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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-14348
METROMAIL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3015410
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
360 EAST 22ND STREET, LOMBARD, IL 60148-4989
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (630) 620-3300
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Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES [] NO [ X ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common Stock, par value $0.01 per share: 22,434,000 shares outstanding as of
June 30, 1996.
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INDEX
<TABLE>
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PAGE
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PART I--FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated and Combined Statements of Operations for the three and
six month periods ended June 30, 1996 and 1995....................... 1
Consolidated and Combined Balance Sheets as of June 30, 1996 and
December 31, 1995.................................................... 2
Consolidated and Combined Statements of Cash Flows for the six month
period ended June 30, 1996 and 1995.................................. 3
Notes to Consolidated and Combined Financial Statements............... 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 4
PART II--OTHER INFORMATION
Item 1. Legal Proceedings............................................... 7
Item 2. Changes in Securities........................................... *
Item 3. Defaults Upon Senior Securities................................. *
Item 4. Submission of Matters to a Vote of Security Holders............. 8
Item 5. Other Information............................................... 8
Item 6. Exhibits and Reports on Form 8-K................................ 8
</TABLE>
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*No response to this item is included herein for the reason that it is
inapplicable or the answer to such item is negative.
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS.
METROMAIL CORPORATION AND AFFILIATES
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------- ----------------
1996 1995 1996 1995
------- ------- ------- -------
(THOUSANDS OF DOLLARS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C> <C>
Direct marketing sales...................... $55,959 $44,862 $97,853 $83,722
Reference sales............................. 13,387 11,531 25,862 22,503
------- ------- ------- -------
Total net sales........................... 69,346 56,393 123,715 106,225
------- ------- ------- -------
Database and production costs............... 37,845 29,106 71,451 59,385
Amortization of goodwill.................... 1,890 1,861 3,779 3,651
Selling expense............................. 13,569 10,682 25,390 21,027
General and administrative expenses......... 6,765 3,831 11,674 7,729
Provision for doubtful accounts............. 564 468 983 893
------- ------- ------- -------
Earnings from operations.................. 8,713 10,445 10,438 13,540
Interest expense--related party............. 4,833 5,127 10,178 10,095
Interest expense............................ 271 10 331 10
Other expense (income)--net................. (40) (16) (45) (26)
------- ------- ------- -------
Earnings (loss) before income taxes....... 3,649 5,324 (26) 3,461
Income taxes................................ 2,165 2,860 1,377 2,730
------- ------- ------- -------
Net income (loss)......................... $ 1,484 $ 2,464 $(1,403) $ 731
======= ======= ======= =======
Net income per share...................... $0.07 $0.11 ($0.06) $0.03
======= ======= ======= =======
</TABLE>
See accompanying Notes to Consolidated and Combined Financial Statements.
1
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METROMAIL CORPORATION AND AFFILIATES
CONSOLIDATED AND COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
ASSETS ------------- -----------------
------ (THOUSANDS OF DOLLARS)
<S> <C> <C>
Cash and equivalents $ 14,339 $ --
Receivables, less sales allowances and
allowances for doubtful accounts of $4,514 in
1996 and $3,965 in 1995 69,138 68,438
Inventories 6,924 5,658
Prepaid expenses 5,529 7,449
Deferred income taxes 625 625
-------- --------
Total current assets 96,555 82,170
Net property, plant and equipment, at cost,
less accumulated depreciation of $47,473 in
1996 and $43,392 in 1995 41,024 37,545
Goodwill and other intangibles, net of
accumulated amortization of $75,475 in 1996
and $66,614 in 1995 254,385 252,526
Deferred income taxes 149 149
Other assets 7,666 6,331
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Total assets $399,779 $378,721
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Accounts payable $ 7,653 $ 5,742
Accrued compensation 6,774 6,073
Short-term debt 35 1,884
Short-term debt and payables--Due to related
parties -- 248,492
Deferred revenue 6,271 6,721
Other accrued liabilities 21,107 19,206
-------- --------
Total current liabilities 41,840 288,118
Other noncurrent liabilities 5,860 5,211
Shareholders' equity:
Capital stock 224 86
Additional paid-in capital 379,141 111,779
Retained deficit (includes cumulative
adjustment for currency translation of $353
in 1996 and $(237) in 1995) (27,286) (26,473)
-------- --------
Total shareholders' equity 352,079 85,392
-------- --------
Total liabilities and shareholders' equity $399,779 $378,721
======== ========
</TABLE>
See accompanying Notes to Consolidated and Combined Financial Statements.
2
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METROMAIL CORPORATION AND AFFILIATES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
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1996 1995
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(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income (loss) from operations..................... $ (1,403) $ 731
Depreciation and amortization of intangibles.......... 9,162 7,051
Amortization of goodwill.............................. 3,780 3,651
Other--net............................................ 98 --
Net change in assets and liabilities.................. 3,331 (2,771)
--------- ---------
Net cash provided by operating activities....... 14,968 8,662
Cash flows used for investing activities:
Capital expenditures.................................. (15,406) (12,354)
Other investments including acquisitions, net of cash. -- (15,330)
--------- ---------
Net cash used for investing activities.......... (15,406) (27,684)
Cash flows provided by (used for) financing activities:
Borrowings and advances from related parties.......... 129,210 160,832
Repayments of borrowings and advances from related
parties.............................................. (380,084) (141,810)
Decrease in short term borrowings..................... (1,849) --
Proceeds from initial public offering................. 267,500 --
--------- ---------
Net cash provided by financing activities....... 14,777 19,022
--------- ---------
Net Increase (decrease) in cash and equivalents......... 14,339 --
Cash and equivalents at beginning of year....... -- --
--------- ---------
Cash and equivalents at end of year............. $ 14,339 $ --
========= =========
The changes in assets and liabilities, net of balances
assumed through acquisitions were as follows:
Decrease (increase) in assets:
Receivables--net.................................... $ (700) $ 7,449
Inventories--net.................................... (1,266) (1,550)
Prepaid Expenses.................................... 1,920 (571)
Other assets........................................ (1,335) 525
Increase (decrease) in liabilities:
Accounts payable.................................... 1,911 (3,847)
Accrued compensation................................ 701 (2,075)
Deferred revenue.................................... (450) (984)
Other accrued liabilities........................... 1,901 (12)
Deferred income taxes............................... -- (1,708)
Other noncurrent liabilities........................ 649 2
--------- ---------
Net change in assets and liabilities............ $ 3,331 $ (2,771)
========= =========
</TABLE>
See accompanying Notes to Consolidated and Combined Financial Statements.
3
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METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS
NOTE 1. The consolidated and combined financial statements included herein
are unaudited and have been prepared by Metromail Corporation (the "Company")
to conform with the requirements applicable to this Quarterly Report on Form
10-Q. Certain information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted as permitted by such requirements. However, the Company
believes that the disclosures made are adequate to make the information
presented not misleading. These consolidated and combined financial statements
should be read in conjunction with the Company's Registration Statement on Form
S-1 (No. 333-2042) that became effective on June 13, 1996.
The consolidated and combined financial statements included herein reflect,
in the opinion of the Company, all adjustments (which include only normal,
recurring adjustments) necessary to present fairly the financial information
for such periods.
NOTE 2. On June 19, 1996, the Company completed an initial public offering of
13,800,000 shares of Common Stock (the "IPO"). Prior to the IPO, the Company
had been a wholly-owned subsidiary of R.R. Donnelley & Sons Company ("R.R.
Donnelley"). Approximately $247.4 million of the net proceeds of $267.4 million
from the IPO were used to repay the amounts owed by the Company to R.R.
Donnelley and the amounts owed by a subsidiary of the Company under a revolving
credit facility. As a result of the repayment, short-term debt and short-term
debt and advances-due to related party have been substantially eliminated from
the June 30, 1996 balance sheet. This reduction in debt is expected to
substantially reduce the Company's interest expense for the remainder of the
year.
As a result of the IPO, the amount of outstanding shares of common stock was
increased 13,834,000 shares to 22,434,000 shares (including 34,000 of
restricted shares granted to key executives) from 8,600,000 shares outstanding
prior to the IPO. Additional paid-in capital was increased to $379.1 million
primarily due to the proceeds from the IPO.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Three months ended June 30, 1996 compared to three months ended June 30, 1995
Total net sales increased 23.0% to $69.4 million for the second quarter of
1996 from $56.4 million for the second quarter of 1995. This $13.0 million
increase was comprised of a $11.1 million, or 24.7%, increase in direct
marketing sales and a $1.9 million, or 16.1%, increase in reference sales.
Approximately one half of the direct marketing sales growth resulted from the
increase in International Communication & Data PLC ("ICD") sales (acquired in
May 1995). Marketing database sales grew $2.4 million due to continuing strong
demand for the AnalytiX product. The growth in reference services was due to a
25.1% increase in MetroNet and National Directory Assistance ("NDA") on-line
services, while directory publishing services grew 11.3%.
Database and production costs primarily represent expenses incurred to
maintain the Company's database and customize data for client use, including
salaries and wages, amortization of capitalized data costs, facility costs and
depreciation of equipment. Database and production costs increased for the
three months ended June 30, 1996 to $37.8 million, or 54.6% as a percentage of
total net sales, from $29.1 million for the three months ended June 30, 1995,
or 51.6% as a percentage of total net sales, primarily due to investment for
growth in the NDA service, addition of ICD expenses, increased expenses related
to an upgrade of computer capacity added in the second half of 1995 and
increased survey data amortization expense.
Selling expenses increased $2.9 million, or 27.0%, from the three month
period ended June 30, 1995 and as a percentage of total net sales to 19.6% from
18.9% in the prior year period. The increase in selling expenses as a
percentage of total net sales resulted primarily from the acquisition of ICD
and the inclusion of their selling
4
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expenses related to the completion and sale of compiled data responses to
their annual survey. The increase in the amount of selling expenses from 1995
to 1996 was due to the inclusion of ICD and increased selling expenses related
to increased volume across the Company.
General and administrative expenses grew $2.9 million, or 76.6%, from the
three months ended June 30, 1995 and increased as a percentage of total net
sales from 6.8% to 9.7% for the three months ended June 30, 1996. The increase
in these expenses resulted primarily from the acquisition of ICD along with
increased staff costs.
Provision for doubtful accounts increased from the second quarter of 1995,
commensurate with the growth in total net sales and remained constant as a
percentage of net sales at 0.8%.
Earnings from operations of $8.7 million decreased $1.7 million for the
three months ended June 30, 1996 from $10.4 million for the three months ended
June 30, 1995 due to the foregoing factors. Also, the Company's operating
earnings for the second quarter 1995 benefited in an amount estimated at $2.0
million from the deferral of expenses from the second quarter of 1995 to the
second half of 1995.
Interest expense--related party, primarily paid to a subsidiary of R.R.
Donnelley, decreased from the second quarter of 1996 by $0.3 million due to
the elimination of the debt subsequent to completion of the IPO. Interest
expense is expected to be substantially reduced for the remainder of the year.
The Company's tax expense decreased $0.7 million compared to the second
quarter of 1995 due to the reduction in earnings before income taxes. The
effective tax rate exceeds the U.S. federal statutory rate primarily due to
the effect of non-deductible goodwill amortization.
Net income decreased $1.0 million to $1.5 million for the three months ended
June 30, 1996 as a result of the foregoing factors.
Six months ended June 30, 1996 compared to six months ended June 30, 1995
Total net sales increased 16.5% to $123.7 million for the six months ended
June 30, 1996 from $106.2 million for the six months ended June 30, 1995. This
$17.5 million increase resulted from a $14.1 million, or 16.9%, increase in
direct marketing sales and a $3.4 million, or 14.9%, increase in reference
sales. Direct marketing sales growth was due to the increase in ICD sales of
$7.1 million, an increase in marketing database sales of $3.3 million due to
strong demand for the AnalytiX product and more modest increases across all
other areas. Reference sales growth was primarily due to a 29.4% increase in
the Company's MetroNet and NDA on-line services.
Database and production costs increased from $59.4 million for the six
months ended June 30, 1995, or 55.9% as a percentage of total net sales, to
$71.4 million, or 57.8% as a percentage of total net sales, for the six months
ended June 30, 1996. This growth was due to increased expenses related to the
start up of the NDA services of $2.6 million, increased ICD expenses of $2.1
million, increased U.S. survey expenses and expenses related to the upgrade of
computer capacity. The growth in database and production costs as a percentage
of sales is primarily due to the expenses related to the NDA service, first
introduced in 1995.
Amortization of goodwill increased 3.5% to $3.8 million for the six months
ended June 30, 1996. This increase reflected the increased goodwill related to
the acquisition of ICD.
Selling expenses increased $4.4 million, or 20.8%, from the first six months
of 1995 and as a percentage of total net sales to 20.5% for the first six
months of 1996 from 19.8% for the first six months of 1995. The increase in
selling expenses as a percentage of total net sales resulted primarily from
the acquisition of ICD and increased costs due to sales increases in the
marketing database software and survey operations, where selling expenses as a
percentage of total net sales is higher than for the Company's other
operations.
5
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General and administrative expenses grew $3.9 million, or 51.1%, from the
first six months of 1996, and increased as a percentage of total net sales from
7.3% to 9.4% for the six months ended June 30, 1996. The increase in these
expenses resulted primarily from the acquisition of ICD and increased staff
costs.
Earnings from operations of $10.4 million decreased $3.1 million for the six
months ended June 30, 1996 from $13.5 million for the six months ended June 30,
1995 due to the foregoing factors. Also, the Company's operating earnings for
the first half of 1995 benefited in an amount estimated at $2.0 million from
the deferral of expenses from the second quarter 1995 to the second half of
1995.
Interest expense--related party, primarily paid to a subsidiary of R.R.
Donnelley, increased $0.1 million due to higher average debt levels for the
first six months of 1996. The higher debt levels were required to acquire ICD
and to fund short-term working capital needs. Approximately $247.4 million of
the net proceeds of $267.4 million from the IPO were used to reduce the
Company's debt. Interest expense is expected to be substantially reduced for
the remainder of the year.
The Company's tax expense decreased $1.4 million compared to the six months
ended June 30, 1995 due to the reduction in earnings before income taxes. The
effective tax rate exceeds the U.S. federal statutory rate primarily due to the
effect of non-deductible goodwill amortization.
Net income decreased $2.1 million to a loss of $1.4 million for the six
months ended June 30, 1996 as a result of the foregoing factors.
CHANGES IN FINANCIAL CONDITION
For the first six months, operating cash flow (net income (loss) plus
depreciation and amortization of $11.5 million) was up $0.1 million or 1.0%
from the prior year period. The Company believes that cash flows from
operations will be sufficient to fund its ongoing operations on a long-term
basis and continued growth and investment. The Company expects the credit
agreement described below to be available for seasonal cash needs and
acquisitions.
Capital expenditures for the first months totaled $15.4 million, an increase
of $3.0 million over the first six months of 1995. Capital expenditures for the
full year are expected to be approximately $30 million.
The Company has entered into a credit agreement with a syndicate of banks
(the "Credit Agreement") under which it will be entitled to borrow up to $45
million on a revolving credit basis. Borrowings under the Credit Agreement will
mature in five years and will bear interest (i) at the prime rate announced by
the bank acting as agent for the syndicate, (ii) at the LIBOR rate plus,
depending on the Company's leverage ratio and fixed charge coverage ratio, up
to 42.5 basis points per annum, or (iii) at a rate determined by competitive
bidding. At June 30, 1996, there were no borrowings outstanding under the
credit agreement.
OUTLOOK
Historically, the Company's net sales build quarterly through the year, with
the majority of net sales being achieved in the second half of a given year. In
1993, 1994 and 1995, total net sales of the Company during the second half of
the year constituted 56.2%, 56.3% and 55.3%, respectively, of total net sales
for the year.
Many of the Company's expenses are incurred ratably throughout the year and,
when combined with the quarterly revenue pattern discussed above, result
historically in fluctuations in earnings from operations. Earnings from
operations are strongest in the second half of the year. Earnings from
operations in the second half of 1993, 1994 and 1995 constituted 80.7%, 70.4%
and 55.6%, respectively, of total earnings from operations for the year. Had
certain expense deferral actions discussed above in this Item 2 not been taken
in the second quarter of 1995 (to the detriment of operating earnings for the
second half of 1995) the Company estimates that the percentage of earnings from
operations for the second half of 1995 would have been 62.1% of the full year's
earnings from operations.
6
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Management expects the historical patterns of larger second half portions of
the year's sales and operating earnings to occur again in 1996. In addition,
compared to the first half of 1996 and to the last half of 1995, management
expects significantly lower interest expense, the result of the debt repayment
in June using the net proceeds received from the IPO.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In 1993, the Company purchased the assets of Computerized Marketing
Technologies, Inc. and affiliated companies ("CMT") relating to a database
created through the use of questionnaires distributed to consumers. Following
this purchase, the Company continued CMT's practice of contracting with
Computerized Image & Data Systems, Inc. ("CIDS") for CIDS to provide data
input services with respect to completed surveys. CIDS had been subcontracting
a portion of these services to a correctional facility maintained by the State
of Texas. This facility was a major supplier of data input services to the
State of Texas, including services with respect to voter registration and
drivers' license records, and according to CIDS, was selected as a
subcontractor, in part, because of the procedures followed by the facility to
safeguard the information made available to the prisoners. In June 1994, the
Company became aware of a report that a woman in Ohio, who apparently had
completed a Company survey, had received a letter purporting to contain
sexually explicit language from a convicted rapist held in the facility that
provided data input services. Immediately after becoming aware of this report,
the Company requested the third party to terminate its subcontract with the
facility. On April 18, 1996, a complaint was filed in the District Court of
Travis County, Texas (Beverly J. Dennis v. Metromail Corporation et al., Cause
No. 96-04451) against the Company, R.R. Donnelley, CIDS, the Texas Department
of Criminal Justice, the executive director of the Texas Department of
Criminal Justice and the chairman of the Texas Board of Criminal Justice by
the woman who allegedly had received the letter. The complaint alleges the
following causes of action against the Company and R.R. Donnelley and certain
of the other defendants: (1) defendants' conduct represented an intentional or
reckless disregard of plaintiffs' safety; (2) the conduct of the Company, R.R.
Donnelley and CIDS in inducing plaintiffs to provide information without
disclosing to plaintiffs that such information would be provided to convicted
felons constituted fraud; (3) defendants have been unjustly enriched by their
actions; (4) defendants' conduct resulted in the invasion of plaintiffs'
privacy; (5) defendants' conduct resulted in the infliction of severe
emotional distress upon plaintiffs; and (6) defendants were grossly negligent
in entrusting plaintiffs' information to convicted felons. In addition, the
complaint alleged two causes of action solely against the Texas Department of
Criminal Justice and the two state officials. The complaint seeks restitution,
actual and exemplary damages in an unspecified amount and injunctive relief on
behalf of the named plaintiff and a purported class consisting of all persons
who completed Company surveys and whose completed surveys were processed by
inmates in the Texas prison system from January 1, 1993 to the present time.
The Company is not yet able to determine the number of persons comprising the
purported class but believes the number of persons who completed surveys in
this period and whose surveys were processed by such inmates could exceed 1.3
million. The Company intends to defend vigorously this suit. The Company had
removed the case to the United States District Court for the Western District
of Texas but the case was subsequently remanded to state court. The Company
has filed a motion to dismiss all counts against it. If the motion is not
granted, the Company intends to challenge certification of the class, and the
Company believes that if such challenge is successful, this litigation would
not have a material adverse effect on the Company. However, because this
litigation is in its early stages, it is not possible to make a meaningful
determination of the ultimate outcome or to make an estimate of the loss, if
any, should the outcome be unfavorable. The Company has made a preliminary
estimate that its costs of litigating the case will be $1.5 million. The
Company's insurer has agreed to assume the defense of this case, subject to a
reservation of rights to deny coverage. In the event the Company's insurer
were to successfully deny coverage, R.R. Donnelley has agreed to pay the legal
fees and expenses incurred by the Company in defending this case, but the
Company would be responsible for any other amounts payable by it as a result
of this case. Because of such agreements to pay such fees and expenses, such
legal fees and expenses will not affect the Company's cash flows; however, if
R.R. Donnelley were to pay such fees and expenses, applicable accounting
principles would require the Company to recognize such fees and expenses as
incurred and apply all payments by R.R. Donnelley in respect of such fees and
expenses to additional paid-in capital. No assurances can be given that the
costs of litigating this case will not exceed $1.5 million or that this
litigation will not result in a material adverse effect on the Company's
business, operating results or financial condition.
7
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Prior to the IPO, the Company had been a wholly-owned subsidiary of R.R.
Donnelley. During the second quarter of 1996, two special meetings of R.R.
Donnelley, as sole stockholder of the Company, were held. At a special meeting
held April 23, 1996, R.R. Donnelley approved the Amended and Restated
Metromail Corporation 1996 Stock Incentive Plan. At a special meeting held
June 7, 1996, R.R. Donnelley approved the Metromail Corporation 1996 Broad-
Based Employee Stock Plan.
ITEM 5. OTHER INFORMATION.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: Certain statements in this filing and elsewhere (such as in other
filings by the Company with the Securities and Exchange Commission, press
releases, presentations by the Company or its management and oral statements)
may constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties, and other factors which may
cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors are
discussed in the Company's Registration Statement (No. 333-2042) under "Risk
Factors," and include, among other things, the possible emergence of
governmental legislation or regulation or industry guidelines concerning
certain aspects of the Company's business; the ability of the Company to
retain its customers who generally do not operate under long-term contracts
with the Company; the potential unpredictability of the Company's net sales
due to seasonal and other factors which can lead to fluctuations in quarterly
and annual operating results, especially because many expenses are incurred by
the Company ratably throughout the year; the ability of the Company to keep
pace with technological advancements in its industry; the efforts of certain
individuals against the Company; the risk of damage to the Company's data
centers or interruptions in the Company's telecommunications links; changes in
postal rates and paper prices; competition within the Company's industry; and
market and general economic factors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<C> <S>
3.1 Third Restated Certificate of Incorporation of the Company.(1)
3.2 By-laws of the Company.(1)
10.1 Form of Transition Services Agreement between the Company and
R.R. Donnelley.(1)
10.2 Form of Sales Agreement between the Company and R.R.
Donnelley.(1)
10.3 Form of Benefit Administration Services Agreement between the
Company and R. R. Donnelley.(1)
10.4 Form of Data Center Services Agreement between the Company and
R.R. Donnelley.(1)
10.5 Form of Tax Allocation and Indemnification Agreement between the
Company and R. R. Donnelley.(1)
10.6 Employment Agreement between the Company and Barton L.
Faber.(1)(2)
10.7 Employment Agreement between the Company and Susan L.
Henricks.(1)(2)
10.8 Retirement, Consulting and Release Agreement dated as of July
26, 1995 among R.R. Donnelley, the Company and James D.
McQuaid.(1)
10.9 Employment Agreement dated June 16, 1994 between Customer
Insight Company and Tery R. Larrew.(1)(2)
10.10 Amended and Restated 1996 Stock Incentive Plan.(1)(2)
10.11 1996 Broad-Based Employee Stock Plan.(1)(2)
10.12 Form of Credit Agreement among the Company and certain
Subsidiaries, as Borrower, the Banks named therein and the First
National Bank of Chicago, as Administrative Agent.(1)
11 Computation of Earnings per Share of Common Stock.
27 Financial Data Schedule.
</TABLE>
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(1) Incorporated herein by reference to the Company's Registration Statement
on Form S-1 (No. 333-2042), declared effective on June 13, 1996.
(2)Indicates a management contract or compensatory plan or agreement.
(b) No Current Report on Form 8-K was filed by the Company during the second
quarter of 1996.
8
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SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
Metromail Corporation
/s/ Kenneth A. Glowacki
By __________________________________
Kenneth A. Glowacki
Vice President, Finance
(Authorized Officer and
Chief Accounting Officer)
Date: August 14, 1996
9
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EXHIBIT INDEX
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EXHIBIT
NUMBER DOCUMENT DESCRIPTION PAGE
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<C> <S> <C>
3.1 Third Restated Certificate of Incorporation of the
Company.(1)
3.2 By-laws of the Company.(1)
10.1 Form of Transition Services Agreement between the Company and
R.R. Donnelley.(1)
10.2 Form of Sales Agreement between the Company and R.R.
Donnelley.(1)
10.3 Form of Benefit Administration Services Agreement between the
Company and R.R. Donnelley.(1)
10.4 Form of Data Center Services Agreement between the Company
and R.R. Donnelley.(1)
10.5 Form of Tax Allocation and Indemnification Agreement between
the Company and R.R. Donnelley.(1)
10.6 Employment Agreement between the Company and Barton L.
Faber.(1)(2)
10.7 Employment Agreement between the Company and Susan L.
Henricks.(1)(2)
10.8 Retirement, Consulting and Release Agreement dated as of July
26, 1995 among R.R. Donnelley, the Company and James D.
McQuaid.(1)
10.9 Employment Agreement dated June 16, 1994 between Customer
Insight Company and Tery R. Larrew.(1)(2)
10.10 Amended and Restated 1996 Stock Incentive Plan.(1)(2)
10.11 1996 Broad-Based Employee Stock Plan.(1)(2)
10.12 Form of Credit Agreement among the Company and certain
Subsidiaries, as Borrower, the Banks named therein and the
First National Bank of Chicago, as Administrative Agent.(1)
11 Computation of Earnings per Share of Common Stock............ 11
27 Financial Data Schedule...................................... 12
</TABLE>
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(1) Incorporated herein by reference to the Company's Registration Statement
on Form S-1 (No. 333-2042), declared effective on June 13, 1996.
(2) Indicates management contract or compensatory plan or arrangement.
<PAGE>
EXHIBIT 11
METROMAIL CORPORATION AND AFFILIATES
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK
AND COMMON STOCK EQUIVALENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------- ----------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Income.................................... $ 1,484 $ 2,464 $(1,403) $ 731
Average number of shares of Common Stock
outstanding.................................. 22,400 22,400 22,400 22,400
Restricted Common Shares...................... 34 34 34 34
------- ------- ------- -------
Total..................................... 22,434 22,434 22,434 22,434
======= ======= ======= =======
------- ------- ------- -------
Net Income per share.......................... $ 0.07 $ 0.11 $ (0.06) $ 0.03
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Form 10-Q quarterly report for the quarter ended June 30, 1996, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1993 DEC-31-1994 DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1993 JAN-01-1994 JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1993 DEC-31-1994 DEC-31-1995 JUN-30-1996
<CASH> 0 0 0 14,339
<SECURITIES> 0 0 0 0
<RECEIVABLES> 0 59,926 72,403 73,652
<ALLOWANCES> 0 (3,586) (3,965) (4,514)
<INVENTORY> 0 4,414 5,658 6,924
<CURRENT-ASSETS> 0 64,843 82,170 96,555
<PP&E> 0 72,159 80,937 88,497
<DEPRECIATION> 0 (39,565) (43,392) (47,473)
<TOTAL-ASSETS> 0 328,768 378,721 399,779
<CURRENT-LIABILITIES> 0 81,966 288,118 41,840
<BONDS> 0 0 379 379
<COMMON> 0 86 86 224
0 0 0 0
0 0 0 0
<OTHER-SE> 0 78,873 85,392 352,079
<TOTAL-LIABILITY-AND-EQUITY> 0 328,768 378,721 399,779
<SALES> 0 0 0 0
<TOTAL-REVENUES> 163,715 195,471 237,187 123,715
<CGS> 0 0 0 0
<TOTAL-COSTS> 143,067 166,929 204,365 112,294
<OTHER-EXPENSES> (138) 24 (87) (45)
<LOSS-PROVISION> 1,959 1,848 2,180 983
<INTEREST-EXPENSE> 22,112 18,999 21,409 10,509
<INCOME-PRETAX> (3,285) 7,671 9,320 (26)
<INCOME-TAX> 1,181 5,684 6,585 1,377
<INCOME-CONTINUING> 0 0 0 0
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 4,388 0 0 0
<NET-INCOME> (8,854) 1,987 2,735 (1,403)
<EPS-PRIMARY> (1.03) 0.23 0.32 (0.06)
<EPS-DILUTED> (1.03) 0.23 0.32 (0.06)
</TABLE>
