SECURITIES AND EXCHANGE COMMISSION
Washington, DCD.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 December 31, 1995June 30, 1996 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, $0.10common stock, $ 0.10 par value per share,
outstanding as of January 19,August 5, 1996, was 23,641,709.25,563,145.
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,(UNAUDITED)
June 30, March 31,
1995 1995
---------- ----------1996 1996
----------- -----------
Assets
------
Current assets:
Cash and short-term cash investmentsequivalents $ 1,906,000 3,149,000536,000 3,469,000
Trade accounts receivable, net 48,563,000 37,764,00058,094,000 44,474,000
Refundable income taxes --- 1,537,000
Other current assets 3,351,000 2,604,000
------------6,813,000 4,534,000
----------- -----------
Total current assets 53,820,000 43,517,000
------------65,443,000 54,014,000
----------- -----------
Property and equipment 156,912,000 123,321,000171,606,000 153,224,000
Less - Accumulated depreciation
and amortization 70,107,000 55,902,000
------------68,783,000 64,123,000
----------- -----------
Property and equipment, net 86,805,000 67,419,000
------------102,823,000 89,101,000
----------- -----------
Software, net of accumulated amortization 10,404,000 9,693,00013,413,000 10,524,000
Excess of cost over fair value of net
assets acquired 14,367,000 9,638,00041,191,000 13,982,000
Other assets 22,738,000 17,903,000
------------29,010,000 26,428,000
----------- $188,134,000 148,170,000
============-----------
$ 251,880,000 194,049,000
=========== ===========
Liabilities and Stockholders' Equity
----------------------------------
Current liabilities:
Short-term borrowings 1,174,000 ---notes payable 1,000,000 646,000
Current installments of long-
termlong-term debt 3,893,000 3,564,0004,053,000 3,866,000
Trade accounts payable 10,591,000 8,342,00015,907,000 13,596,000
Accrued interest 174,000 522,000352,000 435,000
Accrued payroll and related expenses 4,406,000 5,280,0006,980,000 5,111,000
Other accrued expenses 5,226,000 7,055,00010,502,000 7,189,000
Advances from customers 410,000 162,000434,000 316,000
Income taxes 3,885,000 39,0001,046,000 ---
----------- -----------
Total current liabilities 29,759,000 24,964,00040,274,000 31,159,000
----------- -----------
Long-term debt, excluding current
installments 32,736,000 18,219,00072,544,000 26,885,000
Deferred income taxes 7,164,000 7,138,000
Form 10-Q10,933,000 10,933,000
Deferred revenue 2,304,000 672,0001,472,000 2,331,000
Stockholders' equity:
Preferred stock --- ---
Common stock 2,427,000 2,308,0002,613,000 2,435,000
Additional paid-in capital 52,960,000 46,493,00058,519,000 54,514,000
Retained earnings 63,774,000 50,776,00068,471,000 68,978,000
Foreign currency translation adjustment (628,000) 7,000(638,000) (863,000)
Treasury stock, at cost (2,362,000) (2,407,000)
------------(2,308,000) (2,323,000)
----------- -----------
Total stockholders' equity 116,171,000 97,177,000126,657,000 122,741,000
----------- -----------
Commitments and contingencies
------------ -----------
$188,134,000 148,170,000
============$ 251,880,000 194,049,000
=========== ===========
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,
---------------------------------------------------
June 30,
--------------------------
1996 1995
1994
---------- --------------------- -----------
Revenue $ 71,315,000 52,742,00093,953,000 59,182,000
Operating costs and expenses:
Salaries and benefits 25,844,000 17,862,00035,532,000 22,785,000
Computer, communications and other equipment 11,998,000 7,110,00012,821,000 8,121,000
Data costs 14,930,000 14,583,00018,781,000 15,500,000
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 16,731,00017,608,000 7,259,000
----------- -----------
Total operating costs and expenses 170,482,000 130,973,00084,742,000 53,665,000
----------- -----------
Income from operations 22,391,000 16,503,0009,211,000 5,517,000
----------- -----------
Other income (expense):
Interest expense (1,177,000) (1,876,000)(818,000) (392,000)
Other, net (226,000) (808,000)(1,492,000) (67,000)
----------- -----------
(1,403,000) (2,684,000)(2,310,000) (459,000)
----------- -----------
Earnings before income taxes 20,988,000 13,819,0006,901,000 5,058,000
Income taxes 7,968,000 5,389,0002,656,000 1,922,000
----------- -----------
Net earnings $13,020,000 8,430,000$ 4,245,000 3,136,000
=========== ===========
Earnings per share $ .50 .370.15 0.12
=========== ===========
Weighted average shares 25,966,000 22,564,000
outstanding 29,253,000 25,822,000
=========== ===========
See accompanying condensed notes to consolidated financial statements.
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the NineThree Months Ended
-------------------------
December 31,
---------------------------------------------------
June 30,
--------------------------
1996 1995
1994
---------- --------------------- -----------
Cash flows from operating activities:
Net earnings $ 13,020,000 8,430,0004,245,000 3,136,000
Non-cash operating activities:
Depreciation and amortization 14,770,000 14,193,0006,660,000 5,065,000
Loss on disposalimpairment of assets 1,000,000 --- 540,000
Equity in operations of joint
venture --- 279,000
Other, net 292,000 1,170,0001,256,000 153,000
Changes in assets and liabilities:
Accounts receivable (8,167,000) (9,063,000)(5,471,000) (167,000)
Other assets (1,336,000) 285,000231,000 (1,202,000)
Accounts payable and other liabilities 1,486,000 8,101,000
---------- ----------(1,316,000) (455,000)
----------- -----------
Net cash provided by operating activities 20,065,000 23,935,000
---------- ----------6,605,000 6,530,000
----------- -----------
Cash flows from investing activities:
Sale of assets 351,000 5,638,000--- 131,000
Cash acquired in pooling
acquisition 21,000 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)(1,004,000) (250,000)
Capital expenditures (28,590,000) (16,380,000)
---------- ----------(18,740,000) (10,481,000)
----------- -----------
Net cash used by investing activities (35,513,000) (18,768,000)
---------- ----------
Form 10-Q(19,723,000) (8,976,000)
----------- -----------
Cash flows from financing activities:
Proceeds from debt 18,108,000 ---22,481,000 4,199,000
Payments of debt (4,708,000) (13,484,000)(13,516,000) (2,295,000)
Sale of common stock 2,124,000 12,930,0001,220,000 636,000
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)
---------- ----------10,185,000 1,062,000
----------- -----------
Effect of exchange rate changes on cash (31,000) --- ---------- ----------(24,000)
----------- -----------
Net increase (decrease)decrease in cash and short-term cash
investments (1,243,000) 4,613,000(2,933,000) (1,408,000)
Cash and short-term cash investments at
beginning of period 3,469,000 3,149,000
475,000
---------- --------------------- -----------
Cash and short-term cash investments at end
of period $ 1,906,000 5,088,000
========== ==========536,000 1,741,000
=========== ===========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 1,525,000 2,276,000901,000 740,000
Income taxes 4,122,000 2,424,000
========== ==========73,000 316,000
=========== ===========
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,In April 1996, the Company purchased certain assets of Direct Media/DMI,
Inc. ("DMI") for $25,000,000 and the outstandingassumption of certain liabilities of
DMI. The $25,000,000 purchase price, payable in three (3) years, is
collaterized by a letter of credit, and may, at DMI's option, be paid in
one million shares of Acxiom common stock in lieu of Generator Datamarketing Limited (``Generator''). Generator
is locatedcash plus accrued
interest. Headquartered in Hertfordshire, near London,Greenwich, Connecticut, DMI provides list
brokerage, management, and provides data
and database marketing software and processingconsulting services to its
customers.business-to-business and
consumer list owners and mailers. At April 1, 1996 the liabilities assumed
by the Company exceeded the fair value of the assets acquired from DMI by
$2,673,000 (unaudited). The resulting excess of purchase price was 4,000,000 pounds sterling
(approximately $6,460,000).over fair
value of net assets acquired of $27,673,000 is being amortized over its
estimated economic life of 20 years. The acquisition has been accounted for
as a purchase and accordingly, Generator'sthe results of operations of DMI are included in the
consolidated statementsresults of earnings asoperations from the date of the purchase date.acquisition. The
purchase price exceeded thefor DMI has been allocated as follows:
Trade accounts receivable $ 7,558,000
Property and equipment 2,010,000
Excess of cost over fair value
of the net assets acquired by
$5,648,000.27,673,000
Other assets 1,340,000
Short-term payable to bank (11,594,000)
Accounts payable and other liabilities (1,700,000)
Long-term debt (287,000)
----------
$ 25,000,000
==========
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.
Thefollowing consolidated pro forma combinedfinancial information (which includes
adjustments to reflect the accounting bases recognized in recording the
purchase and to eliminate the effects of transactions between the Company
and DMI) shows the results of the Company's operations assumingfor the acquisitionquarter
ended June 30, 1995 as if the purchase of DMI had 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 andperiod:
Revenue $ 70,117,000
==========
Net earnings before income taxes of $215,000 for
the year ended December 31, 1994.$ 4,118,000
==========
Earnings per share $ 0.15
==========
2. On August 25, 1995,April 9, 1996, 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 984,839issued approximately 1.7 million 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 exerciseand common stock
options of such
options.Pro CD, Inc. ("Pro CD"). Headquartered in Danvers,
Massachusetts, Pro CD is a publisher of reference software on CD-ROM. 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 DataQuickPro CD 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, 1995,1996, without
restating prior years'year statements of earnings to reflect the pooling of
interestinterests 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, DataQuick1995, Pro CD had
revenues and earnings before income taxesa net loss of $20,251,000approximately $21,675,000 and $891,000,$970,000,
respectively. IncludedAt April 1, 1996, Pro CD's liabilities exceeded its assets by
approximately $1,775,000.
3. Effective March 31, 1994 the Company sold substantially all of the assets
of its former Acxiom Mailing Services operating unit ("AMS") to MorCom,
Inc. ("MorCom") in the current fiscal year's results
are revenue of $8,048,000 and earnings before income taxes of
$79,000 for DataQuickexchange for the period fromassumption of certain liabilities,
$4,500,000 in cash, a mortgage note receivable, and $1,000,000 of preferred
stock issued by MorCom. Additionally, the Company sold MorCom a software
license to use certain applications of the Company's software. At June 30,
1996 the assets remaining on the Company's books related to this
transaction were as follows:
Mortgage note receivable (other assets) $ 3,912,000
Software license receivable (other assets) 640,000
Preferred stock (other assets) 1,000,000
Trade accounts receivable 491,000
---------
$ 6,043,000
In June 1996, MorCom ceased operations. The Company has established
valuation reserves for the full amount of the software license receivable,
preferred stock, and trade accounts receivable. The Company is currently
evaluating various alternatives related to the property. Management
believes that any further loss associated with this event will not be
material to the financial statements.
4. Long term debt consists of the following:
June 30, March 31,
1996 1996
Unsecured revolving credit agreement $ 34,476,000 11,995,000
Convertible note, payable April 30,
1999 together with interest at
3.12%; collateralized by letter
of credit; convertible at maturity
into 1 million shares of common
stock 25,000,000 ---
9.75% Senior Notes, due May 1, 2000,
payable in annual installments of
$2,143,000 each May 1; Interest is
payable semiannually 8,571,000 10,714,000
8.94% note payable due in monthly
installments of principal and
interest of $50,000 with remaining
balance due June 30, 1997;
collateralized by real estate 4,208,000 4,264,000
Other notes and capital lease
obligations payable 4,342,000 3,778,000
---------- ----------
Total long term debt 76,597,000 30,751,000
Less current installments 4,053,000 3,866,000
---------- ----------
Long-term debt, excluding current
installments $ 72,544,000 $ 26,885,000
========== ==========
Subsequent to June 30, 1996 the unsecured credit agreement was increased to
provide for revolving loans up to $50,000,000 and now expires on July 30,
2001. The 8.94% note payable which is due June 30, 1997 continues to be
classified as long-term debt because the Company intends to use available
funding under the credit agreement to refinance the note on a long-term
basis.
5. Earnings per share computations are based upon the weighted average number
of shares outstanding, including the dilutive effect of stock options and
warrants and the convertible debt issued for the purchase of DMI, all of
which are considered common stock equivalents. For purposes of calculating
earnings per share, the interest expense on the convertible note is
eliminated. The calculation of earnings per share for the periods presented
is as follows:
For the Three Months Ended
------------------------------
June 30, 1996 June 30, 1995
to
August 25, 1995.
3.------------- -------------
Net earnings $ 4,245,000 $ 3,136,000
Interest expense (net of tax effect) 120,000 ---
---------- ----------
Adjusted net earnings $ 4,365,000 $ 3,136,000
========== ==========
Earnings per share $ .15 $ .12
==== ====
Weighted average shares outstanding 29,253,000 25,822,000
========== ==========
6. On July 25, 1995, a customer of the Company, Highlights for Children, Inc.
("Highlights"(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 twothree 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 other related fees invoicesinvoiced
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 providing7. Trade accounts receivable are presented net of allowances for revolving loans in amountsdoubtful
accounts, returns, and credits of up to $30,000,000 which was set
to expire August$4,489,000 and $1,880,000 at June 30,
1996 and March 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.respectively.
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$93,953,000 for the quarter ended December 31, 1995, anJune 30,
1996, a 59% increase of 35% over revenue of $52,742,000$59,182,000 for the same quarter a year
ago. Excluding the effects of the Pro CD and DMI acquisitions which were
completed effective April 1, 1996, revenue was up 38% over the prior year. By
industry sector, the direct marketing industry revenue grew 168% including the
additional revenue from DMI, and information and communications revenue grew
118%, which includes the additional revenue from Pro CD. Financial services
revenue grew 13% and insurance revenue grew 19% while the media/publishing
industry sector was flat compared to the prior year.
Operating costs and expenses increased 58% compared to the same quarter a year
ago. Salaries and benefits increased 56%, but after adjusting for the effects of
the acquisitions noted above, the increase was only 28%, principally as a result
of new contracts with The Polk Company ("Polk") and Trans Union Marketing
Services. Computer, communications and other equipment costs were up 58%,
primarily attributable to the new contracts noted above. Data costs were up 21%,
reflecting increased revenue under the Allstate contract. Other operating costs
and expenses were up 143% or $10,349,000. After adjusting for the impact of the
acquisitions noted above, the increase is 52% or $3.8 million which principally
relates to higher facility costs on newly constructed facilities and
volume-related increases. Income from operations was 10% of revenue compared to
9% for the first quarter of the prior year.
Interest expense increased due to increased levels of debt during the quarter
when compared to the year earlier period. Other expense in the quarter included
a charge of $1,000,000 for the write-off of the preferred stock investment in
MorCom (see discussion below).
The Company's effective income tax rate was 38.5% for the quarter, compared to
38% for the first quarter in the prior year. The financial services sector grew 42%, primarily due toCompany expects 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 reportedactual
effective rate 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%full fiscal year to remain in the 37-39% range.
Net earnings 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 in35% over the previous year. Salaries and benefitsEarnings per
share increased 46%, computer,
communications and other equipment expenses increased 33%, data
costs increased 4%, and other operating costs and expenses
increased 48%. Once again, most25% on a 13% increase in the weighted average number of shares
outstanding. The increase in 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%number of revenue compared
to 11% forshares from 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 is primarily due to lower average
levelsthe acquisitions of debt, lower interest rates,Pro CD and capitalization in the
current year of approximately $400,000 in interest incurred in
construction of new facilities. Other expense inDMI during 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 priorthis 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, 1995June 30, 1996 was $24,061,000$25,169,000 compared to $18,553,000$22,855,000 at
March 31, 1995.1996. At December 31, 1995June 30, 1996 the Company had arranged for a temporary
increase in its revolving credit agreement from $30,000,000 to $40,000,000,
giving the Company total available credit lines of $31,000,000$41,000,000 of which
$18,257,000$35,476,000 was outstanding. Subsequent to June 30, 1996 the Company has
completed the negotiation of a new $50,000,000 revolving credit agreement. As
the new revolving credit agreement has a 5-year life, the Company has continued
to classify the entire balance as long-term debt.
In addition, the Company continues to classify as long-term debt the note
payable, totaling $4,208,000, which is due in full on June 30, 1997 because it
is the Company's intention to pay this loan with additional proceeds from the
revolving credit agreement.
The Company's debt-to-capital ratio (capital defined as long-term debt plus
stockholders' equity) was 22%36% at December 31,June 30, 1995 compared to 16%18% at March 31,
1995. As
discussed1996. The increase in footnote 4the ratio is due to the consolidated financial statements,issuance of a convertible note in
the Company's $30,000,000amount of $25,000,000 for the purchase of DMI as well as additional funding
drawn on the revolving credit agreement which was
set to expire August 31, 1996 has been amended to extend through
August 31, 1998.during the quarter. Cash provided by
operating activities was $20,065,000$6,605,000 for the ninethree months ended December 31, 1995June 30, 1996
compared to $23,935,000$6,530,000 for the same period a year earlier. In the current
period
$35,513,000quarter, $19,723,000 was used by investing activities and $14,236,000$10,185,000 was
provided by financing activities. Investing activities included $18,740,000 in
capital expenditures of $28,590,000 compared to $16,380,000 for$10,481,000 in the prior period. Investing activities also included $5,914,000
paid foryear's quarter. A
significant amount of the first quarter capital expenditures related to the
acquisition of Generator Datamarketing Limited
("Generator") which is discussed more fully in footnote 1data center equipment for the Polk data center outsourcing
contract. Management expects capital expenditures to the consolidated financial statements. Generator's results of
operations are includedbe substantially lower in
the Company's consolidated results for
the second and third quartersquarter 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,included paying off
short-term bank debt incurred when the Company announced a letter of intent to
form a business alliance withacquired DMI and proceeds from
additional borrowings under 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.revolving credit agreement.
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 fromthrough 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 unused capacity to raise capital which could be used to support
future growth.
Effective March 31, 1994 the Company sold substantially all of the assets of its
former Acxiom Mailing Services unit ("AMS") in exchange for the assumption of
certain liabilities, $4,500,000 in cash, a mortgage note receivable, and
$1,000,000 of preferred stock issued by the buyer, MorCom, Inc. Additionally the
Company sold MorCom a software license to use certain of the Company's software.
In June, 1996, MorCom ceased operations. The Company has established valuation
reserves for the full amount of the software license receivable, preferred
stock, and trade accounts receivable and is currently evaluating various
alternatives related to the property. Management believes that any further loss
associated with this event will not be material to the financial statements.
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 against4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Company inwas held on July
24, 1996. The following matters were voted upon at the United States Bankruptcy Courtmeeting:
(1) Shareholders approved the election of three
directors. Voting results for the
Southern District of New York seeking to recover
certain computer equipment, together with alleged past
due lease payments, taxeseach individual nominee
were as follows: William T. Dillard II, 21,421,690
votes for 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, tax185,218 withheld; Harry C. Gambill,
21,418,167 votes for and interest charges assessed after the initial lease
terms expired188,741 withheld; 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,Walter
V. Smiley, 21,605,513 votes for and 1,395 withheld.
(2) make scheduled sub-
lease paymentsShareholders approved an amendment to the Company, (3) properly recordCompany's
Certificate of Incorporation to increase the number
of authorized shares of common stock, $.10 par value
per share, from 60,000,000 to 200,000,000, with
18,708,820 votes for, 3,183,989 votes against,
478,931 votes withheld, 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.no broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3(i) Amended and Restated Certificate of Incorporation
10 Amended and Restated Key Associate Stock Option Plan
of Acxiom Corporation
27 Financial Data Schedule
(b) Reports on Form 8-K filed during the thirdfirst quarter:
NoneA report was filed on May 14, 1996, as amended by a Form 8-K/A
filed on July 12, 1996, which reported the acquisition of
substantially all of the assets and assumption of certain
liabilities of Direct Media/DMI, Inc.
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,Dated: August 13, 1996
/S/By: /s/ Robert S. Bloom
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(Signature)
Robert S. Bloom
Chief Financial Officer
(Chief Accounting Officer)
Form 10-Q
EXHIBIT INDEX
Exhibits to Form 10-Q
Exhibit Number Exhibit
3(i) Amended and Restated Certificate of Incorporation
10 Amended and Restated Key Associate Stock Option Plan
of Acxiom Corporation
27 Financial Data Schedule