-----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, T9pXigRZPSBgQfOvKGIRBlzJObhaY0MkQs21zRdffZHVke+ZilKZtGYpxBYHbgtX QXX9/FBd30MWazU+/ZIEWg== 0000931763-96-000930.txt : 19961118 0000931763-96-000930.hdr.sgml : 19961118 ACCESSION NUMBER: 0000931763-96-000930 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CATALINA MARKETING CORP/DE CENTRAL INDEX KEY: 0000883977 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 330499007 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11008 FILM NUMBER: 96662954 BUSINESS ADDRESS: STREET 1: 11300 9TH ST NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33716 BUSINESS PHONE: 8135795000 MAIL ADDRESS: STREET 1: 11300 9TH STREET NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33716-2329 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 ( ) 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 1-11008 CATALINA MARKETING CORPORATION - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter)
Delaware 33-0499007 - ------------------------------------------------------------------------------- (State of Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 11300 9th Street North St. Petersburg, Florida 33716-2329 - ------------------------------------- --------------------------------------
(813) 579-5000 ---------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---------- --------- At November 12, 1996, Registrant had outstanding 19,731,292 shares of ---------- Common Stock. CATALINA MARKETING CORPORATION INDEX
PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements Condensed Consolidated Statements of Income for the three month and six month periods ended September 30, 1996 and 1995 3 Condensed Consolidated Balance Sheets at September 30, 1996 and March 31, 1996 4 Condensed Consolidated Statements of Cash Flow for the six month periods ended September 30, 1996 and 1995 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 12
2 CATALINA MARKETING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share data) (unaudited)
Three Months Ended Six Months Ended September 30, September 30, ------------------ --------------- 1996 1995 1996 1995 ------- ------- ------ ------- Revenues $41,618 $30,942 $79,745 $61,555 ------- ------- ------- ------- Costs and Expenses: Direct operating expenses 14,863 11,142 27,999 22,084 Selling, general and administrative 11,658 8,140 22,812 15,801 Depreciation and amortization 4,090 3,582 7,754 7,477 ------- ------- ------- ------- Total costs and expenses 30,611 22,864 58,565 45,362 ------- ------- ------- ------- Income From Operations 11,007 8,078 21,180 16,193 Other Income, net 341 435 573 644 ------- ------- ------- ------- Income Before Income Taxes and Minority Interest 11,348 8,513 21,753 16,837 Income Taxes (4,371) (3,277) (8,642) (6,642) Minority Interest 212 98 372 277 ------- ------- ------- ------- Net Income $ 7,189 $ 5,334 $13,483 $10,472 ======= ======= ======= ======= Net Income Per Common and Common Equivalent Share $ 0.35 $ 0.27 $ 0.66 $ 0.53 ======= ======= ======= ======= Weighted Average Shares Outstanding 20,608 19,728 20,580 19,816 ======= ======= ======= =======
The accompanying Notes are an integral part of these consolidated financial statements. 3 CATALINA MARKETING CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands)
(Unaudited) September 30, March 31 1996 1996 ------------ --------- ASSETS Current Assets: Cash and cash equivalents $ 25,894 $ 25,778 Accounts receivable, net 25,174 26,725 Prepaid and other assets 6,570 5,352 Deferred tax asset 7,970 7,436 ------- ------- Total current assets 65,608 65,291 ------- ------- Property and Equipment: Property and equipment 126,800 110,475 Accumulated depreciation and amortization (71,807) (64,222) ------- ------- Total property and equipment 54,993 46,253 ------- ------- Purchased intangible assets, net 14,101 - Other assets 1,689 2,643 ------- ------- Total Assets $136,391 $114,187 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 8,725 $ 10,832 Taxes payable 3,990 620 Accrued expenses 17,881 17,049 Deferred revenue 14,518 11,960 ------- ------- Total current liabilities 45,114 40,461 ------- ------- Deferred tax liability 2,983 2,504 ------- ------- Commitments and Contingencies Stockholders' Equity: Preferred stock; $.01 par value; 5,000,000 authorized shares; none issued and outstanding - - Common stock; $0.01 par value; 50,000,000 and 30,000,000 authorized shares and 20,623,814 and 20,459,728 shares issued at September 30, 1996 and March 31, 1996, respectively 206 205 Paid-in capital 38,124 34,079 Cumulative translation adjustment 542 501 Retained earnings 70,456 36,973 Less common stock in treasury, at cost (975,300 and 963,800 shares at September 30, 1996 and March 31, 1996, respectively) (21,034) (20,536) ------- ------- Total stockholders' equity 88,294 71,222 ------- -------- Total Liabilities and Stockholders' Equity $136,391 $114,187 ======== ========
The accompanying Notes are an integral part of these consolidated financial statements. 4 CATALINA MARKETING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (dollars in thousands) (unaudited)
Six Months Ended September 30, ------------------------------ 1996 1995 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $13,483 $10,472 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,754 7,477 Minority interest (372) (277) Other 673 24 Changes in operating assets and liabilities 5,024 (4,619) ------- ------- Net cash provided by operating activities 26,562 13,077 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (16,408) (6,303) Proceeds from sale of fixed assets 79 170 Purchase of minority interest in subsidiary (11,915) - ------- ------- Net cash used in investing activities (28,244) (6,133) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 1,697 1,386 Proceeds from issuance of subsidiary stock 459 78 Purchase of minority interest (133) (314) Tax benefit from exercise of non-qualified options 276 143 Common stock repurchases (498) (10,518) ------- ------- Net cash provided by (used in) financing activities 1,801 (9,225) ------- ------- NET INCREASE (DECREASE) IN CASH 119 (2,281) Effect of exchange rate changes on cash (3) 130 CASH, at end of prior period 25,778 30,729 ------- ------- CASH, at end of current period $25,894 $28,578 ======= =======
The accompanying Notes are an integral part of these consolidated financial statements. 5 CATALINA MARKETING CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1. Condensed Consolidated Financial Statements In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of the Company as of September 30, 1996 and March 31, 1996 and the results of operations for the three month and six month periods ended September 30, 1996 and 1995 and cash flows for the six month periods ended September 30, 1996 and 1995. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. The second quarter results of the majority owned foreign subsidiaries are included as of and for the three and six month periods ended June 30, 1996 and 1995, respectively. All material intercompany profits, transactions and balances have been eliminated. These financial statements, including the condensed consolidated balance sheet as of March 31, 1996, which has been derived from audited financial statements, are presented in accordance with the requirements of Form 10-Q and consequently may not include all disclosures normally required by generally accepted accounting principles or those normally made in the Company's Annual Report on Form 10-K. The accompanying condensed consolidated financial statements and related notes should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996. Note 2. Net Income Per Common and Common Equivalent Share Net Income per common and common equivalent share is based on the weighted average number of shares of common stock outstanding and dilutive common equivalent shares using the treasury stock method, effected for the two-for-one stock split (see Note 4). 6 Note 3. Acquisitions On April 10, 1996, the Company purchased from its minority shareholders the remaining 46% of Catalina Marketing UK, Inc. not owned by it for $11.9 million cash consideration and 41,672 newly issued shares of Company common stock. Catalina Marketing UK, Inc. owns all of the outstanding stock of Catalina Marketing UK, Ltd., the United Kingdom operating company. The Company also chose to replace existing options in the Catalina Marketing UK, Ltd. stock option plan by issuing 12,845 shares of Company common stock to the Catalina Marketing UK, Ltd. plan participants. The April 10, 1996 purchase has been accounted for on the purchase method. The intangible assets resulting from the transaction, primarily related to patent license and retailer relationships, are being amortized on the straight line basis over a weighted average life of 22 years. If Catalina Marketing UK, Inc. had been 100% owned by the Company during the quarter ended September 30, 1995, there would have been no effect on net income or net income per common and common equivalent share. On October 10, 1996, the Company purchased 51% of Pacific Media, K.K. (PMK), a Japanese outdoor media company, for $3.0 million in initial cash consideration. As part of the transaction, the Company contributed its PMK shares, and the selling shareholders contributed their remaining PMK shares, to a newly established Delaware limited liability holding company, Catalina-Pacific Media, L.L.C., which is now owned 51% by a subsidiary of the Company. Terms of the purchase agreement call for the Company to make a series of three annual payments, which are contingent upon the future financial performance of PMK for the calendar years ended 1996, 1997 and 1998, respectively. The joint venture will introduce Checkout Coupon (R) and other electronic marketing programs to Japan through a division to be called Catalina Marketing Japan (CMJ), and is part of the continued international expansion of the Catalina Marketing(R) Network. Note 4. Two-for-One Stock Split On June 10, 1996 the Company's board of directors declared a two-for-one common stock split effected in the form of a stock dividend. The record date for the stock dividend was June 24, 1996, and the payment date was July 15, 1996. The financial statements for the periods ended September 30, 1996 and 1995 and all other information provided herein have been restated to include the effects of the stock split. 7 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: FISCAL 1997 COMPARED TO FISCAL 1996 The Company's revenues for the second quarter and first six months of fiscal 1997 increased 35% and 30%, respectively, compared with the same periods in fiscal 1996. The increase in revenues is primarily due to a greater distribution of Checkout Coupon incentives. In the U.S., the Catalina Marketing Network printed 574 million and 1,095 million promotions during the second quarter and first six months of fiscal 1997, respectively, up 22% and 16% compared to the comparable fiscal 1996 periods (471 and 941 million promotions). The greater distribution of Checkout Coupon promotions is attributable to additional sales of category cycles and the broader reach of the Catalina Marketing Network. In the current quarter and first six months of fiscal 1997, foreign consolidated subsidiaries, Catalina Electronic Clearing Services (CECS) and Health Resource Publishing Company contributed approximately $3.9 million and $6.7 million of revenues, respectively. CECS continues to experience slower adoption in the market place than expected, greater than anticipated working capital requirements, operational difficulties, and therefore continues to incur operating losses. In the U.S., the Catalina Marketing Network was in 10,470 stores at September 30, 1996, which reach 136 million shoppers each week as compared to 9,197 stores reaching 122 million shoppers each week at September 30, 1995 and 9,766 stores reaching 127 million shoppers each week at March 31, 1996. The Health Resources Network was in 715 pharmacies at September 30, 1996 as compared to 40 pharmacies at September 30, 1995 and 237 pharmacies at March 31, 1996. Outside the U.S., the Catalina Marketing Network was in 690 stores at September 30, 1996, which reach 14 million shoppers each week as compared to 283 stores reaching 7 million shoppers each week at September 30, 1995 and 558 stores reaching 12.6 million shoppers each week at March 31, 1996. The Company installed its Catalina Marketing Network in 704 stores in the U.S. and also installed its Health Resources Network in 478 pharmacies in the first six months of fiscal 1997 as compared to 193 stores and 31 pharmacies in the comparable fiscal 1996 period. Outside the U.S., the Company installed 132 stores in the first six months of fiscal 1997 as compared to 115 stores in the comparable fiscal 1996 period. Direct operating expenses consist of retailer fees, paper and sales commissions and the expenses of operating and maintaining the Catalina Marketing Network (primarily expenses relating to operations personnel and service offices) and provision for doubtful accounts. Direct operating expenses increased in absolute terms to $14.9 million and $28.0 million for the second quarter and first six months of fiscal 1997, respectively, from $11.1 and $22.0 million in comparable periods of fiscal 1996. Direct operating expenses for the first six months of fiscal 1997 as compared to the first six months of fiscal 1996 remained consistently 35% to 36% of revenues. Selling, general and administrative expenses include personnel-related costs of selling and administrative staff, overhead and new product development expenses. Selling, general and administrative expenses for the second quarter and first six months of fiscal 1997, respectively, increased as a percent of revenues to 28% and 29% from 26% for the 8 comparable periods of fiscal 1996. In absolute terms, these expenses increased to $11.6 million and $22.8 million for the second quarter and first six months of fiscal 1997, respectively from $8.1 and $15.8 million in comparable periods of fiscal 1996. The increase relates primarily to higher costs associated with a larger sales force, and administrative expenses of new business ventures and products. Depreciation and amortization increased to $4.1 million and $7.8 million for the second quarter and first six months of fiscal 1997 from $3.6 million and $7.5 million for the comparable periods in fiscal 1996. Depreciation increased due to the increase in capital expenditures associated with new business ventures partially offset by an increase in fully depreciated U.S. store equipment in fiscal 1997. Amortization in the second quarter of fiscal 1997 includes approximately $.2 million in amortization of the intangible assets originated when the Company purchased the remaining 46% of its U.K. operation from its minority shareholders. The provision for income taxes increased to $8.6 million (39.7% of income before income taxes and minority interest) for the six month period of fiscal 1997 compared to $6.6 million (39.5% of income before income taxes and minority interest) for the same period in fiscal 1996. The Company's effective tax rate is higher than the expected federal statutory tax rate due to state and foreign income taxes and the inability to offset losses of majority owned foreign subsidiaries against U.S. income. LIQUIDITY AND CAPITAL RESOURCES The Company's primary capital expenditures are store equipment and third-party store installation costs. These amounts generally range from $5,000 to $13,000 per installed store. During the first six month periods of fiscal 1997 and 1996, the Company made capital expenditures of $16.4 million and $6.3 million, respectively. The pace of installations vary depending on the timing of contracts entered into with retailers and the scheduling of store installations by mutual agreement. During the first six months of fiscal 1997 the Company increased expenditures for data processing equipment and had a much greater pace of store installations compared to the comparable fiscal 1996 period. On October 10, 1996, the Company purchased 51% of Pacific Media, K.K. (PMK), a Japanese outdoor media company, for $3.0 million in initial cash consideration. Terms of the purchase agreement call for the Company to make a series of three annual payments, which are contingent upon the future financial performance of PMK for the calendar years ended 1996, 1997 and 1998, respectively. Catalina Marketing finances capital expenditures from internally generated cash flows. Management believes that expenditures for equipment and research and development will remain between $25 and $35 million annually for the foreseeable future. Management has been authorized to purchase up to $10 million of Company common stock subject to market conditions. During the second quarter of fiscal 1997, management purchased 11,500 shares of its common stock for $498,000 so that the Company has spent $1.0 million on such purchases since such authorization. The Company has an unsecured revolving bank credit facility under which it may borrow up to $30 million. There have been no borrowings under this credit facility to date. 9 In accordance with coupon industry practice, the Company generally pre-bills manufacturers prior to the commencement of the purchased category cycle. The Company recognizes revenue as promotions are printed, and the amounts collected prior to printing are reflected as deferred revenue, which is classified as current liabilities. The Company believes working capital generated by operations is sufficient for its capital requirements, although the Company may choose to utilize debt or lease financing if available on acceptable terms. CATALINA MARKETING CORPORATION PART II OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Stockholders was held on July 23, 1996. The following members were elected as Class II members of the Company's Board of Directors for the period ending as of the annual meeting of stockholders in 1999: Fredrick W. Beinecke Tommy D. Greer Helene Monat Thomas W. Smith The terms of the other directors of the Company continued after the meeting. These directors are: George W. Off, Frank H. Barker, Patrick W. Collins, Stephen I. D'Agostino, Thomas G. Mendell, and Michael B. Wilson. With regard to the proposal to approve an amendment to the Company's 1992 Director Stock Grant Plan to provide for the grant of 1,000 shares of Common Stock to each director upon election or reelection to the Board of Directors and an amendment to the 1992 Director Stock Grant Plan permitting deferral of stock grants under the terms of the Company's Deferred Compensation Plan, 8,975,239 votes were cast in Favor, 279,042 were cast Against and there were 36,410 Abstentions. With regard to the proposal to approve various amendments to the Company's Deferred Compensation Plan, 8,972,370 votes were cast in Favor, 19,020 were cast Against and there were 299,301 Abstentions. With regard to the proposal to approve an amendment to the Company's Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock to 50,000,000 from 30,000,000, 8,966,924 votes were cast in Favor, 307,886 were cast Against and there were 15,881 Abstentions. 10 With regard to the proposal to ratify and approve the Company's independent public accountants for fiscal 1997, 9,273,396 votes were cast in Favor, 3,740 were cast Against and there were 13,555 Abstentions. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. a. Exhibits 99 Review Report of Independent Certified Public Accountants 15 Acknowledgment Letter 11 CATALINA MARKETING CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, Registrant's principal financial officer, thereunto duly authorized. November 13, 1996 CATALINA MARKETING CORPORATION ------------------------------ (Registrant) /s/ Philip B. Livingston ------------------------------------- Philip B. Livingston Senior Vice President and Chief Financial Officer (Authorized officer of Registrant and principal financial officer) 12 EX-15 2 ACKNOWLEDGEMENT LETTER October 11, 1996 Catalina Marketing Corporation 11300 9/th/ Street North St. Petersburg, Florida 33716 Catalina Marketing Corporation: We are aware that Catalina Marketing Corporation has incorporated by reference in its Registration Statement File Nos. 33-46793, 33-77100, 33-82456, 333- 07525, and 333-13335 its Form 10-Q for the three month and six month periods ended September 30, 1996, which includes our report dated October 11, 1996, covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933 (the Act), that report is not considered a part of the registration statement prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, ARTHUR ANDERSEN LLP By /s/ William J. Meurer ---------------------- William J. Meurer EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS MAR-31-1996 JUL-01-1996 SEP-30-1996 25,894 0 25,174 0 0 65,608 126,800 71,807 136,391 45,114 0 0 0 206 88,088 136,391 79,745 79,745 27,999 58,565 (573) 0 0 21,753 8,642 13,483 0 0 0 13,483 .66 .66
EX-99 4 REVIEW REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCO REVIEW REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To Catalina Marketing Corporation: We have reviewed the accompanying condensed consolidated balance sheet of Catalina Marketing Corporation (a Delaware corporation) as of September 30, 1996, and the related condensed consolidated statements of income for the three month and six month periods then ended and the condensed consolidated statement of cashflows for the six month period then ended. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of March 31, 1996, and the related consolidated statements of income, stockholders' equity and cash flows for the year then ended (not presented separately herein), and in our report dated April 24, 1996, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 1996, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Tampa, Florida, October 11, 1996 -----END PRIVACY-ENHANCED MESSAGE-----