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Snyder Communications Inc · 424B4 · On 5/21/98

Filed On 5/21/98   ·   SEC File 333-50929   ·   Accession Number 950109-98-3398

  in   Show  and 
  As Of               Filer                 Filing     On/For/As Docs:Pgs              Issuer               Agent

 5/21/98  Snyder Communications Inc         424B4                  1:86                                     950109

Prospectus   ·   Rule 424(b)(4)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B4       424B4 Filing                                          86    548K 


Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page
4Summary
5Growth Strategy
10Risk Factors
"Reliance on Significant Clients
16Use of Proceeds
"Dividend Policy
"Price Range of Common Stock
17Capitalization
18Business
26Management
28Principal Stockholders
30Selling Stockholders
35Shares Eligible for Future Sale
37Considerations for Non-United States Holders
40Underwriting
43Legal Matters
"Experts
"Available Information
44Incorporation of Certain Information by Reference
45Index to Consolidated Financial Statements
51Revenues
54Report of Independent Public Accountants
59Notes to Consolidated Financial Statements
62Cash and equivalents
63Marketable securities
70Lines of credit
77Pro forma net income (loss)
78Net periodic pension cost
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Pursuant to Rule 424(b)(4) Registration No. 333-50929 PROSPECTUS 7,068,006 SHARES [LOGO OF SYNDER COMMUNICATIONS, INC. APPEARS HERE] COMMON STOCK --------------- Of the 7,068,006 shares of Common Stock of Snyder Communications, Inc. (the "Company") offered hereby, 500,064 are being offered by the Company and 6,567,942 are being offered by certain stockholders of the Company (the "Selling Stockholders"). The Company and certain other stockholders of the Company (the "Over-Allotment Selling Stockholders") have granted to the Underwriters options to purchase up to 1,060,200 additional shares to cover over-allotments, if any. The Company will not receive any of the proceeds from the sale of the shares of Common Stock by the Selling Stockholders. Of the 7,068,006 shares of Common Stock offered hereby, 1,413,601 are being offered for sale initially outside the United States and Canada by the International Managers and 5,654,405 shares are being offered for sale initially in a concurrent offering in the United States and Canada by the U.S. Underwriters. The initial public offering price and the underwriting discount per share will be identical for both Offerings. See "Underwriting." The Common Stock is listed on the New York Stock Exchange under the symbol "SNC." On May 20, 1998, the last sale price of the Common Stock as reported on the New York Stock Exchange was $42. See "Price Range of Common Stock." SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY. --------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- · Download Table PROCEEDS TO PRICE TO UNDERWRITING PROCEEDS TO SELLING PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS -------------------------------------------------------------------------------- Per Share................... $42.00 $1.68 $40.32 $40.32 -------------------------------------------------------------------------------- Total(3).................... $296,856,252 $11,874,250 $20,162,580 $264,819,421 ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- (1) The Company, the Selling Stockholders and the Over-Allotment Selling Stockholders have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) Before deducting expenses payable by the Company, estimated at $1,050,000. (3) The Company and the Over-Allotment Selling Stockholders have granted the International Managers and U.S. Underwriters options to purchase up to an additional 212,040 shares and 848,160 shares of Common Stock, respectively, exercisable within 30 days after the date hereof, solely to cover over-allotments, if any. If such options are exercised in full, the total Price to Public, Underwriting Discount, Proceeds to Company and Proceeds to Selling Stockholders (including in such case, the Over- Allotment Selling Stockholders) will be $341,384,652, $13,655,386, $37,096,980 and $290,632,285, respectively. See "Underwriting." --------------- The shares of Common Stock are offered by the several Underwriters, subject to prior sale, when, as and if issued to and accepted by them, subject to the approval of certain legal matters by counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the shares of Common Stock will be made in New York, New York, on or about May 27, 1998. --------------- MERRILL LYNCH INTERNATIONAL GOLDMAN SACHS INTERNATIONAL BEAR, STEARNS INTERNATIONAL LIMITED NATIONSBANC MONTGOMERY SECURITIES LLC --------------- The date of this Prospectus is May 20, 1998.
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[INSIDE FRONT COVER] Snyder Communications, Inc. Complete targeted marketing solutions Snyder provides a wide range of integrated targeted marketing solutions to Fortune 500 companies across a wide variety of industries. [_] Pharmaceutical [_] Healthcare [_] Financial Services [_] Consumer Packaged Goods [_] Telecommunications [_] Gas and Electric Utilities [_] Technology [Images of: logo stating "SNC Listed NYSE The New York Stock Exchange"; client logos; picture of a one dollar bill, an arrow pointing upwards and a dollar sign displayed on a tag connected to a line ascending upwards from left to right in a step-like fashion; photograph of satellite dishes; contents of a sample pack; globe; capsules of medication; photograph of high-tension wire towers.] Certain persons participating in the Offerings may engage in transactions that stabilize, maintain or otherwise affect the price of the Common Stock. Such transactions may include stabilizing, the purchase of Common Stock to cover syndicate short positions and the imposition of penalty bids. For a description of these activities, see "Underwriting." MERRILL LYNCH SPECIALISTS INC. ("MLSI"), AN AFFILIATE OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, ONE OF THE UNDERWRITERS, ACTS AS A SPECIALIST IN THE COMMON STOCK OF THE COMPANY PURSUANT TO THE RULES OF THE NEW YORK STOCK EXCHANGE, INC. UNDER AN EXEMPTION GRANTED BY THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1995, MLSI WILL BE PERMITTED TO CARRY ON ITS ACTIVITIES AS A SPECIALIST IN THE COMMON STOCK FOR THE ENTIRE PERIOD OF THE DISTRIBUTION OF THE COMMON STOCK. THE EXEMPTION IS SUBJECT TO THE SATISFACTION BY MLSI OF THE CONDITIONS SPECIFIED IN THE EXEMPTION.
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[Gatefold] Snyder Communications, Inc. The company identifies high-value consumer segments; designs and implements targeted sales and marketing programs; and provides customer care and retention services. Offering a broad array of services [_] Proprietary databases of targeted consumers and businesses [_] Database management services [_] Pharmaceutical detailing [_] Targeted product sampling programs and publications [_] Strategic planning and consulting [_] Marketing program consultation [_] Field sales representatives [_] WallBoard(R) information displays [_] Creative services [_] Direct mail, fulfillment capabilities [_] Interactive services [Images of: globe; photo collages of WallBoards(R); distributor presenting sample pack to new mother; photographs of medical detailing representatives with physicians, working parents and healthcare professionals; representative contents of sample packs; pamphlets included in sample packs; database operators with computers.]
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SUMMARY The following description is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the financial statements and notes thereto appearing elsewhere or incorporated by reference in this Prospectus. Unless otherwise indicated, all information in this Prospectus (a) assumes no exercise of the Underwriters' over-allotment options and (b) assumes that each of the entities acquired by the Company through a pooling of interests transaction was a wholly-owned subsidiary of the Company. As used herein, the "Company" means Snyder Communications, Inc., including the acquisitions and its other directly and indirectly owned subsidiaries. THE COMPANY The Company is a rapidly growing international provider of complete marketing solutions primarily to Fortune 500 size companies. The Company integrates its various capabilities, including its proprietary distribution channels, producing value-added marketing solutions. The Company identifies high value market segments; designs and implements marketing programs to reach them; initiates and closes sales on behalf of its clients; and provides customer care, retention and loyalty marketing services. The Company's resources include proprietary databases of targeted consumers and small businesses, database management services, pharmaceutical detailing services, pharmaceutical consulting, medical educational communications, proprietary product sampling programs and publications, sponsored information displays in proprietary locations, marketing program consultants, creative services, field sales and marketing representatives, customer service representatives, interactive services and direct mail and fulfillment capabilities. By expanding the range of its capabilities, its specialized distribution channels and its geographic presence, the Company seeks to provide a single source for its clients' outsourced sales and marketing needs. The Company's consolidated revenues, restated to include revenues from all acquisitions accounted for as pooling of interests transactions for all reported periods, increased from $334.1 million in 1995 to $428.9 million in 1996, and to $520.0 million in 1997, and from $118.6 million in the first three months of 1997 to $146.9 million in the first three months of 1998. Through 1997, substantially all of the Company's operations (excluding operations of 1998 acquisitions) were located in the United States and the United Kingdom. In 1998, the Company established operations in continental Europe principally through two acquisitions in France. The Company's clients primarily are global companies with large annual sales and marketing expenditures facing significant competitive pressures to retain or expand market share. The clients operate in various industries, including pharmaceuticals, consumer packaged goods, financial services, telecommunications and gas and electric utilities. The Company's ten largest current clients based on 1997 revenues, listed alphabetically, are Astra Pharmaceuticals, Bell Atlantic, Bristol Myers Squibb, IBM, McDonald's, Novartis Consumer Health, Pharmacia & Upjohn, Procter & Gamble, Volkswagen of America and Wyeth-Ayerst. Several of these clients use the services of more than one of the Company's service groups. Since completing its initial public offering in September 1996, the Company has significantly expanded the range of marketing and sales services it is able to offer its clients. This expansion has been accomplished both by building and initiating new programs or service offerings and by acquiring businesses that offer complementary services. The service offerings of acquired companies have been combined with those previously offered by the Company to create four service groups: Medical Services; Media and Sampling Services; Communications Services; and Data Delivery Services. Utilizing the service offerings of its four service groups, the Company's goal is to provide complete marketing solutions for its clients. The Medical Services group specializes in establishing and monitoring marketing plans as well as face-to-face interaction with physicians or other healthcare providers to market clients' pharmaceutical products. The programs offered by the Media and Sampling Services group are designed to stimulate and create brand awareness for the clients' products. The Communications Services group's offerings are designed to establish brand awareness for clients' products and 1
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to provide targeted customer acquisition and customer care, retention and loyalty marketing. The Data Delivery Services group provides services that enable the Company's clients to target the right customers for their products and services. During 1997 and 1998, the Company made strategic acquisitions to broaden the range of services it provides to clients, to expand the geographic reach of its services and to enhance its clients' access to strategic consumer groups. To complement and supplement its existing management depth, the Company retained key members of management of each of the acquired companies. GROWTH STRATEGY The Company believes that it is well positioned to capitalize on increased demand for marketing services due to the outsourcing of marketing and sales functions, changes in the regulatory environment and increased demand for marketing services in Europe by providing its clients with integrated global marketing solutions and the capability to reach strategic consumer groups, including aging baby-boomers, multicultural populations and young consumers. In order to capitalize on this increased demand and its existing resources and to continue its growth, the Company plans to broaden the range of services offered to existing and future clients, expand its global presence, increase the scale of its services and pursue strategic acquisitions. Leverage Client Base and Broaden Range of Services. The Company intends to continue its growth by providing a broader range of services to its existing clients. Through its recent acquisitions and internal growth, the Company has significantly increased the types of services and the range of targeted marketing channels that the Company can offer its clients. The Company is actively leveraging its demonstrated success on behalf of existing clients by offering such clients additional Company services. The Company also believes it can more successfully attract new clients as a result of its increased capabilities. Expand Global Presence. The Company intends to continue expanding the geographic markets in which it provides services. Many of the Company's existing and potential clients are large companies that market products globally. Developing an expanded geographic market reach will enable the Company to offer single-source solutions for its clients' global outsourced sales and marketing needs. In furtherance of this strategy, the Company's recent acquisitions have given the Company marketing capabilities in continental Europe and have significantly enhanced the Company's presence in the U.K. The Company expects that its further geographic expansion will be accomplished by performing services for existing clients in new geographic markets and by acquiring companies that perform services in new geographic markets similar to those already provided by the Company. Increase Scale of Services. The Company intends to continue to increase the scale of services it can offer to clients. Many of the Company's current and prospective clients, particularly those served by the Communications Services and Medical Services groups, have an increasing need for global, comprehensive, large-scale marketing solutions. By expanding its capacity to perform large projects, the Company intends to enhance its ability to provide single-source marketing solutions to its clients. Pursue Strategic Acquisitions. The Company intends to continue to supplement its growth through strategic acquisitions. The Company expects to pursue acquisition opportunities that give the Company additional proprietary channels of distribution to important demographic segments, offer complementary services or replicate the Company's existing marketing capabilities in unserved geographic markets. The Company believes that the fragmentation in the marketing services industry provides opportunities for the Company to selectively pursue complementary domestic and international acquisitions. Although there are no definitive agreements, understandings or arrangements at this time, the Company is currently and expects to continue evaluating acquisition opportunities. The Company's corporate headquarters are located at Two Democracy Center, 6903 Rockledge Drive, Bethesda, Maryland, 20817, and its telephone number is (301) 468-1010. 2
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THE OFFERINGS The offering of 5,654,405 shares of the Company's Common Stock, par value $.001 per share, in the United States and Canada (the "U.S. Offering") and the offering of 1,413,601 shares of the Common Stock outside the United States and Canada (the "International Offering") are collectively referred to herein as the "Offerings." Common Stock Offered: By the Company............................. 500,064 shares By the Selling Stockholders................ 6,567,942 shares ---------- Total.................................... 7,068,006 shares ========== Common Stock to be Outstanding After the Of- 61,914,402 shares ferings(1).................................. Use of Proceeds.............................. The net proceeds to be received by the Company from the Offerings will be used to fund working capital, capital expenditures, potential acquisitions and general corporate purposes. The Company will not receive any proceeds from the sale of shares of Common Stock by the Selling Stockholders. See "Use of Proceeds." New York Stock Exchange Symbol............... SNC -------- (1) Includes 71,544 shares issuable upon exercise of outstanding options and expected to be sold in the Offerings. Does not include (i) 9,669,536 shares of Common Stock reserved for issuance upon exercise of outstanding options and (ii) 2,035,781 shares of Common Stock available for future issuance under the Company's 1996 Stock Incentive Plan. See "Shares Eligible for Future Sale." 3
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SUMMARY CONSOLIDATED FINANCIAL DATA The following table sets forth summary consolidated financial data of the Company as of and for each of the years in the five year period ended December 31, 1997, and for the three months ended March 31, 1997 and March 31, 1998, after giving effect to all transactions accounted for as poolings of interests (the "Mergers"). The table gives effect to all of the Mergers, as if they had occurred at the beginning of the earliest period presented. The table also sets forth unaudited pro forma income statement data for each of the years in the five year period ended December 31, 1997, and for the three months ended March 31, 1997 and March 31, 1998, which give pro forma effect to federal, state and city income taxes as if all operations of the Company were subject to such taxes for all periods presented. The income statement data for each of the years in the three year period ended December 31, 1997 and the balance sheet data as of December 31, 1996 and December 31, 1997 are derived from the audited consolidated financial statements of the Company. All other income statement and balance sheet data presented are derived from unaudited consolidated financial statements of the Company and in the opinion of the management of the Company include all adjustments, consisting of normal and recurring adjustments, which are necessary to present fairly the combined results of operations and financial position of the Company for each period presented. The following summary consolidated selected financial data should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Prospectus. Table on following page 4
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· Enlarge/Download Table FOR THE THREE MONTHS FOR THE YEARS ENDED DECEMBER 31, ENDED MARCH 31, ---------------------------------------------------- ---------------------- 1993 1994 1995 1996 1997 1997 1998 ----------- ----------- -------- -------- -------- ---------- ---------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA:(1) Revenues................ $149,348 $235,356 $334,090 $428,897 $520,040 $ 118,583 $ 146,853 Operating Expenses: Cost of services....... 101,428 151,644 215,059 297,942 363,006 82,906 97,493 Selling, general and administrative expenses.............. 32,825 56,598 70,758 89,041 107,427 24,285 29,369 Compensation to stockholders.......... 2,389 5,276 9,439 7,363 13,623 1,427 -- ESOP expense........... 30 2,203 2,172 6,553 5,411 1,245 -- Acquisition and related costs(2).............. -- -- -- -- 39,431 16,181 33,953 -------- -------- -------- -------- -------- ---------- ---------- Income (loss) from operations............. 12,676 19,635 36,662 27,998 (8,858) (7,461) (13,962) Interest (expense) income, net............ (615) (1,513) (1,654) (2,400) (391) (249) 738 -------- -------- -------- -------- -------- ---------- ---------- Income (loss) from continuing operations before income taxes.... 12,061 18,122 35,008 25,598 (9,249) (7,710) (13,224) Income tax (provision) benefit................ (4,663) (6,730) (9,892) (5,994) (6,246) (2,288) 2,346 -------- -------- -------- -------- -------- ---------- ---------- Income (loss) from continuing operations.. 7,398 11,392 25,116 19,604 (15,495) (9,998) (10,878) Loss from discontinued operations(3).......... -- -- -- (1,498) (1,507) (558) -- -------- -------- -------- -------- -------- ---------- ---------- Income (loss) before extraordinary item..... 7,398 11,392 25,116 18,106 (17,002) (10,556) (10,878) Extraordinary item, less applicable income taxes of $806(4) ............ -- -- -- (1,215) -- -- -- -------- -------- -------- -------- -------- ---------- ---------- Net income (loss)..... $ 7,398 $ 11,392 $ 25,116 $ 16,891 $(17,002) $ (10,556) $ (10,878) ======== ======== ======== ======== ======== ========== ========== Historical net income (loss) per share: Basic net income (loss) per share Income (loss) from continuing operations........... $ 0.15 $ 0.23 $ 0.48 $ 0.37 $ (0.27) $ (0.18) $ (0.18) ======== ======== ======== ======== ======== ========== ========== Net income (loss) per share................ $ 0.15 $ 0.23 $ 0.48 $ 0.32 $ (0.30) $ (0.19) $ (0.18) ======== ======== ======== ======== ======== ========== ========== Diluted net income (loss) per share Income (loss) from continuing operations........... $ 0.15 $ 0.23 $ 0.48 $ 0.37 $ (0.27) $ (0.18) $ (0.18) ======== ======== ======== ======== ======== ========== ========== Net income (loss) per share................ $ 0.15 $ 0.23 $ 0.48 $ 0.32 $ (0.30) $ (0.19) $ (0.18) ======== ======== ======== ======== ======== ========== ========== Unaudited: Pro forma net income (loss) from continuing operations(5)......... $ 7,390 $ 10,846 $ 21,220 $ 14,291 $(18,900) $ (10,556) $ (12,432) ======== ======== ======== ======== ======== ========== ========== Pro forma diluted net income (loss) per share from continuing operations............ $ 0.15 $ 0.22 $ 0.41 $ 0.27 $ (0.33) $ (0.19) $ (0.21) ======== ======== ======== ======== ======== ========== ========== Pro forma net income (loss)(5)............. $ 7,390 $ 10,846 $ 21,220 $ 12,181 $(19,800) $ (10,863) $ (12,432) ======== ======== ======== ======== ======== ========== ========== Pro forma diluted net income (loss) per share(6).............. $ 0.15 $ 0.22 $ 0.41 $ 0.23 $ (0.35) $ (0.20) $ (0.21) ======== ======== ======== ======== ======== ========== ========== Pro forma net income from continuing operations, excluding non-recurring items(5)(7)........... $ 8,872 $ 15,322 $ 28,256 $ 22,061 $ 28,838 $ 6,519 $ 12,852 ======== ======== ======== ======== ======== ========== ========== Pro forma diluted net income per share from continuing operations, excluding non- recurring items(6)(7)........... $ 0.19 $ 0.31 $ 0.54 $ 0.42 $ 0.50 $ 0.11 $ 0.21 ======== ======== ======== ======== ======== ========== ========== Shares used in computing per share amounts:(6) Basic................. 47,783 49,324 52,030 52,487 56,624 55,413 60,135 Diluted............... 47,783 49,324 52,121 53,041 58,056 56,820 62,166 · Enlarge/Download Table AS OF DECEMBER 31, -------------------------------------------------- AS OF MARCH 31, 1993 1994 1995 1996 1997 1998 ----------- ----------- -------- -------- -------- --------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (IN THOUSANDS) BALANCE SHEET DATA:(1) Total assets........... $117,300 $157,269 $209,913 $295,990 $410,702 $524,679 Long-term debt(8)...... 14,708 30,758 36,826 36,707 10,439 9,410 Redeemable ESOP stock(9).............. -- -- 269 2,452 5,278 6,891 Total equity........... 20,569 20,398 33,170 70,275 144,582 241,846 Footnotes on following page 5
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(1) Prior to the consummation on September 24, 1996 of the reorganization (the "Reorganization") in which the Company acquired all of the limited partnership interests in Snyder Communications, L.P. (the "Partnership") and all of the issued and outstanding stock of the corporate general partner, Snyder Marketing Services, Inc. ("SMS"), the operations of the Company were conducted through the Partnership. The Partnership was owned 63.85% by SMS and 36.15% by the limited partners. The Reorganization resulted in the stockholders of SMS exchanging 100% of their SMS stock for the Company's Common Stock simultaneously with the limited partners exchanging their limited partner interests in the Partnership for the Company's Common Stock. After the Reorganization, the Company owned 100% of the stock of SMS and, directly and indirectly through its ownership of SMS, 100% of the interest of the Partnership. Because of the continuity of ownership, the Reorganization was accounted for by combining the assets, liabilities, and operations of SMS, the Partnership and the Company at their historical cost basis. Accordingly, for the periods prior to the Reorganization, the income statement and balance sheet data include a combination of the accounts of SMS and the Partnership. Prior to its acquisition by the Company, American List Corporation ("American List") had a fiscal year that ended in February. The accompanying balance sheet data as of December 31, 1993, 1994, 1995 and 1996 reflect the combination of American List's accounts as of the following February month-end while the income statement data for each of the four years ended December 31, 1996 reflect the combination of American List's operations for the twelve months that end in the February following the respective income statement date. (2) The $39.4 million of acquisition and related costs includes $34.1 million in costs directly related to the consummation of the Company's acquisitions accounted for as poolings of interests. These costs include primarily investment banking fees, other professional service fees, certain United Kingdom excise and transfer taxes, as well as a non-cash charge of $9.1 million related to the accelerated vesting of options held by Brann employees. The remaining $5.3 million consists of the write-off of deferred license fees and the accrual of a liability expected to resolve outstanding litigation. Both the write-off of the deferred fees and the accrual of the liability were recorded due to changes in fact which resulted from the Company's acquisitions. The Company recorded $34.0 million in acquisition and related costs during the first quarter of 1998 primarily related to the Mergers consummated during the first quarter of 1998. These costs consist of investment banking fees, other professional service fees, the expense associated with stock appreciation rights, tax payments and other contractual payments. In addition, this amount includes approximately $4.7 million for the costs of consolidating existing Company facilities and acquired operations, including the external costs and liabilities to close redundant Company facilities and severance and relocation costs related to the Company's employees. (3) Represents the net losses of Bob Woolf Associates, Inc., which was spun off to stockholders of record of one of the Company's 1998 acquisitions on October 31, 1997. These losses represent $0.03 and $0.03 per diluted share for 1996 and 1997, respectively. (4) An extraordinary item of $1.2 million ($0.02 per diluted share) was recorded in conjunction with the early redemption of subordinated debentures which were due to related parties. The extraordinary item is net of a $0.8 million tax benefit and consists of prepayment penalties and the write-off of unamortized discount and debt issuance costs. (5) Prior to the Reorganization, the Company's principal operations were not subject to federal or state corporate income taxes. Similarly, prior to their respective acquisitions, certain of the U.S.-based acquirees were not subject to federal (except for one Massachusetts incorporated acquiree) or state income taxes. In addition, the Company's international subsidiaries are subject to different statutory income tax rates. Pro forma data are calculated as if the Company had been taxed similarly to a C corporation for all periods presented. (6) The shares used in computing the per share amounts assume that the Reorganization and the Mergers had occurred at the beginning of each of the periods presented and reflect the issuance of additional shares as a result of the Company's public offerings, the impact of stock options, and certain share repurchases. (7) Represents income from continuing operations adjusted to reflect (a) a provision for income taxes as if the Company had been taxed similarly to a C corporation for all periods presented, (b) the elimination of compensation to stockholders for amounts paid to managers of acquired companies prior to their merger with the Company which was in excess of amounts they will receive pursuant to employment contracts, (c) the elimination of the impact of nonrecurring acquisition and related costs, and (d) the elimination of ESOP related expenses incurred by the ESOP of an acquired company which will not be incurred in the future. (8) Includes mandatorily redeemable preferred stock of $4.6 million, $4.6 million and $8.5 million at December 31, 1994, 1995 and 1996, respectively. The preferred stock did not carry voting rights unless dividends were in arrears, which did not occur, and was not convertible into common stock. Accordingly, the preferred stock was classified as long-term debt. This preferred stock was redeemed during 1997. (9) Represents the balance necessary to satisfy the repurchase obligation associated with the Company's shares held by the ESOP of an acquired company which have been allocated to former employees of the acquired company whose employment had terminated prior to its merger with the Company. 6
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RISK FACTORS The following risk factors should be considered carefully in addition to the other information in this prospectus before purchasing the shares of Common Stock offered hereby. Certain statements in this Prospectus and documents incorporated herein by reference are forward-looking and are identified by the use of forward-looking words or phrases such as "intended," "will be positioned," "expects," is or are "expected," "anticipates," and "anticipated." These forward-looking statements are based on the Company's current expectations. To the extent any of the information contained or incorporated by reference in this Prospectus constitutes a "forward-looking statement" as defined in Section 27A(i)(1) of the Securities Act, the risk factors set forth below are cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement. RELIANCE ON SIGNIFICANT CLIENTS The Company's ten largest current clients, based on 1997 revenues, listed alphabetically, are Astra Pharmaceuticals, Bell Atlantic, Bristol Myers Squibb, IBM, McDonald's, Novartis Consumer Health, Pharmacia & Upjohn, Procter & Gamble, Volkswagen of America and Wyeth-Ayerst. These clients accounted for 27.6% of the Company's 1997 revenues. In January 1998, the Company elected not to renew its then-existing contract with AT&T, which provided 12.1% of the Company's 1997 revenues, and began providing similar services to another national telecommunications client under a three-year contract. The Company provides services to many of its most significant clients pursuant to multi- year contracts. As is typical in the industry, the Company's multi-year contracts are cancelable on specified notice periods by the client. As a result, there can be no assurance that the Company's most significant clients will continue to do business with the Company over the long term. If any of the Company's significant clients elect not to renew their contracts, it could have a material adverse effect on the Company's results of operations. GROWTH THROUGH ACQUISITIONS The Company plans to continue to supplement its growth through acquisitions of complementary businesses. Since the beginning of 1998, the Company has completed several strategic acquisitions. In most instances, the Company has issued shares of Common Stock as consideration. The Company is currently evaluating several additional acquisitions and expects to continue to consider growth opportunities through additional acquisitions that may involve payments in cash or the issuance of additional shares of Common Stock, although there are no definitive arrangements or agreements to do so at this time. There can be no assurance that the Company will have sufficient capital resources to continue to pursue this aspect of its growth strategy or that its Common Stock will remain an attractive acquisition currency. Additionally, there can be no assurance that the Company will successfully identify, complete or integrate additional acquisitions or that any acquired companies, including its recent acquisitions, will perform as expected or will contribute significant revenues or profits to the Company. The Company may also, in the future, face increased competition for acquisition opportunities, which may inhibit the Company's ability to consummate suitable acquisitions on terms favorable to the Company. INTEGRATION OF ACQUISITIONS Since its initial public offering in September 1996, the Company has completed numerous acquisitions of complementary businesses. The services provided by the acquired companies, although complementary, differ in varying degrees from the services offered by the Company prior to making the acquisitions. There can be no assurance that the anticipated benefits with respect to the clients and targeted markets of these acquisitions will be achieved. Prior to its initial public offering, the Company had limited experience in acquiring businesses. Thus, the Company has not yet demonstrated the long-term ability to successfully integrate and manage a large number of acquired businesses. There can be no assurance that the Company will be able to manage successfully the new service areas of the Company, the employees of such service areas or the client bases supported by such service areas. The inability of the Company to integrate and manage acquired businesses successfully could have a material adverse effect upon the Company. 7
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MANAGEMENT OF GROWTH The Company has experienced rapid growth over the past several years. Continued growth depends to a significant degree on the Company's ability to successfully utilize its existing infrastructure and databases to perform services for other clients, as well as on the Company's ability to develop and successfully implement new marketing methods or channels for new services for existing and new clients. Continued growth will also depend on a number of other factors, including the Company's ability to maintain the high quality of the services it provides to customers and to increase its penetration with existing customers, recruit, motivate and retain qualified personnel, and train existing sales representatives or recruit new sales representatives on an economic basis to sell different categories of services or products. The Company's continued growth will also require the implementation of enhanced operational and financial systems and additional management resources. There can be no assurance that the Company will be able to manage its expanding operations effectively or that it will be able to maintain its growth. If the Company is unable to manage growth effectively, its business, results of operations or financial condition could be materially adversely affected. RISK ASSOCIATED WITH INTERNATIONAL OPERATIONS AND EXPANSION In March 1997, the Company made its first international acquisition. The Company has since acquired a number of companies in the United Kingdom and continental Europe. A key component of the Company's growth strategy is continued international expansion. There can be no assurance that the Company will be able to successfully acquire companies, integrate acquired companies or successfully introduce new services into these markets in order to expand its international operations. In addition, there are certain risks inherent in conducting international business, including exposure to currency fluctuations, difficulties in complying with a variety of foreign laws, unexpected changes in regulatory requirements, difficulties in staffing and managing foreign operations, and potentially adverse tax consequences. There can be no assurance that one or more of such factors will not have a material adverse effect on the Company's international operations and consequently on the Company's business, results of operations or financial condition. ADVERSE EFFECT OF FOREIGN EXCHANGE RATES ON RESULTS OF OPERATIONS As a result of a number of acquisitions in the United Kingdom and continental Europe, approximately 32.6% of the Company's revenues in 1997 were from outside of the United States, the majority of which were denominated in British pounds and French francs. The U.S. dollar value of the Company's revenues varies with currency exchange rate fluctuations. Significant increases in the value of the U.S. dollar relative to the British pound or French franc could have a material adverse effect on the Company's results of operations. The Company continually evaluates its exposure to exchange rate risk but does not currently hedge such risk. DEPENDENCE ON TREND TOWARD OUTSOURCING The Company's business and growth depend in large part on the trend toward outsourcing of marketing services. There can be no assurance that this trend in outsourcing will continue, as companies may elect to perform such services internally. A significant change in the direction of this trend generally, or a trend in the pharmaceutical or telecommunications industries not to use, or to reduce the use of, outsourced marketing services, such as those provided by the Company, would have a material adverse effect on the Company. COMPETITIVE AND FRAGMENTED INDUSTRY The industry in which the Company competes is highly competitive and fragmented. The Company competes with providers of other forms of sales and marketing media, such as direct mail, television, radio and other media. The Company also competes with the internal marketing capabilities of clients and prospective clients. The Company competes as well with other marketing services firms, ranging in size from very small firms offering special applications or short-term projects to large independent firms. A number of competitors have certain capabilities and resources equal to, or greater than, the Company's. There can be no assurance that, as the Company's industry continues to evolve, additional competitors with greater resources than the Company 8
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will not enter the industry (or particular segments of the industry) or that the Company's clients will not choose to conduct more of their targeted marketing services internally or through alternative marketing providers. Although the Company intends to monitor industry trends and respond accordingly, there can be no assurance that the Company will be able to anticipate and successfully respond to such trends in a timely manner. In addition, many of the Company's initial sources for names in its databases could also be available to a competitor wishing to develop a data delivery business. DEPENDENCE ON LABOR FORCE Many aspects of the Company's business are very labor intensive and experience high personnel turnover. Many of the Company's employees receive hourly wages plus commissions, if earned. A higher turnover rate among the Company's employees would increase the Company's recruiting and training costs and decrease operating efficiencies and productivity. The Company's operations typically require specially trained persons, such as those employees and independent contractors in the pharmaceutical detailing business and those employees who market services and products in languages other than English. Growth in the Company's business will require it to recruit and train qualified personnel at an accelerated rate from time to time. The labor markets for quality personnel are competitive, and there can be no assurance that the Company will be able to continue to hire, train and retain a sufficient labor force of qualified persons. RELIANCE ON TECHNOLOGY; RISK OF BUSINESS INTERRUPTION The Company has invested significantly in sophisticated and specialized computer and telecommunications technology and has focused on the application of this technology to provide customized solutions to meet many of its clients' needs. In addition, the Company has invested significantly in sophisticated end-user databases and software that enable it to market its clients' products to targeted markets. The Company anticipates that it will be necessary to continue to select, invest in and develop new and enhanced technology and end-user databases on a timely basis in the future in order to maintain its competitiveness. In addition, the Company's business is dependent on its computer and telephone equipment and software systems, and the temporary or permanent loss of such equipment or systems, through casualty or operating malfunction, or a significant increase in the cost of telephone services that is not recoverable through an increase in the price of the Company's services, could have a material adverse effect on the Company's business. The Company's property and business interruption insurance may not adequately compensate the Company for all losses that it may incur in any such event. DEPENDENCE ON KEY PERSONNEL The success of the Company depends in large part upon the abilities and continued service of its executive officers and other key employees, particularly Daniel M. Snyder, Chairman of the Board of Directors and Chief Executive Officer. There can be no assurance that the Company will be able to retain the services of such officers and employees. The failure of the Company to retain the services of Mr. Snyder or of other key personnel could have a material adverse effect on the Company. The Company has employment agreements with certain executive officers, including Mr. Snyder, and also has non- competition agreements with certain key personnel, including each of its executive officers. Courts, however, are at times reluctant to enforce such non-competition agreements. In addition, many of the Company's executive officers and other key personnel either are participants in the Company's 1996 Stock Incentive Plan or hold a significant amount of Common Stock (as is the case with Mr. Snyder). The Company believes that these interests increase the incentives such key employees have to remain with the Company. In order to support its growth, the Company will be required to effectively recruit, hire, train and retain additional qualified management personnel. The inability of the Company to attract and retain the necessary personnel could have a material adverse effect on the Company. GOVERNMENT REGULATION Several of the industries in which the Company's clients operate are subject to varying degrees of governmental regulation, particularly the pharmaceutical, healthcare and telecommunications industries. 9
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Generally, compliance with these regulations is the responsibility of the Company's clients. However, the Company could be subject to a variety of enforcement or private actions for its failure or the failure of its clients to comply with such regulations. In connection with the handling and distribution of samples of pharmaceutical products, the Medical Services group is subject to regulation by its clients, the Prescription Drug Marketing Act of 1987 and other applicable federal, state and local laws and regulations in the United States and certain regulations of the United Kingdom, France and the European Union. Pharmaceutical manufacturers and the health care industry in general are subject to significant U.S. federal and state, U.K., French and European Union regulation. In particular, regulations affecting the pricing or marketing of pharmaceuticals could make it uneconomic or infeasible for pharmaceutical companies to market their products through medical marketing detailers. Other changes in the domestic and international regulation of the pharmaceutical industry could also have a material adverse effect on the Medical Services group. The Company's physician education services are also subject to a variety of federal and state regulations relating to both the education of medical professionals and sales of pharmaceuticals. Any changes in such regulations or their application could have a material adverse effect on the Medical Services group. From time to time state and federal legislation is proposed with regard to the use of proprietary databases of consumer and health groups. The uncertainty of the regulatory environment is increased by the fact that the Company generates and receives data from many sources. As a result, there are many ways both domestic and foreign governments might attempt to regulate the Company's use of its data. Any such restriction could have a material adverse affect on the Data Delivery Services group. The Communications Services group is subject to a large number of federal and state regulations. The Federal Communications Commission (the "FCC") rules under the Federal Telephone Consumer Protection Act of 1991 limit the hours during which telemarketers may call consumers and prohibit the use of automated telephone dialing equipment to call certain telephone numbers. The Federal Telemarketing and Consumer Fraud and Abuse Protection Act of 1994 broadly authorizes the Federal Trade Commission to issue regulations prohibiting misrepresentation in telephone sales. One of the significant regulations of the FCC applicable to long distance carriers, including the Company's telecommunication clients, prohibits the unauthorized switching of subscribers' long distance carriers. A fine of up to $100,000 may be imposed by the FCC for each instance of unauthorized switching. In order to prevent unauthorized switches, federal law requires that switches authorized over the telephone, such as through the Company's teleservices, be verified contemporaneously by a third party. Third-party verification generally is not required for switches obtained in person, such as those obtained by members of the Company's Communications Services field sales force. The Company's training and other procedures are designed to prevent unauthorized switching. However, as with any field sales force, the Company cannot completely ensure that each employee will always follow the Company's mandated procedures. Accordingly, it is possible that employees may in some instances engage in unauthorized activities, including unauthorized switching. To the Company's knowledge, no formal FCC complaint has been brought against the Company or any of its clients as a result of the Company's services. If any complaints were brought, the Company's clients might assert that such complaints constituted a breach of its agreement with the Company and, if material, seek to terminate the contract. Legislation currently pending in Congress would increase penalties against carriers that engage in unauthorized switching of subscribers' long distance carriers and would impose additional procedural safeguards to ensure against such unauthorized switches. If such proposed legislation is enacted, compliance with the additional procedural safeguards could result in increased costs associated with the Communications Services group's marketing efforts on behalf of its telecommunications clients. The services offered by the Company outside the United States may be subject to certain regulations of the United Kingdom, France and the European Union, including regulations relating to inbound and outbound teleservices, advertising content, promotions of financial products, activities requiring customers to send money with mail orders and the maintenance and use of customer data held on databases. In addition, the Company 10
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operates a small U.K. printing facility which is subject to certain environmental regulations regarding the storage and disposal of certain chemicals involved in the printing process. The Company believes that its operations outside the United States are substantially in compliance with applicable regulations. There can be no assurance, however, that additional U.K., French or European Union legislation, or changes in the regulatory implementation, would not limit the Company's international activities or significantly increase the cost of regulatory compliance. POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS The Company could experience quarterly variations in revenues and operating income as a result of many factors, including the timing of clients' marketing campaigns, the implementation of new products or services, the timing of additional selling efforts and the general and administrative expenses to acquire and support such new business and changes in the Company's revenue mix among its various service offerings. In connection with certain contracts, the Company could incur costs in periods prior to recognizing revenue under those contracts. In addition, the Company must plan its operating expenditures based on revenue forecasts, and a revenue shortfall below such forecast in any quarter would be likely to affect adversely the Company's operating results for that quarter. SHARES ELIGIBLE FOR FUTURE SALE AND REGISTRATION RIGHTS The Company has outstanding an aggregate of 61,342,794 shares of Common Stock. Of the outstanding shares, 24,715,061 shares are freely transferable without restriction or further registration under the Securities Act, 6,496,398 shares owned by the Selling Stockholders are offered for resale pursuant hereto and 30,131,335 shares are "restricted securities" within the meaning of Rule 144 under the Securities Act and will not be able to be sold other than pursuant to an effective registration statement under the Securities Act, pursuant to an exemption from the registration requirements of the Securities Act, or subject to the volume limitations of Rule 144 under the Securities Act. In addition, shares of Common Stock to be issued upon the exercise of certain options will be freely transferable upon such exercise. On September 24, 1997, D.M.S. Endowment, LLC, a limited liability company of which Daniel M. Snyder and Michele D. Snyder are the beneficial owners, F.D. Sutton, LLC, a limited liability company of which Fred Drasner is the beneficial owner, USN College Marketing, L.P., a limited partnership of which Mortimer B. Zuckerman, the MBZ Trust of 1996 and Fred Drasner are the beneficial owners, and A.O. Roberts, LLC, a limited liability company of which Dr. A.O. Roberts is the beneficial owner, each entered into a forward purchase contract (the "Contracts") with the Snyder STRYPES Trust, a Delaware business trust. Pursuant to the Contracts, such stockholders are obligated to deliver to the Snyder STRYPES Trust an aggregate of up to 5,175,000 shares of Common Stock owned by such stockholders, or cash equal to the value thereof, three years from the date of the Contracts. Prior to any such delivery, such stockholders will retain voting and dividend rights with respect to the shares that are the subject of the Contracts. Pursuant to agreements, Mr. Snyder and certain of the Company's other stockholders are entitled to certain registration rights with respect to their shares of Common Stock. If such stockholders, by exercising such registration rights, cause a large number of shares to be registered and sold in the public market, such sales could have an adverse effect on the market price of the Common Stock. Future sales of substantial amounts of Common Stock in the public market could adversely affect the market price of the Common Stock and the ability of the Company to raise additional capital or engage in business combinations through sales of additional shares of Common Stock. See "Shares Eligible for Future Sale." CONTROL BY PRINCIPAL STOCKHOLDERS Daniel M. Snyder, the Chairman of the Board of Directors and Chief Executive Officer of the Company, and Michele D. Snyder, Vice Chairman, President, Chief Operating Officer and a director of the Company, beneficially own approximately 15.7% and 5.4%, respectively, of the outstanding shares of Common Stock. As a result, Mr. Snyder individually, and he and Ms. Snyder if they act in concert, have the ability to exercise substantial influence over the Company's business by virtue of their voting power with respect to the election of 11
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directors and all other matters requiring action by stockholders. Such concentration of share ownership may have the effect of discouraging, delaying or preventing a change in control of the Company. EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS The Company's Certificate of Incorporation and Bylaws contain certain provisions that could discourage potential takeover attempts and make attempts by the Company's stockholders to change management more difficult. Such provisions include the requirement that the Company's stockholders follow an advance notification procedure for certain stockholder nominations of candidates for the Board of Directors of the Company (the "Board") and for new business to be conducted at any meeting of the stockholders. In addition, the Certificate of Incorporation allows the Board to issue up to 5,000,000 shares of preferred stock and to fix the rights, privileges and preferences of those shares without any further vote or action by the stockholders. The rights of the holders of Common Stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred shares that may be issued by the Company in the future. While the Company has no present intention to issue any shares of preferred stock, any such issuance could have the effect of making it more difficult for a third party to acquire a majority of the outstanding voting stock of the Company. In addition, the Company is subject to certain anti-takeover provisions of the Delaware General Corporation Law, which could have the effect of discouraging, delaying or preventing a change of control of the Company. VOLATILITY OF STOCK PRICE AND ABSENCE OF DIVIDENDS The public trading market for Common Stock was first established after the Company's initial public offering in September 1996. Between the date of the Company's initial public offering and May 20, 1998, the market price of Common Stock has traded at a high of $54.19 per share and a low of $17.75 per share. Future announcements concerning the Company or its competitors, including quarterly results, innovations, new product introductions, governmental regulation, litigation or changes in earnings estimates published by analysts may cause the market price of Common Stock to fluctuate significantly. The stock market has from time to time experienced extreme price and volume fluctuations that have particularly affected the market price for many emerging growth companies that often have been unrelated to the operating performance or prospects of these companies. These fluctuations, as well as general economic, political and market conditions, such as recessions or international currency fluctuations, may adversely affect the market price of Common Stock. There can be no assurance that the market price of Common Stock will not decline below its present market price. The market price of Common Stock is based upon anticipated future earnings growth. Furthermore, the Company is reliant on a core group of key customers. Any loss of any of these customers could be detrimental to the market price of Common Stock. See "-- Reliance on Significant Clients." The future market price of Common Stock will depend on delivering results anticipated by public investors. Any failure to meet specific expectations may have an adverse effect on the market price of Common Stock. YEAR 2000 The Company is undergoing an assessment of its current systems and equipment and is in the process of making the modifications necessary to address the issues presented by the Year 2000 issue. The Company expects to incur no more than $3.0 million in capital expenditures in 1998 with respect to system upgrades which are designed in part to address specific Year 2000 requirements. The Company does not expect expenditures incurred after 1998 for Year 2000 compliance to be material. To the extent that additional acquisitions are consummated, the Company will need to evaluate how the Year 2000 issue will impact its future acquirees. If such expenditures exceed expectations or if a future acquiree requires substantial expenditures to address its Year 2000 issues, the Company's financial results could be adversely affected. There can be no assurance that the Company's systems or the systems of other companies on which the Company's systems rely will be timely installed or converted. Although the impact on the Company caused by the failure of the Company's significant customers or vendors to achieve Year 2000 compliance in a timely or effective manner is uncertain, the Company's business and results of operations could be materially affected by such failure. 12
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USE OF PROCEEDS The net proceeds to be received by the Company of $19.1 million ($36.0 million if the Underwriters' over-allotment options are exercised in full) will be used to fund working capital, capital expenditures, potential acquisitions and general corporate purposes. See "Business--Growth Strategy." The Company is currently considering and expects to continue to consider additional acquisitions that may involve payments in cash or the issuance of additional shares of Common Stock, although there are no definitive agreements, understandings or arrangements to do so at this time. The Company will not receive any proceeds from the sale of shares of Common Stock by the Selling Stockholders. Pending application of the net proceeds as described above, the Company intends to invest the net proceeds in short-term, interest-bearing investment grade securities. DIVIDEND POLICY The Company currently intends to retain future earnings to finance its growth and development and, therefore, does not anticipate paying any cash dividends in the foreseeable future. Payment of any future dividends will depend upon the future earnings and capital requirements of the Company and other factors that the Board considers appropriate. PRICE RANGE OF COMMON STOCK The Common Stock is traded in the U.S. on the New York Stock Exchange (the "NYSE") under the symbol "SNC." At March 31, 1998, there were approximately 330 holders of record of Common Stock, and the Company believes there were approximately 8,100 beneficial owners of the Common Stock. The following table sets forth, for the fiscal periods indicated, the range of high and low sale prices per share of Common Stock as reported on the NYSE. · Download Table HIGH LOW ------ ------ 1996 Third Quarter (From September 24, 1996).......................... $21.75 $17.75 Fourth Quarter................................................... 29.38 18.63 1997 First Quarter.................................................... $33.13 $23.50 Second Quarter................................................... 28.00 19.50 Third Quarter.................................................... 31.06 24.00 Fourth Quarter................................................... 37.25 28.00 1998 First Quarter.................................................... $47.25 $32.56 Second Quarter (Through May 20, 1998)............................ 54.19 39.75 On May 20, 1998, the closing sale price of the Common Stock on the NYSE was $42 per share. 13
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CAPITALIZATION The following table sets forth the combined capitalization of the Company, based on the Consolidated Financial Statements of the Company found elsewhere in this Prospectus, (i) as of March 31, 1998 and (ii) as of March 31, 1998 as adjusted to reflect (a) the issuance of and the use of the net proceeds from the sale of 500,064 shares of Common Stock by the Company (after deduction of underwriting discounts and estimated offering expenses) and (b) the proceeds from the exercise of 71,544 options by certain Selling Stockholders. See "Use of Proceeds." This table should be read in conjunction with the Company's supplemental consolidated financial statements and notes thereto appearing elsewhere in the Prospectus. · Download Table AS OF MARCH 31, 1998 --------------------- ACTUAL AS ADJUSTED -------- ----------- (IN THOUSANDS) Cash and equivalents.................................. $ 62,517 $ 82,020 ======== ======== Current maturities of long-term debt.................. $ 3,527 $ 3,527 ======== ======== Long-term debt and obligations under capital leases... $ 9,410 $ 9,410 Redeemable ESOP stock(1).............................. 6,891 6,891 Equity(2): Preferred stock, $.001 par value per share, 5,000 shares authorized, none issued and outstanding, actual and as adjusted -- -- Common stock, $.001 par value per share, 120,000 shares authorized, actual and as adjusted; 62,266 shares issued and 61,170 outstanding, actual; and 62,838 shares issued and 61,742 outstanding, as adjusted(3)........................................ 62 63 Additional paid-in capital.......................... 266,293 285,795 Retained deficit.................................... (18,209) (18,209) Treasury stock, at cost............................. (7,575) (7,575) Accumulated other comprehensive income(4)........... 1,275 1,275 -------- -------- Total equity...................................... 241,846 261,349 -------- -------- Total capitalization.............................. $258,147 $277,650 ======== ======== -------- (1) Represents the balance necessary to satisfy the repurchase obligations associated with the Company's shares held by the ESOP of an acquired company which have been allocated to former employees of the acquired company whose employment had terminated prior to its merger with the Company. (2) Includes 71,544 shares issuable upon exercise of outstanding options and expected to be sold in the Offerings. Does not include (i) 9,669,536 shares of Common Stock issuable upon exercise of outstanding options and (ii) 2,035,781 shares of Common Stock reserved for future issuance under the Company's 1996 Stock Incentive Plan. See "Shares Eligible for Future Sale." (3) Does not reflect the amendment on May 6, 1998 of the Company's Certificate of Incorporation that increased the authorized number of shares of Common Stock to 400,000,000. (4) The Company adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" during the first quarter of 1998. Included within accumulated other comprehensive income are the cumulative amounts for foreign currency translation adjustments and unrealized gains and losses on marketable securities. 14
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