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 24, 2007

 

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):

 

o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02      Results of Operations and Financial Condition

On January 24, 2007, Acxiom Corporation (the “Company”) issued a press release announcing the results of its financial performance for the third quarter of fiscal year 2007. 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 available to equity. Free cash flow available to equity is defined as operating cash flow less cash used by investing activities (excluding the impact of cash paid in acquisitions), less required payments of debt (total debt payments excluding payments on the line of credit). The Company’s management believes that this measure of free cash flow available to equity is superior to the previously reported free cash flow, since it represents the amount of money available for the Company’s discretionary spending after funding all required obligations including scheduled debt payments, and it therefore provides a useful measure of liquidity for assessing the amount of cash available for general corporate and strategic purposes.

 

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 for fiscal 2006, and for any four-quarter period including the quarter ended September 30, 2005, 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.

 

 

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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 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 have been 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 24, 2007 announcing third quarter earnings for fiscal year 2007.

 

 

 

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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 24, 2007

 

 

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 24, 2007 announcing third quarter earnings for fiscal year 2007.

 

 

 

 

 

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 24, 2007

 

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):

 

o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o	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 24, 2007, Acxiom Corporation (the “Company”) issued a press release announcing the results of its financial performance for the third quarter of fiscal year 2007. 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 available to equity. Free cash flow available to equity is defined as operating cash flow less cash used by investing activities (excluding the impact of cash paid in acquisitions), less required payments of debt (total debt payments excluding payments on the line of credit). The Company’s management believes that this measure of free cash flow available to equity is superior to the previously reported free cash flow, since it represents the amount of money available for the Company’s discretionary spending after funding all required obligations including scheduled debt payments, and it therefore provides a useful measure of liquidity for assessing the amount of cash available for general corporate and strategic purposes.

 

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 for fiscal 2006, and for any four-quarter period including the quarter ended September 30, 2005, 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.

 

 

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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 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 have been 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 24, 2007 announcing third quarter earnings for fiscal year 2007.

 

 

 

---

 

 

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 24, 2007

 

 

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 24, 2007 announcing third quarter earnings for fiscal year 2007.

 

 

 

 

 

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ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share)
					For the Nine Months Ended
					December 31,
									$	%
					2006		2005		Variance	Variance
Revenue:
Services					793,789		754,958		38,831	5.1%
Data					244,076		233,267		10,809	4.6%
Total revenue					1,037,865		988,225		49,640	5.0%
Operating costs and expenses:
Cost of revenue
Services					597,161		575,734		21,427	3.7%
Data					153,638		149,808		3,830	2.6%
Total cost of revenue					750,799		725,542		25,257	3.5%
Services gross margin					24.8%		23.7%
Data gross margin					37.1%		35.8%
Total gross margin					27.7%		26.6%
Selling, general and administrative					157,818		166,227		(8,409)	(5.1%)
Gains, losses and other items, net					(225)		9,960		(10,185)	0.0%
Total operating costs and expenses					908,392		901,729		6,663	0.7%
Income from operations					129,473		86,496		42,977	49.7%
Other income (expense):
Interest expense					(31,630)		(21,213)		(10,417)	49.1%
Other, net					4,489		1,870		2,619	140.1%
Total other income (expense)					(27,141)		(19,343)		(7,798)	40.3%
Earnings before income taxes					102,332		67,153		35,179	52.4%
Income taxes					37,863		26,084		11,779	45.2%
Net earnings					64,469		41,069		23,400	57.0%
Earnings per share:
Basic					0.77		0.47		0.30	63.8%
Diluted					0.75		0.45		0.30	66.7%

 

6

ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share)
					For the Three Months Ended
					December 31,		September 30,		$	%
					2006		2006		Variance	Variance
Revenue:
Services					265,798		266,099		(301)	(0.1%)
Data					87,043		82,220		4,823	5.9%
Total revenue					352,841		348,319		4,522	1.3%
Operating costs and expenses:
Cost of revenue
Services					199,704		201,384		(1,680)	(0.8%)
Data					53,004		51,062		1,942	3.8%
Total cost of revenue					252,708		252,446		262	0.1%
Services gross margin					24.9%		24.3%
Data gross margin					39.1%		37.9%
Total gross margin					28.4%		27.5%
Selling, general and administrative					49,065		54,008		(4,943)	(9.2%)
Gains, losses and other items, net					(225)		-		(225)	0.0%
Total operating costs and expenses					301,548		306,454		(4,906)	(1.6%)
Income from operations					51,293		41,865		9,428	22.5%
Other income (expense):
Interest expense					(14,911)		(8,950)		(5,961)	66.6%
Other, net					1,157		2,685		(1,528)	(56.9%)
Total other income (expense)					(13,754)		(6,265)		(7,489)	119.5%
Earnings before income taxes					37,539		35,600		1,939	5.4%
Income taxes					12,594		13,884		(1,290)	(9.3%)
Net earnings					24,945		21,716		3,229	14.9%
Earnings per share:
Basic					0.32		0.25		0.07	28.0%
Diluted					0.31		0.25		0.06	24.0%

 

7

ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except earnings per share)
					For the Three Months Ended
					December 31,		December 31,		September 30,
					2006		2005		2006
Basic earnings per share:
Numerator - net earnings					24,945		27,281		21,716
Denominator - weighted-average shares outstanding					77,717		85,203		86,000
Basic earnings per share					0.32		0.32		0.25
Diluted earnings per share:
Numerator - net earnings
Net earnings					24,945		27,281		21,716
Denominator:
Weighted-average shares outstanding					77,717		85,203		86,000
Dilutive effect of common stock options, warrants and restricted stock					2,238		2,723		2,203
					79,955		87,926		88,203
Diluted earnings per share					0.31		0.31		0.25

 

8

ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except earnings per share)
					For the Nine Months Ended
					December 31,
					2006		2005
Basic earnings per share:
Numerator - net earnings					64,469		41,069
Denominator - weighted-average shares outstanding					83,957		87,748
Basic earnings per share					0.77		0.47
Diluted earnings per share:
Numerator - net earnings
Net earnings					64,469		41,069
Denominator:
Weighted-average shares outstanding					83,957		87,748
Dilutive effect of common stock options, warrants and restricted stock					2,237		2,691
					86,194		90,439
Diluted earnings per share					0.75		0.45

 

9

ACXIOM CORPORATION AND SUBSIDIARIES
RESULTS BY SEGMENT
(Unaudited)
(Dollars in thousands)
					For the Three Months Ended
					December 31,		December 31,		September 30,
Revenue:					2006		2005		2006
US services & data					298,978		300,086		300,204
International services & data					53,863		47,345		48,115
Total revenue					352,841		347,431		348,319
US supplemental information:
Services & data excluding IT mgmt					211,312		210,455		211,447
IT management services					87,666		89,631		88,757
					298,978		300,086		300,204
International supplemental information:
Services & data excluding IT mgmt					53,863		47,345		48,115
Income from operations:
US services & data					46,832		47,766		40,090
International services & data					4,236		3,739		1,775
Corporate & other					225		1,202		-
Total income from operations					51,293		52,707		41,865
Margin:
US services & data					15.7%		15.9%		13.4%
International services & data					7.9%		7.9%		3.7%
Total margin					14.5%		15.2%		12.0%

 

10

ACXIOM CORPORATION AND SUBSIDIARIES
RESULTS BY SEGMENT
(Unaudited)
(Dollars in thousands)
					For the Nine Months Ended
					December 31,
Revenue:					2006		2005
US services & data					890,601		851,846
International services & data					147,264		136,379
Total revenue					1,037,865		988,225
US supplemental information:
Services & data excluding IT mgmt					624,001		589,653
IT management services					266,600		262,193
					890,601		851,846
International supplemental information:
Services & data excluding IT mgmt					147,264		136,379
Income from operations:
US services & data					122,872		95,129
International services & data					6,376		1,327
Corporate & other					225		(9,960)
Total income from operations					129,473		86,496
Margin:
US services & data					13.8%		11.2%
International services & data					4.3%		1.0%
Total margin					12.5%		8.8%

 

11

ACXIOM CORPORATION AND SUBSIDIARIES
DATA REVENUE AND COST OF DATA SUPPLEMENTAL SCHEDULE
(Unaudited)
(Dollars in thousands)
			For the Three Months Ended
			December 31,		December 31,		$	%		September 30,		$	%
			2006		2005		Variance	Variance		2006		Variance	Variance
Data			68,520		66,054		2,466	3.7%		62,654		5,866	9.4%
Passthrough data			18,523		18,111		412	2.3%		19,566		(1,043)	(5.3%)
Total data revenue			87,043		84,165		2,878	3.4%		82,220		4,823	5.9%
Cost of data revenue:
Data			34,481		30,688		3,793	12.4%		31,496		2,985	9.5%
Passthrough data			18,523		18,111		412	2.3%		19,566		(1,043)	(5.3%)
Total cost of data			53,004		48,799		4,205	8.6%		51,062		1,942	3.8%
Margin:
Data			49.7%		53.5%					49.7%
Passthrough data			0.0%		0.0%					0.0%
Total data			39.1%		42.0%					37.9%

 

12

ACXIOM CORPORATION AND SUBSIDIARIES
DATA REVENUE AND COST OF DATA SUPPLEMENTAL SCHEDULE
(Unaudited)
(Dollars in thousands)
					For the Nine Months Ended
					December 31,
									$	%
					2006		2005		Variance	Variance
Data					185,704		177,454		8,250	4.6%
Passthrough data					58,372		55,813		2,559	4.6%
Total data revenue					244,076		233,267		10,809	4.6%
Cost of data revenue:
Data					95,266		93,995		1,271	1.4%
Passthrough data					58,372		55,813		2,559	4.6%
Total cost of data					153,638		149,808		3,830	2.6%
Margin:
Data					48.7%		47.0%
Passthrough data					0.0%		0.0%
Total data					37.1%		35.8%

 

13

ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
	December 31,		March 31,		$	%
	2006		2006		Variance	Variance
Assets
Current assets:
Cash and cash equivalents	88,014		7,705		80,309	1042.3%
Trade accounts receivable, net	276,061		261,624		14,437	5.5%
Deferred income taxes	24,452		24,587		(135)	(0.5%)
Other current assets	53,437		44,937		8,500	18.9%
Total current assets	441,964		338,853		103,111	30.4%
Property and equipment	713,235		662,948		50,287	7.6%
Less - accumulated depreciation and amortization	397,261		329,177		68,084	20.7%
Property and equipment, net	315,974		333,771		(17,797)	(5.3%)
Software, net of accumulated amortization	40,319		45,509		(5,190)	(11.4%)
Goodwill	500,639		472,401		28,238	6.0%
Purchased software licenses, net of accumulated amortization	149,982		155,518		(5,536)	(3.6%)
Unbilled and notes receivable, excluding current portions	17,466		19,139		(1,673)	(8.7%)
Deferred costs, net	130,016		112,817		17,199	15.2%
Data acquisition costs	35,241		40,828		(5,587)	(13.7%)
Other assets, net	19,504		21,662		(2,158)	(10.0%)
	1,651,105		1,540,498		110,607	7.2%
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term obligations	100,801		93,518		7,283	7.8%
Trade accounts payable	41,343		44,144		(2,801)	(6.3%)
Accrued payroll and related expenses	28,318		32,139		(3,821)	(11.9%)
Other accrued expenses	79,166		81,428		(2,262)	(2.8%)
Deferred revenue	99,606		123,916		(24,310)	(19.6%)
Income taxes	7,055		4,845		2,210	45.6%
Total current liabilities	356,289		379,990		(23,701)	(6.2%)
Long-term obligations:
Long-term debt and capital leases, net of current installments	688,381		353,692		334,689	94.6%
Software and data licenses, net of current installments	20,353		22,723		(2,370)	(10.4%)
Total long-term obligations	708,734		376,415		332,319	88.3%
Deferred income taxes	77,043		77,916		(873)	(1.1%)
Commitments and contingencies
Stockholders' equity:
Common stock	11,103		10,946		157	1.4%
Additional paid-in capital	709,983		677,026		32,957	4.9%
Unearned stock-based compensation	-		(1,941)		1,941	(100.0%)
Retained earnings	461,276		410,278		50,998	12.4%
Accumulated other comprehensive income	15,670		2,205		13,465	610.7%
Treasury stock, at cost	(688,993)		(392,337)		(296,656)	75.6%
Total stockholders' equity	509,039		706,177		(197,138)	(27.9%)
	1,651,105		1,540,498		110,607	7.2%

 

14

ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
	For the Three Months Ended
	December 31,
	2006		2005
Cash flows from operating activities:
Net earnings	24,945		27,281
Non-cash operating activities:
Depreciation and amortization	54,396		59,712
Loss (gain) on disposal or impairment of assets, net	187		(524)
Deferred income taxes	(553)		4,386
Non-cash stock compensation expense	1,555		346
Changes in operating assets and liabilities:
Accounts receivable	(8,933)		(8,552)
Other assets	(769)		(6,587)
Accounts payable and other liabilities	979		4,161
Deferred revenue	(9,148)		15,191
Net cash provided by operating activities	62,659		95,414
Cash flows from investing activities:
Disposition of operations	-		3,315
Sale of assets	-		1,510
Capitalized software	(6,798)		(5,204)
Capital expenditures	(2,518)		(401)
Cash collected from the sale and license of software	-		20,000
Deferral of costs	(16,149)		(19,603)
Payments received from investments	-		2,093
Net cash paid in acquisitions	(14,400)		(2,983)
Net cash used by investing activities	(39,865)		(1,273)
Cash flows from financing activities:
Proceeds from debt	(513)		31,833
Payments of debt	(25,817)		(125,264)
Dividends paid	(4,663)		(4,259)
Sale of common stock	8,896		10,058
Acquisition of treasury stock	(6,001)		(2,430)
Tax benefit of stock options exercised	1,237		-
Net cash used by financing activities	(26,861)		(90,062)
Effect of exchange rate changes on cash	249		(135)
Net increase (decrease) in cash and cash equivalents	(3,818)		3,944
Cash and cash equivalents at beginning of period	91,832		5,962
Cash and cash equivalents at end of period	88,014		9,906
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest	14,813		7,932
Income taxes	8,196		1,070
Payments on capital leases and installment payment arrangements	16,700		17,994
Payments on software and data license liabilities	6,000		7,344
Other debt payments, excluding line of credit	3,117		1,715
Noncash investing and financing activities:
Acquisition of property and equipment under capital lease
and installment payment arrangements	10,427		14,804
Construction and other financing	4,511		402
Issuance of common stock for acquisition	3,610		-

 

15

ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
	For the Nine Months Ended
	December 31,
	2006		2005
Cash flows from operating activities:
Net earnings	64,469		41,069
Non-cash operating activities:
Depreciation and amortization	170,379		172,350
Gain on disposal or impairment of assets, net	(1,483)		(1,451)
Deferred income taxes	(975)		12,401
Non-cash stock compensation expense	2,699		968
Changes in operating assets and liabilities:
Accounts receivable	(15,768)		(13,838)
Other assets	(2,159)		(21,747)
Accounts payable and other liabilities	(7,844)		2,790
Deferred revenue	(25,900)		9,133
Net cash provided by operating activities	183,418		201,675
Cash flows from investing activities:
Disposition of operations	-		4,844
Sale of assets	-		5,123
Capitalized software	(19,443)		(16,686)
Capital expenditures	(5,995)		(6,355)
Cash collected from the sale and license of software	10,000		20,000
Deferral of costs	(49,595)		(54,498)
Payments received from investments	2,708		2,855
Net cash paid in acquisitions	(14,400)		(144,509)
Net cash used by investing activities	(76,725)		(189,226)
Cash flows from financing activities:
Proceeds from debt	649,756		423,122
Payments of debt	(393,742)		(216,041)
Dividends paid	(13,471)		(13,068)
Sale of common stock	25,801		31,609
Acquisition of treasury stock	(299,301)		(231,865)
Tax benefit of stock options exercised	4,081		-
Net cash used by financing activities	(26,876)		(6,243)
Effect of exchange rate changes on cash	492		(485)
Net increase in cash and cash equivalents	80,309		5,721
Cash and cash equivalents at beginning of period	7,705		4,185
Cash and cash equivalents at end of period	88,014		9,906
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest	31,375		18,405
Income taxes	31,027		(376)
Payments on capital leases and installment payment arrangements	57,556		53,890
Payments on software and data license liabilities	21,151		23,610
Other debt payments, excluding line of credit	6,632		5,506
Noncash investing and financing activities:
Issuance of options for acquisition	-		7,541
Software licenses and maintenance acquired under software obligation	15,266		8,380
Acquisition of property and equipment under capital lease
and installment payment arrangements	44,454		70,377
Construction and other financing	18,167		7,200
Issuance of common stock for acquisition	3,610		-

 

16

ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF FREE CASH FLOW AVAILABLE TO EQUITY
AND RECONCILIATION TO OPERATING CASH FLOW
(Unaudited)
(Dollars in thousands)
		06/30/05	09/30/05	12/31/05	03/31/06	FY2006		06/30/06	09/30/06	12/31/06	YTD FY2007
Net cash provided by operating activities		61,476	44,785	95,414	74,158	275,833		56,350	64,409	62,659	183,418
Less:
	Tax benefit of stock options and warrants	-	-	-	(19,097)	(19,097)		-	-	-	-
Subtotal		61,476	44,785	95,414	55,061	256,736		56,350	64,409	62,659	183,418
Plus:
	Proceeds received from the disposition of operations	-	1,529	3,315	-	4,844		-	-	-	-
	Proceeds received from the disposition of assets	-	3,613	1,510	-	5,123		-	-	-	-
	Payments received from investments	721	41	2,093	905	3,760		783	1,925	-	2,708
Less:
	Capitalized software	(5,673)	(5,809)	(5,204)	(5,217)	(21,903)		(5,719)	(6,926)	(6,798)	(19,443)
	Capital expenditures	(2,929)	(3,025)	(401)	(493)	(6,848)		(217)	(3,260)	(2,518)	(5,995)
	Deferral of costs	(16,192)	(18,703)	(19,603)	(15,956)	(70,454)		(16,887)	(16,559)	(16,149)	(49,595)
	Payments on capital leases and installment payment arrangements	(19,929)	(15,967)	(17,994)	(18,342)	(72,232)		(18,905)	(21,951)	(16,700)	(57,556)
	Payments on software and data license liabilities	(10,938)	(5,328)	(7,344)	(5,459)	(29,069)		(7,847)	(7,304)	(6,000)	(21,151)
	Other required debt payments	(1,357)	(2,434)	(1,715)	(3,796)	(9,302)		(1,711)	(1,804)	(3,117)	(6,632)
Subtotal		5,179	(1,298)	50,071	6,703	60,655		5,847	8,530	11,377	25,754
Plus:
	Tax benefit of stock options and warrants	-	-	-	19,097	19,097		1,079	1,765	1,237	4,081
Subtotal		5,179	(1,298)	50,071	25,800	79,752		6,926	10,295	12,614	29,835
Plus:
	Cash collected from sale of software	-	-	20,000	-	20,000		5,000	5,000	-	10,000
Total		5,179	(1,298)	70,071	25,800	99,752		11,926	15,295	12,614	39,835

 

17

	ACXIOM CORPORATION AND SUBSIDIARIES
	CONSOLIDATED STATEMENTS OF OPERATIONS
	(Unaudited)
	(Dollars in thousands, except earnings per share)
												Q3 FY06 to Q3 FY07			Q2 FY07 to Q3 FY07
		06/30/05	09/30/05	12/31/05	03/31/06	FY2006		06/30/06	09/30/06	12/31/06		%	$		%	$
Revenue:
	Services	238,499	253,193	263,266	257,591	1,012,549		261,892	266,099	265,798		1.0%	2,532		-0.1%	(301)
	Data	71,772	77,330	84,165	86,752	320,019		74,813	82,220	87,043		3.4%	2,878		5.9%	4,823
	Total revenue	310,271	330,523	347,431	344,343	1,332,568		336,705	348,319	352,841		1.6%	5,410		1.3%	4,522
Operating costs and expenses:
	Cost of revenue
	Services	194,349	191,883	189,502	196,428	772,162		196,073	201,384	199,704		5.4%	10,202		-0.8%	(1,680)
	Data	48,885	52,124	48,799	52,142	201,950		49,572	51,062	53,004		8.6%	4,205		3.8%	1,942
	Total cost of revenue	243,234	244,007	238,301	248,570	974,112		245,645	252,446	252,708		6.0%	14,407		0.1%	262
	Selling, general and administrative	53,700	54,902	57,625	51,642	217,869		54,745	54,008	49,065		-14.9%	(8,560)		-9.2%	(4,943)
	Gains, losses and other items, net	(1,637)	12,799	(1,202)	(456)	9,504		0	0	(225)		-81.3%	977		0.0%	(225)
	Total operating costs and expenses	295,297	311,708	294,724	299,756	1,201,485		300,390	306,454	301,548		2.3%	6,824		-1.6%	(4,906)
	Income from operations	14,974	18,815	52,707	44,587	131,083		36,315	41,865	51,293		-2.7%	(1,414)		22.5%	9,428
	% Margin	4.8%	5.7%	15.2%	12.9%	9.8%		10.8%	12.0%	14.5%
	Other income (expense)
	Interest expense	(5,162)	(7,416)	(8,635)	(7,531)	(28,744)		(7,769)	(8,950)	(14,911)		72.7%	(6,276)		66.6%	(5,961)
	Other, net	891	1,050	(71)	135	2,005		647	2,685	1,157		-1729.6%	1,228		-56.9%	(1,528)
	Total other income (expense)	(4,271)	(6,366)	(8,706)	(7,396)	(26,739)		(7,122)	(6,265)	(13,754)		58.0%	(5,048)		119.5%	(7,489)
	Earnings before income taxes	10,703	12,449	44,001	37,191	104,344		29,193	35,600	37,539		-14.7%	(6,462)		5.4%	1,939
	Income taxes	4,064	5,300	16,720	14,132	40,216		11,385	13,884	12,594		-24.7%	(4,126)		-9.3%	(1,290)
	Net earnings	6,639	7,149	27,281	23,059	64,128		17,808	21,716	24,945		-8.6%	(2,336)		14.9%	3,229
	Diluted earnings (loss) per share	0.07	0.08	0.31	0.26	0.71		0.20	0.25	0.31		0.0%	0.00		24.0%	0.06

 

18

ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - INTERNAL FORMAT
(Unaudited)
(Dollars in thousands, except earnings per share)
											Q3 FY06 to Q3 FY07			Q2 FY07 to Q3 FY07
	06/30/05	09/30/05	12/31/05	03/31/06	FY2006		06/30/06	09/30/06	12/31/06		%	$		%	$
Revenue	310,271	330,523	347,431	344,343	1,332,568		336,705	348,319	352,841		1.6%	5,410		1.3%	4,522
Operating costs and expenses:
Salaries and benefits	126,264	127,325	129,888	132,579	516,056		135,917	139,557	139,724		7.6%	9,836		0.1%	167
Computer, communications and
other equipment	77,647	76,250	73,614	71,730	299,241		73,119	72,685	71,132		-3.4%	(2,482)		-2.1%	(1,553)
Data costs	41,831	44,752	42,021	44,593	173,197		43,372	44,196	43,761		4.1%	1,740		-1.0%	(435)
Other operating costs and expenses	51,192	50,582	50,403	51,310	203,487		47,982	50,016	47,156		-6.4%	(3,247)		-5.7%	(2,860)
Gains, losses and other items, net	(1,637)	12,799	(1,202)	(456)	9,504		-	-	(225)		-81.3%	977		0.0%	(225)
Total operating costs and expenses	295,297	311,708	294,724	299,756	1,201,485		300,390	306,454	301,548		2.3%	6,824		-1.6%	(4,906)
Income (loss) from operations	14,974	18,815	52,707	44,587	131,083		36,315	41,865	51,293		-2.7%	(1,414)		22.5%	9,428
Operating Margin	4.8%	5.7%	15.2%	12.9%	9.8%		10.8%	12.0%	14.5%
Other income (expense):
Interest expense	(5,162)	(7,416)	(8,635)	(7,531)	(28,744)		(7,769)	(8,950)	(14,911)		72.7%	(6,276)		66.6%	(5,961)
Other, net	891	1,050	(71)	135	2,005		647	2,685	1,157		-1729.6%	1,228		-56.9%	(1,528)
	(4,271)	(6,366)	(8,706)	(7,396)	(26,739)		(7,122)	(6,265)	(13,754)		58.0%	(5,048)		119.5%	(7,489)
Earnings (loss) before income taxes	10,703	12,449	44,001	37,191	104,344		29,193	35,600	37,539		-14.7%	(6,462)		5.4%	1,939
Income taxes	4,064	5,300	16,720	14,132	40,216		11,385	13,884	12,594		-24.7%	(4,126)		-9.3%	(1,290)
Net earnings (loss)	6,639	7,149	27,281	23,059	64,128		17,808	21,716	24,945		-8.6%	(2,336)		14.9%	3,229
Diluted earnings (loss) per share	0.07	0.08	0.31	0.26	0.71		0.20	0.25	0.31		0.0%	0.00		24.0%	0.06

 

19

ACXIOM CORPORATION AND SUBSIDIARIES
MARGIN ANALYSIS
(Unaudited)
										Q3 FY06 to Q3 FY07			Q2 FY07 to Q3 FY07
	06/30/05	09/30/05	12/31/05	03/31/06	FY2006		06/30/06	09/30/06	12/31/06	%	$		%	$
Gross profit	67,037	86,516	109,130	95,773	358,456		91,060	95,873	100,133	-8.2%	(8,997)		4.4%	4,260
Gross margin	21.6%	26.2%	31.4%	27.8%	26.9%		27.0%	27.5%	28.4%
Operating margin	4.8%	5.7%	15.2%	12.9%	9.8%		10.8%	12.0%	14.5%
Services gross profit	44,150	61,310	73,764	61,163	240,387		65,819	64,715	66,094	-10.4%	(7,670)		2.1%	1,379
Services gross margin	18.5%	24.2%	28.0%	23.7%	23.7%		25.1%	24.3%	24.9%
Data gross profit	22,887	25,206	35,366	34,610	118,069		25,241	31,158	34,039	-3.8%	(1,327)		9.2%	2,881
Data gross margin	31.9%	32.6%	42.0%	39.9%	36.9%		33.7%	37.9%	39.1%

 

20

ACXIOM CORPORATION AND SUBSIDIARIES
EXPENSE TREND ANALYSIS
(Unaudited)
	06/30/05	09/30/05	12/31/05	03/31/06	FY2006		06/30/06	09/30/06	12/31/06	YTD FY2007
Salaries and benefits % of revenue	40.7%	38.5%	37.4%	38.5%	38.7%		40.4%	40.1%	39.6%	40.0%
Computer, communications and other
equipment % of revenue	25.0%	23.1%	21.2%	20.8%	22.5%		21.7%	20.9%	20.2%	20.9%
Data costs % of revenue	13.5%	13.5%	12.1%	13.0%	13.0%		12.9%	12.7%	12.4%	12.7%
Other operating costs and expenses % of revenue	16.5%	15.3%	14.5%	14.9%	15.3%		14.3%	14.4%	13.4%	14.0%
Total operating costs and expenses % of revenue	95.2%	94.3%	84.8%	87.1%	90.2%		89.2%	88.0%	85.5%	87.5%
SG&A % of revenue	17.3%	16.6%	16.6%	15.0%	16.3%		16.3%	15.5%	13.9%	15.2%

 

21

 

 

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ACXIOM CORPORATION

Financial Road Map

(as of December 31, 2006)

Actual

Actual

Actual

Target

Long-Term Goals

Years Ending March 31,

Fiscal 2006

Q3 Fiscal 2007

YTD Fiscal 2007

Fiscal 2007

Fiscal 2010

U.S. Revenue Growth

13.6%

-0.4%

4.5%

4% to 5%

8% to 11% (CAGR)

U.S. Revenue

$1,148 million

$299 million

$891 million

$1,195 to $1,205 mil

-

International Revenue Growth

-13.0%

13.8%

8.0%

5% to 8%

5% to 8% (CAGR)

International Revenue

$185 million

$54 million

$147 million

$195 to $200 mil

-

U.S. Operating Margin

11.6%

15.7%

13.8%

13% to 14%

16% to 18%

Adjusted U.S. Operating Margin

12.4%2

International Operating Margin

-1.1%

7.9%

4.3%

4% to 5%

12% to 15%

Adjusted International Operating Margin

2.5%2

Return on Assets 1

8.5%

10.9%

10.9%

10% to 11%

14% to 17%

Adjusted Return on Assets 1

9.5%2

Return on Invested Capital 1

11.4%2

13.2%

13.2%

12% to 13%

16% to 19%

Operating Cash Flow

$276 million

$63 million

$183 million

$245 to $255 mil

$320 to $360 mil

Free Cash Flow to Equity

$100 million

$13 million

$40 million

$50 to $60 mil

$140 to $160 mil

Revolving Credit Line Balance

$252 million

$0 million

$0 million

< $250 mil

< $250 mil

Dividends Per Share

$0.20

$0.06

$0.16

$0.22

$0.24 to $0.28

1 ROA and ROIC are calculated on a trailing 4 quarters basis.

2 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.

 

22

 

 

 

 

 

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Reconciliation of Non-GAAP Measurements
(Dollars in thousands)
					Actual				Actual				Actual				Target				Long-Term Goals
Years Ending March 31,					Fiscal 2006				Q3 Fiscal 2007				YTD Fiscal 2007				Fiscal 2007				Fiscal 2010
U.S. Operating Margin
U.S. Revenue						1,147,641				298,978				890,601
U.S. Operating Income						133,072				47,057				123,097
U.S. Operating Income Margin						11.6%				15.7%				13.8%
Gains, losses and nonrecurring items, net						6,147				0				0
ValueAct Defense						2,216				0				0
Lawsuit Expenses						761				0				0
Adjusted U.S. Operating Income (1)						142,196				47,057				123,097
Adjusted U.S. Operating Income Margin (1)						12.4%				15.7%				13.8%
International Operating Margin
International Revenue						184,927				53,863				147,264
International Operating Income						(1,991)				4,236				6,376
International Operating Income Margin						-1.1%				7.9%				4.3%
Gains, losses and nonrecurring items, net						6,652				0				0
Adjusted International Operating Income (1)						4,661				4,236				6,376
Adjusted International Operating Income Margin (1)						2.5%				7.9%				4.3%
Free Cash Flow to Equity																	Low		High		Low		High
Net cash provided by operating activities						275,833				62,659				183,418			245,000		255,000		320,000		360,000
Plus:	Proceeds received from disposition of assets					5,123				0				0			0		0		0		0
	Proceeds received from disposition of operations					4,844				0				0			0		0		0		0
	Cash received from investments					3,760				0				2,708			3,000		3,000		0		0
	Tax benefit of stock option and warrant exercise					0				1,237				4,081			5,000		5,000		10,000		10,000
	Proceeds received from sale of software					20,000				0				10,000			10,000		10,000		0		0
						33,727				1,237				16,789			18,000		18,000		10,000		10,000
Less:	Capitalized software					(21,903)				(6,798)				(19,443)			(26,000)		(26,000)		(20,000)		(25,000)
	Capital expenditures					(6,848)				(2,518)				(5,995)			(9,000)		(9,000)		(10,000)		(10,000)
	Deferral of costs					(70,454)				(16,149)				(49,595)			(66,000)		(66,000)		(65,000)		(75,000)
	Capital lease and installment payments					(72,232)				(16,700)				(57,556)			(75,000)		(75,000)		(65,000)		(70,000)
	Software and data license liability payments					(29,069)				(6,000)				(21,151)			(27,000)		(27,000)		(25,000)		(25,000)
	Other debt payments					(9,302)				(3,117)				(6,632)			(10,000)		(10,000)		(5,000)		(5,000)
						(209,808)				(51,282)				(160,372)			(213,000)		(213,000)		(190,000)		(210,000)
Free cash flow to equity						99,752				12,614				39,835			50,000	to	60,000		140,000	to	160,000
Free cash flow to equity 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 to equity in this
Financial Road Map representing the amount of money available for the Company's discretionary spending. 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 after funding operating activities and capital expenditures, capitalized software expenses, deferred costs and required debt repayments. The above table
reconciles free cash flow to equity to cash provided by operating activities, the nearest comparable GAAP measure.
	Notes
1	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.

23

 

 

 

 

 

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Reconciliation of Non-GAAP Measurements
(Dollars in thousands)
					Actual				Actual			Actual			Target							Long-Term Goals
					Fiscal 2006				Q3 Fiscal 2007			YTD Fiscal 2007			Fiscal 2007							Fiscal 2010
Return on Assets (ROA) and						Adjusted									ROA			ROIC				ROA			ROIC
Return on Invested Capital (ROIC)					ROA	ROA	ROIC		ROA	ROIC		ROA	ROIC		Low		High	Low		High		Low		High	Low		High
Numerator:
Income from operations (3)					131,083	131,083	131,083		174,060	174,060		174,060	174,060		163,200		178,700	163,200		178,700		268,600		337,600	268,600		337,600
Unusual Charges, Net (1)						15,776	15,776		0	0		0	0		0		0	0		0
Add implied interest on operating leases							11,696			10,369			10,369					10,400		10,400					9,000		9,000
					131,083	146,859	158,554		174,060	184,429		174,060	184,429		163,200		178,700	173,600		189,100		268,600		337,600	277,600		346,600
Denominator:
Average total assets					1,549,933	1,549,933	1,549,933		1,592,493	1,592,493		1,592,493	1,592,493		1,622,400		1,627,800	1,622,400		1,627,800		1,860,000		1,960,000	1,860,000		1,960,000
Less average cash (2)							(8,616)			(47,929)			(47,929)					(71,700)		(74,200)					(10,000)		(10,000)
Less average non-interest bearing current liabilities							(288,063)			(271,317)			(271,317)					(263,400)		(266,400)					(261,000)		(285,000)
Plus average present value of operating leases							135,190			128,525			128,525					128,600		128,600					114,000		114,000
					1,549,933	1,549,933	1,388,444		1,592,493	1,401,773		1,592,493	1,401,773		1,622,400		1,627,800	1,415,900		1,415,800		1,860,000		1,960,000	1,703,000		1,779,000
Return on invested capital					8.5%	9.5%	11.4%		10.9%	13.2%		10.9%	13.2%		10%	to	11%	12%	to	13%		14%	to	17%	16%	to	19%
	Notes
1	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.
2	Future cash balances above $10.0 million are assumed to be invested at money market rates and are excluded from this operating cash adjustment.
3	Trailing four quarters.
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.
General 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.	Operating Cash Flow is as shown on the Company's cash flow statement.
4.	Free Cash Flow to Equity is defined as cash flow from operating activities plus or minus cash flow from investing activities (excluding net cash
	paid for acquisitions), less required payments of debt (total debt payments excluding payments on the line of credit).
5.	Revolving Credit Line Balance is defined as actual funds borrowed under the Company’s revolving line of credit facility at the end of the period.
6.	Dividends Per Share is defined as the sum of the dividends for that period.
7.	Return on Assets (ROA) is defined as income from operations divided by average total assets for the trailing four quarters.
8.	Return on Invested Capital (ROIC) is defined as trailing four quarters 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 (current liabilities less the current portion of
	long-term debt), plus the present value of operating leases.

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