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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
March 31, 2004
Date of Report (Date of earliest event reported)
ACXIOM CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 0-13163 71-0581897
(State or Other Jurisdiction of (Commission File (IRS Employer Identification
Incorporation) Number) No.)
1 Information Way, P.O. Box 8180, Little Rock, Arkansas 72203-8180
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 501-342-1000
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
99.1 Press Release dated March 31, 2004
ITEM 9. REGULATION FD DISCLOSURE.
See Item 12. Results of Operations and Financial Condition.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On March 31, 2004, Acxiom Corporation (the "Company") issued a press release confirming previous estimates for the fourth
quarter of fiscal 2004 ended March 31, 2004. The press release is furnished herewith as Exhibit 99.1 and incorporated by reference
herein.
The Company's press release and other communications from time to time include certain non-GAAP financial measures. A
"non-GAAP financial measure" is defined as a numerical measure of a company's financial performance, financial position or cash
flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated
and presented in accordance with GAAP in the Company's financial statements.
The attached press release utilizes a measure of free cash flow. Free cash flow is defined as operating cash flow less cash
used by investing activities excluding the impact of investments in joint ventures and other business alliances and cash paid and/or
received in acquisitions and dispositions. The Company's management believes that while free cash flow does not represent the amount
of money available for the Company's discretionary spending since certain obligations of the Company must be funded out of free cash
flow, it nevertheless provides a useful measure of liquidity for assessing the amount of cash available for general corporate and
strategic purposes after funding operating activities and capital expenditures, capitalized software expenses, and deferred costs.
In addition, return on invested capital, also included in the attached press release, may be considered a non-GAAP
financial measure. Management defines "return on invested capital" as adjusted operating profit divided by the trailing four
quarters average invested capital. In this calculation, operating profit is adjusted for the implied interest expense from
off-balance sheet financing (the present value of operating leases x 8% annually) and invested capital is defined as working capital
(current assets excluding cash and equivalents less current liabilities excluding interest bearing obligations) plus all other
assets plus the present value of operating leases. Management believes that return on invested capital is useful because it provides
investors with additional useful information for evaluating the efficiency of the Company's capital deployed in its operations.
The non-GAAP financial measures used by the Company in the attached press release may not be comparable to similarly titled
measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared
in accordance with GAAP.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Dated: March 31, 2004
ACXIOM CORPORATION
By: /s/ Jefferson D. Stalnaker
----------------------------------------------------
Name: Jefferson D. Stalnaker
Title: Financial Operations Leader
(principal financial and accounting officer)
3
EXHIBIT INDEX
Exhibit Number Description
99.1 Press Release of the Company dated March 31, 2004.
4
For More Information Contact:
Robert S. Bloom
Financial Relations Leader
Acxiom Corporation
(501) 342-1321
EACXM
Acxiom® Announces New U.S. Organizational Structure,
Confirms Previous Fourth Quarter Estimates
The Company also expects stronger fiscal 2005 performance
LITTLE ROCK, Ark.-- March 31, 2004 - Acxiom® Corporation (Nasdaq: ACXM) today announced a new organizational
structure that will capitalize on its new technologies which improve service delivery to its clients. These new
technologies and the new organizational structure will significantly increase Acxiom's operational efficiency.
The Company also announced that it has completed a workforce reduction of approximately 230 associates, which
represents 5.4 percent of its U.S. workforce, related to the new structure. Acxiom also expects a stronger
financial performance in the fiscal year ending March 31, 2005, due to increased efficiencies and improving
business conditions. Acxiom will hold a conference call at 8:00 a.m. CST today to discuss this information
further. Interested parties are invited to listen to the call, which will be broadcast via the Internet at
www.acxiom.com.
"The new technologies we have been implementing over the past few years increase the speed at which we can do our
work and reduce the number of people required," Company Leader Charles D. Morgan said. "AbiliTec® and our new
Customer Information Infrastructure grid-enabled solutions are dramatically changing our business, and our new
functional organization is designed to help us better leverage standard tools, best practices and training.
Reducing the size of our workforce was a difficult decision, but it was necessary to leverage our technological
advances into more value for our clients."
Acxiom also announced that it:
o Expects revenue to exceed the range previously estimated of $265 million to $270 million and operating
and free cash flow to exceed our previous expectation for the fourth quarter ending March 31, 2004.
o Expects to be in line with previous diluted earnings per share estimates for the fourth quarter ending
March 31, 2004.
o Anticipates recording a non-recurring charge of approximately $3 million associated with severance costs
related to the workforce reduction in the fourth quarter.
o Expects that in the fourth quarter it will record other one-time non-cash charges associated with the
write-down of an investment and a third-party software package, which will be substantially offset by a
one-time benefit in income tax expense, as previously discussed in the Company's October 22, 2003
earnings release.
o Is changing its approach to projecting future financial results and for fiscal 2005 will begin providing
a strategic financial road map that defines the trends expected for the one-year and long-term horizons.
o Is proceeding with the integration of Claritas Europe and Consodata Europe into Acxiom European
operations now that the acquisition of Consodata, S.A. has been completed.
Outlook
The financial projections stated today are based on the Company's current expectations. These projections are
forward looking, and actual results may differ materially. These projections include the recently completed
acquisitions of the Claritas and Consodata European operations (including the Consodata German operation,
formerly known as pan-adress, which is pending formal approval by German merger authorities and is expected to
close by mid-April). These projections do not include the potential impact of any mergers, acquisitions,
divestitures or other business combinations that may be announced and completed in the future.
For the fiscal year ended March 31, 2005 and thereafter, the Company's expectations will be communicated in a new
format. Please refer to the attached exhibit titled "Financial Road Map" which includes a chart summarizing the
one-year and long-term goals as well as an explanation of the assumptions and definitions which accompany these
goals. This financial road map supercedes all previous guidance issued by the Company.
"We are confident that Acxiom is well positioned for an outstanding fiscal 2005, and that is reflected in the
attached Financial Road Map," Morgan said. "We think our shareholders are better served by understanding our
strategic financial direction as opposed to us trying to predict with great precision our results on a
quarter-to-quarter basis. This approach better communicates our long-term strategic planning and will help our
shareholders and the investment community better understand the financial results and trends we expect as a
result."
This release and the scheduled conference call include a discussion of non-GAAP financial measures. Whenever the
Company reports non-GAAP financial measures, there is a reconciliation to the comparable GAAP measure attached to
the press release.
About Acxiom
Acxiom Corporation (Nasdaq: ACXM) integrates data, services and technology to create and deliver customer and
information management solutions for many of the largest, most respected companies in the world. The core
components of Acxiom's innovative solutions are Customer Data Integration (CDI) technology, data, database
services, IT outsourcing, consulting and analytics, and privacy leadership. Founded in 1969, Acxiom is
headquartered in Little Rock, Arkansas, with locations throughout the United States and Europe, and in Australia
and Japan.
This release and today's conference call contain forward-looking statements that are subject to certain risks and
uncertainties that could cause actual results to differ materially. Such statements include but are not
necessarily limited to the following: that the projected revenue and diluted earnings per share, operating cash
flow and free cash flow for the 2004 fiscal year referred to above will meet or exceed the estimated amounts;
that the non-recurring cash and non-cash charges and write-offs for the 2004 fiscal year referred to above will
be in the anticipated amounts; and that Acxiom is well-positioned for an outstanding 2005 fiscal year. The
attached Financial Road Map consists primarily of forward-looking statements that are subject to certain risks
and uncertainties that could cause actual results to differ materially, with regard to management's projections
of one-year and fiscal year 2008 expectations, as well as an explanation of the assumptions and definitions which
accompany these expectations.
The following are important factors, among others, that could cause actual results to differ materially from
these forward-looking statements: The possibility that certain contracts may not be closed, or may not be closed
within the anticipated time frames; the possibility that certain contracts may not generate the anticipated
revenue or profitability; the possibility that negative changes in economic or other conditions might lead to a
reduction in demand for our products and services; the possibility that the recovery from the previous three
years' economic slowdown may take longer than expected or that economic conditions in general will not be as
expected; the possibility that significant customers may experience extreme, severe economic difficulty; the
possibility that the fair value of certain of our assets may not be equal to the carrying value of those assets
now or in future time periods; the possibility that sales cycles may lengthen; the possibility that we may not be
able to attract and retain qualified technical and leadership associates, or that we may lose key associates to
other organizations; the possibility that we won't be able to properly motivate our sales force or other
associates; the possibility that we won't be able to achieve cost reductions and avoid unanticipated costs; the
possibility that we won't be able to continue to receive credit upon satisfactory terms and conditions; the
possibility that competent, competitive products, technologies or services will be introduced into the
marketplace by other companies; the possibility that we may be subjected to pricing pressure due to market
conditions and/or competitive products and services; the possibility that there will be changes in consumer or
business information industries and markets; the possibility that we won't be able to protect proprietary
information and technology or to obtain necessary licenses on commercially reasonable terms; the possibility that
we may encounter difficulties when entering new markets or industries; the possibility that there will be changes
in the legislative, accounting, regulatory and consumer environments affecting our business, including but not
limited to litigation, legislation, regulations and customs relating to our ability to collect, manage, aggregate
and use data; the possibility that data suppliers might withdraw data from us, leading to our inability to
provide certain products and services; the possibility that we may enter into short-term contracts which would
affect the predictability of our revenues; the possibility that the amount of ad hoc, volume-based and project
work will not be as expected; the possibility that we may experience a loss of data center capacity or
interruption of telecommunication links or power sources; the possibility that postal rates may increase, thereby
leading to reduced volumes of business; the possibility that our clients may cancel or modify their agreements
with us; the possibility that the services of the United States Postal Service, their global counterparts and
other delivery systems may be disrupted; the possibility that the integration of our recently acquired businesses
may not be successful; the possibility of currency exchange rate fluctuations having a negative impact on the
financial results of the company; and the possibility that we may be affected by other competitive factors.
With respect to the attached Financial Road Map exhibit, all of the above factors apply, along with the following
which were assumptions made in creating the Financial Road Map: that the U.S. and global economies will continue
to improve at a moderate pace, that global growth will continue to be strong and that globalization trends will
continue to grow at an increasing pace; relating to Operating Margin, that 1) Acxiom's computer and
communications related expenses will continue to fall as a percentage of revenue, 2) that the Customer
Information Infrastructure (CII) grid-based environment Acxiom has begun to implement will continue to be
implemented successfully over the next 3-4 years and that the new CII infrastructure will continue to provide
increasing operational efficiencies, 3) that the recent acquisitions of Claritas Europe and Consodata Europe will
be successfully integrated and that significant efficiencies will be realized from this integration; relating to
Free Cash Flow, that sufficient operating and capital lease arrangements will continue to be available to the
Company to provide for the financing of most of its computer equipment and that software suppliers will continue
to provide financing arrangements for most of the software purchases; relating to Revolving Credit Line Balance,
that free cash flow will meet expectations and that the Company will continue to use free cash flow to pay down
bank debt, buy back stock and fund dividends; relating to Annual Dividends, that the Board of Directors will
continue to approve quarterly dividends and will vote to increase dividends over time; relating to Diluted
Shares, that the Company will meet its cash flow expectations and that potential dilution created through the
issuance of stock options and warrants will be mitigated by continued stock repurchases in accordance with the
Company's stock repurchase program.
With respect to the provision of products or services outside our primary base of operations in the U.S., all of
the above factors apply, along with 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 our periodic
reports and registration statements filed with the United States Securities and Exchange Commission. We believe
that we have 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. We undertake no
obligation to update the information contained in this press release or any other forward-looking statement.
Acxiom and AbiliTec are registered trademarks of Acxiom Corporation.
###
ACXIOM CORPORATION
Financial Road Map*
Introduction
Acxiom is well positioned to grow top-line and improve margins as we better
leverage our new technologies and associates to deliver more value to our
clients. Over the past several years, we have made a number of investments in
the Company, the most significant of which are AbiliTec and our grid-based
Customer Information Infrastructure technologies. Effective April 1, 2004, we
will have completed the reorganization Company to deliver our services more
effectively to our clients, increasing their speed to market and ability to
access and analyze more data to make better business decisions. This
reorganization includes establishing a delivery center through which we will
deliver all standard services and custom services. This "functional"
organization will allow us to better utilize our resources and establish more
consistent and repeatable solutions and delivery methodologies. Segregating the
primary delivery functions will allow our client services teams to focus on
growing the relationships with our clients.
Acxiom going forward will be able to better leverage the existing technology
infrastructure through more modest workforce growth over the periods referenced,
and continued modest capital investments (which will yield lower depreciation
and amortization expense over the next several years). It is important to note
that our IT outsourcing segment's business model is different than the Services
and Data segments in that new outsourcing business is often accompanied by
higher incremental operating expenses, which means incremental margins are lower
on new revenues than in other operating segments.
This returns-driven strategy will also deliver significant cash flows, which
will allow us to continue to improve the balance sheet and give us significant
operating flexibility. These cash flows will allow us to pay down debt, fund all
financial obligations as due, fund the recently announced dividend, buy back
stock as opportunities arise and have cash available should a strategic
acquisition arise. At this time, we do not anticipate a significant acquisition
that would require the Company to raise additional capital.
We have recently acquired Claritas and Consodata, two primary data and services
providers, and are in the process of integrating them into our ongoing
UK-headquartered European services business. These new additions should be a
significant catalyst to grow our business in Europe. We believe that combining
these three businesses will create increasing returns that over the next several
years should exceed the returns in the US. Additionally, European margins should
also be higher because of the large percentage of data revenue, which is a
fixed-cost business.
Finally, we believe we have significant top-line growth opportunities in many
areas. Our clients are increasingly calling on Acxiom to support existing and
new applications, including prospecting, portfolio management, fraud and risk
management, privacy and security. We are increasing our penetration in
traditional and emerging industries, including pharmaceutical and automotive,
and we continue to roll out new products, including our recently announced fraud
management product delivered jointly with TransUnion. We also are optimistic
about the results we'll generate through our developing alliance strategy,
highlighted by our strategic partnership with Accenture, and our European
opportunities.
In summary, we believe the Company has never been better positioned to deliver
consistently improving results.
----------------- ----------------- ------------------ -----------------
Years Actual Estimated Target Long-Term Goals
Ending Fiscal 2003 Fiscal 2004 Fiscal 2005 Fiscal 2008
March 31, ----------------- ----------------- ------------------ -----------------
U.S. 10.1% 2.1% to 2.7% 7% to 11% 7% to 10% (CAGR)
Revenue
Growth
U.S. 903 million $922 to $927 million $987 to $1,029 million -
Revenue
Non-U.S. 19.3% 45% to 50% 175% to 215% 14% to 18% (CAGR)
Revenue
Growth
Non-U.S. $55 million $80 to $83 million $220 to $261 million -
Revenue
U.S. 5.5% 10.0% to 10.2% 11.5% to 12% 15% to 16%
Operating
Margin
Non-U.S. 9.0% 8.8% to 10.0% 8% to 11% 18% to 20%
Operating
Margin
Return on 6% 10% 11% to 13% 16% to 20%
Invested
Capital
Free $199 million $155 to $160 million $150 to $170 million $160 to $180 million
Cash
Flow
Revolving $29 million $30 to $40 million Less than $150 million Less than $200 million
Credit
Line
Balance
Annual $0.00 $0.04 $0.16 $0.20 to $0.24
Dividends
Per Share
- -----------------------------
* Assumptions and definitions defined on the following schedule: "Financial Road Map assumptions and definitions"
ACXIOM CORPORATION
Financial Road Map Assumptions and Definitions
Assumptions
1. The effective tax rate is 37% to 38% over each of the years presented.
2. Investing activities (including capital expenditures, deferred costs and
capitalized software) will be $60 million to $80 million for each of the
years presented.
3. Interest rates will remain at approximately the current levels.
4. The Company will utilize all of its tax loss carry forwards and begin to
pay U.S. federal and state income taxes during FY06.
5. The Company will pay incentives under its bonus plan of approximately $15
million to $25 million for each of the years beginning in fiscal 2005.
6. The Company will maintain a relatively constant mix of business for each of
our three business segments (Services, Data and IT outsourcing).
7. Foreign exchange rates will remain at approximately the current levels.
8. Stock repurchases will be in amounts that yield the highest shareholder
return considering all other uses for the available cash.
9. Diluted outstanding shares will increase slightly to reflect the impact of
in-the-money options as the stock price increases.
10. Long-term goals are based on the Company's current assessment of
opportunities and are subject to change. There are risks associated with
obtaining these goals which are explained under forward looking statements
in the press release.
Definitions
1. Revenue Growth is defined as the percentage growth compared to the previous
corresponding fiscal year or quarter.
2. Operating Margin is defined as the income from operations as a percentage
of revenue.
3. Return on Capital is defined as operating profit adjusted for the implied
interest expense included in operating leases (the average present value of
operating leases times an 8% annual interest rate) divided by the trailing
four quarters average invested capital. Invested capital is defined as
working capital (current assets excluding cash less current liabilities
excluding interest bearing obligations) plus all other assets plus the
present value of operating leases.
4. Free Cash Flow is defined as cash flow from operating activities less cash
flow from investing activities excluding net cash paid or received for
acquisitions and divestitures, joint ventures and investments.
5. Revolving Credit Line Balance is defined as actual funds borrowed under the
Company's revolving line of credit facility at the end of the fiscal year.
This debt is shown on the balance sheet under long-term debt. This measure
specifically excludes the $175 million convertible debenture and debt
associated with capital leases for hardware and software and data licenses.
6. Annual Dividends Per Share is defined as the sum of the four quarterly
dividends for that fiscal year.
ACXIOM CORPORATION
Reconciliation of Non-GAAP Measurements
(Dollars in thousands)
----------------- ---------------------- ---------------------- ----------------------
Years Ending Actual Estimated Target Long-Term Goals
March 31, Fiscal 2003 Fiscal 2004 Fiscal 2005 Fiscal 2008
----------------- ---------------------- ---------------------- ----------------------
Free Cash Flow
Net cash 253,793 220,000 225,000 210,000 250,000 220,000 260,000
provided by
operating
activities
Proceeds 293 0 0 0 0 0 0
received from
disposition of
assets
Capitalized (34,573) (28,000) (28,000) (26,000) (28,000) (26,000) (28,000)
software
Capital (13,212) (17,000) (17,000) (16,000) (25,000) (16,000) (25,000)
expenditures
Deferral of costs (15,027) (20,000) (20,000) (18,000) (27,000) (18,000) (27,000)
Proceeds from 7,729 0 0 0 0 0 0
sale and
leaseback
transaction
----------------- --------- --------- --------- --------- --------- ---------
Free cash flow 199,003 155,000 to 160,000 150,000 to 170,000 160,000 to 180,000
================= ========= ========= ========= ========= ======== =========
Return on Invested Capital
Numerator:
Income from 55,073 99,000 102,000 131,000 152,000 221,000 272,000
operations
Assumed 15,170 14,000 14,000 16,000 16,000 21,000 21,000
interest on
operating leases
----------------- --------- --------- --------- --------- ---------- --------
Return 70,243 113,000 116,000 147,000 168,000 242,000 293,000
----------------- --------- --------- --------- --------- ---------- --------
Denominator:
Average 312,636 276,000 276,000 311,000 318,000 370,000 393,000
current assets
excluding cash
Average (139,226) (145,000) (145,000) (145,000) (145,000) (145,000) (145,000)
current
liabilities
excluding
interest bearing
obligations
----------------- --------- --------- ---------- -------- ---------- --------
Average net 173,410 131,000 131,000 166,000 173,000 225,000 248,000
working capital
Average 801,191 860,000 860,000 940,000 938,000 993,000 991,000
other assets
Average 185,222 172,000 172,000 201,000 201,000 258,000 258,000
present value
of operating
leases
----------------- --------- --------- ---------- -------- ---------- --------
Average invested 1,159,823 1,163,000 1,163,000 1,307,000 1,312,000 1,476,000 1,497,000
capital
----------------- --------- --------- ---------- -------- ---------- --------
Return on 6.1% 9.7% to 10.0% 11.2% to 12.8% 16.4% to 19.6%
invested capital
================= ===================== ====================== =======================