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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 20, 1998
Catalina Marketing Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-11008 33-0499007
Commission File Number (IRS Employer
Identification No.)
11300 9th Street North 33716
St. Petersburg, Florida (Zip code)
(Address of principal executive offices)
(813) 579-5000
Registrant's Telephone Number
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Item 5. Other Events.
On January 15, 1998 Catalina Marketing Corporation (the
Company) issued a press release communicating its fiscal 1998 third
quarter earnings, included in this report as Exhibit 99.4.
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Item 7. Exhibits.
99.4 Form of press release dated January 15, 1998.
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SIGNATURE
Pursuant to the requirements of Section 12 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.
CATALINA MARKETING CORPORATION
By /s/ Philip B. Livingston
------------------------------
Philip B. Livingston,
Senior Vice President and
Chief Financial Officer
Dated: January 20, 1998
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Exhibit 99.4
[CATALINA MARKETING CORPORATION LOGO]
NEWS
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FOR IMMEDIATE RELEASE CONTACT: Philip B. Livingston
Senior Vice President and
Chief Financial Officer
813-579-5006
Bruce Valentine
Treasurer
813-579-5210
CATALINA MARKETING REPORTS 37 PERCENT INCREASE IN
REVENUE AND 43 PERCENT INCREASE IN EARNINGS
ST. PETERSBURG, Florida, January 15, 1998 - Catalina Marketing Corporation
(NYSE: POS) today announced that for the third quarter ended December 31, 1997,
earnings per share increased 43 percent to 57 cents per share from 40 cents
reported for the comparable period a year ago. The company's net income was a
record $10.9 million on total revenue of $63.7 million, compared to net income
of $8.3 million on revenue of $46.3 million in the December 1996 quarter. The
company's revenue growth equated to a 37 percent increase over the year-ago
quarter and exceeded last quarter's record revenue level by 21 percent.
For the nine month period ended December 31, 1997, total revenue increased 29
percent to $163.1 million versus $126.1 million posted in the first nine months
of fiscal 1997. Net income was $24.7 million compared to $21.8 million
reported for the nine month period ended December 31, 1996. Earnings per share
was $1.30, a 23 percent increase over $1.06 for the corresponding period a year
ago.
George W. Off, president and chief executive officer, commented, "Our
performance was outstanding in the quarter. With nearly $64 million in revenue
in the period, we surpassed a key milestone and broke the $200 million sales
mark on a twelve-month rolling basis. The company's record results were driven
by a surge in our core domestic business, which was partially attributable to
some shifting in client spending from the March, 1998 quarter into the current
quarter. Also, our international operations and new ventures provided a
growing share of revenue."
Other third quarter highlights and key events included:
# In the company's core domestic business, revenue increased 30 percent, and
revenue per average store grew 27 percent over the comparable period a year
ago. On a trailing twelve month basis, core domestic business revenue grew
19 percent over the prior twelve month period.
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# Operating cash flow, or EBITDA, increased 38 percent to $24.9 million from
the comparable period a year ago. On a trailing twelve month basis, EBITDA
reached $74.8 million, up 25 percent over the prior twelve month period.
Operating income for the quarter increased 42 percent to $19.3 million from
$13.6 million in the year-ago quarter. The above references made to EBITDA
and operating income exclude the effect of the company's shut-down of
Mexican operations completed during the quarter and explained in more
detail below.
# Net income was up 31 percent over the third quarter a year ago. The
difference between this mark and the 43 percent increase in earnings per
share is attributable to the company's share repurchase activity and
related interest costs. In November, the company announced, and currently
has fully available, a $30 million common stock repurchase authorization.
# The Company's U.S. installed store base increased to 10,979, with 178
additional stores installed on a net basis. During the quarter the company
announced the execution of a contract to install its system in 138 stores
in North Carolina-based Harris Teeter. In addition, the company has
entered into contracts to install over 100 stores in the Minneapolis-based
Rainbow Foods chain, the Bashas' chain in Arizona, and Buttrey Big Fresh
and Fresh Foods stores in Montana.
# Overseas, more than 300 stores were added during the quarter, resulting in
an installed base of 1,290 stores at quarter end. The overseas activity
primarily occurred in the Somerfield chain (U.K.) and Champion stores
(France), while pilot programs in Japan's Jusco and Seiyu chains continued.
During the quarter, the company completed its shut-down of operations in
Mexico. Included in selling, general and administrative expense for the
quarter was $3.5 million incurred for termination of Mexican operations,
substantially offset by a $3.1 million reduction in income tax expense due
to a tax benefit arising from such termination. Giving effect to these
items, consolidated earnings for the third quarter and fiscal year-to-date
included after-tax losses of three and nine cents per share, respectively,
attributable to Mexican operations.
# Health Resource Publishing Company ("HRPC") finished the quarter with an
installed base of 1,566 stores in over 25 retailers, including Weis, Duane
Reade, Fry's, Save Mart, Discount Drug, Dillon's, Rite-Aid, Kroger,
Pathmark, and King Soopers.
# SuperMarkets Online, Inc., continued to develop its secure online coupon
initiative, and announced that it had entered into distribution agreements
and strategic alliances with 10 online services, 24 packaged goods
manufacturers and nearly 90 grocery chains, including such industry leaders
as America Online, Excite, Microsoft, General Mills, Nabisco, Piggly Wiggly
and A&P. The arrangements have laid the foundation for expansion of the
subsidiary's ValuPageSM service, a mechanism which links the Internet and
the Catalina Marketing Network(R) to deliver Web Bucks(TM) to consumers
in-store.
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# Net income for the quarter included pre-tax losses from domestic new
business ventures of $1.8 million, or six cents per share after tax. In
the comparable quarter a year ago, net income reflected pre-tax losses from
domestic new business ventures of $2.1 million, or six cents per share on
an after-tax basis.
Commenting on the upcoming fourth quarter, George Off stated, "Given our
outstanding sales performance in the third quarter, which partially benefited
from a shift of fourth quarter client spending into the current period, we are
planning on core domestic business top line growth of approximately 17 percent
for fiscal 1998. Reflecting this growth, and given the expected performance of
our international and new venture businesses, we are looking to finish the
fiscal year within the consolidated earnings per share range of $1.70 to $1.75
previously anticipated for fiscal 1998."
Regarding preliminary prospects for fiscal 1999, Off added, "Based upon our
analysis of recent selling activity, client contract commitment levels and
sales prospects for such new programs as One-to-One Direct and Loyalty
Marketing Services, our fiscal 1999 expectation for growth of core domestic
business revenue is approximately 15 percent. With the expected contribution
of our international and new venture initiatives, our consolidated growth
target for fiscal 1999 is to deliver growth of 20 to 25 percent on both the top
and bottom lines."
In reference to the company's core domestic business revenue, the company
advised that advance contract commitments for Checkout Coupon(R) and related
programs for calendar 1998 are up three percent over the corresponding prior
year level, and up 16 percent when commitments for calendar 1999 are included.
The company believes that this "backlog" information, which has been published
in the company's January press release over the last several years, has become
a less reliable indicator of expected performance, and that the 15 percent
growth range quoted above should be attainable in the core domestic business
notwithstanding the current level of contract commitments. The company's
belief is based upon a general pattern experienced over recent periods with
respect to core domestic business revenue, as the correlation between forward
contract commitments (or "backlog") and actual revenue realized has been
decreasing. This trend is expected to continue, and is indicative of several
factors:
# The company has become less dependent on a single annual contract renewal
season. The previous pressure on fall renewals for manufacturer contracts
effective as of the beginning of the calendar year has shifted toward
renewal campaigns distributed throughout the year, facilitating a more
evenly spread selling effort throughout the year and greater flexibility
based on customer budgeting cycles.
# The company continues to introduce new programs which, although part of
"core domestic business revenue," are not included in the backlog
statistics due to the nature of such programs. These include One-to-One
Direct(R), a household-level targeted direct mail product; Loyalty
Marketing Services, a suite of products which offer frequent shopper
program solutions and other database marketing tools; and CTA NetworkSM, a
program which uses the Catalina Marketing Network(R) to deliver targeted
advertising nationwide. Moreover, an
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increasing percentage of the company's core domestic business revenue is
attributable to retailer programs, including Checkout CallcardSM, a
turnkey program for delivering pre-paid phone cards at the checkstand.
Retailer revenue is not included in the backlog statistics.
# Over time many manufacturers appear to be less willing to commit as far in
advance as was historically the case. The company believes this trend is
related to a variety of factors affecting the promotion, advertising and
packaged goods industries. This trend may also be attributable, at least
in part, to annual increases in contract minimums as the company's
installed store base continues to grow. The company also believes that the
sheer scale of its Network has made company programs more effective as a
very short term tactical vehicle for generating incremental volume which
many clients are using on short notice. Furthermore, the development of
better working relationships with clients has made the push for up-front
contractual commitments less critical, and, in some cases, inconsistent
with such closer working relationships.
Based upon the above factors, and the company's belief that the backlog
information is not as helpful in understanding trends in the company's business
as was historically the case, the company has decided that it will no longer
publish such information in future periods.
Certain statements in the preceding paragraphs are forward looking, and actual
results may differ materially. Statements not based on historical 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, and the
company's ability to maintain favorable client relationships.
Based in St. Petersburg, Florida, Catalina Marketing Corporation provides a
menu of in-store electronic marketing programs to over 150 consumer goods
companies. The company's purchase-based, individually customized
communications and promotions reach more than 145 million U.S. shoppers in more
than 10,900 supermarkets via the Catalina Marketing Network(R). The company
consists of four distinct business units: Catalina Marketing Services, which
markets the company's core electronic marketing programs in the U.S.; Catalina
Marketing International, which markets Network programs abroad; Health
Resource Publishing Company, which delivers targeted incentives and advertising
through customized newsletters to pharmacy customers based on prescription
purchases; and SuperMarkets Online, Inc., a secure coupon vehicle for the
distribution of promotions via the World Wide Web.
###
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CATALINA MARKETING CORPORATION
Selected Financial Data
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
------------ -----------
Periods Ended December 31 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $63,703 $46,344 $163,089 $126,089
Direct Operating Expenses 23,752 16,055 62,192 44,054
Selling, General and Administrative 18,561 12,195 43,878 35,007
Depreciation and Amortization 5,613 4,448 17,227 12,202
Income from Operations 15,777 13,646 39,792 34,826
Interest Income/(Expense) and Other (208) 273 (991) 846
Minority Interest - - - 372
Provision for Income Taxes 4,706 5,607 14,057 14,249
Net Income $10,863 $ 8,312 $24,744 $21,795
Diluted:
--------
Earnings Per Share $ 0.57 $ 0.40 $ 1.30 $ 1.06
Weighted Average Shares Outstanding 19,118 20,635 18,970 20,615
Basic:
------
Earnings Per Share $ 0.59 $ 0.42 $ 1.35 $ 1.11
Weighted Average Shares Outstanding 18,445 19,703 18,381 19,627
</TABLE>
Selected Other Data
<TABLE>
<CAPTION>
December 31
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1997 1996
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<S> <C> <C>
Balance Sheet and Cash Flow (in thousands):
Cash $ 16,357 $ 21,647
Stockholders' Equity 88,441 95,100
Twelve Month EBITDA 74,768* 59,616
U.S. Checkout Coupon Business:
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Number of Stores at Quarter End 10,979 10,741
Net Stores Installed During Quarter/YTD 178/234 271/975
Promotions Printed During Quarter/YTD (in millions) 764/2,021 634/1,729
Weekly Shopper Reach at Quarter End (in millions) 145 141
International Checkout Coupon Business:
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Number of Stores at Quarter End 1,290 837
Net Stores Installed During Quarter/YTD 377/349 147/279
Promotions Printed During Quarter/YTD (in millions) 152/336 70/168
Weekly Shopper Reach at Quarter End (in millions) 19 18
</TABLE>
* Excludes $3.5 million in expense associated with the shutdown of Mexican
operations during the quarter ended December 31, 1997.
