-----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, LOdsI/BCqfB0+HIpmRr+p70ldZ+b4Qq1G7MpdacIKSBAstDo7YUw4Em/p32LElDd fzx7d8n5oQpTZrG8QUAE1w== 0000931763-97-000126.txt : 19970222 0000931763-97-000126.hdr.sgml : 19970222 ACCESSION NUMBER: 0000931763-97-000126 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970212 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: 97525662 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 FOR QUARTERLY PERIOD ENDED DECEMBER 31, 1996 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 DECEMBER 31, 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 ----------------------- ---------- (Address of principal (Zip Code) executive offices) (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 February 7, 1997, Registrant had outstanding 19,716,543 shares of Common Stock. CATALINA MARKETING CORPORATION INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Income for the three month and nine month periods ended December 31, 1996 and 1995 3 Condensed Consolidated Balance Sheets at December 31, 1996 and March 31, 1996 4 Condensed Consolidated Statements of Cash Flow for the nine month periods ended December 31, 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 9 SIGNATURES 11 2 CATALINA MARKETING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share data) (unaudited)
Three Months Ended Nine Months Ended December 31, December 31, ------------------ ------------------- 1996 1995 1996 1995 ------- ------- -------- -------- Revenues $46,344 $36,546 $126,089 $ 98,101 Costs and Expenses: Direct operating expenses 16,055 13,033 44,054 35,117 Selling, general and administrative 12,195 10,635 35,007 26,436 Depreciation and amortization 4,448 3,496 12,202 10,973 ------- ------- -------- -------- Total costs and expenses 32,698 27,164 91,263 72,526 ------- ------- -------- -------- Income From Operations 13,646 9,382 34,826 25,575 Other Income, net 273 286 846 930 ------- ------- -------- -------- Income Before Income Taxes and Minority Interest 13,919 9,668 35,672 26,505 Income Taxes (5,607) (3,822) (14,249) (10,464) Minority Interest - 107 372 384 ------- ------- -------- -------- Net Income $ 8,312 $ 5,953 $ 21,795 $ 16,425 ======= ======= ======== ======== Net Income Per Common and Common Equivalent Share $0.40 $0.30 $1.06 $0.83 ======= ======= ======== ======== Weighted Average Shares Outstanding 20,635 19,840 20,615 19,818 ======= ======= ======== ========
The accompanying Notes are an integral part of these consolidated financial statements. 3 CATALINA MARKETING CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands)
(Unaudited) December 31, March 31, ASSETS 1996 1996 ------------ --------- Current Assets: Cash and cash equivalents $ 21,647 $ 25,778 Accounts receivable, net 32,397 26,725 Prepaid and other assets 9,996 5,352 Deferred tax asset 7,389 7,436 -------- -------- Total current assets 71,429 65,291 -------- -------- Property and Equipment: Property and equipment 138,265 110,475 Accumulated depreciation and amortization (71,334) (64,222) -------- -------- Total property and equipment 66,931 46,253 -------- -------- Purchased intangible assets, net 17,841 - Other assets 4,516 2,643 -------- -------- Total Assets $160,717 $114,187 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 8,582 $ 10,832 Accrued expenses 29,424 17,669 Deferred revenue 16,605 11,960 Short term borrowings 6,139 - -------- -------- Total current liabilities 60,750 40,461 -------- -------- Deferred tax liability 3,653 2,504 Long term debt 1,214 - -------- -------- 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 20,718,150 and 20,459,728 shares issued at December 31, 1996 and March 31, 1996, respectively 207 205 Paid-in capital 39,715 34,079 Cumulative translation adjustment 593 501 Retained earnings 78,768 56,973 Less common stock in treasury, at cost (1,041,968 and 963,800 shares at December 31, 1996 and March 31, 1996, respectively) (24,183) (20,536) -------- -------- Total stockholders' equity 95,100 71,222 -------- -------- Total Liabilities and Stockholders' Equity $160,717 $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)
Nine Months Ended December 31, ------------------------ 1996 1995 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 21,795 $ 16,425 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 12,202 10,973 Minority interest (372) (384) Other 2,409 (2,288) Changes in operating assets and liabilities 4,034 (11,013) -------- -------- Net cash provided by operating activities 40,068 13,713 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures, net (26,431) (14,283) Purchase of investments, net of cash acquired (18,028) (541) -------- -------- Net cash used in investing activities (44,459) (14,824) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 3,235 1,624 Proceeds from issuance of subsidiary stock 459 142 Tax benefit from exercise of non-qualified options 276 206 Common stock repurchases (3,647) (10,518) -------- -------- Net cash provided by (used in) financing activities 323 (8,546) -------- -------- NET DECREASE IN CASH (4,068) (9,657) Effect of exchange rate changes on cash (63) (210) CASH, at end of prior period 25,778 30,729 -------- -------- CASH, at end of current period $ 21,647 $ 20,862 ======== ========
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 December 31, 1996 and March 31, 1996 and the results of operations for the three month and nine month periods ended December 31, 1996 and 1995 and cash flows for the nine month periods ended December 31, 1996 and 1995. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. The third quarter results of the majority owned foreign subsidiaries are included as of and for the three and nine month periods ended September 30, 1996 and 1995. All material intercompany profits, transactions and balances have been eliminated. All other investments are accounted for using the cost method. 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 stockholders 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 December 31, 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 stockholders 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 1996, 1997 and 1998 calendar years, 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. The balance sheet of Catalina-Pacific Media, L.L.C. as of the purchase date, which includes short term borrowings and long term debt, is included in the Company's condensed consolidated balance sheet as of December 31, 1996. The October 10, 1996 purchase has been accounted for on the purchase method. 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 December 31, 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 third quarter and first nine months of fiscal 1997 increased 27% and 29%, 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 634 million and 1,729 million promotions during the third quarter and first nine months of fiscal 1997, respectively, up 15% and 16% compared to the comparable fiscal 1996 periods (549 million and 1,489 million promotions). The greater distribution of Checkout Coupon promotions is attributable to the broader reach of the Catalina Marketing Network and additional sales of category cycles. In the current quarter and first nine months of fiscal 1997, foreign consolidated subsidiaries, Catalina Electronic Clearing Services (CECS) and Health Resource Publishing Company contributed approximately $4.1 million and $10.8 million of revenues, respectively. In the U.S., the Catalina Marketing Network was in 10,741 stores at December 31, 1996, which reach 141 million shoppers each week as compared to 9,465 stores reaching 126 million shoppers each week at December 31, 1995 and 9,766 stores reaching 127 million shoppers each week at March 31, 1996. The Health Resources Network was in 977 pharmacies at December 31, 1996 as compared to 55 pharmacies at December 31, 1995 and 237 pharmacies at March 31, 1996. Outside the U.S., the Catalina Marketing Network was in 837 stores at December 31, 1996, which reach 18 million shoppers each week as compared to 399 stores reaching 10 million shoppers each week at December 31, 1995 and 558 stores reaching 12.6 million shoppers each week at March 31, 1996. The Company installed its Catalina Marketing Network in 975 stores in the U.S. and also installed its Health Resources Network in 740 pharmacies in the first nine months of fiscal 1997 as compared to 461 stores and 46 pharmacies in the comparable fiscal 1996 period. Outside the U.S., the Company installed 279 stores in the first nine months of fiscal 1997 as compared to 231 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 $16.1 million and $44.1 million for the third quarter and first nine months of fiscal 1997, respectively, from $13.0 million and $35.1 million in comparable periods of fiscal 1996. Direct operating expenses for the first nine months of fiscal 1997 as compared to the first nine 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 third quarter of fiscal 1997 decreased as a percent of revenues to 26% from 29% for the comparable period of fiscal 1996, which is principally attributable to the reorganization of one of the Company's subsidiaries during the second quarter of fiscal 1997, as previously disclosed. Selling, general and administrative expenses increased 8 as a percent of revenues to 28% from 27% for the first nine months of fiscal 1997 as compared to the first nine months of fiscal 1996. In absolute terms, these expenses increased to $12.2 million and $35.0 million for the third quarter and first nine months of fiscal 1997, respectively from $10.6 million and $26.4 million in comparable periods of fiscal 1996. The increases relate primarily to higher costs associated with a larger sales force, and administrative expenses of new business ventures and products. Depreciation and amortization increased to $4.4 million and $12.2 million for the third quarter and first nine months of fiscal 1997 from $3.5 million and $11.0 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 a decrease in depreciation expense on US installed store equipment in fiscal 1997. Amortization in the first nine months of fiscal 1997 includes approximately $0.3 million in amortization of intangible assets arising from the purchase in the first quarter of fiscal 1997 by the Company of the remaining 46% of its U.K. operation from its minority stockholders. The provision for income taxes increased to $14.2 million (40% of income before income taxes and minority interest) for the nine month period of fiscal 1997 compared to $10.5 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 nine month periods of fiscal 1997 and 1996, the Company made capital expenditures of $26.5 million and $14.6 million, respectively. The pace of installations varies depending on the timing of contracts entered into with retailers and the scheduling of store installations by mutual agreement. During the first nine 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 financial performance of PMK for the 1996, 1997 and 1998 calendar years. 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 and third quarters of fiscal 1997, management purchased 78,168 shares of its common stock for $3.6 million so that the Company has spent $4.2 million on such purchases since such authorization. 9 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. 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. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. a. Exhibits 15 Acknowledgment Letter 27 Financial Data Schedule 99 Review Report of Independent Certified Public Accountants CATALINA MARKETING CORPORATION 10 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. February 11, 1997 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) 11 EX-15 2 ACKNOWLEDGEMENT LETTER EXHIBIT 15 January 10, 1997 Catalina Marketing Corporation 11300 9th 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 nine-month period ended December 31, 1996, which includes our report dated January 10, 1997, 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 DMS EX-27 3 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS MAR-31-1996 OCT-01-1996 DEC-31-1996 21,647 0 32,397 0 0 71,429 138,265 71,334 160,717 60,750 1,214 0 0 207 94,893 160,717 126,089 126,089 44,054 91,263 (846) 0 0 35,672 14,249 21,795 0 0 0 21,795 1.06 1.06
EX-99 4 REVIEW REPORT OF INDEPENDENT CPA EXHIBIT 99 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 December 31, 1996, and the related condensed consolidated statements of income for the three-month and nine-month periods then ended, and the condensed consolidated statement of cash flows for the nine-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, January 10, 1997 -----END PRIVACY-ENHANCED MESSAGE-----