of Independent Accountants......................................... F-30
AMERICAN LIST CORPORATION
Report of Independent Certified Public Accountants........................ F-31
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Snyder Communications, Inc.:
We have audited the accompanying supplemental consolidated balance sheet of
Snyder Communications, Inc. and subsidiaries (the "Company") as of December
31, 1995 and 1996, and the related supplemental consolidated statements of
income, equity, and cash flows for each of the years in the three year period
ended December 31, 1996. The supplemental consolidated financial statements
give retroactive effect to the mergers with GEM Communications, Inc. on
November 25, 1997, Rapid Deployment Group Limited on November 28, 1997, and
PharmFlex, Inc. on December 5, 1997, all of which have been accounted for as
poolings of interests as described in Note 1. These supplemental consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these supplemental consolidated
financial statements based on our audits. We did not audit the financial
statements of American List Corporation or Brann Holdings Limited included in
the supplemental consolidated financial statements of the Company, which
statements reflect total assets constituting 47 percent and 30 percent of the
related supplemental consolidated totals as of December 31, 1995 and 1996,
respectively, and revenues constituting 41 percent, 34 percent and 24 percent
of the related supplemental consolidated totals in 1994, 1995 and 1996,
respectively. These statements were audited by other auditors whose reports
thereon have been furnished to us, and our opinion expressed herein, insofar
as it relates to the amounts included for American List Corporation or Brann
Holdings Limited, is based solely upon the reports of the other auditors.
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 financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the reports of the other auditors,
the supplemental consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Snyder
Communications, Inc. and subsidiaries as of December 31, 1995 and 1996, and
the results of their operations and their cash flows for each of the years in
the three year period ended December 31, 1996, after giving retroactive effect
to the mergers with GEM Communications Inc., Rapid Deployment Group Limited
and PharmFlex, Inc., as described in Note 1, all in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Washington, D.C.
December 24, 1997
F-2
<PAGE>
SNYDER COMMUNICATIONS, INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEET
(NOTE 1)
<TABLE>
<CAPTION>
SEPTEMBER
DECEMBER 31, 30,
-------------------------- ------------
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and equivalents............... $ 18,698,384 $ 62,020,586 $ 70,450,950
Marketable securities.............. 7,775,052 6,297,412 2,515,775
Accounts receivable, net of
allowance for doubtful accounts of
$583,316, $988,211 and $1,710,057
at December 31, 1995 and 1996 and
September 30, 1997, respectively.. 34,531,208 42,661,084 56,243,753
Unbilled services.................. 1,427,712 3,672,113 4,040,004
Other current assets............... 7,019,954 9,403,672 14,313,337
------------ ------------ ------------
Total current assets............. 69,452,310 124,054,867 147,563,819
------------ ------------ ------------
Note and advances to stockholders.... 2,824,304 24,250 491,226
Property and equipment, net.......... 17,940,730 24,537,913 29,467,664
Goodwill and other intangible assets. 18,308,751 18,586,115 41,712,209
Deposits and other assets............ 1,848,737 2,669,409 670,668
------------ ------------ ------------
Total assets..................... $110,374,832 $169,872,554 $219,905,586
============ ============ ============
<CAPTION>
LIABILITIES AND EQUITY
<S> <C> <C> <C>
Current liabilities:
Lines of credit.................... $ 5,029,422 $ 2,495,845 $ 390,224
Current maturities of long-term
debt.............................. 1,018,423 3,550,753 188,671
Accrued payroll.................... 3,186,233 6,577,632 6,442,644
Accounts payable................... 14,507,504 19,366,381 17,899,766
Accrued expenses................... 22,881,567 30,894,203 44,655,372
Unearned revenue................... 9,398,041 10,011,366 11,331,035
Distribution payable............... -- 1,087,734 --
------------ ------------ ------------
Total current liabilities........ 56,021,190 73,983,914 80,907,712
------------ ------------ ------------
Related party borrowings, net of
current maturities.................. 14,271,980 10,177,101 --
Deferred income taxes................ 334,087 180,888 619,857
Mandatorily redeemable preferred
stock, held by related parties...... 4,596,793 8,452,484 2,024,080
Long-term obligations under capital
leases.............................. 493,481 2,077,359 1,396,541
Long-term debt, net of current
maturities.......................... 11,410,822 10,722,907 1,569,192
------------ ------------ ------------
Total liabilities................ 87,128,353 105,594,653 86,517,382
------------ ------------ ------------
Commitments and contingencies
Equity:
Preferred stock, $.001 par value
per share, 5,000,000 shares
authorized, none issued and
outstanding at December 31, 1995,
December 31, 1996 and
September 30, 1997................ -- -- --
Common stock, $.001 par value per
share, 120,000,000 shares
authorized, 16,835,244, 48,457,094
and 51,673,423 shares issued at
December 31, 1995, December 31,
1996 and September 30, 1997,
respectively...................... 16,835 48,457 51,673
Additional paid-in capital........... 8,539,623 50,583,581 133,270,404
Unrealized gain on marketable
securities.......................... 4,687 3,747 30,798
Treasury Stock, at cost, 1,549,172,
248,489 and 198,064 shares
outstanding at December 31, 1995,
December 31, 1996 and September 30,
1997, respectively.................. (419,692) (3,992,763) (2,666,948)
Retained earnings.................... 16,473,655 17,639,271 2,164,441
Cumulative foreign currency
translation adjustment.............. 81,701 (4,392) 537,836
Limited partners' deficit............ (1,450,330) -- --
------------ ------------ ------------
Total equity..................... 23,246,479 64,277,901 133,388,204
------------ ------------ ------------
Total liabilities and equity..... $110,374,832 $169,872,554 $219,905,586
============ ============ ============
</TABLE>
The accompanying notes are an integral part of this supplemental consolidated
balance sheet.
F-3
<PAGE>
SNYDER COMMUNICATIONS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME
(NOTE 1)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- --------------------------
1994 1995 1996 1996 1997
------------- ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................ $121, 331,872 $187,618,950 $266,373,846 $188,555,924 $238,212,406
Operating expenses:
Cost of services....... 69,856,761 113,977,841 177,287,350 125,193,571 155,614,376
Selling, general and
administrative
expenses.............. 27,047,731 38,571,446 58,561,343 40,685,654 51,437,033
Compensation to
stockholders.......... 4,506,179 8,545,090 5,158,613 2,509,200 1,118,613
Acquisition and
related costs......... -- -- -- -- 33,207,052
------------- ------------ ------------ ------------ ------------
Income (loss) from
operations............. 19,921,201 26,524,573 25,366,540 20,167,499 (3,164,668)
Interest expense,
including amounts to
related parties of
$620,558, $1,375,202
and $2,487,332 in 1994,
1995 and 1996,
respectively........... (1,440,449) (2,482,456) (3,825,546) (2,870,663) (1,903,900)
Investment income....... 531,566 955,213 1,771,297 781,051 1,491,260
------------- ------------ ------------ ------------ ------------
Income (loss) before
taxes and extraordinary
item................... 19,012,318 24,997,330 23,312,291 18,077,887 (3,577,308)
Income tax provision.... 5,830,492 6,648,473 5,993,939 2,853,988 7,003,073
------------- ------------ ------------ ------------ ------------
Income (loss) before
extraordinary item..... 13,181,826 18,348,857 17,318,352 15,223,899 (10,580,381)
Extraordinary item, less
applicable income taxes
of $805,874............ -- -- (1,215,405) -- --
------------- ------------ ------------ ------------ ------------
Net income (loss).... $ 13,181,826 $ 18,348,857 $ 16,102,947 $ 15,223,899 $(10,580,381)
============= ============ ============ ============ ============
Pro forma income (loss)
data (unaudited):
Historical income
(loss) before income
taxes and
extraordinary item as
reported.............. $ 19,012,318 $ 24,997,330 $ 23,312,291 $ 18,077,887 $ (3,577,308)
Pro forma provision
for income taxes...... 7,537,470 9,699,390 9,877,604 7,590,893 7,560,993
------------- ------------ ------------ ------------ ------------
Pro forma income
(loss) before
extraordinary item.... 11,474,848 15,297,940 13,434,687 10,486,994 (11,138,301)
Extraordinary item,
less applicable
income taxes of
$805,874.............. -- -- (1,215,405) -- --
------------- ------------ ------------ ------------ ------------
Pro forma net income
(loss)................ $ 11,474,848 $ 15,297,940 $ 12,219,282 $ 10,486,994 $(11,138,301)
============= ============ ============ ============ ============
Pro forma income
(loss) before
extraordinary item
per share............. $ 0.27 $ 0.35 $ 0.30 $ 0.24 $ (0.23)
============= ============ ============ ============ ============
Pro forma net income
(loss) per share...... $ 0.27 $ 0.35 $ 0.27 $ 0.24 $ (0.23)
============= ============ ============ ============ ============
Shares used in
computing pro forma
per share amounts..... 41,886,619 44,245,210 45,377,442 43,984,587 48,406,099
Pro forma fully
diluted income (loss)
before extraordinary
item per share........ $ 0.27 $ 0.35 $ 0.29 $ 0.24 $ (0.23)
============= ============ ============ ============ ============
Pro forma fully
diluted net income
(loss) per share...... $ 0.27 $ 0.35 $ 0.27 $ 0.24 $ (0.23)
============= ============ ============ ============ ============
Shares used in
computing pro forma
fully diluted per
share amounts......... 41,903,924 44,292,736 45,545,759 44,012,624 48,406,099
</TABLE>
The accompanying notes are an integral part of this supplemental consolidated
statement of income.
F-4
<PAGE>
SNYDER COMMUNICATIONS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENT OF EQUITY
(NOTE 1)
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN GAIN
ADDITIONAL LIMITED CURRENCY (LOSS) ON
COMMON PAID-IN RETAINED PARTNERS' TRANSLATION MARKETABLE TREASURY
STOCK CAPITAL EARNINGS DEFICIT ADJUSTMENT SECURITIES STOCK TOTAL
------- ------------ ------------ ----------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993, as previously
reported.............. $ 500 $ 138,342 $ (693,823) $(2,680,421) $ -- $ -- $ -- $ (3,235,402)
Pooling of MMD, Inc... 1,355 7,140 985,162 -- -- -- -- 993,657
Pooling of American
List................. 4,723 36,703 12,867,120 -- -- -- -- 12,908,546
Pooling of Sample
Corporation of
America.............. 3,098 (1,597) 106,226 -- -- -- (34,477) 73,250
Pooling of GEM........ 724 276 (410,433) -- -- -- -- (409,433)
Pooling of PharmFlex.. 1,188 (1,088) (126,170) -- -- -- -- (126,070)
Pooling of RDL........ 76 73 496,776 -- -- -- -- 496,925
------- ------------ ------------ ----------- -------- ------- ----------- ------------
Balance, December 31,
1993, as Restated..... 11,664 179,849 13,224,858 (2,680,421) -- -- (34,477) 10,701,473
Pooling of Brann
Holdings Limited..... 2,350 504,116 -- -- -- -- -- 506,466
Distributions and
dividends............ -- -- (4,724,819) -- -- -- -- (4,724,819)
Foreign currency
translation
adjustment........... -- -- -- -- 74,711 -- -- 74,711
Unrealized loss on
marketable
securities........... -- -- -- -- -- (11,833) (11,833)
Common stock dividend. 472 6,884,888 (6,885,360) -- -- -- -- --
Exercise of stock
options.............. 4 32,121 -- -- -- -- -- 32,125
Purchase of treasury
stock................ (385,215) (385,215)
Net income............ -- -- 11,911,885 1,269,941 -- -- -- 13,181,826
------- ------------ ------------ ----------- -------- ------- ----------- ------------
Balance, December 31,
1994.................. 14,490 7,600,974 13,526,564 (1,410,480) 74,711 (11,833) (419,692) 19,374,734
Pooling of Bounty
Group Holdings
Limited.............. 1,594 170,990 (5,007,918) -- -- -- -- (4,835,334)
Proceeds from sale of
Partnership interest,
net of income taxes
of $815,000.......... -- 1,221,361 -- 13,639 -- -- -- 1,235,000
Distributions and
dividends............ -- -- (6,594,168) (3,853,169) -- -- -- (10,447,337)
Issuance of shares.... 773 763 -- -- -- -- -- 1,536
Foreign currency
translation
adjustment........... -- -- -- -- 6,990 -- -- 6,990
Unrealized gain on
marketable
securities........... -- -- -- -- -- 16,520 -- 16,520
Exercise of stock
options.............. 6 62,178 -- -- -- -- -- 62,184
Purchase and
retirement of
treasury stock....... (28) (516,643) -- -- -- -- -- (516,671)
Net income............ -- -- 14,549,177 3,799,680 -- -- -- 18,348,857
------- ------------ ------------ ----------- -------- ------- ----------- ------------
Balance, December 31,
1995.................. 16,835 8,539,623 16,473,655 (1,450,330) 81,701 4,687 (419,692) 23,246,479
Proceeds from Initial
Public Offering...... 4,038 59,169,659 -- -- -- -- -- 59,173,697
Distributions and
dividends............ -- -- (20,371,479) (8,612,050) -- -- -- (28,983,529)
Reorganization........ 28,959 (15,558,415) 7,630,431 7,899,025 -- -- -- --
Issuance of shares.... 233 193,664 -- -- -- -- -- 193,897
Purchase and partial
retirement of
treasury stock....... (1,674) (2,767,884) (32,929) -- -- (3,573,071) (6,375,558)
Unrealized loss on
marketable
securities........... -- -- -- -- -- (940) -- (940)
Exercise of stock
options.............. 66 1,006,934 -- -- -- -- -- 1,007,000
Foreign currency
translation
adjustment........... -- -- -- -- (86,093) -- -- (86,093)
Net income............ -- -- 13,939,593 2,163,355 -- -- -- 16,102,948
------- ------------ ------------ ----------- -------- ------- ----------- ------------
Balance, December 31,
1996.................. 48,457 50,583,581 17,639,271 -- (4,392) 3,747 (3,992,763) 64,277,901
Proceeds from
Secondary Stock
Offering (unaudited). 1,850 42,711,242 -- -- -- -- -- 42,713,092
Issuance of shares for
Halliday Jones
(unaudited).......... 425 11,327,927 -- -- -- -- -- 11,328,352
Distributions and
dividends
(unaudited).......... -- -- (3,389,092) -- -- -- -- (3,389,092)
Retirement of treasury
stock (unaudited).... (58) (1,325,757) -- -- -- -- 1,325,815 --
Unrealized loss on
marketable securities
(unaudited).......... 27,051 -- 27,051
Exercise of stock
options (unaudited).. 999 29,973,411 -- -- -- -- -- 29,974,410
Foreign currency
translation
adjustment
(unaudited).......... -- -- -- -- 542,228 -- -- 542,228
Net income
(unaudited).......... -- -- (10,580,381) -- -- -- -- (10,580,381)
Impact from differing
year ends
(unaudited).......... -- -- (1,505,357) -- -- -- -- (1,505,357)
------- ------------ ------------ ----------- -------- ------- ----------- ------------
Balance, September 30,
1997 (unaudited)...... $51,673 $133,270,404 $ 2,164,441 $ -- $537,836 $30,798 $(2,666,948) $133,388,204
======= ============ ============ =========== ======== ======= =========== ============
</TABLE>
The accompanying notes are an integral part of this supplemental consolidated
statement of equity.
F-5
<PAGE>
SNYDER COMMUNICATIONS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENT OF CASH FLOWS
(NOTE 1)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------------------------- ---------------------------
1994 1995 1996 1996 1997
------------ ------------ ----------- ------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss)...... $ 13,181,826 $ 18,348,857 $16,102,947 $ 15,223,899 $ (10,580,381)
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation and
amortization......... 4,357,356 6,009,894 9,098,659 3,675,748 7,513,381
Non cash charge from
accelerated vesting
of Brann Holdings
options.............. -- -- -- -- 9,096,899
Loss on repayment of
subordinated debt.... -- -- 2,021,279 -- --
Loss on disposal of
assets............... -- 133,921 323,385 147,003 2,838,288
Other non cash
expenses............. 833,380 301,540 (1,475,033) (2,581,551) (511,949)
Changes in assets and
liabilities:
Accounts receivable,
net.................. (8,874,960) (7,197,194) (7,763,557) (2,524,090) (15,293,654)
Unbilled services..... (2,690,991) 1,467,388 (2,244,400) (2,177,150) (367,892)
Deposits and other
assets............... (914,705) (4,230,036) (533,381) (210,299) (156,593)
Accrued payroll,
accounts payable and
accrued expenses..... 9,506,657 9,457,670 12,997,221 11,751,055 17,133,982
Unearned revenue...... 3,415,036 2,353,880 613,325 4,470,771 501,620
Less impact from
effect of differing
year ends............ -- -- -- -- (2,760,568)
------------ ------------ ----------- ------------ -------------
Net cash provided by
operating
activities......... 18,813,599 26,645,920 29,140,445 27,775,386 7,413,133
------------ ------------ ----------- ------------ -------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of
subsidiaries.......... (3,498,948) (5,637,000) -- -- (15,645,845)
Purchases of property
and equipment......... (4,032,920) (6,488,069) (8,480,639) (3,543,533) (10,986,334)
Proceeds from sale of
equipment............. 173,648 96,099 63,322 -- 81,673
Sale (purchase) of
marketable securities,
net................... (1,959,812) (605,313) 1,421,869 606,022 4,170,088
Purchases of intangible
assets................ (1,919,183) (3,354,188) (2,174,195) (819,595) (445,251)
Note and net advances
to stockholders....... (59,535) (2,764,769) 29,628 (317,197) (466,976)
Less impact from effect
of differing year
ends.................. -- -- -- -- (446,167)
------------ ------------ ----------- ------------ -------------
Net cash used in
investing
activities......... (11,296,750) (18,753,240) (9,140,015) (4,074,303) (23,738,812)
------------ ------------ ----------- ------------ -------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Repayment of long-term
notes payable to
limited partners and
others................ (9,905,977) (3,241,968) (1,359,897) (744,837) (11,556,435)
Proceeds from issuance
of subordinated
debentures due to
related parties....... -- 9,531,018 293,656 3,355,618 --
Redemption of preferred
stock................. -- -- -- -- (6,305,584)
Net proceeds from sale
of partnership
interest.............. -- 1,235,000 -- -- --
Acquisition of common
stock................. -- (516,872) (6,375,557) (5,049,742) (1,325,815)
Debt issuance costs.... (180,774) (603,873) (25,031) (25,031) --
Distributions and
dividends............. (5,938,521) (10,450,919) (25,169,997) (22,335,689) (5,840,757)
Repayment (proceeds) of
subordinated
debentures............ -- -- (6,900,000) (145,365)
Proceeds from
mandatorily redeemable
preferred stock....... 4,582,098 -- 3,237,957 2,146,900 --
Net borrowings
(repayments) on line
of credit............. 8,041,703 1,370,752 (1,438,738) (1,291,584) (2,488,752)
Repayment of note
payable............... -- -- -- -- (12,048,533)
Payments on capital
lease obligations..... (702,921) (665,470) (663,669) (2,006,508) (1,048,352)
Proceeds from long term
debt.................. -- 1,735,266 734,023 -- --
Proceeds from common
stock issuances....... 538,591 62,386 59,656,847 59,656,847 42,713,092
Proceeds from exercise
of options............ -- -- 425,000 -- 17,998,343
Impact from effect of
differing year ends... -- -- -- -- 3,704,306
------------ ------------ ----------- ------------ -------------
Net cash provided by
(used in) financing
activities......... (3,565,801) (1,544,680) 22,414,594 33,560,609 23,801,513
------------ ------------ ----------- ------------ -------------
Effect of exchange rate
changes............... 253,011 (226,144) 907,178 773,206 954,530
Net increase in cash
and equivalents....... 4,204,059 6,121,856 43,322,202 58,034,898 8,430,364
Cash and equivalents,
beginning of period... 8,372,469 12,576,528 18,698,384 18,698,384 62,020,586
------------ ------------ ----------- ------------ -------------
Cash and equivalents,
end of period......... $ 12,576,528 $ 18,698,384 $62,020,586 $ 76,733,282 $ 70,450,950
============ ============ =========== ============ =============
</TABLE>
The accompanying notes are an integral part of this supplemental consolidated
statement of cash flows.
F-6
<PAGE>
SNYDER COMMUNICATIONS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(NOTE 1)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------- -----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid for interest
including dividends on
mandatorily redeemable
preferred stock........ $1,151,958 $1,915,441 $3,555,378 $3,602,794 $1,272,264
Cash paid for income
taxes.................. 5,131,602 6,738,135 7,570,870 2,195,391 5,274,970
SUPPLEMENTAL DISCLOSURE
OF NONCASH ACTIVITIES:
Equipment purchased
under capital leases... 268,599 525,926 3,191,298 2,811,570 256,983
Distribution of note
receivable from
stockholder to SMS
stockholders........... -- -- 2,725,000 2,725,000 --
Distribution payable.... -- -- 1,087,734 -- --
Issuance of shares of
common stock for
purchase of subsidiary. -- -- -- -- 11,328,352
</TABLE>
The accompanying notes are an integral part of this supplemental consolidated
statement of cash flows.
F-7
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION, BASIS OF PRESENTATION AND BUSINESS:
On October 19, 1988, Collegiate Marketing and Communications, Inc., a
Delaware corporation (the "General Partner"), and a Delaware limited
partnership beneficially owned by Mortimer B. Zuckerman and Fred Drasner (the
"Original Limited Partner") entered into a partnership agreement (the
"Partnership Agreement") pursuant to the provisions of the Delaware Act, under
the name Collegiate Marketing and Communications, L.P. (the "Partnership"). On
September 1, 1989, the name of the Partnership was changed to Snyder
Communications, L.P., and the name of the General Partner was changed to
Snyder Communications, Inc. On May 18, 1995, the Partnership Agreement was
amended to admit several new limited partners into the Partnership. On June
25, 1996, the name of the General Partner was changed to Snyder Marketing
Services, Inc. ("SMS").
Snyder Communications, Inc., a Delaware corporation, was incorporated on
June 25, 1996, to continue the business operations of the Partnership. Snyder
Communications, Inc., in conjunction with all of the existing partners in the
Partnership, reorganized on September 24, 1996 (the "Reorganization"), upon
the effectiveness of the initial public offering of its common stock.
Prior to the Reorganization, SMS owned 63.85 percent of the Partnership and
the limited partners owned the remaining 36.15 percent. The Reorganization
resulted in the stockholders of SMS exchanging 100 percent of their SMS stock
for stock of Snyder Communications, Inc. simultaneously with the limited
partners exchanging their limited partnership interests in the Partnership for
common stock of Snyder Communications, Inc. After consummation of the
Reorganization, Snyder Communications, Inc. owns 100 percent of the stock of
SMS and, directly and indirectly (through its ownership of SMS), 100 percent
of the interests in the Partnership. In connection with the Reorganization,
29,458,400 shares of common stock were issued to the stockholders of Snyder
Communications, Inc.
Because of the continuity of ownership, the Reorganization was accounted for
by combining the assets, liabilities and operations of SMS, the Partnership
and Snyder Communications, Inc., at their historical cost basis. Accordingly,
the accompanying supplemental consolidated balance sheet as of December 31,
1995 and the consolidated financial statements for the years ended December
31, 1994 and 1995 include a combination of the accounts of SMS and the
Partnership after elimination of all significant intercompany transactions.
The accompanying supplemental consolidated financial statements as of and for
the year ended December 31, 1996 include the consolidated accounts of Snyder
Communications, Inc., SMS and the Partnership (the consolidated entity will be
referred to herein as "SCI" or "Snyder Communications") after elimination of
all significant intercompany transactions. Certain amounts previously
presented have been reclassified to conform to the December 31, 1996
presentation.
Snyder Communications provides outsourced marketing services. SCI designs
and implements marketing programs for its customers utilizing field sales,
teleservices, sponsored WallBoards(R) and product sampling. SCI's operations
are conducted throughout the United States, the United Kingdom ("U.K."),
Ireland and Hungary.
During 1997, SCI has acquired several companies in transactions which have
been accounted for as poolings of interests for financial reporting purposes.
The following is a summary of these transactions, as well as a brief
description of the primary business of the acquired companies.
MMD, INC.--On January 6, 1997, SCI acquired MMD, Inc. ("MMD") in a merger
transaction in which MMD became a wholly owned subsidiary of SCI. In this
transaction, 966 shares of outstanding MMD common stock were converted into
1,354,500 shares of SCI common stock. MMD was incorporated under the laws of
the state of New Jersey on December 7, 1982. MMD's principal business activity
involves marketing medical products for pharmaceutical companies, utilizing
field sales, throughout the United States. MMD previously utilized an October
31 year-end. Concurrent with its merger with SCI, MMD changed its fiscal year-
end to December 31 and restated its financial statements to conform to SCI's
calendar reporting.
F-8
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
BRANN HOLDINGS LIMITED--On March 27, 1997, SCI acquired Brann Holdings
Limited ("Brann") in a share exchange transaction in which Brann became a
wholly owned subsidiary of SCI. In this transaction, 339,000 shares of
outstanding Brann common stock were converted into 2,350,152 shares of SCI
common stock, while 63,850 Brann options, which were fully vested and
immediately exercisable, were converted into 389,730 SCI options with similar
terms. Brann, a U.K. registered company, began operations on January 25, 1994
when it acquired all of the outstanding common stock of Brann Direct Marketing
Limited through a management buy-out. On January 11, 1995, Brann Direct
Marketing Limited changed its name to Brann Holdings Limited. Brann's
principal business activities are planning, creating and delivering direct
response marketing communications; marketing systems design and consultancy;
print production services; and telephone and response management services, for
companies involved in marketing, advertising and direct selling and services.
Brann's operations are conducted throughout the U.K.
AMERICAN LIST CORPORATION--On July 11, 1997, SCI acquired American List
Corporation ("American List") in a merger transaction in which American List
became a wholly owned subsidiary of SCI. In this transaction, 4,414,318 shares
of outstanding American List common stock were converted into 5,032,322 shares
of SCI common stock, while 82,090 American List options were converted into
93,583 SCI options with terms similar to the American List options prior to
their conversion. American List, through its wholly-owned subsidiary, American
Student List Company, Inc. ("ASL"), develops, maintains and markets databases
of high school, college and pre-school through junior high school students in
the United States. ASL rents lists to its customers derived from its database
for use primarily in direct mail and marketing programs. ASL's customers
consist mainly of list brokers, advertising agencies, financial institutions,
retailers and educational institutions. These customers are located primarily
in the United States. American List previously utilized a February 28 year-
end. Concurrent with its merger with SCI, American List changed its fiscal
year-end to December 31.
BOUNTY GROUP HOLDINGS LIMITED--On July 13, 1997, SCI acquired Bounty Group
Holdings Limited ("Bounty") in a share exchange transaction in which Bounty
became a wholly owned subsidiary of SCI. In this transaction, 500,000 shares
of outstanding Bounty common stock were converted into 1,483,240 shares of SCI
common stock, while 33,312 Bounty options, which were fully vested and
immediately exercisable, were converted into 96,472 SCI options with similar
terms. Bounty, a U.K. registered company, began operations on August 24, 1995,
when it acquired all of the outstanding common stock of Bounty Holdings
Limited through a leveraged management buy-out. Bounty provides targeted
product sampling and proprietary health-oriented publications to expectant
mothers, new mothers and parents of toddlers in the U.K. and Ireland.
SAMPLING CORPORATION OF AMERICA--On July 14, 1997, SCI acquired Sampling
Corporation of America ("SCA") in a merger transaction in which SCA became a
wholly owned subsidiary of SCI. In this transaction, 750 shares of outstanding
SCA shares were converted into 1,549,172 shares of SCI common stock. SCA was
incorporated on October 13, 1981 in the State of Illinois under the Illinois
Business Corporation Act. SCA was formed to provide targeted marketing and
product distribution to school age children. On behalf of its customers,
primarily packaged goods manufacturers, SCA designs advertising programs and
distributes product samples and coupons to primary and secondary schools,
daycare centers, colleges and immigrant organizations.
GEM COMMUNICATIONS INC.--On November 25, 1997, SCI acquired GEM
Communications Inc. ("GEM") in a merger transaction in which GEM became a
wholly owned subsidiary of SCI. In this transaction, 1,000 shares of
outstanding GEM common stock were converted into 723,794 shares of SCI common
stock. GEM was incorporated in the State of Connecticut on April 13, 1992. GEM
offers a complete range of healthcare communications services with specialties
in educational marketing and publishing for the pharmaceutical industry.
RAPID DEPLOYMENT GROUP LIMITED--On November 28, 1997, SCI acquired Rapid
Deployment Group Limited ("RDL") in a merger transaction in which RDL became a
wholly owned subsidiary of SCI. In this
F-9
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
transaction, 9,049 shares of RDL outstanding common stock were converted into
768,726 shares of SCI common stock. RDL is a provider of outsourced
pharmaceutical sales services primarily in the United Kingdom as well as
Hungary.
PHARMFLEX, INC.--On December 5, 1997, SCI acquired PharmFlex, Inc.
("PharmFlex") in a merger transaction in which PharmFlex became a wholly owned
subsidiary of SCI. In this transaction 1,100 shares of outstanding PharmFlex
common stock were converted into 1,188,256 shares of SCI common stock.
PharmFlex was incorporated under the laws of the state of New Jersey on March
30, 1993. PharmFlex provides outsourced pharmaceutical and marketing services
to manufacturers of prescription and over-the-counter pharmaceuticals
throughout the United States.
MMD, Brann, American List, Bounty, SCA, GEM, RDL, and PharmFlex will be
collectively referred to as the "Pooled Entities" and their mergers will be
referred to herein as the "Acquisitions." The Acquisitions have been accounted
for as poolings of interests for financial reporting purposes. The
accompanying supplemental consolidated financial statements have been
retroactively restated to reflect the combined supplemental financial position
and combined supplemental results of operations and supplemental cash flows of
SCI, MMD, Brann, American List, Bounty, SCA, GEM, RDL, and PharmFlex for all
periods presented, giving effect to the Acquisitions as if they had occurred
at the beginning of the earliest period presented (the combined entity will be
referred to herein as the "Company"). The accompanying supplemental
consolidated balance sheets as of December 31, 1995 and 1996 reflect the
combination of the accounts of American List as of February 29, 1996 and
February 28, 1997, respectively, while the related supplemental consolidated
statements of income, equity and cash flows for each of the three years in the
period ended December 31, 1996 reflect the combination of the American List
statements of income, equity and cash flows for the three years in the period
ended February 28, 1997, respectively. The supplemental consolidated balance
sheets for all periods presented give effect to the conversion of the shares
of MMD, Brann, American List, Bounty, SCA, GEM, PharmFlex, and RDL common
stock into 14,450,162 shares of SCI common stock. Generally accepted
accounting principles prohibit giving effect to a consummated business
combination accounted for by the pooling of interests method in financial
statements that do not cover the date of consummation of the business
combination. The accompanying supplemental financial statements do not extend
through the dates of consummation of SCI's combination with GEM, PharmFlex and
RDL; however, they will become the historical consolidated financial
statements of SCI after financial statements covering the dates of
consummation of these business combination are issued.
The following details revenues and net income (loss) for each of the years
ended December 31, 1994, 1995 and 1996 and for the nine months ended September
30, 1996 and 1997 of SCI and the Pooled Entities through the dates of their
respective mergers.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------- -------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
SCI................... $ 11,740,235 $ 42,891,561 $ 82,839,947 $ 56,326,296 $ 70,739,699
Pooled Entities....... 109,591,637 144,727,389 183,533,899 132,229,628 167,472,707
------------ ------------ ------------ ------------ ------------
$121,331,872 $187,618,950 $266,373,846 $188,555,924 $238,212,406
============ ============ ============ ============ ============
Net Income (Loss):
SCI................... $ 1,389,995 $ 3,971,760 $ 6,977,003 $ 6,279,031 $(19,706,922)
Pooled Entities....... 11,791,831 14,377,097 9,125,944 8,944,868 9,126,541
------------ ------------ ------------ ------------ ------------
$ 13,181,826 $ 18,348,857 $ 16,102,947 $ 15,223,899 $(10,580,381)
============ ============ ============ ============ ============
</TABLE>
F-10
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company recognized a charge to first quarter 1997 income of
approximately $16.2 million (before income taxes) related to costs incurred
and resulting from the MMD and Brann business combinations. This charge
consisted primarily of investment banking, other professional service fees and
certain U.K. excise and transfer taxes as well as a charge of approximately
$9.1 million related to the accelerated vesting of Brann options (see Note 12)
and is included in acquisition and related costs in the supplemental
consolidated statement of income.
The Company recognized a charge to third quarter 1997 income of
approximately $17.0 million (before income taxes) relating to the American
List, Bounty and SCA business combinations. This charge consisted primarily of
investment banking, other professional service fees, legal expenses, certain
U.K. excise and transfer taxes, and the writeoff of certain intangible assets
which became impaired as a result of the combination and is included in
acquisition and related costs in the supplemental consolidated statement of
income.
Excluding the $33.2 million in non-recurring acquisition and related costs
recorded during the nine months ended September 30, 1997, the Company would
have recorded $17.9 million in pro forma net income and $0.36 in pro forma
fully diluted net income per share.
The Company anticipates recognizing a charge to fourth quarter 1997 income
of approximately $5.8 million (before income taxes) relating to the GEM, RDL
and PharmFlex business combinations. This charge consists primarily of
investment banking, legal and other professional service fees.
Purchase Business Combinations
During 1997 SCI has made several acquisitions which have been accounted for
as purchase business combinations. These transactions have resulted in the
recognition of additional amounts of goodwill and other intangible assets of
approximately $27.6 million.
HALLIDAY JONES SALES LTD.--On August 28, 1997 SCI acquired 100% of Halliday
Jones Sales Ltd. ("HJ") in a purchase transaction in which HJ became a wholly
owned subsidiary of SCI. The total consideration paid in connection with the
acquisition of HJ, including the repayment of assumed debt immediately
following the closing, was $19.4 million, consisting of 425,478 shares of SCI
common stock and $7.4 million in cash. HJ is a provider of outsourced
pharmaceutical sales services primarily in the United Kingdom but also in
Ireland.
The following table presents proforma financial information as if these 1997
purchase business combinations had been consummated at the beginning of each
of the periods presented and all of the Company's operations had been taxed
similar to a C Corporation.
<TABLE>
<CAPTION>
FOR THE NINE FOR THE NINE
FOR THE YEAR MONTHS ENDED MONTHS ENDED
ENDED DECEMBER 31, SEPTEMBER SEPTEMBER
1996 30, 1996 30, 1997
------------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Pro Forma Revenues............... $291,046,615 $207,060,501 $251,308,237
Pro Forma Income (Loss) Before
Extraordinary Item.............. 13,144,464 10,269,917 (10,973,915)
Pro Forma Net Income (Loss)...... 11,929,059 10,269,917 (10,973,915)
Pro Forma Net Income (Loss) Per
Share........................... .26 .23 (.22)
</TABLE>
There are important risks associated with the Company's business and
financial results. These risks include: (i) the Company's reliance on
significant clients, one of which constituted 19 percent of its 1996 revenues
(see
F-11
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Note 3); (ii) the Company's ability to sustain and manage future growth; (iii)
the Company's ability to manage and successfully integrate the businesses it
has acquired and may acquire in the future; (iv) the Company's ability to
successfully manage its international operations; (v) the potential adverse
effects of fluctuations in foreign exchange rates; (vi) the Company's
dependence on industry trends toward outsourcing of marketing services; (vii)
the risks associated with the Company's reliance on technology and the risk of
business interruption resulting from a temporary or permanent loss of such
technology; and (viii) the dependence of the Company's success on its
executive officers and other key employees, in particular, its Chairman of the
Board of Directors and Chief Executive Officer.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Equivalents
Cash and equivalents are comprised principally of amounts in operating
accounts, money market investments, and other short-term instruments, stated
at cost which approximates market value, with original maturities of three
months or less.
Marketable Securities
The Company's investments are classified into three categories. Those
securities classified as "trading" or "available-for-sale" are reported at
market value. Debt securities consisting of state municipal bonds,
certificates of deposit, and U.S. Treasury bills are classified as "held-to-
maturity" and are reported at amortized cost. Cost is determined using the
specific identification method. Unrealized gains and losses from securities
"available-for-sale" are reported as a separate component of stockholders'
equity, net of related tax effects.
Debt Issuance Costs
Debt issuance costs are charged to expense as additional interest expense
over the life of the related debt using the interest method.
Property and Equipment
Property and equipment is stated at cost. The Company depreciates furniture,
fixtures and office and telephone equipment on a straight-line basis over
three to ten years; WallBoard(R) displays over five years; computer equipment
over two to four years; automobiles over three to five years and buildings
over fifty years. Leasehold improvements are amortized on a straight-line
basis over the shorter of the term of the lease or the estimated useful life
of the improvements.
When assets are retired or sold, the cost and related accumulated
depreciation and amortization are removed from the accounts and any gain or
loss is reflected in income.
Revenue Recognition
DIRECT SERVICES--The Company performs direct sales services on behalf of its
clients including field sales, teleservices, database management, creative
design, direct response marketing and print production. Revenues are
recognized as services are rendered in accordance with the terms of the
contracts. Certain of these contracts provide for payments based on accepted
customers and the type of service purchased by the customer. Revenues related
to these sales are recognized on the date the application for service is
accepted by the Company's clients. At this point, the Company has no further
performance obligation related to the submitted customer and is contractually
entitled to payment. Certain of the contracts include postage and other pass-
through costs incurred
F-12
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
by the Company on behalf of its clients. For these contracts, the Company
records as revenue the net billings to its clients. Certain other contracts of
the Company provide the client with the right to seek a return of previously
paid commissions if the customers submitted by the Company do not meet certain
defined characteristics and performance standards. These relate to the
client's ability to successfully provide service to the customer, the bad debt
experience of the customer base submitted by the Company, the achievement of
targeted customer goals and certain minimum usage and life measures of the
customer base. At the point of revenue recognition, an allowance is recorded
by the Company based on an estimate for these returned commissions. The
allowance is estimated based on the Company's historical experience and
periodically reviewed by the Company and adjusted when necessary.
MEDIA AND SAMPLING SERVICES--Media and Sampling services revenues are
recognized over the contract term as program services are rendered. Unearned
revenue is recorded for billings prior to the earning of such revenue.
MEDICAL SERVICES--The Company recognizes revenue and associated costs when
services have been performed by field representatives. Unbilled services
represent revenues earned on contracts, but billed in a subsequent accounting
period.
DATA DELIVERY SERVICES--Revenues from the sale of lists are recognized upon
the shipment to customers of lists on computerized labels, magnetic tape or
computer diskettes for a one-time usage. Additional billings are made by the
Company for additional usage by the customers.
Goodwill and Other Intangible Assets
Goodwill equal to the fair value of consideration paid in excess of the fair
value of net assets purchased has been recorded in conjunction with several of
the Company's purchase business combinations and is being amortized on a
straight-line basis over periods of fifteen to thirty years. When conditions
or events occur which management believes might indicate the goodwill is
impaired, an analysis of estimated future undiscounted cash flows is
undertaken to determine if any write down in the carrying value of the
goodwill is required.
Costs of purchased lists are amortized on a straight-line basis over their
estimated useful lives, generally one to five years. The Company determines
the useful lives of its lists based upon the estimated period of time such
lists are marketable. The Company periodically reviews the marketability of
its lists and, accordingly, their respective estimated useful lives. Such
reviews, to date, have not resulted in revised estimates of the useful lives
of the lists.
The costs of licenses to use, reproduce, and distribute lists are amortized
on a straight-line basis over the term of the related license agreement. In
the event that facts and circumstances indicate that the deferred cost of the
license may be impaired, an evaluation of recoverability would be performed.
If an evaluation is required, the estimated future undiscounted cash flows
associated with the license would be compared to the asset's carrying amount
to determine if a write-down to market value or discounted cash flow value is
required. Impairment would be recognized in operating results if a permanent
diminution in value were to occur. In conjunction with SCI's acquisitions of
American List, SCA and Bounty in July 1997 and the Company's current
competitive strategy, management determined that the intangible asset
associated with the license fee had been impaired, and accordingly an
impairment loss was recorded in the third quarter of 1997.
Income Taxes
The accompanying supplemental consolidated financial statements reflect no
provision for Federal or state income taxes related to income earned by the
Partnership prior to the Reorganization since each of the partners
F-13
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of the Partnership reflected their share of the Partnership's net income on
their respective tax returns. Prior to January 1, 1996, SMS was taxed as a C
corporation and, accordingly, a provision for taxes of SMS is reflected in the
accompanying consolidated statement of income for each of the two years in the
period ended December 31, 1995. During this period, SMS accounted for income
taxes in accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109").
Effective January 1, 1996, SMS elected to be taxed as an S corporation under
the Internal Revenue Code. In lieu of corporate taxes, the stockholders of an
S corporation are taxed on their proportionate share of the Company's taxable
income.
Effective with the Reorganization, SCI is treated as a C corporation for
Federal and state income tax purposes. At the date of the Reorganization, SCI
recognized a net deferred tax asset and an associated tax benefit equal to the
cumulative net deductible temporary differences existing at that date. The
income tax provision recorded for the year ended December 31, 1996 includes a
provision for income taxes for SCI for the period from September 24, 1996, the
date of the Reorganization, through December 31, 1996, offset by the net
deductible temporary differences existing at the date of the Reorganization.
During 1994, MMD elected to be taxed as an S corporation. Accordingly, no
provision for Federal income taxes has been made for MMD in the accompanying
supplemental consolidated financial statements. However, MMD is subject to New
York state income tax at reduced rates and New York City income tax.
SCA elected to be taxed as an S corporation effective January 1, 1995.
Accordingly, no provision for Federal or state income taxes has been made for
SCA in the accompanying 1995 and 1996 supplemental consolidated financial
statements.
Prior to their combination with SCI, both GEM and PharmFlex were taxed as S
corporations. Accordingly, no provision for Federal or state income taxes has
been made for GEM or PharmFlex in the accompanying supplemental consolidated
financial statements.
Brann, Bounty and RDL incur and pay taxes in the U.K. on a corporate level
similar to a C corporation in the United States.
Pro Forma Income Data (Unaudited)
The unaudited pro forma net income and net income per share amounts include
a provision for Federal and state income taxes as if the Company had been a
taxable C corporation for all periods presented. The shares used in computing
pro forma net income per share assume that the Reorganization and the
Acquisitions had occurred at the beginning of each of the periods presented,
reflect the issuance of additional shares as a result of issuances of stock,
the exercise of stock options, and the repurchase of outstanding shares by
certain subsidiaries of the Company prior to their mergers with SCI. The pro
forma income tax rate reflects the combined Federal and state income taxes of
approximately 39.6 percent, 38.8 percent and 42.4 percent, for the years ended
December 31, 1994, 1995 and 1996, respectively, and 42.0 percent and (211.4)
percent (after giving effect to certain acquisition costs which are not
deductible for tax purposes) for the nine months ended September 30, 1996 and
1997, respectively.
The Company's September 30, 1997 tax provision exceeds its statutory rate
due to the recognition of certain acquisition and related costs which are not
deductible for income tax purposes.
F-14
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Accounting for Stock Options
The Company accounts for its stock-based compensation plan using the
intrinsic value based method in accordance with the provisions of APB Opinion
No. 25, "Accounting for Stock Issued to Employees." Pro forma disclosure of
net income and earnings per share, calculated as if the Company accounted for
its stock-based compensation plan using the fair value based method in
accordance with the provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), is
included in Note 12.
Interim Financial Statements
The supplemental combined financial statements of the Company as of and for
the nine months ending September 30, 1996, and 1997, presented herein have
been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. As a result, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted. The financial statements reflect all adjustments (consisting of only
normal recurring adjustments) which, in the opinion of management, are
necessary to present fairly the combined financial position of the Company as
of September 30, 1997 and the results of its operations and cash flows for the
nine months ended September 30, 1996 and 1997.
Foreign Currency Translations
Assets and liabilities of the Company's international subsidiaries are
translated using the exchange rate in effect at the balance sheet date.
Revenue and expense accounts for these subsidiaries are translated using the
average exchange rate during the period. Foreign currency translation
adjustments are disclosed as a separate component of equity.
Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
Company's most significant estimates relate to certain of its contracts to
provide outsourced marketing services. The terms of these contracts provide
that the Company's clients may seek a return of previously paid commissions if
certain defined characteristics or performance standards are not met. The
Company has recorded an allowance in the accompanying supplemental
consolidated financial statements in an amount which it considers sufficient
to satisfy any claims which might be made pursuant to these provisions. During
the quarter ended March 31, 1997, the Company completed all services required
under its MCI contract and recorded $2.3 million of revenue which had been
deferred at December 31, 1996.
Concentration of Credit Risk
Concentration of credit risk is limited to cash and cash equivalents,
marketable securities, accounts receivable, and unbilled services and is
subject to the financial conditions of certain major clients as described in
Note 3. The Company places its investments in highly rated financial
institutions, United States Treasury bills, investment grade short-term debt
instruments and state and local municipalities, while limiting the amount of
credit exposure to any one entity. The Company's receivables are concentrated
with customers in the telecommunications, pharmaceutical and consumer packaged
goods industries. The Company does not require collateral or other security to
support clients' receivables.
F-15
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
New Accounting Pronouncements
During February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS No. 128"). This statement is effective for years ending after December
15, 1997 and will be implemented by the Company in its December 31, 1997
financial statements.
SFAS No. 128 requires primary earnings per share ("EPS") to be replaced with
basic EPS. Primary EPS is computed by dividing reported earnings available to
common stockholders by the weighted average number of shares outstanding
without consideration of common stock equivalents or other potentially
dilutive securities. Fully diluted EPS, now called diluted EPS is still
included. As discussed in Note 12, SCI adopted its stock option plan and began
offering stock options in September 1996. Because the options were outstanding
for only a short period of time during 1996, management has established that
the effect of this pronouncement on the computation of basic EPS is immaterial
for 1996. However, in future years, when the options are outstanding for the
entire year, management has estimated that the Company's reported EPS will be
higher under SFAS No. 128 than under the old EPS standard.
During June 1997, the Financial Accounting Standards Board issued SFAS No.
130 "Reporting Comprehensive Income" ("SFAS No. 130"). This statement is
effective for years beginning after December 15, 1997. SFAS No. 130
establishes standards for reporting and display of comprehensive income and
its components in a full set of general purpose financial statements.
Management is currently evaluating the impact of SFAS No. 130.
3. SIGNIFICANT CLIENTS:
The Company had one client which represented 2, 13 and 19 percent of the
Company's total revenues for the years ended December 31, 1994, 1995 and 1996,
respectively. The Company's principal contract with this client extended
through December 1997. In December 1997 the Company elected not to renew its
contract with this client, and instead has entered into a contract with a new
client to provide services similar to those previously provided to this
customer. There can be no assurance, however, that the contract with the new
client will generate revenues or profitability which are greater than or equal
to those generated by this one client. The Company had a second client which
represented 10, 11, and 7 percent of the Company's total revenues for the
years ended December 31, 1994, 1995, 1996, respectively.
F-16
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. MARKETABLE SECURITIES
The amortized cost, unrealized gains and losses, and market values of the
Company's held-to-maturity and available-for-sale securities are summarized as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
December 31, 1996
Held to maturity, maturing in
less than one year:
State and municipal bonds...... $5,571,856 $ 4,493 $ (5,945) $5,570,404
Certificates of deposit........ 188,656 -- (547) 188,109
---------- ------- -------- ----------
$5,760,512 $ 4,493 $ (6,492) $5,758,513
========== ======= ======== ==========
Available for sale:
Equity securities.............. $ 104,452 $ 1,192 $(23,739) $ 81,905
Government income securities... 498,162 -- (43,167) 454,995
---------- ------- -------- ----------
$ 602,614 $ 1,192 $(66,906) $ 536,900
========== ======= ======== ==========
December 31, 1995
Held to maturity, maturing in
less than one year:
State and municipal bonds...... $6,484,774 $ 8,116 $ (718) $6,492,172
U.S. Treasury bills............ 500,353 -- (116) 500,237
Certificates of deposit........ 281,956 -- (541) 281,415
---------- ------- -------- ----------
$7,267,083 $ 8,116 $ (1,375) $7,273,824
========== ======= ======== ==========
Available for sale:
Equity securities.............. $ 102,882 $ 1,091 $(30,760) $ 73,213
Government income securities... 469,808 -- (35,052) 434,756
---------- ------- -------- ----------
$ 572,690 $ 1,091 $(65,812) $ 507,969
========== ======= ======== ==========
December 31, 1994
Held to maturity, maturing in
less than one year:
State and municipal bonds...... $6,214,203 $ 3,566 $(15,947) $6,201,822
U.S. Treasury bills............ 613,840 14,362 -- 628,202
---------- ------- -------- ----------
$6,828,043 $17,928 $(15,947) $6,830,024
========== ======= ======== ==========
Available for sale:
Equity securities.............. $ 173,293 $ 803 $(43,763) $ 130,333
Government income securities... 439,968 -- (46,934) 393,034
---------- ------- -------- ----------
$ 613,261 $ 803 $(90,697) $ 523,367
========== ======= ======== ==========
</TABLE>
As a result of changes in market value of the available-for-sale security
portfolio, a valuation adjustment of $3,747, $4,687 and $(11,833), net of
deferred taxes, is recorded as a separate component of equity at December 31,
1996, December 31, 1995 and December 31, 1994.
F-17
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
WallBoards(R)....................................... $ 1,829,398 $ 1,790,566
Buildings and machinery............................. 11,393,322 14,359,796
Computer equipment.................................. 10,717,099 14,753,787
Office and telephone equipment...................... 8,017,771 13,347,913
Furniture and fixtures.............................. 1,712,677 2,196,705
------------ ------------
33,670,267 46,448,767
Accumulated depreciation............................ (15,729,537) (21,910,854)
------------ ------------
$17,940,730 $ 24,537,913
============ ============
</TABLE>
6. GOODWILL AND OTHER INTANGIBLE ASSETS:
Goodwill and other intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
Goodwill.............................................. $13,880,770 $15,037,176
Unamortized costs of lists............................ 3,886,624 5,121,445
License agreement..................................... 3,339,369 3,339,782
Covenant not to compete............................... 571,012 571,012
Marketing rights...................................... 361,259 560,758
----------- -----------
22,039,034 24,630,173
Less accumulated amortization......................... (3,730,283) (6,044,058)
----------- -----------
$18,308,751 $18,586,115
=========== ===========
</TABLE>
Goodwill arose from the Brann, Bounty and GEM management buy-outs in January
1994, August 1995 and September 1993, respectively which were accounted for as
purchase business combinations.
Effective July 1, 1994, American List entered into an exclusive licensing
agreement, whereby it obtained a ten-year license to use, reproduce and
distribute a defined segment of the licensor's lists and to use their sources
and customer list to compile and market American List's own lists. As
consideration for the granting of the license, American List is obligated to
pay a total of $4,200,000. The license fee is payable in three annual
installments of $600,000 which began July 1994; three annual installments of
$500,000 beginning July 1997; three annual installments of $250,000 beginning
July 2000; and a final installment of $150,000 in July 2003 (see Note 7). The
Company has recorded the cost and related obligation for the license, net of
imputed interest at 7.25 percent, which approximated $3.3 million. The net
cost of the license is being amortized on a straight-line basis over the ten-
year term of the license agreement. In conjunction with SCI's acquisitions of
American List, SCA and Bounty in July 1997 and the Company's current
competitive strategy, management determined that the intangible asset
associated with the license fee had been impaired and accordingly, an
impairment loss was recorded in the Company's third quarter 1997 income
statement as an acquisition related cost.
Amortization expense of goodwill and other intangible assets totaled
$1,541,354, $2,188,429 and $2,313,775 in 1994, 1995 and 1996, respectively.
F-18
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. DEBT:
Long-Term Borrowings
At December 24, 1997, the Company has approximately $1.6 million in long-
term borrowings outstanding.
Brann had a loan payable to a commercial bank in the amount of $7,246,290
and $7,165,631 as of December 31, 1995 and 1996, respectively. The loan had an
interest rate of 7.6275 percent per annum until January 28, 1999, at which
date the interest rate was to change to the bank's base rate plus 1.75
percent. The loan was payable in annual installments of $855,700, until March
1, 2004, when the entire unpaid amount was due in full. The loan was secured
by Brann's assets and the book value of the loan approximated its fair value
as of December 31, 1996. In April 1997, the full amount of the loan
outstanding was repaid.
Bounty has a loan payable to a commercial bank in the amount of $3,296,000
and $4,114,000 as of December 31, 1995 and 1996, respectively. The loan bears
interest at 2.75 percent above the bank's base rate, which equates to an
interest rate of 8.75 percent at December 31, 1996. The book value of the loan
approximated its fair value at December 31, 1996. The loan is secured by all
of the assets of Bounty. In September 1997, the full amount of the loan
outstanding was repaid.
American List is obligated under a license agreement to make future payments
(see Note 6). This net obligation of $2,339,000 and $1,914,000 at December 31,
1995 and 1996, respectively, has been classified as a long-term borrowing in
the accompanying supplemental consolidated balance sheet. Of these amounts,
$445,645 and $374,113 have been classified as current as of December 31, 1995
and 1996, respectively.
GEM had a loan payable to a commercial bank in the amount of $750,000 as of
December 31, 1995. Of this amount, $120,000 has been classified as short-term
borrowing in the accompanying supplemental consolidated balance sheet as of
December 31, 1995. The loan was payable in quarterly installments of $30,000
for eight reductions beginning March 31, 1996 and ending on December 31, 1997.
The entire unpaid amount was due in full January 2, 1999. In June 1996, the
full amount of the loan outstanding was repaid.
RDL has a loan payable to a commercial bank in the amount of $459,556 and
$382,356 as of December 31, 1995 and 1996, respectively. The loan bears
interest at 1.25 percent above the bank's base rate. Of these amounts, $30,034
and $37,477 have been classified as current as of December 31, 1995 and 1996,
respectively. On December 31, 1997, the full amount of the loan outstanding
was repaid.
Related Party Borrowings--Subordinated Debentures
On October 28, 1996 SCI used approximately $7.0 million of cash to redeem in
full the subordinated debentures (the "Debentures") due to related parties.
The Debentures were originally issued on May 18, 1995, with a face amount of
$6.0 million. Cash proceeds of $5.0 million were received upon issuance of the
Debentures. The difference between the cash proceeds received and the face
amount of the Debentures was accounted for as an original issue discount. The
Debentures had a stated interest rate of 12.25 percent (effective interest
rate to maturity of approximately 17 percent) and an original maturity date of
December 31, 2001. The Debentures were classified as long term at December 31,
1995, because SCI did not have the intent to repay them at that date. The $7.0
million payment consisted of the face amount of the Debentures, a prepayment
penalty and accrued interest. A non-recurring charge of $1.2 million, net of a
$805,874 tax benefit, was recorded at December 31, 1996 as an extraordinary
loss related to this early debt extinguishment. The non-recurring charge
consists of prepayment penalties and the write-off of unamortized discount and
debt issuance costs.
Related Party Borrowings--Stockholder Loans
Bounty borrowed approximately $10.4 million from certain stockholders to
fund, in part, its August, 1995 management buy-out of Bounty Holdings Limited.
The borrowings had interest rates ranging from 0 percent to 10 percent with
maturities beginning in 1996 and extending through 2008. At December 31, 1995
and 1996,
F-19
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$10.4 million and $10.5 million, respectively, remained outstanding under
these borrowings. In July 1997, the full amount outstanding under these
borrowings was repaid.
RDL borrowed approximately $389,665 from a principal shareholder. The
borrowings had interest rates equivalent to the UK bank rate applied quarterly
with a maturity of December 31, 2004. At December 31, 1995 and 1996, $190,567
and $147,784, respectively, remained outstanding under these borrowings. In
October 1997, the full amount outstanding under these borrowings was repaid.
Notes Payable
Concurrent with the formation of the Partnership, the Original Limited
Partner loaned the Partnership $350,000 as evidenced by a promissory note. On
May 10, 1989, the Partnership entered into another promissory note agreement
with the Original Limited Partner to repay the principal amount of advances
previously made by the Original Limited Partner to the Partnership. Effective
January 1, 1993, all prior notes payable and the related accrued interest to
the Original Limited Partner were combined into one note totaling $3,252,781.
This note bore interest of 8.00 percent per annum. This note was paid in full
in May of 1995 with a portion of the proceeds from the Debentures.
Future minimum payments as of December 31, 1996 on all long-term borrowings
are as follows:
<TABLE>
<S> <C>
1997......................................................... $ 3,550,753
1998......................................................... 3,042,860
1999......................................................... 3,048,519
2000......................................................... 2,768,194
2001......................................................... 2,750,004
Thereafter................................................... 9,290,431
-----------
Total future minimum payments................................ 24,450,761
Less--current portion........................................ 3,550,753
-----------
Total.................................................... $20,900,008
===========
</TABLE>
Lines of Credit
SCI obtained a $2.5 million line of credit in September 1996. The line of
credit has a variable rate of interest with borrowings payable on an
amortizing basis to September 1999, the date the line expires. At December 31,
1996, approximately $0.9 million was outstanding and the interest rate was
6.75 percent. The weighted average interest for the period ended December 31,
1996 was 6.71 percent.
MMD has a $2.0 million revolving line of credit agreement with a bank. The
line of credit has a variable interest rate based on the bank's prime rate
(8.25 percent as of December 31, 1996). MMD had $1.0 and $0.5 million
outstanding on this line at December 31, 1995 and 1996, respectively, and the
effective interest rate was 8.0 percent for the year ended December 31, 1996.
Borrowings pursuant to the line of credit are collateralized by substantially
all of the assets of MMD. In February 1997, MMD paid off the outstanding
balance of $0.5 million.
Brann and Bounty maintain lines of credit for general business expenditures.
These lines bear interest at the commercial bank's base rate plus 1.25 percent
to 2.75 percent. There was $1.0 million outstanding under these lines of
credit at December 31, 1996.
F-20
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. INCOME TAXES:
At the date of the Reorganization, a net deferred tax asset was recorded with
an associated credit to the provision for income taxes. The Company's income
tax provision includes the following components.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C> <C>
Current................. U.S.-Federal $3,281,639 $4,250,500 $4,964,176
U.S.-State and City 1,062,608 887,347 1,125,938
U.K. 1,404,777 2,216,739 1,418,702
---------- ---------- ----------
5,749,024 7,354,586 7,508,816
---------- ---------- ----------
Deferred................ U.S.-Federal 83,000 51,000 (668,618)
U.S.-State and City -- 9,000 (114,824)
U.K. (1,532) 48,887 (731,435)
---------- ---------- ----------
81,468 108,887 (1,514,877)
Tax effect of equity transaction............ -- (815,000) --
---------- ---------- ----------
Income tax provision........................ $5,830,492 $6,648,473 $5,993,939
========== ========== ==========
</TABLE>
The provision for taxes on income before extraordinary item differs from the
amount computed by applying the U.S. Federal income tax rate as a result of the
following:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------------
1994 1995 1996
----- ------ ------
<S> <C> <C> <C>
Taxes at statutory U.S. Federal income tax rate......... 35.00% 35.00% 35.00%
U.S./U.K. tax rate differential......................... (0.33) (0.44) 0.03
Income taxed directly to owners......................... (9.40) (11.23) (13.68)
State and city income taxes, net of Federal tax benefit. 4.48 2.29 3.06
Tax effect of Reorganization............................ -- -- (2.77)
Tax effect of dividends on mandatorily redeemable
preferred stock........................................ 0.56 0.48 0.78
Tax effect of goodwill amortization..................... 0.20 0.42 0.58
Tax effect of U.K. permanent differences................ 0.88 0.40 1.84
Other................................................... (0.72) (0.32) 0.87
----- ------ ------
Effective tax rate...................................... 30.67% 26.60% 25.71%
===== ====== ======
</TABLE>
Deferred income taxes are recorded based upon differences between the
financial statement and tax bases of assets and liabilities. As of December 31,
1995 and 1996 temporary differences that give rise to the deferred tax assets
and liabilities consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
Accrued expenses and other liabilities................ $ 85,318 $ 1,281,339
Tax losses of a subsidiary of Bounty.................. 2,005,969 1,964,338
Tax benefit of capital losses......................... 1,090,697 1,202,183
Other................................................. 57,751 42,582
----------- -----------
Gross deferred tax assets............................. 3,239,735 4,490,442
Property and equipment................................ (273,766) (97,029)
Prepaid pension cost.................................. (60,321) (83,859)
----------- -----------
Gross deferred tax liabilities........................ (334,087) (180,888)
Valuation allowance................................... (3,096,666) (3,166,521)
----------- -----------
Net deferred tax (liability) asset.................... $ (191,018) $ 1,143,033
=========== ===========
</TABLE>
F-21
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Two subsidiaries of Bounty have certain tax capital and operating losses
which can be realized only if these subsidiaries generate taxable capital
gains or operating income, respectively. At December 31, 1995 and 1996,
management determined that a valuation allowance against the deferred tax
asset associated with these tax losses was required.
At December 31, 1996, cumulative undistributed earnings of Brann, Bounty and
RDL were approximately $3.7 million. No provision for U.S. income taxes or
U.K. withholding taxes has been made since the Company considers these
undistributed earnings to be permanently invested in the U.K. The Company has
estimated that because of available tax planning strategies such earnings, if
repatriated, would not result in an additional material tax provision.
9. GEOGRAPHICAL DATA:
After giving effect to the Acquisitions, the Company has operations in the
United States, the U.K., Ireland and Hungary. Financial information for the
Company's operations in the U.K., Ireland, and Hungary are classified as
foreign and consist primarily of operations in the U.K.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues
United States.................... $ 71,258,303 $113,187,930 $170,780,884
Foreign.......................... 50,073,569 74,431,020 95,592,962
------------ ------------ ------------
Total revenues................. $121,331,872 $187,618,950 $266,373,846
============ ============ ============
Income from operations
United States.................... $ 15,881,015 $ 19,688,087 $ 23,244,162
Foreign.......................... 4,040,186 6,836,486 2,122,378
------------ ------------ ------------
Total income from operations... $ 19,921,201 $ 26,524,573 $ 25,366,540
============ ============ ============
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C> <C>
Identifiable assets
United States.................... $ 55,414,189 $105,799,130
Foreign.......................... 54,960,643 64,073,424
------------ ------------
Total identifiable assets...... $110,374,832 $169,872,554
============ ============
</TABLE>
10. LEASES:
The Company leases certain facilities, office equipment and other assets.
The following is a schedule of future minimum lease payments for capital
leases and for operating leases (with initial or remaining terms in excess of
one year at December 31, 1996).
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEARS ENDING DECEMBER 31, LEASES LEASES
------------------------- ----------- -----------
<S> <C> <C>
1997............................................ $ 1,360,357 $ 8,762,904
1998............................................ 1,500,673 6,686,917
1999............................................ 653,974 5,119,774
2000............................................ 86,563 4,136,302
2001............................................ 3,646 3,362,081
Thereafter...................................... -- 10,640,657
----------- -----------
Total minimum lease payments.................... 3,605,213 $38,708,635
===========
Less--Amount representing interest.............. (418,900)
-----------
Total obligation under capital leases........... 3,186,313
Less--Current portion........................... (1,108,954)
-----------
Long-term portion............................... $ 2,077,359
===========
</TABLE>
F-22
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property and equipment, net, on the supplemental consolidated balance sheets
includes $1,326,069 and $3,791,991 for equipment purchased under capital
leases as of December 31, 1995 and 1996, respectively.
Rental expense for all operating leases was approximately $2,399,498,
$4,019,887 and $5,544,997 for the years ended December 31, 1994, 1995 and
1996, respectively.
11. CAPITAL STOCK:
On September 30, 1996 SCI completed an initial public offering of 8,970,000
shares of its common stock, par value $0.001 per share (the "Common Stock") at
an offering price of $17.00 per share. The offering included 4,038,162 newly
issued shares of Common Stock sold by SCI and 4,931,838 previously outstanding
shares of Common Stock sold by selling stockholders. SCI received net proceeds
of $59.2 million from the offering (after deducting the costs associated with
the offering). SCI did not receive any proceeds from the sale of shares of
Common Stock in the offering by the selling stockholders.
In May 1995, SMS sold a 6.15 percent interest in the Partnership for
$2,050,000 in cash proceeds. These proceeds are reflected (net of associated
income taxes of $815,000 and SMS's basis in the equity interest) as a
contribution to additional paid-in capital in the accompanying supplemental
consolidated financial statements.
12. STOCK INCENTIVE PLAN:
In September 1996, SCI adopted the 1996 Stock Incentive Plan (the "Stock
Option Plan"). The Stock Option Plan authorizes SCI to grant incentive stock
options, non-qualified stock options, restricted stock awards and stock
appreciation rights ("SARs"). Subject to adjustment, the aggregate number of
shares of Common Stock which may be issued under the Stock Option Plan upon
exercise of options, SARs or in the form of restricted stock may not exceed
17.5% of the number of shares of Common Stock outstanding.
In conjunction with Brann's purchase of Brann Holdings Limited in January
1994, Brann adopted a stock option plan. Granted options were exercisable upon
a sale or flotation of Brann as defined in the terms of the plan. No
compensation expense has been recognized in the financial statements for the
Brann options for any of the periods presented as the conditions for their
exercise were not probable at any of the balance sheet dates. In conjunction
with the acquisition of Brann by SCI, all of the outstanding options of Brann
were exchanged for options of the common stock of the Company under the Stock
Option Plan. The exchange of Brann options for SCI options was based on the
final common stock exchange rates used in the acquisition, with the SCI
options possessing identical terms to the Brann options at the date of
conversion. The Company recognized a charge to first quarter 1997 income of
approximately $9.1 million related to the accelerated vesting of these
options.
The exercise price of options granted under the Stock Option Plan may not be
less than 100 percent (110 percent in the case of an optionee who is a 10
percent stockholder) of the fair market value per share of Common Stock on the
date of the option grant. The vesting and other provisions of the options are
determined by the Company's Board of Directors. All options granted as of
December 31, 1996 vest on or before the fourth anniversary of the date of
grant and expire on or before the tenth anniversary of the date of grant.
F-23
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the activity within the Stock Option Plan, for the three years
ended December 31, 1996, after giving retroactive effect to the conversion of
the Brann, Bounty and American List options, is as follows:
<TABLE>
<CAPTION>
SHARES OUTSTANDING
---------------------------
1994 1995 1996
------- ------- ---------
<S> <C> <C> <C>
Beginning of year............................ 45,708 558,200 652,390
Granted.................................... 516,254 128,829 4,329,359
Exercised.................................. (3,762) (7,171) (65,214)
Forfeited.................................. -- (27,468) (280,520)
Expired.................................... -- -- (85,500)
------- ------- ---------
End of year.................................. 558,200 652,390 4,550,515
======= ======= =========
Exercisable at end of year................... 463,093
=========
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
EXERCISE PRICE
-------------------
1994 1995 1996
----- ------ ------
<S> <C> <C> <C>
Beginning of year..................................... $9.33 $ 4.14 $ 5.43
Granted............................................. 3.70 10.07 17.01
Exercised........................................... 9.33 8.93 13.93
Forfeited........................................... -- 0.27 15.65
Expired............................................. -- -- 15.79
End of year........................................... 4.12 5.42 15.50
</TABLE>
The weighted average option fair value on the grant date was $8.85 for
options issued during the year ended December 31, 1996.
The following table presents information related to the 4,550,515 options
outstanding at December 31, 1996.
<TABLE>
<CAPTION>
WEIGHTED
COMPANY OPTIONS AVERAGE
--------------- NUMBER OF EXERCISE CONTRACTUAL
ISSUED BY OPTIONS PRICE LIFE IN YEARS
--------- --------- ------------- -------------
<S> <C> <C> <C>
SCI prior to initial public
offering.......................... 3,767,500 $17.00 9.69
SCI subsequent to initial public
offering.......................... 194,500 $19.38-$27 9.93
Brann.............................. 400,422 $0.27-$2.67 7.00
Bounty............................. 91,501 $0.52-$1.73 0.96
American List...................... 96,592 $15.79-$23.58 7.53
---------
4,550,515
=========
</TABLE>
The fair value of each option grant is estimated on the date of grant using
a Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1996: risk-free interest rate of 6.2 percent,
expected dividend yield of zero, expected life of 5 years, and expected
volatility of 50 percent.
F-24
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
If the Company had recorded compensation expense using the fair value based
method prescribed by SFAS No. 123, the Company's 1996 pro forma net income and
1996 pro forma net income per share amounts would have been reduced to the
following as adjusted amounts.
<TABLE>
<S> <C>
Pro forma net income:
As reported.................................................. 12,219,282
As adjusted.................................................. 5,324,128
Pro forma net income per share:
As reported.................................................. 0.27
As adjusted.................................................. 0.12
Pro forma fully diluted net income per share:
As reported.................................................. 0.27
As adjusted.................................................. 0.12
</TABLE>
13. MANDATORILY REDEEMABLE PREFERRED STOCK:
The preferred shares were redeemed in full subsequent to December 31, 1996,
as part of the Acquisitions.
On January 25, 1994, in connection with the acquisition of Brann Direct
Marketing Limited by Brann Holdings, fixed cumulative mandatorily redeemable
preferred shares with a par value of (Pounds)0.90 were issued for
(Pounds)1.00. All of the 3,067,000 authorized shares were issued yielding
proceeds of $4,582,098 less associated issue costs of $129,978. A fixed
cumulative dividend was payable at the following rates:
<TABLE>
<S> <C>
1994.................................................................. 5%
1995.................................................................. 6%
1996.................................................................. 7%
Thereafter............................................................ 8%
</TABLE>
The shares were redeemable at (Pounds)1.00 per share, including the
(Pounds)0.10 premium per share on the following dates by the holders or
earlier at the option of Brann.
<TABLE>
<CAPTION>
NUMBER
-------
<S> <C>
December 31, 1998................................................. 517,000
December 31, 1999................................................. 850,000
December 31, 2000................................................. 850,000
December 31, 2001................................................. 850,000
</TABLE>
In October 1996, Bounty issued 750,000 shares of fixed cumulative
mandatorily redeemable preferred shares with a par value of (Pounds)1.0 per
share. A fixed cumulative dividend was payable on these preferred shares at 8
percent through December 1997 increasing to 10 percent thereafter. The shares
were mandatorily redeemable in five equal annual installments beginning March
31, 2003.
In September 1996, RDL issued 1,333,333 shares of fixed cumulative
mandatorily redeemable preferred shares for (Pounds)1,333,333. A fixed
cumulative dividend was payable on these preferred shares at (Pounds).09 per
annum per share. The shares were mandatorily redeemable in three equal
installments commencing on December 31, 2000.
The Brann, Bounty, and RDL preferred shares are mandatorily redeemable on
specific dates, do not carry voting rights unless dividends are in arrears,
which has not occurred, and are not convertible into common equity.
Accordingly, the preferred shares are classified as long-term debt obligations
and the dividends, as well as the amortization of associated issue costs and
discounts, are charged as a component of interest expense in the accompanying
supplemental consolidated financial statements. Dividends included in interest
expense were $324,784, $366,096 and $630,987 in 1994, 1995 and 1996,
respectively.
F-25
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. PENSION AND PROFIT-SHARING PLANS:
Brann operates The Brann Retirement Benefits Plan, which is a funded defined
benefit plan available to all employees. The assets of the plan are held
separately from those of Brann and are invested in managed funds principally
comprising equity securities. Plan benefits are based on years of service and
compensation levels at the time of retirement. The funding of the plan is
determined following consultation with actuaries using the projected unit
credit method.
An actuarial valuation of the pension plan is performed on a triennial basis
consistent with regulations governing pensions plans and the accounting
therefor in the United Kingdom. SFAS No. 87 requires an annual valuation of a
plan's assets and liabilities. For purposes of these financial statements, the
actuarial value of the plan's liabilities has been estimated using the
available actuarial valuations and the plan's asset values reflect the actual
market value of those assets at each balance sheet date based on records
maintained by the plan's trustees. The most recent actuarial valuation of the
plan's liabilities was performed as of April 1, 1996. The significant
assumptions used and the funded status of the plan are set out in the tables
below.
Significant Assumptions
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
--------------
1994 1995 1996
---- ---- ----
% % %
---- ---- ----
<S> <C> <C> <C>
Discount rate.............................................. 9.0 8.0 8.0
Expected long-term rate of return on plan assets........... 10.0 9.0 9.0
Rate of increase in compensation........................... 7.0 6.0 6.0
</TABLE>
Net Periodic Pension Cost
Net periodic pension cost is determined using the assumptions as of the
beginning of the year and is comprised of the following (in thousands).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Service cost........................................ $ 812 $ 726 $ 1,109
Interest cost on projected benefit obligation....... 521 710 875
Actual return on plan assets........................ 935 (1,704) (1,078)
Net amortization of unrecognized net (gain) loss and
deferral of actual return on plan assets........... (1,578) 915 125
------- ------- -------
Net periodic pension cost........................... $ 690 $ 647 $ 1,031
======= ======= =======
</TABLE>
F-26
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Funded Status
The funded status is determined using the assumption as of the end of the
year and is reflected as follows (in thousands).
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
----------------
1995 1996
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated and fully vested................................ $ 9,033 $11,501
------- -------
Accumulated benefit obligation................................ 9,033 11,501
Effect of projected future compensation levels................ 1,918 2,430
------- -------
Projected benefit obligation.................................. 10,951 13,931
Plan assets at fair value..................................... 9,930 13,777
------- -------
Plan assets less than projected benefit obligation............ (1,021) (154)
Unrecognized loss............................................. 1,206 411
------- -------
Prepaid pension cost.......................................... $ 185 $ 257
======= =======
</TABLE>
Effective March 1, 1974, American List adopted both pension and profit-
sharing plans covering all full-time employees, as defined, which provide for
death and retirement benefits. The noncontributory plans are funded through
the purchase of insurance policies and contributions to trust funds.
Contributions and trust earnings of the plans are credited to the account of
each employee. The plans are defined contribution plans and, accordingly,
individual benefits are limited to the balance of the trust funds and amounts
payable under the insurance policies.
Bounty operates two defined contribution pension plans. The assets of the
plans are held in separate trustee administered funds.
SCA has a profit sharing plan which covers substantially all employees.
Contributions are at the discretion of the Company. The Company also has a
401(k) plan for which no employer contribution is made.
GEM has a 401(k) plan for which employer contributions are made at the
discretion of the Company.
RDL maintains a defined contribution plan which covers substantially all
employees. RDL makes matching contributions to the plan which vary based on
the employees contributions.
Pension and profit sharing costs related to the American List, SCA, Bounty,
GEM and RDL plans amounted to approximately $318,278, $391,826 and $581,674
for 1994, 1995 and 1996, respectively.
15. RELATED PARTIES:
SCI's headquarters office space is leased from a third party, in which one
of the former limited partners has an ownership interest. Rent paid under this
lease was $355,483, $771,855, and $1,125,542 in 1994, 1995, and 1996,
respectively.
During 1995, SCI advanced $2,725,000 to a stockholder of SMS as evidenced by
a promissory note. The note was non-interest bearing and secured by SMS stock.
This note was distributed to the SMS stockholders, pro rata, on June 30, 1996.
F-27
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SCI produces a WallBoard(R) for which a publication beneficially owned by
the Original Limited Partner is one of the sponsors. Such publication
participates as a sponsor in exchange for the use by the Company of its
editorial information. Because it is not practicable to estimate the benefit
received by or provided to SCI and the Original Limited Partner, no accounting
recognition has been provided for this transaction in the accompanying
supplemental consolidated financial statements.
16. COMPENSATION TO STOCKHOLDERS:
On September 24, 1997 the Company completed the public offering of 8,776,334
shares of its common stock, par value $0.001 per share (the "Common Stock") at
an offering price of $25.8125 per share. The offering included 1,850,000 newly
issued shares of Common Stock sold by the Company and 6,926,334 previously
outstanding shares of Common Stock sold by selling stockholders. The Company
received net proceeds of $42.7 million from the offering (after deducting the
estimated costs associated with the offering). The Company did not receive any
proceeds from the sale of shares of Common Stock in the offering by the
selling stockholders.
Prior to the Reorganization, SCI's operations were conducted by the
Partnership. SMS, the general partner of the Partnership, paid compensation to
certain officers and employees of the Partnership for services performed for
SMS. The compensation from SMS was in addition to the compensation that these
individuals received from the Partnership. Following consummation of the
Reorganization, these individuals are not performing any comparable duties or
responsibilities for SMS. No such compensation was paid by SMS to these
individuals in 1996 nor is any such compensation expected to be paid in the
future. This non-recurring compensation is included in compensation to
stockholders on the supplemental consolidated statement of income for the year
ended December 31, 1995.
Prior to their merger with SCI, certain stockholders of the acquired
companies received annual compensation in their roles as managers in excess of
amounts which they will receive pursuant to employment agreements they have
entered into with the Company. The amount by which the historical compensation
paid to these managers exceeds that provided in their employment contracts has
been classified as compensation to stockholders in the accompanying
supplemental consolidated statements of income.
17. COMMITMENTS AND CONTINGENCIES:
An officer of one of the acquired Companies was terminated in February 1997,
and the matter is subject to ongoing litigation. Due to changes in fact which
resulted from the acquisition, the Company has recorded a liability in
September 1997 equal to the expected cost to resolve the matter.
The Company is subject to lawsuits, investigations and claims arising out of
the conduct of its business, including those related to commercial
transactions, contracts, government regulation and employment matters. Certain
claims, suits and complaints have been filed or are pending against the
Company. In the opinion of management, all matters are without merit or are of
such kind, or involve such amounts, as would not have a material effect on the
financial position or results of operations of the Company if disposed of
unfavorably.
F-28
<PAGE>
SNYDER COMMUNICATIONS, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED, IN THOUSANDS, EXCEPT PER
SHARE DATA):
The following table summarizes financial data by quarter for the Company for
1995 and 1996, giving effect to the Acquisitions as if they had occurred at
the beginning of the earliest period presented.
<TABLE>
<CAPTION>
QUARTER ENDED 1995
-----------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
-------- ------- ------------ ----------- -------
<S> <C> <C> <C> <C> <C>
Revenues..................... 38,968 40,262 49,750 58,639 187,619
Gross profit................. 16,176 14,901 19,305 23,259 73,641
Net income................... 4,652 3,637 6,938 3,122 18,349
Pro forma net income......... 4,254 3,061 5,446 2,537 15,298
Pro forma net income per
share....................... 0.09 0.08 0.13 0.05 0.35
<CAPTION>
QUARTER ENDED 1996
-----------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
-------- ------- ------------ ----------- -------
<S> <C> <C> <C> <C> <C>
Revenues..................... 54,725 62,556 71,276 77,817 266,374
Gross profit................. 18,229 20,833 24,299 25,725 89,086
Income before extraordinary
item........................ 3,402 4,456 7,366 2,094 17,318
Net income................... 3,402 4,456 7,366 879 16,103
Pro forma net income before
extraordinary item.......... 2,689 3,156 4,572 3,018 13,435
Pro forma net income......... 2,689 3,156 4,572 1,802 12,219
Pro forma net income before
extraordinary item per
Share....................... 0.06 0.07 0.10 0.06 0.29
Pro forma net income per
share....................... 0.06 0.07 0.10 0.04 0.27
</TABLE>
19. SUBSEQUENT EVENT (UNAUDITED):
On December 31, 1997, the Company entered into an agreement and plan of
merger with Blau Marketing Technologies, Inc. ("Blau"). Blau provides direct
marketing services including strategic consulting, creative services, program
design and implementation, consumer database management, response tracking and
analysis and production management to large national and international
corporations in the financial services, technology, retail, telecommunications
and utilities industries. The transaction has been approved by Blau's board of
directors and principal shareholders, but remains subject to the approval of
other shareholders. Final approval and completion of the transaction are
expected in January 1998. The transaction is valued at $71.4 million and will
be accounted for as a pooling of interests.
F-29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Brann Holdings Limited:
We have audited the consolidated balance sheets of Brann Holdings Limited
(the Company) and its subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1996
(not presented separately herein). These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United Kingdom, which do not differ in any material respect
from generally accepted auditing standards in the United States. Those
standard require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements audited by us present
fairly, in all material respects, the financial position of the Company and
its subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles in the United States.
Price Waterhouse
Chartered Accountants and Registered
Auditors
Bristol, England
May 30, 1997
F-30
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
American List Corporation
We have audited the consolidated balance sheets of American List Corporation
and Subsidiaries as of February 28, 1997 and February 29, 1996, and the
related consolidated statements of earnings, stockholders' equity and cash
flows for each of the years in the three-year period ended February 28, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these 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 financial statements referred to above present fairly ,
in all material respects, the consolidated financial position of American List
Corporation and Subsidiaries as of February 28, 1997 and February 29, 1996,
and the consolidated results of their operations and their consolidated cash
flows for each of the years in the three-year period ended February 28, 1997
in conformity with generally accepted accounting principles.
Grant Thornton LLP
Melville, New York
April 11, 1997
F-31
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Snyder Communications, Inc.:
We have audited in accordance with generally accepted auditing standards,
the supplemental consolidated financial statements of Snyder Communications,
Inc. included in this Form 8-K filing and have issued our report thereon dated
December 24, 1997. Our audits were made for the purpose of forming an opinion
on the basic financial statements taken as a whole. Schedule II--Allowance for
Doubtful Accounts included in this Form 8-K is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion based on our audit and the report of other auditors, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Washington, D.C.
December 24, 1997
<PAGE>
SNYDER COMMUNICATIONS, INC.
SCHEDULE II
ALLOWANCE FOR DOUBTFUL ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
DEDUCTIONS FROM RESERVE
BALANCE AT ADDITIONS CHARGED TO FOR PURPOSES FOR WHICH TRANSLATION BALANCE AT
BEGINNING OF YEAR COST AND EXPENSE RESERVE WAS CREATED ADJUSTMENTS END OF YEAR
----------------- -------------------- ----------------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1994.................... $296,870 $245,811 $ 70,355 $10,891 $483,217
1995.................... 483,217 247,077 141,800 (5,178) 583,316
1996.................... 583,316 529,997 187,447 62,345 988,211
</TABLE>
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED HEREUNTO DULY AUTHORIZED.
Snyder Communications, Inc.
Date: January 21, 1998 By: /s/ Michele D. Snyder
---------------------------------
Name: Michele D. Snyder
Title: Vice Chairman, President and
Chief Operating Officer
Date: January 21, 1998 By: /s/ A. Clayton Perfall
---------------------------------
Name: A. Clayton Perfall
Title: Chief Financial Officer
