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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): October 20, 2004
ACXIOM CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
0-13163 71-0581897
(Commission File Number) (IRS Employer Identification No.)
1 Information Way, P.O. Box 8180, Little Rock, Arkansas 72203-8180
(Address of Principal Executive Offices) (Zip Code)
501-342-1000
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation
of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
1
Item 2.02 Results of Operations and Financial Condition
On October 20, 2004, Acxiom Corporation (the "Company") issued a press release announcing the results of its financial
performance for the second quarter of fiscal year 2005. The Company will hold a conference call at 4:30 p.m. CDT 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 press release is furnished herewith as Exhibit 99.1 and incorporated by reference herein.
The Company's press release, including the Financial Road Map, 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, is a non-GAAP financial measure.
Management defines "return on invested capital" as income from operations adjusted for the implied interest expense included in
operating leases divided by the trailing four quarters' average invested capital. The implied interest adjustment for operating
leases is calculated by multiplying the average quarterly balances of the present value of operating leases [(beginning balance +
ending balance)/2] times an 8% implied interest rate on the leases. Average invested capital is defined as the trailing 4 quarter
average of the ending quarterly balances for total assets less cash, less non-interest bearing liabilities, 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. Return on invested capital
does not consider whether the business is financed with debt or equity, but rather calculates a return on all capital invested in
the business. Return on invested capital includes the present value of future payments on operating leases as a component of the
denominator of the calculation, and adjusts the numerator of the calculation for the implied interest expense on those operating
leases, in order to recognize the fact that the Company finances portions of its operations with leases instead of using either
debt or equity.
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 or
liquidity prepared in accordance with GAAP.
2
Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.
In its October 20, 2004 earnings release, the Company announced that a new "Office of the Company Leader" was being
established effective as of January 1, 2005, and that two new positions were being created within that office, namely, Chief
Finance & Administration Leader and Chief Operations Leader. Rodger S. Kline, currently serving as Company Operations Leader,
will be appointed as Chief Finance & Administration Leader and will serve as the Company's principal financial and accounting
officer. L. Lee Hodges, currently the Company's Outsourcing & IT Services Leader, will be appointed as Chief Operations Leader.
The "Office of the Company Leader" will be headed by Charles Morgan, Chairman and CEO, and will include Mr. Kline and Mr. Hodges.
All of the Company's organizations and functions will report to Messrs. Morgan, Kline or Hodges.
James T. Womble, currently Client Services Organization Leader of the Company's financial services, government and health
client services, will be appointed as Global Business Development Leader, a new position which will be focused on the continued
expansion of the Company's global business opportunities. Jefferson D. Stalnaker, currently serving as Company Financial
Operations Leader, will be appointed as Client Services Organization Leader of the Company's financial services, government and
health client services.
Mr. Kline, age 61, joined the Company in 1973 and has served as a director of the Company since 1975. He has held various
senior-level positions during his tenure, including Executive Vice President, Chief Information Officer, Treasurer, Chief Operating
Officer (Company Operations Leader), and has served in prior years as the Company's principal financial officer. Mr. Kline holds a
degree in electrical engineering from the University of Arkansas at Fayetteville, where he has served since 1990 as Chairman of the
College of Engineering Advisory Board. Prior to joining Acxiom, Mr. Kline spent seven years with IBM Corporation and two years as
an officer in the U.S. Army.
Mr. Hodges, age 58, joined the Company in 1998 as its Outsourcing & IT Services Leader. Prior to joining Acxiom, he was
employed for six years with Tascor, the outsourcing subsidiary of Norrell Corporation, most recently serving as a Senior Vice
President. Prior to that time, Mr. Hodges served in a number of engineering, sales, marketing and executive positions with IBM
Corporation for 24 years. Mr. Hodges holds a bachelor's degree in industrial engineering from Pennsylvania State University.
Mr. Womble, age 61, joined Acxiom in 1974 and has served as a director of the Company since 1975. He has been a senior
officer of the Company throughout his tenure, serving as Executive Vice President, then as a Division Leader, and, most currently,
as one of the Company's two Client Services Organization Leaders. In his current position, he oversees the management of
relationships with clients in major industries including credit card, retail banking and health, as well as governmental entities.
Mr. Womble's success in obtaining new business for the Company has been instrumental in the Company's growth over the past thirty
years. Prior to joining Acxiom, Mr. Womble was employed by IBM Corporation as a systems engineer and marketing representative.
He holds a degree in civil engineering from the University of Arkansas, where he graduated magna cum laude.
Mr. Stalnaker, age 38, joined the Company in 1995 and during his tenure has served in a number of roles in the financial
organization. He most recently served as Company Financial Operations Leader. He previously served for four years as the
financial leader of the Company's largest operating organization (financial services) while also serving in a business development
role for several key clients. Before joining the Company, Mr. Stalnaker was employed by the Arkansas Public Service Commission as
a senior financial analyst. Prior to that, Mr. Stalnaker worked for several years as a Certified Public Accountant for a regional
public accounting firm located in Little Rock, Arkansas. Mr. Stalnaker holds a degree in business administration with a major in
accounting from the University of Central Arkansas.
3
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
The following exhibits are furnished herewith:
Exhibit
Number Description
- ------------ -------------------------------------------------------------------------------------------------------
99.1 Press Release of the Company dated October 20, 2004.
4
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: October 20, 2004
ACXIOM CORPORATION
By:/s/ Jerry C. Jones
Name: Jerry C. Jones
Title: Business Development/Legal Leader
5
EXHIBIT INDEX
Exhibit
Number Description
- --------------------------------------------------------------------------------------------------------------------
99.1 Press Release of the Company dated October 20, 2004
6
EXHIBIT 99.1
[ACXIOM LOGO]
For more information, contact:
Robert S. Bloom
Financial Relations Leader
Acxiom Corporation
(501) 342-1321
EACXM
Acxiom® Announces Second-Quarter Results
Significant year-over-year growth achieved in revenue, earnings
LITTLE ROCK, Ark - October 20, 2004 - Acxiom® Corporation (Nasdaq: ACXM) today announced financial results for
the second quarter of fiscal 2005 ended September 30, 2004. Revenue of $299.1 million, income from operations of
$34.4 million, pre-tax earnings of $29.8 million and diluted earnings per share of $.20 all represent significant
improvements compared to the same quarter a year ago. Acxiom will hold a conference call at 4:30 p.m. CDT 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.
"We are pleased with our second-quarter performance, which keeps us solidly on track to meet the financial goals
we have communicated in our Financial Road Map," Company Leader Charles D. Morgan said. "We are particularly
encouraged with the growth in our U.S. operations, with revenue up 11 percent and operating income up 58 percent
compared to the same quarter last year."
Highlights of Acxiom's second-quarter performance include:
o Revenue of $299.1 million, up 24 percent from $241.1 million in the second quarter a year ago.
Acquisitions contributed 12 percentage points of this 24 percentage-point growth in revenue.
o Income from operations of $34.4 million, an increase of 51 percent compared to $22.7 million in the
second quarter last year.
o Pre-tax earnings of $29.8 million, an increase of 66 percent compared to $17.9 million in the second
quarter a year ago.
o Diluted earnings per share of $.20, up 54 percent from $.13 the year before.
o Operating cash flow of $61.7 million and free cash flow of $41.1 million. The free cash flow of $41.1
million is a non-GAAP financial measure and a reconciliation to the comparable GAAP measure, operating
cash flow, is attached to this press release.
o New contracts that are expected to deliver $43 million in annual revenue and renewals that total $71
million in annual revenue.
o Committed new deals in the pipeline that are expected to generate $71 million in annual revenue.
Morgan noted that Acxiom recently completed contracts with Information Resources, Inc. (IRI); TransUnion;
Accenture; MGM MIRAGE; GE Consumer Finance; E-LOAN®; Southeast Toyota Distributors, LLC; Ziff Davis Media, Inc.;
CopperKey Inc.; and Wolters Kluwer Health.
"We were very pleased with the new business we won in the quarter," Morgan said. "Many of these deals are
significant for Acxiom and our future. The relationship with IRI takes our integrated outsourcing value
proposition to a new level, as we'll use our Customer Information Infrastructure (CII) grid-based solutions
architecture to transform the way IRI builds and delivers its data products. And we're also beginning to deploy
CII in a limited capacity at TransUnion, our long-time business partner with whom we have recently completed a
five-year extension of our data center outsourcing agreement."
Recognition
Acxiom recently:
o Was included in CIO magazine's "CIO 100," which recognizes organizations around the world that exemplify
the highest level of operational and strategic excellence in information technology.
o Was named one of the "Best Places to Work in Information Technology" by Computerworld magazine.
o Won the "CRM Data Quality Market Leader" award from CRM magazine.
o Was named "2004 Best Practices Award" winner for "Radical Data Warehousing/Business Intelligence" by The
Data Warehousing Institute.
o Received Sonoco's "Supplier of the Year" Award.
o Was honored as a member of the InformationWeek 500, which recognizes the most innovative corporate users
of information technology.
Organizational Changes
Effective January 1, 2005, a new "Office of the Company Leader" will be established and two new positions are
being created within that office, namely, Chief Finance & Administration Leader and Chief Operations Leader.
Rodger S. Kline, currently serving as Company Operations Leader, will be appointed as Chief Finance &
Administration Leader and will serve as the Company's principal financial and accounting officer. L. Lee Hodges,
currently the Company's Outsourcing & IT Services Leader, will be appointed as Chief Operations Leader. The
"Office of the Company Leader" will be headed by Charles Morgan, Chairman and Company Leader, and will include Mr.
Kline and Mr. Hodges. All of the Company's organizations and functions will report to Messrs. Morgan, Kline or
Hodges.
James T. Womble, currently Client Services Organization Leader for financial services, government and health,
will be appointed as Global Business Development Leader, a new position which will be focused on the continued
expansion of the Company's global business opportunities. Jefferson D. Stalnaker, currently serving as Company
Financial Operations Leader, will be appointed as Client Services Organization Leader for financial services,
government and health.
"These changes position us to better capitalize on our many growth opportunities," Morgan said. "Jim's
experience will be very valuable as we continue to expand our business globally. Lee will help us very tightly
coordinate sales, client service and delivery, ensuring we maximize effectiveness, efficiency and growth in all
operational areas of our business. Jeff has done a great job as a financial leader over the past several years
and will now expand his scope and responsibility. Rodger has previously served as our principal financial
officer and has been in that role or one closely associated with it for more than ten years and will provide
continuity in our financial operations. I am very excited about these organizational changes and the positive
impact they will have on our business."
Outlook
For the fiscal year ended March 31, 2005 and thereafter, the Company's expectations are communicated in the
attached Financial Road Map, which includes a chart summarizing the Company's one-year and long-term goals as
well as an explanation of the assumptions and definitions that accompany these goals.
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 do not include the potential impact
of any mergers, acquisitions, divestitures or other business combinations that may be completed in the future and
do not include the impact of the expensing of employee stock options which is currently proposed by the FASB.
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 (including references to the Financial Road Map) 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.
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 may include but are not
necessarily limited to the following: that the projected revenue, operating margin, return on assets and return
on invested capital, operating cash flow and free cash flow, borrowings and dividends referred to in the
Financial Road Map will be within the estimated ranges; that the company is on track for a successful year and is
currently operating in line with the Financial Road Map; that the business pipeline and our current cost
structure will allow us to continue to meet or exceed revenue, cash flow and other projections; that new
contracts and contract renewals will generate the indicated amounts of revenue; that we have committed new deals
in the pipeline that are expected to deliver the indicated amounts; that we are well positioned for success and
improving margins going forward; that future results will be within the indicated ranges; that new products and
services will produce the expected results.
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 changes in accounting pronouncements (including
the proposed accounting pronouncement changes which will require expensing of stock option grants and other
equity compensation awards) may occur and may impact these projections; 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 we may
experience failures or breaches of our network and data security systems, leading to potential adverse publicity,
negative customer reaction, or liability to third parties; 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 we will not successfully complete customer contract requirements on time
or meet the service levels specified in the contracts, which may result in contract penalties or lost revenue;
the possibility that we experience processing errors which result in credits to customers, re-performance of
services or payment of damages to customers; 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 as successful as planned; and the possibility that we
may be affected by other competitive factors.
With respect to the 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; that Acxiom's computer and communications related expenses will continue
to fall as a percentage of revenue; 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; 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 operating cash flow and 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, including the Financial Road Map or any
other forward-looking statement.
Acxiom is a registered trademark of Acxiom Corporation.
###
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share)
For the Three Months Ended
September 30,
------------------------------------------
2004 2003
------------------------------------------
Revenue:
Services 220,072 190,098
Data 79,037 50,998
--------------- ---------------
Total revenue 299,109 241,096
Operating costs and expenses:
Cost of revenue
Services 168,950 154,429
Data 49,768 36,556
--------------- ---------------
Total cost of revenue 218,718 190,985
Selling, general and administrative 46,020 27,395
--------------- ---------------
Total operating costs and expenses 264,738 218,380
--------------- ---------------
Income from operations 34,371 22,716
--------------- ---------------
Other income (expense):
Interest expense (4,743) (4,889)
Other, net 205 121
--------------- ---------------
Total other income (expense) (4,538) (4,768)
--------------- ---------------
Earnings before income taxes 29,833 17,948
Income taxes 11,337 6,731
--------------- ---------------
Net earnings 18,496 11,217
=============== ===============
Earnings per share:
Basic 0.22 0.13
=============== ===============
Diluted 0.20 0.13
=============== ===============
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share)
For the Six Months Ended
September 30,
------------------------------------------
2004 2003
------------------------------------------
Revenue:
Services 427,919 382,612
Data 160,184 95,166
--------------- ---------------
Total revenue 588,103 477,778
Operating costs and expenses:
Cost of revenue
Services 332,499 313,184
Data 101,587 71,193
--------------- ---------------
Total cost of revenue 434,086 384,377
Selling, general and administrative 94,549 60,459
Gains, losses and nonrecurring items, net (344) (1,008)
--------------- ---------------
Total operating costs and expenses 528,291 443,828
--------------- ---------------
Income from operations 59,812 33,950
--------------- ---------------
Other income (expense):
Interest expense (9,813) (9,654)
Other, net 614 886
--------------- ---------------
Total other income (expense) (9,199) (8,768)
--------------- ---------------
Earnings before income taxes 50,613 25,182
Income taxes 19,233 2,702
--------------- ---------------
Net earnings 31,380 22,480
=============== ===============
Earnings per share:
Basic 0.36 0.26
=============== ===============
Diluted 0.34 0.25
=============== ===============
ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except earnings per share)
For the Three Months Ended
September 30,
-------------------------------------
2004 2003
-------------------------------------
Basic earnings per share:
Numerator - net earnings 18,496 11,217
Denominator - weighted-average shares outstanding 86,010 85,236
-------------- ---------------
Basic earnings per share 0.22 0.13
============== ===============
Diluted earnings per share:
Numerator:
Net earnings 18,496 11,217
Interest expense on convertible bonds (net of tax benefit) 1,017 1,026
-------------- ---------------
19,513 12,243
-------------- ---------------
Denominator:
Weighted-average shares outstanding 86,010 85,236
Dilutive effect of common stock options and warrants 3,464 1,937
Dilutive effect of convertible debt 9,589 9,589
-------------- ---------------
99,063 96,762
-------------- ---------------
Diluted earnings per share 0.20 0.13
============== ===============
ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except earnings per share)
For the Six Months Ended
September 30,
-------------------------------------
2004 2003
-------------------------------------
Basic earnings per share:
Numerator - net earnings 31,380 22,480
Denominator - weighted-average shares outstanding 86,047 85,839
-------------- ---------------
Basic earnings per share 0.36 0.26
============== ===============
Diluted earnings per share:
Numerator:
Net earnings 31,380 22,480
Interest expense on convertible bonds (net of tax benefit) 2,034 2,051
-------------- ---------------
33,414 24,531
-------------- ---------------
Denominator:
Weighted-average shares outstanding 86,047 85,839
Dilutive effect of common stock options and warrants 3,709 1,770
Dilutive effect of convertible debt 9,589 9,589
-------------- ---------------
99,345 97,198
-------------- ---------------
Diluted earnings per share 0.34 0.25
============== ===============
ACXIOM CORPORATION AND SUBSIDIARIES
REVENUES BY SEGMENT
(Unaudited)
(Dollars in thousands)
For the Three Months Ended
September 30,
------------------------------------------------------------------------
2004 2003
------------------------------------------------------------------------
US Services & Data 188,105 169,031
International Services & Data 47,893 15,037
IT Management 69,325 60,967
Intercompany eliminations (6,214) (3,939)
--------------------------------- ----------------------------------
Total Revenue 299,109 241,096
================================= ==================================
For the Six Months Ended
September 30,
------------------------------------------------------------------------
2004 2003
------------------------------------------------------------------------
US Services & Data 363,069 331,141
International Services & Data 101,335 28,620
IT Management 132,594 122,912
Intercompany eliminations (8,895) (4,895)
--------------------------------- ----------------------------------
Total Revenue 588,103 477,778
================================= ==================================
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
September 30, March 31,
2004 2004
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 10,140 $ 14,355
Trade accounts receivable, net 236,862 212,387
Deferred income taxes 14,288 14,032
Refundable income taxes 915 2,280
Other current assets 48,136 43,272
------------ ------------
Total current assets 310,341 286,326
------------ ------------
Property and equipment 536,578 521,064
Less - accumulated depreciation and amortization 243,700 253,976
------------ ------------
Property and equipment, net 292,878 267,088
------------ ------------
Software, net of accumulated amortization 60,214 64,553
Goodwill 312,168 282,971
Purchased software licenses, net of accumulated amortization 152,206 157,217
Unbilled and notes receivable, excluding current portions 15,675 13,030
Deferred costs, net 84,210 88,096
Data acquisition costs 45,009 36,557
Other assets, net 13,273 19,946
------------ ------------
$ 1,285,974 $ 1,215,784
=================== ===================
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term obligations 79,585 73,245
Trade accounts payable 50,778 41,527
Accrued merger, integration and impairment costs 190 2,881
Accrued payroll and related expenses 23,791 23,979
Other accrued expenses 70,902 63,411
Deferred revenue 86,053 91,060
------------ ------------
Total current liabilities 311,299 296,103
------------ ------------
Long-term obligations:
Long-term debt and capital leases, net of current installments 265,830 239,327
Software and data licenses, net of current installments 41,268 54,130
------------ ------------
Total long-term obligations 307,098 293,457
------------ ------------
Deferred income taxes 58,892 39,008
Commitments and contingencies
Stockholders' equity:
Common stock 9,352 9,226
Additional paid-in capital 384,615 361,256
Retained earnings 332,972 308,487
Accumulated other comprehensive loss 3,608 2,940
Treasury stock, at cost (121,862) (94,693)
------------ ------------
Total stockholders' equity 608,685 587,216
------------ ------------
$ 1,285,974 $ 1,215,784
=================== ===================
ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF FREE CASH FLOW TO OPERATING CASH FLOW
(Unaudited)
(Dollars in thousands)
Qtr ended Qtr ended Qtr ended Qtr ended Yr ended
6/30/2001 9/30/2001 12/31/2001 3/31/2002 3/31/2002
Net cash provided by operating activities (39,280) 69,300 60,493 60,092 150,605
Proceeds received from disposition of assets 127 - - 46 173
Capitalized software (5,935) (5,464) (5,832) (6,890) (24,121)
Capital expenditures (8,789) - (2,612) (3,474) (14,875)
Deferral of costs (8,690) (18,012) (14,077) (7,352) (48,131)
Proceeds from sale and leaseback transaction - 1,964 4,035 - 5,999
---------- ---------- ---------- ---------- ----------
Free cash flow (62,567) 47,788 42,007 42,422 69,650
========== ========== ========== ========== ==========
Qtr ended Qtr ended Qtr ended Qtr ended Yr ended
6/30/2002 9/30/2002 12/31/2002 3/31/2003 3/31/2003
Net cash provided by operating activities 60,243 53,446 76,992 63,112 253,793
Proceeds received from disposition of assets 45 155 - 93 293
Capitalized software (8,652) (8,958) (8,726) (8,237) (34,573)
Capital expenditures (1,916) (3,000) (5,893) (2,403) (13,212)
Deferral of costs (3,240) (4,108) (3,796) (3,883) (15,027)
Proceeds from sale and leaseback transaction - 7,729 - - 7,729
---------- ---------- ---------- ---------- ----------
Free cash flow 46,480 45,264 58,577 48,682 199,003
========== ========== ========== =========== ==========
Qtr ended Qtr ended Qtr ended Qtr ended Yr ended
6/30/2003 9/30/2003 12/31/2003 3/31/2004 3/31/2004
Net cash provided by operating activities 48,125 49,909 79,282 82,567 259,883
Proceeds received from disposition of assets 506 192 39 2,046 2,783
Capitalized software (6,335) (7,296) (6,510) (7,703) (27,844)
Capital expenditures (1,588) (3,036) (7,637) (9,917) (22,178)
Deferral of costs (6,026) (4,006) (5,312) (9,537) (24,881)
---------- ---------- ---------- ------------ ----------
Free cash flow 34,682 35,763 59,862 57,456 187,763
========== ========== ========== ============ ==========
Qtr ended Qtr ended
6/30/2004 9/30/2004
Net cash provided by operating activities 34,714 61,742
Capitalized software (4,107) (4,721)
Capital expenditures (1,823) (4,813)
Deferral of costs (9,610) (11,113)
---------- ----------
Free cash flow 19,174 41,095
========== ==========
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Three Months Ended
September 30,
------------------------------------------------
2004 2003
------------------------------------------------
Cash flows from operating activities:
Net earnings 18,496 11,218
Non-cash operating activities:
Depreciation and amortization 45,102 37,140
Deferred income taxes 10,699 -
Changes in operating assets and liabilities:
Accounts receivable (7,488) (1,199)
Other assets (7,434) 6,765
Accounts payable and other liabilities 2,548 (3,600)
Merger, integration and impairment costs (181) (415)
------------ ------------
Net cash provided by operating activities 61,742 49,909
------------ ------------
Cash flows from investing activities:
Proceeds received from the disposition of assets - 192
Capitalized software (4,721) (7,296)
Capital expenditures (4,813) (3,036)
Deferral of costs (11,113) (4,006)
Payments received from investments 219 159
Net cash paid in acquisitions (11,181) -
------------ ------------
Net cash used by investing activities (31,609) (13,987)
------------ ------------
Cash flows from financing activities:
Proceeds from debt 59,203 29,286
Payments of debt (75,049) (50,233)
Dividends paid (3,446) -
Sale of common stock 4,354 3,859
Acquisition of treasury stock (16,397) (20,032)
------------ ------------
Net cash used by financing activities (31,335) (37,120)
------------ ------------
Effect of exchange rate changes on cash 128 (15)
------------ ------------
Net decrease in cash and cash equivalents (1,074) (1,213)
Cash and cash equivalents at beginning of period 11,214 4,862
------------ ------------
Cash and cash equivalents at end of period 10,140 3,649
------------ ------------
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest 6,554 6,794
Income taxes 8 (2,533)
Noncash investing and financing activities:
Enterprise software licenses acquired under long-term obligation 3,282 991
Acquisition of property and equipment under capital lease
and installment payment arrangements 18,572 14,531
Construction of assets under construction loan 6,323 2,610
------------ ------------
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Six Months Ended
September 30,
------------------------------------------------
2004 2003
------------------------------------------------
Cash flows from operating activities:
Net earnings 31,380 22,481
Non-cash operating activities:
Depreciation and amortization 89,099 71,036
Loss on disposal or impairment of assets, net - (1,008)
Deferred income taxes 19,548 (6,742)
Changes in operating assets and liabilities:
Accounts receivable (26,149) 4,810
Other assets (8,446) 8,826
Accounts payable and other liabilities (6,285) (815)
Merger, integration and impairment costs (2,691) (554)
------------ ------------
Net cash provided by operating activities 96,456 98,034
------------ ------------
Cash flows from investing activities:
Proceeds received from the disposition of operations - 7,684
Proceeds received from the disposition of assets - 698
Capitalized software (8,828) (13,631)
Capital expenditures (6,636) (4,624)
Investments in joint ventures and other companies - (5,000)
Deferral of costs (20,723) (10,032)
Payments received from investments 503 1,360
Net cash paid in acquisitions (16,741) -
------------ ------------
Net cash used by investing activities (52,425) (23,545)
------------ ------------
Cash flows from financing activities:
Proceeds from debt 98,129 82,473
Payments of debt (135,609) (110,888)
Dividends paid (6,895) -
Sale of common stock 23,671 6,709
Acquisition of treasury stock (27,368) (54,697)
------------ ------------
Net cash used by financing activities (48,072) (76,403)
------------ ------------
Effect of exchange rate changes on cash (174) 72
------------ ------------
Net decrease in cash and cash equivalents (4,215) (1,842)
Cash and cash equivalents at beginning of period 14,355 5,491
------------ ------------
Cash and cash equivalents at end of period 10,140 3,649
------------ ------------
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest 9,888 10,302
Income taxes 108 (1,556)
Noncash investing and financing activities:
Acquisition of land in exchange for debt - 2,698
Acquisition of data under long-term obligation - 18,340
Enterprise software licenses acquired under long-term obligation 5,967 9,212
Acquisition of property and equipment under capital lease
and installment payment arrangements 39,070 31,334
Construction of assets under construction loan 13,111 2,610
------------ ------------
ACXIOM CORPORATION
Financial Road Map 1
-------------------
(as of Sep 30, 2004)
------------- -------------- --------------- ---------------------- --------------------
Actual 2 Actual Actual Target Long-Term Goals
Years Ending March 31, Fiscal 2004 Q2 Fiscal 2005 YTD Fiscal 2005 Fiscal 2005 Fiscal 2008
------------- -------------- --------------- ---------------------- --------------------
U.S. Revenue Growth 2.7% 11.1% 8.4% 7.0% to 11.0% 7.0% to 10.0% (CAGR)
U.S. Revenue $926 million $251 million $487 million $991 to $1,028 million -
International Revenue Growth 51.3% 218.5% 254.1% - 14.0% to 18.0% (CAGR)
International Revenue $85 million $48 million $101 million $220 to $240 million -
U.S. Operating Margin 9.8% 13.9% 11.8% 11.5% to 12.0% 15.0% to 16.0%
International Operating Margin 3.1% -1.3% 2.2% 8.0% to 11.0% 18.0% to 20.0%
Return on Assets 8.2% 9.7% 3 9.7% 3 10.0% to 12.0% 14.0% to 16.0%
Return on Invested Capital 9.4% 11.3% 3 11.3% 3 12.0% to 14.0% 16.0% to 19.0%
Operating Cash Flow $260 million $62 million $96 million $220 to $260 million $220 to $260 million
Free Cash Flow $188 million $41 million $60 million $160 to $180 million $160 to $180 million
Revolving Credit Line Balance $16 million $22 million $22 million Less than $150 million Less than $200 million
Dividends Per Share $0.04 4 $0.04 $0.08 $0.16 $0.20 to $0.24
- --------------------------------
1 Assumptions and definitions are defined on the following schedule: "Financial Road Map assumptions and definitions"
2 The Fiscal 2004 results include $0.9 million expense recorded in gains, losses and nonrecurring items, net and $2.8 million
related to a write-down of a third-party software package.
3 ROA and ROIC for Q2 & YTD of Fiscal 2005 are calculated on a trailing 4 quarters basis. Results for the trailing 4 quarters ending
Q2 of Fiscal 2005 include $4.5 million of restructuring charges, $3.7 million of asset impairment charges, partially offset by $3.9
million of recovery of previous charges on a bankrupt customer.
4 Acxiom declared its first quarterly dividend in the fourth quarter of Fiscal 2004.
ACXIOM CORPORATION
Financial Road Map Assumptions and Definitions
----------------------------------------------
Assumptions
- -----------
1. The effective tax rate is projected to be approximately 38% for future years.
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 its three business segments.
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 accompanying
this Financial Road Map. Acxiom disclaims any obligation to update the information contained in this Financial Road Map.
Definitions
- -----------
1. Revenue Growth is defined as the percentage growth compared to the previous corresponding fiscal year or comparable period.
2. Operating Margin is defined as the income from operations as a percentage of revenue.
3. Return on Assets (ROA) is defined as income from operations divided by average total assets for the trailing four quarters.
4. Return on Invested Capital (ROIC) is defined as income from operations adjusted for the implied interest expense included in
operating leases divided by the trailing four quarters' average invested capital. The implied interest adjustment for
operating leases is calculated by multiplying the average quarterly balances of the present value of operating leases
[(beginning balance + ending balance)/2] x an 8% implied interest rate on the leases.
Average invested capital is defined as the trailing four-quarter average of the ending quarterly balances for total assets
less cash, less non-interest bearing liabilities, plus the present value of operating leases.
5. Operating Cash Flow is as shown on the Company's cash flow statement.
6. 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.
7. Revolving Credit Line Balance is defined as actual funds borrowed under the Company's revolving line of credit facility at the
end of the period.
8. Dividends Per Share is defined as the sum of the dividends for that period.
ACXIOM CORPORATION
Reconciliation of Non-GAAP Measurements
---------------------------------------
(Dollars in thousands)
----------- -------------- --------------- ----------------- ------------------
Actual Actual Actual Target Long-Term Goals
Years Ending March 31, Fiscal 2004 Q2 Fiscal 2005 YTD Fiscal 2005 Fiscal 2005 Fiscal 2008
----------- -------------- --------------- ----------------- ------------------
Free Cash Flow
- --------------
Net cash provided by operating activities 259,883 61,742 96,456 220,000 260,000 220,000 260,000
Proceeds received from disposition of assets 2,783 0 0 0 0 0 0
Capitalized software (27,844) (4,721) (8,828) (26,000) (28,000) (26,000) (28,000)
Capital expenditures (22,178) (4,813) (6,636) (16,000) (25,000) (16,000) (25,000)
Deferral of costs (24,881) (11,113) (20,723) (18,000) (27,000) (18,000) (27,000)
------------ ------------- --------------- -------- -------- -------- --------
Free cash flow 187,763 41,095 60,269 160,000 to 180,000 160,000 to 180,000
============ ============= =============== ======== ======= ======= =======
Free cash flow as defined by the Company may not be comparable to similarly titled measures reported by other companies. Management
of the Company has included free cash flow in this Financial Road Map because although 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, management believes that it provides investors with a useful alternative measure of liquidity by allowing an assessment of the
amount of cash available for general corporate and strategic purposes, including debt payments, after funding operating activities
and capital expenditures, capitalized software expenses and deferred costs. The above table reconciles free cash flow to cash
provided by operating activities, the nearest comparable GAAP measure.
- ------------------------------------------------------------------------------------------------------------------------------------
--------- --------- --------- --------- --------- --------- -------------------- -------------------- -------------------- --------------------
Return on Assets (ROA) and ROA ROIC ROA ROIC ROA ROIC ROA ROIC ROA ROIC
Return on Invested Capital (ROIC) --------- --------- --------- --------- --------- --------- -------------------- -------------------- -------------------- --------------------
(5) (5) (5) (5)
Numerator:
Income from operations 93,284 93,284 119,153 119,153 119,153 119,153 131,000 155,000 131,000 155,000 221,000 272,000 221,000 272,000
Add implied interest on
operating leases (1) 13,557 12,981 12,981 16,000 16,000 21,000 21,000
--------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
93,284 106,841 119,153 132,134 119,153 132,134 131,000 155,000 147,000 171,000 221,000 272,000 242,000 293,000
--------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Denominator:
Average total assets (2) 1,143,120 1,143,120 1,224,411 1,224,411 1,224,411 1,224,411 1,250,000 1,300,000 1,250,000 1,300,000 1,600,000 1,700,000 1,600,000 1,700,000
Less average cash (10,129) (13,339) (13,339) (5,000) (5,000) (100,000) (200,000)
Less average non-interest
bearing current liabilities (4) (166,175) (207,093) (207,093) (220,000) (230,000) (240,000) (240,000)
Plus average present value of
operating leases (1) 171,422 170,234 170,234 201,000 201,000 258,000 258,000
--------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
1,143,120 1,138,238 1,224,411 1,174,212 1,224,411 1,174,212 1,250,000 1,300,000 1,226,000 1,266,000 1,600,000 1,700,000 1,518,000 1,518,000
--------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Return on invested capital 8.2% 9.4% 9.7% 11.3% 9.7% 11.3% 10.5% to 11.9% 12.0% to 1 3.5% 13.8% to 16.0% 15.9% to 19.3%
========= ========= ========= ========= ========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Notes
-----
1 Average present value of operating leases is the average for the trailing 4 quarter ends of the present value of future
payments on operating leases, discounted at 8% which is the assumed implicit interest rate included in the leases. The
implied interest added to the numerator is the 8% assumed interest charge on the average quarterly balance [(beginning +
Ending) / 2] of the present value of the leases.
2 Average total assets is the average of the GAAP amount for the trailing 4 quarter ends.
3 Average cash is the average of the GAAP amount for the trailing 4 quarter ends.
4 Average non-interest bearing current liabilities is the average for the trailing 4 quarter ends of all current liabilities
excluding the current portion of long-term debt.
5 ROA and ROIC for Q2 and YTD of Fiscal 2005 are calculated on a trailing 4 quarters basis and are therefore the same.
Return on Invested Capital (ROIC) as defined by the Company, may not be comparable to similarly titled measures reported by other
companies. Management of the Company has included ROIC in this Financial Road Map because it measures the capital efficiency of our
business. ROIC does not consider whether the business is financed with debt or equity; rather ROIC calculates a return on all
capital invested in the business.
The above table reconciles ROIC to a ROA calculation using GAAP numbers. The Company uses ROIC in a number of ways, including
pricing analysis, capital expenditure evaluation, and merger and acquisition valuation.