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 June 30, 1997 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ----- to -----
Commission file number 0-13163
Acxiom Corporation
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 71-0581897
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P.O. Box 2000, 301 Industrial Boulevard,
Conway, Arkansas 72033-2000
(Address of Principal Executive Offices) (Zip Code)
(501) 336-1000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares of Common Stock, $ 0.10 par value per share,
outstanding as of July 23, 1997 was 51,947,770.
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)
June 30, March 31,
1997 1997
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 626,000 2,721,000
Trade accounts receivable, net 81,874,000 70,636,000
Refundable income taxes ---- 1,809,000
Other current assets 11,692,000 9,379,000
----------- -----------
Total current assets 94,192,000 84,545,000
----------- -----------
Property and equipment 204,032,000 199,286,000
Less - Accumulated depreciation and
amortization 87,359,000 83,115,000
----------- -----------
Property and equipment, net 116,673,000 116,171,000
----------- -----------
Software, net of accumulated amortization 19,453,000 18,627,000
Excess of cost over fair value of net assets
acquired 37,941,000 38,297,000
Other assets 48,249,000 42,028,000
----------- -----------
$ 316,508,000 299,668,000
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term notes payable 60,000 158,000
Current installments of long-term debt 3,645,000 3,923,000
Trade accounts payable 12,669,000 15,323,000
Accrued interest 1,599,000 1,128,000
Accrued payroll and related expenses 5,696,000 7,519,000
Accrued royalties 1,493,000 2,047,000
Other accrued expenses 5,613,000 5,492,000
Advances from customers 497,000 519,000
Income taxes 1,186,000 ----
----------- -----------
Total current liabilities 32,458,000 36,109,000
----------- -----------
Long-term debt, excluding current installments 99,232,000 87,120,000
Deferred income taxes 17,324,000 17,324,000
Deferred revenue 3,802,000 3,018,000
Stockholders' equity:
Preferred stock ---- ----
Common stock 5,289,000 5,274,000
Additional paid-in capital 63,252,000 61,322,000
Retained earnings 97,051,000 91,738,000
Foreign currency translation adjustment 571,000 278,000
Treasury stock, at cost (2,471,000) (2,515,000)
----------- -----------
Total stockholders' equity 163,692,000 156,097,000
----------- -----------
Commitments and contingencies $ 316,508,000 299,668,000
=========== ===========
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
------------------------------
June 30
------------------------------
1997 1996
----------- -----------
Revenue $ 100,327,000 93,953,000
Operating costs and expenses:
Salaries and benefits 37,979,000 35,532,000
Computer, communications and other equipment 14,929,000 12,821,000
Data costs 20,688,000 18,781,000
Other operating costs and expenses 16,516,000 17,608,000
----------- -----------
Total operating costs and expenses 90,112,000 84,742,000
----------- -----------
Income from operations 10,215,000 9,211,000
----------- -----------
Other income (expense):
Interest expense (1,534,000) (818,000)
Other, net (180,000) (1,492,000)
----------- -----------
(1,714,000) (2,310,000)
----------- -----------
Earnings before income taxes 8,501,000 6,901,000
Income taxes 3,188,000 2,656,000
----------- -----------
Net earnings $ 5,313,000 4,245,000
=========== ===========
Earnings per share $ 0.09 0.07
=========== ===========
Weighted average shares outstanding 59,193,000 58,506,000
=========== ===========
See accompanying condensed notes to consolidated financial statements.
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
------------------------------
June 30
------------------------------
1997 1996
----------- -----------
Cash flows from operating activities:
Net earnings $ 5,313,000 4,245,000
Non-cash operating activities:
Depreciation and amortization 9,532,000 6,660,000
Loss (Gain) on disposal or impairment
of assets (3,000) 1,000,000
Provision for returns and doubtful accounts 317,000 1,256,000
Changes in assets and liabilities:
Accounts receivable (11,446,000) (5,471,000)
Other assets (4,318,000) 231,000
Accounts payable and other liabilities (2,553,000) (1,316,000)
----------- -----------
Net cash provided (used) by operating
activities (3,158,000) 6,605,000
----------- -----------
Cash flows from investing activities:
Sale of assets 372,000 ----
Cash acquired in pooling acquisition ---- 21,000
Development of software (2,089,000) (1,004,000)
Capital expenditures (10,944,000) (18,740,000)
----------- -----------
Net cash used by investing activities (12,661,000) (19,723,000)
----------- -----------
Cash flows from financing activities:
Proceeds from debt 14,158,000 22,481,000
Payments of debt (2,424,000) (13,516,000)
Sale of common stock 1,989,000 1,220,000
----------- -----------
Net cash provided by financing activities 13,723,000 10,185,000
----------- -----------
Effect of exchange rate changes on cash 1,000 ----
----------- -----------
Net decrease in cash and short-term cash
investments (2,095,000) (2,933,000)
Cash and short-term cash investments at
beginning of period 2,721,000 3,469,000
----------- -----------
Cash and short-term cash investments at end
of period $ 626,000 536,000
=========== ===========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 1,063,000 901,000
Income taxes 193,000 73,000
=========== ===========
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 17 of the Notes to
Consolidated Financial Statements filed as a part of Item 14 of Registrant's
1997 Annual Report on Form 10-K as filed with the Securities and Exchange
Commission on June 30, 1997.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Included in other assets are unamortized conversion costs in the amount of
$20,259,000 and $18,137,000 at June 30, 1997 and March 31, 1997,
respectively. These costs, incurred in connection with the conversion phase
of outsourcing and facilities management contracts are deferred and
amortized over the life of the contract.
2. Long-term debt consists of the following:
June 30, March 31,
1997 1997
6.92% Senior notes due March 30, 2007, $ 30,000,000 30,000,000
payable in annual installments of
$4,286,000 commencing March 30, 2001;
interest is payable semi-annually
3.12% Convertible note, interest and 25,000,000 25,000,000
principal due April 30, 1999;
collateralized by letter of credit;
convertible at maturity into two million
shares of common stock
Unsecured revolving credit agreement 35,612,000 21,454,000
9.75% Senior notes due May 1, 2000, 6,429,000 8,571,000
payable in annual installments of
$2,143,000 each May 1; interest is
payable semi-annually
Note payable due in monthly installments 3,970,000 4,031,000
of principal and interest of $50,000 with
remaining balance due June 30, 2002;
collateralized by real estate; floating
interest rate
Other notes and capital lease obligations 1,866,000 1,987,000
payable ----------- -----------
Total long term debt 102,877,000 91,043,000
Less current installments 3,645,000 3,923,000
----------- -----------
Long-term debt, excluding current $ 99,232,000 87,120,000
installments =========== ===========
The floating rate note payable was previously due June 30, 1997, but has been
refinanced with the same lender. The interest rate is 2% above the Federal
Reserve discount rate with a maximum of 8.75%.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. 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 Direct
Media/DMI, Inc. ("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, 1997 June 30, 1996
------------- -------------
Net earnings $ 5,313,000 4,245,000
Interest expense (net of tax effect) 111,000 120,000
---------- ----------
Adjusted net earnings $ 5,424,000 4,365,000
========== ==========
Earnings per share $ 0.09 0.07
========== ==========
Weighted average shares outstanding $ 59,193,000 58,506,000
========== ==========
4. Trade accounts receivable are presented net of allowances for doubtful
accounts, returns, and credits of $4,630,000 and $4,333,000 at June 30,
1997 and March 31, 1997, respectively.
5. On July 24, 1997, the Company entered into an agreement to sell certain
assets of its Pro CD, Inc. ("Pro CD") subsidiary to CD-Rom Technologies,
Inc. ("CTI"), a wholly-owned subsidiary of American Business Information,
Inc., for cash. The sale includes all of the assets of Pro CD which are
used in connection with its business of retail and direct marketing sales
of reference products on CD-ROM/DVD, but excludes certain other assets of
Pro CD used in connection with its corporate sales business. The sale
is subject to completion of due diligence by CTI and receipt of any
required governmental consent. An addendum to the agreement, to be agreed
upon prior to closing, will itemize the assets to be sold and liabilities
to be assumed. Subject to the above, the sale is expected to close during
the quarter ended September 30, 1997. The sale is expected to result in a
one-time gain on disposal.
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 $100.3 million for the quarter ended June 30,
1997, a 7% increase over the same quarter a year ago. Adjusting for prior year
pass-through revenues discussed below, the revenue increase over the prior year
was 10%. Overall, the revenue growth was slightly lower than anticipated in what
has traditionally been the Company's weakest quarter, which was partially caused
by delays in projects in the Telecommunications, Financial Services and
Insurance business units which management expects to be completed in future
periods. The Company has also been awarded a significant amount of new business
during the quarter which will impact the remainder of the fiscal year.
Services Division revenue of $35.6 million increased 16% over the first quarter
in the prior year. The Services Division represents the Company's traditional
processing revenues and includes the Insurance, Retail, High Tech, Publishing,
Telecommunications, Utilities, and Citicorp business units. Strong performances
by the Insurance and Citicorp units offset a decrease from last year by the
Telecommunications business unit reflecting delays in projects.
Alliances Division revenue of $28.3 million reflects a 4% decrease from the
prior year. However, adjusting for a reduction in pass-through revenues recorded
on the Trans Union Corporation ("Trans Union") marketing services contract in
the prior year, revenue actually increased by 8%. The Alliances Division
includes the Company's outsourcing relationships and the Financial Services
business units. Financial Services revenue is off $1.5 million from the prior
year due to a data license which was sold in the previous year's first quarter
and several Financial Services customers' reduced mailing volumes or delayed
projects which impacted the first quarter. This segment continues to show
volatility but the trends appear to be improving.
Data Products Division revenue of $28.8 million increased 5% over the prior
year. The Data Products Division includes the Acxiom Data Group (InfoBase),
DataQuick, Direct Media and Pro CD business units. DataQuick revenue increased
29% due to strong list sales, which was largely offset by an 18% decrease in Pro
CD revenues. Pro CD continues to be impacted by slowing revenues from its retail
channel. Although corporate sales are growing, they have not offset the drop in
retail sales.
The International Division recorded revenue of $7.6 million, an 18% increase
over the prior year. This is particularly positive because the last year's first
quarter included significant database design fees for new customers.
Operating expenses for the quarter increased 6% compared to the same quarter a
year ago. Salaries and benefits increased $2.4 million or 7% over the prior
year's first quarter due to headcount increases on the increased volume and
normal pay increases. Computer, communications and other equipment costs
increased $2.1 million or 16% reflecting the impact of the prior year's capital
expenditures and the Polk Company ("Polk") data center outsourcing contract,
partially mitigated by the offset in computer costs associated with lower Trans
Union pass-through revenues. Data costs increased $1.9 million or 10%
principally due to the increase
in data volumes under the Allstate data management agreement. Other operating
expenses were lower by $1.1 million or 6% lower than the prior year's first
quarter due to a bad debt write-off related to sale of the lettershop facility
in the prior year, combined with lower cost of sales associated with lower
retail sales for Pro CD.
Income from operations increased from 9.8% of revenue to 10.2% of revenue.
Interest expense was higher in the quarter due primarily to higher debt levels,
combined with slightly higher interest rates. Other expense in the prior year
included a $1 million write-off related to the sale of the Company's lettershop
facility.
The Company's effective tax rate for the quarter was 37.5% compared to 38.5% for
the year-earlier period. For the full fiscal year ended March 31, 1997, the
effective rate was 37.5%. The Company expects the rate to remain in the 37-39%
range for the current fiscal year.
Net income and earnings per share increased 25% and 29%, respectively, over the
prior year's first quarter results.
Capital Resources and Liquidity
Working capital at June 30, 1997 was $61.7 million compared to $48.4 million at
March 31, 1997. At June 30, 1997 the Company had available credit lines of $51.5
million, of which $35.6 million was outstanding. The long-term debt, which has a
balance as of June 30, 1997 of $3,970,000, has been refinanced with the same
lender and is now due June 30, 2002. This note had previously been due in full
on June 30, 1997. The Company has also renewed its short-term unsecured credit
agreement, in the amount of $1.5 million, which now expires July 31, 1998. The
Company's debt-to-capital ratio (capital defined as long-term debt plus
stockholders' equity) was 38% on June 30, 1997, compared with 36% on March 31,
1997. The increase is due to the increase in the amount outstanding under the
revolving credit agreement, as discussed below.
Net cash used by operating activities was $3.2 million for the quarter ended
June 30, 1997, compared with cash provided by operating activities of $6.6
million in the previous year's first quarter. Earnings before interest, taxes,
depreciation, and amortization ("EBITDA") increased by 36% compared to the
year-earlier period, but the resulting operating cash flow was offset by
increases in accounts receivable and other assets. In the current year, $12.7
million was used by investing activities, including capital expenditures of
$10.9 million. This represents a decrease from capital expenditures in the prior
year period of $18.7 million. The prior year included significant capital
expenditures for the Polk data center outsourcing contract. The Company
continues to expect capital expenditures for the full year to be in the $40-50
million range. Financing activities of $13.7 million, primarily additional debt
under the revolving credit agreement, provided the remainder of the Company's
cash flow.
While the Company does not have any material contractual commitments for capital
expenditures, additional investments in facilities and computer equipment
continue to be necessary to support the growth of the business. In addition, new
outsourcing or facilities management contracts frequently require substantial
up-front capital expenditures in order to acquire or replace existing assets.
Management believes that the combination of existing working capital,
anticipated funds to be generated from future operations and the Company's
available credit lines is sufficient to meet the Company's current operating
needs as well as to fund the anticipated levels of capital expenditures. If
additional funds are required, the Company would use existing credit lines to
generate cash, followed by either additional borrowings to be secured by the
Company's assets or the issuance of additional equity securities in either
public or private offerings. Management believes that the Company has
significant unused capacity to raise capital which could be used to support
future growth.
The Financial Accounting Standards Board has recently issued Statements No. 130,
"Reporting Comprehensive Income" and No. 131, "Disclosures about Segments of an
Enterprise and Related Information." Both of these statements will be adopted by
the Company in fiscal 1999. Statement No. 130 requires that all components of
comprehensive income be reported in a financial statement displayed with the
same prominence as other financial statements, and requires the reporting of
total comprehensive income in that financial statement. Statement No. 131
requires public companies to report certain information about operating
segments. The Company expects to report segment information using the four
operating divisions into which it was organized effective April, 1997.
On July 24, 1997, the Company entered into an agreement to sell certain assets
of its Pro CD, Inc. subsidiary to CD-Rom Technologies, Inc., a wholly owned
subsidiary of American Business Information, Inc., for cash. The sale includes
all of the assets of Pro CD which are used in connection with its business of
retail and direct marketing sales of reference products on CD-ROM/DVD, but
excludes certain other assets of Pro CD used in connection with its corporate
sales business. The sale is subject to completion of due diligence by CTI and
receipt of any required governmental consent. An addendum to the agreement, to
be agreed upon prior to closing, will itemize the assets to be sold and
liabilities to be assumed. Subject to the above, the sale is expected to close
during the quarter ended September 30, 1997. The sale is expected to result in a
one-time gain on disposal.
Certain statements in this Management's Discussion and Analysis may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements, which are not statements of
historical fact, may contain estimates, assumptions, projections and/or
expectations regarding the Company's financial position, results of operations,
market position, product development, regulatory matters, growth opportunities,
and other similar forecasts and statements of expectation. Such forward-looking
statements are not guarantees of future performance. They involve known and
unknown risks, uncertainties, and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Representative examples of such factors are
discussed in more detail in the Company's Annual Report on Form 10-K and
include, among other things, the possible adoption of legislation or industry
regulation concerning certain aspects of the Company's business; the removal of
data sources and/or marketing lists from the Company; the ability of the Company
to retain customers who are not under long-term contracts with the Company;
technology challenges; year 2000 compliance issues; the risk of damage to the
Company's data centers or interruptions in the Company's telecommunications
links; acquisition integration; the effects of postal rate increases; and other
market factors. See "Additional Information Regarding Forward-looking
Statements" in the Company's Annual Report on Form 10-K.
Form 10-Q
ACXIOM CORPORATION
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Company was held on July 30,
1997. At the meeting, the Shareholders approved the election of two
directors. Voting results for each individual nominee were as follows:
Dr. Ann Die, 42,268,614 votes for and 176,878 votes withheld; and
Charles D. Morgan, 42,268,614 votes for and 176,878 votes withheld.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K.
None
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Acxiom Corporation
Dated: August 12, 1997
By: /s/ Robert S. Bloom
------------------------------------
(Signature)
Robert S. Bloom
Chief Financial Officer
(Chief Accounting Officer)
EXHIBIT INDEX
Exhibits to Form 10-Q
Exhibit Number Exhibit
27 Financial Data Schedule