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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 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 October 19, 2005, Acxiom Corporation (the "Company") issued a press release announcing the results of
its financial performance for the second quarter of fiscal year 2006. 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. Return on invested capital also excludes the impact of certain unusual charges recorded during
the quarter ended September 30, 2005. 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.
Adjusted U.S. operating margin and adjusted international operating margin are also non-GAAP measures
since they exclude unusual charges for the quarter ended September 30, 2005. These charges are excluded as
unusual because they were not considered or anticipated when management set the Financial Road Map targets for
fiscal 2006, and therefore management believes that it is appropriate to exclude these charges for purposes of
comparison to the Financial Road Map. Furthermore, management believes this information will be useful to
investors in assessing the Company's performance against the stated Road Map targets. A reconciliation of the
adjusted operating margin to operating margin is included as an attachment to the press release.
EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA is not
mentioned in the attached press release, but may be discussed during the conference call. EBITDA can be
calculated directly from the financial statements by adding pre-tax income plus interest expense from the
statement of operations plus depreciation and amortization from the cash flow statement. Management believes
EBITDA is a useful measure of liquidity which may be used by investors to assess the Company's ongoing operations
and liquidity.
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 October 19, 2005 announcing 2nd quarter earnings for FY 2006.
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 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 October 19, 2005 announcing 2nd quarter earnings for FY 2006.
For more information, contact:
Katharine Raymond
Investor Relations Coordinator
Acxiom Corporation
(501) 342-1321
EACXM
Acxiom Announces Second-Quarter Results
Revenue growth highlights Company performance
LITTLE ROCK, Ark.-- October 19, 2005-- Acxiom(R)Corporation (Nasdaq: ACXM) today announced financial results for the second quarter of
fiscal 2006 ended September 30, 2005. Revenue for the quarter was $330.5 million, income from operations was $18.8 million, pre-tax
earnings were $12.4 million, and diluted earnings per share (EPS) were $.08.
These results include the impact of net pre-tax charges of $15.8 million associated with the restructuring plan, the sale of
non-strategic operations and two unusual items explained below. The impact of these items on net earnings after tax was $10.4
million, which reduced diluted EPS by $.12 for the quarter. 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.
"During our second quarter, we saw 11 percent year-over-year revenue improvement, the expense-reduction initiative we announced in
June produced better than expected results, our business in Europe improved, and we signed a number of large, new deals," Company
Leader Charles D. Morgan said. "These results give us an encouraging outlook for the third and fourth quarters."
An overview of Acxiom's second-quarter performance includes:
o Revenue of $330.5 million, up 11 percent from $299.1 million in the second quarter a year ago. The net impact of
acquisitions and divestitures contributed 4 percentage points of this 11 percentage-point growth in revenue.
o Net unusual charges of $15.8 million, which include:
• A net $12.8 million in gains, losses and non-recurring items, which consist of:
Restructuring charges of $13.0 million
Losses on the sale of assets and operating units of $2.6 million
A gain of $2.8 million on the sale of an unused Phoenix facility.
• $2.2 million in legal, investment banking and other fees associated with representation of the Company related to activities
by ValueAct Capital
• $0.8 million in expenses related to a lawsuit resolved in the quarter.
o Income from operations of $18.8 million, which was reduced by the $15.8 million noted above, compared to $34.4 million in
the second quarter last year.
o Pre-tax earnings of $12.4 million, which was reduced by the $15.8 million noted above, compared to $29.8 million in the
second quarter a year ago.
o Diluted earnings per share of $.08, which was reduced by the $.12 EPS noted above, compared to $.20 in the second quarter
last year.
o Operating cash flow of $44.8 million and free cash flow of $20.9 million. The free cash flow of $20.9 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 The acquisition of Insight America, a Broomfield, Colo.-based company that provides data-driven solutions, analytic tools
and background screening services to help clients mitigate risks, prevent identity theft and limit fraud.
o The purchase of 3.5 million shares of common stock through the Company's buy-back program at a total cost of $69.1 million.
o New contracts that will deliver $49 million in annual revenue and renewals that total $17 million in annual revenue. The $49
million in new annual revenue equals the highest new contract annual revenue total for any quarter.
o Committed new deals in the pipeline that are expected to generate $61 million in annual revenue.
"Our profit improvement plan helped us achieve $11 million in pre-tax cost savings in the second quarter, and we will continue to
realize benefits from our operational initiatives, including ongoing expense management and an intense focus on performance metrics,"
Company Operations Leader Lee Hodges said. "We expect those initiatives to contribute more than $15 million in the third quarter and
in each subsequent quarter going forward."
Morgan noted that Acxiom recently completed new contracts with Washington Mutual Inc. (formerly Providian), NDCHealth Corporation,
MGM MIRAGE, Yellow Book USA and Reliance Insurance.
"The amount and nature of the new contracts we signed in the quarter certainly give us reason for optimism," Morgan said. "For
example, the NDCHealth deal is particularly significant, as it represents our third grid computing-based data center re-engineering
project."
Outlook
The Company's expectations for fiscal 2006 and beyond are communicated in the Financial Road Map, which is attached.
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 exclude the net unusual charges recorded in the
quarter ended September 30, 2005.
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 China.
For more information, visit www.acxiom.com.
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
with the exception of the impact of the net unusual charges recorded in the quarter ended September 30, 2005, the projected revenue,
operating margin, return on assets and return on invested capital, operating cash flow and free cash flow, borrowings, dividends and
other metrics referred to in the Financial Road Map attached to this release will be within the estimated ranges; that the
estimations of revenue, earnings, cash flow, growth rates, restructuring charges and expense reductions will be within the estimated
ranges; that the business pipeline and our anticipated cost structure will allow us to continue to meet or exceed revenue, cash flow
and other projections. The following are important factors, among others, that could cause actual results to differ materially from
these forward-looking statements: The possibility that we may incur expenses related to unsolicited proposals or other efforts by
others to acquire or control the Company; 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
of an economic slowdown 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 integration of acquired businesses may not be as
successful as planned; 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 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; and the possibility that we may be affected by other competitive factors.
With respect to the Financial Road Map, 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 acquisitions of companies operating
primarily outside of the United States 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 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 United States, 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,
------------------------------------------
2005 2004
------------------------------------------
Revenue:
Services 253,193 220,072
Data 77,330 79,037
--------------- ---------------
Total revenue 330,523 299,109
Operating costs and expenses:
Cost of revenue
Services 193,500 168,950
Data 52,124 49,768
--------------- ---------------
Total cost of revenue 245,624 218,718
Selling, general and administrative 53,285 46,020
Gains, losses and nonrecurring items, net 12,799 -
--------------- ---------------
Total operating costs and expenses 311,708 264,738
--------------- ---------------
Income from operations 18,815 34,371
--------------- ---------------
Other income (expense):
Interest expense (7,416) (4,743)
Other, net 1,050 205
--------------- ---------------
Total other income (expense) (6,366) (4,538)
--------------- ---------------
Earnings before income taxes 12,449 29,833
Income taxes 5,300 11,337
--------------- ---------------
Net earnings 7,149 18,496
=============== ===============
Earnings per share:
Basic 0.08 0.22
=============== ===============
Diluted 0.08 0.20
=============== ===============
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share)
For the Six Months Ended
September 30,
------------------------------------------
2005 2004
------------------------------------------
Revenue:
Services 491,692 427,919
Data 149,102 160,184
--------------- ---------------
Total revenue 640,794 588,103
Operating costs and expenses:
Cost of revenue
Services 389,469 332,499
Data 101,009 101,587
--------------- ---------------
Total cost of revenue 490,478 434,086
Selling, general and administrative 105,365 94,549
Gains, losses and nonrecurring items, net 11,162 (344)
--------------- ---------------
Total operating costs and expenses 607,005 528,291
--------------- ---------------
Income from operations 33,789 59,812
--------------- ---------------
Other income (expense):
Interest expense (12,578) (9,813)
Other, net 1,941 614
--------------- ---------------
Total other income (expense) (10,637) (9,199)
--------------- ---------------
Earnings before income taxes 23,152 50,613
Income taxes 9,364 19,233
--------------- ---------------
Net earnings 13,788 31,380
=============== ===============
Earnings per share:
Basic 0.15 0.36
=============== ===============
Diluted 0.15 0.34
=============== ===============
ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except earnings per share)
For the Three Months Ended
September 30,
-------------------------------------
2005 2004
-------------------------------------
Basic earnings per share:
Numerator - net earnings 7,149 18,496
Denominator - weighted-average shares outstanding 86,998 86,010
-------------- ---------------
Basic earnings per share 0.08 0.22
============== ===============
Diluted earnings per share:
Numerator:
Net earnings 7,149 18,496
Interest expense on convertible bonds (net of tax benefit) - 1,017
-------------- ---------------
7,149 19,513
-------------- ---------------
Denominator:
Weighted-average shares outstanding 86,998 86,010
Dilutive effect of common stock options and warrants 2,599 3,464
Dilutive effect of convertible debt - 9,589
-------------- ---------------
89,597 99,063
-------------- ---------------
Diluted earnings per share 0.08 0.20
============== ===============
ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except earnings per share)
For the Six Months Ended
September 30,
-------------------------------------
2005 2004
-------------------------------------
Basic earnings per share:
Numerator - net earnings 13,788 31,380
Denominator - weighted-average shares outstanding 89,021 86,047
-------------- ---------------
Basic earnings per share 0.15 0.36
============== ===============
Diluted earnings per share:
Numerator:
Net earnings 13,788 31,380
Interest expense on convertible bonds (net of tax benefit) - 2,034
-------------- ---------------
13,788 33,414
-------------- ---------------
Denominator:
Weighted-average shares outstanding 89,021 86,047
Dilutive effect of common stock options and warrants 2,676 3,709
Dilutive effect of convertible debt - 9,589
-------------- ---------------
91,697 99,345
-------------- ---------------
Diluted earnings per share 0.15 0.34
============== ===============
ACXIOM CORPORATION AND SUBSIDIARIES
REVENUES BY SEGMENT
(Unaudited)
(Dollars in thousands)
For the Three Months Ended
September 30,
--------------------------------------------------------------------
2005 2004
--------------------------------------------------------------------
US Services & Data 286,326 251,216
International Services & Data 44,197 47,893
------------------------------- --------------------------------
Total Revenue 330,523 299,109
=============================== ================================
US Supplemental Information:
Services & Data Excluding IT Mgmt 200,566 182,558
IT Management Services 85,760 68,658
------------------------------- --------------------------------
286,326 251,216
=============================== ================================
International Supplemental
Information:
Services & Data Excluding IT Mgmt 44,197 47,893
IT Management Services - -
------------------------------- --------------------------------
44,197 47,893
=============================== ================================
ACXIOM CORPORATION AND SUBSIDIARIES
REVENUES BY SEGMENT
(Unaudited)
(Dollars in thousands)
For the Six Months Ended
September 30,
--------------------------------------------------------------------
2005 2004
--------------------------------------------------------------------
US Services & Data 551,760 486,768
International Services & Data 89,034 101,335
------------------------------- --------------------------------
Total Revenue 640,794 588,103
=============================== ================================
US Supplemental Information:
Services & Data Excluding IT Mgmt 379,198 354,841
IT Management Services 172,562 131,927
------------------------------- --------------------------------
551,760 486,768
=============================== ================================
International Supplemental
Information:
Services & Data Excluding IT Mgmt 89,034 101,335
IT Management Services - -
------------------------------- --------------------------------
89,034 101,335
=============================== ================================
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
September 30, March 31,
2005 2005
----------------- -----------------
Assets
------
Current assets:
Cash and cash equivalents $ 5,962 $ 4,185
Trade accounts receivable, net 258,004 250,653
Deferred income taxes 31,766 31,415
Refundable income taxes - 1,345
Other current assets 42,048 46,034
----------------- -----------------
Total current assets 337,780 333,632
----------------- -----------------
Property and equipment 655,255 581,918
Less - accumulated depreciation and amortization 304,142 258,532
----------------- -----------------
Property and equipment, net 351,113 323,386
----------------- -----------------
Software, net of accumulated amortization 69,927 57,135
Goodwill 474,360 354,182
Purchased software licenses, net of accumulated amortization 161,321 157,999
Unbilled and notes receivable, excluding current portions 21,322 20,410
Deferred costs, net 99,035 88,851
Data acquisition costs 42,861 48,915
Other assets, net 25,431 15,369
----------------- -----------------
$ 1,583,150 $ 1,399,879
================= =================
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current installments of long-term obligations 87,623 83,005
Trade accounts payable 54,920 63,295
Accrued payroll and related expenses 24,979 27,435
Other accrued expenses 89,905 74,635
Deferred revenue 112,936 115,892
Income Taxes 1,025 -
----------------- -----------------
Total current liabilities 371,388 364,262
----------------- -----------------
Long-term obligations:
Long-term debt and capital leases, net of current installments 477,461 104,210
Software and data licenses, net of current installments 31,186 37,494
----------------- -----------------
Total long-term obligations 508,647 141,704
----------------- -----------------
Deferred income taxes 87,147 79,079
Commitments and contingencies
Stockholders' equity:
Common stock 10,554 10,440
Additional paid-in capital 617,752 588,156
Retained earnings 368,535 363,556
Accumulated other comprehensive loss 4,747 12,616
Treasury stock, at cost (385,620) (159,934)
----------------- -----------------
Total stockholders' equity 615,968 814,834
----------------- -----------------
$ 1,583,150 $ 1,399,879
================= =================
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
6/30/2002 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 Qtr ended Yr ended
6/30/2004 9/30/2004 12/31/2004 3/31/2005 3/31/2005
Net cash provided by operating activities 34,714 61,742 82,805 67,753 247,014
Capitalized software (4,107) (4,721) (5,706) (5,760) (20,294)
Capital expenditures (1,823) (4,813) (3,132) (4,562) (14,330)
Deferral of costs (9,610) (11,113) (15,502) (17,203) (53,428)
----------- ----------- ----------- ----------- -----------
Free cash flow 19,174 41,095 58,465 40,228 158,962
=========== =========== =========== =========== ===========
Qtr ended Qtr ended
6/30/2005 9/30/2005
Net cash provided by operating activities 61,476 44,785
Proceeds received from disposition of assets - 3,613
Capitalized software (5,673) (5,809)
Capital expenditures (2,929) (3,025)
Deferral of costs (16,192) (18,703)
----------- -----------
Free cash flow 36,682 20,861
=========== ===========
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Three Months Ended
September 30,
------------------------------------------------
2005 2004
------------------------------------------------
Cash flows from operating activities:
Net earnings 7,149 18,496
Non-cash operating activities:
Depreciation and amortization 57,104 45,102
Loss (gain) on disposal or impairment of assets, net (970) -
Deferred income taxes 4,380 10,699
Non-cash stock compensation expense 324 -
Changes in operating assets and liabilities:
Accounts receivable (22,583) (7,488)
Other assets 2,785 (7,434)
Accounts payable and other liabilities (3,404) 2,367
------------ ------------
Net cash provided by operating activities 44,785 61,742
------------ ------------
Cash flows from investing activities:
Disposition of operations 1,529 -
Sale of assets 3,613 -
Capitalized software (5,809) (4,721)
Capital expenditures (3,025) (4,813)
Deferral of costs (18,703) (11,113)
Payments received from investments 41 219
Net cash paid in acquisitions (34,807) (11,181)
------------ ------------
Net cash used by investing activities (57,161) (31,609)
------------ ------------
Cash flows from financing activities:
Proceeds from debt 109,583 59,203
Payments of debt (36,647) (75,049)
Dividends paid (4,377) (3,446)
Sale of common stock 8,024 4,354
Acquisition of treasury stock (69,081) (16,397)
------------ ------------
Net cash used by financing activities 7,502 (31,335)
------------ ------------
Effect of exchange rate changes on cash (53) 128
------------ ------------
Net decrease in cash and cash equivalents (4,927) (1,074)
Cash and cash equivalents at beginning of period 10,889 11,214
------------ ------------
Cash and cash equivalents at end of period 5,962 10,140
============ ============
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest 6,076 6,554
Income taxes 282 8
Payments on capital leases and installment payment arrangements 15,967 13,374
Payments on software and data license liabilities 5,328 3,151
Noncash investing and financing activities:
Enterprise software licenses acquired under software obligation 6,219 3,282
Acquisition of property and equipment under capital lease
and installment payment arrangements 29,115 18,572
Construction of assets under construction loan 3,144 6,323
============ ============
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Six Months Ended
September 30,
----------------------------------------------
2005 2004
----------------------------------------------
Cash flows from operating activities:
Net earnings 13,788 31,380
Non-cash operating activities:
Depreciation and amortization 112,638 89,099
Loss (gain) on disposal or impairment of assets, net (927) -
Deferred income taxes 8,015 19,548
Non-cash stock compensation expense 622 -
Changes in operating assets and liabilities:
Accounts receivable (5,286) (26,149)
Other assets (15,160) (8,446)
Accounts payable and other liabilities (7,429) (8,976)
------------ ------------
Net cash provided by operating activities 106,261 96,456
------------ ------------
Cash flows from investing activities:
Disposition of operations 1,529 -
Sale of assets 3,613 -
Capitalized software (11,482) (8,828)
Capital expenditures (5,954) (6,636)
Deferral of costs (34,895) (20,723)
Payments received from investments 762 503
Net cash paid in acquisitions (141,526) (16,741)
------------ ------------
Net cash used by investing activities (187,953) (52,425)
------------ ------------
Cash flows from financing activities:
Proceeds from debt 391,289 98,129
Payments of debt (90,777) (135,609)
Dividends paid (8,809) (6,895)
Sale of common stock 21,551 23,671
Acquisition of treasury stock (229,435) (27,368)
------------ ------------
Net cash used by financing activities 83,819 (48,072)
------------ ------------
Effect of exchange rate changes on cash (350) (174)
------------ ------------
Net decrease in cash and cash equivalents 1,777 (4,215)
Cash and cash equivalents at beginning of period 4,185 14,355
------------ ------------
Cash and cash equivalents at end of period 5,962 10,140
============ ============
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest 10,473 9,888
Income taxes 472 108
Payments on capital leases and installment payment arrangements 35,896 26,633
Payments on software and data license liabilities 16,266 14,847
Noncash investing and financing activities:
Enterprise software licenses acquired under software obligation 8,380 5,967
Acquisition of property and equipment under capital lease
and installment payment arrangements 55,573 39,070
Construction of assets under construction loan 6,798 13,111
============ ============
ACXIOM CORPORATION
Financial Road Map1
(as of September 30, 2005)
------------- ----------------- -------------------- ---------------- -------------------------
Actual Actual Actual Target Long-Term Goals
Years Ending March 31, Fiscal 2005 Q2 Fiscal 2006 YTD Fiscal 2006 Fiscal 2006 Fiscal 2009
------------- ----------------- -------------------- ---------------- -------------------------
U.S. Revenue Growth 9.0% 14.0% 13.4% 13% to 15% 7% to 10% (CAGR)
U.S. Revenue $1,011 million $286 million $552 million $1,140 to $1,160 mil -
International Revenue Growth 152.9% -7.7% -12.1% -10% to -20% 5% to 8% (CAGR)
International Revenue $213 million $44 million $89 million $170 to $190 mil -
U.S. Operating Margin 11.3% 9.3% 7.8% 11.5% to 12.5% 15% to 18%
Adjusted U.S. Operating Margin 12.4% 3 9.4% 3
International Operating Margin 3.9% -17.4% -10.3% 4.5% to 6.5% 12% to 15%
Adjusted International Operating Margin -2.3% 3 -2.8% 3
Return on Assets 2 9.2% 6.6% 6.6% 9% to 10% 10% to 14%
Return on Invested Capital 2 11.0% 9.4% 3 9.4% 3 11% to 12% 13% to 18%
Operating Cash Flow $247 million $45 million $106 million $250 to $270 mil $270 to $300 mil
Free Cash Flow $159 million $21 million $58 million $160 to $180 mil $170 to $200 mil
Revolving Credit Line Balance $11 million $367 million $367 million $200 to $375 mil < $300 mil
Dividends Per Share $0.17 $0.05 $0.05 $0.20 $0.24 to $0.28
- ----------------------
1 Assumptions and definitions are defined on the following schedule: "Financial Road Map assumptions and definitions"
2 ROA and ROIC are calculated on a trailing 4 quarters basis.
3 Results exclude unusual charges of $9.1 million for U.S. and $6.7 million for International in the quarter ended September 30, 2005. These charges are excluded when
calculating performance compared to the Road Map since they were not considered in settting the Road Map target. All other time periods are as reported for GAAP.
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 are assumed to increase slightly over the current levels.
3. Excluding acquired NOLs, the Company expects to utilize all of its federal tax loss carry forwards during fiscal 2006. Excluding acquired credits, the Company expects
to utilize all of its federal credits and begin paying regular tax in fiscal 2007. The Company expects to gradually begin paying state taxes as state NOLs are utilized.
4. The Company will pay incentives under its bonus plan of approximately $5 million for fiscal 2006 and $15 to $25 million for each of the years beginning in fiscal 2007
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.
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 2005 Q2 Fiscal 2006 YTD Fiscal 2006 Fiscal 2006 Fiscal 2009
----------- ------------ ------------- ----------------- --------------------------
U.S. Operating Margin
U.S. Revenue 1,010,513 286,326 551,760
U.S. Operating Income 113,992 26,498 42,939
U.S. Operating Income Margin 11.3% 9.3% 7.8%
Gains, losses and nonrecurring items, net 0 6,147 6,147
ValueAct Defense 0 2,216 2,216
Lawsuit Expenses 0 761 761
----------- ------------ ------------
Adjusted U.S. Operating Income (6) 113,992 35,622 52,063
Adjusted U.S. Operating Income Margin (6) 11.3% 12.4% 9.4%
----------- ------------ ------------
International Operating Margin
International Revenue 212,529 44,197 89,034
International Operating Income 8,200 (7,684) (9,151)
International Operating Income Margin 3.9% -17.4% -10.3%
Gains, losses and nonrecurring items, net 0 6,652 6,652
---------- ------------ ------------
Adjusted International Operating Income (6) 8,200 (1,032) (2,499)
Adjusted International Operating Income Margin (6) 3.9% -2.3% -2.8%
---------- ------------ ------------
Free Cash Flow
Net cash provided by operating activities 247,014 44,785 106,261 250,000 270,000 270,000 300,000
Proceeds received from disposition of assets 0 3,613 3,613 0 0 0 0
Capitalized software (20,294) (5,809) (11,482) (20,000) (20,000) (25,000) (25,000)
Capital expenditures (14,330) (3,025) (5,954) (15,000) (15,000) (20,000) (20,000)
Deferral of costs (53,428) (18,703) (34,895) (55,000) (55,000) (55,000) (55,000)
----------- ------------ ------------- ----------------------- -------------------------
Free cash flow 158,962 20,861 57,543 160,000 to 180,000 170,000 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)5 ROA ROIC ROA ROIC ROA ROIC ROA ROIC ROA ROIC
---------- ---------- ---------- --------- ---------- ---------- -------------------- -------------------- ------------------- -----------------------
Numerator:
Income from operations 122,192 122,192 96,169 96,169 96,169 96,169 141,000 160,000 141,000 160,000 191,000 272,000 191,000 272,000
Unusual Charges, Net (6) 0 15,776 0 15,776
Add implied interest on operating
leases (1) 13,903 12,513 12,513 14,200 14,200 19,000 19,000
---------- ---------- ---------- --------- ---------- ---------- --------- ---------- ---------- ---------- ---------- --------- ---------- -----------
122,192 136,095 96,169 124,457 96,169 124,457 141,000 160,000 155,200 174,200 191,000 272,000 210,000 291,000
---------- ---------- --------- ---------- ---------- ---------- --------- ---------- ---------- ---------- ---------- --------- --------- ------------
Denominator:
Average total assets (2) 1,321,122 1,321,122 1,463,339 1,463,339 1,463,339 1,463,339 1,542,000 1,552,000 1,542,000 1,552,000 1,840,000 1,938,000 1,840,000 1,938,000
Less average cash (3) (11,858) (10,733) (10,733) (6,300) (12,700) (214,800) (285,100)
Less average non-interest bearing
current liabilities (4) (246,280) (276,286) (276,286) (280,000) (280,200) (290,000) (291,500)
Plus average present value of
operating leases 168,734 151,919 151,919 180,000 179,500 237,000 237,000
----------- ---------- --------- ---------- ----------- ---------- --------- --------- ----------- --------- ----------- --------- ---------- -----------
1,321,122 1,231,717 1,463,339 1,328,239 1,463,339 1,328,239 1,542,000 1,552,000 1,435,700 1,438,600 1,840,000 1,938,000 1,572,200 1,598,400
----------- ---------- --------- ---------- ----------- ---------- --------- --------- ----------- --------- ----------- --------- ---------- -----------
Return on invested capital 9.2% 11.0% 6.6% 9.4% 6.6% 9.4% 9% to 10% 11% to 12% 10% to 14% 13% to 18%
----------- ---------- --------- ---------- ----------- ---------- --------- --------- ----------- --------- ----------- --------- ---------- -----------
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 figures are calculated on a trailing 4 quarters basis.
6 Results exclude unusual charges of $9.1 million for U.S. and $6.7 million for International in the quarter ended September 30, 2005. These charges are excluded when calculating performance
compared to the Road Map since they were not considered in settting the Road Map target. All other time periods are as reported for GAAP.
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.
ACXIOM CORPORATION AND SUBSIDIARIES
SUMMARIZED SUPPLEMENTAL CASH FLOW INFORMATION
(Unaudited)
(Dollars in thousands)
Quarters ended
------------- -------------- ------------- ------------- Last 12
12/31/04 03/31/05 06/30/05 09/30/05 Months
------------- -------------- ------------- ------------- --------------
Free cash flow 58,465 40,228 36,682 20,861 156,236
Payments received from investments 1,795 235 721 41 2,792
Change in revolver (22,440) 10,921 259,800 96,665 344,946
Other debt proceeds 0 4,175 0 0 4,175
Sale of common stock 14,537 5,776 13,527 8,024 41,864
Acquisition of treasury stock (2,840) (33,551) (160,354) (69,081) (265,826)
Dividends paid (3,464) (4,290) (4,432) (4,377) (16,563)
Debt payments (excluding payments on line of credit) (28,072) (22,316) (32,224) (23,729) (106,341)
Proceeds from the disposition of operations - - - 1,529 1,529
Net cash paid in acquisitions (6,847) (18,612) (106,719) (34,807) (166,985)
Effect of exchange rate changes on cash 620 (275) (297) (53) (5)
------------- -------------- ------------- ------------- --------------
Net change in cash 11,754 (17,709) 6,704 (4,927) (4,178)
============= ============== ============= ============= ==============
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