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, 1999
( ) 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, 2000 Registrant had outstanding 18,285,624 shares of
Common Stock.
<PAGE>
CATALINA MARKETING CORPORATION
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
for the three and nine month periods ended
December 31, 1999 and 1998 3
Condensed Consolidated Balance Sheets at
December 31, 1999 and March 31, 1999 4
Condensed Consolidated Statements of Cash Flows
for the nine month periods ended
December 31, 1999 and 1998 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
2
<PAGE>
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,
----------------------- -----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 97,790 $ 67,604 $ 257,232 $ 188,886
--------- --------- --------- ---------
Costs and Expenses:
Direct operating expenses 39,226 27,279 104,931 79,027
Selling, general and administrative 22,200 13,665 65,488 42,992
Depreciation and amortization 8,862 6,931 25,626 19,973
--------- --------- --------- ---------
Total costs and expenses 70,288 47,875 196,045 141,992
--------- --------- --------- ---------
Income From Operations 27,502 19,729 61,187 46,894
Interest Expense, Net and Other (31) 199 (241) (2,722)
--------- --------- --------- ---------
Income Before Income Taxes and Minority Interest
27,471 19,928 60,946 44,172
Income Taxes (11,043) (7,913) (24,501) (19,030)
Minority Interest in Losses of Subsidiaries
132 -- 490 --
--------- --------- --------- ---------
Net Income $ 16,560 $ 12,015 $ 36,935 $ 25,142
DILUTED:
Earnings Per Common Share $ 0.86 $ 0.64 $ 1.91 $ 1.33
Weighted Average Common Shares Outstanding
19,230 18,891 19,360 18,964
BASIC:
Earnings Per Common Share $ 0.90 $ 0.65 $ 1.99 $ 1.36
Weighted Average Common Shares Outstanding
18,415 18,398 18,571 18,483
</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)
DECEMBER 31, MARCH 31,
ASSETS 1999 1999
----------- ----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 7,535 $ 13,942
Accounts receivable, net 56,065 44,045
Deferred tax asset 10,723 8,932
Prepaid expenses and other current assets 31,011 28,562
--------- ---------
Total current assets 105,334 95,481
--------- ---------
Property and Equipment:
Property and equipment 236,122 199,625
Accumulated depreciation and amortization (132,460) (111,939)
--------- ---------
Property and equipment, net 103,662 87,686
--------- ---------
Purchased intangible assets, net 58,749 35,628
Other assets 2,624 2,252
--------- ---------
Total Assets $ 270,369 $ 221,047
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 14,889 $ 14,149
Accrued expenses 59,275 44,697
Deferred revenue 24,479 27,349
Short term borrowings 23,878 7,635
--------- ---------
Total current liabilities 122,521 93,830
--------- ---------
Deferred tax liability 7,393 5,696
Minority interest 1,391 --
Long term debt 1,853 588
--------- ---------
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
18,244,230 and 18,389,438 shares issued and outstanding at
December 31, 1999 and March 31, 1999, respectively
182 184
Paid-in capital 1,341 819
Accumulated other comprehensive income 1,101 843
Retained earnings 134,587 119,087
--------- ---------
Total stockholders' equity 137,211 120,933
--------- ---------
Total Liabilities and Stockholders' Equity $ 270,369 $ 221,047
========= =========
</TABLE>
The accompanying Notes are an integral part of these
consolidated financial statements.
4
<PAGE>
CATALINA MARKETING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 36,935 $ 25,142
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interest (490) --
Depreciation and amortization 25,626 20,035
Other 2,396 2,611
Changes in operating assets and liabilities (3,031) (19,340)
-------- --------
Net cash provided by operating activities 61,436 28,448
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (35,720) (29,034)
Purchase of investments, net of cash acquired (30,982) (3,970)
-------- --------
Net cash used in investing activities (66,702) (33,004)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on credit facility 5,000 --
Proceeds from debt obligations 23,152 17,869
Principal payments on debt obligations (12,006) (17,848)
Proceeds from issuance of common and subsidiary stock 12,199 5,087
Tax benefit from exercise of non-qualified options and disqualified
dispositions 4,780 1,715
Payment for repurchase of company common stock (34,531) (11,771)
-------- --------
Net cash used in financing activities (1,406) (4,948)
-------- --------
NET DECREASE IN CASH (6,672) (9,504)
Effect of exchange rate changes on cash 265 (171)
CASH, at end of prior period 13,942 18,434
-------- --------
CASH, at end of current period $ 7,535 $ 8,759
======== ========
</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 December 31, 1999 and March 31, 1999, the results of operations
for the three and nine months ended December 31, 1999 and 1998, and cash flows
for the nine month periods ended December 31, 1999 and 1998. Certain prior
period balances have been reclassified to conform with the current period
presentation.
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 majority and wholly owned foreign subsidiaries are
included as of September 30, 1999 and December 31, 1998 and for the three and
nine month periods ended September 30, 1999 and 1998, respectively. All material
intercompany profits, transactions and balances have been eliminated.
These financial statements, including the condensed consolidated balance sheet
as of March 31, 1999, 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, 1999.
Note 2. Earnings Per Common Share:
The following is a reconciliation of the denominator of basic EPS to the
denominator of diluted EPS (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------------
1999 1998 1999 1998
------------------------------------
Basic weighted average common
shares outstanding 18,415 18,398 18,571 18,483
Dilutive effect of options outstanding 815 493 789 481
-------------------------------------
Diluted weighted average common shares
outstanding 19,230 18,891 19,360 18,964
6
<PAGE>
Options to purchase 30,300 shares of common stock at $106 7/8 exercise price per
share were outstanding at December 31, 1999, but were not included in the
computation of diluted EPS because such options' exercise prices were greater
than the average market price of common stock.
Note 3. Comprehensive Income:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
----------------------------------------
1999 1998 1999 1998
----------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Net income $16,560 $12,015 $36,935 $25,142
Other comprehensive income, net of tax:
Currency translation adjustment 1,539 672 258 132
----------------------------------------
Comprehensive Income $18,099 $12,687 $37,193 $25,274
</TABLE>
Note 4. Credit Facility:
In September 1999, the Company, as a part of its $150 million credit agreement,
extended the term of the $50 million 364 day line of credit facility to
September 26, 2000. At December 31, 1999, there was $5 million outstanding
thereunder.
Note 5. Convertible Long Term Debt:
Effective April 5, 1999, the Tribune Company, an unrelated entity, made an
investment in Supermarkets Online, a majority owned subsidiary of the Company.
In addition to this equity investment, Supermarkets Online borrowed $1.4 million
from the Tribune Company in exchange for a subordinated convertible note bearing
interest at a rate of 4.5 percent per annum. This long term debt obligation is
convertible into 500,000 shares of Supermarkets Online common stock upon certain
occurrences.
Note 6. Acquisitions:
Effective April 21, 1999, the Company, through one of its wholly owned
subsidiaries, acquired one of its vendors, CompuScan Marketing, Inc.
("CompuScan"), for $9.1 million in initial cash consideration, net of cash
acquired, by means of a merger transaction. CompuScan provides the intellectual
property and backroom processing for the Company's Checkout Prizes product.
Terms of the merger agreement call for the Company to make a series of
additional payments, which are based on specified criteria, including future
revenue growth targets of the Checkout Prizes product.
Effective July 1, 1999, the Company acquired certain assets and assumed certain
liabilities of Alliance Research, Inc., an attitudinal research company, for
$6.7 million in initial consideration, net of cash and cash equivalents
acquired. Terms of the purchase agreement call for the Company to make a series
of payments, which are contingent upon future operating performance of the
business purchased from Alliance Research, Inc.
7
<PAGE>
The above referenced acquisitions have been accounted for using the purchase
method of accounting for acquisitions and, accordingly, the results of
operations of each acquisition have been included in the fiscal 2000 financial
statements since the date of such acquisition.
Additionally, in the first nine months of fiscal 2000, investments were made
totaling $15.1 million which were comprised of earnout payments attributable to
past acquisitions.
Note 7. Segment Information (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED DECEMBER 31,
---------------------------------------------------------------
1999 1998
-------------------------------- ----------------------------
TARGETED TARGETED
MARKETING MARKETING
SERVICES ELIMINATIONS SERVICES ELIMINATIONS
--------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
Revenue from external customers $ 97,790 $ 67,604
Revenue from internal sources 420 (420) 979 (979)
Net income 16,560 12,015
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED DECEMBER 31,
---------------------------------------------------------------
1999 1998
-------------------------------- ----------------------------
TARGETED TARGETED
MARKETING MARKETING
SERVICES ELIMINATIONS SERVICES ELIMINATIONS
--------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
Revenue from external customers $257,232 $188,886
Revenue from internal sources 1,074 (1,074) 2,068 (2,068)
Net income 36,935 25,142
</TABLE>
Note 8. Commitments and Contingencies
As of October 21, 1999, the Company entered into a lease financing agreement for
a new corporate headquarters building in St. Petersburg, Florida. The lease term
runs through September 2005. The Company has the option to extend the lease term
for up to three, five year renewal periods, subject to certain conditions. The
agreement includes a purchase option for the Company that approximates the
original cost of the building. The Company anticipates that it will occupy the
new corporate headquarters building and begin making lease payments in the
second quarter of fiscal 2001.
8
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS:
FISCAL 2000 COMPARED TO FISCAL 1999
The Company's revenues for the third quarter and first nine months of fiscal
2000 increased 44.6 percent and 36.2 percent, respectively, compared with the
same periods in fiscal 1999. The increase in revenues is due to an increase in
promotions printed worldwide, growth in the Checkout Direct(R) program and
increases in direct mail marketing programs. Additionally, the third quarter and
first nine months of fiscal 2000 include revenues from Market Logic and DCI
Cardmarketing, acquired in July 1998 and January 1999, respectively. The second
and third quarters of fiscal 2000 also include revenues from Alliance Research,
Inc. acquired in July 1999.
In the U.S., the Catalina Marketing Network was in 13,020 stores at December 31,
1999, which reach 173 million shoppers each week as compared to 11,814 stores
reaching 156 million shoppers each week at December 31, 1998 and 12,092 stores
reaching 152 million shoppers each week at March 31, 1999. The Health Resource
Network was in 5,912 pharmacies at December 31, 1999 as compared to 3,733
pharmacies at December 31, 1998 and 3,861 pharmacies at March 31, 1999. Outside
the U.S., the Catalina Marketing Network was in 2,476 stores at December 31,
1999, which reach 35 million shoppers each week as compared to 1,811 stores
reaching 31 million shoppers each week at December 31, 1998 and 1,935 stores
reaching 29 million shoppers each week at March 31, 1999.
In the first nine months of fiscal 2000 the Company installed its Catalina
Marketing Network in 928 stores in the U.S., net of deinstallations, as compared
to 650 stores in the comparable fiscal 1999 period. Deinstallation activity can
and does occur primarily due to the consolidation and business combination of
supermarket chains as well as store closures made by retailers in the ordinary
course of business. The Company also installed its Health Resource Network in
2,051 pharmacies in the first nine months of fiscal 2000, net of
deinstallations, as compared to 1,813 stores in the comparable fiscal 1999
period. Outside the U.S., the Company installed 541 stores in the first nine
months of fiscal 2000, net of deinstallations, as compared to 439 stores in the
comparable fiscal 1999 period.
Direct operating expenses consist of retailer fees; paper; sales commissions;
loyalty and direct marketing expenses; provision for doubtful accounts; the
expenses of operating and maintaining the Catalina Marketing and Health Resource
network, primarily expenses relating to operations personnel and service
offices; and the direct expenses associated with operating the outdoor media
business in a majority-owned subsidiary in Asia. Direct operating expenses
increased in absolute terms to $39.2 million and $104.9 million for the third
quarter and first nine months of fiscal 2000, respectively, from $27.3 million
and $79.0 million in the comparable periods of fiscal 1999. Direct operating
expenses in the third quarter and first nine months of fiscal 2000 as a
percentage of revenues decreased to 40.1 percent and 40.8 percent, respectively,
from 40.3 percent and 41.8 percent in the comparable periods of fiscal 1999.
This decrease in fiscal 2000 is principally attributable to a favorable shift in
product mix towards higher margin
9
<PAGE>
domestic sales, partially offset by the higher material costs component of
direct costs as a function of revenue associated with the increase in direct
marketing and research programs, including Market Logic, Alliance Research, and
the DCI Cardmarketing business.
Selling, general and administrative expenses include personnel-related costs of
selling and administrative staff, overhead, marketing expenses and new product
development expenses. Selling, general and administrative expenses for the third
quarter and first nine months of fiscal 2000 were $22.2 million and $65.5
million, respectively, compared to $13.7 million and $43.0 million for the
comparable period of fiscal 1999, increases of 62.5 percent and 52.3 percent,
respectively. As a percentage of revenues, selling, general and administrative
expenses increased 2.5 percent and 2.7 percent in the third quarter and first
nine months of fiscal 2000, to 22.7 percent and 25.5 percent, respectively, from
20.2 percent and 22.8 percent for the comparable periods of fiscal 1999. These
increases relate primarily to administrative, advertising and marketing expenses
relating to new operating units and products.
Depreciation and amortization increased to $8.9 million and $25.6 million for
the third quarter and first nine months of fiscal 2000 from $6.9 million and
$20.0 million for the comparable periods in fiscal 1999. Depreciation increased
due to additional investment in capital expenditures, during the current and
prior periods, associated with new operating units and product lines, data
processing equipment and the increase in stores installed. Amortization expense
increased due to the additions in goodwill and other intangible assets related
to the Company's acquisitions.
Interest expense, net and other changed to $31,000 and $241,000 net expense for
the third quarter and first nine months of fiscal 2000 from $199,000 net income
and $2.7 million net expense for each of the comparable periods in fiscal 1999.
The unfavorable comparison for the third quarter of fiscal 2000 is primarily due
to increased interest expense due to borrowings on the Company's credit facility
during the second and third quarters of fiscal 2000. The decrease in net expense
for the comparable nine month periods 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 $24.5 million, or 40.2 percent of
income before income taxes and minority interest, for the first nine months of
fiscal 2000, compared to $19.0 million, or 43.1 percent of income before income
taxes and minority interest, for the same period in fiscal 1999. The rate
decrease 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 to a lesser extent due to the Company's
ability to utilize losses of a majority owned foreign subsidiary for income tax
purposes in fiscal 2000. The Company's effective tax rate is higher than the
federal statutory income tax rate due to state and foreign income taxes, various
nondeductible expenses, primarily the amortization of goodwill related to the
Company's acquisitions and, in the case of fiscal 1999, the valuation allowance
referred to in the previous sentence.
10
<PAGE>
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 $3,000 to $13,000 per store. During the first nine
months of fiscal 2000 and 1999, the Company made capital expenditures of $35.7
million and $29.0 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 2000, the Company had a faster pace of store installations
spending $4.5 million more on store equipment compared to the comparable fiscal
1999 period.
Effective April 21, 1999, the Company, through one of its wholly owned
subsidiaries, acquired one of its vendors, CompuScan, for $9.1 million in
initial cash consideration, net of cash acquired, by means of a merger
transaction. Terms of the merger agreement call for the Company to make a series
of additional payments, which are based on specified future revenue growth
targets of the Checkout Prizes product.
Effective July 1, 1999, the Company acquired certain assets and assumed certain
liabilities of Alliance Research, Inc., an attitudinal research company, for
$6.7 million in initial consideration, net of cash and cash equivalents
acquired. Terms of the purchase agreement call for the Company to make a series
of payments, which are contingent upon future operating performance of the
business purchased from Alliance Research, Inc.
Additionally, in the first nine months of fiscal 2000, investments were made
totaling $15.1 million which were comprised of earnout payments attributable to
past acquisitions.
During the second quarter of fiscal 2000, the Company purchased 396,500 shares
of its common stock for $34.5 million. On October 25, 1999 the Company announced
approval by its Board of Directors of an additional $50.0 million to buy back
Company common stock. As of October 25, 1999, this authorization increases the
total funds available for share repurchases to $59.0 million.
During the second quarter of fiscal 2000, the Company borrowed approximately
$10.0 million against its $150 million credit facility and repaid $5.0 million
of that borrowing in the third quarter of fiscal 2000. As of December 31, 1999
$5.0 million was outstanding thereunder.
The Company believes working capital generated by operations along with existing
credit facilities is sufficient for its overall capital requirements.
11
<PAGE>
OTHER
Year 2000 Disclosure
This year 2000 disclosure is the most current information available and replaces
all previous disclosures made by the Company in its filings on Form 10-Q and
Form 10-K, and in its Annual Report to Stockholders.
The year 2000 issue involves the potentially serious risks associated with the
inability of existing business systems to appropriately recognize calendar dates
beginning in the year 2000. In December 1999, the Company completed its detailed
plan to address the issue of transition to the year 2000 and noted no apparent
internal business system problems. Additionally, there have been no apparent
issues with the Company's retail and manufacturer clients or suppliers in
relation to the year 2000 transition. The Company spent approximately $1.4
million on the year 2000 issue through December 31, 1999.
Forward Looking Statements
The statements in this Form 10-Q may be 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, the success of new services and
businesses and the pace of their implementation, and the Company's ability to
maintain favorable client relationships.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
15 Acknowledgement Letter
19 Review Report of Independent Certified Public Accountants
27 Financial Data Schedule
b. Reports of Form 8-K
None
12
<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.
February 14, 2000 CATALINA MARKETING CORPORATION
------------------------------
(Registrant)
/s/ JOSEPH P. PORT
------------------------------
Joseph P. Port
Senior Vice President and
Chief Financial Officer
(Authorized officer of Registrant and
principal financial officer)
13
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ---------- -----------
15 Acknowledgement Letter
19 Review Report of Independent Certified Public Accountants
27 Financial Data Schedule
EXHIBIT 15
February 14, 2000
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 Nos. 33-46793, 33-77100, 33-82456, 333-07525,
333-13335 and 333-86905, its Form 10-Q for the quarter ended December 31, 1999,
which includes our report dated January 11, 2000, 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,
/s/ ARTHUR ANDERSEN LLP
- -------------------------
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) and subsidiaries as of
December 31, 1999, and the related condensed consolidated statements of income
for the three-month and nine-month periods ended December 31, 1999 and 1998, and
the condensed consolidated statements of cash flow for the nine-month periods
ended December 31, 1999 and 1998. 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 and
subsidiaries as of March 31, 1999, and the related consolidated statements of
income, stockholders' equity and cash flows for the year then ended (not
presented herein), and, in our report dated April 29, 1999, 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, 1999, 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 11, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 7,535
<SECURITIES> 0
<RECEIVABLES> 56,065
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 105,334
<PP&E> 236,122
<DEPRECIATION> 132,460
<TOTAL-ASSETS> 270,369
<CURRENT-LIABILITIES> 122,521
<BONDS> 1,853
0
0
<COMMON> 182
<OTHER-SE> 137,029
<TOTAL-LIABILITY-AND-EQUITY> 270,369
<SALES> 257,232
<TOTAL-REVENUES> 257,232
<CGS> 104,931
<TOTAL-COSTS> 196,045
<OTHER-EXPENSES> 241
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 60,946
<INCOME-TAX> 24,501
<INCOME-CONTINUING> 36,935
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,935
<EPS-BASIC> 1.99
<EPS-DILUTED> 1.91
</TABLE>
