<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 DECEMBER 31, 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
- --------------------------------- -----------------------------------
(727) 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 February 10, 1999, Registrant had outstanding 18,449,441 shares of
Common Stock.
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CATALINA MARKETING CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
for the three and nine month periods ended
December 31, 1998 and 1997 3
Condensed Consolidated Balance Sheets at
December 31, 1998 and March 31, 1998 4
Condensed Consolidated Statements of Cash Flows
for the nine month periods ended
December 31, 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 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
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 Nine Months Ended
December 31, December 31,
----------------------- -------------------------
1998 1997 1998 1997
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 67,604 $ 63,703 $ 188,886 $ 163,089
Costs and Expenses:
Direct operating expenses 27,279 23,752 79,027 62,192
Selling, general and administrative 13,665 18,561 42,992 43,878
Depreciation and amortization 6,931 5,613 19,973 17,227
-------- -------- --------- ---------
Total costs and expenses 47,875 47,926 141,992 123,297
-------- -------- --------- ---------
Income From Operations 19,729 15,777 46,894 39,792
Interest Income/(Expense) and Other 199 (208) (2,722) (991)
-------- -------- --------- ---------
Income Before Income Taxes 19,928 15,569 44,172 38,801
Income Taxes (7,913) (4,706) (19,030) (14,057)
-------- -------- --------- ---------
Net Income $ 12,015 $ 10,863 $ 25,142 $ 24,744
Diluted:
Net Income Per Common Share $ 0.64 $ 0.57 $ 1.33 $ 1.30
Weighted Average Common Shares
Outstanding 18,891 19,118 18,964 18,970
Basic:
Net Income Per Common Share $ 0.65 $ 0.59 $ 1.36 $ 1.35
Weighted Average Common Shares
Outstanding 18,398 18,445 18,483 18,381
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
3
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CATALINA MARKETING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
(unaudited)
December 31, March 31,
ASSETS 1998 1998
--------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 8,759 $ 18,434
Accounts receivable, net 37,422 20,251
Deferred tax asset 11,898 9,666
Prepaid expenses and other current assets 19,320 15,216
--------- ---------
Total current assets 77,399 63,567
--------- ---------
Property and Equipment:
Property and equipment 185,029 160,186
Accumulated depreciation and amortization (105,232) (89,673)
--------- ---------
Property and equipment, net 79,797 70,513
--------- ---------
Purchased intangible assets, net 26,357 19,112
Other assets 1,688 3,874
--------- ---------
Total Assets $ 185,241 $ 157,066
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 10,300 $ 8,348
Accrued expenses 38,262 27,520
Deferred revenue 14,304 20,116
Short term borrowings 5,533 5,537
--------- ---------
Total current liabilities 68,399 61,521
--------- ---------
Deferred tax liability 6,074 5,073
Long term debt 215 430
--------- ---------
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
18,307,176 and 18,379,153 shares
issued and outstanding at December 31,
1998 and March 31, 1998, respectively
183 184
Paid-in capital 2,970 685
Cumulative translation adjustment (3) (135)
Retained earnings 107,403 89,308
--------- ---------
Total stockholders' equity 110,553 90,042
--------- ---------
Total Liabilities and Stockholders' Equity $ 185,241 $ 157,066
========= =========
</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 FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-----------------------
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 25,142 $ 24,744
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 20,035 17,372
Other 2,611 119
Changes in operating assets and liabilities (19,340) 9,606
-------- --------
Net cash provided by operating activities 28,448 51,841
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (29,034) (14,144)
Acquisitions, net of cash acquired (3,970) (2,087)
-------- --------
Net cash used in investing activities (33,004) (16,231)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on credit facility -- --
Proceeds from debt obligations 17,869 31,486
Principal payments on debt obligations (17,848) (32,231)
Proceeds from issuance of common and subsidiary stock 5,087 5,535
Tax benefit from exercise of non-qualified options 1,715 2,131
Payment for repurchase of company common stock (11,771) (40,000)
-------- --------
Net cash used in financing activities (4,948) (33,079)
-------- --------
NET (DECREASE)INCREASE IN CASH (9,504) 2,531
Effect of exchange rate changes on cash (171) 128
CASH, at end of prior period 18,434 13,698
======== ========
CASH, at end of current period $ 8,759 $ 16,357
======== ========
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
5
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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 December 31, 1998 and March 31, 1998, the results of operations
for the three and nine months ended December 31, 1998 and 1997 and the
statements of cash flows for the nine month periods ended December 31, 1998 and
1997.
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned and majority-owned subsidiaries. The third quarter
balances and results of the wholly-owned and majority-owned foreign subsidiaries
are included as of and for the three and nine month periods ended September 30,
1998 and 1997. All material intercompany profits, transactions and balances have
been eliminated. The Company's investment in a non-majority owned company was
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 used in calculating basic
earnings per share ("EPS") to the denominator used in calculating diluted EPS
(in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
----------------------------------------------------
1998 1997 1998 1997
----------------------------------------------------
<S> <C> <C> <C> <C>
Basic weighted average common
shares outstanding 18,398 18,445 18,483 18,381
Dilutive effect of options outstanding 493 673 481 589
----------------------------------------------------
Diluted weighted average common shares
outstanding 18,891 19,118 18,964 18,970
</TABLE>
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Options to purchase 543,300 shares of common stock at prices ranging from $51.31
to $53.50 per share were outstanding at December 31, 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 NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
----------------------------------------------------
1998 1997 1998 1997
----------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 12,015 $ 10,863 $ 25,142 $ 24,744
Other comprehensive income, net of tax:
Currency translation adjustment 417 (403) 81 (657)
----------------------------------------------------
Comprehensive Income $ 12,432 $ 10,460 $ 25,223 $ 24,087
</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 nine month periods ended December 31, 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 December 31,
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 company 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.
Effective December 30, 1998, the Company purchased from its minority
stockholders the remaining ownership of Catalina Marketing of France, Inc.
Catalina Marketing of France, Inc. owns substantially all of the outstanding
stock of Catalina Marketing de France, S.A., the French operating company. Terms
of the purchase agreement call for the Company to make an initial down payment
and a series of payments to the minority stockholders, which are contingent upon
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the future operating performance of Catalina Marketing de France, S.A. The
purchase has been accounted for using the purchase method of accounting.
Note 6. Subsequent Event:
Effective January 4, 1999, the Company acquired 100 percent of the outstanding
common shares of Dynamic Controls Incorporated which offers card-based loyalty
marketing programs for retailers.
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 networks, 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 third quarter and first nine months of fiscal
1999 increased 6.1 percent and 15.8 percent, respectively, compared with the
same periods in fiscal 1998. The increase in revenues is due to both a growth in
Checkout Direct(R) programs as well as increases in loyalty and other direct
marketing programs. Loyalty and direct marketing programs include, among others,
the 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 $54.0 million and $152.9 million of revenues,
respectively, in the third quarter and first nine months of fiscal 1999, down
1.8 percent and up 10.5 percent, respectively, compared to revenues of $55.0
million and $138.4 million, respectively, in the comparable fiscal 1998 periods.
The third quarter of fiscal 1998 results included an acceleration of certain
programs originally intended for the fourth quarter of fiscal 1998. This shift
did not occur from the fourth quarter of fiscal 1999 to the third quarter of
fiscal 1999.
In the U.S., the Catalina Marketing Network was in 11,814 stores at December 31,
1998, which reach 156 million shoppers each week as compared to 10,979 stores
reaching 145 million shoppers each week at December 31, 1997, 11,164 stores
reaching 143 million shoppers each week at March 31, 1998 and 11,621 stores
reaching 151 million shoppers each week at September 30, 1998. The Health
Resources Network was in 3,733 pharmacies at December 31, 1998 as compared to
1,566 pharmacies at December 31, 1997, 1,920 pharmacies at March 31, 1998 and
3,186 pharmacies at September 30, 1998. Outside the U.S., the Catalina Marketing
Network was in 1,811 stores at December 31, 1998, which reach 37 million
shoppers each week
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as compared to 1,290 stores reaching 19 million shoppers each week at December
31, 1997, 1,372 stores reaching 20 million shoppers each week at March 31, 1998
and 1,560 stores reaching 24 million shoppers each week at September 30, 1998.
In the first nine months of fiscal 1999 the Company installed its Catalina
Marketing Network in 650 stores (net of deinstallations) in the U.S. as compared
to 234 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
1,813 pharmacies (net of deinstallations) in the first nine months of fiscal
1999 as compared to 371 stores in the comparable fiscal 1998 period. Outside the
U.S., the Company installed 439 stores (net of deinstallations) in the first
nine months of fiscal 1999 as compared to 649 stores (with respect to continuing
operations, net of deinstallations) in the comparable fiscal 1998 period. During
the first nine 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 $27.3 million and $79.0 million for the third
quarter and first nine months of fiscal 1999, respectively, from $23.8 million
and $62.2 million in the comparable periods of fiscal 1998. Direct operating
expenses in the third quarter and first nine months of fiscal 1999 as a
percentage of revenues increased to 40.3 percent and 41.8 percent, respectively,
from 37.3 percent and 38.1 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 core business services.
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 third quarter and first
nine months of fiscal 1999 were $13.7 million and $43.0 million, respectively,
compared to $18.6 million and $43.9 million for the comparable periods of fiscal
1998, decreases of 26.4 percent and 2.0 percent, respectively. As a percentage
of revenues, selling, general and administrative expenses decreased 8.9 percent
and 4.1 percent in the third quarter and first nine months of fiscal 1999, to
20.2 percent and 22.8 percent, respectively, from 29.1 percent and 26.9 percent
for the comparable periods of fiscal 1998. These decreases are primarily
attributable to a $3.5 million one time expense incurred in the third quarter of
fiscal 1998 associated with the shutdown of the Company's Mexican operations.
Additionally, the Company was successful in lowering and limiting certain
categories of overhead expenses during the fiscal 1999 periods.
Depreciation and amortization increased to $6.9 million and $20.0 million for
the third quarter and first nine months of fiscal 1999 from $5.6 million and
$17.2 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.
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Interest income/(expense) and other was $0.2 million income for the third
quarter of fiscal 1999 compared to $0.2 million expense for the comparable
period in fiscal 1998 and was $2.7 million expense for the first nine months of
fiscal 1999 compared to $1.0 million expense for the comparable nine month
period in fiscal 1998. The favorable comparison for the third quarter of fiscal
1999 is primarily due to the Company incurring interest expense on borrowings
from its credit facility during the third quarter of fiscal 1998. The
comparatively high level of expense for the first nine months of fiscal 1999 is
principally attributable 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 $19.0 million (43.1 percent of
income before income taxes) for the first nine months of fiscal 1999, compared
to $14.1 million (36.2 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 the second quarter of fiscal 1999 and the $3.1 million
tax benefit arising due to the shutdown of the Mexican operations in the third
quarter of fiscal 1998. Excluding the effect of the Mexican operations shutdown,
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 nine
months of fiscal 1999 and 1998, the Company made capital expenditures of $29.0
million and $14.1 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 nine
months of fiscal 1999, the Company had a faster pace of U.S. store installations
and spent $4.6 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 $40 and $50 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 company 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.
Effective December 30, 1998, the Company purchased from its minority
stockholders the remaining ownership of Catalina Marketing of France, Inc.
Catalina Marketing of France, Inc.
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owns substantially all of the outstanding stock of Catalina Marketing de France,
S.A., the French operating company. Terms of the purchase agreement call for the
Company to make an initial down payment and a series of payments to the minority
stockholders, which are contingent upon the future operating performance of
Catalina Marketing de France, S.A.
During the first nine 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
$40.0 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 made no purchases of common stock during the third
quarter of fiscal 1999.
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, with a goal for completion
in June 1999 and includes spending of approximately $1.4 million for testing and
upgrading hardware and software. The Company has spent approximately $0.85
million on the year 2000 issue and is approximately 85 percent complete with its
plan as of December 31, 1998.
In addition, the Company has contacted all of its hardware and software vendors,
suppliers and financial institution partners to evaluate their compliance
efforts. The Company has received responses from 96 percent of these parties.
Those that have been deemed noncompliant have been evaluated and corrective
action has been or will be taken 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
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The Company expects to formulate a contingency plan by June 1999 for the
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.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
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 October 15, 1998 was filed with the Commission
regarding the Company's press release communicating its fiscal 1999
second quarter earnings.
Report dated December 1, 1998 was filed with the Commission
regarding the Company's press release announcing that its Chief
Financial Officer, Philip Livingston, had resigned.
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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.
February 16, 1999 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
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February 12, 1999
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 December 31, 1998, which
includes our report dated January 12, 1999, 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
/s/ William J. Meurer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 8,759
<SECURITIES> 0
<RECEIVABLES> 37,422
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 77,399
<PP&E> 185,029
<DEPRECIATION> 105,232
<TOTAL-ASSETS> 185,241
<CURRENT-LIABILITIES> 68,399
<BONDS> 215
0
0
<COMMON> 183
<OTHER-SE> 110,370
<TOTAL-LIABILITY-AND-EQUITY> 185,241
<SALES> 188,886
<TOTAL-REVENUES> 188,886
<CGS> 79,027
<TOTAL-COSTS> 141,992
<OTHER-EXPENSES> 2,722
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 44,172
<INCOME-TAX> 19,030
<INCOME-CONTINUING> 25,142
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,142
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.33
</TABLE>
<PAGE> 1
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 December 31, 1998,
and the related condensed consolidated statements of income for the three-month
and nine-month periods ended December 31, 1998 and 1997, and the condensed
consolidated statements of cash flow for the nine-month periods ended December
31, 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.
/s/ ARTHUR ANDERSEN LLP
Tampa, Florida,
January 12, 1999
