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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 25, 2006
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 25, 2006, Acxiom Corporation (the "Company") issued a press release announcing the results of its financial
performance for the third quarter of fiscal year 2006. The Company 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. 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 non-GAAP 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
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 financial 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. A reconciliation of return on invested capital to return on assets is included as an attachment to the press release.
Adjusted U.S. operating margin, adjusted international operating margin, and adjusted return on assets 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 and a reconciliation of adjusted return on assets to
return on assets are included in 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 January 25, 2006 announcing third quarter earnings for fiscal year
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: January 25, 2006
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 25, 2006 announcing third quarter earnings for fiscal year
2006.
[ACXIOM LOGO]
For more information, contact:
Katharine Raymond
Investor Relations Coordinator
Acxiom Corporation
(501) 342-1321
Dale Ingram
Public Relations Leader
Acxiom Corporation
(501) 342-4346
EACXM
Acxiom Announces Third-Quarter Results
Company Generates Record Revenue, Earnings, Cash Flow
LITTLE ROCK, Ark.-- January 25, 2006-- Acxiom® Corporation (Nasdaq: ACXM) today announced financial results for
the third quarter of fiscal 2006 ended December 31, 2005. Revenue for the quarter was $347.4 million, income from
operations was $52.7 million, pre-tax earnings were $44.0 million, and diluted earnings per share (EPS) were
$0.31. All represent record quarterly performances in the Company's history.
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 are very encouraging and demonstrate the continuing improvement in our financial
performance," Company Leader Charles D. Morgan said. "Combined with the recent announcement of our strategic
partnership with EMC Corporation and the outlook for the fourth quarter and fiscal 2007, our performance in the
third quarter is clear evidence of the growing momentum at Acxiom."
Highlights of Acxiom's third-quarter performance include:
o Revenue of $347.4 million, up 11 percent from $312.4 million in the third quarter a year ago. The net
impact of acquisitions and divestitures contributed 5 percentage points of this 11 percentage-point
growth in revenue.
o Income from operations of $52.7 million, a 34 percent increase compared to $39.4 million in the third
quarter last year.
o Pre-tax earnings of $44.0 million, up 27 percent from $34.6 million in the third quarter of fiscal 2005.
o Diluted earnings per share of $.31, a 29 percent increase compared to $.24 in the third quarter last
year.
o Operating cash flow of $95.4 million and free cash flow of $91.7 million, both of which represent record
quarterly cash flow results. The free cash flow of $91.7 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 A technology and distribution agreement with EMC Corporation that includes $30 million from EMC to
purchase the grid operating system developed by Acxiom and license certain other grid-related software.
The deal contributed to $20 million of the Company's free cash flow performance in the third quarter but
had no impact on revenue, earnings or operating cash flow.
o New contracts that will deliver $41 million in annual revenue and renewals that total $31 million in
annual revenue.
o Committed new deals in the pipeline that are expected to generate $68.4 million in annual revenue.
"The operational improvements we have made, combined with a strong pipeline and the continued signing of new
contracts, add up to an improving performance at Acxiom," Company Operations Leader Lee Hodges said. "Our
expense-savings initiatives have produced better-than-expected results, and we continue to focus on expense
containment and control, which we expect to result in continued improvement in operating margins."
Morgan noted that Acxiom recently completed new contracts with AIG Marketing, Inc., Canadian Tire Financial
Services, Inc., Federated Department Stores, Inc., Hyundai Motor America, Lowe's, Nationwide, Novartis
Pharmaceuticals Corporation, Staples, ZelnickMedia
and Primedia.
Outlook
The Company's expectations for fiscal 2006, fiscal 2007 and beyond are communicated in the Financial Road Map,
which is attached.
The Financial Road Map has been updated based on current expectations for fiscal year 2007, and the long-term
goals have been updated to reflect the expectation for fiscal year 2010. For the fiscal year ending March 31,
2007, the Company estimates that U.S. revenue will grow 7 percent to 10 percent, the U.S. operating margins will
be 14 percent to 15 percent, international revenue will grow 0 percent to 5 percent, and international margin
will be 2 percent to 4 percent.
The financial projections stated today are based on the Company's current expectations and the assumption 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.
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 the Company is continuing to experience continued improvement and
momentum in financial performance, that we expect that continued focus on expense controls will lead to continued
improvement in operating margins, 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; and 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 the historical seasonality of our business may change; 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 that negatively
impact the Company; 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 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 scale, competition, 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,
_____________________________________________
2005 2004
_____________________________________________
Revenue:
Services 263,266 225,811
Data 84,165 86,594
________________ _________________
Total revenue 347,431 312,405
Operating costs and expenses:
Cost of revenue
Services 190,993 174,960
Data 48,799 52,199
________________ _________________
Total cost of revenue 239,792 227,159
Selling, general and administrative 56,134 46,461
Gains, losses and nonrecurring items, net (1,202) (640)
________________ __________________
Total operating costs and expenses 294,724 272,980
________________ __________________
Income from operations 52,707 39,425
________________ __________________
Other income (expense):
Interest expense (8,635) (5,076)
Other, net (71) 210
________________ ___________________
Total other income (expense) (8,706) (4,866)
________________ __________________
Earnings before income taxes 44,001 34,559
Income taxes 16,720 11,079
________________ __________________
Net earnings 27,281 23,480
================ =================
Earnings per share:
Basic 0.32 0.27
================ =================
Diluted 0.31 0.24
================ =================
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share)
For the Nine Months Ended
December 31,
_____________________________________________
2005 2004
_____________________________________________
Revenue:
Services 754,958 653,730
Data 233,267 246,778
_______________ __________________
Total revenue 988,225 900,508
Operating costs and expenses:
Cost of revenue
Services 580,462 507,459
Data 149,808 153,786
_______________ __________________
Total cost of revenue 730,270 661,245
Selling, general and administrative 161,499 141,010
Gains, losses and nonrecurring items, net 9,960 (984)
_______________ __________________
Total operating costs and expenses 901,729 801,271
_______________ __________________
Income from operations 86,496 99,237
_______________ __________________
Other income (expense):
Interest expense (21,213) (14,889)
Other, net 1,870 824
________________ _________________
Total other income (expense) (19,343) (14,065)
________________ _________________
Earnings before income taxes 67,153 85,172
Income taxes 26,084 30,312
________________ _________________
Net earnings 41,069 54,860
================ =================
Earnings per share:
Basic 0.47 0.64
================ =================
Diluted 0.45 0.58
================ =================
ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except earnings per share)
For the Three Months Ended
December 31,
______________________________________
2005 2004
______________________________________
Basic earnings per share:
Numerator - net earnings 27,281 23,480
Denominator - weighted-average shares outstanding 85,203 86,468
________________ _________________
Basic earnings per share 0.32 0.27
================ ==================
Diluted earnings per share:
Numerator:
Net earnings 27,281 23,480
Interest expense on convertible bonds (net of tax benefit) - 1,017
________________ __________________
27,281 24,497
________________ __________________
Denominator:
Weighted-average shares outstanding 85,203 86,468
Dilutive effect of common stock options and warrants 2,723 4,191
Dilutive effect of convertible debt - 9,589
________________ __________________
87,926 100,248
Diluted earnings per share 0.31 0.24
================ ==================
ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except earnings per share)
For the Nine Months Ended
December 31,
_________________________________________
2005 2004
_________________________________________
Basic earnings per share:
Numerator - net earnings 41,069 54,860
Denominator - weighted-average shares outstanding 87,748 86,187
________________ __________________
Basic earnings per share 0.47 0.64
================ ==================
Diluted earnings per share:
Numerator:
Net earnings 41,069 54,860
Interest expense on convertible bonds (net of tax benefit) - 3,051
_________________ __________________
41,069 57,911
_________________ _________________
Denominator:
Weighted-average shares outstanding 87,748 86,187
Dilutive effect of common stock options and warrants 2,691 3,870
Dilutive effect of convertible debt - 9,589
_________________ _________________
90,439 99,646
_________________ _________________
Diluted earnings per share 0.45 0.58
================== =================
ACXIOM CORPORATION AND SUBSIDIARIES
REVENUES BY SEGMENT
(Unaudited)
(Dollars in thousands)
For the Three Months Ended
December 31,
___________________________________
2005 2004
___________________________________
US Services & Data 300,086 253,898
International Services & Data 47,345 58,507
______________ ________________
Total Revenue 347,431 312,405
================= ================
US Supplemental Information:
Services & Data Excluding IT Mgmt 210,455 178,983
IT Management Services 89,631 74,915
_________________ ________________
300,086 253,898
================= ================
International Supplemental Information:
Services & Data Excluding IT Mgmt 47,345 58,507
IT Management Services - -
_________________ _________________
47,345 58,507
================= =================
ACXIOM CORPORATION AND SUBSIDIARIES
REVENUES BY SEGMENT
(Unaudited)
(Dollars in thousands)
For the Nine Months Ended
December 31,
_____________________________________
2005 2004
_____________________________________
US Services & Data 851,846 740,666
International Services & Data 136,379 159,842
_________________ __________________
Total Revenue 988,225 900,508
================= ==================
US Supplemental Information:
Services & Data Excluding IT Mgmt 589,653 533,824
IT Management Services 262,193 206,842
_________________ ___________________
851,846 740,666
================= ==================
International Supplemental Information:
Services & Data Excluding IT Mgmt 136,379 159,842
IT Management Services - -
_________________ ___________________
136,379 159,842
================= ==================
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
December 31, March 31,
2005 2005
____________ ____________
Assets
Current assets:
Cash and cash equivalents $ 9,906 $ 4,185
Trade accounts receivable, net 261,135 250,653
Deferred income taxes 31,615 31,415
Refundable income taxes - 1,345
Other current assets 40,321 46,034
____________ ____________
Total current assets 342,977 333,632
____________ ____________
Property and equipment 663,521 581,918
Less - accumulated depreciation and amortization 324,158 258,532
____________ ____________
Property and equipment, net 339,363 323,386
____________ ____________
Software, net of accumulated amortization 47,850 57,135
Goodwill 474,680 354,182
Purchased software licenses, net of accumulated amortization 157,203 157,999
Unbilled and notes receivable, excluding current portions 20,551 20,410
Deferred costs, net 104,419 88,851
Data acquisition costs 40,530 48,915
Other assets, net 22,757 15,369
____________ ____________
$ 1,550,330 $ 1,399,879
==================== ====================
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term obligations 87,401 83,005
Trade accounts payable 43,622 63,295
Accrued payroll and related expenses 31,841 27,435
Other accrued expenses 81,000 74,635
Deferred revenue 127,753 115,892
Income Taxes 12,182 -
____________ ____________
Total current liabilities 383,799 364,262
____________ ____________
Long-term obligations:
Long-term debt and capital leases, net of current installments 404,104 104,210
Software and data licenses, net of current installments 26,740 37,494
____________ ____________
Total long-term obligations 430,844 141,704
____________ ____________
Deferred income taxes 91,329 79,079
Commitments and contingencies
Stockholders' equity:
Common stock 10,674 10,440
Additional paid-in capital 627,982 588,156
Retained earnings 391,557 363,556
Accumulated other comprehensive loss 2,141 12,616
Treasury stock, at cost (387,996) (159,934)
____________ ____________
Total stockholders' equity 644,358 814,834
____________ ____________
$ 1,550,330 $ 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 Qtr ended Qtr ended YTD
6/30/2005 9/30/2005 12/31/2005 3/31/2006 12/31/2005
Net cash provided by operating activities 61,476 44,785 95,414 201,675
Proceeds received from disposition of assets - 3,613 1,510 5,123
Capitalized software (5,673) (5,809) (5,204) (16,686)
Cash collected from sale of software - - 20,000 20,000
Capital expenditures (2,929) (3,025) (401) (6,355)
Deferral of costs (16,192) (18,703) (19,603) (54,498)
_________________________________________________________________________________________
Free cash flow 36,682 20,861 91,716 0 149,259
=========================================================================================
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Three Months Ended
December 31,
__________________________________
2005 2004
__________________________________
Cash flows from operating activities:
Net earnings 27,281 23,480
Non-cash operating activities:
Depreciation and amortization 59,712 50,817
Loss (gain) on disposal or impairment of assets, net (524) (50)
Deferred income taxes 4,386 11,385
Non-cash stock compensation expense 346 -
Changes in operating assets and liabilities:
Accounts receivable (8,552) 3,403
Other assets (6,587) 5,915
Accounts payable and other liabilities 4,161 (18,896)
Deferrred revenue 15,191 6,751
____________ ____________
Net cash provided by operating activities 95,414 82,805
____________ ____________
Cash flows from investing activities:
Disposition of operations 3,315 1,636
Sale of assets 1,510 -
Capitalized software (5,204) (5,706)
Capital expenditures (401) (3,132)
Cash collected from sale of software 20,000 -
Deferral of costs (19,603) (15,502)
Payments received from investments 2,093 159
Net cash paid in acquisitions (2,983) (6,847)
____________ ____________
Net cash used by investing activities (1,273) (29,392)
____________ ____________
Cash flows from financing activities:
Proceeds from debt 31,833 31,663
Payments of debt (125,264) (82,175)
Dividends paid (4,259) (3,464)
Sale of common stock 10,058 14,537
Acquisition of treasury stock (2,430) (2,840)
____________ ____________
Net cash used by financing activities (90,062) (42,279)
____________ ____________
Effect of exchange rate changes on cash (135) 620
____________ ____________
Net increase in cash and cash equivalents 3,944 11,754
Cash and cash equivalents at beginning of period 5,962 10,140
____________ ____________
Cash and cash equivalents at end of period 9,906 21,894
____________ ____________
Supplemental cash flow information:
Cash paid during the period for:
Interest 7,932 3,521
Income taxes 1,070 583
Payments on capital leases and installment payment arrangements 17,994 23,012
Payments on software and data license liabilities 7,344 4,842
Noncash investing and financing activities:
Issuance of warrants in acquisition - 1,833
Enterprise software licenses acquired under software obligation - 6,715
Acquisition of property and equipment under capital lease
and installment payment arrangements 14,804 27,289
Construction of assets under construction loan 402 4,868
____________ ____________
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Nine Months Ended
December 31,
_____________________________________
2005 2004
_____________________________________
Cash flows from operating activities:
Net earnings 41,069 54,860
Non-cash operating activities:
Depreciation and amortization 172,350 139,916
Loss (gain) on disposal or impairment of assets, net (1,451) (50)
Deferred income taxes 12,401 30,933
Non-cash stock compensation expense 968 -
Changes in operating assets and liabilities:
Accounts receivable (13,838) (22,746)
Other assets (21,747) (2,531)
Accounts payable and other liabilities 2,790 (23,474)
Deferred revenue 9,133 2,353
____________ ____________
Net cash provided by operating activities 201,675 179,261
____________ ____________
Cash flows from investing activities:
Disposition of operations 4,844 1,636
Sale of assets 5,123 -
Capitalized software (16,686) (14,534)
Capital expenditures (6,355) (9,768)
Cash collected from the sale of software 20,000 -
Deferral of costs (54,498) (36,225)
Payments received from investments 2,855 662
Net cash paid in acquisitions (144,509) (23,588)
____________ ____________
Net cash used by investing activities (189,226) (81,817)
____________ ____________
Cash flows from financing activities:
Proceeds from debt 423,122 129,792
Payments of debt (216,041) (217,784)
Dividends paid (13,068) (10,359)
Sale of common stock 31,609 38,208
Acquisition of treasury stock (231,865) (30,208)
____________ ____________
Net cash used by financing activities (6,243) (90,351)
____________ ____________
Effect of exchange rate changes on cash (485) 446
____________ ____________
Net increase in cash and cash equivalents 5,721 7,539
Cash and cash equivalents at beginning of period 4,185 14,355
____________ ____________
Cash and cash equivalents at end of period 9,906 21,894
_____________ ____________
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest 18,405 13,409
Income taxes (376) 1,080
Payments on capital leases and installment payment arrangements 53,890 49,645
Payments on software and data license liabilities 17,141 13,899
Noncash investing and financing activities:
Issuance of warrants in acquisition - 1,833
Enterprise software licenses acquired under software obligation 8,380 12,682
Acquisition of property and equipment under capital lease
and installment payment arrangements 70,377 66,359
Construction of assets under construction loan 7,200 17,979
______________ ____________
ACXIOM CORPORATION AND SUBSIDIARIES
SUMMARIZED SUPPLEMENTAL CASH FLOW INFORMATION
(Unaudited)
(Dollars in thousands)
Last 12
______________________________________________________________
03/31/05 06/30/05 09/30/05 12/31/05 Months
_______________________________________________________________ ___________________
Free cash flow 40,228 36,682 20,861 91,716 189,487
Change in revolver 10,921 259,800 96,665 (66,378) 301,008
Other debt proceeds 4,175 - - - 4,175
Debt payments (excluding payments on line of credit) (22,316) (32,224) (23,729) (27,053) (105,322)
Sale of common stock 5,776 13,527 8,024 10,058 37,385
Acquisition of treasury stock (33,551) (160,354) (69,081) (2,430) (265,416)
Dividends paid (4,290) (4,432) (4,377) (4,259) (17,358)
Payments received from investments 235 721 41 2,093 3,090
Proceeds from the disposition of operations - - 1,529 3,315 4,844
Net cash paid in acquisitions (18,612) (106,719) (34,807) (2,983) (163,121)
Effect of exchange rate changes on cash (275) (297) (53) (135) (760)
________________________________________________________________ _________________
Net change in cash (17,709) 6,704 (4,927) 3,944 (11,988)
============================================================== ===============
------------------------------ ------------------------------- ----------------------------------- ------------------------------ ----------------------------------------- ----------------------------------------- --------------------------------------
Actual Actual Actual Estimated Target Target Long-Term Goals
Years Ending March 31, Fiscal 2005 Q3 Fiscal 2006 YTD Fiscal 2006 Fiscal 2006 (4) Fiscal 2006 Fiscal 2007 Fiscal 2010
------------------------------ ------------------------------- ----------------------------------- ------------------------------ ----------------------------------------- ----------------------------------------- --------------------------------------
U.S. Revenue Growth 9.0% 18.2% 15.0% 14% 13% to 15% 7% to 10% 8% to 11% (CAGR)
U.S. Revenue $1,011 million $300 million $851 million $1,150 million $1,140 to $1,160 mil $1,230 to $1,260 mil -
International Revenue Growth 152.9% -19.1% -14.7% -15% -10% to -20% 0% to 5% 5% to 8% (CAGR)
International Revenue $213 million $47 million $136 million $180 million $170 to $190 mil $180 to $190 mil -
U.S. Operating Margin 11.3% 16.3% 10.8% 11.7% 14% to 15% 16% to 18%
Adjusted U.S. Operating Margin 11.3% 16.3% 11.9%(3) 12.4%(3) 11.5% to 12.5%
International Operating Margin 3.9% 7.9% -4.0% -2.2% 2% to 4% 12% to 15%
Adjusted International Operating Margin 3.9% 7.9% 0.9%(3) 1.6%(3) 1% to 2%
Return on Assets (2) 9.2% 7.2% 7.2% 8.4% 11% to 13% 14% to 17%
Adjusted Return on Assets (2) 8.3%(3) 8.3%(3) 9.4%(3) 9% to 10%
Return on Invested Capital (2) 11.0% 10.1%(3) 10.1%(3) 11.3%(3) 11% to 12% 13% to 15% 16% to 19%
Operating Cash Flow $247 million $95 million $201 million $270 million $250 to $270 mil $280 to $300 mil $320 to $360 mil
Free Cash Flow $159 million $92 million $149 million $190 million $160 to $180 mil $175 to $195 mil $185 to $225 mil
Revolving Credit Line Balance $11 million $301 million $301 million $290 million $200 to $375 mil < $500 mil < $500 mil
Dividends Per Share $0.17 $0.05 $0.15 $0.20 $0.20 $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
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 $5 to $10 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 operating 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.
Reconciliation of Non-GAAP Measurements
(Dollars in thousands)
------------------------------------ ------------------------------------- ------------------------------------ ------------------------------------ ------------------------------------ ------------------------------------ --------------------------
Actual Actual Actual Estimated Target Target Long-Term Goals
Years Ending March 31, Fiscal 2005 Q3 Fiscal 2006 YTD Fiscal 2006 Fiscal 2006 Fiscal 2006 Fiscal 2007 Fiscal 2010
------------------------------------ ------------------------------------- ------------------------------------ ------------------------------------ ------------------------------------ ------------------------------------ --------------------------
U.S. Operating Margin
U.S. Revenue 1,010,513 300,086 851,846 1,150,000
U.S. Operating Income 113,992 48,965 91,904 134,000
U.S. Operating Income Margin 11.3% 16.3% 10.8% 11.7%
Gains, losses and nonrecurring items, net 0 0 6,147 6,147
ValueAct Defense 0 0 2,216 2,216
Lawsuit Expenses 0 0 761 761
----------- ------------ ----------- -----------
Adjusted U.S. Operating Income (6) 113,992 48,965 101,028 143,124
Adjusted U.S. Operating Income Margin (6) 11.3% 16.3% 11.9% 12.4%
=========== ============ =========== ===========
International Operating Margin
International Revenue 212,529 47,345 136,379 180,000
International Operating Income 8,200 3,741 (5,410) (3,800)
International Operating Income Margin 3.9% 7.9% -4.0% -2.1%
Gains, losses and nonrecurring items, net 0 0 6,652 6,652
----------- ------------ ----------- -----------
Adjusted International Operating Income (6) 8,200 3,741 1,242 2,852
Adjusted International Operating Income Margin (6) 3.9% 7.9% 0.9% 1.6%
=========== ============ =========== ===========
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Free Cash Flow
Net cash provided by operating activities 247,014 95,414 201,675 270,000 250,000 270,000 280,000 300,000 320,000 360,000
Proceeds received from disposition of assets 0 1,510 5,123 5,123 0 0 0 0 0 0
Capitalized software (20,294) (5,204) (16,686) (22,000) (20,000) (20,000) (23,000) (23,000) (25,000) (25,000)
Proceeds received from sale of software 0 20,000 20,000 20,000 0 0 10,000 10,000 0 0
Capital expenditures (14,330) (401) (6,355) (12,000) (15,000) (15,000) (16,000) (16,000) (20,000) (20,000)
Deferral of costs (53,428) (19,603) (54,498) (71,000) (55,000) (55,000) (76,000) (76,000) (90,000) (90,000)
----------- ------------ ----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
Free cash flow 158,962 91,716 149,259 190,123 160,000 to 180,000 175,000 to 195,000 185,000 to 225,000
=========== ============ =========== =========== =========== =========== =========== ============ =========== ===========
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.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
------------------------------------ ------------------------------------- ------------------------------------ ------------------------------------ -------------------------------------------------------- --------------------------------------------------------- ---------------------------------------------------------
Actual Actual Actual Estimated Target Target Long-Term Goals
Fiscal 2005 Q3 Fiscal 2006 YTD Fiscal 2006 Fiscal 2006 Fiscal 2006 Fiscal 2007 Fiscal 2010
------------------------------------ ------------------------------------- ------------------------------------ ------------------------------------ -------------------------------------------------------- --------------------------------------------------------- ---------------------------------------------------------
------------------------------------ ------------------------------------ ------------------------------------ ------------------------------------ -------------------------------------------------------- --------------------------------------------------------- ---------------------------------------------------------
Return on Assets (ROA) and Adjusted Adjusted Adjusted Adjusted ROA ROIC ROA ROIC ROA ROIC
---------------------------- --------------------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------
Return on Invested Capital (ROIC)(5) ROA ROA ROIC ROA ROA ROIC ROA ROA ROIC ROA ROA ROIC Low High Low High Low High Low High Low High Low High
------------------------------------ ------------------------------------ ------------------------------------ ------------------------------------ ---------------------------- --------------------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------
Numerator:
Income from operations 122,192 122,192 122,192 109,451 109,451 109,451 109,451 109,451 109,451 130,000 130,000 130,000 141,000 160,000 141,000 160,000 175,500 196,900 175,500 196,900 268,600 337,600 268,600 337,600
Unusual Charges, Net (6) 0 0 0 15,776 15,776 15,776 15,776 15,776 15,776 0 0 0 0 0 0 0 0 0 0 0 0
Add implied interest on operating leases (1) 13,903 12,241 12,241 12,000 14,200 14,200 11,000 11,000 9,000 9,000
------------------------------------ ------------------------------------- ------------------------------------ ------------------------------------ ---------------------------- --------------------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------
122,192 122,192 136,095 109,451 125,227 137,467 109,451 125,227 137,467 130,000 145,776 157,776 141,000 160,000 155,200 174,200 175,500 196,900 186,500 207,900 268,600 337,600 277,600 346,600
------------------------------------ ------------------------------------- ------------------------------------ ------------------------------------ ---------------------------- --------------------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------
Denominator:
Average total assets (2) 1,321,122 1,321,122 1,321,122 1,514,779 1,514,779 1,514,779 1,514,779 1,514,779 1,514,779 1,550,000 1,550,000 1,550,000 1,542,000 1,552,000 1,542,000 1,552,000 1,566,000 1,574,000 1,566,000 1,574,000 1,864,000 1,965,000 1,864,000 1,965,000
Less average cash (3) (11,858) (7,736) (7,736) (9,000) (6,300) (12,700) (10,000) (10,000) (10,000) (10,000)
Less average non-interest bearing current liabilities (4) (246,280) (286,759) (286,759) (285,000) (280,000) (280,200) (277,000) (288,000) (261,000) (285,000)
Plus average present value of operating leases (1) 168,734 144,860 144,860 140,000 180,000 179,500 133,000 133,000 114,000 114,000
------------------------------------ ------------------------------------- ------------------------------------ ------------------------------------ ---------------------------- --------------------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------
1,321,122 1,321,122 1,231,717 1,514,779 1,514,779 1,365,143 1,514,779 1,514,779 1,365,143 1,550,000 1,550,000 1,396,000 1,542,000 1,552,000 1,435,700 1,438,600 1,566,000 1,574,000 1,412,000 1,409,000 1,864,000 1,965,000 1,707,000 1,784,000
------------------------------------ ------------------------------------- ------------------------------------ ------------------------------------ ---------------------------- --------------------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------
Return on invested capital 9.2% 9.2% 11.0% 7.2% 8.3% 10.1% 7.2% 8.3% 10.1% 8.4% 9.4% 11.3% 9% to 10% 11% to 12% 11% to 13% 13% to 15% 14% to 17% 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. Future cash balances above $10.0 million are assumed to be invested at money market rates and are excluded from this operating cash adjustment.
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 setting 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.