-----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, HqUYpPBJKzjyH4kaSWDFXWKV8rmQz4+xZgnfgjc1Pgky+hk6r8StEVjSX7tF9V2M /yXQ5Ai143x+cPErENGArA== 0000904511-96-000001.txt : 19960131 0000904511-96-000001.hdr.sgml : 19960131 ACCESSION NUMBER: 0000904511-96-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960129 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACXIOM CORP CENTRAL INDEX KEY: 0000733269 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 710581897 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13163 FILM NUMBER: 96508168 BUSINESS ADDRESS: STREET 1: 301 INDUSTRIAL BLVD CITY: CONWAY STATE: AR ZIP: 72032 BUSINESS PHONE: 5013361000 MAIL ADDRESS: STREET 1: 301 INDUSTRIAL BOULEVARD CITY: CONWAY STATE: AK ZIP: 72032 FORMER COMPANY: FORMER CONFORMED NAME: CCX NETWORK INC DATE OF NAME CHANGE: 19880816 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 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 December 31, 1995 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 2000, 301 Industrial Boulevard, Conway, Arkansas 72033-2000 (Address of Principal Executive Offices) (Zip Code) (501) 336-1000 (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 January 19, 1996, was 23,641,709. Form 10-Q PART I - FINANCIAL INFORMATION Item 1. Financial Statements Company for which report is filed: ACXIOM CORPORATION The 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 CONSOLIDATED BALANCE SHEETS (Unaudited) December 31, March 31, 1995 1995 ---------- ---------- Assets ------ Current assets: Cash and short-term cash investments $ 1,906,000 3,149,000 Trade accounts receivable, net 48,563,000 37,764,000 Other current assets 3,351,000 2,604,000 ------------ ----------- Total current assets 53,820,000 43,517,000 ------------ ----------- Property and equipment 156,912,000 123,321,000 Less - Accumulated depreciation and amortization 70,107,000 55,902,000 ------------ ----------- Property and equipment, net 86,805,000 67,419,000 ------------ ----------- Software, net of accumulated amortization 10,404,000 9,693,000 Excess of cost over fair value of net assets acquired 14,367,000 9,638,000 Other assets 22,738,000 17,903,000 ------------ ----------- $188,134,000 148,170,000 ============ =========== Liabilities and Stockholders' Equity ---------------------------------- Current liabilities: Short-term borrowings 1,174,000 --- Current installments of long- term debt 3,893,000 3,564,000 Trade accounts payable 10,591,000 8,342,000 Accrued interest 174,000 522,000 Accrued payroll and related expenses 4,406,000 5,280,000 Other accrued expenses 5,226,000 7,055,000 Advances from customers 410,000 162,000 Income taxes 3,885,000 39,000 ----------- ----------- Total current liabilities 29,759,000 24,964,000 ----------- ----------- Long-term debt, excluding current installments 32,736,000 18,219,000 Deferred income taxes 7,164,000 7,138,000 Form 10-Q Deferred revenue 2,304,000 672,000 Stockholders' equity: Preferred stock --- --- Common stock 2,427,000 2,308,000 Additional paid-in capital 52,960,000 46,493,000 Retained earnings 63,774,000 50,776,000 Foreign currency translation adjustment (628,000) 7,000 Treasury stock, at cost (2,362,000) (2,407,000) ------------ ----------- Total stockholders' equity 116,171,000 97,177,000 Commitments and contingencies ------------ ----------- $188,134,000 148,170,000 ============ =========== See accompanying condensed notes to consolidated financial statements. Form 10-Q ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) For the Three Months Ended ------------------------- December 31, ------------------------- 1995 1994 ---------- ---------- Revenue $ 71,315,000 52,742,000 Operating costs and expenses: Salaries and benefits 25,844,000 17,862,000 Computer, communications and other equipment 11,998,000 7,110,000 Data costs 14,930,000 14,583,000 Other operating costs and expenses 9,011,000 5,750,000 ----------- ---------- Total operating costs and expenses 61,783,000 45,305,000 ----------- ---------- Income from operations 9,532,000 7,437,000 ----------- ---------- Other income (expense): Interest expense (239,000) (619,000) Other, net (75,000) (63,000) ----------- ---------- (314,000) (682,000) ----------- ---------- Earnings before income taxes 9,218,000 6,755,000 Income taxes 3,406,000 2,634,000 ----------- ---------- Net earnings $ 5,812,000 4,121,000 =========== ========== Earnings per share $ .22 .18 =========== ========== Weighted average shares outstanding 26,057,000 23,192,000 =========== ========== See accompanying condensed notes to consolidated financial statements. Form 10-Q ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) For the Nine Months Ended ------------------------- December 31, ------------------------- 1995 1994 ---------- ---------- Revenue $192,873,000 147,476,000 Operating costs and expenses: Salaries and benefits 71,281,000 48,693,000 Computer, communications and other equipment 27,963,000 21,047,000 Data costs 46,422,000 44,502,000 Other operating costs and expenses 24,816,000 16,731,000 ----------- ----------- Total operating costs and expenses 170,482,000 130,973,000 ----------- ----------- Income from operations 22,391,000 16,503,000 ----------- ----------- Other income (expense): Interest expense (1,177,000) (1,876,000) Other, net (226,000) (808,000) ----------- ----------- (1,403,000) (2,684,000) ----------- ----------- Earnings before income taxes 20,988,000 13,819,000 Income taxes 7,968,000 5,389,000 ----------- ----------- Net earnings $13,020,000 8,430,000 =========== =========== Earnings per share $ .50 .37 =========== =========== Weighted average shares 25,966,000 22,564,000 outstanding =========== =========== See accompanying condensed notes to consolidated financial statements. Form 10-Q ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Nine Months Ended ------------------------- December 31, ------------------------- 1995 1994 ---------- ---------- Cash flows from operating activities: Net earnings $ 13,020,000 8,430,000 Non-cash operating activities: Depreciation and amortization 14,770,000 14,193,000 Loss on disposal of assets --- 540,000 Equity in operations of joint venture --- 279,000 Other, net 292,000 1,170,000 Changes in assets and liabilities: Accounts receivable (8,167,000) (9,063,000) Other assets (1,336,000) 285,000 Accounts payable and other liabilities 1,486,000 8,101,000 ---------- ---------- Net cash provided by operating activities 20,065,000 23,935,000 ---------- ---------- Cash flows from investing activities: Sale of assets 351,000 5,638,000 Cash acquired in pooling acquisition 1,624,000 --- Cash paid in purchase acquisition (5,914,000) --- Advances to and acquisition of joint venture --- (7,290,000) Development of software (2,984,000) (736,000) Capital expenditures (28,590,000) (16,380,000) ---------- ---------- Net cash used by investing activities (35,513,000) (18,768,000) ---------- ---------- Form 10-Q Cash flows from financing activities: Proceeds from debt 18,108,000 --- Payments of debt (4,708,000) (13,484,000) Sale of common stock 2,124,000 12,930,000 Cash dividends paid by acquired company prior to merger (468,000) --- Acquisition and retirement of common stock by acquired company prior to merger (1,010,000) --- Issuance of common stock by acquired company prior to merger 190,000 --- ---------- ---------- Net cash provided (used) by financing activities 14,236,000 (554,000) ---------- ---------- Effect of exchange rate changes on cash (31,000) --- ---------- ---------- Net increase (decrease) in cash and short-term cash investments (1,243,000) 4,613,000 Cash and short-term cash investments at beginning of period 3,149,000 475,000 ---------- ---------- Cash and short-term cash investments at end of period $ 1,906,000 5,088,000 ========== ========== Cash paid during the period for: Interest $ 1,525,000 2,276,000 Income taxes 4,122,000 2,424,000 ========== ========== See accompanying condensed notes to consolidated financial statements. Form 10-Q ACXIOM CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Certain note information has been omitted because it has not changed significantly from that reflected in Notes 1 through 15 of the Notes to Consolidated Financial Statements filed as a part of Item 14 of Registrant's 1995 annual report on Form 10-K as filed with the Securities and Exchange Commission on June 28, 1995. Notes to Consolidated Financial Statements: 1. On July 14, 1995, the Company purchased the outstanding stock of Generator Datamarketing Limited (``Generator''). Generator is located in Hertfordshire, near London, and provides data and database marketing software and processing services to its customers. The purchase price was 4,000,000 pounds sterling (approximately $6,460,000). The acquisition has been accounted for as a purchase, and, accordingly, Generator's results of operations are included in the consolidated statements of earnings as of the purchase date. The purchase price exceeded the fair value of the net assets acquired by $5,648,000. The resulting excess of cost over net assets acquired is being amortized using the straight-line method over its estimated economic life of 15 years. The pro forma combined results of operations, assuming the acquisition occurred at the beginning of each period presented, are not materially different than the historical results of operations reported. Generator had revenue of $3,122,000 and earnings before income taxes of $215,000 for the year ended December 31, 1994. 2. On August 25, 1995, the Company acquired all of the outstanding capital stock of DataQuick Information Systems (formerly an "S" Corporation) and DQ Investment Corporation (collectively referred to as "DataQuick"). The Company exchanged 984,839 shares of its common stock for all of the outstanding shares of capital stock of DataQuick. Additionally, the Company assumed all of the currently outstanding options granted under DataQuick's stock option plans, with the result that 808,370 shares of the Company's common stock are now subject to issuance upon exercise of such options. The acquisition was in the form of a merger of two wholly owned subsidiaries of the Company in to each of DataQuick Information Systems and DQ Investment Corporation and is accounted for as a pooling of interests. Form 10-Q DataQuick is headquartered in San Diego, California, and provides real property information to support a broad range of applications including marketing, appraisal, real estate, banking, mortgage and insurance. This information is distributed on-line and via CD-ROM, list services, and microfiche. The stockholders' equity and operations of DataQuick are not material in relation to those of the Company. As such, the Company has recorded the combination by restating stockholders' equity as of April 1, 1995, without restating prior years' statements of earnings to reflect the pooling of interest combination. DataQuick's net assets as of April 1, 1995 totaled $5,773,000. The statements of earnings for the three months and nine months ended December 31, 1995 include the results of DataQuick for the entire period presented. For the year ended December 31, 1994, DataQuick had revenues and earnings before income taxes of $20,251,000 and $891,000, respectively. Included in the current fiscal year's results are revenue of $8,048,000 and earnings before income taxes of $79,000 for DataQuick for the period from April 1, 1995 to August 25, 1995. 3. On July 25, 1995, a customer of the Company, Highlights for Children, Inc. ("Highlights"), filed a demand for arbitration with the American Arbitration Association. The demand alleges, among other things, breaches of express warranties in connection with a software license agreement for the Company's GS/2000 software product. The demand seeks compensatory damages of approximately $22,000,000 and punitive damages of $44,000,000, plus attorneys' fees and costs. The Company believes that the action is substantially without merit. Highlights is and has been using the GS/2000 software in the daily operation of its business for over two years. Highlights accepted the software as operational as of September 1, 1993 and paid the final license fee payment. Acxiom's software license fee and related fees invoices to Highlights for the GS/2000 software totaled approximately $2,000,000. The Company intends to vigorously defend the arbitration claim. Management believes that the ultimate outcome of the arbitration case will result in a final settlement, if any, which would not be material to the financial statements and which would be substantially lower than the amount noted above. Form 10-Q The Company is involved in various other claims and legal actions in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position or its expected future consolidated results of operations. 4. The Company's unsecured credit agreement providing for revolving loans in amounts of up to $30,000,000 which was set to expire August 31, 1996, has been extended through August 31, 1998. The Company's other unsecured credit line of $1,000,000 has also been renewed and now expires in June 1996. At December 31, 1995 there was a balance of $17,757,000 outstanding under the Company's revolving credit agreement and a balance of $500,000 outstanding on the short-term credit line. Form 10-Q Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations --------------------- Consolidated revenue was a record $71,315,000 for the quarter ended December 31, 1995, an increase of 35% over revenue of $52,742,000 for the same quarter in the prior year. The financial services sector grew 42%, primarily due to the DataQuick acquisition, and the direct marketing sector grew 81% as a result of revenue related to the marketing services agreement with Trans Union Corporation. The insurance segment and the information and communication segment were up 13% and 21%, respectively, while the media segment declined 14%. For the nine months ended December 31, 1995, consolidated revenue was $192,873,000, up 31% from $147,476,000 reported for the prior year. The financial services, insurance, direct marketing, and information and communication services sectors were up 55%, 11%, 51%, and 16%, respectively, while media decreased 3%. The DataQuick and Generator acquisitions added year-to-date revenue of $17,171,000. Operating costs and expenses increased 36% for the quarter compared to the prior year. Salaries and benefits increased 45%, computer, communications and other equipment expenses increased 69%, data costs increased 2%, and other operating costs and expenses increased 57%. The expense increases were primarily associated with the DataQuick and Generator acquisitions, the new data center management agreement with the Polk Company, which was effective November 1, 1995, and which is discussed in greater detail under "Capital Resources and Liquidity," and the Trans Union marketing services contract. Operating margin for the quarter was 13% compared to 14% a year ago. For the nine months ended December 31, 1995, operating costs and expenses increased 30% when compared with the same period in the previous year. Salaries and benefits increased 46%, computer, communications and other equipment expenses increased 33%, data costs increased 4%, and other operating costs and expenses increased 48%. Once again, most of the expense increases were associated with the acquisitions and new contracts noted above. Excluding these effects, operating expenses increased 10%. Operating margin for the nine months was 12% of revenue compared to 11% for the same period in the prior year. Interest expense for the current quarter and the year-to-date period were lower than in the prior year, due to lower average levels of debt, lower interest rates, and capitalization in the current year of approximately $400,000 in interest incurred in construction of new facilities. Other expense in the first quarter of the prior year included $500,000 for the estimated disposal cost of certain BSA assets in the United States. Form 10-Q The Company's effective tax rate was 37% for the current quarter and 38% for the nine months ended December 31, 1995 compared to 39% for the comparable periods in the prior year. The effective tax rate for the year ended March 31, 1995 was 38%. The Company expects the effective tax rate for fiscal 1996 to remain in the 37 - 39% range. Capital Resources and Liquidity ------------------------------- Working capital at December 31, 1995 was $24,061,000 compared to $18,553,000 at March 31, 1995. At December 31, 1995 the Company had available credit lines of $31,000,000 of which $18,257,000 was outstanding. The Company's debt-to-capital ratio (capital defined as long-term debt plus stockholders' equity) was 22% at December 31, 1995 compared to 16% at March 31, 1995. As discussed in footnote 4 to the consolidated financial statements, the Company's $30,000,000 revolving credit agreement which was set to expire August 31, 1996 has been amended to extend through August 31, 1998. Cash provided by operating activities was $20,065,000 for the nine months ended December 31, 1995 compared to $23,935,000 for the same period a year earlier. In the current period $35,513,000 was used by investing activities and $14,236,000 was provided by financing activities. Investing activities included capital expenditures of $28,590,000 compared to $16,380,000 for the prior period. Investing activities also included $5,914,000 paid for the acquisition of Generator Datamarketing Limited ("Generator") which is discussed more fully in footnote 1 to the consolidated financial statements. Generator's results of operations are included in the Company's consolidated results for the second and third quarters of the fiscal year. Investing activities in the prior year included $5,638,000 collected from the sale of assets, primarily from the sale of substantially all of the assets of Acxiom Mailing Services, and $7,290,000 paid for the acquisition of the remaining one-half interest in the InfoBase partnership. Financing activities in the current year include the effects of cash dividends and common stock transactions made by DataQuick Information Systems ("DataQuick") prior to its acquisition in a pooling-of-interest transaction on August 25, 1995. For a more detailed description of the DataQuick merger, see footnote 2 to the consolidated financial statements. The statements of earnings and cash flows for the current year include the results of DataQuick for the entire periods presented. Form 10-Q The Company has completed and begun to occupy an expansion of its Conway data center and a new 100,000 square-foot customer service building on its main campus in Conway, Arkansas. The data center expansion cost approximately $4,000,000 and the new customer service building cost approximately $8,000,000. Both projects were funded through current operations and existing credit lines. Management expects total capital expenditures for fiscal year 1996 to be approximately $40,000,000. On October 4, 1995, the Company announced a letter of intent to form a business alliance with the Polk Company ("Polk"). The Company has assumed management of Polk's data center in Taylor, Michigan and has completed a definitive ten-year agreement effective November 1, 1995. A phased program will transfer Polk's data center operations to the Company's headquarters in Conway. Management estimates the agreement will contribute $15- 16 million in initial annual revenue. The Company and Polk are also exploring joint ventures in marketing, product development, data acquisition, and international sales. The exact nature of the partnership in these areas will be determined by future discussions. As discussed in footnote 3 to the consolidated financial statements, the Company is involved in an arbitration claim which, if resolved against the Company, could result in payment of an amount which could be material to the financial statements. However, management believes the ultimate outcome of this case will result in a settlement, if any, which will not be material to the financial statements. While the Company does not have any other material contractual commitments for capital expenditures, additional investments in facilities and computer equipment will continue to be necessary to support the anticipated growth of the business. In addition, new outsourcing or facilities management contracts frequently require substantial up-front capital expenditures in order to acquire existing assets. Management believes that the combination of existing working capital, anticipated funds to be generated from future operations and the Company's available credit lines is sufficient to meet the Company's current operating needs as well as to fund the anticipated levels of capital expenditures. If additional funds are required, the Company would use existing credit lines to generate cash, followed by either additional borrowings to be secured by the Company's assets or the issuance of additional equity securities in either public or private offerings. Management believes that the Company has significant capacity to raise capital which could be used to support future growth. Form 10-Q ACXIOM CORPORATION PART II - OTHER INFORMATION Item 1. Legal Proceedings. On March 9, 1994, the chapter 11 bankruptcy trustee for CIS Corporation ("CIS") initiated suit against the Company in the United States Bankruptcy Court for the Southern District of New York seeking to recover certain computer equipment, together with alleged past due lease payments, taxes and interest amounting to approximately $2,500,000. The Company had entered into several capital leases with CIS prior to CIS declaring bankruptcy in January 1989. The majority of the amounts sought by CIS related to continuing lease, tax and interest charges assessed after the initial lease terms expired and after the Company had exercised its option to purchase the equipment, after which time no lease payments were due under the terms of the lease agreements. The Company's defense rested upon CIS' failure to (1) deliver title, (2) make scheduled sub- lease payments to the Company, (3) properly record and acknowledge lease payments actually paid by the Company, which CIS claimed were not paid, and (4) remit property taxes to the proper authorities after the Company paid such taxes to CIS. The Company also filed a counterclaim against CIS for compensatory and punitive damages. The dispute was settled and the suit was dismissed with prejudice by order of the court on November 17, 1995, which order became final on or about December 1, 1995. Under the terms of the settlement agreement, the Company paid CIS $332,448.94 and CIS released all of its claims against the Company. CIS further agreed to be responsible for taxes on the equipment up to the date the order was final and agreed to indemnify the Company for any title challenge to the equipment. The Company also dismissed its counterclaim with prejudice and withdrew its proof of claim against CIS in the amount of $37,732.44. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 27 Financial Data Schedule (b) Reports on Form 8-K filed during the third quarter: None 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 January 29, 1996 /S/ Robert S. Bloom ------------------------------- (Signature) Robert S. Bloom Chief Financial Officer (Chief Accounting Officer) Form 10-Q EXHIBIT INDEX Exhibits to Form 10-Q Exhibit Number Exhibit 27 Financial Data Schedule EX-27 2 ART. 5 FDS FOR THIRD 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 3-MOS MAR-31-1996 DEC-31-1995 1,906 0 48,563 0 0 53,820 156,912 70,107 188,134 29,759 32,736 0 0 2,427 113,744 188,134 0 192,873 0 170,482 226 0 1,177 20,988 7,968 13,020 0 0 0 13,020 .50 .50
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