SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ----- to -----
Commission file number 0-13163
Acxiom Corporation
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 71-0581897
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
301 Industrial Boulevard, Conway, Arkansas 72032
(Address of Principal Executive Offices) (Zip Code)
(501) 336-1000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
The number of shares of Common Stock, par value of $0.10 per share,
outstanding as of January 31, 1995 was 22,381,014 (after giving effect to
a two-for-one stock split effective January 10, 1995).
<PAGE>
Form 10-Q
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Company for which report is filed:
ACXIOM CORPORATION
The consolidated financial statements included herein have been prepared
by Registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of the Registrant's
management, however, all adjustments necessary for a fair statement of
the results for the periods included herein have been made and the
disclosures contained herein are adequate to make the information presented
not misleading. All such adjustments are of a normal recurring nature.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, March 31,
1994 1994
-------- ---------
Assets
------
Current assets:
Cash and short-term cash investments $ 5,088,000 475,000
Trade accounts receivable, net 38,874,000 28,204,000
Refundable income taxes --- 923,000
Other current assets 1,030,000 6,255,000
------------ -----------
Total current assets 44,992,000 35,857,000
------------ -----------
Property and equipment 117,038,000 102,826,000
Less - Accumulated depreciation and
amortization 52,699,000 43,129,000
------------ -----------
Property and equipment, net 64,339,000 59,697,000
------------ -----------
Software, net of accumulated amortization 10,158,000 5,113,000
Excess of cost over fair value
of net assets acquired 9,744,000 2,716,000
Investment in and advances to joint venture --- 3,974,000
Other assets 17,003,000 16,021,000
------------ -----------
$146,236,000 123,378,000
============ ===========
Liabilities and Stockholders' Equity
-------------------------------------
Current liabilities:
Current installments of long-term debt 3,601,000 3,046,000
Short-term borrowings --- 500,000
Trade accounts payable 6,979,000 3,006,000
Accrued interest 209,000 609,000
Accrued payroll and related expenses 4,362,000 2,073,000
Other accrued expenses 5,764,000 3,315,000
Advances from customers 743,000 346,000
Income taxes 2,042,000 ---
------------ ------------
Total current liabilities 23,700,000 12,895,000
------------ ------------
Long-term debt, excluding current installments 24,126,000 34,992,000
Deferred income taxes 5,734,000 5,734,000
Deferred revenue 702,000 169,000
<PAGE>
Redeemable common stock --- 7,692,000
Stockholders' equity:
Preferred stock --- ---
Common stock 1,150,000 1,049,000
Additional paid-in capital 46,768,000 25,672,000
Retained earnings 46,801,000 38,562,000
Foreign currency translation adjustment (328,000) (818,000)
Treasury stock, at cost (2,417,000) (2,569,000)
----------- ------------
Total stockholders' equity 91,974,000 61,896,000
Commitments and contingencies ------------ ------------
$146,236,000 123,378,000
============ ============
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
For the Three Months Ended
---------------------------
December 31,
---------------------------
1994 1993
--------- ----------
Revenue $ 52,742,000 41,430,000
Operating costs and expenses:
Salaries and benefits 17,862,000 16,904,000
Computer, communications and
other equipment 7,110,000 7,264,000
Data costs 14,583,000 5,022,000
Other operating costs and expenses 5,750,000 7,390,000
----------- -----------
Total operating costs and expenses 45,305,000 36,580,000
----------- ----------
Income from operations 7,437,000 4,850,000
----------- ----------
Other income (expense):
Interest expense (619,000) (791,000)
Other, net (63,000) 264,000
------------ -----------
(682,000) (527,000)
------------ -----------
Earnings before income taxes 6,755,000 4,323,000
Income taxes 2,634,000 1,686,000
----------- ----------
Net earnings $ 4,121,000 2,637,000
=========== ==========
Earnings per share $ .36 .24
=========== ==========
Weighted average shares outstanding 11,596,000 10,954,000
=========== ==========
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
For the Nine Months Ended
--------------------------
December 31,
--------------------------
1994 1993
---------- ---------
Revenue $147,476,000 109,862,000
Operating costs and expenses:
Salaries and benefits 48,693,000 49,316,000
Computer, communications and
other equipment 21,047,000 20,819,000
Data costs 44,502,000 9,416,000
Other operating costs and expenses 16,731,000 19,050,000
----------- ----------
Total operating costs and expenses 130,973,000 98,601,000
----------- ----------
Income from operations 16,503,000 11,261,000
----------- ----------
Other income (expense):
Interest expense (1,876,000) (2,073,000)
Other, net (808,000) 662,000
----------- ----------
(2,684,000) (1,411,000)
----------- ---------
Earnings before income taxes 13,819,000 9,850,000
Income taxes 5,389,000 3,841,000
---------- ----------
Net earnings $ 8,430,000 6,009,000
========== ==========
Earnings per share $ .75 .55
========== ==========
Weighted average shares outstanding 11,282,000 10,992,000
========== ==========
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
-------------------------
December 31,
-------------------------
1994 1993
-------- --------
Cash flows from operating activities:
Net earnings $ 8,430,000 6,009,000
Non-cash operating activities:
Depreciation and amortization 14,193,000 14,489,000
Loss on disposal of assets 540,000 35,000
Equity in operations of joint
venture 279,000 (641,000)
Other, net 1,170,000 ( 84,000)
Changes in assets and Liabilities:
Accounts receivable (9,063,000) (3,224,000)
Other assets 285,000 (688,000)
Accounts payable and other
liabilities 8,101,000 1,599,000
---------- ----------
Net cash provided by operating
activities 23,935,000 17,495,000
---------- ----------
Cash flows from investing activities:
Sale of assets 5,638,000 260,000
Acquisition and development of software (736,000) (740,000)
Capital expenditures (16,380,000) (19,765,000)
Advances to and acquisition of joint
venture (7,290,000) (365,000)
---------- ----------
Net cash used by investing activities (18,768,000) (20,610,000)
---------- ----------
Cash flows from financing activities:
Proceeds from current and long-term debt --- 3,699,000
Payments of current and long-term debt (13,484,000) (1,195,000)
Sale of common stock 12,930,000 1,237,000
---------- ----------
Net cash provided (used) by financing
activities (554,000) 3,741,000
----------- ----------
Net increase in cash and
short-term cash investments 4,613,000 626,000
<PAGE>
Cash and short-term cash investments
at beginning of period 475,000 1,479,000
---------- ----------
Cash and short-term cash investments
at end of period $ 5,088,000 2,105,000
========== ==========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 2,276,000 2,531,000
Income taxes 2,424,000 722,000
========== ==========
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Certain note information has been omitted because it has not changed
significantly from that reflected in Notes 1 through 14 of the Notes to
Consolidated Financial Statements filed as a part of Item 14 of
Registrant's 1994 Annual report on Form 10-K as filed with the Securities
and Exchange Commission on June 29, 1994.
Notes to Consolidated Financial Statements:
1. Accretion on redeemable common stock of $191,000 for the nine months
ended December 31, 1994 is reflected as a direct charge to retained
earnings.
2. On August 31, 1994 the Company announced the extension of its data
center management agreement with Trans Union Corporation. The
extension will carry the contract through July 2002, its full term
of 10 years. As part of the extension agreement, Trans Union agreed
to give up its right to cause the Company to repurchase the 480,000
shares of common stock then held by Trans Union. At the same time,
the Company gave up its right to call the stock. At December 31, 1994,
the $7,883,000 in carrying value of the redeemable common stock has
been reclassified to stockholders' equity.
The election to extend the data center agreement gives Trans Union
the right to exercise 750,000 additional shares under the warrant
which was issued at the inception of the contract, giving Trans Union
the right to acquire a total of 1,000,000 shares. However, Trans
Union is precluded from exercising the warrant to the extent that
the shares acquired thereunder would cause its percentage ownership
of the Company's common stock acquired pursuant to the data center
management agreement to exceed 10% of the Company's then issued and
outstanding common stock. The $536,000 value of the additional
shares now exercisable under the warrant has been credited to
additional paid-in capital.
During the third quarter, the Company completed a sale of 500,000
shares of newly-issued common stock to Trans Union. The Company
received sales proceeds of approximately $12,000,000.
3. The Company has completed the sale of certain U.S. assets of its
BSA, Inc. subsidiary for $500,000 in cash. The sale closed
July 15, 1994, effective as of June 1, 1994. The effect of the
transaction on consolidated net earnings for the periods reported
was not significant.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
4. On March 9, 1994, the Chapter 11 bankruptcy trustee for CIS
Corporation ("CIS") initiated suit in the United States Bankruptcy
Court for the Southern District of New York seeking to recover
certain computer equipment, together with alleged past due lease
payments, taxes and interest amounting to approximately $2,500,000.
The Company had entered into several capital leases with CIS prior
to CIS declaring bankruptcy in January 1989. The majority of the
amounts sought by CIS relate to continuing lease, tax and interest
charges assessed after the initial lease terms expired and after
the Company had exercised its options to purchase the equipment,
after which time no lease payments were due under the terms of the
lease agreements. The Company intends to defend the case on the
merits, based upon CIS' failure to (1) deliver title, (2) make
scheduled sub-lease payments to the Company, (3) properly record
and acknowledge lease payments actually paid by Acxiom which CIS
claims were not paid, and (4) remit property taxes to the proper
authorities after the Company paid such taxes to CIS. Under
current circumstances, management believes that the ultimate
outcome of the litigation will result in a final settlement,
if any, substantially lower than the amount noted above.
The Company is involved in other various claims and legal actions
in the ordinary course of business. In the opinion of management,
the ultimate disposition of these matters will not have a material
adverse effect on the Company's consolidated financial position or
its expected future consolidated results of operations.
5. At its quarterly meeting held on October 26, 1994, the Company's
board of directors approved a two-for-one stock split of its common
stock, effected in the form of a stock dividend to be distributed on
January 10, 1995. Following approval by the Company's shareholders
of an increase in the number of authorized shares of common stock
from 20 million to 30 million at a special meeting of the
shareholders held December 15, 1994, certificates for the additional
shares were mailed on January 10, 1995 to shareholders of record as
of December 27, 1994.
6. Effective October 1, 1994, the Company purchased the remaining
one-half interest in the InfoBase Services partnership owned by
ADVO, Inc. The purchase price consisted of $9 million in cash
and service discounts over the next four years, aggregating
$2,560,000, which is included in long-term debt at December 31,
1994. If the service discounts do not aggregate at least
$2,560,000 over the four-year period, the shortfall will be
paid in cash.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The Company has accounted for the purchase of the partnership interest
using the purchase method of accounting. The aggregate investment in the
InfoBase partnership has been allocated as follows:
Cash paid $ 9,000,000
Less cash purchased 1,710,000
-----------
Net cash expenditure 7,290,000
Service discounts 2,560,000
Investment in and advances to
joint venture prior to purchase 3,695,000
-----------
Total investment $13,545,000
===========
Software 5,797,000
Excess of cost over fair value of net
assets acquired 7,144,000
Accounts receivable 2,612,000
Property and equipment 442,000
Other assets 7,000
Accounts payable and other liabilities (2,457,000)
-----------
Total investment $13,545,000
===========
The operations of InfoBase are included in the Company's consolidated
results of operations beginning October 1, 1994. Prior to that date,
the Company's 50% equity in the earnings of the joint venture was
included in other income (expense).
The amount of the purchase price allocated to software is being
amortized over the estimated remaining economic life of the software
products of 2 to 4 years. The excess of cost over fair value of net
assets acquired is being amortized using the straight line method over
its estimated economic life of 15 years.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The following consolidated pro forma financial information shows the
results of the Company's operations for the nine months ended December
31, 1994 and 1993 as though the purchase of InfoBase had occurred at
the beginning of each period presented:
1994 1993
==== ====
Revenue $150,206,000 118,153,000
============ ===========
Net Earnings $ 7,902,000 5,838,000
============ ===========
Earnings per share $ .70 .53
============ ===========
Pro forma adjustments have been made to reflect the accounting bases
recognized in recording the purchase and to eliminate the effects of
transactions between the Company and InfoBase.
<PAGE>
Form 10-Q
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- - ---------------------
Consolidated revenue increased 27% to $52.7 million for the quarter ended
December 31, 1994 compared to the same quarter a year ago. Discounting the
impact of units disposed of earlier in the year, revenues are up 49% for
the quarter. This increase primarily reflects significant growth associated
with the Allstate Insurance Company data management agreement combined with
revenue from InfoBase Services whose results are presented on a consolidated
basis after the Company acquired the remaining 50% interest not previously
owned effective October 1, 1994. Revenues from the U.K. increased 7%.
For the nine months ended December 31, 1994, revenue increased 34% to
$147.5 million over the comparable period a year ago. Again discounting
the impacts of the units sold, revenues are up 55%. Revenue increases
associated with the Allstate agreement and InfoBase Services noted above
combined to account for most of the increase. Additionally, financial
services also provided substantial year-over-year gains. U.K. revenue
declined 5% from the prior year.
For the quarter ended December 31, 1994, operating costs and expenses
increased 24% when compared to the same quarter a year ago. Salaries
and benefits increased 6%, computer, communications and other equipment
expenses decreased 2%, and other operating costs and expenses decreased
22%. These expenses were favorably impacted from the units disposed of
noted above. Data costs increased $9.6 million principally due to the
Allstate agreement. Income from operations was 14% for the quarter
compared to 12% in the previous year.
Operating costs and expenses for the nine months ended December 31, 1994
increased 33% over the comparable period a year ago. Salaries and
benefits decreased 1%, computer, communications and other equipment
expenses increased 1%, and other operating costs and expenses decreased
12%. Again, these expenses were favorably impacted by the units disposed
of. Data costs increased $35.1 million principally due to the Allstate
agreement. Income from operations was 11% of revenue for the nine months
ended December 31, 1994 compared to 10% for the first nine months of
the previous year.
Other expenses for the nine months ended December 31, 1994 included a
$500,000 charge for the estimated cost of disposal of certain assets
of the U.S. operation of BSA.
The Company's effective tax rate was 39% for all periods presented.
The Company expects the effective rate to remain in the 38-40% range for
the fiscal year.
<PAGE>
Form 10-Q
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
Capital Resources and Liquidity
- - -------------------------------
Working capital at December 31, 1994 totaled $21.3 million compared to
$23 million at March 31, 1994. At December 31, 1994 the Company had
available credit lines of $31 million of which $6.3 million was
outstanding. The Company's debt-to-capital ratio (capital defined as
long-term-debt plus redeemable common stock plus stockholders' equity)
was 21% at December 31, 1994 compared to 33% at March 31, 1994.
Cash provided from operating activities was $23.9 million for the nine
months ended December 31, 1994 compared to $17.5 million for the same
period a year earlier. In the current year, investing activities used
$18.8 million and financing activities used $0.6 million. Investing
activities included $16.4 million in capital expenditures compared to
$19.8 million for the same period a year ago, and $7.3 million paid to
purchase the remaining half of the InfoBase Services partnership.
Investing activities also included proceeds of $5.6 million from sales
of assets, primarily from the sale of substantially all the assets of
Acxiom Mailing Services and the U.S. operations of BSA. Financing
activities included payments on debt of $13.5 million, partially
offset by proceeds from the sale of stock of $12.9 million.
On August 31, 1994, the Company announced the extension of its data
center management agreement with Trans Union Corporation which will
carry the contract through July, 2002, its full term of ten years.
As part of the extension agreement, Trans Union agreed to give up its
right to cause the Company to repurchase the 480,000 shares of common
stock then held by Trans Union. At the same time, the Company gave up
its right to call the stock. Accordingly, the $7.9 million carrying
value of the redeemable common stock has been transferred to stockholders'
equity.
The Company also announced on August 31, 1994, an agreement to sell Trans
Union an additional 500,000 shares of newly issued common stock. This
sale was completed during the third quarter, with the Company receiving
sales proceeds of approximately $12 million.
As noted in footnote 6 to the consolidated financial statements, the
Company has purchased the remaining one-half interest in the InfoBase
Services partnership owned by ADVO, Inc. The Company paid $9 million
in cash, and also agreed to provide ADVO with service discounts over
the next four years totaling at least $2.6 million. If the service
discounts do not aggregate at least $2.6 million, the shortfall will
be paid in cash.
The Company is proceeding with plans to build a new 92,000 square foot
customer service building on the main campus in Conway, Arkansas and
plans to expand its Conway data center to accommodate increasing data
processing requirements. These building projects are expected to be
completed in the next year at an estimated cost of $12 million.
<PAGE>
Form 10-Q
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
While the Company does not have any other material contractual commitments
for capital expenditures, additional investments in facilities and
computer equipment will continue to be necessary to support the anticipated
growth of the business. In addition, new outsourcing or facilities
management contracts frequently require substantial up-front capital
expenditures in order to acquire existing assets. Management believes that
the combination of existing working capital, anticipated funds to be
generated from future operations and the Company's available credit lines
is sufficient to meet the Company's current operating needs as well as
to fund the anticipated levels of capital expenditures. If additional
funds are required, the Company would use existing credit lines to generate
cash, followed by either additional borrowings to be secured by the
Company's assets or the issuance of additional equity securities in either
public or private offerings. Management believes that the Company has
significant capacity to raise capital which could be used to support
future growth.
<PAGE>
Form 10-Q
ACXIOM CORPORATION
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On December 15, 1994, the Company held a Special
Meeting of Shareholders to consider a proposal to amend
the Company's Certificate of Incorporation to increase
the number of authorized shares of Common Stock, $.10
par value, from 20,000,000 to 30,000,000. The proposal
was duly voted upon and ratified by an affirmative vote
of 8,086,912, with 33,458 votes opposed, 13,586 votes
abstaining, and 0 broker non-votes.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K filed during the third quarter:
None
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
SIGNATURE
---------
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Acxiom Corporation
------------------
Dated February 6, 1995
/s/ Robert S. Bloom
-------------------
(Signature)
Robert S. Bloom
Chief Financial Officer
(Chief Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibits to Form 10-Q
Exhibit Number Exhibit
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
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<PERIOD-END> DEC-31-1994
<CASH> 5,088
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<RECEIVABLES> 38,874
<ALLOWANCES> 0
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<CURRENT-ASSETS> 44,992
<PP&E> 117,038
<DEPRECIATION> 52,699
<TOTAL-ASSETS> 146,236
<CURRENT-LIABILITIES> 23,700
<BONDS> 24,126
0
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