UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 1997
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)
Securities registered pursuant to Section 12(b)of the Act: None
Securities registered pursuant to Section 12(g)of the Act:
Common Stock, $.10 Par Value
(Title of Class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the registrant's Common Stock,
$.10 par value per share, as of June 20, 1997 as reported on the Nasdaq National
Market, was approximately $645,337,091. (For purposes of determination of the
above stated amount only, all directors, officers and 10% or more shareholders
of the registrant are presumed to be affiliates.)
The number of shares of Common Stock, $.10 par value per share, outstanding as
of June 20, 1997 was 51,815,787.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for the
fiscal year ended March 31, 1997 ("Annual Report") are incorporated by reference
into Parts I and II.
Portions of the Proxy Statement for the Annual Meeting of Shareholders
to be held July 30, 1997 ("1997 Proxy Statement") are incorporated by reference
into Part III.
Forward-Looking Statements or Information
Certain statements in this filing and elsewhere (such as in other
filings by the Company with the Securities and Exchange Commission ("SEC"),
press releases, presentations by the Company or its management and oral
statements) may constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties, and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors are
discussed below under the heading "Additional Information Regarding
Forward-Looking Statements" and include, among other things, the possible
adoption of legislation or industry regulation concerning certain aspects of the
Company's business; the removal of data sources and/or marketing lists from the
Company; the ability of the Company to retain customers who are not under
long-term contracts with the Company; technology challenges; Year 2000 issues;
the risk of damage to the Company's data centers or interruptions in the
Company's telecommunications links; acquisition integration; the effects of
postal rate increases; and other market factors.
PART I
Item 1. Business
General
The Company is in the business of data delivery and information
integration and management for customers in the United States and the United
Kingdom, and, to a smaller extent, Europe and Malaysia. While in the past the
Company's traditional business was focused upon the provision of data processing
and related computer-based services mainly to direct marketing organizations,
the Company's business has expanded in recent years beyond the direct marketing
industry. For some of its major customers, the Company provides assistance in
the form of information/database management, data center management and/or the
provision of data, the primary purpose of which may be for activities other than
direct marketing. For example, the Company's largest customer, Allstate
Insurance Company, uses the Company's information management services and data
for the purpose of underwriting insurance. The Company's second largest
customer, Trans Union Corporation, one of the three major credit bureaus in the
U.S., has among other things outsourced the operation of its data center to the
Company.
In the traditional direct marketing area, the Company is one of the
leading providers of computer-based marketing information services and marketing
data. The Company offers a broad range of services and data to direct marketers
and to other businesses which utilize direct marketing techniques such as direct
mail advertising, database marketing and mining of data warehouses. The Company
assists its customers with the marketing process, including project design, list
brokering and management, list cleaning, list enhancement and list production,
database creation and management, and fulfillment and consumer response
analysis.
Corporate Information
The Company was originally incorporated in 1969 as Demographics, Inc.,
an Arkansas corporation which later became known as Conway Communications
Exchange, Inc. In connection with its initial public offering in 1983, the
Company was reincorporated in Delaware as CCX Network, Inc. In 1988, the name
Acxiom Corporation
<PAGE>
was adopted. The Company is headquartered in Conway, Arkansas, and has
additional operations in twenty-three states, the District of Columbia, Canada,
the U.K., and Malaysia. The Company employs approximately 3,050 employees
("associates").
Two acquisitions were completed by the Company during the past fiscal
year, both of which became effective in April 1996. The Company purchased
substantially all of the assets and assumed certain liabilities of Direct
Media(TM)/DMI, Inc. ("Direct Media"). Direct Media, the largest list
management/list brokerage operation in the world, provides list management, list
brokerage and other list consulting services to business-to-business and
consumer list owners and mailers. See the detailed description of Direct Media's
business below under "The Company's Products and Services, Acxiom Data Products
Division."
During the past fiscal year, the Company also acquired all of the
outstanding capital stock of Pro CD(R), Inc. ("Pro CD"). Pro CD provides
reference data, both on CD-ROM, batch, and on-line, including telephone data
derived from telephone directories for the U.S. and Canada, mapping data, and
related products and services. See the detailed discussion of Pro CD's business
below under "The Company's Products and Services, Acxiom Data Products
Division."
The acquisitions of Direct Media and Pro CD were preceded by two
acquisitions in the prior year, when the Company purchased the outstanding stock
of Generator Datamarketing Limited ("Generator") and DataQuick(R) Information
Systems ("DataQuick"). Generator, located in England, provides data and database
marketing software, including the Rapidus(TM) product, and processing services
to its customers. These services have been integrated with those of Acxiom U.K.,
Ltd., the Company's primary U.K. subsidiary.
DataQuick, whose headquarters are in San Diego, California, provides
real property information to support a broad range of applications including
marketing, appraisal, real estate, banking, mortgage, credit/collection,
insurance and research. The information is distributed on-line and via CD-ROM,
list services, and microfiche. See the discussion below under "The Company's
Products and Services, Acxiom Data Products Division."
Technology Applications
In the past, the Company relied heavily in its traditional data
processing business upon the use of mainframe hardware (older and less expensive
versions) for batch processing, and utilized more current technology for on-line
processing. Due to increased customer demand for access to information, the
Company has begun using faster and more cost-effective ways to deliver its
services through client/server and networking solutions. The Company has
incorporated a number of new strategies into its processing environment: (1)
Several of the Company's core application systems products have been
re-engineered to run on a parallel processing architecture, thereby allowing the
Company to significantly reduce its processing cycle time and improve the
scalability of its legacy list processing applications; (2) Dedicated
stand-alone mainframes have been utilized as attached processors to the
Company's computing enterprise, resulting in the ability to off-load high volume
list processing work onto cost efficient data processing platforms; (3) The
Company installed a Local Area Network ("LAN") system and implemented extensive
use of personal computers ("PCs") as front-end client workstations, providing a
graphical user interface ("GUI") front-end user access capability to all
internal and customer applications, as well as the ability to institute a
client/server architecture within the Company's existing computing enterprise;
and (4) Relationships with several third party decision support systems ("DSS")
software providers have been developed pursuant to which the Company is
authorized to sublicense the DSS products of such providers as part of its
overall customer solution. The third party DSS providers with whom the Company
currently has alliances are Oracle Corporation; Red Brick Systems, Inc.;
Microstrategy, Inc.; Arbor Software Corporation; Trajecta, Inc.; Business
Objects, Inc.; Appsource Corporation; Exchange Applications, Inc.; and Informix
Software, Inc. The Company has dedicated substantial manpower and computer
resources to its DSS laboratory, whose purpose is to test the various third
party DSS software products in real-time customer environments.
To accommodate a balanced distribution of processes among the
client/server technology, DSS and mainframes, the Company is incorporating an
industry standard network environment using the "TCP/IP" protocol (Transmission
Control Protocol/Internet Protocol), which is the standard currently used in
most private networks.
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For its applications to be able to interface in this new network environment,
the Company has written a communications application program interface ("API")
specifically for TCP/IP. The API may be used as a standard for the Company's
applications that must communicate with other Acxiom applications (distributed
processes and remote products). It is designed to fit into customer environments
without imposing non-standard requirements on their desktops or networks. Using
this simplistic approach, implementation of the Company's products at customer
sites should be significantly easier than in the past.
As the processes grow on the Company's server network, the requirement
to move data across the network grows as well. To meet this requirement, the
Company has adopted an infrastructure that will enable direct peer-to-peer
communications between mainframe and server-based applications, along with
increased bandwidth. This strategy is designed to provide much faster and more
reliable application access than was available in the past. While management
believes that this configuration will be adequate for the foreseeable future,
the Company will continue to assess other technologies that can be implemented
in a phased approach. Network stability and manageability are also being
addressed to support this distributed environment. Management believes that this
approach to networking enhances the Company's ability to deliver improved
functionality within its network as well as connectivity to customer networks.
The Company's Products and Services
Following the Company's recent acquisitions, a decision was made by
management to realign the Company's business into four operating divisions in
order to maximize synergies between similar business units. The divisions are
referred to as the Acxiom Data Products Division, the Acxiom Services Division,
the Acxiom International Division, and the Acxiom Alliances Division. The
products and services of each division are discussed below:
Acxiom Data Products Division
The focus of the recent acquisitions has been to strengthen the
Company's position as a leading provider of data. With the addition of the
DataQuick real property data, the marketing lists managed by Direct Media, and
the Pro CD reference data, the Company has made substantial progress towards
this goal. When combined with the InfoBase(TM) data already offered by the
Company and the Company's developing on-line Interactive Information Services
offerings, opportunities exist for a variety of applications for the Company's
existing customers. The acquisitions have also created the potential for new
markets, such as the middle market and small companies market ("Middle Tier
Market"), Internet and consumer markets.
The Data Products Division is comprised of InfoBase, Direct Media,
DataQuick, Pro CD and Interactive Information Services. Headquartered in Conway,
Arkansas, the Division also has locations in Arizona, California, Colorado,
Connecticut, Florida, Illinois, Massachusetts, Minnesota, Nevada, New Hampshire,
New York, North Carolina, Ohio, Oregon, Vermont, Virginia, Washington, and
Canada. Approximately 1,150 associates work in this division. The components of
the Data Products Division are as follows:
InfoBase provides list enhancement services to companies engaged in
direct marketing to consumers. The household data which comprises the
IBConsumerSM database is owned by data contributors who permit the Company to
access their data for purposes such as list enhancement, list analysis,
segmentation modeling, and merge/purge screening. The type of data made
available includes consumer names and addresses, as well as such demographic
information as age, gender, approximate income brackets, occupation, marital
status, the presence of other household members, and car and home ownership.
Management believes that the IBConsumer database is the most complete database
of its kind in the United States, covering over 95% of all U.S. households.
In addition to its IBConsumer database, the Company until recently
offered a business database, IBBusinessSM, to companies engaged in direct
marketing to businesses. The IBBusiness database was discontinued in May 1997
due to two of its three data suppliers having withdrawn their data from the
combined file.
<PAGE>
InfoBase also offers a computerized listing (the "EDGE File") of all
U.S. telephone book white page information. With the acquisition of Pro CD,
which also compiles white page telephone directories, the combined expense of
compiling updates to the EDGE File has significantly decreased. The Company
markets the Pro CD file on CD-ROM to the Middle Tier Market, and markets both
the Pro CD file and the EDGE file to large-volume users.
Direct Media, the largest list management/list brokerage company in the
world, provides list management, list brokerage, package insert marketing,
internet marketing, Web site brokerage and management, and analytical and
modeling services to business-to-business and consumer list owners and mailers.
The Direct Media sales staff is the largest in the industry and has substantial
experience in the market segments served by Direct Media. As a list manager,
Direct Media controls over 1200 lists in the U.S. and 175 lists in the U.K. As a
list broker, Direct Media offers a variety of services, including private
prospecting databases from which a mailer may choose the lists that best fit its
specific needs to build its own database. Cooperative databases are offered as a
more economical alternative to the private databases. Included among the
cooperative databases is SmartBase(TM), comprised of the mailing lists of
hundreds of the country's best consumer merchandise vendors. By specifying the
demographic characteristics of its targeted market (instead of requesting
particular lists), a user may generate a mailing list using SmartBase.
Management estimates that approximately 12% of all third class mail in the U.S.
is processed through Direct Media. For 20 years prior to the acquisition, Direct
Media had been one of the Company's primary customers. The acquisition has
enabled the Company to offer its customers expanded capabilities and services
which should result in a significant competitive advantage in the marketplace.
By combining Direct Media's marketing expertise with the Company's software
systems, more efficient mailing programs are possible for the Company's
customers.
DataQuick provides data products, list targeting, list fulfillment, and
file enhancement centered around real property information. Data is gathered
from a number of sources including county assessors, county recorders and the
U.S. Census Bureau. DataQuick currently has 17 on-line databases containing
information on over 70 million properties affecting over 140 million consumers
across the country. Through alliances with several regional real property data
providers in other parts of the U.S., DataQuick offers additional databases
containing real property information on other major Metropolitan Statistical
Areas ("MSAs") throughout the country. Several CD-ROM titles are offered,
including Countywide Property Data (currently available for five western
states), Assessors Parcel Maps (actual plat maps for the five states), and
CD-ShareData(TM) (a product for lenders which can be used to measure market
potential and analyze product performance). Specifically for the title insurance
industry, DataQuick offers TitleShare(R), a product designed to assist in market
share analysis and long-term planning; TOPS (Title Operations Property System),
a product which provides property profiles; and GOTOPS, an Internet access
product exclusively available to the title insurance industry which provides
property reports with custom comparable sales, nearby homeowners, neighborhood
information, U.S demographic census data, schools and maps, all for a defined
area. DataQuick's ListServices(TM) division, which combines real property data
with InfoBase demographic data, is used by target marketers for such purposes as
determining types and sizes of homes, the year a home was built, and length of
current ownership. Other lists focus on new homeowners who have moved within the
last six months, and real estate investors. Another file provides market values,
the available and lendable equity, loan-to-value ratio, and purchase and loan
amounts. For the general public, DataQuick offers DQ Express where customized
reports drawn from all its information databases can be obtained. In all,
DataQuick has over 50 real property databases, products and services. The
information is distributed on a variety of media: On-line, Internet, CD-ROM,
magnetic tape, floppy disk, Bulletin Board Service (electronic transmission),
microfiche, and hard copy reports or mailing labels. The DataQuick information
has a broad range of applications and a variety of markets, including appraisal,
real estate, banking, mortgage, investments, credit / collection, marketing,
insurance, home improvements, home products marketing, and research. Management
believes that the combination of the DataQuick information and services with the
Company's other data products and marketing capabilities gives it a competitive
advantage in the marketplace.
Pro CD provides telephone data derived from telephone directories for
the U.S. and Canada, mapping data, and other related reference products and
services. These products are distributed as CD-ROM, on-line and batch products.
Through its Select Phone(R) and Select Phone Deluxe(TM) family of products, Pro
CD provides electronic telephone, name and address data for approximately 112
million residential and business listings as
<PAGE>
published in the U.S. and Canadian telephone directories, searchable by name,
street, city, county, state, ZIP Code, telephone number, SIC (Standard Industry
Classification) code, geographic location, and MSA. Pro CD's newest CD-ROM
product, Listings Deluxe(TM), includes both residential and business listings,
street level maps and other reference data combined within one product. Through
its recently released Select Link(TM) product, Pro CD offers direct links to
E-mail addresses, maps, census profiles, other companies' home pages, stock
quotes, financials, weather information and other internet sites. Select Link
also provides a subscription service which allows the user to conduct new
searches or verify existing listings through a nationwide telephone database
which is updated daily. Another product, Select Street Atlas(TM), is a complete
street atlas that imports and displays lists of names and addresses from Select
Phone or other databases. Another product, Select Mail(TM), is a postal program
that edits and corrects addresses, and sorts and barcodes mailings to comply
with postal regulations. The market for Pro CD's products includes the small
office/home office market, the Middle Tier Market, including but not limited to
real estate companies, financial service companies, law firms, companies
requiring data for site licenses or for call center integration, and individual
consumers. Management anticipates that the acquisition of Pro CD will allow the
Company, through retail channels, to solicit both the Middle Tier Market and
traditional markets for expanded sales of data-enriched products.
Interactive Information Services provides customers with secure,
on-line access to the demographic, real estate and telephone data described
above. This information is available 24 hours a day, seven days a week, except
for regularly scheduled weekly maintenance periods. Many traditional services of
the Company are offered as well, including Addressability(R), an address
standardization and geographic coding system that corrects and standardizes the
city, state and ZIP Code components of an address, and which assigns the carrier
route, ZIP+4, delivery point and other postal codes. Also offered is Geo-Coding
On-Line, which is used to enhance a mailer's addresses with geo-demographic
information. Other elements which may be overlayed are latitude, longitude,
Census Tract Code, Census Block Code, and MSA Code.
Acxiom Services Division and Acxiom International Division
The services provided by the Acxiom Services Division and the Acxiom
International Division have historically formed the core of the Company's
business and continue to be key to its operations. The revenue units comprising
the Acxiom Services Division are Citicorp, IBM, Retail, Insurance, Publishing,
Telecommunications, Utilities, and High Tech Information Services. Approximately
650 associates are employed within this division, which is headquartered in
Conway, Arkansas, with additional locations in California, Colorado, Georgia,
Kansas, Minnesota, Missouri, New York, Texas and Washington, D.C.
The International Division, with headquarters in London, England,
employs approximately 600 associates. The revenue groups comprising this
division are the U.K. Group (Financial Services/Insurance/Charities/Government,
Fast Moving Consumer Goods & Fulfillment Services Delivery, Business
International Business Development Group, and the Malaysia Group.
Through the Services Division and the International Division, the
Company offers data processing and related services to the direct marketing
industry and to a variety of other businesses. Management believes, based upon
its knowledge of the industry, that the Company is one of the leading suppliers
of information services to the direct marketing industries in the United States
and the United Kingdom, offering companies that use direct marketing access to
extensive customer lists and databases of information, as well as providing a
wide range of services and software that permit customers to precisely tailor
their mailing lists in accordance with specifically targeted marketing plans.
Efforts are currently underway to expand the International Division's
services to customers in the Netherlands, France, Germany and Malaysia.
Management believes that the market for the Company's services in such locations
is largely untapped. Some of the considerations which must be considered
include, but are not limited to, the following: Strict data protection laws in
some countries would require the Company to make adjustments in the way in which
it collects and disseminates data. Several European countries require an
"opt-in" process whereby
<PAGE>
prior consent by an individual consumer is necessary in order for certain data
about the consumer to be sold. Secondly, the Company's proprietary software
would have to be adapted to fit the address requirements, languages and
character sets of other countries. Thirdly, the strength of any local competing
businesses would have to be evaluated. In addition, cultural differences would
have to be taken into account.
Currently, through the Services Division and the International
Division, the Company provides computer-based targeted marketing support for
direct marketers, which support consists of planning and project design, list
cleaning, list enhancement, list order fulfillment, database services and
response analysis. In addition to focusing upon direct marketing programs
designed to obtain new business prospects for its customers, the Company assists
its customers in creating marketing databases which enable the customers to
focus upon developing their existing clientele. Such databases allow a marketer
to analyze its customers' buying habits, and to narrowly target advertising
campaigns to those customers who are most likely to respond. In addition, the
Company offers integrated data processing software systems and enhancement
services which provide its customers with rapid access to marketing information
housed at the Company's Conway, Arkansas and Sunderland, England data centers.
The direct marketing industry is composed of businesses that use direct
mail order and other methods of direct consumer contact to promote their
products or services. Unlike traditional forms of advertising which are aimed at
a broad audience through print or broadcast media, direct marketing involves
targeted advertising sent directly to potential customers. Historically, direct
marketing programs have had a positive response rate of approximately 1 to 3%.
Consequently, direct marketers are heavily dependent upon specific market
information and the application of statistics and computer modeling to assist
them in predicting market behavior and thereby maximizing the response rate. The
products and services offered by the Company are designed to assist its
customers to achieve a higher rate of return on their marketing investments by
selectively targeting their marketing efforts to individuals who are most likely
to respond.
An integral aspect of the Services and International Divisions'
business is offering the Company's customers access to extensive marketing lists
and databases of information. The Company either provides its proprietary data
or acts as a link between those who own or manage lists and those who buy or use
lists for direct marketing purposes. Based upon its knowledge of the operations
of its competitors and its customers, management believes that the Company has
been entrusted with the largest aggregation of names, addresses and related data
available to the U.S. and the U.K. direct marketing industry and to other
businesses.
Direct marketing programs require the analysis and segmentation of
large amounts of data on past customers and known marketplace prospects to
identify desired purchasing characteristics. Using advanced technology, the
Company can integrate the diversified databases of its customers into a single
database. Then external InfoBase data, consisting of demographic, behavioral and
comparative customer information, is overlayed to create a unified customer
database. The customer's information then becomes accessible and actionable
enterprise-wide through the Company's proprietary desktop tools and services
and/or through third party DSS tools.
Typically, decision support involves the ability to extract
user-defined segments from an aggregation of data ("data warehouse") via a query
capability and then to profile and/or report on a data segment, as well as the
ability to perform more detailed analysis. From the resulting information,
specific targeted marketing strategies and personalized communications can be
generated. Through its data communications network, the Company provides access
to data warehouse information to drive decision support strategies for its
customers. The Company also provides several decision support software tools and
services which are designed to provide customers with access to their data
warehouse resources and to further allow them to design and execute their
strategic marketing initiatives. As noted above (see "Technology Applications"),
the Company has expanded its architecture to include the DSS environment. In
this area, the Company offers custom systems integration services that may
combine the Company's software with third party DSS software products to provide
a customized decision support solution for a customer or an industry.
The Company's primary vehicle for rapid delivery of these services in
the U.S. is its data communications network through which direct marketing
customers receive authorized access to lists and databases housed at the
Company's Conway data center. Management believes that the Company has one of
the largest capacities for
<PAGE>
database management, mailing list processing and networking in the industry.
Through its communication network, lists may be interrogated and regrouped with
marketing information selected by a customer, including geographic, demographic,
psychographic and previous consumer response data, so as to create the desired
universe of names. A customer can then create, select, merge and enhance the
lists available to it for even more precise market segmentation, thus enabling
each mailing program to be tailored for a carefully targeted sales audience.
The Company also offers several front-end desktop DSS products,
including the third party DSS software described above (see "Technology
Applications") and the Company's proprietary Acxiom MarketGuide(TM) and Rapidus
products. Such products are designed to permit users with even minimal training
to extract information from large databases via desktop computers. The Company
has also established a unified software development team composed of both U.S.
and U.K. associates. These associates will focus on the development of key
generic software products for use by the Company's customers. Part of this
initiative is aimed at linking Company tools and/or data with third party tools
and/or data to provide a full function system to database marketers for data
analysis, promotion design, database build, campaign fulfillment, management and
tracking. This team is also involved in developing a PC-based software tool
designed to provide support to marketers for campaign administration, response
profiling and database scoring.
In addition to the traditional marketing services provided by the
Services Division, the Company, through its subsidiary, Acxiom RM-Tools, Inc.
("Acxiom RM-T") is managing the outside purchasing and internal processing of
the consumer data Allstate Insurance Company ("Allstate") uses for the
underwriting of its lines of automobile insurance. The five-year information
management agreement initially entered into in 1992 is currently being
renegotiated for an extended term. The functions now being performed for
Allstate were previously handled through Allstate's various regional offices.
The savings which result from Acxiom RM-T's management of this data are shared
equally by the two parties. Under the agreement, Acxiom RM-T provides software
systems and database management for Allstate to use in connection with new
automobile insurance policies across the United States. Included among the data
which Acxiom RM-T furnishes to Allstate is motor vehicle registration
information, automatic claims history, driver information, financial stability
information, vehicle verifications, property telephone inspections, property
replacement costs and property claims history. In addition to using Acxiom
RM-T's services in connection with writing new policies, Allstate uses software
systems developed by Acxiom RM-T to help evaluate auto policy renewals and to
market various types of insurance to new and existing customers.
Allstate has the right to obtain a non-transferable, non-exclusive
license to the core software utilized in processing Allstate's data, upon
payment of the then current standard software license fee. The Acxiom RM-Tools
software product, as jointly developed by the Company and Allstate, is also
accessible for use by other personal lines property and casualty risk insurers.
The agreement with Allstate reflects the Company's strategy to obtain long-term,
large-volume contracts which generate predictable revenue. During the past
fiscal year, Allstate accounted for approximately $67.7 million of total
revenues.
Through Acxiom RM-T, the Company is pursuing contracts with other
insurance companies whereby Acxiom RM-T would provide information management
services to assist with the insurers' risk management, underwriting and
marketing functions. Together with Fair, Isaac and Company, Incorporated ("Fair
Isaac"), a leading developer of scoring technology for the insurance and credit
industries, Acxiom RM-T offers risk management information services to the
insurance industry. The Company and Fair Isaac have completed development of
InfoScore(TM), a demographic marketing scorecard for the personal lines
insurance industry segment that is used to rank applicants by risk level.
In addition to the data processing services offered by the Company in
the U.K., the Company also provides comprehensive promotional materials handling
and fulfillment services to its U.K. customers. Based upon its knowledge of the
industry, management believes that it is one of the largest firms of its kind in
the U.K. Among the services provided are promotional fulfillment, competition
handling, in-bound telemarketing and response handling, lead monitoring,
contract packing and mailing, coupon redemption, and optical character
recognition support. Through the use of computerized tracking and monitoring
systems, the Company is able to provide customers with current reports on the
progress of their marketing campaigns and can furnish customers with information
useful for
<PAGE>
promotion analysis and subsequent database campaigns. The Company's proprietary
software product Tracx(TM) also provides support for points redemption
processing for loyalty programs.
Acxiom Alliances Division
The Alliances Division encompasses strategic relationships which the
Company has with its outsourcing and finance industry<F1> customers. The Company
provides outsourcing services whereby it manages a customer's data center and/or
provides information systems functions, both on-site at the customer's location
and from the Company's Conway, Arkansas data center. The services currently
provided by the Company to such customers include data center management;
information management; hardware installation and support; account management
systems; installation, support and enhancement of software; customized software
programming; and licensing of the Company's proprietary software. For its
finance industry customers, the Company provides more traditional direct
marketing services as described above under the "Acxiom Services Division and
Acxiom International Division" discussion.
The revenue units within the Alliances Division are Trans Union, Polk,
ADP, Guideposts, and three units within the Financial Services industry.
Headquartered in Conway, Arkansas, the Alliances Division has additional
operations in Colorado, Illinois, Kansas, Michigan, New York, Ohio, Texas and
Virginia. Approximately 650 associates are in this division. A description of
the Company's key relationships within the Alliances Division follows.
Under a data center management agreement effective since 1992 with
Trans Union Corporation ("Trans Union"), one of the three largest credit bureaus
in the U.S., the Company, through its subsidiary Acxiom CDC, Inc., manages Trans
Union's data processing center in Chicago, Illinois. In December 1996, the
Company and Trans Union agreed to extend the data center management agreement
through August 2005, three years beyond its original expiration date in 2002,
for a term of 13 years. For additional discussion, see Note 10 of the Notes to
Consolidated Financial Statements in the Company's Annual Report on p. 39, which
information is incorporated herein by reference. In addition, in 1994 an
agreement was executed between the Company and Trans Union's Marketing Services
Division. Under the Marketing Services Agreement, the Company provides all of
the data processing services, as well as application enhancements, for Trans
Union's Marketing Services Division. The term of that agreement, which
originally expired in 2002, was also extended in December 1996 for an additional
three years to 2005. Management anticipates aggregate revenues in excess of $400
million over the remaining life of both contracts. The preceding statement is a
"forward-looking statement" for purposes of this Report and is qualified by the
cautionary language that appears under the headings "Forward-Looking Statements
or Information" and "Additional Information Regarding Forward-Looking
Statements."
In 1995, the Company entered into data center management agreements
with Automatic Data Processing ("ADP"), and The Polk Company ("Polk"), one of
the largest data compilation companies in the United States. Pursuant to the
agreements, both companies outsourced certain of their data center functions to
the Company. These functions have been transferred to the Company's Conway,
Arkansas data center. The terms of the agreements are five (5) years and ten
(10) years, respectively. Annual revenues from the ADP agreement are expected to
generate approximately $3 million, while annual revenues from the Polk agreement
are expected to generate approximately $17 million. The preceding statement is a
"forward-looking statement" for purposes of this Report and is qualified by the
cautionary language that appears under the heading "Forward-Looking Statements
or Information" and "Additional Information Regarding Forward-Looking
Statements."
- - --------------------------
<F1> All finance industry customers are served by this division, with the
exception of Citibank, N.A., which is served by the Acxiom Services Division.
<PAGE>
Pursuant to an agreement with Guideposts, Inc., A Church Corporation
("Guideposts"), one of the largest magazine publishers in the U.S., the Company
manages Guideposts' data processing personnel, computer technology and
operations. The agreement, which originally began in 1989, was recently extended
for an additional ten year term. Under related agreements, the Company has
agreed to provide software development services to Guideposts, and has sold all
of the rights to the GS/2000 R97 subscription fulfillment software to
Guideposts. Under the original 1989 agreement, the Company acquired an exclusive
license to develop, and to ultimately purchase, Guideposts' proprietary
subscription fulfillment software ("GS/2000(R)"). GS/2000 R97 is a
Guideposts-specific version of the GS/2000 software. The Company stopped
marketing other customized versions of GS/2000 in 1995, after having installed
the customized software at three publishing companies and at one membership and
continuity organization.
The Alliances Division also has agreements with several major financial
institutions. The Division's Financial Services Group provides various services,
including traditional data processing and direct marketing services, database
build and management services, and list enhancement services. (See the
discussion above under "Acxiom Services Division and Acxiom International
Division" for compete description of these traditional direct marketing
services.) The Division continues to expand its coverage of the largest
financial institutions within the U.S. through extensive sales and marketing
efforts.
It is the Company's intention to continue seeking outsourcing and
information management agreements in the future. Because of the Company's skills
and technology in the area of data processing, and because of the long-term
contracts generally associated with such arrangements, management believes that
these types of agreements will provide substantial benefits to the Company and
will result in cost-effective data processing solutions for its customers.
Competition
Acxiom Data Products Division - Competition
Within the Data Products Division, the Company experiences competition
as follows:
There are at least five other companies which compete with InfoBase,
including some of the companies who contribute their data to InfoBase.
Management believes that InfoBase can effectively compete due to the leadership
position which it has established in the industry thus far and due to its
technical capabilities.
Direct Media has approximately 50 smaller competitors in the
business-to-business and consumer list brokerage/list management industry. Since
Direct Media is the largest company of its type in the U.S. and has over 15% of
the market share in this industry, management is of the opinion that Direct
Media can effectively compete in the U.S. marketplace. With regard to its
international operations, Direct Media has approximately 25 competitors.
Management believes that such competitors' operations are not as extensive as
those of Direct Media and that, therefore, Direct Media is well-positioned to
compete in the U.K. and abroad. Management believes that by combining Direct
Media's marketing expertise with the Company's other software systems, more
efficient mailing programs are possible for the Company's customers than are
available from competitors.
DataQuick has two major competitors in connection with the distribution
of property data to the real estate, finance and insurance industries. However,
management believes that the expansion of data coverage by DataQuick from
regional to national, combined with timeliness and reliability of its data, will
place DataQuick in a competitive position within this industry. Management also
believes that the combination of the DataQuick information and services with the
Company's other data products and marketing capabilities gives it a competitive
advantage in the marketplace.
Pro CD previously had two primary competitors in the business of
providing CD-ROM telephone listings and mapping data to consumers and small
office/home office businesses. During the past year, one of the two competitors
acquired the other, thus creating only one major competitor to Pro CD. Prior to
the Company's
<PAGE>
acquisition of Pro CD, it was the leading retailer in its field. During the past
year, however, the competition obtained a significant portion of Pro CD's market
share by offering products which operated and looked similar to those of Pro CD
at a substantially lower cost. Pro CD subsequently lost its leading position in
the market. Management has implemented a strategy to regain market share by
continuing to offer functionally superior products, becoming increasingly price
competitive, and improving marketing efforts with respect to Pro CD's products.
In addition, Pro CD will focus on combining its desktop functionality with
information available through the Internet. It will also continue its efforts to
sell its products directly to large corporations, which represent a fast-growing
and highly profitable market.
With regard to competitive forces affecting the services provided by
the Data Products Division's Interactive Information Services, the Company
believes that its competitors in the traditional direct marketing industry are
pursuing similar initiatives to offer services via the Internet. Management
intends to focus on creating the technological infrastructure required to offer
highly differentiated services to its customers. See, also, the discussion below
under "Acxiom Services Division and Acxiom International Division -
Competition."
Acxiom Services Division and International Division - Competition
The Company experiences competition from at least six other service
bureaus in the U.S. and ten in the U.K direct marketing industry with respect to
certain targeted marketing services, including merge/purge, list enhancement,
and database and data warehouse services. While some direct competitors are
divisions of larger corporations having greater financial, research and
development, and/or marketing resources than the Company, management believes
that the Company's unique application software, its ability to build open
solutions, its experience building and managing some of the largest databases
within the industry, its knowledge of the various industries it serves, its
business partner relationships, and the skills and experience of its associates
enable it to effectively compete. Technological developments are expected to
continue at a rapid pace in the field of direct marketing database management
and market data collection, analysis and distribution, and management intends to
utilize the best tools available to it to build fully integrated solutions that
meet each customer's unique requirements. It is management's belief that most of
its competitors do not provide their customers with such solution flexibility.
There are many diverse businesses which offer DSS software and/or
services. However, based upon the broad spectrum of software and services in the
marketplace, the Company's recent alliances with various DSS software providers
(see "Technology Applications" above), and the Company's unique data management
services, management believes that the effects of competition are minimal. In
addition, management believes that by using the TCP/IP protocol (discussed above
under "Technology Applications"), the Company's products will be significantly
less difficult to implement at customer sites. Management further believes that
through continued investment in research and development, the Company will be
able to maintain or improve its present position in the marketplace. See
"Research and Development," below.
Acxiom Alliances Division - Competition
The Company is aware of numerous other major businesses which offer
outsourcing services and/or information management services. Due to the recent
emergence of this industry, and due to the fact that the market for such
services remains largely untapped, the Company anticipates that the effects of
competition will be minimal. With respect to software licensing, despite the
existence of other vendors, the Company likewise anticipates minimal competitive
effects due to the unique nature of the Company's software and the breadth of
the potential marketplace.
With regard to competitive forces affecting the services provided by
the Alliances Division to its finance industry customers, see the discussion
above under "Acxiom Services Division and Acxiom International Division -
Competition."
<PAGE>
Customers
The Company's customers include financial institutions, insurance
companies, consumer credit organizations, utility companies, seminar companies,
communications companies, catalogers, retailers, television shopping networks,
publishers, consumer goods manufacturers, membership and continuity
associations, real estate and appraisal firms, title companies, advertising
agencies, charities, and governmental entities. Other customers include list
users (direct mailers and telemarketers), list owners (customers who generate
and own their lists), and list managers and brokers (agents who manage lists and
provide direct marketing consulting services). In addition to its larger
corporate customers, the Company's customers include small to mid-size business
owners and individuals who are retail purchasers of the Pro CD reference CD-ROM
products. Although most of the Company's customers are in the U.S. and the U.K.,
the Company has a small number of customers in Canada, the Netherlands, France
and Malaysia. Many are companies which specialize in the direct marketing
industry, as well as the marketing departments of large corporations who have
turned to targeted marketing techniques to sell their goods and services. The
Company also provides data processing and information management services to
companies that are not in the direct marketing business. The Company's practice
has been to extend payment terms to its customers for periods of up to 60 days
and, accordingly, the Company uses operating capital to finance its accounts
receivable. In fiscal 1997, the following customers accounted for 10% or more of
the Company's total revenue: Allstate Insurance Company (16.8%) and Trans Union
Corporation (14.1%).
Additional Information Regarding Forward-Looking Statements
This Report on Form 10-K and the Company's Annual Report to
Shareholders include, and future SEC filings by the Company and future oral and
written statements by the Company and its management may include certain
forward-looking statements. Such statements which may include, among other
things, statements regarding the Company's financial position, results of
operations, market position, product development, regulatory matters, growth
opportunities and growth rates, acquisition and divestiture opportunities, and
other similar forecasts and statements of expectation. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates" and
"should," and variations of these words and similar expressions, are intended to
identify these forward-looking statements. Such statements are not statements of
historical fact. Rather, they are based on the Company's estimates, assumptions,
projections and current expectations, and are not guarantees of future
performance. The Company disclaims any obligation to update or revise any
forward-looking statement based upon the occurrence of future events, the
receipt of new information, or otherwise. Some of the factors that could cause
the Company's actual results and other matters to differ materially from the
results, projections and expectations expressed in the forward-looking
statements are set forth below. There may be additional factors which could also
affect actual results.
Consumer Privacy, Legislative and Regulatory Concerns
There could be a material adverse impact on the Company's direct
marketing and data sales business due to the enactment of legislation or
industry regulations arising from, among other things, the increase in public
concern over consumer privacy issues. Restrictions upon the collection and use
of information which is currently legally available could be adopted, in which
case the cost to the Company of collecting certain kinds of data might be
materially increased. It is also possible that the Company could be prohibited
from collecting or disseminating certain types of data, which could in turn
materially adversely affect the Company's business.
Senior management of the Company has taken a proactive role in the
privacy arena. Internally, the Company has formulated and distributed to each of
its associates a written privacy policy which supports consumers' rights to
control the dissemination of information about themselves. Privacy is included
as a topic in the Company's corporate culture education program in which all
associates participate. Associates of the Company are required to sign a privacy
acknowledgment form as a condition of continued employment. The privacy policy
reflects the Company's continuing commitment to strict data security systems, as
well as the Company's support of the Direct Marketing Association's ("DMA") Mail
and Telephone Preference Service programs, which permit
<PAGE>
consumers to "opt-out" of unrequested marketing solicitations. The Company has
adopted a practice of purging its customers' prospecting databases of all names
appearing on such DMA opt-out lists free of charge.
In addition, the Company includes in its customer contracts a
commitment that any data sent to the Company has been legally obtained and that
the customer's subsequent use of any data received from the Company will be in
compliance with all data protection laws, as well as with applicable industry
policies. The Company also includes in its information provider contracts a
commitment that the data the Company receives has been legally obtained for the
uses to which it will be put, and the Company further agrees to comply with any
restrictions that the providers place upon the data.
The Company also participates in other industry-specific associations
focused on privacy issues such as the Magazine Publishers Association and the
Advertising and Mail Marketing Association.
Loss of Data and/or Customer Lists
The Company could suffer a material adverse effect if owners of the
data used by the Company were to withdraw the data from the Company. In order to
reduce this risk, management has undertaken a strategy to obtain ownership of as
much data as possible, and, in the alternative, to enter into long-term data
supply agreements with the data owners that remain essential to its business.
The owners of the marketing lists maintained by the Company could
decide to remove their lists from the Company's possession, and if a substantial
number of lists were removed, a material adverse impact upon the Company's
operations could result. However, management believes that any such actions are
unlikely in that the value of the lists is enhanced through manipulation by the
Company's software and through combination with other lists. Further, management
believes that the Company's acquisition of Direct Media has further solidified
the Company's relationship with many list owners. Historically, only a few list
owners utilizing the Company's services have removed their lists.
Effects of Short-Term Contracts
While approximately 50% of the Company's total revenue is currently
derived from long-term (over three years) customer contracts, the remainder is
not. With respect to that portion of the business which is not under long-term
contract, revenues are less predictable, and the Company must consequently
engage in continual sales efforts to maintain its revenue stability and future
growth. Management has emphasized the importance of securing as much revenue as
possible under long-term contracts, having increased the percentage from 9% to
50% over the past five years.
Technology Challenges
Maintaining technological competitiveness in its data products,
processing functionality, software systems and services is key to the Company's
continued success. The Company's ability to continually improve its current
processes and to develop and introduce new products and services is essential in
order to meet its competitors' technological developments and the increasingly
sophisticated requirements of its customers. If the Company failed to do so, its
business could be materially adversely affected.
Year 2000 Issues
The Company has developed an internal plan to address the effects of
the imminent century change upon the Company's internal software (the "Year
2000" issue). The Company is currently implementing a full 4-digit-year format
solution, believed by the Company to be the only complete, permanent, and
obvious resolution of this issue, in the following manner: (1) all dates
currently stored with a 2 position year (YY) will be stored with a 4 position
year (CCYY); (2) all routines using these fields to handle the new format will
be changed; and (3) installation of upgrades to hardware/operating systems date
routines to return Year 2000 compliant dates that can be stored in the same
format. Notwithstanding, many records of the Company are already at a maximum
physical
<PAGE>
record length or such that changes to the layout would require extensive changes
to routines not directly affected by the Year 2000 date issues. As a result,
implementation to the permanent 4-digit solution will be an on-going process for
the Company that may take several years. In the short-term, the Company will use
a combination of the 4-digit dates and industry standard bridging technologies
(e.g., fixed window technique, sliding window technique, 2-digit
encoding/compression scheme) for processing date fields to bring all of the
Company's internal applications to a compliant position.
Loss of Data Center Capacity or Interruption of Telecommunications Links
The Company's success is dependent upon its ability to protect its
various data centers against damage from fire, power loss, telecommunications
failure or other disasters. The on-line services provided by the Company are
dependent on links to telecommunications servers. Management has taken
reasonable precautions to protect its data centers and telecommunications links
from events that could interrupt the Company's operations. Any damage to the
Company's data centers or any failure of the Company's telecommunication links
that causes interruptions in the Company's operations could have a material
adverse effect on the Company's business.
Acquisitions
The Company's growth strategy currently includes growth through
acquisitions. While management believes that the Company has been reasonably
successful implementing this strategy during the past two years, there is no
certainty that future acquisitions will be consummated on acceptable terms or
that any acquired assets, data or businesses will be successfully integrated
into the Company's operations.
Postal Rate Increases
The direct marketing industry has been negatively impacted from time to
time during past years by postal rate increases. The most recent postal rate
increase, which became effective in January 1995, and any future increases will,
in the Company's opinion, force direct mailers to mail fewer pieces and to
target their prospects more carefully. Through its software products and data
processing services, the Company has the capability to assist its direct
marketing customers to target their mailings to consumers who are most likely to
favorably respond, thereby meeting its customers' increasing need to market more
effectively. The Company experienced no significant negative financial impact as
a result of the most recent postal rate increase, but there is no assurance that
future postal increases will have no impact upon the Company.
Other Factors
Revenues could be materially adversely affected if the Company failed
to be competitive within its industry. In addition, the expenses associated with
acquiring data, and the timing of acquisitions and the costs and expenses
associated therewith, might also affect operating results. A downturn in the
general economic conditions in the primary marketplaces served by the Company
could also have a material adverse effect upon the Company's business.
Item 2. Properties
The following table sets forth the location, ownership and general use
of the principal properties of the Company.
Location Held Use
Acxiom Corporation:
Conway, Arkansas Five facilities held Principal executive
in fee; one facility offices; customer
secures a $4,031,000 service facilities and
encumbrance computer equipment space
<PAGE>
Acxiom CDC, Inc.:
Chicago, Illinois Lease Office and computer
equipment space
Acxiom/Direct Media,
Inc.:
Greenwich, Connecticut Lease Office space; customer
service facility
Acxiom Great Lakes Data
Center, Inc.:
Taylor, Michigan Lease Office and computer
equipment space
Acxiom U.K., Ltd.:
(a) London, England Lease Office space; customer
service facility
(b) Sunderland, England Held in fee Office space; computer
equipment and warehouse
space
DataQuick Information
Systems, Inc.:
San Diego, California Lease Office space; customer
service facility
Pro CD, Inc.:
Danvers, Massachusetts Lease Office space; warehouse
space
The Company's headquarters are located in Conway, Arkansas and consist
of office buildings and a data processing center.
Pursuant to its data center management agreement with Trans Union
discussed above under Item 1, the Company leases office and computer equipment
space at Trans Union's corporate headquarters in Chicago, Illinois.
Pursuant to its data center management agreement with Polk discussed
above under Item 1, the Company leases office and computer equipment space in
Taylor, Michigan. In addition, the Company leases office space in Brewery Park,
Michigan, Cincinnati, Ohio and Denver, Colorado in connection with the services
the Company provides to Polk.
The Company's International Division's corporate and customer service
operations in London, England are presently housed in two principal buildings,
both of which are leased. The Company also owns a facility in Sunderland,
England where data processing and fulfillment services operations are housed.
As a result of the Company's acquisition of DataQuick, the Company
leases two facilities in San Diego, California. DataQuick also leases sales
office space in California, Arizona, Nevada, Oregon and Washington.
Due to the acquisition of Direct Media, the Company leases primary
office and customer service space in Greenwich, Connecticut. In addition, the
Company leases sales office space in California, Florida, Illinois, New
Hampshire, New York, North Carolina, Ohio and London, England. In connection
with the Company's acquisition of Pro CD, the Company leases office and
warehouse space in Danvers, Massachusetts, as well as sales office space in
California and Minnesota.
<PAGE>
In addition to the foregoing, pursuant to the Guideposts data
processing agreement, Guideposts provides office and computer equipment space
for the Company's use at Guideposts' corporate headquarters in Carmel, New York.
The Company also leases sales offices in California, Illinois, Kansas,
Massachusetts, New York, North Carolina, Texas, Virginia, Washington, D.C. and
Wisconsin.
In connection with the previous operation of its mailing services
division, the Company owns a warehouse facility in Warminster, Pennsylvania,
which it is presently leasing to a third party who has entered into a sale
agreement with the Company to purchase the property. The Company also owns a
warehouse facility in Philadelphia, which is currently subject to a sale
agreement.
In general, the offices, customer service and data processing
facilities of the Company are in good condition. Management believes that its
facilities are suitable and adequate to meet the current needs of the Company.
As such, management believes that no substantial additional properties will be
required during fiscal 1998. A portion of the real property owned by the Company
is pledged to secure notes payable. For additional discussion, this information
appears in Notes 4 and 5 of the Notes to Consolidated Financial Statements in
the Company's Annual Report at pp. 33-34, which information is incorporated
herein by reference.
Item 3. Legal Proceedings
The information required by this Item appears in Note 13 of the Notes
to Consolidated Financial Statements in the Company's Annual Report at p. 40,
which information is incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
EXECUTIVE OFFICERS OF THE COMPANY
Each of the Company's executive officers, including position held,
age, and year of initial appointment as an executive officer and business
experience for the past five years, is listed below:
Year
Name Position Held Age Elected
Charles D. Morgan (a) Chairman of the Board 54 1972
and President (Company Leader)
Rodger S. Kline (b) Chief Operating Officer, 54 1975
Treasurer and Director
James T. Womble (c) Division Leader and Director 54 1975
Paul L. Zaffaroni (d) Division Leader 50 1990
C. Alex Dietz (e) Division Leader 54 1983
Jerry C.D. Ellis (f) Division Leader 47 1991
Robert S. Bloom (g) Chief Financial Officer 41 1992
- - ------------------------------------
<PAGE>
(a) Mr. Morgan joined the Company in 1972. He has been Chairman of the Board of
Directors since 1975, and serves as the Company's president (Company
Leader). He was employed by IBM Corporation prior to joining the Company.
Mr. Morgan holds a mechanical engineering degree from the University of
Arkansas.
(b) Mr. Kline joined the Company in 1973. He has been a director since 1975,
and serves as the Company's chief operating officer and treasurer. Prior to
joining the Company, Mr. Kline was employed by IBM Corporation. Mr. Kline
holds a degree in electrical engineering from the University of Arkansas.
(c) Mr. Womble joined the Company in 1974. He has been a director since 1975,
and serves as one of the Company's four division leaders. Prior to joining
the Company, Mr. Womble was employed by IBM Corporation. Mr. Womble holds a
degree in civil engineering from the University of Arkansas.
(d) Mr. Zaffaroni joined the Company in 1990. He serves as one of the Company's
four division leaders. Prior to joining the Company he was employed by IBM
Corporation for 21 years, most recently serving as regional sales manager.
Mr. Zaffaroni holds a degree in marketing from Youngstown State University.
(e) Mr. Dietz joined the Company in 1969 and served as a vice president until
1975. Between 1975 and 1979 he was an officer of a commercial bank
responsible for data processing matters. Following his return to the
Company in 1979, Mr. Dietz served as senior level officer of the Company
and is presently one of the Company's four division leaders. Mr. Dietz
holds a degree in electrical engineering from Tulane University.
(f) Mr. Ellis joined the Company in 1991 as managing director of the Company's
U.K. operations. He serves as one of the Company's four division leaders.
Prior to 1991, Mr. Ellis was employed for 22 years with IBM Corporation,
serving most recently as assistant to the CEO of IBM's U.K. operations.
Prior to that, Mr. Ellis served as branch manager of the IBM U.K. Public
Sector division.
(g) Mr. Bloom joined the Company in 1992 as chief financial officer. Prior to
joining the Company, he was employed for six years with Wilson Sporting
Goods Co. as chief financial officer of its international division. Prior
to his employment with Wilson, Mr. Bloom was employed by Arthur Andersen &
Co. for nine years, serving most recently as manager. Mr. Bloom, a
Certified Public Accountant, holds a degree in accounting from the
University of Illinois.
There are no family relationships among any of the Company's executive
officers and/or directors.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The information required by this Item appears in the Company's Annual
Report at p. 44, which information is incorporated herein by reference.
Item 6. Selected Financial Data
The information required by this Item appears in the Company's Annual
Report at pp. 20-21, which information is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this Item appears in the Company's Annual
Report at pp. 22-25, which information is incorporated herein by reference.
<PAGE>
Item 8. Financial Statements and Supplementary Data
The Financial Statements required by this Item appear in the Company's
Annual Report at pp. 26-41, which information is incorporated herein by
reference. The Financial Statement Schedule which constitutes the Supplementary
Data required by this Item is attached hereto.
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Pursuant to general instruction G(3) of the instructions to Form 10-K,
information concerning the Company's executive officers is included under the
caption "Executive Officers of the Company" at the end of Part I of this Report.
The remaining information required by this Item appears under the caption
"Election of Directors" in the Company's 1997 Proxy Statement at pp. 4-5 and
under the caption "Section 16(a) Reporting Delinquencies" in the Company's 1997
Proxy Statement at p. 13, which information is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item appears under the heading
"Compensation of Directors and Company Leaders" in the Company's 1997 Proxy
Statement at pp. 6-10, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item appears under the headings
"Principal Shareholders" and "Equity Ownership of Directors and Executive
Officers" in the Company's 1997 Proxy Statement at pp. 2-3, which information is
incorporated herein by reference.
Item 13. Certain Relationships and Transactions
The information required by this Item appears under the heading
"Certain Transactions" in the Company's 1997 Proxy Statement at pp. 12-13, which
information is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
The following documents are filed as a part of this Report:
1. Financial Statements.
The following consolidated financial statements of
the registrant and its subsidiaries included on pages 26 through 41 of the
Company's Annual Report and the Independent Auditors' Report on page 42 thereof
are incorporated herein by reference. Page references are to page numbers in the
Annual Report.
Page
Consolidated Balance Sheets as of March 31, 1997 and 1996 26
<PAGE>
Consolidated Statements of Earnings for the years ended
March 31, 1997, 1996 and 1995 27
Consolidated Statements of Stockholders' Equity for the
years ended March 31, 1997, 1996 and 1995 28-29
Consolidated Statements of Cash Flows for the years ended
March 31, 1997, 1996 and 1995 30
Notes to the Consolidated Financial Statements 31-41
Independent Auditors' Report 42
2. Financial Statement Schedule.
The following additional information for the years
1997, 1996 and 1995 is submitted herewith and appears on the two pages
immediately preceding the signature page of this Report on Form 10-K.
Independent Auditors' Report
Schedule II - Valuation and Qualifying Accounts for the years ended March 31,
1997, 1996 and 1995
All other schedules are omitted because they are not applicable or
not required or because the required information is included in the consolidated
financial statements or notes thereto.
3. Exhibits and Executive Compensation Plans.
The following exhibits are filed with this Report or
are incorporated by reference to previously filed material.
Exhibit No.
3(a) Amended and Restated Certificate of Incorporation (previously filed as
Exhibit 3(i) to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1996, Commission File No. 0-13163, and
incorporated herein by reference)
3(b) Amended and Restated Bylaws (previously filed as Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended March
31, 1991, Commission File No. 0-13163, and incorporated herein by
reference)
10(a) Data Center Management Agreement dated July 27, 1992 between the
Company and Trans Union Corporation (previously filed as Exhibit A to
Schedule 13-D of Trans Union Corporation dated August 31, 1992,
Commission File No. 5-36226, and incorporated herein by reference)
10(b) Agreement to Extend and Amend Data Center Management Agreement and to
Amend Registration Rights Agreement dated August 31, 1994 (previously
filed as Exhibit 10(b) to Form 10-K for the fiscal year ended March 31,
1995, as amended, in 0-13163, and incorporated herein by reference)
10(c) Agreement for Professional Services dated November 23, 1992 between the
Company and Allstate Insurance Company (previously filed as Exhibit 28
to Amendment No. 1 to the Company's Current Report on Form 8-K dated
December 9, 1992, Commission File No. 0-13613, and incorporated herein
by reference)
<PAGE>
10(d) Acxiom Corporation Deferred Compensation Plan (previously filed as
Exhibit 10(b) to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1990, Commission File No. 0-13163, and
incorporated herein by reference)
10(e) Amended and Restated Key Associate Stock Option Plan of Acxiom
Corporation
10(f) Acxiom Corporation U.K. Share Option Scheme
10(g) Leadership Compensation Plan
10(h) Acxiom Corporation Non-Qualified Deferred Compensation Plan (previously
filed as Exhibit 10(i) to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996, Commission File No.
0-13163, and incorporated herein by reference)
10(i) Asset Purchase Agreement dated April 1, 1996 between the Company and
Direct Media/DMI, Inc. (previously filed as Exhibit 2 to the Company's
Current Report on Form 8-K dated April 30, 1996, Commission File No.
0-13613, and incorporated herein by reference)
13 Portions of the Company's Annual Report
21 Subsidiaries of the Company
23 Consent of KPMG Peat Marwick LLP
24 Powers of Attorney for Robert S. Bloom, Dr. Ann H. Die, William T.
Dillard II, Harry L. Gambill, Rodger S. Kline, Charles D. Morgan,
Robert A. Pritzker, Walter V. Smiley and James T. Womble
27 Financial Data Schedule
Listed below are the executive compensation plans and arrangements
currently in effect and which are required to be filed as exhibits to this
Report:
- Amended and Restated Key Associate Stock Option Plan
of Acxiom Corporation
- Acxiom Corporation U.K. Share Option Scheme
- Leadership Compensation Plan
- Acxiom Corporation Deferred Compensation Plan*
- Acxiom Non-Qualified Deferred Compensation Plan
- - -------------------------------
* To date, only one grant has been made, in 1990.
4. Reports on Form 8-K.
None.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Acxiom Corporation
Under date of May 14, 1997, we reported on the consolidated balance sheets of
Acxiom Corporation and subsidiaries as of March 31, 1997 and 1996, and the
related consolidated statements of earnings, stockholders' equity and cash flows
for each of the years in the three-year period ended March 31, 1997, as
contained in the 1997 annual report to shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year ended March 31, 1997. In connection with
our audits of the aforementioned consolidated financial statements, we also have
audited the related financial statement schedule as listed in the accompanying
index. This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Little Rock, Arkansas
May 14, 1997
<PAGE>
Schedule II
ACXIOM CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended March 31, 1997, 1996 and 1995
Additions
Balance at charged to Other Bad debts Bad Balance
beginning costs and additions written debts at end
of period expenses (note) off recovered of period
1997:
Allowance
for
doubtful
accounts,
returns
and
credits $ 1,880,000 4,399,000 4,800,000 7,044,000 298,000 4,333,000
========= ========= ========= ========= ======= =========
1996:
Allowance
for
doubtful
accounts,
returns
and
credits $ 2,143,000 150,000 131,000 726,000 182,000 1,880,000
========= ======= ======= ======= ======= =========
1995:
Allowance
for
doubtful
accounts,
returns
and
credits $ 1,086,000 1,656,000 178,000 803,000 26,000 2,143,000
========= ========= ======= ======= ====== =========
Note - Other additions in 1997 represent the valuation accounts acquired in
the Pro CD and DMI acquisitions. Other additions in 1996 represent the
valuation accounts acquired in the Generator and DataQuick
acquisitions. Other additions in 1995 represent the valuation account
acquired in the InfoBase acquisition. See notes 8 and 15 of notes to
consolidated financial statements.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned.
ACXIOM CORPORATION
Date: June 30, 1997 By: /s/ Catherine L. Hughes
-------------------------
Catherine L. Hughes
Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and as of the dates indicated.
Signature
Robert S. Bloom* Chief Financial Officer June 30, 1997
- - --------------------------- (Principle accounting officer)
Robert S. Bloom
Dr. Ann H. Die* Director June 30, 1997
- - ---------------------------
Dr. Ann H. Die
William T. Dillard II* Director June 30, 1997
- - ---------------------------
William T. Dillard II
Harry C. Gambill* Director June 30, 1997
Harry C. Gambill
Rodger S. Kline* Chief Operating Officer, June 30, 1997
- - --------------------------- Treasurer and Director
Rodger S. Kline (Principle financial officer)
Charles D. Morgan* Chairman of the Board and June 30, 1997
- - -------------------- President (Company Leader)
Charles D. Morgan (Principle executive officer)
Robert A. Pritzker* Director June 30, 1997
Robert A. Pritzker
Walter V. Smiley* Director June 30, 1997
Walter V. Smiley
James T. Womble* Division Leader and Director June 30, 1997
- - --------------------
James T. Womble
*By: /s/ Catherine L. Hughes
-------------------------
Catherine L. Hughes
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibits to Form 10-K
Exhibit
No. Exhibit
3(a) Amended and Restated Certificate of Incorporation (previously filed as
Exhibit 3(i) to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1996, Commission File No. 0-13163, and
incorporated herein by reference)
3(b) Amended and Restated Bylaws (previously filed as Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended March
31, 1991, Commission File No. 0-13163, and incorporated herein by
reference)
10(a) Data Center Management Agreement dated July 27, 1992 between the
Company and Trans Union Corporation (previously filed as Exhibit A to
Schedule 13-D of Trans Union Corporation dated August 31, 1992,
Commission File No. 5-36226, and incorporated herein by reference)
10(b) Agreement to Extend and Amend Data Center Management Agreement and to
Amend Registration Rights Agreement dated August 31, 1994 (previously
filed as Exhibit 10(b) to Form 10-K for the fiscal year ended March 31,
1995, as amended, in 0-13163, and incorporated herein by reference)
10(c) Agreement for Professional Services dated November 23, 1992 between the
Company and Allstate Insurance Company (previously filed as Exhibit 28
to Amendment No. 1 to the Company's Current Report on Form 8-K dated
December 9, 1992, Commission File No. 0-13613, and incorporated herein
by reference)
10(d) Acxiom Corporation Deferred Compensation Plan (previously filed as
Exhibit 10(b) to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1990, Commission File No. 0-13163, and
incorporated herein by reference)
10(e) Amended and Restated Key Associate Stock Option Plan of Acxiom
Corporation
10(f) Acxiom Corporation U.K. Share Option Scheme
10(g) Leadership Compensation Plan
10(h) Acxiom Corporation Non-Qualified Deferred Compensation Plan (previously
filed as Exhibit 10(i) to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996, Commission File No.
0-13163, and incorporated herein by reference)
10(i) Asset Purchase Agreement dated April 1, 1996 between the Company and
Direct Media/DMI, Inc. (previously filed as Exhibit 2 to the Company's
Current Report on Form 8-K dated April 30, 1996, Commission File No.
0-13613, and incorporated herein by reference)
13 Portions of the Company's Annual Report
21 Subsidiaries of the Company
23 Consent of KPMG Peat Marwick LLP
24 Powers of Attorney for Robert S. Bloom, Dr. Ann H. Die, William T.
Dillard II, Harry L. Gambill, Rodger S. Kline, Charles D. Morgan,
Robert A. Pritzker, Walter V. Smiley and James T. Womble
27 Financial Data Schedule
<PAGE>
EXHIBIT 10(e)
AMENDED AND RESTATED KEY ASSOCIATE STOCK OPTION PLAN
OF
ACXIOM CORPORATION
As of May 28, 1997
1. Establishment, Continuation, and Purpose. On November 9, 1983, the
Board of Directors (the "Board") and the shareholders of Acxiom Corporation
(formerly CCX Network, Inc.) (the "Company") approved the adoption of the CCX
Network, Inc. Incentive Stock Option Plan and the CCX Network, Inc. Nonstatutory
Stock Option Plan. Such plans were amended and restated effective as of April
22, 1987 so as to combine the two separate plans into one plan (the "Plan") and
to comply with certain provisions of the Tax Reform Act of 1986. Subsequent
amendments were adopted on July 20, 1988; January 30, 1991; May 26, 1993; May
24, 1995, July 23, 1996 and May 28, 1997. The purpose of the Plan is to further
the growth and development of the Company and any of its present or future
subsidiary corporations, as hereinafter defined, by granting to certain key
associates of the Company and any subsidiary corporation, as an incentive and
encouragement to stock ownership, options to purchase shares of common stock of
the Company, $.10 par value ("Common Stock"), thereby offering such key
associates a proprietary interest in the Company's business and a more direct
stake in its continuing welfare, and aligning their interests with those of the
Company's stockholders.
2. Administration. The Plan shall be administered by a committee (the
"Committee") of no less than two "disinterested" (as that term is defined in
Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Act"))
members of the Company's Board of Directors. The Committee is authorized to
grant options on behalf of the Company as hereinafter provided, to interpret the
Plan and options granted pursuant to the Plan, and to make and amend such
regulations as it may deem appropriate.
3. Grant of Options. Options to purchase shares of Common Stock shall
be granted on behalf of the Company by the Committee from time to time and
within the limits of the Plan. The Committee shall determine the key associates
("Optionees" or "Participants") of the Company and of any subsidiary corporation
to whom options are to be granted, the number of shares to be granted to each,
the option price, the option period(s), and the number of shares that may be
exercised during such option period(s). Options granted under the Plan may be
either non-qualified stock options or incentive stock options, as defined by
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"). The
Committee, at the time each option is granted, shall designate such option as
either a non-qualified stock option or an incentive stock option. Any incentive
stock option granted under the Plan must be exerciseable within ten (10) years
of the date upon which it is granted. For incentive options granted after
December 31, 1986, the aggregate fair market value (as determined at the time
the option is granted) of the stock with respect to which incentive options
granted herein are exerciseable for the first time by any Optionee during any
calendar year (under all plans of the Company and its subsidiaries) shall not
exceed $100,000.
4. Shares Subject to the Plan. The shares which may be granted
pursuant to the Plan shall be authorized and unissued shares of Common Stock not
exceeding in the aggregate 15,200,000 shares.
5. Eligible Participants. All key associates of the Company and any
subsidiary corporation of the Company shall be eligible to receive options and
thereby become Participants in the Plan. In granting options, the Board may
include or exclude previous Participants in the Plan. As used herein, the terms
"subsidiary corporation" and "parent corporation" shall mean a "subsidiary
corporation" or "parent corporation" as defined in Section 425 of the Code.
For purposes of this Plan, a "key associate" shall mean employees of
the Company or its affiliates, directors, officers (whether or not they are
directors), independent contractors and consultants who render those types of
services which tend to contribute materially to the success of the Company or an
affiliate or which reasonably may be anticipated to contribute materially to the
future success of the Company or an affiliate.
No executive officer named in the Summary Compensation Table of the Company's
then current Proxy Statement shall be eligible to receive in excess of 600,000
options in any three-year period.
<PAGE>
6. Option Price. (a) The price for each share of Common Stock
purchasable under any incentive option shall be not less than one hundred
percent (100%) of the fair market value per share on the date of grant. The
price for each share of Common Stock purchasable under any non-qualified option
shall be any price determined by the Committee in its sole discretion. All such
prices shall be subject to adjustment as provided for in paragraph 17 hereof.
For purposes of determining the fair market value of the Common Stock, the
following rules shall apply:
(i) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value shall be
either (a) the closing sales price of the Common Stock on the date in
question on the principal exchange on which the Common Stock is then
listed or admitted to trading, or (b) the average bid and ask price for
the ten (10) trading days preceding the week during which the Committee
grants options. With respect to (a), if no reported sale of the Common
Stock takes place on the date in question on the principal exchange,
then the fair market value shall be determined as of the closest
preceding date on which such principal exchange shall be have been open
for business and shares of the Common Stock were traded.
(ii) If the Common Stock is not at the time listed or admitted
to trading on a stock exchange, the fair market value shall be the mean
between the closing bid and asked quotations for the Common Stock on
the date in question in the over-the-counter market, as such prices are
reported in a publication of general circulation selected by the
Company and regularly reporting the market price of the Common Stock in
such market. If there are no bid and asked quotations for the Common
Stock on such date, the fair market value shall be deemed to be the
mean between the closing bid and asked quotations in the
over-the-counter market for the Common Stock on the closest date
preceding the date in question for which such quotations are available.
(b) If any Optionee to whom an incentive option is to be granted under
the Plan is on the date of grant the owner of stock (as determined under Section
425(d) of the Code) possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any one of its subsidiaries, then the
following special provisions shall be applicable to any options granted to such
individual:
(i) The option price per share of Common Stock
subject to such option shall not be less than 110% of the fair
market value of one share of Common Stock on the date of
grant; and
(ii) The option shall not have a term in excess of
five (5) years from the date of grant.
7. Exercise Period. Subject to paragraph 18, the period for
exercising an option (the "Exercise Period") shall be such period of time as may
be designated by the Committee at the time of grant, except that:
(a) If a Participant retires during the Exercise Period, such
option shall be exerciseable only during the three (3) months following
the effective date of retirement, but in no event after the expiration
of the Exercise Period, unless the Committee in its discretion provides
otherwise.
(b) If a Participant terminates his or her employment by
reason of disability, such option shall be exerciseable only during the
six (6) months following such termination, but in no event after the
expiration of the Exercise Period, unless the Committee in its
discretion provides otherwise.
(c) If a Participant dies during the Exercise Period, such
option shall be exerciseable by the executors, administrators, legatees
or distributees of the Participant's estate only during the twelve (12)
months following the date of death, but in no event after the
expiration of the Exercise Period, unless the Committee in its
discretion provides otherwise.
(d) If a Participant ceases to be an associate of the Company
for any cause other than retirement, disability or death, such option
shall be exerciseable only during the three (3) months following such
termination, but in no event after the expiration of the Exercise
Period, unless the Committee in its discretion provides otherwise.
The maximum duration of any incentive stock option granted under the
Plan shall be ten (10) years from the date of grant, although such options may
be granted for a lesser duration. The Committee shall have the right to
accelerate, in whole or in part, from time to time, conditionally or
unconditionally, a Participant's rights to exercise any option granted
hereunder.
8. Exercise of Option. Subject to paragraphs 7(a), 7(b), 7(c), 7(d) and
18, an option may be exercised at any time and from time to time during the
Exercise Period. If one of the events referred to in paragraphs 7(a), 7(b), 7(c)
or 7(d) occurs, the option shall be exerciseable (subject to paragraph 18) under
this paragraph 8 during the three months following retirement, during the six
months following termination by reason of disability, during the twelve months
following death, or during the three months following termination for any other
reason, only as to the number of shares, if any, as to which the option was
exerciseable immediately prior to said retirement, disability, death or other
termination, unless the Committee in its discretion provides otherwise.
Notwithstanding the foregoing, with respect to any incentive stock
option granted under the Plan prior to January 1, 1987, no such incentive stock
option shall be exerciseable by a Participant while there is outstanding any
other incentive stock option which was previously granted to the Participant to
purchase shares in the Company or in a corporation which (at the time of the
granting of such option) is a parent or subsidiary corporation of the Company,
or is a predecessor corporation of any such corporation. This provision shall
not apply to any options granted after December 31, 1986. For purposes of this
paragraph 8, any incentive stock option shall be treated as outstanding until
such option is exercised in full or expires by reason of lapse of time.
9. Payment for Shares. Full payment for shares purchased, together with
the amount of any tax or excise due in respect of the sale and issue thereof,
shall be made in such form of property (whether cash, securities or other
consideration) as may be acceptable to the Committee. The Company will issue no
certificates for shares until full payment therefor has been made, and a
Participant shall have none of the rights of a shareholder until certificates
for the shares purchased are issued to him or her. In lieu of cash, a
Participant may pay for the shares purchased with shares of the Company's Common
Stock having a fair market value on the date upon which the Participant
exercises his or her option equal to the option price, or with a combination of
cash and shares of Common Stock equal to the aggregate option price. For
purposes of determining fair market value, the rules set forth in paragraph 6
shall apply.
10. Withholding Taxes. The Company may require a Participant exercising
a non-qualified option granted hereunder to reimburse the Company (or the
subsidiary which employs such Participant) for taxes required by any government
to be withheld or otherwise deducted and paid by such corporation in respect of
the issuance of the shares. For purposes of determining fair market value, the
rules set forth in Paragraph 6 shall apply. A Participant may elect to satisfy
such withholding requirements by any one of the following methods:
(a) A Participant may request that the Company (or the
subsidiary which employs such Participant) withhold from the number of
shares which would otherwise be issued to the Participant that number
of shares (based upon the fair market value of the Common Stock on the
date of exercise) which would satisfy the withholding requirement. If
such an election is made, the Participant must notify the Company that
he or she is so electing either (i) six months prior to the date the
option exercise becomes taxable (which will either be the date of
exercise or, if an election under Section 83(b) of the Code is made,
six months before the date of exercise), or (ii) during any period
beginning on the third business day following the date upon which any
quarterly or annual sales and earnings statement is released by the
Company and ending on the thirtieth day following the release of any
such statement, such notice provisions being applicable only to those
Participants who are "executive officers," as defined in the Act, or
directors of the Company.
<PAGE>
(b) A Participant may deliver previously-owned shares of
Common Stock (based upon the fair market value of the Common Stock on
the date of exercise) in an amount which would satisfy the withholding
requirement.
(c) A Participant may deliver cash in an amount which would
satisfy the withholding requirement.
11. Stock Appreciation Rights. The Committee may, under such terms and
conditions as it deems appropriate, authorize the surrender by an Optionee of
all or part of an unexercised option and authorize a payment in consideration
therefor of an amount equal to the difference obtained by subtracting the option
price of the shares then subject to exercise under such option from the fair
market value of the Common Stock represented by such shares on the date of
surrender, provided that the Committee determines that such settlement is
consistent with the purpose of the Plan. Such payment may be made in shares of
Common Stock valued at their fair market value on the date of surrender of such
option or in cash, or partly in shares and partly in cash. Acceptance of such a
surrender and the manner of payment shall be in the discretion of the Committee,
subject to the limitations contained in Section 422A of the Code and Section
16b(3) of the Act. For purposes of determining fair market value, the rules set
forth in Paragraph 6 shall apply. If an option is surrendered pursuant to this
Paragraph 11, the shares covered by the surrendered option will not thereafter
be available for grant under the Plan.
12. Loans or Guarantee of Loans. The Committee may authorize the
extension of a loan to an Optionee by the Company (or the guarantee by the
Company of a loan obtained by an Optionee from a third party) in order to assist
an Optionee to exercise an option granted under the Plan. The terms of any loans
or guarantees, including the interest rate and terms of repayment, will be
subject to the discretion of the Committee. Loans and guarantees may be granted
without security, the maximum credit available being the exercise price of the
option sought to be executed plus any federal and state income tax liability
incurred upon exercise of the option.
13. Transferability. Current and future nonqualified options granted
under the Plan may be transferred by a Participant to (i) the Participant's
family members (whether related by blood, marriage, or adoption); (ii) trust(s)
for the benefit of family members; (iii) family partnerships and/or family
limited liability companies; and (iv) former spouse(s) pursuant to divorce. The
Committee may, in its sole discretion, permit transfers to other persons or
entities upon the request of a Participant. Subsequent transfers of transferred
options may only be made to one of the permitted transferees named above, unless
the Committee has approved of such subsequent transfer. Otherwise, such
transferred options may be transferred only by will or the laws of descent and
distribution. Concurrently with any transfer, the transferor shall give written
notice to the Plan's then current stock option administrator of the name and
address of the transferee, the number of shares being transferred, the date of
grant of the options being transferred, and such other information as may
reasonably be required by the administrator. Following transfer, any such
options shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer. The events of termination of
employment set forth in Section 7 of the Plan shall continue to be applied with
respect to the original Participant, following which the options shall be
exerciseable by the transferee only to the extent that they could have been
exercised by the Participant. The Company disclaims any obligation to provide
notice to a transferee of any termination or expiration of a transferred option.
14. Conditions to Exercise of Options. The Committee may, in its
discretion, require as conditions to the exercise of options and the issuance of
shares thereunder either (a) that a registration statement under the Securities
Act of 1933, as amended, with respect to the options and the shares to be issued
upon the exercise thereof, containing such current information as is required by
the Rules and Regulations under said Act, shall have become, and continue to be,
effective; or (b) that the Participant (i) shall have represented, warranted and
agreed, in form and substance satisfactory to the Company, both that he or she
is acquiring the option and, at the time of exercising the option, that he or
she is acquiring the shares for his/her own account, for investment and not with
a view to or in connection with any distribution; (ii) shall have agreed to
restrictions on transfer, in form and substance satisfactory to the Company; and
(iii) shall have agreed to an endorsement which makes appropriate reference to
such
<PAGE>
representations, warranties, agreements and restrictions both on the option and
and on the certificate representing the shares.
15. Conditions to Effectiveness of the Plan. No option shall be granted
or exercised if the grant of the option, or the exercise and the issuance of
shares pursuant thereto, would be contrary to law or the regulations of any duly
constituted authority having jurisdiction.
16. Alteration, Termination, Discontinuance, Suspension, or Amendment.
The Board, in its discretion, may alter, terminate, discontinue, suspend or
amend the Plan at any time. The Board may not, however, without shareholder
approval (except as provided below in paragraph 17), (i) materially increase the
maximum number of shares subject to the Plan, (ii) materially increase the
benefits accruing to Participants under the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the Plan or, without the
consent of the affected Participant, change, alter or impair any option
previously granted to him under the Plan (except as provided below in paragraph
18). The Committee shall be authorized to amend the Plan and the options granted
thereunder to permit the options to qualify as incentive stock options under
Section 422A of the Code and the regulations promulgated thereunder. The rights
and obligations under any option granted before amendment of the Plan or any
unexercised portion of such option shall not be adversely affected by amendment
of the Plan or the option without the consent of the holder of the option.
17. Effect of Changes in Common Stock. If the Company shall combine,
subdivide or reclassify the shares of Common Stock which have been or may be
subject to the Plan, or shall declare thereon any dividend payable in shares of
Common Stock, or shall reclassify or take any other action of a similar nature
affecting the Common Stock, then the number and class of shares of Common Stock
which may thereafter become subject to options (in the aggregate and to any
Participant) shall be adjusted accordingly, and, in the case of each option
outstanding at the time of any such action, the number and class of shares which
may thereafter be purchased pursuant to such option and the option price per
share shall be adjusted to such extent as may be determined by the Committee to
be necessary to preserve unimpaired the rights of the Participants, and each and
every such determination shall be conclusive and binding upon such Participants.
18. Reorganization. In case of any one or more reclassifications,
changes or exchanges of outstanding shares of Common Stock or other stock (other
than as provided in paragraph 17), or consolidations of the Company with, or
mergers of the Company into other corporations, or other recapitalizations or
reorganizations (other than transactions in which the Company continues to exist
and which do not result in any reclassification change or exchange of
outstanding shares of the Company), or in case of any one or more sales or
conveyances to another corporation of the property of the Company as an
entirety, or substantially an entirety (any and all of which are referred to in
this paragraph 18 as "Reorganization(s)"), the holder of each option then or
thereafter outstanding shall have the right, upon any subsequent exercise
thereof, to acquire the same kind and amount of securities and property which
such holder would then hold if such holder had exercised the option immediately
before the first of any such Reorganization, and continued to hold all
securities and property which came to such holder as a result of that and any
subsequent Reorganization, less all securities and property surrendered or
canceled pursuant to any of same, the adjustment rights in paragraph 17 and this
paragraph 18 being continuing and cumulative; provided, that notwithstanding any
provisions of paragraph 7 to the contrary, the Committee shall have the right in
connection with any such Reorganization, upon not less than thirty (30) days,
written notice to the holders of outstanding options, to terminate the Exercise
Period, and in such event all outstanding options (other than options as to
which one of the events referred to in paragraph 7 has occurred) may be
exercised only to the extent thereby permitted, in each case only at a time
prior to such Reorganization. A liquidation shall be deemed a Reorganization for
the foregoing purpose.
19. Use of Proceeds. Proceeds realized from the sale of Common Stock
pursuant to options granted hereunder shall constitute general funds of the
Company.
<PAGE>
EXHIBIT 10(f)
ACXIOM(R) CORPORATION
U.K. SHARE OPTION SCHEME
Adopted on November 18, 1987
Incorporating amendments made
by the Board on 17 December 1990,
on 8 March 1993, on
26 May 1993, on 24 July 1996,
on 23 October 1996, and on 28 May 1997
Part A approved by the Board of Inland Revenue
under Finance Act 1984
under reference X2945
CLIFFORD CHANCE
200 Aldersgate Street
London ECIA 4JJ
Ref: DPP/A1848no/RTT
WP Ref: DPP/DPP$086D.06
(previously DJL$07D3.21)
<PAGE>
ACXIOM CORPORATION
U.K. SHARE OPTION SCHEME
PART A: APPROVED OPTIONS
A. DEFINITIONS
In this Scheme references to the following words and expressions shall
bear the following meanings, namely:
"Associated Company" - Has the same meaning as in Section 302 of the
Income and Corporation Taxes Act 1970.
"Adoption Date" - The date on which the Scheme is adopted by Resolution
of the Board.
"the Board" - The Board of Directors of the Company.
"the Committee" - A duly constituted committee of the Board consisting
of not less than two persons, each of whom is a "disinterested person" within
the meaning of Rule 16b-3 of the Securities Exchange Act of the United States of
America of 1934, as amended.
"the Company" - Acxiom Corporation
"First Exercise Date" - The date or dates specified in the relevant
Option Certificate being not earlier than one year and not later than nine and a
half years from the date of grant.
"the Group" - The Company and all of its Subsidiaries for the time
being or (where the context so requires) the Company and/or any of its
Subsidiaries.
"Market Value" - The price of a Share on the date of grant of an Option
determined in accordance with Part VIII of the Capital Gains Tax Act 1979 as
agreed in advance for the purposes of the Scheme with the Board of Inland
Revenue.
"Material Interest" - An interest in the Company or another company on
any date or within the preceding twelve months determined in accordance with the
provisions of paragraphs 4(l)(b) and 4(4) of Schedule 10 of the Finance Act
1984.
"Option" - A right to subscribe for or acquire Option Shares granted
pursuant to the Scheme.
"Option Certificate" - The Option Certificate substantially in the form
set out in the Appendix as may be amended by the Board from time to time.
"Option Holder" - A Qualified Person or a former Qualified Person who
holds an Option in accordance with the terms of the Scheme or where the context
permits a person becoming entitled to any such Option in consequence of the
death of the original Option Holder.
"Option Period" - A period commencing at the First Exercise Date and
ending at the date resolved upon by the Committee and specified in the relevant
option certificate being the period within which (subject to the provisions
hereof) the Options granted hereunder must be exercised if at all provided that
such period must end not later than ten years from the date of grant of the
Option.
"Option Shares" - Unissued or issued Shares in respect of which Options
are granted.
<PAGE>
"Shares" - Shares of Common Stock of $0.10 par value each in the
capital of the Company which comply with the provisions of paragraphs 7 to 11 of
Schedule 10 of the Finance Act 1984.
"Qualified Person" - Any full-time director of a company in the Group
who is required by the terms of his employment or office to work for the Group
or any part of it for 25 hours or more per week (exclusive of meal breaks) or a
full-time employee of the Group (other than one who is also a director of a
company in the Group) who is required by the terms of his employment to work for
the Group or any part of it for 20 hours or more per week (exclusive of meal
breaks).
"the Scheme" - This Acxiom Corporation U.K. Share Option Scheme in its
present form with and subject to any amendments thereto properly effected.
"Subscription Price" - The amount payable for Option Shares on the
exercise of an Option granted hereunder, and to be determined in accordance with
paragraph C below.
"Subsidiary" - A company the majority of whose issued share capital is
owned directly or indirectly by the Company.
Except so far as the context otherwise requires any reference herein to any
enactment shall be construed as a reference to that enactment as for the time
being amended, extended or re-enacted. References to the exercise of an Option
shall where the context so allows include the exercise of an Option in part. The
masculine gender shall include the feminine gender. The singular shall include
the plural.
B. GRANT OF OPTIONS
(1) The Committee may at its discretion grant by resolution Options to any
Qualified Persons subject to the terms set out in the Scheme in respect
of the number of Shares that the Committee shall decide and (if the
Committee so resolves in any particular case) subject to achievement of
profit or other performance criteria that have been previously agreed
with the Board of Inland Revenue.
(2) No Options shall be granted to any Qualified Person who has a Material
Interest.
(3) As soon as practicable after the grant of Options the Committee shall
arrange for the despatch of an Option Certificate to each Option Holder
to whom an Option has been granted.
(4) Each Option Certificate shall specify:
(a) the number of Shares over which the Option is granted;
(b) the Subscription Price for each Share;
(c) the First Exercise Date;
(d) the date on which the Option Period will end;
(e) (if the Committee resolves) the profit or other performance
criteria to be attained; and
(f) the date of grant,
(5) The Committee shall report to the Board the names of Qualified Persons
granted options, the number of shares covered by each option, the date
of grant and the terms and conditions of each such option.
<PAGE>
C. SUBSCRIPTION PRICE
Subject to adjustment pursuant to Rule G, the Subscription Price for
each Share in respect of which an Option is exercisable shall be not less than
the higher of the Market Value and the par value of a Share.
D. LIMITATION
(1) An Option shall not be granted to a Qualified Person if the aggregate
subscription price for--
(i) the Option Shares to be subject to the Option; and
(ii) all shares under option or acquired on the exercise of an
option by the Qualified Person pursuant to the Scheme or any other scheme
approved under Schedule 10 to the Finance Act 1984 which is established by the
Company or any Associated Company would exceed (pound)30,000
(2) For the purposes of sub-rule (1) above the exchange rate of pounds
sterling to U.S. dollars on any day shall be taken as the average of the buy and
sell exchange rates quoted by the Wall Street Journal on the business day
preceding the date of grant.
E. EXERCISE AND LAPSE OF OPTIONS
(1) Subject to (2) below, the Option is not to be exercisable unless:
(i) at the date of exercise the Option Holder is a Qualified Person;
and
(ii) the Option Period has commenced and not expired but so that the
Option shall not in any event be exercisable more than ten years after the date
of grant of the Option and shall lapse if not exercised during the Option
Period.
(2) The Option shall, in the following circumstances but subject to the
provisions of this Rule E, be exercisable earlier or otherwise than as
aforesaid:
(i) if the Option Holder ceases to be a Qualified Person before the
commencement of the Option Period or (if the Option Period shall have commenced)
while an Option Period is current: by reason of injury, disability or redundancy
(within the meaning of the Employment Protection (Consolidation) Act 1978) or by
reason of retirement on reaching pensionable age within the meaning of Schedule
20 to the Social Security Act 1975 or any other age at which he is bound to
retire in accordance with the terms of his contract of employment whereupon the
Option may be exercised until the expiry of the latest of--
(a) six months of his so ceasing;
(b) three years and six months after the date of Grant of
the Option; and
(c) three years and six months fter the date (prior to
cessation) that the Option Holder last exercised an option in circumstances in
which paragraphs (a) and (b) of subsection 3 of Section 38 of Finance Act 1984
apply and thereafter the Option shall lapse;
(d) in relation to options granted on or after 23rd
January, 1991 such greater period as the Board in its absolute discretion shall
allow;
and in relation to options granted on or after 23rd January, 1991 if he
so ceases for any other reason at any time, the Option may not be exercised at
all unless the Board shall so permit, in which event it may (and subject to (ii)
below must, if at all), be exercised to the extent permitted by the Board within
the period mentioned herein.
<PAGE>
(ii) if the Option Holder dies before the commencement of the Option
Period while still being a Qualified Person or (if the Option Period shall have
commenced) while an Option Period is current whereupon the Option may be
exercised within twelve months of his death by his legal personal
representatives and thereafter the Option shall lapse;
(iii) if the Option Holder ceases to hold the office or employment by
virtue of which he is a Qualified Person while still being a Qualified Person at
any time on or after the First Exercise Date for any reason other than those set
out in sub-clause E(2)(i) and the Board resolves that the Option should become
exercisable whereupon the Option may be exercised within 90 days of him so
ceasing (unless the Board in its absolute discretion allows some greater period)
and thereafter the Option shall lapse;
(iv) in the event that notice is duly given to the stockholders of the
Company of a proposal to merge, amalgamate, or otherwise reconstruct the capital
of the Company or to dissolve or wind-up the Company or in the event an offer to
purchase the Shares shall be made to the holders of Shares generally (where any
person obtains control of the Company as a result) then the Option Holders may
exercise the Option immediately prior to:
(a) such merger, amalgamation or reconstruction; or
(b) the commencement of such dissolution or winding-up; or
(c) the lapse of an offer to purchase shares by virtue of
which a person obtains control of the Company
(v) for the purposes of the foregoing sub-clause (iv) a person shall be
deemed to have obtained control of the Company if he and others acting in
concert with him have together obtained control of it.
(3) Each period referred to in Rule E(2) shall in any event end not later than
ten years from the date of grant of the Option.
(4) Any Option that is exercisable on the attainment of a performance target
specified pursuant to Rule B(4) shall lapse (if and to the extent not waived by
the Committee with the prior approval of the Board of Inland Revenue) if such
performance target has not been attained.
(5) No Option is to be exercised if the Option Holder has a Material Interest.
(6) Exercise of an Option is to be by application in writing addressed to the
Company and specifying the number of Option Shares in respect of which the
Option is being exercised on that occasion and accompanied by payment in full of
the Subscription Price for each Option Shares, such application to be delivered
or sent by prepaid post to the registered office for the time being of the
Company or to such office as may from time to time be specified.
(7) Subject to such consents of the Bank of England, H.M. Treasury or other
competent authority under the regulations or enactments for the time being in
force as may be necessary and subject to compliance by the Option Holder with
the terms of the Option the Company will not later than twenty-eight days after
receipt of the application make an allotment or transfer to the Option Holder of
the number of Shares specified in the application at the Subscription Price (as
adjusted in accordance with the provisions of the Scheme) and will deliver to
the Option Holder definitive Share Certificates in respect thereof.
F. SUBSTITUTION OF OPTION SHARES
(1) Notwithstanding the provisions of sub-rule E(2)(iv) hereof if any company
(hereinafter called the "acquiring company") shall obtain control of the new
Company as a result of making:
<PAGE>
(a) A general offer to acquire the whole of the issued share capital of
the Company which offer is made on a condition that if the condition is
satisfied the acquiring company will have control of the Company; or
(b) A general offer to acquire all shares of the Company which are of
the same class as the Option Shares;
any Option Holder may at any time within the appropriate period (as defined in
sub-clause (2) below) by agreement with the acquiring company release his rights
under the Scheme (hereinafter called "the old rights") in consideration of the
grant to him of rights (hereinafter called "the new rights") which are
equivalent (as defined in sub-clause (3) below) to the old rights but relate to
shares in a company other than the Company (being either the acquiring company
or some other company within the provisions of paragraph 7(b) or (c) of Schedule
10 to the Finance Act 1984).
(2) For the purposes of sub-rule F(l) above the appropriate period
means a period of 90 days beginning with the time when the acquiring company has
obtained control of the Company and (if applicable) any condition subject to
which the offer is made is satisfied.
(3) For the purposes of sub-rule (1) above the new rights shall be
equivalent to the old rights if the requirements of paragraph 4A(3)(a) to (d)
inclusive of the said Schedule 10 are met.
G. VARIATION IN THE SHARE CAPITAL OF THE COMPANY
On any variation of the Share Capital of the Company (whether by way of
capitalisation or rights issue, sub-division or consolidation of the Shares or a
share capital reduction) the Subscription Price and/or the number of shares
comprised in an Option shall be varied in such manner as the Committee shall
determine and such decision of the Committee shall be final and binding on the
Option Holders and the Company with notification being given in writing to the
Option Holders
PROVIDED ALWAYS THAT:
(i) no adjustment to the Subscription Price shall be made pursuant to
the provisions of this sub-paragraph which would result in any Option Shares
being issued unlawfully at a discount and if in the case of any such Option
Shares such an adjustment would but for this proviso have so resulted the
Subscription Price payable for such Option Shares shall be the par value
thereof,
(ii) no variation to the number of Shares comprised in an Option or the
Subscription Price thereof shall be made pursuant to any of the provisions
contained in this subparagraph until the Board of Inland Revenue have approved
such variation.
H. RIGHTS OF ORDINARY SHARES ALLOTTED
Shares to be allotted pursuant to the exercise of any Option shall rank
pari passu in all respects and as one class with the Shares in issue at the date
of allotment but shall not rank for dividends for which the record date precedes
the date of exercise of the Option.
I. AVAILABILITY OF SHARES
The Company shall at all times have available sufficient unissued
Shares to meet any exercise of any Option. The maximum number of Shares which
may be issued on the exercise of Options granted under the Scheme shall be
800,000.
<PAGE>
J. TRANSFER OF OPTIONS
(1) No Option granted pursuant to this Scheme nor the benefit thereof
may be transferred assigned charged or otherwise alienated.
(2) If an Option Holder does or suffers an act or thing whereby he
would or might be deprived of the legal or beneficial ownership of an Option
that Option shall forthwith lapse and the Board shall not knowingly permit its
exercise.
K. LOSS OF OFFICE
If an Option Holder shall cease to be a Qualified Person for any reason he shall
not be entitled by way of compensation for loss of office or (save as otherwise
provided herein) otherwise however to any sum or other benefit to compensate him
for the loss of any right under the Scheme.
L. THE ADMINISTRATION OF AND AMENDMENTS TO SCHEME
The Board may amend any of the provisions of the Scheme in any way it thinks fit
save that:
(i) no alteration shall be effective to abrogate or alter
adversely any of the subsisting rights of Option Holders except with such
consent or sanction on the part of the Option Holders as would be required under
the provisions of the Company's Restated Certificate of Incorporation as if the
Option Shares constituted a single class of shares and as if such provisions
applied mutatis mutandis thereto.
(ii) no amendment to this Part of the Scheme made while this
Part of the Scheme continues to have the approval of the Board of Inland Revenue
shall be effective until approved by the Board of Inland Revenue.
(2) The decision of the Committee shall be final and binding in all
matters relating to the Scheme and it may at any time discontinue the grant of
further Options or decide in any year not to grant any Options.
(3) The Committee shall have the power from time to time to make and
vary such regulations (not being inconsistent with the Scheme) for the
implementation and administration of the Scheme as it may think fit and its
decision on any matter relating to the interpretation of the Rules of the Scheme
or any other matter concerning the Scheme shall be final and binding (save as
expressly stated otherwise).
(4) The Scheme shall be administered by the Committee. The Board may
from time to time remove members from, or add members to, the Committee.
Vacancies on the Committee, howsoever caused, shall be filled by the Board.
Members of the Committee shall not be eligible to receive Options under the
Scheme. The Committee shall select one of its members as chairman and shall hold
meetings at such times and places as it may determine. A majority of the
Committee shall constitute a quorum and acts of the Committee at which a quorum
is present, or acts reduced to or approved in writing by all the members of the
Committee, shall be valid acts of the Committee.
PART B: UNAPPROVED OPTIONS
Options may be granted under this Part of the Scheme as unapproved options,
which are not eligible for such relief from taxation as is available under
Schedule 9 of the Income and Corporation Taxes Act 1988.
Such options may be granted in accordance with such provisions as would be
applicable if the provisions of Part A above were herein set out in full subject
to the following modifications:
1. In Rule A, delete the definition of "Associated Company."
<PAGE>
2. In Rule A, in the definition of "First Exercise Date", delete the words
"nine and a half years from" and insert "seven years (or such other period as
the Board may have determined before the date of grant of the Option) beginning
with".
3. In Rule A, delete the definition of "Market Value" and insert a new
definition as follows:
"The market value of a Share on the date of grant of an Option as
determined by the Board before the grant thereof".
4. In Rule A, delete the definition of "Material Interest" in its entirety.
5. In Rule A, in the definition of "Option Period", delete the words "ten
years from" and insert "seven years (or such other period up to a maximum of
fifteen years as the Board may have determined before the date of grant of the
Option) beginning with".
6. In Rule A, in the definition of "Shares", delete from "which comply
with the provisions" to the end.
7. In Rule A, delete the definition of "Qualified Person" and substitute
as the definition of "Qualified Person" the words:
"Any director or employee of a company in the Group who is required to
devote the whole or substantially the whole of his working time to the service
of the Group".
8. Delete Rule B(2).
9. Delete Rule D(1) and insert a new Rule D(1) as follows:
"(1) An Option shall not be granted to a Qualified Person if the
aggregate subscription price for the Option Shares to be subject to the Option
would exceed four times the higher of the total remuneration (excluding benefits
in kind) expressed as an annual rate payable by the Group to him as on that day
and the total remuneration (excluding benefits in kind) paid by the Group to him
in the period of 12 months immediately preceding that day".
10. In Rule E(1)(ii), delete the words "ten years after" and insert "seven
years (or such other period as the Board may have determined before the date of
grant of the Option) beginning with".
11. In Rule E(2)(i), delete sub-rule (c) in its entirety.
12. In Rule E(3), delete the words "ten years after" and insert "seven
years (or such other period as the Board may have determined before the date of
grant of the Option) beginning with".
Delete sub-rule E(5).
14. At the end of Rule E(7), insert the following:
", provided that, in the case of Options granted on or after 28 May 1997, where
a company in the Group is obliged (in any jurisdiction) to account for any tax
for which a person exercising an Option is liable by virtue of the exercise of
such Option and/or for any social security contributions recoverable from the
person in question (together, the "Tax Liability"), that person has either:
(a) made a payment to the company concerned or an amount equal to the Tax
Liability; or
<PAGE>
(b) entered into arrangements satisfactory to that company or another company in
the Group to secure that such a payment is made (whether by authorising the sale
of some or all of the Shares on his behalf and payment to the company concerned
of the relevant amount out of the proceeds of sale or otherwise)."; and
15. In Rule F(1), delete the words "(being either the acquiring company or some
other company within the provisions of paragraph 7(b) or (c) of Schedule 10 to
the Finance Act 1984)".
16. Delete Rule F(3).
17. Delete Rule G(ii).
18. Delete Rule L(1)(ii).
<PAGE>
EXHIBIT 10(g)
GENERAL DESCRIPTION OF THE LEADERSHIP TEAM
COMPENSATION PLAN
OBJECTIVE
The objective of the Leadership Team compensation plan is to implement a pay
plan which will reflect the leader's responsibility, provide compensation that
is both equitable and competitive, and which will:
- Align the leader's interests with shareholder/investor's
interest.
- Motivate leaders to achieve the highest level of performance.
- Retain key leaders by linking leadership team compensation to
company performance.
- Attract the best leaders through competitive, growth-oriented
plans.
- Enable sharing of growth & success between associates, leaders
and shareholders.
PLAN PROVISIONS
Eligibility of Participants
For purposes of the Leadership Team Compensation plan, eligible associates will
include Division leaders, Group leaders, Business Unit leaders, Sales leaders,
Business Development leaders, Industry Application Development leaders, Finance
and Accounting leaders Organizational Development leaders, and Corporate Office
leaders.
Components and Plan Structure
The components of the Leadership Team Compensation Plan are as follows:
- Base salary (not at risk)
- Base salary (at risk)
- Long-term incentive
Exhibit 1 of this document reflects the above components for the 5 levels of the
Leadership Team Compensation Plan. In addition, it reflects the Business
Development / Sales Leadership plan.
Each level of the plan has the following:
- Base salary ranges (lower and upper)
- Plan structure (reflecting percentages of each plan component
to total compensation as well as number of years for which
options are granted under the long-term incentive component of
the plan)
Each leader is slotted into one of the five levels based on their experience,
scope of responsibility and past performance. The individual to whom the leader
reports is responsible for managing their respective slotting. Division leaders
must approve all level 3 slottings. Additionally, Division leaders must approve
all slottings of individuals on the Business Development / Sales Leadership
compensation plan. The Company leader must approve all slottings of levels 4 and
5.
Leaders slotted in the Business Development / Sales Leadership plan must be a
senior level business development / sales leader responsible for:
<PAGE>
- developing new business and relationships at senior executive
levels of customers and prospects, or
- providing leadership to two or more sales associates for a
Group or Division. Providing leadership means assigning quotas
and territories, conducting regular reviews of salesperson's
call activity, hiring, terminations, preparing skill
development plans, performance reviews, coaching, mentoring
and overseeing the overall sales process for the area.
Base Salary (Not At Risk)
Guidelines have been established to award Base salary increases for salaries
that are "within range", "in excess of range" and "below range".
The percentage increase guidelines are revised / validated annually.
Base salaries for Business Development / Sales leaders will be established and
managed using the Level 2 salary ranges.
Base Salary (At Risk)
General
The base salary at risk (referred to as at risk throughout the remainder of this
document) amount for the full fiscal year is determined based on the eligible
associate's base salary as of May 1. No adjustment is made to at risk amounts
during the plan year unless the leader moves from one plan level to another. In
the event there is a change in plan level, the at risk will be prorated based on
the date of the change.
Eligible associates must be employed on the date of the actual payment to
receive payment for the quarterly and/or year-end at risk. The at risk for
eligible associates who joined the Leadership Team after the beginning of the
quarter will be pro-rated based on hire date. Additionally, the year-end at risk
amount will be prorated in the same manner.
At risk targets
At risk will be based on the change in EVA attained with an EPS gate. (With the
exception of the commission/specific objective component of the Business
Development / Sales Leadership plans. See page 5 - Commission/specific objective
at risk targets.)
EVA Incentive Principles
- - - Target Incentive
Competitive total compensation opportunity
- - - Expected EVA Improvement
Performance standard to achieve "Target"
- - - Sharing of EVA Improvement Above/Below Expected
Associates and shareholders share risks and rewards
- - - Incentive Bank
Cumulative performance and incentive linked
Target Incentives and Expected EVA Improvement
<PAGE>
Achievement of Expected EVA Improvement results in Target Incentive Pool
Sharing of Incremental EVA Results
Sharing of incremental EVA (above/below "Expected") is constant
- 50% of every $1 of EVA above expected is added to incentive
pool.
- 50% of every $1 of EVA below expected is subtracted from
incentive pool (EVA improvement can be below zero.)
Associates/leaders share in all risks and rewards (no caps or floors)
Incentive Bank Principles
Incentive Pool for current year "deposited" into incentive bank
Bank balance distributed:
- 100% up to "target" incentive
- 33% above "target" incentive
Remaining bank balance reserved against future performance
"Negative" bank balance "repaid" before future incentives are paid
Incentive Funding (EPS Gates)
Incentive attainment determined based on EVA achievement
Incentive funding subject to pro rata reduction if EPS Gate is not achieved
Bank "deposits" equal to Incentive Attained Times Funding Factor. (Funding
factor equals Incentives funded divided by Incentives Attained.)
Existing bank balances also subject to forfeiture to satisfy EPS Gate.
Common fate at risk target breakdown
Corporate Division Group Revenue Shared
Office Leaders Leaders Unit Services
OD/FA Leaders Unit
Leaders** Leaders
- - --------------------------------------------------------------------------------
Common 100% 60% 50% 25% 50%
Fate Co. EVA Co. EVA Co. EVA Co. EVA Co. EVA
- - --------------------------------------------------------------------------------
Unit 0% 40% 25% 75%* 50%
Div. EVA Div. EVA
25% (25% Div. (35%
Group EVA EVA)* Set by
Board)
(25% Group (15%
EVA)* Bus. Plan)
<PAGE>
(25% Unit
EVA)*
- - --------------------------------------------------------------------------------
* These are the default percentages unless the corporate office approves a
different documented plan. Differences should be submitted to the corporate
office by the division leader by June 30 for FY98 and by October 31 for mid-year
revisions.
** Organizational Development and Finance / Accounting Leaders' at risk
percentages will be 50% Company EVA and 50% Division EVA.
Note: All at risk payments are subject to EPS gate (with the exception of the
commissions/specific objective portion of the Business Development/Sales
Leadership plan)
Commission/specific objective at risk targets
These targets apply only to Business Development / Sales Leadership plan.
The commission/specific objective portion of at risk under this plan is based on
revenue and/or EVA percentage of quota attainment for the territories assigned
to the business development/sales leader. It is the responsibility of the
individual's Division and/or Group Leader to establish these targets.
The commission/specific objective portion will be funded by the Unit, Group or
Division and is not subject to the EPS gate as is the common fate portion of at
risk. For FY98, budgets/EVA targets will not be adjusted for additional
commission expense due to these plans.
All commissions are calculated on a YTD, cumulative basis.
The plan provisions and quota assigned may be changed at any time by the
division leader.
The division leader may choose not to accept additional business when resources
are not available to process the work. It is the sales leader's responsibility
to make certain that the work will be accepted before customer commitments are
made.
Divisions and Units (Except Data Products Division):
The Division, Group and unit EVA is the controllable EVA for a Division and
revenue Group/Unit which includes the direct revenue and expenses for the
unit(s) less appropriate charges for data center consumption, application
software and facilities as determined by the ABM system. Also included will be a
charge for the cost of capital including accounts receivable, data center
equipment, workstation/LAN and facilities. The target for your Group/Unit EVA
will be negotiated with your Division Leader.
Data Products Division - Groups/Units:
Product Line EVA targets and attainment must be certified by the corporate
office.
Shared Services Units:
The business plan target component for Shared Services is to maintain your
expenses at or below your current fiscal year budget.
EPS Gate Target
The EPS target for fiscal 1998 is $.59 per share.
<PAGE>
All common fate at risk payments are subject to first achieving Acxiom's EPS
targets.
Over Achievement
Above the funding at targeted EVA, 50% of all Incremental EVA will be added to
Incentive Funding with no gate calculation. Above target funds will be added to
the respective incentive banks and 1/3 will be paid at the end of the fiscal
year and 2/3 will be banked for future payment (subject to the sustained
business performance of Acxiom Corporation).
The over achievement EVA will be funded at the corporate level and distributed
to the Divisions, Groups and Units that over achieved their respective EVA
targets.
Method of payment:
It is Acxiom's intention to pay at risk in cash. However, from time to time the
Company Leadership Team (CLT), may elect to pay at risk in stock options if
conditions of the business justify it. In the event this decision is made, the
CLT will make every effort to notify the Leadership Team members within 5
business days of the decision being finalized. If at risk is paid in stock
options in lieu of cash, the Black-Scholes model will be used to calculate the
option value and number of options.
Payments will be made on a quarterly basis based on attainment of financial
objectives up to your target incentive and subject to the EPS funding gate
calculation, as follows:
First Quarter - 1/8th of total opportunity
Second Quarter - 1/8th of total opportunity
Third Quarter - 1/8th of total opportunity
Fourth Quarter - 5/8th of total opportunity (1/8 for the 4th Quarter &
1/2 for the Annual Target)
All over achievement incentives will be deferred until the year end payment.
All payments will be made within 60 days of the end of the quarter.
All EVA and EPS gate calculations will be done on a year-to-date basis.
For the first, second and third quarters, the objectives are equal to the
Year-to-date financial targets as of the end of each respective quarter and are
subject to the EPS gate calculation. The total Company EVA and EPS quarterly
gate targets are shown below.
EVA EVA
(in 000's) EPS (in 000's) EPS
-------------------------------------------------------
First Quarter $(169) $.09 Third Quarter $5,470 $.19
Second Quarter $2,480 $.14 Fourth Quarter $4,174 $.17
TOTALS $10,505 $.59
---------------------------------
LONG-TERM INCENTIVE
For purposes of determination of the long-term incentive (LTI), eligible
associates must be employed and be a member of the Leadership Team on the date
the Board of Directors reviews the LTI grants for that year (May Board of
Directors meeting). There is no provision for prorating partial years. These
options fall under the Acxiom stock option plan and will be subject to all
standard provisions.
<PAGE>
The long-term incentive will be in the form of stock options and other
performance vehicles as necessary. The current year vehicle will be stock
options.
Stock options will be awarded under three categories:
Category A - Fair market value at date of grant
Category B - 50% above fair market value
Category C - 100% above fair market value
Using the Black-Scholes stock options pricing model, the mix of options to be
awarded as an approximate percentage of the total long-term incentive are:
Category A - 50% of total long-term incentive
Category B - 25% of total long-term incentive
Category C - 25% of total long-term incentive
Under the long-term incentive plan, participants will be awarded a grant of
stock options on a cycle corresponding to the level of compensation plan to
which the leader has been assigned. Multi-year grants are awarded for levels 3
through 5.
In the event a leader is assigned a level with multi-year grants, they will be
awarded the number of years of options necessary to put them on the same cycle
as all other leaders on that level.
Stock options awarded will vest equally on each of the nine anniversary dates
following the date of grant. Stock options may not be exercisable later than
fifteen years after their date of grant.
The fiscal 1998 stock options were officially approved and priced by the Board
of Directors in January, 1997 for those individuals on the Leadership Team at
that time. All other Leadership Team options were approved at the May, 1997
Board of Directors meeting. The May options include new Leadership Team members
as well as adjustments for those moving from one level to another.
It is the current intent of the Board of Directors to continue this plan (or a
similar plan) in future years. The Board of Directors reserves the right to
modify or cancel this plan in future years for any reason at its sole
discretion.
PLAN MODIFICATIONS
Any modification to the standard plan described in this document must be
approved in advance by Rodger Kline.
<PAGE>
EXHIBIT 1
Acxiom Corporation
Leadership Team
Compensation Guidelines
Leadership Compensation Plan - FY98
- - --------------------------------------------------------------------------------
Leader
Classifi-
cation 'Not at Risk' Base Salary Ranges Plan Structure
- - --------------------------------------------------------------------------------
At Yrs
Lower Range Upper Range Base Risk LTI Granted
- - --------------------------------------------------------------------------------
Level 5 $170,000 - $240,000 $240,000 - $310,000 35% 25% 40% 3
Level 4 $120,000 - $180,000 $180,000 - $240,000 40% 25% 35% 3
Level 3 $ 90,000 - $140,000 $140,000 - $190,000 50% 25% 25% 2
Level 2 $ 60,000 - $110,000 $110,000 - $160,000 60% 20% 20% 1
Level 1 $ 50,000 - $ 90,000 $ 90,000 - $130,000 70% 15% 15% 1
- - --------------------------------------------------------------------------------
Note: At Risk Opportunity for the fiscal year is established based on Base
Salary as of May 1, 1997.
Business Development / Sales Leadership
Compensation Plan - FY98
- - --------------------------------------------------------------------------------
Leader 'Not at Risk' Base Salary Ranges Plan Structure
Classifi- At Yrs
cation Lower Range Upper Range Base Risk LTI Granted
- - --------------------------------------------------------------------------------
Bus. Dev./
Sales $ 60,000 - $110,000 $110,000 - $160,000 40% 40% 20% 1
50% 30% 20% 1
Common Commis-
Fate sions
75% 25%
50% 50%
25% 75%
- - --------------------------------------------------------------------------------
Note: At Risk Opportunity for the fiscal year is established based on Base
Salary as of May 1, 1997.
% Increase Guidelines for Salaries
FY98
- - --------------------------------------------------------------------------------
Rating Within Range In Excess
Lower Upper of Range Below Range
- - --------------------------------------------------------------------------------
Low 0% 0% 0% For ratings of Solid or High,
Solid Up to 9% Up to 7% Up to 2% up to 10% every 6 months until
High Up to 12% Up to 10% Up to 4% range minimum is reached.
- - --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 13
(This page and the following five (5) pages correspond to pages 20-25 of the
Company's Annual Report.)
Selected Financial Data
Years Ended March 31, 1997 1996 1995 1994 1993
- - ----------------------------- ------- ------- ------- ------- -------
Earnings Statement Data:
- - ----------------------------- ------- ------- ------- ------- -------
Revenue $ 402,016 269,902 202,448 151,669 115,827
Net Earnings $ 27,512 18,223 12,405 8,397 6,230
Earnings per share $ .47 .35 .27 .19 .15
Average shares outstanding 59,143 52,078 45,886 43,680 41,536
============================= ======= ======= ======= ======= =======
March 31, 1997 1996 1995 1994 1993
- - ----------------------------- ------- ------- ------- ------- -------
Balance Sheet Data:
Current assets $ 84,545 54,014 43,517 35,857 36,027
Current liabilities $ 36,109 31,159 24,964 12,895 14,938
Total assets $ 299,668 194,049 148,170 123,378 112,841
Long-term debt, excluding
current installments $ 87,120 26,885 18,219 34,992 33,237
Redeemable common stock $ - - - 7,692 7,222
Stockholders' equity $ 156,097 122,741 97,177 61,896 52,171
============================= ======= ======= ======= ======= =======
(In thousands, except per share data. Per share data are restated to reflect
2-for-1 stock splits in fiscal 1997, 1995, and 1993.)
<PAGE>
The following table is submitted in lieu of the required graphs:
YEAR 1993 1994 1995 1996 1997
- - ------------------------ ----- ----- ----- ----- -----
Revenue (Dollars in
Millions) $115.8 $151.7 $202.4 $269.9 $402.0
Earnings Per Share
(In Dollars) $0.15 $0.19 $0.27 $0.35 $0.47
Stock Price (In
Dollars) at March 31 $4.38 $5.19 $8.38 $11.94 $14.38
Pretax Margin (In
Percent) 8.8% 8.9% 9.9% 10.9% 11.0%
Return on Equity
(In Percent) 12.4% 13.2% 15.3% 16.5% 20.3%
Earnings Before Interest
Taxes, Depreciation and
Amortization ("EBITDA")
(Dollars in Millions) $28.7 $35.6 $42.0 $52.9 $81.2
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
In fiscal 1997, the Company recorded the highest annual revenues, earnings, and
earnings per share in its history.
The following table shows the Company's revenue distribution by customer
industry for each of the years in the three-year period ended March 31, 1997:
1997 1996 1995
---- ---- ----
Direct Marketing 34% 26% 22%
Financial Services 20 27 24
Insurance 20 25 30
Information & 20 15 16
Communication Services
Media/Publishing 6 7 8
--- --- ---
100% 100% 100%
Consolidated revenues were a record $402.0 million in 1997, up 49% from 1996
after increasing 33% from 1995 to 1996. Excluding the impacts of the Pro CD and
DMI acquisitions which were completed at the beginning of the fiscal year, the
growth rate in 1997 was 29% over the prior year. Direct marketing revenue of
$136.9 million grew 90% over 1996, including the revenue from the DMI
acquisition. Excluding DMI, the revenue increase was 34% reflecting growth in
Acxiom UK, retail and the high-tech business. Financial services grew 12% to
$80.4 million including growth in DataQuick revenues of 24% and growth in credit
card processing revenues of 7%. Insurance revenues of $81.2 million grew 21%,
primarily due to growth in revenues from the Allstate Insurance Company
("Allstate") data management agreement. Information and communication services
grew 93% to $81.1 million, including the effects of the Pro CD acquisition.
Excluding the acquisition, the growth was 58%, reflecting the incremental
revenues from the outsourcing contract with The Polk Company ("Polk"), for which
revenues were not ramped up until the fourth quarter of 1996. Media/Publishing
revenues grew 34% over 1996 to $22.4 million, due primarily to the addition of
new customers.
In fiscal 1996, consolidated revenues grew $67.5 million from 1995. Direct
marketing revenues grew 61%, reflecting a $16 million increase in revenues from
the Trans Union Marketing Services agreement and 26% growth in other direct
marketing revenues. Financial services grew 51%, including $20.8 million
resulting from the acquisition of DataQuick and 8% growth in credit card
processing revenues. Insurance revenue increased 13%, reflecting growth in
revenues from the Allstate agreement. Information and communication services
revenues were up 34% reflecting revenues from the outsourcing contract with
Polk, 6% growth in the Trans Union data center management agreement and 30%
growth in the remaining industry sector. Media/publishing revenues did not
change substantially from 1995.
The following table presents operating expenses for each of the years in
the three-year period ended March 31, 1997 (in millions):
1996 to 1995 to
1997 1996 1995 1997 1996
----- ----- ----- ---- ----
Salaries & $145.0 $ 98.1 $ 67.3 +48% +46%
benefits
Computer, 58.6 40.9 28.3 +43 +45
communications and
other equipment
Data costs 76.3 63.4 60.0 +20 +6
Other operating
costs and expenses 70.4 35.8 23.8 +97 +50
----- ----- ----- ---- ----
$350.3 $238.2 $179.1 +47% +33%
Salaries and benefits increased from 1996 to 1997 by 48% due primarily to the
acquisitions of DMI and Pro CD. After adjusting for the acquisitions, the
resulting 20% growth primarily reflects increased headcount to support the
growth of the business. From 1995 to 1996, salaries and benefits increased 46%,
due primarily to the acquisitions in 1996 of DataQuick and Generator
Datamarketing Limited, combined with the effects of the Polk and Trans Union
Marketing Services contracts. After adjusting for the acquisitions and new
contracts, the growth was 15%, reflecting increased headcount to support the
growth of the business.
Computer, communications and other equipment costs increased 43% in 1997.
Beginning in the fourth quarter of 1996, the Company recorded pass-through
revenue and expenses in connection with the Trans Union Marketing Services
contract. The Company discontinued recording these pass-through revenues and
expenses in the fourth quarter of 1997 upon renegotiation of the deliverables
under this contract. After adjusting for the acquisitions of Pro CD and DMI
noted above and these pass-through expenses, computer costs increased 15% due
primarily to additional depreciation and other equipment costs related to
increases in data center equipment to support the growth of the business,
including the Polk outsourcing contract. These costs increased 45% in 1996, but
after adjusting for the acquisitions and new contracts in 1996 these costs
actually declined by 4%.
<PAGE>
Data costs grew 20% in 1997 and 6% in 1996. In both years, the primary
reason for the increase was the growth in revenues under the Allstate contract.
Other operating costs and expenses increased 97% in 1997. After adjusting
for the impact of the DMI and Pro CD acquisitions and the ramp-up of the Polk
contract the increase was 24%, reflecting increased costs necessary to support
increased revenues. For 1996, these costs increased 50%; however, after
adjusting for the new contracts, acquisitions, and a full year of InfoBase
results (since October 1, 1994, the operations of InfoBase are consolidated),
the increase is reduced to 15%, primarily reflecting larger advertising
expenditures and higher facilities costs associated with newly-constructed
buildings at the Company's headquarters location.
Software and research and development spending was $17.2 million in 1997
compared to $10.4 million in 1996 and $8.1 million in 1995.
Income from operations was a record $51.7 million, an increase of 63% over
1996. Income from operations in 1996 reflected an increase of 37% from 1995. The
operating margin in 1997 was 12.9%, compared with 11.7% in 1996 and 11.4% in
1995.
Interest expense increased by over $2 million in 1997 due to higher levels
of debt during the year and lower interest capitalization. Interest expense
decreased by $525,000 in 1996 due to lower interest rates and the capitalization
of $400,000 in interest costs related to the newly-constructed buildings noted
earlier.
Other expense in 1997 includes writedowns related to the MorCom property
and preferred stock investment (see discussion below) and amortization of the
excess of cost over the fair value of net assets acquired (goodwill), which
increased in 1997 due to the acquisition of DMI. Other expense in 1995 includes
a charge of $259,000 for the equity in operations of the InfoBase partnership
for the first half of the year.
The Company's effective tax rate was 37.5%, 38.0%, and 38.2% for 1997,
1996, and 1995, respectively. In each year, the effective rate exceeded the U.S.
statutory rate primarily because of state income taxes, partially offset by
research and experimentation tax credits.
Net earnings were a record $27.5 million in 1997, up 51% from 1996 after
increasing 47% from 1995 to 1996. Earnings per share of $.47 was also a record
in 1997, up 34% from 1996 after increasing 30% from 1995 to 1996.
Capital Resources and Liquidity
Working capital at March 31, 1997 totaled $48.4 million compared to $22.9
million a year earlier. At March 31, 1997, the Company had available credit
lines of $51.5 million of which $21.5 million was outstanding. The Company
continues to classify as long-term debt the note payable totaling $4.0 million
which is due in full on June 30, 1997, as it is the Company's intention to
retire this loan with additional proceeds from the revolving credit facility.
The Company's debt-to-capital ratio (capital defined as long-term debt plus
stockholders' equity) was 36% at March 31, 1997 compared to 18% at March 31,
1996. The increase in the ratio is due to the issuance of a convertible note in
the amount of $25.0 million related to the DMI acquisition (see footnote 15 of
the notes to consolidated financial statements for additional discussion of the
DMI transaction), the issuance of $30.0 million in senior unsecured notes, and
increased borrowing under the revolving credit agreement. Total stockholders'
equity increased 27% to $156.1 million at March 31, 1997.
Cash provided by operating activities was $35.1 million for 1997 compared
to $39.3 million in 1996 and $36.9 million in 1995. Earnings before interest,
taxes, depreciation, and amortization ("EBITDA") increased by 54% compared to
1996, but the resulting increase in operating cash flow was offset by an
increase of $22.0 million in accounts receivable due to a decrease in receivable
turnover. In 1997, $64.1 million was used by investing activities and $28.3
million was provided through financing activities. Investing activities in 1997
included capital expenditures of $59.8 million, compared to $39.0 million in
1996 and $24.4 million in 1995. The increase in capital expenditures was
principally due to purchases of data center equipment to support the Company's
outsourcing agreements with Polk and Trans Union, as well as the purchase of
additional data center equipment in the Company's core data centers to provide
for incremental capacity along with reengineering a number of key proprietary
processes to run on client servers using low-cost parallel processors. In
addition to the Polk and Trans Union data center equipment purchases, the
Company has also purchased other data center equipment (primarily servers) which
are also tied to contracts with customers. In 1996, the Company also completed
an expansion of its Conway data center and a new 100,000 square-foot customer
service building on its main campus in Conway, Arkansas, at a cost of
approximately $12.0 million, funded through current operations and existing
credit lines.
Financing activities in 1997 include the issuance of $30.0 million in
senior notes, issuance of a $25.0 million convertible note in connection with
the purchase acquisition of DMI, and increases under the revolving credit
facility. Financing activities in 1997 also reflect the payment of short-term
bank debt assumed when the Company acquired DMI. Financing activities in 1996
include the effects of cash dividends and common stock transactions made by
DataQuick prior to its acquisition on August 25, 1995.
While the Company does not have any material contractual commitments for
capital expenditures, additional investments in facilities and computer
equipment continue to be necessary to support the growth of the business. In
addition, new outsourcing or facilities management contracts frequently require
substantial up-front capital expenditures in order to acquire or replace
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 unused capacity to raise capital which could be used to support
future growth.
<PAGE>
Seasonality and Inflation
Although the Company cannot accurately determine the amounts attributable
thereto, the Company has been affected by inflation through increased costs of
compensation and other operating expenses. Generally, the effects of inflation
are offset by technological advances, economies of scale and other operational
efficiencies. The Company has established a pricing policy for long-term
contracts which provides for the effects of expected increases resulting from
inflation.
The Company's operations have not proved to be significantly seasonal,
although the Company's traditional direct marketing operations experience
slightly higher revenues in the Company's second and third quarters. In order to
minimize the impact of these fluctuations, the Company continues to move toward
long-term strategic partnerships with more predictable revenues. Revenues under
long-term contract (defined as three years or longer) were 50%, 52%, and 43% of
consolidated revenues for 1997, 1996 and 1995, respectively.
Acquisitions and Partnerships
The Company completed two acquisitions during the year ended March 31, 1996. The
acquisition of Generator Datamarketing Limited in the U.K. was accounted for as
a purchase and the acquisition of DataQuick Information Systems was accounted
for as a pooling of interests. In fiscal 1997, the Company completed two
additional acquisitions, which became effective in April 1996. The acquisition
of Pro CD, Inc. has been accounted for as a pooling of interests and the
acquisition of Direct Media/DMI, Inc. is accounted for as a purchase. See
footnote 15 to the consolidated financial statements for more information
regarding these acquisitions. Together, these four acquisitions contributed
approximately $86 million in revenue in fiscal 1997.
Effective November 1, 1995, the Company assumed management of The Polk
Company's data center in Taylor, Michigan pursuant to a ten-year agreement. In
July 1996, Polk's data center operations were transferred to the Company's
headquarters in Conway.
Other Information
In 1997, 1996, and 1995, the Company had two customers who accounted for more
than 10% of revenue. Allstate accounted for 16.8%, 20.7%, and 26.4% in 1997,
1996, and 1995, respectively, and Trans Union accounted for 14.1%, 15.5% and
12.6% in 1997, 1996, and 1995, respectively. The Trans Union data center
management agreement and marketing services agreement have been extended and now
expire in 2005. A long-term extension of the Allstate agreement, which was
originally signed for a five-year term expiring in fiscal 1998, is currently
being negotiated. The Company does not have any reason to believe that either of
these custom.
Acxiom U.K., the Company's United Kingdom business unit, provides services
to the United Kingdom market which are similar to the traditional direct
marketing industry services the Company provides in the United States. In
addition, Acxiom U.K. also provides promotional materials handling and
fulfillment services to U.K. customers. The recent Generator acquisition is also
managed through Acxiom U.K. Most of the Company's exposure to exchange rate
fluctuation is due to translation gains and losses as there are no material
transactions which cause exchange rate impact. The U.K. operation generally
funds its own operations and capital expenditures, although the parent company
occasionally advances funds from the U.S. to the U.K. These advances are
considered to be long-term investments, and any gain or loss resulting from
changes in exchange rates as well as gains or losses resulting from translating
the financial statements into U.S. dollars are accumulated in a separate
component of stockholders' equity. There are no restrictions on transfers of
funds from the U.K.
Efforts are currently underway to expand the services of Acxiom U.K. to
customers in central Europe and the Asia Pacific region. Management believes
that the market for the Company's services in such locations is largely
untapped. To date the Company has had no significant revenues or operations
outside of the United States and the United Kingdom.
As noted in footnote 12 to the consolidated financial statements, the
Company's United Kingdom operations earned profits of $1,046,000 in fiscal
1997, and are expected to continue to show profits in the future. The U.K.
operations sustained losses of $399,000 and $856,000 in 1996 and 1995,
respectively. The loss in 1996 resulted from the operation of Generator
Datamarketing Limited, which was acquired in 1996. The loss in 1995 resulted
from the BSA U.K. operation which sold catalog fulfillment software and which
was sold in 1995.
As discussed in footnote 13 to the consolidated financial statements, the
Company has settled the arbitration matter between the Company and Highlights
for Children, Inc. The settlement, the terms of which are confidential, was not
material to the consolidated financial statements of the Company.
Effective March 31, 1994, the Company sold substantially all of the assets
of its former Acxiom Mailing Services operation in exchange for the assumption
of certain liabilities, $4.5 million in cash, a mortgage note receivable, and
$1.0 million of preferred stock issued by the buyer, MorCom, Inc. Additionally,
the Company sold MorCom a software license to use certain of the Company's
software. In June 1996, MorCom ceased operations. The Company has established
valuation reserves for the full remaining amount of the software license
receivable, the preferred stock, and trade accounts receivable. The Company has
obtained title to and sold a portion of the property related to the mortgage
note, receiving proceeds of $949,000. The Company is negotiating a sale of the
remaining property and has established a valuation reserve of $1.6 million for
its ultimate disposition. Management believes that any further loss associated
with this event will not be material to the consolidated financial statements.
<PAGE>
The Financial Accounting Standards Board has issued Statements No. 128,
"Earnings per Share" and No. 129, "Disclosure of Information about Capital
Structure." Statements No. 128 and 129 are required to be adopted by the Company
in fiscal 1998. The adoption of Statement No. 128 will cause the Company to be
required to change the manner in which it calculates and presents earnings per
share. As a result, the Company will be required to report both "basic earnings
per share" and "diluted earnings per share." In general, "diluted earnings per
share" will be approximately the same as the earnings per share historically
reported by the Company. "Basic earnings per share" will be a greater amount,
because it does not take into account dilution from stock options and warrants
which are common stock equivalents and which have previously been included by
the Company in its reported earnings per share. Early application of Statement
No. 128 is not permitted; however, if the statement had been implemented in
fiscal 1997, "basic earnings per share" would have been $.54 and "diluted
earnings per share" would have been $.47.
Statement No. 129 specifies certain disclosures about capital structure.
Management does not expect any material impact to the Company's consolidated
financial statements from the implementation of this new accounting standard.
Outlook
Certain statements in this Annual Report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements, which are not statements of historical fact, may
contain estimates, assumptions, projections and/or expectations regarding the
Company's financial position, results of operations, market position, product
development, regulatory matters, growth opportunities and growth rates,
acquisition and divestiture opportunities, and other similar forecasts and
statements of expectation. Such forward-looking statements are not guarantees of
future performance. They involve known and unknown risks, uncertainties, and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Representative examples of such factors are discussed in more detail in the
Company's Annual Report on Form 10-K and include, among other things, the
possible adoption of legislation or industry regulation concerning certain
aspects of the Company's business; the removal of data sources and/or marketing
lists from the Company; the ability of the Company to retain customers who are
not under long-term contracts with the Company; technology challenges; the risk
of damage to the Company's data centers or interruptions in the Company's
telecommunications links; acquisition integration; the effects of postal rate
increases; and other market factors. See "Additional Information Regarding
Forward-looking Statements" in the Company's Annual Report on Form 10-K.
Effective April 1997, the Company realigned itself into four operating
divisions-Services, Alliances, Data Products and International. The purpose of
the realignment was to improve focus, maintain the entrepreneurial environment,
leverage the data assets, and to support future growth. The Services and
International Division will provide the computer processing services
historically performed by the Company. The Alliances Division has responsibility
for the Company's outsourcing and finance industry customers. The Data Products
Division is comprised of InfoBase, DMI, DataQuick and Pro CD. The Company
believes that existing customer industries (direct marketing, financial
services, insurance, information and communication services, and
media/publishing) all continue to offer good growth potential. There is an
increased emphasis on one-to-one marketing by businesses in general which we
believe will increase demand for the Company's data content and services both in
the U.S. and worldwide. The Company continues to explore uses of its data and
services beyond marketing applications and has had some success in developing
applications in the insurance underwriting area. At the same time, the Company
is also focusing on industries such as retail, telecommunications, high tech,
entertainment, packaged goods and utilities as strong growth opportunities. In
particular, telecommunications and utilities businesses are increasing their
focus on direct marketing as the result of deregulation in their respective
industries. The Company also believes there is strong growth potential beyond
the Fortune 500 companies that it has traditionally served with medium-sized
businesses and divisions of large corporations as well as the small office/home
office marketplace. As a result of improved delivery systems, these markets are
now becoming cost efficient for the Company to render some of its products and
services. Lastly, the Company is developing relationships with other firms such
as Oracle, IBM, Informix and Red Brick to promote alternate channels of
distribution for the Company's products and services.
The Company believes that operating margins will continue to improve
primarily as a result of leveraging the Company's data content resources,
improving internal processes and the increased profitability of the Company's
U.K. operations.
To implement its strategy, the Company will continue to add data center
capacity to support growth. The Company expects that capital expenditures will
be $40-50 million in 1998, a substantial portion of which is supported directly
by contracts with customers.
The Company currently expects its effective tax rate to be 37-39% for 1998.
This estimate is based on current tax law and current estimates of earnings, and
is subject to change. Under current law, the research and experimentation tax
credits will expire May 31, 1997, which could cause the Company's effective rate
to increase if Congress does not reinstate the credit.
<PAGE>
(This page and the following seventeen (17) pages correspond to pages 26-42 of
the Company's Annual Report.)
Consolidated Balance Sheets
March 31, 1997 and 1996
Assets 1997 1996
- - ------ ---- ----
Current assets:
Cash and cash equivalents $ 2,721,000 $ 3,469,000
Trade accounts receivable, net 70,636,000 44,474,000
Refundable income taxes (note 7) 1,809,000 1,537,000
Other current assets (note 7) 9,379,000 4,534,000
----------- -----------
Total current assets 84,545,000 54,014,000
Property and equipment, net of
accumulated depreciation and
amortization (notes 3, 4 and 5) 116,171,000 89,101,000
Software, net of accumulated
amortization of $11,330,000 in 1997
and $9,714,000 in 1996 (note 2) 18,627,000 10,524,000
Excess of cost over fair value of net
assets acquired, net of accumulated
amortization of $4,924,000 in 1997
and $2,593,000 in 1996 (notes 8 and 15) 38,297,000 13,982,000
Other assets (note 14) 42,028,000 26,428,000
----------- -----------
$299,668,000 $194,049,000
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term notes payable 158,000 646,000
Current installments of long-term debt
(note 4) 3,923,000 3,866,000
Trade accounts payable 15,323,000 13,596,000
Accrued expenses:
Interest 1,128,000 435,000
Payroll and payroll related 7,519,000 5,111,000
Royalties 2,047,000 1,314,000
Other 5,492,000 5,875,000
Advances from customers 519,000 316,000
----------- -----------
Total current liabilities 36,109,000 31,159,000
Long-term debt, excluding current
installments (note 4) 87,120,000 26,885,000
Deferred income taxes (note 7) 17,324,000 10,933,000
Deferred revenue 3,018,000 2,331,000
Stockholders' equity (notes 6, 10
and 15):
Preferred stock - -
Common stock 5,274,000 4,870,000
Additional paid-in capital 61,322,000 52,079,000
Retained earnings 91,738,000 68,978,000
Foreign currency translation adjustment 278,000 (863,000)
Treasury stock, at cost (2,515,000) (2,323,000)
----------- -----------
Total stockholders' equity 156,097,000 122,741,000
Commitments and contingencies (notes 4,
5, 8, 9, 10 and 13)
----------- -----------
$299,668,000 $194,049,000
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Earnings
Years ended March 31, 1997, 1996 and 1995
1997 1996 1995
---- ---- ----
Revenue (notes 8, 10 and 11) $402,016,000 $269,902,000 $202,448,000
Operating costs and expenses
(notes 2, 8, 9 and 14):
Salaries and benefits 145,038,000 98,075,000 67,287,000
Computer, communications and
other equipment 58,552,000 40,972,000 28,330,000
Data costs 76,282,000 63,442,000 59,963,000
Other operating costs and
expenses 70,431,000 35,755,000 23,803,000
----------- ----------- -----------
Total operating costs and
expenses 350,303,000 238,244,000 179,383,000
----------- ----------- -----------
Income from operations 51,713,000 31,658,000 23,065,000
----------- ----------- -----------
Other expense net:
Interest expense (3,903,000) (1,863,000) (2,388,000)
Other, net (notes 8 and 14) (3,772,000) (399,000) (602,000)
----------- ----------- -----------
(7,675,000) (2,262,000) (2,990,000)
----------- ----------- -----------
Earnings before income taxes 44,038,000 29,396,000 20,075,000
Income taxes (note 7) 16,526,000 11,173,000 7,670,000
----------- ----------- -----------
Net earnings $ 27,512,000 $ 18,223,000 $ 12,405,000
=========== =========== ===========
Earnings per share $.47 $.35 $.27
=========== =========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Stockholders' Equity
Years ended March 31, 1997, 1996 and 1995
Common stock
----------------------------
Number of
shares Amount
---------- ----------
Balances at March 31, 1994 41,944,128 $ 4,194,000
Sale of common stock (note 6) 2,288,454 229,000
Tax benefit of stock options exercised (note 7) - -
Issuance of common stock warrants (note 10) - -
Issuance of treasury stock net of shares
repurchased - -
Accretion on redeemable common stock (note 10) - -
Transfer of redeemable common stock to
stockholders' equity (note 10) 1,920,000 192,000
Translation adjustment - -
Net earnings - -
Balances at March 31, 1995 46,152,582 4,615,000
DataQuick merger (note 15) 1,969,678 197,000
Retirement of DataQuick common stock prior to
merger - -
Sale of DataQuick common stock prior to merger - -
DataQuick dividends prior to merger - -
Sale of common stock 562,794 56,000
Tax benefit of stock options exercised (note 7) - -
Issuance of employee stock awards 13,356 2,000
Issuance of treasury stock, net of shares
repurchased - -
Translation adjustment - -
Net earnings - -
Balances at March 31, 1996 48,698,410 4,870,000
Pro CD merger (note 15) 3,313,324 331,000
Sale of common stock 724,164 73,000
Tax benefit of stock options exercised (note 7) - -
Issuance of treasury stock, net of shares
repurchased - -
Translation adjustment - -
Net earnings - -
Balances at March 31, 1997 52,735,898 $5,274,000
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Stockholders' Equity (Continued)
Years ended March 31, 1997, 1996 and 1995
Foreign Treasury stock
Additional currency ----------------------- Total
paid-in Retained translation Number of stockholders'
capital earnings adjustment shares Amount equity (note 6)
---------- ---------- ---------- --------- ---------- -----------
$22,527,000 $38,562,000 $ (818,000) (1,411,064) $(2,569,000) $ 61,896,000
12,719,000 - - - - 12,948,000
252,000 - - - - 252,000
536,000 - - - - 536,000
461,000 - - 99,494 162,000 623,000
- (191,000) - - - (191,000)
7,691,000 - - - - 7,883,000
- - 825,000 - - 825,000
- 12,405,000 - - - 12,405,000
---------- ---------- --------- --------- --------- -----------
44,186,000 50,776,000 7,000 (1,311,570) (2,407,000) 97,177,000
5,113,000 447,000 - - - 5,757,000
(1,010,000) - - - - (1,010,000)
190,000 - - - - 190,000
- (468,000) - - - (468,000)
2,063,000 - - - - 2,119,000
656,000 - - - - 656,000
101,000 - - - - 103,000
780,000 - - 69,328 84,000 864,000
- - (870,000) - - (870,000)
- 18,223,000 - - - 18,223,000
---------- ---------- --------- --------- --------- -----------
52,079,000 68,978,000 (863,000) (1,242,242) (2,323,000) 122,741,000
2,647,000 (4,752,000) - - - (1,774,000)
3,553,000 - - - - 3,626,000
1,684,000 - - - - 1,684,000
1,359,000 - - 145,912 (192,000) 1,167,000
- - 1,141,000 - - 1,141,000
- 27,512,000 - - - 27,512,000
---------- ---------- --------- --------- --------- -----------
$61,322,000 $91,738,000 $ 278,000 (1,096,330) $(2,515,000) $156,097,000
========== ========== ========= ========= ========= ===========
<PAGE>
Consolidated Statements of Cash Flows
Years ended March 31, 1997, 1996 and 1995
1997 1996 1995
---- ---- ----
Cash flows
from
operating
activities: Net earnings $27,512,000 $18,223,000 $12,405,000
Adjustments to reconcile
net earnings to net
cash provided by
operating activities:
Depreciation and
amortization 33,244,000 21,602,000 19,566,000
Loss on disposal or
impairment of assets 2,412,000 49,000 114,000
Provision for returns and
doubtful accounts 5,530,000 149,000 1,656,000
Deferred income taxes 5,776,000 3,434,000 319,000
Tax benefit of stock
options exercised 1,684,000 656,000 252,000
Other, net - - 406,000
Changes in operating
assets and
liabilities:
Accounts receivable (21,972,000) (4,092,000) (8,271,000)
Other assets (14,669,000) (5,173,000) 60,000
Accounts payable and
other liabilities (4,432,000) 4,459,000 10,440,000
---------- ---------- ----------
Net cash provided by
operating activities 35,085,000 39,307,000 36,947,000
---------- ---------- ----------
Cash flows
from
investing
activities: Disposition of assets 2,385,000 402,000 5,717,000
Cash received in merger 21,000 1,624,000 -
Development of software (6,725,000) (3,944,000) (1,084,000)
Capital expenditures (59,784,000) (39,021,000) (24,417,000)
Net cash paid in
acquisitions (notes 8
and 15) - (5,914,000) (7,290,000)
---------- ---------- ----------
Net cash used in
investing activities (64,103,000) (46,853,000) (27,074,000)
---------- ---------- ----------
Cash flows
from
financing
activities: Proceeds from current
and long-term debt 39,459,000 11,995,000 -
Payments of current and
long-term debt (15,982,000) (4,897,000) (20,147,000)
Sale of common stock 4,793,000 2,309,000 12,948,000
DataQuick pre-merger
retirement of common
stock - (1,010,000) -
DataQuick pre-merger
dividends - (468,000) -
---------- ---------- ----------
Net cash provided by
(used in) financing
activities 28,270,000 7,929,000 (7,199,000)
---------- ---------- ----------
Effect of
exchange
rate
changes
on cash - (63,000) -
---------- ---------- ----------
Net increase
(decrease) in
cash and cash
equivalents (748,000) 320,000 2,674,000
Cash and cash
equivalents at
beginning of
year 3,469,000 3,149,000 475,000
---------- ---------- ----------
Cash and cash
equivalents at
end of year $ 2,721,000 $ 3,469,000 $ 3,149,000
========== ========== ==========
Supplemental
cash flow
information: Non-cash investing and
financing activities:
Capital lease
obligations incurred $ - $ - $ 566,000
Convertible debt issued
in acquisition
(note 15) 25,000,000 - -
Warrants issued in asset
acquisition (note 10) - - 536,000
Cash paid during the year
for:
Interest 3,210,000 2,214,000 2,475,000
Income taxes 9,360,000 8,660,000 6,137,000
========== ========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
March 31, 1997, 1996 and 1995
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
The Company provides information management technology and other related
services, primarily for marketing applications. Operating units of the Company
provide list services, data warehouse services, data and information products,
fulfillment services, computerized list, postal and database services, and
outsourcing and facilities management services in both the United States (U.S.)
and United Kingdom (U.K.).
(b) Consolidation Policy
The consolidated financial statements include the accounts of Acxiom Corporation
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation. Prior to October 1, 1994 the Company
carried its 50% interest in InfoBase Services ("InfoBase") on the equity method
(see note 8).
(c) Revenue Recognition
Revenues from the production of direct marketing lists and CD-ROM products are
recognized when shipped. Revenues from data processing and outsourcing and
facilities management services are recognized when the services are performed.
Costs incurred in connection with the conversion phase of outsourcing and
facilities management contracts are deferred and amortized over the life of the
contract. Included in other assets are unamortized conversion costs in the
amount of $18,137,000 and $10,620,000 at March 31, 1997 and 1996, respectively.
Revenues from software licenses are recognized primarily when the software is
installed or when the Company fulfills its obligations under the sales contract.
The Company recognizes revenue from long-term contracts involving significant
production, modification, or customization of software using the
percentage-of-completion method, based on performance milestones specified in
the contract where such milestones fairly reflect progress toward contract
completion. In other instances, progress toward completion is based on
individual contract costs incurred to date compared with total estimated
contract costs. Revenues associated with the promotional fulfillment service are
recognized based on usage of the service. Billed but unearned portions of
revenues are reported as deferred revenues.
(d) Accounts Receivable
Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of trade receivables. All of the Company's
receivables are from a large number of customers located throughout the U.S. and
the U.K. Accordingly, the Company's credit risk is affected by general economic
conditions. Although the Company has several large individual customers,
concentrations of credit risk are limited because of the diversity of the
Company's customers.
Trade accounts receivable are presented net of allowances for doubtful accounts
and credits of $4,333,000 and $1,880,000 in 1997 and 1996, respectively.
(e) Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are
calculated on the straight-line method over the estimated useful lives of the
assets as follows:
Estimated useful lives
Buildings and improvements 5 - 30 years
Office furniture and equipment 3 - 10 years
Data processing equipment 2 - 10 years
Gains or losses resulting from sales or retirements are recorded as incurred, at
which time related costs and accumulated depreciation are removed from the
accounts. Maintenance and repairs are charged to expense as incurred. Property
held under capitalized lease arrangements is included in property and equipment,
and the associated liabilities are included with long-term debt. Property and
equipment taken out of service and held for sale is recorded at net realizable
value and depreciation is ceased.
(f) Software and Research and Development Costs
Capitalized and purchased software costs are amortized on a straight-line basis
over the remaining estimated economic life of the product, or the amortization
that would be recorded by using the ratio of gross revenues for a product to
total current and anticipated future gross revenues for that product, whichever
is greater. Research and development costs incurred prior to establishing
technological feasibility of software products are charged to operations as
incurred.
(g) Excess of Cost Over Fair Value of Net Assets Acquired
The excess of acquisition costs over the fair values of net assets acquired in
business combinations treated as purchase transactions (goodwill) is being
amortized on a straight-line basis over 15 to 25 years from acquisition dates.
The Company periodically evaluates the existence of goodwill impairment on the
basis of whether the goodwill is fully recoverable from the projected,
undiscounted net cash flows of the related business unit. The amount of goodwill
impairment, if any, is measured based on projected discounted future operating
cash flows using a discount rate reflecting the Company's average cost of
funds. The assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
(h) Income Taxes
The Company and its domestic subsidiaries file a consolidated Federal income tax
return. The Company's foreign subsidiaries file separate income tax returns in
the U.K.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(i) Foreign Currency Translation
The balance sheets of the Company's foreign subsidiaries are translated at
year-end rates of exchange, and the statements of earnings are translated at the
weighted average exchange rate for the period. Gains or losses resulting from
translating foreign currency financial statements are accumulated in a separate
component of stockholders' equity.
(j) Earnings Per Share
Earnings per share computations are based upon the weighted average number of
shares outstanding as adjusted for stock splits (see note 6). The weighted
average number of shares outstanding includes redeemable common shares and the
dilutive effect of stock options and warrants and the convertible debt issued
for the purchase of Direct Media/DMI, Inc. ("DMI"), all of which are considered
common stock equivalents (see note 6). For purposes of calculating earnings per
share, the interest expense on the convertible note is eliminated. The
calculation of earnings per share for the periods presented is as follows:
1997 1996 1995
---- ---- ----
Net earnings $27,512,000 $18,223,000 $12,405,000
Interest expense 445,000 - -
(net of tax effect)
---------- ---------- ----------
Adjusted net earnings $27,957,000 $18,223,000 $12,405,000
========== ========== ==========
Earnings per share $.47 $.35 $.27
========== ========== ==========
Weighted average
shares outstanding 59,143,000 52,078,000 45,886,000
========== ========== ==========
The Financial Accounting Standards Board has issued Statement No. 128, "Earnings
per Share" that is required to be adopted by the Company in fiscal 1998.
Statement No. 128 will require the Company to report both basic earnings per
share and diluted earnings per share. Early application of Statement No. 128 is
not permitted; however, if the statement had been implemented in fiscal 1997,
basic earnings per share would have been $.54 and diluted earnings per share
would have been $.47.
(k) Statement of Cash Flows
The Company considers highly liquid, short-term investments with original
maturities of three months or less when acquired to be cash equivalents. Capital
expenditures include payments for property and equipment and conversion costs.
(l) Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported assets and liabilities and disclosure
of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
(m) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," in fiscal 1997. This Statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of this Statement did not have
a material impact on the Company's financial position, results of operations,
or liquidity.
<PAGE>
(n) Stock Option Plan
Prior to fiscal 1997, the Company accounted for its stock option plans in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. In
1997, the Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-Based Compensation," which permits entities to
recognize as expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide pro forma net
earnings and pro forma earnings per share disclosures for employee stock option
grants made in 1996 and future years as if the fair-value-based method defined
in SFAS No. 123 had been applied. The Company has elected to continue to apply
the provisions of APB Opinion No. 25 and provide the pro forma disclosure
provisions of SFAS No. 123.
(2) Software and Research and Development Costs
The Company recorded amortization expense related to internally developed and
purchased computer software of $5,370,000, $3,113,000 and $2,246,000 in 1997,
1996 and 1995, respectively. Additionally, research and development costs of
$10,505,000, $6,440,000 and $7,020,000 were charged to operations during 1997,
1996 and 1995, respectively.
(3) Property and Equipment
Property and equipment are summarized as follows:
1997 1996
---- ----
Land $2,238,000 $2,233,000
Buildings and improvements 56,825,000 50,778,000
Office furniture and equipment 13,484,000 11,097,000
Data processing equipment 126,739,000 89,116,000
----------- -----------
199,286,000 153,224,000
Less accumulated depreciation
and amortization 83,115,000 64,123,000
----------- -----------
$116,171,000 $ 89,101,000
=========== ===========
<PAGE>
(4) Long-Term Debt
Long-term debt consists of the following:
1997 1996
6.92% Senior notes due March 30, 2007,
payable in annual installments of
$4,286,000 commencing March 30, 2001;
2001; interest is payable semi-annually $30,000,000 $ -
3.12% Convertible note, interest and
principal due April 30, 1999;
collateralized by letter of credit;
convertible at maturity into two
million shares of common stock (note 15) 25,000,000 -
Unsecured revolving credit agreement 21,454,000 11,995,000
9.75% Senior notes, due May 1, 2000,
payable in annual installments of
$2,143,000 each May 1; interest is
payable semiannually 8,571,000 10,714,000
8.94% note payable due in monthly
installments of principal and
interest of $50,000 with remaining
balance due June 30, 1997;
collateralized by real estate 4,031,000 4,264,000
Other notes and capital lease
obligations payable (notes 5 and 8) 1,987,000 3,778,000
---------- ----------
Total long-term debt 91,043,000 30,751,000
Less current installments 3,923,000 3,866,000
---------- ----------
Long-term debt, excluding
current installments $87,120,000 $26,885,000
========== ==========
<PAGE>
The unsecured revolving credit agreement provides for revolving loans and
letters of credit in amounts of up to $75,000,000. The terms of the credit
agreement provide for interest at the prime rate (or, at the Company's option,
at other alternative market rates). At March 31, 1997, the effective rate was
7.9%. The agreement requires a commitment fee equal to 3_16 of 1% on the average
unused portion of the loan. A letter of credit in the amount of $25,000,000 was
issued in connection with the acquisition of DMI (see note 15), leaving
$50,000,000 available for revolving loans. The credit agreement expires on July
30, 2001. The 8.94% note payable which is due June 30, 1997 continues to be
classified as long-term debt because the Company intends to use available
funding under the revolving credit agreement to refinance the note on a
long-term basis. The Company also has another unsecured line of credit amounting
to $1,500,000, of which none was outstanding at March 31, 1997. The other
unsecured line expires in June 1997 and bears interest at the prime rate.
Under the terms of certain of the above borrowings, the Company is required to
maintain certain tangible net worth levels and working capital, debt to equity
and debt service coverage ratios. At March 31, 1997, the Company was in
compliance with all such financial requirements. The aggregate maturities of
long-term debt for the five years ending March 31, 2002 are as follows: 1998,
$3,923,000; 1999, $2,844,000; 2000, $27,198,000; 2001, $6,429,000; and 2002,
$29,221,000.
<PAGE>
(5) Leases
The Company leases data processing equipment, office furniture and equipment,
land and office space under noncancellable operating leases and capital leases.
Total property and accumulated amortization held under capital leases amount to
$2,591,000 and $1,452,000, respectively, at March 31, 1997. Amortization of
property held under capital leases is included in depreciation expense. Future
minimum lease payments under noncancellable operating leases and capital leases
as of March 31, 1997 are as follows:
Capital Operating
leases leases
Year ending March 31:
1998 $475,000 $3,995,000
1999 355,000 3,805,000
2000 56,000 3,148,000
2001 - 2,168,000
2002 - 963,000
Thereafter (through 2039) - $3,524,000
--------- =========
Total capital lease payments 886,000
Less amount representing interest 77,000
---------
Present value of minimum capital lease
payments (note 4) 809,000
Less current installments of obligations under
capital leases 420,000
---------
Obligations under capital leases, excluding
current installments $389,000
=========
Total rental expense each year on operating leases was as follows:
1997 1996 1995
---- ---- ----
Gross rentals (note 8) $6,704,000 $3,793,000 $2,169,000
Sublease rentals - 44,000 76,000
--------- --------- ---------
$6,704,000 $3,749,000 $2,093,000
========= ========= =========
<PAGE>
(6) Stockholders' Equity
On May 29, 1996 the Board of Directors increased the authorized shares of the
Company's $.10 par value common stock from 60,000,000 to 200,000,000. The
Company also has 1,000,000 shares of authorized but unissued $1.00 par value
preferred stock. The Board of Directors of the Company may designate the
relative rights and preferences of the preferred stock when and if issued. Such
rights and preferences could include liquidation preferences, redemption rights,
voting rights and dividends and the shares could be issued in multiple series
with different rights and preferences. The Company currently has no plans for
the issuance of any shares of preferred stock.
On October 26, 1994 the Board of Directors declared a two-for-one stock split,
effected in the form of a stock dividend, which was distributed January 10, 1995
to shareholders of record on December 27, 1994. On October 10, 1996, the Board
of Directors approved a two-for-one stock split, effected in the form of a stock
dividend, which was distributed November 12, 1996 to shareholders of record on
October 25, 1996. All share and per share data in the financial statements have
been restated to give effect to the stock splits. Additionally, during the year
ended March 31, 1995, the Company sold 2,000,000 shares of newly-issued common
stock to Trans Union Corporation for approximately $12,000,000.
The Company has for its U.S. employees a Key Employee Stock Option Plan ("Plano)
for which 15,200,000 shares of the Company's common stock have been reserved.
The Company has for its U.K. employees a U.K. Share Option Scheme ("Scheme") for
which 1,600,000 shares of the Company's common stock have been reserved. These
plans generally provide that the option price will be at least the fair market
value at the time of the grant, except that the option price of nonqualified
options granted under the Plan is determined by the Board of Directors.
Incentive options granted under the plans must be exercised within 10 years
after the date of the option. The term of nonqualified options is determined by
the Board of Directors. At March 31, 1997, 2,650,562 shares and 798,008 shares
are available for future grants under the Plan and the Scheme, respectively.
<PAGE>
Activity in stock options was as follows:
Number
Number of Options price of shares
shares per share exercisable
--------- ----------- ---------
Outstanding at March 31, 1994 4,600,456 $ 1.38-11.75 1,028,844
Granted 788,864 5.38-15.75
Exercised (185,550) 1.42- 6.25
Terminated (275,074) 1.42-11.75
--------- ----------- ---------
Outstanding at March 31, 1995 4,928,696 1.38-15.75 1,715,966
Granted 1,560,556 8.98-24.81
DataQuick acquisition (note 15) 1,616,740 1.49- 6.75
Exercised (371,046) 1.42- 9.93
Terminated (6,000) 1.42
--------- ----------- ---------
Outstanding at March 31, 1996 7,728,946 1.38-24.81 3,467,728
Granted 454,251 16.89-34.75
Pro CD acquisition (note 15) 294,132 .04- 3.44
Exercised (662,117) .04-14.86
Terminated (93,255) 1.59-24.81
--------- ----------- ---------
Outstanding at March 31, 1997 7,721,957 $ .09-34.75 3,652,744
========= =========== =========
The per share weighted-average fair value of stock options granted during fiscal
1997 and 1996 was $8.61 and $4.14 on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions:
1997 Expected dividend yield 0%, risk-free interest rate of 6.62%-6.83%,
expected life of 10 years, and expected volatility of 34.85%; 1996 Expected
dividend yield 0%, risk-free interest rate of 5.62%-6.69%, expected life of 10
years, and expected volatility of 28.53%.
<PAGE>
The following is a summary of stock options outstanding as of March 31, 1997:
Options outstanding Options exercisable
------------------------------------ -----------------------
Weighted
average Weighted Weighted
Range of remaining average average
exercise Options contractual exercise Options exercise
prices outstanding life per share exercisable per share
------ ----------- ---- --------- ----------- ---------
$ 0.09-$ 2.54 1,556,082 7.33 years $ 2.10 1,313,012 $ 2.19
$ 2.56-$ 4.69 1,777,914 6.78 years $ 3.78 1,078,957 $ 3.77
$ 5.38-$ 5.88 324,862 7.08 years $ 5.48 270,433 $ 5.42
$ 6.25 1,311,108 5.90 years $ 6.25 601,758 $ 6.25
$ 6.74-$18.61 1,586,793 8.80 years $14.01 289,086 $12.34
$24.50-$34.75 1,165,198 9.90 years $26.16 99,498 $24.79
--------- ---------- ----- --------- -----
7,721,957 7.64 years $ 9.37 3,652,744 $ 4.98
Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Company's net earnings
and earnings per share would have been reduced to the pro forma amounts
indicated below:
1997 1996
---- ----
Net earnings As reported $27,512,000 $18,223,000
Pro forma $26,624,000 $17,935,000
Earnings per share As reported $.47 $.35
Pro forma $.45 $.34
Pro forma net earnings reflect only options granted in fiscal 1997 and 1996.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net earnings amounts
presented above because compensation cost is reflected over the options'
vesting period of nine years and compensation cost for options granted prior to
April 1, 1995 is not considered.
<PAGE>
The Company maintains an employee stock purchase plan which provides for the
purchase of shares of common stock by its U.S. employees through payroll
deductions which may not exceed 10% of employee compensation. The price of the
stock purchased under the plan is 85% of the market price as of the date the
stock is purchased for the employee by the Trustee of the plan. The Company
maintains a similar plan for its U.K. employees. There were 110,332, 190,470 and
99,952 shares purchased under the plans during the years ended March 31, 1997,
1996 and 1995, respectively.
(7) Income Taxes
Total income tax expense was allocated as follows:
1997 1996 1995
---- ---- ----
Income from operations $16,526,000 $11,173,000 $7,670,000
Stockholders' equity, for
compensation expense for
tax purposes in excess
of amounts recognized for
financial reporting purposes (1,684,000) (656,000) (252,000
---------- ---------- ---------
$14,842,000 $10,517,000 $7,418,000
========== ========== =========
<PAGE>
Income tax expense attributable to earnings from operations consists of:
1997 1996 1995
---- ---- ----
Current expense:
Federal $ 9,884,000 $ 6,720,000 $5,953,000
Foreign 83,000 - -
State 783,000 1,019,000 1,398,000
---------- --------- ---------
10,750,000 7,739,000 7,351,000
---------- --------- ---------
Deferred expense (benefit):
Federal 3,898,000 2,706,000 1,027,000
Foreign 687,000 161,000 (408,000)
State 1,191,000 567,000 (300,000)
---------- --------- ---------
5,776,000 3,434,000 319,000
---------- --------- ---------
Total tax expense $16,526,000 $11,173,000 $7,670,000
========== ========== =========
The actual income tax expense attributable to earnings from operations differs
from the expected tax expense (computed by applying the U.S. Federal corporate
tax rate of 35% to earnings before income taxes) as follows:
1997 1996 1995
---- ---- ----
Computed expected tax expense $15,413,000 $10,289,000 $7,026,000
Increase (reduction) in income
taxes resulting from:
State income taxes, net of
Federal income tax benefit 1,283,000 1,031,000 714,000
Research and experimentation
credits (683,000) (800,000) (315,000)
Other 513,000 653,000 245,000
---------- ---------- ---------
$16,526,000 $11,173,000 $7,670,000
========== ========== =========
<PAGE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at March 31, 1997 and 1996 are
presented below.
1997 1996
---- ----
Deferred tax assets:
Accrued expenses not currently deductible
for tax purposes $ 1,407,000 $ 1,692,000
Investment in InfoBase, principally due to
differences in basis for tax and financial
reporting purposes 327,000 330,000
Net operating loss carryforwards 1,208,000 1,088,000
Other 903,000 929,000
Valuation allowance (1,208,000) (328,000)
---------- ----------
Total deferred tax assets 2,637,000 3,711,000
---------- ----------
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation (6,390,000) (6,263,000)
Intangible assets, principally due to
differences in amortization (482,000) -
Capitalized software and other costs expensed
as incurred for tax purposes (10,519,000) (6,431,000)
Installment sale gains for tax purposes (259,000) (254,000)
---------- ----------
Total deferred tax liabilities (17,650,000) (12,948,000)
---------- ----------
Net deferred tax liability $(15,013,000) $ (9,237,000)
========== ==========
The valuation allowance for deferred tax assets as of March 31, 1997 and March
31, 1996 was $1,208,000 and $328,000, respectively. The net change in the total
valuation allowance for the years ended March 31, 1997 and 1996 was an increase
of $880,000 and increase of $328,000, respectively. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Based upon the Company's history of substantial
profitability and taxable income and its utilization of tax planning strategies,
management believes it is more likely than not the Company will realize the
benefits of these deductible differences, net of the existing valuation
allowances. Included in other current assets are deferred tax assets of
$2,311,000 and $1,696,000 at March 31, 1997 and 1996, respectively.
<PAGE>
(8) Related Party Transactions
The Company leases certain equipment from a business partially owned by an
officer. Rent expense under these leases during the years ended March 31, 1997,
1996 and 1995 was approximately $797,000, $371,000 and $247,000, respectively.
Under the terms of the lease in effect at March 31, 1997 the Company will make
monthly lease payments of $66,000 through December, 2000. The Company has agreed
to pay the difference, if any, between the sales price of the equipment and 70
percent of the lessor's related loan balance (approximately $5,800,000 at March
31, 1997) should the Company elect to exercise its early termination rights or
not extend the lease beyond its initial five year term and the lessor sells the
equipment as a result thereof.
Effective October 1, 1994, the Company purchased the remaining one-half interest
in the InfoBase partnership owned by ADVO, Inc. The purchase price consisted of
$9,000,000 in cash and service discounts over the next four years. If the
service discounts do not aggregate at least $2,560,000 over the four-year
period, the shortfall will be paid in cash. The balance of the liability at
March 31, 1997 and 1996, which is included in long-term debt, is $1,178,000 and
$1,958,000, respectively.
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 3,715,000
----------
Total investment $13,565,000
==========
Software $ 5,797,000
Excess of cost over fair value of net assets acquired 7,049,000
Accounts receivable 2,612,000
Property and equipment 442,000
Deferred tax asset 115,000
Other assets 7,000
Accounts payable and other liabilities (2,457,000)
----------
Total investment $13,565,000
==========
<PAGE>
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. The
following consolidated pro forma financial information (which includes
adjustments to reflect the accounting bases recognized in recording the purchase
and to eliminate the effects of transactions between the Company and InfoBase)
shows the results of the Company's operations for the year ended March 31, 1995
as though the purchase of InfoBase had occurred at the beginning of the year:
Revenue $205,178,000
Net earnings $ 11,865,000
Earnings per share $.26
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 operations of the joint venture was included in other income
(expense). Included in revenue in 1995 isa$1,562,000 from sales of services to
InfoBase. InfoBase also reimbursed the Company for processing, programming, and
facility costs amounting to $2,585,000. Commissions paid to InfoBase for list
enhancement services totaled $4,395,000. Included in other expense fora1995 is
the Company's 50% share of the loss of the partnership amounting to $259,000.
(9) Retirement Plans
The Company has a retirement savings plan which covers substantially all
domestic employees. The Company also offers a supplemental non-qualified
deferred compensation plan for certain management employees. The Company matches
50% of the employee's salary deferred contributions under both plans up to 6%
in total annually and may contribute amounts to the plans from the Company's
earnings at the discretion of the Board of Directors. Company contributions
amounted to approximately $1,523,000, $835,000 and $653,000 in 1997, 1996 and
1995, respectively.
<PAGE>
(10) Data Center Agreement
In connection with its data center management agreement ("Agreement") entered
into in August 1992 with Trans Union Corporation ("Trans Union"), the Company
acquired certain Trans Union data center assets and issued 1,920,000 shares of
newly-issued redeemable common stock and a warrant to purchase additional shares
of common stock. The difference between the assigned value of the redeemable
common stock and the estimated redemption value per share was being accreted
through charges to retained earnings. In connection with an extension of the
Agreement in August 1994, Trans Union agreed to give up its right to cause the
Company to repurchase the 1,920,000 shares of common stock then held by Trans
Union. Accordingly, the carrying value of the redeemable common stock has been
reclassified to stockholders' equity. The warrant, which expires on August 31,
2000, entitles Trans Union to acquire up to 4,000,000 additional shares of
newly-issued common stock. The exercise price for the warrant stock is $2.81 per
share through August 31, 1997 and increases $.25 per share in each of the three
years subsequent to August 31, 1997. The first one million shares became
exercisable as of the closing of the Agreement and the remaining three million
shares became exercisable upon the extension of the Agreement. The value
($536,000) of the additional shares which became exercisable has been credited
to additional paid-in capital. 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
Agreement to exceed 10% of the Company's then issued and outstanding common
stock. Based on shares outstanding at March 31, 1997, Trans Union would be
entitled to purchase approximately 3,604,000 total shares under the warrant.
Also, in 1994, an agreement was executed between the Company and Trans Union's
Marketing Services Division, whereby the Company provides all of the data
processing services for that division. In December 1996, the term of both the
Agreement and the marketing services agreement were extended through August
2005.
(11) Major Customers
In 1997, 1996 and 1995, the Company had two major customers who accounted for
more than 10% of revenue. Allstate Insurance Company accounted for revenue of
$67,696,000 (16.8%), $55,789,000 (20.7%) and $53,416,000 (26.4%) in 1997, 1996
and 1995, respectively, and Trans Union accounted for revenue of $56,580,000
(14.1%), $41,952,000 (15.5%) and $25,552,000 (12.6%) in 1997, 1996 and 1995,
respectively.
<PAGE>
(12) Foreign Operations
The following table shows financial information by geographic area for the years
1997, 1996 and 1995.
United States United Kingdom Consolidated
1997:
Revenue $373,596,000 $28,420,000 $402,016,000
Earnings before income taxes 42,365,000 1,673,000 44,038,000
Net earnings 26,466,000 1,046,000 27,512,000
Total assets 276,832,000 22,836,000 299,668,000
Total tangible assets 246,262,000 15,109,000 261,371,000
Total liabilities (including
deferred credits) 135,039,000 8,532,000 143,571,000
Total equity 141,793,000 14,304,000 156,097,000
=========== ========== ===========
1996:
Revenue 252,190,000 17,712,000 269,902,000
Earnings (loss) before
income taxes 29,634,000 (238,000) 29,396,000
Net earnings (loss) 18,622,000 (399,000) 18,223,000
Total assets 176,321,000 17,728,000 194,049,000
Total tangible assets 169,971,000 10,096,000 180,067,000
Total liabilities (including
deferred credits) 65,172,000 6,136,000 71,308,000
Total equity 111,149,000 11,592,000 122,741,000
=========== ========== ===========
1995:
Revenue 187,879,000 14,569,000 202,448,000
Earnings (loss) before
income taxes 21,339,000 (1,264,000) 20,075,000
Net earnings (loss) 13,261,000 (856,000) 12,405,000
Total assets 138,180,000 9,990,000 148,170,000
Total tangible assets 131,367,000 7,165,000 138,532,000
Total liabilities (including
deferred credits) 46,989,000 4,004,000 50,993,000
Total equity 91,191,000 5,986,000 97,177,000
=========== ========== ===========
<PAGE>
(13) Contingencies
On October 10, 1996, the Company settled the arbitration matter between the
Company and Highlights for Children, Inc. The settlement, the terms of which are
confidential, was not material to the consolidated financial statements of the
Company.
The Company is involved in 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.
(14) Dispositions
Effective March 31, 1994, the Company sold substantially all of the assets of
its mailing services operating unit, Acxiom Mailing Services ("AMS"), in
exchange for the assumption of $3,045,000 in liabilities, $4,500,000 in cash, a
$4,127,000 mortgage note receivable and $1,000,000 of preferred stock issued by
the buyer. The sale closed May 20, 1994 effective as of March 31, 1994.
Additionally, the Company sold the buyer a non-exclusive, perpetual software
license for $1,550,000, payable over five years, to use certain of the
Company's database marketing and data processing software.
In June 1996, the buyer ceased operations. In the year ended March 31, 1997 the
Company established valuation reserves for the full amount of the uncollected
software license ($640,000), the preferred stock (valued at $1,000,000), trade
accounts receivable of $491,000 and a partial reserve of $1,600,000 against the
remaining mortgage note receivable, resulting in bad debt expense of $1,131,000
and other expense of $2,600,000 for the year ended March 31, 1997. The Company
has also obtained title to the property and sold a portion of the property for
proceeds of $949,000. The Company is negotiating the sale of the remaining
property and believes any further loss associated with this event will not be
material to the consolidated financial statements.
(15) Acquisitions
On July 14, 1995, the Company purchased the outstanding stock of Generator
Datamarketing Limited ("Generator"), a U.K. company located in Herfordshire,
near London. Generator 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.
<PAGE>
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.
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
1,969,678 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 1,616,740 shares of the Company's common stock are now
subject to issuance upon exercise of such options (see note 6). The acquisition
was in the form of a merger of two wholly-owned subsidiaries of the Company into
each of DataQuick Information Systems and DQ Investment Corporation and is
accounted for as a pooling-of-interests.
DataQuick, headquartered in San Diego, California, 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 were not material in
relation to those of the Company. As such, the Company recorded the combination
by restating stockholders' equity as of April 1, 1995, without restating prior
years' financial statements to reflect the pooling-of-interests combination.
DataQuick's net assets as of April 1, 1995 totaled $5,757,000. The statements
of earnings for the years ended March 31, 1997 and 1996 include the results of
DataQuick for the entire periods 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
statement of earnings for 1996 are revenues ofa$8,048,000 and earnings before
income taxes of $79,000 for DataQuick for the period from April 1, 1995 to
August 25, 1995.
On April 9, 1996, the Company exchanged 3,313,324 shares of its common stock for
all of the outstanding common stock and common stock options of Pro CD, Inc.,
("Pro CD"). Headquartered in Danvers, Massachusetts, Pro CD is a publisher of
reference software on CD-ROM. The business combination was accounted for as a
pooling-of-interests. The stockholders' equity and operations of Pro CD were
not material in relation to those of the Company. As such, the Company recorded
the combination by restating stockholders' equity as of April 1, 1996, without
restating prior years' financial statements to reflect the
pooling-of-interests. For the year ended December 31, 1995, Pro CD had revenues
and a net loss of approximately $21,675,000 and $970,000, respectively. At April
1, 1996 Pro CD's liabilities exceeded its assets by approximately $1,774,000.
<PAGE>
Also in April 1996, the Company acquired the assets of DMI for $25 million and
the assumption of certain liabilities of DMI. The $25 million purchase price is
payable in three years, is collateralized by a letter of credit (see note 4),
and may, at DMI's option, be paid in two million shares of Acxiom common stock
in lieu of cash plus accrued interest. Headquartered in Greenwich, Connecticut,
DMI provides list brokerage, management and consulting services to
business-to-business and consumer list owners and mailers. At April 1, 1996 the
liabilities assumed by the Company exceeded the fair value of the net assets
acquired from DMI by $993,000. The resulting excess of purchase price over fair
value of net assets acquired of $25,993,000 is being amortized over its
estimated economic life of 20 years. The acquisition has been accounted for as a
purchase, and accordingly, the results of operations of DMI are included in the
consolidated results of operations from the date of its acquisition.
The purchase price for DMI has been allocated as follows:
Trade accounts receivable $ 7,558,000
Property and equipment 2,010,000
Software 3,500,000
Excess of cost over fair value of net assets acquired 25,993,000
Other assets 840,000
Short-term note payable to bank (11,594,000)
Accounts payable and other liabilities (3,020,000)
Long-term debt (287,000)
==========
$25,000,000
The following consolidated pro forma financial information (which includes
adjustments to reflect the accounting bases recognized in recording the purchase
and to eliminate the effects of transactions between the Company and DMI) shows
the results of the Company's operations for the year ended March 31, 1996 as if
the purchase of DMI had occurred at the beginning of the period:
Revenue $311,125,000
Net earnings $18,080,000
Earnings per share $.34
(16) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value.
Cash and cash equivalents, trade receivables, short-term borrowings, and trade
payables-The carrying amount approximates fair value because of the short
maturity of these instruments.
Long-term debt-The interest rate on the revolving credit agreement is adjusted
for changes in market rates and therefore the carrying value of the credit
agreement approximates fair value. The estimated fair value of other long-term
debt was determined based upon the present value of the expected cash flows
considering expected maturities and using interest rates currently available to
the Company for long-term borrowings with similar terms. At March 31, 1997 the
estimated fair value of long-term debt approximates its carrying value.
(17) Selected Quarterly Financial Data (Unaudited)
The table below sets forth selected financial information for each quarter of
the last two years:
1st quarter 2nd quarter 3rd quarter 4th quarter
1997:
Revenue $93,953,000 $97,547,000 $104,534,000 $105,982,000
Income from operations 9,211,000 12,384,000 15,807,000 14,311,000
Net earnings 4,245,000 6,263,000 8,863,000 8,141,000
Earnings per share .07 .11 .15 .14
1996:
Revenue $59,182,000 $62,376,000 $71,315,000 $77,029,000
Income from operations 5,517,000 7,342,000 9,532,000 9,267,000
Net earnings 3,136,000 4,072,000 5,812,000 5,203,000
Earnings per share .06 .08 .11 .10
<PAGE>
(This page corresponds with page 44 of the Company's Annual Report.)
Market Information
Per share data is restated to reflect a stock split during fiscal 1997.
Stock Prices
The Company's Common Stock is traded on the national Market System of Nasdaq
under the symbol "ACXM." The following table sets forth for the periods
indicated the high and low closing sale prices of the Common Stock.
Fiscal 1997 High Low
Fourth Quarter $24 $14 3/8
Third Quarter 25 18 5/8
Second Quarter 20 5/8 15 7/8
First Quarter 17 7/8 11 15/16
Fiscal 1996 High Low
Fourth Quarter $14 $11 1/4
Third Quarter 15 7/8 13
Second Quarter 14 1/8 11 3/8
First Quarter 12 5/8 8 1/8
During the period beginning April 1, 1997, and ending May 13, 1997, the high
closing sales price per share for the Company's Common Stock as reported by
Nasdaq was 16 3/8 and the low closing sales price per share was $11 1/8. On May
13, 1997, the closing price per share was $16 1/8.
Shareholders of Record
The approximate number of shareholders of record of the Company's Common Stock
as of May 13, 1997, was 1,469.
Dividends
The Company has never paid cash dividends on its Common Stock. The Company
presently intends to retain earnings to provide funds for its business
operations and for the expansion of its business. Thus, it does not anticipate
paying cash dividends in the foreseeable future.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
U.S. SUBSIDIARIES
Name Incorporated In Doing Business As
Acxiom Asia, Ltd. Arkansas Acxiom Asia, Ltd.
Acxiom CDC, Inc. Arkansas Acxiom CDC, Inc.
Acxiom Children's Center, Inc. Arkansas Acxiom Children's Center,
Inc.
Acxiom/Direct Media, Inc. Arkansas Acxiom/Direct Media
Acxiom Great Lakes Data
Center, Inc. Arkansas Acxiom Great Lakes Data
Center, Inc.
Acxiom Leasing Corporation Arkansas Acxiom Leasing Corporation
Acxiom RM-Tools, Inc. Arkansas Acxiom RM-Tools, Inc.
Acxiom Transportation
Services, Inc. Arkansas ATS; Conway Aviation, Inc.
BSA, Inc.* New Jersey BSA
DQ Investment Corporation California AccuDat
DataQuick Information
Systems, Inc. California DataQuick Information
Systems, Inc.
Modern Mailers, Inc.* Delaware Acxiom Mailing Services
Pro CD, Inc. Delaware Pro CD
U.K. SUBSIDIARIES
Name Incorporated In Doing Business As
Acxiom U.K., Ltd. United Kingdom Acxiom U.K., Ltd.
Generator Datamarketing
Limited United Kingdom Generator Datamarketing
Limited
Marketlead Services, Ltd. United Kingdom N/A
(Agency company of Acxiom
U.K., Ltd.)
Southwark Computer Services,
Ltd. (Agency company United Kingdom N/A
of Acxiom U.K., Ltd.)
* Inactive
<PAGE>
EXHIBIT 23
The Board of Directors
Acxiom Corporation
We consent to incorporation by reference in the registration statements (No.
33-17115, No. 33-37609, No. 33-37610, No. 33-42351, No. 33-72310, No. 33-72312,
No. 33-63423 and No. 333-03391 on Form S-8 and No. 33-63431 and No. 333-08011 on
Form S-3) of Acxiom Corporation of our report dated May 14, 1997, relating to
the consolidated balance sheets of Acxiom Corporation and subsidiaries as of
March 31, 1997 and 1996, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the years in the three-year
period ended March 31, 1997 which is incorporated by reference in the March 31,
1997 annual report on Form 10-K of Acxiom Corporation. We also consent to
incorporation by reference in the above-mentioned registration statements of our
report dated May 14, 1997 relating to the consolidated financial statement
schedule, which report appears in the March 31, 1997 annual report on Form 10-K
of Acxiom Corporation.
/s/ KPMG Peat Marwick LLP
Little Rock, Arkansas
June 23, 1997
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes as his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution for him and in his name,
place and stead, in his capacity as the principal accounting officer of the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1997, together with any amendments thereto, and to file the same,
together with any exhibits and all other documents related thereto, with the
Securities and Exchange Commission, granting to said attorney-in-fact and agent,
full power and authority to do and perform each and any act and thing requisite
and necessary to be done in connection therewith, as fully to all intents and
purposes as the undersigned might or could do in person, duly ratifying and
confirming all that said attorney-in-fact and agent may lawfully do or cause to
be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ Robert S. Bloom
- - ------------------------
Robert S. Bloom
Date: May 29, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes and/or Robert S. Bloom as her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for her and in her name, place and stead, in her capacity as a director of the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1997, together with any amendments thereto, and to file the same,
together with any exhibits and all other documents related thereto, with the
Securities and Exchange Commission, granting to said attorneys-in-fact and
agents, full power and authority to do and perform each and any act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as the undersigned might or could do in person, duly
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this
date.
Signature:
/s/ Ann H. Die
- - ------------------------
Dr. Ann H. Die
Date: May 28, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes and/or Robert S. Bloom as his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in his capacity as a director of the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1997, together with any amendments thereto, and to file the same,
together with any exhibits and all other documents related thereto, with the
Securities and Exchange Commission, granting to said attorneys-in-fact and
agents, full power and authority to do and perform each and any act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as the undersigned might or could do in person, duly
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ William Dillard II
- - ------------------------
William T. Dillard II
Date: May 28, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes and/or Robert S. Bloom as his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in his capacity as a director of the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1997, together with any amendments thereto, and to file the same,
together with any exhibits and all other documents related thereto, with the
Securities and Exchange Commission, granting to said attorneys-in-fact and
agents, full power and authority to do and perform each and any act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as the undersigned might or could do in person, duly
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ Harry C. Gambill
- - ------------------------
Harry C. Gambill
Date: May 28, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and
officer of Acxiom Corporation, a Delaware corporation (the "Company"), does
hereby constitute and appoint Catherine L. Hughes and/or Robert S. Bloom as his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution for him and in his name, place and stead, in his capacity as
a director and principal financial officer of the Company, to sign the Company's
Annual Report on Form 10-K for the year ended March 31, 1997, together with any
amendments thereto, and to file the same, together with any exhibits and all
other documents related thereto, with the Securities and Exchange Commission,
granting to said attorneys-in-fact and agents, full power and authority to do
and perform each and any act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as the undersigned
might or could do in person, duly ratifying and confirming all that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue of
the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ Rodger S. Kline
- - ------------------------
Rodger S. Kline
Date: May 28, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and
officer of Acxiom Corporation, a Delaware corporation (the "Company"), does
hereby constitute and appoint Catherine L. Hughes and/or Robert S. Bloom as his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution for him and in his name, place and stead, in his capacity as
a director and principal executive officer of the Company, to sign the Company's
Annual Report on Form 10-K for the year ended March 31, 1997, together with any
amendments thereto, and to file the same, together with any exhibits and all
other documents related thereto, with the Securities and Exchange Commission,
granting to said attorneys-in-fact and agents, full power and authority to do
and perform each and any act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as the undersigned
might or could do in person, duly ratifying and confirming all that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue of
the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ Charles D. Morgan
- - ------------------------
Charles D. Morgan
Date: May 28, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes and/or Robert S. Bloom as his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in his capacity as a director of the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1997, together with any amendments thereto, and to file the same,
together with any exhibits and all other documents related thereto, with the
Securities and Exchange Commission, granting to said attorneys-in-fact and
agents, full power and authority to do and perform each and any act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as the undersigned might or could do in person, duly
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ Robert A. Pritzker
- - ------------------------
Robert A. Pritzker
Date: May 28, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes and/or Robert S. Bloom as his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in his capacity as a director of the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1997, together with any amendments thereto, and to file the same,
together with any exhibits and all other documents related thereto, with the
Securities and Exchange Commission, granting to said attorneys-in-fact and
agent, full power and authority to do and perform each and any act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as the undersigned might or could do in person, duly
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ Walter V. Smiley
- - ------------------------
Walter V. Smiley
Date: May 28, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and
officer of Acxiom Corporation, a Delaware corporation (the "Company"), does
hereby constitute and appoint Catherine L. Hughes and/or Robert S. Bloom as his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution for him and in his name, place and stead, in his capacity as
a director and officer of the Company, to sign the Company's Annual Report on
Form 10-K for the year ended March 31, 1997, together with any amendments
thereto, and to file the same, together with any exhibits and all other
documents related thereto, with the Securities and Exchange Commission, granting
to said attorneys-in-fact and agents, full power and authority to do and perform
each and any act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as the undersigned might or
could do in person, duly ratifying and confirming all that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue of
the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ James T. Womble
- - ------------------------
James T. Womble
Date: May 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000733269
<NAME> Acxiom Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,721
<SECURITIES> 0
<RECEIVABLES> 70,636
<ALLOWANCES> 4,333
<INVENTORY> 0
<CURRENT-ASSETS> 84,545
<PP&E> 199,286
<DEPRECIATION> 83,115
<TOTAL-ASSETS> 299,668
<CURRENT-LIABILITIES> 36,109
<BONDS> 87,120
0
0
<COMMON> 5,274
<OTHER-SE> 150,823
<TOTAL-LIABILITY-AND-EQUITY> 299,668
<SALES> 0
<TOTAL-REVENUES> 402,016
<CGS> 0
<TOTAL-COSTS> 350,303
<OTHER-EXPENSES> 3,772
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,903
<INCOME-PRETAX> 44,038
<INCOME-TAX> 16,526
<INCOME-CONTINUING> 27,512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,512
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
