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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, 2000
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 8180, 1 Information Way,
Little Rock, Arkansas 72203
(Address of Principal Executive Offices) (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
The number of shares of Common Stock, $ 0.10 par value per share,
outstanding as of February 2, 2001 was 89,220,933.
Form 10-Q
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Company for which report is filed:
ACXIOM CORPORATION
The interim condensed 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
December 31, March 31,
2000 2000
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 15,240 23,924
Trade accounts receivable, net 230,802 198,818
Deferred income taxes 18,432 18,432
Other current assets 122,110 98,872
------- -------
Total current assets 386,584 340,046
------- -------
Property and equipment 415,319 381,942
Less - Accumulated depreciation and amortization 172,588 132,266
------- -------
Property and equipment, net 242,731 249,676
------- -------
Software, net of accumulated amortization 63,885 58,964
Excess of cost over fair value of net assets acquired, net 175,868 145,082
Purchased software licenses, net of accumulated amortization 136,792 123,846
Notes receivable, net of current portion 116,733 55,804
Other 183,980 131,878
------- -------
$1,306,573 1,105,296
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt 36,111 23,156
Trade accounts payable 43,935 54,016
Accrued merger and integration costs 356 15,106
Accrued payroll and related expenses 21,693 26,483
Other accrued expenses 42,264 31,779
Deferred revenue 7,637 19,995
Income taxes 30,848 9,473
------- -------
Total current liabilities 182,844 180,008
------- -------
Long-term debt, excluding current installments 369,886 289,234
Deferred income taxes 70,520 48,324
Stockholders' equity:
Common stock 9,009 8,831
Additional paid-in capital 335,929 325,729
Retained earnings 342,842 257,376
Accumulated other comprehensive loss (1,970) (1,448)
Treasury stock, at cost (2,487) (2,758)
------- -------
Total stockholders' equity 683,323 587,730
------- -------
Commitments and contingencies $ 1,306,573 1,105,296
========= =========
See accompanying notes to condensed consolidated financial statements.
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
For the Three Months Ended
December 31
2000 1999
------------ ------------
Revenue $ 279,501 244,303
Operating costs and expenses:
Salaries and benefits 89,647 95,490
Computer, communications and other equipment 48,056 36,400
Data costs 28,650 25,825
Other operating costs and expenses 54,843 40,199
------- -------
Total operating costs and expenses 221,196 197,914
------- -------
Income from operations
58,305 46,389
------- -------
Other income (expense):
Interest expense (6,943) (5,624)
Other, net 1,954 1,598
------- -------
(4,989) (4,026)
------- -------
Earnings before income taxes 53,316 42,363
Income taxes 20,526 15,885
------- -------
Net earnings $ 32,790 26,478
======= =======
Earnings per share:
Basic $ .37 .31
======= =======
Diluted $ .34 .29
======= =======
See accompanying notes to condensed consolidated financial statements.
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
For the Nine Months Ended
December 31
2000 1999
------------ ------------
Revenue $ 801,120 702,649
Operating costs and expenses:
Salaries and benefits 275,817 271,040
Computer, communications and other equipment 139,935 109,143
Data costs 82,743 80,473
Other operating costs and expenses 158,860 125,475
Gains, losses and nonrecurring items (3,064) -
------- -------
Total operating costs and expenses 654,291 586,131
------- -------
Income from operations 146,829 116,518
------- -------
Other income (expense):
Interest expense (18,452) (17,977)
Other, net 10,592 3,098
------- -------
(7,860) (14,879)
------- -------
Earnings before income taxes 138,969 101,639
Income taxes 53,503 38,112
------- -------
Net earnings $ 85,466 63,527
======= =======
Earnings per share:
Basic $ .97 .75
======= =======
Diluted $ .90 .71
======= =======
See accompanying notes to condensed consolidated financial statements.
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Nine Months Ended
December 31
2000 1999
---------- ----------
Cash flows from operating activities:
Net earnings $ 85,466 63,527
Non-cash operating activities:
Depreciation and amortization 85,976 62,281
Loss (gain) on disposal or impairment of assets (16,812) 311
Provision for returns and doubtful accounts 1,995 685
Changes in operating assets and liabilities:
Accounts receivable (36,187) (22,195)
Other assets (123,696) (28,646)
Accounts payable and other liabilities 3,663 (5,012)
Merger and integration costs (14,750) (16,533)
------- -------
Net cash provided (used) by operating activities (14,345) 54,418
------- -------
Cash flows from investing activities:
Disposition of assets 59,997 1,424
Development of software (28,694) (25,465)
Capital expenditures (79,559) (88,084)
Proceeds from sale and leaseback transaction - 34,763
Investments in joint ventures (20,285) (4,246)
Net cash paid in acquisitions (16,030) (32,897)
------- -------
Net cash used by investing activities (84,571) (114,505)
------- -------
Cash flows from financing activities:
Proceeds from debt 99,403 190,882
Payments of debt (19,724) (191,447)
Sale of common stock 22,859 66,028
Acquisition of treasury stock (12,210) -
------- -------
Net cash provided by financing activities 90,328 65,463
------- -------
Effect of exchange rate changes on cash (96) (51)
------- -------
Net increase (decrease) in cash and cash equivalents (8,684) 5,325
Cash and cash equivalents at beginning of period 23,924 12,604
------- -------
Cash and cash equivalents at end of period $ 15,240 17,929
======= =======
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 25,647 21,987
Income taxes 9,998 (12,190)
======= =======
See accompanying notes to condensed consolidated financial statements.
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 a part of Item 14 of the Registrant's
2000 Annual Report on Form 10-K, as filed with the Securities and Exchange
Commission on June 26, 2000.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. During the year ended March 31, 1999, the Company recorded special charges
totaling $118.7 million related to merger and integration charges
associated with the May & Speh merger and the write down of other impaired
assets.
The following table shows the remaining balances which were accrued as of
March 31, 2000 and the changes in those balances during the nine months
ended December 31, 2000 (dollars in thousands):
March 31, Less December 31,
2000 Payments 2000
---- -------- ----
Associate-related reserves $ 1,052 876 176
Contract termination costs 13,500 13,500 -
Other accruals 554 374 180
------ ------ ----- $ 15,106 14,750 -
$ 15,106 14,750 356
====== ====== =====
The remaining associate-related reserves and other accruals will be paid
out over remaining periods ranging up to four years.
Effective December 28, 2000 the Company acquired certain assets and assumed
certain liabilities of Data Dimension Information Services, Inc. ("DDIS")
for $5.4 million, of which $1.8 million was paid at closing and the
remaining $3.6 million was paid in January 2001. DDIS provides information
technology outsourcing to a variety of customers including mainframe,
client/server, and application service provider hosting. The acquisition
has been accounted for as a purchase and, accordingly, the results of
operations of DDIS are included in the consolidated results from the date
of acquisition. The excess of purchase price over the fair value of net
assets acquired of $9.7 million is being amortized over 20 years. The pro
forma effect of the acquisition is not material to the Company's
consolidated results for the periods reported.
Effective May 15, 2000 the Company acquired certain assets and assumed
certain liabilities of MCRB Service Bureau, Inc. for cash of $5.8 million.
MCRB provides information technology outsourcing services. The acquisition
has been accounted for as a purchase and, accordingly, the results of
operations of MCRB are included in the consolidated results from the date
of acquisition. The excess of purchase price over the fair value of net
assets acquired of $11.8 million is being amortized over 20 years. The pro
forma effect of the acquisition is not material to the Company's
consolidated results for the periods reported.
Effective February 1, 2000, the Company sold certain assets and a 51%
interest in a newly formed Limited Liability Company ("LLC") to certain
management of its Acxiom/Direct Media, Inc. business unit ("DMI"). The LLC
was formed by the contribution of net assets used in the DMI operations. As
consideration, the Company received a 6% note in the approximate amount of
$22.5 million payable over 7 years. The Company also retained a 49%
interest in the LLC. During the quarter ended June 30, 2000, the Company
agreed to sell its remaining 49% interest in the LLC and certain other
assets to DMI management for an additional note of $1.0 million. The
Company also committed to complete the development of a computer system for
the LLC. As a result of this sale agreement, the Company has written down
its investment in the assets of DMI by $20.0 million. This amount is
included in gains, losses and nonrecurring items. The sale is a divestiture
for legal and tax purposes, but not for accounting purposes under
applicable accounting rules because the collection of the sales price is
primarily dependent on the buyer's ability to repay the note through
operations of the business. Accordingly, any losses of the LLC will
continue to be included in the Company's financial statements until such
time as a sufficient portion of the note balance has been collected, at
which time the Company will account for the transaction as a sale. To date,
the LLC has not recorded any significant gains or losses. The note
receivable is included in other assets. Subsequent to December 31, 2000 the
Company received the first scheduled payment on the note in the amount of
$4.2 million.
Effective April 25, 2000, the Company sold a portion of its DataQuick
business group, which is based in San Diego, California, to MacDonald
Dettwiler & Associates, Ltd., a publicly-traded Canadian information
products company, for $55.5 million. The Company retained the real property
data sourcing and compiling portion of DataQuick. Of the total sale price,
$30.0 million was received in cash as of the effective date and the
remainder was collected in October 2000. The gain on sale of these assets,
which is included in gains, losses and nonrecurring items, was $39.7
million.
Effective April 10, 2000, the Company sold its investment in Ceres, Inc. to
NCR Corporation. The Company received cash, a note, and NCR stock totaling
$14.8 million, and recorded investment income of $6.2 million on the
disposal, which is included in other income.
Effective April 1, 2000, the Company sold its CIMS business unit for
preferred stock and options in Sedona Corp., a publicly-traded company. The
preferred stock and options received had an aggregate fair value of $3.1
million. The Company recorded a loss on the disposal of $3.2 million, which
is included in gains, losses and nonrecurring items.
In addition to the DataQuick gain, DMI write-down and CIMS loss noted
above, gains, losses and nonrecurring items also includes the write-off
during the quarter ended June 30, 2000 of $7.2 million of certain campaign
management software which management decided to discontinue support of
during the quarter as a result of the Company's strategy to utilize
external application software tools rather than building such tools
internally. The Company performed an analysis to determine whether and to
what extent these assets had been impaired. These assets were completely
written off as their fair value was estimated to be zero.
During the quarter ended June 30, 2000, the compensation committee of the
Company committed to pay in cash $6.3 million of "over-attainment"
incentive which was related to results of operations in prior years. Under
the normal policy of the Company's compensation plan, such over-attainment,
if not funded through current year earnings, would have been distributed in
the form of stock options with an exercise price equal to the market price
at date of grant. Therefore, under applicable accounting rules, there would
have been no compensation expense. The one-time decision to pay this amount
in cash is an accruable event, and resulted in a charge that has been
recorded in gains, losses and nonrecurring items. In accordance with the
Company's existing over-attainment plan, the amount accrued will be paid
over the next three fiscal years beginning in May 2001, assuming continued
performance.
2. Purchased software licenses include long-term software licenses which are
amortized over their useful lives, including both prepaid software and
capitalized future software obligations for which the liability is included
in long-term debt.
Notes receivable are from the sales of software, data licenses and
equipment, net of the current portion of such receivables. The increase in
notes receivable is primarily due to sales of AbiliTec software. AbiliTec
software is sold under licenses which generally have terms of from one to
three years. The Company records the license revenue as a note receivable,
which is collected over the license term. Revenue for maintenance and
service transactions is recognized as it is earned and billed over the
license term. The current portion of such notes are included in other
current assets.
Other assets consist of the following (dollars in thousands):
December 31, March 31,
2000 2000
---- ----
Deferred contract costs $ 88,568 63,173
Assets transferred under contractual arrangement 23,958 34,291
Investments in joint ventures and other companies 52,150 22,890
Other 19,304 11,524
------- -------
$183,980 131,878
======= =======
Deferred contract costs include up-front costs incurred on long-term
contracts, primarily outsourcing contracts, which are amortized over the
life of the contract. The increase reflects new outsourcing contract
activity. The decrease in assets transferred under contractual arrangement
is due to the DMI write-down noted above. The increase in joint ventures
and other companies includes an additional $5.4 million investment in an
Australian joint venture, $6.0 million invested in USADATA.com, Inc., $5.0
million invested in HealthCarePro Connect, LLC, a joint venture with the
American Medical Association, and $1.1 million invested in Landscape Co.,
Ltd., a Japanese data company, as well as the consideration received in NCR
and Sedona stock noted above.
Other current assets consist of the following (dollars in thousands):
December 31, March 31,
2000 2000
---- ----
Current portion of notes receivable $ 68,064 42,402
Prepaid expenses, non trade receivables and other 54,046 56,470
------- ------
$ 122,110 98,872
======= ======
Deferred revenue represents cash received from customers in advance of
services being rendered. The decrease reflects the timing of these
discretionary customer cash payments net of the services being performed.
3. Long-term debt consists of the following (dollars in thousands):
December 31, March 31,
2000 2000
---- ----
5.25% Convertible subordinated notes due 2003; convertible at the $115,000 115,000
option of the holder into shares of common stock at a conversion
price of $19.89 per share; redeemable at the option of the Company
at any time on or after April 3, 2001
Software license liabilities payable over terms of from 57,264 67,545
five to seven years; effective interest rates at
approximately 6%
Unsecured revolving credit agreement 155,262 61,500
6.92% Senior notes due March 30, 2007, payable 30,000 30,000
in annual installments of $4,286 commencing
March 30, 2001; interest is payable semiannually
Capital leases on land, buildings and equipment payable in monthly 17,841 18,051
payments of $357 of principal and interest; remaining terms of
from five to twenty years; interest rates at approximately 8%
8.5% Unsecured term loan; quarterly principal payments of $200 7,600 8,200
plus interest with the balance due in 2003
Other capital leases, debt and liabilities 23,030 12,094
------- -------
Total long-term debt 405,997 312,390
Less current installments 36,111 23,156
------- -------
Long-term debt, excluding current installments $369,886 289,234
======== =======
In connection with the construction of the Company's new headquarters building
and a new customer service facility in Little Rock, Arkansas, the Company has
entered into 50/50 joint ventures with local real estate developers. In each
case, the Company is guaranteeing portions of the loans for the buildings. The
aggregate amount of the guarantees at December 31, 2000 was approximately $4.5
million.
In October 2000 the Company recorded an additional liability for its acquisition
of Access Communication Systems, Inc. ("Access") which was initially recorded in
fiscal 2000. Under the acquisition agreement, the Company is required to issue
approximately 276,000 additional shares of stock to the former owners of Access
contingent upon meeting certain operating performance measurements of Access
which are now considered probable of occurring. The value of the stock, which is
approximately $9.2 million, has been charged to the excess of cost over fair
value of net assets acquired and the liability is included in current
installments of long-term debt. Once the stock is issued, this liability will be
transferred to common stock and additional paid-in capital.
4. Below is a calculation and reconciliation of the numerator and denominator
of basic and diluted earnings per share (dollars in thousands, except per
share amounts):
For the Quarter Ended For the Nine Months Ended
December 31, December 31,
2000 1999 2000 1999
---- ---- ---- ----
Basic earnings per share:
Numerator - net earnings $ 32,790 26,478 85,466 63,527
======== ====== ====== ======
Denominator:
Weighted average shares outstanding
88,833 85,895 88,341 84,474
====== ====== ====== ======
Earnings per share $ .37 .31 .97 .75
==== === === = ===
Diluted earnings per share:
Numerator:
Net earnings $ 32,790 26,478 85,466 63,527
Interest expense on convertible
debt (net of tax effect)
928 943 2,785 2,829
--- --- ----- -----
$ 33,718 27,421 88,251 66,356
======== ====== ====== ======
Denominator:
Weighted average shares
outstanding 88,833 85,895 88,341 84,474
Effect of common stock
options and warrants 4,742 2,942 3,955 3,547
Convertible debt 5,783 5,783 5,783 5,783
----- ----- ----- -----
99,358 94,620 98,079 93,804
====== ====== ====== ======
Earnings per share $ .34 .29 .90 .71
=== === === ===
Options to purchase shares of common stock that were outstanding during the
periods reported, but were not included in the computation of diluted
earnings per share because the option exercise price was greater than the
average market price of the common shares, are shown below:
For the Quarter Ended For the Nine Months Ended
December 31, December 31,
2000 1999 2000 1999
---- ---- ---- ----
Number of shares under option (in
thousands) 784 6,122 1,643 3,849
Range of exercise prices $38.98 -62.06 $17.93 - 54.00 $17.93 - 62.06 $17.93 - 54.00
============= ============== ============== ==============
As of December 31, 2000 the Company has entered into equity forward
purchase agreements to purchase 3.7 million shares of the Company's common
stock. The effects of settling these equity forward contracts are not
reflected in the computation of diluted earnings per share, because the
effect is anti-dilutive since the market price of the Company's common
stock is greater than the purchase prices under the equity forward
agreements.
5. Trade accounts receivable are presented net of allowances for doubtful
accounts, returns, and credits of $5.6 million at December 31, 2000 and
$5.4 million at March 31, 2000.
6. The following tables present information by business segment (dollars in
thousands):
For the Quarter For the Nine Months
Ended Ended
December 31, December 31,
2000 1999 2000 1999
---- ---- ---- ----
Services $202,156 173,415 580,840 502,958
Data Products 63,872 43,554 166,062 115,246
Information Technology (I. T.) Management 61,471 50,127 174,051 139,116
Intercompany eliminations (47,998) (22,793) (119,833) (54,671)
------ ------ ------- -------
Total revenue $279,501 244,303 801,120 702,649
======== ======= ======= =======
Services 59,730 36,698 155,283 94,975
Data Products 22,000 8,270 50,675 12,353
Information Technology (I. T.) Management 10,193 11,569 22,496 30,673
Intercompany eliminations (37,118) (11,315) (89,303) (26,966)
Corporate and other 3,500 1,167 7,678 5,483
------- ------- ------- -------
Income from operations $58,305 46,389 146,829 116,518
======= ======= ======= =======
The Company has reorganized its segments for the current year. The primary
change was to reclassify the business units associated with Direct Media
from the Data Products segment to the Services Segment. Also, the
International Division, which was exclusively in the Services segment, has
been reorganized with the appropriate revenues and expenses being allocated
to Services, Data Products and Information Technology Management. The prior
year segment information has been restated to conform to the current year
presentation.
7. The accumulated balance of other comprehensive loss, which consists of
foreign currency translation adjustments and unrealized depreciation on
marketable securities, was $2.0 million and $1.4 million as of December 31,
2000 and March 31, 2000, respectively. Comprehensive income was $36.0
million and $25.8 million for the quarters ended December 31, 2000 and
1999, respectively, and was $84.9 million and $63.5 million for the nine
months ended December 31, 2000 and 1999, respectively.
8. Montgomery Ward, LLC, a subsidiary of General Electric Capital Corporation
and a significant customer of the Information Technology Management
segment, filed for bankruptcy December 28, 2000 and is proceeding to
liquidate its assets. The bankruptcy is in its early stages and the Company
has not yet been able to make a determination as to whether a write-off
will be required. If a write-off is required, it is expected to be
primarily non-cash, and could potentially be as much as $25 to $30 million.
Included in the high end of the range are Ward-related accounts receivable,
deferred contract costs, property and equipment, software licenses,
employee compensation arrangements and commitments on contractual
arrangements. This high-end range assumes few of these items are
recoverable, negotiable, or re-deployable. The Company expects to continue
operating the Ward's data center during the liquidation process which is
expected to last through at least the first quarter of fiscal 2002.
Form 10-Q
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
For the quarter ended December 31, 2000, consolidated revenue was $279.5
million, reflecting a 14% increase over the third quarter in the previous year.
Excluding operations disposed of subsequent to the year-earlier quarter,
including DMI and DataQuick, consolidated revenue increased 27%. The increase in
revenue was fueled by sales of AbiliTec software, which contributed over $26.0
million in revenue for the quarter due to completion of 12 new contracts during
the quarter.
For the nine months ended December 31, 2000, consolidated revenue was $801.1
million, up 14% from the same period a year ago. Excluding the impact of the
dispositions referred to above, revenue increased 29% compared to the prior
year.
The following table shows the Company's revenue by business segment for the
quarters ended December 31, 2000 and 1999 (dollars in millions):
% Change
December 31, % Excluding
2000 1999 Change Dispositions
---- ---- ------ ------------
Services $202.1 $173.4 +17% +30%
Data Products 63.9 43.6 +47 +74
I. T. Management 61.5 50.1 +23 +23
Intercompany eliminations (48.0) (22.8) +111 +111
------ ------ ---- ----
$279.5 $244.3 +14% +27%
===== ===== ==== ====
Services segment revenue of $202.1 million grew 17% over the prior year.
Excluding operations disposed of the Services segment grew 30%. The growth in
the Services segment reflects a strong contribution from financial services,
technology, media, and health care. Also, Allstate revenue increased 20% over
the previous year. For the nine months ended December 31, 2000 the Services
segment recorded revenue of $580.8 million, an increase of 15%. Again excluding
dispositions since the prior year, the Services segment grew 30% over the prior
year period.
Data Products segment revenue of $63.9 million increased 47% over the prior
year. Excluding the impact from dispositions, the segment revenue would have
increased 74% over the prior year. This increase reflects the impact of AbiliTec
revenue coupled with a strong contribution from InfoBase. InfoBase revenue
increased 34% over the prior year. For the nine month period, Data Products
segment revenue grew 44% to $166.1 million. Excluding the effect of
dispositions, the increase for the nine months was 80%.
Information Technology ("I. T.") Management segment revenue of $61.5 million
reflects a 23% increase over the prior year. For the nine month period, I. T.
Management revenue grew 25% to $174.1 million.
Certain revenues, including most AbiliTec software and data product revenue are
reported both as revenue in the segment which owns the customer relationship
(generally the Services segment) as well as the Data Products segment which owns
the product development, maintenance, sales support, etc. These duplicate
revenues are eliminated in consolidation. The intercompany elimination increased
111% for the quarter and 119% for the nine month period, reflecting the impact
of significant AbiliTec software revenue.
The following table presents operating expenses for the quarters ended December
31, 2000 and 1999 (dollars in millions):
December 31, % Change
2000 1999
---- ----
Salaries and benefits $89.6 $95.5 - 6%
Computer, communications and
other equipment 48.1 36.4 +32
Data costs 28.7 25.8 +11
Other operating costs and
expenses 54.8 40.2 +36
---- ---- ---
$221.2 $197.9 +12%
===== ===== ===
Salaries and benefits for the quarter decreased 6% from the third quarter last
year. Excluding operations disposed of, salaries and benefits increased 8%
reflecting additional headcount to support the growth of the business and normal
merit increases. For the nine months ended December 31, 2000, the increase in
salaries and benefits was 2%, or 19% after adjusting for the disposals referred
to above.
Computer, communications and other equipment costs increased 32% over the third
quarter in the prior year. Adjusting for the impact of the dispositions noted
earlier would result in computer, communications and other equipment costs
increasing 45% over the prior year. This growth is principally due to the
increased level of hardware and software expenditures made over the last year to
support the growth of the business, particularly in the I. T. Management
segment, as well as additional expense associated with building the AbiliTec
infrastructure. For the nine months, computer, communications and other
equipment costs increased 28%, or 39% after adjusting for the disposals.
Data costs for the quarter increased 11% from the prior year, and excluding
dispositions increased 14%, primarily reflecting the 20% increase in revenue
associated with the Allstate contract referred to above. For the nine months,
data costs increased 3%, or 5% after adjusting for the dispositions.
Other operating costs and expenses for the third quarter increased by 36%
compared to a year ago. Adjusting for the impact of the dispositions, other
operating costs and expenses grew 51%. This increase reflects the impact from
growth in the business on office and operating expenses, travel, temporary
staffing, advertising and marketing expenses, and higher costs of sales on
server sales. For the nine months ended December 31, 2000, other operating
expenses increased 27%, or 40% after adjusting for the dispositions. Expenses
for the nine months have also been impacted by the same factors noted above.
The nine month period includes a net gain associated with gains, losses and
nonrecurring items of $3.1 million recorded in the first quarter reflecting the
$39.7 million gain on the sale of the DataQuick operation in April, the $3.2
million loss on the sale of the CIMS business unit, a $20.0 million write-down
of the remaining 49% interest in the DMI operation, a $7.2 million write-down of
campaign management software, and a $6.3 million accrual established to fund
over-attainment incentives.
The Company's operations for both the quarter and the nine months ended December
31, 2000 were heavily impacted by investment in the AbiliTec software. This
investment has totaled approximately $58.4 million for the nine months,
including $20.0 million of capitalized software development, with the remaining
$38.4 million being expensed. As of December 31, 2000, net capitalized software
related to AbiliTec totaled $24.7 million.
Income from operations for the quarter of $58.3 million represents an increase
of 26% over the prior year. For the nine month period, income from operations
also increased 26% to $146.8 million. Excluding the net gain in the first
quarter noted above, operating income for the nine months of $143.8 million
increased 23% compared to the same period a year ago. Operating margin for the
quarter increased from 19.0% to 20.9%.
Interest expense for the quarter of $6.9 million increased from $5.6 million
last year reflecting slightly higher average debt levels this year. Other, net
increased slightly due to higher interest income on long-term receivables. For
the nine months, interest expense increased from $18.0 million to $18.5 million,
for the same reason as noted above for the quarter. Other, net for the nine
months increased from $3.1 million to $10.6 million largely due to a $6.2
million gain on the sale of the Company's investment in Ceres. Other, net also
includes investment income, principally on the exchange of the Company's
investment in Customer Analytics for stock in Exchange Applications, Inc., a
publicly-traded company, equity in losses of joint ventures, and interest income
from notes receivable.
Earnings before income taxes of $53.3 million for the quarter increased 26% over
the same quarter a year ago. For the nine months, earnings before income taxes
grew 37% to $139.0 million. The Company's effective tax rate was 38.5% in the
current quarter and nine months compared to 37.5% in the prior year. The Company
currently expects its effective tax rate to remain at 38.5% for fiscal 2001.
This estimate is based on current tax law and current estimates of earnings, and
is subject to change.
Basic earnings per share for the quarter were $0.37 compared to $0.31 a year
ago. Diluted earnings per share for the quarter were $0.34 compared to $0.29 a
year ago. For the nine month period, basic earnings per share were $0.97
compared to $0.75 a year ago. Diluted earnings per share were $0.90 for the nine
months compared to $0.71 a year ago.
Capital Resources and Liquidity
Working capital at December 31, 2000 totaled $203.7 million compared to $160.0
million at March 31, 2000. At December 31, 2000, the Company had available
credit lines of $296.5 million of which $156.8 million was outstanding. The
Company's debt-to-capital ratio (capital defined as long-term debt plus
stockholders' equity) was 35% at December 31, 2000 compared to 33% at March 31,
2000. Included in long-term debt at both December 31, 2000 and March 31, 2000 is
a convertible note in the amount of $115.0 million. The conversion price for the
convertible debt is $19.89 per share and the debt is callable by the Company,
beginning April 3, 2001. If the price of the Company's common stock stays above
the conversion price, management expects this debt to be converted to equity.
Assuming the convertible debt had converted to equity, the Company's
debt-to-capital ratio would have been reduced to 24% at December 31, 2000. Total
stockholders' equity has increased 16% to $683.3 million at December 31, 2000
from $587.7 million at March 31, 2000.
Cash used by operating activities was $14.3 million for the nine months ended
December 31, 2000 compared to $54.4 million provided by operating activities for
the same period in the prior year. Earnings before interest expense, taxes,
depreciation, and amortization ("EBITDA"), increased 34% to $243.4 million for
the nine month period. EBITDA is not intended to represent cash flows for the
period, is not presented as an alternative to operating income as an indicator
of operating performance, may not be comparable to other similarly titled
measures of other companies, and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles. However, EBITDA is a relevant measure of the
Company's operations and cash flows and is used internally as a surrogate
measure of cash provided by operating activities.
Operating cash flow was reduced by $171.0 million in the current year versus
$72.4 million in the prior year due to the net change in operating assets and
liabilities. The net change in operating assets and liabilities in the current
year includes an increase in accounts receivable of $36.2 million, an increase
in other assets of $123.7 million, payments of merger and integration costs of
$14.8 million, and an increase in accounts payable and other liabilities of $3.7
million. The increase in other assets of $123.7 million in the current year
includes an increase in both current and non-current notes receivable of $86.6
million, primarily due to sales of AbiliTec software recorded during the second
and third quarters. The change in operating assets and liabilities also includes
payment of $14.8 million in merger and integration costs related to the
Company's merger with May & Speh. The majority of these costs have now been
paid, with only $0.4 million still remaining to be paid out. Accounts receivable
days sales outstanding ("DSO") were 79 days at December 31, 2000, compared to 78
days at December 31, 1999. The Company adjusts accounts receivable and revenues
to place them on a comparable basis, including removing notes receivable from
revenues in the calculation since notes receivable are not included in accounts
receivable. The Company believes that the calculation of DSO excluding notes
receivable provides a more actionable financial metric as the notes receivable
are due in the future and are not collectible at present.
Investing activities used $84.6 million for the nine months ended December 31,
2000, compared to $114.5 million for the same period a year ago. Investing
activities in the current year included $60.0 million in cash proceeds from the
disposition of assets, primarily the $55.5 million from the sale of the
DataQuick operation to MacDonald Dettwiler & Associates, Ltd., a Canadian public
company. Most of the remaining proceeds from the disposition of assets relates
to cash received from the disposal of the Ceres investment. Investing activities
in the current year also include capitalized software development costs of $28.7
million and capital expenditures of $79.6 million. Capital expenditures
decreased compared to the previous year, due to much of the Company's hardware
needs being funded through a synthetic leasing facility which was entered into
in the prior year. The Company has obtained a total of $140.0 million in
commitments to fund synthetic leases of both computer equipment and furniture
and fixtures. During the nine months ended December 31, 2000 the Company has
funded a total of $49.6 million under these commitments as well as an additional
$11.2 million in an airplane lease. The remaining unused lease funding
commitment totals approximately $24.9 million. The effect of the synthetic lease
has been to reduce operating cash flow by approximately $22.2 million in the
current year, since payments under the lease are a cash expense, while
depreciation is not.
Investing activities during the current year also include investments in joint
ventures of $20.3 million, which includes an additional advance of $5.4 million
to the Company's joint venture in Australia to fund acquisitions, a $5.0 million
investment in HealthCareProConnect, LLC, a joint venture with the American
Medical Association, a $6.0 million investment in USADATA.com, Inc., and an
investment of $1.1 million in Landscape Co., Ltd., a Japanese data company. Net
cash paid in acquisitions in the current year of $16.0 million includes the
acquisition of MCRB, Inc. in April for $5.8 million and the $1.8 million cash
paid for the acquisition of DDIS, an information technology outsourcing company.
The remainder of the cash paid in acquisitions relates to earn-out payments made
during the current year for acquisitions initially recorded in prior years. Note
1 to the consolidated financial statements discusses the acquisitions and
dispositions in more detail.
Financing activities in the current year provided $90.3 million, most of which
relates to debt proceeds from the Company's revolving credit arrangement. The
Company also has paid $12.2 million for the purchase of common stock and may
continue to purchase stock in the open market from time to time.
During the quarter ended December 31, 2000 the Company has begun construction on
a customer service facility in Little Rock, and is in the planning stage of
another customer service and data center facility in Phoenix. The Little Rock
building is expected to cost approximately $30.0 to $35.0 million including
interest during construction with construction expected to last until January
2003. The Phoenix project is expected to cost approximately $25.0 million,
including land and construction interest, with construction expected to last
until January 2002. The City of Little Rock has issued revenue bonds for the
Little Rock project. The Company is financing both the Phoenix and Little Rock
projects using an off balance sheet synthetic lease arrangement. Upon
completion, the combined impact of these two leasing arrangements will reduce
operating cash flow by approximately $5.0 million per year over the three-year
minimum term of the lease. The Company has also announced its intention to build
another facility in Little Rock, although plans and financing arrangements for
that facility are incomplete.
While the Company does not have any other 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. In some cases, the Company also sells software and hardware to
customers under extended payment terms or notes receivable collectible generally
over three years. These arrangements also require up-front expenditures of cash,
which are repaid over the life of the agreement. The Company also evaluates
acquisitions from time to time, which may require up-front payments of cash.
Depending on the size of the acquisition it may be necessary to raise additional
capital. If additional capital becomes necessary, the Company could use
available borrowing capacity under its revolving credit agreement, or issue
additional debt or equity securities. The Company is currently negotiating an
accounts receivable securitization facility which may either supplement or
partially replace its existing revolving credit facility, and is also
negotiating an additional synthetic leasing commitment for computer equipment.
As of December 31, 2000 the Company has entered into three equity forward
purchase agreements with a commercial bank under which the Company will purchase
3.1 million, 0.2 million, and 0.5 million shares of its common stock at an
average total cost of $20.81, $26.51, and $23.37 per share, respectively, for a
total notional amount of $80.0 million. In accordance with the terms of the
forward contracts, the shares remain issued and outstanding until the forward
purchase contracts are settled. The agreements may be settled in cash, shares of
common stock, or in net shares of common stock. The Company has accounted for
these forward contracts as permanent equity. The fair value of the equity
forward contracts as of December 31, 2000 was $60.2 million, based on a stock
price of $38.94. An increase or decrease in the stock price of $1.00 per share
increases or decreases the market value by approximately $3.7 million. The
Emerging Issues Task Force ("EITF") of the Financial Accounting Standards Board
has recently reached a consensus in EITF 00-7 that requires such contracts
entered into after March 15, 2000 to be recorded as assets and liabilities, with
adjustments to the market value of the common stock to be recorded on the income
statement, in situations in which the counter party can force the contracts to
be settled in cash. The effective date of the new consensus was delayed until
December 31, 2000 to allow such contracts to be amended. The EITF has
subsequently reached conclusions in EITF 00-19 that also require asset and
liability treatment in certain circumstances, including when an agency agreement
is in place. In order to qualify for permanent equity treatment, the forward
contract must permit settlement in unregistered shares, contain an explicit cap
on the number of shares to be delivered under a net share settlement, must not
require the posting of collateral, and must not provide the commercial bank with
any right that would rank higher than those of a common shareholder.
Additionally the forwards must not require cash "true-ups" under the net share
method and must not contain any economic penalties that would compel the Company
to net cash settle. The Company has amended the forward agreements to comply
with the permanent equity provisions of EITF 00-7 and EITF 00-19.
Montgomery Ward, LLC, a subsidiary of General Electric Capital Corporation and a
significant customer of the Information Technology Management segment, filed for
bankruptcy December 28, 2000 and is proceeding to liquidate its assets. The
bankruptcy is in its early stages and the Company has not yet been able to make
a determination as to whether a write-off will be required. If a write-off is
required, it is expected to be primarily non-cash, and could potentially be as
much as $25 to $30 million. Included in the high end of the range are
Ward-related accounts receivable, deferred contract costs, property and
equipment, software licenses, employee compensation arrangement and commitments
on contractual arrangements. This high-end range assumes few of these items are
recoverable, negotiable, or re-deployable. The Company expects to continue
operating the Ward's data center during the liquidation process which is
expected to last through at least the first quarter of fiscal 2002.
New Accounting Pronouncement
On December 3, 1999 the Securities and Exchange Commission staff issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 summarizes certain of the SEC staff's views in applying generally
accepted accounting principles to revenue recognition in financial statements
and affects a broad range of industries. Subsequently, the SEC has issued Staff
Accounting Bulletins No. 101A and 101B which deferred the effective date of SAB
101. The accounting and disclosure requirements of SAB 101 will now be effective
for Acxiom in the last quarter of fiscal 2001. The Company is currently
evaluating the effects of SAB 101 on its methods of recognizing revenue and has
not yet quantified the impact, if any, the application of SAB 101 will have on
the Company's results of operations or financial position.
In September 2000, the Financial Accounting Standards Board issued Financial
Accounting Standard ("FAS") No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" which replaces FAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities". This standard revises the methods for accounting for
securitizations and other transfers of financial assets and collateral as
outlined in FAS No. 125, and requires certain additional disclosures. For
transfers and servicing of financial assets and extinguishments of liabilities,
this standard will be effective for the Company's June 30, 2001 financial
statements. However, for disclosures regarding securitizations and collateral,
as well as the accounting for recognition and reclassification of collateral,
this standard is currently effective. The Company is currently evaluating the
impact of the adoption of this standard, however it does not expect the adoption
of this standard to have a material effect on its financial position or results
of operations.
Outlook
The opportunities for AbiliTec continue to grow as companies implement customer
relationship management (CRM) strategies. These CRM efforts are putting focus on
the need to aggregate customer information across the enterprise, sometimes on a
real-time basis. Acxiom's AbiliTec software provides the customer data
integration that can accurately and quickly aggregate all records about an
individual or business. Customer data integration (or CDI) is the foundational
data management process for every use of customer information. During the last
two quarters, a number of companies adopted AbiliTec as their software to
deliver customer data integration.
The following statements are based on current expectations. These statements are
forward looking, and actual results may differ materially. These statements do
not include the potential impact of any mergers, acquisitions or other business
combinations or divestitures that may be completed after December 31, 2000.
These statements also do not include any impact of any required write-offs
related to Montgomery Ward, discussed above.
As outlined above, AbiliTec is providing significant opportunities for the
fourth quarter of fiscal 2001 and for Acxiom's 2002 fiscal year which begins
April 1, 2001. Therefore, we have updated our Outlook for the balance of fiscal
2001 and for fiscal 2002 as follows:
o The Company maintains its expectation that revenue growth for the remainder
of the fiscal year will be at least 25% above fiscal 2000 after adjusting
for divested operations and any unusual levels of sales of computer
equipment (client servers) associated with delivering data warehouse
solutions.
o The Company maintains its expectation that AbiliTec revenues for this
fiscal year could be $90 million to $125 million.
o The tax rate for fiscal 2001 is expected to be 38.5%.
o Capital expenditures are expected to be $100 million to $120 million for
fiscal 2001.
o Capitalized development of software costs are expected to be $30 million to
$40 million for fiscal 2001.
o Depreciation and amortization costs are expected to be $110 million to $120
million for fiscal 2001.
Additional applications for AbiliTec also continue to arise, most notably the
ability to assist companies in implementing their consumer privacy policy
strategies. The recent passage of the Gramm-Leach-Bliley legislation, which has
significant ramifications for the financial services industry, represents a
significant opportunity for AbiliTec.
Also, Acxiom's channel partner strategy continues to gain momentum as software
providers, consultants, system integrators and others realize the power of
AbiliTec to enhance the selling of their products and their services.
As a result of the events outlined above, we believe that the opportunities for
AbiliTec have enhanced our outlook for the balance of fiscal 2001 and for fiscal
2002. We are maintaining the expectation discussed last quarter that our fiscal
2001 year-over-year earnings per share growth could be 20% or higher from
continuing operations. For fiscal 2002, we believe that revenue and earnings
from continuing operations should grow 25% or more.
In connection with the recent adoption of the new SEC rules on corporate
disclosure, Acxiom is changing its procedures for publishing and updating its
Outlook, forward-looking statements and risk factors statements. Following the
publication of the Outlook in its quarterly earnings release, Acxiom will
continue its current practice of having corporate representatives meet privately
during the quarter with investors, the media, investment analysts and others. At
these meetings Acxiom may reiterate the Outlook publicly available on its web
site (www.acxiom.com).
Toward the end of each fiscal quarter, Acxiom will have a "Quiet Period" when it
no longer publishes or updates the Outlook and Acxiom representatives will not
comment concerning the Outlook or Acxiom's financial results or expectations.
The Quiet Period will extend until the day when Acxiom's next earnings release
is published. For the fourth quarter, the Quiet Period will be March 19, 2001
through May 15, 2001.
Certain statements in this quarterly report 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 growth rates,
acquisition and divestiture opportunities, and other similar forecasts and
statements of expectation. Words such as "expects," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates," and "should," and variations of these
words and similar expressions, are intended to identify these forward-looking
statements. 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. The
forward-looking statements include: statements concerning the Company's need for
additional capital and the ability to raise additional capital; statements
concerning future earnings per share growth; statements concerning the length
and future impact of the Company's investment in AbiliTec on the Company's
future revenue and margins; statements concerning the benefits of AbiliTec for
our customers; statements concerning any competitive lead; statements concerning
the impact of implementation of AbiliTec technology in CRM applications;
statements concerning the momentum of CRM application and e-commerce
initiatives; statements concerning the future growth and size of the CRM market;
statements concerning AbiliTec becoming an industry standard; statements
concerning efficiency gains related to the implementation of AbiliTec;
statements that AbiliTec will be a revolutionary customer data integration
technology that will successfully support the creation of a real-time, single,
accurate, comprehensive and enhanced view of a customer across a business'
enterprise; statements that major companies will continue to include AbiliTec in
their strategic enterprise-wide CRM planning; that this quarter may be a good
indicator of future results; statements that Acxiom will continue to be able to
sign long-term, multi-million dollar contracts with blue-chip companies;
statements that sales of AbiliTec will accelerate and accelerate the sales
momentum; statements that AbiliTec will continue to achieve customer acceptance
in the marketplace and result in additional business; statements that AbiliTec
will be perceived and realized as a software capable of allowing its users to
better serve consumer privacy and preference interests; statements that the
company will be able to continue to develop relationships with other companies
that will be able to successfully incorporate AbiliTec into their products and
services in a manner that will yield benefits to Acxiom; statements that Acxiom
will meet the introduction timetables for AbiliTec in markets outside of the
United States; statements that Acxiom will be able to reach contractual terms
with customers who have decided to adopt the Company's solutions and products,
and statements concerning future revenue growth; expectations for future
AbiliTec revenues; future earnings expectations; expected tax rates; days sales
outstanding expectations; capital expenditure expectations; future software
development cost; future depreciation and amortization costs; whether there will
be any write-offs connected with the bankruptcy of Montgomery Ward; whether
additional applications for AbiliTec will continue to arise; whether the channel
partner strategy continues to gain momentum; and statements concerning potential
growth of international markets. The following factors may cause actual results
to differ materially from those in the forward-looking statements. With regard
to all statements concerning AbiliTec: the complexity and uncertainty regarding
the development of new software and high technologies; the difficulties
associated with developing new AbiliTec products; the loss of market share
through competition or the acceptance of these or other Company offerings on a
less rapid basis than expected; changes in the length of sales cycles due to the
nature of AbiliTec being an enterprise-wide solution; the introduction of
competent, competitive products or technologies by other companies; changes in
the consumer and/or business information industries and markets; the Company's
ability to protect proprietary information and technology or to obtain necessary
licenses on commercially reasonable terms; the impact of changing legislative,
accounting, regulatory and consumer environments in the geographies in which
AbiliTec will be deployed. With regard to the statements that generally relate
to the business of the Company: all of the above factors; the possibility that
economic or other conditions might lead to a reduction in demand for the
Company's products and services; the possibility that the current economic
slowdown may persist; the possibility that significant customers may experience
extreme severe economic difficulty; the continued ability to attract and retain
qualified technical and leadership associates and the possible loss of
associates to other organizations; the ability to properly motivate the sales
force and other associates of the Company; the ability to achieve cost
reductions and avoid unanticipated costs; changes in the litigation,
legislative, accounting, regulatory and consumer environments affecting the
Company's business including but not limited to legislation, regulations and
customs relating to the Company's ability to collect, manage, aggregate and use
data; data suppliers might withdraw data from the Company, leading to the
Company's inability to provide certain products and services; short-term
contracts affect the predictability of the Company's revenues; the potential
loss of data center capacity or interruption of telecommunication links; postal
rate increases that could lead to reduced volumes of business; customers that
may cancel or modify their agreements with the Company; the successful
integration of any acquired businesses and other competitive factors. With
specific reference to all statements that relate to the providing of products or
services outside the Company's primary base of operations in the United States:
all of the above factors and the difficulty of doing business in numerous
sovereign jurisdictions due to differences in culture, laws and regulations.
Other factors are detailed from time to time in the Company's periodic reports
and registration statements. Acxiom believes that it has the product and
technology offerings, facilities, associates and competitive and financial
resources for continued business success, but future revenues, costs, margins
and profits are all influenced by a number of factors, including those discussed
above, all of which are inherently difficult to forecast. The Company undertakes
no obligation to publicly release any revision to any forward-looking statement
to reflect any future events or circumstances.
Form 10-Q
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Acxiom's earnings are affected by changes in short-term interest rates primarily
as a result of its revolving credit agreement, which bears interest at a
floating rate. Acxiom does not use derivative or other financial instruments to
mitigate the interest rate risk. Risk can be estimated by measuring the impact
of a near-term adverse movement of 10% in short-term market interest rates. If
short-term market interest rates average 10% more in fiscal 2001 than in 2000,
there would be no material adverse impact on Acxiom's results of operations.
Acxiom has no material future earnings or cash flow expenses from changes in
interest rates related to its other long-term debt obligations as substantially
all of Acxiom's remaining long-term debt obligations have fixed rates. At both
December 31, 2000 and March 31, 2000, the fair value of Acxiom's fixed rate
long-term obligations approximated carrying value.
Although Acxiom conducts business in foreign countries, principally the United
Kingdom, foreign currency translation gains and losses are not material to
Acxiom's consolidated financial position, results of operations or cash flows.
Accordingly, Acxiom is not currently subject to material foreign currency
exchange rate risks from the effects that exchange rate movements of foreign
currencies would have on Acxiom's future costs or on future cash flows it would
receive from its foreign investment. To date, Acxiom has not entered into any
foreign currency forward exchange contracts or other derivative financial
instruments to hedge the effects of adverse fluctuations in foreign currency
exchange rates.
As of March 31, 2000, Acxiom was a party to two equity forward purchase
agreements under which it will purchase 3.1 million and 0.2 million shares of
its common stock at average total costs of approximately $20.81 and $26.51 per
share, respectively, for a total notional purchase price of $69.4 million. The
value of the equity forward contracts at March 31, 2000 was $38.6 million, based
on the market value of Acxiom common stock of $33.25 at March 31, 2000. As of
December 31, 2000, the Company had entered into another equity forward contract
for 0.5 million shares at $23.37 per share for an additional notional amount of
$10.6 million. The value of the three equity forward contracts at December 31,
2000 was $60.2 million, based on a share price of $38.94. The value of the
equity forward contracts will vary based on the market price of the common
stock. For each $1.00 increase or decrease in the stock price, the value of the
equity forward contracts will increase or decrease by approximately $3.7
million.
Form 10-Q
ACXIOM CORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On September 20, 1999 the Company and certain of its directors and
officers were sued by an individual shareholder in a purported class
action filed in the United States District Court for the Eastern
District of Arkansas. The action alleges that the defendants violated
Section 11 of the Securities Act of 1933 in connection with the July
23, 1999 public offering of 5,421,000 shares of the common stock of the
Company. In addition, the action seeks to assert liability against
Company Leader Charles Morgan pursuant to Section 15 of the Securities
Act of 1933. The action seeks to have a class certified of all
purchasers of the stock sold in the public offering. Two additional
suits were subsequently filed in the same venue against the same
defendants and asserting the same allegations. The plaintiffs have now
filed a consolidated complaint. The cases are still in the initial
phase of litigation, with the defendants having filed their initial
response to the lawsuit. The Company believes the allegations are
without merit and the defendants intend to vigorously contest the
cases, and at the appropriate time, seek their dismissal.
There are various other litigation matters that arise in the normal
course of the business of the Company. None of these, however, are
believed to be material in their nature or scope.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
None
(b) Reports on Forms 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: February 13, 2001 By: /s/ Caroline Rook
-------------------------------
(Signature)
Caroline Rook
Chief Financial Officer
(Chief Accounting Officer)