DMA Loses $3 Million in FY '02The Direct Marketing Association operated at a loss of more than $3 million in fiscal year 2002 and lost $233,865 on its investments, according to its latest tax returns.
The figures represent an improvement in the DMA's investment portfolio performance from the previous year, but a worsening in its financial picture overall. The preceding year, the DMA operated at a loss of more than $1.7 million and lost more than $1.9 million on investments.
The DMA files its taxes as a 501(c)(6) not-for-profit organization. As a result, its tax filings are public record and available to anyone who requests them. They generally become available eight months after the DMA closes its books on the fiscal year.
This year, DM News obtained tax returns dating back to FY '98, which paint a picture of an organization that -- like many -- rode the economy upward until 2001 and then began a fall that would erase years of gains.
The DMA did not return telephone calls or e-mails for comment for this story.
The most recent tax return reflects the 12 months ending June 30, 2002. For perspective, it includes the 84th Annual Conference & Exhibition in Chicago, held just weeks after the Sept. 11, 2001, terrorist attacks. To boost attendance, the DMA was forced to offer big discounts, including free airfare and train tickets to Chicago.
The period also included the U.S. Postal Service's anthrax scare, and was not a pretty year for most. The DMA was no exception.
The association's net assets fell from $8.4 million in FY '01 to $5 million in FY '02, continuing a two-year slide from $12 million in assets reported at the end of FY '00.
Because DM News did not request returns before FY '98, it is not known when the DMA last finished a year with $5 million or less in assets. Here is the breakdown since then:
· In FY '98, the DMA reported closing with $8.7 million in assets and an operating loss of $673,790 on $27.3 million in revenue. It reported gaining $169,307 on its investments.
· In FY '99, the DMA operated at a gain of $315,461 on $30.26 million in revenue. It reported closing with $9.2 million in assets. It reported a gain of $138,543 on investments.
· In FY '00, the DMA gained $1.7 million on $38 million in revenue and reported its assets at $12 million. It reported a gain of $1.1 million on investments.
· In FY '01, the DMA operated at a loss of more than $1.7 million on just under $41 million in revenue and lost more than $1.9 million on investments.
· In FY '02, the most recent year available, the DMA's revenue fell to $29.7 million.
· The most recent return indicates a year in which companies' limited marketing, travel and training budgets continued to hammer at the DMA's bottom line.
The DMA's hardest-hit revenue generator was its meetings and conferences department, which brought in $12 million in FY '02 compared with $18.5 million the preceding year. Also, the association reported $3.1 million in revenue from its seminars for FY '02, down from $5.5 million the year before. Member dues held relatively steady, accounting for $11.3 million of its revenue compared with $11.8 million the year before.
Notably, the association reported that it raised spending on member acquisition and retention in FY '02: a reported $3.9 million compared with $3.3 million the preceding year. But it reported a decrease in spending on "membership promotion," from $2.4 million in FY '01 to $760,214 in FY '02.
Taken together, membership-related spending was $5.7 million in FY '01, dropping to $4.7 million last year.
The DMA also reported a drastic decrease in spending on government relations: $2.6 million in FY '02 compared with $3.5 million in FY '01.
In other cost-cutting moves, the DMA had three rounds of layoffs in FY '02, amounting to more than 15 percent of its staff.
The DMA also changed its compensation-reporting policy for its FY '02 tax return. The return reports only DMA president/CEO H. Robert Wientzen's compensation and that of former senior vice president Jasvant Mahadevia. Rather than report officers' salaries, this year's return lists the names of the DMA's non-paid board of directors. The previous four years, the DMA reported the compensation of nine to 16 of its officers.
An October article in DM News about the DMA's FY '01 tax return listed all officers' salaries. After that, many direct marketers questioned some of the employment packages -- one woman's salary in particular raised eyebrows, as she was compensated just over $86,000 compared with the six-figure salaries of all but one other officer.
"She is the backbone of the conference department," said one insider who declined to go on the record. "She should be making double what that report said she made."
It is unknown whether the DMA gave any of its officers raises in FY '02 other than Wientzen.
Meanwhile, five years' of returns show that Wientzen has received healthy pay increases. In FY '98, the DMA paid Wientzen $388,644 in salary and bonus money and contributed $104,934 to his benefit plan. The following years, his compensation was reported as:
· FY '99, $402,626 in salary and bonus, $108,709 in benefits.
· FY '00, $470,943 in salary and bonus, $117,736 in benefits.
· FY '01, $568,186 in salary and bonus, $142,047 in benefits.
· FY '02, $576,000 in salary and bonus, $144,000 in benefits.
For comparison, Advertising Age reported in December that in total 2001 compensation Advertising Council president/CEO Peggy Conlon received $360,000, American Marketing Association CEO Dennis Dunlap received $284,000 and American Association of Advertising Agencies president O. Burtch Drake received $641,000.
Though it is unclear why the DMA stopped reporting many of its top officers' salaries, a tax expert who wished not to be named said it is not unusual for an association to report only its top one or two "key" officers' compensation.
"They probably checked and realized they didn't have to report all those salaries," he said.
Meanwhile, after taking a hit in the stock market in FY '01, the DMA drastically cut back on its stock portfolio. At the close of FY '01, it reported stock ownership in 29 companies, including Enron Corp. and Tyco International, with a year-ending value of $6.55 million. Its stock portfolio lost $573,333 that year.
At the close of the most recent fiscal year, the DMA reported an $801,883 tech-heavy stock portfolio of just eight companies: Clear Channel Communications, Dell Computer Corp., Goldman Sachs Group, IBM, Intel Corp., Microsoft Corp., Nokia Corp. and Oracle Corp.
The DMA also reported $25,867 in money market funds. The rest of its investments were $2.5 million in government securities and corporate bonds.
To view the DMA's tax return in a PDF format, click on the following link: