LiveRamp (RAMP) 10-Q 2013 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

  [X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

                                                                                                For the quarterly period ended December 31, 2012

                                                                                                                                          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 (State or Other Jurisdiction of Incorporation or Organization)	71-0581897 (I.R.S. Employer Identification No.)
P.O. Box 8180, 601 E. Third Street, Little Rock, Arkansas (Address of Principal Executive Offices)	72201 (Zip Code)
(501) 342-1000 (Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
		Yes  [X]	No  [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
		Yes [X]		No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
	Large accelerated filer [X]				Accelerated filer   [ ]
	Non-accelerated filer [ ]				Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
		Yes  [ ]	No  [X]
The number of shares of Common Stock, $ 0.10 par value per share, outstanding as of February 4, 2013 was 73,827,393.

1 

ACXIOM CORPORATION AND SUBSIDIARIES

INDEX

REPORT ON FORM 10-Q

December 31, 2012

Part I.           Financial Information		Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets                              as of December 31, 2012 and March 31, 2012 (Unaudited)		3
Condensed Consolidated Statements of Operations                              for the Three Months ended December 31, 2012 and 2011 (Unaudited)		4
Condensed Consolidated Statements of Operations                             for the Nine Months ended December 31, 2012 and 2011 (Unaudited)		5
Condensed Consolidated Statements of Comprehensive Income                             for the Three Months ended December 31, 2012 and 2011 (Unaudited)		6
Condensed Consolidated Statements of Comprehensive Income                              for the Nine Months ended December 31, 2012 and 2011 (Unaudited)		7
Condensed Consolidated Statement of Stockholders’ Equity                              for the Nine Months ended December 31, 2012 (Unaudited)		8
Condensed Consolidated Statements of Cash Flows                             for the Nine Months ended December 31, 2012 and 2011 (Unaudited)		9-10
Notes to Condensed Consolidated Financial Statements		11-22
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23-33
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34
Item 4.	Controls and Procedures	34
Part II.           Other Information
Item 1.	Legal Proceedings	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 6.	Exhibits	36
Signature		37
Exhibit Index		38

2 

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

ACXIOM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)

	December 31, 2012			March 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	186,220		$	229,648
Trade accounts receivable, net		182,457			169,446
Deferred income taxes		15,082			15,107
Other current assets		52,750			57,804
Total current assets		436,509			472,005
Property and equipment, net of accumulated depreciation and amortization		231,774			253,373
Software, net of accumulated amortization		19,491			13,211
Goodwill		382,704			382,285
Purchased software licenses, net of accumulated amortization		21,583			25,294
Deferred costs, net		47,211			61,977
Data acquisition costs, net		11,540			15,009
Other assets, net		2,831			3,697
	$	1,153,643		$	1,226,851
LIABILITIES AND EQUITY
Current liabilities:
Current installments of long-term debt	$	19,814		$	26,336
Trade accounts payable		19,873			31,030
Accrued expenses
Payroll		47,041			54,839
Other		73,696			77,062
Deferred revenue		47,389			59,949
Income taxes payable		3,229			16,400
Total current liabilities		211,042			265,616
Long-term debt		240,774			251,886
Deferred income taxes		86,614			93,039
Other liabilities		4,178			4,455
Commitments and contingencies
Equity:
Common stock		12,108			12,003
Additional paid-in capital		877,619			860,165
Retained earnings		580,728			536,359
Accumulated other comprehensive income		14,714			13,601
Treasury stock, at cost		(873,893	)		(810,381	)
Total Acxiom stockholders' equity		611,276			611,747
Noncontrolling interest		(241	)		108
Total equity		611,035			611,855
	$	1,153,643		$	1,226,851
See accompanying notes to condensed consolidated financial statements.

3 

ACXIOM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except per share amounts)

	For the Three Months ended December 31
	2012			2011
Revenues	$	273,102		$	280,893
Operating costs and expenses:
Cost of revenue		209,027			213,925
Selling, general and administrative		37,303			36,318
Impairment of goodwill and other intangibles		-			17,803
Gains, losses and other items, net		(126	)		(2,671	)
Total operating costs and expenses		246,204			265,375
Income from operations		26,898			15,518
Other expense:
Interest expense		(3,178	)		(3,883	)
Other, net		565			(98	)
Total other expense		(2,613	)		(3,981	)
Earnings from continuing operations before income taxes		24,285			11,537
Income taxes		9,836			9,700
Net earnings from continuing operations	$	14,449		$	1,837
Earnings from discontinued operations, net of tax		-			814
Net earnings	$	14,449		$	2,651
Less: Net loss attributable to noncontrolling interest		(76	)		(5,279	)
Net earnings attributable to Acxiom	$	14,525		$	7,930
Basic earnings per share:
Net earnings from continuing operations	$	0.19		$	0.02
Net earnings from discontinued operations		-			0.01
Net earnings	$	0.19		$	0.03
Net earnings attributable to Acxiom stockholders	$	0.20		$	0.10
Diluted earnings per share:
Net earnings from continuing operations	$	0.19		$	0.02
Net earnings from discontinued operations		-			0.01
Net earnings	$	0.19		$	0.03
Net earnings attributable to Acxiom stockholders	$	0.19		$	0.10
See accompanying notes to condensed consolidated financial statements.

4 

ACXIOM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except per share amounts)

	For the Nine Months ended December 31
	2012			2011
Revenues	$	822,228		$	843,369
Operating costs and expenses:
Cost of revenue		628,239			649,701
Selling, general and administrative		111,393			112,554
Impairment of goodwill and other intangibles		-			17,803
Gains, losses and other items, net		66			38
Total operating costs and expenses		739,698			780,096
Income from operations		82,530			63,273
Other expense:
Interest expense		(9,735	)		(14,057	)
Other, net		(36	)		(1,150	)
Total other expense		(9,771	)		(15,207	)
Earnings from continuing operations before income taxes		72,759			48,066
Income taxes		28,739			25,291
Net earnings from continuing operations	$	44,020		$	22,775
Earnings from discontinued operations, net of tax		-			2,868
Net earnings	$	44,020		$	25,643
Less: Net loss attributable to noncontrolling interest		(349	)		(5,554	)
Net earnings attributable to Acxiom	$	44,369		$	31,197
Basic earnings per share:
Net earnings from continuing operations	$	0.59		$	0.28
Net earnings from discontinued operations		-			0.04
Net earnings	$	0.59		$	0.32
Net earnings attributable to Acxiom stockholders	$	0.59		$	0.39
Diluted earnings per share:
Net earnings from continuing operations	$	0.57		$	0.28
Net earnings from discontinued operations		-			0.04
Net earnings	$	0.57		$	0.32
Net earnings attributable to Acxiom stockholders	$	0.58		$	0.39
See accompanying notes to condensed consolidated financial statements.

5 

ACXIOM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)

	For the Three Months ended December 31
	2012			2011
Net earnings	$	14,449		$	2,651
Other comprehensive income:
Change in foreign currency translation adjustment		862			1,528
Unrealized gain on interest rate swap		200			494
Other comprehensive income		1,062			2,022
Comprehensive income		15,511			4,673
Less: Comprehensive loss attributable to noncontrolling interest		(76	)		(5,279	)
Comprehensive income attributable to Acxiom stockholders	$	15,587		$	9,952
See accompanying notes to condensed consolidated financial statements.

6 

ACXIOM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)

	For the Nine Months ended December 31
	2012			2011
Net earnings	$	44,020		$	25,643
Other comprehensive income (loss):
Change in foreign currency translation adjustment		1,046			(4,190	)
Unrealized gain on interest rate swap		67			194
Other comprehensive income (loss)		1,113			(3,996	)
Comprehensive income		45,133			21,647
Less: Comprehensive loss attributable to noncontrolling interest		(349	)		(5,554	)
Comprehensive income attributable to Acxiom stockholders	$	45,482		$	27,201
See accompanying notes to condensed consolidated financial statements.

7 

ACXIOM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

NINE MONTHS ENDED DECEMBER 31, 2012

(Unaudited)

(Dollars in thousands)

					Accumulated
	Common Stock		Additional			other	Treasury Stock
	Number		paid-in	Retained		comprehensive	Number		Noncontrolling	Total
	of shares	Amount	Capital	earnings		income	of shares	Amount	Interest	Equity
Balances at March 31, 2012	120,027,013	$12,003	$    860,165	$    536,359		$13,601	(43,213,027)	$(810,381)	$      108	$611,855
Employee stock awards, benefit plans and other issuances	590,028	59	8,594	-		-	(56,600)	(790)	-	7,863
Restricted stock units vested	464,688	46	(46)	-		-	-	-	-	-
Non-cash share-based compensation	-	-	8,906	-		-	-	-	-	8,906
Acquisition of treasury stock	-	-	-	-		-	(4,059,090)	(62,722)	-	(62,722)
Comprehensive income:
Foreign currency translation	-	-	-	-		1,046	-	-	-	1,046
Unrealized loss on interest rate swap	-	-	-	-		67	-	-	-	67
Net earnings (loss)	-	-	-	44,369		-	-	-	(349)	44,020
Balances at December 31, 2012	121,081,729	$12,108	$      877,619	$    580,728		$14,714	(47,328,717)	$(873,893)	$    (241)	$611,035

See accompanying notes to condensed consolidated financial statements

8 

ACXIOM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

	For the Nine Months ended December 31
	2012			2011
Cash flows from operating activities:
Net earnings	$	44,020		$	25,643
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation and amortization		89,594			103,240
Loss on disposal or impairment of assets		25			183
Impairment of goodwill and other intangibles		-			17,803
Deferred income taxes		(6,428	)		2,539
Non-cash share-based compensation expense		8,906			6,910
Changes in operating assets and liabilities:
Accounts receivable, net		(13,925	)		(2,763	)
Other assets		756			(202	)
Deferred costs		(1,600	)		(1,879	)
Accounts payable and other liabilities		(32,607	)		7,391
Deferred revenue		(12,830	)		14,143
Net cash provided by operating activities		75,911			173,008
Cash flows from investing activities:
Disposition of operations		-			(1,043	)
Capitalized software development costs		(13,190	)		(3,167	)
Capital expenditures		(21,976	)		(39,147	)
Payments received for investments		-			370
Data acquisition costs		(6,464	)		(8,549	)
Net cash paid in acquisitions		-			(255	)
Net cash used in investing activities		(41,630	)		(51,791	)
Cash flows from financing activities:
Payments of debt		(19,790	)		(145,768	)
Acquisition liability payment		-			(326	)
Acquisition of treasury stock		(65,356	)		(42,827	)
Sale of common stock		7,863			7,318
Contingent consideration paid for prior acquisitions		(287	)		-
Net cash used in financing activities		(77,570	)		(181,603	)
Effect of exchange rate changes on cash		(139	)		(724	)
Net change in cash and cash equivalents		(43,428	)		(61,110	)
Cash and cash equivalents at beginning of period		229,648			206,973
Cash and cash equivalents at end of period	$	186,220		$	145,863

9 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

(Dollars in thousands)

	For the Nine Months ended December 31
	2012		2011
Supplemental cash flow information:
Cash paid during the period for:
Interest	$	9,678	$	15,491
Income taxes		48,268		15,171
Payments on capital leases and installment payment arrangements		12,948		13,687
Prepayments of debt		-		125,000
Other debt payments		6,842		7,081
Non-cash investing and financing activities:
Acquisition of property and equipment under capital leases and installment payment arrangements		2,157		8,733
See accompanying notes to condensed consolidated financial statements.

10 

ACXIOM CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.           BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

These condensed consolidated financial statements have been prepared by Acxiom Corporation (“Registrant,” “Acxiom” or “the Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC” or “the Commission”).  In the opinion of the Registrant’s management all adjustments necessary for a fair presentation of the results for the periods included have been made and the disclosures are adequate to make the information presented not misleading.  All such adjustments are of a normal recurring nature.  Certain note information has been omitted because it has not changed significantly from that reflected in notes 1 through 18 of the Notes to Consolidated Financial Statements filed as part of Item 8 of the Registrant’s annual report on Form 10-K for the fiscal year ended March 31, 2012 (“2012 Annual Report”), as filed with the Commission on May 25, 2012.  This report and the accompanying condensed consolidated financial statements should be read in connection with the 2012 Annual Report.  The financial information contained in this report is not necessarily indicative of the results to be expected for any other period or for the full fiscal year ending March 31, 2013.

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States.  Actual results could differ from those estimates.  Certain of the accounting policies used in the preparation of these condensed consolidated financial statements are complex and require management to make judgments and/or significant estimates regarding amounts reported or disclosed in these financial statements.  Additionally, the application of certain of these accounting policies is governed by complex accounting principles and their interpretation.  A discussion of the Company’s significant accounting principles and their application is included in note 1 and in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, to the Company’s 2012 Annual Report.

Discontinued Operations -

During the quarter ended December 31, 2011, the Company announced the sale of its background screening unit, Acxiom Information Security Systems (AISS).  The sale was completed in the quarter ended March 31, 2012.  As a result, AISS results for the prior year are presented as discontinued operations in the condensed consolidated statement of operations.  Revenue and expenses related to discontinued operations are netted and presented on one line, net of tax, in the statement of operations.

Reclassifications -

Certain amounts reported in previous periods have been reclassified to conform to the current presentation.

Recent Accounting Pronouncements -

In June 2011, the FASB issued an amendment to an existing accounting standard which requires companies to present net income and other comprehensive income in one continuous statement or in two separate, but consecutive, statements.  The Company adopted the standard in the first quarter of fiscal 2013.

11 

2.           EARNINGS PER SHARE AND STOCKHOLDERS’ EQUITY:

Earnings Per Share

A reconciliation of the numerator and denominator of basic and diluted earnings per share is shown below (in thousands, except per share amounts):

	For the quarter ended December 31						For the nine months ended December 31
	2012			2011			2012			2011
Basic earnings per share:
Net earnings from continuing operations	$	14,449		$	1,837		$	44,020		$	22,775
Net earnings from discontinued operations		-			814			-			2,868
Net earnings	$	14,449		$	2,651		$	44,020		$	25,643
Net loss attributable to noncontrolling interest		(76	)		(5,279	)		(349	)		(5,554	)
Net earnings attributable to Acxiom	$	14,525		$	7,930		$	44,369		$	31,197
Basic weighted-average shares outstanding		74,103			78,189			75,195			80,039
Basic earnings per share:
Continuing operations	$	0.19		$	0.02		$	0.59		$	0.28
Discontinued operations		-		$	0.01			-		$	0.04
Net earnings	$	0.19		$	0.03		$	0.59		$	0.32
Net loss attributable to noncontrolling interest		-		$	(0.07	)		-		$	(0.07	)
Net earnings attributable to Acxiom	$	0.20		$	0.10		$	0.59		$	0.39
Diluted earnings per share:
Basic weighted-average shares outstanding		74,103			78,189			75,195			80,039
Dilutive effect of common stock options, warrants, and restricted stock as computed under the treasury stock method		1,775			831			1,792			838
Diluted weighted-average shares outstanding		75,878			79,020			76,987			80,877
Diluted earnings per share:
Continuing operations	$	0.19		$	0.02		$	0.57		$	0.28
Discontinued operations		-		$	0.01			-		$	0.04
Net earnings	$	0.19		$	0.03		$	0.57		$	0.32
Net loss attributable to noncontrolling interest		-		$	(0.07	)		-		$	(0.07	)
Net earnings attributable to Acxiom	$	0.19		$	0.10		$	0.58		$	0.39

Some earnings per share amounts may not add due to rounding.

12 

As of December 31, 2012, the Company had options and warrants outstanding providing for the purchase of approximately 9.7 million shares of common stock together with restricted stock units relating to 1.2 million shares of stock.  Options, warrants and restricted stock units that were outstanding during the periods presented, but were not included in the computation of diluted earnings per share because the effect was antidilutive are shown below (in thousands, except per share amounts):

	For the quarter ended December 31				For the nine months ended December 31
	2012		2011		2012		2011
Number of shares outstanding under options, warrants and restricted stock units		4,752		9,515		7,872		9,438
Range of exercise prices for options and warrants	$	17.76-$62.06	$	12.25-$62.06	$	13.10-$62.06	$	13.14-$62.06

Stockholders’ Equity

On August 29, 2011, the board of directors adopted a common stock repurchase program.  That program was subsequently modified and expanded on December 5, 2011, on May 24, 2012, and again on February 5, 2013.  Under the modified common stock repurchase program, the Company may purchase up to $200.0 million of its common stock through the period ending February 5, 2014.  During the nine months ended December 31, 2012, the Company repurchased 4.1 million shares of its common stock for $62.7 million.  Cash paid for acquisition of treasury stock in the condensed consolidated statement of cash flows may differ from the aggregate purchase price due to trades made during one fiscal period that settle in a different fiscal period.  Through December 31, 2012, the Company had repurchased 9.9 million shares of its stock for $130.9 million, leaving remaining capacity of $69.1 million under the stock repurchase program.

3.           SHARE-BASED COMPENSATION:

Share-based Compensation Plans

Stock Option Activity

The Company has stock option and equity compensation plans for which a total of 38.2 million shares of the Company’s common stock have been reserved for issuance since inception of the plans.  These plans provide that the exercise prices of qualified options will be at or above the fair market value of the common stock at the time of the grant.  Board policy requires that nonqualified options be priced at or above the fair market value of the common stock at the time of grant.  At December 31, 2012, there were a total of 4.4 million shares available for future grants under the plans.

The Company granted 497,409 stock options in the nine months ended December 31, 2012.  The per-share weighted-average fair value of the stock options granted during the nine months ended December 31, 2012 was $5.00.  This valuation was determined using a customized binomial lattice approach with the following weighted-average assumptions: dividend yield of 0.0%; risk-free interest rate of 1.7%; expected option life of 4.5 years; expected volatility of 43% and a suboptimal exercise multiple of 1.4.

Option activity for the nine months ended December 31, 2012 was as follows:

	Number of shares			Weighted-average exercise price per share		Weighted-average remaining contractual term (in years)	Aggregate intrinsic value (in thousands)
Outstanding at March 31, 2012		8,322,077		$	20.91
Granted		497,409		$	13.31
Exercised		(243,026	)	$	13.14		$	1,050
Forfeited or cancelled		(207,993	)	$	18.66
Outstanding at December 31, 2012		8,368,467		$	20.74