SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 29, 1996
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ to _______
Commission File No. 1-9312
AMERICAN LIST CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 11-2050322
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
330 OLD COUNTRY ROAD, MINEOLA, NY 11501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 248-6100
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or for such shorter period that the registrant
was required to file such report(s)), and (2) has been subject to the filing
requirements for the past ninety (90) days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
State the aggregate market value of the voting stock held by non-affiliates of
the registrant, computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of May 21, 1996.
$90,530,100.
State the number of shares outstanding of the registrant's Common Stock, $.01
par value, as of May 16, 1996. 4,542,403.
DOCUMENTS INCORPORATED BY REFERENCE
See Part III hereof with respect to incorporation by reference from the
registrant's definitive proxy statement to be filed pursuant to Regulation 14A
under the Securities Exchange Act of 1934 and the Exhibit Index hereto.
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Part I
ITEM 1. DESCRIPTION OF BUSINESS
American List Corporation (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. The Company rents lists derived from its database for use primarily in
direct mail and telemarketing programs. During the fiscal year ended February
29, 1996, the Company rented its lists to approximately 3,600 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. The Company'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.
Statements in this report that are not statements of historical fact
may be forward-looking statements that are subject to risks and uncertainties.
Actual results could differ materially from this anticipated.
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 tasks 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
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$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 lists in the following categories:
High School Students
The Company believes it maintains the most complete and accurate list
of high school students available. For fiscal 1996, rentals of high school
student lists accounted for approximately 55% 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 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.
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. The Company
offers its customers its college student 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
The Company has compiled a database of approximately 35%, 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
The Company has compiled a database of young adults between the ages of
19 and 36. 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.
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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
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.
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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 an in-house 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 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 the GeoDemX product is successfully commercialized.
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EMPLOYEES
At May 16, 1996, the Company had 38 employees, including 11 in
marketing and sales, seven in administration, five in data compilation, nine in
data processing operations and six 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.
ITEM 2. DESCRIPTION OF PROPERTY
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 $294,000 during the year ended February 29, 1996. 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.
ITEM 3. LEGAL PROCEEDINGS
There are currently no legal proceedings to which the Company is a
party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of the security holders of the Company.
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Part II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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 two fiscal years as reported by the American Stock Exchange.
Closing Prices
HIGH LOW
YEAR ENDED ---- ---
FEBRUARY 29, 1996
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First Quarter 25.13 20.13
Second Quarter 30.75 23.63
Third Quarter 29.63 24.50
Fourth Quarter 37.50 25.50
YEAR ENDED
FEBRUARY 28, 1995
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First Quarter 17.88 16.13
Second Quarter 18.75 17.00
Third Quarter 19.25 17.00
Fourth Quarter 20.25 16.13
The number of holders of record of the Company's Common Stock as of May
16, 1996 was 307.
The Company currently pays regular quarterly dividends to holders of
its Common Stock. For the second, third and fourth quarters of fiscal 1996, the
Company declared quarterly dividends of $.25 per share. The first quarter
dividend of fiscal 1997 was increased to $.30 per share and was declared on
April 19, 1996, payable on May 14, 1996 to stockholders of record on May 1,
1996.
On March 22, 1995, the Board of Directors authorized the repurchase of
up to 200,000 shares of the Company's Common Stock. In April 1995, the Company
purchased 24,600 shares of its Common Stock for an aggregate price of $509,238.
An additional 300 shares were repurchased in November 1995 for an aggregate
price of $7,634. In May 1996, the Company purchased 100,000 shares of its Common
Stock for an aggregate price of $2,518,750. On May 23, 1996, the Board of
Directors increased the total number of shares that may be repurchased to
300,000 shares of Common Stock.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
February 29, February 28, February 28, February 28, February 29,
1992 1993 1994 1995 1996
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Statement of Earnings
Data:
Revenues $8,787,550 $10,108,463 $12,634,919 $15,494,219 $18,886,844
Operating income 4,483,129 5,389,435 7,251,566 9,678,107 11,746,310
Pre-tax income 4,855,720 5,660,357 7,445,146 9,927,050 12,037,022
Net earnings 2,944,720 3,512,357 4,574,146 6,176,050 7,609,022
Net earnings per
Common Share $.61 $.77 $1.00 $1.36 $1.68
Weighted average shares
outstanding 4,556,881 4,556,881 4,556,881 4,557,445 4,542,397
Balance Sheet Data:
Total assets $11,813,858 $12,621,291 $15,534,142 $20,112,429 $22,510,072
Long-term debt (including
current maturities) -- -- -- 2,739,459 2,338,909
Stockholders' equity 11,174,018 11,924,643 12,908,546 16,370,365 19,217,300
Cash dividend per
Common Share .61 .61 .79 .60 .95
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its cash flow requirements with
funds generated from operations. At February 29, 1996, the Company had cash,
cash equivalents and marketable securities of approximately $11.4 million and
working capital of approximately $17.0 million.
Net cash flows from operating activities amounted to approximately $6.6
million and $4.7 million during fiscal 1996 and 1995, respectively.
Net cash used in investing activities amounted to approximately $.8
million and $2.6 million during fiscal 1996 and 1995, respectively.
Approximately 82% of the 1996 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 $5.4
million and $3.5 million during fiscal 1996 and 1995, respectively.
Approximately 80% of the 1996 amount reflects the payment
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of dividends. The remainder reflects the purchase of treasury stock and the
payment of long-term debt pursuant to the licensing agreement described below.
In May 1996, the Company purchased 100,000 shares of its Common Stock
for an aggregate price of $2,518,750. On May 23, 1996, the Board of Directors
increased the number of shares that may be repurchased to 300,000 shares of
Common Stock.
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. In April 1995, the Company
purchased 24,600 shares of its Common Stock for an aggregate price of $509,238.
An additional 300 shares were repurchased in November 1995 for an aggregate
price of $7,634. The Company may from time to time repurchase additional shares.
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. 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 $707,000 had been advanced as of February 29, 1996. The
Company has not yet determined the extent to which it will continue to invest in
the GeoDemX technology beyond the remaining $43,000 commitment and there can be
no assurance that the GeoDemX technology will ever be successfully
commercialized. Although it is the Company's present position 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 $445,000 before taxes at February 29, 1996, may 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
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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.
RESULTS OF OPERATIONS
On May 17, 1996, the Company announced that preliminary indications are
that revenues and earnings for the quarter ended May 31, 1996 are not expected
to exceed the results reported for the quarter ended May 31, 1995. Revenues and
net earnings were $5,330,609 and $2,335,870 (51 cents per share), respectively,
for the quarter ended May 31, 1995. The anticipated results are primarily due to
the timing of expected orders from certain customers combined with a decrease in
orders from new customers. The Company believes that the results for the first
quarter will not be indicative of the results anticipated for the fiscal year
ending February 28, 1997.
FISCAL YEAR ENDED FEBRUARY 29, 1996
COMPARED TO FISCAL YEAR ENDED FEBRUARY 28, 1995
Revenues increased by approximately $3.4 million (22%) for the fiscal
year ended February 29, 1996 ("fiscal 1996") from the fiscal year ended February
28, 1995 ("fiscal 1995"). 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 $702,000 (32%) for fiscal
1996 as compared to fiscal 1995 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 fiscal 1996 and 1995,
reflecting the inclusion of sales of lower margin GeoDemX products.
Selling, general and administrative expenses increased by approximately
$623,000 (17%) for fiscal 1996 as compared to fiscal 1995 primarily due to
expenses associated with GeoDemX and the Company's hiring of additional
personnel. As a percentage of sales, such expenses decreased during fiscal 1996
to 22.4% as compared to 23.3% during fiscal 1995.
Investment income increased by approximately $98,000 (26%) for fiscal
1996 from fiscal 1995 primarily due to an increase in interest rates and a
greater amount of funds available for investment.
Interest expense increased by approximately 56,000 (43%) for fiscal
1996 as compared to fiscal 1995 as a result of the debt associated with a
license agreement entered into in July 1994. See Note E to the Consolidated
Financial Statements.
The effective tax rate decreased to 36.8% for fiscal 1996 as compared
to 37.8% for fiscal 1995 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 fiscal 1995
from fiscal 1994. The increase in revenues is primarily attributable to
increased sales to existing and new customers, price
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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 primarly 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 primarly 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.
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There was no significant change in the effective tax rate during fiscal
1993 and 1994.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information appears in a separate section of this Report following
Part III.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
IN ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
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PART III
The information called for by Item 10 (Directors and Executive Officers
of the Registrant; Compliance with Section 16(a) of the Exchange Act), Item 11
(Executive Compensation), Item 12 (Security Ownership of Certain Beneficial
Owners and Management), and Item 13 (Certain Relationships and Related
Transactions) is incorporated by reference from the Registrant's definitive
proxy statement to be filed pursuant to Regulation 14A.
ITEM 14
(a) EXHIBITS, LISTS AND REPORTS ON FORM 8-K
3.1 Articles of Incorporation as amended to August 31, 1983 (1)
3.1a Certificate of Amendment to Articles of Incorporation filed September
19, 1983(2)
3.1b Certificate of Amendment to Articles of Incorporation filed September
9, 1987(3)
3.2 By laws as amended to date (1)
10.1 Profit-sharing Plan (1)
10.2 Pension Plan (1)
10.3 Lease Agreement (4)
10.4 Stock Option Plan (5)
10.5 Employment Agreement between the Registrant and Jan Stumacher (6)
10.6 Employment Agreement, as amended, between the Registrant and Martin
Lerner (7)
10.7 Agreement of Sale and Purchase of Assets between the Registrant and
GeoDemX Corporation (8)
22 Subsidiaries of the Registrant (9)
---------------------------
(1) Incorporated by reference to the Annual Report on Form 10-K for the
year ended February 28, 1981.
(2) Incorporated by reference to the Annual Report on Form 10-K for the
year ended February 29, 1984.
(3) Incorporated by reference to the Annual Report on Form 10-K for the
year ended February 29, 1988.
(4) Incorporated by reference to the Annual Report on Form 10-K for the
year ended February 29, 1992.
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(5) Incorporated by reference to the Annual Report on Form 10-K for the
year ended February 28, 1993.
(6) Incorporated by reference to the Annual Report on Form 10-KSB for the
year ended February 28, 1994.
(7) Incorporated by reference to the Annual Report on Form 10-KSB for the
year ended February 28, 1995.
(8) Incorporated by reference to the Annual Report on Form 10-Q for the
three months ended May 31, 1995.
(9) Incorporated by reference to the Annual Report on Form 10-Q for the
three months ended August 31, 1995.
(b) REPORTS ON FORM 8-K
---------------------
No reports on Form 8-K have been filed during the three months ended
February 29, 1996.
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American List Corporation
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets
February 29, 1996 and February 28, 1995 F-3
Consolidated Statements of Earnings
Year Ended February 29, 1996 and
February 28, 1995 and 1994 F-5
Consolidated Statement of Stockholders' Equity
Year Ended February 29, 1996 and
February 28, 1995 and 1994 F-6
Consolidated Statements of Cash Flows
Year Ended February 29, 1996 and
February 28, 1995 and 1994 F-7
Notes to Consolidated Financial Statements F-9
Report of Independent Certified Public Accountants
on Financial Statement Schedule F-20
Schedule II - Valuation and Qualifying Accounts F-21
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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 February 29, 1996 and February 28, 1995, and
the related consolidated statements of earnings, stockholders' equity and cash
flows for each of the years in the three-year period ended February 29, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American List
Corporation and Subsidiaries as of February 29, 1996 and 1995, and the
consolidated results of their operations and their consolidated cash flows for
each of the years in the three-year period ended February 29, 1996, in
conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Melville, New York
April 10, 1996
-16-
<PAGE>
American List Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
FEBRUARY 29, February 28,
ASSETS 1996 1995
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,611,609 $ 3,196,634
Marketable securities 7,775,051 7,351,410
Trade accounts receivable, net of allowance
for doubtful accounts of $50,000 5,781,175 4,393,107
Unamortized costs of lists 869,899 933,669
Prepaid income taxes 192,152
Prepaid expenses and other 127,380 37,042
----------- -----------
Total current assets 18,357,266 15,911,862
PROPERTY AND EQUIPMENT - AT COST
Furniture and fixtures 294,783 226,601
Computer equipment 1,000,824 642,745
Leasehold improvements 10,959 10,959
---------- ----------
1,306,566 880,305
Less accumulated depreciation 845,121 690,427
---------- ----------
461,445 189,878
DEFERRED LICENSE COST, net of accumulated
amortization of $549,090 and $213,586, respectively 2,790,369 3,125,873
UNAMORTIZED COSTS OF LISTS 494,200 654,402
OTHER ASSETS 406,792 230,414
----------- ----------
$22,510,072 $20,112,429
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-17-
<PAGE>
American List Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
FEBRUARY 29, February 28,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
----------- ------------
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 445,645 $ 414,569
Accounts payable 240,973 97,653
Accrued pension and profit-sharing contributions 202,773 192,049
Accrued salaries 270,564 363,441
Accrued expenses 239,553 179,125
Income taxes payable 170,337
----------- -------------
Total current liabilities 1,399,508 1,417,174
LONG-TERM DEBT 1,893,264 2,324,890
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share;
authorized 10,000,000 shares; issued
4,541,403 and 4,560,013 shares, respectively 45,414 45,600
Additional paid-in capital 6,459,011 6,913,311
Unrealized gain (loss) on marketable securities 4,687 (11,833)
Retained earnings 12,708,188 9,423,287
----------- -------------
19,217,300 16,370,365
----------- -------------
$22,510,072 $ 20,112,429
=========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
-18-
<PAGE>
American List Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
Year ended
<TABLE>
FEBRUARY 29, February 28, February 28,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues $ 18,886,844 $ 15,494,219 $12,634,919
------------ ------------ -----------
Costs and expenses
Cost of operations 2,902,328 2,200,784 1,992,093
Selling, general and administrative expenses 4,238,206 3,615,328 3,391,260
----------- ------------ -----------
7,140,534 5,816,112 5,383,353
----------- ------------ -----------
Operating income 11,746,310 9,678,107 7,251,566
Other income (expense)
Investment income 476,142 378,430 193,580
Interest expense (185,430) (129,487)
----------- ------------ -----------
Earnings before provision for
income taxes 12,037,022 9,927,050 7,445,146
Provision for income taxes 4,428,000 3,751,000 2,871,000
----------- ------------ -----------
NET EARNINGS $ 7,609,022 $ 6,176,050 $ 4,574,146
============ ============ ===========
Net earnings per common share $ 1.68 $ 1.36 $ 1.00
======= ======= =======
Weighted average shares outstanding 4,542,397 4,557,445 4,556,881
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-19-
<PAGE>
American List Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended February 29, 1996 and February 28, 1995 and 1994
<TABLE>
UNREALIZED
ADDITIONAL GAIN (LOSS)
PAID-IN ON MARKETABLE
SHARES AMOUNT CAPITAL SECURITIES
------ ------ ------- ----------
<S> <C> <C> <C> <C>
Balance at March 1, 1993 2,761,732 $ 27,618
Issuance of common stock in connection with 3-for-2
stock split 1,380,824 13,808
Net earnings
Cash Dividends declared on common stock -
$.79 per share, as adjusted
----------- --------
Balance at February 28, 1994 4,142,556 41,426
Issuance of common stock in connection with
10% stock dividend 414,157 4,141 $ 6,881,219
Issuance of common stock in connection with
exercise of stock options 3,300 33 32,092
Unrealized loss on marketable securities (11,833)
Net earnings
Cash dividends declared on common stock - $.60 per share
---------- ------- --------- -----------
Balance at February 28, 1995 4,560,013 45,600 6,913,311 (11,833)
Issuance of common stock in connection with exercise
of stock options 6,290 63 62,323
Purchase and retirement of treasury stock (24,900) (249) (516,623)
Unrealized gain on marketable securities 16,520
Net earnings
Cash dividends declared on common stock - $.95 per share
---------- ------------ ------------- -----------
BALANCE AT FEBRUARY 29, 1996 4,541,403 $ 45,414 $ 6,459,011 $ 4,687
========= ====== ========= =======
</TABLE>
The accompanying notes are an integral part of this statement.
**THIS TABLE CONTINUED ON THE FOLLOWING PAGE**
-20 A-
<PAGE>
TABLE CONTINUED
<TABLE>
RETAINED
EARNINGS TOTAL
-------- -----
<S> <C> <C>
Balance at March 1, 1993 $ 11,897,025 $ 11,924,643
Issuance of common stock in connection with 3-for-2
stock split (13,808)
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)
---------------- --------------
Balance at February 28, 1994 12,867,120 12,908,546
Issuance of common stock in connection with
10% stock dividend (6,885,360)
Issuance of common stock in connection with
exercise of stock options 32,125
Unrealized loss on marketable securities (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 9,423,287 16,370,365
Issuance of common stock in connection with exercise
of stock options 62,386
Purchase and retirement of treasury stock (516,872)
Unrealized gain on marketable securities 16,520
Net earnings 7,609,022 7,609,022
Cash dividends declared on common stock - $.95 per share (4,324,121) (4,324,121)
--------------- --------------
BALANCE AT FEBRUARY 29, 1996 $ 12,708,188 $ 19,217,300
========== ==========
</TABLE>
-20 B-
<PAGE>
American List Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended
<TABLE>
FEBRUARY 29, February 28, February 28,
1996 1995 1994
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings $ 7,609,022 $ 6,176,050 $ 4,574,146
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization 510,102 302,244 92,288
Provision for losses on accounts receivable (17,734) (22,955) (60,210)
Amortization of bond premiums 220,937 256,992 193,265
Unrealized loss on marketable
securities 52,329
Gain on sale of investments (12,745) (20,715)
Changes in operating assets and liabilities,
net of acquisition in 1996
Accounts receivable (1,355,854) (1,431,636) (30,321)
Unamortized costs of lists 223,972 195,837 276,158
Prepaid income taxes (192,152)
Prepaid expenses and other (84,338) 28,436 7,038
Other assets (116,489) (52,219) (10,002)
Accounts payable (64,168) (34,764) 41,031
Accrued pension and profit-sharing
contributions 10,724 5,536 14,489
Accrued salaries (118,996) (176,973) 277,613
Accrued expenses 183,454 156,980 (55,107)
Income taxes payable (170,337) (745,259) 822,411
----------- ------------ ------------
Net cash provided by operating
activities 6,625,398 4,658,269 6,174,413
----------- ------------ ------------
</TABLE>
-21-
<PAGE>
American List Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Year ended
<TABLE>
FEBRUARY 29, February 28, February 28,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from investing activities
Capital expenditures $ (156,969) $ (71,176) $ (71,306)
Sale of temporary investments, net 1,147,626
Purchase of marketable securities (680,756) (1,959,812) (3,137,513)
Acquisition of Subsidiary, net of cash acquired (69,534)
Proceeds from sale of marketable securities 75,443 200,423
Deferred license costs (600,000)
------------ ------------ ------------
Net cash used in investing activities (831,816) (2,630,988) (1,860,770)
------------ ------------ ------------
Cash flows from financing activities
Proceeds from issuance of common stock 62,386 32,125
Cash dividends paid (4,324,121) (3,563,034) (2,761,732)
Acquisition of common stock for treasury (516,872)
Payment of long-term debt (600,000)
------------ ------------ ------------
Net cash used in financing activities (5,378,607) (3,530,909) (2,761,732)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 414,975 (1,503,628) 1,551,911
Cash and cash equivalents at beginning of year 3,196,634 4,700,262 3,148,351
------------ ------------ ------------
Cash and cash equivalents at end of year $ 3,611,609 $ 3,196,634 $ 4,700,262
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-22-
<PAGE>
American List Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 29, 1996 and February 28, 1995 and 1994
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. Revenues from the sale
of software use recognized upon installation by the Company and
acceptance from customers.
-23-
<PAGE>
American List Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
February 29, 1996 and February 28, 1995 and 1994
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF
ACCOUNTING POLICIES (CONTINUED)
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 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.
-24-
<PAGE>
American List Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
February 29, 1996 and February 28, 1995 and 1994
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 method. 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 29, 1996 and
February 28, 1995 and 1994 of $4,832,044, $4,553,686 and $2,065,163,
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.
-25-
<PAGE>
American List Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
February 29, 1996 and February 28, 1995 and 1994
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF
ACCOUNTING POLICIES (CONTINUED)
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.
11. Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of
the financial statements, and revenues and expenses during the
reporting period. Actual results could differ from those estimates.
-26-
<PAGE>
American List Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
February 29, 1996 and February 28, 1995 and 1994
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
February 29, 1996 are summarized as follows:
<TABLE>
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 $6,484,774 $ 8,116 $ (718) $ 6,492,172
U.S. Treasury bills 500,353 (116) 500,237
Certificates of deposit 281,955 (541) 281,414
---------- --------- ----------- -----------
$7,267,082 $ 8,116 $ (1,375) $7,273,823
========== ========= =========== ==========
Available for sale
Equity securities $ 102,882 $ 1,091 $ (30,760) $ 73,213
Government income securities 469,808 (35,052) 434,756
---------- -------- ----------- ----------
$ 572,690 $ 1,091 $ (65,812) $ 507,969
========== ======== =========== ==========
</TABLE>
-27-
<PAGE>
American List Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
February 29, 1996 and February 28, 1995 and 1994
NOTE B - MARKETABLE SECURITIES (CONTINUED)
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>
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>
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>
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>
As a result of changes in market value of the available-for-sale security
portfolio, a valuation adjustment of $4,687 and $(11,833), net of deferred
taxes, is recorded as a separate component of stockholders' equity at
February 29, 1996 and February 28, 1995, respectively.
-28-
<PAGE>
American List Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
February 29, 1996 and February 28, 1995 and 1994
NOTE C - INCOME TAXES
The Company files a consolidated Federal income tax return.
Income tax expense is comprised of the following elements:
1996 1995 1994
---- ---- ----
Current
Federal $3,817,000 $3,126,000 $2,369,000
State 611,000 625,000 502,000
---------- ---------- ----------
$4,428,000 $3,751,000 $2,871,000
========= ========= =========
The difference between these amounts and amounts computed by applying the
statutory Federal income tax rate to earnings before taxes is as follows:
<TABLE>
YEAR ENDED FEBRUARY 29, YEAR ENDED FEBRUARY 28, YEAR ENDED FEBRUARY 28,
1996 1995 1994
---- ---- ----
% OF % OF % OF
PRETAX PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax
expense $4,092,587 34.0% $3,375,200 34.0% $2,531,350 34.0%
Increases (reductions) in
taxes resulting from
State income taxes,
net of Federal in-
come tax benefit 403,260 3.4 412,500 4.2 331,320 4.5
Other (67,847) (.6) (36,700) (.4) 8,330 .1
----------- -------- ---------- ------- --------- ------
Actual tax expense $4,428,000 36.8% $3,751,000 37.8% $2,871,000 38.6%
========= ======== ========= ======= ========= ======
</TABLE>
-29-
<PAGE>
American List Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
February 29, 1996 and February 28, 1995 and 1994
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:
YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1996 1995 1994
---- ---- ----
Pension expense $178,306 $174,222 $171,327
Profit-sharing expense 25,000 23,000 20,000
-------- -------- --------
$203,306 $197,222 $191,327
======= ======= =======
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.
-30-
<PAGE>
American List Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
February 29, 1996 and February 28, 1995 and 1994
NOTE E - LICENSE AGREEMENT (CONTINUED)
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:
Years ending February 28,
1997 $ 266,000
1998 273,000
1999 281,000
2000 289,000
2001 297,000
2002 84,000
-----------
Total minimum payments required $ 1,490,000
===========
Total rent expense for the years ended February 29, 1996 and February 28,
1995 and 1994 including escalation payments, amounted to approximately
$294,000, $288,000, and $268,000, 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).
-31-
<PAGE>
American List Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
February 29, 1996 and February 28, 1995 and 1994
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.
A summary of stock option activity related to the Company's 1992 Stock
Option Plan is as follows:
<TABLE>
INCENTIVE NONQUALIFIED
STOCK OPTIONS STOCK OPTIONS
------------- -------------
PRICE RANGE SHARES PRICE RANGE SHARES
----------- ------ ----------- ------
<S> <C> <C> <C> <C>
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 - 29.88 57,500
Exercised 9.39 - 11.89 (6,290)
------------- ---------- ------------ ---------
OUTSTANDING AT FEBRUARY 29, 1996 $ 9.39 - $29.88 186,355 $ 11.89 1,650
=============== ======= ============ =========
EXERCISABLE AT FEBRUARY 29,1996 $ 9.39 - $29.88 96,355 $ 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.
-32-
<PAGE>
American List Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
February 29, 1996 and February 28, 1995 and 1994
NOTE H - ACQUISITION OF GEODEMX
On June 22, 1995, the Company acquired substantially all of the operating
assets and liabilities of GeoDemX for nominal considerations. 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 $445,000 at February 29, 1996) are estimated to be fully
recoverable.
-33-
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
Board of Directors and Stockholders
AMERICAN LIST CORPORATION
In connection with our audit of the consolidated financial statements of
American List Corporation and Subsidiaries referred to in our report dated April
10, 1996, we have also audited financial statement Schedule II for each of the
years in the three-year period ended February 29, 1996. In our opinion, the
financial statement schedule presents fairly, in all material respects, the
information required to be set forth therein.
GRANT THORNTON LLP
Melville, New York
April 10, 1996
-34-
<PAGE>
American List Corporation and Subsidiaries
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
ADDITIONS
<S> <C> <C> <C> <C> <C>
(1) (2)
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS - DEDUCTIONS - END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
Consolidated
Allowance for doubtful accounts
YEAR ENDED FEBRUARY 29, 1996 $ 50,000 $17,734 $17,734 (a) $50,000
======== ====== ====== ======
Year ended February 28, 1995 $ 90,000 $22,955 $62,955 (a) $50,000
======== ====== ====== ======
Year ended February 28, 1994 $ 125,000 $60,210 $95,210 (a) $90,000
======== ====== ====== ======
</TABLE>
-35-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AMERICAN LIST CORPORATION
Date: May 28, 1996 By: /S/ MARTIN LERNER
--------------------
Martin Lerner - Chairman of the
Board of Directors, President and Treasurer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
/S/ MARTIN LERNER May 28, 1996
- ---------------------------------------
Martin Lerner - Chairman of the
Board of Directors, President and
Treasurer (Principal Executive and
Financial Officer)
/S/ DON DAMORE May 28, 1996
- ---------------------------------------
Don Damore - Vice-President of Finance
(Principal Accounting Officer)
/S/ J. MORTON DAVIS May 28, 1996
- ---------------------------------------
J. Morton Davis - Director
/S/ JAN STUMACHER May 28, 1996
- ---------------------------------------
Jan Stumacher - Vice President, Secretary
and Director
/S/ KENTON WOOD May 28, 1996
- ---------------------------------------
Kenton Wood - Director
/S/ BEN ERMINI May 28, 1996
- ---------------------------------------
Ben Ermini - Director
/S/ PHILIP LUBITZ May 28, 1996
- ---------------------------------------
Philip Lubitz - Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> FEB-29-1996
<CASH> 13,611,609
<SECURITIES> 7,775,051
<RECEIVABLES> 5,831,175
<ALLOWANCES> 50,000
<INVENTORY> 0
<CURRENT-ASSETS> 18,357,266
<PP&E> 1,306,566
<DEPRECIATION> 845,121
<TOTAL-ASSETS> 22,510,072
<CURRENT-LIABILITIES> 1,399,508
<BONDS> 0
0
0
<COMMON> 45,414
<OTHER-SE> 19,171,886
<TOTAL-LIABILITY-AND-EQUITY> 22,510,072
<SALES> 18,886,844
<TOTAL-REVENUES> 18,886,844
<CGS> 2,902,328
<TOTAL-COSTS> 7,140,534
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 185,430
<INCOME-PRETAX> 12,037,022
<INCOME-TAX> 4,428,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,609,022
<EPS-PRIMARY> 1.68
<EPS-DILUTED> 0
</TABLE>
