<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
AMENDMENT NO. 1 TO FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
( ) 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 1-11008
CATALINA MARKETING CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 33-0499007
- ------------------------------ ------------------------------
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
11300 9th Street North
St. Petersburg, Florida 33716-2329
- ------------------------------ ------------------------------
(813) 579-5000
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(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether 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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
At July 22, 1996, Registrant had outstanding 19,572,046 shares of
Common Stock.
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CATALINA MARKETING CORPORATION
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Income (Unaudited)
for the three months ended June 30, 1996 and 1995 3
Condensed Consolidated Balance Sheets at
June 30, 1996 (Unaudited) and March 31, 1996 4
Condensed Consolidated Statements of Cash Flow
(Unaudited) for the three months ended
June 30, 1996 and 1995 5
Notes to Unaudited Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. Other Information 9
Signatures 10
2
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CATALINA MARKETING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------------------
<S> <C> <C>
1996 1995
--------- --------
Revenues $38,127 $30,613
Costs and Expenses:
Direct operating expenses 13,136 10,942
Selling, general and administrative 11,154 7,661
Depreciation and amortization 3,664 3,895
---------- ---------
Total costs and expenses 27,954 22,498
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Income From Operations 10,173 8,115
Other Income, net 232 209
---------- ---------
Income Before Income Taxes And
Minority Interest 10,405 8,324
Income Taxes (4,271) (3,365)
Minority Interest 160 179
---------- ---------
Net Income 6,294 $ 5,138
========== =========
Net Income Per Common and
Common Equivalent Share $ 0.31 $ 0.26
========== =========
Weighted Average Common and
Common Equivalent Shares
Outstanding 20,432 19,870
========== =========
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
3
<PAGE>
CATALINA MARKETING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited)
June 30, March 31,
ASSETS 1996 1996
--------------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 19,580 $ 25,778
Accounts receivable, net 22,729 26,725
Prepaid and other assets 3,660 5,352
Deferred tax asset 4,359 7,436
------------- -----------
Total current assets 50,328 65,291
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Property and Equipment:
Property and equipment 119,576 110,475
Accumulated depreciation and
amortization (67,887) (64,222)
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Total property and equipment 51,689 46,253
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Purchased Intangible Assets 14,760 -
Other Assets 2,174 2,643
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Total Assets $118,951 $114,187
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 9,292 $ 10,832
Taxes payable 1,364 620
Accrued expenses 18,818 17,049
Deferred revenue 7,548 11,960
------------- -----------
Total current liabilities 37,022 40,461
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Deferred Tax Liability 3,046 2,504
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Commitments and Contingencies
Stockholders' Equity:
Preferred stock; $.01 par value;
5,000,000 authorized shares; - -
none issud and outstanding
Common stock; $0.01 par value;
30,000,000 authorized shares;
20,532,254 and 20,459,728
shares issued at June 30, 1996
and March 31, 1996, respectively 205 205
Paid-in capital 35,937 34,079
Cumulative translation adjustment 10 501
Retained earnings 63,267 56,973
Less common stock in treasury, at
cost (963,800 shares at June
30, 1996 and March 31,1996) (20,536) (20,536)
------------- -----------
Total stockholders' equity 78,883 71,222
------------- -----------
Total Liabilities and Stockholders'
Equity $118,951 $114,187
------------- ------------
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
4
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CATALINA MARKETING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended June 30
---------------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,294 $ 5,138
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 3,664 3,895
Minority interest (160) (179)
Other 278 (7)
Changes in operating assets and
liabilities 4,124 (36)
---------- ----------
Net cash provided by
operating activities 14,200 8,811
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (9,171) (2,529)
Proceeds from sale of fixed assets 79 174
Purchase of minority interest
in subsidiary (cash consideration) (11,915) -
---------- ----------
Net cash used in investing
activities (21,007) (2,355)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common
stock 203 385
Proceeds from issuance of
subsidiary stock 459 63
Common stock repurchases - (10,518)
---------- ----------
Net cash used in financing
activities 662 (10,070)
---------- ----------
NET DECREASE IN CASH (6,145) (3,614)
Effect of exchange rate changes on cash (53) 97
CASH, at end of prior period 25,778 30,729
---------- ----------
CASH, at end of current period 19,580 $ 27,212
========== ==========
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
5
<PAGE>
CATALINA MARKETING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Condensed Consolidated Financial Statements:
In the opinion of the Company, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position of the
Company as of June 30, 1996 and March 31, 1996 and the results of operations and
cash flows for the three-month periods ended June 30, 1996 and 1995.
The consolidated financial statements include the accounts of the Company and
its wholly-owned and majority-owned subsidiaries. The first quarter results of
the majority owned foreign subsidiaries are included as of, and for the three
month periods ended March 31, 1996 and 1995, respectively. All material
intercompany profits, transactions and balances have been eliminated. The
Company's investment in non-majority owned companies is accounted for on the
equity method.
These financial statements are presented in accordance with the requirements of
Form 10-Q and consequently may not include all disclosures normally required by
generally accepted accounting principles or those normally made in the Company's
Annual Report on Form 10-K. The accompanying condensed consolidated financial
statements and related notes should be read in conjunction with the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1996.
Note 2. Net Income Per Common and Common Equivalent Share:
Net income per common and common equivalent share is based on the weighted
average number of shares of common stock outstanding and dilutive common
equivalent shares from stock options using the treasury stock method, effected
for the two-for-one stock split (see Note 4).
Note 3. Intangible Assets
On April 10, 1996, the Company purchased from its minority shareholders the
remaining 46% of Catalina Marketing U.K., Inc. not owned by it for $11.9 million
cash consideration and 41,672 newly issued shares of Company common stock. The
Company also chose to replace existing options in the Catalina Marketing U.K.,
Ltd. stock option plan by issuing approximately 17,600 shares of Company common
stock to the Catalina Marketing U.K., Ltd. plan participants. The April 10, 1996
purchase has been accounted for on the purchase method. The intangible assets
purchased in the transaction are being amortized on the straight line basis.
$1.3 million in goodwill is being amortized over a 40 year life, with the
remainder of the intangible assets related to the patent license and retailer
relationships amortized over an average 20 year life.
6
<PAGE>
If Catalina Marketing U.K., Inc. had been 100% owned by the Company during the
quarter ended June 30, 1995, net income would have been $5.0 million or $0.25
per common and common equivalent share.
Note 4. Subsequent Event:
Two-for-one Stock Split
- -----------------------
On June 10, 1996 the Company's board of directors declared a two-for-one common
stock split to be effected in the form of a stock dividend. The record date for
the stock dividend was June 24, 1996, and the payment date was July 15, 1996.
The financial statements for the periods ended June 30, 1996 and 1995 and all
other information provided herein have been restated to include the effects of
the stock split.
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations:
Fiscal 1997 Compared to Fiscal 1996
The Company's revenues for the first quarter of fiscal 1997 increased 25%,
compared with the same period in fiscal 1996. The increase in revenues is
primarily due to a greater distribution of Checkout Coupon(R) incentives. In the
U.S., the Catalina Marketing Network/sm/ printed 521 million during the first
quarter of fiscal 1997, up 11% compared to the comparable fiscal 1996 period
(470 million promotions). The greater distribution of Checkout Coupon
promotions is attributable to additional sales of category cycles and the
broader reach of the Catalina Marketing Network. In the first quarter of fiscal
1997, foreign consolidated subsidiaries, Catalina Electronic Clearing Services
(CECS) and Health Resource Publishing Company contributed approximately $2.8
million of revenues. CECS continues to experience slower adoption in the market
place than expected, greater than anticipated working capital requirements,
operational difficulties, and therefore continues to incur operating losses.
In the U.S., the Catalina Marketing Network was in 10,085 Checkout Coupon stores
at June 30, 1996, which reach 135 million shoppers each week as compared to
9,049 stores reaching 122 million shoppers each week at June 30, 1995. Outside
the U.S., the Catalina Marketing Network was in 622 stores at June 30, 1996,
which reach 14 million shoppers each week as compared to 178 stores reaching 5
million shoppers each week at June 30, 1995. The Company installed 319 U.S.
Checkout Coupon stores in the first quarter of fiscal 1997 as compared to 45
stores in the comparable fiscal 1996 period. Outside the U.S., the Company
installed 64 stores in the first quarter of fiscal 1997 as compared to 10 stores
in the comparable fiscal 1996 period.
Direct operating expenses consist of retailer fees, paper, and sales commissions
and the expenses of operating and maintaining the Catalina Marketing Network
(primarily expenses relating to operations personnel and service offices) and
provision for doubtful accounts. Direct operating expenses increased in
absolute terms to $13.1 million for the first quarter of fiscal 1997, from $10.9
million in fiscal 1996, decreasing to 34% from 36% of revenues. The percentage
decrease is due primarily to economies in paper purchasing.
7
<PAGE>
Selling, general and administrative expenses include personnel-related costs of
selling and administrative staff, overhead and new product development expenses.
Selling, general and administrative expenses for the first quarter of fiscal
1997 increased as a percent of revenues to 29% from 25% for fiscal 1996. In
absolute terms, these expenses increased to $11.1 million compared to $7.7
million fiscal 1996. The increase relates primarily to higher costs associated
with a larger sales force, and administrative expenses of new business ventures
and products.
Depreciation and amortization decreased to $3.7 million for the first quarter of
fiscal 1997 from $3.9 million in the comparable fiscal 1996 period. The
decrease is due to the increase in fully depreciated store equipment in fiscal
1997.
The provision for income taxes increased to $4.3 million (41% of income before
income taxes and minority interest) for the three-month period of fiscal 1997
compared to $3.4 million (40% of income before income taxes and minority
interest) for the same period of fiscal 1996. The Company's effective tax rate
is higher than the expected federal statutory tax rate due to state and foreign
income taxes and the inability to offset losses of majority owned foreign
subsidiaries against U.S. income.
Liquidity and Capital Resources
The Company's primary capital expenditures are store equipment and third-party
store installation costs. These amounts generally range from $5,000 to $13,000
per installed store. During the first three-month periods of fiscal 1997 and
1996, the Company made capital expenditures of $9.2 million and $2.5 million,
respectively. The pace of installations vary depending on the timing of
contracts entered into with retailers and the scheduling of store installations
by mutual agreement. In the first quarter of fiscal 1997, the Company increased
expenditures for data processing equipment and had an increased pace of store
installations compared to the comparable prior fiscal period. Catalina Marketing
finances capital expenditures from internally generated cash flows. Management
believes that expenditures for equipment and research and development will
remain $20 to $30 million annually for the foreseeable future.
Additionally, management has been authorized to purchase up to $10 million of
Company Common Stock subject to market conditions.
The Company has an unsecured revolving bank credit facility under which it may
borrow up to $30 million. There have been no borrowings under this credit
facility to date.
8
<PAGE>
In accordance with coupon industry practice, the Company generally pre-bills
manufacturers prior to the commencement of the purchased category cycle. The
Company recognizes revenue as promotions are printed, and the amounts collected
prior to printing are reflected as deferred revenue, which is classified as
current liabilities. The Company believes working capital generated by
operations is sufficient for its capital requirements, although the Company may
choose to utilize debt and lease financing, if available on acceptable terms.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None.
b) Reports on Form 8-K
Filing dated April 24, 1996 and Amendment 1 dated June 24, 1996,
both regarding the purchase by the Company of common shares not already owned by
it in Catalina Marketing U.K., Inc., which was previously 54%
owned by the Company.
9
<PAGE>
CATALINA MARKETING CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, Registrant's principal financial officer, thereunto duly
authorized.
August 15,1996 CATALINA MARKETING CORPORATION
-----------------------------------------
(Registrant)
/s/ Philip B. Livingston
-----------------------------------------
Philip B. Livingston
Senior Vice President and
Chief Financial Officer
(Authorized officer of Registrant and principal
financial officer)
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 19,580
<SECURITIES> 0
<RECEIVABLES> 22,729
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 50,328
<PP&E> 119,576
<DEPRECIATION> 67,887
<TOTAL-ASSETS> 118,951
<CURRENT-LIABILITIES> 37,022
<BONDS> 0
0
0
<COMMON> 205
<OTHER-SE> 78,678
<TOTAL-LIABILITY-AND-EQUITY> 118,951
<SALES> 38,127
<TOTAL-REVENUES> 38,127
<CGS> 13,136
<TOTAL-COSTS> 27,954
<OTHER-EXPENSES> (392)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,405
<INCOME-TAX> 4,271
<INCOME-CONTINUING> 6,294
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,294
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
