<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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 SEPTEMBER 30, 1998
( ) 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
(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 November 10, 1998, Registrant had outstanding 18,261,216 shares of
Common Stock.
<PAGE> 2
CATALINA MARKETING CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
for the three and six month periods ended
September 30, 1998 and 1997 3
Condensed Consolidated Balance Sheets at
September 30, 1998 and March 31, 1998 4
Condensed Consolidated Statements of Cash Flows
for the six month periods ended
September 30, 1998 and 1997 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE> 3
CATALINA MARKETING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 64,448 $ 52,727 $ 121,282 $ 99,386
Costs and Expenses:
Direct operating expenses 28,198 20,407 51,748 38,440
Selling, general and 14,022 12,421 29,327 25,317
administrative
Depreciation and amortization 6,638 5,923 13,042 11,614
--------- --------- --------- ---------
Total costs and expenses 48,858 38,751 94,117 75,371
--------- --------- --------- ---------
Income From Operations 15,590 13,976 27,165 24,015
Interest Expense and Other (2,893) (390) (2,921) (783)
--------- --------- --------- ---------
Income Before Income Taxes 12,697 13,586 24,244 23,232
Income Taxes (6,308) (5,342) (11,117) (9,351)
--------- --------- --------- ---------
Net Income $ 6,389 $ 8,244 $ 13,127 $ 13,881
Diluted:
Net Income Per Common Share $ 0.34 $ 0.43 $ 0.69 $ 0.73
Weighted Average Common Shares
Outstanding 18,963 19,146 18,998 19,135
Basic:
Net Income Per Common Share $ 0.35 $ 0.45 $ 0.71 $ 0.76
Weighted Average Common Shares
Outstanding 18,512 18,368 18,521 18,349
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
CATALINA MARKETING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
(unaudited)
September 30, March 31,
ASSETS 1998 1998
---- ----
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 10,900 $ 18,434
Accounts receivable, net 33,715 20,251
Deferred tax asset 10,440 9,666
Prepaid expenses and other current assets 18,160 15,216
--------- ---------
Total current assets 73,215 63,567
--------- ---------
Property and Equipment:
Property and equipment 173,512 160,186
Accumulated depreciation and amortization (99,808) (89,673)
--------- ---------
Property and equipment, net 73,704 70,513
--------- ---------
Purchased intangible assets, net 25,254 19,112
Other assets 1,437 3,874
--------- ---------
Total Assets $ 173,610 $ 157,066
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 11,068 $ 8,348
Accrued expenses 34,058 27,520
Deferred revenue 22,769 20,116
Short term borrowings 5,276 5,537
--------- ---------
Total current liabilities 73,171 61,521
--------- ---------
Deferred tax liability 5,007 5,073
Long term debt 286 430
--------- ---------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock; $0.01 par value; 5,000,000
authorized shares; none issued and outstanding -- --
Common stock; $0.01 par value; 50,000,000
authorized shares and 18,236,119 and
18,379,153 shares issued and outstanding at
September 30, 1998 and March 31, 1998,
respectively 182 184
Paid-in capital 251 685
Cumulative translation adjustment (675) (135)
Retained earnings 95,388 89,308
--------- ---------
Total stockholders' equity 95,146 90,042
--------- ---------
Total Liabilities and Stockholders' Equity $ 173,610 $ 157,066
========= =========
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
CATALINA MARKETING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,127 $ 13,881
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,003 11,709
Other 2,204 (1,399)
Changes in operating assets and liabilities (9,438) 6,792
-------- --------
Net cash provided by operating activities 19,896 30,983
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (17,096) (7,609)
Purchase of investments, net of cash acquired (2,480) (2,087)
-------- --------
Net cash used in investing activities (19,576) (9,696)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on credit facility -- 1,650
Proceeds from debt obligations 13,436 22,195
Principal payments on debt obligations (13,369) (21,266)
Proceeds from issuance of common and subsidiary
stock 3,152 3,900
Tax benefit from exercise of non-qualified
options 1,010 1,516
Payment for repurchase of company common stock (11,771) (40,000)
-------- --------
Net cash used in financing activities (7,542) (32,005)
-------- --------
NET DECREASE IN CASH (7,222) (10,718)
Effect of exchange rate changes on cash (312) (211)
CASH, at end of prior period 18,434 13,698
-------- --------
CASH, at end of current period $ 10,900 $ 2,769
======== ========
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
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 September 30, 1998 and March 31, 1998, the results of operations
for the three and six months ended September 30, 1998 and 1997 and the
statements of cash flows for the six month periods ended September 30, 1998 and
1997.
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned and majority-owned subsidiaries. The second quarter
balances and results of the wholly-owned and majority-owned foreign subsidiaries
are included as of and for the three and six month periods ended June 30, 1998
and 1997. All material intercompany profits, transactions and balances have been
eliminated. The Company's investment in a non-majority owned company is
accounted for on the equity method.
These financial statements, including the condensed consolidated balance sheet
as of March 31, 1998, which has been derived from audited 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, 1998.
Note 2. Net Income Per Common Share:
The following is a reconciliation of the denominator of basic EPS to the
denominator of diluted EPS (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------------
1998 1997 1998 1997
------------------------------------------
<S> <C> <C> <C> <C>
Basic weighted average
common shares outstanding 18,512 18,368 18,521 18,349
Dilutive effect of options
outstanding 451 778 477 786
------------------------------------------
Diluted weighted average
common shares outstanding 18,963 19,146 18,998 19,135
</TABLE>
6
<PAGE> 7
Options to purchase 550,900 shares of common stock at prices ranging from $51.31
to $54.50 per share were outstanding at September 30, 1998, but were not
included in the computation of diluted EPS because the options' exercise prices
were greater than the average market price of common stock.
Note 3. Accounting Changes:
In June 1998, the Company adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (SFAS No. 130) and accordingly,
comprehensive income is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------------
1998 1997 1998 1997
------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 6,389 $ 8,244 $ 13,127 $ 13,881
Other comprehensive income,
net of tax:
Currency translation
adjustment 121 (507) (332) (254)
------------------------------------------
Comprehensive Income $ 6,510 $ 7,737 $ 12,795 $ 13,627
</TABLE>
In June 1998, the Company adopted Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use" (SOP
98-1). The effect of implementing SOP 98-1 was immaterial to the financial
statements for the three and six month periods ended September 30, 1998.
Note 4. Credit Facility:
In August 1998, the Company amended its $150 million credit agreement to extend
the term of the $50 million 364 day line of credit facility to September 29,
1999 and modify certain terms and conditions of the agreement. At September 30,
1998, there were no borrowings outstanding thereunder.
Note 5. Acquisitions:
Effective July 13, 1998, the Company acquired 100 percent of the outstanding
common shares of Market Logic, a full service targeted marketing organization
that specializes in the development and fulfillment of highly sophisticated,
personalized, direct marketing programs for retailers, for $1.7 million in
initial cash consideration, net of cash acquired. Terms of the purchase
agreement call for the Company to make a series of payments, which are
contingent upon the future operating performance of Market Logic. The purchase
has been accounted for using the purchase method of accounting for acquisition.
7
<PAGE> 8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:
Certain statements in the following paragraphs are forward looking, and actual
results may differ materially. Statements not based on historic facts involve
risks and uncertainties, including, but not limited to, the changing market for
promotional activities, especially as it relates to policies and programs of
packaged goods manufacturers for the issuance of certain product coupons, the
effect of economic and competitive conditions and seasonal variations, actual
promotional activities and programs with the company's customers, the pace of
installation of the Company's store network, the success of new services and
businesses and the pace of their implementation, and the Company's ability to
maintain favorable client relationships.
FISCAL 1999 COMPARED TO FISCAL 1998
The Company's revenues for the second quarter and first six months of fiscal
1999 increased 22.2 percent and 22.0 percent, respectively, compared with the
same periods in fiscal 1998. The increase in revenues is primarily due to growth
in new programs such as Checkout Direct(R) and, to a lesser extent, revenues
added by the acquisition of Market Logic, which closed on July 13, 1998. The
Company's core domestic business, which includes primarily business generated by
manufacturers and retailers through the Company's U.S. supermarket network, and
certain other retailer programs, and including Market Logic, contributed
approximately $52.2 million and $98.9 million of revenues, respectively, in the
second quarter and first six months of fiscal 1999, up 20.3 percent and 18.6
percent over revenues of $43.4 million and $83.4 million, respectively, in the
comparable fiscal 1998 periods.
In the U.S., the Catalina Marketing Network was in 11,621 stores at September
30, 1998, which reach 151 million shoppers each week as compared to 10,801
stores reaching 142 million shoppers each week at September 30, 1997, 11,164
stores reaching 143 million shoppers each week at March 31, 1998 and 11,432
stores reaching 153 million shoppers each week at June 30, 1998. The Health
Resources Network was in 3,186 pharmacies at September 30, 1998 as compared to
1,477 pharmacies at September 30, 1997, 1,920 pharmacies at March 31, 1998 and
2,256 pharmacies at June 30, 1998. Outside the U.S., the Catalina Marketing
Network was in 1,560 stores at September 30, 1998, which reach 24 million
shoppers each week as compared to 913 stores reaching 15 million shoppers each
week at September 30, 1997, 1,372 stores reaching 20 million shoppers each week
at March 31, 1998 and 1,456 stores reaching 23 million shoppers each week at
June 30, 1998.
In the first six months of fiscal 1999 the Company installed its Catalina
Marketing Network in 457 stores (net of deinstallations) in the U.S. as compared
to 56 stores in the comparable fiscal 1998 period. Deinstallation activity can
and does occur primarily due to store closures made by retailers in the ordinary
course of business as well as the consolidation and business combination of
supermarket chains. The Company also installed its Health Resources Network in
1,266 pharmacies (net of deinstallations) in the first six months of fiscal 1999
as compared to 282 stores in the comparable fiscal 1998 period. Outside the
U.S., the Company installed
8
<PAGE> 9
188 stores (net of deinstallations) in the first six months of fiscal 1999 as
compared to 272 stores (with respect to continuing operations, net of
deinstallations) in the comparable fiscal 1998 period. During the first six
months of fiscal 1998 the Company also ceased operations in 300 stores in and
around Mexico City.
Direct operating expenses consist of retailer fees, paper, sales commissions,
loyalty and direct marketing expenses, marketing expenses, the expenses of
operating and maintaining the Catalina Marketing Network (primarily expenses
relating to operations personnel and service offices), provision for doubtful
accounts and the direct expenses associated with operating the outdoor media
business in a majority-owned subsidiary in Japan. Direct operating expenses
increased in absolute terms to $28.2 million and $51.7 million for the second
quarter and first six months of fiscal 1999, respectively, from $20.4 million
and $38.4 million in the comparable periods of fiscal 1998. Direct operating
expenses in the second quarter and first six months of fiscal 1999 as a
percentage of revenues increased to 43.7 percent and 42.7 percent, respectively,
from 38.7 percent in the comparable periods of fiscal 1998. This increase in
fiscal 1999 is principally attributable to the Company's increase in loyalty and
direct marketing programs,including Market Logic's business, which by their
nature have a higher percentage of direct costs as a function of revenue than
the Company's other base business products.
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 second quarter and first
six months of fiscal 1999 were $14.0 million and $29.3 million, respectively,
compared to $12.4 million and $25.3 million for the comparable period of fiscal
1998, increases of 12.9 percent and 15.8 percent, respectively. The increases
relate primarily to higher costs associated with a larger sales force, and
administrative expenses of new business ventures and products. As a percentage
of revenues, selling, general and administrative expenses decreased 1.8 percent
and 1.3 percent in the second quarter and first six months of fiscal 1999, to
21.8 percent and 24.2 percent, respectively, from 23.6 percent and 25.5 percent
for the comparable periods of fiscal 1998. This decrease is attributable to more
disciplined spending on overhead costs in fiscal 1999.
Depreciation and amortization increased to $6.6 million and $13.0 million for
the second quarter and first six months of fiscal 1999 from $5.9 million and
$11.6 million for the comparable periods in fiscal 1998. Depreciation increased
due to the investment in capital expenditures associated with new business
ventures and data processing equipment and the increase in stores installed.
Interest expense and other increased to $2.9 million for the second quarter and
first six months of fiscal 1999 from $.4 million and $.8 million for the
comparable periods in fiscal 1998. The increase is primarily due to the Company
writing off its $3.0 million investment in Intelledge Corporation in the second
quarter of fiscal 1999.
The provision for income taxes increased to $11.1 million (45.9 percent of
income before income taxes) for the first six months of fiscal 1999, compared to
$9.3 million (40.2 percent of income before income taxes) for the same period in
fiscal 1998. The increase is primarily due to the valuation allowance recorded
against the $3.0 million deferred tax benefit for the Intelledge investment
write off in
9
<PAGE> 10
the second quarter of fiscal 1999. The Company's effective tax rate is higher
than the expected federal statutory tax rate due to state and foreign income
taxes, the inability to currently utilize losses of majority owned foreign
subsidiaries for tax purposes and, in the case of fiscal 1999, the valuation
allowance referred to in the previous sentence.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital expenditures are store equipment and third-party
store installation costs, as well as data processing equipment for the Company's
central data processing facilities. Total store equipment and third-party store
installation costs range from $5,000 to $13,000 per store. During the first six
months of fiscal 1999 and 1998, the Company made capital expenditures of $17.1
million and $7.6 million, respectively. The pace of installations varies
depending on the timing of contracts entered into with retailers and the
scheduling of store installations by mutual agreement. During the first six
months of fiscal 1999, the Company had a faster pace of U.S. store installations
and spent $2.6 million more in data processing equipment and furniture and
fixtures compared to the comparable fiscal 1998 period. Management believes that
expenditures for capital equipment will remain between $20 and $35 million
annually for the foreseeable future.
Effective July 13, 1998, the Company acquired 100 percent of the outstanding
common shares of Market Logic, a full service targeted marketing organization
that specializes in the development and fulfillment of highly sophisticated,
personalized, direct marketing programs for retailers, for $1.7 million in
initial cash consideration, net of cash acquired. Terms of the purchase
agreement call for the Company to make a series of payments, which are
contingent upon the future operating performance of Market Logic.
During the first six months of fiscal 1999 and fiscal 1998, the Company
purchased 270,100 and 1,403,477 shares of its common stock for $11.8 million and
$40 million, respectively. Effective October 1998, the Company is authorized to
purchase an additional $50 million of Company common stock subject to market
conditions.
The Company believes working capital generated by operations along with existing
credit facilities are sufficient for its overall capital requirements.
In the next two years, many companies will face potentially serious risks
associated with the inability of existing business systems to appropriately
recognize calendar dates beginning in the year 2000. The Company is aware of the
year 2000 issue and the effects it may have on its business systems. In
response, the Company has developed a detailed plan to address the issue. This
plan includes a campaign which began in fiscal 1998, will be completed in June
1999 and includes spending of approximately $1.4 million for testing and
upgrading hardware and software. The Company has spent approximately $0.7
million on the year 2000 issue and is approximately 80 percent complete with its
plan as of September 30, 1998.
In addition, the Company has contacted all of its hardware and software vendors,
suppliers and financial institution partners to evaluate their compliance
efforts. This information is being
10
<PAGE> 11
used to ensure the vendors' year 2000 efforts or lack of will not adversely
impact the Company's operations.
The Company's manufacturer clients and retailers will also encounter year
2000 issues and are in various states of readiness. If these manufacturers or
retailers encounter serious problems related to the year 2000 issue, those
problems could have a material adverse impact on the operations of the Company.
The Company believes the manufacturers and retailers are addressing the year
2000 issue and is closely monitoring the status of their readiness.
In the event that the Company's year 2000 compliance efforts are unsuccessful
and/or one or more of the Company's critical internal systems are not year
2000 compliant by December 31, 1999, the following could occur, any of which
could have a material adverse impact on the operations of the Company:
(a) Customer service could deteriorate to the point that a substantial number
of the Company's customers move their account relationships to another
organization;
(b) The Company may be unable to provide manufacturer and retail clients with
timely and accurate information about program execution; or
(c) The Company may be unable to fulfill various contractual obligations
The Company expects to formulate a contingency plan by June 1999 for the remote
possibility that its business systems will not be year 2000 compliant. The
Company will continue its efforts toward year 2000 compliance with a goal of
June 1999 for completion of all testing and implementation of compliant systems.
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Stockholders was held on July 21, 1998.
The following members were elected as Class III members of the Company's
Board of Directors for the period ending as of the annual meeting of
stockholders in 2001:
Frank H. Barker
Patrick W. Collins
George W. Off
The terms of the other directors of the Company continued after the
meeting. These directors are: Fredrick W. Beinecke, Tommy D. Greer,
Helene Monat, Thomas W. Smith, Stephen I. D'Agostino and Michael B.
Wilson.
With regard to the proposal to ratify and approve the Company's
independent certified public accountants for fiscal 1999, 14,592,569 votes
were cast in favor, 4,580 were cast against, there were 8,095 abstentions,
and the proposal was approved.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
10.26.1 First Amendment dated as of August 12, 1998, to the
Credit Agreement dated as of September 30, 1997, by and
between the Registrant and Nationsbank, National
Association, as agent and lender, and the other lenders
party thereto, a copy of which is attached as an exhibit
to the Company's Report on Form 10Q for the quarter
ended September 30, 1997
15 Acknowledgment Letter
27 Financial Data Schedule (for SEC use only)
99 Review Report of Independent Certified Public Accountants
b. Reports of Form 8-K
Report dated July 16, 1998 was filed with the Commission regarding
the Company's press release communicating its fiscal 1999 first quarter
earnings.
12
<PAGE> 13
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, thereunto duly authorized.
November 13, 1998 CATALINA MARKETING CORPORATION
(Registrant)
/s/ Daniel D. Granger
----------------------------------------
Daniel D. Granger
Chief Executive Officer
(Authorized officer of Registrant)
/s/ Tamara L. Zeph
----------------------------------------
Tamara L. Zeph
Corporate Controller
(Principal accounting officer)
13
<PAGE> 1
EXHIBIT 10.26.1
AMENDMENT AGREEMENT NO. 1
TO CREDIT AGREEMENT
THIS AMENDMENT AGREEMENT is made and entered into this 12th day of August,
1998, by and among CATALINA MARKETING CORPORATION, a Delaware corporation
(herein called the "Borrower"), NATIONSBANK, NATIONAL ASSOCIATION a national
banking association organized and existing under the laws of the United States
(the "Agent"), as Agent for the lenders (the "Lenders") party to a Credit
Agreement dated September 30, 1997 among such Lenders, Borrowers and the Agent,
as amended (the "Agreement") and Lenders party to this Amendment Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Lenders have entered into the
Agreement pursuant to which the Lenders have agreed to make revolving loans to
the Borrower in the principal amount of $150,000,000 as evidenced by the Notes
(as defined in the Agreement); and
WHEREAS, the Borrower has requested that the Agent and the Lenders amend
the Agreement as provided herein; and
WHEREAS, upon the terms and conditions contained herein the Agent and the
Lenders are willing to amend the Agreement;
NOW, THEREFORE, the Borrower, the Agent and the Lenders do hereby agree as
follows:
1. Definitions. The term "Agreement" as used herein and in the Loan
Documents (as defined in the Agreement) shall mean the Agreement as hereby
amended and modified. Unless the context otherwise requires, all terms used
herein without definition shall have the definition provided therefor in the
Agreement.
2. Amendments. The Agreement is hereby amended, effective as of
September 30, 1998, as follows:
(a) The definition of "Stated Termination Date" in Section 1.1 is
hereby amended by deleting the date "September 29, 1998" appearing therein
and insetting in lieu thereof the date "September 28, 1999".
(b) Subsection (f) of Section 9.6 is hereby amended in its entirety so
that as amended it shall read as follows:
"(f) loans to or investments in, including the purchase of shares of,
(i) Subsidiaries other than Pacific Media KK, which are not Guarantors
so long as the aggregate amount loaned or invested or cost of shares
purchased does not exceed on a non-
<PAGE> 2
cumulative basis (so that amounts not utilized in one Fiscal Year may
not be carried forward to a subsequent Fiscal Year) $15,000,000 in
any Fiscal Year, and (ii) any Persons, other than Subsidiaries or
directors, officers or employees of the Borrower or any Subsidiaries,
so long as the aggregate amount loaned or invested or cost of shares
purchased does not exceed on a non-cumulative basis $5,000,000 in any
Fiscal Year."
(c) Subsection (g) of Section 9.6 is hereby amended by deleting the
figure "$10,000,000" appearing therein and inserting in lieu thereof the
figure "$15,000,000".
3. Representations and Warranties. The Borrower hereby certifies that:
(a) The representations and warranties made by Borrower in Article
VII of the Agreement are true on and as of the date hereof except that
the financial statements referred to in Section 7.6 shall be those most
recently furnished to each Lender pursuant to Section 8.1(a) and (b);
(b) There has been no material change in the condition, financial or
otherwise, of the Borrower and its Subsidiaries since the date of the
most recent financial reports of the Borrower received by each Lender
under Section 8.1 of the Agreement, other than changes in the ordinary
course of business, none of which has been a material adverse change;
(c) The business and properties of the Borrower and its Subsidiaries
are not, and since the date of the most recent financial report of the
Borrower and its Subsidiaries received by each Lender under Section 8.1
of the Agreement have not been, adversely affected in any substantial way
as the result of any fire, explosion, earthquake, accident, strike,
lockout, combination of workers, flood, embargo, riot, activities of
armed forces, war or acts of God or the public enemy, or cancellation or
loss of any major contracts; and
(d) No event has occurred and no condition exists which, upon the
consummation of the transaction contemplated hereby, constituted a
Default or an Event of Default under the Agreement or the Notes either
immediately or with the lapse of time or the giving of notice, or both.
4. Conditions. As a condition to the effectiveness of this Amendment
Agreement, the Borrower shall deliver, or cause to be delivered to the Agent,
the following:
(a) Twelve (12) executed counterparts of this Amendment Agreement;
and
(b) copies of all additional agreements, instruments and documents
which the Agent may reasonably request, such documents, when appropriate,
to be certified by appropriate governmental authorities.
2
<PAGE> 3
5. Entire Agreement. This Amendment Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter. No promise, conditions, representation
or warranty, express or implied, not herein set forth shall bind any party
hereto, and no one of them has relied on any such promise, condition,
representation or warranty. Each of the parties hereto acknowledges that,
except as in this Amendment Agreement or otherwise expressly stated, no
representations, warranties or commitments, express or implied, have been made
by any other party to the other. None of the terms of conditions of this
Amendment Agreement may be changed, modified, waived or canceled orally or
otherwise, except by writing, signed by all the parties hereto, specifying such
change, modification, waiver or cancellation of such terms or conditions, or of
any proceeding or succeeding breach thereof.
6. Consent. The Guarantors have joined in the execution of this
Amendment Agreement for the purpose of consenting hereto and confirming their
respective guaranty of the Obligations on the terms set forth in the Facility
Guaranty.
7. Full Force and Effect of Agreement. Except as hereby specifically
amended, modified or supplemented, the Agreement and all of the other Loan
Documents are hereby confirmed and ratified in all respects and shall remain in
full force and effect according to their respective terms.
[Remainder of page intentionally left blank.]
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
agreement to be duly executed by their duly authorized officers, all as of the
day and year first above written.
CATALINA MARKETING CORPORATION
WITNESS:
/s/ Gayle B. Pullara By: /s/ Philip B. Livingston
- ------------------------------ ------------------------------------
Gayle B. Pullara Name: Philip B. Livingston
----------------------------------
Title: SVP and Chief Financial Officer
- ------------------------------ ---------------------------------
4
<PAGE> 5
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent and Lender
By: /s/ Andrew M. Airheart
------------------------------------
Name: Andrew M. Airheart
----------------------------------
Title: Senior Vice President
---------------------------------
5
<PAGE> 6
FLEET NATIONAL BANK
By: /s/ Thomas J. Bullard
------------------------------------
Name: Thomas J. Bullard
----------------------------------
Title: Vice President
---------------------------------
6
<PAGE> 7
FIRST UNION NATIONAL BANK
By: /s/ Jorge Gonzales
------------------------------------
Name: Jorge Gonzales
----------------------------------
Title: SVP
---------------------------------
7
<PAGE> 8
CREDIT LYONNAIS ATLANTA AGENCY
By: /s/ David M. Cawrse
------------------------------------
Name: David M. Cawrse
----------------------------------
Title: First Vice President & Manager
---------------------------------
8
<PAGE> 9
COMERICA BANK
By: /s/ Martin G. Ellis
------------------------------------
Name: Martin G. Ellis
----------------------------------
Title: Vice President
---------------------------------
9
<PAGE> 10
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By: /s/ Thomas Meyer
------------------------------------
Name: Thomas Meyer
----------------------------------
Title: SVP
---------------------------------
10
<PAGE> 11
PNC BANK, N.A.
By: /s/ Marian L. Egge
------------------------------------
Name: Marian L. Egge
----------------------------------
Title: Assistant Vice President
---------------------------------
11
<PAGE> 12
SUNTRUST BANK, TAMPA BAY
By: /s/ Frank A. Coe
------------------------------------
Name: Frank A. Coe
----------------------------------
Title: Vice President
---------------------------------
12
<PAGE> 13
AMSOUTH BANK
By: /s/ Larry P. Byrd
------------------------------------
Name: Larry P. Byrd
----------------------------------
Title: Vice President
---------------------------------
13
<PAGE> 14
UNION BANK OF CALIFORNIA
By: /s/ J. Scott Jessup
------------------------------------
Name: J. Scott Jessup
----------------------------------
Title: Vice President
---------------------------------
14
<PAGE> 15
RIGGS BANK, N.A.
By: /s/ Craig A. Havard
------------------------------------
Name: Craig A. Havard
----------------------------------
Title: Vice President
---------------------------------
15
<PAGE> 16
GUARANTORS:
CATALINA MARKETING SALES CORPORATION
By: /s/ George W. Off
------------------------------------
Name: George W. Off
----------------------------------
Title: Director
---------------------------------
CATALINA MARKETING RETAIL SALES
CORPORATION
By: /s/ George W. Off
------------------------------------
Name: George W. Off
----------------------------------
Title: Director
---------------------------------
CATALINA MARKETING INTERNATIONAL, INC.
By: /s/ George W. Off
------------------------------------
Name: George W. Off
----------------------------------
Title: Chief Executive Officer and
President
---------------------------------
CATALINA MARKETING WORLDWIDE, INC.
By: /s/ George W. Off
------------------------------------
Name: George W. Off
----------------------------------
Title: President
---------------------------------
CATALINA MARKETING U.K., INC.
By: /s/ George W. Off
------------------------------------
Name: George W. Off
----------------------------------
Title: President
---------------------------------
16
<PAGE> 17
HEALTH RESOURCE PUBLISHING COMPANY
By: /s/ George W. Off
------------------------------------
Name: George W. Off
----------------------------------
Title: Vice President
---------------------------------
SUPERMARKETS ONLINE, INC.
By: /s/ Christopher Wolf
------------------------------------
Name: Christopher Wolf
----------------------------------
Title: Assistant Secretary
---------------------------------
17
<PAGE> 1
Exhibit 15
November 13, 1998
Catalina Marketing Corporation
11300 9th Street North
St. Petersburg, Florida 33716
Catalina Marketing Corporation:
We are aware that Catalina Marketing Corporation has incorporated, by reference
in its Registration Statement File Nos. 33-46793, 33-77100, 33-82456, 333-07525
and 333-13335, its Form 10-Q for the quarter ended September 30, 1998, which
includes our report dated October 15, 1998, covering the unaudited interim
financial information contained therein. Pursuant to Regulation C of the
Securities Act of 1933 (the Act), that report is not considered a part of the
registration statement prepared or certified by our firm or a report prepared or
certified by our firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
Arthur Andersen LLP
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 10,900
<SECURITIES> 0
<RECEIVABLES> 33,715
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 73,215
<PP&E> 173,512
<DEPRECIATION> 99,808
<TOTAL-ASSETS> 173,610
<CURRENT-LIABILITIES> 73,171
<BONDS> 286
0
0
<COMMON> 182
<OTHER-SE> 94,964
<TOTAL-LIABILITY-AND-EQUITY> 173,610
<SALES> 121,282
<TOTAL-REVENUES> 121,282
<CGS> 51,748
<TOTAL-COSTS> 94,117
<OTHER-EXPENSES> 2,921
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 24,244
<INCOME-TAX> 11,117
<INCOME-CONTINUING> 13,127
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,127
<EPS-PRIMARY> .71
<EPS-DILUTED> .69
</TABLE>
<PAGE> 1
Exhibit 99
REVIEW REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Catalina Marketing Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
Catalina Marketing Corporation (a Delaware corporation) as of September 30,
1998, and the related condensed consolidated statements of income for the
three-month and six-month periods ended September 30, 1998 and 1997, and the
condensed consolidated statements of cash flow for the six-month periods ended
September 30, 1998 and 1997. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above, for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Catalina Marketing Corporation as
of March 31, 1998, and the related consolidated statements of income,
stockholders' equity and cash flows for the year then ended (not presented
separately herein), and, in our report dated April 23, 1998, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of March 31, 1998, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
Arthur Andersen LLP
Tampa, Florida,
October 15, 1998
