Rule 424(b)(4)
File No. 333-00545
1,400,000 Shares
[LOGO] American List Corporation
Common Stock
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All of the 1,400,000 shares of Common Stock of American List Corporation
(the "Company") offered hereby are being sold by the Selling Stockholders. See
"Principal and Selling Stockholders." The Company will not receive any proceeds
from the sale of the shares offered hereby.
The Common Stock is traded on the American Stock Exchange under the symbol
"AMZ." On March 7, 1996, the last reported sale price of the Common Stock was
$34.25 per share. See "Price Range of Common Stock."
See "Risk Factors" beginning on page 6 for a discussion of certain factors
that should be considered by prospective purchasers of the Common Stock.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Proceeds to
Price to Underwriting Selling
Public Discount (1) Stockholders (2)
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Per Share ................. $32.00 $1.92 $30.08
Total (3) ................. $44,800,000 $2,688,000 $42,112,000
================================================================================
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other information.
(2) Before deducting expenses of the offering estimated at $413,225 payable by
the Selling Stockholders.
(3) One of the Selling Stockholders has granted the Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to 210,000
additional shares of Common Stock at the Price to Public per share, less
the Underwriting Discount, for the purpose of covering over-allotments, if
any. If the Underwriters exercise such option in full, the total Price to
Public, Underwriting Discount and Proceeds to Selling Stockholders will be
$51,520,000, $3,091,200, and $48,428,800, respectively. See "Underwriting."
------------
The shares of Common Stock are offered by the Underwriters when, as and if
delivered to and accepted by them, subject to their right to withdraw, cancel or
reject orders in whole or in part and subject to certain other conditions. It is
expected that delivery of certificates representing the Shares will be made
against payment on or about March 13, 1996 at the office of Oppenheimer & Co.,
Inc., Oppenheimer Tower, World Financial Center, New York, New York 10281.
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Oppenheimer & Co., Inc. Furman Selz
The date of this Prospectus is March 8, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules and
regulations thereunder, and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such materials may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at 7
World Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-3 filed by the Company with the Commission (the
"Registration Statement") with respect to the securities to which this
Prospectus relates, certain parts of which are omitted in accordance with the
rules and regulations of the Commission. For further information with respect to
the Company and the shares offered hereby, reference is made to the Registration
Statement, including the exhibits thereto. Each summary in this Prospectus of
information included in the Registration Statement or any exhibit thereto is
qualified in its entirety by reference to such information or exhibit.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Unless otherwise indicated, information in this Prospectus assumes no exercise
of options to purchase 187,005 shares of Common Stock outstanding under the
Company's stock option plan. All share and per share information gives
retroactive effect to a 3-for-2 stock split effected in July 1993 and a 10%
stock dividend effected in March 1994.
The Company
American List Corporation ("American List" or the "Company") develops,
maintains and markets one of the largest and most comprehensive databases of
high school, college, and pre-school through junior high school students in the
United States, currently containing information on approximately 30 million
individuals. The Company rents lists derived from its database for use primarily
in direct mail and telemarketing programs. During the fiscal year ended February
28, 1995, the Company rented its lists to approximately 3,200 customers,
including financial institutions, list brokers and advertising agencies,
retailers and educational institutions.
The Company's computerized database contains information such as name,
address, gender and, if available, date of birth and telephone number of the
individuals included. From this database, the Company extracts, manipulates and
sorts information to create its multiple list products which are available in a
variety of formats, including prospect lists, mailing labels, 3" x 5" index
cards and computer magnetic tapes, cartridges and disks. American List's
computer processing facility provides it with the ability to customize its lists
to best serve each customer's marketing goals.
The information contained in the Company's database is derived from a
number of sources which are the result of long-term relationships developed by
the Company over the past 30 years, as well as from certain publicly available
sources. The Company believes that its relationships with many of its
information sources make it difficult for others to obtain comparable data and,
accordingly, provide the Company with a competitive advantage.
The Company's total revenues have grown from $8.8 million in fiscal 1991 to
$15.5 million in fiscal 1995, reflecting a compound annual growth rate of 15.2%.
During this same period, operating income has grown from $4.7 million to $9.7
million, reflecting a compound annual growth rate of 19.9%. Management believes
this growth was primarily attributable to increased use of the Company's
products by new and existing customers, due in part to growth in the use of
direct marketing generally during this period. Additionally, the Company's
operating margins increased from 53.5% in fiscal 1991 to 62.5% in fiscal 1995,
reflecting the Company's ability to leverage the high component of fixed costs
inherent in its business.
Direct mail and telemarketing provide convenient and cost-effective means
for organizations to appeal directly to selected segments of the population. In
recent years, the use of direct marketing has grown substantially. According to
the U.S. Department of Commerce, between 1989 and 1994, total advertising
expenditures grew at a compound annual rate of 3.75%, while direct mail
expenditures grew at 5.96%. The growth in direct marketing has increased the
need for comprehensive, current and accurate information to identify high
probability purchasers. This information, combined with direct marketing
programs, results in lower expense per sales contact and increased revenue from
identified customers.
The Company's strategy is to focus on developing and marketing
comprehensive list products utilizing its database. The Company's strategy
consists of the following elements:
o Maintain a comprehensive and accurate database. The Company will
continue to emphasize its commitment to maintaining the accuracy of
its database and to enhancing its content.
o Increase sales to existing customers. The Company will continue to
expand marketing efforts to existing customers. Generally, customers
initially utilize only a small portion of the Company's database, and
increase their usage after successful implementation.
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3
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o Broaden customer base; identify new markets. The Company will continue
to broaden its customer base by identifying new markets to utilize the
Company's existing products and services. For example, the Company
recently began marketing its products to operators of camps and
amusement parks.
o Introduce new list products. The Company intends to continue to expand
its product offerings and plans to introduce new lists which appeal to
the Company's current customers. Recently, the Company began marketing
data on newly engaged couples and has rented these lists to many of
the Company's existing customers, including photographers and formal
wear retailers.
o Maintain a high level of customer service. The Company will continue
to emphasize its ability to quickly fill and ship customer orders, to
provide a high rate of deliverable names and to customize its database
to meet customer specifications.
o Develop other products and services. In addition to its list products,
the Company is continually investigating new opportunities to provide
other products and services. Examples include the acquisition in June
1995 of a business engaged in the sale of software incorporating
mapping and demographic information which is used for the generation
of sales leads, and the possible establishment of a web site on the
Internet.
The Company's principal executive offices are located at 330 Old Country
Road, Mineola, New York 11501, and its telephone number is (516) 248-6100.
References to the Company and to American List include the operations of its
wholly-owned subsidiaries, American Student List Company, Inc. and GeoDemX
Corporation.
The Offering
Common Stock offered by the Selling Stockholders .......... 1,400,000 shares(1)
Common Stock outstanding before and after this offering ... 4,542,403 shares
American Stock Exchange Symbol ............................ AMZ
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(1) Does not include up to 210,000 additional shares which would be sold by one
of the Selling Stockholders in the event the Underwriters exercise their
over-allotment option. See "Principal and Selling Stockholders" and
"Underwriting."
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4
<PAGE>
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share information)
<TABLE>
<CAPTION>
Nine Month Period
Fiscal Year Ended February 28 or 29, Ended November 30,
----------------------------------------------- ------------------
1991 1992 1993 1994 1995 1994 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues .............................. $8,753 $8,788 $10,108 $12,635 $15,494 $10,601 $13,222
Cost of operations .................... 1,488 1,777 1,985 1,992 2,201 1,635 2,026
Selling, general and
administrative expenses ............. 2,582 2,528 2,734 3,391 3,615 2,694 3,252
Operating income ...................... 4,683 4,483 5,389 7,252 9,678 6,272 7,944
Net earnings .......................... 3,190 2,945 3,512 4,574 6,176 3,959 5,119
Net earnings per common share ......... $.70 $.65 $.77 $1.00 $1.36 $.87 $1.13
Weighted average shares outstanding ... 4,557 4,557 4,557 4,557 4,557 4,558 4,543
Dividends per common share(1) ......... $.27 $.61 $.61 $.79 $.60 $.40 $.70
</TABLE>
February 28, 1995 November 30, 1995
----------------- -----------------
Balance Sheet Data:
Cash, cash equivalents and
marketable securities ....... $10,548 $11,370
Working capital ............... 14,495 15,581
Total assets .................. 20,112 21,204
Total liabilities ............. 3,742 3,339
Stockholders' equity .......... 16,370 17,865
- ------------
(1) The Company commenced paying regular quarterly dividends of $.20 per share
in February 1994, which amount was increased to $.25 per share in June
1995. Reported dividends during fiscal 1995 and the nine months ended
November 30, 1995 reflect timing differences in the declaration and payment
of dividends. See "Dividend Policy."
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5
<PAGE>
RISK FACTORS
In evaluating the Company and its business, prospective purchasers of the
Common Stock offered hereby should consider carefully the following factors:
Competition
The Company competes with a number of small and large companies, including
list compilers, list brokers, marketing consultants and advertising agencies,
many of which have substantially greater resources and provide a broader array
of services than does the Company. Although the Company believes that the
comprehensiveness of its database and its long-standing relationships with
certain of its list sources provide a competitive advantage, competitors may
enter the market and there can be no assurance that the Company will not face
increased competition in the future. See "Business -- Competition."
Dependence on Key Personnel; Need to Attract and Retain Key Personnel
The Company's success depends, in part, upon the continued contributions of
Martin Lerner, Chief Executive Officer and President, and Jan Stumacher, Vice
President. Although the Company has entered into employment agreements with each
of Messrs. Lerner and Stumacher, the loss of services of, or a material
reduction in the amount of time devoted to the Company by, such individuals
could materially adversely affect the business of the Company. The Company is
the beneficiary under a key-man life insurance policy in the amount of $1.8
million on the life of Mr. Lerner. At March 6, 1996, the Company had only 37
employees. Therefore, the Company's success will depend, in part, upon its
ability to retain such employees and attract and retain additional qualified
personnel. There can be no assurance that the Company will be successful in its
efforts to recruit or retain sufficient qualified personnel. See "Management."
Reliance on Certain Categories of Customers
Historically, a substantial portion of the Company's revenues has been
derived from sales to the following categories of customers: banks and financial
institutions, list brokers and advertising agencies, educational institutions
and the armed forces. Accordingly, factors which might negatively impact these
categories of customers and their use of direct marketing could also have an
adverse impact on the Company's business and results of operations. For example,
a significant portion of the Company's recent growth has been the result of
increased marketing expenditures by financial institutions relating to the
promotion of credit cards and other products. A reduction in marketing
expenditures for such purposes, as a result of any number of factors, would have
a material adverse impact on the Company's future operating results. See
"Business -- Customers."
Possible Charges Arising From GeoDemX Business
The Company has not yet determined the extent to which it will continue to
develop the software business of its GeoDemX Corporation subsidiary ("GeoDemX")
beyond its remaining $65,000 commitment. While it is the Company's present
intention to pursue the marketing and commercialization of the GeoDemX
technology, in the event the Company determines not to fund further development
of this business, it may be required to recognize certain charges relating to
the discontinuation or disposition of the business. Such charges, which
management believes would not exceed $400,000 before taxes at November 30, 1995,
may be expected to have a material adverse effect on the Company's net earnings
and earnings per share during the quarter in which such determination is made.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- Products and
Services."
Lack of Proprietary Rights
Although the Company attempts to protect its database and certain of its
software by relying on trade secret laws and seeding its lists with decoy names
to identify unauthorized usage, there can be no assurance that confidentiality
or trade secrets will be maintained or that others will not independently
develop or obtain access to the same or comparable sources of list information.
Although the Company has long-term relationships with many of its information
sources, it has no contracts with such sources and such sources are not
necessarily exclusive to the Company. In addition, a substantial portion of the
Company's database is derived from publicly available documents. The Company has
not filed for copyright protection of its database or list products. A patent
6
<PAGE>
application relating to the Company's geodemographic software product has been
filed with the United States Patent and Trademark Office (the "PTO"). There can
be no assurance that this patent application will result in a patent being
issued, or that any issued patent will afford adequate protection to the Company
in the event that this product is successfully commercialized (as to which there
can be no assurance). See "Business -- Rights to Data."
Factors Impacting Direct Marketing
The end users of the Company's list products are primarily entities engaged
in direct marketing programs. Accordingly, factors which would negatively impact
the direct mail industry, including substantial increases in postal rates,
delivery costs, printing and paper costs, or a decrease in overall advertising
budgets could cause such entities to reduce the extent of their mailings which,
in turn, could adversely impact the Company's business and results of
operations. See "Business -- Sales and Marketing."
Potential Adverse Impact of Legislation and Privacy Issues
In recent years numerous legislation has been proposed before federal and
state legislatures which would limit the use of direct marketing and the
dissemination of information by certain sources of list information. Several
bills are pending before Congress which, if enacted, will regulate the use of
credit and other personal information. The Company's database does not include
credit information. However, there can be no assurance that legislation will not
ultimately be adopted which results in reduced use of direct mail marketing
which, in turn, would adversely impact the Company's business and results of
operations. Further, the loss of important sources of information as a result of
such legislation as well as changes in public policy regarding issues of privacy
could have a material adverse impact on the Company's ability to obtain complete
and accurate information needed for the compilation of its list products.
Loss of Computer Center
The Company's business is dependent upon the successful operation of the
computer system maintained at its executive offices. The Company has no present
intention of establishing additional computer centers in other locations.
Although the information contained in the Company's database is backed up and is
stored off site as it is updated, and is protected by fire suppression systems,
there can be no assurance that a fire or other disaster will not disable the
Company's computer system, which event could have a material adverse effect on
the Company. See "Business -- Products and Services."
Control by Insiders
Upon completion of this offering, the executive officers and directors of
the Company will beneficially own approximately 26% of the outstanding Common
Stock of the Company. As a result, these stockholders will determine or
substantially affect the election of the Company's directors and, in general,
determine or substantially influence the outcome of corporate transactions or
other matters submitted for stockholder approval, including mergers,
consolidations, the sale of all or substantially all of the Company's assets and
a change in control of the Company. See "Principal and Selling Stockholders."
Effect of Outstanding Options
The Company has outstanding options to purchase approximately 187,005
shares of Common Stock under the Company's stock option plan at a weighted
average price of $18.12 per share. Holders of such options are likely to
exercise them when, in all likelihood, the Company could obtain additional
capital on terms more favorable than those provided by the options. See
"Capitalization" and "Management -- Stock Option Plan."
Shares Eligible for Future Sale
Of the shares of Common Stock outstanding immediately upon completion of
this offering, 1,100,665 are "restricted securities" as that term is defined in
Rule 144 ("Rule 144") promulgated under the Securities Act of 1933, as amended
(the "Securities Act") and are eligible for immediate sale in the public market
subject to certain timing and volume restrictions without registration pursuant
to Rule 144. The Company has also registered under the Securities Act the
300,000 shares of Common Stock issuable upon exercise of options granted or
available for grant under its stock option plan. Holders of 1,111,642 shares and
7
<PAGE>
options to purchase 158,150 additional shares after this offering have agreed
not to publicly sell such shares for a period of 180 days from the date of this
Prospectus without the consent of Oppenheimer & Co., Inc.; provided, however,
that up to 210,000 of such shares may be sold pursuant to the Underwriters'
over-allotment option. The Company has also agreed not to issue shares of Common
Stock for a period of 180 days after the date hereof, subject to certain
exceptions, without the consent of Oppenheimer & Co., Inc. Future sales of
shares by existing stockholders could adversely affect the market price
prevailing from time to time of the Common Stock and could impair the Company's
ability to raise additional capital through the sale of its equity securities.
See "Management -- Stock Option Plan," "Shares Eligible for Future Sale" and
"Underwriting."
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the American Stock Exchange under
the symbol AMZ. The following sets forth the high and low closing prices for the
last three fiscal years as reported by the American Stock Exchange:
High Low
---- ---
Year ended February 28, 1994
First Quarter ....................................... $12.90 $10.88
Second Quarter ...................................... 14.33 11.70
Third Quarter ....................................... 16.20 12.49
Fourth Quarter ...................................... 16.09 14.29
Year ended February 28, 1995
First Quarter ....................................... 17.88 16.13
Second Quarter ...................................... 18.75 17.00
Third Quarter ....................................... 19.25 17.00
Fourth Quarter ...................................... 20.25 16.13
Year ending February 28, 1996
First Quarter ....................................... 25.13 20.13
Second Quarter ...................................... 30.75 23.63
Third Quarter ....................................... 29.63 24.50
Fourth Quarter ...................................... 37.50 25.50
The number of holders of record of the Company's Common Stock as of March
7, 1996 was 316. On that date, the last reported sale price of the Company's
Common Stock was $34.25 per share.
DIVIDEND POLICY
The Company currently pays regular quarterly dividends to holders of its
Common Stock. For the second and third quarters of fiscal 1996, the Company
declared quarterly dividends of $.25 per share. The fourth quarter dividend of
$.25 per share was declared on January 12, 1996 and was paid on February 6, 1996
to stockholders of record on January 31, 1996. The current dividend rate
represents an increase over the prior quarterly dividend rate of $.20 per share
which was implemented by the Company in the fourth quarter of fiscal 1994.
Although the Company currently intends to maintain the current dividend rate,
future dividends will be at the discretion of the Board of Directors and will
depend on the actual cash available for distribution by the Company, the
Company's financial condition, capital requirements and such other factors as
the Board of Directors deems relevant.
8
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
November 30, 1995:
November 30, 1995
-----------------
Cash, cash equivalents and marketable securities ......... $11,370,224
==========
Current portion of long-term debt(1) ..................... $ 437,665
==========
Long-term debt, less current portion(1) .................. $ 1,901,244
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Stockholders' equity:
Common Stock, $.01 par value, 10,000,000 shares
authorized; 4,541,703 shares issued and outstanding .. 45,417
Additional paid-in capital ............................. 6,466,642
Unrealized gain on marketable securities ............... 7,107
Retained earnings ...................................... 11,353,170
Less: treasury stock at cost ........................... (7,634)
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Total stockholders' equity ............................... 17,864,702
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Total capitalization ................................... $19,765,946
==========
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(1) All of the Company's outstanding debt relates to a license agreement. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note E to the Consolidated Financial Statements.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share information)
The selected consolidated financial information presented below for each of
the fiscal years ended February 28, 1993, 1994 and 1995 and the nine month
period ended November 30, 1995 are derived from and are qualified by reference
to the Company's Consolidated Financial Statements which have been audited by
Grant Thornton LLP, independent certified public accountants, as indicated in
their report included elsewhere in this Prospectus. The consolidated financial
data for the years ended February 28, 1991 and February 29, 1992 are derived
from financial statements audited by Grant Thornton LLP but not included in this
Prospectus. This data should be read in conjunction with the Company's
Consolidated Financial Statements and the Notes thereto. The selected
consolidated financial data for the nine month period ended November 30, 1994 is
derived from unaudited financial statements which, in the opinion of management,
reflect all adjustments, consisting only of normal recurring accrual
adjustments, necessary to present fairly the information set forth therein. The
results for the nine months ended November 30, 1995 are not necessarily
indicative of the results that may be expected for the full year.
<TABLE>
<CAPTION>
Nine Month Period
Fiscal Year Ended February 28 or 29, Ended November 30,
----------------------------------------------- ------------------
1991 1992 1993 1994 1995 1994 1995
---- ---- ---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues .............................. $8,753 $8,788 $10,108 $12,635 $15,494 $10,601 $13,222
Cost of operations .................... 1,488 1,777 1,985 1,992 2,201 1,635 2,026
Selling, general and
administrative expenses ............. 2,582 2,528 2,734 3,391 3,615 2,694 3,252
------ ------ ------- ------- ------- ------- -------
Operating income ...................... 4,683 4,483 5,389 7,252 9,678 6,272 7,944
Investment income...................... 496 373 271 193 378 256 361
Interest expense....................... -- -- -- -- 129 78 141
Earnings before provision
for income taxes..................... 5,179 4,856 5,660 7,445 9,927 6,450 8,164
Provision for income taxes............. 1,989 1,911 2,148 2,871 3,751 2,491 3,045
------ ------ ------- ------- ------- ------- -------
Net earnings .......................... $3,190 $2,945 $ 3,512 $ 4,574 $ 6,176 $ 3,959 $ 5,119
====== ====== ======= ======= ======= ======= =======
Net earnings per common share ......... $ .70 $ .65 $ .77 $ 1.00 $ 1.36 $ .87 $ 1.13
====== ====== ======= ======= ======= ======= =======
Weighted average shares outstanding ... 4,557 4,557 4,557 4,557 4,557 4,558 4,543
Dividends per common share (1) ........ $ .27 $ .61 $ .61 $ .79 $ .60 $ .40 $ .70
</TABLE>
February 28, 1995 November 30, 1995
----------------- -----------------
Balance Sheet Data:
Cash, cash equivalents and
marketable securities $10,548 $11,370
Working capital ....................... 14,495 15,581
Total assets .......................... 20,112 21,204
Total liabilities ..................... 3,742 3,339
Stockholders' equity .................. 16,370 17,865
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(1) The Company commenced paying regular quarterly dividends of $.20 per share
in February 1994, which amount was increased to $.25 per share in June
1995. Reported dividends during fiscal 1995 and the nine months ended
November 30, 1995 reflect timing differences in the declaration and payment
of dividends. See "Dividend Policy."
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company develops, maintains and markets one of the largest and most
comprehensive databases of high school, college and pre-school through junior
high school students. The Company's revenues and operating income in fiscal 1995
were $15.5 million and $9.7 million, respectively. For the nine months ended
November 30, 1995, the Company's revenues and operating income were $13.2
million and $7.9 million, respectively. The Company's revenues and operating
income have grown at compound annual growth rates of 15.2% and 19.9%,
respectively, from fiscal 1991 through fiscal 1995. Management believes this
growth was primarily attributable to increased use of the Company's products by
new and existing customers, due in part to the growth in the use of direct
marketing generally. To a lesser extent, this increase in revenues is
attributable to price increases implemented by the Company. During this same
period, the Company's operating margins increased from 53.5% to 62.5%,
reflecting the Company's ability to leverage the high component of fixed costs
inherent in its business.
The Company's recent growth in revenues and operating income can be
attributed to the Company's operating and growth strategy designed to (i)
maintain a comprehensive and accurate database; (ii) increase sales to existing
customers; (iii) broaden its customer base and identify new markets; (iv)
introduce new list products; (v) maintain a high level of customer service; and
(vi) develop other products and services.
The following table sets forth the amount of, and percentage relationship
to revenues of, certain items included in the Company's Consolidated Statements
of Earnings for the fiscal years ended February 28, 1993, 1994 and 1995 and the
nine month periods ended November 30, 1994 and 1995.
<TABLE>
<CAPTION>
Nine Month Period Ended
Fiscal Year Ended February 28, November 30,
------------------------------------------------- -------------------------------
1993 1994 1995 1994 1995
-------------- ------------- ------------- ------------- -------------
Amount % Amount % Amount % Amount % Amount %
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues ............. $10,108 100.0% $12,635 100.0% $15,494 100.0% $10,601 100.0% $13,222 100.0%
Cost of operations ... 1,985 19.6 1,992 15.8 2,201 14.2 1,635 15.4 2,026 15.3
Selling, general and
administrative
expenses ........... 2,734 27.1 3,391 26.8 3,615 23.3 2,694 25.4 3,252 24.6
Operating income ..... 5,389 53.5 7,252 57.4 9,678 62.5 6,272 59.2 7,944 60.1
Net earnings ......... 3,512 34.7 4,574 36.2 6,176 39.9 3,959 37.3 5,119 38.7
</TABLE>
Results of Operations
Nine Months Ended November 30, 1995
Compared to Nine Months Ended November 30, 1994
Revenues increased by approximately $2.6 million (25%) for the nine months
ended November 30, 1995 (the "1995 nine months") from the nine months ended
November 30, 1994 (the "1994 nine months"). The increase in revenues is
primarily attributable to increased sales to existing and new customers, price
increases which took effect in September 1994 and April 1995 and revenues
generated by GeoDemX.
Cost of operations increased by approximately $391,000 (24%) for the 1995
nine months as compared to the 1994 nine months primarily due to the
amortization of deferred license costs and costs associated with GeoDemX. As a
percentage of sales, cost of operations remained relatively constant during the
1994 and 1995 nine months, reflecting the inclusion of sales of lower margin
GeoDemX products.
Selling, general and administrative expenses increased by approximately
$558,000 (21%) for the 1995 nine months from the 1994 nine months primarily due
to expenses associated with GeoDemX and the Company's hiring of additional
personnel. As a percentage of sales, such expenses decreased during the 1995
nine months to 24.6% as compared to 25.4% during the 1994 nine months.
Investment income increased by approximately $105,000 (41%) for the 1995
nine months from the 1994 nine months primarily due to an increase in interest
rates and a greater amount of funds available for investment.
Interest expense increased by approximately $63,000 (81%) for the 1995 nine
months as compared to the 1994 nine months as a result of the debt associated
with a license agreement entered into in July 1994. See Note E to the
Consolidated Financial Statements.
11
<PAGE>
The effective tax rate decreased to 37.3% for the 1995 nine months as
compared to 38.6% for the 1994 nine months primarily due to increased
non-taxable municipal bond interest income.
Fiscal Year Ended February 28, 1995
Compared to Fiscal Year Ended February 28, 1994
Revenues increased by approximately $2.9 million (23%) for the fiscal year
ended February 28, 1995 ("fiscal 1995") from the fiscal year ended February 28,
1994 ("fiscal 1994"). The increase in revenues is primarily attributable to
increased sales to existing and new customers, price increases which took effect
in January and September 1994 and a license agreement entered into in July 1994.
See Note E to the Consolidated Financial Statements.
Cost of operations increased by approximately $209,000 (10%) for fiscal
1995 as compared to fiscal 1994 primarily due to the amortization of deferred
license costs. See Note E to the Consolidated Financial Statements. As a
percentage of sales, cost of operations decreased from 16% during fiscal 1994 to
14% during fiscal 1995 due to increased sales volume in excess of the growth in
cost of operations.
Selling, general and administrative expenses increased by approximately
$224,000 (7%) for fiscal 1995 from fiscal 1994 primarily due to an increase in
personnel costs and consulting fees related to the upgrade of the Company's
computer networking system. As a percentage of revenues, such expenses decreased
during fiscal 1995 to 23% as compared to 27% during fiscal 1994. This decrease
resulted from changes to an executive officer's compensation agreement which
kept such costs constant for fiscal 1995 as compared to fiscal 1994.
Investment income increased by approximately $184,000 (95%) for fiscal 1995
from fiscal 1994 primarily due to an increase in interest rates and to a lesser
extent the adoption of Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" which
requires the Company to record any unrealized gains and losses from securities
available for sale as a component of stockholders' equity. In contrast, during
fiscal 1994, the Company recorded an unrealized loss as a reduction of
investment income.
Interest expense of approximately $129,000 for fiscal 1995 resulted from a
license agreement entered into in July 1994. See Note E to the Consolidated
Financial Statements.
The effective tax rate decreased to 37.8% for fiscal 1995 as compared to
38.6% for fiscal 1994 as a result of an increase of tax-free municipal bond
interest earned in fiscal 1995.
Fiscal Year Ended February 28, 1994
Compared to Fiscal Year Ended February 28, 1993
Revenues increased by approximately $2.5 million (25%) for fiscal 1994 from
the fiscal year ended February 28, 1993 ("fiscal 1993"). The increase in
revenues is primarily attributable to increased sales to existing and new
customers. Price increases which took effect in October 1992 and January 1994
also impacted revenues favorably during fiscal 1994.
Cost of operations remained constant during fiscal 1993 and 1994, but
decreased as a percentage of revenues from 19.6% during fiscal 1993 to 15.8%
during fiscal 1994 due to increased sales volume.
Selling, general and administrative expenses increased by approximately
$657,000 (24%) for fiscal 1994 from fiscal 1993 primarily due to an increase in
executive compensation which was based upon Company performance.
Investment income decreased by approximately $77,000 (28%) for fiscal 1994
compared to fiscal 1993, primarily due to a decline in the market value of
certain investments.
There was no significant change in the effective tax rate during fiscal
1993 and 1994.
Liquidity and Capital Resources
Historically, the Company has financed its cash flow requirements with
funds generated from operations. At November 30, 1995, the Company had cash,
cash equivalents and marketable securities of approximately $11.4 million and
working capital of approximately $15.6 million.
Net cash flows from operating activities amounted to approximately $4.7
million and $5.4 million during fiscal 1995 and the 1995 nine months,
respectively.
12
<PAGE>
Net cash used in investing activities amounted to approximately $2.6
million and $1.1 million during fiscal 1995 and the 1995 nine months,
respectively. Approximately 84% of the 1995 nine month amount reflects the
purchase of marketable securities. The remainder reflects expenditures for
capital equipment and the purchase of GeoDemX, net of cash acquired.
Net cash used in financing activities amounted to approximately $3.5
million and $4.2 million during fiscal 1995 and the 1995 nine months,
respectively. Approximately 75% of the 1995 nine month amount reflects the
payment of dividends. The remainder reflects the purchase of treasury stock and
the payment of long-term debt pursuant to the licensing agreement described
below.
Effective July 1, 1994, the Company entered into a licensing agreement
pursuant to which it became obligated to pay the licensor a total of $4,200,000
payable in decreasing annual installments through July 2003. See Note E to the
Consolidated Financial Statements.
On March 22, 1995, the Board of Directors authorized the repurchase of up
to 200,000 shares of the Company's Common Stock. On April 7, 1995, the Company
purchased 24,600 shares of its Common Stock for an aggregate price of $509,238.
An additional 300 shares were repurchased on November 16, 1995 for an aggregate
price of $7,634. The Company may from time to time repurchase additional shares
after the completion of this offering.
On June 22, 1995, the Company consummated an agreement (the "GeoDemX
Agreement") pursuant to which it acquired, through GeoDemX, a wholly-owned
subsidiary of the Company, a business engaged in the sale of geodemographic
software -- an emerging category of software defined by the combination of
computerized maps with electronic demographic data -- for use in the generation
of sales leads. See "Business -- Products and Services." Pursuant to the GeoDemX
Agreement, the Company agreed to advance GeoDemX $750,000 to fund its working
capital requirements and other operating expenses, of which $685,000 had been
advanced as of January 24, 1996. The Company has not yet determined the extent
to which it will continue to invest in the GeoDemX technology beyond the
remaining $65,000 commitment and there can be no assurance that the GeoDemX
technology will ever be successfully commercialized. Although it is the
Company's present intention to pursue the marketing and commercialization of the
GeoDemX technology, in the event the Company determines not to fund further
development of the GeoDemX business, it may be required to recognize certain
charges relating to the discontinuation or disposition of the business. Such
charges, which management believes would not exceed $400,000 before taxes at
November 30, 1995, may be expected to have a material adverse effect on the
Company's net earnings and earnings per share during the quarter in which such
determination is made. Continued investments in GeoDemX, if made, are not
expected to have a material effect on the Company's liquidity.
Pursuant to the GeoDemX Agreement, additional consideration for the
acquisition will involve the issuance by the Company of shares of its Common
Stock having a market value equal to between 40% and 50% of the Pre-Tax Earnings
(as defined), if any, of the GeoDemX business during the fiscal years ending
February 28 or 29, 1996, 1997, 1998 and 1999. Any payment required during the
second year will be reduced in the event the GeoDemX operations generate a
Pre-Tax Loss (as defined) during the first year. The GeoDemX Agreement grants
the sellers the option to receive a portion of any payments earned in cash.
The Company believes that available cash, together with revenues generated
from operations, will be sufficient to fund the Company's continuing operations
and the payment of dividends for the foreseeable future. The Company may also
from time to time consider the acquisition of complementary businesses, products
or technologies which may require the Company to obtain additional financing.
The Company has no present understandings, commitments or agreements, nor is it
engaged in any discussions or negotiations, with respect to any such
transaction.
Backlog
The Company does not consider its backlog of orders to be significant to
its business since all orders are filled shortly after receipt.
Seasonality
Historically, the Company has experienced higher sales and earnings in the
fourth and first fiscal quarters as its new lists become available and customers
prepare for spring mailings in order to take advantage of seasonal events such
as graduations and proms. The Company experiences lower demand during the summer
months of the Company's second fiscal quarter, when schools are not in session.
13
<PAGE>
BUSINESS
American List develops, maintains and markets one of the largest and most
comprehensive databases of high school, college, and pre-school through junior
high school students in the United States, currently containing information on
approximately 30 million individuals. The Company rents lists derived from its
database for use primarily in direct mail and telemarketing programs. During the
fiscal year ended February 28, 1995, the Company rented its lists to
approximately 3,200 customers, including list brokers and advertising agencies,
financial institutions, retailers and educational institutions.
The Company's computerized database contains information such as name,
address, gender and, if available, date of birth and telephone number of the
individuals included. From this database, the Company extracts, manipulates and
sorts information to create its multiple list products which are available in a
variety of formats, including prospect lists, mailing labels, 3" x 5" index
cards and computer magnetic tapes, cartridges and disks. American List's
computer processing facility provides it with the ability to customize its lists
to best serve each customer's marketing goals.
The information contained in the Company's database is derived from a
number of sources which are the result of long-term relationships developed by
the Company over the past 30 years, as well as from certain publicly available
sources. The Company believes that its relationships with many of its
information sources make it difficult for others to obtain comparable data and,
accordingly, provide the Company with a competitive advantage.
The Company's total revenues have grown from $8.8 million in fiscal 1991 to
$15.5 million in fiscal 1995, reflecting a compound annual growth rate of 15.2%.
During this same period, operating income has grown from $4.7 million to $9.7
million, reflecting a compound annual growth rate of 19.9%. Management believes
this growth was primarily attributable to increased use of the Company's
products by new and existing customers, due in part to growth in the use of
direct marketing generally during this period. Additionally, the Company's
operating margins increased from 53.5% in fiscal 1991 to 62.5% in fiscal 1995,
reflecting the Company's ability to leverage the high component of fixed costs
inherent in its business.
The Company's strategy is to focus on developing and marketing
comprehensive lists utilizing its proprietary database. The Company's strategy
consists of the following elements:
o Maintain a comprehensive and accurate database. The Company will
continue to emphasize its commitment to maintaining the accuracy of
its database and to enhancing its content.
o Increase sales to existing customers. The Company will continue to
expand marketing efforts to existing customers. Generally, customers
initially utilize only a small portion of the Company's database, and
increase their usage after successful implementation.
o Broaden customer base; identify new markets. The Company will continue
to broaden its customer base by identifying new markets which can
utilize the Company's existing products and services. For example, the
Company recently began marketing its products to operators of camps
and amusement parks.
o Introduce new list products. The Company intends to continue to expand
its product offerings and plans to introduce new lists which appeal to
the Company's current customers. Recently, the Company began marketing
data on newly engaged couples and has rented these lists to many of
the Company's existing customers, including photographers and formal
wear retailers.
o Maintain a high level of customer service. The Company will continue
to emphasize its ability to quickly fill and ship customer orders, to
provide a high rate of deliverable names and to customize its database
to meet customer specifications.
o Develop other products and services. In addition to its list products,
the Company is continually investigating new opportunities to provide
other products and services. Examples include the acquisition in June
1995 of a business engaged in the sale of software incorporating
mapping and demographic information which is used for the generation
of sales leads, and the possible establishment of a web site on the
Internet.
14
<PAGE>
The Direct Marketing Industry
The direct marketing industry is composed of businesses that use direct
mail and other methods of direct consumer contact to promote their products and
services. Unlike traditional forms of advertising, which are aimed at promoting
a product or service to a broad audience through print or broadcast media,
direct marketing solicits a direct response from the consumer and targets
potential customers most likely to purchase a company's products and services.
The use of direct marketing has increased steadily over the last decade. In
the years prior to and during the 1970's, the costs associated with selling
products and services on a mass market basis were relatively low, while the
costs of computer processing and data management were prohibitive for all but
the largest businesses. In the 1980's, the cost of computer technology declined
while marketing and selling costs increased dramatically. Businesses have
responded to these trends by increasing the use of computer technology to use
direct marketing techniques to target potential customers more precisely and
efficiently. In addition, the declining costs of computer resources have
afforded businesses, particularly smaller businesses, the opportunity to develop
and implement more sophisticated marketing programs in-house.
In recent years, the use of direct marketing has grown substantially.
According to the U.S. Department of Commerce, between 1989 and 1994, total
advertising expenditures grew at a compound annual rate of 3.75%, while direct
mail expenditures grew at 5.96%. The growth in direct marketing has increased
the need for comprehensive, current and accurate information to identify high
probability purchasers. This information, combined with direct marketing
programs, results in lower expense per sales contact and increased revenue from
identified customers.
Products and Services
The Company markets a variety of products and services, which are created
from the information contained in its database. The Company has devoted
significant time and effort to developing, maintaining and enhancing its
database. The Company utilizes an IBM 4381 mainframe system for data compilation
and list production. Data inputting is outsourced to third party vendors. Data
is backed up as information is updated and is then stored off site.
Sophisticated computer hardware and software enable the rapid compilation,
processing, storage, sorting and quality control of inputted data. The Company
also utilizes software to check the accuracy of the inputted data, including
spelling, zip code information, address and date of birth, as well as to perform
the valuable task of removing duplication from the Company's list products. Each
of the Company's lists is guaranteed to be at least 95% deliverable if the
mailing takes place within 30 days after receipt of the list. To date, refunds
pursuant to this guarantee arrangement have not been material.
The Company typically will rent its lists for a one-time use unless other
arrangements are made. Rental prices for a one-time use generally range from $60
to $120 per thousand names depending upon the criteria selected. Rates for
unlimited use of a list for a one year period typically range from $150 to $250
per thousand names. In order to protect the lists from unauthorized usage, the
Company seeds its lists with decoy names.
The Company currently markets its lists in the following categories:
High School Students
According to the U.S. Department of Education's Digest of Education
Statistics 1995, there were approximately 14.0 million individuals enrolled in
high school for the 1995-96 school year. The Company has compiled a database of
approximately 9 million names, or 64% of this population segment, which it has
divided from grades 9 through 12. The Company believes this is the most complete
and accurate list of high school students available. For fiscal 1995, rentals of
high school student lists accounted for approximately 58% of the Company's
revenues. The high school student list is used by marketers of credit cards,
scholarships, colleges, the armed services, catalogue items, formal wear,
magazines, computers, software and accessories. This segment, as well as the
college segment of the Company's database, has significant appeal to direct
marketing companies, which place a very strong emphasis on effectively reaching
younger consumers, as they are seen as important first-time buyers who are in a
position to form their own long-term buying habits and develop brand loyalties.
The Company updates this list as new information becomes available, which is
generally on a monthly basis.
15
<PAGE>
College Students
The college student market is attractive to direct marketing companies
because of the significant amount of money college students have available for
discretionary spending. Additionally, marketers generally wish to cultivate the
development of first-time buying habits of this group. Furthermore, the
Company's information is extremely valuable to marketers because the transient
nature of college students makes them often difficult to reach.
American List has compiled a database of approximately 6 million names of
students attending approximately 1,200 institutions in all 50 states. This
represents approximately 42% of the 14.4 million students enrolled in
institutions of higher education in 1995, according to the U.S. Department of
Education's Digest of Education Statistics 1995. The Company offers its
customers this list segmented by school, class and/or major. Customers
purchasing this list include companies marketing automobiles, credit cards,
clothing and scholarships. The Company recreates its college student list
primarily in the late fall and winter when student addresses become available.
Pre-School Through Junior High School Students
In 1995, there were an estimated 44.7 million children in this population
segment in the United States, according to the U.S. Department of Education's
Digest of Education Statistics 1995. American List has compiled a database of
approximately 34%, or 15 million names, of these children between the ages of
two and 13. Applications of this list include the marketing of encyclopedias and
books, children's magazines, children's catalogue items, summer camps and
amusement parks. The Company updates this list as information becomes available,
generally on a monthly basis.
Young Adults
American List has compiled a database of over 40 million names of young
adults between the ages of 19 and 36. This list represents approximately 55% of
the estimated 72.8 million individuals in this population segment in 1995, based
on data compiled by the Population Division, U.S. Bureau of the Census, 1990.
Applications of this list include the marketing of automobiles, trade schools
and the armed services. The Company updates this list as information becomes
available which is generally on a monthly basis. Historically, this list has
accounted for less than 5% of the Company's revenues.
Other List Products and Services
In order to expand its customer base and increase sales to its existing
customers, the Company is focusing on new list products and new applications of
its database. The Company has recently introduced the following new list
compilations: (i) a list of newly engaged couples which it markets for use by
caterers, musicians, photographers and other product and service providers in
the wedding market as well as to insurance companies and others seeking to
target newlyweds; and (ii) religious and ethnic compilations which it will
market for use by religious and ethnic publications and colleges and
universities, as well as existing customers. These lists are designed to further
a company's ability to distinctly target customers through direct marketing
programs.
Additionally, the Company offers its customers a full range of data
processing services which enable them to maintain their current customer files
and prospect files for ongoing mailings. Among the services offered by the
Company are carrier route coding, address standardization, postal presorting,
file overlays, back end mailing analysis, tape/diskette conversions, telephone
appending, merge/purge and custom programming.
New Products and Services
In June 1995, the Company, through its GeoDemX subsidiary, acquired certain
assets and liabilities of an early stage business engaged in the sale of
software that incorporates computerized maps and electronic demographic data for
the generation of sales leads. The GeoDemX software is designed to permit an
organization to selectively target a prospective customer base that is similar
to that organization's existing customer base. GeoDemX also resells software
manufactured by MapInfo Corp.
As part of the Company's strategy to expand the applications of its
database, the Company is contemplating the establishment of a web site on the
Internet, which would incorporate programming designed to appeal primarily to
high school and college students. Revenues are anticipated to be derived from
the sale of advertising space, initially to the existing customers of the
16
<PAGE>
Company who wish to employ another medium as part of their overall marketing
strategy.
Customers
The Company's customer base is comprised of list brokers and advertising
agencies which resell the Company's list products as well as end users employing
direct mail and telemarketing campaigns as part of their marketing efforts.
Among the numerous large and small entities who have utilized the Company's
lists over the years are banks and other financial institutions, educational
institutions such as colleges and trade schools, the armed forces, record
companies, publishers, catalogue companies, retailers and consumer goods
marketers. A significant portion of the Company's recent growth has been the
result of increased marketing expenditures by financial institutions relating to
the promotion of credit cards and other products. List brokers and advertising
agencies, which are resellers of the Company's products, generally account for
between 40% and 50% of annual revenues. These customers generally receive a 20%
brokerage commission on their sales. The Company's revenues are calculated net
of such brokerage commissions. In each of the past 10 years, no single customer
has accounted for in excess of 5% of the Company's revenues.
The Company's in-house marketing staff continually seeks new and innovative
applications for the Company's list products in order to expand the Company's
customer base. During fiscal 1995 for example, the Company substantially
increased the marketing of its child and student lists to amusement parks,
summer camps, zoos, bowling alleys and photographers.
To date, the Company's experience has been that customers initially rent
only a small portion of the Company's database and generally increase their
usage over time. The Company believes this results from customers' increasing
familiarity with the effectiveness of the Company's products in their direct
marketing programs.
Sales and Marketing
The Company markets its products and services to existing and prospective
customers through a 10-person marketing staff which conducts telemarketing and
direct sales, and through third party resellers such as independent list brokers
and advertising agencies. The Company also continually seeks to broaden its
customer base by attending trade shows and conventions. The Company has recently
increased expenditures for in-house advertising and expects that revenues from
direct sales as a percentage of total revenues will increase in the future.
Competition
The Company competes with a number of small and large companies, many of
which have substantially greater resources and provide a broader array of
services than does the Company. These companies include list compilers, list
brokers, marketing consultants and advertising agencies and include companies
such as MetroMail Corp., a subsidiary of R.R. Donnelley & Sons Co., Donnelley
Marketing, Inc., TRW, Inc. and Equifax, Inc. The primary competitive factors in
the children and student list business are the reliability of the information,
the level of service provided and pricing. The Company believes the accuracy and
breadth of its database, its service and its prices enable it to remain
competitive. The Company maintains long-term relationships with many of its
customers and information sources and considers this a competitive advantage, as
well as a significant barrier to entry to the student list business. Although
Educational Testing Services of Princeton, New Jersey also provides lists of
high school students, it does so only for non-profit institutions and,
accordingly, competes with the Company solely in this limited market.
Rights to Data
The Company attempts to protect its database and certain of its software by
relying on trade secret laws and seeding its lists with decoy names to identify
unauthorized usage. The Company has not filed for copyright protection of its
database or list products. There can be no assurance that the steps taken by the
Company will be adequate to deter misappropriation of its data or independent
third party development of substantially similar products and technology.
A patent application relating to the GeoDemX software product has been
filed with the PTO. There can be no assurance that this patent application will
result in a patent being issued or that any issued patent will afford adequate
protection to the Company in the event that the GeoDemX product is successfully
commercialized.
17
<PAGE>
Facilities
The Company's principal executive offices and computer facility are located
in approximately 8,300 square feet of space at 330 Old Country Road, Mineola,
New York, and are occupied pursuant to a lease which terminates on June 15,
2001. Rent expense was $288,000 during the year ended February 28, 1995. The
lease contains an escalation clause relating to increases in real estate taxes.
GeoDemX currently occupies approximately 2,300 square feet of office space
at 17117 West Nine Mile Road, Southfield, Michigan pursuant to a lease which
terminates on May 31, 1996. The base monthly rental is $2,204. The Company
believes it will be able to renew its lease or lease new space at the same
building should it determine to do so.
Employees
At March 6, 1996, the Company had 37 employees, including 10 in marketing
and sales, seven in administration, five in data compilation, eight in data
processing operations and seven in its GeoDemX operations. None of the Company's
employees is subject to a collective bargaining agreement nor has the Company
ever experienced a work stoppage. The Company believes that its employee
relations are good.
Legal Proceedings
There are currently no legal proceedings to which the Company is a party.
18
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth the names, ages and positions of the
executive officers and directors of the Company:
<TABLE>
<CAPTION>
Name Position Age
---- ------ ---
<S> <C> <C>
Martin Lerner (1)..................... Chief Executive Officer, President, 63
Treasurer and Director
Jan Stumacher (1)..................... Vice President and Director 43
J. Morton Davis ...................... Director 67
Kenton Wood .......................... Director 48
Ben Ermini (2) ....................... Director 59
Philip Lubitz (2) .................... Director 62
</TABLE>
- ------------
(1) Member of the Stock Option Committee
(2) Member of the Audit Committee
Martin Lerner has served as Chief Executive Officer, President, Treasurer
and Director of the Company since 1965. Mr. Lerner also serves on the Board of
Directors of the National Center for Missing and Exploited Children.
Jan Stumacher joined the Company in 1971 and has been a Vice President of
the Company in charge of sales and marketing since 1984 and a director of the
Company since 1988.
J. Morton Davis has been Chairman of D.H. Blair Investment Banking Corp., a
member of the New York Stock Exchange, or its predecessor entity for more than
the last five years. He has been a director of the Company since 1983.
Kenton Wood has been Chairman and Chief Executive Officer of D.H. Blair &
Co., Inc., a member of the New York Stock Exchange, since January 1992 and
served as its President for more than five years prior thereto. He has been a
director of the Company since 1992.
Ben Ermini has been Director of Case Management of the National Center for
Missing and Exploited Children for more than the last five years. He has been a
director of the Company since 1992.
Philip Lubitz has been President of the Dover Group, an employee benefits
consulting firm, for more than the last five years. He has been a director of
the Company since 1992.
Directors serve until the next annual meeting or until their successors are
elected and qualified. Officers serve at the discretion of the Board of
Directors, subject to rights, if any, under contracts of employment. See
"Management -- Employment Agreements."
The Securities and Exchange Commission is conducting an investigation
concerning various business activities of D.H. Blair Investment Banking Corp.
and D.H. Blair & Co., Inc. (collectively, the "Blair Companies"). The
investigation appears to be broad in scope, involving numerous aspects of the
Blair Companies' compliance with Federal securities laws and compliance with
Federal securities laws by issuers whose securities were underwritten by the
Blair Companies, or in which the Blair Companies made over-the-counter markets.
The Company has been advised by the Blair Companies that the investigation has
been ongoing since at least 1989, that the Blair Companies are cooperating with
the investigation and that they cannot predict whether this investigation will
ever result in any type of formal enforcement action against the Blair
Companies.
Board Committees
The Board of Directors has a Stock Option Committee which administer's the
Company's stock option plan. See "Management -- Stock Option Plan." The Board of
Directors also has an Audit Committee which reviews the results and scope of the
audit and other accounting related matters.
19
<PAGE>
Director Compensation
Directors do not receive compensation for Board or committee meetings
attended but are reimbursed for their expenses in attending such meetings.
Directors are not precluded from serving the Company in any other capacity and
receiving compensation therefor.
Executive Compensation
The following summary compensation table sets forth the aggregate
compensation paid or accrued by the Company to the Chief Executive Officer and
to executive officers whose annual compensation exceeded $100,000 during fiscal
1995 (collectively, the "Named Executive Officers") for services during fiscal
1995, 1994 and 1993:
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Annual Compensation Compensation
------------------------ -----------------------------
Name and All Other
Principal Position Year Salary($) Bonus($) Options(#) Compensation($)(1)
------------------ ---- --------- -------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Martin Lerner .................. 1995 212,881 737,119 50,000 24,250
President and Chief 1994 207,470 727,576 -- 30,000
Executive Officer 1993 201,625 524,792 -- 30,000
Jan Stumacher .................. 1995 425,000 191,654 90,000 24,250
Vice President 1994 82,981 503,616 8,250 30,000
1993 80,642 276,207 8,250 30,000
</TABLE>
- ----------
(1) Includes amounts paid pursuant to pension and profit sharing plans. The
pension plan contributions by the Company are credited to the account of
each employee and are based upon a percentage of salary, including bonus.
Contributions for the profit sharing plan are allocated proportionately by
salary and bonus to each employee's account.
The following table sets forth certain information with respect to
individual grants of stock options made during the fiscal year ended February
28, 1995 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term (1)
----------------------------------------------------- ---------------------
% of
Total Options
Granted to Exercise
Options Employees or Base Expiration
Name Granted(#) in Fiscal Year Price($/Sh) Date 5%($) 10%($)
---- --------- -------------- ----------- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Martin Lerner ........ -- -- -- -- -- --
Jan Stumacher ......... 90,000 90% $18.00 07/19/04 $81,000 $162,000
</TABLE>
- ----------
(1) Amounts for the Named Executive Officers shown under the "Potential
Realizable Value" columns above have been calculated by multiplying the
exercise price per share by the annual appreciation rate shown (compounded
for the term of the options), subtracting the exercise price per share and
multiplying the resulting gain per share by the number of shares covered by
the options.
20
<PAGE>
The following table sets forth certain information with respect to the
number and value of unexercised options held by the Named Executive Officers as
of February 28, 1995:
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable Unexercisable
---- ------------ -------- ----------- ----------
<S> <C> <C> <C> <C>
Martin Lerner ............. -- -- -- --
Jan Stumacher ............. -- -- 16,500/90,000 $158,500/$202,500
</TABLE>
Employment Agreements
On August 15, 1983, Martin Lerner entered into an employment agreement (the
"Lerner Agreement") with the Company to serve as President of the Company. The
Lerner Agreement presently provides for a current base annual salary of $220,678
plus an incentive bonus equal to the sum of (i) 5% of the pre-tax net income of
the Company provided pre-tax income is at least $1,943,082 (which amount is
subject to annual cost of living adjustments), (ii) 7 1/2% of the next $200,000
of pre-tax net income and (iii) 10% of any pre-tax net income in excess thereof.
The Lerner Agreement provides for annual cost of living adjustments based on the
increase in the Cost of Living Index as of July of each employment year over the
Cost of Living Index for the month of July 1985. On April 12, 1995, the Lerner
Agreement was amended to provide that the maximum annual compensation in the
form of salary and incentive bonus payable to Mr. Lerner for any employment year
would be $950,000. In addition, Mr. Lerner was granted 10-year options to
purchase 50,000 shares of Common Stock at an exercise price of $21 per share.
The Lerner Agreement is currently subject to automatic renewal from year to
year unless either the Company or Mr. Lerner gives six months written notice of
termination, which notice shall become effective as of August 15 in any year.
The Lerner Agreement contains confidentiality provisions and a five-year post
termination non-competition provision with respect to the high school list
business.
In July 1994, Jan Stumacher entered into an employment agreement (the
"Stumacher Agreement") with American Student List Company, Inc. ("ASL"), the
Company's wholly-owned subsidiary, to serve as Executive Vice President of ASL
for a base annual salary of $425,000 per annum retroactive to March 1, 1994. The
Stumacher Agreement also provides for an incentive bonus equal to 8% of any
annual increase in the pre-bonus operating income (as defined) of the Company
over the preceding year. In the event the pre-bonus operating income of the
Company decreases for any given fiscal year, the amount used as the preceding
year's pre-bonus operating income in the calculation of the ensuing year's bonus
will be the highest pre-bonus operating income determined in any previous year.
Pursuant to the Stumacher Agreement, the Company granted Mr. Stumacher options
to purchase 90,000 shares at an exercise price of $18.00 per share, which
options vest incrementally from March 1996 through March 2001.
The initial term of the Stumacher Agreement expires on February 28, 2001
after which time it is renewable at Mr. Stumacher's option for up to three
additional one-year periods; provided, however, that ASL is not obligated to
renew for the second or third renewal period if the Company's pre-bonus
operating income for the fiscal years ending February 28, 2002 or 2003,
respectively, is less than that of the fiscal year ending February 28, 2001. The
Stumacher Agreement contains confidentiality provisions and a two-year post
termination non-competition provision.
Stock Option Plan
In 1992 the Board of Directors adopted, and the Company's stockholders
approved, the 1992 Stock Option Plan (the "Plan") covering 300,000 shares of the
Company's Common Stock pursuant to which employees, officers and directors of,
and consultants or advisers to, the Company and any subsidiary corporations are
eligible to receive incentive stock options ("incentive options") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") and/or options that do not qualify as incentive options ("non-qualified
21
<PAGE>
options"). The Plan, which expires in May 2002, is administered by the Board of
Directors or a committee of the Board of Directors currently comprised of Martin
Lerner and Jan Stumacher.
Incentive options granted under the Plan are exercisable for a period of up
to 10 years from the date of grant at an exercise price which is not less than
the fair market value of the Common Stock on the date of the grant, except that
the term of an incentive option granted under the Plan to a stockholder owning
more than 10% of the outstanding voting power may not exceed five years and its
exercise price may not be less than 110% of the fair market value of the Common
Stock on the date of the grant. To the extent that the aggregate fair market
value, as of the date of grant, of the shares for which incentive options become
exercisable for the first time by an optionee during the calendar year exceeds
$100,000, the portion of such option which is in excess of the $100,000
limitation will be treated as a nonqualified option. Options granted under the
Plan to officers, directors or employees of the Company may be exercised only
while the optionee is employed or retained by the Company or within 90 days of
the date of termination of the employment relationship or directorship. However,
options which are exercisable at the time of termination by reason of death or
permanent disability of the optionee may be exercised within 12 months of the
date of termination of the employment relationship or directorship. Upon the
exercise of an option, payment may be made by cash or by any other means that
the Board of Directors or the committee determines.
As of March 6, 1996, options to purchase 187,005 shares have been granted
under the Plan at exercise prices ranging from $9.39 to $29.875 per share, with
a weighted average exercise price of $18.12 per share.
Limitation of Liability and Indemnification Matters
The Company's Certificate of Incorporation eliminates in certain
circumstances the liability of directors of the Company for monetary damages for
breach of their fiduciary duty as directors. This provision does not eliminate
the liability of a director (i) for breach of the director's duty of loyalty to
the Company or its stockholders; (ii) for acts or omissions by the director not
in good faith or which involve intentional misconduct or a knowing violation of
law; (iii) for willful or negligent declaration of an unlawful dividend, stock
purchase or redemption; or (iv) for transactions from which the director derived
an improper personal benefit. Such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief or rescission.
The Company believes that it is the position of the Commission that insofar
as the foregoing provision may be invoked to disclaim liability for damages
arising under the Securities Act, the provision is against public policy as
expressed in the Securities Act and is therefore unenforceable.
The Company's By-laws provide that the Company shall indemnify its
directors or officers to the full extent permitted by the Delaware General
Corporation Law ("DGCL").
At present, there is no pending litigation or proceeding involving a
director or officer of the Company where indemnification will be required or
permitted. The Company is not aware of any threatened litigation or proceeding
which may result in a claim for indemnification.
22
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information concerning beneficial
ownership of Common Stock at March 7, 1996 and as adjusted to reflect the sale
of the 1,400,000 Shares offered hereby by the Selling Stockholders, by (i) each
person known by the Company to own beneficially 5% or more of the outstanding
shares of the Company's Common Stock; (ii) each director; (iii) each Named
Executive Officer; and (iv) all executive officers and directors of the Company
as a group and their percentage ownership of Common Stock after completion of
this offering:
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Before Owned After
Name and Address the Offering the Offering (1)
of Beneficial Owner ------------------------- Shares to --------------------------
or Selling Stockholder Number Percentage be Offered Number Percentage
---------------------- --------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
D.H. Blair Investment
Banking Corp. .................. 2,121,021(2) 46.69% 1,200,000 921,021(2) 20.28%
44 Wall Street
New York, NY 10005
Martin Lerner .................... 427,089(3) 9.30% 200,000 227,089(3) 4.94%
330 Old Country Road
Mineola, NY 11501
J. Morton Davis .................. 2,121,021(4) 46.69% 1,200,000 921,021(4) 20.28%
44 Wall Street
New York, NY 10005
Jan Stumacher .................... 44,422(5) * -- 44,422(5) *
Kenton Wood ...................... -- -- -- -- --
Ben Ermini ....................... -- -- -- -- --
Philip Lubitz .................... 610 * -- 610 *
All directors and
executive officers
as a group (six persons) ....... 2,593,142 56.08% 1,400,000 1,193,142 25.80%
</TABLE>
- ---------
* Less than 1%.
(1) In the event the Underwriters exercise their over-allotment option, up to
210,000 additional Shares will be sold by Blair. If the over-allotment
option is exercised in full, Blair's percentage ownership after the
offering will be 15.65%. Mr. Lerner will not participate in the
over-allotment option.
(2) Includes 200,000 shares held by Blair Holdings.
(3) Includes (i) 3,564 shares held by his wife and (ii) 50,000 shares
underlying immediately exercisable options. See "Management."
(4) Represents shares owned by Blair and Blair Holdings. Mr. Davis is Chairman
and Chief Executive Officer of Blair and is the sole stockholder of Blair
Holdings.
(5) Includes (i) 1,072 shares held by his wife; (ii) 6,000 shares held in
custodial accounts for the benefit of his children; and (iii) 31,500 shares
underlying immediately exercisable options. See "Management." Mr. Stumacher
is a party to a non-recourse loan payable from the proceeds of the sale of
his securities at any time after September 30, 1996.
23
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Common Stock
The Company's authorized capital stock consists of 10,000,000 shares of
Common Stock, $.01 par value. As of March 6, 1996, 4,542,403 shares of Common
Stock were outstanding.
Holders of shares of Common Stock are entitled to one vote at all meetings
of stockholders for each share held by them and are not entitled to cumulative
voting. Holders of Common Stock have no preemptive rights and have no other
rights to subscribe for additional shares of the Company nor does the Common
Stock have any conversion rights or rights of redemption. Holders of Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor. See "Dividend
Policy." Upon liquidation, all holders of Common Stock are entitled to
participate pro rata in the assets of the Company available for distribution.
All of the outstanding shares of Common Stock are fully paid and nonassessable.
Transfer Agent
Continental Stock Transfer & Trust Company, 2 Broadway, New York, New York,
serves as Transfer Agent and Registrar for the Company's Common Stock.
Certain Provisions of Delaware Law
Section 203 of the DGCL is applicable to corporate takeovers in Delaware.
Subject to certain exceptions set forth therein, Section 203 of the DGCL
provides that a corporation shall not engage in any business combination with
any "interested stockholder" for a three-year period following the date that
such stockholder becomes an interested stockholder unless (a) prior to such
date, the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (b) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction was commenced (excluding certain shares)
or (c) on or subsequent to such date, the business combination is approved by
the board of directors of the corporation and by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder. Except as specified therein, an interested stockholder
is defined to include any person that is (a) the owner of 15% or more of the
outstanding voting stock of the corporation, (b) an affiliate or associate of
the corporation and was the owner of 15% or more of the outstanding voting stock
of the corporation, at any time within three years immediately prior to the
relevant date, and (c) the affiliates and associates of (a) or (b). Under
certain circumstances, Section 203 of the DGCL makes it more difficult for an
interested stockholder to effect various business combinations with a
corporation for a three-year period, although the stockholders may, by adopting
an amendment to the corporation's certificate of incorporation or by-laws, elect
not to be governed by this section, effective twelve months after adoption.
Neither the Certificate of Incorporation nor the By-Laws exclude the Company
from the restrictions imposed under Section 203 of the DGCL. It is anticipated
that the provisions of Section 203 of the DGCL may encourage companies
interested in acquiring the Company to negotiate in advance with the Board of
Directors of the Company since the stockholder approval requirement would be
avoided if a majority of the directors then in office approve either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder.
24
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
The Company has outstanding 4,542,403 shares of Common Stock. Upon
completion of this offering (assuming no exercise of the Underwriters'
over-allotment option), 3,441,738 of such shares will be freely transferable
without restriction or further registration under the Securities Act, unless
purchased by affiliates of the Company as that term is defined in Rule 144 under
the Securities Act. The remaining 1,100,665 shares outstanding (assuming no
exercise of the Underwriters' over-allotment option) will be "restricted
securities" or owned by affiliates within the meaning of Rule 144 and may not be
sold publicly unless they are registered under the Securities Act or are sold
pursuant to Rule 144 or other exemption from registration. All of such shares
are currently eligible for sale pursuant to Rule 144. Notwithstanding the
foregoing, the officers and directors of the Company and the Selling
Stockholders have agreed not to publicly sell any shares of the Company's Common
Stock without the prior consent of Oppenheimer & Co., Inc. for a period of 180
days after the date of this Prospectus, except for up to 210,000 shares which
may be sold by one of the Selling Stockholders pursuant to this Prospectus to
cover over-allotments, if any. The Company has also agreed not to issue shares
of Common Stock for a period of 180 days after the date hereof, subject to
certain exceptions, without the consent of Oppenheimer & Co., Inc. See
"Underwriting."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including persons who may be deemed to be
"affiliates" of the Company as that term is defined under the Securities Act, is
entitled to sell within any three-month period a number of restricted shares
beneficially owned for at least two years that does not exceed the greater of
(i) 1% of the then outstanding shares of Common Stock (45,424 shares immediately
after the offering) or (ii) the average weekly trading volume in the Common
Stock during the four calendar weeks preceding such sale. Sales under Rule 144
are also subject to certain requirements as to the manner of sale, notice and
the availability of current public information about the Company. However, a
person who is not an affiliate and has beneficially owned such shares for at
least three years is entitled to sell such shares without regard to the volume
or other resale requirements.
The Company has reserved an aggregate of 300,000 shares of Common Stock for
issuance pursuant to its stock option plan. As of March 6, 1996, there were
options outstanding to purchase 187,005 shares. The Company has registered the
shares of Common Stock for issuance under the Plan under the Securities Act.
Shares of Common Stock issued under the Plan will be freely tradeable in the
public market, subject in the case of sale by affiliates to the amount, manner
of sale, notice and public information requirements of Rule 144. See "Management
- -- Stock Option Plan."
Sales of substantial amounts of Common Stock in the public market could
have a material adverse effect on the market price of the Common Stock and could
impair the Company's future ability to raise capital through the sale of its
equity securities. See "Underwriting."
25
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
among the Company, the Selling Stockholders and Oppenheimer & Co., Inc. and
Furman Selz LLC, as representatives (the "Representatives") of the Underwriters,
the Underwriters named below have severally agreed to purchase from the Selling
Stockholders, and the Selling Stockholders have agreed to sell to the several
Underwriters, the number of shares of Common Stock set forth opposite their
names below:
Number
Underwriters of Shares
---------- ---------
Oppenheimer & Co., Inc. ................................ 525,000
Furman Selz LLC ........................................ 525,000
William Blair & Company, L.L.C. ........................ 30,000
J.C. Bradford & Co. .................................... 30,000
Dain Bosworth Incorporated ............................. 30,000
Piper Jaffray Inc. ..................................... 30,000
The Robinson-Humphrey Company, Inc. .................... 30,000
Stephens Inc. .......................................... 30,000
Wheat First Butcher Singer ............................. 30,000
Brean Murray, Foster Securities, Inc. .................. 20,000
Cleary Gull Reiland & McDevitt Inc. .................... 20,000
GS2 Securities, Inc. ................................... 20,000
Josephthal Lyon & Ross Incorporated .................... 20,000
Natcity Investments, Inc. .............................. 20,000
Stifel, Nicolaus & Company, Incorporated ............... 20,000
H.G. Wellington & Co. Inc. ............................. 20,000
---------
Total .......................................... 1,400,000
=========
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations is such that they are committed to purchase all of the above shares
offered hereby if any are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the offering price set forth on the cover page of this Prospectus,
and at such price less a concession of not in excess of $1.10 per share to
certain securities dealers of which a concession not in excess of $.10 per share
may be reallowed to certain other securities dealers. After this offering, the
public offering price and other selling terms may be changed by the
Underwriters.
D.H. Blair Investment Banking Corp., one of the Selling Stockholders, has
granted to the Underwriters an option, exercisable within 30 days after the date
of this Prospectus, to purchase from such Selling Stockholder up to an aggregate
of 210,000 additional shares of Common Stock to cover over-allotments, if any,
at the public offering price less the underwriting discount set forth on the
cover page of this Prospectus. If the Underwriters exercise such over-allotment
option to purchase any of the 210,000 additional shares of Common Stock, the
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof as the number of shares to be
purchased by each of them bears to the 1,400,000 shares offered hereby.
The officers and directors of the Company and the Selling Stockholders
beneficially owning 1,111,642 shares in the aggregate and options to purchase an
additional 158,150 shares after completion of this offering have agreed,
pursuant to lock-up agreements, that they will not publicly sell, transfer or
dispose of any shares of Common Stock of the Company for a period of 180 days
after the date of this Prospectus without the consent of Oppenheimer & Co.,
Inc.; provided, however, that Blair may sell up to 210,000 shares in connection
with the Underwriters' over-allotment option.
The Company has agreed not to offer for sale, sell, distribute or otherwise
dispose of, directly or indirectly, shares of Common Stock (or any securities
convertible into, exercisable for or exchangeable for such shares) for a period
of 180 days after the date of this Prospectus without the prior written consent
of Oppenheimer & Co., Inc.; provided, however, that the Company may issue shares
of Common Stock upon exercise of outstanding options or in connection with the
GeoDemX Agreement.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to certain payments that the Underwriters may
be required to make in respect thereof.
The Underwriters have advised the Company that they do not intend to
confirm sales of the shares offered hereby to any account over which they
exercise discretionary authority.
26
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby is being passed upon for
the Company and the Selling Stockholders by Bachner, Tally, Polevoy & Misher
LLP, 380 Madison Avenue, New York, New York 10017. Certain legal matters
relating to the offering will be passed upon for the Underwriters by Schulte
Roth & Zabel, 900 Third Avenue, New York, New York 10022.
EXPERTS
The consolidated balance sheets of the Company as of February 28, 1994 and
1995 and November 30, 1995 and the statements of earnings, stockholders' equity
and cash flows for each of the years in the three year period ended February 28,
1995 and for the nine month period ended November 30, 1995, have been included
herein in reliance on the report of Grant Thornton LLP, independent certified
public accountants, given on the authority of that firm as experts in accounting
and auditing.
27
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference the following documents filed
with the Commission pursuant to the Exchange Act:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
February 28, 1995;
2. The Company's Quarterly Report on Form 10-Q for the period ended May
31, 1995;
3. The Company's Quarterly Report on Form 10-Q for the period ended
August 31, 1995;
4. The Company's Quarterly Report on Form 10-Q for the period ended
November 30, 1995;
5. The Company's Proxy Statement dated June 23, 1995;
6. The Company's Current Report on Form 8-K dated June 23, 1995.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof, and
prior to the termination of the offering made hereby, shall be deemed to be
incorporated by reference into this Prospectus. Any statement contained in a
document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide a copy of any documents incorporated by reference
herein (excluding exhibits to the documents so incorporated, unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates), free of charge, to each person to whom this
Prospectus is delivered, upon written or oral request to American List
Corporation, 330 Old Country Road, Mineola, New York 11501, Attention:
Controller; Telephone: (516) 248-6100.
28
<PAGE>
AMERICAN LIST CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Certified Public
Accountants ................................................ F-2
Consolidated Balance Sheets
February 28, 1994 and 1995 and
November 30, 1995 .......................................... F-3
Consolidated Statements of Earnings
Year Ended February 28, 1993, 1994 and
1995, and the Nine Months Ended
November 30, 1994 (unaudited) and 1995 ..................... F-4
Consolidated Statement of Stockholders' Equity
Year Ended February 28, 1993, 1994
and 1995, and the Nine Months
Ended November 30, 1995 .................................... F-5
Consolidated Statements of Cash Flows
Year Ended February 28, 1993, 1994 and 1995,
and the Nine Months Ended November 30,
1994 (unaudited) and 1995 .................................. F-6
Notes to Consolidated Financial Statements ..................... F-7
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
American List Corporation
We have audited the accompanying consolidated balance sheets of American
List Corporation and Subsidiaries as of November 30, 1995, February 28, 1995 and
1994, and the related consolidated statements of earnings, stockholders' equity
and cash flows for the nine months ended November 30, 1995 and for each of the
years in the three-year period ended February 28, 1995. 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 November 30, 1995, February 28, 1995 and
1994, and the consolidated results of their operations and their consolidated
cash flows for the nine months ended November 30, 1995 and for each of the years
in the three-year period ended February 28, 1995, in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Melville, New York
January 16, 1996
F-2
<PAGE>
AMERICAN LIST CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28,
------------------------- November 30,
ASSETS 1994 1995 1995
----------- ----------- -----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ...................... $4,700,262 $3,196,634 $3,227,013
Marketable securities .......................... 5,668,423 7,351,410 8,143,211
Trade accounts receivable, net of allowance
for doubtful accounts of $90,000, $50,000
and $60,000, respectively ................... 2,938,516 4,393,107 4,310,980
Unamortized costs of lists ..................... 961,195 933,669 872,639
Prepaid income taxes ........................... -- -- 395,152
Prepaid expenses and other ..................... 65,478 37,042 70,761
----------- ----------- -----------
Total current assets ........................ 14,333,874 15,911,862 17,019,756
PROPERTY AND EQUIPMENT - AT COST
Furniture and fixtures ......................... 212,916 226,601 256,881
Computer equipment ............................. 585,254 642,745 987,429
Leasehold improvements ......................... 10,959 10,959 10,959
----------- ----------- -----------
809,129 880,305 1,255,269
Less accumulated depreciation .................. 601,769 690,427 812,232
----------- ----------- -----------
207,360 189,878 443,037
DEFERRED LICENSE COST, net of accumulated
amortization of $213,586 and
$465,672, respectively ........................... -- 3,125,873 2,873,787
UNAMORTIZED COSTS OF LISTS ......................... 822,713 654,402 475,877
OTHER ASSETS ....................................... 170,195 230,414 391,834
----------- ----------- -----------
$15,534,142 $20,112,429 $21,204,291
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Current portion of long-term debt ................ $ -- $ 414,569 $ 437,665
Accounts payable ................................. 132,417 97,653 259,460
Accrued pension and profit-sharing contributions . 186,513 192,049 151,000
Accrued salaries ................................. 540,414 363,441 439,272
Accrued expenses ................................. 22,145 179,125 150,948
Income taxes payable ............................. 915,596 170,337 --
Dividends payable ................................ 828,511 -- --
---------- ---------- ----------
Total current liabilities ................... 2,625,596 1,417,174 1,438,345
LONG-TERM DEBT ..................................... -- 2,324,890 1,901,244
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share;
authorized 5,000,000 and 10,000,000 shares
in 1994 and 1995, respectively; issued
4,142,556, 4,560,013 and 4,541,703 shares,
respectively .................................. 41,426 45,600 45,417
Additional paid-in capital ....................... -- 6,913,311 6,466,642
Unrealized gain (loss) on marketable securities .. -- (11,833) 7,107
Retained earnings ................................ 12,867,120 9,423,287 11,353,170
Less: treasury stock at cost - 300 shares ........ -- -- (7,634)
----------- ----------- -----------
12,908,546 16,370,365 17,864,702
----------- ----------- -----------
$15,534,142 $20,112,429 $21,204,291
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
AMERICAN LIST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Nine months ended
Year ended February 28, November 30,
----------------------------------------------- ----------------------------
1993 1994 1995 1994 1995
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues ................................... $10,108,463 $12,634,919 $15,494,219 $10,601,178 $13,221,531
----------- ----------- ----------- ----------- -----------
Costs and expenses
Cost of operations ....................... 1,984,965 1,992,093 2,200,784 1,635,193 2,025,687
Selling, general and
administrative expenses ............... 2,734,063 3,391,260 3,615,328 2,694,247 3,252,192
----------- ----------- ----------- ----------- -----------
4,719,028 5,383,353 5,816,112 4,329,440 5,277,879
----------- ----------- ----------- ----------- -----------
Operating income ...................... 5,389,435 7,251,566 9,678,107 6,271,738 7,943,652
Other income (expense)
Investment income ........................ 270,922 193,580 378,430 256,692 361,478
Interest expense -- -- (129,487) (78,109) (141,477)
----------- ----------- ----------- ----------- -----------
Earnings before provision
for income taxes .................... 5,660,357 7,445,146 9,927,050 6,450,321 8,163,653
Provision for income taxes ................. 2,148,000 2,871,000 3,751,000 2,491,000 3,045,000
----------- ----------- ----------- ----------- -----------
NET EARNINGS .......................... $3,512,357 $4,574,146 $6,176,050 $3,959,321 $5,118,653
========== ========== ========== ========== ==========
Net earnings per common share .............. $.77 $1.00 $1.36 $.87 $1.13
==== ===== ===== ==== =====
Weighted average shares outstanding ........ 4,556,881 4,556,881 4,557,445 4,557,810 4,542,742
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
AMERICAN LIST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended February 28, 1993, 1994 and 1995 and nine months ended November 30, 1995
Unrealized
Additional gain (loss) on
paid-in marketable Retained Treasury
Shares Amount capital securities earnings stock Total
------ ------ ------- ---------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 1, 1992 ................ 2,761,732 $27,618 $11,146,400 $11,174,018
Net earnings ............................ -- -- 3,512,357 3,512,357
Cash dividends declared on
common stock - $.61
per share, as adjusted ............... -- -- (2,761,732) (2,761,732)
--------- ------- ----------- -----------
Balance at February 28, 1993 ............ 2,761,732 27,618 11,897,025 11,924,643
Net earnings ............................ -- -- 4,574,146 4,574,146
Cash dividends declared on
common stock - $.79
per share, as adjusted ............... -- -- (3,590,243) (3,590,243)
Issuance of common stock in connection
with the 3-for-2 stock split ......... 1,380,824 13,808 (13,808) --
--------- ------ ----------- -----------
Balance at February 28, 1994 ............ 4,142,556 41,426 12,867,120 12,908,546
Issuance of common stock in connec-
tion with 10% stock dividend ......... 414,157 4,141 $6,881,219 (6,885,360) --
Issuance of common stock in connec-
tion with exercise of stock options .. 3,300 33 32,092 -- 32,125
Unrealized loss on marketable securities -- -- -- $(11,833) -- (11,833)
Net earnings ............................ -- -- -- -- 6,176,050 6,176,050
Cash dividends declared on
common stock - $.60 per share ........ -- -- -- -- (2,734,523) (2,734,523)
--------- ------- ---------- ------ ----------- -----------
Balance at February 28, 1995 ............ 4,560,013 45,600 6,913,311 (11,833) 9,423,287 16,370,365
Issuance of common stock in connection
with exercise of stock options ....... 6,290 63 62,323 -- -- 62,386
Purchase of common stock for treasury ... -- -- -- -- -- $(516,872) (516,872)
Retirement of treasury stock ............ (24,600) (246) (508,992) -- -- 509,238 --
Unrealized gain on marketable securities -- -- -- 18,940 -- -- 18,940
Net earnings ............................ -- -- -- -- 5,118,653 -- 5,118,653
Cash dividends declared on
common stock - $.70 per share ....... -- -- -- -- (3,188,770) -- (3,188,770)
--------- ------- ---------- ------ ----------- ------- -----------
Balance at November 30, 1995 ............ 4,541,703 $45,417 $6,466,642 $7,107 $11,353,170 $(7,634) $17,864,702
========= ======= ========== ====== =========== ======= ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
AMERICAN LIST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
Year ended February 28, November 30,
--------------------------------------- -------------------------
1993 1994 1995 1994 1995
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net earnings ................................................. $ 3,512,357 $ 4,574,146 $ 6,176,050 $ 3,959,321 $ 5,118,653
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation ............................................ 118,586 92,288 88,658 65,115 121,805
Provision for losses on accounts receivable ............. 60,000 (60,210) (22,955) -- 10,000
Amortization of bond premiums ........................... 68,765 193,265 256,992 195,178 164,931
Amortization of deferred license cost ................... -- -- 213,586 131,124 252,086
Amortization of goodwill ................................ -- -- -- -- 13,068
Unrealized (gains) losses on marketable securities ...... (11,588) 52,329 -- -- --
Gain on sale of investments ............................. (21,661) (20,715) -- -- --
Changes in operating assets and liabilities,
net of acquisition in 1995
Accounts receivable ............................... (533,513) (30,321) (1,431,636) (244,337) 86,607
Unamortized costs of lists ........................ 66,656 276,158 195,837 240,729 239,555
Prepaid income taxes .............................. 223,017 -- -- (244,064) (395,152)
Prepaid expenses and other ........................ (26,915) 7,038 28,436 10,725 (27,719)
Other assets ...................................... (50,493) (10,002) (52,219) 9,780 (94,845)
Accounts payable .................................. 296 41,031 (34,764) 58,559 (45,681)
Accrued pension and profit-sharing contributions .. 22,977 14,489 5,536 (41,013) (41,049)
Accrued salaries .................................. (114,779) 277,613 (176,973) (118,851) 49,712
Accrued expenses .................................. 55,129 (55,107) 156,980 91,524 94,849
Income taxes payable .............................. 93,185 822,411 (745,259) (915,596) (170,337)
----------- ----------- ----------- ----------- -----------
Net cash provided by operating activities .. 3,462,019 6,174,413 4,658,269 3,198,194 5,376,483
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities
Capital expenditures .............................. (40,650) (71,306) (71,176) (60,691) (105,672)
Sale of temporary investments, net ................ 426,281 1,147,626 -- -- --
Purchase of marketable securities ................. (2,264,779) (3,137,513) (1,959,812) (1,837,217) (927,642)
Acquisition of Subsidiary, net of cash acquired ... -- -- -- -- (69,534)
Proceeds from sale of marketable securities ....... 453,436 200,423 -- -- --
Deferred license costs ............................ -- -- (600,000) (600,000) --
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities ...... (1,425,712) (1,860,770) (2,630,988) (2,497,908) (1,102,848)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities
Proceeds from issuance of common stock ............ -- -- 32,125 16,625 62,386
Cash dividends paid ............................... (2,761,732) (2,761,732) (3,563,034) (2,651,361) (3,188,770)
Acquisition of common stock for treasury .......... -- -- -- -- (516,872)
Payment of long-term debt ......................... -- -- -- -- (600,000)
----------- ----------- ----------- ----------- -----------
Net cash used in financing activities ...... (2,761,732) (2,761,732) (3,530,909) (2,634,736) (4,243,256)
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS .................... (725,425) 1,551,911 (1,503,628) (1,934,450) 30,379
Cash and cash equivalents at beginning of period ....... 3,873,776 3,148,351 4,700,262 4,700,262 3,196,634
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period ............. $ 3,148,351 $ 4,700,262 $ 3,196,634 $ 2,765,812 $ 3,227,013
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
AMERICAN LIST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 28, 1993, 1994 and 1995 and November 30, 1995
(Information with respect to the nine-month period ended
November 30, 1994 is unaudited)
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
American List Corporation ("ALC"), through its wholly owned subsidiary,
American Student List Company, Inc. ("ASL"), primarily 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 and advertising agencies, financial
institutions, retailers and educational institutions. ALC's wholly-owned
subsidiary, GeoDemX Corporation ("GeoDemX"), is engaged in the sale of software
that incorporates computerized map and electronic demographic data for the
generation of sales leads.
A summary of the significant accounting policies applied on a consistent
basis in the preparation of the accompanying consolidated financial statements
follows:
1. Principles Applied in Consolidation
The consolidated financial statements include the accounts of American
List Corporation and its wholly-owned subsidiaries, American Student List
Company, Inc. and GeoDemX Corporation (the "Company"). All significant
intercompany balances and transactions have been eliminated.
2. Depreciation and Amortization
Depreciation and amortization of property and equipment are provided
primarily on the straight-line basis over the estimated useful lives of the
respective assets, generally ranging from 3 to 7 years.
3. Revenue Recognition
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.
4. Costs of Lists
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 salable. The Company periodically reviews the
salability of its lists and, accordingly, the respective estimated useful
lives. Such reviews to date have not resulted in revised estimates of
useful lives of the lists.
5. Earnings and Dividends per Share
Earnings and dividends per share are based upon the weighted average
number of shares of common stock outstanding during the year, as
retroactively adjusted for the July 6, 1993 stock-split and the March 16,
1994 stock dividend. Common stock equivalents are not included in the
computation as they are not materially dilutive. Dividends per share have
been retroactively adjusted for the above stock split and stock dividend.
6. Income Taxes
Effective March 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). Such adoption did not have a material effect on the Company's
consolidated financial position or results of operations. In accordance
with the provisions of SFAS No. 109, deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates in effect for the year
in which those temporary differences are expected to be recovered or
settled. Under SFAS No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
F-7
<PAGE>
AMERICAN LIST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
February 28, 1993, 1994 and 1995 and November 30, 1995
(Information with respect to the nine-month period ended
November 30, 1994 is unaudited)
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF
ACCOUNTING POLICIES (continued)
7. Marketable Securities
Effective March 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" ("SFAS No. 115"). Such adoption did not have a
material effect on the Company's consolidated financial position or results
of operations. In accordance with the provisions of SFAS No. 115,
investments should be classified into three categories. Those securities
classified as "trading" or "available-for-sale" are reported at market
value. Debt securities are classified as "held to maturity" which are
reported at amortized cost. Cost is determined using the specific
identification methods. Unrealized gains and losses from securities
"available-for-sale" are reported as a separate component of stockholders'
equity, net of related tax effects. Prior to the adoption of SFAS No. 115,
unrealized losses were charged to operations.
8. Costs in Excess of the Fair Value of Net Assets Acquired
Costs in excess of the fair value of net assets acquired arising from
the acquisition of GeoDemX (Note H) are being amortized on a straight-line
basis over a period of five years. In March 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 121
("SFAS No. 121") that established accounting standards for the impairment
of long-lived assets, certain intangibles and goodwill related to those
assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. In accordance with SFAS No.
121, it is the Company's policy to periodically review and evaluate whether
there has been any permanent impairment in the value of recorded amounts.
Factors considered in the valuation include current operating results,
trends and anticipated undiscounted future cash flows.
9. Statement of Cash Flows
The Company considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash equivalents.
The Company paid income taxes for the years ended February 28, 1993, 1994
and 1995 and the nine months ended November 30, 1995 of $1,880,203,
$2,065,163, $4,553,686 and $3,636,541, respectively. During fiscal 1995,
the Company had noncash investing and financing activities in connection
with the acquisition of a licensing agreement of approximately $3,339,000.
10. Financial Instruments and Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash and cash equivalents,
marketable securities and accounts receivable. 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. Concentrations of credit risk with respect to accounts receivable
are limited due to the large number of customers, generally short payment
terms, and their dispersion across geographic areas.
F-8
<PAGE>
AMERICAN LIST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
February 28, 1993, 1994 and 1995 and November 30, 1995
(Information with respect to the nine-month period ended
November 30, 1994 is unaudited)
NOTE B - MARKETABLE SECURITIES
The amortized cost, unrealized gains and losses, and market values of the
Company's held-to-maturity and available-for-sale securities held at November
30, 1995 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Market
cost gains losses value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Held to maturity, maturing in less
than one year
State and municipal bonds ....... $ 6,782,120 $ 3,992 $ (4,112) $ 6,782,000
U.S. Treasury bills ............. 500,460 2,874 503,334
Certificates of deposit ......... 281,955 (1,283) 280,672
----------- ----------- ----------- -----------
$ 7,564,535 $ 6,866 $ (5,395) $ 7,566,006
=========== =========== =========== ===========
Available for sale
Equity securities ................ $ 177,289 $ 9,066 $ (36,095) $ 150,260
Government income securities ..... 462,190 (33,774) 428,416
----------- ----------- ----------- -----------
$ 639,479 $ 9,066 $ (69,869) $ 578,676
=========== =========== =========== ===========
</TABLE>
The amortized cost, unrealized gains and losses, and market values of the
Company's held-to-maturity and available-for-sale securities held at February
28, 1995 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Market
cost gains losses value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
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 $(11,833) and $7,107, net of deferred
taxes, is recorded as a separate component of stockholders' equity at February
28, 1995 and November 30, 1995, respectively.
The amortized cost, unrealized gains and losses, and market values of the
Company's held-to-maturity and available-for-sale securities at February 28,
1994 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Market
cost gains losses value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Held to maturity
State and municipal bonds ....... $5,160,105 $ 2,892 $ (11,625) $5,151,372
========== ========== ========== ==========
Available for sale
Equity securities ............... $ 167,867 $ 1,009 $ (47,243) $ 121,633
Government income securities .... 410,512 -- (23,827) 386,685
---------- ---------- ---------- ----------
$ 578,379 $ 1,009 $ (71,070) $ 508,318
========== ========== ========== ==========
</TABLE>
F-9
<PAGE>
AMERICAN LIST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
February 28, 1993, 1994 and 1995 and November 30, 1995
(Information with respect to the nine-month period ended
November 30, 1994 is unaudited)
NOTE C - INCOME TAXES
The Company files a consolidated Federal income tax return.
Income tax expense is comprised of the following elements:
<TABLE>
<CAPTION>
February 28, November 30,
------------------------------------------- ----------------------------
1993 1994 1995 1994 1995
----------- ----------- ----------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Current
Federal ........ $1,794,000 $2,369,000 $3,126,000 $2,081,000 $2,552,000
State .......... 354,000 502,000 625,000 410,000 493,000
---------- ---------- ---------- ---------- ----------
$2,148,000 $2,871,000 $3,751,000 $2,491,000 $3,045,000
========== ========== ========== ========== ==========
</TABLE>
The difference between these amounts and amounts computed by applying the
statutory Federal income tax rate to earnings before taxes is as follows:
<TABLE>
<CAPTION>
Nine months ended
Year ended February 28, November 30,
-------------------------------------------------------------- ---------------------------------------
1993 1994 1995 1994 1995
----------------- ---------------- ----------------- ---------------- -----------------
(unaudited)
% of % of % of % of % of
pretax pretax pretax pretax pretax
Amount income Amount income Amount income Amount income Amount income
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Computed "expected"
tax expense ........ $1,924,500 34.0% $2,531,350 34.0% $3,375,200 34.0% $2,193,100 34.0% $2,775,600 34.0%
Increases
(reductions) in
taxes resulting
from
State income
taxes, net of
Federal income
tax benefit ... 233,600 4.1 331,320 4.5 412,500 4.2 270,600 4.2 325,400 4.0
Other ........... (10,100) (.2) 8,330 .1 (36,700) (.4) 27,300 .4 (56,000) (.7)
---------- ---- ---------- ---- ---------- ---- ---------- ---- ---------- ----
Actual tax expense ... $2,148,000 37.9% $2,871,000 38.6% $3,751,000 37.8% $2,491,000 38.6% $3,045,000 37.3%
========== ==== ========== ==== ========== ==== ========== ==== ========== ====
</TABLE>
NOTE D - PENSION AND PROFIT-SHARING PLANS
Effective March 1, 1974, the Company 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.
Pension and profit-sharing expenses have been charged as follows:
<TABLE>
<CAPTION>
Nine months ended
Year ended February 28, November 30,
------------------------------------- ----------------------------
1993 1994 1995 1994 1995
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Pension expense ................ $158,006 $171,327 $174,222 $132,346 $132,783
Profit-sharing expense ......... 18,000 20,000 23,000 17,250 18,750
-------- -------- -------- -------- --------
$176,006 $191,327 $197,222 $149,596 $151,533
======== ======== ======== ======== ========
</TABLE>
F-10
<PAGE>
AMERICAN LIST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
February 28, 1993, 1994 and 1995 and November 30, 1995
(Information with respect to the nine-month period ended
November 30, 1994 is unaudited)
NOTE E - LICENSE AGREEMENT
Effective July 1, 1994, the Company entered into an exclusive licensing
agreement, whereby the Company has 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 the Company's own lists. The
licensor will have the nonexclusive right to broker the licensed list to third
parties in return for a commission.
As consideration for the granting of the license, the Company will 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.
The Company has recorded the cost and related obligation for the license,
net of imputed interest at 7.25%, 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.
NOTE F - COMMITMENTS
The Company currently occupies an office and computer facility under an
operating lease which commenced June 15, 1991 and expires June 15, 2001. The
lease currently provides for an annual base rent of $235,952 which will increase
ratably over the term of the lease to a maximum of $299,191. The lease contains
an escalation clause relating to increases in real estate taxes.
The approximate minimum rental commitments under these operating leases are
as follows:
Twelve months ending November 30,
1996 ............................................... $ 264,000
1997 ............................................... 271,000
1998 ............................................... 279,000
1999 ............................................... 287,000
2000 ............................................... 295,000
2001 ............................................... 159,000
-----------
Total minimum payments required ....................... $ 1,555,000
===========
Total rent expense for the years ended February 28, 1993, 1994 and 1995 and
the nine months ended November 30, 1994 and 1995, including escalation payments,
amounted to approximately $252,000, $268,000, $288,000, $205,000 and $224,000,
respectively.
Pursuant to an employment agreement expiring in March 2001, the Company is
obligated to pay an executive a base annual salary of $425,000, plus an
incentive bonus based on increases in operating income (as defined).
NOTE G - STOCKHOLDERS' EQUITY
In May 1992, the Company adopted the 1992 Stock Option Plan (the "Plan")
which provided for the issuance of options to purchase up to 82,500 shares, as
adjusted, of common stock. The Plan provides for the issuance of both incentive
stock options to purchase the Company's common stock at not less than fair
market value on the date of the grant and nonqualified options to purchase
shares at exercise prices determined by the Board of Directors. On July 17,
1995, the Company's stockholders approved an amendment to the Plan increasing
the number of options available for issuance to 300,000 shares.
F-11
<PAGE>
AMERICAN LIST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
February 28, 1993, 1994 and 1995 and November 30, 1995
(Information with respect to the nine-month period ended
November 30, 1994 is unaudited)
NOTE G - STOCKHOLDERS' EQUITY (continued)
A summary of stock option activity related to the Company's 1992 Stock
Option Plan is as follows:
<TABLE>
<CAPTION>
Incentive Nonqualified
Stock Options Stock Options
-------------------------------- ------------------------------
Price Range Shares Price Range Shares
---------------- -------- ----------- ------
<S> <C> <C> <C> <C> <C>
Outstanding at March 1, 1992
Granted ................................ $ 9.39 - $10.08 23,595
---------------- --------
Outstanding at February 28, 1993 ....... 9.39 - 10.08 23,595
Granted ................................ 11.89 15,675 $11.89 1,650
Expired ................................ 10.08 (825)
---------------- -------- ------ -----
Outstanding at February 28, 1994 ....... 9.39 - 11.89 38,445 11.89 1,650
Granted ................................ 18.00 100,000
Exercised .............................. 9.39 - 10.08 (3,300)
---------------- -------- ------ -----
Outstanding at February 28, 1995 ....... 9.39 - 18.00 135,145 11.89 1,650
Granted ................................ 21.00 - 29.38 56,000
Exercised .............................. 9.39 - 11.89 (6,290)
---------------- -------- ------ -----
Outstanding at November 30, 1995 ....... $ 9.39 - $29.38 184,855 $11.89 1,650
================ ======== ====== =====
Exercisable at November 30, 1995 ....... $ 9.39 - 29.38 94,855 $11.89 1,650
================ ======== ====== =====
</TABLE>
On March 22, 1995, the Board of Directors authorized the repurchase of up
to 200,000 shares of the Company's common stock. On April 7 and November 16,
1995, the Company purchased 24,600 and 300 shares of its common stock for
$509,238 and $7,634, respectively.
NOTE H - ACQUISITION OF GEODEMX
On June 22, 1995, the Company acquired substantially all of the operating
assets and liabilities of GeoDemX for nominal consideration. The purchase
agreement provides for, among other things, additional consideration to be paid
based on a percentage of GeoDemX's annual pretax earnings through February 28,
1999. Such additional consideration shall be paid through the issuance of the
Company's common stock. However, the sellers may elect to receive up to 50% of
such additional consideration in cash. The excess of the costs over the net
assets acquired, approximating $125,000, has been included in other assets.
Historical pro forma information is not presented as the pro forma results would
not be materially different from those of the Company.
At the date of acquisition, the Company set forth certain conditions and
expectations for the GeoDemX business. Ultimately, the Company may decide to
dispose of GeoDemX should these conditions and expectations not materialize.
Under the Company's current plan, the net assets of GeoDemX (approximately
$400,000 at November 30, 1995) are estimated to be fully recoverable.
F-12
<PAGE>
================================================================================
No dealer, salesman or other person has been authorized to give any
information or to make any representations in connection with this offering
other than those contained in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company, any Underwriter or Selling Stockholder or by any other person.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the registered securities to which it
relates or an offer to or solicitation of any person in any jurisdiction in
which such offer or solicitation would be unlawful. Neither the delivery of this
Prospectus nor any sale or distribution made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any time subsequent to its date.
------------
TABLE OF CONTENTS
Page
---
Available Information ......................................... 2
Prospectus Summary ............................................ 3
Risk Factors .................................................. 6
Price Range of Common Stock ................................... 8
Dividend Policy ............................................... 8
Capitalization ................................................ 9
Selected Consolidated
Financial Information ....................................... 10
Management's Discussion and
Analysis of Financial
Condition and Results of Operations ......................... 11
Business ...................................................... 14
Management .................................................... 19
Principal and Selling Stockholders ............................ 23
Description of Capital Stock .................................. 24
Shares Eligible for Future Sale ............................... 25
Underwriting .................................................. 26
Legal Matters ................................................. 27
Experts ....................................................... 27
Incorporation of Certain
Information by Reference.................................... 28
================================================================================
================================================================================
1,400,000 Shares
[LOGO] American List Corporation
Common Stock
---------------------
PROSPECTUS
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Oppenheimer & Co., Inc.
Furman Selz
March 8, 1996
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