-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CN40jyZ1jSy886FFbS1Ptps41yYZuXNDkq3c7yD+q41KTogFjlpBNdoWjSq1gyhN BIJLMN+GStV1TO3hKSRxyw== 0000733269-96-000007.txt : 19960715 0000733269-96-000007.hdr.sgml : 19960715 ACCESSION NUMBER: 0000733269-96-000007 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960430 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960712 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACXIOM CORP CENTRAL INDEX KEY: 0000733269 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 710581897 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-13163 FILM NUMBER: 96593896 BUSINESS ADDRESS: STREET 1: 301 INDUSTRIAL BLVD CITY: CONWAY STATE: AR ZIP: 72032 BUSINESS PHONE: 5013361000 MAIL ADDRESS: STREET 1: 301 INDUSTRIAL BOULEVARD CITY: CONWAY STATE: AK ZIP: 72032 FORMER COMPANY: FORMER CONFORMED NAME: CCX NETWORK INC DATE OF NAME CHANGE: 19880816 8-K/A 1 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- FORM 8-K/A ----------------------- ACXIOM CORPORATION (Exact name of registrant as specified in its charter) AMENDMENT NO. 1 The undersigned Registrant hereby amends Item 7 of its Current Report on Form 8-K dated April 30, 1996 by filing Exhibits 23, 99.1, 99.2 and 99.3 to that Current Report. Item 7, as amended, appears below in its entirety: 1. Item 7. Financial Statements and Exhibits. (a) Financial statements of business acquired. Audited financial statements of Direct Media/DMI, Inc. are filed as Exhibit 99.1 hereto and are incorporated herein by reference. Unaudited interim financial statements are filed as Exhibit 99.2 (b) Pro forma financial information. The pro forma financial information required by this Item is filed as Exhibit 99.3 hereto and is incorporated herein by reference. (c) Exhibits. *2 Asset Purchase Agreement dated April 1, 1996. Registrant agrees to furnish supplementally to the Securities and Exchange Commission a copy of the exhibits to the Asset Purchase Agreement upon request. 23 Consents of Price Waterhouse LLP 99.1 Audited financial statements of Direct Media/ DMI, Inc. 99.2 Unaudited interim financial statements of Direct Media/DMI, Inc. 99.3 Pro forma financial information -------------------------------- * Previously filed. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned hereunto duly authorized. ACXIOM CORPORATION (Registrant) By: /s/ Catherine L. Hughes ---------------------------------------- Catherine L. Hughes Secretary and General Counsel Date: July 11, 1996 EXHIBIT INDEX Exhibits to Form 8-K Number in Exhibit Table Exhibit *2 Asset Purchase Agreement dated April 1, 1996. Registrant agrees to furnish supplementally to the Securities and Exchange Commission a copy of the exhibits to the Asset Purchase Agreement upon request. 23 Consents of Price Waterhouse LLP 99.1 Audited financial statements of Direct Media/ DMI, Inc. 99.2 Unaudited interim financial statements of Direct Media/DMI, Inc. 99.3 Pro forma financial information - ---------------------------------- * Previously filed. EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 33-63431) of Acxiom Corporation of our report dated January 3, 1996 relating to the consolidated financial statements of Direct Media/DMI, Inc., which appears in the Current Report on Form 8-K/A of Acxiom Corporation dated July 11, 1996. /s/ Price Waterhouse LLP Stamford, Connecticut July 11, 1996 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statements on Form S-8 (No. 33-17115, No. 33-37609, No. 33-37610, No. 33-42351, No. 33-72310, No. 33-72312, No. 33-63423, and No. 33-03391) of Acxiom Corporation of our report dated January 3, 1996 relating to the consolidated financial statements of Direct Media/DMI, Inc., which appears in the Current Report on Form 8-K/A of Acxiom Corporation dated July 11, 1996. /s/ Price Waterhouse LLP Stamford, Connecticut July 11, 1996 EXHIBIT 99.1 DIRECT MEDIA/DMI, INC. Consolidated Financial Statements September 2, 1995 and September 3, 1994 DIRECT MEDIA/DMI, INC. Table of Contents to Consolidated Financial Statements Page Report of Independent Accountants 1 Consolidated Balance Sheet 2 Consolidated Statement of Income and Retained Earnings 3 Consolidated Statement of Cash Flows 4 Notes to Consolidated Financial Statements 5-8 Report of Independent Accountants January 3, 1996 To the Board of Directors and Stockholders of Direct Media/DMI, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income and retained earnings and of cash flow, present fairly, in all material respects, the financial position of Direct Media/DMI, Inc. and its consolidated affiliates at September 2, 1995 and September 3, 1994, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ Price Waterhouse LLP Price Waterhouse LLP DIRECT MEDIA/DMI, INC. Consolidated Balance Sheet Assets September 2, September 3, 1995 1994 Current assets: Cash and cash equivalents $ 1,297,137 $ 1,211,825 Accounts receivable from mailers, less allowance for doubtful accounts of $334,885 and $316,273, respectively 11,279,862 11,733,979 Prepaid expenses and other current assets 553,498 679,576 ---------- ---------- Total current assets 13,130,497 13,625,380 ---------- ---------- Noncurrent assets: Fixed assets, net 8,679,010 8,930,631 Deferred financing costs 231,114 241,443 ---------- ---------- Total noncurrent assets 8,910,124 9,172,074 ---------- ---------- Total assets $ 22,040,621 $ 22,797,454 ========== ========== Liabilities and stockholders' equity Current liabilities: Amounts due to list owners $ 1,404,651 $ 2,515,207 Accrued liabilities 7,808,863 9,213,274 Notes payable to bank - current portion 4,900,257 656,000 Obligation under lease agreement 111,902 88,685 Deferred revenues 73,740 104,096 Deferred compensation 699,200 - ---------- ---------- Total current liabilities 14,998,613 12,577,262 ---------- ---------- Noncurrent liabilities: Notes payable to bank - 4,643,920 Obligation under lease agreement 560,708 689,721 Deferred compensation 4,886,809 - Other - 9,975 ---------- ---------- Total noncurrent liabilities 5,447,517 5,343,616 ---------- ---------- Stockholders' equity: Capital stock, $1 par value; authorized - 5,000 shares; issued - 1,000 shares; outstanding - 986 shares in 1995 and 460 shares in 1994 986 460 Capital in excess of par value 1,851,084 10,610 Retained earnings (accumulated deficit) (236,579) 5,675,506 ---------- ---------- 1,615,491 5,686,576 Less - Treasury stock at cost - 14 shares in 1995 and 540 shares in 1994 (21,000) (810,000) ---------- ---------- Total stockholders' equity 1,594,491 4,876,576 ---------- ---------- Total liabilities and stockholders' equity $ 22,040,621 $ 22,797,454 ========== ========== See accompanying notes to the financial statements. DIRECT MEDIA/DMI, INC. Consolidated Statement of Income and Retained Earnings For the year ended September 2, September 3, 1995 1994 Revenues: List brokerage and management revenues $ 39,465,537 $ 34,151,456 Other income 351,697 267,678 ---------- ---------- Total revenues 39,817,234 34,419,134 ---------- ---------- Expenses: Selling expenses 17,776,009 14,856,026 General and administrative expenses 18,122,730 16,479,533 Compensation expense (Note 10) 8,216,009 - Depreciation and amortization 1,358,368 1,092,004 Interest expense, net 256,203 423,039 ---------- ---------- Total expenses 45,729,319 32,850,602 ---------- ---------- Net (loss) income (5,912,085) 1,568,532 Retained earnings at beginning of year 5,675,506 4,106,974 ---------- ---------- Retained earnings (accumulated deficit) at end of year $ (236,579) $ 5,675,506 ========= ========== See accompanying notes to the financial statements. DIRECT MEDIA/DMI, INC. Consolidated Statement of Cash Flows For the year ended September 2, September 3, 1995 1994 Cash flows from operating activities:- Net income $ (5,912,085) $ 1,568,532 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,358,368 1,092,004 Gain on sale of assets (41,985) Accretion of obligation under lease agreement 81,208 78,713 (Increase) decrease in operating assets: Accounts receivable from mailers 454,117 (2,686,366) Prepaid expenses and other current assets 124,244 (78,737) Other assets 116,902 Amounts due to list owners (1,110,556) (14,314) Increase (decrease) in operating liabilities: Accrued liabilities (1,414,386) 3,172,572 Deferred revenues (30,356) (39,745) Deferred compensation 8,216,009 - ---------- ---------- Total adjustments 7,678,648 1,599,044 ---------- ---------- Net cash provided by operating activities 1,766,563 3,167,576 ---------- ---------- Cash flows from investing activities: Purchase of fixed assets (1,094,584) (1,991,469) Proceeds from sale of fixed assets - 61,953 ---------- ---------- Net cash used for investing activities (1,094,584) (1,929,516) ---------- ---------- Cash flows from financing activities: Repayment of notes payable (399,663) (200,332) Payment of obligation under lease agreement, net of sublease income (187,004) (276,177) ---------- ---------- Net cash used for financing activities (586,667) (476,509) ---------- ---------- Net increase in cash and cash equivalents 85,312 761,551 Cash and cash equivalents at beginning of year 1,211,825 450,274 ---------- ---------- Cash and cash equivalents at end of year $ 1,297,137 $ 1,211,825 ========== ========== Cash paid during the year for: Interest $ 523,746 $ 475,230 ========== ========== See accompanying notes to the financial statements. DIRECT MEDIA/DMI, INC. Notes to Consolidated Financial Statements NOTE 1 - DESCRIPTION OF THE COMPANY: Direct Media/DMI, Inc. (the "Company"), a New York corporation, is engaged in mailing list management and list brokerage. The Company's fiscal year ends on the Saturday closest to August 31 for financial statement reporting purposes. As further described below, the Company's tax year ends on the Friday closest to November 30. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of significant accounting policies followed by the Company: Basis of presentation: The accompanying consolidated financial statements include the accounts of the Company; SPD Associates, an 84% owned real estate partnership which owns the facilities in Greenwich, Connecticut occupied by the Company, Direct Media, Canada, Inc., a joint venture controlled by the Company and another joint venture, Direct Media (UK) Limited. All material transactions among the consolidated entities have been eliminated in the preparation of the consolidated financial statements. Revenue recognition: The Company's share of revenues from list brokerage and list management services is recognized upon delivery by the Company of the owner's mailing list to the mailer's data processing service center. Provision is made for estimated revenue adjustments resulting from mailing list data integrity checks and other data processing steps performed by the mailer's service center. Accounts receivable from mailers: Accounts receivable from mailers represents the outstanding balance of the Company's share of revenues based on gross billings to third party mailers. Should the mailer fail to remit to the Company all or a portion of the billings earned by the list owner (see Note 6), the Company has no contractual obligation to remit such uncollected funds to the list owner. Fixed assets: Fixed assets are recorded at cost, less accumulated depreciation. Depreciation of furniture and fixtures, buildings, autos and computer equipment is provided based on tax accelerated methods over the estimated useful lives of 5 to 31.5 years. See accompanying notes to the financial statements. Cash and cash equivalents: The Company considers all highly liquid investments having original maturities of three months or less to be cash equivalents. Tax elections: The Company has elected, under Internal Revenue Code Section 1362(a), to be taxed as an S corporation whereby income is taxed directly to the stockholders. The Company has also elected to be taxed as an S corporation in New York State pursuant to Section 660 of Article 22 of the New York State tax law. The Company is taxed as a regular corporation in Connecticut. NOTE 3 - FIXED ASSETS: A summary of the Company's fixed assets at September 2, 1995 and September 3, 1994 is as follows: 1995 1994 ---- ---- Land $ 1,917,724 $ 1,917,724 Buildings and improvements 6,762,868 6,724,267 Furniture and fixtures 651,478 539,118 Office equipment 3,110,546 2,229,273 Autos and other 745,344 680,632 ---------- ---------- 13,187,960 12,091,014 Less - Accumulated depreciation (4,508,950) (3,160,383) ---- ---------- ---------- $ 8,679,010 $ 8,930,631 ========== ========== NOTE 4 - NOTES PAYABLE: At September 2, 1995 and September 3, 1994, the Company had $4,900,257 and $5,299,920, respectively, of borrowings outstanding under the terms of a Note Agreement with a commercial bank at an interest rate of 10.25% and 8.75%, respectively, secured by the Company's Greenwich facilities. The Company is currently negotiating the terms of the outstanding debt. As no agreement is presently in place, the total outstanding balance of $4,900,257 has been classified as current in the consolidated balance sheet. At September 2, 1995, the Company had available lines of credit of $4,000,000. No funds have been withdrawn from the available line of credit. NOTE 5 - OBLIGATION UNDER LEASE AGREEMENT: The Company is obligated under a long-term lease agreement expiring in fiscal 2004 for rentals on its former headquarters facility in Port Chester, New York. The present value of the future minimum lease payments, net of sublease income, in the amount of $672,610 and $778,406 is reflected in the accompanying financial statements as of September 2, 1995 and September 3, 1994, respectively. The Company has no other material lease commitments. NOTE 6 - ACCOUNTS RECEIVABLE FROM MAILERS: The Company, acting in the capacity of agent for its list owner clientele, has offset in the accompanying consolidated balance sheet the portion of the gross receivable due from third party mailers with the corresponding amount due to the list owners upon collection. The liability shown as "amounts due to list owners" in the balance sheet at September 2, 1995 and September 3, 1994 represents amounts collected by the Company on behalf of list owners and in the process of remittance. The gross amounts of accounts receivable from mailers and amounts due to list owners which have been offset are as follows: 1995 1994 Accounts receivable from mailers $ 63,594,577 $ 59,818,450 Amounts due to list owners (54,097,830) (50,378,198) Unbilled revenues 2,118,000 2,610,000 Allowance for doubtful accounts (334,885) (316,273) ---------- ---------- Accounts receivable from mailers, net $ 11,279,862 $ 11,733,979 ========== ========== Unbilled revenues at September 2, 1995 and September 3, 1994 represent mailing lists delivered to the Company's customers as of year-end which were not yet billed. NOTE 7 - INVESTMENT IN UNCONSOLIDATED AFFILIATE: During 1994, the Company had a 50% equity interest in Direct Media (UK) Limited, a list brokerage firm based in London, England. The Company had historically accounted for its investment under the equity method. During 1994, the Company decided to discontinue its relationship with Direct Media (UK) Limited. The discontinuance was finalized in fiscal 1995 and the effects of the discontinuance were not material to the results or operations of the Company. NOTE 8 - BENEFIT PLAN: The Company has a defined contribution profit sharing plan which allows for a maximum contribution of 15% of all eligible employees' salaries. Contributions to the plan totaled $485,000 for the years ended September 2, 1995 and September 3, 1994. NOTE 9 - RELATED PARTY TRANSACTIONS: Included in gross accounts receivable from mailers, as disclosed in Note 6, is $1,178,117 and $846,560 as of September 2, 1995 and September 3, 1994, respectively, due from a list brokerage company controlled by a stockholder of the Company. Management believes such amount is fully collectible. NOTE 10 - SHAREHOLDER AGREEMENTS: During 1995, the Company entered into Shareholder Agreements (the "Agreements") with all shareholders who are also employees of the Company. The Agreements cover 956 of the 986 outstanding common shares of the Company as of September 2, 1995, including 526 shares issued from treasury during 1995, at no cost to the employees. Under the Agreements, the Company, at its sole discretion, will repurchase the shares at $16,500 per share upon the occurrence of a purchasing event as defined in the Agreements. The purchase price for the shares is subject to annual adjustment by the Company's Board of Directors. Should the Company decide to purchase the shares, the shareholder will be entitled to receive the proceeds in five equal annual installments plus interest. The shares vest upon the earlier of attainment of age 62 or 20 years (in certain cases 25 years) of service to the Company. The total amount under the Agreements to be charged to operations over the vesting period as compensation expense is $13,624,000, of which $8,216,009 was charged in fiscal 1995 and the balance of $5,407,991 will be charged in the periods shown in the table below. Ultimately, the total compensation charge of $13,624,000 will appear in the company's balance sheet as a liability for deferred compensation in the amount of $10,994,000 and a credit to capital for $2,630,000. The remaining compensation charge to be recorded in each of the following five years, and thereafter, is as follows: Fiscal year Amount 1996 $ 1,621,886 1997 738,232 1998 311,982 1999 311,982 2000 311,982 Thereafter 2,111,927 -------------- Total $ 5,407,991 ============== EXHIBIT 99.2 Direct Media/DMI, Inc. Unaudited Consolidated Balance Sheet December 31, 1995 Assets Current assets Cash & cash equivalents $ - Accounts receivable from mailers, net 13,871,615 Prepaid expenses and other current assets 443,556 ---------- Total current assets 14,315,171 Noncurrent assets Fixed assets, net 8,743,881 Other assets 225,949 ---------- Total noncurrent assets 8,969,830 ---------- Total assets 23,285,001 ========== Liabilities and stockholders' equity Current liabilities Amounts due to list owners 1,623,310 Accrued liabilities 2,977,679 Short-term note payable bank 8,178,109 Notes payable to bank - current portion 4,766,925 Obligation under lease 111,902 ---------- 17,657,925 Noncurrent liabilities Obligation under lease agreement 560,708 Deferred compensation 5,819,076 ---------- 6,379,784 Stockholders' equity Capital Stock, $1 par value; authorized - 5,000 shares issued - 1,000 shares; outstanding - 986 shares 986 Capital in excess of par value 1,851,084 Retained earnings (2,583,778) ---------- (731,708) Less - Treasury stock at cost - 14 shares (21,000) ---------- Total stockholders' equity (752,708) ---------- ---------- Total liabilities and stockholders' equity $ 23,285,001 ========== Direct Media/DMI, Inc. Unaudited Consolidated Statements of Income For the four months ended December 31, 1995 1994 ---- ---- Revenues List brokerage and management revenues $ 13,737,619 14,237,786 Other income 882,410 359,342 ----------------------------- Total revenues 14,620,029 14,597,128 Expenses Selling expenses 7,324,581 3,982,884 General and administrative expenses 8,662,542 4,810,271 Deferred compensation expense 233,067 - Depreciation and amortization 403,978 177,942 Interest expense, net 343,060 163,570 ----------------------------- Total expenses 16,967,228 9,134,666 ----------------------------- Net income $ (2,347,199) 5,462,462 ============================= Direct Media/DMI, Inc. Unaudited Consolidated Statement of Cash Flows For the four months ended December 31, 1995 1994 ---- ---- Cash flows from operating activities: Net income (loss) $ (2,347,199) 5,462,462 Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization 403,978 177,942 Deferred compensation 233,067 - Change in operating assets and liabilities: Accounts receivable from mailers (2,591,753) (859,515) Prepaid expenses and other current assets 109,942 (1,948,369) Other assets 5,165 5,165 Amounts due to list owners 218,659 (915,207) Accrued liabilities (4,831,184) (5,246,396) Deferred revenues (73,740) (104,096) ----------------------------- Net cash used by operating activities (8,873,065) (3,428,015) ------------------------------ Cash flows from investing activities: Purchase of fixed assets, net of disposals (468,849) 346,188 ------------------------------ Net cash (used for) provided by investing activities (468,849) 346,188 ------------------------------ Cash flows from financing activities: Borrowings from bank 8,178,109 2,259,721 Repayment of notes payable (133,332) (99,999) Payment of obligation under lease, net of sublease income (289,721) ------------------------------ Net cash provided by financing activities 8,044,777 1,870,001 ------------------------------ Net decrease in cash and cash equivalents (1,297,137) (1,211,825) Cash and cash equivalents at beginning of period 1,297,137 1,211,825 ------------------------------ Cash and cash equivalents at end of period - - ------------------------------ Cash paid during period for: Interest $ 523,746 129,327 EXHIBIT 99.3 UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS The unaudited pro forma data presented in the unaudited pro forma combined financial statements are included in order to illustrate the effect on the Company's financial statements of the transaction described below. In April 1996, the Company acquired the assets of Direct Media/DMI, Inc. ("DMI") for $25 million and the assumption of certain liabilities of DMI. The $25 million purchase price is payable in three years, is collateralized by a letter of credit, and may, at DMI's option be paid in one million shares of Acxiom common stock in lieu of cash plus accrued interest. Headquartered in Greenwich, CT, DMI provides list brokerage, management, and consulting services to business-to-business and consumer list owners and mailers. The acquisition of DMI will be accounted for as a purchase, and accordingly, the results of operations of DMI will be included in the consolidated results of operations from the date of the acquisition. The unaudited pro forma combined balance sheet at March 31, 1996 presents adjustments related to the acquisition as if the acquisition had occurred on March 31, 1996. The unaudited pro forma combined statement of operations for the year ended March 31, 1996 present adjustments as though the transaction had occurred at the beginning of the period. Pro forma adjustments have been made to reflect the accounting bases recognized in recording the purchase and to eliminate the effects of transactions between the Company and DMI, as well as to incorporate changes in operations of DMI that have been implemented as a result of the acquisition. In the opinion of management, all adjustments have been made that are necessary to present fairly the pro forma data. The unaudited pro forma combined financial statements should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto located in the Company's Annual Report on Form 10-K as filed with the United States Securities and Exchange Commission, and the Financial Statements and Notes thereto of DMI, appearing as Exhibit 99.1 to this Form 8-K/A filing. The unaudited pro forma combined statement of operations data are not necessarily indicative of the results that would have been reported had such events actually occurred on the date specified, nor are they indicative of the Company's future results. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS For Year Ended March 31, 1996 (dollars in thousands, except per share data) Pro Forma Company as Adjustments for (2) Reported (1) Direct Media/DMI, Inc. Combined Revenue $ 269,902 41,223 311,125 Operating costs and expenses Salaries and benefits 98,075 25,031(3) 123,106 Computer, communications and other equipment 40,972 3,061 44,033 Data costs 63,442 - 63,442 Other operating costs and expenses 35,755 10,379 46,134 -------------------------------------------- Total operating costs and expenses 238,244 38,471 276,715 -------------------------------------------- Income from operations 31,658 2,752 34,410 Other income (expense): Interest expense (1,863) (1,433)(4) (3,296) Other, net (399) (1,566)(5) (1,965) -------------------------------------------- (2,262) (2,999) (5,261) Earnings (loss) before income taxes 29,396 (247) 29,149 Income taxes 11,173 (104)(6) 11,069 -------------------------------------------- Net earnings (loss) $ 18,223 (143) $ 18,080 ======= ======= Earnings per share $ 0.70 $ 0.69(7) ======= ======= Weighted average shares outstanding 26,039 27,039 ======= ======= NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (1) The Company's statement of operations reflects its fiscal year ended March 31, 1996. (2) The Pro Forma adjustments reflect the operations of Direct Media for the year ended December 31, 1995. (3) Excludes expenses of $8.4 million which relate to deferred compensation as a result of issuance of common shares in Direct Media which vest over a period of time and excludes expenses of $7.2 million related to various bonus payments paid to Direct Media personnel. These adjustments relate to items not considered recurring. (4) Reflects incremental interest expense related to the acquisition financing. (5) Reflects incremental intangible amortization of $1.4 million computed as follows: $27.7 million over 20 years. (6) Reflects the tax effect on the Pro Forma adjustments at a combined federal and state tax rate of 42%. (7) The acquisition agreement reflects that the Company will issue 1 million shares of its common stock or pay $25 million plus interest at the election of Direct Media. Consequently, for purposes of earnings per share, the Company will eliminate the interest expense related to the note payable of $25 million and include in its weighted average shares outstanding the additional 1 million shares. Calculated as follows: Net Income $ 18,080 Interest expense (net of tax effect) 458 ------ Adjusted Net Income 18,538 ====== Weighted average common shares outstanding 27,039 ====== Earnings per common share $ 0.69 ====== UNAUDITED PRO FORMA COMBINED BALANCE SHEET March 31, 1996 (in thousands) Pro Forma Adjustments Company for as Direct Media/ Assets Reported DMI, Inc.(1) Combined - ------ -------- ------------- -------- Current assets: Cash and cash equivalents $ 3,469 3,469 Trade accounts receivable, net 44,474 7,902(2) 52,376 Refundable income taxes 1,537 1,537 Other current assets 4,534 514(2) 5,048 ------------------------------------- Total current assets 54,014 8,416 62,430 Property and equipment, net of accumulated depreciation and amortization 89,101 2,010(2) 91,111 Software, net of accumulated amortization 10,524 10,524 Excess of cost over fair value of net assets acquired, net accumulated amortization 13,982 27,673(2) 41,655 Other assets 26,428 826(2) 27,254 ------------------------------------- $ 194,049 38,925 232,974 ===================================== Liabilities & Stockholders' Equity Current liabilities Short-term notes payable 646 11,594(2) 12,240 Current installments of long-term debt 3,866 3,866 Trade accounts payable 13,596 13,596 Accrued expenses: Interest 435 435 Payroll and payroll related 5,111 614(2) 5,725 Other 7,189 1,430(2) 8,619 Advances from customers 316 316 Income taxes ------------------------------------- Total current liabilities 31,159 13,638 44,797 Long-term debt, excluding current portion 26,885 25,287(2) 52,172 Deferred income taxes 10,933 10,933 Deferred revenue 2,331 2,331 Stockholders' equity Preferred stock Common stock 2,435 2,435 Additional paid-in capital 54,514 54,514 Retained earnings 68,978 68,978 Foreign currency translation adjustment (863) (863) Treasury stock, at cost (2,323) (2,323) ------------------------------------- Total stockholders' equity 122,741 - 122,741 ===================================== $ 194,049 38,925 232,974 ===================================== NOTES TO UNAUDITED PRO FORM A COMBINED BALANCE SHEET (1) Reflects the Company's purchase of Direct Media as of April 1, 1996. (2) Reflects the allocation of total consideration for Direct Media as follows: $7.9 million for accounts receivable (net of reserve and related accounts payable), $2.0 million for property and equipment, $.5 million for other current assets, $.8 million for other assets and $27.7 million for intangible assets (goodwill). Additionally, the Company assumed obligations of $13.9 million and executed a note payable in the amount of $25 million payable three years from the effective date of the Acquisition, April 1, 1996. -----END PRIVACY-ENHANCED MESSAGE-----