-----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, R21dqXOCnPbxWYjJglZBkKwK5zDl1dqQzoEq0WO2tVD3FAtFrzlXP074Q+oYrdqs O0nrD9c1SOTiA7HnAYe+Aw== /in/edgar/work/0000733269-00-000018/0000733269-00-000018.txt : 20001115 0000733269-00-000018.hdr.sgml : 20001115 ACCESSION NUMBER: 0000733269-00-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACXIOM CORP CENTRAL INDEX KEY: 0000733269 STANDARD INDUSTRIAL CLASSIFICATION: [7374 ] IRS NUMBER: 710581897 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13163 FILM NUMBER: 763488 BUSINESS ADDRESS: STREET 1: 1 INFORMATION WAY STREET 2: P O BOX 8180 CITY: LITTLE ROCK STATE: AR ZIP: 72203-0180 BUSINESS PHONE: 5813421000 MAIL ADDRESS: STREET 1: 1 INFORMATION WAY CITY: LITTLE ROCK STATE: AR ZIP: 72202 FORMER COMPANY: FORMER CONFORMED NAME: CCX NETWORK INC DATE OF NAME CHANGE: 19880816 10-Q 1 0001.txt 2ND QUARTER 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ----- to ----- Commission file number 0-13163 Acxiom Corporation (Exact Name of Registrant as Specified in Its Charter) DELAWARE 71-0581897 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) P.O. Box 8180, 1 Information Way, Little Rock, Arkansas 72203 (Address of Principal Executive Offices) (Zip Code) (501) 342-1000 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares of Common Stock, $ 0.10 par value per share, outstanding as of November 7, 2000 was 88,993,102. Form 10-Q PART I - FINANCIAL INFORMATION Item 1. Financial Statements Company for which report is filed: ACXIOM CORPORATION The interim condensed consolidated financial statements included herein have been prepared by Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Registrant's management, however, all adjustments necessary for a fair statement of the results for the periods included herein have been made and the disclosures contained herein are adequate to make the information presented not misleading. All such adjustments are of a normal recurring nature. Form 10-Q ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) September 30, March 31, 2000 2000 ------------ ------------ Assets Current assets: Cash and cash equivalents $ 9,271 23,924 Trade accounts receivable, net 216,213 198,818 Deferred income taxes 18,432 18,432 Other current assets 141,263 98,872 --------- --------- Total current assets 385,179 340,046 --------- --------- Property and equipment 411,335 381,942 Less - Accumulated depreciation and amortization 162,131 132,266 --------- --------- Property and equipment, net 249,204 249,676 --------- --------- Software, net of accumulated amortization 60,351 58,964 Excess of cost over fair value of net assets acquired, net 158,541 145,082 Other assets 368,945 311,528 --------- --------- $ 1,222,220 1,105,296 --------- --------- Liabilities and Stockholders' Equity Current liabilities: Current installments of long-term debt 24,968 23,156 Trade accounts payable 55,227 54,016 Accrued merger and integration costs 740 15,106 Accrued payroll and related expenses 22,673 26,483 Other accrued expenses 35,042 31,779 Deferred revenue 4,229 19,995 Income taxes 22,332 9,473 --------- --------- Total current liabilities 165,211 180,008 --------- --------- Long-term debt, excluding current installments 359,243 289,234 Deferred income taxes 61,486 48,324 Stockholders' equity: Common stock 8,859 8,831 Additional paid-in capital 325,185 325,729 Retained earnings 310,052 257,376 Accumulated other comprehensive loss (5,204) (1,448) Treasury stock, at cost (2,612) (2,758) --------- --------- Total stockholders' equity 636,280 587,730 --------- --------- Commitments and contingencies $ 1,222,220 1,105,296 --------- --------- See accompanying notes to condensed consolidated financial statements. Form 10-Q ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except per share amounts) For the Three Months Ended September 30 2000 1999 ------- ------- Revenue $ 276,061 246,840 Operating costs and expenses: Salaries and benefits 94,922 91,840 Computer, communications and other equipment 49,805 38,570 Data costs 28,418 29,532 Other operating costs and expenses 50,680 47,015 ------- ------- Total operating costs and expenses 223,825 206,957 ------- ------- Income from operations 52,236 39,883 ------- ------- Other income (expense): Interest expense (6,040) (6,534) Other, net (256) 731 ------- ------- (6,296) (5,803) ------- ------- Earnings before income taxes 45,940 34,080 Income taxes 17,687 12,780 ------- ------- Net earnings $ 28,253 21,300 ======= ======= Earnings per share: Basic $ .32 .25 ======= ======= Diluted $ .30 .24 ======= ======= See accompanying notes to condensed consolidated financial statements. Form 10-Q ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except per share amounts) For the Six Months Ended September 30 2000 1999 ------- ------- Revenue $ 521,618 458,346 Operating costs and expenses: Salaries and benefits 186,170 175,549 Computer, communications and other equipment 91,879 72,744 Data costs 54,093 54,648 Other operating costs and expenses 104,018 85,276 Gains, losses and nonrecurring items (3,064) - ------- ------- Total operating costs and expenses 433,096 388,217 ------- ------- Income from operations 88,522 70,129 ------- ------- Other income (expense): Interest expense (11,509) (12,353) Other, net 8,639 1,500 ------- ------- (2,870) (10,853) ------- ------- Earnings before income taxes 85,652 59,276 Income taxes 32,976 22,227 ------- ------- Net earnings $ 52,676 37,049 ======= ======= Earnings per share: Basic $ .60 .44 ======= ======= Diluted $ .56 .42 ======= ======= See accompanying notes to condensed consolidated financial statements. Form 10-Q ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) For the Six Months Ended September 30 2000 1999 ------ ------ Cash flows from operating activities: Net earnings $ 52,676 37,049 Non-cash operating activities: Depreciation and amortization 54,712 40,849 Loss (gain) on disposal or impairment of assets (16,812) 265 Provision for returns and doubtful accounts 1,499 528 Changes in operating assets and liabilities: Accounts receivable (22,073) (23,188) Other assets (74,082) (18,100) Accounts payable and other liabilities (1,701) (13,332) Merger and integration costs (14,366) (15,422) ------ ------ Net cash provided (used) by operating activities (20,147) 8,649 ------ ------ Cash flows from investing activities: Disposition of assets 34,485 1,211 Development of software (18,738) (20,736) Capital expenditures (44,007) (64,701) Proceeds from sale and leaseback transaction - 32,513 Investments in joint ventures (18,707) (1,401) Net cash paid in acquisitions (14,133) (15,581) ------ ------ Net cash used by investing activities (61,100) (68,695) ------ ------ Cash flows from financing activities: Proceeds from debt 78,958 76,076 Payments of debt (11,840) (77,939) Sale of common stock 9,975 62,636 Acquisition of treasury stock (10,345) - ------ ------ Net cash provided by financing activities 66,748 60,773 ------ ------ Effect of exchange rate changes on cash (154) (16) ------ ------ Net decrease in cash and cash equivalents (14,653) 711 Cash and cash equivalents at beginning of period 23,924 12,604 ------ ------ Cash and cash equivalents at end of period $ 9,271 13,315 ====== ====== Supplemental cash flow information: Cash paid during the period for: Interest $ 14,634 16,454 Income taxes 7,034 717 ====== ====== See accompanying notes to condensed consolidated financial statements. Form 10-Q ACXIOM CORPORATION AND SUBSIDIARIES NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Certain note information has been omitted because it has not changed significantly from that reflected in Notes 1 through 18 of the Notes to Consolidated Financial Statements filed as a part of Item 14 of the Registrant's 2000 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on June 26, 2000. ACXIOM CORPORATION AND SUBSIDIARIES NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. During the year ended March 31, 1999, the Company recorded special charges totaling $118.7 million related to merger and integration charges associated with the May & Speh merger and the write down of other impaired assets. The following table shows the remaining balances which were accrued as of March 31, 2000 and the changes in those balances during the six months ended September 30, 2000 (dollars in thousands): March 31, Less September 30, 2000 Payments 2000 ------ ------ ---- Associate-related reserves $ 1,052 575 477 Contract termination costs 13,500 13,500 - Other accruals 554 291 263 ------ ------ --- $15,106 14,366 740 ====== ====== === The remaining associate-related reserves and other accruals will be paid out over remaining periods ranging up to four years. Effective May 15, 2000 the Company acquired certain assets and assumed certain liabilities of MCRB Service Bureau, Inc. for cash of $5.8 million. MCRB provides information technology outsourcing services. The acquisition has been accounted for as a purchase and, accordingly, the results of operations of MCRB are included in the consolidated results from the date of acquisition. The excess of purchase price over the fair value of net assets acquired of $11.8 million is being amortized over 20 years. The pro forma effect of the acquisition is not material to the Company's consolidated results for the periods reported. Effective February 1, 2000, the Company sold certain assets and a 51% interest in a newly formed Limited Liability Company ("LLC") to certain management of its Acxiom/Direct Media, Inc. business unit ("DMI"). The LLC was formed by the contribution of net assets used in the DMI operations. As consideration, the Company received a 6% note in the approximate amount of $22.5 million payable over 7 years. The Company also retained a 49% interest in the LLC. During the quarter ended June 30, 2000, the Company agreed to sell its remaining 49% interest in the LLC and certain other assets to DMI management for an additional note of $1.0 million. The Company also committed to complete the development of a computer system for the LLC. As a result of this sale agreement, the Company has written down its investment in the assets of DMI by $20.0 million. This amount is included in gains, losses and nonrecurring items. The sale is a divestiture for legal and tax purposes, but not for accounting purposes under applicable accounting rules because the collection of the sales price is primarily dependent on the buyer's ability to repay the note through operations of the business. Accordingly, any losses of the LLC will continue to be included in the Company's financial statements until such time as a sufficient portion of the note balance has been collected, at which time the Company will account for the transaction as a sale. The note receivable is included in other assets. Effective April 25, 2000, the Company sold a portion of its DataQuick business group, which is based in San Diego, California, to MacDonald Dettwiler & Associates, Ltd., a publicly-traded Canadian information products company, for $55.5 million. The Company retained the real property data sourcing and compiling portion of DataQuick. Of the total sale price, $30.0 million was received in cash as of the effective date. The gain on sale of these assets, which is included in gains, losses and nonrecurring items, was $39.7 million. The receivable for the remaining $25.5 million is included in other current assets, and was collected subsequent to September 30, 2000. Effective April 10, 2000, the Company sold its investment in Ceres, Inc. to NCR Corporation. The Company received cash, a note, and NCR stock totaling $14.8 million, and recorded investment income of $6.2 million on the disposal, which is included in other income. Effective April 1, 2000, the Company sold its CIMS business unit for preferred stock and options in Sedona Corp., a publicly-traded company. The preferred stock and options received had an aggregate fair value of $3.1 million. The Company recorded a loss on the disposal of $3.2 million, which is included in gains, losses and nonrecurring items. In addition to the DataQuick gain, DMI write-down and CIMS loss noted above, gains, losses and nonrecurring items also includes the write-off during the quarter ended June 30, 2000 of $7.2 million of certain campaign management software which management decided to discontinue support of during the quarter as a result of the Company's strategy to utilize external application software tools rather than building such tools internally. The Company performed an analysis to determine whether and to what extent these assets had been impaired. These assets were completely written off as their fair value was estimated to be zero. During the quarter ended June 30, 2000, the compensation committee of the Company committed to pay in cash $6.3 million of "over-attainment" incentive which was related to results of operations in prior years. Under the normal policy of the Company's compensation plan, such over-attainment would have been distributed in the form of stock options with an exercise price equal to the market price at date of grant. Therefore, under applicable accounting rules, there would have been no compensation expense. The one-time decision to pay this amount in cash is an accruable event, and resulted in a charge that has been recorded in gains, losses and nonrecurring items. In accordance with the Company's existing over-attainment plan, the amount accrued will be paid over the next three fiscal years beginning in May 2001, assuming continued performance. 2. Other assets consist of the following (dollars in thousands): September 30, March 31, 2000 2000 ------- ------- Purchased software licenses $125,171 123,846 Deferred contract costs 70,314 63,173 Notes receivable from software and data licenses and sales of equipment, net of current portion 91,345 55,804 Assets transferred under contractual arrangement 23,575 34,291 Investments in joint ventures and other companies 47,642 22,890 Other 10,898 11,524 ------- ------- $368,945 311,528 ======= ======= The increase in notes receivable is primarily due to sales of AbiliTec software. AbiliTec software is sold under licenses which generally have terms of from one to three years. The Company records the license revenue as a note receivable, which is collected over the license term. Revenue for maintenance and service transactions is recognized as it is earned and billed over the license term. The current portion of such notes are included in other current assets. The decrease in assets transferred under contractual arrangement is due to the DMI write-down noted above. The increase in joint ventures and other companies includes an additional $5.4 million investment in an Australian joint venture, $6.0 million invested in USADATA.com, Inc., and $5.0 million invested in HealthCarePro Connect, LLC, a joint venture with the American Medical Association, as well as the consideration received in NCR and Sedona stock noted above. Other current assets includes the current portion of the notes receivable from software and data licenses and equipment sales of $60.3 million and $42.4 million as of September 30, 2000 and March 31, 2000, respectively. Other current assets also includes prepaid expenses, nontrade receivables and other miscellaneous assets of $81.0 million and $56.5 million as of September 30, 2000 and March 31, 2000, respectively. The September 30, 2000 balance includes the remaining receivable from MacDonald Dettwiler of $25.5 million, which was collected in October, 2000. 3. Long-term debt consists of the following (dollars in thousands): September 30, March 31, 2000 2000 ------- ------- 5.25% Convertible subordinated notes due $115,000 115,000 2003; convertible at the option of the holder into shares of common stock at a conversion price of $19.89 per share; redeemable at the option of the Company at any time on or after April 3, 2001 Software license liabilities payable over 63,377 67,545 terms of from five to seven years; effective interest rates at approximately 6% Unsecured revolving credit agreement 136,974 61,500 6.92% Senior notes due March 30, 2007, 30,000 30,000 payable in annual installments of $4,286 commencing March 30, 2001; interest is payable semiannually Capital leases on land, buildings and 17,798 18,051 equipment payable in monthly payments of $357 of principal and interest; remaining terms of from five to twenty years; interest rates at approximately 8% 8.5% Unsecured term loan; quarterly 7,800 8,200 principal payments of $200 plus interest with the balance due in 2003 Other capital leases, debt and long-term 13,262 12,094 liabilities ------- ------- Total long-term debt 384,211 312,390 Less current installments 24,968 23,156 ------- ------- Long-term debt, excluding current $359,243 289,234 installments ======= ======= In connection with the construction of the Company's new headquarters building and a new customer service facility in Little Rock, Arkansas, the Company has entered into 50/50 joint ventures with local real estate developers. In each case, the Company is guaranteeing portions of the loans for the buildings. The aggregate amount of the guarantees at September 30, 2000 was approximately $4.5 million. 4. Below is a calculation and reconciliation of the numerator and denominator of basic and diluted earnings per share (dollars in thousands, except per share amounts): For the Quarter Ended For the Six Months Ended September 30, September 30, 2000 1999 2000 1999 ------ ------ ------ ------ Basic earnings per share: Numerator - net earnings $ 28,253 21,300 52,676 37,049 ====== ====== ====== ====== Denominator: Weighted average shares outstanding 88,221 84,741 88,095 83,764 ====== ====== ====== ====== Earnings per share $ .32 .25 .60 .32 ====== ====== ====== ====== Diluted earnings per share: Numerator: Net earnings $ 28,253 21,300 52,676 37,049 Interest expense on convertible debt (net of tax effect) 928 943 1,857 1,886 ------ ------ ------ ------ $ 29,181 22,243 54,533 38,935 ====== ====== ====== ====== Denominator: Weighted average shares outstanding 88,221 84,741 88,095 83,764 Effect of common stock options and warrants 3,388 3,569 3,562 3,849 Convertible debt 5,783 5,783 5,783 5,783 ------ ------ ------ ------ 97,392 94,093 97,440 93,396 ====== ====== ====== ====== Earnings per share $ .30 .24 .56 .42 ====== ====== ====== ====== Options to purchase shares of common stock that were outstanding during the periods reported, but were not included in the computation of diluted earnings per share because the option exercise price was greater than the average market price of the common shares, are shown below: For the Quarter Ended For the Six Months Ended September 30, September 30, 2000 1999 2000 1999 ---- ---- ---- ---- Number of shares under option (in thousands) 2,872 4,059 2,073 2,713 Range of exercise prices $17.93 - 54.00 $23.55 - 54.00 $17.93 - 54.00 $23.55 - 54.00 ============= ============= ============= ============= As of September 30, 2000 the Company has entered into equity forward purchase agreements to purchase 3.7 million shares of stock. The effects of settling these equity forward contracts are not reflected in the computation of diluted earnings per share, because the effect is anti-dilutive since the market price of the Company's common stock is greater than the prices under the equity forward agreements. 5. Trade accounts receivable are presented net of allowances for doubtful accounts, returns, and credits of $6.0 million at September 30, 2000 and $5.4 million at March 31, 2000. 6. The following tables present information by business segment (dollars in thousands): For the Quarter Ended For the Six Months Ended September 30, September 30, 2000 1999 2000 1999 ---- ---- ---- ---- Services $202,289 183,281 378,683 329,443 Data Products 76,607 39,736 102,189 71,792 Information Technology (I. T.) Management 55,111 43,650 112,581 88,988 Intercompany eliminations (57,946) (19,827) (71,835) (31,877) ------- ------- ------- ------- Total revenue $276,061 246,840 521,618 458,346 ======= ======= ======= ======= Services 58,757 34,951 94,197 58,503 Data Products 36,910 2,853 30,808 5,495 Information Technology (I. T.) Management 1,826 10,058 12,722 20,019 Intercompany eliminations (43,771) (9,715) (52,185) (15,651) Corporate and other (1,486) 1,736 2,980 1,763 ------- ------- ------- ------- Income from operations $52,236 39,883 88,522 70,129 ======= ======= ======= ======= The Company has reorganized its segments for the current year. The primary change was to reclassify the business units associated with Direct Media from the Data Products segment to the Services Segment. Also, the International Division, which was exclusively in the Services segment, has been reorganized with the appropriate revenues and expenses being allocated to Services, Data Products and Information Technology Management. The prior year segment information has been restated to conform to the current year presentation. 7. The accumulated balance of other comprehensive loss, which consists of foreign currency translation adjustments and unrealized depreciation on marketable securities, was $5.2 million and $1.4 million as of September 30, 2000 and March 31, 2000, respectively. Comprehensive income was $25.5 million and $22.2 million for the quarters ended September 30, 2000 and 1999, respectively, and was $48.9 million and $37.8 million for the six months ended September 30, 2000 and 1999, respectively. Form 10-Q Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations For the quarter ended September 30, 2000, consolidated revenue was $276.1 million, reflecting a 12% increase over the second quarter in the previous year. Excluding operations disposed of subsequent to the year-earlier quarter, including DMI and DataQuick, consolidated revenue increased 28%. Further adjusting each quarter's revenue for sales of server equipment, which decreased from $17.3 million to $14.0 million, revenue increased 32% compared to the prior year. The increase in revenue was fueled by sales of AbiliTec software, which contributed over $40.0 million in revenue for the quarter. For the six months ended September 30, 2000, consolidated revenue was $521.6 million, up 14% from the same period a year ago. Excluding the impact of the dispositions referred to above, revenue increased 28% compared to the prior year. The following table shows the Company's revenue by business segment for the quarters ended September 30, 2000 and 1999 (dollars in millions): September 30, % 2000 1999 Change ----- ---- Services $202.3 $183.3 +10% Data Products 76.6 39.7 +93 I. T. Management 55.1 43.6 +26 Intercompany eliminations (57.9) (19.8) +192 ----- ----- ---- $276.1 $246.8 +12% ===== ===== ==== Services segment revenue of $202.3 million grew 10% over the prior year. Excluding operations disposed of and the impact of server sales referred to above, the Services segment grew 32%. The growth in the Services segment reflects a strong contribution from AbiliTec revenue. For the six months ended September 30, 2000 the Services segment recorded revenue of $378.7 million, an increase of 15%. Again excluding dispositions since the prior year, the Services segment grew 28% over the prior year period. Data Products segment revenue of $76.6 million almost doubled the revenue from the prior year, reflecting the significant impact from AbiliTec software sales. Excluding the impact from dispositions, the segment revenue would have increased 140% over the prior year. Data Products segment revenue before the impact of AbiliTec increased nearly 20% after allowing for dispositions. For the six month period, Data Products segment revenue grew 42% to $102.2 million. Information Technology ("I. T.") Management segment revenue of $55.1 million reflects a 26% increase over the prior year. The I. T. Management segment closed six new or expanded mainframe and mid-range data center outsourcing and web hosting contracts during the quarter. For the six month period, I. T. Management revenue grew 27% to $112.6 million. Certain revenues, including most AbiliTec software and data product revenue, are reported both as revenue in the segment which owns the customer relationship (generally the Services segment) as well as the Data Products segment which owns the product development, maintenance, sales support, etc. These duplicate revenues are eliminated in consolidation. The intercompany elimination increased 192% for the quarter, due to the impact of significant AbiliTec software revenue. The following table presents operating expenses for the quarters ended September 30, 2000 and 1999 (dollars in millions): September 30, % 2000 1999 Change ---- ---- Salaries and benefits $94.9 $91.9 + 3% Computer, communications and other equipment 49.8 38.6 +29 Data costs 28.4 29.5 - 4 Other operating costs and expenses 50.7 47.0 + 8 ---- ---- --- $223.8 $207.0 + 8% ===== ===== === Salaries and benefits for the quarter increased 3% from the prior year's second quarter. Excluding operations disposed of, salaries and benefits increased 20% reflecting additional headcount to support the growth of the business, merit increases and a larger incentive accrual. For the six months ended September 30, 2000, the increase in salaries and benefits was 6%, or 23% after adjusting for the disposals referred to above. Computer, communications and other equipment costs increased 29% over the second quarter in the prior year. Adjusting for the impact of the dispositions noted earlier would result in computer, communications and other equipment costs increasing 42% over the prior year. This growth is principally due to the increased level of hardware and software expenditures made over the last year to support the growth of the business, particularly in the I. T. Management segment, as well as additional expense associated with building the AbiliTec infrastructure. For the six months, computer, communications and other equipment costs increased 26%, or 35% after adjusting for the disposals. Data costs for the quarter decreased 4% from the prior year, and were substantially unchanged from the prior year after adjusting for disposals. For the six months, data costs decreased 1%. Increases in data costs have been substantially mitigated by a reduction in the cost of data associated with lower revenue under the Allstate data management contract. Allstate revenue increased 4% for the second quarter but has decreased 2% for the six months. Other operating costs and expenses for the second quarter increased by 8% compared to a year ago. Adjusting for the impact of the dispositions, other operating costs and expenses grew 17%. This increase reflects the impact from growth in the business on office and operating expenses, travel, temporary staffing, and administrative costs. In addition, increases in advertising and marketing costs of $1.3 million were incurred to support the roll-out of AbiliTec. All of the above increases were offset by lower cost of sales for server equipment sold in data warehousing solutions. For the six months ended September 30, 2000, other operating expenses increased 22%, or 33% after adjusting for the dispositions. Expenses for the six months have also been impacted by the same factors noted above, most notably by the advertising and marketing expenditures related to AbiliTec. The six month period includes a net gain associated with gains, losses and nonrecurring items of $3.1 million recorded in the first quarter reflecting the $39.7 million gain on the sale of the DataQuick operation in April, the $3.2 million loss on the sale of the CIMS business unit, a $20.0 million write-down of the remaining 49% interest in the DMI operation, a $7.2 million write-down of campaign management software, and a $6.3 million accrual established to fund over-attainment incentives. The Company's operations for both the quarter and the six months ended September 30, 2000 were heavily impacted by investment in the AbiliTec software. This investment has totaled approximately $36.5 million for the six months, including $14.5 million of capitalized software development, with the remaining $22.0 million being expensed. As of September 30, 2000 net capitalized software related to AbiliTec totaled $23.8 million. Income from operations for the quarter of $52.2 million represents an increase of 31% over the prior year. For the six month period, income from operations increased 26% to $88.5 million. Excluding the net gain in the first quarter noted above, operating income for the six months of $85.5 million increased 22% compared to the same period a year ago. Operating margin for the quarter increased from 16.2% to 18.9%. Interest expense for the quarter of $6.0 million decreased from $6.5 million last year reflecting slightly lower average debt levels this year. Other, net decreased from $0.7 million income in last year's second quarter to $0.3 million expense this year due to the recording of losses on the Company's joint ventures during the current fiscal year which offset interest income from notes receivable. For the six months, interest expense decreased from $12.4 million to $11.5 million, for the same reason as noted above for the quarter. Other net for the six months increased from $1.5 million income to $8.6 million income largely due to a $6.2 million gain on the sale of the Company's investment in Ceres. Other, net also includes investment income, principally on the exchange of the Company's investment in Customer Analytics for stock in Exchange Applications, Inc., a publicly-traded company, equity in losses of joint ventures, and interest income from notes receivable. Earnings before income taxes of $45.9 million for the quarter increased 35% over the same quarter a year ago. For the six months, earnings before income taxes grew 44% to $85.7 million. The Company's effective tax rate was 38.5% in the current quarter and six months compared to 37.5% in the prior year. The Company currently expects its effective tax rate to remain at 38.5% for fiscal 2001. This estimate is based on current tax law and current estimates of earnings, and is subject to change. Basic earnings per share for the quarter were $0.32 compared to $0.25 a year ago. Diluted earnings per share for the quarter were $0.30 compared to $0.24 a year ago. For the six month period, basic earnings per share were $0.60 compared to $0.44 a year ago. Diluted earnings per share were $0.56 for the six months compared to $0.42 a year ago. Capital Resources and Liquidity Working capital at September 30, 2000 totaled $220.0 million compared to $160.0 million at March 31, 2000. At September 30, 2000, the Company had available credit lines of $296.5 million of which $138.5 million was outstanding. The Company's debt-to-capital ratio (capital defined as long-term debt plus stockholders' equity) was 36% at September 30, 2000 compared to 33% at March 31, 2000. Included in long-term debt at both September 30, 2000 and March 31, 2000 is a convertible note in the amount of $115.0 million. The conversion price for the convertible debt is $19.89 per share and the debt is callable by the Company, beginning April 3, 2001. If the price of the Company's common stock stays above the conversion price, management expects this debt to be converted to equity. Assuming the convertible debt had converted to equity, the Company's debt-to-capital ratio would have been reduced to 25% at September 30, 2000. Total stockholders' equity has increased 8% to $636.3 million at September 30, 2000 from $587.7 million at March 31, 2000. Cash used by operating activities was $20.1 million for the six months ended September 30, 2000 compared to $8.6 million provided by operating activities for the same period in the prior year. Earnings before interest expense, taxes, depreciation, and amortization ("EBITDA"), increased 35% to $151.9 million for the six month period. EBITDA is not intended to represent cash flows for the period, is not presented as an alternative to operating income as an indicator of operating performance, may not be comparable to other similarly titled measures of other companies, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. However, EBITDA is a relevant measure of the Company's operations and cash flows and is used internally as a surrogate measure of cash provided by operating activities. Operating cash flow was reduced by $112.2 million in the current year, and $70.0 million in the prior year due to the net change in operating assets and liabilities. The increase in other assets of $74.1 million in the current year includes an increase in both current and non-current notes receivable of $53.4 million, primarily due to sales of AbiliTec software recorded during the second quarter. The change in operating assets and liabilities also includes payment of $14.4 million in merger and integration costs related to the Company's merger with May & Speh. The bulk of these costs have now been paid, with only $0.7 million still remaining to be paid out. Accounts receivable days sales outstanding ("DSO") were 82 days at September 30, 2000, compared to 67 days at March 31, 2000. The Company adjusts accounts receivable and revenues to place them on a comparable basis, including removing notes receivable from revenues in the calculation since notes receivable are not included in accounts receivable. Investing activities used $61.1 million for the six months ended September 30, 2000, compared to $68.7 million a year previously. Investing activities in the current year included $34.5 million in cash proceeds from the disposition of assets, primarily the $30.0 million from the sale of the DataQuick operation to MacDonald Dettwiler & Associates, Ltd., a Canadian public company. The remaining $25.5 million receivable from this sale was collected subsequent to September 30, 2000. The bulk of the remainder of the proceeds from the disposition of assets relates to cash received from the disposal of the Ceres investment. Investing activities in the current year also include capitalized software development costs of $18.7 million and capital expenditures of $44.0 million. Capital expenditures decreased compared to the previous year, due to much of the Company's hardware needs being funded through a synthetic leasing facility which was entered into in the prior year. The Company funded $18.2 million in equipment under the synthetic lease facility during the six months ended September 20, 2000 and has $16.2 million remaining under the original $100 million commitment. The Company has also secured an additional commitment of $40.0 million in synthetic leases for furniture and fixtures and has funded purchases of approximately $10.9 million during the six months. The effect of the synthetic lease reduces operating cash flow, since payments under the lease are a cash expense, while depreciation is not. Investing activities during the current year also include investments in joint ventures of $18.7 million, which includes an additional advance of $5.4 million to the Company's joint venture in Australia to fund acquisitions, a $5.0 million investment in HealthCarePro Connect, LLC, a joint venture with the American Medical Association, and a $6.0 million investment in USADATA.com, Inc. Net cash paid in acquisitions in the current year of $14.1 million includes the acquisition of MCRB, Inc. in April for $5.8 million. The remainder of the cash paid in acquisitions relates to earn-out payments made during the current year for acquisitions initially recorded in prior years. Note 1 to the consolidated financial statements discusses the acquisitions and dispositions in more detail. Financing activities in the current year provided $66.7 million, most of which relates to debt proceeds from the Company's revolving credit arrangement. The Company also has purchased $10.3 million of common stock in the open market and may continue to purchase stock in the open market from time to time. During the first quarter ended June 30, 2000, the Company occupied a new customer service facility in Conway, Arkansas, and subsequent to September 30, 2000 has begun construction on another customer service facility in Little Rock, as well as a new customer service and data center facility in Phoenix. The Little Rock building is expected to cost approximately $30.0 to $35.0 million including interest during construction and construction is expected to last until November 2002. The Phoenix project is expected to cost approximately $25.0 million, including land and construction interest, and construction is expected to last until January 2002. The City of Little Rock has issued revenue bonds for the Little Rock project. The Company is financing both the Phoenix and Little Rock projects using an off balance sheet synthetic lease arrangement. Upon completion, the impact of these two leasing arrangements will reduce operating cash flow by approximately $5.0 million per year over the three-year minimum term of the lease. The Company has also announced its intention to build another facility in central Arkansas, although plans and financing arrangements for that facility are incomplete. While the Company does not have any other material contractual commitments for capital expenditures, additional investments in facilities and computer equipment continue to be necessary to support the growth of the business. In addition, new outsourcing or facilities management contracts frequently require substantial up-front capital expenditures in order to acquire or replace existing assets. In some cases, the Company also sells software and hardware to customers under extended payment terms or notes receivable collectible generally over three years. These arrangements also require up-front expenditures of cash, which are repaid over the life of the agreement. The Company also evaluates acquisitions from time to time, which may require up-front payments of cash. Depending on the size of the acquisition it may be necessary to raise additional capital. If additional capital becomes necessary, the Company would first use available borrowing capacity under its revolving credit agreement, followed by the issuance of other debt or equity securities. The Company is currently negotiating an accounts receivable securitization facility which may either supplement or partially replace its existing revolving credit facility, and is also negotiating an additional synthetic leasing commitment for computer equipment. As of September 30, 2000 the Company has entered into three equity forward purchase agreements with a commercial bank under which the Company will purchase 3.1 million, 0.2 million, and 0.5 million shares of its common stock at an average total cost of $20.81, $26.51, and $23.37 per share, respectively, for a total notional amount of $80.0 million. In accordance with the terms of the forward contracts, the shares remain issued and outstanding until the forward purchase contracts are settled. The agreements may be settled in cash, shares of common stock, or in net shares of common stock. The Company has the option to settle the contracts at any time prior to December 26, 2003, and has accounted for these forward contracts as permanent equity. The fair value of the equity forward contracts as of September 30, 2000 was $37.2 million, based on a stock price of $31.75. An increase or decrease in the stock price of $1.00 per share increases or decreases the market value by approximately $3.7 million. The Emerging Issues Task Force ("EITF") of the Financial Accounting Standards Board has recently reached a consensus in EITF 00-7 that requires such contracts entered into after March 15, 2000 to be recorded as assets and liabilities, with adjustments to the market value of the common stock to be recorded on the income statement, in situations in which the counter party can force the contracts to be settled in cash. The effective date of the new consensus was delayed until December 31, 2000 to allow such contracts to be amended. The EITF has subsequently reached conclusions in EITF 00-19 that also require asset and liability treatment in certain circumstances, including when an agency agreement is in place. In order to qualify for permanent equity treatment, the forward contract must permit settlement in unregistered shares, contain an explicit cap on the number of shares to be delivered under a net share settlement, must not require the posting of collateral, and must not provide the commercial bank with any right that would rank higher than those of a common shareholder. Additionally the forwards must not require cash "true-ups" under the net share method and must not contain any economic penalties that would compel the Company to net cash settle. The Company has amended the forward agreements to comply with the permanent equity provisions of EITF 00-7 and EITF 00-19. Year 2000 Many computer systems ("IT Systems') and equipment and instruments with embedded microprocessors ("non-IT systems") were designed to only recognize the last two digits of a calendar year. With the arrival of the Year 2000, these systems and microprocessors may encounter operating problems due to their inability to distinguish years after 1999 from years preceding 1999. This could manifest in a system failure or miscalculations causing disruption of operations, including, among other things, a temporary inability to process or transmit data, or engage in normal business activities. As a result, the Company has previously engaged in an extensive project to remediate or replace its date-sensitive IT systems and non-IT systems. From 1996 through 1999, the Company was engaged in an enterprise-wide effort ("the Project") to address the risks associated with the Year 2000 problem, both internal and external. While the core Project substantially ended on March 31, 1999, a transition strategy was implemented moving the Company from a project mode to a standards-based maintenance mode. The Company also monitored Year 2000 issues during the Year 2000 rollover event, from midnight December 30, 1999, through midnight January 2, 2000, and exercised critical production systems and equipment on Saturday January 1, 2000 to identify if they were operating correctly. Like most well prepared companies, the Company did not experience any significant Year 2000 related issues during the rollover period or thereafter. The Company currently believes that with modifications to existing software and conversions to new software, the Year 2000 issues have been mitigated. But a vendor or customer may have failed to convert its software or may have implemented a conversion that is incompatible with the Company's systems, which could have a material adverse impact on the Company. In an effort to mitigate any remaining risks associated with the Year 2000 problem, efforts to maintain and enhance our state of readiness will continue throughout the year 2000. Some of the follow-on activities include ensuring that existing operations remain Year 2000 ready, continuing vendor product analysis and evaluation, establishing the Year 2000 readiness of acquisitions, and reviewing or enhancing contingency plans. The Company will continue to maintain awareness and address the Year 2000 problem from both a leadership and operational perspective throughout this year. Despite the best efforts of the Company, the failure to correct a material Year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations. Any failures could materially and adversely affect the Company's results of operations, liquidity and financial condition. While there remains some general uncertainty inherent in the Year 2000 problem, resulting in part from the uncertainty of the Year 2000 readiness of third party vendors and customers, the Company does not believe at this time that the consequences of Year 2000 failures will have a material impact on the Company's results of operations, liquidity or financial condition. New Accounting Pronouncement On December 3, 1999 the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 summarizes certain of the SEC staff's views in applying generally accepted accounting principles to revenue recognition in financial statements and affects a broad range of industries. Subsequently, the SEC has issued Staff Accounting Bulletins No. 101A and 101B which deferred the effective date of SAB 101. The accounting and disclosure requirements of SAB 101 will now be effective for Acxiom in the last quarter of fiscal 2001. The Company is currently evaluating the effects of SAB 101 on its methods of recognizing revenue and has not yet quantified the impact, if any, the application of SAB 101 will have on the Company's results of operations or financial position. In September 2000, the Financial Accounting Standards Board issued Financial Accounting Standard ("FAS") No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" which replaces FAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". This standard revises the methods for accounting for securitizations and other transfers of financial assets and collateral as outlined in FAS No. 125, and requires certain additional disclosures. For transfers and servicing of financial assets and extinguishments of liabilities, this standard will be effective for the Company's June 30, 2001 financial statements. However, for disclosures regarding securitizations and collateral, as well as the accounting for recognition and reclassification of collateral, this standard will be effective for the Company's December 31, 2000 financial statements. The Company is currently evaluating the impact of the adoption of this standard, however it does not expect the adoption of this standard to have a material effect on its financial position or results of operations. Outlook The opportunities for AbiliTec continue to grow as companies aggressively implement customer relationship management (CRM) strategies. These CRM efforts are putting focus on the need to aggregate customer information across the enterprise, sometimes on a real-time basis. Acxiom's AbiliTec software provides the customer data integration that can accurately and quickly aggregate all records about an individual. Customer data integration (or CDI) is the foundational data management process for every use of customer information. During the quarter, a number of companies adopted AbiliTec as their software to deliver customer data integration. The following statements are based on current expectations. These statements are forward looking, and actual results may differ materially. These statements do not include the potential impact of any mergers, acquisitions or other business combinations or divestitures that may be completed after September 30, 2000. As a result of the events outlined above, we believe the opportunities for AbiliTec will enhance our outlook for the balance of fiscal 2001 as follows: o The Company expects revenue growth for the remainder of the fiscal year to be at least 25% above fiscal 2000 after adjusting for divested operations and any unusual level of sales of computer equipment (client servers) associated with delivering data warehouse solutions. o The Company expects that AbiliTec revenues for this fiscal year could be $90 million-$125 million. o The tax rate for fiscal 2001 is expected to be 38.5%. o Capital expenditures are expected to be $90 million to $100 million for fiscal 2001. o Capitalized development of software costs are expected to be $30 million to $35 million for fiscal 2001. o Depreciation and amortization costs are expected to be $100 million to $110 million for fiscal 2001. Additional applications for AbiliTec also continue to arise, most notably the ability to assist companies in implementing their consumer privacy policy strategies. The recent passage of the Gramm-Leach-Bliley legislation, which has significant ramifications for the financial services industry, represents a significant opportunity for AbiliTec. Also, Acxiom's channel partner strategy continues to gain momentum as software providers, consultants, system integrators and others realize the power of AbiliTec to enhance the selling of their products and their services. As a result of the events outlined above, we believe that the opportunities for AbiliTec will enhance our outlook for the balance of fiscal 2001 such that our earnings per share growth could be 20% or higher over the previous year excluding the net gain on dispositions reported in the first quarter of fiscal 2001. For fiscal 2002, we believe that revenue and earnings per share should grow 25% or more over fiscal 2001. In connection with the recent adoption of the new SEC rules on corporate disclosure, Acxiom is changing its procedures for publishing and updating its Outlook forward-looking statements and risk factors statements. Following the publication of Outlook in its quarterly earnings release, Acxiom will continue its current practice of having corporate representatives meet privately during the quarter with investors, the media, investment analysts and others. At these meetings Acxiom may reiterate the Outlook publicly available on its web site (www.acxiom.com). Prior to the start of the Quiet Period (described below), the public can continue to rely on the Outlook on the web site as still being Acxiom's current expectations on matters covered, unless Acxiom publishes a notice stating otherwise. Toward the end of each fiscal quarter, Acxiom will have a "Quiet Period" when it no longer publishes or updates Outlook and Acxiom representatives will not comment concerning Outlook or Acxiom's financial results or expectations. The Quiet Period will extend until the day when Acxiom's next quarterly earnings release is published. For the third quarter, the Quiet Period will be December 23, 2000 through January 23, 2001. Certain statements in this quarterly report may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which are not statements of historical fact, may contain estimates, assumptions, projections and/or expectations regarding the Company's financial position, results of operations, market position, product development, regulatory matters, growth opportunities and growth rates, acquisition and divestiture opportunities, and other similar forecasts and statements of expectation. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and "should," and variations of these words and similar expressions, are intended to identify these forward-looking statements. Such forward-looking statements are not guarantees of future performance. They involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements include: statements concerning the Company's need for additional capital and the ability to raise additional capital; statements concerning the Company's ability to remediate date sensitive IT-systems and non-IT systems in conjunction with the arrival of the year 2000 and the impact of those efforts, and their success or failure, on the Company's future results of operations; statements concerning future earnings per share growth; statements concerning the length and future impact of the Company's investment in Acxiom Data Network and AbiliTec products on the Company's future revenue and margins; statements concerning the benefits of AbiliTec for our customers; statements concerning any competitive lead; statements concerning the impact of implementation of Acxiom Data Network and AbiliTec technology in CRM applications; statements concerning the momentum of CRM application and e-commerce initiatives; statements concerning the future growth and size of the CRM market; statements concerning AbiliTec becoming an industry standard; statements concerning efficiency gains related to the implementation of AbiliTec; statements that AbiliTec will be a revolutionary customer data integration technology that will successfully support the creation of a real-time, single, accurate, comprehensive and enhanced view of a customer across a business' enterprise; statements that major companies will continue to include AbiliTec in their strategic enterprise-wide CRM planning; that this quarter may be a good indicator of future results; statements that Acxiom will continue to be able to sign long-term, multi-million dollar contracts with blue-chip companies; statements that sales of AbiliTec will accelerate and accelerate the sales momentum; statements that AbiliTec will continue to achieve customer acceptance in the marketplace and result in additional business; statements that AbiliTec will be perceived and realized as a software capable of allowing its users to better serve consumer privacy and preference interests; statements that the company will be able to continue to develop relationships with other companies that will be able to successfully incorporate AbiliTec into their products and services in a manner that will yield benefits to Acxiom; statements that Acxiom will meet the introduction timetables for AbiliTec in markets outside of the United States; statements that Acxiom will be able to reach contractual terms with customers who have decided to adopt the Company's solutions and products, and statements concerning future revenue growth; expectations for future AbiliTec revenues; future earnings expectations; expected tax rates; days sales outstanding expectations; capital expenditure expectations; future software development cost; future depreciation and amortization costs; whether additional applications for AbiliTec will continue to arise; whether the channel partner strategy continues to gain momentum; and statements concerning potential growth of international markets. The following factors may cause actual results to differ materially from those in the forward-looking statements. With regard to all statements concerning AbiliTec: the complexity and uncertainty regarding the development of new high technologies; the loss of market share through competition or the acceptance of these or other Company offerings on a less rapid basis than expected; changes in the length of sales cycles due to the nature of AbiliTec being an enterprise-wide solution; the introduction of competent, competitive products or technologies by other companies; changes in the consumer and/or business information industries and markets; the Company's ability to protect proprietary information and technology or to obtain necessary licenses on commercially reasonable terms; the impact of changing legislative, regulatory and consumer environments in the geography that AbiliTec will be deployed. With regard to the statements that generally relate to the business of the Company: all of the above factors; the possibility that economic or other conditions might lead to a reduction in demand for the Company's products and services; the continued ability to attract and retain qualified technical and leadership associates and the possible loss of associates to other organizations; the ability to properly motivate the sales force and other associates of the Company; the ability to achieve cost reductions; changes in the litigation, legislative, regulatory and consumer environments affecting the Company's business including but not limited to legislation, regulations and customs relating to the Company's ability to collect, manage, aggregate and use data; data suppliers might withdraw data from the Company, leading to the Company's inability to provide certain products and services; short-term contracts affect the predictability of the Company's revenues; the potential loss of data center capacity or interruption of telecommunication links; postal rate increases that could lead to reduced volumes of business; customers that may cancel or modify their agreements with the Company. With specific reference to all statements that relate to the providing of products or services outside the Company's primary base of operations in the United States: all of the above factors and the difficulty of doing business in numerous sovereign jurisdictions due to differences in culture, laws and regulations. Other factors are detailed from time to time in the Company's periodic reports and registration statements. Acxiom believes that it has the product and technology offerings, facilities, associates and competitive and financial resources for continued business success, but future revenues, costs, margins and profits are all influenced by a number of factors, including those discussed above, all of which are inherently difficult to forecast. The Company undertakes no obligation to publicly release any revision to any forward-looking statement to reflect any future events or circumstances. Form 10-Q Item 3. Quantitative and Qualitative Disclosures about Market Risk Acxiom's earnings are affected by changes in short-term interest rates primarily as a result of its revolving credit agreement, which bears interest at a floating rate. Acxiom does not use derivative or other financial instruments to mitigate the interest rate risk. Risk can be estimated by measuring the impact of a near-term adverse movement of 10% in short-term market interest rates. If short-term market interest rates average 10% more in fiscal 2001 than in 2000, there would be no material adverse impact on Acxiom's results of operations. Acxiom has no material future earnings or cash flow expenses from changes in interest rates related to its other long-term debt obligations as substantially all of Acxiom's remaining long-term debt obligations have fixed rates. At both September 30, 2000 and March 31, 2000, the fair value of Acxiom's fixed rate long-term obligations approximated carrying value. Although Acxiom conducts business in foreign countries, principally the United Kingdom, foreign currency translation gains and losses are not material to Acxiom's consolidated financial position, results of operations or cash flows. Accordingly, Acxiom is not currently subject to material foreign currency exchange rate risks from the effects that exchange rate movements of foreign currencies would have on Acxiom's future costs or on future cash flows it would receive from its foreign investment. To date, Acxiom has not entered into any foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates. As of March 31, 2000, Acxiom was a party to two equity forward purchase agreements under which it will purchase 3.1 million and 0.2 million shares of its common stock at average total costs of approximately $20.81 and $26.51 per share, respectively, for a total notional purchase price of $69.4 million. The value of the equity forward contracts at March 31, 2000 was $38.6 million, based on the market value of Acxiom common stock of $33.25 at March 31, 2000. As of September 30, 2000, the Company had entered into another equity forward contract for 0.5 million shares at $23.37 per share for an additional notional amount of $10.6 million. The value of the three equity forward contracts at September 30, 2000 was $37.2 million, based on a share price of $31.75. The value of the equity forward contracts will vary based on the market price of the common stock. For each $1.00 increase or decrease in the stock price, the value of the equity forward contracts will increase or decrease by approximately $3.7 million. Form 10-Q ACXIOM CORPORATION PART II - OTHER INFORMATION Item 1. Legal Proceedings. On September 20, 1999 the Company and certain of its directors and officers were sued by an individual shareholder in a purported class action filed in the United States District Court for the Eastern District of Arkansas. The action alleges that the defendants violated Section 11 of the Securities Act of 1933 in connection with the July 23, 1999 public offering of 5,421,000 shares of the common stock of the Company. In addition, the action seeks to assert liability against Company Leader Charles Morgan pursuant to Section 15 of the Securities Act of 1933. The action seeks to have a class certified of all purchasers of the stock sold in the public offering. Two additional suits were subsequently filed in the same venue against the same defendants and asserting the same allegations. The plaintiffs have now filed a consolidated complaint. The cases are still in the initial phase of litigation, with the defendants having filed their initial response to the lawsuit. The Company believes the allegations are without merit and the defendants intend to vigorously contest the cases, and at the appropriate time, seek their dismissal. There are various other litigation matters that arise in the normal course of the business of the Company. None of these, however, are believed to be material in their nature or scope. Item 4. The Annual Meeting of Shareholders of the Company was held on August 9, 2000. At the meeting, the shareholders voted on and approved two proposals: 1) The election of two directors. Voting results for each individual nominee were as follows: Dr. Ann H. Die, 60,945,437 votes for and 15,532,183 votes withheld; Charles D. Morgan, 72,193,330 votes for and 4,284,290 votes withheld. These two elected directors will serve with the other six Board members: Rodger S. Kline, Stephen M. Patterson and James T. Womble, whose terms expire at the 2001 Annual Meeting, and William T. Dillard II, Harry C. Gambill and Thomas F. (Mack) McLarty, III, whose terms will expire at the 2002 Annual Meeting. 2) The adoption of a new stock option plan. Voting results for this proposal were: 46,119,946 votes for; 15,138,869 votes against; 449,477 votes abstained; and 14,769,328 non-votes. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 27 Financial Data Schedule (b) Reports on Forms 8-K. A report was filed on July 26, 2000, which reported the Company's change in certifying accountants. Form 10-Q ACXIOM CORPORATION AND SUBSIDIARIES SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Acxiom Corporation Dated: November 14, 2000 By: /s/ Caroline Rook ---------------------------------- (Signature) Caroline Rook Chief Financial Officer (Chief Accounting Officer) EX-27 2 0002.txt ART. 5 FDS FOR SECOND QUARTER 10-Q
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS MAR-31-2001 SEP-30-2000 9,271 0 216,213 6,000 0 385,179 411,335 162,131 1,222,220 165,211 359,243 0 0 8,859 627,421 1,222,220 0 521,618 0 433,096 (8,639) 0 11,509 85,652 32,976 52,676 0 0 0 52,676 .60 .56
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