SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1995 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.)
P.O. Box 2000, 301 Industrial Boulevard,
Conway, Arkansas 72033-2000
(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, $0.10 par value per
share, outstanding as of January 19, 1996, was 23,641,709.
<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,
1995 1995
---------- ----------
Assets
------
Current assets:
Cash and short-term cash
investments $ 1,906,000 3,149,000
Trade accounts receivable, net 48,563,000 37,764,000
Other current assets 3,351,000 2,604,000
------------ -----------
Total current assets 53,820,000 43,517,000
------------ -----------
Property and equipment 156,912,000 123,321,000
Less - Accumulated depreciation
and amortization 70,107,000 55,902,000
------------ -----------
Property and equipment, net 86,805,000 67,419,000
------------ -----------
Software, net of accumulated
amortization 10,404,000 9,693,000
Excess of cost over fair value
of net assets acquired 14,367,000 9,638,000
Other assets 22,738,000 17,903,000
------------ -----------
$188,134,000 148,170,000
============ ===========
Liabilities and Stockholders'
Equity
----------------------------------
Current liabilities:
Short-term borrowings 1,174,000 ---
Current installments of long-
term debt 3,893,000 3,564,000
Trade accounts payable 10,591,000 8,342,000
Accrued interest 174,000 522,000
Accrued payroll and related
expenses 4,406,000 5,280,000
Other accrued expenses 5,226,000 7,055,000
Advances from customers 410,000 162,000
Income taxes 3,885,000 39,000
----------- -----------
Total current liabilities 29,759,000 24,964,000
----------- -----------
Long-term debt, excluding current
installments 32,736,000 18,219,000
Deferred income taxes 7,164,000 7,138,000
<PAGE>
Form 10-Q
Deferred revenue 2,304,000 672,000
Stockholders' equity:
Preferred stock --- ---
Common stock 2,427,000 2,308,000
Additional paid-in capital 52,960,000 46,493,000
Retained earnings 63,774,000 50,776,000
Foreign currency translation
adjustment (628,000) 7,000
Treasury stock, at cost (2,362,000) (2,407,000)
------------ -----------
Total stockholders' equity 116,171,000 97,177,000
Commitments and contingencies ------------ -----------
$188,134,000 148,170,000
============ ===========
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,
-------------------------
1995 1994
---------- ----------
Revenue $ 71,315,000 52,742,000
Operating costs and expenses:
Salaries and benefits 25,844,000 17,862,000
Computer, communications and
other equipment 11,998,000 7,110,000
Data costs 14,930,000 14,583,000
Other operating costs and
expenses 9,011,000 5,750,000
----------- ----------
Total operating costs and
expenses 61,783,000 45,305,000
----------- ----------
Income from operations 9,532,000 7,437,000
----------- ----------
Other income (expense):
Interest expense (239,000) (619,000)
Other, net (75,000) (63,000)
----------- ----------
(314,000) (682,000)
----------- ----------
Earnings before income taxes 9,218,000 6,755,000
Income taxes 3,406,000 2,634,000
----------- ----------
Net earnings $ 5,812,000 4,121,000
=========== ==========
Earnings per share $ .22 .18
=========== ==========
Weighted average shares
outstanding 26,057,000 23,192,000
=========== ==========
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,
-------------------------
1995 1994
---------- ----------
Revenue $192,873,000 147,476,000
Operating costs and expenses:
Salaries and benefits 71,281,000 48,693,000
Computer, communications and
other equipment 27,963,000 21,047,000
Data costs 46,422,000 44,502,000
Other operating costs and
expenses 24,816,000 16,731,000
----------- -----------
Total operating costs and
expenses 170,482,000 130,973,000
----------- -----------
Income from operations 22,391,000 16,503,000
----------- -----------
Other income (expense):
Interest expense (1,177,000) (1,876,000)
Other, net (226,000) (808,000)
----------- -----------
(1,403,000) (2,684,000)
----------- -----------
Earnings before income taxes 20,988,000 13,819,000
Income taxes 7,968,000 5,389,000
----------- -----------
Net earnings $13,020,000 8,430,000
=========== ===========
Earnings per share $ .50 .37
=========== ===========
Weighted average shares 25,966,000 22,564,000
outstanding =========== ===========
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,
-------------------------
1995 1994
---------- ----------
Cash flows from operating
activities:
Net earnings $ 13,020,000 8,430,000
Non-cash operating activities:
Depreciation and amortization 14,770,000 14,193,000
Loss on disposal of assets --- 540,000
Equity in operations of joint
venture --- 279,000
Other, net 292,000 1,170,000
Changes in assets and
liabilities:
Accounts receivable (8,167,000) (9,063,000)
Other assets (1,336,000) 285,000
Accounts payable and other
liabilities 1,486,000 8,101,000
---------- ----------
Net cash provided by
operating activities 20,065,000 23,935,000
---------- ----------
Cash flows from investing
activities:
Sale of assets 351,000 5,638,000
Cash acquired in pooling
acquisition 1,624,000 ---
Cash paid in purchase
acquisition (5,914,000) ---
Advances to and acquisition of
joint venture --- (7,290,000)
Development of software (2,984,000) (736,000)
Capital expenditures (28,590,000) (16,380,000)
---------- ----------
Net cash used by investing
activities (35,513,000) (18,768,000)
---------- ----------
<PAGE>
Form 10-Q
Cash flows from financing
activities:
Proceeds from debt 18,108,000 ---
Payments of debt (4,708,000) (13,484,000)
Sale of common stock 2,124,000 12,930,000
Cash dividends paid by acquired
company prior to merger (468,000) ---
Acquisition and retirement of
common stock by acquired
company prior to merger (1,010,000) ---
Issuance of common stock by
acquired company prior to
merger 190,000 ---
---------- ----------
Net cash provided (used) by
financing activities 14,236,000 (554,000)
---------- ----------
Effect of exchange rate
changes on cash (31,000) ---
---------- ----------
Net increase (decrease) in
cash and short-term cash
investments (1,243,000) 4,613,000
Cash and short-term cash
investments at beginning of
period 3,149,000 475,000
---------- ----------
Cash and short-term cash
investments at end of period $ 1,906,000 5,088,000
========== ==========
Cash paid during the period for:
Interest $ 1,525,000 2,276,000
Income taxes 4,122,000 2,424,000
========== ==========
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 15
of the Notes to Consolidated Financial Statements filed as a part
of Item 14 of Registrant's 1995 annual report on Form 10-K as
filed with the Securities and Exchange Commission on June 28,
1995.
Notes to Consolidated Financial Statements:
1. On July 14, 1995, the Company purchased the outstanding stock
of Generator Datamarketing Limited (``Generator''). Generator
is located in Hertfordshire, near London, and provides data
and database marketing software and processing services to its
customers. The purchase price was 4,000,000 pounds sterling
(approximately $6,460,000). The acquisition has been
accounted for as a purchase, and, accordingly, Generator's
results of operations are included in the consolidated
statements of earnings as of the purchase date. The purchase
price exceeded the fair value of the net assets acquired by
$5,648,000. The resulting excess of cost over net assets
acquired is being amortized using the straight-line method
over its estimated economic life of 15 years.
The pro forma combined results of operations, assuming the
acquisition occurred at the beginning of each period
presented, are not materially different than the historical
results of operations reported. Generator had revenue of
$3,122,000 and earnings before income taxes of $215,000 for
the year ended December 31, 1994.
2. On August 25, 1995, the Company acquired all of the
outstanding capital stock of DataQuick Information Systems
(formerly an "S" Corporation) and DQ Investment Corporation
(collectively referred to as "DataQuick"). The Company
exchanged 984,839 shares of its common stock for all of the
outstanding shares of capital stock of DataQuick.
Additionally, the Company assumed all of the currently
outstanding options granted under DataQuick's stock option
plans, with the result that 808,370 shares of the Company's
common stock are now subject to issuance upon exercise of such
options. The acquisition was in the form of a merger of two
wholly owned subsidiaries of the Company in to each of
DataQuick Information Systems and DQ Investment Corporation
and is accounted for as a pooling of interests.
<PAGE>
Form 10-Q
DataQuick is headquartered in San Diego, California, and
provides real property information to support a broad range of
applications including marketing, appraisal, real estate,
banking, mortgage and insurance. This information is
distributed on-line and via CD-ROM, list services, and
microfiche.
The stockholders' equity and operations of DataQuick are not
material in relation to those of the Company. As such, the
Company has recorded the combination by restating
stockholders' equity as of April 1, 1995, without restating
prior years' statements of earnings to reflect the pooling of
interest combination. DataQuick's net assets as of April 1,
1995 totaled $5,773,000. The statements of earnings for the
three months and nine months ended December 31, 1995 include
the results of DataQuick for the entire period presented.
For the year ended December 31, 1994, DataQuick had revenues
and earnings before income taxes of $20,251,000 and $891,000,
respectively. Included in the current fiscal year's results
are revenue of $8,048,000 and earnings before income taxes of
$79,000 for DataQuick for the period from April 1, 1995 to
August 25, 1995.
3. On July 25, 1995, a customer of the Company, Highlights for
Children, Inc. ("Highlights"), filed a demand for arbitration
with the American Arbitration Association. The demand
alleges, among other things, breaches of express warranties in
connection with a software license agreement for the Company's
GS/2000 software product. The demand seeks compensatory
damages of approximately $22,000,000 and punitive damages of
$44,000,000, plus attorneys' fees and costs.
The Company believes that the action is substantially without
merit. Highlights is and has been using the GS/2000 software
in the daily operation of its business for over two years.
Highlights accepted the software as operational as of
September 1, 1993 and paid the final license fee payment.
Acxiom's software license fee and related fees invoices to
Highlights for the GS/2000 software totaled approximately
$2,000,000. The Company intends to vigorously defend the
arbitration claim. Management believes that the ultimate
outcome of the arbitration case will result in a final
settlement, if any, which would not be material to the
financial statements and which would be substantially lower
than the amount noted above.
<PAGE>
Form 10-Q
The Company is involved in various other 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.
4. The Company's unsecured credit agreement providing for
revolving loans in amounts of up to $30,000,000 which was set
to expire August 31, 1996, has been extended through August
31, 1998. The Company's other unsecured credit line of
$1,000,000 has also been renewed and now expires in June 1996.
At December 31, 1995 there was a balance of $17,757,000
outstanding under the Company's revolving credit agreement and
a balance of $500,000 outstanding on the short-term credit
line.
<PAGE>
Form 10-Q
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
---------------------
Consolidated revenue was a record $71,315,000 for the quarter
ended December 31, 1995, an increase of 35% over revenue of
$52,742,000 for the same quarter in the prior year. The
financial services sector grew 42%, primarily due to the
DataQuick acquisition, and the direct marketing sector grew 81%
as a result of revenue related to the marketing services
agreement with Trans Union Corporation. The insurance segment
and the information and communication segment were up 13% and
21%, respectively, while the media segment declined 14%.
For the nine months ended December 31, 1995, consolidated revenue
was $192,873,000, up 31% from $147,476,000 reported for the prior
year. The financial services, insurance, direct marketing, and
information and communication services sectors were up 55%, 11%,
51%, and 16%, respectively, while media decreased 3%. The
DataQuick and Generator acquisitions added year-to-date revenue
of $17,171,000.
Operating costs and expenses increased 36% for the quarter
compared to the prior year. Salaries and benefits increased 45%,
computer, communications and other equipment expenses increased
69%, data costs increased 2%, and other operating costs and
expenses increased 57%. The expense increases were primarily
associated with the DataQuick and Generator acquisitions, the new
data center management agreement with the Polk Company, which was
effective November 1, 1995, and which is discussed in greater
detail under "Capital Resources and Liquidity," and the Trans
Union marketing services contract. Operating margin for the
quarter was 13% compared to 14% a year ago.
For the nine months ended December 31, 1995, operating costs and
expenses increased 30% when compared with the same period in the
previous year. Salaries and benefits increased 46%, computer,
communications and other equipment expenses increased 33%, data
costs increased 4%, and other operating costs and expenses
increased 48%. Once again, most of the expense increases were
associated with the acquisitions and new contracts noted above.
Excluding these effects, operating expenses increased 10%.
Operating margin for the nine months was 12% of revenue compared
to 11% for the same period in the prior year.
Interest expense for the current quarter and the year-to-date
period were lower than in the prior year, due to lower average
levels of debt, lower interest rates, and capitalization in the
current year of approximately $400,000 in interest incurred in
construction of new facilities. Other expense in the first
quarter of the prior year included $500,000 for the estimated
disposal cost of certain BSA assets in the United States.
<PAGE>
Form 10-Q
The Company's effective tax rate was 37% for the current quarter
and 38% for the nine months ended December 31, 1995 compared to
39% for the comparable periods in the prior year. The effective
tax rate for the year ended March 31, 1995 was 38%. The Company
expects the effective tax rate for fiscal 1996 to remain in the
37 - 39% range.
Capital Resources and Liquidity
-------------------------------
Working capital at December 31, 1995 was $24,061,000 compared to
$18,553,000 at March 31, 1995. At December 31, 1995 the Company
had available credit lines of $31,000,000 of which $18,257,000
was outstanding. The Company's debt-to-capital ratio (capital
defined as long-term debt plus stockholders' equity) was 22% at
December 31, 1995 compared to 16% at March 31, 1995. As
discussed in footnote 4 to the consolidated financial statements,
the Company's $30,000,000 revolving credit agreement which was
set to expire August 31, 1996 has been amended to extend through
August 31, 1998.
Cash provided by operating activities was $20,065,000 for the
nine months ended December 31, 1995 compared to $23,935,000 for
the same period a year earlier. In the current period
$35,513,000 was used by investing activities and $14,236,000 was
provided by financing activities. Investing activities included
capital expenditures of $28,590,000 compared to $16,380,000 for
the prior period. Investing activities also included $5,914,000
paid for the acquisition of Generator Datamarketing Limited
("Generator") which is discussed more fully in footnote 1 to
the consolidated financial statements. Generator's results of
operations are included in the Company's consolidated results for
the second and third quarters of the fiscal year. Investing
activities in the prior year included $5,638,000 collected from
the sale of assets, primarily from the sale of substantially all
of the assets of Acxiom Mailing Services, and $7,290,000 paid for
the acquisition of the remaining one-half interest in the
InfoBase partnership. Financing activities in the current year
include the effects of cash dividends and common stock
transactions made by DataQuick Information Systems
("DataQuick") prior to its acquisition in a pooling-of-interest
transaction on August 25, 1995. For a more detailed description
of the DataQuick merger, see footnote 2 to the consolidated
financial statements. The statements of earnings and cash flows
for the current year include the results of DataQuick for the
entire periods presented.
<PAGE>
Form 10-Q
The Company has completed and begun to occupy an expansion of its
Conway data center and a new 100,000 square-foot customer service
building on its main campus in Conway, Arkansas. The data center
expansion cost approximately $4,000,000 and the new customer
service building cost approximately $8,000,000. Both projects
were funded through current operations and existing credit lines.
Management expects total capital expenditures for fiscal year
1996 to be approximately $40,000,000.
On October 4, 1995, the Company announced a letter of intent to
form a business alliance with the Polk Company ("Polk"). The
Company has assumed management of Polk's data center in Taylor,
Michigan and has completed a definitive ten-year agreement
effective November 1, 1995. A phased program will transfer
Polk's data center operations to the Company's headquarters in
Conway. Management estimates the agreement will contribute $15-
16 million in initial annual revenue. The Company and Polk are
also exploring joint ventures in marketing, product development,
data acquisition, and international sales. The exact nature of
the partnership in these areas will be determined by future
discussions.
As discussed in footnote 3 to the consolidated financial
statements, the Company is involved in an arbitration claim
which, if resolved against the Company, could result in payment
of an amount which could be material to the financial statements.
However, management believes the ultimate outcome of this case
will result in a settlement, if any, which will not be material
to the financial statements.
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 1. Legal Proceedings.
On March 9, 1994, the chapter 11 bankruptcy trustee for
CIS Corporation ("CIS") initiated suit against the
Company 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 related to continuing lease, tax
and interest charges assessed after the initial lease
terms expired and after the Company had exercised its
option to purchase the equipment, after which time no
lease payments were due under the terms of the lease
agreements. The Company's defense rested 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 the
Company, which CIS claimed were not paid, and (4) remit
property taxes to the proper authorities after the
Company paid such taxes to CIS. The Company also filed
a counterclaim against CIS for compensatory and
punitive damages. The dispute was settled and the suit
was dismissed with prejudice by order of the court on
November 17, 1995, which order became final on or about
December 1, 1995. Under the terms of the settlement
agreement, the Company paid CIS $332,448.94 and CIS
released all of its claims against the Company. CIS
further agreed to be responsible for taxes on the
equipment up to the date the order was final and agreed
to indemnify the Company for any title challenge to the
equipment. The Company also dismissed its counterclaim
with prejudice and withdrew its proof of claim against
CIS in the amount of $37,732.44.
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 January 29, 1996
/S/ Robert S. Bloom
-------------------------------
(Signature)
Robert S. Bloom
Chief Financial Officer
(Chief Accounting Officer)
<PAGE>
Form 10-Q
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>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1995
<CASH> 1,906
<SECURITIES> 0
<RECEIVABLES> 48,563
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 53,820
<PP&E> 156,912
<DEPRECIATION> 70,107
<TOTAL-ASSETS> 188,134
<CURRENT-LIABILITIES> 29,759
<BONDS> 32,736
0
0
<COMMON> 2,427
<OTHER-SE> 113,744
<TOTAL-LIABILITY-AND-EQUITY> 188,134
<SALES> 0
<TOTAL-REVENUES> 192,873
<CGS> 0
<TOTAL-COSTS> 170,482
<OTHER-EXPENSES> 226
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,177
<INCOME-PRETAX> 20,988
<INCOME-TAX> 7,968
<INCOME-CONTINUING> 13,020
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<NET-INCOME> 13,020
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
