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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): January 19, 2005
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))
Item 2.02 Results of Operations and Financial Condition
On January 19, 2005, Acxiom Corporation (the "Company") issued a press release announcing the results of its financial
performance for the third 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.
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 January 19, 2005.
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: January 19, 2005
ACXIOM CORPORATION
By: /s/ Jerry C. Jones
------------------------------
Name: Jerry C. Jones
Title: Business Development/Legal Leader
EXHIBIT INDEX
Exhibit
Number Description
- ----------- ---------------------------------------------------------------------------------------------------------
99.1 Press Release of the Company dated January 19, 2005
EXHIBIT 99.1
For more information, contact:
Robert S. Bloom
Financial Relations Leader
Acxiom Corporation
(501) 342-1321
EACXM
Acxiom® Announces Third-Quarter Results
Highlights include strong international results, strong cash flow and new business
LITTLE ROCK, Ark. - January 19, 2005 - Acxiom® Corporation (Nasdaq: ACXM) today announced financial results for the third
quarter of fiscal 2005 ended December 31, 2004. Financial results for the quarter include revenue of $312.4 million, income from
operations of $39.4 million, diluted earnings per share of $.24, operating cash flow of $82.8 million and free cash flow of $58.5
million. Acxiom will hold a conference call at 4:30 p.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.
"Our third quarter results keep us on track to achieve the fiscal-year targets we've communicated in our Financial Road Map,"
Company Leader Charles D. Morgan said. "There were several highlights in the quarter, including a much-improved 10.6 percent
operating margin in our international business, several significant new contracts won and existing contracts renewed and another
strong cash flow performance."
Highlights of Acxiom's third-quarter performance include:
–Revenue of $312.4 million, up 22 percent from $255.2 million in the third quarter a year ago. Acquisitions contributed 15
percentage points of this 22 percentage-point growth in revenue.
–Income from operations of $39.4 million, an increase of 6 percent compared to $37.3 million in the third quarter last year.
–Pre-tax earnings of $34.6 million, an increase of 7 percent compared to $32.2 million in the third quarter a year ago.
–Diluted earnings per share of $.24, up 9 percent from $.22 the year before.
–Operating cash flow of $82.8 million and free cash flow of $58.5 million. The free cash flow of $58.5 million is a non-GAAP
financial measure, and a reconciliation to the comparable GAAP measure, operating cash flow, is attached to this press
release.
–New contracts that are expected to deliver $36 million in annual revenue and renewals that total $45 million in annual
revenue.
–Committed new deals in the pipeline that are expected to generate $84 million in annual revenue.
–The acquisition of ChinaLOOP, a pioneering business intelligence, customer relationship management and data management
company based in Shanghai, China.
In early January, Acxiom also acquired SmartDM, a full-service direct marketing firm based in Nashville, Tenn., that offers
comprehensive direct marketing services and information management for mid-sized companies.
Morgan noted that "Acxiom recently completed contracts with TransUnion, Providian Financial Corporation, GE Capital Corporation,
Lands' End, ALLTEL, Sak's Incorporated, The Home Depot, Inc., and Bernard C. Harris Publishing Co., Inc. We've also had some
success with our Accenture partnership. Recently we've added three new clients related to this partnership - two in
telecommunications and one government agency. And at TransUnion we have implemented the first grid-based solution housed at a
client site."
"We again had a very encouraging quarter in new business won and renewals completed," Morgan continued. "They represent several
substantial deals with important new and existing clients. Business activity in our pipeline remains strong, and we are confident
our new-business outlook is good."
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 Road Map has been updated based on current expectations for fiscal years 2005 and 2006, and the long-term goals have
been updated to reflect the expectation for fiscal year 2009. For the fiscal year ending March 31, 2006, the Company estimates
that U.S. revenue will grow 7 percent to 11 percent, the U.S. operating margins will be 12.5 percent to 13.5 percent, international
revenue will grow 7 percent to 11 percent and international margin will be 8 percent to 11 percent.
The financial projections stated today are based on the Company's current expectations and the assumptions and limitations set
forth in the Financial Road Map. 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. Expensing of employee stock
options will be required beginning July 1, 2005, and the Company is currently evaluating the new accounting standard to determine
the potential impact on the Company's financial statements.
About Acxiom Corporation
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, Australia, China and Japan.
For more information, visit www.acxiom.com.
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
December 31,
------------------------------------------------------------------------
2004 2003
------------------------------------------------------------------------
Revenue:
Services 225,811 196,407
Data 86,594 58,800
--------------------------------- ----------------------------------
Total revenue 312,405 255,207
Operating costs and expenses:
Cost of revenue
Services 174,960 157,058
Data 52,199 36,714
--------------------------------- ----------------------------------
Total cost of revenue 227,159 193,772
Selling, general and administrative 46,461 27,100
Gains, losses and nonrecurring items, net (640) (3,000)
--------------------------------- ----------------------------------
Total operating costs and expenses 272,980 217,872
--------------------------------- ----------------------------------
Income from operations 39,425 37,335
--------------------------------- ----------------------------------
Other income (expense):
Interest expense (5,076) (4,702)
Other, net 210 (456)
--------------------------------- ----------------------------------
Total other income (expense) (4,866) (5,158)
--------------------------------- ----------------------------------
Earnings before income taxes 34,559 32,177
Income taxes 11,079 12,233
--------------------------------- ----------------------------------
Net earnings 23,480 19,944
================================= ==================================
Earnings per share:
Basic 0.27 0.23
================================= ==================================
Diluted 0.24 0.22
================================= ==================================
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share)
For the Nine Months Ended
December 31,
------------------------------------------------------------------------
2004 2003
------------------------------------------------------------------------
Revenue:
Services 653,730 579,019
Data 246,778 153,966
--------------------------------- ----------------------------------
Total revenue 900,508 732,985
Operating costs and expenses:
Cost of revenue
Services 507,459 470,242
Data 153,786 107,907
--------------------------------- ----------------------------------
Total cost of revenue 661,245 578,149
Selling, general and administrative 141,010 87,559
Gains, losses and nonrecurring items, net (984) (4,008)
--------------------------------- ----------------------------------
Total operating costs and expenses 801,271 661,700
--------------------------------- ----------------------------------
Income from operations 99,237 71,285
--------------------------------- ----------------------------------
Other income (expense):
Interest expense (14,889) (14,356)
Other, net 824 430
--------------------------------- ----------------------------------
Total other income (expense) (14,065) (13,926)
--------------------------------- ----------------------------------
Earnings before income taxes 85,172 57,359
Income taxes 30,312 14,935
--------------------------------- ----------------------------------
Net earnings 54,860 42,424
================================= ==================================
Earnings per share:
Basic 0.64 0.50
================================= ==================================
Diluted 0.58 0.47
================================= ==================================
ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except earnings per share)
For the Three Months Ended
December 31,
-------------------------------------
2004 2003
-------------------------------------
Basic earnings per share:
Numerator - net earnings 23,480 19,944
Denominator - weighted-average shares outstanding 86,468 84,926
-------------- ---------------
Basic earnings per share 0.27 0.23
============== ===============
Diluted earnings per share:
Numerator:
Net earnings 23,480 19,944
Interest expense on convertible bonds (net of tax benefit) 1,017 1,026
-------------- ---------------
24,497 20,970
-------------- ---------------
Denominator:
Weighted-average shares outstanding 86,468 84,926
Dilutive effect of common stock options and warrants 4,191 2,082
Dilutive effect of convertible debt 9,589 9,589
-------------- ---------------
100,248 96,597
-------------- ---------------
Diluted earnings per share 0.24 0.22
============== ===============
ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except earnings per share)
For the Nine Months Ended
December 31,
-------------------------------------
2004 2003
-------------------------------------
Basic earnings per share:
Numerator - net earnings 54,860 42,424
Denominator - weighted-average shares outstanding 86,187 85,535
-------------- ---------------
Basic earnings per share 0.64 0.50
============== ===============
Diluted earnings per share:
Numerator:
Net earnings 54,860 42,424
Interest expense on convertible bonds (net of tax benefit) 3,051 3,076
-------------- ---------------
57,911 45,500
-------------- ---------------
Denominator:
Weighted-average shares outstanding 86,187 85,535
Dilutive effect of common stock options and warrants 3,870 1,874
Dilutive effect of convertible debt 9,589 9,589
-------------- ---------------
99,646 96,998
-------------- ---------------
Diluted earnings per share 0.58 0.47
============== ===============
ACXIOM CORPORATION AND SUBSIDIARIES
REVENUES BY SEGMENT
(Unaudited)
(Dollars in thousands)
For the Three Months Ended
December 31,
-----------------------------------------------------------------------
2004 2003
-----------------------------------------------------------------------
US Services & Data 182,606 176,151
International Services & Data 58,507 15,547
IT Management 75,268 66,323
Intercompany eliminations (3,976) (2,814)
---------------------------------- --------------------------------
Total Revenue 312,405 255,207
================================== ================================
For the Nine Months Ended
December 31,
-----------------------------------------------------------------------
2004 2003
-----------------------------------------------------------------------
US Services & Data 544,927 507,292
International Services & Data 159,842 44,167
IT Management 208,610 189,235
Intercompany eliminations (12,871) (7,709)
---------------------------------- --------------------------------
Total Revenue 900,508 732,985
================================== ================================
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
December 31, March 31,
2004 2004
----------------- -----------------
Assets
Current assets:
Cash and cash equivalents $ 21,894 $ 14,355
Trade accounts receivable, net 232,815 212,387
Deferred income taxes 14,316 14,032
Refundable income taxes 1,444 2,280
Other current assets 44,939 43,272
----------------- -----------------
Total current assets 315,408 286,326
----------------- -----------------
Property and equipment 552,359 521,064
Less - accumulated depreciation and amortization 243,530 253,976
----------------- -----------------
Property and equipment, net 308,829 267,088
----------------- -----------------
Software, net of accumulated amortization 58,010 64,553
Goodwill 339,986 282,971
Purchased software licenses, net of accumulated amortization 154,192 157,217
Unbilled and notes receivable, excluding current portions 18,864 13,030
Deferred costs, net 89,311 88,096
Data acquisition costs 48,681 36,557
Other assets, net 13,012 19,946
----------------- -----------------
$ 1,346,293 $ 1,215,784
================= =================
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term obligations 84,808 73,245
Trade accounts payable 48,116 41,527
Accrued merger, integration and impairment costs - 2,881
Accrued payroll and related expenses 25,948 23,979
Other accrued expenses 78,723 63,411
Deferred revenue 94,084 91,060
----------------- -----------------
Total current liabilities 331,679 296,103
----------------- -----------------
Long-term obligations:
Long-term debt and capital leases, net of current installments 251,391 239,327
Software and data licenses, net of current installments 40,848 54,130
----------------- -----------------
Total long-term obligations 292,239 293,457
----------------- -----------------
Deferred income taxes 71,025 39,008
Commitments and contingencies
Stockholders' equity:
Common stock 9,446 9,226
Additional paid-in capital 398,687 361,256
Retained earnings 352,988 308,487
Accumulated other comprehensive loss 14,525 2,940
Treasury stock, at cost (124,296) (94,693)
----------------- -----------------
Total stockholders' equity 651,350 587,216
----------------- -----------------
$ 1,346,293 $ 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 Qtr ended
6/30/2004 9/30/2004 12/31/2004
Net cash provided by operating activities 34,714 61,742 82,805
Capitalized software (4,107) (4,721) (5,706)
Capital expenditures (1,823) (4,813) (3,132)
Deferral of costs (9,610) (11,113) (15,502)
---------- ---------- -----------
Free cash flow 19,174 41,095 58,465
========== ========== ===========
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Three Months Ended
December 31,
------------------------------------------------
2004 2003
------------------------------------------------
Cash flows from operating activities:
Net earnings 23,480 19,944
Non-cash operating activities:
Depreciation and amortization 50,817 36,709
Loss on disposal or impairment of assets, net (50) -
Deferred income taxes 11,385 23,418
Changes in operating assets and liabilities:
Accounts receivable 3,403 (7,197)
Other assets 5,915 3,168
Accounts payable and other liabilities (12,145) 3,270
Merger, integration and impairment costs - (30)
------------------- -----------------------
Net cash provided by operating activities 82,805 79,282
------------------- -----------------------
Cash flows from investing activities:
Proceeds received from the disposition of assets - 39
Capitalized software (5,706) (6,510)
Capital expenditures (3,132) (7,637)
Deferral of costs (15,502) (5,312)
Payments received from investments 1,795 159
Net cash paid in acquisitions (6,847) -
------------------- -----------------------
Net cash used by investing activities (29,392) (19,261)
------------------- -----------------------
Cash flows from financing activities:
Proceeds from debt 31,663 18,516
Payments of debt (82,175) (67,592)
Dividends paid (3,464) -
Sale of common stock 14,537 4,275
Acquisition of treasury stock (2,840) (1,350)
------------------- -----------------------
Net cash used by financing activities (42,279) (46,151)
------------------- -----------------------
Effect of exchange rate changes on cash 620 129
------------------- -----------------------
Net decrease in cash and cash equivalents 11,754 13,999
Cash and cash equivalents at beginning of period 10,140 3,649
------------------- -----------------------
Cash and cash equivalents at end of period 21,894 17,648
------------------- -----------------------
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest 3,521 3,195
Income taxes 583 570
Noncash investing and financing activities:
Issuance of warrants in acquisition 1,833 -
Enterprise software licenses acquired under long-term obligation 6,715 1,923
Acquisition of property and equipment under capital lease
and installment payment arrangements 27,289 28,861
Construction of assets under construction loan 4,868 4,244
------------------- -----------------------
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Nine Months Ended
December 31,
------------------------------------------------
2004 2003
------------------------------------------------
Cash flows from operating activities:
Net earnings 54,860 42,424
Non-cash operating activities:
Depreciation and amortization 139,916 107,745
Loss on disposal or impairment of assets, net (50) (1,008)
Deferred income taxes 30,933 16,676
Changes in operating assets and liabilities:
Accounts receivable (22,746) (2,387)
Other assets (2,531) 11,995
Accounts payable and other liabilities (18,430) 2,455
Merger, integration and impairment costs (2,691) (584)
------------------- -----------------------
Net cash provided by operating activities 179,261 177,316
------------------- -----------------------
Cash flows from investing activities:
Proceeds received from the disposition of operations - 7,684
Proceeds received from the disposition of assets - 737
Capitalized software (14,534) (20,141)
Capital expenditures (9,768) (12,261)
Investments in joint ventures and other companies - (5,000)
Deferral of costs (36,225) (15,344)
Payments received from investments 2,298 1,519
Net cash paid in acquisitions (23,588) -
------------------- -----------------------
Net cash used by investing activities (81,817) (42,806)
------------------- -----------------------
Cash flows from financing activities:
Proceeds from debt 129,792 100,989
Payments of debt (217,784) (178,480)
Dividends paid (10,359) -
Sale of common stock 38,208 10,984
Acquisition of treasury stock (30,208) (56,047)
------------------- -----------------------
Net cash used by financing activities (90,351) (122,554)
------------------- -----------------------
Effect of exchange rate changes on cash 446 201
------------------- -----------------------
Net decrease in cash and cash equivalents 7,539 12,157
Cash and cash equivalents at beginning of period 14,355 5,491
------------------- -----------------------
Cash and cash equivalents at end of period 21,894 17,648
------------------- -----------------------
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest 13,409 13,497
Income taxes 1,080 (986)
Noncash investing and financing activities:
Issuance of warrants in acquisition 1,833 -
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 12,682 11,135
Acquisition of property and equipment under capital lease
and installment payment arrangements 66,359 60,195
Construction of assets under construction loan 17,979 6,854
------------------- -----------------------
ACXIOM CORPORATION
Financial Road Map 1
(as of Dec 31, 2004)
--------------- ---------------- ----------------- ------------------------ --------------------------- -----------------------
Actual 2 Actual Actual Target Target Long-Term Goals
Years Ending March 31, Fiscal 2004 Q3 Fiscal 2005 YTD Fiscal 2005 Fiscal 2005 Fiscal 2006 Fiscal 2009
--------------- ---------------- ----------------- ------------------------ --------------------------- ------------------------
U.S. Revenue Growth 2.7% 5.9% 7.5% 7% to 9% 7% to 11% 7% to 10% (CAGR)
U.S. Revenue $926 million $254 million $741 million $991 to $1,010 million $1,075 to $1,110 million -
International Revenue Growth 51.3% 276.3% 261.9% - 7% to 11% 10% to 15% (CAGR)
International Revenue $85 million $59 million $160 million $215 to $225 million $235 to $245 million -
U.S. Operating Margin 9.8% 13.1% 12.2% 12% to 12.5% 12.5% to 13.5% 15% to 18%
International Operating Margin 3.1% 10.6% 5.4% 5% to 7% 8% to 11% 15% to 18%
Return on Assets 8.2% 9.5% 3 9.5% 3 10% to 11% 11% to 13% 14% to 16%
Return on Invested Capital 9.4% 11.1% 3 11.1% 3 12% to 13% 13% to 15% 16% to 19%
Operating Cash Flow $260 million $83 million $179 million $240 to $260 million $260 to $290 million $270 to $300 million
Free Cash Flow $188 million $58 million $119 million $160 to $180 million $170 to $200 million $170 to $200 million
Revolving Credit Line Balance $16 million $0 million $0 million Less than $150 million Less than $150 million Less than $200 million
Dividends Per Share $0.04 4 $0.04 $0.12 $0.16 $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 Q3 & YTD of Fiscal 2005 are calculated on a trailing 4 quarters basis. Results for the trailing 4 quarters
ending Q3 of Fiscal 2005 include $4.3 million of restructuring charges, $3.7 million of asset impairment charges,
partially offset by $1.4 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. Interest rates will remain at approximately the current levels.
3. The Company will utilize all of its tax loss carry forwards and begin to pay U.S. federal and state income taxes during
FY07.
4. The Company will pay incentives under its bonus plan of approximately $15 million to $25 million for each of the years
beginning in fiscal 2006 based on achievement of the Company's business plan.
5. The Company will maintain a relatively constant mix of business for each of its three business segments.
6. Foreign exchange rates will remain at approximately the current levels.
7. Stock repurchases will be in amounts that yield the highest shareholder return considering all other uses for the available
cash.
8. Diluted outstanding shares will increase slightly to reflect the impact of in-the-money options as the stock price
increases.
9. 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.
10. The effect of expensing employee stock options, which will be required beginning July 1, 2005, is not included in the
Financial Roadmap. The Company is currently evaluating the potential impact on the Company's financial statements.
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 Target Long-Term Goals
Years Ending March 31, Fiscal 2004 Q2 Fiscal 2005 YTD Fiscal 2005 Fiscal 2005 Fiscal 2006 Fiscal 2009
----------- -------------- --------------- --------------------------- ------------------------- --------------------------------
Free Cash Flow
Net cash provided by operating activities 259,883 82,805 179,261 240,000 260,000 260,000 290,000 270,000 300,000
Proceeds received from disposition of assets 2,783 0 0 0 0 0 0 0 0
Capitalized software (27,844) (5,706) (14,534) (20,000) (20,000) (20,000) (20,000) (20,000) (20,000)
Capital expenditures (22,178) (3,132) (9,768) (15,000) (15,000) (25,000) (25,000) (25,000) (25,000)
Deferral of costs (24,881) (15,502) (36,225) (45,000) (45,000) (45,000) (45,000) (55,000) (55,000)
----------- -------------- ---------------- ----------- ----------- ----------- ----------- ----------- ----------
Free cash flow 187,763 58,465 118,734 160,000 to 180,000 170,000 to 200,000 170,000 to 200,000
=========== ============== ================ =========== =========== =========== =========== =========== ==========
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 ------------------- ------------------- ------------------- ----------------- ----------------- ----------------- --------------------------------------- --------------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- -----------------------------------
Return on Invested Capital (ROIC) ROA ROIC ROA ROIC ROA ROIC ROA ROIC ROA ROIC ROA ROIC
------------------- ------------------- ------------------- ----------------- ----------------- ----------------- --------------------------------------- --------------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- -----------------------------------
(5) (5) (5) (5)
Numerator:
Income from operations 93,284 93,284 121,237 121,237 121,237 121,237 125,000 142,000 125,000 142,000 150,000 175,000 150,000 175,000 230,000 310,000 230,000 310,000
Add implied interest on operating leases (1) 13,557 13,243 13,243 15,000 15,000 15,500 15,500 20,000 20,000
------------------- ------------------- ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ---------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
93,284 106,841 121,237 134,480 121,237 134,480 125,000 142,000 140,000 157,000 150,000 175,000 165,500 190,500 230,000 310,000 250,000 330,000
------------------- ------------------- ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ---------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Denominator:
Average total assets (2) 1,143,120 1,143,120 1,275,529 1,275,529 1,275,529 1,275,529 1,280,000 1,300,000 1,280,000 1,300,000 1,350,000 1,400,000 1,350,000 1,400,000 1,700,000 1,900,000 1,700,000 1,900,000
Less average cash (3) (10,129) (14,401) (14,401) (10,000) (30,000) (50,000) (120,000) (100,000) (140,000)
Less average non-interest bearing current liabilities (4) (166,175) (231,681) (231,681) (230,000) (240,000) (240,000) (250,000) (240,000) (250,000)
Plus average present value of operating leases (1) 171,422 177,024 177,024 175,000 180,000 190,000 200,000 240,000 250,000
------------------- ------------------- ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ---------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
1,143,120 1,138,238 1,275,529 1,206,472 1,275,529 1,206,472 1,280,000 1,300,000 1,215,000 1,210,000 1,350,000 1,400,000 1,250,000 1,230,000 1,700,000 1,900,000 1,600,000 1,760,000
------------------- ------------------- ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ---------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Return on invested capital 8.2% 9.4% 9.5% 11.1% 9.5% 11.1% 10% to 11% 12% to 13% 11% to 13% 13% to 15% 14% to 16% 16% to 19%
=================== =================== =================== ================= ================= ================= ================= ================= ================= ================ =============== =============== =============== =============== =============== =============== =============== ===============
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 quarterly and YTD figures 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.