SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
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 8180, 1 Information Way,
Little Rock, Arkansas 72203
(Address of Principal Executive Offices) (Zip Code)
(501) 342-1000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares of Common Stock, $ 0.10 par value per share,
outstanding as of November 7, 2000 was 88,993,102.
<PAGE>
Form 10-Q
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Company for which report is filed:
ACXIOM CORPORATION
The interim condensed consolidated financial statements included herein have
been prepared by Registrant, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion of the
Registrant's management, however, all adjustments necessary for a fair statement
of the results for the periods included herein have been made and the
disclosures contained herein are adequate to make the information presented not
misleading. All such adjustments are of a normal recurring nature.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
September 30, March 31,
2000 2000
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 9,271 23,924
Trade accounts receivable, net 216,213 198,818
Deferred income taxes 18,432 18,432
Other current assets 141,263 98,872
--------- ---------
Total current assets 385,179 340,046
--------- ---------
Property and equipment 411,335 381,942
Less - Accumulated depreciation
and amortization 162,131 132,266
--------- ---------
Property and equipment, net 249,204 249,676
--------- ---------
Software, net of accumulated amortization 60,351 58,964
Excess of cost over fair value of net
assets acquired, net 158,541 145,082
Other assets 368,945 311,528
--------- ---------
$ 1,222,220 1,105,296
--------- ---------
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt 24,968 23,156
Trade accounts payable 55,227 54,016
Accrued merger and integration costs 740 15,106
Accrued payroll and related expenses 22,673 26,483
Other accrued expenses 35,042 31,779
Deferred revenue 4,229 19,995
Income taxes 22,332 9,473
--------- ---------
Total current liabilities 165,211 180,008
--------- ---------
Long-term debt, excluding current
installments 359,243 289,234
Deferred income taxes 61,486 48,324
Stockholders' equity:
Common stock 8,859 8,831
Additional paid-in capital 325,185 325,729
Retained earnings 310,052 257,376
Accumulated other comprehensive loss (5,204) (1,448)
Treasury stock, at cost (2,612) (2,758)
--------- ---------
Total stockholders' equity 636,280 587,730
--------- ---------
Commitments and contingencies $ 1,222,220 1,105,296
--------- ---------
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
For the Three Months Ended
September 30
2000 1999
------- -------
Revenue $ 276,061 246,840
Operating costs and expenses:
Salaries and benefits 94,922 91,840
Computer, communications and other equipment 49,805 38,570
Data costs 28,418 29,532
Other operating costs and expenses 50,680 47,015
------- -------
Total operating costs and expenses 223,825 206,957
------- -------
Income from operations 52,236 39,883
------- -------
Other income (expense):
Interest expense (6,040) (6,534)
Other, net (256) 731
------- -------
(6,296) (5,803)
------- -------
Earnings before income taxes 45,940 34,080
Income taxes 17,687 12,780
------- -------
Net earnings $ 28,253 21,300
======= =======
Earnings per share:
Basic $ .32 .25
======= =======
Diluted $ .30 .24
======= =======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
For the Six Months Ended
September 30
2000 1999
------- -------
Revenue $ 521,618 458,346
Operating costs and expenses:
Salaries and benefits 186,170 175,549
Computer, communications and other equipment 91,879 72,744
Data costs 54,093 54,648
Other operating costs and expenses 104,018 85,276
Gains, losses and nonrecurring items (3,064) -
------- -------
Total operating costs and expenses 433,096 388,217
------- -------
Income from operations 88,522 70,129
------- -------
Other income (expense):
Interest expense (11,509) (12,353)
Other, net 8,639 1,500
------- -------
(2,870) (10,853)
------- -------
Earnings before income taxes 85,652 59,276
Income taxes 32,976 22,227
------- -------
Net earnings $ 52,676 37,049
======= =======
Earnings per share:
Basic $ .60 .44
======= =======
Diluted $ .56 .42
======= =======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Six Months Ended
September 30
2000 1999
------ ------
Cash flows from operating activities:
Net earnings $ 52,676 37,049
Non-cash operating activities:
Depreciation and amortization 54,712 40,849
Loss (gain) on disposal or impairment
of assets (16,812) 265
Provision for returns and doubtful accounts 1,499 528
Changes in operating assets and liabilities:
Accounts receivable (22,073) (23,188)
Other assets (74,082) (18,100)
Accounts payable and other liabilities (1,701) (13,332)
Merger and integration costs (14,366) (15,422)
------ ------
Net cash provided (used) by operating
activities (20,147) 8,649
------ ------
Cash flows from investing activities:
Disposition of assets 34,485 1,211
Development of software (18,738) (20,736)
Capital expenditures (44,007) (64,701)
Proceeds from sale and leaseback transaction - 32,513
Investments in joint ventures (18,707) (1,401)
Net cash paid in acquisitions (14,133) (15,581)
------ ------
Net cash used by investing activities (61,100) (68,695)
------ ------
Cash flows from financing activities:
Proceeds from debt 78,958 76,076
Payments of debt (11,840) (77,939)
Sale of common stock 9,975 62,636
Acquisition of treasury stock (10,345) -
------ ------
Net cash provided by financing activities 66,748 60,773
------ ------
Effect of exchange rate changes on cash (154) (16)
------ ------
Net decrease in cash and cash equivalents (14,653) 711
Cash and cash equivalents at beginning of
period 23,924 12,604
------ ------
Cash and cash equivalents at end of period $ 9,271 13,315
====== ======
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 14,634 16,454
Income taxes 7,034 717
====== ======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Certain note information has been omitted because it has not changed
significantly from that reflected in Notes 1 through 18 of the Notes to
Consolidated Financial Statements filed as a part of Item 14 of the Registrant's
2000 Annual Report on Form 10-K, as filed with the Securities and Exchange
Commission on June 26, 2000.
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. During the year ended March 31, 1999, the Company recorded special charges
totaling $118.7 million related to merger and integration charges
associated with the May & Speh merger and the write down of other impaired
assets.
The following table shows the remaining balances which were accrued as of
March 31, 2000 and the changes in those balances during the six months
ended September 30, 2000 (dollars in thousands):
March 31, Less September 30,
2000 Payments 2000
------ ------ ----
Associate-related reserves $ 1,052 575 477
Contract termination costs 13,500 13,500 -
Other accruals 554 291 263
------ ------ ---
$15,106 14,366 740
====== ====== ===
The remaining associate-related reserves and other accruals will be paid
out over remaining periods ranging up to four years.
Effective May 15, 2000 the Company acquired certain assets and assumed
certain liabilities of MCRB Service Bureau, Inc. for cash of $5.8 million.
MCRB provides information technology outsourcing services. The acquisition
has been accounted for as a purchase and, accordingly, the results of
operations of MCRB are included in the consolidated results from the date
of acquisition. The excess of purchase price over the fair value of net
assets acquired of $11.8 million is being amortized over 20 years. The pro
forma effect of the acquisition is not material to the Company's
consolidated results for the periods reported.
Effective February 1, 2000, the Company sold certain assets and a 51%
interest in a newly formed Limited Liability Company ("LLC") to certain
management of its Acxiom/Direct Media, Inc. business unit ("DMI"). The LLC
was formed by the contribution of net assets used in the DMI operations. As
consideration, the Company received a 6% note in the approximate amount of
$22.5 million payable over 7 years. The Company also retained a 49%
interest in the LLC. During the quarter ended June 30, 2000, the Company
agreed to sell its remaining 49% interest in the LLC and certain other
assets to DMI management for an additional note of $1.0 million. The
Company also committed to complete the development of a computer system for
the LLC. As a result of this sale agreement, the Company has written down
its investment in the assets of DMI by $20.0 million. This amount is
included in gains, losses and nonrecurring items. The sale is a divestiture
for legal and tax purposes, but not for accounting purposes under
applicable accounting rules because the collection of the sales price is
primarily dependent on the buyer's ability to repay the note through
operations of the business. Accordingly, any losses of the LLC will
continue to be included in the Company's financial statements until such
time as a sufficient portion of the note balance has been collected, at
which time the Company will account for the transaction as a sale. The note
receivable is included in other assets.
<PAGE>
Effective April 25, 2000, the Company sold a portion of its DataQuick
business group, which is based in San Diego, California, to MacDonald
Dettwiler & Associates, Ltd., a publicly-traded Canadian information
products company, for $55.5 million. The Company retained the real property
data sourcing and compiling portion of DataQuick. Of the total sale price,
$30.0 million was received in cash as of the effective date. The gain on
sale of these assets, which is included in gains, losses and nonrecurring
items, was $39.7 million. The receivable for the remaining $25.5 million is
included in other current assets, and was collected subsequent to September
30, 2000.
Effective April 10, 2000, the Company sold its investment in Ceres, Inc. to
NCR Corporation. The Company received cash, a note, and NCR stock totaling
$14.8 million, and recorded investment income of $6.2 million on the
disposal, which is included in other income.
Effective April 1, 2000, the Company sold its CIMS business unit for
preferred stock and options in Sedona Corp., a publicly-traded company. The
preferred stock and options received had an aggregate fair value of $3.1
million. The Company recorded a loss on the disposal of $3.2 million, which
is included in gains, losses and nonrecurring items.
In addition to the DataQuick gain, DMI write-down and CIMS loss noted
above, gains, losses and nonrecurring items also includes the write-off
during the quarter ended June 30, 2000 of $7.2 million of certain campaign
management software which management decided to discontinue support of
during the quarter as a result of the Company's strategy to utilize
external application software tools rather than building such tools
internally. The Company performed an analysis to determine whether and to
what extent these assets had been impaired. These assets were completely
written off as their fair value was estimated to be zero.
During the quarter ended June 30, 2000, the compensation committee of the
Company committed to pay in cash $6.3 million of "over-attainment"
incentive which was related to results of operations in prior years. Under
the normal policy of the Company's compensation plan, such over-attainment
would have been distributed in the form of stock options with an exercise
price equal to the market price at date of grant. Therefore, under
applicable accounting rules, there would have been no compensation expense.
The one-time decision to pay this amount in cash is an accruable event, and
resulted in a charge that has been recorded in gains, losses and
nonrecurring items. In accordance with the Company's existing
over-attainment plan, the amount accrued will be paid over the next three
fiscal years beginning in May 2001, assuming continued performance.
<PAGE>
2. Other assets consist of the following (dollars in thousands):
September 30, March 31,
2000 2000
------- -------
Purchased software licenses $125,171 123,846
Deferred contract costs 70,314 63,173
Notes receivable from software
and data licenses and sales of
equipment, net of current portion 91,345 55,804
Assets transferred under contractual
arrangement 23,575 34,291
Investments in joint ventures and
other companies 47,642 22,890
Other 10,898 11,524
------- -------
$368,945 311,528
======= =======
The increase in notes receivable is primarily due to sales of AbiliTec
software. AbiliTec software is sold under licenses which generally have
terms of from one to three years. The Company records the license revenue
as a note receivable, which is collected over the license term. Revenue for
maintenance and service transactions is recognized as it is earned and
billed over the license term. The current portion of such notes are
included in other current assets. The decrease in assets transferred under
contractual arrangement is due to the DMI write-down noted above. The
increase in joint ventures and other companies includes an additional $5.4
million investment in an Australian joint venture, $6.0 million invested in
USADATA.com, Inc., and $5.0 million invested in HealthCarePro Connect, LLC,
a joint venture with the American Medical Association, as well as the
consideration received in NCR and Sedona stock noted above.
Other current assets includes the current portion of the notes receivable
from software and data licenses and equipment sales of $60.3 million and
$42.4 million as of September 30, 2000 and March 31, 2000, respectively.
Other current assets also includes prepaid expenses, nontrade receivables
and other miscellaneous assets of $81.0 million and $56.5 million as of
September 30, 2000 and March 31, 2000, respectively. The September 30, 2000
balance includes the remaining receivable from MacDonald Dettwiler of $25.5
million, which was collected in October, 2000.
<PAGE>
3. Long-term debt consists of the following (dollars in thousands):
September 30, March 31,
2000 2000
------- -------
5.25% Convertible subordinated notes due $115,000 115,000
2003; convertible at the option of the
holder into shares of common stock at a
conversion price of $19.89 per share;
redeemable at the option of the Company
at any time on or after April 3, 2001
Software license liabilities payable over 63,377 67,545
terms of from five to seven years; effective
interest rates at approximately 6%
Unsecured revolving credit agreement 136,974 61,500
6.92% Senior notes due March 30, 2007, 30,000 30,000
payable in annual installments of $4,286
commencing March 30, 2001; interest is
payable semiannually
Capital leases on land, buildings and 17,798 18,051
equipment payable in monthly payments of
$357 of principal and interest; remaining
terms of from five to twenty years;
interest rates at approximately 8%
8.5% Unsecured term loan; quarterly 7,800 8,200
principal payments of $200 plus interest
with the balance due in 2003
Other capital leases, debt and long-term 13,262 12,094
liabilities ------- -------
Total long-term debt 384,211 312,390
Less current installments 24,968 23,156
------- -------
Long-term debt, excluding current $359,243 289,234
installments ======= =======
In connection with the construction of the Company's new headquarters
building and a new customer service facility in Little Rock, Arkansas, the
Company has entered into 50/50 joint ventures with local real estate
developers. In each case, the Company is guaranteeing portions of the loans
for the buildings. The aggregate amount of the guarantees at September 30,
2000 was approximately $4.5 million.
<PAGE>
4. Below is a calculation and reconciliation of the numerator and denominator
of basic and diluted earnings per share (dollars in thousands, except per
share amounts):
For the Quarter Ended For the Six Months Ended
September 30, September 30,
2000 1999 2000 1999
------ ------ ------ ------
Basic earnings per share:
Numerator - net earnings $ 28,253 21,300 52,676 37,049
====== ====== ====== ======
Denominator:
Weighted average shares
outstanding 88,221 84,741 88,095 83,764
====== ====== ====== ======
Earnings per share $ .32 .25 .60 .32
====== ====== ====== ======
Diluted earnings per share:
Numerator:
Net earnings $ 28,253 21,300 52,676 37,049
Interest expense on
convertible debt
(net of tax effect) 928 943 1,857 1,886
------ ------ ------ ------
$ 29,181 22,243 54,533 38,935
====== ====== ====== ======
Denominator:
Weighted average shares
outstanding 88,221 84,741 88,095 83,764
Effect of common stock
options and warrants 3,388 3,569 3,562 3,849
Convertible debt 5,783 5,783 5,783 5,783
------ ------ ------ ------
97,392 94,093 97,440 93,396
====== ====== ====== ======
Earnings per share $ .30 .24 .56 .42
====== ====== ====== ======
<PAGE>
Options to purchase shares of common stock that were outstanding during the
periods reported, but were not included in the computation of diluted
earnings per share because the option exercise price was greater than the
average market price of the common shares, are shown below:
For the Quarter Ended For the Six Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Number of
shares under
option (in
thousands) 2,872 4,059 2,073 2,713
Range of
exercise
prices $17.93 - 54.00 $23.55 - 54.00 $17.93 - 54.00 $23.55 - 54.00
============= ============= ============= =============
As of September 30, 2000 the Company has entered into equity forward
purchase agreements to purchase 3.7 million shares of stock. The effects of
settling these equity forward contracts are not reflected in the
computation of diluted earnings per share, because the effect is
anti-dilutive since the market price of the Company's common stock is
greater than the prices under the equity forward agreements.
5. Trade accounts receivable are presented net of allowances for doubtful
accounts, returns, and credits of $6.0 million at September 30, 2000 and
$5.4 million at March 31, 2000.
6. The following tables present information by business segment (dollars in
thousands):
For the Quarter Ended For the Six Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Services $202,289 183,281 378,683 329,443
Data Products 76,607 39,736 102,189 71,792
Information Technology
(I. T.) Management 55,111 43,650 112,581 88,988
Intercompany eliminations (57,946) (19,827) (71,835) (31,877)
------- ------- ------- -------
Total revenue $276,061 246,840 521,618 458,346
======= ======= ======= =======
Services 58,757 34,951 94,197 58,503
Data Products 36,910 2,853 30,808 5,495
Information Technology
(I. T.) Management 1,826 10,058 12,722 20,019
Intercompany eliminations (43,771) (9,715) (52,185) (15,651)
Corporate and other (1,486) 1,736 2,980 1,763
------- ------- ------- -------
Income from operations $52,236 39,883 88,522 70,129
======= ======= ======= =======
<PAGE>
The Company has reorganized its segments for the current year. The primary
change was to reclassify the business units associated with Direct Media
from the Data Products segment to the Services Segment. Also, the
International Division, which was exclusively in the Services segment, has
been reorganized with the appropriate revenues and expenses being allocated
to Services, Data Products and Information Technology Management. The prior
year segment information has been restated to conform to the current year
presentation.
7. The accumulated balance of other comprehensive loss, which consists of
foreign currency translation adjustments and unrealized depreciation on
marketable securities, was $5.2 million and $1.4 million as of September
30, 2000 and March 31, 2000, respectively. Comprehensive income was $25.5
million and $22.2 million for the quarters ended September 30, 2000 and
1999, respectively, and was $48.9 million and $37.8 million for the six
months ended September 30, 2000 and 1999, respectively.
<PAGE>
Form 10-Q
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
For the quarter ended September 30, 2000, consolidated revenue was $276.1
million, reflecting a 12% increase over the second quarter in the previous year.
Excluding operations disposed of subsequent to the year-earlier quarter,
including DMI and DataQuick, consolidated revenue increased 28%. Further
adjusting each quarter's revenue for sales of server equipment, which decreased
from $17.3 million to $14.0 million, revenue increased 32% compared to the prior
year. The increase in revenue was fueled by sales of AbiliTec software, which
contributed over $40.0 million in revenue for the quarter.
For the six months ended September 30, 2000, consolidated revenue was $521.6
million, up 14% from the same period a year ago. Excluding the impact of the
dispositions referred to above, revenue increased 28% compared to the prior
year.
The following table shows the Company's revenue by business segment for the
quarters ended September 30, 2000 and 1999 (dollars in millions):
September 30, %
2000 1999 Change
----- ----
Services $202.3 $183.3 +10%
Data Products 76.6 39.7 +93
I. T. Management 55.1 43.6 +26
Intercompany eliminations (57.9) (19.8) +192
----- ----- ----
$276.1 $246.8 +12%
===== ===== ====
Services segment revenue of $202.3 million grew 10% over the prior year.
Excluding operations disposed of and the impact of server sales referred to
above, the Services segment grew 32%. The growth in the Services segment
reflects a strong contribution from AbiliTec revenue. For the six months ended
September 30, 2000 the Services segment recorded revenue of $378.7 million, an
increase of 15%. Again excluding dispositions since the prior year, the Services
segment grew 28% over the prior year period.
Data Products segment revenue of $76.6 million almost doubled the revenue from
the prior year, reflecting the significant impact from AbiliTec software sales.
Excluding the impact from dispositions, the segment revenue would have increased
140% over the prior year. Data Products segment revenue before the impact of
AbiliTec increased nearly 20% after allowing for dispositions. For the six month
period, Data Products segment revenue grew 42% to $102.2 million.
Information Technology ("I. T.") Management segment revenue of $55.1 million
reflects a 26% increase over the prior year. The I. T. Management segment closed
six new or expanded mainframe and mid-range data center outsourcing and web
hosting contracts during the quarter. For the six month period, I. T. Management
revenue grew 27% to $112.6 million.
<PAGE>
Certain revenues, including most AbiliTec software and data product revenue, are
reported both as revenue in the segment which owns the customer relationship
(generally the Services segment) as well as the Data Products segment which owns
the product development, maintenance, sales support, etc. These duplicate
revenues are eliminated in consolidation. The intercompany elimination increased
192% for the quarter, due to the impact of significant AbiliTec software
revenue.
The following table presents operating expenses for the quarters ended September
30, 2000 and 1999 (dollars in millions):
September 30, %
2000 1999 Change
---- ----
Salaries and benefits $94.9 $91.9 + 3%
Computer, communications and
other equipment 49.8 38.6 +29
Data costs 28.4 29.5 - 4
Other operating costs and
expenses 50.7 47.0 + 8
---- ---- ---
$223.8 $207.0 + 8%
===== ===== ===
Salaries and benefits for the quarter increased 3% from the prior year's second
quarter. Excluding operations disposed of, salaries and benefits increased 20%
reflecting additional headcount to support the growth of the business, merit
increases and a larger incentive accrual. For the six months ended September 30,
2000, the increase in salaries and benefits was 6%, or 23% after adjusting for
the disposals referred to above.
Computer, communications and other equipment costs increased 29% over the second
quarter in the prior year. Adjusting for the impact of the dispositions noted
earlier would result in computer, communications and other equipment costs
increasing 42% over the prior year. This growth is principally due to the
increased level of hardware and software expenditures made over the last year to
support the growth of the business, particularly in the I. T. Management
segment, as well as additional expense associated with building the AbiliTec
infrastructure. For the six months, computer, communications and other equipment
costs increased 26%, or 35% after adjusting for the disposals.
Data costs for the quarter decreased 4% from the prior year, and were
substantially unchanged from the prior year after adjusting for disposals. For
the six months, data costs decreased 1%. Increases in data costs have been
substantially mitigated by a reduction in the cost of data associated with lower
revenue under the Allstate data management contract. Allstate revenue increased
4% for the second quarter but has decreased 2% for the six months.
Other operating costs and expenses for the second quarter increased by 8%
compared to a year ago. Adjusting for the impact of the dispositions, other
operating costs and expenses grew 17%. This increase reflects the impact from
growth in the business on office and operating expenses, travel, temporary
staffing, and administrative costs. In addition, increases in advertising and
marketing costs of $1.3 million were incurred to support the roll-out of
AbiliTec. All of the above increases were offset by lower cost of sales for
server equipment sold in data warehousing solutions. For the six months ended
September 30, 2000, other operating expenses increased 22%, or 33% after
adjusting for the dispositions. Expenses for the six months have also been
impacted by the same factors noted above, most notably by the advertising and
marketing expenditures related to AbiliTec.
<PAGE>
The six month period includes a net gain associated with gains, losses and
nonrecurring items of $3.1 million recorded in the first quarter reflecting the
$39.7 million gain on the sale of the DataQuick operation in April, the $3.2
million loss on the sale of the CIMS business unit, a $20.0 million write-down
of the remaining 49% interest in the DMI operation, a $7.2 million write-down of
campaign management software, and a $6.3 million accrual established to fund
over-attainment incentives.
The Company's operations for both the quarter and the six months ended September
30, 2000 were heavily impacted by investment in the AbiliTec software. This
investment has totaled approximately $36.5 million for the six months, including
$14.5 million of capitalized software development, with the remaining $22.0
million being expensed. As of September 30, 2000 net capitalized software
related to AbiliTec totaled $23.8 million.
Income from operations for the quarter of $52.2 million represents an increase
of 31% over the prior year. For the six month period, income from operations
increased 26% to $88.5 million. Excluding the net gain in the first quarter
noted above, operating income for the six months of $85.5 million increased 22%
compared to the same period a year ago. Operating margin for the quarter
increased from 16.2% to 18.9%.
Interest expense for the quarter of $6.0 million decreased from $6.5 million
last year reflecting slightly lower average debt levels this year. Other, net
decreased from $0.7 million income in last year's second quarter to $0.3 million
expense this year due to the recording of losses on the Company's joint ventures
during the current fiscal year which offset interest income from notes
receivable. For the six months, interest expense decreased from $12.4 million to
$11.5 million, for the same reason as noted above for the quarter. Other net for
the six months increased from $1.5 million income to $8.6 million income largely
due to a $6.2 million gain on the sale of the Company's investment in Ceres.
Other, net also includes investment income, principally on the exchange of the
Company's investment in Customer Analytics for stock in Exchange Applications,
Inc., a publicly-traded company, equity in losses of joint ventures, and
interest income from notes receivable.
Earnings before income taxes of $45.9 million for the quarter increased 35% over
the same quarter a year ago. For the six months, earnings before income taxes
grew 44% to $85.7 million. The Company's effective tax rate was 38.5% in the
current quarter and six months compared to 37.5% in the prior year. The Company
currently expects its effective tax rate to remain at 38.5% for fiscal 2001.
This estimate is based on current tax law and current estimates of earnings, and
is subject to change.
Basic earnings per share for the quarter were $0.32 compared to $0.25 a year
ago. Diluted earnings per share for the quarter were $0.30 compared to $0.24 a
year ago. For the six month period, basic earnings per share were $0.60 compared
to $0.44 a year ago. Diluted earnings per share were $0.56 for the six months
compared to $0.42 a year ago.
<PAGE>
Capital Resources and Liquidity
Working capital at September 30, 2000 totaled $220.0 million compared to $160.0
million at March 31, 2000. At September 30, 2000, the Company had available
credit lines of $296.5 million of which $138.5 million was outstanding. The
Company's debt-to-capital ratio (capital defined as long-term debt plus
stockholders' equity) was 36% at September 30, 2000 compared to 33% at March 31,
2000. Included in long-term debt at both September 30, 2000 and March 31, 2000
is a convertible note in the amount of $115.0 million. The conversion price for
the convertible debt is $19.89 per share and the debt is callable by the
Company, beginning April 3, 2001. If the price of the Company's common stock
stays above the conversion price, management expects this debt to be converted
to equity. Assuming the convertible debt had converted to equity, the Company's
debt-to-capital ratio would have been reduced to 25% at September 30, 2000.
Total stockholders' equity has increased 8% to $636.3 million at September 30,
2000 from $587.7 million at March 31, 2000.
Cash used by operating activities was $20.1 million for the six months ended
September 30, 2000 compared to $8.6 million provided by operating activities for
the same period in the prior year. Earnings before interest expense, taxes,
depreciation, and amortization ("EBITDA"), increased 35% to $151.9 million for
the six month period. EBITDA is not intended to represent cash flows for the
period, is not presented as an alternative to operating income as an indicator
of operating performance, may not be comparable to other similarly titled
measures of other companies, and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles. However, EBITDA is a relevant measure of the
Company's operations and cash flows and is used internally as a surrogate
measure of cash provided by operating activities.
Operating cash flow was reduced by $112.2 million in the current year, and $70.0
million in the prior year due to the net change in operating assets and
liabilities. The increase in other assets of $74.1 million in the current year
includes an increase in both current and non-current notes receivable of $53.4
million, primarily due to sales of AbiliTec software recorded during the second
quarter. The change in operating assets and liabilities also includes payment of
$14.4 million in merger and integration costs related to the Company's merger
with May & Speh. The bulk of these costs have now been paid, with only $0.7
million still remaining to be paid out. Accounts receivable days sales
outstanding ("DSO") were 82 days at September 30, 2000, compared to 67 days at
March 31, 2000. The Company adjusts accounts receivable and revenues to place
them on a comparable basis, including removing notes receivable from revenues in
the calculation since notes receivable are not included in accounts receivable.
Investing activities used $61.1 million for the six months ended September 30,
2000, compared to $68.7 million a year previously. Investing activities in the
current year included $34.5 million in cash proceeds from the disposition of
assets, primarily the $30.0 million from the sale of the DataQuick operation to
MacDonald Dettwiler & Associates, Ltd., a Canadian public company. The remaining
$25.5 million receivable from this sale was collected subsequent to September
30, 2000. The bulk of the remainder of the proceeds from the disposition of
assets relates to cash received from the disposal of the Ceres investment.
Investing activities in the current year also include capitalized software
development costs of $18.7 million and capital expenditures of $44.0 million.
Capital expenditures decreased compared to the previous year, due to much of the
Company's hardware needs being funded through a synthetic leasing facility which
was entered into in the prior year. The Company funded $18.2 million in
equipment under the synthetic lease facility during the six months ended
September 20, 2000 and has $16.2 million remaining under the original $100
million commitment. The Company has also secured an additional commitment of
$40.0 million in synthetic leases for furniture and fixtures and has funded
purchases of approximately $10.9 million during the six months. The effect of
the synthetic lease reduces operating cash flow, since payments under the lease
are a cash expense, while depreciation is not.
<PAGE>
Investing activities during the current year also include investments in joint
ventures of $18.7 million, which includes an additional advance of $5.4 million
to the Company's joint venture in Australia to fund acquisitions, a $5.0 million
investment in HealthCarePro Connect, LLC, a joint venture with the American
Medical Association, and a $6.0 million investment in USADATA.com, Inc. Net cash
paid in acquisitions in the current year of $14.1 million includes the
acquisition of MCRB, Inc. in April for $5.8 million. The remainder of the cash
paid in acquisitions relates to earn-out payments made during the current year
for acquisitions initially recorded in prior years. Note 1 to the consolidated
financial statements discusses the acquisitions and dispositions in more detail.
Financing activities in the current year provided $66.7 million, most of which
relates to debt proceeds from the Company's revolving credit arrangement. The
Company also has purchased $10.3 million of common stock in the open market and
may continue to purchase stock in the open market from time to time.
During the first quarter ended June 30, 2000, the Company occupied a new
customer service facility in Conway, Arkansas, and subsequent to September 30,
2000 has begun construction on another customer service facility in Little Rock,
as well as a new customer service and data center facility in Phoenix. The
Little Rock building is expected to cost approximately $30.0 to $35.0 million
including interest during construction and construction is expected to last
until November 2002. The Phoenix project is expected to cost approximately $25.0
million, including land and construction interest, and construction is expected
to last until January 2002. The City of Little Rock has issued revenue bonds for
the Little Rock project. The Company is financing both the Phoenix and Little
Rock projects using an off balance sheet synthetic lease arrangement. Upon
completion, the impact of these two leasing arrangements will reduce operating
cash flow by approximately $5.0 million per year over the three-year minimum
term of the lease. The Company has also announced its intention to build another
facility in central Arkansas, although plans and financing arrangements for that
facility are incomplete.
While the Company does not have any other 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. In some cases, the Company also sells software and hardware to
customers under extended payment terms or notes receivable collectible generally
over three years. These arrangements also require up-front expenditures of cash,
which are repaid over the life of the agreement. The Company also evaluates
acquisitions from time to time, which may require up-front payments of cash.
Depending on the size of the acquisition it may be necessary to raise additional
capital. If additional capital becomes necessary, the Company would first use
available borrowing capacity under its revolving credit agreement, followed by
the issuance of other debt or equity securities. The Company is currently
negotiating an accounts receivable securitization facility which may either
supplement or partially replace its existing revolving credit facility, and is
also negotiating an additional synthetic leasing commitment for computer
equipment.
As of September 30, 2000 the Company has entered into three equity forward
purchase agreements with a commercial bank under which the Company will purchase
3.1 million, 0.2 million, and 0.5 million shares of its common stock at an
average total cost of $20.81, $26.51, and $23.37 per share, respectively, for a
total notional amount of $80.0 million. In accordance with the terms of the
forward contracts, the shares remain issued and outstanding until the forward
purchase contracts are settled. The agreements may be settled in cash, shares of
common stock, or in net shares of common stock. The Company has the option to
settle the contracts at any time prior to December 26, 2003, and has accounted
for these forward contracts as permanent equity. The fair value of the equity
forward contracts as of September 30, 2000 was $37.2 million, based on a stock
price of $31.75. An increase or decrease in the stock price of $1.00 per share
<PAGE>
increases or decreases the market value by approximately $3.7 million. The
Emerging Issues Task Force ("EITF") of the Financial Accounting Standards Board
has recently reached a consensus in EITF 00-7 that requires such contracts
entered into after March 15, 2000 to be recorded as assets and liabilities, with
adjustments to the market value of the common stock to be recorded on the income
statement, in situations in which the counter party can force the contracts to
be settled in cash. The effective date of the new consensus was delayed until
December 31, 2000 to allow such contracts to be amended. The EITF has
subsequently reached conclusions in EITF 00-19 that also require asset and
liability treatment in certain circumstances, including when an agency agreement
is in place. In order to qualify for permanent equity treatment, the forward
contract must permit settlement in unregistered shares, contain an explicit cap
on the number of shares to be delivered under a net share settlement, must not
require the posting of collateral, and must not provide the commercial bank with
any right that would rank higher than those of a common shareholder.
Additionally the forwards must not require cash "true-ups" under the net share
method and must not contain any economic penalties that would compel the Company
to net cash settle. The Company has amended the forward agreements to comply
with the permanent equity provisions of EITF 00-7 and EITF 00-19.
Year 2000
Many computer systems ("IT Systems') and equipment and instruments with embedded
microprocessors ("non-IT systems") were designed to only recognize the last two
digits of a calendar year. With the arrival of the Year 2000, these systems and
microprocessors may encounter operating problems due to their inability to
distinguish years after 1999 from years preceding 1999. This could manifest in a
system failure or miscalculations causing disruption of operations, including,
among other things, a temporary inability to process or transmit data, or engage
in normal business activities. As a result, the Company has previously engaged
in an extensive project to remediate or replace its date-sensitive IT systems
and non-IT systems.
From 1996 through 1999, the Company was engaged in an enterprise-wide effort
("the Project") to address the risks associated with the Year 2000 problem, both
internal and external. While the core Project substantially ended on March 31,
1999, a transition strategy was implemented moving the Company from a project
mode to a standards-based maintenance mode. The Company also monitored Year 2000
issues during the Year 2000 rollover event, from midnight December 30, 1999,
through midnight January 2, 2000, and exercised critical production systems and
equipment on Saturday January 1, 2000 to identify if they were operating
correctly. Like most well prepared companies, the Company did not experience any
significant Year 2000 related issues during the rollover period or thereafter.
The Company currently believes that with modifications to existing software and
conversions to new software, the Year 2000 issues have been mitigated. But a
vendor or customer may have failed to convert its software or may have
implemented a conversion that is incompatible with the Company's systems, which
could have a material adverse impact on the Company.
In an effort to mitigate any remaining risks associated with the Year 2000
problem, efforts to maintain and enhance our state of readiness will continue
throughout the year 2000. Some of the follow-on activities include ensuring that
existing operations remain Year 2000 ready, continuing vendor product analysis
and evaluation, establishing the Year 2000 readiness of acquisitions, and
reviewing or enhancing contingency plans. The Company will continue to maintain
awareness and address the Year 2000 problem from both a leadership and
operational perspective throughout this year.
<PAGE>
Despite the best efforts of the Company, the failure to correct a material Year
2000 problem could result in an interruption in, or a failure of, certain normal
business activities or operations. Any failures could materially and adversely
affect the Company's results of operations, liquidity and financial condition.
While there remains some general uncertainty inherent in the Year 2000 problem,
resulting in part from the uncertainty of the Year 2000 readiness of third party
vendors and customers, the Company does not believe at this time that the
consequences of Year 2000 failures will have a material impact on the Company's
results of operations, liquidity or financial condition.
New Accounting Pronouncement
On December 3, 1999 the Securities and Exchange Commission staff issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 summarizes certain of the SEC staff's views in applying generally
accepted accounting principles to revenue recognition in financial statements
and affects a broad range of industries. Subsequently, the SEC has issued Staff
Accounting Bulletins No. 101A and 101B which deferred the effective date of SAB
101. The accounting and disclosure requirements of SAB 101 will now be effective
for Acxiom in the last quarter of fiscal 2001. The Company is currently
evaluating the effects of SAB 101 on its methods of recognizing revenue and has
not yet quantified the impact, if any, the application of SAB 101 will have on
the Company's results of operations or financial position.
In September 2000, the Financial Accounting Standards Board issued Financial
Accounting Standard ("FAS") No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" which replaces FAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities". This standard revises the methods for accounting for
securitizations and other transfers of financial assets and collateral as
outlined in FAS No. 125, and requires certain additional disclosures. For
transfers and servicing of financial assets and extinguishments of liabilities,
this standard will be effective for the Company's June 30, 2001 financial
statements. However, for disclosures regarding securitizations and collateral,
as well as the accounting for recognition and reclassification of collateral,
this standard will be effective for the Company's December 31, 2000 financial
statements. The Company is currently evaluating the impact of the adoption of
this standard, however it does not expect the adoption of this standard to have
a material effect on its financial position or results of operations.
Outlook
The opportunities for AbiliTec continue to grow as companies aggressively
implement customer relationship management (CRM) strategies. These CRM efforts
are putting focus on the need to aggregate customer information across the
enterprise, sometimes on a real-time basis. Acxiom's AbiliTec software provides
the customer data integration that can accurately and quickly aggregate all
records about an individual. Customer data integration (or CDI) is the
foundational data management process for every use of customer information.
During the quarter, a number of companies adopted AbiliTec as their software to
deliver customer data integration.
The following statements are based on current expectations. These statements are
forward looking, and actual results may differ materially. These statements do
not include the potential impact of any mergers, acquisitions or other business
combinations or divestitures that may be completed after September 30, 2000. As
a result of the events outlined above, we believe the opportunities for AbiliTec
will enhance our outlook for the balance of fiscal 2001 as follows:
o The Company expects revenue growth for the remainder of the fiscal year to
be at least 25% above fiscal 2000 after adjusting for divested operations
and any unusual level of sales of computer equipment (client servers)
associated with delivering data warehouse solutions.
<PAGE>
o The Company expects that AbiliTec revenues for this fiscal year could be
$90 million-$125 million.
o The tax rate for fiscal 2001 is expected to be 38.5%.
o Capital
expenditures are expected to be $90 million to $100 million for fiscal
2001.
o Capitalized development of software costs are expected to be $30 million to
$35 million for fiscal 2001.
o Depreciation and amortization costs are expected to be $100 million to $110
million for fiscal 2001.
Additional applications for AbiliTec also continue to arise, most notably the
ability to assist companies in implementing their consumer privacy policy
strategies. The recent passage of the Gramm-Leach-Bliley legislation, which has
significant ramifications for the financial services industry, represents a
significant opportunity for AbiliTec.
Also, Acxiom's channel partner strategy continues to gain momentum as software
providers, consultants, system integrators and others realize the power of
AbiliTec to enhance the selling of their products and their services.
As a result of the events outlined above, we believe that the opportunities for
AbiliTec will enhance our outlook for the balance of fiscal 2001 such that our
earnings per share growth could be 20% or higher over the previous year
excluding the net gain on dispositions reported in the first quarter of fiscal
2001. For fiscal 2002, we believe that revenue and earnings per share should
grow 25% or more over fiscal 2001.
In connection with the recent adoption of the new SEC rules on corporate
disclosure, Acxiom is changing its procedures for publishing and updating its
Outlook forward-looking statements and risk factors statements. Following the
publication of Outlook in its quarterly earnings release, Acxiom will continue
its current practice of having corporate representatives meet privately during
the quarter with investors, the media, investment analysts and others. At these
meetings Acxiom may reiterate the Outlook publicly available on its web site
(www.acxiom.com). Prior to the start of the Quiet Period (described below), the
public can continue to rely on the Outlook on the web site as still being
Acxiom's current expectations on matters covered, unless Acxiom publishes a
notice stating otherwise.
Toward the end of each fiscal quarter, Acxiom will have a "Quiet Period" when it
no longer publishes or updates Outlook and Acxiom representatives will not
comment concerning Outlook or Acxiom's financial results or expectations. The
Quiet Period will extend until the day when Acxiom's next quarterly earnings
release is published. For the third quarter, the Quiet Period will be December
23, 2000 through January 23, 2001.
Certain statements in this quarterly 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. 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 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. The
forward-looking statements include: statements concerning the Company's need for
additional capital and the ability to raise additional capital; statements
concerning the Company's ability to remediate date sensitive IT-systems and
non-IT systems in conjunction with the arrival of the year 2000 and the impact
<PAGE>
of those efforts, and their success or failure, on the Company's future results
of operations; statements concerning future earnings per share growth;
statements concerning the length and future impact of the Company's investment
in Acxiom Data Network and AbiliTec products on the Company's future revenue and
margins; statements concerning the benefits of AbiliTec for our customers;
statements concerning any competitive lead; statements concerning the impact of
implementation of Acxiom Data Network and AbiliTec technology in CRM
applications; statements concerning the momentum of CRM application and
e-commerce initiatives; statements concerning the future growth and size of the
CRM market; statements concerning AbiliTec becoming an industry standard;
statements concerning efficiency gains related to the implementation of
AbiliTec; statements that AbiliTec will be a revolutionary customer data
integration technology that will successfully support the creation of a
real-time, single, accurate, comprehensive and enhanced view of a customer
across a business' enterprise; statements that major companies will continue to
include AbiliTec in their strategic enterprise-wide CRM planning; that this
quarter may be a good indicator of future results; statements that Acxiom will
continue to be able to sign long-term, multi-million dollar contracts with
blue-chip companies; statements that sales of AbiliTec will accelerate and
accelerate the sales momentum; statements that AbiliTec will continue to achieve
customer acceptance in the marketplace and result in additional business;
statements that AbiliTec will be perceived and realized as a software capable of
allowing its users to better serve consumer privacy and preference interests;
statements that the company will be able to continue to develop relationships
with other companies that will be able to successfully incorporate AbiliTec into
their products and services in a manner that will yield benefits to Acxiom;
statements that Acxiom will meet the introduction timetables for AbiliTec in
markets outside of the United States; statements that Acxiom will be able to
reach contractual terms with customers who have decided to adopt the Company's
solutions and products, and statements concerning future revenue growth;
expectations for future AbiliTec revenues; future earnings expectations;
expected tax rates; days sales outstanding expectations; capital expenditure
expectations; future software development cost; future depreciation and
amortization costs; whether additional applications for AbiliTec will continue
to arise; whether the channel partner strategy continues to gain momentum; and
statements concerning potential growth of international markets. The following
factors may cause actual results to differ materially from those in the
forward-looking statements. With regard to all statements concerning AbiliTec:
the complexity and uncertainty regarding the development of new high
technologies; the loss of market share through competition or the acceptance of
these or other Company offerings on a less rapid basis than expected; changes in
the length of sales cycles due to the nature of AbiliTec being an
enterprise-wide solution; the introduction of competent, competitive products or
technologies by other companies; changes in the consumer and/or business
information industries and markets; the Company's ability to protect proprietary
information and technology or to obtain necessary licenses on commercially
reasonable terms; the impact of changing legislative, regulatory and consumer
environments in the geography that AbiliTec will be deployed. With regard to the
statements that generally relate to the business of the Company: all of the
above factors; the possibility that economic or other conditions might lead to a
reduction in demand for the Company's products and services; the continued
ability to attract and retain qualified technical and leadership associates and
the possible loss of associates to other organizations; the ability to properly
motivate the sales force and other associates of the Company; the ability to
achieve cost reductions; changes in the litigation, legislative, regulatory and
consumer environments affecting the Company's business including but not limited
to legislation, regulations and customs relating to the Company's ability to
collect, manage, aggregate and use data; data suppliers might withdraw data from
the Company, leading to the Company's inability to provide certain products and
services; short-term contracts affect the predictability of the Company's
revenues; the potential loss of data center capacity or interruption of
telecommunication links; postal rate increases that could lead to reduced
volumes of business; customers that may cancel or modify their agreements with
the Company. With specific reference to all statements that relate to the
providing of products or services outside the Company's primary base of
operations in the United States: all of the above factors and the difficulty of
doing business in numerous sovereign jurisdictions due to differences in
<PAGE>
culture, laws and regulations. Other factors are detailed from time to time in
the Company's periodic reports and registration statements. Acxiom believes that
it has the product and technology offerings, facilities, associates and
competitive and financial resources for continued business success, but future
revenues, costs, margins and profits are all influenced by a number of factors,
including those discussed above, all of which are inherently difficult to
forecast. The Company undertakes no obligation to publicly release any revision
to any forward-looking statement to reflect any future events or circumstances.
<PAGE>
Form 10-Q
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Acxiom's earnings are affected by changes in short-term interest rates primarily
as a result of its revolving credit agreement, which bears interest at a
floating rate. Acxiom does not use derivative or other financial instruments to
mitigate the interest rate risk. Risk can be estimated by measuring the impact
of a near-term adverse movement of 10% in short-term market interest rates. If
short-term market interest rates average 10% more in fiscal 2001 than in 2000,
there would be no material adverse impact on Acxiom's results of operations.
Acxiom has no material future earnings or cash flow expenses from changes in
interest rates related to its other long-term debt obligations as substantially
all of Acxiom's remaining long-term debt obligations have fixed rates. At both
September 30, 2000 and March 31, 2000, the fair value of Acxiom's fixed rate
long-term obligations approximated carrying value.
Although Acxiom conducts business in foreign countries, principally the United
Kingdom, foreign currency translation gains and losses are not material to
Acxiom's consolidated financial position, results of operations or cash flows.
Accordingly, Acxiom is not currently subject to material foreign currency
exchange rate risks from the effects that exchange rate movements of foreign
currencies would have on Acxiom's future costs or on future cash flows it would
receive from its foreign investment. To date, Acxiom has not entered into any
foreign currency forward exchange contracts or other derivative financial
instruments to hedge the effects of adverse fluctuations in foreign currency
exchange rates.
As of March 31, 2000, Acxiom was a party to two equity forward purchase
agreements under which it will purchase 3.1 million and 0.2 million shares of
its common stock at average total costs of approximately $20.81 and $26.51 per
share, respectively, for a total notional purchase price of $69.4 million. The
value of the equity forward contracts at March 31, 2000 was $38.6 million, based
on the market value of Acxiom common stock of $33.25 at March 31, 2000. As of
September 30, 2000, the Company had entered into another equity forward contract
for 0.5 million shares at $23.37 per share for an additional notional amount of
$10.6 million. The value of the three equity forward contracts at September 30,
2000 was $37.2 million, based on a share price of $31.75. The value of the
equity forward contracts will vary based on the market price of the common
stock. For each $1.00 increase or decrease in the stock price, the value of the
equity forward contracts will increase or decrease by approximately $3.7
million.
<PAGE>
Form 10-Q
ACXIOM CORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On September 20, 1999 the Company and certain of its directors and officers
were sued by an individual shareholder in a purported class action filed in
the United States District Court for the Eastern District of Arkansas. The
action alleges that the defendants violated Section 11 of the Securities
Act of 1933 in connection with the July 23, 1999 public offering of
5,421,000 shares of the common stock of the Company. In addition, the
action seeks to assert liability against Company Leader Charles Morgan
pursuant to Section 15 of the Securities Act of 1933. The action seeks to
have a class certified of all purchasers of the stock sold in the public
offering. Two additional suits were subsequently filed in the same venue
against the same defendants and asserting the same allegations. The
plaintiffs have now filed a consolidated complaint. The cases are still in
the initial phase of litigation, with the defendants having filed their
initial response to the lawsuit. The Company believes the allegations are
without merit and the defendants intend to vigorously contest the cases,
and at the appropriate time, seek their dismissal.
There are various other litigation matters that arise in the normal course
of the business of the Company. None of these, however, are believed to be
material in their nature or scope.
Item 4. The Annual Meeting of Shareholders of the Company was held on August 9,
2000. At the meeting, the shareholders voted on and approved two proposals:
1) The election of two directors. Voting results for each individual
nominee were as follows: Dr. Ann H. Die, 60,945,437 votes for and
15,532,183 votes withheld; Charles D. Morgan, 72,193,330 votes for and
4,284,290 votes withheld. These two elected directors will serve with the
other six Board members: Rodger S. Kline, Stephen M. Patterson and James T.
Womble, whose terms expire at the 2001 Annual Meeting, and William T.
Dillard II, Harry C. Gambill and Thomas F. (Mack) McLarty, III, whose terms
will expire at the 2002 Annual Meeting.
2) The adoption of a new stock option plan. Voting results for this
proposal were: 46,119,946 votes for; 15,138,869 votes against; 449,477
votes abstained; and 14,769,328 non-votes.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Forms 8-K.
A report was filed on July 26, 2000, which reported the Company's
change in certifying accountants.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Acxiom Corporation
Dated: November 14, 2000
By: /s/ Caroline Rook
----------------------------------
(Signature)
Caroline Rook
Chief Financial Officer
(Chief Accounting Officer)
