The Direct Marketing Association's tax return for fiscal 2001 offers stark evidence of how dramatically the business landscape changed from one summer to the next.
During fiscal 2001, which ended June 30, 2001, the DMA operated at a loss of more than $1.7 million and lost more than $1.9 million on its investments, according to the latest available tax records. As a result, its net assets fell from $12 million to $8.4 million.
DM News obtained the tax return through a request to the Internal Revenue Service.
The fiscal year began in summer 2000 when the stock market was flying high and business and technology magazines were fat with advertising. The DMA's fiscal year 2001 ended just after the spring dot-com implosion.
Ironically, two bright spots in the DMA's stock portfolio for the period were Enron Corp. and Tyco International Ltd., two companies that since have become poster children for executive mismanagement and abuse.
At the time of the filing, the DMA owned 3,655 shares of Enron valued at $179,461, which it purchased for $148,061; and 5,765 shares of Tyco valued at $314,250, which it bought for $253,034. It is unknown whether the DMA has since sold those stocks.
Among other notable figures on the return, the DMA spent just over $2.7 million on its 16 officers' compensation and $679,135 on their benefits. President H. Robert Wientzen's compensation was $568,186. The DMA's contribution to his benefit plan was $142,047. The DMA also reported $6.4 million in “other salaries and wages.”
Those executive salaries are not out of whack with similarly sized associations, said nonprofit expert Michael McNee of accounting firm Marks Paneth & Shron LLP, New York, and former chairman of the New York State Society of Certified Public Accountants Nonprofit Organizations Committee.
Association executives reportedly tend to make more than their counterparts in voluntary health and welfare not-for-profits, such as Goodwill and United Way. The Chronicle of Philanthropy, for example, reported earlier this month that of 282 nonprofit groups it surveyed, 34 paid their chief executives $500,000 or more.
In any case, that the DMA ended fiscal 2001 with just under $8.4 million in net assets was a healthy sign, McNee said.
“Their net asset balance is still quite significant,” he said. “The fact that they had a loss for the year of $1.7 million, while that's certainly not a good thing in any given year, they still have net worth.”
Wientzen declined to comment for this article.
Downsizing as Membership Drops
Meanwhile, the DMA said in its annual report that it had 4,769 company members at the close of fiscal 2001. In 2000, it had 4,841.
The questions now are how much membership has declined since then and how well the DMA has been able to stem its losses since fiscal 2002 began in July 2001.
In May 2001, the DMA laid off 14 people. Those dismissals preceded two more rounds in fiscal 2002, which left the DMA with 170 employees. The DMA also restructured to eliminate three officers' positions that were vacated. The association has consolidated office space, bringing the majority of staff from its Broadway location to its 6th Avenue office, leaving the majority of the Broadway space available for sub-lease. It also reportedly has renegotiated contracts with suppliers.
The DMA also began outsourcing registration for its larger conferences beginning with the 2001 fall show in Chicago.
Among its income-bolstering moves, the DMA has increased the number of research products it produces. For example, it has published three new merchandising studies: the Mystery Shopping report, the Merchandising Scan and the Merchant Speaks report.
“These are products our members are most interested in and in need of right now,” said Christina Duffney, director of corporate communications at the DMA.
Also, the DMA has reduced the number of seminars that require members to travel and has conducted some seminars online. It has more than doubled the number of custom on-site seminars, to more than 20, for member companies, Duffney said.
“Whether their travel budgets have been cut or they don't have the time to attend, this way it makes it more convenient for the attendee,” she said.
Among other notable figures on the DMA tax return, it reported spending $3.3 million on membership acquisition and retention in fiscal 2001 and $3.5 million in government relations.
The DMA files its taxes as a 501(c)(6) not-for-profit organization. As a result, its tax filings are public records and available to anyone who requests them. Tax returns for fiscal 2002, which ended June 30, won't be available until next year, and how soon depends on when the DMA files. It filed for an extension until Feb. 15 on its 2001 return.
Conferences Take Big Hit
Overall in fiscal 2001, the DMA spent $42,479,426 on revenue of $40,733,509, according to the return.
In that period it collected $11.8 million in dues. The DMA reported $5.5 million in revenue from the 100-plus seminars it conducted in fiscal 2001. And the bulk of its revenue came from its conferences: $18.5 million. However, during fiscal 2001 the DMA's conferences already were taking some heavy hits as companies' marketing budgets dried up. They continued struggling into fiscal 2002.
The DMA's 83rd Annual Conference & Exhibition in October 2000 in New Orleans was by all accounts a well-attended success. But in March 2001, the DMA's net.marketing show in Seattle was cut short by an earthquake. It was so sparsely attended that once it became clear no one was seriously hurt, bored attendees considered it an excuse to leave. What's more, unrelated riots marred some evening events. Though the quake and riots were out of the DMA's control, they helped etch the event in attendees' minds as a disaster.
This was in stark contrast to previous net.marketing shows. They had worked so well since being rebranded net.marketing in 1997 that the DMA debuted a second one in October 2000 in Boston. The DMA had planned to stage the event twice yearly, but the Boston show was not as well attended. In August 2001, the DMA canceled what would have been its second fall net.marketing show because of a lack of attendance.
And in December 2001, the DMA merged its Association for Interactive Marketing shows and its net.marketing show into one entity, dubbed the DMA/AIM net.marketing Conference & Exhibition.
To bolster its conference division in the wake of fiscal 2001, the DMA has increased sponsorship opportunities for its shows. For this year's annual show, it added the Digital Print Pavilion, a so-called show within a show dedicated to custom printing, sponsored by Hewlett-Packard, Xerox and Nexpress. As a cost-cutting measure, the marketing department has been doing more of its promotions with e-mail, Duffney said.
“[E-mail] also allows you to make and test an offer fairly quickly,” she said, adding that the association also has become more aggressive about targeting offers.
To market the annual show, the DMA identified six segments of its database – members who went to the 83rd show in New Orleans but not the 84th in Chicago, for example – and sent them offers accordingly.
Stocks Plunge
Then there were the stocks.
The DMA reported a $1.9 million slide in the value of its stocks for fiscal year 2001.
The return lists 29 diverse, well-known companies in which the DMA held stock. Among them: American Express Co., Capital One Financial Corp., Dell Computer Corp., Harley Davidson Inc., Home Depot Inc., Johnson & Johnson, Merck & Co. Inc. and Vodafone Group.
The DMA's stock portfolio, which cost the organization $7.1 million and evidently rose well above that by the beginning of the fiscal year, had dropped to $6.6 million by June 30, 2001. It also held $3.6 million worth of government securities and corporate bonds, and $363,584 in money market funds.
Overall, the book value of its securities and investments dropped from $14.3 million in the beginning of fiscal 2001 to $10.5 million at the end.
The DMA also reported on its tax return that it received income from unrelated business. However, the form it must report this income on, a 990-T, is not a public record. As a result, DM News is unable to determine how much revenue the DMA took in from unrelated business or what the venture or ventures entailed.
McNee said the IRS scrutinizes 990-Ts and generally it is understood that revenue on a 990-T should not represent more than 25 percent of income the nonprofit organization brings in from its core mission.
DM News will request the DMA's fiscal 2002 return as soon as it becomes available.
2000-01 EXECUTIVE COMPENSATION
H. Robert Wientzen, Pres.: $568,186 compensation; $142,047 cont. to benefits
Frank Rigano*, Ex. VP: $240,308 compensation; $60,077 cont. to benefits
Gerald Cerasale, Sr. VP: $197,445 compensation; $49,361 cont. to benefits
Peter Eustis, Sr. VP: $169,631 compensation; $42,408 cont. to benefits
Christopher Gallagher, Sr. VP: $165,800 compensation; $41,450 cont. to benefits
Michael Faulkner, Sr. VP: $144,604 compensation; $36,151 cont. to benefits
Jasvant Mahadevia, Sr. VP: $143,220 compensation; $35,805 cont. to benefits
Roscoe Starek III*, Sr. VP: $130,390 compensation; $32,597 cont. to benefits
Richard Barton*, Sr. VP: $63,908 compensation; $15,977 cont. to benefits
Charles Prescott, VP: $177,539 compensation; $44,385 cont. to benefits
Patricia Faley, VP: $157,389 compensation; $39,347 cont. to benefits
Ann Schaeffer, VP: $138,814 compensation; $34,704 cont. to benefits
S. Scott Roberts*, VP: $118,112 compensation; $29,528 cont. to benefits
Mark Micali, VP: $110,658 compensation; $27,664 cont. to benefits
Ann Zeller, VP: $103,644 compensation; $25,911 cont. to benefits
Tana Stellato, VP: $86,893 compensation; $21,723 cont. to benefits
Total: $2,716,541 compensation; $679,135 cont. to benefits
* No longer with DMA
DMA AND SUBSIDIARIES TOP EQUITY STOCK INVESTMENTS
Capital One Financial: 4,910 shares, paid: $183,338, value: $295,337
CitiGroup, 6,140 shares, paid: $184,521, value: $324,438
Clear Channel Comm.: 4,665 shares, paid: $300,309, value: $292,496
Harley Davidson: 6,685 shares, paid: $196,372, value: $314,730
Intel: 9,730 shares, paid: $599,556, value: $284,603
Johnson & Johnson: 5,200 shares, paid: $243,899, value: $260,000
Kohls: 4,365 shares, paid: $153,184, value: $273,816
Pfizer: 7,177 shares, paid: $191,377, value: $ 287,439
Tyco International Ltd.: 5,765 shares, paid: $253,034, value: $314,250
United Technologies: 3,840 shares, paid: $193,854, value: 281,318
Shares and value are as of June 30, 2001
